-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ia2tgEBgkQa1DqyIRPZNHb8K+BwnplLL05TC7I3G40XMrNhGaLAaVfD8CTW6Kue9 wGzj7oiAqRLTVVUcPOTTQw== 0000800459-99-000009.txt : 19991115 0000800459-99-000009.hdr.sgml : 19991115 ACCESSION NUMBER: 0000800459-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARMAN INTERNATIONAL INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000800459 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 112534306 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09764 FILM NUMBER: 99748654 BUSINESS ADDRESS: STREET 1: 1101 PENNSYLVANIA AVENUE N W STREET 2: STE 1010 CITY: WASHINGTON STATE: DC ZIP: 20004 BUSINESS PHONE: 2023931101 MAIL ADDRESS: STREET 1: 1101 PENNSYLVANIA AVENUE NW STREET 2: SUITE 1010 CITY: WASHINGTON STATE: DC ZIP: 20004 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: September 30, 1999 Commission File Number: 1-9764 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 11-2534306 - ---------------------------------- -------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 1101 PENNSYLVANIA AVENUE, NW WASHINGTON, D.C. 20004 -------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (202) 393-1101 ---------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE ----------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 17,261,512 shares of Common Stock, $.01 par value, at October 31, 1999. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets - September 30, 1999 and June 30, 1999 3 Condensed Consolidated Statements of Operations - Three months ended September 30, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows - Three months ended September 30, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6-9 Item 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition 10-14 PART II. OTHER INFORMATION 15-16 SIGNATURES 17 EXHIBIT 10.67 18 EXHIBIT 10.68 77 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1999 AND JUNE 30, 1999 (000s omitted except per share amounts)
09/30/99 06/30/99 ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 11,729 2,963 Receivables (less allowance for doubtful accounts of $ 9,160 at September 30, 1999 and $ 8,732 at June 30, 1999) 303,613 303,371 Inventories 296,180 280,115 Other current assets 58,459 60,160 ------------ ------------ Total current assets 669,981 646,609 ------------ ------------ Property, plant and equipment, net 231,131 241,063 Excess of cost over fair value of assets acquired, net 143,077 140,824 Other assets 39,774 37,259 ------------ ------------ Total assets $ 1,083,963 1,065,755 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short-term borrowings $ 12,117 19,411 Current portion of long-term debt 11,165 11,750 Accounts payable 110,128 120,116 Accrued liabilities 129,550 135,544 ------------ ------------ Total current liabilities 262,960 286,821 ------------ ------------ Borrowings under revolving credit facility 84,378 34,375 Senior long-term debt 246,823 246,039 Other non-current liabilities 30,708 29,585 Minority interest 780 748 Shareholders' equity Common stock, $.01 par value 187 187 Additional paid-in capital 291,018 290,873 Accumulated foreign currency translation adjustments (34,034) (41,885) Retained earnings 257,010 252,989 Less common stock held in treasury (55,867) (33,977) ------------ ------------ Total shareholders' equity 458,314 468,187 ------------ ------------ Total liabilities and shareholders' equity $ 1,083,963 1,065,755 ------------ ------------
See accompanying Notes to Condensed Consolidated Financial Statements. 3 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (000s omitted except per share amounts)
Three Months Ended September 30, 1999 1998 -------------- -------------- Net sales $ 356,773 315,896 Cost of sales 260,530 232,161 -------------- -------------- Gross profit 96,243 83,735 Selling, general and administrative expenses 83,926 65,406 -------------- -------------- Operating income 12,317 18,329 Other expense Interest expense 4,630 5,933 Miscellaneous, net 594 90 -------------- -------------- Income before income taxes 7,093 12,306 Income tax expense 2,199 3,815 -------------- -------------- Net income $ 4,894 8,491 -------------- -------------- Basic earnings per share $ 0.28 0.46 -------------- -------------- Diluted earnings per share $ 0.28 0.45 -------------- -------------- Weighted average shares outstanding - basic 17,479 18,578 -------------- -------------- Weighted average shares outstanding - diluted 17,698 18,738 -------------- --------------
See accompanying Notes to Condensed Consolidated Financial Statements. 4 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 ($000s omitted)
1999 1998 ------------- ------------- Cash flows from operating activities: Net income $ 4,894 8,491 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 12,809 14,312 Amortization of intangible assets 1,544 1,608 Changes in assets and liabilities: (Increase) decrease in: Receivables (242) 274 Inventories (16,065) (37,448) Other current assets 1,701 (9,486) Increase (decrease) in: Accounts payable (9,988) (9,141) Accrued liabilities (5,994) (17,313) ------------- ------------- Net cash used in operating activities $ (11,341) (48,703) ------------- ------------- Cash flows from investing activities: Proceeds from disposition of assets $ 7,406 -- Capital expenditures (7,038) (19,183) Other items, net (551) (2,537) ------------- ------------- Net cash used in investing activities $ (183) (21,720) ------------- ------------- Cash flows from financing activities: Borrowings on (repayments of) lines of credit $ (7,294) 2,307 Net proceeds from long-term debt 50,202 78,477 Net purchase of common stock for treasury (21,890) (20,693) Dividends paid to shareholders (873) (932) Proceeds from exercise of stock options 145 381 ------------- ------------- Net cash provided by financing activities $ 20,290 59,540 ------------- ------------- Net increase (decrease) in cash and cash equivalents 8,766 (10,883) Cash and cash equivalents at beginning of period 2,963 16,204 ------------- ------------- Cash and cash equivalents at end of period $ 11,729 5,321 ------------- ------------- Supplemental disclosures of cash flow information: Interest paid $ 7,637 7,738 Income taxes paid $ 2,401 630
See accompanying Notes to Condensed Consolidated Financial Statements. 5 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements NOTE A - BASIS OF PRESENTATION The Company's Condensed Consolidated Financial Statements as of and for the three months ended September 30, 1999 and 1998, have not been audited by the Company's independent auditors; however, in the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the consolidated financial position of the Company and subsidiaries as of September 30, 1999 and the results of their operations and their cash flows for the periods presented. Where necessary, prior years' information has been reclassified to conform to the current year consolidated financial statement presentation. The results of operations for the three months ended September 30, 1999, are not necessarily indicative of the results to be expected for the full year. NOTE B - COMPREHENSIVE INCOME Comprehensive income and its components for the three months ended September 30, 1999 and 1998 are presented below.
Three Months Ended September 30, (Dollars in thousands) 1999 1998 ----------- ----------- Net income $ 4,894 8,491 Foreign currency translation adjustments 7,851 8,909 ----------- ----------- Total comprehensive income $ 12,745 17,400 ----------- -----------
6 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) NOTE C - EARNINGS PER SHARE INFORMATION
Three Months Ended September 30, 1999 1998 ---------------------- ---------------------- Basic Diluted Basic Diluted --------- --------- --------- --------- Net income $ 4,894 4,894 8,491 8,491 --------- --------- --------- --------- Shares of Harman common stock outstanding 17,479 17,479 18,578 18,578 Employee stock options -- 219 -- 160 --------- --------- --------- --------- Total average equivalent shares 17,479 17,698 18,578 18,738 --------- --------- --------- --------- Earnings per share $ 0.28 0.28 0.46 0.45 --------- --------- --------- ---------
NOTE D - RESTRUCTURING During the quarter ended December 31, 1998, the Company completed planning and began implementation of a restructuring program designed to improve the profitability of the consumer business and other operations. The Company implemented a program to: (1) re-align the consumer audio dealer and distribution structure to strengthen the positioning of our various brands, (2) significantly reduce the number of marginally profitable product lines, and (3) significantly reduce overhead as a result of weakening consumer market conditions. The Company also implemented overhead reduction programs and eliminated product lines in certain professional businesses. These actions resulted in pretax charges totaling $66.4 million. The components of the charges and costs incurred through September 30, 1999 are shown below. 7 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued)
Charges to Charges to Reserves Reserves Three Months Original Through Ended Remaining ($ in millions) Provision June 1999 Sept 1999 Balance ----------- ------------- ------------ ------------- Plant closures and severance $ 17.0 14.7 .7 1.6 Asset impairment 20.0 18.7 -- 1.3 Inventories 24.3 11.9 1.2 11.2 Other 5.1 5.1 -- 0.0 ----------- ------------- ------------ ------------- Total $ 66.4 50.4 1.9 14.1 ----------- ------------- ------------ -------------
NOTE E - SEGMENTATION The Company is engaged in the design, manufacture and marketing of high fidelity audio products. Our businesses are organized based on the end-user markets served-consumer and professional. The Consumer Systems Group manufactures loudspeakers and electronics for high fidelity audio and video reproduction in the home, with computers and in vehicles. Home applications include two- channel audio, multi-channel audio/video and personal computer audio. Vehicle applications include audio, video, navigation and multi-media. Consumer products are marketed worldwide under brand names including JBL, Harman Kardon, Infinity, Becker, Revel, Mark Levinson and Proceed. The Professional Group manufactures loudspeakers and electronics used by audio professionals in concert halls, cinemas, recording studios, broadcasting operations and live music events. Professional products are marketed worldwide under brand names including JBL, AKG, Studer, Lexicon, Soundcraft, DOD, Digitech and dbx. 8 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) The following table reports external sales and operating income by segment for the three months ended September 30, 1999.
Three Months Ended September 30, ($000s omitted) 1999 1998 ------------ ------------ Net sales: Consumer Systems Group $ 254,513 217,831 Professional Group 102,260 97,985 Other -- 80 ------------ ------------ Total $ 356,773 315,896 ------------ ------------ Operating income: Consumer Systems Group $ 11,958 13,533 Professional Group 2,719 4,061 Other (2,360) 735 ------------ ------------ Total $ 12,317 18,329 ------------ ------------
Other operating income (loss) is primarily comprised of corporate expenses less subsidiary allocations. NOTE F - INVENTORIES Inventories consist of the following:
September 30, June 30, (Dollars in thousands) 1999 1999 ------------ ------------ Raw materials and supplies $ 119,191 104,791 Work in process 37,861 37,317 Finished goods and inventory purchased for resale 139,128 138,007 ------------ ------------ Total inventories $ 296,180 280,115 ------------ ------------
9 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS --------------------- COMPARISON OF THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 Net sales for the quarter ended September 30, 1999 increased 13 percent to $356.8 million. Excluding currency effects, sales increased 16 percent. Sales in the first quarter last year totaled $315.9 million. The Consumer Systems Group reported sales of $254.5 million for the quarter, an increase of 17 percent over the prior year. Sales to consumer audio dealers and distributors equaled last year's first quarter, reflecting higher North American volumes offset by lower international sales due to the international dealer destocking program. Sales to the automakers increased. Strong growth in Infinity audio system shipments for the Jeep Grand Cherokee and higher volumes with Mitsubishi contributed in North America and Asia. In Europe, sales gains were driven by the introduction of navigation systems in Mercedes Benz vehicles and by robust aftermarket activity in Becker radios and navigation systems. Sales to personal computer manufacturers increased nearly $20 million, reflecting higher shipments of Harman Kardon systems to Dell and Apple and higher shipments of JBL systems to Compaq. The Professional Group reported sales of $102.3 million for the quarter, a 4 percent increase over the prior year. JBL Professional, Lexicon and AKG reported strong sales growth, partially offset by lower recording and broadcast sales. A major new OEM supply contract with Qualcomm contributed to the growth at AKG. The gross profit margin for the quarter ended September 30, 1999 was 27.0 percent ($96.2 million) compared to 26.5 percent ($83.7 million) in the prior year. The majority of our operating units reported higher gross margins, primarily reflecting lower fixed overhead levels and improved capacity utilization. Operating income as a percentage of sales was 3.5 percent ($12.3 million) for the quarter ended September 30, 1999, compared to 5.8 percent ($18.3 million) for the same period in the prior year. Selling, general and administrative costs were 23.5 percent of sales for the first 10 quarter compared to 20.7 percent in the prior year. Selling, general and administrative costs increased due to higher engineering and development outlays required to fulfill future automotive and personal computer audio system contracts, the timing of advertising and other selling expenses and overall increases associated with sales growth. Interest expense for the three months ended September 30, 1999 was $4.6 million compared to $5.9 million in the same quarter last year. Average borrowings outstanding decreased to $338.2 million for the first quarter of fiscal 2000, compared to $365.4 million for the same period in the prior year. Average borrowings were lower due to improved operating cash flow and lower working capital levels. The weighted average interest rate on borrowings was 5.5 percent for the first quarter, down from 6.5 percent for the first quarter last year. The decrease in the weighted average interest rate was due to the December 1998 retirement of $45 million of 11.2% notes. Income before income taxes for the first quarter was $7.1 million, compared to $12.3 million in the prior year. The effective tax rate for the first quarter of fiscal 2000 was 31.0 percent, equal to last year's rate. The effective tax rates for both periods were below the U.S. statutory rate due to utilization of tax credits, realization of certain tax benefits for United States exports and the utilization of tax loss carryforwards at certain foreign subsidiaries. The Company calculates its effective tax rate based upon its current estimate of annual results. Net income for the three months ended September 30, 1999 was $4.9 million, compared with $8.5 million in the prior year. Diluted earnings per share were $.28 for the three months ended September 30, 1999, compared to $.45 last year. FINANCIAL CONDITION ------------------- Net working capital at September 30, 1999 was $407.0 million, compared with $359.8 million at June 30, 1999. The working capital increase was primarily due to increased inventory requirements at September compared to June to support the following quarter's increased sales volume. Second quarter sales are typically the Company's highest and first quarter sales are the lowest. Additionally, 11 cash balances increased and accounts payable decreased compared to June 1999 levels, reflecting the timing of cash receipts and payments. The Company continued its common stock repurchase program in the quarter, acquiring and placing in treasury an additional 502,100 shares of its common stock at a cost of $21.9 million. Borrowings under the revolving credit facility at September 30, 1999 were $85.2 million, comprised of swing line borrowings of $0.8 million, which were included in short-term borrowings, and competitive advance borrowings and revolving credit borrowings of $84.4 million. Borrowings under the revolving credit facility at June 30, 1999 were $41.2 million, comprised of swing line borrowings of $6.8 million and competitive advance borrowings and revolving credit borrowings of $34.4 million. Borrowings under the revolving credit facility increased due to higher working capital requirements and the common stock repurchases discussed above. In September 1999, the Company put in place a $90 million equipment financing line to fund capital additions at operating subsidiaries. As of September 30, 1999, $19.2 million of capital additions had been funded under this line. YEAR 2000 --------- The Company and its subsidiaries have been engaged in a review of computer hardware and software, communication devices, facilities, operating and manufacturing equipment, and supplier and customer preparedness related to Year 2000 readiness. Our Year 2000 readiness programs are on schedule. The Company and its subsidiaries have completed inventory and assessment in all areas. Remediation and testing is substantially complete for mission-critical operations, and contingency planning is in varying stages of completion. Hardware/Software: As of September 30, 1999, the Company and its subsidiaries have completed inventory and assessment of computer hardware and software applications. Remediation and testing is substantially complete. Total Year 2000 compliance costs for computer hardware and software are projected to be $2.0 million, of which $1.4 million has already been incurred. The remaining costs are comprised of hardware and software upgrades at the North American distribution center for JBL, Infinity and Harman Kardon, systems upgrades at Studer in Switzerland, and non-mission critical hardware/software upgrades and replacements at certain other locations. 12 Communications: As of September 30, 1999, the Company and its subsidiaries have completed inventory, assessment, remediation and testing of communications equipment and software. Total Year 2000 compliance costs for communications equipment were not material. Facilities: As of September 30, 1999, the Company and its subsidiaries have completed inventory, assessment, remediation and testing of facilities infrastructure. Total Year 2000 compliance costs for facilities were not material. Operating and Manufacturing Equipment: As of September 30, 1999, the Company and its subsidiaries have completed inventory, assessment, remediation and testing of operating and manufacturing equipment. Total Year 2000 compliance costs for operating and manufacturing equipment were not material. Suppliers: As of September 30, 1999, the Company and its subsidiaries have completed evaluation of Year 2000 compliance surveys returned by important suppliers. Some suppliers have not returned the surveys. The Company has also hired consultants to review the Year 2000 readiness of certain suppliers. Most of our important suppliers have certified current Year 2000 compliance or have projected compliance before the end of the year. Certain of our subsidiaries have selected and qualified alternate sources for critical components and raw materials to provide additional assurance of supply continuity. Customers: As of September 30, 1999, the Company and its subsidiaries have completed issuance of Year 2000 compliance surveys to customers. The Company has participated in Year 2000 compliance programs with its major automotive partners, such as DaimlerChrysler, Toyota and BMW, including both scheduled and surprise audits. Evaluation of customer survey results is substantially complete. Most of our major customers and the electronic interfaces we share have been certified as Year 2000 compliant. Contingency planning is the final step in our Year 2000 readiness process. Contingency plans address potential Year 2000 problems that are unanticipated or outside of the Company's control. The objective of our contingency plans is to provide for rapid response and minimal disruption of operations in the event of unforeseen Year 2000 related problems. As part of its overall contingency plan, the Company has identified a global Year 2000 Emergency Response Team. The Emergency Response Team is staffed with mission-critical IT and operations 13 personnel. The Company and its subsidiaries have also developed detailed contingency plans for each critical location. Completion of all contingency plans is scheduled for late 1999. Certain of our critical facilities have final contingency plans in place which include purchased or leased power generators, alternate supplier qualification, extra safety stocks and other back-up measures. The Year 2000 Emergency Response Team will be on call for the remainder of the calendar year and through the Year 2000 transition. The failure by the Company and its subsidiaries or its suppliers or its major customers to correct a Year 2000 problem could interrupt normal business activities. Management believes that its plans provide reasonable assurance that the Company's primary computer systems, manufacturing processes and distribution processes will not be materially impacted by a Year 2000 problem. The Company cannot provide assurance that all principal customers and suppliers will successfully complete Year 2000 compliance plans in a timely manner or that unexpected events will not occur. However, management believes that its plans should reduce the risk of business interruptions due to such occurrences. Except for historical information contained herein, the matters discussed are forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including, but not limited to the effect of economic conditions, product demand, currency exchange rates, labor disputes, competitive products and other risks detailed in the Company's other Securities and Exchange Commission filings. 14 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings There are various legal proceedings pending against the registrant and its subsidiaries, but, in the opinion of management, liabilities, if any, arising from such claims will not have a materially adverse effect upon the consolidated financial condition of the registrant. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders (a) The date of the Annual Meeting of Stockholders was November 9, 1999. (b) Dr. Sidney Harman was re-elected as a director of the Company with 14,725,347 affirmative votes and 435,702 votes withholding authority. Dr. Harman will serve a three-year term expiring at the 2002 Annual Meeting of Stockholders. Ms. Shirley Mount Hufstedler was re-elected as a director of the Company with 14,851,322 affirmative votes and 309,727 votes withholding authority. Ms. Hufstedler will serve a three-year term expiring at the 2002 Annual Meeting of Stockholders. (c) The proposal to adopt the Key Executive Officer Incentive Plan was approved with 13,726,129 affirmative votes, 396,756 negative votes and 1,038,164 votes withholding authority, which includes abstentions and broker non-votes. 15 HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES PART II - OTHER INFORMATION (continued) (d) The proposal to amend the 1992 Incentive Plan was approved with 11,737,248 affirmative votes, 3,369,395 negative votes and 54,406 votes withholding authority, which includes abstentions and broker non-votes. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K - Equipment financing agreement dated September 30, 1999. - Participation agreement dated September 30, 1999, pursuant to equipment financing agreement dated September 30, 1999. (b) Reports on Form 8-K None. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED (Registrant) DATE: November 12, 1999 BY: /s/ Bernard A. Girod ------------------------------- Bernard A. Girod Chief Executive Officer DATE: November 12, 1999 BY: /s/ Frank Meredith ------------------------------- Frank Meredith Vice President of Finance and Administration, Chief Financial Officer and Secretary 17 EX-10 2 EXHIBIT 10.67 18 EQUIPMENT FINANCING AGREEMENT between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, Not In Its Individual Capacity But Solely as Trustee under the Trust Agreement dated as of September 30, 1999, as Obligee and HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, as Obligor Dated as of September 30, 1999 TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1. COUNTERPART NO. _____ OF _____ SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. 19 EQUIPMENT FINANCING AGREEMENT EQUIPMENT FINANCING AGREEMENT dated as of September 30 1999 (herein, as amended, supplemented and otherwise modified from time to time, called "this Equipment Agreement"), between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association not in its individual capacity, but solely as trustee under a Trust Agreement (the "Trust Agreement"), dated as of September 30, 1999 (together with its successors and assigns, "Obligee") and HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, a Delaware corporation (together with its successors and assigns, "Obligor"). In consideration of the mutual covenants and agreements set forth herein and in the Participation Agreement dated as of September 30, 1999 (the "Participation Agreement") among Obligee, Obligor, BTM Capital Corporation, Bank of Tokyo-Mitsubishi Trust Company, Four Winds Funding Corporation and Commerzbank Aktiengesellschaft, New York Branch, the parties hereto agree as follows: 1. Definitions. Unless the context otherwise requires, capitalized terms used herein and not otherwise defined herein shall have meanings set forth or referred to in Appendix A to the Participation Agreement which Appendix A also contains the rules of usage that shall apply hereto. 2. Agreement for Financing of Equipment. Subject to, and upon all of the terms and conditions of this Equipment Agreement, Obligee hereby agrees to finance for Obligor and Obligor hereby agrees to finance Obligee each Item of Equipment for the Term with respect to such Item. So long as no Equipment Agreement Event of Default has occurred and is continuing hereunder, Obligee agrees that it shall not interfere with Obligor's quiet enjoyment and use of any Item of Equipment financed hereunder during the Term thereof. 3. Conditions Precedent. Obligee shall have no obligation to finance any Item of Equipment to Obligor unless each of the conditions set forth in Section 3.1 of the Participation Agreement are fulfilled to the satisfaction of Obligee. 4. Delivery, Acceptance and Leasing of Equipment. Obligee shall not be liable to Obligor for any failure or delay in obtaining any Item of Equipment or making delivery thereof. Forthwith upon delivery of each Item of Equipment to Obligor, Obligor will inspect such Item, and unless Obligor gives Obligee prompt written notice of any defect in or other proper objection to such Item, Obligor shall, promptly upon completion of such inspection, execute and deliver to Obligee an Equipment Agreement Supplement for such Item, dated the Acceptance Date of such Item. The execution by Obligee and Obligor of an Equipment Agreement Supplement for an Item of Equipment shall (a) evidence that such Item is leased under, and is subject to all of the terms, provisions and conditions of, this Equipment Agreement, and (b) constitute Obligor's unconditional and irrevocable acceptance of such Item for all purposes of this Equipment Agreement. An Item of Equipment shall be conclusively deemed to relate to the particular Related Exhibit A now or hereafter attached hereto and made a part hereof that is so identified on the Related Equipment Agreement Supplement of such Item. 20 5. Term. The Interim Term (if any) for each Item of Equipment shall commence on the Acceptance Date thereof, and, unless sooner terminated pursuant to the provisions hereof, shall end on the date immediately prior to the Basic Term Commencement Date therefor. The Basic Term for each Item of Equipment shall commence on the Basic Term Commencement Date thereof and, unless this Equipment Agreement is sooner terminated with respect to such Item (or all Equipment) pursuant to the provisions hereof, shall end on the last day of such Basic Term. If not sooner terminated pursuant to the provisions hereof, the Term for each Item of Equipment shall end on the last day of the Basic Term thereof, or if this Equipment Agreement is renewed with respect to such Item of Equipment pursuant to Section 25.1 hereof, on the last day of the last Renewal Term thereof. 6. Return of Equipment. 6.1 Redelivery. Upon the expiration or earlier termination of the Term with respect to each Item of Equipment (unless Obligor has exercised its transfer option with respect thereto pursuant to Section 25.2 hereof or a third party sale thereof acceptable to Obligee is consummated on the Termination Date with respect thereto pursuant to Section 25.3 hereof), Obligor will, at its expense, dismantle, surrender and deliver possession of each Item of Equipment to Obligee at the Redelivery Location with a certificate executed by a Responsible Officer of Obligor certifying that the Item of Equipment is in the condition required hereunder, a copy of an inventory list for each Item, proof of payment by Obligor to the Person from whom Obligor acquired such Item of Equipment in the form of a canceled check or wire transfer confirmation, all then current plans, specifications and operating, maintenance, and repair manuals and logs relating to each Item that have been prepared or received by Obligor, and with respect to any Item of Equipment which qualifies for or is subject to any manufacturer's maintenance, repair or warranty policy, a statement or certificate that has been signed by an authorized representative of the manufacturer attesting to such condition. At the time of such return to Obligee, each Item of Equipment (and each part or component thereof) shall (a) meet the original design specifications and operating standards of such Item, (b) be in as good operating condition, state of repair and appearance as when delivered to Obligor hereunder, ordinary wear and tear excepted, and in the condition required by Section 11 hereof, (c) have no missing or damaged components such that its value, utility or remaining useful life will be reduced, (d) comply with all laws and rules referred to in Section 11 hereof, (e) have attached or affixed thereto any addition, modification or improvement considered an accession thereto as provided in Section 12 hereof and (f) have had removed therefrom in a workmanlike manner, (i) at Obligor's option, any addition, modification or improvement which, as provided in Section 12 hereof, is owned by Obligor, and (ii) any insignia or marking permitted pursuant to Section 13 hereof, and (g) be free and clear of all Liens, other than a Lien granted or placed thereon by Obligee, Lender, or any Assignee pursuant to Section 14.2 hereof. With respect to any Item of Equipment which has an hour meter or similar device affixed to or relating to such Equipment, Obligor must provide evidence of the total operating hours on such Item at redelivery, as evidenced by such meter or similar device. The total operating hours for each such Item of Equipment in excess of 3000 hours per year shall be billed to Obligor at a rate set by Obligee (which rate shall be reasonable in all the circumstances). All operating licenses and agreements pertinent to operation of each Item of Equipment, whether or not included in the original Agreement (other than non-transferable licenses to use software), that are capable of being -2- 21 transferred, shall be fully transferable upon the expiration of the Term to Obligee or its designee. Obligor shall transfer any such transferable license or agreement upon return of the Item of Equipment at Obligor's cost and expense. Each Item of Equipment that qualifies for or is subject to any manufacturer's maintenance, repair or warranty policy must be properly deinstalled in a manner consistent with such policy and in such a way that the Item remains eligible for or subject to such policy, as appropriate, and Obligee shall provide or shall cause a representative of the manufacturer of such Item a certificate certifying that each Item of Equipment was deinstalled in a manner consistent with such policy and remains eligible for or subject to such policy, as appropriate. Upon deinstallation each Item of Equipment shall be secured properly for air or overland transport. Each Item of Equipment originally delivered to Obligor, secured for shock proof and minimum vibration travel or delivered via air ride van shall be redelivered in a similar manner, and each other Item of Equipment shall be delivered in the manner in which it was delivered to Obligor or such other manner as is customary for such Item of Equipment. Obligor shall pay for any repairs necessary to restore any Item of Equipment to the condition required by this Section 6.1. The term "ordinary wear and tear" as used herein shall not be construed as permitting any material broken, damaged or missing items or components of any Item of Equipment. Upon redelivery, Obligor shall provide any additional documentation reasonably requested by Obligee, at Obligee's cost, relating to the redelivery of or Obligee's interest in each Item of Equipment. 6.2 Storage. For the purpose of delivering possession of any Item of Equipment to Obligee as above required, Obligor shall at its own cost, expense and risk cause each such Item of Equipment to be insured in accordance with Section 17 hereof and stored at the Redelivery Location identified therefor by Obligee at the risk of Obligor without charge to Obligee or any Assignee for insurance, rent or storage until all such Items of Equipment have been sold, leased or otherwise disposed of by Obligee; provided however, Obligor's obligations under this Section 6.2 shall terminate with respect to each Item of Equipment on the 90th day after delivery of such Item to the Redelivery Location in the condition required by Section 6.1 hereof. 6.3 Holdover Equipment Payment. Each Item of Equipment shall be deemed redelivered upon satisfaction of the obligations and conditions set forth in Section 6.1 hereof. Until each such Item of Equipment has been returned to Obligee in the condition and as otherwise provided in this Section 6, Obligor shall continue to pay Obligee, on the same dates on which an Equipment Payment for such Item was payable during the Term thereof 125% of the Equipment Payment for such Item that was payable on the last Payment Date of the Term thereof; provided, that during such holdover period, Obligor shall use its best efforts to secure the return of the Equipment as required under this Section 6. The provision for payment pursuant to this Section 6 shall not abrogate Obligee's right under this Section 6 to have such Equipment returned to it hereunder. 6.4 Specific Performance. The provisions of this Section 6 are of the essence of this Equipment Agreement, and upon application to any court of equity having jurisdiction in the premises, Obligee shall be entitled to a decree against Obligor requiring specific performance of the covenants of Obligor set forth in this Section 6. -3- 22 7. Payments. 7.1 Interim Equipment Payment. Obligor hereby agrees to pay Obligee an Equipment Payment for each Item of Equipment on each Payment Date during the Interim Term therefor, in an amount equal to the sum of (a) the Debt Amortization Payment due on such Payment Date for such Item (b) an amount calculated by multiplying the Outstanding Debt Amount for such Item immediately prior to such payment by the Applicable Debt Rate and (c) an amount calculated by multiplying the Equity Component for such Item by the Equity Rate and in the case of clauses (b) and (c) for the number of days elapsed since the immediately preceding Payment Date, or in the case of the first payment of an Equipment Payment during the Interim Term, the Acceptance Date thereof. 7.2 Basic Equipment Payment. Obligor hereby agrees to pay Obligee an Equipment Payment for each Item of Equipment on each Payment Date during the Basic Term therefor, in an amount equal to the sum of (a) the Debt Amortization Payment due on such Payment Date for such Item (b) an amount calculated by multiplying the Outstanding Debt Amount immediately prior to such payment by the Applicable Debt Rate and (c) an amount calculated by multiplying the Equity Component for such Item by the Equity Rate and in the case of clauses (b) and (c) for the number of days elapsed since the immediately preceding Payment Date, or in the case of the first payment of an Equipment Payment during the Basic Term, the Basic Term Commencement Date thereof. 7.3 Commitment Fee. Obligor hereby agrees to pay Obligee a commitment fee ("Commitment Fee") during each Commitment Period, which fee shall be computed at the Commitment Fee Rate on a per annum basis on the average daily amount of the Obligee Available Commitment. Such Commitment Fee shall be payable quarterly in arrears on each Payment Date during such Commitment Period and on the last of such Commitment Period. 7.4 Supplemental Payments. Obligor also agrees to pay to Obligee, or to whoever shall be entitled thereto as expressly provided herein, all Supplemental Payments, promptly as the same shall become due and owing, and in the event of any failure on the part of Obligor so to pay any such Supplemental Payment hereunder Obligee shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Equipment Payments. 7.5 Method of Payment. All payments of Equipment Payments and Supplemental Payments required to be made by Obligor to Obligee (or, in the case of Supplemental Payments, any other Person entitled thereto) shall be made in immediately available funds. In the event of any assignment to an Assignee pursuant to Section 14.2 hereof, all payments which are assigned to such Assignee, whether Equipment Payments, Supplemental Payments or otherwise, shall be paid in such manner as shall be designated by Obligee or such Assignee. Subject to the security assignment and the obligations of Obligor with respect thereto in Section 7 of the Participation Agreement, all payments of Equipment Payments required to be made by Obligor to Obligee hereunder shall be paid at the address or bank account as Obligee may hereafter designate in writing to Obligor. Time is of the essence in connection with the payment of Equipment Payments, and Supplemental Payments. -4- 23 7.6 Applicable Debt Rate. So long as no Equipment Agreement Event of Default has occurred and is continuing and Commercial Paper Rates are available to Obligee and acceptable to Obligor for the financing or refinancing of the entire Unamortized Debt Balance of an Item of Equipment, the Applicable Debt Rate for such Unamortized Debt Balance shall be the Commercial Paper Rate then in effect for the Related Note. If an Equipment Agreement Event of Default has occurred and is continuing or Commercial Paper Rates are not available to Obligee and acceptable to Obligor or the Lender sells a participation interest or ownership interest in the Related Note in accordance with the Liquidity Facility, the Applicable Debt Rate for each Item of Equipment shall be the LIBOR Rate then in effect for the Related Note; provided however, upon the occurrence of any Illegality Event, the Applicable Rate will be the Alternate Rate as of the date interest on the Related Note commences to accrue at the Applicable Rate in accordance with Section 5.5.9 of the Participation Agreement. At least three (3) Business Days before each Payment Date, Obligee or its designee shall advise Obligor of the total amount due on such Payment Date. Except as may otherwise be provided herein, no Equipment Payments or portion thereof may be prepaid. 7.7 Additional Costs; Illegality. Obligor does hereby assume liability for, and does hereby agree to indemnify, protect, save, defend and hold harmless Obligee from and against obligations, fees, liabilities, losses, damages, penalties, claims, demands, actions, suits, judgments, costs and expenses, including reasonable legal expenses, of every kind and nature whatsoever, imposed on, incurred by, or asserted against Obligee which in any way arises out of Obligee's obligations to pay increased costs pursuant to Section 5.5.8 of the Participation Agreement and Obligee's obligation to compensate Lender in accordance with the last sentence of Section 5.5.9 of the Participation Agreement. Obligee shall provide to Obligor a copy of any certificate provided to Obligee in accordance with Section 5.5.8 or 5.5.9 of the Participation Agreement. 8. Net Financing Agreement. This Equipment Agreement is a net financing agreement. Obligor acknowledges and agrees that its obligations hereunder, including, without limitation, its obligations to pay Equipment Payments and all Supplemental Payments payable hereunder, shall be unconditional and irrevocable under any and all circumstances, shall not be subject to cancellation, termination, modification or repudiation by Obligor, and shall be paid and performed by Obligor without notice or demand and without any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever, including, without limitation, any abatement, reduction, diminution, setoff, defense, counterclaim, withholding or recoupment due or alleged to be due to, or by reason of, any past, present or future claims which Obligor may have against Obligee, Owner Participant, Trust Company, any Assignee, Lender, any Liquidity Provider, any manufacturer or supplier of any Item of Equipment or any part thereof, or any other Person for any reason whatsoever, or any defect in any Item of Equipment or any part thereof, or the condition, design, operation or fitness for use thereof, any damage to, or any loss or destruction of, any Item of Equipment or any part thereof, or any Liens or rights of others with respect to any Item of Equipment or any part thereof, or any prohibition or interruption of or other restriction against Obligor's use, operation, possession, maintenance, insurance, improvement or return of the Equipment or any Item thereof, for any reason whatsoever, or any interference with such use, operation or possession by any Person or entity, or any default by Obligee in the performance of any of its obligations herein contained, or any other -5- 24 indebtedness or liability, howsoever and whenever arising, of Obligee, Trust Company or of any Assignee, or of Obligor to any other Person, or by reason of insolvency, bankruptcy or similar proceedings by or against Obligee, Trust Company, any Assignee or Obligor, or for any other reason whatsoever, whether similar or dissimilar to any of the foregoing, any present or future law to the contrary notwithstanding; it being the intention of the parties hereto that all Equipment Payments and Supplemental Payments payable by Obligor hereunder shall continue to be payable in all events and in the manner and at the times herein provided, without notice or demand, unless the obligation to pay the same shall be terminated pursuant to the express provisions of this Equipment Agreement. 9. Grant of Security Interest; Equipment to be and Remain Personal Property. This Equipment Agreement is a financing agreement intended as security. Obligor hereby grants, bargains, assigns, transfers, conveys and pledges to Obligee a security interest in and Lien upon the Equipment, this Equipment Agreement, each Subsidiary Equipment Agreement and Security Document and all proceeds thereof as collateral security for the payment and performance by Obligor of Obligor's obligations as Obligor under the Operative Documents. For each Item of Equipment located in the United States, France, Germany or England, Obligor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to Obligee from time to time such confirmatory assignments, conveyances, financing and continuation statements, transfer endorsements, powers of attorney, notes, reports and other assurances or instruments and take such further actions which are appropriate or advisable to perfect, preserve or protect Obligee's security interest granted hereunder or which Obligee deems necessary or advisable in order to obtain the full benefits of the Liens created or intended to be created hereunder, and will take such other actions reasonably requested by Obligee to effectuate the intent of the Operative Documents. Obligor will pay all applicable filing fees and related expenses. It is the intention and understanding of both Obligee and Obligor, and Obligor shall take all such actions as may be required to assure, that the Equipment shall be and at all times remain personal property, notwithstanding the manner in which the Equipment may be attached or affixed to realty. Obligor shall obtain and record such instruments and take such steps as may be necessary to prevent any Person from acquiring any rights in the Equipment by reason of the Equipment being claimed or deemed to be real property. 10. Use of Equipment; Compliance with Laws. Obligor agrees that each Item of Equipment will be used and operated solely in the conduct of its business or that of its Subsidiaries in the manner for which it was intended, in accordance with the license or certificate, if any, provided by the manufacturer thereof and in compliance with any and all insurance policy terms, conditions and provisions and with all statutes, laws, ordinances, rules and regulations of any federal, national, state or local governmental body, agency or authority applicable to the use and operation of the Equipment, including, without limitation, environmental, noise and pollution laws (including notifications and reports). Obligor shall procure and maintain in effect all licenses, registrations, certificates, permits, approvals and consents required by federal, national, state or local laws or by any governmental body, agency or authority in connection with the ownership, delivery, installation, use and operation of each Item of Equipment, including, without limitation, those required by environmental, noise and pollution laws (including notifications and reports) and including, in the case of any Item subject to titling and registration laws, all titles, registrations, registration plates, permits, licenses, and -6- 25 all renewals thereof. Other than as expressly set forth in the following sentence, no Item of Equipment shall be used or located at a location other than that identified therefor on the Related Equipment Agreement Supplement and in no event shall any Item of Equipment be used or located outside of the United States, England, Wales, France, Switzerland, Germany, Hungary, Austria, Belgium, Denmark, Sweden or the Netherlands; provided, however, Items of Equipment, the aggregate of the Acquisition Costs for which does not exceed $1,500,000 may, subject to the prior written consent of the Obligee, LC Issuer, Lender and each Liquidity Provider, be located in Mexico. Obligor shall use reasonable precautions to prevent loss or damage to each Item of Equipment from fire and other hazards. Obligor shall not permit any Item of Equipment to be used in any unlawful trade or in any manner that would violate any law that would expose such Item of Equipment to penalty, forfeiture or capture. 11. Maintenance and Repair of Equipment. Obligor agrees, at its own cost and expense, to keep, repair, maintain, service and preserve the Equipment in good repair, operating and serviceable condition and shall keep the Equipment in order and condition equal to or better than other equipment of the same type owned by Obligor, and in compliance with all requirements of law applicable to the maintenance and condition of the Equipment, including, without limitation, environmental, noise and pollution laws and regulations (including notifications and reports) of any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Equipment, to the extent that such laws and rules affect the title, operation, maintenance or use of the Equipment, and in the event that such laws or rules require any alteration, replacement or addition of or to any part on any Equipment, Obligor will conform therewith at its own expense. With respect to any Item of Equipment which qualifies for or is subject to any manufacturer's maintenance, repair or warranty policy, such maintenance or repair will be only performed in a manner consistent with such policy. Obligor agrees to prepare and deliver to Obligee and any Assignee within a reasonable time prior to the required date of filing (or, to the extent permissible, file on behalf of Obligee and any Assignee) any and all reports (other than income tax returns) to be filed by Obligee or any Assignee with any federal, national, state or other regulatory authority by reason of the ownership by Obligee or any Assignee of the Items of Equipment or the leasing thereof to Obligor. Obligor agrees to maintain all records, logs and other materials required by any Governmental Entity having jurisdiction over the Items of Equipment or Obligor, to be maintained in respect of each Item of Equipment. Obligor hereby waives any right now or hereafter conferred by law to make repairs on the Equipment at the expense of Obligee. 12. Alterations; Modifications; Replacements. In case any Item of Equipment (or any equipment, part or appliance therein) is required to be altered, added to, replaced or modified in order to comply with any laws, regulations, requirements or rules ("Required Alteration") pursuant to Sections 10 or 11 hereof, Obligor agrees to make such Required Alteration at its own expense and the same shall, without further act, immediately be and become the property of, and title shall vest in, Obligee free and clear of all Liens other than Liens granted or placed thereon by Obligee or any Assignee pursuant to Section 14.2 hereof and subject to the terms of this Equipment Agreement. Obligor may make any optional alteration to any Item of Equipment ("Optional Alteration") provided such Optional Alteration does not impair the value, use or remaining useful life of such Item of Equipment. In the event such Optional Alteration is readily removable without impairing the value, use or remaining useful life of the Item of Equipment, -7- 26 and is not a part, item of equipment or appliance which replaces any part, item of equipment or appliance originally incorporated or installed in or attached to such Item of Equipment on the Acceptance Date therefor or any part, item of equipment or appliance in replacement of or substitution for any such original part, item of equipment or appliance, any such Optional Alteration shall be and remain the property of Obligor. To the extent such Optional Alteration is not readily removable without impairing the value, use or remaining useful life of the Item of Equipment to which such Optional Alteration has been made, or is a part, item of equipment or appliance which replaces any part, item of equipment or appliance originally incorporated or installed in or attached to such Item of Equipment on the Acceptance Date therefor or any part, item of equipment or appliance in replacement of or substitution for any such original part, item of equipment or appliance, the same shall, without further act, immediately be and become the property of, and title shall vest in, Obligee free and clear of all Liens other than Liens granted or placed thereon by Obligee or any Assignee pursuant to Section 14.2 hereof and subject to the terms of this Equipment Agreement. Any parts installed or replacements made by Obligor upon any Item of Equipment pursuant to its obligation to maintain and keep the Equipment in good and serviceable operating condition and repair under Section 11 hereof shall be considered accessions to such Item of Equipment and title thereto or security interest therein shall be immediately vested in Obligee. Except as required or permitted by the provisions of this Section 12, Obligor shall not modify an Item of Equipment without the prior written authority and approval of Obligee. Subject to the prior written consent of Obligee, LC Issuer and Lender (which consent shall be at the sole and absolute discretion of each of Obligee, LC Issuer and Lender) and on terms acceptable to such Persons, Obligor may replace an Item of Equipment with other equipment. 13. Identification Marks; Inspection. Obligor shall use commercially reasonable efforts to keep and maintain, plainly, distinctly and conspicuously marked on each Item, the words "Financed by State Street Bank and Trust Company of Connecticut, National Association, Trustee, as owner trustee, subject to a security interest in favor of Commerzbank AG, New York Branch as Security Trustee" or other appropriate words designated by Obligee, with appropriate changes thereof and additions thereto as from time to time may be required by law in order to protect Obligee's and any Assignee's interests in such Item and the rights of Obligee and of any Assignee unless the size or characteristics of such Item would make such obligation unduly burdensome or commercially impracticable. Obligor shall not allow the name of any Person, to be placed upon any Item of Equipment as a designation that might be interpreted as indicating a claim of ownership thereto or a security interest therein by any Person other than Obligee or any Assignee. Upon the request of Obligee, Obligor shall (i) make the Equipment and Obligor's books, records and accounts available to Obligee, Assignee or any of their designees for inspection and, for the purpose of inspecting any Items of Equipment for which Obligor's end of term transfer option set forth in Section 25.2 has expired, such inspection may include, the use of photographic and video equipment and (ii) make a good faith effort to discuss with Obligee or its designees from time to time as Obligee or its designees deem reasonably necessary the Obligor's affairs, finances and accounts. If Obligor does not elect to renew this Equipment Agreement and does not elect to acquire rights and interests in the Equipment in accordance with the provisions and deadlines contained herein, Obligor shall, at any time prior to thirty (30) days prior to the Termination Date, permit Obligee or any designee thereof to inspect each Item of Equipment in -8- 27 full operation. The location for the inspection or demonstration of any Item of Equipment shall be the location designated for such Item on the Related Equipment Agreement Supplement; provided, however, if at the time of Obligee's or Assignee's request an Equipment Agreement Event of Default has occurred and is continuing, Obligor shall make the Equipment available to Obligee or Assignee for inspection at a location in the United States or Europe reasonably determined by Obligee. 14. Assignment and Leasing. 14.1 By Obligor. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS SECTION 14.1, OBLIGOR WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF OBLIGEE, LEASE ANY ITEM OF EQUIPMENT, OR ASSIGN, TRANSFER OR ENCUMBER ITS RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER. ANY ATTEMPTED LEASE IN VIOLATION HEREOF AND ANY ASSIGNMENT, TRANSFER OR ENCUMBERING BY OBLIGOR OF ITS RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER SHALL BE NULL AND VOID. Obligor may, without Obligee's consent, lease any Item of Equipment to Subsidiaries of Obligor in the ordinary course of business. Any such lease or financing agreement (together will all amendments, modifications and supplements thereto, a "Subsidiary Equipment Agreement") shall be, and shall expressly state that it is, subject and subordinate in all respects to this Equipment Agreement and the rights of Obligee (and any Assignee) hereunder including Obligee's right to possession of the Equipment upon an Equipment Agreement Event of Default, shall prohibit subleasing, shall not have a term that may exceed the remaining portion of the Term of such Item of Equipment, and shall be secured by a first priority security interest granted by such Subsidiary in favor of Obligor, which security interest shall be a perfected security interest for all Equipment located in the United States. Obligor shall promptly deliver to Security Trustee the original counterpart of each Subsidiary Equipment Agreement and shall provide prompt notice to Obligee (including the name and address of the lessee) of any lease or sublease to or financing agreement with a third party having a term coterminous with the then current Term of the Items of Equipment subject to such lease, sublease or financing agreement. Obligor shall deliver a certified schedule of all leases, subleases and financing agreements to Obligee by March 31 and September 30 of each year during the Term that were in effect at any time during the preceding calendar year and otherwise at Obligee's reasonable request. No such leasing by Obligor will reduce any of the obligations of Obligor hereunder or the rights of Obligee (and any Assignee) hereunder, and all of the obligations of Obligor hereunder shall be and remain primary and shall continue in full force and effect as the obligations of a principal and not of a guarantor or surety. 14.2 By Obligee. Obligee may sell, assign, transfer or grant a security interest in all or any part of Obligee's rights, obligations, title or interest in, to and under the Trust Estate, the Equipment or any Item(s) thereof, this Equipment Agreement, any Equipment Agreement Supplement and/or any Equipment Payment and Supplemental Payments payable under this Equipment Agreement or any Equipment Agreement Supplement without Obligor's consent. Any entity to whom any such sale, assignment, transfer or grant of security interest is made is herein called an "Assignee" and any such sale, assignment, transfer or grant of security interest is herein called an "assignment". An Assignee may re-assign and/or grant a security interest in any of such rights, obligations, title or interest assigned to such Assignee without Obligor's consent. -9- 28 Obligor agrees to execute related acknowledgments and other documents that may be reasonably requested by Obligee or an Assignee. Each Assignee shall have and may enforce all of the rights and benefits of Obligee hereunder with respect to the Item(s) of Equipment and related Equipment Agreement Supplement(s) covered by the assignment, including, without limitation, the provisions of Section 8 hereof. Each such assignment shall be subject to Obligor's rights hereunder so long as no Equipment Agreement Event of Default has occurred and is continuing. Obligor shall be under no obligation to any Assignee except upon written notice of such assignment from Obligee or, in the case of a reassignment, from the Assignee. Upon written notice to Obligor of an assignment in accordance with this Section 14.2, Obligor agrees to pay the Equipment Payments and Supplemental Payments with respect to the Item(s) of Equipment covered by such assignment to such Assignee in accordance with the instructions specified in such notice without any abatement, defense, setoff, counterclaim or recoupment whatsoever, and to otherwise comply with all notices, directions and demands which may be given by Obligee or such Assignee with respect to such Item(s), in accordance with the provisions of this Equipment Agreement. Notwithstanding any such assignment, all obligations of Obligee to Obligor under this Equipment Agreement shall be and remain enforceable by Obligor against Obligee and any Assignee to whom an assignment has been made. 14.3. Registration. This Equipment Agreement is a registered instrument. Obligee will establish and maintain registration books in which it will register, and register any assignment effected in compliance with Section 14 hereof of, each of Obligee's and Obligor's interest in this Equipment Agreement or any portion thereof and which identifies each registered holder of any interest in this Equipment Agreement or any portion thereof. No transfer by Obligee or Obligor of any interest in this Equipment Agreement shall be effective unless and until such transfer is made upon the registration books maintained by Obligee. 15. Liens. Obligor will not directly or indirectly create, incur, assume or suffer to exist any Lien on or with respect to (a) any Item of Equipment or any part thereof, Obligee's title thereto, or any interest therein or proceeds thereof, or (b) this Equipment Agreement or any of Obligee's interests hereunder, except (i) Permitted Liens or (ii) any Lien granted or placed thereon by Obligee, Lender, or any Assignee pursuant to Section 14.2 hereof or any Person with a claim against Obligee or any Assignee. Obligor, at its own expense, will promptly pay, satisfy and otherwise take such actions as may be necessary to keep this Equipment Agreement and each Item of Equipment free and clear of, and to duly discharge or eliminate or bond in a manner satisfactory to Obligee and each Assignee, any such Lien not excepted above if the same shall arise at any time. Obligor will notify Obligee and each Assignee in writing promptly upon becoming aware of any tax or other Lien (other than any Lien excepted above) that shall attach to the Equipment or any Item of Equipment, and of the full particulars thereof. 16. Loss, Damage or Destruction. 16.1 Risk of Loss, Damage or Destruction. Obligor hereby assumes all risk of loss, damage, theft, taking, destruction, confiscation, requisition or commandeering, partial or complete, of or to each Item of Equipment, however caused or occasioned, such risk to be borne by Obligor with respect to each Item of Equipment from the date of this Equipment Agreement, and continuing until such Item of Equipment has been returned to Obligee in accordance with the -10- 29 provisions of Section 6 hereof, the rights and interests in which have been transferred to Obligor in accordance with the provisions of Section 25.2 hereof, or has been sold in accordance with Section 25.3 hereof. Obligor agrees that no occurrence specified in the preceding sentence shall impair, in whole or in part, any obligation of Obligor under this Equipment Agreement, including, without limitation, the obligation to pay Equipment Payments. 16.2 Payment of Casualty Loss Value Upon an Event of Loss. If an Event of Loss occurs with respect to an Item of Equipment during the Term thereof, Obligor shall give Obligee prompt written notice thereof and shall pay to Obligee on the corresponding Casualty Loss Value Payment Date the sum of (a) all unpaid Equipment Payments payable for such Item of Equipment for the entire Equipment Payment Period in which the Event of Loss has occurred, plus (b) the Casualty Loss Value of such Item of Equipment determined as of the Casualty Loss Value Payment Date, plus (c) all other Supplemental Payments due for such Item of Equipment as of the date of payment of the amounts specified in the foregoing clauses (a) and (b). Any payments received at any time by Obligee or by Obligor from any insurer or other party (except Obligor) as a result of the occurrence of such Event of Loss will be applied in reduction of Obligor's obligation to pay the foregoing amounts, if not already paid by Obligor, or, if already paid by Obligor, will be applied to reimburse Obligor for its payment of such amount, unless an Equipment Agreement Event of Default shall have occurred and be continuing. Upon payment in full of such Casualty Loss Value, Equipment Payments and Supplemental Payments, (a) the obligation of Obligor to pay Equipment Payments (other than Obligor Commitment Fees) hereunder with respect to such Item of Equipment shall terminate and the Term of such Item shall terminate, and (b) Obligee shall renounce all title and rights to such Item of Equipment. 16.3 Application of Payments Not Relating to an Event of Loss. Any payments (including, without limitation, insurance proceeds) received at any time by Obligee or Obligor from any Governmental Entity or other party with respect to any loss or damage to any Item or Items of Equipment not constituting an Event of Loss, will be applied directly in payment of repairs or for replacement of property in accordance with the provisions of Sections 11 and 12 hereof, if not already paid by Obligor, or if already paid by Obligor and no Equipment Agreement Event of Default shall have occurred and be continuing, shall be applied to reimburse Obligor for such payment, and any balance remaining after compliance with the provisions of said Sections with respect to such loss or damage shall be retained by Obligor. If any Equipment Agreement Event of Default shall have occurred and is continuing, all payments hereunder shall be paid to Obligee or its Assignee in accordance with Section 14.2 hereof. 17. Insurance. Obligor will cause to be carried and maintained, at its sole expense, with respect to each Item of Equipment at all times during the Term thereof and for the geographic area in which such Item is at any time located and until such Item of Equipment has been returned to Obligee pursuant to Section 6 hereof, the rights and interests therein have been transferred to Obligor pursuant to Section 25.2 hereof or sold to a third party pursuant to Section 25.3.2 hereof (a) physical damage insurance (including theft and collision insurance) insuring against all risks of physical loss or damage to the Equipment ("Property Insurance"), in an amount not less than the greater of the Casualty Loss Value of such Item of Equipment and the replacement value of the Equipment, and (b) insurance against liability for bodily injury, death and property damage resulting from the use and operation of the Equipment (including sudden -11- 30 and accidental environmental pollution coverage) ("Liability Insurance") in an amount not less than $25,000,000 per occurrence, but in no event shall the insurance coverage described in clauses (a) and (b) above provide less coverage than the insurance coverage on any other similar equipment owned or leased by Obligor. The insurance coverage described in the preceding sentence shall have deductibles no greater than those applicable to insurance on similar equipment owned or leased by Obligor. Such Property Insurance policy or policies will name Obligor and Obligee as the sole loss payees and Obligee and each Assignee as additional insureds. Such Liability Insurance policy or policies will name each Obligor Indemnified Person as an additional insured. All such policies will provide that the insurers waive any claim for premiums and any right of subrogation or setoff against the Obligor Indemnified Parties and that the same may not be invalidated against any Obligor Indemnified Person by reason of any violation of a condition or breach of warranty of the policies or the application therefor by Obligor, that the policies may be canceled or materially altered or reduced in coverage (except as otherwise permitted under the terms of this Equipment Agreement) by the insurer only after thirty (30) days' prior written notice from Obligor's insurance broker to Obligee, Trust Company, Owner Participant and each Assignee, and that the insurer will give written notice to Obligee, Trust Company, Owner Participant, Lender and each Assignee in the event of nonpayment of premium by Obligor when due. The policies of insurance required under this Section 17 shall be valid and enforceable policies issued by insurers of recognized responsibility and shall provide coverage with respect to incidents occurring anywhere in the United States or Canada or Europe. In the event that any of such Liability Insurance policies shall now or hereafter provide coverage on a "claims-made" basis, Obligor shall continue to maintain such policies in effect for a period of not less than three (3) years after the expiration of the Term of the last Item of Equipment financed hereunder. Upon the execution of this Equipment Agreement and thereafter not less than thirty (30) days prior to the expiration dates of any expiring policies required under this Section 17, Obligor shall furnish Obligee with certificates of the insurance coverage required by this Section 17. If requested by any Obligor Indemnified Person in connection with a claim made or any suit, action or proceeding brought against any Obligor Indemnified Person, copies of the policies evidencing such insurance coverage, shall be delivered by Obligor to such Obligor Indemnified Person. Any certificate of insurance issued with respect to a blanket policy covering other equipment not subject to this Equipment Agreement shall specifically describe the Equipment as being included therein and covered thereby to the full extent of the coverages and amounts required hereunder. If Obligor shall fail to cause the insurance required under this Section 17 to be carried and maintained, Obligee, Trust Company, Owner Participant, Lender or any Assignee may, but shall not be required to, provide such insurance and Obligor shall reimburse Obligee, Trust Company, Owner Participant, Lender or any such Assignee, as the case may be, upon demand for the cost thereof as a Supplemental Payment hereunder together with interest thereon at the Overdue Rate from the date such cost was incurred. 18. NO OBLIGEE WARRANTIES. OBLIGEE HEREBY FINANCES THE EQUIPMENT FOR OBLIGOR AS-IS WHERE-IS, WITH ALL FAULTS AND IN WHATEVER CONDITION IT MAY BE IN, AND EXPRESSLY DISCLAIMS AND MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS TO THE DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY, DURABILITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF, OR -12- 31 ANY OTHER MATTER CONCERNING, THE EQUIPMENT. OBLIGOR HEREBY WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR INFRINGEMENT) IT MIGHT HAVE AGAINST OBLIGEE OR OWNER PARTICIPANT FOR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE EQUIPMENT OR BY OBLIGOR'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER, INCLUDING COMPLIANCE WITH ENVIRONMENTAL LAWS (WHICH ITEMS OF EQUIPMENT, OBLIGOR ACKNOWLEDGES, WERE SELECTED BY OBLIGOR ON THE BASIS OF ITS OWN JUDGMENT WITHOUT RELIANCE ON ANY STATEMENTS, REPRESENTATIONS, GUARANTIES OR WARRANTIES MADE BY OBLIGEE). 19. Assignment of Manufacturer Warranties. So long and only so long as an Equipment Agreement Event of Default shall not have occurred and be continuing, and so long and only so long as the Equipment shall be subject to this Equipment Agreement and Obligor shall be entitled to possession of the Equipment hereunder, Obligee authorizes Obligor, at Obligor's expense, to assert for Obligee's account, all rights and powers of Obligee under any manufacturer's, vendor's or dealer's warranty on the Equipment or any part thereof and Obligee agrees to use reasonable efforts at Obligor's expense to assist Obligor in obtaining the benefits of such warranties; provided, however, that Obligor shall indemnify, protect, save, defend and hold harmless Obligee from and against any and all claims, and all costs, expenses, damages, losses and liabilities incurred or suffered by Obligee in connection therewith, as a result of, or incident to, any action by Obligor pursuant to the foregoing authorization. 20. Events of Default. Any of the following events shall constitute an Equipment Agreement Event of Default: (a) Obligor shall fail to make any payment of an Equipment Payment within five (5) days after the same is due and payable or any Supplemental Payment within fifteen (15) days after the same is due and payable; or (b) Obligor shall fail to observe or perform any of the covenants, agreements or obligations of Obligor set forth in the Sections 14.1 or 17 hereof or in Section 6.7 of the Participation Agreement; or (c) Obligor shall fail to perform or observe any other covenant, condition, or agreement to be performed or observed by it under this Equipment Agreement, any Equipment Agreement Supplement, the Participation Agreement, or in any agreement or certificate furnished to Obligee or any Assignee in connection herewith or therewith, and such failure shall continue unremedied for thirty (30) days after written notice to Obligor specifying such failure and demanding the same to be remedied; or (d) (i) Obligor shall default under the Multi-Currency Agreement, or (ii) Obligor shall default under any agreements or instruments relating to any Indebtedness or Material Obligations of Obligor, or any other event shall occur and shall continue after the applicable grace period, if any, specified in such agreements or instruments, but only if (x) such default is a payment default that occurs upon the scheduled maturity of such Indebtedness or -13- 32 Material Obligations or (y) the effect of such default or event is to permit the acceleration of the maturity of such Indebtedness or Material Obligations and in either the case of (x) or (y), the aggregate principal amount of all such Indebtedness or Material Obligations is equal to or greater than $25,000,000, or (iii) any one or more Subsidiaries of Obligor shall default under any agreements or instruments relating to any Indebtedness or Material Obligations of such Subsidiary or Subsidiaries, or any other event shall occur and shall continue after the applicable grace period, if any, specified in such agreements or instruments, but only if (x) such default is a payment default that occurs upon the scheduled maturity of such Indebtedness or Material Obligations or (y) the effect of such default or event is to accelerate the maturity of such Indebtedness or Material Obligations and in either the case of (x) or (y), the aggregate principal amount of all such Subsidiary Indebtedness or Material Obligations is equal to or greater than $25,000,000; or (e) Obligor shall become insolvent; or Obligor or any Subsidiary thereof shall make an assignment for the benefit of creditors or consent to the appointment of a trustee or receiver; or a trustee or a receiver shall be appointed for Obligor or any Subsidiary thereof or for a substantial part of the property of Obligor or any Subsidiary thereof without its consent and shall not be dismissed for a period of 60 days; or any petition for the relief, reorganization or arrangement of Obligor or any Subsidiary thereof or any other petition in bankruptcy or for the liquidation, insolvency or dissolution of Obligor or any Subsidiary thereof, shall be filed by or against Obligor or any Subsidiary thereof and, if filed against Obligor or any Subsidiary thereof, shall be consented to or be pending and not dismissed for a period of 60 days, or an order for relief under any bankruptcy or insolvency law shall be entered by any court or Governmental Entity of competent jurisdiction with respect to Obligor or any Subsidiary thereof; or any execution or writ or process shall be issued under any action or proceeding against Obligor or any Subsidiary thereof whereby any of the Equipment may be taken or restrained and such execution or writ or process is not stayed within 60 days; or Obligor's corporate existence shall cease; or (f) any representation, warranty, statement or certification made by Obligor under this Equipment Agreement, in any Equipment Agreement Supplement, the Participation Agreement or in any document or certificate furnished to Obligee or any Assignee in connection herewith or therewith, or pursuant hereto or thereto, shall prove to be untrue or incorrect when made (or deemed made) except for inaccuracies or misstatements when made (or deemed made) that would not have a material effect on Obligor's ability to fulfill its obligations under this Equipment Agreement or the Participation Agreement; or (g) final judgments or orders for the payment of money in the aggregate in excess of $25,000,000 shall be rendered against Obligor or any Subsidiary and Obligor or such Subsidiary shall not discharge the same or provide for its discharge in accordance with its terms, or procure a stay of execution thereof, within 60 days after the date of entry thereof and within said period of 60 days (or such longer period during which execution of such judgment shall have been stayed) appeal therefrom and cause the execution thereof to be stayed during such appeal; 21. Remedies Upon Default. Upon the occurrence of any Equipment Agreement Event of Default and at any time thereafter so long as the same shall be continuing, Obligee may -14- 33 (except in the case of an Equipment Agreement Event of Default of the type described in Section 22(e) hereof, in which case Obligee shall be deemed automatically without further act to have elected the remedy set forth in clause (d) below) exercise one or more of the following remedies as Obligee in its sole discretion shall elect: (a) Obligee may terminate or cancel this Equipment Agreement, without prejudice to any other remedies of Obligee hereunder, with respect to all or any Item of Equipment, and whether or not this Equipment Agreement has been so terminated, may enter the premises of Obligor, subject to Obligor's normal safety and security concerns, including standard confidentiality requirements, or any other party to take immediate possession of the Equipment and remove all or any Item of Equipment by summary proceedings or otherwise, or may cause Obligor, at Obligor's expense, to store, maintain, surrender and deliver possession of the Equipment or such Item in the same manner as provided in Section 6 hereof; (b) Obligee may hold, keep idle or lease to others the Equipment or any Item of Equipment, as Obligee in its sole discretion may determine, free and clear of any rights of Obligor and without any duty to account to Obligor with respect to such action or inaction or for any proceeds with respect thereto, except that Obligor's obligation to pay Equipment Payments for any Equipment Payment Periods commencing after Obligor shall have been deprived of possession pursuant to this Section 21 shall be reduced by the net proceeds, if any, received by Obligee from leasing the Equipment or such Item to any Person other than Obligor for the same Equipment Payment Periods or any portion thereof; (c) Obligee may sell the Equipment or any Item of Equipment at public or private sale as Obligee may determine, free and clear of any rights of Obligor, and Obligor shall pay to Obligee, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Equipment Payments due for the Equipment or Item(s) so sold for any Equipment Payment Period commencing after the date on which such sale occurs), the sum of (i) all unpaid Equipment Payments payable for each Item of Equipment for all Equipment Payment Periods through the date on which such sale occurs, plus (ii) an amount equal to the excess, if any, of (x) the Casualty Loss Value of the Item(s) of Equipment so sold, computed as of the Payment Date coincident with or next preceding the date of such sale, over (y) the net proceeds of such sale, plus interest at the rate specified in Section 23 hereof on the amount of such excess from the Payment Date as of which such Casualty Loss Value is computed until the date of actual payment, plus (iii) all unpaid Supplemental Payments due with respect to each Item of Equipment so sold; (d) whether or not Obligee shall have exercised, or shall thereafter at any time exercise, any of its rights under subsection (a) or (b) above with respect to any Item(s) of Equipment, Obligee, by written notice to Obligor specifying a payment date, may demand that Obligor pay to Obligee, and Obligor shall pay to Obligee, on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Equipment Payment due for any Item(s) of Equipment for any Equipment Payment Period commencing after the payment date specified in such notice and in lieu of the exercise by Obligee of its remedies under subsection (b) above in the case of a re-lease of such Item(s) or under subsection (c) above with respect to a sale of such Item(s)), the sum of (i) all unpaid Equipment Payments payable for -15- 34 such Item(s) for all Equipment Payment Periods through the payment date specified in such notice, plus (ii) all unpaid Supplemental Payments due with respect to such Item(s) as of the payment date specified in such notice, plus (iii) an amount equal to any Prepayment Premium owed or paid by Obligee to Lender as a result of Equipment Agreement Event of Default, plus (iv) an amount, with respect to each such Item, equal to the Casualty Loss Value of such Item(s) computed as of the Payment Date coincident with or next preceding the payment date specified in such notice; provided, however, that with respect to any such Item(s) returned to or repossessed by Obligee, the amount recoverable by Obligee pursuant to the foregoing shall be reduced (but not below zero) by an amount equal to the fair market sales value of such Item(s) as of the date on which Obligee has obtained possession of such Item(s); and (e) Obligee may exercise any other right or remedy which may be available to it under applicable law or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof or to rescind this Equipment Agreement. In addition, Obligor shall be liable for all costs and expenses, including reasonable attorney's fees, incurred by Obligee or any Assignee by reason of the occurrence of any Equipment Agreement Event of Default or the exercise of Obligee's remedies with respect thereto, including all reasonable costs and expenses incurred in connection with the return of the Equipment in accordance with Section 6 hereof or in placing the Equipment in the condition required by said Section. For the purpose of subsection (d) above, the "fair market sales value" of any Item of Equipment shall mean such value as has been determined by an independent qualified appraiser selected jointly by Obligee and Obligor and in the absence of agreement on an independent qualified appraiser, each of Obligee and Obligor shall select an appraiser who together shall select the independent qualified appraiser. Except as otherwise expressly provided above, no remedy referred to in this Section 21 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Obligee at law or in equity; and the exercise or beginning of exercise by Obligee of any one or more of such remedies shall not constitute the exclusive election of such remedies and shall not preclude the simultaneous or later exercise by Obligee of any or all of such other remedies. No express or implied waiver by Obligee of any Equipment Agreement Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Equipment Agreement Event of Default. To the extent permitted by applicable law, Obligor hereby waives any rights now or hereafter conferred by statute or otherwise which may require Obligee to sell, lease or otherwise use the Equipment in mitigation of Obligee's damages as set forth in this Section 21 or which may otherwise limit or modify any of Obligee's rights and remedies in this Section 21. 22. Obligee's Right to Perform for Obligor. If Obligor fails to make any Supplemental Payment required to be made by it hereunder or fails to perform or comply with any of its agreements contained herein, Obligee may itself, after notice to Obligor, make such payment or perform or comply with such agreement, and the amount of such payment and the amount of the reasonable expenses of Obligee incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, together with interest thereon at the rate specified in Section 23 hereof, shall, if not paid by Obligor to Obligee on demand, be deemed a Supplemental Payment hereunder; provided, however, that no such -16- 35 payment, performance or compliance by Obligee shall be deemed to cure any Equipment Agreement Event of Default hereunder. 23. Late Charges. Obligor shall pay to Obligee, upon demand, to the extent permitted by applicable law, interest on any installment of an Equipment Payment not paid when due, and on any Supplemental Payment or other amount payable under this Equipment Agreement which is not paid when due, for any period for which any of the same is overdue (without regard to any grace period) at a rate equal to the lesser of (a) the Overdue Rate and (b) the maximum rate of interest permitted by law. 24. Notices. All notices provided for or required under the terms and provisions hereof shall be given in accordance with Section 10.4 of the Participation Agreement. 25. Obligor's Renewal and Transfer Options. 25.1 Obligor's Renewal Option. If no Equipment Agreement Event of Default shall have occurred and be continuing and this Equipment Agreement shall not have been earlier terminated, Obligor shall be entitled, at its option, to renew this Equipment Agreement with respect to all but not less than all Items of Equipment then subject to this Equipment Agreement, up to the number of Renewal Terms specified on the Related Exhibit A. The first Renewal Term with respect to each such Item of Equipment will commence at the expiration of the Basic Term of such Item, and each succeeding Renewal Term will commence at the expiration of the next preceding Renewal Term. All of the provisions of this Equipment Agreement, including the Applicable Debt Rate, shall be applicable during each Renewal Term for each such Item of Equipment. Obligor hereby agrees to pay Obligee an Equipment Payment for each Item of Equipment during each Renewal Term for which Obligor exercises its renewal option therefor in an amount equal to the sum of (a) the Debt Amortization Payment due on such Payment Date for such Item (b) an amount calculated by multiplying the Outstanding Debt Amount immediately prior to such payment by the Applicable Debt Rate and (c) an amount calculated by multiplying the Equity Component for such Item by the Equity Rate and in the case of clauses (b) and (c) for the number of days elapsed since the immediately preceding Payment Date. If, with respect to any Renewal Term, Obligor intends to not exercise said renewal option, Obligor shall give written notice to Obligee to such effect at least 180 days prior to the expiration of the Basic Term of the Item(s) of Equipment whose Renewal Term first expires hereunder, in the case of the first Renewal Term, and at least 180 days prior to the expiration of the then current Renewal Term of the Item(s) of Equipment whose Basic Term first expires hereunder, in the case of the then next succeeding Renewal Term. If Obligor fails to give such written notice to Obligee with respect to any of said Renewal Terms, it shall be conclusively presumed that Obligor has irrevocably elected to exercise said renewal option with respect to all Items of Equipment for said Renewal Term. In the event Obligor elects not to exercise said renewal option with respect to all Items of Equipment (unless Obligee has otherwise agreed in writing or Obligor has exercised its transfer option under Section 25.2 hereof), each Item of Equipment shall be returned to Obligee in accordance with the provisions of Section 6 hereof (unless delivered to a bidder in accordance with Section 25.3 hereof) and until each such Item has been so returned or delivered Obligor shall continue to pay Obligee the Equipment Payment for each such Item as specified in Section 6.3 hereof. -17- 36 25.2 Obligor's End of Term Transfer Option. On any Termination Date, if (a) no Equipment Agreement Event of Default shall have occurred and be continuing, and (b) this Equipment Agreement shall not have been earlier terminated, Obligor shall be entitled, at its option, upon written notice to Obligee, as hereinafter provided, to acquire all, but not less than all, of Obligee's rights and interests in the Items of Equipment the Term for which is scheduled to expire (if not otherwise renewed in accordance with Section 25.1 hereof) on such Termination Date for an amount (the "Transfer Option Amount"), with respect to each Item of Equipment, payable in immediately available funds, equal to the sum of (i) the aggregate of the Estimated Residual Values of such Items of Equipment applicable to the Basic Term or Renewal Term thereof then ending, plus (ii) the Equipment Payment due and payable for such Items of Equipment on the Termination Date, plus (iii) any applicable sales, excise or other Taxes imposed as a result of such sale (other than gross or net income taxes attributable to such sale), plus (iv) any Supplemental Payments then due and owing to any Person. Obligee's sale of each Item of Equipment shall be on an as-is, where-is basis, without any representation or warranty by, or recourse to, Obligee. If Obligor intends to exercise said transfer option, Obligor shall give written notice to Obligee to such effect at least thirty (30) days prior to the expiration of the Basic Term, or, if Obligor has renewed this Equipment Agreement pursuant to Section 25.1 hereof, then at least thirty (30) days prior to the expiration of the then current Renewal Term. If Obligor gives such written notice to Obligee, such notice shall constitute a binding obligation of Obligor to pay Obligee the Transfer Option Amount with respect thereto on the Termination Date thereof. 25.3 Third Party Sale of Equipment. 25.3.1 Remarketing Obligations. In the event Obligor does not exercise its option to acquire Obligee's rights and interests in all the Equipment pursuant to this Section and does not renew this Equipment Agreement, then Obligor shall have the obligation during the last 180 days of the Basic Term, or the then current Renewal Term, if applicable (the "Remarketing Period"), to solicit bona fide bids for not less than all Items of Equipment from prospective purchasers who are financially capable of purchasing such Items of Equipment for cash on an as-is, where-is basis, without recourse or warranty. Any bid received by Obligor prior to the end of the Remarketing Period shall be immediately communicated to Obligee, Owner Participant and LC Issuer in writing, setting forth the amount of such bid and the name and address of the person or entity submitting such bid. Notwithstanding the foregoing, Obligee and LC Issuer shall have the right, but not the obligation, to seek bids for the Equipment during the Remarketing Period. 25.3.2 Sale of Equipment to Third Party Buyer. On the Termination Date, provided that all the conditions set forth in Section 25.3.1 and in clauses (a) and (b) below have been met, Obligee shall sell (or cause to be sold) all Items of Equipment, for cash to the bidder, if any, who shall have submitted the highest bid during the Remarketing Period on an as-is, where-is basis and without recourse or warranty, and upon receipt by Obligee of the sales price, Obligee shall instruct Obligor to deliver and Obligor shall deliver the Equipment to such bidder; provided, that (a) any such sale to a third party shall be consummated, and the sales price for the Equipment shall have been paid to Obligee in immediately available funds, on or before the Termination Date; and (b) Obligee shall not be obligated to sell such Equipment (i) if the Net Proceeds of Sale of the Equipment are less than the aggregate Maximum Obligee Risk Amount -18- 37 applicable to the Equipment as of the Termination Date, or (ii) if Obligee has not received the amounts, if any, payable by Obligor pursuant to Section 26.1. 26. End of Term Equipment Payment Adjustment. 26.1 Third Party Sale of Equipment. This Section 26.1 shall apply only if, with respect to any Non-Renewal Item(s) of Equipment, a sale of such Item(s) to a third party pursuant to Section 25.3 hereof has been consummated on the Termination Date. If the Net Proceeds of Sale of such Item(s) are less than the aggregate Estimated Residual Value of such Item(s) as of such Termination Date, Obligor shall, on the Termination Date, pay to Obligee as an end of term Equipment Payment adjustment, in immediately available funds, an amount equal to such deficiency (a "Deficiency") as an adjustment to the Equipment Payment payable under this Equipment Agreement for such Item(s), plus the Equipment Payment due and payable for such Item(s) of Equipment on the Termination Date, plus any Supplemental Payments then due and owing to Obligee hereunder; provided, however, that if no Equipment Agreement Event of Default or event which, with notice or passage of time or both would constitute an Equipment Agreement Event of Default, shall have occurred and be continuing hereunder, the amount of the Deficiency payable by Obligor with respect to such Item(s) shall not exceed the aggregate Maximum Obligor Risk Amount then applicable to such Item(s). If the Net Proceeds of Sale of such Item(s) of Equipment exceed the aggregate Estimated Residual Value of such Item(s) and if no Equipment Agreement Event of Default or event which, with notice or passage of time or both would constitute an Equipment Agreement Event of Default, shall have occurred and be continuing hereunder and Obligor shall have paid Obligee on or before the Termination Date the Equipment Payment due and payable for such Item(s) of Equipment on the Termination Date, plus all Supplemental Payments then due and owing with respect to such Item(s), Obligee shall pay to Obligor an amount equal to such excess as an adjustment to the Equipment Payment payable under this Equipment Agreement for such Item(s). 26.2 Obligor Payment. If a sale of all Non-Renewal Items of Equipment either to Obligor pursuant to Section 25.2 hereof or to a third party pursuant to Section 25.3 hereof has not been consummated on the Termination Date with respect thereto for any reason, then Obligor shall, on the Termination Date of such Item(s), pay to Obligee as an end of term Equipment Payment adjustment, in immediately available funds, as an adjustment to the Equipment Payment payable under this Equipment Agreement for such Item(s) that have not been sold pursuant to Section 25.2 or 25.3, an amount equal to the Equipment Payment due and payable for such Item(s) of Equipment on the Termination Date, plus all Supplemental Payments then due and owing with respect to such Item(s) plus (a) the Maximum Obligor Risk Amount of all of such Items, if (i) on the Termination Date no Equipment Agreement Event of Default or event which, with notice or passage of time or both would constitute an Equipment Agreement Event of Default, shall have occurred and be continuing hereunder, and (ii) all Items of Equipment then subject to this Equipment Agreement have been returned to Obligee on the Termination Date in the condition and at the locations required by Section 6 hereof, and (iii) this Equipment Agreement shall not have been terminated prior to the Termination Date, and (iv) no amendment, modification, supplement, consent, waiver, approval, settlement, extension, compromise or accommodation of this Equipment Agreement shall have been entered into or granted without the prior written consent of the LC Issuer or (b) the Estimated Residual Value of all of such Items, if -19- 38 (i) on the Termination Date an Equipment Agreement Event of Default or event which, with notice or passage of time or both would constitute an Equipment Agreement Event of Default, shall have occurred and be continuing hereunder, or (ii) all Items of Equipment then subject to this Equipment Agreement have not been returned to Obligee on the Termination Date in the condition and at the locations required by Section 6 hereof, or (iii) this Equipment Agreement shall have been terminated prior to the Termination Date, or (iv) an amendment, modification, supplement, consent, waiver, approval, settlement, extension, compromise or accommodation of this Equipment Agreement shall have been entered into or granted without the prior written consent of the LC Issuer. Obligor shall remain liable for the payment of, and upon the consummation by Obligee of the sale of any Item(s) of Equipment on or after the Termination Date thereof, Obligor shall pay, or reimburse Obligee for the payment of, all applicable sales, excise or other Taxes imposed as a result of such sale, other than gross or net income taxes attributable to such sale, and such obligation shall survive the termination of this Equipment Agreement. 27. Governing Law, Jurisdiction and Venue; Waiver of Jury. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with, and be governed by, the law of the State of New York. The parties hereto hereby agree that all actions or proceedings initiated by any party hereto arising directly or indirectly out of this Agreement or the other Loan Documents may be litigated in the Supreme Court of the State of New York located in New York City or the District Court or the United States District Court for the Southern District of New York. Each party hereto hereby expressly submits and consents in advance to such jurisdiction and venue in any action or proceeding commenced by any party hereto in any of such courts, agrees that jurisdiction and venue is proper in such courts, and hereby waives personal service of the summons and complaint, or other process or papers issued therein, and agrees that such service of the summons and complaint may be made by registered mail, return receipt requested, addressed to the party hereto being served at the address for such party set forth in Section 10.4 of the Participation Agreement. Each party hereto waives any claim that New York City or the Southern District of New York is an inconvenient forum or an improper forum based on lack of venue. The choice of forum set forth herein shall not be deemed to preclude the enforcement by Lender or Security Trustee of any judgment in any other appropriate jurisdiction. Each of Obligor and Obligee hereby waives trial by jury in any judicial proceeding brought by it, Lender or Security Trustee involving directly or indirectly, any matter in any way arising out of, related to, or connected with this Agreement or the other Operative Documents. 28. Miscellaneous. Any provision of this Equipment Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating or diminishing Obligee's rights under 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. To the extent permitted by applicable law, Obligor hereby waives any provision of law which renders any provision of this Equipment Agreement prohibited or unenforceable in any respect. No term or provision of this Equipment Agreement may be amended, altered, waived, discharged or terminated orally, but may be amended, altered, waived, discharged or terminated only by an instrument in writing signed by a duly authorized representative of the party against which the -20- 39 enforcement of the amendment, alteration, waiver, discharge or termination is sought. A waiver on any one occasion shall not be construed as a waiver on a future occasion. All of the covenants, conditions and obligations contained in this Equipment Agreement shall be binding upon and shall inure to the benefit of the respective successors and assigns of Obligee and (subject to the restrictions of Sections 14.1 and 14.3 hereof) Obligor. This Equipment Agreement and the other Operative Documents, and each related instrument, document, agreement and certificate, collectively constitute the complete and exclusive statement of the terms of the agreement between Obligee and Obligor with respect to the acquisition and leasing of the Equipment, and cancel and supersede any and all prior oral or written understandings with respect thereto. 29. Payments. All payments by Obligor under this Agreement shall be made in immediately available funds to such bank and/or account as Obligee may from time to time notify to Obligor no less than three (3) Business Days prior to the due date of any such payment. 30. Concerning Obligee. Trust Company is entering into this Equipment Agreement solely in its capacity as Owner Trustee under the Trust Agreement and not in its individual capacity (except as expressly stated herein) and in no case shall Trust Company (or any entity acting as successor Owner Trustee under the Trust Agreement) be personally liable for or on account of any of the statements, representations, warranties, covenants or obligations stated to be those of Obligee hereunder; provided, however, that Trust Company (or any such successor Owner Trustee) shall be personally liable hereunder for Trust Company Liabilities. -21- 40 IN WITNESS WHEREOF, the parties hereto have caused this Equipment Agreement to be duly executed by their duly authorized representatives as of the date first above written. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as trustee under a Trust Agreement dated as of September 30, 1999 Obligee By: ----------------- Name: Title: HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Obligor By: ------------------ Name: Title: COUNTERPART NO. ____ OF ____ SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1. 41 EXHIBIT A-1 TO EQUIPMENT FINANCING AGREEMENT DATED AS OF SEPTEMBER 30, 1999 Type(s) of Equipment: As described on each of the Schedules of Equipment attached to the Equipment Agreement Supplements made with respect to this Exhibit A-1. Maximum Acquisition Cost: $90,000,000 Commitment Fee Rate: The rate set forth as such in the Program Administration and Fee Letter Acquisition Period: From September 30, 1999 to November 15, 1999, both dates inclusive. Basic Term Commencement Date: September 20, 2000 Renewal Terms: three (3) Renewal Terms of twelve (12) months each. 42 Dated as of September 30, 1999 STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as trustee under Trust Agreement dated as of September 30, 1999 Obligee By: ------------------- Name: Title: HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Obligor By: ------------------- Name: Title: Lender Consent Lender hereby consents to the terms contained herein: FOUR WINDS FUNDING CORPORATION, by Commerzbank AG, New York Branch as attorney-in-fact Lender By: ----------------------- Name: Title: By: ------------------------ Name: Title: 43 EXHIBIT A-2 TO EQUIPMENT FINANCING AGREEMENT DATED AS OF SEPTEMBER 30, 1999 Type(s) of Equipment: As described on each of the Schedules of Equipment attached to the Equipment Agreement Supplements made with respect to this Exhibit A-2. Maximum Acquisition Cost: $90,000,000 Commitment Fee Rate: The rate set forth as such in the Program Administration and Fee Letter Acquisition Period: From January 15, 2000 to June 30, 2000, both dates inclusive. Basic Term Commencement Date: September 20, 2000 Renewal Term: three (3) Renewal Terms of twelve (12) months each. 44 Dated as of September 30, 1999 STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as trustee under Trust Agreement dated as of September 30, 1999 Obligee By: ------------------ Name: Title: HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Obligor By: ------------------ Name: Title: Lender Consent Lender hereby consents to the terms contained herein: FOUR WINDS FUNDING CORPORATION, by Commerzbank AG, New York Branch as attorney-in-fact Lender By: ---------------------- Name: Title: By: ---------------------- Name: Title: 45 EXHIBIT B TO EQUIPMENT FINANCING AGREEMENT [FORM OF] EQUIPMENT AGREEMENT SUPPLEMENT NO. This Equipment Agreement Supplement is executed pursuant to, and incorporates by reference all of the terms, conditions and provisions of, the Equipment Financing Agreement dated as of September 30, 1999, between the undersigned State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but as trustee under a Trust Agreement dated as of September 30, 1999 ("Obligee") and Harman International Industries, Incorporated ("Obligor") (herein, as amended and supplemented from time to time, called the "Equipment Agreement"). Obligor hereby (a) acknowledges and certifies that (i) each Item of Equipment described below or on any Schedule attached hereto has been selected by, delivered to, and inspected by, Obligor, and is located at the location set forth below, (ii) Obligor has reviewed and approved the purchase order, supply contract or purchase agreement covering each such Item, and (iii) as between Obligee and Obligor, each such Item is of a size, design, capacity and manufacture acceptable to and suitable for Obligor's purposes, has been installed to Obligor's satisfaction, and is in good working order, repair and condition; and (b) unconditionally and irrevocably accepts each such Item for Equipment Agreement under the Equipment Agreement on the date hereof. Obligee and Obligor hereby agree that each Item of Equipment described below or on any Schedule attached hereto is hereby financed by Obligee under and subject to all of the terms, conditions and provisions of the Equipment Agreement; that the Term of each such Item commences on the date hereof and that such date is the Acceptance Date thereof; and that the Acquisition Cost, Interim Term, Related Exhibit A, Estimated Residual Values, Maximum Obligor Risk, Maximum Obligee Risk, Casualty Loss Values and Debt Component Amortization for all Items of Equipment covered by this Equipment Agreement Supplement are as set forth below. Obligor hereby agrees to pay the Equipment Payment for all Items of Equipment covered by this Equipment Agreement Supplement in the amounts and at the times specified in Section 7 of the Equipment Agreement and as specified below, reaffirms its acknowledgments and agreements in the Equipment Agreement and certifies that its representations and warranties set forth in Section 2.1 of the Participation Agreement and in any related certificate delivered to Obligee are true and correct on the date hereof. All capitalized terms used herein which are not defined herein shall have the meaning given to such terms in the Equipment Agreement. 1. Description of Item(s) of Equipment (include make, model and serial number): See Schedule A attached hereto. 2. Location: See Schedule A attached hereto. 3. Acquisition Cost: See Schedule A attached hereto 46 4. Interim Term: commencing on date hereof ("Acceptance Date") and ending on ______________, _____. 5. Related Exhibit A: Exhibit A - to the Equipment Agreement. 6. Certain Values: a. Estimated Residual Values: See Schedule B attached hereto. b. Maximum Obligor Risk: See Schedule C attached hereto. c. Maximum Obligee Risk: See Schedule C attached hereto. d. Casualty Loss Values: See Schedule D attached hereto. e. Debt Component Amortization: See Schedule E hereto. Dated: ___________________, _____. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as trustee under Trust Agreement dated as of September 30, 1999 Obligee By: -------------------- Name: Title: HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Obligor By: -------------------- Name: Title: 47 COUNTERPART NO. ____ OF ____ SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1. 48 Schedule A to Equipment Agreement Supplement [FORM OF] SCHEDULE OF EQUIPMENT TO EQUIPMENT AGREEMENT SUPPLEMENT NO. Subsidiary Name and Chief Executive Office Location of Equipment (Address) Total Type of Model Serial Acquisition Equipment Manufacturer Number Number Cost 49 Schedule B to Equipment Agreement Supplement [FORM OF] ESTIMATED RESIDUAL VALUES TO EQUIPMENT AGREEMENT SUPPLEMENT NO. Estimated Residual Prior to end of*: Value Percentage**: Month 24 Month 36 Month 48 Month 60 * References are to the number of calendar months following the Acceptance Date for an Item of Equipment. ** As a percentage of Acquisition Cost; based on an assumed Applicable Debt Rate of ____%. 50 Schedule C to Equipment Agreement Supplement [FORM OF] MAXIMUM OBLIGOR AND OBLIGEE RISK VALUES Maximum Maximum Obligor Obligee Risk Risk Percentage**: Percentage**: Month 24 Month 36 Month 48 Month 60 * References are to the number of calendar months following the Acceptance Date for an Item of Equipment. ** As a percentage of Acquisition Cost; based on an assumed Applicable Debt Rate of ____%. 51 Schedule D to Equipment Agreement Supplement [FORM OF] CASUALTY LOSS VALUES Casualty Loss Value Payment Date in Percentage of Acquisition Cost Month 4 Month 6 Month 9 Month 12 Month 15 Month 18 Month 21 Month 24 Month 27 Month 30 Month 33 Month 36 Month 39 Month 42 Month 45 Month 48 Month 51 Month 54 52 Month 57 Month 60 All Casualty Loss Value Payment Date ranges in the left hand column are inclusive. 53 Schedule E to Equipment Agreement Supplement [FORM OF] DEBT COMPONENT AMORTIZATION Payment Date in: Percentage of Debt Component Month 4 Month 6 Month 9 Month 12 Month 15 Month 18 Month 21 Month 24 Month 27 Month 30 Month 33 Month 36 Month 39 Month 42 Month 45 Month 48 Month 51 54 Month 54 Month 57 Month 60 -2- 55 TABLE OF CONTENTS Page 1. Definitions............................................1 2. Agreement for Lease of Equipment.......................1 3. Conditions Precedent...................................1 4. Delivery, Acceptance and Leasing of Equipment..........1 5. Term...................................................2 6. Return of Equipment....................................2 6.1 Redelivery........................................2 6.2 Storage...........................................3 6.3 Holdover Equipment Payment........................3 6.4 Specific Performance..............................3 7. Payments...............................................3 7.1 Interim Equipment Payment.........................3 7.2 Basic Equipment Payment...........................4 7.3 Commitment Fee....................................4 7.4 Supplemental Payments.............................4 7.5 Method of Payment.................................4 7.6 Applicable Debt Rate..............................4 7.7 Additional Costs; Illegality......................5 (i) 56 Page 8. Net Lease..............................................5 9. Grant of Security Interest; Equipment to be and Remain Personal Property..........................6 10. Use of Equipment; Compliance with Laws................6 11. Maintenance and Repair of Equipment...................6 12. Alterations; Modifications; Replacements..............7 13. Identification Marks; Inspection......................8 14. Assignment and Leasing................................8 14.1 By Obligor.......................................8 14.2 By Obligee.......................................9 14.3. Registration..................................10 15. Liens................................................10 16. Loss, Damage or Destruction..........................10 16.1 Risk of Loss, Damage or Destruction.............10 16.2 Payment of Casualty Loss Value Upon an Event of Loss................................10 16.3 Application of Payments Not Relating to an Event of Loss.............................11 (ii) 57 Page 17. Insurance............................................11 18. NO OBLIGEE WARRANTIES................................12 19. Assignment of Manufacturer Warranties................12 20. Events of Default....................................13 21. Remedies Upon Default................................14 22. Obligee's Right to Perform for Obligor...............16 23. Late Charges.........................................16 24. Notices..............................................16 25. Obligor's Renewal and Transfer Options...............16 25.1 Obligor's Renewal Option........................16 25.2 Obligor's End of Term Transfer Option...........17 25.3 Third Party Sale of Equipment...................17 25.3.1 Remarketing Obligations.......................18 25.3.2 Sale of Equipment to Third Party Buyer........18 26. End of Term Equipment Payment Adjustment.............18 26.1 Third Party Sale of Equipment...................18 26.2 Obligor Payment.................................19 (iii) 58 Page 27. Governing Law, Jurisdiction and Venue; Waiver of Jury......................................19 28. Miscellaneous........................................20 29. Payments.............................................20 30. Concerning Obligee...................................20 EXHIBIT A-2 TO EQUIPMENT FINANCING AGREEMENT DATED AS OF SEPTEMBER 30, 1999............................1 EXHIBIT B TO EQUIPMENT FINANCING AGREEMENT.............................1 Schedule A to Equipment Agreement Supplement...........................1 [FORM OF] SCHEDULE OF EQUIPMENT TO EQUIPMENT AGREEMENT SUPPLEMENT NO......................1 Schedule B to Equipment Agreement Supplement............................2 [FORM OF] ESTIMATED RESIDUAL VALUES TO EQUIPMENT AGREEMENT SUPPLEMENT NO......................2 Schedule C to Equipment Agreement Supplement............................3 [FORM OF] MAXIMUM OBLIGOR AND OBLIGEE RISK VALUES.......................................3 Schedule D to Equipment Agreement Supplement.........................4 [FORM OF] CASUALTY LOSS VALUES......................................4 (iv) 59 Page Schedule E to Equipment Agreement Supplement............................1 [FORM OF] DEBT COMPONENT AMORTIZATION...............................1 (v) 60 APPENDIX A HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED EQUIPMENT FINANCING AGREEMENT The definitions stated herein shall equally apply to both the singular and plural forms of the terms defined. Any agreement defined or referred to below means such agreement as amended, supplemented or modified from time to time, and includes all exhibits, supplements and appendices thereto. Any Person defined or referred to below include its successors, permitted transferees and assigns. The word "including," when used below or in any Operative Document, is deemed to be followed by "without limitation," whether or not such words appear. "Acceptance Date" for each Item of Equipment means the date on which Obligor has financed such Item hereunder, as evidenced by Obligor's execution and delivery of an Equipment Agreement Supplement for such Item dated such date. "Acquisition Cost" of each Item of Equipment means an amount equal to the sum of (i) the total cost paid by Obligee to Obligor for such Item, plus (ii) all sales and excise taxes paid by Obligee and/or Obligor as agent for Obligee on or with respect to the acquisition of such Item, plus (iii) all costs and expenses approved and paid by Obligor as agent for Obligee in connection with the delivery and installation of such Item. "Acquisition Period" means the period specified as such on each consecutively numbered Related Exhibit A now or hereafter attached hereto and made a part of the Equipment Agreement. "Affected Person" means each of the Lender, the Liquidity Providers, the Credit Support Parties, any permitted assignee of the Lender, the Liquidity Providers or the Credit Support Parties, the administrator and liquidity agent under the Liquidity Facility, the Agent, the holding company of any of the Liquidity Providers or the Credit Support Parties and any successor holding company thereof, so long as, in the case of any bank, insurance company or financial institution other than any Liquidity Provider or Commerzbank serving as Liquidity Provider or Credit Support Party, such Person has been approved as an Affected Person by Obligor and Obligee, such approval not to be unreasonably withheld. "Affiliate" means as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. 61 "After-Tax Basis" means in respect of an amount (the "base amount") with respect to a Person, the base amount supplemented by a future payment, if necessary, to such Person such that, after reduction for all Taxes (other than Taxes based upon a Person's net income or gross receipts and which are imposed or levied by any Federal, national, state, provincial or local taxing authority in the United States or a foreign country unless such Person would not otherwise have been subject to taxation in such jurisdiction but for such Person's involvement in this transaction), if any, imposed on such Person in respect of the sum of the base amount and such future payment shall be equal to the base amount. "Alternate Rate" means a variable rate equal to the greater of (i) the sum of the Federal Funds Rate from time to time in effect and 1/2 of one percent (0.5%) and (ii) the rate of interest from time to time announced by Agent at its New York Branch from time to time as its "prime commercial lending rate" (which rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer, and Agent may make commercial loans or other loans at rates of interest at, above or below such reference rate). "Applicable Debt Rate" (a) for the purpose of calculating Equipment Payment means the rate calculated in accordance with Section 7.6 of the Equipment Agreement and (b) for the purpose of calculating interest due on a Loan means the Commercial Paper Rate if and for so long as the Loan is funded by the issuance of Commercial Paper Notes and no participation interest or ownership interest in the Loan has been sold under the Liquidity Facility otherwise, subject to Section 5.5.9 of the Participation Agreement, the LIBOR Rate then in effect as determined by Lender. "Applicable Law" means, with respect to any Person or Item of Equipment, all provisions of statutes, rules, regulations, orders and requests (whether or not having the force of law) of any Governmental Entity applicable to such Person or Item of Equipment, and all orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party. "Assignee" has the meaning set forth in Section 14.2 of the Equipment Agreement. "Basic Term" for each Item of Equipment means the period consisting of twelve (12) months commencing on the "Basic Term Commencement Date" set forth on the Related Exhibit A for such Item and terminating on the Payment Date that occurs in the last month of such twelve (12) month period. "Basic Term Commencement Date" for each Item of Equipment means the date specified as such on the Related Exhibit A. "Business Day" means any day other than a day on which banking institutions in the State of Connecticut or the State of New York are authorized by law to close. 2 62 "Casualty Loss Value" of each Item of Equipment as of any Casualty Loss Value Payment Date means an amount determined by multiplying the Acquisition Cost of such Item of Equipment by the percentage set forth opposite such Casualty Loss Value Payment Date on the Schedule of Casualty Loss Values attached to the Equipment Agreement Supplement for such Item. "Casualty Loss Value Payment Date" for each Item of Equipment for which an Event of Loss occurs shall mean the Payment Date for such Item next following the date of such Event of Loss. "Certificate of Costs" means a certificate by Obligor executed by a Responsible Officer certifying Obligor's original purchase price and date of purchase of each Item of Equipment to be sold by Obligor to Obligee under the Participation Agreement in the form of Exhibit B to the Participation Agreement. "Closing Date" means the first Funding Date. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time, or any comparable successor law. "Collateral" has the meaning set forth in Section 7.1 of the Participation Agreement. "Commercial Paper Margin" means the commercial paper margin set forth in the Program Administration Letter expressed as an annual percentage rate calculated to the seventh decimal place. "Commercial Paper Notes" means short term promissory notes issued or to be issued by Lender to fund its investment in, or the make of, the Loans, with maturities of one (1) to ninety (90) days selected by Obligor, Obligee and Lender, provided however, for so long as a Loan Default has occurred and is continuing the maturities shall be selected by Lender in its sole discretion. "Commercial Paper Rate" except as otherwise provided in the Program Administration Letter, means for any period the sum of (a) the rate or yield (or if more than one rate or yield, the weighted average of the rates or yields) at which Commercial Paper Notes of Lender have been sold by Lender or any placement agent or commercial paper dealer selected by Lender, as agreed between each such dealer or agent and Lender, for the purpose of financing a Loan, plus (b) the commissions and charges charged by such placement agent or dealer with respect to such Commercial Paper Notes, plus (c) the Commercial Paper Margin. "Commerzbank" means Commerzbank Aktiengesellschaft, New York Branch. 3 63 "Commitment" means for the initial Commitment Period, $87,300,000 less any Debt Amortization Payments from time to time received by Lender and for any subsequent Commitment Period, if any, such amount as agreed among Obligor, Obligee and Lender. "Commitment Fee" means the payment payable to Obligee pursuant to Section 7.3 of the Equipment Agreement. "Commitment Fee Rate" means, at any time, the rate then applicable set forth as such in Schedule 2 to the Participation Agreement expressed as an annual percentage rate calculated to the seventh decimal place on an actual/360-day basis. "Commitment Period" means initially the period from the Closing Date to June 30, 2000 and thereafter shall mean the Acquisition Period, if any, then in effect. "Consolidated Capitalization" means any date, the sum of (a) shareholders' equity of Obligor and (without duplication) its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, and (b) Consolidated Total Debt; provided, that the Studer Preferred Stock shall not be included in determining shareholders' equity of Obligor and its consolidated Subsidiaries. "Consolidated EBITDA" means for any period, Consolidated Net Income for such period, plus the amount of taxes, interest, depreciation and amortization deducted from earnings in determining such Consolidated Net Income. "Consolidated Interest Expense" means for any period, the amount of interest expense deducted from earnings of Obligor and its consolidated Subsidiaries in determining Consolidated Net Income for such period in accordance with GAAP. "Consolidated Net Income" means for any fiscal period, the net income of Obligor and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Consolidated Total Debt" means at any date, without duplication, the aggregate of all Indebtedness (including the current portion thereof) of Obligor and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Credit Support Party" means any Liquidity Provider and any bank, insurance company or other financial institution extending or having a commitment to extend funds to or for the account of Lender. "Cross Receipt" means a cross receipt in the form of Exhibit A to the Participation Agreement to be executed and delivered by Obligor. "Debt Amortization Payment" for any Item of Equipment as of any Payment Date means the amount determined by multiplying the Debt Component of such Item by the 4 64 percentage set forth opposite such Payment Date on the Schedule of Debt Component Amortization attached to the Related Equipment Agreement Supplement. "Debt Component" for each Item of Equipment means the dollar amount of the Acquisition Cost financed by Lender on the Acquisition Date therefor calculated as 97.00% of the Acquisition Cost for such Item. "Deficiency" has the meaning set forth in Section 26.1 of the Equipment Agreement. "Dollar" means freely transferable, lawful money of the United States. "EBITDA Ratio" means on any date, the ratio of Consolidated EBITDA to Consolidated Interest Expense for the four consecutive fiscal quarters of Obligor most recently ended prior to such date. "English Debenture" means each of Debentures among (i) Obligee and Security Trustee, (ii) Obligor and Security Trustee and (iii) Harman International Industries, Limited in the forms attached hereto as Exhibits H-1, H-2 and H-3. "Equipment" means the equipment of the type(s) described on the Schedule of Equipment attached to each consecutively numbered Equipment Agreement Supplement now or hereafter made a part of the Equipment Agreement together with any and all related appliances, parts, accessories, appurtenances, accessions, additions, improvements, replacements and other equipment or components of any nature from time to time incorporated or installed therein. "Equipment Agreement" means the Equipment Financing Agreement dated as of September 30, 1999 between Obligor and Obligee and each Equipment Agreement Supplement as amended, supplemented and modified from time to time in accordance with the terms of the Operative Documents. "Equipment Agreement Default" has the meaning set forth in Section 20 of the Equipment Agreement. "Equipment Agreement Event of Default" has the meaning set forth in Section 20 of the Equipment Agreement. "Equipment Agreement Supplement" means an Equipment Agreement Supplement substantially in the form attached to the Equipment Agreement as Exhibit B, to be executed by Obligee and Obligor with respect to each Item of Equipment as provided in Section 4 of the Equipment Agreement and consented thereto by Lender. "Equipment Payment" means the amount payable during the Interim Term pursuant to Section 7.1 of the Equipment Agreement, during the Basic Term pursuant to Section 7.2 of the Equipment Agreement, during each Renewal Term pursuant to Section 25.1 of the 5 65 Equipment Agreement and during any holdover period pursuant to Section 6.3 of the Equipment Agreement, any Deficiency, any end of term rent adjustment payable in accordance with Section 26.2 of the Equipment Agreement and the Commitment Fees. "Equipment Payment Period" for each Item of Equipment means (a) for the Interim Term of such Item, each period for which a payment of Equipment Payment is to be made for such Item during the Interim Term as set forth in Section 7.1 of the Equipment Agreement, (b) for the Basic Term of such Item, each period for which a payment of Equipment Payment is to be made for such Item during the Basic Term thereof as set forth in Section 7.2 of the Equipment Agreement, and (c) for each Renewal Term of such Item, each period for which a payment of Equipment Payment is to be made for such Item during such Renewal Term as set forth in Section 25.1 of the Equipment Agreement. "Equity Component" for each Item of Equipment means the difference between the Acquisition Cost and the Debt Component therefor. "Equity Margin" means the equity margin set forth in the Program Administration Letter, expressed as an annual percentage rate calculated to the seventh decimal place. "Equity Rate" means the three (3)-month LIBOR Rate in effect as of the first LIBOR Banking Day of each Equipment Payment Period plus the Equity Margin. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Estimated Residual Value" for any Item of Equipment on any date of determination shall mean an amount obtained by multiplying (a) the percentage set forth in the Equipment Agreement Supplement for such Item under the caption "Estimated Residual Value Percentage" applicable to the Basic Term or Renewal Term in effect on such date, by (b) the Acquisition Cost for such Item. "Event of Loss" with respect to any Item of Equipment means (a) the loss of such Item of Equipment or any substantial part thereof, or (b) the loss of the use of such Item of Equipment due to theft or disappearance for a period in excess of 45 days during the Term, or existing at the expiration or earlier termination of the Term, or (c) the destruction, damage beyond repair, or rendition of such Item of Equipment or any substantial part thereof permanently unfit for normal use for any reason whatsoever, or (d) the condemnation, confiscation, seizure, or requisition of use or title to such Item of Equipment or any substantial part thereof by any Governmental Entity under the power of eminent domain or otherwise beyond the earlier of sixty (60) days and the end of the Basic Term or Renewal Term, as applicable. "Excepted Payments" means (a) indemnity payments paid or payable in favor of Trust Company, Owner Participant, Lenders, any Liquidity Provider or any Assignee, or their 6 66 successors or assigns, directors, officers, employees, affiliates and agents under the Operative Documents, (b) proceeds of public liability insurance (or government indemnities in lieu thereof) payable to Trust Company, Owner Participant, Lenders, any Liquidity Provider or any Assignee either pursuant to the Equipment Agreement or the Participation Agreement (which shall include proceeds of any self- insurance by Obligor) or maintained by Obligor, Trust Company, Obligee, Owner Participant, Lenders, any Liquidity Provider or any Assignee and not required to be maintained under the Equipment Agreement, (c) costs or expenses paid or payable by Obligor to, or for the benefit of, Trust Company, Owner Participant, Lenders, any Liquidity Provider or any Assignee, (d) all rights of, and payments to, Owner Participant under and pursuant to the Trust Agreement, (e) where any amount payable to Trust Company, Owner Participant, Lenders, any Liquidity Provider or any Assignee is expressed to be payable on an After-Tax Basis, the increment to the underlying payment obligation arising by virtue of the operation of the definition of "After-Tax Basis," (f) any payments in respect of interest to the extent attributable to payments referred to in clauses (a) through (e) above and otherwise required to be paid thereon, (g) all rights to receive the amounts referred to in clauses (a) through (f) above, and (h) the proceeds of enforcement of any right to receive the proceeds of any amount referred to in clauses (a) through (f) above. "Federal Funds Rate" means for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of one percent) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 a.m. (New York time) for such day on such transactions received by Agent from three federal funds brokers of recognized standing selected by Agent. "French Commercial Pledge Agreement" means each Commercial Pledge Agreement among Audax Industries S.N.C., Obligee and Security Trustee in the form attached hereto as Exhibit F-1. "Funding Date" has the meaning set forth in Section 4.5 of the Participation Agreement. "Funding Notice" has the meaning set forth in Section 4.5 of the Participation Agreement. "GAAP" means generally accepted accounting principles in the United States of America in effect from time to time. 7 67 "German Chattel Mortgage Agreement" means each of the Agreements on Chattel Mortgage among (i) Becker GMBH and Obligor, (ii) Harman Audio Electronic Systems GMBH and Obligor, (iii) Obligor and Obligee and (iv) Obligee and Security Trustee in the forms attached hereto as Exhibits G-1, G-2, G-3, and G-4. "Guaranty Obligation" means as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends, derivative instrument or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guaranty Obligation shall not include (x) endorsements of instruments for deposit or collection in the ordinary course of business or (y) obligations of the Obligor or any of its Subsidiaries under arrangements entered into in the ordinary course of business whereby Obligor or such Subsidiary sells inventory to other Persons under agreements obligating Obligor or such Subsidiary to repurchase such inventory, at a price not exceeding the original sale price, upon the occurrence of certain specified events. "Governmental Entity" means any Federal, state, municipal or other governmental department, commission, board, bureau, agency, central bank or instrumentality or any court, in each case whether of the United States or any foreign country. "Illegality Event" has the meaning set forth in Section 5.5.9 of the Participation Agreement. "Indebtedness" means of any Person at any date, all indebtedness or obligations of such Person (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), as reflected on the balance sheet of such Person prepared in accordance with GAAP. "Interim Term" for each Item of Equipment means the period commencing on the Acceptance Date for such Item (unless the Acceptance Date is the Basic Term Commencement Date, in which case there shall be no Interim Term for such Item) and ending on the date immediately prior to the Basic Term Commencement Date. 8 68 "Item of Equipment" or "Item" means any of the items of Equipment separately identified on any of the Schedules of Equipment attached to the Equipment Agreement Supplements now or hereafter made a part of the Equipment Agreement. "Lender" means Four Winds Funding Corporation, a Delaware corporation, and its permitted successors and assigns. "LC Reimbursement Security Agreement" means the Reimbursement Security Agreement between Obligee and LC Issuer dated as of September 30, 1999. "LC Issuer" means BTM Capital Corporation, a Delaware Corporation and its permitted successors and assigns. "LC Issuer Option" has the meaning set forth in Section 9A.1 of the Participation Agreement. "Lender Available Commitment" means, at any time during a Commitment Period, an amount equal to the excess, if any, of the Commitment less the aggregate of the initial principal balances of all Loans previously made. "LIBOR" means, in relation to any period, the rate for deposits in Dollars for that period which appears on the Telerate Page 3750 as of 11:00 a.m. London time on the second LIBOR Banking Day before the first day of the relevant period; provided that if such rate does not appear on the Telerate Screen Page 3750, LIBOR shall mean the rate for deposits of an amount comparable to the aggregate of the Unamortized Debt Balances then financed or refinanced by Lender by loans on the London interbank Dollar market for that period determined by Lender to be the LIBOR rate offered by Agent to leading banks in the London Eurodollar interbank market at 11:00 a.m. London time on the second LIBOR Banking Day before the first day of the relevant period for that relevant period adjusted for any reserve requirements in effect on the first day of such period. "LIBOR Banking Day" means any day other than a day on which banking institutions in the State of New York or the City of London are authorized by law to close. "LIBOR Margin" means, at any time, the liquidity margin then applicable set forth in Schedule 2 to the Participation Agreement, expressed as an annual percentage rate calculated to the seventh decimal place. "LIBOR Rate" means the sum of LIBOR plus the LIBOR Margin. "Lien" means liens, mortgages, encumbrances, pledges, charges and security interests of any kind. "Liquidity Facility" means (i) Liquidity Asset Purchase Agreement dated as of September [30], 1999, among Lender, as issuer, Commerzbank, as liquidity agent for the 9 69 purchasers thereunder, and the purchasers and (ii) any other agreement hereafter entered into by Lender providing for the sale by Lender of undivided participation or ownership interests in the Note or Notes (or portions thereof) or the making of loans or other extensions of credit to Lender to support all or part of Lender's payment obligations under the Commercial Paper Notes or to provide alternate means of funding Lender's investments in, or in the making of, the Loans. "Liquidity Provider" means Commerzbank and any other Permitted Lender Assignee that extends credit to or for the account of Lender or any other Liquidity Provider (whether by means of a loan or advance, the acquisition of an interest in the Note or Notes or otherwise) or that has a commitment to do the foregoing, in each case, under the Liquidity Facility or pursuant to a participation in an interest in the Liquidity Facility. "Loan" has the meaning set forth in Section 5.1 of the Participation Agreement. "Loan Commitment Fee" means the commitment fee payable to Lender pursuant to Section 5.5.3 of the Participation Agreement. "Loan Default" means an event, which with the giving of notice or lapse of time or both, would become a Loan Event of Default. "Loan Documents" means the Participation Agreement, Notes and Security Documents. "Loan Event of Default" has the meaning set forth in section 5.10 of the Participation Agreement. "Majority Lenders" means Lenders in the aggregate holding Notes representing more than 50% of the aggregate outstanding principal balances of the Loans with each Lender being able to vote all or any portion of its outstanding principal balance. "Material Obligation" means any capitalized lease, derivative instrument or Guaranty Obligation. "Maturity Date" for each Loan means the earlier of (a) the last day of the third Renewal Period for the Items of Equipment financed with the Loan proceeds and (b) such earlier date on which such Loan becomes due and payable under the Participation Agreement. "Maximum Acquisition Cost" means initially for the period from the Closing Date to June 30, 2000, $90,000,000 and thereafter the amount specified as such on the latest Exhibit A. "Maximum Obligor Risk Amount" for any Item of Equipment on any date of determination shall mean an amount obtained by multiplying (a) the percentage set forth in the Equipment Agreement Supplement for such Item under the caption "Maximum Obligor Risk 10 70 Percentage" applicable to the Basic Term or Renewal Term in effect on such date, by (b) the Acquisition Cost for such Item. "Maximum Obligee Risk Amount" for any Item of Equipment on any date of determination shall mean an amount obtained by multiplying (a) the percentage set forth in the Equipment Agreement Supplement for such Item under the caption "Maximum Obligee Risk Percentage" applicable to the Basic Term or Renewal Term in effect on such date, by (b) the Acquisition Cost for such Item. "Multi-Currency Credit Agreement" means the Multi-Currency, Multi-Option Credit Agreement dated as of September 30, 1994 among Obligor, Chemical Securities Inc., Nationsbank of North Carolina N.A., Chemical Bank and the several lenders party thereto as amended from time to time prior to the date hereof, and if such is no longer in effect, any other credit agreement or loan agreement which provides Obligor and all or some of its subsidiaries with their primary source of working capital borrowings and if there is no such credit agreement or loan in effect then such last agreement or loan as in effect immediately prior to its termination or expiration. "Multi-Currency Negative Covenants" means each and every financial and negative covenant contained in the Multi-Currency Credit Agreement (other than covenants (a) for the maintenance of a ratio of Consolidated Total Debt to Consolidated Capitalization, (b) for the maintenance of an EBITDA Ratio or (c) restricting mergers, consolidations, amalgamations, liquidation, winding up or dissolutions) as such covenants are in effect from time to time, which, as of the date hereof, are contained in Section 10 of the Multi-Currency Credit Agreement. "Net Proceeds of Sale" means with respect to each Item of Equipment sold by Obligee to a third party pursuant to Section 25.3 of the Equipment Agreement, the net amount of the proceeds of sale of such Item, after deducting from the gross proceeds of such sale (a) all sales taxes and other taxes (excluding income taxes on or measured by Obligee's income) as may be applicable to the sale or transfer of such Item, (b) all fees, costs and expenses of such sale incurred by Obligee and (b) any other amounts for which, if not paid, Obligee would be liable or which, if not paid, would constitute a Lien on such Item. "Non-Renewal Item of Equipment" means each Item of Equipment with respect to which the Equipment Agreement is not renewed at the end of the Basic Term or any Renewal Term pursuant to timely notice to Obligee in accordance with the provisions of Section 25.1 of the Equipment Agreement. "Note" has the meaning set forth in Section 5.3 of the Participation Agreement. "Obligee" means State Street Bank and Trust Company of Connecticut, a national banking association not in its individual capacity by solely as trustee and its permitted successors and assigns. 11 71 "Obligee Available Commitment" means, at any time during a Commitment Period, an amount equal to the excess, if any, of (a) the Maximum Acquisition Cost for such Commitment Period less (b) the aggregate of the Acquisition Costs of all Items of Equipment first financed during such Acquisition Period. "Obligee Indemnified Person" means each of Trust Company, Owner Participant, LC Issuer, Lender, Agent, Security Trustee, any Liquidity Provider and any Assignee, their successors and assigns and each of their respective officers, directors, employees, beneficiaries, stockholders, agents and servants. "Obligor" means Harman International Industries, Incorporated and its permitted successors and assigns. "Obligor Indemnified Person" means each Obligee Indemnified Person and Obligee, its successors and assigns and each of their respective officers, directors, employees, beneficiaries, stockholders, agents and servants. "Operative Documents" means the Participation Agreement, the Notes, the Cross Receipts, the Equipment Agreement, all Equipment Agreement Supplements, the Liquidity Facility, the Program Administration Letter, the Trust Agreement, the LC Reimbursement Security Agreement, the letter agreement between Obligor and Obligee concerning the initial Equity Rate for the first Funding Date and the Security Documents and in each case, all exhibits and supplements thereto, and all notices, consents, certificates and other documents from time to time issued or entered into pursuant to or in connection therewith; in each case as amended and modified from time to time. "Optional Alteration" has the meaning given set forth in Section 12 of the Equipment Agreement. "Outstanding Debt Amount" with respect to each Item of Equipment means the Debt Component therefor less the aggregate of all Debt Amortization Payments, all payments on account of Casualty Loss Value and all Deficiency payments and all payments made by Obligor to Obligee in accordance with Section 26.2 of the Equipment Agreement paid by Obligor to Obligee with respect to such Item. "Overdue Rate" means the Applicable Debt Rate at the time in effect plus two (2) percent (200 basis points). "Owner Participant" means Bank of Tokyo-Mitsubishi Trust Company, a New York trust company, and its permitted successors and assigns. "Participation Agreement" means the Participation Agreement dated as of September 30, 1999 among Obligor, Obligee, Lender and Owner Participant, and Security Trustee as amended and modified from time to time in accordance with the terms thereof. 12 72 "Payment and Amortization Schedule" for each Loan means the payment and amortization scheduled attached to the Related Note. "Payment Date" means January 20, 2000, March 20, 2000 and the 20th of each June, September, December and March thereafter, provided however, if any such date is not a LIBOR Banking Day, then the Payment Date shall be the next LIBOR Banking Day. "Permitted Lender Assignee" means any "accredited investor" under Rule 501(a) of the Securities Act of 1933, as amended, which is either a bank, insurance company, mutual fund, trust company, employee benefit plan (as defined in ERISA), or savings and loan company, in each case having total assets of at least $200,000,000 or LC Issuer upon exercise of the LC Issuer Option. "Permitted Lien" means Liens created or granted by Obligee in connection with the Participation Agreement or the LC Reimbursement Security Agreement and any Lien of a mechanic, material-man, carrier, employee or other similar Lien arising in the ordinary course of business by statute or by operation of law, in respect of obligations that are not overdue or that are being contested in good faith by appropriate proceedings. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or government or Governmental Entity, agency or political subdivision thereof. "Prepayment Premium" means with respect to any repayment of a Loan in whole or in part on any day other than a Payment Date the amount (if any) by which (a) the amount of interest payable on the next Payment Date on the amount of the Loan which is repaid, but for it having been so repaid, exceeds (b) the aggregate of the amount of interest accrued to the date such amount is repaid and an amount equal to AR x D x R, where AR equals the amount which is repaid, D equals the number of days from the date of repayment to the next Payment Date and R equals (i) for each Loan or portion thereof accruing interest at the Commercial Paper Rate, the rate earned by Lender by reinvesting the amount repaid in such interest bearing short term investments as Lender may select in its sole discretion or (ii) for each Loan or portion thereof accruing interest at the LIBOR Rate, the rate per annum at which the Lender concerned is offering or would offer in the London Interbank Market (based on commercially reasonable criteria) for Dollar deposits of leading banks in an amount substantially equal in the amount repaid for a period from such date to the next Payment Date. "Program Administration Letter" means that certain Program Administration and Fee Letter between Obligor, Obligee, Owner Participant and Lender of even date herewith, as amended and modified from time to time in accordance with the terms thereof. "Redelivery Location" means, with respect to any Item of Equipment that is to be returned by Obligor to Obligee, a location or locations designated by Obligee. 13 73 "Related Exhibit A" means, with respect to an Item of Equipment, the particular numbered Exhibit A now or hereafter attached to the Equipment Agreement and made a part thereof to which such Item relates as specified in Section 4 of the Equipment Agreement. "Related Equipment Agreement Supplement" means, with respect to an Item of Equipment, the particular numbered Equipment Agreement Supplement on which that Item is identified. "Related Note" means with respect to any Loan, the Note therefor, and with respect to any Item of Equipment, the Note issued by Obligee to finance or refinance the Debt Portion of the Acquisition Cost therefor. "Renewal Term" for each Item of Equipment means each twelve (12) month period following the end of the Basic Term for such Item with respect to which Obligor has the option to renew the Equipment Agreement pursuant to Section 25.1 of the Equipment Agreement, terminating on the Payment Date that occurs in the twelfth month of such Renewal Term. "Required Alteration" has the meaning set forth in Section 12 of the Equipment Agreement. "Responsible Officer" means the chief executive officer, the president, the chief financial officer, the Chief operating officer or the vice president for financial or legal affairs of Obligor. "Restricted Subsidiary" means any Subsidiary identified as a "Restricted Subsidiary in the Multi-Currency Credit Agreement. "Secured Obligations" has the meaning set forth in Section 12 of the Participation Agreement. "Security Documents" means the UCC financing statements referenced in Section 2.1(g) of the Participation Agreement, the French Commercial Pledge Agreements, the German Chattel Mortgage Agreements, the English Debentures, and Subsidiary Equipment Agreements. "Security Trustee" means Commerzbank. "Standard & Poor's" means Standard & Poor's Rating Service, a Division of McGraw Hill Companies, Inc. and any successor or assign. "Subsidiary" means as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, 14 74 partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. "Subsidiary Equipment Agreement" has the meaning set forth in Section 14.1 of the Equipment Agreement. "Supplemental Payments" means all amounts, liabilities and obligations which Obligor assumes or agrees to pay hereunder to Obligee or others, including payments of Casualty Loss Value, Estimated Residual Value and indemnities, but excluding Equipment Payment. "Taxes" has the meaning set forth in Section 8.2 of the Participation Agreement. "Term" for each Item of Equipment means the period from and including the Acceptance Date thereof and ending on the last day of the Basic Term thereof or, if renewed, the last Renewal Term thereof. "Termination Date" for each Item of Equipment means the last day of the Basic Term therefor, or if the Term of such Item has been renewed pursuant to Section 25.1 of the Equipment Agreement, the last day of the then current Renewal Term of such Item. "Transfer Option Amount" has the meaning set forth in Section 25.2 of the Equipment Agreement. "Trust" means the trust created by the Trust Agreement. "Trust Agreement" means that certain Trust Agreement by and between Trust Company and Owner Participant, dated as of September , 1999, as amended, supplemented or modified from time to time. "Trust Company" means State Street Bank and Trust Company of Connecticut, National Association, a national banking association, and its successors and assigns, each in its individual capacity. "Trust Company Liabilities" has the meaning set forth in Section 6.11 of the Trust Agreement. "Trust Estate" means all of the estate, right, title and interest of Obligee, solely in its capacity as Owner Trustee under the Trust Agreement, and as Obligee in and to the Participation Agreement and the Equipment Agreement and all documents related hereto and to the Equipment, and all proceeds thereof, including, without limitation, all Equipment Payment, insurance proceeds and Supplemental Payments, but excluding any Excepted Payments. "UCC" means the Uniform Commercial Code, as in effect in any applicable jurisdiction. 15 75 "Unamortized Debt Balance" for any Item of Equipment means the amount calculated by multiplying the unpaid principal balance of the Related Loan by a fraction, the numerator of which is the Acquisition Cost of such Item of Equipment and the denominator is the aggregate of all Acquisition Costs for Items of Equipment (including such Item of Equipment with respect to which such calculation is being made) acquired by Obligee with the proceeds of such Related Loan and at the time subject to the Equipment Agreement. When used in any Operative Document the words "this Agreement", "herein", "hereunder", "hereof" or other like words mean and include such Operative Document and each amendment and supplement thereto, and with respect to the Equipment Agreement, each Exhibit A, each Equipment Agreement Supplement. All references to sections, schedules and exhibits in any Operative Document are to sections, schedules and exhibits in or to such Operative Document unless otherwise specified. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles in effect from time to time in the United States. All words importing any gender shall be deemed to include the other gender. All references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to. Unless otherwise specified, references to agreements and other contractual instruments shall be deemed to include all subsequent amendments, modifications and supplements thereto. 16 76 EX-10 3 EXHIBIT 10.68 77 PARTICIPATION AGREEMENT among HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Obligor STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION in its individual capacity and as trustee, as Obligee FOUR WINDS FUNDING CORPORATION as Lender COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH as Agent and Security Trustee BANK OF TOKYO - MITSUBISHI TRUST COMPANY as Owner Participant and BTM CAPITAL CORPORATION as Letter of Credit Issuer Dated as of September 30, 1999 MANUFACTURING EQUIPMENT FINANCING AGREEMENT 78 PARTICIPATION AGREEMENT This PARTICIPATION AGREEMENT, dated as of September 30, 1999 (together with all amendments and supplements hereto, this "Agreement") is among HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, a Delaware corporation (together with its successors and permitted assigns "Obligor"), STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as trustee (together with its successors and permitted assigns, "Obligee") and in its individual capacity, but only where so specified, (together with its successors and permitted assigns, "Trust Company"), FOUR WINDS FUNDING CORPORATION, a Delaware corporation (together with its successors and assigns, "Lender"), COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH, the New York Branch of a German banking corporation as agent for Lender (together with its successors and permitted assigns "Agent") and as security trustee (together with its successors and permitted assigns, "Security Trustee"), BANK OF TOKYO - MITSUBISHI TRUST COMPANY, a New York trust company (together with its successors and permitted assigns, the "Owner Participant") and BTM CAPITAL CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the "LC Issuer"). W I T N E S S E T H: WHEREAS, Obligee has agreed to finance certain manufacturing equipment pursuant to an Equipment Agreement of even date herewith between Obligor and Obligee (the "Equipment Agreement"); WHEREAS, Lender has agreed to make a loan or loans to Obligee subject to the conditions, restrictions and limitations in this Agreement, for the purpose of financing Obligee's acquisition of the manufacturing equipment to be financed under the Equipment Agreement; WHEREAS, to induce Lender to make a loan or loans to Obligee, Obligee has agreed to provide Security Trustee on behalf of Lender certain security in accordance with the terms hereof. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, the parties hereto agree as follows: 1.Definitions. Unless the context otherwise requires, capitalized terms used herein and not otherwise defined herein shall have the meanings set forth or referred to in Appendix A. 2.Representations and Warranties. 2.1. Obligor Representations and Warranties. Obligor hereby represents and warrants as of the Closing Date and on each Funding Date for the benefit of each other party hereto that: -1- 79 (a) Obligor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation set forth above, has full power, authority and legal right under such laws to execute, deliver and perform its obligations under the Operative Documents to which it is a party and is qualified to do business in and is in good standing in each state or other jurisdiction in which the nature of its business makes such qualification necessary, except where failure to so qualify would not have a material adverse effect on Obligor; (b) the financing of the Equipment, the execution and delivery of the Operative Documents and the other related instruments, documents and agreements to which it is a party, and the compliance by Obligor with the terms hereof and thereof and the payments and performance by Obligor of any of its obligations hereunder and thereunder (i) have been duly and legally authorized by appropriate corporate action taken by Obligor, (ii) are not in contravention of, and will not result in a violation or breach of, any of the terms of Obligor's certificate of incorporation, its by-laws or any provisions relating to the capital stock of Obligor, and (iii) do not violate or constitute a breach of any provision of law, any order of any court or other agency of government, or any indenture, agreement or other instrument to which Obligor is a party, or by or under which Obligor or any of Obligor's property is bound except where such violation or breach would not be expected to have a material adverse effect on Obligor and would not affect Obligee's interest in the Trust Estate, Security Trustee's interest in the Collateral or any party's remedies under the Operative Documents, or conflict with, result in a breach of, or constitute (with due notice and/or lapse of time) a default under any such indenture, agreement or instrument except where such conflict, breach or default would not be expected to have a material adverse effect on Obligor and would not affect Obligee's interest in the Trust Estate, Security Trustee's interest in the Collateral or any party's remedies under the Operative Documents, or result in the creation or imposition of any Lien, other than Permitted Liens, upon any of Obligor's property or assets and (iv) do not require, on the part of Obligor or any shareholder or Subsidiary thereof, the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Governmental Entity except for filings, if any, made pursuant to any notice reporting requirement applicable to it; (c) each Operative Document to which it is a party and each Security Document to which a Subsidiary of Obligor is a party has been executed by the duly authorized officer or officers of Obligor or such Subsidiary, respectively, and delivered to the other parties thereto and (assuming due authorization, execution and delivery of the Operative Documents by the other parties thereto) constitutes, or when executed by the duly authorized officer or officers of Obligor or such Subsidiary and delivered to the other parties thereto, such Operative Documents will constitute, the legal, valid and binding obligations of Obligor or such Subsidiary, enforceable in accordance with their terms except as limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights from time to time in effect and by general principles of equity including those applicable to the enforceability of the remedy of specific performance; (d) Immediately prior to giving effect to the Cross-Receipt therefor, Obligor has good and marketable title to each Item of Equipment, and Obligor has not granted any Lien on any Item of Equipment or the proceeds thereof, the Equipment Agreement or the insurances required under the Equipment Agreement other than those that arise under the Operative Documents, and no Lien, other than Permitted Liens, has attached to any Item of Equipment, the -2- 80 proceeds thereof or the Equipment Agreement or the insurances required under the Equipment Agreement, or in any manner has affected adversely Obligee's or Security Trustee's right, title and interest therein; (e) each Item of Equipment is personal property and not a fixture attached to realty under Applicable Law, and each Item of Equipment that has a serial number or other identification number set forth therefor on the Related Lease Supplement has such serial number or other identification number permanently affixed thereto. (f) (i) when the Subsidiary Equipment Agreements are executed, the security interests in the Equipment granted to Obligor by the Subsidiaries pursuant to the Subsidiary Equipment Agreements, (ii) the security interests in the Equipment and, when the Subsidiary Equipment Agreements are executed, in Subsidiary Equipment Agreements granted to Obligee by Obligor pursuant to the Equipment Agreement and (iii) the security interests in the Collateral granted to Security Trustee pursuant to this Agreement in each case constitute a first priority Lien with respect to such Collateral under Applicable Law, and Obligor, Obligee and Security Trustee shall be entitled to all of the rights, benefits and priorities provided to a holder of a first priority Lien under Applicable Law. (g) for each Item of Equipment located in the United States for which a serial number or other identification number is identified on the Related Lease Supplement, upon the filing of appropriately completed UCC financing statements with the Equipment described in the manner described on the Related Equipment Agreement Supplement (i) executed by the Obligor Subsidiary for the benefit of Obligor and filed with the Secretary of State or other appropriate state filing office for UCC personal property financing statements for the state in which the Equipment is located and in addition, if such Item of Equipment is located in Massachusetts, with the town clerk for the City of Bedford and if in New York with the filing officer for Orange County, (ii) executed by Obligor for the benefit of Obligee and filed with the Secretary of State or other appropriate state filing office for UCC personal property financing statements for the state in which the Equipment is located and in addition, if such Item of Equipment is located in Massachusetts, with the town clerk for the City of Bedford and if in New York with the filing officer for Orange County and (iii) and by Obligee for the benefit of the Security Trustee and filed with the Secretary of State or other appropriate state filing office for UCC personal property financing statements for the state in which the Equipment is located and in addition, if such Item of Equipment is located in Massachusetts, with the town clerk for the City of Bedford and if in New York with the filing officer for Orange County the security interest in each such Item of Equipment granted to Obligor by such Subsidiary pursuant to the related Subsidiary Equipment Agreement, the security interests in such Item of Equipment and in the related Subsidiary Equipment Agreement granted to Obligee by Obligor pursuant to the Equipment Agreement, and the security interests in such Item of Equipment and in the Equipment Agreement granted to Security Trustee pursuant to this Agreement constitute a first priority perfected Lien with respect to such Equipment, Subsidiary Equipment Agreement and Equipment Agreement under Applicable Law and Obligor, Obligee and Security Trustee shall be entitled to all of the rights and benefits and priorities provided to a holder of a perfected first priority Lien under Applicable Law, and on each Funding Date, all -3- 81 recordations and filings shall have been accomplished with respect to this Agreement in each jurisdiction as may be required by law to establish and perfect Obligor's, Obligee's and Security Trustee's respective rights in and to such Item of Equipment, Subsidiary Equipment Agreement and Equipment Agreement, and any giving of notice or any other action to such end required by Applicable Law has been given or taken; (h) Obligor's chief executive office and principal place of business is located at 1101 Pennsylvania Avenue N.W. Suite 1010, Washington, D.C. 20004 and Obligor's records with respect to the transactions contemplated by the Operative Documents are located at such address; (i) no Equipment Agreement Default or Equipment Agreement Event of Default has occurred and is continuing and no Event of Loss or event which with the passage of time, would become or Event of Loss has occurred; (j) there is no litigation or other proceeding now pending or, to the Obligor's knowledge, threatened, against or affecting Obligor or any Subsidiary thereof, in any court or before any regulatory commission, board or other administrative governmental agency which will adversely affect or impair the right, title or interest of Obligee to any Item of Equipment, the Equipment Agreement or any Operative Document, or the security interest of Security Trustee in any Item of Equipment or the Equipment Agreement, this Agreement or any Operative Document, or which, if decided adversely to Obligor or such Subsidiary, will materially adversely affect the business operations or financial condition of Obligor; (k) without limiting the generality of the foregoing, the retention of possession by Obligor of the Items of Equipment to be financed hereunder following the transfer of an interest therein to Obligee shall not be deemed fraudulent or void as against any present or future creditor of Obligor under Applicable Law, nor would any subsequent bona fide purchaser from Obligor of such Items of Equipment, in the event of any attempted subsequent transfer thereof by Obligor, acquire any title to or rights therein superior to Obligee's right, title or interest therein; (l) Obligor has delivered to Obligee, Owner Participant, Lender and Agent its most recent annual report on Form 10-K and quarterly report on Form 10-Q and they are complete and correct in all material respects, accurately present the financial condition of Obligor on the dates for which, and the results of its operations for the periods for which, the same have been furnished and have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods covered thereby; and there has been no material adverse change in the condition of Obligor and its Subsidiaries taken as a whole, financial or otherwise, since the date of such Form 10-Q; (m) Obligor has not entered into the transactions contemplated herein, directly or indirectly, in connection with any arrangement in any way involving any employee benefit plan or plans or related trust to which it is a party in interest or disqualified person, all within the meaning of ERISA, and the Code, and, assuming the accuracy of the representations made in Sections 2.5(f) and (g) and 2.6(a) and (b) herein, the execution and delivery of, and the consummation of the transactions contemplated by, the Operative Documents, will be exempt from, or will not involve any transaction which is subject to, the prohibitions of either Section -4- 82 406 of ERISA or Section 4975 of the Code and will not involve any transaction in connection with which a penalty could be imposed under Section 502(i) of ERISA or a tax could be imposed pursuant to Section 4975 of the Code; (n) Obligor is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended; (o) Obligor has delivered to Obligee a true, correct and complete Certificate of Costs evidencing payment for the Items of Equipment financed by Obligee; (p) payment in full has been made by or on behalf of Obligor to the vendor of each Item of Equipment; and (q) after giving effect to the Cross-Receipt and Related Equipment Supplement therefor, each Item of Equipment shall be leased to an Obligor Subsidiary, and the identification of such Subsidiary, the location of its chief executive office and the location of such Item of Equipment are each identified on the Related Equipment Supplement. 2.2. Obligee Representations and Warranties. Obligee hereby represents and warrants as of the Closing Date and on each Funding Date for the benefit of each party hereto that: (a) Obligee is a trust duly established and validly existing under the laws of the State of Connecticut, has full power, authority and legal right under such laws to execute, deliver and perform its obligations under the Operative Documents to which it is a party and has its chief executive offices at 225 Asylum Street, Goodwin Square, Hartford, Connecticut; (b) the financing of the Equipment, the execution and delivery of the Operative Documents and the other related instruments, documents and agreements to which it is a party, and the compliance by Obligor with the terms hereof and thereof and the payments and performance by Obligor of any of its obligations hereunder and thereunder (i) have been duly and legally authorized by appropriate trust action taken by Obligee, (ii) are not in contravention of, and will not result in a violation or breach of, any of the terms of Obligee's declaration of trust and related trust instruments, and (iii) will not violate or constitute a breach of any provision of law, any order of any court or other agency of government, or any indenture, agreement or other instrument to which Obligee is a party, or by or under which Obligee or any of Obligee's property is bound, or be in conflict with, result in a breach of, or constitute (with due notice and/or lapse of time) a default under any such indenture, agreement or instrument, or result in the creation or imposition of any Lien, other than Permitted Liens, upon any of Obligee's property or assets and (iv) will not require, on the part of Trustee or any Affiliate thereof, the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any United States federal or Connecticut local governmental or public commission, board, authority or agency except for filings, if any, made pursuant to any notice reporting requirement applicable to it; (c) each Operative Document to which it is a party has been executed by the duly authorized officer or officers of Obligee and delivered to the other parties thereto and -5- 83 constitutes, or when executed by the duly authorized officer or officers of Obligee and delivered to the other parties thereto, such Operative Documents will constitute, the legal, valid and binding obligations of Obligee, enforceable in accordance with their terms except as limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights from time to time in effect and by general principles of equity including those applicable to the enforceability of the remedy of specific performance; (d) there are no outstanding judgments against Obligee and no pending or threatened action (known to Obligee) or proceeding affecting Obligee before any court, governmental agency or arbitrator, in any jurisdiction; (e) there is no tax, levy, impost, deduction, charge or withholding which may be imposed on or asserted against the Collateral or any part thereof or any interest therein, or against Lender, Agent or Security Trustee under the laws of the State of Connecticut either (i) on or by virtue of the execution or delivery of Operative Documents or any other document contemplated thereby, or (ii) on any payment to be made by Obligee pursuant to the Loan Documents or any other document contemplated thereby to which Obligee is a party; and (f) Obligee has no indebtedness or other liabilities, whether contingent or otherwise, other than its obligations under and as contemplated by the Operative Documents. 2.3. Further Obligee Representations and Warranties. Obligee hereby represents and warrants as of the Closing Date and on each Funding Date for the benefit of Lender, Agent and Security Trustee that: (a) after giving effect to each Cross Receipt, Obligee has all rights and interests in each Item of Equipment (including the parts and components thereof) and the Collateral, free and clear of all Liens other than Permitted Liens; (b) (i) the security interests in the Collateral granted to Security Trustee pursuant to this Agreement constitute a first priority Lien with respect to such Collateral under Applicable Law, (ii) for each Item of Equipment located in the United States for which a serial number or other identification number is identified on the Related Lease Supplement, upon the filing of appropriately completed UCC financing statements with the Equipment described in the manner described on the Related Equipment Agreement Supplement executed by Obligee for the benefit of the Security Trustee and filed with the Secretary of State for the State of Connecticut and if such Item of Equipment is located in Massachusetts, with town clerk for the City of Bedford and if in New York with filing officer for Orange County the security interest in each such Item of Equipment granted to Security Trustee pursuant to this Agreement constitutes a first priority perfected Lien with respect to such Equipment under Applicable Law and Security Trustee shall be entitled to all of the rights and benefits and priorities provided to a holder of a perfected first priority Lien under Applicable Law, -6- 84 (iii) on each Funding Date, Security Trustee's interests in the Equipment Agreement have been registered in accordance with Section 14.3 of the Equipment Agreement (iv) and all recordations and filings shall have been accomplished with respect to this Agreement in each jurisdiction in the United States as may be required by law to establish and perfect Security Trustee's rights in and to the Equipment located in the United States and in the Equipment Agreement and any giving of notice or any other action to such end required by Applicable Law has been given or taken; (c) Obligee's chief executive office and principal place of business is located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut; and Obligee's records with respect to the transactions contemplated by the Operative Documents and located at such address; (d) no Equipment Agreement Default, Equipment Agreement Event of Default, Loan Default or Loan Event or Default has occurred and is continuing and no Event of Loss, or event which with the passage of time would become an Event of Loss, has occurred; and (e) Obligee makes each of the representations and warranties made by it in each other Operative Document to which Obligee is a party to, and for the benefit of, Lender, LC Issuer, Agent and Security Trustee as if the same were set forth in full herein. 2.4. Trust Company Representations and Warranties. Trust Company hereby represents and warrants as of the Closing Date and each Funding Date for the benefit of each of the parties hereto that: (a) Trust Company is a national banking association, duly organized, validly existing and in good standing under the laws of the United States of America, and has full power, authority and legal right under such laws to execute, deliver and perform its obligations under this Agreement and the Trust Agreement; (b) each of the Trust Agreement and (to the extent of the covenants, agreements, representations and warranties of Trust Company in its individual capacity contained herein) this Agreement has been duly executed and delivered by Trust Company, and (assuming due authorization, execution and delivery of the Trust Agreement by Owner Participant) the Trust Agreement and (to the extent of the covenants, agreements, representations and warranties of Trust Company in its individual capacity contained herein) this Agreement constitutes a legal, valid and binding obligation of Trust Company, enforceable against Trust Company in accordance with its terms; (c) neither the execution or delivery by Trust Company of the Trust Agreement or this Agreement nor the performance by Trust Company of its obligations hereunder or thereunder (i) conflicts or will conflict with or violate in any respect any applicable United States federal law governing the banking or trust powers of Trust Company or any Connecticut law applicable to or binding upon Trust Company or any of its Affiliates, or any of their respective properties, (ii) conflicts or will conflict with or violate Trust Company's articles of association or by- laws, (iii) conflicts or will conflict with, or contravene, violate or result in a breach of, any indenture, mortgage, loan agreement, lease or any other material agreement or -7- 85 material instrument to which Trust Company or any of its Affiliates is a party or by which any of their respective properties is bound, (iv) results or will result in the creation or imposition of any Lien (other than Permitted Liens) on the Collateral, or (v) requires or will require, on the part of Trust Company or any Affiliate of Trust Company, the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any Government Entity governing the banking or trust powers of Trust Company, except for filings, if any, made pursuant to any notice reporting requirement applicable to it; provided, that no representation is made as to any laws, rules or regulations applicable to the particular nature of the Collateral or the use thereof; (d) Trust Company is not in breach of any covenants or agreements made by it in the Trust Agreement or by it in its individual capacity in this Agreement; (e) Trust Company's chief executive office is located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut, and Trust Company's records with respect to the transactions contemplated by the Operative Documents are located at such address; and (f) there are no actions, suits or proceedings pending or, to the best knowledge of Trust Company, threatened before any court or by or before any other Government Entity, or any arbitrator, which (i) either individually or in the aggregate, would have a material adverse effect on the Trust Company or the Trust Estate or on the right, power or authority of Trust Company to perform its obligations under the Operative Documents to which it is, or is to become a party or on Obligee's ability to perform its obligations under any Operative Document to which it is, or is to become, a party or (ii) call into question the validity or the enforceability of any Operative Document. 2.5. Owner Participant Representations and Warranties. Owner Participant represents and warrants as of the Closing Date and on each Funding Date for the benefit of each other party hereto that (a) Owner Participant is a trust company duly organized, validly existing and in good standing under the laws of the state of New York, has full power, authority and legal right under such laws to execute, deliver and perform its obligations under the Operative Documents to which it is a party and is qualified to do business in, is in good standing in all material respects in, each state or other jurisdiction in which the nature of its business makes such qualification necessary, except where failure to so qualify would not have a material adverse effect on Owner Participant; (b) the execution and delivery of the Operative Documents and the other related instruments, documents and agreements to which it is a party, and the compliance by Owner Participant with the terms hereof and thereof and the payments and performance by Owner Participant of any of its obligations hereunder and thereunder (i) have been duly and legally authorized by appropriate corporate action taken by Owner Participant, (ii) are not in contravention of, and will not result in a violation or breach of, any of the terms of Owner Participant's certificate of incorporation (or equivalent document), its by-laws or any provisions relating to the capital stock of Owner Participant, and (iii) will not violate or constitute a breach of any provision of law, any order of any court or other agency of government, or any indenture, -8- 86 agreement or other instrument to which Owner Participant is a party, or by or under which Owner Participant or any of Owner Participant's property is bound, or be in conflict with, result in a breach of, or constitute (with due notice and/or lapse of time) a default under any such indenture, agreement or instrument, or result in the creation or imposition of any Lien upon any of Owner Participant's property or assets and (iv) will not require, on the part of Owner Participant or any Affiliate thereof, the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any United States federal or New York local governmental or public commission, board, authority or agency except for filings, if any, made pursuant to any notice reporting requirement applicable to it; (c) each Operative Document to which it is a party has been executed by the duly authorized officer or officers of Owner Participant and delivered to the other parties thereto and constitutes, or when executed by the duly authorized officer or officers of Owner Participant and delivered to the other parties thereto, such Operative Documents will constitute, the legal, valid and binding obligations of Owner Participant, enforceable in accordance with their terms except as limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights from time to time in effect and by general principles of equity including those applicable to the enforceability of the remedy of specific performance; (d) Owner Participant is not in breach of any covenants or agreements made by it in the Trust Agreement or in this Agreement; (e) there are no actions, suits or proceedings pending or, to the best knowledge of Owner Participant, threatened before any court or by or before any other Government Entity, or any arbitrator, which (i) either individually or in the aggregate, would have a material adverse effect on the Collateral or on the right, power and authority of Owner Participant's ability to perform its obligations under any Operative Document to which it is, or is to become, a party or (ii) call into question the validity thereof or the enforceability thereof in accordance with the terms thereof; (f) no part of the funds used or to be used by it to make its investment in the Trust Estate contemplated hereby does or will constitute assets of an employee benefit plan, within the meaning of ERISA or any applicable regulation thereunder, or any assets or any plan, as defined in Section 4975(e)(1) of the Code; and (g) it will not transfer its interest herein unless the prospective transferee makes the representations and warranties set forth in clause (f) above as of the date of such transfer, as if it had originally been a party hereto. 2.6. Lender Representations and Warranties. Lender hereby represents and warrants on the Closing Date and each Funding Date for the benefit of Obligee that: (a) either (a) no part of the funds to be used by it for the funding of any Loan shall constitute assets of an "employee benefit plan", within the meaning of ERISA or any applicable regulation thereunder or assets of a "plan" as defined in Section 4975(e)(1) of the Code or (b) all of such funds are assets of an insurance company general account as such term is -9- 87 defined in Prohibited Transaction Exemption 95-60 issued by the U.S. Department of Labor ("PTE 95-60") and as of the date the Notes are acquired there is no employee benefit plan with respect to which the aggregate amount of such general account's reserves and liabilities for the contracts held by or on behalf of such employee benefit plan and all other employee benefit plans maintained by the same employer (and affiliates thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee organization (in each case determined in accordance with the provisions of PTE 95-60) exceeds 10% of the total reserves and liabilities of such general account (as determined under PTE 95-60) (exclusive of separate account liabilities) plus surplus as set forth in the National Association of Insurance Commissioners Annual Statement filed with the state of domicile of the Lender. (b) it will not transfer its interest herein unless the prospective transferee (i) is a Permitted Lender Assignee, and (ii) makes the representations and warranties set forth in clause (a) above as of the date of such transfer, as if it had originally been a party hereto. 2.7. Warranty Disclaimers. EACH OF OBLIGEE, OWNER PARTICIPANT AND LENDER DEMISE, LEASE AND FINANCE THE ITEMS OF EQUIPMENT HEREUNDER AS-IS AND WHERE- IS WITH ALL FAULTS AND IN WHATEVER CONDITION THEY MAY BE IN AND EXPRESSLY DISCLAIMS AND MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS TO THE DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY, DURABILITY, SUITABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, OR QUALIFICATION FOR ANY PARTICULAR TRADE OR ANY OTHER MATTER CONCERNING, THE ITEMS OF EQUIPMENT. OBLIGOR HEREBY WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR INFRINGEMENT) IT MIGHT HAVE AGAINST OBLIGEE, OWNER PARTICIPANT, LENDER, AGENT OR SECURITY TRUSTEE FOR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE ITEMS OF EQUIPMENT OR BY OBLIGOR'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER. 3. Conditions Precedent. 3.1. Obligee Conditions. Obligee shall have no obligation to acquire any Item of Equipment and subject it to the Equipment Agreement unless on the Funding Date therefor each of the following conditions are fulfilled to the satisfaction of Obligee: (a) no Equipment Agreement Default or Equipment Agreement Event of Default, or with respect to such Item of Equipment, an Event of Loss, has occurred and is continuing, nor has any information come to Obligee's attention from which Obligee could reasonably and in good faith infer that such event is likely to occur; (b) no material adverse change in the financial condition of Obligor has occurred since March 31, 1999, which, in Obligee's reasonable opinion, would impair the ability of Obligor to pay or perform its obligations under the Equipment Agreement; -10- 88 (c) such Item of Equipment is reasonably acceptable to Obligee, Lender Security Trustee and LC Issuer, and is free of all Liens other than Permitted Liens; (d) the Acquisition Cost of such Item of Equipment, when added to the total Acquisition Costs of all Items of Equipment to be financed hereunder will not cause the Maximum Acquisition Cost to be exceeded; (e) Obligee has received an invoice for such Item of Equipment in the form described in Section 4.2 hereof and a Certificate of Costs duly executed by Obligor, dated the Funding Date therefor substantially in the form of Exhibit B hereto; (f) Obligee shall have received executed copies of each Operative Document including the Related Exhibit A with Lender's consent thereto, the Related Equipment Agreement Supplement and an executed Cross Receipt; (g) all licenses, registrations, permits, consents and approvals required by Applicable Laws or by any Government Entity in connection with Obligee's rights and interests in, and the delivery, acquisition, installation, use and operation of, each Item of Equipment shall have been obtained to the satisfaction of Obligee; (h) Obligee shall have received a certificate in form and substance satisfactory to Obligee dated such Funding Date from Obligor, executed by a duly authorized officer of Obligor, the truth and accuracy of which shall be a condition to the Obligee to acquire any Item of Equipment, confirming that each of the representations and warranties set forth in Section 2.1 hereof are true and correct as if made on and as of such date; (i) Obligee shall have received from Obligor, in form and substance satisfactory to Obligee, resolutions of the board of directors of Obligor or other written evidence of appropriate corporate action, and the certificate of incorporation and by-laws, each certified by the secretary of Obligor, duly authorizing the execution, delivery and performance of the Participation Agreement and Equipment Agreement and each other document to be delivered in connection therewith to which it is a party, together with an incumbency certificate as to the person or persons authorized to execute and deliver such documents on behalf of Obligor; (j) on the Closing Date, Obligee shall have received a written opinion of counsel to Obligor, addressed to Obligee, Lender, Agent, Owner Participant, LC Issuer and Security Trustee in the form of Exhibit C-1 hereto; (k) Obligor shall have paid all of the reasonable costs and expenses incurred by Trust Company, Obligee, Lender, Owner Participant, Agent and Security Trustee (including attorneys' fees) in relation to the negotiation, preparation and execution of the Operative Documents to be executed and delivered on or before the Closing Date; (l) Obligee shall have received the proceeds of the Related Note; and -11- 89 (m) Obligee shall have received at least three LIBOR Banking Days before the Funding Date an executed "Funding Notice and Indemnity Agreement" in the form of Exhibit E hereto. (n) Obligee shall have received such other documents, filings, opinions, certificates and waivers, in form and substance satisfactory to Obligee, as Obligee may reasonably require including without limitation documents, filings and opinions that Obligee may reasonably require in order to secure or perfect its interests in each Item of Equipment. 3.2. Lender Conditions. Lender shall have no obligation to make a Loan for the acquisition of any Item of Equipment hereunder unless on the Funding Date therefor each of the following conditions are fulfilled to the satisfaction of Lender: (a) the conditions precedent to Obligee's obligation to finance such Items of Equipment to Obligor in accordance with the terms hereof and of the Equipment Agreement shall have been satisfied, without waiver or modification (except as consented to by Lender), and Lender shall have received copies of all documents and opinions with respect thereto and any other evidence of satisfaction of such conditions as Lender may reasonably request; (b) the following shall have been duly authorized, executed and delivered by the respective party or parties thereto (other than Lender), shall be in full force and effect and received by Lender: (i) this Agreement, (ii) the Related Note, (iii) a certified copy of the Trust Agreement, (iv) the original counterpart of the Equipment Agreement and the Related Equipment Agreement Supplement, (v) for any Item of Equipment located in the United States, UCC-1s of the type described in Section 2.1(g), (vi) for any Item of Equipment located in France, a French Commercial Pledge Agreement, (vii) for any Item of Equipment located in Germany, each of the four Chattel Mortgage Agreements, (viii) for any Item of Equipment located in England or Wales, each of the three English Debentures, (ix) a certified copy of the Cross Receipt for such Item of Equipment and (x) the Liquidity Asset Purchase Agreement dated as of the date hereof among Lender, Commerzbank and the other Liquidity Providers thereto; (c) such Item of Equipment shall be reasonably acceptable to Lender, and Lender shall be satisfied that on the Funding Date Obligee has all rights and interests to such Items of Equipment subject to the Equipment Agreement and the Liens of this Agreement; (d) the Loan shall on the Funding Date qualify as a legal investment for Lender under any Applicable Laws regulating investments to which it may be subject (without recourse to provisions in any such law permitting limited investments without restriction as to the character of the particular investment), and Lender shall have received such evidence as it may reasonably request to establish compliance with this condition; (e) Lender shall have received a certificate in form and substance satisfactory to Lender dated such Funding Date from each of Obligee, Trust Company and Owner Participant, the truth and accuracy of which shall be a condition to the obligation of Lender to make the Loan, confirming that the respective representations and warranties of the party delivering such certificate, set forth in Section 2 hereof are true and correct as if made on and as of such date; -12- 90 (f) Lender shall have received from each of Obligee, Trust Company and Owner Participant, in form and substance satisfactory to Lender resolutions of the board of directors of such party or other written evidence of appropriate corporate action, and the certificate of incorporation and by-laws of such party, each certified by the secretary thereof, duly authorizing the execution, delivery and performance of the Operative Documents and each other document to be delivered in connection therewith to which it is a party, together with an incumbency certificate as to the person or persons authorized to execute and deliver such documents on behalf of such party; (g) no Loan Default or Loan Event of Default shall have occurred; all proceedings taken on the Closing Date in connection with the transactions contemplated hereby and all documents and papers relating thereto shall be satisfactory to Lender; (h) On the Closing Date, Lender shall have received written opinions of counsel to Obligee and Owner Participant in the forms of Exhibits C-2 and C-3 hereto, respectively, and if such Item of Equipment is located in France, Germany or England, special counsel in such country in the form of Exhibit C-4, C-5 or C-6 hereto; and (i) Lender shall have received such other documents, filings, opinions, certificates and waivers, in form and substance satisfactory to Lender, as Lender may reasonably require including without limitation documents, filings and opinions that Lender may reasonably require in order to secure or perfect its interests in each Item of Equipment. 4. Transfer Agreement. 4.1. Owner Participant Commitment. Subject to and upon the terms and conditions herein set forth for the benefit of Owner Participant and Obligee, during each Acquisition Period, Owner Participant agrees to make an equity contribution to the Trust Estate on or before each Funding Date in an amount equal to the aggregate of the Equity Components for each Item of Equipment the rights and interests in which are to be transferred by Obligee hereunder on such Funding Date. 4.2. Transfer of Equipment. Subject to and upon the terms and conditions herein set forth for the benefit of Obligee and Lender during each Acquisition Period, Obligor agrees to transfer all rights and interests to Obligee and Obligee agrees to finance, certain manufacturing equipment. The manufacturing equipment to be transferred by Obligor to Obligee pursuant to this Agreement shall include only manufacturing equipment of the type(s) described on Schedule 1 hereto and as may be specifically approved by Obligee, LC Issuer and Lender prior to transfer. For each item of equipment all rights and interests in which are to be transferred by Obligor to Obligee, Obligor shall submit to Obligee, Owner Participant, LC Issuer and Lender in accordance with Section 10.4 hereof at least ten (10) days prior to the Funding Date therefor, a copy of the invoice or invoices issued by the person from whom Obligor acquired the Item of Equipment and a Certificate of Costs, in each case identifying the type of equipment, model, serial or other identification number and the date of delivery to Obligor. So long as no Equipment Agreement Default or Equipment Agreement Event of Default has occurred and is continuing and so long as such item of equipment is reasonably acceptable to Obligee, LC Issuer and Lender and copies of such invoices and Certificate of Costs have been delivered to Obligee, -13- 91 Owner Participant, LC Issuer and Lender in accordance with this Section 4.2, Obligee shall finance such item equipment on the next Funding Date. Each of Obligee, Lender and LC Issuer shall acknowledge its acceptance or rejection of each item of equipment so offered for transfer by Obligor to Obligee by executing and delivering to Obligor within five (5) Business Days of receipt by Obligee, LC Issuer, Lender and Security Trustee of the invoice or invoices and the Certificate of Costs for such Item of Equipment in accordance with this Section 4.2 the acknowledgment of acceptance or the notice of rejection on the Certificate of Costs for such Item of Equipment. 4.3. Equipment Agreement Supplements. Upon the transfer of an item of equipment in accordance with Section 4.2 hereof, Obligor shall execute and deliver to Obligee an Equipment Agreement Supplement (in the form of Exhibit B to the Equipment Agreement) for such item of equipment which Equipment Agreement Supplement shall be executed by Obligee. Obligor agrees that it will not execute an Equipment Agreement Supplement regarding such item of equipment unless and until the same shall have been inspected by Obligor and Obligor shall have determined that the same is in good working order and condition, it being understood, however, that nothing herein is intended to relieve or decrease in any way the responsibility of the manufacturer or vendor of any item of equipment for any warranties with respect to such equipment. Upon such acceptance, such item of equipment shall automatically become in accordance with this Section 4.3 of this Agreement subject to the Equipment Agreement and an "Item of Equipment" thereunder. 4.4. Rights in Equipment. Upon the execution and delivery by Obligor of an Equipment Agreement Supplement relating to an Item of Equipment and satisfaction of the other conditions precedent set forth in Section 3.1 hereof, Obligee shall have all rights and interests in such Item of Equipment and shall be obligated to pay Obligor in full for the Acquisition Cost of such Item of Equipment in accordance with the provisions of this Agreement; provided, that nothing in this Section 4.4 shall affect in any manner the respective rights and obligations of Obligee and Obligor under the Equipment Agreement or shall reduce or diminish any claim or remedy for damages which Obligee might assert for any breach or violation of the terms of the Equipment Agreement or of this Agreement. Obligor hereby transfers, grants, sells, and assigns to Obligee, its successors and assigns, all of Obligor's rights and interest in and to the various agreements, contracts, warranties, purchase orders and requisitions relating to the purchase, procurement, design and assembly of each Item of Equipment. Notwithstanding the foregoing assignment, Obligee shall not be deemed to have assumed any liability to any equipment vendor by virtue of this Agreement, Obligee's only obligation with respect to any Item of Equipment hereunder being to finance such Item in accordance with the terms of the Operative Documents. 4.5. Funding Dates. From time to time, but no more frequently than two times in any Acquisition Period, and in any event no later than the last date of the Acquisition Period then in effect, Obligor may request payment by Obligee of amounts owed by Obligee to Obligor in connection with the transfer of Items of Equipment accepted under the Equipment Agreement in accordance with the terms hereof and thereof. Obligor shall send to Obligee, Owner Participant, LC Issuer and Lender, so as to be received by Obligee, Owner Participant, LC Issuer and Lender at least ten (10) Business Days prior to the date proposed for such payment or reimbursement by Obligee, which date shall be a Business Day mutually agreeable to Obligor, Obligee, Owner Participant and Lender (each such date, a "Funding Date"), a statement showing -14- 92 the aggregate amounts to be paid by Obligee to Obligor on the applicable Funding Date (each such statement, a "Funding Notice"). Each Funding Notice shall request payment in an amount at least equal to $10,000,000 (except for the final Funding Notice which shall request payment in an amount at least equal to $5,000,000), shall specify the proposed Funding Date. Obligor may request payment of Acquisition Costs in an aggregate amount not to exceed the excess of the Maximum Acquisition Cost over the aggregate Acquisition Costs of all Items of Equipment previously financed by Obligee. Obligor represents and agrees that all payments for which reimbursement will be so requested will represent amounts which have been incurred or paid by Obligor and for which it has not received and will not receive any commission, allowance, rebate or other profit. If the closing of a payment of Acquisition Costs occurs on or before 2:00 p.m. (New York time) on a Business Day, Obligee shall make available to Obligor on the same Business Day the amount of Acquisition Costs to be paid or reimbursed in immediately available funds. If such closing occurs after 2:00 p.m. (New York time) on a Business Day Obligee shall make available to Obligor on the next succeeding Business Day the amount of the Acquisition Costs to be reimbursed or paid in immediately available funds. Payment of amounts on account of the Acquisition Cost of Items of Equipment shall be made by wire transfer to the account of Obligor at Chase Manhattan Bank, New York, New York ABA No 021000021, Account No. 141024946, or such other bank or account maintained in the United States as Obligor shall designate in writing to Obligee and Owner Participant no later than 11:00 a.m. (New York time) on the Business Day preceding the Funding Date. 5. Amount and Terms of Loan. 5.1 Lender Commitment. Subject to and upon the terms and conditions herein set forth, during each Acquisition Period, Lender agrees to make multiple, non-revolving loans to Obligee in an aggregate principal amount up to the amount of the Commitment (each such advance, a "Loan"). 5.2 Payment to Obligee. The closing of each Loan shall occur on a Funding Date. If the closing of a Loan occurs on or before 2:00 p.m. (New York time), Lender shall make available to Obligee on the same Business Day the amount of the Loan in immediately available funds. If such closing occurs after 2:00 p.m. (New York time), Lender shall make available to Obligee on the next succeeding Business Day the amount of the Loan in immediately available funds. Amounts advanced by Lender hereunder shall be made by wire transfer on behalf of Obligee to the account of Harman International Industries, Inc. at Chase Manhattan Bank, New York, New York, ABA No. 021000021, Account No. 141024946, or such other bank or account maintained in the United States as Obligee shall designate in writing to Lender no later than 11:00 a.m. (New York) time on the Business Day preceding the Funding Date. 5.3 Note. Each Loan made by Lender shall be evidenced by a promissory note of Obligee in substantially the form of Exhibit D hereto with blanks and Payment and Amortization Schedule appropriately completed in conformity herewith (the "Note"). 5.4. Termination of Commitment. If the conditions to the obligations of Lender specified in Section 3 hereof have not been fulfilled or waived by it on or before the last day of the last Acquisition Period, Lender may thereupon elect to be relieved of all further obligations under this Agreement. Nothing in this Section 5.4 shall operate to relieve Obligee or -15- 93 Obligor from their respective obligations hereunder and under the other Operative Documents or to waive any of Lender's rights against Obligee or Obligor. 5.5 Payments. 5.5.1 Principal. Unless otherwise adjusted in accordance with Section 5.9 hereof principal on each Loan shall be payable to Lender on each Payment Date in an amount equal to the amount specified for such date on the Payment and Amortization Schedule attached to the Related Note. 5.5.2 Interest. Obligee agrees to pay to Lender interest in respect of the unpaid principal amount of each Loan from the date the proceeds thereof are made available to Obligee until the date on which such Loan (together with accrued and unpaid interest thereon) is repaid in full (whether on the Maturity Date, by acceleration or otherwise) at the Applicable Debt Rate (calculated on the basis of a 360-day year and actual days elapsed). Accrued (and theretofore unpaid) interest shall be payable in arrears, on each Payment Date, on the date of any prepayment (on the amount prepaid), on the Maturity Date and, after the Maturity Date, on demand. 5.5.3 Commitment Fee. Obligee hereby agrees to pay Lender as a commitment fee ("Loan Commitment Fee") during each Commitment Period, which fee shall be computed at the applicable Commitment Fee Rate per annum on the average daily amount of the Lender Available Commitment. Such Loan Commitment Fee shall be payable quarterly in arrears on each Payment Date during each Commitment Period and on the last day of each Commitment Period. 5.5.4 Overdue Rate. Obligee shall pay to Lender interest on any part of the principal amount of any Note, if any, and interest on the Note and any other amount payable by Obligee hereunder which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise) on demand for the period commencing on the due date thereof until the same is paid in full at the Overdue Rate. 5.5.5 Payment Instructions. All payments to Lender hereunder or under the other Operative Documents shall be made without defense, set-off or counterclaim to Security Trustee no later than 12:00 noon (New York time) on the date when due and shall be made in lawful money of the United States of America in immediately available funds to the account of Security Trustee maintained at Commerzbank AG, New York Branch, ABA No. 026008044, Account No. 150 10 17 10200, reference: Four Winds Funding Corporation/Harman or such other account as Lender may designate in a written notice to Obligee. 5.5.6 Withholding Tax. If any amount of principal or interest payable with respect to the Loan becomes subject to any withholding Tax under Applicable Laws, Obligee shall withhold such Tax and shall pay to Lender such additional amounts so that the net amount actually received by Lender, after reduction for such withholding Tax, shall be equal on an After-Tax Basis to the full amount of principal and interest otherwise due and payable hereunder; provided, however, that, notwithstanding the foregoing, Obligee shall be required to pay such additional amounts only if and to the extent that (a) Obligor is required to indemnify -16- 94 Lender for such withholding amounts under Section 8.2 hereof and (b) Obligor has not paid such amounts within three days after notice of nonpayment; provided further, that Obligee shall, upon such payment to Lender, be subrogated to the rights of Lender in respect thereof following payment in full to Lender of all amounts due and owing to it under Section 8.2 hereof. 5.5.7 Business Day Convention. Unless otherwise provided herein, any payment or prepayment of amounts due in accordance with the terms hereof which is due on a date which is not a Business Day shall be payable on the next succeeding Business Day. 5.5.8 Increased Costs. In the event any Affected Person shall have reasonably determined that any Regulatory Change (as hereinafter defined) shall (a) subject such Affected Person to any tax of any kind whatsoever as a result of this Agreement or any Operative Document or its interest therein or as a result of its commitments hereunder or thereunder or its liquidity or other commitment to Obligee or Lender as a result of this Agreement or any Operative Document or its interest therein (any such commitment or commitments, individually or collectively, an "Affected Person Commitment"), or change the basis of taxation of payments as a result thereof (except for Taxes for which Obligor indemnifies Lender under Section 8.2 hereof); or (b) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances under this Agreement or any Operative Documents, loans or other extensions of credit by, or any other acquisition of funds by, such Affected Person, and the result of any of the foregoing is to increase the cost to such Affected Person, by an amount which such Affected Person reasonably determines in good faith to be material, of maintaining its interest in this Agreement, the Notes or any Operative Document or its Affected Person Commitment or to reduce any amount receivable in respect thereof, then in any such case, after submission by such Affected Person to Obligee of a written request therefor Obligee shall pay to such Affected Person any additional amounts necessary to compensate such Affected Person for such increased cost or reduced amount receivable, together with interest on each such amount from the day which is five (5) Business Days after the date such request for compensation under this Section 5.5.8 is received by the Obligee until payment in full thereof (after as well as before judgment) at the Applicable Debt Rate in effect from time to time. In the event that any Affected Person shall have determined that any Regulatory Change regarding capital adequacy has the effect of reducing the rate of return on such Affected Person's capital or on the capital of any entity controlling such Affected Person as a result of its obligations hereunder or under any liquidity or credit support agreement or under any Operative Document or its maintenance of its Affected Person Commitment or its interest in this Agreement, the Notes or any Operative Document to a level below that which such Affected Person or such entity could have achieved but for such Regulatory Change (taking into consideration such Affected Person's or such entity's policies with respect to capital adequacy) by an amount reasonably determined in good faith by such Affected Person to be material, then, from time to time, after submission by such Affected Person to Obligee of such written request therefor, Obligee shall pay to such Affected Person such additional amount or amounts as will compensate such Affected Person for such reduction, together with interest on each such amount from the day which is five (5) Business Days after the date such request for compensation under this Section (b) is received by Obligor until payment in full thereof (after as well as before judgment) at the Applicable Debt Rate in effect from time to time. It shall be a condition to the right of an Affected Person to receive any compensation under this Section 5.5.8 that it use its reasonable efforts to reduce or eliminate any claim for such -17- 95 compensation, including but not limited to designating a different investing office for its interest in this Agreement, the Notes or the Operative Documents, if such designation will avoid the need for, or reduce the amount of any increased amounts referred to in this Section 5.5.8 and will not in the reasonable opinion of such Affected Person, be unlawful or otherwise disadvantageous to such Affected Person or inconsistent with its policies or result in an unreimbursed cost or expense to such Affected Person or in an increase in the aggregate amounts payable under this Section 5.5.8. Each Affected Person claiming any increased amounts described in this Section 5.5.8 will furnish to Obligee and Agent together with its request for compensation a certificate prepared in good faith setting forth the basis and the calculation of the amount (in reasonable detail) of each request by such Affected Person for any such increased amounts referred to in this Section 5.5.8. Failure on the part of any Affected Person to demand compensation for any amount pursuant to this Section 5.5.8 with respect to any period shall not constitute a waiver of such Affected Person's right to demand compensation with respect to such period. For purposes of this Section 5.5.8, "Regulatory Change" shall mean as to each Affected Person, any change occurring after the date of the execution and delivery of this Agreement in any (or the adoption after such date of any new) (a) United States Federal or state law or foreign law applicable to such Affected Person; or (b) regulation, interpretation, directive, guideline or request (whether or not having the force of law) applicable to such Affected Person of any court or other judicial authority, or any entity which is exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to the government of any nation or any state or other political subdivision thereof and which is charged with the interpretation or administration of any law referred to in clause (a) or of any fiscal, monetary or other authority or central bank having jurisdiction over such Affected Person. 5.5.9 Illegality. Notwithstanding any other provision of this Agreement or the other Operative Documents to the contrary, if it becomes unlawful or contrary to an official directive of a Governmental Entity, any Applicable Law, or any interpretation, directive or request or change therein, or change in the administration or enforcement thereof after the date hereof for Lender or any Liquidity Provider to honor any obligation to make, to maintain or to participate in any Loan funded by Dollar borrowings on the London interbank market or if for any reason Lender or any Liquidity Provider is unable to borrow Dollars on the London interbank market (in either case, an "Illegality Event", and any Loan affected thereby, an "Illegal Loan") then (a) Lender shall promptly notify Agent and Obligee thereof, (b) if such Illegality Event can be avoided without incurring any consequences which are, in the sole judgment of Lender or such Liquidity Provider, adverse to Lender or such Liquidity Provider, then Lender or such Liquidity Provider shall make reasonable, good faith efforts consistent with its internal policy to effect such avoidance, (c) if, notwithstanding Lender's or such Liquidity Provider's efforts in accordance with clause (b) hereof, any Loan remains an Illegal Loan, then, at the time specified for such in the notice given in accordance with clause (a) above, the interest rate on any such Illegal Loan shall be automatically converted to the Alternate Rate and (d) all Loans made after such Illegality Event other than Loans bearing interest at the Commercial Paper Rate shall accrue interest at the Alternate Rate. Obligee shall compensate Lender and any Liquidity Provider, upon Lender's or such Liquidity Provider's written request, for all reasonable losses, expenses and liabilities incurred which Lender or such Liquidity Provider may sustain as a result of the conversion or any payment of any Illegal Loan on a date other than a Payment Date. -18- 96 5.6. Prepayments Limited. No prepayment of the Loan may be made except to the extent and in the manner expressly permitted by this Agreement. 5.7. Mandatory Prepayments. 5.7.1 Event of Loss. In the event an Item of Equipment shall suffer an Event of Loss, then on the Casualty Payment Loss Value Date for such Item Obligee shall prepay and apply, and there shall become due and payable on the Casualty Loss Value Payment Date for such Item, a principal amount of the Loan equal to the Unamortized Debt Balance with respect to such Item of Equipment and all accrued and unpaid interest thereon. 5.7.2 Transfer of Rights and Interests in Items of Equipment. In the event that Obligor exercises its option to acquire rights and interests in an Item of Equipment pursuant to Section 25.2 of the Equipment Agreement, on the Termination Date for such Item of Equipment, Obligee shall prepay and apply, and there shall become due and payable, a principal amount of the Loan equal to the Unamortized Debt Balance with respect to such Items of Equipment and all accrued and unpaid interest thereon. 5.7.3 Other Termination of Equipment Agreement. In the event that Obligor does not exercise any option to renew the Equipment Agreement with respect to any Item of Equipment pursuant to Section 25.1 thereof or does not exercise on the Termination Date for such Item of Equipment the option to transfer such Item of Equipment pursuant to Section 25.2 of the Equipment Agreement, then on the Termination Date for such Item of Equipment Obligee shall prepay and apply, and there shall become due and payable, the Unamortized Debt Balance of the Loan with respect to such Item of Equipment and all accrued and unpaid interest thereon. 5.8. Application of Prepayments. The amount of any prepayment shall be applied first, to the payment of accrued but unpaid interest on all Loans at the Overdue Rate if any, to the date of such payment then due hereunder, second, to the payment of accrued but unpaid interest on all Loans at the Applicable Debt Rate, if any, to the date of such prepayment then due hereunder, third, to the payment of any other amounts due Lender under the Operative Documents, fourth to the payment of the entire outstanding principal amount of the Related Note and fifth to the payment of the entire outstanding principal amount of any other Loan. 5.9. Recalculation of Loan Payment and Amortization Schedule. Upon any partial prepayment in accordance with this Section 5, the amount of principal due in accordance with the Payment and Amortization Schedule attached to any Note or Notes against which principal amounts were prepaid, shall be recalculated on each Payment Date occurring after the date of such partial payment so as to equal the following: (1.0 - PP/ OP) x SP Where: PP = Principal amount of such Loan being prepaid -19- 97 OP = Outstanding principal balance of such Loan immediately prior to the payment of the principal being prepaid (excluding, however, any principal scheduled to be paid on the date principal is being prepaid) SP = Amount of scheduled principal payment for such Loan had the principal prepayment at issue not been paid 5.10. Loan Events of Default. The occurrence of any of the following specified events (whatever the reason for such Loan Event of Default and 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 "Loan Event of Default": (a) an Equipment Agreement Event of Default shall have occurred and be continuing; or (b) Obligee shall default in the due and punctual payment of any principal of or interest on, the Loan (including any mandatory prepayment) or any other amount to be paid to Lender under the Loan Documents; provided, however, that if any such amount is paid after the due date thereof, it shall only be deemed to be paid in full if there shall also be paid, together with such amount, interest on such amount at the Overdue Rate from the date such payment was due until the date of payment; or (c) Obligee shall default in the due performance or observance of any of its other obligations hereunder, or Owner Participant shall breach any of its obligations under this Agreement or the Trust Agreement, and in each case the same shall continue unremedied for a period of 30 days from the earlier of actual knowledge thereof by Obligee and receipt by Obligee of written notice of such default; or (d) any representation, warranty or statement made by Obligee, Trust Company or Owner Participant in any of the Operative Documents, or otherwise in writing in connection herewith or therewith, or in any statement furnished pursuant hereto or thereto or in connection herewith or therewith, shall be breached or shall prove to be untrue in any material respect on the date as of which made; or (e) judgments for the payment of money in excess of $100,000 in the aggregate shall be rendered against Obligee and shall not be satisfied, stayed, bonded with a reputable and financially sound surety company to the full extent thereof, vacated or discharged for more than 60 days; or (f) (i) Obligee, Trust Company or Owner Participant shall consent to the appointment of or the taking of possession by a receiver, agent or liquidator of itself or of a substantial part of its property, or Obligee, Trust Company or Owner Participant shall admit in writing its inability to pay its debts generally as they become due, or does not pay its debts generally as they become due or shall make a general assignment for the benefit of creditors, or Obligee, Trust Company or Owner Participant shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization, liquidation or other relief in a case under -20- 98 any bankruptcy laws or other insolvency laws (as in effect at such time) or an answer admitting the material allegations of a petition filed against it, or Obligee, Trust Company or Owner Participant shall seek relief by voluntary petition, answer or consent, under the provisions of any other bankruptcy or other similar law providing for the reorganization or winding-up of corporations (as in effect at such time) or Obligee, Trust Company or Owner Participant shall seek an agreement, composition, extension or adjustment with its creditors under such laws, or Obligee, Trust Company or Owner Participant shall adopt a resolution authorizing action in furtherance of any of the foregoing; or (ii) an order, judgment or decree shall be entered by any court of competent jurisdiction (A) appointing, without the consent of Obligee, Trust Company or Owner Participant, a receiver, trustee or liquidator of such person or of any substantial part of its property, or (B) sequestering any substantial part of the property of Obligee, Trust Company or Owner Participant, or (C) granting any other relief in respect of Obligee, Trust Company, or Owner Participant as a debtor under any bankruptcy laws or other insolvency laws (as in effect at such time), and in each case any such order, judgment or decree of appointment or sequestration shall remain in force undismissed, unstayed and unvacated for a period of 60 days after the date of entry thereof; or (iii) a petition against Obligee, Trust Company or Owner Participant in a case under any bankruptcy laws or other insolvency laws (as in effect at such time) is filed and not withdrawn or dismissed within 60 days thereafter, or if, under the provisions of any law providing for reorganization or winding-up of corporations which may apply to Obligee, Trust Company or Owner Participant, any court of competent jurisdiction assumes jurisdiction, custody or control of such person or of any substantial part of its property and such jurisdiction, custody or control remains in force unrelinquished, unstayed and unterminated for a period of 60 days; or (g) Obligee shall default in any of its obligations under any other Operative Document or any Operative Document shall cease to be in full force and effect or be disaffirmed or repudiated in any respect by or on behalf of Obligee or any party thereto (other than Lender); or (h) if this Agreement at any time shall not be in full force and effect or shall no longer create a first and prior Lien on any portion of the Collateral, or (i) the trust created pursuant to the Trust Agreement shall have been terminated. 5.11. Remedies of Lender. 5.11.1 Rights in Collateral. If a Loan Event of Default shall have occurred and be continuing, then and in every such case Lender and Security Trustee may exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Section 5.11, any and all remedies under the other Security Documents, and any and all remedies available to a secured party under the UCC or any other provision or law and, in the event such Loan Event of Default is a Loan Event of Default referred to in Section 5.10(a) hereof, any and all of the remedies pursuant to the Equipment Agreement, and may take possession of all or any part of the Collateral and may exclude Obligee, Obligor, any lessee and all Persons claiming under any of them wholly or partly therefrom. -21- 99 5.11.2 Insolvency. If a Loan Event of Default referred to in clause (f) of Section 5.10 hereof shall have occurred or an Equipment Agreement Event of Default of the type referred to in clause (e) of Section 20 of the Equipment Agreement thereof shall have occurred, then and in every such case the unpaid principal of each Loan, together with interest accrued but unpaid thereon, Prepayment Premium, if any, and all other amounts due to Lender shall, unless Lender shall otherwise direct, immediately and without further act become due and payable by Obligee to Lender, without presentment, demand, protest or notice, all of which are hereby waived. If any other Loan Event of Default shall have occurred and be continuing, then and in every such case, Lender may, by written notice or notice to Obligee, declare all Loans to be due and payable, whereupon the unpaid principal of the Loans then outstanding, together with accrued but unpaid interest thereon, Prepayment Premium, if any, and all other amounts due from Obligee to Lender, shall immediately and without further act become due and payable by Obligee to Lender without presentment, demand, protest or other notice, all of which are hereby waived. 5.11.3 Delivery of Documents. Upon the occurrence of a Loan Event of Default, at the request of Security Trustee, Obligee shall promptly execute and deliver to Security Trustee such instruments of title and other documents as Security Trustee may deem necessary or advisable to enable Security Trustee or a representative designated by Security Trustee, at such time or times and place or places as Security Trustee may specify, to obtain possession of all or any part of the Collateral to whose possession Security Trustee shall at the time be entitled hereunder. If Obligee shall for any reason fail to execute and deliver such instruments and documents after the request by Security Trustee, Security Trustee may (a) obtain a judgment conferring on Security Trustee the right to immediate possession and requiring Obligee to execute and deliver such instruments and documents to Security Trustee, to the entry of which judgment Obligee hereby specifically consents, and (b) pursue all or part of such Collateral wherever it may be found and may enter any of the premises of Obligor or Obligee wherever such Collateral may be or is purported to be and search for such Collateral and take possession of and remove such Collateral. All expenses of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien of this Agreement. 5.11.4 Possession of Collateral. Upon taking of possession pursuant hereto, Security Trustee or a representative designated by Security Trustee may, from time to time, at the expense of Obligee, make all such expenditures for maintenance, insurance, repairs, replacements and alterations to any of the Collateral, as it may deem appropriate and commercially reasonable. In such case, Security Trustee or a representative of Security Trustee shall have the right (but not the obligation) to maintain, use, operate, store, lease, control or manage the Collateral and to carry on the business and to exercise all rights and powers of Obligee relating to the Collateral, as Security Trustee shall deem best, including the right to enter into any and all such agreements with respect to the maintenance, use, operation, storage, leasing, control, management or disposition of the Collateral or any part thereof as Security Trustee may determine; and Security Trustee shall be entitled to collect and receive directly all tolls, rents (including Equipment Payment and Supplemental Payments), revenues, issues, income, products and profits of the Collateral and every part thereof, without prejudice, however, to the right of Lender or Security Trustee under any provision of this Agreement to collect and receive all cash held by, or required to be deposited with, Obligee hereunder. Such tolls, rents (including Rental and Supplemental Payments), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management or disposition of -22- 100 the Collateral and of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to make all payments which Security Trustee may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Collateral or any part thereof (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of Obligee or Obligor), and all other payments which Security Trustee may be required or authorized to make under any provision of this Agreement, as well as just and reasonable compensation for the services of Security Trustee, and of all Persons properly engaged and employed by Security Trustee. 5.11.5 Sale of Collateral. In addition, Security Trustee may sell, assign, transfer and deliver the whole, or from time to time to the extent permitted by law, any part of the Collateral or any interest therein, at any private sale or public auction with or without demand, advertisement or notice (except as herein required or as may be required by law) of the date, time and place of sale and any adjustment thereof for cash or credit or other property for immediate or future delivery and for such price or prices and on such terms as Security Trustee may determine, or as may be required by law. It is agreed that ten (10) Business Days' notice to Obligee of the date, time and place (and terms, in the case of a private sale) of any proposed sale by Security Trustee of the Collateral or any part thereof or interest therein is reasonable. Each of Security Trustee and Lender may be a purchaser of the Collateral or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. Security Trustee may apply against the purchase price therefor the amount then due under the Notes secured hereby. Security Trustee shall, upon any such purchase, acquire good title to the property so purchased, to the extent permitted by applicable law, free of all rights of redemption. 5.11.6 Discharge. Upon any sale of the Collateral or any part thereof or interest therein, whether pursuant to foreclosure or power of sale or otherwise, the receipt of the purchase money of the official making the sale by judicial proceeding or by Security Trustee shall be sufficient discharge to the purchaser for the purchase money and neither such official nor such purchaser shall be obliged to see to the application thereof. 5.11.7 Appointment of Receiver. If a Loan Event of Default shall have occurred and be continuing, Security Trustee shall, as a matter of right, be entitled to appoint a receiver or trustee or representative (who may be Security Trustee or any successor or nominee thereof, or any Lender appointed by Security Trustee) for all or any part of the Collateral, whether such receivership or agency or representation be incidental to a proposed sale of the Collateral or the taking of possession thereof, the exercise of remedies under this Agreement or the Equipment Agreement or otherwise, and Obligee hereby consents to the appointment of such a receiver, trustee or representative. Any receiver, trustee or representative appointed for all or any part of the Collateral shall be entitled to exercise all rights of Security Trustee under this Agreement and the other Operative Documents to the extent provided in such appointment and shall be entitled to exercise all the powers and pursue all the remedies of Security Trustee hereunder with respect to the Collateral. 5.11.8 Redemption. Any sale of the Collateral or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall forever be a perpetual bar against Obligee, after the expiration of the period, if any, during which -23- 101 Obligee shall have the benefit of redemption laws which may not be waived pursuant to clause (i) above. Subject to the provisions of this Agreement, Obligee covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay or extension law wherever enacted, nor at any time hereafter in force, in order to prevent or hinder the enforcement of this Agreement or the execution of any power granted herein to Lender or Security Trustee, or the absolute sale of the Collateral, or any part thereof, or the possession thereof by any transfer at any sale under this Section 5.11; and Obligee for itself and all who may claim under it, so far as it or any of them now or thereafter lawfully do so, waives all right to have the Collateral marshaled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Agreement may order the sale of the Collateral as an entirety. 5.11.9 Rights Cumulative; No Waiver. Each and every right, power and remedy herein given to Lender and Security Trustee specifically 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 Lender or Security Trustee, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by Lender or Security Trustee in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of Obligee or Obligor or to be an acquiescence therein. 5.11.10 Termination of Proceedings. If Lender or Security Trustee shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to Lender or Security Trustee, then and in every such case Obligee, Lender, Security Trustee and Obligor shall, subject to any binding determination in such proceeding, be restored to their former positions and rights hereunder with respect to the Collateral, and all rights, remedies and powers of Lender and Security Trustee shall continue as if no such proceedings had been instituted. 6. Covenants. 6.1. Obligee Covenants. Obligee covenants and agrees for the benefit of Lender (unless Lender shall have otherwise waived in writing compliance herewith) during the term of this Agreement as follows: (a) the proceeds of each Loan shall be used solely to finance Obligee's acquisitions of Items of Equipment in accordance with the terms of this Agreement and for costs related to such transactions; (b) it shall comply with all Applicable Laws, rules, regulations and orders of any jurisdiction, such compliance to include paying when due all Taxes imposed upon it or upon -24- 102 its property by any Government Entity except to the extent contested in good faith and for which adequate reserves have been segregated; (c) it shall promptly take, and maintain the effectiveness of, all action of the type referred to in clause (d) of Section 2.3 or otherwise that may, from time to time, be necessary or appropriate under Applicable Law in connection with the performance by Obligee of its obligations under the Operative Documents, or the taking of any action hereby or thereby contemplated, or necessary for the legality, validity, binding effect or enforceability of the Operative Documents, or for the making of any payment or the transfer or remittance of any funds by Obligee under the Operative Documents; (d) it shall furnish to Lender or cause to be furnished to Lender, as the case may be (i) the documents, certificates and financial statements to be provided by Obligor pursuant to Section 6.6 hereof, at the times set forth therein; (ii) such other information regarding the condition or operations, financial or otherwise, of Obligor or the Collateral as Lender may from time to time reasonably request and which Obligor is obligated to provide to Obligee under the terms of the Equipment Agreement; (iii) upon notice thereof, notice of the existence of any Equipment Agreement Default or Equipment Agreement Event of Default; (iv) promptly upon receipt, copies of all notices, lists or other written information received by Obligee from Obligor pursuant to the Equipment Agreement; and (v) promptly upon receipt by Obligee, copies of all notices, communications documents and agreements relating to the Collateral; (e) it shall allow or cause to allow any person acting on behalf of Lender or Security Trustee (i) to visit and inspect the Equipment, to visit, inspect and examine the books and records and accounts of Obligor and to discuss with Obligor its affairs, finances and accounts and (ii) to visit, inspect and examine its books of record and accounts of Obligee and to discuss with Obligee its affairs, finances and accounts, in each case at such times and as often as Lender may reasonably request; (f) it shall duly pay and discharge (i) all Liens other than Permitted Liens, (ii) all of its trade bills before the time that any Lien attaches and (iii) all Taxes imposed upon or against it or its property or assets, or upon any property leased by it, prior to the date on which penalties attach thereto and (iv) all lawful claims, whether for labor, materials, supplies, services or anything else, which might or could, if unpaid, become a Lien upon such property or assets, unless and only to the extent that any such amounts are not yet due and payable or the validity thereof is being contested in good faith by appropriate proceedings so long as such proceedings do not involve any material danger of the sale, forfeiture or loss of the Items of Equipment or any interest therein and Obligee maintains appropriate reserves with respect thereto or has made adequate provision for the payment thereof, in accordance with generally accepted accounting principles and approved by Lender; (g) it shall keep at all times books of record and account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs, and provide or cause to be provided adequate protection against loss or damage to such books of record and account; -25- 103 (h) it shall not except as expressly permitted by the Equipment Agreement and under this Agreement, sell, lease, convey, transfer or encumber or otherwise dispose of all or any part of any Item of Equipment, or cause or permit any Person to do any of the foregoing with respect to all or any part of any Item of Equipment; (i) it shall not amend, modify, consent to any change to the terms or otherwise alter any of the Operative Documents in any manner without the consent of Lender and Security Trustee; (j) it shall not operate in a manner that would result in an actual, constructive or substantive consolidation with Owner Participant, or any other Person, and in such connection Obligee shall observe all trust formalities, maintain records separately and independently from those of Owner Participant or other Person and enter into any transactions with Owner Participant only on an arm's-length contractual basis; (k) it shall not waive an Equipment Agreement Default or Equipment Agreement Event of Default or breach any of its obligations under the Equipment Agreement without the consent of Lender, and shall enforce all of its rights under the Equipment Agreement; and (l) within the six-month period preceding the fifth anniversary of the Closing Date, Obligee will provide to Lender and Security Trustee continuation statements with respect to any UCC financing statements filed in connection with the Security Documents, to file the same, and promptly upon such filing will provide Lender and Security Trustee with written evidence thereof. 6.2. Further Obligee Covenants. Obligee covenants for the benefit of each other party hereto (unless each shall have otherwise waived in writing compliance herewith) during the term of this Agreement as follows: (a) it shall take all actions as are required to keep the representations and warranties made by it in Section 2.3 hereof (except, in the case of clause (e) of Section 2.3, if the location of such office shall change, Obligee shall provide each other party hereto with not less than ten (10) days' prior written notice of such change), true and correct in all material respects (but without regard to the date when such representations and warranties were made or are expressed to be effective) until such time as all of the obligations secured hereby have been paid in full; (b) it shall obtain and maintain, or cause to be obtained or maintained, in full force and effect, any authorization, approval, license, or consent of any governmental or judicial authority including which may be or become necessary in order for Lender, Security Trustee, Obligor and Owner Participant to obtain the full benefits of this Agreement and all rights and remedies granted or to be granted herein. (c) it shall not create, assume or suffer to exist any Lien with respect to the Collateral, except Permitted Liens; -26- 104 (d) it shall not (i) enter into any business other than its financing of Equipment, (ii) create, incur, assume or permit to exist any Indebtedness, except as expressly permitted by this Agreement, (iii) enter into, or be a party to, any transaction with any Person, except the transactions set forth in the Operative Documents and as expressly permitted thereby, or (iv) make any investment in, guaranty the obligations of, or make or advance money to any Person, through the direct or indirect lending of money, holding of securities or otherwise except the transactions set forth in the Operative Documents and as expressly permitted thereby; and (e) it shall not wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease (substantially as a whole), or otherwise dispose of (whether in one or in a series of transactions) its assets except as expressly permitted by this Agreement. 6.3. Trust Company Covenants. Trust Company covenants and agrees for the benefit of each other party hereto (unless each party shall have otherwise waived in writing compliance herewith) during the term of this Agreement as follows: (a) it shall perform all of its obligations set forth in the Trust Agreement and shall not amend, modify, consent to any change to the terms or otherwise alter the Trust Agreement in any manner without the consent of each of the other parties hereto; (b) it shall not, through its own actions or inactions, interfere in Obligor's quiet enjoyment of the Items of Equipment during the Term as long as the Equipment Agreement shall not have been declared in default pursuant to Section 21 thereof; and (c) it shall (i) not cause or permit to exist any Lien attributable to it with respect to the Items of Equipment or any other portion of the Trust Estate other than Permitted Liens, (ii) promptly, at its own expense, take such action as may be necessary duly to discharge any Lien attributable to it, and (iii) make restitution to the Trust Estate for any actual diminution of the assets of the Trust Estate resulting from any Liens attributable to it; and (d) it shall not change the location of its principal office to a location outside of Hartford, Connecticut without providing at least 30 days advance written notice thereof. 6.4. Owner Participant Covenants. Owner Participant covenants and agrees for the benefit of each party hereto (unless each party hereto shall have otherwise waived in writing compliance herewith) during the term of this Agreement as follows: (a) it shall maintain its existence as a corporation in good standing under the laws of the State of New York; (b) it shall maintain its right to transact business in each jurisdiction in which the character of the properties owned or leased by it or the business conducted by it makes such qualification necessary and the failure to so qualify would preclude Obligee from enforcing its rights or meeting its obligations under or with respect to any Operative Document; -27- 105 (c) it shall perform all of its obligations set forth in the Trust Agreement and shall not amend, modify, consent to any change to the terms or otherwise alter the Trust Agreement in any manner without the consent of each of the other parties hereto; (d) it shall not, through its own actions or inactions, interfere in Obligor's quiet enjoyment of the Items of Equipment during the Term as long as the Equipment Agreement shall not have been declared in default pursuant to Section 21 thereof; and (e) it shall (i) not cause or permit to exist any Lien attributable to it with respect to the Items of Equipment or any other portion of the Trust Estate other than Permitted Liens, (ii) promptly, at its own expense, take such action as may be necessary duly to discharge any Lien attributable to it, and (iii) make restitution to the Trust Estate for any actual diminution of the assets of the Trust Estate resulting from any Liens attributable to it; 6.5. Lender and Security Trustee Covenant. Each of Lender and Security Trustee hereby covenants and agrees, for the benefit of Obligee and Obligor, that so long as no Equipment Agreement Event of Default has occurred and is continuing, it shall not take or cause to be taken any action contrary to Obligor's or any permitted lessee's right to quiet enjoyment of, and the continuing possession, use and operation of, the Equipment during the Term of the Equipment Agreement. 6.6. Obligor Covenants. Obligor covenants and agrees for the benefit of each other party hereto (unless each party shall otherwise waive in writing compliance herewith) during the term of this Agreement as follows: (a) it shall furnish Obligee, Owner Participant and Lender (i) as soon as available, but in any event within 90 days after the end of each fiscal year of Obligor, a copy of the consolidated balance sheet of Obligor and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on, without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by KPMG, LLC or other independent certified public accountants of nationally recognized standing, and (ii) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of Obligor, the unaudited consolidated statements of income and retained earnings and of cash flows of Obligor and its consolidated Subsidiaries for such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, disclosed therein). (b) it shall furnish Obligee, Owner Participant and Lender (i) concurrently with the delivery of the financial statements referred to in Section 6.6(a)(i) hereof, a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Equipment -28- 106 Agreement Default or Equipment Agreement Event of Default, except as specified in such certificate, (ii) concurrently with the delivery of the financial statements referred to in Sections 6.6(a)(i) and (ii), a certificate of a Responsible Officer stating that, to the best of such officer's knowledge, Obligor during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Operative Documents to be observed, performed or satisfied by it, and that such officer has obtained no knowledge of any Equipment Agreement Default or Equipment Agreement Event of Default except as specified in such certificate, (iii) not later than ten (10) Business Days following approval by the Board of Directors of Obligor (and in any event at least once in each fiscal year), a copy of Obligor's final business plan as approved by the Directors, (iv) within five (5) days after the same are sent, copies of all financial statements and reports which Obligor sends to its stockholders, and within five (5) days after the same are filed, copies of all financial statements and periodic reports which Obligor may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Entity, and (v) promptly, such additional financial and other information as Obligee, Lender or Owner Participant may from time to time reasonably request (including, but not limited to, annual consolidating financial statements not later than 150 days after the end of each fiscal year.); and (c) within the six-month period preceding the fifth anniversary of the Closing Date, Obligor will provide to Obligee, Lender and Security Trustee continuation statements with respect to any UCC financing statements filed in connection with the Equipment Agreement or this Agreement, to file the same, and promptly upon such filing will provide Obligee, Lender and Security Trustee with written evidence thereof. and (d) within fifteen Business Days of each Funding Date, Obligor shall deliver to Security Trustee original counterparts of Subsidiary Equipment Agreements for each of the Subsidiaries in possession of Equipment on such Funding Date. 6.7. Obligor Negative Covenants. Obligor covenants and agrees for the benefit of each other party hereto (unless each party shall otherwise waive in writing compliance herewith) during the term of this Agreement that it shall comply with the Multi-Currency Negative Covenants, and such Multi-Currency Negative Covenants (together with all terms utilized therein) are hereby incorporated by reference as if set forth herein in their entirety and: (a) Obligor shall not permit the ratio of Consolidated Total Debt to Consolidated Capitalization at any time to be greater than 68%; (b) Obligor shall not permit the EBITDA Ratio for any period of four consecutive fiscal quarters to be less than 2.25 to 1.0; (c) Obligor shall not enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, or permit any Restricted Subsidiary to do any of the foregoing, except (i) any Restricted Subsidiary of Obligor may be merged or consolidated with or into Obligor (provided that Obligor shall be the continuing or surviving corporation) or with or into any one or more wholly-owned Restricted Subsidiaries of Obligor (provided that the wholly-owned Restricted Subsidiary or Restricted Subsidiaries shall be the continuing or surviving corporation), (ii) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to Obligor or any other wholly-owned Restricted Subsidiary of Obligor, and (iii) -29- 107 Obligor and its Restricted Subsidiaries may consummate the transactions permitted by subsection 10.5 of the Multi-Currency Credit Agreement; 6.8. Covenant of Lender, Obligee, Agent and Security Trustee, LC Issuer, Trust Company and Owner Participant. Each Obligee, Lender, Agent, Security Trustee, LC Issuer, Trust Company and Owner Participant that is not a "United States person" as such term is defined in Code Section 7701(a)(30) shall provide to Obligor at Closing and in 2000 on or before January 15 and at such times as may be necessary thereafter under Applicable Law as in effect on the Closing Date (including Treasury regulations promulgated under Section 1441 of the Code presently scheduled as of the Closing Date to go into effect on January 1, 2001) and at such other times as shall be reasonably requested by Obligor, a fully completed Internal Revenue Service Form 4224 or successor form (including an Internal Revenue Service Form W-8 as specified in Treasury Regulations section 1.1441-4(a) presently scheduled as of the Closing Date to go into effect on January 1, 2001) upon which Obligor can rely establishing that all payments to be made by Obligor to each such Person under the Operative Documents can be made by Obligor free and clear of any requirement to withhold any federal income tax therefrom because such payments are effectively connected with the conduct of a trade or business by such Person in the United States; provided, however, that each such Person shall not be required to provide such forms if, solely as a result of a change in Applicable Law (but not including for this purpose, Treasury Regulations Section 1.1441-4(a) in the form scheduled as of the Closing Date to go into effect on January 1, 2001), such Person is not legally entitled to deliver such form. The only consequence of a breach by any Lender, Obligee, Agent, Security Trustee, LC Issuer, Trust Company or Owner Participant of this Section 6.8, shall be that Obligor shall be entitled to withhold from any payment made by Obligor to such Person the appropriate amount of federal income tax, notwithstanding the provisions of the Operative Documents to the contrary and Obligor shall have no obligation under Section 8.2 for those amounts withheld from payments to such Person hereunder. 7. Security. 7.1. Security Interest. For valuable consideration, and to secure the due payment and performance of all principal of, Prepayment Premium, if any, and interest on the Loans, the Loan Commitment Fee and any interest due thereon, and all indebtedness and other liabilities and obligations, whether now existing or hereafter arising (including any obligations to indemnify, reimburse or pay costs and/or expenses) of Obligee to Lender arising out of or in any way connected with the Operative Documents and all instruments, agreements and documents executed, issued and delivered pursuant thereto (collectively, the "Secured Obligations"), Obligee hereby assigns, conveys, mortgages, pledges, hypothecates, transfers and sets over to Security Trustee, and its successors and assigns, and grants to Security Trustee, and its successors and assigns, a first Lien on and security interest in the following property and rights of Obligee, except for Excepted Payments with respect thereto (collectively, the "Collateral"): (a) the Items of Equipment; (b) all right, title and interest of Obligee in and to any Cross Receipt and all warranties (including, without limitation, warranties of title, merchantability, fitness for a -30- 108 particular purpose, quality and freedom from defects) and rights of recourse against manufacturers, assemblers, sellers and others in connection with the Items of Equipment; (c) all right, title and interest of Obligee in and to, but none of the obligations of Obligee under, the Equipment Agreement, the Security Documents and the Subsidiary Equipment Agreements and all Equipment Payments, Equipment Agreement Commitment Fees and Supplemental Payments payable under the Equipment Agreement including installments of Equipment Payment payments and all other sums payable thereunder; (d) all accounts, contract rights, general intangibles and all other property rights of any nature whatsoever arising out of or in connection with the Equipment Agreement or the Items of Equipment, including, without limitation, Equipment Payment, Equipment Agreement Commitment Fees and Supplemental Payments and any other payments due and to become due under the Equipment Agreement whether as repayments, reimbursements, contractual obligations, indemnities, damages or otherwise; (e) all claims, rights, powers, or privileges and remedies of Obligee, as Obligee, under the Equipment Agreement; (f) all rights of Obligee under the Equipment Agreement to make determinations to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing or any property which is the subject of the Equipment Agreement, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action which (in the opinion of Security Trustee) may be necessary or advisable in connection with any of the foregoing; provided, however, Security Trustee agrees for the benefit of Obligee that so long as no Loan Event of Default has occurred and is continuing, it will not exercise any of the rights assigned to it under clauses (e) and (f) of this Section 7.1, other than the right to receive amounts due under the Equipment Agreement, without the prior written consent of Obligee; (g) all moneys now or hereafter paid or required to be paid to Lender pursuant to any Operative Document; and (h) all proceeds of the Collateral including, without limitation, all rentals, income and profits in respect of the Items of Equipment, whether under the Equipment Agreement or otherwise, all credits granted by any manufacturer or vendor with respect to the return of any Item of Equipment and the proceeds of any insurance payable with respect to the Items of Equipment. 7.2. Consent and Agreement of Obligor. Obligor hereby consents to the assignment set forth in Section 7.1 hereof. Obligee and Security Trustee hereby instruct, and Obligor agrees, that until further notified by Security Trustee, Obligor shall pay all amounts payable under the Equipment Agreement other than Excepted Payments to the account of Security Trustee maintained at Commerzbank AG, New York Branch, ABA No. 026008044, Account No. 150 10 1710200, reference: Four Winds Funding Corporation/Harman or such other account as Security Trustee may designate in a written notice to Obligor. If there is any -31- 109 disagreement between Security Trustee and Obligee as to whether any amount is an Excepted Payment, Obligor shall abide by Security Trustee's determination with respect to such amount. 7.3. Further Obligee Covenants. Obligee covenants and agrees with Security Trustee as follows: (a) Obligee will faithfully abide by, perform and discharge each and every obligation, covenant and agreement to be performed by Obligee under the Operative Documents to which it is a party, and Security Trustee shall not be responsible for any of such obligations, covenants or agreements under any circumstances; (b) at the request of Security Trustee, and at the sole cost and expense of Obligee, Obligee will use its best efforts to enforce or secure the performance of each and every obligation, covenant, condition and agreement contained in the Equipment Agreement to be performed by Obligor; (c) Obligee, at the reasonable request of Security Trustee, will appear in and defend every action or proceeding arising under, growing out of or in any manner connected with the Equipment Agreement or the obligations, duties or liabilities thereunder of Obligee and Obligor; (d) if at any time during a Loan Default or Loan Event of Default Obligee should receive any amounts payable by Obligor under the Equipment Agreement or any other proceeds for or with respect to the Collateral, it will hold such amounts in trust for Security Trustee and not commingle such amounts with any other amounts belonging to or held by Obligee, advise Security Trustee of such receipt and promptly forward such amounts directly to Security Trustee; (e) upon the occurrence and continuance of any Loan Event of Default, Obligee will immediately upon receipt of all checks, drafts, cash or other remittances in payment of any of its accounts, contract rights or general intangible constituting part of the Collateral, or in payment for any Collateral sold, transferred, leased or otherwise disposed of, or in payment or on account of its accounts, contracts, contract rights, notes, drafts, acceptances, general intangibles, chooses in action and all other forms of obligation relating to any of the Collateral so sold, transferred or otherwise disposed of, deliver any such items to Security Trustee accompanied by a remittance report in form supplied or approved by Security Trustee, such items to be delivered to Security Trustee in the same form received, endorsed or otherwise assigned by such Obligee where necessary to permit collection of items and, regardless of the form of such endorsement, Obligee hereby waives presentment, demand, notice of dishonor, protest and notice of protest; and (f) within the six-month period preceding the fifth anniversary of the Closing Date, Obligee will provide to and will obtain from Obligor continuation statements with respect to the UCC financing statements filed in connection with this Agreement, will file the same pursuant to Section 10.1 hereof, and promptly upon such filing will provide Security Trustee with written evidence thereof. -32- 110 7.4. Further Assurances. For each Item of Equipment located in the United States, France, Germany, or England, Obligee will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to Security Trustee from time to time such confirmatory assignments, conveyances, financing and continuation statements, transfer endorsements, powers of attorney, notes, reports and other assurances or instruments and take such further actions which are appropriate or advisable to perfect, preserve or protect Security Trustee's security interest granted hereunder or which Security Trustee deems necessary or advisable in order to obtain the full benefits of the Liens created or intended to be created hereunder, and will take such other actions reasonably requested by Security Trustee to effectuate the intent of the Operative Documents. To the extent permitted by applicable law, Obligee authorizes Security Trustee to file any such financing and continuation statements without the signature of Obligee and Obligee will pay all applicable filing fees and related expenses. 7.5. Termination. Upon the full and final discharge and satisfaction of the Loans and the Obligee's obligations to Lender and Security Trustee under the Operative Documents, the provisions of this Section 7 and all grants and assignments hereunder shall terminate, and all right, title and interest of Security Trustee in and to the Equipment Agreement, the Collateral and the proceeds thereof shall revert to Obligee, provided that the indemnification provisions hereof shall survive the termination of this Agreement and, provided, further, that if such discharge and satisfaction shall be made following the occurrence of a Loan Event of Default, the foregoing discharge shall be made following satisfaction of Obligor's obligations under Section 21 of the Equipment Agreement. Security Trustee shall, at Obligee's expense, execute and deliver any evidence of such release as Obligee may reasonably require and furnish to Security Trustee. 7.6. Other Security. To the extent that the obligations of Obligee under any Operative Document are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other Person, then Security Trustee shall have the right in its sole discretion to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of Security Trustee's rights and remedies hereunder. 7.7. Power of Attorney. Obligee irrevocably authorizes Security Trustee and does hereby make, constitute and appoint Security Trustee and any officer of Security Trustee, with full power of substitution, as Obligee's true and lawful attorney-in-fact, with power, in its own name or in the name of Obligee, to endorse any notes, checks, drafts, money orders, or other instruments of payment (including payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of Security Trustee; to sign and endorse any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; to pay or discharge Taxes, Liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; and generally, to do, at Security Trustee's option and at Obligee's expenses, at any time, or from time to time, all acts and things which Security Trustee deems necessary to protect, preserve and realize upon the Collateral and Security Trustee's security interests therein and in order to effect the intent of the Operative Documents all as fully and effectually as Obligee might -33- 111 or could do; and Obligee hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney shall be coupled with an interest and irrevocable for the term of this Agreement and thereafter as long as any of the obligations of Obligee under any Operative Document shall be outstanding. The powers conferred on Security Trustee hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon Security Trustee to exercise any such powers. Security Trustee shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and neither it nor any of its officers, directors or employees shall be responsible to Obligee for any act or failure to act, except for its own gross negligence or willful misconduct. 7.8. Assignment of Rights. Obligee agrees that the assignments herein are irrevocable and it will not, while said assignment is in effect or thereafter until Obligee has received from Security Trustee notice of the termination thereof, take any action as Obligee under the Equipment Agreement or otherwise which is inconsistent with this Agreement or make any other assignment, designation or direction inconsistent herewith and that any assignment, designation or direction inconsistent herewith shall be void. Obligee and Security Trustee agree that the following are, without limitation, rights, powers, privileges, options, and benefits assigned by Obligee hereunder: the right to make claim for, receive, collect and receipt for (and to apply the same to the payment of the principal of, Prepayment Premium, if any, and interest on the Notes) all rents, income, revenues, issues, profits, insurance proceeds, condemnation awards, payments of Casualty Loss Value and other sums payable or receivable under the Equipment Agreement or pursuant thereto, and to make all waivers and agreements, to give and receive all notices and other instruments, and to take all action upon the happening of an Equipment Agreement Event of Default, including the commencement, conduct and consummation of proceedings at law or in equity as shall be permitted under any provision of the Equipment Agreement or by law, and to do all other things which Obligee or any owner of the Equipment is or may become entitled to do under the Equipment Agreement. 7.9. Transfer of the Collateral by Lender. Security Trustee or Lender may be a transferee of the Collateral or of any part thereof or of any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise hereunder, and may apply upon the transfer price the indebtedness secured hereby owing to such transfer, to the extent of such transferee's distributive share of the transfer price. Any such transferee shall, upon any such transfer, acquire title to the properties so transferred, free of the Lien of this Agreement. 7.10. No Segregation of Monies; No Interest. Any monies paid to or retained by Security Trustee pursuant to any provision hereof and not then required to be distributed to any party as provided in Section 7 hereof need not be segregated in any manner except to the extent required by law, and may be deposited under such general conditions as may be prescribed by law, and Lender shall not be liable for any interest thereon. 7.11. Distribution of Moneys. Except as may be otherwise provided in this Section 7 and for so long as no Loan Event of Default has occurred and is continuing, all moneys received by Security Trustee shall be applied in accordance with this Section 7.11: 7.11.1 Payments under the Equipment Agreement. Moneys received by Security Trustee constituting Equipment Payment or Equipment Agreement Commitment Fees -34- 112 under the Equipment Agreement (including the payment of interest on any such overdue Equipment Payment or Equipment Agreement Commitment Fees) shall be applied: First, so much of such funds as shall be required to pay in full the aggregate amount of any interest then due on the Loans hereunder, if any, at the Overdue Rate and of the interest then due on the Loans at the Applicable Rate therefor; Second, so much of such funds as shall be required to pay in full interest due on any Loan Commitment Fee then due hereunder, if any, at the Overdue Rate; Third, so much of such funds as shall be required to pay in full any Loan Commitment Fee then due hereunder; Fourth, so much of such funds shall be required to pay in full any principal installment then due on the Loans; and Fifth, the balance, if any, of such payment remaining thereafter shall be distributed to Obligee or its designee. 7.11.2 Payments in Respect of an Event of Loss. Moneys received by Security Trustee constituting Casualty Loss Value (including any insurance proceeds or condemnation awards in respect of the subject Event of Loss which are payable to Security Trustee pursuant to the provisions of the Equipment Agreement) shall be applied first, to the prepayment of the Loans required by Section 5.7.1 hereof, and second, the balance of any such moneys shall be distributed to Obligee or its designee. 7.11.3 Payment of the Unamortized Debt Balance of any Item of Equipment. Moneys received by Security Trustee constituting payment by Obligor of the Unamortized Debt Balance of any Item of Equipment pursuant to Section 25.2 or 26 of the Equipment Agreement shall be applied to the prepayment of the Notes required by Section 5.7.2 hereof. 7.11.4 Payment upon Final Disposition of the Items of Equipment. Moneys received by Security Trustee constituting proceeds of the sale of any Item of Equipment to a third party pursuant to Section 25.3 of the Equipment Agreement, plus moneys received by Security Trustee constituting any Deficiency with respect to such Item of Equipment shall be applied to the prepayment of the Notes required by Section 5.7.3 hereof. 7.12. Payments after a Loan Event of Default. All payments received and all amounts held or realized by Security Trustee (including any amounts realized by Security Trustee from the exercise of any remedies) after any Loan Event of Default, and all payments or amounts then held or thereafter received by Security Trustee hereunder or under the Operative Documents, shall, so long as such Loan Event of Default continues and shall not have been waived in writing by Lender, be applied forthwith by Security Trustee in the following order or priority: First, so much of such payments or amounts held or realized by Security Trustee as shall be required to reimburse Security Trustee for any expenses not reimbursed by Obligee in connection with the collection or distribution of such amounts held or realized by Security -35- 113 Trustee or in connection with the expenses incurred in enforcing its remedies hereunder and preserving the Collateral including, without limitation, those expenses contemplated under Section 10.1 hereof, shall be retained by Security Trustee; Second, so much of such payments or amounts as shall be required to pay Lender, Security Trustee and Agent the amounts payable to Lender, Security Trustee and Agent pursuant to the provisions of any indemnification provisions of this Agreement shall be distributed to Lender, Security Trustee and Agent; Third, so much of such payments or amounts remaining as shall be required to pay (i) any accrued but unpaid interest on the Loan at the Overdue Rate to the date of distribution, then (ii) any accrued but unpaid interest thereon at the Applicable Debt Rate to the date of distribution, then (iii) the Prepayment Premium payable upon any principal amount paid following acceleration, then (iv) any accrued by unpaid interest on any accrued unpaid Loan Commitment Fee, if any, at the Overdue Rate to the date of distribution, then (v) any accrued and unpaid Loan Commitment Fee, and then (vi) all of the unpaid principal amount of the Loans and all other amounts due Lender under the other Operative Documents shall be distributed to Lender; and Fourth, the balance, if any, of such payments or amounts remaining thereafter shall be distributed to Obligee or its designee. 7.13. Application of Certain Other Payments. Any payments received by Lender for which provision as to the application thereof is made in the Operative Documents but not elsewhere in this Agreement shall be applied forthwith to the purpose for which such payment was made in accordance with the terms of the Operative Documents. 7.14. Other Payments. Except as otherwise provided in Sections 7.12 and 7.15 hereof, (a) any payments received by Security Trustee for which no provision as to the application thereof is made in the Operative Documents, or elsewhere in this Section 7, and (b) all payments received and amounts realized by Security Trustee with respect to the Collateral (including, without limitation, all amounts realized upon the sale, release or other disposition of the Collateral upon foreclosure of this Agreement), to the extent received or realized at any time after payment in full of the principal of, Prepayment Premium, if any, and interest on the Loans, as well as any other amounts remaining as part of the Collateral after payment in full of the principal of and interest on the Loans and all other amounts due Lender hereunder and under any other Loan Document, shall in each case be distributed forthwith by Security Trustee in the following order of priority: First, in the manner provided in clause "First" of Section 7.12 hereof; Second, in the manner provided in clause "Second" of Section 7.12 hereof; and Third, in the manner provided in clause "Fourth" of Section 7.12 hereof. 7.15. Retention of Amounts by Security Trustee . Except as otherwise provided in Section 7.12 hereof, if at the time of receipt by Security Trustee of any payment or amount which would otherwise be distributable to Obligee, there shall have occurred and be continuing a -36- 114 Loan Default or a Loan Event of Default, Security Trustee shall not distribute any such amount to Obligee or its designee and shall hold it as security for Obligee's obligations to Lender under the Operative Documents until such time as there shall not be continuing such Loan Default or Loan Event of Default. 8. Indemnities. 8.1. Obligor General Indemnification. Obligor hereby assumes liability for, and does hereby agree to indemnify, protect, save, defend, and hold harmless each Obligor Indemnified Person on an After-Tax Basis from and against any and all obligations, fees, liabilities, losses, damages, penalties, claims, demands, actions, suits, judgments, costs and expenses, including reasonable legal fees and expenses, of every kind and nature whatsoever, imposed on, incurred by, or asserted against such Obligor Indemnified Person (collectively, "Losses"), which is not directly and primarily caused by the gross negligence or willful misconduct of such Obligor Indemnified Person and which relates in any way to or arises in any way out of (a) the manufacture, construction, ordering, transfer, acceptance or rejection, ownership, transfer of ownership, titling or retitling, registration or reregistration, delivery, leasing, subleasing, possession, use, operation, maintenance, storage, removal, return, repossession, mortgaging, granting of any interest in, transfer of title to, acquisition, sale or other application or disposition, disposition of licensing, documentation, of the Items of Equipment or any Item of Equipment, or any part thereof, including, without limitation, any of such as may arise from (i) loss or damage to any property or death or injury to any Persons, (ii) patent or latent defects in the Items of Equipment (whether or not discoverable by Obligor or any Obligor Indemnified Person), (iii) any claims based on strict liability in tort or negligence, (iv) any claims related to the release of any substance into the environment and (v) any claims based on patent, trademark, trade name or copyright infringement or (b) the Operative Documents or the transactions contemplated hereby or thereby other than Losses primarily caused by such Obligor Indemnified Person's breach under the Operative Documents provided such breach is not caused by a breach or default by Obligor under the Operative Documents, or (c) any failure on the part of Obligor to perform or comply with any of the terms of the Equipment Agreement or any other Operative Document to which it is a party or instrument referred to or contemplated hereby or thereby. With respect to any Obligor Indemnified Person this indemnification shall not include any matters for which such Obligor Indemnified Person is indemnified under Section 8.2 or which are excluded from Obligor's indemnity obligation thereunder. Obligor shall give each Obligor Indemnified Person prompt notice of any occurrence, event or condition known to Obligor as a consequence of which any Obligor Indemnified Person may be entitled to indemnification hereunder, except only that Obligor shall not be required pursuant to this Section 8.1 to indemnify any Obligor Indemnified Person for any liability relating to the Items of Equipment arising out of acts or events which occur after return of the Items of Equipment to Obligee (and expiration of any storage period) pursuant to Section 6 of the Equipment Agreement (other than a return pursuant to Section 21 of the Equipment Agreement) or which occur after a sale to a third party pursuant to Section 25.3 of the Equipment Agreement. Unless Obligor is contesting any such claim specified in clause (a) hereof in a manner reasonably satisfactory to the affected Obligor Indemnified Person, Obligor shall forthwith upon demand of any such Obligor Indemnified Person reimburse such Obligor Indemnified Person for amounts expended by it in connection with any of the foregoing or pay such amounts directly. Obligor shall be subrogated to an Obligor Indemnified Person's rights in any matter with respect to which -37- 115 Obligor has actually reimbursed such Obligor Indemnified Person for amounts expended by it or has actually paid such amounts directly pursuant to this Section 8.1. In case any claim, action, suit or proceeding is made or brought against any Obligor Indemnified Person in connection with any claim indemnified against hereunder, such Obligor Indemnified Person will, promptly after receipt of notice of such claim or the commencement of such action, suit or proceeding, notify Obligor thereof, enclosing a copy of all papers served upon such Obligor Indemnified Person, but failure to give such notice or to enclose such papers shall not relieve Obligor from any liability hereunder unless such failure materially and adversely affects Obligor's defense of such claim resulting in an increase in liability of Obligor in respect of such claim or preventing it from reducing liability therefor, in which case Obligor shall not be required to indemnify such Obligor Indemnified Person for the amount by which such liability was increased or not reduced for failure to give such notice. Obligor may, and upon such Obligor Indemnified Person's request will, at Obligor's expense, resist and defend such claim, action, suit or proceeding, or cause the same to be resisted or defended by counsel selected by Obligor and reasonably satisfactory to such Obligor Indemnified Person and in the event of any failure by Obligor to satisfy its obligations under this Section, Obligor shall pay all reasonable costs and expenses (including, without limitation, attorney's fees and expenses) incurred by such Obligor Indemnified Person in connection with such action, suit or proceeding. The provisions of this Section 8.1, and the obligations of Obligor under this Section 8.1, shall apply from the date of the execution of the Equipment Agreement notwithstanding that the Term may not have commenced with respect to any Item of Equipment, and shall survive and continue in full force and effect notwithstanding the expiration or earlier termination of the Equipment Agreement in whole or in part, including the expiration of termination of the Term with respect to any Item of Equipment, and are expressly made for the benefit of, and shall be enforceable by, each Obligor Indemnified Person. 8.2. Obligor General Tax Indemnity. Except as provided in Section 6.8 hereof, Obligor agrees to pay, defend and indemnify and hold Obligee, Trust Company, Lender, Agent, Security Trustee, Owner Participant and LC Issuer and their respective Affiliates, successors and assigns (including any consolidated or combined group of which any such Person is a member) (each a "Tax Indemnitee") harmless on an After-Tax Basis from any and all Federal, state, local and foreign taxes, fees, withholdings, levies, imposts, duties, assessments and charges of any kind and nature whatsoever, together with any penalties, fines or interest thereon (herein called "Taxes") howsoever imposed, whether levied or imposed upon or asserted against a Tax Indemnitee, Obligor, any Item of Equipment, or any part thereof, by any federal, state or local government or taxing authority in the United States, or by any taxing authority of a foreign country or subdivision thereof, upon or with respect to (a) the Items of Equipment, any Item of Equipment or any part thereof, (b) the manufacture, construction, ordering, transfer, ownership, transfer of ownership, titling or retitling, registration or reregistration, delivery, leasing, subleasing, possession, use, operation, maintenance, storage, removal, return, mortgaging, granting of any interest in, transfers of title to, acquisition, sale or other disposal of licensing, documentation, repossession, sale or other application or disposition of the Items of Equipment, any Item of Equipment or any part thereof, (c) the revenues, rent, receipts or earnings arising from any Item of Equipment or any part thereof, (d) the Equipment Agreement, each Item of Equipment Supplement, the Equipment Payment, Equipment Agreement Commission and/or Supplemental Payments payable by Obligor hereunder or under the Equipment Agreement or any payment made to Lender by Obligee, Obligor, Owner Participant or Trust Company pursuant to -38- 116 the Operative Documents, or (e) otherwise in respect of the Operative Documents or any thereof or any transaction or transactions contemplated hereby or thereby; provided, however, that the foregoing indemnity shall not apply with respect to any Tax Indemnitee to (i) Taxes based upon or measured by such Tax Indemnitee's net income, gross income, gross receipts (except gross income and gross receipts Taxes expressly imposed in lieu of overall sales Taxes), capital, net worth, excess profits or items of tax preference, including minimum and alternative minimum Taxes imposed by any United Sates federal, state or local taxing authority (but in the case of state and local taxes only, such Taxes shall not be excluded from indemnification to the extent imposed due to the location or presence of the Items of Equipment, the presence, activities or place of business or organization of Obligor (or any person claiming or taking possession of the Items of Equipment from or through Obligor) in the taxing jurisdiction imposing such Tax, or any payments being made from such jurisdiction or as contemplated by Section 25.3.2 of the Equipment Agreement) ("Income Taxes"), (ii) Taxes imposed on a Tax Indemnitee, including, without limitation, sales and transfer Taxes, that result from any voluntary or involuntary transfer by such Tax Indemnitee of any interest in the Items of Equipment or in any other Tax Indemnitee or any portion of any of the foregoing or any interest arising out of the Equipment Agreement and Operative Documents unless such transfer shall have occurred in connection with, or as a result of, Obligee's acquisition of an Item of Equipment following an Equipment Agreement Event of Default or exercise of a transfer option or sale to a third party pursuant to Section 25.3.2 of the Equipment Agreement, (iii) Taxes imposed on a Tax Indemnitee by any jurisdiction as a result of a situs of organization of such Tax Indemnitee or such Tax Indemnitee's engaging in activities in such jurisdiction unrelated to the transactions contemplated by the Operative Documents and not as a result of the presence of the Items of Equipment, Obligor, any Tax Indemnitee other than such Tax Indemnitee in, or any payments being made from, or the registration, filing or enforcement of any document or charge contemplated or necessitated by the Operative Documents, in such jurisdiction, (iv) Taxes imposed on a Tax Indemnitee that result from any willful misconduct or gross negligence of such Tax Indemnitee, (v) except where there exists an Equipment Agreement Event of Default, Taxes that are attributable to any period beginning or circumstances occurring after the expiration or earlier termination of the Equipment Agreement other than with respect to a sale to a third party pursuant to Section 25.3.2 of the Equipment Agreement, and other than the payment of any amount after such date that has accrued on or prior to such date, and any interest thereon, (vi) Taxes that are based on or measured by fees or compensation for services rendered by Obligee but not including interest, (vii) Taxes imposed by a taxing authority of a foreign country or subdivision thereof not by reason of the location or presence of the Items of Equipment, Obligor, in such jurisdiction or payments being made from such jurisdiction or the registration, filing or enforcement of any document or charge contemplated or necessitated by the Operative Documents in such jurisdiction, (viii) Taxes, including, without limitation, any excise Taxes or other impositions or penalties, payable as a result of such Tax Indemnitee's participation in the transactions contemplated by the Operative Documents being deemed to result in a "prohibited transaction" by any party to the Equipment Agreement within the meaning of Section 406 of ERISA or Section 4975 of the Code due to such Tax Indemnitee's violation of its representation set forth in section 2, (ix) Taxes imposed on a transferee Tax Indemnitee in excess of the amount of such Taxes that would have been imposed on the transferor had there not been a transfer by a Tax Indemnitee after the Closing Date of an interest in the Items of Equipment or in any other Tax Indemnitee or any portion of the foregoing or any interest arising under any Operative Document (except to the extent such excess Taxes are -39- 117 imposed as a result of a change in Applicable Law after the date of such transfer) unless such transfer shall have occurred in connection with, or as a result of, an Equipment Agreement Event of Default or exercise of a transfer option or a sale to a third party pursuant to Section 25.3.2 of the Equipment Agreement, provided that this exclusion shall not be read to prevent any payment pursuant to this Section 8.2 being made on an After-Tax Basis, and (x) Taxes imposed on a Tax Indemnitee resulting from (a) the existence of any Liens created by such Tax Indemnitee (other than Permitted Liens), or (b) any inaccuracy of any representation, or breach of any warranty or covenant by such Tax Indemnitee, unless such violation or breach is a result of a breach by Obligor of any of its obligations under any Operative Document. Obligor will promptly notify Obligee and each Tax Indemnitee of all reports or returns required to be made by it with respect to any tax or other imposition with respect to which Obligor is required to indemnify hereunder, and will promptly provide each Tax Indemnitee with all information necessary for the making and timely filing of such reports or returns by it. If a Tax Indemnitee requests that any such reports or returns be prepared and filed by Obligor, Obligor will prepare and file the same if permitted by applicable law to file the same, and if not so permitted, Obligor shall prepare such reports or returns for signature and shall forward the same, together with immediately available funds for payment of any Tax due, at least ten (10) days in advance of the date such payment is to be made. Upon written request, Obligor shall furnish each Tax Indemnitee with copies of all paid receipts or other appropriate evidence of payment for all Taxes paid by Obligor pursuant to this Section 8.2. Each Tax Indemnitee shall furnish Obligor with copies of any written requests for information received by it from any taxing authority relating to any Tax with respect to which Obligor is required to indemnify hereunder, and if a written claim is made against a Tax Indemnitee for any such Tax with respect to which Obligor is liable for a payment or indemnity hereunder, Obligee or such Tax Indemnitee shall give Obligor notice in writing of such claim. Each such Tax Indemnitee will use its best efforts to inform Obligor of any potential claims of which it has notice. Obligor may, at its sole cost and expense, either in its own name (other than with respect to Income Taxes) or in the name of the Tax Indemnitee, contest the validity, applicability or amount of such Tax, by (i) resisting payment thereof if practicable, unless payment is required to avoid risk of the sale or forfeiture of, or the creation of a Lien on, the Items of Equipment to which such contest relates, (ii) not paying the same except under protest, if protest is necessary, or (iii) if the payment is made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; provided, however, that such contest shall be permitted only if no Equipment Agreement Event of Default has occurred and is continuing hereunder, and only if and to the extent that such contest is being diligently prosecuted by Obligor by appropriate legal or administrative proceedings, and the action to be taken in connection with such contest (a) will not result in the sale, forfeiture or loss of, or the creation of a Lien on, the Items of Equipment to which such contest relates or Obligee's title thereto or any Tax Indemnitee interest therein, (b) is only with respect to any issue or Tax that is the subject of the indemnity provided in this Section 8.2, (c) Obligor shall have provided such Tax Indemnitee with an opinion of tax counsel reasonably satisfactory to such Tax Indemnitee, that such a contest has a reasonable basis, and (d) Obligor shall have acknowledged in writing its obligation to indemnify such Tax Indemnitee in the event the contest is unsuccessful (but such acknowledgment shall be of no force and effect if the resolution of such contest is on a basis that clearly demonstrates that Obligor is not liable for such indemnity); provided that a Tax Indemnitee may assert control of the conduct of a contest which the Obligor has a right to control hereunder if the Tax Indemnitee provides written notice to Obligor that it wishes to conduct such -40- 118 contest and that it fully and irrevocably releases Obligor from its indemnification obligations for the Tax (or Taxes) that is (or are) the subject of such contest and all otherwise indemnifiable amounts related thereto; provided further that Obligor can eliminate its obligations to cover the costs and expenses of any contest by irrevocably paying the amount of such Taxes. If a Tax Indemnitee has received a refund of any amount paid by Obligor pursuant to this Section 8.2, such Tax Indemnitee shall pay to Obligor the amount of such refund, together with the amount of any interest actually received by such Tax Indemnitee on account of such refund net of any actual loss incurred by such Tax Indemnitee resulting from the circumstances relating to such payments. Each Tax Indemnitee shall have sole control over the positions taken with respect to its tax returns, filings and proceedings except with respect to Tax filings and proceedings that are otherwise provided for in this Section 8.2. All of the indemnities contained in this Section 8.2 are expressly made for the benefit of, and shall be enforceable by each Tax Indemnitee. Each Tax Indemnitee shall determine the allocation of any tax credit, tax savings, refund or other benefit and any related detriment resulting from any Tax indemnified hereunder, or from any indemnity payment hereunder, in its sole discretion and shall not be obligated to disclose its tax returns and related materials to any Person, other than any court or governmental agency if required in any contest, undertaken pursuant to this Section 8.2 hereof, of the imposition of any Tax indemnified hereunder, and the positions of each Tax Indemnitee in its tax returns, filings and proceedings shall be within its sole control except with respect to Tax filings and proceedings that are otherwise provided for in this Section 8.2. Notwithstanding anything in the foregoing to the contrary, Obligor hereby agrees that all tax reports and returns of Owner Participant will be treated in a responsible manner and their confidentiality maintained. If Obligor pays any Tax to or on behalf of any Tax Indemnitee for which the Obligor has no indemnity obligation pursuant to this Section 8.2 (or otherwise pursuant to the Operative Documents), the Tax Indemnitee upon whom, or with respect to which, such Tax was imposed, and for which the Obligor has no indemnity obligation, shall, within 10 days of written request therefor by Obligor, pay to Obligor the amount of Tax so paid, with interest at the Applicable Debt Rate from the date of payment of such Tax. 8.3. Obligee Indemnities. Obligee hereby assumes liability for, and does hereby agree to indemnify, protect, save, defend, and hold harmless each Obligee Indemnified Person on an After-Tax Basis from and against any and all Losses and each Tax Indemnitee against any and all Taxes to the same extent as Obligor indemnifies such Persons under Sections 8.1 and 8.2 hereof. 8.4. Survival. All obligations provided for in this Section 8 shall survive the sale of any Item of Equipment, any termination of the Equipment Agreement, the termination of this Agreement, and the payment in full of the Notes. 9. Agent for Lender. 9.1. Authorization and Action. Lender hereby appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to Agent by the terms hereof and thereof, respectively, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by a Loan Document (including enforcement or collection of the Notes), Agent shall not be required to exercise any discretion or take any action, but shall be -41- 119 required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of Lender (or in the event there are multiple Lenders upon the instruction of the Majority Lenders) and such instructions shall be binding upon Lender and Agent shall not be required to take any action which exposes Agent to personal liability or which is contrary to any Loan Document or Applicable Law. Agent agrees to give to Lender prompt notice of each notice given to it by Obligee pursuant to the terms of this Agreement. Agent may, with the prior consent of Lender (or if there are multiple Lenders, the Majority Lenders) agree to any waiver or amendment of the Operative Documents on behalf of Lender; provided, however, if there are multiple Lenders Agent will not, without the prior consent of all Lenders agree to any waiver or amendment that would (i) postpone the time or times for payment of any amount payable under the Equipment Agreement or the principal of or interest on any Loan, (ii) reduce any amount payable under the Equipment Agreement or the principal amount of any Loan or reduce the rate of interest on any Loan, or (iii) prior to the payment in full of the Secured Obligations, release any of the Collateral from the Lien created by the Loan Documents, other than in accordance with the terms thereof. Each of Agent and Security Trustee shall pursue its remedies under the Loan Documents following a Loan Event of Default in accordance with the instructions of Lender (or in the event there are multiple Lenders the Majority Lenders). 9.2. Agent's Reliance, etc. Neither Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted by it or them under or in connection with any Loan Document, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, Agent (i) may consult with legal counsel (including counsel for Obligor), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted in good faith by it in accordance with the advice of such counsel, accountants or experts, (ii) makes no warranty or representation to Lender and shall not be responsible to Lender for any statements, warranties or representations made in or in connection with any Loan Document, (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of Obligor or to inspect the property (including the books and records) of Obligor, (iv) shall not be responsible to Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant thereto, and (v) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by fax, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. 9.3. Agent and Affiliates. With respect to any Commitment made by it, any Loans made by it and any Note issued to it, Agent shall have the same rights and powers under each Loan Document as any other Lender and may exercise the same as though it were not an agent hereunder; Agent and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, Obligee or Obligor, any of its subsidiaries and any Person who may do business with or own securities of Obligee or Obligor or any such subsidiary, all as if Agent were not an agent hereunder and without any duty to account therefor to Lender. 9.4. Lender Credit Decision. Lender acknowledges that it has, independently and without reliance upon Agent and based on the financial statements of Obligee and Obligor -42- 120 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Lender also acknowledges that it will, independently and without reliance upon Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents. 9.5. Indemnification. Lender agrees to indemnify Agent (to the extent not reimbursed by Obligee or Obligor), (and if there are multiple Lenders, each Lender agrees to do so ratably according to the respective principal amounts of the Notes then held by it), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in any way relating or arising out of any Loan Document or any action taken or omitted by Agent under any Loan Document; provided that Lender shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's gross negligence or willful misconduct. Without limitation of the foregoing, Lender agrees to reimburse Agent promptly upon demand for out-of-pocket expenses (including counsel fees) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, any Loan Document, to the extent that Agent is not reimbursed for such expenses by Obligee or Obligor. 9.6. Successor Agent. Agent may resign at any time by giving at least 15 days written notice thereof to Lender and Obligee, and Agent may be removed at any time with or without cause by Lender (of if there are multiple Lenders, by the Majority Lenders). Upon any such resignation or removal, Lender or the Majority Lenders, as the case may, be shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by Lender or the Majority Lenders, and shall have accepted such appointment, within 30 days after any such resignation of removal, the retiring Agent may, on behalf of Lender, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $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 obligations under each Loan Document. 9.7. Holder List; Ownership of Notes. Agent shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the holders of the Notes, which list shall be available to Obligee or its representative for inspection. Ownership of the Notes shall be proved by the Note register kept by Agent. Prior to due presentment for registration of transfer of any Note, Agent and Obligee may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, and Prepayment Premium, if any, and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and neither Agent nor Obligee shall be affected by any notice to the contrary. 9A LC Issuer Purchase Option -43- 121 9A.1 In the event that on any Termination Date Obligor has not exercised its option to transfer the Equipment pursuant to Section 25.2 of the Equipment Agreement and has not renewed the Equipment Agreement, LC Issuer shall have the right, and is hereby granted the option (the "LC Issuer Option") to purchase, or at the option of LC Issuer, to designate a third party to purchase, and the Lender hereby agrees to sell to LC Issuer or its designee all of its right, title and interest in the Loans and the Notes, any time after such Termination Date at a purchase price equal to the aggregate of all amounts then owing to Lender under the Operative Documents (the "Purchase Option Price") and to assign all of Lender's rights, remedies and security interests with respect to the Loans and Notes under the Operative Documents to LC Issuer or its designee. In order to exercise the LC Issuer Option, LC Issuer shall deliver to Lender and Security Trustee irrevocable written notice of such election (the "Option Notice") and shall pay the Purchase Option Price in immediately available funds on or before the second Business Day after delivery of the Option Notice in accordance herewith. 9A.2 Lender agrees that it shall not grant participations in, assign, sell or otherwise transfer all or any part of its interest in the Loans or any Note unless such transferee, assignee, participant or Liquidity Provider expressly acknowledges and agrees that its interest in the Loans and the Notes shall be subject to the LC Issuer Option (in the case of each Liquidity Provider the Liquidity Agreement shall expressly so provide) and Lender and Security Trustee agree that they will not take any action with respect to the Equipment during the period after Lender and Security Trustee receive the Option Notice and prior to the third Business Day thereafter without the consent of LC Issuer. 10. Miscellaneous. 10.1. Expenses and Recording. Obligor shall reimburse Obligee, Trust Company, Owner Participant, Lender, Owner Participant, Agent and Security Trustee for all reasonable costs and expenses in connection with the preparation, execution and delivery of the Operative Documents, the documents relating to the Liquidity Facility and the consummation of the transactions contemplated thereby, and without limiting the generality of Obligor's undertaking to do so, Obligor shall pay the reasonable fees and expenses (initial and ongoing) of Trust Company for serving as Obligee and shall reimburse Trust Company, Lender, Owner Participant, LC Issuer, Agent and Security Trustee for all of their respective costs and expenses (including, without limitation, reasonable counsel fees and disbursements) in connection with the preparation, execution and delivery of and the consummation of the transactions contemplated thereby; provided, however, Obligor shall have no obligation to reimburse the above Persons for costs and expenses in the negotiation, preparation and execution of Operative Documents negotiated, prepared and executed after the Closing Date unless otherwise required under this Agreement or such Operative Documents relate to or arise out of an Equipment Agreement Event of Default. Obligor shall also pay the reasonable fees and disbursements of special counsel to Owner Participant and special counsel to Lender in connection with any amendments, waivers or consents requested by Obligor under the Equipment Agreement. Upon the occurrence of any Equipment Agreement Default or Equipment Agreement Event of Default, Obligor will also pay or reimburse Lender and Owner Participant for reasonable costs and expenses of counsel and of financial advisors as shall have been selected by Owner Participant or Lender to assist Owner Participant and Lender in connection with such Equipment Agreement Defaults or Equipment Agreement Events of Default. Obligor, at its own expense, will further cause the Equipment -44- 122 Agreement, the Loan Documents and/or appropriate financing statements or continuation statements to be filed and recorded and, from time to time when required, refiled and re-recorded, in accordance with Applicable Law in any jurisdiction in which Obligor or any Item of Equipment is located recognizing Obligee's, Lender's or Security Trustee's interest in the Equipment Agreement and in the Items of Equipment as a security interest and in any other jurisdiction where filing shall be reasonably requested by Obligee or Lender for the purpose of proper protection, to the satisfaction of counsel for Obligee or Lender, of its interests and rights under the Equipment Agreement, or the Loan Documents for the purpose of carrying out the intention of the Equipment Agreement and the Loan Documents. Obligor in addition will from time to time do and perform any other act and will execute, acknowledge, deliver, file, register, record (and will refile, reregister, deposit and redeposit or rerecord whenever required) any and all further instruments reasonably requested by Obligee or Lender for the purpose of proper protection, to its satisfaction, of Obligee's or Security Trustee's interests in the Items of Equipment, or for the purpose of carrying out the intention of the Equipment Agreement or the Loan Documents; and Obligor will promptly furnish to Obligee or Lender which shall have requested the same evidence of all such filing, registering, depositing or recording. 10.2. Modification. This Agreement and the Notes may be modified only by an instrument in writing signed by the parties hereto. 10.3. Governing Law, Jurisdiction and Venue; Waiver of Jury. This Agreement and the rights and obligations of the parties hereunder and under the Notes shall be construed in accordance with, and be governed by, the law of the State of New York. The parties hereto hereby agree that all actions or proceedings initiated by any party hereto arising directly or indirectly out of this Agreement or the other Loan Documents may be litigated in the Supreme Court of the State of New York located in New York City or the District Court or the United States District Court for the Southern District of New York. Each party hereto hereby expressly submits and consents in advance to such jurisdiction and venue in any action or proceeding commenced by any party hereto in any of such courts, agrees that jurisdiction and venue is proper in such courts, and hereby waives personal service of the summons and complaint, or other process or papers issued therein, and agrees that such service of the summons and complaint may be made by registered mail, return receipt requested, addressed to the party hereto being served at the address for such party set forth in Section 10.4 hereof. Each party hereto waives any claim that New York City or the Southern District of New York is an inconvenient forum or an improper forum based on lack of venue. The choice of forum set forth herein shall not be deemed to preclude the enforcement by Lender or Security Trustee of any judgment in any other appropriate jurisdiction. Each of Obligor, Obligee, Trust Company and Owner Participant hereby waives trial by jury in any judicial proceeding brought by it, Lender or Security Trustee involving directly or indirectly, any matter in any way arising out of, related to, or connected with this Agreement or the other Operative Documents. 10.4.Notices. All notifications, notices, demands, requests and other communications herein provided for or made pursuant hereto shall be in writing and shall be sent via (i) reputable overnight delivery service, and the giving of such communication shall be complete on the immediately succeeding Business Day after the same is deposited with such delivery service, (ii) by legible telefax with original to promptly follow by certified mail, with return receipt requested, and the giving of such communication shall be completed on the -45- 123 Business Day on which such fax is received. Written communications may be in any form of writing howsoever transmitted. The initial address of the parties hereto are as follows: Lender: c/o Commerzbank AG, New York Branch 2 World Financial Center New York, New York 10281-1050 Attention: Structured Finance Department Telephone: (212) 266-7474 Telefax: (212) 266-7661 Agent and Security Trustee: 2 World Financial Center New York, New York 10281-1050 Attention: Syndication Department Telephone: (212) 266-7338 Telefax: (212) 266-7374 with a copy to: Commerzbank AG, Los Angeles Branch 633 West Fifth Street, Suite 6600 Los Angeles, California 90071 Telephone: (213) 683-5413 Telefax: (213) 623-0039 Obligee and Trust Company: Goodwin Square 225 Asylum Street Hartford, Connecticut 08103 Attention: Patrick Thebado Telephone: (617) 662-1726 Telefax: (617) 662-1460 Owner Participant: 1251 Avenue of the Americas New York, New York Attention: Stephanie Geesey Telephone: (212) 782-4218 Telefax: (212) 782-6445 LC Issuer: 125 Summer Street Boston, Massachusetts 02110 Attention: Senior Vice President - Administration Telephone: (617) 573-9000 Telefax: (617) 345-1444 Obligor: 1101 Pennsylvania Avenue, NW, Suite 1010 Washington, D.C. 20004 -46- 124 Attention: Treasurer or Assistant Treasurer Telephone: (202) 393-1190 Telefax: (202) 393-3064 10.5. Interests in the Equipment. The parties hereto intend that (a) for financial accounting purposes with respect to Obligor, Obligee will be treated as the owner and the lessor of each Item of Equipment and Obligor will be treated as the lessee of each Item of Equipment and (b) for all other purposes, including federal and all state and local income tax purposes, state sales, use and other transaction tax purposes and state commercial law, (i) the Operative Documents will be treated as a financing arrangement, (ii) Obligee will be deemed a lender making loans to Obligor in an amount equal to the sum of the aggregate of the Equity Components for each Item of Equipment and the outstanding principal amount of the Loans and (iii) Obligor will be treated as the owner of each Item of Equipment and will be entitled to all tax benefits ordinarily available to an owner of equipment like the Equipment for such tax purposes. Obligee shall take no action inconsistent with the intention of the parties set forth in clause (b)(iii) of this Section 10.5; provided however, if this Equipment Agreement is finally and conclusively determined by any taxing authority having jurisdiction with respect thereto not to constitute a finance lease, Obligee, Owner Participant, Lender, Security Trustee and Obligor may take all actions necessary or desirable as a result of such determination and otherwise permitted by the terms of the Operative Documents. Notwithstanding the intentions of the parties expressed herein, Obligor acknowledges and agrees that neither Obligee, Owner Participant, Lender, Security Trustee nor Agent has made any representations or warranties to Obligor concerning the tax, accounting or legal characteristics of the Operative Documents and that Obligor has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents as it deems appropriate. 10.6. Descriptive Headings, etc. The descriptive headings used in this Agreement are for convenience only and shall not be deemed to affect the meaning or construction of any provision hereof. 10.7. Benefit of Agreement; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns and in particular any holder from time to time of any Note. No party hereto may assign any or all of its rights or obligations hereunder without the consent of the other parties hereto; provided however, Obligee may transfer or assign any or all of its rights or obligations hereunder to a successor Obligee appointed in accordance with the Trust Agreement and Lender may at any time grant participations in or sell, assign, negotiate or otherwise transfer to any Permitted Lender Assignee, any of its rights or obligations hereunder or under any other Loan Document provided each such Permitted Lender Assignee shall expressly acknowledge and consent to the LC Issuer Option. Obligee shall from time to time at the request of Lender, execute and deliver to Lender such documents as such Lender may deem reasonably necessary or desirable to give full force and effect to any such sale, assignment or transfer. If Lender sells, assigns, negotiates or otherwise transfers all or a part of its rights and obligations hereunder, or all or a part of the Loan, or all or a part of any Note outstanding at the time, to any Permitted Lender Assignee, any reference to "Lender" in any Operative Document shall thereafter refer to Lender and to such other Permitted Lender Assignee to the extent of their respective interests. -47- 125 10.8. Execution and Effectiveness. This Agreement may be executed in multiple counterparts, each of which shall be regarded as an original and all of which shall constitute a single instrument and shall become effective on the Closing Date when each of the parties hereto shall have signed a copy hereof (whether the same or different copies) and Obligee shall have delivered to Lender a copy executed by each such party. 10.9 Registration. The Notes are or, when issued, will be registered obligations. Obligee and Lender hereby direct and authorize Agent to establish and maintain at the office of Agent registration books in which Agent will register, and register any assignment effected in compliance with Section 10.7 of, each holder's interest in each Note or any portion thereof and which identifies each registered holder of each Note or any portion thereof. No transfer by any holder of a Note or any portion thereof shall be effective unless and until such transfer is made upon the registration books maintained by Agent. Prior to registration of transfer, Obligee may treat the person in whose name the Note is registered as the absolute owner thereof for all purposes, and Obligee shall not be affected by any notice to the contrary. 10.10. Confidentiality. Each of Obligee, Owner Participant, Lender, Agent and Security Trustee agrees that all financial statements and other proprietary information furnished by Obligor will be treated by it in a responsible manner, and their confidentiality maintained; such material will not be disseminated except to the parties hereto or their respective officers, directors, employees, agents, auditors, attorneys and professional consultants who, for proper reasons consistent with the purposes for which this information is furnished, need access to such information, and to such other parties to whom Obligee, Trust Company, Owner Participant, Lender, Agent or Security Trustee may have a duty or legal obligation of disclosure, including, without limitation, any Governmental Entity having jurisdiction over Obligee, Trust Company, Lender, Agent or Security Trustee. This confidentiality provision will survive the expiration or early termination of this Agreement. Each of Obligee, Owner Participant, Lender, Agent or Security Trustee may designate any person in writing who is an officer, employee or agent thereof (each, a "Designee"), to visit and inspect the properties (including, without limitation, the Items of Equipment) of Obligor, and to the extent reasonable under the circumstances, examine its books of record and accounts (including, without limitation, Obligor's records pertaining to the Items of Equipment but excluding tax returns and related tax information), and discuss its affairs, finances and accounts with its officers, and, with notice to Obligor so that it may have an officer present if it so reasonably requests, the accountants of Obligor, all at such reasonable times, during normal business hours, as Obligee, Owner Participant, Lender, Agent or Security Trustee, as the case may be, may reasonably request and, upon such request, Obligor shall make such properties and such books of record and accounts available to Obligee, Owner Participant, Lender, Agent or Security Trustee, as the case may be, for inspection; provided, however, that, with respect to the properties of Obligor, other than the Items of Equipment and the records of Obligor other than those pertaining to the Items of Equipment, Obligor's obligations hereunder shall arise only following the occurrence and during the continuance of an Equipment Agreement Default or Equipment Agreement Event of Default, except that prior to the occurrence of an Equipment Agreement Default or Equipment Agreement Event of Default, Obligor shall, upon receipt of reasonable notice, permit Obligee, Owner Participant, Lender, Agent or Security Trustee or any Designee to discuss the affairs, finances and accounts of Obligor with a financial officer of Obligor. No breach of the foregoing covenants by Obligee, shall affect or impair the -48- 126 obligation of Obligor to pay Obligee or Lender any amounts due under this Agreement or the Equipment Agreement. 10.11. Survival. Each of the representations, warranties, terms, covenants, agreements and conditions contained in this Agreement shall specifically survive the execution and delivery of this Agreement and the other Loan Documents and the making of the Loans and shall, unless otherwise expressly provided, continue in full force and effect until the Loans, together with interest thereon, and all other sums payable hereunder or thereunder have been indefeasibly paid in full. 10.12. Severability. The provisions of this Agreement are severable, and if any section or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. 10.13. No Broker. Each party hereto hereby represents and warrants to the other parties that no broker other than BTM Financial Services, Inc. (whose fees shall be paid solely by Obligor) brought about the transactions contemplated hereby and each party hereby agrees to indemnify (the "Indemnifying Party") and hold each other party harmless from, any and all other liabilities and costs (including without limitation, costs of counsel) to any Person claiming brokerage commissions or finder's fees as a result of any agreement with the Indemnifying Party. 10.14. Performance by Lender. If Obligee fails to perform any of its obligations under the Operative Documents in a timely fashion, Lender shall be entitled, but not obliged, to perform such obligation at the expense of Obligee and without waiving any rights they may have with respect to such breach. 10.15. Payment from Collateral; Limited Recourse. Without impairing any of the other rights, powers, privileges, liens or security interests of Lender or Security Trustee pursuant to the Loan Documents, except for the Trust Company's or Owner Participant's gross negligence, willful misconduct, misrepresentations or fraud and as expressly provided in this Agreement or any other Loan Document, and subject to the proviso below, Lender agrees that as between it and the Trust Company and Owner Participant, no recourse shall be had with respect to this Agreement or such other Loan Documents against the Trust Company or Owner Participant , or any officer, director, employee, agent or Affiliate thereof for amounts owed by Obligee under the Loan Documents; and neither the Trust Company nor Owner Participant, nor any officer, director, employee, agent or Affiliate thereof shall have any personal liability for any amounts owed by Obligee under the Loan Documents; provided, however, that nothing contained in this Section 10.15 or elsewhere shall be construed to (i) prevent recourse to and the enforcement against the Collateral of all liabilities, obligations and undertakings contained in the Loan Documents, (ii) limit, restrict, or impair the right of Lender to accelerate the maturity of the Loan upon the occurrence of a Loan Event of Default, (iii) prevent the bringing of an action or obtaining a judgment against Obligee or against the Trust Company or Owner Participant for any breach of any of its representations, warranties or covenants under any of the Operative Documents, or (iv) prevent the bringing of an action or obtaining of a judgment to foreclose the lien of this Agreement or Security Documents or otherwise realize upon the Collateral or the -49- 127 sums due or to become due under the Equipment Agreement or the other Loan Documents to which any such Person is a party. 10.16. No Proceedings. Each party hereto agrees that it shall not institute against, or join any other Person in instituting against Four Winds Funding Corporation any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings under any federal or state bankruptcy or similar law for one year and a day after the latest maturing Commercial Paper Notes issued by Four Winds Funding Corporation is paid. 10.17. Concerning Obligee. Trust Company is entering into this Equipment Agreement solely in its capacity as Owner Trustee under the Trust Agreement and not in its individual capacity (except as expressly stated herein) and in no case shall Trust Company (or any entity acting as successor Owner Trustee under the Trust Agreement) be personally liable for or on account of any of the statements, representations, warranties, covenants or obligations stated to be those of Obligee hereunder; provided, however, that Trust Company (or any such successor Owner Trustee) shall be personally liable hereunder for Trust Company Liabilities. -50- 128 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the date first above written. HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, Obligor By:_________________________________ Name: Title: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as trustee, Obligee By:_________________________________ Name: Title: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, in its individual capacity, Trust Company By:_________________________________ Name: Title: 129 FOUR WINDS FUNDING CORPORATION By: Commerzbank AG, New York Branch as attorney-in-fact, Lender By:_________________________________ Name: Title: By:_________________________________ Name: Title: COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH, Agent and Security Trustee By:_________________________________ Name: Title: By:_________________________________ Name: Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY, Owner Participant By:_________________________________ Name: Title: 130 BTM CAPITAL CORPORATION, LC Issuer By:_________________________________ Name: Title: 131 Schedule 1 Description of Equipment The principal equipment to be financed under this facility will be used by Obligor in the manufacturing and assembly of amplifiers, microphones and loudspeakers. The equipment will typically include, but is not limited to: surface mounting component placement equipment, automatic insertion machines, computers, software, wavesolderers, conveyor assembly, x-ray inspection stations, coil winders, static free floors and hand insertion stations. The equipment is usually combined in some fashion in order to complete a manufacturing cell or line to produce the final goods that Obligor sells. This combination can require labor costs, other soft and hard costs and other equipment that comprise the final price of the cell or line. Obligor may also include other equipment, which is typically purchased under a financing structure that meets the tenor of this facility. 132 Schedule 3 Commitment Fee Rates and LIBOR Margins Obligor's Standard and Commitment Fee LIBOR Margin (in Poor's and Moody's Rate(in basis basis points Senior Unsecured points per annum) per annum) Credit Ratings BBB+ / Baa1 or higher 15.0 65.0 BBB / Baa2 20.0 75.0 BBB- / Baa3 25.0 125.0 BB+ / Ba1 37.5 175.0 BB / Ba2 or lower 50.0 250.0 If the Commitment Fee Rate and LIBOR Margin based Obligor's Standard and Poor's rating is different from the Commitment Fee Rate and LIBOR Margin based on Obligor's Moody's rating, then (a) the Commitment Fee Rate and LIBOR Margin based on the higher of the Standard and Poor's and Moody's ratings will apply provided the lowest of those two ratings is greater than BBB- and Baa3 and (b) the Commitment Fee Rate and LIBOR Margin based on the lower of the two ratings will apply if the lowest of those two ratings is equal to or less than BBB- or Baa3. The Commitment Fee Rate and LIBOR Margin during each Equipment Payment Period shall be the greatest of the Commitment Fee Rates and LIBOR Margins calculated in accordance with the preceding sentence for any day during such Equipment Payment Period. 133 EXHIBIT A CROSS-RECEIPT State Street Bank and Trust Company of Connecticut, NA as Trustee under Trust Agreement dated as of September 30, 1999 Ladies and Gentlemen: We refer to the Participation Agreement, dated as of September 30, 1999 (together with all schedules and exhibits thereto, the "Agreement") relating to the transfer by us to you of all rights and interest in certain equipment (the "Equipment") as defined in the Agreement. Terms used and not otherwise defined herein shall have the respective meaning given thereto in the Agreement. The undersigned has this date transferred to you all rights and interests in each Item of Equipment identified in the attached schedule. The undersigned acknowledges that you have delivered to it payment in an amount equal to 100% of the Acquisition Cost of the Equipment in the amount of __________ Dollars ($_____), in consideration of the transfer to you of all rights and interest in such Equipment under the Agreement. Kindly confirm the delivery to you of the Agreement and such interest, and your acceptance of the same, by signing the enclosed copy of this letter at the place provided below and returning it to the undersigned. Very truly yours, Harman Industries International, Inc. By: _____________________ Delivery confirmed: State Street Bank and Trust Company, N.A. as Trustee ____________________________ 134 EXHIBIT B FORM OF CERTIFICATE OF COSTS CERTIFICATE OF COSTS RELATING TO EQUIPMENT AGREEMENT SUPPLEMENT NO. This Certificate of Costs is executed pursuant to, and incorporates by reference all of the terms, conditions and provisions of, the Participation Agreement ("Participation Agreement"), dated as of September 30, 1999, among Harman International Industries, Incorporated ("Obligor"), State Street Bank and Trust Company of Connecticut, National Association ("Obligee"), Four Winds Funding Corporation ("Lender"), Commerzbank Aktiengesellschaft, New York Branch ("Agent"), The Bank of Tokyo- Mitsubishi Trust Company ("Owner Participant"), and BTM Capital Corporation ("LC Issuer"). Capitalized terms not otherwise defined herein have the meanings given in the Participation Agreement. Obligor hereby certifies that each Item of Equipment described on or attached to the form of Related Equipment Agreement Supplement delivered herewith and attached hereto (i) has been selected by, delivered to, inspected by, accepted by and purchased by Obligor, and has been paid for by Obligor in an amount as indicated on such Related Equipment Agreement Supplement, and (ii) is free and clear of all Liens other than Permitted Liens. Original or true and correct copies of all invoices relating to such Equipment have been previously delivered or are delivered herewith, in each case identifying the type of equipment, model, serial or other identification number, where appropriate, and date of delivery to Obligor. Obligor, Lender, Owner Participant and LC Issuer hereby agree that each Item of Equipment on the form of Related Equipment Agreement Supplement attached hereto is accepted to be Equipment under and subject to all of the terms, conditions and provisions of the Equipment Agreement. Dated: HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, as Obligor By:____________________________ Name: Title: 135 EXHIBIT B ACKNOWLEDGED AND APPROVED BY: FOUR WINDS FUNDING CORPORATION, as Lender, By:___________________________ Name: Title: By:___________________________ Name: Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Owner Participant By:___________________________ Name: Title: BTM CAPITAL CORPORATION, as LC ISSUER, By:___________________________ Name: Title: 136 FORM OF LEGAL OPINION September 30, 1999 Commerzbank Aktiengesellschaft, New York Branch as Agent and Security Trustee State Street Bank and Trust Company of Connecticut, N.A., as trustee and as Obligee Four Winds Funding Corporation as Lender BTM Capital Corporation, as LC Issuer Bank of Tokyo-Mitsubishi Trust Company, as Owner Participant Re: Equipment Financing for Harman International Industries, Incorporated We have acted as counsel to Harman International Industries, Incorporated, a Delaware corporation (the "Company"), in connection with the Equipment Financing Agreement, dated as of September 30, 1999 (the "Equipment Agreement"), by and among the Company and State Street Bank and Trust Company of Connecticut, N.A., not in its individual capacity but solely as trustee, and the Participation Agreement, dated as of September 30, 1999 (the "Participation Agreement"), among the Company, as Obligor, State Street Bank and Trust Company of Connecticut, N.A. as trustee and in its individual capacity as Obligee, BTM Capital Corporation as LC Issuer, Bank of Tokyo-Mitsubishi Trust Company as Owner Participant, Four Winds Funding Corporation as Lender and Commerzbank Aktiengesellschaft, New York Branch, as Agent and Security Trustee. The opinions expressed below are furnished to you pursuant to subsection 3.1(j) of the Participation Agreement. Unless otherwise defined herein, capitalized terms defined Appendix A to the Participation Agreement and used herein shall have the meanings given to them in the Appendix A to the Participation Agreement. In connection with this opinion, we have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such agreements, instruments and documents of the Company and others, and (iii) received such information from 137 Commerzbank Aktiengessellschaft New York Branch as Agent and Security Trustee; State Street Bank and Trust Company of Connecticut, N.A. as trustee and as Lessor; and Four Winds Funding Corporation as Lender September 30, 1999 Page 2 the officers and representatives of the Company and others, as we have deemed necessary or appropriate for the purposes of this opinion. In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, representations and warranties contained in the Operative Documents and in oral or written statements and other information of or from representatives of the Company and others and assume compliance on the part of parties to the Operative Documents with their covenants and agreements contained therein. To the extent it may be relevant to the opinions expressed herein, we have assumed that each party other than the Company has power to enter into and perform the Operative Documents to which it is a party and that the Operative Documents have been duly authorized, executed and delivered by, and constitutes the legal, valid and binding obligation of, each other party thereto. Based upon the foregoing, and subject to the qualifications, assumptions and limitations set forth herein, we are of the opinion that: 1. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware. 2. The Company has the corporate power and authority to enter into, transfer all rights and interest in and to finance the Equipment, and to perform its obligations under, the Operative Documents. Each of the Operative Documents to which the Company is a party has been duly authorized, executed and delivered by the Company and constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms. 3. No consent or authorization of, filing with, notice to, or other act by or in respect of, any Governmental Entity or any other Person is required to be made or obtained by the Company in connection with the selling or leasing under the Operative Documents to which it is a party, or with the execution, delivery or performance by the Company of the Operative Documents to which it is a party. 4. Neither the execution nor delivery of the Operative Documents to which it is a party by the Company nor the performance by the Company of the transactions therein 138 Commerzbank Aktiengessellschaft New York Branch as Agent and Security Trustee; State Street Bank and Trust Company of Connecticut, N.A. as trustee and as Lessor; and Four Winds Funding Corporation as Lender September 30, 1999 Page 3 contemplated will (a) result in a breach or violation by the Company of, or constitute a default under, any material indenture, material mortgage, material deed of trust, material loan agreement or other material agreement or material instrument, in each case known to us, to which the Company or any of the Company's property is bound, or (b) conflict with the Certificate of Incorporation or By-laws (each as amended) of the Company, or (c) result in the violation of (i) any statute or regulation of the United States, New York or Delaware General Corporation Law applicable to the Company or any of the Company's properties or (ii) any order or decree known to us of any Governmental Entity binding on the Company or any of the Company's properties 5. The Company is not (a) an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company" as defined in, or otherwise subject to regulation under, the Public Utility Holding Company Act of 1935. (A) Our opinions in paragraph 2 above are subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, voidable preference or similar laws, and related judicial doctrines, from time to time in effect, affecting creditors' rights and remedies generally and (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies), whether such principles are considered in a proceeding at law or in equity. (B) We express no opinion as to the enforceability of any provision in the Participation Agreement or the Equipment Agreement: i) relating to indemnification, contribution or exculpation in connection with violations of any securities or commodities laws or statutory duties or public policy, or in connection with willful, reckless or unlawful acts or gross negligence of the indemnified or exculpated party or the party receiving contribution; ii) relating to exculpation of any party in connection with its own negligence that a court would determine in the circumstances under applicable law to be unfair or insufficiently explicit; iii) relating to forum selection to the extent the forum is a federal court; iv) relating to choice of governing law to the extent that the enforceability of any such provision is to be determined by any court other than a 139 court of the State of New York; v) waiving any rights to trial by jury; vi) specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of the Participation Agreement or Equipment Agreement; or vii) in any circumstance which would operate to result in a claim for more than a claimant's actual damages. (C) Our opinions in paragraph 2 above are subject to the effect of generally applicable rules of law that: ii) provide that forum selection clauses in contracts are not necessarily binding on the court(s) in the forum selected; iii) limit the availability of a remedy under certain circumstances when another remedy has been elected; iv) may, where less than all of a contract may be unenforceable, limit the enforceability of the balance of the contract to circumstances in which the unenforceable portion is not an essential part of the agreed exchange; and v) govern and afford judicial discretion regarding the determination of damages and entitlement to attorneys' fees and other costs. (D) For purposes of our opinion in paragraph 1 with respect to the valid existence and good standing of the Company we have relied exclusively upon certificates of public officials. The opinions expressed herein are limited to the federal laws of the United States of America, the laws of the State of New York and the Corporation Law of the State of Delaware, as currently in effect, provided that we express no opinion as to (i) the necessity for the Company to qualify to do business in any state or (ii) federal or state laws, rules or regulations that regulate or purport to regulate the ownership or activities of a particular industry or any other specific business activity, including, but not limited to, federal or state securities or commodities laws or with respect to state "bucket shop" or gambling laws. Our opinions are limited to those expressly set forth herein, and we express no opinions by implication. 140 The opinions expressed herein are solely for the benefit of the addressees hereof in connection with the foregoing transaction and may not be relied on in any manner or for any purpose by any other person without our prior written consent. We are not assuming any professional responsibility to any other person by rendering this opinion. Each of the matters set forth in this opinion is as of the date hereof, and we undertake no, and hereby disclaim any, obligation to advise you of any change in any matters set forth herein or in any matters on which this opinion is based. Very truly yours, Jones, Day, Reavis & Pogue 141 [Obligee Opinion] September 30, 1999 To Each of the Parties Listed on Schedule I Hereto Re: Harman International Industries, Incorporated Ladies and Gentlemen: We have acted as counsel to State Street Bank and Trust Company of Connecticut, National Association, a national banking association in its individual capacity ("State Street") and its capacity as Owner Trustee (the "Owner Trustee") under the Trust Agreement, dated as of September 30, 1999, (the "Trust Agreement"), between State Street and Bank of Tokyo-Mitsubishi Trust Company, as Owner Participant (the "Owner Participant") in connection with the transactions contemplated by that certain Participation Agreement, dated as of September __, 1999 ( the "Participation Agreement") among Harman International Industries, Incorporated, as Obligor, (the "Obligor"), the Owner Participant, the Owner Trustee, as Obligee, Four Winds Funding Corporation, as Lender, Commerzbank Aktiengesellschaft, New York Branch, as Agent and Security Trustee and BTM Capital Corporation, as Letter of Credit Issuer.. Except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in, or by reference to, the Participation Agreement. The Owner Trustee has requested that we deliver this opinion to you. Our representation of State Street and the Owner Trustee has been as special counsel for the limited purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied, with your permission, entirely upon (i) the representations and warranties of the parties set forth in the Owner Trustee Documents (as defined below) and (ii) certificates delivered to us by the management of State Street and have assumed, without independent inquiry, the accuracy of those representations, warranties and certificates. We have examined the Participation Agreement, the Trust Agreement, the Equipment Agreement, the LC Reimbursement and Security Agreement and each of the other Operative Documents to which State Street or the Owner Trustee, as applicable, is a party (the "Owner Trustee Documents"). We have also examined the Certificate of the Comptroller of the Currency relating to State Street and originals, or copies, certified or otherwise identified to our satisfaction, of such other corporate and public records and agreements, instruments, certificates and other documents as we have deemed necessary or appropriate for the purposes of rendering this opinion. For purposes of our opinion rendered in paragraph 1 below, with respect to the authority of State Street to transact the business of banking and exercise trust powers, our opinion relies upon and is limited by such Certificate of the Comptroller of the Currency. We have assumed the genuineness of all signatures (other than those on behalf of State Street and the Owner Trustee), the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document (other than those individuals executing documents on behalf of State Street and the Owner Trustee). When an opinion set forth below is given to the best of our knowledge, or to our knowledge, or with reference to matters of which we are aware or which are known to us, or with another similar qualification, the relevant knowledge or awareness is limited to the actual knowledge or awareness of the individual lawyers in the firm who have participated directly and substantively in the specific transactions to which this opinion relates and without any special or additional investigation undertaken for the purposes of this opinion. For the purposes of this opinion, we have made such examination of law as we have deemed necessary for the purposes of this opinion. The opinions expressed below are limited solely to the internal substantive laws of the State of Connecticut as applied by courts located in Connecticut without regard to choice of law and the federal laws of the United States of America. We express no opinion as to the laws of any other jurisdiction. No opinion is given herein as to the choice of law or internal substantive rules of law that any court or other tribunal may apply to the transactions contemplated by the Owner Trustee Documents. No opinion is expressed herein as to the application or effect of federal securities laws or as to the securities or so-called "Blue Sky" laws of any state or other jurisdiction. In addition, no opinion is expressed as to matters governed by any law, statute, rule or regulation of the United States or of any state relating to the acquisition, ownership, registration, use, operation, maintenance, repair, replacement or sale of or the nature of the Equipment. To the extent to which this opinion deals with matters governed by or relating to the laws of any other state or jurisdiction, we have assumed, with your permission that the Owner Trustee Documents are governed by the internal substantive laws of the State of Connecticut. 142 Our opinion is further subject to the following exceptions, qualifications and assumptions: 1. We have assumed without any independent investigation that (i) each party to the Owner Trustee Documents, other than State Street or the Owner Trustee, as applicable, at all times relevant thereto, is validly existing and in good standing under the laws of the jurisdiction in which it is organized, and is qualified to do business and in good standing under the laws of each jurisdiction where such qualification is required generally or necessary in order for such party to enforce its rights under such Owner Trustee Documents, and (ii) each party to the Owner Trustee Documents (other than State Street and the Owner Trustee), at all times relevant thereto, had and has the full power, authority and legal right under its certificate of incorporation, partnership agreement, by-laws, and other governing organizational documents, and the applicable corporate, partnership, or other enterprise legislation and other applicable laws, as the case may be, to execute, and to perform its obligations under, the Owner Trustee Documents. 2. We have assumed without any independent investigation that each of the Owner Trustee Documents is a valid, binding and enforceable obligation of each party thereto other than State Street or the Owner Trustee, as applicable. 3. The enforcement of any obligations of State Street or the Owner Trustee, as applicable, under any of the Owner Trustee Documents may be limited (i) in the case of State Street, by the receivership, conservatorship and supervisory powers of bank regulatory agencies generally, (ii) as relates to State Street or Owner Trustee, by bankruptcy, insolvency, reorganization, moratorium, marshaling or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' or guarantors' rights); and we express no opinion as to the status under any fraudulent conveyance laws or fraudulent transfer laws of any of the obligations of State Street or the Owner Trustee, as applicable, under any of the Owner Trustee Documents. 4. We express no opinion as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to remedies after default. 5. We express no opinion as the availability of any specific or equitable relief of any kind. 6. The enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and, as to any of your rights to collateral security, will be subject to a duty to act in a commercially reasonable manner. 7. We express no opinion as to the enforceability of any particular provision of any of the Owner Trustee Documents relating to (i) waivers of rights to object to jurisdiction or venue, or consents to jurisdiction or venue, (ii) waivers of rights to (or methods of) service of process, or rights to trial by jury, or other rights or benefits bestowed by operation of law, (iii) waivers of any applicable defenses, setoffs, recoupments, or counterclaims, (iv) waivers or variations of provisions which are not capable of waiver or variation under Sections 1-102(3), 9-501(3) or other provisions of the Uniform Commercial Code ("UCC") of the State of Connecticut (the "Connecticut UCC"), (v) the grant of powers of attorney to any person or entity, (vi) exculpation or exoneration clauses, indemnity clauses, and clauses relating to releases or waivers of unmatured claims or rights, (vii) the imposition or collection of interest on overdue interest or providing for a penalty rate of interest or late charges on overdue or defaulted obligations, or the payment of any premium, liquidated damages, or other amount which may be held by any court to be a "penalty" or a "forfeiture," or (viii) so-called "usury savings clauses" purporting to specify methods of (or otherwise assure) compliance with usury laws or other similar laws of any jurisdiction. 8. We express no opinion as to the effect of events occurring, circumstances arising, or changes of law becoming effective or occurring, after the date hereof on the matters addressed in this opinion letter, and we assume no responsibility to inform you of additional or changed facts, or changes in law, of which we may become aware. 9. No opinion is given herein as to the effect of usury laws (or other similar laws) of any jurisdiction with respect to the Owner Trustee Documents. 143 10. We express no opinion as to any requirement that any party to the Owner Trustee Documents (or any other persons or entities purportedly entitled to the benefits thereof) qualify or register to do business in any jurisdiction in order to be able to enforce its rights thereunder or obtain the benefits thereof. 11. We have made no examination of, and no opinion is given herein as to the Owner Trustee's or the Owner Participant's title to or other ownership rights in, the accuracy of the descriptions of, or the existence of any liens, charges, encumbrances, restrictions or limitations on, or adverse claims against, the Trust Estate. This opinion is rendered solely for the benefit of those institutions listed on Schedule I hereto and their successors and assigns in connection with the transactions contemplated by the Owner Trustee Documents and may not be used or relied upon by any other person or for any other purpose. Based upon the foregoing and subject to the limitations and qualifications set forth herein, we are of the opinion that: 12. State Street is a national banking association validly formed and existing under the laws of the United States of America, and had and has the requisite corporate and trust power, authority and legal right to execute, deliver and perform its obligations under the Trust Agreement and, as Owner Trustee under the Trust Agreement, to execute, deliver and perform its obligations under the other Owner Trustee Documents. 13. State Street has duly authorized, executed, and delivered the Participation Agreement and the Trust Agreement and the Participation Agreement and the Trust Agreement constitutes the legal, valid and binding obligation of State Street, enforceable against it in its individual capacity in accordance with the terms thereof. 14. The Owner Trustee is duly authorized under the Trust Agreement to execute, deliver and perform each of the Owner Trustee Documents and each such Owner Trustee Document constitutes a legal, valid and binding obligation of the Owner Trustee enforceable against the Owner Trustee in accordance with its terms. 15. Neither the execution, delivery or performance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of the Owner Trustee Documents, the consummation by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated thereby nor the compliance by the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, with any of the terms and provisions thereof (i) requires any approval of its stockholders, any consent or approval of or the giving of notice to any trustees or holders of any indebtedness or obligations of it known to us, or (ii) violates its charter documents or by-laws, or contravenes or will contravene any provision of, or constitutes a default under, or results in any breach of, or results in the creation of any lien (other than as permitted under the Operative Agreements) upon property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, license or other agreement or instrument, in each case, known to us to which it is a party or by which it is bound or contravenes any Connecticut or United States applicable law governing the banking or trust powers of the Owner Trustee, or any judgment or order, in each case, known to us applicable to or binding on it. 16. No consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Connecticut or United States governmental authority regulating the banking or trust powers of the Owner Trustee, in its individual capacity, is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated by the Owner Trustee Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken. 17. To our knowledge, but without having investigated any governmental records or court dockets, and without having made any other independent investigation, there are no proceedings or actions pending or overtly threatened against or affecting the Owner Trustee, in its individual capacity or as Owner Trustee, before any governmental authority in which, there is a reasonable possibility of an adverse decision which could reasonably be expected to affect materially and 144 adversely the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to enter into or to perform its obligations under the Owner Trustee Documents. Very truly yours, BINGHAM DANA LLP SCHEDULE I Obligor Harman International Industries, Incorporated Owner Trustee State Street Bank and Trust Company of Connecticut, National Association Owner Participant Bank of Tokyo-Mitsubishi Trust Company Lender Four Winds Funding Corporation Agent and Security Trustee Commerzbank Aktiengesellschaft, New York Branch Letter of Credit Issuer BTM Capital corporation 145 [Owner Participant Opinion] 146 [Form of Opinion] RL/SL September 30, 1999 Commerzbank Aktiengesellschaft, New York Branch [______________________] Ladies and Gentlemen: We have acted as special French counsel to Commerzbank Aktiengesellschaft, New York Branch ("Commerzbank"), the New York Branch of a German bank, for French legal matters in connection with the drafting of: a Convention de Gage Commercial (commercial pledge agreement) entered into on September ?30], 1999 between State Street Bank, as Constituant (pledgor), Commerzbank, as Agent des Sretes (security trustee), and Audax Industries SNC, as Tiers Convenu (custodian) (the "Pledge Agreement"), pursuant to which State Street Bank pledges an equipment (the "Equipment") in favor of Commerzbank. Capitalized Terms used herein without definition shall have the meanings assigned to them in the Pledge Agreement. In rendering this opinion, we have assumed without any independent investigation or verification the genuineness of all signatures appearing on the Pledge Agreement, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies and the authenticity of the originals of such copies. We have relied, without any independent investigation or verification, as to factual matters on the information and representations in the Pledge Agreement and other documents we have been provided with. We have also assumed, without any independent investigation or verification, that: (i) each of the parties to the Pledge Agreement (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (b) has the full power and authority to enter into and perform its obligations under the Pledge Agreement and (c) 147 has taken all necessary actions to authorize the execution of such Pledge Agreement and the performance of its obligations thereunder; (ii) all signatories of the Pledge Agreement have the power and authority to execute and deliver the Pledge Agreement to which they are parties on behalf of the respective parties which they represent; (iii) the obligations secured by the Pledge Agreement (collectively the "Secured Obligations") constitute legal, valid and binding obligations of State Street Bank under the laws stated therein to govern them; (iv) the choice in the Pledge Agreement of the laws of the French Republic to govern the respective Pledge Agreement and the choice therein of the jurisdiction of courts of the French Republic are valid and enforceable against State Street Bank; (v) State Street Bank has full ownership of the Equipment and has full right, power and authority to pledge such equipment in accordance with the provisions of the Pledge Agreement, and (vi) the Equipment is personal property and shall remain so for the entire duration of the Pledge Agreement. In rendering this opinion, we have also assumed that the Equipment is as of the date hereof free of any lien except the lien granted upon each equipment pursuant to the Pledge Agreement. We are rendering this opinion solely as to the laws of the French Republic where we are admitted as "Avocats au barreau de Paris". No opinion is given herein as to the laws of any other jurisdiction. Based upon and subject to the foregoing, and further subject to the qualifications set forth below, under French law as now is effect and interpreted by the French courts it is our opinion that: (1) The execution by the parties to the Pledge Agreement of the said Pledge Agreement does not contravene any provision of any law or regulation of the French Republic. (2) No consent, approval, license, authorization or filing, recording or registration of or with, or exemption by, any governmental or public body or authority of the French Republic, or any subdivision thereof, is required (i) to authorize the execution and performance of the Pledge Agreement, (ii) to make the Pledge Agreement a legal, valid and binding agreement, enforceable against State Street Bank in accordance with its terms, or (iii) to execute or perform the Pledge Agreement. 148 (3) The Pledge Agreement creates a valid security interest in favor of Commerzbank and constitute a legal, valid and binding agreement, enforceable against State Street Bank in accordance with its terms. In addition to the assumptions set forth above, our opinions are subject to the following qualifications: (a) We express no opinion as to the possibility of obtaining a court decision under French law that, in connection with the performance of an obligation to do or not do something, is expressed in non-monetary terms. (b) In the event of any proceeding being brought in a French court in respect of a monetary obligation expressed to be payable in a currency other than French Francs, a French court may give judgment as an order to pay the French Franc equivalent of such currency at the time of actual payment of the debtor. Furthermore, with respect to a bankruptcy, insolvency, liquidation, moratorium, reorganization, reconstruction or similar proceeding, French law requires that all claims or debts be converted to equivalent French Franc amounts at an exchange rate determined at the date of the judgment declaring the commencement of the proceeding. (c) In respect of payment obligations, a French court has the power under Article 1244-1 of the French Civil Code to postpone or stagger payments due by a debtor after taking into account the debtor's situation and the needs of the creditor, provided that such postponements or staggering do not exceed two years in the aggregate; the court may also decide to prescribe the payment of interest (not less than the legal interest rate (taux legal) in France which, for the year 1999, is 3.47 % per annum) on any such postponed or staggered payments and that payments will apply first to principal, then to interest. Pursuant to Article 1244-2 of the French Civil Code, (i) the decision of a French court to postpone payments by a debtor in respect of amounts owed to a creditor will stay enforcement proceedings brought by such creditor against such debtor, and (ii) overdue interest or other penalties for overdue payment will not accrue during the postponement period determined by such court. (d) Enforcement of the Pledge Agreement may be limited or affected by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights generally. (e) We express no opinion as to any tax issues. (f) In order to be in proper legal form for use in the courts of the French Republic, the documents evidencing all Secured Obligations, which are in the English language, must be translated into French by an official French translator in order to be submitted (together with such translation(s)) as evidence or otherwise. 149 This opinion is furnished to you solely for your benefit in connection with the Pledge Agreement and may not be furnished to or relied upon by any other person or for any other purpose. Very truly yours, 150 [Form of Opinion] RL/SL September 30, 1999 Commerzbank Aktiengesellschaft, New York Branch [______________________] Dear Sirs, We have acted as German legal advisers to Commerzbank Aktiengesellschaft, New York Branch ("Commerzbank"), the New York Branch of a German bank, for German legal matters in connection with the drafting of: (i) an Agreement on Chattel Mortgage entered into on [________], 1999 between HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, a Delaware corporation, whose registered office is at 1101 Pennsylvania Avenue, NW, Suite 1010, Washington D.C., 20004 U.S.A. ("Harman") and Harman's subsidiary BECKER GmbH whose registered office is at: Im Stockmadle, 76307 Karlsbad, Germany; (ii) an Agreement on Chattel Mortgage entered into on [________], 1999 between Harman and its subsidiary HARMAN AUDIO ELECTRONIC SYSTEMS GmbH whose registered office is at: Schlesische Strasse 135, 94315 Straubing, Germany; (iii) an Agreement on Chattel Mortgage entered into on [________], 1999 between Harman and its subsidiary HARMAN AUDIO ELECTRIC SYSTEMS KFT whose registered office is at: Sosto U. 7, H-8000 Szekesfehervar, Hungary; The parties to the Agreements referred to in paragraph (i) to (iii) shall apart from Harman collectively hereinafter be referred to as the "Subsidiaries". (iv) an Agreement on Chattel Mortgage entered into on [________], 1999 between Harman and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, whose principal place of business is at: Goodwin Square, 225 Asylum Street, Hartford, Connecticut, 08103 U.S.A ("State Street Bank"). 151 (v) an Agreement on Chattel Mortgage entered into on ?________?, 1999 between State Street Bank and COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH, a company incorporated according to the laws of Germany, acting through its New York branch, located: 2 World Financial Center, New York, New York 10281 U.S.A ("Commerzbank"). The documents referred to in paragraph (i) to (v) above shall collectively hereinafter be referred to as the "Pledge Agreements". Capitalized Terms used herein without definition shall have the meanings assigned to them in the Pledge Agreements. In rendering this opinion, we have assumed without any independent investigation or verification the genuineness of all signatures appearing on the Pledge Agreements, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies and the authenticity of the originals of such copies. We have relied, without any independent investigation or verification, as to factual matters on the information and representations in the Pledge Agreements and other documents we have been provided with. We have also assumed, without any independent investigation or verification, that: (i) each of the parties to the Pledge Agreements (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (b) has the full power and authority to enter into and perform its obligations under the Pledge Agreements and (c) has taken all necessary actions to authorize the execution of such Pledge Agreements and the performance of its obligations thereunder; (ii) all signatories of the Pledge Agreements have the power and authority to execute and deliver the Pledge Agreements to which they are parties on behalf of the respective parties which they represent; (iii) the obligations secured by each Pledge Agreement (collectively the "Secured Obligations") constitute legal, valid and binding obligations under the laws stated therein to govern them; (iv) Harman or its Subsidiaries has full ownership in the Items and has full right, power and authority to pledge such items in accordance with the provisions of the respective Agreements on Chattel Mortgage, and (vi) the Items are movable property and shall remain so for the entire duration of the respective Pledge Agreements. In rendering this opinion, we have also assumed that the Items are as of the date hereof free of any lien except the lien granted upon the Items pursuant to the respective Pledge Agreements. 152 We are rendering this opinion solely as to the laws of the Federal Republic of Germany where we are admitted as "Rechtsanwaelte". No opinion is given herein as to the laws of any other jurisdiction. Based upon and subject to the foregoing, and further subject to the qualifications set forth below, under German law as now is in effect and interpreted by the German courts it is our opinion that: (1) The execution by the parties to the Pledge Agreements of the said Pledge Agreements does not contravene any provision of any law or regulation of the Federal Republic of Germany. (2) No consent, approval, license, authorization or filing, recording or registration of or with, or exemption by, any governmental or public body or authority of the Federal Republic of Germany, or any subdivision thereof, is required (i) to authorize the execution, delivery and performance of the Pledge Agreements, (ii) to make the Pledge Agreements legal, valid and binding agreements, enforceable in accordance with their terms, or (iii) to execute, deliver or perform the Pledge Agreements. (3) Each of the Pledge Agreements creates a valid security interest in favor of the respective Mortgagee and constitutes a legal, valid and binding agreement. However, under German law Commerzbank is the only party to the Pledge Agreements which is able to enforce its security interest granted thereunder. In addition to the assumptions set forth above, our opinions are subject to the following qualifications: (a) We express no opinion as to the possibility of obtaining a court decision under German law that, in connection with the performance of an obligation to do or not to do something, is expressed in non- monetary terms. (b) In the event of any proceeding being brought in a German court in respect of a monetary obligation expressed to be payable in a currency other than Deutsche Mark, a German court may give judgment as an order to pay the Deutsche Mark equivalent of such currency at the time of actual payment of the debtor. (c) Enforcement of the Pledge Agreements may be limited or affected by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights generally. (d) Claims may become barred under Section 194 ff. BGB (German Civil Code) or may become subject to set-off or counterclaim. This opinion is addressed to and is for the benefit solely of the addressee of this letter. The opinion is given solely in connection with the Pledge Agreements and may not be furnished to or relied upon by any other person or for any other purpose. 153 Yours faithfully, 154 [Form of Opinion] FFB: RC [Date] Commerzbank Aktiengesellschaft, New York Branch 2 World Financial Center New York, New York 10281 Four Winds Funding Corporation c/o Commerzbank Aktiengesellschaft, New York Branch 2 World Financial Center New York, New York 10281 Dear Sirs, We have acted as English legal advisers to [addressee] in connection with: (a) a Debenture dated September 30, 1999 between State Street Bank and Trust Company of Connecticut, National Association and Commerzbank Aktiengesellschaft, New York Branch (the "Security Trustee"); (b) a Debenture dated September 30, 1999 between Harman International Industries, Incorporated and the Security Trustee; and (c) a Debenture dated September 30, 1999 between Harman International Industries, Limited and the Security Trustee, (together the "Debentures"). Terms defined in the Debentures are used in this opinion as so defined. In connection with this opinion, we have examined executed copies of the Debentures; we have not examined any other document or made any other investigation other than as to such matters of English law as we have deemed appropriate. We express no opinion as to the laws of 155 any jurisdiction other than the laws of England and Wales in effect on the date of this opinion. This opinion is to be governed by English law. 1. In giving this opinion we have assumed: (a) the genuineness of all signatures and seals, the completeness and conformity to originals of all documents purporting to be copies of originals and the authenticity of the originals of such documents; (b) that each of the parties to the Debentures is and will be validly incorporated and existing; (c) that each of the parties to the Debentures have all necessary capacity, authority and legal right to enter into the Debentures and perform its obligations thereunder, that the execution and delivery of the Debentures by each such party has in each case been duly authorised and that each of the Debentures has been duly executed and delivered by each such party to it; (d) the absence of any other or collateral arrangements between any of the parties to the Debentures which modify or supersede any of their terms; (e) the due compliance with all requirements (including, without limitation, the obtaining of necessary consents, licences and approvals, the making of necessary filings and registrations and compliance with the provisions) of such laws (other than the laws of England and Wales) as are applicable to the Debentures and the parties thereto, the legality, validity, binding effect and enforceability of the Debentures under such laws and that no such laws would affect any of the conclusions in this opinion; and (f) that the choice of English law as the law governing the Debentures has not been made in order to avoid the application of the laws of a jurisdiction under which any provision of the Debentures would be illegal. 2. Based upon the foregoing and subject to the matters set out below, and having regard to such considerations of English law in force as at the date of this opinion as we consider relevant, we are of the opinion that: (a) each of the Debentures constitutes valid, binding and enforceable obligations of each of the parties thereto. (b) it is not necessary to file, register or record the Debentures in any public place in England and Wales. (c) no ad valorem stamp duty (or documentary taxes other than standard court fees or nominal stamp duty) is payable in the United Kingdom in respect of the execution, delivery or enforcement of the Debentures. 156 (d) We are aware of no reason why the choice of English law to govern the Debentures should not be recognised as a valid choice of law under English conflicts of laws and given effect as such by the courts of England. (e) No consent, approval or authorisation of, or notice to any governmental or regulatory authority of England having jurisdiction with respect to the execution, delivery and performance of the Debentures is required for the execution and delivery by the parties to the Debentures or the performance of the transactions on its part contemplated therein. (f) The Debentures are effective to create security interests in favour of the Security Trustee in respect of the assets which are the subject thereof. 3. This opinion is subject to the following qualifications: (a) The validity, binding effect and enforceability of the obligations of the parties under the Debentures respectively may be limited by: (i) the provisions of any applicable bankruptcy, liquidation, insolvency, reorganisation, administration or other laws relating to or affecting the enforcement of creditors' rights generally; (ii) the provisions of English law applicable to contracts held to have been frustrated by events happening after their execution; and (iii) the principle that where any obligation of any person is to be performed or observed in a jurisdiction outside England and Wales, such obligation may not be enforceable under English law if and to the extent that such performance or observance would be illegal under the laws of such jurisdiction. (b) Enforcement may be limited by general principles of equity. For example, equitable remedies may not be available where damages are considered by the court to be an adequate remedy. Accordingly, the term "enforceable" in relation to any obligation means that it is of a type which may be enforced, not that it will be enforced in all circumstances in accordance with its terms. (c) Where a party to the Debentures is vested with a discretion in respect of any calculation, determination or certificate to be made or given, such calculation, determination or certificate might be held not to be final, conclusive or binding if the exercise of such discretion could be shown to have been fraudulent, incorrect or arbitrary or not to have been given or made by a party acting reasonably or in good faith. (d) A remedy consequent or right arising upon default may not be enforceable if construed by any tribunal as being a penalty, particularly if such remedy involves enforcing an additional pecuniary remedy (such as default or overdue interest) referable to such default. (e) An English court may refuse to give effect to a purported contractual obligation to pay costs imposed upon another party in respect of the costs of any unsuccessful litigation 157 brought against that party before it and may not award by way of costs all of the expenditure incurred by a successful litigant in proceedings brought before that court. (f) In the event of any proceedings being brought in respect of a monetary obligation expressed to be payable in a currency other than pounds sterling, an English court may, in its discretion, decline to give judgment expressed as an order to pay such currency and may not enforce the benefit of a currency indemnity clause. (g) We express no opinion as to the enforceability of any provision in the Debentures with regard to any United Kingdom stamp duty which might subsequently become payable or any purported indemnity in respect of such stamp duty. (h) Provisions as to severability may not be binding under English law. The question of whether or not any provision of the Debentures which is illegal, invalid or unenforceable may be severed from the other provisions of the Debentures in order to save those other provisions would be determined by an English court in its discretion. (i) Claims may become barred under the Limitation Act 1980 or may be or become subject to set-off or counterclaim. (j) Provisions in the Debentures providing that their provisions may only be amended, waived or varied by an instrument in writing may not be effective. (k) Provisions exculpating a party from liability or a duty otherwise owed and provisions imposing obligations of confidentiality may be overridden by principles of law or equity. While exclusions of liability for negligence are generally enforceable, they may not be enforceable, for example, where there has been fraud or bad faith on the part of the party attempting to enforce the exclusion. Further, exclusions for non- reliance may not work when there has actually been reliance and the other party knows this to be the case or there has been some form of express warranty. (l) The opinion expressed in 2(b) above is subject to the assumption that none of the parties to the Debentures has any place of business in England and Wales and therefore that the Debentures is not required to be registered pursuant to Section 409 of the Companies Act 1985; however, it is advisable that, in relation to each of the parties to the Debentures, the prescribed particulars in respect of each of the Debentures to which it is a party together with an executed copy thereof be delivered to the Companies Office in accordance with Chapter 1 of Part XII of the Companies Act 1985 in order that, even if the prescribed particulars and such Debentures are not accepted by the register in the event that such parties subsequently establishes a place of business in the United Kingdom. (m) This opinion relates only to English domestic law and not its conflict of laws rules and, in particular, no opinion is expressed on the enforceability or effectiveness of any of the Debentures to the extent that such Debentures purport to create security on assets located outside England and Wales; in this regard, please note that under the usual English applications of the principles of the conflicts of law, contractual or other obligations (including debts) are generally situated in the jurisdiction in which the contractual or other obligations are enforceable, which is usually taken to be the jurisdiction in which the parties to the Debentures reside, and it will be 158 necessary to comply with the laws of that jurisdiction regarding security in order to obtain an effective security interest in such obligations or assets. (n) We express no opinion as to the title of the parties to the Debentures to the Collateral, as to the nature of the security created by the Debentures (whether legal or equitable, fixed or floating), as to the marketability of or rights of enforcement over the Collateral or as to any defences which might be raised or rights claimed in relation to the Collateral nor do we express any opinion as to the priority or perfection of any security created or to be created by, or as to the effect on such perfection of any stipulation in that regard in, the Debentures. (o) Provisions in the Debentures permitting service of process outside the United Kingdom may not be effective unless the prior leave of an English court has been obtained in respect of such service. (p) Any suit, action or proceeding against any of the parties hereto with respect to the Debentures, or any action to enforce any judgement entered by any court, may only be made where prior leave of an English court has been obtained in respect of such service. This opinion (which is strictly limited to the matters stated in this letter and is not to be read as extending by implication to any other matters not expressly and specifically referred to in this letter) is addressed to and is for the benefit solely of the addressee of this letter, is given solely in connection with the Debentures and may not be relied upon by any other person or for any other purpose nor may it be quoted or referred to in any public document. Yours faithfully, 159 EXHIBIT D SECURED PROMISSORY NOTE (For Financing Equipment in accordance with Equipment Agreement Exhibit A-__ and Equipment Agreement Supplement No. __) $________________ _______________ ___, ____ FOR VALUE RECEIVED, STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Obligee under a Trust Agreement dated as of September [30], 1999 (the "Maker"), hereby promises to pay to FOUR WINDS FUNDING CORPORATION (together with its successors and assigns, the "Payee") or registered assigns thereof the principal sum of [DOLLARS] $[_______], plus interest thereon at the Applicable Debt Rate, on or before the Maturity Date (as defined in Annex A to the Participation Agreement defined below) in lawful money of the United States of America and in immediately available funds. This Note and interest thereon shall be payable on dates, and principal shall be payable in the amounts, set forth in the Payment and Amortization schedule attached hereto as Annex A (as such may be modified or amended in accordance with the terms of the Participation Agreement defined below). A final payment of all unpaid principal of, and interest on this Note and all other amounts due and payable with respect hereto or the Participation Agreement shall be due and payable on the Maturity Date. Each payment on this Note described above shall be applied in accordance with the Participation Agreement, as defined below. This Note is one of the Notes described in and issued pursuant to the Participation Agreement dated as of September [ ], 1999 (the "Participation Agreement") among the Maker, as Obligee, and the Payee, as Lender, State Street Bank and Trust Company in its individual capacity, Commerzbank Aktiengesellschaft, New York Branch, as Agent and Security Trustee, BTM Capital Corporation, as LC Issuer, Bank of Tokyo-Mitsubishi Trust Company, as Owner Participant and Harman International Industries, Inc., as Obligor and is entitled to the benefits thereof and is subject to the terms and conditions set forth therein. Upon the occurrence of a Loan Event of Default, the principal of, Prepayment Premium and accrued interest on, this Note may be declared to be due and payable in the manner and with the effect provided in the Participation Agreement. Capitalized terms used in this Note which are not otherwise defined herein have the meanings set forth in the Participation Agreement. In the event any sum payable hereunder is not paid when due (by acceleration or otherwise), the principal amount hereof and, to the extent permitted by law, Prepayment Premium, if any, and interest hereon shall bear interest at the Overdue Rate, in accordance with Section 5.5.4 of the Participation Agreement. Interest shall be computed on the basis of a 360-day year for the number of days actually elapsed. This Note is subject to the repayment and prepayment provisions set forth in Section 5 of the Participation Agreement. The Maker waives presentment, demand, protest or notice of any kind in connection with this Note, 160 Should the indebtedness represented by this Note or any part thereof be collected at law or in equity or in bankruptcy, receivership or other court proceeding or should this Note be placed in the hands of attorneys for collection after default, the Maker, and any other Person who may be liable hereunder in any capacity, agree to pay, on demand, in addition to the principal, the Prepayment Premium, if any, and interest due and payable hereon, all costs of collecting or attempting to collect this Note, including attorneys' fees and expenses (including those incurred in connection with any appeal). This Note is issued as a registered Note, The Maker and the Payee may deem and treat the Person in whose name this Note is registered on the register held at the principal place of business of Agent as the absolute owner hereof (whether or not this Note shall be overdue) for the purpose of receiving payments of principal, the Prepayment Premium, if applicable, and interest and for all other purposes, and the Maker and the Payee shall not be affected by any notice to the contrary. In accordance with the provisions of the Participation Agreement, this Note may be transferred only on such register. The holder of this Note shall have recourse for all liabilities and obligations arising under this Note, the Participation Agreement and the other Loan Documents to the Collateral, all as more particularly set forth in the Participation Agreement. Neither this Note nor the Participation Agreement shall require the payment or permit the collection of interest in excess of the maximum permitted by law. If any such excess of interest is provided for, or shall be adjudicated to be so provided for, herein or in the Participation Agreement, the Maker shall not be obligated to pay such interest in excess of the maximum amount permitted by law, and the right to demand the payment of any such excess shall be and hereby is waived. This provision shall control any other provision of this Note or the Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the Maker has caused this Promissory Note to be signed under seal on the date first above written. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity but solely as trustee under Trust Agreement dated as of September 30, 1999 By:_____________________________________ Name: Title: 161 EXHIBIT D Payment and Amortization Schedule Payment Date Principal Payment (Last LIBOR Banking Day of:) 162 EXHIBIT E [FORM OF] FUNDING NOTICE AND INDEMNITY AGREEMENT This FUNDING NOTICE AND INDEMNITY AGREEMENT dated as of ______ __, _____ (this "Agreement") is made among HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, a Delaware corporation ("Harman"), Bank of Tokyo-Mitsubishi Trust Company ("BTM") and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, N.A. not in its individual capacity but solely as trustee ("Trustee"). W I T N E S S E T H: WHEREAS, Harman, BTM, State Street Bank and Trust Company of Connecticut, N.A. in its individual capacity and in its capacity as trustee, Four Winds Funding Corporation ("Lender"), Commerzbank Aktiengesellaschaft, New York Branch and BTM Capital Corporation have entered into that certain Participation Agreement dated as of September 30, 1999 (the "Participation Agreement") and Harman and Trustee have entered into that certain Equipment Financing Agreement dated as of September 30, 1999 (the "Equipment Agreement") (capitalized terms not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Participation Agreement); WHEREAS, pursuant to the Participation Agreement, Trustee has agreed, subject to the satisfaction of certain conditions precedent, to pay to Harman on each Funding Date an amount equal to the aggregate of the Acquisition Costs of the Equpment to be delivered on such Funding Date; and WHEREAS, pursuant to the Participation Agreeement, BTM, as owner participant, has agreed to provide Trustee on each Funding Date a portion of the amount to be paid by Trustee to Harman equal to the aggregate of the Equity Components of the Equipment to be delivered on such Funding Date (the "Equity Commitment"). NOW, THEREFORE, in order to induce BTM to fund its Equity Commitment, Harman provides the following notices and agrees with BTM and Trustee as follows: 11. Harman hereby irrevocably notifies BTM, Trustee, the Lender and the Agent that with respect to the next Funding Date, (i) the aggregate amount of the Acquisition Costs for the Equipment to be transferred on such Funding Date is US$[ ], (ii) the aggregate amount of the Equity Components of such Equipment is $[ ] and (iii) the scheduled Funding Date is [ ] (the "Scheduled Funding Date"). Harman hereby requests BTM to establish on the second LIBOR Banking Day prior to the Scheduled Funding Date, the Equity Rate for the Equipment to be delivered on the Funding Date (such rate, the "Initial Eurodollar Rate"). 12. In order to facilitate the timely closing of the transactions contemplated by the Participation Agreement and Equipment Agreement, Harman hereby irrevocably instructs BTM to wire transfer no later than 12:00 noon (New York City time) on the Scheduled Funding Date the amount of the Equity Commitment for such Funding Date in immediately available funds in 163 United States Dollars to the account of [_______________] as follows (or such other account which [_______________] shall designate): Bank: Account No.: [Other information]: 13. In the event that for any reason the closing under the Participation Agreement scheduled on the Scheduled Funding Date does not occur by 3:00 p.m. (New York City time) on such date, Harman and BTM each instruct Trustee to invest the Equity Commitment amount received by Trustee from BTM for such Funding Date (the "Advance Funding Amount") in overnight money-market investments with the income earned on such investments paid to BTM. Harman agrees to pay interest on the Advance Funding Amount to BTM for the period from and including the Scheduled Funding Date to but excluding the earlier of (i) the date the Advance Funding Amount is released to Harman by the Trustee pursuant to the Participation Agreement or (ii) 12:00 noon (New York City time) on the [______] Business Day after the Scheduled Funding Date (the "Return Time"). Such interest shall accrue at a rate per annum equal to the Initial Eurodollar Rate and shall be payable (a) if the closing under the Participation Agreement occurs before the Return Time, on the first Payment Date after the Funding Date or (b) if the closing under the Participation Agreement does not occur before the Return Time, by 10:00 a.m. (New York City time) on the first Business Day after the Return Time, provided that, in either case, Harman shall be entitled to a credit against the interest owed on the Advance Funding Amount in the amount of the income earned on the investment of the Advance Funding Amount. If the closing under the Participation Agreement scheduled for the Scheduled Funding Date does not occur by the Return Time, Harman and BTM hereby instruct Trustee to transfer to BTM on the first Business Day after the Return Time the amount of the Equity Commitment received by Trustee for the Scheduled Funding Date. Further, in the event closing under the Participation Agreement does not occur by 3:00 p.m. (New York time) on the Scheduled Funding Date, Harman shall indemnify BTM and hold BTM harmless from any loss, cost or expense which BTM may sustain or incur as a result of BTM having made arrangements in the London interbank market or otherwise to fund its Equity Commitment on the Scheduled Funding Date and the closing under the Participation Agreement failing to occur by 3:00 p.m. (New York City time) on that date. 4. The provisions of Sections 10.3, 10.4, 10.8, 10.10, 10.11, 10.12 and 10.17 of the Participation Agreement are, by this reference, incorporated herein as if set forth in full herein together with all necessary defined terms, except that references to the term "Agreement" shall mean this Agreement. 164 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. HARMAN INTERNATIONAL INDUSTRIES, INC., By: Name: Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY, By: Name: Title: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, N.A., not in its individual capacity but solely as trustee under that certain Trust Agreement dated as of September 30, 1999 By: Name: Title: 165 TABLE OF CONTENTS Page 1. Definitions 1 2. Representations and Warranties 2 2.1.Obligor Representations and Warranties 2 2.2.Obligee Representations and Warranties 5 2.3.Further Obligee Representations and Warranties 6 2.4.Trust Company Representations and Warranties 7 2.5.Owner Participant Representations and Warranties 8 2.6.Lender Representations and Warranties 9 2.7.Warranty Disclaimers 9 3.Conditions Precedent 10 3.1Obligee Conditions 10 3.2.Lender Conditions 11 4.Transfer Agreement 12 4.1.Owner Participant Commitment 12 4.2.Transfer of Equipment 12 4.3.Equipment Agreement Supplements 13 4.4.Ownership; Rights 13 4.5 Funding Dates 14 5. Amount and Terms of Loan 14 5.1 Lender Commitment 14 5.2 Payment to Obligee 14 5.3 Note 15 5.4 Termination of Commitment 15 5.5 Payments 15 5.5.1 Principal 15 5.5.2 Interest 15 5.5.3 Commitment Fee 15 5.5.4 Overdue Rate 15 5.5.5 Payment Instructions 15 5.5.6 Withholding Tax 16 5.5.7 Business Day Convention 16 5.5.8 Increased Costs 16 5.5.9 Illegality 17 5.6 Prepayments Limited 18 5.7 Mandatory Prepayments 18 5.7.1 Event of Loss 18 5.7.2 Transfer of Items of Equipment by Obligor 18 5.7.3 Other Termination of Equipment Agreement 18 5.8 Application of Prepayments 18 5.9 Recalculation of Loan Payment and Amortization Schedule 18 5.10 Loan Events of Default 19 166 Page 5.11 Remedies of Lender 20 5.11.1 Rights in Collateral 20 5.11.2 Insolvency. 21 5.11.3 Delivery of Documents 21 5.11.4 Possession of Collateral 21 5.11.5 Sale of Collateral 22 5.11.6 Discharge 22 5.11.7 Appointment of Receiver 22 5.11.8 Redemption 23 5.11.9 Rights Cumulative; No Waiver 23 5.11.10 Termination of Proceedings 23 6. Covenants 23 6.1 Obligee Covenants 23 6.2 Further Obligee Covenants 25 6.3 Trust Company Covenants 26 6.4 Owner Participant Covenants 27 6.5. Lender and Security Trustee Covenant 27 6.6 Obligor Covenants 27 6.7 Obligor Negative Covenants 28 6.8 Covenant of Lender, Lessor, Agent and Security Trustee, and Owner Participant 29 7. Security 29 7.1 Security Interest 29 7.2 Consent and Agreement of Obligor 30 7.3 Further Obligee Covenants 30 7.4 Further Assurances 31 7.5 Termination 32 7.6 Other Security 32 7.7 Power of Attorney 32 7.8 Assignment of Rights 33 7.9 Transfer of the Collateral by Lender 33 7.10 No Segregation of Monies; No Interest 33 7.11 Distribution of Moneys 33 7.11.1 Payments under the Equipment Agreement 33 7.11.2 Payments in Respect of an Event of Loss 34 7.11.3 Payment of the Unamortized Debt Balance of any Item of Equipment 34 7.11.4 Payment upon Final Disposition of the Items of Equipment 34 7.12 Payments after a Loan Event of Default 34 7.13 Application of Certain Other Payments 35 7.14. Other Payments 35 7.15 Retention of Amounts by Security Trustee 35 8. Indemnities 35 8.1 Obligor General Indemnification 35 8.2. Obligor General Tax Indemnity 37 8.3 Obligee Indemnities 40 8.4 Survival 40 9. Agent for Lender 40 167 Page 9.1 Authorization and Action 40 9.2 Agent's Reliance, etc. 41 9.3 Agent and Affiliates 41 9.4 Lender Credit Decision 41 9.5 Indemnification 41 9.6 Successor Agent 42 9.7 Holder List; Ownership of Notes 42 9A LC Issuer Transfer Option 42 9A.1 42 9A.2 42 10. Miscellaneous 43 10.1 Expenses and Recording 43 10.2 Modification 43 10.3 Governing Law, Jurisdiction and Venue; Waiver of Jury 44 10.4 Notices 44 10.5 Ownership of the Equipment. 45 10.6 Descriptive Headings, etc. 46 10.7 Benefit of Agreement; Assignment 46 10.8 Execution and Effectiveness 46 10.9 Registration 46 10.10 Confidentiality 46 10.11 Survival 47 10.12 Severability 47 10.13 No Broker 47 10.14 Performance by Lender. 48 10.15 Payment from Collateral; Limited Recourse. 48 10.16 No Proceedings. 48 10.17 Concerning Obligee. 48 168 EX-27 4 ART 5 FDS FOR 10-Q
5 1000 3-MOS JUN-30-2000 SEP-30-1999 11514 215 312773 9160 296180 669981 465736 234605 1083963 262960 331201 187 0 0 458127 1083963 356773 356773 194839 260530 0 470 4630 7093 2199 4894 0 0 0 4894 0.28 0.28
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