10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________________________ to __________________________________          

Commission File Number: 001-08931

CUBIC CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	95-1678055
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

9333 Balboa Avenue	92123
San Diego, California	(Zip Code)
(Address of principal executive offices)

(858) 277-6780

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	CUB	New York Stock Exchange
Preferred Stock Purchase Rights	—	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2021, there were 31,768,576 shares of the registrant’s common stock, no par value, issued and outstanding (after deducting 9,030,995 shares held as treasury stock).

CUBIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended March 31, 2021

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 6.	Exhibits	51

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except per share data)

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Net sales:
Products	$	200,428	$	187,494	$	381,917	$	388,098
Services		142,980		133,988		280,285		262,223
		343,408		321,482		662,202		650,321
Costs and expenses:
Products		149,671		153,002		287,690		319,845
Services		98,879		88,420		182,309		171,068
Selling, general and administrative expenses		83,141		78,294		146,801		144,209
Research and development		14,368		11,360		26,514		19,782
Amortization of purchased intangibles		15,033		16,493		31,140		26,582
(Gain) loss on sale of property, plant and equipment		125		40		125		(130)
Restructuring costs		7,746		3,807		11,881		5,382
		368,963		351,416		686,460		686,738
Operating loss		(25,555)		(29,934)		(24,258)		(36,417)
Other income (expenses):
Interest and dividend income		1,946		1,693		3,735		3,911
Interest expense		(6,734)		(8,219)		(14,905)		(13,582)
Loss on extinguishment of debt		—		(16,090)		—		(16,090)
Other income (expense), net		14,543		(19,664)		15,839		(19,791)
Loss from continuing operations before income taxes		(15,800)		(72,214)		(19,589)		(81,969)
Income tax provision (benefit)		3,440		(19,784)		6,929		(13,538)
Loss from continuing operations		(19,240)		(52,430)		(26,518)		(68,431)
Net income (loss) from discontinued operations		—		129		—		(455)
Net loss		(19,240)		(52,301)		(26,518)		(68,886)
Less noncontrolling interest in net income (loss) of VIE		16,777		(13,178)		22,494		(9,188)
Net loss attributable to Cubic	$	(36,017)	$	(39,123)	$	(49,012)	$	(59,698)
Amounts attributable to Cubic:
Net loss from continuing operations	$	(36,017)	$	(39,252)	$	(49,012)	$	(59,243)
Net loss from discontinued operations		—		129		—		(455)
Net loss attributable to Cubic	$	(36,017)	$	(39,123)	$	(49,012)	$	(59,698)
Net loss per share:
Basic
Continuing operations attributable to Cubic	$	(1.14)	$	(1.25)	$	(1.55)	$	(1.89)
Discontinued operations	$	—	$	—	$	—	$	(0.01)
Basic earnings per share attributable to Cubic	$	(1.14)	$	(1.25)	$	(1.55)	$	(1.91)
Diluted
Continuing operations attributable to Cubic	$	(1.14)	$	(1.25)	$	(1.55)	$	(1.89)
Discontinued operations	$	—	$	—	$	—	$	(0.01)
Diluted earnings per share attributable to Cubic	$	(1.14)	$	(1.25)	$	(1.55)	$	(1.91)
Weighted average shares used in per share calculations:
Basic		31,633		31,296		31,598		31,284
Diluted		31,633		31,296		31,598		31,284

See Notes to Condensed Consolidated Financial Statements.

3

CUBIC CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(amounts in thousands)

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Net loss	$	(19,240)	$	(52,301)	$	(26,518)	$	(68,886)
Other comprehensive income (loss):
Foreign currency translation		(3,353)		(17,905)		8,184		(7,425)
Change in unrealized gains/losses from cash flow hedges:
Change in fair value of cash flow hedges, net of tax		9,453		1,058		9,408		(127)
Adjustment for net gains/losses realized and included in net income, net of tax		(212)		(963)		(397)		(914)
Total change in unrealized gains/losses realized from cash flow hedges, net of tax		9,241		95		9,011		(1,041)
Total other comprehensive income (loss)		5,888		(17,810)		17,195		(8,466)
Total comprehensive loss		(13,352)		(70,111)		(9,323)		(77,352)
Noncontrolling interest in comprehensive income (loss) of consolidated VIE, net of tax		16,777		(13,178)		22,494		(9,188)
Comprehensive loss attributable to Cubic, net of tax	$	(30,129)	$	(56,933)	$	(31,817)	$	(68,164)

See Notes to Condensed Consolidated Financial Statements.

4

CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in thousands)

	March 31,		September 30,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	133,817	$	128,619
Cash of consolidated VIE		1,546		1,065
Restricted cash		28,580		25,478
Restricted cash of consolidated VIE		7,322		1,822
Accounts receivable:
Billed		109,604		161,473
Allowance for doubtful accounts		(1,450)		(1,498)
		108,154		159,975
Contract assets		321,545		268,773
Recoverable income taxes		20,502		17,434
Inventories		132,803		127,251
Other current assets		41,926		32,626
Other current assets of consolidated VIE		—		31
Total current assets		796,195		763,074
Long-term contracts financing receivables		72,605		64,642
Long-term contracts financing receivables of consolidated VIE		257,185		221,245
Property, plant and equipment, net		168,783		166,301
Operating lease right-of-use asset		83,076		87,167
Financing lease right-of-use asset, net		12,766		—
Deferred income taxes		5,483		4,790
Goodwill		788,027		784,882
Purchased intangibles, net		179,460		210,361
Other assets		25,424		21,759
Other assets of consolidated VIE		12,454		—
Total assets	$	2,401,458	$	2,324,221
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	279,000	$	215,716
Trade accounts payable		147,223		156,953
Trade accounts payable of consolidated VIE		35		49
Contract liabilities		74,779		75,546
Accrued compensation and current liabilities		131,465		126,388
Other current liabilities of consolidated VIE		108		85
Income taxes payable		719		799
Current portion of long-term debt		11,250		11,250
Total current liabilities		644,579		586,786
Long-term debt		425,498		430,115
Long-term debt of consolidated VIE		208,594		163,348
Operating lease liability		76,971		80,568
Financing lease liability		10,002		395
Other noncurrent liabilities		58,163		68,939
Other noncurrent liabilities of consolidated VIE		—		5,890
Shareholders’ equity:
Common stock		304,293		295,986
Retained earnings		797,190		850,472
Accumulated other comprehensive loss		(132,408)		(149,603)
Treasury stock at cost - 9,031 shares at March 31, 2021 and 8,945 at September 30, 2020		(41,321)		(36,078)
Shareholders’ equity related to Cubic		927,754		960,777
Noncontrolling interest in VIE		49,897		27,403
Total shareholders’ equity		977,651		988,180
Total liabilities and shareholders’ equity	$	2,401,458	$	2,324,221

See Notes to Condensed Consolidated Financial Statements.

5

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Operating Activities:
Net loss	$	(19,240)	$	(52,301)	$	(26,518)	$	(68,886)
Net income (loss) from discontinued operations		—		(129)		—		455
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		25,055		23,414		49,716		40,364
Share-based compensation expense		6,472		5,382		11,151		9,859
Change in fair value of contingent consideration		1,260		(1,473)		684		(4,478)
Change in fair value of interest rate swap of consolidated VIE		(15,091)		15,819		(18,343)		11,482
Deferred income taxes		161		2,909		(977)		2,909
Loss on extinguishment of debt		—		16,090		—		16,090
Other items		2,094		13		5,705		4,308
Changes in operating assets and liabilities, net of effects from acquisitions		(37,150)		(36,281)		(80,027)		(86,222)
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS		(36,439)		(26,557)		(58,609)		(74,119)
NET CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		—		129		—		85
NET CASH USED IN OPERATING ACTIVITIES		(36,439)		(26,428)		(58,609)		(74,034)
Investing Activities:
Acquisition of businesses, net of cash acquired		—		(234,538)		—		(234,538)
Purchases of property, plant and equipment		(13,389)		(13,478)		(20,053)		(25,311)
Purchase of non-marketable debt and equity securities		(1,446)		—		(1,446)		—
Receipt of withheld proceeds from sale of trade receivables		641		—		2,483		5,521
NET CASH USED IN INVESTING ACTIVITIES		(14,194)		(248,016)		(19,016)		(254,328)
Financing Activities:
Proceeds from short-term borrowings		104,786		727,000		186,644		884,500
Principal payments on short-term borrowings		(32,956)		(616,500)		(123,646)		(743,000)
Proceeds from long-term borrowings		1,008		450,000		1,008		450,000
Principal payments on long-term borrowings		(3,653)		(199,833)		(5,625)		(199,833)
Proceeds from long-term borrowings of consolidated VIE		18,967		3,036		41,501		23,222
Debt extinguishment make-whole payment		—		(15,856)		—		(15,856)
Deferred financing fees		—		(2,517)		—		(2,517)
Principal payments on finance lease liability		(673)		—		(691)		—
Proceeds from stock issued under employee stock purchase plan		1,170		—		1,170		1,169
Purchase of common stock		(1,004)		(39)		(4,014)		(3,660)
Shares repurchased for tax withholdings		(5,243)		—		(5,243)		—
Dividends paid		(4,270)		(4,225)		(4,270)		(4,225)
Contingent consideration payments related to acquisitions of businesses		(1,006)		—		(1,006)		—
NET CASH PROVIDED BY FINANCING ACTIVITIES		77,126		341,066		85,828		389,800
Effect of exchange rates on cash		(2,448)		(11,224)		6,078		(7,203)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		24,045		55,398		14,281		54,235
Cash, cash equivalents and restricted cash at the beginning of the period		147,220		94,458		156,984		95,621
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD	$	171,265	$	149,856	$	171,265	$	149,856
Supplemental disclosure of non-cash investing and financing activities:
Receivable recognized in connection with the acquisition of PIXIA, net		—		1,214		—		1,214
Contingent consideration liability incurred with the acquisition of Delerrok		—		1,600		—		1,600

See Notes to Condensed Consolidated Financial Statements.

6

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands, except per share data)

	For the Three Months Ended March 31, 2021
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
January 1, 2021	$	297,655	$	837,477	$	(138,296)	$	(36,078)	$	33,120	31,810
Net income (loss)		—		(36,017)		—		—		16,777	—
Other comprehensive income, net of tax		—		—		5,888		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	9
Stock issued under employee stock purchase plan		1,170		—		—		—		—	20
Purchase of common stock		(1,004)		—		—		—		—	—
Share-based compensation		6,472		—		—		—		—	—
Shares repurchased for tax withholdings		—		—		—		(5,243)		—	(86)
Cash dividends paid - $0.14 per share of common stock		—		(4,270)		—		—		—	—
March 31, 2021	$	304,293	$	797,190	$	(132,408)	$	(41,321)	$	49,897	31,753
	For the Six Months Ended March 31, 2021
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
October 1, 2020	$	295,986	$	850,472	$	(149,603)	$	(36,078)	$	27,403	31,329
Net income (loss)		—		(49,012)		—		—		22,494	—
Other comprehensive income, net of tax		—		—		17,195		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	556
Stock issued under employee stock purchase plan		1,170		—		—		—		—	20
Purchase of common stock		(4,014)		—		—		—		—	(66)
Share-based compensation		11,151		—		—		—		—	—
Shares repurchased for tax withholdings		—		—		—		(5,243)		—	(86)
Cash dividends paid - $0.14 per share of common stock		—		(4,270)		—		—		—	—
March 31, 2021	$	304,293	$	797,190	$	(132,408)	$	(41,321)	$	49,897	31,753

7

	For the Three Months Ended March 31, 2020
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
January 1, 2020	$	276,497	$	841,549	$	(130,349)	$	(36,078)	$	22,909	31,274
Net loss		—		(39,123)		—		—		(13,178)	—
Other comprehensive loss, net of tax		—		—		(17,810)		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	23
Purchase of common stock		(39)		—		—		—		—	(1)
Share-based compensation		5,382		—		—		—		—	—
Cash dividends paid - $0.14 per share of common stock		—		(4,225)		—		—		—	—
March 31, 2020	$	281,840	$	798,201	$	(148,159)	$	(36,078)	$	9,731	31,296
	For the Six Months Ended March 31, 2020
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
October 1, 2019	$	274,472	$	862,948	$	(139,693)	$	(36,078)	$	18,919	31,178
Net loss		—		(59,698)		—		—		(9,188)	—
Other comprehensive loss, net of tax		—		—		(8,466)		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	153
Stock issued under employee stock purchase plan		1,169		—		—		—		—	19
Purchase of common stock		(3,660)		—		—		—		—	(54)
Share-based compensation		9,859		—		—		—		—	—
Cumulative effect of accounting standard adoption		—		(824)		—		—		—	—
Cash dividends paid - $0.14 per share of common stock		—		(4,225)		—		—		—	—
March 31, 2020	$	281,840	$	798,201	$	(148,159)	$	(36,078)	$	9,731	31,296

See Notes to Condensed Consolidated Financial Statements.

8

CUBIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2021

Note 1 — Basis for Presentation

Cubic Corporation (“we,” “us,” the “Company” and “Cubic”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements.

In our opinion, the accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented. Operating results for the quarter ended March 31, 2021 are not necessarily indicative of the results that may be expected for our fiscal year ending September 30, 2021 (“fiscal 2021”). For further information, refer to the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (“fiscal 2020”).

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

As described in Note 14, we concluded that the combination of our legacy Cubic Mission Solutions (“CMS”) and our legacy Cubic Global Defense (“CGD”) segments into our new Cubic Mission and Performance Solutions (“CMPS”) segment resulted in CMPS becoming a single operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

Agreement and Plan of Merger

On March 30, 2021, we executed Amendment No. 1 to that certain Agreement and Plan of Merger, dated as of February 7,2021, by and among the Company, Atlas CC Acquisition Corp. and Atlas Merger Sub Inc. (as amended and as may be further amended from time to time, the “Merger Agreement”). Pursuant to the Merger Agreement, the Company will be acquired by Veritas Capital and Evergreen Coast Capital Corporation at a price of $75.00 per outstanding share of common stock of the Company, without interest and subject to required tax withholding in accordance with the terms of the Merger Agreement, in an all-cash transaction. On April 27, 2021, the Company’s stockholders voted upon and approved a proposal to adopt the Merger Agreement. The transaction is expected to close during our third quarter of fiscal 2021, subject to customary closing conditions, including the receipt of shareholder and regulatory approvals. Our financial statements and associated disclosures for the three- and six- month periods ended March 31, 2021 and March 31, 2020 do not reflect any potential impacts or effects the Merger might have on our financial statements if the Merger is finalized.

There can be no assurance that the transaction will close in the timeframe contemplated or on the terms anticipated, if at all.

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This standard removes the second step of the goodwill impairment test, where a determination of the fair value of individual assets and liabilities of a reporting unit was needed to measure the goodwill impairment. Under this updated standard, goodwill impairment will now be the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted ASU 2017-04 on October 1, 2020. The adoption of ASU 2017-04 did not have an impact on our consolidated financial statements and would only have the potential to impact the amount of goodwill impairment recorded in the event that goodwill is determined to be impaired in the future.

9

Recent Accounting Pronouncements – Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“Topic 740”), which removes certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for us in our annual period beginning October 1, 2021 and interim periods within that annual period. We are currently evaluating the impact of this standard on our consolidated financial statements.

Note 2 — Business Acquisitions

Each of the following acquisitions have been treated as a business combination for accounting purposes. The results of operations of each acquired business have been included in our consolidated financial statements since the respective date of each acquisition.

PIXIA Corp.

On June 27, 2019, we paid cash of $50.0 million to purchase 20% of the outstanding shares of PIXIA Corp. (“Pixia”), a provider of high-performance advanced data indexing, warehousing, processing and dissemination software solutions for large volumes of imagery data within traditional or cloud-based architectures. On January 3, 2020, we completed the purchase of the remaining 80% of Pixia’s issued and outstanding shares of capital stock for aggregate consideration consisting of $197.8 million in net cash, resulting in our ownership of all of Pixia’s issued and outstanding shares of capital stock. The acquisition was financed primarily with proceeds from draws on our line of credit.

From June 27, 2019 through January 3, 2020, we accounted for our 20% ownership of Pixia using the equity method of accounting. Upon completion of the acquisition of the remaining 80% ownership interest, we began consolidating Pixia into our financial statements. The acquisition-date fair value of consideration transferred is $245.2 million and is comprised of cumulative cash paid of $247.8 million, less a $2.0 million dividend received from Pixia and less a $0.6 million loss recognized during the period that we accounted for our 20% ownership of Pixia using the equity method of accounting.

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date (in millions):

Backlog	$	42.5
Customer relationships		25.5
Developed technology		14.1
Trade name		5.7
Accounts receivable, prepaids and other assets		3.8
Deferred taxes		(17.6)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		72.2
Goodwill		173.0
Net assets acquired	$	245.2

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The trade name valuation used the relief from royalty method, the customer relationships and non-compete agreements valuations used the lost profits valuation method and the technology and backlog valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over a weighted average useful life of approximately four years from the date of acquisition.

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The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Pixia with our existing CMPS business and strengthening our capability of developing and integrating products in our CMPS portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CMPS segment and is not expected to be deductible for tax purposes.

Delerrok Inc.

In fiscal 2018 and 2019 we invested a total of $8.3 million to purchase 17.5% of the outstanding shares of common stock of Delerrok Inc. (“Delerrok”), a private technology company based in Vista, California, that specializes in electronic fare collection systems for the mid-market. On January 3, 2020, we completed the purchase of the remaining 82.5% of Delerrok’s outstanding shares of common stock for aggregate consideration consisting of $36.8 million, resulting in our ownership of all of Delerrok’s shares of common stock. Prior to January 3, 2020, we accounted for our investment in Delerrok using the cost method of accounting. We began consolidating Delerrok in our financial statements effective January 3, 2020. The acquisition-date fair value of consideration is $45.1 million and is comprised of total cash paid of $43.5 million plus the fair value of contingent consideration of $1.6 million. The acquisition was financed primarily with proceeds from draws on our line of credit.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.3)
Deferred tax liability		(1.7)
Net identifiable assets acquired		14.7
Goodwill		30.4
Net assets acquired	$	45.1

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method and the technology valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an average useful life of approximately ten years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Delerrok with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CTS segment and is not expected to be deductible for tax purposes.

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Operating Results

The sales and results of operations from Delerrok and Pixia included in our operating results were as follows (in millions):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Sales	$	0.9	$	6.2	$	0.7	$	1.1
Operating loss		(1.1)		(5.6)		(1.1)		(10.0)
Net loss after taxes		(1.1)		(5.6)		(1.1)		(10.0)
	Six Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Sales	$	1.2	$	8.5	$	0.7	$	1.1
Operating loss		(2.2)		(13.6)		(1.1)		(10.0)
Net loss after taxes		(2.2)		(13.6)		(1.1)		(10.0)

The operating results above included the following amounts (in millions):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Amortization	$	0.4	$	7.2	$	0.4	$	7.2
Acquisition-related expenses (income)		(0.2)		0.1		0.7		2.0
	Six Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Amortization	$	0.9	$	14.3	$	0.4	$	7.2
Acquisition-related expenses		0.2		0.6		0.7		2.0
Gain from changes in fair value of contingent consideration		(0.9)		—		—		—

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions are as follows (in millions):

Year Ending September 30,	Delerrok		Pixia
2021	$	1.7	$	28.7
2022		1.6		12.7
2023		1.6		7.3
2024		1.6		7.3
2025		1.6		7.3
Thereafter		6.4		3.2

Pro Forma Information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia and Delerrok had been included in our consolidated results since October 1, 2019 (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Net sales	$	343.4	$	321.5	$	662.2	$	654.6
Net loss		(36.0)		(39.3)		(49.0)		(68.1)

The pro forma information includes adjustments to give effect to events that are directly attributable to the acquisitions and have a continuing impact on our operations including the amortization of purchased intangibles. No adjustments were made for transaction expenses, other items that do not reflect ongoing operations or for operating efficiencies or

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synergies. The pro forma financial information is not necessarily indicative of what the consolidated financial results of our operations would have been had the acquisitions been completed on October 1, 2019, and it does not purport to project our future operating results.

Goodwill

Changes in goodwill for the six months ended March 31, 2021 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission
	Systems		Performance Solutions		Total
Net balances at October 1, 2020	$	287,668	$	497,214	$	784,882
Adjustments		(260)		—		(260)
Foreign currency exchange rate changes		2,541		864		3,405
Net balances at March 31, 2021	$	289,949	$	498,078	$	788,027

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. Goodwill is not amortized but is subject to an impairment test at a reporting unit level on an annual basis and when circumstances indicate that an impairment is more-likely-than-not. Circumstances that might indicate an impairment is more-likely-than-not include a significant adverse change in the business climate for one of our reporting units or a decision to dispose of a reporting unit or a significant portion of a reporting unit.

We complete our annual goodwill impairment test each year as of July 1 separately for each of our reporting units.

For our fiscal 2020 impairment test we concluded there was no impairment of goodwill and in the second quarter of fiscal 2021 we concluded that no circumstances were present that required an interim impairment test.

Note 3 – Variable Interest Entities

In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”), we assess our partnerships and joint ventures at inception, and when there are changes in relevant factors, to determine if they are a variable interest entity (a “VIE”). We consider a partnership or joint venture to be a VIE if it has any of the following characteristics: (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing, or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity.

We continually assess each VIE to determine if we are its primary beneficiary. We conclude that we are the primary beneficiary and consolidate the VIE if we have both (a) the power to direct the activities that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. We consider the VIE design, ownership and voting structure, contractual relationships, distribution of profits and losses, risks, responsibilities, and indebtedness in determining if we are the primary beneficiary.

In March 2018, Cubic and John Laing, an unaffiliated company that specializes in contracting under public-private partnerships, jointly formed Boston AFC 2.0 HoldCo. LLC (“Boston HoldCo”). Also in March 2018, Boston HoldCo’s created a wholly owned subsidiary, Boston AFC 2.0 OpCo. LLC (“Boston OpCo”), entered into a contract with the Massachusetts Bay Transit Authority (“MBTA”) for the financing, development and operation of a next-generation fare payment system in Boston, Massachusetts (the “Original MBTA Contract”). Boston HoldCo is 90% owned by John Laing and 10% owned by Cubic. Collectively, Boston HoldCo and Boston OpCo are referred to as the “P3 Venture”. Based on our assessment under ASC 810, we concluded that Boston OpCo and Boston HoldCo are VIEs and that we are the primary beneficiary of Boston OpCo. Consequently, we have consolidated the financial statements of Boston OpCo. We have concluded that we are not the primary beneficiary of Boston HoldCo, and thus we have not consolidated the financial statements of Boston HoldCo. In June 2020, MBTA and Boston OpCo executed an amended agreement (the “Amended MBTA Contract”), which modified certain provisions of the Original MBTA Contract.

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The Amended MBTA Contract consists of a design and build phase of approximately four years and an operate and maintain phase of approximately twelve years. The design and build phase is planned to be completed in 2024 and the initial operate and maintain phase is expected to commence in December 2021, with full service commencement spanning from 2024 through 2033. Under the Amended MBTA Contract, MBTA will make payments to Boston OpCo consisting of fixed payments of $43.5 million during the design and build phase, fixed payments of $175.8 million at the full service commencement date, fixed payments of $618.0 million during the full service operate and maintain phase, variable payments for incremental transaction-based fees and inflation indexed payments during the operate and maintain phase, and payment adjustments for any performance penalties incurred by Boston OpCo during the project.

Boston OpCo subcontracted all of its contractual responsibilities regarding the design and build and the operation and maintenance of the fare system under the Amended MBTA Contract to Cubic. Under its subcontract with Boston OpCo, Cubic will receive fixed payments in the aggregate amount of $596.4 million, adjusted for incremental transaction-based fees, inflation indexed payments, less any performance penalties incurred.

Upon creation of the P3 Venture and upon execution of the Amended MBTA Contract, John Laing made loans to Boston HoldCo totaling $26.2 million in the form of bridge loans that are intended to be converted to equity in the future in accordance with its equity funding responsibilities under the terms of the P3 Venture. Concurrently, Boston HoldCo made corresponding equity contributions to Boston OpCo in the same amounts which are included within equity of noncontrolling interest in the VIE in our consolidated financial statements. Also, we issued a letter of credit for $2.9 million to Boston HoldCo in accordance with our equity funding responsibilities. Boston HoldCo is able to draw on this letter of credit in certain liquidity instances, but no amounts have been drawn through March 31, 2021.

In connection with the execution of the Amended MBTA Contract, Boston OpCo entered into an amended credit agreement with a group of financial institutions (the “Boston OpCo Amended Credit Agreement”), which includes two long-term debt facilities and a revolving credit facility. Under the Boston OpCo Amended Credit Agreement, the long-term debt facilities allow for draws up to an aggregate of $421.6 million during the design and build phase of the Amended MBTA Contract. The long-term debt facilities, including all interest and fees incurred, are required to be repaid on a fixed monthly schedule commencing once the design and build phase is completed in 2024. The long-term debt facilities bear interest at variable rates of LIBOR plus a margin of 1.75% to 2.0%. Boston OpCo incurred debt issuance and modification costs of $9.2 million during fiscal 2020 in connection with the Boston OpCo Amended Credit Agreement and these fees are being amortized as interest expense using the effective interest method over the term of the long-term debt facilities. Unamortized deferred financing costs are netted against long-term debt and amounted to $16.7 million and $17.2 million at March 31, 2021 and September 30, 2020, respectively. The revolving credit facility allows for draws up to a maximum aggregate amount of $15.8 million during the operate and maintain phase of the Amended MBTA Contract. Boston OpCo’s debt is nonrecourse with respect to Cubic and our subsidiaries. The fair value of the long-term debt facility approximates its carrying amount.

The Boston OpCo Amended Credit Agreement contains a number of covenants which require that Boston OpCo and Cubic maintain progress on the delivery of the MBTA Amended Agreement within a specified timeline and budget and provide regular reporting on such progress. The Boston OpCo Amended Credit Agreement also contains customary events of default including the delivery of a customized fare collection system to MBTA by a pre-determined date. Failure to meet such delivery date will result in Boston OpCo, and Cubic via our subcontract with Boston OpCo, to incur penalties due to the lenders thereunder.

Upon execution of the Boston OpCo Amended Credit Agreement, Boston OpCo terminated its existing interest rate swaps and paid termination costs of $34.4 million to the counterparties. Additionally, in connection with the Boston OpCo Amended Credit Agreement, Boston OpCo entered into new pay-fixed/receive-variable interest rate swaps to mitigate the variable interest rate associated with its long-term debt facility. The interest rate swaps contain forward starting notional principal amounts which align with Boston OpCo’s expected draws on its long-term debt facility. Boston OpCo’s interest rate swaps were not designated as effective hedges, and as such unrealized gains (losses) are included in other income (expense), net. At March 31, 2021 and September 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $233.5 million and $194.0 million, respectively. The fair value of Boston OpCo’s interest rate swaps was $12.5 million at March 31, 2021 and is recorded as an asset in other noncurrent assets in our condensed consolidated balance sheet. The fair value of the interest rate swaps was $5.9 million at September 30, 2020, and was recorded as a liability in other noncurrent liabilities in our condensed consolidated balance sheet. As a result of changes in the fair value of its interest rate swaps, Boston OpCo recognized gains of $15.1 million and $18.3 million for the three- and six- month periods ended March 31, 2021, respectively, and recognized losses of $15.8 million

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and $11.5 million for the three- and six- month periods ended March 31, 2020, respectively. See Note 7 for a description of the measurement of fair value of derivative financial instruments, including Boston OpCo’s interest rate swaps.

Boston OpCo holds a restricted cash balance which is required by the Amended MBTA Contract to allow for the delivery of future change orders directed by MBTA.

The assets and liabilities of Boston OpCo that are included in our condensed consolidated balance sheets are as follows:

	March 31,		September 30,
	2021		2020
	(in thousands)
Cash	$	1,546	$	1,065
Restricted cash		7,322		1,822
Other current assets		18		31
Long-term contracts financing receivable		257,185		221,245
Other noncurrent assets		12,454		—
Total assets	$	278,525	$	224,163
Trade accounts payable	$	35	$	49
Accrued compensation and other current liabilities		109		85
Due to Cubic		17,262		27,259
Other noncurrent liabilities		—		5,890
Long-term debt		208,594		163,348
Total liabilities	$	226,000	$	196,631
Total Cubic equity		2,628		129
Noncontrolling interests		49,897		27,403
Total liabilities and owners' equity	$	278,525	$	224,163

The assets of Boston OpCo are restricted for its use only and are not available for our general operations. Boston OpCo’s debt is non-recourse to Cubic. Our maximum exposure to loss as a result of our equity interest in the P3 Venture is limited to the $2.9 million outstanding letter of credit, which will be converted to a cash contribution upon completion of the design and build phase of the Amended MBTA Contract.

Boston OpCo’s results of operations included in our Condensed Consolidated Statements of Operations are as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Revenue	$	4,616	$	1,802	$	8,637	$	3,047
Operating income		4,184		1,516		7,901		2,488
Other income (expense), net		15,091		(15,819)		18,343		(12,748)
Interest income		1,487		1,655		2,860		3,208
Interest expense		(2,122)		(1,995)		(4,111)		(3,154)

Note 4 — Revenue Recognition

We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers.

Contract Estimates: Use of the cost-to-cost or other similar methods of revenue recognition requires us to make reasonably dependable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services. Revisions or adjustments to estimates of the transaction price, estimated costs at completion and estimated profit or loss of a performance obligation are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit or loss estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect our

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results of operations and cash flows, and in some cases result in liabilities to complete contracts in a loss position. The aggregate impact of net changes in contract estimates are presented in the table below (amounts in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Operating income (loss)	$	222	$	(5,155)	$	606	$	(11,312)
Net income (loss) from continuing operations		402		(5,522)		644		(11,304)
Net income (loss) from continuing operations attributable to Cubic		263		(5,522)		483		(11,304)
Diluted income (loss) per share attributable to Cubic		0.01		(0.18)		0.02		(0.36)

Backlog: Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. It is comprised of both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (“IDIQ”) contracts are not included in backlog until the time the option or IDIQ task order is exercised or awarded. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As of March 31, 2021, our ending backlog was $3.626 billion, compared to $3.667 billion at September 30, 2020. We expect to recognize approximately 30% of our March 31, 2021 backlog over the next 12 months as revenue, and approximately 50% over the next 24 months, with the remainder recognized thereafter.

Accounts Receivable:

The components of accounts receivable are as follows (in thousands):

	March 31,		September 30,
	2021		2020
Accounts receivable
Billed	$	109,604	$	161,473
Allowance for doubtful accounts		(1,450)		(1,498)
Net accounts receivable	$	108,154	$	159,975

Amounts billed include $21.8 million and $82.2 million due on U.S. federal government contracts at March 31, 2021 and September 30, 2020, respectively.

In our normal course of business, we may sell trade receivables to financial institutions as a cash management technique. We do not retain financial or legal obligations for these receivables that would result in material losses. Our ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables; therefore, our sold trade receivables are not included in our Condensed Consolidated Balance Sheet in any period presented. As of March 31, 2021, we had no outstanding trade receivables sold to financial institutions, compared with $18.4 million as of September 30, 2020. During the six months ended March 31, 2021, we received $2.5 million related to withheld proceeds from receivables we sold as of September 30, 2020, which is included in cash provided by investing activities in our Condensed Consolidated Statements of Cash Flows.

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Contract Assets and Liabilities: Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer per the contractually agreed project milestones. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in thousands):

	March 31,		September 30,
	2021		2020
Contract assets	$	321,545	$	268,773
Contract liabilities	$	74,779	$	75,546

Contract assets increased $52.8 million during the six months ended March 31, 2021, due to revenue recognized in excess of billings related to the satisfaction or partial satisfaction of performance obligations. There were no significant impairment losses related to our contract assets during the six months ended March 31, 2021.

Contract liabilities decreased $0.8 million during the six months ended March 31, 2021, due to payments received in excess of revenue recognized on these performance obligations. During the six months ended March 31, 2021, we recognized $35.7 million of our contract liabilities at September 30, 2020 as revenue. We expect our contract liabilities to be recognized as revenue over the next 24 months.

Note 5 — Net Income (Loss) Per Share

Basic net income (loss) per share (EPS) is computed by dividing the net income (loss) attributable to Cubic for the period by the weighted average number of common shares outstanding during the period, including vested restricted stock units (RSUs).

In periods with a net income from continuing operations attributable to Cubic, diluted EPS is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of dilutive RSUs. Dilutive RSUs are calculated based on the average share price for each fiscal period using the treasury stock method. For RSUs with performance and market-based vesting, no common equivalent shares are included in the computation of diluted EPS until the performance criteria have been met, and once the criteria are met the dilutive RSUs are calculated using the treasury stock method, modified by the multiplier that is calculated at the end of the accounting period as if the vesting date was at the end of the accounting period.

In periods with a net loss from continuing operations attributable to Cubic, common equivalent shares are not included in the computation of diluted EPS, because to do so would be anti-dilutive.

The weighted-average number of shares outstanding used to compute net income (loss) per common share were as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Weighted average shares - basic		31,633		31,296		31,598		31,284
Effect of dilutive securities		—		—		—		—
Weighted average shares - diluted		31,633		31,296		31,598		31,284
Number of anti-dilutive securities		1,236		1,246		1,174		1,099

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Note 6 — Balance Sheet Details

Restricted Cash

Cash and cash equivalents excluded $35.9 million and $27.3 million of restricted cash at March 31, 2021 and September 30, 2020, respectively, which for purposes of our consolidated statements of cash flows, is included in cash, cash equivalents and restricted cash.

Inventories

Inventories consist of the following (in thousands):

	March 31,		September 30,
	2021		2020
Finished products	$	17,941	$	14,838
Work in process and inventoried costs under long-term contracts		67,164		73,076
Materials and purchased parts		47,698		39,337
Net inventories	$	132,803	$	127,251

At March 31, 2021, work in process and inventoried costs under long-term contracts included approximately $8.3 million in costs incurred outside the scope of work or in advance of a contract award compared to $5.3 million at September 30, 2020. We believe it is probable that we will recover the costs inventoried at March 31, 2021, plus a profit margin, under contract change orders or awards within the next year.

Property, Plant and Equipment

Significant components of property, plant and equipment are as follows (in thousands):

	March 31,		September 30,
	2021		2020
Land and land improvements	$	7,213	$	7,423
Buildings and improvements		50,858		49,716
Machinery and other equipment		153,418		132,962
Software		126,446		121,890
Leasehold improvements		23,260		22,295
Construction and internal-use software development in progress		16,146		21,409
Accumulated depreciation and amortization		(208,558)		(189,394)
	$	168,783	$	166,301

Deferred Compensation Plan

We have a non-qualified deferred compensation plan offered to a select group of highly compensated employees. The plan provides participants with the opportunity to defer a portion of their compensation in a given plan year. The liabilities associated with the non-qualified deferred compensation plan are included in other noncurrent liabilities in our Condensed Consolidated Balance Sheets and totaled $8.2 million at March 31, 2021 and $9.6 million at September 30, 2020.

In the past we have made contributions to a rabbi trust to provide a source of funds for satisfying a portion of these deferred compensation liabilities. The total carrying value of the assets set aside to fund deferred compensation liabilities totaled $7.4 million at March 31, 2021 and $6.8 million at September 30, 2020 and were comprised entirely of life insurance contracts. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. Changes in the carrying value of the deferred compensation liability, and changes in the carrying value of the assets held in the rabbi trust are reflected in our Condensed Consolidated Statements of Operations.

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Note 7 — Fair Value of Financial Instruments

The valuation techniques required to determine fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The two types of inputs create the following fair value hierarchy:

● Level 1 - Quoted prices for identical instruments in active markets.

● Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

● Level 3 - Significant inputs to the valuation model are unobservable.

The following table presents assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheets on a recurring basis (in thousands):

	March 31, 2021								September 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	2,177	$	—	$	2,177	$	—	$	1,398	$	—	$	1,398
Noncurrent derivative assets		—		229		—		229		—		222		—		222
Total assets measured at fair value	$	—	$	2,406	$	—	$	2,406	$	—	$	1,620	$	—	$	1,620
Liabilities
Current derivative liabilities		—		6,350		—		6,350		—		4,557		—		4,557
Noncurrent derivative liabilities		—		4,537		—		4,537		—		14,070		—		14,070
Contingent consideration to seller of H4 Global		—		—		—		—		—		—		1,148		1,148
Contingent consideration to seller of Deltenna		—		—		3,205		3,205		—		—		3,004		3,004
Contingent consideration to seller of Shield		—		—		6,811		6,811		—		—		5,566		5,566
Contingent consideration to seller of Delerrok		—		—		—		—		—		—		900		900
Total liabilities measured at fair value	$	—	$	10,887	$	10,016	$	20,903	$	—	$	18,627	$	10,618	$	29,245

Derivative financial instruments are measured at fair value, the material portions of which are based on active or inactive markets for identical or similar instruments or model-derived valuations whose inputs are observable. Where model-derived valuations are appropriate, we use the applicable credit spread as the discount rate. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions.

The fair value of contingent consideration liabilities to the sellers of businesses that we have acquired are revalued to their fair value each period and any increase or decrease is recorded into selling, general and administrative expense. Any changes in the assumed timing and amount of the probability of payment scenarios could impact the fair value.

At March 31, 2021, we have the following remaining contingent consideration arrangements with the sellers of companies which we acquired:

H4 Global: A payment of $1.3 million was made in January 2021 based on a percentage of the value of H4 contracts entered into from October 1, 2015 through September 30, 2020. There is no remaining liability at March 31, 2021.

Deltenna: Payments of up to $7.4 million if Deltenna meets certain sales goals from the date of acquisition through September 30, 2022. The fair value of the contingent consideration was estimated using a combination of a probability weighted approach and the real option approach. Under the real option approach, each payment was modeled using long digital options written on the underlying revenue metric. The strike price for each option is the respective revenue as

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specified in the related agreement, and the spot price is calibrated to the revenue forecast by calculating the present value of the corresponding projected revenues using a risk-adjusted discount rate. The volatility for the underlying revenue metrics was based upon an analysis of comparable public companies and was 52% as of March 31, 2021 and September 30, 2020. The selected discount rate was 10.5% as of March 31, 2021 and September 30, 2020.

Shield: Payments of up to $10.0 million if Shield meets certain sales goals from the date of acquisition through July 31, 2025. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials. Key inputs for the simulation include projected revenues, discount rates, risk adjustment factors and volatility. The volatility and revenue risk adjustment factors were determined based on an analysis of publicly traded comparable companies and as of March 31, 2021 were 26% and 13% compared to 31% and 16% at September 30, 2020. The selected discount rate was based primarily on an analysis of publicly traded comparable companies and was 5.3% at March 31, 2021 and 5.7% at September 30, 2020.

Nuvotronics: Payments of up to $8.0 million if Nuvotronics meets certain gross profit goals for the 12-month period ending December 31, 2021. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials. As of March 31, 2021, the fair value of the Nuvotronics contingent consideration was determined to be zero as its forecasted gross profit amounts were below the payout thresholds.

Delerrok: As of December 31, 2020, the value of the Delerrok contingent consideration was determined to be zero as its sales amounts were below the payout threshold for the measurement period that lapsed on December 31, 2020.

The inputs to each of the contingent consideration fair value models include significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition dates and each subsequent period. Accordingly, changes in the assumptions described above can materially impact the amount of contingent consideration expense we record in any period.

As of March 31, 2021, the following table summarizes the change in fair value of our Level 3 contingent consideration liabilities (in thousands):

	H4 Global		Deltenna		Shield		Nuvotronics		Delerrok		Total
Balance as of September 30, 2020	$	1,148	$	3,004	$	5,566	$	—	$	900	$	10,618
Cash paid to seller		(1,286)		—		—		—		—		(1,286)
Total remeasurement (gain) loss recognized in earnings		138		201		1,245		—		(900)		684
Balance as of March 31, 2021	$	—	$	3,205	$	6,811	$	—	$	—	$	10,016

We carry certain financial instruments, including accounts receivable, short-term borrowings, accounts payable and accrued liabilities at cost, which we believe approximates fair value because of the short-term maturity of these instruments. The fair value of our variable rate long-term debt approximates its carrying value at March 31, 2021.

In fiscal 2019, 2020 and 2021, we invested $5.0 million, $1.2 million, and $1.4 million respectively, in Franklin Blackhorse, L.P., a limited partnership investment fund that invests in early stage, privately owned companies in the military, commercial and disruptive technology sectors. We account for our investment using the equity method of accounting. Our share of the fund’s operating income was not material for the three or six months ended March 31, 2021 or March 31, 2020. Our investment balance is included within other assets in our Condensed Consolidated Statements of Operations and amounted to $7.3 million and $5.6 million as of March 31, 2021 and September 30, 2020, respectively.

We did not have any significant non-financial assets or liabilities measured at fair value on a non-recurring basis in the second quarter of fiscal 2021 or fiscal 2020 other than assets and liabilities acquired in business acquisitions described in Note 2 and the RSUs that contain performance and market-based vesting criteria described in Note 11.

Note 8 — Financing Arrangements

On March 27, 2020, we executed a Fifth Amended and Restated Credit Agreement (the “Credit Facility”) with a group of financial institutions. The Credit Facility provided for a new term loan in the aggregate amount of $450.0 million (the

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“Term Loan”) and increased our existing revolving line of credit limit (the “Revolving Line of Credit”) from $800.0 million to $850.0 million. The commitments under the Credit Facility will mature on March 27, 2025 and bear interest generally at the LIBOR rate plus a margin that ranges between 1.00% and 2.00%. At March 31, 2021, the weighted average interest rate on outstanding borrowings under the Credit Facility was 1.92%. The Credit Facility is unsecured, but it is guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into interest rate swaps with a group of financial institutions to mitigate the variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts which align with our fixed repayment schedules under the Credit Facility and as of March 31, 2021 have an interest rate of approximately 2.49% and outstanding notional principal amounts of $500.0 million. See Note 7 for a description of the measurement of fair value of our derivative financial instruments.

Debt issuance and modification costs of $3.4 million were incurred in connection with the execution of the Credit Facility and are classified as a reduction to the related liability on our Condensed Consolidated Balance Sheets and are being amortized as interest expense using the effective interest method over the stated term of the Credit Facility. At March 31, 2021, our total debt issuance costs for our Term Loan and Revolving Line of Credit had an unamortized balance of $4.9 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of March 31, 2021, there were $438.8 million of borrowings under the Term Loan and $279.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.5 million at March 31, 2021, which reduced our available line of credit to $476.5 million. The $94.5 million of letters of credit includes both financial letters of credit and performance guarantees.

As of March 31, 2021, we had letters of credit and bank guarantees outstanding totaling $101.1 million, which includes the $94.5 million of letters of credit issued under the Revolving Line of Credit and $6.6 million of letters of credit issued under other facilities. The $101.1 million of letters of credit and bank guarantees includes $97.4 million that guarantees either our performance or customer advances under certain contracts and $3.7 million of financial letters of credit that primarily guarantees our payment of certain self-insured liabilities. We have never had a drawing on a letter of credit instrument, nor are any anticipated; therefore, we estimate the fair value of these instruments to be zero. We also use surety bonds as an alternative to letters of credit.

We have entered into a short-term borrowing arrangement in the United Kingdom for up to £15.0 million British Pounds (equivalent to approximately $20.7 million at March 31, 2021) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At March 31, 2021, no amounts were outstanding under this borrowing arrangement.

We maintain a cash account with a bank in the United Kingdom for which the funds are restricted as to use. The account is required to secure the customer’s interest in cash deposited in the account to fund our activities related to our performance under a fare collection services contract in the United Kingdom. The balance in the account as of March 31, 2021 was $28.6 million and is classified as restricted cash in our Condensed Consolidated Balance Sheets.

The terms of the Credit Facility contain financial covenants setting a maximum total ratio of debt to adjusted earnings before interest, taxes, depreciation and amortization and a minimum interest coverage ratio. In addition, the terms contain covenants that restrict, among other things, our ability to sell assets, incur indebtedness, make investments, grant liens, pay dividends and make other restricted payments. As of March 31, 2021, we were in compliance with all covenants under the Credit Facility.

We maintain self-insurance arrangements related to certain workers’ compensation plans, automobile liability and product liability claims. Under these arrangements, we self-insure only up to the amount of a specified deductible for each claim. Additionally, effective January 1, 2021, we provide healthcare benefits to our U.S. employees through a self-insured plan. We have purchased stop-loss insurance to cover U.S. employee healthcare claims over certain thresholds. Our estimated reserves are based on historical experience and trends related to both insurance claims and payments. The ultimate cost of healthcare benefits will depend on actual costs incurred to settle the claims and may differ from the amounts reserved by the Company for those claims. We record all self-insurance liabilities in accrued compensation and current liabilities in our Condensed Consolidated Balance Sheets, which amounted to $7.4 million and $5.1 million at March 31, 2021 and September 30, 2020, respectively.

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Note 9 — Leases

Our primary involvement with leases is as a lessee where we lease properties to support our business. A majority of our leases are operating leases of office space. For these leases, we have elected to account for the lease and non-lease components together as a single lease component. Our operating and financing leases expire at various dates through 2032 and 2026, respectively, without taking into consideration available renewal options, and many such leases require variable lease payments by us for property taxes, insurance premiums, common area maintenance and other costs. Certain of these leases also have extension or termination options, and we assess the likelihood of exercising such options. If it is reasonably certain that we will exercise the options, we include the impact in the measurement of our right-of-use assets and lease liabilities.

Our right-of-use assets for operating leases are included in operating lease right-of-use-assets and our right-of-use assets for financing leases are included in financing lease right-of-use-assets, net, on our Condensed Consolidated Balance Sheets. Our lease liabilities for operating and financing leases are included in other current liabilities for the current portion and separately in operating and financing lease liabilities for the long-term portion. We use our incremental borrowing rate in determining the present value of lease payments. Our operating lease expense is included in cost of sales and selling, general and administrative expenses in our consolidated statements of operations. Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred. Our finance lease expense consists of amortization of the right-of-use asset and interest expense. Amortization expense is recognized on a straight-line basis over the lease term and is included in cost of sales and selling, general and administrative expenses in our consolidated statement of operations. Interest expense is calculated using the effective interest method and is included in interest expense in our consolidated statement of operations. We also sublease certain immaterial properties and sublease income is included as a reduction of rental expense.

The following tables present our operating and finance leases, related lease expenses and other information (dollars in millions):

Operating Lease Portfolio

	March 31,		September 30,
	2021		2020
Right-of-use assets	$	83.1	$	87.2
Short-term lease liability		15.6		16.8
Long-term lease liability		77.0		80.6
Weighted average remaining lease term		7.2 years		7.6 years
Weighted average discount rate		3.0%		3.0%

Finance Lease Portfolio

	March 31,		September 30,
	2021		2020
Right-of-use assets	$	12.8	$	0.5
Short-term lease liability		2.9		0.2
Long-term lease liability		10.0		0.4
Weighted average remaining lease term		4.6 years		2.4 years
Weighted average discount rate		1.8%		1.7%

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Lease Expense

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Lease Expense
Operating lease expense	$	4.9	$	4.8	$	9.8	$	9.4
Finance lease expense
Amortization of right-of-use asset		0.7		—		0.8		—
Interest on lease liabilities		0.1		—		0.1		—
Short-term lease expense		0.1		0.1		0.1		0.1
Variable lease expense		0.5		0.7		1.4		1.8
Total lease expense	$	6.3	$	5.6	$	12.2	$	11.3

Other Information

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Cash paid related to lease liabilities
Finance lease - cash paid for interest	$	—	$	—	$	—	$	—
Operating lease - cash paid for fixed payments		5.1		4.6		9.9		9.1
Finance lease - cash paid for finance lease liabilities		0.7		—		0.7		—
Right-of-use assets obtained in exchange for new finance lease liabilities		0.4		—		13.0		—
Right-of-use assets obtained in exchange for new operating lease liabilities		2.8		8.4		3.0		18.0

Maturities of Lease Liabilities

Our future lease commitments from our operating and finance leases on an undiscounted basis, reconciled to the lease liability at March 31, 2021 were as follows (in millions):

	Financing		Operating
2021	$	1.5	$	8.3
2022		3.0		16.9
2023		2.8		14.9
2024		2.7		13.9
2025		2.7		11.5
Thereafter		0.7		37.9
Total lease payments		13.4		103.4
Less: imputed interest		(0.5)		(10.8)
Present value of lease liabilities	$	12.9	$	92.6

In fiscal 2019, we entered into agreements related to the construction and leasing of two buildings on our existing corporate campus in San Diego, California. Under these agreements, a financial institution owns the buildings and we acted as the construction agent. We began leasing the real property for a term of five years upon the completion of the buildings in December 2020, which is reflected in our finance lease right-of-use assets and finance lease liabilities presented above. The terms of these agreements include provisions that require or limit, among other financial ratios and measurements, the permitted levels of debt, coverage of cash interest expense, and under certain circumstances, payments of dividends or other distributions to shareholders. As of March 31, 2021, we were in compliance with all covenants included in these agreements.

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Note 10 — Pension Plans

The components of net periodic pension cost (benefit) are as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Service cost	$	162	$	164	$	320	$	329
Interest cost		1,346		1,507		2,679		3,038
Expected return on plan assets		(2,686)		(2,946)		(5,335)		(5,892)
Amortization of actuarial loss		1,165		968		2,305		1,969
Administrative expenses		89		83		178		169
Net pension cost (benefit)	$	76	$	(224)	$	147	$	(387)

Note 11 - Shareholders’ Equity

Long-Term Equity Incentive Plan

Under our long-term equity incentive plan, we have provided participants with three general categories of grant awards: (a) RSUs with time-based vesting, (b) RSUs with performance-based vesting, and (c) RSUs with performance and market-based vesting.

Each RSU with time-based vesting or performance-based vesting represents a contingent right to receive one share of our common stock. Each RSU with performance and market-based vesting represents a contingent right to receive up to 1.25 shares of our common stock. Dividend equivalent rights accrue with respect to the RSUs as dividends are paid on shares of our common stock and vest proportionately with the RSUs to which they relate. Participants receive the full benefit of the underlying common stock upon vesting.

Time-based RSUs granted prior to fiscal 2020 generally vest in four equal installments on each of the four October 1 dates following the grant date, subject to the recipient’s continued service with the Company through such vesting date. Time-based RSUs granted in fiscal 2020 and 2021 generally vest in three equal installments on each of the three October 1 dates following the grant date, subject to the recipient’s continued service with the Company through such vesting date.

The performance-based RSUs granted to participants vest over three-year performance periods based on our achievement of certain revenue growth targets, earnings growth targets and return on equity targets established by the Compensation Committee of our Board of Directors (the “Compensation Committee”) over the performance periods, subject to the recipient’s continued service with the Company through the end of the respective performance periods. The level at which we perform against scalable targets over the performance periods will determine the percentage of the RSUs that will ultimately vest.

The performance- and market-based RSUs granted to participants vest over three-year performance periods based on our achievement of revenue growth targets and earnings growth targets subject to the recipient’s continued service with the Company through the end of the respective performance periods. For these RSUs, the relative total stock return (“TSR”) for shares of our common stock as compared to the Russell 2000 Index (the “Index”) over the performance period will result in a multiplier for the number of RSUs that will vest. If the TSR performance exceeds the performance of the Index based on a scale established by the Compensation Committee, the multiplier will result in up to an additional 25% of RSUs vesting at the end of the performance period. If the TSR performance is below the performance of the Index based on a scale established by the Compensation Committee, the multiplier would result in a reduction of up to 25% of these RSUs vesting at the end of the performance period. For the performance- and market-based RSUs granted in fiscal 2020 and 2021, if our absolute TSR is negative for the three-year performance period, the TSR multiplier shall not exceed 100%, regardless of the performance relative to the Index.

Participants who are 60 years of age, and have achieved 10 years of continuous service, are eligible for accelerated vesting of their RSUs. Participants who have reached the retirement age criteria must generally provide us with a one-year notice of retirement. For participants who have reached the retirement age criteria, expense is recognized over the adjusted service period.

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The grant date fair value of each RSU with time-based vesting or performance-based vesting is the fair market value of one share of our common stock at the grant date.

The grant date fair value of each RSU with performance and market-based vesting was calculated using a Monte Carlo simulation valuation method. Under this method, the prices of the Index and shares of our common stock were simulated through the end of the performance period. The correlation matrix between shares of our common stock and the Index as well as the corresponding return volatilities were developed based upon an analysis of historical data. The following tables include the assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted during fiscal 2019, 2020 and 2021:

	RSUs granted during fiscal 2021
Valuation Date	November 17, 2020
Grant date fair value per RSU	$57.71
Performance period begins	October 1, 2020
Performance period ends	September 30, 2023
Risk-free interest rate	0.2%
Expected volatility	50%
	RSUs granted during fiscal 2020
Valuation Date	September 17, 2020
Grant date fair value per RSU	$41.13
Performance period begins	October 1, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	0.1%
Expected volatility	52%

At March 31, 2021, the total number of unvested RSUs that are ultimately expected to vest, after consideration of expected forfeitures and estimated vesting of performance-based RSUs, is 376,592 RSUs with time-based vesting, and 395,980 RSUs with performance- and market-based vesting.

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The following table summarizes our RSU activity:

	Unvested RSUs with Time-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	554,423	$	58.54
Granted	249,960		61.09
Vested	(230,975)		58.34
Forfeited	(116,969)		59.17
Unvested at March 31, 2021	456,439	$	59.88

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	137,770	$	61.40
Granted	—		—
Vested	(110,247)		61.40
Forfeited	(27,523)		61.40
Unvested at March 31, 2021	—	$	—

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	471,496	$	51.56
Granted	277,250		57.71
Vested	—		—
Forfeited	(20,542)		55.09
Unvested at March 31, 2021	728,204	$	53.80

We recorded non-cash compensation expense related to stock-based awards as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Cost of sales	$	771	$	743	$	1,372	$	1,282
Selling, general and administrative		5,701		4,639		9,779		8,577
	$	6,472	$	5,382	$	11,151	$	9,859

As of March 31, 2021, there was $46.1 million of unrecognized compensation expense related to unvested RSUs. Based upon the expected forfeitures and the expected vesting of performance-based RSUs, the aggregate fair value of RSUs expected to ultimately vest is $45.8 million, which is expected to be recognized over a weighted average period of 1.4 years.

We estimate forfeitures at the time of grant and revise those estimates in subsequent periods on a cumulative basis in the period the estimated forfeiture rate changes for all stock-based awards when significant events occur. We consider our historical experience with employee turnover as the basis to arrive at our estimated forfeiture rate. The forfeiture rate was estimated to be 12.5% per year in each of fiscal 2020 and fiscal 2021. To the extent the actual forfeiture rate is different from what we have estimated, compensation expense related to these awards will be different from our expectations.

Note 12 – Income Taxes

The quarterly forecast of our annual effective tax rate is impacted by numerous factors including income fluctuations by tax jurisdiction throughout the year, the level of intercompany transactions, applicability of new tax regimes and the impact of acquisitions. For the three- and six-month periods ended March 31, 2021, we concluded it is more appropriate to determine income tax expense for the period using a blend of the discrete effective tax rate method for U.S. operations and the estimated annual effective tax rate method for foreign operations.

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The income tax expense recognized on the pre-tax loss from continuing operations for the three and six months ended March 31, 2021 resulted in tax expense of $3.4 million and $6.9 million, or negative 22% and negative 35% effective tax rates, respectively, as compared to a tax benefit of $19.8 million and $13.5 million, or 27% and 17% effective tax rates, for the three and six months ended March 31, 2020. The variability in tax expense and effective tax rates relates to the difference in jurisdictional mix of earnings and discrete impacts related to current year changes to the existing U.S. deferred tax valuation allowance.

Note 13 — Derivative Instruments and Hedging Activities

In order to manage our exposure to fluctuations in interest and foreign currency exchange rates, we utilize derivative financial instruments such as forward starting swaps and foreign currency forwards for periods typically up to five years. We do not use any derivative financial instruments for trading or other speculative purposes.

The following table shows the notional principal amounts of our outstanding derivative instruments as of March 31, 2021 and September 30, 2020 (in thousands):

	Notional Principal
	March 31, 2021		September 30, 2020
Instruments receiving hedge accounting treatment:
Foreign currency forwards	$	128,920	$	92,931
Interest rate swaps		595,000		595,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	4,538	$	4,298

Included in the amounts not receiving hedge accounting treatment at March 31, 2021 and September 30, 2020 were foreign currency forwards with notional principal amounts of $3.5 million and $4.3 million, respectively, that have been designed to manage exposure to foreign currency exchange risks, and for which the gains or losses of the changes in fair value of the forwards have approximately offset an equal and opposite amount of gains or losses related to the foreign currency exposure. These foreign currency forward contracts resulted in unrealized losses of $0.2 million and $2.6 million for the three months ended March 31, 2021 and 2020, respectively, and resulted in unrealized gains of $0.6 million and unrealized losses of $1.8 million for the six months ended March 31, 2021 and 2020, respectively. Unrealized gains or losses are included in other income (expense), net in our condensed consolidated statements of operations.

We hold pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the lease obligations for our two new buildings located on our existing corporate campus. At March 31, 2021 and September 30, 2020, the outstanding notional principal amounts on these interest rate swaps were $95.0 million which align with our expected lease payments. These interest rate swaps were designated as effective cash flow hedges and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). As a result of changes in the fair value of the interest rate swaps, unrealized gains were $2.6 million and unrealized losses were $5.0 million for the three months ended March 31, 2021, and 2020, respectively, and resulted in unrealized gains of $2.7 million and unrealized losses of $3.6 million for the six months ended March 31, 2021 and 2020, respectively.

In April 2020, we entered into interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the Credit Facility. At March 31, 2021 and September 30, 2020, the interest rate swaps contain outstanding notional principal amounts of $500.0 million and were designated as effective cash flow hedges, and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). Unrealized gains as a result of changes in the fair value of the interest rate swaps were $7.3 million and $8.3 million for the three and six months ended March 31, 2021, respectively.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current interest or currency exchange rates at each respective date. Our exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material as of March 31, 2021 and September 30, 2020. Although the table above reflects the notional principal amounts of our foreign

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exchange instruments, it does not reflect the gains or losses associated with the exposures and transactions that the foreign exchange instruments are intended to hedge. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.

We generally enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. We present our derivative assets and derivative liabilities at their gross fair values. We did not have any derivative instruments with credit risk-related contingent features that would require us to post collateral as of March 31, 2021 or September 30, 2020.

The table below presents the fair value of our derivative financial instruments that qualify for hedge accounting as well as their classification in the condensed consolidated balance sheets (in thousands):

		Fair Value
	Balance Sheet Location	March 31, 2021		September 30, 2020
Asset derivatives:
Foreign currency forwards	Other current assets	$	2,177	$	1,398
Foreign currency forwards	Other assets		229		222
Total		$	2,406	$	1,620
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	6,350	$	4,557
Foreign currency forwards	Other noncurrent liabilities		1,344		866
Interest rate swaps	Other noncurrent liabilities		3,193		13,204
Total		$	10,887	$	18,627

The tables below present gains and losses recognized in other comprehensive income (loss) related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings (in thousands):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	434	$	295	$	1,438	$	1,306
Interest rate swaps		9,878		—		—		—
	$	10,312	$	295	$	1,438	$	1,306
	Six Months Ended
	March 31, 2021				March 31, 2020
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(665)	$	550	$	(177)	$	1,273
Interest rate swaps		11,036		—		—		—
Total	$	10,371	$	550	$	(177)	$	1,273

Foreign currency forwards designated as accounting hedges had realized losses of $0.2 million and unrealized gains of $2.7 million for the three-months ended March 31, 2021 and 2020, respectively. The amounts of realized gains were immaterial for the six-months ended March 31, 2021 and were $2.8 million for the six-months ended March 31, 2020.

The amount of unrealized gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the three- and six-month periods ended March 31, 2021 or 2020. The amount of estimated unrealized net gains from cash flow hedges which are expected to be reclassified to earnings in the next twelve months is $3.0 million, net of income taxes.

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Note 14 — Segment Information

We define our operating segments and reportable segments based on the way our Chief Executive Officer, who we have concluded is our chief operating decision maker, manages our operations for purposes of allocating resources and assessing performance and we continually reassess our operating segment and reportable segment designation based upon these criteria. In August 2020, we implemented a plan to realign and combine our legacy CMS and CGD segments into our new CMPS segment. At September 30, 2020, we concluded that CMS and CGD remained separate operating segments based upon factors including the nature of information presented to our chief executive officer and Board of Directors and the consequential level at which certain resource allocations and performance assessments were made. In the first quarter of fiscal 2021, we began providing financial information to our chief executive officer and Board of Directors at the CMPS level, which allowed resource allocation decisions and performance assessments to be made at that level. As such, we concluded that CMPS became an operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

We evaluate performance and allocate resources based on total segment operating income or loss. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1. Intersegment sales and transfers are immaterial and are eliminated in consolidation.

Our reportable segments are business units that offer different products and services. Operating results for each segment are reported separately to senior corporate management to make decisions as to the allocation of corporate resources and to assess performance.

Business segment financial data is as follows (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Sales:
Cubic Transportation Systems	$	217.4	$	197.6	$	414.5	$	386.2
Cubic Mission and Performance Solutions		126.0		123.9		247.7		264.1
Total sales	$	343.4	$	321.5	$	662.2	$	650.3
Operating income (loss):
Cubic Transportation Systems	$	33.0	$	12.6	$	64.7	$	26.9
Cubic Mission and Performance Solutions		(22.3)		(25.7)		(38.8)		(34.3)
Unallocated corporate expenses		(36.3)		(16.8)		(50.2)		(29.0)
Total operating loss	$	(25.6)	$	(29.9)	$	(24.3)	$	(36.4)
Depreciation and amortization:
Cubic Transportation Systems	$	7.5	$	7.4	$	15.0	$	14.5
Cubic Mission and Performance Solutions		15.2		15.1		30.3		24.3
Corporate		2.3		0.9		4.4		1.6
Total depreciation and amortization	$	25.0	$	23.4	$	49.7	$	40.4

Disaggregation of Total Net Sales: We disaggregate our sales from contracts with customers by end customer, contract type, deliverable type and revenue recognition method for each of our segments, as we believe these factors can affect the nature, amount, timing and uncertainty of our revenue and cash flows.

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Sales by Geographic Region (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
United States	$	123.6	$	83.8	$	207.4	$	235.5	$	164.1	$	399.6
United Kingdom		54.3		7.6		61.9		102.2		15.6		117.8
Australia		32.3		9.5		41.8		61.4		19.1		80.5
Far East/Middle East		0.5		16.3		16.8		1.5		32.1		33.6
Other		6.7		8.8		15.5		13.9		16.8		30.7
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
United States	$	111.0	$	61.4	$	172.4	$	207.7	$	140.4	$	348.1
United Kingdom		49.9		5.1		55.0		97.5		9.6		107.1
Australia		30.1		7.2		37.3		66.5		15.0		81.5
Far East/Middle East		0.6		35.4		36.0		1.9		72.1		74.0
Other		6.0		14.8		20.8		12.6		27.0		39.6
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Sales by End Customer: We are the prime contractor for the vast majority of our sales. The table below presents total net sales disaggregated by end customer (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	115.4	$	82.5	$	197.9	$	223.0	$	161.8	$	384.8
Other		102.0		43.5		145.5		191.5		85.9		277.4
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	104.0	$	61.2	$	165.2	$	197.5	$	143.2	$	340.7
Other		93.6		62.7		156.3		188.7		120.9		309.6
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

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Sales by Contract Type: The vast majority of our contracts are fixed-price type contracts. Sales included in “Other” contract types represent cost-plus and time-and-material type contracts.

On a fixed-price type contract, we agree to perform the contractual statement of work for a predetermined sales price. Certain of our fixed-price contracts include compensation for bonuses, transactional variable based fees or other similar provisions. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the applicable contract’s fee arrangement up to funding levels that are predetermined by the customer. On a time-and-material type contract, we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. The table below presents total net sales disaggregated by contract type (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Fixed Price	$	214.6	$	107.2	$	321.8	$	409.0	$	209.0	$	618.0
Other		2.8		18.8		21.6		5.5		38.7		44.2
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Fixed Price	$	194.8	$	107.3	$	302.1	$	379.3	$	232.1	$	611.4
Other		2.8		16.6		19.4		6.9		32.0		38.9
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Sales by Deliverable Type: The table below presents total net sales disaggregated by the type of deliverable, which is determined by us at the performance obligation level (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Product	$	113.1	$	87.3	$	200.4	$	213.2	$	168.7	$	381.9
Service		104.3		38.7		143.0		201.3		79.0		280.3
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Product	$	99.7	$	87.8	$	187.5	$	193.1	$	195.0	$	388.1
Service		97.9		36.1		134.0		193.1		69.1		262.2
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

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Revenue Recognition Method: Sales recognized at a point in time are typically for standard goods with a short production cycle and are recognized when the customer obtains control, which is generally upon delivery and acceptance. Sales for services and for products with a long production cycle, which often include significant customization and development, are recognized over time. The table below presents total net sales disaggregated based on the revenue recognition method applied (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Point in Time	$	20.8	$	20.9	$	41.7	$	39.6	$	45.9	$	85.5
Over Time		196.6		105.1		301.7		374.9		201.8		576.7
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Point in Time	$	28.1	$	15.0	$	43.1	$	45.8	$	54.4	$	100.2
Over Time		169.5		108.9		278.4		340.4		209.7		550.1
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Note 15 — Restructuring Costs

In the fourth quarter of fiscal 2020, we announced our NextCUBIC transformation to restructure the way we work and operate as a business. Part of this initiative included establishing a Transformation Office and appointing a Chief Transformation Officer to identify, vet, plan and implement improvement initiatives across Cubic. Coinciding with this initiative, we also announced the combination of CGD and CMS into CMPS. This combination will help us optimize customer access and presence, leverage key enablers across the combined businesses and realize untapped cross-segment technical synergies to capture organizational efficiencies. The significant portion of the costs associated with these restructuring activities are related to consultants that we have engaged in connection with these efforts, and such costs have been recognized by our corporate entity. Other restructuring charges related to headcount reductions initiated to optimize our cost positions. Our NextCUBIC transformation initiatives will continue through fiscal 2021, and our consulting fees that will be incurred in the future are generally contingent upon the achievement of future cost savings, the total expected restructuring costs related to these initiatives cannot currently be estimated.

In the first quarter of fiscal 2021, CMPS also incurred costs related to modifying its go-to market and legal structure in the Middle East. The total cost of these efforts is not expected to be significantly greater than those incurred through December 31, 2020.

Restructuring charges incurred by our business segments were as follows (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Restructuring costs:
Cubic Transportation Systems	$	1.6		0.1	$	1.8	$	0.5
Cubic Mission and Performance Solutions		0.8		0.5		3.9		0.6
Unallocated corporate expenses		5.4		3.2		6.2		4.3
Total restructuring costs	$	7.8	$	3.8	$	11.9	$	5.4

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The following table presents a rollforward of our restructuring liability as of March 31, 2021, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheet (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of October 1, 2020	$	5.2	$	0.8
Accrued costs		6.9		5.0
Cash payments		(8.3)		(2.5)
Balance as of March 31, 2021	$	3.8	$	3.3

Certain restructuring costs are based upon estimates. Actual amounts paid may ultimately differ from these estimates. If additional costs are incurred or recognized amounts exceed costs, such changes in estimates will be recognized when incurred.

Note 16 — Legal Matters

We consider all current legal matters to be ordinary proceedings incidental to our business. We believe the outcome of these proceedings will not have a materially adverse effect on our financial position, results of operations or cash flows.

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CUBIC CORPORATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

March 31, 2021

Overview

Cubic Corporation (“we,” “us,” the “Company” and “Cubic”) is a technology-driven, market-leading global provider of innovative, mission-critical solutions that reduce congestion and increase operational readiness and effectiveness through superior situational understanding. Cubic designs, integrates and operates systems, products and services focused in the transportation, command, control, communication, computers, intelligence, surveillance and reconnaissance (“C4ISR”), and training markets. We operate in two reportable business segments: Cubic Transportation Systems (“CTS”) and Cubic Mission and Performance Solutions (“CMPS”).

CTS specializes in the design, development, production, installation, maintenance and operation of automated fare payment, traffic management and enforcement solutions, real-time information systems, and revenue management infrastructure and technologies for transportation agencies. As part of our turnkey solutions, CTS also provides these customers with a comprehensive suite of business process outsourcing services and expertise, such as card and payment media management, central systems and application support, retail network management, customer call centers and financial clearing and settlement support. As transportation authorities seek to optimize their operations by outsourcing bundled systems and services, CTS has transformed itself from a provider of automated fare collection systems into a systems integrator and services company focused on the intelligent transportation market.

CMPS provides networked C4ISR capabilities for defense, intelligence, security and commercial missions and is a leading provider of live, virtual, constructive and game-based training solutions for the U.S. and allied forces. CMPS’s core competencies include protected wide-band communications for space, aircraft, unmanned aerial vehicle, and terrestrial applications. It provides rugged internet of things cloud solutions, interoperability gateways, and artificial intelligence/machine learning based command and control, intelligence, surveillance and reconnaissance applications for video situational understanding and offers cloud-based platforms designed to manage and share large amounts of imagery data, wide-area motion imagery and geospatial data. It’s LVC training solutions blend virtual and constructive elements into live training to provide the highest fidelity and most threat realistic secure training environments.

Beginning on October 1, 2020, we concluded that the combination of our legacy Cubic Mission Solutions (“CMS”) and our legacy Cubic Global Defense (“CGD”) segments into our new Cubic Mission and Performance Solutions (“CMPS”) segment resulted in CMPS becoming a single operating segment. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

The three months ended March 31, 2021 and 2020 represent the second quarters of our fiscal years ending September 30, 2021 (“fiscal 2021”) and September 30, 2020 (“fiscal 2020”), respectively.

On March 30, 2021, we executed Amendment No. 1 to that certain Agreement and Plan of Merger, dated as of February 7, 2021, by and among the Company, Atlas CC Acquisition Corp. and Atlas Merger Sub Inc. (as amended and as may be further amended from time to time, the “Merger Agreement”). Pursuant to the Merger Agreement, the Company will be acquired by Veritas Capital and Evergreen Coast Capital Corporation at a price of $75.00 per outstanding share of common stock of the Company, without interest and subject to required tax withholding in accordance with the terms of the Merger Agreement, in an all-cash transaction. On April 27, 2021, the Company’s stockholders voted upon and approved a proposal to adopt the Merger Agreement. The transaction is expected to close during our third quarter of fiscal 2021, subject to customary closing conditions, including the receipt of shareholder and regulatory approvals. Our financial statements and associated disclosures for the three- and six- month periods ended March 31, 2021 and March 31, 2020 do not reflect any potential impacts or effects the Merger might have on our financial statements if the Merger is finalized.

There can be no assurance that the transaction will close in the timeframe contemplated or on the terms anticipated, if at all.

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COVID-19 Update

The COVID-19 pandemic has presented challenges and impacts on each of our businesses, including delays of customer orders, slowdown of certain projects and impacts due to travel restrictions and remote work. We have taken proactive measures in order to reduce the potential impacts of the pandemic. To date we have not experienced significant disruptions in our supply chain, nor have we experienced any significant disruptions at our manufacturing facilities.

The vast majority of revenue from our CTS businesses is earned under fixed-price contracts. However, approximately 2% of our annual revenue is directly tied to the level of transit ridership. While transit ridership levels have improved from the lows of the pandemic, they remain significantly below normal levels impacting our transit agency customer’s revenue, with uncertainty surrounding the pace and timing of recovery. While we continue to believe that CTS’s backlog is largely insulated from the impacts of COVID-19 due to the critical service of fare collection, there could be potential delays in the award of new business. While the U.S. National Defense Strategy continues to drive demand, our CMPS business has experienced some delays in timing of orders and shipments due to the COVID-19 pandemic.

We believe that the fundamentals of our Company remain strong in the midst of the global pandemic. We expect to have sufficient liquidity on hand to continue business operations during this volatile period and we have taken a number of steps to strengthen liquidity and manage cash flow.

The extent to which COVID-19 will adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including the severity and duration of the outbreak and the effectiveness of actions to contain or mitigate its effects. While we expect the pandemic to continue to negatively impact our results, the current level of uncertainty over the economic and operational impacts of COVID-19 could lead to variability in results.

Consolidated Financial Results

	Three Months Ended							Six Months Ended
	March 31,							March 31,
	2021		2020		% Change			2021		2020		% Change
(in millions, except per share and percentage data)
Sales	$	343.4	$	321.5		7	%	$	662.2	$	650.3		2	%
Operating loss		(25.6)		(29.9)		(14)	%		(24.3)		(36.4)		(33)	%
Net loss from continuing operations attributable to Cubic		(36.0)		(39.3)		8	%		(49.0)		(59.2)		(17)	%
Diluted loss per share from continuing operations attributable to Cubic		(1.14)		(1.25)		9	%		(1.55)		(1.89)		(18)	%
Adjusted EBITDA		22.7		4.5		409	%		52.3		15.9		229	%
Adjusted net income (loss)		4.8		(3.9)		Nm			16.5		(7.6)		Nm	%
Adjusted EPS		0.15		(0.12)		Nm			0.52		(0.24)		Nm	%
Nm - Not meaningful

Note on non-GAAP measures: Throughout the following results of operations discussion, we disclose certain non-U.S. generally accepted accounting principles (“GAAP”) financial measures, including Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. For an explanation and reconciliation of such measures, see the section titled ‘Non-GAAP Financial Information’ below.

Sales:

Second Quarter of 2021 vs. Second Quarter of 2020: Sales for the second quarter of fiscal 2021 increased 7% to $343.4 million from $321.5 million in the same period last year. Sales from CTS and CMPS increased by 10% and 2%, respectively. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar had favorable impacts on sales of $10.1 million for the second quarter of fiscal 2021 compared to the same period last

35

year. Sales generated by businesses we acquired during fiscal 2020 totaled $7.1 million for the second quarter of fiscal 2021, compared to $1.8 million in the same period last year.

First Six Months of 2021 vs. First Six Months of 2020: Sales for the first six months of fiscal 2021 increased 2% to $662.2 million from $650.3 million in the same period last year. Sales from CTS increased by 7%, which was partially offset by a decrease in CMPS sales of 6%. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar had a favorable impact on sales of $14.0 million for the first six months of fiscal 2021 compared to the same period last year. Sales generated by businesses we acquired during fiscal 2020 totaled $9.7 million for the first six months of fiscal 2021, compared to $1.8 million in the same period last year.

See the segment discussions below for further analysis of segment sales.

Gross Margin:

Our gross margin percentage on product sales increased to 25% in both the second quarter and first six months of fiscal 2021, as compared to 18% in the same periods last year. The increase was primarily due to improved performance in CTS. Our gross margin percentage on service sales decreased to 31% for the second quarter of fiscal 2021, compared to 34% in the second quarter of last year due to lower margins on international service contracts in our CMPS segment. For the first half of both fiscal 2021 and fiscal 2020, service margins were 35% in both periods.

Selling, General and Administrative (“SG&A”):

Second Quarter of 2021 vs. Second Quarter of 2020: SG&A expenses increased in the second quarter of fiscal 2021 to $83.1 million compared to $78.3 million in the same period last year. As a percentage of sales, SG&A expenses were 24% in both the second quarter of fiscal 2021 and fiscal 2020. The increase in SG&A expenses was driven by $16.7 million of costs incurred in connection with proposals to acquire Cubic, partially offset by company-wide cost reduction initiatives.

First Six Months of 2021 vs. First Six Months of 2020: SG&A expenses increased in the first six months of fiscal 2021 to $146.8 million compared to $144.2 million in the same period last year. As a percentage of sales, SG&A expenses were 22% in both the first six months of fiscal 2021 and fiscal 2020. The increase in SG&A expenses was driven by $18.4 million of costs incurred in connection with proposals to acquire Cubic, partially offset by company-wide cost reduction initiatives.

Restructuring:

Restructuring expenses increased to $7.7 million in the second quarter of fiscal 2021 compared to $3.8 million in the same period last year, and for the first six months of fiscal 2021, restructuring expenses increased to $11.9 million compared to $5.4 million for the same period last year. The increase is due to headcount reductions, NextCubic consultant and advisory costs, and costs incurred by CMPS related to modifying its go-to market and legal structure in the Middle East.

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Research and Development:

Internally funded company-sponsored research and development (“R&D”) expenses, as reflected in our Condensed Consolidated Statements of Operations (as included in Part I, Item 1 of this Quarterly Report on Form 10-Q) are as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Company-Sponsored Research and Development Expense:
Cubic Transportation Systems	$	1,368	$	1,666	$	4,032	$	3,116
Cubic Mission and Performance Solutions		12,329		9,694		21,746		16,666
Unallocated corporate expenses		671		—		736		—
Total company-sponsored research and development expense	$	14,368	$	11,360	$	26,514	$	19,782

Company-sponsored R&D expense increased by $3.0 million and $6.7 million in the second quarter and first half of fiscal 2021, respectively, compared to the same periods last year. The increase was primarily due to the acceleration of work on CMPS secure communication initiatives.

In addition to internally funded Company-sponsored R&D, a significant portion of our new product development occurs during the performance of contractual work for our customers. These costs are included in cost of sales in our Condensed Consolidated Statements of Operations (included in Part I, Item 1 of this Quarterly Report on Form 10-Q) as they are directly related to contract performance. The estimated cost of contract R&D activities included in our cost of sales is as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Cost of Contract Research and Development Activities:
Cubic Transportation Systems	$	15,159	$	15,509	$	29,080	$	30,299
Cubic Mission and Performance Solutions		21,076		20,672		40,549		35,858
Total cost of contract research and development activities	$	36,235	$	36,181	$	69,629	$	66,157

Amortization of Purchased Intangibles: Amortization of purchased intangibles for the second quarter of fiscal 2021 decreased to $15.0 million from $16.5 million in the same period last year due to lower amortization of purchased intangible assets that are amortized on accelerated methods. For the first half of fiscal 2021, amortization of purchased intangibles increased to $31.1 million from $26.6 million in the same period last year. The increase in amortization expense was driven by the completion of our acquisitions of Delerrok Inc. (“Delerrok”) and PIXIA Corp. (“Pixia”) in January 2020.

Operating Income (Loss):

Second Quarter of 2021 vs. Second Quarter of 2020: Our operating loss decreased to $25.6 million in the second quarter of fiscal 2021 compared to a loss of $29.9 million in the same period last year. CTS operating income increased to $33.0 million for the second quarter of fiscal 2021 compared to $12.6 million last year and CMPS operating loss decreased to $22.3 million in the second quarter compared to a loss of $25.7 million in the same period last year. Our operating results, and particularly the CMPS operating results, were impacted by accounting for businesses acquired in fiscal 2020. On a consolidated basis, the businesses that we acquired during fiscal 2020 had operating losses totaling $6.7 million in the second quarter of fiscal 2021, as compared to $11.0 million in the second quarter last year. The operating losses include total acquisition-related expenses, including amortization of intangible assets, of $7.4 million in the second quarter of fiscal 2021, as compared to $10.4 million in the same period last year.

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Unallocated corporate and other costs for the second quarter of fiscal 2021 were $36.2 million compared to $17.0 million in the same period last year. The increase was driven by $16.7 million of costs incurred in connection with proposals to acquire Cubic and higher restructuring costs.

The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar had a net favorable impact on operating income in the second quarter of fiscal 2021 of $1.7 million as compared to the same period last year.

First Six Months of 2021 vs. First Six Months of 2020: Our operating loss decreased to $24.3 million in the first six months of fiscal 2021 compared to an operating loss of $36.4 million in the same period last year. CTS operating income increased to $64.7 million for the first six months of fiscal 2021 compared to $26.9 million last year. This increase was partially offset by an increased operating loss from CMPS of $38.8 million in the first six months of fiscal 2021 compared to $34.3 million in the same period last year. Our operating results, and particularly the CMPS operating results, were significantly impacted by accounting for businesses acquired in fiscal 2020. On a consolidated basis, the businesses that we acquired during fiscal 2020 had operating losses totaling $15.8 million in the first six months of fiscal 2021, as compared to losses of $11.0 million in the same period last year. The operating losses include acquisition-related expenses, including amortization of intangible assets, of $15.1 million in the first six months of fiscal 2021, as compared to $10.4 million in the same period last year.

Unallocated corporate and other costs for the first six months of fiscal 2021 were $50.1 million compared to $29.0 million in the same period last year. The increase was driven by $18.4 million of costs incurred in connection with proposals to acquire Cubic and higher restructuring costs.

The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar had a net favorable impact on our operating results of $2.5 million in the first six months of fiscal 2021 as compared to the same period last year.

See the segment discussions below for further analysis of segment operating income and loss.

Interest and Dividend Income and Interest Expense:

Interest and dividend income was $1.9 million in the second quarter of fiscal 2021 compared to $1.7 million in the same period last year, and was $3.7 million in the first half of fiscal 2021 compared to $3.9 million in the same period last year.

Interest expense was $6.7 million in the second quarter of fiscal 2021 compared to $8.2 million in the same period last year, and was $14.9 million for the first half of fiscal 2021 compared to $13.6 million for the same period last year. The decrease in interest expense during the second quarter of fiscal 2021 was due to lower average debt balances as compared to the same period last year. The increase in interest expense for the first half of Fiscal 2021 was due to a higher average debt balance in the first quarter of our Fiscal 2021 and an increase in the average outstanding non-recourse debt balance of our consolidated variable interest entity (“VIE”). The 90% noncontrolling interest in the net income (loss) of the consolidated VIE, which includes the interest income and expense of such VIE, is added back to our net income (loss) to arrive at net income (loss) attributable to Cubic.

Other Income (Expense):

Other income (expense) netted to income of $14.5 million in the second quarter of fiscal 2021 compared to expense of $19.7 million in the first quarter of fiscal 2020, and netted to income of $15.8 million in the first half of fiscal 2021 compared to expense of $19.8 million in the same period last year. Changes in our other income (expense) are primarily driven by changes in the fair value of an interest rate swap held by our consolidated VIE, which resulted in income of $15.1 million and $18.3 million for the second quarter and first six months of fiscal 2021, respectively. The 90% noncontrolling interest in the net income (loss) of the consolidated VIE, including the VIE’s loss on its interest rate swap, is added back to our net income (loss) to arrive at net income (loss) attributable to Cubic.

Income Tax Provision:

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The income tax expense recognized on pre-tax loss from continuing operations for the three and six months ended March 31, 2021 resulted in an effective tax rates of negative 22% and negative 35%, respectively, which differs from the effective tax rates of 27% and 17% for the three and six months ended March 31, 2020, respectively. The variability in effective tax rates primarily relates to the difference in both the level and jurisdictional mix of earnings, discrete impacts related to current year changes to the existing U.S. deferred tax valuation allowance, and the impact of deferred tax liabilities acquired in business combinations.

Our effective tax rate could be affected by, among other factors, the mix of business between U.S. and foreign jurisdictions, the level of intercompany transactions, applicability of changes in U.S. or foreign tax law, the impact of acquisitions, fluctuations in the need for a valuation allowance against deferred tax assets, and our ability to take advantage of available tax attributes. After considering these impacts, we have determined that a reliable estimate of the annual effective tax rate for fiscal 2021 cannot be made.

Net Loss from Continuing Operations attributable to Cubic:

Our net loss from continuing operations attributable to Cubic in the second quarter of fiscal 2021 was $36.0 million compared to $39.3 million in the same period last year. For the first half of fiscal 2021, our net loss from continuing operations attributable to Cubic was $49.0 million compared to $59.2 million last year. The decrease in net loss from continuing operations attributable to Cubic was primarily due to the increase in operating income and other income (expense) as described above.

Adjusted EBITDA:

Adjusted EBITDA increased to $22.7 million in the second quarter of fiscal 2021 compared to $4.5 million in the same period last year. For the first half of fiscal 2021, Adjusted EBITDA increased to $52.3 million compared to $15.9 million last year. The increase in Adjusted EBITDA was due to the same factors described above in operating income (loss), but excludes amortization expense, restructuring costs and acquisition-related expenses.

Adjusted Net Income (Loss):

Our Adjusted Net Income increased to $4.8 million in the second quarter of fiscal 2021 compared to Adjusted Net Loss of $3.9 million in the same period last year. For the first half of fiscal 2021, Adjusted Net Income was $16.5 million compared to Adjusted Net Loss of $7.6 million last year. The increase in Adjusted Net Income was primarily due to the same factors described above in net loss from continuing operations attributable to Cubic, but excludes amortization expense, restructuring costs, acquisition-related expenses and non-operating gains and losses.

Adjusted EPS:

Adjusted EPS increased to $0.15 in the second quarter of fiscal 2021 compared to negative $0.12 in the same period last year. For the first half of fiscal 2021, Adjusted EPS increased to $0.52 compared to negative $0.24 last year. The changes in Adjusted EPS was due to the same factors that impacted Adjusted Net Income (Loss) noted above.

CTS Segment

	Three Months Ended							Six Months Ended
	March 31,							March 31,
	2021		2020		% Change			2021		2020		% Change
(in millions)
Sales	$	217.4	$	197.6		10	%	$	414.5	$	386.2		7	%
Operating income		33.0		12.6		162	%		64.7		26.9		141	%
Adjusted EBITDA		38.4		24.2		59	%		74.2		46.4		60	%

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Sales:

Second Quarter of 2021 vs. Second Quarter of 2020: CTS sales for the second quarter of fiscal 2021 increased 10% to $217.4 million from $197.6 million in the same period last year. Sales were higher in the U.S due to increased work on our system development contracts in Boston and New York. Sales were higher in the U.K. and Australia primarily due to the impact of foreign currency exchange rates as the average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in sales of $8.2 million for the second quarter of fiscal 2021, compared to the second quarter last year.

First Six Months of 2021 vs. First Six Months of 2020: CTS sales for the first six months of fiscal 2021 increased 7% to $414.5 million from $386.2 million in the same period last year. Sales were higher in the U.S. and U.K. due to increased work on our system development contracts in Boston and Chicago and the impact of foreign currency exchange rates. Sales were slightly lower in Australia due to lower work on our system development contract in Brisbane. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in sales of $11.3 million for the first six months of fiscal 2021, compared to the same period last year.

Operating Income:

Second Quarter of 2021 vs. Second Quarter of 2020: CTS operating income for the second quarter of fiscal 2021 increased 162% to $33.0 million compared to $12.6 million in the same period last year. Operating income was higher in the U.S., U.K., and Australia due to increased work and higher profitability on our system development contracts in the U.S and the impact of cost savings initiatives in all our regions. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in operating income of $1.4 million for the second quarter of fiscal 2021 compared to the same period last year.

First Six Months of 2021 vs. First Six Months of 2020: CTS operating income for the first six months of fiscal 2021 increased 141% to $64.7 million compared to $26.9 million in the first six months last year. Operating income was higher in the U.S., U.K., and Australia due to increased work and higher profitability on our system development contracts in the U.S. and the impact of cost savings initiatives in all our regions. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in operating income of $2.1 million for the first six months of fiscal 2021 compared to the same period last year.

Amortization of Purchased Intangibles:

Amortization of purchased intangibles included in the CTS results amounted to $4.3 million in the second quarter of fiscal 2021 compared to $4.8 million in the second quarter of fiscal 2020, and $9.1 million in the first six months of fiscal 2021 compared to $9.3 million in the same period last year. 

Adjusted EBITDA:

CTS Adjusted EBITDA increased 59% to $38.4 million in the second quarter of fiscal 2021 compared to $24.2 million in the same period last year, and increased 60% to $74.2 million in the first six months of fiscal 2021 compared to $46.4 million in the same period last year. The increase in Adjusted EBITDA was primarily driven by the same factors that drove the increase in operating income described above, excluding amortization of purchased intangibles and acquisition-related expenses.

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CMPS Segment

	Three Months Ended							Six Months Ended
	March 31,							March 31,
	2021		2020		% Change			2021		2020		% Change
(in millions)
Sales	$	126.0	$	123.9		2	%	$	247.7	$	264.1		(6)	%
Operating loss		(22.3)		(25.7)		(13)	%		(38.8)		(34.3)		13	%
Adjusted EBITDA		(4.8)		(8.7)		(45)	%		(2.1)		(10.5)		(80)	%

Sales:

Second Quarter of 2021 vs. Second Quarter of 2020: CMPS sales for the second quarter of fiscal 2021 increased 2% to $126.0 million from $123.9 million in the same period last year. The increase was due to higher sales generated by our C2ISR business and expeditionary satellite communications, which were partially offset by lower sales from our LVC training systems business. Businesses acquired by CMPS in fiscal 2020 had sales of $6.2 million in the second quarter of fiscal 2021, compared to sales of $1.1 million in the same period last year. In addition, average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in sales of $1.9 million for the second quarter of fiscal 2021, compared to the same period last year.

First Six Months of 2021 vs. First Six Months of 2020: CMPS sales for the first six months of fiscal 2021 decreased 6% to $247.7 million from $264.1 million in the same period last year. The decrease in sales primarily resulted from reduced work on LVC training systems, which was partially offset by higher sales from our C2ISR business and sales generated by recently acquired businesses. Businesses acquired by CMPS in fiscal 2020 had sales of $8.5 million for the first six months of fiscal 2021, compared to $1.1 million of sales in the same period last year. In addition, average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in sales of $2.7 million for the first six months of fiscal 2021, compared to the same period last year.

Operating Loss:

Second Quarter of 2021 vs. Second Quarter of 2020: CMPS operating loss for the second quarter of fiscal 2021 decreased 13% to $22.3 million compared to a loss of $25.7 million in the second quarter last year. The decrease in operating loss was primarily driven by lower SG&A expenses as a result of cost saving initiatives and an increase in profits from higher sales from our C2ISR business. These items were partially offset by higher R&D expenses. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in operating income of $0.3 million for the second quarter of fiscal 2021 compared to the same period last year.

First Six Months of 2021 vs. First Six Months of 2020: The CMPS operating loss for the first six months of fiscal 2021 increased to $38.8 million compared to an operating loss of $34.3 million in the same period last year. The increase in operating loss was driven by a $3.3 million increase in restructuring expense, a $5.0 million increase in R&D expense, and a $4.7 million increase in the amortization of purchased intangibles. Partially offsetting these increased expenses were cost saving initiatives that resulted in a reduction in SG&A expenses as well as an increase in profits on higher sales from our C2ISR business.

Amortization of Purchased Intangibles:

Amortization of purchased intangibles included in the CMPS results amounted to $10.7 million in the second quarter of fiscal 2021 compared to $11.7 million in same period last year, and $22.0 million in the first six months of fiscal 2021 compared to $17.3 million in the first six months of last year. The increase in amortization for the first half of fiscal 2021 was due to the amortization of purchased intangibles related to our acquisition of Pixia in January 2020.

Adjusted EBITDA:

CMPS Adjusted EBITDA loss was $4.8 million in the second quarter of fiscal 2021 compared to a loss of $8.7 million in the same period last year, and a loss of $2.1 million in the first six months of fiscal 2021 compared to a loss of $10.5 million in the same period last year. The change in Adjusted EBITDA was primarily driven by the same factors that

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drove the change in operating loss described above, excluding amortization of purchased intangibles, acquisition-related expenses, and restructuring expenses.

Backlog

	March 31,		September 30,
	2021		2020
	(in millions)
Total backlog
Cubic Transportation Systems	$	3,072.1	$	3,139.9
Cubic Mission and Performance Solutions		554.3		527.1
Total	$	3,626.4	$	3,667.0

Total backlog decreased by $40.6 million from September 30, 2020 to March 31, 2021 including the impact of foreign currency exchange rates. Changes in exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar as of March 31, 2021 increased backlog by a net $71.8 million as compared to September 30, 2020.

Reconciliation of Non-GAAP Financial Information

In addition to results reported under U.S. generally accepted accounting principles (“GAAP”), this Quarterly Report on Form 10-Q also contains non-GAAP measures as defined under Regulation G. These non-GAAP measures consist of Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. We believe that these non-GAAP measures provide additional insight into our ongoing operations and underlying business trends, facilitate a comparison of our results between current and prior periods, and facilitate the comparison of our operating results with the results of other public companies that provide non-GAAP measures. We use Adjusted EBITDA internally to evaluate the operating performance of our business, for strategic planning purposes and as a factor in determining incentive compensation for certain employees. These non-GAAP measures facilitate company-to-company operating comparisons by excluding items that we believe are not part of our core operating performance. Adjusted Net Income is defined as GAAP net income (loss) from continuing operations attributable to Cubic excluding amortization of purchased intangibles, restructuring costs, loss on extinguishment of debt, acquisition-related expenses, strategic and IT system resource planning expenses, gains or losses on the disposal of fixed assets, other non-operating expense (income), tax impacts related to acquisitions, and the impact of the Tax Cuts and Jobs Act (“U.S. Tax Reform”). Adjusted EPS is defined as Adjusted Net Income on a per share basis using the weighted average diluted shares outstanding. Adjusted EBITDA is defined as GAAP net income (loss) from continuing operations attributable to Cubic before interest expense (income), loss on extinguishment of debt, income taxes, depreciation and amortization, other non-operating expense (income), acquisition-related expenses, strategic and IT system resource planning expenses, restructuring costs, and gains or losses on the disposal of fixed assets. Strategic and IT system resource planning expenses consists of expenses incurred in the development of our enterprise resource planning system and the redesign of our supply chain which include internal labor costs and external costs of materials and services that do not qualify for capitalization. Acquisition-related expenses include business acquisition expenses including retention bonus expenses, due diligence and consulting costs incurred in connection with the acquisitions, expenses recognized related to the change in the fair value of contingent consideration for acquisitions, and costs incurred in connection with proposals to acquire Cubic.

These non-GAAP measures are not measurements of financial performance under GAAP and should not be considered as measures of discretionary cash available to the Company or as alternatives to net income as a measure of performance. In addition, other companies may define these non-GAAP measures differently and, as a result, our non-GAAP measures may not be directly comparable to the non-GAAP measures of other companies. Furthermore, non-GAAP financial measures have limitations as an analytical tool and you should not consider these measures in isolation, or as a substitute for analysis of our results as reported under GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included below.

We reconcile Adjusted EBITDA and Adjusted Net Income to GAAP net income, which we consider to be the most directly comparable GAAP financial measure. We reconcile Adjusted EPS to GAAP EPS, which we consider to be the most directly comparable GAAP financial measure. The following tables reconcile these non-GAAP measures to their most directly comparable GAAP financial measure:

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Adjusted Net Income and Adjusted EPS Reconciliation

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
(in millions, except per share data)
GAAP EPS	$	(1.14)	$	(1.25)	$	(1.55)	$	(1.89)
GAAP Net loss from continuing operations attributable to Cubic	$	(36.0)	$	(39.3)	$	(49.0)	$	(59.2)
Noncontrolling interest in net income (loss) of VIE		16.8		(13.2)		22.5		(9.2)
Amortization of purchased intangibles		15.0		16.5		31.1		26.6
(Gain) loss on sale of fixed assets		0.1		0.1		0.1		(0.1)
Restructuring costs		7.8		3.8		11.9		5.4
Loss on extinguishment of debt		—		16.1		—		16.1
Acquisition-related expenses, excluding amortization		18.5		6.6		20.8		5.9
Strategic and IT system resource planning expenses		0.7		1.8		1.3		2.9
Other non-operating expense (income), net		(14.5)		19.6		(15.8)		19.8
Noncontrolling interest in Adjusted Net Income of VIE		(3.2)		(1.3)		(6.0)		(2.2)
Tax impact related to acquisitions1		—		(13.5)		0.2		(13.5)
Impact of U.S. Tax Reform		—		0.5		—		0.5
Tax impact related to non-GAAP adjustments2		(0.4)		(1.6)		(0.6)		(0.6)
Adjusted Net Income (Loss)	$	4.8	$	(3.9)	$	16.5	$	(7.6)
Adjusted EPS	$	0.15	$	(0.12)	$	0.52	$	(0.24)
Weighted Average Diluted Shares Outstanding (in thousands)		31,633		31,296		31,598		31,284

¹ Represents the tax accounting impact of significant discrete items recorded at the time of acquisition.

² The tax effect of the non-GAAP adjustments is generally based on the statutory tax rate of the jurisdiction of the event.

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Adjusted EBITDA Reconciliation

	Three Months Ended				Six Months Ended
(in millions, except margin data)	March 31,				March 31,
Cubic Transportation Systems	2021		2020		2021		2020
Sales	$	217.4	$	197.6	$	414.5	$	386.2
Operating income	$	33.0	$	12.6	$	64.7	$	26.9
Depreciation and amortization		7.5		7.4		15.0		14.5
Noncontrolling interest in EBITDA of VIE		(3.8)		(1.3)		(7.2)		(2.2)
Acquisition-related expenses (gains), excluding amortization		0.1		5.4		(0.1)		6.7
Restructuring costs		1.6		0.1		1.8		0.5
Adjusted EBITDA	$	38.4	$	24.2	$	74.2	$	46.4
Adjusted EBITDA margin		17.7%		12.2%		17.9%		12.0%
	Three Months Ended				Six Months Ended
(in millions, except margin data)	March 31,				March 31,
Cubic Mission and Performance Solutions	2021		2020		2021		2020
Sales	$	126.0	$	123.9	$	247.7	$	264.1
Operating loss	$	(22.3)	$	(25.7)	$	(38.8)	$	(34.3)
Depreciation and amortization		15.2		15.1		30.3		24.3
Acquisition-related expenses (gains), excluding amortization		1.5		1.2		2.5		(1.0)
(Gain) loss on sale of fixed assets		-		0.1		-		(0.1)
Restructuring costs		0.8		0.6		3.9		0.6
Adjusted EBITDA	$	(4.8)	$	(8.7)	$	(2.1)	$	(10.5)
Adjusted EBITDA margin		(3.8)%		(7.0)%		(0.8)%		(4.0)%
	Three Months Ended				Six Months Ended
(in millions, except margin data)	March 31,				March 31,
Cubic Consolidated	2021		2020		2021		2020
Sales	$	343.4	$	321.5	$	662.2	$	650.3
Net income (loss) from continuing operations attributable to Cubic	$	(36.0)	$	(39.3)	$	(49.0)	$	(59.2)
Noncontrolling interest in net income (loss) of VIE		16.8		(13.2)		22.5		(9.2)
Income tax provision (benefit)		3.4		(19.7)		6.9		(13.5)
Interest expense, net		4.8		6.6		11.2		9.7
Loss on extinguishment of debt		-		16.1		-		16.1
Other non-operating expense (income), net		(14.5)		19.6		(15.8)		19.8
Operating loss	$	(25.6)	$	(29.9)	$	(24.3)	$	(36.4)
Depreciation and amortization		25.0		23.4		49.7		40.4
Noncontrolling interest in EBITDA of VIE		(3.8)		(1.3)		(7.2)		(2.2)
Acquisition-related expenses, excluding amortization		18.5		6.6		20.8		5.9
Strategic and IT system resource planning expenses		0.7		1.8		1.3		2.9
(Gain) loss on sale of fixed assets		0.1		0.1		0.1		(0.1)
Restructuring costs		7.8		3.8		11.9		5.4
Adjusted EBITDA	$	22.7	$	4.5	$	52.3	$	15.9
Adjusted EBITDA margin		6.6%		1.4%		7.9%		2.4%

Note: Amounts may not sum due to rounding

Liquidity and Capital Resources

Operating activities used cash of $58.6 million for the first half of fiscal 2021 primarily due to higher balances in our contract assets and long term financing receivables due to timing differences between revenue recognition and when we are able to bill for milestone payments under our customer contracts. Our use of cash from operating activities includes cash outflows of $35.5 million from our consolidated VIE. As further described below, our consolidated operating cash flows exclude $34.4 million of cash received by Cubic from our consolidated VIE during the first half of fiscal 2021.

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Investing activities used cash of $19.0 million for the first half of fiscal 2021, including capital expenditures of $20.1 million and purchases of non-marketable equity securities of $1.4 million, partially offset by $2.5 million of proceeds received related to the sale of trade receivables to banks which are required to be classified as investing activities under GAAP, as further described below.

Financing activities provided cash of $85.8 million for the first half of fiscal 2021 and included net proceeds from short-term borrowings of $63.0 million and payments of $4.6 million on and long-term borrowings. Net long-term borrowings undertaken by our consolidated VIE were $41.5 million for the first half of fiscal 2021. See discussion of our consolidated VIE in the section below.

Consolidated Variable Interest Entity

In March 2018, Cubic and John Laing, an unrelated company that specializes in contracting under public-private partnerships, jointly formed Boston AFC 2.0 HoldCo. LLC (“Boston HoldCo”). Also in March 2018, Boston HoldCo created a wholly owned entity, Boston AFC 2.0 OpCo. LLC (“Boston OpCo”), which entered into a contract with the Massachusetts Bay Transit Authority (“MBTA”) for the financing, development and operation of a next-generation fare payment system in Boston (the “Original MBTA Contract”). In June 2020, MBTA and Boston OpCo executed an amended agreement (the “Amended MBTA Contract”) to reset the project and modify certain aspects of the Original MBTA Contract. Collectively, Boston HoldCo and Boston OpCo are referred to as the “P3 Venture”.

We have consolidated Boston OpCo into our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Because we consolidate Boston OpCo, any payments from Boston OpCo to Cubic are excluded from our cash flows provided by operating activities, and the cash received by Boston OpCo in connection with its draws on its non-recourse debt are reflected as cash provided by financing activities. Boston OpCo’s draws on its non-recourse debt amounted to $41.5 million in the first half of fiscal 2021. Payments we received from Boston OpCo that were not included in our cash provided by operating activities totaled $34.4 million in the first half of fiscal 2021 and have totaled a cumulative $171.7 million since the inception of our contract with Boston OpCo in March 2018.

In connection with the execution of the Amended MBTA Contract, Boston OpCo entered into an amended credit agreement with a group of financial institutions (the “Boston OpCo Amended Credit Agreement”), which includes two long-term debt facilities and a revolving credit facility. The long-term debt facilities allow for draws up to an aggregate of $421.6 million during the design and build phase. The long-term debt facilities, including all interest and fees incurred, are required to be repaid on a fixed monthly schedule commencing once the design and build phase is completed in 2024. The long-term debt facilities bear interest at variable rates of LIBOR plus a margin of 1.75% to 2.0%. At March 31, 2021, the outstanding balance on the long-term debt facilities was $225.3 million, which is presented net of unamortized deferred financing costs of $16.7 million. The revolving credit facility allows for draws up to a maximum aggregate amount of $15.8 million during the operate and maintain phase. Boston OpCo’s debt is nonrecourse with respect to Cubic and our subsidiaries.

The Boston OpCo Amended Credit Agreement contains covenants that require Boston OpCo and Cubic to maintain progress on the delivery within a specified timeline and budget and provide regular reporting on such progress. It also contains events of default, including the delivery of a customized fare collection system to the MBTA by a pre-determined date as well as other customary events of default. Failure to meet such delivery date will result in incurring penalties due to the lenders thereunder.

Upon execution of the Boston OpCo Amended Credit Agreement, Boston OpCo entered into new pay-fixed/receive-variable interest rate swaps to mitigate variable interest rate associated with its long-term debt. At March 31, 2021, the outstanding notional principal amounts on open interest rate swaps were $233.5 million.

Financing Arrangements

On March 27, 2020, we also executed a Fifth Amended and Restated Credit Agreement (the “Credit Facility”) with a group of financial institutions. The Credit Facility provided for a new term loan in the aggregate amount of $450.0 million (the “Term Loan”) and increased our existing revolving line of credit limit (the “Revolving Line of Credit”) from

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$800.0 million to $850.0 million. The commitments under the Credit Facility will mature on March 27, 2025 and bear interest generally at the LIBOR rate plus a margin that ranges between 1.00% and 2.00%. At March 31, 2021, the weighted average interest rate on outstanding borrowings under the Credit Facility was 1.92%. The Credit Facility is unsecured, but it is guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into interest rate swaps with a group of financial institutions to mitigate the variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts which align with our fixed repayment schedules under the Credit Facility and as of March 31, 2021 have an interest rate of approximately 2.49% and outstanding notional principal amounts of $500.0 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of March 31, 2021, there were $438.8 million of borrowings under the Term Loan and $279.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.5 million at March 31, 2021, which reduced our available line of credit to $476.5 million. The $94.5 million of letters of credit includes both financial letters of credit and performance guarantees.

As of March 31, 2021, we had letters of credit and bank guarantees outstanding totaling $101.1 million, which includes the $94.5 million of letters of credit issued under the Revolving Line of Credit and $6.6 million of letters of credit issued under other facilities. The $101.1 million of letters of credit and bank guarantees includes $97.4 million that guarantees either our performance or customer advances under certain contracts and $3.7 million of financial letters of credit that primarily guarantees our payment of certain self-insured liabilities. We have never had a drawing on a letter of credit instrument, nor are any anticipated; therefore, we estimate the fair value of these instruments to be zero. We also use surety bonds as an alternative to letters of credit.

We have entered into a short-term borrowing arrangement in the United Kingdom for up to £15.0 million British Pounds (equivalent to approximately $20.7 million at March 31, 2021) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At March 31, 2021, no amounts were outstanding under this arrangement.

We maintain a cash account with a bank in the U.K. for which the funds are restricted as to use. The account is required to secure the customer’s interest in cash deposited in the account to fund our activities related to our performance under a fare collection services contract in the United Kingdom. The balance in the account as of March 31, 2021 was $28.6 million and is classified as restricted cash in our Condensed Consolidated Balance Sheets.

The terms of the Credit Facility contain financial covenants setting a maximum total ratio of debt to adjusted earnings before interest, taxes, depreciation and amortization and a minimum interest coverage ratio. In addition, the terms contain covenants that restrict, among other things, our ability to sell assets, incur indebtedness, make investments, grant liens, pay dividends and make other restricted payments. As of March 31, 2021, we were in compliance with all covenants under the Credit Facility.

In the normal course of our business, we may sell trade receivables to financial institutions as a cash management technique. We do not retain financial or legal obligations for these receivables that would result in material losses. Our ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables; therefore, our sold trade receivables are not included in our Condensed Consolidated Balance Sheet in any period presented. As of March 31, 2021, we did not have any outstanding trade receivables sold to financial institutions.

Our financial condition remains strong with net working capital of $151.6 million and a current ratio of 1.2 to 1 at March 31, 2021. We expect that cash on hand and our Revolving Credit Agreement will be adequate to meet our working capital requirements for the foreseeable future. Our total debt to capital ratio at March 31, 2021 was 73%.

As of March 31, 2021, the majority of the $162.4 million of our cash, cash equivalents and restricted cash was held by our foreign subsidiaries, primarily in the U.K., New Zealand and Australia

Future repatriations of foreign earnings will generally be exempt from U.S. tax. We will continue to provide applicable deferred taxes based on the tax liability or withholding taxes that would be due upon repatriation of the undistributed foreign earnings.

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Recent Accounting Pronouncements

See “Recent Accounting Pronouncements” in Note 1 of the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Critical Accounting Policies, Estimates and Judgments

Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to revenue recognition, income taxes, valuation of goodwill, purchased intangibles, accounting for business combinations and pension costs. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

There have been no significant changes to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2020.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact should be considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, objectives, assumptions, future events or our future financial or operating performance, including those concerning new programs and growth in the markets in which we do business, increases in demand for our products and for fully integrated systems, retention of existing contracts and receipt of new contracts, the development of new products, systems and services, expansion of our automated payment and fare collection systems and services, maintenance of long-term relationships with our existing customers, expansion of our service offerings and customer base for services, maintenance of a diversified business mix, expansion of our international footprint, strategic acquisitions, the uncertainty regarding the scope, duration and impact of COVID-19, U.S. and foreign government funding, supplies of raw materials and purchased parts, cash needs, financial condition, liquidity, prospects, and the trends that may affect us or the industries in which we operate, are not historical and may be forward-looking.

These statements are often, but not always, made through the use of words or phrases such as “may,” “will,” “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “predict,” “potential,” “opportunity” and similar words or phrases or the negatives of these words or phrases. These forward-looking statements involve risks, estimates, assumptions and uncertainties, including those discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for fiscal 2020 and in Part II, Item 1A of this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those expressed in these statements.

Such risks, estimates, assumptions and uncertainties include, among others:

● the impact of the pending acquisition of Cubic by Veritas Capital and Evergreen Coast Capital Corporation and whether closing conditions related to the pending acquisition will be satisfied and the timing thereof;

● the impact of the COVID-19 outbreak or future epidemics on our business, including the potential for facility closures or work stoppages; supply chain disruptions; program delays; our ability to recover our costs under

47

contracts; changing government funding and acquisition priorities and payment policies and regulations; and potential impacts to the fair value of our assets;

● our dependence on U.S. and foreign government contracts;

● delays in approving U.S. and foreign government budgets and cuts in U.S. and foreign government defense expenditures;

● the ability of certain government agencies to unilaterally terminate or modify our contracts with them;

● the effects of potential sequestration on our contracts;

● our assumptions covering behavior by public transit authorities;

● our ability to successfully integrate new companies into our business and to properly assess the effects of such integration on our financial condition;

● the U.S. government’s increased emphasis on awarding contracts to small businesses, and our ability to retain existing contracts or win new contracts under competitive bidding processes;

● negative audits by the U.S. government;

● the effects of politics and economic conditions on negotiations and business dealings in the various countries in which we do business or intend to do business;

● competition and technology changes in the defense and transportation industries;

● changes in the way transit agencies pay for transit systems;

● our ability to accurately estimate the time and resources necessary to satisfy obligations under our contracts;

● the effect of adverse regulatory changes on our ability to sell products and services;

● our ability to identify, attract and retain qualified employees;

● our failure to properly implement our enterprise resource planning system;

● unforeseen problems with the implementation and maintenance of our information systems;

● business disruptions due to cyber security threats, physical threats, terrorist acts, acts of nature and public health crises;

● our involvement in litigation, including litigation related to patents, proprietary rights and employee misconduct;

● our reliance on subcontractors and on a limited number of third parties to manufacture and supply our products;

● our ability to comply with our development contracts and to successfully develop, introduce and sell new products, systems and services in current and future markets;

● defects in, or a lack of adequate coverage by insurance or indemnity for, our products and systems;

● changes in U.S. and foreign tax laws, exchange rates or our economic assumptions regarding our pension plans; and

● other factors discussed elsewhere in this Quarterly Report on Form 10-Q.

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Because the risks, estimates, assumptions and uncertainties referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. In addition, past financial or operating performance is not necessarily a reliable indicator of future performance and you should not use our historical performance to anticipate results or future period trends. Further, any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks at March 31, 2021 have not materially changed from those described under “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for fiscal 2020.

ITEM 4. CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2021. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, and under the supervision of our Chief Executive Officer and our Chief Financial Officer. Based on our evaluation, we concluded that our disclosure controls and procedures were operating and effective as of that date.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

There have not been any significant changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We consider all current legal matters to be ordinary proceedings incidental to our business. We believe the outcome of these proceedings will not have a materially adverse effect on our financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for fiscal 2020.

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ITEM 6. EXHIBITS

Exhibit Index

Exhibit No.	Description
2.1*	Agreement and Plan of Merger, dated as of February 7, 2021, by and among Atlas CC Acquisition Corp., Atlas Merger Sub Inc. and Cubic Corporation (incorporated by reference to Exhibit 2.1 to Cubic Corporation’s Current Report on Form 8-K, filed with the SEC on February 9, 2021, File No. 001-08931).
2.2*	Amendment No. 1 to Agreement and Plan of Merger, dated as of March 30, 2021, by and among Atlas CC Acquisition Corp., Atlas Merger Sub Inc. and Cubic Corporation (incorporated by reference to Exhibit 2.1 to Cubic Corporation’s Current Report on Form 8-K, filed with the SEC on April 1, 2021, File No. 001-08931).
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Cubic Corporation’s Current Report on Form 8-K, filed with the SEC on February 19, 2019, File No. 001-08931).
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Cubic Corporation’s Current Report on Form 8-K, filed with the SEC on September 21, 2020, File No. 001-08931).
3.3	Certificate of Designations of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Cubic Corporation’s Current Report on Form 8-K, filed with the SEC on September 21, 2020, File No. 001-08931).
4.1	Amendment No. 1 to Rights Agreement, dated as of February 7, 2021, by Cubic Corporation (incorporated by reference to Exhibit 4.1 to Cubic Corporation’s Current Report on Form 8-K, filed with the SEC on February 9, 2021, File No. 001-08931).
10.1	Second Amended and Restated Participation Agreement, dated as of May 29, 2020, by and between Cubic Corporation, Bankers Commercial Corporation, MUFG Union Bank, N.A., MUFG Bank, Ltd., and the Rent Assignees listed on Schedule 1-A therein.
10.2	Amended and Restated Lease Agreement, dated as of June 7, 2019, by and between Cubic Corporation and Bankers Commercial Corporation.
10.3	Lease Supplement, dated December 30, 2020, by and between Cubic Corporation and Bankers Commercial Corporation.
10.4	Omnibus Amendment, dated December 30, 2020, by and among Cubic Corporation, Bankers Commercial Corporation, MUFG Union Bank, N.A., MUFG Bank, Ltd. and BA Leasing BSC, LLC.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
99.1	Voting Agreement, dated as of February 7, 2021, by and among Cubic Corporation and the persons identified on Exhibit A thereto (incorporated by reference to Exhibit 99.1 to Cubic Corporation’s Current Report on Form 8-K, filed with the SEC on February 9, 2021 , File No. 001-08931).
101	Financial statements from the Cubic Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.
104	Cover Page Interactive Data File, formatted as Inline XBRL and contained in Exhibit 101.

* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish a copy of any omitted schedule or exhibit to the SEC upon request.

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SIGNATURES

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 thereunto duly authorized.

		CUBIC CORPORATION
Date:	May 5, 2021	/s/ Anshooman Aga
		Anshooman Aga
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
Date:	May 5, 2021	/s/ Mark A. Harrison
		Mark A. Harrison
		Senior Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

E

SECOND AMENDED AND RESTATED PARTICIPATION AGREEMENT

DATED AS OF May 29, 2020

AMONG

CUBIC CORPORATION,

AS THE LESSEE AND THE CONSTRUCTION AGENT,

BANKERS COMMERCIAL CORPORATION,

AS THE LESSOR,

MUFG UNION BANK, N.A.,

AS COLLATERAL AGENT,

MUFG BANK, LTD.

AS ADMINISTRATIVE AGENT,

AND

THE RENT ASSIGNEES SET FORTH ON

SCHEDULE I-A FROM TIME TO TIME

AS RENT ASSIGNEES

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	1
ARTICLE II	EFFECTIVENESS; GENERAL PROVISION	2
SECTION 2.1.	Effectiveness of Agreement.	2
SECTION 2.2.	Commitments.	7
SECTION 2.3.	Fundings.	9
SECTION 2.4.	Obligations Several.	11
SECTION 2.5.	Advance Requests.	11
SECTION 2.6.	Funding Notations.	12
SECTION 2.7.	Payments to Participants.	12
SECTION 2.8.	Computations.	13
SECTION 2.9.	Determination of Yield Rate and Payment Periods.	13
SECTION 2.10.	Capitalized Yield.	16
SECTION 2.11.	Lessor Investment.	16
SECTION 2.12.	Rent Assignment Interests.	17
SECTION 2.13.	Fees and Other Transaction Costs.	18
SECTION 2.14.	Nature of Transaction.	19
SECTION 2.15.	Amounts Due.	20
ARTICLE III	CONDITIONS TO ADVANCES; DELIVERIES UPON COMPLETION	21
SECTION 3.1.	Conditions to Each Advance.	21
SECTION 3.2.	Conditions to Initial Advance.	25
SECTION 3.3.	Deliveries Upon Completion.	25
SECTION 3.4.	Final Funding Date Conditions.	27
ARTICLE IV	REPRESENTATIONS AND WARRANTIES	27
SECTION 4.1.	Representations and Warranties of the Lessee.	27
SECTION 4.2.	Representations and Warranties of the Lessor.	34
SECTION 4.3.	Representations and Warranties of Rent Assignees.	35
SECTION 4.4.	Representations and Warranties of Administrative Agent and Collateral Agent.	36
ARTICLE V	COVENANTS OF THE LESSEE	37
SECTION 5.1.	Financial Reporting.	37

TABLE OF CONTENTS

(continued)

SECTION 5.2.	Affirmative Covenants of the Lessee.	40
SECTION 5.3.	Consolidations, Mergers, Sales of Assets.	42
SECTION 5.4.	Compliance with Laws and Approvals.	45
SECTION 5.5.	[Intentionally Omitted.]	45
SECTION 5.6.	Financial Covenants of the Lessee.	45
ARTICLE VI	OTHER COVENANTS AND AGREEMENTS	60
SECTION 6.1.	Cooperation with the Lessee.	60
SECTION 6.2.	Covenants of the Agents and the Participants.	61
SECTION 6.3.	Assignments	64
SECTION 6.4.	Participations.	67
SECTION 6.5.	Ground Lease.	68
SECTION 6.6.	Amendments Related to Credit Facilities.	68
ARTICLE VII	INDEMNIFICATION AND ADDITIONAL PAYMENTS	69
SECTION 7.1.	General Indemnification.	69
SECTION 7.2.	General Tax Indemnity.	74
SECTION 7.3.	Withholding Tax Documentation.	81
SECTION 7.4.	Increased Costs.	82
SECTION 7.5.	Funding Losses.	85
SECTION 7.6.	Gross Up.	85
SECTION 7.7.	Leased Property Indemnity.	86
ARTICLE VIII	AGENCY	86
SECTION 8.1.	Appointment of Administrative Agent and Collateral Agent; Powers and Authorization to Take Certain Actions.	86
SECTION 8.2.	Reliance.	88
SECTION 8.3.	Action Upon Instructions Generally.	88
SECTION 8.4.	Indemnification.	89
SECTION 8.5.	Independent Credit Investigation.	89
SECTION 8.6.	Refusal to Act.	90
SECTION 8.7.	Resignation or Removal of Administrative Agent, Collateral Agent; Appointment of Successor.	90
SECTION 8.8.	Separate Agent.	91

ii

TABLE OF CONTENTS

(continued)

SECTION 8.9.	Termination of Agency.	92
SECTION 8.10.	Compensation of Administrative Agent and Collateral Agent.	92
SECTION 8.11.	Limitations.	92
ARTICLE IX	MISCELLANEOUS	93
SECTION 9.1.	Survival of Indemnities.	93
SECTION 9.2.	No Broker, etc.	93
SECTION 9.3.	Notices.	93
SECTION 9.4.	Counterparts.	93
SECTION 9.5.	Amendments	94
SECTION 9.6.	Headings, etc.	95
SECTION 9.7.	Parties in Interest.	95
SECTION 9.8.	Governing Law.	95
SECTION 9.9.	Payment of Transaction Costs and Other Costs.	95
SECTION 9.10.	Severability.	96
SECTION 9.11.	Limited Liability of the Lessor.	96
SECTION 9.12.	Liabilities of the Participants.	97
SECTION 9.13.	Submission to Jurisdiction; Waivers.	97
SECTION 9.14.	Reproduction of Documents.	98
SECTION 9.15.	Role of Arranger.	98
SECTION 9.16.	Rights Under Rent Assignment Agreements.	99
SECTION 9.17.	Limitation on Recourse Liability During Construction Period.	99
SECTION 9.18.	Payments in Dollars.	99
SECTION 9.19.	Confidentiality.	99
SECTION 9.20.	Entire Agreement.	101
SECTION 9.21.	UCC Filings and Other Matters.	101
SECTION 9.22.	Existence and Continuation of an Event of Default.	101
SECTION 9.23.	USA PATRIOT Act.	101
SECTION 9.24.	Certifications from the Construction Consultant.	102
SECTION 9.25.	Substitution of a Participant; Change in Lending Office.	102

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TABLE OF CONTENTS

(continued)

SECTION 9.26.	Collateral Agent Statements	102
ARTICLE X	RECEIPT, DISTRIBUTION AND APPLICATION OF RECEIPTS	103
SECTION 10.1.	Receipt, Distribution and Application of Receipts; Rent Distribution.	103
SECTION 10.2.	Distribution of Certain Other Payments	104
SECTION 10.3.	Distribution of Payments After Event of Default	105
SECTION 10.4.	Other Payments	106
SECTION 10.5.	Distribution of Excluded Amounts	106

Appendix I	Definitions
Schedule I-A	Rent Assignee Commitments
Schedule I-B	Lessor Investment
Schedule II	Addresses For Notice; Wire Instructions
Schedule III	Liens
Schedule IV	Description of Site Owned by the Lessor
Schedule 2.9(f)	Planned Advances
Schedule 5.6(d)	Existing Investments
Schedule 5.6(e)	Existing Indebtedness; Disclosed Matters as to Pension Funds
Schedule 5.6(f)	Existing Encumbrances
Exhibit A	Form of Advance Request
Exhibit B	Form of Assignment Agreement
Exhibit C	Form of Compliance Certificate

iv

SECOND AMENDED AND RESTATED PARTICIPATION AGREEMENT

THIS SECOND AMENDED AND RESTATED PARTICIPATION AGREEMENT, dated as of May 29, 2020 (this “Agreement”), is made among CUBIC CORPORATION, a Delaware corporation, as Lessee (the “Lessee”) and as the Construction Agent (the “Construction Agent”), BANKERS COMMERCIAL CORPORATION, a California corporation, as the Lessor (in such capacity, the “Lessor”), MUFG UNION BANK, N.A., as Collateral Agent for the Rent Assignees (the “Collateral Agent”), MUFG BANK, LTD., as Administrative Agent for the Participants (in such capacity, the “Administrative Agent”) and the Rent Assignee(s) named on Schedule I-A hereto from time to time (the “Rent Assignees”).

PRELIMINARY STATEMENT

A.         Lessee, Construction Agent, Lessor, Collateral Agent, Administrative Agent and the Rent Assignees entered into an Amended and Restated Participation Agreement, dated as of June 7, 2019 (as amended, the “Original Participation Agreement”).

B.         Lessee has amended and restated the Credit Agreement (as defined in the Original Participation Agreement) pursuant to that certain Fifth Amended and Restated Credit Agreement, dated as of March 27, 2020, by and among Cubic, Cubic Transportation Systems, Inc., Cubic Defense Applications, Inc. and the other subsidiary borrowers from time to time party, as borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, joint lead book runner and joint lead arranger, Bank of the West, MUFG Union Bank, N.A., Truist Bank and Wells Fargo Bank, National Association, as co-syndication agents, joint lead book runners and joint lead arrangers, and Bank of America, N.A., Fifth Third Bank, National Association and U.S. Bank National Association, as co-documentation agents, as the same may be further amended, restated, supplemented or otherwise modified.

C.         Lessee, Construction Agent, Lessor, Collateral Agent, Administrative Agent and the Rent Assignees desire to amend and restate the Original Participation Agreement in its entirety to conform to certain modifications made to the Credit Agreement as set forth below.

NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Original Participation Agreement shall be amended and restated in its entirety as follows:

ARTICLE I

DEFINITIONS

Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix I hereto for all purposes hereof and the rules of interpretation set forth in Appendix I hereto shall apply to this Agreement.

ARTICLE II

EFFECTIVENESS; GENERAL PROVISION

SECTION 2.1.           Effectiveness of Agreement.

The obligations of the Lessor to acquire Building 1 pursuant to the Deed and lease the Site pursuant to the Ground Lease and lease the Leased Property and of the Participants to finance the demolition of Building 1 and construction of the Facility and issue their respective Commitments and the effectiveness of this Agreement (the “Closing”) shall occur upon the satisfaction of each of the following conditions and of the conditions set forth in Section 3.1 hereof (all such conditions to be satisfied to the satisfaction of the Lessor in its reasonable discretion):

(a)Authorization, Execution and Delivery of Documents; No Default. The Operative Documents shall have been duly authorized, executed and delivered by each of the parties thereto, shall be in form and substance reasonably satisfactory to the Lessee, each Participant, and the Agents and an executed counterpart of each thereof shall have been received by such parties. Each of the documents referred to above shall be in full force and effect as to all parties and no event which would constitute a Default or Event of Default under the Lease or a default under any other Operative Document shall be continuing.

(b)Legal Opinions. The Agents and each of the Participants shall have received favorable opinions of James R. Edwards, Senior Vice President, General Counsel and Secretary of the Lessee, and of Jones Day, special counsel to the Lessee and as California local counsel. Each of the foregoing opinions shall be dated the Closing Date and in form and substance reasonably satisfactory to the recipients thereof.

(c)Insurance. The Agents and each Participant shall have received the insurance certificates required by Section 2.7(d) of the Construction and Development Agreement.

(d)Governmental and Third Party Approvals. All necessary or advisable Governmental Actions and all consents, approvals and authorizations of Persons, required in connection with the Overall Transaction, shall have been obtained or made and be in full force and effect and not be subject to any pending procedures or appeals, whether administrative, judicial or otherwise, except for (i) any Governmental Actions that are not required with respect to the then current status of the construction of the Facility; and (ii) any other Governmental Action, consent, approval or authorization the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect.

(e)Corporate Status and Proceedings. The Agents and each of the Participants shall have received:

(i)certificates of good standing with respect to the Lessee from the State of Delaware and the State of California, each dated no earlier than the thirtieth (30^th) day prior to the Closing Date; and

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(ii)        a certificate of the Secretary or Assistant Secretary (or other Responsible Officer) of the Lessee, in form and substance reasonably satisfactory to the Agents and each of the Participants and attaching and certifying as to (A) the board of directors’ resolutions in respect of the execution, delivery and performance by the Lessee of each Operative Document to which it is or will be a party, (B) its certificate of incorporation and bylaws, and (C) the incumbency and signatures of persons authorized to execute and deliver the Operative Documents on behalf of the Lessee.

(f)         The Lessor Documents. Each of the Rent Assignees, the Agents and the Lessee shall have received:

(i)         a certificate of good standing with respect to the Lessor from the State of California, dated no earlier than the thirtieth (30^th) day prior to the Closing Date; and

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

(g)        Representations and Warranties; Absence of Defaults; Etc. Each representation and warranty of the Lessee and the Participants contained herein or in any other Operative Document shall be true and correct in all material respects.

(h)        Appraisal; Survey. The Agents and each of the Participants shall have received an (the “Appraisal”) from the Appraiser which shall establish (by the use of appraisal methods reasonably satisfactory to the Participants) values and other information as required by the Participants, including without limitation, as to the economic useful life of the Leased Property (assuming Completion of the Facility on the Site substantially in accordance with Applicable Laws and Regulations, and assuming that the Facility has been constructed) as of the Construction Period Termination Date and as of the Maturity Date. The Appraisal shall comply 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 Laws and Regulations. The Lessee shall have delivered, or shall have caused to be delivered, to the Participants, at the Lessee’s expense, sufficient copies of an accurate “Boundary” survey (the “Survey”) prepared in accordance with the 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys certified to the Agents and each of the Participants and showing no state of facts reasonably unsatisfactory to each of the Participants and prepared within thirty (30) days of the Closing Date by a Person reasonably satisfactory to each of the Participants. Such survey shall (1) be acceptable to the Title Insurance Company, (2) show no encroachments on the Site by structures owned by others, and no encroachments from any part of the Leased Property onto any land owned by others, and (3) disclose no state of facts reasonably objectionable to any

3

of the Participants or the Title Insurance Company, and be reasonably acceptable to each such Participant.

(i)         Environmental Report and Related Reliance Letter. The Agents and each of the Participants shall have received a copy of the “Phase I” environmental assessment report (or its equivalent) of the Site in form and substance satisfactory to each of the Participants by the Environmental Expert, and, if such assessment indicates any exceptions reasonably requiring remedy or further investigation, a further environmental assessment of the Site by such environmental engineer satisfactory to each of the Participants; and the Environmental Expert shall have delivered to each of the Participants a letter in form and substance satisfactory to each of the Participants stating that each such Person may rely upon the Environmental Expert’s assessment of the Site. In addition, the Lessee shall deliver to the Administrative Agent a written approval from the DEH of (i) the Remediation Plan in connection with certain remediation actions to be undertaken as part of the Construction, and such approval shall be satisfactory in form and substance to the Participants, and (ii) the project-specific community health and safety plan related to the Construction.

(j)         Construction Matters. The Agents and each of the Participants shall have received:

(i)         a certificate from the Construction Consultant and the Construction Agent (provided, the Construction Consultant shall provide such certifications only with respect to the matters described in subsections (A) and (B) of this Section 2.1(j)(i) and only if the Agents or any of the Participants, prior to the Closing, expressly requests the Construction Consultant to provide such certifications but the Construction Agent shall provide certifications with respect to the matters described in all subsections of this Section 2.1(j)(i)), dated the Closing Date, certifying to the effect that: (A) the aggregate Commitments of the Rent Assignees and the Lessor are sufficient to Complete the Facility and to pay all Construction Costs, in each case on or before the Construction Period Termination Date; (B) Completion of the Facility can be achieved before the Construction Period Termination Date; (C) the Facility will be constructed on the Site substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget; (D) all representations and warranties of the Lessee and the Construction Agent contained in the Operative Documents are true and correct in all material respects; (E) no Construction Default, Construction Event of Default or Force Majeure Event is continuing; (F) the matters set forth in clause (d) of this Section 2.1 are true and correct; and (G) attached thereto are true, correct and complete copies of the Construction Budget (which includes appropriate contingency reserves as set forth therein), the construction schedule, a site-map of the Site and the Major Construction Documents entered into as of the Closing Date, and that the same have not been amended or otherwise modified, revoked or rescinded and, in the case of such Major Construction Documents, are in full force and effect;

(ii)        at least ten (10) days prior to the Closing Date, a copy of the Construction Budget prepared in accordance with Section 2.6 of the Construction and

4

Development Agreement and a copy of the General Construction Agreement, the Development Agreement; and

(iii)       an Assignment of Contracts and a Consent and Acknowledgment with respect to each Major Construction Document then in existence.

(k)        No Material Adverse Effect. Since September 30, 2018, there has been no Material Adverse Effect with respect to the Site or the Lessee.

(l)         Fees and Transaction Costs. (i) The Agents, the Arranger and each of the Participants shall have received payment of all Fees agreed to by the Lessee in writing and due and payable to them on the Closing Date and (ii) the Lessee shall have paid all other Transaction Costs due and payable on or prior to the Closing Date that have been set forth in detailed invoices delivered to the Lessee at least five (5) Business Days prior to the Closing Date. Provisions for the payment of all Taxes and filing fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Documents and the Overall Transaction shall have been made by the Lessee to the reasonable satisfaction of the Administrative Agent and each of the Participants.

(m)       Title and Title Insurance. On the Closing Date, the Site will be ground leased to the Lessor pursuant to the Ground Lease. The Title Insurance Company shall deliver to Lessor, a Leasehold Policy of Title Insurance and an alternative Mortgagee Policy of Title Insurance (insuring the lien of the mortgage contained in the Memorandum of Lease) issued to the Lessor and its successors and assigns including Administrative Agent, in each case, reasonably acceptable in form and substance to the Administrative Agent and each of the Participants (collectively, the “Title Policy”). The Title Policy shall be dated as of the Closing Date, shall include coverage over the general exceptions to such policy and shall contain such affirmative endorsements as to mechanic’s liens, easements and rights-of-way, encroachments, the non-violation of covenants and restrictions, zoning, survey matters, an alternative policy endorsement and other matters as the Lessor or Lessee shall reasonably request, in each case to the extent customarily available in California, as applicable.

(n)        Lien Searches, Financing Statements. Uniform Commercial Code lien searches shall have been performed and sufficient copies thereof delivered to the Lessor and Administrative Agent, which shall indicate to each such party’s reasonable satisfaction that there are no Liens other than Liens released concurrently with the effectiveness of this Agreement on the Closing Date (regardless of whether senior, pari passu or junior) in effect with respect to any Lessee Collateral and UCC-1 financing statements covering such collateral shall have been prepared by the parties thereto and copies thereof delivered to the Lessor and the Administrative Agent, all of which shall be in form and substance reasonably acceptable to the Lessor and the Administrative Agent.

(o)        Filings, Recordings and Other Actions. The Lessee shall have caused the Ground Lease to be executed and delivered in favor of the Lessor. The Lessee and the Lessor shall have executed and delivered all instruments and documents necessary for (i) the Lessor to obtain a Lien on the Lessee Collateral and (ii) any of the Operative Documents to become effective or enforceable, in each case in accordance with Applicable Laws and Regulations and to the extent

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reasonably required in connection with the then current status of the construction and planning of the Facility. The Lessee and the Lessor shall cause all such instruments and documents to be filed and recorded in the Recorder’s Office or such governmental offices as is necessary to perfect or publish notice of such Liens in favor of the Lessor. The Lessor and the Administrative Agent shall have received satisfactory evidence of the payment of all recording and filing fees and taxes with respect to any recordings or filings made of the Memorandum of Lease, the Memorandum of Ground Lease and any UCC financing statements to be filed with the Secretary of State of the State of Delaware and the Recorder’s Office (or other appropriate filing office).

(p)        Flood Hazard Certification. The Administrative Agent and the Lessor shall have obtained the necessary documents regarding flood hazard certification, which shall be prepared at Lessee’s expense.

(q)        Assignments and Liens. The Lessor shall have a security interest in the interests of the Lessee in the Lessee Collateral.

(r)         No Event of Loss, Taking, Force Majeure Event. No Event of Loss, Event of Taking, Force Majeure Event shall have occurred with respect to the Leased Property.

(s)        Rent Assignment Interests and Lessor Investment Permitted by Applicable Law, etc. The acquisition of the Rent Assignment Interests by the Rent Assignees and the making of the Lessor Investment by the Lessor shall be permitted by Applicable Laws and Regulations (including, without limitation, Regulations T, U and X of the F.R.S. Board) and shall not subject any Participant to any Tax, penalty, liability or other onerous condition under or pursuant to any Applicable Laws and Regulations. If requested any Participant, such Participant shall have received an Officer’s Certificate from a Responsible Officer by the Lessee certifying as to such matters of fact as it may reasonably specify to enable it to determine whether such acquisition of the Rent Assignment Interests or the making of the Lessor Investment, as applicable, is so permitted.

(t)         The Lessor Confirmation Letter. The Lessee shall have received a lessor confirmation letter from the Lessor providing information related to ASC 810.

(u)        KYC, FIN Cen Information. Upon the reasonable request of the Lessor made at least ten (10) days prior to the initial Advance Date, Lessee shall have provided to the Lessor the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including the USA PATRIOT Act, as defined below, in each case at least five (5) days prior to the initial Advance Date.

All documents and instruments required to be delivered on the Closing Date pursuant to the Operative Documents shall be delivered at the offices of Dechert LLP, or at such other location as the Lessor, the Agents and the Lessee may agree. The release by any party of its counterpart to this Agreement shall constitute conclusive evidence of its satisfaction with the form and substance of each of the items so delivered under this Section 2.1, subject to the right of the Lessor to require a side letter for satisfaction of certain items under this Section 2.1 after the Closing Date.

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Each of the parties hereto acknowledge and agree that the Closing occurred on the Closing Date and that the foregoing conditions set forth in Section 2.1 have been satisfied prior to the Amendment Date.

(v)        Note Purchase Agreement Indebtedness. The Administrative Agent shall have received evidence satisfactory to it that, prior to the effectiveness of this Agreement, any and all Indebtedness under the Note Purchase Agreement shall have been fully repaid.

SECTION 2.2.           Commitments.

(a)        Rent Assignment Commitments.

(i)         Subject to the terms and conditions hereof and of the Rent Assignment Agreement and after receipt of each Advance Request in accordance with Section 2.5 hereof, each Rent Assignee severally agrees to acquire the Rent Assignment Interests from the Lessor for the purpose of enabling the Lessor to make the Advance to Lessee on the Closing Date and on each other Advance Date, in the amounts required under Section 2.12(a) hereof and Section 1.02(b) of the respective Rent Assignment Agreement.

(ii)        Each Rent Assignee’s Commitment and Commitment Percentage are as specified on Schedule I-A (in the case of the initial Rent Assignees) or as specified in the applicable Assignment Agreement pursuant to which such Rent Assignee became a party to the Rent Assignment Agreement. In no event shall any Rent Assignee be obligated to acquire any Rent Assignment Interest to fund an Advance on any Advance Date if, after giving effect to such Advance, (1) the aggregate outstanding amount of the Rent Assignment Advances funded and Lessor Investment made to fund Advances would exceed the Commitment Amount or (2) the aggregate amount of funds so provided by such Rent Assignee would exceed the amount of its Commitment.

(b)        Lessor Commitment.

(i)         Subject to the terms and conditions hereof and after receipt of each Advance Request in accordance with Section 2.5 hereof, the Lessor agrees to make an investment on the Closing Date and each other Advance Date to the Administrative Agent in accordance with Section 2.3 in an amount equal to its Commitment Percentage times the Commitment Amount (such contributions collectively called the “Lessor Investment”).

(ii)        The Lessor’s Commitment and Commitment Percentage are as specified on Schedule I-B or as specified in the applicable Assignment Agreement pursuant to which the Lessor became a party hereto. In no event shall the Lessor be obligated to make a Lessor Investment on any Advance Date if, after giving effect to such Advance, (1) the aggregate outstanding amount of the Rent Assignment Advances funded and Lessor Investment made to fund Advances would exceed the Commitment Amount or (2) the aggregate amount of funds so provided by the Lessor would exceed the amount of its Commitment. Nothing in this Section 2.2(b) shall operate to relieve the Rent Assignees or the Lessee from their respective obligations under the Operative Documents or to waive any of the Lessor’s rights against the Rent Assignees or Lessee.

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(c)        Termination and Reduction of Commitments.

(i)         Notwithstanding anything in this Agreement to the contrary, the Commitments shall terminate and the Lessor shall not be obligated to make any Advance, and no Rent Assignee shall be obligated to make any Rent Assignment Advances in respect of any Advance and no Advance Date may thereafter occur at 11:00 a.m. New York time on the last day of the Commitment Period.

(ii)        During the continuation of an Event of Default, whether automatically or with the consent, or at the request, of the Required Participants, upon written notice to the Lessee (except in the case of an Event of Default described in paragraphs (h) or (i) of Article XVII of the Lease), the Commitments of the Participants shall be terminated, the Lease Balance outstanding with accrued Yield thereon and all other amounts owing hereunder and shall immediately become due and payable and the application of proceeds therefrom shall be subject to Article X hereof.

(iii)       The Lessee shall have the right, upon not less than ten (10) days prior written notice to the Administrative Agent, to voluntarily reduce the Commitments on a Payment Date, subject to the satisfaction of the following conditions:

(A)       the Construction Consultant and the Construction Agent shall certify (provided the Construction Consultant shall provide the certifications specified in subsections (i) and (ii) below but not subsection (iii) below) to each Participant that, following such reduction of the Commitment, (i) the remaining Available Commitments of the Lessor and Rent Assignees are sufficient to Complete the Facility and to pay all Construction Costs, (ii) the Facility can be Completed before the Construction Period Termination Date, and (iii) no Construction Event of Default is continuing;

(B)       all Transaction Costs and other amounts accrued with respect to the portion of the Commitments so reduced through the effective date of such reduction shall be paid in accordance with Section 2.13;

(C)       such reduction shall be in a minimum amount of $1,000,000 in the aggregate or, if less, the aggregate remaining unfunded Available Commitments of the Lessor and Rent Assignees; and

(D)       such reduction shall reduce (1) each Rent Assignee’s Commitment pro rata based on the percentage of the aggregate Commitments of the Rent Assignees then in effect represented by such Rent Assignee’s Commitment, and (2) the Lessor’s Commitment pro rata based on the percentage of the aggregate Commitments of all of the Participants then in effect represented by the Lessor’s Commitments.

(d)        Increase in Commitments. If the Construction Agent determines that the Commitments are not sufficient to Complete the Facility on or prior to the Construction Period Termination Date inclusive of all Carrying Costs, then the Participants and the Construction Agent shall, at the written request of the Construction Agent accompanied by the certificate hereinafter described, in good faith, but for a period not in excess of twenty (20) days (provided that such

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period shall not extend beyond the Construction Period Termination Date), discuss the terms and conditions applicable to an increase in the Commitments to enable the Construction Agent to Complete the Facility on or prior to the Construction Period Termination Date. Notwithstanding any provision of any Operative Document to the contrary, during such twenty (20) (or shorter) day period, no Advance shall be made but none of the Participants may exercise any remedy under any Operative Document solely as a result of the remaining Available Commitments of the Lessor and the Rent Assignees being insufficient to Complete the Facility and to pay all Construction Costs. It is understood and agreed that (x) the Participants are not obligated to increase the Commitments by reason of their entering into such good faith discussions and may decline to increase their respective Commitment for any reason in their sole and absolute discretion and (y) no Participant may cause another Participant’s Commitment to be increased without such Participant’s prior consent which may be withheld in its sole and absolute discretion. In connection with any such request, the Construction Agent shall deliver to the Participants (i) a written explanation detailing the reasons why the Commitment was not sufficient to finance Completion, (ii) a certification from the Construction Consultant and the Construction Agent to the effect that the increased Commitment will allow Completion to occur on or before the Construction Period Termination Date substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget, and (iii) any other evidence or information reasonably requested by the Participants in connection therewith. If less than all of the Participants agree to increase their respective Commitments, the remaining Participants have the option to increase their Commitments further, on a pro rata basis with other Participants also electing to further increase their Commitments (and, in such event, the parties hereto agree that the amounts and percentages set forth opposite each Participant’s names on Schedule I-A and Schedule I-B shall be modified accordingly) provided, however, if after such twenty (20) day (or shorter) period, the Construction Agent is unable to obtain the Commitments necessary to Complete the Facility, then a Construction Event of Default shall have occurred.

SECTION 2.3.           Fundings.

(a)        Closing Date. The initial Advance Date shall be the Closing Date. Prior to the initial Advance Date, subject to the terms and conditions set forth in this Agreement and the Rent Assignment Agreement, the Participants, in accordance with their respective Commitment Percentages, shall provide immediately available funds to the Administrative Agent, and on the initial Advance Date, subject to the terms and conditions set forth in this Agreement and the Rent Assignment Agreement, the parties shall instruct the Administrative Agent to provide immediately available funds to the Lessee in an amount necessary to enable (i) the Lessee to pay for the Transaction Costs and Fees referred to in Section 2.1(l), and (ii) the Construction Agent to be reimbursed for, or to be able to make funds available to pay third parties for, any Construction Costs incurred as of or prior to the Closing Date. Such amounts transferred or applied by the Administrative Agent shall constitute an Advance.

(b)        Fundings Generally. Subject to the terms and conditions of this Agreement and the Rent Assignment Agreement, and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, upon receipt of an Advance Request in accordance with Section 2.5, regarding each Advance Date, each Participant shall provide immediately available funds to the Administrative Agent, and on each Advance Date, subject to

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the terms and conditions set forth in this Agreement, the parties intend that the Administrative Agent shall provide immediately available funds to Construction Agent, which shall be used by the Construction Agent for the payment of Construction Costs, including Carrying Costs invoiced at least five (5) Business Days prior to the relevant Advance Date. Such amounts transferred or applied by the Administrative Agent shall constitute an Advance. Transfers of such funds by the Participants shall be made in immediately available funds by wire transfers to the Administrative Agent in accordance with the instructions set forth in Schedule II for deposit not later than 11:00 a.m., New York time, on each Advance Date, except that such funds shall be made available not later than 3:00 p.m., New York time, on the initial Advance Date. The parties intend that funds from the Participants shall be transferred by the Administrative Agent to such account as the Lessee or the Construction Agent, as applicable, shall have indicated in the Advance Request and for same day value provided, that, if the terms and conditions for the Funding set forth herein have not been satisfied by 5:00 p.m. New York time on two (2) Business Days prior to such date, the Participants shall not be obligated to maintain the availability of their funds for such Funding unless the Lessee elects to deliver a satisfactory indemnity for the overnight investment of such funds.

(c)        No Reborrowing. No amounts paid or prepaid with respect to any Advance, Lessor Investment or Rent Assignment Interest may be readvanced.

(d)        Limitations on Advances. There shall be no more than one Advance made during any calendar month (except as may be the case with the final Advance), which shall be made on the Monthly Date occurring in each month. Each Advance made after the first two Advance Dates (excluding any Advance made solely to fund Carrying Costs and excluding the final Advance) shall be in a minimum amount of $500,000 or such other amount as the Lessee and the Lessor shall agree. The Advance made on the final Advance Date shall include funds for any anticipated Construction Costs not yet incurred by the Construction Agent, any Construction Costs being contested by the Construction Agent or for any reimbursement which is in process, provided, that, such final Advance shall be made to the Escrow Agent to be held and disbursed pursuant to the Escrow Agreement and provided, further, that if the amount of such funds advanced and remaining unapplied to such Construction Costs on the next Payment Date following the Construction Period Termination Date exceed $150,000 (to the extent not related to the Holdback Amount (as defined in the Development Agreement)), the Construction Agent will return to the Administrative Agent on behalf of the Participants any such funds on the next Payment Date following the Construction Period Termination Date and any such returned funds shall be credited against and reduce the outstanding Lease Balance. With respect to the Holdback Amount, the Construction Agent will return to the Administrative Agent on behalf of the Participants any such funds remaining unapplied in excess of $150,000 on the first Payment Date following the Post GMP Warranty Period (as defined in the Development Agreement).

(e)        Extension of Construction Period. If the Construction Agent reasonably determines in good faith that it will be unable to Complete the Facility on or prior to the Construction Period Termination Date, then the Participants and the Construction Agent shall, at the written request of the Construction Agent accompanied by the certificate hereinafter described, in good faith, but for a period not in excess of thirty (30) days (provided that such period shall not extend beyond the Construction Period Termination Date), discuss the terms and conditions

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applicable to a postponement of the Construction Period Termination Date to enable the Construction Agent to Complete the Facility on or prior to such extended Construction Period Termination Date. Notwithstanding any provision of any Operative Document to the contrary, during such thirty (30) (or shorter) day period, no Participant may exercise any remedy under any Operative Document solely as a result of the Construction Agent being unable to Complete the Facility by the Construction Period Termination Date. It is understood and agreed that the Participants are not obligated to extend the Construction Period for any reason. The request for such postponement shall be subject to the prior approval of the Required Participants which may be granted or withheld in the Required Participants’ sole and absolute discretion. In connection with any such request, the Construction Agent shall deliver to the Participants (i) a written explanation detailing the reasons why Completion will be unable to occur prior to the Construction Period Termination Date and how such delays will be rectified, and (ii) a certification from the Construction Consultant and the Construction Agent to the effect that the extension of the Construction Period will allow Completion to occur on or before the extended Construction Period Termination Date and within the remaining Available Commitments. If after such thirty (30) day (or shorter) period, the Construction Agent is unable to obtain approval for such postponement, then a Construction Event of Default shall have occurred.

SECTION 2.4.           Obligations Several.

The obligations of the Participants hereunder or elsewhere in the Operative Documents shall be several and not joint and the Participants shall not be liable or responsible for the acts or defaults of any other Participant hereunder or under any other Operative Document, nor shall the failure of any Participant to perform its obligations in and of itself relieve any other Participant from its obligations hereunder.

SECTION 2.5.           Advance Requests.

At or before 11:00 a.m. New York time on the fifth (5th) Business Day prior to a proposed Advance Date, which proposed Advance Date must be a Monthly Date, the Construction Agent shall deliver to the Construction Consultant and the Administrative Agent an irrevocable written notice substantially in the form of Exhibit A (an “Advance Request”), together with the certificate required under Section 3.1(e), setting forth:

(i)         the proposed Advance Date;

(ii)        a statement of the amount of the requested Advance in Dollars (including a separate statement of the amount thereof, if any, that constitutes Carrying Costs, Upfront Fees, Non-Use Fees, Transaction Costs, other Fees and other Construction Costs);

(iii)       the initial Payment Period applicable thereto; and

(iv)       wire transfer instructions for the disbursement of the appropriate amount of funds to the Lessee or the Construction Agent, as applicable.

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Notwithstanding the foregoing, with respect to the initial Advance Date only, the Construction Agent may request that the Advance be made on any Business Day agreed to between the Construction Agent and the Participants. Promptly upon receipt, the Administrative Agent shall confirm the Capitalized Yield and Non-Use Fees set forth in the Advance Request and the Administrative Agent shall forward the Advance Request to each Participant with instructions to each recipient as to the amount of Capitalized Yield and Non-Use Fees which have accrued with respect to its Rent Assignment Interests or Lessor Investment, as applicable, and to retain such amounts from their respective Advances. In the event the Construction Agent shall not deliver an Advance Request at or before 11:00 a.m. New York time on the fifth (5th) Business Day prior to a Payment Date during the Construction Period, the Construction Agent shall be deemed to have made an Advance Request in accordance with Sections 2.10 (Capitalized Yield) and 2.13 (Fees and Other Transaction Costs) and the other relevant terms of this Agreement.

All documents and instruments required to be delivered on any Advance Date pursuant to the Operative Documents other than the Advance Request shall be delivered to the Administrative Agent, or at such other location as the Administrative Agent and the Construction Agent may agree. On the scheduled Advance Date, and subject to the satisfaction of the conditions set forth in this Section 2.5 and in Section 3.1, the Participants shall fund their respective portion of the Advance in Dollars by wire transfer to the Administrative Agent for payment to the Construction Agent in the manner described in Section 2.3(b). Notwithstanding the foregoing, in the event that the Lessor elects to cause the Completion of the Facility pursuant to Section 5.3(a)(iii) of the Construction and Development Agreement, then the Lessor may submit Advance Requests, the aggregate amount available to be funded by the Participants shall equal the aggregate amount of the Available Commitments and such amounts shall be disbursed directly to the Lessor for the payment of Construction Costs.

SECTION 2.6.           Funding Notations.

Each Participant is hereby authorized to record the date and amount of each funding made in respect of an Advance, the amount of all Capitalized Yield, each payment or repayment of principal with respect to its Rent Assignment Interests or Lessor Investment, as applicable, and the length of each Payment Period with respect thereto in any manner consistent with its ordinary business practices, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded; provided, that the failure to make any such recordation or any errors in such recordation shall not affect the obligation of the Lessor under such instrument or the corresponding obligation of the Lessee to pay Rent (including any Lease Balance).

SECTION 2.7.           Payments to Participants. The parties to this Agreement hereby agree that any payment required to be made to (a) the Lessor or (b) the Rent Assignees by the Lessor pursuant to the Rent Assignment Agreements from payments to be made by the Lessee shall be made to the Administrative Agent. Such payment by the Lessee to the Administrative Agent for the benefit of the Participants, shall be deemed to constitute (i) the required payment from the Lessee to the Lessor and (ii) the corresponding payment by the Lessor to the Rent Assignees.

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SECTION 2.8.           Computations.

For all purposes under the Operative Documents, all computations of Yield and other accrued amounts (including, without limitation, the Overdue Rate) shall be made on the basis of a 360-day year and the actual days elapsed (including the first day but excluding the last day).

SECTION 2.9.           Determination of Yield Rate and Payment Periods.

(a)        Determination of Yield Rate. The Lease Balance outstanding from time to time shall accrue Yield at the rate per annum equal to the Yield Rate. The Administrative Agent shall as soon as practicable after receipt of the related Advance Request, but in no event later than 11:00 a.m., New York time, two (2) Business Days prior to the effectiveness of each LIBOR Rate, notify the Lessee, the Lessor and each other Participant of such LIBOR Rate and the corresponding Yield Rate but failure to so notify shall not affect the obligations of the parties hereunder or under the other Operative Documents, provided, however, that such notice may be delivered no later than 11:00 a.m., New York time, one (1) Business Day prior to the effectiveness of such LIBOR Rate with respect to the initial Advance Request. Prior to the Completion Date, Yield attributable to amounts advanced by the Lessor and the Rent Assignees will be (i) retained by the Participants and added to the Lessor Investment or Rent Assignment Interests, as applicable, pursuant to Section 2.10 and (ii) capitalized monthly in arrears. From and after the Base Term Commencement Date, accrued Yield shall be due and payable on each applicable Payment Date and on the Maturity Date and, for purposes of calculating the amount of Yield due and payable on any such date, Yield accruing on the last day of any Payment Period that is not a Payment Date shall be capitalized and added to the outstanding amount of Rent Assignment Advances or Lessor Investment, as applicable, and such capitalized amount shall earn Yield until the next to occur of a Payment Date or the Maturity Date. If all or any portion of the principal of the Lease Balance, any accrued Yield payable thereon or any other amount payable hereunder shall not be paid when due (whether at stated maturity, acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is equal to the Overdue Rate and shall be payable from time to time on demand as Supplemental Rent.

(b)        Change in Law, Circumstances. If:

(A)       the Administrative Agent or any Participant shall determine (which determination shall be conclusive and binding on the Lessee absent manifest error) that

(i)  a Change in Law after the date hereof makes it unlawful, or the applicable central bank or other applicable Authority asserts that it is unlawful, for such Participant or its principal bank Affiliate to make, continue or maintain any amount of such Participant’s Lessor Investment or Rent Assignment Advances, as applicable, on a LIBOR Rate basis, or

(ii)  [reserved], or

(B)       the Administrative Agent or any Participant determines (which determination shall be conclusive and binding upon the Lessee absent manifest

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error) that (i) the LIBOR Rate, as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Participant or its principal bank Affiliates of maintaining or funding its investments for the applicable Payment Period, or (ii) the making or funding of such Participant’s investment hereunder on a LIBOR Rate basis has become impracticable as a result of an event occurring after the date hereof which in the opinion of such Participant materially changes such investment, or

(C)       an Event of Default shall be continuing,

then the obligations of such Participant to make, continue or maintain any such investment on a LIBOR Rate basis shall, upon such determination, forthwith be suspended until such Participant shall notify the Lessee that such circumstances no longer exist, and all Yield allocable to the fundings made or to be made by the Participants shall automatically be determined on an Alternate Base Rate basis beginning on the Advance Date or the next immediately succeeding Payment Date with respect thereto or sooner, if required by such law, assertion or determination. Subject to the rights of the Participants following an Event of Default and the provisions of this clause (b) shall not limit the right of the Lessee to receive Advances funded by the Participants that accrue yield at the Alternate Base Rate.

(c)        Rate Determinations. Each determination of a Yield Rate pursuant to any provision of this Agreement or any other Operative Document shall be conclusive and binding on the Lessee and the Participants in the absence of manifest error.

(d)        LIBOR Payment Periods. Each Payment Period applicable to Fundings bearing yield at a rate determined with respect to the LIBOR Rate shall end on a Payment Date and shall be a period of one month, if such Payment Period commences during the Construction Period, in each case, after the end of the preceding Payment Period or the Advance Date applicable to such Funding, as the case may be, except (i) the first Payment Period shall commence on the Closing Date and last until the first Payment Date, (ii) for the Payment Period applicable to any such Funding outstanding on the Base Term Commencement Date, which Payment Period shall end on, but exclude, the Base Term Commencement Date even if such Payment Period is less than one month, and (iii) as otherwise agreed to by the Participants, but in any event ending not later than the date such Funding shall be due and payable.

(e)        Alternate Base Rate Payment Periods. Each Payment Period applicable to Fundings bearing yield at the Alternate Base Rate shall end on a Payment Date and shall be a period of one month, if such Payment Period commences during the Construction Period, in each case, after the end of the preceding Payment Period or regarding the initial Advance Date, one month after the initial Advance Date, except (i) for the Payment Period applicable to any such Funding outstanding on the Base Term Commencement Date, which Payment Period shall end on, but exclude, the Base Term Commencement Date even if such Payment Period is less than one month, and (ii) as otherwise agreed to by the Participants. So long as none of the circumstances described in clauses (A), (B) or (C) of Section 2.09(b) shall exist, the Lessee may elect during the Construction Period to convert any Funding bearing yield at the Alternate Base Rate into a Funding bearing yield at a rate determined with respect to the LIBOR Rate on three (3) Business Days’

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irrevocable notice to the Administrative Agent and each of the Participants prior to a Monthly Date and, subject to clause (b) above, such conversion shall be effective on such Monthly Date and such date shall be the last day of the Payment Period that was applicable to such Funding prior to such conversion.

(f)         LIBOR Calculation During the Construction Period. For purposes of calculating the LIBOR Rate during the Construction Period, the Construction Agent currently intends to request Advances in accordance with Schedule 2.9(f) hereto. The parties agree that the Construction Agent is not required to request Advances in accordance with such Schedule, and actual Advances shall be made pursuant to Advance Requests properly submitted in accordance with Section 2.5 hereof.

(g)        Notwithstanding anything to the contrary herein or in any other Operative Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the Administrative Agent and the Lessee may amend this Agreement to replace the LIBOR Rate with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all Participants and the Lessee, so long as the Administrative Agent has not received, by such time, written notice of objection to such proposed amendment from Participants comprising the Required Participants; provided that, with respect to any such proposed amendment containing any SOFR-Based Rate, the Participants shall be entitled to object only to the Benchmark Replacement Adjustment contained therein. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Participations comprising the Required Participants have delivered to the Administrative Agent written notice that such Required Participants accept such amendment. No replacement of any LIBOR Rate with a Benchmark Replacement will occur prior to the applicable Benchmark Transition Start Date.

(h)        In connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Operative Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

(i)         The Administrative Agent will promptly notify the Lessee and the Participants of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or Participants pursuant to this Section 2.9, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 2.9.

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SECTION 2.10.         Capitalized Yield.

During the Construction Period, in the event the Construction Agent shall not deliver an Advance Request at or before 11:00 a.m. New York time on the fifth (5th) Business Day prior to a Payment Date, the Construction Agent shall be deemed to have requested an Advance in Dollars in an amount equal to Capitalized Yield accrued on the Lease Balance for the Payment Period ending on such Payment Date. The Advance Date with respect to each such Advance for such accrued Capitalized Yield shall be the relevant Payment Date. The Payment Period with respect to any such Advance shall be the same as the Payment Period with respect to an Advance of the same type that is made on the same Advance Date. If no Advance Request is timely delivered by the Construction Agent, the Administrative Agent shall calculate such Capitalized Yield accrued on the Lease Balance in accordance with the following sentence and notify the Participants and Construction Agent thereof in writing setting forth the calculation. On each such Advance Date, the Lessor Investment shall be increased by an amount equal to Lessor’s Commitment Percentage of such deemed Advance and the outstanding principal of each Rent Assignee’s Rent Assignment Advances shall be increased by an amount equal to such Rent Assignee’s respective Commitment Percentage of such deemed Advance.

SECTION 2.11.         Lessor Investment.

(a)        Procedure for Investment. Upon receipt of an Advance Request, and subject to the terms and conditions of this Agreement, the Lessor agrees that it shall wire transfer its portion of the requested Advance equal to the lesser of (i) its Commitment Percentage multiplied by the amount requested for such Advance, and (ii) its Available Commitment, in immediately available funds to the Administrative Agent for further funding to Lessee or the Construction Agent, as applicable, as set forth in Section 2.3.

(b)        Return of Investment. The Lessor shall be entitled to a return of its Lessor Investment outstanding, in full, together with (i) Yield accrued thereon to the date of return and (ii)  all other amounts then due and payable by the Lessee hereunder or under the other Operative Documents to the Lessor, upon the first to occur of:

(i)         the purchase by the Lessee during the Base Term of all of the Leased Property pursuant to Article XIII, Article XX or Article XXI of the Lease, such return to be due on the date specified in such provisions for payment with respect to such purchase;

(ii)        a termination of the Lease during the Construction Period pursuant to Section 3.3(a) of the Construction and Development Agreement, such return to be due on the date of such termination;

(iii)       the Return Date; and

(iv)       following an Event of Default and the exercise of remedies under

the Lease.

(c)        Scheduled Return of Lessor Investment. Except in the case of a required return described in Section 2.11(b) above and any payment of Lease Balance pursuant to Section

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2.3(d) (which will be applied pro rata among the outstanding Advances), no return in respect of the Lessor Investment shall be due prior to the Maturity Date. On the Maturity Date and subject to the rights of the Rent Assignees under Article X hereof and the Rent Assignment Agreements, the Lessor shall be entitled to the aggregate unpaid Lessor Investment as of such date.

(d)        Yield.

(i)         The Lessor Investment outstanding shall earn a Yield on the unpaid amount thereof at a rate per annum equal to the Yield Rate.

(ii)        If all or a portion of the Lessor Investment or Yield is not paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting the rights of the Lessor under any Operative Document, bear interest at the Overdue Rate, in each case from the date of nonpayment until paid (after as well as before judgment).

(iii)       Yield shall be payable in arrears on each Payment Date.

(e)        Computation of Yield. Yield in respect of the Lessor Investment shall be calculated as provided in Section 2.8.

SECTION 2.12.         Rent Assignment Interests.

(a)        Procedure for Acquiring Rent Assignment Interests. Upon receipt of the Advance Request and subject to the terms and conditions of this Agreement, (i) each Rent Assignee agrees that it shall wire transfer funds equal to the lesser of (x) its Commitment Percentage multiplied by such Advance, and (ii) its Available Commitment, in immediately available funds to the Administrative Agent for further funding to Lessee or the Construction Agent, as applicable, as set forth in Section 2.3.

(b)        Payments with respect to Rent Assignment Interests. Payments with respect to the Rent Assignment Interests shall be made to the Rent Assignees together with all accrued and unpaid Yield thereon, at the times and in the manner set forth in the Rent Assignment Agreements and this Agreement. Each Rent Assignee shall be entitled to payments with respect to its outstanding Rent Assignment Advances, in full, together with (i) Yield accrued thereon to the date of repayment and (ii) all other amounts then due and payable by the Lessor under the related Rent Assignment Agreement to such Rent Assignee, upon the first to occur of:

(i)         the purchase by the Lessee during the Base Term of all of the Leased Property pursuant to Article XIII, Article XX or Article XXI of the Lease, such payment to be made on the date specified in such provisions for payment with respect to such purchase;

(ii)        a termination of the Lease during the Construction Period pursuant to Sections 3.3(a) of the Construction and Development Agreement, such payment to be made on the date of such termination;

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(iii)       the Return Date; and

(iv)       following an Event of Default.

(c)        Scheduled Return of Rent Assignment Advances. Except in the case of a required repayment described in Section 2.12(b) above and any payment of Lease Balance pursuant to Section 2.3(d) (which will be applied pro rata among the outstanding Advances), there shall be no payments with respect to Rent Assignment Advances prior to the Maturity Date. On the Maturity Date, the Rent Assignees shall be entitled to payments to be applied to the aggregate unpaid principal amount of the Rent Assignment Advances as of such date.

(d)        Yield.

(i)         Pursuant to Section 2.01 of each Rent Assignment Agreement, Yield shall be payable with respect to the outstanding Rent Assignment Advances at an effective rate per annum thereon equal to the Yield Rate.

(ii)        If all or a portion of the Rent Assignment Advances or Yield is not paid when due under the Rent Assignment Agreements or under Article X hereof, such overdue amount shall, without limiting the rights of the Rent Assignees under any Operative Document, bear interest at the Overdue Rate, in each case from the date of nonpayment until paid (after as well as before judgment).

(iii)       Payments of Yield with respect to Rent Assignment Advances shall be payable in arrears on each Payment Date.

(e)        Computation of Yield. Yield in respect of the Rent Assignment Interests shall be calculated as provided in Section 2.8.

SECTION 2.13.         Fees and Other Transaction Costs.

The Construction Agent shall authorize and request Advances to fund during the Construction Period any and all Transaction Costs with respect to which invoices have been received at least five (5) Business Days prior to an Advance Date and shall pay any and all fees described in the succeeding provisions of this Section 2.13 (collectively, “Fees”):

(a)        Arrangement Fee. The Construction Agent shall pay to the Arranger on the initial Advance Date, an arrangement and structuring fee as previously agreed to in writing between Lessee and Arranger. (the “Arrangement Fee”);

(b)        Upfront Fee. The Construction Agent shall pay to each Rent Assignee on the Closing Date, a commitment fee (the “Upfront Fee”) as previously agreed to in writing between Construction Agent and such Rent Assignee;

(c)        Non-Use Fee. The Construction Agent shall pay to the Participants on each Advance Date occurring during the Commitment Period and on the last day of the Commitment Period, an unused commitment fee (the “Non-Use Fee”) at a rate per annum equal to the product

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of the Non-Use Fee Rate times the average amount of the Available Commitment of each such Participant during the preceding Payment Period (or other period commencing on the Closing Date or ending on the last day of the Commitment Period, as applicable). Such fee shall commence to accrue on the Closing Date and shall cease to accrue on the day prior to the last day of the Commitment Period. During the Construction Period, (A) pursuant to Section 2.10 hereof, the Construction Agent shall be deemed to have requested an Advance in an amount equal to Non-Use Fees accrued with respect to the Rent Assignment Advances and Lessor Investment with a Payment Period ending on such Payment Date, (B) each Participant shall retain the Non-Use Fees applicable to its Rent Assignment Advances and Lessor Investment in accordance with the Construction Agent’s instructions pursuant to Section 2.5, (C) if no Advance Request is timely delivered by the Construction Agent, the Participants shall calculate such Non-Use Fees in accordance with the prior sentence and notify the Construction Agent thereof, and (D) on each such Advance Date, the Lessor Investment shall be increased by an amount equal to such Advance;

(d)        Non-Use Fee Statements. The Administrative Agent shall provide to the Construction Agent from time to time not less than ten (10) Business Days prior to the due date(s) for the Non-Use Fee a written statement of the amount of such Fees then due, the due date therefor and the calculation thereof provided, that, failure to give such notice shall not relieve the Construction Agent of its obligation to authorize Advances in respect of such Fees;

(e)        Agent Fees. The Construction Agent and Lessee, respectively, shall pay to the Administrative Agent (for the benefit of the Agents) in advance (i) on the initial Advance Date, an initial agency fee and (ii) on each anniversary of the initial Advance Date (excluding the Maturity Date), an annual agency fee, each in the amounts set forth in a separate writing between the Agents and Cubic; and

(f)         Cap Fees. The Construction Agent shall pay to the Participants on the Closing Date an interest rate cap fee in the amount set forth in separate writings between the Participants and the Lessee.

(g)        Post Construction Period. Notwithstanding any term to the contrary in this Section 2.13, after the Construction Period, the Lessee shall promptly pay all Transaction Costs after receiving invoices therefor and shall pay all Fees when due and payable.

SECTION 2.14.         Nature of Transaction.

It is the intention of the parties that:

(a)        the Overall Transaction constitutes an operating lease for purposes of the Lessee’s financial reporting under GAAP provisions relating to leases including without limitation the Accounting Standards Codification (“ASC”) 840 (including ASC 840-20 and 840-40) and, upon applicability, ASC 842; and

(b)        for United States federal, state and local income tax, property tax, transfer tax, sales tax, franchise tax, general corporation tax and other similar taxes that may be imposed upon net or gross income, bankruptcy (including the substantive law upon which bankruptcy proceedings are based) and real estate and commercial law purposes:

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(i)         the Overall Transaction constitutes (x) a financing by the Lessor to the Lessee, the obligations of the Lessee to pay Basic Rent shall be treated as payments of interest to the Lessor and the payment by the Lessee of any amounts in respect of the Lease Balance shall be treated as payments of principal to the Lessor, and (y) a sale of receivables and other rights under the Operative Documents as set forth in the Rent Assignment Agreements from the Lessor to the Rent Assignees;

(ii)        The Lessee will not be entitled to, and shall not avail itself of, any of the rights or benefits accorded to a lessee under Applicable Laws and Regulations except as expressly permitted under the Lease and the Lessor will be deemed and will have the rights of a lender making secured loans to the Lessee secured by, among other things the Lessee Collateral, a portion of which rights will be deemed sold by the Lessor to the Rent Assignees upon payment for their respective Rent Assignment Interests; and

(iii)       The Lessee is and will be the owner of the Site and the Facility and lessor of the Site under the Ground Lease.

The Lessee acknowledges and agrees that none of the Agents, the Arranger or any of the Participants has made, in any capacity, any representations or warranties concerning the tax, accounting or legal consequences or characteristics of the Operative Documents or any aspect of the Overall Transaction and that the Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents and the Overall Transaction as it deems appropriate, provided, that the Lessee may rely on the representations and warranties contained in the Operative Documents and the legal opinions issued to it in connection therewith and to which it is an addressee. Each Participant acknowledges and agrees that the Lessee has not made any representations or warranties concerning the tax, accounting or legal consequences or characteristics of the Operative Documents or any aspect of the Overall Transaction and that such Person has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents and the Overall Transaction as it deems appropriate, provided, that each Participant may rely on the representations and warranties contained in the Operative Documents and the legal opinions issued in connection therewith.

SECTION 2.15.         Amounts Due.

(a)        It is the intention of the Lessee and the Participants that (i) from and after the Completion Date, the amount and timing of installments of Basic Rent due and payable from time to time from the Lessee under the Lease shall be equal to the aggregate payments due and payable in respect of Yield accrued on the Lessor Investment and payable with respect to the Rent Assignee Advances under each Rent Assignment Agreement due on each Payment Date; (ii) if the Lessee elects the Early Termination Option or the Purchase Option, the outstanding principal of the Rent Assignment Advances and the Lessor Investment, all Yield thereon, all Fees and Transaction Costs and all other obligations of the Lessee owing to the Agents and the Participants shall be paid in full by the Lessee in accordance with Article XX or Article XXI of the Lease, as applicable; (iii) if the Lessee properly elects the Return Option and remarkets the Leased Property in accordance with Article XXII of the Lease, in the absence of a Default or Event of Default or a default under the Lease, the Lessee shall be required to pay the Sale Proceeds of the sale of the

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Leased Property (in an amount not to exceed the Lease Balance, any excess being payable to the Lessee, except in the case of application of Section 22.4 of the Lease), and if the Sale Proceeds are less than the Lease Balance, the lesser of (x) the amount of such difference and (y) the Return Price Recourse Deficiency Amount, all in accordance with Article XXII of the Lease, and any amounts due pursuant to Article VII hereof and Section 22.3(a) of the Lease (which aggregate amounts may be less than the Lease Balance); and (iv) upon an Event of Default or a default under the Lease that is not solely a Limiting Event pursuant to Section 18.1(b) of the Lease or that is not subject to the limitations of Section 18.5 of the Lease, the amounts then due and payable by the Lessee under the Lease and the Construction Agent under the Construction and Development Agreement shall include all amounts necessary to pay in full the outstanding principal with respect to the Rent Assignment Advances and the Lessor Investment and all accrued Yield on the Lease Balance, plus all other amounts then payable by the Lessee to the Agents and the Participants under the Operative Documents.

(b)        The Lessee and the Construction Agent, as applicable, shall pay or repay the Advances at such times and in such amounts as the Lease Balance becomes due and payable, which payment obligations shall be satisfied by and to the extent of any payment made by or on behalf of the Lessee or the Construction Agent, as applicable, pursuant to the Operative Documents of Rent, the Lease Balance, the Purchase Amount, the Sale Proceeds, the Construction Recourse Amount, Deficiency payments, the Return Price Recourse Deficiency Amount or the Recourse Deficiency Amount, as the case may be.

ARTICLE III

CONDITIONS TO ADVANCES; DELIVERIES UPON COMPLETION

SECTION 3.1.           Conditions to Each Advance.

The obligation of each Participant to perform its obligations on any Advance Date shall be subject to Section 2.2 and to the satisfaction of, or the waiver in writing by such Participant of, the conditions precedent set forth in this Section 3.1 on or prior to such Advance Date (all such conditions precedent to be satisfied to the satisfaction of such Participant in its reasonable discretion, except that the obligation of any party hereto shall not be subject to such party’s own performance or compliance):

(a)        Advance Request. The Construction Agent shall have delivered an Advance Request conforming to the requirements of Section 2.5 in respect of the proposed Advance Date.

(b)        Performance. The Lessee and the Construction Agent shall have performed and complied in all material respects with all agreements and conditions contained herein and in any other Operative Document to which such Person is a party that are required to be performed or complied with by such party on or prior to the proposed Advance Date.

(c)        Consents and Approvals. All necessary or advisable Governmental Actions, and all consents, approvals and authorizations of Persons, required in connection with the Overall Transaction, shall have been obtained or made and be in full force and effect and not be subject to any pending procedures or appeals, whether administrative, judicial or otherwise, except for (i)

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any Governmental Actions that are not required with respect to the then current status of the construction of the Facility; and (ii) any other Governmental Action, consent, approval or authorization the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect.

(d)        Representations and Warranties True; Absence of Defaults. Each representation and warranty of the Lessee and the Construction Agent contained herein or in any other Operative Document or in any certificate delivered in connection therewith shall be true and correct in all material respects as though made on and as of the related Advance Date, except that any such representation or warranty which is expressly made only as of an earlier date need be true only as of such date. No Default for which the cure period, if any, has commenced, Default for which there is no notice and cure period, or Event of Default shall be continuing.

(e)        Certificates. The Agents, the Participants and the Construction Consultant shall have received a certificate (an “Advance Certificate”) from a Responsible Officer of the Construction Agent certifying to the effect that (i) the remaining Available Commitment of the Rent Assignees and Lessor is sufficient to Complete the Facility and to pay all Construction Costs, (ii) Completion can be achieved before the Construction Period Termination Date, (iii) the Facility is being constructed on the Site substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget (in each case, as supplemented or amended pursuant to Section 3.2 of the Construction and Development Agreement), (iv) all Change Orders which have not previously been certified in a prior Advance Certificate are attached as an exhibit to the applicable Advance Certificate, together with reasonably sufficient detail thereof, including the change and cost of the change for all such Change Orders, (v) the Change Orders required to be attached as an exhibit to the applicable Advance Certificate pursuant to the foregoing subsection (iv) (the “Current Change Orders”), individually and in the aggregate, after giving effect thereto, will not (A) materially diminish: (1) the utility, useful life or functional capability of the Facility as two (2) Class A office buildings when Completion has been effected; (2) the expected Fair Market Value of the Facility as of the Construction Period Termination Date; or (3) the Fair Market Value as of the Maturity Date; (B) cause the remaining Available Commitments of Lessor and the Rent Assignees to be insufficient to Complete the Facility; or (C) delay Completion beyond the Construction Period Termination Date (unless extended in accordance with the terms hereof), (vi) funds for the Current Change Orders are available from the unused Aggregate Contingency Amount (subject to the requirement for Lessor’s consent, if applicable, as referenced in subsection (viii) below), (vii) in the aggregate respecting any particular Major Construction Document, the cost of all Current Change Orders under such Major Construction Document, when aggregated with the cost of all prior Change Orders under such Major Construction Document, does not exceed the higher of $200,000 and ten percent (10%) of the original total amount payable under such Major Construction Document (in the aggregate with all prior and concurrent Change Orders with respect to such Construction Document) unless the Administrative Agent, acting upon the direction of the Required Participants, has provided its prior written consent to each such additional Current Change Order under such Major Construction Document; provided, that the prior written consent of Administrative Agent, acting upon the direction of the Required Participants, shall also be required for any Change Order that is for an amount in excess of $250,000, (viii) in the aggregate respecting all Construction Documents, the Construction Budget and the Plans and Specifications, the cost of all Current Change Orders, when aggregated with the cost of all prior Change Orders,

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does not exceed an amount equal to the Permitted Excess Amount, unless the Administrative Agent, acting upon the direction of the Required Participants, has provided its prior written consent to each such additional Current Change Order causing such amount to exceed the Permitted Excess Amount, (ix) attached thereto is a reconciliation of the Construction Budget which shall be attached as an exhibit thereto, (x) all representations and warranties of the Lessee and the Construction Agent contained in the Operative Documents are true and correct in all material respects except for those representations and warranties that were made as of a specific date, which shall be true and correct as of such specific date, (xi) no Construction Event of Default or Construction Default is continuing, (xii) all necessary or advisable Governmental Actions, and all consents, approvals and authorizations of Persons, required in connection with the Overall Transaction, shall have been obtained or made and be in full force and effect and not be subject to any pending procedures or appeals, whether administrative, judicial or otherwise, except for (A) any Governmental Actions that are not required with respect to the then current status of the construction of the Facility; (B) any other Governmental Action, consent, approval or authorization the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect; and (C) the execution of those Construction Documents not required with respect to the then current status of the construction of the Facility, (xiii) all Major Construction Documents which have been entered into by the Construction Agent prior to such Advance Date have been assigned to the Lessor pursuant to an Assignment of Contracts or joinder thereto and any applicable Consent and Acknowledgments have been delivered to the Lessor, (xiv) the proceeds of the Advance will be used solely to pay for accrued and unpaid Construction Costs previously performed or contracted for and then due or payable, or that have been invoiced (or in the case of costs incurred by the Construction Agent using its own resources, that have been described in writing to the Lessor in reasonable detail) and will become due and payable in the month immediately following such Advance Date, or materials previously purchased or contracted for, together with all Carrying Costs and that all invoices for the foregoing costs have been (or will be with the proceeds of such Advance) paid in full, (xv) none of such costs specified in clause (xiv) have been reimbursed or paid pursuant to a previous Advance, (xvi) the costs being funded with the Advance are as set forth in a schedule attached to such certificate, (xvii) no Major Construction Documents have been entered into since the Closing Date or the most recent prior Advance Date, as applicable, except as for those attached to the Advance Request and which have been approved by the Administrative Agent, and (xviii) all conditions precedent to the Advance have been satisfied. The foregoing certifications may be included in the applicable Advance Request.

(f)         Collateral Assignments and Liens. The Lessor shall have a security interest in all Lessee Collateral, including collateral assignments of the Lessee’s rights under all Major Construction Documents pursuant to the Assignments of Contract then in existence or hereafter arising and Consent and Acknowledgments with respect to each Major Construction Document then in existence or hereafter arising and the Lessee shall have, subject to the prior security interest therein in favor of the Lessor, a security interest in the Lessor’s rights and interests as set forth in the Memorandum of Lease.

(g)        No Event of Loss, Event of Taking, Force Majeure Event. No Event of Loss, Event of Taking, Force Majeure Event shall have occurred and be continuing, unless the Lessor

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shall have elected to continue the Lease and Complete the Facility in accordance with Section 3.3(b) of the Construction and Development Agreement.

(h)        Mechanics Liens, Etc. No mechanic’s (unless bonded over) or other liens exist and one or more waivers, as needed, as evidence of the same are delivered in form and substance satisfactory to the Title Insurance Company in order for it to issue date-down endorsement(s), if available, to the Title Policies insuring the continuing first priority of the interests described therein, as applicable, and increasing the insured amount thereunder to reflect the Advance made on such date, and such endorsements have been issued.

(i)         Transaction Costs. After the initial Advance, all Transaction Costs invoiced at least five (5) Business Days prior to such Advance Date shall have been paid, or will be paid with the proceeds of the Advance to be made on such Advance Date, to the parties to whom such Transaction Costs were owed.

(j)         Construction Report. The Lessee has delivered or cause to be delivered to the Administrative Agent and each of the Participants the most recently due update of any report provided pursuant to Section 2.7(o) of the Construction and Development Agreement.

(k)        Available Commitment. No Advance hereunder would exceed the aggregate Available Commitments of the Participants and, in such circumstance, no Participant shall have any obligation to make any such funding and any Participant shall have the right to declare a default under the Construction and Development Agreement.

(l)         Demolition Date Conditions. On or one (1) Business Day prior to the Demolition Date, Lessee shall execute and deliver the Deed to the Lessor and, thereafter, commence demolition of Building 1 pursuant to the Construction and Development Agreement. On or prior to the Demolition Date, Lessee shall deliver to Administrative Agent a copy of the Twentieth Amendment to Declaration of Restrictions of San Diego Industrial Park (the “Twentieth CCR Amendment”), which shall be executed by a sufficient number of Property Owners (as defined therein) to make such document effective and which shall be promptly recorded in the Recorder’s Office. As of the first Amendment Date, each of the parties hereto acknowledge and agree that the requirements described in this Section 3.1(l) have been satisfied prior to the first Amendment Date.

For the avoidance of doubt, no Participant shall have any obligation to make any Advance if any Construction Event of Default or Construction Default shall be continuing, except to the extent that such Advance is requested with respect to any Construction Costs which have previously been paid by the Construction Agent but not previously reimbursed with proceeds from any Advance prior to the occurrence of such Construction Event of Default or Construction Default.

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SECTION 3.2.           Conditions to Initial Advance.

The obligation of each Participant to perform its obligations on the initial Advance Date shall be subject to the satisfaction of, or the waiver in writing by, such Participant of the conditions precedent set forth in Section 2.1 and, to the extent not inconsistent therewith, Section 3.1.

SECTION 3.3.           Deliveries Upon Completion.

(a)        Promptly (but not to exceed twenty (20) Business Days following the Completion Date), the Lessee shall furnish to the Agents and each Participant a certification of a Responsible Officer of the Lessee as follows (such certification and such certified items referenced therein or attached thereto to be satisfactory to the Lessor in its reasonable discretion):

(i)         the Facility has been Completed;

(ii)        the Facility complies in all material respects with all Applicable Laws and Regulations;

(iii)       the representations and warranties of the Lessee with respect to the Leased Property and the Site set forth in Section 4.1(j) are true and correct in all material respects as of the Completion Date as if made on and as of each such date (except to the extent any such representation or warranty specifically relates to an earlier date in which case such representations and warranties shall have been true and correct as of such earlier date). All amounts owing to third parties for the construction of the Facility with respect to which invoices have been received by the Lessee on or before the day which is forty-five (45) days prior to such date have been paid in full (other than any subject to a Permitted Contest and other than contingent obligations for which adequate reserves have been created to the extent required by GAAP);

(iv)       no changes or modifications were made to the Plans and Specifications except in accordance with Section 3.2 of the Construction and Development Agreement or as approved by Lessor;

(v)        there are no defects to the Facility which individually or in the aggregate have caused or reasonably could cause a Material Adverse Effect;

(vi)       setting forth the aggregate final amount of the (x) Lessor Investment, (y) Rent Assignment Advances and (z) Lease Balance, each with itemized documentation detailing such amount, as of the Base Term Commencement Date;

(vii)      attaching insurance certificates respecting the Facility as required under the Operative Documents; and

(viii)     attaching a true and correct copy of the temporary certificate of occupancy (or final certificate of occupancy, if available);

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provided, however, that if the items described in clauses (vii) and (viii) are not available at the time of delivery such certification, the Lessee shall have up to twenty (20) Business Days following the Completion Date to deliver such items to each Agent and the Participants.

The Administrative Agent and each Participant shall have the right to contest the information contained in such certification.

(b)        Subject to the Lessee’s right to contest same under Section 9.5 of the Lease, as soon as practicable (but not to exceed ninety (90) days following the Completion Date), the Lessee shall deliver unconditional lien waivers by the applicable contractors, subcontractors and suppliers with respect to the Facility.

(c)        As soon as practicable (but not to exceed ninety (90) days) following the Completion Date, the Lessee shall furnish to the Agents and each Participant a certification of a Responsible Officer of the Lessee as follows (such certification and such certified items referenced therein or attached thereto to be satisfactory to the Lessor in its reasonable discretion):

(i)         attaching a true and correct copy of the final certificate of occupancy for the Facility;

(ii)        no holdback amounts or contingency allocations under the Budget, the Development Agreement or any Construction Document was left unpaid to the Developer, General Contractor or other party thereto except for such sums which have been paid over by the Lessee to the Administrative Agent pursuant to Section 3.3(g) below; and

(iii)       attaching evidence that all utilities required to adequately service the Facility for its intended use are available except to the extent the unavailability of which individually or in the aggregate would not be reasonably expected to have a Material Adverse Effect.

The Administrative Agent and each Participant shall have the right to contest the information contained in such certification.

(d)        As soon as practicable (but not to exceed one hundred twenty (120) days) following the Completion Date, the Lessee shall deliver or cause to be delivered to the Lessor (unless previously delivered to the Lessor) originals of the following relating to the Facility, each of which shall be in form and substance acceptable to the Lessor, in its sole and reasonable discretion, and paid for with the Advances by the Lessee: (x) a title insurance endorsement regarding the title insurance policies in connection with the requirements of Section 2.1(m) provide for insurance in an amount at least equal to the maximum total Lease Balance and, if endorsed, the endorsement shall not include any title change or exception except to the extent that such is acceptable to the Lessor, in its reasonable discretion; (y) a certification of a Responsible Officer of the Lessee, with a true and complete copy of an “as-built” or “record” survey of the Facility and a site map of the Site reflecting the actual location of the Facility attached thereto and (z) a recorded copy of the Twentieth CCR Amendment.

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(e)        Lessee shall deliver or cause to be delivered to the Agents and each Participant a supplement to the environmental report delivered pursuant to Section 2.1(i) hereof, dated within ninety (90) days of the Completion Date, showing that the environmental assessment of the Site has not deteriorated in any material respect since the date of the original environmental report.

(f)         As soon as practicable (but not to exceed ninety (90) days) following the Completion Date, the Lessee shall furnish to the Agents and each Participant written evidence of approval by the DEH of performance to completion of the Remediation Plan and concurrence from DEH that all remediation and mitigation activities set forth in the Remediation Plan have been completed and that no further action is necessary.

(g)        As soon as practicable (but not to exceed five (5) Business Days) following the final completion of work under the Development Agreement or any Construction Document but, in any event, not to exceed ninety (90) days following the Completion Date, the Lessee shall pay over to the Administrative Agent any holdback amounts or contingency allocations under the Development Agreement or such Construction Document to which it is entitled and retained or received thereunder (which amounts are not to be applied toward any replacement contract for any such Construction Document) and any such funds shall be credited against and reduce the outstanding Lease Balance in accordance with Section 10.2.

SECTION 3.4.           Final Funding Date Conditions.

At least five (5) Business Days prior to the designated Base Term Commencement Date, the Lessee shall have delivered to the Lessor a Base Term Commencement Date Notice. On or before the Base Term Commencement Date, (i) the Lessee shall have delivered a bring down certificate as to its incumbency certificate and as to the representations and warranties set forth herein, (ii) a Lease Supplement shall have been entered into to reflect the Return Price Recourse Deficiency Amount, calculated as of the Base Term Commencement Date, (iii) all Transaction Costs shall have been paid, and (iv) an Escrow Agreement shall be entered into, the purpose of which will be to hold any Advances made for Construction Costs that are to be paid following the Completion Date including the Holdback Amount, all other holdbacks and all contingency amounts outstanding and to be applied under the respective Construction Documents.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.1.           Representations and Warranties of the Lessee.

As of the Closing Date, the Amendment Date and each Advance Date, the Lessee makes the representations and warranties set forth in this Section 4.1 to each of the other parties hereto:

(a)        Organization; Power; Qualification. The Lessee is duly incorporated and is validly existing and in good standing under the laws of the State of Delaware, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in the State of California and

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each other jurisdiction in which the character of its properties or the nature of its business requires such qualification and authorization, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b)        Authorization of Operative Documents. The Lessee has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of each of the Operative Documents to which it is a party in accordance with its respective terms. Each of the Operative Documents to which the Lessee is a party has been duly executed and delivered by a Responsible Officer of the Lessee, and each such document constitutes the legal, valid and binding obligation of the Lessee, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar debtor relief laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies.

(c)        No Conflicts, etc. The execution, delivery and performance by the Lessee of the Operative Documents to which it is a party and the transactions contemplated thereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) violate any Applicable Laws and Regulations relating to the Lessee, (ii) conflict with, result in a breach of or constitute a default under the charter or bylaws of the Lessee, or any material agreement, judgment, injunction, order, decree or other material instrument binding upon the Lessee, or any Governmental Action relating to the Lessee, except, in any case, as could not reasonably be expected to have a Material Adverse Effect, or (iii) result in or require the creation or imposition of any Lien upon or with respect to the Leased Property or the Site (except as contemplated by the Operative Documents) or any material Lien upon or with respect to any other property now owned or hereafter acquired by the Lessee.

(d)        Compliance with Law; Governmental Approvals. Other than with respect to environmental matters, which are treated exclusively in Section 4.1(e) hereof, (i) the Lessee has obtained or received all Governmental Action required by any Applicable Laws and Regulations with respect to the then current status of the construction of the Facility on the Site, each of which is in full force and effect and not subject to any pending proceedings or appeals (administrative, judicial or otherwise), except for any other Governmental Action the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect, (ii) the information provided by the Lessee to the Agents, the Participants and the Construction Consultant regarding the Governmental Actions that are necessary to Complete the Facility was true and complete in all material respects, and (iii) the Lessee and the Leased Property are in compliance with each Governmental Action applicable to it and in compliance with all other Applicable Laws and Regulations relating to it in each case, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(e)        Environmental Matters. Except as could not reasonably be expected to have a Material Adverse Effect:

(i)         the Site (including soils, surface waters and ground waters on, at or under the Site or such structures) does not contain and is not otherwise adversely affected

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by, and to the Lessee’s knowledge has not previously contained or been adversely affected by, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a violation of applicable Environmental Laws or (B) could give rise to any liability or obligation under applicable Environmental Laws;

(ii)        the Site and all operations conducted in connection therewith are in compliance, and during Lessee’s operation of the Site have been in compliance, with all applicable Environmental Laws, and there are no Hazardous Materials at, under or about the Site and there was and is no Release of Hazardous Materials from, to, at, under or about the Site or from such operations;

(iii)       the Lessee has obtained, is in compliance with, and has made all appropriate filings for issuance or renewal of, all Environmental Permits required for the then current status of the Site and the construction of the Facility, and all such Environmental Permits are in full force and effect;

(iv)       the Lessee has not received any written notice of violation, alleged violation, noncompliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with respect to the Site that has not been fully remediated, nor does the Lessee have knowledge that any such notice will be received or is being threatened; and

(v)        no judicial proceeding or governmental or administrative action is pending, or, to the knowledge of the Lessee threatened, under any Environmental Law to which the Lessee has been or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Site or operations of the Lessee with respect thereto, other than the Voluntary Assistance Program Case No. DEH2018˗LSAM˗000521.

(f)         Absence of Defaults, Loss, etc. No Default for which the cure period, if any, has commenced, Default for which there is no notice and cure period, Event of Default, Event of Loss (unless the Lessor shall have elected to continue the Lease and Complete the Facility in accordance with Section 3.3(b) of the Construction and Development Agreement), Event of Taking, or Condemnation or Casualty has occurred and is continuing; there is no action pending or, to the best of its knowledge, threatened by an Authority to initiate a Condemnation or an Event of Taking.

(g)        Accuracy and Completeness of Information. The information (other than forward looking information), taken as a whole and in light of the circumstances under which such information is furnished, furnished by or on behalf of the Lessee to the Agents and any Participant in connection with the negotiation of this Agreement and the other Operative Documents or delivered hereunder (as modified or supplemented by other information so furnished) is true and accurate in all material respects on the date as of which such information is furnished, and true and accurate in all material respects on the date as of which such information is stated or certified; provided that, with respect to the Construction Budget and any other projected financial information, the Lessee represents only that such information was prepared in good faith based

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upon assumptions believed to be reasonable at the time. It is understood that the foregoing is limited to the extent that (i) projections have been made in good faith by the management of the Lessee and in the view of the Lessee’s management are reasonable in light of all information known to management as of the date such representations and warranties are made, and (ii) no representation or warranty is made as to whether the projected results will be realized.

(h)        Subjection to Government Regulation. To the Lessee’s Actual Knowledge, none of the Lessor, the Agents or any Participant shall be required to, solely by reason of entering into the Operative Documents or consummating any of the transactions contemplated thereby (other than upon the exercise by such Person of remedies under the Operative Documents), perform in its own capacity or on behalf of any other Person any obligations, instructions or other duties imposed by an Authority (except with respect to bank regulations or, if such Person shall have assumed operational control of the Leased Property, operating permit requirements for the Leased Property) as long as the Lessee is not in breach of any of the Operative Documents.

(i)         Private Offering. Excluding the effect of any violation by the Participants of Section 5 of the Securities Act or any state or foreign securities laws, and assuming that the representations and warranties contained in Sections 4.2 and 4.3 are correct, the issuance and delivery of the interests in the Operative Documents under the circumstances contemplated hereby do not require the registration or qualification of such interests under the Securities Act, any state securities laws or the Trust Indenture Act of 1939.

(j)         The Leased Property and the Site.

(i)         As of the Closing, the Lessee is the sole owner of and holds legal title to the Site (as is described on Schedule IV hereto), free and clear of all Liens other than Permitted Liens; the Site is subject to a valid leasehold interest in favor of the Lessor pursuant to the Ground Lease; after giving effect to the transactions to be consummated on the Closing Date, no default or event of default has or will occur under the Ground Lease; and the Lessee is not a party to any other contract or agreement to sell, transfer or encumber any interest in the Leased Property or the Site in which it has an interest or any part thereof other than pursuant to the Operative Documents and no party is in default under the Lease;

(ii)        the Site is located on the parcel of land described on Schedule IV to this Agreement and such parcel constitutes all of the land subject to the Lease, the surveys of the Site furnished pursuant to Section 2.1(h) are complete and true and correct in all material respects and contain a flood hazard certification, no portion of the Site is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable Authority and the Facility is being constructed entirely on the Site. The Leased Property and any present use or construction and presently anticipated future use or construction thereof by the Lessee and its agents, assignees, employees, invitees, lessees, licensees and tenants comply with all Applicable Laws and Regulations (including planning, zoning and land use laws and Environmental Laws) and Insurance Requirements, except for such instances of non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or that are inconsequential for the then current status of the construction of the Facility. No notices,

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complaints or orders of violation or non-compliance or liability have been issued or, to the best of its knowledge, threatened by any Authority with respect to the Leased Property or the Site or the present or intended future use of the Leased Property or the Site except for such violations and instances of non-compliance as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and the Lessee is not aware of any circumstances which could give rise to the issuance of any such notices, complaints or orders;

(iii)       Upon Completion, the Facility will be serviced by all utilities necessary for the use and operation of the Facility and transmission pipes and other connections into the Facility and out of the Facility necessary for the contemplated use and operation thereof, all of which are located on the Site and access to the Facility or any part thereof from the public road is or will be provided by the Operative Documents;

(iv)       The Lessor has, in accordance with the Operative Documents, or will have, upon execution of the Memorandum of Lease and the filing of any documents required in respect thereof, a valid Lien on the Lessee Collateral, and such Lien has or will have, upon proper filing of any documents required in connection with such agreements, priority over any other Lien on the Lessee Collateral, except for Permitted Liens, and provided that any Lien in favor of the Lessee pursuant to the Memorandum of Lease shall be subordinate to the Liens in favor of the Lessor pursuant to the Security Documents;

(v)        all Major Construction Documents that have been entered into explicitly allow for and will allow for the assignment or pledge of the rights of the Construction Agent thereunder, except for any such provision as has been waived by the appropriate Persons in accordance with the terms of such document, or the Lessee has caused the counterparty thereto to enter into a consent to assignment with the Lessor, and no default is continuing under any Major Construction Contract;

(vi)       to the Actual Knowledge of the Lessee, there is no action being taken by any Person with respect to any actual or pending Condemnation or Event of Taking, except as is being contested by the Lessee in accordance with Section 13.6 of the Lease;

(vii)      the structures constructed as part of the Leased Property are in such condition that such structures at all times meet the standards which, in the given circumstances, each of them may be expected to meet so as not to constitute a danger for persons or things;

(viii)     the rights granted or made available to the Lessor pursuant to the Operative Documents, assuming due performance by the parties thereto, are sufficient in all material respects to enable the Lessor or its assigns or any designee thereof to maintain, use and operate the Facility from and after the date of possession of the Leased Property by the Lessor; and

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(ix)       the description of the Lessee Collateral sufficiently identifies such property to the extent required by Applicable Laws and Regulations in order to obtain a valid security interest therein.

(k)        Facility Ownership in the Lessor. Subject to Permitted Liens and the Lease, the Lessor will be the sole owner of and holds legal title to the Facility.

(l)         Financial Information. The Lessee has heretofore furnished to the Administrative Agent financial statements of the Lessee (i) for the fiscal year ended September 30, 2019 audited by Ernst & Young LLP, independent public accountants and (ii) for the fiscal quarter ended December 31, 2019, which quarterly financial statements were unaudited. Such financial statements present fairly in all material respects the financial condition and results of operations of the Lessee and its Subsidiaries as of the dates and for the periods indicated, and such financial statements disclose in accordance with GAAP all material liabilities, direct or contingent, of the Lessee as of the dates thereof.

Since September 30, 2019, there has been no material adverse change in the business, assets, operations or financial condition of the Lessee and its Restricted Subsidiaries, considered as a whole.

(m)       Taxes.

(i)         The Lessee has filed or caused to be filed all United States Federal income Tax returns and all other material Tax returns which are required to be filed by it and has paid or caused to be paid all Taxes due pursuant to such returns or pursuant to any assessment received by it except where the amount, applicability or validity of such Taxes are being contested in good faith by proper legal proceedings. The charges, accruals and reserves on the books of the Lessee in respect of Taxes or other governmental charges, additions to taxes and any penalties and interest thereon are, in the opinion of the Lessee, adequate; and

(ii)        On the Closing Date, to the Actual Knowledge of the Lessee, no Participant is subject to any Taxes with respect to which the Lessee is obligated to indemnify such Participant pursuant to Section 7.2(a)(ii) and no Indemnitee is subject to Withholding Taxes with respect to which the Lessee is obligated to indemnify such Indemnitee pursuant to Section 7.2(a)(iii), assuming that each Indemnitee complies with its obligations pursuant to Section 7.3.

(n)        Compliance with ERISA. Except to the extent it would not result in any material liability, each of the Lessee and its Restricted Subsidiaries and each ERISA Affiliate (i) has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan, (ii) is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan, and (iii) has not incurred any liability under Title IV of ERISA (A) to the PBGC other than a liability to the PBGC for premiums under Section 4007 of ERISA or (B) in respect of a Multiemployer Plan which has not been discharged in full when due.

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(o)        No Actions. There is no action, suit or proceeding against, or to the knowledge of the Lessee threatened against or affecting, the Lessee or any of its Restricted Subsidiaries before any Authority or arbitrator that (1) could be expected, individually or in the aggregate, to have a Material Adverse Effect or (2) purports to affect or draws into question the legality, validity or enforceability of this Agreement or any Operative Document or the consummation of the transactions contemplated hereby or thereby in any material respect.

(p)        Dissolution or Winding Up. The Lessee has not taken any action nor have any steps been taken or legal proceedings commenced or, to the Actual Knowledge of the Lessee, threatened, against the Lessee for its dissolution, winding-up, examination, administration, court protection or reorganization or for the appointment of a receiver, administrator, administrative receiver, examiner, trustee or similar official with respect to the Lessee or any substantial part of its assets or revenues. Prior to and after giving effect to the overall transaction, the Lessee will be Solvent.

(q)        Foreign Assets Control Regulations, etc. The use of the proceeds of the Lessor Investment and the Rent Assignment Advances will not violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. None of the Lessee, nor any investor in the Lessee, is (i) on the SDNL, or (ii) in violation of any money laundering law, regulation or order including the Beneficial Ownership Regulations and Executive Order No. 13244 on Terrorist Financing, effective September 24, 2001 and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (the “USA PATRIOT Act”).

(r)         Location of the Lessee. The location of the Lessee, as defined by the Uniform Commercial Code, is the State of Delaware and the Lessee’s address for purposes of preparing any UCC financing statement is at the following address:

Cubic Corporation
9333 Balboa Avenue

San Diego, California 92123

The Lessee keeps or will keep its company records concerning the Facility, the Site and the Operative Documents to which it is or will be a party at such address or at such other address of which the Lessee will provide the Lessor notice within forty-five (45) days after its company records have been relocated.

(s)        Subject to Government Regulation. The Lessee is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940. The Lessee is not a “covered fund” under Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. § 1851).

(t)         Not a Foreign Person. The Lessee is not a “foreign person” within the meaning of Sections 1445 and 7701 of the Code (i.e., the Lessee is not a non-resident alien, foreign

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corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder).

(u)        No Approvals, etc. The execution and delivery by the Lessee of any of the Operative Documents to which it is a party does not require the consent or approval of, or the giving of notice to or registration with, or the taking of any other action in respect of, any Authority.

(v)        Note Purchase Agreement. As of the Amendment Date only, the Lessee represents that the Note Purchase Agreement has been fully repaid and all obligations (other than contingent indemnification obligations with respect to which no claim has been made) thereunder have been satisfied.

SECTION 4.2.           Representations and Warranties of the Lessor.

As of the Closing Date, the Lessor represents and warrants to each of the other parties hereto as follows:

(a)        Due Organization, etc. The Lessor is duly incorporated and validly existing under the laws of the jurisdiction of its incorporation and has full power and authority to own its properties, to enter into and perform its obligations as the Lessor under each Operative Document to which it is or will be a party and each other agreement, instrument and document to be executed and delivered by it on or before the Closing Date in connection with or as contemplated by each such Operative Document to which it is or is to be a party, and to carry on its business as now being and hereafter proposed to be conducted.

(b)        ERISA. It is making its Lessor Investment with assets that are not “plan assets” within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, of any Employee Benefit Plan.

(c)        Due Authorization; Enforceability, etc. This Agreement and each other Operative Document to which the Lessor is or will be a party have been or will be (to the extent it is to be a party thereto in its individual capacity) duly authorized, executed and delivered by or on behalf of the Lessor (in its individual capacity) and are, or upon execution and delivery will be, legal, valid and binding obligations of the Lessor, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting creditors’ rights generally and by general equitable principles.

(d)        No Conflict. The execution and delivery by the Lessor of each Operative Document to which the Lessor is or will be a party, are not and will not be, and the performance by the Lessor of its obligations under each Operative Document (i) are not and will not be, inconsistent with the organizational documents of the Lessor; (ii) do not and will not contravene any Applicable Laws and Regulations applicable to the Lessor and (iii) do not and will not conflict with result in a breach of, or a default under, the charter documents or resolutions of the Lessor or any indenture or other material agreement or instrument to which the Lessor is party, or any Governmental Action relating to the Lessor, except in any case, as could not reasonably be

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expected to have a material adverse effect on the ability of the Lessor to perform its obligations pursuant to the Operative Documents.

(e)        Lessor Liens. The Leased Property is free and clear of all Lessor Liens attributable to the Lessor and no act or omission by it has occurred which would cause a Lessor Lien attributable to it.

(f)         Location of the Lessor. The location of the Lessor, as defined by the Uniform Commercial Code, is the State of California and the Lessor’s address for purposes of preparing any UCC financing statement is at the following address:

Bankers Commercial Corporation
445 South Figueroa, 14th Floor
Los Angeles, California 90017

The Lessor keeps or will keep its company records concerning the Facility, the Site and the Operative Documents to which it is or will be a party at such address or at such other address of which the Lessor will provide the Collateral Agent notice within forty-five (45) days after its company records have been relocated.

(g)        Not a Foreign Person. The Lessor is not a “foreign person” within the meaning of Sections 1445 and 7701 of the Code (i.e., the Lessor is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder).

SECTION 4.3.           Representations and Warranties of Rent Assignees.

As of the Closing Date, each Rent Assignee represents and warrants severally and only as to itself to each of the other parties hereto as follows:

(a)        Due Organization, etc. It is duly organized and validly existing under the laws of the jurisdiction of its formation and has full power and authority to enter into and perform its obligations as a Rent Assignee under each Operative Document to which it is or is to be a party and each other agreement, instrument and document to be executed and delivered by it on or before the Closing Date in connection with or as contemplated by each such Operative Document to which it is or is to be a party.

(b)        ERISA. It is acquiring the Rent Assignment Interests with assets that are not “plan assets”, within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, of any Employee Benefit Plan.

(c)        Investment in Rent Assignment Interests. It is acquiring the Rent Assignment Interests for its own account for investment and not with a view to any distribution (as such term is used in Section 2(11) of the Securities Act) thereof other than in accordance with the Operative Documents and, if in the future it should decide to dispose of its interest in such Rent Assignment Interest, it understands that it may do so only in compliance with the Securities Act and the rules and regulations of the United States Securities and Exchange Commission

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thereunder, any applicable state securities laws and the applicable securities laws of any other jurisdiction. It is an Eligible Assignee and is aware that the Rent Assignment Interests have not been registered under the Securities Act or qualified or registered under any state or other jurisdiction’s securities laws. Neither it nor anyone authorized to act on its behalf has taken or will take any action which would subject the issuance or sale of any Rent Assignment Interest to the registration requirements of Section 5 of the Securities Act. No representation or warranty contained in this Section 4.3(c) shall include or cover any action or inaction of any Cubic Person whether or not purportedly on behalf of the Agents, any Participant or any of their Affiliates. Notwithstanding the foregoing, but subject to the provisions of Article VI hereof, it is understood among the parties that the disposition of its property shall be at all times within its control. It and its respective agents and representatives have such knowledge and experience in financial and business matters as to enable them to utilize the information made available to them in connection with the transactions contemplated hereby, to evaluate the merits and risk of an investment in the Rent Assignment Interests and to make an informed decision with respect thereto and such an evaluation and informed decision have been made.

(d)        Lessor Liens. The Leased Property is free and clear of all Lessor Liens attributable to it and no act or omission by it has occurred which would cause a Lessor Lien attributable to it.

SECTION 4.4.           Representations and Warranties of Administrative Agent and Collateral Agent.

As of the Closing Date, each Agent hereby represents and warrants to each of the other parties hereto as follows:

(a)        Organization and Authority. It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has the power and authority to enter into and perform its obligations under the Operative Documents.

(b)        Authorization; Binding Effect. The Operative Documents to which it is or will be a party have been or will be, on the date required to be delivered hereby, duly authorized, executed and delivered by it and this Agreement is, and such other Operative Documents are, or, when so executed and delivered by it will be, valid, legal and binding agreements of such Agent, enforceable against it in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

(c)        Non-Contravention. Neither the execution and delivery by it of the Operative Documents to which it is or will be a party, either in its individual capacity, as Agent or both, nor compliance with the terms and provisions thereof, conflicts with, results in a breach of, constitutes a default under (with or without the giving of notice or lapse of time or both), or violates any of the terms, conditions or provisions of: (i) its organizational documents; (ii) any bond, debenture, note, mortgage, indenture, agreement, lease or other instrument to which it, either in its individual capacity, as Agent, or both, is now a party or by which it or its property, either in its individual capacity, as Agent or both, is bound or affected, where such conflict, breach, default or violation would be reasonably likely to materially and adversely affect its ability, either in its

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individual capacity, as Agent or both, to perform its obligations under any Operative Document to which it is or will be a party, either in its individual capacity, as Agent or both; or (iii) any of the terms, conditions or provisions of any Applicable Laws and Regulations governing its banking or trust powers, or any order, injunction or decree of any Authority applicable to it in its individual capacity, as Agent or both, where such conflict, breach, default or violation would be reasonably likely to materially and adversely affect its ability, either in its individual capacity, as the Agent or both, to perform its obligations under any Operative Document to which it is or will be a party.

(d)        Absence of Litigation, etc. There is no litigation (including, without limitation, derivative actions), arbitration or governmental proceedings served and pending or, to the best knowledge of such Agent, threatened against it which would be reasonably likely to adversely affect its ability to perform its obligations under the Operative Documents to which it is party.

(e)        Consents, etc. No authorization, consent, approval, license or formal exemption from, nor any filing, declaration or registration with, any Authority governing its banking or trust powers, is or will be required in connection with its execution and delivery of the Operative Documents to which it is party or its performance by of its obligations under such Operative Documents.

(f)         Lessor Liens. The Leased Property is free and clear of all Lessor Liens attributable to it.

ARTICLE V

COVENANTS OF THE LESSEE

SECTION 5.1.           Financial Reporting.

The Lessee agrees to furnish or cause to be furnished each of the following to the Administrative Agent:

(a)        Annual Reports. Within one hundred twenty (120) days after the end of each fiscal year of the Lessee (or such earlier date on which the Lessee is required to file a Form 10-K under the Securities Exchange Act of 1934), the consolidated balance sheet of the Lessee as of the end of such fiscal year; and related consolidated statements of income, cash flows and stockholders’ equity for such fiscal year, in comparative form with such financial statements as of the end of, and for, the preceding fiscal year, accompanied by an unqualified opinion thereon of independent public accountants of recognized national standing, stating that such financial statements present fairly, in all material respects, the consolidated financial condition, results of operations and cash flows of the Lessee as of the dates and for the periods specified in accordance with GAAP consistently applied (it being understood that the information required may be furnished in the form of a Form 10-K (together with the Lessee’s annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the SEC); provided that the term “unqualified opinion” as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that does not include any “going concern” or like qualification or exception.

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(b)        Quarterly Reports. Within sixty (60) days (or such earlier date on which the Lessee is required to file a Form 10-Q under the Securities Exchange Act of 1934) after the end of each of the first three (3) fiscal quarters of each fiscal year, the consolidated balance sheet of the Lessee as of the end of such fiscal quarter and related consolidated statements of income and cash flows for such fiscal quarter and for the then elapsed portion of the fiscal year, in comparative form with the consolidated statements of income and cash flows for the comparable periods in the previous fiscal year, and accompanied by a certificate of the chief financial officer, principal accounting officer or treasurer of the Lessee stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of the Lessee as of the date and for the periods specified therein in accordance with GAAP consistently applied, and on a basis consistent with audited financial statements referred to in clause (a) of this Section, subject to normal year-end audit adjustments and the absence of footnote disclosures (it being understood that the information required may be furnished in the form of a Form 10-Q).

(c)        Public Reports. Promptly after the same become publicly available, copies of all periodic and other financial statement, proxy statements, notices and reports which the Lessee sends to its public stockholders and other materials filed by the Lessee with the SEC, or any Authority succeeding to any or all of the functions of the SEC, or with any national securities exchange.

(d)        Notice Regarding Default or Event of Default. Promptly and, in any event, within ten (10) Business Days after the Lessee obtains Actual Knowledge of any Default or Event of Default, a written notice setting forth the details thereof and the action that the Lessee is taking or proposes to take with respect thereto.

(e)        ERISA Matters. Promptly, and in any event within thirty (30) days after the Lessee becomes aware of any of the following with respect to the Lessee or any ERISA Affiliate, a written notice setting forth the nature thereof and the actions, if any that the Lessee or any ERISA Affiliate proposes to take (i) with respect to any Plan, any reportable event, as defined in Section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Lessee or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any ERISA Event or any event, transaction or condition that reasonably could be expected to result in the incurrence of any liability by the Lessee or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Lessee or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect.

(f)         Authority Matters. Promptly, and in any event within thirty (30) days of receipt thereof, copies of any notice to the Lessee or any Restricted Subsidiary from any Authority

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relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect.

(g)        Reserved.

(h)        Other Information. Promptly, (x) written notice of any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect, and (y) from time to time, such other data and information regarding the operations, business affairs and financial condition of the Lessee, the condition, use and operation of the Facility, compliance with the terms of any Operative Document or any information and documentation reasonably requested by the Administrative Agent or any Rent Assignee for purposes of compliance with applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT ACT and the Beneficial Ownership Regulation, as the Administrative Agent or any of the Participants may reasonably request; provided, however, that such Person will not be allowed to receive information the provision or disclosure of which is prohibited pursuant to Applicable Laws and Regulations or contractual obligations or that is protected by attorney-client privilege.

(i)         Financial Covenants. Contemporaneously with the delivery of reports pursuant to Section 5.1(a) and (b), an Officer’s Certificate in the form of Exhibit C.

(j)         Reporting Treatment of Unrestricted Subsidiaries. Notwithstanding anything to the contrary contained in this Agreement, so long as the Unrestricted Subsidiaries continue to constitute, in the aggregate, less than seven percent (7%) of Consolidated Total Capitalization in any fiscal period, the Lessee shall be permitted to include, for purposes of the financial reporting requirements contained in Sections 5.1(a) and (b), and only for purposes of such Sections (and in no event for purposes of determining compliance with any of the covenants contained in this Article V hereof), the financial information of such entities on a consolidated basis. If at any time the Unrestricted Subsidiaries shall constitute, in the aggregate, seven percent (7%) or more of Consolidated Total Capitalization in any fiscal period, the Lessee shall, notwithstanding that Section 5.1(a) and (b) permit the Lessee to comply therewith by delivery of its Quarterly Reports on SEC Form 10-Q and Annual Reports on SEC Form 10-K, provide consolidating financial statements setting forth separately the financial information for the Unrestricted Subsidiaries for such period, together with the financial information of such entities on a consolidated basis for purposes of the financial reporting requirements contained in Sections 5.1(a) and (b) and only for purposes of such Sections (and in no event for purposes of determining compliance with any of the covenants contained in this Article V hereof). In no event shall the Lessee include financial information of the Unrestricted Subsidiaries for purposes of any determination of compliance with any of the covenants contained in this Article V hereof.

Any documents required to be delivered pursuant to clauses (a), (b), (c), (e) or (f) above may be delivered electronically (including by having been publicly filed with the SEC) and if so delivered, shall be deemed to have been delivered to the Administrative Agent and each of the Participants on the date (i) on which the Lessee posts such documents or provides a link thereto on the Lessee’s website on the Internet at www.cubic.com (or such other website address provided to the Administrative Agent and each of the Participants in writing from time to time); (ii) on

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which such documents are posted on the Lessee’s behalf on an Internet or intranet website, if any, to which the Administrative Agent and each of the Participants has access (whether a commercial, third-party website or whether sponsored by the Administrative Agent or any of the Participants); or (iii) if publicly filed with the SEC, as of the date of such filing. Neither the Administrative Agent nor any Participant shall have any obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Lessee with any such request for delivery, and each of the Administrative Agent and each Participant shall be solely responsible for requesting delivery to it or maintaining its copies of such documents. The Lessee shall deliver paper copies of such documentation to the Administrative Agent or any Rent Assignee upon its request to deliver such paper copies.

(k)        Projections. Concurrently with the delivery of the financial statements required to be delivered pursuant to Section 5.1(a), a copy of the plan and forecast (including a projected consolidated balance sheet, income statement and funds flow statement) of the Lessee for each quarter of the current fiscal year during which such financial statements are delivered in form reasonably satisfactory to the Administrative Agent.

SECTION 5.2.           Affirmative Covenants of the Lessee.

The Lessee covenants and agrees with the Lessor that the Agents and each of the Participants shall comply with the following provisions of this Section 5.2 and the covenants set forth in Sections 5.3 and 5.4.

(a)        Investigation and Litigation. The Lessee shall deliver a written notice to the Administrative Agent promptly upon the Lessee’s receiving notice, or upon the Lessee’s obtaining Actual Knowledge, of the intent by an Authority to (i) take an action which would constitute a Condemnation or Event of Taking, (ii) investigate the Leased Property or the Site or other land on which any portion of the Leased Property has been or is being constructed for a material violation of any Applicable Laws and Regulations (including any Environmental Law) on or in respect of the Facility or any portion thereof, or (iii) investigate the Leased Property or the Site or other land on which any portion of the Leased Property has been or is being constructed (other than routine fire, occupational health and safety and similar inspections) for any violation of Applicable Laws and Regulations under which civil liability in excess of $500,000 or any criminal liability may be incurred or imposed upon the Agents, the Participants or the Lessee.

(b)        Notices. The Lessee shall provide prompt (but, other than as noted clause (iii) below, in no event later than five (5) Business Days after the Lessee obtains Actual Knowledge thereof) telephonic (confirmed in writing) or written notice to the Administrative Agent of:

(i)         the commencement of all proceedings and investigations by or before any Authority and all actions and proceedings in any court or before any arbitrator against or involving the Lessee or any of the Leased Property or the Site or other land on which any portion of the Leased Property has been or is being constructed (A) which in the reasonable judgment of the Lessee could reasonably be expected to have a Material Adverse Effect or (B) with respect to any Operative Document;

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(ii)        the occurrence and continuation of any event which constitutes, or which could reasonably be expected to result in, a Default, Event of Default, Event of Loss, Event of Taking, Casualty (as required by Section 3.3 of the Construction and Development Agreement or Section 13.4 of the Lease) or Condemnation (as required by Section 3.3 of the Construction and Development Agreement or Section 13.3 of the Lease); and

(iii)       any change or proposed change in Applicable Laws and Regulations which would, if adopted, require that the Agents or any of the Participants pay any amount in Taxes sufficient to cause the remaining Available Commitments of the Lessor and Rent Assignees to be insufficient to Complete the Facility on or before the Construction Period Termination Date. Notice of any such change or proposed change in Applicable Laws and Regulations shall be delivered within thirty (30) days of the earliest date a Responsible Officer of the Lessee obtains Actual Knowledge thereof.

(c)        Securities. The Lessee shall not, nor shall it permit anyone (other than the Arranger and the Participants) authorized to act on its behalf to, take any action which would subject the issuance or sale of the Rent Assignment Interests, the Leased Property or the Operative Documents, or any security or lease the offering of which, for purposes of the Securities Act or any state securities laws would be deemed to be part of the same offering as the offering of the aforementioned items, to the registration requirements of Section 5 of the Securities Act or any state securities laws.

(d)        Conduct of Business and Maintenance of Existence. The Lessee will (i) continue to engage in business of the same general type as now conducted by the Lessee, (ii) preserve, renew and keep in full force and effect its existence and (iii) preserve, renew and keep in full force and effect its rights, privileges and franchises necessary or desirable (as determined in good faith by the Lessee) in the normal conduct of business except (i) for any such rights, privileges and franchises the failure of which to preserve, renew or keep in full force and effect would not, individually or in the aggregate, have a Material Adverse Effect, taken as a whole, and (ii) as permitted under Section 5.3 below.

(e)        Compliance with Laws and Material Contractual Obligations. The Lessee will, and will cause each of its Restricted Subsidiaries to, (i) comply with all applicable laws and regulations (including ERISA and Environmental Laws), ordinances, rules, regulations, and requirements of Authorities applicable to the Lessee and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, and (ii) perform in all material respects its obligations under material agreements to which it is a party, in each case except where (a) the necessity of compliance therewith is contested by a Permitted Contest in good faith by appropriate proceedings diligently prosecuted so long as such proceedings shall not involve any meaningful danger of the sale, forfeiture, loss or diminution in value of, and shall not interfere with the use, operation or disposition of, any part of the Leased Property or the Site, the Lease or title thereto or any interest therein or the payment of Rent or (b) noncompliance therewith would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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(f)         Obligations to Rank Pari Passu. The obligations of the Lessee under the Lease and other Operative Documents are and shall at all times rank at least pari passu as against the assets of the Lessee with all other present and future unsecured Indebtedness (actual or contingent) of the Lessee which is not expressed to be subordinate or junior in rank to any other unsecured Indebtedness of the Lessee.

(g)        Rates. With respect to each determination of Yield pursuant to this Agreement, the Rent Assignment Agreement and of Basic Rent under the Lease, the Lessee agrees to be bound by Sections 2.8, 2.9(d), 2.9(e), 2.11(d) and 2.12(d) hereof and the applicable definitions in Appendix I with respect to such determinations.

(h)        Books and Records. The Lessee will keep proper books of record and account in which full, true and correct entries in all material respects are made of all dealings and transactions in relation to its business and activities.

SECTION 5.3.           Consolidations, Mergers, Sales of Assets.

(a)        Except for a Permitted Acquisition, the Lessee shall not, and will not permit any Restricted Subsidiary to, consolidate with or be a party to a merger with any other Person, or sell, lease or otherwise dispose (including pursuant to a Division) of all or substantially all of its assets or acquire all or substantially all of the assets, all or a substantial part of, a business, division, brand or product line, or all or substantially all of the stock of any Person, provided that any Subsidiary may merge or consolidate with or into or dissolve into the Lessee or any Wholly-owned Restricted Subsidiary so long as in (1) any merger, consolidation or dissolution involving the Lessee, the Lessee shall be the surviving corporation, (2) any merger, consolidation or dissolution involving a Wholly-owned Restricted Subsidiary, the Wholly-owned Restricted Subsidiary shall be the surviving or continuing corporation, and (3) any merger, consolidation or dissolution involving a Restricted Subsidiary (and not a Wholly-owned Restricted Subsidiary), the Restricted Subsidiary shall be the surviving or continuing corporation, and, provided further, the Lessee and any Restricted Subsidiary may engage in the transactions contemplated by Section 5.3(b).

(b)        The Lessee will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer, abandon or otherwise dispose of assets (except as provided in this Section 5.3); provided that the foregoing restrictions do not apply to:

(i)                     the sale, lease, transfer or other disposition of assets (x) of the Lessee to a Restricted Subsidiary or (y) of a Restricted Subsidiary to the Lessee or a Wholly-owned Restricted Subsidiary, provided that the aggregate amount of assets sold, leased, transferred or otherwise disposed by Lessee to a Subsidiary that is not a Domestic Subsidiary shall not exceed $10,000,000;

(ii)                    the use or transfer of money or cash equivalents in a manner that is not prohibited by the terms of this Agreement or the other Operative Documents;

(iii)                   dispositions of Permitted Investments for other Permitted Investments or other transactions permitted pursuant to this Agreement in the ordinary course of business;

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(iv)                   the sale of inventory in the ordinary course of business and sales of accounts receivable pursuant to the terms of a Permitted Factoring Program;

(v)                    dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;

(vi)                   leases or subleases of real property in the ordinary course of the business of the Lessee and its Restricted Subsidiaries;

(vii)                  cancellations, terminations, or surrender by the Lessee or any of its Restricted Subsidiaries of any leasehold interest in the ordinary course of business;

(viii)                 dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such disposition are reasonably promptly applied to the purchase price of such replacement property;

(ix)                   the licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business;

(x)                    (i) the lapse of registered patents, trademarks, copyrights and other intellectual property of the Lessee or any Restricted Subsidiary to the extent not economically desirable in or is immaterial to the conduct of its business, or (ii) the abandonment of patents, trademarks, copyrights, or other intellectual property rights in the ordinary course of business so long as (in each case under clauses (i) and (ii)), such lapse or abandonment could not reasonably be expected to result in a Material Adverse Effect,

(xi)                   transactions expressly permitted pursuant to Sections 5.6(c), 5.6(d), 5.6(e), 5.6(f), 5.6(g) and 5.6(i);

(xii)                  the sale, discount or compromise, in each case without recourse, of accounts receivable arising in the ordinary course of business;

(xiii)                 any involuntary loss, damage or destruction of property or any involuntary condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, or confiscation or requisition of use of property

(xiv)                 dispositions of assets acquired pursuant to a Permitted Acquisition consummated within 12 months of the date of the proposed disposition so long as (i) the consideration received for the assets to be so disposed is at least equal to the fair market value of such assets, (ii) the assets to be so disposed are not necessary or economically desirable in connection with the business of the Lessee and its Restricted Subsidiaries, and (iii) the assets to be so disposed are readily identifiable as assets acquired pursuant to the subject Permitted Acquisition;

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(xv)                  dispositions of Equity Interests in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

(xvi)                 to the extent allowable under Section 1031 of the Internal Revenue Code, any disposition of assets other than accounts receivable in exchange for other like property for use in a business of the Lessee or its Restricted Subsidiaries;

(xvii)                (i) the expiration of any option agreement in respect of real or personal property and (ii) any surrender or waiver of contractual rights or the settlement, release or surrender of contractual rights or other litigation claims (including in tort) in the ordinary course of business;

(xviii)               the unwinding, settlement or termination of any Swap Agreement permitted under Section 5.6(l);

(xix)                 sales, transfers or other dispositions of assets acquired required by any Authority;

(xx)                  the liquidation or dissolution or change in form of entity of any Subsidiary if the Lessee determines in good faith that such liquidation, dissolution or change in form is in the best interests of the Lessee and is not materially disadvantageous to the Lessor;

(xxi)                 the sale of assets for cash or other property to a Person and the designation of a Restricted Subsidiary as an Unrestricted Subsidiary as contemplated by Section 5.6(b), if all of the following conditions are met:

(1)                    such assets (valued at net book value) do not, together with all other assets (valued at book value) of the Lessee and its Restricted Subsidiaries previously disposed of pursuant to this clause (b)(xxi) during the immediately preceding twelve calendar month period, exceed fifteen percent (15%) of Consolidated Total Assets (determined by reference to Consolidated Total Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l)));

(2)                    in the opinion of the Lessee’s Board of Directors, the sale is for fair value and is in the best interests of the Lessee;

(3)                    immediately after the consummation of the transaction and after giving effect thereto, no Default would exist; and

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(4)                    in the case of any such sale of assets having a net book value in excess of 5% of Consolidated Total Assets (determined by reference to Consolidated Total Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))), the Lessee prior to the consummation of such sale, shall have delivered a certificate to the Administrative Agent to the effect that the foregoing conditions of this clause (b)(xxi) shall have been met, including calculations evidencing compliance with clause (a) above.

SECTION 5.4.           Compliance with Laws and Approvals.

The Lessee shall observe and remain in compliance with all Applicable Laws and Regulations and maintain in full force and effect all Governmental Actions, in each case applicable to the conduct of its business except (x) where the failure to observe or comply could not reasonably be expected to have a Material Adverse Effect; or (y) where such obligations are being contested by the Lessee in good faith in accordance with Section 9.5 of the Lease. The Lessee shall promptly notify the Agents and each of the Participants should it or its parent companies be named on the SDNL and shall promptly cause such entity to be removed from such list.

SECTION 5.5.           [Intentionally Omitted.]

SECTION 5.6.           Financial Covenants of the Lessee.

(a)        Financial Ratios. The Lessee shall not permit:

(i)         the ratio determined at the end of each fiscal quarter on a rolling four quarter basis of (x) Consolidated EBITDA to (y) Consolidated Cash Interest Expense to be less than 3.00 to 1.00; or

(ii)        the Net Leverage Ratio (i) as of the last day of any fiscal quarter ending on or prior to December 31, 2020 to be greater than 4.75 to 1.00 and (ii) as of the last day of any fiscal quarter ending after December 31, 2020 to be greater than 4.00 to 1.00.

Notwithstanding the foregoing, the Lessee shall be permitted, but in no event on more than one (1) occasion after June 30, 2021 (in the aggregate), to allow the Net Leverage Ratio permitted under Section 5.6(a)(ii) to be increased to 4.75 to 1.00 for a period of four consecutive fiscal quarters (such period, the “Adjusted Covenant Period”) in connection with a Permitted Acquisition if the aggregate consideration paid or to be paid in respect of such Permitted Acquisition exceeds $50,000,000 (and in respect of which the Lessee shall provide notice in writing to the Administrative Agent (for distribution to the Participants) of such increase and a transaction description of such Permitted Acquisition (regarding the name of the Person or summary description of the assets being acquired and the approximate purchase price)), so long as the Lessee is in compliance on a pro forma basis with the Net Leverage Ratio of 4.75 to 1.00 on

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the closing date of such Permitted Acquisition immediately after giving effect (including pro forma effect) to such Permitted Acquisition; provided that it is understood and agreed that the Net Leverage Ratio permitted under Section 5.6(a)(ii) shall revert to 4.00 to 1.00 with respect to the first fiscal quarter end following the Adjusted Covenant Period and thereafter.

(b)        Designation of Subsidiaries. The Lessee may designate or redesignate any Unrestricted Subsidiary as a Restricted Subsidiary and may designate or redesignate any Restricted Subsidiary as an Unrestricted Subsidiary; provided, that (i) any such designation of a Restricted Subsidiary (other than a Restricted Subsidiary that is an SPE) as an Unrestricted Subsidiary shall be subject to the prior written approval of the Required Participants when a Default has occurred and is continuing (or would arise immediately after giving effect on a pro forma basis to such designation), (ii) any such Subsidiary designated as an Unrestricted Subsidiary shall not, directly or indirectly, own any Indebtedness or capital stock (or similar equity interests) of the Lessee or any Indebtedness of any Restricted Subsidiary, (iii) the designation of such Restricted Subsidiary (other than a Restricted Subsidiary that is an SPE) as an Unrestricted Subsidiary shall be deemed to be a sale or other disposition of assets to be consummated within the limitations of Section 5.3(b)(xxi) and, immediately after giving effect to such deemed sale or other disposition, the company would be in pro-forma compliance with such Section, (iv) immediately after giving effect to such designation as an Unrestricted Subsidiary, the company would be in pro-forma compliance with Section 5.6(d), and (v) no such designation or redesignation shall be effective unless the Lessee has delivered to the Administrative Agent written notice thereof together with a certification by a Responsible Officer of the Lessee that the requirements set forth in this Section 5.6(b) have been satisfied. For the avoidance of doubt, (i) upon and following the designation of an Unrestricted Subsidiary as a Restricted Subsidiary and after giving effect thereto, each Restricted Subsidiary so designated shall be subject to the provisions of this Agreement which apply to Restricted Subsidiaries and (ii) no Subsidiary Borrower (as defined under the Credit Agreement) may be designated an Unrestricted Subsidiary.

(c)        Restricted Payments. The Lessee will not, and will not permit any of its Restricted Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly (including, without limitation, on a synthetic basis through Swap Agreements), any Restricted Payment, except (a) the Lessee may declare and pay dividends with respect to its Equity Interests payable solely in additional Equity Interests, (b) Subsidiaries may declare and pay dividends and other Restricted Payments ratably with respect to their Equity Interests, (c) the Lessee may make Restricted Payments pursuant to and in accordance with option plans or other benefit plans for management, employees and other eligible service providers of the Lessee and its Subsidiaries, and (d) the Lessee may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issuance of its Equity Interests, (e) the Lessee may repurchase fractional shares of its Equity Interests arising out of stock dividends, splits or combinations, business combinations or conversions of convertible securities, and (f) the Lessee may declare and pay cash dividends on its Equity Interests, or make any payment on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or any option, warrant or other right to acquire any such Equity Interests (i) in an unlimited amount so long as the Net Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such Restricted Payment) is less than or equal to 2.50 to 1.00, (ii) if the Net

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Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such Restricted Payment) is greater than 2.50 to 1.00 but less than or equal to 3.00 to 1.00, in an amount not to exceed, together with all such Restricted Payments made during the current fiscal quarter and the period of three consecutive complete fiscal quarters immediately preceding such current fiscal quarter, ten percent (10%) of Consolidated Tangible Assets (determined by reference to Consolidated Tangible Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))) and (iii) if the Net Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such Restricted Payment) is greater than 3.00 to 1.00, in an amount not to exceed, together with all such Restricted Payments made during the current fiscal quarter and the period of three consecutive complete fiscal quarters immediately preceding such current fiscal quarter, five percent (5%) of Consolidated Tangible Assets (determined by reference to Consolidated Tangible Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))), in each case if, at the time thereof and immediately after giving effect thereto, no Default shall have occurred and be continuing.

(d)        Investments, Loans, Advances, and Guarantees. The Lessee will not, and will not permit any of its Restricted Subsidiaries to, purchase, hold or acquire (including pursuant to any merger or consolidation with, or as a Division Successor pursuant to the Division of, any Person (other than the Lessee or any Restricted Subsidiary) that was not a Wholly-owned Subsidiary prior to such merger, consolidation or Division) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any Indebtedness of, or purchase or otherwise acquire (in one transaction or a series of transactions) any Person (other than the Lessee or any Restricted Subsidiary) or any assets of any other Person (other than the Lessee or any Restricted Subsidiary) constituting a business unit (each an “Investment”), except:

(i)         Permitted Investments;

(ii)        Permitted Acquisitions;

(iii)       Investments by the Lessee and its Restricted Subsidiaries existing on the date hereof in the capital stock of their respective Subsidiaries;

(iv)       Investments, loans, advances or capital contributions made by the Lessee in or to any Restricted Subsidiary and made by any Restricted Subsidiary in or to the Lessee or any other Restricted Subsidiary (provided that not more than an aggregate amount of $10,000,000 in investments, loans or advances or capital contributions may be made and remain outstanding, at any time, by Lessee to Subsidiaries which are not Domestic Loan Parties (as defined under the Credit Agreement));

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(v)        Investments, loans, advances or capital contributions made by the Lessee or any Restricted Subsidiary in or to any Unrestricted Subsidiary which were made prior to the Amendment Date;

(vi)       Investments in Local Law Joint Ventures in an aggregate amount not to exceed $10,000,000 at any time outstanding;

(vii)      Guarantees constituting Indebtedness permitted by Section 5.6(e)(4);

(viii)     Investments in existence on the Amendment Date, or with respect to which the Lessee or any Restricted Subsidiary is contractually obligated as of the Amendment Date to make in the future, and in each case as described in Schedule 5.6(d) and any modification, replacement, renewal or extension thereof to the extent not involving any additional investment;

(ix)       Investments in the form of Swap Agreements permitted by Section 5.6(l);

(x)        Investments comprised of notes payable, stock or other securities issued by account debtors to the Lessee or any of its Subsidiaries pursuant to negotiated agreements with respect to settlement of such account debtor’s accounts in the ordinary course of business or Investments otherwise received in settlement of obligations owed by any financially troubled account debtors or other debtors in connection with such Person’s reorganization or in bankruptcy, insolvency or similar proceedings or in connection with foreclosure on or transfer of title with respect to any secured Investment;

(xi)       extensions of trade credit or the holding of receivables in the ordinary course of business;

(xii)      the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests of the Lessee or any Restricted Subsidiary or any option, warrant or other right to acquire any such Equity Interests in the Lessee or any Restricted Subsidiary, in each case to the extent the payment therefore is permitted under Section 5.6(c);

(xiii)     loans and advances to officers, directors and employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $1,000,000 in the aggregate at any time outstanding;

(xiv)     endorsements for collection or deposit and prepaid expenses made in the ordinary course of business;

(xv)      transactions (to the extent constituting Investments) or promissory notes and other non-cash consideration received in connection with dispositions permitted by Section 5.3;

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(xvi)     Investments constituting the creation of new Subsidiaries so long as any Investment in such new Subsidiary is otherwise permitted under this Section 5.6(d);

(xvii)    Investments in Project X;

(xviii)   Investments resulting from pledges and deposits permitted as Encumbrances under Section 5.6(f);

(xix)     Investments of a Subsidiary acquired after the Amendment Date or of a Person merged into the Lessee or merged into or consolidated with a Restricted Subsidiary after the Amendment Date, in each case, (i) to the extent such acquisition, merger or consolidation is permitted under this Section 5.6(d) and Section 5.3 and (ii) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;

(xx)      Guarantees by the Lessee or any Restricted Subsidiary of operating leases or of other obligations that do not constitute Indebtedness, in each case entered into by the Lessee or any Restricted Subsidiary in the ordinary course of business;

(xxi)     Investments consisting of Restricted Payments permitted under Section 5.6(c);

(xxii)    Investments consisting of the licensing or contribution of Intangible Assets pursuant to joint marketing arrangements with other persons in the ordinary course of business; and

(xxiii)   any other Investment made after the Amendment Date (other than, for the avoidance of doubt, acquisitions of all or substantially all of the assets of any Target or all of the stock of any Target, which are governed by Section 5.6(d)(ii) and the definition of Permitted Acquisition), including Investments in Unrestricted Subsidiaries (based on the amount of cash or the fair market value of property originally transferred as consideration for such Investments less the amount of cash or the fair market value of property received as a return on or repayment of such Investments) (i) in an unlimited amount so long as the Net Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l)) (and giving pro forma effect to any such Investment (or, if made or acquired while such Unrestricted Subsidiary was designated a Restricted Subsidiary, then at the time of designation as an Unrestricted Subsidiary and immediately after giving effect thereto)) is less than 2.50 to 1.00, (ii) if the Net Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l)) (and giving pro forma effect to any such Investment (or, if made or acquired while such Unrestricted Subsidiary was designated a Restricted Subsidiary, then at the time of designation as an Unrestricted

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Subsidiary and immediately after giving effect thereto)) is greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00, in an amount not to exceed ten percent (10%) of Consolidated Tangible Assets (determined by reference to Consolidated Tangible Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))) and (iii) if the Net Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l)) (and giving pro forma effect to any such Investment (or, if made or acquired while such Unrestricted Subsidiary was designated a Restricted Subsidiary, then at the time of designation as an Unrestricted Subsidiary and immediately after giving effect thereto)) is greater than or equal to 3.00 to 1.00, in an amount not to exceed five percent (5%) of Consolidated Tangible Assets (determined by reference to Consolidated Tangible Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))), in each case if, at the time thereof and immediately after giving effect thereto, no Default shall have occurred and be continuing.

(e)        Limitations on Indebtedness. The Lessee will not, and will not permit any Restricted Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:

(1)        the Obligations;

(2)        Indebtedness existing on the date hereof and set forth in Schedule 5.6(e) and extensions, renewals and replacements of any such Indebtedness with Indebtedness of a similar type that does not increase the outstanding principal amount thereof (except by the amount of any accrued interest and premiums with respect to such Indebtedness and transaction fees, costs and expenses in connection with such extension, renewal or replacement thereof);

(3)        Indebtedness of the Lessee to any Subsidiary and of any Restricted Subsidiary to the Lessee or any other Subsidiary; provided that Indebtedness of any Restricted Subsidiary that is not a Guarantor to the Lessee or any other Guarantor shall be subject to the limitations set forth in Section 5.6(d);

(4)        Guarantees by the Lessee of any Indebtedness of any Restricted Subsidiary and by any Restricted Subsidiary of Indebtedness of the Lessee or any other Restricted Subsidiary;

(5)        Indebtedness of the Lessee or any Restricted Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by an Encumbrance on any such assets prior to the

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acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (except by the amount of any accrued interest and premiums with respect to such Indebtedness and transaction fees, costs and expenses in connection with such extension, renewal or replacement thereof); provided that (i) such Indebtedness is incurred prior to or within ninety (90) days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this clause (5) shall not exceed $60,000,000 at any time outstanding;

(6)        Indebtedness of any Person that becomes a Restricted Subsidiary after the date hereof other than as a result of a Division; provided that (i) such Indebtedness exists at the time such Person becomes a Restricted Subsidiary and is not created in contemplation of or in connection with such Person becoming a Restricted Subsidiary and (ii) the aggregate principal amount of Indebtedness permitted by this clause (6) with respect to any individual Restricted Subsidiary shall not exceed $2,500,000 at any time outstanding and with respect to all Restricted Subsidiaries shall not exceed $10,000,000 in the aggregate at any time outstanding;

(7)        Indebtedness of the Lessee or any Restricted Subsidiary as an account party in respect of trade letters of credit;

(8)        Indebtedness of the Lessee or any Restricted Subsidiary in an aggregate outstanding principal amount not exceed ten percent (10%) of Consolidated Total Assets (determined by reference to Consolidated Total Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))); provided that the aggregate outstanding principal amount of Indebtedness permitted by this clause (8) that is secured by an Encumbrance on any asset of the Lessee or any Restricted Subsidiary shall not in the aggregate exceed five percent (5%) of Consolidated Total Assets (as so determined);

(9)        unsecured Indebtedness of the Lessee so long as (i) both immediately prior to and after giving effect (including pro forma effect) to the incurrence of such Indebtedness, the Lessee is in compliance with the maximum Net Leverage Ratio permitted under Section 5.6(a) at such time (including, if applicable, giving effect to the impact of any Adjusted Covenant Period to the extent elected by the Lessee in accordance with Section 5.6(a)), (ii) such Indebtedness has a final maturity date after the date that is 181 days after the Maturity Date (as defined in the Credit Agreement), (iii) such Indebtedness shall not require scheduled amortization or other scheduled payments of principal (other than pursuant to customary “change of control” provisions or asset sale offers), (iv) such Indebtedness is not guaranteed by any Person other than the Guarantors and (v) the covenants contained in the documents applicable to such Indebtedness are not more onerous or more restrictive (taken as a whole) than the applicable covenants under the Credit Agreement;

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(10)      unfunded pension fund and other employee benefit plan obligations and liabilities to the extent they are permitted to remain unfunded under applicable law, including pension funding obligations with respect to CTSL described on Schedule 5.6(e);

(11)      Indebtedness representing deferred compensation to employees incurred in the ordinary course of business;

(12)      indemnification obligations, earnout or similar obligations (contingent or otherwise), or Guarantees, surety bonds or performance bonds securing the performance of the Lessee or any of its Restricted Subsidiaries, in each case incurred or assumed in connection with a Permitted Acquisition or disposition or other acquisition of assets permitted hereunder;

(13)      Indebtedness of the Lessee or any of its Restricted Subsidiaries in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business, including guarantees or obligations with respect to letters of credit supporting such performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations;

(14)      Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business or otherwise in respect of any netting services, overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing-house transfers of funds;

(15)      Indebtedness in respect to judgments or awards under circumstances not giving rise to an Event of Default;

(16)      Indebtedness in respect of obligations that are being contested in accordance with Section 4.1(m) or Permitted Contests;

(17)      Indebtedness consisting of (i) deferred payments or financing of insurance premiums incurred in the ordinary course of business of the Lessee or any of its Restricted Subsidiaries and (ii) take or pay obligations contained in any supply agreement entered into in the ordinary course of business;

(18)      Indebtedness of Foreign Subsidiaries which are Restricted Subsidiaries (other than Foreign Subsidiary Borrowers, as defined under the Credit Agreement), and Guarantees thereof by Foreign Subsidiaries which are Restricted Subsidiaries (other than Foreign Subsidiary Borrowers), in respect of local lines of credit, letters of credit, bank guarantees and similar extensions of credit, in an aggregate principal amount not to exceed $15,000,000 at any time outstanding;

(19)      Indebtedness representing deferred compensation, severance, pension, workers’ compensation and health and welfare retirement benefits or the equivalent to current and former employees of the Lessee and its Restricted Subsidiaries incurred in the ordinary course of business or existing on the Amendment Date;

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(20)      customer advances or deposits or other endorsements for collection, deposit or negotiation and warranties of products or services, in each case received or incurred in the ordinary course of business;

(21)      Indebtedness incurred by the Lessee or any of its Restricted Subsidiaries arising from agreements providing for indemnification related to sales of goods, services or adjustment of purchase price or similar obligations in any case incurred in connection with the acquisition or disposition of any business, assets or Person;

(22)      [reserved];

(23)      (i) Indebtedness of the Lessee or any of its Restricted Subsidiaries undertaken in connection with cash management and related activities with respect to any Subsidiary or joint venture in the ordinary course of business and (ii) Indebtedness of the Lessee or any Restricted Subsidiary to any joint venture (regardless of the form of legal entity) that is not a Subsidiary arising in the ordinary course of business in connection with the cash management operations (including in respect of intercompany self-insurance arrangements);

(24)      Indebtedness consisting of take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business consistent with past or industry practice;

(25)      Indebtedness incurred in the ordinary course of business in respect of obligations to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services; provided, that such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms in the ordinary course of business consistent with past or industry practice and not in connection with the borrowing of money;

(26)      to the extent constituting Indebtedness, obligations in respect of the Permitted Factoring Program;

(27)      to the extent constituting Indebtedness, obligations pursuant to the Lease and the other Operative Documents;

(28)      obligations in respect of Swaps permitted pursuant to Section 5.6(l); and

(29)      Indebtedness under the Credit Agreement and the Financing Documents (as defined in the Credit Agreement), including, without limitation Indebtedness related to each Letter of Credit (as defined in the Credit Agreement) issued thereunder, and extensions, renewals and replacements of any such Indebtedness.

For purposes of determining compliance with this Section 5.6(e) (A) Indebtedness need not be permitted solely by reference to one category of permitted Indebtedness described in Sections 5.6(e)(1) through (29) but may be permitted in part under any combination thereof and (B) in the event that an item of Indebtedness (or any portion thereof) meets the criteria of one or

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more of the categories of permitted Indebtedness described in Sections 5.6(e)(1) through (29), the Lessee and the Restricted Subsidiaries shall, in their sole discretion, be permitted to classify or reclassify, or later divide, classify or reclassify, such item of Indebtedness (or any portion thereof) in any manner that complies with this Section 5.6(e) at the time of such reclassification and will only be required to include the amount and type of such item of Indebtedness (or any portion thereof) in one of the above clauses and such item of Indebtedness shall be treated as having been incurred or existing pursuant to only one of such clauses.

(f)         Limitation on Encumbrances. The Lessee will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Encumbrance on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, except:

(i)         Encumbrances for property taxes and assessments or governmental charges or levies and Encumbrances securing claims or demands of mechanics and materialmen; provided that payment thereof is not at the time required by Section 4.1(m);

(ii)        Encumbrances of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Lessee or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured;

(iii)       Encumbrances incidental to the conduct of business or the ownership of properties and assets (including Encumbrances in connection with worker’s compensation, unemployment insurance and other like laws, warehousemen’s and attorneys’ liens and statutory landlords’ liens) and Encumbrances to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Encumbrances of like general nature, in any such case incurred in the ordinary course of business and not in connection with the borrowing of money; provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings;

(iv)       minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Lessee and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Lessee and its Restricted Subsidiaries;

(v)        Encumbrances securing Indebtedness of a Restricted Subsidiary to the Lessee or to another Wholly-owned Restricted Subsidiary;

(vi)       Encumbrances existing on the date hereof as scheduled on Schedule 5.6(f) annexed hereto provided, however, with respect to the Leased Property, the Permitted Liens;

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(vii)      Encumbrances on fixed or capital assets acquired, constructed or improved by the Lessee or any Restricted Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 5.6(e), (ii) such Encumbrances and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Lessee or any Subsidiary, other than proceeds of such fixed or capital assets acquired, constructed or improved by the Lessee or any Restricted Subsidiary;

(viii)     Encumbrances on property or assets of a Person existing at the time such Person acquires such property or assets or such Person is merged with or into or consolidated with the Lessee or a Restricted Subsidiary (and not created or incurred in anticipation of such transaction); provided, that, such Encumbrances are not extended to any property or assets of the Lessee or any Restricted Subsidiary other than the property or assets acquired and the proceeds thereof;

(ix)       other Encumbrances not securing indebtedness that are incidental to the conduct of the business of the Lessee or any of its Restricted Subsidiaries, as the case may be, or the ownership of their assets which do not individually or in the aggregate materially adversely affect the value of the Lessee and its Restricted Subsidiaries taken as a whole or materially impair the operation of the business of the Lessee and its Restricted Subsidiaries taken as a whole;

(x)        Encumbrances upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligation in respect of letters of credit and banker’s acceptances issued or created in the ordinary course of business for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(xi)       the interests of lessors and sublessors under operating leases and licenses and sublicenses of intellectual property granted in the ordinary course of business;

(xii)      Encumbrances (i) that are contractual rights of set-off (A) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (B) relating to pooled deposit or sweep accounts of the Lessee and/or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations and other cash management activities incurred in the ordinary course of business of the Lessee and/or any of its Restricted Subsidiaries or (C) relating to purchase orders and other agreements entered into with customers of the Lessee and/or any of its Restricted Subsidiaries in the ordinary course of business, and (ii) of a collecting bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, in favor of banking institutions arising as a matter of law or pursuant to customary account agreements encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

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(xiii)     options, put and call arrangements, rights of first refusal and similar rights relating to Investments in joint ventures, partnerships and the like permitted to be made under this Agreement;

(xiv)     Encumbrances attaching to earnest money deposits (or equivalent deposits otherwise named) made in connection with proposed acquisitions in an amount not to exceed $10,000,000;

(xv)      Encumbrances on accounts receivable subject to a Permitted Factoring Program, as well as supporting obligations and proceeds in respect thereof, and other ancillary property and rights related to such accounts receivable;

(xvi)     Encumbrances in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(xvii)    (i) Encumbrances pursuant to this Agreement and the other Operative Documents and (ii) with respect to the Leased Property, the Permitted Liens; and

(xviii)   other Encumbrances securing obligations of the Lessee and its Restricted Subsidiaries other than as described in the foregoing clauses (i) through (xvii) above, provided that the obligations secured by all such other Encumbrances do not exceed at any time five percent (5%) of Consolidated Total Assets (determined by reference to Consolidated Total Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))).

For purposes of determining compliance with this Section 5.6(f), (A) an Encumbrance securing an item of Indebtedness need not be permitted solely by reference to one category of permitted Encumbrances described in Sections 5.6(f)(i) through (xviii) but may be permitted in part under any combination thereof and (B) in the event that an Encumbrance securing an item of Indebtedness (or any portion thereof) meets the criteria of one or more of the categories of permitted Encumbrances described in Sections 5.6(f)(i) through (xviii), the Lessee and the Restricted Subsidiaries shall, in their sole discretion, be permitted to classify or reclassify, or later divide, classify or reclassify, such Encumbrance securing such item of Indebtedness (or any portion thereof) in any manner that complies with this covenant at the time of such reclassification and will only be required to include the amount and type of such Encumbrance or such item of Indebtedness secured by such Encumbrance in one of the above clauses and such Encumbrance securing such item of Indebtedness will be treated as being incurred or existing pursuant to only one of such clauses.

(g)        Limitation on Sale and Leasebacks. The Lessee will not, and will not permit any Restricted Subsidiary to, enter into any arrangement, directly or indirectly, whereby the Lessee or such Restricted Subsidiary shall in one or more related transactions sell, transfer or otherwise dispose of any property owned by the Lessee or such Restricted Subsidiary more than 180 days

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after the later of the date of initial acquisition of such property or completion or occupancy thereof, as the case may be, by the Lessee or such Restricted Subsidiary, and then rent or lease, as lessee, such property or any part thereof (a “Sale and Leaseback Transaction”); provided that the foregoing restriction shall not apply to any Sale and Leaseback Transaction if immediately after the consummation of such Sale and Leaseback Transaction and after giving effect thereto and the application of the proceeds therefrom, no Default would exist and either:

(i)                     the sale of property relating to such Sale and Leaseback Transaction constitutes a sale of such property by a Restricted Subsidiary to the Lessee or to a Wholly-owned Restricted Subsidiary or by the Lessee to a Wholly-owned Restricted Subsidiary;

(ii)                    the aggregate fair market value (as determined in good faith by the Lessee) of all property of the Lessee and its Restricted Subsidiaries disposed of in all such Sale and Leaseback Transactions consummated and permitted by this clause (b) does not exceed $50,000,000 in the aggregate during the term of the Credit Agreement, as in effect on the date hereof; provided that, if after giving effect (including giving effect on a pro forma basis) to any such Sale and Leaseback Transaction the Net Leverage Ratio would be greater than 3.00 to 1.00, the sale of such property is for cash consideration which (after deduction of any expenses incurred by the Lessee or any Restricted Subsidiary in connection with such Sale and Leaseback Transaction) equals or exceeds the fair market value of the property so sold (as determined in good faith by the board of directors of the Lessee) and the net proceeds from such sale are applied to either (x) the purchase or acquisition (and, in the case of real property, the construction) of fixed assets useful and intended to be used by the Lessee or a Restricted Subsidiary in the operation of the business of the Lessee and its Restricted Subsidiaries of the same general nature of the business engaged in by the Lessee and its Restricted Subsidiaries on the date of this Agreement (provided; that in any such event the Lessee and its Restricted Subsidiaries shall not then or thereafter cause or permit or agree or consent to cause or permit such tangible assets to be subject to any Encumbrance) or (y) the prepayment with the applicable prepayment premium, if any, on a pro rata basis, of Senior Funded Debt of the Lessee; provided that if any such Senior Funded Debt so prepaid constitutes Indebtedness outstanding under any revolving credit or similar credit facility, such prepayment shall result in a permanent reduction of the Indebtedness which the Lessee and its Restricted Subsidiaries may incur thereunder by an amount at least equal to the amount of the prepayment of such Senior Funded Debt; or

(iii)                   such Sale and Leaseback Transaction is one of the anticipated Sale and Leaseback Transactions in respect of the Lessee’s locations in Kearny Mesa, California and Orlando, Florida.

(h)        Restrictive Agreements. The Lessee will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Lessee or any Restricted Subsidiary to create, incur or permit to exist any Encumbrance upon any of its property or assets, or (b) the ability of any Restricted Subsidiary (other than a Restricted Subsidiary that is an SPE) to pay dividends or other distributions with respect to any shares of its capital stock (or similar equity interests) or to make or repay loans or advances to the Lessee or any other Restricted Subsidiary or to Guarantee Indebtedness of the Lessee or any other Restricted Subsidiary; provided; that (i) the foregoing shall not apply to restrictions and conditions imposed by law, by this Agreement or by the Credit Agreement, (ii) the foregoing shall not apply to such

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restrictions or conditions contained in documents evidencing Indebtedness permitted pursuant to Section 5.6(e) if such restrictions or conditions are customary for such Indebtedness, (iii) the foregoing shall not apply to such restrictions or conditions contained in documents which were in existence as of the Amendment Date, (iv) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Restricted Subsidiary or any asset pending such sale, provided such restrictions and conditions apply only to the Restricted Subsidiary or asset that is to be sold and such sale is permitted hereunder, (v) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to Encumbrance or Liens permitted by this Agreement if such restrictions or conditions apply only to the property or assets subject to such permitted Encumbrance or Lien, (vi) clause (a) of the foregoing shall not apply to customary provisions in leases, licenses and other contracts restricting the assignment thereof, (vii) the foregoing shall not apply to restrictions on cash or other deposits imposed by customers of the Lessee or any Restricted Subsidiary under contracts entered into in the ordinary course of business, (viii) the foregoing shall not apply to restrictions under any arrangement with any Authority imposed on any Foreign Subsidiary in connection with governmental grants, financial aid, tax holidays or similar benefits or economic interests, (ix) the foregoing shall not apply to, in the case of any joint venture or Restricted Subsidiary that is not a Wholly-owned Subsidiary, restrictions and conditions imposed by its organizational documents or any related joint venture or similar agreement, provided that such restrictions and conditions apply only to such joint venture or Restricted Subsidiary and to any Equity Interests in such joint venture or Restricted Subsidiary and (x) the foregoing shall not apply to any contractual obligations binding on a Person at the time such Person first becomes a Restricted Subsidiary, so long as such contractual obligations were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary.

(i)         Transactions with Affiliates. The Lessee will not, and will not permit any Restricted Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (excluding transactions with any Restricted Subsidiary or the Lessee, but including transactions with any Unrestricted Subsidiary or any other Affiliate) (an “Applicable Affiliate”) (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Applicable Affiliate), except for (a) management services, operation and maintenance agreements entered into between the Lessee or a Restricted Subsidiary and one or more SPEs or Unrestricted Subsidiaries on reasonable business terms, (b) other transactions between or among the Lessee or one or more of its Restricted Subsidiaries and any Applicable Affiliate entered into in the ordinary course of the Lessee’s or such Restricted Subsidiary’s business consistent with past practices, (c) transactions expressly permitted pursuant to Section 5.3 or Sections 5.6(b), (c), (d), (e) or (g), and (d) other transactions or arrangements entered into in the ordinary course of and pursuant to the reasonable requirements of the Lessee’s or such Restricted Subsidiary’s business and upon fair and reasonable terms no less favorable to the Lessee or such Restricted Subsidiary than would obtain in a comparable arm’s-length transaction with a Person other than an Applicable Affiliate.

(j)         Most Favored Provisions. If at any time the Credit Agreement, or any agreement or document related to the Credit Agreement, (a) includes (1) any covenant, event of default or similar provision that is not provided for in this Agreement, or (2) any covenant, event of default or similar provision that is more restrictive than the same or similar covenant, event of

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default or similar provision provided in this Agreement, or (b) (1) deletes any covenant, event of default or similar provision that was previously added pursuant to the foregoing clause (a)(1) or modified pursuant to the foregoing clause (a)(2), or (2) modifies any provision that was previously added or modified pursuant to such clause (a) to make it less restrictive than the same or similar covenant, event of default or similar provision provided in this Agreement (all such provisions described in clauses (a) or (b) of this Section 5.6(j) being referred to as the “Most Favored Provisions”), then (i) such Most Favored Provision shall immediately and automatically be incorporated by reference in this Agreement as if set forth fully herein, mutatis mutandis, and no such provision may thereafter be waived, amended or modified under this Agreement, except pursuant to the provisions of Section 9.5, and (ii) the Lessee shall promptly, and in any event within five (5) Business Days after entering into any such Most Favored Provision, so advise the Administrative Agent in writing; provided, that notwithstanding the foregoing, unless agreed to in writing by each Participant in its sole discretion, no such deletion or modification described in the foregoing clause (b) shall be incorporated by reference if the result thereof is to cause the applicable covenant, event of default or similar provision to be less restrictive than exists under this Agreement on the Amendment Date, as determined by the Participants. Thereafter, upon the request of the Administrative Agent or the Lessee, the parties hereto shall enter into an amendment to this Agreement at the expense of Lessee evidencing the incorporation of such Most Favored Provision, it being agreed that any failure to make such request or to enter into any such amendment shall in no way qualify or limit the incorporation by reference described in clause (i) of the immediately preceding sentence.

(k)        Subordinated Indebtedness and Amendments to Subordinated Indebtedness Documents. The Lessee will not, and will not permit any Restricted Subsidiary to, directly or indirectly voluntarily prepay, defease or in substance defease, purchase, redeem, retire or otherwise acquire, any Subordinated Indebtedness or any Indebtedness from time to time outstanding under the Subordinated Indebtedness Documents. Furthermore, the Lessee will not, and will not permit any Restricted Subsidiary to, amend the Subordinated Indebtedness Documents or any document, agreement or instrument evidencing any Indebtedness incurred pursuant to the Subordinated Indebtedness Documents (or any replacements, substitutions, extensions or renewals thereof) or pursuant to which such Indebtedness is issued where such amendment, modification or supplement provides for the following or which has any of the following effects, in each case, except to the extent permitted pursuant to the subordination agreement entered into by the Administrative Agent (as defined in the Credit Agreement) in connection with any such Subordinated Indebtedness:

(i)         increases the overall principal amount of any such Indebtedness or increases the amount of any single scheduled installment of principal or interest;

(ii)        shortens or accelerates the date upon which any installment of principal or interest becomes due or adds any additional mandatory redemption provisions;

(iii)       shortens the final maturity date of such Indebtedness or otherwise accelerates the amortization schedule with respect to such Indebtedness;

(iv)       increases the rate of interest accruing on such Indebtedness;

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(v)        provides for the payment of additional fees or increases existing fees;

(vi)       amends or modifies any financial or negative covenant (or covenant which prohibits or restricts the Lessee or any Restricted Subsidiary from taking certain actions) in a manner which is more onerous or more restrictive in any material respect to the Lessee or such Restricted Subsidiary or which is otherwise materially adverse to the Lessee, any Restricted Subsidiary, the Lessor and/or the Rent Assignees or, in the case of any such covenant, which places material additional restrictions on the Lessee or such Restricted Subsidiary or which requires the Lessee or such Restricted Subsidiary to comply with more restrictive financial ratios or which requires the Lessee to better its financial performance, in each case from that set forth in the existing applicable covenants in the Subordinated Indebtedness Documents or the applicable covenants in this Agreement; or

(vii)      amends, modifies or adds any affirmative covenant in a manner which (i) when taken as a whole, is materially adverse to the Lessee, any Restricted Subsidiary, the Lessor and/or the Rent Assignees or (ii) is more onerous than the existing applicable covenant in the Subordinated Indebtedness Documents or the applicable covenant in this Agreement.

(l)         Swap Agreements. The Lessee will not, and will not permit any of its Restricted Subsidiaries to, enter into any Swap Agreement, except (a) Swap Agreements entered into in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a “market view”.

(m)       Change in Fiscal Year. The Lessee will not permit its fiscal year to end on a day other than September 30 or change the Lessee’s method of determining its fiscal quarters.

(n)        Change in Line of Business. The Lessee will not, and will not permit any of its Restricted Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Lessee and its Restricted Subsidiaries on the date of execution of this Agreement and businesses reasonably related, ancillary or complementary thereto and reasonable extensions thereof.

ARTICLE VI

OTHER COVENANTS AND AGREEMENTS

SECTION 6.1.           Cooperation with the Lessee.

The Agents and each of the Participants shall, to the extent reasonably requested by the Lessee (but without assuming additional liability on account thereof), as a Transaction Cost (or as a Construction Cost before the Completion Date) and at the Lessee’s expense thereafter, cooperate to allow the Lessee to (a) perform its covenants contained in the Construction and Development Agreement including, without limitation, at any time and from time to time, upon the reasonable

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request of the Lessee, to promptly and duly execute and deliver any and all such further instruments, documents and financing statements (and continuation statements related thereto) as the Lessee may reasonably request in order to perform such covenants and (b) further the Lessee’s requirements as lessee of the Leased Property, including, without limitation, to file any statement with respect to any tax abatements or other requirements; provided, none of the foregoing expose the Administrative Agent or any Participant to increased liability beyond that contemplated by the Operative Documents.

SECTION 6.2.           Covenants of the Agents and the Participants.

(a)        Discharge of Liens. Each of the Rent Assignees covenants as to itself, and not jointly with any other Rent Assignee, that it will not create or permit to exist at any time, any Lessor Lien attributable to it and will, at its own cost and expense, promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens attributable to it and will cause restitution to be made to the Lessor for the benefit of the Lessee and the other Participants (as their interests may appear) in the amount of any diminution of the value of the Leased Property or the Site as a result of its failure to discharge or cause to be discharged all Lessor Liens attributable to it pursuant to this Section 6.2(a). The Lessor will not create or permit to exist at any time any Lessor Lien attributable to it, and will promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens attributable to it and will cause restitution to be made to the Lessee and the Rent Assignees (as their interests may appear) in the amount of any diminution of the value of the Leased Property or the Site as a result of its failure to comply with its obligations under this Section 6.2(a). Each Agent, in both its individual capacity and in its capacity as Agent, will not create or permit to exist at any time any Lessor Lien attributable to it, and will promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens attributable to it and will cause restitution to be made to the Lessor for the benefit of the Lessee and the Participants (as their interests may appear) in the amount of any diminution of the value of the Leased Property or the Site as a result of its failure to comply with its obligations under this Section 6.2(a). Notwithstanding the foregoing, none of the Participants and/or the Agents, as the case may be, shall be required to so discharge any such Lessor Lien while the same is being contested by a Permitted Contest in good faith by appropriate proceedings diligently prosecuted so long as such proceedings shall not involve any meaningful danger of the sale, forfeiture, loss or diminution in value of, and shall not interfere with the use, operation or disposition of, any part of the Leased Property or the Site, the Lease or title thereto or any interest therein or the payment of Rent; provided, however, that each Participant and each Agent shall discharge any such Lessor Lien attributable to it, whether or not subject to contest as provided above, upon the purchase of the Leased Property by the Lessee pursuant to the Lease or a sale of the Leased Property pursuant to the Return Option.

(b)        Other Lessor Covenants. The Lessor shall not subject any of the Leased Property or the Site to any mortgage, lien, security interest or other claim or encumbrance, other than in favor of the Collateral Agent, the Lessee and the Participants or transfer any interest in the Leased Property in each case other than as contemplated by, arising from or related to the Operative Documents.

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(c)        Change of Information. The Lessor shall give prompt notice to the other Participants and the Lessee if any facts regarding it shall change where such change might reasonably affect its interests in the Leased Property.

(d)        Depreciation. Prior to the termination of the Lease and the transfer of the Leased Property to any Person other than the Lessee or its Affiliate or its designee, none of the Participants shall claim any United States federal, state, or local tax attributes or benefits (including depreciation) relating to the Leased Property unless required to do so by an appropriate taxing Authority or after a clearly applicable change in Applicable Laws and Regulations or as a protective response to a proposed adjustment by an Authority; provided, however, that if an appropriate taxing Authority shall require such Participant to claim any such United States federal, state, or local tax attributes or benefits, such Participant shall promptly notify the Lessee thereof and shall permit the Lessee to contest such requirement in a manner similar to the contest rights provided in, and subject to any applicable limitation to a contest contained in, Section 7.2(b) hereof.

(e)        Quiet Possession. If and so long as no Event of Default shall be continuing, the Agents and each Participant, individually, and not severally, agrees that it shall not interfere with the Lessee’s right to the use, possession and quiet enjoyment of the Leased Property and the Site according to the terms hereof and of the other Operative Documents.

(f)         Assignment of Warranties and Other Rights and Appointment of the Lessee as Agent.

(i)         The Lessor hereby assigns to the Construction Agent, as its construction agent, all of its rights, if any (including indemnification rights and rights to receive payments), under any and all warranties of, and other claims against, dealers, manufacturers, vendors, suppliers, installers, contractors or subcontractors relating to the Leased Property. If the Lessor is contractually or legally prohibited from so assigning any such warranty, indemnity or claim, the Lessor hereby assigns to the Construction Agent, to the extent permitted by Applicable Laws and Regulations, its beneficial interest in such warranty, indemnity or claim. Except as set forth below, the Lessor hereby irrevocably appoints the Construction Agent as its attorney-in-fact and agent with full authority in its place and stead and in the Lessor or otherwise from time to time to assert and enforce (including compromise, waiver or settlement thereof) whatever claims and rights the Lessor may have against suppliers, dealers, manufacturers, vendors, contractors and subcontractors relating to the Leased Property or any component thereof, whether under warranty, product liability claim or otherwise.

(ii)        Upon the occurrence of (A) and during the continuation of an Event of Default and (B) either (1) the Lessor’s election to take possession of the Facility or (2) its express termination of the agency relationship between itself and the Construction Agent, the power of attorney granted pursuant to Section 6.2(f)(i) shall terminate and the Construction Agent shall, without further act on its part, be deemed to have reassigned to the Lessor (A) all of the rights and claims held by the Construction Agent under this subsection relating to the Facility that arise after such taking of possession or termination

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of the agency relationship and (B) a share of such rights and claims held by the Construction Agent under this subsection relating to the Facility that arise before such taking of possession or termination of the agency relationship to the extent that the claims relate to effects that continue after such taking of possession, apportioned by the parties on a reasonable basis between the Construction Agent and the Lessor, taking all relevant factors into account.

(iii)       Except during the continuance of an Event of Default, the Lessor agrees to remit to the Lessee any rebates, refunds or like payments received from dealers, manufacturers, vendors or suppliers of the Leased Property as and when received from such Persons. Any such rebates, refunds or like payments shall not affect in any manner the amounts owing or the payments to be made by the Lessee hereunder.

(g)        Insurance Covenants. The Agents and the Participants herewith accept all covenants between the Lessee and each insurer made in accordance with the terms of the Operative Documents for their respective benefit, including but not limited to the naming of the Agents and the Participants as additional insureds or as loss payees, as the case may be.

(h)        ERISA. No amount shall be funded or held by the Lessor or any Participant with “plan assets,” as defined by 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, of any Employee Benefit Plan.

(i)         Further Assurances. Upon the written request of the Lessee delivered at least thirty (30) days prior to the date specified in such request for a restructuring of the Overall Transaction, as a result of a change or proposed change in the applicable accounting rules, the Participants agree to cooperate with the reasonable requests of the Lessee promptly and in good faith to negotiate with a view toward causing a restructuring of the obligations represented by the Lease and the other Operative Documents, provided the Lessee shall reimburse the Participants for their respective expenses incurred in connection with any such written request or restructuring including the reasonable and properly documented fees and expenses of its legal counsel. In the event any such restructuring involves a change in the nature and scope of the Lessor’s obligations under the Operative Documents and does not involve a transfer by the Lessor of its interest in the Facility and the Site, the Lessee and the Lessor shall agree upon a reasonable and appropriate amount to be paid to the Lessor as reimbursement for personnel expenses incurred by the Lessor in such restructuring. Notwithstanding any of the foregoing negotiations, the Lessor shall not be obligated to restructure the transaction.

(j)         Notice of Change; Lessor Confirmation Letter. The Lessor shall, upon the request of the Lessee and, in any event, not more than on an annual basis, provide to the Lessee a letter of the same tenor as the Lessor Confirmation Letter. In the event the Lessor is not able to provide the Lessor Confirmation Letter, then at the Lessee’s option, the Lessor shall, at the Lessee’s expense, assign its interest in this Agreement, the other Operative Documents and the Leased Property to a successor lessor designated by the Lessee in accordance with Section 6.3(a).

(k)        Compliance with Operative Documents. The Participants agree to comply with their obligations under the Operative Documents

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SECTION 6.3.           Assignments.

(a)        Rent Assignee Assignments. Any Rent Assignee may, with the prior written consent of the Lessee, which consent shall not be unreasonably withheld or delayed at any time (it being agreed that it would be reasonable for the Lessee to withhold such consent if, among other things, payments to any such transferee would be subject to United States federal or state Withholding Tax, or would be subject to an indemnity obligation under Section 7.2(a)(ii) or related gross-up obligations which would not apply to the transferor), assign and delegate all or a portion of its Rent Assignment Interest, Commitment and its rights, obligations and interest in, to or under this Agreement, the Operative Documents and the Leased Property to one or more Eligible Assignees, subject to the following conditions:

(i)         if the assignment occurs prior to the end of the Commitment Period, the assignor shall concurrently assign to the assignee that percentage of its Commitment set forth in Schedule I-A hereto equal to the percentage of its Rent Assignment Interest being assigned;

(ii)        each such assignment shall be of a constant, and not a varying, percentage of the assigning Rent Assignee’s rights and obligations being assigned;

(iii)       the aggregate principal amount of the Rent Assignment Advances and Commitment assigned by any Rent Assignee shall be in a minimum amount equal to the least of (A) $25,000,000 and integral multiples of $5,000,000 in excess thereof, (B) any lower amount approved by the Lessee in its sole discretion, and (C) the aggregate principal amount of all of such Rent Assignee’s Rent Assignment Advances and Commitment; and

(iv)       after giving effect to any such assignment by a Rent Assignee, such Rent Assignee holds an aggregate outstanding principal amount of Rent Assignment Advances and Commitment equal to either zero or at least $25,000,000 or any lower amount approved by the Lessee in its sole discretion.

(b)        Lessor Assignments. Subject to Section 6.3(d), the Lessor shall not directly or indirectly assign, convey or otherwise transfer in whole or in part any of its right, title or interest in this Agreement, the Leased Property, the Lease or any other Operative Document to any Person except upon compliance with the conditions set forth in this Section 6.3(b); provided that without regard to any of the restrictions contained in this Section 6.3(b) the Lessor may, prior to the end of the Lease Term, agree to sell or otherwise dispose of its beneficial interest in the Leased Property effective at or after the end of the Lease Term. The Lessor shall not, without the prior written consent of the Lessee, transfer its interests in the Facility and the Operative Documents to any entity that would (i) be subject to United States federal or state Withholding Tax, if any (except to the extent that the transferor at the time of such transfer is subject to United States federal or state Withholding Tax subject to indemnification by the Lessee pursuant to Section 7.2(a)(iii)), or (ii) as reasonably determined by the Lessee and communicated in writing to the Lessor, result in consolidation of the transferee to the balance sheet of the Lessee pursuant to ASC 810, as defined by the Financial Accounting Standards Board. The Lessor shall have the right at any time without the consent of the Lessee but with prior notice to the Lessee, at the Lessor’s sole expense, to sell, assign or transfer in whole or in part such right, title and interest to a transferee satisfying the

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conditions set forth below (a “Permitted Transferee”) and, provided, further, that it shall also be a condition to any such sale, assignment or transfer that:

(i)         such sale, assignment or transfer will not be in violation of the registration requirements of the Securities Act of 1933, as amended or violate the Patriot Act or otherwise cause Lessee to violate Section 4.1(g);

(ii)        the Permitted Transferee shall have the requisite power and authority to enter into and carry out the transactions of the Lessor contemplated hereby and by the Operative Documents to which the Lessor is then a party;

(iii)       the Permitted Transferee shall execute an instrument, in form and substance reasonably satisfactory to the Lessee, the Agents, the Lessor and the other Participants, whereby such Permitted Transferee confirms for the benefit of the Lessee, the Agents, the Lessor and the other Participants, that it has the requisite power and authority to enter into and to carry out the provisions of this Agreement and the Operative Documents to which the Lessor is then a party and agrees to be bound by all the terms of, and assumes all of the liabilities and obligations of the Lessor contained in, this Agreement and each of such Operative Documents;

(iv)       the Permitted Transferee shall be either (A) an Eligible Assignee, (B) a subsidiary of any Person described in clause (A) above, or (C) a corporation which is a member of the same consolidated group for Federal income tax purposes as the Lessor, or another corporation owned and controlled by, or under common control with, the Lessor, provided, that if the Permitted Transferee is (x) a Person described in clause (B) above and not described in clause (A) above, a Person described in clause (A) shall have executed and delivered a guaranty in form and substance reasonably satisfactory to the Lessee, the Agents and the other Participants, or (y) a Person described in clause (C) above and not described in clause (A) above, the Lessor shall continue to be liable with respect to the obligations of the Permitted Transferee and shall confirm such fact in writing to the Lessee, the Agents and the other Participants; and

(v)        if the Lessor proposes to transfer its interest hereunder at any time pursuant to this Section 6.3(b), the Lessor shall give not less than ten (10) days’ (or in the case of a transfer to a Person described in clause (B) or (C) of clause (iv) above, five (5) days’) notice to the Lessee, the Agents and the other Participants specifying the name and address of the proposed Permitted Transferee and specifying the facts necessary to determine compliance with this Section 6.3.

From and after any transfer effected in accordance with this Section 6.3(b), the Permitted Transferee shall be deemed the “Lessor” for all purposes of the Operative Documents and shall be deemed to have made the Lessor Investment in the Leased Property previously made by the Lessor; and each reference contained in the Operative Documents to the Lessor shall thereafter be deemed a reference to the Permitted Transferee, as the Lessor shall have no further liability hereunder or thereunder except (i) to the extent of claims relating to or arising out of the period prior to such transfer or (ii) as otherwise provided in this Section 6.3(b).

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(c)        Required Deliveries. The Lessee, the Agents and the other Participants may continue to deal solely and directly with the assignor Lessor in connection with any interest so assigned until (A) notice of such assignment shall have been given to the Lessee, the Agents and the other Participants by such Lessor or its assignee; and (B) the assignor and assignee shall have executed and delivered to the Lessee, the Administrative Agent and the other Participants an instrument of assignment in the form attached hereto as Exhibit B. When the relevant Persons have received the items listed in clauses (A) and (B) of the preceding sentence, subject to subsection (a) or (b) above, as applicable, the assignee shall be a party hereto and the other Operative Documents to which the assignor was (or, in the case of a partial assignment, is) a party and, to the extent of the rights and obligations so assigned to it, shall have the rights and obligations of the Lessor hereunder and under such other Operative Documents, and the assignor shall, to the extent that rights and obligations hereunder and under such other Operative Documents have been assigned by it, relinquish its rights and be released from its obligations hereunder and under such other Operative Documents. The Commitment allocated to an assignee shall reduce the Commitment of the assignor pro tanto.

(d)        Exceptions to Restrictions. Notwithstanding anything to the contrary contained in this Section 6.3, (i) when an Event of Default is continuing, no consent of the Lessee shall be required in respect of an assignment by any Participant to any third party (whether or not an Eligible Assignee or a Permitted Transferee) of all or any part of its rights and obligations under or with respect to this Agreement and the other Operative Documents, (ii) without the consent of the Lessee, any Participant may assign and pledge all or any portion of its Commitment, Rent Assignment Advance or Lessor Investment, as applicable, owing to it to any Federal Reserve Bank, the European Central Bank and the central bank of any country which is a member of the Organization for Economic Cooperation and Development as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank or regulations of the European Central Bank or other central bank of any country which is a member of the Organization for Economic Cooperation and Development, as applicable, provided that no such assignment shall release the assigning Participant from its obligations under the Operative Documents, (iii) without the consent of the Lessee, any Participant may assign all or any portion of its Commitment, Rent Assignment Advance or Lessor Investment, as applicable, owing to it (including retention of the unfunded portion of its Commitment and assignment of the funded portion of its Commitment and assignment of a portion of its Commitment or Rent Assignment Advance for capital requirement purposes due to residual risk with respect thereto or otherwise) to any affiliate or subsidiary of such Participant, another Participant or any affiliate or subsidiary of such other Participant, provided that no such assignment shall cause payments to such transferee to be subject to United States federal or state Withholding Tax (except to the extent that the transferor at the time of such transfer is subject to United States federal or state Withholding Tax subject to indemnification by the Lessee pursuant to Section 7.2(a)(iii)) and, provided further that, for the avoidance of doubt, no change in the law, rules or regulations applicable to any Participant due solely to any such assignment shall be deemed a “Change in Law” or a change in any “regulatory requirement” as such terms are defined in Section 7.4 hereof, and (iv) no consent of the Lessee shall be required in respect to an assignment by any Participant to any third party (whether or not an Eligible Assignee or a Permitted Transferee) of all or any part of the rights and obligations under or with respect to

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this Agreement and the other Operative Documents, if such assignment is required by Applicable Laws and Regulations or constitutes a Permitted Lien.

(e)        Register. The Administrative Agent shall maintain a book-entry register for the recordation of the names and addresses of the Participants that own Rent Assignment Interests, and the Commitments of, and Advances and any other amounts treated as principal or interest for United States Federal income tax purposes owing to, each Participant pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Lessee, the Agents and the Participants shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Participant hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Lessee and any Participant, at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall make payments only to persons named on the Register, and a Participant may only transfer its right to receive payments in respect of its Rent Assignment Interests by having the transfer recorded on the Register.

SECTION 6.4.           Participations.

Each of the Participants may sell, transfer or assign a participation in all or a portion of the interests represented by its Rent Assignment Interests or the interests represented by its Lessor Investment, as applicable, or any right to payment thereunder (each such sale, transfer or assignment of a participation in such interests or rights, a “Participation”), to any Person (such Person, a “Participation Holder”) upon prior notice to the Lessee. In the event of any such sale, transfer or assignment by a Rent Assignee or the Lessor of a Participation to a Participation Holder, the rights and obligations of such Participant under this Agreement and under the other Operative Documents shall remain unchanged, such Participant shall remain solely responsible for the performance thereof, such Participant shall remain the holder of its Rent Assignment Interests or the Lessor Investment, as applicable, for all purposes under this Agreement and under the other Operative Documents, and the Agents, the Lessee and the other Participants shall continue to deal solely and directly with such Participant in connection with such Participation Holder’s rights and obligations under this Agreement and the other Operative Documents. Any agreement pursuant to which any Rent Assignee or the Lessor may grant such a Participation shall provide that such Participant shall retain the sole right and responsibility to enforce the obligations of the Lessee under the Operative Documents including, without limitation, the right to approve any amendment, modification or waiver of any provision of the Operative Documents; provided, that such agreement may require such Participant to obtain the consent of the Participation Holder party thereto before such Participant enters into or approves any amendment, modification or waiver of any provision of any Operative Document that (i) extends any date upon which any payment of money is due to the Participants, (ii) reduces the Yield on the Lease Balance, any fee or any other payment obligation under the Operative Documents, (iii) releases any party from any payment obligations, or (iv) releases any interest of Participants in the Leased Property (except as otherwise expressly provided for in any Operative Document). Any Participant that sells, transfers or assigns a Participation pursuant hereto hereby agrees to indemnify, protect, defend and hold harmless the Lessee, on a Grossed-Up Basis, against any United States federal or state Withholding Tax which may arise solely from its Participation, except to the extent (x) the Lessee is responsible for such Withholding Tax pursuant to Section 7.2(a)(iii) or (y) such Withholding Tax is imposed on the

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Lessee as a result of the fraud, gross negligence or willful misconduct of the Lessee. Each Participant that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Lessee, maintain a register on which it enters the name and address of each Participation Holder and information relating to the Rent Assignment Interests of each Participation Holder (including information relating to any amounts treated as principal or interest for United States Federal income tax purposes) (the “Participant Register”); provided that no Participant shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participation Holder or any information relating to a Participation Holder’s Rent Assignment Interests) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Participant shall treat each Person whose name is recorded in the Participant Register as the owner of such Participation for all purposes of this Agreement notwithstanding any notice to the contrary. Each Participant subject to this Section 6.4 shall make payments only to persons named on the Participant Register, and any owner of a participation may only transfer its right to receive payments in respect of its participation in Rent Assignment Interests by having the transfer recorded on the Participant Register.

SECTION 6.5.           Ground Lease.

The Lessor will, for the benefit of the Collateral Agent on behalf of the Rent Assignees, pay and perform, or cause to be paid and performed, all obligations, covenants and agreements to be performed by it as the lessee under the Ground Lease including, without limitation, the payment of all rent and other amounts due thereunder. The Lessor will notify, or will cause to be notified, the Collateral Agent of all defaults (or alleged defaults) by any party under the Ground Lease, or any claim, action or proceeding made by or involving any party to the Ground Lease, in each case promptly after obtaining Actual Knowledge thereof. The Lessor will not amend, modify, terminate or waive any of the provisions of the Ground Lease without the prior written consent of the Collateral Agent, and any attempt to so amend, modify, terminate or waive, or approve or consent, shall be void. The Lessor will not surrender the leasehold interest in the Ground Lease.

SECTION 6.6.           Amendments Related to Credit Facilities.

Following the Lessee’s written request, the Agents and the Participants each agree to promptly evaluate in good faith and in its sole discretion any request made by the Lessee to amend this Agreement (and the other Operative Documents) from time to time as may be desirable in order to conform the operating covenants and negative covenants regarding the business operations of Lessee to any new credit or other similar facility to which the Lessee shall be subject from time to time.

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ARTICLE VII

INDEMNIFICATION AND ADDITIONAL PAYMENTS

SECTION 7.1.           General Indemnification.

(a)        Subject to clauses (b) and (f) below, the Lessee will indemnify, defend and hold each Indemnitee harmless, on a Grossed-Up Basis, from and against any and all Claims (which may include the outstanding Lease Balance or any portion thereof subject to any limitations set forth in the Operative Documents, including, without limitation, payments limited to the Return Price Recourse Deficiency Amount, the Recourse Deficiency Amount or Construction Recourse Amount, as applicable) that directly or indirectly relate to, result from or arise out of or are alleged by Persons other than any Indemnitee to relate to, result from or arise out of any of the following (whether or not any such Indemnitee is indemnified as to such matter by any other Person and whether or not such Claim arises or accrues prior to the Closing Date, the Completion Date or after the Maturity Date or the Lease Expiration Date):

(i)         the Leased Property, the Site, the Lessee Collateral or, in each case, any part thereof;

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

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

(iv)       the offer, financing, refinancing, inspection, mortgaging, pledging, granting, of a security interest in, the design, manufacture, construction, purchase, ownership, acquisition, acceptance, rejection, delivery, nondelivery, redelivery, possession, transportation, lease, sublease, installation, condition, transfer of title or other ownership interest, rental, use, operation, storage, maintenance, modification, alteration, repair, assembly, sale, return, abandonment or other application or disposition of all or any part of the Leased Property or any product produced therewith, the Site or any interest therein or improvements thereto or the imposition of any Lien thereon, or the failure to perform or accomplish any of the foregoing in accordance with the requirements of the Operative Documents, other agreements governing such matters or Applicable Laws and Regulations including, without limitation: Claims or penalties arising from any violation of law or in tort (strict liability or otherwise), latent or other defects, whether or not discoverable, any Claim based upon a violation or alleged violation of the terms of any restriction, easement, condition or covenant or other matter affecting title to the Leased Property or the Site, the making of any Alterations in violation of any standards imposed by any insurance policies required to be maintained by the Lessee pursuant to the Lease which policies are in effect at any time with respect to the Leased Property or any part

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thereof, any Claim for patent, trademark or copyright infringement, and Claims arising from any public improvements with respect to the Leased Property and the Site resulting in any change or special assessments being levied against the Leased Property or the Site or any plans to modify, widen or realign any street or highway adjacent to the Leased Property or any Claim for utility “tap-in” fees;

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

(vi)       other than the Lessor’s Liens, the existence of any Lien on or with respect to the Leased Property, the Site, title thereto, any interest therein or any Basic Rent or Supplemental Rent, including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of the Leased Property or the Site 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 personality or equipment purchased or leased by the Lessee or Alterations constructed by the Lessee, except Liens in favor of the Lessee, the Collateral Agent or the Lessor;

(vii)      any Environmental Claim, including, without limitation, those indemnified under Section 13.8 of the Lease and Section 3.4 of the Construction and Development Agreement; and

(viii)     the offer, issuance, sale, transfer or delivery of the Lessor Investments and the Rent Assignment Interests.

The Lessee shall be entitled to credit against any payments due to an Indemnitee under this Section 7.1 both (x) any insurance recoveries received by such Indemnitee in respect of the matters described herein under or from insurance paid for by any Person other than the Indemnitee or an Affiliate thereof or assigned to the Lessor by the Lessee and (y) any other indemnity amount received by such Indemnitee in respect of such matters from a Person (other than the Lessor) unrelated to such Indemnitee; provided, to the extent any such insurance amounts or indemnity amounts referenced in the foregoing subsections (x) or (y) are utilized for one purpose (for example, such as addressing a remediation expense in the context of an Event of Loss), then such insurance amount or indemnity amount shall not be available, or deemed available, for any other purpose (for example, such as rebuilding the Leased Property in the context of an Event of Loss).

(b)        Exclusions. The provisions of Section 7.1(a) shall not apply to any Claim:

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

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respect of any representation or warranty made by such Indemnitee under the Operative Documents;

(ii)        to the extent attributable to acts or events that occur after the commencement of day to day operation of the Facility by the Lessor or any Person designated by the Lessor following an Event of Default or the return of the Leased Property pursuant to the Return Option (except (A) to the extent fairly attributable to circumstances existing or acts, events, liabilities or damages occurring or accruing prior to such day to day operation, or (B) to the extent relating to the acts or omissions of the Lessee or any other Cubic Person in relation to, or liabilities arising out of, the location, structure, installation, putting into service, operation, repair, servicing, maintenance, replacement or dismantling of the Facility or remaining on or the entering onto the Site or the Facility by any such Person); or

(iii)       in respect of Taxes, which are governed by Section 7.2, other than a payment necessary to make payments under this Section 7.1 on a Grossed-Up Basis.

(c)        Contests. In respect of the indemnification provided under Section 7.1(a), promptly after receipt by an Indemnitee of notice of any pending or threatened Claim, such Indemnitee shall, if a claim for indemnification in respect thereof is to be made against the Lessee, give notice thereof to the Lessee. So long as no Event of Default is continuing, the Lessee, at its own expense, may elect to assume the defense of any such Claim through its own counsel, which shall be subject to the reasonable approval of the Indemnitee, on behalf of the Indemnitee (with full right of subrogation to the Indemnitee’s rights and defenses). The Lessee must indicate its election to assume such defense by written notice to the Indemnitee within forty-five (45) days following receipt of Indemnitee’s notice of the Claim, or in the case of a third-party claim which requires a shorter time for response then within such shorter period as specified in the Indemnitee’s notice of Claim; provided that such Indemnitee has given the Lessee notice thereof. If the Lessee denies liability or fails to respond to the notice within the time period set forth above, the Indemnitee may defend or compromise the Claim as it deems appropriate without prejudice to any of Indemnitee’s rights hereunder. If the Lessee shall have elected to assume the defense of any such Claim, then upon the request of the Lessee, the Indemnitee requesting payment of indemnity under Section 7.1(a) shall promptly furnish the Lessee with copies of any records or documents pertaining to the matter to be indemnified and, to the extent known by such Indemnitee, a reasonably detailed explanation of the circumstances giving rise to the claim of indemnification and the determination of the amount of the requested indemnity payment. Upon payment in full to Indemnitee of any indemnity pursuant to Section 7.1(a), the Lessee shall be subrogated to any right of Indemnitee in respect of the matter against which such indemnity has been paid. If the Lessee shall have elected to assume the defense of any such Claim, upon the written request at any time and from time to time of the Lessee, Indemnitee shall, at the expense of the Lessee, take such reasonable actions and execute such documents as are necessary or reasonably appropriate to assist the Lessee in the preservation and enforcement against third parties of the Lessee’s right of subrogation hereunder. The Indemnitee may employ separate counsel in any such Claim and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnitee unless the Indemnitee and the Lessee shall have been advised by counsel that there exists a conflict of interest in such counsel’s representation of the Indemnitee and the Lessee

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in which case the fees and expenses of such separate counsel shall be for the account of the Lessee. All fees and expenses shall be paid periodically as incurred. So long as no Default or Event of Default shall be continuing, the Lessee shall not be liable for any settlement of any such Claim effected without its consent unless the Lessee shall fail to, or elect in writing not to, assume the defense thereof in which case the Indemnitee, without waiving any rights to indemnification hereunder, may defend such Claim and enter into any good faith settlement thereof without the prior written consent of the Lessee. The Lessee shall not, without the prior written consent (not to be unreasonably withheld) of the Indemnitee, effect any settlement of any such Claim unless such settlement includes an unconditional release of the Indemnitee from all liabilities that are the subject of such Claim. The parties agree to cooperate in any defense or settlement of any such Claim and to give each other reasonable access to all information relevant thereto subject to appropriate confidentiality agreements. The parties will similarly cooperate in the prosecution of any claim or lawsuit against any third party.

(d)        Subrogation. Upon the indefeasible payment in full of any Claim pursuant to this Section 7.1, the Lessee, without any further action, shall be subrogated to any claims the Indemnitee may have relating thereto. The Indemnitee agrees, at the Lessee’s expense, to give such further assurances or agreements and to cooperate with the Lessee to permit the Lessee to pursue such claims, if any, to the extent reasonably requested by the Lessee. If the Lessee shall have paid an amount to or for an Indemnitee pursuant to this Section 7.1, and such Indemnitee subsequently shall be reimbursed in respect of such indemnified amount from any other Person, such Indemnitee shall promptly pay the Lessee, but not before the Lessee shall have made all payments then due to such Indemnitee pursuant to this Section 7.1 and any other payments then due hereunder and under any other Operative Document, the amount of such reimbursement, including interest actually received attributable thereto, net of Taxes required to be paid by such Indemnitee as a result of any refund received, after giving effect to such payment to the Lessee.

(e)        Not Residual Guaranty. Nothing in this Section 7.1 shall be construed as a guaranty of residual value of the Leased Property.

(f)         Limitation.

(i)         Prior to the Completion Date, the provisions of Sections 7.1, 7.2, 7.4, 7.5 and 7.6 shall be subject to the following provisions:

(A)       The term “Indemnitee” shall mean the Lessor and its successors and/or assigns, and no other Person is entitled to the benefits of Section 7.1 from the Lessee, provided, that this provision shall not limit the rights of Administrative Agent, the Collateral Agent, the Rent Assignees and other Persons against the Lessor under clause (C) of this Section 7.1(f)(i).

(B)       The Lessee shall only be required to indemnify the Indemnitee for the following, without duplication:

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1.          Claims (including Rent Assignees’ Claims) caused by or resulting from a Specified Event;

2.          Claims caused by or resulting from (a) the failure to Complete the Facility when required or from the failure to otherwise pay or perform its other obligations prior to the Construction Period Termination Date (other than caused by or resulting from a Specified Event) or (b) actions or failures to act of any Cubic Person; provided, however, that recourse to the assets of the Lessee for any such Claims shall be limited to the extent recourse against assets of the Lessee is limited by Section 18.5 of the Lease; and

3.          Claims (including Taxes and Rent Assignees’ Claims) under Sections 7.2, 7.4, 7.5 and 7.6; provided, however, that such Claims under this clause (3) will only be funded out of proceeds of Advances.

(C)       Subject to Section 9.11, the Lessor will, with respect to Claims of a type described in clauses (B)(1) through (B)(3) above, indemnify all Persons who would have otherwise been indemnified by the Lessee, to the extent such Persons would have been so indemnified, but for the foregoing provisions of Section 7.1(f)(i)(A); provided, however, that any obligation of the Lessor pursuant to this subsection shall be discharged solely and exclusively from amounts received by the Lessor pursuant to this subsection or, in the case of clause (B)(3) above, the proceeds of the applicable Advances.

(D)       The Lessee agrees that any claim for indemnification by any Person against the Lessor pursuant to and permitted by clause (C) of this Section 7.1(f)(i) shall constitute a Claim entitling the Lessor to be indemnified by the Lessee pursuant to Section 7.1 of this Agreement.

(ii)        The limitations set forth in Section 7.1(f)(i) shall continue to apply on and after the Completion Date with respect to Claims accruing prior to such Completion Date.

(iii)       Any Claims that are incurred by any Indemnitee (as such term is defined during the Base Term, solely for the purposes of this clause (iii)) for which the Lessee is not obligated to indemnify either the Lessor or such Indemnitee pursuant to this Section by virtue of the provisions of Section 7.1(f)(i) (it being the understanding of the parties that if the Lessee is obligated to indemnify the Lessor for any Claim incurred or arising during the Construction Period, with any other Indemnitee being indemnified by the Lessor under clause (i)(C) above for the same Claim, the applicable Claim will not be a Claim which is subject to this clause (iii)) shall, if requested in writing by the Required Participants to the Administrative Agent in their sole and absolute discretion, be capitalized and result in an increase to the Construction Costs (such claims herein called “Funded Claims”). In the event Funded Claims are advanced by the Lessor or Rent Assignees hereunder, any increase in Lessor Investment resulting therefrom shall not be included for

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purpose of (but for no other purpose) (x) calculating Eligible Construction Costs solely for purposes of calculating the Construction Recourse Amount, (y) calculating Eligible Construction Costs solely for purposes of calculating the Return Price Recourse Deficiency Amount payable by the Lessee following an election to return the Leased Property at the end of the applicable Lease Term and (z) calculating any Basic Rent that is to accrue thereon during the Lease Term. The foregoing indemnities are in addition to, and not in limitation of, the indemnities with respect to Sections 7.1 and 7.2 this Agreement.

SECTION 7.2.           General Tax Indemnity.

(a)        (i) Tax Indemnity. The Lessee shall pay on a Grossed-up Basis, and on written demand shall indemnify and hold each Indemnitee at all times harmless from and against, any and all Taxes, howsoever imposed, on or with respect to any Indemnitee, the Leased Property or the Lessee or any sublessee or user of the Leased Property by any taxing Authority, in connection with or in any way relating to: (A) the acquisition, mortgaging, design, construction, preparation, installation, inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership, possession, rental, lease, sublease, repossession, maintenance, repair, alteration, modification, addition, substitution, storage, transfer of title, redelivery, use, financing, refinancing, operation, condition, purchase, repurchase, sale, return or other application or disposition of all or any part of the Leased Property or the imposition of any Lien (or incurrence of any liability to refund or pay over any amount as a result of any Lien) thereon; (B) the payment of Basic Rent or Supplemental Rent or the receipts arising from or received with respect to the Leased Property or any part thereof, or any interest therein; (C) the payment of any other amount pursuant to the Rent Assignment Agreements or any other Operative Documents, or the property or the income or other proceeds with respect to the Facility; (D) the Leased Property or any part thereof or any interest therein; (E) the execution, delivery, filing, registration or recording of any of the Operative Documents and any amendments and supplements thereto; and (F) otherwise with respect to or in connection with the transactions contemplated by the Operative Documents or the enforcement thereof; provided, however, that the indemnification obligation of this Section 7.2(a)(i) shall not apply to:

(1)        Taxes (other than Taxes that are sales, use, rental, value added, real estate transfer or similar Taxes that are not substitutes for income taxes) based upon or measured by the Indemnitee’s gross or net income, gross or net receipts or that are in the nature of, or are imposed with respect to, capital, net worth, excess profits, accumulated earnings capital gains, franchise or conduct of business of such Indemnitee except in the case of gross or net income Taxes, to the extent necessary so that payments under this Section 7.2 are made to an Indemnitee on a Grossed- Up Basis within the meaning of Section 7.6;

(2)        Taxes that result from a transfer or other disposition by the Indemnitee or any of its Affiliates of all or any portion of its interest in the Leased Property, the Rent Assignment Agreements or the Operative Documents (other than a transfer or disposition that occurs while an Event of Default is continuing and is related to such Event of Default or that results from (a) the Lessee’s exercise of the Return Option, the Early Termination Option or Purchase Option under the Lease,

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(b)  any other transfer to the Lessee under the Operative Documents or which is contemplated by the Operative Documents or (c) any other transfer made at the request of the Lessee in an effort to maintain or enhance the accounting treatment of the Lessee with regard to the Overall Transaction);

(3)        Taxes imposed with respect to any period or portion thereof after the expiration or earlier termination of the Lease (but not to the extent attributable to events occurring on or prior to such date) (other than any Tax that is attributable to (a)  any Indemnitee exercising its remedies upon an Event of Default, (b) any payment to, by or on behalf of the Lessee after such termination, or (c) any party’s compliance with any obligation under the Operative Documents that survives the termination of the Lease, except, in each case, to the extent such Tax would otherwise be an excludable tax but for this parenthetical);

(4)        Taxes resulting from (a) the gross negligence, willful misconduct or fraud of the Indemnitee or any of its Affiliates, (b) any representation, warranty, certification or statement of the Indemnitee under the Operative Documents proving to have been incorrect in any material respect when made or deemed to have been made, or (c) the breach of any covenant of the Indemnitee under the Operative Documents;

(5)        Taxes imposed on the Agents, the Lessee or the Lessor, in each case in their respective individual capacity, with respect to any fees received by it for services rendered;

(6)        Withholding Taxes, indemnification for which shall be solely as provided in Section 7.2(a)(iii) hereof;

(7)        Taxes while they are being contested in accordance with Section 7.2(b);

(8)        Taxes imposed on, or, in the case of value added taxes, not refunded to, an Indemnitee that results from its failure to file tax returns properly or timely, to claim a deduction or credit to which it is entitled, or to comply with certification, reporting, or similar requirements of the jurisdiction imposing the Tax, except to the extent caused by a failure of the Lessee to comply with Section 7.2(d), provided that the foregoing exclusion shall apply only if such Indemnitee is eligible to comply with such requirement and either (A) such Indemnitee shall have been given timely written notice by the Lessee of such requirement or (B) such Indemnitee’s officers or other employees having primary responsibility for ensuring compliance with such requirement have actual and timely knowledge (without any obligation of due inquiry and without any imputation of such knowledge) of such requirement;

(9)        Taxes imposed on a transferee of any Participant’s interest hereunder (other than a transferee who acquired such interest as a result of any transfer or assignment in connection with the occurrence of an Event of Default) to

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the extent of the excess of such Taxes over the total amount of the Taxes of the same or similar nature that would have been imposed had there not been a transfer by the initial Indemnitee of its interest after the Closing Date;

(10)      Taxes in the nature of intangible taxes or similar taxes upon or with respect to the value of the interest of a Rent Assignee or the Lessor in any of the Rent Assignment Interests or the Lessor Investment, as applicable;

(11)      Taxes included in the cost of the Facility and funded by Advances;

and

(12)      Taxes imposed by a taxing Authority that is not the United States or any taxing Authority within the United States, except to the extent caused by the Lessee making a payment from such jurisdiction.

(ii)        Additional Tax Indemnity. Notwithstanding any contrary provision in Section 7.2(a)(i), the Lessee shall indemnify and hold harmless each Participant Party for any Taxes that are described in Section 7.2(a)(i) without regard to exclusions and that are imposed upon any Participant Party by the United States or by any taxing Authority within the United States, but only to the extent that such Taxes would not have been imposed on such Participant Party if, for purposes of such Taxes, the Advance made on each Advance Date by a Participant Party had been in the form of a secured loan made directly to the Lessee, the obligation to pay a proportionate part of Basic Rent were the obligation to pay interest to such Participant Party, and the proportionate amount of the Lease Balance were the principal amount owed to such Participant Party; provided, however, that the indemnification obligation of this Section 7.2(a)(ii) shall not apply to: (1) Taxes resulting from (a) the gross negligence, willful misconduct, or fraud of the Lessor, such Participant Party (if different) or any of their respective Affiliates, (b) any representation, warranty, certification or statement of the Lessor or such Participant Party (if different) under the Operative Documents proving to have been incorrect in any material respect when made or deemed to have been made, or (c) the breach of any covenant of the Lessor or such Participant Party (if different) under the Operative Documents; (2) Withholding Taxes, indemnification for which shall be solely provided in Section 7.2(a)(iii); (3) Taxes while they are being contested in accordance with Section 7.2(b); (4) Taxes imposed on such Participant Party that result from its failure to file tax returns properly or timely, to claim a deduction or credit to which it is entitled, or to comply with certification, reporting or similar requirements of the jurisdiction imposing the Tax, in each case, in accordance with the intent specified in Section 2.7 or as otherwise required by Applicable Laws and Regulations with respect to such Participant Party, except to the extent such failure by such Participant Party is caused by a failure of the Lessee to comply with Section 7.2(d), provided that the foregoing exclusion shall apply only if such Participant Party is eligible to comply with such requirement and either (A) such Participant Party shall have been given timely written notice by the Lessee of such requirement or (B) such Participant Party’s officer or other employees having primary responsibility for ensuring compliance with such requirement have actual and timely knowledge (without any obligation of due inquiry and without any imputation of such

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knowledge) of such requirement; (5) Taxes imposed on a transferee of any Participant’s interest hereunder (other than a transferee who acquired such interest as a result of any transfer or assignment in connection with the occurrence of an Event of Default) to the extent of the excess of such Taxes over the total amount of the Taxes of the same or similar nature that would have been imposed had there not been a transfer by the initial Participant of its interest after the Closing Date; (6) Taxes included in the cost of the Facility and funded by Advances; (7) Taxes imposed upon the Leased Property and indemnifiable pursuant to Section 7.2(a)(i); and (8) Delaware income, franchise, corporate or other similar taxes imposed on an Indemnitee.

(iii)       Withholding Tax Indemnity. The Lessee shall not be required to make any additional payment to or on behalf of an Indemnitee with respect to any Withholding Tax, except that the Lessee agrees to indemnify, protect, defend and hold harmless the Indemnitees, on a Grossed-Up Basis, against Withholding Taxes described in paragraphs (A) and (B) of this Section 7.2(a)(iii). If any such withholding is so required, the Lessee shall make the withholding and pay the amount withheld to the appropriate taxing Authority before penalties attach thereto or interest accrues thereon. The Lessee shall forthwith pay the relevant Indemnitee an amount that, after making all required deductions (including deductions applicable to additional sums payable under this Section), equals the amount that would have been paid if such withholding had not been required. Withholding Taxes referred to in the first sentence of this Section 7.2(a)(iii) as indemnifiable are:

(A)       Withholding Taxes imposed under the laws of any jurisdiction other than the United States and any taxing jurisdictions therein, if such Tax is imposed solely as a result of the Lessee making the payment from such jurisdiction;

(B)       Withholding Taxes imposed under the laws of the United States, or any taxing jurisdiction therein, imposed solely as the result of a change in Tax laws, regulations, rulings, interpretations or treaties after the Closing Date (and, in the case of a Rent Assignee, after the date of the assignment pursuant to which such Rent Assignee acquired an interest hereunder) other than a Withholding Tax that results from a change in Tax law which is excluded from the definition of Change in Law pursuant to Section 7.4(a)(i)(F).

Notwithstanding the foregoing, the Lessee shall not be required to make any additional payment to or on behalf of an Indemnitee with respect to any Withholding Tax to the extent result from the failure of such Indemnitee to comply with Section 7.3(c). If the Lessee pays any amount to an Indemnitee with respect to Withholding Taxes required to be withheld by law but not subject to indemnity pursuant to this Section 7.2, such Indemnitee shall reimburse the Lessee within fifteen (15) days of written demand therefor for the amount so paid by the Lessee provided that if such Indemnitee fails to reimburse the Lessee within such fifteen (15) days, such Indemnitee shall thereafter be obligated to reimburse the Lessee for such amount together with interest on such amount at the Overdue Rate from the date such reimbursement was due until the date it is paid.

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(iv)       Nothing contained in Section 7.2(a) shall entitle an Indemnitee to indemnification of a Tax under more than one subsection of Section 7.2(a).

(b)        Contests. If any claim or claims is or are made against any Indemnitee for any Tax which is subject to indemnification as provided in Section 7.2(a), such Indemnitee shall as soon as practicable, but in no event more than thirty (30) days after receipt of formal written notice of the Tax or proposed Tax, notify the Lessee and if, in the reasonable opinion of the Lessee there exists a reasonable basis to contest such Tax which satisfies the requirements of ABA Formal Opinion 85-352 (and if the provisos of the definition of “Permitted Contest” continue to be satisfied), the Lessee at its expense may, to the extent permitted by Applicable Laws and Regulations and provided that it has acknowledged in writing its liability for the Tax at issue if the contest is not successful, contest such Tax, and subsequently may appeal any adverse determination (other than to the United States Supreme Court), in the appropriate administrative and legal forums; provided, that in all other circumstances, upon notice from the Lessee to such Indemnitee that there exists a reasonable basis to contest any such Tax which satisfies the requirements of ABA Formal Opinion 85-352 (as supported by an opinion of tax counsel to the Lessee reasonably acceptable to the Indemnitee), the Indemnitee, at the Lessee’s expense, shall contest any such Tax (so long as the provisos of the definition of “Permitted Contest” continue to be satisfied and, in the case of a Tax on gross or net income, the aggregate amount of the Tax exceeds $100,000); provided, further, that no contest by the Indemnitee shall be required, and no contest by the Lessee shall be permitted, so long as an Event of Default shall be continuing, unless the Lessee shall have posted a bond or other security that is reasonably satisfactory to the Participants in respect of (A) Taxes reasonably expected to arise in connection with such contest that are indemnifiable pursuant to Section 7.2(a)(i) (including any amount necessary to make payment of such Taxes on a Grossed-up Basis) and (B) the Lessee’s obligations pursuant to this Section 7.2(b) in connection with such contest. The Lessee shall pay all expenses incurred by the Indemnitee in contesting any such Tax (including, without limitation, all reasonable attorney’s and accountants’ fees and expenses), upon demand by the Indemnitee. The Lessee shall have the right to participate in the conduct of any proceedings controlled by the Indemnitee to the extent that such participation by the Lessee does not interfere with the Indemnitee’s control of such contest and the Lessee shall in all events be kept informed, to the extent practicable, of material developments relative to such proceedings. The Indemnitee shall have the right to participate in the conduct of any proceedings controlled by the Lessee to the extent that such participation by the Indemnitee does not interfere with the Lessee’s control of such contest, and the Indemnitee shall in all events be kept informed, to the extent practicable, of material developments relative to such proceedings. The Indemnitees agree that a contested claim for which the Lessee would be required to make a reimbursement payment hereunder will not be settled or compromised without the Lessee’s prior written consent or the Indemnitee waives its right to indemnification hereunder and repays the Taxes advanced by the Lessee as a non-interest bearing loan by the Lessee to such Indemnitee without interest. Indemnitee shall endeavor to settle or compromise any such contested claim in accordance with written instructions received from the Lessee; provided, that (i) the Lessee on or before the date the Indemnitee executes a settlement or compromise pays the contested Tax to the extent agreed upon or makes an indemnification payment to the Indemnitee in an amount acceptable to the Indemnitee; and (ii) the settlement or compromise does not, in the reasonable opinion of the Indemnitee materially adversely affect the right of the Lessor or such Indemnitee to receive Rent or the Lease Balance or any other payment pursuant to the Operative

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Documents, or involve a material risk of sale, forfeiture or loss of the Leased Property or any interest therein or any matter described in the provisos to the definition of “Permitted Contest.” The failure of an Indemnitee to (x) notify the Lessee of the existence of any claim against such Indemnitee of any Tax as required by the first sentence of this Section 7.2(b) or (y) contest timely a claim against it for any Tax which is subject to indemnification under Section 7.2(a) and for which it has an obligation to the Lessee to contest under this Section 7.2(b) in the manner required by Applicable Laws and Regulations where the Lessee has timely requested (with regard to the time of the initial notification by Indemnitee) that such Indemnitee contest such claim, in each case shall relieve the Lessee of its obligations to such Indemnitee under Section 7.2(a) with respect to such claim only to the extent such failure results in the loss of an effective contest. If Applicable Laws and Regulations require the payment of a contested Tax as a condition to, or regardless of, its being contested, and the Lessee chooses to contest such Tax or to direct the Indemnitee to contest such Tax in accordance with this Section, then the Lessee shall provide the Indemnitee with the funds to pay such Tax, such provision of funds to be deemed a non-interest bearing loan by the Lessee to the Indemnitee to be repaid by any recovery of such Tax (including the amount of any interest received by reason of payment or deposit of the Tax claimed with funds advanced by the Lessee to the Indemnitee with respect to such recovered Tax, payable on a net after-tax basis to the Indemnitee) from such contest and any remaining unpaid amount not recovered to offset the Lessee’s obligation to indemnify the Indemnitee for such Tax. The Lessee shall indemnify the Indemnitee on a Grossed-Up Basis in accordance with Section 7.6 for and against any adverse consequences of any such interest-free loan.

(c)        Payments. Any Tax indemnifiable under Section 7.2(a) shall be paid by the Lessee directly when due to the applicable taxing Authority if direct payment is practicable and permitted. If direct payment to the applicable taxing Authority is not permitted or is otherwise not made, any amount payable to an Indemnitee pursuant to Section 7.2(a) shall be paid within thirty (30) days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the amount so payable, but not before the date that the relevant Taxes are due or, in the case of taxes that are contested under Section 7.2(b), the contest is finally resolved. Any payments made pursuant to Section 7.2(a) directly to the Indemnitee entitled thereto or the Lessee, as the case may be, shall be made in immediately available funds at such bank or to such account as specified by the payee in written directions to the payor, or, if no such direction shall have been given, by check of the payor payable to the order of the payee by certified mail, postage prepaid at its address as set forth in this Agreement. Upon the request of any Indemnitee with respect to a Tax that the Lessee is required to pay, the Lessee shall furnish to such Indemnitee the original or a certified copy of a receipt for the Lessee’s payment of such Tax or such other evidence of payment as is reasonably acceptable to such Indemnitee.

(d)        Ownership. The Lessee represents that it is wholly owned by shareholders of its publicly traded stock and covenants that it shall remain (i) organized under the laws of the United States or any state thereof, and (ii) wholly owned by shareholders of its publicly traded stock; it being understood that the sole remedy of an Indemnitee for a breach by the Lessee of the foregoing representation and covenant shall be the right of such Indemnitee to indemnification by the Lessee on an after-tax basis for any incremental tax liability of such Indemnitee that would not have been imposed but for such breach.

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(e)        Calculation of Payments. Any payment that the Lessee shall be required to make to or for the account of any Indemnitee with respect to any Tax that is subject to indemnification under this Section 7.2 shall be paid on a Grossed-Up Basis under Section 7.6 of this Agreement. If an Indemnitee or any Affiliate of such Indemnitee who files any tax return on a combined, consolidated, unitary or similar basis with such Indemnitee shall actually realize any saving of any Tax not indemnifiable by the Lessee pursuant to the Operative Documents (by way of credit (including any foreign tax credit), deduction, exclusion from income or otherwise) by reason of any amount with respect to which the Lessee has indemnified such Indemnitee pursuant to this Section 7.2, and such tax saving was not taken into account in determining the amount payable by the Lessee on account of such indemnification, such Indemnitee shall promptly pay to the Lessee the amount of such saving together with the amount of any tax saving resulting from any payment pursuant to this sentence (provided that such payments by such Indemnitee shall not exceed the amount of the payments made by the Lessee to or for such Indemnitee which gave rise to such savings and payment by such Indemnitee). Each Indemnitee agrees to make, at the Lessee’s expense, good-faith efforts to claim any such tax saving that may reasonably be available and to provide promptly thereafter to the Lessee written notification of any action, proceeding or decision with respect to such claim.

(f)         Refund. If an Indemnitee shall receive a refund of (or receive a credit against or any other current reduction in, any Tax not indemnified by the Lessee under this Section 7.2, in respect of) all or part of any Taxes which the Lessee shall have paid on behalf of such Indemnitee or for which the Lessee shall have reimbursed, advanced funds to or indemnified such Indemnitee, such Indemnitee shall promptly pay or repay to the Lessee an amount equal to the amount of such refund, plus any net tax benefit (taking into account any Taxes incurred by such Indemnitee by reason of the receipt of such refund, credit or reduction) realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence (provided that such payments by such Indemnitee shall not exceed the amount of the payments made by the Lessee to or for such Indemnitee which gave rise to such refund and payment by such Indemnitee). If, in addition to such refund, credit or reduction, as the case may be, such Indemnitee shall receive an amount representing interest on the amount of such refund, credit or reduction, as the case may be, such Indemnitee shall promptly pay to the Lessee that proportion of such interest that shall be fairly attributable to Taxes paid, reimbursed or advanced by the Lessee prior to the receipt of such refund. If an Indemnitee loses the benefit of any refund for which it has made a payment pursuant to this Section 7.2(f), such loss shall be treated as a Tax indemnifiable hereunder without regard to exclusions. Each Indemnitee agrees to make, at the Lessee’s expense, good-faith efforts to claim any such refund, credit or reduction that may reasonably be available and to provide promptly thereafter to the Lessee written notification of any action, proceeding or decision with respect to such claim.

(g)        Restructuring for Withholding Taxes. Each  party  covered  by  this Section 7.2 agrees to use reasonable efforts to investigate alternatives for reducing any Withholding Taxes that are indemnified against hereunder or imposed on Rent, or Yield on the Lease Balance (whether or not indemnifiable hereunder) and to use reasonable efforts to reduce any Withholding Taxes that are indemnified against hereunder, including, without limitation, negotiating in good faith to restructure the Advance (which restructuring shall be at the Lessee’s expense in the case of indemnifiable Withholding Taxes), but no party shall be obligated to take

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any such action as such party determines will be adverse to its business or financial or commercial interests.

(h)        Tax Ownership. Each Indemnitee represents and warrants that it will not, prior to the termination of the Lease and the transfer of the Leased Property to any Person other than the Lessee or its Affiliates, claim ownership of (or any tax benefits, including depreciation, with respect to) the Leased Property for any income tax purposes (unless required to do so by a taxing Authority) with respect to the period prior to the termination of the Lease, it being understood that it is the intention of all parties to this transaction that the Lessee is and will remain the owner of the Leased Property for such income tax purposes until the termination of the Lease and such transfer.

(i)         Preparation and Filing of Tax Returns. The Lessee shall be responsible for preparing and filing on its behalf (i) any real and personal property or ad valorem Tax returns in respect of the Leased Property and (ii) any other Tax returns required of any Participant Party respecting the transactions described in the Operative Documents applicable to the Lessee (but in the case of Tax returns described in clause (ii), other than returns with respect to Taxes excluded from indemnification pursuant to Section 7.2(a)(i)). In case any report or Tax return shall be required to be made with respect to any Tax indemnified by the Lessee under Section 7.2(a)(i), the Lessee, at its sole cost and expense, shall notify the relevant Participant Party of such requirement and reasonably cooperate with such Participant Party in the filing of such return.

SECTION 7.3.           Withholding Tax Documentation.

(a)        Reserved.

(b)        At least five (5) Business Days prior to the first payment date with respect to a payment under the Operative Documents that is subject to a Withholding Tax on interest or yield that is indemnifiable under Section 7.2(a)(iii) and that is imposed by a jurisdiction outside the United States, the Indemnitee shall have complied with certification, information, documentation, reporting, filing, or other similar requirements concerning the nationality, residence, identity, or connection with the jurisdiction imposing such Withholding Taxes or any other similar matters that are required by law as a condition to total exemption or total relief from such Withholding Taxes to the extent it is legally entitled to do so and shall have notified the Lessee in writing of such compliance. The Indemnitee shall further timely comply with all requirements for keeping any such exemption in full force and effect, unless a change in treaty, law, or regulation has occurred that would prevent the Indemnitee from complying and the Indemnitee promptly advises the Lessee in writing that it is not capable of receiving payments without withholding. Each of the Participants that is not a U.S. Person represents and warrants that it qualifies for portfolio interest exemption contained in Section 871(h) or Section 881(c) of the Code. Each of the parties hereto agrees that on the Closing Date, no certification, documentation, reporting or similar confirmation is required of an Indemnitee to establish total exemption from Withholding Taxes on interest, yield or any other amounts relevant to this transaction in any applicable jurisdiction other than Internal Revenue Service Forms W-8BEN, W-8BEN-E, W-8ECI or W-8IMY and any required attachments (in the case of an Indemnitee that is not a U.S. Person)

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or Internal Revenue Service Form W-9 (in the case of an Indemnitee that is a U.S. Person), in each case as required by Section 7.3(c).

(c)        At least five (5) Business Days prior to the first date on which any payment is due with respect to the Rent Assignment Agreement or Lessor Investment for the account of any Participant, such Participant shall have delivered to each of the Lessee, Lessor and Administrative Agent, (i) in the case of a Participant that is a U.S. Person, two duly completed copies of United States Internal Revenue Service form W-9, certifying that such Participant is exempt from United States backup withholding tax, and (ii) in the case of a Participant that is not a U.S. Person, two duly completed copies of United States Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY and any required attachments, in any case with taxpayer identifying numbers, certifying that such Participant is entitled to receive payments of Yield and a return of principal of its Lease Balance, as applicable, including Capitalized Yield, under the Operative Documents without deduction or withholding of any United States Federal income taxes. In delivering any such form or any successor or replacement form, a Participant shall be entitled to assume that the payor of such Yield or return of principal is organized under the laws of the United States or any state thereof. Each Participant which so delivers Internal Revenue Service Form W-9 or Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY and any required attachments shall further deliver to each of the Lessee, Lessor and Administrative Agent, two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or within thirty (30) days after the occurrence of any event requiring a change in the most recent forms so delivered by it, and, as may be reasonably requested by the Lessee, the Lessor or the Administrative Agent such amendments thereto or extensions or renewals thereof, in each case certifying that such Participant is entitled to receive payments under the Operative Documents without deduction or withholding of any United States Federal income taxes, unless a change in treaty, law or regulation has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Participant from duly completing and delivering any such form with respect to it and such Participant promptly advises the Lessee, Lessor and Administrative Agent in writing that it is not capable of receiving payments without any withholding of United States Federal income tax.

(d)        If any payment made to an Indemnitee hereunder would be subject to U.S. federal withholding Tax imposed by FATCA if such Indemnitee were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Indemnitee shall deliver to the Lessee, Lessor and Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Lessee or the other Participants such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) as may be necessary for the Lessee, Lessor and Administrative Agent to comply with their respective obligations, if any, under FATCA and to determine that such Indemnitee has complied with such Indemnitee’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

SECTION 7.4.           Increased Costs.

(a)        If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the

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interpretation or administration thereof (each such event being a “Change in Law”) by any Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Participant (or its applicable lending office) with any request or directive (whether or not having the force of law) of any such Authority, central bank or comparable agency:

(i)         shall subject any Participant (or its applicable lending office) to any Tax with respect to its Rent Assignment Advance or Lessor Investment or its obligation to make an additional Advance, or shall change the basis of taxation of payments to any Participant (or its applicable lending office) of the principal of or yield on its obligations hereunder or any other amounts due under the Operative Documents in respect of its obligations hereunder or thereunder (except for (A) franchise taxes or Taxes related to the general authority of such Participant (or its applicable lending office) to do business, (B) Taxes imposed other than by way of withholding from payments under this Agreement on the gross income of such Participant (or its applicable lending office), (C) Taxes imposed by the jurisdiction where such Participant is incorporated (or any political subdivision thereof) or where it is managed or controlled or where its applicable lending office is located, (D) Taxes that would not have been imposed but for the failure to provide an Internal Revenue Service Form W-9 or applicable Internal Revenue Service Form W-8 or such other certification that may reasonably be requested in order to avoid, eliminate or reduce any Taxes (or the withholding thereof) to the extent such Participant is legally entitled to provide such certification, (E) withholding taxes imposed under the laws of any jurisdiction other than the United States or any State thereof, unless imposed solely as a result of the Lessee making a payment from such jurisdiction, or (F) U.S. withholding Taxes imposed pursuant to FATCA); or

(ii)        shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding, with respect to any Rent Assignment Advance or Lessor Investment, the Yield on which is determined on a LIBOR Rate basis, any such requirement with respect to which such Participant is entitled to compensation pursuant to clause (d) below), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Participant (or its applicable lending office) or shall impose on any Participant (or its applicable lending office) or on the London interbank market any other condition affecting its Rent Assignment Advance or Lessor Investment or its obligation to make an additional Advance;

and the result of any of the foregoing is to increase the cost to such Participant (or its applicable lending office) of making, acquiring or maintaining any Rent Assignment Advance or Lessor Investment or to reduce the amount of any sum received or receivable by such Participant (or its applicable lending office) under this Agreement or the Rent Assignment Agreements by an amount deemed by such Participant to be material, then, within fifteen (15) days after demand by such Participant (with a copy to the Administrative Agent), the Lessee shall pay to such Participant such additional amount or amounts as will compensate such Participant for such increased cost or reduction; provided that no such amount shall be payable with respect to any such increased costs

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or reductions incurred more than one hundred eighty (180) days before the date such Participant first notifies the Lessee of its intention to demand compensation under this Section 7.4(a); provided further that if the Change in Law that gives rise to such increased cost or reduction is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

(b)        If any Participant shall have determined that any applicable law, rule, guideline or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such Authority, central bank or comparable agency (a “regulatory requirement”), has or would have the effect of reducing the rate of return on capital of such Participant (or its parent) as a consequence of such Participant’s obligations under the Operative Documents to a level below that which such Participant (or its parent) could have achieved but for such regulatory requirement (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Participant to be material, then from time to time, within fifteen (15) days after demand by such Participant (with a copy to the Administrative Agent), the Lessee shall pay to such Participant such additional amount or amounts as will compensate such Participant (or its parent) for the portion of any such reduction which is reasonably allocable to the Operative Documents.

(c)        Each Participant will promptly notify the Lessee and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Participant to compensation pursuant to this Section and will designate a different applicable lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Participant, result in any economic or regulatory or other disadvantage to such Participant. A certificate of any Participant claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder, accompanied by a computation in reasonable detail of such amount or amounts, shall be conclusive if prepared in good faith and on a reasonable basis. In determining such amount, such Participant may use any reasonable averaging and attribution methods; provided that such methods shall not be inconsistent with the methods used by such Participant in calculating the reduction in return allocable to other similar investments or commitments to other companies.

(d)        For so long as a Participant shall be required pursuant to the requirements of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including “Eurocurrency liabilities” (or any other category of liabilities which includes deposits by reference to which the rate on the Rent Assignment Advances or Lessor Investment, the Yield on which is determined on a LIBOR Rate basis, is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Participant to United States residents), then such Participant may require the Lessee to pay, contemporaneously with each payment of Yield on such Rent Assignment Advances or Lessor Investment, additional yield on the related Rent Assignment Advances or Lessor Investment of such Participant at a rate per annum determined by such Participant up to but not exceeding the excess of (a) (i) the applicable LIBOR Rate divided by (ii) one minus the LIBOR Reserve Percentage over (b) the applicable LIBOR Rate. Any Participant wishing to require

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payment of such additional yield (x) shall so notify the Lessee and the Administrative Agent, in which case such additional yield on the Rent Assignment Advances or Lessor Investment of such Participant shall be payable to such Participant at the place indicated in such notice with respect to each Payment Period commencing at least four (4) Business Days after the giving of such notice and (y) to the extent possible, shall notify the Lessee at least four (4) Business Days prior to each date on which yield is payable on the Rent Assignment Advances or Lessor Investment of such Participant of the amount then due it under this clause.

SECTION 7.5.           Funding Losses.

The Lessee shall pay to the Lessor, as Supplemental Rent, such amounts as may be necessary to reimburse any Participant for any loss or expense incurred (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Participant to make, continue or maintain any portion of its Rent Assignment Advance or Lessor Investment on a LIBOR Rate basis but excluding any loss of margin included therein) as a result of (i) any payment of all or any portion of the Lease Balance for any reason on a date other than a Payment Date, including, without limitation, by reason of acceleration, or (ii) any Funding or Advance not being made due to the Construction Agent canceling a request previously made by it for, or not satisfying the conditions precedent to, such Funding or Advance, including with respect to the actions or inactions of the Administrative Agent (the amount of such loss or expense, the “Break Amount”). Any Participant shall promptly notify the Lessee, the Lessor and the Administrative Agent in writing of the amount of any claim under this Section 7.5, the reason or reasons therefor and the additional amount required fully to compensate such Participant for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Lessee.

SECTION 7.6.           Gross Up.

If an Indemnitee shall not be entitled to a corresponding and equal deduction with respect to any payment or Tax which the Lessee is required to pay or reimburse under any other provision of this Article VII (each such payment or reimbursement under this Article VII, an “original payment”) and which original payment constitutes income to such Indemnitee when accrued or received, then the Lessee shall pay to such Indemnitee on demand the amount of such original payment on a grossed-up basis such that, after subtracting all Taxes imposed on such Indemnitee with respect to such grossed-up payment by the Lessee (including any Taxes otherwise excluded by Section 7.2(a)(i) and assuming for this purpose that such Indemnitee was subject to taxation at the highest United States Federal, state and local marginal rates applicable to corporations and, in the case of Withholding Taxes subject to indemnification pursuant to Section 7.2(a)(iii), the marginal rates actually applicable to the Indemnitee for the year in which such income is taxable), such amount (i.e., the grossed-up payment minus the taxes thereon) shall be equal to the original payment to be received or reimbursed (net of any credits, deductions or other tax benefits then actually recognized that arise from the payment by such Indemnitee of any amount, including taxes, for which the payment to be received is made) (“Grossed-Up Basis”).

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SECTION 7.7.           Leased Property Indemnity.

Notwithstanding any provision to the contrary in this Article VII, in the event that (a) the Lessee elects the Return Option and (b) after paying to the Lessor, for the benefit of the Participants, any amounts due under Article XXII of the Lease, the Lease Balance shall not have been reduced to zero, then, except to the extent such amounts represent amounts due in respect of a Default or Event of Default, the Lessee shall promptly pay over to the Lessor on the Return Date, the shortfall between the Fair Market Value of the Leased Property as of the Return Date, and an amount up to but not to exceed the outstanding Lease Balance, unless an appraisal establishing the Fair Market Value of the Leased Property confirms that the reason such Fair Market Value is less than the outstanding Lease Balance is not due to any of the following events, circumstances or conditions, whether or not permitted under the Lease: (i) the failure to maintain the Leased Property as required by the Lease and the other Operative Documents, and in at least as good a condition as it was in on the Completion Date, ordinary wear and tear excepted; (ii) the carrying out of or the failure to complete any modifications, improvements or Alterations; (iii) any change or modification to the Plans and Specifications in violation of Section 3.2 of the Construction and Development Agreement; (iv) the existence of any environmental condition at or affecting the Leased Property that did not exist on the Closing Date (subject, in the case of any environmental condition arising prior to the Base Term Commencement Date, to the limitations set forth in Section 7.1(f) hereof); (v) any defect, exception, easement, restriction or other encumbrance on or title to the Leased Property not existing on the Closing Date and not consented to by the Lessor; or (vi) any other cause or condition within the power of the Lessee to control or affect (other than ordinary wear and tear) that did not exist on the Closing Date (subject, in the case of any cause or condition arising prior to the Base Term Commencement Date, to the limitations set forth in Section 7.1(f) hereof).

ARTICLE VIII

AGENCY

SECTION 8.1.           Appointment of Administrative Agent and Collateral Agent; Powers and Authorization to Take Certain Actions.

(a)        Each of the Participants irrevocably appoints and authorizes MUFG Bank, Ltd. to act as its Administrative Agent (and MUFG Bank, Ltd. hereby consents to such appointment and authorization) and the Lessor irrevocably appoints and authorizes MUFG Union Bank, N.A. to act as its Collateral Agent (and MUFG Union Bank, N.A. hereby consents to such appointment and authorization), in each case hereunder and under the other Operative Documents, with such powers as are specifically delegated to the Administrative Agent or the Collateral Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. Each Participant and the Lessor authorizes and directs the Administrative Agent or the Collateral Agent, as the case may be, to, and each of the Agents agrees for the benefit of the Participants and the Lessor and, as the case may be, that, on the Closing Date it will accept the documents described or referred to in Article III of this Agreement. Each of the Agents accepts the agency hereby created applicable to it and agrees to receive all applicable payments and

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proceeds pursuant to the Operative Documents and disburse such payments or proceeds in accordance with the Operative Documents to which it is a party.

(b)        Neither the Administrative Agent nor the Collateral Agent shall have any duties or responsibilities except those expressly set forth in the Operative Documents. Neither the Administrative Agent nor the Collateral Agent shall be responsible to any Participant (or to any other Person): (i) for any recitals, statements, representations or warranties of any party contained in any Operative Document or in any certificate or other document referred to or provided for in, or received by it under, the Operative Documents, other than the representations and warranties made by each of the Agents in Section 4.4, (ii) for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Leased Property, the Site or the title thereto or (iii) for any failure by the Lessee, the Lessor, or any other Person (other than each of the Agents, as applicable) to perform any of its obligations under any Operative Document. Each of the Agents may, in fulfilling its obligations, employ agents, trustees or attorneys-in-fact, may vest any of them with any property, title, right or power deemed necessary for the purposes of such appointment and shall not be responsible for the negligence or misconduct of any of them selected by it with reasonable care.

(c)        Neither the Administrative Agent nor the Collateral Agent shall have any duty or obligation to manage, control, use, operate, store, lease, sell, dispose of or otherwise deal with the Lease and, with respect to the Collateral Agent, any other easement granted to it pursuant to the Operative Documents, the Leased Property or the Site, or to otherwise take or refrain from taking any action with respect thereto, except as expressly provided by the terms of the Operative Documents, and no implied duties of any kind shall be read into any Operative Document against each of the Agents. The permissive right of each of the Agents to take actions enumerated in this Agreement or any other Operative Document shall never be construed as a duty, unless it is instructed or directed to exercise, perform or enforce one or more rights by the Required Participants (provided that each of the Agents has received indemnification reasonably satisfactory to it). Subject to Section 8.1(d) below, no provision of the Operative Documents shall require the Administrative Agent or the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its obligations under the Operative Documents, or in the exercise of any of its rights or powers thereunder. It is understood and agreed that the duties of each of the Agents are ministerial in nature.

(d)        Except as specifically provided herein, each of the Agents is acting hereunder solely as agent and, except as specifically provided herein, is not responsible to any party hereto in its individual capacity, except with respect to any claim arising from its own gross negligence or willful misconduct, or its negligence in the handling of funds or any breach of a representation or covenant made in its individual capacity.

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

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SECTION 8.2.           Reliance.

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

SECTION 8.3.           Action Upon Instructions Generally.

(a)        Subject to Sections 8.4 and 8.6, upon written instructions of the Required Participants if so required hereunder or pursuant to any other Operative Document, each of the Agents shall, solely in the furtherance of its duties as Administrative Agent or the Collateral Agent, as applicable, on behalf of the Participants or the Lessor, as the case may be, give such notice, consent, approval or direction, exercise such right, remedy or power hereunder or under the other Operative Documents or in respect of the Leased Property or the Site, and enter into such amendment to any document to which it is a party as the Administrative Agent or the Collateral Agent, as applicable, as may be specified in such instructions. The Administrative Agent shall deliver to each Participant a copy of each notice, demand, report and certificate received by it pursuant to the Operative Documents, and the Collateral Agent shall deliver to the Lessor a copy of each notice, demand, report and certificate received by it pursuant to the Operative Documents. Neither the Administrative Agent nor the Collateral Agent shall have any obligation to investigate or determine whether there has been an Event of Default or Default. Neither the Administrative Agent nor the Collateral Agent shall be deemed to have any notice or knowledge of an Event of Default or Default unless a Responsible Officer of it is notified in writing of such Event of Default or Default; provided that the Administrative Agent shall be deemed to have been notified in writing of any failure of the Lessee to pay Rent in the amounts and at the times set forth in Article IV of the Lease. If either the Administrative Agent or the Collateral Agent receives notice of an Event of Default, it shall give prompt notice thereof, at the Lessee’s expense, to each Participant, and if either the Administrative Agent or the Collateral Agent receives notice of an Event of Default, it shall give prompt notice thereof, at the Lessor’s expense, to each Rent Assignee.

(b)        Subject to Sections 8.4 and 8.6, each of the Agents shall take action or refrain from taking action with respect to an Event of Default as directed by the Required Participants; provided that, unless and until it receives such directions, each of the Agents may refrain from taking any action with respect to such Event of Default; provided, further, that the Agents, in their individual capacity or any other capacity, covenants for the benefit of the Lessor and the Rent Assignees only, that it shall not exercise, or attempt to exercise, any right of setoff, banker’s lien or the like against any deposit account or property of the Lessee or any of its Affiliates held or maintained by any Agent without the prior written consent of the Participants. Prior to the date the Lease Balance shall have become due and payable by acceleration pursuant to Section 18.1 of the Lease, the Required Participants may deliver written instructions to the Agents to waive, and each of the Agents, respectively, shall waive pursuant thereto, any Event of Default

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and its consequences; provided that in the absence of written instructions from all of the Participants, neither the Administrative Agent nor the Collateral Agent shall waive any payment default. As to any matters not expressly provided for by this Agreement, each of the Agents shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions signed by the Required Participants and such instructions of the Required Participants and any action taken, and any action taken or failure to act pursuant thereto shall be binding on all Participants.

SECTION 8.4.           Indemnification.

Each Rent Assignee and the Lessor shall reimburse and hold each of the Agents harmless, ratably in accordance with its Commitment at the time the indemnification is required to be given (but only to the extent that any such indemnified amounts have not in fact been paid to each of the Agents by, or on behalf of, the Lessee in accordance with Section 7.1), from any and all claims, losses, damages, obligations, penalties, liabilities, demands, suits, judgments, or causes of action, and all legal proceedings, and any reasonable costs or expenses in connection therewith, including allocated charges, costs and expenses of internal counsel of each of the Agents and all other reasonable attorneys’ fees and expenses incurred by each of the Agents, in any way relating to or arising in any manner out of (i) any Operative Document, the enforcement thereof or the consummation of the transactions contemplated thereby, (ii) instructions from the Required Participants (in the case of the Administrative Agent) or the Lessor (in the case of the Collateral Agent) or all Participants or the Lessor, as the case may be, if so required hereunder or pursuant to any other Operative Document (including, without limitation, the costs and expenses that the Lessee is obligated to and does not pay hereunder, but excluding normal administrative costs and expenses incident to the performance by each of the Agents of its agency duties hereunder other than materially increased administrative costs and expenses incurred as a result of an Event of Default); provided that no Rent Assignee shall be liable for any of the foregoing to the extent they arise from (a) the gross negligence or willful misconduct of either of the Administrative Agent or the Collateral Agent, (b) the inaccuracy of any representation or warranty or breach of any covenant given by the Administrative Agent or the Collateral Agent in Section 4.4 or in the Rent Assignment Agreement, (c) in the case of the Administrative Agent’s handling of funds, the failure to act with the same care as the Administrative Agent uses in handling its own funds, or (d) any taxes, fees or other charges payable by each of the Agents based on or measured by any fees, commissions or compensation received by it for acting as Administrative Agent or the Collateral Agent, as applicable, in connection with the Overall Transaction.

SECTION 8.5.           Independent Credit Investigation.

Each Participant, by entering into this Agreement agrees that it has, independently and without reliance on each of the Agents, the Arranger or any other Participant and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Lessee and its own decision to enter into this Agreement and each of the other Operative Documents to which it is a party and that it will, independently and without reliance upon the Administrative Agent or the Collateral Agent, the Arranger or any other Participant and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking action under this Agreement and any related documents to which

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it is a party. Neither the Administrative Agent nor the Collateral Agent shall be required to keep itself informed as to the performance or observance by the Lessee of any other document referred to (directly or indirectly) or provided for herein or to inspect the properties or books of the Lessee. Except for notices or statements which the Administrative Agent or the Collateral Agent is expressly required to give under this Agreement and for notices, reports and other documents and information expressly required to be furnished to the Administrative Agent or the Collateral Agent alone (and not also to each Participant, it being understood that each of the Agents shall forward copies of same to each of the other Participants or the Rent Assignees, as the case may be) hereunder or under any other Operative Document, neither the Administrative Agent nor the Collateral Agent shall have any duty or responsibility to provide any Participant with copies of notices or with any credit or other information concerning the affairs, financial condition or business of the Lessee (or any of its Affiliates) that may come into the possession of the Administrative Agent or the Collateral Agent or any of their respective Affiliates. Notices, reports and other documents and information expressly required to be furnished to the Collateral Agent are being provided to the Collateral Agent for file-keeping purposes only and unless otherwise expressly provided herein, the Collateral Agent shall have no obligation to review or be familiar with the contents thereof or provide copies to any other person.

SECTION 8.6.           Refusal to Act.

Except for notices and actions expressly required of each of the Agents hereunder and except for the performance of expressed obligations under the Operative Documents as the Administrative Agent or the Collateral Agent, each of the Agents shall in all cases be fully justified in failing or refusing to act unless (a) it is indemnified to its reasonable satisfaction by the Participants or the Lessor, as applicable, against any and all liability and reasonable expense which may be incurred by it by reason of taking or continuing to take any such action (provided that such indemnity shall be subject to each of the limitations set forth in Section 8.4, including clauses (a) through (d) of Section 8.4, it being understood that no action taken by the Administrative Agent or the Collateral Agent in accordance with the instructions of the Required Participants (in the case of the Administrative Agent) or of the Lessor (in the case of the Collateral Agent) shall be deemed to constitute any such matter) and (b) it is reasonably satisfied that such action is not contrary to any Operative Document or to any Applicable Laws and Regulations.

SECTION 8.7.          Resignation or Removal of Administrative Agent, Collateral Agent; Appointment of Successor.

Subject to the appointment and acceptance of a successor Administrative Agent or Collateral Agent as provided below, each of the Administrative Agent and Collateral Agent may resign at any time by giving notice thereof to the other and to each Participant and the Lessee, and may be removed from such position at any time by written notice from the Required Participants or the Lessor, as applicable. Upon any such resignation or removal of the Administrative Agent or Collateral Agent, the Required Participants or the Lessor, as applicable, at the time of the resignation or removal shall have the right to appoint a successor Administrative Agent or Collateral Agent, as applicable, which shall be a financial institution having (i) a long-term credit rating no lower than investment grade as rated by Moody’s and S&P and (ii) a combined capital and surplus of not less than $100,000,000. If, within thirty (30) days after the retiring

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Administrative Agent’s or Collateral Agent’s giving of notice of resignation or receipt of a written notice of removal, a successor Administrative Agent or Collateral Agent is not so appointed and does not accept such appointment, then the retiring or removed Administrative Agent or Collateral Agent may appoint a successor to itself meeting the requirements in the prior sentence and transfer to such successor all of its rights and obligations. Upon the acceptance of any appointment as the Administrative Agent or Collateral Agent hereunder, such successor Administrative Agent or Collateral Agent, as applicable, shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and Collateral Agent, respectively, and the retiring or removed Administrative Agent or Collateral Agent, as applicable, shall be discharged from duties and obligations as Administrative Agent and Collateral Agent, respectively, thereafter arising hereunder and under any related document. If the retiring Administrative Agent or Collateral Agent does not appoint a successor, any Participant or the Lessor, as applicable, shall be entitled to apply to a court of competent jurisdiction for such appointment, and such court may thereupon appoint a successor to act until such time, if any, as a successor shall have been appointed as above provided.

SECTION 8.8.           Separate Agent.

Subject to any Applicable Laws and Regulations, the Required Participants or the Lessor, as applicable, may, and if they fail to do so at any time when they are so required, each of the Agents may, for the purpose of meeting any legal requirements of any jurisdiction in which the Leased Property may be located, appoint one or more Persons either to act as co-agent jointly with the Administrative Agent or the Collateral Agent, as applicable, or to act as separate agent of all or any part of the Leased Property or the Site, and vest in such individuals or corporations, in such capacity, such rights to such Leased Property or the Site or any part thereof, and such other rights or duties as each of the Agents may consider necessary or desirable. Each of the Agents shall execute, acknowledge and deliver all such instruments as may be required by any such co-agent or separate agent more fully confirming such title, rights or duties to such co-agent or separate agent. Upon the acceptance in writing of such appointment by any such co-agent or separate agent, it shall be vested with such interest in the Leased Property or any part thereof, and with such rights and duties, not inconsistent with the provisions of the Operative Documents, as shall be specified in the instrument of appointment, jointly with each of the Agents (except insofar as local law makes it necessary for any such co-agent or separate agent to act alone), subject to all terms of the Operative Documents. Any co-agent or separate agent, to the fullest extent permitted by legal requirements of the relevant jurisdiction, at any time, by an instrument in writing, shall constitute the Administrative Agent or the Collateral Agent, as applicable, pursuant to its appointment, its attorney-in-fact and agent, with full power and authority to do all acts and things and to exercise all discretion on its behalf and in its name. If any co-agent or separate agent shall become incapable of acting, resign or be removed, the interest in the Leased Property and all rights and duties of such co-agent or separate agent shall, so far as permitted by law, vest in and be exercised by the Administrative Agent or the Collateral Agent, respectively, without the appointment of a successor to such co-agent or separate agent.

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SECTION 8.9.           Termination of Agency.

The agency created hereby shall terminate upon the final disposition by each of the Agents of all Leased Property and each of the Administrative Agent’s and the Collateral Agent’s interest in the Site and the final distribution by each of the Agents of all monies or other property or proceeds received pursuant to the Operative Documents in accordance with their terms; provided, that at such time the Lessee shall have complied fully with all the terms hereof.

SECTION 8.10.         Compensation of Administrative Agent and Collateral Agent.

The Lessee shall pay each of the Agents the annual fee as set forth in Section 2.13(e) hereof and including after an Event of Default, any other fees, costs and expenses for the performance by each of the Administrative Agent and Collateral Agent of its respective obligations hereunder (including the reasonable fees and expenses of its counsel) (collectively, “Agency Fees”).

SECTION 8.11.         Limitations.

It is expressly understood and agreed by and among the parties hereto that, except as otherwise provided herein or in the other Operative Documents: (a) to the extent each of the Agents is entering into such documents and agreements as the Administrative Agent or the Collateral Agent, this Agreement and the other Operative Documents to which each of the Agents is a party are executed by each of the Administrative Agent or the Collateral Agent in its capacity as Administrative Agent or Collateral Agent, as applicable, under the Operative Documents in the exercise of the power and authority conferred and vested in it as such Administrative Agent or Collateral Agent; (b) each of the undertakings and agreements herein made on the part of each of the Agents are each and every one of them made and intended not as personal undertakings and agreements by each of the Agents, or for the purpose or with the intention of binding each of the Agents personally, but are made and intended for the purpose of binding only the Leased Property unless expressly provided otherwise; (c) actions to be taken by each of the Agents pursuant to its obligations under the Operative Documents may, in certain circumstances, be taken by each of the Agents only upon specific authority of the Participants or the Rent Assignees, as further set forth herein an in the other Operative Documents; (d) nothing contained in the Operative Documents shall be construed as creating any liability on either of and the Agents, individually or personally, or any incorporator or any past, present or future subscriber to the capital stock of, or stockholder, officer or director, employee or agent of, each of the Agents to perform any covenants either express or implied contained herein, all such liability, if any, being expressly waived by the other parties hereto and by any Person claiming by, through or under them; and (e) so far as each of the Agents, individually or personally, is concerned, the other parties hereto and any Person claiming by, through or under them shall look solely to the Leased Property and the Lessee for the performance of any obligation under any of the instruments referred to herein, provided, however, that nothing in this Section 8.11 shall be construed to limit in scope or substance the general corporate liability of each of the Agents in respect of its gross negligence or willful misconduct, negligence in the handling of funds or for those representations, warranties and covenants of each of the Agents, as applicable, in its individual capacity set forth herein, in the other Operative Documents or in any of the other agreements contemplated hereby or thereby.

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ARTICLE IX

MISCELLANEOUS

SECTION 9.1.           Survival of Indemnities.

The indemnities of the parties provided for in the Operative Documents shall survive the execution and delivery and the termination or expiration of this Agreement and any of the Operative Documents, the transfer of the interest in the Leased Property as provided herein or in any other Operative Documents, any disposition of any interest of the Lessor or the Collateral Agent in the Leased Property, the purchase and sale of the Rent Assignment Interests, payment therefor and any disposition thereof and shall continue in effect notwithstanding that any party hereto may waive compliance with any of the other terms, provisions or conditions of any of the Operative Documents.

SECTION 9.2.           No Broker, etc.

Except for the Lessee’s dealings with the Arranger (for which the Lessee shall be responsible) each of the parties hereto represents to the others that it has not retained or employed any arranger, broker, finder or financial advisor to act on its behalf in connection with this Agreement, nor has it authorized any arranger, broker, finder or financial adviser retained or employed by any other Person so to act, nor has it incurred any fees or commissions to which the Agents or any Participant might be subjected by virtue of its entering into the transactions contemplated by this Agreement. 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 9.3.           Notices.

Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto in connection with the Operative Documents shall be in writing (including bank wire, transmission, electronic mail or similar writing) and shall be effective given to such party: (i) if given by electronic mail transmission, when transmitted to the e-mail address specified on Schedule II during the recipient’s normal business hours and confirmation of receipt is received or (ii) if given by any other means, when delivered during the recipient’s normal business hours at the address specified on Schedule II; provided that notices under Article II or Sections 7.4, 7.5 or 7.6 hereof shall not be effective until received.

SECTION 9.4.           Counterparts.

This Agreement and each of the other Operative Documents may be executed by the parties hereto and thereto 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 agreement. Except as provided in Section 2.1, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties

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hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by e-mailed .pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Administrative Agent to accept Electronic Signatures in any form or format without its prior written consent.

SECTION 9.5.           Amendments.

No Operative Document nor any of the terms thereof may be terminated, amended, supplemented, waived or modified without the written agreement or consent of the Lessor, the Administrative Agent (as directed by the Required Participants), the Lessee, the Collateral Agent (as directed by the Lessor), the Required Participants and the Lessor; provided, however, that Section 9.15 hereof and the other Sections referenced therein may not be terminated, amended, supplemented, waived or modified without the written consent of the Arranger; provided, further, that such termination, amendment, supplement, waiver or modification of any Operative Document shall require the written agreement or consent of each Participant if such termination, amendment, supplement, waiver or modification would:

(a)        modify any of the provisions of this Section 9.5, change the definition of “Required Participants”, or modify or waive any provision of any Operative Document requiring action by the Required Participants or all of the Participants such that such provision no longer requires such action, or release any collateral (except in connection with a transaction permitted by the Operative Documents);

(b)        reduce the amount or change the time of payment of any amount of principal owing or payable with respect to any Rent Assignment Advances, Lessor Investment, or Yield owing or payable with respect thereto or Fees, or modify any of the provisions of Article X or Sections 2.11 or 2.12 hereof, or modify the definition of “Yield Rate” or the other defined terms contained in such definitions (and except that any amendment entered into pursuant to the terms of 2.9(g) or (h) shall not constitute a reduction in amount for purposes of this clause (b));

(c)        reduce, modify, amend or waive any Excluded Amounts in favor of any Participant;

(d)        reduce the amount or change the time of payment of any Rent, the Lease Balance, Purchase Amount, Sale Proceeds, Deficiency payments, Construction Recourse Deficiency Amount, the Recourse Deficiency Amount or the Return Option Construction Recourse Amount;

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(e)        modify any provision of any Operative Document that expressly requires the unanimous consent of the Participants;

(f)         consent to releasing the Lessee from its obligations to pay any Rent, the Lease Balance, Purchase Amount, Sale Proceeds, Deficiency payments, the Construction Recourse Amount, the Recourse Deficiency Amount or the Return Price Recourse Deficiency Amount or changing the absolute and unconditional character of such obligations;

(g)        permit the creation of any Lien on the Leased Property, the Site, the Lessee Collateral or any part thereof, except as permitted by the Operative Documents;

(h)        modify the definition of “Maturity Date” or “Lease Expiration Date” or otherwise extend either such date other than as permitted by Section 2.17 provided, however, for purposes of clarity, that any extension of either such date permitted under Section 2.17 shall require the unanimous vote of each Participant (including any Replacement Participant which replace the non-consenting Participants in accordance with the terms thereof); and

(i)         waive, amend or otherwise modify any of the provisions contained in Section 2.2(d).

SECTION 9.6.           Headings, etc.

The Table of Contents and headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof.

SECTION 9.7.           Parties in Interest.

Except as expressly provided herein, none of the provisions of this Agreement is intended for the benefit of any Person except the parties hereto and their respective successors and permitted assigns.

SECTION 9.8.           Governing Law.

THIS AGREEMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF, THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE WHERE THE SITE IS LOCATED ARE REQUIRED TO APPLY.

SECTION 9.9.           Payment of Transaction Costs and Other Costs.

(a)        Transaction Costs and Fees. As and when any portion of Transaction Costs, including, without limitation, any Fees becomes due and payable, such Transaction Costs, including, without limitation, any Fees shall be paid by the Lessee as Supplemental Rent; provided, that with respect to Transaction Costs, including, without limitation, any Fees which are due and

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payable before the Completion Date, the Lessee’s obligation to pay such Transaction Costs including, without limitation, any Fees is subject to the provisions of Section 2.13.

(b)        Continuing Expenses. The continuing fees, expenses and disbursements (including reasonable counsel fees) of (i) the Lessor set forth by the Lessor and agreed in writing by the Lessee, (ii) the Administrative Agent and Collateral Agent, as set forth in Section 2.13, and (iii)  the Participants, in each case as set forth in Section 2.13, shall be included in Advance Requests and paid for out of Advances before the Completion Date and, following the Completion Date, paid directly by the Lessee as Supplemental Rent.

(c)        Amendments, Supplements, etc. Without limitation of the foregoing, the Lessee agrees to pay to the Agents and the Participants (i) all costs and expenses (including reasonable and properly documented legal fees and expenses of counsel to the Agents and the Participants) incurred by any of them in connection with: (A) the considering, evaluating, investigating, negotiating and entering into or giving or withholding of any amendments or supplements or waivers or consents with respect to any Operative Document requested by the Lessee; or (B) the negotiation and documentation of any restructuring or “workout,” whether or not consummated, of any Operative Document; and (ii) all costs and expenses (including properly documented legal fees and expenses of counsel to the Agents and the Participants) incurred by any of them in connection with: (A) the enforcement of the rights or remedies under the Operative Documents; or (B) any sale, assignment or transfer by a Participant of any interest in the Operative Documents during the continuance of an Event of Default.

SECTION 9.10.         Severability.

Any provision of this 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 9.11.         Limited Liability of the Lessor.

The parties hereto agree that except as specifically set forth herein or in any Operative Document, no Representatives (other than Affiliates of the Lessor to the extent that funds are received by the Lessor and not applied in accordance with the terms of the Operating Documents) of the Lessor shall have personal liability whatsoever to the Lessee or its successors and assigns for any claim or obligation based on or in respect of this Agreement or any of the other Operative Documents (including the construction of the Facility or for the accuracy, sufficiency or adequacy of any of the information or documents submitted in connection with each Advance or upon Completion of the Facility) or arising in any way from the transactions contemplated hereby or thereby, except to the extent attributable to the willful misconduct or gross negligence of, or negligence in the handling of funds by, Lessor, its officers, agents, employees and Affiliates or the breach in any material respect of any representation or warranty made by the Lessor under the Operative Documents or a breach or violation of the terms and conditions of this Agreement or any Operative Document. Anything in this Agreement or the other Operative Documents to the contrary notwithstanding, none of the Lessee, any Agent, any Rent Assignee and any other holder

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of Rent Assignment Interests (and the successors or assigns of any of said Persons) shall have any claim, remedy or right to proceed against the Lessor or any past, present or future stockholder, subscriber of capital stock, officer, director, incorporator or partner of the Lessor, whether by virtue of any statute or rule of law or by enforcement of any penalty or assessment or otherwise, for the payment of any amount owing under this Agreement or any other Operative Documents or any deficiency or any other sum owing on account of the indebtedness evidenced by the Rent Assignment Interests or for the payment of any other unpaid Obligations or any liability resulting from the breach of any representation, agreement or warranty of any nature whatsoever in this Agreement or any other Operative Document; and the parties hereto, by their execution and delivery of this Agreement, waive and release any liability of the Lessor or any past, present or future stockholder, subscriber of capital stock, officer, director, incorporator or partner of the Lessor for and on account of such amounts, deficiencies, sums, payments or such liability; provided, however, that nothing herein contained shall limit, restrict or impair the rights of a party hereto to bring suit and obtain a judgment against the Lessor under this Agreement or any other Operative Documents or to exercise all rights and remedies provided under the Lease.

SECTION 9.12.         Liabilities of the Participants.

No Participant shall have any obligation to the Agents or any other Participant or to the Lessee with respect to the Overall Transaction 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 9.13.         Submission to Jurisdiction; Waivers.

(a)        EACH           PARTY           HERETO          IRREVOCABLY           AND UNCONDITIONALLY:

(i)         SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE SOLE, EXCLUSIVE GENERAL JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, AND APPELLATE COURTS FROM ANY THEREOF;

(ii)        CONSENTS THAT ANY SUCH ACTION OR PROCEEDINGS MAY BE BROUGHT TO SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

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(iii)       AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH ON SCHEDULE II OR AT SUCH OTHER ADDRESS OF WHICH THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 9.3; AND

(iv)       AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(b)        EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THE OPERATIVE DOCUMENTS AND FOR ANY COUNTERCLAIM THEREIN.

SECTION 9.14.         Reproduction of Documents.

Subject to Section 9.19, this Agreement, all documents constituting an Appendix, Schedule or Exhibit hereto, and all documents relating hereto received by a party hereto, including, without limitation: (a) consents, waivers and modifications that may hereafter be executed; (b) documents received by the Agents or any Participant in connection with the receipt and/or acquisition of the Leased Property; and (c) financial statements, certificates and other information previously or hereafter furnished to the Agents or any Participant may be reproduced by the party receiving the same by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. Each of the parties hereto agrees and stipulates that, to the extent permitted by law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such party in the regular course of business) and that, to the extent permitted by law, any enlargement, electronic copy, or further reproduction of such reproduction shall likewise be admissible in evidence. Without limiting the generality of the foregoing, the Lessee hereby (i) agrees that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent, the Lessor and the Rent Assignees, electronic images of this Agreement or any other Operative Documents (in each case, including with respect to any signature pages thereto) shall have the same legal effect, validity and enforceability as any paper original, and (ii) waives any argument, defense or right to contest the validity or enforceability of the Operative Documents based solely on the lack of paper original copies of any Operative Documents, including with respect to any signature pages thereto.

SECTION 9.15.         Role of Arranger.

Each party hereto acknowledges hereby that it is aware of the fact that the Arranger has acted as an “arranger” with respect to the transactions contemplated by the Operative Documents. The parties hereto acknowledge and agree that the Arranger and its Affiliates have not made any representations or warranties concerning, and that they have not relied upon the Arranger as to, the

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tax, accounting or legal characterization or validity of (i) the Operative Documents or (ii) any aspect of the Overall Transaction. The parties hereto acknowledge and agree that the Arranger has no duties, express or implied, under the Operative Documents in its capacity as the Arranger. The parties hereto further agree that Section 2.1(l), Section 2.8, Section 2.13(a), Section 8.5, Section 9.2, Section 9.5, Section 9.9(a) and this Section 9.15 are for the express benefit of the Arranger, in such capacity, and the Arranger shall be entitled to rely thereon as if it were a party hereto.

SECTION 9.16.         Rights Under Rent Assignment Agreements.

The Lessee acknowledges the sales and assignments by the Lessor under the Rent Assignment Agreements, expressly consents to the sales and assignments thereof regarding the Lessee and agrees to pay and deliver to the Rent Assignees the sums and materials set forth therein as they relate to the Lessee.

SECTION 9.17.         Limitation on Recourse Liability During Construction Period.

Nothing herein contained shall affect the applicability of the provisions of Section 18.5 of the Lease.

SECTION 9.18.         Payments in Dollars.

All payments to be made by the Lessee hereunder shall be made in Dollars in immediately available and freely transferable funds at the place of payment, all such payments to be paid without setoff, counterclaim or reduction.

SECTION 9.19.         Confidentiality.

In connection with the Overall Transaction and the Lessee’s compliance with the Operative Documents, the Agents and the Participants may be receiving certain information (whether in written or electronic form, or if oral, confirmed in writing as confidential information) which is non-public, confidential or proprietary in nature. Such information and any other non-public, confidential or proprietary information concerning the Plans and Specifications, the Facility, the Lessee and/or its Subsidiaries (the Lessee and/or its Subsidiaries being collectively referred to as the “Cubic Companies”) furnished by or on behalf of the Cubic Companies to the Agents or the Participants in connection with the Overall Transaction (at any time on, before or after the date hereof), together with any other documents prepared by the Cubic Companies or by any of their respective agents, Affiliates, representatives (including attorneys, accountants and financial advisors) or employees which contain or otherwise reflect such information is hereinafter referred to as the “Information”.

The Agents and each of the Participants hereby severally agrees, as to itself only, subject to the exclusions set forth elsewhere in this Section 9.19, that the Information shall be kept confidential and shall not, without the prior written consent of relevant Cubic Company, be disclosed by such Person or by any of its Affiliates, directors, officers, employees, attorneys and agents (“Representatives”) in any manner whatsoever, in whole or in part, and shall not be used by such Person or its Representatives other than in connection with monitoring the progress of the construction of the Facility and the compliance by the Cubic Companies with the terms of the

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Operative Documents, provided, however, that such Person may reveal the Information (i) to its Representatives solely for the purpose of evaluating or managing such Person’s investment in the Overall Transaction if the recipients of the Information are informed by such Person of the confidentiality obligations with respect to the Information and such recipients agree to be bound by the terms and conditions of this Section or are otherwise bound by an obligation of confidentiality with respect thereto or (ii) to applicable regulatory Authorities having jurisdiction.

The provisions of this Section shall be inoperative as to such portions of the Information that (i) are or become generally available to the public on a non-confidential basis through no fault of or action by the Agents or the Participants or by any of their respective Representatives, (ii) become available to the Agents or any of the Participants on a non-confidential basis from a source other than the Cubic Companies or their representatives or agents, so long as the Person to whom such portions of Information have been made available has no knowledge that the source of such Information is prohibited from disclosing such portions by a contractual, legal or fiduciary obligation to the Cubic Companies, (iii) was heretofore independently developed or compiled by the Agents, or any of the Participants or their respective Representatives, as evidenced by records of such Person, without the use of the Information, or (iv) are provided to any court or tribunal in connection with the exercise or enforcement of any rights under this Agreement or other Operative Document. In addition, the Agents and the Participants may disclose such Information to potential transferees of its interest, provided such potential transferee has entered into a confidentiality agreement containing provisions substantially similar to the provisions of this Section.

In the event that the Agents or any of the Participants or anyone to whom any such Person transmits the Information pursuant to this Section 9.19, becomes required by Applicable Laws and Regulations or Governmental Action to disclose any of the Information, the Person so required (if a party to this Agreement) or the Person that transmitted the Information to the Person so required (if the Person so required is not a party to this Agreement) if legally permitted shall provide the Lessee with notice of such event promptly upon obtaining knowledge thereof so that the Lessee or the applicable Cubic Company may seek a protective order or other appropriate remedy against such disclosure. In the event that no protective order or other remedy is obtained, the Person so required to disclose such Information (if a party to this Agreement) or the Person that transmitted the Information to the Person so required to disclose such Information (if the Person so required is not a party to this Agreement) shall have the right to disclose such information to the appropriate Authority. Notwithstanding such right, such Person shall, at the Lessee’s expense, cooperate to the extent reasonable with the Lessee’s or such Cubic Company’s instructions to disclose, only that portion of the Information that is required to be disclosed in accordance with Applicable Laws and Regulations and shall do so in a manner reasonably designed to preserve the Information’s confidential nature. Notwithstanding anything to the contrary in this Section 9.19, the Agents and each of the Participants may disclose the Information as requested by any Authority to whose jurisdiction such Person is subject or in connection with an examination of such Person by regulatory examiners or independent auditors. In addition, to the extent not contrary to the foregoing, the Lessor shall use reasonable efforts to comply with written instruction from the Lessee to such Person or, at the Lessee’s expense, return confidential information to the Lessee; provided, however, that the Lessor may retain one (1) file copy of such Information, documents, memoranda, notes and other writings for regulatory and audit purposes and for the purposes of

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defending or maintaining any proceedings relating to this Agreement, and any such materials so retained shall remain subject to the provisions of this Section 9.19.

The agreements of the Agents and each of the Participants in this Section shall survive the termination of any of the Operative Documents to which any such Person is a party and the payment of all or any part of the Lease Balance or the Purchase Amount and the repayment of all or any part of the Advances or Fundings made by the Agents or any of the Participants in respect thereof.

SECTION 9.20.         Entire Agreement.

This Agreement (together with the other Operative Documents) constitutes the entire agreement between the parties hereto with respect to the matters covered hereby and supersedes all prior agreements and understandings, written or oral, with respect to such matters between the parties. The parties hereto shall not have any duties or obligations, except those expressly set forth herein, and no implied duties or obligations shall be read into this Agreement.

SECTION 9.21.         UCC Filings and Other Matters.

The Lessee hereby grants to the Collateral Agent (or Lessor or its counsel on its behalf) the permission and right to file, without the signature of the Lessee, any financing statements, amendment statements and continuation statements under the Uniform Commercial Code necessary to perfect the Collateral Agent’s security interest in the Lessee Collateral under the Memorandum and Security Documents. The Lessee shall attend to the filing of any necessary UCC amendment statements and continuation statements in order to maintain the perfection of its security interest as set forth in the Memorandum of Lease perfected by the UCC Financing Statements filed on or about the Closing Date and referencing the Lessee as the secured party.

SECTION 9.22.         Existence and Continuation of an Event of Default.

Notwithstanding any other provision of any Operative Document to the contrary, if an Event of Default shall have occurred then following the giving of any required notice and the expiration of any applicable cure period, such Event of Default shall continue in existence unless and until such time that such Event of Default is expressly and specifically waived in writing by the Administrative Agent or the Participants, as applicable, in accordance with the requirements of the Operative Documents.

SECTION 9.23.         USA PATRIOT Act.

The Lessee acknowledges that the Administrative Agent and the Participants may be required, pursuant to the USA PATRIOT Act, to obtain, verify, record and disclose to law enforcement authorities information that identifies the Lessee, including the name and address of the Lessee. Consistent with Section 5.1(g) hereof, the Lessee will provide to the Administrative Agent and the Participants any such information they may request pursuant to the USA PATRIOT Act, and the Lessee agrees that the Administrative Agent and the Participants may disclose such information to law enforcement authorities if the authorities make a request or demand for disclosure pursuant to the USA PATRIOT Act. The Lessee also acknowledges that, in such event

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the Administrative Agent and the Participants may not be required or even permitted by the USA PATRIOT Act to notify the Lessee of the request or demand for disclosure.

SECTION 9.24.         Certifications from the Construction Consultant.

Notwithstanding any other provision of any Operative Document to the contrary, any certification or other reporting required to be made by the Construction Consultant pursuant to any Operative Document shall be required only to the extent the Administrative Agent and the Participants determines such certification or reporting to be necessary or appropriate at the applicable time, such determination to be made by the Administrative Agent and the Participants in its sole and absolute discretion.

SECTION 9.25.         Substitution of a Participant; Change in Lending Office.

(a)        If any Indemnitee has demanded indemnification under Sections 2.9(b), 7.2(a)(ii), 7.2(a)(iii) or 7.4 hereof and such demand for indemnification or compensation by Indemnitee has been made to other similarly situated companies with LIBOR based pricing and similar terms, then, if no Default or Event of Default is continuing, the Lessee shall have the right, with or without the assistance of the Administrative Agent, but subject to Section 6.3 hereof and the provisos below, to seek a substitute financial institution or institutions to purchase the Rent Assignment Advances or Lessor Investment, as applicable, from such Indemnitee making such demand and to instruct such Indemnitee to, and such Indemnitee shall, promptly upon the identification by the Lessee of such substitute financial institution or financial institutions, assign its Rent Assignment Interests or Lessor Investment, as applicable, and all of its rights and obligations under the Operative Documents to such substitute financial institution or financial institutions, subject to Section 6.3 hereof, provided, that such Indemnitee shall have been paid in full in immediately available funds for all amounts due hereunder or under any other Operative Document. The Lessee shall exercise its rights under this Section 9.25 if at all, within ten (10) days of receipt of any claim by an Indemnitee under Sections 2.9(b), 7.2(a)(ii), 7.2(a)(iii) or 7.4 hereof, as applicable, and, provided further that such substitute institution or institutions will not make any similar demand.

(b)        If any Indemnitee requests compensation under Section 2.9(b), then such Indemnitee shall use reasonable efforts to designate a different lending office for funding or booking its Rent Assignment Interests or Lessor Investment hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Indemnitee, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.9(b) in the future and (ii) would not subject such Indemnitee to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Indemnitee. The Lessee hereby agrees to pay all reasonable costs and expenses incurred by any Indemnitee in connection with any such designation or assignment.

SECTION 9.26.         Collateral Agent Statements

To the extent amounts are held and/or invested by the Collateral Agent under the Operative Documents including, without limitation, under Section 23.13 of the Lease, the Collateral Agent shall furnish the Lessee periodic cash transaction statements which shall include detail for all

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investment transactions effected by the Collateral Agent. Upon the Lessee’s election, such statements will be delivered via the Collateral Agent providing the Lessee with online access to the Collateral Agent’s system with respect to this Participation Agreement and upon electing such service, paper statements will be provided only upon request. The Lessee waives the right to receive brokerage confirmations of security transactions effected by the Collateral Agent as they occur, to the extent permitted by law. The Lessee further understands that trade confirmations for securities transactions effected by the Collateral Agent will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker.

ARTICLE X

RECEIPT, DISTRIBUTION AND APPLICATION OF RECEIPTS

SECTION 10.1. Receipt, Distribution and Application of Receipts; Rent Distribution.

The parties hereto agree that the payments specified in this Section 10 will be distributed pursuant to the applicable subsections of this Section 10 and, with respect to payments required in this Section 10 below to be made to the Rent Assignees, in accordance with the Rent Assignment Agreement.

(a)        Except as otherwise provided in Section 10.1(b) and Section 10.3, each payment of Basic Rent under the Lease as well as any payment of interest on overdue installments of Basic Rent under the Lease, and any other monies paid over by the Lessee to Administrative Agent which shall be remitted to Administrative Agent on behalf of the Lessor, shall be distributed by Administrative Agent as promptly as possible (it being understood that any payments of Basic Rent received by Administrative Agent under the Lease on a timely basis and in accordance with the provisions of the Lease shall be distributed by Administrative Agent on the date received in the funds so received) to the Rent Assignees and the Lessor, pro rata, without priority of one such Person over the other, with the Rent Assignees to be paid in accordance with such Rent Assignee’s Commitment Percentage and the remainder to be paid to the Lessor; provided, however, that such payment of interest on overdue installments of Basic Rent shall be paid to the Rent Assignees and the Lessor, without priority of one such Person over the other, in accordance with the ratio of the portion of such installment due to such Person over the total amount of such installment.

(b)        Except as otherwise provided in Section 10.3, if any payment of Basic Rent shall be insufficient to pay in full the amounts set forth in Section 10.1(a), then such payment of Basic Rent as well as any payment in respect of interest on such payment of Basic Rent and any other monies paid over by the Lessee to the Lessor or any party hereto in respect thereof, shall be remitted to Administrative Agent and distributed as promptly as possible (it being understood that any payments of Basic Rent received by Administrative Agent under the Lease on a timely basis and in accordance with the provisions of the Lease shall be distributed by the Administrative Agent on the date received in the funds so received) to the Rent Assignees and the Lessor, pro rata, without priority of one such Person over the other, with the Rent Assignees to be paid in accordance with such Rent Assignee’s Commitment Percentage and the remainder to be

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paid to the Lessor. Any payment of interest at the Overdue Rate shall be paid to the Participants still due their full payment of Yield, without priority of one such Person over the other, in such proportions as such amount due and unpaid to such Participant bears to the total amount of Basic Rent remaining unpaid.

SECTION 10.2. Distribution of Certain Other Payments. (a) Except as otherwise provided in Sections 10.3 and 10.5, the amount of any payment of Purchase Amount, Lease Balance, Deficiency, Recourse Deficiency Amount, Sale Proceeds and any other amounts received as a result of the termination of the Lease due to a purchase of the Leased Property by the Lessee, an election to return the Leased Property pursuant to Section 21.1(b) of the Lease, an Event of Loss or an Event of Taking (including, without limitation, any insurance proceeds, condemnation awards or payments by any Authority) under the Lease, in each case, with respect to which the Lessor, Agents or Rent Assignee shall have the right to receive and apply such amounts, shall, in each case be distributed and/or paid by Administrative Agent, in the following order of priority:

(i)         first, so much of such payments, proceeds and/or amounts as shall be required to reimburse the Agents for services in their capacities as such as provided in the Operative Documents for any Tax or other Claim incurred by such Persons (to the extent not previously reimbursed and to the extent incurred in connection with their administrative duties under the Operative Documents duties as Agents) and any such unpaid ongoing administrative fees owing to such Persons shall be retained by the Person due such amounts;

(ii)        second, the balance of such payments, proceeds and/or amounts shall be distributed to the Rent Assignees and Lessor, pro rata, without priority of one such Person over the other, with the Rent Assignees to be paid in accordance with such Rent Assignee’s Commitment Percentage and the remainder to be paid to the Lessor until payment in full of the outstanding Lease Balance with respect to the Rent Assignee Advances and the Lessor Investment together with all accrued and unpaid Yield thereon and all other amounts payable to the Rent Assignees and the Lessor under the Operative Documents;

(iii)       third, the balance thereof shall be distributed to the Rent Assignees and Lessor, pro rata, without priority of one such Person over the other, with respect to all other amounts payable to the Rent Assignees and the Lessor under the Operative Documents; and

(iv)       fourth, the balance, if any, shall be paid to the Lessee or such other Person as the Lessee may designate in writing.

(b)        Any payment received as a result of a Casualty or Condemnation that does not result in the termination of the Lease and/or the Construction and Development Agreement (including, without limitation, any insurance proceeds, condemnation awards or payments by any Authority), shall be paid to the Lessee in accordance with the Lease or the Construction and Development Agreement, as applicable, if the Lessee or the Construction Agent, as applicable, is entitled thereto pursuant to the terms of the Operative Documents and, if the Lessee or the

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Construction Agent, as applicable, is not entitled thereto, such payment shall be remitted to Administrative Agent and distributed and paid in accordance with Section 10.3.

(c)        Any payment received as a result of a payment of holdback amounts or unused contingency amounts pursuant to Section 3.3(g) hereof shall be applied in accordance with Section 10.2(a) hereof.

SECTION 10.3.         Distribution of Payments After Event of Default. Except as otherwise provided in Section 10.5:

(a) All payments received and amounts realized by the Lessor and the Agents after the Lease shall have been declared in default in accordance with Article XVII of the Lease following an Event of Default shall be continuing, as well as all payments or amounts then held or thereafter received (other than Excluded Amounts) by the Lessor and the Agents while such Event of Default shall be continuing, shall be remitted to Administrative Agent, and forthwith distributed, in each case, with respect to which the Lessor, the Agents or the Rent Assignees shall have the right to receive and apply such amounts, in the following order of priority:

(i)         first, so much of such payments or amounts as shall be required to reimburse the Agents for services in their capacities as such as provided in the Operative Documents for any Tax or other Claim incurred by such Persons (to the extent not previously reimbursed and to the extent incurred in connection with their administrative duties under the Operative Documents duties as Agents) and any such unpaid ongoing administrative fees owing to such Persons shall be retained by the Person due such amounts;

(ii)        second, so much of such payments or amounts as shall be required to reimburse the then existing or prior Rent Assignees or Lessor for payments made by them pursuant to this Agreement or other Operative Documents in connection with such Event of Default (to the extent not previously reimbursed), excluding payments in respect of Yield, Rent Assignee Advance or Lessor Investment and any such unpaid payments or amounts owing to such Rent Assignees or Lessor shall be distributed to each such Rent Assignee or Lessor, pro rata, without priority of one over the other, in proportion to the amount of such payment or payments payable to each such Rent Assignee and Lessor;

(iii)       third, the balance of such payments and amounts shall be distributed to the Rent Assignees and the Lessor, pro rata, without priority of one such Person over the other, with the Rent Assignees to be paid in accordance with such Rent Assignee’s Commitment Percentage and the remainder to be paid to the Lessor until payment in full of the outstanding principal amount with respect to the Rent Assignee Advances and the Lessor Investment together with all accrued and unpaid Yield thereon and all other amounts payable to the Rent Assignees and the Lessor under the Operative Documents;

(iv)       fourth, so much of the remainder thereof provision for the application of which is contained in the Lease or any of the Operative Documents shall be applied and distributed in accordance with the terms of the Lease or such Operative Document; and

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(v)        fifth, the balance, if any, shall be paid to the Lessee or such other Person as the Lessee may designate in writing.

SECTION 10.4. Other Payments. (a) Except as otherwise provided in Sections 10.1, 10.2, 10.3 and 10.5 and paragraph (b) below:

(i)         any payments received by the Lessor (or Administrative Agent or Collateral Agent) no provision for the application of which is made in the Operative Documents or elsewhere in this Section 10, and

(ii)        all payments received and amounts realized by the Lessor (or Administrative Agent or Collateral Agent) under the Lease or otherwise with respect to the Leased Property to the extent received or realized at any time after payment in full of the outstanding Lease Balance with respect to the Rent Assignee Advances and the Lessor Investment together with all accrued and unpaid Yield thereon and all other amounts payable to the Rent Assignees and the Lessor under the Operative Documents, shall be remitted to the Administrative Agent and distributed forthwith in the order of priority set forth in Section 10.2, if the Lease shall not have been declared in default in accordance with Article XVII of the Lease during the continuance of an Event of Default, and Section 10.3(a), if the Lease shall have been declared in default in accordance with Article XVII of the Lease during the continuance of an Event of Default.

(b)  Any payment received by the Lessor (or the Administrative Agent or the Collateral Agent) provision for the application of which is made in an Operative Document but not elsewhere in this Section 10 shall be remitted to the Administrative Agent and distributed forthwith to the Person for the purpose for which such payment was made in accordance with the terms of such Operative Document.

SECTION 10.5. Distribution of Excluded Amounts and Supplemental Rent. All amounts constituting Excluded Amounts or Supplemental Rent received by the Lessor (or Administrative Agent) shall be remitted to Administrative Agent and paid to or upon the order of the Person entitled thereto pursuant to the Operative Documents.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

CUBIC CORPORATION,

AS THE LESSEE AND1HE CONS1RUCTION AGENT

By:	/s/Anshooman Aga
	Name:Anshooman Aga
	Title:Chief Financial Officer
By:	/s/ Rhys Williams
	Name:Rhys V. Williams
	Title:Vice President, Treasurer

[Participation Agreement]

BANKERS COMMERCIAL CORPORATION,
AS THE L ESSOR
By:	/s/ Gordon Cook
	Name:	Gordon R. Cook
	Title:	Vice President

[Participation Agreement]

MUFG UNION BANK, N.A.,
AS COLLATERAL AGENT
By:	/s/ Keith Sevigny
	Name:	Keith Sevigny
	Title:	Vice President

[Participation Agreement]

MUFG BANK, LTD.,
AS THE ADMINISTRATIVE AGENT
By:	/s/ Gordon R. Cook
	Name:	Gordon R. Cook
	Title:	Director

[Participation Agreement]

BA LEASING BSC, LLC
AS A RENT ASSIGNEE
By:	/s/ John P. White ,Sr.
	Name:	John P. White ,Sr.
	Title:	Vice President

[Participation Agreement]

APPENDIX I

TO

PARTICIPATION AGREEMENT

In the Participation Agreement and each other Operative Document, unless the context otherwise requires:

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

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

(c)        words importing a gender include any gender;

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

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

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

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

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

(i)         Accounting Terms; GAAP; Pro Forma Calculations.

(i)          Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Lessee notifies the Administrative Agent that the Lessee requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Lessee that the Required Participants request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in

effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. In calculating compliance with any of the financial covenants (and related definitions), any amounts taken into account in making such calculations that were paid, incurred or accrued in violation of any provision of the Participation Agreement shall be added back or deducted, as applicable, in order to determine compliance with such covenants. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made without giving effect to (i) Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Lessee or any Subsidiary at “fair value”, as defined therein and (ii) any treatment of Indebtedness under Accounting Standards Codification 470-20 or 2015-03 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof. Notwithstanding anything to the contrary contained in this paragraph (i)(i) or in the definition of “Capital Lease Obligations,” any change in accounting for leases pursuant to GAAP resulting from the adoption of Financial Accounting Standards Board Accounting Standards Update No. 2016-02, Leases (Topic 842) (“FAS 842”), to the extent such adoption would require treating any lease (or similar arrangement conveying the right to use) as a capital lease where such lease (or similar arrangement) would not have been required to be so treated under GAAP as in effect on December 31, 2015, such lease shall not be considered a capital lease, and all calculations and deliverables under the Participation Agreement or any other Operative Document shall be made or delivered, as applicable, in accordance therewith.

(ii)        All pro forma computations required to be made hereunder giving effect to any acquisition or disposition, or issuance, incurrence or assumption of Indebtedness, or other transaction shall in each case be calculated giving pro forma effect thereto (and, in the case of any pro forma computation made hereunder to determine whether such acquisition or disposition, or issuance, incurrence or assumption of Indebtedness, or other transaction is permitted to be consummated hereunder, to any other such transaction consummated since the first day of the period covered by any component of such pro forma computation and on or prior to the date of such computation) as if such transaction had occurred on the first day of the period of four consecutive fiscal quarters ending with the most recent fiscal quarter for which financial statements shall have been delivered pursuant to Section 5.1(a) or 5.1(b) (or, prior to the delivery of any such financial statements, ending with the last fiscal quarter included in the financial statements referred to in Section 4.1(l)), and, to the extent applicable, to the historical earnings and cash flows associated with the assets acquired or disposed of (giving effect to any cost synergies or cost savings projected by the Lessee in good faith to be realized as a result from actions taken by the Lessee or any of its Subsidiaries and permitted hereunder during such period) and any related incurrence or reduction of Indebtedness, all (including with respect to such cost synergies and cost savings) in accordance with Article 11 of Regulation S-X under the Securities Act (provided that for purposes of clarity it is understood and agreed that with respect to computations required to be made hereunder with respect to the Net Leverage

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Ratio after giving effect to any acquisition or disposition, or issuance, incurrence or assumption of Indebtedness, or other transaction, any Indebtedness attributable to letters of credit (including, without duplication, Indebtedness in the form of Guarantees with respect to letters of credit) associated with such transaction, shall be subtracted from Consolidated Indebtedness in the manner described clause (i)(y) in the definition of “Net Leverage Ratio”). If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Swap Agreement applicable to such Indebtedness).

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

Further, for the avoidance of doubt, any reference in any of the Operative Documents to the Participation Agreement or the Lease shall be deemed to refer to the Participation Agreement and the Lease as defined in this Appendix.

“Acquisition” shall mean any acquisition by the Lessee or any of its Subsidiaries of all or substantially all of the capital stock of, or all or a substantial part of the assets of, or of a business unit or division of, any Person.

“Actual Knowledge” shall mean, as to any matter with respect to any Person, the actual knowledge of such matter by a Responsible Officer of such Person.

“Additional Costs” shall mean the amounts payable by the Lessee pursuant to Sections 7.2(a)(iii), 7.4, 7.5 and 7.7 of the Participation Agreement.

“Adjusted Covenant Period” shall have the meaning set forth in Section 5.6 of the Participation Agreement.

“Administrative Agent” shall mean MUFG Bank, Ltd. in its capacity as Administrative Agent under the Operative Documents.

“Advance” shall mean an advance of funds by the Lessor pursuant to Article II of the Participation Agreement comprised of Rent Assignment Advances made by the Rent Assignees and an advance of a portion of the Lessor Investment made by the Lessor.

“Advance Certificate” shall have the meaning set forth in Section 3.1(e) of the Participation Agreement.

“Advance Date” shall mean the actual date on which an Advance occurs in accordance with the terms of Section 2.5 of the Participation Agreement.

“Advance Request” shall have the meaning provided in Section 2.5 of the Participation Agreement.

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“Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person or any of its subsidiaries. The term “control” shall mean the possession, directly or indirectly, of any power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Agency Fees” shall have the meaning provided in Section 8.10 of the Participation Agreement.

“Agents” shall mean the Administrative Agent and the Collateral Agent.

“Agreed Currencies” shall mean (i) Dollars, (ii) Pounds Sterling and (iii) any other currency that is a lawful currency (other than Dollars) that is readily available and freely transferable and convertible into Dollars.

“Aggregate Contingency Amount” shall mean an amount equal to $10,000,000.

“Alterations” shall have the meaning provided in Section 9.2(a) of the Lease.

“Alternate Base Rate” shall mean for any day, a rate per annum equal to the higher of (a) the MUFG Base Rate for such day, (b) the sum of 0.50% per annum plus the Federal Funds Rate for such day, and (c) the LIBOR Rate on such day plus 1.00%. Any change in the Alternate Base Rate due to a change in the MUFG Base Rate, the Federal Funds Rate or the LIBOR Rate shall be effective as of the opening of business on the day of such change in the MUFG Base Rate, the Federal Funds Rate or the LIBOR Rate, respectively.

“A.M. Best’s” shall mean A.M. Best Company or any successor thereto.

“Amendment Date” shall mean (i) June 7, 2019, if reference to the first Amendment Date is referenced, or (ii) in all other cases, May 29, 2020.

“Applicable Affiliate” shall have the meaning provided in Section 5.6(i) of the Participation Agreement.

“Applicable Laws and Regulations” shall mean as of any date all applicable laws, rules, regulations (including Environmental Laws), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any 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 and those pertaining to the construction, use, occupancy or subdivision of the Leased Property and the Site) and any restrictive covenant or deed restriction or easement of record affecting the Leased Property or the Site (including the Appurtenant Service Rights).

“Applicable Margin” shall mean two hundred ten (210) basis points.

“Appraisal” shall have the meaning provided in Section 2.1(h) of the Participation Agreement.

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“Appraiser” shall mean CBRE Group, Inc., or such other appraiser or appraisal firm that is reasonably satisfactory to the Lessor.

“Appurtenant Service Rights” shall mean all rights and easements appurtenant to the Site which are necessary to provide the Facility with all utility services necessary for construction and use of the Facility (including without limitation, electric, gas, telephone, water and sewer service) to be transmitted into the Facility and out of the Facility which the Ground Lessor, as fee owner, has the right to grant and connect.

“Arrangement Fee” shall have the meaning provided in Section 2.13(a) of the Participation Agreement.

“Arranger” shall mean Bankers Commercial Corporation.

“ASC” shall have the meaning provided in Section 2.14(a) of the Participation Agreement.

“Assignment Agreement” shall mean an Assignment Agreement substantially in the form of Exhibit B to the Participation Agreement.

“Assignment of Contracts” shall have the meaning provided in Section 2.4(a) of the Construction and Development Agreement, which shall include, without limitation, the following, each of which is dated as of the Closing Date: (1) Developer Consent Agreement, by and among the Construction Agent and the Developer for the benefit of the Lessor, (2) General Contractor Assignment and Consent Agreement, by and among the Construction Agent and the Developer for the benefit of the Lessor, and acknowledged and consented to by the General Contractor, (3) General Contractor Consent Agreement, by and between the Construction Agent and the Lessor, and (4) Subcontractor Assignment and Consent Agreement, by and among the Construction Agent, the Developer and the General Contractor for the benefit of Lessor, and acknowledged and consented to by the subcontractor and suppliers listed on Exhibit A thereto from time to time.

“Authority” shall mean the government of the United States, any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Available Commitment” shall mean, as to any Participant, an amount equal to the difference, if any, of (a) the aggregate Commitment of such Participant minus (b) the aggregate outstanding amount of such Participant’s Rent Assignment Advances (in the case of the Rent Assignees) or Lessor Investment (in the case of the Lessor).

“Bankruptcy Code” shall mean the United States Bankruptcy Code as set forth in Title 11 of the United States Code, as amended from time to time and any successor provision.

“Base Term” shall have the meaning provided in Section 2.2 of the Lease.

“Base Term Commencement Date” shall have the meaning provided in Section 2.2 of the Lease.

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“Base Term Commencement Date Notice” shall mean an Officer’s Certificate of the Lessee that shall set forth: (a) the aggregate principal amount of the Rent Assignment Advances made by the Rent Assignees, (b) the aggregate Lessor Investment made by the Lessor, and (c) the date of the Base Term Commencement Date.

“Basic Rent” shall mean the sum of the Basic Rent (Facility) and the Basic Rent (Land).

“Basic Rent (Facility)” shall mean for any period of determination, an amount equal to the aggregate amount of Yield payable on the last day of such period on the Lease Balance.

“Basic Rent (Land)” shall mean for any period of determination, an amount equal to $750,000, per annum, payable in advance on the Closing Date and on the first Advance Date after the one year anniversary of the Closing Date.

“Benchmark Replacement” shall mean the sum of: (a) the alternate benchmark rate (which may be a SOFR-Based Rate) that has been selected by the Administrative Agent and the Lessee giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement for the LIBOR Rate for lease financing facilities denominated in Dollars and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero, the Benchmark Replacement will be deemed to be zero for the purposes of this Agreement; provided further that any such Benchmark Replacement shall be administratively feasible as determined by the Administrative Agent in its sole discretion.

“Benchmark Replacement Adjustment” shall mean the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Lessee giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBOR Rate with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBOR Rate with the applicable Unadjusted Benchmark Replacement for lease financing facilities denominated in Dollars at such time (for the avoidance of doubt, such Benchmark Replacement Adjustment shall not be in the form of a reduction to the Applicable Margin).

“Benchmark Replacement Conforming Changes” shall mean, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Alternate Base Rate”, the definition of “Payment Period”, timing and frequency of determining rates and making payments of interest and other administrative matters) that the Administrative Agent decides in its reasonable discretion may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as

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the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).

“Benchmark Replacement Date” shall mean the earlier to occur of the following events with respect to the LIBOR Rate:

(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event”, the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Relevant Screen Rate permanently or indefinitely ceases to provide such Relevant Screen Rate; or

(2) in the case of clause (3) of the definition of “Benchmark Transition Event”, the date of the public statement or publication of information referenced therein.

“Benchmark Transition Event” shall mean the occurrence of one or more of the following events with respect to the LIBOR Rate:

(1) a public statement or publication of information by or on behalf of the administrator of the Relevant Screen Rate announcing that such administrator has ceased or will cease to provide such Relevant Screen Rate, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Relevant Screen Rate;

(2)  a public statement or publication of information by the regulatory supervisor for the administrator of the Relevant Screen Rate, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for such Relevant Screen Rate, a resolution authority with jurisdiction over the administrator for such Relevant Screen Rate or a court or an entity with similar insolvency or resolution authority over the administrator for such Relevant Screen Rate, in each case which states that the administrator of such Relevant Screen Rate has ceased or will cease to provide such Relevant Screen Rate permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Relevant Screen Rate; and/or

(3)  a public statement or publication of information by the regulatory supervisor for the administrator of the Relevant Screen Rate announcing that such Relevant Screen Rate is no longer representative.

“Benchmark Transition Start Date” shall mean (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by the Administrative Agent or the Required Participants, as applicable, by notice to the Lessee, the Administrative Agent (in the case of such notice by the Required Participants) and the Participants.

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“Benchmark Unavailability Period” shall mean, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the LIBOR Rate and solely to the extent that such LIBOR Rate has not been replaced with a Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced such LIBOR Rate for all purposes hereunder in accordance with Section 2.9 and (y) ending at the time that a Benchmark Replacement has replaced such LIBOR Rate for all purposes hereunder pursuant to Section 2.9.

“Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230

“Bill of Sale” shall mean any Bill of Sale, dated on or after the Closing Date, from a vendor, as grantor, to the Lessor, as grantee, with respect to any Equipment.

“Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America.

“Board of Directors” shall mean, with respect to any Person, (a) in the case of any corporation, the board of directors of such Person, (b) in the case of any limited liability company, the board of managers of such Person, (c) in the case of any partnership, the Board of Directors of the general partner of such Person and (d) in any other case, the functional equivalent of the foregoing.

“Break Amount” shall have the meaning provided in Section 7.5 of the Participation Agreement.

“Building 1” shall have the meaning provided in the definition of Existing Buildings.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York and San Diego, California (and, solely with respect to definition of LIBOR Rate and the payment of any Yield calculated on the basis of the LIBOR Rate, London, England) are authorized or required by law to close.

“Capital Lease” shall mean all leases that have been or should be, in accordance with GAAP, recorded as capital leases.

“Capital Lease Obligations” of any Person shall mean as of the date of any determination thereof the amount of liability of such Person in respect of any lease (or other arrangement conveying the right to use) real or personal property, or a combination thereof, that would, at such time, be required to be classified and reflected as a liability on a balance sheet of such Person in accordance with GAAP.

“Capitalized Rentals” shall mean, with respect to any Person and as of the date of any determination thereof, the amount at which the aggregate Rentals due and to become due under all Capital Leases under which such Person is a lessee would be reflected as a liability on a consolidated balance sheet of such Person.

“Capitalized Yield” shall mean, with respect to the Lessor Investment and Rent Assignment Advances, the aggregate amount of all Yield accruing thereon attributable to

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Advances made during and for any Payment Period ending on or before the Base Term Commencement Date. Yield accruing during such Payment Periods on the Advances shall be treated as Capitalized Yield pursuant to Section 2.10 of the Participation Agreement, except to the extent that such amount is not to be capitalized because such amount exceeds the Available Commitment for the Lessor or Rent Assignee, as applicable.

“Carrying Costs” shall mean, carrying and closing costs incurred in connection the Overall Transaction including Transaction Costs (except any amounts constituting indemnification that are payable by the Lessee directly prior to the Construction Period Termination Date and not through Advances) and Capitalized Yield on prior unpaid Advances, Taxes, insurance premiums and other similar budget items.

“Casualty” shall mean an event of damage or casualty relating to any portion or all of the Leased Property which does not constitute an Event of Loss.

“Change in Law” shall have the meaning provided in Section 7.4(a) of the Participation Agreement.

“Change Order” shall mean any amendment, modification, supplement, replacement, restatement or novation regarding any Construction Document, the Construction Budget and/or the Plans and Specifications, including any component part or line item of any Construction Document, the Construction Budget and/or the Plans and Specifications.

“Claims” shall mean liabilities, obligations, damages, losses, demands, penalties, fines, claims, actions, suits, judgments, settlements, charges, costs, fees, expenses and disbursements (including, without limitation, out-of-pocket legal fees and expenses and costs of investigation which, in the case of counsel or investigators retained by an Indemnitee, shall be reasonable) of any kind and nature whatsoever including (except where specifically noted otherwise) but not limited to the outstanding Lease Balance or any part thereof.

“Closing” shall have the meaning provided in Section 2.1 of the Participation Agreement.

“Closing Date” shall mean February 5, 2019.

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

“Collateral Agent” shall mean MUFG Union Bank, N.A., in its capacity as Collateral Agent under the Operative Documents.

“Commitment” shall mean (i) as to any Rent Assignee, its obligation to acquire Rent Assignment Interests from the Lessor which are to be sold by the Lessor under each Rent Assignment Agreement and to make Rent Assignment Advances available to the Escrow Agent (for the account of Lessor) in an aggregate amount not to exceed at any one time outstanding the amount set forth opposite such Rent Assignee’s name on Schedule I-A to the Participation Agreement, and (ii) as to the Lessor, its obligation to fund Advances from proceeds of its Lessor Investment in an aggregate amount not to exceed at any one time outstanding the amount set forth

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on Schedule I-B to the Participation Agreement, in each case as such schedule may be amended pursuant to Section 2.2(d) or Section 9.5 of the Participation Agreement.

“Commitment Amount” shall mean $104,800,000.

“Commitment Percentage” shall mean as to any Participant, the percentage set forth opposite such Person’s name under the heading “Commitment Percentage” on Schedule I-A to the Participation Agreement with respect to the Rent Assignees or on Schedule I-B to the Participation Agreement with respect to the Lessor or the percentage obtained by dividing (x) the amount of the Commitment assumed by such Participant pursuant to the Participation Agreement or the Assignment Agreement by (y) the aggregate amount of the Commitments of the Participants.

“Commitment Period” shall mean the period of time beginning on the Closing Date and ending on the earlier of (i) the Construction Period Termination Date and (ii) the date upon which the Commitments are otherwise terminated pursuant to the terms of the Operative Documents.

“Commodity Hedging Agreement” shall mean any agreement (including any master agreement or master netting agreement) that evidences or provides for a swap, cap, collar, floor, put, call, option, future, other derivative, spot purchase or sale, forward purchase or sale, supply or off-take, transportation agreement, storage agreement or other commercial or trading agreement in or involving crude oil, natural gas, any feedstock, blendstock, intermediate product, finished product, refined product or other hydrocarbons product, carbon credit, pollution credits and/or any other “cap and trade” assets or any other energy, weather or emissions related commodity (including any crack spread), or any prices or price indices relating to any of the foregoing commodities, or any economic index or measure of economic risk or value, or other benchmark against which payments or deliveries are to be made (including any combination of such transactions).

“Complete” shall mean to cause Completion to occur.

“Completion” shall mean Substantial Completion of the Facility substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget (in each case, as supplemented or amended pursuant to Section 3.2 of the Construction and Development Agreement, but without regard to whether the Facility has been subjected to any post-construction testing requirements called for under any Construction Document).

“Completion Date” shall mean the date on which Completion has occurred.

“Compounded SOFR” shall mean the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate (which may include compounding in arrears with a lookback and/or suspension period as a mechanism to determine the interest amount payable prior to the end of each Payment Period) being established by the Administrative Agent in accordance with:

(1)  the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded SOFR; provided that:

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(2)  if, and to the extent that, the Administrative Agent determines that Compounded SOFR cannot be determined in accordance with clause (1) above, then the rate, or methodology for this rate, and conventions for this rate that the Administrative Agent determines in its reasonable discretion are substantially consistent with any evolving or then-prevailing market convention for determining compounded SOFR for Dollar-denominated lease financing facilities at such time;

provided, further, that if the Administrative Agent decides that any such rate, methodology or convention determined in accordance with clause (1) or clause (2) is not administratively feasible for the Administrative Agent, then Compounded SOFR will be deemed unable to be determined for purposes of the definition of “Benchmark Replacement”.

“Condemnation” shall mean any condemnation, requisition, confiscation, seizure or other taking or sale of the use, occupancy or title to the Leased Property or the Site or any part thereof in, by or on account of any eminent domain proceeding or other action by any Authority or other Person under the power of eminent domain or otherwise or any transfer in lieu of or in anticipation thereof, which in any case (a) does not constitute an Event of Taking and (b) in any event, unlike an Event of Taking, does not result in the loss of use or possession of substantially all or a material portion of the Leased Property or the Site as reasonably determined in good faith by the Board of Directors of the Lessee, with any such determination of an Event of Taking to be made promptly after the occurrence of such event and to be evidenced by an Officer’s Certificate of the Lessee delivered promptly after the occurrence of such event to the Administrative Agent and each of the Participants. A Condemnation shall be deemed to have “occurred” on the earliest of the dates that use, occupancy or title is taken. For clarification, a Condemnation shall not constitute an Event of Taking.

“Consent and Acknowledgment” shall mean each Joinder to Subcontractor Assignment and Consent Agreement, in form and substance reasonably acceptable to Lessor, to be entered into by a subcontractor or a supplier, pursuant to which such subcontractor or supplier will consent to, among other things, the Assignment of Contracts to the Lessor related to the Major Construction Document applicable to such subcontractor or supplier.

“Consolidated Adjusted EBITDA” shall mean with respect to the Lessee and its Restricted Subsidiaries for any period Consolidated EBITDA for such period adjusted on a pro forma basis in accordance with paragraph (i)(ii) of this Appendix as determined by the Lessee in good faith to take into account (i) as an addition, the Consolidated EBITDA attributable to any subsequently acquired Person (calculated for such acquired Person and, to the extent acquired, its Subsidiaries, notwithstanding anything to the contrary in the definition of the term “Consolidated EBITDA”) which becomes a Restricted Subsidiary for that portion of the applicable period of calculation which occurred prior to its acquisition and reasonably detailed in the applicable certificate delivered pursuant to Section 5.1(i), and (ii) as a deduction, the Consolidated EBITDA attributable to any subsequently disposed Person, division or line of business (calculated for such disposed Person and, to the extent disposed, such Person’s Subsidiaries, division or line of business notwithstanding anything to the contrary in the definition of the term “Consolidated EBITDA”) which was a Restricted Subsidiary (or was owned by the Lessee or a Restricted Subsidiary) for that portion of the applicable period of calculation which occurred prior to its disposition and reasonably detailed in the applicable certificate delivered pursuant to Section 5.1(i).

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“Consolidated Cash Interest Expense” shall mean, with respect to the Lessee and its Restricted Subsidiaries for any period, the cash interest expense of the Lessee and its Restricted Subsidiaries during such period determined on a consolidated basis in accordance with GAAP; provided, that Consolidated Cash Interest Expense shall exclude (a) fees, costs and expenses (including, without limitation, debt issuance costs, make-whole premiums, prepayment penalties, commissions and original issue discount) incurred in connection with the consummation of this Agreement or the issuance, incurrence or repayment of any Indebtedness permitted hereunder; (b) annual administrative agency fees paid to the Administrative Agent; (c) capitalized costs incurred in connection with the initial closing of any Swap Agreement, including those paid in connection with the Operative Documents, the Transactions (as defined in the Credit Agreement), or upon entering into any amendment of this Agreement.

“Consolidated EBITDA” shall mean, with respect to the Lessee and its Restricted Subsidiaries for any period (a) the sum of (i) Consolidated Net Income for such period, (ii) Consolidated Interest Expense (to the extent deducted in determining Consolidated Net Income), (iii)  federal, state, local and foreign income tax expense and any provision for income or profits taxes, franchise or similar taxes and foreign withholding taxes (to the extent deducted in determining Consolidated Net Income), (iv) depreciation and amortization expense (to the extent deducted in determining Consolidated Net Income) and (v) non-cash stock compensation and other non-cash expense items (to the extent deducted in determining Consolidated Net Income), calculated on a consolidated basis in accordance with GAAP, plus (b) without duplication (i) [reserved], (ii) non-recurring business optimization expenses and other restructuring charges or reserves to the extent set forth in a certificate of a Responsible Officer of the Lessee (which, for the avoidance of doubt, shall include the effect of inventory optimization programs, facility closure, facility consolidations, retention, severance, systems establishment costs, contract termination costs, and future lease commitments) not to exceed $10,000,000 during any four consecutive fiscal quarter measurement period, (iii) pro forma “run rate” cost savings, operating expense reductions and cost synergies (in each case net of continuing associated expenses), in each case related to a consummated Permitted Acquisition, that are reasonably identifiable, factually supportable and that are reasonably expected by the Lessee in good faith to be realized within twelve months following the consummation of such Permitted Acquisition as a result of specified actions (x) taken since the beginning of such period or (y) initiated prior to or during such period or (z) reasonably anticipated to be taken in connection with or following such consummated Permitted Acquisition (and a Responsible Officer of the Lessee shall have delivered (i) an officer’s certificate to the Administrative Agent stating that such cost savings, operating expense reductions and/or cost synergies are reasonably identifiable, factually supportable and reasonably anticipated in good faith to be achieved, which certification may be made in any compliance certificate in the form of Exhibit C for such period, and (ii) information and calculations supporting in reasonable detail such estimated cost savings, operating expense reductions and/or cost synergies) (in the case of each of the foregoing, calculated on a pro forma basis as though such cost savings, operating expense reductions or cost synergies, as applicable, had been realized on the first day of such period, net of the amount of actual benefits realized during such period from such actions); provided that (x) the aggregate amount added back pursuant to this clause (iii) shall not exceed (to the extent any such adjustment is not permissible under Article 11 of Regulation S-X under the Securities Act), for any period, ten percent (10%) of Consolidated EBITDA for such period (calculated without giving effect to this clause (iii)) and (y) if any cost savings, operating expense reductions or cost synergies shall at any time cease to be reasonably anticipated by the Lessee to

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be achieved within the twelve month period following the consummation of such Permitted Acquisition, then on and after such time such cost savings, operating expense reductions or cost synergies shall not be permitted to be added back pursuant to this clause (iii), (iv) one-time transaction fees, costs, expenses, premiums, make-whole amounts, penalty payments and other similar items during such period in connection with any issuance, incurrence or repayment of Indebtedness, any issuance of Equity Interests, any investment, any acquisition and any disposition, in each case to the extent permitted hereunder, including without limitation in connection with this Agreement and the other Operative Documents (including legal fees and fees, costs and expenses paid or reimbursed to the Lenders, the Issuing Banks and the Administrative Agent, in each case as defined under the Credit Agreement), (v) charges, losses, lost profits, expenses or write-offs to the extent indemnified or insured by a third party, including expenses covered by indemnification provisions in any agreement in connection with a Permitted Acquisition, provided that, in respect of any item that is added back in reliance on this clause (v), the relevant Person in good faith (to the extent set forth in a certificate of a Responsible Officer of the Lessee) expects to receive reimbursement for such item within the next four fiscal quarters (it being understood that to the extent any reimbursement amount is not actually received within such four fiscal quarter period, such reimbursement amount so added back but not so received shall be deducted in calculating Consolidated EBITDA for the fiscal quarter immediately following such four fiscal quarter period); and (vi) losses recognized and expenses incurred in connection with the effect of currency and exchange rate fluctuations on intercompany balances and other balance sheet items minus (c) (i) non-cash items of gain or revenue (to the extent added in determining Consolidated Net Income) and (ii) gains recognized and income recognized in connection with the effect of currency and exchange rate fluctuations on intercompany balances and other balance sheet items, calculated on a consolidated basis in accordance with GAAP.

“Consolidated Indebtedness” shall mean, as the context requires, (a) all Indebtedness of the Lessee and its Restricted Subsidiaries or (b) all Indebtedness of the Lessee and its Subsidiaries, in either case determined on a consolidated basis eliminating intercompany loans; provided that, notwithstanding anything to the contrary in the definition of the term “Indebtedness”, for purposes of this definition, “Indebtedness” shall include all non-contingent liabilities in respect of letters of credit or instruments serving a similar function, in each case which have been drawn upon by the beneficiary thereof and which were issued or accepted for the account of the Lessee or any Restricted Subsidiary (in the case of clause (a)) or the Lessee or any Subsidiary (in the case of clause (b)), as applicable, by banks or other financial institutions, whether or not representing obligations for borrowed money.

“Consolidated Interest Expense” shall mean, with respect to the Lessee and its Restricted Subsidiaries for any period, the interest expense of the Lessee and its Restricted Subsidiaries during such period determined on a consolidated basis in accordance with GAAP, and shall in any event include, without limitation, (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any Capital Lease allocable to interest expense.

“Consolidated Net Income” shall mean, for any period, consolidated net income or net earnings (or any comparable line item) of the Lessee and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, but excluding (i) extraordinary or non-recurring items (except the non-recurring gain expected to result from the

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Sale and Leaseback Transactions permitted in Section 5.6(g)(iii) of the Participation Agreement) and (ii) gains or losses resulting from changes in accounting principles.

“Consolidated Net Indebtedness” shall mean, as of any date of determination thereof, the difference (if positive) between (i) Consolidated Indebtedness of the Lessee and its Restricted Subsidiaries minus (ii) the amount of Unrestricted Cash and Unrestricted Permitted Investments, in excess of $30,000,000, in each case as of such date.

“Consolidated Net Worth” shall mean, as of the date of any determination thereof the amount of the capital stock accounts (net of treasury stock, at cost) plus (or minus in the case of a deficit) the surplus in retained earnings of the Lessee and its Subsidiaries on a consolidated basis as determined in accordance with GAAP.

“Consolidated Tangible Assets” shall mean, as of any date of determination thereof, Consolidated Total Assets minus the Intangible Assets of the Lessee and its Restricted Subsidiaries on such date.

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

“Consolidated Total Capitalization” shall mean as of the date of any determination thereof, the sum of (a) Consolidated Indebtedness of the Lessee and its Subsidiaries on a consolidated basis as of such date plus (b) Consolidated Net Worth as of such date.

“Construction” shall mean the razing of Building 1, preparation of the Site, remediation of the Site pursuant to the Remediation Plan and design and construction of the entire Facility on the Site, including engineering (including front-end loading and detailed engineering), mechanical construction and procurement procedures.

“Construction Agent” shall mean Cubic in its capacity as the “Construction Agent” under the Operative Documents.

“Construction and Development Agreement” shall mean the Construction and Development Agreement dated as of the Closing Date, between the Owner and the Construction Agent.

“Construction Budget” shall mean the construction budget delivered pursuant to Section 2.1(j)(ii) of the Participation Agreement, which Construction Budget shall (i) specify the Construction Costs allocable to Completion of the Facility and (ii) set forth as separate line items the portion of the Contingency Reserve allocated by the Construction Agent and which, as modified, shall be subject to the reasonable satisfaction of the Participants and the Construction Consultant.

“Construction Consultant” shall mean CBRE Global Investors, LLC, or such other construction consultant services firm reasonably satisfactory to the Participants.

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“Construction Costs” shall mean the amounts (including Carrying Costs during the Construction Period) required to (i) construct the Facility (including Soft Costs) substantially in accordance with the Plans and Specifications (as supplemented or amended pursuant to Section 2.7(o) or 3.2 of the Construction and Development Agreement) and the Operative Documents, (ii) pay Transaction Costs, (iii) pay Fees, (iv) pay utility charges pursuant to Article VI of the Lease, (v) pay property taxes relating to the Site, (vi) pay any tax indemnity claims required by Section 7.2 of the Participation Agreement, (vii) pay any funded insurance premium, deductible or other costs, all of which shall be funded through the Commitments, (viii) rent the Site under the Ground Lease and acquire and demolish Building 1, and (ix) pay any other expenses for Construction of the Facility or other items as set forth in the Construction Budget.

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

“Construction Documents” shall have the meaning provided in Section 2.4(a) of the Construction and Development Agreement.

“Construction Documents Collateral” shall have the meaning provided in Section 1 of the Memorandum of Lease.

“Construction Event of Default” shall have the meaning provided in Section 5.1 of the Construction and Development Agreement.

“Construction Fee” shall have the meaning provided in Article VI of the Construction and Development Agreement.

“Construction Period” shall mean a period commencing on and including the Closing Date and ending on the Completion Date.

“Construction Period Insurance Requirements” shall mean the terms of the insurance required to be maintained in accordance with Section 2.7(d) of the Construction and Development Agreement.

“Construction Period Termination Date” shall mean February 5, 2021, as the same may be extended by the Lessee up to (3) three months during the occurrence of any Force Majeure Event or restoration of the Facility following an Event of Loss, Condemnation or Casualty, or as may be extended by the Lessor in its sole and absolute discretion at the request of the Construction Agent; provided, that such date shall not be extended beyond May 5, 2021.

“Construction Recourse Amount” shall mean, as of any date of determination calculated as required by ASC 840-40-55-10 through 55-13, the sum of (i) the accreted value of Basic Rent and any other payments that are required to be included in the computation of the maximum guarantee test as prescribed in ASC 840-40-55-11(a) previously paid prior to Completion and (ii) an amount, the present value of which, discounted to the date on which any claim or demand is paid in the case of a Construction Event of Default (such date, the “Calculation Date”), when added to the present value (discounted to the Calculation Date) of (x) Fees described in Section 2.13(a) and (b) of the Participation Agreement, and (y) any other Supplemental Rent (other than the Construction Recourse Amount itself) which is required by ASC 840-40-55-11(b), in each case

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to be paid by the Lessee (including the estimated reasonable costs relating to the realization by the Lessor of the Construction Recourse Amount which will be borne by the Lessee) will not exceed 89.9% of the Eligible Construction Costs. The rate used to accrete or discount values will be the incremental borrowing rate of the Lessee.

“Contingency Reserve” shall mean an aggregate reserve, as such shall adjust from time to time, to be funded by Advances in excess of all budgeted Construction Costs and Transaction Costs (without duplication), as listed in the Construction Budget.

“Contingent Obligation” shall mean, as to any Person, any obligation, agreement, understanding or arrangement of such Person guaranteeing or intended to guarantee any Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; (d) with respect to bankers’ acceptances, letters of credit and similar credit arrangements, until a reimbursement obligation arises; or (e) otherwise to assure or hold harmless the holder of such primary obligation against loss 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 or any product warranties and other customary contractual indemnities. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable, whether singly or jointly, pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith.

“Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Corresponding Tenor” with respect to a Benchmark Replacement shall mean a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the applicable Payment Period with respect to the LIBOR Rate.

“Credit Agreement” shall mean that certain Fifth Amended and Restated Credit Agreement, dated as of March 27, 2020, by and among Cubic, Cubic Transportation Systems, Inc., Cubic Defense Applications, Inc. and the other subsidiary borrowers from time to time party thereto (the “Subsidiary Borrowers”), as borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, joint lead book runner and joint lead arranger, Bank of the West, MUFG Union Bank, N.A., Truist Bank and Wells Fargo Bank, National Association, as co-

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syndication agents, joint lead book runners and joint lead arrangers, and Bank of America, N.A., Fifth Third Bank, National Association and U.S. Bank National Association, as co-documentation agents, as the same may be further amended, restated, supplemented or otherwise modified.

“CTSL” shall mean Cubic Transportation Systems Limited, a limited liability company incorporated under the laws of England and Wales with registration number 01381707 whose registered office is at AFC House, Honeycrock Lane, Salfords Redhill, Surrey RH1 5LA.

“Cubic” shall mean Cubic Corporation, a Delaware corporation.

“Cubic Companies” shall have the meaning provided in Section 9.19 of the Participation Agreement.

“Cubic Person” shall mean (i) the Lessee or the Construction Agent, (ii) any contractor, subcontractor, architect, engineer or Person performing services or providing materials under a Major Construction Document with respect to the Construction of the Facility pursuant to the Construction and Development Agreement and the other applicable Operative Documents, (iii) any other third party for which any Person identified in clauses (i) through (ii) above has control or supervisory authority (by contract or otherwise), and (iv) their respective affiliates, employees, officers or agents.

“Current Change Orders” shall have the meaning provided in Section 3.1(e) of the Participation Agreement.

“Deed” shall mean the Quitclaim Deed dated on or one (1) Business Day prior to the Demolition Date from Lessee, as grantor, to Lessor, as grantee, pursuant to which Lessor acquires title to Building 1.

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

“Deficiency” shall have the meaning set forth in Section 22.3(a) of the Lease.

“DEH” shall mean the Department of Environmental Health of the City of San Diego, California.

“Demolition Date” shall mean the date demolition of Building 1 commences pursuant to the Construction and Development Agreement.

“Developer” shall mean Cisterra Partners, LLC, a California limited liability company.

“Development Agreement” shall mean that certain Development Management Agreement dated as of the Closing Date between Developer and Construction Agent.

“Division” shall mean the statutory division of the assets, liabilities and/or obligations of a Person (the “Dividing Person”) among two or more Persons (whether pursuant to a “plan of division” or similar arrangement), which may or may not include the Dividing Person and pursuant to which the Dividing Person may or may not survive.

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“Division Successor” shall mean any Person that, upon the consummation of a Division of a Dividing Person, holds all or any portion of the assets, liabilities and/or obligations previously held by such Dividing Person immediately prior to the consummation of such Division. A Dividing Person which retains any of its assets, liabilities and/or obligations after a Division shall be deemed a Division Successor upon the occurrence of such Division.

“Dollars” or “$” shall mean, unless otherwise qualified, dollars in lawful currency of the United States.

“Domestic Subsidiary” shall mean a Subsidiary organized under the laws of a jurisdiction located in the United States of America.

“Early Opt-in Election” shall mean the occurrence of:

(1)  (i) a determination by the Administrative Agent or (ii) a notification by the Required Participants to the Administrative Agent (with a copy to the Lessee) that the Required Participants have determined that lease financing facilities denominated in Dollars being executed at such time, or that include language similar to that contained in Section 2.9 are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the LIBOR Rate, and

(2)  (i) the election by the Administrative Agent or (ii) the election by the Required Participants to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Administrative Agent of written notice of such election to the Lessee and the Participants or by the Required Participants of written notice of such election to the Administrative Agent.

“Early Termination Option” shall have the meaning provided in Section 20.1 of the Lease.

“Electronic Signature” shall mean an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.

“Eligible Assignee” shall mean (A) an entity that is either (i) a commercial bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a capital and surplus in excess of $100,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having a tangible net worth in excess of $100,000,000, (iii) the central bank of any country which is a member of the Organization for Economic Cooperation and Development; or (iv) a finance company, insurance company or other financial institution (whether a corporation, partnership or other entity, but excluding any savings and loan association) which is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, and having a tangible net worth in excess of $100,000,000, (B) each of the Participants on the Closing Date, and (C) each other Person reasonably approved by the Lessee as an Eligible Assignee; provided that in no instance may an Eligible Assignee be a Prohibited Person.

“Eligible Construction Costs” shall mean the aggregate amount of all Construction Costs incurred as of the date of any demand for the Lessee to pay the Lease Balance, Construction

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Recourse Amount or Recourse Deficiency Amount, as applicable (including any amounts paid by the Lessor to complete construction of the Facility pursuant to Section 5.3(a)(ii), (iii) or (v) of the Construction and Development Agreement (including any payments made under any Construction Document)), and any damages relating to the breach or termination of any Construction Document following a Construction Event of Default, but excluding (i) all Capitalized Yield, (ii) all Fees paid to the Lessor or any of its Affiliates (in any capacity) and (iii) all payments which may not be capitalized in accordance with GAAP, and subject to the provisions of Section 7.1(f)(iii) of the Participation Agreement.

“Employee Benefit Plan” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA which is subject to Title I of ERISA or a “plan” within the meaning of Section 4975(e)(I) of the Code.

“Encumbrance” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities; provided that in no event shall an operating lease or an agreement to sell be deemed to constitute an Encumbrance.

“Environmental Claim” shall mean any accusation, allegation, notice of violation, claim, demand, abatement order or other order or direction (conditional or otherwise), or other mandatory communication by any Authority or any Person for any damage, including personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damage, damage to the environment, violation of pollution standards, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restrictions, in each case resulting from or based upon (A) the existence of a Release (whether sudden or non-sudden or accidental or non-accidental), or exposure to, any Hazardous Material in, into or onto the environment at, in, by, from or related to the Leased Property or any part thereof and relating to, arising from or as a result of the Lessee’s or any of its Affiliate’s or any other sublessee’s or sub-sublessee’s use or operation thereof, or any architect, engineer or any tier of the Lessee’s or the Construction Agent’s subcontractors in the construction of the Facility on the Lessor’s behalf while any such entity is in possession or control of the Leased Property (each such Person, a “Covered Contractor”) use or operation thereof, (B) the use, handling, transportation, storage, treatment or disposal of any such Hazardous Material in connection with the operation of the Leased Property or any part thereof and relating to, arising from or as a result of the Lessee’s or any of its Affiliate’s or any other sublessee’s or sub-sublessee’s or Covered Contractor’s use or operation thereof, or (C) the violation, or alleged violation of any Environmental Laws or any Environmental Permits or other Governmental Action in connection with the Leased Property or any part thereof or any contiguous, proximate or neighboring property irrespective of whether or not such property is owned or leased by the Lessee or the Lessor, and arising from, relating to or as a result of the Lessee’s or any of their respective Affiliate’s or any other sublessee’s or sub-sublessee’s or Covered Contractor’s use or operation thereof.

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“Environmental Expert” shall mean EFI Global, Inc., or such other environmental services firm reasonably satisfactory to the Participants.

“Environmental Laws” shall mean all laws, statutes, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Authority, relating to the environment, preservation or reclamation of natural resources, the presence, management, release or threatened release of or exposure to any Hazardous Material or to health and safety matters.

“Environmental Permits” shall mean all permits, licenses, authorizations, registrations, certificates and approvals of Authorities required by Environmental Laws relating to the Leased Property or the Overall Transaction.

“Environmental Violation” shall mean an activity, occurrence or condition that violates or results in non-compliance with or liability under or arising as a result of Environmental Laws or Environmental Permits.

“Equipment” shall mean personal property of every kind and nature whatsoever purchased or otherwise paid for with Advances or otherwise acquired by or on behalf of the Lessor and necessary for the legal use and operation of the Facility or the Site including but without limiting the generality of the foregoing, all electrical and mechanical equipment, plumbing, ventilation, furnaces, air conditioning and air-cooling apparatus, escalators, generators, communications systems (including satellite dishes and antennae), sprinkler systems and other fire prevention and extinguishing apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks, conduits, fittings and fixtures of every kind and description, and any substitutions or replacements thereof, except that, unless acquired using the Advances, lab equipment, machinery, tools and testing equipment are the sole property of the Lessee and shall not be part of the Equipment.

“Equity Interests” shall mean, shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest, but excluding any debt securities convertible into any of the foregoing.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended, supplemented or otherwise modified from time to time.

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Lessee, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) with respect to a Plan, the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or

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not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Lessee or any of its ERISA Affiliates of any material liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Lessee or any ERISA Affiliate from the PBGC or a plan administrator of any notice stating its intention to terminate any Plan in a distress termination or notice from PBGC of its intent to appoint a trustee to administer any Plan; (f) with respect to a Multiemployer Plan, the incurrence by the Lessee or any of its ERISA Affiliates any Withdrawal Liability with respect to the total withdrawal or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) of the Lessee or any of its ERISA Affiliates; or (g) the receipt by the Lessee or any ERISA Affiliate of any notice from any Multiemployer Plan regarding its intent to impose upon the Lessee or any of its ERISA Affiliates of Withdrawal Liability or that a determination was made that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Escrow Agent” shall mean the Title Insurance Company agent.

“Escrow Agreement” shall mean that certain Escrow Agreement dated as of the Base Term Commencement Date among Escrow Agent, the Administrative Agent and the Lessee.

“Event of Default” shall have the meaning provided in Article XVII of the Lease.

“Event of Loss” shall mean: (w) the actual or constructive total or substantial loss of the Facility, the Site or damage to the Facility or the Site to an extent rendering repair impractical or uneconomical, in any case as reasonably determined in good faith by the Board of Directors of the Lessee, such determination to be made promptly after the occurrence of such event and to be evidenced by an Officer’s Certificate of the Lessee delivered to the Administrative Agent, (x) damage to the Facility which results in an insurance settlement on the basis of a total loss or constructive total loss (including title insurance proceeds) in respect of a total loss of the Facility or (y) an Environmental Violation with respect to which the Lessee, the Agents or any Participant could reasonably be expected to incur liability in excess of $1,000,000; provided, however, any activity, occurrence or condition subject to the Remediation Plan shall not constitute an Event of Loss. For clarification, no Casualty, Condemnation or Event of Taking shall constitute an Event of Loss.

“Event of Taking” shall mean: any Condemnation, requisition, confiscation, seizure or other taking or sale of the use, occupancy or title to the Leased Property or the Site or any part thereof in, by or on account of any eminent domain proceeding or other action by any Authority or other Person under the power of eminent domain or otherwise or any transfer in lieu thereof (other than a requisition of temporary use) or requisition of use for a period scheduled to last beyond the Maturity Date or which in fact is continuing on the Maturity Date (even if not scheduled to last beyond the Maturity Date), in any case, resulting in the loss of use or possession of substantially all or a material portion of the Leased Property or the Site as reasonably determined in good faith by the Board of Directors of the Lessee, such determination to be made promptly after the occurrence of such event and to be evidenced by an Officer’s Certificate of the Lessee delivered promptly after the occurrence of such event to the Administrative Agent. For clarification, no Casualty, Condemnation or Event of Loss shall constitute an Event of Taking.

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“Excluded Amounts” shall mean:

(a)        indemnity payments, tax or general, and expenses to which the Agents or any Participant (or any of their respective Affiliates, successors, assigns, agents, officers, directors or employees) is entitled pursuant to the Operative Documents;

(b)        any amounts payable under any Operative Documents to reimburse the Agents or any Participant (including the reasonable expenses incurred in connection with any such payment) for performing or complying with any of the obligations of the Lessee under and as permitted by any Operative Document;

(c)        any insurance proceeds (or payments with respect to risks self-insured or policy deductibles) under liability policies payable to the Agents or any Participant (or any of their respective successors, assigns, agents, officers, directors or employees);

(d)        any insurance proceeds under policies maintained by the Agents or any Participant and not required to be maintained by the Lessee under the Lease;

(e)        any amount payable to the Agents or the Participants pursuant to Section 2.1(l) of the Participation Agreement;

(f)         any payments of interest or yield on payments referred to in clauses (a) through (e) above; and

(g)        all rights to receive and enforce payment of the foregoing.

“Existing Buildings” shall mean, collectively, the four (4) buildings (referred to individually  as  “Building  1”  (9223  Balboa  Avenue;  132,172  square  feet  on  13.879 acres), “Building 2” (4285 Ponderosa Avenue; 65,146 square feet on 3.86 acres), “Building 8” (9323 Balboa Ave; 101,325 square feet on 4.05 acres) and “Building 10” (9333 Balboa Ave; 98,730 square feet on 4.05 acres)).

“Extended Remarketing Period” shall have the meaning provided in Section 22.4(b) of the Lease.

“Facility” shall mean the two three-story office buildings, each consisting of approximately 125,000 square feet of Class A office space, and approximately 1,016 surface parking stalls to be constructed on the Site in accordance with the terms of the Construction and Development Agreement including all buildings, structures, fixtures, Equipment, Personal Property and other improvements of every kind constructed and purchased at any time and from time to time on or under the Site (pursuant to the Construction and Development Agreement with amounts advanced by the Lessor pursuant to the Participation Agreement), together with all Alterations (except any Alteration which remains the property of the Lessee in accordance with the Operative Documents).

“Fair Market Value” shall with respect to the Leased Property or any portion thereof, as of the date of determination, the fair market value (which in any event shall not be less than zero), as mutually agreed to by the Lessor and the Lessee, and in the absence of such agreement, as

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determined by an independent appraiser chosen by the Lessor and reasonably acceptable to the Lessee, that would be obtained in an arm’s-length transaction settled in cash or comparable financial instruments between an informed and willing buyer (other than a buyer currently in possession) and an informed and willing seller, under no compulsion to buy or sell, and neither of which is related to the Lessor, the Agents or the Lessee or any of their respective Affiliates, for the purchase of the Leased Property or any portion thereof, as applicable. Such fair market value shall be determined assuming a reasonable amount of time is allowed for exposure in the open market, and the price shall represent the normal consideration for the property unaffected by any financing or sales concessions granted by anyone associated with the sale. Such fair market value shall be calculated as the value for the use of the Leased Property or any such portion, assuming, in the determination of such fair market value, that the Leased Property or any such portion is in the condition and repair required to be maintained by the terms of the Lease (unless such fair market value is being determined for purposes of the Appraisal to be delivered on or prior to the Closing Date or for evaluating the items described in Section 7.7 of the Participation Agreement, in which case this assumption shall not be made).

“FATCA” shall mean Sections 1471 through 1474 of the Code, any current or future regulations promulgated thereunder or official interpretations thereof, any applicable agreements entered into pursuant to Section 1471(b)(1) of the Code, and any applicable intergovernmental agreements and local implementing laws, regulations and official guidance with respect to the foregoing.

“Federal Funds Rate” shall mean, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions (as determined in such manner as shall be set forth on the Federal Reserve Bank of New York’s Website from time to time) and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate; provided that if the Federal Funds Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.

“Federal Reserve Bank of New York’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.

“Fees” shall have the meaning provided in Section 2.13 of the Participation Agreement.

“Final Completion Work” shall mean any work (other than performance relating to warranty obligations) required under the Construction Documents subsequent to Substantial Completion in order to fully perform such contract including the completion of all punch list items and all payments required thereunder.

“Final Rent Payment Date” shall have the meaning provided in Section 18.1(a)(iii)(B)(1) of the Lease.

“Force Majeure Event” shall mean any act of God, unusually severe weather conditions (such as catastrophic storms or floods, tornadoes, hurricanes and cyclones), civil or enemy action, or any Governmental Action or inability to obtain or delay in obtaining labor or materials not arising from an act or omission of any Cubic Person; provided, that any Specified Event and any

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other event, cause or condition that is within the control of any Cubic Person shall not be a Force Majeure Event.

“Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic Subsidiary.

“F.R.S. Board” shall mean the Board of Governors of the Federal Reserve System or any successor thereto.

“Fund,” “Funded” or “Funding” shall mean each funding of any Advance as described in Article II of the Participation Agreement.

“Funded Claim” shall have the meaning provided in Section 7.1(f)(iii) of the Participation Agreement.

“Funded Debt” shall mean, with respect to any Person, all Indebtedness of such Person for borrowed money or which has been incurred in connection with the acquisition of assets in each case having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not the obligation to make such payments shall constitute a current liability of the obligor under GAAP.

“GAAP” shall mean generally accepted accounting principles in the United States of America, subject to the provisions of paragraph (i) of this Appendix; provided, that any reference to the application of GAAP to a Foreign Subsidiary (and not as a consolidated Subsidiary of the Lessee) shall mean generally accepted accounting principles or equivalent in effect from time to time in the jurisdiction of organization of such Foreign Subsidiary.

“General Construction Agreement” shall mean that certain Cubic Corporation Headquarters/CTS Building General Contractor Agreement (Cost of the Work with a Fee and Guaranteed Maximum Price), dated as of February 5, 2019, by and among General Contractor, Developer and Construction Agent, as agent for the Lessor, together with all addendums appended thereto, and assigned to the Lessor pursuant to the Assignment of Contracts, as it may be amended, supplemented or modified from time to time in accordance with the terms thereof and of the Construction and Development Agreement.

“General Contractor” shall mean The Whiting-Turner Contracting Company, a Maryland corporation.

“Governmental Action” shall mean all applicable permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Authority, or required by any Applicable Laws and Regulations, and shall include, without limitation, all citings, Environmental Permits, construction permits and operating permits and licenses that are required for the use, occupancy, zoning, construction and operation of the Leased Property.

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“Grossed-Up Basis” shall have the meaning provided in Section 7.6 of the Participation Agreement.

“Ground Lease” shall mean the Ground Lease Agreement, dated as of the Closing Date, between Lessee, as ground lessor, and Lessor, as ground lessee.

“Ground Lease Release” shall mean the Discharge and Release of Ground Lease, dated on or after the Return Date by Ground Lessee.

“Ground Lessee” shall mean the Lessor in its capacity as ground lessee under the Ground Lease.

“Ground Lessor” shall mean the Lessee in its capacity as ground lessor under the Ground Lease.

“Guarantee”  shall  mean  with  respect  to  any  Person,  any  obligation  (except  the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person:

(a)         to purchase such Indebtedness or obligation or any property constituting security therefor;

(b)         to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation;

(c)         to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to make payment of the Indebtedness or obligation; or

(d)         otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof.

The amount of any Guarantee of any guaranteeing Person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case, the amount of such Guarantee shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such Person in good faith.

“Guarantor” shall mean each Domestic Subsidiary that is a Restricted Subsidiary now existing or hereafter created that is a party to the Subsidiary Guarantee; provided that in no event shall any SPE be required to be a Guarantor.

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“Hazardous Material” shall mean all explosive or radioactive substances or wastes and all hazardous or toxic materials, substances, wastes or other pollutants or contaminants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances, materials or wastes of any nature regulated or defined pursuant to any Environmental Law.

“Indebtedness” of any Person shall mean, at any time, without duplication:

(a)         its liabilities for borrowed money, including obligations of such Person evidenced by bonds, debentures, notes or similar instruments;

(b)         its liabilities for the deferred purchase price of property acquired by such Person (excluding (a) accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property and (b) obligations which are being contested in good faith by appropriate proceedings and for which adequate reserves have been set aside in accordance with GAAP);

(c)         all Capital Lease Obligations;

(d)         all liabilities for borrowed money (excluding prepaid interest thereon) secured by any Encumbrance with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities);

(e)         all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions, whether or not representing obligations for borrowed money, but excluding, without duplication, (i) any commercial letter of credit entered into in the ordinary course of business by any such bank or other financial institution relating to the export or import of properties or any letter of credit entered into in the ordinary course of business by any such bank or other financial institution relating to the performance by such Person of its obligations under any contract or agreement (other than any note, credit, loan or other financial instrument or like agreement) and (ii) the undrawn amount of any letter of credit;

(f)          net obligations in respect of Swaps of such Person (as determined in accordance with, and excluding the Swaps not constituting Indebtedness pursuant to, the definition of “Swaps”); and

(g)         any Guarantee of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof.

Notwithstanding the foregoing, “Indebtedness” of any Person shall not include (y) payment of bonuses or other deferred compensation to employees of such Person or any of its Subsidiaries or (z) any contingent purchase price adjustment, contingent payment, earnout, or contingent deferred payment obligation of a similar nature incurred in connection with an acquisition unless, in the case of this clause (z), required to be reflected as a liability on the balance sheet of such Person in accordance with GAAP.

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“Indemnitee” shall mean the Lessor, the Rent Assignees, the Agents, any co-agent appointed in accordance with the terms of the Participation Agreement and their respective Affiliates, successors, permitted assigns, permitted transferees, contractors, servants, employees, officers, directors, shareholders, partners, participants, representatives, trustees and agents; provided, however, that in no event shall the Lessee or any its Affiliates be an indemnitee.

“Information” shall have the meaning provided in Section 9.19 of the Participation Agreement.

“Inspecting Parties” shall have the meaning provided in Article XV of the Lease.

“Insurance Requirements” shall mean the terms of the insurance required to be maintained in accordance with the Lease.

“Intangible Assets” shall mean the aggregate amount, for the Lessee and its Restricted Subsidiaries on a consolidated basis, of all assets classified as intangible assets under GAAP, including, without limitation, in each case solely to the extent classified as intangible assets under GAAP, customer lists, acquired technology, goodwill, computer software, trademarks, patents, copyrights, organization expenses, franchises, licenses, trade names, brand names, mailing lists, catalogs, unamortized debt discount and capitalized research and development costs.

“Invested Amounts” shall mean the amounts invested by investors that are not Affiliates of the Lessee in connection with a receivables securitization program and paid to the Lessee or any of its Subsidiaries, as reduced by the aggregate amounts received by such investors from the payment of receivables and applied to reduce such invested amounts.

“Land” shall mean approximately 26-acres of property located on Balboa Avenue between Ponderosa Avenues and Ruffin Road in San Diego, California, together with all rights, privileges, easements and appurtenances thereto, as more particularly described in Exhibit A attached to the Development Agreement.

“Lease” shall mean that certain Amended and Restated Lease Agreement dated as of June 7, 2019 between the Lessor and the Lessee.

“Lease Balance” shall mean, as of any date of determination, an amount equal to the aggregate sum of the outstanding principal amount of the Rent Assignment Advances of all of the Rent Assignees and of the Lessor Investment of the Lessor which may include, without limitation, any Advance amounts by the Participants during the Construction Period in excess of the aggregate Commitments of the Lessor and the Rent Assignees, any Capitalized Yield and any Transaction Costs which are capitalized. Except as otherwise expressly required pursuant to Section 18.5 of the Lease, any reference to the Lease Balance shall be to the Lease Balance taken as a whole.

“Lease Expiration Date” shall mean the last day of the Lease Term, subject to any Extended Remarketing Period or any other date on which the Lease is terminated, including pursuant to Article XIII, XVIII, XX, XXI or XXII of the Lease.

“Lease Supplement” shall mean the supplement to the Lease delivered prior to the Base Term Commencement Date pursuant to Section 3.4 of the Participation Agreement.

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“Lease Term” shall have the meaning provided in Section 2.2 of the Lease.

“Leased Property” shall mean the Facility (excluding Personal Property other than Personal Property which is Equipment or which has been funded by an Advance) and the leasehold interest of the Lessor in the Site granted to it pursuant to the Ground Lease.

“Lessee” shall mean Cubic Corporation, a Delaware corporation.

“Lessee Change of Control” shall mean (a) the acquisition by any party, or two or more parties acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of 50% or more of the outstanding shares of voting stock of the Lessee, or (b) during any period of twelve (12) consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Lessee cease to be composed of individuals (i) who were members of that board or equivalent governing body as of the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body, or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body.

“Lessee Collateral” shall mean the property of the Lessee with respect to which a lien is purported to be granted pursuant to the Lease and the Memorandum of Lease.

“Lessor” shall mean Bankers Commercial Corporation, a California corporation.

“Lessor Confirmation Letter” shall mean that certain letter, dated February 5, 2019, from the Lessor to the Lessee with respect to ASC 810.

“Lessor Investment” shall mean, as of any date of determination, the aggregate amount advanced by the Lessor pursuant to Article II of the Participation Agreement, net of any distributions (other than distributions of Yield or Break Amount) with respect thereto. Except as otherwise expressly required pursuant to Section 18.5 of the Lease, any reference to the Lessor Investment shall be to the Lessor Investment taken as a whole.

“Lessor Liens” shall mean Liens on or against the Leased Property, the Site, the Lease or any payment of Rent (a) which result from any act of, or any Claim against, either of the Agents and any Participant, in any case, unrelated to the transactions contemplated by the Operative Documents, (b) which result from any Tax owed by the Lessor (in its individual capacity), the Agents or any Participant, except any Tax for which such Person is entitled to indemnification by Lessee under the Operative Documents, or (c) which result from any act or omission of the Lessor that is in breach of such Person’s covenants or agreements under the Operative Documents.

“LIBOR Office” shall mean initially, the funding office of each Participant designated as such in Schedule II to the Participation Agreement and, thereafter, such other office of such Participant, if any, which shall be making or maintaining the Rent Assignment Advances or the Lessor Investment, as applicable.

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“LIBOR Rate” shall mean with respect to any Payment Period, (i) the rate of interest equal to a rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) determined by the Administrative Agent to be the London interbank offered rate as administered by the ICE Benchmark Administration (or any other Person that takes over the administration of such rate) as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion) as of approximately 1l:00 a.m., London time, two Business Days prior to the beginning of such Payment Period as the rate for dollar deposits in the London interbank market with a maturity comparable to such Payment Period, provided, however, that for the initial Payment Period, such selection by the Administrative Agent may be made as of approximately 11:00 a.m., London Time, one (1) Business Day prior to the beginning of such Payment Period, provided further, however, that such LIBOR Rate shall be capped for a period beginning with the Payment Period starting on February 25, 2019, and continuing up to and including the Payment Period starting on January 25, 2021, at a rate of 3.00% per annum for Advances on a cumulative basis at or below the levels set forth on Schedule 2.9(f) of the Participation Agreement, or (ii) in the event the rates referenced in the preceding clause (i) are not available, (x) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the quotation rate offered to first class banks in the London interbank market as determined by the Administrative Agent for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the Lease Balance, for which LIBOR is then being determined with maturities comparable to such period as of approximately 11:00 a.m., (London time) time on such determination date or (y) to the extent an alternative rate under clause (x) is not ascertainable, a comparable or successor rate, which rate is approved by the Administrative Agent provided, that if the LIBOR as otherwise determined above would be less than zero percent (0.00%), then the LIBOR for the purposes hereof shall be deemed to be zero percent (0.00%). If the F.R.S. Board imposes a LIBOR Reserve Percentage with respect to LIBOR deposits and the applicable rate is determined by reference to the foregoing clause (i), then LIBOR shall be (x) the foregoing rate, divided by (y) the sum of 1 minus the LIBOR Reserve Percentage. To the extent a comparable or successor rate is approved by the Administrative Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided, further that to the extent such market practice is not administratively feasible for the Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.

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

“LIBOR Screen Rate” shall mean, for any day and time, and for any Payment Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for Dollars for a period equal in length to such Payment Period as displayed on such day and time on pages LIBOR01 or LIBOR02 of the

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Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that regularly publishes such rate in the ordinary course of such information services’ business from time to time as selected by the Administrative Agent in its reasonable discretion); provided that if the Relevant Screen Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.

“Lien” shall mean any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term “Lien” shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting property. For the purposes of this Agreement, the Lessee or a Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capital Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien.

“Limiting Event” shall mean an Event of Default arising under (i) paragraph (n) of Article XVII of the Lease (solely to the extent that such Event of Default was the result of an unsolicited Lessee Change of Control to which neither the board of directors nor the shareholders of the Lessee approved, consented or acquiesced), or (ii) paragraphs (e), (f), (g), or (j) of Article XVII of the Lease, with respect to the paragraphs in clause (ii) solely if the breach of the related covenant, representation or warranty was based on the following: a subjective interpretation of the term “adequate,” “diligently,” “material,” “materially,” “Material Adverse Effect,” “materially adversely affect,” “material adverse change,” “materially and adversely affects,” “material adverse effect,” or any other term that is not objectively determinable, or results from a condition that is not solely related to the Lessee or the Lessee’s operations or the Lessee’s use of the Leased Property; provided, however, if the Event of Default, covenant, representation or warranty relates to the Lessee’s use of the Leased Property, then such Event of Default, covenant, representation or warranty will not be deemed a Limiting Event.

“Local Law Joint Ventures” shall mean any Person (the “JV”) which the Lessee or a Restricted Subsidiary owns Equity Interests in and with respect to which a percentage of the Equity Interests of such JV must be held by certain Persons resident in the jurisdiction in which such JV is formed in order to facilitate sales by such JV and for certain tax purposes. Local Law Joint Ventures may be Unrestricted Subsidiaries.

“Material Environmental Violation” shall have the meaning provided in Section 13.9 of the Lease.

“Major Construction Document” shall have the meaning provided in Section 2.4(a) of the Construction and Development Agreement.

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“Margin Stock” shall have the meaning given such term under Regulation T, Regulation U and Regulation X, as applicable, issued by the Board of Governors of the Federal Reserve System.

“Material Adverse Effect” shall mean a material adverse effect on (a) the business, assets, operations or financial condition of the Lessee and its Restricted Subsidiaries taken as a whole, (b) the ability of the Lessee to perform any of its obligations under this Agreement and the other Operative Documents, taken as a whole, (c) the validity or enforceability of any of the Operative Documents, or (d) the rights of or benefits available to the Participants or the Administrative Agent under this Agreement and the other Operative Documents, taken as a whole.

“Material Default” shall mean any event, condition or failure which, with notice or lapse of time or both, would become an Event of Default of the type described in clause (a), (b), (c), (g),

(h) or (i) of Article XVII of the Lease.

“Material Environmental Violation” shall have the meaning provided in Section 13.9 of the Lease.

“Material Indebtedness” shall mean Indebtedness (other than obligations under the Operative Documents) or obligations in respect of one or more Swaps, of any one or more of the Lessee or any Restricted Subsidiary in an aggregate principal amount exceeding $10,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Lessee or any Restricted Subsidiary in respect of any Swap Agreement at any time shall be determined in accordance with the definition of “Swaps”.

“Material Modification” shall mean, with respect to any Major Construction Document, any amendment, waiver, termination, release or other alteration which would diminish in any material respect, with regard to the Facility, when Completion has been effected, as an office building, the value, utility, useful life or functional capability of the Facility.

“Maturity Date” shall mean the date which is the earlier of the day that is the seventh anniversary of the Closing Date (subject to any extension due to a Force Majeure Event not to exceed three months) or the fifth anniversary of the Base Term Commencement Date.

“Memorandum of Ground Lease” shall mean that certain Memorandum of Ground Lease, dated as of the Closing Date by and between the Ground Lessor and the Ground Lessee.

“Memorandum of Lease” shall mean that certain Memorandum of Lease, Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of the Closing Date by and between the Lessee and the Lessor.

“Monthly Date” shall mean (i) the twenty-fifth (25th) calendar day of each month (or the next succeeding Business Day if such day is not a Business Day unless such next succeeding Business Day falls in the next calendar month in which case Monthly Date shall mean the prior Business Day if such day is not a Business Day) and (ii) for the final Advance only, the Base Term Commencement Date.

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

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“MUFG” shall mean MUFG Bank, Ltd.

“MUFG Base Rate” shall mean the rate of interest publicly announced by MUFG Union Bank, N.A., from time to time as its base rate.

“Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA which is subject to Title IV of ERISA to which Lessee or any ERISA Affiliate is then, or at any time during the preceding five (5) calendar years was, making or obligated to make contributions or with respect to which Lessee or any ERISA Affiliate has any liability.

“Net Leverage Ratio” shall mean, as of the last day of any fiscal quarter of the Lessee and its Restricted Subsidiaries on a consolidated basis, the ratio on a rolling four fiscal quarter basis of (i) (x) Consolidated Net Indebtedness minus (y) to the extent included in Consolidated Indebtedness, all Indebtedness attributable to undrawn letters of credit (including, without duplication, Indebtedness in the form of Guarantees with respect to letters of credit) to (ii)  Consolidated Adjusted EBITDA.

“Next Date” shall have the meaning provided in Section 13.1(a) of the Lease.

“Non-Severable” shall mean regarding fixtures, Alterations, additions and improvements and substitutions and replacements thereof relating to the Facility and Personal Property, those which (i) cannot be readily removed from the Facility without causing damage to the Facility or the Site which cannot be readily repaired, or (ii) are required for the Leased Property to comply with Applicable Laws and Regulations and Insurance Requirements; for the avoidance of doubt, the foregoing shall not include any items of personalty (or their replacement) which were not paid for as part of Construction Costs during the period prior to the Completion Date.

“Non-Use Fee” shall have the meaning provided in Section 2.13(c) of the Participation Agreement.

“Non-Use Fee Rate” shall mean twenty-five (25) basis points.

“Note Purchase Agreement” shall mean that certain Second Amended and Restated Note Purchase and Private Shelf Agreement (including all exhibits and schedules attached thereto) dated as of August 11, 2016, between Cubic and certain Guarantors on the one hand, and the Purchasers (as defined therein) on the other hand, as it may be amended, restated, supplemented or otherwise modified from time to time, together “with any renewals, extensions, replacements and refinancings thereof.

“NYFRB” shall mean the Federal Reserve Bank of New York.

“Obligations” shall mean, in each case, whether now in existence or hereafter arising: all payment and performance obligations of Cubic under the Operative Documents including, without limitation, (i) Cubic’s obligation to pay the Construction Recourse Amount, (ii) Cubic’s obligation to pay Deficiency payments, the Recourse Deficiency Amount or the Return Price Recourse Deficiency Amount, as applicable, (iii) Cubic’s obligation to pay the Purchase Amount as the purchase price for the Leased Property, (iv) Cubic’s obligation to pay any damages incurred by the Administrative Agent or any Participant or other amounts due under the Operative Documents

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from time to time, including, without limitation, following an Event of Default including any rejection by Cubic of the Construction and Development Agreement, the Lease or any other Operative Document in any bankruptcy, insolvency or similar proceeding, (v) Cubic’s obligation to pay the Basic Rent (including yield accruing after the filing of any bankruptcy, insolvency or similar petition), (vi) Cubic’s obligation to pay any and all other amounts of Rent, and (vii) Cubic’s obligation to pay or perform, as applicable, all other fees, expenses and commissions (including attorney’s fees and expenses), charges, costs, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Lessee to the Agents, any Participant or any other Person, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortuous, liquidated or unliquidated, and whether or not evidenced by any note, instrument, agreement or any other document, in each case under or in respect of the Operative Documents.

“OFAC” shall mean the Office of the Foreign Assets Control of the U.S. Treasury Department.

“Officer’s Certificate” of a Person shall mean a certificate signed by the Chairman of the Board of Directors and/or the President and/or any Executive Vice President and/or any Senior Vice President and/or any other Vice President, Managing Director, Principal and/or other authorized officer(s) of such Person, provided, that with respect to the Lessee, whomever signs the certificate is authorized to represent such Person.

“Offsite Plans and Specifications” shall mean the plans and specifications necessary to construct the improvements as described in, and pursuant to, the Development Agreement and delivered to the Lessor pursuant to Section 3.3(a) of the Participation Agreement and updated and supplemented pursuant to Section 2.7(o) of the Construction and Development Agreement including working drawings and other drawings and specifications of every kind and description required to construct such improvements.

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

(1)        the Participation Agreement;

(2)        the Lease;

(3)        the Memorandum of Lease;

(4)        the Construction and Development Agreement;

(5)        each Rent Assignment Agreement;

(6)        the Ground Lease;

(7)        the Memorandum of Ground Lease;

(8)        the Deed;

(9)        each Assignment of Contracts;

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(10)      each Consent and Acknowledgment;

(11)      each Bill of Sale; and

(12)      the Escrow Agreement.

“Overall Parcel” shall mean the Site and the land adjacent thereto commonly referred to as Lots 18 and 22 as depicted on the Survey.

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

“Overdue Rate” shall mean the lesser of (a) the highest interest rate permitted by Applicable Laws and Regulations and (b) an interest rate per annum equal to the Yield Rate (without regard to the proviso in clause (i) of the definition of “LIBOR Rate”, to the extent applicable) plus 2% per annum.

“Owner” shall mean Bankers Commercial Corporation, in its capacity as owner of the Facility and Building 1, and as lessee under the Ground Lease.

“Participant Party” shall mean the Participants and their respective Affiliates, successors, permitted assigns and permitted transferees.

“Participants” shall mean the Lessor and the Rent Assignees, collectively.

“Participation” shall have the meaning provided in Section 6.4 of the Participation Agreement.

“Participation Agreement” shall mean the Second Amended and Restated Participation Agreement dated as of the Amendment Date among the Lessee, the Lessor, the Rent Assignees and the Agents, as the same may be further amended, restated, supplemented or otherwise modified.

“Participation Holder” shall have the meaning provided in Section 6.4 of the Participation Agreement.

“Payment Date” shall mean (i) for any Payment Period commencing and ending prior to the Base Term Commencement Date: the Monthly Date, (ii) for the Payment Period commencing prior to the Base Term Commencement Date and ending on, but excluding, the Base Term Commencement Date: the Base Term Commencement Date, and (iii) for any Payment Period commencing on or after the Base Term Commencement Date: the Monthly Date occurring after the third month of a respective Payment Period; provided, that, with reference to Yield defined by reference to the Alternate Base Rate, the Monthly Date immediately following the prior Payment Period, provided further, that in each case regarding the foregoing subsection (i) – (iii), any Payment Date that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.

“Payment Event of Default” shall mean an Event of Default arising under paragraph 17(a)(i) or 17(a)(iii) of Article XVII of the Lease.

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“Payment Period” shall mean (i) during the Construction Period, a period of one (1) month ending on a Monthly Date, except for (x) the first Payment Period during the Construction Period which shall be for a period less than one (1) month and which shall commence on the Closing Date and shall end on the next Monthly Date, and (y) the final Payment Period during the Construction Period which may be for a period of less than one (1) month and shall end on, but exclude, the Base Term Commencement Date, and (ii) during the Base Term, a period of three (3) months; provided, that, in each case, each Payment Period in which a Payment Date occurs shall end on such Payment Date, provided that, with respect to Yield defined by reference to the Alternate Base Rate, the Monthly Date immediately following the prior Payment Period, provided, further, that regarding each of the foregoing subsections (i) and (ii), any Payment Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor agency.

“Permitted Acquisition” shall mean the acquisition of all or substantially all of the assets, all or a substantial part of, a business, division, brand or product line, or all or substantially all of the stock of any Person (such Person being the “Target”) that is engaged in a line of business which is substantially related to that of the Lessee or any Restricted Subsidiary and with respect to which:

(a)        such acquisition was approved by each Person’s (including the Target’s) Board of Directors (or other similar governing body);

(b)        at the time of such proposed acquisition and immediately after giving effect thereto, no Default would exist;

(c)        at the time of such proposed acquisition and immediately after giving effect thereto, the Lessee and the Restricted Subsidiaries are in compliance, on a pro forma basis, with a ratio that is less than or equal to a ratio equal to (i) the numerator of the maximum Net Leverage Ratio permitted under Section 5.6(a)(ii) of the Participation Agreement at such time (including, if applicable, giving effect to the impact of any Adjusted Covenant Period to the extent elected by the Lessee in accordance with Section 5.6(a) of the Participation Agreement) minus 0.25 to (ii) 1.00, recomputed as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (such compliance to be confirmed by an officer’s certificate in a form satisfactory to the Administrative Agent);

(d)        the Lessee shall have given the Administrative Agent prior written notice, together with, if the total consideration being paid in connection with such acquisition (including, without limitation, assumed Indebtedness or Preferred Stock) exceeds $50,000,000, such documents and information as the Administrative Agent may reasonably request and which are reasonably available to the Lessee at such time; and

(e)        such acquisition was consummated (i) prior to March 27, 2020 or (ii) on or after October 1, 2020.

“Permitted Contest” shall mean actions taken by a Person to contest in good faith, by appropriate proceedings initiated timely and diligently prosecuted, the legality, validity or applicability to the Leased Property, the Site or any interest in the Leased Property, the Site or to

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the operation, use or maintenance of the Leased Property and the Site or the Overall Transaction by, any Person of: (a) any Applicable Laws and Regulations; (b) any term or condition of, or any revocation or amendment of, or other proceeding relating to, any Governmental Action; or (c) any Lien or Tax; provided that the initiation and prosecution of such contest would not: (i) in the reasonable opinion of an Indemnitee to which such proceeding relates, result in, or increase the risk of, the imposition of any criminal liability or penalty or material civil liability on any Indemnitee; (ii) be reasonably likely to adversely affect the validity, perfection or priority of the lien and security interests created by the Operative Documents or the right, title or interest of the Lessor in or to the Leased Property, the Site, or the right of any Participant to receive payment of the Lease Balance or Yield or any interest therein; (iii) be reasonably likely to adversely affect the fair market value, utility or remaining useful life of the Leased Property, the Site or any interest in the Leased Property or the Site or the continued economic operation of the Leased Property and the Site; and provided further that in any event reserves to the extent required by GAAP are maintained against any adverse determination of such contest; or (iv) involve any Claim not fully indemnified by the Lessee which the Lessee and the Indemnitee to which such Claim relates have been unable to sever from the indemnified Claims, unless the Lessee shall have posted a bond or other security that is reasonably satisfactory to such Indemnitee to defend, protect, save and keep harmless such Indemnitee on a Grossed Up Basis with respect to costs, expenses, fees and charges arising from such otherwise not fully indemnified Claim; and provided further that in any event reserves to the extent required by GAAP are maintained against any adverse determination of such contest.

“Permitted Encumbrances” shall mean Encumbrances permitted by any of clauses (i) through (iv), (ix), (xi), (xii) and (xvi) of Section 5.6(f) of the Participation Agreement.

“Permitted Excess Amount” shall mean an amount equal to fifty percent (50%) of the Aggregate Contingency Amount.

“Permitted Factoring Program” shall mean the sale or other similar monetization by the Lessee or any of its Subsidiaries of accounts receivable originated by the Lessee or such Subsidiaries to a third-party in the ordinary course of business pursuant to a factoring or other similar transaction on a basis that is non-recourse to the Lessee or its Subsidiaries other than limited recourse customary for transactions of a similar kind, so long as the then current aggregate outstanding amount of all such accounts receivable which are subject to any such sale, similar factoring or similar monetization transaction shall not exceed $75,000,000 at any time.

“Permitted Investments” shall mean:

(a)        direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or of any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America) or any member of the European Union (or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of any member of the European Union), in each case maturing within one year from the date of acquisition thereof;

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(b)        investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a credit rating of A-2 (or the equivalent thereof) or better by S&P or P-2 (or the equivalent thereof) or better by Moody’s;

(c)        investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, (i) any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000 or (ii) any bank organized under the laws of a country other than the United State of America which has a combined capital and surplus and undivided profits of not less than $100,000,000;

(d)        fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;

(e)        marketable short-term money market and similar highly liquid funds either (i) having assets in excess of $500,000,000 or (ii) having a rating of at least A-2 or P-2 from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized rating service);

(f)         cash in Agreed Currencies and other currencies held by the Lessee or its Subsidiaries from time to time in the ordinary course of business;

(g)        in the case of any Foreign Subsidiary, other short-term investments that are analogous to the foregoing, are of comparable credit quality and are customarily used by Persons in the jurisdiction of such Foreign Subsidiary for cash management purposes.

“Permitted Liens” shall mean (a) the respective rights and interests of the Lessee, the Participants, the Agents, as provided in the Operative Documents, (b) Lessor Liens, (c) Liens for Taxes either not yet delinquent or being contested in good faith and by appropriate proceedings diligently conducted and in any event constituting a Permitted Contest, (d) materialmen’s, mechanics’, workers, repairmen’s, employees’ or other like Liens arising in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings constituting a Permitted Contest and to the extent any reserve or other appropriate provision required by GAAP shall have been made in respect of the Lien, (e) Liens arising after the Closing Date out of judgments or awards not otherwise constituting an Event of Default under clause (j) of Article XVII of the Lease and with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith and either (x) (A) with respect to such Liens arising on or prior to the Completion Date, have been bonded to the reasonable satisfaction of the Lessor or (B) with respect to such Liens arising after the Completion Date, have been reserved for to the extent required by GAAP, or (y) the enforcement of such Lien has been stayed pending such appeal or review, and (f) Liens set forth on Schedule III to the Participation Agreement.

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“Permitted Transferee” shall have the meaning provided in Section 6.3(b) of the Participation Agreement.

“Person” shall mean any individual, partnership, corporation, limited liability company, trust, association, joint venture, joint stock company, un-incorporated organization, Authority or any other entity.

“Personal Property” shall mean all of the Leased Property that does not constitute real property and in which a security interest may be created under the UCC including the Equipment.

“Plan” shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Lessee or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Plans and Specifications” shall mean the plans and specifications necessary to demolish Building 1 and to construct the Facility to operate in accordance with its intended purposes as Class A office buildings and delivered to the Appraiser and the Lessor pursuant to Section 2.7(o) of the Construction and Development Agreement and updated and supplemented pursuant to Section 2.7(o) of the Construction and Development Agreement including working drawings and other drawings and specifications of every kind and description required to assemble and construct the Facility.

“Pounds Sterling” shall mean the lawful currency of the United Kingdom.

“Preferred Stock” shall mean any class of capital stock (or other equity interests) of a Person that is preferred over any other class of capital stock (or other equity interests) of such Person as to the payment of dividends or other distributions or the payment of any amount upon liquidation or dissolution of such Person.

“Prohibited Person” shall mean a Person that is (i) on the SDNL or (ii) in violation of any money laundering law, regulation or order, including the USA PATRIOT Act.

“Project X” shall mean the project identified as Project X and disclosed to the Participants in writing prior to the Amendment Date.

“Public Utility Holding Company Act” shall mean the Public Utility Holding Company Act of 2005.

“Purchase Amount” shall mean, as of any date of determination, the sum of (a) the aggregate sum of the outstanding principal amount of the outstanding Rent Assignment Advances of all the Rent Assignees and the Lessor Investment of the Lessor (including amounts with respect to Funded Claims), plus (b) all accrued but unpaid Yield, plus (c) Break Amounts, if any, plus (d) without duplication, all unpaid Rent and all other sums then due and payable pursuant to the terms of the Operative Documents by the Lessee or the Lessor including, without limitation, all Supplemental Rent.

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“Purchase Option” shall have the meaning provided in Section 21.1(a) of the Lease.

“Recorder’s Office” shall mean the County Clerk’s Office for San Diego County, California.

“Recourse Deficiency Amount” shall mean, as of the date on which any claim or demand is made (the “Calculation Date”) due to the occurrence of a Limiting Event (in the case of application of Section 18.1(b) of the Lease), the sum of (i) the accreted value of Basic Rent and any other payments that are required to be included in the computation of the maximum guarantee test as prescribed in ASC 840-10-25-14 and ASC 840-10-25-1(d) or ASC 842-10-25-2 and ASC 842-10-55-2, as applicable to Lessee, previously paid prior to the Calculation Date and (ii) an amount, the present value of which, discounted to the Calculation Date, when added to the present value (discounted to the Calculation Date) of (x) Fees described in Section 2.13(a) and (b) of the Participation Agreement and (y) any other Supplemental Rent (other than the Recourse Deficiency Amount itself) which is required to be included in the 90% test pursuant to ASC 840-10-25-14 and ASC 840-10-25-1(d) or ASC 842-10-25-2 and ASC 842-10-55-2, as applicable to Lessee, in each case to be paid by the Lessee (plus the estimated reasonable costs relating to such Limiting Event which will be borne by the Lessee) from and after the Completion Date to and including the Calculation Date will be equal to 89.95% of Eligible Construction Costs. The rate used to accrete or discount values will be (x) the incremental borrowing rate of Lessee prior to the Construction Period Termination Date, and (y) the implicit rate of the Lease used for determination of classification of the Lease on the Closing Date for a term equal to such date of claim or demand under ASC 840-10-25-1(d) or ASC 842-20-30-3, respectively. The calculation further assumes that such payments are made quarterly in arrears throughout the period at the rates established hereunder, calculated using an actual day convention on the Lease Balance outstanding on such date of claim or demand. To the extent the Calculation Date shall occur on or before September 30, 2019, the foregoing calculations shall be made with reference to ASC 840, and thereafter, with reference to ASC 842.

“Regulation T” shall mean Regulation T of the F.R.S. Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“Regulation U” shall mean Regulation U of the F.R.S. Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“Regulation X” shall mean Regulation X of the F.R.S. Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“Regulations” shall mean the income tax regulations promulgated from time to time under and pursuant to the Code.

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

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“Relevant Governmental Body” shall mean the Board and/or the NYFRB, or a committee officially endorsed or convened by the Board and/or the NYFRB or, in each case, any successor thereto.

“Relevant Screen Rate” shall mean the LIBOR Screen Rate.

“Remediation Plan” shall mean the Soil Management Plan dated December 17, 2018 by SCS Engineers related to DEH Voluntary Assistance Program Case # DEH2018-LSAM-000521.

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

“Rent Assignee” or “Rent Assignees” shall mean any Person which enters into a Rent Assignment Agreement with Lessor and joins the Participation Agreement and other Operative Documents as a Rent Assignee.

“Rent Assignee Release” shall mean the release and discharge executed by the Collateral Agent which will cause the Recorder’s Office to release, discharge and cancel the Security Documents from its registry when it is submitted.

“Rent Assignment Advance” shall mean the aggregate amount advanced by the Rent Assignees pursuant to Article II of the Participation Agreement and Section 2.1 of each Rent Assignment Agreement.

“Rent Assignment Agreements” shall mean each Rent Assignment Agreement dated as of the Closing Date between the Lessor and a Rent Assignee and any Rent Assignment Agreement agreed to from time to time pursuant to a permitted assignment by a Rent Assignee.

“Rent Assignment Documents” shall mean the Rent Assignment Agreements, the Security Documents and all documents and instruments executed and delivered in connection with each of the foregoing.

“Rent Assignment Interests” shall have the meaning set forth in Section 2.01 of each Rent Assignment Agreement.

“Rentals” shall mean as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Lessee or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Lessee or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges.

“Representatives” shall have the meaning provided in Section 9.19 of the Participation Agreement.

“Required Participants” shall mean, as of the date of determination, Participants with outstanding Rent Assignment Advances and Lessor Investment (directly or indirectly through acquisitions of Rent Assignment Advances or Lessor Investment) representing at least 50.1% of the aggregate unpaid balance of the Rent Assignment Advances and Lessor Investments; provided,

40

however, that with respect to (i) any termination, amendment, supplement, waiver or modification of, or request, direction or action under, Article IX, XI, XII, XIII, XXI, XXII, XXIII of the Lease or under Sections 2.6, 2.7 or 3.3 of the Construction Development Agreement, or (ii) any termination, amendment, supplement, waiver or modification of Section 2.10 of the Participation Agreement or the Rent Assignment Agreement, “Required Participants” shall mean, as of any date of determination, subject to the terms of the Rent Assignment Agreement, the Required Rent Assignees and the Lessor, voting as separate classes.

“Required Rent Assignees” shall mean, as of the date of the determination, the Rent Assignee(s) holding outstanding Rent Assignment Advances (directly or indirectly through acquisitions of Rent Assignment Advances) representing at least 50.1% of the unpaid principal amount of all Rent Assignment Advances.

“Responsible Officer” of (i) Lessor shall mean the President or any Vice President, Assistant Vice President, Secretary, Assistant Secretary, Chief Financial Officer, Treasurer or Assistant Treasurer, or (ii) Lessee shall mean any Senior Financial Officer, any director of treasury, any senior treasury analyst, any treasury association, any Responsible Officer or any other officer of Lessee with responsibility for the administration of the relevant portion of any Operative Document.

“Restricted Payment” shall mean any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Lessee or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Lessee or any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in the Lessee or any Subsidiary. The amount of any Restricted Payment made other than in the form of cash or cash equivalents shall be the fair market value thereof (as reasonably determined by the Lessee in good faith).

“Restricted Subsidiary” shall mean any (i) Subsidiary Borrower and (ii) Subsidiary (a) of which more than 80% (by number of votes) of the Equity Interests with voting power is beneficially owned, directly or indirectly, by the Lessee and (b) if applicable, as so designated within the limitations of Section 5.6 of the Participation Agreement. An SPE may be either a Restricted Subsidiary or an Unrestricted Subsidiary.

“Return Date” shall mean the earlier to occur of the Lease Expiration Date or the Maturity

Date.

“Return Option” shall have the meaning provided in Section 21.1(b) of the Lease.

“Return Option Liens” shall have the meaning provided in Section 22.1(a) of the Lease.

“Return Price Recourse Deficiency Amount” shall mean the amount equal to the Return Price Recourse Deficiency Amount set forth on the Lease Supplement calculated as an amount, the present value of which, discounted to the Base Term Commencement Date (herein, the “Calculation Date”) if paid on the last day of the Base Term (in the case of the application of Article XXII of the Lease), when added to the present value (discounted to the Base Term Commencement Date) of (x) the accreted value of Basic Rent and any other payments that are

41

required to be included in the computation of the maximum guarantee test as prescribed in ASC 842-10-25-2 and ASC 842-10-55-2 previously paid prior to Completion together with the Basic Rent to be paid during the Base Term, (y) Fees described in Section 2.13(a) and (b) of the Participation Agreement and (z) any other Supplemental Rent (other than the Return Price Recourse Deficiency Amount itself) which is included under ASC 842-10-25 and ASC 842-10-55-2, in each case to be paid by the Lessee during the Lease Term to and including the Calculation Date will be equal to 89.95% of Eligible Construction Costs. The rate used to accrete or discount values will be the implicit rate of the Lease used for determination of classification of the Lease on the Calculation Date for a term equal to the Base Term as prescribed in ASC 842-20-30-3. The calculation further assumes that such payments are made quarterly in arrears throughout the period at the rates established hereunder, calculated using an actual day convention on the Lease Balance outstanding on the Base Term Commencement Date.

“Reuters” shall mean Thomson Reuters Corp., Refinitiv, or any successor thereto.

“Sale Proceeds” shall mean the gross sale proceeds from the sale of the Leased Property pursuant to Articles XVIII or XXII of the Lease minus any transfer or deed tax thereon (to the extent not paid by the assignee or transferee thereof) and minus the aggregate amount of any costs or expenses incurred by the Lessee (under Article XXII but not under Article XVIII of the Lease), the Lessor and, if so referenced under Article XXII of the Lease as entitled to reimbursement from sale proceeds, any other Person (including a buyer or potential buyer) to the extent Lessor and Lessee have agreed to such payment of such other Person’s costs or expenses, in each case, in connection with the actions required under Article XXII of the Lease, excluding, in the case of the Lessee, any provision of Article XXII which expressly specifies that the Lessee’s costs shall not be reimbursable out of gross sale proceeds.

“SDNL” shall mean the list of Specially Designated Nationals and Blocked Persons issued by OFAC.

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

“Security Documents” shall mean, collectively, the Assignments of Contracts.

“Senior Financial Officer” shall mean the chief financial officer, principal accounting officer or treasurer of the Lessee.

“Senior Funded Debt” shall mean all Funded Debt of the Lessee which is not expressed to be subordinate or junior in rank to any other Funded Debt of the Lessee.

“Significant Subsidiary” shall mean a subsidiary that is a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X.

“Site” shall mean an approximately 13.879-acre portion located on the northwest corner of the Land on which the Facility is to be located, as described in Schedule IV to the Participation Agreement.

42

“SOFR” with respect to any day shall mean the secured overnight financing rate published for such day by the NYFRB, as the administrator of the benchmark (or a successor administrator), on the Federal Reserve Bank of New York’s Website.

“SOFR-Based Rate” shall mean SOFR, Compounded SOFR or Term SOFR.

“Soft Costs” shall mean Construction Costs incurred for the production of the Plans and Specifications, architectural and engineering fees, legal and accounting fees, permit and license fees and other such similar costs.

“Solvent” shall mean, with respect to any Person, that as of the date of determination both (i)  the then fair saleable value of the assets of such Person is (y) greater than the total amount of liabilities of such Person and (z) not less than the amount that will be required to pay the probable liabilities on such Person’s then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; and (ii) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances.

“SPE” shall mean any direct or indirect Subsidiary of Cubic that constitutes a special purpose entity.

“Specified Event” shall mean (i) any Event of Default described in clause (h) or (i) of Article XVII of the Lease, (ii) fraud, misapplication of funds, illegal acts or willful misconduct on the part of Lessee, (iii) with respect to Claims pursuant to Section 7.1(a)(vii) of the Participation Agreement, any acts, events, conditions or circumstances existing or occurring with respect to the Site on or prior to the Closing Date, or (iv) any act or failure to act (including any misrepresentation or the failure to comply with the Operative Documents including, without limitation, the failure to maintain insurance required by the Lease or the Construction and Development Agreement) by any Cubic Person (other than the failure to complete construction of the Facility or to cause Completion by the Construction Period Termination Date). For the avoidance of doubt, it shall deemed to be the Lessee’s failure to act where any exclusion arises from insurance coverages required to be maintained by the Lessee under the Lease or the Construction and Development Agreement.

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

“Subordinated Indebtedness” shall mean any Indebtedness of the Lessee or any Restricted Subsidiary the payment of which is contractually subordinated to payment of the Obligations under the Financing Documents (as defined under the Credit Agreement).

“Subordinated Indebtedness Documents” shall mean any document, agreement or instrument evidencing any Subordinated Indebtedness or entered into in connection with any Subordinated Indebtedness.

“Subsidiary” shall mean, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily,

43

in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Lessee.

“Subsidiary Guarantee” shall mean that certain Fifth Amended and Restated Guarantee dated as of March 27, 2020 (including any and all supplements thereto) and executed (or joined) by each Guarantor, as amended, restated, supplemented or otherwise modified from time to time, which is associated with the Credit Agreement.

“Substantial Completion” shall mean substantial completion of the Construction subject to punch list items, final work and final payments, in accordance with the approved Plans and Specifications and pursuant to the General Construction Agreement which substantial completion may be evidenced by a certificate of occupancy (including a temporary certificate of occupancy) or its equivalent as available.

“Supplemental Rent” shall mean any and all amounts, liabilities and obligations other than Basic Rent which the Lessee assumes or agrees or is otherwise obligated to pay under the Lease or any other Operative Document (whether or not designated as Supplemental Rent) to the Lessor or any other Person, including, without limitation and without duplication, Purchase Amount, Break Amounts, Additional Costs, Sale Proceeds, the Construction Recourse Amount, payments of Deficiency, the Recourse Deficiency Amount or the Return Price Recourse Deficiency Amount, the amounts payable pursuant to Section 7.7 of the Participation Agreement and indemnities and damages for breach of any covenants, representations, warranties or agreements by Lessee contained in the Operative Documents.

“Survey” shall have the meaning provided in Section 2.1(h) of the Participation Agreement.

“Swap Agreement” shall mean any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Lessee or the Subsidiaries shall be a Swap Agreement.

“Swaps” shall mean, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency; provided that Swaps entered into by such Person in the ordinary course of business for the sole purpose of managing or hedging risk shall not be deemed or construed to constitute Indebtedness within the terms of this Agreement. Without limiting the foregoing, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such

44

fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined.

“Tax” and “Taxes” shall mean any and all fees (including, without limitation, documentation, recording, license and registration fees and public dues), taxes (including, without limitation, income (whether net, gross or adjusted gross), gross receipts, sales, rental, use, value added, net asset, property, real estate transfer, transfer, excise and stamp taxes), levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever imposed by an Authority, together with any penalties, fines or interest thereon or additions thereto.

“Term SOFR” shall mean the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

“Title Insurance Company” shall mean the title insurance company that has or will issue the title policies with respect to the Leased Property, which company shall be reasonably acceptable to the Lessor.

“Title Policy” shall have the meaning provided in Section 2.1(m) of the Participation Agreement.

“Transaction Costs” shall mean reasonable and properly documented costs, expenses and fees incurred by the Lessee, the Agents and the Participants in connection with the consummation of the transactions contemplated by the Operative Documents, and the preparation, negotiation, syndication, execution and delivery of the Operative Documents, including, without duplication, (1) the fees and expenses of Jones Day, special counsel to the Lessee and special California counsel to the Lessee; (2) the fees and expenses of Dechert LLP, special counsel to the Lessor and Rent Assignees; (3) all premiums and other fees and expenses of the Title Insurance Company with respect to its issuance of the Title Policies; (4) all fees and expenses of the Environmental Expert with respect to the Phase I environmental report and any additional work as referenced in Section 2.1(i) of the Participation Agreement, payable in accordance with the fee agreement between the Environmental Expert and the Lessor; (5) the initial and ongoing reasonable fees and expenses of the Agents and their respective counsel; (6) all fees and expenses of the Appraiser with respect to the Appraisal payable in accordance with the fee agreement between the Appraiser and the Lessor; (7) all taxes and search fees, recording fees and filing fees incurred in connection with lien searches and the recording, registering or filing any Operative Document, any deed, declaration, mortgage, security agreement, notice, release, discharge, termination or financing statement with any public office, registry or governmental agency; (8) all reasonable costs, expenses and fees of the surveyor engaged to survey the Site, including any flood zone determination costs, expenses and fees; (9) all fees and expenses of the Construction Consultant with respect to the initial preparation and subsequent updating of the construction report (as referenced in Section 3.1(j) of the Participation Agreement) payable in accordance with the fee agreement between the Construction Consultant and the Lessor; (10) all costs and expenses of one company engaged to advise the Participants on insurance issues arising in connection with the negotiation of the Operative Documents; (11) all insurance premiums, including premiums related to residual value insurance procured by Lessor

45

for its accounting purposes; (12) the out-of-pocket fees and expenses of the Participants; and (13) all other Fees.

“UK Bankruptcy Event” shall mean:

(a)        a UK Relevant Entity is unable or admits inability to pay its debts (as defined in section 123(1)(a) of the Insolvency Act 1986) as they fall due or is deemed to or declared to be unable to pay its debts under applicable law, or suspends or threatens to suspend making payments on any of its debts or, by reason of actual or anticipated financial difficulties; or

(b)        any corporate action, legal proceedings or other formal procedure or formal step for (i) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise) of any UK Relevant Entity; (ii) a composition, compromise, assignment or arrangement with any creditor of any UK Relevant Entity; or (iii) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any UK Relevant Entity, or any of the assets of any UK Relevant Entity; save that this paragraph (b) shall not apply to any action, proceeding, procedure or formal step which is frivolous or vexatious and is discharged, stayed or dismissed within 21 days of commencement.

“UK Relevant Entity” shall mean Lessee or any Restricted Subsidiary that is incorporated in England and Wales, or any Restricted Subsidiary capable of becoming subject of an order for winding-up or administration under the Insolvency Act 1986.

“Unadjusted Benchmark Replacement” shall mean the Benchmark Replacement excluding the Benchmark Replacement Adjustment; provided that, if the Unadjusted Benchmark Replacement as so determined would be less than zero, the Unadjusted Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.

“Uniform Commercial Code” and “UCC” shall mean the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction.

“Unrestricted Cash” shall mean, at any time of determination, the sum of all unrestricted and unencumbered (other than Permitted Encumbrances) cash of the Lessee and its Restricted Subsidiaries at such time.

“Unrestricted Permitted Investments” shall mean, at any time of determination, the sum of all unrestricted and unencumbered (other than Permitted Encumbrances) Permitted Investments of the Lessee and its Restricted Subsidiaries at such time.

“Unrestricted Subsidiary” shall mean any Subsidiary which is not a Restricted Subsidiary and, if applicable, as has been designated as such within the limitations of Section 5.6 of the Participation Agreement. An SPE may be either a Restricted Subsidiary or an Unrestricted Subsidiary.

“Upfront Fee” shall have the meaning provided in Section 2.13(b) of the Participation Agreement.

46

“U.S. Person” shall mean any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

“USA PATRIOT Act” shall have the meaning provided in Section 4.1(q) of the Participation Agreement.

“Wholly-owned Restricted Subsidiary” shall mean, at any time, any Restricted Subsidiary one hundred percent (100%) of all of the Equity Interests (except directors’ qualifying shares) and voting interests of which are owned by any one or more of the Lessee and the Lessee’s other Wholly-owned Restricted Subsidiaries at such time.

“Wholly-owned Subsidiary” shall mean, at any time, any Subsidiary one hundred percent (100%) of all of the Equity Interests (except directors’ qualifying shares) and voting interests of which are owned by any one or more of the Lessee and the Lessee’s other Wholly-owned Subsidiaries at such time.

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Taxes” shall mean Taxes arising under the laws of any national, municipal or local government, political subdivision or taxing Authority of the United States or any other jurisdiction imposed or collected by way of withholding (regardless of whether such taxes may also be imposed upon or collected from the recipient of a payment), and fines, interest, penalties or other additions thereto, thereon, in lieu thereof or for noncollection or in respect thereof.

“Yield” shall mean with respect to each Payment Period (a) the Yield Rate for such Payment Period multiplied by (b) the aggregate Lease Balance outstanding.

“Yield Rate” shall mean, (a) the sum of the LIBOR Rate for such Payment Period plus the Applicable Margin, (b) at any time that the provisions of Section 2.9(b) of the Participation Agreement shall apply to the Lease Balance, the Alternate Base Rate, plus the Applicable Margin or (c) following the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the sum of the Benchmark Replacement, plus the Applicable Margin.

47

Schedule I-A

Rent Assignee Commitments

Institution	Commitment Amount		Commitment Percentage
BA Leasing BSC, LLC	$	52,400,000	50	%
Aggregate Rent Assignee Commitments:	$	52,400,000	50	%

Schedule I-B

Lessor Commitment

Institution	Commitment Amount		Commitment Percentage
Bankers Commercial Corporation	$	52,400,000	50	%
Aggregate Lessor Commitment:	$	52,400,000	50	%

Schedule II

Addresses For Notice; Wire Instructions

LESSEE AND CONSTRUCTION AGENT:

Cubic Corporation

9333 Balboa Avenue

San Diego, California 92123

Attn: Legal Department

With a copy to:

Cubic Corporation

9333 Balboa Avenue

San Diego, California 92123

Attn: Treasury Department

Rhys.Williams@cubic.com

Wire Transfer Instructions:
Bank:	MUFG UNION BANK N.A.
City:	SAN DIEGO
ACH Routing:	122 000 496
Wire Routing:	122 000 496
Account #:	4000080581
Account Name:	Cubic Corporation
Swift/BIC Code:	BOFCUS33MPK
Bank Address:	530 B Street 4th Floor,
	San Diego, CA 92101
Bank Phone:	(858) 812-3855 – Christine Cervenka
Confirmation Call Back:	(858) 505-2950 – Cera Connaughy

LESSOR:

Bankers Commercial Corporation

445 South Figueroa, 14th Floor

Los Angeles, California 90017

Attention: Portfolio Servicing

Email: CMalekyan@us.mufg.jp

Wire Transfer Instructions for the Lessor:
Bank Name:	MUFG Union Bank, N.A.
Bank Address:	445 South Figueroa Street, 14th Floor, Los Angeles, CA 90071
ABA No:	122000496
SWIFT Code:	BOFCUS33MPK
Account No:	0011783776
For the Account of:	Bankers Commercial Corporation
Reference:	Cubic Corporation
Confirmation Call Back:	Edwin Chan
	213-236-6523

COLLATERAL AGENT:

MUFG Union Bank, N.A.

350 California Street, 17th Floor

San Francisco, CA 94104

Attention: Corporate Trust

Tel.: (415) 273-2515

Email: AccountAdministration-Corporate.Trust@unionbank.com

Wiring Instructions:
Bank:	MUFG Union Bank, N.A., Monterey Park, CA 91755
ABA:	122000496
SWIFT BIC:	BOFCUS33
Account Name:	Cubic Corporation Collateral Account
Account Number:	6712233701
Attention:	Corporate Trust
Reference:	Cubic Corporation
Confirmation Call Back:	(415) 273-2535

ADMINISTRATIVE AGENT:

MUFG Bank, Ltd., New York Branch

1251 Avenue of the Americas

New York, NY 10020

Attention: Lease Finance

Tel.: 212-282-3000

Email: AgencyDesk@us.sc.mufg.jp

Wiring Instructions:

Bank Name:	MUFG Bank, Ltd.
Address:	1221 Avenue of the Americas, 6th Floor
	New York, New York 10020, USA
Fed ABA Number:	026-009-632
Swift Code (if needed):	BOTKUS33
Account No.:	9777-0191
For Further Credit Account
Name (if any):	N/A
Account Name:	LOAN OPERATIONS DEPT.
Reference:	Cubic Corporation
Confirmation Call Back:	Lawrence Blat
	212-405-6621
	agencydesk@us.sc.mufg.jp

RENT ASSIGNEE:

BA Leasing BSC, LLC

11333 McCormick Road

Hunt Valley II

M/C MD 5 032 07 05

Hunt Valley, Maryland 21031

Attn: Terri Preston, Group Operations Manager

Email: terri.preston@baml.com

Tel: 443-541-3642

Wiring Instructions:

Bank Name:	Bank of America
Address:
Fed ABA Number:	121000358
Swift Code (if needed):
Account No.:	12334-01992
Account Name:	BA Leasing
Reference:	Attn: Benny Sumardi/Cubic Corporation

Schedule III

Liens

None

Schedule IV

Description of Site Owned by Lessor

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF SAN DIEGO, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 2 OF PARCEL MAP NO. 21650, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, DECEMBER 21, 2018 AS DOCUMENT NO. 2018-7000508 OF OFFICIAL RECORDS.

EXCEPTING THEREFROM ALL BUILDING IMPROVEMENTS LOCATED ON SAID LAND.

APN: PORTIONS 369-163-05-00 AND 369-170-18-00

A-1

Schedule 2.9(f)

Draw Date		Cumulative
		Advance
2/5/19	$	0
2/25/19	$	7,969,283
3/25/19	$	8,574,833
4/25/19	$	11,822,855
5/28/19	$	14,314,140
6/25/19	$	16,963,615
7/25/19	$	19,585,891
8/26/19	$	23,318,875
9/25/19	$	25,967,102
10/25/19	$	29,863,643
11/25/19	$	34,397,595
12/26/19	$	38,878,560
1/27/20	$	44,422,822
2/25/20	$	49,164,724
3/25/20	$	54,915,988
4/27/20	$	60,910,737
5/26/20	$	67,754,792
6/25/20	$	75,451,966
7/27/20	$	83,125,570
8/25/20	$	90,830,508
9/25/20	$	97,788,179
10/26/20	$	103,781,989
11/25/20	$	104,800,000
12/28/20	$	104,800,000
1/25/21	$	104,800,000

A-2

Schedule 5.6(d)

Existing Investments

	Amount Invested/
	Obligated to be		Percentage
Investment	Invested		Owned
CUBIC DEFENCE WLL
Doho, Qatar	$	27,000.00	49	%
(49% owned subsidiary of Cubic Defence UK Ltd.)
JV created to facilitate sales in Qatar – being replaced with Cubic Defense Doha LLC
EMIRATES TRAINING TECHNOLOGY LLC
Abu Dhabi, United Arab Emirates	$	5,100,000.00	49	%
(49% owned by Cubic Defence UK Ltd.)
JV created to facilitate sales in United Arab Emirates
BEATY & COMPANY COMPUTING INC.
California	$	4,000,000.00	20	%
(20% owned by Cubic Corporation)
AHA – CUBIC CORPORATION, LLC
Jacksonville, Florida	$	0.0	49	%
(49% owned by Cubic Defense Applications, Inc.)
BOSTON AFC 2.0 HOLDCO LLC.
Delaware	$	2,750,378.651	10	%
(10% owned by Cubic Transportation Systems, Inc.)
LC # NUSCGS002830 – Undrawn
BLACKHORSE, LP
Delaware	$	10,000,000.002	TBD
($10M obligation to be funded over time)

¹Potential investment posted in the form of an undrawn performance letter of credit, which could be drawn in certain circumstances.

²Obligated to invest this amount over time. Currently, $5,053,411.00 has been invested

A-1

Schedule 5.6(e)

Existing Indebtedness; Disclosed Matters as to Pension Funds

Borrower	Name	Bank	Maximum Amount / Amount Drawn/Used
Cubic Transportation Systems, Limited	Loan Facility – Bi-lateral line	BNP Paribas	GBP 20,000,000.00 / GBP 0.00

LETTER OF			AMOUNT
CREDIT	ISSUING BANK	CURRENCY	OUTSTANDING
NUMBER
SB017468	BANK OF THE WEST	USD	$224,000.00
MB 60513437	BANK OF THE WEST	USD	$3,000,000.00
69616047	CITIBANK	USD	$500,000.00
69616947	CITIBANK	USD	$4,990.80
SB001331	Umpqua	USD	$163,077.71
SLCPPDX05180	US BANK	USD	$3,492,000.00

Indebtedness related to the Encumbrances listed on Schedule 5.6(f).

UK Pension Funding Obligation – Cubic Transportation Systems Limited:

The Pensions Regulator technical provision calculates the deficit at £32.0M.

In agreement with the Trustees, Cubic Transportation Systems Limited currently makes additional contributions to the (closed) scheme of £3.9M3 per annum. It is anticipated that this will remove the deficit over a 7 year period. Consistent with other UK defined benefit schemes, these assumptions are reviewed every 3 years (tri-annual review) and the Trustees report back to The Pensions Regulator on the current deficit of the Plan, changes to previous valuation assumptions and any additional (or reduced) measures agreed to close the deficit over the next 3-7 years.

³The previous agreement is in the process of being renegotiated. The technical deficit was recently remeasured and increased from £24.0M to £32.0M. Contributions are expected to increase from £3.9M to £5.0M.

A-2

Schedule 5.6(f)

Existing Encumbrances

Cubic Related Entity	Filing Office	File Number File Date	Secured Party
Cubic Corporation	Delaware Department of State	No. 2016 4515142 Filed: 07/26/2016	Dell Financial Services L.L.C.
Cubic Corporation	Delaware Department of State	No. 2018 6781021 Filed: 10/01/2018	Bank of the West
Cubic Corporation	Delaware Department of State	No. 2019 0846043 Filed: 02/05/2019	MUFG Union Bank, N.A.
Cubic Corporation	Delaware Department of State	No. 2019 0866124 Filed: 02/06/2019	MUFG Union Bank, N.A.
Cubic Corporation	Delaware Department of State	No. 2020 1353046 Filed: 02/06/2019	Virginia Tech Foundation, Inc.
Cubic Transportation Systems, Inc.	California Secretary of State	No. 18-7673388566 Filed: 10/01/2018	Bank of the West
Cubic Defense Applications, Inc.	California Secretary of State	No. 17-7572916247 Filed: 02/27/2017	Marubeni Citizen Cincom, Inc.
Cubic Defense Applications, Inc. (Cubic Mission Solutions)	California Secretary of State	No. 18-7658288538 Filed: 07/10/2018	Electro Rent Corporation
Cubic Defense Applications, Inc.	California Secretary of State	No. 19-7707617237 Filed: 04/16/2019	Electro Rent Corporation
Cubic Defense Applications, Inc.	California Secretary of State	No. 197742641152 Filed: 10/24/2019	Employment Development Department
Cubic Defense Applications, Inc.	California Secretary of State	No. 207764748489 Filed: 2/28/2020	Employment Development Department
GATR Technologies, Inc.	Alabama Secretary of State	No. 19-7040140 Filed: 1/30/2019	Electro Rent Corporation
GATR Technologies, Inc.	Alabama Secretary of State	No. 19-0523015 Filed: 9/27/2019	Wells Fargo Bank, National Association

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			First Tennessee Bank of National Association Xenith Bank Towne Bank Townebank Suntrust Bank Wells Fargo Bank
Nuvotronics, Inc.	Delaware Department of State	No. 2016 1142569 Filed: 02/25/2016	· CCA Financial, LLC · First Tennessee Bank of National Association · Xenith Bank · Towne Bank · Townebank · Suntrust Bank · Wells Fargo Bank
Cubic Transportation Systems Limited	First Charge granted to Transport for London (TfL)	Bank Account Royal Bank of Scotland, Knightsbridge Account #85127647	Encumbrance balance varies based upon cash maintained in the restricted cash. A portion of payments received from TfL are deposited into this account and the funds are used to fund future work. Current balance:
			GBP 18,584,314.19

A-4

EXHIBIT A

TO PARTICIPATION AGREEMENT

Form of Advance Request

                   , 20     

To:        Bankers Commercial Corporation, in its capacity as the Lessor (the “Lessor”)

MUFG Bank, Ltd., in its capacity as Administrative Agent (the “Administrative Agent”)

CBRE Global Investors, LLC, in its capacity as Construction Consultant

From:   Cubic Corporation, as Construction Agent

Re:       Advance for $ [                                   ] pursuant to the Second Amended and Restated Participation Agreement dated as of May 29, 2020 (as may be amended, the “Participation Agreement”), among Cubic Corporation, as the Lessee (the “Lessee”) and the Construction Agent, MUFG Union Bank, N.A., as Collateral Agent (the “Collateral Agent”), the Administrative Agent, the Rent Assignee(s) named on Schedule I-A thereto from time to time, and the Lessor.

1.          All capitalized terms used but not defined herein shall have the meanings as set forth in Annex I of the [ , 2020, draft of the]1 Participation Agreement.

2.         The  proposed  Advance Date is  , 20 (the “Advance Date”), provided that the Lessor is hereby directed and authorized by the Construction Agent to wire the Advance directly to the Administrative Agent on the proposed Advance Date.²

3.         The Lessee hereby requests that the Advance be made in an aggregate amount of $[                                  ].

4.         $[                                 ] of the Advance is to fund Construction Costs other than Carrying Costs.

5.         $[                                 ] of the Advance is to fund Carrying Costs other than Capitalized Yield and Transaction Costs.

6.         $[                                 ] of the Advance is to fund Capitalized Yield.

¹ Use for initial Advance only.

²The Monthly Date which will be the same date each month.

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7.         $[                                 ] of the Advance is to fund Upfront Fees.³

8.         $[                                 ] of the Advance is to fund Non-Use Fees.

9.         $[                                 ] of the Advance is to fund Transaction Costs other than Upfront Fees and Non-Use Fees.

10.       The initial Payment Period for the Advance commences on the Advance Date and shall end on [the next Monthly Date/the Base Term Commencement Date].

11.       [The Lessee agrees that it shall pay to the Lessor and Rent Assignees such amounts as may be necessary to reimburse the Lessor and Rent Assignees for any loss or expense incurred (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Lessor or Rent Assignees to make, continue or maintain any portion of its investment in any Rent Assignment Interests or Lessor Investment, as applicable, on a LIBOR Rate basis) as a result of the Advance not being made on the Advance Date due to the Lessee cancelling or rescinding this Advance Request, or not satisfying the conditions precedent to, the Advance on the Advance Date or otherwise with respect to the actions or inactions of the Administrative Agent such that the Lessor or Rent Assignees are not able, in light of internal funding procedures or otherwise, to deliver or release its portion of the Advance on the Advance Date. The Lessor and Rent Assignees shall promptly notify the Lessee in writing of the amount of any claim under this paragraph, the reason or reasons therefore and the additional amount required fully to compensate the Lessor and Rent Assignees for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding upon the Lessee. The indemnity set forth herein shall survive the Advance Date and the execution and delivery hereof.]⁴

12.       The undersigned requests that disbursements be sent by wire transfer in accordance with the wire instructions of the Lessee set forth in Schedule II to the Participation Agreement.

13.       [The notice provisions set forth in Section 9.3 of the Participation Agreement are hereby incorporated by reference as if fully set forth herein. Any notices delivered hereunder in accordance with such Section shall be deemed validly given to such other Person.]⁵

³Initial Advance Request only.

⁴Only to be made in connection with initial Advance Request.

⁵.Only to be made in connection with initial Advance Request

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14.        [In addition, the provisions set forth in Sections 9.8, 9.10, 9.13, and 9.17 of the [ ], 2020 draft of Participation Agreement shall be incorporated herein by reference.]⁶

15.        Each addressee hereof shall be entitled to rely on this Advance Request and the undersigned agree that such addressees shall have third-party beneficiary rights, all as if such addressees were signatories hereto.

16.        Pursuant to Section 3.1(e) of the Participation Agreement, the undersigned hereby certifies that:

(i) the remaining Available Commitments of the Lessor and the Rent Assignees are sufficient to Complete the Facility and to pay all Construction Costs;

(ii)  Completion can be achieved before the Construction Period Termination Date;

(iii)  the Facility is being constructed on the Site substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget (in each case, as supplemented or amended pursuant to Section 3.2 of the Construction and Development Agreement);

(iv) all Change Orders which have not previously been certified in a prior Advance Certificate are attached hereto as Exhibit A (the “Current Change Orders”), together with reasonably sufficient detail thereof, including of the change and cost of the change for all such Change Orders;

(v) the Current Change Orders, individually and in the aggregate, after giving effect thereto, will not (A) materially diminish: (1) the utility, useful life or functional capability of the Facility as Class A office buildings when Completion has been effected; (2) the expected Fair Market Value of the Facility as of the Construction Period Termination Date; or (3) the Fair Market Value as of the Maturity Date; (B) cause the remaining Available Commitments of the Lessor and the Rent Assignees to be insufficient to Complete the Facility; or (C) delay Completion beyond the Construction Period Termination Date;

(vi)  funds for the Current Change Orders are available from the unused Aggregate Contingency Amount (subject to the requirement for Lessor’s and Rent Assignees’ consent, if applicable, as referenced in subsection (viii) below);

(vii)  in the aggregate respecting any particular Major Construction Document, the cost of all Current Change Orders under such Major Construction Document, when aggregated with the cost of all prior Change Orders under such Major Construction Document, does not exceed the higher of $200,000 and ten percent (10%) of the original total amount payable under such Major Construction Document (in the

A-3

aggregate with all prior and concurrent Change Orders with respect to such Construction Document);

(viii)  in the aggregate respecting all Construction Documents, the Construction Budget and the Plans and Specifications, the cost of all Current Change Orders, when aggregated with the cost of all prior Change Orders, does not exceed an amount equal to the Permitted Excess Amount, unless the Lessor and Rent Assignees have provided their prior written consent to each such additional Current Change Order causing such amount to exceed the Permitted Excess Amount;

(ix)  a true, correct and complete reconciliation of the Construction Budget is attached hereto as Exhibit B-1 and, to the extent completed since the prior Advance, a true, correct and complete copy of the Plans and Specifications are attached hereto as Exhibit B-2 and the Offsite Plans and Specifications are attached hereto as Exhibit B-3;

(x)  all representations and warranties of the Lessee and the Construction Agent contained in the Operative Documents are true and correct in all material respects;

(xi) no Construction Event of Default or Construction Default is continuing;

(xii)  all necessary or advisable Governmental Actions, and all consents, approvals and authorizations of Persons, required in connection with the Overall Transaction, have been obtained or made and are in full force and effect and are not subject to any pending procedures or appeals, whether administrative, judicial or otherwise, except for (A) any Governmental Actions that are not required with respect to the current status of the construction of the Facility; (B) any other Governmental Action, consent, approval or authorization the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect; and (C) the execution of those Construction Documents not required with respect to the current status of the construction of the Facility;

(xiii)   all Major Construction Documents which have been entered into by the Construction Agent prior to the Advance Date have been assigned to the Lessor pursuant to an Assignment of Contracts and the applicable Consent and Acknowledgments have been delivered to Lessor, the Rent Assignees and the Administrative Agent;

(xiv) the proceeds of the Advance will be used solely to pay for accrued and unpaid Construction Costs previously performed or contracted for and then due or payable, or that have been invoiced (or in the case of costs incurred by the Construction Agent using its own resources, that have been described in writing to the Lessor in reasonable detail) and will be come due and payable in the month immediately following the Advance Date, or materials previously purchased or contracted for, together with all Carrying Costs and that all invoices for the foregoing costs have been (or will be with the proceeds of such Advance) paid in full;

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(xv)  none of such costs specified in clause (xiv) have been reimbursed or paid pursuant to a previous Advance;

(xvi) the costs being funded with the Advance are as set forth in Schedule 1 attached hereto;

(xvii)  all conditions precedent to the Advance have been satisfied, and

(xviii)  no Major Construction Documents have been entered into since the Closing Date or the most recent prior Advance Date, as applicable[, except for those attached hereto as Exhibit C].

17.        $250 of the Advance is to fund the Construction Fee.

[Signature page follows]

A-5

IN WITNESS WHEREOF, the undersigned has caused this Advance Request to be duly executed and delivered by its proper and duly authorized officers as of the day and year first above written.

CUBIC CORPORATION

By:
	Name:
	Title:

EXHIBIT A to Advance Request

[Current Change Orders]

EXHIBIT B-1 to Advance Request

[Reconciliation of Budget]

EXHIBIT B-2 to Advance Request

[Plans and Specifications]

EXHIBIT B-2 to Advance Request

[Offsite Plans and Specifications]

EXHIBIT C to Advance Request

[New Major Construction Documents]

SCHEDULE 1 to Advance Request

[Detail of Costs Being Funded With the Current Advance]

EXHIBIT B TO PARTICIPATION AGREEMENT

FORM OF ASSIGNMENT AGREEMENT

This Assignment Agreement (this “Assignment Agreement”) is made and entered into as of                                 ,               , by and between [NAME OF ASSIGNOR] (the “Assignor”) and [NAME OF ASSIGNEE] (the “Assignee”).

RECITALS

A.         Reference is made to the Second Amended and Restated Participation Agreement, dated as of May 29, 2020, by and among Cubic Corporation, a Delaware corporation, as the Lessee and the Construction Agent, Bankers Commercial Corporation, as the Lessor, MUFG Union Bank, N.A., as the Collateral Agent, MUFG Bank, Ltd. as the Administrative Agent and the Rent Assignee(s) named on Schedule I-A thereto from time to time (as the same may be amended, supplemented or otherwise modified from time to time, the “Participation Agreement”). Capitalized terms used herein that are defined in the Participation Agreement shall have the meanings therein defined.

B.         Pursuant to the Participation Agreement and the other Operative Documents and subject to the limitations set forth therein, (i) the Rent Assignees agreed to acquire the Rent Assignment Interests from the Lessor which are to be sold by Lessor under each Rent Assignment Agreement and (ii) the Lessor agreed to make the Lessor Investment.

C.         The Assignor’s Commitment (without giving effect to the assignment effected hereby or to other assignments thereof which have not yet become effective) in respect of Rent Assignment Interests and Lessor Investment is specified in Item 1 of Schedule I hereto. The outstanding principal amount of the Rent Assignment Interests corresponding to Assignor’s Rent Assignment Interests and/or the outstanding principal amount of the Lessor Investment of the Assignor (without, in both cases, giving effect to the assignment effected hereby or to other assignments thereof which have not yet become effective) are specified in Item 2 of Schedule 1 hereto.

D.         The Assignor wishes to sell and assign to the Assignee, and the Assignee wishes to purchase and assume from the Assignor, (i) the portion of the Assignor’s rights and obligations under the Operative Documents, including its Commitment specified in Item 3 of Schedule 1 hereto (collectively, the “Assigned Commitment”) and (ii) the portion of the Assignor’s Rent Assignment Interests, and/or outstanding Lessor Investment specified in Item 4 of Schedule 1 hereto (the “Assigned Property”).

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.          Assignment

Subject to the terms and conditions set forth herein and in the Participation Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, without recourse, on the date first set forth above (the “Assignment Date”), (i) all right, title and interest of the Assignor to the Assigned Property and (ii)  all obligations of the Assignor under the Operative Documents with respect to the Assigned Commitment. The Assignor shall at the cost and expense of the Assignee take such steps as may be necessary to fully effect legally or commercially such sale. As full consideration for the sale of the Assigned Property and the Assigned Commitment, the Assignee shall pay to the Assignor on the Assignment Date the purchase price agreed to between such parties (the “Purchase Price”).

2.          Representations, Warranties [and Comments]

(a)        Each of the Assignor and the Assignee represents and warrants to the other that (i) it has full power and legal right to execute and deliver this Assignment Agreement and to perform the provisions of this Assignment Agreement; (ii) the execution, delivery and performance of this Assignment Agreement have been authorized by all necessary action, corporate or otherwise, and do not violate any provisions of its organizational documents or any contractual obligations or requirement of law binding on it; and (iii) this Assignment Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. The Assignor further represents to the Assignee that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor.

(b)        The Assignee represents and warrants to the Assignor, the Lessee, the Administrative Agent and the Lessor that it is an Eligible Assignee or, in the case of an assignment made by the Lessor pursuant to Section 6.3(b) of the Participation Agreement, that it is a Permitted Transferee and that the conditions of assignment set forth in Section 6.3 of the Participation Agreement have been satisfied.

(c)        The Assignee represents and warrants to the Lessee, upon consummation of the assignment and assumption contemplated hereby, that it will not be subject to United States federal or state Withholding Tax on payments of yield under the Operative Documents.

(d)        [The Assignee agrees to deliver a lessor confirmation letter to the Lessee].¹

3.          Conditions Precedent

The obligations of the Assignor and the Assignee hereunder shall be subject to the fulfillment of the conditions that the Assignor shall have (i) received payment in full of the Purchase Price, and (ii) complied with the other applicable provisions of Section 6.3 of the Participation Agreement.

¹Applicable only to Lessor.

4.          Notice of Assignment

The Assignor agrees to give notice of the assignment and assumption of the Assigned Property and the Assigned Commitment in accordance with Section 6.3(c)(A) of the Participation Agreement and hereby instructs the Administrative Agent, the Lessee and the Lessor to make all payments with respect to the Assigned Property and the Assigned Commitment directly to the Assignee at the applicable offices specified on Schedule 2 hereto; provided, however, that the Administrative Agent, the Lessee and the Lessor shall be entitled to continue to deal solely and directly with the Assignor in connection with the interests so assigned until (i) the Agents, the other Participants and the Lessee shall have received notice of the assignment and (ii) the Lessee shall have consented in writing thereto to the extent required by Section 6.3 of the Participation Agreement. From and after the date (the “Assignment Effective Date”) on which the Administrative Agent shall notify the Lessee and the Assignor that the requirements set forth in the foregoing sentence shall have occurred and all consents (if any) required shall have been given, (x) the Assignee shall be deemed to be a party to the Operative Documents and, to the extent that rights and obligations thereunder shall have been assigned to Assignee as provided in such notice of assignment to the Administrative Agent, shall have the rights and obligations of a Rent Assignee and/or the Lessor, as applicable, under the Operative Documents, and (y) the Assignee shall be deemed to have appointed and the Agents to take such action as agent on its behalf and to exercise such powers under the Operative Documents as are delegated to the Administrative Agent or the Collateral Agent, as applicable, by the terms thereof, together with such powers as are reasonably incidental thereto. After the Assignment Effective Date, the Administrative Agent and the Lessee shall make all payments in respect of the interest assigned hereby (including payments of principal on the Rent Assignment Interests, Lessor Investment, Yield, Fees and other amounts) to the Assignee. The Assignor and the Assignee shall make all appropriate adjustment in payments under the Assigned Property and the Assigned Commitment for periods prior to the Assignment Effective Date hereof directly between themselves. If the Assignee is not a United States Person as defined in Section 7701(a)(30) of the Code, the Assignee (if legally entitled to do so) shall deliver to the Administrative Agent and the Lessor and the Lessee herewith the forms required by Section 7.3 of the Participation Agreement to evidence the Assignee’s complete exemption from United States withholding taxes with respect to payments under the Operative Documents. If the Assignee is a United States Person, the Assignee (if legally entitled to do so) shall deliver to the Administrative Agent and the Lessor and the Lessee herewith an Internal Revenue Service Form W-9 evidencing the Assignee’s exemption from United States backup withholding taxes and any other forms required by Section 7.3 of the Participation Agreement.

5.          Independent Investigation

The Assignee acknowledges that it is purchasing the Assigned Property and the Assigned Commitment from the Assignor totally without recourse and, except as provided in Section 2 hereof, without representation or warranty. The Assignee further acknowledges that it has made its own independent investigation and credit evaluation of the Lessee in connection with its purchase of the Assigned Property and the Assigned Commitment. Except for the representations or warranties set forth in Section 2, the Assignee acknowledges that it is not relying on any representation or warranty of the Assignor, expressed or implied, including without limitation, any representation or warranty relating to the legality, validity, genuineness,

enforceability, collectability, yield rate, repayment schedule or accrual status of the Assigned Property or the Assigned Commitment, the legality, validity, genuineness or enforceability of the Operative Documents, or the financial condition or creditworthiness of the Lessee or any other Person. The Assignor has not and will not be acting as the representative, agent or trustee of the Assignee with respect to matters arising out of or relating to the Operative Documents or this Assignment Agreement. From and after the Assignment Effective Date, except as set forth in Section 4 above, the Assignor shall have no rights or obligations with respect to the Assigned Property or the Assigned Commitment.

6.          Consents

Pursuant to the provisions of Section 6.3 of the Participation Agreement and to the extent required thereby, the Lessee, by signing below, consents to this Assignment Agreement and to the assignment contemplated herein.

7.          Method of Payment

All payments to be made by either party hereunder shall be in funds available at the place of payment on the same day and shall be made by wire transfer to the account designated by the party to receive payment.

8.          Integration

This Assignment Agreement shall supersede any prior agreement or understanding between the parties (other than the Participation Agreement and the other Operative Documents) as to the subject matter hereof.

9.          Counterparts

This Assignment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns.

10.        Headings

Section headings have been inserted herein for convenience only and shall not be construed to be a part hereof.

11.        Amendments; Waivers

This Assignment Agreement may not be amended, changed, waived or modified except by a writing executed by the parties hereto, and may not be amended, changed, waived or modified in any manner inconsistent with Section 6.3 of the Participation Agreement without the prior written consent of the Administrative Agent and the Lessee.

12.        Governing Law

This Assignment Agreement shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York, without regard to principles of conflict of laws (except Section 5-1401 of the New York General Obligations Law).

13.        Beneficiaries

To the extent not a party hereto, the Agents, the Lessor and the Lessee shall be third party beneficiaries of this Assignment Agreement with respect to the representations and warranties applicable to such parties as set forth in Sections 2(b), (c) and/or (d) hereof.

*            *            *

IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

[NAME OF ASSIGNOR], as Assignor
By:
	Name:
	Title:
[NAME OF ASSIGNEE], as Assignee
By:
	Name:
	Title:

Consented to by:²

Cubic Corporation, as Lessee

By:
	Name:
	Title:

²To the extent required under Section 6(a) hereof.

SCHEDULE 1

TO

ASSIGNMENT AGREEMENT,

dated as of May 29, 2020,

between [Name of Assignor], as Assignor and

[Name of Assignee], as Assignee

Item 1	Assignor’s Commitment:
	Rent Assignment Interests	$
	Lessor Investment	$
Item 2	Outstanding principal amount of:
	Rent Assignment Interests	$
	Lessor Investment	$
Item 3	Assigned Commitment:	$
Item 4	Outstanding amount of Assigned Property:
	Rent Assignment Interests	$
	Lessor Investment	$

SCHEDULE 2

TO

ASSIGNMENT AGREEMENT

dated as of May 29, 2020,

between [Name of Assignor], as Assignor and

[Name of Assignee], as Assignee

DOMESTIC LENDING OFFICE	LIBOR LENDING OFFICE
Attention:	Attention:
Telephone: (      )         -	Telephone: (      )         -
Telecopy: (         )           -	Telecopy: (         )           -
ADDRESS FOR NOTICES
Attention:
Telephone: (      )         -
Telecopy: (         )           -
WIRING INSTRUCTIONS FOR ASSIGNEE:
Bank:
Account Number:
ABA Number:
Attention:
Ref:

EXHIBIT C TO PARTICIPATION AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

CUBIC CORPORATION

OFFICER’S CERTIFICATE

In Conformance with the Second Amended and Restated Participation Agreement

Dated May 29, 2020

As of and for the Period Ending [            ].

The following certification is provided to the Participants as required under Section 5.1(i) of the Second Amended and Restated Participation Agreement dated May 29, 2020 (the “Participation Agreement”). The undersigned hereby certifies that:

a.         the Lessee was in compliance with the financial covenants set forth on Schedule 1 attached hereto during the period covered by the accompanying financial statements (detailed calculations of financial covenant compliance annexed),

b.         the undersigned has reviewed the terms of the Participation Agreement and has made, or caused to be made under his or her supervision, a review of the transactions and conditions of the Lessee and its Restricted Subsidiaries from the beginning of the period covered by the accompanying financial statements to the date of this certificate, and that such review (i) has not disclosed the existence during such period of any condition or event that constitutes a Default or Event of Default as defined in the Participation Agreement and (ii) has confirmed that Unrestricted Subsidiaries constitute, as of the end of the period covered by the accompanying financial statements, in the aggregate,       % of Consolidated Total Capitalization, and

c.         to the extent included in any cost savings, operating expense reductions and/or cost synergies as an addback to the calculation of Consolidated EBITDA, such cost savings, operating expense reductions and/or cost synergies are reasonably identifiable, factually supportable and reasonably anticipated in good faith to be achieved savings, operating expense reductions and/or cost synergies.

Dated at San Diego, California, this          day of                           ,       .

Name:

Title:

For the Quarter/Year ended                    (“Statement Date”)

SCHEDULE 1

to the Compliance Certificate

($ in 000’s)

I. Section 5.6(a)(i) - Consolidated EBITDA to Consolidated Cash Interest Expense.
A. Consolidated EBITDA for four consecutive fiscal quarters ending on above date (“Subject Period”) as set forth on Schedule 2:	$
B. Consolidated Cash Interest Expense for the Subject Period:	$
C. Consolidated EBITDA to Consolidated Cash Interest Expense (Line I.A ÷ Line I.B):
Minimum required: 3.00 to 1.00
II. Section 5.6(a)(ii) – Net Leverage Ratio.
A. Consolidated Net Indebtedness at Statement Date as set forth on Schedule 2:	$
B. Indebtedness attributable to undrawn letters of credit	$
C. Consolidated Adjusted EBITDA for the Subject Period as set forth on Schedule 2 (calculated in accordance with the terms of the definition thereof to include the Consolidated EBITDA attributable to any Person which becomes a Restricted Subsidiary during the Subject Period):	$
D. Net Leverage Ratio ((Line II.A – Line II.B) ÷ Line II.C):
Maximum permitted: Subject to any Adjusted Covenant Period, [ ​ ​]12 to 1.00

¹² Insert applicable amount pursuant to Section 5.6(a)(ii).

SCHEDULE 2

to the Compliance Certificate

($ in 000’s)

Consolidated EBITDA

(in accordance with the definition of Consolidated EBITDA as set forth in the Participation Agreement)

EBITDA	Quarter Ended	Quarter Ended	Quarter Ended	Quarter Ended	Twelve Months Ended
consolidated net income or net earnings (or any comparable line item) of the Lessee and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, but excluding:
extraordinary or non-recurring items (except the non-recurring gain expected to result from the Sale and Leaseback Transactions permitted in Section 5.6(g)(iii))
gains or losses resulting from changes in accounting principles
+ Consolidated Interest Expense
+ income tax expense
+ depreciation expense
+ amortization expense
+ non-cash stock compensation expense and other non-cash expense items
+ non-recurring business optimization expenses and other restructuring charges or reserves

+pro forma “run rate” cost savings, operating expense reductions and cost synergies (in each case net of continuing associated expenses), in each case related to a consummated

Permitted Acquisition

+ one-time transaction fees, costs, expenses, premiums, make-whole amounts, penalty

payments and other similar items

+ charges, losses, lost profits, expenses or write-offs to the extent indemnified or

insured by a third party

+ losses recognized and expenses incurred in connection with the effect of currency and exchange rate fluctuations on intercompany balances and other balance sheet

items

- non-cash gains or revenues

- gains recognized and income recognized in connection with the effect of currency and exchange rate fluctuations on intercompany balances and other balance sheet

items

= Consolidated EBITDA

Consolidated Indebtedness

(in accordance with the definition of Consolidated Indebtedness

as set forth in the Participation Agreement)

Liabilities for borrowed money	$
+ liabilities for deferred purchase prices of property	$
+ Capital Lease Obligations	$
+ liabilities for borrowed money secured by an Encumbrance with respect to property	$
+ liabilities for letters of credit (excluding performance letters of credit and undrawn letters of credit)
+ net obligations in respect of Swaps	$
+ Guarantees of any of the foregoing (without duplication)
Consolidated Indebtedness	$

Consolidated Net Indebtedness

(in accordance with the definition of Consolidated Net Indebtedness

as set forth in the Participation Agreement)

Consolidated Indebtedness (see above)	$
-Unrestricted Cash	$
-Unrestricted Permitted Investments	$
Consolidated Net Indebtedness	$

EX-10.2

Exhibit 10.2

EXECUTION VERSION

AMENDED AND RESTATED LEASE AGREEMENT

DATED AS OF JUNE 7, 2019

BETWEEN

BANKERS COMMERCIAL CORPORATION,

AS THE LESSOR,

AND

CUBIC CORPORATION,

AS THE LESSEE

THIS AMENDED AND RESTATED LEASE AGREEMENT HAS BEEN EXECUTED IN MULTIPLE COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN COUNTERPART NO. 1, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE COLLATERAL AGENT ON OR FOLLOWING THE SIGNATURE PAGES THEREOF.

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS		1
SECTION 1.1.	Definitions	1
ARTICLE II LEASE OF LEASED PROPERTY; LEASE TERM		2
SECTION 2.1.	Acceptance and Lease	2
SECTION 2.2.	Lease Term	2
ARTICLE III TAXES		3
SECTION 3.1.	Impositions	3
SECTION 3.2.	Contests	3
ARTICLE IV RENT		3
SECTION 4.1.	Basic Rent	3
SECTION 4.2.	Supplemental Rent	3
SECTION 4.3.	Method and Amount of Payment	4
SECTION 4.4.	Late Payment	4
ARTICLE V NET LEASE		4
ARTICLE VI UTILITY CHARGES		6
ARTICLE VII CONDITION AND USE OF LEASED PROPERTY		6
SECTION 7.1.	Waivers	6
ARTICLE VIII LIENS; EASEMENTS		7
SECTION 8.1.	Liens	7
SECTION 8.2.	Easements	7
ARTICLE IX MAINTENANCE AND REPAIR; ALTERATIONS AND ADDITIONS		8
SECTION 9.1.	Maintenance and Repair; Compliance With Law	8
SECTION 9.2.	Facility and Alterations	9
SECTION 9.3.	Alterations Subject to Lease	10
SECTION 9.4.	Maintenance and Repair Reports	11
SECTION 9.5.	Permitted Contests	11
ARTICLE X USE		11
SECTION 10.1.	Use.	11
SECTION 10.2.	Trade Compliance	12
ARTICLE XI INSURANCE		12
SECTION 11.1.	Required Coverages	12

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SECTION 11.2.	Delivery of Insurance Certificates	16
SECTION 11.3.	Other Insurance	16
ARTICLE XII ASSIGNMENT AND SUBLEASING		16
ARTICLE XIII LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE; ENVIRONMENTAL		18
SECTION 13.1.	Event of Taking, Event of Loss	18
SECTION 13.2.	Application of Payments Relating to an Event of Taking or an
Event of Loss		19
SECTION 13.3.	Application of Certain Payments Relating to a Condemnation	19
SECTION 13.4.	Application of Certain Payments Relating to a Casualty	20
SECTION 13.5.	Proceeds	20
SECTION 13.6.	Negotiations	21
SECTION 13.7.	No Rent Abatement	21
SECTION 13.8.	Environmental Matters	21
SECTION 13.9.	Notice of Environmental Matters	22
ARTICLE XIV CERTAIN DUTIES AND RESPONSIBILITIES		22
ARTICLE XV INSPECTION		23
ARTICLE XVI THE GROUND LEASE		23
ARTICLE XVII EVENTS OF DEFAULT		24
ARTICLE XVIII ENFORCEMENT		26
SECTION 18.1.	Remedies	26
SECTION 18.2.	Proceeds of Sale; Deficiency	30
SECTION 18.3.	Waiver of Certain Rights	30
SECTION 18.4.	Remedies Cumulative; No Waiver; Consents	30
SECTION 18.5.	Limitation of Recourse Liability	31
SECTION 18.6.	Phase I Environmental Report	32
ARTICLE XIX RIGHT TO CURE		32
ARTICLE XX EARLY TERMINATION OPTION AND OBLIGATION TO PURCHASE		32
SECTION 20.1.	Early Termination Option	32
SECTION 20.2.	Required Purchase	32
ARTICLE XXI END OF TERM OPTIONS		33
SECTION 21.1.	End of Term Options	33
SECTION 21.2.	Election of Options	33
ARTICLE XXII RETURN OPTION		33

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SECTION 22.1.	Return Option Procedures	33
SECTION 22.2.	Sale	36
SECTION 22.3.	Application of Sale Proceeds and Recourse Payments	37
SECTION 22.4.	Failure to Sell Leased Property	38
SECTION 22.5.	Surrender and Return	40
ARTICLE XXIII MISCELLANEOUS		41
SECTION 23.1.	Binding Effect; Successors and Assigns; Survival	41
SECTION 23.2.	Severability	41
SECTION 23.3.	Notices	41
SECTION 23.4.	Amendment; Complete Agreements	42
SECTION 23.5.	Headings	42
SECTION 23.6.	Original Executed Counterpart	42
SECTION 23.7.	Governing Law	42
SECTION 23.8.	No Joint Venture	42
SECTION 23.9.	No Accord and Satisfaction	43
SECTION 23.10.	Survival	43
SECTION 23.11.	Transfer of Leased Property	43
SECTION 23.12.	Enforcement of Certain Warranties	44
SECTION 23.13.	Security Interest in Funds	44
SECTION 23.14.	Quiet Enjoyment	44
SECTION 23.15.	Submission to Jurisdiction	45
SECTION 23.16.	Jury Trial	45
SECTION 23.17.	Payments	45
SECTION 23.18.	Nature of Transaction	46
EXHIBITS
EXHIBIT A	FORM OF LEASE SUPPLEMENT

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AMENDED AND RESTATED LEASE AGREEMENT

THIS AMENDED AND RESTATED LEASE AGREEMENT, dated as of June 7, 2019 (as amended, supplemented, or otherwise modified from time to time, this “Lease”), is between BANKERS COMMERCIAL CORPORATION, a California corporation, as the Lessor (the “Lessor”), and whose principal offices are located at 445 S. Figueroa Street, 14th Floor, Los Angeles, California 90071, and CUBIC CORPORATION, a Delaware corporation, as the Lessee (the “Lessee”), and whose principal offices are located at 9333 Balboa Avenue, San Diego, California 92123-1589.

WITNESSETH:

The parties hereto desire to enter into the Overall Transaction for the purpose of financing the construction of the Facility on the Site.

A.         Lessee and Lessor entered into a Lease Agreement, dated as of February 5, 2019 (the “Original Lease”).

B.         Lessee has amended and restated the Credit Agreement pursuant to that certain Fourth Amended and Restated Credit Agreement, dated as of April 30, 2019 (the “Credit Agreement”), by and among Cubic, Cubic Transportation Systems, Inc., Cubic Defense Applications, Inc. and the other subsidiary borrowers party thereto, as borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, joint lead bookruner and joint lead arranger, Bank of the West, Citibank, N.A., and MUFG Union Bank, N.A., as co-syndication agents, joint lead bookruners and joint lead arrangers, and U.S. Bank National Association and Bank of America, N.A. as co-documentation agents.

C.         Lessee and Lessor desire to amend and restate the Original Lease in its entirety to conform to certain modifications made to the Credit Agreement (as defined above) as set forth below.

D.         Pursuant to this Lease, the Lessor will lease the Leased Property to the Lessee, and the Lessee will lease the Leased Property from the Lessor.

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

ARTICLE I

DEFINITIONS

SECTION 1.1.      Definitions.

For all purposes hereof, the capitalized terms used herein and not otherwise defined and interpretation thereof shall have the meanings assigned thereto in Appendix I to that certain Amended and Restated Participation Agreement dated as of even date herewith, among the Lessee,

the Construction Agent, the Lessor, MUFG Bank, Ltd., as the Administrative Agent, MUFG Union Bank, N.A. as the Collateral Agent, and the Rent Assignee(s) named on Schedule I-A thereto from time to time (as the same may be amended, modified, restated or supplemented from time to time, the “Participation Agreement”), and the rules of interpretation set forth in Appendix I to the Participation Agreement shall apply to this Lease.

ARTICLE II

LEASE OF LEASED PROPERTY; LEASE TERM

SECTION 2.1.      Acceptance and Lease.

The Lessor, subject to the satisfaction or waiver of the conditions set forth in Section 2.1 of the Participation Agreement, hereby agrees to lease all of the Leased Property to the Lessee hereunder, and the Lessee hereby agrees, expressly for the direct benefit of the Lessor, to lease from the Lessor for the Lease Term, all of the Leased Property. Without limiting the generality of the foregoing, the Lessee acknowledges that the leasehold interest conveyed by this Lease and the Lessee’s rights hereunder are expressly made subject to the terms and conditions of the matters listed in Schedule B to the Title Policy, the Ground Lease, all other Permitted Liens and any other Liens not constituting Lessor Liens. The Lessee hereby agrees that delivery of possession of the subleasehold interest in the Site under the Ground Lease or payment from Advances for any portion of the Facility shall, without further act, constitute the irrevocable acceptance by the Lessee of the Site and such portion of the Facility for all purposes of this Lease and shall constitute the Lessee’s agreement to lease the Leased Property pursuant to the terms hereof during the Lease Term.

Subject to Articles XII and XVIII hereof, the Lessor will not lease nor otherwise make the Leased Property, in whole or in part, available to any Person other than the Lessee and its permitted successors, assigns and sublessees during the Lease Term, and (without derogating in any way from the Lessor’s rights under Article XV hereof) during the Lease Term the Lessee shall have unimpeded physical control of the Leased Property notwithstanding the Lessor’s rights to inspect the Leased Property in accordance with Article XV.

SECTION 2.2.      Lease Term.

Unless earlier terminated, the term of this Lease shall consist of (a) a base term (the “Base Term”) commencing immediately upon, and without further act of the parties hereto, the Completion Date (such date, the “Base Term Commencement Date”) and ending on the fifth anniversary of the Base Term Commencement Date, and (b) any Extended Remarketing Period described in Section 22.4 (the Base Term and any such Extended Remarketing Period are hereinafter collectively referred to as the “Lease Term”).

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ARTICLE III

TAXES

SECTION 3.1.      Impositions.

During the Lease Term, the Lessee agrees to pay when due without penalty or interest all Taxes imposed upon or levied against the Leased Property or any part thereof or interest therein consistent with Section 7.2 of the Participation Agreement. The Site is a separate tax lot for real property tax assessment purposes. Any Tax relating to a fiscal period of any taxing Authority falling partially within and partially outside the Lease Term shall be apportioned and adjusted between the Lessor and the Lessee. The Lessee covenants to furnish the Lessor, upon its request, within forty-five (45) days after the last date when any Tax must be paid by the Lessee, official receipts of the appropriate taxing Authority or other proof satisfactory to the Lessor evidencing the payment thereof.

SECTION 3.2.      Contests.

The Lessee shall have the right to contest any Tax in accordance with Section 7.2(b) of the Participation Agreement.

ARTICLE IV

RENT

SECTION 4.1.      Basic Rent.

During the Lease Term, the Lessee shall pay Basic Rent in arrears to the Lessor (i) on each Payment Date; provided, however, that prior to the Base Term Commencement Date, Basic Rent shall be payable solely from Advances, (ii) on the date required under Section 22.3 in connection with the Lessee’s exercise of the Return Option, if exercised, and (iii) on any date on which this Lease terminates, whether on a Lease Expiration Date or upon the Maturity Date or upon demand following an Event of Default pursuant to Article XVII.

SECTION 4.2.      Supplemental Rent.

The Lessee shall pay to the Lessor, or to whomever shall be entitled thereto as expressly provided herein or in any other Operative Document (and the Lessor hereby directs the Lessee, on behalf of the Lessor, to so pay any such other Person), any and all Supplemental Rent promptly as the same shall become due and payable and, in the event of any failure on the part of the Lessee to pay any Supplemental Rent, the Lessor shall have all rights, powers and remedies provided for herein or by law or in equity or otherwise in the case of nonpayment of Basic Rent subject to any applicable notice and grace period; provided, however, that prior to the Base Term Commencement Date, any Supplemental Rent payable through Advances pursuant to the Participation Agreement shall be payable by the Lessee only through Advances and shall be payable on Advance Dates. The Lessee hereby reaffirms that its obligation to pay Supplemental Rent shall include the payment of any and all Additional Costs. 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.

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SECTION 4.3.      Method and Amount of Payment.

Basic Rent and Supplemental Rent shall be paid by wire transfer by the Lessee to the Lessor (or, in the case of Supplemental Rent, to such Person as may be entitled thereto) at such place as the Lessor (or such other Person) shall specify in writing to the Lessee pursuant to Schedule II to the Participation Agreement; provided, however, that, so long as any Rent Assignee retains a Rent Assignment Interest, the Lessor directs the Lessee to pay Basic Rent to the Administrative Agent for the benefit of the Participants in accordance with Section 2.7 of the Participation Agreement. Each payment of Rent shall be made by the Lessee prior to 2:00 P.M. New York time (and payments made after such time shall be deemed to have been made on the next day) at the place of payment in funds consisting of Dollars which (in the case of any amount payable to any Participant or any other Indemnitee) shall be immediately available on the scheduled date when such payment shall be due unless, with respect to Supplemental Rent, the scheduled date shall not be a Business Day, in which case such payment shall be due and made on the next succeeding Business Day. The provisions of the foregoing sentence of this Section 4.3 shall be applicable only to Basic Rent and to Supplemental Rent payable to, or on behalf of or for the account of the Lessor and any other Indemnitee.

SECTION 4.4.      Late Payment.

If any Basic Rent shall not be paid when due, the Lessee shall pay to the Lessor, or if any Supplemental Rent payable to or on behalf or for the account of the Lessor, any Participant or other Indemnitee is not paid when due, the Lessee shall pay to whomever shall be entitled thereto, in each case as Supplemental Rent, interest at the Overdue Rate (to the maximum extent permitted by law) on such overdue amount from and including the due date thereof (without regard to any applicable grace period) to but excluding the Business Day of payment thereof.

ARTICLE V

NET LEASE

This Lease shall constitute a net lease and, notwithstanding any other provision of this Lease, except as specifically set forth in Article XIII and Section 20.1 below, it is intended that Basic Rent, Supplemental Rent, the Lease Balance and all other amounts due and payable under the Operative Documents shall be paid without counterclaim, setoff, deduction or defense of any kind and without abatement, suspension, deferment, diminution or reduction of any kind, and the Lessee’s obligation to pay all such amounts throughout the Lease Term is absolute and unconditional. The obligations and liabilities of the Lessee hereunder shall, to the fullest extent permitted by Applicable Laws and Regulations, in no way be released, discharged or otherwise affected for any reason (other than the indefeasible payment or performance in full of such liability or obligation) including: (a) any defect in the condition, merchantability, design, construction, quality or fitness for use of any portion of any Leased Property or the Site, or any failure of any Leased Property or the Site to comply with all Applicable Laws and Regulations, including any inability to occupy or use any Leased Property or the Site by reason of such non-compliance; (b) any damage to, abandonment, loss, contamination of or Release from or destruction of or any requisition or taking of any Leased Property or the Site or any part thereof; (c) any restriction, prevention or curtailment of or interference with any use of any Leased Property or the Site or any part thereof, including eviction; (d) any defect in title to or rights to any Leased Property or the

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Site or any Lien on such title or rights or on any Leased Property or the Site; (e) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by any Participant; (f) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to the Lessee, any Participant or any other Person, or any action taken with respect to this Lease by any trustee or receiver of the Lessee, any Participant or any other Person, or by any court, in any such proceeding; (g) any claim that the Lessee has or might have against any Person including, without limitation, any Participant, arising from any of the circumstances set forth in this sentence (but will not constitute a waiver of such claim); (h) any action, omission or breach on the part of the Ground Lessor or Ground Lessee under the Ground Lease or any failure on the part of the Lessor to perform or comply with any of the terms of this Lease, any other Operative Document or of any other agreement whether or not related to the Overall Transaction; (i) any invalidity or unenforceability or disaffirmance against or by the Lessee of this Lease or any provision hereof or any of the other Operative Documents or any provision of any thereof; (j) the impossibility of performance by the Lessee, the Lessor or both; (k) any action by any court, administrative agency or other Authority; (l) any restriction, prevention or curtailment of or any use of any Leased Property or any part thereof or the construction of any Alterations; (m) the failure of the Lessee to achieve any accounting or tax benefits or the characterization of the transaction intended by Section 2.14 of the Participation Agreement; (n) the inability or failure of Ground Lessee to take leasehold title to the Site under the Ground Lease; or (o) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not the Lessee shall have notice or knowledge of any of the foregoing. Except as specifically set forth in Article XIII or Section 20.1 of this Lease, this Lease shall be noncancellable by the Lessee for any reason whatsoever, and the Lessee, to the fullest extent permitted by Applicable Laws and Regulations, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Lease, or to any diminution, abatement or reduction of Rent payable by the Lessee hereunder. If for any reason whatsoever this Lease shall be terminated or amended in whole or in part by operation of law or otherwise, except as expressly provided in Article XIII or Sections 20.1 or 23.4 of this Lease, the Lessee shall, unless prohibited by Applicable Laws and Regulations, pay to the Lessor (or, in the case of Supplemental Rent, to whomever shall be entitled thereto) a compensation in an amount equal to each Rent payment (including the Lease Balance and any other amount due and payable under any Operative Documents) at the time and in the manner that such payment would have become due and payable under the terms of this Lease if it had not been terminated or amended in whole or in part. Each payment of Rent (including any payment of the Lease Balance and Purchase Amount) made by the Lessee hereunder shall be final and, absent error in the computation of the amount thereof, the Lessee shall not seek or have any right to recover all or any part of such payment from any Participant or any party to any agreements related thereto for any reason whatsoever. Lessee assumes the sole responsibility for the condition, use, operation, maintenance, and management of the Leased Property and the Site and the Lessor shall have no responsibility in respect thereof and shall have no liability for damage to the Leased Property, the Site or the property relating thereto of the Lessee or any subtenant of the Lessee on any account or for any reason whatsoever. Without affecting the Lessee’s obligation to pay Basic Rent, Supplemental Rent, the Lease Balance and all other amounts due and payable under the Operative Documents or to perform its obligations under the Operative Documents, the Lessee may, notwithstanding any other provision of the Operative Documents (but subject to Section 9.11 of the Participation Agreement), seek damages of any kind or any other remedy at law or equity against the Lessor for such willful misconduct or gross

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negligence or negligence in the handling of funds or for a breach by the Lessor of its obligations under this Lease or the other Operative Documents.

ARTICLE VI

UTILITY CHARGES

During the Lease Term the Lessee shall pay or cause to be paid all development and improvement charges and all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents, utilities or public dues used in or on the Leased Property or the Site during the Lease Term. The Lessee shall be entitled to receive any credit or refund with respect to any utility charge or public dues 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, which amount shall be promptly paid over to the Lessee. All charges for utilities imposed, rents or public dues with respect to the Leased Property and the Site (a) incurred prior to the Base Term Commencement Date shall be paid solely through the proceeds of Advances pursuant to the Construction and Development Agreement and the Participation Agreement, and (b) for a billing period during which this Lease expires or terminates (except pursuant to Article XX or Section 21.1(a), in which case the Lessee shall be solely responsible for all such charges) shall be adjusted and prorated on a daily basis between the Lessee and any purchaser of the Leased Property, and each party shall pay or reimburse the other for each party’s pro rata share thereof; provided, that in no event shall the Lessor have any liability therefor. Unless requested by the Lessee, the Lessor agrees not to take any action to incur any additional utility charges during the Lease Term.

ARTICLE VII

CONDITION AND USE OF LEASED PROPERTY

SECTION 7.1.      Waivers.

THE LESSEE ACKNOWLEDGES AND AGREES THAT THE LESSEE, ACTING AS THE CONSTRUCTION AGENT AND AGENT FOR LESSOR, IS RESPONSIBLE UNDER THE TERMS OF THE CONSTRUCTION AND DEVELOPMENT AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND SUPERVISION OF CONSTRUCTION OF THE FACILITY AND ANY ALTERATIONS OR MODIFICATIONS. THE LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE LEASED PROPERTY FROM THE LESSOR “AS IS” IN ITS PRESENT CONDITION, SUBJECT TO (A) ANY RIGHTS OF ANY PARTIES IN POSSESSION THEREOF OR OF THE SITE, (B) THE STATE OF THE TITLE THERETO OR TO THE SITE EXISTING AT THE TIME THE LESSOR ACQUIRED ITS INTEREST IN THE LEASED PROPERTY, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW (INCLUDING ANY SURVEY DELIVERED ON OR PRIOR TO THE CLOSING DATE, ANY ADVANCE DATE OR THE COMPLETION DATE), (D) ALL APPLICABLE LAWS AND REGULATIONS, AND (E)  ANY VIOLATIONS OF APPLICABLE LAWS AND REGULATIONS WHICH MAY EXIST AT THE COMMENCEMENT OF THE LEASE TERM. THE LESSEE HAS EXAMINED THE LEASED PROPERTY AND THE SITE AND (INSOFAR AS THE LESSOR IS CONCERNED) HAS FOUND THE SAME TO BE SATISFACTORY. WITHOUT LIMITING

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THE SPECIFIC REPRESENTATIONS AND WARRANTIES IN ARTICLE IV OF THE PARTICIPATION AGREEMENT, NONE OF THE LESSOR, THE COLLATERAL AGENT, THE ADMINISTRATIVE AGENT NOR ANY OTHER PARTICIPANT HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, NOR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE TO THE LEASED PROPERTY OR THE SITE OR TO THE VALUE, MERCHANTABILITY, HABITABILITY, CONDITION, OR FITNESS FOR USE OF THE LEASED PROPERTY OR THE SITE, OR ANY PART THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY OR THE SITE, OR ANY PART THEREOF, AND NONE OF THE LESSOR, THE COLLATERAL AGENT, THE ADMINISTRATIVE AGENT NOR ANY OTHER PARTICIPANT SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF THE LEASED PROPERTY OR THE SITE, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAWS AND REGULATIONS, except that the Lessor hereby represents and warrants that as of the date of this Lease, the Leased Property is free of Lessor Liens. The Lessee, having been afforded full opportunity to inspect the Leased Property and the Site, is satisfied with the results of its inspections and is entering into this Lease solely on the basis of the results of its own inspections, and all risks incident to the matters discussed in the preceding sentence, as between the Collateral Agent, the Administrative Agent and the Participants, on the one hand, and the Lessee, on the other, are to be borne by the Lessee. The provisions of this Article VII have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by any of the Collateral Agent, the Administrative Agent or the Participant, express or implied, with respect to the Leased Property (or any interest therein) and the Site, that may arise pursuant to any law now or hereafter in effect or otherwise.

ARTICLE VIII

LIENS; EASEMENTS

SECTION 8.1.      Liens.

During the Lease Term, the Lessee will not directly or indirectly create, incur, assume or suffer to exist any Lien (other than Permitted Liens) on or with respect to any portion of the Leased Property, the Site or the Lessor’s interest therein. The Lessee, at its own expense, will promptly pay, satisfy and otherwise take such actions as may be necessary to keep the Leased Property and the Site free and clear of, and duly to discharge, eliminate or bond in a manner reasonably satisfactory to the Required Participants, any such Lien (other than Permitted Liens) if the same shall arise at any time provided that any such payments required prior to the Base Term Commencement Date shall be paid solely through the proceeds of Advances pursuant to the Construction and Development Agreement and the Participation Agreement.

SECTION 8.2.      Easements.

Notwithstanding Section 8.1, at the request of the Lessee, the Lessor shall, from time to time during the Lease Term and upon reasonable advance written notice from the Lessee and receipt of the materials specified below, consent to and join in any (i) grant of easements, licenses,

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rights of way and other rights in the nature of easements including, without limitation, utility easements which in each case facilitate the Lessee’s use, development and operation of the Leased Property, (ii) release or termination of easements, licenses, rights of way or other rights in the nature of easements which releases and terminations are for the benefit of the Site or the Facility or any portion thereof, (iii) execution of agreements for ingress and egress and amendments to any covenants and restrictions affecting the Site or the Facility or any portion thereof, and (iv) request to any Authority for platting or subdivision or replatting or resubdivision approval with respect to the Site or any portion thereof or any parcel of land of which the Site or any portion thereof forms a part or a request for any variance from zoning or other governmental requirements, provided that:

(a)        any such action shall be at the sole cost and expense of the Lessee and the Lessee shall pay all out-of-pocket costs of Lessor and the other Participants in connection therewith (including, without limitation, the reasonable fees of attorneys, architects, engineers, planners, appraisers and other professionals retained by Lessor or the other Participants in connection with any such action);

(b)        the Lessee shall have delivered to the Lessor a certificate of a Responsible Officer of the Lessee stating that:

(i)        such action will not cause the Leased Property, the Site or the Facility, or any portion thereof, to fail to comply in any respect with the provisions of the Lease or any other Operative Documents, or in any respect with Applicable Laws and Regulations; and

(ii)        such action will not materially reduce the Fair Market Value, utility or useful life of the Leased Property, the Site or the Facility or the Lessor’s interest therein;

(c)        in the case of any release or conveyance, if Lessor or the Required Participants so reasonably request, Lessee will cause to be issued and delivered to Lessor by the Title Insurance Company endorsements to the Title Policies (to the extent available) pursuant to which the Title Insurance Company agrees that its liability for the payment of any loss or damage under the terms and provisions of the Title Policies, as to the remaining portion of the Leased Property that was not released or conveyed, will not be affected by reason of the fact that a portion of the real property referred to in Schedule A of the Title Policies has been released or conveyed by the Lessor; and

(d)        there shall be no abatement of Rent as a result thereof.

ARTICLE IX

MAINTENANCE AND REPAIR; ALTERATIONS AND ADDITIONS

SECTION 9.1.      Maintenance and Repair; Compliance With Law.

At all times during the Lease Term, the Lessee shall (a) maintain the Leased Property and the Site in good operating condition and repair, subject to ordinary wear and tear, and in any event in a manner consistent with exercising reasonable care and prudence and with other similar facilities or buildings owned or leased by the Lessee and its Affiliates and similar to other facilities of like kind, quality and use; (b) subject to Section 9.5, maintain the Leased Property and the Site

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in accordance with all Applicable Laws and Regulations (including all Environmental Laws) in all material respects, whether or not such maintenance requires structural modifications; (c) maintain the Facility (whether under construction or completed) and the Site in such a way that the Facility and the Site shall not constitute a danger to persons or things; (d) comply in all material respects with the Insurance Requirements which are in effect at any time with respect to the Leased Property or any part thereof; (e) use the Leased Property and the Site only in accordance with Article X; (f) make all necessary or appropriate repairs, replacements and renewals of the Leased Property and the Site or any part thereof which may be required to keep the Leased Property and the Site in the condition required by this Section 9.1, whether interior or exterior, structural or nonstructural, ordinary or extraordinary, and including, without limitation, repairs, replacements and renewals that would constitute capital expenditures under GAAP if incurred by an owner of property; and (g)  procure, maintain and comply in all material respects with all licenses, permits, orders, approvals, consents and other authorizations required for the construction, use, maintenance and operation of the Leased Property. The Lessee waives any right that it may now have or hereafter acquire to (x) require the Lessor to maintain, repair, replace, alter, remove or rebuild all or any part of the Leased Property or (y) make repairs at the expense of the Lessor pursuant to any Applicable Laws and Regulations or other agreements.

SECTION 9.2.      Facility and Alterations.

(a)        In addition to the Lessee’s obligations in its capacity as the Construction Agent to build the Facility under the Construction and Development Agreement, on and after the Base Term Commencement Date (i) the Lessee, at the Lessee’s own cost and expense, shall make alterations, renovations, repairs, improvements and additions to the Leased Property or any part thereof and substitutions and replacements therefor (collectively, “Alterations”) which are (A) necessary or advisable to repair or maintain the Leased Property or the Site in the condition required by Section 9.1 or (B) necessary or advisable to restore the Leased Property and the Site to its condition existing prior to a Casualty or Condemnation to the extent required pursuant to Article XIII and (ii) so long as no Material Default or Event of Default is continuing, the Lessee, at the Lessee’s own cost and expense, may undertake Alterations to the Leased Property so long as, in each case, such Alterations comply in all material respects with Applicable Laws and Regulations and are consistent and comply with Section 9.1 and subsection (b) of this Section 9.2.

(b)        The making of any Alterations must be in compliance with the following requirements:

(i)        The Lessee shall not make any Alterations in violation of the terms of any restriction, easement, condition, covenant or other similar matter affecting title to or binding on the Leased Property or the Site.

(ii)        No Alterations shall be undertaken until the Lessee shall have procured and paid for, so far as the same may be required from time to time, all permits and authorizations relating to such Alterations of all municipal and other Authorities having jurisdiction over the Leased Property or the Site. The Lessor, at the Lessee’s expense, shall join in the application for any such permit or authorization and execute and deliver any document in connection therewith, whenever such joinder is necessary or advisable;

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provided, however, such joinder shall not constitute or be deemed to constitute, any assumption or responsibility or liability whatsoever.

(iii)        The Alterations shall be completed in a good and workmanlike manner and in compliance in all material respects with all Applicable Laws and Regulations then in effect and with the standards imposed by any insurance policies required to be maintained hereunder.

(iv)        All Alterations shall, when completed, be of such a character as to not materially diminish (A) the utility, useful life or functional capability of the Facility as Class A office buildings, (B) the then current Fair Market Value, or (C) the Fair Market Value as of the Maturity Date, and provided that the Facility at all times shall remain Class A office buildings.

(v)        The Lessee shall have made adequate arrangements for payment of the cost of all Alterations when due so that the Leased Property and the Site shall at all times be free of Liens for labor and materials supplied or claimed to have been supplied to the Leased Property or the Site, other than Permitted Liens; provided, that the Lessee shall have the right to engage in Permitted Contests in accordance with Section 9.5 or otherwise bond over any Liens for labor or materials.

(vi)        The Alterations must be located solely on the Site.

SECTION 9.3.      Alterations Subject to Lease.

The following Alterations without further act shall be deemed to constitute a part of the Leased Property and be subject to this Lease:

(a)        Alterations that are in replacement of or in substitution for a portion of the Facility:

(b)        Alterations that are required to be made pursuant to the terms of Section 9.1 or 9.2(a)(i) hereof; or

(c)        Alterations that are Non-Severable or immovable.

To the extent any Alterations are deemed to constitute part of the Leased Property pursuant to the preceding sentence, the Lessee hereby acknowledges and agrees that such will become upon installation property of the Lessor. The Lessee will, at the Lessor’s request, execute and deliver any documents reasonably necessary to evidence or cause the vesting of such interests in and to such Alterations to the Lessor.

If such Alterations are not within any of the categories set forth in clauses (a) through (c) of this Section 9.3 and have not become property of the Lessor in accordance therewith, then such Alterations shall remain the sole property of the Lessee and such Alterations shall not be deemed to be Alterations which are part of the Leased Property. All such Alterations not constituting part of the Leased Property may, so long as no Material Default or Event of Default is continuing, be removed at any time by the Lessee other than Alterations the removal of which would result in a violation of Applicable Laws and Regulations. The Lessee shall at its expense prior to the Lease

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Expiration Date repair any damage to the Leased Property or the Site caused by the removal of such Alterations. The Lessor (or the purchaser of the Leased Property if the Lessee elects the Return Option or in connection with a sale pursuant to Section 18.1) may purchase from the Lessee any such Alterations (if not already owned by the Lessor) that the Lessee intends to remove from the Leased Property or the Site prior to the Lease Expiration Date, which purchase shall be at the Fair Market Value of such Alterations as determined by the Appraiser or an appraiser reasonably selected by the Lessor at the time of such purchase.

SECTION 9.4.      Maintenance and Repair Reports.

During the Lease Term, the Lessee shall keep maintenance and repair reports regarding the Facility in sufficient detail, on the same basis as records are kept for similar properties owned or leased by the Lessee or its Affiliates and as otherwise would be kept by the lessees of other similar Class A office buildings of comparable age and size, to indicate the nature and date of major work done. Such reports shall be kept on file by the Lessee at its offices during the Lease Term, and shall be made available at the Lessee’s office to the Lessor upon reasonable request.

SECTION 9.5.      Permitted Contests.

If, to the extent and for so long as (a) a contest of the legality, validity or applicability to the Leased Property or the Site or any interest therein of, or the operation, use or maintenance thereof by the Lessee of (i) any Applicable Laws and Regulations, (ii) any term or condition of, or any revocation or amendment of, or other proceeding relating to, any Governmental Action, or (iii) any Lien or Tax shall be made in good faith, by appropriate proceedings initiated timely and diligently prosecuted, by the Lessee or (b) compliance with such Applicable Laws and Regulations, Governmental Action, Lien or Tax shall have been excused or exempted by a valid nonconforming use permit, waiver, extension or forbearance, the Lessee shall not be required to comply with such Applicable Laws and Regulations, Governmental Action, Lien or Tax but only if and so long as any such contest shall constitute a Permitted Contest and shall be conducted in accordance with Section 7.1(c) or Section 7.2(b), as applicable, of the Participation Agreement.

The Lessor will not be required to join in any Permitted Contest unless a provision of any Applicable Laws and Regulations requires, or, in the good faith opinion of the Lessee, it is materially helpful to the Lessee 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 only if and so long as (i) no Material Default or Event of Default is continuing, (ii) the Lessee has not elected the Return Option, and (iii) the Lessee pays all related out-of-pocket expenses, and the Lessee shall be deemed to have acknowledged and agreed that the Lessor is indemnified therefor pursuant to Section 7.1 or Section 7.2 of the Participation Agreement.

ARTICLE X
USE

SECTION 10.1.    Use.

The Site on which the Facility is located shall be used solely for the purposes of constructing and operating two Class A office buildings. The Lessee shall not use the Leased

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Property or the Site or any part thereof for any purpose or in any manner that would not keep the Facility in a first-class condition consistent with other similar Class A office buildings of comparable age and size or that would diminish (A) the utility, useful life or functional capability of the Facility as Class A office buildings, (B) the then current Fair Market Value, or (C) the Fair Market Value as of the Maturity Date. The Lessee shall use the Leased Property and the Site in compliance in all material respects with (a) any Applicable Laws and Regulations (including Environmental Laws), except to the extent permitted by Section 9.5, (b) the Insurance Requirements, and (c) all of the Operative Documents. The Lessee shall pay, or cause to be paid, all charges and costs required in connection with the use of the Leased Property and the Site in accordance with this Lease and the Participation Agreement. The Lessee shall not commit or permit any waste of the Leased Property or any part thereof or the Site.

SECTION 10.2.    Trade Compliance.

The Lessee shall comply with the Trading with the Enemy Act, as amended, and all of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), federal sanctions and embargo laws and regulations, and the USA PATRIOT Act in the conduct of all of its activities, including the following: (i) the use, assignment, or sublease of Site or the Facility by Prohibited Persons; and (ii) the export of any products manufactured at the Facility to any destination or Prohibited Person.

ARTICLE XI
INSURANCE

SECTION 11.1.    Required Coverages.

The Lessee will provide or cause to be provided insurance with respect to the Leased Property and the Site of a character usually obtained by the Lessee and its Affiliates against loss or damage of the kinds and in the amounts customarily insured against by the Lessee and its Affiliates with respect to similar properties, and carry such other insurance as is usually carried by the Lessee and its Affiliates with respect to similar properties; provided, that in any event the Lessee will maintain insurance during the Lease Term, as follows:

(a)        Comprehensive General Liability Insurance. The Lessee will maintain comprehensive general liability insurance, including coverages for contractual liability, against third-party bodily injury, including death, and third-party property damage, written on a claims- made basis, including against Lessor, in an amount at least equal to $30,000,000 per occurrence and $30,000,000 in the aggregate during the Lease Term (which coverage may be met in combination with Primary Commercial General Liability coverage and Umbrella Liability excess coverage). Such coverage may be subject to deductibles or self-insurance of no more than such amount that is customarily carried by the Lessee with respect to similar properties, whichever is lower. Such liability insurance shall name the Administrative Agent, the Collateral Agent, Lessor and each of the other Participants as additional insureds and such parties shall continue to be named as additional insureds, and such policy shall remain in effect, until at least the third (3rd) anniversary of the Maturity Date.

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Without limiting the foregoing, Lessee will maintain a pollution legal liability policy covering itself. Such coverage shall be written on a claims made basis and shall apply to sudden and non-sudden pollution conditions. Such policy shall have limits not less than $15,000,000 per occurrence and $15,000,000 in the aggregate claims for bodily injury, property damage and cleanup costs, shall be in effect for a period of three years from and after the Completion Date and shall name Lessor as an additional insured with respect to such policy.

(b)        Property Insurance. From and after the Completion Date, the Lessee will maintain insurance against loss or damage covering the Leased Property, the Site and any portion thereof against such risks customarily maintained by the Lessee with respect to similar properties, including coverage for the perils of earth movement (including but not limited to earthquake and landslide) and fire, hurricanes and flood (if the property is located in a high-risk flood zone), in an amount not less than the Lease Balance or the replacement cost of the Facility (including any costs that may be required to cause the Facility to be reconstructed to comply with then current Applicable Laws and Regulations), whichever is greater. Such property insurance coverage may be subject to deductibles or self-insurance in amounts to be approved by Lessor. Such property insurance shall name the Administrative Agent, the Collateral Agent, Lessor and each of the other Participants as additional insureds and Administrative Agent as loss payee as their interests may appear.

(c)        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 (if any), non-owned and hired vehicles used in the performance of the Lessee’s obligations under the Lease with a $2,000,000 minimum limit per accident for combined bodily injury and property damage and containing appropriate no-fault insurance provisions wherever applicable. The automobile liability insurance shall have no self-insurance amounts and shall have deductibles not in excess of $50,000.

(d)        Worker’s Compensation and Employer’s Liability Insurance: Worker’s Compensation and Employer’s Liability Insurance, with respect to any Contractor or the Developer, if applicable, including occupational illness or disease coverage, or other similar social insurance in accordance with the laws of the nation, state, territory or province exercising jurisdiction over the Leased Property. Employer’s Liability coverage shall have a limit of

$1,000,000 per accident, per employee for disease and in the aggregate for disease.

(e)        Builders’ Risk Insurance. From and after the Completion Date with respect to any rebuilding of the Leased Property under Section 13.4 hereof, the Lessee will maintain a builders’ all-risk insurance policy on terms and conditions acceptable to the Required Participants and in an amount not less than the higher of replacement cost of the Facility and the aggregate amount of the outstanding Lease Balance at any time, subject to a deductible not in excess of $50,000 per occurrence but, in the case of flood, $25,000 per occurrence and in the case of named storms, $25,000 per occurrence and, in the case of earth movement, not in excess of $50,000 per occurrence (and not in the form of self-insurance) and shall have no other self-insurance with respect thereto. Such builders’ risk insurance policy shall provide for property damage on an “all risk” basis in form and substance reasonably acceptable to Administrative Agent, subject to limits, perils, exclusions and deductibles listed on the policies and its forms, insuring Lessee, each Participant, the Developer, any contractor and subcontractors at any tier, as their interests may

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appear, including coverage for the perils of earth movement (including but not limited to earthquake, landslide and subsidence), damage from collapse, coverage for fire, hurricanes and flood (if the property is located in a high-risk flood zone), strike, riot, vandalism, sabotage and damage or loss caused by machinery accidents and operational and performance testing and start- up. Such builders’ all-risk insurance shall name the Administrative Agent, the Collateral Agent, Lessor and each of the other Participants as additional insureds and Administrative Agent as loss payee as their interests may appear. The builder’s risk policy shall provide coverage for (a) the Facility, including buildings, non-temporary structures, machinery, equipment, facilities, fixtures, supplies and other property constituting part of the leased property including but not limited to boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, ventilation and air conditioning equipment, and elevator and escalator equipment and other properties constituting the Facility, (b) coverage for foundations, including underground water and sewer mains, pilings and other property below the surface of the ground, and (c) electronic equipment. In addition,

(i)        Property Covered: The builder’s risk policy shall provide coverage for (a) the Facility, including buildings, all preliminary work, temporary works, non-temporary structures, machinery, equipment, facilities, fixtures, supplies and other property constituting part of the leased property including but not limited to boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, ventilation and air conditioning equipment, and elevator and escalator equipment and other properties constituting the Facility, (b) coverage for foundations, including underground water and sewer mains, pilings and other property below the surface of the ground, (c) electronic equipment and (d) property of others in the care, custody or control of the Lessee, a Lessee Person or Lessor.

(ii)        Special Clauses: The builder’s risk policy shall include (a) earthquake coverage in an amount not less than the higher of replacement cost of the Facility and the aggregate amount of all Advances outstanding at any time with a deductible not to exceed $100,000 per occurrence, (b) a requirement that the insurer pay losses within a reasonable period of time after receipt of an acceptable proof or partial proof of loss, (c) a clause making this insurance primary over any other insurance and (d) an unintentional errors and omissions clause.

(iii)        Additional Coverages: The builder’s risk policy shall insure (a) off-site coverage with sub-limits sufficient to insure the full replacement value of any equipment, supplies and materials not stored on the Site, (b) the removal of debris with a sublimit of not less than the lesser of twenty-five percent of the minimum builder’s risk coverage required hereunder and $15,000,000 per occurrence, (c) inland transit coverage with sublimits to insure the largest single shipment to or from the Site from designated storage facilities, (d) project management costs including architects’ fees, engineering costs, permit application fees, and other necessary fees or costs directly incurred in order to replace damage to insured property and (e) pollution cleanup and removal with a sublimit not less than $1,500,000 per occurrence.

(iv)        Prohibited Exclusions: The builder’s risk policy shall not contain any (a) coinsurance provisions, (b) exclusion for loss or damage covered under any guarantee or

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warranty arising out of an insured peril, (c) exclusion for resultant damage caused by faulty workmanship, designs, specifications or materials or (d) exclusion for resultant damage to insured property from a peril not otherwise excluded caused by ordinary wear and tear, gradual deterioration, normal subsidence, settling, cracking, expansion or contraction, and faulty workmanship, design or materials.

(v)        Sum Insured: The builder’s risk policy shall (a) be on a completed value form, with no periodic reporting requirements, (b) insure the Facility for 100% of its insurable replacement cost value, but in no case less than the aggregate amount of all Advances outstanding at any time, (c) value losses at replacement cost, without deduction for physical depreciation or obsolescence including customs duties, taxes and fees (if rebuilt or repaired), and (d) insure earth movement and named-wind coverage at the greater of (i) 100% of the Facility’s replacement cost and (ii) outstanding Advances.

(f)         Other Insurance. Insurance shall not cover any terrorism or war risks unless the Lessee carries insurance for such risks generally on similar property it owns or leases. To the extent any portion of the Facility is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable Authority, the Lessee shall (i) obtain flood insurance for the Facility in an amount not less than the greater of (1) 100% of the replacement cost of the Facility, including any costs that may be required to cause the Facility to be reconstructed to comply with then current Applicable Laws and Regulations, and (2) the aggregate amount of all Advances outstanding at any time, and (ii) require and shall ensure that such flood insurance at all times names Lessor as an additional insured and as loss payee, as its interests may appear.

(g)        Insurance Requirements. Insurance provided pursuant to this Section 11.1 (other than permitted self-insurance) shall be written by reputable insurance companies that are financially sound and solvent with a rating of at least “A-/VIII” by A.M. Best’s or a claims paying rating of “A-” by S&P or by other insurers approved in writing by the Lessor and shall be with such insurance companies as were approved by the Lessor on the Closing Date. Each policy referred to in this Section 11.1 shall provide that: (i) it will not be canceled, materially modified or its limits reduced, or allowed to lapse without renewal, except after not less than thirty (30) days’ prior written notice to the Administrative Agent and Lessor and not less than ten (10) days’ prior written notice to the Administrative Agent and Lessor for the non-payment of premium; (ii) the interests of the Administrative Agent, the Collateral Agent, Lessor and any other Participant shall not be invalidated by any act or negligence of or breach of warranty or representation by the Lessee or any Person having an interest in the Leased Property or the Site; (iii) such insurance is primary and non-contributory with respect to any other insurance carried by or available to the Administrative Agent, the Collateral Agent, the Lessor or any other Participant; (iv) the insurer shall waive customary rights of subrogation, setoff, counterclaim, or other deduction, whether by attachment or otherwise, against any additional insured or loss payee; (v) such policy shall contain a severability clause providing for coverage of the Administrative Agent, the Collateral Agent, the Lessor and each other Participant as if separate policies had been issued to each of them; (vi) the Lessee will notify the Administrative Agent and the Lessor promptly of any policy cancellation, reduction in policy limits, lapse, modification or amendment; and (vii) the insurer shall waive all claims for premiums against the Administrative Agent, the Collateral Agent, the Lessor and any other Participant.

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SECTION 11.2.    Delivery of Insurance Certificates.

Throughout the Lease Term, at the time each of the Lessee’s insurance policies is renewed (but in no event less frequently than once every twelve (12) months) or upon written request by the Lessor during the continuance of an Event of Default, the Lessee shall deliver to the Administrative Agent, the Collateral Agent, the Lessor and each other Participant certificates of insurance evidencing that all insurance required by Section 11.1 to be maintained by the Lessee with respect to the Leased Property is in effect. Concurrent with the delivery of certificates required above, the Lessee shall furnish the Administrative Agent, the Collateral Agent, the Lessor and each other Participant with a letter from an independent broker or the insurer(s) signed by an officer of the broker or insurer(s), stating that in the opinion of such broker or insurer(s) the insurance so carried is in compliance with Section 11.1. Upon written request by the Administrative Agent, the Lessee will promptly furnish to the Administrative Agent copies of all insurance policies, applications, binders and cover notes or other evidence of insurance required to be maintained hereunder.

No provision of Article XI or any other Operative Document shall impose on the Administrative Agent, the Collateral Agent, the Lessor or any other Participant any obligation to verify the existence or adequacy of the insurance coverage to be maintained pursuant to Article XI, nor shall any such Person be responsible for any representations or warranties made by or on behalf of the Lessee or any Cubic Person to any insurance company or underwriter. Any failure on the part of Lessor to obtain the evidence of insurance required by Article XI from the Lessee and/or failure of such to identify any noncompliance of such evidence of insurance shall not constitute a waiver of any of the insurance requirements in Article XI.

SECTION 11.3.    Other Insurance.

Lessee agrees that nothing in this Article XI shall prohibit the Lessor or any other Participant from maintaining its own insurance coverage, at the expense of such Person, which coverage shall not reduce the obligations of the Lessee under this Article XI; provided, however, that no such insurance shall be maintained if its maintenance would prevent the Lessee from maintaining insurance as to the Leased Property and the Site with insurers when required to do so herein.

ARTICLE XII

ASSIGNMENT AND SUBLEASING

During the Lease Term, the Lessee may not assign, mortgage, transfer or pledge to any Person (including any Affiliate), at any time, in whole or in part, its right, title or interest in, to or under this Lease or any portion of the Leased Property or the Site without the prior written consent of the Lessor, which may be granted or withheld in its sole and absolute discretion provided, however, that Lessee may sublease its rights in connection with this Lease or the Leased Property to any Person with the prior consent of the Participants, not to be unreasonably withheld or delayed at any time, it being agreed that it would be reasonable to withhold such consent if, among other things, (x) any such sublease would subject any of the Participants to a violation of laws or regulations then applicable to any of the Participants, including, without limitation, those promulgated by OFAC, (y) an Event of Default shall be continuing or, after giving effect to such

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sublease, would exist, or (z) any such sublease extends beyond the Base Term expiration date, is not expressly subject and subordinate to the Lease or Lessee does not remain primarily liable for all obligations under the Lease.

Notwithstanding the foregoing, the Lessee will have the right at any time during the Lease Term, without the written consent of Lessor so long as no Material Default or Event of Default shall be continuing, to sublease all of the Leased Property to any Affiliate, provided that (i) no sublease may be made to any Person which would subject a Participant to a violation of Applicable Laws and Regulations applicable to such Participant including, without limitation, those promulgated by OFAC, and (ii) such sublease is expressly subject and subordinate to the Lease and the Lessee remains primarily liable for all obligations hereunder. Lessee shall give Lessor and Administrative Agent prompt written notice of any such sublease which notice shall include copies of each such sublease. Lessee hereby agrees that no sublease hereunder will violate the terms of the Ground Lease.

No sublease hereunder will discharge or diminish any of the Lessee’s obligations hereunder or any of the Lessee’s obligations hereunder or under the other Operative Documents and the Lessee shall remain directly and primarily liable under the Lease with respect to the Leased Property and the Operative Documents to which it is a party. Each sublease permitted hereby shall be made and shall expressly provide in writing that it is subject and subordinate to this Lease and the rights of the Lessor hereunder, shall expressly provide for the surrender of the Leased Property by the sublessee at the election of the Lessor after an Event of Default, shall provide that such provisions may be directly enforced by the Lessor, and shall provide that such sublessee expressly agrees to comply with the use restrictions set forth in Article X hereof. All such subleases under this Article XII shall expressly provide in writing for termination on or prior to the Lease Expiration Date unless the Lessee shall purchase all of the Leased Property pursuant to Section 21.1(a) and Article XX of this Lease.

Notwithstanding the foregoing, (a) the Lessee will have the right at any time during the Lease Term, without the prior written consent of the Lessor, to purchase the Leased Property pursuant to Section 20.1 hereof, (b) the Lessee may assign, at any time during the Lease Term, in whole but not in part, its right, title and interest in, to and under this Lease as a result of any transaction permitted under Section 5.3 of the Participation Agreement, and (c) the Lessee may otherwise assign, in whole but not in part, its right, title and interest in, to and under this Lease to any Affiliate of the Lessee without the prior written consent of the Lessor and Administrative Agent at the direction of Required Participants provided that (i) the parties enter into an assignment agreement as to all of Lessee’s obligations under the Operative Documents and related amendments thereto, each in form and substance reasonably satisfactory to the Lessor, (ii) after such assignment, the Lessee shall remain fully liable under the Operative Documents or shall issue an irrevocable and unconditional guaranty of the obligations of such assignee thereunder in form and substance reasonably satisfactory to the Lessor, (iii) prior to such assignment and immediately after giving effect thereto, no Default or Event of Default shall be continuing, (iv) all filings of or in respect of any such assignment necessary to protect the rights of the Lessor in the Leased Property, the Site and the other Operative Documents are made in a timely fashion, (v) without limiting any provisions of this Article XII, any such assignment shall include an appropriate provision for the operation, maintenance and insurance of the Leased Property and the Site in accordance with the terms hereof, (vi) the Lessor shall have received certificates and opinions of

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counsel with respect to the foregoing and such other matters as the Lessor may reasonably request, (vii) such assignment will not result in the imposition of any unindemnified Taxes, (viii) the Lessor shall receive such other documents and instruments and the Lessee shall take such further acts as the Lessor may reasonably request, (ix) such assignment will not, with respect to any Participant, violate the use restrictions set forth in Article X hereof or Applicable Laws and Regulations including, without limitation, those promulgated by OFAC, and (x) the Lessee shall provide to the Lessor not less than thirty (30) days’ prior written notice of such assignment, such notice to identify the assignee.

ARTICLE XIII

LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE; ENVIRONMENTAL

SECTION 13.1.    Event of Taking, Event of Loss.

(a)        If an Event of Taking shall occur during the Lease Term, the Lessee shall give the Lessor prompt written notice of such occurrence and the date thereof and on the next succeeding Payment Date (the “Next Date”) after such Event of Taking shall have occurred or, if such Event of Taking shall have occurred within five (5) Business Days preceding a Payment Date, then on the next succeeding Payment Date after such Next Date shall have occurred, this Lease shall terminate and, as compensation for such Event of Taking, the Lessee shall pay to the Lessor on such Payment Date the Purchase Amount.

(b)        If an Event of Loss shall occur during the Lease Term, the Lessee shall give the Lessor prompt written notice of such occurrence and the date thereof which notice shall contain an election by the Lessee to either (i) purchase the Leased Property from the Lessor on the second Next Date after the date such Event of Loss shall have occurred, but in no event sooner than sixty (60) days after the date of such Event of Loss, at a purchase price equal to the Purchase Amount (and if the Lessee makes such election the Purchase Amount shall become due and payable and the Lessee shall purchase the Leased Property on such Payment Date) or (ii) provided no Material Default or Event of Default is continuing and rebuilding of the Facility is capable of being completed prior to the end of the Lease Term (as certified in writing by the Construction Consultant), rebuild the Facility and continue the Lease (it being understood that insurance proceeds shall be paid over by the Administrative Agent to the Lessee against costs actually incurred by the Lessee and the Lessee shall be entitled to any excess insurance proceeds), subject further to the obligations of the Lessee under the Operative Documents. If the Lessee elects to rebuild the Facility, the Lessee shall rebuild the Facility to the condition required to be maintained pursuant to Section 9.1.

(c)        Upon receipt in full by the Administrative Agent, as assignee of Lessor, of the Purchase Amount pursuant to this Section 13.1, the Lease shall terminate and the obligations of the Lessee hereunder and under the other Operative Documents (in each case, other than any obligations expressed herein or in any other Operative Document as surviving termination of this Lease or such other Operative Document) shall terminate as of the date of such receipt. Upon such receipt in full of the Purchase Amount, the Leased Property (including all rights under the Ground Lease) and all rights to any remaining awards or proceeds shall be transferred to the Lessee or its designee in accordance with Section 23.11 hereof.

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SECTION 13.2. Application of Payments Relating to an Event of Taking or an Event of Loss.

Regarding any Event of Taking, all condemnation awards and proceeds and property insurance proceeds received at any time by the Lessee during the Lease Term from any Authority or other Person with respect to any Event of Taking shall be promptly remitted to the Administrative Agent, as assignee of Lessor (up to, but not exceeding, the Purchase Amount), and, unless an Event of Default as described in clauses (h) or (i) of Article XVII hereof is continuing, upon the indefeasible payment in full of the Purchase Amount in accordance with Section 13.1(a), the Administrative Agent and Lessor shall assign to the Lessee all rights to any condemnation awards and proceeds and property insurance proceeds and any such condemnation awards and proceeds and property insurance proceeds remaining thereafter or thereafter received shall be paid by the Administrative Agent over to the Lessee, or as the Lessee may direct, and any receipt of such proceeds shall satisfy the Lessee’s obligations under Section 13.1(a).

Regarding any Event of Loss, all awards and proceeds and property insurance proceeds received at any time by the Lessee during the Lease Term from any Person with respect to any Event of Loss shall be promptly remitted to the Administrative Agent (up to, but not exceeding, the Purchase Amount) and, unless an Event of Default as described in clauses (h) or (i) of Article XVII hereof is continuing, upon the indefeasible payment in full of the Purchase Amount in accordance with Section 13.1(b)(i), the Administrative Agent and Lessor shall assign to the Lessee all rights to any awards and proceeds and property insurance proceeds and any such awards and proceeds and property insurance proceeds remaining thereafter or thereafter received shall be paid by the Administrative Agent over to the Lessee, or as the Lessee may direct, and any receipt of such proceeds shall satisfy the Lessee’s obligations under Section 13.1(b); provided, if the Lessee elects to rebuild the Facility in accordance with Section 13.1(b)(ii), then any awards and proceeds and property insurance proceeds shall be applied as described in Section 13.1(b)(ii).

SECTION 13.3.    Application of Certain Payments Relating to a Condemnation.

In case of a Condemnation of the Leased Property or a portion thereof (which, for clarification, is not an Event of Taking), this Lease shall remain in full force and effect, without any abatement or reduction of Rent, and the awards and proceeds received from any Authority relating to such Condemnation for the affected portion of the Leased Property shall, so long as no Material Default or Event of Default shall be continuing, be paid by the Administrative Agent to the Lessee and shall be used by the Lessee to repair and restore the affected Leased Property to the condition required by Section 9.1. Notwithstanding anything herein to the contrary, any portion of such awards and proceeds that is awarded with respect to the time period after the expiration or termination of the Lease Term (unless the Lessee shall have exercised an option to purchase the Leased Property and consummated such purchase) shall be paid to the Administrative Agent; provided, that if the Lessee has paid the Purchase Amount to the Administrative Agent such proceeds (or the portion of such proceeds in excess of portion thereof applied to the Purchase Amount) shall be paid by the Administrative Agent over to the Lessee. Regarding any Condemnation occurring during the Lease Term, the Lessee shall give the Administrative Agent and Lessor written notice of such Condemnation.

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SECTION 13.4.    Application of Certain Payments Relating to a Casualty.

Upon any Casualty during the Lease Term with respect to the Leased Property (which, for clarification, is not an Event of Loss), this Lease shall remain in full force and effect, without any abatement or reduction of Rent and, regarding any Casualty, if the cost of repair would exceed One Million Dollars ($1,000,000), the Lessee shall give to the Administrative Agent and Lessor written notice of such Casualty. As soon as practicable after such Casualty (which, for clarification, is not an Event of Loss) with respect to the Leased Property has occurred, subject to receipt of insurance proceeds if held by Administrative Agent in accordance with Section 13.1(b)(ii), the Lessee shall repair and rebuild the affected portions of the Leased Property suffering such Casualty (or cause such affected portions to be repaired and rebuilt) to the condition required to be maintained by Section 9.1 and so that the value, utility, useful life and functional capability of such item as restored is at least equivalent to the value, utility, useful life and functional capability of such item as in effect immediately prior to the occurrence of such Casualty (assuming the Facility was being maintained in accordance with Section 9.1); provided, that at all times during such repair or rebuilding the Lessee shall maintain the Facility in accordance with Section 9.1.

SECTION 13.5.    Proceeds.

Upon the occurrence of any Event of Taking, if a Material Default or Event of Default is continuing at such time, any awards or proceeds received from any Authority or any other Person or any property insurance proceeds, in either case, with respect to any Event of Taking (a) shall be paid to and held by the Administrative Agent and (b) if an Event of Default is continuing, then in the Administrative Agent’s sole and absolute discretion, such amounts may be applied to the amounts then due and owing or accrued by the Lessee pursuant to the Operative Documents or as Lessee may direct so long as no Material Default or Event of Default is continuing.

Upon the occurrence of any Event of Loss, Casualty or Condemnation, if an Event of Default or Default is continuing at such time or if the Lessee has elected either to rebuild the Facility or to purchase the Facility pursuant to Section 13.1 hereof, any awards or proceeds received from any Authority or any other Person or any property insurance proceeds, in either case, with respect to such Event of Loss, Casualty or Condemnation, shall be held by the Administrative Agent. If an Event of Default is then continuing, then in the Administrative Agent’s sole and absolute discretion, such amounts may be applied to the amounts then due and owing or accrued by the Lessee pursuant to the Operative Documents. If no Material Default or Event of Default is then continuing, any such awards or proceeds received from any Authority or any insurance proceeds with respect to any Event of Loss, Casualty or Condemnation, in each case, shall be held by the Administrative Agent and made available to the Lessee to the extent the Lessee rebuilds the Facility pursuant to Section 13.1, to pay costs actually incurred by the Lessee to restore the Leased Property as required herein in accordance with Section 13.1 and any awards or proceeds received from any Authority or any insurance proceeds remaining after such restoration shall be paid by the Administrative Agent over to the Lessee. To the extent the Lessee purchases the Facility pursuant to Section 13.1, after the Lessee has satisfied all payment obligations pursuant to Section 13.1 regarding such purchase, so long as no Event of Default as described in clauses (h) or (i) of Article XVII hereof is continuing (as evidenced by an order of a court), any awards or proceeds received from any Authority or any insurance proceeds shall be paid by Administrative Agent over to Lessee.

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SECTION 13.6.    Negotiations.

In the event any part of the Leased Property becomes subject to condemnation or requisition proceedings during the Lease Term, the Lessee shall give notice thereof to the Administrative Agent and Lessor promptly after the Lessee has knowledge thereof and, to the extent permitted by any Applicable Laws and Regulations, the Lessee shall control the negotiations with the relevant Authority unless a Material Default or Event of Default exists or such condemnation or requisition occurs during the Construction Period, in which case the Lessor shall be entitled to control such negotiations in consultation with the Lessee; provided, that in any event the Lessor may participate at the Lessor’s expense (or if a Material Default or Event of Default exists or such negotiations occur during the Construction Period, at the Construction Agent’s expense) in such negotiations. The Lessee shall give to the Lessor such information, and copies of such documents, which relate to such proceedings, or which relate to the settlement of amounts due under insurance policies required by Section 11.1, and are in the possession of the Lessee, as are reasonably requested by the Lessor. If the proceedings relate to an Event of Taking, the Lessee shall act diligently in connection therewith. Nothing contained in this Section 13.6 shall diminish the Lessor’s rights with respect to condemnation awards or proceeds and property insurance proceeds under Section 13.1.

SECTION 13.7.    No Rent Abatement.

Rent shall not abate hereunder by reason of any Casualty, any Event of Loss, any Event of Taking or any Condemnation of any portion of the Leased Property, and the Lessee shall continue to perform and fulfill all of the Lessee’s obligations, covenants and agreements hereunder notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation until the Lease Expiration Date or the purchase of the Leased Property by the Lessee in accordance with Section

13.1  hereof.

SECTION 13.8.    Environmental Matters.

At the Lessee’s sole cost and expense, the Lessee shall promptly and diligently and in material accordance with Applicable Laws and Regulations commence and complete any response, clean up, remedial or other action necessary to remove, clean up or remediate any Environmental Violation with respect to the Leased Property or the Site to the extent required of the Lessee, any Participant, the Collateral Agent or the Administrative Agent, as required by the DEH and otherwise in order to comply with Applicable Laws and Regulations. Lessee shall, upon completion of remedial action by the Lessee (i) with respect to any Material Environmental Violation described in clause (ii) of the definition thereof, cause to be prepared by a Responsible Officer of the Lessee a certificate describing in sufficient detail such Environmental Violation and the actions taken by the Lessee (or its agents) in response to such Environmental Violation and a statement of such Responsible Officer of the Lessee that such Environmental Violation has been remedied in compliance in all material respects with Applicable Laws and Regulations and (ii) with respect to any other Material Environmental Violation, cause to be prepared by the Environmental Expert a report describing in sufficient detail such Environmental Violation and the actions taken by the Lessee (or its agents) in response to such Environmental Violation, and a statement by the Environmental Expert that the Environmental Violation has been remedied in compliance in all material respects with Applicable Laws and Regulations, and a letter or other

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document issued by the DEH or other appropriate Authority having jurisdiction with respect to the Leased Property or the Site, as applicable, that would allow continued use of the Leased Property and the Site for their uses as of the date hereof, and confirming that no further action is required with respect to the investigation, cleanup, remediation or monitoring of the Leased Property or the Site with respect to such Environmental Violation. Each Environmental Violation shall be remedied in full prior to the Maturity Date unless the Leased Property has been purchased by the Lessee in accordance with Section 20.1, 20.2 or 21.1(a). Nothing in this Article XIII shall reduce or limit the Lessee’s obligations under Article VII of the Participation Agreement (which obligations shall include any Claims arising from such actions). On each anniversary of the Closing Date, the Lessee shall deliver to the Lessor (i) copies of any work plans, reports and other documents submitted to DEH, (ii) copies of all correspondence with or from DEH, and (iii) a copy of any supplement or modification to the regulatory concurrence letter from DEH.

SECTION 13.9.    Notice of Environmental Matters.

Promptly upon the Lessee’s obtaining knowledge of the existence of any Material Environmental Violation with respect to the Leased Property or the Site, the Lessee shall notify the Lessor in writing of such Material Environmental Violation. Promptly, but in any event within thirty (30) days from the date a Responsible Officer of the Lessee has actual knowledge thereof, the Lessee shall provide to the Lessor written notice of any pending or, to the Lessee’s knowledge, threatened claim, action or proceeding involving any Material Environmental Violation with respect to the Leased Property or the Site. 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) days of receipt, copies of all material written communications with any Authority relating to any such Material Environmental Violation for which notice was provided. The Lessee shall also promptly provide such detailed reports of any Material Environmental Violation for which notice was provided as may reasonably be requested by the Administrative Agent or any Participant. For purposes hereof, “Material Environmental Violation” shall mean any Environmental Violation (i) which imposes or, in the good faith judgment of the Lessee, the Administrative Agent, the Collateral Agent, or any Participant, could reasonably be expected to impose criminal liability on the Administrative Agent, the Collateral Agent, or any Participant or (ii) the cost of which to remediate is in excess of Five Hundred Thousand Dollars ($500,000).

ARTICLE XIV

CERTAIN DUTIES AND RESPONSIBILITIES

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

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ARTICLE XV
INSPECTION

Upon five (5) Business Days prior notice to the Lessee, the Lessor and the Rent Assignees or their respective authorized representatives (the “Inspecting Parties”) at any time during the Lease Term (provided that, except during the continuance of an Event of Default, the Lessor and the Rent Assignees shall limit their inspections to no more than one time in any calendar year and the Lessor shall coordinate such inspections as set forth below) may inspect (a) the Leased Property and the Site and (b) the books and records of the Lessee and its Affiliates relating to the Leased Property and the Site and make copies and abstracts therefrom. All such inspections shall be (i) during the Lessee’s normal business hours, (ii) subject to the Lessee’s reasonable safety and confidentiality requirements, (iii) accompanied by a representative of Lessee, and (iv) at the expense and risk of the Inspecting Parties, except that if an Event of Default is continuing, the Lessee shall reimburse the Inspecting Parties for the costs and reasonable out-of-pocket expenses of such inspections and, except for the Inspecting Party’s gross negligence or willful misconduct, such inspection shall be at the Lessee’s risk. In addition, Inspecting Parties shall use commercially reasonable efforts to coordinate their visits together and inspect the Leased Property and the Site in groups to the extent reasonably practicable. No inspection shall unreasonably interfere with the Lessee’s operations. None of the Inspecting Parties shall have any duty to make any such inspection or inquiry. None of the Inspecting Parties shall incur any liability or obligation by reason of making any such inspection or inquiry unless and to the extent such Inspecting Party causes damage to the Leased Property or the Site or any property of the Lessee or any other Person during the course of such inspection. The Inspecting Parties shall be third party beneficiaries of this Lease with respect to the rights set forth in this Article XV applicable to such Persons.

ARTICLE XVI
THE GROUND LEASE

Lessee acknowledges receipt of the Ground Lease and is familiar with the respective terms thereof. Lessee will, for the benefit of Lessor, perform all obligations, covenants and agreements to be performed by the lessee under the Ground Lease including without limitation the payment of all rent and other amounts due under such agreements during the term hereof and, as between Lessor and Lessee, Lessor shall have no responsibility for compliance with such obligations, covenants and agreements accruing during the term hereof. Lessee will at all times during the term hereof do all things necessary to perform all Ground Lessor’s obligations, covenants and agreements under the Ground Lease and will give Lessor notice of all defaults under the Ground Lease promptly after obtaining Actual Knowledge thereof. In addition to, and not in limitation of, Lessee’s obligations set forth elsewhere in this Lease during the term hereof, Lessee shall punctually pay and perform for the benefit of Lessor all of the obligations and liabilities whatsoever of Lessee or Lessor under any instrument that is a Permitted Lien including, without limitation, payment of indemnification of Lessor from and against all claims for which Lessor is liable thereunder during the term hereof. Lessee represents as of the date hereof that the Ground Lease is in full force and effect.

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ARTICLE XVII
EVENTS OF DEFAULT

The occurrence of any one or more of the following events, whether any 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 an “Event of Default”:

(a)        (i) the Lessee shall fail to make any payment of Basic Rent when due and such failure shall continue for a period of two (2) Business Days after the same became due, (ii) the Lessee shall fail to make any payment of the Purchase Amount, Lease Balance or other amounts due and payable under Article XIII, Article XVIII, Article XX, Article XXI or Article XXII, or

(iii) the Lessee shall fail to make any payment of any amount due and payable on the Maturity Date or the Lease Expiration Date;

(b)        the Lessee shall fail to make payment of any Supplemental Rent (other than any Supplemental Rent described in clause (a) above) when due and such failure shall continue for a period of five (5) days after written notice thereof has been given to the Lessee;

(c)        the Lessee shall fail to (i) comply with Sections 5.2(d), 5.3, 5.6 or 6.5 of the Participation Agreement, (ii) perform or comply with Article XII hereof, or (iii) maintain insurance as required by Article XI hereof;

(d)        the Lessee shall fail to perform or observe any of the terms, covenants, conditions and agreements set forth in Articles XXI and XXII hereof other than the failure to give notice of an end of term option pursuant to Section 21.1 hereof;

(e)        any representation, warranty, certification or statement made or deemed to be made by the Lessee under this Lease, any other Operative Document or in any report, certificate, financial statement or other document delivered pursuant hereto or thereto, shall at any time prove to have been incorrect in any material respect as of the date when made or deemed made;

(f)         the Lessee shall default in the performance or observance of any term, covenant, condition or agreement contained in this Lease or any other Operative Document (in each case, other than as specifically provided for otherwise in this Article XVII) and such default shall continue for a period of thirty (30) days after written notice thereof has been given to the Lessee or the Construction Agent;

(g)        the Lessee or any Restricted Subsidiary or Guarantor (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness (other than payment obligations hereunder), or (ii) fails to observe or perform any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders or the beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such

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Indebtedness to be made, prior to its stated maturity, or cash collateral in respect thereof to be demanded;

(h)        an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Lessee or any Restricted Subsidiary or Guarantor (other than a UK Relevant Entity) or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Lessee or any Restricted Subsidiary or Guarantor (other than a UK Relevant Entity) or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i)         the Lessee or any Restricted Subsidiary or Guarantor (other than a UK Relevant Entity) shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Lessee or any Restricted Subsidiary or Guarantor or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing or a UK Bankruptcy Event occurs with respect to any UK Relevant Entity;

(j)         the Lessee or any Restricted Subsidiary or Guarantor shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k)        one or more judgments or orders for the payment of money in an aggregate amount in excess of US$50,000,000 (not covered by insurance where the carrier has accepted responsibility in writing) shall be rendered against the Lessee, any Restricted Subsidiary or Guarantor or any combination thereof and the same shall remain undischarged for a period of sixty

(60) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any material assets of the Lessee or any Subsidiary to enforce any such judgment;

(l)         an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(m)       any material provision of any Operative Document (except in accordance with its terms), in whole or in part, terminates, ceases to be effective or ceases to be the legal, valid and binding enforceable obligation of the Lessee or any of its Affiliates directly or indirectly, contests in any manner in any court the effectiveness, validity, binding nature or enforceability thereof; or any assignment, security interest or Lien securing the Lessee’s obligations under the Operative Documents, in whole or in part, ceases to be perfected with the same priority as was in effect on the Closing Date or the Lessee shall disaffirm or deny any of its obligations under any Operative Document;

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(n)        a Construction Event of Default shall be continuing; or

(o)        a Lessee Change of Control shall occur.

ARTICLE XVIII
ENFORCEMENT

SECTION 18.1.    Remedies.

(a)        Subject to the limitation set forth in Section 18.5 hereof, during the existence of an Event of Default and notwithstanding any Event of Loss, Event of Taking, termination of this Lease pursuant to Article XIII or any other matter or occurrence, at the Lessor’s option and without limiting the Lessor in the exercise of any other right or remedy the Lessor may have on account of such Event of Default, and without any further demand or notice, the Lessor may to the fullest extent permitted under Applicable Laws and Regulations cause the following to occur:

(i)        By notice to the Lessee, the Lessor may terminate the Lessee’s right to possession of the Leased Property provided, however, that this Lease shall terminate immediately without notice upon the occurrence of an Event of Default described in paragraphs (h) or (i) of Article XVII hereof.

(ii)        Upon termination of the Lessee’s right to possession and without further demand or notice, the Lessee shall surrender possession and vacate the Leased Property and deliver possession of the Leased Property in accordance with Section 22.5 of this Lease, and the Lessor may re-enter the Leased Property and remove any Persons in possession thereof and re-lease the Leased Property to any third party.

(iii)        The Lessor may terminate this Lease with respect to all or any part of the Leased Property and/or declare the aggregate outstanding Lease Balance and all other amounts payable by the Lessee hereunder or under any other Operative Document to be immediately due and payable (provided, however, that this Lease shall terminate immediately without notice, and the aggregate outstanding Lease Balance and Break Amounts, if any, and such other amounts payable by the Lessee shall become immediately due and payable without demand therefor, upon the occurrence of an Event of Default described in paragraphs (h) or (i) of Article XVII hereof and, subject to the conditions therein, the Leased Property shall be transferred in accordance with Section 20.2 hereof), and the Lessor shall be entitled to (x) recover from the Lessee the following amounts without duplication of amounts owed and (y) take the following actions:

(A)       the Lessee shall pay all accrued and unpaid Rent hereunder (including, without limitation, Basic Rent and Supplemental Rent) for the period commencing on the Closing Date through the Final Rent Payment Date with respect to the Leased Property;

(B)       the Lessor may elect either of the following with respect to any or all of the Leased Property:

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(1)        the Lessor may demand, by written notice to the Lessee specifying a payment date (the “Final Rent Payment Date”) on a date no earlier than thirty (30) days after the date of such notice, that the Lessee shall pay to the Lessor, on the Final Rent Payment Date (in lieu of Basic Rent due after the Final Rent Payment Date), an amount equal to the sum of (A) the Lease Balance, plus (B) Break Amounts, if any, and (C) all accrued and unpaid Rent due and unpaid for the period commencing on the Closing Date to and including the Final Rent Payment Date (less any amounts paid by the Lessee under clause (A) above), and upon payment of such amount, and the amount of all other sums due and payable by the Lessee under this Lease and the other Operative Documents (and interest at the Overdue Rate on the amounts payable under this clause (B)(1) from the Final Rent Payment Date to the date of actual payment), the Leased Property shall be transferred to the Lessee or its designee pursuant to Section 23.11; provided, however, (x) that at any time prior to the Base Term Commencement Date, if the Lessee pays the amounts set forth above with respect to an Event of Default other than as described in paragraphs (n) or (o) of Article XVII where such Event of Default arises solely as a result of a Force Majeure Event, in the case of clause (m), and an unsolicited Change of Control to which neither the board of directors nor the shareholders of the Lessee approve, consent or acquiesce, in the case of clause (n), or (y) if the limitations set forth in Section 18.5 hereof shall be in effect and, in lieu of paying the amounts set forth above in full, the Lessee pays to the Lessor the Construction Recourse Amount, then, in each such case, the Leased Property shall not be transferred to the Lessee (or any designee thereof) and the Lessor shall have all of its rights and remedies with respect to the Leased Property and the Site contained in this Article XVIII (including, but not limited to, Section 18.5); or

(2)        the Lessor may sell its interest in the Leased Property and/or pursue any and all remedies under the Security Documents, and, in any event, the Lessee shall pay to the Lessor an amount equal to the excess, if any, of (x) all amounts described in clause (B)(1) above due the Lessor over (y) the net Sale Proceeds received by the Lessor from the foregoing sale (provided, that in calculating such net Sale Proceeds, all expenses and Taxes to the extent not indemnified and not paid by the Lessee pursuant to Section 7.2 of the Participation Agreement incurred by any of the Participants in connection with such sale including, without limitation, legal fees and expenses, shall be deducted from such Sale Proceeds);

(C)       Any other amount necessary to compensate the Lessor for all the damages caused by or resulting from the Lessee’s failure to perform the Lessee’s obligation under this Lease, including, but not limited to, the costs and expenses (including without limitation, attorneys’ fees and expenses, advertising costs and brokers’ commissions) of recovering possession of the Facility, removing Persons or property from the Facility, placing the Facility in good order, condition, and

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repair, preparing and altering the Facility for reletting, and all other costs and expenses of reletting; and

(D)       Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by Applicable Laws and Regulations.

(iv)        The Lessor may exercise any and all rights and remedies under the Security Documents.

(v)        If the Event of Default occurs prior to the Base Term Commencement Date, the Lessor may exercise any and all rights and remedies under the Construction and Development Agreement.

(vi)        If the Lessee has breached this Lease, this Lease shall continue in effect for so long as the Lessor does not terminate this Lease, and the Lessor may enforce all of the Lessor’s rights and remedies under this Lease, including the right to recover the Rent hereunder (including, without limitation, Basic Rent (when applicable) and Supplemental Rent) as it becomes due under this Lease. The Lessee’s right to possession shall not be deemed to have been terminated by the Lessor except pursuant to clause (i) above. The following do not constitute a termination of this Lease:

(A)       Acts of maintenance or preservation or efforts to relet the Leased Property; and

(B)       Withholding of consent to assignment or subletting, or terminating a subletting or assignment by the Lessee.

(vii)        In the event that the Lessor elects to continue this Lease in full force and effect following the termination of the Lessee’s right of possession of the Facility, the Lessor, to the maximum extent permitted by Applicable Laws and Regulations, may enforce all its rights and remedies under this Lease, including, but not limited to, the right to recover Rent hereunder as it becomes due. During the continuance of an Event of Default or following the termination of the Lessee’s right to possession of the Facility, the Lessor may enter the Facility and the Site in accordance with Applicable Laws and Regulations without terminating this Lease and, pursuant to Article VII hereof, sublet all or any part of the Leased Property for the Lessee’s account to any Person, for such term (which may be a period beyond the remaining Lease Term), at such rents and on such other terms and conditions as are commercially reasonable. In the event of any such subletting, rents received by the Lessor from such subletting shall be applied (a) first, to the payment of the costs incurred by the Lessor in maintaining, preserving, altering and preparing the Leased Property for subletting and other costs of subletting, including, but not limited to, brokers’ commissions and attorneys’ fees and expenses; (b) second, to the payment of Rent hereunder then due and payable; (c) third, to the payment of future Rent hereunder as the same may become due and payable hereunder; (d) fourth, to the payment of all other obligations of the Lessee hereunder and under the other Operative Documents (including, without limitation, the Lease Balance), and (e) fifth, the balance, if any, shall be paid to the Lessee upon (but not before) expiration of the Lease Term. If the rents received by the

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Lessor from such subletting, after application as provided above, are insufficient in any period to pay the Rent due and payable hereunder for such period, the Lessee shall pay such deficiency to the Lessor upon demand. Notwithstanding any such subletting for the Lessee’s account without termination, the Lessor may at any time thereafter, by written notice to the Lessee, elect to terminate this Lease.

(viii)        The Lessor may exercise any other right or remedy that may be available to it under Applicable Laws and Regulations or in equity, or proceed by appropriate court action (legal or equitable) to enforce the terms or to recover damages for the breach hereof, including those arising from a breach by the Lessee of its obligations under Section 20.2 hereof. Separate suits may be brought to collect any such damages for any Rent installment period(s), and such suits shall not in any manner prejudice the Lessor’s right to collect any such damages for any subsequent Rent installment period(s), or the Lessor may defer any such suit until the Lessor determines to bring such suit.

(ix)        The Lessor may retain and apply against the Lessor’s damages all sums which the Lessor would, absent such Event of Default, be required to pay to, or turn over to, the Lessee pursuant to the terms of this Lease.

The Lessee acknowledges and agrees that upon the declaration of an Event of Default the amount due and owing by the Lessee to the Lessor hereunder shall be the Lease Balance and that to the maximum extent permitted by Applicable Laws and Regulations, the Lessee waives any right to contest the Lease Balance as the liquidated sum or agreed upon sum due and owing.

(b)        In the event that an Event of Default is declared (or deemed declared) solely and exclusively on the basis of the occurrence of one or more Limiting Events on or before September 30, 2019:

(i)        a claim or demand by the Lessor for payment by the Lessee of or in respect of the Lease Balance under Section 18.1(a) hereof shall be limited as follows:

(A)       any obligation of the Lessee to pay the Lease Balance and amounts due under clauses (C) and (D) of Section 18.1(a)(iii) shall be reduced to be an obligation to pay an amount equal to the Recourse Deficiency Amount; provided, however, that if the Lessee shall not pay the full Lease Balance and such other amounts, the Lessor shall not have any obligation to transfer the Leased Property to the Lessee or its designee including, without limitation, as provided in clause (B)(1) of Section 18.1(a)(iii); and

(B)       any obligation of the Lessee to pay any shortfall determined by reference to the Lease Balance as provided in clause (B)(2) of Section 18.1(a)(iii), and amounts due under clauses (C) and (D) of Section 18.1(a)(iii) shall be revised to be an obligation to pay the lesser of (i) such shortfall plus such other amounts and (ii) the Recourse Deficiency Amount; and

the references to “Lease Balance” in the last paragraph of Section 18.1(a) and in Section 18.2 shall be deemed references to the amount described in clause (A) or clause (B) above, as applicable, provided, however, that the foregoing limitation shall not limit or affect any other rights of the

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Lessor as the Lessor shall have all rights and remedies available under the Operative Documents or available at law, equity or otherwise including, without limitation, the right to demand the payment of Supplemental Rent (other than the Lease Balance) and the right to require surrender and return or sale to a third party of the Leased Property all as set forth herein; and

(ii)        if Section 18.1(a)(vii) is applicable, the reference to Lease Balance in clause (d) thereof shall be a reference to the Recourse Deficiency Amount so long as the Lease has not been terminated.

SECTION 18.2.    Proceeds of Sale; Deficiency.

All payments received and amounts held or realized by the Lessor at any time when an Event of Default shall be continuing and after the Lease Balance shall have been accelerated pursuant to this Article XVIII as well as all payments or amounts then held or thereafter received by the Lessor (except for rents received by the Lessor from subletting pursuant to Section 18.1(a)(vii), which shall be distributed as set forth therein) and the proceeds of sale pursuant to Section 18.1(a)(iii)(B)(2) shall be distributed forthwith upon receipt by the Lessor in accordance with Article III of the Loan Agreement.

SECTION 18.3.    Waiver of Certain Rights.

To the maximum extent permitted by Applicable Laws and Regulations, (a) 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 marshalling in the event of any sale of the Leased Property or any interest therein and (b) if this Lease shall be terminated pursuant to this Article XVIII, the Lessee waives, to the fullest extent permitted by Applicable Laws and Regulations, (i) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (ii) any right of redemption, re-entry or repossession; (iii) 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; (iv) any other rights which might otherwise limit or modify any of the Lessor’s rights or remedies under this Article XVIII; and (v) any rights now or hereafter conferred under California Applicable Laws and Regulations that may require the Lessor to sell, lease or otherwise use the Leased Property, or any part thereof in mitigation of the Lessor’s damages upon the occurrence of an Event of Default or that may otherwise limit or modify any of the Lessor’s rights or remedies under this Article XVIII.

SECTION 18.4.    Remedies Cumulative; No Waiver; Consents.

To the extent permitted by, and subject to the mandatory requirements of, Applicable Laws and Regulations, each and every right, power and remedy herein specifically given to the Lessor or otherwise in this Lease shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Lessor, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Lessor in the exercise of any right,

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power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Lessee or be an acquiescence therein. The Lessor’s consent to any request made by the Lessee shall not be deemed to constitute or preclude the necessity for obtaining the Lessor’s consent, in the future, to all similar requests. No express or implied waiver by the Lessor of any Default or Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Default or Event of Default.

SECTION 18.5.    Limitation of Recourse Liability.

(a)        Notwithstanding anything set forth herein or in the other Operative Documents to the contrary with respect to the Lessee’s obligations to pay the Lease Balance under this Article XVIII, the Lessor shall have full recourse to the Leased Property, the other Lessee Collateral and the proceeds thereof and to any non-Cubic Person. However, recourse to the Lessee for such payment obligation prior to the Base Term Commencement Date shall be limited as follows:

(i)         upon a termination of this Lease caused by or arising out of an Event of Loss or an Event of Taking if caused by a Force Majeure Event during the Construction Period, the Lessee’s indemnification liability under Section 7.1(f)(i)(B)(1) of the Participation Agreement shall remain in effect, but so long as no Specified Event has occurred there shall be no other recourse to the Lessee;

(ii)        upon the occurrence and during the continuation of an Event of Default caused by or arising out of a Specified Event, or upon a termination of this Lease caused by or arising out of any Specified Event, the Lessee shall be obligated to the full extent of its payment obligations under the Operative Documents; and

(iii)       in any other case, the Lessee’s payment obligation shall be limited to an amount not to exceed the Construction Recourse Amount, provided, that this limitation shall not affect the Lessee’s indemnification liability under Section 7.1(f)(i)(B)(1) of the Participation Agreement.

(b)        Concurrently with the payment of any amounts set forth in Section 18.5(a) above and other amounts then owing, the Lessee shall, if requested by the Lessor, relinquish possession of the Leased Property, in the condition required by this Lease, subject only to Permitted Liens described in clauses (a) (but excluding any such rights and interests of the Lessee referenced therein) and (b) of the definition thereof, if the Lessor requests, convey by deed all of the Lessee’s right, title and interest, if any, in and to the Leased Property or any part thereof to the Lessor or a party designated by the Lessor, subject only to Permitted Liens described in clauses (a) (but excluding any such rights and interests of the Lessee referenced therein) and (b) of the definition thereof. The foregoing limitation on recourse to the Lessee will not apply on or after the Base Term Commencement Date. Notwithstanding the foregoing limitation on recourse to other assets of the Lessee, (1) the Lessor shall have the right to proceed against the Leased Property and to exercise any and all rights and remedies under the Security Documents and to sell or lease the Leased Property (or any parts thereof) and to recover the remaining outstanding Lease Balance and all other amounts due and owing hereunder from the proceeds of any sale, lease or other disposition thereof, and (2) subject to Section 7.1(f) of the Participation Agreement, each Indemnitee shall

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have the right to seek indemnification from the Lessee for any Claim and regarding Taxes pursuant to the indemnity sections of the Participation Agreement.

SECTION 18.6.    Phase I Environmental Report.

Upon the occurrence of an Event of Default, the Lessee at Lessor’s request shall furnish to the Lessor a current Phase I environmental assessment report for the Leased Property (and such other reports that may be reasonably required or recommended under such report) dated, commenced and completed no earlier than forty-five (45) days from and after the date of occurrence of the Event of Default and in form and substance reasonably satisfactory to the Lessor, from an environmental consultant selected by the Lessee and approved by the Lessor as to the environmental conditions with respect to the Leased Property. The obligations of the Lessee under this Section 18.6 shall survive the termination of this Lease.

ARTICLE XIX
RIGHT TO CURE

If any Event of Default shall be continuing and in the Lessor’s reasonable judgment the Lessee is not acting diligently and appropriately to cure such Event of Default, the Lessor may, but shall not be obligated to, on five (5) Business Days’ prior notice to the Lessee (except in the event of an emergency, in which case only one (1) Business Day’s prior notice shall be required), cure such Event of Default and the Lessor shall not thereby be deemed to have waived any default caused by such failure to cure, and the amount of any such payment and the amount of any expenses of the Lessor (including attorneys’ fees and expenses) incurred in connection with such cure, together with interest thereon at the Overdue Rate, shall be deemed Supplemental Rent, payable by the Lessee to the Lessor upon demand.

ARTICLE XX

EARLY TERMINATION OPTION AND OBLIGATION TO PURCHASE

SECTION 20.1.    Early Termination Option.

Without limitation of the Lessee’s purchase obligation pursuant to Section 20.2, the Lessee may, at its option, on any Payment Date following the second anniversary of the Base Term Commencement Date but at least one hundred eighty (180) days prior to the Return Date, purchase all, but not less than all, of the Leased Property (the “Early Termination Option”) at a price equal to the Purchase Amount. In order to exercise its option to purchase the Leased Property pursuant to this Section 20.1, the Lessee shall give the Lessor not less than thirty (30) days’ prior written notice of such election which election shall be irrevocable when made. Upon receipt of the Purchase Amount, the Leased Property shall be transferred to the Lessee (or its designee) pursuant to Section 23.11 whereupon this Lease shall terminate except for such provisions which expressly survive such a termination.

SECTION 20.2.    Required Purchase.

On or after the Base Term Commencement Date and so long as the Lessor has not exercised any other remedy inconsistent therewith, the Lessee shall be obligated to purchase the Leased

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Property for the Purchase Amount automatically and without notice upon the occurrence of any Event of Default described in clauses (h) or (i) of Article XVII and upon receipt of the Purchase Amount the Leased Property shall be transferred to the Lessee (or its designee) pursuant to Section 23.11  whereupon this Lease shall terminate except for such provisions which expressly survive such a termination.

ARTICLE XXI

END OF TERM OPTIONS

SECTION 21.1.    End of Term Options

At least one hundred and eighty (180) days prior to the Return Date, the Lessee shall, by delivery of an irrevocable written notice to the Administrative Agent, exercise one of the following options:

(a)        Purchase for cash for the Purchase Amount all, but not less than all, of the Leased Property then subject to this Lease on the last day of the Lease Term (the “Purchase Option”); and if the Lessee shall have elected the Purchase Option, upon the payment to the Lessor of the Purchase Amount, the Leased Property shall be transferred to the Lessee (or its designee or assignee provided that the Lessee shall remain primarily liable for all payments due in respect of the Purchase Option election) pursuant to Section 23.11 whereupon this Lease shall terminate except for such provisions which expressly survive such a termination; or

(b)        Provided no Default or Event of Default shall be continuing, return the Leased Property to the Lessor at the end of the scheduled expiration date of the Lease Term (the “Return Option”). The Return Option shall be conditioned upon and subject to the fulfillment by the Lessee of each of the terms and conditions set forth in Article XXII and, thereafter, the Lessee shall have no further obligations to pay Basic Rent or the remaining Lease Balance. The Lessee shall not enter into any additional subleases or renew any subleases with respect to the Leased Property following the Lessee’s election of the Return Option. Following the Lessee’s election of the Return Option, the Lessee shall not remove any Alterations.

SECTION 21.2.    Election of Options.

In the event the Lessee fails to make a timely election under Section 21.1 hereof, the Lessee shall be deemed to have elected the Purchase Option. The Lessee may not elect the Return Option if there exists on the date the election is made or prior to the Lease Expiration Date a Default, an Event of Default, an Event of Loss, an Event of Taking, a Casualty or a Condemnation.

ARTICLE XXII
RETURN OPTION

SECTION 22.1.    Return Option Procedures.

(a)        If the Lessee elects the Return Option, and the Lessor elects to require the Lessee to offer to assign Lessor’s Ground Lease interests and to sell the Facility, at the option of the Lessor, (x) the purchaser shall be reasonably entitled (whether on or before the Return Date or

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thereafter) to (i) (A) be granted a ground lease in lieu of the Ground Lease, from the Lessee, as ground lessor, substantially in the form of such Ground Lease, as modified by the Estoppel Certificate (the “Third Party Ground Lease”), free and clear of any Lien other than the Liens created pursuant to the Additional Easement, Lessor Liens, the Liens set forth on Schedule III to the Participation Agreement and any Liens arising after the Closing Date which have been expressly approved by the Participants in accordance with the Operative Documents (the “Return Option Liens”), which leasehold estate shall be evidenced of record by a memorandum of the Third Party Ground Lease in form and substance reasonably acceptable to Lessee as ground lessor and such purchaser, and the Ground Lessor acknowledge that the Facility and other improvements on the Site shall not revert to the Ground Lessor until the expiration or termination of the Third Party Ground Lease, and (B) if not otherwise provided in the Third Party Ground Lease, be granted easements on portions of the Overall Parcel (the “Additional Easement”) to (i) enable the purchaser to reasonably operate and have access over and use of paths, lots (including parking lots) and private ways necessary to ensure the continued operation of the Facility, or (ii) remain in compliance with Applicable Laws and Regulations including, without limitation, zoning ordinances and the California Subdivision Map Act, as applicable, which easement shall not be a “blanket easement” and is in all other respects reasonably acceptable to Lessor and Ground Lessor (which obligation of the Lessee to grant or cause to be granted such Third Party Ground Lease and Additional Easement hereunder shall survive the termination of this Lease) provided, however, to the extent necessary to enable Ground Lessor to reasonably operate improvements located on the Overall Parcel other than the Site, Lessor or such purchaser shall grant an easement over the Site in favor of the Ground Lessor, which easement shall not be a “blanket easement” and shall be in all other respects reasonably acceptable to Lessor and Ground Lessor (which obligation of Lessor or such purchaser to grant or cause to be granted such Third Party Ground Lease and Additional Easement hereunder shall survive the termination of this Lease), or (ii) be assigned the rights of the Lessor, as lessee under the Ground Lease, for the remaining term thereof, free and clear of any Lien other than the Return Option Liens and be granted the Additional Easement (which obligation of the Lessee to grant the Additional Easement hereunder shall survive the termination of this Lease), and (y) the Lessee shall use commercially reasonable efforts as non-exclusive agent for the Lessor to remarket the Leased Property and obtain the highest all cash purchase price for the sale of the Facility and the leasehold interests in the Site from the date of such request to the Return Date, subject to any extension thereof pursuant to Section 22.4(b). In the event the Lessee receives any bid, the Lessee shall within five (5) Business Days after receipt thereof and, at least twenty (20) Business Days prior to the Return Date, certify to the Lessor in writing the amount and terms of such bid and the name and address of the party (provided, such party shall not be (x) the Lessee or any Affiliate of the Lessee, or (y) any Person with whom the Lessee has an understanding or arrangement regarding their future use, possession or ownership of the Leased Property or the Lessor’s other rights, title and interest in and to the Leased Property, unless, in the case of the foregoing subsections (x) or (y) the sum of (i) the Sale Proceeds pursuant to a proposed bid which the Lessee desires to accept plus (ii) the Return Price Recourse Deficiency Amount (as set forth in the Lease Supplement hereto) plus (iii) any amount payable pursuant to Section 7.7 of the Participation Agreement is equal to or greater than the Lease Balance; provided further, such party may be the Lessor, any Affiliate thereof, or any other Person contacted by the Lessor (other than as referenced in the foregoing subsections (x) or (y))) submitting such bid, and the Lessee and any ground Lessee or sublessee shall confirm in writing both to the Lessor and to the bidder that it will

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surrender and vacate the Facility and take such reasonable steps as may be required to grant to the bidder the Third Party Ground Lease on or before the Return Date.

If the sum of (i) the Sale Proceeds pursuant to a proposed bid which the Lessee desires to accept plus (ii) the Return Price Recourse Deficiency Amount plus (iii) any amount payable pursuant to Section 7.7 of the Participation Agreement is equal to or greater than the Lease Balance, then the Lessee shall determine and accept the winning bid; otherwise, the Lessor shall have the right, in its sole and absolute discretion, to consent to such sale and the Lessor shall have the right, in its sole and absolute discretion to accept or reject any bid so presented by the Lessee to the extent any portion of its Lessor Investment would remain unpaid. Unless pursuant to the terms of the bid submitted, the Sale Proceeds shall exceed the aggregate outstanding Lease Balance as of the Return Date, any Participant may submit a bid to the Lessee not later than five (5) Business Days prior to the Return Date. As non-exclusive selling agent, Lessee’s expenses and the out-of-pocket expenses incurred by the Lessor and each other Participant in connection with any such bidding and sale process pursuant to this Section 22.1 as well as all costs and expenses incurred by any party (including a buyer or potential buyer) to the extent the Lessor and the Lessee have agreed to such payment to place the Leased Property and the Site in the condition required by Section 9.1, shall be deducted from the Sale Proceeds.

(b)        On or before the Return Date, (i) the Lessee shall (a) prepare, in form and substance reasonably satisfactory to the lessee under the Ground Lease or Third Party Ground Lease an acknowledgement that the Facility and other improvements on the Site shall not revert to the Ground Lessor until the expiration or termination of the Third Party Ground Lease or the Ground Lease, (b) transfer all of the Lessee’s right, title and interest in and to the Leased Property hereunder, to the extent required by the bidder, if any, which shall have submitted the bid (if any) accepted pursuant to Section 22.1(a), in the same manner and in the same condition and otherwise in accordance with all of the terms of this Lease; and (c) if applicable, prepare, in form and substance reasonably satisfactory to the purchaser of the Facility under Section 22.1(a), a Third Party Ground Lease and the Additional Easement; (ii) subject to the prior or current payment by the Lessee of all amounts due under clause (iii) of this sentence, the Lessor shall comply with any conditions to transfer set forth in Section 22.2 and the transfer provisions of Section 23.11 in order to transfer its interests in the Leased Property for cash to such bidder; (iii) the Lessee, as non- exclusive selling agent, shall simultaneously pay to the Lessor all of the amounts required pursuant to Section 22.3; (iv) after payment in full of all amounts owing to the Lessor hereunder and under the terms of the bid, this Lease shall terminate; and (v) subject to the conditions set forth in subsection (d) below, at least thirty (30) days prior to the Return Date, Lessor and Lessee shall enter into the Additional Easement; provided, however, that any return of the Leased Property under a Return Option shall be conditioned upon the absence of any Default or Event of Default on the Return Date (in which case, this subsection will not apply and the Lessee shall be responsible for the Lease Balance (and, in the case where the Lease Balance is paid, the Lessor shall convey to the Lessee or its designee the Leased Property in accordance with Section 23.11)). Neither the Administrative Agent nor any Participant shall have any responsibility for procuring any purchaser; provided, however, that the Lessor and its designees may, at the direction of the Required Participants, engage in activities to market and sell the Leased Property so long as such activities do not conflict with Lessee’s remarketing activities. Any such activities undertaken by the Lessor pursuant to this Section 22.1 shall be at the Lessee’s sole cost and expense (which shall be deducted from the Sale Proceeds in accordance with the foregoing) and shall not change the

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Lessee’s obligations, as non-exclusive selling agent, under this Section 22.1 or during the Extended Remarketing Period (as defined in Section 22.4) to use commercially reasonable efforts, as non-exclusive selling agent, to sell the Leased Property in accordance with the requirements of this Article XXII.

(c)        On the Return Date, the Lessor or any purchaser of the Leased Property, if sold, shall pay to the Lessee the Fair Market Rental Value of the Site subject to the Ground Lease or Third Party Ground Lease for the remainder of the term of the Ground Lease or the term of the Third Party Ground Lease, commencing on the Lease Expiration Date. Such amount shall not affect the calculation of any other amount owed by any party to the Operative Documents and shall be paid by wire transfer to the Lessee at such place as the Lessee shall specify in writing to the Lessor pursuant to Schedule 11 to the Participation Agreement. The term “Fair Market Rental Value of the Site” means the value for the Site that would be obtained in an arm’s-length transaction for the leasing of such portion of the Site for the remainder of the term of the Ground Lease or the term of the Third Party Ground Lease, between an informed and willing lessee-user (other than a lessee currently in possession) under no compulsion to lease and an informed and willing lessor under no compulsion to lease, as the same shall be specified by agreement between the Lessor and the Lessee or, if not agreed to by Lessor and the Lessee, upon the election of the Return Option, within a period of fifteen (15) days after either party requests the determination, then as specified in an appraisal mutually agreed to by two real estate appraisers, one of which shall be appointed by the Lessor and the other of which shall be appointed by Lessee, or, if such appraisers cannot agree on such appraisal, an appraisal arrived at by a third independent real estate appraiser chosen by the mutual consent of the two appraisers, or if they do not agree, appointed by the American Arbitration Association. If either party should fail to appoint an appraiser within fifteen (15) days of receiving notice of the appointment of an appraiser by the other party, then such appraisal shall be made by the appraiser appointed by the first party. If the two appraisers cannot agree on such appraisal and fail to appoint a third appraiser within fifteen (15) days after the appointment of the second appraiser, then either party may apply to the American Arbitration Association to make such appointment. The appraisal shall be completed within thirty (30) days of the appointment of the last appraiser appointed and before the consummation of the Return Option.

SECTION 22.2.    Sale.

The Lessee, as non-exclusive selling agent for Lessor, shall, on the Return Date, at the Lessee’s own expense (without right of reimbursement therefor out of gross sale proceeds), ensure that the Leased Property as so transferred is (i) free and clear of all Liens, other than Permitted Liens described in clauses (a) (but excluding any such rights and interests of the Lessee referenced therein) or (b) of the definition thereof and (ii) (A) in the condition required by the terms of this Lease, (B) without any parties in possession claiming relief or exemption from judicial execution, and (C) in compliance with all Applicable Laws and Regulations. The Lessee, as non-exclusive selling agent, shall obtain all necessary Governmental Actions and make all governmental filings required by the Lessee or the Lessor in connection with any sale and grant of rights. The Lessee, as non-exclusive selling agent, shall cooperate with the purchaser of the Leased Property in order to facilitate the transfers of the ownership and operation of the Leased Property by such purchaser after the date of the sale or transfer, including providing all books, reports and records regarding the maintenance, repair and ownership of the Leased Property, permitting inspection of the Leased

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Property by the Lessor, the Administrative Agent and any potential purchasers, granting or assigning all licenses that are assignable and necessary for the operation of the Leased Property and cooperating in seeking and obtaining all necessary Governmental Actions, and otherwise doing all things reasonably necessary to sell and deliver possession of the Leased Property to any purchaser. The Lessee shall also, on the Return Date, vacate and cause any sublessee to vacate the Leased Property in accordance with Section 22.5. As a further condition to the Lessee’s rights hereunder, the Lessee shall pay the total cost for the completion of all Alterations commenced after the Base Term Commencement Date and prior to the Return Date and, subject to the Lessee’s right to use applicable insurance proceeds as set forth in Article XIII hereof, for the repair and rebuilding of the affected portions of the Leased Property suffering a Casualty or a Condemnation after the Base Term Commencement Date. Such Alterations and all such repairs and rebuilding shall be completed prior to the Return Date. Prior to the Return Date, the Lessee (or the independent purchaser) shall furnish to the Administrative Agent, the Collateral Agent, the Participants and the independent purchaser hereunder a reasonably current Phase II environmental assessment report for the Leased Property (and such other reports that may be required or recommended under such report) dated, commenced and completed no earlier than forty-five (45) days prior to the Return Date and in form and substance satisfactory to the Lessor in its reasonable discretion, from an environmental consultant reasonably selected by the Lessee and approved by the Lessor, certifying that (x) there exists no contamination with respect to the Leased Property that would adversely affect the fair market value, marketability, utility, useful life or functional capability of the Leased Property or have any adverse effect on the Lessor and (y) there are no environmental remediation requirements with respect to the Leased Property, which certificate shall be addressed to each such party in form and substance satisfactory in the reasonable discretion of such purchaser, the Administrative Agent and the Participants. The obligations of the Lessee under this Section 22.2 shall survive the Maturity Date or the expiration or termination of this Lease.

Unless the Lessee shall have exercised or been deemed to have exercised its Purchase Option, the Lessor shall be entitled to perform such investigation, including obtaining reports of engineers and other experts as to the condition and state of repair and maintenance of the Leased Property and the Site required by this Section 22.2 and as to the compliance of the Leased Property, such land and the Site with Applicable Laws and Regulations including Environmental Laws, as it deems appropriate. The Lessee, at its sole cost and expense (without right of reimbursement therefor out of gross sale proceeds but, subject to the Lessee’s right to use applicable insurance and condemnation proceeds as set forth in Article XIII hereof), shall cause the repair or other remediation of any discrepancies between the actual condition of the Leased Property and the Site and the condition required under this Lease, such repair or remediation to be completed not later than the Return Date.

SECTION 22.3.    Application of Sale Proceeds and Recourse Payments.

(a) On the Return Date, in connection with the Lessee’s exercise of the Return Option, the Lessee shall pay to the Lessor all Rent then due together with all other amounts due and payable by the Lessee to any Indemnitee. The Lessee also shall cause to be paid to the Lessor, from the aggregate Sale Proceeds (after application of gross sale proceeds to payment of any deed or transfer tax thereon to the extent not paid by the purchaser thereof and payment or reimbursement to the Lessee, the Lessor and any other party (including a buyer or potential buyer) to the extent the Lessor and the Lessee have agreed to such payment for any costs or expenses incurred by the

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Lessee, the Lessor or such other party in connection with the actions required under this Article XXII, excluding any provision of Article XXII which expressly specifies that the Lessee’s costs shall not be reimbursable out of gross sale proceeds), the aggregate outstanding Lease Balance as of the Return Date (as determined after the payment of all Rent due on such date). If the Sale Proceeds exceed the Lease Balance as of the Return Date, the Lessee shall retain or be entitled to receive the portion of the Sale Proceeds in excess thereof. If the Sale Proceeds are less than the aggregate outstanding Lease Balance, the Lessee shall pay or shall cause to be paid to the Lessor, as Supplemental Rent, on the Return Date, in addition to the Sale Proceeds, an additional amount (the “Deficiency”) equal to the lesser of (x) the amount that the Lease Balance exceeds the Sale Proceeds or, (y) provided no Default or Event of Default is continuing (in which case, this clause (y) will not apply and the Lessee shall be responsible for the Lease Balance (and, in the case where the Lease Balance is paid, the Lessor shall convey to the Lessee or its designee the Leased Property in accordance with Section 23.11)), the Return Price Recourse Deficiency Amount.

(b) The obligation of the Lessee to pay the amounts determined pursuant to Sections 22.3(a) and 22.4 shall be recourse obligations of the Lessee, and such payments by the Lessee shall not limit any other obligation of the Lessee under the Operative Documents, including pursuant to Article VII of the Participation Agreement.

SECTION 22.4.    Failure to Sell Leased Property.

If the Leased Property shall not have been sold on or prior to the Return Date, in accordance with and subject to the provisions of this Article XXII, then the Lessee and the Lessor hereby agree as follows:

(a)        The Lessee shall pay to the Lessor on the Return Date an amount equal to the Return Price Recourse Deficiency Amount plus all other Rent then due under this Lease and the other Operative Documents or, in the event a Default or Event of Default shall be continuing on such date, the Lease Balance and, in the case where the Lease Balance is paid, the Lessor shall convey to the Lessee or its designee the Leased Property in accordance with Section 23.11 whereupon this Lease shall terminate except for such provisions which expressly survive such a termination.

(b)        To the extent that the Lessor has required the Lessee to remarket the Leased Property, at the option of the Lessor, the Lessee shall be required to continue using commercially reasonable efforts as non-exclusive agent for the Lessor to sell the Leased Property in accordance with this Article XXII for the period (the “Extended Remarketing Period”) commencing on the Return Date and ending on the earliest of (i) the sale of the Leased Property in accordance with the provisions of this Article XXII or such earlier date as the Lessor has received payment in full of the Lease Balance and all accrued and unpaid Rent, (ii) the delivery of a written notice from the Lessor to the Lessee at any time terminating this Lease, which notice shall indicate that such termination is being made pursuant to this Section 22.4(b)(ii) and the date such termination shall be effective, (iii) the delivery of a written notice from the Lessee to the Lessor pursuant to which the Lessee notifies the Lessor of its election to terminate the Extended Remarketing Period; and (iv) the end of the twelfth month following the Return Date. The notice given by the Lessee pursuant to this Section 22.4(b)(iii) shall indicate that it is being made pursuant to this Section 22.4(b)(iii) and shall set forth the date of termination of the Extended Remarketing Period; provided, however, in no event shall such termination date occur prior to the ninth (9^th) month

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following the Return Date. On the last day of the Extended Remarketing Period, if the Leased Property has not been sold during the Extended Remarketing Period in accordance with this Article XXII, the Lessee shall also make the payments required under Section 22.4(a), to the extent not already paid under such Section. Nothing in this Section 22.4 shall adversely affect any other rights the Lessor may have to terminate this Lease pursuant to any other Section of this Lease or the Lessor’s right to pursue any remedy hereunder as a result of an Event of Default arising as a result of the Lessee’s failure to comply with the requirements set forth herein including, without limitation, pursuant to Article XVII or the Lessee’s obligation to pay amounts arising under Article VII of the Participation Agreement.

(c)        Following the expiration of the Extended Remarketing Period (or, if not so elected by the Lessor, following the Return Date) and the absence of any sale of the Leased Property, the Lessor may sell the Leased Property and require that the Lessee (pursuant to documents reasonably acceptable to the Lessee and the purchaser of the Leased Property) (1) (x) grant a Third Party Ground Lease and grant the Additional Easement, (y) consent to Lessor’s assignment of the rights of the Lessor, as lessee under the Ground Lease, or (z) consent to Lessor’s lease of the Leased Property and the Lessor’s other interest in and to the Leased Property to any third party at such reasonable times and for such amounts as the Lessor deems commercially reasonable and appropriate, and (2) facilitate the transfers of the ownership, leasing and operation of the Leased Property to Lessor or any third party designated by the Lessor including providing all books, reports and records regarding the maintenance, repair and ownership of the Leased Property, granting or assigning all licenses necessary for the operation of the Leased Property and cooperating in seeking and obtaining all necessary Governmental Actions and otherwise doing all things reasonably necessary to convey and deliver possession of the Leased Property to any such Person in order to maximize the Lessor’s opportunity to recover the Lease Balance and the Lessor shall not have any obligation to account to the Lessee for, and the Lessor shall be entitled to retain, any Sale Proceeds or other amounts recovered from the sale or other disposition or lease of the Leased Property following such termination (whether or not in the excess of the Lease Balance). The Lessor’s appointment of the Lessee as the Lessor’s non-exclusive agent to use commercially reasonable efforts to obtain the highest all-cash price for the purchase of the Leased Property and the Lessor’s interest therein shall not restrict the Lessor’s right to market or lease the Leased Property and the Lessor’s interest in the Leased Property, to retain one or more sales agents or brokers (with the costs and expenses thereof being paid out of the Sale Proceeds, as provided in Sections 22.1(a) and 22.3(a) hereof), or the right of any Participant to submit or cause to be submitted bids for the Leased Property and the Lessor’s other interest in and to the Leased Property in the manner contemplated by Section 22.1. Upon such sale, assignment and transfer of the Leased Property, the Lessee’s possession under this Lease shall terminate; provided that any provisions hereof that expressly survive the expiration or other termination of this Lease shall survive such termination.

(d)        The Lessor reserves all rights under this Lease and the other Operative Documents arising out of the Lessee’s breach of any provisions of this Lease (including this Article XXII), whether occurring prior to, on or after the Return Date, including the Lessee’s breach of any of its obligations under this Article XXII, including the right to sue the Lessee for damages.

(e)        To the greatest extent permitted by law, the Lessee hereby unconditionally and irrevocably waives any right, and releases the Lessor from any related obligation, to require the

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Lessor at any time prior to the Return Date or the last day of the Extended Remarketing Period, as applicable, to market the Leased Property and the Lessor’s other interest in and to the Leased Property at all or for any minimum purchase price or on any particular terms and conditions. The Lessee hereby agrees that if the Lessee shall elect the Return Option, its ability to sell the Leased Property and the Lessor’s other interest in and to the Leased Property on or prior to the Return Date, and to cause any Person to submit a bid to the Lessor pursuant to Section 22.1 shall constitute full and complete protection of the Lessee’s interest hereunder.

SECTION 22.5.    Surrender and Return.

(a)        Upon the expiration or earlier termination of the Lease Term, and provided that the Lessee, if so entitled, has not exercised its option to purchase the Leased Property or to renew this Lease, the Lessee shall peaceably leave and surrender and return the Leased Property to the Lessor in the same condition in which the Leased Property existed on the Closing Date and such subsequent date on which the Facility thereon (including any Alterations that constitute part of the Facility) was constructed pursuant to the Construction and Development Agreement, except as completed, repaired, rebuilt, restored, altered or added to as required by or permitted by any provision of this Lease (ordinary wear and tear excepted). The Lessee shall remove from the Leased Property on or prior to such expiration or earlier termination all property situated thereon which is not the property of the Lessor and the Leased Property shall be clean and the Lessee shall repair any damage caused by such removal. Leased Property not so removed shall become the property of the Lessor and the Lessor may cause such property to be removed from the Leased Property and disposed of, and the Lessee shall pay (without right of reimbursement out of gross sale proceeds) the reasonable cost of any such removal and disposition and of repairing any damage caused by such removal. Notwithstanding the foregoing, if the Lease is terminated early due to an Event of Default, then Lessee shall have a period of thirty (30) days to remove any property that is not part of the Leased Property other than such property the removal of which would result in a violation of Applicable Laws and Regulations. The Lessee shall at its expense repair any damage to the Leased Property caused by the removal of such property.

(b)        Except for surrender upon the expiration or earlier termination of the Lease Term hereof, no surrender to the Lessor of this Lease or of the Leased Property shall be valid or effective unless agreed to and accepted in writing by the Lessor.

(c)        Without limiting the generality of the foregoing, upon the surrender and return of the Leased Property to the Lessor pursuant to this Section 22.5, (i) the Leased Property shall be (x) capable of being immediately utilized by a third-party purchaser or third-party lessee without further inspection, repair, replacement, alterations or improvements, licenses, permits, or approvals, except for any of the foregoing required solely by virtue of the change in ownership (other than to the Lessor), use or occupancy of the Leased Property, (y) in accordance and compliance with all Applicable Laws and Regulations including, without limitation, any of the foregoing required by virtue of a change in ownership, use or occupancy of the Leased Property other than to the Lessee, and (z) free and clear of any Lien and (ii) the Facility shall have been Completed. Until the Leased Property has been surrendered and returned to the Lessor in accordance with the provisions of this Section 22.5 and subject to Article XVIII hereof, the Lessee shall continue to pay the Lessor all Basic Rent and Supplemental Rent due hereunder.

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(d)        The Lessee acknowledges and agrees that a breach of any of the provisions of this Section 22.5 may result in damages to the Lessor that are difficult or impossible to ascertain and that may not be compensable at law. Accordingly, upon application to any court of equity having jurisdiction over the Leased Property or the Lessee, the Lessor shall be entitled to a decree against the Lessee requiring specific performance of the covenants of the Lessee set forth in this Section 22.5.

(e)        Upon the request of the Lessor, the Lessee shall continue to maintain its insurance policies for the Leased Property, to the extent permitted by such policies, provided that the Lessor pays or reimburses the Lessee for the pro rata cost thereof.

ARTICLE XXIII
MISCELLANEOUS

SECTION 23.1.    Binding Effect; Successors and Assigns; Survival.

The terms and provisions of this Lease, and the respective rights and obligations hereunder of the Lessor and the Lessee shall be binding upon them and their respective successors, legal representatives and assigns (including, in the case of the Lessor, any Person to whom the Lessor may transfer the Leased Property or any interest therein in accordance with the provisions of the Operative Documents), and inure to their benefit and the benefit of their respective permitted successors, legal representatives and assigns (including, in the case of the Lessor, any Person to whom the Lessor may transfer the Leased Property or any interest therein in accordance with the provisions of the Operative Documents).

SECTION 23.2.    Severability.

Any provision of this Lease that shall be 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, and the Lessee shall remain liable to perform its obligations hereunder except to the extent of such unenforceability. To the extent permitted by Applicable Laws and Regulations, the Lessee hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect.

SECTION 23.3.    Notices.

Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be in writing and shall be delivered and shall be deemed to have been given in accordance with Section 9.3 of the Participation Agreement. The parties shall copy the Administrative Agent, the Collateral Agent and the Rent Assignees on all notices, requests, demands or other written communications made hereunder.

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SECTION 23.4.    Amendment; Complete Agreements.

Neither this Lease or any other Operative Document nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of the Participation Agreement. This Lease, together with the other Operative Documents, is intended by the parties as a final expression of their agreement and as a complete and exclusive statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein and therein. No course of prior dealings between the parties or their officers, employees, agents or Affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease or any other Operative Document. Acceptance of, or acquiescence in, a course of performance rendered under this or any prior agreement between the parties or their Affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease or any other Operative Document. No representations, undertakings, or agreements have been made or relied upon in the making of this Lease other than those specifically set forth in the Operative Documents.

SECTION 23.5.    Headings.

The Table of Contents and headings of the various Articles and Sections of this Lease are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof.

SECTION 23.6.    Original Executed Counterpart.

The single executed original of this Lease containing the receipt of the Lessor therefor on or following the signature pages thereof shall be the “original executed counterpart” of this Lease. To the extent that this 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 Lease may be created through the transfer or possession of any counterpart other than the “original executed counterpart.”

SECTION 23.7.    Governing Law.

THIS LEASE HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE WHERE THE SITE IS LOCATED ARE REQUIRED TO APPLY.

SECTION 23.8.    No Joint Venture.

Any intention to create a joint venture or partnership relation hereunder or pursuant to any other Operative Document between the Lessor and the Lessee is hereby expressly disclaimed.

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SECTION 23.9.    No Accord and Satisfaction.

The acceptance by the Lessor of any sums from the Lessee (whether as Basic Rent or otherwise) in amounts which are less than the amounts due and payable by the Lessee hereunder is not intended, nor shall be construed, to constitute an accord and satisfaction of any dispute between the Lessor and the Lessee regarding sums due and payable by the Lessee hereunder, unless the Required Participants specifically deem it as such in writing.

SECTION 23.10. Survival.

The termination of this Lease pursuant to Section 18.1 shall in no event relieve the Lessee of its liabilities and obligations hereunder or under any other Operative Document which accrued prior to such termination, all of which shall survive any such termination. The extension of any applicable statute of limitations by the Lessee, any Participant or any other Indemnitee shall not affect such survival.

SECTION 23.11. Transfer of Leased Property.

Except as provided in Article XXII, any sale or transfer of the Leased Property pursuant to this Lease (excluding for this purpose any transfer pursuant to Section 6.3(b) of the Participation Agreement, unless such transfer is made after the occurrence and during the continuance of any Default or Event of Default) shall be at the Lessee’s expense. Upon receipt by the Lessor of payment in full of the Purchase Amount pursuant to the applicable provision of this Lease (but subject to the proviso in Section 18.1(a)(iii)(B)(1) hereof) (i) the Leased Property shall be transferred to the Lessee or any designee it may identify, and (ii) upon request of Lessee, the interest in the Site granted by the Ground Lease shall be terminated by the filing of the Ground Lease Release.

Any transfer of the Lessor’s interest in and to the Leased Property pursuant to this Lease shall be transferred on an “as is, where is, with all faults” basis, without covenants or warranties of title and without recourse, representation or warranty of any kind, other than with respect to the Lessor, the absence of Lessor Liens, and together with the due assumption by the Lessee (or its designee), of, and due release of the Lessor from, all obligations relating to the Leased Property. In connection with any transfer to an independent third party, the Lessee shall, or shall ensure that its designee shall, execute and deliver such documents, certificates and estoppels as may be required to facilitate the transfer of the Leased Property. Any provision in this Lease or other Operative Document to the contrary notwithstanding, no transfer of the Leased Property to the Lessee or to a third party buyer pursuant to the Purchase Option, the Return Option or otherwise shall be made until the Participants have received all Rent and other amounts then due and owing by the Lessee hereunder and under the other Operative Documents and no designation by the Lessee of a third party buyer shall relieve it of any its obligations hereunder or under the other Operative Documents. At or subsequent to the transfer or return of all or any of the Leased Property to a third party buyer pursuant to the Return Option, the Lessee will provide the Lessor with such lien and title searches as the Lessor may reasonably request to demonstrate to the Lessor’s satisfaction that the Leased Property is subject to no Liens other than Permitted Liens as described in clauses (a) (but excluding any such rights and interests of the Lessee referenced therein) or (b) of the definition thereof. Notwithstanding anything contained herein or in the other Operative

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Documents to the contrary, any obligation of the Lessor to transfer any assets to the Lessee shall be satisfied by a transfer of such assets to any designee selected by it.

SECTION 23.12. Enforcement of Certain Warranties.

Lessor hereby assigns, without recourse or warranty whatsoever, to Lessee, all warranties related to the construction of the Facility. Such assignment shall remain in effect until the expiration or termination of this Lease. Lessor shall also retain the right to enforce any warranties assigned in the name of Lessee upon the occurrence of an Event of Default. Lessor hereby agrees to execute and deliver at Lessee’s expense such further documents, including powers of attorney, as Lessee may reasonably request in order that Lessee may have the full benefit of the assignment effected or intended to be effected by this Section 23.12. Upon the termination of this Lease, the warranties hereby assigned shall automatically revert to Lessor or be transferred to Lessee or its designee in accordance with Section 23.11. The foregoing provision of reversion shall be self-operative and no further instrument of reassignment shall be required. In confirmation of such reassignment to Lessor or assignment to Lessee in connection with a transfer under Section 23.11, Lessee or Lessor, as applicable, shall execute and deliver promptly any certificate or other instrument which other may reasonably request. Any monies collected by Lessee under any of the warranties after the occurrence of and during the continuation of an Event of Default shall be held in trust by Lessee and promptly paid over to Lessor to be held in trust in accordance with Section 23.13.

SECTION 23.13. Security Interest in Funds.

As long as a Material Default or Event of Default shall be continuing, any amount that would otherwise be payable to the Lessee under the Operative Documents shall be paid to or retained by the Lessor (including amounts to be paid to the Lessee pursuant to Article XIII or Section 23.12) as security for the performance by the Lessee in full of its obligations under this Lease and the other Operative Documents, and it may be applied to the obligations of the Lessee hereunder and under the other Operative Documents and distributed pursuant to Section 18.2. At such time as no Material Default or Event of Default shall be continuing, such amounts, net of any amounts previously applied to the Lessee’s obligations hereunder or under any other Operative Documents, shall be paid to the Lessee. Any such amounts which are held pending payment to the Lessee or application hereunder shall be invested by the Lessor as directed from time to time in writing by the Lessee, and at the expense and risk of the Lessee, in Permitted Investments. Any gain (including interest received) realized as the result of any such investment (net of any fees, commissions and other expenses, if any, incurred in connection with such investment) shall be applied from time to time in the same manner as the principal invested. The Lessor shall not be liable for any losses on such investments or for any failure to make any investment.

SECTION 23.14. Quiet Enjoyment.

Lessor covenants that it will not interfere in Lessee’s quiet enjoyment of the Leased Property in accordance with this Lease during the Base Term so long as no Event of Default is continuing. Such right of quiet enjoyment is independent of, and shall not affect, Lessor’s rights otherwise to initiate legal action to enforce the obligations of Lessee under this Lease during the continuance of an Event of Default.

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SECTION 23.15. Submission to Jurisdiction.

EACH OF THE LESSOR AND THE LESSEE IRREVOCABLY AND UNCONDITIONALLY:

(a)        SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE SOLE, EXCLUSIVE GENERAL JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, AND APPELLATE COURTS FROM ANY THEREOF;

(b)        CONSENTS THAT ANY SUCH ACTION OR PROCEEDINGS MAY BE BROUGHT TO SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(c)        AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH ON SCHEDULE II TO THE PARTICIPATION AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 9.3 OF THE PARTICIPATION AGREEMENT; AND

(d)        AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

SECTION 23.16. Jury Trial.

EACH OF THE LESSOR AND THE LESSEE HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

SECTION 23.17. Payments.

All payments to be made by the Lessee hereunder shall be made to the Lessor or the Administrative Agent, as the case may be, in Dollars in immediately available and freely transferable funds at the place of payment, all such payments to be paid without setoff, counterclaim or reduction and without deduction for, and free from, any and all present or future

45

taxes, levies, imposts, duties, fees, charges, deductions, withholding or liabilities with respect thereto or any restrictions or conditions of any nature. If the Lessee is required by law to make any deduction or withholding on account of any tax or other withholding or deduction from any sum payable by the undersigned hereunder, the Lessee shall pay any such tax or other withholding or deduction and shall pay such additional amount necessary to ensure that, after making any payment, deduction or withholding, the recipient thereof shall receive and retain (free of any liability in respect of any payment, deduction or withholding) a net sum equal to what it would have received and so retained hereunder had no such deduction, withholding or payment been required to have been made, which payment or withholding is made subject to the limitations set forth in Sections 7.2(a)(iii) and 7.6 of the Participation Agreement, reimbursement obligations of Indemnitees set forth in Sections 7.2(a)(iii), 7.2(e) and 7.2(f) of the Participation Agreement and other rights of the Lessee set forth in Sections 7.2(e), 7.2(f) and 7.6 of the Participation Agreement.

SECTION 23.18. Nature of Transaction.

It is the intention of the parties that the Overall Transaction constitutes an operating lease for purposes of the Lessee’s financial reporting under GAAP provisions relating to leases and variable interest entities including without limitation the Accounting Standards Codification (“ASC”) 810-10-55, ASC 840 (including ASC 840-10, ASC 840-20 and 840-40) and, once applicable, ASC 842 (including 842-10 and 842-40-55).

[Signature Pages Follow]

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

BANKERS COMMERCIAL CORPORATION,
AS THE LESSOR
By:	/s/ Michael Irwin
	Name: Michael Irwin
	Title:   Managing Director

[THIS IS COUNTERPART NO._ OF _ ORIGINALLY EXECUTED COUNTERPARTS.]

[Signature Page to Amended and Restated Lease]

CUBIC CORPORATION,
AS THE LESSEE
By:	/s/ Anshooman Aga
	Name: Anshooman Aga
	Title: Executive Vice President and Chief Financial Officer

By:	/s/ Rhys Williams
	Name: Rhys Williams
	Title: Vice President, Treasurer

[THIS IS COUNTERPART NO._ OF_ ORIGINALLY EXECUTED COUNTERPARTS.]

[Signature Page to Amended and Restated Lease]

Receipt of this original counterpart of the foregoing Lease Agreement dated June 7, 2019,is hereby acknowledged on this 7^thday of June, 2019.

MUFG UNION BANK, N.A.,
AS COLLATERAL AGENT
By:	/s/ Sonia N. Flores
	Name: Sonia N. Flores
	Title: Vice President

[Signature Page to Amended and Restated Lease]

Exhibit A
to Lease

LEASE SUPPLEMENT

This Lease Supplement is executed pursuant to, and incorporates by reference all of the terms, conditions and provisions of, the Amended and Restated Lease Agreement, dated as of June 7, 2019 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Lease”), between Bankers Commercial Corporation (“Lessor”) and Cubic Corporation (“Lessee”). All capitalized terms used herein which are not defined herein shall have the meaning given to such terms in the Lease. Lessor and Lessee hereby agree that:

1.          Basic Term Commencement Date: [·], [2021]

2.          Return Price Recourse Deficiency Amount: the Return Price Recourse Deficiency Amount, calculated as of the Base Term Commencement Date, is the amount equal to      % times the Lease Balance.

3.          Basic Term: Expires on [     ], [2026].

4.          Miscellaneous: This Lease Supplement 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. To the extent that this Lease Supplement constitutes chattel paper, within the meaning of any applicable Uniform Commercial Code provision, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original executed counterpart, which shall be identified for such purposes as the counterpart No. 1, containing the receipt therefor executed by Lessor on the signature page thereof.

5.          Governing Law: This Lease Supplement shall be construed in accordance with and governed by the laws of the State of New York without giving effect to the conflicts of laws principles thereof (except for Section 5-1401 of the New York General Obligations Law).

A-2

Dated: ​ ​​ ​, [2021].
	BANKERS COMMERCIAL CORPORATION
	(Lessor)
	By:
	Name:
	Title:
	CUBIC CORPORATION
	(Lessee)
	By:
	Name:
	Title:

COUNTERPART NO.      OF       SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.

A-3

EX-10.3

Exhibit 10.3

LEASE SUPPLEMENT

This Lease Supplement is executed pursuant to, and incorporates by reference all of the terms, conditions and provisions of, the Amended and Restated Lease Agreement, dated as of June 7, 2019 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Lease”), between Bankers Commercial Corporation (“Lessor”) and Cubic Corporation (“Lessee”). All capitalized terms used herein which are not defined herein shall have the meaning given to such terms in the Lease. Lessor and Lessee hereby agree that:

1. Base Term Commencement Date: December 30, 2020

2. Return Price Recourse Deficiency Amount: The Return Price Recourse Deficiency Amount, calculated as of the Base Term Commencement Date, is the amount equal to 89.95% times the Lease Balance.

3. Base Term: Expires on December 30, 2025.

4. Lease Balance: As of the Base Term Commencement Date, the (i) the aggregate final amount of the Lessor Investment is $50,500,000.00, (ii) the aggregate final amount of the Rent Assignment Advances is $50,500,000.00, and (iii) the aggregate final amount of the Lease Balance is $101,000,000.00.

5. Miscellaneous: This Lease Supplement 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. To the extent that this Lease Supplement constitutes chattel paper, within the meaning of any applicable Uniform Commercial Code provision, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original executed counterpart, which shall be identified for such purposes as the counterpart No. 1, containing the receipt therefor executed by Lessor on the signature page thereof.

6. Governing Law: This Lease Supplement shall be construed in accordance with and governed by the laws of the State of New York without giving effect to the conflicts of laws principles thereof (except for Section 5-1401 of the New York General Obligations Law).

Dated: December 30, 2020.
	BANKERS COMMERCIAL CORPORATION
	(Lessor)
	By:	/s/ Robert J. Hoegter
		Name: Robert J. Hoegter
		Title: Vice President

COUNTERPART  NO.  1  OF  2  SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.

[Signature Page to Lease Supplement]

CUBIC CORPORATION
(Lessee)
By:	/s/ Anshooman Aga
	Name: Anshooman Aga
	Title:   Executive Vice President and Chief Financial Officer
By:	/s/ Rhys V.Williams
	Name: Rhys V. Williams
	Title:   Vice President and Treasurer

COUNTERPART NO.  1  OF  2  SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.

[Signature Page to Lease Supplement]

EX-10.4

Exhibit 10.4

OMNIBUS AMENDMENT

This Omnibus Amendment (this “Amendment”), dated as of December 30, 2020 (the “Amendment Closing Date”), is made by and among BANKERS COMMERCIAL CORPORATION, a California corporation, as Lessor (“Lessor”), MUFG UNION BANK, N.A., as Collateral Agent for the Rent Assignees (“Collateral Agent”), MUFG BANK, LTD., as Administrative Agent for the Participants (“Administrative Agent”), CUBIC CORPORATION, a Delaware corporation, as Lessee and Construction Agent (“Lessee”), and each of the Rent Assignees listed on the signature pages hereof (the “Rent Assignees”).

W I T N E S S E T H:

WHEREAS, Lessee, Lessor, the Rent Assignees (together with Lessor, the “Participants”), Collateral Agent and Administrative Agent entered into a Second Amended and Restated Participation Agreement, dated as of May 29, 2020 (the “A&R Participation Agreement” and, as amended by this Amendment, collectively, the “Participation Agreement”);

WHEREAS, Lessor and Lessee entered into an Amended and Restated Lease Agreement, dated as of June 7, 2019 (the “A&R Lease” and, as amended by this Amendment, collectively, the “Lease”); and

WHEREAS, Lessee desires to modify the A&R Participation Agreement and the A&R Lease to (i) reflect a change to its intention regarding the accounting treatment of the Overall Transaction (as defined in the Participation Agreement), (ii) amend the insurance requirements, and (iii) obtain certain waivers as more specifically set forth herein, and the Participants, Collateral Agent and Administrative Agent are amenable to such modifications.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.         Defined Terms. All capitalized terms used but not defined in this Amendment shall have the meanings assigned to them in Appendix I to the Participation Agreement and the rules of interpretation set forth in such Appendix shall apply to this Amendment.

2.         Amendments to the A&R Participation Agreement. The parties thereto hereby agree that the A&R Participation Agreement shall be modified as set forth below:

(a)        The following definitions are hereby inserted into Appendix I to the Participation Agreement in the appropriate alphabetical order, to read as follows:

“Omnibus Amendment” shall mean that certain Omnibus Amendment, dated December 30, 2020, by and among the Lessee, the Lessor, the Collateral Agent, the Administrative Agent and the Rent Assignees.

(b)        The definition of “Escrow Agreement” as set forth in Appendix I to the A&R Participation Agreement is hereby deleted in its entirety and the following is inserted in its place:

“Escrow Agreement” shall mean that certain Escrow Agreement dated as of the Base Term Commencement Date among the Collateral Agent (in its capacity as escrow agent), the Administrative Agent and Lessee.

(c)        The definition of “Lease” as set forth in Appendix I to the A&R Participation Agreement is hereby deleted in its entirety and the following is inserted in its place:

“Lease” shall mean that certain Amended and Restated Lease Agreement dated as of June 7, 2019 between the Lessor and the Lessee, as amended by the Omnibus Amendment.

(d)        The definition of “Operative Documents” as set forth in Appendix I to the A&R Participation Agreement is hereby amended by adding a document (13) as follows: “(13) the Omnibus Agreement”.

(e)        The definition of “Return Price Recourse Deficiency Amount” as set forth in Appendix I to the A&R Participation Agreement is hereby deleted in its entirety and the following is inserted in its place:

“Return Price Recourse Deficiency Amount” shall mean the amount equal to the Return Price Recourse Deficiency Amount set forth on the Lease Supplement.

(f)        Section 2.5 of the A&R Participation Agreement is hereby amended so that, with respect to the final Advance Request only, such Advance Request shall be required to be delivered to the Construction Consultant and the Administrative Agent at or before 11:00 a.m. New York time on the second (2nd) Business Day prior to the proposed Advance Date, which proposed Advance Date may be, but is not required to be, a Monthly Date.

(g)        Section 2.9 of the A&R Participation Agreement is hereby amended so that, with respect to the final Advance Request only, the Administrative Agent may provide notice of the applicable LIBOR Rate to the Lessee, the Lessor and each other Participant no later than 11:00 a.m., New York time, one (1) Business Day prior to the effectiveness of such LIBOR Rate with respect to the final Advance Request.

(h)        Section 2.14(a) of the A&R Participation Agreement is hereby amended by deleting that clause entirely and replacing it with the following:

(a)        the Overall Transaction constitutes a financing lease for purposes of the Lessee’s financial reporting under GAAP provisions relating to leases including

2

without limitation the Accounting Standards Codification (“ASC”) 842 (including 842-10 and 842-40-55).

3.         Amendments to the A&R Lease. The parties hereto hereby agree that the A&R Lease shall be modified as set forth below:

(a)        The first sentence of Section 11.1(a) of the A&R Lease is hereby deleted in its entirety and the following is inserted in its place:

The Lessee will maintain comprehensive general liability insurance, including coverages for contractual liability, against third-party bodily injury, including death, and third-party property damage, written on an occurrence basis, including against Lessor, in an amount at least equal to $30,000,000 per occurrence and $30,000,000 in the aggregate during the Lease Term (which coverage may be met in combination with Primary Commercial General Liability coverage and Umbrella Liability excess coverage).

(b)        Section 11.1(b) of the A&R Lease is hereby amended solely to require that coverage for the perils of earth movement (including but not limited to earthquake and landslide) shall be in an amount not less than the replacement cost of the Facility (including any costs that may be required to cause the Facility to be reconstructed to comply with then current Applicable Laws and Regulations).

(c)        The last sentence of Section 11.1(c) of the A&R Lease is hereby deleted in its entirety and the following is inserted in its place:

The automobile liability insurance shall have no self-insurance amounts and shall have deductibles not in excess of $100,000.

(d)        Section 23.18 of the A&R Lease is hereby deleted in its entirety and the following is inserted in its place:

It is the intention of the parties that the Overall Transaction constitutes a financing lease for purposes of the Lessee’s financial reporting under GAAP provisions relating to leases and variable interest entities including without limitation the Accounting Standards Codification (“ASC”) 842 (including 842-10 and 842-40-

55).

4.         Waivers. Lessee hereby acknowledges that, in connection with each Advance, it delivered an Advance Certificate which stated, among other things, that all conditions precedent to such Advance had been satisfied, but in each case, Lessee failed to satisfy the requirements of Section 3.1(h) of the Participation Agreement in connection with any Advance. Each such false certification constitutes an Event of Default under clause (e) of the definition thereof (collectively, the “Advance Certificate Defaults”), and hereby requests that the Participants, Collateral Agent and Administrative Agent waive such Advance Certificate Defaults. Collateral

3

Agent, Administrative Agent and each Participant hereby waives the Advance Certificate Defaults in connection with any Advance that has occurred prior to the date hereof; provided, that Lessee shall provide a true, complete and correct Advance Certificate, including compliance with the requirements of Section 3.1(h) of the Participation Agreement, in connection with the final Advance. This waiver will not operate as a waiver of any other default, Material Default or Event of Default that occurs as a result of Lessee’s actions or as any future waiver of the Participants’, Collateral’s Agent or Administrative Agent’s rights and remedies in that regard or be interpreted or construed as creating any course of conduct as between Lessee, on the one hand, and the Participants, Collateral Agent and Administrative Agent, on the other hand. Further, this letter is not intended to act as a justification for any expectation of Lessee with respect to the Participation Agreement should any default, Material Default or Event of Default arise in the future and does not preclude any Participant’s exercise of its available rights and remedies under the Operative Documents in the future with respect to any such default, Material Default or Event of Default. This Amendment shall not be construed to be a waiver of any existing or future defaults, Material Defaults or Events of Default under the Participation Agreement or the other Operative Documents other than the Advance Certificate Defaults and, other than as specified herein, shall not be construed to be a modification of any provision, term or condition of the Participation Agreement or any other Operative Document, and the Participants, Collateral Agent and Administrative Agent hereby reserve all of their rights and remedies.

5.         Representations  and  Warranties.     Lessee hereby represents and warrants to Lessor, Administrative Agent, Collateral Agent and the Rent Assignees that as of the date hereof:

(a)        Lessee is duly incorporated and is validly existing and in good standing under the laws of the State of Delaware, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in the State of California and each other jurisdiction in which the character of its properties or the nature of its business requires such qualification and authorization, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b)        Lessee has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Amendment and the related Operative Documents to which it is a party. This Amendment has been duly executed and delivered by a Responsible Officer of Lessee, and this Amendment and the related Operative Documents to which it is a party constitute the legal, valid and binding obligations of Lessee, each enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar debtor relief laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies.

(c)        The execution, delivery and performance by Lessee of this Amendment and the transactions contemplated hereby and under the related Operative Documents to

4

which it is a party do not and will not, by the passage of time, the giving of notice or otherwise, (i) violate any Applicable Laws and Regulations relating to Lessee, (ii) conflict with, result in a breach of or constitute a default under the charter or bylaws of Lessee, or any material agreement, judgment, injunction, order, decree or other material instrument binding upon Lessee, or any Governmental Action relating to Lessee, except, in any case, as could not reasonably be expected to have a Material Adverse Effect, or (iii) result in or require the creation or imposition of any Lien upon or with respect to the Leased Property or the Site (except as contemplated by the Operative Documents) or any material Lien upon or with respect to any other property now owned or hereafter acquired by Lessee.

(d)        All representations and warranties of Lessee contained in the Operative Documents to which it is a party are true and correct in all material respects on and as of the date hereof (except with respect to representations and warranties expressly made only as of an earlier date, which representations were true and correct in all material respects as of such earlier date).

6.         Representations and Warranties of Lessor. Lessor represents and warrants to each of the other parties hereto that, as of the date hereof:

(a)        Lessor is duly incorporated and validly existing under the laws of the jurisdiction of its incorporation and has full power and authority to own its properties, to enter into and perform its obligations as Lessor under this Amendment and the related Operative Documents, and to carry on its business as now being and hereafter proposed to be conducted.

(b)        This Amendment and each related Operative Document have been or will be duly authorized, executed and delivered by or on behalf of Lessor (in its individual capacity) and are, or upon execution and delivery will be, legal, valid and binding obligations of Lessor, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting creditors’ rights generally and by general equitable principles.

(c)        The execution and delivery by Lessor of this Amendment are not and will not be, and the performance by Lessor of its obligations under this Amendment and the related Operative Documents (i) are not and will not be, inconsistent with the organizational documents of Lessor; (ii) do not and will not contravene any Applicable Laws and Regulations applicable to Lessor and (iii) do not and will not conflict with result in a breach of, or a default under, the charter documents or resolutions of Lessor or any indenture or other material agreement or instrument to which Lessor is party, or any Governmental Action relating to Lessor, except in any case, as could not reasonably be expected to have a material adverse effect on the ability of Lessor to perform its obligations pursuant to the Operative Documents.

5

(d)        all representations and warranties of Lessor contained in the Operative Documents (as amended hereby) are true and correct in all material respects on and as of the date hereof (except with respect to representations and warranties expressly made only as of an earlier date, which representations were true and correct in all material respects as of such earlier date).

7.         Conditions Precedent. This Amendment shall become effective as of the first date (the “Effective Date”) on which each of the following conditions shall have been satisfied:

(a)        each representation and warranty of Lessee and Lessor contained herein shall be true and correct in all material respects on and as of the Amendment Closing Date;

(b)        since September 30, 2020, there has been no Material Adverse Effect with respect to the Site or in the financial position or operations of Lessee, except as otherwise disclosed to the Participants and Administrative Agent;

(c)        the requirements of Section 3.4 of the Participation Agreement shall have been satisfied;

(d)        each of Administrative Agent, Lessee and Collateral Agent shall have received counterparts of the Escrow Agreement, duly executed and delivered by each of the parties thereto; and

(e)        each of the Participants, Lessee, Collateral Agent and Administrative Agent shall have received (except as otherwise set forth below) counterparts of this Amendment, duly executed and delivered by each of the parties hereto.

8.         Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Rent Assignees, Lessor, Collateral Agent or Administrative Agent under the Participation Agreement or any other Operative Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Lease or the Participation Agreement or any other Operative Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle Lessee to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Lease or the Participation Agreement or any other Operative Document in similar or different circumstances. This Amendment shall apply and be effective only with respect to the provisions of the A&R Participation Agreement, the A&R Lease and each other Operative Document specifically referred to herein. On and after the Effective Date, any reference to the Lease or the Participation Agreement contained in the Operative Documents shall mean the Lease or the Participation Agreement, respectively, as modified hereby. If there is a conflict between the provisions of any of the A&R Lease or the A&R Participation Agreement and this Amendment, the provisions of this Amendment will control.

6

9.         Expenses. Lessee agrees to reimburse Lessor, Administrative Agent, Collateral Agent and the Rent Assignees for their reasonable, properly documented, out-of-pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of counsel.

10.       Governing Law. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

11.       Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

12.       Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. The words “executed,” “signed,” “signature,” and words of like import in this Amendment or in any other certificate, agreement or document related to this transaction shall include, in addition to manually executed signatures, images of manually executed signatures transmitted by electronic format (including, without limitation, “pdf”) and other electronic signatures (including, without limitation, any electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record). The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity and enforceability as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code.

[signature pages follow]

7

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.

CUBIC CORPORATION, as
Lessee and Construction Agent
By:	/s/ Anshooman Aga
	Name:Anshooman Aga
	Title:   Executive Vice President and Chief Financial Officer

By:	/s/ Rhys V. Williams
	Name: Rhys V. Williams
	Title:   Vice President and Treasurer

[Signature Page to Omnibus Amendment]

Acknowledged and Agreed as of the date first above written:

BANKERS COMMERCIAL CORPORATION,
as Lessor
By:	/s/ Robert J. Hoegter
	Name:Robert J. Hoegter
	Title:   Vice President

[Signature Page to Omnibus Amendment]

MUFG UNION BANK, N.A.,
as Collateral Agent
By:	/s/ Keith Sevigny
	Name:Keith Sevigny
	Title:   Vice President

[Signature Page to Omnibus Amendment]

MUFG BANK, LTD.,
as Administrative Agent
By:	/s/ Lawrence Blat
	Name: Lawrence Blat
	Title:   Authorized Signatory

[Signature Page to Omnibus Amendment]

BA LEASING BSC, LLC
as a Rent Assignee
By:	/s/ John P. White, Sr.
	Name:John P. White, Sr.
	Title:   Vice President

[Signature Page to Omnibus Amendment]

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bradley H. Feldmann, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Cubic Corporation;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Bradley H. Feldmann

Bradley H. Feldmann

Chairman, President and Chief Executive Officer

Date: May 5, 2021

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anshooman Aga, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Cubic Corporation;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

a

/s/ Anshooman Aga

Anshooman Aga

Executive Vice President and Chief Financial Officer

Date: May 5, 2021

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

The undersigned, in his capacity as an officer of Cubic Corporation (the “Registrant”) hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

(1) The quarterly report of the Registrant on Form 10-Q for the period ended March 31, 2021, (the “Report”), which accompanies this certification, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Bradley H. Feldmann

Bradley H. Feldmann

Chairman, President and Chief Executive Officer

Date: May 5, 2021

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

The undersigned, in his capacity as an officer of Cubic Corporation (the “Registrant”) hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

(1) The quarterly report of the Registrant on Form 10-Q for the period ended March 31, 2021, (the “Report”), which accompanies this certification, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Anshooman Aga

Anshooman Aga

Executive Vice President and Chief Financial Officer

Date: May 5, 2021

XML

Document and Entity Information - shares	6 Months Ended
	Mar. 31, 2021	Apr. 30, 2021
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2021
Entity File Number	001-08931
Entity Registrant Name	CUBIC CORP /DE/
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-1678055
Entity Address, Address Line One	9333 Balboa Avenue
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92123
City Area Code	858
Local Phone Number	277-6780
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		31,768,576
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000026076
Amendment Flag	false
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	CUB
Security Exchange Name	NYSE
Preferred Stock Purchase Rights
Document Information [Line Items]
Title of 12(b) Security	Preferred Stock Purchase Rights
No Trading Symbol Flag	true
Security Exchange Name	NYSE

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Net sales:
Net sales	$ 343,408	$ 321,482	$ 662,202	$ 650,321
Costs and expenses:
Selling, general and administrative expenses	83,141	78,294	146,801	144,209
Research and development	14,368	11,360	26,514	19,782
Amortization of purchased intangibles	15,033	16,493	31,140	26,582
(Gain) loss on sale of property, plant and equipment	125	40	125	(130)
Restructuring costs	7,746	3,807	11,881	5,382
Total costs and expenses	368,963	351,416	686,460	686,738
Operating loss	(25,555)	(29,934)	(24,258)	(36,417)
Other income (expenses):
Interest and dividend income	1,946	1,693	3,735	3,911
Interest expense	(6,734)	(8,219)	(14,905)	(13,582)
Loss on extinguishment of debt		(16,090)		(16,090)
Other income (expense), net	14,543	(19,664)	15,839	(19,791)
Loss from continuing operations before income taxes	(15,800)	(72,214)	(19,589)	(81,969)
Income tax provision (benefit)	3,440	(19,784)	6,929	(13,538)
Loss from continuing operations	(19,240)	(52,430)	(26,518)	(68,431)
Net income (loss) from discontinued operations		129		(455)
Net loss	(19,240)	(52,301)	(26,518)	(68,886)
Less noncontrolling interest in net income (loss) of VIE	16,777	(13,178)	22,494	(9,188)
Net loss attributable to Cubic	(36,017)	(39,123)	(49,012)	(59,698)
Amounts attributable to Cubic:
Net loss from continuing operations	(36,017)	(39,252)	(49,012)	(59,243)
Net loss from discontinued operations		129		(455)
Net loss attributable to Cubic	$ (36,017)	$ (39,123)	$ (49,012)	$ (59,698)
Basic
Continuing operations attributable to Cubic (in dollars per share)	$ (1.14)	$ (1.25)	$ (1.55)	$ (1.89)
Discontinued operations (in dollars per share)				(0.01)
Basic earnings per share attributable to Cubic (in dollars per share)	(1.14)	(1.25)	(1.55)	(1.91)
Diluted
Continuing operations attributable to Cubic (in dollars per share)	(1.14)	(1.25)	(1.55)	(1.89)
Discontinued operations (in dollars per share)				(0.01)
Diluted earnings per share attributable to Cubic (in dollars per share)	$ (1.14)	$ (1.25)	$ (1.55)	$ (1.91)
Weighted average shares used in per share calculations:
Basic (in shares)	31,633	31,296	31,598	31,284
Diluted (in shares)	31,633	31,296	31,598	31,284
Products
Net sales:
Net sales	$ 200,428	$ 187,494	$ 381,917	$ 388,098
Costs and expenses:
Costs	149,671	153,002	287,690	319,845
Services
Net sales:
Net sales	142,980	133,988	280,285	262,223
Costs and expenses:
Costs	$ 98,879	$ 88,420	$ 182,309	$ 171,068

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net loss	$ (19,240)	$ (52,301)	$ (26,518)	$ (68,886)
Other comprehensive income (loss):
Foreign currency translation	(3,353)	(17,905)	8,184	(7,425)
Change in unrealized gains/losses from cash flow hedges:
Change in fair value of cash flow hedges, net of tax	9,453	1,058	9,408	(127)
Adjustment for net gains/losses realized and included in net income, net of tax	(212)	(963)	(397)	(914)
Total change in unrealized gains/losses realized from cash flow hedges, net of tax	9,241	95	9,011	(1,041)
Total other comprehensive income (loss)	5,888	(17,810)	17,195	(8,466)
Total comprehensive loss	(13,352)	(70,111)	(9,323)	(77,352)
Noncontrolling interest in comprehensive income (loss) of consolidated VIE, net of tax	16,777	(13,178)	22,494	(9,188)
Comprehensive loss attributable to Cubic, net of tax	$ (30,129)	$ (56,933)	$ (31,817)	$ (68,164)

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2021	Sep. 30, 2020
Accounts receivable:
Billed	$ 109,604	$ 161,473
Allowance for doubtful accounts	(1,450)	(1,498)
Accounts receivable - net	108,154	159,975
Contract assets	321,545	268,773
Recoverable income taxes	20,502	17,434
Inventories	132,803	127,251
Total current assets	796,195	763,074
Property, plant and equipment, net	168,783	166,301
Operating lease right-of-use asset	83,076	87,167
Financing lease right-of-use asset, net	12,766	500
Deferred income taxes	5,483	4,790
Goodwill	788,027	784,882
Purchased intangibles, net	179,460	210,361
Other assets	25,424	21,759
Total assets	2,401,458	2,324,221
Current liabilities:
Short-term borrowings	279,000	215,716
Contract liabilities	74,779	75,546
Accrued compensation and current liabilities	131,465	126,388
Income taxes payable	719	799
Current portion of long-term debt	11,250	11,250
Total current liabilities	644,579	586,786
Operating lease liability	76,971	80,568
Financing lease liability	10,002	395
Shareholders' equity:
Common stock	304,293	295,986
Retained earnings	797,190	850,472
Accumulated other comprehensive loss	(132,408)	(149,603)
Treasury stock at cost - 9,031 shares at March 31, 2021 and 8,945 at September 30, 2020	(41,321)	(36,078)
Shareholders' equity related to Cubic	927,754	960,777
Total shareholders' equity	977,651	988,180
Total liabilities and shareholders' equity	2,401,458	2,324,221
Cubic Corporation Excluding VIE
Current assets:
Cash and cash equivalents	133,817	128,619
Restricted cash	28,580	25,478
Accounts receivable:
Other current assets	41,926	32,626
Long-term contracts financing receivables	72,605	64,642
Current liabilities:
Trade accounts payable	147,223	156,953
Long-term debt	425,498	430,115
Other noncurrent liabilities	58,163	68,939
VIE
Current assets:
Cash and cash equivalents	1,546	1,065
Restricted cash	7,322	1,822
Accounts receivable:
Other current assets	18	31
Long-term contracts financing receivables	257,185	221,245
Other assets	12,454
Total assets	278,525	224,163
Current liabilities:
Trade accounts payable	35	49
Other current liabilities	108	85
Long-term debt	208,594	163,348
Other noncurrent liabilities		5,890
Shareholders' equity:
Shareholders' equity related to Cubic	2,628	129
Noncontrolling interest	49,897	27,403
Total liabilities and shareholders' equity	$ 278,525	$ 224,163

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares shares in Thousands	Mar. 31, 2021	Sep. 30, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
Treasury stock, shares	9,031	8,945

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Operating Activities:
Net loss	$ (19,240)	$ (52,301)	$ (26,518)	$ (68,886)
Net income (loss) from discontinued operations		(129)		455
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	25,055	23,414	49,716	40,364
Share-based compensation expense	6,472	5,382	11,151	9,859
Change in fair value of contingent consideration	1,260	(1,473)	684	(4,478)
Deferred income taxes	161	2,909	(977)	2,909
Loss on extinguishment of debt		16,090		16,090
Other items	2,094	13	5,705	4,308
Changes in operating assets and liabilities, net of effects from acquisitions	(37,150)	(36,281)	(80,027)	(86,222)
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS	(36,439)	(26,557)	(58,609)	(74,119)
NET CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		129		85
NET CASH USED IN OPERATING ACTIVITIES	(36,439)	(26,428)	(58,609)	(74,034)
Investing Activities:
Acquisition of businesses, net of cash acquired		(234,538)		(234,538)
Purchases of property, plant and equipment	(13,389)	(13,478)	(20,053)	(25,311)
Purchase of non-marketable debt and equity securities	(1,446)		(1,446)
Receipt of withheld proceeds from sale of trade receivables	641		2,483	5,521
NET CASH USED IN INVESTING ACTIVITIES	(14,194)	(248,016)	(19,016)	(254,328)
Financing Activities:
Proceeds from short-term borrowings	104,786	727,000	186,644	884,500
Principal payments on short-term borrowings	(32,956)	(616,500)	(123,646)	(743,000)
Principal payments on long-term borrowings	(3,653)	(199,833)	(5,625)	(199,833)
Debt extinguishment make-whole payment		(15,856)		(15,856)
Deferred financing fees		(2,517)		(2,517)
Principal payments on finance lease liability	(673)		(691)
Proceeds from stock issued under employee stock purchase plan	1,170		1,170	1,169
Purchase of common stock	(1,004)	(39)	(4,014)	(3,660)
Shares repurchased for tax withholdings	(5,243)		(5,243)
Dividends paid	(4,270)	(4,225)	(4,270)	(4,225)
Contingent consideration payments related to acquisitions of businesses	(1,006)		(1,006)
NET CASH PROVIDED BY FINANCING ACTIVITIES	77,126	341,066	85,828	389,800
Effect of exchange rates on cash	(2,448)	(11,224)	6,078	(7,203)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	24,045	55,398	14,281	54,235
Cash, cash equivalents and restricted cash at the beginning of the period	147,220	94,458	156,984	95,621
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD	171,265	149,856	171,265	149,856
PIXIA Corp
Supplemental disclosure of non-cash investing and financing activities:
Receivable recognized in connection with the acquisition of net		1,214		1,214
Delerrok Inc.
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of contingent consideration			(900)
Supplemental disclosure of non-cash investing and financing activities:
Contingent consideration liability incurred with the acquisition		1,600		1,600
Cubic Corporation Excluding VIE
Financing Activities:
Proceeds from long-term borrowings	1,008	450,000	1,008	450,000
VIE
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of interest rate swap	(15,091)	15,819	(18,343)	11,482
Financing Activities:
Proceeds from long-term borrowings	$ 18,967	$ 3,036	$ 41,501	$ 23,222

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock	Retained Earnings Cumulative effect of accounting standard adoption	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Noncontrolling Interest in VIE	Total
Balance at Sep. 30, 2019	$ 274,472	$ (824)	$ 862,948	$ (139,693)	$ (36,078)	$ 18,919
Balance (in shares) at Sep. 30, 2019							31,178
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(59,698)			(9,188)	$ (59,698)
Other comprehensive income (loss), net of tax				(8,466)			$ (8,466)
Stock issued under equity incentive plans (in shares)							153
Stock issued under employee stock purchase plans, value	1,169
Stock issued under employee stock purchase plans (in shares)							19
Purchase of common stock, value	(3,660)
Purchase of common stock (in shares)							(54)
Share - based compensation	9,859
Cash dividends paid			(4,225)
Balance at Mar. 31, 2020	281,840		798,201	(148,159)	(36,078)	9,731
Balance (in shares) at Mar. 31, 2020							31,296
Balance at Dec. 31, 2019	276,497		841,549	(130,349)	(36,078)	22,909
Balance (in shares) at Dec. 31, 2019							31,274
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(39,123)			(13,178)	$ (39,123)
Other comprehensive income (loss), net of tax				(17,810)			$ (17,810)
Stock issued under equity incentive plans (in shares)							23
Purchase of common stock, value	(39)
Purchase of common stock (in shares)							(1)
Share - based compensation	5,382
Cash dividends paid			(4,225)
Balance at Mar. 31, 2020	281,840		798,201	(148,159)	(36,078)	9,731
Balance (in shares) at Mar. 31, 2020							31,296
Balance at Sep. 30, 2020	295,986		850,472	(149,603)	(36,078)	27,403	$ 988,180
Balance (in shares) at Sep. 30, 2020							31,329
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(49,012)			22,494	$ (49,012)
Other comprehensive income (loss), net of tax				17,195			$ 17,195
Stock issued under equity incentive plans (in shares)							556
Stock issued under employee stock purchase plans, value	1,170
Stock issued under employee stock purchase plans (in shares)							20
Purchase of common stock, value	(4,014)
Purchase of common stock (in shares)							(66)
Share - based compensation	11,151
Shares repurchased for tax withholdings					(5,243)
Shares repurchased for tax withholdings (in shares)							(86)
Cash dividends paid			(4,270)
Balance at Mar. 31, 2021	304,293		797,190	(132,408)	(41,321)	49,897	$ 977,651
Balance (in shares) at Mar. 31, 2021							31,753
Balance at Dec. 31, 2020	297,655		837,477	(138,296)	(36,078)	33,120
Balance (in shares) at Dec. 31, 2020							31,810
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(36,017)			16,777	$ (36,017)
Other comprehensive income (loss), net of tax				5,888			$ 5,888
Stock issued under equity incentive plans (in shares)							9
Stock issued under employee stock purchase plans, value	1,170
Stock issued under employee stock purchase plans (in shares)							20
Purchase of common stock, value	(1,004)
Share - based compensation	6,472
Shares repurchased for tax withholdings					(5,243)
Shares repurchased for tax withholdings (in shares)							(86)
Cash dividends paid			(4,270)
Balance at Mar. 31, 2021	$ 304,293		$ 797,190	$ (132,408)	$ (41,321)	$ 49,897	$ 977,651
Balance (in shares) at Mar. 31, 2021							31,753

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Cash dividends paid, per share of common stock	$ 0.14	$ 0.14	$ 0.14	$ 0.14

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Basis for Presentation

6 Months Ended

Mar. 31, 2021

Basis for Presentation

Basis for Presentation

Note 1 — Basis for Presentation

Cubic Corporation (“we,” “us,” the “Company” and “Cubic”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements.

In our opinion, the accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented. Operating results for the quarter ended March 31, 2021 are not necessarily indicative of the results that may be expected for our fiscal year ending September 30, 2021 (“fiscal 2021”). For further information, refer to the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (“fiscal 2020”).

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

As described in Note 14, we concluded that the combination of our legacy Cubic Mission Solutions (“CMS”) and our legacy Cubic Global Defense (“CGD”) segments into our new Cubic Mission and Performance Solutions (“CMPS”) segment resulted in CMPS becoming a single operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

Agreement and Plan of Merger

On March 30, 2021, we executed Amendment No. 1 to that certain Agreement and Plan of Merger, dated as of February 7,2021, by and among the Company, Atlas CC Acquisition Corp. and Atlas Merger Sub Inc. (as amended and as may be further amended from time to time, the “Merger Agreement”). Pursuant to the Merger Agreement, the Company will be acquired by Veritas Capital and Evergreen Coast Capital Corporation at a price of $75.00 per outstanding share of common stock of the Company, without interest and subject to required tax withholding in accordance with the terms of the Merger Agreement, in an all-cash transaction. On April 27, 2021, the Company’s stockholders voted upon and approved a proposal to adopt the Merger Agreement. The transaction is expected to close during our third quarter of fiscal 2021, subject to customary closing conditions, including the receipt of shareholder and regulatory approvals. Our financial statements and associated disclosures for the three- and six- month periods ended March 31, 2021 and March 31, 2020 do not reflect any potential impacts or effects the Merger might have on our financial statements if the Merger is finalized.

There can be no assurance that the transaction will close in the timeframe contemplated or on the terms anticipated, if at all.

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This standard removes the second step of the goodwill impairment test, where a determination of the fair value of individual assets and liabilities of a reporting unit was needed to measure the goodwill impairment. Under this updated standard, goodwill impairment will now be the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted ASU 2017-04 on October 1, 2020. The adoption of ASU 2017-04 did not have an impact on our consolidated financial statements and would only have the potential to impact the amount of goodwill impairment recorded in the event that goodwill is determined to be impaired in the future.

Recent Accounting Pronouncements – Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“Topic 740”), which removes certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for us in our annual period beginning October 1, 2021 and interim periods within that annual period. We are currently evaluating the impact of this standard on our consolidated financial statements.

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Business Acquisitions

6 Months Ended

Mar. 31, 2021

Business Acquisitions

Business Acquisitions

Note 2 — Business Acquisitions

Each of the following acquisitions have been treated as a business combination for accounting purposes. The results of operations of each acquired business have been included in our consolidated financial statements since the respective date of each acquisition.

PIXIA Corp.

On June 27, 2019, we paid cash of $50.0 million to purchase 20% of the outstanding shares of PIXIA Corp. (“Pixia”), a provider of high-performance advanced data indexing, warehousing, processing and dissemination software solutions for large volumes of imagery data within traditional or cloud-based architectures. On January 3, 2020, we completed the purchase of the remaining 80% of Pixia’s issued and outstanding shares of capital stock for aggregate consideration consisting of $197.8 million in net cash, resulting in our ownership of all of Pixia’s issued and outstanding shares of capital stock. The acquisition was financed primarily with proceeds from draws on our line of credit.

From June 27, 2019 through January 3, 2020, we accounted for our 20% ownership of Pixia using the equity method of accounting. Upon completion of the acquisition of the remaining 80% ownership interest, we began consolidating Pixia into our financial statements. The acquisition-date fair value of consideration transferred is $245.2 million and is comprised of cumulative cash paid of $247.8 million, less a $2.0 million dividend received from Pixia and less a $0.6 million loss recognized during the period that we accounted for our 20% ownership of Pixia using the equity method of accounting.

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date (in millions):

Backlog	$	42.5
Customer relationships		25.5
Developed technology		14.1
Trade name		5.7
Accounts receivable, prepaids and other assets		3.8
Deferred taxes		(17.6)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		72.2
Goodwill		173.0
Net assets acquired	$	245.2

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The trade name valuation used the relief from royalty method, the customer relationships and non-compete agreements valuations used the lost profits valuation method and the technology and backlog valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over a weighted average useful life of approximately four years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Pixia with our existing CMPS business and strengthening our capability of developing and integrating products in our CMPS portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CMPS segment and is not expected to be deductible for tax purposes.

Delerrok Inc.

In fiscal 2018 and 2019 we invested a total of $8.3 million to purchase 17.5% of the outstanding shares of common stock of Delerrok Inc. (“Delerrok”), a private technology company based in Vista, California, that specializes in electronic fare collection systems for the mid-market. On January 3, 2020, we completed the purchase of the remaining 82.5% of Delerrok’s outstanding shares of common stock for aggregate consideration consisting of $36.8 million, resulting in our ownership of all of Delerrok’s shares of common stock. Prior to January 3, 2020, we accounted for our investment in Delerrok using the cost method of accounting. We began consolidating Delerrok in our financial statements effective January 3, 2020. The acquisition-date fair value of consideration is $45.1 million and is comprised of total cash paid of $43.5 million plus the fair value of contingent consideration of $1.6 million. The acquisition was financed primarily with proceeds from draws on our line of credit.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.3)
Deferred tax liability		(1.7)
Net identifiable assets acquired		14.7
Goodwill		30.4
Net assets acquired	$	45.1

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method and the technology valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an average useful life of approximately ten years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Delerrok with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CTS segment and is not expected to be deductible for tax purposes.

Operating Results

The sales and results of operations from Delerrok and Pixia included in our operating results were as follows (in millions):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Sales	$	0.9	$	6.2	$	0.7	$	1.1
Operating loss		(1.1)		(5.6)		(1.1)		(10.0)
Net loss after taxes		(1.1)		(5.6)		(1.1)		(10.0)
	Six Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Sales	$	1.2	$	8.5	$	0.7	$	1.1
Operating loss		(2.2)		(13.6)		(1.1)		(10.0)
Net loss after taxes		(2.2)		(13.6)		(1.1)		(10.0)

The operating results above included the following amounts (in millions):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Amortization	$	0.4	$	7.2	$	0.4	$	7.2
Acquisition-related expenses (income)		(0.2)		0.1		0.7		2.0
	Six Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Amortization	$	0.9	$	14.3	$	0.4	$	7.2
Acquisition-related expenses		0.2		0.6		0.7		2.0
Gain from changes in fair value of contingent consideration		(0.9)		—		—		—

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions are as follows (in millions):

Year Ending September 30,	Delerrok		Pixia
2021	$	1.7	$	28.7
2022		1.6		12.7
2023		1.6		7.3
2024		1.6		7.3
2025		1.6		7.3
Thereafter		6.4		3.2

Pro Forma Information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia and Delerrok had been included in our consolidated results since October 1, 2019 (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Net sales	$	343.4	$	321.5	$	662.2	$	654.6
Net loss		(36.0)		(39.3)		(49.0)		(68.1)

The pro forma information includes adjustments to give effect to events that are directly attributable to the acquisitions and have a continuing impact on our operations including the amortization of purchased intangibles. No adjustments were made for transaction expenses, other items that do not reflect ongoing operations or for operating efficiencies or

synergies. The pro forma financial information is not necessarily indicative of what the consolidated financial results of our operations would have been had the acquisitions been completed on October 1, 2019, and it does not purport to project our future operating results.

Goodwill

Changes in goodwill for the six months ended March 31, 2021 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission
	Systems		Performance Solutions		Total
Net balances at October 1, 2020	$	287,668	$	497,214	$	784,882
Adjustments		(260)		—		(260)
Foreign currency exchange rate changes		2,541		864		3,405
Net balances at March 31, 2021	$	289,949	$	498,078	$	788,027

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. Goodwill is not amortized but is subject to an impairment test at a reporting unit level on an annual basis and when circumstances indicate that an impairment is more-likely-than-not. Circumstances that might indicate an impairment is more-likely-than-not include a significant adverse change in the business climate for one of our reporting units or a decision to dispose of a reporting unit or a significant portion of a reporting unit.

We complete our annual goodwill impairment test each year as of July 1 separately for each of our reporting units.

For our fiscal 2020 impairment test we concluded there was no impairment of goodwill and in the second quarter of fiscal 2021 we concluded that no circumstances were present that required an interim impairment test.

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Variable Interest Entities

6 Months Ended

Mar. 31, 2021

Variable Interest Entities

Variable Interest Entities

Note 3 – Variable Interest Entities

In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”), we assess our partnerships and joint ventures at inception, and when there are changes in relevant factors, to determine if they are a variable interest entity (a “VIE”). We consider a partnership or joint venture to be a VIE if it has any of the following characteristics: (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing, or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity.

We continually assess each VIE to determine if we are its primary beneficiary. We conclude that we are the primary beneficiary and consolidate the VIE if we have both (a) the power to direct the activities that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. We consider the VIE design, ownership and voting structure, contractual relationships, distribution of profits and losses, risks, responsibilities, and indebtedness in determining if we are the primary beneficiary.

In March 2018, Cubic and John Laing, an unaffiliated company that specializes in contracting under public-private partnerships, jointly formed Boston AFC 2.0 HoldCo. LLC (“Boston HoldCo”). Also in March 2018, Boston HoldCo’s created a wholly owned subsidiary, Boston AFC 2.0 OpCo. LLC (“Boston OpCo”), entered into a contract with the Massachusetts Bay Transit Authority (“MBTA”) for the financing, development and operation of a next-generation fare payment system in Boston, Massachusetts (the “Original MBTA Contract”). Boston HoldCo is 90% owned by John Laing and 10% owned by Cubic. Collectively, Boston HoldCo and Boston OpCo are referred to as the “P3 Venture”. Based on our assessment under ASC 810, we concluded that Boston OpCo and Boston HoldCo are VIEs and that we are the primary beneficiary of Boston OpCo. Consequently, we have consolidated the financial statements of Boston OpCo. We have concluded that we are not the primary beneficiary of Boston HoldCo, and thus we have not consolidated the financial statements of Boston HoldCo. In June 2020, MBTA and Boston OpCo executed an amended agreement (the “Amended MBTA Contract”), which modified certain provisions of the Original MBTA Contract.

The Amended MBTA Contract consists of a design and build phase of approximately four years and an operate and maintain phase of approximately twelve years. The design and build phase is planned to be completed in 2024 and the initial operate and maintain phase is expected to commence in December 2021, with full service commencement spanning from 2024 through 2033. Under the Amended MBTA Contract, MBTA will make payments to Boston OpCo consisting of fixed payments of $43.5 million during the design and build phase, fixed payments of $175.8 million at the full service commencement date, fixed payments of $618.0 million during the full service operate and maintain phase, variable payments for incremental transaction-based fees and inflation indexed payments during the operate and maintain phase, and payment adjustments for any performance penalties incurred by Boston OpCo during the project.

Boston OpCo subcontracted all of its contractual responsibilities regarding the design and build and the operation and maintenance of the fare system under the Amended MBTA Contract to Cubic. Under its subcontract with Boston OpCo, Cubic will receive fixed payments in the aggregate amount of $596.4 million, adjusted for incremental transaction-based fees, inflation indexed payments, less any performance penalties incurred.

Upon creation of the P3 Venture and upon execution of the Amended MBTA Contract, John Laing made loans to Boston HoldCo totaling $26.2 million in the form of bridge loans that are intended to be converted to equity in the future in accordance with its equity funding responsibilities under the terms of the P3 Venture. Concurrently, Boston HoldCo made corresponding equity contributions to Boston OpCo in the same amounts which are included within equity of noncontrolling interest in the VIE in our consolidated financial statements. Also, we issued a letter of credit for $2.9 million to Boston HoldCo in accordance with our equity funding responsibilities. Boston HoldCo is able to draw on this letter of credit in certain liquidity instances, but no amounts have been drawn through March 31, 2021.

In connection with the execution of the Amended MBTA Contract, Boston OpCo entered into an amended credit agreement with a group of financial institutions (the “Boston OpCo Amended Credit Agreement”), which includes two long-term debt facilities and a revolving credit facility. Under the Boston OpCo Amended Credit Agreement, the long-term debt facilities allow for draws up to an aggregate of $421.6 million during the design and build phase of the Amended MBTA Contract. The long-term debt facilities, including all interest and fees incurred, are required to be repaid on a fixed monthly schedule commencing once the design and build phase is completed in 2024. The long-term debt facilities bear interest at variable rates of LIBOR plus a margin of 1.75% to 2.0%. Boston OpCo incurred debt issuance and modification costs of $9.2 million during fiscal 2020 in connection with the Boston OpCo Amended Credit Agreement and these fees are being amortized as interest expense using the effective interest method over the term of the long-term debt facilities. Unamortized deferred financing costs are netted against long-term debt and amounted to $16.7 million and $17.2 million at March 31, 2021 and September 30, 2020, respectively. The revolving credit facility allows for draws up to a maximum aggregate amount of $15.8 million during the operate and maintain phase of the Amended MBTA Contract. Boston OpCo’s debt is nonrecourse with respect to Cubic and our subsidiaries. The fair value of the long-term debt facility approximates its carrying amount.

The Boston OpCo Amended Credit Agreement contains a number of covenants which require that Boston OpCo and Cubic maintain progress on the delivery of the MBTA Amended Agreement within a specified timeline and budget and provide regular reporting on such progress. The Boston OpCo Amended Credit Agreement also contains customary events of default including the delivery of a customized fare collection system to MBTA by a pre-determined date. Failure to meet such delivery date will result in Boston OpCo, and Cubic via our subcontract with Boston OpCo, to incur penalties due to the lenders thereunder.

Upon execution of the Boston OpCo Amended Credit Agreement, Boston OpCo terminated its existing interest rate swaps and paid termination costs of $34.4 million to the counterparties. Additionally, in connection with the Boston OpCo Amended Credit Agreement, Boston OpCo entered into new pay-fixed/receive-variable interest rate swaps to mitigate the variable interest rate associated with its long-term debt facility. The interest rate swaps contain forward starting notional principal amounts which align with Boston OpCo’s expected draws on its long-term debt facility. Boston OpCo’s interest rate swaps were not designated as effective hedges, and as such unrealized gains (losses) are included in other income (expense), net. At March 31, 2021 and September 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $233.5 million and $194.0 million, respectively. The fair value of Boston OpCo’s interest rate swaps was $12.5 million at March 31, 2021 and is recorded as an asset in other noncurrent assets in our condensed consolidated balance sheet. The fair value of the interest rate swaps was $5.9 million at September 30, 2020, and was recorded as a liability in other noncurrent liabilities in our condensed consolidated balance sheet. As a result of changes in the fair value of its interest rate swaps, Boston OpCo recognized gains of $15.1 million and $18.3 million for the three- and six- month periods ended March 31, 2021, respectively, and recognized losses of $15.8 million

and $11.5 million for the three- and six- month periods ended March 31, 2020, respectively. See Note 7 for a description of the measurement of fair value of derivative financial instruments, including Boston OpCo’s interest rate swaps.

Boston OpCo holds a restricted cash balance which is required by the Amended MBTA Contract to allow for the delivery of future change orders directed by MBTA.

The assets and liabilities of Boston OpCo that are included in our condensed consolidated balance sheets are as follows:

	March 31,		September 30,
	2021		2020
	(in thousands)
Cash	$	1,546	$	1,065
Restricted cash		7,322		1,822
Other current assets		18		31
Long-term contracts financing receivable		257,185		221,245
Other noncurrent assets		12,454		—
Total assets	$	278,525	$	224,163
Trade accounts payable	$	35	$	49
Accrued compensation and other current liabilities		109		85
Due to Cubic		17,262		27,259
Other noncurrent liabilities		—		5,890
Long-term debt		208,594		163,348
Total liabilities	$	226,000	$	196,631
Total Cubic equity		2,628		129
Noncontrolling interests		49,897		27,403
Total liabilities and owners' equity	$	278,525	$	224,163

The assets of Boston OpCo are restricted for its use only and are not available for our general operations. Boston OpCo’s debt is non-recourse to Cubic. Our maximum exposure to loss as a result of our equity interest in the P3 Venture is limited to the $2.9 million outstanding letter of credit, which will be converted to a cash contribution upon completion of the design and build phase of the Amended MBTA Contract.

Boston OpCo’s results of operations included in our Condensed Consolidated Statements of Operations are as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Revenue	$	4,616	$	1,802	$	8,637	$	3,047
Operating income		4,184		1,516		7,901		2,488
Other income (expense), net		15,091		(15,819)		18,343		(12,748)
Interest income		1,487		1,655		2,860		3,208
Interest expense		(2,122)		(1,995)		(4,111)		(3,154)

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Revenue Recognition

6 Months Ended

Mar. 31, 2021

Revenue Recognition

Revenue Recognition

Note 4 — Revenue Recognition

We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers.

Contract Estimates: Use of the cost-to-cost or other similar methods of revenue recognition requires us to make reasonably dependable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services. Revisions or adjustments to estimates of the transaction price, estimated costs at completion and estimated profit or loss of a performance obligation are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit or loss estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect our

results of operations and cash flows, and in some cases result in liabilities to complete contracts in a loss position. The aggregate impact of net changes in contract estimates are presented in the table below (amounts in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Operating income (loss)	$	222	$	(5,155)	$	606	$	(11,312)
Net income (loss) from continuing operations		402		(5,522)		644		(11,304)
Net income (loss) from continuing operations attributable to Cubic		263		(5,522)		483		(11,304)
Diluted income (loss) per share attributable to Cubic		0.01		(0.18)		0.02		(0.36)

Backlog: Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. It is comprised of both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (“IDIQ”) contracts are not included in backlog until the time the option or IDIQ task order is exercised or awarded. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As of March 31, 2021, our ending backlog was $3.626 billion, compared to $3.667 billion at September 30, 2020. We expect to recognize approximately 30% of our March 31, 2021 backlog over the next 12 months as revenue, and approximately 50% over the next 24 months, with the remainder recognized thereafter.

Accounts Receivable:

The components of accounts receivable are as follows (in thousands):

	March 31,		September 30,
	2021		2020
Accounts receivable
Billed	$	109,604	$	161,473
Allowance for doubtful accounts		(1,450)		(1,498)
Net accounts receivable	$	108,154	$	159,975

Amounts billed include $21.8 million and $82.2 million due on U.S. federal government contracts at March 31, 2021 and September 30, 2020, respectively.

In our normal course of business, we may sell trade receivables to financial institutions as a cash management technique. We do not retain financial or legal obligations for these receivables that would result in material losses. Our ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables; therefore, our sold trade receivables are not included in our Condensed Consolidated Balance Sheet in any period presented. As of March 31, 2021, we had no outstanding trade receivables sold to financial institutions, compared with $18.4 million as of September 30, 2020. During the six months ended March 31, 2021, we received $2.5 million related to withheld proceeds from receivables we sold as of September 30, 2020, which is included in cash provided by investing activities in our Condensed Consolidated Statements of Cash Flows.

Contract Assets and Liabilities: Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer per the contractually agreed project milestones. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in thousands):

	March 31,		September 30,
	2021		2020
Contract assets	$	321,545	$	268,773
Contract liabilities	$	74,779	$	75,546

Contract assets increased $52.8 million during the six months ended March 31, 2021, due to revenue recognized in excess of billings related to the satisfaction or partial satisfaction of performance obligations. There were no significant impairment losses related to our contract assets during the six months ended March 31, 2021.

Contract liabilities decreased $0.8 million during the six months ended March 31, 2021, due to payments received in excess of revenue recognized on these performance obligations. During the six months ended March 31, 2021, we recognized $35.7 million of our contract liabilities at September 30, 2020 as revenue. We expect our contract liabilities to be recognized as revenue over the next 24 months.

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Net Income (Loss) Per Share

6 Months Ended

Mar. 31, 2021

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Note 5 — Net Income (Loss) Per Share

Basic net income (loss) per share (EPS) is computed by dividing the net income (loss) attributable to Cubic for the period by the weighted average number of common shares outstanding during the period, including vested restricted stock units (RSUs).

In periods with a net income from continuing operations attributable to Cubic, diluted EPS is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of dilutive RSUs. Dilutive RSUs are calculated based on the average share price for each fiscal period using the treasury stock method. For RSUs with performance and market-based vesting, no common equivalent shares are included in the computation of diluted EPS until the performance criteria have been met, and once the criteria are met the dilutive RSUs are calculated using the treasury stock method, modified by the multiplier that is calculated at the end of the accounting period as if the vesting date was at the end of the accounting period.

In periods with a net loss from continuing operations attributable to Cubic, common equivalent shares are not included in the computation of diluted EPS, because to do so would be anti-dilutive.

The weighted-average number of shares outstanding used to compute net income (loss) per common share were as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Weighted average shares - basic		31,633		31,296		31,598		31,284
Effect of dilutive securities		—		—		—		—
Weighted average shares - diluted		31,633		31,296		31,598		31,284
Number of anti-dilutive securities		1,236		1,246		1,174		1,099

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Balance Sheet Details

6 Months Ended

Mar. 31, 2021

Balance Sheet Details

Balance Sheet Details

Note 6 — Balance Sheet Details

Restricted Cash

Cash and cash equivalents excluded $35.9 million and $27.3 million of restricted cash at March 31, 2021 and September 30, 2020, respectively, which for purposes of our consolidated statements of cash flows, is included in cash, cash equivalents and restricted cash.

Inventories

Inventories consist of the following (in thousands):

	March 31,		September 30,
	2021		2020
Finished products	$	17,941	$	14,838
Work in process and inventoried costs under long-term contracts		67,164		73,076
Materials and purchased parts		47,698		39,337
Net inventories	$	132,803	$	127,251

At March 31, 2021, work in process and inventoried costs under long-term contracts included approximately $8.3 million in costs incurred outside the scope of work or in advance of a contract award compared to $5.3 million at September 30, 2020. We believe it is probable that we will recover the costs inventoried at March 31, 2021, plus a profit margin, under contract change orders or awards within the next year.

Property, Plant and Equipment

Significant components of property, plant and equipment are as follows (in thousands):

	March 31,		September 30,
	2021		2020
Land and land improvements	$	7,213	$	7,423
Buildings and improvements		50,858		49,716
Machinery and other equipment		153,418		132,962
Software		126,446		121,890
Leasehold improvements		23,260		22,295
Construction and internal-use software development in progress		16,146		21,409
Accumulated depreciation and amortization		(208,558)		(189,394)
	$	168,783	$	166,301

Deferred Compensation Plan

We have a non-qualified deferred compensation plan offered to a select group of highly compensated employees. The plan provides participants with the opportunity to defer a portion of their compensation in a given plan year. The liabilities associated with the non-qualified deferred compensation plan are included in other noncurrent liabilities in our Condensed Consolidated Balance Sheets and totaled $8.2 million at March 31, 2021 and $9.6 million at September 30, 2020.

In the past we have made contributions to a rabbi trust to provide a source of funds for satisfying a portion of these deferred compensation liabilities. The total carrying value of the assets set aside to fund deferred compensation liabilities totaled $7.4 million at March 31, 2021 and $6.8 million at September 30, 2020 and were comprised entirely of life insurance contracts. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. Changes in the carrying value of the deferred compensation liability, and changes in the carrying value of the assets held in the rabbi trust are reflected in our Condensed Consolidated Statements of Operations.

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Fair Value of Financial Instruments

6 Months Ended

Mar. 31, 2021

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 7 — Fair Value of Financial Instruments

The valuation techniques required to determine fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The two types of inputs create the following fair value hierarchy:

● Level 1 - Quoted prices for identical instruments in active markets.

● Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

● Level 3 - Significant inputs to the valuation model are unobservable.

The following table presents assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheets on a recurring basis (in thousands):

	March 31, 2021								September 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	2,177	$	—	$	2,177	$	—	$	1,398	$	—	$	1,398
Noncurrent derivative assets		—		229		—		229		—		222		—		222
Total assets measured at fair value	$	—	$	2,406	$	—	$	2,406	$	—	$	1,620	$	—	$	1,620
Liabilities
Current derivative liabilities		—		6,350		—		6,350		—		4,557		—		4,557
Noncurrent derivative liabilities		—		4,537		—		4,537		—		14,070		—		14,070
Contingent consideration to seller of H4 Global		—		—		—		—		—		—		1,148		1,148
Contingent consideration to seller of Deltenna		—		—		3,205		3,205		—		—		3,004		3,004
Contingent consideration to seller of Shield		—		—		6,811		6,811		—		—		5,566		5,566
Contingent consideration to seller of Delerrok		—		—		—		—		—		—		900		900
Total liabilities measured at fair value	$	—	$	10,887	$	10,016	$	20,903	$	—	$	18,627	$	10,618	$	29,245

Derivative financial instruments are measured at fair value, the material portions of which are based on active or inactive markets for identical or similar instruments or model-derived valuations whose inputs are observable. Where model-derived valuations are appropriate, we use the applicable credit spread as the discount rate. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions.

The fair value of contingent consideration liabilities to the sellers of businesses that we have acquired are revalued to their fair value each period and any increase or decrease is recorded into selling, general and administrative expense. Any changes in the assumed timing and amount of the probability of payment scenarios could impact the fair value.

At March 31, 2021, we have the following remaining contingent consideration arrangements with the sellers of companies which we acquired:

H4 Global: A payment of $1.3 million was made in January 2021 based on a percentage of the value of H4 contracts entered into from October 1, 2015 through September 30, 2020. There is no remaining liability at March 31, 2021.

Deltenna: Payments of up to $7.4 million if Deltenna meets certain sales goals from the date of acquisition through September 30, 2022. The fair value of the contingent consideration was estimated using a combination of a probability weighted approach and the real option approach. Under the real option approach, each payment was modeled using long digital options written on the underlying revenue metric. The strike price for each option is the respective revenue as

specified in the related agreement, and the spot price is calibrated to the revenue forecast by calculating the present value of the corresponding projected revenues using a risk-adjusted discount rate. The volatility for the underlying revenue metrics was based upon an analysis of comparable public companies and was 52% as of March 31, 2021 and September 30, 2020. The selected discount rate was 10.5% as of March 31, 2021 and September 30, 2020.

Shield: Payments of up to $10.0 million if Shield meets certain sales goals from the date of acquisition through July 31, 2025. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials. Key inputs for the simulation include projected revenues, discount rates, risk adjustment factors and volatility. The volatility and revenue risk adjustment factors were determined based on an analysis of publicly traded comparable companies and as of March 31, 2021 were 26% and 13% compared to 31% and 16% at September 30, 2020. The selected discount rate was based primarily on an analysis of publicly traded comparable companies and was 5.3% at March 31, 2021 and 5.7% at September 30, 2020.

Nuvotronics: Payments of up to $8.0 million if Nuvotronics meets certain gross profit goals for the 12-month period ending December 31, 2021. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials. As of March 31, 2021, the fair value of the Nuvotronics contingent consideration was determined to be zero as its forecasted gross profit amounts were below the payout thresholds.

Delerrok: As of December 31, 2020, the value of the Delerrok contingent consideration was determined to be zero as its sales amounts were below the payout threshold for the measurement period that lapsed on December 31, 2020.

The inputs to each of the contingent consideration fair value models include significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition dates and each subsequent period. Accordingly, changes in the assumptions described above can materially impact the amount of contingent consideration expense we record in any period.

As of March 31, 2021, the following table summarizes the change in fair value of our Level 3 contingent consideration liabilities (in thousands):

	H4 Global		Deltenna		Shield		Nuvotronics		Delerrok		Total
Balance as of September 30, 2020	$	1,148	$	3,004	$	5,566	$	—	$	900	$	10,618
Cash paid to seller		(1,286)		—		—		—		—		(1,286)
Total remeasurement (gain) loss recognized in earnings		138		201		1,245		—		(900)		684
Balance as of March 31, 2021	$	—	$	3,205	$	6,811	$	—	$	—	$	10,016

We carry certain financial instruments, including accounts receivable, short-term borrowings, accounts payable and accrued liabilities at cost, which we believe approximates fair value because of the short-term maturity of these instruments. The fair value of our variable rate long-term debt approximates its carrying value at March 31, 2021.

In fiscal 2019, 2020 and 2021, we invested $5.0 million, $1.2 million, and $1.4 million respectively, in Franklin Blackhorse, L.P., a limited partnership investment fund that invests in early stage, privately owned companies in the military, commercial and disruptive technology sectors. We account for our investment using the equity method of accounting. Our share of the fund’s operating income was not material for the three or six months ended March 31, 2021 or March 31, 2020. Our investment balance is included within other assets in our Condensed Consolidated Statements of Operations and amounted to $7.3 million and $5.6 million as of March 31, 2021 and September 30, 2020, respectively.

We did not have any significant non-financial assets or liabilities measured at fair value on a non-recurring basis in the second quarter of fiscal 2021 or fiscal 2020 other than assets and liabilities acquired in business acquisitions described in Note 2 and the RSUs that contain performance and market-based vesting criteria described in Note 11.

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Financing Arrangements

6 Months Ended

Mar. 31, 2021

Financing Arrangements

Financing Arrangements

Note 8 — Financing Arrangements

On March 27, 2020, we executed a Fifth Amended and Restated Credit Agreement (the “Credit Facility”) with a group of financial institutions. The Credit Facility provided for a new term loan in the aggregate amount of $450.0 million (the

“Term Loan”) and increased our existing revolving line of credit limit (the “Revolving Line of Credit”) from $800.0 million to $850.0 million. The commitments under the Credit Facility will mature on March 27, 2025 and bear interest generally at the LIBOR rate plus a margin that ranges between 1.00% and 2.00%. At March 31, 2021, the weighted average interest rate on outstanding borrowings under the Credit Facility was 1.92%. The Credit Facility is unsecured, but it is guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into interest rate swaps with a group of financial institutions to mitigate the variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts which align with our fixed repayment schedules under the Credit Facility and as of March 31, 2021 have an interest rate of approximately 2.49% and outstanding notional principal amounts of $500.0 million. See Note 7 for a description of the measurement of fair value of our derivative financial instruments.

Debt issuance and modification costs of $3.4 million were incurred in connection with the execution of the Credit Facility and are classified as a reduction to the related liability on our Condensed Consolidated Balance Sheets and are being amortized as interest expense using the effective interest method over the stated term of the Credit Facility. At March 31, 2021, our total debt issuance costs for our Term Loan and Revolving Line of Credit had an unamortized balance of $4.9 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of March 31, 2021, there were $438.8 million of borrowings under the Term Loan and $279.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.5 million at March 31, 2021, which reduced our available line of credit to $476.5 million. The $94.5 million of letters of credit includes both financial letters of credit and performance guarantees.

As of March 31, 2021, we had letters of credit and bank guarantees outstanding totaling $101.1 million, which includes the $94.5 million of letters of credit issued under the Revolving Line of Credit and $6.6 million of letters of credit issued under other facilities. The $101.1 million of letters of credit and bank guarantees includes $97.4 million that guarantees either our performance or customer advances under certain contracts and $3.7 million of financial letters of credit that primarily guarantees our payment of certain self-insured liabilities. We have never had a drawing on a letter of credit instrument, nor are any anticipated; therefore, we estimate the fair value of these instruments to be zero. We also use surety bonds as an alternative to letters of credit.

We have entered into a short-term borrowing arrangement in the United Kingdom for up to £15.0 million British Pounds (equivalent to approximately $20.7 million at March 31, 2021) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At March 31, 2021, no amounts were outstanding under this borrowing arrangement.

We maintain a cash account with a bank in the United Kingdom for which the funds are restricted as to use. The account is required to secure the customer’s interest in cash deposited in the account to fund our activities related to our performance under a fare collection services contract in the United Kingdom. The balance in the account as of March 31, 2021 was $28.6 million and is classified as restricted cash in our Condensed Consolidated Balance Sheets.

The terms of the Credit Facility contain financial covenants setting a maximum total ratio of debt to adjusted earnings before interest, taxes, depreciation and amortization and a minimum interest coverage ratio. In addition, the terms contain covenants that restrict, among other things, our ability to sell assets, incur indebtedness, make investments, grant liens, pay dividends and make other restricted payments. As of March 31, 2021, we were in compliance with all covenants under the Credit Facility.

We maintain self-insurance arrangements related to certain workers’ compensation plans, automobile liability and product liability claims. Under these arrangements, we self-insure only up to the amount of a specified deductible for each claim. Additionally, effective January 1, 2021, we provide healthcare benefits to our U.S. employees through a self-insured plan. We have purchased stop-loss insurance to cover U.S. employee healthcare claims over certain thresholds. Our estimated reserves are based on historical experience and trends related to both insurance claims and payments. The ultimate cost of healthcare benefits will depend on actual costs incurred to settle the claims and may differ from the amounts reserved by the Company for those claims. We record all self-insurance liabilities in accrued compensation and current liabilities in our Condensed Consolidated Balance Sheets, which amounted to $7.4 million and $5.1 million at March 31, 2021 and September 30, 2020, respectively.

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Leases

6 Months Ended

Mar. 31, 2021

Leases

Leases

Note 9 — Leases

Our primary involvement with leases is as a lessee where we lease properties to support our business. A majority of our leases are operating leases of office space. For these leases, we have elected to account for the lease and non-lease components together as a single lease component. Our operating and financing leases expire at various dates through 2032 and 2026, respectively, without taking into consideration available renewal options, and many such leases require variable lease payments by us for property taxes, insurance premiums, common area maintenance and other costs. Certain of these leases also have extension or termination options, and we assess the likelihood of exercising such options. If it is reasonably certain that we will exercise the options, we include the impact in the measurement of our right-of-use assets and lease liabilities.

Our right-of-use assets for operating leases are included in operating lease right-of-use-assets and our right-of-use assets for financing leases are included in financing lease right-of-use-assets, net, on our Condensed Consolidated Balance Sheets. Our lease liabilities for operating and financing leases are included in other current liabilities for the current portion and separately in operating and financing lease liabilities for the long-term portion. We use our incremental borrowing rate in determining the present value of lease payments. Our operating lease expense is included in cost of sales and selling, general and administrative expenses in our consolidated statements of operations. Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred. Our finance lease expense consists of amortization of the right-of-use asset and interest expense. Amortization expense is recognized on a straight-line basis over the lease term and is included in cost of sales and selling, general and administrative expenses in our consolidated statement of operations. Interest expense is calculated using the effective interest method and is included in interest expense in our consolidated statement of operations. We also sublease certain immaterial properties and sublease income is included as a reduction of rental expense.

The following tables present our operating and finance leases, related lease expenses and other information (dollars in millions):

Operating Lease Portfolio

	March 31,		September 30,
	2021		2020
Right-of-use assets	$	83.1	$	87.2
Short-term lease liability		15.6		16.8
Long-term lease liability		77.0		80.6
Weighted average remaining lease term		7.2 years		7.6 years
Weighted average discount rate		3.0%		3.0%

Finance Lease Portfolio

	March 31,		September 30,
	2021		2020
Right-of-use assets	$	12.8	$	0.5
Short-term lease liability		2.9		0.2
Long-term lease liability		10.0		0.4
Weighted average remaining lease term		4.6 years		2.4 years
Weighted average discount rate		1.8%		1.7%

Lease Expense

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Lease Expense
Operating lease expense	$	4.9	$	4.8	$	9.8	$	9.4
Finance lease expense
Amortization of right-of-use asset		0.7		—		0.8		—
Interest on lease liabilities		0.1		—		0.1		—
Short-term lease expense		0.1		0.1		0.1		0.1
Variable lease expense		0.5		0.7		1.4		1.8
Total lease expense	$	6.3	$	5.6	$	12.2	$	11.3

Other Information

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Cash paid related to lease liabilities
Finance lease - cash paid for interest	$	—	$	—	$	—	$	—
Operating lease - cash paid for fixed payments		5.1		4.6		9.9		9.1
Finance lease - cash paid for finance lease liabilities		0.7		—		0.7		—
Right-of-use assets obtained in exchange for new finance lease liabilities		0.4		—		13.0		—
Right-of-use assets obtained in exchange for new operating lease liabilities		2.8		8.4		3.0		18.0

Maturities of Lease Liabilities

Our future lease commitments from our operating and finance leases on an undiscounted basis, reconciled to the lease liability at March 31, 2021 were as follows (in millions):

	Financing		Operating
2021	$	1.5	$	8.3
2022		3.0		16.9
2023		2.8		14.9
2024		2.7		13.9
2025		2.7		11.5
Thereafter		0.7		37.9
Total lease payments		13.4		103.4
Less: imputed interest		(0.5)		(10.8)
Present value of lease liabilities	$	12.9	$	92.6

In fiscal 2019, we entered into agreements related to the construction and leasing of two buildings on our existing corporate campus in San Diego, California. Under these agreements, a financial institution owns the buildings and we acted as the construction agent. We began leasing the real property for a term of five years upon the completion of the buildings in December 2020, which is reflected in our finance lease right-of-use assets and finance lease liabilities presented above. The terms of these agreements include provisions that require or limit, among other financial ratios and measurements, the permitted levels of debt, coverage of cash interest expense, and under certain circumstances, payments of dividends or other distributions to shareholders. As of March 31, 2021, we were in compliance with all covenants included in these agreements.

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Pension Plans

6 Months Ended

Mar. 31, 2021

Pension Plans

Pension Plans

Note 10 — Pension Plans

The components of net periodic pension cost (benefit) are as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Service cost	$	162	$	164	$	320	$	329
Interest cost		1,346		1,507		2,679		3,038
Expected return on plan assets		(2,686)		(2,946)		(5,335)		(5,892)
Amortization of actuarial loss		1,165		968		2,305		1,969
Administrative expenses		89		83		178		169
Net pension cost (benefit)	$	76	$	(224)	$	147	$	(387)

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Stockholders' Equity

6 Months Ended

Mar. 31, 2021

Stockholders' Equity

Stockholders' Equity

Note 11 - Shareholders’ Equity

Long-Term Equity Incentive Plan

Under our long-term equity incentive plan, we have provided participants with three general categories of grant awards: (a) RSUs with time-based vesting, (b) RSUs with performance-based vesting, and (c) RSUs with performance and market-based vesting.

Each RSU with time-based vesting or performance-based vesting represents a contingent right to receive one share of our common stock. Each RSU with performance and market-based vesting represents a contingent right to receive up to 1.25 shares of our common stock. Dividend equivalent rights accrue with respect to the RSUs as dividends are paid on shares of our common stock and vest proportionately with the RSUs to which they relate. Participants receive the full benefit of the underlying common stock upon vesting.

Time-based RSUs granted prior to fiscal 2020 generally vest in four equal installments on each of the four October 1 dates following the grant date, subject to the recipient’s continued service with the Company through such vesting date. Time-based RSUs granted in fiscal 2020 and 2021 generally vest in three equal installments on each of the three October 1 dates following the grant date, subject to the recipient’s continued service with the Company through such vesting date.

The performance-based RSUs granted to participants vest over three-year performance periods based on our achievement of certain revenue growth targets, earnings growth targets and return on equity targets established by the Compensation Committee of our Board of Directors (the “Compensation Committee”) over the performance periods, subject to the recipient’s continued service with the Company through the end of the respective performance periods. The level at which we perform against scalable targets over the performance periods will determine the percentage of the RSUs that will ultimately vest.

The performance- and market-based RSUs granted to participants vest over three-year performance periods based on our achievement of revenue growth targets and earnings growth targets subject to the recipient’s continued service with the Company through the end of the respective performance periods. For these RSUs, the relative total stock return (“TSR”) for shares of our common stock as compared to the Russell 2000 Index (the “Index”) over the performance period will result in a multiplier for the number of RSUs that will vest. If the TSR performance exceeds the performance of the Index based on a scale established by the Compensation Committee, the multiplier will result in up to an additional 25% of RSUs vesting at the end of the performance period. If the TSR performance is below the performance of the Index based on a scale established by the Compensation Committee, the multiplier would result in a reduction of up to 25% of these RSUs vesting at the end of the performance period. For the performance- and market-based RSUs granted in fiscal 2020 and 2021, if our absolute TSR is negative for the three-year performance period, the TSR multiplier shall not exceed 100%, regardless of the performance relative to the Index.

Participants who are 60 years of age, and have achieved 10 years of continuous service, are eligible for accelerated vesting of their RSUs. Participants who have reached the retirement age criteria must generally provide us with a one-year notice of retirement. For participants who have reached the retirement age criteria, expense is recognized over the adjusted service period.

The grant date fair value of each RSU with time-based vesting or performance-based vesting is the fair market value of one share of our common stock at the grant date.

The grant date fair value of each RSU with performance and market-based vesting was calculated using a Monte Carlo simulation valuation method. Under this method, the prices of the Index and shares of our common stock were simulated through the end of the performance period. The correlation matrix between shares of our common stock and the Index as well as the corresponding return volatilities were developed based upon an analysis of historical data. The following tables include the assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted during fiscal 2019, 2020 and 2021:

	RSUs granted during fiscal 2021
Valuation Date	November 17, 2020
Grant date fair value per RSU	$57.71
Performance period begins	October 1, 2020
Performance period ends	September 30, 2023
Risk-free interest rate	0.2%
Expected volatility	50%
	RSUs granted during fiscal 2020
Valuation Date	September 17, 2020
Grant date fair value per RSU	$41.13
Performance period begins	October 1, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	0.1%
Expected volatility	52%

At March 31, 2021, the total number of unvested RSUs that are ultimately expected to vest, after consideration of expected forfeitures and estimated vesting of performance-based RSUs, is 376,592 RSUs with time-based vesting, and 395,980 RSUs with performance- and market-based vesting.

The following table summarizes our RSU activity:

	Unvested RSUs with Time-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	554,423	$	58.54
Granted	249,960		61.09
Vested	(230,975)		58.34
Forfeited	(116,969)		59.17
Unvested at March 31, 2021	456,439	$	59.88

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	137,770	$	61.40
Granted	—		—
Vested	(110,247)		61.40
Forfeited	(27,523)		61.40
Unvested at March 31, 2021	—	$	—

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	471,496	$	51.56
Granted	277,250		57.71
Vested	—		—
Forfeited	(20,542)		55.09
Unvested at March 31, 2021	728,204	$	53.80

We recorded non-cash compensation expense related to stock-based awards as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Cost of sales	$	771	$	743	$	1,372	$	1,282
Selling, general and administrative		5,701		4,639		9,779		8,577
	$	6,472	$	5,382	$	11,151	$	9,859

As of March 31, 2021, there was $46.1 million of unrecognized compensation expense related to unvested RSUs. Based upon the expected forfeitures and the expected vesting of performance-based RSUs, the aggregate fair value of RSUs expected to ultimately vest is $45.8 million, which is expected to be recognized over a weighted average period of 1.4 years.

We estimate forfeitures at the time of grant and revise those estimates in subsequent periods on a cumulative basis in the period the estimated forfeiture rate changes for all stock-based awards when significant events occur. We consider our historical experience with employee turnover as the basis to arrive at our estimated forfeiture rate. The forfeiture rate was estimated to be 12.5% per year in each of fiscal 2020 and fiscal 2021. To the extent the actual forfeiture rate is different from what we have estimated, compensation expense related to these awards will be different from our expectations.

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Income Taxes

6 Months Ended

Mar. 31, 2021

Income Taxes

Income Taxes

Note 12 – Income Taxes

The quarterly forecast of our annual effective tax rate is impacted by numerous factors including income fluctuations by tax jurisdiction throughout the year, the level of intercompany transactions, applicability of new tax regimes and the impact of acquisitions. For the three- and six-month periods ended March 31, 2021, we concluded it is more appropriate to determine income tax expense for the period using a blend of the discrete effective tax rate method for U.S. operations and the estimated annual effective tax rate method for foreign operations.

The income tax expense recognized on the pre-tax loss from continuing operations for the three and six months ended March 31, 2021 resulted in tax expense of $3.4 million and $6.9 million, or negative 22% and negative 35% effective tax rates, respectively, as compared to a tax benefit of $19.8 million and $13.5 million, or 27% and 17% effective tax rates, for the three and six months ended March 31, 2020. The variability in tax expense and effective tax rates relates to the difference in jurisdictional mix of earnings and discrete impacts related to current year changes to the existing U.S. deferred tax valuation allowance.

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Derivative Instruments and Hedging Activities

6 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Note 13 — Derivative Instruments and Hedging Activities

In order to manage our exposure to fluctuations in interest and foreign currency exchange rates, we utilize derivative financial instruments such as forward starting swaps and foreign currency forwards for periods typically up to five years. We do not use any derivative financial instruments for trading or other speculative purposes.

The following table shows the notional principal amounts of our outstanding derivative instruments as of March 31, 2021 and September 30, 2020 (in thousands):

	Notional Principal
	March 31, 2021		September 30, 2020
Instruments receiving hedge accounting treatment:
Foreign currency forwards	$	128,920	$	92,931
Interest rate swaps		595,000		595,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	4,538	$	4,298

Included in the amounts not receiving hedge accounting treatment at March 31, 2021 and September 30, 2020 were foreign currency forwards with notional principal amounts of $3.5 million and $4.3 million, respectively, that have been designed to manage exposure to foreign currency exchange risks, and for which the gains or losses of the changes in fair value of the forwards have approximately offset an equal and opposite amount of gains or losses related to the foreign currency exposure. These foreign currency forward contracts resulted in unrealized losses of $0.2 million and $2.6 million for the three months ended March 31, 2021 and 2020, respectively, and resulted in unrealized gains of $0.6 million and unrealized losses of $1.8 million for the six months ended March 31, 2021 and 2020, respectively. Unrealized gains or losses are included in other income (expense), net in our condensed consolidated statements of operations.

We hold pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the lease obligations for our two new buildings located on our existing corporate campus. At March 31, 2021 and September 30, 2020, the outstanding notional principal amounts on these interest rate swaps were $95.0 million which align with our expected lease payments. These interest rate swaps were designated as effective cash flow hedges and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). As a result of changes in the fair value of the interest rate swaps, unrealized gains were $2.6 million and unrealized losses were $5.0 million for the three months ended March 31, 2021, and 2020, respectively, and resulted in unrealized gains of $2.7 million and unrealized losses of $3.6 million for the six months ended March 31, 2021 and 2020, respectively.

In April 2020, we entered into interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the Credit Facility. At March 31, 2021 and September 30, 2020, the interest rate swaps contain outstanding notional principal amounts of $500.0 million and were designated as effective cash flow hedges, and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). Unrealized gains as a result of changes in the fair value of the interest rate swaps were $7.3 million and $8.3 million for the three and six months ended March 31, 2021, respectively.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current interest or currency exchange rates at each respective date. Our exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material as of March 31, 2021 and September 30, 2020. Although the table above reflects the notional principal amounts of our foreign

exchange instruments, it does not reflect the gains or losses associated with the exposures and transactions that the foreign exchange instruments are intended to hedge. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.

We generally enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. We present our derivative assets and derivative liabilities at their gross fair values. We did not have any derivative instruments with credit risk-related contingent features that would require us to post collateral as of March 31, 2021 or September 30, 2020.

The table below presents the fair value of our derivative financial instruments that qualify for hedge accounting as well as their classification in the condensed consolidated balance sheets (in thousands):

		Fair Value
	Balance Sheet Location	March 31, 2021		September 30, 2020
Asset derivatives:
Foreign currency forwards	Other current assets	$	2,177	$	1,398
Foreign currency forwards	Other assets		229		222
Total		$	2,406	$	1,620
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	6,350	$	4,557
Foreign currency forwards	Other noncurrent liabilities		1,344		866
Interest rate swaps	Other noncurrent liabilities		3,193		13,204
Total		$	10,887	$	18,627

The tables below present gains and losses recognized in other comprehensive income (loss) related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings (in thousands):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	434	$	295	$	1,438	$	1,306
Interest rate swaps		9,878		—		—		—
	$	10,312	$	295	$	1,438	$	1,306
	Six Months Ended
	March 31, 2021				March 31, 2020
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(665)	$	550	$	(177)	$	1,273
Interest rate swaps		11,036		—		—		—
Total	$	10,371	$	550	$	(177)	$	1,273

Foreign currency forwards designated as accounting hedges had realized losses of $0.2 million and unrealized gains of $2.7 million for the three-months ended March 31, 2021 and 2020, respectively. The amounts of realized gains were immaterial for the six-months ended March 31, 2021 and were $2.8 million for the six-months ended March 31, 2020.

The amount of unrealized gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the three- and six-month periods ended March 31, 2021 or 2020. The amount of estimated unrealized net gains from cash flow hedges which are expected to be reclassified to earnings in the next twelve months is $3.0 million, net of income taxes.

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Segment Information

6 Months Ended

Mar. 31, 2021

Segment Information

Segment Information

Note 14 — Segment Information

We define our operating segments and reportable segments based on the way our Chief Executive Officer, who we have concluded is our chief operating decision maker, manages our operations for purposes of allocating resources and assessing performance and we continually reassess our operating segment and reportable segment designation based upon these criteria. In August 2020, we implemented a plan to realign and combine our legacy CMS and CGD segments into our new CMPS segment. At September 30, 2020, we concluded that CMS and CGD remained separate operating segments based upon factors including the nature of information presented to our chief executive officer and Board of Directors and the consequential level at which certain resource allocations and performance assessments were made. In the first quarter of fiscal 2021, we began providing financial information to our chief executive officer and Board of Directors at the CMPS level, which allowed resource allocation decisions and performance assessments to be made at that level. As such, we concluded that CMPS became an operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

We evaluate performance and allocate resources based on total segment operating income or loss. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1. Intersegment sales and transfers are immaterial and are eliminated in consolidation.

Our reportable segments are business units that offer different products and services. Operating results for each segment are reported separately to senior corporate management to make decisions as to the allocation of corporate resources and to assess performance.

Business segment financial data is as follows (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Sales:
Cubic Transportation Systems	$	217.4	$	197.6	$	414.5	$	386.2
Cubic Mission and Performance Solutions		126.0		123.9		247.7		264.1
Total sales	$	343.4	$	321.5	$	662.2	$	650.3
Operating income (loss):
Cubic Transportation Systems	$	33.0	$	12.6	$	64.7	$	26.9
Cubic Mission and Performance Solutions		(22.3)		(25.7)		(38.8)		(34.3)
Unallocated corporate expenses		(36.3)		(16.8)		(50.2)		(29.0)
Total operating loss	$	(25.6)	$	(29.9)	$	(24.3)	$	(36.4)
Depreciation and amortization:
Cubic Transportation Systems	$	7.5	$	7.4	$	15.0	$	14.5
Cubic Mission and Performance Solutions		15.2		15.1		30.3		24.3
Corporate		2.3		0.9		4.4		1.6
Total depreciation and amortization	$	25.0	$	23.4	$	49.7	$	40.4

Disaggregation of Total Net Sales: We disaggregate our sales from contracts with customers by end customer, contract type, deliverable type and revenue recognition method for each of our segments, as we believe these factors can affect the nature, amount, timing and uncertainty of our revenue and cash flows.

Sales by Geographic Region (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
United States	$	123.6	$	83.8	$	207.4	$	235.5	$	164.1	$	399.6
United Kingdom		54.3		7.6		61.9		102.2		15.6		117.8
Australia		32.3		9.5		41.8		61.4		19.1		80.5
Far East/Middle East		0.5		16.3		16.8		1.5		32.1		33.6
Other		6.7		8.8		15.5		13.9		16.8		30.7
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
United States	$	111.0	$	61.4	$	172.4	$	207.7	$	140.4	$	348.1
United Kingdom		49.9		5.1		55.0		97.5		9.6		107.1
Australia		30.1		7.2		37.3		66.5		15.0		81.5
Far East/Middle East		0.6		35.4		36.0		1.9		72.1		74.0
Other		6.0		14.8		20.8		12.6		27.0		39.6
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Sales by End Customer: We are the prime contractor for the vast majority of our sales. The table below presents total net sales disaggregated by end customer (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	115.4	$	82.5	$	197.9	$	223.0	$	161.8	$	384.8
Other		102.0		43.5		145.5		191.5		85.9		277.4
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	104.0	$	61.2	$	165.2	$	197.5	$	143.2	$	340.7
Other		93.6		62.7		156.3		188.7		120.9		309.6
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Sales by Contract Type: The vast majority of our contracts are fixed-price type contracts. Sales included in “Other” contract types represent cost-plus and time-and-material type contracts.

On a fixed-price type contract, we agree to perform the contractual statement of work for a predetermined sales price. Certain of our fixed-price contracts include compensation for bonuses, transactional variable based fees or other similar provisions. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the applicable contract’s fee arrangement up to funding levels that are predetermined by the customer. On a time-and-material type contract, we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. The table below presents total net sales disaggregated by contract type (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Fixed Price	$	214.6	$	107.2	$	321.8	$	409.0	$	209.0	$	618.0
Other		2.8		18.8		21.6		5.5		38.7		44.2
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Fixed Price	$	194.8	$	107.3	$	302.1	$	379.3	$	232.1	$	611.4
Other		2.8		16.6		19.4		6.9		32.0		38.9
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Sales by Deliverable Type: The table below presents total net sales disaggregated by the type of deliverable, which is determined by us at the performance obligation level (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Product	$	113.1	$	87.3	$	200.4	$	213.2	$	168.7	$	381.9
Service		104.3		38.7		143.0		201.3		79.0		280.3
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Product	$	99.7	$	87.8	$	187.5	$	193.1	$	195.0	$	388.1
Service		97.9		36.1		134.0		193.1		69.1		262.2
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Revenue Recognition Method: Sales recognized at a point in time are typically for standard goods with a short production cycle and are recognized when the customer obtains control, which is generally upon delivery and acceptance. Sales for services and for products with a long production cycle, which often include significant customization and development, are recognized over time. The table below presents total net sales disaggregated based on the revenue recognition method applied (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Point in Time	$	20.8	$	20.9	$	41.7	$	39.6	$	45.9	$	85.5
Over Time		196.6		105.1		301.7		374.9		201.8		576.7
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Point in Time	$	28.1	$	15.0	$	43.1	$	45.8	$	54.4	$	100.2
Over Time		169.5		108.9		278.4		340.4		209.7		550.1
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

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Restructuring Costs

6 Months Ended

Mar. 31, 2021

Restructuring Costs

Restructuring Costs

Note 15 — Restructuring Costs

In the fourth quarter of fiscal 2020, we announced our NextCUBIC transformation to restructure the way we work and operate as a business. Part of this initiative included establishing a Transformation Office and appointing a Chief Transformation Officer to identify, vet, plan and implement improvement initiatives across Cubic. Coinciding with this initiative, we also announced the combination of CGD and CMS into CMPS. This combination will help us optimize customer access and presence, leverage key enablers across the combined businesses and realize untapped cross-segment technical synergies to capture organizational efficiencies. The significant portion of the costs associated with these restructuring activities are related to consultants that we have engaged in connection with these efforts, and such costs have been recognized by our corporate entity. Other restructuring charges related to headcount reductions initiated to optimize our cost positions. Our NextCUBIC transformation initiatives will continue through fiscal 2021, and our consulting fees that will be incurred in the future are generally contingent upon the achievement of future cost savings, the total expected restructuring costs related to these initiatives cannot currently be estimated.

In the first quarter of fiscal 2021, CMPS also incurred costs related to modifying its go-to market and legal structure in the Middle East. The total cost of these efforts is not expected to be significantly greater than those incurred through December 31, 2020.

Restructuring charges incurred by our business segments were as follows (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Restructuring costs:
Cubic Transportation Systems	$	1.6		0.1	$	1.8	$	0.5
Cubic Mission and Performance Solutions		0.8		0.5		3.9		0.6
Unallocated corporate expenses		5.4		3.2		6.2		4.3
Total restructuring costs	$	7.8	$	3.8	$	11.9	$	5.4

The following table presents a rollforward of our restructuring liability as of March 31, 2021, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheet (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of October 1, 2020	$	5.2	$	0.8
Accrued costs		6.9		5.0
Cash payments		(8.3)		(2.5)
Balance as of March 31, 2021	$	3.8	$	3.3

Certain restructuring costs are based upon estimates. Actual amounts paid may ultimately differ from these estimates. If additional costs are incurred or recognized amounts exceed costs, such changes in estimates will be recognized when incurred.

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Legal Matters

6 Months Ended

Mar. 31, 2021

Legal Matters

Legal Matters

Note 16 — Legal Matters

We consider all current legal matters to be ordinary proceedings incidental to our business. We believe the outcome of these proceedings will not have a materially adverse effect on our financial position, results of operations or cash flows.

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Basis for Presentation (Policies)

6 Months Ended

Mar. 31, 2021

Basis for Presentation

Agreement and Plan of Merger

Agreement and Plan of Merger

On March 30, 2021, we executed Amendment No. 1 to that certain Agreement and Plan of Merger, dated as of February 7,2021, by and among the Company, Atlas CC Acquisition Corp. and Atlas Merger Sub Inc. (as amended and as may be further amended from time to time, the “Merger Agreement”). Pursuant to the Merger Agreement, the Company will be acquired by Veritas Capital and Evergreen Coast Capital Corporation at a price of $75.00 per outstanding share of common stock of the Company, without interest and subject to required tax withholding in accordance with the terms of the Merger Agreement, in an all-cash transaction. On April 27, 2021, the Company’s stockholders voted upon and approved a proposal to adopt the Merger Agreement. The transaction is expected to close during our third quarter of fiscal 2021, subject to customary closing conditions, including the receipt of shareholder and regulatory approvals. Our financial statements and associated disclosures for the three- and six- month periods ended March 31, 2021 and March 31, 2020 do not reflect any potential impacts or effects the Merger might have on our financial statements if the Merger is finalized.

There can be no assurance that the transaction will close in the timeframe contemplated or on the terms anticipated, if at all.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This standard removes the second step of the goodwill impairment test, where a determination of the fair value of individual assets and liabilities of a reporting unit was needed to measure the goodwill impairment. Under this updated standard, goodwill impairment will now be the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted ASU 2017-04 on October 1, 2020. The adoption of ASU 2017-04 did not have an impact on our consolidated financial statements and would only have the potential to impact the amount of goodwill impairment recorded in the event that goodwill is determined to be impaired in the future.

Recent Accounting Pronouncements – Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“Topic 740”), which removes certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for us in our annual period beginning October 1, 2021 and interim periods within that annual period. We are currently evaluating the impact of this standard on our consolidated financial statements.

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Business Acquisitions (Tables)

6 Months Ended

Mar. 31, 2021

Acquisitions and Divestitures

Schedule of Business Combination Operating Results

The sales and results of operations from Delerrok and Pixia included in our operating results were as follows (in millions):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Sales	$	0.9	$	6.2	$	0.7	$	1.1
Operating loss		(1.1)		(5.6)		(1.1)		(10.0)
Net loss after taxes		(1.1)		(5.6)		(1.1)		(10.0)
	Six Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Sales	$	1.2	$	8.5	$	0.7	$	1.1
Operating loss		(2.2)		(13.6)		(1.1)		(10.0)
Net loss after taxes		(2.2)		(13.6)		(1.1)		(10.0)

Schedule of Business Combination components of operating results

The operating results above included the following amounts (in millions):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Amortization	$	0.4	$	7.2	$	0.4	$	7.2
Acquisition-related expenses (income)		(0.2)		0.1		0.7		2.0
	Six Months Ended
	March 31, 2021				March 31, 2020
	Delerrok		Pixia		Delerrok		Pixia
Amortization	$	0.9	$	14.3	$	0.4	$	7.2
Acquisition-related expenses		0.2		0.6		0.7		2.0
Gain from changes in fair value of contingent consideration		(0.9)		—		—		—

Schedule of estimated amortization expense related to acquisition

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions are as follows (in millions):

Year Ending September 30,	Delerrok		Pixia
2021	$	1.7	$	28.7
2022		1.6		12.7
2023		1.6		7.3
2024		1.6		7.3
2025		1.6		7.3
Thereafter		6.4		3.2

Schedule of unaudited pro forma information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia and Delerrok had been included in our consolidated results since October 1, 2019 (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Net sales	$	343.4	$	321.5	$	662.2	$	654.6
Net loss		(36.0)		(39.3)		(49.0)		(68.1)

Schedule of changes in the carrying amount of goodwill

Changes in goodwill for the six months ended March 31, 2021 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission
	Systems		Performance Solutions		Total
Net balances at October 1, 2020	$	287,668	$	497,214	$	784,882
Adjustments		(260)		—		(260)
Foreign currency exchange rate changes		2,541		864		3,405
Net balances at March 31, 2021	$	289,949	$	498,078	$	788,027

PIXIA Corp

Acquisitions and Divestitures

Schedule of estimated fair values of the assets acquired and liabilities assumed at the acquisition date

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date (in millions):

Backlog	$	42.5
Customer relationships		25.5
Developed technology		14.1
Trade name		5.7
Accounts receivable, prepaids and other assets		3.8
Deferred taxes		(17.6)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		72.2
Goodwill		173.0
Net assets acquired	$	245.2

Delerrok Inc.

Acquisitions and Divestitures

Schedule of estimated fair values of the assets acquired and liabilities assumed at the acquisition date

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.3)
Deferred tax liability		(1.7)
Net identifiable assets acquired		14.7
Goodwill		30.4
Net assets acquired	$	45.1

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Variable Interest Entities (Tables)

6 Months Ended

Mar. 31, 2021

Variable Interest Entities

Schedule of summary of the consolidated net assets and liabilities

The assets and liabilities of Boston OpCo that are included in our condensed consolidated balance sheets are as follows:

	March 31,		September 30,
	2021		2020
	(in thousands)
Cash	$	1,546	$	1,065
Restricted cash		7,322		1,822
Other current assets		18		31
Long-term contracts financing receivable		257,185		221,245
Other noncurrent assets		12,454		—
Total assets	$	278,525	$	224,163
Trade accounts payable	$	35	$	49
Accrued compensation and other current liabilities		109		85
Due to Cubic		17,262		27,259
Other noncurrent liabilities		—		5,890
Long-term debt		208,594		163,348
Total liabilities	$	226,000	$	196,631
Total Cubic equity		2,628		129
Noncontrolling interests		49,897		27,403
Total liabilities and owners' equity	$	278,525	$	224,163

Schedule of revenue, operating profit, and other income/(expense), net

Boston OpCo’s results of operations included in our Condensed Consolidated Statements of Operations are as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Revenue	$	4,616	$	1,802	$	8,637	$	3,047
Operating income		4,184		1,516		7,901		2,488
Other income (expense), net		15,091		(15,819)		18,343		(12,748)
Interest income		1,487		1,655		2,860		3,208
Interest expense		(2,122)		(1,995)		(4,111)		(3,154)

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Revenue Recognition (Tables)

6 Months Ended

Mar. 31, 2021

Schedule of components of accounts receivable

The components of accounts receivable are as follows (in thousands):

	March 31,		September 30,
	2021		2020
Accounts receivable
Billed	$	109,604	$	161,473
Allowance for doubtful accounts		(1,450)		(1,498)
Net accounts receivable	$	108,154	$	159,975

Schedule of contract assets and liabilities

	March 31,		September 30,
	2021		2020
Contract assets	$	321,545	$	268,773
Contract liabilities	$	74,779	$	75,546

ASU 2014-09

Schedule of aggregate impact of net changes in contract estimates

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Operating income (loss)	$	222	$	(5,155)	$	606	$	(11,312)
Net income (loss) from continuing operations		402		(5,522)		644		(11,304)
Net income (loss) from continuing operations attributable to Cubic		263		(5,522)		483		(11,304)
Diluted income (loss) per share attributable to Cubic		0.01		(0.18)		0.02		(0.36)

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Net Income (Loss) Per Share (Tables)

6 Months Ended

Mar. 31, 2021

Net Income (Loss) Per Share

Schedule of computation of basic and diluted EPS

The weighted-average number of shares outstanding used to compute net income (loss) per common share were as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Weighted average shares - basic		31,633		31,296		31,598		31,284
Effect of dilutive securities		—		—		—		—
Weighted average shares - diluted		31,633		31,296		31,598		31,284
Number of anti-dilutive securities		1,236		1,246		1,174		1,099

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Balance Sheet Details (Tables)

6 Months Ended

Mar. 31, 2021

Balance Sheet Details

Components of inventories

Inventories consist of the following (in thousands):

	March 31,		September 30,
	2021		2020
Finished products	$	17,941	$	14,838
Work in process and inventoried costs under long-term contracts		67,164		73,076
Materials and purchased parts		47,698		39,337
Net inventories	$	132,803	$	127,251

Components of property, plant and equipment

Significant components of property, plant and equipment are as follows (in thousands):

	March 31,		September 30,
	2021		2020
Land and land improvements	$	7,213	$	7,423
Buildings and improvements		50,858		49,716
Machinery and other equipment		153,418		132,962
Software		126,446		121,890
Leasehold improvements		23,260		22,295
Construction and internal-use software development in progress		16,146		21,409
Accumulated depreciation and amortization		(208,558)		(189,394)
	$	168,783	$	166,301

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Fair Value Of Financial Instruments (Tables)

6 Months Ended

Mar. 31, 2021

Fair Value of Financial Instruments

Summary of assets and liabilities measured and recorded at fair value on Balance Sheet on a recurring basis

The following table presents assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheets on a recurring basis (in thousands):

	March 31, 2021								September 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	2,177	$	—	$	2,177	$	—	$	1,398	$	—	$	1,398
Noncurrent derivative assets		—		229		—		229		—		222		—		222
Total assets measured at fair value	$	—	$	2,406	$	—	$	2,406	$	—	$	1,620	$	—	$	1,620
Liabilities
Current derivative liabilities		—		6,350		—		6,350		—		4,557		—		4,557
Noncurrent derivative liabilities		—		4,537		—		4,537		—		14,070		—		14,070
Contingent consideration to seller of H4 Global		—		—		—		—		—		—		1,148		1,148
Contingent consideration to seller of Deltenna		—		—		3,205		3,205		—		—		3,004		3,004
Contingent consideration to seller of Shield		—		—		6,811		6,811		—		—		5,566		5,566
Contingent consideration to seller of Delerrok		—		—		—		—		—		—		900		900
Total liabilities measured at fair value	$	—	$	10,887	$	10,016	$	20,903	$	—	$	18,627	$	10,618	$	29,245

Summary of change in fair value of contingent consideration liability

As of March 31, 2021, the following table summarizes the change in fair value of our Level 3 contingent consideration liabilities (in thousands):

	H4 Global		Deltenna		Shield		Nuvotronics		Delerrok		Total
Balance as of September 30, 2020	$	1,148	$	3,004	$	5,566	$	—	$	900	$	10,618
Cash paid to seller		(1,286)		—		—		—		—		(1,286)
Total remeasurement (gain) loss recognized in earnings		138		201		1,245		—		(900)		684
Balance as of March 31, 2021	$	—	$	3,205	$	6,811	$	—	$	—	$	10,016

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Leases (Tables)

6 Months Ended

Mar. 31, 2021

Leases

Schedule of Operating Lease Portfolio

The following tables present our operating and finance leases, related lease expenses and other information (dollars in millions):

Operating Lease Portfolio

	March 31,		September 30,
	2021		2020
Right-of-use assets	$	83.1	$	87.2
Short-term lease liability		15.6		16.8
Long-term lease liability		77.0		80.6
Weighted average remaining lease term		7.2 years		7.6 years
Weighted average discount rate		3.0%		3.0%

Finance Lease Portfolio

	March 31,		September 30,
	2021		2020
Right-of-use assets	$	12.8	$	0.5
Short-term lease liability		2.9		0.2
Long-term lease liability		10.0		0.4
Weighted average remaining lease term		4.6 years		2.4 years
Weighted average discount rate		1.8%		1.7%

Schedule of operating Expense and Other Information

Lease Expense

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Lease Expense
Operating lease expense	$	4.9	$	4.8	$	9.8	$	9.4
Finance lease expense
Amortization of right-of-use asset		0.7		—		0.8		—
Interest on lease liabilities		0.1		—		0.1		—
Short-term lease expense		0.1		0.1		0.1		0.1
Variable lease expense		0.5		0.7		1.4		1.8
Total lease expense	$	6.3	$	5.6	$	12.2	$	11.3

Other Information

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Cash paid related to lease liabilities
Finance lease - cash paid for interest	$	—	$	—	$	—	$	—
Operating lease - cash paid for fixed payments		5.1		4.6		9.9		9.1
Finance lease - cash paid for finance lease liabilities		0.7		—		0.7		—
Right-of-use assets obtained in exchange for new finance lease liabilities		0.4		—		13.0		—
Right-of-use assets obtained in exchange for new operating lease liabilities		2.8		8.4		3.0		18.0

Schedule of Maturities of Operating Lease Liabilities

Our future lease commitments from our operating and finance leases on an undiscounted basis, reconciled to the lease liability at March 31, 2021 were as follows (in millions):

	Financing		Operating
2021	$	1.5	$	8.3
2022		3.0		16.9
2023		2.8		14.9
2024		2.7		13.9
2025		2.7		11.5
Thereafter		0.7		37.9
Total lease payments		13.4		103.4
Less: imputed interest		(0.5)		(10.8)
Present value of lease liabilities	$	12.9	$	92.6

Schedule of Maturities of Finance Lease Liabilities

	Financing		Operating
2021	$	1.5	$	8.3
2022		3.0		16.9
2023		2.8		14.9
2024		2.7		13.9
2025		2.7		11.5
Thereafter		0.7		37.9
Total lease payments		13.4		103.4
Less: imputed interest		(0.5)		(10.8)
Present value of lease liabilities	$	12.9	$	92.6

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Pension Plans (Tables)

6 Months Ended

Mar. 31, 2021

Pension Plans

Components of net periodic pension cost (benefit)

The components of net periodic pension cost (benefit) are as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Service cost	$	162	$	164	$	320	$	329
Interest cost		1,346		1,507		2,679		3,038
Expected return on plan assets		(2,686)		(2,946)		(5,335)		(5,892)
Amortization of actuarial loss		1,165		968		2,305		1,969
Administrative expenses		89		83		178		169
Net pension cost (benefit)	$	76	$	(224)	$	147	$	(387)

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Stockholders' Equity (Tables)

6 Months Ended

Mar. 31, 2021

Stockholders' Equity

Summary of assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted

The following tables include the assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted during fiscal 2019, 2020 and 2021:

	RSUs granted during fiscal 2021
Valuation Date	November 17, 2020
Grant date fair value per RSU	$57.71
Performance period begins	October 1, 2020
Performance period ends	September 30, 2023
Risk-free interest rate	0.2%
Expected volatility	50%
	RSUs granted during fiscal 2020
Valuation Date	September 17, 2020
Grant date fair value per RSU	$41.13
Performance period begins	October 1, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	0.1%
Expected volatility	52%

Summary of RSU activity

The following table summarizes our RSU activity:

	Unvested RSUs with Time-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	554,423	$	58.54
Granted	249,960		61.09
Vested	(230,975)		58.34
Forfeited	(116,969)		59.17
Unvested at March 31, 2021	456,439	$	59.88

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	137,770	$	61.40
Granted	—		—
Vested	(110,247)		61.40
Forfeited	(27,523)		61.40
Unvested at March 31, 2021	—	$	—

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	471,496	$	51.56
Granted	277,250		57.71
Vested	—		—
Forfeited	(20,542)		55.09
Unvested at March 31, 2021	728,204	$	53.80

Schedule of stock-based compensation expense related to stock-based awards

We recorded non-cash compensation expense related to stock-based awards as follows (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Cost of sales	$	771	$	743	$	1,372	$	1,282
Selling, general and administrative		5,701		4,639		9,779		8,577
	$	6,472	$	5,382	$	11,151	$	9,859

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Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities

Schedule of notional principal amounts of the outstanding derivative instruments

The following table shows the notional principal amounts of our outstanding derivative instruments as of March 31, 2021 and September 30, 2020 (in thousands):

	Notional Principal
	March 31, 2021		September 30, 2020
Instruments receiving hedge accounting treatment:
Foreign currency forwards	$	128,920	$	92,931
Interest rate swaps		595,000		595,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	4,538	$	4,298

Schedule of fair value of derivative financial instruments

The table below presents the fair value of our derivative financial instruments that qualify for hedge accounting as well as their classification in the condensed consolidated balance sheets (in thousands):

		Fair Value
	Balance Sheet Location	March 31, 2021		September 30, 2020
Asset derivatives:
Foreign currency forwards	Other current assets	$	2,177	$	1,398
Foreign currency forwards	Other assets		229		222
Total		$	2,406	$	1,620
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	6,350	$	4,557
Foreign currency forwards	Other noncurrent liabilities		1,344		866
Interest rate swaps	Other noncurrent liabilities		3,193		13,204
Total		$	10,887	$	18,627

Schedule of gains and losses recognized in other comprehensive income (loss) on derivative financial instruments designated as cash flow hedges

The tables below present gains and losses recognized in other comprehensive income (loss) related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings (in thousands):

	Three Months Ended
	March 31, 2021				March 31, 2020
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	434	$	295	$	1,438	$	1,306
Interest rate swaps		9,878		—		—		—
	$	10,312	$	295	$	1,438	$	1,306
	Six Months Ended
	March 31, 2021				March 31, 2020
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(665)	$	550	$	(177)	$	1,273
Interest rate swaps		11,036		—		—		—
Total	$	10,371	$	550	$	(177)	$	1,273

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Segment Information (Tables)

6 Months Ended

Mar. 31, 2021

Segment Information

Schedule of business segment financial data

Business segment financial data is as follows (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Sales:
Cubic Transportation Systems	$	217.4	$	197.6	$	414.5	$	386.2
Cubic Mission and Performance Solutions		126.0		123.9		247.7		264.1
Total sales	$	343.4	$	321.5	$	662.2	$	650.3
Operating income (loss):
Cubic Transportation Systems	$	33.0	$	12.6	$	64.7	$	26.9
Cubic Mission and Performance Solutions		(22.3)		(25.7)		(38.8)		(34.3)
Unallocated corporate expenses		(36.3)		(16.8)		(50.2)		(29.0)
Total operating loss	$	(25.6)	$	(29.9)	$	(24.3)	$	(36.4)
Depreciation and amortization:
Cubic Transportation Systems	$	7.5	$	7.4	$	15.0	$	14.5
Cubic Mission and Performance Solutions		15.2		15.1		30.3		24.3
Corporate		2.3		0.9		4.4		1.6
Total depreciation and amortization	$	25.0	$	23.4	$	49.7	$	40.4

Schedule of Disaggregation of Total Net Sales

Disaggregation of Total Net Sales: We disaggregate our sales from contracts with customers by end customer, contract type, deliverable type and revenue recognition method for each of our segments, as we believe these factors can affect the nature, amount, timing and uncertainty of our revenue and cash flows.

Sales by Geographic Region (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
United States	$	123.6	$	83.8	$	207.4	$	235.5	$	164.1	$	399.6
United Kingdom		54.3		7.6		61.9		102.2		15.6		117.8
Australia		32.3		9.5		41.8		61.4		19.1		80.5
Far East/Middle East		0.5		16.3		16.8		1.5		32.1		33.6
Other		6.7		8.8		15.5		13.9		16.8		30.7
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
United States	$	111.0	$	61.4	$	172.4	$	207.7	$	140.4	$	348.1
United Kingdom		49.9		5.1		55.0		97.5		9.6		107.1
Australia		30.1		7.2		37.3		66.5		15.0		81.5
Far East/Middle East		0.6		35.4		36.0		1.9		72.1		74.0
Other		6.0		14.8		20.8		12.6		27.0		39.6
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Sales by End Customer: We are the prime contractor for the vast majority of our sales. The table below presents total net sales disaggregated by end customer (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	115.4	$	82.5	$	197.9	$	223.0	$	161.8	$	384.8
Other		102.0		43.5		145.5		191.5		85.9		277.4
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	104.0	$	61.2	$	165.2	$	197.5	$	143.2	$	340.7
Other		93.6		62.7		156.3		188.7		120.9		309.6
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Sales by Contract Type: The vast majority of our contracts are fixed-price type contracts. Sales included in “Other” contract types represent cost-plus and time-and-material type contracts.

On a fixed-price type contract, we agree to perform the contractual statement of work for a predetermined sales price. Certain of our fixed-price contracts include compensation for bonuses, transactional variable based fees or other similar provisions. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the applicable contract’s fee arrangement up to funding levels that are predetermined by the customer. On a time-and-material type contract, we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. The table below presents total net sales disaggregated by contract type (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Fixed Price	$	214.6	$	107.2	$	321.8	$	409.0	$	209.0	$	618.0
Other		2.8		18.8		21.6		5.5		38.7		44.2
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Fixed Price	$	194.8	$	107.3	$	302.1	$	379.3	$	232.1	$	611.4
Other		2.8		16.6		19.4		6.9		32.0		38.9
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Sales by Deliverable Type: The table below presents total net sales disaggregated by the type of deliverable, which is determined by us at the performance obligation level (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Product	$	113.1	$	87.3	$	200.4	$	213.2	$	168.7	$	381.9
Service		104.3		38.7		143.0		201.3		79.0		280.3
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Product	$	99.7	$	87.8	$	187.5	$	193.1	$	195.0	$	388.1
Service		97.9		36.1		134.0		193.1		69.1		262.2
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

Revenue Recognition Method: Sales recognized at a point in time are typically for standard goods with a short production cycle and are recognized when the customer obtains control, which is generally upon delivery and acceptance. Sales for services and for products with a long production cycle, which often include significant customization and development, are recognized over time. The table below presents total net sales disaggregated based on the revenue recognition method applied (in millions):

	Three months ended March 31, 2021						Six months ended March 31, 2021
	CTS		CMPS		Total		CTS		CMPS		Total
Point in Time	$	20.8	$	20.9	$	41.7	$	39.6	$	45.9	$	85.5
Over Time		196.6		105.1		301.7		374.9		201.8		576.7
Total sales	$	217.4	$	126.0	$	343.4	$	414.5	$	247.7	$	662.2
	Three months ended March 31, 2020						Six months ended March 31, 2020
	CTS		CMPS		Total		CTS		CMPS		Total
Point in Time	$	28.1	$	15.0	$	43.1	$	45.8	$	54.4	$	100.2
Over Time		169.5		108.9		278.4		340.4		209.7		550.1
Total sales	$	197.6	$	123.9	$	321.5	$	386.2	$	264.1	$	650.3

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Restructuring Costs (Tables)

6 Months Ended

Mar. 31, 2021

Restructuring Costs

Schedule of restructuring charges incurred

Restructuring charges incurred by our business segments were as follows (in millions):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Restructuring costs:
Cubic Transportation Systems	$	1.6		0.1	$	1.8	$	0.5
Cubic Mission and Performance Solutions		0.8		0.5		3.9		0.6
Unallocated corporate expenses		5.4		3.2		6.2		4.3
Total restructuring costs	$	7.8	$	3.8	$	11.9	$	5.4

Schedule of rollforward of restructuring liability

The following table presents a rollforward of our restructuring liability as of March 31, 2021, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheet (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of October 1, 2020	$	5.2	$	0.8
Accrued costs		6.9		5.0
Cash payments		(8.3)		(2.5)
Balance as of March 31, 2021	$	3.8	$	3.3

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Basis for Presentation (Details)	Mar. 30, 2021 $ / shares
Veritas Capital and Evergreen Coast Capital Corporation
Recent Accounting Pronouncements
Cash per share to be received (in dollars per share)	$ 75.00

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Business Acquisitions - Equity Method Investment (Details) - USD ($) $ in Millions		6 Months Ended	15 Months Ended
	Jan. 03, 2020	Jan. 03, 2020	Jan. 03, 2020	Sep. 30, 2019	Jun. 27, 2019	Sep. 30, 2018
Delerrok Inc.
Equity method investment
Purchase price of capital stock				$ 8.3		$ 8.3
Ownership percentage				17.50%		17.50%
Remaining outstanding shares purchased (as a percent)	82.50%	82.50%	82.50%
Fair value of consideration transferred	$ 45.1
Cash consideration paid	36.8		$ 43.5
Contingent consideration	$ 1.6	$ 1.6	$ 1.6
PIXIA Corp
Equity method investment
Purchase price of capital stock					$ 50.0
Ownership percentage					20.00%
Remaining outstanding shares purchased (as a percent)	80.00%	80.00%	80.00%
Fair value of consideration transferred	$ 197.8	$ 245.2
Cash consideration paid		247.8
Dividend from equity method investment		2.0
Income (loss) from equity method investments		$ (0.6)

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Business Acquisitions - Consolidated Business Acquisitions (Details) - USD ($) $ in Thousands			3 Months Ended		6 Months Ended
	Jan. 03, 2020	Jun. 27, 2019	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020	Jan. 03, 2020	Sep. 30, 2020
Purchase price allocation
Goodwill			$ 788,027		$ 788,027			$ 784,882
Sales and results of operations
Sales			343,408	$ 321,482	662,202	$ 650,321
Operating income (loss)			(25,555)	(29,934)	(24,258)	(36,417)
Net income (loss) after taxes			(36,017)	(39,123)	(49,012)	(59,698)
Gain from changes in fair value of contingent consideration			1,260	(1,473)	684	(4,478)
PIXIA Corp
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred	$ 197,800						$ 245,200
Purchase price allocation
Accounts receivable, prepaids and other assets		$ 3,800
Deferred tax liability		(17,600)
Other net assets acquired (liabilities assumed)		(1,800)
Net identifiable assets acquired		72,200
Goodwill		173,000
Net assets acquired		$ 245,200
Weighted average useful life of intangible assets		4 years
Sales and results of operations
Sales			6,200	1,100	8,500	1,100
Operating income (loss)			(5,600)	(10,000)	(13,600)	(10,000)
Net income (loss) after taxes			(5,600)	(10,000)	(13,600)	(10,000)
Amortization			7,200	7,200	14,300	7,200
Acquisition-related expenses (income)			100	2,000	600	2,000
Estimated amortization expense related to the intangible assets
2021								28,700
2022								12,700
2023								7,300
2024								7,300
2025								7,300
Thereafter								3,200
PIXIA Corp | Trade names
Purchase price allocation
Indefinite intangible assets		$ 5,700
PIXIA Corp | Backlog
Purchase price allocation
Amortizable intangible assets		42,500
PIXIA Corp | Customer relationships
Purchase price allocation
Amortizable intangible assets		25,500
PIXIA Corp | Technology
Purchase price allocation
Amortizable intangible assets		$ 14,100
Delerrok Inc.
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred	45,100
Purchase price allocation
Accounts receivable	900						900
Deferred tax liability	(1,700)						(1,700)
Other net assets acquired (liabilities assumed)	(300)						(300)
Net identifiable assets acquired	14,700						14,700
Goodwill	30,400						30,400
Net assets acquired	$ 45,100						45,100
Weighted average useful life of intangible assets	10 years
Sales and results of operations
Sales			900	700	1,200	700
Operating income (loss)			(1,100)	(1,100)	(2,200)	(1,100)
Net income (loss) after taxes			(1,100)	(1,100)	(2,200)	(1,100)
Amortization			400	400	900	400
Acquisition-related expenses (income)			$ (200)	$ 700	200	$ 700
Gain from changes in fair value of contingent consideration					$ (900)
Estimated amortization expense related to the intangible assets
2021								1,700
2022								1,600
2023								1,600
2024								1,600
2025								1,600
Thereafter								$ 6,400
Delerrok Inc. | Trade names
Purchase price allocation
Indefinite intangible assets	$ 900						900
Delerrok Inc. | Technology
Purchase price allocation
Amortizable intangible assets	$ 14,900						$ 14,900

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Business Acquisitions - Goodwill and Pro forma information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Unaudited pro forma information
Net sales	$ 343,400	$ 321,500	$ 662,200	$ 654,600
Net loss	(36,000)	$ (39,300)	(49,000)	$ (68,100)
Adjustments made for transaction expenses			0
Changes in the carrying amount of goodwill
Net balances at the beginning of the period			784,882
Adjustments			(260)
Foreign currency exchange rate changes			3,405
Net balance at the end of the period	788,027		788,027
Impairment of goodwill			0
Cubic Transportation Systems
Changes in the carrying amount of goodwill
Net balances at the beginning of the period			287,668
Adjustments			(260)
Foreign currency exchange rate changes			2,541
Net balance at the end of the period	289,949		289,949
Cubic Mission Performance Solutions
Changes in the carrying amount of goodwill
Net balances at the beginning of the period			497,214
Foreign currency exchange rate changes			864
Net balance at the end of the period	$ 498,078		$ 498,078

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Variable Interest Entities - Narrative (Details) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020 USD ($)	Mar. 31, 2021 USD ($) item	Mar. 31, 2020 USD ($)	Mar. 31, 2021 USD ($) item	Mar. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Mar. 31, 2018 USD ($)
Revenue recognition
Termination costs			$ (16,090)		$ (16,090)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue recognition
Contract term		12 months		12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue recognition
Contract term		24 months		24 months
Revolving Credit Agreement
Revenue recognition
Maximum borrowing capacity under credit agreement							$ 800,000
Design and Build Phase | Boston OpCo Amended Credit Agreement | Long-term Debt Facility | LIBOR | Minimum
Revenue recognition
Variable interest rate (as a percent)				1.75%
Design and Build Phase | Boston OpCo Amended Credit Agreement | Long-term Debt Facility | LIBOR | Maximum
Revenue recognition
Variable interest rate (as a percent)				2.00%
MBTA | Design and Build Phase | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01
Revenue recognition
Contract term		4 years		4 years
MBTA | Operate and Maintain Phase | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-01
Revenue recognition
Contract term		12 years		12 years
P3 Joint Venture
Revenue recognition
Maximum exposure to loss		$ 2,900		$ 2,900
OpCo. | Interest Rate Swaps | Not Designated as Hedging Instrument
Revenue recognition
Notional principal outstanding derivative instruments		233,500		233,500		$ 194,000
Unrealized gain (loss) on derivative		15,100	$ 15,800	18,300	$ 11,500
OpCo. | Interest Rate Swaps | Not Designated as Hedging Instrument | Other noncurrent liabilities
Revenue recognition
Fair value interest rate swaps		12,500		12,500		5,900
OpCo. | P3 Credit Agreement | Revolving Credit Agreement
Revenue recognition
Maximum borrowing capacity under credit agreement		15,800		15,800
OpCo. | P3 Credit Agreement | Long-term Debt Facility
Revenue recognition
Maximum borrowing capacity under credit agreement		$ 421,600		$ 421,600
OpCo. | Boston OpCo Amended Credit Agreement
Revenue recognition
Number of long-term debt facilities | item		2		2
Debt issuance and modification costs						9,200
OpCo. | Boston OpCo Amended Credit Agreement | Interest Rate Swaps
Revenue recognition
Termination costs	$ 34,400
OpCo. | Boston OpCo Amended Credit Agreement | Long-term Debt Facility
Revenue recognition
Unamortized deferred financing costs		$ 16,700		$ 16,700		$ 17,200
OpCo. | Original MBTA Contract
Revenue recognition
Expected contract revenue		175,800		175,800
OpCo. | Original MBTA Contract | Design and Build Phase
Revenue recognition
Expected contract revenue		43,500		43,500
OpCo. | Original MBTA Contract | Operate and Maintain Phase
Revenue recognition
Expected contract revenue		618,000		618,000
OpCo. | MBTA
Revenue recognition
Expected contract revenue		$ 596,400		$ 596,400
Cubic Transportation Systems | HoldCo.
Revenue recognition
Ownership percentage		10.00%		10.00%
Cubic Transportation Systems | HoldCo. | Letter of credit agreement
Revenue recognition
Maximum borrowing capacity under credit agreement								$ 2,900
Borrowings outstanding under credit agreement		$ 0		$ 0
John Laing | HoldCo.
Revenue recognition
Ownership percentage		90.00%		90.00%
John Laing | HoldCo. | Equity Bridge Loan
Revenue recognition
Loan amount								$ 26,200

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Variable Interest Entities - Net assets and liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020	Sep. 30, 2020
ASSETS
Other noncurrent assets	$ 25,424		$ 25,424		$ 21,759
Total assets	2,401,458		2,401,458		2,324,221
LIABILITIES AND SHAREHOLDERS' EQUITY
Total Cubic equity	927,754		927,754		960,777
Total liabilities and shareholders' equity	2,401,458		2,401,458		2,324,221
Revenue	343,408	$ 321,482	662,202	$ 650,321
Operating income	(25,555)	(29,934)	(24,258)	(36,417)
Other income (expense), net	14,543	(19,664)	15,839	(19,791)
VIE
ASSETS
Cash	1,546		1,546		1,065
Restricted cash	7,322		7,322		1,822
Other current assets	18		18		31
Long-term contracts financing receivables	257,185		257,185		221,245
Other noncurrent assets	12,454		12,454
Total assets	278,525		278,525		224,163
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable	35		35		49
Accrued compensation and other current liabilities	109		109		85
Due to Cubic	17,262		17,262		27,259
Other noncurrent liabilities					5,890
Long-term debt	208,594		208,594		163,348
Total liabilities	226,000		226,000		196,631
Total Cubic equity	2,628		2,628		129
Noncontrolling interests	49,897		49,897		27,403
Total liabilities and shareholders' equity	278,525		278,525		$ 224,163
Revenue	4,616	1,802	8,637	3,047
Operating income	4,184	1,516	7,901	2,488
Other income (expense), net	15,091	(15,819)	18,343	(12,748)
Interest income	1,487	1,655	2,860	3,208
Interest Expense	$ (2,122)	$ (1,995)	$ (4,111)	$ (3,154)

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Revenue Recognition (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating income (loss)	$ (25,555)	$ (29,934)	$ (24,258)	$ (36,417)
Net income (loss) from continuing operations	(19,240)	(52,430)	(26,518)	(68,431)
Net income (loss) from continuing operations attributable to Cubic	$ (36,017)	$ (39,252)	$ (49,012)	$ (59,243)
Diluted income (loss) per share attributable to Cubic	$ (1.14)	$ (1.25)	$ (1.55)	$ (1.91)
ASU 2014-09 | ASC 606
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating income (loss)	$ 222	$ (5,155)	$ 606	$ (11,312)
Net income (loss) from continuing operations	402	(5,522)	644	(11,304)
Net income (loss) from continuing operations attributable to Cubic	$ 263	$ (5,522)	$ 483	$ (11,304)
Diluted income (loss) per share attributable to Cubic	$ 0.01	$ (0.18)	$ 0.02	$ (0.36)

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Revenue Recognition - Backlog (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining performance obligation	$ 3,626	$ 3,667
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining performance obligation (in percent)	30.00%
Contract term	12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining performance obligation (in percent)	50.00%
Contract term	24 months

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Revenue Recognition - Accounts Receivable (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2021	Mar. 31, 2020	Sep. 30, 2020
Accounts receivable
Billed	$ 109,604	$ 109,604		$ 161,473
Allowance for doubtful accounts	(1,450)	(1,450)		(1,498)
Accounts receivable - net	108,154	108,154		159,975
Trade receivables sold to a financial institution		0		18,400
Receipt of withheld proceeds from sale of trade receivables	641	2,483	$ 5,521
U.S. federal government contracts
Accounts receivable
Amounts billed	$ 21,800	$ 21,800		$ 82,200

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Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2021	Sep. 30, 2020
Contract Assets and Liabilities
Contract assets	$ 321,545	$ 268,773
Contract liabilities	74,779	$ 75,546
Increase (decrease) in contract asset	52,800
Impairment losses related to contract assets	0
Increase (decrease) in contract liabilities	800
Revenue recognized included in contract liability	$ 35,700

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Net Income (Loss) Per Share (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Weighted-average number of shares outstanding
Weighted average shares - basic	31,633	31,296	31,598	31,284
Weighted average shares - diluted	31,633	31,296	31,598	31,284
Number of anti-dilutive securities	1,236	1,246	1,174	1,099

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Balance Sheet Details (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Sep. 30, 2020
Restricted Cash
Restricted cash	$ 35,900	$ 27,300
Inventories
Finished products	17,941	14,838
Work in process and inventoried costs under long-term contracts	67,164	73,076
Materials and purchased parts	47,698	39,337
Net inventories	132,803	127,251
Costs incurred outside the scope of work or in advance of a contract award	8,300	5,300
Property, Plant and Equipment
Accumulated depreciation and amortization	(208,558)	(189,394)
Property, plant and equipment - net	168,783	166,301
Deferred Compensation Plan
Deferred compensation	8,200	9,600
Carrying value of Rabbi trust to fund deferred compensation liabilities	7,400	6,800
Land and land improvements
Property, Plant and Equipment
Property, plant and equipment, Gross	7,213	7,423
Buildings and improvements
Property, Plant and Equipment
Property, plant and equipment, Gross	50,858	49,716
Machinery and other equipment
Property, Plant and Equipment
Property, plant and equipment, Gross	153,418	132,962
Software
Property, Plant and Equipment
Property, plant and equipment, Gross	126,446	121,890
Leasehold improvements
Property, Plant and Equipment
Property, plant and equipment, Gross	23,260	22,295
Construction and internal-use software development in progress
Property, Plant and Equipment
Property, plant and equipment, Gross	$ 16,146	$ 21,409

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Fair Value of Financial Instruments - Recurring Basis (Details) - Assets and liabilities measured at fair value - USD ($) $ in Thousands	Mar. 31, 2021	Sep. 30, 2020
Assets
Current derivative assets	$ 2,177	$ 1,398
Noncurrent derivative assets	229	222
Total assets measured at fair value	2,406	1,620
Liabilities
Current derivative liabilities	6,350	4,557
Noncurrent derivative liabilities	4,537	14,070
Total liabilities measured at fair value	20,903	29,245
Deltenna
Liabilities
Contingent consideration to seller	3,205	3,004
Shield Aviation
Liabilities
Contingent consideration to seller	6,811	5,566
H4 Global
Liabilities
Contingent consideration to seller		1,148
Delerrok Inc.
Liabilities
Contingent consideration to seller		900
Level 2
Assets
Current derivative assets	2,177	1,398
Noncurrent derivative assets	229	222
Total assets measured at fair value	2,406	1,620
Liabilities
Current derivative liabilities	6,350	4,557
Noncurrent derivative liabilities	4,537	14,070
Total liabilities measured at fair value	10,887	18,627
Level 3
Liabilities
Total liabilities measured at fair value	10,016	10,618
Level 3 | Deltenna
Liabilities
Contingent consideration to seller	3,205	3,004
Level 3 | Shield Aviation
Liabilities
Contingent consideration to seller	$ 6,811	5,566
Level 3 | H4 Global
Liabilities
Contingent consideration to seller		1,148
Level 3 | Delerrok Inc.
Liabilities
Contingent consideration to seller		$ 900

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Fair Value of Financial Instruments - Contingent Consideration (Details) $ in Thousands, item in Millions		6 Months Ended	12 Months Ended
	Jan. 31, 2021 USD ($)	Mar. 31, 2021 USD ($) item	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($)	Jan. 03, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)
Assets and liabilities measured at fair value on a recurring basis
Assets		$ 2,401,458	$ 2,324,221
Franklin Blackhorse, L.P
Assets and liabilities measured at fair value on a recurring basis
Investment			1,200			$ 5,000
Franklin Blackhorse, L.P | Other Assets
Assets and liabilities measured at fair value on a recurring basis
Assets		7,300	5,600
Franklin Blackhorse, L.P | Forecast
Assets and liabilities measured at fair value on a recurring basis
Investment				$ 1,400
Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		10,618
Cash paid to seller		(1,286)
Total remeasurement (gain) loss recognized in earnings		684
Balance at the ending period		10,016	10,618
H4 Global
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals	$ 1,300
Contingent consideration		0
H4 Global | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		1,148
Cash paid to seller		(1,286)
Total remeasurement (gain) loss recognized in earnings		138
Balance at the ending period			1,148
Deltenna | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		3,004
Total remeasurement (gain) loss recognized in earnings		201
Balance at the ending period		3,205	$ 3,004
Deltenna | Maximum
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals		$ 7,400
Deltenna | Volatility for underlying revenue metrics
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		52	52
Deltenna | Discount Rate
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		10.5	10.5
Shield Aviation
Assets and liabilities measured at fair value on a recurring basis
Determination of fair value of contingent consideration | item		1
Volatility for underlying earnings metrics used in determination of fair value of contingent consideration		26.00%	31.00%
Revenue risk adjustment used in determination of fair value of contingent consideration		13.00%	16.00%
Shield Aviation | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		$ 5,566
Total remeasurement (gain) loss recognized in earnings		1,245
Balance at the ending period		6,811	$ 5,566
Shield Aviation | Maximum
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals		$ 10,000
Shield Aviation | Discount Rate
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		5.3	5.7
Nuvotronics
Assets and liabilities measured at fair value on a recurring basis
Determination of fair value of contingent consideration | item		1
Period for contingent consideration contracts		12 months
Contingent consideration, fair value		$ 0
Nuvotronics | Maximum
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals		8,000
Delerrok Inc.
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration					$ 1,600
Investment						$ 8,300	$ 8,300
Contingent consideration, fair value		0
Delerrok Inc. | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		900
Total remeasurement (gain) loss recognized in earnings		$ (900)
Balance at the ending period			$ 900

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Financing Arrangements - Credit Facility (Details) £ in Millions, $ in Millions	Apr. 01, 2020 USD ($)	Mar. 27, 2020 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2021 GBP (£)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)
Debt Instrument [Line Items]
Letters of Credit and bank guarantees outstanding			$ 101.1
Self-insurance liabilities			7.4		$ 5.1
United Kingdom
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement			20.7	£ 15.0
Borrowings outstanding under credit agreement			0.0
Cash on deposit as collateral			28.6
Performance guarantee | Letter of credit agreement
Debt Instrument [Line Items]
Letters of credit outstanding			97.4
Letters of credit primarily for self-insured liabilities
Debt Instrument [Line Items]
Letters of credit outstanding			3.7
Fair value of instruments			0.0
Revolving Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement						$ 800.0
Other Credit Facility
Debt Instrument [Line Items]
Letters of credit outstanding			$ 6.6
Credit Facility
Debt Instrument [Line Items]
Loan amount	$ 500.0
Weighted average interest rate on outstanding borrowings (as a percent)			1.92%	1.92%
Debt issuance costs incurred		$ 3.4
Unamortized debt issuance costs			$ 4.9
Credit Facility | LIBOR
Debt Instrument [Line Items]
Variable interest rate (as a percent)	2.49%
Credit Facility | LIBOR | Minimum
Debt Instrument [Line Items]
Variable interest rate (as a percent)		1.00%
Credit Facility | LIBOR | Maximum
Debt Instrument [Line Items]
Variable interest rate (as a percent)		2.00%
Credit Facility | Term Loan
Debt Instrument [Line Items]
Loan amount		$ 450.0
Borrowings under term loan			438.8
Credit Facility | Revolving Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement		$ 850.0
Borrowings outstanding under credit agreement			279.0
Letters of credit outstanding			94.5
Available amount under line of credit			$ 476.5

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Leases - Lease Portfolio (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Sep. 30, 2020
Leases
Operating Lease Right-of-use assets	$ 83,076	$ 87,167
Operating Lease, Short-term lease liability	15,600	16,800
Operating Lease Long-term lease liability	$ 76,971	$ 80,568
Operating Lease Weighted average remaining lease term	7 years 2 months 12 days	7 years 7 months 6 days
Operating Lease Weighted average discount rate	3.00%	3.00%
Finance Lease, Right-of-use assets	$ 12,766	$ 500
Finance Lease, Short-term lease liability	2,900	200
Finance Lease, Long-term lease liability	$ 10,002	$ 395
Finance Lease, Weighted average remaining lease term	4 years 7 months 6 days	2 years 4 months 24 days
Finance Lease, Weighted average discount rate	1.80%	1.70%

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Leases - Lease Expense (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Leases
Operating lease expense	$ 4.9	$ 4.8	$ 9.8	$ 9.4
Finance lease expense Amortization of right-of-use asset	0.7		0.8
Finance lease expense Interest on lease liabilities	0.1		0.1
Short-term lease expense	0.1	0.1	0.1	0.1
Variable lease expense	0.5	0.7	1.4	1.8
Total lease expense	$ 6.3	$ 5.6	$ 12.2	$ 11.3

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Leases - Other Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Leases
Operating lease - cash paid for fixed payments	$ 5,100	$ 4,600	$ 9,900	$ 9,100
Finance lease - cash paid for finance lease liabilities	673		691
Right-of-use assets obtained in exchange for new finance lease liabilities	400		13,000
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 2,800	$ 8,400	$ 3,000	$ 18,000

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Leases - Maturities of Lease Liabilities (Details) $ in Millions	Mar. 31, 2021 USD ($)	Sep. 30, 2019 building
Financing
2021	$ 1.5
2022	3.0
2023	2.8
2024	2.7
2025	2.7
Thereafter	0.7
Total lease payments	13.4
Less: imputed interest	(0.5)
Present value of financing lease liabilities	12.9
Operating
2021	8.3
2022	16.9
2023	14.9
2024	13.9
2025	11.5
Thereafter	37.9
Total lease payments	103.4
Less: imputed interest	(10.8)
Present value of operating lease liabilities	$ 92.6
Number of buildings | building		2
Lease term		5 years

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Pension Plans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Components of net periodic pension cost (benefit)
Service cost	$ 162	$ 164	$ 320	$ 329
Interest cost	1,346	1,507	2,679	3,038
Expected return on plan assets	(2,686)	(2,946)	(5,335)	(5,892)
Amortization of actuarial loss	1,165	968	2,305	1,969
Administrative expenses	89	83	178	169
Net pension cost (benefit)	$ 76	$ (224)	$ 147	$ (387)

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Stockholders' Equity - Narrative (Details)	6 Months Ended	12 Months Ended
	Mar. 31, 2021 item shares	Sep. 30, 2019 item
Stockholders' Equity
Retirement age for participants	60 years
Notice period	1 year
Long term equity incentive program, service period (in years)	10 years
RSUs
Stockholders' Equity
Number of shares of common stock that each award holder has the contingent right to receive	1
Time-based RSUs
Stockholders' Equity
Number of equal installments for vesting of stock awards | item	3	4
Expected awards vested (in shares)	376,592
Performance-based RSUs
Stockholders' Equity
Vesting period	3 years
Performance and market-based RSUs
Stockholders' Equity
Number of shares of common stock that each award holder has the contingent right to receive	1.25
Vesting period	3 years
Maximum TSR multiplier rate	100.00%
Expected awards vested (in shares)	395,980
Performance and market-based RSUs | Maximum
Stockholders' Equity
Increase (decrease) in multiplier based on performance	25.00%
Performance and market-based RSUs | Minimum
Stockholders' Equity
Decrease in multiplier based on performance	25.00%

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Stockholders' Equity - Assumption used for RSU activity (Details) - RSUs - $ / shares	Nov. 17, 2020	Sep. 17, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value units granted (per share)	$ 57.71	$ 41.13
Risk-free interest rate(as a percent)	0.20%	0.10%
Expected volatility (as a percent)	50.00%	52.00%

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Stockholders' Equity - RSU activity (Details)	6 Months Ended
	Mar. 31, 2021 $ / shares shares
Time-based RSUs
Number of Shares
Balance unvested at the beginning of the period (in shares) | shares	554,423
Granted (in shares) | shares	249,960
Vested (in shares) | shares	(230,975)
Forfeited (in shares) | shares	(116,969)
Balance unvested at the end of the period (in shares) | shares	456,439
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 58.54
Granted (in dollars per share) | $ / shares	61.09
Vested (in dollars per share) | $ / shares	58.34
Forfeited (in dollars per share) | $ / shares	59.17
Balance unvested at the end of the period (in dollars per share) | $ / shares	$ 59.88
Performance-based RSUs
Number of Shares
Balance unvested at the beginning of the period (in shares) | shares	137,770
Vested (in shares) | shares	(110,247)
Forfeited (in shares) | shares	(27,523)
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 61.40
Vested (in dollars per share) | $ / shares	61.40
Forfeited (in dollars per share) | $ / shares	$ 61.40
Performance and market-based RSUs
Number of Shares
Balance unvested at the beginning of the period (in shares) | shares	471,496
Granted (in shares) | shares	277,250
Forfeited (in shares) | shares	(20,542)
Balance unvested at the end of the period (in shares) | shares	728,204
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 51.56
Granted (in dollars per share) | $ / shares	57.71
Forfeited (in dollars per share) | $ / shares	55.09
Balance unvested at the end of the period (in dollars per share) | $ / shares	$ 53.80

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Stockholders' Equity - Non-cash compensation expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020	Sep. 30, 2020
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	$ 6,472	$ 5,382	$ 11,151	$ 9,859
Estimated forfeiture rate (as a percent)			12.50%		12.50%
Cost of sales
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	771	743	$ 1,372	1,282
Selling, general and administrative
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	5,701	$ 4,639	9,779	$ 8,577
RSUs
Stockholders' Equity
Unrecognized compensation cost related to unvested awards	$ 46,100		46,100
Aggregate fair value of awards			$ 45,800
Weighted-average period of recognition			1 year 4 months 24 days

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Income Taxes
Effective tax rate (as a percent)	22.00%	27.00%	35.00%	17.00%
Income tax provision (benefit)	$ 3,440	$ (19,784)	$ 6,929	$ (13,538)

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Derivative Instruments and Hedging Activities - Notional principal amounts (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021 USD ($) building	Mar. 31, 2020 USD ($)	Mar. 31, 2021 USD ($) building	Mar. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)
Two Buildings on Existing Campus
Derivative Instruments and Hedging Activities
Unrealized gain (loss) on derivative	$ 2,600	$ (5,000)	$ 2,700	$ (3,600)
Number of building under lease | building	2		2
Maximum
Derivative Instruments and Hedging Activities
Term of derivative contract			5 years
Instruments receiving hedge accounting treatment | Foreign currency forwards
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	$ 128,920		$ 128,920		$ 92,931
Instruments receiving hedge accounting treatment | Interest Rate Swaps
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	595,000		595,000		595,000
Instruments receiving hedge accounting treatment | Interest Rate Swaps | Credit Facility
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	500,000		500,000		500,000
Unrealized gain (loss) on derivative	7,300		8,300
Instruments receiving hedge accounting treatment | Interest Rate Swaps | Two Buildings on Existing Campus
Derivative Instruments and Hedging Activities
Notional principal amount	95,000		95,000		95,000
Instruments not receiving hedge accounting treatment | Foreign currency forwards
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	4,538		4,538		4,298
Notional principal outstanding derivative instruments designed to manage exposure	3,500		3,500		$ 4,300
Unrealized gain (loss) on derivative	$ (200)	$ (2,600)	$ 600	$ (1,800)

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Derivative Instruments and Hedging Activities - Fair value of derivative financial instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Sep. 30, 2020
Derivative Instruments and Hedging Activities
Asset derivatives	$ 2,406	$ 1,620
Liability derivatives	10,887	18,627
Foreign currency forwards | Other current assets
Derivative Instruments and Hedging Activities
Asset derivatives	2,177	1,398
Foreign currency forwards | Other assets
Derivative Instruments and Hedging Activities
Asset derivatives	229	222
Foreign currency forwards | Accrued compensation and current liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	6,350	4,557
Foreign currency forwards | Other noncurrent liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	1,344	866
Interest Rate Swaps | Other noncurrent liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	$ 3,193	$ 13,204

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Derivative Instruments and Hedging Activities - Gains and losses recognized (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Derivative instruments and hedging activities
Gains (losses) recognized in OCI	$ 10,312	$ 1,438	$ 10,371	$ (177)
Gains (losses) reclassified into earnings	295	1,306	550	1,273
Estimated unrealized net gains from cash flow hedges which are expected to be reclassified into earnings in the next twelve months	3,000		3,000
Foreign currency forwards
Derivative instruments and hedging activities
Gains (losses) recognized in OCI	434	1,438	(665)	(177)
Gains (losses) reclassified into earnings	295	1,306	550	1,273
Realized gain (losses) on derivative	200	$ 2,700		$ 2,800
Interest Rate Swaps
Derivative instruments and hedging activities
Gains (losses) recognized in OCI	$ 9,878		$ 11,036

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Segment Information - Business Segment Financial Data (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Segment Information
Sales	$ 343,408	$ 321,482	$ 662,202	$ 650,321
Operating income (loss)	(25,555)	(29,934)	(24,258)	(36,417)
Depreciation and amortization	25,055	23,414	49,716	40,364
Cubic Transportation Systems
Segment Information
Sales	217,400	197,600	414,500	386,200
Operating income (loss)	33,000	12,600	64,700	26,900
Depreciation and amortization	7,500	7,400	15,000	14,500
Cubic Mission and Performance Solutions
Segment Information
Sales	126,000	123,900	247,700	264,100
Operating income (loss)	(22,300)	(25,700)	(38,800)	(34,300)
Depreciation and amortization	15,200	15,100	30,300	24,300
Corporate
Segment Information
Depreciation and amortization	2,300	900	4,400	1,600
Unallocated corporate expenses
Segment Information
Operating income (loss)	$ (36,300)	$ (16,800)	$ (50,200)	$ (29,000)

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Segment Information - Sales by Geographical Region (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue
Sales	$ 343,408	$ 321,482	$ 662,202	$ 650,321
United States
Disaggregation of Revenue
Sales	207,400	172,400	399,600	348,100
United Kingdom
Disaggregation of Revenue
Sales	61,900	55,000	117,800	107,100
Australia
Disaggregation of Revenue
Sales	41,800	37,300	80,500	81,500
Far East/Middle East
Disaggregation of Revenue
Sales	16,800	36,000	33,600	74,000
Other foreign countries
Disaggregation of Revenue
Sales	15,500	20,800	30,700	39,600
Cubic Transportation Systems
Disaggregation of Revenue
Sales	217,400	197,600	414,500	386,200
Cubic Transportation Systems | United States
Disaggregation of Revenue
Sales	123,600	111,000	235,500	207,700
Cubic Transportation Systems | United Kingdom
Disaggregation of Revenue
Sales	54,300	49,900	102,200	97,500
Cubic Transportation Systems | Australia
Disaggregation of Revenue
Sales	32,300	30,100	61,400	66,500
Cubic Transportation Systems | Far East/Middle East
Disaggregation of Revenue
Sales	500	600	1,500	1,900
Cubic Transportation Systems | Other foreign countries
Disaggregation of Revenue
Sales	6,700	6,000	13,900	12,600
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	126,000	123,900	247,700	264,100
Cubic Mission and Performance Solutions | United States
Disaggregation of Revenue
Sales	83,800	61,400	164,100	140,400
Cubic Mission and Performance Solutions | United Kingdom
Disaggregation of Revenue
Sales	7,600	5,100	15,600	9,600
Cubic Mission and Performance Solutions | Australia
Disaggregation of Revenue
Sales	9,500	7,200	19,100	15,000
Cubic Mission and Performance Solutions | Far East/Middle East
Disaggregation of Revenue
Sales	16,300	35,400	32,100	72,100
Cubic Mission and Performance Solutions | Other foreign countries
Disaggregation of Revenue
Sales	$ 8,800	$ 14,800	$ 16,800	$ 27,000

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Segment Information - Sales by End Customer (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue
Sales	$ 343,408	$ 321,482	$ 662,202	$ 650,321
U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	197,900	165,200	384,800	340,700
Other
Disaggregation of Revenue
Sales	145,500	156,300	277,400	309,600
Cubic Transportation Systems
Disaggregation of Revenue
Sales	217,400	197,600	414,500	386,200
Cubic Transportation Systems | U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	115,400	104,000	223,000	197,500
Cubic Transportation Systems | Other
Disaggregation of Revenue
Sales	102,000	93,600	191,500	188,700
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	126,000	123,900	247,700	264,100
Cubic Mission and Performance Solutions | U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	82,500	61,200	161,800	143,200
Cubic Mission and Performance Solutions | Other
Disaggregation of Revenue
Sales	$ 43,500	$ 62,700	$ 85,900	$ 120,900

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Segment Information - Sales by Contract Type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue
Sales	$ 343,408	$ 321,482	$ 662,202	$ 650,321
Fixed Price
Disaggregation of Revenue
Sales	321,800	302,100	618,000	611,400
Other
Disaggregation of Revenue
Sales	21,600	19,400	44,200	38,900
Cubic Transportation Systems
Disaggregation of Revenue
Sales	217,400	197,600	414,500	386,200
Cubic Transportation Systems | Fixed Price
Disaggregation of Revenue
Sales	214,600	194,800	409,000	379,300
Cubic Transportation Systems | Other
Disaggregation of Revenue
Sales	2,800	2,800	5,500	6,900
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	126,000	123,900	247,700	264,100
Cubic Mission and Performance Solutions | Fixed Price
Disaggregation of Revenue
Sales	107,200	107,300	209,000	232,100
Cubic Mission and Performance Solutions | Other
Disaggregation of Revenue
Sales	$ 18,800	$ 16,600	$ 38,700	$ 32,000

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Segment Information - Sales by Deliverable Type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue
Sales	$ 343,408	$ 321,482	$ 662,202	$ 650,321
Products
Disaggregation of Revenue
Sales	200,428	187,494	381,917	388,098
Services
Disaggregation of Revenue
Sales	142,980	133,988	280,285	262,223
Cubic Transportation Systems
Disaggregation of Revenue
Sales	217,400	197,600	414,500	386,200
Cubic Transportation Systems | Products
Disaggregation of Revenue
Sales	113,100	99,700	213,200	193,100
Cubic Transportation Systems | Services
Disaggregation of Revenue
Sales	104,300	97,900	201,300	193,100
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	126,000	123,900	247,700	264,100
Cubic Mission and Performance Solutions | Products
Disaggregation of Revenue
Sales	87,300	87,800	168,700	195,000
Cubic Mission and Performance Solutions | Services
Disaggregation of Revenue
Sales	$ 38,700	$ 36,100	$ 79,000	$ 69,100

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Segment Information - Revenue Recognition Method (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue
Sales	$ 343,408	$ 321,482	$ 662,202	$ 650,321
Point in time
Disaggregation of Revenue
Sales	41,700	43,100	85,500	100,200
Over time
Disaggregation of Revenue
Sales	301,700	278,400	576,700	550,100
Cubic Transportation Systems
Disaggregation of Revenue
Sales	217,400	197,600	414,500	386,200
Cubic Transportation Systems | Point in time
Disaggregation of Revenue
Sales	20,800	28,100	39,600	45,800
Cubic Transportation Systems | Over time
Disaggregation of Revenue
Sales	196,600	169,500	374,900	340,400
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	126,000	123,900	247,700	264,100
Cubic Mission and Performance Solutions | Point in time
Disaggregation of Revenue
Sales	20,900	15,000	45,900	54,400
Cubic Mission and Performance Solutions | Over time
Disaggregation of Revenue
Sales	$ 105,100	$ 108,900	$ 201,800	$ 209,700

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Restructuring Costs - Restructuring Charges (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Restructuring plan
Restructuring costs	$ 7,746	$ 3,807	$ 11,881	$ 5,382
Unallocated corporate expenses
Restructuring plan
Restructuring costs	5,400	3,200	6,200	4,300
Cubic Transportation Systems
Restructuring plan
Restructuring costs	1,600	100	1,800	500
Cubic Mission and Performance Solutions
Restructuring plan
Restructuring costs	$ 800	$ 500	$ 3,900	$ 600

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Restructuring Costs - Rollforward of Restructuring Liability (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Restructuring liability
Accrued costs	$ 7,746	$ 3,807	$ 11,881	$ 5,382
Employee Separation and Other
Restructuring liability
Balance as of the beginning of the period			5,200
Accrued costs			6,900
Cash payments			(8,300)
Balance as of the end of the period	3,800		3,800
Consulting Costs
Restructuring liability
Balance as of the beginning of the period			800
Accrued costs			5,000
Cash payments			(2,500)
Balance as of the end of the period	$ 3,300		$ 3,300