10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

/x/	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended October 31, 1999
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 No. 0-1424

ADC Telecommunications, Inc.
(Exact name of registrant as specified in its charter)

Minnesota (State or other jurisdiction of incorporation or organization	41-0743912 (I.R.S. Employer Identification No.)
12501 Whitewater Drive Minnetonka, Minnesota (Address of principal executive offices	55343 (Zip Code)

Registrant's telephone number, including area code:  (612) 938-8080

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.20 par value
Common Stock Purchase Rights

    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.  /x/ Yes  / / No

    The aggregate market value of voting stock held by non-affiliates of the registrant, as of December 29, 1999, was approximately $10,972,168,748 (based on the last sale price of such stock as reported by the Nasdaq Stock Market National Market).

    The number of shares outstanding of the registrant's common stock, $0.20 par value, as of December 29, 1999, was 151,381,721.

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  / /

DOCUMENTS INCORPORATED BY REFERENCE

    The information required by Part II of this Form 10-K is incorporated herein by reference to portions of ADC's Annual Report to Shareholders for the fiscal year ended October 31, 1999. The information required by Part III of this Form 10-K is incorporated by reference to portions of ADC's definitive proxy statement for its 1999 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission on or before January 29, 2000.

PART I

Item 1. BUSINESS

    ADC Telecommunications, Inc. ("ADC") was incorporated in Minnesota in 1953 as Magnetic Controls Company and changed its name to ADC Telecommunications, Inc. in 1985. ADC offers a broad range of network equipment, software and integration services for broadband, multiservice networks that deliver Internet/data, video and voice communications over telephone, cable television, Internet, broadcast, wireless and enterprise networks. ADC's broadband, multiservice network solutions enable local access, high-speed transmission and software management of communications services from service providers to consumers and businesses over fiber-optic, copper, coaxial and wireless media.

    Telephone companies, cable television operators, Internet/data service providers, wireless service providers and other communications service providers are building the broadband infrastructure required to offer high-speed Internet access and data, video, telephony and other interactive multimedia services to residential and business customers. Broader network bandwidths are continually required for these services, and ADC's product offerings and development efforts are focused on increasing the speed and efficiency of communications networks from the service providers' offices through the network equipment that connects to end users' residences and businesses.

    ADC offers network equipment, software and integration services within the following three product groups:

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Broadband Connectivity,



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Broadband Access and Transport, and



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Integrated Solutions.

BROADBAND CONNECTIVITY products include broadband connection and access devices for copper, coaxial, fiber-optic, wireless and broadcast communications networks. The group also supplies fiber-optic and wireless components. These products are used globally in telephone, cable television, Internet, wireless, enterprise and broadcast communications networks. Broadband Connectivity products provide the physical contact points for connecting different communications system components and gaining access to communications system circuits for the purpose of installing, testing, monitoring, accessing, managing, reconfiguring, splitting and multiplexing such circuits within the central office and the "last mile/kilometer" portion of communications networks.

BROADBAND ACCESS AND TRANSPORT products include access and transport systems that deliver broadband, multiservice communications to residences and businesses over copper, coaxial, fiber-optic and wireless networks. These products are used globally to deliver Internet/data, video and voice services to residential and business customers. Generally, these products are aimed at upgrading service providers' networks to broadband capabilities, while also introducing new service delivery functionality and cost effectiveness into the networks.

INTEGRATED SOLUTIONS products and services consist of systems integration services, operations support systems (OSS) software and enhanced services/intelligent network software that positions service providers to deliver broadband, multiservice communications over wireline and wireless networks. Systems integration services are used to design, equip and build communications networks and OSS applications that deliver Internet/data, video and voice services to residences and businesses. OSS Software includes communications billing, customer care, network performance and service level assurance software. Enhanced services/intelligent network software includes a range of wireline, wireless and Internet applications.

    ADC's customers include local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers, broadcasters, enterprises, governments, system integrators and communications equipment manufacturers and distributors.

    As used in this report, unless the context otherwise requires, the terms "ADC" refers to ADC Telecommunications, Inc. and its wholly owned and majority owned subsidiaries; 1997, 1998 and 1999 refer to the ADC's fiscal years ended October 31, 1997, 1998 and 1999, respectively; and 2000 refers to ADC's fiscal year ending October 31, 2000.

Industry Background

    As a result of the global deregulation of communications markets, thousands of new competitive service providers have entered the market to compete with the incumbent service providers of Internet/data, video and voice communications. These new service providers are rapidly changing the marketplace by offering new choices and bundles of communications services never before offered to consumers and businesses. The dynamics of the deregulated communications market has resulted in the recent high growth rate of sales for suppliers of communications equipment, software and services. The factors driving this growth consist primarily of the following: increased demand from consumers and businesses for high-speed, integrated services such as Internet access, digital video and broadband wireless access; rapid growth of Internet services; continuous technological development of fiber-optics, integrated circuits and software to increase broadband capacities and applications; and the convergence of Internet/data, video, and voice network traffic onto broadband, multiservice networks. ADC believes that these trends will continue to drive changes in the global communications industry for the foreseeable future.

    Increased demand for higher-speed, higher-capacity services such as Internet access, digital video and broadband wireless access has in turn resulted in substantial demands to build and upgrade the communications network infrastructure. Communications networks are increasingly required to transmit large volumes of data and video for the purpose of communicating information, conducting business and delivering entertainment. In addition, both consumers and businesses are requesting high-speed connections from a single broadband, multiservice provider offering a range of prices for various bundles of integrated Internet/data, video and voice services. Specifically, the industry term "broadband" refers to all transmission speeds of T1 (1.544 million bits per second) and higher. Growth in broadband applications has resulted in increased infrastructure investment by communications service providers in order to expand network capacity and provide new applications and services to meet users' needs.

    Several important technological developments have spurred growth in the communications equipment industry. One important technological change has been the deployment of fiber-optic transmission systems. In a fiber-optic system, lasers transmit Internet/data, video and voice traffic in the form of analog or digital coded light pulses through glass fibers. The increasing shift to fiber-optic transmission systems has been principally due to the ability of fiber optics to carry large volumes of information at high speeds, its insensitivity to electromagnetic interference and the high transmission quality made possible by the physical properties of light. As technologies such as Synchronous Optical NETwork (SONET), Dense Wavelength Division Multiplexing (DWDM) and 1550 nanometer laser transmission technologies have evolved over the last several years, the capacity of fiber-optic systems to transport information has increased significantly.

    The development of cost-effective digital technology has also allowed greater capacity (or speed) in network transmission and has resulted in an increasing trend over the past decade to replace analog technology in copper, fiber and wireless transmission networks. In analog technology, information is converted to a voltage or current wave form for processing or transmission. In digital technology, information is converted to digital bits and then processed or transmitted using computer-based components. High-speed digital technology developments such as SONET, cell-based Asynchronous Transfer Mode (ATM) and Orthogonal Frequency Division Multiplexing (OFDM) modulation technologies have enabled network providers to transmit increasing amounts of data and video communications.

    Wireless technology developments have also had an impact on the communications equipment industry. There has been substantial growth in wireless communications such as cellular telephone services and satellite-based services, as well as Personal Communications Services (PCS) communications, Multichannel Multipoint Distribution Services (MMDS) and Local Multipoint Distribution Services (LMDS) for wireless cable services and wireless data and paging services. This growth has been driven by the convenience of mobility and the limits of wireline infrastructure. In particular, in countries without reliable or extensive wireline systems, wireless service could ultimately provide the primary service platform for both mobile and fixed communications applications due to the potential savings in installation time and cost. ADC believes that in future years the continuing development of wireless communications technology could substantially extend the reach of current communications networks.

    ADC believes that broadband, multiservice networks represent a key enabling capability for meeting the information needs of consumers and businesses around the world. The rapid growth of Internet/ data and digital video traffic has driven the need for broadband infrastructure. Additional bandwidth is required as the result of a wide range of new applications, including video and audio programs on the Internet, wireless Internet access, personal video conferencing from a personal computer, video e-mail, video on demand, electronic commerce, distance learning, telecommuting, telemedicine and high-speed imaging such as remote medical imaging. ADC believes that the global deregulation of communications markets is transforming traditional communications service providers into integrated communications providers. Traditional communications service providers offer only a limited selection of Internet/data, video or voice services—each on a separate network connection and a separate customer bill. Integrated communications providers operate broadband, multiservice networks that offer faster, cost-effective and integrated Internet/data, video and voice services over a single high-speed network connection and send one bill for all the services the customer uses. As a result of deregulation, each service provider now competes for customers by offering the best-value bundle of communications services over the most cost-effective network. As a result of competition among communications service providers to win and retain customers with bundled services, there is a large and growing global market for network equipment, software and integration services to build and upgrade broadband, multiservice networks.

Strategy

    ADC's strategy is to capitalize on opportunities in the global communications market by providing the network equipment, software and integration services to enable communications service providers to service their residential and business customers with broadband, multiservice networks offering faster, cost-effective and integrated Internet/data, video and voice services. ADC's broad range of products and services address key areas of the communications network infrastructure, and are used to design, build and upgrade networks, provide equipment to connect and access networks and transport communications services, and provide software to generate, deliver and manage communications services. ADC's many product and service offerings address the diverse needs of its customers, including local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers, broadcasters, enterprises, governments, system integrators and communications equipment manufacturers and distributors.

    Key components of ADC's strategy include:

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Focus on Broadband, Multiservice Opportunities. Global deregulation, rapid growth of the Internet, and increasing consumer and business demands for broadband communications has created significant global opportunities to build and upgrade broadband, multiservice networks. Telephone companies, cable television operators, Internet/data service providers, wireless service providers and other communications service providers are building the broadband infrastructure required to offer high-speed Internet access, data, video, telephony and other interactive multimedia services to residential and business customers. As broader network bandwidths are continually required for these services, ADC believes that building and upgrading of broadband, multiservice networks presents one of the greatest market growth opportunities in the communications industry today. ADC is focusing its development and marketing resources on network equipment, software and integration services that will enable communications service providers worldwide to serve their residential and businesses customers with broadband, multiservice networks offering faster, cost effective and integrated Internet/data, video and voice services.



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Leverage Technological Capabilities Across Product Groups ADC has developed substantial expertise in fiber-optic, broadband copper, coaxial, video, wireless and broadband infrastructure and transport technologies, software and systems integration services. ADC has built these core competencies through internal development, acquisitions, joint ventures and technology licensing arrangements. ADC's strategy is to leverage these core competencies across its product groups in order to develop new products with enhanced architectures, functions, cost effectiveness and network management tools for its customers' evolving Internet/data, video and voice service offerings.



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Increase International Market Penetration. ADC believes that significant growth for its products and services will occur outside the United States as a result of deregulation and the need of many foreign countries to substantially expand or enhance their communications services. ADC's strategy is to grow its international penetration by increasing its international sales and marketing resources, expanding global manufacturing capacity, leveraging its existing customer relationships, developing additional international distribution channels and seeking strategic alliances and acquisitions. ADC is expanding its presence in international markets with manufacturing facilities, distribution centers and sales offices to serve its customers outside the United States.



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Supplement Internal Development Efforts with Strategic Acquisitions and Alliances. Because of the dynamic nature of the communications equipment industry, ADC has sought and intends to continue to seek acquisitions and alliances that will: (i) add key technologies that ADC can leverage across its businesses, (ii) broaden its product offerings, (iii) permit ADC to enter attractive new markets and (iv) expand or enhance its distribution channels. To accomplish these objectives, during 1999, ADC completed the following acquisitions: (a) Teledata Communications, Ltd., a supplier of advanced wireline and wireless customer access network equipment for telephone operating companies; (b) Hadax Electronics, Inc., a company with remote network test and access products and technology; (c) Phasor Electronics, an Austrian-based manufacturer of radio frequency amplifiers; (d) Pathway, Inc., a manufacturer of the AccessPoint™ access system, which interfaces with several existing ADC products and includes an ATM access product that transports Internet/data, video and voice communications over high-speed, switched broadband networks; (e) Spectracom Inc., a developer of high-powered pump laser chips and modules for use in fiber-optic networks, and (f) Saville Systems PLC, a provider of convergent billing and customer care solutions for local, data, long distance, wireless, cable television and energy communications markets.

    The ability of ADC to implement its strategy effectively is subject to many uncertainties, and there can be no assurance of any future results of ADC's activities.

Product Groups

    ADC's network equipment, software and integration services are divided into three groups: (1) Broadband Connectivity; (2) Broadband Access and Transport; and (3) Integrated Solutions. Each of these groups is described below.

Broadband Connectivity

    Broadband Connectivity products include broadband connection and access devices for copper, coaxial, fiber-optic, wireless and broadcast communications networks. The group also supplies fiber-optic and wireless components. These products are used globally in telephone, cable television, Internet, wireless, enterprise and broadcast communications networks. Broadband Connectivity products provide the physical contact points for connecting different communications system components and gaining access to communications system circuits for the purpose of installing, testing, monitoring, accessing, managing, reconfiguring, splitting and multiplexing such circuits within the central office and the "last mile/kilometer" portion of communications networks. Fiber-optic components include connectors, isolators, circulators, collimators, couplers, splitters, and dense wavelength division multiplexing (DWDM) devices and pump lasers. Wireless components include coverage enhancement products, tower top amplifiers and RF filters. Broadband Connectivity products are sold to local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers, broadcasters, enterprises, governments, system integrators and communications equipment manufacturers and distributors.

    DSX Products.  ADC manufactures digital signal cross-connect (DSX) modules and bays, which are designed to gain access to and cross-connect digital copper circuits for Internet/data, video and voice transmission. The Digital Distribution Point (DDP) family of products within the DSX product group are mechanical alternatives to hard-wiring equipment used for cable management and circuit access with software-based, electronic digital cross-connect systems. With the acquisition of Hadax Electronics, ADC has added remote test access capability to its DSX products. This capability enables service providers to monitor high capacity circuit performance at unstaffed sites such as carrier collocation points.

    Terminal Block and Frame Products  ADC manufactures a wide variety of terminal blocks, which are molded plastic blocks with contact points used to facilitate multiple wire interconnections. ADC's cross-connect frames are terminal block assemblies used to connect the external wiring of a communications network to the internal wiring of a telephone operating company's central office or to interconnect various pieces of equipment within a telephone company's central office or at a customer's premises.

    Fiber Distribution Frames.  ADC's fiber distribution panels and frames, which are functionally similar to copper cross-connect modules and bays, are designed with special considerations of fiber-optic properties. They also provide interconnection points between fiber-optic cables entering a building and fiber-optic cables connected to fiber-optic equipment within the building.

    Fiber Optic Components.  ADC's Australian subsidiary, AOFR Pty. Ltd., sells fiber optic couplers, which are passive connection devices used in fiber optic transmission systems. Fiber optic couplers, which include optical splitters and wavelength division multiplexers, enable efficient and cost-effective deployment of broadband networks. ADC also sells Dense Wavelength Division Multiplexing (DWDM) components such as splitters and multiplexers which are designed with special considerations of fiber optic properties. These products increase the channel capacity of fiber optic cabling systems in multiples of four. ADC currently is selling four-channel and eight-channel components and has recently introduced 16-channel and 32-channel components. ADC's acquisition of Princeton Optics broadened ADC's optic components product line by adding optical isolators and circulators and related technology. Isolators function as one-way optical check valves that protect lasers and other elements from reflective light. Circulators are devices that carry a light signal from one port to the next in the forward direction only. Spectracom, a fiscal year 1999 acquisition, has patent-pending applications for the development of reliable, high-powered 980 nanometer pump laser diodes and modules for use in erbium doped fiber amplifiers, which enable wavelength division multiplexing technology.

    Fiber Optic Patch Cords.  Fiber optic patch cords are the basic components used to gain access to fiber communications circuits for testing, maintenance, cross-connection and configuration purposes. ADC's LightTracer® fiber optic patch cords provide immediate identification of fiber optic connections. ADC's new LX.5. fiber connector doubles the capacity of fiber termination equipment by allowing two fibers to fit into the standard SC adapter footprint. ADC incorporates its fiber optic patch cords and cable assemblies into its own products and also sells them in component form.

    Other Fiber Optic Products.  ADC's FiberGuide® system is a modular routing system which provides a segregated, protected method of storing and routing fiber patch cords and cables within buildings.

    Broadband Software Infrastructure Management Solutions.  ADC has developed a number of software products which provide management of fiber-optic infrastructure connectivity, geographical tracking of equipment, cables and other network elements in the telephone company's central office, cable TV company headend and outside plant portion of those networks.

    Video Signal Distribution Products.  ADC's series of Video Signal Distribution (VSD) products are designed to meet the unique performance requirements of Radio Frequency (RF) video transmission over coaxial cable. This product family includes a series of splitter/combiner panels, a series of video jacks and panels which monitor, patch and provide a test access point and an analog video interface system panel designed for on-demand testing.

    Wireless Infrastructure Equipment and Subsystems.  ADC designs, manufactures and markets radio frequency (RF) front-ends, filters, SMARTop™ tower-top amplifiers and other wireless base station and subscriber equipment components and subsystems. Products are distributed and sold globally for all major air interfaces. These products are sold primarily to wireless OEMs. 

    CityWide™ Products.  ADC's family of CityWide wireless systems products includes the CityCell wideband digital microcells, CityRad® repeaters for adding and extending cellular communication coverage out-of-doors and CityMicro® Bi-Directional Amplifiers for in-building coverage. CityWide products are transparent to digital modulation, and products have been commercially deployed by five of seven major U.S. cellular network providers.

    Jacks, Plugs, Patch Cords, Jackfields and Patch Bays.  Jacks and plugs are the basic components used to gain access to copper communications circuits for testing and maintenance. Patch cords are wires or cables with a plug on each end. ADC incorporates its jacks, plugs and patch cords into its own products and also sells them in component form, primarily to OEMs. A jackfield is a module containing an assembly of jacks wired to terminal blocks or connectors and used by communications companies to gain access to copper communication circuits for testing or patching the circuits. When testing a large number of circuits, series of jackfields are combined in specialized rack assemblies called patch bays. ADC manufactures a range of jackfields and patch bays in various configurations. Certain of these jackfields are specialized for use in audio and visual transmission networks in the broadcast industry.

Broadband Access and Transport

    Broadband Access and Transport products include access and transport systems that deliver broadband, multiservice communications to residences and businesses over copper, coaxial, fiber-optic and wireless networks. These products are used globally to deliver Internet/data, video and voice services to residential and business customers. Generally, these products are aimed at upgrading service providers' networks to broadband capabilities, while also introducing new service delivery functionality and cost effectiveness into the networks. Broadband Access and Transport products are sold to local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers, broadcasters, enterprises, governments and communications equipment distributors.

    The group's transport systems operate between central offices and in the "last mile/kilometer" portion of communications networks and include Soneplex®, Cellworx®, CellSpan™, Homeworx™, Optiworx™, DV6000™ and BroadAccess™ systems.

    The group's access systems include both customer located devices (which are part of the service provider's network) and customer premise devices (which are owned by the service provider's business customer) that can work alone or in conjunction with one of ADC's transport systems or with other vendors' transport systems. These devices include data service units (DSUs), channel service units (CSUs), T1/E1 multiplexers, T3/E3 multiplexers, integrated access devices (offering a wide variety of Internet/data, video and voice interfaces), MPEG video products and ATM access concentrators.

    Soneplex and Cellworx Products.  Soneplex is a carrier-class, intelligent loop access platform enabling incumbent local exchange carriers and competitive local exchange carriers to deliver T1/E1-based services over copper or fiber facilities. Soneplex integrates functions and capabilities that reduce a carrier's capital and operating costs of delivering T1/E1-based services. Cellworx represents a next-generation OC3/12/48 ATM virtual path transport product which integrates ATM and SONET/SDH technologies. While Soneplex is centered on T1/E1-based service delivery, Cellworx is a broad-based service delivery infrastructure product aimed at reducing a carrier's capital and operating costs of delivering the full range of high-speed to low-speed services over copper or fiber facilities.

    The Cellworx Service Transport Node (STN) has broad-based applications in most telecommunication network infrastructures. ADC has sold the Cellworx STN into many market segments, including installation of an 18 node network in South Dakota for Internet Access and Private Line service, an installation at a major IXC for broadband switch port consolidation and DSLAM backhaul, and with Iowa Communications Network for its statewide distance learning network. ADC has also received three contracts from the U.S. government for building data, voice, video and telemetry networks on various military bases. In addition, five international distributors have purchased Cellworx STN lab and demo equipment and are actively reselling the equipment in their countries. Lastly, ADC was recently selected for ATM Virtual Path transport at a major RBOC, and the Cellworx STN has been placed in the lab for technical evaluation.

    Customer Located and Customer Premise Devices.  ADC's products include Customer Located Devices (which are part of the carrier's network) as well as Customer Premise Devices (which are owned by the carrier's business customer). These stand-alone products can work in conjunction with Soneplex or Cellworx or with other vendors' transport systems. They include T1/E1 multiplexers (offering a variety of Internet/data, video and voice interfaces), T3/E3 multiplexers and ATM access concentrators.

    Public Network Access Equipment.  ADC manufactures a family of Channel Service Unit (CSU) and Data Service Unit (DSU) products which are used to digitally interconnect the public network and the private network. This equipment monitors circuits and provides system protection and other network management functions. Certain of these products also enable the customer to test the performance of its voice network and allow connection of Internet/data, video and voice circuits. These products support T1, T3 (44.6 million bits per second) and OC3 (155 million bits per second) services and a variety of data protocols, including Frame Relay, Switched Multi-megabit Data Service (SMDS), ATM, ISDN, HDSL and the Internet protocols. The ServicePoint service delivery platform is designed to be upgraded to enhance this core termination and monitoring functionality with control features, such as bandwidth management. ADC's AAC-1® and AAC-3® ATM access concentrators adapt, aggregate, multiplex and manage all voice, data and video signals in various speeds, technologies and protocols for transport over T1, E1, T3 and E3 speed ATM networks. ADC sells several remote access and routing products, some of which are specifically designed for Internet access. ADC has entered into agreements with other ATM equipment suppliers providing for the joint marketing of and integration of ADC's ATM adaptation and concentration technologies into the ATM switching and routing products manufactured by such companies. ADC's EZT, ICX® and Opera® products support a wide range of customer interfaces and applications which enable service providers to deliver many network services simultaneously in a cost-effective manner. In June 1999, ADC completed the acquisition of Pathway, Inc. Pathway manufactures the AccessPoint™ Universal Media Access system. AccessPoint interfaces with several existing ADC products and is an ATM access product that transports Internet/data, video and voice and communications over high-speed, switched broadband networks.

    Internetworking Products.  Internetworking products include fiber optic backbones used to transport high speed multiple voice, data and video signals simultaneously over private networks and link Local Area Networks (LANs), mainframes, minicomputers, personal computers, telephone systems and video equipment with diverse protocols within private networks or over the public network; intelligent wiring hub products which interconnect workstations, personal computers and terminals, utilizing many different LAN protocols and types of cables; and network management systems.

    PatchSwitch System and PatchMate™ Module.  ADC's PatchSwitch system is a data network management product which provides access to and monitors, tests and reconfigures digital data circuits and permits local or remote switching to alternate circuits or backup equipment. This system is modular, permitting the user to select and combine the particular functions desired in a system. The PatchMate module is a manually operated electromechanical device used to gain access to the network in order to monitor, test and reconfigure digital data circuits.

    Homeworx Access Transport Platform.  The Homeworx system has been designed for deployment on video-only, telephony-only and integrated video, telephony and Internet/data broadband networks provided by telephone operating companies, cable TV operators and other communications common carriers. The Homeworx access transport platform utilizes Hybrid Fiber Coax (HFC) technology.

    DV6000™ and Other Fiber Video Delivery Equipment.  ADC's DV6000 system transmits a variety of signal types using a high-speed, uncompressed digital format (at speeds up to 10 billion bits per second, with capacity of up to 64 channels) over fiber in the super trunking portions of broadcast and interactive video networks.

    Optiworx™ HFC Transport Systems Platform. ADC's Optiworx family offers a comprehensive, multiservice HFC transport system including 1310nm and 1550nm optical transmitters, optical receivers, optical distribution nodes, patented RF amplifier technology, dense wavelength division multiplexing (DWDM) capability, and digital HFC products and technology—all tied together with a network management system. ADC's Optiworx product line is designed for a broad range of HFC transport applications, including broadcast video, IP or circuit-switched telephony, video on demand, Internet access and targeted advertising. These products are being deployed in the U.S. and around the world by cable TV operators who are upgrading their plants to carry two-way service over hybrid fiber/coaxial plants, including digital interactive Internet/data, video and voice services.

    ADC Teledata Products.  In November 1998, ADC acquired Teledata Communications, Ltd. ("Teledata"). ADC's Teledata products enable telephone operating companies to enhance the capacity, reach and functionality of the local loop. Teledata's product portfolio currently consists of a family of digital loop carriers and wireless local loop access solutions. Teledata's digital loop carriers include the following: the BroadAccess™ family of compact and flexible future generation DLCs, which provide voice and Internet/data services for digital networks of clusters of 60 to 480 subscribers and consist of the DCS-30 (formerly known as the TDLC 30), the DCS-20F and the DCS-20T; the DCS-20E multiplexer and cross-connect system that allows telephone operating companies to connect from 120 to 480 subscribers to the local exchange; the TIMUX access multiplexer that enables the connection of groups of 30 to 150 subscribers to the local exchange; and the CTLOOP digital "pair-gain" system that allows the connection of groups of up to 10 subscribers to the local exchange without additional investment in infrastructure. The ERC digital wireless local loop point to multi-point system connects up to 960 subscribers using base stations, each of which serves subscribers within a 50 kilometer radius.

    Cellspan Broadband Wireless System.  ADC's Cellspan broadband wireless system offers a wireless alternative to copper-based and fiber-optic-based products by delivering high-speed wireless Internet/data, video and voice services to customers. With major carriers Worldcom and Sprint entering the wireless market in 1999, ADC believes that wireless products offer a viable alternative to wireline solutions for access to the "last mile/kilometer" of the communications network. In 1999, ADC released and began selling its Cellspan system. Although further refinement and testing of the Cellspan system will be required prior to large-scale deployment, ADC believes that the experience it gained from selling one-way Multi-point Microwave Distribution Systems (MMDS) in this market for the past four years will enable ADC to compete successfully in the wireless market.

    Wireless Cable and Broadcast TV Transmission Equipment.  ADC supplies products to the wireless cable and broadcast TV market. ADC designs and manufactures television transmission products for these markets, including transmitters, combiners, back-up equipment and antennas to wireless cable operators for MMDS. Because the Federal Communications Commission has mandated that each TV station establish a digital channel by the end of the year 2003 or lose their license to the existing analog TV market, each TV station must establish a separate digital TV channel and install an additional TV transmitter for broadcasting. ADC believes that its existing TV transmitters and other system capabilities will enable ADC to leverage other products into other Broadband Access and Transport applications in the wireless cable and broadcast TV industries.

Integrated Solutions

    Integrated Solutions products and services consist of systems integration services, operations support systems (OSS) software and enhanced services/intelligent network software that positions service providers to deliver broadband, multiservice communications over wireline and wireless networks. Systems integration services are used to design, equip and build communications networks and OSS applications that deliver Internet/data, video and voice services to residences and businesses. OSS software includes the Saville Systems® line of communications billing and customer care software and the Metrica® line of network performance and service level assurance software. Enhanced services/ intelligent network software includes the NewNet® line of Signaling System 7 (SS7), intelligent network, wireless messaging and provisioning, Communications Assistance to Law Enforcement Act (CALEA) and Internet applications software. Integrated Solutions products and services are sold to local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers and communications equipment manufacturers.

    Systems Integration Services.  Systems integration services consist of project management, technical consulting and design, implementation, reliability, performance and training services. System integration services support ADC as well as multi-vendor solutions. ADC provides its systems integration services and software primarily to telephone operating companies, cable TV companies, other common carriers and users of private communications networks.

    ADC's systems integration services implement multimedia systems designed for integration of Internet/data, video and voice applications, including applications such as distance learning, business, medical and government networks. In addition, ADC's Systems Integration division has expanded its capabilities to include network records inventory and management, along with a full offering of Operational Support Systems (OSS) solutions. This division of ADC has expanded to most regions of the United States and is deploying services internationally with strategic partners.

    Customer Care and Billing Software.  In October 1999, ADC completed the acquisition of Saville Systems PLC, a provider of convergent billing and customer care solutions for local, Internet/data, long distance, wireless, cable television and energy service markets. Saville offers products and services designed to enable communications and energy service providers to bring new service offerings to market quickly, and to bill accurately and reliably for multiple services on one convergent invoice. Saville's line of products includes Saville CBP® (Convergent Billing Platform), Saville IBP™ (Interconnect Billing Platform), SavilleCare™ and Saville Express™. Saville has also introduced facilities management services, which allow customers to license CBP from Saville and have Saville manage the operation of the software on customer-owned hardware, and offers a complete service bureau billing and customer care service. In addition to its product offerings, Saville also provides its customers with a full range of professional services, including assisting a customer in analyzing its requirements and then designing, developing and implementing a customer care and billing solution.

    Performance and Network Management Software.  ADC designs and sells communications network performance management software under the Metrica® brand name. Metrica's software platforms are used in the infrastructure management systems of wireless and wireline public network operators throughout the world.

    Intelligent Network Software.  ADC supplies intelligent network communications software, including Signaling Systems 7 (SS7) technology, wireless intelligent network products (such as short messaging services) software to assist carriers in complying with CALEA, and Internet applications software, under the NewNet® brand name.

Sales and Marketing

    ADC sells its products to customers in three primary markets: (i) the United States public communications network market, which includes all five of the RBOCs, other telephone companies, long distance carriers, wireless service providers, cable TV operators and other domestic public network providers; (ii) the private and governmental voice, Internet/data and video network markets in the United States, which includes large business customers and governmental agencies that own and operate their own voice, data and video networks for internal use; and (iii) the international public and private network market. The U.S. public, U.S. private and governmental and international market segments accounted for 74.6%, 2.4% and 23.0%, respectively, of ADC's net sales for the year ended October 31, 1999; 73.3%, 5.1% and 21.6%, respectively, of ADC's net sales for the year ended October 31, 1998; and 73.2%, 5.5% and 21.3%, respectively, of ADC's net sales for the year ended October 31, 1997. ADC also sells product for each of these customer groups to communications OEMs. Additional financial information concerning sales of ADC's products is contained in ADC's Annual Report to Shareholders for the fiscal year ended October 31, 1999 (the "Annual Report"). Portions of the Annual Report are contained in Exhibit 13-a to this Form 10-K, as filed with the Securities and Exchange Commission (the "SEC" or the "Commission"), and are incorporated herein by reference.

    Purchases of products by public network providers and the OEMs which supply such companies accounted for the largest portion of ADC's net sales. ADC's business broadband and residential broadband transmission systems and broadband connectivity products for public network providers are primarily located in central transmission facilities (such as telephone company network central offices, cable TV company network supertrunks and headend offices, and wireless network global switching centers and base stations, all of which contain the equipment used in switching and transmitting incoming and outgoing circuits). Increasingly, portions of ADC's business broadband and residential broadband transmission systems are located in the public network outside plant facilities (outside the central transmission buildings) and on customers' premises. ADC's private and governmental network customers generally purchase ADC's enterprise-wide communications systems and public network access equipment for installation in the networks located at their premises.

    ADC also markets its products outside the United States primarily to telephone operating companies and cable TV operators for public communications networks located in Canada, Europe, the Middle East, Asia/Pacific, Australia and Latin America.

    A majority of ADC's sales are made by a direct sales force, and ADC maintains sales offices throughout the United States as well as in Canada, Europe, the Middle East, Asia/Pacific, Australia and Latin America. ADC's products are sold in the United States by several sales offices located throughout the country, as well as through dealer organizations and distributors. ADC's products are sold outside the United States by several field sales offices and by independent sales representatives and distributors, as well as through United States public and private network providers who also distribute products outside the United States.

    ADC has a customer service group that supports field sales personnel and is responsible for application engineering, customer training, entering orders and supplying delivery status information, and a field service engineering group that provides on-site service to customers.

Research and Development

    ADC believes that its future success depends on its ability to adapt to the rapidly changing communications environment, to maintain its significant expertise in core technologies and to continue to meet and anticipate its customers' needs. ADC continually reviews and evaluates technological changes affecting the communications market and invests substantially in applications-based research and development. ADC intends to continue an ongoing program of new product development that combines internal development efforts with acquisitions, joint ventures and licensing or marketing arrangements relating to new products and technologies from sources outside ADC.

    In recent years, increasingly significant portions of new communications equipment purchased by public network providers and private network customers have employed fiber-optic transmission, digital, integrated circuit, wireless and broadband copper-based technologies for residential, business and wireless broadband local loop applications. In the future, these communications network equipment purchasing trends will include increasingly sophisticated, software-intensive, OSS and network management systems. As a result, ADC's internal and external product development activities are primarily directed at the following areas: (i) the integration of fiber optic technology into additional products; (ii) the continuing development of its Homeworx system for telephony, data and integrated video, telephony and Internet/data applications; (iii) the development of network systems (including billing and customer care) software; (iv) the continuing development of its Soneplex and Cellworx systems for integrated Internet/data, video and voice applications; (v) the continuing development of wireless products; (vi) the incorporation of ATM and internet protocol technologies into Internet/data, video and voice products for both public and private communications networks; and (vii) the addition of video compression technology to its product line.

    New product development often requires long-term forecasting of market trends, development and implementation of new processes and technologies and a substantial capital commitment. As a result of these and other factors, development and customer acceptance of new products is inherently uncertain, and there can be no assurance that such products will be developed on a timely basis or achieve market acceptance.

Competition

    Competition in the communications equipment industry is intense, and ADC believes that competition may increase substantially with the deployment of broadband networks and regulatory changes. Many of ADC's foreign and domestic competitors have more extensive engineering, manufacturing, marketing, financial and personnel resources than those of ADC. ADC's Broadband Connectivity products are competitive with products offered by several other companies, including Lucent Technologies, Siecor and Telect. ADC's principal competitors in the Broadband Access and Transport market include Pairgain Technologies, Adtran, 3COM, General Instrument, Scientific-Atlanta and ANTEC. In the systems integration services and product market, ADC competes with Lucent Technologies, Nortel and Andersen Consulting. In the customer care and billing software market, ADC's primary competitors are Kenan Systems, a subsidiary of Lucent Technologies, and Daleen Technologies. In addition, ADC faces increasing competition from a number of other smaller competitors, none of which is dominant at this time.

    The rapid technological developments within the communications industry have resulted in frequent changes to ADC's group of competitors. ADC believes its success in competing with other manufacturers of communications products depends primarily on its engineering, manufacturing and marketing skills, the price, quality and reliability of its products and its delivery and service capabilities. While the market for ADC's products has not historically been characterized by significant price competition, ADC may face increasing pricing pressures from current and future competitors in certain or all of the markets for its products.

    ADC believes that technological change, the increasing addition of Internet/data, video, voice and other services to integrated multimedia networks, continuing regulatory changes and industry consolidation or new entrants will continue to cause rapid evolution in the competitive environment of the communications equipment market, the full scope and nature of which are difficult to predict at this time. Increased competition could result in price reductions, reduced margins and the loss of market share by ADC. ADC believes that industry regulatory change may create new opportunities for suppliers of communications equipment. ADC expects, however, that such opportunities may attract increased competition from others as well. In addition, ADC expects that Lucent Technologies will continue to be a major supplier to the RBOCs and will compete more extensively outside the RBOC market. ADC also believes that the rapid technological changes which characterize the communications industry will continue to make the markets in which ADC competes attractive to new entrants. There can be no assurance that ADC will be able to compete successfully with its existing or new competitors or that competitive pressures faced by ADC will not materially and adversely affect its business, operating results or financial condition.

Manufacturing and Supplies

    ADC manufactures a wide variety of products which are fabricated, assembled and tested in its own facilities or in subcontracted facilities. In an effort to reduce costs, ADC also utilizes off-shore assembly and sourcing. The manufacturing process for ADC's electronic products consists primarily of assembly and testing of electronic systems built from fabricated parts, printed circuit boards and electronic components. The manufacturing process for ADC's electromechanical products consists primarily of fabrication of jacks, plugs, and other basic components from raw materials, assembly of components and testing. ADC's sheet metal, plastic molding, stamping and machining capabilities permit ADC to configure components to customer specifications.

    ADC purchases raw materials and component parts, consisting primarily of copper wire, optical fiber, steel, brass, nickel-steel alloys, gold, plastics, printed circuit boards, solid state components, discrete electronic components and similar items, from several suppliers. Although a few of the components used by ADC are single-sourced, ADC has experienced no significant difficulties to date in obtaining adequate quantities of these raw materials and component parts. This circumstance could change in the future, however, and ADC cannot be sure that the quantity or quality of raw materials and component parts will be as readily available in the future.

Proprietary Rights

    ADC owns a number of United States and foreign patents relating to its products. These patents, in the aggregate, constitute a valuable asset of ADC. ADC, however, believes that its business is not dependent upon any single patent or any group of related patents.

    ADC has registered the initials "ADC" alone and in conjunction with specific designs as trademarks in the United States and various foreign countries.

Employees

    As of October 31, 1999, there were approximately 13,500 persons employed by ADC. ADC considers relations with its employees to be good.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

    Certain portions of this Form 10-K, including "Business" herein and "Management's Discussion and Analysis of Financial Condition and Results of Operations" incorporated herein by reference, contain various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent ADC's expectations or beliefs concerning future events, including the following: any statements regarding future sales, profit percentages and other results of operations, any statements regarding the continuation of historical trends, any statements regarding the sufficiency of ADC's cash balances and cash generated from operating and financing activities for ADC's future liquidity and capital resource needs, any statements regarding the effect of regulatory changes and any statements regarding the future of the communications equipment industry or ADC's business. ADC cautions that any forward-looking statements made by ADC in this report or in other announcements made by ADC are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the factors set forth on Exhibit 99-a to this Form 10-K.

Item 2. PROPERTIES

    ADC's corporate headquarters are currently located in four leased buildings in Minnetonka, Minnesota comprising an aggregate of approximately 286,400 square feet. Leases for ADC's headquarters buildings expire at different times through 2001.

    ADC has entered into a five-year operating lease agreement for a new corporate headquarters facility located in Eden Prairie, Minnesota. The total cost of the facilities is expected to be approximately $100 million. Construction of the facilities began late in fiscal 1999 and is expected to be completed in 2001. The new corporate headquarters facility is expected to comprise approximately 1.2 million square feet.

    ADC owns a manufacturing facility and an adjacent distribution facility in Shakopee, Minnesota that comprises approximately 372,000 square feet.

    ADC also owns and leases a variety of other facilities for ADC's manufacturing, development, distribution, warehousing, sales and other activities. These facilities, including sales offices, are located in various countries, including the United States, Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Finland, France, Germany, Hungary, Ireland, Israel, Japan, Korea, Malaysia, Mexico, the Netherlands, the Philippines, Singapore, Spain, Thailand, the United Kingdom and Venezuela.

    ADC believes that the facilities used in its operations and currently under development are suitable for their respective uses and adequate to meet ADC's current needs.

Item 3. LEGAL PROCEEDINGS

    None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.

EXECUTIVE OFFICERS OF THE REGISTRANT

    The executive officers of ADC are as follows:

Name	Office	Officer Since	Age
William J. Cadogan	Chairman of the Board of Directors, President, Chief Executive Officer and Chief Operating Officer	1987	51
Lynn J. Davis	Senior Vice President, President, Broadband Connectivity Group	1984	52
Robert W. Switz	Senior Vice President, Chief Financial Officer	1994	53
Larry J. Ford	Senior Vice President, President, Integrated Solutions Group	1999	58
Arun Sobti	Senior Vice President, President, Broadband, Access and Transport Group	1999	53
Charles T. Roehrick	Vice President, Controller	1995	45
Jeffrey D. Pflaum	Vice President, General Counsel and Corporate Secretary	1999	40
Laura N. Owen	Vice President, Human Resources	1999	43
J. Wayne Stewart	Vice President, Operations	1999	49

    Messrs. Cadogan and Davis have served in various capacities with ADC for more than five years. Biographical information regarding the other named executive officers is set forth below:

    Mr. Switz joined ADC in January 1994. Prior to such time, he was employed by Burr-Brown Corporation, a manufacturer of precision micro-electronics, from 1988, most recently as Vice President, Chief Financial Officer and Director, Ventures and Systems Business.

    Mr. Ford joined ADC in October 1999. From April 1995 to August 1999, Mr. Ford served as President and Chief Executive Officer of Information Advantage, an Eden Prairie, Minnesota-based software company focused on the data warehousing and business intelligence markets. Prior to that time, Mr. Ford served as Chairman and Chief Executive Officer of Systems Software Associates (SSA), a Chicago-based application software company that provides enterprise business information solutions to the industrial sector market, from August 1991 to November 1994. Mr. Ford also served more than 25 years with IBM in various management capacities.

    Mr. Sobti joined ADC in June 1999. Prior to such time, Mr. Sobti was employed by Motorola, Inc. for over 20 years, most recently as Vice President and Director of Solutions Engineering for Motorola's Global Telecom Solutions Group.

    Mr. Roehrick joined ADC in January 1995. Prior to such time, he was employed by Cray Research, Inc., a manufacturer of large scale computers, most recently as Controller. From 1992 to 1993, he was Assistant Controller of Cray Research, and from 1989 to 1991, he was Director of Accounting for Cray Research.

    Mr. Pflaum joined ADC in April 1996 and became Vice President, General Counsel and Secretary of ADC in March 1999. Prior to joining ADC, he was an attorney with the Minneapolis-based law firm of Popham Haik Schnobrich & Kaufman.

    Ms. Owen joined ADC in December 1997. Prior to such time, she was employed by Texas Instruments and Raytheon, manufacturers of high technology systems and components. From 1995 to 1997, she was the Vice President of Human Resources for the Defense Systems and Electronics Group of Texas Instruments, which was sold to Raytheon in 1997.

    Mr. Stewart joined ADC in November 1998. From 1994 to 1999, he served either as Vice President or Executive Vice President, Operations at FSI International, Inc. Between 1973 and 1994, he worked in various management positions with Texas Instruments, Inc. From 1990 to 1994, Mr. Stewart served as General Manager of Texas Instrument's CIM Products Division and Dallas Custom Manufacturing Services businesses. From 1983 to 1990, Mr. Stewart worked in operations management at Texas Instrument's Missile Systems Business and HARM Manufacturing, preceded by 10 years of experience with Texas Instruments.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The section entitled "Quarterly Stock Prices" of the Annual Report is incorporated herein by reference. This section is also included on Exhibit 13-a to this Form 10-K, as filed with the SEC.

Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The summary of certain consolidated statement of income and balance sheet information for the eleven years ended October 31, 1999 included in the Annual Report is incorporated herein by reference. This information is also included on Exhibit 13-a to this Form 10-K, as filed with the SEC. Such summary information should be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference in Item 14 of this Form 10-K.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview," "Results of Operations," "Liquidity and Capital Resources" and "Year 2000 Matters" in the Annual Report are incorporated herein by reference. This section is also included in Exhibit 13-a to this Form 10-K, as filed with the SEC.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    The section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management" in the Annual Report is incorporated herein by reference. This section is also included in Exhibit 13-a to this Form 10-K, as filed with the SEC.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The consolidated financial statements and notes thereto included in the Annual Report are incorporated herein by reference. These financial statements are also included in Exhibit 13-a to this Form 10-K, as filed with the SEC.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

    None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The sections entitled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in ADC's definitive proxy statement for its 2000 Annual Meeting of Shareholders to be filed with the Commission on or before January 29, 2000 (the "Proxy Statement") are incorporated herein by reference. The section entitled "Executive Officers of the Registrant" following Item 4 of this Form 10-K is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

    The section entitled "Executive Compensation" in the Proxy Statement is incorporated herein by reference (except for the information set forth under the subcaption "Compensation and Organization Committee Report on Executive Compensation," which is not incorporated herein).

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The section entitled "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    None.

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)

1.  Financial Statements

    The following consolidated financial statements of ADC are part of this report and are found on the pages of the Annual Report indicated below and incorporated herein by this reference. These financial statements are included on Exhibit 13-a to this Form 10-K, as filed with the SEC.

	Page Reference in the Annual Report to Shareholders
Management's Responsibility for Financial Reporting	29
Report of Independent Public Accountants	29
Consolidated Statements of Income for the years ended October 31, 1999, 1998 and 1997	30
Consolidated Balance Sheets as of October 31, 1999 and 1998	31
Consolidated Statements of Shareowners' Investment for the years ended October 31, 1999, 1998 and 1997	32
Consolidated Statements of Cash Flows for the years ended October 31, 1999, 1998 and 1997	33
Notes to Consolidated Financial Statements	34
Eleven-Year Financial Summary for the years ended October 31, 1989 through October 31, 1999 (Unaudited)	44

    The following reports are part of this report and are included as Exhibits 13-b and 13-c to this Form 10-K, as filed with the SEC.

Report of PricewaterhouseCoopers, Chartered Accountants   and Registered Auditors	Exhibit 13-b
Report of Ernst & Young Chartered Accountants	Exhibit 13-c

2.

Financial Statement Schedules

    All schedules for which provision is made in the applicable accounting regulations of the SEC have been omitted as not required or not applicable, or the information required has been included elsewhere by reference in the financial statements and related notes, except for Schedule II, which is included as Exhibit 99-b to this Form 10-K, as filed with the SEC.

3.

Listing of Exhibits

Exhibit Number	Description
3-a	Restated Articles of Incorporation of ADC Telecommunications, Inc., as amended. (Incorporated by reference to Exhibit 4.1 to ADC's Registration Statement on Form S-3 dated April 15, 1997.)
3-b	Restated Bylaws of ADC Telecommunications, Inc., as amended. (Incorporated by reference to Exhibit 4.2 to ADC's Registration Statement on Form S-3 dated April 15, 1997.)
4-a	Form of certificate for shares of Common Stock of ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 4-a to ADC's Form 10-Q for the quarter ended January 31, 1996.)
4-b	Second Amended and Restated Rights Agreement, amended and restated as of November 28, 1995, between ADC Telecommunications, Inc. and Norwest Bank Minnesota, National Association (amending and restating the Rights Agreement dated as of September 23, 1986, as amended and restated as of August 16, 1989 and November 28, 1995), which includes as Exhibit A thereto the form of Right Certificate. (Incorporated by reference to Exhibit 4 to ADC's Form 8-K dated December 11, 1995.)
4-c	Amendment to Second Amended and Restated Rights Agreement dated as of October 6, 1999.
10-a*	Stock Option and Restricted Stock Plan, restated as of January 26, 1988. (Incorporated by reference to Exhibit 10-a to ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1988.)
10-b*	Amendment to Stock Option and Restricted Stock Plan dated as of September 26, 1989. (Incorporated by reference to Exhibit 10-e to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1989.)
10-c*	ADC Telecommunications, Inc. 1991 Stock Incentive Plan, as amended and restated through February 23, 1999. (Incorporated by reference to Exhibit 10-a to ADC's Quarterly Report on Form 10-Q for the quarter ended January 31, 1999).
10-d*	Business Development Management Incentive Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-f of ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-e*	Business Unit Management Incentive Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-q to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-f*	Corporate Management Incentive Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-r to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-g*	International Management Incentive Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-s to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-h*	Business Unit Management Incentive Plan Fiscal Year 1999. (Incorporated by reference to Exhibit 10-m to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1998.)
10-i*	Corporate Management Incentive Plan Fiscal Year 1999. (Incorporated by reference to Exhibit 10-n to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1998.)
10-j*	ADC Telecommunications Management Incentive Plan Document for Fiscal Year 2000.
10-k*	Executive Incentive Exchange Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-u to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-l*	Executive Incentive Exchange Plan Fiscal Year 1999. (Incorporated by reference to Exhibit 10-q to ADC's Annual Report Form 10-K for the fiscal year ended October 31, 1998.)
10-m*	Executive Incentive Exchange Plan Fiscal Year 2000.
10-n*	Supplemental Executive Retirement Plan Agreement for William J. Cadogan, dated as of November 1, 1990, between ADC Telecommunications, Inc. and William J. Cadogan, as amended. (Incorporated by reference to Exhibit 10-u to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1996.)
10-o*	ADC Telecommunications, Inc. Change in Control Severance Pay Plan Statement and Summary Plan Description. (Incorporated by reference to Exhibit 10-q to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1989.)
10-p*	First Amendment of ADC Telecommunications, Inc. Change in Control Severance Pay Plan Statement and Summary Plan Description, effective July 22, 1997. (Incorporated by reference to Exhibit 10-x to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-q*	Compensation Plan for Directors of ADC Telecommunications, Inc., restated as of December 31, 1988. (Incorporated by reference to Exhibit 10-b to ADC's Quarterly Report on Form 10-Q for the quarter ended January 31, 1989.)
10-r*	First Amendment of the Compensation Plan for Directors of ADC Telecommunications, Inc. restated as of December 31, 1988. (Incorporated by reference to Exhibit 10-s to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1989.)
10-s*	ADC Telecommunications, Inc. Nonemployee Director Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10-aa to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-t*	ADC Telecommunications, Inc. Deferred Compensation Plan, dated as of November 1, 1978, as amended. (Incorporated by reference to Exhibit 10-aa to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1996.)
10-u*	Second Amendment of ADC Telecommunications, Inc. Deferred Compensation Plan, dated effective March 12, 1996 and approved on April 1, 1997. (Incorporated by reference to Exhibit 10-b to ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997.)
10-v*	ADC Telecommunications, Inc. Pension Excess Plan, dated as of January 1, 1985, as amended. (Incorporated by reference to Exhibit 10-bb to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1996.)
10-w*	Second Amendment of ADC Telecommunications, Inc. Pension Excess Plan, dated effective March 12, 1996 and approved on April 1, 1997. (Incorporated by reference to Exhibit 10-a to ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997.)
10-x*	ADC Telecommunications, Inc. 401(k) Excess Plan, dated as of September 1, 1990, as amended. (Incorporated by reference to Exhibit 10-cc to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1996.)
10-y*	Third Amendment of ADC Telecommunications, Inc. 401(k) Excess Plan, dated effective March 12, 1996 and approved on April 1, 1997. (Incorporated by reference to Exhibit 10-c to ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997.)
10-z	Lease Agreement, dated August 21, 1990, between Minnetonka Corporate Center I Limited Partnership and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 10-x to ADC's Annual Report on Form  10-K for the fiscal year ended October 31, 1990.)
10-aa	Lease Agreement, dated October 26, 1990, between Lutheran Brotherhood and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 10-w to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1990.)
10-bb	Sublease Agreement, dated October 31, 1990, between Seagate Technology, Inc. and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 10-y to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1990.)
10-cc	Sublease, dated as of February 21, 1995, between Seagate Technology, Inc. and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 10-a of ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1995.)
10-dd	Extension of Lease, dated December 7, 1995, between ADC Telecommunications, Inc. and Lutheran Brotherhood (for ADC's facility located at 5900 Clearwater Drive, Minnetonka Corporate Center, Minnetonka, Minnesota). (Incorporated by reference to Exhibit 10-w to ADC's Quarterly Report on Form 10-Q for the quarter ended January 31, 1996.)
10-ee	Extension of Lease, dated December 7, 1995, between ADC Telecommunications, Inc. and Lutheran Brotherhood (for ADC's facility located at 5950 Clearwater Drive, Minnetonka Corporate Center, Minnetonka, Minnesota). (Incorporated by reference to Exhibit 10-x to ADC's Quarterly Report on Form 10-Q for the quarter ended January 31, 1996.)
10-ff	Lease, dated as of October 22, 1999, between ADC Telecommunications, Inc. and Lease Plan North America, Inc.
10-gg	Ground Lease, dated as of October 22, 1999, between ADC Telecommunications, Inc. and Lease Plan North America, Inc.
10-hh	Construction Agreement, dated as of October 22, 1999, between ADC Telecommunications, Inc. and Kraus-Anderson Construction Company.
10-ii	Construction Agency Agreement, dated as of October 22, 1999, between Lease Plan North America, Inc. and ADC Telecommunications, Inc.
10-jj	Participation Agreement, dated as of October 22, 1999, among ADC Telecommunications, Inc., Lease Plan North America, Inc., the Participants named therein and ABN AMRO Bank N.V.
10-kk	Conduit Facility, Transfer and Revolving Credit Agreement, dated as of November 24, 1998, by and among ADC Telecommunications, Inc., Windmill Funding Corporation, Amsterdam Funding Corporation, ABN AMRO Bank N.V., and certain other financial institutions. (Incorporated by reference to Exhibit 10-kk to ADC's Form 10-K for the year ended October 31, 1998.)
13-a	Portions of the 1999 Annual Report to Shareholders.
13-b	Report of PricewaterhouseCoopers, Chartered Accountants and Registered Auditors.
13-c	Report of Ernst & Young Chartered Accountants.
21-a	Subsidiaries of ADC Telecommunications, Inc.
23-a	Consent of Arthur Andersen LLP.
23-b	Consent of PricewaterhouseCoopers, Chartered Accountants and Registered Auditors.
23-c	Consent of Ernst & Young Chartered Accountants.
24-a	Power of Attorney.
27-a	Financial Data Schedule for the fiscal year ended October 31, 1999.
27-b	Restated Financial Data Schedule for the fiscal year ended October 31, 1998.
27-c	Restated Financial Data Schedule for the fiscal year ended October 31, 1997.
99-a	Cautionary Statement regarding Forward-Looking Statements.
99-b	Report of Arthur Andersen LLP and Schedule II.

There have been excluded from the exhibits filed with this report instruments defining the rights of holders of long-term debt of ADC where the total amount of the securities authorized under such instruments does not exceed 10% of the total assets of ADC. ADC hereby agrees to furnish a copy of any such instruments to the Commission upon request.

(b)

The following Reports on Form 8-K were filed during the last quarter of the period covered by this report:

•

Report on Form 8-K dated August 18, 1999, filed in connection with the election of new directors to ADC's Board of Directors; and

•

Report on Form 8-K dated October 12, 1999, filed in connection with the acquisition of Saville Systems PLC.

(c)

See Item 14(a)(3) above.

(d)

See Item 14(a)(2) above.

*

Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-K.

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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.

	ADC Telecommunications, Inc.
Dated: December 30, 1999	By:	/s/ WILLIAM J. CADOGAN William J. Cadogan Chairman of the Board, President and Chief Executive Officer

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ WILLIAM J. CADOGAN William J. Cadogan	Chairman of the Board, President and Chief Executive Officer (principal executive officer)	Dated: December 30, 1999
/s/ ROBERT E. SWITZ Robert E. Switz	Senior Vice President, Chief Financial Officer (principal financial officer)	Dated: December 30, 1999
/s/ CHARLES T. ROEHRICK Charles T. Roehrick	Vice President, Controller (principal accounting officer)	Dated: December 30, 1999
John A. Blanchard III*	Director
John J. Boyle III*	Director
James C. Castle*	Director
Thomas E. Holloran*	Director
B. Kristine Johnson*	Director
Alan E. Ross*	Director
Jean-Pierre Rosso*	Director
John W. Sidgmore*	Director
John D. Wunsch*	Director
Charles D. Yost	Director

 
*By:  
/s/ JEFFREY D. PFLAUM Jeffrey D. Pflaum
Attorney-in-Fact  
Dated: December 30, 1999

ADC Telecommunications, INC.

Annual Report on Form 10-K

For the Fiscal Year Ended October 31, 1999

EXHIBIT INDEX

Exhibit Number	Description	Page
3-a	Restated Articles of Incorporation of ADC Telecommunications, Inc., as amended. (Incorporated by reference to Exhibit 4.1 to ADC's Registration Statement on Form S-3 dated April 15, 1997.)
3-b	Restated Bylaws of ADC Telecommunications, Inc., as amended. (Incorporated by reference to Exhibit 4.2 to ADC's Registration Statement on Form S-3 dated April 15, 1997.)
4-a	Form of certificate for shares of Common Stock of ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 4-a to ADC's Form 10-Q for the quarter ended January 31, 1996.)
4-b	Second Amended and Restated Rights Agreement, amended and restated as of November 28, 1995, between ADC Telecommunications, Inc. and Norwest Bank Minnesota, National Association (amending and restating the Rights Agreement dated as of September 23, 1986, as amended and restated as of August 16, 1989 and November 28, 1995), which includes as Exhibit A thereto the form of Right Certificate. (Incorporated by reference to Exhibit 4 to ADC's Form  8-K dated December 11, 1995.)
4-c	Amendment to Second Amended and Restated Rights Agreement dated as of October 6, 1999.
10-a*	Stock Option and Restricted Stock Plan, restated as of January 26, 1988. (Incorporated by reference to Exhibit 10-a to ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1988.)
10-b*	Amendment to Stock Option and Restricted Stock Plan dated as of September 26, 1989. (Incorporated by reference to Exhibit 10-e to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1989.)
10-c*	ADC Telecommunications, Inc. 1991 Stock Incentive Plan, as amended and restated through February 23, 1999. (Incorporated by reference to Exhibit 10-a to ADC's Quarterly Report on Form 10-Q for the quarter ended January 31, 1999).
10-d*	Business Development Management Incentive Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-f of ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-e*	Business Unit Management Incentive Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-q to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-f*	Corporate Management Incentive Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-r to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-g*	International Management Incentive Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-s to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-h*	Business Unit Management Incentive Plan Fiscal Year 1999. (Incorporated by reference to Exhibit 10-m to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1998.)
10-i*	Corporate Management Incentive Plan Fiscal Year 1999. (Incorporated by reference to Exhibit 10-n to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1998.)
10-j*	ADC Telecommunications Management Incentive Plan Document for Fiscal Year 2000.
10-k*	Executive Incentive Exchange Plan Fiscal Year 1998. (Incorporated by reference to Exhibit 10-u to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-l*	Executive Incentive Exchange Plan Fiscal Year 1999. (Incorporated by reference to Exhibit 10-q to ADC's Annual Report Form 10-K for the fiscal year ended October 31, 1998.)
10-m*	Executive Incentive Exchange Plan Fiscal Year 2000.
10-n*	Supplemental Executive Retirement Plan Agreement for William J. Cadogan, dated as of November 1, 1990, between ADC Telecommunications, Inc. and William J. Cadogan, as amended. (Incorporated by reference to Exhibit 10-u to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1996.)
10-o*	ADC Telecommunications, Inc. Change in Control Severance Pay Plan Statement and Summary Plan Description. (Incorporated by reference to Exhibit 10-q to ADC's Annual Report on Form 10-K for the fiscal year ended October  31, 1989.)
10-p*	First Amendment of ADC Telecommunications, Inc. Change in Control Severance Pay Plan Statement and Summary Plan Description, effective July 22, 1997. (Incorporated by reference to Exhibit 10-x to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-q*	Compensation Plan for Directors of ADC Telecommunications, Inc., restated as of December 31, 1988. (Incorporated by reference to Exhibit 10-b to ADC's Quarterly Report on Form 10-Q for the quarter ended January  31, 1989.)
10-r*	First Amendment of the Compensation Plan for Directors of ADC Telecommunications, Inc. restated as of December 31, 1988. (Incorporated by reference to Exhibit 10-s to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1989.)
10-s*	ADC Telecommunications, Inc. Nonemployee Director Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10-aa to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1997.)
10-t*	ADC Telecommunications, Inc. Deferred Compensation Plan, dated as of November 1, 1978, as amended. (Incorporated by reference to Exhibit 10-aa to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1996.)
10-u*	Second Amendment of ADC Telecommunications, Inc. Deferred Compensation Plan, dated effective March 12, 1996 and approved on April 1, 1997. (Incorporated by reference to Exhibit 10-b to ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997.)
10-v*	ADC Telecommunications, Inc. Pension Excess Plan, dated as of January 1, 1985, as amended. (Incorporated by reference to Exhibit 10-bb to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1996.)
10-w*	Second Amendment of ADC Telecommunications, Inc. Pension Excess Plan, dated effective March 12, 1996 and approved on April 1, 1997. (Incorporated by reference to Exhibit 10-a to ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997.)
10-x*	ADC Telecommunications, Inc. 401(k) Excess Plan, dated as of September 1, 1990, as amended. (Incorporated by reference to Exhibit 10-cc to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1996.)
10-y*	Third Amendment of ADC Telecommunications, Inc. 401(k) Excess Plan, dated effective March 12, 1996 and approved on April 1, 1997. (Incorporated by reference to Exhibit 10-c to ADC's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997.)
10-z	Lease Agreement, dated August 21, 1990, between Minnetonka Corporate Center I Limited Partnership and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 10-x to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1990.)
10-aa	Lease Agreement, dated October 26, 1990, between Lutheran Brotherhood and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 10-w to ADC's Annual Report on Form 10-K for the fiscal year ended October  31, 1990.)
10-bb	Sublease Agreement, dated October 31, 1990, between Seagate Technology, Inc. and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 10-y to ADC's Annual Report on Form 10-K for the fiscal year ended October 31, 1990.)
10-cc	Sublease, dated as of February 21, 1995, between Seagate Technology, Inc. and ADC Telecommunications, Inc. (Incorporated by reference to Exhibit 10-a of ADC's Quarterly Report on Form 10-Q for the quarter ended April  30, 1995.)
10-dd	Extension of Lease, dated December 7, 1995, between ADC Telecommunications, Inc. and Lutheran Brotherhood (for ADC's facility located at 5900 Clearwater Drive, Minnetonka Corporate Center, Minnetonka, Minnesota). (Incorporated by reference to Exhibit 10-w to ADC's Quarterly Report on Form 10-Q for the quarter ended January 31, 1996.)
10-ee	Extension of Lease, dated December 7, 1995, between ADC Telecommunications, Inc. and Lutheran Brotherhood (for ADC's facility located at 5950 Clearwater Drive, Minnetonka Corporate Center, Minnetonka, Minnesota). (Incorporated by reference to Exhibit 10-x to ADC's Quarterly Report on Form 10-Q for the quarter ended January 31, 1996.)
10-ff	Lease, dated as of October 22, 1999, between ADC Telecommunications, Inc. and Lease Plan North America, Inc.
10-gg	Ground Lease, dated as of October 22, 1999, between ADC Telecommunications, Inc. and Lease Plan North America, Inc.
10-hh	Construction Agreement, dated as of October 22, 1999, between ADC Telecommunications, Inc. and Kraus-Anderson Construction Company.
10-ii	Construction Agency Agreement, dated as of October 22, 1999, between Lease Plan North America, Inc. and ADC Telecommunications, Inc.
10-jj	Participation Agreement, dated as of October 22, 1999, among ADC Telecommunications, Inc., Lease Plan North America, Inc., the Participants named therein and ABN AMRO Bank N.V.
10-kk	Conduit Facility, Transfer and Revolving Credit Agreement, dated as of November 24, 1998, by and among ADC Telecommunications, Inc., Windmill Funding Corporation, Amsterdam Funding Corporation, ABN AMRO Bank N.V., and certain other financial institutions. (Incorporated by reference to Exhibit 10-kk to ADC's Form 10-K for the year ended October 31, 1998.)
13-a	Portions of the 1999 Annual Report to Shareholders.
13-b	Report of PricewaterhouseCoopers, Chartered Accountants and Registered Auditors.
13-c	Report of Ernst & Young Chartered Accountants.
21-a	Subsidiaries of ADC Telecommunications, Inc.
23-a	Consent of Arthur Andersen LLP.
23-b	Consent of PricewaterhouseCoopers, Chartered Accountants and Registered Auditors.
23-c	Consent of Ernst & Young Chartered Accountants.
24-a	Power of Attorney.
27-a	Financial Data Schedule for the fiscal year ended October 31, 1999.
27-b	Restated Financial Data Schedule for the fiscal year ended October 31, 1998.
27-c	Restated Financial Data Schedule for the fiscal year ended October 31, 1997.
99-a	Cautionary Statement regarding Forward-Looking Statements.
99-b	Report of Arthur Andersen LLP and Schedule II.

*

Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-K.

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PART II
PART III
PART IV

ADC Telecommunications, INC.
EXHIBIT INDEX

EX-4.B

AMENDMENT TO RIGHTS AGREEMENT

    Amendment dated as of October 6, 1999 (this "Amendment") to Second Amended and Restated Rights Agreement dated as of November 28, 1995 (the "Rights Agreement"), between ADC Telecommunications, Inc., a Minnesota corporation (the "Company"), and Norwest Bank Minnesota, N.A., a national banking association, as Rights Agent (the "Rights Agent").

W I T N E S S E T H

    WHEREAS, as of November 28, 1995, the Company and the Rights Agent entered into the Rights Agreement; and

    WHEREAS, the Board of Directors of the Company by a written action dated October 6, 1999 determined to amend the Rights Agreement as permitted by Section 27 thereof, and directed the Rights Agent to enter into this Amendment.

    NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

    1.  Section 1 of the Rights Agreement is amended by deleting paragraph (g) thereof in its entirety.

    2.  Section 1 of the Rights Agreement is further amended by renumbering paragraphs (h), (i), (j), (k), (l), (m), (n) and (o) as paragraphs (g), (h), (i), (j), (k), (l), (m) and (n), respectively.

    3.  Section 7(e) of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors (or, if are no Continuing Directors, the Board of Directors)" with the words "the Board of Directors".

    4.  Section 11(a)(iv) of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors (or, if are no Continuing Directors, the Board of Directors)" with the words "the Board of Directors".

    5.  Section 11(a)(iv) of the Rights Agreement is further amended by replacing the words "a majority of the Continuing Directors (or the Board of Directors)" each time they appear with the words "the Board of Directors".

    6.  Section 11(b) of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors (or, if are no Continuing Directors, the Board of Directors)" with the words "the Board of Directors".

    7.  Section 11(c) of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors or, if there are no Continuing Directors, the Board of Directors" with the words "the Board of Directors".

    8.  Section 11(d) of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors (or, if there are no Continuing Directors, the Board of Directors)" each time they appear with the words "the Board of Directors".

    9.  Section 11(m) of the Rights Agreement is amended by replacing the words "their sole discretion a majority of the Continuing Directors (or, if there are no Continuing Directors, the Board of Directors)" with the words "its sole discretion the Board of Directors".

    10. Section 11(n) of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors" with the words "the Board of Directors".

    11. Section 14(a) of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors (or, if there are no Continuing Directors, the Board of Directors)" with the words "the Board of Directors".

    12. Section 14(a) of the Rights Agreement is further amended by replacing the words "a majority of the Continuing Directors (or the Board of Directors)" with the words "the Board of Directors".

    13. Section 16 of the Rights Agreement is amended by replacing the words "the Board of Directors and the Continuing Directors" with the words "and the Board of Directors".

    14. Section 23(a) of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors (or, if there are no Continuing Directors, the Board of Directors) may, at their" with the words "the Board of Directors may, at its".

    15. Section 23(a) of the Rights Agreement is further amended by replacing the words "Continuing Directors (or the Board of Directors)" each time they appear with the words "Board of Directors".

    16. Section 23(a) of the Rights Agreement is further amended to eliminate the words "Continuing Directors" in the last sentence of such section.

    17. Section 23(b) of the Rights Agreement is amended by replacing the words "Continuing Directors (or the Board of Directors)" each time they appear with the words "Board of Directors".

    18. Section 24(a) of the Rights Agreement is amended by deleting the words "(at a time when a majority of the members of the Board of Directors then serving are Continuing Directors)" in the first sentence of such section.

    19. Section 27 of the Rights Agreement is amended by replacing the words "at least a majority of the Continuing Directors (or, if there are no Continuing Directors, the Board of Directors)" with the words "the Board of Directors".

    20. Section 27 of the Rights Agreement is further amended to replace the words "Continuing Directors (or the Board of Directors)" with the words "Board of Directors".

    21. Section 30 of the Rights Agreement is amended to eliminate the words "(and/or, as provided for herein, the Continuing Directors)" each time they appear in the first sentence of such section.

    22. Section 30 of the Rights Agreement is further amended by deleting the words "and/or the Continuing Directors" in the second sentence of such section.

    23. Section 30 of the Rights Agreement is further amended by deleting the words "and the Continuing Directors, as the case may be," in the third sentence of such section.

    24. Section 31 of the Rights Agreement is amended by replacing the words "a majority of the Continuing Directors (or, if there are no Continuing Directors, the Board of Directors)" with the words "the Board of Directors".

    25. Except as set forth above, the Rights Agreement shall be unchanged and remain in full force and effect in its original form.

    IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year above written.

ADC TELECOMMUNICATIONS, INC.
By	/s/ ROBERT E. SWITZ
Its	Senior Vice President, Chief Financial Officer
NORWEST BANK MINNESOTA, N.A.
By	/s/ KENNETH SWANSON
Its	Vice President

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AMENDMENT TO RIGHTS AGREEMENT
W I T N E S S E T H

EX-10.J

ADC TELECOMMUNICATIONS
MANAGEMENT INCENTIVE PLAN DOCUMENT
FISCAL YEAR 2000

ADC TELECOMMUNICATIONS
MANAGEMENT INCENTIVE PLAN DOCUMENT
FISCAL YEAR 2000

I.   PLAN NAME AND EFFECTIVE DATE

The name of this Plan is the ADC Telecommunications, Inc. ("Company"), Management Incentive Plan—Fiscal Year ("FY") 2000, effective November 1, 1999 through October 31, 2000.

II.   PURPOSE

The purpose of the Plan is to provide, with full regard to the protection of shareholder's investments, a direct financial incentive for eligible management employees to perform an effective leadership role and make a significant contribution to the Company's established goals.

III.  ADMINISTRATION

This Plan will be administered by a Management Incentive Plan Committee ("Committee") appointed and authorized by the Company's Board of Directors. Subject to the complete and full discretion of the Board of Directors, the Committee is authorized to make all decisions as required in administration of the Plan and to exercise its discretion to define, interpret, construe, apply and make any exceptions to the terms of the Plan.

IV.  ELIGIBILITY

The Committee establishes rules of eligibility for participation in the Plan and determines eligibility in accordance with those rules. Participation is effective as of the date approved by the Committee and is communicated to the participant by an incentive opportunity statement ("Participant Form") specifying the target incentive level for the position held by the participant. No employee will become a participant in the Plan after October 1, 2000.

V.   TIME OF PAYMENT

Payments which become due under this Plan are made as soon as administratively feasible following the close of the Company's fiscal year.

VI.  PLAN GOALS

The Plan reinforces the key goals which support ADC's long-term strategic plans. The FY 2000 goals are as follows:

Corporate Participants		Group/Division Participants
•	ADC EVA Improvement*	•	ADC EVA Improvement*
•	ADC Revenue	•	Group and/or Division EVA Improvement*
•	ADC New Product Revenue	•	Group or Division Revenue
		•	Key Group/Division Goal (not applicable for Heads of Sales, see attached goal sheet for specifics)

The goal weights and threshold, target, and maximum performance levels are specified on the attached goal sheet.

•

EVA Improvement is the dollar amount of planned year-over-year improvement in EVA. If the previous year (FY 1999) EVA Improvement was below the threshold level, the current year (FY 2000) EVA Improvement will be calculated using the previous year's (FY 1999) threshold level EVA amount.

Individual Performance

In addition to the goals indicated above, an individual performance factor will be applied to the calculation of your MIP payout. The factor ranges from 50% to 150% of your overall payout.

VII.  MINIMUM PERFORMANCE PAYOUT REQUIREMENTS

To ensure protection of shareholder interest before an incentive payout can be generated, the following criteria must be met:

Corporate Participants		Group/Division Participants
•	ADC EVA must be positive and;	•	ADC EVA must be positive and;
•	The threshold level of ADC Revenue or ADC EVA Improvement must be met	•	The threshold level of ADC EVA Improvement or Group and/or Division EVA Improvement or Group or Division Revenue must be met

VIII. CALCULATION OF PAYMENTS

A.

Determination of Achievement Against Goals and Obligation to Make Payments.

1.

The obligation to make payments under the Plan will be determined by achievement of goals determined by the Board of Directors.

2.

The payout opportunity for meeting threshold, target and maximum goal levels are as follows:

Threshold	Target	Maximum
0% of Target Incentive Opportunity	100% of Target Incentive Opportunity	300% of Target Incentive Opportunity

•

Results between threshold-target and target-maximum are interpolated.



•

Your individual target incentive opportunity is indicated on your participant form

B.

Calculation of individual payments under this plan is a function of:

1.

Target incentive opportunity—expressed as a percentage of an individual's FY 2000 earnings.

2.

Participant's 2000 fiscal year base salary earnings.

3.

Performance against the established goals.

4.

Individual performance factor.

C.

Individual award calculations are shown by the following example:

Assume we have a Group Plan participant with the following facts:

Grade:	15
Target Payout:	15% of base salary earnings
Base Salary Earnings:	$70,000

Minimum performance payout requirements are met.

Goal	Weight		Achievement
			(As a % of Target)
ADC EVA Improvement	30	%	100	%
Group EVA Improvement	30	%	95	%
Group Revenue	20	%	110	%
Key Division Goal	20	%	100	%
Overall Result as % of Target			101	%
Individual Performance Factor			100	%

Calculation of Payment:

$70,000 (FY Earnings) × 15% (Target Incentive Opportunity) × 101% (Overall Result as a % of Target) × 100% (Individual Performance Factor) =$10,605.

IX.  EFFECT OF CHANGE IN EMPLOYMENT STATUS

A.

Termination of Employment. A participant who terminates employment for any reason prior to the end of the Fiscal Year receives no payment under the Plan.

B.

Change Based Upon Promotion or Demotion To Another Eligible Plan Job With the Same MIP Goals. A current participant who is promoted or demoted from an incentive eligible position to another incentive eligible position with the same MIP goals during the fiscal year has a pro rata calculation of payment based upon the time served in each position during the Fiscal Year, provided at least three months was served in each position. If a participant is in an eligible position for less than three months during the fiscal year, the payment calculation is based on the incentive level of the position served in the longest.

C.

Change in Jobs Within the Company but not Eligible for a Management Incentive Plan. A participant who changes jobs within the Company but is not eligible for this Plan, retains the right to a pro rata payout under this Plan based on the length of time in the eligible position provided at least three months was served in the eligible position.

D.

Change Based Upon a Transfer. A transfer is defined as a change in position which results in the MIP participant working under new MIP goals. How a transfer payout is calculated is based on the quarter in which the effective date occurs. The guideline is as follows:

Fiscal Year Qtr of Effective Date	Impact on MIP Payout Calculation
1st Quarter	Payout is based on the new MIP goals for the entire fiscal year
2nd & 3rd Quarter	The participant's payout for the period prior to the effective date of the transfer will be based on the old Plan. The participant's payout after the effective date of the transfers will be based on the overall MIP results of the old goals or the new goals, whichever result in a higher payout for the participant. For this comparison, the calculation of the payout for the old goals will be based on the same level of payout the employee would have received if the employee had not been transferred including their prior salary and target incentive level.
4th Quarter	Payout is based on the old MIP goals for the entire fiscal year

E.

Death. If a participant dies during the fiscal year, the participant's heirs as determined by will or applicable laws of descent and distribution has a pro-rata calculation of payment based upon the time the participant served in the eligible position during the fiscal year.

X.   COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986

If a current Plan year payout causes the participant's total cash compensation to exceed one million dollars in the Fiscal Year, the participant must defer the portion that exceeds the one million dollars in the ADC Telecommunications Deferred Compensation Plan.

XI.  AMENDMENT OR TERMINATION OF PLAN

The Board of Directors reserves and retains the right to modify, rescind or terminate this plan in whole or in part, at its sole discretion, and nothing in this Plan limits this right in any way or creates any rights in any employee of future participation in this Plan or any other plan, or constitutes any guarantee of compensation or employment with ADC. Further, neither the Board of Directors nor the Company has any obligation under this Plan or otherwise to adopt this or any other plan in any future fiscal year.

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ADC TELECOMMUNICATIONS MANAGEMENT INCENTIVE PLAN DOCUMENT FISCAL YEAR 2000
ADC TELECOMMUNICATIONS MANAGEMENT INCENTIVE PLAN DOCUMENT FISCAL YEAR 2000

EX-10.M

ADC TELECOMMUNICATIONS, INC.
EXECUTIVE INCENTIVE EXCHANGE PLAN
FISCAL YEAR 2000

ADC TELECOMMUNICATIONS, INC.
EXECUTIVE INCENTIVE EXCHANGE PLAN
FISCAL YEAR 2000

I.	PLAN NAME AND EFFECTIVE DATE
The name of this Plan is the ADC Telecommunications, Inc. ("Company") Executive Incentive Exchange Plan—Fiscal Year 2000 ("FY 2000"), effective November 1, 1999 through October 31, 2000.
II.	PURPOSE
The purpose of the Plan is to provide exceptional rewards for exceptional performance of eligible executives, align executive rewards with shareholder interests, and provide an incentive for retention.
III.	ADMINISTRATION
This Plan will be administered by the same Committee ("Committee") appointed and authorized by the Company's Board of Directors to administer the Company's 1991 Stock Incentive Plan. The Committee is authorized to make all decisions as required in administration of the Plan and to exercise its discretion to define, interpret, construe, apply, and make any exceptions to the terms of the Plan.
IV.	STOCK OPTION ISSUANCE
All stock options issued under this Plan will be granted under the Company's 1991 Stock Incentive Plan and/or its successor plans.
V.	ELIGIBILITY
The Committee will establish rules of eligibility for participation in the Plan in accordance with the 1991 Stock Incentive Plan and determine eligibility in accordance with those rules. Eligibility is limited to Corporate and Divisional Vice Presidents who receive approval from the Chief Executive Officer for participation in the Fiscal Year Plan. All Plan participants must also be participants under the Company's Management Incentive Plan ("MIP"). No employee will become a participant after November 1, 1999.
VI.	PLAN GOALS AND ACHIEVEMENT
All goals and objectives under this Plan shall be identical to the goals and objectives stated in each participant's MIP. Total payouts are calculated in the same fashion as payouts made under the applicable MIP.
VII.	EXCHANGE ELECTION
Prior to the beginning of FY 2000, participants may irrevocably elect to exchange up to 50% of their FY 2000 MIP award for options to purchase common stock of the Company. Such elections may be made in 10% increments up to a maximum of 50% of the cash MIP award. No exchange will be made if the portion elected for exchange is less than One Hundred Dollars ($100.00).
VIII.	EXCHANGE DATE
Exchanges made under this Plan will be made as soon as administratively feasible following the close of FY 2000 and as soon as MIP awards are approved.
IX.	EXCHANGE CALCULATION
The MIP award that will be used to calculate the exchange to options will be the incentive amount eligible to be paid for the fiscal year.
The dollar amount of the MIP award elected to be exchanged will first be multiplied by an exchange factor ("Factor") of six (6). This amount is then divided by the Black-Scholes value of an option to purchase one share of ADC common stock on the last day of FY 1999 to determine the number of option shares to be received by the participant.
This Black-Scholes value will reflect the vesting characteristics of the options to be granted under this Plan and other characteristics as appropriate, and as such may differ from the Black-Scholes value applied for other options granted under other Company plans. The final number of shares will be rounded down if necessary to the nearest whole share.
This exchange causes payment of the MIP cash incentive amount exchanged to be forfeited, except as described under Section XIV.
X.	NATURE OF OPTIONS TO BE GRANTED
All options granted under this Plan will be nonqualified stock options, that are not "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
XI.	TERM AND VESTING OF OPTIONS
All options granted under this Plan will have a term and method of exercise as determined by the Committee. The term will be 10 years from the date of grant. Options will vest in three (3) equal annual installments, beginning one (1) year after the grant date.
XII.	EXERCISE PRICE OF OPTIONS
The exercise price of the stock options granted under this Plan will be the Fair Market Value of the Company's common stock on the last business day of the fiscal year and be determined in accordance with the 1991 Stock Incentive Plan.
XIII.	STOCK OPTION GRANT DATE
The effective date of the stock options granted under the Plan will be the last business day of the fiscal year.
XIV.	EFFECT OF CHANGE IN EMPLOYMENT STATUS ON CURRENT YEAR ELECTIONS (CHANGES DURING THE PLAN YEAR)
A.	Termination of Employment. A participant who terminates employment prior to the end of FY 2000 will relinquish all rights to the grant of any stock option under this plan and will forfeit the MIP cash equivalent amount as defined in his/her irrevocable exchange election.
B.	Change in Job Status Based Upon a Demotion. A participant who is demoted from an eligible position under this Plan to an ineligible position will exchange the pro-rata portion of cash MIP award that is calculated according to the time served in the eligible position during FY 2000, provided at least three months was served in the eligible position.
C.	Death. If a participant dies during FY 2000, the participant's heirs as determined by will or applicable laws of descent and distribution will have no right to receive any stock options under this plan. Heirs will receive instead the cash equivalent of the pro-rata MIP award that is calculated according to the MIP Plan, but not subject to the Factor.
XV.	EFFECT OF CHANGE IN EMPLOYMENT STATUS OCCURRING AFTER FY 2000 ON EXCHANGES MADE IN FY 2000
All stock options already awarded under this Plan will vest fully upon a participant's death, disability, or voluntary retirement. For purposes of this Plan, retirement from the Company shall be defined as having attained age 55 with 10 years of service with the Company ("early retirement"), or age 65 with 5 years of service with the Company ("normal retirement").
If a participant terminates for any other reason, termination provisions will be applied. For each grant or exchange already made, if the participant terminates prior to the vesting of the first one third of the options, all options and the MIP cash equivalent amount will be immediately forfeited. If the participant terminates after the first one third of the options have vested, all vested options will remain exercisable for a period of one (1) year. All unvested options will be forfeited, and no cash equivalent will be provided.
XVI.	EFFECT OF CHANGE IN CONTROL ON EXCHANGES ALREADY MADE
In the event of a change in control of the Company as referenced in stock option agreements issued pursuant to this Plan, all unvested options will immediately vest in full.
XVII.	AMENDMENT OR TERMINATION OF PLAN
The Board of Directors reserves and retains the right to modify, rescind or terminate this Plan in whole or in part, at its sole discretion, and nothing in this Plan limits this right in any way or creates any rights in any employee in future participation in this Plan or any other Plan, or constitutes any guarantee of compensation or employment with ADC. Further, neither the Board of Directors nor the Company has any obligation under this Plan or otherwise to adopt this or any other plan in any future fiscal year.

ATTACHMENT I
EXCHANGE EXAMPLE

Assumptions
Annual earnings for FY 2000:	$100,000
Exchange election:	50% of MIP award
MIP award:	$30,000
*FMV of stock on 10/29/99:	$40.00
Black-Scholes factor for option on 10/29/99:	.60 (actual factor will vary)
Black-Scholes value of option on 10/29/99:	$40.00× .60 = $24.00
*Exercise price of option (10/31/00):	$46.00
Grant date:	October 31, 2000

    *Last business day of the fiscal year 2000

Exchange Calculation

    MIP Award × Exchange Election × Exchange Factor =
Black-Scholes Value of Option on 10/30/98

$30,000 × 50% × 6 =
$40.00 × .60

$90,000 =
$24.00 

3,750 options at an exercise price of $46.00 per share

Vesting

1,250 shares vest on 10/31/01

1,250 shares vest on 10/31/02

1,250 shares vest on 10/31/03

Five Year Projected Value of Award

•

Assume 10% annual stock price appreciation

•

Assumed stock price 10/31/05 = $74.08

•

5 year gain: $74.08 - $46.00 (exercise price) = $28.08

•

Projected value: 3,750 × $28.08 = $105,300 vs. $15,000 original amount exchanged

ADC TELECOMMUNICATIONS, INC.
FY 2000 MANAGEMENT INCENTIVE PLAN
PAYOUT DISTRIBUTION OPTIONS

I hereby make the following irrevocable elections for the current plan year:

I.  2000 Executive Incentive Exchange Plan (Check and complete one line only)

       I wish to have 100% of my incentive paid under the terms of the ADC Telecommunications, Inc. Management Incentive Plan; or:

       I wish to participate in the Executive Incentive Exchange Plan and receive        % (at least 50%, in a multiple of 10%) of my annual MIP award to be paid under the terms of the Management Incentive Plan, and to receive stock options based upon a value equal to        % of my annual MIP award up to 50% in accordance with the Executive Incentive Exchange Plan, except that no exchange will be made if the portion elected for exchange is less than One Hundred Dollars ($100.00).

II.  Deferred Compensation Plan

A.  Deferred Compensation Election Amount (Check and complete one line only)

Of the cash amount remaining after my election in Section I above, I elect:

       To defer none of this remaining annual cash MIP award under the Deferred Compensation Plan (no deferral); or:

       To defer        % of this remaining annual cash MIP award under the Deferred Compensation Plan, except that no deferral will be made if the portion elected for deferral is less than One Hundred Dollars ($100.00); or:

       To defer one hundred percent (100%) of the balance over $       of the remaining annual cash MIP award under the Deferred Compensation Plan, except that the amount hereby excluded from deferral shall not be less than One Hundred Dollars ($100.00).

B.  Deferred Compensation Distribution Option

This section should only be completed if you have elected to defer a portion of your FY 2000 Management Incentive Payout under the Deferred Compensation Plan (Section IIA above). Because of the potential tax implications at distribution, you may want to consult a tax advisor.

At termination of employment, I elect to have my deferred compensation account balance distributed:

       In a lump sum; or

       In ten equal annual installments (This installment form will be available only if the single lump sum value of my benefit at termination is at least $100,000.)

I hereby certify that I have been given a copy of all applicable plan documents, that I have read them, and that I understand their provisions.

	Name (print or type)
Attest	Signature
Date	Date

QuickLinks

ADC TELECOMMUNICATIONS, INC. EXECUTIVE INCENTIVE EXCHANGE PLAN FISCAL YEAR 2000
ADC TELECOMMUNICATIONS, INC. EXECUTIVE INCENTIVE EXCHANGE PLAN FISCAL YEAR 2000

ATTACHMENT I EXCHANGE EXAMPLE
ADC TELECOMMUNICATIONS, INC. FY 2000 MANAGEMENT INCENTIVE PLAN PAYOUT DISTRIBUTION OPTIONS

EX-10.FF

LEASE

THIS DOCUMENT SECURES FUTURE ADVANCES

Dated as of October 22, 1999

between

ADC TELECOMMUNICATIONS, INC.,
as Lessee and Mortgagor,

and

LEASE PLAN NORTH AMERICA, INC.
not in its individual capacity
except as expressly stated herein,
but solely as Agent Lessor
for the Participants, as
Agent Lessor and Mortgagee

ADC 1999 Lease Financing

This Lease has been executed in several counterparts. To the extent, if any, that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Lease may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by Agent Lessor on or following the signature page hereof.

This counterpart is not the original counterpart.

TABLE OF CONTENTS

ARTICLE I DEFINITIONS
SECTION 1.1.	Definitions; Interpretation	1
ARTICLE II LEASE OF PREMISES; LEASE TERM
SECTION 2.1.	Acceptance and Lease of the Premises.	1
SECTION 2.2.	Acceptance Procedure.	1
SECTION 2.3.	Term.	2
SECTION 2.4.	Title	2
ARTICLE III PAYMENT OF RENT
SECTION 3.1.	Rent; Loan to Value Optional Prepayment	2
SECTION 3.2.	Payment of Basic Rent	3
SECTION 3.3.	Supplemental Rent	3
SECTION 3.4.	Method of Payment	3
ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT
SECTION 4.1.	Non-Interference	3
SECTION 4.2.	Inspection and Reports	4
ARTICLE V NET LEASE, ETC.
SECTION 5.1.	Net Lease	4
SECTION 5.2.	No Termination or Abatement	5
ARTICLE VI SUBLEASES; SPACE LEASES
ARTICLE VII LESSEE ACKNOWLEDGMENTS
SECTION 7.1.	Condition of the Premises	6
SECTION 7.2.	Risk of Loss	6
SECTION 7.3.	Certain Duties and Responsibilities of Agent Lessor	7
ARTICLE VIII POSSESSION AND USE OF THE PROPERTY, ETC.
SECTION 8.1.	Utility and Other Charges	7
SECTION 8.2.	Possession and Use of the Premises	7
SECTION 8.3.	Compliance with Requirements of Law and Insurance Requirements	7
ARTICLE IX MAINTENANCE AND REPAIR; REPORTS
SECTION 9.1.	Maintenance and Repair; Reports	8
SECTION 9.2.	Maintenance and Repair Reports	8
ARTICLE X MODIFICATIONS, ETC.
SECTION 10.1.	Improvements and Modifications	8
SECTION 10.2.	Title to Modifications	9
SECTION 10.3.	Other Property	10
ARTICLE XI COVENANTS WITH RESPECT TO LIENS; EASEMENTS
SECTION 11.1.	Covenants with Respect to Liens	10
SECTION 11.2.	Lessee's Grants and Releases of Easements; Agent Lessor's Waivers	11
ARTICLE XII PERMITTED CONTESTS
SECTION 12.1.	Permitted Contests in Respect of Applicable Laws	11
ARTICLE XIII INSURANCE
SECTION 13.1.	Required Coverages	12
SECTION 13.2.	Insurance Coverage	13
SECTION 13.3.	Delivery of Insurance Certificates	13
SECTION 13.4.	Insurance by Agent Lessor or any Participant	14
ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
SECTION 14.1.	Casualty and Condemnation	14
SECTION 14.2.	Environmental Matters	15
SECTION 14.3.	Notice of Environmental Matters	16
ARTICLE XV TERMINATION OF LEASE
SECTION 15.1.	Termination upon Certain Events	16
SECTION 15.2.	Termination Procedures	17
ARTICLE XVI EVENTS OF DEFAULT
SECTION 16.1.	Lease Events of Default	18
SECTION 16.2.	Remedies	19
SECTION 16.3.	Waiver of Certain Rights	21
SECTION 16.4.	Power of Sale and Foreclosure	21
SECTION 16.5.	Grant of Security Interest	22
SECTION 16.6.	Limitation of Recourse During the Interim Term	22
ARTICLE XVII AGENT LESSOR'S RIGHT TO CURE
SECTION 17.1.	Agent Lessor's Right to Cure Lessee's Lease Defaults	22
ARTICLE XVIII PURCHASE PROVISIONS
SECTION 18.1.	Early and End of Term Purchase Options	22
SECTION 18.2.	Acceleration of Premises Purchase	23
ARTICLE XIX END OF TERM OPTIONS
SECTION 19.1.	End of Term Options	23
SECTION 19.2.	Election of Options	23
SECTION 19.3.	Renewal Options; Extension Options	24
ARTICLE XX SALE OPTION
SECTION 20.1.	Sale Option Procedures	24
SECTION 20.2.	Certain Obligations Continue	26
ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR SALES OPTION
SECTION 21.1.	Provisions Relating to Conveyance of the Premises Upon Purchase by Lessee, Sales or Certain Other Events	26
ARTICLE XXII ACCEPTANCE OF SURRENDER
SECTION 22.1.	Acceptance of Surrender	27
ARTICLE XXIII NO MERGER OF TITLE
SECTION 23.1.	No Merger of Title	28
ARTICLE XXIV INTENT OF THE PARTIES
SECTION 24.1.	Nature of Transaction	28
ARTICLE XXV MISCELLANEOUS
SECTION 25.1.	Survival; Severability; Etc.	29
SECTION 25.2.	Amendments and Modifications	29
SECTION 25.3.	No Waiver	29
SECTION 25.4.	Notices	29
SECTION 25.5.	Successors and Assigns	30
SECTION 25.6.	Headings and Table of Contents	30
SECTION 25.7.	Counterparts	30
SECTION 25.8.	GOVERNING LAW	30
SECTION 25.9.	Original Lease	30
SECTION 25.10.	Limitations on Recourse	30

EXHIBITS

EXHIBIT A	—	Legal Description of Land
EXHIBIT B	—	Form of Memorandum of Lease

LEASE

THIS DOCUMENT SECURES FUTURE ADVANCES

    This Lease (this "Lease"), dated as of October 22, 1999, between LEASE PLAN NORTH AMERICA, INC., not in its individual capacity except as expressly stated herein, but solely as agent for the Participants (in such capacity, together with its successor and assigns in such capacity, the "Agent Lessor"), having its principal office at 135 South LaSalle Street, Chicago, Illinois 60674, as Agent Lessor and as Mortgagee, and ADC TELECOMMUNICATIONS, INC., a Minnesota corporation, having a principal office at 12501 Whitewater Drive, Minnetonka, Minnesota 55343, as Lessee and as Mortgagor (the "Lessee").

W I T N E S S E T H:

    A.  Lessee has acquired record title to the parcel of land located in Eden Prairie, Minnesota, and as more particularly described on Exhibit A hereto, together with all Appurtenant Rights thereto (the "Land").

    B.  Subject to the terms and conditions set forth in the Operative Documents, (i) Lessee and Agent Lessor have entered into a Ground Lease pursuant to which Lessee will lease the Land to Lessor commencing on the initial Advance Date; (ii) during the Construction Period, Construction Agent, using Advances funded by the Participants, will construct the Financed Improvements on behalf of Agent Lessor; and (iii) pursuant to this Lease, Agent Lessor will sublease the Land and lease the Financed Improvements to Lessee, and Lessee will lease the Premises from Agent Lessor.

    NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

    SECTION 1.1.  Definitions; Interpretation.  For all purposes hereof, the capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in Appendix 1 to that certain Participation Agreement dated as of even date herewith, among ADC Telecommunications, Inc., as Lessee, Lease Plan North America, Inc., not in its individual capacity except as expressly stated therein, but solely as Agent Lessor for the Participants, ABN AMRO Bank N.V., not in its individual capacity except as expressly stated therein, but solely as Administrative Agent for the Participants, and the Persons named on Schedule I thereto, as Participants (the "Participation Agreement"); and the rules of interpretation set forth in Appendix 1  to the Participation Agreement shall apply to this Lease. Except as specifically provided for in Section 16.6  hereof, all obligations imposed on the "Lessee" in this Lease shall be the full recourse liability of Lessee.

ARTICLE II
LEASE OF PREMISES; LEASE TERM

    SECTION 2.1.  Acceptance and Lease of the Premises.  Agent Lessor, subject to the satisfaction or waiver of the conditions set forth in Article VI of the Participation Agreement, hereby agrees to accept delivery of the Land on the initial Advance Date pursuant to the Ground Lease and the Financed Improvements pursuant to the terms of the Participation Agreement and the Construction Agency Agreement and to lease all of Agent Lessor's interest in the Premises to Lessee hereunder, and Lessee hereby agrees, expressly for the direct benefit of Agent Lessor, to lease the Premises from Agent Lessor for the Term.

    SECTION 2.2.  Acceptance Procedure.  Agent Lessor hereby authorizes one or more employees of Lessee, to be designated by Lessee, as the authorized representative or representatives of Agent Lessor to accept delivery of the Premises, including without limitation the Financed Improvements to be constructed. Lessee hereby agrees that the execution and delivery by Lessee of the Memorandum of Lease (in the form of Exhibit B) with respect to the Land and all Financed Improvements to be constructed thereon during the Term shall, without further act, constitute the irrevocable acceptance by Lessee of the Land and all such Financed Improvements for all purposes of this Lease and the other Operative Documents on the terms set forth therein and herein.

    SECTION 2.3.  Term.  Unless earlier terminated, the term of this Lease shall consist of (a) an interim period (the "Interim Term") commencing on and including the Document Closing Date and ending on but not including the Base Term Commencement Date, (b) a base term (the "Base Term") commencing on and including the Base Term Commencement Date and ending on but not including the fifth anniversary of the Document Closing Date, and (c) if exercised and approved pursuant to each of the terms and conditions of Section 4.4 of the Participation Agreement and exercised pursuant to the terms of this Lease, including Article XIX hereof, each Lease Renewal Term (the Interim Term, the Base Term and the Lease Renewal Terms, if any, collectively, the "Term").

    SECTION 2.4.  Title.  The Premises are leased to Lessee without any representation or warranty, express or implied, by Agent Lessor and subject to the rights of parties in possession, the existing state of title with respect thereto (including, without limitation, all Liens other than Lessor Liens) and all applicable Requirements of Law and any violations thereof. Lessee shall in no event have any recourse against Agent Lessor for any defect in or exception to title to the Premises other than resulting from Lessor Liens or a breach by Agent Lessor of its obligations under Article XXI.

ARTICLE III
PAYMENT OF RENT

    SECTION 3.1.  Rent; Loan to Value Optional Prepayment.

    (a) During the Term, Lessee shall pay Basic Rent on each Payment Date, on the date required under Section 20.1(j)  in connection with Lessee's exercise of the Sale Option and on any date on which this Lease shall terminate with respect to the Premises; provided, however, that Basic Rent payable prior to the Base Term Commencement Date shall be payable through Advances under Article III of the Participation Agreement. Until otherwise directed in writing by Agent Lessor, all payments of Rent shall be made to the Administrative Agent as set forth on Schedule II to the Participation Agreement.

    (b) Lessee shall advise Agent Lessor (who shall then notify the Tranche A2 Participants and the Tranche A3 Participants) by irrevocable written notice, that Lessee desires to extend the Scheduled Liquidity Termination Date for an additional 364 days, provided such request is made not more than 90 days prior to, and not less than 60 days prior to, the Scheduled Liquidity Termination Date then in effect. Beginning with the notice to be delivered for the Scheduled Liquidity Termination Date occurring on or following the Completion Date, each such notice shall also (i) state whether or not Lessee intends to make the Loan to Value Optional Rent Prepayment on the Loan to Value Prepayment Date as described in the following sentence and (ii) be accompanied by the appraisal required by Section 8.1(t) of the Participation Agreement. If Lessee has elected in such notice to make the Loan to Value Optional Rent Prepayment, then Lessee shall, on the Payment Date immediately preceding the next one-year anniversary of the Document Closing Date (such Payment Date the "Loan to Value Prepayment Date"), pay to Agent Lessor as Supplemental Rent an amount (the "Loan to Value Optional Rent Prepayment") sufficient, when applied to the outstanding Tranche A Certificate Amounts pursuant to Section 5.3 of the Participation Agreement, to reduce the Loan to Value Ratio to the Maximum Loan to Value Ratio after giving effect to such payment. Such payment shall be accompanied by an Officer's Certificate from Lessee setting forth the calculation of the Loan to Value Ratio immediately prior to and after giving effect to such payment.

    (c) Basic Rent shall be due and payable in lawful money of the United States and shall be paid directly by Lessee to the account designated by Agent Lessor by wire transfer of immediately available funds on the due date therefor.

    (d) Lessee's inability or failure to take possession of all or any portion of the Premises when delivered by Agent Lessor, whether or not attributable to any act or omission of Lessee or any act or omission of Agent Lessor, shall not delay or otherwise affect Lessee's obligation to pay Rent in accordance with the terms of this Lease.

    SECTION 3.2.  Payment of Basic Rent.  Basic Rent shall be paid absolutely net to Agent Lessor, so that this Lease shall yield to Agent Lessor the full amount thereof, without setoff, deduction or reduction.

    SECTION 3.3.  Supplemental Rent.  Lessee shall pay to Agent Lessor or the Person entitled thereto any and all Supplemental Rent promptly as the same shall become due and payable, and if Lessee fails to pay any Supplemental Rent, Agent Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent; provided, however, that except as provided in Section 3.2(c) of the Participation Agreement, Supplemental Rent payable prior to the Base Term Commencement Date, to the extent provided for in the Approved Construction Budget, shall be payable with Advances pursuant to and subject to the terms of Article III of the Participation Agreement. Lessee shall pay to Agent Lessor, as Supplemental Rent, among other things, on demand, to the extent permitted by applicable Requirements of Law, interest at the applicable Overdue Rate on any installment of Basic Rent not paid when due for the period for which the same shall be overdue and on any payment of Supplemental Rent payable to Agent Lessor or any Indemnitee not paid when due or demanded by Agent Lessor or any Indemnitee for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid. The expiration or other termination of Lessee's obligations to pay Basic Rent hereunder shall not limit or modify the obligations of Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in this Lease, in the event of any failure on the part of Lessee to pay and discharge any Supplemental Rent as and when due, Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added under any agreement with a third party or otherwise for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent.

    SECTION 3.4.  Method of Payment.  Each payment of Rent shall be made by Lessee to Agent Lessor prior to 12:00 noon, New York City time to the account of Agent Lessor designated on Schedule II to the Participation Agreement in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding Business Day unless the result of such extension would be to carry into another calendar month, in which case such payment shall be made on the immediately preceding Business Day. Payments received after 12:00 noon, New York City time on the date due shall for the purpose of Section 16.1 hereof be deemed received on such day; provided, however, that for the purposes of the second sentence of Section 3.3 hereof, such payments shall be deemed received on the next succeeding Business Day and subject to interest at the Overdue Rate as provided in such Section 3.3.

ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT

    SECTION 4.1.  Non-Interference.  Subject to Agent Lessor's cure rights, as provided for in Section 17.1, Agent Lessor covenants that it will not interfere in Lessee's use or possession of the Premises during the Term, so long as no Event of Default has occurred and is continuing, it being agreed that Lessee's remedies for breach of the foregoing covenant shall be limited to the commencement of proceedings to enjoin such breach. Such right is independent of and shall not affect Lessee's obligations hereunder and under the other Operative Documents or Agent Lessor's rights otherwise to initiate legal action to enforce the obligations of Lessee under this Lease. The foregoing covenant shall not require Agent Lessor to take any action contrary to, or which would permit Lessee to use the Premises for a use not permitted under, the provisions of this Lease.

    SECTION 4.2.  Inspection and Reports.

    (a) Upon five (5) Business Days prior notice to Lessee, Agent Lessor or its authorized representatives (the "Inspecting Parties") at any time during the Term may inspect (a) the Premises and (b) the books and records of Lessee relating to the Premises and (subject to appropriate confidentiality arrangements) make copies and abstracts therefrom. All such inspections shall be during Lessee's normal business hours (unless an Event of Default has occurred and is existing), shall be subject to Lessee's customary safety and security provisions and shall be at the expense and risk of the Inspecting Parties, except that if an Event of Default or Default has occurred and is continuing, Lessee shall reimburse the Inspecting Parties for the reasonable costs of such inspections and, except for the Inspecting Party's gross negligence or willful misconduct, such inspection shall be at Lessee's risk. No inspection shall unreasonably interfere with 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 Premises or any property of Lessee or any other Person during the course of such inspection.

    (b) To the extent permissible under Applicable Laws, during the Term, Lessee shall prepare and file in timely fashion, or, where Agent Lessor shall be required to file, Lessee shall prepare and make available to Agent Lessor within a reasonable time prior to the date for filing and Agent Lessor shall file, any reports with respect to the condition or operation of the Premises that shall be required to be filed with any Governmental Authority.

ARTICLE V
NET LEASE, ETC.

    SECTION 5.1.  Net Lease.  This Lease shall constitute a net lease and Lessee's obligations to pay all Rent shall be absolute and unconditional under any and all circumstances. Any present or future law to the contrary notwithstanding, this Lease shall not terminate, nor shall Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall the obligations of Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) by reason of: (i) any defect in the condition, merchantability, design, construction, quality or fitness for use of the Premises or any part thereof, or the failure of the Premises to comply with all Requirements of Law, including any inability to occupy or use the Premises by reason of such non-compliance; (ii) any damage to, removal, abandonment, salvage, loss, contamination of, or Release from, scrapping or destruction of or any requisition or taking of the Premises or any part thereof; (iii) any restriction, prevention or curtailment of or interference with any use of the Premises or any part thereof including eviction; (iv) any defect in title to or rights to the Premises or any Lien on such title or rights or on the Premises (provided, that the foregoing shall not relieve any Person from its responsibility to remove Lessor Liens attributable to it); (v) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by Agent Lessor or any Participant; (vi) to the fullest extent permitted by Applicable Laws, any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to Lessee, Agent Lessor, any Participant or any other Person, or any action taken with respect to this Lease by any trustee or receiver of Lessee, Agent Lessor, any Participant or any other Person, or by any court, in any such proceeding; (vii) any claim that Lessee has or might have against any Person, including without limitation Agent Lessor, any Participant, or any vendor, manufacturer, contractor of or for the Premises; (viii) any failure on the part of Agent Lessor to perform or comply with any of the terms of this Lease, of any other Operative Document or of any other agreement; (ix) any invalidity or unenforceability or illegality or disaffirmance of this Lease against or by Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof; (x) the impossibility or illegality of performance by Lessee, Agent Lessor or both; (xi) any action by any court, administrative agency or other Governmental Authority; (xii) any restriction, prevention or curtailment of or interference with the construction on or any use of the Premises or any part thereof; (xiii) the failure of Lessee to achieve any accounting or tax benefits or the characterization of the transaction intended by the parties as set forth at Section 24.1 and Section 5.1 of the Participation Agreement; or (xiv) any other cause or circumstances whether similar or dissimilar to the foregoing and whether or not Lessee shall have notice or knowledge of any of the foregoing. Lessee's agreement in the preceding sentence shall not affect any claim, action or right Lessee may have against any Person. The parties intend that the obligations of Lessee hereunder shall be covenants and agreements that are separate and independent from any obligations of Agent Lessor hereunder or under any other Operative Documents and the obligations of Lessee shall continue unaffected unless such obligations shall have been modified or terminated in accordance with an express provision of this Lease.

    SECTION 5.2.  No Termination or Abatement.  Lessee shall remain obligated under this Lease in accordance with its terms and the terms of the other Operative Documents and shall not take any action to terminate, rescind or avoid this Lease to the fullest extent permitted by Applicable Laws, notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting Lessee, Agent Lessor or any Participant, or any action with respect to this Lease which may be taken by any trustee, receiver or liquidator of Lessee, Agent Lessor or any Participant or by any court with respect to Lessee, Agent Lessor, Administrative Agent or any Participant. Lessee hereby waives all right to terminate or surrender this Lease (except as provided herein) or to avail itself of any abatement, suspension, deferment, reduction, setoff, counterclaim or defense with respect to any Rent. Lessee shall remain obligated under this Lease in accordance with its terms and the terms of the other Operative Documents and Lessee hereby waives any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Lease. Notwithstanding any such statute or otherwise, Lessee shall be bound by all of the terms and conditions contained in this Lease.

ARTICLE VI
SUBLEASES; SPACE LEASES

    Except for subleases permitted by this Article VI, Lessee during the Term may not assign, sublease, mortgage or pledge to any Person, including an Affiliate of Lessee, at any time, in whole or in part, any of its right, title or interest in, to or under this Lease, or any portion of the Premises, or permit any portion of the Premises to be used or occupied by any other Person, in any case without the prior written consent of the Required Participants, and any such assignment, sublease, mortgage or pledge shall be void. Lessee may not sublease, in whole or in part, any of its right, title or interest in, to or under this Lease or any portion of the Premises to any Person, or permit any portion of the Premises to be used or occupied by any other Person, except that, following the Base Term Commencement Date, Lessee may enter into subleases (each, a "Sublease") of the Premises (together with the nonexclusive use of any related or necessary portion of the Land as necessary for access and parking). With respect to any sublease permitted under this Article VI, Lessee shall not sublease any portion of the Premises to, or permit the sublease of any portion of the Premises to, or permit the sublease of any portion of the Premises by, any Person who shall then be engaged in any proceedings for relief under any bankruptcy or insolvency law or laws relating to the relief of debtors. No sublease hereunder will discharge or diminish any of Lessee's obligations to Agent Lessor hereunder or to any other Person under any other Operative Document, and Lessee shall remain directly and primarily liable under this Lease with respect to the entire Premises. Each sublease permitted hereby shall be made and shall expressly provide that it is subject and subordinate to this Lease and the rights of Agent Lessor hereunder, and shall expressly provide for the surrender of the space subleased by the applicable sublessee at the election of Agent Lessor after a Lease Event of Default or upon any termination or expiration of this Lease, unless Lessee purchases the Premises pursuant to Article XVIII or Section 19.1(b)  of this Lease. Lessee shall give Agent Lessor prompt written notice of any sublease permitted under this Article VI, and Lessee shall, within fifteen (15)  days following the execution of any sublease, deliver to Agent Lessor a fully executed copy of such sublease.

ARTICLE VII
LESSEE ACKNOWLEDGMENTS

    SECTION 7.1.  Condition of the Premises.  LESSEE ACKNOWLEDGES AND AGREES THAT ALTHOUGH AGENT LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS, LESSEE, ACTING AS CONSTRUCTION AGENT, IS SOLELY RESPONSIBLE UNDER THE TERMS OF THE CONSTRUCTION AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING, ACQUISITION AND CONSTRUCTION OF THE PREMISES AND ANY ALTERATIONS OR MODIFICATIONS AND ALL ACTIVITIES CONDUCTED IN CONNECTION THEREWITH. LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE PREMISES "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY AGENT LESSOR, ADMINISTRATIVE AGENT OR THE PARTICIPANTS AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE (EXCLUDING LESSOR LIENS), (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST ON THE DATE HEREOF OR AT ANY TIME. NONE OF AGENT LESSOR, ADMINISTRATIVE AGENT OR ANY PARTICIPANT HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE PREMISES (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES (OR ANY PART THEREOF) AND NONE OF AGENT LESSOR, ADMINISTRATIVE AGENT OR ANY PARTICIPANT SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF THE PREMISES, OR ANY PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW. Lessee has been afforded full opportunity to inspect the Premises, 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 Agent Lessor, Administrative Agent and the Participants, on the one hand, and Lessee, on the other, are to be borne by Lessee. The provisions of this Section 7.1  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 Agent Lessor, Administrative Agent or the Participants, express or implied, with respect to the Premises (or any interest therein), that may arise pursuant to any law now or hereafter in effect or otherwise.

    SECTION 7.2.  Risk of Loss.  During the Term and subject to the limitations set forth in Section 14.1(e), the risk of loss of or decrease in the enjoyment and beneficial use of the Premises as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by Lessee, and neither Agent Lessor nor any Participant shall in no event be answerable or accountable therefor.

    SECTION 7.3.  Certain Duties and Responsibilities of Agent Lessor.  Agent 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 Agent Lessor, and Agent 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 Premises or any other part of the Collateral in any manner whatsoever, except as required by the terms of the Operative Documents and as otherwise provided herein.

ARTICLE VIII
POSSESSION AND USE OF THE PROPERTY, ETC.

    SECTION 8.1.  Utility and Other Charges.  During the Term and subject to the limitations set forth at Section 3.3 with respect to such charges payable during the Interim Term, Lessee shall pay or cause to be paid, as Supplemental Rent, all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents and utilities used in or on the Premises during the Term. Lessee shall be entitled to receive any credit or refund with respect to any utility charge paid by Lessee and the amount of any credit or refund received by Agent Lessor on account of any utility charges paid by Lessee, net of the costs and expenses reasonably incurred by Agent Lessor in obtaining such credit or refund, shall be promptly paid over to Lessee. All charges for utilities imposed with respect to the Premises for a billing period during which this Lease expires or terminates (except when Lessee purchases the Premises in accordance with the terms of this Lease, in which case Lessee shall be solely responsible for all such charges) shall be adjusted and prorated on a daily basis between Lessee and any purchaser of the Premises, and each party shall pay or reimburse the other for each party's pro rata share thereof; provided, that in no event shall Agent Lessor have any liability therefor.

    SECTION 8.2.  Possession and Use of the Premises.  The Premises shall be used only as a first class commercial office building and for computer simulated and other dry research and development activities related to Lessee's business. Following the Base Term Commencement Date, the Leased Property shall be continuously occupied by Lessee, or a permitted sublessee to the extent permitted herein, in the ordinary course of business. Lessee shall not use the Premises or any part thereof, or permit the Premises to be used, for any purpose or in any manner that would adversely affect the Fair Market Value, utility, remaining useful life or residual value of the Premises. Lessee shall pay, or cause to be paid, as Supplemental Rent, all charges and costs required in connection with the use of the Premises as contemplated by this Lease and the other Operative Documents. Lessee shall not commit or permit any waste of the Premises or any part thereof.

    SECTION 8.3.  Compliance with Requirements of Law and Insurance Requirements.  Subject to the terms of Article XII relating to permitted contests, Lessee, at its sole cost and expense, shall comply in all material respects with all Requirements of Law (including all Environmental Laws) and Insurance Requirements relating to the Premises, including the use, construction, operation, maintenance, repair and restoration thereof and the remarketing thereof pursuant to Article XX, whether or not compliance therewith shall require structural or extraordinary changes in the Premises or interfere with the use and enjoyment of the Premises, and procure, maintain and comply with all licenses, permits, orders, approvals, consents and other authorizations required for the construction, use, maintenance and operation of the Premises and for the use, operation, maintenance, repair and restoration of the Improvements.

ARTICLE IX
MAINTENANCE AND REPAIR; REPORTS

    SECTION 9.1.  Maintenance and Repair; Reports.  On and after the Base Term Commencement Date, Lessee, at its own expense, shall at all times (a) maintain the Premises in good repair and condition, subject to ordinary wear and tear, and as a first class office building subject to the other uses permitted at Section 8.2, and in any event at least as good as the condition of similar buildings owned or leased by Lessee or its Affiliates; (b) maintain the Premises in accordance with all Applicable Laws in all material respects, whether or not such maintenance requires structural modifications; (c) comply in all material respects with the Insurance Requirements which are in effect at any time with respect to the Premises or any part thereof; (d) use the Premises only in accordance with Article VIII; (e) make all necessary or appropriate repairs, replacements and renewals of the Premises or any part thereof which may be required to keep the Premises in the condition required by the preceding clauses (a)  through (d), whether interior or exterior, structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen, and including, without limitation, repairs, replacements and renewals that would constitute capital expenditures under GAAP if incurred by an owner of property; and (f) procure, maintain and comply in all material respects with all material licenses, permits, orders, approvals, consents and other authorizations required for the construction, use, maintenance and operation of the Premises. Lessee waives any right that it may now have or hereafter acquire to (x) require Agent Lessor to maintain, repair, replace, alter, remove or rebuild all or any part of the Premises or (y) make repairs at the expense of Agent Lessor pursuant to any Applicable Laws or other agreements.

    SECTION 9.2.  Maintenance and Repair Reports.  During the Term, Lessee shall keep maintenance and repair reports in sufficient detail to indicate the nature and date of major work done. Such reports shall be kept on file by Lessee at its offices during the Term, and shall be made available at Lessee's office to Agent Lessor upon reasonable request. Lessee shall give written notice to Agent Lessor of any Condemnation or Casualty promptly after Lessee has knowledge thereof.

ARTICLE X
MODIFICATIONS, ETC.

    SECTION 10.1.  Improvements and Modifications.

    (a) In addition to Lessee's obligations as Construction Agent to build the Financed Improvements under the Construction Agency Agreement, on and after the Base Term Commencement Date (i) Lessee, at Lessee's own cost and expense, shall make alterations, renovations, improvements and additions to the Premises or any part thereof and substitutions and replacements therefor (collectively, "Modifications") which are (A) necessary to repair or maintain the Premises in the condition required by Section 9.1; (B) necessary in order for the Premises to be in compliance in all material respects with Applicable Laws; or (C) necessary or advisable to restore the Premises to their condition existing prior to a Casualty or Condemnation to the extent required pursuant to Article XIV; and (ii) so long as no Lease Event of Default or Lease Default has occurred and is continuing, Lessee, at Lessee's own cost and expense, may undertake Modifications on the Premises so long as such Modifications comply with Applicable Laws and with Section 9.1  and subsection (b) of this Section 10.1. During the Interim Term, all Modifications (other than the Financed Improvements being built pursuant to the Approved Plans and Specifications and in compliance with the Construction Agency Agreement, and any modification permitted pursuant to and in accordance with Section 3.2 of the Construction Agency Agreement) shall be subject to the written approval of the Required Participants and the terms, conditions and restrictions set forth in the Construction Agency Agreement.

    (b) The making of any Modifications must be in compliance with the following requirements:

     (i) No such Modifications with a cost exceeding Two Million Five Hundred Thousand Dollars ($2,500,000) shall be made or undertaken except upon not less than thirty days' prior written notice to Agent Lessor.

    (ii) Lessee shall not make any Modifications in violation of the terms of any restriction, easement, condition, covenant or other similar matter affecting title to or binding on the Premises.

    (iii) No Modifications shall be undertaken until 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 Modifications of all municipal and other Governmental Authorities having jurisdiction over the Premises. Agent Lessor, at 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.

    (iv) The Modifications shall be completed in a good and workmanlike manner and in compliance in all material respects with all Applicable Laws then in effect and the standards imposed by any insurance policies required to be maintained hereunder.

    (v) All Modifications shall, when completed, be of such a character as to not materially adversely affect the Fair Market Value, utility, remaining economic useful life or residual value of the Premises from their Fair Market Value, utility, remaining economic useful life or residual value immediately prior to the making thereof or, in the case of Modifications being made by virtue of a Casualty or Condemnation, immediately prior to the occurrence of such Casualty or Condemnation. If such Modifications have a cost exceeding Two Million Five Hundred Thousand Dollars ($2,500,000) and if requested by Required Participants, Agent Lessor may engage an appraiser of nationally recognized standing, at Lessee's sole cost and expense, to determine (by appraisal methods satisfactory to the Required Participants) the projected Fair Market Value of the Premises following completion of the Modifications relating thereto.

    (vi) Lessee shall have made adequate arrangements for payment of the cost of all Modifications when due so that the Premises shall at all times be free of Liens for labor and materials supplied or claimed to have been supplied to the Premises, other than Permitted Liens.

   (vii) The Modifications must be located solely on the Land.

    SECTION 10.2.  Title to Modifications.  Title to the following described Modifications shall, without further act, vest in Agent Lessor and shall be deemed to constitute a part of the Premises and be subject to this Lease:

    (a) each of the Financed Improvements and any Modifications commenced during the Interim Term;

    (b) Modifications that are in replacement of or in substitution for a portion of any Improvements existing on the date of this Lease or any Financed Improvements;

    (c) Modifications that are required to be made pursuant to the terms of Section 10.1(a)(i)  hereof; or

    (d) Modifications that cannot be readily removed from the Premises without causing damage to or impairing the value of the Premises.

    Lessee, at Agent Lessor's request, shall execute and deliver any deeds, bills of sale, assignments or other documents of conveyance reasonably necessary to evidence the vesting of title in and to such Modifications to Agent Lessor.

    If such Modifications are not within any of the categories set forth in clauses (a)  through (d) of this Section 10.2, then title to such Modifications shall vest in Lessee and such Modifications shall not be deemed to be Modifications which are part of the Premises.

    All Modifications to which Lessee shall have title may, so long as removal thereof shall not result in the violation of any Applicable Laws and no Lease Event of Default is continuing, be removed at any time by Lessee. Lessee agrees to notify Agent Lessor in writing at least 30 days before it removes any such Modifications which individually or in the aggregate had an original cost exceeding $500,000, and Lessee shall at its expense repair any damage to the Premises caused by the removal of such Modifications. Agent Lessor (or the purchaser of the Premises) may purchase from Lessee any such Modifications (if not already owned by Agent Lessor) that Lessee intends to remove from the Premises prior to the return of the Premises to Agent Lessor or sale of the Premises, which purchase shall be at the Fair Market Value of such Modifications as determined by the Appraiser at the time of such purchase. Title to any such Modifications shall vest in Agent Lessor (or the purchaser of the applicable Premises) if not removed from the Premises by Lessee prior to the return of the Premises to Agent Lessor or sale of the Premises.

    SECTION 10.3.  Other Property.  Lessee may from time to time own or hold under lease from Persons other than Agent Lessor, furniture, trade fixtures, equipment and other tangible personal property located on or about the Premises that is not subject to this Lease and does not constitute a portion of the Financed Improvements. Agent Lessor shall from time to time, upon the reasonable request, and at the cost and expense of Lessee, which request shall be accompanied by such supporting information and documents as Agent Lessor may reasonably require, promptly acknowledge in writing to Lessee or other Persons that the particular items of furniture, trade fixtures and equipment in question are not part of the Premises and that, subject to the rights of Agent Lessor hereunder and under any other Operative Documents, Agent Lessor does not own or have any other right or interest in or to such furniture, trade fixtures and equipment.

ARTICLE XI
COVENANTS WITH RESPECT TO LIENS; EASEMENTS

    SECTION 11.1.  Covenants with Respect to Liens.

    (a) During the Term, 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 Premises, Agent Lessor's title thereto, or any interest therein. Lessee, at its own expense, will promptly pay, satisfy and otherwise take such actions as may be necessary to keep the Premises free and clear of, and duly to discharge, eliminate or bond in a manner reasonably satisfactory to Agent Lessor, any such Lien (other than Permitted Liens) if the same shall arise at any time.

    (b) Nothing contained in this Lease shall be construed as constituting the consent or request of Agent Lessor, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Premises or any part thereof. NOTICE IS HEREBY GIVEN THAT NONE OF AGENT LESSOR OR THE PARTICIPANTS IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE PREMISES OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF AGENT LESSOR OR ANY PARTICIPANT IN AND TO THE PREMISES.

    SECTION 11.2.  Lessee's Grants and Releases of Easements; Agent Lessor's Waivers.  Provided that no Default or Lease Event of Default shall have occurred and be continuing, and subject to the provisions of Articles VII, IX  and X and Section 8.3, Agent Lessor hereby consents in each instance to the following actions by Lessee in the name and stead of Agent Lessor and as the true and lawful attorney-in-fact of Agent Lessor with full power and authority to execute documents on behalf of Agent Lessor for the following purposes, but at Lessee's sole cost and expense and only following the Base Term Commencement Date: (a) the granting of, or entry into agreements in connection with, easements, licenses, rights-of-way, building and use restrictions and covenants and other rights and privileges in the nature of easements or similar interests and burdens reasonably necessary or desirable for the use, repair, maintenance or protection of the Premises as herein provided; (b) the release of existing easements or other rights in the nature of easements which are for the benefit of, or burden to, the Premises; (c) if required by any applicable Governmental Authority in connection with the Construction, the dedication or transfer of unimproved portions of the Premises for road, highway or other public purposes; (d) the seeking of any zoning variances or modifications to existing zoning; (e) the execution of amendments to, or waivers or releases of, any easements, licenses or covenants and restrictions affecting the Premises; and (f) the exercise of all rights under any redevelopment agreement or document contemplated thereby affecting the Premises; provided, however, that in each case (i) such grant, release, dedication, transfer, amendment, agreement or other action does not impair the value, utility, residual value or remaining useful life of the Premises, (ii) such grant, release, dedication, transfer, amendment, agreement or other action in Lessee's judgment is reasonably necessary in connection with the use, maintenance, alteration or improvement of the Premises, (iii) such grant, release, dedication, transfer, amendment, agreement or other action will not cause the Premises or any portion thereof to fail to comply with the provisions of this Lease or any other Operative Documents and all Requirements of Law (including, without limitation, all applicable zoning, planning, building and subdivision ordinances, all applicable restrictive covenants and all applicable architectural approval requirements); (iv) all governmental consents or approvals required prior to such grant, release, dedication, transfer, amendment, agreement or other action have been obtained, and all filings required prior to such action have been made; (v) Lessee shall remain obligated under this Lease and under any instrument executed by Lessee consenting to the assignment of Agent Lessor's interest in this Lease as security for indebtedness, in each such case in accordance with their terms, as though such grant, release, dedication, transfer, amendment, agreement or other action had not been effected; and (vi) Lessee shall timely pay and perform any obligations of Agent Lessor under such grant, release, dedication, transfer, amendment, agreement or other action. Without limiting the effectiveness of the foregoing, provided, that no Lease Default or Lease Event of Default shall have occurred and be continuing, Agent Lessor shall, upon the request of Lessee, and at Lessee's sole cost and expense, execute and deliver any instruments necessary or appropriate to confirm any such grant, release, dedication, transfer, amendment, agreement or other action to any Person permitted under this Section.

ARTICLE XII
PERMITTED CONTESTS

    SECTION 12.1.  Permitted Contests in Respect of Applicable Laws.  If, to the extent and for so long as (a) a test, challenge, appeal or proceeding for review of any Applicable Laws relating to the Premises or the obligation to comply therewith shall be prosecuted diligently and in good faith in appropriate proceedings by Lessee or (b) compliance with such Applicable Laws shall have been excused or exempted by a valid nonconforming use, variance permit, waiver, extension or forbearance, then following the Base Term Commencement Date, Lessee shall not be required to comply with such Applicable Laws but only if and so long as any such test, challenge, appeal, proceeding, waiver, extension, forbearance or noncompliance shall not, in the reasonable opinion of Agent Lessor, acting at the direction of the Required Participants, involve (A) any risk of criminal liability being imposed on Agent Lessor, any Participant or the Premises or (B) any material risk of (1) until after an adverse determination therein, the foreclosure, forfeiture or loss of the Premises, or any material part thereof, or (2) the nonpayment of Rent or (3) any sale of, or, until after an adverse determination therein, the creation of any Lien (other than a Permitted Lien) on, any part of the Premises, (4) civil liability being imposed on Agent Lessor, any Participant or the Premises for which Lessee is not obligated to indemnify such parties under the Operative Documents, or (5) enjoinment of, or interference with, the use, possession or disposition of the Premises in any material respect.

    Agent Lessor will not be required to join in any proceedings pursuant to this Section 12.1  unless a provision of any Applicable Laws requires that such proceedings be brought by or in the name of Agent Lessor or it is customary in the applicable jurisdiction for the title holder of the Improvements to join in such proceedings; and in that event Agent Lessor will join in the proceedings or permit them or any part thereof to be brought in its name if and so long as (i) Lessee has not elected the Sale Option and (ii) Lessee agrees in writing to and pays all related expenses and agrees in writing to indemnify Agent Lessor and the Participants in form and substance reasonably satisfactory to each of the respective Indemnitees.

ARTICLE XIII
INSURANCE

    SECTION 13.1.  Required Coverages.  During the Term, Lessee will provide or cause to be provided insurance with respect to the Premises of a character usually carried by corporations engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such corporations, and carry such other insurance as is usually carried by such corporations; provided, that in any event Lessee will maintain at all times:

    (a)  General Liability Insurance.  Combined single limit insurance against claims for third-party bodily injury, including death and third-party property damage occurring on, in or about the Premises (including adjoining streets and sidewalks) in an amount at least equal to One Million Dollars ($1,000,000) per occurrence and a minimum of Fifteen Million Dollars ($15,000,000) excess of such coverage. Such coverage may be subject to deductibles or self-insured retentions up to an amount that is customarily carried by a company of similar size and engaged in business similar to Lessee and shall be otherwise acceptable to the Required Participants.

    (b)  Property Insurance.  Insurance against loss or damage covering the Premises or any portion thereof by reason of any Peril (as defined below) in an amount (subject to such deductibles and/or self-insurance in such minimum amounts as is carried by corporations owning and/or operating similar properties); provided, however, that at no time shall the amount of such coverage be less than the replacement cost of the Improvements, including any costs that may be required to cause the Premises to be reconstructed to then current Applicable Laws and in amounts sufficient to fund all Tranche A Basic Rent and Tranche B Basic Rent, Tranche C Equity Basic Rent and Fees accruing on the Certificates or otherwise payable during any period while the Premises are being reconstructed or repaired). The term "Peril" shall mean, collectively, fire, lightning, windstorm, hail, explosion, riot and civil commotion, vandalism and malicious mischief, damage from aircraft, vehicles and smoke and all other perils covered by the "all risk endorsement" then in use in the State of Minnesota, and flood and/or earthquake insurance to the extent reasonably required by the Agent Lessor.

    (c)  Workers' Compensation.  Lessee shall, in the construction of the Improvements or other Modifications and the operation of the Premises, comply with the applicable Workers' Compensation laws and protect Agent Lessor and the Participants against any liability under such laws.

    (d)  Builders' Risk Insurance.  During the Construction Period and during the construction of any Modifications, Lessee shall also maintain, for the benefit of Agent Lessor, all-risk Builders' Risk Insurance in an amount equal to the greater of the replacement value of such Modifications or the Improvements, as applicable, and the aggregate cost for the construction of same (including Soft Costs, Capitalized Basic Rent and loss of rents), including costs that may be required to cause the Premises to be reconstructed to then current Applicable Laws and in amounts sufficient to fund all Tranche A Basic Rent and Tranche B Basic Rent, Tranche C Equity Basic Rent and Fees accruing on the Certificates or otherwise payable during any period while the Premises are being reconstructed or repaired but in no event shall such coverage exceed $106,000,000. To the extent the Agent Lessor and Participants have funded amounts greater than $106,000,000, such coverage shall be covered under ADC's Property Insurance as specified in 13.1(b) up to $120,000,000.

    (e)  Other Insurance.  Such other insurance, in each case as is generally carried by Lessee or its Affiliates for similar properties owned or leased by any of them or by other owners of similar properties in such amounts and against such risks as are then customary for properties similar in use and to the extent required by any Participant, and flood insurance to the extent reasonably required by the Agent Lessor.

    SECTION 13.2.  Insurance Coverage.  The insurance coverage required in Section 13.1 shall be written by reputable insurance companies that are financially sound and solvent and otherwise reasonably appropriate considering the amount and type of insurance being provided by such companies. Any insurance company selected by Lessee shall be rated in A.M. Best's Insurance Guide or any successor thereto (or if there be none, an organization having a similar national reputation) and shall have a general policyholder rating of "A" (or comparable rating for a rating by an organization other than A.M. Best) and a financial rating of at least "X" (or comparable rating for a rating by an organization other than A.M. Best) or be otherwise acceptable to the Required Participants. In the case of liability insurance maintained by Lessee, it shall name Agent Lessor (both in its individual capacity and as agent) and each of the Participants, as additional insureds and, in the case of property insurance maintained by Lessee, it shall name Agent Lessor, as mortgagee and sole loss payee. Each policy referred to in Section 13.1 shall provide that: (i)  it will not be canceled, or allowed to lapse without renewal, except after not less than 30 days' prior written notice to Agent Lessor; (ii) the interests of Agent Lessor and any Participant shall not be invalidated by any act or negligence of or breach of warranty or representation by Lessee or any other Person having an interest in the Premises; (iii) such insurance is primary with respect to any other insurance carried by or available to Agent Lessor or any Participant; (iv) the insurer shall waive any right of subrogation, setoff, counterclaim, or other deduction, whether by attachment or otherwise, against Agent Lessor and each Participant; and (v) such policy shall contain a cross-liability clause providing for coverage of Agent Lessor and each Participant, as if separate policies had been issued to each of them. Lessee will notify Agent Lessor promptly of any policy cancellation, reduction in policy limits, modification or amendment.

    SECTION 13.3.  Delivery of Insurance Certificates.  Lessee shall deliver to the Administrative Agent certificates of insurance on or before the initial Advance Date, and within thirty (30) days following the initial Advance Date certified copies of insurance policies, satisfactory to the Administrative Agent and the Participants evidencing the existence of all insurance required to be maintained hereunder and setting forth the respective coverages, limits of liability, carrier, policy number and period of coverage. Thereafter, throughout the Term, at the time each of Lessee's insurance policies is renewed (but in no event less frequently than once each year) or upon written request by Agent Lessor following a Lease Event of Default, Lessee shall deliver to Agent Lessor certificates of insurance evidencing that all insurance required by Sections 13.1 and 13.2 to be maintained by Lessee is in effect. The foregoing requirements are in addition to Lessee's insurance obligations, as Construction Agent, in the Construction Agency Agreement.

    SECTION 13.4.  Insurance by Agent Lessor or any Participant.  Each of Agent Lessor or any Participant may at its own expense carry insurance with respect to its interest in the Premises, and any insurance payments received from policies maintained by Agent Lessor or any Participant shall be retained by Agent Lessor or such Participant, as the case may be, without reducing or otherwise affecting Lessee's obligations hereunder.

ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS

    SECTION 14.1.  Casualty and Condemnation.

    (a) Subject to the provisions of this Article XIV, if all or a portion of the Premises is damaged or destroyed in whole or in part by a Casualty (other than a Significant Casualty), any insurance proceeds payable with respect to such Casualty up to $100,000 shall be paid directly to Lessee, or if received by Agent Lessor or the Participants, shall be paid over to Lessee and shall be used by Lessee solely for the reconstruction, refurbishment and repair of the Premises, and if the use, access, occupancy, easement rights or title to the Premises or any part thereof is the subject of a Condemnation (other than a Significant Condemnation), then any award or compensation relating thereto up to Five Million Dollars ($5,000,000) shall be paid to Lessee and shall be used by Lessee solely for the restoration of the Premises. Any insurance proceeds or condemnation award or compensation in excess of Five Million Dollars ($5,000,000) for any single Casualty or Condemnation or which are payable with respect to a Casualty or Condemnation occurring prior to the Base Term Commencement Date shall be held in trust by Agent Lessor in a segregated account for reimbursement to Lessee from time to time during the course of Lessee's restoration of the Premises and compliance with the provisions of Section 9.1 and to fund the payment of Tranche A Basic Rent and Tranche B Basic Rent and Tranche C Equity Basic Rent accruing on the Certificates and the payment of fees accruing during such period. Any such amounts held by Agent Lessor shall be invested by Agent Lessor at the direction of Lessee from time to time, with all interest and earnings on such investments being payable to Lessee promptly upon receipt thereof by Agent Lessor from time to time. All amounts held by Agent Lessor or any of the Participants on account of any award, compensation or insurance proceeds paid directly to or otherwise received by Agent Lessor or any of the Participants shall promptly be remitted to Lessee (or if the immediately preceding sentence is applicable, Agent Lessor) to be applied in accordance with this Section 14.1. Notwithstanding the foregoing, if any Lease Event of Default shall have occurred and be continuing, such award, compensation or insurance proceeds shall be paid directly to Agent Lessor or, if received by Lessee, shall be held in trust for the Participants and shall be paid over by Lessee to Agent Lessor to be distributed by Agent Lessor in accordance with the Participation Agreement. All amounts held by Agent Lessor on account of any award, compensation or insurance proceeds either paid directly to Agent Lessor or turned over to Agent Lessor, in each case after the occurrence and during the continuance of a Lease Event of Default shall at the option of Agent Lessor (at the direction of the Required Participants) either be (A) paid to Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with this clause (a), or (B) applied to the Lease Balance and any other amounts owed by Lessee under the Operative Documents in accordance with Article XVI.

    (b) In the event any part of the Premises becomes subject to condemnation or requisition proceedings during the Term, (i) Lessee shall, not later than (10) days after such occurrence, deliver to Agent Lessor an estimate of the amount necessary to rebuild or restore the Premises, in Lessee's reasonable judgment (the "Estimate"), which Estimate shall state whether such Casualty or Condemnation has resulted in a Construction Casualty Event and (ii) Lessee shall give notice thereof to Agent Lessor promptly after Lessee has knowledge thereof and, to the extent permitted by Applicable Laws, Lessee shall control the negotiations with the relevant Governmental Authority unless a Lease Event of Default exists or such condemnation or requisition occurs during the Interim Term in which case Agent Lessor shall be entitled to control such negotiations; provided, that in any event, Agent Lessor may participate at Agent Lessor's expense (or if a Lease Event of Default exists or such condemnation or requisition occurs during the Interim Term, at Lessee's expense) in such negotiations; and provided  in all cases, that no settlement will be made without Agent Lessor's prior written consent. Lessee shall give to Agent 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 Article XIII, and are in the possession of Lessee, as are reasonably requested by Agent Lessor. If the proceedings relate to a Significant Condemnation, Lessee shall act diligently in connection therewith. Nothing contained in this Section 14.1(b) shall diminish Agent Lessor's rights with respect to condemnation awards and property insurance proceeds under Articles XIII  or XIV.

    (c) In no event shall a Casualty or Condemnation affect Lessee's obligations to pay Rent pursuant to Section 3.1  or to perform its obligations and pay any amounts due on the Expiration Date or pursuant to Articles XVIII  and XXI.

    (d) If, pursuant to this Article XIV, this Lease shall continue in full force and effect following a Casualty or Condemnation, Lessee shall, at its sole cost and expense (and, without limitation, if any award, compensation or insurance payment is not sufficient to restore the Premises in accordance with this clause (d) Lessee shall pay the shortfall, unless such Casualty or Condemnation occurs during the Interim Term and did not arise as a result of, and is not related to, a Lessee Related Event, in which case Lessee's liability shall be as provided for in Section 14.1(e)), promptly and diligently repair any damage to the Premises caused by such Casualty or Condemnation in conformity with the requirements of Sections 9.1 and 10.1 using the as-built Approved Plans and Specifications for the Premises (as modified to give effect to any subsequent Modifications, any Condemnation affecting the Premises and all applicable Requirements of Law) so as to restore the Premises to at least the same condition and value as existed immediately prior to such Casualty or Condemnation. In such event, title to the Premises shall remain with Agent Lessor subject to the terms of this Lease. Upon completion of such restoration, Lessee shall furnish Agent Lessor a Responsible Officer's Certificate confirming that such restoration has been completed pursuant to this Lease.

    (e) Notwithstanding any provision to the contrary contained herein (including in Article XV), should a Casualty or Condemnation occur during the Interim Term, Lessee shall have no recourse liability to fund any shortfall in available insurance proceeds as required pursuant to Section 14.1(d) or to pay amounts to purchase the Premises in accordance with Article XV unless such shortfall, Casualty or Condemnation arose as a result of or was otherwise related to a Lessee Related Event, in which case such limitation on Lessee's liability shall not apply. Notwithstanding the foregoing, the limitation in this Section 14.1(e)  shall not relieve Lessee of its obligations to repair, rebuild or reconstruct under Section 14.1(d)  with any insurance proceeds, condemnation awards, and, if the Participants elect, additional amounts funded by Lessee up to a maximum amount of the Construction Recourse Amount. "Lessee Related Event" shall mean any act or omission of Lessee or any Construction Agency Person, including, without limitation, any breach under any Operative Document (including the insurance provisions at Article XIII and in the Construction Agency Agreement) or Construction Document and, in any case, any fraud, misapplication of funds, illegal acts or willful misconduct by any such Person.

    SECTION 14.2.  Environmental Matters.  At Lessee's sole cost and expense, Lessee shall promptly and diligently commence any response, clean up, remedial or other action necessary to cure any Environmental Violation with respect to the Premises.

    SECTION 14.3.  Notice of Environmental Matters.  Lessee shall promptly provide to Agent Lessor written notice of any pending or threatened claim, action or proceeding involving any Environmental Violation or any Release on, at, under or from the Premises, of which claim, action or proceeding Lessee has received written notice or has knowledge and which violation or Release in the reasonable opinion of the Lessee and Agent Lessor (provided that if the parties are unable to agree, then Agent Lessor shall designate an environmental engineering firm reasonably acceptable to Lessee which shall make such determination, at Lessee's expense, which determination shall be binding upon the parties) could require in excess of Five Million Dollars ($5,000,000) in response costs to remedy the same, or which could result in the imposition of criminal penalties upon Agent Lessor or any Participant (any such violation, claim, action, proceeding or Release, a "Material Environmental Violation"). All such notices shall describe in reasonable detail the nature of the Material Environmental Violation, including any claims, actions or proceedings in respect thereof, and Lessee's proposed response thereto. In addition, Lessee shall provide to Agent Lessor, within ten (10) Business Days of receipt, copies of all written communications with any Governmental Authority relating to any such Material Environmental Violation. Lessee shall also promptly provide such detailed reports of any such Material Environmental Violations as may reasonably be requested by Agent Lessor. Upon completion of response actions with respect to such Material Environmental Violation by Lessee, Lessee shall cause to be prepared by an environmental consultant reasonably acceptable to Agent Lessor a report describing the Material Environmental Violation and the actions taken by Lessee (or its agents) in response to such Material Environmental Violation, and a statement by the consultant that the Material Environmental Violation has been remedied in compliance in all material respects with applicable Environmental Law. Each such Material Environmental Violation shall be so remedied prior to the Expiration Date unless the Premises have been purchased by Lessee (or its designee) in accordance with Article XV or Article XVIII. Nothing in this  Article XIV shall reduce or limit Lessee's obligations elsewhere in this Lease or under the Participation Agreement.

ARTICLE XV
TERMINATION OF LEASE

    SECTION 15.1.  Termination upon Certain Events.

    (a) If any of the following occurs during the Term with respect to the Premises:

     (i) a Significant Condemnation occurs;

    (ii) a Significant Casualty occurs; or

    (iii) an Environmental Violation occurs or is discovered and the cost of response to cure the Environmental Violation is, in the reasonable judgment of Agent Lessor, in excess of Ten Million Dollars ($10,000,000).

Agent Lessor may elect to terminate this Lease by giving written notice (a "Termination Notice") to Lessee that, as a consequence of such event, this Lease is to be terminated.

    (b) Following Lessee's receipt of the Termination Notice, unless Section 15.1(c)  below is applicable, then Lessee shall be obligated to purchase Agent Lessor's interest in the Premises on or prior to the next occurring Payment Date (but in no event any earlier than ten (10) Business Days from the date Lessee receives the applicable Termination Notice) by paying Agent Lessor an amount equal to the Purchase Amount.

    (c) If a Significant Condemnation or a Significant Casualty occurs during the Interim Term for which the limitation on Lessee's recourse liability set forth in Section 14.1(e) applies, then, following Lessee's receipt of a Termination Notice and in lieu of the procedures set forth in Section 15.1(b) above, Lessee shall be obligated to either (y) purchase Agent Lessor's interest in the Premises and pay to Agent Lessor on or prior to the next occurring Payment Date (but in no event any earlier than ten (10) Business Days from the date Lessee receives the applicable Termination Notice) the Purchase Amount (in which case Agent Lessor shall, as set forth in Section 15.2(a), transfer to Lessee its interest in the Premises or (z) deliver the Premises to Agent Lessor in which case Section 15.2(b)  shall apply; provided however, if Lessee fails, for any reason, to comply with all of the requirements at Section 15.2(b) in all material respects, Lessee shall instead be deemed to have elected to and shall purchase the Premises pursuant to Section 15.1(c)(y) above. Lessee acknowledges that an Environmental Violation in which clause (iii) of Section 15.1(a) applies or a Significant Condemnation or Significant Casualty to which Section 14.1(e) is not applicable shall be subject to Section 15.1(b) rather than this Section 15.1(c).

    SECTION 15.2.  Termination Procedures.

    (a) On the date of the payment by Lessee of the Purchase Amount in accordance with Section 15.1(b)  or Section 15.1(c)(y) (such date, the "Termination Date"), this Lease shall terminate and, concurrent with Agent Lessor's receipt of such payment:

     (i) Agent Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's cost and expense a special warranty deed of Agent Lessor's interest in the Premises and a discharge of mortgage with respect to this Lease, in each case, in recordable form and otherwise in conformity with local custom and without representation and warranty except as to the absence of any Lessor Liens attributable to Agent Lessor;

    (ii) the Premises shall be conveyed to Lessee (or to Lessee's designee) "AS IS" and in its then present physical condition; and

    (iii) in the case of a termination pursuant to clause (i) or (ii) of Section 15.1(a), Agent Lessor shall convey to Lessee any Net Proceeds with respect to the Casualty or Condemnation giving rise to the termination of this Lease theretofore received by Agent Lessor or at the request of Lessee, to the extent actually received, such amounts shall be applied against sums due hereunder.

    (b) If Section 15.1(c) is applicable to a Significant Condemnation or a Significant Casualty and Lessee elects not to purchase the Premises but instead elects to return the Premises as described in Section 15.1(c)(z), Lessee shall at its own cost and expense, do each of the following after which this Lease shall terminate:

     (i) Lessee shall execute and deliver to Agent Lessor (or to Agent Lessor's designee) (A) a warranty deed with respect to its interest in the Premises (expressly excluding Lessee's fee simple interest in the Land and Lessee's interest as landlord under the Ground Lease) containing representations and warranties of grantor to Agent Lessor (or such other Person) regarding the absence of Liens (other than Permitted Liens of the type described in clauses (i), (iii), (iv)  and (vi) of the definition of "Permitted Liens"), (B) an assignment of Lessee's entire interest in the Premises (which shall include an assignment of all of Lessee's right, title and interest in and to all awards, compensation and insurance proceeds payable in connection with the applicable Significant Condemnation or Significant Casualty and, if requested by Agent Lessor, an assignment of leases of the Premises), and (C) all other transfer requirements described in Section 21.1(iii), in each case in recordable form and otherwise in conformity with local custom and free and clear of any Liens attributable to Lessee;

    (ii) Lessee shall pay over to Agent Lessor all awards, compensation and insurance proceeds previously received by Lessee in connection with the applicable Significant Condemnation or Significant Casualty;

    (iii) Lessee shall execute and deliver to Agent Lessor and Agent Lessor's title insurance company an affidavit as to the absence of any Liens (other than Permitted Liens of the type described in clauses (i), (iii), (iv) and (vi)  of the definition of "Permitted Liens"), and shall execute and deliver to Agent Lessor a statement of termination of this Lease;

    (iv) Lessee shall vacate the Premises and transfer possession of the Premises to Agent Lessor or any Person designated by Agent Lessor, in each case by surrendering the same into the possession of Agent Lessor or such Person, as the case may be, in the condition required by Section 21.1(iv)  and in compliance with all Applicable Laws and Insurance Requirements; and

    (v) Lessee shall deliver to Agent Lessor or any Person designated by Agent Lessor copies of all books and records regarding the maintenance of, and Lessee's interest in, the Premises, a current copy of the Approved Plans and Specifications, and an assignment of all assignable licenses necessary for the operation and maintenance of the Premises. Lessee shall comply with each of the obligations at Section 21.1(iv). The obligations of Lessee under this paragraph shall survive the expiration or termination of this Lease.

ARTICLE XVI
EVENTS OF DEFAULT

    SECTION 16.1.  Lease Events of Default.  The occurrence of any one or more of the following events (whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall constitute a "Lease Event of Default":

    (a) the occurrence of a Payment Default; or

    (b) Lessee shall fail to make payment of any Supplemental Rent (other than Supplemental Rent referred to in clause (a)  of this Section 16.1) due and payable within ten (10) Business Days after receipt of notice thereof; or

    (c) Lessee shall fail to maintain insurance as required by Article XIII of this Lease; or

    (d) Lessee shall fail to observe or perform any material term, covenant or condition of Lessee under this Lease or any other Operative Document (other than those described in any other clause of this Section 16.1) and such failure shall have continued for thirty (30) days after the earlier of (i) receipt by Lessee of notice thereof and (ii) notification by Lessee of such event pursuant to Section 15.3 of the Participation Agreement; provided, however, that if such failure is capable of cure but cannot be cured by payment of money or cannot be cured by diligent efforts within such thirty (30)-day period, but such diligent efforts shall be properly commenced within the cure period and Lessee is diligently pursuing, and shall continue to pursue diligently, remedy of such failure, the cure period shall be extended for an additional period of time as may be necessary to cure, not to extend beyond the Expiration Date; or

    (e) the occurrence of an ADC Event of Default; or

    (f)  a Construction Agency Event of Default shall have occurred and be continuing; or

    (g) Lessee shall fail to sell the Premises in accordance with and satisfy each of the terms, covenants, conditions and agreements set forth at Article XXI in connection with and following its exercise of the Sale Option, including each of Lessee's obligations at Sections 20.1 and 21.1; or

    (h) Any Operative Document or the security interest and lien granted under this Lease (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 Lessee or any of its Affiliates, as the case may be, or Lessee or any Lessee Group Affiliate, directly or indirectly, contests in any manner in any court the effectiveness, validity, binding nature or enforceability thereof; or the security interest and lien securing Lessee's obligations under the Operative Documents, in whole or in part, ceases to be a perfected first priority security interest and lien.

    SECTION 16.2.  Remedies.  Upon the occurrence of any Lease Event of Default and at any time thereafter, Agent Lessor may, so long as such Lease Event of Default is continuing, do one or more of the following as Agent Lessor in its sole discretion shall determine, without limiting any other right or remedy Agent Lessor may have on account of such Lease Event of Default, including, without limitation, the obligation of Lessee to purchase the Premises as set forth in Section 18.2 and any rights and remedies set forth in the Memorandum of Lease:

    (a) Agent Lessor may, by notice to Lessee, rescind or terminate this Lease as to any or all of the Premises as of the date specified in such notice; however, no reletting, reentry or taking of possession of the Premises (or any portion thereof) by Agent Lessor will be construed as an election on Agent Lessor's part to terminate this Lease unless a written notice of such intention is given to Lessee, notwithstanding any reletting, reentry or taking of possession, Agent Lessor may at any time thereafter elect to terminate this Lease for a continuing Lease Event of Default and no act or thing done by Agent Lessor or any of its agents, representatives or employees and no agreement accepting a surrender of the Premises shall be valid unless the same be made in writing and executed by Agent Lessor;

    (b) Agent Lessor may demand that Lessee, and Lessee shall upon the written demand of Agent Lessor, return the Premises promptly to Agent Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Articles VII  and IX and Section 8.3  and Section 14.2 hereof as if the Premises were being returned at the end of the Term, and Agent Lessor shall not be liable for the reimbursement of Lessee for any costs and expenses incurred by Lessee in connection therewith and without prejudice to any other remedy which Agent Lessor may have for possession of the Premises, and to the extent and in the manner permitted by Applicable Laws, enter upon the Premises and take immediate possession of (to the exclusion of Lessee) the Premises or any part thereof and expel or remove Lessee, by summary proceedings or otherwise, all without liability to Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in addition to Agent Lessor's other damages, Lessee shall be responsible for all costs and expenses incurred by Agent Lessor and the Participants in connection with any reletting, including, without limitation, reasonable brokers' fees and all costs of any alterations or repairs made by Agent Lessor;

    (c) Agent Lessor may (i) sell all or any part of the Premises at public or private sale, as Agent Lessor may determine, free and clear of any rights of Lessee (except that Excess Sales Proceeds are payable to and shall be paid to Lessee) with respect thereto (except to the extent required by clause (ii) below if Agent Lessor shall elect to exercise its rights thereunder) in which event Lessee's obligation to pay Basic Rent hereunder for periods commencing after the date of such sale shall be terminated; and (ii) if Agent Lessor shall so elect, demand that Lessee pay to Agent Lessor, and Lessee shall pay to Agent Lessor, on the date of such sale, as damages for loss of a bargain and not as a penalty (in lieu of Basic Rent due for periods commencing on or after the Payment Date coinciding with such date of sale (or, if the sale date is not a Payment Date, the Payment Date next preceding the date of such sale)), an amount equal to (A) the excess, if any, of (1) the Lease Balance calculated as of such Payment Date (including all Rent due and unpaid to and including such Payment Date), over (2) the net proceeds of such sale (that is, after deducting all costs and expenses incurred by Agent Lessor or any Participant(s) incident to such conveyance, including, without limitation, repossession costs, brokerage commissions, prorations, transfer taxes, fees and expenses for counsel, title insurance fees, survey costs, recording fees and any repair costs); plus (B) interest at the Overdue Rate on the foregoing amount from such Payment Date until the date of payment;

    (d) Agent Lessor may, at its option, elect not to terminate this Lease with respect to the Premises and continue to collect all Basic Rent, Supplemental Rent and all other amounts due Agent Lessor (together with all costs of collection) and enforce Lessee's obligations under this Lease as and when the same become due, or are to be performed, and at the option of Agent Lessor, upon any abandonment of the Premises by Lessee or re-entry of same by Agent Lessor, Agent Lessor may, in its sole and absolute discretion, elect not to terminate this Lease and may make the necessary repairs (and Lessee shall pay the reasonable costs of such repairs) in order to relet the Premises, and relet the Premises or any part thereof for such term or terms (which may be for a term extending beyond the Term of this Lease) and at such rental or rentals and upon such other terms and conditions as Agent Lessor in its reasonable discretion may deem advisable; and upon each such reletting all rentals actually received by Agent Lessor from such reletting shall be applied to Lessee's obligations hereunder and the other Operative Documents in such order, proportion and priority as Agent Lessor may elect in Agent Lessor's sole and absolute discretion. If such rentals received from such reletting during any period are less than the Rent with respect to the Premises to be paid during that period by Lessee hereunder, Lessee shall pay any deficiency, as calculated by Agent Lessor, to Agent Lessor on the next Payment Date;

    (e) Unless the Premises have been sold in its entirety, Agent Lessor may, whether or not Agent Lessor shall have exercised or shall thereafter at any time (subject to Lessee's prior performance in full under this clause) exercise any of its rights under clause (b), (c)  or (d) with respect to the Premises or any portions thereof, demand, by written notice to Lessee specifying a date (a "Termination Date") not earlier than ten (10) days after the date of such notice, that Lessee purchase, on such Termination Date, the Premises (or any remaining portions thereof) in the manner provided in Section 18.2  and in accordance with the provisions of Article XXI;

    (f)  Agent Lessor may exercise any other right or remedy that may be available to it under Applicable Laws, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any period(s), and such suits shall not in any manner prejudice Agent Lessor's right to collect any such damages for any subsequent period(s), or Agent Lessor may defer any such suit until after the expiration of the Term, in which event such suit shall be deemed not to have accrued until the expiration of the Term;

    (g) Agent Lessor may retain and apply against the Lease Balance all sums which Agent Lessor would, absent such Lease Event of Default, be required to pay to, or turn over to, Lessee pursuant to the terms of this Lease; or

    (h) If a Lease Event of Default shall have occurred and be continuing, Agent Lessor, as a matter of right and with notice to Lessee, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Premises, and Lessee hereby irrevocably consents to any such appointment. Any such receiver(s) shall have all of the usual powers and duties of receivers in like or similar cases and all of the powers and duties of Agent Lessor in case of entry, and shall continue as such and exercise such powers until the date of confirmation of the sale of the Premises unless such receivership is sooner terminated.

    To the maximum extent permitted by law, Lessee hereby waives the benefit of any appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshaling in the event of any sale of the Premises or any interest therein.

    Agent Lessor shall be entitled to enforce payment of the indebtedness and performance of the obligations secured hereby and to exercise all rights and powers under this instrument or under any of the other Operative Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this instrument nor its enforcement, shall prejudice or in any manner affect Agent Lessor's right to realize upon or enforce any other security now or hereafter held by Agent Lessor, it being agreed that Agent Lessor shall be entitled to enforce this instrument and any other security now or hereafter held by Agent Lessor in such order and manner as Agent Lessor may determine in its absolute discretion. No remedy herein conferred upon or reserved to Agent Lessor is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Operative Documents to Agent Lessor or to which it may otherwise be entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Agent Lessor. In no event shall Agent Lessor, in the exercise of the remedies provided in this instrument (including, without limitation, in connection with the assignment of rents to Agent Lessor, or the appointment of a receiver and the entry of such receiver onto all or any part of the Premises), be deemed a "mortgagee in possession", and Agent Lessor shall not in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies.

    SECTION 16.3.  Waiver of Certain Rights.  If this Lease shall be terminated pursuant to Section 16.2, Lessee waives, to the fullest extent permitted by law, (a) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (b) any right of redemption, re-entry or repossession; (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt or limiting Agent Lessor with respect to the election of remedies; and (d) any other rights which might otherwise limit or modify any of Agent Lessor's rights or remedies under this Article XVI.

    SECTION 16.4.  Power of Sale and Foreclosure.  As is the intent of the parties pursuant to Article XXIV that the transaction reflected in this Lease shall constitute a mortgage financing as described therein, Lessee hereby grants a Lien upon, and mortgages and warrants the Premises to Agent Lessor WITH POWER OF SALE, to secure all Obligations, and that, upon the occurrence of any Lease Event of Default, Agent Lessor shall have the power and authority, to the extent provided by law, after proper notice and lapse of such time as may be required by law, to sell the Premises at the time and place of sale fixed by Agent Lessor in such notice of sale, either as a whole, or in separate lots or parcels or items and in such order as Agent Lessor may elect, at auction to the highest bidder for cash in lawful money of the United States payable at the time of sale; accordingly, it is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW AGENT LESSOR TO TAKE THE PREMISES AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY LESSEE UNDER THIS INSTRUMENT, and upon the occurrence of a Lease Event of Default, Agent Lessor, in lieu of or in addition to exercising any power of sale hereinabove given, may proceed by a suit or suits in equity or at law, whether for a foreclosure hereunder, or for the sale of the Premises, or against Lessee on a recourse basis for the Lease Balance, or for the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or for the appointment of a receiver pending any foreclosure hereunder or the sale of the Premises, or for the enforcement of any other appropriate legal or equitable remedy.

    SECTION 16.5.  Grant of Security Interest.  Lessee hereby grants a security interest to Agent Lessor in tangible personal property located at the Premises acquired with funds advanced by Agent Lessor and any proceeds thereof. This Lease shall constitute a security agreement within the meaning of the Uniform Commercial Code of the state where the Premises are located ("UCC"), and if a Lease Event of Default has occurred and is continuing, Agent Lessor shall, in addition to all other rights available at law or equity, have all of the rights provided to a secured party under Article 9 of the UCC.

    SECTION 16.6.  Limitation of Recourse During the Interim Term.  Notwithstanding any provision to the contrary contained in this Lease or any other Operative Documents, prior to the commencement of the Base Term, the aggregate amount payable by Lessee on a recourse basis under this Article XVI and under Section 18.2  as the result of a Lease Event of Default which is not a Full Recourse Interim Term Event of Default shall be subject to the limitations on recourse liability set forth in Article XIII of the Participation Agreement.

ARTICLE XVII
AGENT LESSOR'S RIGHT TO CURE

    SECTION 17.1.  Agent Lessor's Right to Cure Lessee's Lease Defaults.  Agent Lessor, without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to), upon two (2) Business Days' prior notice to Lessee, remedy any Lease Event of Default for the account and at the sole cost and expense of Lessee, including the failure by Lessee to maintain the insurance required by Article XIII, and may, to the fullest extent permitted by law, and notwithstanding any right of quiet enjoyment in favor of Lessee, enter upon the Premises for such purpose and take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed an eviction of Lessee. All reasonable out-of-pocket costs and expenses so incurred (including reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by Agent Lessor, shall be paid by Lessee to Agent Lessor on demand as Supplemental Rent.

ARTICLE XVIII
PURCHASE PROVISIONS

    SECTION 18.1.  Early and End of Term Purchase Options.  Subject to the conditions contained herein and without limitation of Lessee's purchase obligation pursuant to Section 18.2, on (1) any Payment Date and provided Lessee has not elected the Sale Option or (2) on any Business Day during the occurrence of a Lease Event of Default of the types described in clause (ii)  of the next sentence, Lessee may, at its option, purchase the Premises (the "Early Termination Option") at a price equal to the Purchase Amount. Lessee's right to purchase all of the Premises pursuant to this Section 18.1  shall terminate automatically and without notice upon (i) the occurrence of a Lease Event of Default arising as a result of an Insolvency Event, or (ii) upon the occurrence of any other Lease Event of Default, unless in the case of a Lease Event of Default described in this clause (ii)  Lessee delivers a written notice of its election to exercise this option to purchase not less than three (3) days prior to the date of the purchase and consummates the purchase within ten (10) Business Days following the occurrence of such Lease Event of Default. In order to exercise its option to purchase the Premises pursuant to this Section 18.1 and except as provided for in the clause (ii)  of the foregoing sentence, Lessee shall give to Agent Lessor not less than thirty (30) days' prior written notice of such election to exercise, which election shall be irrevocable when made. If Lessee exercises its option pursuant to this Section 18.1 then, upon Agent Lessor's receipt of all amounts due in connection therewith, Agent Lessor shall transfer to Lessee all of Agent Lessor's right, title and interest in and to the Premises in accordance with the procedures set forth in Section 21.1, such transfer to be effective as of the date specified in the purchase notice. Agent Lessor agrees that it shall cooperate with Lessee in effecting any transfer to a designee of Lessee pursuant to this Section 18.1.

    SECTION 18.2.  Acceleration of Premises Purchase.

    (a) Lessee shall be obligated to purchase for an amount equal to the Purchase Amount Agent Lessor's interest in the Premises (notwithstanding any prior election to exercise its Early Termination Option pursuant to Section 18.1) (i) automatically and without notice upon the occurrence of a Lease Event of Default resulting from an Insolvency Event, and (ii) as provided for at Section 16.2(e)  upon written demand of Agent Lessor upon the occurrence of any other Lease Event of Default.

    (b) Any purchase under this Section 18.2 shall be in accordance with the procedures for transfer set forth in Section 21.1.

ARTICLE XIX
END OF TERM OPTIONS

    SECTION 19.1.  End of Term Options.  At least 180 days before the scheduled expiration date of the Term, Lessee shall, by delivery of written notice to Agent Lessor and each Agent, exercise one of the following options:

    (a) Renew this Lease (the "Renewal Option") with respect to the Premises for two additional one-year periods (each, a "Lease Renewal Term") on the terms and conditions set forth herein and in the other Operative Documents; provided, however, such Renewal Option shall be available at the end of the Base Term and the first Lease Renewal Term only if the conditions to the Extension Option set forth in Section 4.4 of the Participation Agreement are satisfied; and provided further, that the Renewal Option shall not be available during the second Lease Renewal Term; or

    (b) Purchase for cash for the Purchase Amount the Premises on the last day of the Term (the "Purchase Option"); and if Lessee shall have elected to purchase the Premises, Agent Lessor shall, upon the payment to Agent Lessor of the Purchase Amount then due and payable by Lessee under the Operative Documents, transfer all of Agent Lessor's right, title and interest in and to the Premises pursuant to Section 21.1; or

    (c) Sell on behalf of Agent Lessor for cash to a single purchaser not in any way affiliated with Lessee or any of its Affiliates the Premises on the last day of the Term (the "Sale Option"). Lessee's right to sell the Premises pursuant to the Sale Option shall be conditioned upon and subject to the fulfillment by Lessee of each of the terms and conditions set forth in Article XX. In addition, unless otherwise approved by the Required Participants, all subleases with respect to the Premises shall have been terminated prior to Agent Lessor's receipt of Lessee's election of the Sale Option. Lessee shall not enter into any additional subleases or renew any subleases with respect to the Premises following Lessee's election of the Sale Option. Following Lessee's election of the Sale Option, Lessee shall not remove any Modifications or commence any voluntary Modifications without the consent of the Required Participants.

    SECTION 19.2.  Election of Options.  To the extent that the Renewal Option is available, unless Lessee shall have affirmatively elected in accordance herewith the Purchase Option or the Sale Option, Lessee shall be deemed to have elected the Renewal Option. To the extent that the Renewal Option is not available for any reason (including because of the Participants' refusal to consent to an Extension Option Request), unless Lessee shall have (a) affirmatively elected the Sale Option within the time period provided for in Section 19.1 and (b) satisfied each of the requirements in Articles XX and XXI, Lessee shall be deemed to have elected the Purchase Option. In addition, the Sale Option shall automatically be revoked if there exists a Lease Default, Lease Event of Default, Significant Casualty or Significant Condemnation at any time after the Sale Option is properly elected or Lessee fails to comply with each of the terms and conditions set forth at Articles XX and XXI and Agent Lessor shall be entitled to exercise all rights and remedies provided in Article XVI. Lessee may not elect the Sale Option if there exists on the date the election is made a Lease Default, a Lease Event of Default, Significant Casualty or Significant Condemnation, or an outstanding Extension Option Request. Any election by Lessee pursuant to Section 19.1 shall be irrevocable at the time made.

    SECTION 19.3.  Renewal Options; Extension Options.  The exercise of any Renewal Option by Lessee shall be subject to satisfaction of the following conditions:

     (i) on the Expiration Date then in effect no Lease Event of Default or Lease Default shall have occurred and be continuing, and on the date Lessee gives notice of its exercise of the Renewal Option, no Lease Event of Default or Lease Default shall have occurred and be continuing; and

    (ii) Lessee shall not have exercised the Sale Option or the Purchase Option.

Lessee's exercise of a Renewal Option shall be deemed to be a representation by Lessee that on both the Expiration Date then in effect and the date Lessee gives notice of its exercise of the Renewal Option, no Lease Event of Default or Lease Default shall have occurred and be continuing.

ARTICLE XX
SALE OPTION

    SECTION 20.1.  Sale Option Procedures.  Lessee's effective exercise and consummation of the Sale Option with respect to the Premises shall be subject to the due and timely fulfillment of each of the following provisions as to the Premises as of the dates set forth below.

    (a) Lessee shall have given to Agent Lessor and the Participants written notice of Lessee's exercise of the Sale Option in accordance with Section 19.1.

    (b) Not later than forty-five (45) days prior to Expiration Date, Lessee shall deliver to Agent Lessor an Environmental Audit for the Premises. Such Environmental Audit shall be prepared by an environmental consultant selected by Agent Lessor in Agent Lessor's discretion and shall contain conclusions satisfactory to the Participants as to the environmental status of the Premises. If any such Environmental Audit indicates any exceptions, Lessee shall have also delivered prior to the Expiration Date for the Premises a Phase Two environmental assessment by such environmental consultant and a written statement by such environmental consultant indicating that all such exceptions have been remedied in compliance with Applicable Laws.

    (c) No Lease Event of Default or Lease Default shall exist on or at any time following the date of the exercise of the Sale Option.

    (d) Upon surrender of the Premises, (i) the Premises shall be in the condition required by Section 9.1  and (ii) Lessee shall have completed or caused to be completed all Financed Improvements in accordance with the Approved Plans and Specifications, Modifications commenced prior to the Expiration Date, and Lessee shall have caused to be completed prior to the Expiration Date the repair and rebuilding of the affected portions of the Premises suffering a Casualty or Condemnation.

    (e) Lessee shall, as nonexclusive agent for Agent Lessor, use its best commercial efforts to obtain the highest cash purchase price for the Premises. Lessee will be responsible for hiring brokers and making the Premises available for inspection by prospective purchasers, and all marketing of the Premises shall be at Lessee's expense. Lessee shall promptly upon request permit inspection of the Premises and any Premises Records by Agent Lessor, any Participant and any potential purchasers, and shall otherwise do all things necessary to sell and deliver possession of the Premises to any purchaser.

    (f)  Lessee shall use its best commercial efforts to procure bids from one or more bona fide prospective purchasers to purchase the Premises. No such purchaser shall be Lessee or any Subsidiary or Affiliate of Lessee or any Lessee Group Affiliate.

    (g) Lessee shall submit all bids to Agent Lessor and the Participants, and Agent Lessor will have the right to review the same and to submit any one or more bids. All bids shall be on an all-cash basis unless Agent Lessor and the Required Participants shall otherwise agree in their sole discretion. Lessee shall procure bids from one or more bona fide prospective purchasers and shall deliver to Agent Lessor and the Participants not less than ninety (90) days prior to the Expiration Date a binding written unconditional (except as set forth below), irrevocable offer by such purchaser or purchasers offering the highest all cash bid to purchase the Premises (unless otherwise agreed to by Agent Lessor and the Participants). If the sum of (i) the Gross Proceeds to be paid to Agent Lessor pursuant to clause (l) below from a proposed bid which Lessee desires to accept is less than the Lease Balance, Lessee's rights hereunder shall be further conditioned upon Agent Lessor's receipt of an Appraisal described at Section 20.1(m) demonstrating that such proposed bid is for an amount at least equal to the Fair Market Value of the Premises as established by such Appraisal. All bids shall be on an all-cash basis unless the Required Participants, each Agent and Lessee shall otherwise agree.

    (h) In connection with any such sale of the Premises, Lessee will provide to the purchaser all customary "seller's" indemnities, representations and warranties regarding title, absence of Liens (except Lessor Liens) and the condition of such Premises, including an environmental indemnity in form and substance reasonably required by the purchaser or Agent Lessor. Lessee shall have obtained, at its cost and expense, all required governmental and regulatory consents and approvals and shall have made all filings as required by Applicable Laws in order to carry out and complete the transfer of the Premises. As to Agent Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by Agent Lessor, other than the absence of Lessor Liens. Any agreement as to such sale shall be made subject to Agent Lessor's rights hereunder and shall be in form and substance satisfactory to Agent Lessor.

    (i)  Lessee shall pay or cause to be paid directly, and not from the sale proceeds, any prorations, credits, costs, Impositions and expenses of or arising from the sale of the Premises, whether incurred by Agent Lessor or Lessee, including the cost of all title insurance, surveys, environmental reports, appraisals, transfer taxes, Agent Lessor's reasonable attorneys' fees, Lessee's attorneys' fees, commissions, escrow fees, recording fees, and all applicable documentary and other transfer and document taxes and Impositions.

    (j)  Lessee shall pay to Agent Lessor on or prior to the Expiration Date for the Premises (or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to (i) the Residual Value Guarantee Amount with respect to the Premises plus (ii) all accrued and unpaid Rent (including Supplemental Rent, if any) and all other amounts hereunder which have accrued or will accrue prior to or as of the Expiration Date for the Premises, in the type of funds specified in Section 3.4 hereof.

    (k) Lessee shall pay to Agent Lessor on or prior to the Expiration Date for the Premises the amounts, if any, required to be paid pursuant to Article XII of the Participation Agreement.

    (l)  The purchase of the Premises shall be consummated on the Expiration Date therefor and the gross proceeds (the "Gross Proceeds") of the sale of the Premises (i.e., without deduction for any marketing, closing or other costs, prorations or commissions) shall be paid directly to Agent Lessor; provided, however, that if the sum of (x) the Gross Proceeds from such sale plus  (y) the Residual Value Guarantee Amount with respect to the Premises received by Agent Lessor pursuant to clause (j) plus  (z) amounts received by Agent Lessor pursuant to Section 12.3 of the Participation Agreement exceeds the Lease Balance for the Premises as of such date, then the excess shall be paid to Lessee on such Expiration Date.

    (m) If the bid that Lessee proposes to accept and which Lessee submits pursuant to Section 20.1(g)  is for an amount less than the Lease Balance, then Agent Lessor shall promptly following the receipt of such bid, engage an appraiser, reasonably satisfactory to the Participants, at Lessee's expense, to determine (by appraisal methods reasonably satisfactory to the Required Participants) the Fair Market Value of the Premises as of the Expiration Date. A copy of such appraisal shall be delivered to each of the Participants not later than five (5) Business Days prior to the Expiration Date. The appraiser will be instructed to assume that the Premises are in the condition required by and has been maintained in accordance with this Lease. Any such appraisal shall be at the sole cost and expense of Lessee.

    If one or more of the foregoing provisions shall not be fulfilled as of the date set forth above with respect to the Premises, including Lessee's obligation at Section 20.1(g) to accept a bid for not less than the Fair Market Value of the Premises, then Agent Lessor shall declare by written notice to Lessee the Sale Option to be null and void (whether or not it has been theretofore exercised by Lessee), in which event all of Lessee's rights under this Section 20.1 shall immediately terminate and Lessee shall be obligated to purchase the Premises pursuant to  Section 18.2 on the Expiration Date.

    Except as expressly set forth herein, Lessee shall have no right, power or authority to bind Agent Lessor in connection with any proposed sale of the Premises.

    SECTION 20.2.  Certain Obligations Continue.  During the period following Lessee's exercise of the Sale Option, the obligation of Lessee to pay Rent with respect to the Premises (including the installment of Rent due on the Expiration Date for the Premises) shall continue undiminished. Agent Lessor shall have the right, but shall be under no duty, to solicit bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take action in connection with any such sale, other than as expressly provided in this Artice XX.

ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR SALES OPTION

    SECTION 21.1.  Provisions Relating to Conveyance of the Premises Upon Purchase by Lessee, Sales or Certain Other Events.  In connection with any termination of this Lease pursuant to the terms of Article XV, any purchase of the Premises in accordance with Article XVIII  or pursuant to the Construction Agency Agreement or in connection with Lessee's obligations under Section 16.2(e), then, upon the date on which this Lease is to terminate with respect to the Premises and upon tender by Lessee of the amounts set forth in Article XV, Sections 16.2(e), 18.1 or 18.2  or the Purchase Amount as provided in the final paragraph of Section 5.1 of the Construction Agency Agreement, as applicable:

     (i) Agent Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's cost and expense a special warranty deed of Agent Lessor's interest in the Premises in recordable form and otherwise in conformity with local custom and without representation and warranty except as to the absence of any Lessor Liens attributable to Agent Lessor;

    (ii) the Premises shall be conveyed to Lessee "AS IS" and in its then present physical condition; and

    (iii) Agent Lessor shall execute and deliver to Lessee and Lessee's title insurance company an affidavit as to the absence of Lessor Liens and shall execute and deliver to Lessee a statement of termination of this Lease and the Construction Agency Agreement, in each case to the extent such Operative Documents relate to the Premises and shall execute and deliver a release of the Memorandum of Lease relating to the Premises, releases of any Liens created by the Operative Documents attributable to Agent Lessor, and termination statements for any financing statements which are then of record naming Agent Lessor as the secured party.

    (iv) If Lessee properly exercises the Sale Option, then Lessee shall, on the Expiration Date, and at its own cost, transfer possession of the Premises to the independent purchaser(s) thereof, in each case by surrendering the same into the possession of Agent Lessor or such purchaser, as the case may be, free and clear of all Liens other than Lessor Liens, in good condition (as modified by Modifications permitted by this Lease), ordinary wear and tear excepted, and in compliance with Applicable Laws and the provisions of this Lease, and Lessee shall execute and deliver to the purchaser at Lessee's cost and expense a special warranty deed with respect to the Premises (expressly excluding the fee), a bill of sale with respect to any equipment covered by this Lease, in each case in recordable form and otherwise in conformity with local custom and free and clear of all Liens; Lessee shall execute and deliver to purchaser and the purchaser's title insurance company an affidavit as to the absence of any Liens (other than Permitted Liens), and such other affidavits and certificates reasonably requested by any title insurance company insuring title to the Premises, as well as a FIRPTA affidavit, and an instrument in recordable form declaring this Lease to be terminated on the date of closing of the sale of the Premises. Lessee shall cooperate reasonably with Agent Lessor and the purchaser of the Premises in order to facilitate the purchase and use by such purchaser of the Premises, which cooperation shall include: providing all books and records regarding the maintenance and ownership of the Premises and all know-how, data and technical information relating thereto. The obligations of Lessee under this paragraph shall survive the expiration or termination of this Lease.

    (v) In the event that (A) Lessee does not elect to purchase the Premises on the Expiration Date or pursuant to Section 15.1(c), (B) this Lease is terminated without a purchase of the Premises by Lessee as expressly permitted herein, or (C) pursuant to Agent Lessor's exercise of remedies under Article XVI, this Lease is terminated, Lessee shall provide Agent Lessor or other purchaser of the Premises, effective on the Expiration Date or earlier termination of this Lease, with (i) all permits, certificates of occupancy, governmental licenses and authorizations necessary to use and operate the Premises for its intended purposes (to the extent such items are transferable or may be obtained by Lessee on behalf of another party), (ii) such easements, licenses, rights-of-way and other rights and privileges in the nature of an easement as are reasonably necessary or desirable in connection with the use, repair, access to or maintenance of the Premises as Agent Lessor shall request, and (iii) a services agreement covering such services as Agent Lessor may request in order to use and operate the Premises for its intended purposes at such rates (not in excess of arm's length fair market rates) as shall be acceptable to Agent Lessor and Lessee. All assignments, licenses, easements, agreements and other deliveries required by clauses (i) and (ii) of this Section 21.1(v) shall be in form reasonably satisfactory to Agent Lessor, and shall be fully assignable (including both primary assignments and assignments given in the nature of security) without payment of any fee, cost or other charge, and shall survive the expiration or termination of this Lease.

ARTICLE XXII
ACCEPTANCE OF SURRENDER

    SECTION 22.1.  Acceptance of Surrender.  No surrender to Agent Lessor of this Lease or of the Premises or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by Agent Lessor and, prior to the payment or performance of all obligations under this Lease and the other Operative Documents and termination of the Commitments, the Participants, and no act by Agent Lessor or the Participants or any representative or agent of Agent Lessor or the Participants, other than a written acceptance, shall constitute an acceptance of any such surrender.

ARTICLE XXIII
NO MERGER OF TITLE

    SECTION 23.1.  No Merger of Title.  There shall be no merger of this Lease or of the leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Lease or the leasehold estate created hereby or any interest in this Lease or such leasehold estate, (b) the fee or ground leasehold estate in the Premises, except as may expressly be stated in a written instrument duly executed and delivered by the appropriate Person or (c) a beneficial interest in Agent Lessor.

ARTICLE XXIV
INTENT OF THE PARTIES

    SECTION 24.1.  Nature of Transaction.  It is the intention of the parties that:

    (a) the Overall Transaction constitutes an operating lease from Agent Lessor to Lessee for purposes of Lessee's financial reporting, including, without limitation, under Financial Accounting Standards Board Statement No. 13;

    (b) for all other purposes, including federal and all state and local income and transfer taxes, bankruptcy, insolvency, conservatorships and receiverships (including the substantive law upon which bankruptcy, conservatorship and insolvency and receivership proceedings are based, including FIRREA), and real estate law, commercial law and Uniform Commercial Code purposes:

     (i) the Overall Transaction (including, without limitation, the transactions and activities during the Construction Period referred to or contemplated by the Construction Agency Agreement, subject to the limitations in Article XIII of the Participation Agreement) constitutes a financing by the Participants to Lessee and preserves beneficial ownership in the Premises in Lessee, Lessee will be entitled to all tax benefits ordinarily available to owners of property similar to the Premises for tax purposes and the obligations of Lessee to pay Basic Rent shall be treated as payments of interest to the Participants, and the payment by Lessee of any amounts in respect of the Lease Balance shall be treated as payments of principal to the Participants; and

    (ii) in order to secure the obligations of Lessee now existing or hereafter arising under any of the Operative Documents, this Lease creates, and Lessee hereby grants, conveys, assigns, mortgages and transfers a first priority security interest or a lien, as the case may be, in the Premises and the other Collateral in favor of Agent Lessor, and for the benefit of the Participants, and Lessee does hereby irrevocably GRANT, BARGAIN, SELL, ALIENATE, REMISE, RELEASE, CONFIRM AND CONVEY to Agent Lessor, and for the benefit of the Participants, a Lien, deed of trust and mortgage on all right, title and interest of Lessee in and to the Premises.

Nevertheless, Lessee acknowledges and agrees that none of Agent Lessor or any Participant has made any representations or warranties concerning the tax, accounting or legal characteristics of the Operative Documents or any aspect of the Overall Transaction and that Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents and the Overall Transaction as it deems appropriate.

    (c) Specifically, but without limiting the generality of subsection (b) of this Section 24.1, Agent Lessor and Lessee further intend and agree that, with respect to that portion of the Premises constituting personal property, for the purpose of securing Lessee's obligations for the repayment of the above-described loans from Agent Lessor and the Participants to Lessee, (i) this Lease shall also be deemed to be a security agreement and financing statement within the meaning of Article 9 of the Uniform Commercial Code; (ii) the conveyance provided for hereby shall be deemed to be a grant by Lessee to Agent Lessor, for the benefit of the Participants, of a mortgage lien and security interest in all of Lessee's present and future right, title and interest in and to such portion of the Premises, including but not limited to Lessee's leasehold estate therein and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property, whether in the form of cash, investments, securities or other property to secure such loans, effective on the date hereof, to have and to hold such interests in the Premises unto Agent Lessor, for the benefit of the Participants; (iii) the possession by Agent Lessor of notes and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be "possession by the secured party" for purposes of perfecting the security interest pursuant to Section 9-305 of the Uniform Commercial Code; and (iv) notifications to Persons holding such property, and acknowledgments, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of Lessee shall be deemed to have been given for the purpose of perfecting such security interest under Applicable Laws. Agent Lessor and Lessee shall, to the extent consistent with this Lease, take such actions and execute, deliver, file and record such other documents, financing statements, mortgages and deeds of trust as may be necessary to ensure that, if this Lease were deemed to create a security interest in the Premises in accordance with this Section, such security interest would be deemed to be a perfected security interest with priority over all Liens other than Permitted Liens, under Applicable Laws and will be maintained as such throughout the Term.

ARTICLE XXV
MISCELLANEOUS

    SECTION 25.1.  Survival; Severability; Etc.  Anything contained in this Lease to the contrary notwithstanding, all claims against and liabilities of Lessee or Agent Lessor arising from events commencing prior to the expiration or earlier termination of this Lease shall survive such expiration or earlier termination for a period of one year except as to indemnification which shall continue to survive. If any term or provision of this Lease or any application thereof shall be declared by a court of competent jurisdiction invalid or unenforceable, the remainder of this Lease and any other application of such term or provision shall not be affected thereby. If any right or option of Lessee provided in this Lease, including any right or option described in Articles XIV, XV, XVIII, XIX  or XX, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule of law relating to the vesting of an interest in or the suspension of the power of alienation of property, then such right or option shall be exercisable only during the period which shall end twenty-one (21) years after the date of death of the last survivor of the descendants of Franklin D. Roosevelt, the former President of the United States, Henry Ford, the deceased automobile manufacturer, and John D. Rockefeller, the founder of the Standard Oil Company, known to be alive on the date of the execution, acknowledgment and delivery of this Lease.

    SECTION 25.2.  Amendments and Modifications.  Subject to the requirements, restrictions and conditions set forth in the Participation Agreement, neither this Lease nor any provision hereof may be amended, waived, discharged or terminated except by an instrument in writing in recordable form signed by Agent Lessor and Lessee.

    SECTION 25.3.  No Waiver.  No failure by Agent Lessor or Lessee to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Lease, and this Lease shall continue in full force and effect with respect to any other then existing or subsequent default.

    SECTION 25.4.  Notices.  All notices, demands, requests, consents, approvals and other communications hereunder shall be in writing and directed to the address described in, and deemed received in accordance with the provisions of, Section 15.3 of the Participation Agreement.

    SECTION 25.5.  Successors and Assigns.  All the terms and provisions of this Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

    SECTION 25.6.  Headings and Table of Contents.  The headings and table of contents in this Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

    SECTION 25.7.  Counterparts.  This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument.

    SECTION 25.8.  GOVERNING LAW.  THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW), EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATES ARE LOCATED. WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS LEASE IS DEEMED TO CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW), SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY, BUT ANY LIEN CREATED HEREBY AND THE CREATION, PERFECTION AND THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATES ARE LOCATED.

    SECTION 25.9.  Original Lease.  The single executed original of this Lease marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt thereof of Agent Lessor, on or following the signature page thereof shall be the Original Executed Counterpart of this Lease (the "Original Executed Counterpart"). To the extent that this Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code, no security interest in this Lease may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart.

    SECTION 25.10.  Limitations on Recourse.  The parties hereto agree that, except as specifically set forth in this Lease or in any other Operative Document, Lease Plan North America, Inc. shall have no personal liability whatsoever to Lessee or its respective successors and assigns for any claim based on or in respect of this Lease or any of the other Operative Documents or arising in any way from the Overall Transaction; provided, however, that Lease Plan North America, Inc. shall be liable in its individual capacity (a) for its own willful misconduct or gross negligence (or negligence in the handling of funds), (b) for any Tax based on, with respect to or measured by any income, fees, commission, compensation or other amounts received by it as compensation for services (including for acting as Agent Lessor) or otherwise under, or as contemplated by, the Operative Documents, (c) Lessor Liens on the Premises which are attributable to it, (d) for its representations and warranties made in its individual capacity in the Participation Agreement or in any certificate or documents delivered pursuant thereto, (e) for its failure to perform any of its covenants and agreements set forth in the Participation Agreement or any other Operative Document, and (f) as otherwise expressly provided in the Operative Documents. The provisions of Article XVI of the Participation Agreement are incorporated herein by reference as if fully set forth herein.

[END OF PAGE]
[SIGNATURE PAGES FOLLOW]

    IN WITNESS WHEREOF, the parties have caused this Lease be duly executed and delivered as of the date first above written.

ADC TELECOMMUNICATIONS, INC., as Lessee and Mortgagor

By: /s/ GOKUL HEMMADY

Name: Gokul Hemmady
       

Title: Vice President/Treasurer
      




LEASE PLAN NORTH AMERICA, INC., not in its individual capacity, except as expressly stated herein, but solely as Agent Lessor and Mortgagee

By: 

Name: 

Title: 




By: 

Name: 

Title: 

THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.

Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as of the date hereof.

LEASE PLAN NORTH AMERICA, INC., not its individual capacity, except as expressly stated herein, but solely as Agent Lessor and Mortgagee

By: /s/ BLAKE J. LACHER

Name: Blake J. Lacher
       

Title: Vice President
      




By: 

Name: 

Title: 

STATE OF MINNESOTA	)
	)	SS.:
COUNTY OF HENNEPIN	)

    The foregoing Lease was acknowledged before me this 22nd day of October, 1999, by Gokul Hemmady as Treasurer of ADC Telecommunications, Inc., a corporation organized under the laws of the State of Minnesota, on behalf of the corporation.

[Notarial Seal]

/s/ KAYE M. PARK

Notary Public

My commission expires: 1/31/00

STATE OF ILLINOIS	)
	)	SS.:
COUNTY OF COOK	)

    The foregoing Lease was acknowledged before me, the undersigned Notary Public, in the County of Cook, State of Illinois, this 22nd day of October, 1999, by Blake J. Lacher as Vice President of Lease Plan North America, Inc., a corporation organized under the laws of the State of Illinois, on behalf of the corporation.

[Notarial Seal]

/s/ RUBA GHOULEH

Notary Public

My commission expires: 07/29/2002

EXHIBIT A
to Lease

LEGAL DESCRIPTION OF LAND

    Lot 1, Block 1, Technology Campus 3rd Addition, Hennepin County, Minnesota.

QuickLinks

TABLE OF CONTENTS
EXHIBITS

LEASE
ARTICLE I DEFINITIONS
ARTICLE II LEASE OF PREMISES; LEASE TERM
ARTICLE III PAYMENT OF RENT
ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT
ARTICLE V NET LEASE, ETC.
ARTICLE VI SUBLEASES; SPACE LEASES
ARTICLE VII LESSEE ACKNOWLEDGMENTS
ARTICLE VIII POSSESSION AND USE OF THE PROPERTY, ETC.

ARTICLE IX MAINTENANCE AND REPAIR; REPORTS
ARTICLE X MODIFICATIONS, ETC.
ARTICLE XI COVENANTS WITH RESPECT TO LIENS; EASEMENTS
ARTICLE XII PERMITTED CONTESTS
ARTICLE XIII INSURANCE
ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
ARTICLE XV TERMINATION OF LEASE

ARTICLE XVI EVENTS OF DEFAULT
ARTICLE XVII AGENT LESSOR'S RIGHT TO CURE
ARTICLE XVIII PURCHASE PROVISIONS
ARTICLE XIX END OF TERM OPTIONS
ARTICLE XX SALE OPTION
ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR SALES OPTION
ARTICLE XXII ACCEPTANCE OF SURRENDER

ARTICLE XXIII NO MERGER OF TITLE
ARTICLE XXIV INTENT OF THE PARTIES
ARTICLE XXV MISCELLANEOUS
LEGAL DESCRIPTION OF LAND

EX-10.GG

GROUND LEASE

dated as of October 22, 1999

between

ADC TELECOMMUNICATIONS, INC.,
as Landlord,

and

LEASE PLAN NORTH AMERICA, INC.,
not in its individual capacity,
except as otherwise expressly stated herein,
but solely as Agent Lessor,
as Tenant

TABLE OF CONTENTS

		Page
1.	Land	1
2.	Term and Use	1
3.	Ground Lease Rent	1
4.	Improvements	2
5.	Real Estate Taxes	3
6.	Utilities	3
7.	Insurance	4
8.	Indemnity	4
9.	Repairs	4
10.	Compliance with Laws and Ordinances	4
11.	Landlord's Access to Land	5
12.	Assignment and Subletting	5
13.	Performance by Subtenants and Occupancy Tenants	5
14.	Casualty and Condemnation	5
15.	Ground Lease Events of Default	6
16.	Tenant's Right to Mortgage	7
17.	Landlord's Right to Mortgage	9
18.	Landlord's and Tenant's Certificates	9
19.	Quiet Enjoyment	9
20.	Recording of Memorandum	10
21.	Inability to Perform	10
22.	Notices	10
23.	Tenant's Right of First Refusal; Option to Purchase	10
24.	Liens	12
25.	Liability of Tenant	12
26.	No Merger of Title	12
27.	Landlord's Right to Cure	13
28.	Miscellaneous	13

Exhibit A  —  Legal Description of Land
Exhibit B  —  Form of Memorandum of Ground Lease
Exhibit C  —  Material Contract Terms

GROUND LEASE

    THIS GROUND LEASE (this "Ground Lease") is made as of October 22, 1999, by and between ADC TELECOMMUNICATIONS, INC., a Minnesota corporation (in its capacity as landlord hereunder, "Landlord") and LEASE PLAN NORTH AMERICA, INC., not in its individual capacity, except as expressly stated herein, but solely as Agent Lessor (in its capacity as tenant hereunder, "Tenant"). For all purposes hereof, the capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in Appendix 1 to that certain Participation Agreement dated as of the date hereof, among Tenant, Landlord, ABN AMRO Bank, N. V., as Administrative Agent ("Administrative Agent"), and the Persons Named on Schedule I Thereto, as Participants (as amended, restated or otherwise modified from time to time, the "Participation Agreement").

W I T N E S S E T H:

    A.  Landlord is the fee simple owner of the land legally described on Exhibit A  attached hereto and made a part hereof (together with all rights-of-way or use, easements, servitudes, licenses, tenements, driveways, approaches, pavements, hereditaments, curbs and street front privileges and appurtenances thereunto belonging but excluding the Improvements (as hereinafter defined), the "Land") located in the State of Minnesota, County of Hennepin.

    B.  Landlord and Tenant desire to enter into a ground lease of the Land.

    C.  Concurrently herewith, Tenant is entering into that certain Lease dated as of the date hereof (as amended, restated or otherwise modified from time to time, the "Lease"), by and between Tenant, as Lessor, and Landlord, as Lessee, pursuant to which Tenant, as Lessor under the Lease, subleases to Landlord, as Lessee under the Lease, the interest in the Land granted herein for the Lease Term (as defined in the Lease).

    NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to enter into this Ground Lease, as follows:

    1.  Land.  Landlord, for and in consideration of the rents herein reserved and of the agreements herein contained on the part of Tenant to be kept, observed and performed, does by these presents demise and lease to Tenant, and Tenant hereby hires and lets from Landlord, the Land, subject to the exceptions set forth in the Owner's Policy.

    2.  Term and Use.  To have and to hold, for any and all lawful purposes, for a term of forty (40) years, commencing on the date hereof and expiring on the fortieth anniversary of the date hereof, both days inclusive. Notwithstanding anything herein to the contrary, from and after the Transition Date (as defined in Section 15(f)), this Ground Lease may be terminated by Tenant at any time, without penalty, upon not less than ten (10) days notice to Landlord.

    3.  Ground Lease Rent.  The total rent for the term of this Ground Lease ("Ground Lease Rent") is $100.00. Landlord acknowledges receipt of the sum of $100.00, which represents a prepayment of the Ground Lease Rent due hereunder during the term hereof. Such Ground Lease Rent shall be absolutely net to Landlord.

    Notwithstanding the foregoing, from and after the Transition Date, the annual Ground Lease Rent shall be based on the Fair Market Rent (defined below), as prorated for any partial year or month, in monthly installments payable in advance beginning on the Transition Date and thereafter on the first day of each calendar month. As used herein, the term "Fair Market Rent" shall mean, as of and following the Transition Date, the prevailing market rate per rentable square foot per annum (on a triple net basis) for a comparable ground lease (assuming the Land is unimproved) in the county in which the Land is located where (i) the tenant is a fully creditworthy tenant, (ii) the lessor and the lessee each are acting prudently and knowledgeably, (iii) the lessor and the lessee are well informed or advised and acting in their respective best interests, (iv) the lessor and the lessee have each considered the location and other aspects of the Land, and (v) the rent is not affected by undue stimulus.

    Fair Market Rent shall be determined as of the Transition Date and each third (3rd) anniversary date thereof (each, a "Determination Date"), such determination to be made pursuant to the terms, conditions and time periods set forth below with each such determination becoming effective only for the periods following the applicable Determination Date. Landlord and Tenant shall use their best efforts to agree as to the Fair Market Rent within thirty (30) days after each Determination Date. If the parties are unable to agree upon the Fair Market Rent within thirty (30) days after a Determination Date, the Fair Market Rent shall be determined in the same manner as "Appraised Value" is determined under the second and third paragraphs of Section 23(b), except that the term "Appraised Value" wherever it appears in such section shall be replaced with the term "Fair Market Rent," and the term "value" wherever it appears in such section shall be replaced with the term "rent amount." Until such Fair Market Rent is determined as provided above, Tenant shall pay (i) with respect to the period commencing immediately after the Transition Date, $100.00 per month or such other amount as it believes represents the Fair Market Rent, and (ii) with respect to any other period following the third (3rd) anniversary date of the Transition Date, the Fair Market Rent as in effect immediately prior to the most recent Determination Date. If Fair Market Rent is ultimately established at a higher amount than the amount then being paid by Tenant, then within thirty (30) days of the determination of such Fair Market Rent as provided above, Tenant shall pay the Fair Market Rent accrued from the Determination Date to the date of such payment less any amounts already paid, plus interest on the unpaid amount at an interest rate equal to the "Prime Rate" as published from time to time in the Eastern edition of The Wall Street Journal. Each change in such interest rate due to a change in such Prime Rate shall take effect simultaneously with such change in such Prime Rate without notice. If the Prime Rate shall be in violation of any usury or similar law, then the Prime Rate shall be reduced to the extent necessary to comply with any applicable usury or similar law.

    4.  Improvements.  Without Landlord's consent, Tenant shall have the right, at any time and from time to time, to erect, construct, and install on the Land any and all buildings, structures and other improvements, including, but not limited to, the Financed Improvements and any and all utility lines, pipes, connections and fixtures (herein sometimes collectively called "Improvements") and any and all machinery, equipment, signs, trade fixtures, furniture, furnishings, appointments and other personal property to be located therein and utilized in connection with the use and operation thereof ("Personalty"). Without Landlord's consent, Tenant shall also have the right to change, alter, raze, remove or add to any Improvements, or any part thereof, now existing or hereafter erected, constructed or installed on the Land and remove the Personalty installed or placed in, on, or about the Improvements and the Land. Notwithstanding the foregoing, so long as the Lease is in effect, Tenant's rights hereunder shall be subject to the restrictions of the Lease.

    Landlord acknowledges and agrees that title to the existing Improvements and Personalty and all future Improvements and Personalty (including the Financed Improvements) is and shall remain in Tenant during the term of this Ground Lease, provided that all Improvements and Personalty which are not removed by the Tenant within ninety (90) days following the expiration or termination of this Ground Lease shall become the property of Landlord, and if so requested by Landlord, Tenant shall execute, acknowledge and deliver to Landlord a proper instrument in writing, releasing and quitclaiming to Landlord all right, title and interest of Tenant in and to the Improvements and Personalty remaining on the Land.

    In the event Landlord shall fail or refuse to sign and deliver any application for building and other permits required, if any, for the erection, construction and installation of Improvements (if same is required to be signed by Landlord) within ten (10) days after Tenant submits same to Landlord for execution, for all building and other permits and licenses necessary for the erection, construction and installation of the Improvements, or for the use and operation of the Land and for certificates of occupancy, then Tenant shall have the right and authority to sign any such application in the name of the Landlord. This provision shall constitute an irrevocable power-of-attorney coupled with an interest, but only for these purposes.

    5.  Real Estate Taxes.  During the term of this Ground Lease, Tenant will pay all real estate taxes and assessments, both general and special, which shall become due and payable solely with respect to the Land during the term of this Ground Lease. If any such tax or assessment may, at the option of the taxpayer, be paid in installments, Tenant may exercise the option to pay the same in installments. If Tenant shall elect to pay any such tax or assessment on the installment basis, then Tenant will pay only those installments which become due and payable during the term of this Ground Lease. All real estate taxes and assessments that shall be assessed with respect to the fiscal tax years falling wholly or partially within the first and last calendar years of the term of this Ground Lease shall be apportioned pro rata between Landlord and Tenant on a per diem basis in accordance with the respective numbers of days in such fiscal tax years during which this Ground Lease is in effect. All real estate taxes and assessments which Tenant agrees to pay pursuant to this Ground Lease, and that are not paid when due, may be paid by Landlord, in which event such amount shall be reimbursed by Tenant to Landlord, on demand, and shall become additional rent hereunder, and shall accrue interest at the Overdue Rate from the date paid by Landlord.

    Tenant, at its expense, shall have the right to contest or review by legal, administrative or other proceedings the amount or validity of any such tax or assessment imposed against the Land. Nothing contained herein shall imply any right on the part of Tenant to postpone such payment unless such proceedings or security given shall stay the collection thereof and the sale of the Land to satisfy same. Landlord, at Tenant's request, shall join in any such proceedings, but Landlord shall not be liable for any expenses in connection therewith. The proceedings referred to herein shall include, but shall not be limited to, appropriate appeals from any judgments, decrees or orders made in any such proceedings. In the event of any reduction, cancellation or discharge of such taxes or assessments as a result of such proceedings, and if Tenant had not already paid same, then Tenant will do so forthwith as they are finally levied, assessed or imposed. If there shall be any refund payable by the Governmental Authority with respect thereto, Tenant shall be entitled to receive and retain same.

    Nothing contained herein shall obligate Tenant to pay any income, inheritance, estate, gift, succession, sales, use, revenue or transfer tax (or any substitution therefor) of, or levied or assessed against Landlord; nor any other tax, assessment, charge or levy (or any substitution therefor) against Landlord with respect to or because of the rent and other income derived by Landlord under this Ground Lease; nor shall Tenant be deemed obligated to pay any personal property, corporation, franchise, capital stock, payroll, excise, privilege or any other tax of similar nature (or any substitution therefor) which may be levied or assessed against Landlord.

    6.  Utilities.  Tenant will pay all charges for sewer usage or rental, refuse removal, and utilities, including gas, water and electricity, consumed at the Improvements during the term of this Ground Lease as the same shall become due and payable.

    Tenant shall have the right to grant any easements, rights of way and licenses required by any public or quasi-public utility company with respect to the construction, operation and use of the Improvements and Personalty. Landlord shall execute any instruments any such public or quasi-public utility companies may reasonably request or require from Landlord; provided, however, that in each case, such easement, right of way or license (i) does not materially impair the value, utility and remaining useful life of the Land, (ii) is reasonably necessary in connection with the construction, operation or use of the Improvements and the Personalty and (iii) does not cause the Land or any portion thereof to fail to comply with all material requirements of law. If Landlord shall fail to execute and deliver same, Tenant shall have the right and authority to execute same in the name of Landlord as if a legal power-of-attorney coupled with an interest had this day been executed by Landlord in favor of Tenant, but only for these purposes.

    7.  Insurance.

    (a) Tenant shall, at its sole cost and expense, at all times during the term hereof maintain and/or cause to be maintained, in full force and effect, comprehensive general liability insurance in amounts customarily obtained for comparable properties covering Tenant's operations at the Land, including Landlord as an additional insured. Tenant shall deliver to Landlord a certificate from each insurance carrier as to each such insurance policy.

    (b) Tenant, or its designee, shall have the sole and exclusive right (without the participation of Landlord) to adjust and settle any and all claims under insurance policies obtained by Tenant or those claiming by or through Tenant in connection with or relating to the Land and Improvements and to receive the proceeds of any such claims.

    8.  Indemnity.

    (a) Subject to Section 8(c) below, Landlord shall not be liable for any loss, damage, death or injury of any kind or character to persons or property, arising from any use of the Land, or any part thereof, or caused by any defect in any building, structure or other Improvement thereon or in any other facility thereof, or caused by or arising from any act or omission of Tenant, or any of its agents, employees, sublessees, licensees or invitees, or by or from any accident on the Land or any fire or other casualty thereon.

    (b) Subject to Section 8(c) below, Tenant shall indemnify, defend and hold harmless Landlord from and against any and all claims arising from Tenant's use of the Land, or from the conduct of Tenant's business, or from any activity, work or things done, permitted or suffered by Tenant in or about the Land or elsewhere, and shall further indemnify, defend and hold harmless Landlord from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this Ground Lease, or arising from any negligence of Tenant, or any of Tenant's agents, contractors, subtenants or employees, and from and against all costs, attorneys' fees, expenses and liabilities incurred in the defense of any such claims or any action or proceeding brought against Landlord by reason of any such claims, and Tenant, upon notice from Landlord, shall defend the same, at Tenant's expense, by counsel satisfactory to Landlord. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property or injury to persons, in, upon or about the Land and the Improvements arising from any cause, and Tenant hereby waives all claims in respect thereof against Landlord.

    (c) Notwithstanding anything herein to the contrary, Landlord shall be liable for its own negligence, willful misconduct or for any breach of any covenant, representation or warranty herein.

    9.  Repairs.  So long as there exist any Improvements on the Land, Tenant, at its expense, will keep and maintain the Improvements in good and safe order, condition and repair, ordinary wear and tear excepted. Landlord shall not be required to furnish any services or facilities to the Land, except as otherwise set forth herein.

    Tenant, at its expense, will keep clean and free from dirt, snow, ice, rubbish, obstructions and encumbrances the sidewalks, areas, alleys and curbs in front of or adjacent to the Land.

    10.  Compliance with Laws and Ordinances.  Tenant will comply with all federal, state, county and city laws, ordinances and regulations of any duly constituted authority affecting the Land, except where the failure would not have a material adverse effect, individually or in the aggregate, on the Land. Tenant, at its expense, shall have the right to contest or review by legal, administrative or other proceedings the validity of any such law, ordinance and regulation, or the application thereof. During such proceedings, compliance with any such law, ordinance or regulation may be deferred by Tenant upon the condition that Tenant will secure the cost of complying with same to Landlord in such manner as Landlord may reasonably request. Landlord shall join in such proceedings if necessary to do so in order to prosecute such proceedings properly, but Landlord shall not be liable for any expenses in connection therewith. The proceedings referred to herein shall include, but shall not be limited to, appropriate appeals from any judgments, decrees or orders made in any such proceedings.

    11.  Landlord's Access to Land.  Landlord will have access to the Land, at its own risk and expense, at any and all reasonable times during the term of this Ground Lease for the purpose of examining and inspecting the same upon reasonable prior notice.

    12.  Assignment and Subletting.  Tenant, with the express written consent of Landlord during the term of the Lease and without the consent of Landlord after the term of the Lease, at any time and from time to time during the term of this Ground Lease, shall have the right to assign this Ground Lease, and its rights hereunder and its interest in the Improvements, and to sublet all or any part of the Land and lease the Improvements, or any portion thereof. In the event this Ground Lease shall be assigned by Tenant, then all liabilities and obligations on the part of Tenant accruing after such assignment shall terminate, provided  that any such assignee shall execute an instrument in writing assuming all of those liabilities and obligations imposed upon Tenant hereunder which accrue after the effective date of such assignment and deliver the same to Landlord. Tenant shall give notice to Landlord of any assignment or subletting of all the Property. Nothing contained herein, however, shall be construed to release Tenant from any liability or obligation which accrued prior to the effective date of such assignment. Notwithstanding the foregoing, so long as the Lease is in effect, Tenant will not assign its interests hereunder to the extent prohibited by the Lease.

    13.  Performance by Subtenants and Occupancy Tenants.  Landlord shall accept performance by any subtenant or occupant of any of the terms and provisions of this Ground Lease required to be performed by Tenant with the same force and effect as though performed by Tenant.

    14.  Casualty and Condemnation.  If any buildings, structures or other Improvements located on the Land, or any part thereof, shall be damaged or destroyed by fire or other casualty, Tenant's obligations under this Ground Lease shall not be affected. Except as set forth in Section 9, following any casualty on the Land, Tenant shall have no obligation to restore, repair or rebuild any Improvements on the Land.

    As used herein, a "Significant Condemnation" shall mean taking of title to the Land or the Improvements resulting in the loss or use of possession of a material portion of the Improvements or the Land as reasonably determined in good faith by the Tenant; provided, however, that so long as the Lease shall remain in effect with respect to the Land, a "Significant Condemnation" shall be deemed to have occurred (and shall only be deemed to have occurred) upon the occurrence of a "Significant Condemnation" as defined in the Lease.

    In the event of a Significant Condemnation, the entire award, or the aggregate of any separate awards, shall be apportioned as follows:

      i. There shall be first paid any and all costs, fees and expenses reasonably incurred by Landlord and Tenant in connection with the collection thereof;

     ii. Any balance of the award shall be paid to Tenant (and if the Lease is then in effect, the same shall be distributed in accordance with the Lease) for (a) all amounts owing to Tenant under the Lease or, if the Lease is no longer in effect, for all amounts which would have been owing to Tenant under the Lease assuming that (i) the Lease was still in full force and effect and (ii) had been in full force and effect during the entire period in which it was not in effect, and assuming further that for purposes of making such calculation the interest rate to be used is the Overdue Rate, and (b) for all amounts by which the value of the Improvements as determined in such condemnation proceeding exceeds such amounts in clause (a) above, and the balance of the award after payment to Tenant of the amounts specified in clauses (a) and (b) above shall be paid to Landlord;

and this Ground Lease shall remain in full force and effect; provided, however, that at any time thereafter Tenant shall have the right in its sole discretion to terminate this Ground Lease shall terminate on the following date: (x) if the Lease is in effect on the date of the Significant Condemnation, the date the Lease terminates with respect to the Land and Improvements pursuant to Section 14.1 of the Lease and ADC shall have performed all of its obligations thereunder, including (without limitation) its obligations under Section 14.1 thereof and (y) in all other cases on the date of such Significant Condemnation, and in either case the Ground Lease Rent and other charges shall be apportioned and paid to the date of such Significant Condemnation. The provisions of this Section 14 as to the apportionment of any such awards shall survive such termination.

    In the event of a condemnation or exercise of eminent domain that is not a Significant Condemnation, there shall be no abatement of Ground Lease Rent and the entire award, or the aggregate of the separate awards to Landlord and Tenant, as the case may be (less costs, fees and expenses reasonably incurred by Landlord and Tenant in connection with the collection thereof) shall be paid to Tenant for (a) all amounts owing to Tenant under the Lease or, if the Lease is no longer in effect, for all amounts which would have been owing to Tenant under the Lease assuming that (i) the Lease was still in full force and effect and (ii) had been in full force and effect during the entire period in which it was not in effect, and assuming further that for purposes of making such calculation the interest rate to be used is the Overdue Rate, and (b) for all amounts by which the value of the Improvements as determined in such condemnation proceeding exceeds such amounts in clause (a) above, and the balance of the award after payment to Tenant of the amounts specified in clauses (a) and (b) above shall be paid to Landlord.

    15.  Ground Lease Events of Default.

    (a) Tenant agrees that the following shall be considered a "Ground Lease Event of Default": Tenant shall default in any of the covenants or agreements herein contained to be kept, observed and performed by Tenant, and such default shall continue for thirty (30) days after notice thereof in writing from Landlord to Tenant; provided, however, that if such default is of a nature that it cannot be reasonably cured within such 30-day period, then Tenant shall have such time as is reasonably required to cure such default.

    (b) Upon the occurrence of any Ground Lease Event of Default, it shall be lawful for Landlord, at its election, to declare the term ended and either with or without process of law, to re-enter and to expel, remove and put out, Tenant and re-enter the Land again to repossess and enjoy the same, without such re-entry and repossession working a discharge of the rents unpaid and the covenants unperformed by Tenant prior to such re-entry.

    (c) The foregoing provisions for the termination of this Ground Lease for any default in any of its covenants shall not operate to exclude or suspend any other remedy of Landlord for breach of any of such covenants or for the recovery of unpaid accrued Ground Lease Rent, but Tenant shall not be liable for any Ground Lease Rent or other obligations which would have accrued under this Ground Lease after the date of such termination had this Ground Lease not been terminated.

    (d) Subject to the limitation set forth herein, no remedy herein reserved to Landlord shall be considered exclusive of any other remedy, but the same shall be cumulative and shall be in addition to every other remedy existing at law or in equity, and every remedy given by this Ground Lease to Landlord may be exercised from time to time and as often as occasion may arise. Reasonable attorneys' fees and other expenses incurred by Landlord by reason of any Ground Lease Event of Default of Tenant, or by others holding under Tenant, shall be payable upon demand.

    (e) Notwithstanding anything to the contrary contained herein, Landlord's rights and remedies and Tenant's obligations and liabilities are subject to the provisions of Section 25 of this Ground Lease.

    (f)  Notwithstanding anything in this Ground Lease to the contrary, prior to the date ("Transition Date") that (i) ADC has acquired the Tenant's interest in this Ground Lease pursuant to the Purchase Option or (ii) the Completion Date shall have occurred and a Person (other than an Indemnitee) has acquired the Tenant's interest in this Ground Lease and possession of the Premises, as a result of a "Lease Event of Default" or "Construction Agency Event of Default" and the Lease Balance has been paid in full or (iii) a third party has acquired the Tenant's interest in this Ground Lease and possession of the Premises as a result of a sale of the Premises pursuant to the Sale Option:

    (A) Landlord will look solely to ADC, as lessee under the Lease (whether or not the Base Term has commenced), directly for the performance of all Tenant's obligations and liabilities under this Ground Lease, including, without limitation, Tenant's indemnification obligations hereunder; provided, however, that in the event of any conflict between any obligation of Tenant under this Ground Lease and the obligation of ADC as Lessee under the Lease and the other Operative Documents (excluding this Ground Lease), nothing herein is intended to amend the Lease or any such other Operative Document or reduce or limit ADC's obligations or expand ADC's rights as Lessee or Construction Agent thereunder;

    (B) Neither Agent Lessor, Administrative Agent nor any other Indemnitee (as defined in Appendix 1 to the Participation Agreement) shall have liability to Landlord for any obligations or liabilities of Tenant arising or accruing hereunder, including, without limitation, for any indemnity obligation hereunder;

    (C) Landlord shall not have any right to declare a "Ground Lease Event of Default" hereunder or exercise any right or remedy against Tenant in respect thereof nor shall any "Ground Lease Event of Default" be deemed to exist hereunder; to the extent that any of Tenant's obligations hereunder are not performed by ADC or Tenant when and as required hereby, then so far as Tenant is concerned the Tenant's obligation to perform the same for the benefit of the Landlord shall be deemed waived; and

    (D) Tenant's right to quiet and peaceful enjoyment of the Land shall not be disturbed.

    Except to the extent that Landlord may have otherwise agreed in writing, no waiver by Landlord of any breach by Tenant of any of its obligations, agreements or covenants hereunder shall be deemed to be a waiver of any subsequent breach of the same, or any other obligation, agreement or covenant, nor shall any forbearance by Landlord to seek a remedy for such breach by Tenant be deemed a waiver by Landlord of its rights or remedies with respect to such breach.

    16.  Tenant's Right to Mortgage.  Tenant may at any time and from time to time (and as many times as it desires) mortgage, hypothecate or pledge this Ground Lease and the leasehold estate created hereby and the interest of Tenant in and to this Ground Lease, together with Tenant's right, title and interest in the Improvements and Personalty and Tenant's interest in any and all subleases and in and to all rents due or to become due thereunder (herein called a "Leasehold Mortgage"; and the holder of any such Leasehold Mortgage, whether or not the same is recorded of record, is herein called a "Leasehold Mortgagee").

    Landlord and Tenant agree that so long as any such Leasehold Mortgage exists:

    A.  Landlord will simultaneously mail to any Leasehold Mortgagee a copy of any notice given by Landlord to Tenant at the address given by such Leasehold Mortgagee to Landlord for the receipt of such notice.

    B.  Landlord and Tenant acknowledge that the defaults or other events described in Section 15  may be classified as (i) "Curable Defaults" and (ii) "Non-Curable Defaults." The Non-Curable Defaults are any defaults which are by their nature not susceptible of being cured by a third person such as the Leasehold Mortgagee; and the Curable Defaults are all other defaults.

    C.  If a Curable Default occurs and if, prior to the expiration of the applicable grace period provided for in Section 15, the Leasehold Mortgagee shall give to Landlord written notice that it intends to undertake a curing of all Curable Defaults and within such grace period the Leasehold Mortgagee commences upon a curing and thereafter pursues to conclusion the curing of all Curable Defaults continuously and diligently in good faith, then Landlord will not take action to effect a termination of this Ground Lease or to re-enter or take possession of the Land as a consequence of such Curable Default. However, if (i) a Curable Default is of such a nature that the curing thereof cannot be effected by the Leasehold Mortgagee until it shall have obtained possession of the Land and (ii) prior to the effective date of a termination of this Ground Lease by Landlord or Landlord's re-entering or taking possession of the Land pursuant to the provisions of Section 15, the Leasehold Mortgagee shall give to Landlord written notice that it intends to institute foreclosure or other legal proceedings or to exercise any of its remedies under the Leasehold Mortgage concerned in order to gain possession of the Land and within such grace period takes action to institute such remedies, then Landlord will not take any action to effect a termination of this Ground Lease or to re-enter or take possession of the Land as a consequence of such Curable Default so long as such Leasehold Mortgagee shall continue to pursue its remedies under the Leasehold Mortgage (except during any such time it may be stayed or otherwise legally prevented from doing so) and cure all other Curable Defaults (if any) which may occur from time to time and which are susceptible of being cured by the Leasehold Mortgagee without its obtaining possession of the Land and such Leasehold Mortgagee shall upon taking possession of the Land cure such Curable Defaults within the period reasonably required to cure the same.

    D.  If a Non-Curable Default occurs and (i) the Leasehold Mortgagee shall then be in the process of curing all then existing Curable Defaults pursuant to the provisions of subsection (C) above and (ii) the Leasehold Mortgagee shall give to Landlord written notice that it intends to institute foreclosure or other legal proceedings or to exercise any of its remedies under the Leasehold Mortgage concerned in order to gain possession of the Land, then Landlord will not take any action to effect a termination of this Ground Lease or to re-enter or take possession of the Land as a consequence of such Non-Curable Default so long as such Leasehold Mortgagee shall continue diligently to prosecute its remedies under the Leasehold Mortgage (except during any such time it may be stayed or otherwise legally prevented from doing so) and cure all Curable Defaults (if any) which may occur from time to time and which are susceptible of being cured by the Leasehold Mortgagee without its obtaining possession of the Land and such Leasehold Mortgagee shall upon taking possession of the Land cure such Curable Defaults within the period reasonably required to cure the same.

    E.  In the event a Leasehold Mortgagee or its designee designated for that purpose acquires the Improvements and the leasehold estate pursuant to any proceedings for foreclosure of such Leasehold Mortgage, or by a voluntary assignment or transfer of this Ground Lease and the leasehold estate and the Improvements in lieu of foreclosure or otherwise, the Leasehold Mortgagee or its designee or assignee as aforesaid shall be deemed an assignee of all the rights of Tenant under this Ground Lease.

    F.  If this Ground Lease shall be rejected or disaffirmed pursuant to any bankruptcy law or other law affecting creditors' rights or if this Ground Lease is terminated for any other reason whatsoever, Landlord will enter into a new lease of the Land with the Leasehold Mortgagee or its designee not less than ten (10) nor more than thirty (30) days after the request of the Leasehold Mortgagee referred to below, for the remainder of the term of this Ground Lease effective as of the date of such rejection or disaffirmance or termination, upon all the terms and provisions contained in this Ground Lease; provided that (i) the Leasehold Mortgagee makes a written request to Landlord for such new Ground Lease within ninety (90) days after the effective date of such rejection or disaffirmance or termination, as the case may be, and such written request is accompanied by a copy of such new lease, duly executed and acknowledged by the Leasehold Mortgagee or its designee and (ii) upon taking possession of the Land the Leasehold Mortgagee cures any outstanding Curable Defaults within the period reasonably required to cure the same. Any new lease made pursuant to this paragraph shall have the same priority with respect to other interests in the Land as this Ground Lease. The provisions of this paragraph shall survive the rejection or disaffirmance or termination of this Ground Lease and shall continue in full force and effect thereafter to the same extent as if this paragraph were a separate and independent contract made by Landlord and the Leasehold Mortgagee.

    G.  So long as a Leasehold Mortgage is in effect (i) Landlord will not accept a voluntary surrender of this Ground Lease and (ii) the Ground Lease shall not be modified in any material respect without, in each case, the prior written consent of the Leasehold Mortgagee. Any violation of this paragraph shall be void.

    The provisions of this Section 16 are for the benefit of any Leasehold Mortgagee and may be relied upon and shall be enforceable by any Leasehold Mortgagee. No Leasehold Mortgagee shall be liable upon the covenants, agreements or obligations of Tenant contained in this Ground Lease, except as expressly provided herein.

    Landlord shall execute any instruments any such Leasehold Mortgagee may reasonably request or require from Landlord, with respect to the provisions of this Section 16.

    17.  Landlord's Right to Mortgage.  Subject to the restrictions and limitations of the Lease, Landlord shall have the right to place a mortgage or other lien on the Land or Landlord's interest in this Ground Lease at any time during the term of this Ground Lease; provided, however, that any such mortgage shall at all times be junior and subordinate to (a) this Ground Lease and any amendments, modifications, replacements or substitutions thereof, including, without limitation, any new lease entered into in accordance with Section 16 hereof, and the mortgage shall so expressly state and (b) the rights and interests under the liens granted to Agent Lessor and the Participants under the Operative Documents.

    18.  Landlord's and Tenant's Certificates.  Landlord and Tenant, on written request from each other, shall execute and deliver to the other party or any Leasehold Mortgagee or prospective purchaser, if so requested, without charge, a certificate certifying that this Ground Lease is in full force and effect, and whether it has been modified (and if there have been modifications, stating them), and whether or not the party executing the certificate knows of any default, breach or violation by the other party under any of the terms of this Ground Lease, and such other matters as may reasonably be requested.

    19.  Quiet Enjoyment.  Landlord agrees that during the term of this Ground Lease and following the Transition Date, so long as no Ground Lease Event of Default exists, Tenant's quiet and peaceful enjoyment of the Land shall not be disturbed or interfered with by Landlord or any other person or party, except any person or party (excluding ADC or its Affiliates) claiming by, through or under Tenant.

    20.  Recording of Memorandum.  Upon the execution hereof, Landlord and Tenant shall execute and deliver a memorandum hereof in substantially the form of Exhibit B attached hereto, and Landlord (as its expense) shall record such memorandum in the real estate records of the state and county in which the Land is located.

    21.  Inability to Perform.  Anything in this Ground Lease to the contrary notwithstanding, Tenant's inability to fulfill any of Tenant's agreements and undertakings under this Ground Lease shall not be considered Ground Lease Events of Default if Tenant is prevented or delayed from so doing by reason of a Force Majeure Event.

    22.  Notices.  Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be made in writing and shall be deemed to have been given (i) in the case of notice by letter, the earlier of when delivered to the addressee by hand or courier if delivered on a business day and, if not delivered on a business day, the first business day thereafter or on the third business day after depositing the same in the mails, registered or certified mail, postage prepaid, return receipt requested, addressed as provided below or at such other address within the continental United States as any party may notify the other party as specified herein, and (ii) in the case of notice by facsimile, when receipt is confirmed if delivered on a business day and, if not delivered on a business day, the first business day thereafter, addressed as provided below or at such other address within the continental United States as any party may notify the other party as specified herein. Copies of all notices given by facsimile shall be contemporaneously sent by overnight courier.

    If to Landlord:

ADC Telecommunications, Inc.
12501 Whitewater Drive
Minnetonka, MN 55343
Attention: General Counsel
Facsimile: (612) 946-3209

    If to Tenant:

Lease Plan North America, Inc.
c/o ABN AMRO Bank, N. A., as Administrative Agent
135 South LaSalle Street
Chicago, IL 60674-9135
Attention: Chrissi Boryk
Facsimile: (312) 904-9086

    23.  Tenant's Right of First Refusal; Option to Purchase.

    (a) Notwithstanding anything herein to the contrary, Tenant's option under this Section 23(a) may not be exercised before the earliest of (x) twenty (20) years from the date hereof, (y) the exercise by Landlord of its Sale Option under the Lease and (z) the expiration or termination of the Lease. Tenant may exercise its option under this Section 23(a) at any time during the term of this Ground Lease (subject to the first sentence of this Section 23(a)). Landlord may not sell the Land during the Term of the Lease. If at any time during the Term of the Lease Landlord shall receive a bona fide offer (whether or not solicited by the Landlord) from a person not an affiliate of Landlord for the purchase from it of the Land and desires to sell it upon the terms offered, it shall first advise the Tenant in writing of the material terms of the offer together with a notice regarding Tenant's rights under this Section 23, and Tenant shall have thirty (30) days from the date of receipt of said written information to notify Landlord that it will purchase the Land on the same terms. In the absence of such notification by Tenant, Landlord may sell the Land on terms substantially no more favorable to the offeror within three (3) months from the date it notified Tenant of such offer. If Tenant fails to do so, the right granted to Tenant hereby shall continue and be reinstated. If Tenant desires to purchase the Land, it shall accompany its notice of intent to purchase with (i) an earnest money deposit payable to Landlord equal to the sum (if any) offered as an earnest money deposit by the offeror, and (ii) a contract executed by Tenant including the same material terms as the offer, which shall require a closing on the later of the closing date, if any, specified in the offer and forty-five (45) business days following notification of Tenant's agreement to purchase. At closing, Landlord shall convey the Land by limited warranty deed to or upon the instructions of Tenant. Unless the Tenant shall expressly specify in a recorded written instrument to the contrary, there shall be no merger of the fee and leasehold interests. No reorganization, recapitalization, merger, or like transaction involving a disposition with or without value to an affiliate of Landlord shall be deemed subject to Tenant's right of first refusal. Regardless of whether Tenant exercises its rights under this Section 23(a), any transfer of Landlord's interest in the Land shall be made subject to this Ground Lease, the Operative Documents and the terms and conditions hereof and thereof. This right of first refusal shall terminate upon the expiration of this Ground Lease.

    (b) Notwithstanding anything herein to the contrary, Tenant's option under this Section 23(b) may not be exercised before the earliest of (x) twenty (20) years from the date hereof, and (y) the expiration or termination of the Lease. Landlord hereby grants to Tenant an option to purchase the Land at a price equal to the Appraised Value (hereinafter defined) of the Land (excluding the value of any Improvements). Tenant may exercise this option at any time during the term of this Ground Lease (subject to the first sentence of this Section 23(b)) upon written notice to Landlord. The "Appraised Value" shall be the highest cash price for the Land that would be paid by a purchaser in a competitive open market under all conditions requisite to a fair sale wherein the purchaser and seller each are acting prudently and knowledgeably and the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale under conditions whereby (i) purchaser and seller are typically motivated, (ii) purchaser and seller are well informed or advised and acting in their respective best interests, the parties having each considered the location and other aspects of the Land, (iii) a reasonable time is allowed for exposure of the property in the open market, (iv) payment is made in cash or its equivalent, (v) financing, if any, is on terms generally available in the community at the specified date and typical for the Land in its locale, (vi) the price represents a normal consideration for the assets unaffected by special financing and (vii) the Land is being sold without any Improvements thereon, subject to the Ground Lease at the rental rate provided for herein (as such rate may be adjusted pursuant to Section 3) and subject to Tenant's leasehold estate to a person unaffiliated with Tenant. This option shall terminate upon the expiration of this Ground Lease.

    If the parties are unable to agree upon the Appraised Value within thirty (30) days after the exercise of such option, the Appraised Value shall be determined as follows: Within ten (10) days after the expiration of such 30-day period (or such earlier time upon which the parties may agree) each party shall select an independent appraiser who is an M.A.I. appraiser with at least 5 years experience in the appraisal of similar property in the area in which the Land is located. Within twenty (20) days after such retention, each appraiser shall submit to the parties and to each other a written determination of the Appraised Value based on the criteria set forth above. Such Appraised Value shall be the mean average of the values determined by the two appraisers, provided, the lesser of such values so determined does not vary by more than five percent (5%) from the greater of such values. If there shall be such variance, then the two appraisers shall, within ten (10) days after notice of such variance, select a third appraiser with like experience (and if the two appraisers are unwilling or unable to do so, such appraiser shall be selected by the American Arbitration Association) who shall submit a written determination of the Appraised Value based on the criteria set forth above, within thirty (30) days after the retention of such third appraiser. In such event, such Appraised Value shall mean the mean average of the values determined by the three appraisers, but any value that is more than ten percent (10%) different from the mean average shall be disregarded, and the Appraised Value shall be the mean average of the remaining values. If all three values determined by the three appraisers are more than ten percent (10%) different from the mean average, the Appraised Value shall mean the mean average of the two values which are closest to one another.

    If either of the parties shall fail to appoint an appraiser, the determination of the appraiser appointed by the other party shall control. Each party shall pay its own appraiser's fee and one-half of the fee of the third appraiser, if any.

    Upon the determination of such Appraised Value, and subject to disapproval as hereinafter provided, Landlord and Tenant shall within ten (10) days thereafter (or sooner if mutually agreed upon by the parties) enter into a written agreement for the sale of the Land for the Appraised Value containing substantially those terms set forth in Exhibit C hereto;  provided; however, that if Tenant disapproves of the Appraised Value within fifteen (15) days of the determination thereof by written notice of such disapproval to Landlord, the parties shall be released from any further obligation under this Section 23 with respect to the particular election by Tenant to purchase pursuant to which said Appraised Value shall have then been determined. In the event of a failure or refusal of Landlord to enter into such agreement within the time required therefor and provided Tenant has validly exercised its option to purchase in full compliance with the terms hereof, Tenant may enforce its right to specific performance and damages granted by law or equity or as additionally provided in such purchase agreement.

    24.  Liens.  Tenant shall not permit any mechanics', laborers' or materialmen's liens or the claims thereof to stand against the Land by reason of any cause whatsoever, including, without limitation, the construction of the Improvements, unless (i) appropriate bond is posted covering any loss resulting from such lien within thirty (30) days of Tenant receiving written notice of such lien or claim, or (ii) Tenant agrees in writing to indemnify Landlord for such claims with a creditworthy entity within such thirty (30) day period or (iii) Tenant contests such lien or claim and pays any judgment issued in such contest before execution thereof.

    25.  Liability of Tenant.  Anything in this Ground Lease to the contrary notwithstanding, Landlord acknowledges and agrees that each of the covenants, undertakings and agreements herein made on the part of Tenant, while in form purporting to be covenants, undertakings, and agreements of Tenant, are, nevertheless, made and intended not as personal covenants, undertakings and agreements by Tenant, or for the purpose of binding Tenant or its assets personally, but are made and intended for the purpose of binding only Tenant's interest in the Land, and Agent Lessor is executing this Ground Lease solely in its capacity as Agent Lessor under the Lease; and that no personal liability or personal responsibility is assumed by, nor shall at any time be asserted or enforceable against Tenant, Agent Lessor, or any Participant (each as defined in the Lease) or any past, present or future stockholder, subscriber of capital stock, officer, director, incorporator or partner of Tenant, Agent Lessor, or any Participant or any successors or assigns of any of them whether by virtue of any constitutional provision, statute or rule of law or by enforcement of any liability or claim under or in connection with this Ground Lease from any source other than the Tenant's interest in the Land, it being agreed that all such personal liability is hereby waived.

    26.  No Merger of Title.  There shall be no merger of this Ground Lease or of the ground leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Ground Lease or the ground leasehold estate created hereby or any interest in this Ground Lease or such ground leasehold estate, (b) the fee estate or ground leasehold title in the Land, except as may expressly be stated in a written instrument duly executed and delivered by the appropriate person or (c) a beneficial interest in Landlord.

    27.  Landlord's Right to Cure.  If Tenant shall fail to make any payment or perform any act required to be made or performed hereunder, or shall fail to make any payment or perform any act required to be made or performed by any mortgage which is a lien on the Land or the Property, or Tenant's interest therein, or shall fail to make any payment or perform any act required to be performed by Tenant under any lease or sublease from Tenant, Landlord, without waiving or releasing any obligations or default, may, but shall be under no obligation to, make such payment or perform such act for the account and at the expense of Tenant, and may enter upon the Land and the Property or any part thereof for such purposes and take such action thereon as, in the Landlord's opinion, may be necessary or appropriate therefor. In the event of an emergency, such actions may be taken at any time and without any notice. In the event of a nonemergency, such actions may be taken at any time after such failure continues for more than 10 days after written notice thereof from the Landlord (or if the failure is of such a character as to require more than 10 days to cure and Tenant has commenced the cure and is continuing to use reasonable diligence in curing such failure, at any time after that period of time reasonably necessary to cure such failure). No such entry shall be deemed an eviction of Tenant. All sums so paid by Landlord and all reasonable costs, fees and expenses so incurred shall constitute additional rent hereunder and shall be paid immediately upon demand.

    28.  Miscellaneous.

    (a) All agreements, terms, provisions and conditions in this Ground Lease shall extend and inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.

    (b) The captions of this Ground Lease are for convenience only, and are not to be construed as a part of this Ground Lease, and shall not be construed as defining or limiting in any way the scope or intent of the provisions hereof.

    (c) If any term or provision of this Ground Lease shall be to any extent held invalid or unenforceable, the remaining terms and provisions of this Ground Lease shall not be affected thereby, but each term and provision of this Ground Lease shall be valid and be enforced to the fullest extent permitted by law.

    (d) THIS GROUND LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MINNESOTA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.

    (e) This Ground Lease represents the entire agreement between the parties hereto and supersedes all prior negotiations, representations or agreements, either written or oral, including but not limited to any letters of intent.

    (f)  This Ground Lease may be executed in multiple counterparts each of which taken together shall constitute one and the same instrument.

    (g) Nothing herein contained shall be deemed or constructed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship other than Landlord and Tenant.

    (h) Any waiver given by either party with respect to performance by the other party of any provision of this Ground Lease shall be construed only as a waiver of the particular provision in question and only then with respect to the particular failure to comply, and such waiver shall not be construed as a waiver of any separate failure to comply or of any other provisions of this Ground Lease.

    (i)  In the event Tenant remains in possession of the Land after expiration of this Ground Lease without the execution of a new lease, it shall be deemed to be occupying the Land as a tenant at sufferance at a monthly rental equal to 115% of the then current monthly rental, and otherwise subject to all the conditions, provisions and obligations of this Ground Lease insofar as the same are applicable to a tenancy at sufferance.

    (j)  Whenever herein the singular number is used, the same shall include the plural and words of any gender shall include each other gender.

    (k) The individuals executing this instrument on behalf of Landlord and Tenant, respectively, represent that each has been duly authorized so to do by appropriate action taken by Landlord or Tenant, as the case may be.

Ground Lease

    IN WITNESS WHEREOF, the parties hereto have executed and delivered this Ground Lease as of the date first above written.

LANDLORD:

ADC TELECOMMUNICATIONS, INC.

By: /s/ GOKUL HEMMADY

Name: Gokul Hemmady
       

Title: Vice President/Treasurer
      




TENANT:

LEASE PLAN NORTH AMERICA, INC., not in its individual capacity, except as expressly stated herein, but solely as Agent Lessor

By: /s/ BLAKE J. LACHER

Name: Blake J. Lacher
       

Title: Vice President
      

Ground Lease

STATE OF MINNESOTA	)
	)	SS.:
COUNTY OF HENNEPIN	)

    The foregoing instrument was acknowledged before me this 22nd day of October, 1999, by Gokul Hemmady, the Treasurer of ADC Telecommunications, Inc., a corporation organized under the laws of the State of Minnesota, on behalf of the corporation.

/s/ KAYE M. PARK


Notary Public

Ground Lease

STATE OF ILLINOIS	)
	)	SS.:
COUNTY OF COOK	)

    The foregoing instrument was acknowledged before me this 22nd day of October, 1999, by Blake J. Lacher, the Vice President of Lease Plan North America, Inc., a corporation organized under the laws of the State of Delaware, on behalf of the corporation.

/s/ RUBA GHOULEH


Notary Public

Ground Lease

EXHIBIT A
LEGAL DESCRIPTION OF LAND

    Lot 1, Block 1, Technology Campus 3rd Addition, Hennepin County, Minnesota

EXHIBIT C
MATERIAL CONTRACT TERMS

    1.  Title Policy.  Landlord shall cause to be delivered to Tenant at closing (a) a standard ALTA Form B owner's policy of title insurance (the "Title Policy") or equivalent issued by a reputable title insurance company (the "Title Company") or (b) a commitment from the Title Company to issue the Title Policy upon demand in the amount of the purchase price determined in accordance with Section 23 of the Ground Lease (the "Purchase Price"), which Title Policy shall be free of all general printed exceptions and shall show fee title vested in Tenant free and clear of all liens and other exceptions except (a) general real estate taxes not yet due and payable, (b) matters created or caused by Tenant, (c) the Permitted Exceptions (as defined in the Lease), and (d) other exceptions reasonably approved by Tenant. Such Title Policy shall include (at Tenant's cost) any title endorsements reasonably required by Tenant.

    2.  Escrow Closing.  The closing shall be effected through a so-called "New York Style" escrow at the Title Company, and delivery of the deed and other documents and payment of any unpaid portion of the Purchase Price shall be effected through such escrow. The closing shall be held on the ninetieth (90th) day after the determination of the Purchase Price or such earlier date as may be acceptable to the Landlord and Tenant. The terms of such escrow shall be pursuant to an escrow agreement in customary form then used by the Title Company modified to reflect the transaction contemplated herein.

    3.  Obligations of Landlord at Closing.  At closing Landlord shall execute and cause to be delivered to Tenant a warranty deed in recordable form, delivering fee title to Tenant in the condition required by Paragraph 1  above. Liens other than as specified in clauses(a),(b), (c) and (d) of Paragraph 1 above shall be paid and satisfied of record by Landlord at or prior to closing.

    4.  Obligations of Tenant at Closing.  At closing Tenant shall cause the Purchase Price together with any other amounts due Landlord under the Ground Lease to which this Exhibit C is attached as of the date of the closing to be wire-transferred (which may be satisfied by the Title Company pursuant to the escrow agreement) in good federal funds to Landlord or as may be otherwise directed by Landlord in writing.

    5.  Joint Obligations at Closing.  At closing the joint obligations of Landlord and Tenant shall be as follows:

    a.  Landlord and Tenant shall execute any required transfer declarations; and

    b.  Landlord and Tenant shall execute and deliver such other affidavits, instruments and documents as are customarily given by said parties in the closing of the sale of similar properties, including those required for title insurance purposes.

    6.  Prorations.  There shall be no prorations except to the extent of any rent which may have been paid in advance by Tenant. The Purchase Price shall be absolutely net to Landlord; provided, however, that if there are any title exceptions of a definite or ascertainable amount which are not permitted by clauses (a) through (d) of Paragraph 1, such exceptions may and shall be paid and satisfied by the Title Company with funds otherwise due Landlord under the provisions of this Exhibit C.

    7.  No Warranties.  Tenant shall purchase the property in an as-is condition without warranty or representation of any kind by Landlord, its officers, employees, agents, or representatives. Any disclaimer by the Landlord, however, shall not be construed as a disclaimer of the warranty of ownership and title to the property to be conveyed by Landlord to Tenant set forth in the instruments conveying title to the Tenant.

    8.  Brokerage.  Each party shall represent and covenant to the other that it has not dealt with any real estate broker in connection with this sale, and each party shall indemnify and hold harmless the other in an event a claim is made for any commissions or other compensation in contravention of such representations and covenants.

    9.  Closing Costs.  All costs incurred in connection with the closing of the sale contemplated by this Exhibit C, including, without limitation, title insurance premiums, recording fees, one-half of the escrow fees, and city or village transfer taxes shall be paid by Tenant at closing; provided, however, that Landlord shall pay (i) title insurance premiums and expenses, except for the policy specified in Paragraph 1 of this Exhibit C, (ii) recording fees and other costs relating to the release of record of any unpermitted title exceptions, (iii) one-half of the escrow fees, (iv) any transfer taxes imposed by state or county ordinance or law, and (v) its attorneys' fees and costs, and its own internal costs, in connection with the sale contemplated by this Exhibit C.

    10.  Construction.  All capitalized terms not defined herein shall have the meaning as defined in the Ground Lease of which this Exhibit C is a part.

QuickLinks

EX-10.HH

Standard Form of Agreement Between
Owner and Contractor where the basis of payment is
the Cost of the Work Plus a Fee with or
without a Guaranteed Maximum Price

AIA Document A111—Electronic Format

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

The 1987 Edition of AIA Document A201, General Conditions of the Contract for Construction, is adopted in this document by reference. Do not use with other general conditions unless this document is modified. This document has been approved and endorsed by The Associated General Contractors of America.

Copyright 1920, 1925, 1951, 1958, 1961, 1967, 1974, 1978, 1987 by The American Institute of Architects, 1735 New York Avenue N.W., Washington D.C. 20006-5292. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AIA violates the copyright laws of the United States and will be subject to legal prosecution.

AGREEMENT
made as of the Twenty-Second (22nd) day of October in the year of Nineteen Hundred and Nineteen Hundred Ninety-Nine

BETWEEN the Owner:
(Name and address)
ADC Telecommunications, Inc.
P.O. Box 1101
Minneapolis, Minnesota 55440-1101

and the Contractor:
(Name and address)
Kraus-Anderson Construction Company
Building Division
2500 Minnehaha Avenue
Minneapolis, Minnesota 55404

the Project is:
(Name and address)
ADC Telecommunications, Inc.
Phase I-ADC Telecommunications
World Headquarters & Technology Campus
Mitchell Road and Technology Drive
Eden Prairie, Minnesota 55347-1669

The Architect is:
(Name and address)
Hammell Green and Abrahamson, Inc.
1201 Harmon Place
Minneapolis, Minnesota 55403-1985

AIA DOCUMENT A111—OWNER-CONTRACTOR AGREEMENT—TENTH EDITION—AIA—COPYRIGHT 1987—THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. Unlicensed photocopying violates U.S. copyright laws and is subject to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.

Electronic Format A111-1987
User Document: AIA—10/22/1999. AIA License Number 105495, which expires on 10/31/99—Page #1

The Owner and Contractor agree as set forth below.

ARTICLE 1
THE CONTRACT DOCUMENTS

1.1     The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 16. If anything in the other Contract Documents is inconsistent with this Agreement, this Agreement shall govern.

ARTICLE 2
THE WORK OF THIS CONTRACT

2.1     The Contractor shall execute the entire Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others, or as follows:

To be determined as the Scope of Work is defined.

ARTICLE 3
RELATIONSHIP OF THE PARTIES

3.1     The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Architect and utilize the Contractor's best skill, efforts and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to make best efforts to furnish at all times an adequate supply of workers and materials; and to perform the Work in the best way and most expeditious and economical manner consistent with the interests of the Owner. The Owner agrees to exercise best efforts to enable the Contractor to perform the Work in the best way and most expeditious manner by furnishing and approving in a timely way information required by the Contractor and making payments to the Contractor in accordance with requirements of the Contract Documents.

ARTICLE 4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

4.1     The date of commencement is the date from which the Contract Time of Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first written above, unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner.

(Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.)

The commencement date will be on or about July 26, 1999.

Unless the date of commencement is established by a notice to proceed issued by the Owner, the Contract shall notify the Owner in writing not less than five days before commencing the Work to permit timely filing of mortgages, mechanic's liens and other security interests.

4.2     The Contractor shall achieve Substantial Completion of the entire Work not later than (To Be Determined and agreed upon by Owner and Contractor).

(Insert the calendar date or number of calendar days after the date of commencement. Also insert any requirements for earlier Substantial Completion of certain portions of the Work, if not stated elsewhere in the Contract Documents.)

Portions of the building will be turned over to the Owner as they become available, providing all life safety elements are in place and the City of Eden Prairie is willing to issue partial certificates of occupancy.

, subject to adjustments of this Contract Time as provided in the Contract Documents.

(Insert provisions, if any, for liquidated damages relating to failure to complete on time.)

ARTICLE 5
CONTRACT SUM

5.1     The Owner shall pay the Contractor in current funds for the Contractor's performance of the Contract the Contract Sum consisting of the Cost of the Work as defined in Article 7 and the Contractor's Fee determined as follows:

(State a lump sum, percentage of Cost of the Work or other provision for determining the Contractor's Fee, and explain how the Contractor's Fee is to be adjusted for changes in the Work.)

Contractors Fixed Fee Two Million Seven Hundred Sixty-Two Thousand Five Hundred Dollars ($2,752,500), based on a 3.25% Contractor Fee, for all work performed within the Scope of Work covered by the original agreed upon Guaranteed Maximum Price, plus 3.25% for the cost of any changes mutually agreed upon by the parties in excess of the original agreed upon Guaranteed Maximum Price.

5.2     GUARANTEED MAXIMUM PRICE (IF APPLICABLE)

5.2.1    The sum of the Cost of the Work and the Contractor's Fee is guaranteed by the Contractor not to exceed To Be Determined and agreed upon by Owner and Contractor Dollars ($85,000,000), subject to additions and deductions by Change Order as provided in the Contract Documents. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without reimbursement by the Owner. The fee and cost in Paragraph 5.1 and 5.2.1 is a good faith estimate at this time and will be finalized and agreed to by ADC Telecommunications, Inc. & Kraus-Anderson Construction Company on/or before December 31st, 1999.

(Insert specific provisions if the Contractor is to participate in any savings.)

One Hundred Percent (100%) of any and all savings shall accrue to the Owner.

5.2.2    The Guaranteed Maximum Price is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner:

(State the numbers or other identification of accepted alternates, but only if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date until which that amount is valid.)

To Be Determined.

5.2.3    The amounts agreed to for unit prices, if any, are as follows:

(State unit prices only if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1.)

None at this time/provided upon request.

ARTICLE 6
CHANGES IN THE WORK

6.1     CONTRACTS WITH A GUARANTEED MAXIMUM PRICE

6.1.1    Adjustments to the Guaranteed Maximum Price on account of changes in the Work may be determined by any of the methods listed in Subparagraph 7.3.3 of the General Conditions.

6.1.2    In calculating adjustments to subcontracts (except those awarded with the Owner's prior consent on the basis of cost plus a fee), the terms "cost" and "fee" as used in Clause 7.3.3.3 of the General Conditions and the terms "costs" and "a reasonable allowance for overhead and profit" as used in Subparagraph 7.3.6 of the General Conditions shall have the meanings assigned to them in the General Conditions and shall not be modified by Articles 5, 7 and 8 of this Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on the basis of cost plus a fee shall be calculated in accordance with the terms of those subcontracts.

6.1.3    In calculating adjustments to this Contract, the terms "cost" and "costs" as used in the above-referenced provisions of the General Conditions shall mean the Cost of the Work as defined in Article 7 of this Agreement and the terms "fee" and "a reasonable allowance for overhead and profit" shall mean the Contractor's Fee as defined in Paragraph 5.1 of this Agreement.

6.2     CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE

6.2.1

6.3     ALL CONTRACTS

6.3.1    If no specific provision is made in Paragraph 5.1 for adjustment of the Contractor's Fee in the case of changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment provisions of Paragraph 5.1 will cause substantial inequity to the Owner or Contractor, the Contractor's Fee shall be equitably adjusted on the basis of the Fee established for the original Work.

ARTICLE 7
COSTS TO BE REIMBURSED

7.1     The term Cost of the Work shall mean costs necessarily incurred by the Contractor in the proper performance of the Work. Such costs shall be at rates not higher than the standard paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article 7.

7.1.1    LABOR COSTS

7.1.1.1  Wages of construction workers directly employed by the Contractor to perform the construction of the Work at the site or, with the Owner's agreement, at off-site workshops.

7.1.1.2  Wages or salaries of the Contractor's supervisory and administrative personnel when stationed at the site with the Owner's agreement.

(If it is intended that the wages or salaries of certain personnel stationed at the Contractor's principal or other offices shall be included in the Cost of the Work, identify in Article 14 the personnel to be included and whether for all or only part of their time.)

7.1.1.3  Wages and salaries of the Contractor's supervisory or administrative personnel engaged, at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work.

7.1.1.4  Costs paid or incurred by the Contractor for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions, provided such costs are based on wages and salaries included in the Cost of the Work under Clauses 7.1.1.1 through 7.1.1.3.

7.1.2    SUBCONTRACT COSTS

Payments made by the Contractor to Subcontractors in accordance with the requirements of the subcontracts.

7.1.3    COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION

7.1.3.1  Costs, including transportation, of materials and equipment incorporated or to be incorporated in the completed construction.

7.1.3.2  Costs of materials described in the preceding Clause 7.1.3.1 in excess of those actually installed but required to provide reasonable allowance for waste and for spoilage. Unused excess materials, if any, shall be handed over to the Owner at the completion of the Work or, at the Owner's option, shall be sold by the Contractor; amounts realized, if any, from such sales shall be credited to the Owner as a deduction from the Cost of the Work.

7.1.4    COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS

7.1.4.1  Costs, including transportation, installation, maintenance, dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Contractor at the site and fully consumed in the performance of the Work; and cost less salvage value on such items if not fully consumed, whether sold to others or retained by the Contractor. Cost for items previously used by the Contractor shall mean fair market value.

7.1.4.2  Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Contractor at the site, whether rented from the Contractor or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owner's prior approval and inventory transfers thereof will not exceed One Hundred Thirty percent (130%) of contractor's original cost for equipment rentals per contractors schedule, and Eighty percent (80%) of the fair market value for expendable tools.

7.1.4.3  Costs of removal of debris from the site.

7.1.4.4  Costs of telegrams and long-distance telephone calls, postage and parcel delivery charges, telephone service at the site and reasonable petty cash expenses of the site office.

7.1.4.5  That portion of the reasonable travel and subsistence expenses of the Contractor's personnel incurred while traveling in discharge of duties connected with the Work.

7.1.5    MISCELLANEOUS COSTS

7.1.5.1  That portion directly attributable to this Contract of premiums for insurance and bonds.

7.1.5.2  Sales, use or similar taxes imposed by a governmental authority which are related to the Work and for which the Contractor is liable.

7.1.5.3  Fees and assessments for the building permit and for other permits, licenses and inspections for which the Contractor is required by the Contract Documents to pay.

7.1.5.4  Fees of testing laboratories for tests required by the Contract Documents, except those related to defective or nonconforming Work for which reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or other provisions of the Contract Documents and which do not fall within the scope of Subparagraphs 7.2.2 through 7.2.4 below.

7.1.5.5  Royalties and license fees paid for the use of a particular design, process or product required by the Contract Documents; the cost of defending suits or claims for infringement of patent rights arising from such requirement by the Contract Documents; payments made in accordance with legal judgments against the Contractor resulting from such suits or claims and payments of settlements made with the Owner's consent; provided, however, that such costs of legal defenses, judgment and settlements shall not be included in the calculation of the Contractor's Fee or of a Guaranteed Maximum Price, if any, and provided that such royalties, fees and costs are not excluded by the last sentence of Subparagraph 3.17.1 of the General Conditions or other provisions of the Contract Documents. *(Provided such royalties, license fees and costs are based upon an activity for which the Contractor is not responsible and which arises due to the Contractor complying with the Owner's instructions).

7.1.5.6  Deposits lost for causes other than the Contractor's fault or negligence.

7.1.6    OTHER COSTS

7.1.6.1  Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner.

7.2     EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK

The Cost of the Work shall also include costs described in Paragraph 7.1 which are incurred by the Contractor:

7.2.1    In taking action to prevent threatened damage, injury or loss in case of an emergency affecting the safety of persons and property, as provided in Paragraph 10.3 of the General Conditions.

7.2.2    In repairing or correcting Work damaged or improperly executed by construction workers in the employ of the Contractor, provided such damage or improper execution did not result from the fault or negligence of the Contractor or the Contractor's foremen, engineers or superintendents, or other supervisory, administrative or managerial personnel of the Contractor.

7.2.3    In repairing damaged Work other than that described in Subparagraph 7.2.2, provided such damage did not result from the fault or negligence of the Contractor or the Contractor's personnel, and only to the extent that the cost of such repairs is not recoverable by the Contractor from others and the Contractor is not compensated therefor by insurance or otherwise.

7.2.4    In correcting defective or nonconforming Work performed or supplied by a Subcontractor or material supplier and not corrected by them, provided such defective or nonconforming work did not result from the fault or neglect of the Contractor or the Contractor's personnel adequately to supervise and direct the Work of the Subcontractor or material supplier, and only to the extent that the cost of correcting the defective or nonconforming Work is not recoverable by the Contractor from the Subcontractor or material supplier.

ARTICLE 8
COSTS NOT TO BE REIMBURSED

8.1     The Cost of the Work shall not include:

8.1.1    Salaries and other compensation of the Contractor's personnel stationed at the Contractor's principal office or offices other than the site office, except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be provided in Article 14.

8.1.2    Expenses of the Contractor's principal office and offices other than the site office.

8.1.3    Overhead and general expenses, except as may be expressly included in Article 7.

8.1.4    The Contractor's capital expenses, including interest on the Contractor's capital employed for the Work.

8.1.5    Rental costs of machinery and equipment, except as specifically provided in Clause 7.1.4.2.

8.1.6    Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph 13.5 of this Agreement, costs due to the fault or negligence of the Contractor, Subcontractors, anyone directly or indirectly employed by any of them, or for whose acts any of them may be liable, including but not limited to costs for the correction of damaged, defective or nonconforming Work, disposal and replacement of materials and equipment incorrectly ordered or supplied, and making good damage to property not forming part of the Work.

8.1.7    Any cost not specifically and expressly described in Article 7.

8.1.8    Costs which would cause the Guaranteed Maximum Price, if any, to be exceeded.

ARTICLE 9
DISCOUNTS, REBATES AND REFUNDS

9.1     Cash discounts obtained on payments made by the Contractor shall accrue to the Owner if (1) before making the payment, the Contractor included them in an Application for Payment and received payment therefor from the Owner, or (2) the Owner has deposited funds with the Contractor with which to make payments; otherwise, cash discounts shall accrue to the Contractor. Trade discounts, rebates, refunds and amounts received from sales of surplus materials and equipment shall accrue to the Owner, and the Contractor shall make provisions so that they can be secured.

9.2     Amounts which accrue to the Owner in accordance with the provisions of Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the Work.

ARTICLE 10
SUBCONTRACTS AND OTHER AGREEMENTS

10.1    Those portions of the Work that the Contractor does not customarily perform with the Contractor's own personnel shall be performed under subcontracts or by other appropriate agreements with the Contractor. The Contractor shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated especially for the Work and shall deliver such bids to the Owner. The Owner will then determine, with the advice of the Contractor and subject to the reasonable objection of the Architect, which bids will be accepted. The Owner may designate specific persons or entities from whom the Contractor shall obtain bids; however, if a Guaranteed Maximum Price has been established, the Owner may not prohibit the Contractor from obtaining bids from others. The Contractor shall not be required to contract with anyone to whom the Contractor has reasonable objection.

10.2    If a Guaranteed Maximum Price has been established and a specific bidder among those whose bids are delivered by the Contractor to the Owner (1) is recommended to the Owner by the Contractor; (2) is qualified to perform that portion of the Work; and (3) has submitted a bid which conforms to the requirements of the Contract Documents without reservations or exceptions, but the Owner requires that another bid be accepted; then the Contractor may require that a Change Order be issued to adjust the Guaranteed Maximum Price by the difference between the bid of the person or entity recommended to the Owner by the Contractor and the amount of the subcontract or other agreement actually signed with the person or entity designated by the Owner.

10.3    Subcontracts or other agreements shall conform to the payment provisions of Paragraphs 12.7 and 12.8, and shall not be awarded on the basis of cost plus a fee without the prior consent of the Owner.

ARTICLE 11
ACCOUNTING RECORDS

11.1    The Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Contract; the accounting and control systems shall be satisfactory to the Owner. The Owner and the Owner's accountants shall be afforded access to the Contractor's records, books, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Contract, and the Contractor shall preserve these for a period of three years after final payment, or for such longer period as may be required by law.

ARTICLE 12
PROGRESS PAYMENTS

12.1    Based upon Applications for Payment submitted to the Owner by the Contractor and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents.

12.2    The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows:

12.3    Provided an Application for Payment is received by the Owner not later than the First (1st) day of a month, the Owner shall make payment to the Contractor not later than the Twentieth (20th) day of the same month. If an Application for Payment is received by the Owner after the application date fixed above, payment shall be made by the Owner not later than Twentieth (20th) days after the Owner receives the Application for Payment.

12.4    With each Application for Payment the Contractor shall submit payrolls, petty cash accounts, receipted invoices or invoices with check vouchers attached, and any other evidence required by the Owner or Architect to demonstrate that cash disbursements already made by the Contractor on account of the Cost of the Work equal or exceed (1) progress payments already received by the Contractor; less (2) that portion of those payments attributable to the Contractor's Fee; plus (3) payrolls for the period covered by the present Application for Payment; plus (4) retainage provided in Subparagraph 12.5.4, if any, applicable to prior progress payments.

12.5CONTRACTS WITH A GUARANTEED MAXIMUM PRICE

12.5.1   Each Application for Payment shall be based upon the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Guaranteed Maximum Price among the various portions of the Work, except that the Contractor's Fee shall be shown as a single separate item. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Owner may reasonably require. This schedule, unless reasonably objected to by the Owner, shall be used as a basis for reviewing the Contractor's Applications for Payment.

12.5.2   Applications for Payment shall show the percentage completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed or (2) the percentage obtained by dividing (a) the expense which has actually been incurred by the Contractor on account of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the next Application for Payment by (b) the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values.

12.5.3   Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows:

12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included as provided in Subparagraph 7.3.7 of the General Conditions, even though the Guaranteed Maximum Price has not yet been adjusted by Change Order.

12.5.3.2 Add that portion of the Guaranteed Maximum Price properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing.

12.5.3.3 Add the Contractor's Fee, less retainage of Five percent (5%). The Contractor's Fee shall be computed upon the Cost of the Work described in the two preceding Clauses at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the two preceding Clauses bears to a reasonable estimate of the probable Cost of the Work upon its completion.

12.5.3.4 Subtract the aggregate of previous payments made by the Owner.

12.5.3.5 Subtract the shortfall, if any, indicated by the Contractor in the documentation required by Paragraph 12.4 to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner's accountants in such documentation.

12.5.3.6 Subcontract amounts, if any, for which the Owner has reasonable withheld.

12.5.4   Additional retainage, if any, shall be as follows:

(If it is intended to retain additional amounts from progress payments to the Contractor beyond (1) the retainage from the Contractor's Fee provided in Clause 12.5.3.3, (2) the retainage from Subcontractors provided in Paragraph 12.7 below, and (3) the retainage, if any, provided by other provisions of the Contract, insert provision for such additional retainage here. Such provision, if made, should also describe any arrangement for limiting or reducing the amount retained after the Work reaches a certain state of completion.)

A retainable of five percent (5%) of all labor, material and subcontractors will be withheld until the work is completed. Upon substantial completion, payments to be made to the Contractor in the amount of one hundred percent (100%) less substantially a hold back of one hundred fifty percent (150%) of the value of any uncompleted work. This hold back cost shall be paid from time to time as the uncompleted work is finished.

12.6CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE

12.6.1

12.6.2

12.6.2.1

12.6.2.2

12.6.2.3

12.6.2.4

12.6.2.5

12.6.3

12.7

12.7.1

12.7.2

12.7.3

12.7.4

12.7.5(If it is intended, prior to Substantial Completion of the entire Work of the Contractor, to reduce or limit the retainage from Subcontractors resulting from the percentages inserted in Subparagraphs 12.7.1 and 12.7.2 above, and this is not explained elsewhere in the Contract Documents, insert here provisions for such reduction or limitation.)

12.8

12.9

ARTICLE 13
FINAL PAYMENT

13.1    Final payment shall be made by the Owner to the Contractor when (1) the Contract has been fully performed by the Contractor except for the Contractor's responsibility to correct defective or nonconforming Work, as provided in Subparagraph 12.2.2 of the General Conditions, and to satisfy other requirements, if any, which necessarily survive final payment; (2) a final Application for Payment and a final accounting for the Cost of the Work have been submitted by the Contractor and reviewed by the Owner's accountants; and (3) such final payment shall be made by the Owner not more than 45 days after the completion by the Owner's Accountants of the final Application for Payment and final accounting of the Cost of the Work.

13.2    The amount of the final payment shall be calculated as follows:

13.2.1   Take the sum of the Cost of the Work substantiated by the Contractor's final accounting and the Contractor's Fee; but not more than the Guaranteed Maximum Price, if any.

13.2.2   Subtract amounts, if any, for which the Owner reasonably withholds, in whole or in part,

13.2.3   Subtract the aggregate of previous payments made by the Owner.

If the aggregate of previous payments made by the Owner exceeds the amount due the Contractor, the Contractor shall reimburse the difference to the Owner.

13.3    The Owner's accountants will review and report in writing on the Contractor's final accounting within 45 days after delivery of the final accounting to the Owner by the Contractor. The time periods stated in this Paragraph 13.3 supersede those stated in Subparagraph 9.4.1 of the General Conditions.

13.4    If the Owner's accountants report the Cost of the Work as substantiated by the Contractor's final accounting to be less than claimed by the Contractor, the Contractor shall be entitled to demand arbitration of the disputed amount. Such demand for arbitration shall be made by the Contractor within 30 days after the Contractor's receipt of a copy of the report from Owner's Accountants; failure to demand arbitration within this 30-day period shall result in the substantiated amount reported by the Owner's accountants becoming binding on the Contractor. Pending a final resolution by arbitration, the Owner shall pay the Contractor the amount which is not in dispute.

13.5    If, subsequent to final payment and at the Owner's request, the Contractor incurs costs described in Article 7 and not excluded by Article 8 to correct defective or nonconforming Work, the Owner shall reimburse the Contractor such costs and the Contractor's Fee applicable thereto on the same basis as if such costs had been incurred prior to final payment, but not in excess of the Guaranteed Maximum Price, if any. If the Contractor has participated in savings as provided in Paragraph 5.2, the amount of such savings shall be recalculated and appropriate credit given to the Owner in determining the net amount to be paid by the Owner to the Contractor.

ARTICLE 14
MISCELLANEOUS PROVISIONS

14.1    Where reference is made in this Agreement to a provision of the General Conditions or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents.

14.2    Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located.

(Insert rate of interest agreed upon, if any.)

Invoices due and unpaid shall accrue interest at a rate of daily prime plus two percent (2%) as determined by US Bank.

(Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owner's and Contractor's principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.)

14.3   Other provisions:
Project Manager's time spent on this project, whether in the Contractor's main office or on the jobsite. This is to be recorded on weekly time cards and charged out at a rate of $70.00 per hour with a maximum of 40 hours per week for each Project Manager assigned to this project. Safety Directors time spent on this project will be billed at the rate of $55.00 per hour. General Superintendent time spent on this project will be billed at the rate of $70.00 per hour which is part of the not-to-exceed cost.

Kraus-Anderson's payroll taxes and insurance will be charged out at the standard rate of 24% for field superintendents and 32% for all other labor under the direct employment of Kraus-Anderson for this project which is part of the not-to-exceed cost.

Cost for Excess Liability Insurance Umbrella are included in the Contractor's Fee in Paragraph 5.1.

14.4	The Owner's Representative is:
	Robert Riesselman ADC Telecommunications, Inc. P.O. Box 1101 Minneapolis, Minnesota 55440-1101

14.5	Brad Harvey / Gene Pelszynski
	Kraus Anderson Construction Company Building Division 2500 Minnehaha Avenue Minneapolis, Minnesota 55404

ARTICLE 15
TERMINATION OR SUSPENSION

15.1    The Contract may be terminated by the Contractor as provided in Article 14 of the General Conditions; however, the amount to be paid to the Contractor under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount the Contractor would be entitled to receive under Paragraph 15.3 below, except that the Contractor's Fee shall be calculated as if the Work had been fully completed by the Contractor, including a reasonable estimate of the Cost of the Work for Work not actually completed.

15.2    If a Guaranteed Maximum Price is established in Article 5, the Contract may be terminated by the Owner for cause as provided in Article 14 of the General Conditions; however, the amount, if any, to be paid to the Contractor under Subparagraph 14.2.4 of the General Conditions shall not cause the Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount the Contractor would be entitled to receive under Paragraph 15.3 below.

15.3    If no Guaranteed Maximum Price is established in Article 5, the Contract may be terminated by the Owner for cause as provided in Article 14 of the General Conditions; however, the Owner shall then pay the Contractor an amount calculated as follows:

15.3.1   Take the Cost of the Work incurred by the Contractor to the date of termination.

15.3.2   Add the Contractor's Fee computed upon the Cost of the Work to the date of termination at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work at the time of termination bears to a reasonable estimate of the probable Cost of the Work upon its completion.

15.3.3   Subtract the aggregate of previous payments made by the Owner. The Owner shall also pay the Contractor fair compensation, either by purchase or rental at the election of the Owner, for any equipment owned by the Contractor which the Owner elects to retain and which is not otherwise included in the Cost of the Work under Subparagraph 15.3.1. To the extent that the Owner elects to take legal assignment of subcontracts and purchase orders (including rental agreements), the Contractor shall, as a condition of receiving the payments referred to in this Article 15, execute and deliver all such papers and take all such steps, including the legal assignment of such subcontracts and other contractual rights of the Contractor, as the Owner may require for the purpose of fully vesting in the Owner the rights and benefits of the Contractor under such subcontracts or purchase orders.

15.4    The Work may be suspended by the Owner as provided in Article 14 of the General Conditions; in such case, the Guaranteed Maximum Price, if any, shall be increased as provided in Subparagraph 14.3.2 of the General Conditions except that the term "cost of performance of the Contract" in that Subparagraph shall be understood to mean the Cost of the Work and the term "profit" shall be understood to mean the Contractor's Fee as described in Paragraphs 5.1 and 6.3 of this Agreement.

ARTICLE 16
ENUMERATION OF CONTRACT DOCUMENTS

16.1    The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows:

16.1.1   The Agreement is this executed Standard Form of Agreement Between Owner and Contractor, AIA Document A111, 1987 Edition.

16.1.2   The General Conditions are the General Conditions of the Contract for Construction, AIA Document A201, 1987 Edition.

16.1.3   The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated      , and are as follows:

Document                               Title                                Pages

To be determined and included

16.1.4   The Specifications are those contained in the Project Manual dated as in Paragraph 16.1.3, and are as follows:

(Either list the Specifications here or refer to an exhibit attached to this Agreement.)

Section                                 Title                                Pages

To be determined and included

16.1.5   The Drawings are as follows, and are dated unless a different date is shown below:

(Either list the Drawings here or refer to an exhibit attached to this Agreement.)

Number                                Title                                Date

To be determined and included

16.1.6   The Addenda, if any, are as follows:

Number                                Date                                Pages

To be included upon their completion and as agreed to by the Owner and Contractor.

Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 16.

16.1.7   Other Documents, if any, forming part of the Contract Document are as follows:

(List here any additional documents which are intended to form part of the Contract Documents. The General Conditions provide that bidding requirements such as advertisement or invitation to bid, Instructions to Bidders, sample forms and the Contractor's bid are not part of the Contract Documents unless enumerated in this Agreement. They should be listed only if intended to be part of the Contract Documents.)

Kraus-Anderson Proposal "to be determined and included".

ADC's Confidential Information Rider.

Addendum #1 Revisions to Standard Form of Agreement between ADC Telecommunications, Inc. and Kraus-Anderson Construction Company dated October 22, 1999.

This Agreement is entered into as of the day and year first written above and is executed in at least three original copies of which one is to be delivered to the Contractor, one to the Architect for use in the administration of the Contract, and the remainder to the Owner.

OWNER	CONTRACTOR
/s/ DWIVEDI KAMALESH(Signature) Dwivedi Kamalesh V.P. & C.I.O. (Printed name and title)	/s/ DAVID J. MERVIN(Signature) Kraus-Anderson Construction Company, Building Division David J. Mervin, Senior Vice President (Printed name and title)

ADC CONFIDENTIAL INFORMATION RIDER

1.

ADC (Owner) Confidential Information shall mean all information disclosed by Owner to Contractor whether verbal, written, or in the form of samples, which relates to Owner's past, present or future research, technology, designs, know-how, computer programs, products, markets and business plans which relate directly or indirectly to the purpose(s) of Contractor's services described in the Agreement. All information, specifically including samples, proto types, software, drawings, designs, specifications, notes and memoranda disclosed by Owner relating to such purpose(s) shall be deemed to be confidential to Owner.

2.

Information shall not be deemed to be confidential Owner which:

A.

is, at the time of disclosure or thereafter becomes, a part of the public domain without breach of this Agreement by Contractor (provided, however, that the act of copyrighting shall not cause or be construed as causing the copyrighted materials to be in the public domain);

B.

is lawfully in Contractor's procession prior to disclosure by Owner as shown by written records;

C.

is lawfully disclosed to Contractor by a third party which did not acquire the same under an obligation of confidentiality to Owner; or

D.

is independently developed by Contractor without use of Owner Confidential Information.

3.

Except as may be authorized by Owner in writing, Contractor agrees; (1) not to disclose Owner Confidential Information to any third party, (2) to limit dissemination of Owner Confidential Information only to Contractor's employees having a "need to know," (3) to have an appropriate written agreement with Contractor's employees sufficient to enable them to comply with all of the provisions of this Agreement, and (4) to use the Owner's Confidential Information only for the purposes stated in the first paragraph of this rider.

4.

Contractor agrees to secure all Owner Confidential Information and any work product incorporated Owner Confidential Information, when not in use, in a locked file, desk, cabinet, or other suitable container or furniture in a locked room with restricted access to prevent its unauthorized disclosure.

5.

Contractor agrees to maintain adequate procedures to prevent loss of any Owner Confidential Information, and, in the event of any loss, shall notify Owner immediately.

6.

Upon request by Owner, Contractor shall send all drawings, designs, specifications, notes, memoranda, Owner furnished materials and any other materials that embody Owner Confidential Information to Owner as Owner may instruct.

7.

Notwithstanding any language to the contrary, Owner shall not be obligated to disclose any particular information to Contractor.

ADDENDUM 1
Revisions
To
Standard Form of Agreement
Between
ADC Telecommunications, Inc.
And
Kraus-Anderson Construction Company
Dated
October 22, 1999

I.  AIA Document A111 - 1987 Agreement

A.

Add a new SubSection 15.5 as follows:





"Notwithstanding anything in this Agreement to the contrary, the Owner has the right, at any time, to terminate the Work, the Project, and/or the Contract in part or in whole for its convenience by giving written notice thereof to the Contractor. The Contractor shall discontinue its operations as promptly as reasonably practical, secure the site against trespassers and vandals and store all the material on the site in such a manner as to reasonably protect materials and so as to prevent fire hazards and/or safety hazards. The Contractor may recover from the Owner payment for all work executed, and for any commitments made or sustained upon any work performed, whether on or off the site, and upon any materials, equipment, tools, construction equipment and machinery which represent costs to be reimbursed under Article 7 of the Agreement and the Contractor's Fee as specified in Section 5.1 of this Agreement, but not anticipated profit. This will include the actual costs incurred by the Contractor in terminating subcontracts and purchase orders as well as costs associated with the return or reshelving of material, supplies and inventory. The Contractor shall also be paid its reasonable labor and equipment costs incurred in demobilizing off the site. The Contractor shall have no obligation to secure the site until the Owner provides the Contractor with reasonable assurance of payment therefor." In addition, the Contractor and its subcontractors shall be paid a reasonable amount for general administrative costs and profit for all work performed to the date of termination for convenience and work associated with the termination for convenience.

II.  AIA Document A201 - 1987 General Conditions

A.

Section 3.18.1, replace the existing text with the following text:





"To the fullest extent permitted by law, the Contractor shall defend, indemnify and hold harmless the Owner, the Owner's lessor (if any) at the Project, and their respective present or future officers, employees, directors, invitees, licensees, trustees, shareholders, and subsidiaries from and against any and all claims, demands, suits, proceedings, judgments, liabilities, losses, penalties, fines, costs, expenses, fees, injuries, or damages of every nature (including, without limitation, reasonable attorneys' fees and other costs and expense incident thereto) resulting from the performance of or the failure to perform the Work, any breach of this Agreement, any defective material or workmanship in the materials or services furnished, any failure of any materials to comply with the applicable drawings, specifications or express warranties furnished, or any unlawful, negligent, intentional or otherwise tortious act or omission, by Contractor or its agents, employees, subcontractors or vendors. Such obligations shall not be construed to negate, abridge or reduce other rights or obligations of indemnity or contribution which would otherwise exist as to a party or person described in this paragraph. The rights and obligations described in this paragraph shall survive the completion or termination of this Agreement."

B.

Section 4.2.12, in the second sentence, delete the words "results of interpretations or decisions so rendered in good faith" and substitute the following words:





"the execution of the Architect's interpretations or decision or incorrect execution of such interpretation or decision; however, the Architect shall be liable for the execution of its interpretations or decisions by any person who faithfully follows such interpretation or decision,"

C.

Section 4.5.2, add a new sentence as follows:





"The location of the arbitration hearing shall occur within the county in which the Project is located."

D.

Section 4.5.5, delete the first three sentences and substitute the following sentence: "Any arbitration arising out of or relating to this Agreement may include, by consolidation, joinder or in any other manner, the Architect, the Contractor, subcontractors or suppliers and Contractor shall include an appropriate provision in each subcontract providing for arbitration and for such inclusion of the subcontractor in any arbitration with the Owner, Architect or Contractor. In addition, the Contractor will engage its best efforts to include an appropriate provision in each purchase order with suppliers to provide for the consolidation, joinder or inclusion of the supplier in any arbitration with the Owner, Architect, or Contractor.



E.

Section 11.1.2, the first sentence should be revised to read as follows:





"Each insurance coverage required by Section 11.1.1 shall be written with a combined single limit of at lease $1,000,000.00 or as required by law, whichever is greater."

F.

Section 11.1.3, the second sentence should be revised by adding the word "reduced," before the work "canceled" and add the following words at the end of the sentence:





"by the insurance carrier named in the Certificates."

Delete the fourth sentence of this Section.

G.

All general liability policies maintained by the general contractor shall be endorsed to name the Owner and Mortgagee/Lessor as additional insurer's under all policies required under sections 11.1.1 and 11.1.2 with severability of interests permitted under such policies, the contractor's policies would be primary and that the contractors maintain excess/umbrella liability insurance coverage with an annual aggregate limit of at least Fifty Million dollars ($50,000,000) in excess of claims covered by the insurance coverage's listed in sections 11.1.1.1 through 11.1.1.7





11.2  CONTRACTOR'S LIABILITY INSURANCE

11.2.1  The Contractor shall obtain and maintain insurance coverage for the following claims which may arise out of the performance of this Agreement, whether resulting from the Contractor's operations or by the operations of any Subcontractor, anyone in the employ of any of them, or by an individual or entity for whose acts they may be liable:

.1

workers' compensation, disability and other employee benefit claims under acts applicable to the Work;



.2

under applicable employers liability law, bodily injury, occupational sickness, disease or death claims of the Contractor's employees;



.3

bodily injury, sickness, disease or death claims for damages to persons not employed by the Contractor;



.4

usual personal injury liability claims for damages directly or indirectly related to the person's employment by the Contractor or for damages to any other person;



.5

damage to or destruction of tangible property, including resulting loss of use, claims for property other than the Work itself and other property insured under Paragraph 11.5;



.6

bodily injury, death or property damage claims resulting from motor vehicle liability in the use, maintenance or ownership of any motor vehicle; and



.7

contractual liability claims involving the Contractor's obligations under Subparagraph 11.1.1.





11.2.2  The Contractor's Commercial General and Automobile Liability insurance as required by Subparagraph 11.2.1 shall be written for not less than the following limits of liability;

.1	Commercial General Liability Insurance
	a.	Each Occurrence Limit	$1,000,000
	b.	General Operations Aggregate	$2,000,000
	c.	Products Completed Aggregate	$2,000,000
	d.	Personal and Advertising Injury Limit	$1,000,000
.2	Comprehensive Automobile Liability Insurance
	a.	Combined Single Limit Bodily Injury and Property Damage	$1,000,000 Each Occurrence
		or
	b.	Bodily Injury	$ Each Occurrence
			$ Each Occurrence
	c.	Property Damage	$ Each Occurrence

11.2.3  Commercial General Liability Insurance may be arranged under a single policy for the full limits required or by a combination of underlying policies and an Excess or Umbrella Liability policy.

Umbrella Liability Limit: $50,000,000
Each Occurrence

11.2.4  The policies shall contain a provision that coverage will not be canceled or not renewed until at least thirty (30) days' prior written notice has been given to the Owner. Certificates of Insurance showing required coverage to be in force shall be filed with the Owner prior to commencement of the Work.

11.2.5  Products and Completed Operations insurance shall be maintained for a minimum period of at least two (2) years and either ninety (90) days follow the date of Substantial Completion or final payment, whichever is earlier.

H.

Insert a "." after "Paragraph 9.10" of the Eleventh Line of Section 11.3.1 and delete the balance of the second sentence thereof.



I.

Section 11.3.6, delete the words "copy of each policy" in the first sentence and substitute the following words: "Certificate of Insurance."



J.

Section 14.2.4 should be revised by adding the word "not" following the word "shall" in the first sentence. The third sentence should be revised to read as follows: "The amount to be paid to the Owner shall survive termination of the Contract."

General Conditions of the Contract for Construction
AIA Document A201—Electronic Format

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

This document has been approved and endorsed by the Associated General Contractors of America.

Copyright 1911, 1915, 1918, 1925, 1927, 1951, 1958, 1961, 1963, 1967, 1970, 1976, 1987 by The American Institute of Architects, 1735 New York Avenue N.W., Washington D.C. 20006-5292. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AIA violates the copyright laws of the United States and will be subject to legal prosecutions.

TABLE OF ARTICLES

1.	GENERAL PROVISIONS
2.	OWNER
3.	CONTRACTOR
4.	ADMINISTRATION OF THE CONTRACT
5.	SUBCONTRACTORS
6.	CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS
7.	CHANGES IN THE WORK
8.	TIME
9.	PAYMENTS AND COMPLETION
10.	PROTECTION OF PERSONS AND PROPERTY
11.	INSURANCE AND BONDS
12.	UNCOVERING AND CORRECTION OF WORK
13.	MISCELLANEOUS PROVISIONS
14.	TERMINATION OR SUSPENSION OF THE CONTRACT

AIA DOCUMENT A201—GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION—FOURTEENTH EDITION—AIA—COPYRIGHT 1987—THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.

Electronic Format A201-1987
User Document: AIA—10/22/1999. AIA License Number 105495, which expires on 10/31/1999—Page #1

INDEX

Acceptance of Nonconforming Work	9.6.6, 9.9.3, 12.3
Acceptance of Work	9.6.6, 9.8.2, 9.9.3, 9.10.1, 9.10.3
Access to Work	3.16, 6.2.1, 12.1
Accident Prevention	4.2.3, 10
Acts and Omissions	3.2.1, 3.2.2, 3.3.2, 3.12.8, 3.18, 4.2.3, 4.3.2, 4.3.9, 8.3.1, 10.1.4, 10.2.5, 13.4.2, 13.7, 14.1
Addenda	1.1.1, 3.11
Additional Costs, Claims for	4.3.6, 4.3.7, 4.3.9, 6.1.1, 10.3
Additional Inspections and Testing	4.2.6, 9.8.2, 12.2.1, 13.5
Additional Time, Claims for	4.3.6, 4.3.8, 4.3.9, 8.3.2
ADMINISTRATION OF THE CONTRACT	3.3.3, 4, 9.4, 9.5
Advertisement or Invitation to Bid	1.1.1
Aesthetic Effect	4.2.13, 4.5.1
Allowances	3.8
All-risk Insurance	11.3.1.1
Applications for Payment	4.2.5, 7.3.7, 9.2, 9.3, 9.4, 9.5.1, 9.6.3, 9.8.3, 9.10.1, 9.10.3, 9.10.4, 11.1.3, 14.2.4
Approvals	2.4, 3.3.3, 3.5, 3.10.2, 3.12.4 through 3.12.8, 3.18.3, 4.2.7, 9.3.2, 11.3.1.4, 13.4.2, 13.5
Arbitration	4.1.4, 4.3.2, 4.3.4, 4.4.4, 4.5, 8.3.1, 10.1.2, 11.3.9, 11.3.10
Architect	4.1
Architect, Definition of	4.1.1
Architect, Extent of Authority	2.4, 3.12.6, 4.2, 4.3.2, 4.3.6, 4.4, 5.2, 6.3, 7.1.2, 7.2.1, 7.3.6, 7.4, 9.2, 9.3.1, 9.4, 9.5, 9.6.3, 9.8.2, 9.8.3, 9.10.1, 9.10.3, 12.1, 12.2.1, 13.5.1, 13.5.2, 14.2.2, 14.2.4
Architect, Limitations of Authority and Responsibility	3.3.3, 3.12.8, 3.12.11, 4.1.2, 4.2.1, 4.2.2, 4.2.3, 4.2.6, 4.2.7, 4.2.10, 4.2.12, 4.2.13, 4.3.2, 5.2.1, 7.4, 9.4.2, 9.6.4, 9.6.6
Architect's Additional Services and Expenses	2.4, 9.8.2, 11.3.1.1, 12.2.1, 12.2.4, 13.5.2, 13.5.3, 14.2.4
Architect's Administration of the Contract	4.2, 4.3.6, 4.3.7, 4.4, 9.4, 9.5
Architect's Approvals	2.4, 3.5.1, 3.10.2, 3.12.6, 3.12.8, 3.18.3, 4.2.7
Architect's Authority to Reject Work	3.5.1, 4.2.6, 12.1.2, 12.2.1
Architect's Copyright	1.3
Architect's Decisions	4.2.6, 4.2.7, 4.2.11, 4.2.12, 4.2.13, 4.3.2, 4.3.6, 4.4.1, 4.4.4, 4.5, 6.3, 7.3.6, 7.3.8, 8.1.3, 8.3.1, 9.2, 9.4, 9.5.1, 9.8.2, 9.9.1, 10.1.2, 13.5.2, 14.2.2, 14.2.4
Architect's Inspections	4.2.2, 4.2.9, 4.3.6, 9.4.2, 9.8.2, 9.9.2, 9.10.1, 13.5
Architect's Instructions	4.2.6, 4.2.7, 4.2.8, 4.3.7, 7.4.1, 12.1, 13.5.2
Architect's Interpretations	4.2.11, 4.2.12, 4.3.7
Architect's On-Site Observations	4.2.2, 4.2.5, 4.3.6, 9.4.2, 9.5.1, 9.10.1, 13.5
Architect's Project Representative	4.2.10
Architect's Relationship with Contractor	1.1.2, 3.2.1, 3.2.2, 3.3.3, 3.5.1, 3.7.3, 3.11, 3.12.8, 3.12.11, 3.16, 3.18, 4.2.3, 4.2.4, 4.2.6, 4.2.12, 5.2, 6.2.2, 7.3.4, 9.8.2, 11.3.7, 12.1, 13.5
Architect's Relationship with Subcontractors	1.1.2, 4.2.3, 4.2.4, 4.2.6, 9.6.3, 9.6.4, 11.3.7
Architect's Representations	9.4.2, 9.5.1, 9.10.1
Architect's Site Visits	4.2.2, 4.2.5, 4.2.9, 4.3.6, 9.4.2, 9.5.1, 9.8.2, 9.9.2, 9.10.1, 13.5
Asbestos	10.1
Attorneys' Fees	3.18.1, 9.10.2, 10.1.4
Award of Separate Contracts	6.1.1
Award of Subcontracts and Other Contracts for Portions of the Work	5.2
Basic Definitions	1.1
Bidding Requirements	1.1.1, 1.1.7, 5.2.1, 11.4.1
Boiler and Machinery Insurance	11.3.2
Bonds, Lien	9.10.2
Bonds, Performance and Payment	7.3.6.4, 9.10.3, 11.3.9, 11.4
Building Permit	3.7.1
Capitalization	1.4
Certificate of Substantial Completion	9.8.2
Certificates for Payment	4.2.5, 4.2.9, 9.3.3, 9.4, 9.5, 9.6.1, 9.6.6, 9.7.1, 9.8.3, 9.10.1, 9.10.3, 13.7, 14.1.1.3, 14.2.4
Certificates of Inspection, Testing or Approval	3.12.11, 13.5.4
Certificates of Insurance	9.3.2, 9.10.2, 11.1.3
Change Orders	1.1.1, 2.4.1, 3.8.2.4, 3.11, 4.2.8, 4.3.3, 5.2.3, 7.1, 7.2, 7.3.2, 8.3.1, 9.3.1.1, 9.10.3, 11.3.1.2, 11.3.4, 11.3.9, 12.1.2
Change Orders, Definition of	7.2.1
Changes	7.1
CHANGES IN THE WORK	3.11, 4.2.8, 7, 8.8.1, 9.3.1.1, 10.1.3
Claim, Definition of	4.3.1
Claims and Disputes	4.3, 4.4, 4.5, 6.2.5, 8.3.2, 9.3.1.2, 9.3.3, 9.10.4, 10.1.4
Claims and Timely Assertion of Claims	4.5.6
Claims for Additional Cost	4.3.6, 4.3.7, 4.3.9, 6.1.1, 10.3
Claims for Additional Time	4.3.6, 4.3.8, 4.3.9, 8.3.2
Claims for Concealed or Unknown Conditions	4.3.6
Claims for Damages	3.18, 4.3.9, 6.1.1, 6.2.5, 8.3.2, 9.5.1.2, 10.1.4
Claims Subject to Arbitration	4.3.2, 4.4.4, 4.5.1
Cleaning Up	3.15, 6.3
Commencement of Statutory Limitation Period	13.7
Commencement of the Work, Conditions Relating to	2.1.2, 2.2.1, 3.2.1, 3.2.2, 3.7.1, 3.10.1, 3.12.6, 4.3.7, 5.2.1, 6.2.2, 8.1.2, 8.2.2, 9.2, 11.1.3, 11.3.6, 11.4.1
Commencement of the Work, Definition of	8.1.2
Communications Facilitating Contract Administration	3.9.1, 4.2.4, 5.2.1
Completion, Conditions Relating to	3.11, 3.15, 4.2.2, 4.2.9, 4.3.2, 9.4.2, 9.8, 9.9.1, 9.10, 11.3.5, 12.2.2, 13.7.1
COMPLETION, PAYMENTS AND	9
Completion, Substantial	4.2.9, 4.3.5.2, 8.1.1, 8.1.3, 8.2.3, 9.8, 9.9.1, 12.2.2, 13.7
Compliance with Laws	1.3, 3.6, 3.7, 3.13, 4.1.1, 10.2.2, 11.1, 11.3, 13.1, 13.5.1, 13.5.2, 13.6, 14.1.1, 14.2.1.3
Concealed or Unknown Conditions	4.3.6
Conditions of the Contract	1.1.1, 1.1.7, 6.1.1
Consent, Written	1.3.1, 3.12.8, 3.14.2, 4.1.2, 4.3.4, 4.5.5, 9.3.2, 9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 10.1.3, 11.3.1, 11.3.1.4, 11.3.11, 13.2, 13.4.2
CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS	1.1.4, 6
Construction Change Directive, Definition of	7.3.1
Construction Change Directives	1.1.1, 4.2.8, 7.1, 7.3, 9.3.1.1
Construction Schedules, Contractor's	3.10, 6.1.3
Contingent Assignment of Subcontracts	5.4
Continuing Contract Performance	4.3.4
Contract, Definition of	1.1.2
CONTRACT, TERMINATION OR SUSPENSION OF THE	4.3.7, 5.4.1.1, 14
Contract Administration	3.3.3, 4, 9.4, 9.5
Contract Award and Execution, Conditions Relating to	3.7.1, 3.10, 5.2, 9.2, 11.1.3, 11.3.6, 11.4.1
Contract Documents, The	1.1, 1.2, 7
Contract Documents, Copies Furnished and Use of	1.3, 2.2.5, 5.3
Contract Documents, Definition of	1.1.1
Contract Performance During Arbitration	4.3.4, 4.5.3
Contract Sum	3.8, 4.3.6, 4.3.7, 4.4.4, 5.2.3, 6.1.3, 7.2, 7.3, 9.1, 9.7, 11.3.1, 12.2.4, 12.3, 14.2.4
Contract Sum, Definition of	9.1
Contract Time	4.3.6, 4.3.8, 4.4.4, 7.2.1.3, 7.3, 8.2.1, 8.3.1, 9.7, 12.1.1
Contract Time, Definition of	8.1.1
CONTRACTOR	3
Contractor, Definition of	3.1, 6.1.2
Contractor's Bid	1.1.1
Contractor's Construction Schedules	3.10, 6.1.3
Contractor's Employees	3.3.2, 3.4.2, 3.8.1, 3.9, 3.18, 4.2.3, 4.2.6, 8.1.2, 10.2, 10.3, 11.1.1, 14.2.1.1
Contractor's Liability Insurance	11.1
Contractor's Relationship with Separate Contractors and Owner's Forces	2.2.6, 3.12.5, 3.14.2, 4.2.4, 6, 12.2.5
Contractor's Relationship with Subcontractors	1.2.4, 3.3.2, 3.18.1, 3.18.2, 5.2, 5.3, 5.4, 9.6.2, 11.3.7, 11.3.8, 14.2.1.2
Contractor's Relationship with the Architect	1.1.2, 3.2.1, 3.2.2, 3.3.3, 3.5.1, 3.7.3, 3.11, 3.12.8, 3.16, 3.18, 4.2.3, 4.2.4, 4.2.6, 4.2.12, 5.2, 6.2.2, 7.3.4, 9.8.2, 11.3.7, 12.1, 13.5
Contractor's Representations	1.2.2, 3.5.1, 3.12.7, 6.2.2, 8.2.1, 9.3.3
Contractor's Responsibility for Those Performing the Work	3.3.2, 3.18, 4.2.3, 10
Contractor's Review of Contract Documents	1.2.2, 3.2, 3.7.3
Contractor's Right to Stop the Work	9.7
Contractor's Right to Terminate the Contract	14.1
Contractor's Submittals	3.10, 3.11, 3.12, 4.2.7, 5.2.1, 5.2.3, 7.3.6, 9.2, 9.3.1, 9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 11.4.2, 11.4.3
Contractor's Superintendent	3.9, 10.2.6
Contractor's Supervision and Construction Procedures	1.2.4, 3.3, 3.4, 4.2.3, 8.2.2, 8.2.3, 10
Contractual Liability Insurance	11.1.1.7, 11.2.1
Coordination and Correlation	1.2.2, 1.2.4, 3.3.1, 3.10, 3.12.7, 6.1.3, 6.2.1
Copies Furnished of Drawings and Specifications	1.3, 2.2.5, 3.11
Correction of Work	2.4, 2.4, 4.2.1, 9.8.2, 9.9.1, 12.1.2, 12.2, 13.7.1.3
Cost, Definition of	7.3.6, 14.3.5
Costs	2.4, 3.2.1, 3.7.4, 3.8.2, 3.15.2, 4.3.6, 4.3.7, 4.3.8.1, 5.2.3, 6.1.1, 6.2.3, 6.3, 7.3.3.3, 7.3.6, 7.3.7, 9.7, 9.8.2, 9.10.2, 11.3.1.2, 11.3.1.3, 11.3.4, 11.3.9, 12.1, 12.2.1, 12.2.4, 12.2.5, 13.5, 14
Cutting and Patching	3.14, 6.2.6
Damage to Construction of Owner or Separate Contractors	3.14.2, 6.2.4, 9.5.1.5, 10.2.1.2, 10.2.5, 10.3, 11.1, 11.3, 12.2.5
Damage to the Work	3.14.2, 9.9.1, 10.2.1.2, 10.2.5, 10.3, 11.3
Damages, Claims for	3.18, 4.3.9, 6.1.1, 6.2.5, 8.3.2, 9.5.1.2, 10.1.4
Damages for Delay	6.1.1, 8.3.3, 9.5.1.6, 9.7
Date of Commencement of the Work, Definition of	8.1.2
Date of Substantial Completion, Definition of	8.1.3
Day, Definition of	8.1.4
Decisions of the Architect	4.2.6, 4.2.7, 4.2.11, 4.2.12, 4.2.13, 4.3.2, 4.3.6, 4.4.1, 4.4.4, 4.5, 6.3, 7.3.6, 7.3.8, 8.1.3, 8.3.1, 9.2, 9.4, 9.5.1, 9.8.2, 9.9.1, 10.1.2, 13.5.2, 14.2.2, 14.2.4
Decisions to Withhold Certification	9.5, 9.7, 14.1.1.3
Defective or Nonconforming Work, Acceptance, Rejection and Correction of	2.3, 2.4, 3.5.1, 4.2.1, 4.2.6, 4.3.5, 9.5.2, 9.8.2, 9.9.1, 10.2.5, 12, 13.7.1.3
Defective Work, Definition of	3.5.1
Definitions	1.1, 2.1.1, 3.1, 3.5.1, 3.12.1, 3.12.2, 3.12.3, 4.1.1, 4.3.1, 5.1, 6.1.2, 7.2.1, 7.3.1, 7.3.6, 8.1, 9.1, 9.8.1
Delays and Extensions of Time	4.3.1, 4.3.8.1, 4.3.8.2, 6.1.1, 6.2.3, 7.2.1, 7.3.1, 7.3.4, 7.3.5, 7.3.8, 7.3.9, 8.1.1, 8.3, 10.3.1, 14.1.1.4
Disputes	4.1.4, 4.3, 4.4, 4.5, 6.2.5, 6.3, 7.3.8, 9.3.1.2
Documents and Samples at the Site	3.11
Drawings, Definition of	1.1.5
Drawings and Specifications, Use and Ownership of	1.1.1, 1.3, 2.2.5, 3.11, 5.3
Duty to Review Contract Documents and Field Conditions	3.2
Effective Date of Insurance	8.2.2, 11.1.2
Emergencies	4.3.7, 10.3
Employees, Contractor's	3.3.2, 3.4.2, 3.8.1, 3.9, 3.18.1, 3.18.2, 4.2.3, 4.2.6, 8.1.2, 10.2, 10.3, 11.1.1, 14.2.1.1
Equipment, Labor, Materials and	1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2, 3.12.3, 3.12.7, 3.12.11, 3.13, 3.15.1, 4.2.7, 6.2.1, 7.3.6, 9.3.2, 9.3.3, 11.3, 12.2.4, 14
Execution and Progress of the Work	1.1.3, 1.2.3, 3.2, 3.4.1, 3.5.1, 4.2.2, 4.2.3, 4.3.4, 4.3.8, 6.2.2, 7.1.3, 7.3.9, 8.2, 8.3, 9.5, 9.9.1, 10.2, 14.2, 14.3
Execution, Correlation and Intent of the Contract Documents	1.2, 3.7.1
Extensions of Time	4.3.1, 4.3.8, 7.2.1.3, 8.3, 10.3.1
Failure of Payment by Contractor	9.5.1.3, 14.2.1.2
Failure of Payment by Owner	4.3.7, 9.7, 14.1.3
Faulty Work (See Defective or Nonconforming Work)
Final Completion and Final Payment	4.2.1, 4.2.9, 4.3.2, 4.3.5, 9.10, 11.1.2, 11.1.3, 11.3.5, 12.3.1, 13.7
Financial Arrangements, Owner's	2.2.1
Fire and Extended Coverage Insurance	11.3
GENERAL PROVISIONS	1
Governing Law	1.3.1
Guarantees (See Warranty and Warranties)
Hazardous Materials	10.1, 10.2.4
Identification of Contract Documents	1.2.1
Identification of Subcontractors and Suppliers	5.2.1
Indemnification	3.17, 3.18, 9.10.2, 10.1.4, 11.3.1.2, 11.3.7
Information and Services Required of the Owner	2.1.2, 2.2, 4.3.4, 6.1.3, 6.1.4, 6.2.6, 9.3.2, 9.6.1, 9.6.4, 9.8.3, 9.9.2, 9.10.3, 10.1.4, 11.2, 11.3, 13.5.1, 13.5.2
Injury or Damage to Person or Property	4.3.9
Inspections	3.3.3, 3.3.4, 3.7.1, 4.2.2, 4.2.6, 4.2.9, 4.3.6, 9.4.2, 9.8.2, 9.9.2, 9.10.1, 13.5
Instructions to Bidders	1.1.1
Instructions to the Contractor	3.8.1, 4.2.8, 5.2.1, 7, 12.1, 13.5.2
Insurance	4.3.9, 6.1.1, 7.3.6.4, 9.3.2, 9.8.2, 9.9.1, 9.10.2, 11
Insurance, Boiler and Machinery	11.3.2
Insurance, Contractor's Liability	11.1
Insurance, Effective Date of	8.2.2, 11.1.2
Insurance, Loss of Use	11.3.3
Insurance, Owner's Liability	11.2
Insurance, Property	10.2.5, 11.3
Insurance, Stored Materials	9.3.2, 11.3.1.4
INSURANCE AND BONDS	11
Insurance Companies, Consent to Partial Occupancy	9.9.1, 11.3.11
Insurance Companies, Settlement with	11.3.10
Intent of the Contract Documents	1.2.3, 3.12.4, 4.2.6, 4.2.7. 4.2.12, 4.2.13, 7.4
Interest	13.6
Interpretations	1.2.5, 1.4, 1.5, 4.1.1, 4.3.1, 5.1, 6.1.2., 8.1.4
Interpretations, Written	4.2.11, 4.2.12, 4.3.7
Joinder and Consolidation of Claims Required	4.5.6
Judgment on Final Award	4.5.1, 4.5.4.1, 4.5.7
Labor and Materials, Equipment	1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2, 3.12.2, 3.12.3, 3.12.7, 3.12.11, 3.13, 3.15.1, 4.2.7, 6.2.1, 7.3.6, 9.3.2, 9.3.3, 12.2.4, 14
Labor Disputes	8.3.1
Laws and Regulations	1.3, 3.6, 3.7, 3.13, 4.1.1, 4.5.5, 4.5.7, 9.9.1, 10.2.2, 11.1, 11.3, 13.1, 13.4, 13.5.1, 13.5.2, 13.6
Liens	2.1.2, 4.3.2, 4.3.5.1, 8.2.2, 9.3.3, 9.10.2
Limitation on Consolidation or Joinder	4.5.5
Limitations, Statutes of	4.5.4.2, 12.2.6, 13.7
Limitations of Authority	3.3.1, 4.1.2, 4.2.1, 4.2.3, 4.2.7, 4.2.10, 5.2.2, 5.2.4, 7.4, 11.3.10
Limitations of Liability	2.3, 3.2.1, 3.5.1, 3.7.3, 3.12.8, 3.12.11, 3.17, 3.18, 4.2.6, 4.2.7, 4.2.12, 6.2.2, 9.4.2, 9.6.4, 9.10.4, 10.1.4, 10.2.5, 11.1.2, 11.2.1, 11.3.7, 13.4.2, 13.5.2
Limitations of Time, General	2.2.1, 2.2.4, 3.2.1, 3.7.3, 3.8.2, 3.10, 3.12.5, 3.15.1, 4.2.1, 4.2.7, 4.2.11, 4.3.2, 4.3.3, 4.3.4, 4.3.6, 4.3.9, 4.5.4.2, 5.2.1, 5.2.3, 6.2.4, 7.3.4, 7.4, 8.2, 9.5, 9.6.2, 9.8, 9.9, 9.10, 11.1.3, 11.3.1, 11.3.2, 11.3.5, 11.3.6, 12.2.1, 12.2.2, 13.5, 13.7
Limitations of Time, Specific	2.1.2, 2.2.1, 2.4, 3.10, 3.11, 3.15.1, 4.2.1, 4.2.11, 4.3, 4.4, 4.5, 5.3, 5.4, 7.3.5, 7.3.9, 8.2, 9.2, 9.3.1, 9.3.3, 9.4.1, 9.6.1, 9.7, 9.8.2, 9.10.2, 11.1.3, 11.3.6, 11.3.10, 11.3.11, 12.2.2, 12.2.4, 12.2.6, 13.7, 14
Loss of Use Insurance	11.3.3
Material Suppliers	1.3.1, 3.12.1, 4.2.4, 4.2.6, 5.2.1, 9.3.1, 9.3.1.2, 9.3.3, 9.4.2, 9.6.5, 9.10.4
Materials, Hazardous	10.1, 10.2.4
Materials, Labor, Equipment and	1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2, 3.12.2, 3.12.3, 3.12.7, 3.12.11, 3.13, 3.15.1, 4.2.7, 6.2.1, 7.3.6, 9.3.2, 9.3.3, 12.2.4, 14
Means, Methods, Techniques, Sequences and Procedures of Construction	3.3.1, 4.2.3, 4.2.7, 9.4.2
Minor Changes in the Work	1.1.1, 4.2.8, 4.3.7, 7.1, 7.4
MISCELLANEOUS PROVISIONS	13
Modifications, Definition of	1.1.1
Modifications to the Contract	1.1.1, 1.1.2, 3.7.3, 3.11, 4.2.1, 5.2.3, 7, 8.3.1, 9.7
Mutual Responsibility	6.2
Nonconforming Work, Acceptance of	12.3
Nonconforming Work, Rejection and Correction of	2.3.1, 4.3.5, 9.5.2, 9.8.2, 12, 13.7.1.3
Notice	2.3, 2.4, 3.2.1, 3.2.2, 3.7.3, 3.7.4, 3.9, 3.12.8, 3.12.9, 3.17, 4.3, 4.4.4, 4.5, 5.2.1, 5.3, 5.4.1.1, 8.2.2, 9.4.1, 9.5.1, 9.6.1, 9.7, 9.10, 10.1.2, 10.2.6, 11.1.3, 11.3, 12.2.2, 12.2.4, 13.3, 13.5.1, 13.5.2, 14
Notice, Written	2.3, 2.4, 3.9, 3.12.8, 3.12.9, 4.3, 4.4.4, 4.5, 5.2.1, 5.3, 5.4.1.1, 8.2.2, 9.4.1, 9.5.1, 9.7, 9.10, 10.1.2, 10.2.6, 11.1.3, 11.3, 12.2.2, 12.2.4, 13.3, 13.5.2, 14
Notice of Testing and Inspections	13.5.1, 13.5.2
Notice to Proceed	8.2.2
Notices, Permits, Fees and	2.2.3, 3.7, 3.13, 7.3.6.4, 10.2.2
Observations, Architect's On-Site	4.2.4, 4.2.5, 4.3.6, 9.4.2, 9.5.1, 9.10.1, 13.5
Observations, Contractor's	1.2.2, 3.2.2
Occupancy	9.6.6, 9.8.1, 9.9, 11.3.11
On-Site Inspections by the Architect	4.2.2, 4.2.9, 4.3.6, 9.4.2, 9.8.2, 9.9.2, 9.10.1
On-Site Observations by the Architect	4.2.2, 4.2.5, 4.3.6, 9.4.2, 9.5.1, 9.10.1, 13.5
Orders, Written	2.3, 3.9, 4.3.7, 7, 8.2.2, 11.3.9, 12.1, 12.2, 13.5.2, 14.3.1
OWNER	2
Owner, Definition of	2.1
Owner, Information and Services Required of the	2.1.2, 2.2, 4.3.4, 6, 9, 10.1.4, 11.2, 11.3, 13.5.1, 14.1.1.5, 14.1.3
Owner's Authority	3.8.1, 4.1.3, 4.2.9, 5.2.1, 5.2.4, 5.4.1, 7.3.1, 8.2.2, 9.3.1, 9.3.2, 11.4.1, 12.2.4, 13.5.2, 14.2, 14.3.1
Owner's Financial Capability	2.2.1, 14.1.1.5
Owner's Liability Insurance	11.2
Owner's Loss of Use Insurance	11.3.3
Owner's Relationship with Subcontractors	1.1.2, 5.2.1, 5.4.1, 9.6.4
Owner's Right to Carry Out the Work	2.4, 12.2.4, 14.2.2.2
Owner's Right to Clean Up	6.3
Owner's Right to Perform Construction and to Award Separate Contracts	6.1
Owner's Right to Stop the Work	2.3, 4.3.7
Owner's Right to Suspend the Work	14.3
Owner's Right to Terminate the Contract	14.2
Ownership and Use of Architect's Drawings, Specifications and Other Documents	1.1.1, 1.3, 2.2.5, 5.3
Partial Occupancy or Use	9.6.6, 9.9, 11.3.11
Patching, Cutting and	3.14, 6.2.6
Patents, Royalties and	3.17
Payment, Applications for	4.2.5, 9.2, 9.3, 9.4, 9.5.1, 9.8.3, 9.10.1, 9.10.3, 9.10.4, 14.2.4
Payment, Certificates for	4.2.5, 4.2.9, 9.3.3, 9.4, 9.5, 9.6.1, 9.6.6, 9.7.1, 9.8.3, 9.10.1, 9.10.3, 13.7, 14.1.1.3, 14.2.4
Payment, Failure of	4.3.7, 9.5.1.3, 9.7, 9.10.2, 14.1.1.3, 14.2.1.2
Payment, Final	4.2.1, 4.2.9, 4.3.2, 4.3.5, 9.10, 11.1.2, 11.1.3, 11.3.5, 12.3.1
Payment Bond, Performance Bond and	7.3.6.4, 9.10.3, 11.3.9, 11.4
Payments, Progress	4.3.4, 9.3, 9.6, 9.8.3, 9.10.3, 13.6, 14.2.3
PAYMENTS AND COMPLETION	9.14
Payments to Subcontractors	5.4.2, 9.5.1.3, 9.6.2, 9.6.3, 9.6.4, 11.3.8, 14.2.1.2
PCB	10.1
Performance Bond and Payment Bond	7.3.6.4, 9.10.3, 11.3.9, 11.4
Permits, Fees and Notices	2.2.3, 3.7, 3.13, 7.3.6.4, 10.2.2
PERSONS AND PROPERTY, PROTECTION OF	10
Polychlorinated Bipheny	10.1
Product Data, Definition of	3.12.2
Product Data and Samples, Shop Drawings	.11, 3.12, 4.2.7
Progress and Completion	4.2.2, 4.3.4, 8.2
Progress Payments	4.3.4, 9.3, 9.6, 9.8.3, 9.10.3, 13.6, 14.2.3
Project, Definition of the	1.1.4
Project Manual, Definition of the	1.1.7
Project Manuals	2.2.5
Project Representatives	4.2.10
Property Insurance	10.2.5, 11.3
PROTECTION OF PERSONS AND PROPERTY	10
Regulations and Laws	1.3, 3.6, 3.7, 3.13, 4.1.1, 4.5.5, 4.5.7, 10.2.2, 11.1, 11.3, 13.1, 13.4, 13.5.1, 13.5.2, 13.6, 14
Rejection of Work	3.5.1, 4.2.6, 12.2
Releases of Waivers and Liens	9.10.2
Representations	1.2.2, 3.5.1, 3.12.7, 6.2.2, 8.2.1, 9.3.3, 9.4.2, 9.5.1, 9.8.2, 9.10.1
Representatives	2.1.1, 3.1.1, 3.9, 4.1.1, 4.2.1, 4.2.10, 5.1.1, 5.1.2, 13.2.1
Resolution of Claims and Disputes	4.4, 4.5
Responsibility for Those Performing the Work	3.3.2, 4.2.3, 6.1.3, 6.2, 10
Retainage	9.3.1, 9.6.2, 9.8.3, 9.9.1, 9.10.2, 9.10.3
Review of Contract Documents and Field Conditions by Contractor	1.2.2, 3.2, 3.7.3, 3.12.7
Review of Contractor's Submittals by Owner and Architect	3.10.1, 3.10.2, 3.11, 3.12, 4.2.7, 4.2.9, 5.2.1, 5.2.3, 9.2, 9.8.2
Review of Shop Drawings, Product Data and Samples by Contractor	3.12.5
Rights and Remedies	1.1.2, 2.3, 2.4, 3.5.1, 3.15.2, 4.2.6, 4.3.6, 4.5, 5.3, 6.1, 6.3, 7.3.1, 8.3.1, 9.5.1, 9.7, 10.2.5, 10.3, 12.2.2, 12.2.4, 13.4, 14
Royalties and Patents	3.17
Rules and Notices for Arbitration	4.5.2
Safety of Persons and Property	10.2
Safety Precautions and Programs	4.2.3, 4.2.7, 10.1
Samples, Definition of	3.12.3
Samples, Shop Drawings, Product Data and	3.11, 3.12, 4.2.7
Samples at the Site, Documents and	3.11
Schedule of Values	9.2, 9.3.1
Schedules, Construction	3.10
Separate Contracts and Contractors	1.1.4, 3.14.2, 4.2.4, 4.5.5, 6, 11.3.7, 12.1.2, 12.2.5
Shop Drawings, Definition of	3.12.1
Shop Drawings, Product Data and Samples	3.11, 3.12, 4.2.7
Site, Use of	3.13, 6.1.1, 6.2.1
Site Inspections	1.2.2, 3.3.4, 4.2.2, 4.2.9, 4.3.6, 9.8.2, 9.10.1, 13.5
Site Visits, Architect's	4.2.2, 4.2.5, 4.2.9, 4.3.6, 9.4.2, 9.5.1, 9.8.2, 9.9.2, 9.10.1, 13.5
Special Inspections and Testing	4.2.6, 12.2.1, 13.5
Specifications, Definition of the	1.1.6
Specifications, The	1.1.1, 1.1.6, 1.1.7, 1.2.4, 1.3, 3.11
Statute of Limitations	4.5.4.2, 12.2.6, 13.7
Stopping the Work	2.3, 4.3.7, 9.7, 10.1.2, 10.3, 14.1
Stored Materials	6.2.1, 9.3.2, 10.2.1.2, 11.3.1.4, 12.2.4
Subcontractor, Definition of	5.1.1
SUBCONTRACTORS	5
Subcontractors, Work by	1.2.4, 3.3.2, 3.12.1, 4.2.3, 5.3, 5.4
Subcontractural Relations	5.3, 5.4, 9.3.1.2, 9.6.2, 9.6.3, 9.6.4, 10.2.1, 11.3.7, 11.3.8, 14.1.1, 14.2.1.2, 14.3.2
Submittals	1.3, 3.2.3, 3.10, 3.11, 3.12, 4.2.7, 5.2.1, 5.2.3, 7.3.6, 9.2, 9.3.1, 9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 11.1.3
Subrogation, Waivers of	6.1.1, 11.3.5, 11.3.7
Substantial Completion	4.2.9, 4.3.5.2, 8.1.1, 8.1.3, 8.2.3, 9.8, 9.9.1, 12.2.1, 12.2.2, 13.7
Substantial Completion, Definition of	9.8.1
Substitution of Subcontractors	5.2.3, 5.2.4
Substitution of the Architect	4.1.3
Substitutions of Materials	3.5.1
Sub-subcontractor, Definition of	5.1.2
Subsurface Conditions	4.3.6
Successors and Assigns	13.2
Superindendent	3.9, 10.2.6
Supervision and Construction Procedures	1.2.4, 3.3, 3.4, 4.2.3, 4.3.4, 6.1.3, 6.2.4, 7.1.3, 7.3.4, 8.2, 8.3.1, 10, 12, 14
Surety	4.4.1, 4.4.4, 5.4.1.2, 9.10.2, 9.10.3, 14.2.2
Surety, Consent of	9.9.1, 9.10.2, 9.10.3
Surveys	2.2.2, 3.18.3
Suspension by the Owner for Convenience	14.3
Suspension of the Work	4.3.7, 5.4.2, 14.1.1.4, 14.3
Suspension of Termination of the Contract	4.3.7, 5.4.1.1, 14
Taxes	3.6, 7.3.6.4
Termination by the Contractor	14.1
Termination by the Owner for Cause	5.4.1.1, 14.2
Termination of the Architect	4.1.3
Termination of the Contractor	14.2.2
TERMINATION OR SUSPENSION OF THE CONTRACT	14
Tests and Inspections	3.3.3, 4.2.6, 4.2.9, 9.4.2, 12.2.1, 13.5
TIME	8
Time, Delays and Extensions of	4.3.8, 7.2.1, 8.3
Time Limits, Specific	2.1.2, 2.2.1, 2.4, 3.10, 3.11, 3.15.1, 4.2.1, 4.2.11, 4.3, 4.4, 4.5, 5.3, 5.4, 7.3.5, 7.3.9, 8.2, 9.2, 9.3.1, 9.3.3, 9.4.1, 9.6.1, 9.7, 9.8.2, 9.10.2, 11.1.3, 11.3.6, 11.3.10, 11.3.11, 12.2.2, 12.2.4, 12.2.6, 13.7, 14
Time Limits on Claims	4.3.2, 4.3.3, 4.3.6, 4.3.9, 4.4, 4.5
Title to Work	9.3.2, 9.3.3
UNCOVERING AND CORRECTION OF WORK	12
Uncovering of Work	12.1
Unforeseen Conditions	4.3.6, 8.3.1, 10.1
Unit Prices	7.1.4, 7.3.3.2
Use of Documents	1.1.1, 1.3, 2.2.5, 3.12.7, 5.3
Use of Site	3.13, 6.1.1, 6.2.1
Values, Schedule of	9.2, 9.3.1
Waiver of Claims: Final Payment	4.3.5, 4.5.1, 9.10.3
Waiver of Claims by the Architect	13.4.2
Waiver of Claims by the Contractor	9.10.4, 11.3.7, 13.4.2
Waiver of Claims by the Owner	4.3.5, 4.5.1, 9.9.3, 9.10.3, 11.3.3, 11.3.5, 11.3.7, 13.4.2
Waiver of Liens	9.10.2
Waivers of Subrogation	6.1.1, 11.3.5, 11.3.7
Warranty and Warranties	3.5, 4.2.9, 4.3.5.3, 9.3.3, 9.8.2, 9.9.1, 12.2.2, 13.7.1.3
Weather Delays	4.3.8.2
When Arbitration May Be Demanded	4.5.4
Work, Definition of	1.1.3
Written Consent	1.3.1, 3.12.8, 3.14.2, 4.1.2, 4.3.4, 4.5.5, 9.3.2, 9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 10.1.3, 11.3.1, 11.3.1.4, 11.3.11, 13.2, 13.4.2
Written Interpretations	4.2.11, 4.2.12, 4.3.7
Written Notice	2.3, 2.4, 3.9, 3.12.8, 3.12.9, 4.3, 4.4.4, 4.5, 5.2.1, 5.3, 5.4.1.1, 8.2.2, 9.4.1, 9.5.1, 9.7, 9.10, 10.1.2, 10.2.6, 11.1.3, 11.3, 12.2.2, 12.2.4, 13.3, 13.5.2, 14
Written Orders	2.3, 3.9, 4.3.7, 7, 8.2.2, 11.3.9, 12.1, 12.2, 13.5.2, 14.3.1

GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION

ARTICLE 1
GENERAL PROVISIONS

1.1     BASIC DEFINITIONS

1.1.1THE CONTRACT DOCUMENTS

The Contract Documents consist of the Agreement between Owner and Contractor (hereinafter the Agreement), Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, addenda issued prior to execution of the Contract, other documents listed in the Agreement and Modifications issued after execution of the Contract. A Modification is (1) a written amendment to the Contract signed by both parties, (2) a Change Order, (3) a Construction Change Directive or (4) a written order for a minor change in the Work issued by the Architect. Unless specifically enumerated in the Agreement, the Contract Documents do not include other documents such as bidding requirements (advertisement or invitation to bid, Instructions to Bidders, sample forms, the Contractor's bid or portions of addenda relating to bidding requirements).

1.1.2THE CONTRACT

The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Architect and Contractor, (2) between the Owner and a Subcontractor or Sub-subcontractor or (3) between any persons or entities other than the Owner and Contractor. The Architect shall, however, be entitled to performance and enforcement of obligations under the Contract intended to facilitate performance of the Architect's duties.

1.1.3THE WORK

The term "Work" means the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations. The Work may constitute the whole or a part of the Project.

1.1.4THE PROJECT

The Project is the total construction of which the Work performed under the Contract Documents may be the whole or a part and which may include construction by the Owner or by separate contractors.

1.1.5THE DRAWINGS

The Drawings are the graphic and pictorial portions of the Contract Documents, wherever located and whenever issued, showing the design, location and dimensions of the Work, generally including plans, elevations, sections, details, schedules and diagrams.

1.1.6THE SPECIFICATIONS

The Specifications are that portion of the Contract Documents consisting of the written requirements for materials, equipment, construction systems, standards and workmanship for the Work, and performance of related services.

1.1.7THE PROJECT MANUAL

The Project Manual is the volume usually assembled for the Work which may include the bidding requirements, sample forms, Conditions of the Contract and Specifications.

1.2     EXECUTION, CORRELATION AND INTENT

1.2.1    The Contract Documents shall be signed by the Owner and Contractor as provided in the Agreement. If either the Owner or Contractor or both do not sign all the Contract Documents, the Architect shall identify such unsigned Documents upon request.

1.2.2    Execution of the Contract by the Contractor is a representation that the Contractor has visited the site, become familiar with local conditions under which the Work is to be performed and correlated personal observations with requirements of the Contract Documents.

1.2.3    The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work by the Contractor. The Contract Documents are complementary, and what is required by one shall be as binding as if required by all; performance by the Contractor shall be required only to the extent consistent with the Contract Documents and reasonably inferable from them as being necessary to produce the intended results.

1.2.4    Organization of the Specifications into divisions, sections and articles, and arrangement of Drawings shall not control the Contractor in dividing the Work among Subcontractors or in establishing the extent of Work to be performed by any trade.

1.2.5    Unless otherwise stated in the Contract Documents, words which have well-known technical or construction industry meanings are used in the Contract Documents in accordance with such recognized meanings.

1.3     OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND OTHER DOCUMENTS

1.3.1    The Drawings, Specifications and other documents prepared by the Architect are instruments of the Architect's service through which the Work to be executed by the Contractor is described but are property of the Owner. The Contractor may retain one contract record set. Neither the Contractor nor any Subcontractor, Sub-subcontractor or material or equipment supplier shall own or claim a copyright in the Drawings. Specifications and other documents prepared by the Architect, and unless otherwise indicated the Architect shall be deemed the author of them. All copies of them except the Contractor's record set, shall be returned or suitably accounted for to the Architect, on request, upon completion of the Work. The Drawings, Specifications and other documents prepared by the Owner, and copies thereof furnished to the Contractor, are for use solely with respect to this Project. They are not to be used by the Contractor or any Subcontractor, Sub-subcontractor or material or equipment supplier on other projects or for additions to this Project outside the scope of the Work without the specific written consent of the Owner. The Contractor, Subcontractors, Sub-subcontractors and material or equipment suppliers are granted a limited license to use and reproduce applicable portions of the Drawings, Specifications and other documents prepared by the Architect appropriate to and for use in the execution of their Work under the Contract Documents. All copies made under this license shall bear the statutory copyright notice, if any, shown on the Drawings, Specifications and other documents prepared by the Architect. Submittal or distribution to meet official regulatory requirements or for other purposes in connection with this Project is not to be construed as publication in derogation of the Owner's copyright or other reserved rights.

1.4     CAPITALIZATION

1.4.1    Terms capitalized in these General Conditions include those which are (1) specifically defined, (2) the titles of numbered articles and identified references to Paragraphs, Subparagraphs and Clauses in the document or (3) the titles of other documents published by the American Institute of Architects.

1.5     INTERPRETATION

1.5.1    In the interest of brevity the Contract Documents frequently omit modifying words such as "all" and "any" and articles such as "the" and "an," but the fact that a modifier or an article is absent from one statement and appears in another is not intended to affect the interpretation of either statement.

ARTICLE 2
OWNER

2.1     DEFINITION

2.1.1    The Owner is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Owner" means the Owner or the Owner's authorized representative.

2.1.2    The Owner upon reasonable written request shall furnish to the Contractor in writing information which is necessary and relevant for the Contractor to evaluate, give notice of or enforce mechanic's lien rights. Such information shall include a correct statement of the record legal title to the property on which the Project is located, usually referred to as the site, and the Owner's interest therein at the time of execution of the Agreement and, within five days after any change, information of such change in title, recorded or unrecorded.

2.2     INFORMATION AND SERVICES REQUIRED OF THE OWNER

2.2.1    The Owner shall, at the request of the Contractor, prior to execution of the Agreement and promptly from time to time thereafter, furnish to the Contractor reasonable evidence that financial arrangements have been made to fulfill the Owner's obligations under the Contract. [Note: Unless such reasonable evidence were furnished on request prior to the execution of the Agreement, the prospective contractor would not be required to execute the Agreement or to commence the Work.]

2.2.2    The Owner shall furnish surveys describing physical characteristics, legal limitations and utility locations for the site of the Project, and a legal description of the site.

2.2.3    Except for permits and fees which are the responsibility of the Contractor under the Contract Documents, the Owner shall secure and pay for necessary approvals, easements, assessments and charges required for construction, use or occupancy of permanent structures or for permanent changes in existing facilities.

2.2.4    Information or services under the Owner's control shall be furnished by the Owner with reasonable promptness to avoid delay in orderly progress of the Work.

2.2.5    Unless otherwise provided in the Contract Documents, the Contractor will be furnished, free of charge, such copies of Drawings and Project Manuals as are reasonably necessary for execution of the Work.

2.2.6    The foregoing are in addition to other duties and responsibilities of the Owner enumerated herein and especially those in respect to Article 6 (Construction by Owner or by Separate Contractors), Article 9 (Payments and Completion) and Article 11 (Insurance and Bonds).

2.3     OWNER'S RIGHT TO STOP THE WORK

2.3.1    If the Contractor fails to correct Work which is not in accordance with the requirements of the Contract Documents as required by Paragraph 12.2 or persistently fails to carry out Work in accordance with the Contract Documents, the Owner, by written order signed personally or by an agent specifically so empowered by the Owner in writing, may order the Contractor to stop the Work, or any portion thereof, until the cause for such order has been eliminated; however, the right of the Owner to stop the Work shall not give rise to a duty on the part of the Owner to exercise this right for the benefit of the Contractor or any other person or entity, except to the extent required by Subparagraph 6.1.3.

2.4     OWNER'S RIGHT TO CARRY OUT THE WORK

2.4.1    If the Contractor defaults or neglects to carry out the Work in accordance with the Contract Documents and fails within a seven-day period after receipt of written notice from the Owner to commence and continue correction of such default or neglect with diligence and promptness, the Owner may after such seven-day period give the Contractor a second written notice to correct such deficiencies within a second seven-day period. If the Contractor within such second seven-day period after receipt of such second notice fails to commence and continue to correct any deficiencies, the Owner may, without prejudice to other remedies the Owner may have, correct such deficiencies. In such case an appropriate Change Order shall be issued deducting from payments then or thereafter due the Contractor the cost of correcting such deficiencies, including compensation for the Architect's additional services and expenses made necessary by such default, neglect or failure. If payments then or thereafter due the Contractor are not sufficient to cover such amounts, the Contractor shall pay the difference to the Owner.

ARTICLE 3
CONTRACTOR

3.1     DEFINITION

3.1.1    The Contractor is the person or entity identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Contractor" means the Contractor or the Contractor's authorized representative.

3.2     REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR

3.2.1    The Contractor shall carefully study and compare the Contract Documents with each other and with information furnished by the Owner pursuant to Subparagraph 2.2.2 and shall at once report to the Owner and Architect errors, inconsistencies or omissions discovered. The Contractor shall not be liable to the Owner or Architect for damage resulting from errors, inconsistencies or omissions in the Contract Documents unless the Contractor recognized such error, inconsistency or omission and knowingly failed to report it to the Owner and Architect. If the Contractor performs any construction activity knowing it involves a recognized error, inconsistency or omission in the Contract Documents without such notice to the Owner and Architect, the Contractor shall assume appropriate responsibility for such performance and shall bear an appropriate amount of the attributable costs for correction.

3.2.2    The Contractor shall take field measurements and verify field conditions and shall carefully compare such field measurements and conditions and other information known to the Contractor with the Contract Documents before commencing activities. Errors, inconsistencies or omissions discovered shall be reported to the Owner and Architect at once.

3.2.3    The Contractor shall perform the Work in accordance with the Contract Documents and submittals approved pursuant to Paragraph 3.12.

3.3     SUPERVISION AND CONSTRUCTION PROCEDURES

3.3.1    The Contractor shall supervise and direct the Work, using the Contractor's best skill and attention. The Contractor shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work under the Contract, unless Contract Documents give other specific instructions concerning these matters.

3.3.2    The Contractor shall be responsible to the Owner for acts and omissions of the Contractor's employees, Subcontractors and their agents and employees, and other persons performing portions of the Work under a contract with the Contractor.

3.3.3    The Contractor shall not be relieved of obligations to performing the Work in accordance with the Contract Documents either by activities or duties of the Architect in the Architect's administration of the Contract, or by tests, inspections or approvals required or performed by persons other than the Contractor.

3.3.4    The Contractor shall be responsible for inspection of portions of Work already performed under this Contract to determine that such portions are in proper condition to receive subsequent Work.

3.4     LABOR AND MATERIALS

3.4.1    Unless otherwise provided in the Contract Documents, the Contractor shall provide and pay for labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and other facilities and services necessary for proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated in the Work.

3.4.2    The Contractor shall enforce strict discipline and good order among the Contractor's employees and other persons carrying out the Contract. The Contractor shall not permit employment of unfit persons or persons not skilled in tasks assigned to them.

3.5     WARRANTY

3.5.1    The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Contract Documents, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform with the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Contractor's warranty excludes remedy for damage or defect caused by abuse, modifications not executed by the Contractor, improper or insufficient maintenance, improper operation, or normal wear and tear under normal usage. If required by the Owner and Architect, the Contractor shall furnish satisfactory evidence as to the kind and quality of materials and equipment.

3.6     TAXES

3.6.1    The Contractor shall pay sales, consumer, use and similar taxes for the Work or portions thereof provided by the Contractor which are legally enacted when bids are received or negotiations concluded, whether or not effective or merely scheduled to go into effect.

3.7     PERMITS, FEES AND NOTICES

3.7.1    Unless otherwise provided in the Contract Documents, the Contractor shall secure and pay for the building permit and other permits and governmental fees, licenses and inspections necessary for proper execution and completion of the Work which are customarily secured after execution of the Contract and which are legally required when bids are received or negotiations concluded.

3.7.2    The Contractor shall comply with and give notices required by laws, ordinances, rules, regulations and lawful orders of public authorities bearing on performance of the Work.

3.7.3    It is not the Contractor's responsibility to ascertain that the Contract Documents are in accordance with applicable laws, statutes, ordinances, building codes, and rules and regulations. However, if the Contractor observes that portions of the Contract Documents are at variance therewith, the Contractor shall promptly notify the Architect and Owner in writing, and necessary changes shall be accomplished by appropriate Modification.

3.7.4    If the Contractor performs Work knowing it to be contrary to laws, statutes, ordinances, building codes, and rules and regulations without such notice to the Architect and Owner, the Contractor shall assume full responsibility for such Work and shall bear the attributable costs.

3.8     ALLOWANCES

3.8.1    The Contractor shall include in the Contract Sum all allowances stated in the Contract Documents. Items covered by allowances shall be supplied for such amounts and by such persons or entities as the Owner may direct, but the Contractor shall not be required to employ persons or entities against which the Contractor makes reasonable objection.

3.8.2    Unless otherwise provided in the Contract Documents:

.1

materials and equipment under an allowance shall be selected promptly by the Owner to avoid delay in the Work;



.2

allowances shall cover the cost to the Contractor of materials and equipment delivered at the site and all required taxes, less applicable trade discounts;



.3

Contractor's costs for unloading and handling at the site, labor, installation costs, overhead, profit and other expenses contemplated for stated allowance amounts shall be included in the Contract Sum and not in the allowances;



.4

whenever costs are more than or less than allowances, the Contract Sum shall be adjusted accordingly by Change Order. The amount of the Change Order shall reflect (1) the difference between actual costs and the allowances under Clause 3.8.2.2 and (2) changes in Contractor's costs under Clause 3.8.2.3.

3.9     SUPERINTENDENT

3.9.1    The Contractor shall employ a competent superintendent and necessary assistants who shall be in attendance at the Project site during performance of the Work. The superintendent shall represent the Contractor, and communications given to the superintendent shall be as binding as if given to the Contractor. Important communications shall be confirmed in writing. Other communications shall be similarly confirmed on written request in each case.

3.10    CONTRACTOR'S CONSTRUCTION SCHEDULES

3.10.1   The Contractor, promptly after being awarded the Contract, shall prepare and submit for the Owner's and Architect's information a Contractor's construction schedule for the Work. The schedule shall not exceed time limits current under the Contract Documents, shall be revised at appropriate intervals as required by the conditions of the Work and Project, shall be related to the entire Project to the extent required by the Contract Documents, and shall provide for expeditious and practicable execution of the Work.

3.10.2   The Contractor shall prepare and keep current, for the Architect's approval, a schedule of submittals which is coordinated with the Contractor's construction schedule and allows the Architect reasonable time to review submittals.

3.10.3   The Contractor shall conform to the most recent schedules.

3.11    DOCUMENTS AND SAMPLES AT THE SITE

3.11.1   The Contractor shall maintain at the site for the Owner one record copy of the Drawings, Specifications, addenda, Change Orders and other Modifications, in good order and marked currently to record changes and selections made during construction, and in addition approved Shop Drawings, Product Data, Samples and similar required submittals. These shall be available to the Architect and shall be delivered to the Architect for submittal to the Owner upon completion of the Work.

3.12    SHOP DRAWINGS, PRODUCT DATA AND SAMPLES

3.12.1   Shop Drawings are drawings, diagrams, schedules and other data specially prepared for the Work by the Contractor or a Subcontractor, Sub-subcontractor, manufacturer, supplier or distributor to illustrate some portion of the Work.

3.12.2   Product Data are illustrations, standard schedules, performance charts, instructions, brochures, diagrams and other information furnished by the Contractor to illustrate materials or equipment for some portion of the Work.

3.12.3   Samples are physical examples which illustrate materials, equipment or workmanship and establish standards by which the Work will be judged.

3.12.4   Shop Drawings, Product Data, Samples and similar submittals are not Contract Documents. The purpose of their submittal is to demonstrate for those portions of the Work for which submittals are required the way the Contractor proposes to conform to the information given and the design concept expressed in the Contract Documents. Review by the Architect is subject to the limitations of Subparagraph 4.2.7.

3.12.5   The Contractor shall review, approve and submit to the Architect and Owner Shop Drawings, Product Data, Samples and similar submittals required by the Contract Documents with reasonable promptness and in such sequence as to cause no delay in the Work or in the activities of the Owner or of separate contractors. Submittals made by the Contractor which are not required by the Contract Documents may be returned without action.

3.12.6   The Contractor shall perform no portion of the Work requiring submittal and review of Shop Drawings, Product Data, Samples or similar submittals until the respective submittal has been approved by the Architect. Such Work shall be in accordance with approved submittals.

3.12.7   By approving and submitting Shop Drawings, Product Data, Samples and similar submittals, the Contractor represents that the Contractor has determined and verified materials, field measurements and field construction criteria related thereto, or will do so, and has checked and coordinated the information contained within such submittals with the requirements of the Work and of the Contract Documents.

3.12.8   The Contractor shall not be relieved of responsibility for deviations from requirements of the Contract Documents by the Architect's approval of Shop Drawings, Product Data, Samples or similar submittals unless the Contractor has specifically informed the Architect in writing of such deviation at the time of submittal and the Architect has given written approval to the specific deviation. The Contractor shall not be relieved of responsibility for errors or omissions in Shop Drawings, Product Data, Samples or similar submittals by the Architect's approval thereof.

3.12.9   The Contractor shall direct specific attention, in writing or on resubmitted Shop Drawings, Product Data, Samples or similar submittals, to revisions other than those requested by the Architect on previous submittals.

3.12.10  Informational submittals upon which the Architect is not expected to take responsive action may be so identified in the Contract Documents.

3.12.11  When professional certification of performance criteria of materials, systems or equipment is required by the Contract Documents, the Architect shall be entitled to rely upon the accuracy and completeness of such calculations and certifications.

3.13    USE OF SITE

3.13.1   The Contractor shall confine operations at the site to areas permitted by law, ordinances, permits and the Contract Documents and shall not unreasonably encumber the site with materials or equipment.

3.14    CUTTING AND PATCHING

3.14.1   The Contractor shall be responsible for cutting, fitting or patching required to complete the Work or to make its parts fit together properly.

3.14.2   The Contractor shall not damage or endanger a portion of the Work or fully or partially completed construction of the Owner or separate contractors by cutting, patching or otherwise altering such construction, or by excavation. The Contractor shall not cut or otherwise alter such construction by the Owner or a separate contractor except with written consent of the Owner and of such separate contractor; such consent shall not be unreasonably withheld. The Contractor shall not unreasonably withhold from the Owner or a separate contractor the Contractor's consent to cutting or otherwise altering the Work.

3.15    CLEANING UP

3.15.1   The Contractor shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Contract. At completion of the Work the Contractor shall remove from and about the Project waste materials, rubbish, the Contractor's tools, construction equipment, machinery and surplus materials.

3.15.2   If the Contractor fails to clean up as provided in the Contract Documents, the Owner may do so and the cost thereof shall be charged to the Contractor.

3.16    ACCESS TO WORK

3.16.1   The Contractor shall provide the Owner and Architect access to the Work in preparation and progress wherever located.

3.17    ROYALTIES AND PATENTS

3.17.1   The Contractor shall pay all royalties and license fees. The Contractor shall defend suits or claims for infringement of patent rights and shall hold the Owner, Owner's Lessor (if any) at the project, and Architect harmless from loss on account thereof, but shall not be responsible for such defense or loss when a particular design, process or product of a particular manufacturer or manufacturers "is based upon activity for which the contractor is not responsible and which arises due to the contractor's compliance with the Owner's instructions or the plans and specifications issued by the Architect. If any such contractor created design, process or product is prohibited from use by injunction, the contractor shall, either procure the right to use such design, process or product, or replace such design, process or product with a non-infringing type, or accept the return of such design, process or product and grant the Owner a refund or credit."

3.18    INDEMNIFICATION

3.18.1   SEE ADDENDUM #1.

3.18.2   In claims against any person or entity indemnified under this Paragraph 3.18 by an employee of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Paragraph 3.18 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Contractor or a Subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts.

3.18.3   The obligations of the Contractor under this Paragraph 3.18 shall not extend to the liability of the Architect, the Architect's consultants, and agents and employees of any of them arising out of (1) the preparation or approval of maps, drawings, opinions, reports, surveys, Change Orders, designs or specifications, or (2) the giving of or the failure to give directions or instructions by the Architect, the Architect's consultants, and agents and employees of any of them provided such giving or failure to give is the primary cause of the injury or damage.

ARTICLE 4
ADMINISTRATION OF THE CONTRACT

4.1     ARCHITECT

4.1.1    The Architect is the person lawfully licensed to practice architecture or an entity lawfully practicing architecture identified as such in the Agreement and is referred to throughout the Contract Documents as if singular in number. The term "Architect" means the Architect or the Architect's authorized representative.

4.1.2    Duties, responsibilities and limitations of authority of the Architect as set forth in the Contract Documents shall not be restricted, modified or extended without written consent of the Owner, Contractor and Architect. Consent shall not be unreasonably withheld.

4.1.3    In case of termination of employment of the Architect, the Owner shall appoint an architect against whom the Contractor makes no reasonable objection and whose status under the Contract Documents shall be that of the former architect.

4.1.4    Disputes arising under Subparagraphs 4.1.2 and 4.1.3 shall be subject to arbitration.

4.2     ARCHITECT'S ADMINISTRATION OF THE CONTRACT

4.2.1    The Architect will provide administration of the Contract as described in the Contract Documents, and will be the Owner's representative (1) during construction, (2) until final payment is due and (3) with the Owner's concurrence, from time to time during the correction period described in Paragraph 12.2. The Architect will advise and consult with the Owner. The Architect will have authority to act on behalf of the Owner only to the extent provided in the Contract Documents, unless otherwise modified by written instrument in accordance with other provisions of the Contract.

4.2.2    The Architect will visit the site at intervals appropriate to the stage of construction to become generally familiar with the progress and quality of the completed Work and to determine in general if the Work is being performed in a manner indicating that the Work, when completed, will be in accordance with the Contract Documents. However, the Architect will not be required to make exhaustive or continuous on-site inspections to check quality or quantity of the Work. On the basis of on-site observations as an architect, the Architect will keep the Owner informed of progress of the Work, and will endeavor to guard the Owner against defects and deficiencies in the Work.

4.2.3    The Architect will not have control over or charge of and will not be responsible for construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, since these are solely the Contractor's responsibility as provided in Paragraph 3.3. The Architect will not be responsible for the Contractor's failure to carry out the Work in accordance with the Contract Documents. The Architect will not have control over or charge of and will not be responsible for acts or omissions of the Contractor, Subcontractors, or their agents or employees, or of any other persons performing portions of the Work.

4.2.4Communications Facilitating Contract Administration. Except as otherwise provided in the Contract Documents or when direct communications have been specially authorized, the Owner and Contractor shall to communicate directly with each other and promptly providing copies of all of their communication to the Architect. Communications by and with Subcontractors and material suppliers shall be through the Contractor. Communications by and with separate contractors shall be through the Owner.

4.2.5

4.2.6    The Architect and Owner will have authority to reject Work which does not conform to the Contract Documents. Whenever the Owner or Architect considers it necessary or advisable for implementation of the intent of the Contract Documents, the Owner and Architect will have authority to require additional inspection or testing of the Work in accordance with Subparagraphs 13.5.2 and 13.5.3, whether or not such Work is fabricated, installed or completed. However, neither this authority of the Owner and Architect nor a decision made in good faith either to exercise or not to exercise such authority shall give rise to a duty or responsibility of the Owner and Architect to the Contractor, Subcontractors, material and equipment suppliers, their agents or employees, or other persons performing portions of the Work.

4.2.7    The Architect will review and approve or take other appropriate action upon the Contractor's submittals such as Shop Drawings, Product Data and Samples, but only for the limited purpose of checking for conformance with information given and the design concept expressed in the Contract Documents. The Architect's action will be taken with such reasonable promptness as to cause no delay in the Work or in the activities of the Owner, Contractor or separate contractors, while allowing sufficient time in the Architect's professional judgment to permit adequate review. Review of such submittals is not conducted for the purpose of determining the accuracy and completeness of other details such as dimensions and quantities, or for substantiating instructions for installation or performance of equipment or systems, all of which remain the responsibility of the Contractor as required by the Contract Documents. The Architect's review of the Contractor's submittals shall not relieve the Contractor of the obligations under Paragraphs 3.3, 3.5 and 3.12. The Architect's review shall not constitute approval of safety precautions or, unless otherwise specifically stated by the Architect, of any construction means, methods, techniques, sequences or procedures. The Architect's approval of a specific item shall not indicate approval of an assembly of which the item is a component.

4.2.8    The Architect will prepare Change Orders and Construction Change Directives, and may authorize minor changes in the Work as provided in Paragraph 7.4.

4.2.9    The Architect will conduct inspections to determine the date or dates of Substantial Completion and the date of final completion, will receive and forward to the Owner for the Owner's review and records written warranties and related documents required by the Contract and assembled by the Contractor, upon compliance with the requirements of the Contract Documents.

4.2.10   If the Owner and Architect agree, the Architect will provide one or more project representatives to assist in carrying out the Architect's responsibilities at the site. The duties, responsibilities and limitations of authority of such project representatives shall be as set forth in an exhibit to be incorporated in the Contract Documents.

4.2.11   The Architect will interpret and decide matters concerning performance under and requirements of the Contract Documents on written request of either the Owner or Contractor. The Architect's response to such requests will be made with reasonable promptness and within any time limits agreed upon. If no agreement is made concerning the time within which interpretations required of the Architect shall be furnished in compliance with this Paragraph 4.2, then delay shall not be recognized on account of failure by the Architect to furnish such interpretations until 15 days after written request is made for them.

4.2.12   Interpretations and decisions of the Architect will be consistent with the intent of and reasonably inferable from the Contract Documents and will be in writing or in the form of drawings. When making such interpretations and decisions, the Architect will endeavor to secure faithful performance by both Owner and Contractor, will not show partiality to either and will not be liable for ADDENDUM #1.

4.2.13   The Architect's and/or Owner's decisions on matters relating to aesthetic effect will be final if consistent with the intent expressed in the Contract Documents.

4.3     CLAIMS AND DISPUTES

4.3.1Definition. A Claim is a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms, payment of money, extension of time or other relief with respect to the terms of the contract. The term "Claim" also includes other disputes and matters in question between the Owner and the Contractor arising out of or relating to the Contract. Claims must be made by written notice. The responsibility to substantiate Claims shall rest with the party making the Claim.

4.3.2Decision of Architect. Claims, including those alleging an error or omission by the Architect, shall be referred initially to the Architect for action as provided in Paragraph 4.4. A decision by the Architect, as provided in Subparagraph 4.4.4, shall be required as a condition precedent to arbitration or litigation of a Claim between the contractor and Owner as to all such matters arising prior to the date final payment is due, regardless of (1) whether such matters relate to execution and progress of the Work or (2) the extent to which the Work has been completed. The decision by the Architect in response to a Claim shall not be a condition precedent to arbitration or litigation in the event (1) the position of the Architect is vacant, (2) the Architect has not received evidence or has failed to render a decision within agreed time limits, (3) the Architect has failed to take action required under Subparagraph 4.4.4 within 30 days after the Claim is made, (4) 45 days have passed after the Claim has been referred to the Architect or (5) the Claim relates to a mechanic's lien.

4.3.3Time Limits on Claims. Claims by either party must be made within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later. Claims must be made by written notice. An additional claim made after the initial claim has been implemented by Change Order will not be considered unless submitted in a timely manner.

4.3.4Continuing Contract Performance. Pending final resolutions of a Claim including arbitration, unless otherwise agreed in writing the Contractor shall proceed diligently with performance of the Contract and the Owner shall continue to make payments in accordance with the Contract Documents.

4.3.5Waiver of Claims; Final Payment. The making of final payment shall constitute a waiver of Claims by the Owner except those arising from:

.1

liens, Claims, security interests or encumbrances arising out of the Contract and unsettled;



.2

failure of the Work to comply with the requirements of the Contract Documents; or



.3

terms of special warranties required by the Contract Documents.

4.3.6Claims for Concealed or Unknown Conditions.  If conditions are encountered at the site which are (1) subsurface or otherwise concealed physical conditions which differ materially from those indicated in the Contract Documents or (2) unknown physical conditions of an unusual nature, which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents, then notice by the observing party shall be given to the other party promptly before conditions are disturbed and in no event later than 21 days after first observance of the conditions. The Architect will promptly investigate such conditions and, if they differ materially and cause an increase or decrease in the Contractor's cost of, or time required for, performance of any part of the Work, will recommend an equitable adjustment in the Contract Sum or Contract Time, or both. If the Architect determines that the conditions at the site are not materially different from those indicated in the Contract Documents and that no change in the terms of the Contract is justified, the Architect shall so notify the Owner and Contractor in writing, stating the reasons. Claims by either party in opposition to such determination must be made within 21 days after the Architect has given notice of the decision.

4.3.7Claims for Additional Cost.  If the Contractor wishes to make Claim for an increase in the Contract Sum, written notice as provided herein shall be given before proceeding to execute the Work. Prior notice is not required for Claims relating to an emergency endangering life or property arising under Paragraph 10.3. If the Contractor believes additional cost is involved for reasons including but not limited to (1) a written interpretation from the Architect (2) an order by the Owner to stop the Work where the Contractor was not at fault, (3) a written order for a minor change in the Work issued by the Architect, (4) failure of payment by the Owner, (5) termination of the Contract by the Owner, (6) Owner's suspension or (7) other reasonable grounds. Claim shall be filed in accordance with the procedure established herein.

4.3.8    Claims for Additional Time

4.3.8.1  If the Contractor wishes to make Claim for all increase in the Contract Time, written notice as provided herein shall be given. The Contractor's Claim shall include an estimate of cost and of probable effect of delay on progress of the Work. In the case of a continuing delay only one Claim is necessary.

4.3.8.2  If adverse weather conditions are the basis for a claim for additional time, such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time and could not have been reasonably anticipated, and that weather conditions had an adverse effect on the scheduled construction.

4.3.9Injury or Damage to Person or Property.  If either party to the Contract suffers injury or damage to person or property because of an act or omission of the other party, of any of the other party's employees or agents, or of others for whose acts such party is legally liable, written notice of such injury or damage, whether or not insured, shall be given to the other party within a reasonable time no exceeding 21 days after first observance. The notice shall provide sufficient detail to enable the other party to investigate the matter. if a Claim for additional cost or time related to this Claim is to be asserted, it shall be filed as provided in Subparagraphs 4.3.7 or 4.3.8.

4.4     RESOLUTION OF CLAIMS AND DISPUTES

4.4.1    The Architect will review Claims and take one or more of the following preliminary actions within ten days of receipt of a Claim: (1) request additional supporting data from the claimant, (2) submit a schedule to the parties indicating when the Architect expects to take action, (3)reject the Claim in whole or in part stating reasons for rejection, 94) recommend approval of the Claim by the other party or (5) suggest a compromise. The Architect may also, but is not obligated to, notify the surety, if any, of the nature and amount of the Claim.

4.4.2    If a Claim has been resolved, the Architect will prepare or obtain appropriate documentation.

4.4.3    If a Claim has not been resolved, the party making the Claim shall, within ten days after the Architect's preliminary response, take one or more of the following actions: (1) submit additional supporting data requested by the Architect, (2) modify the initial Claim or (3) notify the Architect that the initial Claim stands.

4.4.4    If a Claim has not been resolved after consideration of the foregoing and of further evidence presented by the parties or requested by the Architect, the Architect will notify the parties in writing that the Architect's decision will be made within seven days, which decision shall be final and handing on the parties but subject to arbitration. Upon expiration of such time period, the Architect will render to the parties the Architect's written decision relative to the Claim, including any change in the Contract Sum or Contract Time or both. If there is a surety and there appears to be a possibility of a Contractor's default, the Architect may, but is not obligated to, notify the surety and request the surety's assistance in resolving the controversy.

4.5     ARBITRATION

4.5.1Controversies and Claims Subject to Arbitration.  Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction industry Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof, except controversies or Claims relating to aesthetic effect and except those waived as provided for in Subparagraph 4.3.5. Such controversies or Claims upon which the Architect has given notice and rendered a decision as provided in Subparagraph 4.4.4 shall be subject to arbitration upon written demand of either party. Arbitration may be commenced when 45 days have passed after a Claim has been referred to the Architect as provided in Paragraph 4.3 and no decision has been rendered.

4.5.2Rules and Notices for Arbitration.  Claims between the Owner and contractor not resolved under Paragraph 4.4 shall, if subject to arbitration under Subparagraph 4.5.1, be decided be arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect, unless the parties mutually agree otherwise. Notice of demand for arbitration shall be filed in writing with the other party to the Agreement between the Owner and Contractor and with the American Arbitration Association, and a copy shall be filed with the Architect *SEE ADDENDUM #1.

4.5.3Contact Performance During Arbitration.  During arbitration proceedings, the Owner and Contractor shall comply with Subparagraph 4.3.4.

4.5.4When Arbitration May Be Demanded.  Demand for arbitration of any Claim may not be made until the earlier of (1) the date on which the Architect has rendered a final written decision on the Claim, (2) the tenth day after the parties have presented evidence to the Architect or have been given reasonable opportunity to do so, if the Architect has not rendered a final written decision by that date, or (3) any of the five events described in Subparagraph 4.3.2.

4.5.4.1  When a written decision of the Architect states that (1) the decision is final but subject to arbitration and (2) a demand for arbitration of a Claim covered by such decision must be made within 30 days after the date on which the party making the demand receives the final written decision, then failure to demand arbitration within said 30 days' period shall result in the Architect's decision becoming final and binding upon the Owner and Contractor. If the Architect renders a decision after arbitration proceedings have been initiated, such decision may be entered as evidence, but shall not supersede arbitration proceedings unless the decision is acceptable to all parties concerned.

4.5.4.2  A demand for arbitration shall be made within the time limits specified in Subparagraphs 4.5.1 and 4.5.4 and Clause 4.5.4.1 as applicable, and in other cases within a reasonable time after the Claim has arisen, and in no event shall it be made after the date when institution of legal or equitable proceedings based on such Claim would be barred by the applicable statute of limitations as determined pursuant to Paragraph 13.7.

4.5.5Limitation on Consolidation of Joinder.  *SEE ADDENDUM #1. Consent to arbitration involving an additional person or entity shall not constitute consent to arbitration of a dispute not described therein or with a person or entity not named or described therein. The foregoing agreement to arbitrate with an additional person or entity duly consented to by parties to the Agreement shall be specifically enforceable under applicable law in any court having jurisdiction thereof.

4.5.6Claims and Timely Assertion of Claims.  A party who files a notice of demand for arbitration must assert in the demand all Claims then known to that party on which arbitration is permitted to be demanded. When a party fails to include a Claim through oversight, inadvertence or excusable neglect, or when a Claim has matured or been acquired subsequently, the arbitrator or arbitrators may permit amendment.

4.5.7Judgment on Final Award.  The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.

ARTICLE 5
SUBCONTRACTORS

5.1     DEFINITIONS

5.1.1.   A Subcontractor is a person or entity who has a direct contract with the Contractor to perform a portion of the Work at the site, The term "Subcontractor" is referred to throughout the Contract Documents as if singular in number and means a Subcontractor or an authorized representative of the Subcontractor. The term "Subcontractor" does not include a separate contractor or subcontractors of a separate contractor.

5.1.2    A Subcontractor is a person or entity who has a direct or indirect contract with a Subcontractor to perform a portion of the Work at the site, The term "Sub-subcontractor" is referred to throughout the Contract Documents as if singular in number and means a Sub-subcontractor or an authorized representative of the Sub-subcontractor.

5.2     AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK

5.2.1    Unless otherwise stated in the Contract Documents or the bidding requirements, the Contractor, as soon as practicable after award of the Contract, shall furnish in writing to the Owner with a copy to the Architect the names of persons or entities (including those who are to furnish materials or equipment fabricated to a special design) proposed for each principal portion of the Work. The Architect will promptly reply to the Contractor in writing stating whether or not the Owner or the Architect, after due investigation, has reasonable objection to any such proposed person or entity. Failure of the Owner or Architect to reply promptly shall constitute notice of no reasonable objection.

5.2.2.   The Contractor shall no contract with a proposed person or entity to whom the Owner or Architect has made reasonable and timely objection. The Contractor shall not be required to contract with anyone to whom the Contractor has made reasonable objection.

5.2.3    If the Owner or Architect has reasonable objection to a person or entity proposed by the Contractor, the Contractor shall proposed another to whom the Owner or Architect has no reasonable objection. The Contract Sum shall be increased or decreased by the difference in cost occasioned by such change and an appropriate Change Order shall be issued. However, no increase in the Contract Sum shall be allowed for such change unless the Contractor has acted promptly and responsively in submitting names as required.

5.2.4    The Contractor shall not change a Subcontractor, person or entity previously selected if the Owner or Architect makes reasonable objection to such change.

5.3     SUBCONTRACTUAL RELATIONS

5.3.1    By appropriate agreement, written where legally required for validity, the Contractor shall require each Subcontractor, to be bound to the Contractor by terms of the Contract Documents, and to assume toward the Contractor all the obligations and responsibilities which the Contractor, by these Documents, assumes towards the Owner and Architect. Each subcontract agreement shall preserve and protect the rights of the Owner and Architect under the Contract Documents with respect to the Work to be performed by the Subcontractor so that subcontracting thereof will not prejudice such rights, and shall allow to the Subcontractor, unless specifically provided otherwise in the subcontract agreement, the benefit of all rights, remedies and redress against the Contractors that the Contractor, by the Contract Documents, has against the Owner. Where appropriate, the Contractor shall require each Subcontractor to enter into similar agreements with Sub-subcontractors. The Contractor shall make available to each proposed Subcontractor, prior to the execution of the subcontract agreement, copies of the Contract Documents to which the Subcontractor will be bound, and, upon written request of the Subcontractor, identify to the Subcontractor terms and conditions of the proposed subcontractor agreement which may be at variance with the Contract Documents. Subcontractors shall similarly make copies of applicable portions of such documents available to their respective proposed Sub-subcontractors. Owner will expect that contractors comply with specific requirements related to change order documents and pricing, and the right of audit provisions which will apply to all levels of contractors. Except for all sub-contractors contracted under a lump-sum contract basis.

5.4     CONTINGENT ASSIGNMENT OF SUBCONTRACTS

5.4.1    Each subcontract agreement for a portion of the Work is assigned by the Contractor to the Owner provided that:

.1

assignment is effective only after termination of the Contract by the Owner for cause pursuant to Paragraph 14.2 and only for those subcontract agreements which the Owner accepts by notifying the Subcontractor in writing; and



.2

assignment is subject to the prior rights of the surety, if any, obligated under bond relating to the Contract.

5.4.2.   If the Work has been suspended for more than 30 days, the Subcontractor's compensation shall be equitably adjusted.

ARTICLE 6
CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS

6.1     OWNERS RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS

6.1.1    The Owner reserves the right to perform construction or operations related to the Project with the Owner's own forces, and to award separate contracts in connection with other portions of the Project or other construction or operations on the site under Conditions of the Contract identical or substantially similar to these including those portions related to insurance and waiver of subrogation. If the Contractor claims that delay or additional cost is involved because of such action by the Owner, the Contractor shall make such Claim as provided elsewhere in the Contract Documents.

6.1.2    When separate contracts are awarded for different portions of the Project or other construction or operations on the site, the term "Contractor" in the Contract Documents in each case shall mean the Contractor who executes each separate Owner-Contractor Agreement.

6.1.3    The Owner shall provide for coordination of the activities of the Owner's own forces and of each separate contractor with the Work of the Contractor, who shall cooperate with the. The Contractor shall participate with other separate contractors and the Owner in reviewing their construction schedules when directed to do so. The Contractor shall make any revisions to the construction schedule and Contract Sum deemed necessary after a joint review and mutual agreement. The construction schedules shall then constitute the schedules to be used by the Contractor, separate contractors and the Owner until subsequently revised.

6.1.4    Unless otherwise provided in the Contract Documents, when the Owner performs construction of operations related to the Project with the Owner's own forces, the Owner shall be deemed to be subject to the same obligations and to have the same rights which apply to the Contractor under the Conditions of the Contract, including, without excluding others, those stated in Article 3, this Article 6 and Articles 10, 11 and 12.

6.2     MUTUAL RESPONSIBILITY

6.2.1    The Contractor shall afford the Owner and separate contractors reasonable opportunity for introduction and storage of their materials and equipment and performance of their activities and shall connect and coordinate the Contractor's construction and operations with theirs as required by the Contract Documents.

6.2.2    If part of the Contractor's Work depends for proper execution or results upon construction or operations by the Owner or a separate contractor, the Contractor shall, prior to proceeding with that portion of the Work, promptly report to the Owner and Architect apparent discrepancies or defects in such other construction that would render it unsuitable for such proper execution and results. Failure of the Contractor so to report shall constitute an acknowledgement that the Owner's or separate contractors' completed or partially completed construction is fit and proper to receive the Contractor's Work, except as to defects not then reasonably discoverable.

6.2.3    Costs caused by delays or by improperly time activities or defective construction shall be borne by the party responsible therefor.

6.2.4    The Contractor shall promptly remedy damage wrongfully caused by the Contractor to completed or partially completed construction or to property of the Owner or separate contractors as provided in Subparagraph 10.2.5.

6.2.5    Claims and other disputes and matters in question between the Contractor and a separate contractor shall be subject to the provisions of Paragraph 4.3 provided the separate contractor has reciprocal obligations.

6.2.6    The Owner and each separate contractor shall have the same responsibilities for cutting and patching as are described for the Contractor in Paragraph 3.14.

6.3     OWNER'S RIGHT TO CLEAN UP

6.3.1    If a dispute arises among the Contractor, separate contractors and the Owner as to the responsibility under their respective contracts for maintaining the premises and surrounding area free from waste materials and rubbish as described in Paragraph 3.15, the Owner may clean up and allocate the cost among those responsible.

ARTICLE 7
CHANGES IN THE WORK

7.1     CHANGES

7.1.1    Changes in the Work may be accomplished after execution of the Contract, and without invalidating the Contract, by Change Order, Construction Change Directive or order for a minor change in the Work, subject to the limitations stated in this Article 7 and elsewhere in the Contract Documents.

7.1.2    A Change Order shall be based upon agreement among the Owner, and Contractor.

7.1.3.   Changes in the Work shall be performed under applicable provisions of the Contract Documents, and the Contractor shall proceed promptly, unless otherwise provided in the Change Order, Construction Change Directive or order for a minor change in the Work.

7.1.4.   If unit prices are stated in the Contract Documents or subsequently agreed upon, and if quantities originally contemplated are so changed in a proposed Change Order or Construction Change Directive that application of such until prices to quantities of Work proposed will cause substantial inequity to the Owner or Contractor, the applicable unit prices shall be equitably adjusted.

7.2     CHANGE ORDERS

7.2.1.   A Change Order is a written instrument prepared by the Owner or the Contractor and signed by the Owner, and Contractor, stating their agreement upon all of the following:

.1

a change in the Work;



.2

the amount of the adjustment in the Contract Sum, if any, and;



.3

the extent of the adjustment in the Contract Time, if any.

7.2.2.   Methods used in determining adjustments to the Contract Sum may include those listed in Subparagraph 7.3.3

7.3     CONSTRUCTION CHANGE DIRECTIVES

7.3.1    A Construction Change Directive is a written order prepared by the Architect and signed by the Owner and Architect, directing a change in the Work and stating a proposed basis for adjustments, if any, in the Contract Sum, or Contract Time, or both. The Owner may be Construction Change Directive, without invalidating the Contract, order changes in the Work within the general scope of the Contract consisting of additions, deletions or other revisions, the Contract Sum and Contract Time being adjusted accordingly.

7.3.2.   A Construction Change Directive shall be used in the absence of total agreement on the terms of a Change ORder.

7.3.3.   If the Construction Change Directive provides for an adjustment to the Contract Sum, the adjustment shall be based on one of the following methods:

.1

mutual acceptance of a lump sum properly itemized and supported by sufficient substantiating data to permit evaluation;



.2

unit prices stated in the Contract Documents or subsequently agreed upon;



.3

cost to be determined in a manner agreed upon by the parties and a mutually acceptable fixed or percentage fee; or



.4

as provided in Subparagraph 7.3.6.

7.3.4.   Upon receipt of a Construction Change Directive, the Contractor shall promptly proceed with the change in the Work involved and advise the Owner and Architect of the Contractor's agreement or disagreement with the method, if any, provided in the Construction Change Directive for determining the proposed adjustment in the Contract Sum or Contract Time.

7.3.5.   A Constructions Change Directive signed by the Contractor indicates the agreement of the Contractor therewith, including adjustment in Contract Sum and Contract Time or the method for determining them. Such agreement shall be effective immediately and shall be recorded as a Change Order.

7.3.6.   If the Contractor does not respond promptly or disagrees with the method for adjustment in the Contract Sum, the method and the adjustment shall be determined by the Architect on the basis of reasonable expenditures and savings of those performing the Work attributable to the change, including, in case of an increase in the Contract Sum, a reasonable allowance for overhead and profit. In such case, and also under Clause 7.3.3.3, the Contractor shall keep and present, in such form as the Owner of Architect may prescribe, an itemized accounting together with appropriate supporting data. Unless otherwise provided to the Contract Documents, costs for the purposes of this Subparagraph 7.3.6 shall be limited to the following:

.1

costs of labor, including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and workers' or workmen's compensation insurance.



.2

costs of materials, supplies and equipment, including cost of transportation, whether incorporated or consumed;



.3

rental costs of machinery and equipment, exclusive of hand tools, whether rented from the Contractor or others;



.4

costs of premiums for all bonds and insurance, permit fees, and sales permit fees, and sales, use or similar taxes related to the Work; and



.5

additional costs of supervisions and field office personnel directly attributable to the change.

7.3.7.   Pending final determination of cost to the Owner, amounts not in dispute may be included in Applications for Payment. The amount of credit to be allowed by the Contractor to the Owner for a deletion or change which results in a net decrease in the Contract Sum shall be actual net cost as agreed to by the parties. When both additions and credits covering related Work or substitutions are involved in a change, the allowance for overhead and profit shall be figured on the basis of net increase, if any, with, respect to that change.

7.3.8.   If the Owner and Contractor do not agree with the adjustment in Contract Time or the method for determining it, the adjustment or the method at the Owner's discretions be referred to the Architect for determination.

7.3.9.   When the Owner and Contractor agree concerning the adjustments in the Contract Sum and Contract Time, or otherwise reach agreement upon the adjustments, such agreement shall be effective immediately and shall be recorded by preparation and execution of an appropriate Change Order.

7.4     MINOR CHANGES IN THE WORK

7.4.1.   The Architect will have authority to order minor changes in the Work not involving adjustment in the Contract Sum or extension of the Contract Time and no inconsistent with the intent of the Contract Documents. Such changes shall be effected by written order and shall be binding on the Owner and Contractor. The Contractor shall carry out such written orders promptly.

ARTICLE 8
TIME

8.1     DEFINITIONS

8.1.1.   Unless otherwise provided, Contract Time is the period of time, including authorized adjustments, allotted in the Contract Documents for Substantial Completion of the Work.

8.1.2.   The date of commencement of the Work is the date established in the Agreement. The date shall not be postponed by the failure to act of the Contractor or of persons or entities for whom the Contractor is responsible.

8.1.3.   The date of Substantial Completion is the date certified by the Architect in accordance with Paragraph 9.8.

8.1.4.   The term "day" as used in the Contract Documents shall mean calendar day unless otherwise specifically defined.

8.2.     PROGRESS AND COMPLETION

8.2.1.   Time limits stated in the Contract Documents are of the essence of the Contract. By executing the Agreement the Contractor confirms that the contract Time is a reasonable period for performing the Work.

8.2.2.   The Contractor shall not knowingly, except by agreement or instruction of the Owner in writing, prematurely commence operations on the site or elsewhere prior to the effective date of insurance required by Article 11 to be furnished by the Contractor. The date of commencement of the Work shall not be changed by the effective date of such insurance. Unless the date of commencement is established by a notice to proceed given by the Owner, the Contractor shall notify the Owner in writing not less than five days or other agreed period before commencing the Work to permit the timely filing of mortgages, mechanic's liens and other security interests.

8.2.3.   The Contractor shall proceed expeditiously with adequate forces and shall achieve Substantial Completion within the Contract Time.

8.3.     DELAYS AND EXTENSIONS OF TIME

8.3.1.   If the Contractor is delayed at any time in progress of the Work by an act or neglect of the Owner or Architect, or of an employee or either, or of a separate contractor employed by the Owner, or by changes ordered in the Work, or by labor disputes, fire, unusual delay in deliveries, unavoidable casualties or other causes beyond the Contractor's control, or by delay authorized by the Owner pending arbitration, then the Contractor Time shall be extended by Change Order for such reasonable time as the Architect may determine.

8.3.2.   Claims relating to time shall be made in accordance with applicable provisions of Paragraph 4.3.

8.3.3.   This Paragraph 8.3 does not preclude recovery of damages for delay by either party under other provisions of the Contract Documents.

ARTICLE 9
PAYMENTS AND COMPLETION

9.1     CONTRACT SUM

9.1.1    The Contract Sum is stated in the Agreement and, including authorized adjustments, is the total amount payable by the Owner to the Contractor for performance of the Work under the Contract Documents.

9.2     SCHEDULE OF VALUES

9.2.1    Before the first Application for Payment, the Contractor shall submit to the Owner and Architect a schedule of values allocated to various portions of the Work, prepared in such form and supported by such data to substantiate its accuracy as the Owner and Architect may require. This schedule, unless objected to by the Owner or Architect, shall be used as a basis for reviewing the Contractor's Applications for Payment.

9.3     APPLICATIONS FOR PAYMENT

9.3.1    At least ten days before the date established for each progress payment, the Contractor shall submit to the Owner an itemized Application for Payment for operations completed in accordance with the schedule of values. Such application shall be notarized, if required, and supported by such data substantiating the Contractor's right to payment as the Owner may require, such as copies of requisitions from Subcontractors and material suppliers, and reflecting retainage if provided for elsewhere in the Contract Documents.

9.3.1.1  Such applications may include requests for payment on account of changes in the Work which have been properly authorized by Construction Change Directives but not yet included in Change Orders.

9.3.1.2  Such applications may not include requests for payment of amounts the Contractor does not intend to pay to a Subcontractor or material supplier because of a dispute or other reason.

9.3.2    Unless otherwise provided in the Contract Documents, payments shall be made on account of materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work. If approved in advance by the Owner, payment may similarly be made for materials and equipment suitably stored off the site at a location agreed upon in writing. Payment for materials and equipment stored on or off the site shall be conditioned upon compliance by the Contractor with procedures satisfactory to the Owner to establish the Owner's title to such materials and equipment or otherwise protect the Owner's interest, and shall include applicable insurance, storage, and transportation to the site for such materials and equipment stored off the site.

9.3.3    The Contractor warrants that title to all Work covered by an Application for Payment will pass to the Owner no later than the time of payment. The Contractor further warrants that upon submittal of an Application for Payment all Work for which Certificates for Payment have been previously issued and payments received from the Owner shall, to the best of the Contractor's knowledge, information and belief, be free and clear of liens, claims, security interests or encumbrances favor of the Contractor, Subcontractors, material suppliers, or other persons or entities making a claim by reason of having provided labor, materials and equipment relating to the Work.

9.4     CERTIFICATES FOR PAYMENT

9.4.1

9.4.2

9.5     DECISIONS TO WITHHOLD CERTIFICATION

9.5.1

9.5.2

9.6     PROGRESS PAYMENTS

9.6.1    the Owner shall make payment in the manner and within the time provided in the Contract Documents.

9.6.2    The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor's portion of the Work, the amount to which said subcontractor is entitled, reflecting percentages actually retained from payments to the Contractor on account of such Subcontractor's portion of the Work. The Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make payments to Sub-contractors in similar manner.

9.6.3

9.6.4    Neither the Owner nor Architect shall have an obligation to pay or to see to the payment of money to a Subcontractor except as may otherwise be required by law.

9.6.5    Payment to material suppliers shall be treated in a manner similar to that provided in Subparagraphs 9.6.2, 9.6.3 and 9.6.4.

9.6.6    A Certificate for Payment, a progress payment, or partial or entire use or occupancy of the Project by the Owner shall not constitute acceptance of Work not in accordance with the Contract Documents.

9.7     FAILURE OF PAYMENT

9.7.1    If through no fault of the Contractor, within fourteen days after receipt of the Contractor's Application for Payment, the Owner does not pay the Contractor the amount requested in the Contractor's Application for payment, then the Contractor may, upon seven additional days' written notice to the Owner and Architect, stop the Work until payment of the amount owing has been received. The Contract Time shall be extended appropriately and the Contract Sum shall be increased by the amount of the Contractor's reasonable costs of shut-down, delay and start-up, which shall be accomplished as provided in Article 7.

9.8     SUBSTANTIAL COMPLETION

9.8.1    Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so the Owner can occupy or utilize the Work for its intended use.

9.8.2    When the Contractor considers that the Work, or a portion thereof which the Owner agrees to accept separately, is substantially complete, the Contractor shall prepare and submit to the Owner and Architect a comprehensive list of items to be completed or corrected. The Contractor shall proceed promptly to complete and correct items on the list. Failure to include an item on such list does not alter the responsibility of the Contractor to complete all Work in accordance with the Contract Documents. Upon receipt of the Contractor's list, the Owner or Architect will make an inspection to determine whether the Work or designated portion thereof is substantially complete. If the Architect's inspection discloses any item, whether or not included on the Contractor's list, which is not in accordance with the requirements of the Contract Documents, the Contractor shall, before issuance of the Certificate of Substantial Completion, complete or correct such item, upon notification by the the Owner or Architect. The Contractor shall then submit a request for another inspection by the Owner or Architect to determine Substantial Completion. When the Work or designated portion thereof is substantially complete, the Architect, if so requested by the Owner will prepare a Certificate of Substantial Completion which shall establish the date or Substantial Completion, shall establish responsibilities of the Owner and Contractor for security, maintenance, beat, utilities, damage to the Work and insurance, and shall fix the time within which the Contractor shall finish all items on the list accompanying the Certificate. Warranties required by the Contract Documents shall commence on the date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Certificate of Substantial Completion. The Certificate of Substantial Completion shall be submitted to the Owner and Contractor for their written acceptance of responsibilities assigned to them in such Certificate.

9.8.3    Upon Substantial Completion of the Work or designated portion thereof and upon application by the Contractor and certification by the Architect, if so requested by the Owner, the Owner shall make payment, reflecting adjustment in retainage, if any, for such Work or portion thereof as provided in the Contract Documents.

9.9     PARTIAL OCCUPANCY OR USE

9.9.1    The Owner may occupy or use any completed or partially completed portion of the Work at any stage when such portion is designated by separate agreement with the Contractor, provided such occupancy or use is consented to by the insurer as required under Subparagraph 11.3.11 and authorized by public authorities having jurisdiction over the Work. Such partial occupancy or use may commence whether or not the portion is substantially complete, provided the Owner and Contractor have accepted in writing the responsibilities assigned to each of them for payments, retainage, if any, security, maintenance, heat, utilities, damage to the Work and insurance, and have agreed in writing concerning the period for correction of the Work and commencement of warranties required by the Contract Documents. When the Contractor considers a portion substantially complete, the Contractor shall prepare and submit a list to the Owner and Architect as provided under Subparagraph 9.8.2. Consent of the Contractor to partial occupancy or use shall not be unreasonably withheld. The stage of the progress of the Work shall be determined by written agreement between the Owner and Contractor or, if no agreement is reached, by decision of the Architect.

9.9.2    Immediately prior to such partial occupancy or use, the Owner, Contractor and Architect shall jointly inspect the area to be occupied or portion of the Work to be used in order to determine and record the condition of the Work.

9.9.3    Unless otherwise agreed upon, partial occupancy or use of a portion or portions of the Work shall not constitute acceptance of Work not complying with the requirements of the Contract Documents.

9.10    FINAL COMPLETION AND FINAL PAYMENT

9.10.1   Upon receipt of written notice that the Work is ready for final inspection and acceptance and upon receipt of a final Application for Payment, the Owner or Architect will promptly make such inspection.

9.10.2   Neither final payment nor any remaining retained percentage shall become due until the Contractor submits to the Owner (1) an affidavit that payrolls, bills for materials and equipment, and other indebtedness connected with the Work for which the Owner or the Owner's property might be responsible or encumbered (less amounts withheld by Owner) have been paid or otherwise satisfied, (2) a certificate evidencing that insurance required by the Contract Documents to remain in force after final payment is currently in effect and will not be cancelled or allowed to expire until at least 30 days' prior written notice has been given to the Owner, (3) a written statement that the Contractor knows of no substantial reason that the insurance will not be renewable to cover the period required by the Contract Documents, (4) consent of surety, if any, to final payment and (5), if required by the Owner, other data establishing payment or satisfaction of obligations, such as receipts, releases and waivers of liens, claims, security interests or encumbrances arising out of the Contract, to the extent and in such form as may be designated by the Owner. If a Subcontractor refuses to furnish a release or waiver required by the Owner, the Contractor may furnish a bond satisfactory to the Owner to indemnify the Owner against such lien. If such lien remains unsatisfied after payments are made, the Contractor shall refund to the Owner all money that the Owner may be compelled to pay in discharging such lien, including all costs and reasonable attorneys' fees.

9.10.3   If, after Substantial Completion of the Work, final completion thereof is materially delayed through no fault of the Contractor or by issuance of Change Orders affecting final completion, and the Architect so confirms, the Owner shall, upon application by the Contractor and without terminating the Contract, make payment of the balance due for that portion of the Work fully completed and accepted. If the remaining balance for Work not fully completed or corrected is less than retainage stipulated in the Contract Documents, and if bonds have been furnished, the written consent of surety to payment of the balance due for that portion of the Work fully completed and accepted shall be submitted by the Contractor to the Owner prior to such payment. Such payment shall be made under terms and conditions governing final payment, except that it shall not constitute a waiver of claims. The making of final payment shall constitute a waiver of claims by the Owner as provided in Subparagraph 4.3.5.

9.10.4   Acceptance of final payment by the Contractor, a Subcontractor or material supplier shall constitute a waiver of claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment. Such waivers shall be in addition to the waiver described in Subparagraph 4.3.5.

ARTICLE 10
PROTECTION OF PERSONS AND PROPERTY

10.1    SAFETY PRECAUTIONS AND PROGRAMS

10.1.1   The Contractor shall be responsible for initiating, maintaining and supervising all safety precautions and programs in connection with the performance of the Contract.

10.1.2   In the event the Contractor encounters on the site material reasonably believed to be asbestos or polychlorinated biphenyl (PCB) which has not been rendered harmless, the Contractor shall immediately stop Work in the area affected and report the condition to the Owner and Architect in writing. The Work in the affected area shall not thereafter be resumed except by written agreement of the Owner and Contractor if in fact that material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered harmless. The Work in the affected area shall be resumed in the absence of asbestos or polychlorinated biphenyl (PCB), or when it has been rendered harmless, by written agreement of the Owner and Contractor, or in accordance with with final determination by the Architect on which arbitration has not been demanded, or by arbitration under Article 4.

10.1.3   The Contractor shall not be required pursuant to Article 7 to perform without consent any Work relating to asbestos or polychlorinated biphenyl (PCB).

10.1.4   To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the Contractor, Architect, Architect's consultants and agents and employees of any of them from and against claims, damages, losses and expenses, including but no limited to attorney's fees, arising out of or resulting from performance of the Work in the affected area if in fact the material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered harmless, provided that such claim damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, but only to the extent caused in whole or in part by negligent acts or omissions of the Owner, anyone directly or indirectly employed by the Owner or anyone for whose acts the Owner may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would other exist as to a party or person described in this Subparagraph 10.1.4.

10.2    SAFETY OF PERSONS AND PROPERTY

10.2.1   The Contractor shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to:

.1

employees on the Work and other persons who may be affected thereby;



.2

the Work and materials and equipment to be incorporated therein, whether in storage on or off the site, under care, custody or control of the Contractor or the Contractor's Subcontractors or Sub-subcontractors; and



.3

other property at the site or adjacent thereto, such as trees, shrubs, lawns, walks, pavements, roadways, structures and utilities not designated for removal, relocation or replacement in the course of construction.

10.2.2   The Contractor shall give notices and comply with applicable laws, ordinances, rules, regulations and lawful orders of public authorizes bearing on safety of persons or property or their protection from damage, injury or loss.

10.2.3   The Contractor shall erect and maintain, as required by existing conditions and performance of the Contract, reasonable safeguards for safety and protection, including posting danger signs and other warnings against hazards, promulgating safety regulations and notifying owners and users of adjacent sites and utilities.

10.2.4   When use or storage of explosives or other hazardous materials or equipment or unusual methods are necessary for execution of the Work, the Contractor shall exercise utmost care and carry on such activities under supervision of properly qualified personnel.

10.2.5   The Contractor shall promptly remedy damage and loss (other than damage or loss insured under property insurance required by the Contract Documents) to property referred to in Clauses 10.2.1.2 and 10.2.1.3 caused in whole or in part by the contractor, a Subcontractor, a Sub-subcontractor, or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable and for which the Contractor is responsible under Clauses 10.2.1.2 and 10.2.1.3, except damage or loss attributable to acts or omissions of the Owner or Architect or anyone directly or indirectly employed by either of them, by anyone for whose acts either of them may be liable, and not attributable to the fault or negligence of the Contractor. The foregoing obligations of the Contractor are in addition to the Contractor's obligations under Paragraph 3.18.

10.2.6   The Contractor shall designate a responsible member of the Contractor's organization at the site whose duty shall be the prevention of accidents. This person shall be the Contractor's superintendent unless otherwise designated by the Contractor in writing to the Owner and Architect.

10.2.7   The Contractor shall not load or permit any part of the construction or site to be loaded so as to endanger its safely.

10.3    EMERGENCIES

10.3.1   In an emergency affecting safety of persons or property, the Contractor shall act, at the Contractor's discretion, to prevent threatened damage, injury or loss. Additional compensation or extension of time claimed by the Contractor on account of an emergency shall be determined as provided in Paragraph 4.3 and Article 7.

ARTICLE 11
INSURANCE AND BONDS

11.1    CONTRACTOR'S LIABILITY INSURANCE

11.1.1   The Contractor shall purchase from and maintain in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located such insurance as will protect the Contractor from claims set forth below which may arise out of or result from the Contractor's operations under the Contract and for which the Contractor may be legally liable, whether such operations be by the Contractor or by a Subcontractor or by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable.

.1

claims under workers' or workmen's compensation, disability benefit and other similar employee benefit acts which are applicable to the Work to be performed;



.2

claims for damages because of bodily injury, occupational sickness or disease, or death of the Contractor's employees;



.3

claims for damages because of bodily injury, sickness or disease, or death of any person other than the Contractor's employees;



.4

claims for damages insured by usual personal injury liability coverage which are sustained (1) by a person as a result of an offense directly or indirectly related to employment of such person by the Contractor, or (2) by another person;



.5

claims for damages, tother than to the Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom:



.6

claims for damages because of bodily injury, death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle; and



.7

claims involving contractual liability insurance applicable to the Contractor's obligations under Paragraph 3.18.

11.1.2   *SEE ADDENDUM #1. Coverages, whether written on an occurrence or claims-made basis, shall be maintained without interruption from date of commencement of the Work until date of final payment and termination of any coverage required to be maintained after final payment.

11.1.3   Certificates of Insurance acceptable to the Owner shall be filed with the Owner prior to commencement of the Work. These Certificates and the insurance policies required by this Paragraph 11.1 shall contain a provision that coverages afforded under the policies will not be reduced, cancelled or allowed to expire until at least 30 days' prior written notice has been given to the Owner by the insurance carrier named in the Certificates. If any of the foregoing insurance coverages are required to remain in force after final payment and are reasonable available, all additional certificate evidencing continuation of such coverage shall be submitted with the final Application for Payment as required by Subparagraph 9.10.2. SEE ADDENDUM #1.

11.2    SEE ADDENDUM #1.

11.2.1   SEE ADDENDUM #1.

11.3    PROPERTY INSURANCE

11.3.1   Unless otherwise provided, the Owner shall purchase and maintain, in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance in the amount of the initial Contract Sum as sell as subsequent modifications thereto for the entire Work at the site on a replacement cost basis without voluntary deductibles. Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in Paragraph 9.10. This insurance shall include interests of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Work. SEE ADDENDUM #1.

11.3.1.1 Property insurance shall be on an all-risk policy form and shall insure against the perils of fire and extended coverage and physical loss or damage including, without duplication of coverage, theft, vandalism, malicious mischief, collapse, false-work, temporary buildings and debris removal, and shall cover reasonable compensation for Architect's services and expenses required as a result of such insured loss. Coverage for other perils shall not be required unless otherwise provided in the Contract Documents.

11.3.1.2 If the Owner does not intend to purchase such property insurance required by the Contract and with all of the coverages in the amount described above, the Owner shall so inform the Contractor in writing prior to commencement of the Work. The Contractor may then effect insurance which will protect the interests of the Contractor, Subcontractors and Sub-subcontractors in the Work, and by appropriate Change Order the cost thereof shall be charged to the Owner. If the Contractor is damaged by the failure or neglect of the Owner to purchase or maintain insurance as described above, without so notifying the Contractor, then the Owner shall bear all reasonable costs properly attributable thereto.

11.3.1.3 If the property insurance requires minimum deductibles and such deductibles are identified in the Contract Documents, the Contractor shall pay costs not covered because of such deductibles. If the Owner or insurer increases the required minimum deductibles above the amounts so identified or if the Owner elects to purchase this insurance with voluntary deductible amounts, the Owner shall be responsible for payment of the additional costs not covered because of such increased or voluntary deductibles. If deductibles are not identified in the Contract Documents, the Owner shall pay costs not covered because of deductibles. The property insurance maintained by the Owner sill have a voluntary deductible of Twenty-Five Thousand dollars ($25,000) per claim. The contractor will be responsible for the first One Thousand dollars($1000) of each such applied deducible the the Owner sill be responsible for costs above the first One Thousand dollars ($1000) up to the deductible amount.

11.3.1.4 Unless otherwise provided in the Contract Documents, this property insurance shall cover portions of the Work stored off the site after written approval of the Owner at the value established in the approval, and also portions of the Work in transit.

11.3.2Boiler and Machinery Insurance. The Owner shall purchase and maintain boiler and machinery insurance required by the Contract Documents or by law, which shall specifically cover such insured objects during installation and until final acceptance by the Owner, this insurance shall include interests of the Owner, Contractor, Subcontractors and Sub-subcontractors in the Work, and the Owner and Costumers shall be named insured.

11.3.3Loss of Use Insurance. The Owner, at the Owner's option, may purchase and maintain such insurance as will insure the Owner against loss of use of the Owner's property due to fire or other hazards, however caused. The Owner waives all rights of action against t the Contractor for loss of use of the Owner's property, including consequential losses due to fire or other perils as described in Article 11.3.1.1.

11.3.4

11.3.5

11.3.6   Before an exposure to loss may occur, the Owner shall file with the Contractor Certificate of Insurance that includes insurance coverages required by this Paragraph 11.3. Each policy shall contain all general applicable conditions, definitions, exclusions and endorsements related to this Project. Each policy shall contain a provision that the policy will not be cancelled or allowed to expire until at least 30 days prior written notice has been given to the Contractor.

11.3.7Waivers of Subrogation. The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub- subcontractors, agents and employees, each of the other, and (2) the Architect, Architect's consultants, separate contractors described in Article 6, if any, and any of their subcontractors, sub-subcontractors, agents and employees, for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by the Owner as fiduciary. The Owner or contractor, as appropriate, shall require of the Architect, Architect's consultants, separate contractors described in Article 6, if any, and the subcontractors, sub-subcontractors, agents and employees of any of them, by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated herein. The policies shall provide such waivers of subrogation by endorsement or otherwise. A waiver of subrogation shall be effective as to a person or entity even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, did not pay the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged.

11.3.8   A loss insured under Owner's property insurance shall be adjusted by the Owner as fiduciary and made payable to the Owner as fiduciary for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause and of Subparagraph 11.3.10. The Contractor shall pay Subcontractors their just shares of insurance proceeds received by the Contractor, and by appropriate agreements, written where legally required for validity, shall require Subcontractors to make payments to their Sub-subcontractors in similar manner.

11.3.9

11.3.10

11.3.11  Partial occupancy or use in accordance with Paragraph 9.9 shall not commence until the insurance company or companies providing property insurance have consented to such partial occupancy or use by endorsement or otherwise. The Owner and the Contractor shall take reasonable steps to obtain consent of the insurance company or companies and shall, without mutual written consent, take no action with respect to partial occupancy or use that would cause cancellation, lapse or reduction of insurance.

11.4    PERFORMANCE BOND AND PAYMENT BOND

11.4.1   The Owner shall have the right to require the Contractor to furnish bonds covering faithful performance of the Contract and payment of obligations arising thereunder as stipulated in bidding requirements or specifically required in the Contract Documents on the date of execution of the Contract.

11.4.2   Upon the request of any person or entity appearing to be a potential beneficiary of bonds covering payment of obligations arising under the Contract, the Contractor shall promptly furnish a copy of the bonds or shall permit a copy to be made.

ARTICLE 12
UNCOVERING AND CORRECTION OF WORK

12.1    UNCOVERING WORK

12.1.1   If a portion of the Work is covered contrary to the Owner's or Architect's request or to requirements specifically expressed in the Contract Documents, it must, if required in writing by the Owner or Architect, be uncovered for the Architect's and Owner's observation and be replaced at the Contractor's expense without change in the Contract Time.

12.1.2   If a portion of the Work has been covered which the Owners or Architect has not specifically requested to observe prior to its being covered, the Owner or Architect may request to see such Work and it shall be uncovered by the Contractor. If such Work is in accordance with the Contract Documents, costs of uncovering and replacement shall, by appropriated Change Order, be charged to the Owner. If such Work is not in accordance with the Contract Documents, the Contractor shall pay such costs unless the condition was caused by the Owner or a separate Contractor in which event the Owner shall be responsible for payment of such costs.

12.2    CORRECTION OF WORK

12.2.1   The Contractor shall promptly correct Work rejected by the Owner of Architect or failing to conform to the requirements of the Contract Documents, whether observed before or after Substantial Completion and whether or not fabricated, installed or completed. The Contractor shall bear costs of correcting such rejected Work, including additional testing and inspections and compensation for the Architect's services and expenses made necessary thereby.

12.2.2   If, within one year after the date of Substantial completion of the Work or designated portion thereof, or after the date for commencement of warranties established under Subparagraph 9.9.1, or by terms of an applicable special warranty required by the Contract Documents, any of the Work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of written notice from the Owner to do so unless the Owner has previously given the Contractor a written acceptance of such condition. This period of time between Substantial completion and the actual performance of the Work. This obligation under this Subparagraph 12.2.2 shall survive acceptance of the Work under the Contract and termination of the Contract. The Owner shall give such notice promptly after discovery of the condition.

12.2.3   The Contractor shall remove from the site portions of the Work which are not in accordance with the requirements of the Contract Documents and are neither corrected by the Contractor nor accepted by the Owner.

12.2.4   If the Contractor fails to correct nonconforming Work within a reasonable time, the Owner may correct it in accordance with Paragraph 2.4. If the Contractor does not proceed with correction of such nonconforming Work within a reasonable time fixed by written notice from the Owner or Architect, the Owner may remove it and store the savable materials or equipment at the Contractor's expense. If the Contractor does not pay costs of such removal and storage within ten days after written notice, the Owner may upon ten additional days' written notice sell such materials and equipment at auction or at private sale and shall account for the proceeds thereof, after deducting costs and damages that should have been borne by the Contractor, including compensation for the Architect's services and expenses made necessary thereby. If such proceeds of sale do not cover costs which the Contractor should have borne, the Contract Sum shall be reduced by the deficiency. If payments then or thereafter due the Contractor are not sufficient to cover such amount, the Contractor shall pay the difference to the Owner.

12.2.5   The Contractor shall bear the cost of correcting destroyed or damaged construction, whether completed or partially completed, of the Owner or separate Contractors caused by the Contractor's correction or removal of Work which is not in accordance with the requirements of the Contract Documents.

12.2.6   Nothing contained in this Paragraph 12.2 shall be construed to establish a period of limitation with respect to other obligations which the Contractor might have under the Contract documents. Establishment of the time period of one year as described in Subparagraph 12.2.2 related only to the specific obligation of the Contractor to correct the Work, and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish the Contractor's liability with respect to the Contractor's obligations other than specifically to correct the Work.

12.3    ACCEPTANCE OF NONCONFORMING WORK

12.3.1   If the Owner prefers to accept Work which is not in accordance with the requirements of the Contract Documents, the Owner may do so instead of requiring its removal and correction, in which case the Contract Sum will be reduced as appropriate and equitable. Such adjustment shall be effected whether or not final payment has been made.

ARTICLE 13
MISCELLANEOUS PROVISIONS

13.1    GOVERNING LAW

13.1.1   The Contract shall be governed by the law of the place where the Project is located.

13.2    SUCCESSORS AND ASSIGNS

13.2.1   The Owner an Contractor respectively bind themselves, their partners, successors, assigns and legal representatives to the other part hereto and to partners, successors, assigns and legal representatives of such other party in respect to covenants, agreements and obligations contained in the contract documents. Neither party to the Contract shall assign the Contract as a whole without written consent of the other. If either party attempts to make such an assignment without such consent, that party shall nevertheless remain legally responsible for all obligations under the Contract.

13.3    WRITTEN NOTICE

13.3.1   Written notice shall be deemed to have been duly served if delivered in person to the individual or a member of the firm or entity or to an officer of the corporation for which it was intended, or if delivered at or sent by registered or certified mail to the last business address known to the party giving notice.

13.4    RIGHTS AND REMEDIES

13.4.1   Duties and obligations imposed by the Contract Documents and rights and remedies available thereunder shall be in addition to and not a limitation of duties, obligations, rights and remedies otherwise imposed or available by law.

13.4.2   No action or failure to act by the Owner, Architect or Contractor shall constitute a waiver of a right or duty afforded them under the Contract, nor shall such action or failure to act constitute approval of or acquiescence in a breach thereunder, except as may be specifically agreed in writing.

13.5    TESTS AND INSPECTIONS

13.5.1   Tests, inspections and approvals of portions of the Work required by the Contract Documents or by laws, ordinances, rules, regulations or orders of public authorities having jurisdiction shall be made at an appropriate time. Unless otherwise provided, the Contractor shall make arrangements for such tests, inspections and approvals with an independent testing laboratory or entity acceptable to the Owner, or with the appropriate public authority, and shall bear all related costs of tests, inspections and approvals. The Contractor shall give the Owner and Architect timely notice of when and where tests and inspections are to be made so the Owner and Architect may observe such procedures. The Owner shall bear costs of tests, inspections or approvals which do not become requirements until after bids are received or negotiations concluded.

13.5.2   If the Architect, Owner or public authorities having jurisdiction determine that portions of the Work require additional testing, inspection or approval not included under Subparagraph 13.5.1, the Architect will upon written authorization from the Owner, instruct the Contractor to make arrangements for such additional testing, inspection or approval by an entity acceptable to the Owner, and the Contractor shall give timely notice to the Owner and Architect of when and where tests and inspections are to be made so the Owner and Architect may observe such procedures. The Owner shall bear such costs except as provided in Subparagraph 13.5.3.

13.5.3   If such procedures for testing, inspection or approval under Subparagraphs 13.5.1 and 13.5.2 reveal failure of the portions of the Work to comply with requirements established by the Contract Documents, the contractor shall bear all costs made necessary by such failure including those of repeated procedures and compensation for the Architect's services and expenses.

13.5.4   Required certificates of testing, inspection or approval shall, unless otherwise required by the Contract Documents, be secured by the Contractor and promptly delivered to the Owner and Architect.

13.5.5   If the Owner or Architect is to observe tests, inspections or approvals required by the Contract Documents, the Owner and Architect will do so promptly and, where practicable, at the normal place of testing.

13.5.6   Tests or inspections conducted pursuant to the Contract Documents shall be made promptly to avoid unreasonable delay in the Work.

13.6    INTEREST

13.6.1   Payments due and unpaid under Contract Documents shall bear interest from the date payment is due at such rate as the parties may agree upon in writing or, in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located.

13.7    COMMENCEMENT OF STATUTORY LIMITATION PERIOD

13.7.1   As between the Owner and Contractor.

.1

Before Substantial Completion. As to acts or failures to act occurring prior to the relevant date of Substantial Completion, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion.



.2

Between Substantial Completion and Final Certificate for Payment, Scheduled Date of Final Payment. As to acts or failures to act occurring subsequent to the relevant date of substantial Completion and prior to issuance of the final Certificate for Payment any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the scheduled date of the final Payment, and



.3

After Final Certificate for Payment, Schedule Date of Final Payment. As to acts or failures to act occurring after the scheduled date of the final Payment, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the date of any act or failure to act by the Contractor pursuant to any warranty provided under Paragraph 3.5, the date of any correction of the Work or failure to correct the Work by the Contractor under Paragraph 12.2, or the date of actual commission of any other act or failure to perform any duty or obligation by the Contractor or Owner, whichever occurs last.

ARTICLE 14
TERMINATION OR SUSPENSION OF THE CONTRACT

14.1    TERMINATION BY THE CONTRACTOR

14.1.1   The Contractor may terminate the Contract if the Work is stopped for a period of 30 days through no act or fault of the Contractor or a Subcontractor, Sub-subcontractor or their agents or employees or any other persons performing portions of the Work under contract with the Contractor, for any of the following reasons:

.1

issuance of an order of a court or other public authority having jurisdiction;



.2

an act of government, such as a declaration of national emergency, making material unavailable;



.3

because the Owner has not made payment within the time stated in the Contract Documents;



.4

if repeated suspensions, delays or interruptions by the Owner as described in Paragraph 14.3 constitute in the aggregate more than 100 percent of the total number of days scheduled for completion, or 120 days in any 365-day period, whichever is less, or



.5

the Owner has failed to furnish to the Contractor promptly, upon the Contractor's request, reasonable evidence as required by Subparagraph 2.2.1

14.1.2   If one of the above reasons exists, the Contractor may, upon seven additional days' written notice to the Owner and Architect, terminate the Contract and recover from the Owner payment for the Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages.

14.1.3   If the Work is stopped for a period of 60 days through no act or fault of the Contractor or a Subcontractor or their agents or employees or any other persons performing portions of the Work under contract with the Contractor because the Owner has persistently failed to fulfill the Owner's obligations under the Contract Documents with respect to matters important to the progress of the Work, the Contractor may, upon seven additional days' written notice to the Owner and the Architect, terminate the Contract and recover from the Owner as provided in Subparagraph 14.1.2.

14.2    TERMINATION BY THE OWNER FOR CAUSE

14.2.1   The Owner may terminate the Contract if the Contractor:

.1

persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials;



.2

fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractors;



.3

persistently disregards laws, ordinances, or rules, regulations or orders of a public authority having jurisdiction; or



.4

otherwise is guilty of substantial breach of a provision of the Contract Documents.

14.2.2   When any of the above reasons exist, the Owner may without prejudice to any other rights or remedies of the Owner and after giving the Contractor and the Contractor's surety, if any, seven days' written notice, terminate employment of the Contractor and may, subject to any prior rights of the surety:

.1

take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Contractor;



.2

accept assignment of subcontractors pursuant to Paragraph 5.4; and



.3

finish the Work by whatever reasonable method the Owner may deem expedient.

14.2.3   When the Owner terminates the Contract for one of the reasons stated in subparagraph 14.2.1, the Contractor shall not be entitled to receive further payment until the Work is finished.

14.2.4   If the unpaid balance of the Contract sum exceeds costs of finishing the Work, including compensation for the Architects services and expenses made necessary thereby, such excess shall not be paid to the Contractor. If such costs exceed the unpaid balance, the Contractor shall pay the difference to the Owner. The amount to be paid to the Owner shall survive termination of the Contract. *SEE ADDENDUM #1.

14.3    SUSPENSION BY THE OWNER FOR CONVENIENCE

14.3.1   The Owner may, without cause, order the Contractor in writing to suspend, delay or interrupt the Work in whole or in part for such period of time as the Owner may determine.

14.3.2   An adjustment shall be made for increases in the cost of performance of the Contract, including profit on the increased cost of performance, caused by suspension, delay or interruption. No adjustment shall be made to the extent:

.1

that performance is, was or would have been so suspended, delayed or interrupted by another cause for which the Contractor is responsible; or



.2

that an equitable adjustment is made or denied under another provision of this Contract.

14.3.3   Adjustments made in the cost of performance may have a mutually agreed fixed or percentage fee.

QuickLinks

Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with or without a Guaranteed Maximum Price
ARTICLE 1 THE CONTRACT DOCUMENTS
ARTICLE 2 THE WORK OF THIS CONTRACT
ARTICLE 3 RELATIONSHIP OF THE PARTIES
ARTICLE 4 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
ARTICLE 5 CONTRACT SUM
ARTICLE 6 CHANGES IN THE WORK
ARTICLE 7 COSTS TO BE REIMBURSED
ARTICLE 8 COSTS NOT TO BE REIMBURSED
ARTICLE 9 DISCOUNTS, REBATES AND REFUNDS
ARTICLE 10 SUBCONTRACTS AND OTHER AGREEMENTS

ARTICLE 11 ACCOUNTING RECORDS
ARTICLE 12 PROGRESS PAYMENTS
ARTICLE 13 FINAL PAYMENT
ARTICLE 14 MISCELLANEOUS PROVISIONS
ARTICLE 15 TERMINATION OR SUSPENSION
ARTICLE 16 ENUMERATION OF CONTRACT DOCUMENTS

ADC CONFIDENTIAL INFORMATION RIDER
ADDENDUM 1 Revisions To Standard Form of Agreement Between ADC Telecommunications, Inc. And Kraus-Anderson Construction Company Dated October 22, 1999

TABLE OF ARTICLES
INDEX

GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
ARTICLE 1 GENERAL PROVISIONS
ARTICLE 2 OWNER
ARTICLE 3 CONTRACTOR

ARTICLE 5 SUBCONTRACTORS
ARTICLE 6 CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS

ARTICLE 7 CHANGES IN THE WORK
ARTICLE 8 TIME
ARTICLE 9 PAYMENTS AND COMPLETION
ARTICLE 10 PROTECTION OF PERSONS AND PROPERTY

ARTICLE 11 INSURANCE AND BONDS
ARTICLE 12 UNCOVERING AND CORRECTION OF WORK
ARTICLE 13 MISCELLANEOUS PROVISIONS
ARTICLE 14 TERMINATION OR SUSPENSION OF THE CONTRACT

EX-10.II

CONSTRUCTION AGENCY AGREEMENT

dated as of October 22, 1999

between

LEASE PLAN NORTH AMERICA, INC.,
not in its individual capacity, but solely as Agent Lessor

and

ADC TELECOMMUNICATIONS, INC.,
as Construction Agent

Table of Contents

		Page
ARTICLE I DEFINITIONS
1.1.	Definitions; Interpretation	1
ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT
2.1.	Appointment and Acceptance	1
2.2.	Construction of the Financed Improvements	1
2.3.	Term	2
2.4.	Construction Documents	2
2.5.	Scope of Authority	3
2.6.	Covenants of the Construction Agent	4
2.7.	Title to the Financed Improvements	6
2.8.	Deliveries to Agent Lessor	6
ARTICLE III THE FINANCED IMPROVEMENTS
3.1.	Construction	6
3.2.	Amendments; Modifications	6
3.3.	Casualty, Condemnation and Force Majeure Events	6
3.4.	Construction Termination Events	6
3.5.	Easements	7
ARTICLE IV PAYMENT OF FUNDS
4.1.	Funding of Construction Costs	8
ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT
5.1.	Construction Agency Events of Default	9
5.2.	Survival	10
5.3.	Remedies Cumulative; Waivers	10
5.4.	Limitation on Recourse Liability of Construction Agent	12
5.5.	Agent Lessor's Right to Cure Construction Agent's Defaults	12
ARTICLE VI NO CONSTRUCTION AGENCY FEE
6.1.	Lease as Fulfillment of Agent Lessor's Obligations	13
ARTICLE VII MISCELLANEOUS
7.1.	Notices	13
7.2.	Successors and Assigns	13
7.3.	GOVERNING LAW	13
7.4.	Amendments, etc	13
7.5.	Counterparts	13
7.6.	Severability	13
7.7.	Headings and Table of Contents	13
7.8.	Exercise of Agent Lessor's Rights	13
7.9.	Limited Liability	14

EXHIBITS

 
EXHIBIT A  —  Form of Certification as to Construction Commencement Date

EXHIBIT B  —  Form of Construction Documents Assignment

EXHIBIT C  —  Acknowledgment of and Consent to Construction Documents Assignment

CONSTRUCTION AGENCY AGREEMENT

    CONSTRUCTION AGENCY AGREEMENT, dated as of October 22, 1999 (this "Agreement"), between LEASE PLAN NORTH AMERICA, INC., an Illinois corporation, not in its individual capacity, but solely as Agent Lessor (the "Agent Lessor"), and ADC TELECOMMUNICATIONS, INC., a Minnesota corporation (the "Construction Agent").

W I T N E S S E T H:

    A.  The Agent Lessor and ADC Telecommunications, Inc. are parties to that certain Lease, pursuant to which the Lessee has agreed to lease from Agent Lessor, and the Agent Lessor has agreed to lease to the Lessee, Agent Lessor's interest in the Land and the Financed Improvements when constructed.

    B.  Agent Lessor, Administrative Agent and Lessee are also parties to that certain Participation Agreement, dated as of even date herewith (as amended, supplemented or otherwise modified, the "Participation Agreement"), among Lessee, Agent Lessor, and the Persons named therein as Participants.

    C.  Subject to the terms and conditions hereof, (i) the Agent Lessor desires to appoint the Construction Agent as its sole and exclusive agent for the construction of the Financed Improvements in accordance with the Approved Construction Budget, the Approved Construction Schedule and the Approved Plans and Specifications (collectively, the "Approved Construction Materials") and pursuant to the Lease and this Agreement, and (ii) the Construction Agent desires, for the benefit of the Agent Lessor, to cause the Financed Improvements to be constructed in accordance with the Approved Construction Materials and pursuant to the Lease and this Agreement, in each case in accordance with the terms set forth herein and in the Lease;

    NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto covenant and agree as follows:

ARTICLE I
DEFINITIONS

    1.1.  Definitions; Interpretation.  Capitalized terms used but not otherwise defined in this Agreement shall have the meanings set forth in Appendix 1 to the Participation Agreement, and the rules of interpretation set forth in Appendix 1 shall apply to this Agreement.

ARTICLE II
APPOINTMENT OF CONSTRUCTION AGENT

    2.1.  Appointment and Acceptance.

    (a) Pursuant to and subject to the terms and conditions set forth herein and in the Participation Agreement and the other Operative Documents, the Agent Lessor hereby irrevocably designates and appoints the Construction Agent as its exclusive agent and as general contractor for the construction of the Financed Improvements on the Land in accordance with the Approved Construction Materials.

    (b) Construction Agent hereby unconditionally and irrevocably accepts the designation and appointment as Construction Agent and agrees to perform its duties and obligations as set forth in this Agreement.

    2.2.  Construction of the Financed Improvements.  The Construction Agent will cause the Financed Improvements to be constructed on the Land in accordance with and subject to the Approved Construction Materials, in compliance in all respects with all Requirements of Law and Insurance Requirements, and otherwise in compliance with the requirements of this Agreement, the Lease and the other Operative Documents. Construction Agent hereby agrees, unconditionally and for the benefit of Agent Lessor, to commence Construction on or before thirty (30) days after the Document Closing Date. Without limiting the foregoing, no such construction shall be undertaken until all material Applicable Laws necessary for the commencement of Construction (including obtaining required Governmental Actions) have been complied with. Construction Agent agrees to deliver to Agent Lessor and Administrative Agent written certification of the Construction Commencement Date in the form of Exhibit A  within ten (10) Business Days after the Construction Commencement Date.

    2.3.  Term.  This Agreement shall commence on the date hereof and shall terminate upon the first to occur of:

    (a) payment by the Lessee of the Lease Balance and all other amounts owing under the Operative Documents, and termination of the Commitments in accordance with the Lease and the Participation Agreement;

    (b) termination of this Agreement by Agent Lessor pursuant to Article V hereof; and

    (c) Substantial Completion, including completion of punch list items referred to in Section 2.6(d)  and the full performance of all other obligations of the Construction Agent hereunder.

    2.4.  Construction Documents.

    (a) Subject to each of the terms and conditions in this Agreement, including specifically Section 3.3, the Construction Agent may execute any of its duties under this Agreement by or through agents, contractors, employees or attorneys-in-fact, and the Construction Agent shall enter into such agreements with architects and contractors as the Construction Agent deems necessary or desirable for the completion of the Construction pursuant hereto (the "Construction Documents"); provided, however, that no such delegation shall limit or reduce in any way the Construction Agent's duties and obligations under this Agreement; provided,  further, that contemporaneously with the execution and delivery of this Agreement, the Construction Agent will execute and deliver to the Agent Lessor the Construction Documents Assignment in the form of Exhibit B attached hereto, pursuant to which the Construction Agent assigns to the Agent Lessor, among other things, all of the Construction Agent's rights under and interest in such Construction Documents then or thereafter entered into. The Construction Agent agrees that it will, on the later of the Document Closing Date or the date of execution of such Construction Document, cause the contractor or architect entering into such Construction Document to execute and deliver to the Administrative Agent an acknowledgment of and consent to the Construction Documents Assignment substantially in the form of Exhibit C  attached hereto (with sufficient copies for the Administrative Agent to deliver to Agent Lessor and each Participant). Each Major Construction Document shall be subject to the prior written approval of the Agent Lessor and the Administrative Agent, which approval may not be unreasonably withheld, conditioned or delayed. For purposes hereof, "Major Construction Document" shall mean: (i) the Construction Contract, (ii) the primary architectural services agreement pertaining to the Construction, and (iii) any other Construction Document calling for payments of $10,000,000 or more during the Term, or upon full performance, thereof.

    (b) Notwithstanding any other provision of this Agreement or of any of the other Operative Documents, all Construction Documents which require the signature of the Construction Agent shall be entered into by the Construction Agent in its own name, and not as agent for the Agent Lessor.

    2.5.  Scope of Authority.

    (a) Subject to the terms, conditions, restrictions and limitations set forth in the Operative Documents, the Agent Lessor hereby expressly authorizes the Construction Agent, or any agent or contractor of the Construction Agent, and the Construction Agent unconditionally agrees, for the benefit of the Agent Lessor, to take all action necessary or desirable for the performance and satisfaction of all of the Construction Agent's obligations hereunder, including:

     (i) assisting in the acquisition of the Land;

    (ii) performing all design and supervisory functions and all engineering work related to the Construction and serving as the general contractor;

    (iii) negotiating and entering into all contracts or arrangements to procure the labor, materials, supplies and equipment necessary to construct the Premises on such terms and conditions as are customary and reasonable in light of local standards and practices; provided, however, that the construction and design contracts (including the Construction Contract) for the Financed Improvements shall be guaranteed maximum or fixed price contracts in form and substance satisfactory to Agent Lessor and the Administrative Agent under which the cost of design of the Financed Improvements, including, without limitation, the Approved Plans and Specifications, working drawings, detailed layouts and other drawings and specifications of every kind and description required for the construction of the Financed Improvements (collectively, the "Plans") and the cost of Construction, including, without limitation, all labor, materials, equipment, supplies, permits, general conditions and other costs and fees of every kind and description required for the completion of the Financed Improvements in accordance with the Approved Plans and Specifications shall not exceed the guaranteed maximum price payable to the General Contractor under the Construction Contract.

    (iv) obtaining all necessary permits, licenses, consents, approvals and other authorizations, including those required under Applicable Laws (including Environmental Laws), from all Governmental Authorities in connection with the Construction;

    (v) maintaining all books and records with respect to the Construction and the operation and management of the Premises;

    (vi) performing any other acts necessary in connection with the construction and development of the Financed Improvements in accordance with the Approved Plans and Specifications, Applicable Laws, any Requirements of Law and all Insurance Requirements;

   (vii) paying when due (subject to reimbursement as provided for under this Agreement) pursuant to and subject to the Approved Construction Budget, or causing to be paid when due in accordance with the Participation Agreement, all Construction Costs to be paid during the Interim Term (including costs associated with the Construction Agent's actions as provided in Section 2.5(a)(viii) below, pursuant to and subject to the Approved Construction Budget);

   (viii) enforcing performance by each party to each Construction Document of their respective obligations, warranties and other design, construction and other obligations with respect to the design, engineering, construction and completion of the Financed Improvements or pursuing remedies with respect to the breach of those obligations; and

    (ix) subject to Article XIV of the Lease, using the proceeds of any property insurance maintained with respect to the Financed Improvements to complete construction of or rebuild any portion of the Financed Improvements with respect to a Casualty occurring with respect to that portion of the Financed Improvements and to fund all Interest, Yield and Fees accruing during such Construction or rebuilding.

    (b) Neither the Construction Agent nor any of its Affiliates or agents shall enter into any contract which would, directly or indirectly, impose any liability or obligation on the Agent Lessor (other than the obligations to provide Advances in accordance with and subject to the terms and conditions of the Operative Documents) for which the Agent Lessor is not fully indemnified by the Construction Agent or the Lessee under this Agreement or any of the other Operative Documents or for which insurance has not been procured.

    (c) Subject to the terms and conditions of this Agreement and the other Operative Documents, the Construction Agent shall have sole management and control over the construction means, methods, sequences and procedures and the hiring, termination and contracting for and supervision of and payment for the labor, personnel and services with respect to the Construction; provided, however, that this subsection (c)  shall not give rise to any rights in any Person other than the Agent Lessor, the Participants and the other Indemnitees.

    (d) All fees and expenses of the Lessee under any Operative Document which are included in the Approved Construction Budget shall be paid or reimbursed through Advances.

    2.6.  Covenants of the Construction Agent.  The Construction Agent hereby covenants and agrees that it will:

    (a) following the Construction Commencement Date, cause the Construction to be prosecuted diligently and without interruption (subject to Force Majeure Events) in accordance in all material respects with the Approved Construction Budget, the Approved Construction Schedule and the Approved Plans and Specifications and all Requirements of Law and Insurance Requirements;

    (b) take all reasonable and practical steps to minimize Casualties and Condemnations, liabilities of Agent Lessor or any Participant, delays, increased costs and the disruption of the construction process;

    (c) cause Substantial Completion to occur on or prior to the Outside Completion Date, and cause all Liens (including Liens or claims for materials supplied or labor or services performed in connection with the construction of the Premises), other than Permitted Liens, to be discharged;

    (d) following Substantial Completion, cause all outstanding punch list items with respect to the Construction to be completed in a timely manner, but in no event later than ninety (90) days after the date of Substantial Completion;

    (e) at all times during Construction, cause all title to all personalty which will become a permanent part of the Financed Improvements on or within the Land (and any other personal property constituting a part of the Financed Improvements which Construction Agent acquired with the funds advanced by the Participants) to be and remain vested in the Agent Lessor and cause to be on file (including financing statements and fixture filings) with the applicable filing office all necessary documents under Article 9 of the Uniform Commercial Code to perfect such title free of all Liens other than Permitted Liens;

    (f)  at all times during Construction, maintain, for the benefit of the Agent Lessor, the insurance described in Article XIII of the Lease. In addition, Construction Agent will from time to time, but in intervals of not less than six months each, undertake all actions and due diligence as reasonably necessary to determine whether the insurance coverage required to be maintained by Lessee under the Lease is in compliance with all of the requirements thereunder, including any increases in coverage required as a result of any change in any Applicable Laws, and if Construction Agent determines that such insurance coverage does not meet such requirements, it agrees to promptly take all actions and steps necessary to cause such coverage to comply with such requirements and to notify Agent Lessor and Administrative Agent of the steps being taken by Construction Agent;

    (g) (i)  cause each Person engaged under any Construction Document to covenant and agree (it being understood that this clause (i) may be satisfied by the General Contractor and the Architect if such covenants and agreements are contained in the acknowledgment and consent such Person is required to deliver to Administrative Agent pursuant to this Agreement) that: (A) none of the Agent Lessor or any Participant is personally liable for any claims or obligations incurred under such contract, (B) such Person will provide written notice to the Agent Lessor and Administrative Agent of any material breach under such contract and, during the existence of a Construction Agency Event of Default, the Agent Lessor and Administrative Agent shall have at least thirty (30) days following the receipt of such notice to cure such breach, plus any additional reasonable time as may be required, and (C) upon written request of the Agent Lessor or Administrative Agent, such Person shall provide to the Agent Lessor and Administrative Agent an estoppel certificate in respect of such contract in a form reasonably requested by the Agent Lessor or Administrative Agent, and (ii) all Construction Documents (or a separate writing made for the benefit of Agent Lessor, Administrative Agent and each Participant, which writing may take the form of the Acknowledgment of and Consent to Construction Documents Assignment attached as Exhibit C) to contain stipulations by the other parties to such Construction Documents that such parties shall have no recourse to the Agent Lessor, Administrative Agent or any of the Participants with respect to any claims arising under such Construction Documents; and

    (h) Monthly:

    (A) provide to the Agent Lessor: (i) copies of all change orders, notices, requests for any increase of any contract sum payable, or other communication received under or in connection with any Construction Document which either (x) seeks to increase the total consideration payable under any Construction Document, or (y) asserts that the Construction Agent or any other party to any Construction Document is in breach or default, or with notice and lapse of time or both will be in breach or default under any Construction Document; (ii) such information as may be reasonably requested by Agent Lessor regarding the status of the Construction, compliance of the parties to the Construction Documents with the terms thereof, and amounts due and payable under the Construction Documents, including, without limitation, such information as Agent Lessor shall reasonably require to determine that the Approved Construction Budget is In Balance. For purposes of this Agreement and the other Operative Documents, the determination, at any time, including at the time of each request for an Advance, as to whether or not the Approved Construction Budget is In Balance will be made in the sole and reasonable judgment of the Agent Lessor.

    (B) Construction Agent's certification: (i) that the Approved Construction Budget is In Balance, (ii) that the remaining contingency reserves, as such amounts may be adjusted pursuant to Section 3.2(b), are sufficient for any reasonably foreseeable contingency which might occur during the remaining course of Construction; (iii) of the number of days the Construction is, without overtime or premium pay (other than such overtime or premium pay as is budgeted or reserved for in the Approved Construction Budget) and given the prevailing weather and other conditions of construction that are anticipated to exist during the remaining course of Construction, ahead of or behind the Critical Path Schedule, (iv) of the anticipated date on which the Construction will be completed, (v) that all conditions to Construction Agent's right to request an Advance pursuant to the Operative Documents have been fully satisfied, (vi) that all conditions to the payment of amounts previously funded and advanced for the purpose of paying any amounts due under any Construction Document, as set forth in such Construction Document, have been fully and completely satisfied, and (vii) that no payment under any Construction Document shall be made unless and until each of the conditions to the payment of amounts due under such Construction Document, as set forth in such Construction Document, have been fully and completely satisfied.

    2.7.  Title to the Financed Improvements.  Title to the Financed Improvements (including, all materials or equipment incorporated therein or purchased by any Person and paid for by Construction Agent for the purpose of being incorporated therein) shall automatically, without further act of Construction Agent, vest in Agent Lessor.

    2.8.  Deliveries to Agent Lessor.  Construction Agent shall deliver to Agent Lessor copies of all documents, instruments, notices and other communications to be delivered by Construction Agent, or which Construction Agent is required to cause to be delivered, to Agent Lessor or Administrative Agent under the Operative Documents and copies of all Advance Requests.

ARTICLE III
THE FINANCED IMPROVEMENTS

    3.1.  Construction.  The Construction Agent shall cause the Financed Improvements to be constructed, equipped, maintained and used in compliance in all respects with the Approved Plans and Specifications, all Requirements of Law and all Insurance Requirements.

    3.2.  Amendments; Modifications.

    (a) The Construction Agent may not revise, amend or modify any of the Approved Construction Materials, the Construction Documents or change orders without the prior written consent of the Agent Lessor. No such consent shall be granted by Agent Lessor unless Construction Agent demonstrates to the reasonable satisfaction of the Agent Lessor that such revisions, amendment, modification or change order will not extend the Estimated Completion Date, cause Construction Agent to fail to achieve any Critical Path Deadline Date or increase the Construction Costs (without regard to reserves) as set forth in the Approved Construction Budget. Any other revision, amendment, modification or change order not otherwise contemplated by this Section 3.2 shall be subject to Agent Lessor's approval, which may be withheld in Agent Lessor's sole and absolute discretion.

    (b) Lessee shall be permitted to amend the Approved Construction Budget to adjust amounts allocated to any item or contingency reserve in the Approved Construction Budget, provided any such adjustment shall be made from actual savings or actual excess amounts originally allocated in the Approved Construction Budget to another item and for which Construction has been substantially completed or, in the case of tenant improvements, such amounts were actually expended. Each such amendment shall be subject to the prior reasonable approval of the Agent Lessor to ensure that any such amendment complies with the foregoing requirements.

    3.3.  Casualty, Condemnation and Force Majeure Events.  If at any time prior to Substantial Completion there occurs a Casualty, Condemnation, or Agent Lessor or Construction Agent receives notice of a Condemnation, then, except as otherwise provided in Article XIV of the Lease, in each case Construction Agent shall promptly and diligently complete the Construction in accordance with the Approved Plans and Specifications and with the terms hereof, and cause Substantial Completion to occur on or prior to the Outside Completion Date.

    3.4.  Construction Termination Events.

    (a) As soon as possible and in no event later than five (5) Business Days after a Construction Termination Event, the Construction Agent shall deliver to Agent Lessor a written notice of such event that sets forth in detail the nature of such event and the Construction Agent's estimate of the effect that such event will have on the costs of Substantial Completion and the Estimated Completion Date.

    (b) To the extent that Agent Lessor has not elected to terminate this Agreement pursuant to Article V  or Lessee has not exercised its Purchase Option, Construction Agent shall continue diligently to construct the Financed Improvements in accordance with this Agreement until the Substantial Completion thereof and shall pay Prepaid Rent to fund, the costs of such construction if Advances are no longer available under the Participation Agreement; provided, however, that the amounts to be paid by Construction Agent pursuant to this Section 3.4 shall, to the extent applicable, be subject to the limitations at Section 5.4.

    (c) If a Construction Termination Event shall occur:

     (i) Agent Lessor and the Participants may terminate their Commitments as provided in Article V;

    (ii) The Construction Agent shall cease construction as of any date, if any, specified by Agent Lessor; and

    (iii) If Agent Lessor shall so require, the Construction Agent shall:

    (A) return the Premises to Agent Lessor or remarket the Premises for Agent Lessor in a manner and for such period as specified by Agent Lessor, and in any event in compliance with the requirement at Sections 21.1(iv) and (v) of the Lease; and

    (B) pay the Construction Recourse Amount or Asset Termination Value to Agent Lessor as provided in Section 18.2 of the Lease, together with the other amounts referred to therein.

    (d) Subject to the amount limitations set forth under the Operative Documents, the right of Agent Lessor and the Participants to terminate their Commitments under the Operative Documents upon the occurrence of any Event of Default and the other terms and conditions of the Operative Documents, if Agent Lessor has not ordered the Construction Agent to cease construction of the Financed Improvements and the Commitments have not been terminated pursuant to Article V, Agent Lessor shall continue to make (and the Participants shall continue to Fund) Advances, in each case subject to the conditions set forth herein and in the Participation Agreement.

    3.5.  Easements.  With respect to the Financed Improvements, Construction Agent may, subject to the conditions, restrictions and limitations set forth herein and in the other Operative Documents, at any time prior to the earlier of (i) termination of the Construction Period and (ii) termination of this Agreement, grant easements, licenses, rights-of-way, party wall rights and other rights in the nature of easements, with or without consideration, necessary or appropriate for the construction or operation of the Premises, without the consent of Agent Lessor as long as the following conditions are satisfied (and, as long as the following conditions are satisfied, Construction Agent may execute such instruments and take such actions in the name of Agent Lessor, and Agent Lessor shall execute a power of attorney evidencing such right from time to time upon request of Construction Agent):

    (a) no Construction Agency Event of Default shall have occurred and be continuing;

    (b) there shall be sufficient sums in the Approved Construction Budget to pay all costs and expenses in connection therewith, such action shall be at the sole cost and expense of Construction Agent, and Construction Agent shall pay all reasonable out-of-pocket costs of Agent Lessor and the Administrative Agent in connection therewith (including, the reasonable fees of attorneys, architects, engineers, planners, appraisers and other professionals retained by Agent Lessor or the Administrative Agent in connection with such action, it being agreed that to the extent there shall be insufficient funds in the Approved Construction Budget to pay all costs and expenses in connection with such matter, then Construction Agent shall not proceed or continue, as the case may be, with such matter until the commencement of the Base Term);

    (c) Construction Agent shall have delivered to Agent Lessor and the Administrative Agent a certificate of a Responsible Officer of Construction Agent stating that:

     (i) such action will not diminish the Fair Market Value, utility, useful life or residual value of the Premises and that there are sufficient sums in the Approved Construction Budget which are designated to pay all costs and expenses with respect to such action;

    (ii) such action will not cause the Premises or any portion thereof to fail to comply in any respect with the provisions of this Agreement or any other Operative Document and in any material respect with all Applicable Laws (including all applicable zoning, planning, building and subdivision ordinances, all applicable restrictive covenants and all applicable architectural approval requirements);

    (iii) all Requirements of Law prior to such action shall have been obtained, and all filings required prior to such action shall have been taken;

    (iv) such action will not result in any down-zoning of the Land or any portion thereof or a reduction in the maximum density or development rights available to the Land under all Applicable Laws;

    (v) this Agreement and Construction Agent's obligations hereunder shall continue in full force and effect, without abatement, suspension, deferment, diminution, reduction, counterclaim, setoff, defense or deduction; and

    (vi) such action will not impose or create any liability or obligation on Agent Lessor.

    At the request of Construction Agent, so long as no Construction Agency Event of Default shall have occurred and be continuing, Agent Lessor shall, from time to time during the Construction Period and upon at least ten (10) Business Days' prior written notice from Construction Agent, consent to and join in any easements, licenses, rights-of-way, party wall rights and other rights in the nature of easements pursuant to this Section 3.5.

ARTICLE IV
PAYMENT OF FUNDS

    4.1.  Funding of Construction Costs.

    (a) During the course of the Construction, the Construction Agent shall request that the Agent Lessor advance funds for the payment of Construction Costs, and the Agent Lessor will comply with such request to the extent provided for under, and subject to the conditions, restrictions and limitations contained in, this Agreement, the Participation Agreement and the Lease. The Construction Agent and the Agent Lessor acknowledge and agree that the Lessee's right to request funds and the Agent Lessor's obligation to advance funds for the payment of Construction Costs are subject in all respects to the terms and conditions of this Agreement, of the Participation Agreement and each of the other Operative Documents.

    (b) The proceeds of any funds made available to the Agent Lessor to pay Construction Costs shall be made available to the Construction Agent in accordance with the Advance Request relating thereto and the terms of the Lease.

    (c) The Construction Agent shall at all times cause to be and remain vested in the Agent Lessor title to any and all construction materials and equipment (except for construction materials and equipment purchased, but not yet delivered) not yet incorporated into the Financed Improvements for which funds shall have been requested pursuant to this Article IV and cause such title to be and remain free of all Liens, other than Permitted Liens.

    (d) The Construction Agent may disburse proceeds from an Advance Request only for payment of Construction Costs as set forth on the Advance Request to the extent permitted by the Operative Documents, provided that on the date such payment is to be made, no Construction Agency Default or Construction Agency Event of Default shall have occurred and be continuing. Any such payment of Construction Costs by the Construction Agent shall constitute the Construction Agent's certification that: (i) the Approved Construction Budget is In Balance and the items to be funded by the requested disbursement are Construction Costs permitted by the Operative Documents and which correspond to and comply with specific line items in the Approved Construction Budget, including any contingencies to the extent not previously utilized, (ii) all construction of the portion of the Financed Improvements paid for by the disbursement have been completed in a good and workmanlike manner and in accordance with all Requirements of Law and the Approved Plans and Specifications, (iii) each Person to be paid out of the disbursement has been paid in full or will be paid in full upon such disbursement and that each such Person has delivered duly executed lien waivers with respect to such payment, (iv) each representation and warranty of the Lessee contained in the Operative Documents is true and correct in all material respects on and as of the date such disbursement is made as though made on and as of such dates, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date, (v) no Default or Event of Default has occurred and is continuing, (vi) all covenants, agreements and conditions contained herein or in any other Operative Document required to be performed or complied with for the disbursement of such funds have been so performed or complied with, and (vii) the Construction Agent has caused the title examination with respect to the Premises to have been continued down to such time for discovery of any possible Liens or other objections to title intervening between the date of any relevant Title Policies and the date of such disbursement, and such continuation search revealed no intervening Lien or other objection to title other than Permitted Liens.

ARTICLE V
CONSTRUCTION AGENCY EVENTS OF DEFAULT

    5.1.  Construction Agency Events of Default.  If any one or more of the following events (each a "Construction Agency Event of Default") shall occur:

    (a) the Construction Agent fails to apply any funds paid by the Agent Lessor to the Construction Agent to the payment of the appropriate Construction Costs in the manner and subject to the limitations set forth herein and in the Participation Agreement, respectively; or

    (b) (i) the Construction Commencement Date shall fail to occur for any reason on or prior to thirty (30) days after the Document Closing Date or (ii) Substantial Completion fails to occur on or prior to the Outside Completion Date; or

    (c) the Approved Construction Budget shall be determined by the Agent Lessor or any Participant in its reasonable judgment not to be In Balance and such failure to be In Balance shall continue for a period of ten (10) Business Days after written notice thereof to the Construction Agent; or

    (d) any Lease Event of Default shall have occurred and be continuing; or

    (e) any breach by Construction Agent, in its capacity as such or as Lessee, of, or any material inaccuracy in any representation, warranty, statement or certification of Lessee or Construction Agent in, any certificate, Advance Request, any of the Approved Construction Materials, any Construction Document, any Operative Document or other agreement, budget, estoppel, or other similar document delivered by the Construction Agent or the Lessee to the Agent Lessor or any Participant;

    (f)  at any time, (i) the undisbursed portion of the Aggregate Commitment Amount is insufficient to pay Construction Costs (including Transaction Expenses, Capitalized Interest, Fees, Impositions or any other amounts) incurred or to be incurred during the Construction Period, or (ii) Construction Costs are incurred which are not provided for or which are in excess of amounts set forth in the Approved Construction Budget, as determined by Agent Lessor in its reasonable judgment;

    (g) a Construction Termination Event shall have occurred or the Construction Agent shall have failed to observe or perform any term, covenant or condition specified in Section 3.4 hereof;

    (h) the occurrence of an ADC Event of Default; or

    (i)  the Construction Agent shall fail to observe or perform any term, covenant or condition of this Agreement (except those specified in clauses (a) through (e)  above), and such failure shall remain uncured for a period of thirty (30) days after receipt of notice thereof by the Construction Agent;

then, in any such event, the Agent Lessor may, in addition to the other rights and remedies provided for in this Article V  or under the Lease, immediately terminate this Agreement by giving the Construction Agent written notice of such termination, and upon the giving of such notice, all rights of the Construction Agent and all obligations of the Agent Lessor under this Agreement shall cease; provided, however, that this Agreement will terminate immediately without notice upon the occurrence of an Insolvency Event. Upon any such termination, all rights of the Construction Agent and all obligations of the Agent Lessor shall cease, and the Construction Agent shall (subject to Section 5.4 below) immediately pay to the Agent Lessor, as and for liquidated damages, an amount equal to the Purchase Amount as of the date of such payment (whereupon the Agent Lessor shall execute a termination of the Ground Lease and shall convey title to the Improvements to the Lessee or its designee in accordance with Article XXI of the Lease). Alternatively, the Agent Lessor, with or without terminating this Agreement and without waiving or releasing the Construction Agent from any obligation or any Construction Agency Event of Default, may (but shall be under no obligation to) remedy any Construction Agency Event of Default for the account of and at the sole cost and expense of the Construction Agent. The Construction Agent shall pay upon demand all costs, expenses, losses, expenditures and damages (including reasonable attorneys' fees) incurred by or on behalf of Agent Lessor in connection with any Construction Agency Event of Default, together with interest thereon at the Overdue Rate from the date on which such amounts are paid by the Agent Lessor. Upon the occurrence of an Insolvency Event, the Financed Improvements, whether or not Construction has been completed, shall become subject to the Lease pursuant to Article II hereof.

    5.2.  Survival.  The termination of this Agreement pursuant to Section 5.1 shall in no event relieve the Construction Agent of its liability and obligations hereunder which accrued prior to such termination, all of which shall survive any such termination.

    5.3.  Remedies Cumulative; Waivers.  Upon the occurrence of a Construction Agency Event of Default, at the Agent Lessor's option and without limiting the Agent Lessor in the exercise of any other right or remedy the Agent Lessor may have on account of such default (including, without limitation, any rights of Agent Lessor or remedies at Section 3.4 or under any other Operative Document), and without any further demand or notice, but subject to Section 5.4 below, the Agent Lessor may cause the following to occur (subject to Lessee's option to purchase the Premises in accordance with the terms and subject to the limitations and time periods applicable during the continuation of an Event of Default as set forth in Section 18.1 of the Lease):

    (a) Without limiting any other remedies set forth in this Agreement or in any of the other Operative Documents, the Agent Lessor and the Construction Agent agree that upon the occurrence of a Construction Agency Event of Default, the Agent Lessor shall have all the rights and may pursue any of the remedies provided to it in the Lease, the terms and provisions of which Lease are incorporated herein by this reference. The Agent Lessor and Administrative Agent may foreclose the lien of the Lease on the Premises and the Mortgage, in which event the Construction Agent shall pay to the Agent Lessor:

     (i) an amount equal to the excess, if any, of (x) the Purchase Amount over (y) the net proceeds received by the Agent Lessor from the foreclosure sale or the net price the Agent Lessor successfully bids for the Premises at any sale of the Premises under the Mortgage and the Lease (provided, that in calculating such net proceeds or net price, all expenses and Taxes incurred by the Agent Lessor or any of the Participants in connection with such sale or purchase, including, without limitation, legal fees, shall be deducted from such sale proceeds or purchase price),

    (ii) any other amount necessary to compensate the Agent Lessor for all the damages proximately caused by the Construction Agent's failure to perform the Construction Agent's obligations under this Agreement or which in the ordinary course of things would be likely to result therefrom; and

    (iii) such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by any Applicable Laws;

    (b) The Agent Lessor may continue this Agreement in effect for so long as the Agent Lessor shall determine, and the Agent Lessor may enforce all of the Agent Lessor's rights and remedies under this Agreement, and require the completion of the Financed Improvements as herein described, so long as the Agent Lessor satisfies its obligations under Section 4.1; and, subject to Section 5.4  hereof, the Construction Agent shall be liable to the Agent Lessor for all Default Completion Costs, which amounts shall be payable by Construction Agent from time to time during the Construction Period to such Persons (including the Agent Lessor) and in such amounts as the Agent Lessor may designate.

    (c) The Agent Lessor may terminate this Agreement at any time, notwithstanding a prior election under Section 5.3(b), and cause the completion of the Financed Improvements as herein described directly through the Agent Lessor or one or more successor construction agents; and, subject to Section 5.4 hereof, the Construction Agent shall be liable to the Agent Lessor for all Default Completion Costs.

    (d) The Agent Lessor may exercise any other right or remedy that may be available to it under Applicable Laws or in equity, or proceed by appropriate court action (legal or equitable) to enforce the terms or to recover damages for the breach hereof.

    (e) As a matter of right and without notice to the Construction Agent or anyone claiming under the Construction Agent, and without regard to the then value of the Collateral or the interest of the Lessee therein, the Agent Lessor shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Collateral at the Lessee's sole cost and expense, and the Construction Agent hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of the Agent Lessor in case of entry as provided in this Agreement and shall continue as such and exercise all such powers until the latest to occur of (i) the date of confirmation of sale of the Collateral; (ii) the disbursement of all proceeds of the Collateral collected by such receiver and the payment of all expenses incurred in connection therewith; or (iii) the termination of such receivership with the consent of Agent Lessor or pursuant to an order by a court of competent jurisdiction.

    (f)  To the extent permitted by, and subject to the mandatory requirements of, any applicable Requirement of Law, each and every right, power and remedy herein specifically given to the Agent Lessor or otherwise in this Agreement 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 Agent 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. The Agent Lessor's consent to any request made by the Construction Agent shall not be deemed to constitute or preclude the necessity for obtaining the Agent Lessor's consent, in the future, to all similar requests. No express or implied waiver by the Agent Lessor of any Construction Agency Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Construction Agency Event of Default. To the extent permitted by any Requirement of Law, the Construction Agent hereby waives any rights now or hereafter conferred by statute or otherwise that may require the Agent Lessor to sell, lease or otherwise use the Premises, the other Collateral or any part thereof in mitigation of the Agent Lessor's damages upon the occurrence of a Construction Agency Event of Default or that may otherwise limit or modify any of the Agent Lessor's rights or remedies under this Article V.

    (g) No failure to exercise and no delay in exercising, on the part of the Agent Lessor, any right, remedy, power or privilege under this Agreement or under the other Operative Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

    5.4.  Limitation on Recourse Liability of Construction Agent.  Notwithstanding anything set forth herein to the contrary, prior to the Base Term Commencement Date, the aggregate amount payable by Construction Agent on a recourse basis under Section 3.4  or this Article V as the result of the occurrence of a Construction Termination Event or a Construction Agency Event of Default which is not a Full Recourse Interim Event of Default shall be subject to the limitations therein on the recourse liability of Construction Agent set forth at Article XIII of the Participation Agreement.

    5.5.  Agent Lessor's Right to Cure Construction Agent's Defaults.  The Agent Lessor, without waiving or releasing any obligation or Construction Agency Event of Default, may (but shall be under no obligation to) remedy any Construction Agency Event of Default for the account of and at the sole cost and expense of the Construction Agent (subject to Section 5.4 above), and in furtherance of such right, the Agent Lessor may make Advance Requests, execute the Construction Documents and otherwise exercise all rights and perform all duties of the Construction Agent hereunder and the Lessee under the Participation Agreement with respect to the Construction. All reasonable out of pocket costs and expenses so incurred (including reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Agent Lessor, shall (subject to Section 5.4  above) be paid by the Construction Agent to the Agent Lessor on demand.

ARTICLE VI
NO CONSTRUCTION AGENCY FEE

    6.1.  Lease as Fulfillment of Agent Lessor's Obligations.  Construction Agent will not be entitled to, and the Agent Lessor shall have no obligation to pay, any agency fee or other fee or compensation, and the Construction Agent shall not be entitled to, and the Agent Lessor shall have no obligation to make or pay, any reimbursement therefor, it being understood that this Agreement is being entered into as consideration for and as an inducement to the Agent Lessor and the Construction Agent entering into the Lease and the other Operative Documents.

ARTICLE VII
MISCELLANEOUS

    7.1.  Notices.  All notices, consents, directions, approvals, instructions, requests, demands and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing in the manner provided in, shall be sent to the respective addresses set forth in, and the effectiveness thereof shall be governed by the provisions of, Section 15.3 of the Participation Agreement.

    7.2.  Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Agent Lessor, the Construction Agent and their respective successors and assigns; provided, however, that the Construction Agent shall not assign any of its rights or, except as permitted by Sections 2.4   and 2.5, delegate any of its duties or obligations under this Agreement without the prior written consent of the Agent Lessor, which consent may be granted or withheld in the Agent Lessor's sole and absolute discretion.

    7.3.  GOVERNING LAW.  THIS AGREEMENT 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 TO THE EXTENT PERMITTED BY APPLICABLE LAW (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), EXCEPT AS TO MATTERS RELATING TO THE CREATION OF LIENS AND THE EXERCISE OF REMEDIES WITH RESPECT TO THE PREMISES CONSTITUTING REAL PROPERTY, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA.

    7.4.  Amendments, etc.  The Agent Lessor and the Construction Agent may, from time to time, enter into written amendments, supplements or modifications hereto, subject to the restrictions set forth in Section 15.5 of the Participation Agreement.

    7.5.  Counterparts.  This Agreement may be executed on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

    7.6.  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.

    7.7.  Headings and Table of Contents.  The headings and table of contents contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

    7.8.  Exercise of Agent Lessor's Rights.  Subject to the Excepted Payments, Construction Agent hereby acknowledges and agrees that, subject to and in accordance with the terms of the Assignment of Construction Agency Agreement dated concurrently herewith made by Agent Lessor in favor of Administrative Agent, the rights and powers of Agent Lessor under this Agreement have been assigned to and may be exercised by the Administrative Agent.

    7.9.  Limited Liability.  Construction Agent agrees that Agent Lessor's obligations and liability under this Agreement are limited pursuant to Section 16.11 of the Participation Agreement.

[END OF PAGE]
[SIGNATURE PAGES FOLLOW]

    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.

Attest:	ADC TELECOMMUNICATIONS, INC., as Construction Agent
/s/ Steven T. Chávey	By:	/s/ Gokul Hemmady
	Name:	Gokul Hemmady
	Title:	Vice President/Treasurer
Attest:	LEASE PLAN NORTH AMERICA, INC., not in its individual capacity, but solely as Agent Lessor
	By:	/s/ Blake J. Lacher
	Name:	Blake J. Lacher
	Title:	Vice President

QuickLinks

Table of Contents
CONSTRUCTION AGENCY AGREEMENT
ARTICLE I DEFINITIONS
ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT

ARTICLE III THE FINANCED IMPROVEMENTS
ARTICLE IV PAYMENT OF FUNDS

ARTICLE VI NO CONSTRUCTION AGENCY FEE
ARTICLE VII MISCELLANEOUS

EX-10.JJ

PARTICIPATION AGREEMENT

dated as of October 22, 1999

among

ADC TELECOMMUNICATIONS, INC.,
as Lessee,

LEASE PLAN NORTH AMERICA, INC.
not in its individual capacity
except as expressly stated herein,
but solely as Agent Lessor
for the Participants,

THE PERSONS NAMED ON SCHEDULE I HERETO,
as Participants

and

ABN AMRO BANK N.V., as Administrative Agent

TABLE OF CONTENTS

ARTICLE I DEFINITIONS; INTERPRETATION
SECTION 1.1.	Definitions; Interpretation	1
ARTICLE II DOCUMENT CLOSING DATE
ARTICLE III PURCHASE AND LEASE OF PREMISES; FUNDING OF ADVANCES
SECTION 3.1.	Fundings	2
SECTION 3.2.	Basic Rent; Payments of Rent	4
SECTION 3.3.	Payment of Construction Costs and Fees; Application of Funds	5
SECTION 3.4.	Advance Dates	5
SECTION 3.5.	Capitalization of Certain Amounts During the Funding Period	6
SECTION 3.6.	Postponement of Advance Date	7
SECTION 3.7.	Certificates	8
SECTION 3.8.	Lost, Stolen or Damaged Certificates	8
ARTICLE IV FEES
SECTION 4.1.	Fees	9
SECTION 4.2.	Obligations Several	10
SECTION 4.3.	Highest Lawful Rate	10
SECTION 4.4.	Extension of Expiration Date	11
ARTICLE V CERTAIN INTENTIONS OF THE PARTIES
SECTION 5.1.	Nature of Transaction	12
SECTION 5.2.	Amounts Due Under Lease	12
SECTION 5.3.	Distribution	13
SECTION 5.4.	Other Payments	16
ARTICLE VI CONDITIONS PRECEDENT TO ADVANCES; COMPLETION DATE CONDITIONS
SECTION 6.1.	Conditions Precedent to the Initial Advance Date	16
SECTION 6.2.	Conditions Precedent to each Advance	20
SECTION 6.3.	Deliveries Upon Completion	21
ARTICLE VII REPRESENTATIONS
SECTION 7.1.	Representations of the Participants	22
SECTION 7.2.	Representations of Lessee	23
SECTION 7.3.	Representations of Lessee with Respect to Each Advance	31
SECTION 7.4.	Representations of Agent Lessor	32
ARTICLE VIII COVENANTS OF LESSEE
SECTION 8.1.	Covenants of Lessee	33
SECTION 8.2.	Limitation on Liens	38
SECTION 8.3.	Disposition of Assets	39
SECTION 8.4.	Consolidations and Mergers	40
SECTION 8.5.	Loans and Investments	40
SECTION 8.6.	Limitation on Indebtedness	41
SECTION 8.7.	Transactions with Affiliates	41
SECTION 8.8.	Use of Proceeds	41
SECTION 8.9.	Contingent Obligations	42
SECTION 8.10.	Lease Obligations	42
SECTION 8.11.	Restricted Payments	42
SECTION 8.12.	ERISA	43
SECTION 8.13.	Change in Business	43
SECTION 8.14.	Accounting Changes	43
SECTION 8.15.	Negative Pledges, Restrictive Agreements, etc.	43
SECTION 8.16.	Ability to Amend; Restrictive Agreements	43
SECTION 8.17.	Net Worth	43
SECTION 8.18.	Funded Debt to EBITDA Ratio	43
SECTION 8.19.	EBITDA to Interest Expense Ratio	44
ARTICLE IX OTHER COVENANTS AND AGREEMENTS
SECTION 9.1.	Covenants of the Participants and Agent Lessor	44
SECTION 9.2.	Withholding	44
ARTICLE X LESSEE DIRECTIONS; REPLACEMENT OF PARTICIPANTS
SECTION 10.1.	Lessee Directions	45
SECTION 10.2.	Replacement of Participants	45
ARTICLE XI TRANSFERS OF PARTICIPANTS' INTERESTS
SECTION 11.1.	Assignments	46
SECTION 11.2.	Participations	47
SECTION 11.3.	Binding Effect; Disclosure of Information; Pledge Under Regulation A	47
ARTICLE XII INDEMNIFICATION
SECTION 12.1.	Indemnification	47
SECTION 12.2.	Environmental Indemnity	51
SECTION 12.3.	Premises Indemnity	52
SECTION 12.4.	Proceedings in Respect of Claims	52
SECTION 12.5.	General Tax Indemnity	54
SECTION 12.6.	Gross Up	58
ARTICLE XIII LIMITATION ON RECOURSE LIABILITY DURING CONSTRUCTION PERIOD
ARTICLE XIV LIBOR PROVISIONS; ADDITIONAL COSTS
SECTION 14.1.	LIBO Rate Lending Unlawful	58
SECTION 14.2.	Deposits Unavailable	58
SECTION 14.3.	Increased Costs, etc.	59
SECTION 14.4.	Funding Losses	59
SECTION 14.5.	Increased Capital Costs	59
SECTION 14.6.	After Tax Basis	60
SECTION 14.7.	Funding Office	60
ARTICLE XV MISCELLANEOUS
SECTION 15.1.	Survival of Agreements	60
SECTION 15.2.	No Broker, etc.	60
SECTION 15.3.	Notices	60
SECTION 15.4.	Counterparts	60
SECTION 15.5.	Amendments	61
SECTION 15.6.	Headings, etc.	61
SECTION 15.7.	Parties in Interest	61
SECTION 15.8.	GOVERNING LAW	61
SECTION 15.9.	Severability	61
SECTION 15.10.	Liability Limited	62
SECTION 15.11.	Further Assurances	62
SECTION 15.12.	Submission to Jurisdiction	62
SECTION 15.13.	WAIVER OF JURY TRIAL	62
SECTION 15.14.	Limited Liability of Agent Lessor	63
SECTION 15.15.	Payment of Transaction Expenses and Other Costs	63
SECTION 15.16.	Reproduction of Documents	63
SECTION 15.17.	Non-Petition	64
SECTION 15.18.	Assignment of Tranche A1 Participant's Interest to Purchasers	64
SECTION 15.19.	Deliveries to Participants	64
SECTION 15.20.	Excess Funds	64
ARTICLE XVI AGENTS
SECTION 16.1.	Appointment of Agents; Powers and Authorization to Take Certain Actions	65
SECTION 16.2.	Reliance	66
SECTION 16.3.	Action Upon Instructions Generally	66
SECTION 16.4.	Indemnification	66
SECTION 16.5.	Independent Credit Investigation	67
SECTION 16.6.	Refusal to Act	67
SECTION 16.7.	Resignation or Removal of an Agent; Appointment of Successor	67
SECTION 16.8.	Separate Agent Lessor	67
SECTION 16.9.	Termination of Agency	68
SECTION 16.10.	MERGER	68
SECTION 16.11.	Limitations	68
SECTION 16.12.	Confidentiality	69

APPENDICES
APPENDIX 1	—	Definitions and Interpretation
APPENDIX 2	—	Conditions Precedent to Document Closing Date

SCHEDULES
SCHEDULE I	—	Participants' Commitments
SCHEDULE II	—	Notice Information, Payment Offices and Applicable Lending Offices
SCHEDULE 6.1(f)	—	Filings and Recordings
SCHEDULE 7.2(a)	—	List of Subsidiaries
SCHEDULE 7.2(e)	—	Litigation
SCHEDULE 7.2(l)	—	ERISA Compliance
SCHEDULE 7.2(n)	—	Governmental Regulations of the State Applicable to Agents and Participants
SCHEDULE 7.2(x)	—	Environmental Matters
SCHEDULE 7.2(y)	—	Appraisal Data
SCHEDULE 7.2(cc)	—	Ownership, Nature, Condition and Use of the Premises
SCHEDULE 8.2	—	Existing Liens
SCHEDULE 8.5	—	Loans and Investments
SCHEDULE 8.6	—	Existing Indebtedness
SCHEDULE 8.9	—	Contingent Obligations

EXHIBITS
EXHIBIT A	—	Form of Advance Request
EXHIBIT B	—	Form of Certificate
EXHIBIT C	—	Form of Officer's Certificate of Lessee
EXHIBIT D	—	Form of Legal Opinion
EXHIBIT E	—	Form of Initial Advance Date Certificate of Construction Agent
EXHIBIT F	—	Construction Agency Agreement
EXHIBIT G	—	Responsible Officer's Certificate
EXHIBIT H	—	Construction Agent's Construction Certificate
EXHIBIT I	—	Architect's Certificate
EXHIBIT J	—	Construction Agent's Completion Certificate
EXHIBIT K	—	Certificate of Chief Financial Officer
EXHIBIT L	—	Assignment Agreement
EXHIBIT M	—	Transfer Agreement

PARTICIPATION AGREEMENT

    THIS PARTICIPATION AGREEMENT (this "Participation Agreement"), dated as of October 22, 1999, is entered into by and among ADC TELECOMMUNICATIONS, INC., a Minnesota corporation (together with its permitted successors and assigns, the "Lessee"); LEASE PLAN NORTH AMERICA, INC., not in its individual capacity except as expressly stated herein, but solely as agent for the Participants (in such capacity, together with its successor and assigns in such capacity, the "Agent Lessor"); and the Persons named on Schedule I  hereto (together with their respective permitted successors, assigns and transferees, each, a "Participant", and collectively, the "Participants") and ABN AMRO BANK N.V., a bank organized under the laws of the Netherlands, as administrative agent for the Participants (in such capacity, the "Administrative Agent").

W I T N E S S E T H:

    A.  Lessee, the Participants, Agent Lessor and the Administrative Agent have entered into this Participation Agreement and are entering into the other Operative Documents for the purpose of providing financing for Lessee for the construction of the Financed Improvements on the Land.

    B.  On the initial Advance Date, Lessee will lease the Land to Agent Lessor and Agent Lessor will lease the Land from Lessee pursuant to the Ground Lease. Pursuant to the Lease, Agent Lessor will sublease the Land to Lessee, and will lease Agent Lessor's interest in the Financed Improvements to Lessee upon the construction thereof.

    C.  Pursuant to the Construction Agency Agreement, Agent Lessor will appoint Lessee to act as Construction Agent to design, procure and construct the Financed Improvements using Advances funded by the Participants.

    D.  Subject to the terms and conditions of this Participation Agreement and the other Operative Documents, the Tranche B Participants and the Tranche C Equity Participants are willing to provide to Agent Lessor through fundings to the Administrative Agent a portion of the funding of the Construction Costs.

    E.  Subject to the terms and conditions of this Participation Agreement and the other Operative Documents, Agent Lessor wishes to obtain, and the Tranche A1 Participant may provide through fundings to the Administrative Agent, financing of the remaining portion of the funding of the Construction Costs out of the proceeds from the issuance of Commercial Paper.

    F.  If, for any reason, the Tranche A1 Participant elects not to issue Commercial Paper and lend such proceeds, subject to the terms and conditions of this Participation Agreement and the other Operative Documents, the Committed Tranche A Participants are willing to provide through fundings to the Administrative Agent financing for the remaining portion of the funding of the Construction Costs.

    G.  To secure the repayment of Lessee's obligations under the Lease and the other Operative Documents, Agent Lessor, on behalf of the Participants, and the Participants will have the benefit of a Lien on the Premises.

    NOW, THEREFORE, in consideration of the mutual agreements contained in this Participation Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS; INTERPRETATION

    SECTION 1.1.  Definitions; Interpretation.  Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix 1 hereto for all purposes hereof; and the rules of interpretation set forth in Appendix 1 hereto shall apply to this Participation Agreement; and capitalized terms used and not defined herein or in Appendix 1 hereto shall have the meanings assigned thereto in Section 1.1 of the Transfer Agreement.

ARTICLE II
DOCUMENT CLOSING DATE

    This Participation Agreement shall be effective as of the earliest date (on or before October 22, 1999) (the "Document Closing Date") on which all of the conditions precedent set forth in Appendix 2 hereto have been satisfied or waived by the applicable parties as set forth therein.

ARTICLE III
PURCHASE AND LEASE OF PREMISES; FUNDING OF ADVANCES

    SECTION 3.1.  Fundings.

    (a) Ground Lease; Grants of Liens. Subject to the terms and conditions of this Participation Agreement, (i) on the Document Closing Date, Agent Lessor and Lessee will enter into (A) the Ground Lease pursuant to which Lessee shall lease to Agent Lessor and Agent Lessor shall lease from Lessee the Land for the Term (as defined in the Ground Lease), (B) the Lease pursuant to which Agent Lessor shall sublease to Lessee, and Lessee shall sublease from Agent Lessor, the Land for the Term, and Agent Lessor shall lease to Lessee and Lessee shall lease from Agent Lessor, Agent Lessor's interest in the Improvements for the Term, with the Base Term commencing on the Base Term Commencement Date and (C) the Construction Agency Agreement pursuant to which Agent Lessor will appoint Lessee as Agent Lessor's Construction Agent to complete Construction of the Financed Improvements, and (ii) on the initial Advance Date, Lessee and Agent Lessor shall enter into and record the Memorandum of Lease and the related UCC financing statements.

    (b) Fundings of Construction Costs. Subject to the terms and conditions of this Participation Agreement (including the limitations set forth in Section 3.1(d)) and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, on each Advance Date, the Administrative Agent shall make an Advance, using funds provided by the Participants, the proceeds of which shall be used by Construction Agent for the payment of Construction Costs (including Capitalized Tranche A and Tranche B Basic Rent and Capitalized Tranche C Equity Basic Rent relating to any Tranche A Basic Rent and Tranche B Basic Rent and Tranche C Equity Basic Rent accrued during the Interest Period immediately preceding such Advance and the payment of accrued Fees and Transaction Expenses).

    (c) Fundings by Tranche C Equity, Tranche B and Tranche A Participants. Subject to the terms and conditions of this Participation Agreement (including the limitations set forth in Section 3.1(d)) 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, on each Advance Date each Tranche C Equity Participant shall Fund to the Administrative Agent by wire transfer in accordance with the instructions set forth in the Advance Request an amount in immediately available funds on such Advance Date equal to such Tranche C Equity Participant's Commitment Percentage of the aggregate amount of the requested Advance. Subject to the terms and conditions of this Participation Agreement (including the limitations set forth in Section 3.1(d)) 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, on each Advance Date each Tranche B Participant shall Fund to the Administrative Agent by wire transfer in accordance with the instructions set forth in the Advance Request an amount in immediately available funds on such Advance Date equal to such Tranche B Participant's Commitment Percentage of the aggregate amount of the requested Advance. Subject to the terms and conditions of this Participation Agreement (including the limitations set forth in Section 3.1(d)) and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, upon receipt of a Advance Request, on each Advance Date, Tranche A1 Participant in its sole discretion may Fund to the Administrative Agent by wire transfer in accordance with the instructions set forth in the Advance Request an amount in immediately available funds on such Advance Date equal to such Tranche A1 Participant's Commitment Percentage of the aggregate amount of the requested Advance by issuing Commercial Paper. If the Tranche A1 Participant elects in its sole discretion not to make any Advance with respect to an Advance Date, the Administrative Agent, on behalf of the Tranche A1 Participant, shall give written notice thereof to the Committed Tranche A Participants no later than 11:00 a.m. New York, New York time the Business Day preceding such Advance Date, and upon delivery of said notice each Committed Tranche A Participant shall Fund to the Administrative Agent by wire transfer in accordance with the instructions set forth in the Advance Request an amount equal to such Committed Tranche A Participant's Commitment Percentage of the aggregate amount of the requested Advance. Unless the Administrative Agent shall have been notified in writing by any Participant prior to funding its Advance that such Participant will not make its share of such Advance available to the Administrative Agent, the Administrative Agent may assume that such Participant is making such amount available to the Administrative Agent. If such Participant's share of such Advance is not made available to the Administrative Agent by such Participant on or prior to such Advance Date, the Administrative Agent shall not be required to make such Advance to Lessee.

    If, pursuant to the Transfer Agreement any Committed Tranche A Participant has funded its Commitment in a Non-Renewal Collateral Account pursuant to Section 4.12(e) of the Transfer Agreement or into a Downgrade Collateral Account pursuant to Section 4.12(c) of the Transfer Agreement, then the portion of Advances to be funded hereunder applicable to such Committed Tranche A Participant shall be funded by such Committed Tranche A Participant out of the Non-Renewal Collateral Account or the Downgrade Collateral Account, as applicable, in accordance with the terms of the Transfer Agreement. The parties acknowledge that the Tranche A1 Participant shall not be obligated to make a Funding on any Advance Date notwithstanding the use of the terms "Commitment", "Available Commitment" or "Commitment Percentage" in relation to the Tranche A1 Participant.

    (d) Advances; Limitations and Limits. Notwithstanding the foregoing, (i) the Funding by each Participant on such Advance Date shall not exceed such Participant's Available Commitment, (ii) the Advance made by the Administrative Agent to Lessee on such Advance Date, together with all prior outstanding Advances, shall not exceed the Aggregate Commitment Amount and (iii) the aggregate amount of Advances used to pay Eligible Transaction Expenses and accrued Fees or to reimburse Lessee for Eligible Transaction Expenses as set forth on the Advance Requests shall not exceed at any time 2% of the Aggregate Commitment Amount. Each Advance shall be used solely (i) to reimburse Construction Agent for any Construction Costs paid by Construction Agent prior to the date of the Advance Request for such Advance for which Construction Agent has not previously been reimbursed hereunder or to pay Construction Costs which are due and payable on or prior to the proposed Advance Date and (ii) to fund Capitalized Tranche A and Tranche B Basic Rent, Capitalized Tranche C Equity Basic Rent and to pay accrued Fees and Transaction Expenses provided for, and in the manner set forth, in Section 4.1(b)  and Section 15.15.

    The initial Advance Date shall occur on or before November 1, 1999. Each Advance Date shall be on a Business Day, and there shall be no more than one Advance Date during any calendar month. Each Advance made on a Advance Date shall be in a minimum amount equal to $1,000,000 (except for the initial Advance, which shall be in a minimum amount of $500,000), or an integral multiple of $100,000 in excess thereof, provided, that so long as an Advance is for the full amount of the aggregate Available Commitment and exceeds the minimum threshold of $1,000,000, such Advance need not be in an integral multiple of $100,000. All Fundings made by Participants for the Funding of any Advance shall be made in immediately available federal funds by wire transfer to the Administrative Agent at the Administrative Agent's address referred to in Schedule II  hereto. In the case of Fundings by the Committed Participants, such Funds shall be remitted to the Administrative Agent prior to 12:00 noon (New York, New York time) on the Advance Date specified in the relevant Advance Request and, in the case of a Funding by the Tranche A1 Participant, such Funds shall be remitted to the Administrative Agent promptly following such Participant's receipt of sufficient proceeds from its issuance of Commercial Paper. Notwithstanding the foregoing, if the terms and conditions for such Advance set forth herein have not been satisfied by 10:00 a.m. New York, New York time on the Advance Date specified in such Advance Request, no Participant shall be obligated to maintain the availability of its funds for such Advance unless such Participant has received a satisfactory indemnity for the overnight investment of such funds. Upon the Administrative Agent's receipt of such funds from the Participants, subject to the conditions herein, the Administrative Agent shall wire such funds to Lessee for deposit on the applicable Advance Date to such account as Lessee shall have indicated in the Advance Request. The Funding by each Participant to the Administrative Agent of its respective portion of an Advance shall constitute authorization and direction by such party to the Administrative Agent to make an Advance pursuant to this Article III.

    (e) Termination of Commitments. Notwithstanding anything in this Participation Agreement to be the contrary, the Commitments shall terminate and no Participant shall be obligated to make any Advance, and no Advance Date may occur, in each case of the foregoing, after the occurrence of 2:00 p.m. New York, New York time on the last day of the Commitment Period.

    SECTION 3.2.  Basic Rent; Payments of Rent.

    (a) Allocation of Basic Rent. Subject to the priority of distributions set forth in Section 5.3(d) and (f), the Tranche A1 Participant shall be entitled to all Tranche A1 Basic Rent, the Tranche A2 Participant shall be entitled to all Tranche A2 Basic Rent, the Tranche A3 Participant shall be entitled to all Tranche A3 Basic Rent, the Tranche B Participant shall be entitled to all Tranche B Basic Rent, and the Tranche C Equity Participant shall be entitled to all Tranche C Equity Basic Rent.

    (b) Computations. Basic Rent shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed at all times that Basic Rent is calculated by reference to the Alternate Base Rate, and Basic Rent at all other times shall be calculated on the basis of a 360-day year for the actual days elapsed.

    (c) Funding of Rent During Interim Term. Except as provided for in the following sentence and excluding amounts payable by other Persons which Lessee is required to pay over to the Administrative Agent or any Participant, (i) Basic Rent due, Fees payable pursuant to Section 4.1 and other Supplemental Rent due in each case during the Interim Term shall be payable solely from Advances to pay such Rent pursuant to the terms and conditions of Section 3.1 and to the extent of the Available Commitments. All payments or other amounts (i) required to be made by Lessee during the Interim Term pursuant to Articles X, XII or  XIV, (ii) which constitutes a deductible or self insurance amount payable by Lessee or its Affiliates with respect to any insurance policy required to be maintained pursuant to Section 13.1(a) or 13.1(b) of the Lease, and (iii) subject to the limitation at Section 16.6 of the Lease and Section 5.4 of the Construction Agency Agreement (to the extent applicable) payable by Lessee pursuant to any of Articles XV, XVI or XVIII of the Lease or by Construction Agent pursuant to Section 3.4(b) of the Construction Agency Agreement, shall be the direct recourse obligations of Lessee and shall not be payable with Advances. In the event that Lessee pays the Purchase Amount to the Administrative Agent in connection with Lessee's purchase of the Premises in accordance with Section 15.1, 16.2(e), 18.1, 18.2 or Article XIX of the Lease, the Administrative Agent will prepay the entire outstanding principal amount of the Certificate Amounts in accordance with Section 5.3. Each of the Participants hereby acknowledges that its Certificate Amounts, as the case may be, may be so prepaid without any prepayment premium (other than Break Costs, if any).

    SECTION 3.3.  Payment of Construction Costs and Fees; Application of Funds.  To the extent provided for in this Agreement and the other Operative Documents, Lessee shall pay all Construction Costs as such costs become due. On the initial Advance Date and on each subsequent Advance Date, upon the satisfaction of the terms and conditions of this Participation Agreement, the Administrative Agent shall make an Advance from funds made available by the Participants pursuant to Section 3.1(c) in the amount specified in the applicable Advance Request either, (i) to the extent the Construction Costs have not been previously paid and are then due and payable, to the Persons entitled to the payment thereof, or (ii) to Lessee to reimburse Construction Agent for Construction Costs incurred and paid by Construction Agent on behalf of Agent Lessor and for which Construction Agent has not been previously reimbursed, provided,  however, that all Fundings for Capitalized Tranche A and Tranche B Basic Rent, Capitalized Tranche C Equity Basic Rent, Fees, and, if specified in the Advance Request, any other Supplemental Rent payable to any Participant will be Funded directly to the Participant to which such amount is due.

    SECTION 3.4.  Advance Dates.

    (a) Notice and Closing. No later than 12:00 noon New York time, at least three (3) Business Days prior to the initial Advance Date and each other proposed Advance Date, Lessee, in its capacity as Construction Agent, shall deliver to the Administrative Agent (which shall promptly forward a copy of such Advance Request to each Participant) an irrevocable written notice substantially in the form of Exhibit A (an "Advance Request"), setting forth:

     (i) the proposed Advance Date;

    (ii) a statement of the amount of the requested Advance (including a statement of the amount thereof, if any, that will be used to Fund Capitalized Tranche A and Tranche B Basic Rent and Capitalized Tranche C Equity Basic Rent, and to pay Fees and Transaction Expenses);

    (iii) with respect to the initial Advance, an estimate of the Estimated Construction Costs and the Estimated Completion Date; and

    (iv) With respect to each Advance:

    (A) a description of all Construction Costs, by type and amount, to which such Advance applies, indicating which portion of such Construction Costs have been paid by Construction Agent and for which Construction Agent has not been reimbursed hereunder, and the portion of the Construction Costs which are then due and unpaid and the identity of the Persons entitled to such payments (including a description of all Soft Costs and Transaction Expenses);

    (B) a certification by Construction Agent that: (I) the aggregate amount to be Funded by the Participants on such Advance Date, together with Advances made on all prior Advance Dates, does not exceed the lesser of: 1) the Aggregate Commitment Amount or 2) 100% of the estimated as-built Fair Market Value of the Financed Improvements as set forth in the Appraisal, (II) the aggregate amount to be funded by the Participants on such Advance Date, together with all Advances made on all prior Advance Dates, does not exceed the aggregate amount set forth in the Approved Construction Budget for the construction line items to be paid with the proceeds of such Advance, (III) all conditions to Construction Agent's right to request an Advance for Construction Costs pursuant to the Construction Agency Agreement have been fully satisfied, (IV) all conditions set forth in the Construction Agency Agreement to the disbursement of all prior Advances to Lessee in respect of Construction Costs have been fully satisfied to the extent not waived in accordance with the Operative Documents and (V) the Construction is proceeding in accordance with the schedule set forth in the Approved Construction Schedule or if not in accordance with the approved Construction Schedule, specifying the amount of delay and estimated cost; and

    (C) wire transfer instructions for the disbursement of the appropriate amount of funds to Lessee or to such other Persons entitled to such Advance.

Any such Advance Request for an Advance shall also be accompanied by the certifications required under the Construction Agency Agreement.

All documents and instruments required to be delivered on the Document Closing Date or initial Advance Date pursuant to this Participation Agreement shall be delivered at the offices of Mayer, Brown & Platt, 190 S. LaSalle Street, Chicago, Illinois, or at such other location as the Administrative Agent and Lessee may agree. All documents and instruments required to be delivered on any subsequent Advance Date pursuant to this Participation Agreement shall be delivered to the Administrative Agent, or at such other location as the Required Participants and Lessee may agree. On the scheduled Advance Date, and subject to the satisfaction of the conditions set forth in Sections 6.1  and 6.2, and with respect to the Tranche A1 Participant, subject to the last sentence of Section 3.1(c), the Participants shall Fund the Advance by wire transfer directly to the Administrative Agent. Notwithstanding the foregoing, in the event that Agent Lessor elects to terminate the Construction Agency Agreement and to cause the completion of the Financed Improvements to be constructed pursuant to Section 5.3(c) of the Construction Agency Agreement, then Agent Lessor may submit Advance Requests, the aggregate amount available to be Funded by the Participants shall equal the aggregate amount of the Available Commitments (without regard to the limitations in Section 3.4(a)(iv)(B), but in all cases subject to the limitations and limits set forth in the first paragraph of Section 3.1(d)), and such amounts shall be disbursed directly to Agent Lessor for the payment of Construction Costs.

    (b) Commitment. Subject to compliance by Lessee, as the Construction Agent, with the terms of this Participation Agreement and the satisfaction or waiver of the conditions set forth in this Article III and in Article VI, and in the case of the Tranche A1 Participant, subject to the last sentence of Section 3.1(c), the Participants shall disburse the respective amounts of their Commitments in accordance with the requirements of this Participation Agreement.

    SECTION 3.5.  Capitalization of Certain Amounts During the Funding Period.

     (i) During the Interim Term, on each date which is four (4) Business Days prior to any Payment Date, Construction Agent shall be deemed to have requested an Advance in an amount equal to Capitalized Tranche A and Tranche B Basic Rent and Capitalized Tranche C Equity Basic Rent accrued on the Certificate Amounts, with an Interest Period ending on such Payment Date. The Advance Date with respect to each such Advance for such accrued Capitalized Tranche A and Tranche B Basic Rent and Capitalized Tranche C Equity Basic Rent shall be the relevant Payment Date (subject to the terms and conditions for an Advance set forth in this Participation Agreement) and the proceeds of such Advance shall be applied to pay such accrued Capitalized Tranche A and Tranche B Basic Rent and Capitalized Tranche C Equity Basic Rent. On each such Advance Date as to which such an Advance is being made, the Certificate Amounts shall be increased by an amount equal to the Capitalized Tranche C Equity Basic Rent and Capitalized Tranche A and Tranche B Basic Rent, as applicable, Funded on such date, and the Construction Costs shall be increased by an amount equal to the Capitalized Tranche A and Tranche B Basic Rent and the Capitalized Tranche C Equity Basic Rent so funded; provided, however, that if an Advance hereunder would exceed the limitations and limits set forth in the first paragraph of Section 3.1(d), no Participant shall have any obligation to make any such Advance.

    (ii) If any Participant shall request the Administrative Agent to capitalize the amount of (A) any Claims relating to a Nonrelated Construction Event, or (B) any loss or liability pursuant to Section 14.1(e) or Article XV of the Lease, any such amount shall be capitalized by automatically treating such amount as an Advance (funded by such Participant) and shall increase the Participant Balances by the aggregate amount so capitalized; provided, however, that Lessee shall have no obligation to pay any such capitalized amounts if Lessee exercises the Sale Option and pays the Residual Value Guarantee Amount, other than from the Proceeds after repayment of the Residual Value Guarantee Amount as described at Section 5.3(d). If any such capitalized amounts are included in the Certificate Amount or Participant Balance (the "3.5(ii) portion" of the Certificate Amount or Participant Balance), all Lessee payments and other amounts applied to the Certificate Amount or Participant Balance shall be applied as provided in Section 5.3. The Administrative Agent shall notify Lessee and each Participant of each amount capitalized and treated as an Advance (and a related increase in Participant Balances therein) under this Section 3.5(ii) within fifteen (15) days after each such Advance.

    SECTION 3.6.  Postponement of Advance Date.  In the event that any Committed Participant fails to make available to the Administrative Agent on the applicable Advance Date (such originally scheduled Advance Date being referred to as the "Scheduled Advance Date" for purposes of this Section 3.6) an amount equal to such Committed Participant's Commitment Percentage of the amount of the Advance required by the terms hereof to be funded on such Advance Date (a "Defaulting Committed Participant"), or the Administrative Agent determines that a Committed Participant will become a Defaulting Committed Participant on the Scheduled Advance Date, the Administrative Agent shall promptly notify Lessee thereof and Lessee may postpone such Advance Date by delivering notice to the Administrative Agent of such postponement and of the date to which such Advance Date has been postponed (such notice to be received by no later than 9:00 a.m. New York, New York time, on the Scheduled Advance Date, and the term "Advance Date" as used herein shall mean such postponed Advance Date). If a Scheduled Advance Date is so postponed or if an Advance Date fails to occur: (i) Lessee shall reimburse each Participant (other than the Defaulting Committed Participant) for loss of the use of its funds occasioned by such postponement or failure to occur by paying to such Participant on demand interest at a rate per annum equal to the sum of the Federal Funds Effective Rate plus 0.50%, for the period from and including such Scheduled Advance Date, if such Participant has made its funds available, to but excluding the earlier of the date upon which such funds are returned (unless such funds are returned after 12:00 noon New York, New York time in which case such date of return shall be included) or the Advance Date, together with any Break Costs; except that Lessee shall in any event pay to each Participant at least one day's interest on the amount of such funds, unless such Participant receives before 12:00 noon New York, New York time on the Business Day preceding the Scheduled Advance Date, a notice of postponement of the Scheduled Advance Date pursuant to this Section 3.6 and (ii) the Administrative Agent shall return not later than 2:00 p.m. on the first Business Day following the Scheduled Advance Date (unless such return date is the postponed Advance Date), any funds received from such Participant as its portion of the Advance payable on such Scheduled Advance Date. Lessee shall have the right to pursue a claim with respect to such costs against any Defaulted Committed Participant.

    SECTION 3.7.  Certificates.  Each Participant shall have an undivided interest in Agent Lessor's interest in the Lease and Lessee's obligations thereunder and under the other Operative Documents to pay Basic Rent, the Lease Balance and any Supplemental Rent to which such Participant is entitled under the Operative Documents and in the amounts and priorities set forth at Section 5.3. The interests of each Participant shall be evidenced by a certificate or certificates in the form of Exhibit B, with appropriate insertions, issued by Lessee indicating such Participant's interest in the Basic Rent and all other amounts distributable to such Participant pursuant to Section 5.3  (each such certificate, and any and all certificates issued in replacement or exchange therefor being a "Certificate"). Lessee hereby irrevocably authorizes each Participant to make (or cause to be made) appropriate notations on the grid attached to such Participant's Certificates (or on any continuations of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding amount of, and the interest rate applicable to the interests evidenced thereby. Such notations shall be conclusive and binding on Lessee absent manifest error; provided, however the failure of any Participant to make any such notations shall not limit or otherwise affect any Obligations of Lessee. In addition to the agency established pursuant to Artice XVI, the Administrative Agent is appointed the agent of each Participant for the limited purpose of transfer and exchange of the Certificates, and, as such, each Participant agrees that the Administrative Agent shall be entitled to the rights and bound by the provisions of Article XVI with respect to such agency, including the limitations on liability set forth therein. The Administrative Agent shall, as agent for Participants, maintain at its office a register for the purpose of registering the Certificate or Certificates originally issued hereunder and all transfers and exchanges thereof. A Participant intending to transfer any or all of its Certificates in accordance with Section 11.1, or to exchange any or all of its Certificates for Certificates evidencing a different interest, shall surrender such Certificate or Certificates to the Administrative Agent at its office set forth on Schedule II, together with a written request from such Participant (a copy of which such Participant shall also send to Lessee) for the issuance of a new Certificate or Certificates, specifying the interests to be evidenced thereby and, in the case of a surrender for registration of transfer, the name and address of the new Participant. Promptly upon receipt of such documents by the Administrative Agent, Lessee shall execute and the Administrative Agent shall authenticate and deliver at no charge to Participant, a new Certificate or Certificates in the same form, evidencing the same aggregate interest and dated the same date or dates as the Certificate or Certificates surrendered. The Administrative Agent, at no charge to Participant, shall make a notation on each new Certificate of the amount of all payments previously made on the old Certificate or Certificates with respect to which such new Certificate is issued and the date to which payments with respect to the old Certificate or Certificates have been paid. Such notations, and the grid attached to each Certificate, shall be prepared by the Administrative Agent, and shall be conclusive and binding absent manifest error. The Participant requesting such transfer or exchange shall be responsible for all stamp taxes related thereto. Lessee, the Administrative Agent and the Participants may deem the owner of each Certificate reflected in the register as the owner thereof for all purposes. The Administrative Agent shall not be responsible for determining if any transferee satisfies the requirements of Section 11.1. In maintaining the register and registering therein the transfers and exchanges of Certificates as required under this Section 3.7, the Administrative Agent shall act as the agent of Lessee, as the issuer of the Certificates, at Lessee's sole cost and expense, for purposes of complying with the requirements of Treas. Reg. §5f.103-1(c)(1), in order to cause the certificates to qualify for the "portfolio interest exemption" under Section 871(h) and related Sections of the Code and applicable regulations thereunder. As such agent, Lessee agrees that the Administrative Agent shall be entitled to the rights and bound by the provisions of Article XVI with respect to such agency, including the limitations on liability set forth therein.

    SECTION 3.8.  Lost, Stolen or Damaged Certificates.  If any Participant's Certificate shall become mutilated, destroyed, lost or stolen, Lessee shall, upon the written request of the appropriate Participant, execute and deliver in replacement thereof and at no charge to Participant, a new Certificate in the same form, evidencing the same interest and dated the same date as the Certificate so mutilated, destroyed, lost or stolen. If the Certificate being replaced has become mutilated, such Certificate shall be surrendered to the Administrative Agent and a photocopy thereof shall be furnished to Lessee by the Administrative Agent. If the Certificate being replaced has been destroyed, lost or stolen, the Participant requesting a replacement Certificate shall furnish to Lessee and the Administrative Agent such reasonable security or indemnity as may be required by each of them to save them harmless if the Participant has not furnished them satisfactory evidence of the destruction, loss or theft of the Certificate; provided, that if the Certificate being replaced is registered in the name of any institutional investor then the affidavit of such authorized officer of Participant in form reasonably satisfactory to the Administrative Agent, setting forth the fact of destruction, loss or theft and of ownership of the Certificate at the time thereof shall be satisfactory evidence and no security or indemnity shall be required other than the written agreement of such person, in form reasonably satisfactory to the Administrative Agent, to indemnify and hold harmless Lessee and the Administrative Agent from all risks resulting from the authentication and delivery of a substitute Certificate. The Participant requesting replacement hereunder shall be responsible for all stamp taxes relating to such replacement.

ARTICLE IV
FEES

    SECTION 4.1.  Fees.

    (a) Lessee covenants and agrees that shall it shall pay the Fees described in Section 4.1(b).

    (b) Fees.  From time to time during the Lease Term, Lessee agrees to pay to the Administrative Agent for the benefit of the Person entitled thereto, the fees (collectively, the "Fees") listed in and which shall be payable on the dates set forth in the Program Fee Letter set forth below:

     (i) Lessee shall pay to the Tranche B Participants from time to time during the Commitment Period a commitment fee (the "Tranche B Commitment Fee") at a rate per annum equal to the Applicable Commitment Fee Rate on an amount equal to the daily unused portion of such Participant's Commitment; such Tranche B Commitment Fees being payable by Lessee on each Payment Date during the Commitment Period, which Tranche B Commitment Fees will be distributed by the Administrative Agent to the Tranche B Participants in accordance with their respective Commitment Percentages.

    (ii) Lessee shall pay to the Tranche C Equity Participants from time to time during the Commitment Period a commitment fee (the "Tranche C Equity Commitment Fee" and together with the Tranche A Commitment Fee and the Tranche B Commitment Fee, collectively, the "Commitment Fees") at a rate per annum equal to the Applicable Commitment Fee Rate on an amount equal to the daily unused portion of such Participant's Commitment; such Tranche C Equity Commitment Fees being payable by Lessee on each Payment Date during the Commitment Period, which Tranche C Equity Commitment Fees will be distributed by the Administrative Agent to the Tranche C Equity Participants in accordance with their respective Commitment Percentages.

    The Administrative Agent shall provide to Lessee from time to time not less than six (6) Business Days prior to the due date(s) for the Commitment Fees, a written statement of the amount of the Commitment Fees then due, the due date therefor and the calculation thereof; provided, however, that the Administrative Agent's failure to give such notice shall not relieve Lessee of its obligation to pay timely all Commitment Fees. The Commitment Fees shall be payable in arrears on each Payment Date and shall be computed on the basis of the actual number of days from and including each Payment Date to but excluding the next succeeding Payment Date (or for any partial period, for the actual number of days in such partial period, including the first day of such partial period but excluding the last day of such partial period), for which such Commitment Fees are payable over a year of 360 days; provided,  however, that the initial period for the Commitment Fees shall be the period from and including the Document Closing Date to but excluding the immediately succeeding Payment Date.

    (iii) Lessee shall pay to Agent Lessor and the Administrative Agent for its own account the fees listed in and which shall be payable on the dates set forth in the Program Fee Letter.

    SECTION 4.2.  Obligations Several.  The obligations of the Participants hereunder or elsewhere in the Operative Documents shall be several and not joint; and no Participant shall be liable or responsible for the acts or defaults of any other party hereunder or under any other Operative Document.

    SECTION 4.3.  Highest Lawful Rate.  It is the intention of the parties hereto to conform strictly to applicable usury laws and, anything herein to the contrary notwithstanding, the obligations of (x) Lessee to Agent Lessor and the Participants under this Participation Agreement and the Lease, and (y) Lessee or any other party under any other Operative Document shall be subject to the limitation that payments of interest or of other amounts constituting interest under Applicable Laws shall not be required to the extent that receipt thereof would be in excess of the Highest Lawful Rate, or otherwise contrary to provisions of law applicable to the recipient limiting rates of interest which may be charged or collected by the recipient. Accordingly, if the transactions or the amount paid or otherwise agreed to be paid for the use, forbearance or detention of money under this Participation Agreement, the Lease, the Certificates or any other Operative Document would exceed the Highest Lawful Rate or otherwise be usurious under Applicable Laws (including without limitation the federal and state laws of the United States of America, or of any other jurisdiction whose laws may be mandatorily applicable) with respect to the recipient of any such amount, then, in that event, notwithstanding anything to the contrary in this Participation Agreement, the Lease, the Certificates or any other Operative Document, it is agreed as follows as to the recipient of any such amount:

    (a) the provisions of this Section 4.3 shall govern and control over any other provision in this Participation Agreement, the Lease, the Certificates and any other Operative Document, and each provision set forth therein is hereby so limited;

    (b) the aggregate of all consideration which constitutes interest under Applicable Laws that is contracted for, charged or received under this Participation Agreement, the Lease, the Certificates or any other Operative Document shall under no circumstances exceed the maximum amount of interest allowed by Applicable Laws (such maximum lawful interest rate, if any, with respect to such recipient herein called the "Highest Lawful Rate"), and all amounts owed under this Participation Agreement, the Lease, the Certificates and any other Operative Document shall be held subject to reduction and: (i) the amount of interest which would otherwise be payable to the recipient hereunder and under the Lease, the Certificates and any other Operative Document, shall be automatically reduced to the amount allowed under Applicable Laws, and (ii) any unearned interest paid in excess of the Highest Lawful Rate shall be credited to the payor by the recipient (or, if such consideration shall have been paid in full, refunded to the payor);

    (c) all sums paid, or agreed to be paid for the use, forbearance and detention of the money under this Participation Agreement, the Lease, the Certificates or any other Operative Document shall, to the extent permitted by Applicable Laws, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full, so that the actual rate of interest is uniform throughout the full term thereof; and

    (d) if at any time the interest, together with any other fees, late charges and other sums payable pursuant to or in connection with this Participation Agreement, the Lease, the Certificates and any other Operative Document executed in connection herewith or therewith and deemed interest under Applicable Laws, exceeds that amount which would have accrued at the Highest Lawful Rate, the amount of interest and any such fees, charges and sums to accrue to the recipient of such interest, fees, charges and sums pursuant to the Operative Documents shall be limited, notwithstanding anything to the contrary in the Operative Documents, to that amount which would have accrued at the Highest Lawful Rate for the recipient, but any subsequent reductions, as applicable, shall not reduce the interest to accrue pursuant to the Operative Documents below the recipient's Highest Lawful Rate until the total amount of interest payable to the recipient (including all consideration which constitutes interest) equals the amount of interest which would have been payable to the recipient (including all consideration which constitutes interest), plus the amount of fees which would have been received but for the effect of this Section 4.3.

    SECTION 4.4.  Extension of Expiration Date.  Lessee may request in writing (the "Extension Option Request") to Agent Lessor and each of the Participants that each of the Participants agrees that Lessee be granted the right (the "Extension Option") pursuant to the Lease to extend the Term (the "Lease Extension") for two (2) additional one-year periods commencing on the last day of the then current Term, as applicable (each, a "Lease Renewal Term"), and that the maturity date for the Certificates be correspondingly extended to the extended Expiration Date. Such Extension Option Request must be delivered in writing to Agent Lessor and each Participant not later than 180 days nor more than 270 days prior to the expiration of the Base Term and the end of the initial Lease Renewal Term, as applicable. Each Participant will notify Agent Lessor in writing of whether or not it has consented to such Extension Option Request not later than 45 days after receipt of the Extension Option Request (the "Extension Option Response Date"). Any Participant who does not so notify Agent Lessor by the Extension Option Response Date will be deemed to be, and any Participant that has notified Agent Lessor that it has not consented to an Extension Option Request will be, a "Non-Consenting Participant". Each Participant's determination with respect to an Extension Option Request shall be a new credit determination and within such Participant's sole and absolute discretion and may be conditioned upon such terms and conditions as deemed appropriate by the consenting Participants, including receipt of such financial information, documentation or other information or conditions as may be requested by such Participant and the receipt of a satisfactory appraisal of the Premises.

    The Extension Option shall become effective as of the first date (the "Extension Effective Date") on or after the Extension Option Response Date on which all of the Participants (other than Non-Consenting Participants who have been replaced by Replacement Participants in accordance with Section 10.2(b)) and Replacement Participants shall have consented to such Lease Extension; provided  that on both the date of the Extension Option Request and the Extension Effective Date: (w) each of the representations and warranties made by Agent Lessor and Lessee in or pursuant to the Operative Documents shall be true and correct in all material respects 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), (x) Lessee shall not have elected the Purchase Option or Sale Option, (y) no Default or Event of Default shall have occurred and be continuing, and (z) on each of such dates, Agent Lessor shall have received a certificate of Lessee as to the matters set forth in clauses (x) and (y) above; and provided further that in no event shall the Extension Effective Date occur unless each of the Participants (other than Non-Consenting Participants who have been replaced in accordance with Section 10.2) and the Replacement Participants shall have consented to the Extension Option Request on or before the expiration of the Base Term.

    At any time after the Extension Option Response Date, as applicable, Lessee shall be permitted to replace any Non-Consenting Participant with a Replacement Participant pursuant to the terms and conditions set forth in Section 10.2(b). Following the Extension Effective Date, Lessee's election of each Lease Renewal Term shall be undertaken pursuant to, and shall be subject to the terms and conditions set forth in, Section 19.1(a) of the Lease.

ARTICLE V
CERTAIN INTENTIONS OF THE PARTIES

    SECTION 5.1.  Nature of Transaction.  It is the intention of the parties that:

    (a) the Overall Transaction constitutes an operating lease from Agent Lessor to Lessee for purposes of Lessee's financial reporting;

    (b) for all other purposes, including federal and all state and local income and transfer taxes, bankruptcy, insolvency and receiverships (including the substantive law upon which bankruptcy, insolvency and receivership proceedings are based), and real estate law, commercial law and Uniform Commercial Code purposes:

     (i) the Overall Transaction constitutes a financing by the Participants to Lessee and preserves beneficial ownership of the Premises in Lessee, and the obligations of Lessee to pay Basic Rent shall be treated as payments of interest to the Participants, and the payment by Lessee of any amounts in respect of the Lease Balance shall be treated as payments of principal to the Participants; and

    (ii) the Lease grants a first-priority mortgage lien and security interest in the Premises in favor of Agent Lessor, for the benefit of the Participants.

Nevertheless, Lessee acknowledges and agrees that neither Agent Lessor nor any Participant has made any representations or warranties concerning the tax, accounting or legal characteristics of the Operative Documents or any aspect of the Overall Transaction and that Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents and the Overall Transaction as it deems appropriate.

    (c) Specifically, without limiting the generality of clause (b), the parties hereto intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting Lessee, Agent Lessor or any of the Participants or any collection actions, the transactions evidenced by the Operative Documents are loans made to Lessee by the Participants in each case as unrelated third party lenders, and Agent Lessor holds a leasehold estate in the Land and title to the Improvements for the benefit of the Participants to secure Lessee's obligations to repay such loans to the Participants and all other amounts due under any of the Operative Documents.

    SECTION 5.2.  Amounts Due Under Lease.  Anything else herein or elsewhere to the contrary notwithstanding, it is the intention of Lessee, Agent Lessor and the Participants that: (i) the amount and timing of installments of the Basic Rent due and payable from time to time from Lessee under the Lease shall be equal to the aggregate payments due and payable as Tranche A Basic Rent and Tranche B Basic Rent and Tranche C Equity Basic Rent on each Payment Date; (ii) if Lessee elects the Early Termination Option, the Purchase Option or becomes obligated or otherwise elects to purchase the Premises under the Lease, the Lease Balance and all other obligations of Lessee owing to the Participants shall be paid in full by Lessee; (iii) if Lessee properly elects the Sale Option with respect to the Premises and subject to Article XX of the Lease, Lessee shall only be required to pay to Agent Lessor the Construction Recourse Amount, the proceeds of the sale of the Premises and any amounts due pursuant to Article XX of the Lease (which aggregate amounts may be less than the Lease Balance), together with all other due and payable Supplemental Rent; and (iv) upon an Event of Default resulting in an acceleration of Lessee's obligation to purchase the Premises under the Lease, the amounts then due and payable by Lessee under the Lease shall include all amounts necessary to pay in full the Lease Balance, plus  all other amounts then due from Lessee to Agent Lessor and the Participants under the Operative Documents.

    SECTION 5.3.  Distribution.

    (a) Upon receipt by the Administrative Agent of each payment of Basic Rent (and any payment of interest on overdue installments of Basic Rent), the Administrative Agent shall distribute to each Tranche A1 Participant its pro rata portion of the Tranche A1 Basic Rent based upon its respective portion of the Tranche A1 Participant Balance, to each Committed Tranche A Participant its pro rata portion of the Tranche A Basic Rent based upon its respective portion of the Tranche A Participant Balance, to each Tranche B Participant its pro rata portion of the Tranche B Basic Rent based upon its respective portion of the Tranche B Participant Balance, and to each Tranche C Equity Participant its pro rata portion of the Tranche C Equity Basic Rent based upon its respective portion of the Tranche C Equity Participant Balance, as provided in Section 3.2(a).

    (b) Any payment received by the Administrative Agent as a result of:

     (i) the purchase of all of the Premises in connection with Lessee's exercise of its Early Termination Option under the Lease, or

    (ii) Lessee's compliance with its obligation to purchase (or cause its designee to purchase) the Premises in accordance with the Lease, or

    (iii) the payment of the Lease Balance in accordance with Article XX of the Lease, or

    (iv) Lessee failing to fulfill one or more of the conditions to the exercise of the Sale Option pursuant to Article XX of the Lease and the Administrative Agent's receipt of the Lease Balance from Lessee pursuant to Article XX of the Lease,

shall be distributed by the Administrative Agent in the following amounts and order of priority:

first, to the Tranche A Participants and Tranche B Participants for application to pay in full the Participant Balance (other than the 3.5(ii) portion) of each such Participant, and in the case where the amount so distributed shall be insufficient to pay in full as aforesaid, then pro rata among the Tranche A Participants and Tranche B Participants without priority of one such Participant over the other in the proportion that each such Participant's Participant Balance bears to the sum of Tranche A Participant Balance and Tranche B Participant Balance;

second, to the Tranche A Participants and Tranche B Participants for application to pay in full the 3.5(ii) portion of each such Participant's Participant Balance, and in the case where the amount so distributed shall be insufficient to pay in full as aforesaid, then pro rata  among such Participants without priority of one Participant over the other in the proportion that each Participant's Participant Balance bears to the aggregate sum of the Tranche A Participant Balance and the Tranche B Participant Balance;

third, to the Tranche C Equity Participants for application to pay in full the Tranche C Participant Balance (other than the 3.5(ii) portion) of each Tranche C Equity Participant, and in the case where the amount so distributed shall be insufficient to pay in full as aforesaid, then pro rata among the Tranche C Equity Participants without priority of one Tranche C Equity Participant over the other in the proportion that each Tranche C Equity Participant's Participant Balance bears to the aggregate Tranche C Equity Participant Balance; and

fourth, to the Tranche C Equity Participants to pay in full the 3.5(ii) portion of each such Tranche C Equity Participant's Participant Balance; and in the case where the amount so distributed shall be insufficient to pay in full as aforesaid, then pro rata among the Tranche C Equity Participants without priority of one Tranche C Equity Participant over the other in the proportion that each such Tranche C Equity Participant's Participant Balance bears to the aggregate Tranche C Participant Balance such Participant.

    (c) The payment by Lessee of the Residual Value Guarantee Amount to the Administrative Agent in accordance with Article XX of the Lease upon Lessee's exercise of the Sale Option shall be distributed by the Administrative Agent as promptly as possible (it being understood that any such payment received by the Administrative Agent on a timely basis in accordance with the provisions of the Lease shall be distributed on the date on which such funds are so received) in the following order of priority:

first, to the Tranche A Participants for application to pay in full the Participant Balance of each Tranche A Participant;

second, to the Tranche B Participants for application to pay in full the Participant Balance of each Tranche B Participant, and in the case where the amounts so distributed shall be insufficient to pay in full as aforesaid, then pro rata among the Tranche B Participants without priority of one Tranche B Participant over the other in the proportion that each such Tranche B Participant's Participant Balance bears to the aggregate Tranche B Participant Balance; and

third, to the Tranche C Equity Participants for application to pay in full the Participant Balance of each Tranche C Equity Participant, and in the case where the amounts so distributed shall be insufficient to pay in full as aforesaid, then pro rata  among the Tranche C Equity Participants without priority of one Tranche C Equity Participant over the other in the proportion that each such Tranche C Equity Participant's Participant Balance bears to the aggregate Tranche C Equity Participant Balance.

    (d) Any payments received by the Administrative Agent as net proceeds from the sale of the Premises following the occurrence of an Event of Default under Article XVI of the Lease, following the occurrence of a Construction Agency Event of Default or pursuant to Lessee's exercise of the Sale Option pursuant to Article XIX of the Lease, together with any payment made by Lessee as a result of an appraisal pursuant to Section 12.3 of this Participation Agreement, shall be distributed by the Administrative Agent as promptly as possible (it being understood that any such payment received by the Administrative Agent on 'a timely basis and in accordance with the provisions of the Lease shall be distributed on the date received) in the funds so received in the following order of priority:

first, on a pro rata basis based on their respective shares of the sum of the Tranche A1 Participant Balance (other than the 3.5(ii) portion) and Tranche A2 Participant Balance (other than the 3.5(ii) portion), to the Tranche A1 Participants and Tranche A2 Participants for application to pay in full the sum of the Tranche A1 Participant Balance and Tranche A2 Participant Balance, and then on a pro rata basis based on their respective shares of the Tranche A3 Participant Balance (other than the 3.5(ii) portion), to the Tranche A3 Participants to pay in full the Tranche A3 Participant Balance;

second, to the Tranche B Participants for application to pay in full the Participant Balance (other than the 3.5(ii) portion) of each Tranche B Participant, and in the case where the amount so distributed shall be insufficient to pay in full as aforesaid, then pro rata  among the Tranche B Participants without priority of one Tranche B Participant over the other in the proportion that each Tranche B Participant's Participant Balance bears to the aggregate Tranche B Participant Balance;

third, to the Tranche C Equity Participants for application to pay in full the Participant Balance (other than the 3.5(ii) portion) of each Tranche C Equity Participant, and in the case where the amount so distributed shall be insufficient to pay in full as aforesaid, then pro rata among the Tranche C Equity Participants without priority of one Tranche C Equity Participant over the other in the proportion that each Tranche C Equity Participant's Participant Balance bears to the aggregate Tranche C Equity Participant Balance;

fourth, an amount up to, but not exceeding, the Residual Value Guarantee Amount paid by Lessee, if any, shall be promptly distributed to, or as directed by, Lessee;

fifth, on a pro rata basis based on their respective shares of the sum of the 3.5(ii) portion of the Tranche A1 Participant Balance and Tranche A2 Participant Balance, to the Tranche A1 Participants and Tranche A2 Participants for application to pay in full the sum of the 3.5(ii) portion of the Tranche A1 Participant Balance and Tranche A2 Participant Balance, and then on a pro rata basis based on their respective shares of the 3.5(ii) portion of the Tranche A3 Participant Balance to the Tranche A3 Participants to pay in full the 3.5(ii) portion of the Tranche A3 Participant Balance;

sixth, to the Tranche B Participants to pay in full the 3.5(ii) portion of their Participant Balances until their Participant Balances have been paid in full; and in any case where the amount shall be insufficient to pay in full as aforesaid, then pro rata  among such Participants without priority of one Tranche B Participant over the other in the proportion that each Tranche B Participant's Participant Balance bears to the aggregate Tranche B Participant Balance;

seventh, to the Tranche C Equity Participants to pay in full the 3.5(ii) portion of their Participant Balances until their Participant Balances have been paid in full; and in any case where the amount shall be insufficient to pay in full as aforesaid, then pro rata  among such Participants without priority of one Tranche C Equity Participant over the other in the proportion that each Tranche C Equity Participant's Participant Balance bears to the aggregate Tranche C Equity Participant Balance; and

eighth, the balance, if any, shall be promptly distributed to, or as directed by, Lessee.

    (e) All payments of Supplemental Rent received by the Administrative Agent (excluding amounts payable pursuant to the preceding provisions of this Section 5.3 shall be distributed promptly by the Administrative Agent upon receipt thereof to the Persons entitled thereto pursuant to the Operative Documents.

    (f)  All payments received and amounts realized by the Administrative Agent after an Event of Default exists, including proceeds from the sale of the Premises, proceeds of any amounts from any insurer or any Governmental Authority in connection with any Casualty or Condemnation, or from Lessee as payment in accordance with the Lease, including any payment received from Lessee pursuant to Article XVI of the Lease, shall, if received by the Administrative Agent, be distributed by the Administrative Agent as promptly as possible (it being understood that any such payment received by the Administrative Agent on a timely basis and in accordance with the provisions of the Operative Documents shall be distributed on the date received in the funds so received) in the following order of priority:

first, so much of such payment or amount as shall be required to reimburse the Administrative Agent for any tax, expense or other loss incurred by the Administrative Agent (including, to the extent not previously reimbursed, those incurred in connection with any duties of the Administrative Agent as the Administrative Agent) and any unpaid ongoing fees of the Administrative Agent shall be distributed to each of them for its own account;

second, so much of such payments or amounts as shall be required to reimburse the then existing or prior Participants for payments made by them to the Administrative Agent pursuant to Section 17.1 of the Lease (to the extent not previously reimbursed) and to pay such then existing or prior Participants the amounts payable to them pursuant to any expense reimbursement or indemnification provisions of the Operative Documents shall be distributed to each such Participant without priority of one over the other in accordance with the amount of such payment or payments payable to each such Person;

third, (i) in the case of a sale of the Premises, in the order set forth in Section 5.3(d); (ii) in the case of the payment of the Construction Recourse Amount in connection with a remarketing or return of the Premises in connection with a Construction Agency Event of Default prior to the Completion Date, in the order of priority set forth in Section 5.3(c); and (iii) in all other cases, so much of such amount as shall be required to pay in full the Participant Balance of each Participant, and in the case where the amount so distributed shall be insufficient to pay in full as aforesaid, then in the order of priority set forth in Section 5.3(d); and in any case where the amount of any such payment in this clause (iii) shall be insufficient to pay in full as aforesaid, then pro rata within a Tranche without priority of any Participant Balance in such Tranche over any other Participation within such Tranche; and

fourth, the balance, if any, of such payment or amounts remaining thereafter shall be promptly distributed to, or as directed by, Lessee.

    SECTION 5.4.  Other Payments.

    (a) Except as otherwise provided in Sections 5.3(a), 5.3(b), 5.3(f) and  paragraph (b)  below,

     (i) any payment received by the Administrative Agent for which no provision as to the application thereof is made in the Operative Documents or elsewhere in Section 5.3, and

    (ii) all payments received and amounts realized by the Administrative Agent under the Lease or otherwise with respect to the Premises to the extent received or realized at any time after indefeasible payment in full of the Participant Balances of all of the Participants and any other amounts due and owing to the Administrative Agent or the Participants,

shall be distributed forthwith by the Administrative Agent in the order of priority set forth in Section 5.3(b)  (in the case of any payment described in clause (i) above) or in Section 5.3(f) hereof (in the case of any payment described in clause (ii) above), except, that in the case of any payment described in clause (ii)  above, such payment shall be distributed omitting clause third of such Section 5.3(f); and the balance, if any (in the case of any payment described in clause (i) or (ii)  above), shall be distributed to, or as directed by, Lessee.

    (b) Except as otherwise provided in Sections 5.3(a) and 5.3(b), any payment received by the Administrative Agent for which provision as to the application thereof is made in an Operative Document but not elsewhere in this Section 5.3 shall be distributed forthwith by the Administrative Agent to the Person and for the purpose for which such payment was made in accordance with the terms of such Operative Document.

ARTICLE VI
CONDITIONS PRECEDENT TO ADVANCES; COMPLETION DATE CONDITIONS

    SECTION 6.1.  Conditions Precedent to the Initial Advance Date.  The obligations of the each Participant (through the Administrative Agent on behalf of the Agent Lessor) to Fund an Advance on the initial Advance Date, are subject to satisfaction of each of the following conditions precedent:

    (a)  Resolutions and Incumbency Certificate, etc. of Lessee.  Lessee shall have delivered to Agent Lessor (i) good standing certificates with respect to Lessee from the Secretary of State of the State of its incorporation or formation issued by such office no earlier than thirty-five (35) days prior to the initial Advance Date and (ii) an Officer's Certificate of Lessee substantially in the form of Exhibit C.

    (b)  Opinion of Counsel to Lessee.  On or prior to the initial Advance Date, Lessee shall have delivered to Agent Lessor opinions of Dorsey & Whitney LLP, special counsel to Lessee, and Jeffrey D. Pflaum, general counsel of Lessee, as to the matters set forth in Exhibit D, which opinion shall be reasonably acceptable in form and substance to the Participants.

    (c)  Construction Agent's Certificate.  On or prior to the initial Advance Date, the Construction Agent shall have delivered to Agent Lessor an Initial Advance Date Certificate in the form of Exhibit E hereto.

    (d)  Taxes.  All taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Documents shall have been paid or provisions for such payment shall have been made by Lessee to the satisfaction of Agent Lessor.

    (e)  Appraisal.  Not less than ten Business Days prior to the initial Advance Date, Lessee shall have delivered to Agent Lessor and each Participant or, in the case of (ii) below, Participants shall have obtained:

     (i) descriptions of the Financed Improvements and a copy of the Approved Plans and Specifications, which shall be in a form and substance reasonably satisfactory to the Participants;

    (ii) an appraisal (the "Appraisal") in form and substance satisfactory to each of the Participants which shall establish (by the use of appraisal methods satisfactory to the Participants) that the "as-built" Fair Market Value of the Financed Improvements (assuming the Substantial Completion of the Financed Improvements in accordance with the Approved Plans and Specifications and for the amounts set forth in the Approved Construction Budget) as of the Estimated Completion Date and as of the last day of the Base Term and each Lease Renewal Term is equal to at least one hundred percent (100%) of the Aggregate Commitment Amount. The Appraisal shall assume that all of the Financed Improvements shall have been completed in a good and workmanlike manner, in compliance with Applicable Laws; and

    (iii) the Approved Construction Budget and the Approved Construction Schedule, each of which shall be in a form and substance reasonably satisfactory to the Participants.

    (f)  Filings and Recordings.  All filings or recordings enumerated and described in Schedule 6.1(f) hereof, as well as all other filings and recordings necessary or advisable, including precautionary financing statements and mortgage filings, reasonably deemed necessary by Agent Lessor to perfect the rights, titles and interests of Agent Lessor and the Participants intended to be created by the Operative Documents shall have been made in the appropriate places or offices, including any recordings and filings necessary to create, perfect and preserve such perfection and the priority thereof: (i) Agent Lessor's interest in the Premises, (ii) first mortgage liens of record on the Premises, subject to Permitted Liens, and (iii) a first priority perfected security interest in all Fixtures, subject to Permitted Liens. All recording and filing fees and taxes with respect to any recordings or filings made pursuant to this Section 6.1(f) shall have been paid in full by Lessee, and satisfactory evidence thereof shall have been delivered to Agent Lessor, or arrangements for such payment shall have been made by Lessee to the reasonable satisfaction of Agent Lessor.

    (g)  Requirements of Law.  In the reasonable opinion of Agent Lessor and the Participants and their respective counsel, the Overall Transaction does not and will not violate in any respect any Requirement of Law and does not and will not subject any such Person to any material adverse regulatory prohibitions or constraints.

    (h)  Responsible Officer's Certificate.  Agent Lessor shall have received a Responsible Officer's Certificate of Lessee, in substantially the form of Exhibit G attached hereto, dated as of the initial Advance Date, stating that: (i) each and every representation and warranty of Lessee contained in each Operative Document to which it is a party is true and correct on and as of the initial Advance Date, except to the extent such representation or warranty relates solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date; (ii) no Default, Event of Default, Casualty or Condemnation has occurred and is continuing, and Lessee, after due inquiry, is not aware of any existing or threatened condemnations, actions, suits or proceedings with respect to the Premises or the Land; (iii) each Operative Document to which Lessee is a party is in full force and effect with respect to it; and (iv) Lessee has duly performed and complied in all material respects with all covenants contained herein or in any other Operative Document required to be performed by it on or prior to the initial Advance Date.

    (i)  Ground Lease.  Lessee and Agent Lessor shall have executed and delivered the Ground Lease.

    (j)  Initial Environmental Audit.  Agent Lessor shall have received the Initial Environmental Audit, which shall be satisfactory in form and substance to Agent Lessor and the Participants.

    (k)  Initial Advance Date.  The initial Advance Date shall occur on or prior to November 1, 1999.

    (l)  Architect's Statement of Professional Opinion.  Agent Lessor shall have received a statement of professional opinion from the Architect, in form and scope reasonably satisfactory to Agent Lessor, stating that (i) the Premises, if improved in all material respects in accordance with the Approved Plans and Specifications, will comply in all material respects with all applicable zoning, land use, building codes, laws, regulations and ordinances, and other similar laws, regulations and ordinances, (ii) the Architect is familiar with the applicable zoning, land use, building codes, laws, regulations and ordinances, and other similar laws, regulations and ordinances, and the Approved Plans and Specifications comply with such building codes, laws, regulations and ordinances, and other similar laws, regulations and ordinances, (iii) all utilities intended to serve the Financed Improvements are adequate to serve the Financed Improvements, and the Financed Improvements will not encroach in any manner onto any adjoining land, and (iv) listing all permits required for the construction of the Financed Improvements. The Approved Plans and Specifications, the contracts with the General Contractor (including, without limitation, the Construction Contract) and other material contractors, and a complete and detailed breakdown, on a line item basis, of the costs (prepared by others) of constructing the Financed Improvements in accordance with the Approved Plans and Specifications, together with evidence of all matters described in the Architect's statement of professional opinion described in this clause, shall have been reviewed and reasonably approved by Agent Lessor acting at the direction of the Required Participants.

    (m)  Searches.  Agent Lessor shall have received a report, as of a current date and reasonably acceptable in form and substance to Agent Lessor, of judgment liens, lis pendens, tax liens and Uniform Commercial Code filings with respect to Lessee and the Land filed of record in each applicable jurisdiction.

    (n)  Survey.  Lessee shall have delivered, or shall have caused to be delivered, to Agent Lessor and to the Title Insurance Company an ALTA survey of the Land in a form and with a certification reasonably satisfactory to Agent Lessor and the Title Insurance Company (and including any applicable flood zone designation (with property annotations based on Federal Flood Insurance Rate Maps or the local equivalent) by scaled map location and graphic plotting) in order to issue the Title Policies and showing no state of facts unsatisfactory to Agent Lessor.

    (o)  Title and Title Insurance.  Agent Lessor shall have received from the Title Insurance Company an ALTA owner's policy of title insurance with respect to the Land and the Financed Improvements (or an irrevocable commitment for the issuance thereof), acceptable in form and substance to Agent Lessor (collectively, the "Owner's Policy"), insuring that Lessee is the owner of fee simple absolute title to the Land, Agent Lessor is the holder of a leasehold interest in the Land pursuant to the Ground Lease, and Agent Lessor has good and marketable title to the Improvements, subject in each case to the Lease and such other exceptions to title as are acceptable to each Participant, in an amount equal to the aggregate Commitments together with complete, legible copies of all encumbrances, maps and surveys of record. Agent Lessor, for the benefit of the Participants, shall have received from the Title Insurance Company (or an irrevocable commitment for the issuance thereof), an ALTA form of loan policy of title insurance (the "Lenders' Policy"; together with the Owner's Policy, the "Title Policies"), acceptable in form and substance to Agent Lessor, insuring the Lien of the Memorandum of Lease as a valid first priority Lien against the Premises, subject to such exceptions to title as are reasonably acceptable to Agent Lessor, in an amount equal to the Aggregate Commitment Amounts, together with complete, legible copies of all encumbrances and plats of record. The Title Policies shall also include recharacterization endorsements satisfactory to Agent Lessor. The Title Policies shall be dated as of the initial Advance Date and, to the extent permitted under Applicable Laws, shall: (w) contain affirmative endorsements as to mechanics' liens, doing business, usury, Form 3.0 zoning, Form B-1 comprehensive coverage, encroachments, the nonviolation of covenants and restrictions, rights of access and survey matters, (x) delete the creditors' rights and survey exclusions, (y) contain endorsements regarding the effect of recharacterization satisfactory to Agent Lessor and (z) contain such other endorsements reasonably requested by Agent Lessor.

    (p)  Approved Plans and Specifications; Architect's Agreement; Assignment.  Agent Lessor shall have received and the Participants shall have reasonably approved: (i) the first page of a copy of the Approved Plans and Specifications signed, and all other pages thereof initialed, by Lessee, as Construction Agent, and the General Contractor (if any), (ii) a copy of Construction Agent's or Lessee's agreement with the Architect, if any, (iii) a copy of the Construction Contract, and (iv) an assignment from Lessee and/or Construction Agent, as applicable, in favor of Agent Lessor, of Lessee's and Construction Agent's interest in the Approved Plans and Specifications, the Architect's agreement and the Construction Contract, in the form required by the Construction Agency Agreement, and attached thereto the Architect's and General Contractor's written consent to such assignment in a form satisfactory to Agent Lessor.

    (q)  Insurance.  Insurance complying with the provisions of Article XIII of the Lease shall be in full force and effect as evidenced by certificates of insurance, broker's reports or insurance binders delivered to Agent Lessor, all in form and substance reasonably satisfactory to the Participants.

    (r)  Disbursement Agreement.  The Disbursement Agreement shall have been executed and delivered by the parties thereto.

    (s)  No Default.  There shall not have occurred and be continuing any Default, Event of Default, Casualty or Condemnation, and no Default or Event of Default will have occurred after giving effect to the Advance Request.

    (t)  Fees and Expenses.  Lessee shall have paid (i) to Agent Lessor, the fees due and payable to it on the Document Closing Date, and (ii) to the Persons entitled thereto, all other Transaction Expenses and Fees accrued as of the Document Closing Date pursuant to and as set forth in Section 4.1(b).

    SECTION 6.2.  Conditions Precedent to each Advance.  The obligations of each Participant (through Agent Lessor) to make an Advance on each Advance Date are subject to satisfaction or waiver of the following conditions precedent:

    (a)  Advance Request.  The Administrative Agent shall have received a fully executed counterpart of the applicable Advance Request, executed by Lessee, in accordance with Section 3.4(a). Each delivery of an Advance Request and the acceptance by Lessee of the proceeds of such Advance shall constitute a representation and warranty by Lessee that on the applicable Advance Date (both immediately before and after giving effect to the making of such Advance and the application of the proceeds thereof), the statements made in Section 7.3 are true and correct as of such date.

    (b)  Construction Certificate.  Agent Lessor shall have received a certificate from the Construction Agent (substantially in the form of Exhibit H), certifying that (i) after giving effect to the applicable Advance, the estimated as yet unpaid cost to the Construction Agent of completing the Construction pursuant to the Construction Documents will not exceed the aggregate Available Commitments, net of any portion of the aggregate Available Commitments that shall be allocated for Advances in respect of Capitalized Tranche A and Tranche B Basic Rent, Capitalized Tranche C Equity Basic Rent, Fees and Transaction Expenses, (ii) the portion of the aggregate Available Commitments allocated to each item described in the Approved Construction Budget, as such amounts may be adjusted pursuant to Section 3.2(b) of the Construction Agency Agreement, plus the portion of the aggregate Available Commitments allocated to the contingency reserve in the Approved Construction Budget (to the extent such contingency funds have not theretofore been set aside by the Construction Agent for the payment of overruns in other cost categories) is sufficient to pay in full the costs to which each such amount in the Approved Construction Budget is allocated and to complete the construction of each such item in accordance with the Approved Plans and Specifications and to timely achieve each Critical Path Deadline Date, (iii) the Premises are being improved in a good and workmanlike manner and in accordance with the Approved Plans and Specifications, and the contemplated use thereof by Lessee will comply with Requirements of Law (including all zoning and land use laws and Environmental Laws), (iv) the progress of the Construction is such that Substantial Completion of the Financed Improvements can occur on or prior to the Outside Completion Date (and specifying the stage and percentage of completion which has been achieved by each of the various trades engaged in the construction of the Financed Improvements), and the Construction is proceeding in accordance with the Approved Construction Schedule and the Approved Construction Budget, and (v) the amount of the Advance (other than amounts attributable to Capitalized Tranche A and Tranche B Basic Rent, Capitalized Tranche C Equity Basic Rent or amounts used to Fund Fees or Transaction Expenses) is not greater than the actual value of the materials incorporated into the Financed Improvements and the work and labor performed in connection therewith, and is not greater than the amount specified in the line item of the Approved Construction Budget for such item (when added to all prior Advances for such line item), provided that to the extent any Construction attributable to a line item in the Approved Construction Budget has been fully completed for less than the budget for such line item, the Construction Agent may upon notice to Agent Lessor allocate the amount of such actual savings to another line item in the Approved Construction Budget.

    (c)  Fees.  Agent Lessor and each Participant shall have received all Fees due and payable pursuant to Section 4.1(b) or such payment will be made out of the requested Advance.

    (d)  Representation and Warranties.  On the applicable Advance Date, the representations and warranties of Lessee herein and in each of the other Operative Documents shall be true and correct in all material respects as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date.

    (e)  Litigation.  No action or proceeding shall have been instituted, nor shall any action or proceeding be threatened, before any Governmental Authority, nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Authority (i) to set aside, restrain, enjoin or prevent the full performance of this Participation Agreement, any other Operative Document or any transaction contemplated as part of the Overall Transaction, (ii) that questions the validity of the Operative Documents or the rights or remedies of Agent Lessor or the Participants with respect to Lessee or the Premises under the Operative Documents, or (iii) which in the reasonable judgment of the Required Participants is reasonably likely to have a Material Adverse Effect.

    (f)  Default; Event of Default; Significant Casualty or Significant Condemnation.  There shall not have occurred and be continuing any Default or Event of Default nor shall Lessee have received a Termination Notice pursuant to Section 15.1 of the Lease, and no Default or Event of Default will have occurred after giving effect to the making of the Advance requested by such Advance Request.

    (g)  Commitment Amount.  After giving effect to the applicable Advance, the aggregate amount of all Advances shall not exceed the Aggregate Commitment Amount and the aggregate amount of all Advances made by each Participant shall not exceed the Available Commitment of such Participant.

    (h)  No Material Adverse Change.  Immediately prior to, and after giving effect to, the applicable Advance, there shall be no material adverse change with respect to (i) the Premises or (ii) the financial condition of Lessee which, in either case, could reasonably be expected to have a Material Adverse Effect in the reasonable judgment of the Required Participants.

    (i)  Transaction Expenses.  Lessee shall have paid all applicable Transaction Expenses or such payment will be made out of the requested Advance.

    (j)  Building Permits.  All building permits required by any Governmental Authority in connection with the Construction for which the applicable Advance is being made shall have been obtained.

    (k)  Commitment Period.  No Advance shall be made after the termination of the Commitment Period.

    SECTION 6.3.  Deliveries Upon Completion.  Within fifteen (15) Business Days following the date of Substantial Completion of the Financed Improvements in accordance with the Approved Plans and Specifications:

    (a)  Architect's Certificate.  Construction Agent shall furnish to Agent Lessor a certificate of the Architect (substantially in the form of Exhibit I) dated at or about the Completion Date and stating that: (i) the Construction has been completed in all material respects in accordance with the Approved Plans and Specifications, and (ii) the Financed Improvements, as so completed, comply in all material respects with all Applicable Laws, and certifying that attached thereto are true and complete copies of an "as built" or "record" set of the Approved Plans and Specifications).

    (b)  Construction Agent's Certification.  Construction Agent shall furnish to Agent Lessor a certification of Construction Agent (substantially in the form of Exhibit J) as follows:

     (i) the representations and warranties of Lessee with respect to the Premises and Financed Improvements set forth in Section 7.2 are true and correct in all material respects as of the Completion Date. All amounts owing to third parties for the Construction have been paid in full (other than contingent obligations for which adequate reserves have been made);

    (ii) no changes or modifications were made to the Approved Plans and Specifications delivered to the Appraiser for purposes of preparing the Appraisal that, individually or in the aggregate, have caused or reasonably could cause, the Fair Market Value of the Financed Improvements to be less than the Fair Market Value at Substantial Completion as set forth in the Appraisal;

    (iii) there are no defects to the Financed Improvements, including the plumbing, heating, air conditioning and electrical systems thereof, or the Premises, which individually or in the aggregate, have caused or reasonably could cause, the Fair Market Value of the Financed Improvements to be less than the Fair Market Value at Substantial Completion as set forth in the Appraisal; and

    (iv) all water, sewer, electric, gas, telephone and drainage facilities and all other utilities required to adequately service the Financed Improvements and the Premises for their intended use are available pursuant to adequate permits (including any that are required under applicable Environmental Laws) except to the extent the unavailability of which individually or in the aggregate would not have a Material Adverse Effect.

    (c)  As Built Survey.  Construction Agent shall furnish to Agent Lessor true, correct and complete copies, certified by the Construction Agent, of an "as built" ALTA survey of the Premises, in form and substance satisfactory to Agent Lessor, certified to Agent Lessor, showing the location of the completed Financed Improvements, the location of all points of access to the Land and the location of all easements affecting the Land and certifying that there are no encroachments of the Financed Improvements onto any easements affecting the Land or onto any adjoining property (other than Permitted Liens) and that all applicable setback requirements and other restrictions have been complied with.

ARTICLE VII
REPRESENTATIONS

    SECTION 7.1.  Representations of the Participants.  As of the date of its execution of this Participation Agreement, each Participant represents and warrants, severally and only as to itself, to the other Participants, Agent Lessor and Lessee that:

    (a)  ERISA.  Such Participant is not and will not be funding Advances hereunder, and is not performing its obligations under the Operative Documents, with the assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or "plan" (as defined in Section 4975(e)(1) of the Code).

    (b)  Status.  Such Participant is a commercial bank, branch or agency of a foreign bank or other similar financial institution, or an Affiliate thereof, or in the case of the Tranche A1 Participant, a finance company established solely to finance the purchase of receivables or the making of loans such as the Advances.

    (c)  Power and Authority.  Such Participant has the requisite power and authority to enter into and perform its obligations under the Operative Documents to which it is a party.

    (d)  Participant Liens.  There are no Lessor Liens attributable to such Participant upon the Lease or the Premises.

    (e)  Organization, etc. Such Participant is a corporation or banking association validly organized and existing and in good standing under the laws of the State or jurisdiction of its creation.

    (f)  Investment.  The Certificates being acquired by such Participant (and in the case of a Committed Participant, its rights and obligations under the applicable Transfer Agreement) are being acquired by such Participant for investment and not with a view to the resale or distribution of such interest or any part thereof, but without prejudice, however, to the right of such Participant at all times to sell or otherwise dispose of all or any part of such interest under a registration available under the Securities Act or under an exemption from such registration available under the Securities Act, it being understood that the disposition by the undersigned of the Certificates to be purchased by such Participant shall, at all times, remain entirely within its control.

    (g)  Offer of Securities, etc.  Neither such Participant nor any Person authorized to act on its behalf has, directly or indirectly, offered to sell the Certificates or any other similar securities (the sale or offer of which would be integrated with the sale or offer of the Certificates), for sale to, or solicited any offer to acquire any of the same from, any Person.

    (h)  No Registration.  Such Participant understands and acknowledges that the Certificates have not been and will not be registered under the Securities Act in reliance upon the exemption provided in Section 4(2) of the Securities Act or any other applicable exemption, the Certificates have not and will not be registered or qualified under the securities or "blue sky" laws of any jurisdiction, that the Certificates may be resold (which resale is not currently contemplated, except for any assignment or participation to the Tranche A2 Participants pursuant to the Transfer Agreements) or otherwise transferred only if so registered or qualified or if an exemption from registration or qualification is available, that neither Lessee nor Agent Lessor is required to register the Certificates and that any transfer must comply with the provisions of the Operative Documents relating thereto. Such Participant will comply with all applicable federal and state securities laws in connection with any subsequent resale of the Certificates held by it.

    (i)  Institutional Investor.  Such Participant is a sophisticated institutional investor and an "accredited investor" as defined in paragraph (1), (2), (3) or (7) of Rule 501(a) of the Securities Act, and has knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of its investment in the Certificates and is able to bear the economic risk of such investment. Such Participant has been given such information concerning the Certificates, the other Operative Documents, the Premises and Lessee as it has requested.

    (j)  Legend.  Such Participant understands and acknowledges that the Certificate which it is acquiring will bear a legend as set forth in the form included in the Certificate included in this Participation Agreement.

    The making of any Advance on any Advance Date, the purchase of any interest in any Certificate by any Tranche A2 Participant, as a Purchaser, under any Transfer Agreement, shall constitute an affirmation by the subject assignee or acquiring Participant of the preceding representations and warranties.

    SECTION 7.2.  Representations of Lessee.  Lessee represents and warrants to each of the other parties hereto as of the Document Closing Date that:

    (a)  Organization; Existence; Compliance with Law.  Lessee and each of its Subsidiaries (i) is duly organized, validly existing and is in good standing under the laws of the jurisdiction of its incorporation or organization, (ii) has the corporate or other necessary power and authority, and all governmental licenses, authorizations, consents and approvals, to own its assets (including the Premises), to lease the property (including the Premises) it operates as lessee and to conduct the business in which it is currently engaged, and (iii) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not be reasonably expected to have a Material Adverse Effect. Set forth on Schedule 7.2(a) is a complete and accurate list of all Subsidiaries of Lessee as of the date hereof.

    (b)  Power; Authorization; Enforceable Obligations.  Lessee has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform this Participation Agreement and each other Operative Document executed or to be executed by it, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Participation Agreement and each other Operative Document executed or to be executed by it. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of Lessee in connection with the execution, delivery, performance, validity or enforceability of this Participation Agreement and each other Operative Document executed or to be executed by it which has not been obtained, except for any building, construction or similar permits which are not yet required by any Governmental Authority at this stage of the Construction, but which shall be obtained by Lessee at such time as they are required by any Governmental Authority and filings or recordations necessary to perfect any liens on the Premises or Financed Improvements as set forth in this Agreement and the other Operative Documents. This Participation Agreement has been, and each other Operative Document to be executed by Lessee will be, duly executed and delivered on behalf of Lessee. This Participation Agreement constitutes, and each other Operative Document to be executed by Lessee, when executed and delivered by Lessee, will constitute, a legal, valid and binding obligation of Lessee enforceable against Lessee in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

    (c)  No Conflicts.  Neither the execution and delivery of this Participation Agreement and each other Operative Document executed or to be executed by Lessee, nor the consummation of the Overall Transaction, nor performance of and compliance with the terms and provisions hereof or thereof by Lessee will (i) violate or conflict with any provision of its articles of association or bylaws or other organizational or governing documents of Lessee, (ii) violate in a material manner any Applicable Laws applicable to it, (iii) violate contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound, the violation of which could reasonably be expected to have a Material Adverse Effect, or (iv) result in or require the creation of any Lien upon or with respect to its properties (including the Premises) other than Permitted Liens.

    (d)  No Change; Dividends.  Since July 31, 1999, (i) there has been no development or event relating to or affecting Lessee or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect and (ii) except as otherwise permitted under the Operative Documents, no Capital Stock or other equity interest in Lessee or any of its Subsidiaries has been redeemed or retired.

    (e)  Litigation.  Except as disclosed in Schedule 7.2(e), there are no actions, suits or legal, equitable, arbitration or administrative proceedings (including any proceeding in condemnation or eminent domain), pending or, to the knowledge of Lessee, threatened, against Lessee or any of its Subsidiaries, Affiliates or the Premises which could reasonably be expected to have a Material Adverse Effect or which adversely affects the title to, or the use, operation or value of, the Premises, or which pertains to any Operative Documents or the transactions contemplated thereby.

    (f)  Offer of Securities, etc. None of Lessee, nor any Person authorized to act on Lessee's behalf (other than ABN AMRO Bank N.V.), has, directly or indirectly, offered the Certificates or any other similar securities (the sale or offer of which would be integrated with the sale or offer of the Certificates), for sale to, or solicited any offer to acquire any of the same from, any Person other than the Participants and other "accredited investors" (as defined in Regulation D of the SEC).

    (g) Financial Statements and Conditions.  The consolidated financial statements of Lessee and its Subsidiaries, including balance sheets and income statements, for the fiscal year ended October 31, 1998, and for the fiscal quarter ended July 31, 1999, have been prepared in accordance with GAAP and present fairly the consolidated financial condition and results of operations of Lessee and its Subsidiaries as of such date and for such period, and show all material Indebtedness and other material liabilities, direct or contingent, of Lessee and its Subsidiaries as of the date thereof, including liabilities for material taxes, material commitments and contingent obligations required by GAAP to be shown thereon. Since October 31, 1998, there has been no sale, transfer or other disposition by Lessee or any of its Subsidiaries of any material part of the business or property of Lessee and its Subsidiaries, taken as a whole, and no purchase or other acquisition by any of them of any business or property (including any Capital Stock of any other person) material in relation to the consolidated financial condition of Lessee and its Subsidiaries, taken as a whole, in each case, which is not reflected in the foregoing financial statements or in the notes thereto, or in the 10K, 10Q or 8K filings with the Securities and Exchange Commission, or has not otherwise been disclosed in writing to the Administrative Agent.

    (h)  Governmental Regulations, Etc.

     (i) No part of any Advance will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation G or Regulation U issued by the F.R.S. Board, or for the purpose of purchasing or carrying or trading in any securities. No part of any Advance will be used, directly or indirectly, to reduce or retire any indebtedness incurred for the purpose of purchasing or carrying margin stock within the meaning of Regulation U or any "margin security" within the meaning of Regulation T issued by the F.R.S. Board. If requested by any Participant or Agent Lessor, Lessee will furnish to Agent Lessor and each Participant a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in Regulation U. None of the transactions contemplated by this Participation Agreement or any other Operative Document (including, without limitation, the direct or indirect use of the proceeds of any Advance) will violate or result in a violation of the Securities Act or the Securities Exchange Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation G, T, U or X issued by the F.R.S. Board.

    (ii) Lessee is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act, each as amended. In addition, Lessee is not (A) an "investment company" registered or required to be registered under the Investment Company Act, and is not controlled by such a company, or (B) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended.

    (iii) To the best knowledge of the Lessee, no director, executive officer or principal shareholder of Lessee or any of its Subsidiaries is a director, executive officer or principal shareholder of any Participant. For the purposes hereof the terms "director", "executive officer" and "principal shareholder" (when used with reference to any Participant) have the respective meanings assigned thereto in Regulation O issued by the F.R.S. Board.

    (iv) No proceeds of any Advance have been or will be used to acquire, directly or indirectly, any security of a company with a class of securities registered under the Securities Exchange Act of 1934, as amended, or which has filed a registration statement that has become effective under the Securities Exchange Act of 1934, as amended, or to refinance any Indebtedness used to acquire any such securities.

    (i)  Chief Executive Office of Lessee.  Lessee's principal place of business and chief executive office, as such terms are used in Section 9-103(3) of the UCC, are located at 12501 Whitewater Drive, Minnetonka, Minnesota 55343.

    (j)  Solvency.  Lessee is and, after consummation of the Overall Transaction, will be, Solvent.

    (k)  Brokers, etc.  Lessee has not engaged or authorized any broker, finder, investment bank or other third party to act on its behalf, directly or indirectly, as a broker, finder, investment banker, agent or in any other like capacity in connection with any of the Operative Documents or the Overall Transaction, other than ABN AMRO N.V. and its affiliates.

    (l)  ERISA Compliance.  Except as specifically disclosed in Schedule 7.2(l):

     (i) Each Plan is in compliance with the applicable provisions of ERISA, the Code and other federal or state law except for such non-compliance as could not, individually or in the aggregate, have a Material Adverse Effect. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of Lessee, nothing has occurred which would cause the loss of such qualification. Lessee and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

    (ii) There are no pending or, to the best knowledge of Lessee, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect.

    (iii) (A) No ERISA Event has occurred or is reasonably expected to occur; (B) no Pension Plan has any material Unfunded Pension Liability; (C) neither Lessee nor any ERISA Affiliate has incurred, or reasonably expects to incur, any material liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (D) neither Lessee nor any ERISA Affiliate has incurred, or reasonably expects to incur, any material liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (E) neither Lessee nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; provided  that the aggregate of all such amounts in cases of clauses (ii), (iii) and (iv) cannot exceed $5,000,000.

    (m)  Taxes.

     (i) Lessee and each of its Subsidiaries has filed or caused to be filed all United States Federal and all other material tax returns and reports that are required to be filed by Lessee or any of its Subsidiaries, and Lessee and each of its Subsidiaries has paid or caused to be paid all taxes shown to be due and payable on such returns or on any other material assessment received by it to the extent that such taxes have become due and payable, except (i) to the extent that taxes due, but unpaid, are being contested in good faith by it by appropriate action or proceeding and, to the extent (if any) that such taxes are not due and payable, it has established or caused to be established reserves that are adequate for the payment thereof in accordance with GAAP or (ii) where the failure to do so would not have or be reasonably expected to have a Material Adverse Effect.

    (ii) No deduction or withholding in respect of Taxes imposed by or for the account of any Governmental Authority of or in any jurisdiction by or through which payments with respect to the Certificates or any other Operative Document made by or for Lessee is required to be made from any payment by Lessee to Agent Lessor, or from Agent Lessor to any Participant, under this Participation Agreement or any other Operative Document.

    (iii) No sales, use, excise, transfer or other tax, fee or imposition shall result from the sale, transfer or purchase of the Premises or any part thereof, except such taxes, fees or impositions that have been paid in full on or prior to the applicable Advance Date or will be paid by Lessee in connection with the recordations described in Section 6.1(f), and except for any transfer taxes payable in connection with the exercise of the Sale Option.

    (n)  Subjection to Government Regulation.  Except as set forth on Schedule 7.2(n), none of Agent Lessor, the Administrative Agent or any Participant will become, solely by reason of entering into the Operative Documents or consummation of the Overall Transaction, subject to ongoing regulation of its operations by a Governmental Authority of the State or any agency or subdivision thereof (except with respect to bank regulations).

    (o)  Licenses, Registrations and Permits.  Lessee and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks, tradenames, technology, know-how and processes or rights thereto in connection with the conduct of their respective businesses and with respect to the Premises, without known conflict with the rights of others, except for those conflicts that, individually or in the aggregate, would not have a Material Adverse Effect.

    (p)  Year 2000.  Lessee and its Subsidiaries are reviewing the areas within their business and operations which could be adversely affected by, and have developed or are developing a program to address on a timely basis, the "Year 2000 Problem" (that is, the risk that computer applications used by Lessee and its Subsidiaries in their business operations may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date on or after December 31, 1999), and are making related appropriate inquiry of material suppliers and vendors. Based on such review and program Lessee believes that, to the best of its information, the "Year 2000 Problem" will not have a Material Adverse Effect on Lessee.

    (q)  No Default.  Lessee is not in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its properties is bound, which default could have a Material Adverse Effect. No Default, Event of Default, Casualty or Condemnation has occurred or exists or will occur or exist after giving effect to any Advance.

    (r)  Ownership.  Lessee is the owner of, and has good and marketable title to, the Land, subject only to the Permitted Exceptions. Lessee and each of its Subsidiaries is the owner of, and has good and marketable title to, or valid leasehold interests in all other real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. None of such assets is subject to any Lien other than Permitted Liens.

    (s)  Improvements.  With respect to any Funding Date, construction of the Improvements prior to such Funding Date has been performed in a good and workmanlike manner, substantially in accordance with the Approved Construction Budget and the Plans and Specifications and in material compliance with all Insurance Requirements and Requirements of Law.

    (t)  Compliance with Laws.  Each of Lessee and its Subsidiaries is in compliance with all Applicable Laws and all other laws, rules, regulations, orders and decrees (including without limitation Environmental Laws) applicable to it, or to its properties, unless such failure to comply could not have a Material Adverse Effect.

    (u)  Disclosure.  Neither this Participation Agreement nor any financial statements delivered to the parties hereto nor any other document, certificate or statement furnished to the parties hereto by or on behalf of Lessee in connection with the Overall Transaction contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading as of the time made or delivered; provided that no representation is made with respect to the accuracy of any forecasts, projections or predictions of future results other than that they were prepared in good faith.

    (v)  No Burdensome Restrictions.  Lessee is not a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any provision of any Applicable Laws which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

    (w)  Labor Matters.  There are no collective bargaining agreements or Multiemployer Plans covering the employees of Lessee or any of its Subsidiaries as of the Document Closing Date, and neither Lessee nor any of its Subsidiaries has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years.

    (x)  Environmental Matters.

     (i) Except as specifically disclosed in Schedule 7.2(x), the on-going operations of Lessee and each of its Subsidiaries comply in all respects with all Environmental Laws, except such non-compliance which would not (if enforced in accordance with applicable law) result in liability in excess of $5,000,000 in the aggregate.

    (ii) Except as specifically disclosed in Schedule 7.2(x), Lessee and each of its Subsidiaries have obtained all licenses, permits, authorizations and registrations required under any Environmental Law ("Environmental Permits") and necessary for their respective ordinary course operations, all such Environmental Permits are in good standing, and Lessee and each of its Subsidiaries are in compliance with all material terms and conditions of such Environmental Permits.

    (iii) Except as specifically disclosed in Schedule 7.2(x), none of Lessee, any of its Subsidiaries or any of their respective present property or operations, is subject to any outstanding written order from or agreement with any Governmental Authority, nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Substance which, if adversely determined, could reasonably be expected to have a Material Adverse Effect.

    (iv) Except as specifically disclosed in Schedule 7.2(x), there are no Hazardous Substances or other conditions or circumstances existing with respect to any property of Lessee or any Subsidiary, or arising from operations prior to the Closing Date, of Lessee or any of its Subsidiaries that would reasonably be expected to give rise to Environmental Claims with a potential liability of Lessee and its Subsidiaries in excess of $5,000,000 in the aggregate for any such condition, circumstance or property. In addition, (i) neither Lessee nor any Subsidiary has any underground storage tanks (x) that are not properly registered or permitted under applicable Environmental Laws, or (y) that are leaking or disposing of Hazardous Substances off-site, and (ii) Lessee and its Subsidiaries have notified all of their employees of the existence, if any, of any health hazard arising from the conditions of their employment (which is either material or for which notification is required by applicable law) and have met all notification requirements under Title III of CERCLA and all other Environmental Laws.

    (y)  Appraisal Data.  The information provided by Lessee to the Appraiser (which information is listed on Schedule 7.2(y)) was true and correct in all material respects when provided, and when provided did not omit any information known to Lessee regarding the title, physical condition, or use of the Premises or Construction which Lessee knew or should reasonably have known was necessary to make the information provided not materially misleading.

    (z)  Premises.  The contemplated use of the Premises by Lessee and its agents, assignees, employees, lessees, licensees and tenants will comply in all material respects with all Applicable Laws (including, without limitation, all zoning and land use laws and Environmental Laws) and Insurance Requirements.

    (aa)  Approved Plans and Specifications.  Upon Substantial Completion, all water, sewer, electric, gas, telephone and drainage facilities, all other utilities required to adequately service the Improvements for its intended use and means of access between such Improvements and public highways for pedestrians and motor vehicles will be available pursuant to adequate permits (including any that may be required under applicable Environmental Laws). No fire or other casualty has occurred on the Premises. All utilities serving the Premises, or proposed to serve the Premises in accordance with the Approved Plans and Specifications, are or will be located in, and vehicular access to the Improvements is provided by, either public rights-of-way abutting the Premises or Appurtenant Rights. With respect to the Premises, all material licenses, approvals, authorizations, consents, permits (including, without limitation, building, demolition and environmental permits, licenses, approvals, authorizations and consents), easements and rights-of-way, including proof and dedication, required for (x) the use, treatment, storage, transport, disposal or disposition of any Hazardous Substance on, at, under or from the Premises during the construction of the applicable Improvements thereon, (y) construction of the Financed Improvements in accordance with the Approved Plans and Specifications and the Construction Agency Agreement and (z) the use, occupancy and operation of the Premises have either been obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, or will be obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, prior to commencing any such construction or use and operation, as applicable.

    (bb)  Flood Hazard Areas.  No portion of the Land is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable Governmental Authority. If the Land is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable Governmental Authority, then, to the extent required by Applicable Laws, flood insurance has been obtained by Lessee in accordance with the National Flood Insurance Act of 1968, as amended.

    (cc)  Ownership, Nature, Condition and Use of the Premises.  On the Document Closing Date, Agent Lessor will be granted a leasehold interest in the Land pursuant to the Ground Lease free and clear of all Liens other than Permitted Liens. Lessee is not a party to any contract or agreement to sell, transfer or encumber any interest in the Premises or any part thereof, other than pursuant to the Ground Lease, this Participation Agreement, the Lease and the documents listed on Schedule 7.2(cc).

    (dd)  Perfection of Security Interest; Filings.  (i) The Memorandum of Lease constitutes an enforceable, first priority mortgage lien of record and perfected security interest of record in Lessee's and Agent Lessor's interest in the Premises in favor of Agent Lessor and the Participants, as against all Persons, including Lessee and its creditors. Except for the filings and recordings listed in Schedule 6.1(f)  and the recording of the Ground Lease (which filings or recordings have been or will be duly made on or before the initial Advance Date (including the payment of any fees or taxes relating to any of the foregoing)), no other filings or recordings are necessary to validly and effectively convey to Agent Lessor a leasehold interest in the Land and good and marketable title to the Improvements, and Agent Lessor and the Participants have a valid and enforceable first priority Lien on the Premises and the other Collateral free and clear of all other Liens, other than Permitted Liens. Neither Lessee nor any of its Affiliates has created, consented to, incurred or suffered to exist any Lien upon the Premises, other than Permitted Liens.

    (ee)  Protection of Interests.  (i) On the initial Advance Date, the Memorandum of Lease is sufficient in form to be recorded with the Hennepin County Registrar of Titles, which is the only recording office necessary to record the mortgage liens on the Premises to Agent Lessor; (ii) Lessor Financing Statements are each in a form sufficient to be filed with the Secretary of State of the State of Minnesota and the Hennepin County Registrar of Titles, which are all filing offices necessary to perfect a security interest in Agent Lessor's interest in all personal property, if any, to be located on the Premises and the Improvements; and (iii) the Lessor Financing Statements are each in a form sufficient to be filed with the Secretary of State of the State of Minnesota and Hennepin County Registrar of Titles, which are all filing offices necessary to perfect Agent Lessor's security interest under the Lease to the extent the Lease is a security agreement, and upon such filing, the secured party will have a first-priority perfected security interest in all of Agent Lessor's personal property on the Premises and the Improvements.

    (ff)  Governmental Approvals.  Except for building permits not required to be obtained prior to commencement of construction, governmental inspections and certificates of occupancy, no Governmental Action by any Governmental Authority having jurisdiction over Lessee or the Premises is required to authorize or is required in connection with (i) the execution, delivery and performance by Lessee of any Operative Document or (ii) the legality, validity, binding effect or enforceability against Lessee of any Operative Document, except for the filing or recording of the Operative Documents listed in Schedule 6.1(f)  hereof with the appropriate Governmental Authorities, all of which will have been or will be completed on or prior to the initial Advance Date.

    (gg)[Reserved]  

    (hh)  Premises.  The Premises consist of a ground lessee's interest in the Land and good and marketable title to the Improvements thereon, including an approximately [420,000] square foot office, research and development facility with parking facilities to be operated as Lessee's corporate headquarters will be constructed pursuant to the Construction Agency Agreement. The Premises are located in Eden Prairie, Minnesota. The Premises as improved in accordance with the related Plans and Specifications and the use thereof by Lessee and its agents, assignees, employees, invitees, lessees, licensees, contractors and tenants will comply in all material respects with all Requirements of Law (including, without limitation, Title III of the Americans with Disabilities Act, all zoning and land use laws and Environmental Laws) and Insurance Requirements, except for such Requirements of Law as Lessee shall be contesting in good faith by appropriate proceedings. The Approved Plans and Specifications have been prepared in all material respects in accordance with applicable Requirements of Law (including, without limitation, Title III of the Americans with Disabilities Act, applicable Environmental Laws and building, planning, zoning and fire codes) and upon completion of the Financed Improvements in accordance with the Approved Plans and Specifications, such Financed Improvements and the other Improvements will not encroach in any manner onto any adjoining land (except as permitted by express written easements). Upon completion of such facility in accordance with the related Approved Plans and Specifications, the Financed Improvements including, without limitation, structural components, the plumbing, heating, air conditioning and electrical systems thereof, and all water, sewer, electric, gas, telephone and drainage facilities will be completed in a workmanlike manner and in accordance with the Approved Plans and Specifications and will be in first class working condition and fit for use as an office, research and development facility with parking facilities, and all other utilities required to adequately service the Financed Improvements for their intended use are or will be available and "tapped on" and hooked up pursuant to adequate permits (including any that may be required under applicable Environmental Laws). There is no action, suit or proceeding (including any proceeding in condemnation or eminent domain or under any Environmental Law) pending or, to the best of Lessee's knowledge, threatened with respect to Lessee, its Affiliates or the Premises which adversely affects the title to, or the use, operation or value of, the Premises or which would have a Material Adverse Effect. No fire or other Casualty with respect to the Premises has occurred. The Premises have (or will have by the Completion Date) available all material services of public facilities and other utilities necessary for use and operation of the Financed Improvements for their primary intended purposes, including, without limitation, adequate water, gas and electrical supply, storm and sanitary sewerage facilities, telephone, other required public utilities and means of access to such facility from publicly dedicated streets and public highways for pedestrians and motor vehicles. All utilities serving the Premises, or proposed to serve the Premises in accordance with the Approved Plans and Specifications, are (or will be) located in, and vehicular access to the Financed Improvements on the Premises is provided by, either public rights-of-way abutting the Premises or Appurtenant Rights. All material licenses, approvals, authorizations, consents, permits (including, without limitation, building, demolition and environmental permits, licenses, approvals, authorizations and consents), easements and rights-of-way, including proof and dedication, required for (x) the use, treatment, storage, transport, disposal or disposition of any Hazardous Substance on, at, under or from the Premises during the construction of the Financed Improvements thereon, and (y) construction of such Financed Improvements in accordance with the Approved Plans and Specifications and the Construction Agency Agreement have either been obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, or will be obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, prior to commencing any such construction or use and operation, as applicable and will in each case be maintained by Lessee during the periods for which they are required by Applicable Law or such Governmental Authorities.

    (ii)  Title.  The Ground Lease is sufficient to convey a leasehold interest in the Land to Agent Lessor, subject only to Permitted Liens. Upon execution and delivery of the Ground Lease, Agent Lessor will hold a leasehold estate in the Land in accordance with the terms of the Ground Lease and will own the Financed Improvements constructed thereon.

    (jj)  Conditions Precedent.  All conditions precedent contained in this Agreement and in the other Operative Documents have been satisfied.

    SECTION 7.3.  Representations of Lessee with Respect to Each Advance.  Lessee represents and warrants to each of the other parties as of each Advance Date on which an Advance is made as follows:

    (a)  Representations and Warranties.  The representations and warranties of Lessee set forth in the Operative Documents (including the representations and warranties set forth in Section 7.2) are true and correct on and as of such Advance Date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct on and as of such earlier date. No Event of Default has occurred and is continuing, or will occur as a result of, or after giving effect to, the Advance requested by the Advance Request on such date. Lessee has not received a Termination Notice pursuant to Section 15.1 of the Lease.

    (b)  Financed Improvements.  The Construction to date has been performed in a good and workmanlike manner, substantially in accordance with the Approved Plans and Specifications and in compliance in all material respects with all Insurance Requirements and Applicable Laws.

    (c)  Liens.  The Premises are free and clear of all Liens other than Permitted Liens.

    (d)  Advance.  The amount of the Advance requested represents amounts owed by Lessee or Construction Agent in respect of Construction Costs incurred prior to the date of such Advance and for which Lessee has not previously been reimbursed by an Advance or represent amounts with respect to Commitment Fees. The conditions precedent to such Advance and the related Certificate Amount set forth in Article VI have been satisfied or waived in accordance with the Operative Documents.

    SECTION 7.4.  Representations of Agent Lessor.  The Bank, in its individual capacity and not as Agent Lessor (with the exception of the last sentence of clause (c) below, which representation and warranty is made by the Bank solely in its capacity as Agent Lessor), represents and warrants to each of the other parties hereto as follows:

    (a)  Chief Executive Office.  The Bank's chief executive office and principal place of business and the place where the documents, accounts and records relating to the Overall Transaction are kept are located at its address set forth in Schedule II  attached hereto.

    (b)  Due Organization, etc.  The Bank is a national banking association duly organized and validly existing in good standing under the laws of the United States and has full corporate power and authority to execute, deliver and perform its obligations: (i) to the extent it is a party hereto in its individual capacity, this Participation Agreement, and (ii) acting as Agent Lessor under this Participation Agreement and each other Operative Document to which it is or will be a party as Agent Lessor.

    (c)  Due Authorization; Enforceability, etc.  This Participation Agreement and each other Operative Document to which the Bank 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 Bank (in its individual capacity) and are, or upon execution and delivery will be, legal, valid and binding obligations of the Bank (in its individual capacity), 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. The Operative Documents to which Agent Lessor is a party constitute the legal, valid and binding obligation of Agent Lessor (acting solely as Agent Lessor pursuant to Article 16, and not in its individual capacity), 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 (i) the Bank, to the extent it is a party hereto in its individual capacity of this Participation Agreement and (ii) the Bank, in its capacity as Agent Lessor, of each Operative Document to which Agent Lessor is or will be a party, are not and will not be, and the performance by the Bank, in its individual capacity or as Agent Lessor, as the case may be, of its obligations under each are not and will not be, inconsistent with the articles of association or by-laws of the Bank, do not and will not contravene any Applicable Laws of the United States of America relating to the banking powers of the Bank and do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales contract, loan or credit arrangement or other agreement or instrument to which the Bank is a party or by which it or its properties may be bound or affected.

    (e)  No Approvals, etc.  Neither the execution and delivery by the Bank as Agent Lessor of any of the Operative Documents to which it is a party requires 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 Governmental Authority regulating its banking practices.

    (f)  Lessor Liens.  The Premises are free and clear of all Lessor Liens attributable to the Bank and no act or omission by it has occurred which would give rise to a Lessor Lien attributable to it.

    (g)  Litigation.  There is no action, proceeding or investigation pending or threatened against the Bank or Agent Lessor which questions the validity of any of the Operative Documents, and there is no action, proceeding or investigation pending or threatened which is likely to result, either in any case or in the aggregate, in any material adverse change in the ability of the Bank or Agent Lessor to perform its obligations under the Operative Documents to which it is a party.

    (h)  Securities Act.  Neither the Bank nor Agent Lessor nor any Person authorized to act on its behalf has offered or sold any interest in the Certificates, or in any similar security relating to the Premises, or in any security, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the aforementioned securities, to, or solicited any offer to acquire any of the same from, any Person other than the Participants, and neither the Bank nor Agent Lessor nor any Person authorized to act on its behalf will take any action which would subject the issuance or sale of any interest in the Certificates to the provisions of Section 5 of the Securities Act or any state securities laws.

ARTICLE VIII
COVENANTS OF LESSEE

    SECTION 8.1.  Covenants of Lessee.  Lessee covenants and agrees with Agent Lessor and each of the Participants that it shall comply with the following provisions of this Section 8.1, it being understood that the following covenants are in addition to, and not by way of limitation of, any covenant set forth in the Lease.

    (a)  Further Assurances.  Lessee or Construction Agent will cause to be promptly and duly taken, executed, acknowledged and delivered all such further acts, documents and assurances as Agent Lessor reasonably may request from time to time in order to carry out more effectively the intent and purposes of this Participation Agreement and the other Operative Documents and the Overall Transaction. Lessee or Construction Agent, as a Transaction Expense or a Construction Cost, as applicable, will cause all financing statements (including precautionary financing statements), fixture filings, mortgages and other documents, to be recorded or filed at such places and times in such manner, and will take all such other actions or cause such actions to be taken, as may be necessary or as may be reasonably requested by Agent Lessor in order to establish, preserve, protect and perfect the title and Lien of Agent Lessor and the Participants in the Premises and Agent Lessor's and/or any Participant's rights under this Participation Agreement and the other Operative Documents; provided however, that all fees and reasonable out of pocket expenses included in connection with the foregoing which are due and payable during the Interim Term shall be payable from, or if Lessee pays such fees or expenses Lessee shall be entitled to reimbursement therefor from, Advances to the extent such fees and expenses are included in the Approved Construction Budget.

    (b)  Completion.  The Construction shall proceed in compliance with the Approved Construction Budget and Approved Construction Schedule, and Substantial Completion shall occur prior to the Outside Completion Date in accordance with the standards set forth in the Operative Documents. No proceeds of any of the Advances shall be used to pay for personal property, including, without limitation, furniture, trade fixtures or equipment.

    (c)  Construction Assurances.  Each Person engaged by Construction Agent on behalf of Agent Lessor under each Major Construction Document shall covenant and agree in a writing (which writing may be incorporated in an acknowledgment or consent to an assignment of such Major Construction Document to Agent Lessor) that: (i) none of Agent Lessor or any Participant is personally liable for any claims or obligations incurred under such contract, (ii) such Person will provide written notice to Agent Lessor of any material breach under such contract and, during the existence of an Event of Default, Agent Lessor shall have at least thirty (30) days following the receipt of such notice to cure such breach, and (iii) upon written request of Agent Lessor, such Person shall provide to Agent Lessor an estoppel certificate in respect of such contract in a form reasonably requested by Agent Lessor.

    (d)  Construction Progress Information.  Lessee shall furnish or cause to be furnished to Agent Lessor, upon request (but, so long as no Event of Default has occurred and is continuing, not more than once per calendar month or such shorter period to coincide with Advance Requests), on forms approved by Agent Lessor, as applicable, details concerning the Construction as Agent Lessor shall reasonably require, including: (i) the costs incurred and the progress of the Financed Improvements, (ii) copies of any modifications or changes to the Approved Plans and Specifications, and (iii) a list of the names and addresses of Lessee's and General Contractor's materials dealers and subcontractors with whom written agreements have been made by Lessee or General Contractor.

    (e)  Liens.  Lessee shall not, by any act or omission to act, incur or suffer to exist any Lien on the Premises other than Permitted Liens.

    (f)  Change of Name or Address.  Lessee shall provide Agent Lessor thirty days' prior written notice of any change in name, or the address of its chief executive office and principal place of business or the office where it keeps its records concerning its accounts and the Premises.

    (g)  Compliance with Law.  Lessee shall comply at all times in all material respects with all Applicable Laws; any Hazardous Substance maintained at the Premises shall be held and used in material compliance with all Environmental Laws; and Lessee shall not cause or permit the installation of any underground storage tanks at the Premises, unless such underground storage tanks are installed, monitored and maintained in accordance with Environmental Laws and do not, in Lessor Agent's reasonable opinion, in any manner materially adversely affect the Fair Market Value, utility, remaining useful life or residual value of the Premises.

    (h)  Investigation and Litigation.  Lessee shall deliver a written notice to Agent Lessor promptly upon Lessee's receiving notice or actual knowledge of a Responsible Officer of Lessee of the intent by a Governmental Authority to (i) take an action which would constitute a Condemnation or (ii) investigate the Premises for a violation of any Applicable Laws which could have a Material Adverse Effect or under which liability (including any criminal liability) may be imposed upon any Indemnitee.

    (i)  Financial and Other Information.  Lessee shall furnish, or cause to be furnished, to Agent Lessor with copies for each Participant to Agent Lessor:

     (i) as soon as available, but not later than 90 days after the end of each fiscal year (commencing with the fiscal year ended October 31, 1999), a copy of the audited consolidated balance sheet of Lessee and its Subsidiaries as at the end of such year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Arthur Andersen LLP or another nationally-recognized independent public accounting firm ("Independent Auditor") which report shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years; it being understood that if Lessee's annual report filed on Form 10K with the SEC contains the information and the report required above, delivery of such 10K shall be sufficient for purposes of satisfying the foregoing. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of Lessee's or any Subsidiary's records; and

    (ii) as soon as available, but not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year (commencing with the fiscal quarter ended January 31, 2000), a copy of the unaudited consolidated balance sheet of Lessee and its Subsidiaries as of the end of such quarter and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position and the results of operations of Lessee and its Subsidiaries; it being understood that if Lessee's quarterly report filed on Form 10Q with the SEC contains the information required above, delivery of such 10Q shall be sufficient for purposes of satisfying the foregoing.

    (iii) concurrently with the delivery of the financial statements referred to in clause (i) above, a certificate of the Independent Auditor stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;

    (iv) promptly, copies of all financial statements and reports that Lessee sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that Lessee or any Subsidiary may make to, or file with, the SEC;

    (v) promptly, such additional information regarding the business, financial or corporate affairs of Lessee or any Subsidiary as Agent Lessor of any Participant may from time to time reasonably request.

    Lessee shall promptly notify Agent Lessor and each Participant:

    A.  of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance which with the passage of time would become a Default or Event of Default;

    B.  of (i) any breach or non-performance of, or any default under, any contractual obligation of Lessee or any of its Subsidiaries which would reasonably be expected to result in a Material Adverse Effect; and (ii) any dispute, litigation, investigation, proceeding or suspension which may exist at any time between Lessee or any of its Subsidiaries and any Governmental Authority which, if adversely determined, would reasonably be expected to have a Material Adverse Effect;

    C.  of the commencement of, or entry of judgment or disposition of, any litigation or proceeding affecting Lessee or any Subsidiary (i) in which the amount of damages claimed is $10,000,000 (or its equivalent in another currency or currencies) or more, (ii) in which injunctive or similar relief is sought and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect, or (iii) in which the relief sought is an injunction or other stay of the performance of this Agreement or any Operative Document;

    D.  upon, but in no event later than 15 days after, becoming aware of any and all Environmental Violations and other enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Lessee or any Subsidiary or any of their respective properties pursuant to any applicable Environmental Laws that could reasonably be expected to have a Material Adverse Effect;

    E.  of any other litigation or proceeding affecting Lessee or any of its Subsidiaries which Lessee would be required to report to the SEC pursuant to the Exchange Act, within four days after reporting the same to the SEC;

    F.  of the occurrence of any of the following events affecting Lessee or any ERISA Affiliate (but in no event more than 15 days after such event), and deliver to Agent Lessor and each participant a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to Lessee or any ERISA Affiliate with respect to such event:

    (A) an ERISA Event which could give rise to a liability of Lessee or an ERISA Affiliate in excess of $500,000;

    (B) a material increase in the Unfunded Pension Liability of any Pension Plan;

    (C) the adoption of, or the commencement of contributions to, any Plan subject to Section 412 of the Code by Lessee or any ERISA Affiliates; or

    (D) the adoption of any amendment to a Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability;

    G.  of any material change in accounting policies or financial reporting practices by Lessee or any of its consolidated Subsidiaries;

    H.  of any change in any rating by any rating agency of the long-term unsecured indebtedness of Lessee.

    I.  promptly upon receipt thereof, copies of all updates to the Initial Environmental Audit.

    J.  except to the extent contained in Lessee's 10Q or 10K reports, statements of financial performance and compliance certificates required to be provided by Lessee and/or its Subsidiaries to Agent Lessor herein shall: (i) include a statement that the Year 2000 remediation efforts of Lessee and its Subsidiaries are proceeding as scheduled and; (ii) indicate whether an auditor, regulator, or third party consultant has issued a management letter or other communication regarding the Year 2000 exposure, program or progress of Lessee and/or its Subsidiaries.

Each notice under this Section shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action Lessee or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under this clause shall describe with particularity any and all clauses or provisions of this Participation Agreement or other Operative Document that have been (or foreseeably will be) breached or violated.

    (j)  Securities.  Lessee shall not, nor shall it permit anyone authorized to act on its behalf to, take any action which would subject the issuance or sale of the Certificates, the Premises or the Operative Documents, 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.

    (k)  Preservation of Existence and Franchises.  Subject to Section 8.4, Lessee shall, and shall cause each Subsidiary to:

     (i) preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction or incorporation;

    (ii) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses, and franchises necessary or desirable in the normal conduct of its business, the non-preservation of which could reasonably be expected to have a Material Adverse Effect;

    (iii) use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill; and

    (iv) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

    (l)[Reserved]  

    (m)  Payment of Taxes and Other Indebtedness.  Lessee will, and will cause each Subsidiary to pay and discharge, as the same shall become due and payable, all their respective material obligations and material liabilities, including:

     (i) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by Lessee or such Subsidiary;

    (ii) all lawful claims which, if unpaid, could by law become a Lien upon its property unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by Lessee or such Subsidiary; and

    (iii) all indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness.

    (n)  Insurance.  Subject to the terms and conditions of Article XIII of the Lease, Lessee will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect, with financially sound and reputable insurance companies, insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice, except where the failure to do so would not have, or be reasonably expected to have, a Material Adverse Effect.

    (o)  Maintenance of Properties.  Lessee will, and will cause each of its Subsidiaries to, maintain and preserve its properties and equipment material to the conduct of its business in good repair, working order and condition, normal wear and tear and casualty and condemnation excepted, and will make, or cause to be made, in such properties and equipment from time to time all repairs, renewals, replacements, extensions, additions, betterments and improvements thereto as may be needed or proper, to the extent and in the manner customary for companies in similar businesses, except where the failure to do so will not have, or be reasonably expected to have, a Material Adverse Effect.

    (p)  Performance of Obligations.  Lessee will, and will cause each of its Subsidiaries to, perform in all material respects all of its obligations under the terms of all material agreements, indentures, mortgages, security agreements or other debt instruments to which it is a party or by which it is bound, unless the failure to do so will not have or be reasonably expected to have a Material Adverse Effect.

    (q)  Compliance with Laws.  Lessee shall comply, and shall cause each Subsidiary to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist.

    (r)  Audits/Inspections.  Lessee shall maintain and shall cause each Subsidiary to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of Lessee and such Subsidiary; provided, however, that the books of record and account for any newly acquired Subsidiary organized under a jurisdiction outside of the United States, its possessions and territories shall not be required to be kept in accordance with GAAP until 12 months after the acquisition of such Subsidiary by Lessee. Lessee shall permit, and shall cause each Subsidiary to permit, representatives and independent contractors of Agent Lessor or any Participant to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers, and independent public accountants, all at the expense of Lessee and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to Lessee; provided, however, when an Event of Default exists Agent Lessor or any Participant (A) may do any of the foregoing at the expense of Lessee at any time during normal business hours and without advance notice and (B) may directly contact directors provided that all information obtained during any such audits or inspections shall be subject to the confidentiality provisions set forth in Section 16.12.

    (s)[Reserved]  

    (t)  Annual Appraisals.  Lessee will deliver to Agent Lessor an update of the Appraisal, on each date as required pursuant to Section 3.1(b) of the Lease, prepared by the Appraiser at Lessee's sole cost and expense, which shall establish by the use of appraisal methods satisfactory to the Participants the Fair Market Value of the Premises as of the upcoming anniversary of the Document Closing Date for purposes of calculating the Loan to Value Ratio.

    SECTION 8.2.  Limitation on Liens.  In addition to, and not in limitation of, any other restrictions contained in any Operative Document with respect to Liens, Lessee shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following:

    (a) any Lien existing on property of Lessee or any Subsidiary on the Closing Date and set forth in Schedule 8.2  securing Indebtedness outstanding on such date including any continuations thereof, or concurrent replacements or substitutions therefor (or in the case of filings which inadvertently lapsed, non-concurrent refilings), in respect of such Indebtedness or Indebtedness incurred to refinance such Indebtedness (which Lien shall not extend to categories, types, classes or items of collateral not previously serving as collateral for such Indebtedness or the Indebtedness so refinanced);

    (b) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 8.7 of the Credit Agreement, provided that no notice of lien has been filed or recorded under the Code;

    (c) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

    (d) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment and other social security legislation;

    (e) Liens on the property of Lessee or any Subsidiary of Lessee securing (i) the nondelinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other nondelinquent obligations of a like nature; in each case, incurred in the ordinary course of business, provided all such Liens in the aggregate would not (even if enforced) cause a Material Adverse Effect;

    (f)  Liens consisting of judgment or judicial attachment liens;

    (g) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of Lessee and its Subsidiaries,

    (h) Liens arising solely by virtue of any statutory or common law provision relating to bankers' liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by Lessee in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by Lessee or any Subsidiary of Lessee to provide collateral to the depository institution;

    (i)  purchase money security interests on any property acquired or held by Lessee or any of its Subsidiaries, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property; provided that (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, and (iii) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such property;

    (j)  Liens securing obligations in respect of capital leases on assets subject to such leases, provided that such capital leases are otherwise permitted hereunder;

    (k) Liens securing obligations in respect of the Equity Swap, provided, that the aggregate fair market value of all property subject to such Liens does not exceed $35,000,000; and

    (l)  other Liens not of the type described in the foregoing clauses (a) through (j); provided, that (i) both before and after giving effect to the creation of such Lien no Default or Event of Default shall have occurred and be continuing and (ii) the aggregate amount of Indebtedness and/or other liabilities secured by such Liens shall at no time exceed $25,000,000.

    SECTION 8.3.  Disposition of Assets.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except:

    (a) dispositions of inventory, or used, worn-out or surplus equipment, all in the ordinary course of business;

    (b) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment;

    (c) dispositions of equipment by Lessee or any Subsidiary of Lessee to Lessee or any Subsidiary of Lessee pursuant to reasonable business requirements;

    (d) sales of financial assets by Lessee or any Subsidiary of Lessee in a transaction that constitutes the sale of such assets under applicable accounting rules;

    (e) dispositions not otherwise permitted hereunder which are made for fair market value; provided, that (i) at the time of any disposition, no Default or Event of Default shall exist or shall result from each such disposition, (ii) the aggregate value of all assets so sold by Lessee and its Subsidiaries, together, shall not exceed in any fiscal year 20.0% of Net Worth as of the last day of the most recent fiscal period for which financial statements have been delivered pursuant to the terms hereof; and

    (f)  any Synthetic Lease of property formerly owned by the Lessee or any Subsidiary pursuant to which the Lessee or such Subsidiary is the lessee under such Synthetic Lease.

    SECTION 8.4.  Consolidations and Mergers.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except:

    (a) Lessee may merge with any Person; provided that (i) Lessee shall be the continuing or surviving corporation, (ii) both before and after giving effect to the consummation of such merger no Default or Event of Default shall have occurred and be continuing and (iii) if such merger had been consummated on the last day of the most recent fiscal period for which financial statements have been delivered pursuant to the terms hereof, no Default or Event of Default would have occurred as a result thereof;

    (b) any Subsidiary of Lessee may merge with Lessee, provided that Lessee shall be the continuing or surviving corporation, or with any one or more Subsidiaries, provided that if any transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or surviving corporation;

    (c) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to Lessee or another Wholly-Owned Subsidiary; and

    (d) the merger of any Subsidiary with any Person in connection with a disposition of assets permitted by Section 8.3(d).

    SECTION 8.5.  Loans and Investments.  Lessee shall not purchase or acquire, or suffer or permit any Subsidiary of Lessee to purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, or make or commit to make any Acquisitions, or make or commit to make any advance, loan, extension of credit or contribution to or any other investment in, any Person including any Affiliate of Lessee (together, "Investments"), except for:

    (a) Investments held by Lessee or any Subsidiary of Lessee in the form of cash equivalents;

    (b) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business;

    (c) extensions of credit by Lessee to any of its Subsidiaries or by any of its Subsidiaries to another of its Subsidiaries;

    (d) Investments incurred in order to consummate Acquisitions, and Investments in other Persons which do not constitute Acquisitions ("Minority Investments") not otherwise prohibited herein (other than the allowance for Investments in Joint Ventures under Section 8.5(e)  which shall be in addition hereto), provided that (i) both before and after giving effect to the consummation of such Acquisition or the making of such Minority Investment no Default or Event of Default shall have occurred and be continuing, (ii) any such Acquisitions and Minority Investments are undertaken in accordance with all applicable Requirements of Law; (iii) the prior, effective written consent or approval to any such Acquisition of the board of directors or equivalent governing body of the acquired Person is obtained, (iv) the Person that is the subject or whose assets are the subject of such Acquisition shall be in a line of business substantially similar to a line of business of Lessee and its Subsidiaries and (v) if such Investment had been consummated on the last day of the most recent fiscal period for which financial statements have been delivered pursuant to the terms hereof, no Default or Event of Default would have occurred as a result thereof;

    (e) Investments in Joint Ventures;

    (f)  investments constituting Permitted Swap Obligations or payments or advances under Swap Contracts relating to Permitted Swap Obligations;

    (g) Investments listed on Schedule 8.5; and

    (h) Investments in Wholly-Owned Subsidiaries.

    SECTION 8.6.  Limitation on Indebtedness.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:

    (a) Indebtedness incurred pursuant to this Agreement;

    (b) Indebtedness consisting of Contingent Obligations permitted pursuant to Section 8.9;

    (c) Indebtedness existing on the Closing Date and set forth in Schedule 8.6;

    (d) other Indebtedness not of the type described in the foregoing clauses (a) through (c);

provided, that in the case of Indebtedness of the type described in the foregoing clause (d), (i) both before and after giving effect to the incurrence of such Indebtedness no Default or Event of Default shall have occurred and be continuing and (ii) if such Indebtedness were incurred on the last day of the most recent fiscal period for which financial statements have been delivered pursuant to the terms hereof, no Default or Event of Default would have occurred as a result thereof, provided further, that the aggregate principal amount of Indebtedness of Subsidiaries arising under the foregoing clause (d) shall at no time exceed $25,000,000.

    SECTION 8.7.  Transactions with Affiliates.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, enter into any transaction with any Affiliate of Lessee, except upon fair and reasonable terms no less favorable to Lessee or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate of Lessee or such Subsidiary.

    SECTION 8.8.  Use of Proceeds.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, use any portion of any loan under any instrument evidencing Indebtedness to which Lessee or any Subsidiary of Lessee is a party, or Advance proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of Lessee or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act.

    SECTION 8.9.  Contingent Obligations.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, create, incur, assume or suffer to exist any Contingent Obligations except:

    (a) endorsements for collection or deposit in the ordinary course of business;

    (b) Surety Instruments issued for the account of Lessee or any of its Subsidiaries in the ordinary course of business;

    (c) Permitted Swap Obligations;

    (d) Contingent Obligations of Lessee and its Subsidiaries existing as of the Closing Date and listed in Schedule 8.9; and

    (e) other Contingent Obligations; provided that at the time such Contingent Obligations are incurred, Lessee and its Subsidiaries would be permitted pursuant to Section 8.6 to incur Indebtedness in an aggregate principal amount equal to the amount of such Contingent Obligations (as determined in accordance with the definition of Contingent Obligation).

    SECTION 8.10.  Lease Obligations.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, except for:

    (a) leases of Lessee and of Subsidiaries of Lessee in existence on the Closing Date and any renewal, extension or refinancing thereof;

    (b) operating leases entered into by Lessee or any Subsidiary of Lessee after the Closing Date in the ordinary course of business; and

    (c) capital leases other than those permitted under clause (a) of this Section, entered into by Lessee or any Subsidiary of Lessee after the Closing Date to finance the acquisition of equipment; provided that the Indebtedness arising from such capital leases is not otherwise prohibited hereunder.

    SECTION 8.11.  Restricted Payments.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock, or purchase, redeem or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding or following consummation of any Acquisition make any "earn-out" payment of assets, properties, cash, rights, obligations or securities in connection with such Acquisition; except that Lessee and any Wholly-Owned Subsidiary may:

    (a) declare and make dividend payments or other distributions payable solely in its common stock;

    (b) purchase, redeem or otherwise acquire shares of its common stock or warrants or options to acquire any such shares with the proceeds received from the substantially concurrent issue of new shares of its common stock; and

    (c) declare or pay cash dividends to its stockholders, purchase, redeem or otherwise acquire shares of its capital stock or warrants, rights or options to acquire any such shares for cash and make "earn-out" payments in connection with Acquisitions; provided that (i) both before and after giving effect thereto no Default or Event of Default shall have occurred and be continuing and (ii) if such declaration, payment, purchase, redemption or other acquisition were made on the last day of the most recent fiscal period for which financial statements have been delivered pursuant to the terms hereof, no Default or Event of Default would have occurred as a result thereof.

    SECTION 8.12.  ERISA.  Lessee shall not, and shall not suffer or permit any of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in liability of Lessee in an aggregate amount in excess of $5,000,000; or (b) engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

    SECTION 8.13.  Change in Business.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to engage in any material line of business substantially different from those lines of business carried on by Lessee and its Subsidiaries on the date hereof.

    SECTION 8.14.  Accounting Changes.  Lessee shall not, and shall not suffer or permit any Subsidiary of Lessee to, make any significant change in accounting treatment or reporting practices, except for changes in accounting treatment or reporting practices (a) required by GAAP and (b) of newly acquired businesses which are made to bring such businesses into conformity with Lessee's accounting treatment or reporting practices; Lessee shall not change the fiscal year of Lessee or of any Subsidiary.

    SECTION 8.15.  Negative Pledges, Restrictive Agreements, etc.  Lessee will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement and any other Operative Document and the Credit Agreement) prohibiting:

    (a) the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, other than upon any properties or assets subject to Liens described in Sections 8.2(i) and (j)  and entered into as part of the financing secured by such Liens; or

    (b) the ability of any Subsidiary of Lessee to make any payments, directly or indirectly, to Lessee by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to Lessee, except on the ability of any special purpose Subsidiary created solely to effect a sale of financial assets entered into as part of such sale.

    SECTION 8.16.  Ability to Amend; Restrictive Agreements.  Lessee will not, and will not permit any of its Subsidiaries to, enter into, or accept obligations under, any agreement (a) prohibiting (including subjecting to any condition) the ability of Lessee, or any of its Subsidiaries to amend, supplement or otherwise modify this Agreement or any other Operative Document or (b) containing any provision that would contravene any provision of this Agreement or any other Operative Document.

    SECTION 8.17.  Net Worth.  Lessee shall not permit at any time Net Worth to be less than the sum of (a) 600,607,200 (80% of Net Worth as of October 31, 1997), plus (b) for each fiscal year, commencing with the fiscal year ending October 31, 1998, 50% of positive net income for such fiscal year, plus  (c) with respect to the issuance or sale of capital stock of Lessee or the conversion of Indebtedness of Lessee into equity of Lessee, in each case occurring after the date hereof, 50% of the aggregate Net Issuance Proceeds received by Lessee from such issuance or sale of capital stock plus 50% of the principal amount of any Indebtedness so converted if such issuance, sale or conversion occurs at a time when Lessee shall have no Rating or at a time when Lessee's Rating is lower than BBB- and Baa3, respectively; such covenant to be calculated as of the end of each fiscal quarter.

    SECTION 8.18.  Funded Debt to EBITDA Ratio.  Lessee shall not permit, as of the end of any fiscal quarter, the ratio of (a) the aggregate principal amount of funded Debt of Lessee and its Subsidiaries to (b) EBITDA for the four consecutive fiscal quarters then ending, to exceed 3.0:1.

    SECTION 8.19.  EBITDA to Interest Expense Ratio.  Lessee shall not permit for any period consisting of four consecutive fiscal quarters then ending the ratio of EBITDA for such period to Interest Expense for such period to be less than 4.0:1.

ARTICLE IX
OTHER COVENANTS AND AGREEMENTS

    SECTION 9.1.  Covenants of the Participants and Agent Lessor.

    (a) Lessor Liens. Each of the Participants (severally and not jointly with any other Participants) and Agent Lessor, hereby agrees that so long as this Participation Agreement is in effect it:

     (i) will not create, incur, assume or suffer to exist any Lessor Lien attributable to it upon the Lease or the Premises (other than as contemplated by any of the Operative Documents); and

    (ii) will remove any Lessor Lien created or incurred by it and use its best efforts to remove any Lessor Lien attributable to it assumed or suffered to exist by it upon the Lease or the Premises (other than such Liens as are contemplated by any of the Operative Documents); provided, however, that any action taken pursuant to this  clause (ii) shall not limit Lessee's rights or remedies under any of the Operative Documents.

    (b) Depreciation. Prior to the Expiration Date, neither Agent Lessor nor any Participant shall claim any federal or state tax attributes or benefits (including depreciation) relating to the Premises unless required to do so by an appropriate taxing authority or after a clearly applicable change in Applicable Laws or as a protective response to a proposed adjustment by a Governmental Authority; provided, however, that if an appropriate taxing authority shall require Agent Lessor or any Participant to claim any such federal or state tax attributes or benefits, such Person shall promptly notify Lessee thereof and shall permit Lessee to contest such requirement in a manner consistent with the contest rights and limitations provided in Section 12.5(b).

    (c) Release of Documents. Agent Lessor hereby agrees that, upon a sale of the Premises pursuant to Article XXI of the Lease and payment of all amounts due and owing from Lessee under the Operative Documents or repayment in full of all Certificates and all other amounts due and owing from Lessee under the Operative Documents to Agent Lessor and the Participants, Agent Lessor shall execute and deliver to Lessee releases of all Liens created by the Operative Documents, and termination statements for any financing statements relating to the Premises which are then of record naming Agent Lessor as secured party.

    SECTION 9.2.  Withholding.  If Agent Lessor, any Participant or any assignee of, or Sub-Participant in, any Certificate (each such assignee or Sub-Participant, a "Transferee") is organized under the laws of any jurisdiction other than the United States or any State thereof, then such Agent Lessor, Participant or Transferee, as applicable, shall (as a condition precedent to acquiring or participating in any Certificate) (i) furnish to Agent Lessor, the agent under the Transfer Agreement and Lessee in duplicate, for each taxable year of such Participant or Transferee during the Lease Term, a properly completed and executed copy of either Internal Revenue Service Form 4224 or Internal Revenue Service Form 1001 and Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and any additional form (or such other form or successor form) as is necessary to claim complete exemption from United States withholding taxes, and (ii) provide to Agent Lessor, the agent under the Transfer Agreement and Lessee a new Internal Revenue Service Form 4224 or Internal Revenue Service Form 1001 and Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and any such additional form (or any successor form or forms) upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws and regulations and amendments duly executed and completed by such Participant or Transferee, and to comply from time to time with all applicable United States laws and regulations with regard to such withholding tax exemption.

ARTICLE X
LESSEE DIRECTIONS; REPLACEMENT OF PARTICIPANTS

    SECTION 10.1.  Lessee Directions.  Each of the Participants, Agent Lessor and Lessee hereby agree that, so long as no Default or Event of Default exists:

    (a) Lessee shall have the exclusive right to replace a Defaulting Committed Participant pursuant to Section 10.2(b);

    (b) Lessee shall have the right to replace any Participant with respect to which there are or would be any claim to reimbursement or compensation under Section 12.5;

    (c) Whenever all or any portion of Basic Rent is calculated by reference to the LIBO Rate, Lessee shall have the right, by delivering a notice to the Administrative Agent on or before 12:00 noon (New York, New York time) on a Business Day, to elect irrevocably, on not less than three nor more than five Business Days' notice prior to the last day of any then current LIBO Rate Period, that all or any portion in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000 of the Certificate Amount of a Committed Participant be continued as Basic Rent determined by reference to the LIBO Rate (Reserve Adjusted) having a LIBO Rate Period (subject to the limitations set forth in the definition thereof) of the length set forth in such notice (in the absence of delivery of such notice at least three Business Days' before the last day of any then current LIBO Rate Period with respect thereto, the LIBO Rate Period shall be one month).

    SECTION 10.2.  Replacement of Participants.

    (a) Lessee shall have the right to replace (i) any Committed Participant that breaches its obligation (if any) under Section 3.1 to make an Advance or (ii) any Tranche A2 Participant, if the short-term debt ratings of such Tranche A2 Participant shall cease to be at least equal to the Required Ratings under the Transfer Agreement.

    (b) Subject to the limitations set forth in Section 10.1, Lessee shall be permitted to replace any Participant subject to replacement as described in Section 10.2(a), with a replacement bank or other financial institution or other Person (a "Replacement Participant") satisfactory to Lessee and, in the case of a Committed Participant, satisfactory to Agent Lessor in its reasonable discretion; provided, that (i) such replacement does not conflict with any Applicable Laws, (ii) the Replacement Participant shall purchase from the Defaulting Committed Participant (A) at par, all Certificate Amounts, of such Defaulting Committed Participant, (B) all accrued Rent with respect to such Certificate Amounts, and (C) all other amounts owing to such Defaulting Committed Participant on or prior to the date of replacement, in each case, (iii) Lessee shall be liable to such Defaulting Committed Participant for any amounts owing under Article XII if any Certificate Amount owing to such Defaulting Committed Participant shall be prepaid (or purchased), (iv) such replacement shall be made in accordance with the provisions of and shall be subject to the requirements of Section 11.1, and if the Defaulting Committed Participant is a Purchaser, Section 4.12 of the Transfer Agreement (provided, that Lessee or the relevant Replacement Participant shall be obligated to pay the Transaction Expenses arising in connection therewith), (v) the Replacement Participant shall have agreed in writing, addressed and delivered to each of the parties to this Participation Agreement, to be subject to all of the terms and conditions of the applicable Operative Documents (including the extension of the Lease Term contemplated by the relevant request for extension), (vi) upon such replacement, the Defaulting Committed Participant shall automatically be deemed to be released by Lessee and each remaining Participant from any and all obligations thereafter arising under the Operative Documents and (vii) in the case of the replacement of a Tranche A2 Participant, such Replacement Participant shall be rated not less than the Required Ratings under the Transfer Agreement.

    (c) Agent Lessor and the Participant hereby agree to cooperate with Lessee, at Lessee's sole cost and expense, in Lessee's efforts to arrange one or more Replacement Participants as contemplated by this Section 10.2.

ARTICLE XI
TRANSFERS OF PARTICIPANTS' INTERESTS

    SECTION 11.1.  Assignments.

    (a) All or any part of the interest of any Participant in, to or under this Participation Agreement, the other Operative Documents, the Premises or the Certificates may be assigned or transferred by such Participant at any time to any Person; provided, however, that (i) each assignment or transfer shall comply with all applicable securities laws; (ii) each assignment or transfer shall consist of a transfer of equivalent portions of such Participant's Certificates, and equivalent portions of such Participant's rights and obligations under this Participation Agreement and the Transfer Agreement (if applicable to such Participant) and Commitments and Put Commitment (if applicable to such Participant); (iii) each assignment or transfer of Certificate Amounts shall be in a minimum aggregate amount of $10,000,000 and $1,000,000 integral multiples in excess thereof (or, if less, the aggregate amount of Certificate Amounts then held by the assignor or transferor Participant), unless such assignment or transfer is by a Tranche A Participant pursuant to the Transfer Agreement; (iv) in the case of an assignment other than to a Tranche A1 Participant, Tranche A2 Participant or Tranche A3 Participant, the assignee or transferee may not have a lower rating by S&P or Moody's than the assignor or transferor; (v) in the case of an assignment by a Tranche A2 Participant, the transferee or assignee shall be a financial institution acceptable to Agent Lessor, in its reasonable discretion; (vi) Agent Lessor shall have received from assignee/transferee or the assignor/transferor a transfer fee in the amount of $2,500; (vii) so long as no Default has occurred, Lessee shall have consented to such assignment or transfer, which consent shall not be unreasonably withheld and shall be deemed granted if Lessee shall not have refused to grant such consent within ten (10) calendar days' notice of a proposed assignment or transfer; and (viii) each assignee or transferee shall (A) acknowledge in writing, addressed and delivered to each of the parties to this Participation Agreement, that the obligations to be performed from and after the date of such transfer or assignment under this Participation Agreement and all other Operative Documents are its obligations, including the obligations imposed by this Section 11.1(a) and the obligations imposed by Section 9.2, and except for an assignment from a Tranche A Participant to another Tranche A Participant under the Transfer Agreement, the transferor and transferee Participant shall deliver to Lessee and Agent Lessor an Assignment Agreement, in substantially the form of Exhibit L and an Investor's Letter in substantially the form of Schedule II to Exhibit L, each executed by the assignee or transferee) and (B) represent and warrant to Agent Lessor, each Participant and Lessee in writing each of the representations and warranties as set forth in Section 7.1 and that:

    (w) it has the requisite power and authority to accept such assignment or transfer;

    (x) it will not transfer any Certificate unless the proposed transferee makes the foregoing representations and covenants;

    (y) it will not take any action with respect to such Certificate that would violate any applicable securities laws; and

    (z) it will not assign or transfer any interest in its Certificate except in compliance with this Section 11.1.

Any transfer or assignment made in violation of the above requirements shall not be effective against the other parties to this Participation Agreement until such requirements are satisfied.

    SECTION 11.2.  Participations.  Any Participant may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Sub-Participant") participating interests in all or a portion (but not less than $1,000,000) of its rights and obligations under this Participation Agreement, the other Operative Documents, or its Certificates (including, without limitation, all or portion of the Rent owing to it); provided, however, that:

    (a) no participation contemplated in this Section 11.2 shall relieve such Participant from its obligations hereunder or under any other Operative Document;

    (b) such Participant shall remain solely responsible for the performance of its Commitment and such other obligations;

    (c) Lessee shall continue to deal solely and directly with such Participant in connection with such Participant's rights and obligations under this Participation Agreement and each of the other Operative Documents;

    (d) each such Sub-Participant will make representations and warranties to the Participant that are consistent with Section 7.1, mutatis mutandis; and

    (e) no Sub-Participant, unless such Sub-Participant is an Affiliate of such Participant, or is itself a Participant, shall be entitled to require such Participant to take or refrain from taking any action hereunder or under any other Operative Document.

    Notwithstanding the foregoing provisions of this Section 11.2, any sale, transfer or participation from any Tranche A1 Participant to any Purchaser pursuant to the Transfer Agreement shall not be subject to the provisions of Sections 11.1  and 11.2, but instead the provisions of the Transfer Agreement shall be applicable.

    SECTION 11.3.  Binding Effect; Disclosure of Information; Pledge Under Regulation A.

    (a) By its acceptance of a participation or assignment of a Participant's Certificate, each Transferee shall be deemed bound by the provisions set forth in this Article XI.

    (b) Any Participant or Agent Lessor may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Article XI, disclose to the assignee or Participant or proposed assignee or Participant any information relating to Lessee.

    (c) Anything in this Article XI to the contrary notwithstanding, any Participant may, without the consent of Lessee, assign and pledge all or any portion of the Certificates held by it to any Federal Reserve Bank, the United States Treasury or to any other financial institution as collateral security pursuant to Regulation A of the F.R.S. Board and any operating circular issued by the Federal Reserve System and/or the Federal Reserve Bank or otherwise.

ARTICLE XII
INDEMNIFICATION

    SECTION 12.1.  Indemnification.

    (a)  General Indemnification.

     (i) Prior to the Base Term Commencement Date and without limitation on the rights of any Indemnitee under any other indemnification set forth in this Article XII:

    A.  Lessee shall pay and assume liability for, and does hereby agree, whether or not any of the transactions contemplated hereby shall be consummated, to indemnify, protect, defend, save and keep harmless Agent Lessor from and against any and all Claims that may be imposed on, incurred by or asserted against Agent Lessor (whether because of action or omission by Agent Lessor), whether or not such Claim is covered by any other indemnification under this Article XII or Agent Lessor shall also be indemnified as to any such Claim by any other Person whenever such Claim arises or accrues, including whether or not such Claim arises or accrues at any time prior to or after the Expiration Date, and which in all cases include any Claim for which Agent Lessor has an obligation to indemnify any Person, or for which Agent Lessor otherwise has liability, under Section 12.1(a)(i)(B) below, and

    B.  Agent Lessor shall pay and assume liability for, and does hereby agree to indemnify, protect, defend, save and keep harmless each Construction Period Participant Indemnitee from and against any and all Claims that my be imposed on, incurred by or asserted against any such Construction Period Participant Indemnitee (whether because of action or omission by such Construction Period Participant Indemnitee), whether or not such Claim is covered by any other indemnification under thisvArticle XII  or such Construction Period Participant Indemnitee shall also be indemnified as to any such Claim by any other Person, and

    (ii) Commencing upon the Base Term Commencement Date, and without limitation on the rights of any Indemnitee under any other indemnification set forth in this Article XII, whether or not any of the transactions contemplated hereby shall be consummated, Lessee shall pay and assume liability for, and does hereby agree to indemnify, protect, defend, save and keep harmless each Indemnitee from and against any and all Claims that may be imposed on, incurred by or asserted against such Indemnitee (whether because of action or omission by such Indemnitee), whether or not such Claim is covered by any other indemnification under this Article XII or such Indemnitee shall also be indemnified as to any such Claim by any other Person, whenever such Claim arises or accrues, including whether or not such Claim arises or accrues at any time prior to or after the Expiration Date, and whether or not such Claim arises or accrues at any time prior to or after the Expiration Date,

in each case under this Section 12.1 (a)(i) or (ii), in any way arising out of or relating to:

    A.  any of the Operative Documents or any of the transactions contemplated thereby or any investigation, litigation or proceeding in connection therewith, and any amendment, modification or waiver in respect thereof;

    B.  the Premises, the Land or any part thereof or interest therein;

    C.  the purchase, mortgaging, design, construction, preparation, installation, inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership, possession, rental, lease, sublease, repossession, maintenance, repair, alteration, modification, addition or substitution, storage, transfer or title, redelivery, use, financing, refinancing, operation, condition, sale (including, without limitation, any sale or other transfer pursuant to the Lease), return or other disposition of all or any part of any interest in the Premises, the Land or the imposition of any Lien (or incurring of any liability to refund or pay over any amount as a result of any Lien) thereon, including, without limitation: (i) Claims or penalties arising from any violation of law or in tort (strict liability or otherwise), (ii) loss of or damage to the environment (including, without limitation, investigation costs, cleanup costs, response costs, remediation and removal costs, costs of corrective action, costs of financial assurance, and all other damages, costs, fees and expenses, fines and penalties, including natural resource damages), or death or injury to any Person, and all expenses associated with the protection of wildlife, aquatic species, vegetation, flora and fauna, and any mitigative action required by or under any Environmental Laws, (iii) any Claim resulting from or related to latent or other defects, whether or not discoverable, (iv) any Claims resulting from the existence or Release of any Hazardous Substance at or from the Premises, (v) any Claim resulting from or related to the acquisition of the Land or the Construction, (vi) 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 Premises, (vii) the making of any Modifications in violation of any standards imposed by any insurance policies required to be maintained by Lessee pursuant to the Lease which are in effect at any time with respect to the Premises or any part thereof, (viii) any Claim for patent, trademark or copyright infringement, or (ix) Claims arising from any public improvements with respect to the Premises resulting in any change or special assessments being levied against the Premises or any plans to widen, modify or realign any street or highway adjacent to the Premises, or any Claim for utility "tap-in" fees;

    D.  the offer, issuance, sale, transfer or delivery of the Certificates;

    E.  the breach or alleged breach by Lessee, including in its role as Construction Agent, of any covenant, representation or warranty made by it or deemed made by it in any Operative Document, any Construction Document or any certificate delivered by it;

    F.  the transactions contemplated hereby or by any other Operative Document, in respect of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA and any prohibited transaction described in Section 4975(c) of the Code;

    G.  the retaining or employment of any broker, finder or financial advisor by Lessee to act on its behalf in connection with this Participation Agreement; or

    H.  any other agreement entered into or assumed by Lessee in connection with the Premises or the Land or by Agent Lessor in the purchase of the Land (including, in connection with each of the matters described in this Section 12.1 to which this indemnity shall apply, matters based on or arising from the negligence of any Indemnitee).

It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any remedy under the Lease or any other Operative Document.

    (b)  Exclusions from Indemnities; Limitations on Lessor Indemnitees.  (i) Notwithstanding the foregoing provisions of this Article XII, Lessee shall not be obligated to indemnify an Indemnitee under Section 12.1(a)(i) and Lessor shall not be required to indemnify a Construction Period Participant Indemnitee under Section 12.1(a)(ii) for any Claim to the extent that such Claim is attributable to: (i) acts, events or circumstances occurring after, and to the extent not attributable to or constituting acts, events or circumstances occurring prior to, (A)(1) the expiration or earlier termination of the Lease and (2) delivery of possession of the Premises to Lessee or a third party or (B) in the event of the occurrence of an Event of Default, the exercise of remedies in connection therewith and the transfer by Agent Lessor to a third party of title to the Premises; (ii) the gross negligence or willful misconduct of such Indemnitee; (iii) the breach by such Indemnitee of its representations and warranties in Section 7.1 or 7.4, as the case may be, or the breach by such Indemnitee of its covenants as set forth in this Participation Agreement or in any other Operative Document to which such Indemnitee is a party; (iv) any Claim resulting from the imposition of any Lessor Lien for which such Indemnitee is responsible for discharging under the Operative Documents; (v) in respect of any indemnification under Section 12.1(a)(i), any Claim resulting solely from a Nonrelated Construction Event; and (vi) any Claim for the recovery of Construction Costs to the extent such Claim arises solely as a result of any Event of Default prior to the Completion Date, the recovery of which shall be governed by Article XIII of this Agreement or Section 16.6 of the Lease, provided,  however, that nothing in the foregoing clauses (i) through (v) shall be deemed to exclude or limit (x) any Claim that Agent Lessor or any Construction Period Participant Indemnitee may have under any Operative Document or Applicable Laws for damages from Lessee for breach by Lessee of its representations, warranties or covenants made or deemed made by it in any Operative Document or (y) any Claim, including any remedy under or right to damages pursuant to Article XVI of the Lease.

     (i) Agent Lessor's obligation to indemnify and hold harmless any Construction Period Participant Indemnitee under Section 12.1(a)(ii):

    A.  is not an individual or personal obligation of Agent Lessor, but solely its obligation it its capacity as Agent Lessor, and nothing herein shall be construed as creating any liability on Agent Lessor, individually or personally, to pay, indemnify or hold harmless any Indemnitee under this Article XII;

    B.  is not an obligation binding on Agent Lessor except to the extent of any payment received by Agent Lessor pursuant to Section 12.1(a)(i); and

    C.  shall be paid and discharged solely and exclusively from amounts received by Agent Lessor pursuant to Section 12.1(a)(i), and it is expressly agreed by each Construction Period Participant Indemnitee that the sole recourse of each such Person for payment or discharge of the indemnification obligations created under Section 12.1(a)(ii) shall be to such amounts paid by Agent Lessor pursuant to Section 12.1(a)(i); and

    D.  is the sole and exclusive right of each Construction Period Participant Indemnitee against Agent Lessor, and any right to proceed against Agent Lessor individually or otherwise under common law, federal or state securities laws or otherwise for indemnification or contribution in connection with the matters covered by this Section 12(a)(ii) is hereby expressly waived by each Construction Period Participant Indemnitee (other than claims that may be made against Agent Lessor, individually or personally, for fraud, gross negligence or willful misconduct).

Nothing in this Article XII is intended as or should be construed as a limitation on the right of any Indemnitee to make indemnification, contribution or other claims of any kind against Lessee, to the extent that such claims otherwise may be made, with respect to any matter, including indemnification for Claims of the type referred to in this Section 12.1(a)(i) and 12.1(a)(ii).

To the extent that any payments made pursuant to Section 12.1(a)(i) to Section 12.1(a)(ii) are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid by Agent Lessor to a trustee, debtor in possession, receiver or other Person under any Bankruptcy Law, common law or equitable cause, then to such extent, the Indemnitee who received any such payments from Agent Lessor (or any portion thereof) shall repay any such amounts to Agent Lessor, or as may otherwise be directed by a court of competent jurisdiction.

The indemnification obligations of Agent Lessor under Section 12.1(a)(ii) shall survive and be reinstated to the same extent, for the same period and in the same manner as the indemnification obligations of Lessee.

The right of any Construction Period Participant Indemnitee to seek indemnification from Agent Lessor under Section 12.1(a)(ii) is subject to and conditioned upon compliance by any such Indemnitee with the notice, cooperation, appointment of counsel, contest rights and other provisions in Section 12.4 except that any reference in such Sections to Lessee shall be deemed to be a reference to Agent Lessor.

    SECTION 12.2.  Environmental Indemnity.  Without limitation of the other provisions of this Article XII, Lessee hereby agrees to indemnify, hold harmless and defend each Indemnitee from and against any and all Claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings (including informal proceedings) and orders, judgments, remedial action, requirements, enforcement actions of any kind, and all reasonable and documented costs and expenses incurred in connection therewith (including reasonable and documented attorneys' and/or paralegals' fees and expenses), including all costs incurred in connection with any investigation or monitoring of the condition of the Premises or any clean-up, remedial, removal or restoration work by any Governmental Authority (all of the foregoing being referred to in this Section 12.2 as "Liabilities"), arising in whole or in part, out of:

    (a) the presence on, under or around the Premises or any portion thereof of any Hazardous Substance, or any releases or discharges of any Hazardous Substance on, under, from, onto or around the Premises or any portion thereof,

    (b) any activity, including, without limitation, construction (including construction of the Financed Improvements), carried on or undertaken on or off the Premises or any portion thereof, and whether by Lessee or any of its Affiliates or any predecessor in title or any employees, agents, sublessees, contractors or subcontractors of Lessee, any of its Affiliates or any predecessor in title, or any other Persons (including such Indemnitee), in connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Substance that at any time is located or present on, under or around, or that at any time migrates, flows, percolates, diffuses or in any way moves onto or under the Premises or any portion thereof,

    (c) loss of or damage to any property or the environment arising from, or in any way related to, the Premises or Lessee or any of its Affiliates (including, without limitation, clean-up costs, response costs, remediation and removal costs, cost of corrective action, costs of financial assurance, fines and penalties and natural resource damages), or death or injury to any Person, and all expenses associated with the protection of wildlife, aquatic species, vegetation, flora and fauna, and any mitigative action required by or under Environmental Laws, in each case arising from, or in any way related to, the Premises, Lessee, any of its Affiliates or the Overall Transaction or any portion thereof,

    (d) any claim concerning lack of compliance with Environmental Laws, or any act or omission causing an environmental condition that requires remediation or would allow any Governmental Authority to record a Lien against the Premises or any portion thereof, or

    (e) any residual contamination on or under any part of the Premises, or affecting any natural resources, and any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Substance, in each case arising from, or in any way related to, the Premises, Lessee, any of its Affiliates, or the Overall Transaction or any portion thereof, and irrespective of whether any of such activities were or will be undertaken in accordance with Applicable Laws.

Notwithstanding anything in this Participation Agreement to the contrary, Lessee shall not be liable and shall not be obligated to indemnify any Indemnitee against Liabilities arising out of:

     (i) Environmental Violations on the Premises after title and exclusive possession of the Premises shall have been conveyed to Agent Lessor to the extent arising solely from Hazardous Substances placed on the Premises after the transfer of such title and exclusive possession to Agent Lessor; and or

    (ii) the willful misconduct by an Indemnitee, its officers, directors, employees, agents, contractors or representatives.

    Promptly upon obtaining knowledge thereof, Indemnitees shall give written notice to Lessee of any claim against Indemnitees, which might give rise to a claim by Indemnitees against Lessee under the foregoing indemnity, stating the nature and basis of the claim, the amount thereof and reasonable best estimate of the amount of Lessee's liability to Indemnitees in connection therewith, provided there shall be no liability to any Indemnitee and no diminution in the obligations of Lessee for failure to give such notice. If any action shall be brought against Indemnitees, Lessee shall be entitled to participate therein, and to assume the defense thereof at the expense of Lessee with counsel reasonably satisfactory to Indemnitees and to settle and compromise any such claim or action with the consent of such Indemnitees in their sole discretion; provided, however, that Indemnitees may elect to be represented by separate counsel, at Lessee's expense, if such Indemnitee believes in good faith that a conflict of interest may exist.

    SECTION 12.3.  Premises Indemnity.  If (a) Lessee elects the Sale Option; and (b) after paying to Lessor, for the benefit of the Participants, any amounts due under Articles XX and XXI of the Lease, the Lease Balance shall not have been reduced to zero, then Lessee shall promptly pay over to Agent Lessor on the Expiration Date the shortfall, unless Lessee delivers a report from an appraiser selected by the Required Participants in form and substance satisfactory to the Required Participants and using approved methods satisfactory to the Required Participants which establishes that the reasons for the actual Fair Market Value of the Premises as of the Expiration Date being less than the Fair Market Value anticipated for such date in the Appraisal was not due to any of the following events, circumstances or conditions, whether or not permitted under the Lease: (i) the failure to maintain the Premises 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 undertake any modifications, improvements or Modifications (including the Financed Improvements) whether or not permitted pursuant to the Operative Documents; (iii) any change or modification to the Approved Plans and Specifications following the earlier of (x) the Document Closing Date and (y) the delivery of the Approved Plans and Specifications pursuant to Section 6.1(p), whether or not permitted pursuant to the Operative Documents, (iv) the existence of any environmental condition at or affecting the Premises, whether or not such condition existed on the initial Advance Date; (v) any defect, exception, easement, restriction or other encumbrance on or title to the Premises, whether or not created or existing on the initial Advance Date; (vi) the dependence of the Premises on any improvement or facility not fully located on the Premises (except for government-provided utilities existing and benefitting the Premises as of the date hereof, the benefits of which are lost for reasons other than the fault of Lessee and which could not have been retained through the exercise by Lessee of commercially reasonable efforts to keep such utilities in place); (vii) any restoration or rebuilding carried out by Lessee or any sublessee; (viii) any condemnation of any portion of the Premises pursuant to Article XV of the Lease; (ix) any use of the Premises or any part thereof by Lessee or any sublessee other than as an office building; or (x) any other cause or condition within the power of Lessee to control or affect, other than ordinary wear and tear.

    SECTION 12.4.  Proceedings in Respect of Claims.  With respect to any amount that Lessee is requested by an Indemnitee to pay by reason of Section 12.1(a) or 12.2, such Indemnitee shall, if so requested by Lessee and prior to any payment, submit such additional information to Lessee as Lessee may reasonably request and which is in the possession of such Indemnitee to substantiate properly the requested payment.

    In case any action, suit or proceeding shall be brought against any Indemnitee, such Indemnitee shall notify Lessee of the commencement thereof, and Lessee shall be entitled, at its expense, to participate in, and, to the extent that Lessee desires to, assume and control the defense thereof through its own counsel, which shall be subject to the reasonable approval of the Required Participants, on behalf of the Indemnitee; provided, however, that Lessee shall have acknowledged in writing its obligation to fully indemnify such Indemnitee in respect of such action, suit or proceeding, and, Lessee shall keep such Indemnitee fully apprised of the status of such action, suit or proceeding and shall provide such Indemnitee with all information with respect to such action, suit or proceeding as such Indemnitee shall reasonably request. Lessee must indicate its election to assume such defense by written notice to the Indemnitee within 90 days following receipt of Indemnitee's notice of the Claim, or in the case of a third party claim which requires a shorter time for response then within such shorter period as specified in the Indemnitee's notice of Claim, provided  that such Indemnitee has given Lessee notice thereof. Lessee shall not be entitled to assume and control the defense of any such action, suit or proceeding if and to the extent that, (A) in the reasonable opinion of such Indemnitee, (x) such action, suit or proceeding involves any risk of imposition of criminal liability or any material risk of imposition of material civil liability on such Indemnitee or will involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien) on the Premises or any part thereof unless, in the case of civil liability, Lessee shall have posted a bond or other security reasonably satisfactory to the relevant Indemnitees in respect to such risk or (y) the control of such action, suit or proceeding would involve an actual or potential conflict of interest, (B) such proceeding involves Claims not fully indemnified by Lessee which Lessee and the Indemnitee have been unable to sever from the indemnified Claim(s), or (C) an Event of Default has occurred and is continuing. The Indemnitee may participate in a reasonable manner at its own expense and with its own counsel in any proceeding conducted by Lessee in accordance with the foregoing. Lessee shall not enter into any settlement or other compromise with respect to any Claim which is entitled to be indemnified under Section 12.1 or 12.2, as applicable, without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld or delayed in the case of a money settlement not involving an admission of liability of such Indemnitee.

    Each Indemnitee shall supply Lessee with such information and documents reasonably requested by Lessee as are necessary or advisable for Lessee to participate in any action, suit or proceeding to the extent permitted by Section 12.1 or 12.2, as applicable, and Lessee shall reimburse the Indemnitee for the reasonable out-of-pocket expenses of supplying such information and documents. Unless an Event of Default shall have occurred and be continuing, no Indemnitee shall enter into any settlement or other compromise with respect to any Claim which is entitled to be indemnified under Section 12.1 or 12.2, as applicable, without the prior written consent of Lessee, which consent shall not be unreasonably withheld, unless such Indemnitee waives its right to be indemnified under Section 12.1 or 12.2, as applicable, with respect to such Claim, does not admit any criminal liability or civil liability on behalf of Lessee in connection with such Claim, and uses reasonable efforts to advise Lessee on the status of proceedings from time to time during the pendency of such Claim.

    Upon payment in full of any Claim by Lessee pursuant to Section 12.1 or 12.2, as applicable, to or on behalf of an Indemnitee, Lessee, without any further action, shall be subrogated to any and all claims that such Indemnitee may have relating thereto (other than claims in respect of insurance policies maintained by such Indemnitee at its own expense), and such Indemnitee shall execute such instruments of assignment and conveyance, evidence of claims and payment and such other documents, instruments and agreements as may be necessary to preserve any such claims and otherwise cooperate with Lessee and give such further assurances as are necessary or advisable to enable Lessee vigorously to pursue such claims.

    Any amount payable to an Indemnitee pursuant to Section 12.1 or 12.2 shall be paid to such Indemnitee promptly upon receipt of a written demand therefor from such Indemnitee, accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable.

    SECTION 12.5.  General Tax Indemnity.

    (a) Indemnification. (i) Lessee shall pay and assume liability for, and does hereby agree to indemnify, protect and defend the Premises and all Indemnitees, and hold the Premises and all Indemnitees harmless against, all Impositions on an After Tax Basis.

    (b) Contests. If any claim shall be made against any Indemnitee or if any proceeding shall be commenced against any Indemnitee (including a written notice of such proceeding) for any Imposition as to which Lessee may have an indemnity obligation pursuant to this Section 12.5, or if any Indemnitee shall determine that any Imposition for which Lessee may have an indemnity obligation pursuant to this Section 12.5 may be payable, such Indemnitee shall promptly (and in any event, within 30 days) notify Lessee in writing (provided that failure to so notify Lessee within 30 days shall not alter such Indemnitee's rights under this Section 12.5, except to the extent such failure precludes or materially adversely affects the ability to conduct a contest of any indemnified Imposition) and shall not take any action with respect to such claim, proceeding or Imposition without the written consent of Lessee (such consent not to be unreasonably withheld or unreasonably delayed) for 30 days after the receipt of such notice by Lessee; provided, however, that in the case of any such claim or proceeding, if such Indemnitee shall be required by law or regulation to take action prior to the end of such 30-day period, such Indemnitee shall in such notice to Lessee, so inform Lessee, and such Indemnitee shall not take any action with respect to such claim, proceeding or Imposition without the consent of Lessee (such consent not to be unreasonably withheld or unreasonably delayed) for 10 days after the receipt of such notice by Lessee, unless the Indemnitee shall be required by law or regulation to take action prior to the end of such 10-day period.

    Lessee shall be entitled for a period of 30 days from receipt of such notice from the Indemnitee (or such shorter period as the Indemnitee has notified Lessee is required by law or regulation for the Indemnitee to commence such contest), to request in writing that such Indemnitee contest such Imposition, at Lessee's expense. If (x) such contest can be pursued in the name of Lessee and independently from any other proceeding involving an Imposition for which Lessee has not agreed to indemnify such Indemnitee, (y) such contest must be pursued in the name of the Indemnitee, but can be pursued independently from any other proceeding involving an Imposition for which Lessee has not agreed to indemnify such Indemnitee or (z) the Indemnitee so requests, then Lessee shall be permitted to control the contest of such claim, provided that in the case of a contest described in any of clause (x), (y)  or (z) if the Indemnitee determines in good faith that such contest by Lessee could have a material adverse impact on the business or operations of the Indemnitee and provides a written explanation to Lessee of such determination, the Indemnitee may elect to control or reassert control of the contest, and provided, that by taking control of the contest, Lessee acknowledges that it is responsible for the Imposition ultimately determined to be due by reason of such claim, and provided, further, that in determining the application of clauses (x)  and (y) of the preceding sentence, each Indemnitee shall take any and all reasonable steps to segregate claims for any Impositions for which Lessee indemnifies hereunder from Impositions for which Lessee is not obligated to indemnify hereunder, so that Lessee can control the contest of the former. In all other claims requested to be contested by Lessee, the Indemnitee shall control the contest of such claim, acting through counsel reasonably acceptable to Lessee. In no event shall Lessee be permitted to contest (or the Indemnitee required to contest) any claim (A) if such Indemnitee provides Lessee with a legal opinion of independent counsel that such action, suit or proceeding involves a material risk of imposition of criminal liability or will involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien) on the Premises or any part of any thereof unless Lessee shall have posted and maintained a bond or other security reasonably satisfactory to the relevant Indemnitee in respect to such risk, (B) if an Event of Default has occurred and is continuing, unless Lessee shall have posted and maintained a bond or other security reasonably satisfactory to the relevant Indemnitee in respect of the Impositions subject to such claim and any and all expenses for which Lessee is responsible hereunder reasonably foreseeable in connection with the contest of such claim, (C) unless Lessee shall have agreed to pay and shall pay to such Indemnitee on demand all reasonable out-of-pocket costs, losses and expenses that such Indemnitee may incur in connection with contesting such Imposition, including all reasonable legal, accounting and investigatory fees and disbursements, or (D) if such contest shall involve the payment of the Impositions prior to the contest, unless Lessee shall provide to the Indemnitee an interest-free advance in an amount equal to the Imposition that the Indemnitee is required to pay (with no additional net after-tax costs (including Taxes) to such Indemnitee). In addition, for Indemnitee-controlled contests and claims contested in the name of the Indemnitee in a public forum, no contest shall be required: (A) unless the amount of the potential indemnity (taking into account all similar or logically related claims that have been or could be raised in any audit involving such Indemnitee for which Lessee may be liable to pay an indemnity under this Section 12.5 exceeds $50,000 and (B) unless, if requested by the Indemnitee, Lessee shall have provided to the Indemnitee an opinion of counsel selected by Lessee (which may be in-house counsel) that a reasonable basis exists to contest such claim. In no event shall an Indemnitee be required to appeal an adverse judicial determination to the United States Supreme Court.

    The party conducting the contest shall consult in good faith with the other party and its counsel with respect to the contest of such claim for Impositions (or claim for refund) but the decisions regarding what actions to be taken shall be made by the controlling party in its sole judgement, provided, however, that if the Indemnitee is the controlling party and Lessee recommends the acceptance of a settlement offer made by the relevant Governmental Authority and such Indemnitee rejects such settlement offer then the amount for which Lessee will be required to indemnify such Indemnitee with respect to the Taxes subject to such offer shall not exceed the amount which it would have owed if such settlement offer had been accepted. In addition, the controlling party shall keep the noncontrolling party reasonably informed as to the progress of the contest, and shall provide the noncontrolling party with a copy of (or appropriate excerpts from) any reports or claims issued by the relevant auditing agent or taxing authority to the controlling party thereof, in connection with such claim or the contest thereof.

    Each Indemnitee shall supply Lessee with such information and documents reasonably requested by Lessee as are necessary or advisable for Lessee to participate in any action, suit or proceeding to the extent permitted by this Section 12.5(b), and Lessee shall promptly reimburse such Indemnitee for the reasonable out-of-pocket expenses of supplying such information and documents. No Indemnitee shall enter into any settlement or other compromise or fail to appeal an adverse ruling with respect to any claim which is entitled to be indemnified under this Section 12.5 (and with respect to which contest is required under this Section 12.5(b)) without the prior written consent of Lessee (such consent not to be unreasonably withheld), unless such Indemnitee waives its right to be indemnified under this Section 12.5 with respect to such claim.

    Notwithstanding anything contained herein to the contrary, an Indemnitee will not be required to contest (and Lessee shall not be permitted to contest) a claim with respect to any Imposition if (i) such Indemnitee shall waive its right to indemnification under this Section 12.5 with respect to such claim (and any claim with respect to such year or any other taxable year, the contest of which is materially adversely affected as a result of such waiver) or (ii) such Imposition is the sole result of a claim of a continuing and consistent nature, which claim has previously been resolved against the relevant Indemnitee (unless a change in law or facts has occurred since such prior adverse resolution and Lessee provides an opinion of independent tax counsel to the effect that it is more likely than not that such change in law or facts will result in a favorable resolution of the claim at issue).

    (c) Payments. (i) To, or for the Account of, an Indemnitee. Any Imposition indemnifiable under this Section 12.5 shall be paid directly when due to the applicable taxing authority if direct payment is practicable and permitted. If direct payment to the applicable taxing authority is not permitted or is otherwise not made, any amount payable to an Indemnitee pursuant to this Section 12.5 shall be paid within thirty (30) days after receipt of a written demand therefor from such Indemnitee (accompanied by a written statement describing in reasonable detail the amount so payable), but not before two Business Days prior to the date that the relevant Taxes are due. Any payments made to an Indemnitee pursuant to this Section 12.5 shall be made directly to the Indemnitee entitled thereto in immediately available funds at such bank or to such account as specified by the Indemnitee in written directions to Lessee, or, if no such direction shall have been given, by check of Lessee payable to the order of the Indemnitee by certified mail, postage prepaid at its address as set forth in this Participation Agreement. Upon the request of any Indemnitee with respect to an Imposition that Lessee is required to pay, Lessee shall furnish to such Indemnitee the original or a certified copy of a receipt for Lessee's payment of such Imposition or such other evidence of payment as is reasonably acceptable to such Indemnitee.

                (ii) To Lessee. (x) If any Indemnitee actually shall realize a Tax benefit (whether by way of deduction, credit, allocation or apportionment or otherwise) with respect to a Tax not indemnifiable hereunder which would not have been realized but for any Tax with respect to which Lessee has reimbursed or indemnified such Indemnitee pursuant to the Operative Documents, which benefit was not previously taken into account in determining the amount of Lessee's payment to such Indemnitee, such Indemnitee shall pay to Lessee an amount equal to the amount of such Tax benefit, increased by any actual Tax savings realized by such Indemnitee and net of any additional Taxes actually borne by such Indemnitee as a result of such payment (a "Grossed-Up Basis"); provided, however, that no payment shall be made as long as an Event of Default is continuing; provided further, however, that no Indemnitee shall be required to pay to Lessee any Tax benefit to the extent such payment would be greater than the amount of such Taxes in respect of which the reimbursement or indemnification was paid by Lessee, reduced by all prior payments by such Indemnitee under this Section 12.5(c)(ii)(x) in respect of such amount; any payment to Lessee which is so limited shall, to the extent of such unpaid excess, be carried over and shall be available to offset any future obligations of Lessee under this Section 12.5. If such repaid Tax benefit is thereafter lost, the additional Tax payable shall be treated as a Tax indemnifiable hereunder without regard to the exclusions set forth in clauses (i) through (viii) of the definition of Impositions.

                (y) Upon receipt by an Indemnitee of a refund or credit of all or part of any Taxes paid or indemnified against by Lessee, which refund or credit was not previously taken into account in determining the amount of Lessee's payment to such Indemnitee, such Indemnitee shall pay to Lessee, on a Grossed-Up Basis, an amount equal to the amount of such refund or credit, plus any interest received by or credited to such Indemnitee with respect to such refund; provided, however, that no such payment shall be made as long as an Event of Default is continuing; provided, further, however, that no Indemnitee shall be required to pay to Lessee any refund or credit to the extent such refund or credit is greater than the amount of Taxes in respect of which payment or indemnification was made by Lessee, reduced by all prior payments by such Indemnitee under this Section 12.5(c)(ii)(y)  in respect of such amount. If such repaid refund or credit is thereafter lost, the additional Tax payable shall be treated as a Tax indemnifiable hereunder without regard to the exclusions set forth in clauses (vi), (vii) and (viii) of the definition of Impositions.

                (z) The Indemnitee will, at Lessee's expense, pursue refunds and tax benefits that would result in any such payments to Lessee, but only if the Indemnitee has been notified in writing by Lessee that such refunds or tax benefits are available.

    (d) Reports. In the case of any report, return or statement required to be filed with respect to any Impositions that are subject to indemnification under this Section 12.5 and of which Lessee or the Indemnitee has knowledge, the party having such knowledge shall promptly notify the other of such requirement and, at Lessee's expense (i) if Lessee is permitted (unless otherwise requested by the Indemnitee) by Applicable Laws, timely file such report, return or statement in its own name or (ii) if such report, return or statement is required to be in the name of or filed by such Indemnitee or the Indemnitee otherwise requests that such report, return or statement be filed in the name of or by such Indemnitee, Lessee shall prepare such report, return or statement for filing by such Indemnitee in such manner as shall be reasonably satisfactory to such Indemnitee and send the same to the Indemnitee for filing no later than 15 days prior to the due date therefor. In any case in which the Indemnitee will file any such report, return or statement, Lessee shall, upon written request of such Indemnitee, provide such Indemnitee with such information as is reasonably necessary to allow the Indemnitee to file such report, return or statement.

    (e) Withholding Taxes.

     (i) Agent Lessor or its agent shall withhold any Taxes required by Applicable Laws to be withheld on any payment to any Participant, except to the extent that the Participant has furnished such information to Agent Lessor or its agent as shall be sufficient under Applicable Laws to entitle such Person to an exemption from withholding Taxes. Except to the extent set forth in Section 14.6, the amount payable to Agent Lessor, any Participant or any Sub-Participant shall be reduced by the amount of any withholding Taxes required to be withheld by Agent Lessor or its agent pursuant to the preceding sentence, and except as provided in Section 14.3, Lessee and Agent Lessor shall have no liability or obligation to the Participants with respect to any such withholding Taxes. In accepting and carrying out its duties with respect to withholding Taxes pursuant to this Section 12.5(e), Agent Lessor shall act as the duly authorized agent of Lessee to act on behalf of Lessee under the withholding provisions of Chapter 3 of the Code. Lessee shall file notice of such appointment with the Director of Foreign Operations District of Internal Revenue Service in accordance with Treas. Reg. §1.1441-7(b). Such agency shall terminate in the event that Applicable Laws are amended so as to release Lessee of the obligation to withhold Taxes with respect to payments made by Lessee to Agent Lessor under the Lease and in any event upon termination or expiration of the Lease.

    (ii) If and to the extent Agent Lessor or its agent has in good faith attempted to comply with its obligation to withhold Taxes in accordance with clause (i) and a claim regarding withholding Taxes is made against Agent Lessor or its agent, as between Lessee and Agent Lessor (or its agent), Lessee shall be responsible for, and Lessee shall indemnify and hold harmless Agent Lessor (and its agent) (without duplication of any indemnification required by subsection (a)) on an After Tax Basis against, such claim to the extent, but only to the extent, Agent Lessor or its agent has actually paid funds to a taxing authority with respect to such withholding taxes or receives a demand for such payment from any taxing authority.

    (iii) Except with respect to withholding Taxes payable by Lessee pursuant to Section 14.3, each Participant agrees to reimburse Agent Lessor or its agent for any withholding Taxes for which Agent Lessor or its agent becomes liable and to reimburse Lessee for any Taxes or other amounts paid by Lessee pursuant to clause (ii) hereof.

    (iv) For purposes of determining whether withholding Taxes apply to payments under the Lease, it shall be assumed that the Lease constitutes a loan for United States Federal income tax purposes (as is the parties' intention).

    SECTION 12.6.  Gross Up.  If an Indemnitee shall not be entitled to a corresponding and equal deduction with respect to any payment or Tax which Lessee is required to pay or reimburse under any other provision of this Article XII  (each such payment or reimbursement under this Article XII, an "original payment") and which original payment constitutes income to such Indemnitee when accrued or received, then Lessee shall pay to, or for the account of, such Indemnitee on demand the amount of such original payment on an After Tax Basis.

ARTICLE XIII
LIMITATION ON RECOURSE LIABILITY DURING CONSTRUCTION PERIOD

    Notwithstanding any other provision set forth in this Participation Agreement or any of the other Operative Documents, in the event of the occurrence of a Construction Agency Event of Default occurring during the Interim Term and until the Base Term Commencement Date has occurred, Lessee shall not be required to pay more than the Construction Recourse Amount on a recourse basis with respect to any damages (which shall include Construction Breakage Costs and amounts payable by Construction Agent as Default Completion Costs) which relate to or arise from any such Construction Agency Event of Default; provided, however, that the foregoing limitation shall not apply (i) with respect to any Full Recourse Interim Term Event of Default, (ii) with respect to the rights of parties to seek all damages, without regard to such limitation, from the proceeds of the Premises or any other Collateral or (iii) to any Claim for indemnity under Article XII  or under any other Operative Document.

ARTICLE XIV
LIBOR PROVISIONS; ADDITIONAL COSTS

    SECTION 14.1.  LIBO Rate Lending Unlawful.  If any Participant shall determine (which determination shall, upon notice thereof to Lessee and the Participants, be conclusive and binding on Lessee) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for such Participant to make available, continue or maintain any Certificate Amount that accrues Rent based upon the LIBO Rate, the obligation of such Participant to make available, continue or maintain any such Certificate Amount, shall, upon such determination, forthwith be suspended until such Participant shall notify Lessee and the Administrative Agent that the circumstances causing such suspension no longer exist and, to the extent required by any such introduction of or change in or in the interpretation of any law, all Certificate Amounts of such Participant that accrue Rent based upon the LIBO Rate shall automatically accrue Rent at the Alternate Base Rate either (a) on the last day of the then current Interest Period applicable to such Certificate Amount if such Participant may lawfully continue to maintain and fund such Certificate Amount, or (b) immediately if such Participant shall determine that it may not lawfully continue to maintain and fund such Certificate Amount to such day thereto or sooner, if required by such law or assertion.

    SECTION 14.2.  Deposits Unavailable.  If any of the Participants shall have determined that:

    (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to such Participant in its relevant market; or

    (b) by reason of circumstances affecting such Participant's relevant market, adequate means do not exist for ascertaining the Rent applicable to such Participant's Certificate Amounts,

then, upon notice from such Participant to Lessee, the Administrative Agent and the other Participants, (i) the obligations of the Participants to make available Certificate Amounts shall be suspended and (ii) each outstanding Certificate Amount shall begin to accrue Rent at the Alternate Base Rate on the last day of the then current Interest Period applicable thereto.

    SECTION 14.3.  Increased Costs, etc.  If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority increases or would increase the cost to any Participant of, or reduces or would reduce the amount of any sum receivable by, such Participant in respect of, making available, continuing or maintaining (or of its obligation to make available, continue or maintain) or prevents or would prevent any Participant from being legally entitled to a complete exemption from withholding as described in Section 9.2 with respect to any Certificate Amounts, Lessee agrees to reimburse such Participant for each such increased cost or reduced amount when applicable to such Participant or its parent, as applicable (on an After Tax Basis). Such Participant shall promptly notify each Agent and Lessee in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Participant for such increased cost or reduced amount. Such additional amounts shall be payable by Lessee as Supplemental Rent directly to such Participant within five days of its receipt of such notice. A statement of a Participant as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on Lessee. In determining such amount, each Participant shall use any method of averaging or attribution that it (in its reasonable discretion) shall deem applicable.

    SECTION 14.4.  Funding Losses.  In the event any Participant shall incur any loss or out-of-pocket expense (including any Break Costs and any loss or out-of-pocket expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Participant to make available, continue or maintain any portion of the principal amount of any Certificate Amount) as a result of:

    (a) any conversion or repayment or prepayment of the principal amount of any Certificate Amounts on a date other than the scheduled last day of the Interest Period applicable thereto; or

    (b) any Certificate Amounts not being made in accordance with the Advance Request therefor (unless such failure to fund such Certificate Amounts, as the case may be, constitutes a breach by the applicable Participant of its obligations under Article III),

then, upon the written notice of such Participant to Lessee (with a copy to each Agent), Lessee shall, within five days of its receipt thereof, pay directly to such Participant as Supplemental Rent such amount (determined on the basis of such Participant's standard practices) as will reimburse such Participant for such loss or out-of-pocket expense. Such written notice (which shall include calculations in sufficiently reasonable detail to indicate the incurrence and amount of such loss and out-of-pocket expense) shall be presumed correct and binding on Lessee absent demonstrable error.

    SECTION 14.5.  Increased Capital Costs.  If any change, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority affects or would affect the amount of capital required or expected to be maintained by any Participant or any Person controlling such Participant, and such Participant reasonably determines that the rate of return on its or such controlling Person's capital as a consequence of its Commitments or the Certificate Amounts made available by such Participant is reduced to a level below that which such Participant or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Participant to Lessee (with a copy to each Agent), Lessee shall immediately pay directly to such Participant or such controlling Persons for such reduction in rate of return. A statement of such Participant as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall be presumed correct and binding on Lessee absent manifest error. In determining such amount, such Participant shall use its standard practice in determining such amount, and, in the absence of such standard practice, may use any reasonable method of averaging and attribution that it shall deem applicable.

    SECTION 14.6.  After Tax Basis.  Lessee shall pay all amounts owing under this Article XIV on an After Tax Basis.

    SECTION 14.7.  Funding Office.  If Lessee is required to pay additional amounts to or for the account of any Participant pursuant to Sections 14.1 to 14.3, to the extent applicable, then such Participant will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the sole judgment of such Participant, is not otherwise disadvantageous to such Participant.

ARTICLE XV
MISCELLANEOUS

    SECTION 15.1.  Survival of Agreements.  The representations, warranties, covenants, indemnities and agreements of the parties provided for in the Operative Documents, and the parties' obligations under any and all thereof, shall survive the execution and delivery and the termination or expiration of this Participation Agreement and any of the other Operative Documents, the transfer of the interest in the Premises as provided herein or in any other Operative Documents (and shall not be merged into any bill of sale or any other conveyance or transfer document), any disposition of any interest of Agent Lessor in the Premises, the purchase and sale of the Certificates, payment therefor and any disposition thereof, and shall be and continue in effect notwithstanding any investigation made by any party hereto or to any of the other Operative Documents and the fact that any such party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Documents.

    SECTION 15.2.  No Broker, etc.  Except for Lessee's dealing with ABN AMRO Bank N.V. 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 Participation 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 Agent Lessor or any Participant might be subjected by virtue of their entering into the Overall Transaction. Any party who is in breach of this representation shall indemnify and hold the other parties harmless from and against any liability arising out of such breach of this representation.

    SECTION 15.3.  Notices.  Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given and shall be effective: (i) in the case of notice by letter, the earlier of when delivered to the addressee by hand or courier if delivered on a Business Day and, if not delivered on a Business Day, the first Business Day thereafter or on the third Business Day after depositing the same in the mails, registered or certified mail, postage prepaid, return receipt requested, (ii) in the case of a prepaid delivery to a reputable national overnight air courier service, on the Business Day following such date of delivery, and (iii) in the case of notice by facsimile or bank wire, when receipt is confirmed if delivered on a Business Day and, if not delivered on a Business Day, the first Business Day thereafter, addressed as provided on Schedule II hereto, or to such other address as any of the parties hereto may designate by written notice.

    SECTION 15.4.  Counterparts.  This Participation Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

    SECTION 15.5.  Amendments.  No Operative Document nor any of the terms thereof may be terminated, amended, supplemented, waived or modified without the written agreement or consent of Agent Lessor, Lessee and the Required Participants; provided  that such termination, amendment, supplement, waiver or modification 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 15.5, change the definition of "Required Participants" or modify or waive any provision of an Operative Document requiring action by each Participant;

    (b) amend, modify, waive or supplement any of the provisions of Section 5.3  hereof;

    (c) reduce, modify, amend or waive any fees or indemnities in favor of any Participant, including without limitation amounts payable pursuant to Article XII (except that any Person may consent to any reduction, modification, amendment or waiver of any indemnity payable to it);

    (d) modify, postpone, reduce or forgive, in whole or in part, any payment of Rent (other than pursuant to the terms of the Operative Documents), any Certificate Amount, Loan to Value Optional Rent Prepayment, the Lease Balance, Fees, Construction Recourse Amount or Residual Value Guarantee Amount (except that any Person may consent to any modification, postponement, reduction or forgiveness of any payment of any Fee payable to it) or, subject to clause (c) above, any other amount payable under the Lease or this Participation Agreement, or modify the definition or method of calculation of Rent (other than pursuant to the terms of the Operative Documents), Certificate Amounts, Loan to Value Optional Rent Prepayment, Lease Balance, Fees, Construction Recourse Amount, Residual Value Guarantee Amount or any other definition which would affect the amounts to be advanced or which are payable under the Operative Documents;

    (e) consent to any assignment of the Lease by Lessee, releasing Lessee from its obligations in respect of the payments of Rent or Lease Balance or changing the absolute and unconditional character of such obligations; or

    (f)  release of any Lien granted by Lessee or the Participant under the Operative Documents, except as provided in the Operative Documents.

    SECTION 15.6.  Headings, etc.  The Table of Contents and headings of the various Articles and Sections of this Participation Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof.

    SECTION 15.7.  Parties in Interest.  Except as expressly provided herein, none of the provisions of this Participation Agreement is intended for the benefit of any Person except the parties hereto. Lessee shall not assign or transfer any of its rights or obligations under the Operative Documents without the prior written consent of the Required Participants.

SECTION 15.8.GOVERNING LAW.THIS PARTICIPATION AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

    SECTION 15.9.  Severability.  Any provision of this Participation Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

    SECTION 15.10.  Liability Limited.  No Participant shall have any obligation to any other Participant or to Lessee or Agent Lessor 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 15.11.  Further Assurances.  The parties hereto shall promptly cause to be taken, executed, acknowledged or delivered, at the sole expense of Lessee, all such further acts, conveyances, documents and assurances as the other parties may from time to time reasonably request in order to carry out and preserve the security interests and Liens (and the priority thereof) intended to be created pursuant to this Participation Agreement, the other Operative Documents and the Overall Transaction (including, without limitation, the preparation, execution and filing of any and all Uniform Commercial Code financing statements and other filings or registrations which the parties hereto may from time to time request to be filed or effected). Lessee, at its own expense and without the need of any prior request from any other party, shall take such action as may be necessary (including any action specified in the preceding sentence), or (if Agent Lessor shall so request) as so requested, in order to maintain and protect all Liens and security interests provided for hereunder or under any other Operative Document.

    SECTION 15.12.  Submission to Jurisdiction.  Each party hereto irrevocably and unconditionally:

    (a) submits for itself and its property in any legal action or proceeding relating to this Participation Agreement or any other Operative Document, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the United States District Court for the Southern District of New York and 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 court 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 or at such other address of which the other parties hereto shall have been notified pursuant to Section 15.3; and

    (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction.

    SECTION 15.13.  WAIVER OF JURY TRIAL.  THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OF THE PARTIES HERETO AND THERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 15.13  HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NO EXCEPTIONS. LESSEE ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTICIPANTS ENTERING INTO THIS PARTICIPATION AGREEMENT AND EACH OTHER OPERATIVE DOCUMENT.

    SECTION 15.14.  Limited Liability of Agent Lessor.  The parties hereto agree that Agent Lessor, in its individual capacity, shall have no personal liability whatsoever to Lessee, the Participants or any of their respective successors and assigns for any Claim based on or in respect of this Participation Agreement or any of the other Operative Documents or arising in any way from the Overall Transaction; provided, however, that Agent Lessor shall be liable in its individual capacity: (a) for its own willful misconduct or gross negligence (or negligence in the handling of funds) and, to each Participant for the breach of its obligations to such Participant in respect of the Operative Documents and the Premises, (b) for liabilities that may result from the incorrectness of any representation or warranty expressly made by it in this Participation Agreement or from its failure to perform the covenants and agreements set forth in this Participation Agreement or any other Operative Document, or (c) for any Tax based on or measured by any fees, commission or compensation received by it for actions contemplated by the Operative Documents. It is understood and agreed that, except as provided in the preceding proviso, Agent Lessor shall have no personal liability under any of the Operative Documents as a result of acting pursuant to and consistent with any of the Operative Documents.

    SECTION 15.15.  Payment of Transaction Expenses and Other Costs.

    (a)  Transaction Expenses and Continuing Expenses.  As and when any portion of Transaction Expenses becomes due and payable, including the continuing fees, expenses and disbursements (including reasonable counsel fees) of Agent Lessor and the Administrative Agent under the Operative Documents, such Transaction Expenses shall be paid by Lessee as Supplemental Rent.

    (b)  Payment by Advances.  Subject to the other provisions of this Section 15.15, Fees and Eligible Transaction Expenses referenced in Section 15.15(a) payable or incurred on or after the initial Advance Date may be paid through Advances.

    (c)  Amendments, Supplements and Appraisal.  Without limitation of the foregoing, Lessee agrees to pay to the Participants, Agent Lessor and the Administrative Agent all costs and expenses (including reasonable legal fees and expenses of special counsel to Agent Lessor and the document counsel for the Participants) incurred by any of them in connection with: (i) 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; (ii) any Casualty or Condemnation or termination of the Lease or any other Operative Document; (iii) the negotiation and documentation of any restructuring or "workout", whether or not consummated, of any Operative Document; (iv) the enforcement of the rights or remedies under the Operative Documents; (v) any transfer by a Participant of any interest in the Operative Documents during the continuance of an Event of Default; or (vi) any Advance Date.

    SECTION 15.16.  Reproduction of Documents.  This Participation 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 Participants or Agent Lessor in connection with the receipt and/or acquisition of the Premises; and (c) financial statements, certificates, and other information previously or hereafter furnished to 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, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

    SECTION 15.17.  Non-Petition.  Each of Lessee, each Purchaser, Agent Lessor and each other Participant hereby agrees that it shall not institute against, or join any other person in instituting against, any Tranche A1 Participant any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law, for one year and a day after the latest maturing indebtedness for borrowed money issued by that Tranche A1 Participant is paid. This Section 15.17 shall survive the termination of this Participation Agreement.

    SECTION 15.18.  Assignment of Tranche A1 Participant's Interest to Purchasers.  In the event a Tranche A1 Participant exercises its option to sell all of its interests under the Operative Documents to the Purchasers pursuant to Section 2.3 of the Transfer Agreements, the Tranche A1 Participant, without further act, will be deemed to have assigned to the Purchasers on a several basis in accordance with their Purchase Percentages all of its right, title and interest in the Operative Documents, and the Purchasers will be deemed to have assumed as of the date of transfer on a several basis as aforesaid all obligations of the Tranche A1 Participant arising on or after the date of transfer. In the event a Tranche A1 Participant assigns all or a portion of its Certificate Amounts and its rights and interests under its Transfer Agreement to ABN AMRO Bank N.V. or any other Person in accordance with Section 4.12(f) of the Transfer Agreement, then (unless and until repurchased by a Tranche A1 Participant pursuant to Section 2.2 of the Transfer Agreement) such Tranche A1 Participant, without further act, will be deemed to have assigned to such Person all or a portion, as applicable, of its right, title and interest in the Operative Documents and such Person will be deemed to have assumed all or a portion, as applicable, of the obligations of the Tranche A1 Participant arising on or after the date of such assignment. The Administrative Agent shall promptly notify Lessee of any assignment pursuant to this Section 15.18.

    SECTION 15.19.  Deliveries to Participants.  Lessee may fulfill its obligations hereunder and under each of the other Operative Documents to provide any item (other than any notices) to any Participant by providing sufficient copies of such item directly to Agent Lessor, along with the costs of postage, with instructions to Agent Lessor to deliver such item to such Participant.

    SECTION 15.20.  Excess Funds.  The Tranche A1 Participant shall be required to make payment of the amounts required to be paid pursuant hereto only if the Tranche A1 Participant has Excess Funds (as defined below). If the Tranche A1 Participant does not have Excess Funds, the excess of the amounts due hereunder over the amount paid shall not constitute a "claim" (as defined in Section 101(5) of the Federal Bankruptcy Code) against the Tranche A1 Participant until such time as the Tranche A1 Participant has Excess Funds. If the Tranche A1 Participant does not have sufficient Excess Funds to make any payment due hereunder, then the Tranche A1 Participant may pay a lesser amount and make additional payments that in the aggregate equal the amount of deficiency as soon as possible thereafter. The term "Excess Funds" means the excess of (a) the aggregate projected value of the Tranche A1 Participant's assets and other property (including cash and cash equivalents), over (b) the sum of (i) the sum of all scheduled payments of principal, interest and other amounts payable on publicly or privately placed indebtedness of the Tranche A1 Participant for borrowed money, plus (ii) the sum of all other liabilities, indebtedness and other obligations of the Tranche A1 Participant for borrowed money or owed to any credit or liquidity provider, together with all unpaid interest then accrued thereon, plus (iii) all taxes payable by the Tranche A1 Participant to the Internal Revenue Service, plus (iv) all other indebtedness, liabilities and obligations of the Tranche A1 Participant then due and payable, but the amount of any liability, indebtedness or obligation of the Tranche A1 Participant shall not exceed the projected value of the assets to which recourse for such liability, indebtedness or obligation is limited. Excess Funds shall be calculated once each Business Day.

ARTICLE XVI
AGENTS

    SECTION 16.1.  Appointment of Agents; Powers and Authorization to Take Certain Actions.

    (a) Each Participant irrevocably appoints and authorizes Lease Plan North America, Inc., to act as its Agent Lessor hereunder and under the other Operative Documents, and the Bank to act as its Administrative Agent hereunder and under such Operative Documents, with such powers as are specifically delegated to Agent Lessor or the Administrative Agent, as the case may be, by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. Each Participant authorizes and directs Agent Lessor to, and Agent Lessor agrees for the benefit of the Participants that it will, on the initial Advance Date and each other Advance Date, accept the documents described in Article III  of this Participation Agreement. Each of the Agents accepts the agency hereby created applicable to it and, in the case of the Administrative Agent, agrees to receive all payments and proceeds pursuant to the Operative Documents and disburse such payments or proceeds in accordance with the Operative Documents. Neither Agent shall have any duties or responsibilities except those expressly set forth in the Lease and this Participation Agreement. Neither 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 the Lease, this Participation Agreement, or in any certificate or other document referred to or provided for in, or received by any of them under, the Operative Documents, other than in the case of Agent Lessor the representations and warranties made by Agent Lessor in Section 7.4, or (ii) for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Collateral or the title thereto (subject to Agent Lessor's obligations under Section 9.1) or of the Lease or any other document referred to or provided for therein or (iii) for any failure by Lessee, any Participant or any other third party (other than such Agent) to perform any of its obligations under any Operative Agreement. Each Agent may employ agents, trustees or attorneys-in-fact, may vest any of them with any property, title, right or power deemed necessary for the purposes of such appointment and shall not be responsible for the negligence or misconduct of any of them selected by it. Neither Agent nor any of its respective directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, except for its or their own gross negligence or willful misconduct.

    (b) Neither Agent shall have any duty or obligation to manage, control, use, operate, store, lease, sell, dispose of or otherwise deal with the Premises, any other Collateral or the Lease, or to otherwise take or refrain from taking any action under, or in connection with, this Agreement, the Lease or any related document to which such Agent is a party, except as expressly provided by the terms hereof or by law, and no implied duties of any kind shall be read into any Operative Agreement against either Agent. The permissive right of either Agent to take actions enumerated in any Operative Document shall never be construed as a duty, unless such Agent is instructed or directed to exercise, perform or enforce one or more rights by the Required Participants (provided that such Agent has received indemnification reasonably satisfactory to it). No provision of the Operative Documents shall require either 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 Agent are ministerial in nature.

    (c) Except as specifically provided herein, each Agent is acting hereunder solely as agent and is not responsible to any party hereto in its individual capacity, except with respect to any claim arising from such Agent's gross negligence or willful misconduct or any breach of a representation or covenant made in its individual capacity.

    (d) Each Agent may accept deposits from, lend money to and otherwise deal with Lessee or any of its Affiliates with the same rights as it would have if it were not a named Agent hereunder.

    SECTION 16.2.  Reliance.  Each Agent may rely upon, and shall not be bound or obligated to make any investigation into the facts or matters stated in, any certificate, notice or other communication (including any communication by telephone, telecopy, telex, telegram or cable) reasonably believed by it to be genuine and correct and to have been made, signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by such Agent (including any expert selected by such Agent to aid such Agent in any calculations required in connection with its duties under the Operative Documents).

    SECTION 16.3.  Action Upon Instructions Generally.  Subject to Sections 16.4 and 16.6, upon written instructions of the Required Participants, Agent Lessor shall, on behalf of the Participants, give such notice or direction, exercise such right, remedy or approval or power hereunder or in respect of the Premises, and give such consent or enter into such amendment to any document to which it is a party as Agent Lessor as may be specified in such instructions. Agent Lessor shall deliver to each Participant a copy of each notice, report and certificate received by Agent Lessor pursuant to the Operative Documents. Neither Agent shall have any obligation to investigate or determine whether there has been an Event of Default or Default. Neither Agent shall be deemed to have notice or knowledge of an Event of Default or Default unless a Responsible Officer of such Agent is notified in writing of such Event of Default or Default. If either Agent receives notice of an Event of Default, such Agent shall give prompt notice thereof, at Lessee's expense, to each Participant. Subject to Sections 16.4, 16.6 and 15.5, such Agent shall take action or refrain from taking action with respect to such Event of Default as directed by the Required Participants; provided that, unless and until such Agent receives such directions, such Agent may refrain from taking any action, or may act in its discretion, with respect to such Event of Default. Prior to the date the Lease Balance shall have become due and payable by acceleration pursuant to Section 18.2 of the Lease, Required Participants may deliver written instructions to Agent Lessor to waive, and Agent Lessor shall waive pursuant thereto, any Event of Default and its consequences; provided that in the absence of written instructions from all Participants, Agent Lessor shall not waive any (i) Payment Default or (ii) covenant or provision which, under Section 15.5, cannot be modified or amended without the consent of all Participants. As to any matters not expressly provided for by this Agreement, each Agent 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 or failure to act pursuant thereto shall be binding on each Participant.

    SECTION 16.4.  Indemnification.  Each Participant shall reimburse and hold each Agent harmless, ratably in accordance with its outstanding Certificate Amount 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 such Agent by, or on behalf of, Lessee in accordance with Section 12.1), 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 such Agent and all other reasonable attorneys' fees and expenses incurred by such Agent, in any way relating to or arising in any manner out of (i) any Operative Document, the enforcement hereof or thereof or the consummation of the transactions contemplated thereby, or (ii) instructions from the Required Participants (including, without limitation, the costs and expenses that Lessee is obligated to and does not pay hereunder), provided that no Participant shall be liable for any of the foregoing to the extent they arise from (a) the gross negligence or willful misconduct of such Agent, (b) the inaccuracy of any representation or warranty or breach of any covenant given by such Agent in Section 7.4 or Section 9.1 hereof or in the Lease, (c) in the case of such Agent's handling of funds, the failure to act with the same care as such Agent uses in handling its own funds or (d) any taxes, fees or other charges payable by such Agent based on or measured by any fees, commissions or compensation received by it for acting as an Agent in connection with the transactions contemplated by the Operative Documents.

    SECTION 16.5.  Independent Credit Investigation.  Each Participant by entering into this Agreement agrees that it has, independently and without reliance on either Agent or any other Participant and based on such documents and information as it has deemed appropriate, made its own credit analysis of Lessee and its own decision to enter into this Agreement and each of the other Operative Documents to which it is a party and that it will, independently and without reliance upon either Agent 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 it is a party. Neither Agent shall be required to keep itself informed as to the performance or observance by Lessee of any other document referred to (directly or indirectly) or provided for herein or to inspect the properties or books of Lessee. Except for notices or statements which an Agent is expressly required to give under this Agreement and for notices, reports and other documents and information expressly required to be furnished to an Agent alone (and not also to each Participant, it being understood that such Agent shall forward copies of same to each Participant) hereunder or under any other Operative Agreement, such Agent shall not 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 Lessee (or any of its Affiliates) that may come into the possession of such Agent or any of its Affiliates.

    SECTION 16.6.  Refusal to Act.  Except for notices and actions expressly required of an Agent hereunder and except for the performance of its covenants in Section 9.1, each Agent 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 against any and all liability and reasonable expense which may be incurred by it by reason of taking or continuing to take any such action (provided that such indemnity shall not be required to extend to liability or expense arising from any matter described in clauses (a) through (d) of Section 16.4, it being understood that no action taken by an Agent in accordance with the instructions of the Required Participants shall be deemed to constitute any such matter) and (b) it is reasonably satisfied that such action is not contrary to any Operative Document or to any Applicable Law.

    SECTION 16.7.  Resignation or Removal of an Agent; Appointment of Successor.  Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by giving notice thereof to each Participant and Lessee. Upon any such resignation, the Required Participants at the time of the resignation shall have the right (with the reasonable, prompt approval of Lessee unless an Event of Default shall be continuing) to appoint a successor Agent which shall be a financial institution having a combined capital and surplus of not less than $100,000,000. If, within 30 calendar days after the retiring Agent's giving of notice of resignation, a successor Agent is not so appointed and does not accept such appointment, then the retiring Agent may appoint a successor Agent and transfer to such successor Agent all rights and obligations of the retiring Agent. Such successor Agent shall be a financial institution having combined capital and surplus of not less than $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from duties and obligations as Agent thereafter arising hereunder and under any related document. If the retiring Agent does not appoint a successor, any Participant 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 16.8.  Separate Agent Lessor.  The Required Participants may, and if they fail to do so at any time when they are so required, Agent Lessor may, for the purpose of meeting any legal requirements of any jurisdiction in which the Premises or Collateral may be located, appoint one or more individuals or corporations either to act as co-agent jointly with Agent Lessor or to act as separate agent of all or any part of the Premises or Collateral or the Lease, and vest in such individuals or corporations, in such capacity, such title to the Premises or Collateral or the Lease or any part thereof, and such rights or duties as Agent Lessor may consider necessary or desirable. Agent Lessor shall not be required to qualify to do business in any jurisdiction where it is not now so qualified. Agent Lessor 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, she or he shall be vested with such interest in the Premises or Collateral and the Lease or any part thereof, and with such rights and duties, not inconsistent with the provisions of the Operative Documents, as shall be specified in the instrument of appointment, jointly with Agent Lessor (except insofar as local law makes it necessary for any such co-agent or separate agent to act alone), subject to all terms of the Operative Documents. Any co-agent or separate agent, to the fullest extent permitted by legal requirements of the relevant jurisdiction, at any time, by an instrument in writing, shall constitute Agent Lessor its attorney-in-fact and agent, with full power and authority to do all acts and things and to exercise all discretion on its behalf and in its name. If any co-agent or separate agent shall die, become incapable of acting, resign or be removed, the interest in the Premises or Collateral and the Lease and all rights and duties of such co-agent or separate agent shall, so far as permitted by law, vest in and be exercised by Agent Lessor, without the appointment of a successor to such co-agent or separate agent.

    SECTION 16.9.  Termination of Agency.  The agency created hereby shall terminate upon the final disposition by Agent Lessor of all Collateral at any time subject hereto and the final distribution by the Administrative Agent of all moneys or other property or proceeds received pursuant to the Lease in accordance with its terms, provided that at such time Lessee shall have complied fully with all the terms hereof.

    SECTION 16.10.  MERGER.  THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER OPERATIVE DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

    THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

    SECTION 16.11.  Limitations.  It is expressly understood and agreed by and among the parties hereto that, except as otherwise provided herein or in the other Operative Documents: (a) this Participation Agreement and the other Operative Documents to which either Agent is a party are executed by such Agent, not in its individual capacity (except with respect to the representations and covenants of Agent Lessor in Sections 7.4  and 9.1), but solely as Agent Lessor or the Administrative Agent, as applicable, under the Operative Documents in the exercise of the power and authority conferred and vested in it as such Agent; (b) each and all of the undertakings and agreements herein made on the part of such Agent are each and every one of them made and intended not as personal undertakings and agreements by such Agent, or for the purpose or with the intention of binding such Agent personally, but are made and intended for the purpose of binding only the Collateral unless expressly provided otherwise; (c) actions to be taken by such Agent pursuant to its obligations under the Operative Documents may, in certain circumstances, be taken by such Agent only upon specific authority of the Participants; (d) nothing contained in the Operative Documents shall be construed as creating any liability on such Agent, individually or personally, or any incorporator or any past, present or future subscriber to the capital stock of, or stockholder, officer or director, employee or agent of, such Agent to perform any covenants either express or implied contained herein, all such liability, if any, being expressly waived by the other parties hereto and by any Person claiming by, through or under them; and (e) so far as such Agent, individually or personally, is concerned, the other parties hereto and any Person claiming by, through or under them shall look solely to the Collateral and Lessee for the performance of any obligation under any of the instruments referred to herein; provided, however, that nothing in this Section 16.11 shall be construed to limit in scope or substance the general corporate liability of such Agent in respect of its gross negligence or willful misconduct or with respect to Agent Lessor those representations, warranties and covenants of Agent in its individual capacity set forth herein or in any of the other agreements contemplated hereby. Nothing in this Section 16.11  shall affect the duties, liabilities and obligations of Agent Lessor or the Administrative Agent in its additional capacity as Participant.

    SECTION 16.12.  Confidentiality.  Each Participant and each Agent shall maintain in confidence and not disclose to any Person any non-public information furnished to it pursuant to this Agreement or any other Operative Agreement and designated by the Lessee in writing as such ("Confidential Information") without the prior consent of the Lessee, subject to each Participant's and each Agent's (a) obligation to disclose any Confidential Information pursuant to a request or order under applicable laws and regulations or pursuant to a subpoena or other legal process, (b) right to disclose any Confidential Information to other Participants, to bank examiners, to its affiliates, auditors and counsel, and to any prospective transferee pursuant to Section 11  approved by the Lessee (if such approval is required pursuant to Section 11), (c) right to disclose any Confidential Information in connection with any litigation or dispute or the exercise of any remedy hereunder involving either Agent or the Participants and the Lessee or any of its Subsidiaries; provided, however, that Confidential Information disclosed pursuant to clause (b) or (c)  of this sentence shall be so disclosed subject to such procedures as are reasonably calculated to maintain the confidentiality thereof and (d) right to disclose any Confidential Information to any rating agency rating the Commercial Paper. Notwithstanding the foregoing provisions of this Section 16.12, (a) the foregoing obligation of confidentiality shall not apply to any Confidential Information that was known to such Agent, Participant or any of their respective affiliates prior to the time it received such Confidential Information from the Lessee pursuant to this Agreement or any other Operative Agreement, other than as a result of the disclosure thereof by a Person who, to the knowledge or reasonable belief of such Participant, was prohibited from disclosing it by any duty of confidentiality arising (under this Agreement or otherwise) by contract or law, and (b) the foregoing obligation of confidentiality shall not apply to any Confidential Information that becomes part of the public domain independently of any act of such Participant not permitted hereunder or when identical or substantially similar information is received by such Participant, without restriction as to its disclosure or use, from a Person who was not prohibited from disclosing it by any duty of confidentiality arising (under this Agreement or otherwise) by contract or law. The obligations of each Participant and each Agent under this Section 16.12 shall survive the termination of this Agreement and the payment of any Certificates and all other amounts payable thereunder.

    IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

ADC TELECOMMUNICATIONS, INC., as Lessee

 
By:  /S/ GOKUL HEMMADY

Name:  Gokul Hemmady

Title:  Vice President/Treasurer

 
LEASE PLAN NORTH AMERICA, INC., not its individual capacity, except as expressly stated herein, but solely as Agent Lessor

 
By:  /S/ BLAKE J. LACHER

Name:  Blake J. Lacher

Title:  Vice President

 
By:

Name:

Title:

 
AMSTERDAM FUNDING CORPORATION, as a Participant

 
By:  /S/ BERNARD J. ANGELO

Name:  Bernard J. Angelo

Title:  Vice President

 
ABN AMRO BANK N.V., as a Participant

 
By:  /S/ PETER L. EATON

Name:  Peter L. Eaton

Title:  Group Vice Presidentr

 
By:  /S/ JOHN P. RICHARDSON

Name:  John P. Richardson

Title:  Vice President

 
ABN AMRO BANK N.V., not in its individual capacity but solely as the Administrative Agent

 
By:  /S/ PETER L. EATON

Name:  Peter L. Eaton

Title:  Group Vice President

 
By:  /S/ JOHN P. RICHARDSON

Name:  John P. Richardson

Title:  Vice President

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TABLE OF CONTENTS
PARTICIPATION AGREEMENT
ARTICLE I DEFINITIONS; INTERPRETATION
ARTICLE II DOCUMENT CLOSING DATE
ARTICLE III PURCHASE AND LEASE OF PREMISES; FUNDING OF ADVANCES

ARTICLE IV FEES
ARTICLE V CERTAIN INTENTIONS OF THE PARTIES
ARTICLE VI CONDITIONS PRECEDENT TO ADVANCES; COMPLETION DATE CONDITIONS

ARTICLE IX OTHER COVENANTS AND AGREEMENTS
ARTICLE X LESSEE DIRECTIONS; REPLACEMENT OF PARTICIPANTS
ARTICLE XI TRANSFERS OF PARTICIPANTS' INTERESTS
ARTICLE XII INDEMNIFICATION

ARTICLE XIII LIMITATION ON RECOURSE LIABILITY DURING CONSTRUCTION PERIOD
ARTICLE XIV LIBOR PROVISIONS; ADDITIONAL COSTS
ARTICLE XV MISCELLANEOUS

EX-13.A

Management's Responsibility for Financial Reporting

    The management of ADC Telecommunications, Inc. is responsible for the preparation, integrity and objectivity of all financial statements and other information contained in this Annual Report. To ensure reliability of financial data, ADC has established and maintains an internal control system, which provides reasonable assurance that financial reports do not contain any material misstatement.

    The Audit Committee of the board of directors is responsible for reviewing and evaluating the overall performance of the ADC's financial reporting and accounting practices. The Committee meets periodically and independently with management, internal auditors and the independent public accountants to discuss ADC's internal accounting controls, auditing and financial matters. The internal auditors and independent public accountants have unrestricted access to the Audit Committee.

    We believe that the financial statements and related notes in this report are presented fairly in all material respects, and that they were prepared according to generally accepted accounting principles.

William J. Cadogan	Robert E. Switz
Chairman, President and	Senior Vice President,
Chief Executive Officer	Chief Financial Officer

November 24, 1999

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To ADC Telecommunications, Inc.:

    We have audited the accompanying consolidated balance sheets of ADC Telecommunications, Inc. and Subsidiaries as of October 31, 1999 and 1998, and the related consolidated statements of income, shareowners' investment and cash flows for each of the three years in the period ended October 31, 1999. These financial statements are the responsibility of ADC's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Saville Systems PLC, a company acquired during 1999 in a transaction accounted for as a pooling of interests, as of October 31, 1998, or for each of the two years in the period ended October 31, 1998 (see Note 5). Such statements are included in the consolidated financial statements of ADC Telecommunications, Inc. and Subsidiaries and reflect total assets and total revenues of 9.6 percent and 10.8 percent in 1998, and 7.2 percent and 8.4 percent in 1997, respectively, of the related consolidated totals. These statements were audited by other auditors whose reports have been furnished to us and our opinion, insofar as it relates to amounts included for Saville Systems PLC, is based solely upon the reports of the other auditors.

    We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

    In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of ADC Telecommunications, Inc. and Subsidiaries as of October 31, 1999 and 1998, and the results of their operations and their cash flows for the three years then ended October 31, 1999 in conformity with generally accepted accounting principles.

Minneapolis, Minnesota	ARTHUR ANDERSEN LLP
November 24, 1999

ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED OCTOBER 31

(In Thousands, Except Earnings Per Share)

	1999			1998		1997
Net Sales	$	1,926,947		$	1,547,383	$	1,271,495
Cost of Product Sold		1,009,983			799,394		661,993
Gross Profit		916,964			747,989		609,502
Expenses:
Research and development		192,872			159,301		132,784
Selling and administration		390,194			307,982		248,334
Goodwill amortization		22,249			12,543		10,013
Non-recurring charges		148,977			9,168		22,700
Total expenses		754,292			488,994		413,831
Operating Income		162,672			258,995		195,671
Other Income (Expense), Net		(2,289	)		3,532		6,312
Income before Income Taxes		160,383			262,527		201,983
Provision for Income Taxes		72,748			88,748		69,209
Net Income	$	87,635		$	173,779	$	132,774
Earnings per Share—Basic	$	0.59		$	1.17	$	0.92
Earnings per Share—Diluted	$	0.57		$	1.15	$	0.90
Average Common Shares Outstanding—Basic		149,501			148,100		144,828
Average Common Shares Outstanding—Diluted		153,069			150,822		147,511

The accompanying notes are an integral part of these consolidated financial statements.

ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF OCTOBER 31

(In Thousands)

ASSETS

	1999		1998
Current Assets:
Cash and cash equivalents	$	143,523	$	328,030
Short-term investments		150,493		47,492
Accounts receivable, net of reserves of $8,814 and $7,687		436,751		409,718
Inventories, net of reserves of $37,385 and $22,516		243,882		175,763
Prepaid and other current assets		54,789		37,889
Total current assets		1,029,438		998,892
Property and Equipment, Net		312,066		269,238
Other Assets, Principally Goodwill		331,025		194,102
	$	1,672,529	$	1,462,232

LIABILITIES AND SHAREOWNERS' INVESTMENT

Current Liabilities:
Accounts payable	$	119,212		$	72,527
Accrued liabilities		216,671			103,823
Accrued and deferred income taxes		41,919			33,620
Note payable and current maturities of long-term debt		35,152			201,851
Total current liabilities		412,954			411,821
Long-Term Debt, Less Current Maturities		11,024			3,947
Total liabilities		423,978			415,768
Shareowners' Investment:
Common stock, $0.20 par value; authorized 300,000 shares; issued and outstanding 150,173 and 148,837 shares		30,035			29,766
Paid-in capital		392,114			325,882
Retained earnings		783,456			702,212
Accumulated other comprehensive income (loss)		44,033			(10,046	)
Deferred compensation		(1,087	)		(1,350	)
Total shareowners' investment		1,248,551			1,046,464
	$	1,672,529		$	1,462,232

The accompanying notes are an integral part of these consolidated financial statements.

ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREOWNERS' INVESTMENT

(In Thousands)

															Accumulated Other Comprehensive Income (Loss)
	Common Stock
						Paid-in Capital			Retained Earnings			Deferred Compensation						Comprehensive Income (Loss)
	Shares		Amount
Balance, October 31, 1996	78,134		$	15,626		$	257,546		$	392,353		$	(1,603	)	$	159
Net income	—			—			—			132,774			—			—		$	132,774
Stock split effected in the form of a stock dividend	65,177			13,035			(13,035	)		—			—			—			—
Stock issued for business acquisitions	2,239			448			15,066			3,306			—			—			—
Stock issued for employee benefit plans	1,384			278			19,082			—			(1,025	)		—			—
Reduction of deferred compensation	11			2			—			—			1,991			—			—
Reduction in minority interest	—			—			189			—			—			—			—
Translation adjustments	—			—			—			—			—			(5,095	)		(5,095	)
Balance, October 31, 1997	146,945			29,389			278,848			528,433			(637	)		(4,936	)	$	127,679
Net income	—			—			—			173,779			—			—		$	173,779
Stock issued for business acquisitions	162			32			15,554			—			(1,691	)		—			—
Stock issued for employee benefit plans	1,730			345			31,475			—			—			—			—
Reduction of deferred compensation	—			—			—			—			978			—			—
Reduction in minority interest	—			—			5			—			—			—			—
Translation adjustments	—			—			—			—			—			(5,110	)		(5,110	)
Balance, October 31, 1998	148,837			29,766			325,882			702,212			(1,350	)		(10,046	)	$	168,669
Net income	—			—			—			87,635			—			—		$	87,635
Adjustment to conform year-end of acquired company	—			—			1,218			(6,391	)		172			(171	)		—
Stock issued for business acquisitions	348			70			9,505			—			(811	)		—			—
Stock issued for employee benefit plans	2,028			407			55,301			—			—			—			—
Reduction of deferred compensation	—			—			—			—			902			—			—
Translation adjustments and other	—			—			—			—			—			(550	)		(550	)
Shares acquired through share repurchase plan	(1,040	)		(208	)		208			—			—			—			—
Unrealized gain on securities, net of deferred taxes of $32,200	—			—			—			—			—			54,800			54,800
Balance, October 31, 1999	150,173		$	30,035		$	392,114		$	783,456		$	(1,087	)	$	44,033		$	141,885

ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED OCTOBER 31

(In Thousands)

	1999			1998			1997
Operating Activities:
Net income	$	87,635		$	173,779		$	132,774
Adjustments to reconcile net income to net cash from operating activities:
Non-recurring charges		148,977			9,168			22,700
Depreciation and amortization		102,090			70,276			51,330
Deferred income taxes provision (benefit)		(30,912	)		(3,287	)		(6,789	)
Other		(810	)		5,383			1,341
Changes in assets and liabilities:
Accounts receivable		(28,610	)		(139,342	)		(79,755	)
Inventories		(46,156	)		(6,869	)		(34,441	)
Prepaids and other assets		(8,869	)		(9,490	)		(9,938	)
Accounts payable		41,644			3,991			9,270
Accrued liabilities		78,327			(685	)		24,009
Total cash from operating activities		343,316			102,924			110,501
Investing Activities:
Property and equipment additions, net		(105,403	)		(101,139	)		(126,431	)
Acquisition payments		(258,752	)		(47,082	)		(33,917	)
Marketable securities and short-term investments, net		(8,336	)		(34,477	)		(12,015	)
Long-term investments and other non-current assets		(17,034	)		(1,433	)		(3,523	)
Total cash used for investing activities		(389,525	)		(184,131	)		(175,886	)
Financing Activities:
Increase (decrease) in debt		(170,896	)		199,607			(4,852	)
Common stock sold		45,206			45,715			19,203
Total cash from (used for) financing activities		(125,690	)		245,322			14,351
Effect of Exchange Rate Changes on Cash		(1,573	)		(1,664	)		(1,003	)
Effect of Conforming Year End of Acquired Company		(11,035	)		—			—
Increase (Decrease) in Cash and Cash Equivalents		(184,507	)		162,451			(52,037	)
Cash and Cash Equivalents, Beginning of Period		328,030			165,579			217,616
Cash and Cash Equivalents, End of Period	$	143,523		$	328,030		$	165,579
Supplemental Disclosures:
Income taxes paid	$	83,382		$	83,271		$	58,098
Interest paid	$	7,563		$	780		$	400

The accompanying notes are an integral part of these consolidated financial statements.

ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

    Principles of Consolidation:  The consolidated financial statements include the accounts of ADC Telecommunications, Inc. (a Minnesota corporation) and all significant subsidiaries in which ADC has more than a 50% equity ownership (collectively, "ADC"). All significant intercompany transactions and balances have been eliminated in consolidation.

    Cash Equivalents:  Cash equivalents represent short-term investments in commercial paper with original maturities of three months or less. The carrying amounts of these investments approximate their fair value due to their short maturities.

    Short-term Investments:  Short-term investments held by ADC and its subsidiaries are classified as available-for-sale securities under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Investments classified as available-for-sale are carried at market value with any unrealized holding gains and losses presented as a component of accumulated other comprehensive income within shareowners' investment.

    Inventories:  Inventories include material, labor and overhead and are stated at the lower of first-in, first-out cost or market.

    Property and Equipment:  Property and equipment are recorded at cost and depreciated using the straight-line method over estimated useful lives of three to thirty years or, in the case of leasehold improvements, over the term of the lease, if shorter. Both straight-line and accelerated methods of depreciation are used for income tax purposes.

    Goodwill:  The excess of the cost of acquired businesses over the fair value of the net assets acquired is amortized on a straight-line basis ranging from five to twenty-five years. Management periodically assesses the amortization period and recoverability of the carrying amount of goodwill based upon an estimate of future cash flows from related operations.

    Research and Development Costs:  ADC's policy is to expense all research and development costs in the period incurred.

    Income Taxes:  ADC utilizes the liability method of accounting for income taxes. Deferred tax liabilities or assets are recognized for the expected future tax consequences of temporary differences between the book and tax bases of assets and liabilities.

    Revenue Recognition:  Revenue is recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. Revenue from product sales is recognized at time of delivery and acceptance, and after consideration of all the terms and conditions of the customer contract.

    Revenue from services consists of fees for systems requirements definition, system design and analysis, customization and installation services, ongoing system management, system enhancements, service bureau processing, facilities management and maintenance fees. Services revenue is recognized as the services are performed, primarily on a time and materials basis and to a lesser extent on a fixed fee basis over the term of the services provided. Revenue from maintenance contracts is recognized ratably over the term of the agreement, generally one year.

    Revenue from the licensing of software rights is recognized at the time of delivery of the product to the customer, provided that ADC has no remaining service obligations, collectibility is considered probable and the fees are fixed and determinable. Where there are service obligations that are essential to the functionality of the software installed, license fees are recorded over the term of the initial customization period.

    Foreign Currency Translation:  ADC converts assets and liabilities of foreign operations to their U.S. dollar equivalents at rates in effect at the balance sheet date and records translation adjustments in shareowners' investment in the balance sheet. Income statements of foreign operations are translated from the operations' functional currency to U.S. dollar equivalents at the exchange rate on the transaction dates. Foreign exchange transaction gains and losses are reported in other income (expense), net.

    Use of Estimates:  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

(2) Consolidated Income Statement Information

Other Income (Expense), Net:

(In thousands)	1999			1998			1997
Interest income	$	12,394		$	9,265		$	9,910
Interest expense		(7,619	)		(838	)		(454	)
Other expense, net		(7,064	)		(4,895	)		(3,144	)
Total, net	$	(2,289	)	$	3,532		$	6,312

    Comprehensive Income:  On November 1, 1998, ADC adopted SFAS No. 130, "Reporting of Comprehensive Income." The standard requires the display and reporting of comprehensive income, which includes all changes in shareowners' investment with the exception of additional investments by shareowners or distributions to shareowners. During the year ended October 31, 1999, a company in which ADC has an investment completed an initial public offering. Comprehensive income includes the unrealized gain from reporting this investment at fair value. Comprehensive income is reported on the statement of shareowners' investment.

(3) Consolidated Balance Sheet Information

(In thousands)	1999			1998
Inventories:
Purchased materials and manufactured products	$	217,021		$	156,006
Work-in-process		26,861			19,757
Total	$	243,882		$	175,763
Property and equipment:
Land and buildings	$	114,335		$	110,656
Machinery and equipment		435,364			341,790
Furniture and fixtures		51,253			43,667
Total		600,952			496,113
Less accumulated depreciation and amortization		(288,886	)		(226,875	)
Total, net	$	312,066		$	269,238
Intangible assets:
Goodwill	$	263,141		$	185,580
Acquired technology		37,973			5,984
Less accumulated amortization		(64,121	)		(44,039	)
Total, net	$	236,993		$	147,525
Accrued liabilities:
Accrued compensation and benefits	$	106,540		$	62,456
Other accrued liabilities		110,131			41,367
Total	$	216,671		$	103,823

(4) Note Payable

    At October 31, 1999, ADC had a $340 million unsecured revolving credit facility for general corporate purposes. Under this five-year credit facility, borrowings carry an initial interest rate equal to the commercial paper interest rate plus 25 basis points. At October 31, 1999, the balance outstanding under this arrangement was $25 million. The revolving credit facility expires on November 24, 2003. This facility requires ADC to maintain certain financial ratios. At October 31, 1999, ADC was in compliance with such requirements.

(5) Acquisitions

    Pooling of Interests Method:  On October 8, 1999, ADC issued 14,096,000 shares of its common stock for all of the outstanding stock of Saville Systems PLC ("Saville"). Saville is a developer and integrator of communications billing and customer care software.

    ADC's consolidated financial statements for prior years have been restated to include the results of Saville within the Integrated Solutions business segment. Net sales and income for the individual entities for fiscal 1999, 1998 and 1997 were as follows (in thousands):

Year ended October 31, 1999	Net Sales		Net Income (Loss)
ADC	$	1,771,423	$	91,115
Saville		155,524		(3,480	)
Combined	$	1,926,947	$	87,635

Year ended October 31, 1998
ADC (as previously reported)	$	1,379,678	$	146,727
Saville		167,705		27,052
Combined	$	1,547,383	$	173,779

Year ended October 31, 1997
ADC (as previously reported)	$	1,164,450	$	108,837
Saville		107,045		23,937
Combined	$	1,271,495	$	132,774

    The historical financial statements of ADC have been restated to include the results of operations and financial condition of Saville. ADC's restated financial statements for the years ended October 31, 1998 and 1997 include the operations of Saville for the twelve months ended December 31, 1998 and 1997 and the balance sheet as of December 31, 1998. As a result of changing Saville's year-end from December 31 to October 31, an adjustment to retained earnings of $6.4 million was made to conform year-ends. Expenses of $21.4 million incurred in consummating the Saville acquisition were recorded as a non-recurring charge in the fourth quarter of 1999.

    Purchase Method:  On November 5, 1998, ADC acquired all outstanding common shares of Teledata Communications Ltd. ("Teledata") for $200 million in cash plus stock options valued at $7.9 million. Teledata designs, develops, manufactures, markets and supports advanced wireline and wireless customer access network equipment for telephone companies worldwide. Purchased research and development expenses of $23.6 million were recorded as a non-recurring charge upon completion of the acquisition. Goodwill and other identifiable intangible assets resulting from the acquisition are being amortized over periods ranging from five to fifteen years. Teledata's results have been included in ADC's results since acquisition. Unaudited pro forma results of operations of ADC and Teledata for the year ended October 31, 1998, after giving effect to certain pro forma adjustments, are as follows (dollars in thousands):

Year ended October 31, 1998
Net Sales	$	1,610,969
Net Income	$	160,081
Earnings Per Share, Diluted	$	1.07

    In addition to the transactions identified above, ADC made several smaller acquisitions during fiscal 1999, 1998 and 1997. A summary of recent significant acquisitions, accounted for by the pooling-of-interests and purchase methods, is as follows:

Company	Date	Transaction value (in thousands)
Saville Systems PLC(1)	October 1999	$	635,000
Pathway, Inc.	July 1999		9,000
Spectracom, Inc.(2)	May 1999		60,000
Phasor Electronics	January 1999		8,200
Hadax Electronics	November 1998		25,000
Teledata Communications Ltd.	November 1998		210,000
BHA Pty Ltd.	April 1998		20,000
W.E. Tech, Inc.	January 1998		16,000
NewNet, Inc.(1)	October 1997		52,500
Apex Group, Inc.(1)	March 1997		26,000
Wireless Infrastructure Group of PCSI	December 1996		23,000

(1)

Accounted for as a pooling-of-interests.

(2)

Spectracom acquisition agreement provides for contingent consideration of up to $45 million.

    The inclusion of the above acquisitions for periods prior to the date of acquisition would not have materially affected results of operations, except for Teledata as discussed above. Goodwill associated with these purchase acquisitions is being amortized using the straight-line method over periods ranging from seven to fifteen years.

    ADC identifies projects that do not have technological feasibility or other uses at the time of acquisition and records expense at the time of acquisition for these in-process research and development projects. Acquired in-process research and development expenses aggregating $88.6 million in 1999 were associated with the purchase acquisitions. Appraisals for each acquired in-process technology were determined using the income approach, discounted based on the estimated likelihood that the project will ultimately succeed. The most significant components of acquired in-process research and development were $47.5 million associated with optical components, which are used in fiber amplifiers, under development at Spectracom, and $23.6 million associated with products which enhance speed and capacity of digital loop networks, under development at Teledata. Upon acquisition, the acquired Spectracom optical components were estimated to be 69% complete, and the acquired Teledata products under development were estimated to be 65% complete.

    Purchased in-process research and development of $88.6 million in 1999 was associated with the acquisitions of Pathway, Teledata, Phasor Electronics, Hadax Electronics and Spectracom. Non-recurring charges of $9.2 million in 1998 were associated with the acquisitions of BHA Pty Ltd. and interconnect billing software technology. In 1997, $22.7 million of in-process research and development charges was associated with the acquisition of the Wireless Infrastructure Group of Pacific Communications Sciences, Inc.

(6) Employee Benefit Plans

    Retirement Savings Plan:  Substantially all employees are eligible to participate in ADC's Retirement Savings Plan (the "Plan"). ADC matches employee contributions to the Plan up to 6% of wages and, depending on ADC performance, may voluntarily make an additional contribution of up to 70% on 6% of wages. Employees are fully vested in all contributions. ADC's contributions to the Plan were $13.6 million, $12.5 million and $8.2 million during 1999, 1998 and 1997, respectively. The Plan's trustee invests a portion of ADC's cash contributions in ADC's common stock.

    Stock Award Plans:  ADC maintains a Stock Incentive Plan to grant certain stock awards, including stock options at fair market value and restricted shares, to key employees of ADC. A maximum of 29,019,008 stock awards can be granted under this plan; 7,732,824 shares were available for stock awards at October 31, 1999. ADC also maintains a Non-employee Director Stock Option Plan in order to enhance the ability to attract and retain the services of experienced and knowledgeable outside directors. This plan provides for granting of a maximum of 840,000 non-qualified stock options at fair market value. As of October 31, 1999, 240,500 shares were available for option grants under this plan. In addition, options to acquire a total of 2,923,704 shares have been granted under plans assumed in conjunction with certain acquisitions.

    The following schedule summarizes activity in all plans:

	Stock Options
	Shares		Weighted Average Exercise Price		Restricted Stock (Shares)
Outstanding at October 31, 1996	6,255,882		$	11.65	108,586
Granted	7,790,145		$	39.19	13,206
Exercised	(1,274,048	)	$	12.64	—
Restrictions Lapsed	—			—	(15,891	)
Canceled	(607,109	)	$	34.76	(2,600	)
Outstanding at October 31, 1997	12,164,870		$	28.05	103,301
Granted	4,564,308		$	46.09	60,000
Exercised	(1,433,443	)	$	12.71	—
Restrictions Lapsed	—			—	(65,543	)
Canceled	(1,347,308	)	$	39.97	(4,383	)
Outstanding at October 31, 1998	13,948,427		$	34.25	93,375
Adjustment to conform year-ends	68,124			—	—
Granted	8,711,766		$	45.26	22,236
Exercised	(2,182,268	)	$	18.07	—
Restrictions Lapsed	—			—	(20,248	)
Canceled	(1,698,142	)	$	32.55	(5,000	)
Outstanding at October 31, 1999	18,847,907		$	37.90	90,363
Exercisable at October 31, 1999	7,720,041		$	36.88	—

    SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require, a fair value based method of accounting for employee stock options or similar equity instruments. As permitted under the standard, ADC has continued to account for employee stock options using the intrinsic value method outlined in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, ADC has recognized no compensation expense for its Stock Incentive Plan or its Non-employee Director Stock Option Plan.

    If compensation expense for ADC's stock-based compensation plans had been determined based on the fair value at the grant dates consistent with the method of SFAS No. 123, ADC's net income and earnings per share would have decreased to the pro forma amounts indicated below:

(In thousands, except per share amounts)	1999		1998		1997
Net income
As reported	$	87,635	$	173,779	$	132,774
Pro forma	$	44,917	$	135,562	$	102,776
Earnings per share—basic
As reported	$	0.59	$	1.17	$	0.92
Pro forma	$	0.30	$	0.92	$	0.71
Earnings per share—diluted
As reported	$	0.57	$	1.15	$	0.90
Pro forma	$	0.29	$	0.90	$	0.70

    The weighted-average fair value per option at the date of grant for options granted in 1999, 1998 and 1997 was $36.47, $34.25 and $28.05, respectively. The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

	1999	1998	1997
Risk-free interest rate	5.27%	5.19%	6.41%
Expected dividend yield	—	—	—
Expected volatility factor	67.6%	68.6%	44.7%
Expected option term	3.2 years	4.6 years	7.0 years

(7) Capital Stock

    Authorized Stock:  ADC is authorized to issue 300,000,000 shares of $0.20 par value common stock and 10,000,000 shares of no par value preferred stock. There are no shares of preferred stock issued.

    Earnings Per Share:  Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock that would have been outstanding if potentially dilutive common shares related to stock options had been issued. The following table reconciles the number of shares utilized in the earnings per share calculations:

(In thousands, except earnings per share)	1999		1998		1997
Net income	$	87,635	$	173,779	$	132,774
Earnings per share—basic	$	0.59	$	1.17	$	0.92
Earnings per share—diluted	$	0.57	$	1.15	$	0.90
Weighted average common shares outstanding—basic		149,501		148,100		144,828
Effect of dilutive securities—stock options		3,568		2,722		2,683
Weighted average common shares outstanding—diluted		153,069		150,822		147,511

    Shareowner Rights Plan:  ADC has adopted a Shareowner Rights Plan which provides that if any person or group acquires 15% or more of ADC's common stock, each right (a "Right") not owned by such person or group will entitle its holder to purchase, at the Right's then current purchase price ($62.50 for each one-half share of ADC's common stock at October 31, 1999), common stock of ADC having a value of twice the Right's purchase price. The Rights would not be triggered, however, if the acquisition of 15% or more of ADC's common stock is pursuant to a tender offer or exchange for all outstanding shares of ADC's common stock which is determined by the board of directors to be fair and in the best interests of ADC and its shareowners. The Rights are redeemable at $0.01 per share any time prior to the time they become exercisable. The Rights will expire on November 28, 2005, if not previously redeemed or exercised.

    Stock Repurchase Program:  In April 1998, ADC announced a stock repurchase program under which ADC was permitted to purchase up to 6.7 million shares of common stock in open market transactions as market and business conditions warranted. As part of this program, ADC allowed for the use of forward repurchase agreements, "equity collar" arrangements using call and put options, or other arrangements to purchase ADC shares. The share repurchase program was terminated in 1999.

    During 1998, ADC sold put options to independent third parties that entitled holders of the options to sell shares of ADC common stock to ADC and purchased call options from the same parties that entitled ADC to buy shares of its common stock. In January and February 1999, ADC received 1,037,622 shares of its common stock in partial settlement of outstanding options. Shares received in settlement of this transaction have been re-issued through unrelated transactions.

(8) Income Taxes

    The components of the provision for income taxes are as follows:

(In thousands)	1999			1998			1997
Current taxes payable:
Federal	$	89,274		$	70,339		$	53,890
Foreign		6,550			14,855			15,512
State		7,836			6,500			6,596
		103,660			91,694			75,998
Deferred		(30,912	)		(2,946	)		(6,789	)
Total provision	$	72,748		$	88,748		$	69,209

    The effective income tax rate differs from the federal statutory rate as follows:

	1999		1998		1997
Federal statutory rate	35	%	35	%	35	%
Research and development tax credits	(3	)	(2	)	(2	)
Goodwill amortization	3		1		1
State income taxes, net	2		2		2
FSC exempt income	(1	)	(1	)	(1	)
Foreign income taxes	(2	)	(2	)	(2	)
Acquired in-process research & development	7		1		—
Acquisition and integration fees	4		—		—
Other, net	—		—		1
Effective income tax rate	45	%	34	%	34	%

    Deferred tax assets (liabilities) of ADC as of October 31, 1999 and 1998 are composed of the following:

(In thousands)	1999			1998
Current deferred tax assets:
Asset valuation reserves	$	7,376		$	8,276
Accrued liabilities		(5,718	)		13,000
Other		2,146			664
Total	$	3,804		$	21,940
Non-current deferred tax assets (liabilities):
Intangible assets	$	39,272		$	21,614
Depreciation		(8,763	)		(3,987	)
Other		4,765			465
Total	$	35,274		$	18,092

    In connection with its 1999 acquisitions, ADC recorded non-recurring, non-tax-deductible charges for acquisition fees and acquired in-process research and development. The exclusion of these charges would result in an effective tax rate of 34% in 1999.

    The provision for foreign income taxes is based upon foreign pretax earnings of approximately $7.3 million, $19.5 million and $27.7 million during 1999, 1998 and 1997, respectively.

(9) Business Restructuring and Other Non-Recurring Charges

    A summary of 1999 business restructuring and other non-recurring charges is as follows (in thousands):

Restructuring the former Wireless Systems Group	$	29,977
Restructuring plan for the Broadband Access & Transport Group		9,000
Purchased in-process research and development expenses		88,600
Saville acquisition and integration fees		21,400
Total	$	148,977

    Non-recurring charges in 1998 and 1997 represent purchased in-process research and development charges from acquisitions. See Note 5.

    During the first quarter of 1999, ADC's management approved a restructuring plan, which included initiatives to integrate the software operations of the former Wireless Systems Group with the newly formed Integrated Solutions Group, consolidate unproductive and duplicative facilities and dispose of product lines that no longer fit ADC's current focus and growth strategy. This business restructuring plan was completed during the fourth quarter of 1999. Actual costs incurred were $30 million, an amount equal to the initial estimate recorded during the first quarter of 1999. The charges included $4.4 million for employee termination costs, $8.8 million on the sale of a subsidiary, $11.1 million associated with the write-off of goodwill and discontinuance of the City RFX product line, as well as $5.7 million in facilities closing and other costs that were directly related to ADC's exit plan.

    During the fourth quarter of 1999, ADC's management approved a restructuring plan to consolidate the Portland, Oregon manufacturing operations of the Broadband Access and Transport Group into Minneapolis, Minnesota. The estimated restructuring charges were $9 million. The estimate was composed of $4.8 million for employee termination costs, $1.5 million for facilities closing costs, and $2.7 million for asset disposals and other directly associated costs. As of October 31, 1999, there have been no costs incurred as part of this restructuring because the plan was still in its initial stages. Completion of the consolidation is expected by the end of the third quarter of 2000.

(10) Derivative Instruments and Hedging Activities

    Accounting for Derivatives and Hedging Activities:  ADC adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," on November 1, 1998. In doing so, ADC did not incur any transition adjustments to earnings.

    All derivatives are recognized on the balance sheet at their fair value. On the date the derivative contract is entered into, ADC designates the derivative as (1) a fair value hedge, (2) a cash flow hedge, (3) a foreign-currency hedge, (4) a net investment in a foreign operation or (5) a trading instrument. ADC engages primarily in derivatives classified as trading instruments, and changes in the fair value of the derivatives are reported in current-period earnings. ADC also hedges some selected foreign-currency denominated forecasted transactions (cash flow hedges), in which changes in the fair value of highly effective derivatives are recorded in accumulated other comprehensive income (loss).

    ADC formally documents all relations between hedging instruments and the hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. ADC formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items.

    Cash Flow Hedges:  ADC uses foreign-currency forward-exchange contracts with durations of less than twelve months to hedge against the effect of exchange-rate fluctuations on forecasted intercompany transactions. Such contracts had a total notional amount of $8.5 million at October 31, 1999. For the year ended October 31,1999, ADC recognized a gain of $352,415 reported in other income (expense) in the statements of income for the hedges that have settled.

    As of October 31,1999, $580,997 of deferred net gains on derivative instruments included in accumulated other comprehensive income are expected to be reclassified to earnings during the next twelve months.

    Trading Derivatives:  ADC purchases foreign-currency forward exchange contracts with contract terms normally lasting less than six months to protect against the adverse effect that exchange-rate fluctuations may have on foreign-currency-denominated assets, principally Canadian Dollars, Mexican Pesos and the Euro. These derivatives do not qualify for hedge accounting, in accordance with SFAS No.133, because they relate to existing assets denominated in a foreign currency. The gains and losses on both the derivatives and the foreign-currency-denominated assets are recorded as transaction adjustments in current earnings. At October 31, 1999, there were no open trading derivatives.

(11) Commitments and Contingencies

    Operating Leases:  A portion of ADC's operations are conducted using leased equipment and facilities. These leases are non-cancelable and renewable, with expiration dates ranging through the year 2014. The rental expense included in the accompanying consolidated statements of income was $24.2 million, $24.9 million and $17.7 million for 1999, 1998 and 1997, respectively.

    ADC has entered into a five-year operating lease agreement for new domestic administrative facilities. The total cost of the facilities covered by the agreement is expected to be approximately $100 million. Construction of the facilities began late in fiscal 1999 and is expected to be completed in 2001. The lease provides for a substantial residual value guarantee (less than 90% of the total cost), which is due upon termination of the lease and includes purchase and renewal options. ADC may exercise its purchase option or the facilities may be sold to a third party. Upon termination of the lease, ADC expects the fair market value of the leased facilities to substantially reduce or eliminate the payment under the residual value guarantees. The table of future minimum operating lease payments below excludes any payments related to these guarantees.

    The following is a schedule of future minimum rental payments required under non-cancelable operating leases as of October 31, 1999:

	(In thousands)
2000	$	29,308
2001		25,683
2002		22,199
2003		17,557
2004 and thereafter		37,156
Total	$	131,903

    Contingencies:  ADC has been named as a defendant in lawsuits in the normal course of business. Management believes that the ultimate resolution of these matters will not have a material adverse effect on ADC's financial condition or results of operations.

    Change of Control:  The board of directors has approved the extension of certain employee benefits, including salary continuation to key employees, in the event of a change of control of ADC. The board has retained the flexibility to cancel such provisions under certain circumstances.

(12) Segment Information

    ADC has three reportable segments: Broadband Connectivity, Broadband Access and Transport, and Integrated Solutions. Broadband Connectivity products include broadband connection and access devices for copper, coaxial, fiber-optic, wireless and broadcast communications networks. The segment also includes fiber-optic and wireless components. Broadband Access and Transport products include access and transport systems that deliver broadband, multiservice communications to residences and businesses over copper, coaxial, fiber-optic and wireless networks. Integrated Solutions products and services consist of systems integration services, operation support systems (OSS) software and enhanced services/intelligent network software that positions service providers to deliver broadband, multiservice communications over wireline and wireless networks.

    The "management approach" called for by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," has been used to present the segment information which follows. That approach is based upon the way management organizes segments within an enterprise for making operating decisions and assessing performance. Accounting policies used by the segments are the same as those described in Note 1.

    Intersegment sales were not significant. The following costs are not allocated to segment results:

• Non-recurring charges;

• Goodwill amortization resulting from acquisitions;

• Interest income or expense; and

• Other non-operating income and expense, resulting primarily from disposition of fixed assets and foreign exchange gains and losses.

    Corporate assets consist primarily of cash, which is managed centrally, and goodwill. Capital expenditures do not include amounts arising from the purchase of businesses.

    International sales to external customers are on a "shipped-to" basis. No single country has property and equipment which is material enough to warrant disclosure. No single customer accounts for more than ten percent of ADC's consolidated sales.

	Segment Information (In thousands)
	Broadband Connectivity		Broadband Access & Transport			Integrated Solutions		Unallocated Corporate Items			Consolidated
1999
External sales	$	912,445	$	631,936		$	382,566	$	—		$	1,926,947
Depreciation and amortization		26,418		26,746			10,353		38,573			102,090
Non-recurring charges		—		—			—		148,977			148,977
Operating income		336,388		(20,888	)		24,691		(177,519	)		162,672
Capital expenditures		50,484		18,491			19,069		17,359			105,403
Assets		397,430		418,887			280,774		575,438			1,672,529
1998
External sales	$	649,734	$	544,644		$	353,005	$	—		$	1,547,383
Depreciation and amortization		24,797		20,375			4,668		20,436			70,276
Non-recurring charges		—		—			—		9,168			9,168
Operating income		192,585		13,075			51,381		1,954			258,995
Capital expenditures		44,906		30,508			9,992		15,733			101,139
Assets		303,489		298,749			194,828		665,166			1,462,232
1997
External sales	$	542,346	$	503,752		$	225,397	$	—		$	1,271,495
Depreciation and amortization		16,292		17,832			1,965		15,241			51,330
Non-recurring charges		—		—			—		22,700			22,700
Operating income		169,227		11,491			45,754		(30,801	)		195,671
Capital expenditures		61,819		26,666			12,802		25,144			126,431
Assets		259,630		249,703			112,502		419,843			1,041,678

Geographic Information (In thousands)
	1999		1998		1997
Sales:
Outside the United States	$	443,031	$	334,994	$	271,014
Inside the United States		1,483,916		1,212,389		1,000,481
Total	$	1,926,947	$	1,547,383	$	1,271,495
Property and Equipment, Net:
Outside the United States	$	60,745	$	54,317	$	41,116
Inside the United States		251,321		214,921		185,182
Total	$	312,066	$	269,238	$	226,298

(13) Quarterly Financial Data

(Unaudited in thousands, except earnings per share)	FIRST QUARTER			SECOND QUARTER		THIRD QUARTER			FOURTH QUARTER			TOTAL
	1999
Net Sales	$	404,294		$	456,591	$	483,597		$	582,465		$	1,926,947
Gross Profit		191,983			216,126		229,354			279,501			916,964
Income (Loss) Before Income Taxes		(4,252	)		68,537		20,741			75,357			160,383
Provision for Income Taxes		5,433			23,244		9,857			34,214			72,748
Net Income (Loss)	$	(9,685	)(1)	$	45,293	$	10,884	(2)	$	41,143	(3)	$	87,635	(4)
Average Common Shares Outstanding—Basic		149,106			149,145		149,658			150,483			149,501
Earnings (Loss) Per Share—Basic	$	(0.06	)	$	0.30	$	0.08		$	0.27		$	0.59
Average Common Shares Outstanding—Diluted		149,452			153,349		153,794			153,706			153,069
Earnings (Loss) Per Share—Diluted	$	(0.06	)(1)	$	0.29	$	0.07	(2)	$	0.27	(3)	$	0.57	(4)

	1998
Net Sales	$	324,418	$	377,546		$	405,074	$	440,345	$	1,547,383
Gross Profit		157,244		183,546			195,557		211,642		747,989
Income Before Income Taxes		51,112		54,607			73,081		83,727		262,527
Provision for Income Taxes		16,507		20,232			24,307		27,702		88,748
Net Income	$	34,605	$	34,375	(5)	$	48,774	$	56,025	$	173,779	(5)
Average Common Shares Outstanding—Basic		147,259		148,077			148,372		148,684		148,100
Earnings Per Share—Basic	$	0.23	$	0.23		$	0.33	$	0.38	$	1.17
Average Common Shares Outstanding—Diluted		151,537		151,057			151,243		150,895		150,822
Earnings Per Share—Diluted	$	0.23	$	0.23	(5)	$	0.32	$	0.37	$	1.15	(5)

(1)

First quarter 1999 includes $47 million net-of-tax charges ($0.31 per diluted share) for non-recurring purchased in-process research and development expenses associated with acquisitions of Teledata Communications, Hadax Electronics, and Phasor Electronics and the restructuring of the former Wireless Systems Group.

(2)

Third quarter 1999 includes $41 million net-of-tax non-recurring charges ($0.27 per diluted share) for purchased in-process research and development expenses associated with acquisitions of Spectracom and Pathway.

(3)

Fourth quarter 1999 includes $30 million net-of-tax non-recurring charges ($0.19 per diluted share) related to the acquisition of Saville Systems and the restructuring plan to consolidate operations of the Broadband Access and Transport Group.

(4)

Full-year 1999 includes $118 million net-of-tax charges ($0.77 per diluted share) as explained for the first, third and fourth quarters of 1999.

(5)

Second quarter 1998 includes $8 million net-of-tax non-recurring charges ($0.06 per diluted share) related to purchased in-process research and development expenses associated with the acquisitions of BHA Pty Ltd. and interconnect billing software technology.

Exhibit 13-a

PORTIONS OF 1999 ANNUAL REPORT TO SHAREOWNERS

Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

    ADC Telecommunications, Inc. ("ADC") offers a broad range of network equipment, software and integration services for broadband, multiservice networks that deliver Internet/data, video and voice communications over telephone, cable television, Internet, broadcast, wireless and enterprise networks. ADC's broadband, multiservice network solutions enable local access, high-speed transmission and software management of communications services from service providers to consumers and businesses over fiber-optic, copper, coaxial and wireless media.

    Telephone companies, cable television operators, Internet/data service providers, wireless service providers and other communications service providers are building the broadband infrastructure required to offer high-speed Internet access and data, video, telephony and other interactive multimedia services to residential and business customers. Broader network bandwidths are continually required for these services, and ADC's product offerings and development efforts are focused on increasing the speed and efficiency of communications networks from the service providers' offices through the network equipment that connects to end users' residences and businesses.

    ADC offers network equipment, software and integration services within the following three product groups: Broadband Connectivity, Broadband Access and Transport, and Integrated Solutions.

    BROADBAND CONNECTIVITY  products include broadband connection and access devices for copper, coaxial, fiber-optic, wireless and broadcast communications networks. The group also supplies fiber-optic and wireless components. These products are used globally in telephone, cable television, Internet, wireless, enterprise and broadcast communications networks. Broadband Connectivity products provide the physical contact points for connecting different communications system components and gaining access to communications system circuits for the purpose of installing, testing, monitoring, accessing, managing, reconfiguring, splitting and multiplexing such circuits within the central office and the "last mile/kilometer" portion of communications networks. Fiber-optic components include connectors, isolators, circulators, collimators, couplers, splitters, dense wavelength division multiplexing (DWDM) devices and pump lasers. Wireless components include coverage enhancement products, tower top amplifiers and RF filters. Broadband Connectivity products are sold to local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers, broadcasters, enterprises, governments, system integrators and communications equipment manufacturers and distributors.

    BROADBAND ACCESS AND TRANSPORT  products include access and transport systems that deliver broadband, multiservice communications to residences and businesses over copper, coaxial, fiber-optic and wireless networks. These products are used globally to deliver Internet/data, video and voice services to residential and business customers. Generally, these products are aimed at upgrading service providers' networks to broadband capabilities, while also introducing new service delivery functionality and cost effectiveness into the networks. Broadband Access and Transport products are sold to local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers, broadcasters, enterprises, governments and communications equipment distributors.

    The group's transport systems operate between central offices and in the "last mile/kilometer" portion of communications networks and include Soneplex®, Cellworx®, CellSpan™, Homeworx™, Optiworx™, DV6000™ and BroadAccess™ systems. The Soneplex system delivers T1-based services over copper or fiber facilities. As the industry's first global ATM Virtual Path transport element, the Cellworx system offers bandwidth-efficient, multiservice delivery of Internet/data, video and voice services, allocates only the bandwidth needed per service type and extends communications services over fiber-optic and copper (using xDSL technologies) facilities to businesses and residences. The CellSpan broadband wireless system delivers high-speed Internet/data, video and voice services. The Homeworx system enables cable television operators to transport high-speed digital signals for two-way Internet/data, video and voice services. ADC also provides the Optiworx family of fiber-optic transmitter and node products, along with coaxial amplifiers that cable television operators use to upgrade their networks to broader bandwidths for digital Internet/data, video, and voice services. The DV6000 system transmits a variety of signal types using a high-speed, uncompressed digital format over fiber facilities, and is used in the long haul portions of cable television, broadcast and interactive video networks, including distance learning, government and campus networks. The BroadAccess digital loop carrier system is used to deliver Internet/data and voice services.

    The group's access systems include both customer located devices (which are part of the service provider's network) and customer premise devices (which are owned by the service provider's business customer) that can work alone or in conjunction with one of ADC's transport systems or with other vendors' transport systems. These devices include data service units (DSUs), channel service units (CSUs), T1/E1 multiplexers, T3/E3 multiplexers, integrated access devices (offering a wide variety of Internet/data, video and voice interfaces), MPEG video products and ATM access concentrators.

    INTEGRATED SOLUTIONS  products and services consist of systems integration services, operations support systems (OSS) software and enhanced services/intelligent network software that positions service providers to deliver broadband, multiservice communications over wireline and wireless networks. Systems integration services are used to design, equip and build communications networks and OSS applications that deliver Internet/data, video and voice services to residences and businesses. OSS software includes the Saville Systems® line of communications billing and customer care software and the Metrica® line of network performance and service level assurance software. Enhanced services/ intelligent network software includes the NewNet® line of Signaling System 7 (SS7), intelligent network, wireless messaging and provisioning, Communications Assistance to Law Enforcement Act (CALEA) and Internet applications software. Integrated Solutions products and services are sold to local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers and communications equipment manufacturers.

    Historically, ADC's principal product offerings generally consisted of copper-based and fiber-optic-based products designed to address the needs of its customers for transmission and connectivity on traditional communications networks. With the growth of multimedia applications and the related development of enhanced Internet/data, video and voice services, ADC's more recent product offerings and research and development efforts have increasingly focused on emerging technologies and network equipment, software and integration service offerings for broadband communications applications. The market for broadband communications network equipment, software and integration services is evolving and rapidly changing. ADC's growth is dependent in part on its ability to successfully develop and commercially introduce new products in each of its product groups and is also dependent on the growth of the market. The growth in the market for such broadband communications products and services is dependent on a number of factors, including the amount of capital expenditures by communications service providers, regulatory and legal developments, changes to capital expenditure rates by communications service providers (which could result from the ongoing consolidation of customers in the market as well as the addition of new customer entrants to the market) and end-user demands for integrated Internet/data, video, voice and other communications services. There can be no assurance that ADC's new or enhanced products and services will meet with market acceptance or be profitable.

    ADC's operating results may fluctuate significantly from quarter to quarter due to several factors. ADC is growing through acquisition and expansion, and results of operations described in this report may not be indicative of results to be achieved in future periods. ADC's expense levels are based in part on management's expectations of future revenues. Although management has and will continue to take measures to adjust expense levels, if revenue levels in a particular period fluctuate, operating results may be adversely affected. In addition, ADC's results of operations are subject to seasonal factors. ADC historically has experienced a stronger demand for its products in the fourth fiscal quarter, primarily as a result of customer budget cycles and ADC's fiscal year-end incentives, and has experienced a weaker demand for its products in the first fiscal quarter, primarily as a result of the number of holidays in late November, December and early January and a general industry slowdown during that period. There can be no assurance that these historical seasonal trends will continue in the future.

    As used in this report, the years 1997, 1998 and 1999 refer to ADC's fiscal years ended October 31, 1997, 1998 and 1999, respectively, and 2000 refers to ADC's fiscal year ending October 31, 2000.

RESULTS OF OPERATIONS

    On October 8, 1999, ADC completed the acquisition of Saville Systems PLC. The acquisition was accounted for using the pooling-of-interests method of accounting. Accordingly, all years have been restated to include the operations and balances of Saville Systems as part of ADC and the Integrated Solutions Group.

    The percentage relationships to net sales of certain income and expense items for 1999, 1998 and 1997, and the percentage changes in these income and expense items between years, are contained in the following table:

							Percentage Increase (Decrease) Between Periods
	Percentage of Net Sales
							1999 vs. 1998		1998 vs. 1997
	1999		1998		1997
Net Sales	100.0	%	100.0	%	100.0	%	24.5	%	21.7	%
Cost of Product Sold	(52.4	)	(51.7	)	(52.1	)	26.3		20.8
Gross Profit	47.6		48.3		47.9		22.6		22.7
Expenses:
Research and development	(10.0	)	(10.3	)	(10.4	)	21.1		20.0
Selling and administration	(20.3	)	(19.9	)	(19.5	)	26.7		24.0
Goodwill amortization	(1.2	)	(0.8	)	(0.8	)	77.4		25.3
Non-recurring charges	(7.7	)	(0.6	)	(1.8	)	1,525.0		(59.6	)
Operating Income	8.4		16.7		15.4		(37.2	)	32.4
Other Income (Expense), Net:
Interest	0.2		0.6		0.7		(43.3	)	(10.9	)
Other	(0.3	)	(0.3	)	(0.2	)	(44.3	)	(55.7	)
Income Before Income Taxes	8.3		17.0		15.9		(38.9	)	30.0
Provision for Income Taxes	(3.8	)	(5.8	)	(5.5	)	(18.0	)	28.2
Net Income	4.5	%	11.2	%	10.4	%	(49.6	)%	30.9	%

    Net Sales:  Net sales were $1.93 billion, $1.55 billion and $1.27 billion for 1999, 1998 and 1997, respectively, reflecting 24.5%, 21.7% and 44.2% increases, respectively, over the prior years. International sales comprised 23.0%, 21.6% and 21.3% of ADC's sales for 1999, 1998 and 1997, respectively.

    The following table sets forth ADC's net sales for 1999, 1998 and 1997 for each of ADC's functional product groups described above (dollars in millions):

	1999				1998				1997
Product Group	Net Sales		%		Net Sales		%		Net Sales		%
Broadband Connectivity	$	912.4	47.3	%	$	649.8	42.0	%	$	542.3	42.7	%
Broadband Access and Transport		631.9	32.8			544.6	35.2			503.8	39.6
Integrated Solutions		382.6	19.9			353.0	22.8			225.4	17.7
Total	$	1,926.9	100.0	%	$	1,547.4	100.0	%	$	1,271.5	100.0	%

    During 1999, 1998 and 1997, net sales of Broadband Connectivity products increased by 40.4%, 19.8% and 36.8%, respectively. This growth reflects continued strong global demand for ADC's copper- and fiber-connectivity systems. In addition, sales of fiber-optic components more than doubled in 1999 compared to 1998. Broadband Connectivity's sales have grown in recent years and now represent approximately half of ADC's net sales. ADC expects that future sales of Broadband Connectivity products will continue to account for a substantial portion of its net sales, although these products may decline as a percentage of total revenues due to the ongoing evolution of technologies in the marketplace.

    During 1999, 1998 and 1997, net sales of Broadband Access and Transport products increased by 16.0%, 8.1% and 30.2%, respectively. This growth is primarily the result of business acquisitions, higher sales of telephone transport systems and ATM access products, and the emerging sales of Homeworx cable telephony systems, but is partially offset by lower sales of other access products.

    During 1999, 1998 and 1997, net sales of Integrated Solutions products increased 8.4%, 56.6% and 127.9%, respectively. The increase was generated primarily by growth in systems integration services and software sales, but was partially offset in 1999 by lower sales of Saville Systems software products and the discontinuance of low-margin consulting services. Sales of systems integration services in 1998 were also favorable as a result of a business acquisition.

    Gross Profit:  During 1999, 1998 and 1997, gross profit percentages were 47.6%, 48.3% and 47.9%, respectively. The decrease in 1999 was primarily the result of a lower gross profit percentage at Saville Systems due to lower sales of older generation software products during the introduction of next-generation software products. ADC anticipates that its future gross profit percentage will continue to be affected by many factors, including product mix, the timing of new product introductions and manufacturing volume.

    Operating Expenses:  Total operating expenses for 1999, 1998 and 1997 were $754.3 million, $489.0 million and $413.8 million, respectively, representing 39.2%, 31.6% and 32.5% of net sales, respectively. Non-recurring charges of $149.0 million, $9.2 million and $22.7 million are included in the results for 1999, 1998 and 1997, respectively. Excluding non-recurring charges, operating expenses would have represented 31.4%, 31.0% and 30.8% of net sales, respectively. The non-recurring charge in 1999 related to the write-off of purchased in-process research and development costs resulting from the acquisitions of Teledata Communications, Hadax Electronics, Phasor Electronics, Spectracom and Pathway, together with costs for the strategic restructuring of the former Wireless Systems Group, consolidation of Broadband Access and Transport manufacturing, and costs directly related to the acquisition of Saville Systems. The increase in operating expenses was primarily driven by costs associated with acquired companies, as well as expanded operations necessary to support higher business volumes.

    Research and development expenses were $192.9 million, $159.3 million and $132.8 million for 1999, 1998 and 1997, respectively, representing 10.0%, 10.3% and 10.4% of net sales, respectively. The dollar increases are primarily due to new product initiatives and business acquisitions. ADC believes that, given the competitive environment and rapidly changing technology in the communications equipment industry, continued commitment to product development efforts will be required for ADC to remain competitive. Accordingly, ADC intends to continue to allocate substantial resources to product development for each of its product groups. However, ADC recognizes the need to balance the cost of product development with expense controls, and remains committed to carefully managing the rate of increase of such expenses.

    Selling and administration expenses were $390.2 million, $308.0 million and $248.3 million for 1999, 1998 and 1997, respectively, representing 20.3%, 19.9% and 19.5% of net sales, respectively. These increases primarily reflect the activities of acquired companies, incentives associated with selling activities and additional personnel related to expanded operations.

    Several of ADC's acquisitions have been accounted for as purchase transactions in which the initial purchase price exceeded the fair value of the acquired assets. As a result of ADC's acquisition activity, goodwill amortization increased to $22.2 million in 1999, compared to $12.5 million and $10.0 million for 1998 and 1997, respectively.

    ADC identifies projects that do not have technological feasibility or other uses at the time of acquisition and records expense at the time of acquisition for these in-process research and development projects. Acquired in-process research and development expenses aggregating $88.6 million in 1999 were associated with the purchase acquisitions described in Note 5 to the Consolidated Financial Statements. Appraisals for each acquired in-process technology were determined using the income approach, discounted based on the estimated likelihood that the project will ultimately succeed. The most significant components of acquired in-process research and development were $47.5 million associated with optical components, which are used in fiber amplifiers, under development at Spectracom, and $23.6 million associated with products which enhance speed and capacity of digital loop networks, under development at Teledata Communications. Upon acquisition, the acquired Spectracom optical components were estimated to be 69% complete, and the acquired Teledata Communications products under development were estimated to be 65% complete. ADC estimates that the Spectracom and Teledata Communications projects will require an additional $40 million and $15 million, respectively, of research and development expenses to complete these technologies.

    Other Income (Expense), Net:  For 1999, 1998 and 1997, interest income was $12.4 million, $9.3 million and $9.9 million, respectively. For 1999, 1998 and 1997, interest expense was $7.6 million, $0.8 million and $0.5 million, respectively. The year-over-year changes reflect the use of debt to finance acquisitions.

    The remaining other income (expense) represents the gain or loss on foreign exchange transactions, the sale of fixed assets and activity associated with investments.

    Income Taxes:  The effective income tax rate for 1999, 1998 and 1997 was significantly affected by non-tax deductible acquisition costs and purchased in-process research and development charges. These expenses are associated with the acquisitions made during the current year. In addition, the marginal tax rate of 37% was applied to restructuring expenses. Excluding the impact of the benefits associated with non-recurring charges, the effective income tax rate was 34%, 33% and 34% for 1999, 1998 and 1997, respectively.

    Net Income:  Net income was $87.6 million (or $0.57 per diluted share) for 1999, compared to $173.8 million (or $1.15 per diluted share) for 1998, and $132.8 million (or $0.90 per diluted share) for 1997. Excluding $117.9 million, $8.3 million and $14.5 million net-of-tax, non-recurring charges in 1999, 1998 and 1997, respectively, net income would have been $205.5 million, $182.1 million and $147.3 million, respectively, and diluted earnings per common share would have been $1.34, $1.21 and $1.00, respectively. Non-recurring charges are discussed in Note 9 to the Consolidated Financial Statements.

Segment Disclosure

Broadband Connectivity Segment

    Broadband Connectivity products include broadband connection and access devices for copper, coaxial, fiber-optic, wireless and broadcast communications networks. The group also supplies fiber-optic and wireless components. These products are used globally in telephone, cable television, Internet, wireless, enterprise and broadcast communications networks.

For the Years Ended October 31,	1999		1998		1997
	(Dollars in Thousands)
External Sales	$	912,445	$	649,734	$	542,346
Depreciation and Amortization		26,418		24,797		16,292
Operating Income		336,388		192,585		169,227
Capital Expenditures		50,484		44,906		61,819

At October 31,	1999		1998		1997
Assets	$	397,430	$	303,489	$	259,630

    Broadband Connectivity sales increased $262.7 million, or 40.4%, in 1999 compared to 1998 due primarily to increased demand for copper- and fiber-connectivity systems. In addition, sales of fiber-optic components more than doubled in 1999 compared to 1998. In 1998, sales increased $107.4 million, or 19.8%. Strong worldwide growth in Broadband Connectivity systems continues as a result of growth in Internet/data traffic and digital services, which are creating demand for broader bandwidth connections, and the growth of new service providers, which are creating demand for connectivity to new and existing communications networks.

    During 1999, operating income for the Broadband Connectivity segment increased $143.8 million, or 74.7%. Expenses were controlled despite the growth in business volume. Efficiencies have been gained through improvements made in cost structures.

    For 1999 and 1998, depreciation increased $1.6 million and $8.5 million, respectively. The increases are due to the construction of manufacturing facilities in Shakopee, Minnesota and Juarez, Mexico.

    Capital expenditures increased $5.6 million, or 12.4%, and decreased $16.9 million, or 27%, in 1999 and 1998, respectively. Capital spending increased in 1999 primarily due to the expansion of manufacturing facilities as a result of increases in product demand. The decrease in capital spending activity in 1998 was caused primarily by the completion of the Shakopee, Minnesota and Juarez, Mexico manufacturing facilities in 1998. The majority of the spending for these facilities occurred in 1997. Subsequent expansions to these facilities were in process or completed during 1999.

Broadband Access and Transport Segment

    Broadband Access and Transport offerings enable service providers to deliver broadband, multiservice communications to residences and businesses over copper, coaxial, fiber-optic and wireless networks. These products are used globally to deliver Internet/data, video and voice services to residential and business customers.

For the Years Ended October 31	1999			1998		1997
	(Dollars in Thousands)
External Sales	$	631,936		$	544,644	$	503,752
Depreciation and Amortization		26,746			20,375		17,832
Operating Income (Loss)		(20,888	)		13,075		11,491
Capital Expenditures		18,491			30,508		26,666

At October 31	1999		1998		1997
Assets	$	418,887	$	298,749	$	249,703

    Broadband Access and Transport sales increased $87.3 million, or 16.0%, in 1999 compared to 1998 due primarily to business acquisitions (mainly Teledata Communications) and higher sales of telephone transport systems and ATM access products. This growth was partially offset by lower demand for other access products. In 1998, sales increased $40.9 million, or 8.1%. For 1998, sales growth was due to higher sales of telephone transport systems and the rollout of Homeworx cable telephony systems in the United States, but was partially offset by lower sales of access products. Broadband Access and Transport products are aimed at upgrading service providers' networks to broadband capabilities, while also introducing new service delivery functionality and cost effectiveness into these networks.

    In 1999, the Broadband Access and Transport segment reported an operating loss of $20.9 million, after reporting operating income of $13.1 million in 1998. The segment experienced declining profitability due to increased research and development and selling/marketing expenses for the development and marketing of new products, combined with slower than expected shipments of new products during 1999.

    Depreciation and amortization increased $6.4 million, or 31.3%, compared to 1998, due primarily to the acquisition of Teledata Communications. For 1998, depreciation and amortization increased $2.5 million, or 14.2%.

    This segment's capital additions for 1999 were $18.5 million, a decrease of $12.0 million, or 39.4%, compared to 1998. Expenditures for software upgrades decreased in 1999 because the majority of software upgrades occurred in 1998 and 1997. Attention was focused on streamlining the cost of operations in 1999 and, as a result, less capital was spent on expansions. During the fourth quarter of 1999, ADC announced a consolidation of the segment's manufacturing operations to improve cost efficiency. Asset increases during 1999 are mainly attributable to the acquisition of Teledata Communications.

Integrated Solutions Segment

    Integrated Solutions products and services consist of systems integration services, OSS software and enhanced services/intelligent network software that positions service providers to deliver broadband, multiservice communications over wireline and wireless networks. Systems integration services are used to design, equip and build communications networks and OSS applications that deliver Internet/data, video and voice services to residences and businesses. This segment also includes the results of Saville Systems, which was acquired in October 1999 and accounted for using the pooling-of-interests method, resulting in the restatement of financial results for all years.

For the Years Ended October 31	1999		1998		1997
	(Dollars in Thousands)
External Sales	$	382,566	$	353,005	$	225,397
Depreciation and Amortization		10,353		4,668		1,965
Operating Income		24,691		51,381		45,754
Capital Expenditures		19,069		9,992		12,802

At October 31	1999		1998		1997
Assets	$	280,774	$	194,828	$	112,502

    Integrated Solutions sales increased $29.6 million, or 8.4%, in 1999 compared to 1998 due primarily to increases in sales generated by systems integration services, but this increase was partially offset by lower sales of Saville Systems software products and the discontinuance of low-margin consulting services. The 56.6% increase in 1998 sales was attributable to an approximately 56% increase in sales for both systems integration services and software products. Sales of systems integration services in 1998 were also favorable as a result of the acquisition of W.E. Tech, Inc. The growth in systems integration services is a result of a broad range of service providers building and upgrading networks that offer integrated Internet/data, video and voice services. Service providers select ADC's systems integration services for consulting, engineering, installation, software and system support, and activation of broadband, multiservice communications networks for growth, flexibility and rapid deployment. Service providers also are purchasing OSS software and enhanced services/intelligent network software to generate, deliver and manage multiple communications services delivered to residential and business customers.

    During 1999, operating income for the Integrated Solutions segment decreased $26.7 million, or 51.9%. The decrease was primarily due to Saville Systems generating lower sales of older generation software products during the introduction of next-generation software products.

    Depreciation and amortization increased $5.7 million from 1998 to $10.4 million in 1999. Implementation of new software systems in 1998 and 1999 contributed to this overall increase.

    During 1999, capital expenditures increased by $9.1 million, or 90.8%. The increase is due to expansion of operations and implementation of software systems.

LIQUIDITY AND CAPITAL RESOURCES

    Cash and cash equivalents, primarily short-term investments in commercial paper with maturities of less than 90 days, decreased $184.5 million, increased $162.5 million and decreased $52.0 million during 1999, 1998 and 1997, respectively. The major cause of the 1999 decrease was related to acquisitions. To prepare for the acquisition of Teledata Communications, ADC borrowed $200.0 million late in 1998, resulting in a $328.0 million temporary cash balance at year-end. During 1999, $343.3 million of cash generated from operations allowed ADC to reduce its note payable from $200.0 million to $3.9 million. Compared to 1998, ADC generated substantially greater cash from operations in 1999 as a result of improved sales, as discussed in "Results of Operations" above, and improved management of working capital.

    During 1998, ADC purchased an investment in Efficient Networks, Inc. The initial investment was $5.0 million, representing a 5.3% ownership position. During the third quarter of fiscal 1999, Efficient Networks completed an initial public offering of its common stock, which caused a valuation adjustment in ADC's investment. At October 31, 1999, ADC carried the investment at a market value of $93.1 million.

    Subsequent to year end, Siara Systems, in which ADC has a 7.75% ownership interest, agreed to be acquired by Redback Networks, Inc. in a stock for stock transaction valued at approximately $4.3 billion. ADC's initial investment in Siara Systems was $3.5 million. Upon consummation of the acquisition of Siara Systems by Redback Networks, ADC's investment will be reflected on the balance sheet at the market value of its shares.

    At October 31, 1999, ADC had a $340 million five-year revolving credit facility, which is available for general corporate purposes. Under this five-year revolving credit facility, borrowings carry an initial interest rate equal to the commercial paper rate plus 25 basis points.

    ADC believes that its current cash and investments, cash generated from operating activities, and available credit facilities will be adequate to fund its working capital requirements and planned capital expenditures for 2000. However, ADC may find it necessary to seek additional sources of financing to support its capital needs, for additional working capital, potential investments or acquisitions or otherwise.

YEAR 2000 MATTERS

    Many currently installed computer systems and software are coded to accept only two-digit entries in the date code fields. These date code fields will need to accept four-digit entries to distinguish 21st century dates from 20th century dates. This problem could result in system failures or miscalculations causing disruptions of business operations (including, among other things, a temporary inability to process transactions, send invoices or engage in other similar business activities). As a result, many companies' computer systems and software will need to be upgraded or replaced in order to comply with Year 2000 requirements. The potential global impact of the Year 2000 problem is not known, and, if not corrected in a timely manner, could affect ADC and the United States and world economy generally.

    ADC's project team (consisting of representatives from its information technology, finance, business development, manufacturing, product development, sales, marketing and legal departments) has addressed both internal and external Year 2000 issues. ADC's internal financial, manufacturing and other computer systems have been reviewed to assess and minimize Year 2000 issues. ADC's assessment of internal systems included its information technology ("IT") as well as non-IT systems (systems which may contain embedded technology in manufacturing or process control equipment containing microprocessors or other similar circuitry). ADC's Year 2000 readiness program included the following three phases: identifying systems that needed to be modified or replaced, carrying out the modifications to existing systems or conversion to new systems, and conducting validation testing of various systems and applications to determine their readiness. ADC has completed all three phases of this program for both corporate-level IT and non-IT systems.

    ADC's product development processes contain steps to include Year 2000 readiness verification for all current and future products. Most of ADC's existing products are currently Year 2000 ready, and all of its active products are either Year 2000 ready or have an upgrade path identified on the ADC Year 2000 Internet web page. Several obsolete or ADC discontinued products will not be upgraded and are so listed on ADC's web page.

    The amount of work required to address Year 2000 issues was not extensive. ADC has replaced certain of its financial and operational systems in the last several years, and the new equipment and software has substantially addressed Year 2000 issues. Existing hardware and software was assessed, and any required modifications have been made.

    ADC retained a consulting firm to assess ADC's corporate-level IT system readiness for Year 2000. The firm concluded that more than 75% of these hardware and software systems were Year 2000 ready. ADC has addressed the remaining 25% and the other hardware and software used by ADC and its business units for Year 2000 readiness. ADC completed its Year 2000 readiness program for all of its significant internal systems by October 31, 1999.

    In addition, ADC has requested assurances from its major suppliers that they are addressing Year 2000 issues and that products and services purchased by ADC from such suppliers will function properly in the Year 2000. Also, ADC has requested similar assurances from its major customers that they have adequately addressed Year 2000 issues. These actions have been completed and are intended to help mitigate the possible external impact of Year 2000 issues. However, it is impossible to fully assess the potential consequences in the event that service interruptions from suppliers occur or in the event that there are disruptions in such infrastructure areas as utilities, communications, transportation, banking and government.

    The total estimated cost for resolving ADC's Year 2000 issues was approximately $4.6 million, of which approximately $4.1 million has been spent through October 31, 1999. The total cost estimate includes the cost of replacing systems in cases where ADC had accelerated plans to replace such systems that were not Year 2000 ready.

    Based upon assessments to date, ADC completed all major activities for Year 2000 readiness by October 31, 1999 and believes it will not experience any material disruption as a result of Year 2000 issues in internal manufacturing processes, information processing, interfacing with major customers, or with processing orders and billing. However, if certain critical third-party providers, such as those providers supplying electricity, water, or telephone service, experience difficulties resulting in disruption of service to ADC, a shutdown of certain of ADC's operations at individual facilities could occur for the duration of the disruption.

    The most reasonably likely worst-case scenario of failure by ADC or its suppliers or customers to resolve Year 2000 issues could potentially be a temporary slowdown or cessation of manufacturing operations at one or more of ADC's facilities, and/or a temporary inability on the part of ADC to timely process orders and to deliver finished products to customers. Delays in meeting customers' orders could potentially affect the timing of billings to and payments received from customers and could result in complaints, charges or claims. Customers' Year 2000 issues could delay the timing of customers' payments to ADC, or result in a change in spending patterns by customers which could affect orders and shipments of ADC's products.

    ADC has a number of contingency plans (in the event of a Year 2000 disruption) for its headquarters and major business unit sites, ranging from primary business systems, to manufacturing processes and facilities, to customer support procedures. Areas addressed in the plans include: establishing an early warning system to gather information from ADC sites around the world, arranging additional customer and technical support staff to maintain customer service levels with 24 hour × 7 day a week coverage during the Year 2000 transition period, and developing contingency planning coordination with key suppliers and customers. Year 2000 readiness and business continuity plans will continue to be reviewed by ADC's Year 2000 program team. Assuming no major disruption in service from utility companies or other critical third-party providers, ADC believes that it will be able to manage its Year 2000 transition without any material adverse effect on its business, results of operations or financial condition.

EURO CONVERSION

    On January 1, 1999, several member countries of the European Union established fixed conversion rates and adopted the Euro as their new common legal currency. Beginning on such date, the Euro began trading on currency exchanges while the legacy currencies remain legal tender in the participating countries for a transition period between January 1, 1999 and January 1, 2002. During the transition period, parties can elect to pay for goods and services and transact business using either the Euro or a legacy currency. Between January 1, 2002 and July 1, 2002, the participating countries will introduce Euro hard currency and withdraw all legacy currencies.

    The Euro conversion may affect cross-border competition by creating cross-border price transparency. ADC is assessing its pricing and marketing strategy in order to ensure that ADC remains competitive in a broader European market. ADC is also modifying its information technology systems to permit transactions to take place in both the legacy currencies and the Euro and provide for the eventual elimination of the legacy currencies. In addition, ADC is reviewing whether certain existing contracts will need to be modified. ADC's currency risk and risk management for operations in participating countries may be reduced as the legacy currencies are converted to the Euro. ADC will continue to evaluate issues involving introduction of the Euro. Based on current information and assessments, ADC does not expect that the Euro conversion will have a material adverse effect on its business, results of operations or financial condition.

RISK MANAGEMENT

    ADC is exposed to market risk from changes in foreign currency exchange rates, which could impact ADC's results of operations and financial condition. To a limited extent, ADC manages its exposure to these market risks through the use of short-term foreign currency forward contracts. ADC has historically hedged accounts receivable in foreign currencies, but in 1999 entered into a limited number of contracts to hedge anticipated transactions. See Note 10 to the Consolidated Financial Statements included in this report. ADC uses forward contracts as risk management tools and not for speculative purposes. While ADC manages exposure to foreign currency fluctuations relating to customer transactions, the decline in the value of currencies may adversely affect future product sales because ADC's products may become more expensive for customers to purchase in their local currency.

    ADC owns approximately 2 million shares of Efficient Networks, Inc. (EFNT) common stock. With EFNT's recent public offering in July 1999 and subsequent changes to the fair value of EFNT's stock, ADC has recorded an $87 million unrealized gain, $54.8 million net of income tax effects, in shareowners' investment as of October 31, 1999. Assuming an immediate decrease of 20% of EFNT's stock price, the hypothetical reduction in shareowners' investment related to these holdings is estimated to be $11.6 million (net of income tax effects), or 0.9% of total shareowners' investment, as of October 31, 1999.

QUARTERLY STOCK PRICE

    ADC's Common Stock, $0.20 par value, is traded on The Nasdaq Stock Market under the symbol "ADCT." The following table sets forth the high and low sales prices for each quarter during the years ended October 31, 1999 and 1998, as reported on that market.

	1999				1998
	High		Low		High		Low
First Quarter	$	41.13	$	23.25	$	43.63	$	16.75
Second Quarter		52.25		35.63		32.13		19.63
Third Quarter		53.63		39.63		37.69		26.63
Fourth Quarter		48.19		34.38		34.81		15.75

    No cash dividends have been declared or paid during the past five years. ADC currently anticipates that it will retain any future earnings for use in its business and does not anticipate paying any cash dividends in the foreseeable future. As of October 31, 1999, there were approximately 6,918 holders of record of ADC's Common Stock.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

    The foregoing Management's Discussion and Analysis of Financial Condition and Results of Operations contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent ADC's expectations or beliefs concerning future events, including the following: any statements regarding future sales, profit percentages and other results of operations, any statements regarding the continuation of historical trends, any statements regarding the sufficiency of ADC's cash balances and cash generated from operating and financing activities for ADC's future liquidity and capital resource needs, any statements regarding the effect of regulatory changes and any statements regarding the future of the communications equipment industry on ADC's business. ADC cautions that any forward-looking statements made by ADC in this report or in other announcements made by ADC are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the factors set forth on Exhibit 99-a to ADC's Form 10-K for the fiscal year ended October 31, 1999.

ELEVEN-YEAR FINANCIAL SUMMARY

Years ended October 31 (dollars in thousands, except per share data)	1999			1998		1997		1996		1995		1994		1993		1992		1991		1990		1989		10-Year Compound Growth Rate 1999-1989		5-Year Compound Growth Rate 1999-1994
Operating Results
Net Sales	$	1,926,947		1,547,383		1,271,495		881,929		616,518		468,808		375,427		321,463		297,936		263,049		196,388		25.7	%	32.7	%
International Sales	$	443,031		334,994		271,014		201,534		120,800		79,023		66,852		49,347		37,960		41,623		31,277		30.4	%	41.2	%
Gross Profit	$	916,964		747,989		609,502		420,687		302,138		238,689		191,808		163,400		146,791		127,190		88,624		26.3	%	30.9	%
Research and Development Expense	$	192,872		159,301		132,784		94,209		68,051		49,158		40,988		36,063		32,315		25,462		17,360		27.2	%	31.4	%
Selling and Administrative Expense	$	390,194		307,982		248,334		174,789		138,600		115,161		97,558		85,227		76,435		63,975		48,580		23.2	%	27.6	%
Goodwill Amortization	$	22,249		12,543		10,013		5,235		3,133		3,135		2,798		2,720		1,953		920		267		55.6	%	48.0	%
Non-Recurring Charges	$	148,977		9,168		22,700		—		3,914		—		—		3,800		—		—		—
Operating Income(1)	$	311,649		268,163		218,371		146,454		92,354		71,235		50,464		39,390		36,088		36,833		22,417		30.1	%	34.3	%
Operating Income as Reported	$	162,672		258,995		195,671		146,454		88,440		71,235		50,464		35,590		36,088		36,833		22,417		21.9	%	18.0	%
Income Taxes(1)	$	103,826		89,580		77,381		52,252		35,423		25,397		18,133		15,085		14,375		15,300		9,842		26.6	%	32.5	%
Income Taxes as Reported	$	72,748		88,748		69,209		52,252		32,915		25,397		18,133		13,708		14,375		15,300		9,842		22.1	%	23.4	%
Net Income(1)	$	205,534		182,115		147,302		99,032		62,974		44,428		31,649		23,106		21,564		22,930		16,403		28.8	%	35.8	%
Net Income as Reported	$	87,635		173,779		132,774		99,032		61,568		44,428		31,649		20,683		21,564		22,930		16,403		18.2	%	14.6	%
EPS (Diluted)(1)	$	1.34		1.21		1.00		0.69		0.48		0.36		0.28		0.21		0.20		0.21		0.16		23.7	%	30.1	%
EPS (Diluted) as Reported	$	0.57		1.15		0.90		0.69		0.47		0.36		0.28		0.19		0.20		0.21		0.16		13.6	%	9.7	%
Financial Ratios
Gross Margin		47.6	%	48.3	%	47.9	%	47.7	%	49.0	%	50.9	%	51.1	%	50.8	%	49.3	%	48.4	%	45.1	%
Operating Margin(1)		16.2	%	17.3	%	17.2	%	16.6	%	15.0	%	15.2	%	13.4	%	12.3	%	12.1	%	14.0	%	11.4	%
Pre-Tax Income Margin(1)		16.1	%	17.6	%	17.7	%	17.2	%	16.0	%	14.9	%	13.3	%	11.9	%	12.1	%	14.5	%	13.4	%
Effective Tax Rate(1)		33.6	%	33.0	%	34.4	%	34.5	%	36.0	%	36.4	%	36.4	%	39.5	%	40.0	%	40.0	%	37.5	%
Net Margin(1)		10.7	%	11.8	%	11.6	%	11.2	%	10.2	%	9.5	%	8.4	%	7.2	%	7.2	%	8.7	%	8.4	%
Return on Average Shareowners' Investment(1)		16.7	%	18.9	%	19.4	%	16.3	%	15.4	%	17.9	%	15.5	%	13.5	%	14.7	%	18.8	%	16.1	%
Current Ratio		2.49		2.43		3.11		3.63		5.11		2.94		2.51		2.88		2.95		2.75		3.18
Long-Term Debt to Equity Ratio		0.88	%	0.38	%	0.41	%	1.04	%	0.01	%	0.41	%	0.37	%	7.94	%	27.49	%	3.61	%	4.25	%
Cash Flow Data
Total Cash from Operating Activities	$	343,316		102,924		110,501		73,815		48,306		62,666		29,049		34,597		37,167		35,026		17,900		34.4	%	40.5	%
Depreciation and Amortization	$	102,090		70,276		51,330		34,576		26,701		23,588		20,650		19,992		17,954		14,306		10,691		25.3	%	34.0	%
Capital Expenditures	$	105,403		101,139		126,431		71,780		34,634		22,115		21,315		15,834		24,567		13,734		9,595		27.1	%	36.7	%
Year-End Data
Current Assets	$	1,029,438		998,892		644,221		551,715		480,702		208,658		145,446		115,355		119,530		102,525		75,914		29.8	%	37.6	%
Current Liabilities	$	412,954		411,821		207,136		151,957		94,024		71,069		57,919		40,071		40,525		37,335		23,864		33.0	%	42.2	%
Working Capital	$	616,484		587,071		437,085		399,758		386,678		137,589		87,527		75,284		79,005		65,190		52,050		28.0	%	35.0	%
Property and Equipment, Net	$	312,066		269,238		226,298		135,355		81,021		66,649		63,111		57,945		57,808		45,384		42,545		22.1	%	36.2	%
Total Assets	$	1,672,529		1,462,232		1,041,678		825,254		637,114		344,541		283,261		242,233		248,293		181,665		143,831		27.8	%	37.2	%
Long-Term Debt	$	11,024		3,947		3,445		6,913		44		1,099		810		14,462		43,634		4,841		4,691
Shareowners' Investment	$	1,248,551		1,046,464		831,097		664,081		541,790		270,210		220,583		182,101		158,747		134,013		110,470		27.4	%	35.8	%
Number of Employees		13,457		9,531		7,043		5,261		3,373		2,894		2,562		2,303		2,428		2,111		1,896		21.6	%	36.0	%
Investor Information
Stock Price—Close	$	47.69		23.00		33.13		34.19		20.00		11.78		9.13		4.53		3.05		2.05		1.92		37.9	%	32.3	%
—High	$	53.63		43.63		45.00		35.13		24.69		11.94		11.00		4.75		5.41		3.25		2.23
—Low	$	23.25		15.75		21.25		14.25		9.88		7.75		4.53		2.56		2.03		1.91		1.38
Price Earnings Ratio at Year-End(1)		35.52		19.05		33.51		49.88		41.65		33.03		32.38		21.57		15.37		9.59		12.39
Book Value Per Share	$	8.31		7.04		5.67		4.64		3.97		2.31		1.99		1.67		1.48		1.26		1.04
Registered Shareowners at Year-End		6,918		5,364		4,442		2,973		2,664		2,172		1,633		1,608		1,621		1,758		1,831
Shares Outstanding at Year-End (000's)		150,173		148,837		146,945		143,048		136,440		117,143		110,790		108,880		107,432		106,312		105,744
Average Shares Outstanding—Diluted (000's)		153,069		150,822		147,511		144,470		131,144		124,564		112,298		109,985		108,794		107,390		105,735

(1)

Before non-recurring charges for acquisitions and restructurings.

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ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
ASSETS
LIABILITIES AND SHAREOWNERS' INVESTMENT

EX-13.B

[Logo]

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Saville Systems PLC

In our opinion, the consolidated balance sheet as of December 31, 1998 and the related consolidated statements of income, of changes in shareholders' equity and of cash flows (not presented separately herein) present fairly, in all material respects, the financial position of Saville Systems PLC and its subsidiaries (the "Company") at December 31, 1998, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The financial statements of the Company as of December 31, 1997 and for the year then ended were audited by other independent accountants, whose report dated January 22, 1998 (except for Comprehensive Income and Note 15 as to which date is March 12, 1999), expressed an unqualified opinion on those statements.

/s/ PRICEWATERHOUSECOOPERS   
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Dublin, Ireland
March 2, 1999

EX-13.C

REPORT OF INDEPENDENT AUDITORS

The Board of Directors of
Saville Systems PLC

We have audited the consolidated statements of income, changes in shareholders' equity and cash flows of Saville Systems PLC and its subsidiaries for the year ended December 31, 1997 (not separately presented herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements of Saville Systems PLC and its subsidiaries referred to above present fairly, in all material respects, the consolidated results of its operations and its cash flows for the year ended December 31, 1997 in conformity with accounting principles generally accepted in the United States.

Ernst & Young Chartered Accountants
Galway, Ireland
January 22, 1998
(Except for Comprehensive Income as to which the date is March 12, 1999)

EX-21.A

ADC Telecommunications, Inc.

Subsidiaries

Name	State/Country of Organization
AOFR Pty Limited	Australia
ADC Mersum Oy	Finland
ADC Solitra Oy	Finland
ADC Mersum U.S., Inc.	Minnesota
ADC Solitra, Inc.	Minnesota
ADC de Juarez, S. de R.L. de C.V.	Mexico
ADC de Declicias, S. de R.L. de C.V.	Mexico
Kentrox Industries, Inc.	Delaware
Skyline Technology, Inc.	California
Fibermux Corporation	California
ADC Broadband Communications, Inc.	Delaware
Pathway, Inc.	Ohio
ADC Teledata Communications Ltd.	Israel
Teledata Communications, Inc.	Delaware
Tdsoft Ltd.	Israel
G-Connect	Israel
T-Link Ltd.	Israel
TDC Teledata Communication GmbH	Germany
Teledata Communication Australia Pty. Ltd.	Australia
Teledata Manufacturing Australia Pty. Ltd.	Australia
Teledata Holdings Australia Pty. Ltd.	Australia
TDC (UK) Limited	United Kingdom
Teledata Communications Hellas LLC	Greece
Teledata Communications do Brasil Ltd.	Brazil
T.D.C. Holdings B.V.	Netherlands
Teledata Communications (Phillipines), Inc.	Philippines
ADC Telecommunications Holding, Inc.	Minnesota
ADC Telecommunications Sales Holding, Inc.	Minnesota
ADC Telecommunications Sales, Inc.	Minnesota
ADC Metrica, an Unlimited company	England/Wales
Metrica, Inc.	Delaware
PCS Solutions, LLC	Delaware
PCS Solutions Canada, Inc.	British Columbia
ADC Broadband Wireless Group, Inc.	Pennsylvania
ADC Europe N.V.	Belgium
ADC Telecommunications Netherlands B.V.	Netherlands
ADC Telecommunications U.K. Ltd.	England
ADC Telecommunications GmbH	Germany
ADC Telecommunications (Holdings) Pty. Limited	Australia
ADC Telecommunications Australia Pty. Limited	Australia
ADC Telecommunications Singapore Pte. Limited	Republic of Singapore
ADC Telecommunications (China) Limited	Hong Kong
ADC Telecommunications (Nanjing) Co., Ltd.	China
Nanjing ADC Broadband Communications Co., Ltd.	China
ADC International, Inc.	Barbados
ADC Telecom Canada Inc.	Quebec
ADC Telecommunicaciones Venezuela, S.A.	Republic of Venezuela
ADC de Mexico S.A. DE C.V.	Mexico
ADC Telecomunicacoes Do Brasil LTDA	Brazil
ADC OUS International, Inc.	Minnesota
ADC OUS Holdings, LLC	Delaware
Telesphere Solutions, Inc.	Minnesota
Teleprocessing Products, Inc.	California
Princeton Optics, Inc.	New Jersey
ADC PHASOR Electronics GmbH	Austria
ITS Service Company, Inc.	Pennsylvania
AOFR Americas Inc.	Delaware
TPO Limited	Delaware
Comtec Electronica S.R.L.	Argentina
ADC Irish Holding I, LLC	Minnesota
ADC Irish Holding II, LLC	Minnesota
ADC Irish Holding III, LLC	Minnesota
ADC Irish Holding IV, LLC	Minnesota
ADC Irish Holding V, LLC	Minnesota
ADC Irish Holding VI, LLC	Minnesota
ADC International Holding Company	Minnesota
Saville Systems PLC	Dublin, Ireland
Saville Systems Canada, Ltd.	Ontario, Canada
Saville Systems, Inc.	Delaware
Saville Systems (UK) Limited	United Kingdom
Saville C.I. Limited	Jersey, Channel Islands
Saville Systems Aust. Pty. Ltd.	Queensland, Australia
2916746 Canada, Inc.	Ontario, Canada

EX-23.A

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

    As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 33-40356, 33-40357, 33-52635, 33-52637, 33-58407, 33-58409, 33-59445, 333-02133, 333-04481, 333-07309, 333-15283, 333-25241, 333-25569, 333-25623, 333-32023, 333-37419, 333-37619, 333-80943, 333-80945 and 333-88669.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
December 30, 1999

EX-23.B

CONSENT OF INDEPENDENT ACCOUNTANTS

    We hereby consent to the incorporation by reference in the Registration Statements on forms S-8 (File Nos. 33-40356, 33-40357, 33-52635, 33-52637, 33-58407, 33-58409, 333-04481, 333-25569, 333-25623, 333-37619, 333-66169, 333-80943, 333-80945, 333-88669) and forms S-3 (File Nos. 33-59445, 333-02133, 333-07309, 333-15283, 333-25241, 333-32023, 333-37419) of ADC Telecommunications, Inc.) of our report dated March 2, 1999 relating to the consolidated financial statements of Saville Systems PLC as of and for the year ended December 31, 1998, which report is included in this form 10-K.

/s/ PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Dublin, Ireland
December 29, 1999

EX-23.C

Exhibit 23-c

CONSENT OF ERNST & YOUNG

We consent to the incorporation by reference in ADC Telecommunications, Inc.'s previously filed Registration Statement Nos. 33-40356, 33-40356, 33-40357, 33-52635, 33-52637, 33-58407, 33-58409, 33-59445, 333-02133, 333-04481, 333-07309, 333-15283, 333-25241, 333-25569, 333-25623, 333-32023, 333-37419, 333-37619, 333-66169, 333-80943, 333-80945 and 333-88669 and in the related Prospectuses of our report dated January 22, 1998 (except for Comprehensive Income as to which the date is March 12, 1999) with respect to the consolidated financial statements of Saville Systems PLC for the year ended December 31, 1997 included in this Annual Report (Form 10-K) of ADC Telecommunications, Inc. for the year ended October 31, 1999.

Ernst & Young Chartered Accountants
Galway, Ireland
December 30, 1999

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EX-24.A

Exhibit 24-a

POWER OF ATTORNEY

    KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of William J. Cadogan, Robert E. Switz and Jeffrey D. Pflaum, with full power to each to act without the other, his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of ADC Telecommunications, Inc. (the "Company") for the Company's fiscal year ended October 31, 1999, and any or all amendments to said Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and to file the same with such other authorities as necessary, granting unto each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

    IN WITNESS WHEREOF, this Power of Attorney has been signed on this 30th day of December, 1999, by the following persons.

/s/ John A. Blanchard III John A. Blanchard III	/s/ John J. Boyle III John J. Boyle III
/s/ William J. Cadogan William J. Cadogan	/s/ James C. Castle, Ph.D. James C. Castle, Ph.D.
/s/ Thomas E. Holloran Thomas E. Holloran	/s/ B. Kristine Johnson B. Kristine Johnson
/s/ Alan E. Ross Alan E. Ross	/s/ Jean-Pierre Rosso Jean-Pierre Rosso
/s/ John W. Sidgmore John W. Sidgmore	/s/ John D. Wunsch John D. Wunsch
Charles D. Yost

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Exhibit 24-a
POWER OF ATTORNEY

EX-27.A

 


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES FOR THE
YEAR ENDED OCTOBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.

<MULTIPLIER> 1,000

                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          OCT-31-1999
<PERIOD-START>                             NOV-01-1998
<PERIOD-END>                               OCT-31-1999
<CASH>                                         143,523
<SECURITIES>                                   150,493
<RECEIVABLES>                                  436,751
<ALLOWANCES>                                     8,814
<INVENTORY>                                    243,882
<CURRENT-ASSETS>                             1,029,438
<PP&E>                                         600,952
<DEPRECIATION>                                 288,886
<TOTAL-ASSETS>                               1,672,529
<CURRENT-LIABILITIES>                          412,954
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        30,035
<OTHER-SE>                                   1,218,516
<TOTAL-LIABILITY-AND-EQUITY>                 1,672,529
<SALES>                                      1,926,947
<TOTAL-REVENUES>                             1,926,947
<CGS>                                        1,009,983
<TOTAL-COSTS>                                1,009,983
<OTHER-EXPENSES>                               754,292
<LOSS-PROVISION>                                 4,081
<INTEREST-EXPENSE>                               7,619
<INCOME-PRETAX>                                160,383
<INCOME-TAX>                                    72,748
<INCOME-CONTINUING>                             87,635
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    87,635
<EPS-BASIC>                                       0.59
<EPS-DILUTED>                                     0.57

<F1>AMOUNT IS NET OF ALLOWANCE FOR BAD DEBTS AND RETURNS
<F2>AMOUNT IS NET OF OBSOLESCENSE RESERVES



 

EX-27.B

 


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES FOR THE
YEAR ENDED OCTOBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.


<MULTIPLIER> 1,000

                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          OCT-31-1998
<PERIOD-START>                             NOV-01-1997
<PERIOD-END>                               OCT-31-1998
<CASH>                                         328,030
<SECURITIES>                                    47,492
<RECEIVABLES>                                  409,718
<ALLOWANCES>                                     7,687
<INVENTORY>                                    175,763
<CURRENT-ASSETS>                               998,892
<PP&E>                                         496,113
<DEPRECIATION>                                 226,875
<TOTAL-ASSETS>                               1,462,232
<CURRENT-LIABILITIES>                          411,821
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        29,766
<OTHER-SE>                                   1,016,698
<TOTAL-LIABILITY-AND-EQUITY>                 1,462,232
<SALES>                                      1,547,383
<TOTAL-REVENUES>                             1,547,383
<CGS>                                          799,394
<TOTAL-COSTS>                                  799,394
<OTHER-EXPENSES>                               488,994
<LOSS-PROVISION>                                 3,557
<INTEREST-EXPENSE>                                 838
<INCOME-PRETAX>                                262,527
<INCOME-TAX>                                    88,748
<INCOME-CONTINUING>                            173,779
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   173,779
<EPS-BASIC>                                       1.17
<EPS-DILUTED>                                     1.15

<F1>AMOUNT IS NET OF ALLOWANCE FOR BAD DEBTS AND RETURNS
<F2>AMOUNT IS NET OF OBSOLESCENSE RESERVES



 

EX-27.C

 


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES FOR THE
YEAR ENDED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.


<MULTIPLIER> 1,000

                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          OCT-31-1997
<PERIOD-START>                             NOV-30-1996
<PERIOD-END>                               OCT-31-1997
<CASH>                                         165,579
<SECURITIES>                                    13,015
<RECEIVABLES>                                  268,614
<ALLOWANCES>                                     6,490
<INVENTORY>                                    168,379
<CURRENT-ASSETS>                               644,221
<PP&E>                                         415,292
<DEPRECIATION>                                 188,994
<TOTAL-ASSETS>                               1,041,678
<CURRENT-LIABILITIES>                          207,136
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        26,844
<OTHER-SE>                                     804,253
<TOTAL-LIABILITY-AND-EQUITY>                 1,041,678
<SALES>                                      1,271,495
<TOTAL-REVENUES>                             1,271,495
<CGS>                                          661,993
<TOTAL-COSTS>                                  661,993
<OTHER-EXPENSES>                               413,831
<LOSS-PROVISION>                                 6,456
<INTEREST-EXPENSE>                                 454
<INCOME-PRETAX>                                201,983
<INCOME-TAX>                                    69,209
<INCOME-CONTINUING>                            132,774
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   132,774
<EPS-BASIC>                                       0.92
<EPS-DILUTED>                                     0.90

<F1>AMOUNT IS NET OF ALLOWANCE FOR BAD DEBTS AND RETURNS
<F2>AMOUNT IS NET OF OBSOLESCENSE RESERVES



 

EX-99.A

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    ADC Telecommunications, Inc. desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and is filing this cautionary statement in connection with the Reform Act. This Form 10-K and our Annual Report to Shareholders, any Form 10-Q or Form 8-K, or any other written or oral statements made by or on our behalf may include forward-looking statements which reflect our current views with respect to future events and financial performance. The words "believes," "expects," "anticipates," "intends," "estimates," "forecasts," "projects," "could," "may" and other similar expressions identify forward-looking statements.

    We wish to caution you that any forward-looking statements made by or on our behalf are subject to uncertainties and other factors that could cause such statements to be wrong. Some of these uncertainties and other factors are listed under the caption "Risk Factors" below (many of which we have discussed in prior SEC filings). Though we have attempted to list comprehensively these important factors, we wish to caution investors that other factors may in the future prove to be important in affecting our results of operations. New factors emerge from time to time, and it is not possible for us to predict all of such factors, nor can we assess the impact each factor or combination of factors may have on our business.

    You are further cautioned not to place undue reliance on those forward-looking statements because they speak only of our views as of the date the statements were made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

RISK FACTORS

Demand for our products may decrease if we are unable to anticipate and adapt to rapidly changing technology.

    The communications equipment industry is characterized by rapid technological change. In our industry, we also face evolving industry standards, changing market conditions and frequent new product and service introductions and enhancements. The introduction of products using new technologies or the adoption of new industry standards can make existing products or products under development obsolete or unmarketable. In order to grow and remain competitive, we will need to adapt to these rapidly changing technologies, to enhance our existing solutions, and to introduce new solutions to address our customers' changing demands.

    In addition, new product development often requires long-term forecasting of market trends, development and implementation of new technologies and processes, and a substantial capital commitment. We have invested, and we will continue to invest, substantial resources for the development of new products. We may experience difficulties that could delay or prevent the successful design, development, introduction or marketing of new solutions. In addition, these new solutions and enhancements must meet the requirements of our current and prospective customers and must achieve significant market acceptance. If we fail to anticipate or respond on a cost-effective and timely basis to technological developments, changes in industry standards or customer requirements, or if we have any significant delays in product development or introduction, our business, operating results and financial condition could be affected in a material adverse way.

The market for communications equipment products and services is rapidly changing.

    In the past, our principal product offerings have been copper-based and fiber-optic-based products designed to connect and transmit information on traditional telephony networks. With the growth of multimedia applications and the development of enhanced Internet/data, video and voice services, our recent product offerings and research and development efforts have been and are focused on emerging technologies and network equipment, software and integration service offerings for communications equipment applications. The market for communications equipment network equipment, software and integration services is rapidly changing. Our future growth is dependent in part on our ability to successfully develop and commercially introduce new products for this market.

    Our future will also depend on the growth of the communications equipment market. The growth in the market for communications equipment products and services is dependent on a number of factors. These factors include:

•

the amount of capital expenditures by network providers;



•

regulatory and legal developments;



•

changes to capital expenditure rates by network providers due to consolidation among our customers;



•

the addition of new customers to the market; and



•

end-user demand for integrated Internet/data, video, voice, and other network services.

    We cannot predict whether the market for communications equipment products and services will develop rapidly. Also, we cannot predict technological trends or new products in this market. In addition, we cannot predict whether our products and services will meet with market acceptance or be profitable. We may not be able to compete successfully, and competitive pressures may materially and adversely affect our business, operating results and financial condition.

Our industry is highly competitive.

    Competition in the communications equipment industry is intense. We believe that competition may increase substantially with the increased use of broadband networks and recent regulatory changes. We believe our success in competing with other manufacturers of communications equipment products and services will depend primarily on our engineering, manufacturing and marketing skills, the price, quality and reliability of our products, and our delivery and service capabilities. We anticipate increasing pricing pressures from current and future competitors. Many of our foreign and domestic competitors have more extensive engineering, manufacturing, marketing, financial and personnel resources than we have. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements. We cannot predict whether we will be able to compete successfully with our existing and new products and services or with current and future competitors.

    In addition, we believe that technological change, the increasing addition of Internet/data, video, voice, and other services to networks, continuing regulatory changes and industry consolidation or new entrants will continue to cause rapid evolution in the competitive environment. The full scope and nature of these changes is difficult to predict at this time. Increased competition could lead to price cuts, reduced gross margins and loss of market share, which may seriously harm our business, operating results and financial condition.

Our operating results fluctuate significantly.

    Our operating results vary significantly from quarter to quarter. These fluctuations are the result of a number of factors, including:

•

the volume and timing of orders from and shipments to major customers;



•

the timing of and the ability to obtain new customer contracts;



•

the timing of new product and service announcements;



•

the availability of products and services;



•

the overall level of capital expenditures by public network providers;



•

the market acceptance of new and enhanced versions of our products and services or variations in the mix of products and services we sell; and



•

the availability and cost of key components.

    Competition may also be affected by consolidation among communications equipment providers. We are growing through acquisition and expansion, and our recent results of operations may not be a good predictor of our results in future periods. Our expense levels are based in part on expectations of future revenues. If revenue levels in a particular period are lower than expected, our operating results will be adversely affected. In addition, our results of operations are also subject to seasonal factors. We historically have had stronger demand for our products and services in the fourth fiscal quarter, primarily as a result of our year-end incentives and customer budget cycles. We have experienced weaker demand for our products and services in the first fiscal quarter, primarily as a result of the number of holidays in late November, December and early January and a general industry slowdown during that period. We cannot predict if historical seasonal trends will continue in the future.

The regulatory environment in which we operate is changing.

    The communications equipment industry is subject to regulation in the United States and other countries. Our business is dependent upon the continued growth of the telecommunications industry in the United States and internationally. Federal and state regulatory agencies regulate most of our domestic customers. In early 1996, the U.S. Telecommunications Act of 1996 was enacted. The Telecommunications Act lifted certain restrictions on the ability of companies, including the Regional Bell Operating Companies and other customers of ours, to compete with one another. The Telecommunications Act also made other significant changes in the regulation of the telecommunications industry. While we believe that these changes could increase our opportunities to provide solutions for our customers' Internet/data, video and voice needs, this result is dependent on the reaction of our existing and prospective customers to these new regulatory trends. The full impact of these regulatory changes on the market for our products is difficult to predict; however, competition in our markets could intensify as a result of the changes in regulation. Changes in current or future laws or regulations in the United States or elsewhere could adversely affect our business.

Conditions in international markets could affect our operations.

    Our international sales accounted for approximately 23% of our net sales in fiscal 1999, 22% of our net sales in fiscal 1998 and 21% of our net sales in fiscal 1997. We expect international sales to increase as a percentage of net sales in the future. In addition to sales and distribution in numerous countries, we own or subcontract operations located in Argentina, Australia, Austria, Canada, China, Finland, Ireland, Israel, Mexico and the United Kingdom. Due to our international sales and our international manufacturing and software development operations, we are subject to the risks of conducting business internationally. These risks include:

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local economic and market conditions;



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political and economic instability;



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unexpected changes in or impositions of legislative or regulatory requirements;



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fluctuations in the exchange rate of the U.S. dollar;



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tariffs and other barriers and restrictions;



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longer payment cycles;



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difficulties in enforcing intellectual property and contract rights;



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greater difficulty in accounts receivable collection;



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potentially adverse taxes; and



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the burdens of complying with a variety of foreign laws and telecommunications standards.

    We are also subject to general geopolitical risks, such as political and economic instability and changes in diplomatic and trade relationships. We maintain business operations and have sales in many international markets. Economic conditions in many of these markets represent significant risks to us. We cannot predict whether our sales and business operations in these markets will be adversely affected by these conditions. Instability in foreign markets, particularly in Asia and Latin America, could have a negative impact on our results of operations. Potential turmoil in the Middle East could also negatively impact our results of operations for our ADC Teledata Communications, Ltd. subsidiary, located in Herzliya, Israel. In addition to the effect of international economic instability on foreign sales, domestic sales to U.S. customers having significant foreign operations could be adversely impacted by these economic conditions. These factors may materially and adversely affect our business and operating results in the future.

We may face higher costs associated with protecting our intellectual property.

    Our future success depends in part upon our proprietary technology. Although we attempt to protect our proprietary technology through patents, copyrights and trade secrets, our future success will depend upon product development, technological expertise and distribution channels. We cannot predict whether we can protect our technology, or whether competitors can develop similar technology independently.

    As the competition in the communications equipment industry increases and the functionality of the products in this industry further overlap, we believe that companies in the communications equipment industry may become increasingly subject to infringement claims. We have received and may continue to receive from third parties, including some of our competitors, notices claiming that we are infringing third-party patents or other proprietary rights. We cannot predict that we will prevail in any litigation over third-party claims, or that we will be able to license any valid and infringed patents on commercially reasonable terms. Any of these claims, whether with or without merit, could result in costly litigation, divert our management's time, attention and resources, delay our product shipments, or require us to enter into royalty or licensing agreements. A third party may not be willing to enter into a royalty or licensing agreement on acceptable terms, if at all. If a claim of product infringement against us is successful and we fail to obtain a license or develop or license non-infringing technology, our business and operating results could be adversely affected.

We may be unable to identify or complete suitable acquisitions and investments.

    We may acquire or make investments in complementary businesses, products, services or technologies. We cannot assure you that we will be able to identify suitable acquisitions or investment candidates. Even if we identify suitable candidates, we cannot assure you that we will be able to make acquisitions or investments on commercially acceptable terms, if at all. If we acquire a company, we may have difficulty assimilating its businesses, products, services, technologies and personnel into our operations. These difficulties could disrupt our ongoing business, distract our management and workforce, increase our expenses and adversely affect our results of operations. In addition, we may incur debt or be required to issue equity securities to pay for future acquisitions or investments. The issuance of any equity securities could be dilutive to our shareowners.

Our products, systems and sales may be subject to Year 2000 problems.

    Many currently installed computer systems and software are coded to accept only two digit entries in date code fields. These date code fields will need to accept four-digit entries to distinguish 21st century dates from 20th century dates. As a result, many companies' computer systems and software will need to be upgraded or replaced in order to comply with Year 2000 requirements. The potential global impact of the Year 2000 problem is not known, and, if not corrected in a timely manner, could affect us and the U.S. and world economy generally.

    Although we believe our current products and systems are Year 2000 ready, our products operate in complex network environments and directly or indirectly interact with a number of other hardware and software systems. Despite preliminary testing, we cannot predict all of the possible Year 2000 issues arising from the interaction of our products with older hardware and software systems. Even though we have requested assurances from our major suppliers and customers that they have adequately addressed Year 2000 issues, it is impossible to fully assess the potential consequences in the event that service interruptions from suppliers occur or in the event that there are disruptions in such infrastructure areas as utilities, communications, transportation, banking and government. Known or unknown errors arising from Year 2000 issues could result in a delay or loss of revenue, interruption of service, cancellation of client contracts, diversion of development resources, damage to our reputation, increased service and warranty costs, and litigation. Any of these outcomes could adversely affect our business and operating results.

Our stock price may be volatile.

    Based on the trading history of our common stock, we believe that some factors have caused and are likely to continue to cause the market price of our common stock to fluctuate substantially. These factors include:

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announcements of new products and services by us or our competitors;



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quarterly fluctuations in our financial results or the financial results of our competitors;



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customer contract awards;



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increased competition;



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disputes concerning intellectual property rights;



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developments in telecommunications regulations;



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general conditions in the communications equipment industry; and



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general economic conditions.

In addition, communications equipment company stocks have experienced significant price and volume fluctuations that are often unrelated to the operating performance of such companies. This market volatility may adversely affect the market price of our common stock.

We are dependent upon key personnel.

    Like all high technology companies, our success is highly dependent on the efforts and abilities of our senior management and other qualified employees. Our ability to attract, retain and motivate skilled employees and other senior management personnel is critical to our continued growth. The competition for qualified employees, particularly engineers, programmers and systems analysts, has been and will likely continue to be intense. In addition, because we may acquire one or more businesses in the future, our success will depend, in part, upon our ability to retain and integrate our own operations personnel with personnel from acquired entities who are necessary to the continued success or successful integration of the acquired businesses.

We do not pay cash dividends on our common stock.

    We currently do not pay any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to finance the expansion of our operations and for general corporate purposes.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
RISK FACTORS

EX-99.B

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To ADC Telecommunications, Inc.:

We have audited in accordance with generally accepted auditing standards, the financial statements of ADC Telecommunications, Inc. and Subsidiaries included in this Form 10-K and have issued our report thereon dated November 24, 1999. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Schedule II is the responsibility of the company's management and is presented for purposes of complying with the Securities and Exchange Commissions rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
November 24, 1999

Schedule II—Valuation and Qualifying Accounts

Description (In thousands)	Balance at Beginning of Period	Charged to Costs and Expenses		Deductions		Balance at End of Period
Year 1999
Reserves related to business restructuring, including force and facility consolidation	—	$	39,000	$	30,000	$	9,000
Year 1998
Reserves related to business restructuring, including force and facility consolidation	—		—		—		—
Year 1997
Reserves related to business restructuring, including force and facility consolidation	—		—		—		—