-----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, TIANrA6C7IMSg2kzfXA6IZXXfFxiPiP2reGRT79ObAiNsdt5iJn7t46r5/c1E3NH GUxicFYoabxjjDSX5vV6Pg== 0000950144-00-001612.txt : 20000216 0000950144-00-001612.hdr.sgml : 20000216 ACCESSION NUMBER: 0000950144-00-001612 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19991225 FILED AS OF DATE: 20000208 DATE AS OF CHANGE: 20000215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RF MICRO DEVICES INC CENTRAL INDEX KEY: 0000911160 STANDARD INDUSTRIAL CLASSIFICATION: 3674 IRS NUMBER: 561733461 STATE OF INCORPORATION: NC FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22511 FILM NUMBER: 527869 BUSINESS ADDRESS: STREET 1: 7625 THORNDIKE ROAD CITY: GREENSBORO STATE: NC ZIP: 27409-9421 BUSINESS PHONE: 9106641233 10-Q 1 RF MICRO DEVICES, INC. FORM 10-Q 1 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-Q --------------------- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 25, 1999 COMMISSION FILE NUMBER: 0-22511 --------------------- RF MICRO DEVICES, INC. (Exact name of registrant as specified in its charter) NORTH CAROLINA 56-1733461 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
7625 THORNDIKE ROAD GREENSBORO, NORTH CAROLINA 27409-9421 (Address of principal executive offices, including zip code) (336) 664-1233 (Registrant's telephone number, including area code) 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 [ ] As of February 1, 2000, there were 79,809,699 shares of the registrant's common stock outstanding. - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 2 RF MICRO DEVICES, INC. INDEX
PAGE ---- Part I. FINANCIAL INFORMATION Item 1. Financial Statements.............................. 3 Condensed Consolidated Statements of Income -- Three months ended December 31, 1999 and 1998............... 3 Condensed Consolidated Statements of Income -- Nine months ended December 31, 1999 and 1998............... 4 Condensed Consolidated Balance Sheets -- December 31, 1999 and March 31, 1999............................... 5 Condensed Consolidated Statements of Cash Flows -- Nine months ended December 31, 1999 and 1998............... 6 Notes to Condensed Consolidated Financial Statements... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 10 Part II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds......... 16 Item 6. Exhibits and Reports on Form 8-K.................. 16
2 3 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RF MICRO DEVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED ---------------------------- DECEMBER 31, DECEMBER 31, 1999 1998 ------------ ------------ Revenues: Product sales............................................. $72,856 $40,993 Engineering revenue....................................... 305 524 ------- ------- Total revenues.................................... 73,161 41,517 Operating costs and expenses: Cost of goods sold........................................ 37,530 26,959 Research and development.................................. 9,061 3,774 Marketing and selling..................................... 5,394 2,682 General and administrative................................ 2,665 1,133 ------- ------- Total operating costs and expenses................ 54,650 34,548 ------- ------- Income from operations...................................... 18,511 6,969 Other income (expense), net................................. 835 (226) ------- ------- Income before income taxes.................................. 19,346 6,743 ------- ------- Income tax expense.......................................... 6,771 1,146 ------- ------- Net income.................................................. $12,575 $ 5,597 ======= ======= Earnings per share: Basic..................................................... $ .16 $ .08 Diluted................................................... $ .15 $ .08 Shares used in per share calculation: Basic..................................................... 79,412 68,848 Diluted................................................... 86,075 72,788
See accompanying Notes to Condensed Consolidated Financial Statements. 3 4 RF MICRO DEVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
NINE MONTHS ENDED ------------------------------ DECEMBER 31, DECEMBER 31, 1999 1998 ------------- ------------- Revenues: Product sales............................................. $203,596 $95,660 Engineering revenue....................................... 535 713 -------- ------- Total revenues.................................... 204,131 96,373 Operating costs and expenses: Cost of goods sold........................................ 110,004 64,252 Research and development.................................. 22,469 9,774 Marketing and selling..................................... 13,667 7,378 General and administrative................................ 6,580 3,124 -------- ------- Total operating costs and expenses................ 152,720 84,528 -------- ------- Income from operations...................................... 51,411 11,845 Other income (expense), net................................. 3,147 (253) -------- ------- Income before income taxes.................................. 54,558 11,592 -------- ------- Income tax expense.......................................... 19,095 1,967 -------- ------- Net income.................................................. $ 35,463 $ 9,625 ======== ======= Earnings per share: Basic..................................................... $ .45 $ .15 Diluted................................................... $ .42 $ .14 Shares used in per share calculation : Basic..................................................... 79,190 66,208 Diluted................................................... 85,389 70,508
See accompanying Notes to Condensed Consolidated Financial Statements. 4 5 RF MICRO DEVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, MARCH 31, 1999 1999 ------------ --------- (UNAUDITED) (AUDITED) ASSETS Current assets: Cash and cash equivalents.............................. $ 30,351 $147,545 Short-term investments................................. 44,925 -- Accounts receivable, net............................... 46,797 23,697 Inventories............................................ 39,991 27,335 Current deferred tax asset............................. 900 898 Other current assets................................... 337 243 -------- -------- Total current assets.............................. 163,301 199,718 Property and equipment, net................................. 140,694 67,431 Technology licenses, net.................................... 14,430 3,078 Restricted cash............................................. 6,783 3,860 Non-current deferred tax asset.............................. 1,088 1,088 Other assets................................................ 4,022 583 -------- -------- Total assets...................................... $330,318 $275,758 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities............... $ 31,615 $ 24,700 Income taxes payable................................... 6,081 2,854 Current obligations under capital leases............... 4,389 4,246 -------- -------- Total current liabilities......................... 42,085 31,800 Obligations under capital leases, less current maturities... 9,363 12,587 Non-current deferred tax liability.......................... 465 465 -------- -------- Total liabilities................................. 51,913 44,852 Shareholders' equity: Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding........... -- -- Common stock, no par value; 150,000,000 shares authorized; 79,508,651 shares and 78,753,952 issued and outstanding at December 31, 1999 and March 31, 1999, respectively........................................... 242,751 224,746 Deferred compensation....................................... (6,135) (165) Retained earnings........................................... 41,789 6,325 -------- -------- Total shareholders' equity........................ 278,405 230,906 -------- -------- Total liabilities and shareholders' equity........ $330,318 $275,758 ======== ========
See accompanying Notes to Condensed Consolidated Financial Statements. 5 6 RF MICRO DEVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED --------------------------- DECEMBER 31, DECEMBER 31, 1999 1998 ------------ ------------ Cash flows from operating activities: Net income.................................................. $ 35,463 $ 9,625 Adjustments to reconcile net income to net cash provided by operating activities: (Loss) on sale of equipment............................... -- (78) Depreciation and amortization............................. 10,252 2,923 Amortization of deferred compensation..................... 173 -- Change in operating assets and liabilities: (Increase) decrease in: Accounts receivable.................................... (23,100) (7,326) Inventories............................................ (12,656) (6,069) Current deferred tax asset............................. (1) -- Other assets........................................... (145) (932) Accounts payable....................................... 5,881 4,063 Accrued liabilities.................................... 1,034 3,006 Deferred revenue....................................... -- 247 Income taxes payable................................... 3,227 1,974 --------- -------- Net cash provided by operating activities......... 20,128 7,433 Cash flows from investing activities: Purchase of capital equipment/leasehold improvements... (83,326) (12,443) Proceeds from sale of equipment........................ -- 31 Capitalization of fabrication facility construction costs................................................. -- (1,227) Purchase of short-term investments..................... (48,314) -- Purchase of technology license......................... (1,500) -- --------- -------- Net cash used in investing activities............. (133,140) (13,639) Cash flows from financing activities: Proceeds from exercise of options...................... 1,822 75 Proceeds from exercise of warrant...................... -- 10,000 Increase in restricted cash............................ (2,923) (3,860) Repayment of capital lease obligations................. (3,081) (2,781) --------- -------- Net cash provided by (used in) financing activities...................................... (4,182) 3,434 --------- -------- Net (decrease) in cash and cash equivalents....... (117,194) (2,772) Cash and cash equivalents at the beginning of the period.... 147,545 16,360 --------- -------- Cash and cash equivalents at the end of the period.......... $ 30,351 $ 13,588 ========= ========
See accompanying Notes to Condensed Consolidated Financial Statements. 6 7 RF MICRO DEVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the statements include all adjustments (which are of a normal and recurring nature) necessary for the fair presentation of the results of the interim periods presented. These financial statements should be read in conjunction with the Company's audited financial statements for the year ended March 31, 1999. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, RF Micro Devices UK Ltd. All significant intercompany accounts and transactions have been eliminated in consolidation The Company uses a 52- or 53-week fiscal year ending on the Saturday closest to March 31 of each year. The Company's other fiscal quarters end on the Saturday closest to June 30, September 30, and December 31 of each year. For purposes of this report (including the Unaudited Consolidated Condensed Financial Statements included herein), each fiscal year is described as having ended on March 31, and each of the first three quarters of each fiscal year is described as having ended on June 30, September 30 and December 31. On March 31, 1999, the Company effected a two-for-one stock split upon which the Company's shareholders of record on March 17, 1999 were issued a certificate representing one additional share of the Company's common stock for each share of the Company's common stock held on such record date. On August 18, 1999, the Company effected a two-for-one split of its common stock upon which the Company's shareholders of record on August 2, 1999 were issued a certificate representing one additional share of the Company's common stock for each share of the Company's common stock held on such record date. All earnings per share and share count information has been restated to reflect the impact of these stock splits. 2. RESEARCH AND DEVELOPMENT COSTS The Company charges all research and development costs to expense as incurred. 3. INCOME TAXES The provision for income taxes has been recorded based on the current estimate of the Company's annual effective tax rate. This rate differs from the federal statutory rate primarily because of the reduction of the valuation allowances on deferred tax assets. 4. INVENTORIES The components of inventories are as follows (in thousands):
DECEMBER 31, MARCH 31, 1999 1999 ------------ --------- Raw materials............................................... $ 8,171 $ 6,628 Work in process............................................. 32,809 18,118 Finished goods.............................................. 9,272 6,975 -------- ------- 50,252 31,721 Inventory allowances........................................ (10,261) (4,386) -------- ------- Total inventory................................... $ 39,991 $27,335 ======== =======
7 8 RF MICRO DEVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) 5. EARNINGS PER SHARE The weighted average shares used in the calculation of diluted earnings per share represent the weighted average shares outstanding plus the dilutive effect of outstanding stock options, warrants, and other potential common shares outstanding. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
THREE MONTHS ENDED NINE MONTHS ENDED --------------------------- --------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Numerator for basic and diluted earnings per share: Net income.................................... $12,575 $ 5,597 $35,463 $ 9,625 Denominator: Denominator for basic earnings per share -- weighted average shares............ 79,412 68,848 79,190 66,208 Effect of dilutive securities: Stock options and warrants.................... 6,663 3,940 6,199 4,300 Denominator for diluted earnings per share -- adjusted weighted average shares and assumed conversions................................. 86,075 72,788 85,389 70,508 ------- ------- ------- ------- Basic earnings per share...................... $ .16 $ .08 $ .45 $ .15 ======= ======= ======= ======= Diluted earnings per share.................... $ .15 $ .08 $ .42 $ .14 ======= ======= ======= =======
6. DEFERRED COMPENSATION During the third quarter, the Company issued shares of restricted stock resulting in deferred compensation of approximately $6.0 million. This amount is being charged to compensation expense over the period in which the restrictions lapse which is generally five years. 7. LEASES On August 13, 1999, as modified effective December 31, 1999, the Company entered into a synthetic lease. A synthetic lease is an asset-based financing structured to be treated as an operating lease for accounting purposes, but as a capital lease for tax purposes. At the end of the third quarter of fiscal year 2000, the synthetic lease transaction was largely secured by cash collateral. The modification effective December 31, 1999 resulted in the release of the cash collateral and the synthetic lease is now secured by substantially all of the personal property assets of the Company. The lease has a term expiring November 3, 2004. At the end of the term, the lease can be extended upon the agreement of the parties or the Company may buy out the lease. The interest rates or yield rates embedded in the lease (and used to calculate lease payments) are either: - the Eurodollar Rate plus margins varying from 150 basis points to 300 basis points per annum (based on certain quarterly financial covenant testing and depending on whether the underlying source of funding is in the form of a promissory note or an equity certificate), or - at our election and under certain other circumstances where funding based on the Eurodollar Rate is not available, the ABR Rate plus margins varying from zero basis points to 75 basis points per annum (based on certain quarterly financial covenant testing and depending on whether the underlying source of funding is in the form of a promissory note or an equity certificate). The Eurodollar Rate is a rate of interest determined under the lease documents by reference to one or more sources for the London interbank offered rate or LIBOR. The ABR Rate is a rate of interest determined under the 8 9 RF MICRO DEVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) lease documents equal to the greater of (a) the prime lending rate of the primary lender or its successor (as determined under the lease documents) or (b) the federal funds effective rate (as determined under the lease documents) plus 0.5% This lease is expected to provide up to $100 million in financing for a new wafer fabrication facility currently under construction. The $100 million of financing is expected to fund approximately $57 million for the building and $43 million of equipment. 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION We design, develop, manufacture and market proprietary radio frequency integrated circuits, or RFICs, for wireless communications applications such as cellular and personal communication services, cordless telephony, wireless local area networks, wireless local loop, industrial radios, wireless security and remote meter reading. We offer a broad array of products -- including amplifiers, mixers, modulators/demodulators and single chip transmitters, receivers and transceivers -- that represent a substantial majority of the RFICs required in wireless subscriber equipment. We design and offer products using three distinct process technologies: gallium arsenide heterojunction bipolar transistor, or GaAs HBT; silicon bipolar transistor; and, to a lesser extent, gallium arsenide metal semiconductor field effect transistor, or GaAs MESFET. We have also recently begun to design products using the silicon germanium process technology. We began manufacturing our own GaAs HBT products at our new wafer fabrication facility in September 1998, and we are now concentrating our efforts on increasing our manufacturing capacity to satisfy customer demand for GaAs HBT products, which is currently greater than we can meet. In September 1999, we began construction on a second wafer fabrication facility. Before September 1998, TRW Inc., which is our largest shareholder, manufactured all of our GaAs HBT products. TRW has granted us a perpetual non-royalty bearing license to use its GaAs HBT process to design and manufacture products for commercial wireless applications. In November 1999, we expanded our license with TRW to cover certain wired applications. Our GaAs HBT power amplifiers and small signal devices have been designed into advanced subscriber equipment made by leading original equipment manufacturers, or OEMs, such as Nokia Mobile Phones Ltd., LG Information and Communications, Ltd., Hyundai Electronics Industries Co. Ltd., Samsung Electronics Co., Ltd., and Motorola, Inc. Through a delivery strategy called Optimum Technology Matching(R), we also offer silicon, silicon germanium, and GaAs MESFET components to complement our GaAs HBT products. Optimum Technology Matching(R) allows us to offer RFIC solutions, on a component-by-component basis, that best fulfill OEMs' performance, cost and time-to-market requirements. RESULTS OF OPERATIONS The following table sets forth our consolidated statement of operations data expressed as a percentage of total revenues for the periods indicated:
THREE MONTHS ENDED NINE MONTHS ENDED --------------------------- --------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Revenues...................................... 100.0% 100.0% 100.0% 100.0% Operating costs and expenses: Cost of goods sold.......................... 51.3 64.9 53.9 66.7 Research and development.................... 12.4 9.1 11.0 10.1 Marketing and selling....................... 7.4 6.5 6.7 7.7 General and administrative.................. 3.6 2.7 3.2 3.2 ----- ----- ----- ----- Total operating costs and expenses.......................... 74.7 74.8 83.2 87.7 Income from operations........................ 25.3 16.8 25.2 12.3 Other income (expense), net................... 1.1 (.5) 1.5 (.3) ----- ----- ----- ----- Income before income taxes.................... 26.4 16.3 26.7 12.0 Income tax expense............................ (9.3) (2.8) (9.4) (2.0) ----- ----- ----- ----- Net income.................................... 17.2% 13.5% 17.4% 10.0% ===== ===== ===== =====
REVENUES Revenues increased 76.2% to $73.2 million for the three months ended December 31, 1999 from $41.5 million for the three months ended December 31, 1998. The increase in revenues during the three months ended December 31, 1999 reflected strong growth in both the GaAs HBT product line (a 73.7% increase over 10 11 the third quarter of fiscal 1999) and the silicon product line (a 123.5% increase over the third quarter of fiscal 1999). One sales representative firm, Jittek, accounted for 16.7% of our revenue during the third quarter of fiscal 2000. For the nine-month period ended December 31, 1999, revenues increased 111.8% to $204.1 million from $96.4 million in the same period in fiscal 1999. This increase was primarily attributable to increased shipments as the result of our capacity expansion efforts for three-volt HBT power amplifiers and small signal devices to be used in a variety of applications. International shipments accounted for $41.6 million, or 56.8% of revenues, for the three months ended December 31, 1999, compared to $27.0 million, or 65.0%, for the three months ended December 31, 1998. Sales to South Korean customers totaled $12.3 million, or 16.9% of revenues for the third quarter of fiscal 2000, compared to $12.2 million, or 29.4% of revenues, for the quarter ended December 31, 1998, and $15.1 million, or 22% of revenues for the three months ended September 30, 1999. Although we experienced a small year-to-year increase in sales to South Korean customers in our third quarter, our shipments in this market decreased from the previous quarter and this market remains unstable. GROSS PROFIT Our gross profit margin was 48.7% for the three months ended December 31, 1999 compared to 35.1% for the three months ended December 31, 1998. For the nine-months ended December 31, 1999, our gross profit margin increased to 46.1% compared to 33.3% for the nine months ended December 31, 1998. The increase in our gross profit margin during both periods is primarily attributable to an increase in the percentage of revenues derived from lower cost output from our GaAs HBT wafer fabrication facility and lower costs on purchased wafers under supply agreements providing for annual price reductions. We have historically experienced significant fluctuations in gross profit margins. In certain cases, we believe that our gross profit margins have been significantly affected by low manufacturing, assembly and test yields, and there can be no assurance that future operating results will not be similarly affected. We currently expect our gross profit margins to continue to improve as an increasing percentage of our GaAs HBT products are fabricated at our wafer fabrication facility, where production costs per wafer are anticipated to be lower; however, there can be no assurance that this will be the case. Further, we sell products in intensely competitive markets, and we believe that downward pressure on average selling prices will continue to occur in the future. RESEARCH AND DEVELOPMENT Research and development expenses for the three months ended December 31, 1999 increased 140.1% to $9.1 million, compared to $3.8 million for the three months ended December 31, 1998. For the nine months ended December 31, 1999, research and development expenses increased 129.8% to $22.5 million, compared to $9.8 million for the nine months ended December 31, 1998. These increases were primarily attributable to increased salaries and benefits, recruiting expenses related to increased headcount, increased software expenses related to software used in the development and design of standard and custom products, and spending increases for development wafers and mask sets. Research and development expenses as a percentage of total revenues increased to 12.4% for the three months ended December 31, 1999 from 9.1% for the three months ended December 31, 1998. For the nine-month period ended December 31, 1999, research and development expenses as a percent of revenue increased to 11.0% from 10.1% for the nine months ended December 31, 1998. We plan to continue to make substantial investments in research and development and expect that such expenses will continue to increase in absolute dollar amounts in future periods. MARKETING AND SELLING Marketing and selling expenses for the three months ended December 31, 1999 were $5.4 million, compared to $2.7 million for the three months ended December 31, 1998, an increase of 100.0%. For the nine months ended December 31, 1999, marketing and selling expenses increased 85.2% to $13.7 million, compared to $7.4 million for the nine months ended December 31, 1998. These increases were primarily attributable to increased salaries and benefits related to increased headcount and to increases in commission expense. Marketing and selling expenses as a percentage of revenue for the three months ended December 31, 1999 11 12 increased to 7.4% from 6.5% for the three months ended December 31, 1998. For the nine-month period ended December 31, 1999, marketing and sales expenses as a percentage of revenue declined to 6.7% from 7.7% for the nine months ended December 31, 1998. We plan to continue to make substantial investments in marketing and selling and expect that such expenses will continue to increase in absolute dollar amounts in future periods. GENERAL AND ADMINISTRATIVE General and administrative expenses for the three months ended December 31, 1999 were $2.7 million compared to $1.1 million for the three months ended December 31, 1998, an increase of 135.2%. For the nine months ended December 31, 1999, general and administrative expenses increased 110.6% to $6.6 million, compared to $3.1 million for the nine months ended December 31, 1998. These increases were attributable primarily to increased salaries and benefits related to headcount increases, increased outside legal and accounting expenses, and consulting costs associated with our SAP implementation. General and administrative expenses as a percentage of revenues increase to 3.6% from 2.7% for the three months ended December 31, 1999 as compared to the three months ended December 31, 1998. For the nine-month period ended December 31, 1999, general and administrative expenses as a percent of revenue remained at 3.2% as compared to the nine months ended December 31, 1998. OTHER INCOME (EXPENSE), NET Other income (expense), net, for the three months ended December 31, 1999 reflected net income of $835,000 compared to net expense of $226,000 for the three months ended December 31, 1998. For the nine months ended December 31, 1999 other income (expense), net, reflected net income of $3.1 million compared to net expense of $253,000 for the nine months ended December 31, 1998. The increase in other income during these periods is attributable to increased interest income resulting from the investment of the proceeds of our secondary stock offering completed in January 1999. INCOME TAX EXPENSE Our effective tax rate was 35% for the three-month period ended December 31, 1999. Our effective rate is less than the combined federal and state statutory rate of approximately 40% due to the reduction of the valuation allowance on the deferred tax assets. Income tax expense for the three months ended December 31, 1999 was approximately $6.8 million as compared to $1.1 million for the corresponding period ended December 31, 1998 when the effective rate was 17.0%. Income tax expense for the nine months ended December 31, 1999 was approximately $19.1 million with an effective rate of 35% as compared to $2.0 million for the corresponding period ended December 31, 1998, when the effective rate was 17.0%. LIQUIDITY AND CAPITAL RESOURCES We have funded our operations to date through sales of equity and debt securities, bank borrowings, capital equipment leases and revenues from product sales. We completed our initial public offering in September 1997, and raised approximately $37.6 million, net of offering expenses. In January 1999, we completed a secondary public offering and raised approximately $133.4 million, net of offering expenses. As of December 31, 1999, we had working capital of approximately $121.2 million, including $30.4 million in cash and cash equivalents. Operating activities generated $20.1 million in cash for the nine-month period ended December 31, 1999. This was primarily attributable to net income of $35.5 million, an increase in accounts payable of $5.9 million, and an increase in taxes payable of $3.2 million partially offset by increases in accounts receivable of $23.1 million, and inventories of $12.7 million,. Cash provided by operating activities for the nine months ended December 31, 1998 was $7.4 million. The cash provided by operating activities during this period was primarily attributable to an increase in accounts payable and accrued liabilities of $7.1 million, increases in taxes payable of $2.0 million, and net income of $9.6 million. These increases were partially offset by increases in accounts receivable of $7.3 million and inventories of $6.1 million. 12 13 The $133.1 million of cash used by investing activities for the nine months ended December 31, 1999 was substantially related to the purchase of $40.0 million of capital equipment, primarily for use in our wafer fabrication facility, $28.6 million for the construction and outfitting of our new facility housing molecular beam epitaxy (MBE) wafer fabrication equipment, $13.0 million capitalized for the construction of our new corporate headquarters, $48.3 million for the purchase of short-term investments, $1.7 million capitalized as the result of our SAP implementation and $1.5 million to access silicon germanium fabrication technology from IBM. The $13.6 million of cash used by investing activities for the nine months ended December 31, 1998 was primarily related to expenditures associated with the construction of our first GaAs HBT wafer fabrication facility and general corporate capital equipment requirements. The $4.2 million of cash used by financing activities for the nine-month period ended December 31, 1999 related primarily to the repayment of capital lease obligations and increases in restricted cash associated with the financing of our new wafer fabrication facility. The $3.4 million of cash provided by financing activities for the nine-month period ended December 31, 1998 related primarily to the receipt of $10.0 million of proceeds from the exercise by TRW of a warrant covering 4,000,000 shares of common stock, partially offset by $2.8 million in repayment of capital lease obligations and an increase in cash restricted as part of the lease terms for our wafer fabrication facility. At December 31, 1999, we had total long-term capital commitments of $24.2 million, with $12.5 million relating to expansion of our first wafer fabrication facility and $11.7 million for general corporate requirements. The $12.5 million in long-term capital commitments relating to the wafer fabrication facility represents continued investment in the second phase expansion, as well as a portion of an expected additional $48.3 million investment to increase further wafer fabrication capacity that consisted of moving our MBE wafer starting equipment out of the facility to a new leased location, reconfiguring the space currently occupied by this equipment with additional wafer production equipment and hiring additional production personnel. We completed the move of our MBE equipment in October 1999 and are now producing MBE wafers from our new facility. We believe this additional investment in wafer fabrication capacity, which is expected to be completed by mid-2000, will bring our total wafer production capacity to approximately 50,000 wafers per year. We expect to fund this investment through a combination of existing cash on hand and capital leases. During the quarter ended September 30, 1999, we began construction of a second wafer fabrication facility. The full capacity output of the first phase of this facility is anticipated to be the equivalent of approximately 60,000 four-inch wafers and is projected to be completed and begin commencement of production wafers in late 2000. Construction for the first phase is currently on schedule. An anticipated second phase of construction, which is expected to be completed near the end of 2001, would increase the facility's total output to the equivalent of 210,000 four-inch wafers per year. The projected cost for this facility is approximately $110 million for the first phase and $140 million for the second phase. The funding for the first phase will come primarily from a synthetic lease arrangement that we entered into on August 13, 1999, as modified effective December 31, 1999. A synthetic lease is an asset-based financing structured to be treated as an operating lease for accounting purposes, and a capital lease for tax purposes. At the end of the third quarter of fiscal year 2000, the synthetic lease transaction was largely secured by cash collateral. The modification effective December 31, 1999 resulted in the release of the cash collateral and the synthetic lease is now secured by substantially all of the personal property assets of the company. The lease has a term expiring November 3, 2004. At the end of the term, the lease can be extended upon the agreement of the parties or we may buy out the lease. The interest rates or yield rates embedded in the lease (and used to calculate lease payments) are either - the Eurodollar Rate plus margins varying from 150 basis points to 300 basis points per annum (based on certain quarterly financial covenant testing and depending on whether the underlying source of funding is in the form of a promissory note or an equity certificate), or - at our election and under certain other circumstances where funding based on the Eurodollar Rate is not available, the ABR Rate plus margins varying from zero basis points to 75 basis points per annum (based on certain quarterly financial covenant testing and depending on whether the underlying source of funding is in the form of a promissory note or an equity certificate). The Eurodollar Rate is 13 14 a rate of interest determined under the lease documents by reference to one or more sources for the London interbank offered rate or LIBOR. The ABR Rate is a rate of interest determined under the lease documents equal to the greater of (a) the prime lending rate of the primary lender or its successor (as determined under the lease documents) or (b) the federal funds effective rate (as determined under the lease documents) plus 0.5%. Additionally, state and local governments have awarded us a series of incentives in the form of property tax abatements in connection with our investment in wafer fabrication and other facilities that approximate $5.5 million payable over a one- to four-year period. We expect to use these incentives to offset infrastructure and other capital costs associated with our expansion activities. During the quarter ended December 31, 1999, we began construction of an integrated RFIC test facility. The purpose of this facility is to ensure that we have adequate capacity to test all the products we sell. This facility will be completed in phases as the need for capacity arises due to increases in production of our products. The projected cost for the initial phase of this project is expected to be approximately $7.5 million in upfit costs of a leased facility and $13.0 million in equipment. The upfit of the leased facility is currently expected to be complete by the end of the second quarter of fiscal year 2001. The equipment will be added over time as the need for test capacity develops and the expenditure of the $13.0 million is currently expected to be completed by middle of fiscal year 2002. If we add more capacity to this facility we will purchase additional test equipment, but we currently have no definitive plans to do so. We expect to fund this investment through a combination of cash on hand and under capital leases. We currently have eight capital lease facilities with four equipment financing companies under which we have financed the cost of capital equipment and leasehold improvements associated with our first wafer fabrication facility. We have financed an aggregate of $23.4 million of leased property under these facilities. Lease terms range from 36 months to 60 months with effective interest factors ranging from 8.6% to 11.1%. At December 31, 1999, the minimum future lease payments under these leases (excluding interest) were $13.8 million. In November 1999, we expanded our license arrangements with TRW in order to use this GaAs HBT technology to manufacture products for commercial coaxial and other non-fiber wire applications. In consideration for this expanded license, we granted TRW two warrants for the purchase of shares of our common stock. The first warrant is for 250,000 shares of common stock and is exercisable after December 31, 2000 and expires on June 30, 2001. The second warrant is for 500,000 shares of common stock and is exercisable after December 31, 2000 and expires on December 31, 2001, but will become null and void if we fail to achieve of certain annualized sales milestones. The value of these warrants has been estimated to be $10.0 million, which represents the cost of our right to use TRW's technology for these new applications. Accordingly, a related intangible asset has been recorded on our balance sheet. Amortization of this intangible asset will commence when we begin shipping products in production volumes that were developed under this expanded license. We believe that the aggregate net proceeds from the follow-on public offering, along with cash generated from operations and new financing arrangements as described above, will be sufficient to meet our capital requirements for at least the next 12 months. Nonetheless, we may elect to sell additional equity securities or to obtain additional credit facilities. Our future capital requirements may differ materially from those currently anticipated and will depend on many factors, including, but not limited to, market acceptance of our products, volume pricing concessions, capital improvements to new and existing facilities, technological advances and our relationships with suppliers and customers. In addition, we may require increased working capital to accommodate planned growth. In the event that the funds generated by the follow-on offering, together with existing resources and cash from operations, are not sufficient to meet our future requirements, we may seek additional debt or equity financing. There can be no assurance that any additional equity financing will not be dilutive to the holders of our common stock. Further, there can be no assurance that additional equity or debt financing, if required, will be available on acceptable terms or at all. 14 15 YEAR 2000 ISSUES Prior to January 1, 2000, we evaluated all of our internal software and current products against Year 2000 concerns. We also completed a project to upgrade all internal software and to conduct testing on both our information technology systems and our other equipment and machinery to further ensure that all aspects of our business would be Year 2000 compliant. These procedures have not had any material effect on our customers and have not required any material expenditure or other material diversion of resources. Prior to January 1, 2000, we also contacted substantially all parties with which we have material relationships, including TRW and Nokia and our other material customers and suppliers, to try to determine their Year 2000 preparedness and to analyze the risk to us if they had significant business interruptions because of Year 2000 noncompliance. Based on this survey, we concluded that these parties were either substantially Year 2000 compliant or that any noncompliance would not have a material effect on our operations. To date, Year 2000 impacts on third parties have not materially affected our business, financial condition or operations, although we intend to continue to monitor third-party preparedness throughout the Year 2000 transition period. As of the date of this filing, February 8, 2000, we have not experienced any interruptions in our business or operations as a result of Year 2000 issues. However, disruptions associated with Year 2000 issues may not be readily apparent and could arise later in the calendar year. We will continue to monitor these issues closely. Our total cost related to the Year 2000 issue is approximately $150,000, which has been included in our information technology expense budget. As of December 31, 1999, this project was essentially complete, except as noted above. To date, there have been no material deferments of other information technology projects resulting from the work taking place on our Year 2000 program. RISKS AND UNCERTAINTIES The preceding Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that relate to our future plans, objectives, estimates and goals. Words such as "expects," "anticipates," "intends," "plans," "believes," and "estimates," and variations of such words and similar expressions identify such forward-looking statements. Our business is subject to numerous risks and uncertainties, including probable variability in our quarterly operating results, manufacturing capacity constraints, risks associated with our operation of our current wafer fabrication facility and the construction of an additional facility, dependence on a limited number of customers, variability in production yields, our ability to manage rapid growth, dependence on third parties and risks associated with doing business in Asia and other areas of the world. These and other risks and uncertainties, which are described in more detail in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements. 15 16 PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (c) Recent Sales of Unregistered Securities On November 15, 1999, we issued two warrants to TRW Inc. in consideration for the grant by TRW to us of a nonexclusive license to utilize TRW's GaAs HBT technology to manufacture products for commercial coaxial and other non-fiber wired communication applications. These warrants have an aggregate value of $10.0 million, which represents the cost of our right to use TRW's technology for these new applications. The first warrant entitles TRW to purchase up to 250,000 shares of our common stock. It is exercisable at any time after December 31, 2000 and expires on June 30, 2001. The second warrant entitles TRW to purchase up to 500,000 shares of our common stock. It becomes exercisable at any time after December 31, 2000 and expires December 31, 2001, except that this warrant will not become exercisable, and will be forfeited, unless we reach a defined annualized sales target of products through use of our expanded license rights. The exercise price of both warrants is equal to 75% of the average closing prices of our common stock during the ten trading days immediately preceding December 31, 2000. We issued these warrants in reliance on the exemption from registration provided in Section 4(2) of the Securities Act of 1933, as amended, based on the sophistication of the purchaser and the nature of this arm's-length negotiated transaction. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 4.1 -- Warrant No. 99-1, dated November 15, 1999, for the purchase of up to 250,000 shares of common stock. Exhibit 4.2 -- Warrant No. 99-2, dated November 15, 1999, for the purchase of up to 500,000 shares of common stock.* Exhibit 10.1 -- Lease Agreement, dated November 5, 1999, between Highwoods Realty Limited Partnership and RF Micro Devices, Inc. Exhibit 10.2 -- License Agreement, dated November 15, 1999, between TRW Inc. and RF Micro Devices, Inc. Exhibit 10.3 -- Cooperation Agreement, dated November 15, 1999, between TRW Inc. and RF Micro Devices, Inc. Exhibit 10.4 -- 1997 Key Employees Stock Option Plan of RF Micro Devices, Inc., as amended. Exhibit 10.5 -- 1999 Stock Incentive Plan of RF Micro Devices, Inc., as amended. Exhibit 10.6 -- Stock Option Agreement, dated October 27, 1998, between RF Micro Devices, Inc. and Walter H. Wilkinson, Jr., as amended. Exhibit 10.7 -- Stock Option Agreement, dated October 27, 1998, between RF Micro Devices, Inc. and Albert E. Paladino, as amended. Exhibit 10.8 -- Stock Option Agreement dated October 27, 1998, between RF Micro Devices, Inc. and Erik H. van der Kaay, as amended.
16 17 Exhibit 10.9 -- Amended, Restated and Replacement Participation Agreement, dated as of December 31, 1999, among RF Micro Devices, Inc., as the Construction Agent and as the Lessee; First Security Bank, National Association, not individually, except as expressly stated therein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1; the Various Banks and Other Lending Institutions Which Are Parties Thereto from Time to Time, as the Holders; the Various Banks and Other Lending Institutions Which Are Parties Thereto from Time to Time, as the Lenders; and First Union National Bank, as the Agent for the Lenders and respecting the Security Documents, as the Agent for the Lenders and the Holders, to the extent of their interests. Exhibit 10.10 -- Amended, Restated and Replacement Lease Agreement, dated as of December 31, 1999, between First Security Bank, National Association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, as Lessor, and RF Micro Devices, Inc., as Lessee. Exhibit 10.11 -- Amended, Restated and Replacement Credit Agreement, dated as of December 31, 1999, among First Security Bank, National Association, not individually, except as expressly stated therein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, as the Borrower; the Several Lenders from Time to Time Parties thereto; and First Union National Bank, as the Agent. Exhibit 27.1 -- Financial Data Schedule
- - --------------- * We have requested that a portion of this exhibit be given confidential treatment. (b) Reports on Form 8-K We did not file any reports on Form 8-K during the three months ended December 31, 1999. 17 18 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. RF Micro Devices, Inc. /s/ DAVID A. NORBURY -------------------------------------- David A. Norbury President and Chief Executive Officer (Principal Executive Officer) Dated: February 8, 2000 /s/ WILLIAM A. PRIDDY, JR. -------------------------------------- William A. Priddy, Jr. Vice President, Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer) Dated: February 8, 2000 18 EX-4.1 2 WARRANT NO. 99-1 DATED 11/15/99 1 EXHIBIT 4.1 NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND NEITHER THIS WARRANT NOR SUCH SECURITIES MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS UNLESS RF MICRO DEVICES, INC. RECEIVES AN OPINION OF COUNSEL, WHICH MAY BE HOLDER'S IN-HOUSE COUNSEL, REASONABLY ACCEPTABLE TO IT THAT SUCH REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS WARRANT IS RESTRICTED. SEE PARAGRAPH 11. 250,000 Shares WARRANT NO. 99-1 RF MICRO DEVICES, INC. A North Carolina Corporation (Void after 5:00 p.m., Washington D.C. Time, on June 30, 2001) THIS CERTIFIES THAT, for value received, TRW Inc. (the "Holder") is entitled at any time after December 31, 2000 and at any time before 5:00 p.m. Washington D.C. time on June 30, 2001 (the "Expiration Time") to purchase up to 250,000 (two hundred fifty thousand) shares (the "RFMD Shares") of common stock, no par value (the "Common Shares"), of RF Micro Devices, Inc. (the "Company") at the price per RFMD Share as determined in paragraph 1 of this Warrant, subject to adjustment as provided in paragraph 5 of this Warrant (that price, as it may be adjusted from time to time, being referred to as the "Warrant Price"). 1. The Warrant Price shall be the average of the Closing Prices of the Common Shares during the ten (10) Trading Days immediately preceding December 31, 2000 (the "Pricing Period") multiplied by 0.75. The Closing Price for each day shall be the reported last sales price regular way or, in case no such reported sale takes place on 2 such day, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange or, if the Common Shares are not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Shares are listed or admitted to trading (based on the aggregate dollar value of all securities listed or admitted to trading) or, if not listed or admitted to trading on any national securities exchange, on the NASDAQ National Market System or, if the Common Shares are not listed or admitted to trading on any national securities exchange or quoted on the NASDAQ National Market System, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. The Closing Prices during the Pricing Period shall be adjusted to take into account any stock divisions, stock combinations, stock recapitalizations or reclassifications, stock dividends and the like in order that the Closing Prices during the entire Pricing Period shall have the same reference point as the Closing Price immediately prior to December 31, 2000. The average of the Closing Prices shall be a simple average and shall not be weighted according to trading volume or any other manner. "Trading Day" shall mean a day on which the national securities exchange or the NASDAQ National Market System used to determine the Closing Price is open for the transaction of business or the reporting of trades or, if the Closing Price is not so determined, a day on which the New York Stock Exchange is open for the transaction of business. 2. To exercise this Warrant, this Warrant must be surrendered prior to the Expiration Time at the office of the Company at 7625 Thorndike Road, Greensboro, North Carolina 27409 (or such other address as the Company may specify in writing to -2- 3 the Holder of this Warrant at least ten days before this Warrant is exercised) with the attached Notice of Exercise duly completed and executed, accompanied by evidence of a wire transfer of immediately available funds to the Company's money market account #__________ with Silicon Valley Bank, Santa Clara, California, ABA Routing #__________ (or such other account as the Company may specify in writing to the Holder of this Warrant at least ten days before this Warrant is exercised) in full payment of the purchase price of the RFMD Shares with respect to which this Warrant is exercised. This Warrant may be exercised in whole or in part as to any whole number of RFMD Shares. If this Warrant is exercised in part, upon surrender of this Warrant for exercise, the Company will issue to the Holder a new Warrant to purchase the remaining number of RFMD Shares which may be purchased upon exercise of this Warrant (before taking account of adjustments by reason of paragraphs 5, 6 and 7) and the number of RFMD Shares with respect to which it is exercised (before taking account of adjustments by reason of paragraphs 5, 6 and 7). The new Warrant will bear the same date as this Warrant and will be identical to this Warrant in all respects, except as to the number of RFMD Shares as to which it may be exercised. 3. The RFMD Shares as to which this Warrant is exercised will be deemed to be issued when this Warrant is exercised. Holder agrees that prior to the exercise of this Warrant, it will comply with the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") as in effect from time to time. If action is taken by the Federal Trade Commission or the United States Department of Justice to enjoin Holder's exercise of this Warrant, the Company agrees reasonably to cooperate with Holder to contest such enjoinment at the expense of this Holder. A certificate representing the RFMD Shares will be issued to the Holder of this -3- 4 Warrant promptly after it is exercised. The certificate may bear a legend to the effect that the RFMD Shares it represents have not been registered under the Securities Act of 1933, as amended (the "Act"), or any applicable state securities laws, and may only be transferred in a transaction registered under the Act or such laws or exempt from the registration requirements of the Act or such laws. In addition, any other legend required by any other agreement between the Company and Holder may be included on the certificate or certificates for such RFMD Shares. 4. This Warrant will expire, and the right to purchase the RFMD Shares by exercise of this Warrant will terminate, at the Expiration Time; provided, however, that if Holder has complied with the filing provisions of the HSR Act at least thirty days prior to the Expiration Time, but the waiting period imposed by the HSR Act has not terminated or lapsed, then the Expiration Time will be extended until ten days after such termination or lapse. After that time this Warrant will be void. 5. The Warrant Price will be subject to adjustment from time to time as follows: (a) If, at any time after December 31, 2000, the Company (i) pays a dividend on its Common Stock in Common Stock, (ii) splits or subdivides its outstanding shares of Common Stock, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, the Warrant Price in effect immediately prior to each of those events will be adjusted proportionately so that the adjusted Warrant Price will bear the same relation to the Warrant Price in effect immediately prior to the event as the total number of shares of Common Stock outstanding immediately prior to the event will bear to the total number of shares of Common Stock outstanding immediately after the event. -4- 5 (b) An adjustment made pursuant to subparagraph (a) of this paragraph will become effective immediately after the corresponding record date in the case of a dividend and immediately after the effective date in the case of a subdivision or combination. No adjustment of the Warrant Price will be made if the amount of such adjustment would be less than 2% of the Warrant Price, but any such adjustment that would otherwise be required to be made and has not previously been made will be carried forward and be made at the time of and together with the next subsequent adjustment which, together with all adjustments so carried forward, amount in the aggregate to 2% or more of the Warrant Price. As used in this Warrant, "Common Stock" includes any class of the Company's capital stock, now or hereafter authorized, having the right to participate in the distribution of either earnings or assets of the Company without limitation as to amount or percentage. At no time will the Warrant Price be less than $.01 per share. 6. (a) In case the Company shall at any time or from time to time (i) subdivide its outstanding shares of Common Stock into a greater number of shares or (ii) combine its outstanding shares of Common Stock into a smaller number of shares, then the number of RFMD Shares, in effect immediately prior to such event, shall be proportionately increased in the case of a subdivision and proportionately decreased in the case of combination. Any adjustment under this subparagraph 6(a) shall become effective at the close of business on the date the subdivision or combination becomes effective. (b) In case the Company shall at any time or from time to time makes, or fixes a record date for the determination of holders of the Common Stock -5- 6 entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in such event the number of RFMD Shares then in effect shall be increased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the number of RFMD Shares then in effect by a fraction (x) the denominator of which is the total number of shares of the Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (y) the numerator of which shall be the total number of shares of the Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of the Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the number of RFMD Shares shall be recomputed accordingly based on the number of additional shares of Common Stock actually issued as of the close of business on the date originally fixed for the payment of such dividend or the making of such distribution and thereafter the number of RFMD Shares shall be adjusted pursuant to this subparagraph 6(b) at the time of actual payment of any additional dividends or distributions of Common Stock. (c) In case the Company shall issue rights or warrants to all or substantially all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Fair Market Value (as hereinafter defined) per share of the Common Stock on the date fixed for the determination of shareholders entitled to receive such rights or warrants, the number of RFMD Shares, in effect at the opening of business on the day following the date fixed for such determination, shall be increased by multiplying such number of RFMD Shares by a fraction of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the -6- 7 number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Fair Market Value, and the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such adjustment to become effective immediately after the opening of business on the day following the date fixed for such determination; provided, however, in the event that all the shares of Common Stock offered for subscription or purchase are not delivered upon the exercise of such rights or warrants, the number of RFMD Shares shall be readjusted to the number of RFMD Shares that would have been in effect had the numerator and the denominator of the foregoing fraction and the resulting adjustment been made based upon the number of shares of Common Stock actually delivered upon the number of shares of Common Stock offered for subscription or purchase. For the purposes of this subparagraph (c), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. "Fair Market Value" shall mean, as to shares of Common Stock the simple average of the daily Closing Prices for the ten (10) consecutive Trading Days immediately preceding the day in question. 7. (a) In case of a distribution to all holders of the Company's Common Stock of shares of its capital stock (other than Common Stock) or evidences of its indebtedness or property, or a capital reorganization of the Company, a reclassification of the Common Stock, a consolidation of the Company with or merger of the Company into another corporation or entity (but only if such consolidation or merger is consummated after December 31, 2000) (other than a consolidation or merger in which the Company is the continuing entity) or a sale of the properties and assets of the Company (but only if such sale is consummated after December 31, 2000) as, or -7- 8 substantially as, an entirety and distribution of the proceeds of sale, after such distribution, capital reorganization, reclassification, consolidation, merger or sale, on exercise of this Warrant the Holder will receive the number of shares of stock or other securities or property which the Holder would have received if this Warrant had been exercised immediately before the first such corporate event and the Holder had retained what it would have received as a result of each such corporate event. The split or subdivision or combination of shares of Common Stock at any time outstanding into a greater or lesser number of shares of Common Stock will not be deemed to be a reclassification of the Common Stock of the Company for the purposes of this paragraph. The Company will not effect any consolidation or merger unless prior to or simultaneously with its consummation the successor entity (if other than the Company) resulting from the consolidation agrees in writing to deliver to the Holder of this Warrant on exercise of this Warrant the shares of stock or other securities or property to which the Holder becomes entitled because of that exercise. (b) In the event that at any time prior to December 31, 2000, the Company (i) consolidates or merges with another corporation or entity (other than a consolidation or merger of the Company in which the Company is the continuing entity) or (ii) sells its properties and assets as, or substantially as, an entirety and distributes the proceeds, this Warrant shall terminate immediately upon the consummation of such consolidation, merger or sale and the Holder shall be promptly paid by the Company (or the Company's successor-in-interest, as the case may be) a dollar amount equal to the number of RFMD Shares purchasable hereunder multiplied by the positive difference (if any) between the Closing Price of the Common Shares as of the last Trading Day immediately prior to the effective date of such consolidation, merger or sale and $71.50 (as adjusted for any stock divisions, stock combinations, stock recapitalizations, stock reclassifications, stock dividends or similar transactions occurring after the date of this Warrant). -8- 9 8. Whenever the Warrant Price and/or the number of RFMD Shares is adjusted as provided in this Warrant, the Company will compute the adjusted Warrant Price and/or the number of RFMD Shares or other assets the Holder would receive on exercise of this Warrant in full and will provide a notice to the Holder within thirty (30) days of the date of such adjustment stating that the Warrant Price and/or the number of RFMD Shares has been adjusted and setting forth the adjusted Warrant Price and/or the number of RFMD Shares and what the Holder would receive upon exercise of this Warrant in full. The Company will also provide a notice to the Holder describing any event that would trigger an adjustment in the Warrant Price and/or the number of RFMD Shares in the absence of the last paragraph of paragraph 5. Such notice will be given within thirty (30) days of the effective date of such event. 9. The Company will at all times keep a sufficient number of authorized but unissued RFMD Shares to permit exercise in full of this Warrant. The Company represents and warrants that all RFMD Shares which are delivered on exercise of this Warrant (and payment of the Warrant Price therefor) will, upon delivery, be duly issued, fully paid and non-assessable. 10. The Holder will not, by reason of holding this Warrant, have any right to vote, to receive dividends or other distributions, or any other rights of a shareholder, with regard to the RFMD Shares. 11. The Holder may not assign, sell or otherwise transfer, dispose of, make any short sale of, pledge or hypothecate, grant any option for the purpose of, or enter into any hedging, synthetic sale or similar transaction with the same economic effect as a sale of, this Warrant or any of the Holder's rights under it, except (i) to a corporation controlling, controlled by or under common control with the Holder (which -9- 10 shall take this Warrant subject to the transfer restrictions in this paragraph) or (ii) by merger or consolidation of Holder with or into another corporation or entity if the Holder is not the surviving corporation (which shall take this Warrant subject to the transfer restrictions in this paragraph), and any transfer or attempted transfer or other prohibited assignment of this Warrant will be null and void and of no force or effect. 12. Any notices or other communications to the holder of this Warrant will be addressed to TRW Inc., Space & Electronics Group, One Space Park, Redondo Beach, California 90278, Attention: Vice President, Finance, with a copy to TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124, Attention: Secretary, or to such other address as the Holder may specify in writing to the Company. 13. This Warrant will be governed by, and construed under, the laws of the State of North Carolina. 14. This Warrant may not be modified without the written consent of the Company and the Holder. Dated: November 15, 1999 RF MICRO DEVICES, INC. By: /s/ William A. Priddy --------------------- -10- 11 NOTICE OF EXERCISE By this Notice, TRW Inc. exercises the Warrant to which this Notice is attached with respect to _______________ shares of the Common Stock of RF Micro Devices, Inc. TRW Inc. represents to RF Micro Devices, Inc. that TRW Inc. will be acquiring the securities which are being purchased by exercise of the Warrant for investment, and not with a view to their resale or distribution. [Cross out the preceding paragraph if the resale of the shares being issued on exercise of this Warrant has been registered under the Securities Act of 1933, as amended.] TRW INC. Dated: ____________________ By: __________________________ -11= EX-4.2 3 WARRANT NO. 99-2 DATED 11/15/99 1 EXHIBIT 4.2 RF MICRO DEVICES, INC. HAS REQUESTED THAT A CERTAIN PORTION OF THIS EXHIBIT BE GIVEN CONFIDENTIAL TREATMENT. SUCH PORTION HAS BEEN REDACTED IN THIS DOCUMENT AND FILED SEPARATELY WITH THE COMMISSION. THE REDACTED MATERIAL IS DENOTED HEREIN BY ******. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND NEITHER THIS WARRANT NOR SUCH SECURITIES MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS UNLESS RF MICRO DEVICES, INC. RECEIVES AN OPINION OF COUNSEL, WHICH MAY BE HOLDER'S IN-HOUSE COUNSEL, REASONABLY ACCEPTABLE TO IT THAT SUCH REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS WARRANT IS RESTRICTED. SEE PARAGRAPH 11. 500,000 Shares WARRANT NO. 99-2 RF MICRO DEVICES, INC. A North Carolina Corporation (Void after 5:00 p.m., Washington D.C. Time, on December 31, 2001) THIS CERTIFIES THAT, for value received, TRW Inc. (the "Holder") is entitled at any time after December 31, 2000 and at any time before 5:00 p.m. Washington D.C. time on December 31, 2001 (the "Expiration Time") to purchase up to 500,000 (five hundred thousand) shares (the "RFMD Shares") of common stock, no par value (the "Common Shares"), of RF Micro Devices, Inc. (the "Company") at the price per RFMD Share as determined in paragraph 1 of this Warrant, subject to adjustment as provided in paragraph 5 of this Warrant (that price, as it may be adjusted from time to time, being referred to as the "Warrant Price"). 2 1. (a) The Warrant Price shall be the average of the Closing Prices of the Common Shares during the ten (10) Trading Days immediately preceding December 31, 2000 (the "Pricing Period") multiplied by 0.75. The Closing Price for each day shall be the reported last sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange or, if the Common Shares are not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Shares are listed or admitted to trading (based on the aggregate dollar value of all securities listed or admitted to trading) or, if not listed or admitted to trading on any national securities exchange, on the NASDAQ National Market System or, if the Common Shares are not listed or admitted to trading on any national securities exchange or quoted on the NASDAQ National Market System, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. The Closing Prices during the Pricing Period shall be adjusted to take into account any stock divisions, stock combinations, stock recapitalizations or reclassifications, stock dividends and the like in order that the Closing Prices during the entire Pricing Period shall have the same reference point as the Closing Price immediately prior to December 31, 2000. The average of the Closing Prices shall be a simple average and shall not be weighted according to trading volume or any other manner. "Trading Day" shall mean a day on which the national securities exchange or the NASDAQ National Market System used to determine the Closing Price is open for the transaction of business or the reporting of trades or, if the Closing Price is not so -2- 3 determined, a day on which the New York Stock Exchange is open for the transaction of business. (b) This Warrant shall not be exercisable, and shall become null and void, unless the Company has "Annualized Sales" of Licensed Products (as defined in the License Agreement, dated as of November 15, 1999, between the Company and the Holder) of at least $******. For the purposes of this Warrant, "Annualized Sales" may be calculated as of any fiscal quarter ending on or prior to the Expiration Time and shall be equal to the product of four times the gross revenues from the sale of the Licensed Products during such fiscal quarter, computed in accordance with generally accepted accounting principles. The Company shall deliver to the Holder a regular quarterly report that shows its revenues from sales of Licensed Products during the preceding fiscal quarter and its Annualized Sales of Licensed Products as of such fiscal quarter end. The Expiration Time shall be extended until the fifth (5th) business day after the delivery by the Company of its quarterly report for the quarter ending December 31, 2001 if the Annualized Sales threshold has not been met prior to such quarter. In the event of a "Change in Control" of the Company at any time prior to the Expiration Time, the Annualized Sale requirement described in this subparagraph shall have no effect and the Warrant will become exercisable at the time provide elsewhere in, and pursuant to the terms of, this Warrant. As used herein, "Change in Control" means the occurrence of any of the following: (i) the sale by the Company of all or substantially all of its assets; or (ii) the participation by the Company as constituent corporation in a merger or consolidation if the shareholders of the Company immediately prior to the effective time of such transaction own less than fifty percent (50%) of the outstanding voting securities of the surviving corporation. -3- 4 2. To exercise this Warrant, this Warrant must be surrendered prior to the Expiration Time at the office of the Company at 7625 Thorndike Road, Greensboro, North Carolina 27409 (or such other address as the Company may specify in writing to the Holder of this Warrant at least ten days before this Warrant is exercised) with the attached Notice of Exercise duly completed and executed, accompanied by evidence of a wire transfer of immediately available funds to the Company's money market account #____________ with Silicon Valley Bank, Santa Clara, California, ABA Routing #____________ (or such other account as the Company may specify in writing to the Holder of this Warrant at least ten days before this Warrant is exercised) in full payment of the purchase price of the RFMD Shares with respect to which this Warrant is exercised. This Warrant may be exercised in whole or in part as to any whole number of RFMD Shares. If this Warrant is exercised in part, upon surrender of this Warrant for exercise, the Company will issue to the Holder a new Warrant to purchase the remaining number of RFMD Shares which may be purchased upon exercise of this Warrant (before taking account of adjustments by reason of paragraphs 5, 6 and 7) and the number of RFMD Shares with respect to which it is exercised (before taking account of adjustments by reason of paragraphs 5, 6 and 7). The new Warrant will bear the same date as this Warrant and will be identical to this Warrant in all respects, except as to the number of RFMD Shares as to which it may be exercised. 3. The RFMD Shares as to which this Warrant is exercised will be deemed to be issued when this Warrant is exercised. Holder agrees that prior to the exercise of this Warrant, it will comply with the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") as in effect from time to time. If action is taken by the Federal Trade Commission or the United States -4- 5 Department of Justice to enjoin Holder's exercise of this Warrant, the Company agrees reasonably to cooperate with Holder to contest such enjoinment at the expense of this Holder. A certificate representing the RFMD Shares will be issued to the Holder of this Warrant promptly after it is exercised. The certificate may bear a legend to the effect that the RFMD Shares it represents have not been registered under the Securities Act of 1933, as amended (the "Act"), or any applicable state securities laws, and may only be transferred in a transaction registered under the Act or such laws or exempt from the registration requirements of the Act or such laws. In addition, any other legend required by any other agreement between the Company and Holder may be included on the certificate or certificates for such RFMD Shares. 4. This Warrant will expire, and the right to purchase the RFMD Shares by exercise of this Warrant will terminate, at the Expiration Time; provided, however, that if Holder has complied with the filing provisions of the HSR Act at least thirty days prior to the Expiration Time, but the waiting period imposed by the HSR Act has not terminated or lapsed, then the Expiration Time will be extended until ten days after such termination or lapse. After that time this Warrant will be void. 5. The Warrant Price will be subject to adjustment from time to time as follows: (a) If, at any time after December 31, 2000, the Company (i) pays a dividend on its Common Stock in Common Stock, (ii) splits or subdivides its outstanding shares of Common Stock, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, the Warrant Price in effect immediately prior to each of those events will be adjusted proportionately so that the adjusted Warrant Price will bear the same relation to the Warrant Price in -5- 6 effect immediately prior to the event as the total number of shares of Common Stock outstanding immediately prior to the event will bear to the total number of shares of Common Stock outstanding immediately after the event. (b) An adjustment made pursuant to subparagraph (a) of this paragraph will become effective immediately after the corresponding record date in the case of a dividend and immediately after the effective date in the case of a subdivision or combination. No adjustment of the Warrant Price will be made if the amount of such adjustment would be less than 2% of the Warrant Price, but any such adjustment that would otherwise be required to be made and has not previously been made will be carried forward and be made at the time of and together with the next subsequent adjustment which, together with all adjustments so carried forward, amount in the aggregate to 2% or more of the Warrant Price. As used in this Warrant, "Common Stock" includes any class of the Company's capital stock, now or hereafter authorized, having the right to participate in the distribution of either earnings or assets of the Company without limitation as to amount or percentage. At no time will the Warrant Price be less than $.01 per share. 6. (a) In case the Company shall at any time or from time to time (i) subdivide its outstanding shares of Common Stock into a greater number of shares or (ii) combine its outstanding shares of Common Stock into a smaller number of shares, then the number of RFMD Shares, in effect immediately prior to such event, shall be proportionately increased in the case of a subdivision and proportionately decreased in the case of combination. Any adjustment under this subparagraph 6(a) shall become effective at the close of business on the date the subdivision or combination becomes -6- 7 effective. (b) In case the Company shall at any time or from time to time makes, or fixes a record date for the determination of holders of the Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in such event the number of RFMD Shares then in effect shall be increased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the number of RFMD Shares then in effect by a fraction (x) the denominator of which is the total number of shares of the Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (y) the numerator of which shall be the total number of shares of the Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of the Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the number of RFMD Shares shall be recomputed accordingly based on the number of additional shares of Common Stock actually issued as of the close of business on the date originally fixed for the payment of such dividend or the making of such distribution and thereafter the number of RFMD Shares shall be adjusted pursuant to this subparagraph 6(b) at the time of actual payment of any additional dividends or distributions of Common Stock. (c) In case the Company shall issue rights or warrants to all or substantially all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Fair Market Value (as hereinafter defined) per share of the Common Stock on the date fixed for the determination of shareholders entitled to receive such rights or warrants, the number of -7- 8 RFMD Shares, in effect at the opening of business on the day following the date fixed for such determination, shall be increased by multiplying such number of RFMD Shares by a fraction of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Fair Market Value, and the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such adjustment to become effective immediately after the opening of business on the day following the date fixed for such determination; provided, however, in the event that all the shares of Common Stock offered for subscription or purchase are not delivered upon the exercise of such rights or warrants, the number of RFMD Shares shall be readjusted to the number of RFMD Shares that would have been in effect had the numerator and the denominator of the foregoing fraction and the resulting adjustment been made based upon the number of shares of Common Stock actually delivered upon the number of shares of Common Stock offered for subscription or purchase. For the purposes of this subparagraph (c), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. "Fair Market Value" shall mean, as to shares of Common Stock the simple average of the daily Closing Prices for the ten (10) consecutive Trading Days immediately preceding the day in question. 7. (a) In case of a distribution to all holders of the Company's Common Stock of shares of its capital stock (other than Common Stock) or evidences of its indebtedness or property, or a capital reorganization of the Company, a reclassification of the Common Stock, a consolidation of the Company with or merger of the Company -8- 9 into another corporation or entity (but only if such consolidation or merger is consummated after December 31, 2000) (other than a consolidation or merger in which the Company is the continuing entity) or a sale of the properties and assets of the Company (but only if such sale is consummated after December 31, 2000) as, or substantially as, an entirety and distribution of the proceeds of sale, after such distribution, capital reorganization, reclassification, consolidation, merger or sale, on exercise of this Warrant the Holder will receive the number of shares of stock or other securities or property which the Holder would have received if this Warrant had been exercised immediately before the first such corporate event and the Holder had retained what it would have received as a result of each such corporate event. The split or subdivision or combination of shares of Common Stock at any time outstanding into a greater or lesser number of shares of Common Stock will not be deemed to be a reclassification of the Common Stock of the Company for the purposes of this paragraph. The Company will not effect any consolidation or merger unless prior to or simultaneously with its consummation the successor entity (if other than the Company) resulting from the consolidation agrees in writing to deliver to the Holder of this Warrant on exercise of this Warrant the shares of stock or other securities or property to which the Holder becomes entitled because of that exercise. (b) In the event that at any time prior to December 31, 2000, the Company (i) consolidates or merges with another corporation or entity (other than a consolidation or merger of the Company in which the Company is the continuing entity) or (ii) sells its properties and assets as, or substantially as, an entirety and distributes the proceeds, this Warrant shall terminate immediately upon the consummation of such consolidation, merger or sale and the Holder shall be promptly paid by the Company (or the Company's successor-in-interest, as the case may be) a dollar amount equal to the number of RFMD Shares purchasable hereunder multiplied by the positive difference (if any) between the Closing Price of the Common Shares as of the last Trading Day -9- 10 immediately prior to the effective date of such consolidation, merger or sale and $71.50 (as adjusted for any stock divisions, stock combinations, stock recapitalizations, stock reclassifications, stock dividends or similar transactions occurring after the date of this Warrant). 8. Whenever the Warrant Price and/or the number of RFMD Shares is adjusted as provided in this Warrant, the Company will compute the adjusted Warrant Price and/or the number of RFMD Shares or other assets the Holder would receive on exercise of this Warrant in full and will provide a notice to the Holder within thirty (30) days of the date of such adjustment stating that the Warrant Price and/or the number of RFMD Shares has been adjusted and setting forth the adjusted Warrant Price and/or the number of RFMD Shares and what the Holder would receive upon exercise of this Warrant in full. The Company will also provide a notice to the Holder describing any event that would trigger an adjustment in the Warrant Price and/or the number of RFMD Shares in the absence of the last paragraph of paragraph 5. Such notice will be given within thirty (30) days of the effective date of such event. 9. The Company will at all times keep a sufficient number of authorized but unissued RFMD Shares to permit exercise in full of this Warrant. The Company represents and warrants that all RFMD Shares which are delivered on exercise of this Warrant (and payment of the Warrant Price therefor) will, upon delivery, be duly issued, fully paid and non-assessable. 10. The Holder will not, by reason of holding this Warrant, have any right to vote, to receive dividends or other distributions, or any other rights of a shareholder, with regard to the RFMD Shares. 11. The Holder may not assign, sell or otherwise transfer, dispose of, make any short sale of, pledge or hypothecate, grant any option for the purpose of, or -10- 11 enter into any hedging, synthetic sale or similar transaction with the same economic effect as a sale of, this Warrant or any of the Holder's rights under it, except (i) to a corporation controlling, controlled by or under common control with the Holder (which shall take this Warrant subject to the transfer restrictions in this paragraph) or (ii) by merger or consolidation of Holder with or into another corporation or entity if the Holder is not the surviving corporation (which shall take this Warrant subject to the transfer restrictions in this paragraph), and any transfer or attempted transfer or other prohibited assignment of this Warrant will be null and void and of no force or effect. 12. Any notices or other communications to the holder of this Warrant will be addressed to TRW Inc., Space & Electronics Group, One Space Park, Redondo Beach, California 90278, Attention: Vice President, Finance, with a copy to TRW Inc., 1900 Richmond Road, Cleveland, Ohio 44124, Attention: Secretary, or to such other address as the Holder may specify in writing to the Company. 13. This Warrant will be governed by, and construed under, the laws of the State of North Carolina. 14. This Warrant may not be modified without the written consent of the Company and the Holder. Dated: November 15, 1999 RF MICRO DEVICES, INC. By: /s/ William A. Priddy --------------------- -11- 12 NOTICE OF EXERCISE By this Notice, TRW Inc. exercises the Warrant to which this Notice is attached with respect to _______________ shares of the Common Stock of RF Micro Devices, Inc. TRW Inc. represents to RF Micro Devices, Inc. that TRW Inc. will be acquiring the securities which are being purchased by exercise of the Warrant for investment, and not with a view to their resale or distribution. [Cross out the preceding paragraph if the resale of the shares being issued on exercise of this Warrant has been registered under the Securities Act of 1933, as amended.] TRW INC. Dated: ____________________ By: __________________________ -12- EX-10.1 4 LEASE AGREEMENT DATED 11/5/99 1 EXHIBIT 10.1 LEASE PROVISIONS & EXHIBITS LANDLORD: HIGHWOODS REALTY LIMITED PARTNERSHIP TENANT: R.F. MICRO DEVICES, INC. LEASE DATE: November 5, 1999 BUILDING ADDRESS: 486 Gallimore Dairy Road, Suite A, Greensboro, North Carolina 27409 NOTICES ADDRESS: 7625 Thorndike Rd., Greensboro, North Carolina 27409 RENTABLE SQUARE FOOTAGE: 120,000 LEASE TERM: Fifteen (15) years RENT COMMENCEMENT: March 1, 2000 TERM: MONTHLY RENT: ANNUAL RENT: PRICE P.R.S.F: R.S.F.: - - ---- ------------ ----------- ------------- ------ 03/01/00 - 08/31/00 $16,900.00 $202,800.00 $3.38 *60,000 09/01/00 - 02/28/03 $30,500.00 $366,000.00 $3.05 120,000 03/01/03 - 02/28/15 Increase based on Consumer Price Index (See Section 3) *Tenant shall occupy the entire Building square footage (120,000 sf). ALL RENTS ARE DUE ON THE 1ST DAY OF EACH MONTH OPTION TO RENEW: Provided Tenant is not in default hereunder, Tenant shall have an option to renew this Lease for two (2) periods of ten (10) years. The rental rate will be adjusted for changes in the Consumer Price Index during the preceding fifteen (15) year period. The rental rate for the initial year of the renewal term will be the basis for all future Consumer Price Index adjustments. NOTICE: Tenant shall provide Landlord six (6) month prior written notice of its intent to renew the Lease. FIRST RIGHT OF REFUSAL: TENANT IMPROVEMENTS: Tenant agrees to lease the building from "shell" condition. Landlord will not provide any funds for improvements of any kind to the leased space. BROKER: Coldwell Banker - Commercial, Attn: Joe Douglas COMMISSION PAID: 4.00% on the First Ten (10) Years of Lease Term PRO-RATA %: 100% EXPENSE PASS THRU'S: Taxes: Entire Cost Insurance: Entire Cost Common Area Maintenance: Entire Cost 2 PAID DIRECTLY BY TENANT: x Janitorial x Extermination x Garbage x Light Bulbs x Water/Sewer x Interior Maintenance x Security x Signage x Electrical/Gas x Plate Glass Breakage x HVAC x Fire Extinguisher Maintenance EXHIBITS ATTACHED: TBA A Legal Description TBA B Building Layout/Specs x C Rules & Regulations x D Insurance Requirements x E Parking Rules & Regulations *The terms set forth in this Lease Provisions and Exhibits page are for convenience only. To the extent that there are any inconsistencies between the terms of the Lease Agreement and the provisions set forth on this page, the terms of the Lease Agreement shall control. 3 NORTH CAROLINA } } LEASE AGREEMENT GUILFORD COUNTY } THIS LEASE, made and entered into this the 5 day of November, 1999, by and between HIGHWOODS REALTY LIMITED PARTNERSHIP, a North Carolina Limited Partnership, hereinafter referred to as "Landlord" and R.F. MICRO DEVICES, INC., A NORTH CAROLINA Corporation, hereinafter referred to as "Tenant". RECITALS Landlord is seized of the business premises described herein, having space therein to let. Tenant desires to lease such space from Landlord. The parties desire to enter into a Lease Agreement defining their respective rights, duties and liabilities relating to the premises. IN CONSIDERATION of the mutual covenants contained herein, the parties agree as follows: 1. DESCRIPTION OF PREMISES: Landlord is the owner of a 120,000 rentable square foot building (the "Building") located ON CERTAIN REAL PROPERTY at 486 GALLIMORE DAIRY ROAD, SUITE A, GREENSBORO, GUILFORD COUNTY, NORTH CAROLINA, being more fully described on Exhibit "A" attached hereto and hereby made a part hereof. The Leased Space shall consist of THE REAL PROPERTY DESCRIBED ON EXHIBIT "A" ATTACHED HERETO TOGETHER WITH THE Building and other improvements in the amount of 120,000 rentable square feet, as outlined in red on Exhibit "B" attached hereto, said space AND REAL PROPERTY, hereinafter referred to as the "Premises". The entire Premises shall be for the exclusive use of Tenant, its agents, servants, employees and invitees for office and related uses. The Premises are more commonly known as Suite A. Landlord represents and warrants that it is the owner in fee simple of the Premises and that there are no covenants, restrictions or zoning or other regulations which prevent, or are violated by, this Lease or the use of the Premises as contemplated herein. 2. TERM: The term of this Lease shall be for a period of FIFTEEN (15) YEARS, beginning MARCH 1, 2000, the "Commencement Date", continuing through FEBRUARY 28, 2015, the "Termination Date". FOR PURPOSES OF THIS LEASE, THE BUILDING SHALL BE DEEMED COMPLETED UPON ISSUANCE OF A CERTIFICATE OF OCCUPANCY FROM THE APPLICABLE GOVERNMENTAL AUTHORITY, AND A CERTIFICATE OF ARCHITECT FROM LOCKWOOD GREENE INDICATING THAT THE PROPERTY HAS BEEN SUBSTANTIALLY COMPLETED IN ACCORDANCE WITH TENANT APPROVED CONSTRUCTION DRAWINGS. THE LEASE, ALONG WITH TENANT'S RENTAL OBLIGATION, SHALL COMMENCE UPON THE ISSUANCE OF A CERTIFICATE OF OCCUPANCY AND CERTIFICATE OF ARCHITECT SUPPLIED BY LOCKWOOD GREENE. 3. BASE RENT: Tenant shall pay rental for the Premises Leased AS FOLLOWS: TERM: MONTHLY RENT: ANNUAL RENT: PRICE P.R.S.F: R.S.F.: - - ---- ------------ ----------- ------------- ------ 03/01/00 - 08/31/00 $16,900.00 $202,800.00 $3.38 60,000 09/01/00 - 02/28/03 $30,500.00 $366,000.00 $3.05 120,000 RENT SHALL INCREASE ON THE THIRD ANNIVERSARY OF THE COMMENCEMENT DATE BY 4.5% FROM THE PREVIOUS LEASE YEAR. Rent shall also increase on THE SIXTH, NINTH, AND TWELFTH ANNIVERSARIES of the Commencement Date by the same percentage as EIGHTY PERCENT (80%) OF THE percentage increase in the Consumer Price Index - All Items - All Urban Consumers ("CPI"), issued by the U.S. Department of Labor, for each prior THIRTY-SIX (36) MONTH PERIOD. However, in no event shall the base rent decrease as a result of a decrease in CPI. AS SOON AS PRACTICABLE AFTER THE CPI FOR THE ANNIVERSARY DATE BECOMES AVAILABLE, THE LANDLORD SHALL FURNISH TO TENANT A STATEMENT FOR SETTING FORTH THE ADJUSTMENT, IF ANY, TO RENT AS REQUIRED BY THIS PARAGRAPH 3. FROM THE BEGINNING OF EACH LEASE YEAR UNTIL LANDLORD SHALL FURNISH TENANT WITH A STATEMENT AS AFORESAID, TENANT SHALL CONTINUE TO PAY RENT AT THE RATE IT SHALL HAVE BEEN OBLIGATED TO PAY DURING THE PRECEDING LEASE YEAR. BEGINNING WITH THE FIRST DAY OF THE CALENDAR MONTH FOLLOWING THE DATE UPON WHICH LANDLORD SHALL HAVE DELIVERED TO TENANT EACH SUCH STATEMENT, TENANT SHALL PAY RENT AT THE RATE REQUIRED BY THIS PARAGRAPH 3 AND SHALL PAY LANDLORD ANY DIFFERENCE BETWEEN RENT IT SHALL HAVE PAID LANDLORD FOR SUCH YEAR AND THE ADJUSTED RENTAL IT SHALL HAVE BEEN OBLIGATED TO PAY LANDLORD FOR SUCH YEAR UNDER THIS PARAGRAPH 3. IT IS AGREED THAT IN THE EVENT THE AFORESAID INDEX IS DISCONTINUED OR REVISED, ANY OTHER INDEX WITH WHICH IT IS REPLACED SHALL BE USED IN ORDER TO OBTAIN SUBSTANTIALLY THE SAME RESULTS AS WOULD BE OBTAINED IF THERE HAD BEEN NO SUCH DISCONTINUATION OR REVISION. All rental payments are payable in advance on the first (1st) day of each month without prior offset or deduction, EXCEPT AS SET FORTH IN THE LEASE, to Landlord at Landlord's address specified in Section 41 hereof entitled "NOTICES" or at such other place as Landlord may direct. In the event any Tenant check tendered to Landlord in payment of its obligations hereunder is returned by Tenant's bank for insufficient funds, any and all REASONABLE charges incurred by Landlord as a result shall be billed to Tenant by Landlord as additional rent hereunder. 4 4. OCCUPANCY AND ACCEPTANCE OF PREMISES: Landlord shall deliver actual possession of the Premises to Tenant on the Commencement Date according to the specifications indicated in Exhibit "B" attached hereto and by this reference made a part hereof, provided Landlord is able to furnish to Tenant evidence obtained from local governmental authorities having jurisdiction that the Premises have been duly inspected and approved for Tenant's occupancy. If the Premises are ready for Tenant's occupancy prior to the Commencement Date, Landlord shall so notify Tenant and Tenant may accept such early occupancy, provided, however, in such event Tenant shall pay to Landlord base rental calculated on a daily basis assuming a 365 day year, for each day Tenant shall occupy the Premises prior to the Commencement Date. If permission is given to Tenant to occupy the Demised Premises prior to the date of commencement of the term hereof, such occupancy shall be subject to all the provisions of this Lease except those relating to the term of this Lease. Upon Tenant's occupancy of the Premises Tenant shall render to Landlord, within ten (10) days of such occupancy date, a written notice listing each and every respect in which the Premises are incomplete according to such building specifications as noted above; Landlord shall then have sixty (60) days from its receipt of said notice to complete those items contained in such listing. The existence of such items shall not alter the Tenant obligation to pay rent pursuant to Section 3. During Tenant's move-in, a representative of the Tenant must be on-site with any moving company to ensure proper treatment of Premises. Elevators in multi-story office buildings must remain in use for the general public during business hours. Any specialized use of elevators must be coordinated with the Landlord's Property Manager. All packing materials and refuse must be properly disposed of. Any damage or destruction due to moving will be the sole responsibility of the Tenant. Tenant shall, at its own expense, comply with all future governmental regulations to include those relating to the Americans with Disabilities Act (ADA). LANDLORD WARRANTS THAT THE PREMISES COMPLIES WITH SUCH GOVERNMENTAL REGULATIONS AS OF THE COMMENCEMENT DATE OF THIS LEASE. NOTWITHSTANDING ANYTHING STATED ABOVE TO THE CONTRARY, THE TENANT SHALL HAVE THE RIGHT TO ENTER INTO THE PREMISES PRIOR TO THE COMMENCEMENT DATE TO BEGIN WORK NECESSARY FOR THE TENANT'S UPFITTING OF THE PREMISES. ALL WORK PERFORMED BY THE TENANT AND THE TENANT'S CONTRACTORS OR SUBCONTRACTORS SHALL BE COORDINATED WITH THE LANDLORD AND THE LANDLORD'S CONTRACTORS SO AS TO NOT INTERFERE WITH THE WORK PERFORMED BY THE LANDLORD'S CONTRACTORS. TENANT AGREES TO INDEMNIFY AND HOLD THE LANDLORD HARMLESS FROM ANY LOSS, COST AND EXPENSE SUFFERED BY THE LANDLORD AS A RESULT OF THE TENANT OR TENANT'S CONTRACTORS' PRESENCE ON THE PREMISES PRIOR TO THE COMMENCEMENT DATE. SHOULD LANDLORD FAIL TO DELIVER THE PREMISES IN ACCORDANCE WITH TENANT APPROVED CONSTRUCTION DRAWINGS BY _________________, THEN TENANT SHALL HAVE THE RIGHT TO TERMINATE THE LEASE. 5. AUDIT: If Tenant disputes the amount of operating expenses as set forth in the invoice from the Landlord within forty -five days after receipt thereof, and provided Tenant is not then in default under this Lease, Tenant shall have the right upon notice to have Landlord's book and records relating to operating expenses audited by a qualified professional selected by Tenant or by Tenant itself. If after such audit Tenant still disputes the amount of operating expenses, a certification as to the proper amount shall be made by Landlord's independent certified public accountant in consultation with Tenant's professional, which certification shall be final and conclusive. If such audit reveals that operating expenses were overstated by FIVE PERCENT (5%) or more in the calendar year audited Landlord shall within thirty (30) days after the certification pay to Tenant the amount of any overstatement which it had collected from Tenant. However, if such certification does not show that Landlord had made such an overstatement then Tenant shall pay both the costs of its professional as well as the reasonable charges of Landlord's independent certified public accountant engaged to determine the correct amount of operating expenses. If the certification shows that Landlord has undercharged Tenant then Tenant shall within thirty (30) days pay to Landlord the amount of any undercharge. Books and records necessary to accomplish any audit permitted under this Section shall be retained for twelve months after the end of each calendar year, and on receipt of notice of Tenant's dispute of the operating expenses shall be made available to Tenant to conduct the audit, which may be either at the Premises, or at Landlord's office in Winston-Salem, North Carolina . In the event that the Tenant elects to have a professional audit Landlord's operating expenses as provided in this Lease, such audit must be conducted by an independent nationally or regionally recognized accounting firm that is not being compensated by Tenant on a contingency fee basis. All information obtained through such audit as well as any compromise, settlement or adjustment reached as a result of such audit shall be held in strict confidence by Tenant and its officers, agents, and employees and as a condition to such audit, the Tenant's auditor shall execute a written agreement agreeing that the auditor is not being compensated on a contingency fee basis and that all information obtained through such audit as well as any compromise, settlement or adjustment reached as a result of such audit, shall be held in strict confidence and shall not be revealed in any manner to any person except upon the prior written consent of the Landlord, which consent shall not be unreasonably withheld in Landlord's sole discretion, or if required pursuant to any litigation between Landlord and Tenant materially related to the facts disclosed by such audit, or if required by law. No subtenant shall have any right to conduct an audit and no assignee shall conduct an audit for any period during which such assignee was not in possession of the Premises. 5 6. LATE PAYMENT OF RENT: All monthly installments of rent herein stipulated are due in advance without prior offset or deduction, EXCEPT AS SET FORTH IN THIS LEASE, on the FIRST (1ST) DAY OF EACH MONTH during the term hereof, as set forth in Section 3 hereof entitled "BASE RENT". All rents not received on the first (1st) day of the month shall be deemed "past due" and all rents not received by the Landlord by the tenth (10th) day of each month during the term hereof shall be subject to a charge of 5% of the amount due. In any such event, Landlord shall so invoice Tenant for any such charge, which shall become due immediately upon Tenant's receipt of the invoice but in no event later than ten (10) days from the invoice date. Once any payment of rent is thirty (30) days past due, the total due, including the 5% charge, shall bear interest at eighteen (18) percent per annum. 7. NO ACCORD AND SATISFACTION: No acceptance by Landlord of a lesser sum than the Base Rent, late charges, additional rent and other sums then due shall be deemed to be other than on account of the earliest installment of such payments due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed as accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy in this Lease provided. 8. USE: Premises shall be used for such office, assembly, storage, distribution and manufacturing activities as are allowed under existing zoning and recorded covenants. Tenant shall not conduct, or allow to be conducted, on or within the Premises any business or permit any act which in any way increases the cost of fire insurance on the building or constitutes a nuisance or is contrary to or in violation of the laws, statutes or ordinances of local state or federal governments having jurisdiction and Tenant agrees to comply, at Tenant's expense, with all governmental regulations, to include those relating to the Americans with Disabilities Act (ADA). TENANT WILL PAY TO BRING THE PREMISES INTO COMPLIANCE WITH ANY REVISIONS TO THE AMERICANS WITH DISABILITIES ACT (ADA) AFTER THE COMMENCEMENT DATE OF THE LEASE. Any violation of this provision by Tenant shall be a material breach of this Lease, entitling Landlord to exercise any rights or remedies contained herein or provided by law or other authority. LANDLORD AND TENANT HEREBY AGREE THAT THE MANUFACTURING OF WAFERS AS CONTEMPLATED BY THE TENANT DOES NOT VIOLATE EXISTING ZONING OR ANY RECORDED RESTRICTIVE COVENANTS. It is hereby agreed and understood that the following functions are prohibited outside the building walls or in the parking or service areas: storage of any item; manufacture or assembly of any product; refuse accumulation; rallies or meetings; any conduct of business. Personal property of Tenant of any type or size shall be permitted outside the Premises only during times of loading or unloading operations. 9. QUIET ENJOYMENT: The Landlord covenants that Tenant, upon paying the Landlord the rental stipulated herein together with all other charges reserved herein, and performing the covenants, promises and agreements herein, shall peaceably and quietly have, hold and enjoy the Premises and all rights, easements, appurtenances and privilege belonging or appertaining thereto, during the full term hereby granted and any extensions or renewals thereof. 10. COMMON AREAS: As used in this Lease, Common Areas shall mean all areas of the entire building and appurtenances which are available for the common use of tenants and which are not held for the exclusive use of the Tenant or other tenants, including but not limited to: the parking areas and entrances and exits thereto, driveways and truck service ways, sidewalks, landscaped areas, access roads, building equipment rooms, and other areas and facilities provided for the common or joint use and benefit of occupants of the Building, their employees, agents, customers and invitees. Landlord reserves the right, from time to time, to reasonable alter said common areas, including converting common areas into leasable areas, constructing additional parking facilities in the common areas, increasing or decreasing common area land and/or facilities and to exercise control and management of the common areas and to establish, modify, change and enforce such reasonable Rules and Regulations as Landlord in its discretion may deem desirable for the management of the Building. Tenants agrees to abide by and conform to such rules and regulations and shall be responsible for the compliance with same by its employees, agents, customers and invitees. The failure of Landlord to enforce any of such Rules and Regulations against Tenant or any other tenant shall not be deemed to be a waiver of same. Landlord shall have the right to restrict or close all or any portion of the common areas at such times and for such periods as may, in the opinion of the Landlord, be necessary to prevent a dedication thereof, or to preserve the status thereof as private property, or to prevent the accrual of any rights in any person; and Landlord may also close said common areas for purposes of maintenance and repair as may be required from time to time. Tenant shall pay to Landlord its proportionate share of the entire common area maintenance cost. Tenant's proportionate share shall be the relation of Tenant's 120,000 rentable square foot area to the 120,000 rentable square foot of total building area, or 100%. During the term hereof, Landlord shall notify Tenant of its proportionate share due for such cost. Landlord shall have the option through the Lease term to require Tenant's reimbursement on either a monthly, quarterly or annual basis, at Landlord's sole 6 discretion, to become due and payable as additional rent within ten (10) days, if invoiced monthly or thirty (30) days, if invoiced quarterly or annually, from the date of invoice. 11. ASSIGNMENT AND SUBLETTING: Tenant covenants and agrees that neither this Lease nor the term hereby granted, nor any part thereof, will be assigned, mortgaged, pledged, encumbered or otherwise transferred, by operation of law or otherwise, and that neither the Premises, nor any part thereof, will be sublet or advertised for subletting or occupied, by anyone other than Tenant, or for any purpose other than as hereinabove set forth, without the prior written consent of Landlord not to be unreasonably withheld. Landlord's withholding of consent shall be deemed reasonable if the use or occupancy of the Premises by such sublessee or assignee could make Landlord responsible for any costs of compliance with the Americans with Disabilities Act (ADA) or any other legislation by any governmental body. 12. LANDLORD'S REPAIRS: The Landlord shall maintain and keep in good condition and repair the roof, parking areas and exterior landscaping, exterior and supporting walls of the Building together with repairs necessary due to structural defects, if any. Landlord shall also maintain and repair the electrical wiring (from the utility company's distribution lines to the Premises, including the electrical service exclusive of fuses, fuse blocks, breaker units or meter deposits) servicing the Premises, the water line servicing the Premises, and the sanitary sewer lines and/or septic tank servicing the Premises. However, the Landlord shall not be responsible for such maintenance and repairs in the event the same are required as a result of the negligence or willful act of the Tenant or its clients, customers, licensees, assignees, agents, employees or invitees and further, in any such event the cost of such maintenance and repairs so required shall be the sole responsibility of the Tenant. TO THE EXTENT ANY REPAIRS REQUIRED TO BE PERFORMED BY THE LANDLORD ARE REQUIRED, THE TENANT SHALL IMMEDIATELY NOTIFY THE LANDLORD THAT SUCH REPAIRS ARE NECESSARY. PROVIDED TENANT'S REQUEST IS REASONABLE, LANDLORD SHALL IMMEDIATELY COMMENCE SUCH REPAIRS AND COMPLETE SUCH REPAIRS AS SOON AS POSSIBLE. TENANT SHALL HAVE THE RIGHT TO COMPLETE ANY REPAIRS NOT COMPLETED BY THE LANDLORD IN A TIMELY FASHION, AND OFFSET SUCH COST IN THE NEXT MONTH'S RENT (NOT TO EXCEED ONE MONTH). TENANT SHALL PROVIDE TO LANDLORD WRITTEN DOCUMENTATION OF SAID COSTS. 13. TENANT REPAIRS; ALTERATIONS: The Tenant shall effect, at its sole cost and expense, all maintenance and repairs to the interior of said Premises, including without limitation, the floor and wall coverings (whether paint or otherwise); lights, light fixtures, and light bulbs; interior and exterior doors and door locks, overhead doors; ceiling tiles; water heaters; windows, frames, glass, window blinds; all heating, ventilating and air conditioning equipment; all plumbing and electrical not described in Section 12 above; security systems and any other improvements not required to be maintained by Landlord in the immediately preceding Section hereof, except in the event the improvements installed by Landlord may be defective in material or labor in installation. All such repairs and replacements required by this section shall be made only by persons approved in advance by Landlord, NOT TO BE UNREASONABLY WITHHELD. Should Tenant fail to comply with the maintenance and repairs required above, the Landlord shall have the right, AFTER TEN (10) DAYS PRIOR WRITTEN NOTICE TO TENANT, to enter on the Premises and make necessary repairs and perform and maintenance required. Any REASONABLE cost incurred by Landlord shall be paid by the Tenant at cost plus ten percent (10%) overhead and ten percent (10%) for profit. Tenant shall submit to the Landlord for Landlords' prior written approval all of the plans and specifications for any alterations, additions or improvements in and to the Premises which tenant may deem desirable or necessary in its use and occupancy thereof. Such alterations, additions or improvements shall not be made without the prior written approval of Landlord. If any changes are made to the plans by the Landlord, Tenant shall review final plans and provide written approval prior to Landlord starting upfit construction All such alterations, additions or improvements shall be made in accordance with applicable city, county, state and federal laws and ordinances, and building and zoning rules and regulations and all present and future governmental regulations relating to the Americans with Disabilities Act (ADA). Landlord's approval hereunder shall not be deemed as warranty that tenant's alterations meet such ADA regulations, however, such consent shall carry a requirement that such alterations will be constructed by Tenant, at its own expense, in full compliance with all existing ADA governmental regulations. Tenant shall be liable for all damages or injuries which may result to any person or property by reason of or resulting from any alterations, additions or improvements made by it to the Premises and shall hold the Landlord harmless with respect thereto. All additions and improvements made by the Tenant, EXCEPT TRADE FIXTURES, shall become a part of the Premises and shall, upon the termination or expiration of this Lease, belong to Landlord except as may be otherwise set forth in a letter agreement or other written instrument executed by the parties hereto and attached to this Lease as an amendment hereto and thereby made a part hereof. In the event Tenant performs any alterations, additions or improvements to the Premises, Tenant agrees that it shall provide to Landlord a reproducible set of as-built plans for Landlord's files. If Tenant fails to perform Tenant's obligations under this Section, Landlord may at its option enter upon the Premises after ten (10) days prior written notice to Tenant, perform such obligation on Tenant's behalf, and the cost thereof together with interest thereon shall become due and payable as additional rental to Landlord together with Tenant's next rental installment. At Landlord's option, Landlord may require that Tenant remove any or all alterations or improvements at Tenant's expense upon termination of the Lease. 7 14. HEATING, VENTILATION AND AIR CONDITIONING: The Tenant shall at its sole cost and expense keep in force a maintenance contract for the entire term of this Lease on all heating, air conditioning and ventilation equipment pertaining to the Premises, providing for service inspections to be done ON A ROUTINE BASIS AS PROPOSED BY SUCH CONTRACT. Tenant shall submit a copy of said contract to Landlord within ten (10) days after occupancy of the Premises. Landlord must approve the terms of the maintenance contract and the firm Tenant chooses as the maintenance contractor, SUCH APPROVAL NOT TO BE UNREASONABLY WITHHELD. Landlord shall be responsible for replacement of any defective motor or compressor within the system provided it is not as a result of negligence or willful act of the Tenant, its clients, customers, licensees, assignees, agents, employees, or invitees. However, Tenant's failure to provide the required maintenance contract shall release Landlord form any and all liability for said equipment. Upon termination of this Lease, Tenant will deliver the HVAC equipment in good operating condition. 15. FEDERAL REGULATION AND/OR PROHIBITION OF CFC'S: Due to an environmental threat that the earth's ozone layer has deteriorated, there is international concern for the control of Chlorofluorocarbons ("CFC's") and possible ban thereof. Future legislation could impose: 1) New maintenance standards and procedures on HVAC equipment in order to reduce the amount of freon existing in the system; or 2) Conversion of the equipment in order to accommodate the use of a substitute chemical; or 3) Replacement of the equipment in the event the equipment does not comply with the required performance and maintenance standards. Landlord and Tenant hereby acknowledge that any costs associated with the above shall be considered a maintenance item and SHALL BE PAID BY TENANT. NOTWITHSTANDING THE PRECEDING SENTENCE, IN THE EVENT THAT ANY SUCH RULES AND REGULATIONS AS DESCRIBED ABOVE ARE ENACTED WHICH REQUIRE SIGNIFICANT CHANGES TO THE HVAC EQUIPMENT OF THE PREMISES DURING THE LAST THREE YEARS OF THE TERM OF THIS LEASE (INCLUDING THE RENEWAL TERM), THE COST OF BRINGING THE HVAC EQUIPMENT ON THE PREMISES INTO COMPLIANCE WITH SUCH RULES OR REGULATIONS SHALL BE PRORATED AMONG THE TENANT AND THE LANDLORD BASED UPON THE ANTICIPATED USEFUL LIFE OF THE HVAC EQUIPMENT, AS MODIFIED, AND THE REMAINING NUMBER OF YEARS LEFT IN THE TERM OF THIS LEASE. 16. SUBORDINATION AND ATTORNMENT: TENANT AGREES THAT THIS LEASE IS SUBJECT AND SUBORDINATE TO ANY AND ALL MORTGAGES OR DEEDS OF TRUST NOW OR HEREAFTER PLACED ON THE PROPERTY OF WHICH THE PREMISES ARE A PART, AND THIS CLAUSE SHALL BE SELF OPERATIVE WITHOUT ANY FURTHER INSTRUMENT NECESSARY TO EFFECT SUCH SUBORDINATION; HOWEVER, IF REQUESTED BY LANDLORD, TENANT SHALL PROMPTLY EXECUTE AND DELIVER TO LANDLORD ANY SUCH CERTIFICATES AS LANDLORD MAY REASONABLY REQUEST EVIDENCING SUCH SUBORDINATION OF THIS LEASE TO OR THE ASSIGNMENT OF THIS LEASE AS ADDITIONAL SECURITY FOR SUCH MORTGAGES OR DEEDS OF TRUST. PROVIDED, HOWEVER, IN EACH CASE, THE HOLDER OF THE MORTGAGE OR DEED OF TRUST SHALL AGREE THAT THIS LEASE SHALL NOT BE DIVESTED BY FORECLOSURE OR OTHER DEFAULT PROCEEDINGS SO LONG AS TENANT SHALL NOT BE IN DEFAULT UNDER THE TERMS OF THIS LEASE BEYOND ANY APPLICABLE CURE PERIOD SET FORTH IN THIS LEASE. TENANT SHALL CONTINUE ITS OBLIGATIONS UNDER THIS LEASE IN FULL FORCE AND EFFECT NOTWITHSTANDING ANY SUCH DEFAULT PROCEEDINGS UNDER A MORTGAGE OR DEED OF TRUST AND SHALL ATTORN TO THE MORTGAGEE, TRUSTEE OR BENEFICIARY OF SUCH MORTGAGE OR DEED OF TRUST, AND THEIR SUCCESSORS OR ASSIGNS, AND TO THE TRANSFEREE UNDER ANY FORECLOSURE OR DEFAULT PROCEEDINGS. THE SUBORDINATION CONTAINED IN THIS PARAGRAPH 16 SHALL NOT APPLY UNLESS AND UNTIL THE MORTGAGEE OR DEED OF TRUST HOLDER AGREES TO THE NONDISTURBANCE PROVISIONS SET FORTH ABOVE. In the event of the sale, assignment, or transfer by Landlord of its interest in the Premises to a successor in interest who expressly assumes the obligation of the Landlord hereunder, AND WHO IS FINANCIALLY SOUND AND ADEQUATELY CAPITALIZED, the Landlord shall thereupon be released or discharged from all of its covenants and obligations hereunder, except such obligations shall have accrued prior to any such sale, assignment or transfer; and Tenant agrees to look solely to any successor in interest of the Landlord for performance of any such obligations. Tenant shall have ten (10) days from its receipt of Landlord's request to deliver any such fully executed documents to Landlord. Tenant's failure to execute and deliver any such documents shall constitute a default hereunder. 17. CHANGE IN OWNERSHIP OF PREMISES: If the ownership of the Premises or the name or address of the party entitled to receive rent hereunder shall be changed, the Tenant may, until receipt of proper notice of such change(s), continue to pay the rent and other charges herein reserved accrued and to accrue hereunder to the party to whom and in the manner in which the last preceding installment of rent or other charge was paid, and each such payment shall, to the extent thereof, exonerate and discharge the Tenant. 8 18. CONDEMNATION: If the whole of the Building, or such substantial portion thereof as will make Premises unusable for the purposes referred to herein, shall be condemned by any legally constituted authority for any public use or purpose, then in either of said events the term hereby granted shall cease from the time when possession thereof is taken by the condemning authority, and rental shall be accounted for as between Landlord and Tenant as of that date. In the event the portion condemned is such that the remaining portion can, after restoration and repair, be made usable for Tenant's purposes, then this Lease shall not terminate; however, the rent shall be reduced equitably to the amount of the Premises taken. In such an event, Landlord shall make such repairs as may be necessary as soon as the same can be reasonably accomplished, NOT TO EXCEED 120 DAYS. Such termination, however, shall be without prejudice to the rights of either Landlord or Tenant, or both, to recover compensation and damage caused by condemnation from the condemnor. It is further understood and agreed that neither the Tenant nor Landlord shall have any rights in any award made to the other by any condemnation authority. Any minor condemnation or taking of the Premises for the construction or maintenance of streets or highways shall not be considered a condemnation or taking for the purposes of this Section 18 so long as the Premises shall not be materially or adversely affected, ingress and egress for the remainder of the Premises shall be adequate for the business of Tenant, and the provisions of any loan documents of Landlord's lender which encumber the Premises are complied with, AND PROVIDED SUFFICIENT PARKING SPACES REMAIN AS REQUIRED UNDER APPLICABLE ZONING REQUIREMENTS. 19. RIGHT OF LANDLORD TO ENTER; "FOR RENT" SIGNS: The Tenant agrees that the Landlord or its agents may at all reasonable times enter upon the Premises for the purpose of inspection or repair of the Building or the building systems and such other purposes as Landlord may deem necessary or proper for the reasonable protection of Landlord's interest in the Premises. In addition, the Landlord may enter the Premises at all reasonable times to exhibit the Premises to prospective purchasers. During the two (2) months immediately preceding the final expiration of the term created hereunder or any renewal thereof, the Landlord, may exhibit the Premises to prospective tenants and/or affix a notice that the premises are for rent; such notice shall not be greater than four (4) square feet in area, and shall be affixed to a suitable part thereof, exclusive of doors and windows and so as not to obstruct the Tenant's signs. 20. TAXES: TENANT agrees to pay before they become delinquent all taxes, assessments and governmental charges of any kind and nature whatsoever (hereinafter referred to as "taxes") lawfully levied or assessed against the PREMISES DURING THE TERM OF THE LEASE. TO THE EXTENT THAT TAXES ARE LEVIED OR ASSESSED FOR ANY YEAR IN WHICH THE TENANT OCCUPIES THE PREMISES FOR ONLY A PORTION OF SUCH YEAR, TAXES SHALL BE PRORATED BETWEEN THE TENANT AND THE LANDLORD BASED UPON THE ACTUAL NUMBER OF DAYS THAT THE TENANT OCCUPIES THE PREMISES DURING SUCH YEAR. If at any time during the term of this Lease, the present method of taxation shall be changed so that in lieu of the whole or any part of any taxes, assessments or governmental charges levied, assessed or imposed on real estate and the improvements thereof, there shall be levied, assessed or imposed on Landlord a capital levy or other tax directly on the rents received therefrom and/or a franchise tax, assessment levy or charge measured by or based, in whole or in part, upon such rents for the present or any future building or building on the Premises, then all such taxes, assessments, levies or charges, or the part thereof so measured or based, shall be deemed to be included with the term "taxes" for the purposes hereof. Tenant shall pay to Landlord its proportionate share of the entire cost of all taxes referenced herein. Tenant's proportionate share shall be the relation of Tenant's 120,000 rentable square foot area to the 120,000 rentable square feet of total building area, or 100%. Real estate taxes, as referenced herein, shall be defined as the amount of the total tax invoice (property assessment x tax rate) and shall exclude any discount or late penalty charge and shall include any charge or fee incurred by Landlord as a result of its attempt in securing a reduction in the assessed value of the Property. During the term hereof, Landlord shall notify Tenant of its proportionate share due for such cost. Landlord shall have the option through the Lease term to require Tenant's reimbursement on either a monthly, quarterly or annual basis, at Landlord's sole discretion, to become due and payable as additional rent within ten (10) days, if invoiced monthly or thirty (30) days if invoiced quarterly or annually from the date of invoice. 21. FIRE, EXTENDED COVERAGE AND LIABILITY INSURANCE: Landlord agrees to keep in force policies of fire and extended coverage insurance which shall insure the Building against such perils or loss as Landlord may deem appropriate including loss of rents, vandalism and malicious mischief, in an amount equal to one hundred percent (100%) of the replacement cost of the Building and the improvements installed by the Landlord. LANDLORD SHALL DELIVER CERTIFICATES OF SUCH INSURANCE TO TENANT PRIOR TO COMMENCEMENT OF THIS LEASE AND AT LEAST TEN DAYS PRIOR TO EXPIRATION OF ANY EXISTING CERTIFICATE. SUCH CERTIFICATE SHALL PROVIDE THAT THE INSURANCE CANNOT BE TERMINATED BY THE INSURER WITHOUT PROVIDING THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO TENANT. Tenant agrees to maintain and keep in force, at its expense and throughout the entire term hereof, insurance against fire and such other risks as are from time to time included in standard extended coverage endorsements including vandalism and malicious mischief, insuring Tenant's stock-in-trade, trade fixtures, furniture, furnishings, special equipment and all other items of personal 9 property of Tenant located on or within the Premises and all such other improvements as are made by the Tenant to the Premises. Tenant shall furnish to Landlord a certificate evidencing Tenant's maintenance of such insurance policies throughout the term hereof. All the furnishings, fixtures, equipment effects and property of every kind, nature and description of Tenant and of all persons claiming by, through or under Tenant which, during the continuance of this Lease or any occupancy of the Premise by Tenant or anyone claiming under Tenant, may be the Premises or elsewhere in the Building shall be at the sole risk and hazard of Tenant, and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by leakage or bursting of water pipes, steam pipes or other pipes, by theft, or from any other cause, no part of said loss or damage is to be charged to or to be borne by Landlord unless the same shall be due to the gross negligence or willful misconduct of Landlord. In addition to the policies of fire and extended coverage insurance to be kept and maintained by Landlord and Tenant herein, Landlord and Tenant shall each obtain and keep in force during the term hereof and any extension or renewal terms, policies of comprehensive general liability providing bodily injury and liability property damage with combined single limits of at least Five Hundred Thousand Dollars ($500,000.00). In addition thereto, Tenant shall provide "umbrella coverage" in the amount of One Million Dollars ($1,000,000.00). The Tenant shall, in addition, name the Landlord as an ADDITIONAL insured under such liability policies and shall provide the Landlord a certificate of same within thirty (30) days after the execution of this Lease, as shown on Exhibit "D". Tenant agrees to pay to the Landlord its proportionate share of the entire cost that Landlord may incur in the cost of maintaining the policies required hereunder. Tenant's proportionate share shall be the relation of Tenant's rentable square foot area to the 120,000 rentable square feet of total building area, or 100%. During the term hereof, Landlord shall notify Tenant of its proportionate share due for such cost. Landlord shall have the option through the Lease term to require Tenant's reimbursement on either a monthly, quarterly or annual basis, at Landlord's sole discretion, to become due and payable as additional rent within ten (10) days, if invoiced monthly or thirty (30) days if invoiced quarterly or annually from the date of invoice. 22. DAMAGE AND DESTRUCTION: IF THE BUILDING, IMPROVEMENTS OR OTHER PORTIONS OF THE PREMISES ARE RENDERED PARTIALLY OR WHOLLY UNTENANTABLE FROM FIRE OR OTHER CASUALTY, AND IF SUCH DAMAGE CANNOT, IN LANDLORD'S REASONABLE ESTIMATION, BE MATERIALLY RESTORED WITHIN ONE HUNDRED EIGHTY (180) DAYS OF SUCH DAMAGE, THEN LANDLORD MAY, IN ITS SOLE OPTION, TERMINATE THIS LEASE AS OF THE DATE OF SUCH FIRE OR CASUALTY. LANDLORD SHALL EXERCISE ITS OPTION PROVIDED HEREIN BY WRITTEN NOTICE TO TENANT WITHIN SIXTY (60) DAYS OF SUCH FIRE OR CASUALTY. FOR PURPOSES HEREOF, THE BUILDING, OR OTHER PORTIONS OF THE PREMISES SHALL BE DEEMED "MATERIALLY RESTORED" IF THEY ARE IN SUCH CONDITION AS WOULD NOT PREVENT OR MATERIALLY INTERFERE WITH TENANT'S USE OF THE PREMISES FOR THE PURPOSES FOR WHICH IT WAS THEN BEING USED. IF THIS LEASE IS NOT TERMINATED PURSUANT TO THE ABOVE PARAGRAPH, THEN LANDLORD SHALL PROCEED WITH ALL DUE DILIGENCE TO REPAIR AND RESTORE THE BUILDING, AT LANDLORD'S COST, ONCE IT HAS BEEN ASSURED OF THE EXISTENCE OF AND PAYMENT OF THE INSURANCE PROCEEDS (EXCEPT THAT LANDLORD MAY ELECT NOT TO REBUILD IF SUCH DAMAGE OCCURS DURING THE LAST YEAR OF THE TERM OF THE LEASE EXCLUSIVE OF ANY OPTION WHICH IS UNEXERCISED AT THE DATE OF SUCH DAMAGE). 10 IF THE LEASE SHALL BE TERMINATED PURSUANT TO THE ABOVE PARAGRAPH, THE TERM OF THIS LEASE SHALL END ON THE DATE OF SUCH DAMAGE AS IF THE DATE HAD BEEN ORIGINALLY FIXED IN THIS LEASE FOR THE EXPIRATION OF TERM HEREOF. IF THE LEASE SHALL NOT BE TERMINATED BY LANDLORD PURSUANT TO THE ABOVE PARAGRAPH AND IN THE EVENT THAT THE LANDLORD SHOULD FAIL TO COMPLETE SUCH REPAIRS AND MATERIAL RESTORATION WITHIN ONE HUNDRED EIGHTY (180) DAYS AFTER THE DATE OF SUCH DAMAGE, TENANT MAY AT ITS OPTION AND AS ITS SOLE REMEDY TERMINATE THIS LEASE BY DELIVERING WRITTEN NOTICE TO LANDLORD WHEREUPON THE LEASE SHALL END ON THE DATE OF SUCH NOTICE AS IF THE DATE OF SUCH NOTICE WERE THE DATE ORIGINALLY FIXED IN THIS LEASE FOR THE EXPIRATION OF THE TERM HEREOF; PROVIDED, HOWEVER, THAT IF CONSTRUCTION IS DELAYED BECAUSE OF CHANGES, DELETIONS OR ADDITIONS IN CONSTRUCTION REQUESTED BY TENANT, STRIKES, LOCKOUTS, CASUALTIES, ACTS OF GOD, WAR, MATERIAL OR LABOR SHORTAGES, GOVERNMENTAL REGULATION OR CONTROL OR OTHER CAUSES BEYOND THE REASONABLE CONTROL OF LANDLORD, THE PERIOD FOR RESTORATION, REPAIR OR REBUILDING SHALL BE EXTENDED FOR THE AMOUNT OF TIME LANDLORD IS SO DELAYED. TENANT AGREES THAT DURING ANY PERIOD OF RESTORATION OR REPAIR OF THE PREMISES, TENANT SHALL CONTINUE THE OPERATION OF THE TENANT'S BUSINESS WITHIN THE PREMISES TO THE EXTENT PRACTICABLE, DURING THE PERIOD FROM THE DATE OF DAMAGE UNTIL THE DATE THAT THE UNTENANTABLE PORTION OF THE PREMISES IS MATERIALLY RESTORED, THE RENT SHALL BE REDUCED TO THE EXTENT OF THE PROPORTION OF THE PREMISES WHICH IS UNTENABLE, HOWEVER, THERE SHALL BE NO ABATEMENT OF OTHER SUMS TO BE PAID BY TENANT TO LANDLORD AS REQUIRED BY THIS LEASE. IN NO EVENT SHALL LANDLORD BE REQUIRED TO REBUILD, REPAIR OR REPLACE ANY PART OF THE PARTITIONS, FIXTURES, ADDITIONS AND OTHER IMPROVEMENTS WHICH MAY HAVE BEEN PLACED IN OR ABOUT THE PREMISES BY TENANT AFTER THE COMMENCEMENT DATE, HOWEVER, LANDLORD HAS THE RIGHT BUT NOT THE OBLIGATION TO REBUILD, REPAIR OR REPLACE AT TENANT'S EXPENSE SO MUCH OF THE PARTITIONS, FIXTURES, ADDITIONS AND OTHER IMPROVEMENTS AS MAY BE NECESSARY TO INSURE THAT THE PREMISES ARE MATERIALLY RESTORED. 23. LIABILITIES OF THE PARTIES: Tenant waives all claims against Landlord for damages to goods or for injuries to persons on or about the Premises or common areas from any cause arising at any time other than damages or injuries directly resulting from Landlord OR LANDLORD'S AGENTS OR EMPLOYEES negligence OR WILLFUL MISCONDUCT. The tenant will indemnify Landlord on account of any damage or injury to any persons, or to the goods of any person, arising from the use of the Premises by the Tenant, or arising form the failure of Tenant to keep the Premises in good condition as provided herein. The Landlord shall not be liable to the Tenant for any damage by or from any act or negligence of any occupant of the same Building, or by any owner or occupant of adjoining or contiguous property. LANDLORD WAIVES ALL CLAIMS AGAINST TENANT FOR DAMAGES TO GOODS OR FOR INJURIES TO PERSONS ON OR ABOUT THE PREMISES OR COMMON AREAS FROM ANY CAUSE ARISING AT ANY TIME OTHER THAN DAMAGES OR INJURIES DIRECTLY RESULTING FROM TENANT OR TENANT'S AGENTS OR EMPLOYEES NEGLIGENCE OR WILLFUL MISCONDUCT OR TENANT'S BREACH OF ITS OBLIGATION UNDER THIS LEASE. THE LANDLORD WILL INDEMNIFY TENANT ON ACCOUNT OF ANY DAMAGE OR INJURY TO ANY PERSONS, OR TO THE GOODS OF ANY PERSON ARISING FROM THE NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD, ITS AGENTS OR EMPLOYEES. The Tenant agrees to pay for all damages to the Building, as well as all damage or injuries suffered by Tenant or occupants thereof caused by misuse or neglect of the Premises by the Tenant TO THE EXTENT NOT COVERED BY INSURANCE. Landlord is specifically not responsible under any circumstance for any damage to any computer, computer component, or computer peripheral, hardware or software damaged by any interruption, usage or variation for whatever reason in the electrical distribution system in the building. Notwithstanding any other term or provision herein contained, it is specifically understood and agreed that there shall be no personal liability of Landlord (nor Landlord's agent, if any) in respect to any of the covenants, conditions or provisions of this Lease. In the event of a breach or default by Landlord of any of its obligations under this Lease, Tenant shall look solely to the equity of the Landlord in the property for the satisfaction of Tenant's remedies. 24. PARKING: The Landlord warrants that it will, without charge and throughout the term of this Lease and any extensions or renewals thereof, provide the Tenant with parking around the demised Premises which complies with applicable city or county code. Tenant agrees to comply with the parking rules contained in the Parking Rules and Regulations attached hereto as Exhibit "E" together with all reasonable modifications and additions thereto which Landlord may from time to time make. 25. SIGNS: Landlord hereby agrees to allow Tenant to have a lighted or spot-lighted sign, as long as such sign complies with standard building finished. Said sign shall be at the sole expense of the Tenant. 26. UTILITIES: Landlord will provide utility service connections to the Premises, including electrical service, natural gas (where available), water and sewer. TENANT SHALL PROCURE FOR ITS OWN ACCOUNT AND SHALL PAY THE COST OF ALL WATER, GAS, ELECTRIC POWER AND FUEL CONSUMED OR USED IN OR AT SAID PREMISES, INCLUDING APPROPRIATE DEPOSITS AS REQUIRED. LANDLORD SHALL NOT BE LIABLE TO TENANT IN DAMAGES OR 11 OTHERWISE FOR ANY INTERRUPTIONS, CURTAILMENT OR SUSPENSION OF UTILITY SERVICE. TENANT'S RESPONSIBILITY FOR THE PAYMENT OF SAID UTILITIES SHALL BEGIN UPON ENTERING THE PREMISES FOR THE PURPOSE OF CONSTRUCTION AND FIXTURING. TENANT SHALL BE DIRECTLY RESPONSIBLE FOR THE COST AND EXPENSE ASSOCIATED WITH ALL UTILITIES USED BY THE TENANT IN THE PREMISES. 27. HEAT, VENTILATION, AND CLIMATE CONTROL COMFORT: Landlord has installed HVAC equipment to provide adequate comfort (72 - 76 degrees) for normal office user load requirements (one ton per 300 square feet). If determined before or during Tenant's occupancy that the Tenant's use of high heat output equipment or other intensive uses (i.e.: computer rooms, telephone rooms or work stations at greater density than one person per 100 square feet), requires additional cooling equipment, Landlord will install necessary additional HVAC equipment at Tenant's sole expense. 28. PLATE GLASS BREAKAGE: Notwithstanding anything herein to the contrary, except by negligence of Landlord, Tenant shall be solely responsible for repair and replacement in the event of plate glass damage or breakage. 29. GARBAGE REMOVAL: Tenant will be responsible for providing a container for garbage and arrange for its systematic pickup. 30. JANITORIAL SERVICES: Tenant shall provide janitorial services and supplies to the Premises, at its own expense. 31. FIRE EXTINGUISHERS: Tenant covenants during the Term and such further time as Tenant occupies any part of the Premises to keep the Premises equipped with all safety appliances, included but not limited to an operating fire extinguisher, required by law or ordinance or any other regulation of any public or private authority having jurisdiction over the Premises (including insurance underwriters or rating bureaus) because of any use made by Tenant and to procure all licenses and permits so required because of such use and, if required by Landlord, to do any work so required because of such use, it being understood that the foregoing provisions shall not be construed to broaden in any way Tenant's permitted uses. 32. EXTERMINATION: The Tenant shall, at its sole cost and expense, on at least a quarterly basis, employ professional exterminators to control pests within the Premises and supply Landlord with a copy of the contract therefor. 33. STORING OF FLAMMABLE MATERIALS: THE TENANT AGREES THAT IT WILL STORE ANY DANGEROUS/FLAMMABLE MATERIALS IN ACCORDANCE WITH ALL APPLICABLE LAWS. 34. REPLACEMENT OF LIGHT BULBS: Tenant shall, at its sole cost and expense, replace all light bulbs within the Premises. 35. KITCHEN APPLIANCES AND EQUIPMENT: In the event of installation of a kitchen or kitchen equipment by either Landlord or Tenant, such maintenance and repair of all items contained within the area shall be at the sole cost and expense of Tenant, to include but not limited to: maintenance, repair and replacement of a microwave oven, refrigerator, stove, ice maker, coffee maker, garbage disposal, dishwasher, sink, faucet or any other item within the area. Tenant hereby acknowledges to Landlord that any fixtures, EXCLUDING TRADE FIXTURES, described herein are to become a part of the Premises and notwithstanding Section 36 herein, upon Tenant's vacating the Premises, all fixtures shall remain the property of Landlord. 36. REMOVAL OF TENANT'S FIXTURES: The Tenant shall have the privilege at any time, on or before vacating the Premises, of removing any or all of its personal property, equipment and fixtures, and Tenant shall repair any damage caused by the removal thereof and shall leave the Premises in good and clean condition and repair. 37. DEFAULT BY TENANT: In the event Tenant shall fail to pay the monthly rental rate by the due date; AND SUCH FAILURE CONTINUES FOR FIVE (5) BUSINESS DAYS AFTER TENANT RECEIVES NOTICE OF SUCH NONPAYMENT, WHICH NOTICE SHALL NOT BE GIVEN MORE THAN TWO (2) TIMES ANNUALLY DURING THE TERM OF THIS LEASE, or if Tenant is adjudicated a bankrupt; or if Tenant files a petition in bankruptcy under any section or provision of the bankruptcy law; or if an involuntary petition in bankruptcy is filed against Tenant, and same is not withdrawn or dismissed within sixty (60) days from filing thereof, or if a receiver or trustee is appointed for Tenant's property and the order appointing such receiver or trustee remains in force for thirty (30) days after the entry of such order; or if, whether voluntarily or involuntarily, Tenant takes advantage of any debtor relief proceedings under any present or future law, reduced payment thereof deferred; or if Tenant makes an assignment for the benefit of the creditors; or if Tenant's effects shall be levied upon or attached under process against Tenant, not satisfied or dissolved within thirty (30) days after written notice from Landlord to Tenant to obtain satisfaction thereof; or if Tenant shall vacate or abandon the Premises; or if Tenant shall fail to perform or observe any other covenant, agreement, or condition to be performed or kept by the Tenant under the terms and provisions of this Lease, and such 12 failure shall continue to thirty (30) days after written notice thereof has been given by Landlord to the Tenant; then in any one of such events, Landlord shall have the right, at the option of the Landlord, then or at any time thereafter while such defaults continue, to elect either: (1) to cure such default or defaults at the expense of Tenant and without prejudice to any other remedies which it might otherwise have, any payment made or expenses incurred by Landlord in curing such default shall bear interest thereon at 18% 10% per annum, or at such maximum legal rate as permitted by North Carolina law, whichever shall be lower, to be and become additional rent to be paid by Tenant with the next installment of rent falling due thereafter; or (2) to re-enter the Premises and dispossess Tenant and anyone claiming under tenant, with or without an order of the court, and remove their effects, and take complete possession of the Premises and then elect to take any one or (to the extent not inconsistent) more of the following actions: (I) declare this Lease forfeited and the term ended; or (ii) elect to continue this Lease in full force and effect, but with the right at any time thereafter to declare this Lease forfeited and the term ended; or (iii) declare Tenant's right to possession of the Premises to be terminated; or (iv) exercise any other remedies or maintain any action permitted to landlords pursuant to the laws of the State of North Carolina, or any other applicable law. In such re-entry the Landlord may, without committing trespass, have all persons and Tenant's personal property removed from the Premises. Tenant hereby covenants in such event for itself and all others occupying the Premises under Tenant; to peacefully yield up and surrender the Premises to the Landlord. Should Landlord declare either (I) this Lease forfeited and the term ended; (ii) the termination of Tenant's right to possession of the Premises; then in any one such events, Landlord shall be entitled to recover from Tenant the rental and all other sums due and owing by Tenant to the date of termination, plus the costs of curing all of Tenant's defaults existing at or prior to the date of termination, plus rental for the balance of the term under this Lease less any rental obtained by Landlord on another Lease for the balance of the term remaining under this Lease. Should Landlord, following default as aforesaid, elect to continue this Lease in full force, Landlord shall use its best efforts to rent the Premises by private negotiations, with or without advertising, and on the best terms available for the remainder of the term hereof, or for such longer or shorter period as Landlord shall deem advisable. Tenant shall remain liable for payment of all rentals and other charges and costs imposed on Tenant herein, in the amounts, at the times and upon the conditions as herein provided, but Landlord shall credit against such liability of the Tenant all amounts received by Landlord from such re-letting after first reimbursing itself for all costs incurred in curing Tenant's defaults and re-entering, preparing and refinishing the Premises for re-letting, and the Premises, and for the payment of any procurement fee and commission paid to obtain another tenant, and for all attorney fees and legal costs incurred by Landlord. AS USED IN THIS LEASE THE TERM "ATTORNEY'S FEES" OR "REASONABLE ATTORNEY'S FEES" SHALL MEAN ACTUAL FEES INCURRED AT CUSTOMARY HOURLY RATES NOTWITHSTANDING ANY STATUTORY PRESUMPTION. 38. RE-ENTRY BY LANDLORD: No re-entry by Landlord or any action brought by Landlord to oust Tenant from the premises shall operate to terminate this Lease unless Landlord shall give written notice of termination to Tenant, in which event Tenant's liability shall be as above provided. No right or remedy granted to Landlord herein is intended to be exclusive of any other right or remedy, and each and every right and remedy herein provided shall be cumulative and in addition to any other right or remedy hereunder or now or hereafter existing in law or equity or by statute. In the event of termination of this Lease, Tenant waives any and all rights to redeem the Premises either given by any statute now in effect or hereafter enacted. 39. WAIVER OF RIGHTS: No waiver by Landlord of any provision hereof shall be deemed to be a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision. Landlord's consent to or approval of any act shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act by Tenant. The acceptance of rent hereunder by Landlord shall not be a waiver of any preceding breach by Tenant of any provision hereof other than the failure of Tenant to pay the particular rent as accepted regardless of Landlord's knowledge of said preceding breach at the time of acceptance of such rent. 13 41. NOTICES: All notices provided for herein shall be in writing and shall be deemed to have been given when deposited in he United States mails, postage fully prepaid, and directed to the parties hereto at their respective addresses given below: Landlord: HIGHWOODS/FORSYTH LIMITED PARTNERSHIP 380 Knollwood Street, Suite 430 Winston-Salem, North Carolina 27103 Tenant: R.F. MICRO DEVICES, INC. 7914 PIEDMONT TRIAD PARKWAY GREENSBORO, NORTH CAROLINA 27409 Either party may, in addition, deliver written notice by hand delivery. Further, the parties hereto may give or receive notice by or from their respective attorneys and may, by like notice, designate a new address to which subsequent notice shall be directed. 42. COMPLIANCE WITH LAWS: In addition to other provisions herein, Tenant shall promptly execute and comply with all laws, ordinances, rules, regulations and requirements of any or all federal, state and municipal authorities having jurisdiction over the manner in which the Tenant's business is conducted, but only insofar as these laws, ordinances, rules and regulations and requirements are violated by the conduct of Tenant's business. 43. RULES AND REGULATIONS: Tenant, its agents, servants and invitees shall observe faithfully and comply strictly with the rules and regulations set forth on the schedule designated BUILDING RULES AND REGULATIONS, attached hereto as Exhibit "C" and by this reference made a part hereof. Landlord shall have the right, from time to time, during the term of this Lease to make reasonable changes in, and additions to, said rules and regulations, provided such changes and additions do not unreasonably affect the conduct of Tenant's business in the Premises. Any failure by Landlord to enforce any said rules and regulations now or hereafter in effect, either against Tenant or any other tenant in the Building, shall not constitute a waiver of such rules and regulations. The defined words in this Lease, whenever used in said rules and regulations, shall have the same meanings as herein. 14 44. HAZARDOUS WASTE: AS USED IN THIS AGREEMENT, "HAZARDOUS MATERIALS" SHALL MEAN ANY HAZARDOUS OR TOXIC SUBSTANCE, MATERIAL, WATER, OR SIMILAR TERM WHICH IS REGULATED BY LOCAL AUTHORITIES, THE STATE OF NORTH CAROLINA OR THE UNITED STATES OF AMERICA, INCLUDING, BUT NOT LIMITED TO, ANY MATERIAL, SUBSTANCE, WASTE OR SIMILAR TERM WHICH IS (I) DEFINED AS A HAZARDOUS MATERIAL UNDER THE LAWS OF THE STATE OF NORTH CAROLINA; (II) DEFINED AS A HAZARDOUS SUBSTANCE UNDER SECTION 311 OF THE FEDERAL WATER POLLUTION CONTROL ACT (33 U.S.C. SECTION 1317); (III) DEFINED AS A HAZARDOUS WASTER UNDER SECTION 1004 OF THE FEDERAL RESOURCE CONSERVATION AND RECOVERY ACT (42 U.S.C. SECTION 6901 ET SEQ.); (IV) DEFINED AS A HAZARDOUS WASTE SUBSTANCE UNDER SECTION 101 OF THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT, (42 U.S.C. SECTION 9601 ET SEQ.); (V) DEFINED AS A HAZARDOUS WASTE OR TOXIC SUBSTANCE, WASTE, MATERIAL OR SIMILAR TERM IN RULES AND REGULATIONS, AS AMENDED FROM TIME TO TIME, WHICH ARE ADOPTED BY ANY ADMINISTRATIVE AGENCY INCLUDING, BUT NOT LIMITED TO, THE ENVIRONMENTAL PROTECTION AGENCY, THE OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION, AND ANY SUCH SIMILAR LOCAL, STATE OR FEDERAL AGENCY HAVING JURISDICTION OVER THE PREMISES WHETHER OR NOT SUCH RULES AND REGULATIONS HAVE THE FORCE OF LAW; (VI) DEFINED AS A HAZARDOUS OR TOXIC WASTE, SUBSTANCE, MATERIAL OR SIMILAR TERM IN ANY STATUTE, REGULATION, RULE OR LAW ENACTED OR ADOPTED AT ANY TIME AFTER THE DATE OF THIS AGREEMENT BY LOCAL AUTHORITIES, THE STATE OF NORTH CAROLINA, OR THE FEDERAL GOVERNMENT. THE TENANT AGREES THAT ANY DISCHARGE FROM THE PREMISES OF ANY HAZARDOUS MATERIAL SHALL COMPLY WITH APPLICABLE LAWS AND/OR PERMIT. TENANT SHALL IMMEDIATELY NOTIFY THE LANDLORD OF ANY DISCHARGE THAT DOES NOT MATERIALLY COMPLY WITH APPLICABLE LAWS AND/OR PERMITTED LEVELS. THE TENANT SHALL PROMPTLY PAY, DISCHARGE, OR REMOVE ANY LIEN UPON THE PREMISES RELATING TO THE PRESENCE OF ANY HAZARDOUS MATERIAL, AND SHALL INDEMNIFY AND HOLD HARMLESS THE LANDLORD, FROM ANY AND ALL LOSS, DAMAGE OR EXPENSE RESULTING FROM SUCH HAZARDOUS MATERIAL THAT EXISTS UPON OR IS DISCHARGES FROM THE PREMISES IN VIOLATION OF LAW BY TENANT. THIS INDEMNIFICATION OF LANDLORD BY TENANT INCLUDES, WITHOUT LIMITATION, COSTS INCURRED IN CONNECTION WITH ANY INVESTIGATION OF SITE CONDITIONS OR ANY CLEAN-UP, REMEDIAL, REMOVAL OR RESTORATION WORK REQUIRED BY ANY FEDERAL, STATE OR LOCAL GOVERNMENTAL AGENCY OR POLITICAL SUBDIVISION BECAUSE OF HAZARDOUS MATERIALS PRESENT IN THE SOIL OR GROUND WATER ON OR UNDER THE PREMISES. WITHOUT LIMITING THE FOREGOING, IF THE PRESENCE OF ANY HAZARDOUS MATERIAL ON THE PREMISES AND BUILDING CAUSED OR PERMITTED BY TENANT RESULTS IN LEVELS OF HAZARDOUS MATERIALS, TENANT SHALL PROMPTLY TAKE ALL ACTIONS AT ITS SOLE EXPENSE THAT ARE NECESSARY TO RETURN THE SAME TO THE CONDITION EXISTING PRIOR TO THE INTRODUCTION OF ANY SUCH HAZARDOUS MATERIAL THERETO, PROVIDED THAT LANDLORD'S APPROVAL OF SUCH ACTIONS SHALL FIRST BE OBTAINED, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD SO LONG AS SUCH ACTIONS WOULD NOT POTENTIALLY HAVE ANY MATERIAL ADVERSE LONG-TERM OR SHORT-TERM EFFECT ON THE PREMISES AND BUILDING. THE FOREGOING INDEMNITY SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE. IF TENANT FAILS TO TAKE SUCH ACTION AND UNLESS TENANT'S FAILURE IS DUE TO LANDLORD'S UNREASONABLY WITHHOLDING APPROVAL OF TENANT'S ACTIONS, LANDLORD MAY TAKE ACTION AND LANDLORD SHALL BE ENTITLED TO RECOVER FROM TENANT, UPON DEMAND IN WRITING, ALL COSTS OF SUCH ACTION. THIS INDEMNIFICATION EXCLUDES ANY AND ALL ENVIRONMENTAL CONDITIONS THAT ARE CURRENTLY PRESENT ON THE PREMISES. 45. SURRENDER: The Tenant shall surrender the Premises in good and clean condition and repair, excepting only normal wear and tear and damage by fire or other casualty damage covered by insurance and paid to Landlord. Tenant shall not remain in the Premises without the benefit of a written Lease or renewal agreement executed by the parties hereto prior to the expiration of the then existing term. No other holding over of the Premises shall be allowed on any basis whatsoever. The delivery of keys or other such tender of possession of the Premises to Landlord or to an employee of Landlord shall not operate as a termination of this Lease or a surrender of the Premises. Any pro-rated rent or damages in excess of the security deposit held by Landlord shall be invoiced by Landlord and payable by Tenant within ten (10) days from the date of invoice. 46. HOLDOVER: In the event Tenant remains in possession of the leased premises after the expiration of the term of this Lease, without having first extended this Lease by written agreement with Landlord, such holding over shall not be construed as a renewal or extension of this Lease. Such holding over shall be deemed to have created and be construed as tenancy from month to month, terminable on 30 days notice in writing from either party to the other. The monthly rental to be paid shall be 150% of the monthly rental payable during the last month of the term of this Lease. All other terms and conditions of this Lease shall continue to be applicable for both Landlord and Tenant. If Tenant fails to surrender the Premises to Landlord on expiration of the term as required by this Section, Tenant shall hold Landlord harmless from all damages resulting from Tenant's failure to surrender the Premises, including without limitation, claims made by the succeeding Tenant resulting from Tenant's failure to surrender the Premises. 15 47. LIENS: If Tenant shall cause any material to be furnished to the Premises or labor to be performed thereon or therein, Landlord shall not under any circumstances be liable for the payment of any expenses incurred or for the value of any work done or material furnished. All such work shall be at Tenant's expense and Tenant shall be solely and wholly responsible to all contractors, laborers, and materialmen furnishing labor and material to the Premises. Nothing herein shall authorize the Tenant or any person dealing through, with or under Tenant to charge the Premises or any interest of the Landlord therein or this Lease with any mechanic's liens or other liens or encumbrances whatsoever. On the contrary, (and notice is hereby given) the right and power to charge any lien or encumbrance of any kind against the Landlord or its estate is hereby expressly denied. 48. BENEFITS, BURDENS AND ENTIRE AGREEMENT: This Lease is binding on and benefits the parties hereto and their respective heirs, legal representatives, successors, nominees and assigns. Liability hereunder shall be joint and several upon all who sign this agreement. Throughout this agreement the masculine gender shall be deemed to include the feminine, the feminine the masculine, the singular the plural and the plural the singular. This Lease contains the entire agreement between the parties hereto with respect to the Premises leased hereunder; further, this Lease may not be modified, altered or amended except by an instrument in writing, executed by the parties hereto or their respective heirs, legal representatives, successors, nominees or assigns and which instrument shall be attached hereto as an amendment to this Lease and shall thereby become a part hereof. 49. ATTORNEY'S FEES: If either Landlord or Tenant files an action to enforce any agreement contained in this Lease, or for breach of any covenant or condition, the prevailing party in any such action, or the party settling to its benefit, shall be reimbursed by the other party for reasonable attorneys' fees in the action. In the event Landlord refers a default by Tenant to an attorney for collection and a suit is not filed, Tenant agrees to pay reasonable attorney fees if action is not filed thereunder. 50. GOVERNING LAW: This Lease shall be governed by and construed under the laws of the State of North Carolina. 51. ESTOPPEL CERTIFICATES: Tenant shall execute and deliver to Landlord, upon its occupancy of the Premises, a certificate/statement provided by Landlord, certifying that this Lease is unmodified and in full force and effect and other factual data relating to the Lease or the Premises which Landlord may reasonably request. Furthermore, Tenant may be required, from time to time during the term of the Lease, to execute and deliver to Landlord a certificate/statement for purposes of refinancing, syndication, sale of property, etc. In such event, Tenant shall have ten (10) days from its receipt thereof from Landlord to execute and deliver such fully executed certificate/statement to Landlord. Tenant's failure to execute said certificate shall constitute a default hereunder. DURING THE TERM OF THIS LEASE, THE LANDLORD WILL, UPON WRITTEN REQUEST BY TENANT, PROVIDE TENANT WITH SIMILAR ESTOPPEL CERTIFICATES AS DESCRIBED ABOVE. 52. BROKERAGE FEES: Landlord and Tenant represent to each other that no broker other than JOE DOUGLAS WITH COLDWELL BANKER - COMMERCIAL has represented either party in respect to this transaction and that a brokerage fee of 4.00% ON THE FIRST TEN (10) YEARS OF THE LEASE TERM shall be paid to Broker by Landlord. 53. CHRONIC DEFAULTS: Tenant will be in "Chronic Default" under this Lease if Tenant commits a default (either a Monetary or Non-Monetary Default) during any 365-day period in which any of the following combinations of default has already occurred (even though said defaults may have been timely cured): (1) Two Monetary Defaults; or (2) Three Non-Monetary Defaults; or (3) One Monetary Default and two Non-Monetary Defaults (a) Remedies. If Tenant is in Chronic Default, Landlord may immediately exercise any or all remedies available under this Lease or at law or in equity, all without giving Tenant any notice or an opportunity to cure the last default causing Tenant's Chronic Default (notwithstanding any notice and cure provision or other lease provision to the contrary). (b) Definitions. For the purpose of this Section, (1) a Monetary Default occurs if Tenant fails to pay any sum of money when due (including, but not limited to, Base Rent, Additional Rent, Percentage Rent, Escalation Rent, Common Area Maintenance Charges, Utility Charges, Pass-thru Expenses, or other Rent); (2) a Non-Monetary Default occurs if Tenant fails to perform any of its obligations under this Lease other than the timely payment of money. 54. EVIDENCE OF AUTHORITY: If requested by Landlord, Tenant shall furnish appropriate legal documentation evidencing the valid existence and good standing of Tenant and the authority of any parties signing this Lease to act for Tenant. If Tenant signs as a corporation, each of the persons executing this Lease on behalf of Tenant does hereby covenant and warrant that Tenant is a duly authorized and existing corporation, that Tenant has and is qualified to do business in North Carolina, that the corporation has full right and authority to enter into this Lease and that each of the persons signing on behalf of the corporation is authorized to do so. 16 55. LEASE REVIEW; DATE OF EXECUTION: The submission of this Lease to Tenant for review does not constitute a reservation of or option for the Premises, and this Lease shall become effective as a contract only upon execution and delivery by both Landlord and Tenant. The date of execution shall be entered on the top of the first page of this Lease by Landlord, and shall be the date on which the last party signed the Lease, or as otherwise may be specifically agreed by both parties. Such date, once inserted, shall be established as the final date of ratification by all parties to this Lease, and shall be the date for use throughout this Lease as the "date of execution" or "execution date". 56. OPTION TO RENEW: PROVIDED TENANT IS NOT IN DEFAULT HEREUNDER, TENANT SHALL HAVE AN OPTION TO RENEW THIS LEASE FOR TWO (2) PERIODS OF TEN (10) YEARS. THE RENTAL RATE WILL BE ADJUSTED FOR CHANGES IN THE CONSUMER PRICE INDEX DURING THE PRECEDING FIFTEEN (15) YEAR PERIOD. THE RENTAL RATE FOR THE INITIAL YEAR OF THE RENEWAL TERM WILL BE THE BASIS FOR ALL FUTURE CONSUMER PRICE INDEX ADJUSTMENTS. RENT SHALL BE ADJUSTED IN SAME MANNER AS DESCRIBED IN THIS LEASE ON THE 16TH, 18TH, 20TH, 22ND, 24TH, 26TH, 28TH, 30TH, 32ND, AND 34TH ANNIVERSARIES OF THE COMMENCEMENT DATE. TENANT SHALL PROVIDE LANDLORD SIX (6) MONTH PRIOR WRITTEN NOTICE OF ITS INTENT TO RENEW THE LEASE. 57. TENANT IMPROVEMENTS: TENANT AGREES TO LEASE THE BUILDING FROM "SHELL" CONDITION. LANDLORD WILL NOT PROVIDE ANY FUNDS FOR IMPROVEMENTS OF ANY KIND TO THE LEASED SPACE. 58. FIRST RIGHT OF REFUSAL: PROVIDED TENANT IS NOT IN DEFAULT HEREUNDER, TENANT SHALL HAVE A FIRST RIGHT OF REFUSAL ON ALL CONTIGUOUS SPACE. TENANT SHALL HAVE FIVE (5) BUSINESS DAYS TO RESPOND IN WRITING AFTER NOTICE OF THIRD PARTY INTEREST HAS BEEN GIVEN. TENANT'S FAILURE TO LEASE THE SPACE WITHIN FIVE (5) BUSINESS DAYS AS SPECIFIED SHALL NULLIFY ALL OF TENANT'S RIGHTS CONTAINED HEREIN. 59. BEGINNING MARCH 1, 2000 THROUGH AUGUST 31, 2000, TENANT SHALL BE REQUIRED TO PAY RENT ON 60,000 SQUARE FEET OF THE PREMISES WHILE OCCUPYING THE ENTIRE BUILDING (120,000 SQUARE FEET). 17 IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement or have caused their duly authorized representatives to execute same in two (2) original counterparts, as of the day and year first above written. LANDLORD: HIGHWOODS/FORSYTH LIMITED PARTNERSHIP, a North Carolina Limited Partnership By: Highwoods Properties, Inc., General Partner Attest: By: - - ---------------------------- ------------------------------------------- Secretary _________ President (Corporate Seal) TENANT: R.F. MICRO DEVICES, INC., A NORTH CAROLINA CORPORATION Attest: By: - - ---------------------------- ------------------------------------------ Secretary ________ President (Corporate Seal) 18 STATE OF NORTH CAROLINA ) ) ACKNOWLEDGMENT COUNTY OF FORSYTH ) I, __________________________________________, a Notary Public for the aforesaid State and County, do hereby certify that JULIE K. GOCO (name of Secretary) personally came before me this day and acknowledged to me that she is the Assistant Secretary of HIGHWOODS PROPERTIES, INC., a North Carolina Corporation, and that by authority duly given and as an act of the corporation, the foregoing instrument was signed in its name by JOHN O. DUNN, III (name of President), its VICE President, sealed with its corporate seal, and attested to by JULIE K. Goco (name of Secretary), its Assistant Secretary. Witness my hand and official seal or stamp, this the __________ day of ____________________, 199__. My Commission Expires: ----------- ----------------------------------- Notary Public - - -------------------------------------------------------------------------------- STATE OF ___________________ ) ) ACKNOWLEDGMENT COUNTY OF _________________ ) I, __________________________________________, a Notary Public for the aforesaid State and County, do hereby certify that ______________________________________ (name of Secretary) personally came before me this day and acknowledged to me that she/he is the ____________ Secretary of R.F. MICRO DEVICES, INC., A NORTH CAROLINA CORPORATION, and that by authority duly given and as an act of the corporation, the foregoing instrument was signed in its name by ____________________________________ (name of President), its __________ President, sealed with its corporate seal, and attested to by __________________________________ (name of Secretary), its __________ Secretary. Witness my hand and official seal or stamp, this the __________ day of __________________, 199__. My Commission Expires: ----------- ----------------------------------- Notary Public 19 EXHIBIT "A" LEGAL DESCRIPTION TO BE ATTACHED 20 EXHIBIT "B" FLOOR PLAN TO BE ATTACHED 21 EXHIBIT "C" BUILDING RULES & REGULATIONS 1. Tenant shall not do or permit anything to be done in the Premises or in the Building which will in any way increase the rate payable, or violate any provision, in respect of any policy of fire insurance on the Building or Landlord's property therein; obstruct or interfere with the rights of other tenants, or unreasonably injure or annoy them; use the Premises as sleeping apartments; engage in or permit games of chance or any form of gambling or immoral conduct in or about the Premises; fasten any article, drill holes, drive nails or screws into walls, floors, doors or partitions; leave Premises unoccupied without locking all doors, extinguishing lights and turning off all water outlets; encumber or obstruct or deposit rubbish and similar substances in the parking and loading areas, sidewalks or entrance areas; bring or keep any animals, or flammable, combustible or explosive substances, to or in the Building; violate security procedures established by Landlord, or in any way create a nuisance. 2. Tenant shall not use the Premises or the Building for any purpose that will damage the Premises or the Building, or the reputation thereof, or for any purposes other than those specified in the Lease. 3. Canvassing, soliciting and peddling in and about the Building are prohibited, and Tenant shall cooperate to prevent such activities. 4. Tenant shall not install or use in the Building and air conditioning unit, engine, boiler, generator, machinery, heating unit, stove, water cooler, ventilator, radiator or any other similar apparatus which will require the use of electrical current or water without the prior written consent of Landlord, and then only as Landlord may direct. 5. Tenant shall not use in the Building any machine, other than standard office machines such as typewriters, calculators, copying machines and similar machines, without the prior written approval of Landlord. All office equipment and any other device of any electrical or mechanical nature shall be placed by Tenant in the Premises in settings approved by Landlord, so as to absorb or prevent any vibration, noise or annoyance. Tenant shall not cause improper noises, vibrations or odors within the Building. 6. Tenant shall not place a load on any floor in the Premises exceeding the floor load limit which such floor was designed to carry, nor shall Tenant install, operate or maintain in the Premises any heavy item or equipment except in such manner as to achieve a proper distribution of weight. 7. Tenant shall not use scotch tape or other adhesive material for the purposes of hanging items on the interior walls of the Premises. 8. Tenant shall not deposit any trash, refuse, cigarettes, or other substances of any kind out of the Building, except in the refuse containers provided therefor. In addition, if Tenant shall place or allow or cause to be placed in the garbage dumpsters excess trash or refuse, such as boxes or cartons, which would necessitate an additional pick-up for such garbage dumpsters, the Tenant shall be responsible for such additional pick-up at its sole cost and expense. Tenant shall exercise its best efforts to keep the sidewalks, entrances in and about the Building clean and free from rubbish. The outside areas immediately adjoining the Premises shall be kept clean and free from snow, ice, dirt and rubbish by Tenant, and Tenant shall not place, suffer or permit any obstruction or storage or display of goods in such areas. 9. Tenant shall not use the washrooms, rest rooms and plumbing fixtures of the Building, and appurtenances thereto, for any other purpose than the purposes for which they were constructed, and Tenant shall not deposit any sweepings, rubbish, rags or other improper substances therein. Tenant shall not waste water by interfering or tampering with the faucets or otherwise. If Tenant or Tenant's servants, employees, agents, contractor, jobbers, licensees, invitees, guests or visitors cause any damage to such washrooms, rest rooms, plumbing fixtures or appurtenances, such damage shall be repaired at Tenant's expense, and Landlord shall not be responsible therefor. 10. Landlord shall have the right to prohibit any publicity, advertising or use of the name of the Building by Tenant which, in Landlord's opinion, tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from Landlord, Tenant shall refrain from or discontinue any such publicity, advertising or use of the Building name. 11. The sashes, sash doors, skylights, windows and doors that reflect or admit light or air into the leased area shall not be covered or obstructed by Tenant without Landlord's prior written approval. Tenant hereby agrees to keep the Premises at a temperature sufficiently high to prevent freezing of water pipes and fixtures. 12. No radio or television aerial or other devise shall be erected on the roof or exterior walls to the Premises or Building in which the Premises are located without first obtaining in each instance the Landlord's consent in writing. Any aerial or devise installed without written consent shall be subject to removal by Landlord at Tenant's expense without notice at any time. No radio, phonograph or similar devise shall be used in a manner so as to be heard or seen outside the Premises. 13. Tenant, upon the termination of its lease, shall deliver to Landlord all keys to doors in the Building. In the event of the loss of any key, it shall be the sole responsibility and expense of Tenant to have the locks to the Premises re-keyed or additional locks installed. 14. In the event Landlord provides a VIM Postal Unit, keys for such unit will be distributed at the time of occupancy. Landlord however, will not be responsible for: (a) the replacement of lost or damaged keys or issuance of extra keys; (b) incorrect distribution of mail; (c) delivery schedules of mail; or (d) mail delivery to door. 15. Tenant shall have cleaned, at its expense, not less than semiannually, the carpet that has been provided by the Landlord for Tenant's use. 16. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the agreements, covenants, conditions and provisions of any lease of premises in the Building. 22 EXHIBIT "D" INSURANCE REQUIREMENTS As referenced in Section 21 herein, an insurance certificate must be provided to Landlord within thirty (30) days of execution of this Lease showing those coverages specified. The following information must be incorporated on all certificates: 1) Tenant's specific leased property address; 2) Thirty (30) day cancellation notice to Landlord; and 3) Highwoods/Forsyth Limited Partnership (Landlord) specifically named as CERTIFICATE HOLDER AND ADDITIONAL INSURED. 23 EXHIBIT "E" PARKING RULES & REGULATIONS Tenant shall be entitled to park in common with other tenants of Landlord on the parking areas located adjacent to the Building(s) within which the Premises are located. Tenant agrees not to overburden such parking facilities and agrees to cooperate with Landlord and other tenants in the use of such parking facilities. Landlord reserves the right, in its reasonable discretion, to determine whether parking facilities are being overburdened and, in such event, to allocate parking spaces among Tenant and other tenants or restrict the number of vehicles which may be parked thereon. Parking as used herein means the use by Tenant's employees, its visitors, invitees and customers of those portions of the parking area designed by Landlord for the parking of motor vehicles in connection with use of and/or visits to the Premises. There will be no assigned parking unless elected by the Landlord in specific instances. Tenant agrees and covenants to park all trucks, trailers or other commercial vehicles in the parking spaces at the rear of the Building(s) within which the Premises are located or where otherwise designated by Landlord. No vehicle, equipment or machinery may be repaired, serviced, cleaned, steam cleaned, lubricated, sandblasted, painted or otherwise maintained in any parking areas, roadways or service areas adjacent to or surrounding the Building(s) in which the Premises are located, or anywhere within the parking area. Any vehicle belonging to Tenant, or Tenant's employees, agents, subcontractors, contractors, licensees, invitees or visitors abandoned (72 hours without movement constitutes abandonment) or disabled or in a state of non-operation or disrepair shall not be permitted anywhere in the parking area and will be considered as trespassing on same, and subject to removal therefrom by Landlord, and all cost resulting therefrom, including towing, and if necessary, storage charges, shall be paid by Tenant to Landlord upon demand. Tenant hereby agrees to enforce said restriction with respect to Tenant's own vehicles and those of Tenant's employees, agents, visitors, contractors and subcontractors, licensees and invitees. Should the Landlord determine that a violation of this restriction has occurred, the vehicle, equipment, trailer or machinery shall be deemed abandoned or in trespass and may be removed from the parking area and all costs thereof shall be the obligation of the Tenant. Should the Landlord be required to pay any towing, removal or storage charges, said expenses or obligations shall become the debt of the identified Tenant under this Lease and shall be reimbursed to the Landlord as additional rent when invoiced. Landlord accepts no responsibility for theft, collision, vandalism, fire, acts of God or any other casualty of vehicles or equipment parked or stored in the parking area or for removal required as set forth in this paragraph while the vehicle or equipment is under tow or otherwise stored. Notwithstanding the foregoing, Landlord shall not be responsible to the Tenant for the nonperformance by any other tenant to any parking rule, and Landlord shall not be required to police said parking area or to remove vehicles or to stop any nonconforming use. EX-10.2 5 LICENSE AGREEMENT DATED 11/15/99 1 EXHIBIT 10.2 LICENSE AGREEMENT BY AND BETWEEN TRW SPACE & ELECTRONICS GROUP ONE SPACE PARK REDONDO BEACH, CALIFORNIA 90278 AND RF MICRO DEVICES, INC. 7625 THORNDIKE ROAD GREENSBORO, NORTH CAROLINA 27409 2 TRW/RF Micro Devices License Agreement November 15, 1999 LICENSE AGREEMENT THIS AGREEMENT, made and entered into as the 15th day of November, 1999 by and between the Space & Electronics Group of TRW Inc., an Ohio corporation, having offices at One Space Park, Redondo Beach, California 90278 (hereinafter "Licensor") and RF Micro Devices, Inc., a North Carolina corporation, having offices at 7625 Thorndike Road, Greensboro, North Carolina 27410 (hereinafter "Licensee"). WHEREAS, Licensor has developed, designed and manufactured certain kinds of gallium arsenide heterojunction bipolar transistors, and possesses patents rights and technical information and know-how relating thereto; and WHEREAS, Licensee has an existing license from Licensor to design, manufacture and sell GaAs heterojunction bipolar transistors and products incorporating such GaAs heterojunction bipolar transistors under Licensor's patent rights and to receive technical assistance relating thereto in certain specified fields of use; and WHEREAS, Licensee desires to obtain from Licensor an additional license under Licensor's patent rights and technical information relating to such GaAs heterojunction bipolar transistors for further specified fields of use; and WHEREAS, Licensor is willing to grant such license for additional specified fields of use. THEREFORE, in consideration of the mutual promises herein contained and the mutual benefits to be derived therefrom, Licensor and Licensee agree as follows: ARTICLE 1 DEFINITIONS The following words and phrases shall have the meanings set forth below unless the context requires a different meaning: -2- 3 TRW/RF Micro Devices License Agreement November 15, 1999 1.1 AGREEMENT: This Agreement. 1.2 COMMERCIAL: Involving the transfer or sale of products where the transaction does not require qualification of the product to relevant specifications in, for example, mil-m-38510, mil-std-883, mil-i-38534, mil-i-38535 or similar specifications and subsequent versions issued by any agency of the United States government. 1.3 EFFECTIVE DATE: November 15, 1999. 1.4 EXISTING AGREEMENT: The License and Technical Assistance Agreement between Licensor and Licensee dated June 6, 1996 related to the Licensor's HBT and molecular beam epitaxy processes. 1.5 EXISTING TRW GAAS HBT PATENT RIGHTS: Licensor's presently existing patents and filed patent applications, and any patent and patent applications filed by Licensor after the Effective Date to protect inventions relating to GaAs HBTs conceived or first actually reduced to practice prior to the Effective Date, and any United States and foreign patents which issue from any continuations, continuations-in-part, divisionals or substitutions thereof, and all extensions, reexaminations, renewals and reissues therefrom, and all rights to bring an action against any person to recover damages or profits resulting from infringement of the foregoing. 1.6 FUTURE TRW GAAS HBT PATENT RIGHTS: Licensor's United States and foreign patents and patent applications filed by Licensor to protect inventions relating to GaAs HBTs conceived subsequent to the Effective Date, and any United States and foreign patents which issue from any continuations, continuations-in-part, divisionals or substitutions thereof, and all extensions, reexaminations, renewals and reissues therefrom, and all rights to bring an action against any person to recover damages or profits resulting from infringement of the foregoing. 1.7 GAAS HBT: A heterojunction bipolar transistor having a base, emitter and collector formed on a substrate of gallium arsenide, and the manufacturing process utilized for forming such transistors on the gallium arsenide substrate. -3- 4 TRW/RF Micro Devices License Agreement November 15, 1999 1.8 HBT TECHNICAL INFORMATION: All documentation, know-how, software or other information of Licensor relating to Licensor's GaAs HBT, whether or not it is considered proprietary or a trade secret by Licensor including, without limitation, data and information contained in reports, documents, computer programs, drawings and graphs, schematics, manuals, files and notes in any medium or representation, electronic or otherwise 1.9 LICENSED FIELD: The design, development, manufacture, use, testing, sale, marketing, service, and repair of Licensed Products, including the sale of spare parts for or spare complete Licensed Products by Licensee, for Commercial customers for the generation, transmission, reception, conversion, tuning or other conditioning of voice, data or other information via coaxial cable, twisted pair, or other wired or combination wireless and wired transmission systems but only if the wireless transmission system operates on signals having a frequency of less than ten (10) gigahertz. The term specifically excludes, without limitation, the design, development, manufacture, use, testing, sale, marketing, service and repair of Licensed Products for use in fiber optic transmission systems. 1.10 LICENSED PRODUCTS: Any GaAs HBT products where the emitter of the GaAs HBT has a width of between One (1) and Three (3) microns inclusive. 1.11 PATENT RIGHTS: Existing TRW GaAs HBT Patent Rights and Future TRW GaAs HBT Patent Rights. 1.12 TRANSFER: any mortgage, pledge, transfer, sale, assignment or other disposition, whether voluntary, by operation of law (including by merger) or otherwise, of a party's rights hereunder. ARTICLE 2 LICENSE 2.1 LICENSE: Licensor hereby grants to Licensee, subject to the terms and conditions of this Agreement, a fully paid up, royalty free worldwide right and license under Existing TRW GaAs HBT Patent Rights, Future TRW GaAs HBT Patent Rights and to HBT Technical Information to design, develop, manufacture, use, test, sell, market, service, and repair Licensed Products in the Licensed Field. -4- 5 TRW/RF Micro Devices License Agreement November 15, 1999 2.1.1 The license granted in this Section 2.1 shall be a non-exclusive license for Licensed Products in the Licensed Field. 2.1.2 The license granted in this Section 2.1 shall be perpetual, subject to the provisions of Article 8 relating to termination and Article 11 relating to default of this Agreement. 2.1.3 The license granted in this Section 2.1 is effective as of the Effective Date. 2.1.4 Licensee shall have the right to assign the licenses to utilize Existing TRW GaAs HBT Patent Rights, Future TRW HBT Patent Rights and HBT Technical Information granted in this Section 2.1 to responsible parties, but only in accordance with the provisions of Article 13 herein. 2.1.5 Licensee shall not have the right to grant sublicenses under the licenses to utilize Existing TRW GaAs HBT Patent Rights, Future TRW HBT Patent Rights and HBT Technical Information granted in this Section 2.1 2.1.6 The license granted in this Section 2.1 to utilize HBT Technical Information in the Licensed Field is a continuing license that extends automatically without any further action on the part of Licensor or Licensee to (i) any modification, update, change or other improvement to the HBT Technical Information that is made by Licensor after the Effective Date; and (ii) any discovery, development or other invention made by Licensor after the Effective Date that constitutes new HBT Technical Information. 2.2 FUTURE TECHNOLOGIES: Except for the Future TRW GaAs HBT Patent Rights, or as specified in Section 2.1.6, rights and licenses to future TRW technologies applicable to the Licensed Products are not granted to Licensee by this Agreement. Commencing on the Effective Date and continuing until ten (10) years from the Effective Date, rights and licenses to the Patent Rights, the HBT Technical Information, and other TRW future technologies applicable to the Licensed Products not granted to Licensee by this Agreement or the Existing Agreement shall be offered to Licensee by Licensor on the following terms and conditions: -5- 6 TRW/RF Micro Devices License Agreement November 15, 1999 2.2.1 Licensor shall deliver a notice to Licensee stating its bona fide intention to grant rights and/or licensees to a third party for technologies applicable to the Licensed Products, and identify the specific technology it desires to license (the "Offered Technology") and the terms and conditions by which it proposes to license the Offered Technology. 2.2.2 Within forty-five (45) days after the date of such notice, Licensee shall inform Licensor whether or not it is willing to license the Offered Technology upon the same terms and conditions which Licensor proposes to license the Offered Technology to the third party. If Licensor has not received Licensee's decision by the end of the forty-five (45) day period, it will be deemed that Licensee has decided not to license the Offered Technology. 2.2.3 If Licensee does not elect to license the Offered Technology in accordance with Section 2.2.2, Licensor may license the Offered Technology to any third party upon terms which in their entirety are no more favorable to the prospective third party than those specified to Licensee, provided that the license is consummated within ninety (90) days of the date of the notice to Licensee. Licensor may, at its discretion, alter the final terms of the license to the third party from those notified to Licensee such that, though individual terms may be more favorable to the third party, the overall license terms and conditions are in their entirety no more favorable to the third party than those notified. If the final terms and conditions are, in their entirety, considered to be more favorable to the third party than those notified to Licensee, then Licensor must offer those terms to Licensee in accordance with Section 2.2.2, and Licensee shall have forty-five (45) days to elect to license the Offered Technology. 2.2.4 All obligations to grant licenses to future TRW technologies under this Section 2.2 shall terminate ten (10) years from the Effective Date. 2.2.5 Licensor's obligation to notify Licensee of proposed licenses under Section 2.2.1 herein, and Licensee's opportunity to license specified in Section 2.2.2 herein, are not applicable to -6- 7 TRW/RF Micro Devices License Agreement November 15, 1999 licenses proposed to be granted by Licensor to its affiliated companies. 2.3 EXCLUSION: Except as otherwise provided in this Agreement, the license and rights granted hereunder shall not be interpreted as granting or implying the grant of rights in any other invention or technical information of either party. 2.4 MARKINGS: To the extent practical, Licensee shall provide on any Licensed Product or component parts thereof manufactured, used or sold utilizing any of the rights or licenses granted under this Agreement, or on the packaging or data sheets related thereto so long as the marking is in accordance with applicable marking provisions of United States or foreign patent laws, a legible notice that such Licensed Product or component part is manufactured under a license granted by Licensor. Licensee shall submit to Licensor prior to marking any Licensed Product or component part thereof the full copy of such proposed marking for written approval by Licensor, which approval will not be unreasonably withheld and will be deemed given unless Licensor responds to the contrary within ten (10) business days of such submission. No rights are granted hereunder by either party to the other regarding their respective trade names or trademarks. 2.5 LICENSOR RESERVATIONS: Licensor reserves unto itself the rights to utilize Existing TRW GaAs HBT Patent Rights, Future TRW GaAs HBT Patent Rights, and HBT Technical Information to manufacture, have manufactured, use, test, sell, service, and repair Licensed Products in the Licensed Field and to grant sublicenses to other parties to do so, subject to the provisions of Section 2.2. 2.6 MAINTENANCE OF PATENTS: Licensor shall retain the right to manage and control the prosecution and maintenance of patent applications and patents included in the Patent Rights on the basis provided in the Existing Agreement. 2.7 ENFORCEMENT OF PATENT RIGHTS: 2.7.1 If either party hereto learns at any time of any infringement or threatened infringement by any other person of any enforceable Patent Rights owned by or licensed to the other party -7- 8 TRW/RF Micro Devices License Agreement November 15, 1999 after the Effective Date, that party shall give notice of that infringement or threatened infringement to the other party. The parties shall then consult together as to the best course of action to pursue in response to such potential infringement, but neither party shall be obligated to institute legal action at its own expense. A good faith failure by one party to provide such notice to the other party shall not be deemed a breach of this Agreement and shall not give rise to a right of action by other party. 2.7.2 In the event that the parties do not reach an agreement as contemplated by Section 2.7.1 hereof as to the best course of action to pursue with respect to a potential infringement (i) Licensor shall have the right, but not the obligation, to institute legal action, through counsel of its own choosing and at its sole expense, to restrain any infringement or threatened infringement, or to recover damages therefor, of its enforceable Patent Rights, and (ii) Licensee shall have the right, but not the obligation, to institute legal action, through counsel of its own choosing and at its sole expense, to restrain any infringement or threatened infringement, or to recover damages therefor, of its enforceable Patent Rights in the Licensed Field. The party that bears the expenses of pursuing legal action against a third party infringer shall be entitled to any damages, lost profits or other monies recovered by judgment, decree, settlement, arbitration or otherwise, resulting from such legal action. 2.7.3 In the event that one party elects to institute legal action against a third party infringer, the other party shall fully cooperate in the prosecution of such action including joining as a party in suit when necessary to acquire standing to institute legal action pursuant to this Section 2.7; provided, however, that such other party shall be reimbursed for all reasonable out-of-pocket expenses incurred in providing such cooperation including its reasonable legal fees and expenses. The electing party shall reimburse the other party for all such expenses within thirty (30) days after its receipt of an invoice from the other party that describes such expenses in reasonable detail, with supporting documentation as appropriate. -8- 9 TRW/RF Micro Devices License Agreement November 15, 1999 ARTICLE 3 HBT TECHNICAL INFORMATION 3.1 HBT TECHNICAL INFORMATION: Licensor shall not be obligated to reduce to a tangible medium of expression any HBT Technical Information. 3.2 DELIVERY OF HBT TECHNICAL INFORMATION: The HBT Technical Information related to Licensed Products shall be delivered to Licensee in accordance with the provisions of the Existing Agreement, and no HBT Technical Information shall be delivered as a result of this Agreement. Licensor shall deliver to Licensee one legible copy of each issued patent and all patent applications included in the Patent Rights as soon as practical after the Effective Date, but only if such patents and patent applications are specific to Licensed Products in the Licensed Field. Licensor shall also promptly furnish Licensee a copy of all patent applications filed and patents issued after the Effective Date that are included in the Patent Rights, but only if such patent applications and patents are specific to Licensed Products in the Licensed Field. 3.3 USE AND NONDISCLOSURE: Licensee shall not use or permit the use of HBT Technical Information for any purpose not authorized by this Agreement or by the Existing Agreement. Licensee shall hold in confidence, and shall not disclose or communicate or permit to be disclosed or communicated to any third person, any HBT Technical Information which is furnished to Licensee hereunder except in accordance with the Existing Agreement. Licensee shall take or cause to be taken all necessary precautions to the same extent that it would with its own technical information, but in no event less than a reasonable standard of care, to prevent the disclosure or communication of HBT Technical Information to third persons. 3.4 UPDATES OF HBT TECHNICAL INFORMATION: Except as specified in the Existing Agreement, Licensor shall be under no obligation to deliver to Licensee any modifications or additions to HBT Technical Information. 3.5 RESTRICTIONS: The rights granted Licensee herein cover only Licensed Products for use as licensed hereunder, and Licensee agrees that it shall not, during the term of this Agreement, manufacture, sell, lease or otherwise dispose of any Licensed Products or parts thereof embodying -9- 10 TRW/RF Micro Devices License Agreement November 15, 1999 any of the Patent Rights except insofar as the application thereof is expressly provided for under this Agreement or under the Existing Agreement. ARTICLE 4 CONSIDERATION In consideration of all rights, licenses, and HBT Technical Information and benefits conferred to Licensee hereunder, Licensee has issued to Licensor the Warrants set forth in the Cooperation Agreement between Licensor and Licensee entered into and effective concurrently with this Agreement. ARTICLE 5 MANUFACTURE OF LICENSED PRODUCTS Licensee agrees to use commercially reasonable efforts to place itself in, and to maintain, a position to manufacture, test, sell, service, repair, and maintain Licensed Products for application in the Licensed Field in the manner necessary to supply effectively the demand therefor. ARTICLE 6 IMPROVEMENTS Licensee agrees that any modifications or improvements in the Licensed Products, Patent Rights or the HBT Technical Information made by Licensee, including any inventions, shall be promptly made known to Licensor in the form of drawings, written descriptions, or other data, and Licensor shall have a royalty free, non-exclusive right to use such modifications or improvements, including any inventions. Licensee further agrees to inform Licensor from time to time in writing of any of Licensee's patents and patent applications relating to such modifications, improvements or inventions. If, in countries selected by Licensor, Licensee decides it shall not file applications for, or maintain patents upon, Licensee's modifications, improvements or inventions, then Licensor shall have the right to do so at its expense and such applications and patents shall be and become its property, provided Licensee shall continue to have -10- 11 TRW/RF Micro Devices License Agreement November 15, 1999 the right to make use thereof on a non-exclusive basis in the Licensed Field. Licensee shall use its best efforts to have executed such application papers and assignments as Licensor may request in connection with such patents. The provisions of this Article 6 shall survive termination or expiration of this Agreement insofar as the rights of the parties to use such improvements, modifications, inventions and patents are concerned. ARTICLE 7 REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION 7.1 REPRESENTATIONS AND WARRANTIES OF LICENSOR: Except as provided for or otherwise described in this Agreement, Licensor represents and warrants to Licensee as follows: 7.1.1 As of the Effective Date, Licensor is the owner of all Patent Rights and HBT Technical Information licensed in this Agreement in existence as of the Effective Date. 7.1.2 As of the Effective Date, Licensor has all requisite power and authority to enter into and execute this Agreement, to grant the licenses provided herein and to perform its obligations hereunder. 7.1.3 This Agreement constitutes a legal, valid and binding obligation of Licensor, enforceable against Licensor in accordance with its terms. 7.1.4 Licensor has not entered into any agreement with third parties that would conflict with the terms and conditions herein. Neither the execution and delivery of this Agreement nor the performance by Licensor of any of its obligations hereunder will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, the Articles of Incorporation or By-Laws of Licensor, as amended. 7.1.5 No royalties or fees have been paid by Licensor to other persons by reason of its ownership of the Patent Rights or HBT Technical Information. -11- 12 TRW/RF Micro Devices License Agreement November 15, 1999 7.1.6 As of the Effective Date there is no pending or, to the actual knowledge of Licensor, threatened claim, litigation or rendered decision, judgment or holding against Licensor concerning: (i) any claims of ownership by Licensor to any of the Patent Rights or HBT Technical Information; (ii) the validity, registrability or enforceability of any intellectual property rights of Licensor associated with any of the Patent Rights or HBT Technical Information; (iii) the license of any Patent Rights or HBT Technical Information to Licensee; or (iv) that the Commercial manufacture, use or sale of any Licensed Product violates the intellectual property rights of any other person. 7.2 LICENSOR'S RIGHTS: Licensor does not make any representation or warranty as to the validity of the Patent Rights or that the manufacture, use or sale of Licensed Products shall not infringe the intellectual property rights of third parties. 7.3 REPRESENTATIONS AND WARRANTIES OF LICENSEE: Except as provided for or otherwise described in this Agreement, Licensee represents and warrants to Licensor as follows: 7.3.1 Licensee has all requisite power and authority to enter into and execute this Agreement and to perform its obligations hereunder. 7.3.2 This Agreement constitutes a legal, valid and binding obligation of Licensee, enforceable against Licensee in accordance with its terms. 7.3.3 Licensee has not entered into any agreements with third parties that would conflict with the terms and conditions herein. Neither the execution and delivery of this Agreement nor the performance by Licensee of its obligations hereunder will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default, under the Articles of Incorporation or By-Laws of Licensee, as amended. 7.4 LIMITATION OF LIABILITY: Licensor does not assume any responsibility, nor does Licensor give any warranties to Licensee, of any -12- 13 TRW/RF Micro Devices License Agreement November 15, 1999 nature whatsoever, with respect to the ability of Licensee to construct successfully Licensed Products using the HBT Technical Information or Patent Rights. LICENSOR'S WARRANTY OBLIGATIONS AND LICENSEE'S REMEDIES THEREUNDER ARE SOLELY AND EXCLUSIVELY AS STATED HEREIN. 7.5 EXCLUSION: THE WARRANTIES PROVIDED IN THIS ARTICLE 7 ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER STATUTORY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE EXPRESSLY EXCLUDED. LICENSOR'S WARRANTY OBLIGATIONS AND LICENSEE'S REMEDIES ARE SOLELY AND EXCLUSIVELY AS STATED IN THIS ARTICLE 7. IN NO CASE SHALL LICENSOR OR LICENSEE BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER ARISING IN CONTRACT, WARRANTY, TORT, INCLUDING NEGLIGENCE, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY. LICENSOR DOES NOT MAKE ANY WARRANTY AS TO THE VALIDITY OR ENFORCEABILITY OF THE PATENT RIGHTS. ARTICLE 8 TERM AND TERMINATION This Agreement shall commence on the Effective Date, and shall remain in effect unless this Agreement is terminated for default in accordance with Section 11.2. ARTICLE 9 EXCUSABLE DELAY 9.1 NOTICE: If either Licensor or Licensee is unable to perform any of their respective obligations as herein provided then the party whose performance is prevented or delayed shall give the other party notice thereof as soon as reasonably possible under the circumstances and information regarding the cause or reason therefor. 9.2 EXCUSABLE DELAY: If either Licensor or Licensee is unable to perform any of their respective obligations as herein provided due to any -13- 14 TRW/RF Micro Devices License Agreement November 15, 1999 circumstances beyond its reasonable control, but not due to its negligence (including but not limited to strikes, war, an act of God, a public enemy, interference by any civil or military authority, inability to secure governmental approval, materials or services or similar cause) and gives notice to the other as provided in Section 9.1, then the time of performance of any such obligation shall be extended for a period equal to the number of days during which performance thereof was delayed due to such circumstances, and during such period such party shall not be deemed in default of this Agreement. ARTICLE 10 NOTICES AND LEGAL ADDRESSES Except as otherwise expressly provided, all notices under this Agreement shall be made by fax, confirmed by letter, to the fax numbers and addresses below: Licensee: RF Micro Devices, Inc. 7625 Thorndike Road Greensboro, North Carolina 27409 Telecopy: 336-664-0311 Attention: Jerry Neal Licensor: TRW Inc. Space & Electronics Group One Space Park Redondo Beach, California 90278 Telecopy: 310-813-4115 Attention: Vice President and General Manager Telecommunication Programs Division ARTICLE 11 DEFAULT 11.1 DEFAULT: The occurrence of one or more of the following shall constitute a default hereunder: -14- 15 TRW/RF Micro Devices License Agreement November 15, 1999 11.1.1 In the event a party fails to pay any sum due and payable hereunder within ten (10) days after same has become due and payable and such failure continues for fifteen (15) days after written notice from the payee; 11.1.2 In the event Licensor is unable to fulfill its obligations under this Agreement as a result of: (a) liens, claims, charges or encumbrances in existence as of the Effective Date or arising as a result of Licensor's execution or performance of this Agreement; (b) Licensor's failure to obtain all consents, approvals or authorizations of other persons necessary as of the Effective Date in order to grant the licenses provided for herein; (c) Licensor's failure to make all filings, notifications and registrations with all governmental authorities, if any, necessary as of the Effective Date in order to grant the licenses provided for herein; or (d) any federal, state or local judgment, writ, decree, order, statute, rule or regulation applicable as of the Effective Date to Licensor, the Patent Rights or HBT Technical Information, and such inability continues for a period of thirty (30) days after written notice from Licensee specifying such failure, provided that if the failure be such that it cannot with due diligence be cured within such thirty (30) day period, then Licensor shall have such longer period, not to exceed thirty (30) additional days, as shall be reasonably necessary to cure such failure so long as Licensor is acting in good faith and with due diligence; 11.1.3 In the event a party fails to perform any other material covenant or obligation required to be performed by such party hereunder and such failure continues for a period of thirty (30) days after written notice from the nondefaulting party specifying such failure, provided that if the failure be such that it cannot be cured solely by the payment of money and cannot with due diligence be cured within such thirty (30) day period, then the notified party shall have such longer period, not to exceed thirty (30) additional days, as shall be reasonably necessary to cure such failure so long as such party is acting in good faith and with due diligence; 11.1.4 In the event a party (i) shall commence a voluntary case or other proceeding seeking dissolution, liquidation or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking -15- 16 TRW/RF Micro Devices License Agreement November 15, 1999 the appointment of a receiver, trustee, liquidator, custodian or other similar official, or (ii) shall consent to any such relief or to the appointment of, or taking possession by, such official in any voluntary case or other proceeding commenced against it; or 11.1.5 In the event any involuntary case or other proceeding shall be commenced against a party seeking dissolution, liquidation or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a receiver, trustee, liquidator, custodian or other similar official of it or any substantial part of its property, if such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) days. 11.2 REMEDY: If any party is in default as specified in Section 11.1, the party not in default may terminate this Agreement by giving the other party thirty (30) days prior written notice of termination and pursue any other remedy hereunder or otherwise available to it at law or in equity. 11.3 COMPENSATION: Each party hereby expressly agrees and acknowledges that termination of this Agreement by either party for default shall not entitle the other party to any termination compensation or to any payment in respect of any goodwill established during the term of this Agreement or render the party liable for damages on account of any loss of prospective profits or on account of any expenditure, investment or obligation incurred or made by the parties, or otherwise. 11.4 PERFORMANCE AFTER DEFAULT TERMINATION: If this Agreement is terminated for default, whether due to the default of Licensor or otherwise, Licensee shall discontinue the use of the Patent Rights, and HBT Technical Information and shall return to Licensor all HBT Technical Information furnished to or otherwise made available to Licensee hereunder. ARTICLE 12 SURVIVAL OF OBLIGATIONS Other provisions hereof notwithstanding, the obligations of Licensor and Licensee under Articles 6 and 7 and Section 3.3 shall survive the termination and expiration of this Agreement. -16- 17 TRW/RF Micro Devices License Agreement November 15, 1999 ARTICLE 13 SUBLICENSES, ASSIGNMENTS AND TRANSFERS 13.1 COMPLIANCE WITH ASSIGNMENT RESTRICTIONS: Neither party may sublicense or Transfer any of its rights or obligations under this Agreement in whole or in part or delegate any of its obligations or duties hereunder to any person except upon compliance with this Article 13. 13.2 LICENSEE TRANSFER OF LICENSE: Licensee may Transfer its license rights under Section 2.1 to any person or organization but only in connection with the sale or Transfer of substantially all of the assets of Licensee pertaining to the use of Licensed Products in the Licensed Field. The Transfer of the license, when permitted, shall be notified to Licensor by delivering to Licensor a written undertaking executed by the transferee under which such transferee acknowledges that the rights it is acquiring from Licensee are limited to the Licensed Field in accordance with this Agreement. 13.3 EFFECT OF NON-COMPLIANCE: Any purported sublicense or Transfer in contravention of this Agreement shall be null and void and of no force or effect. ARTICLE 14 MISCELLANEOUS 14.1 HEADINGS: The headings and titles to the Articles and Sections of this Agreement are inserted for convenience only and shall not be deemed a part hereof or affect the construction or interpretation of any provision hereof. 14.2 REMEDIES: Unless otherwise expressly provided herein, the rights and remedies hereunder are in addition to, and not in limitation of, other rights and remedies under the Agreement, and exercise of one right or remedy shall not be deemed a waiver of any other right or remedy. 14.3 MODIFICATION - WAIVER: No cancellation, modification, amendment, deletion, addition or other change in this Agreement or any provision hereof, or waiver of any right or remedy herein provided, shall be -17- 18 TRW/RF Micro Devices License Agreement November 15, 1999 effective for any purpose unless specifically set forth in a writing signed by the party to be bound thereby and specifically referencing this Agreement. No waiver of any right or remedy in respect of any occurrence or event on one occasion shall be deemed a waiver of such right or remedy in respect of such occurrence or event on any other occasion. 14.4 ENTIRE AGREEMENT: This Agreement supersedes all other agreements, oral or written, heretofore made with respect to the subject hereof and the transactions contemplated hereby and, in conjunction with the Existing Agreement and the Cooperation Agreement to be executed concurrently with this Agreement, contains the entire agreement of the parties. 14.5 CONTROLLING LAW: All questions concerning the validity and operation of this Agreement and the performance of the obligations imposed upon the parties hereunder shall be governed by and construed in accordance with the laws of the State of California, United States of America applicable to contracts entered into and wholly to be performed in the State of California. 14.6 SUCCESSORS AND ASSIGNS: The provisions of this Agreement shall be binding upon and inure to the benefit of Licensor and Licensee and their respective successors and assigns, but this provision shall not be deemed to expand or otherwise affect the limitations on assignment and sublicensing set forth in Article 13 . 14.7 COUNTERPARTS: This Agreement has been executed in several counterparts, each of which shall be deemed to be an original copy hereof. 14.8 GOVERNMENT REGULATIONS: This Agreement is subject to all the laws and regulations, and other administrative acts, now or hereinafter in effect, of the United States Government and its departments and agencies. HBT Technical Information, any Licensed Product, component, or spare part, are not authorized to be directly or indirectly sold, leased, released, assigned, transferred, conveyed, or in any manner disposed of in or to any country where such sale, lease, assignment, transferal, conveyance or use, is regulated by the United States Government without first obtaining any necessary approvals of the United States Government. -18- 19 TRW/RF Micro Devices License Agreement November 15, 1999 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first set forth above. TRW Inc. Space & Electronics Group By: ----------------------------------- RF Micro Devices, Inc. By: ----------------------------------- -19- EX-10.3 6 COOPERATION AGREEMENT DATED 11/15/99 1 EXHIBIT 10.3 COOPERATION AGREEMENT This Cooperation Agreement (the "Agreement") is entered into as of this 15th day of November, 1999, by and between TRW Inc. ("TRW") and RF Micro Devices, Inc. ("RFMD"). WHEREAS, TRW and RFMD have previously entered into a License and Technical Assistance Agreement, dated as of June 6, 1996 (the "1996 Agreement"; and WHEREAS, TRW and RFMD entered into a new License Agreement, dated the date hereof (the "1999 Agreement"), whereby TRW has agreed to expand the scope of the license granted under the 1996 Agreement to cover additional product applications; and WHEREAS, TRW and RFMD wish to reaffirm and extend the cooperative nature that has characterized their relationship in the past; and WHEREAS, TRW and RFMD wish to document their intentions concerning future cooperative actions; . NOW THEREFORE, the parties hereto agree as follows: 1. Strategic Relationship. TRW and RFMD reaffirm their historical and ongoing strategic relationship as evidenced in the 1996 Agreement and the 1999 Agreement. More specifically, the parties agree to continue to exchange technical information with each other concerning the Licensed Products in the Licensed Fields (as such terms are defined in the 1996 Agreement and the 1999 Agreement). Further, during the term of this Agreement, the parties shall on a regular basis consult with each other concerning new technologies which are developed by either party and which could be reasonably viewed as applicable to other party's markets. 2. License Expansion. The parties agree that, during the term of this Agreement, TRW, upon the request of RFMD, shall enter into good faith negotiations with RFMD concerning the further expansion of the licenses granted in the 1996 Agreement and the 1999 Agreement beyond the respective Licensed Fields for the respective Licensed Products (as defined in the 1996 Agreement and the 1999 Agreement). Further, TRW, upon the request of RFMD, shall enter into discussions with RFMD concerning the possible licensing of new or existing TRW technologies that may be applicable to RFMD's markets. Neither of the parties is obligated to enter into any new or expanded license, and the terms of any such new or expanded license shall be subject to the mutual agreement of the parties. 2 3. Supply Agreement Amendment. Upon the request of TRW, RFMD agrees to enter into good faith negotiations with TRW concerning the extension of the Supply Agreement, dated as of June 6, 1996, as amended (the "Supply Agreement"), between TRW and RFMD. Neither of the parties is obligated to enter into any amendment of the Supply Agreement, and the terms of any such amendment to the Supply Agreement shall be subject to the mutual agreement of the parties. 4. Stock Ownership Commitment. In conjunction with the announcement referred to in paragraph 6 hereof, TRW shall publicly state that until May 1, 2001 it (directly and/or indirectly through its affiliated entities) will continue to beneficially hold at least 7,941,161 shares of RFMD common stock (such number to be adjusted for stock divisions, stock combinations, stock recapitalizations and stock reclassifications and stock dividends). Further, TRW agrees that it shall beneficially hold 7,941,161 shares of RFMD common stock (directly and/or indirectly through its affiliated entities) (such number to be adjusted for stock divisions, stock combinations, stock recapitalizations and stock reclassifications and stock dividends) until May 1, 2001 and shall not, at any time prior to May 1, 2001, sell, assign or otherwise transfer, dispose of, grant any option to purchase, make any short sale of or enter into any hedging, synthetic sale or similar transaction with the same economic effect as a sale that would have the effect of causing its RFMD common stock ownership to fall below such number of shares (as may be adjusted), except in conjunction with a transaction involving a Change in Control of RFMD (as such term is defined in paragraph 1(b) of Warrant 99-2 referred to in paragraph 5 hereof). 5. Warrant Issuance. In consideration of TRW executing the 1999 License and this Agreement, RFMD shall issue to TRW contemporaneously herewith two warrants to purchase an aggregate of 750,000 shares of RFMD common stock on the terms provided in the form of warrants attached hereto as Attachment A. 6. Joint Announcement. The parties will coordinate a joint public announcement concerning the 1999 Agreement and this Agreement as soon as possible following execution of this Agreement. 7. Term of this Agreement. This Agreement shall become effective as of the date written above and shall terminate on December 31, 2003. 8. Miscellaneous. (a) Amendments This Agreement may be amended at any time by a written agreement executed by both parties hereto. 3 (b) Severability If any provision of this Agreement shall finally be determined to be unlawful, such provision shall be deemed to be severed from this Agreement and every other provision of this Agreement shall remain in full force and effect. (c) Notices All notices, requests and other communications hereunder shall be in writing and shall be deemed to have been duly given, if delivered by hand, at the time of receipt or, if communicated by facsimile or similar electronic means, at the time receipt thereof has been confirmed by return electronic communication or signal that the message has been clearly received, or if mailed, seven (7) days after mailing, registered or certified airmail return receipt requested, with postage prepaid: If to RFMD, to: RF Micro Devices, Inc. 7625 Thorndike Road Greensboro, NC 27409 Fax No. 336.664.0311 Attention: Jerry Neal If to TRW, to: TRW INC. One Space Park Redondo Beach, CA 90278 Fax No. 310.813.4115 Attention: Wes Bush provided, however, that if any party shall have designated a different address by notice to the other given as provided above, then to the last address so designated. (d) Assignment This Agreement shall be binding upon and inure to the benefit of the successors of each of the parties hereto. Neither this Agreement, nor the rights or obligations of either party hereunder, may be assigned by either party without the prior written consent of the other. (e) Status This Agreement shall not in any respect constitute an appointment of either party as the agent or legal representative of the other for any purpose whatsoever. (f) Third Parties This Agreement is not intended to, and shall not, create any rights in or confer any benefits upon anyone other than the parties hereto. (g) Incorporation by Reference The attachment to this Agreement constitutes an integral part of this Agreement and is hereby incorporated into this Agreement by this reference. 4 (h) Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed in such jurisdiction. (i) Counterparts More than one counterpart of this Agreement may be executed by the parties hereto, and each fully executed counterpart shall be deemed an original without production of the others. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, which shall be effective as of the date first set forth above. TRW Inc. By: --------------------------------------- RF Micro Devices, Inc. By: --------------------------------------- EX-10.4 7 1997 KEY EMPLOYEES STOCK OPTION PLAN 1 EXHIBIT 10.4 1997 KEY EMPLOYEES' STOCK OPTION PLAN OF RF MICRO DEVICES, INC. 2 1997 KEY EMPLOYEES' STOCK OPTION PLAN OF RF MICRO DEVICES, INC. 1. PURPOSE The purpose of the 1997 Key Employees' Stock Option Plan of RF Micro Devices, Inc. (the "Plan") is to encourage and enable selected key employees and independent contractors in the service of RF Micro Devices, Inc. (the "Corporation") or its related corporations to acquire or to increase their holdings of common stock of the Corporation (the "Common Stock") in order to promote a closer identification of their interests with those of the Corporation and its shareholders, thereby further stimulating their efforts to enhance the efficiency, soundness, profitability, growth and shareholder value of the Corporation. This purpose will be carried out through the granting of incentive stock options ("Incentive Options") intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock options ("Nonqualified Options"). Incentive Options and Nonqualified Options shall be referred to herein collectively as "Options." To the extent that any Option is designated as an Incentive Option and such option does not qualify as an Incentive Option, it shall constitute a Nonqualified Option. 2. ADMINISTRATION OF THE PLAN (a) The Plan shall be administered by a committee (the "Committee") appointed by the Board of Directors of the Corporation (the "Board") and comprised solely of members of the Board. The Committee shall include no fewer than the minimum number of "non-employee directors," as such term is defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be required by Rule 16b-3 or any successor rule. (b) Any action of the Committee may be taken by a written instrument signed by all of the members of the Committee and any action so taken by written consent shall be as fully effective as if it had been taken by a majority of the members at a meeting duly held and called. Subject to the provisions of the Plan, the Committee shall have full and final authority, in its discretion, to take any action with respect to the Plan including, without limitation, the following: (i) to determine the individuals to receive Options, the nature of each Option as an Incentive Option or a Nonqualified Option, the times when Options shall be granted, the number of shares to be subject to each Option, the Option price (determined in accordance with Section 6), the Option period, the time or times when each Option shall be exercisable and the other terms, conditions, restrictions and limitations of an Option; (ii) to prescribe the form or forms of the agreements evidencing any Options granted under the Plan; (iii) to establish, amend and rescind rules and regulations for the administration of the Plan; and (iv) to construe and interpret the Plan, the rules and regulations, and the agreements evidencing Options granted under the Plan, and to make all other determinations deemed necessary or advisable for administering the Plan. In addition, the Committee shall have complete authority, in its discretion, to accelerate the date that any Option which is not otherwise exercisable shall become exercisable in whole 3 or in part, without any obligation to accelerate such date with respect to any other Option granted to any person. (c) Notwithstanding Section 2(b), and subject to the terms of the Plan herein, the Committee may delegate from time to time to the Chief Executive Officer of the Corporation the authority to grant Options, and to make any or all of the determinations reserved for the Committee in the Plan and summarized in Section 2(b) with respect to Options that have been granted, to any individual who, at the time of such grant or other determination, (i) is not an officer or director of the Corporation subject to Section 16 of the Exchange Act and (ii) is otherwise eligible to participate in the Plan under Section 5. The Chief Executive Officer of the Corporation shall report to the Committee, not less than quarterly, the material terms of all Options granted since the time of any such immediately preceding report pursuant to authority delegated pursuant to this Section 2(c). 3. EFFECTIVE DATE The effective date of the Plan shall be the date of consummation of an initial public offering (the "Public Offering Date"). Options may be granted under the Plan on and after the effective date, but not after the tenth anniversary of the Public Offering Date. For the purposes herein, the phrase "consummation of an initial public offering" shall mean the closing of a firm commitment underwritten public offering of the Corporation's Common Stock pursuant to a registration statement on Form S-1 filed under the Securities Act of 1933, as amended (the "Securities Act"). 4. OPTIONS; SHARES OF STOCK SUBJECT TO THE PLAN Both Incentive Options and Nonqualified Options, as designated by the Committee, may be granted under the Plan. The shares of Common Stock that may be issued and sold pursuant to Options shall not exceed in the aggregate 1,300,000 shares of authorized but unissued shares of the Common Stock of the Corporation. The Corporation hereby reserves sufficient authorized shares of Common Stock to provide for the exercise of Options granted hereunder. Any shares of Common Stock subject to an Option which, for any reason, expires or is terminated unexercised as to such shares may again be subject to an Option granted under the Plan. No Optionee may be granted Options in any calendar year for more than 500,000 shares of Common Stock. 5. ELIGIBILITY An Option may be granted only to an individual who satisfies the following eligibility requirements on the date the Option is granted: (a) The individual is either (i) a key employee of the Corporation or a related corporation or (ii) an independent contractor providing services to the Corporation or a related corporation. For this purpose, an individual shall be considered to be an "employee" only if there exists between the individual and the Corporation or a related corporation the legal and bona fide relationship of employer and employee. In determining whether such a relationship exists, the regulations of the United States Treasury Department relating to the determination 2 4 of the employment relationship for the purpose of collection of income tax on wages at the source shall be applied. Also, for this purpose, a "key employee" is an employee of the Corporation or a related corporation whom the Committee determines qualifies as a key employee based on the nature and extent of such employee's duties, responsibilities, personal capabilities, performance and potential, or any combination of such factors. (b) With respect to the grant of an Incentive Option, the individual is an employee who does not own, immediately before the time that the Incentive Option is granted, stock possessing more than ten percent of the total combined voting power of all classes of stock of the Corporation or a related corporation; provided, that an individual owning more than ten percent of the total combined voting power of all classes of stock of the Corporation or a related corporation may be granted an Incentive Option if the price at which such Option may be exercised is greater than or equal to 110% of the fair market value of the shares on the date the Option is granted and the Option period does not exceed five years. For this purpose, an individual will be deemed to own stock which is attributed to him under Section 424(d) of the Code. (c) The individual, being otherwise eligible under this Section 5, is selected by the Committee as an individual to whom an Option shall be granted (an "Optionee"). 6. OPTION PRICE The price per share at which an Option may be exercised (the "Option price") shall be established by the Committee at the time the Option is granted and shall be set forth in the terms of the agreement evidencing the grant of the Option; provided, that in the case of an Incentive Option, the Option price shall be equal to or greater than the fair market value per share of the Common Stock on the date the Option is granted. In addition, the following rules shall apply: (a) An Incentive Option shall be considered to be granted on the date that the Committee acts to grant the Option, or on any later date specified by the Committee as the date of grant of the Option. A Nonqualified Option shall be considered to be granted on the date the Committee acts to grant the Option or any other date specified by the Committee as the date of grant of the Option. (b) The fair market value of the shares shall be determined in good faith by the Committee in accordance with the following provisions: (i) if the shares of Common Stock are listed for trading on the New York Stock Exchange or the American Stock Exchange or included in The Nasdaq National Market, the fair market value shall be the closing sales price of the shares on the New York Stock Exchange or the American Stock Exchange or as reported in The Nasdaq National Market (as applicable) on the date immediately preceding the date the Option is granted, or, if there is no transaction on such date, then on the trading date nearest preceding the date the Option is granted for which closing price information is available, and, provided further, if the shares are quoted on The Nasdaq System but are not included in The Nasdaq 3 5 National Market, the fair market value shall be the mean between the high bid and low asked quotations in The Nasdaq System on the date immediately preceding the date the Option is granted for which such information is available; or (ii) if the shares of Common Stock are not listed or reported in any of the foregoing, then fair market value shall be determined by the Committee in accordance with the applicable provisions of Section 20.2031-2 of the Federal Estate Tax Regulations, or in any other manner consistent with the Code and accompanying regulations. (c) In no event shall there first become exercisable by the Optionee in any one calendar year incentive stock Options granted by the Corporation or any related corporation with respect to shares having an aggregate fair market value (determined at the time an Option is granted) greater than $100,000. 7. OPTION PERIOD AND LIMITATIONS ON THE RIGHT TO EXERCISE OPTIONS (a) The period during which an Option may be exercised (the "Option period") shall be determined by the Committee when the Option is granted and shall not extend more than ten years from the date on which the Option is granted. An Option shall be exercisable on such date or dates, during such period, for such number of shares, and subject to such conditions as shall be determined by the Committee and set forth in the agreement evidencing such Option, subject to the rights granted herein to the Committee to accelerate the time when Options may be exercised. Any Option or portion thereof not exercised before the expiration of the Option period shall terminate. (b) An Option may be exercised by giving written notice of at least ten days to the Committee or its designee at such place as the Committee shall direct. Such notice shall specify the number of shares to be purchased pursuant to an Option and the aggregate purchase price to be paid therefor, and shall be accompanied by the payment of such purchase price. Such payment shall be in the form of (i) cash; (ii) shares of Common Stock owned by the Optionee at the time of exercise; (iii) shares of Common Stock withheld upon exercise; (iv) delivery of a properly executed written notice of exercise to the Corporation and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option price; or (v) any combination of the foregoing methods. Shares tendered or withheld in payment upon the exercise of an Option shall be valued at their fair market value on the date of exercise, as determined by the Committee by applying the provisions of Section 6(b). (c) No Option granted to an Optionee who was an employee at the time of grant shall be exercised unless the Optionee is, at the time of exercise, an employee as described in Section 5(a), and has been an employee continuously since the date the Option was granted, subject to the following: 4 6 (i) An Option shall not be affected by any change in the terms, conditions or status of the Optionee's employment, provided that the Optionee continues to be an employee of the Corporation or a related corporation. (ii) The employment relationship of an Optionee shall be treated as continuing intact for any period that the Optionee is on military or sick leave or other bona fide leave of absence, provided that the period of such leave does not exceed ninety days, or, if longer, as long as the Optionee's right to reemployment is guaranteed either by statute or by contract. The employment relationship of an Optionee shall also be treated as continuing intact while the Optionee is not in active service because of disability. For purposes of this Section 7(c)(ii), "disability" shall mean the inability of the Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than twelve months. The Committee shall determine whether an Optionee is disabled within the meaning of this paragraph. (iii) If the employment of an Optionee is terminated because of disability within the meaning of subparagraph (ii), or if the Optionee dies while he is an employee or dies after the termination of his employment because of disability, the Option may be exercised only to the extent exercisable on the date of the Optionee's termination of employment or death while employed (the "termination date"), except that the Committee may in its discretion accelerate the date for exercising all or any part of the Option which was not otherwise exercisable on the termination date. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (A) the close of the period of twelve months next succeeding the termination date; or (B) the close of the Option period. In the event of the Optionee's death, such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. (iv) If the employment of the Optionee is terminated for any reason other than disability (as defined in subparagraph (ii)) or death or for "cause," his Option may be exercised to the extent exercisable on the date of such termination of employment, except that the Committee may in its discretion accelerate the date for exercising all or any part of the Option which was not otherwise exercisable on the date of such termination of employment. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (A) the close of the period of 90 days next succeeding the termination date; or (B) the close of the Option period. If the Optionee dies following such termination of employment and prior to the earlier of the dates specified in (A) or (B) of this subparagraph (iv), the Optionee shall be treated as having died while employed under subparagraph (iii) immediately preceding (treating for this purpose the Optionee's date of termination of employment as the termination date). In the event of the Optionee's death, such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. 5 7 (v) If the employment of the Optionee is terminated for "cause," his Option shall lapse and no longer be exercisable as of the effective time of his termination of employment, as determined by the Committee. For purposes of this subparagraph (v) and subparagraph (iv), the Optionee's termination shall be for "cause" if such termination results from the Optionee's (A) dishonesty; (B) refusal to perform his duties for the Corporation; or (C) engaging in conduct that could be materially damaging to the Corporation without a reasonable good faith belief that such conduct was in the best interest of the Corporation. The determination of "cause" shall be made by the Committee and its determination shall be final and conclusive. (d) An Option granted to an Optionee who was an independent contractor of the Corporation or a related corporation at the time of grant (and who does not thereafter become an employee, in which case he shall be subject to the provisions of Section 7(c) herein) may be exercised only to the extent exercisable on the date of the Optionee's termination of service to the Corporation or a related corporation (unless the termination was for cause), and must be exercised, if at all, prior to the first to occur of the following, as applicable: (A) the close of the period of 90 days next succeeding the termination date; or (B) the close of the Option period. If the services of such an Optionee are terminated for cause (as defined in Section 7(c)(v) herein), his Option shall lapse and no longer be exercisable as of the effective time of his termination of services, as determined by the Committee. Notwithstanding the foregoing, the Committee may in its discretion accelerate the date for exercising all or any part of an Option which was not otherwise exercisable on the termination date or extend the Option period, or both. (e) An Optionee or his legal representative, legatees or distributees shall not be deemed to be the holder of any shares subject to an Option unless and until certificates for such shares are issued to him or them under the Plan. (f) Nothing in the Plan shall confer upon the Optionee any right to continue in the service of the Corporation or a related corporation as an employee or independent contractor, as the case may be, or to interfere in any way with the right of the Corporation or a related corporation to terminate the Optionee's service at any time. 8. NONTRANSFERABILITY OF OPTIONS AND SHARES Incentive Options granted pursuant to the Plan shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order, as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder. Nonqualified Options granted pursuant to the Plan shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession or pursuant to a qualified domestic relations order, as defined by the Code or Title I of ERISA or the rules thereunder, except as may be permitted by the Committee in a manner consistent with the registration provisions of the Securities Act. An Option shall be exercisable during the Optionee's lifetime only by him. To the extent required by Section 16 of the Exchange Act, shares acquired upon the exercise of an Option shall not, without the consent of the Committee, be transferable 6 8 (including by pledge or hypothecation) until the expiration of six months after the date the Option was granted. 9. DILUTION OR OTHER ADJUSTMENTS If there is any change in the outstanding shares of Common Stock of the Corporation as a result of a merger, consolidation, reorganization, stock dividend, stock split distributable in shares, or other change in the capital stock structure of the Corporation, the Committee shall make such adjustments to Options, to the number of shares reserved for issuance under the Plan, and to any provisions of this Plan as the Committee deems equitable to prevent dilution or enlargement of Options or otherwise advisable to reflect such change. 10. WITHHOLDING The Corporation shall require any recipient of shares pursuant to the exercise of a Nonqualified Option to pay to the Corporation in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Corporation to such authority for the account of such Optionee. Notwithstanding the foregoing, the Optionee may satisfy such obligation in whole or in part, and any other local, state or federal income tax obligations relating to the exercise of a Nonqualified Option, by electing (the "Election") to have the Corporation withhold shares of Common Stock from the shares to which the Optionee is entitled. The number of shares to be withheld shall have a fair market value (determined in accordance with Section 6(b)) as of the date that the amount of tax to be withheld is determined (the "Tax Date") as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each Election must be made in writing to the Committee prior to the Tax Date. 11. CERTAIN DEFINITIONS For purposes of the Plan, the following terms shall have the meaning indicated: (a) "Related corporation" means any parent, subsidiary or predecessor of the Corporation. (b) "Parent" or "parent corporation" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if, at the time that the Option is granted, each corporation other than the Corporation owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in another corporation in the chain. (c) "Subsidiary" or "subsidiary corporation" means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if, at the time that the Option is granted, each corporation other than the last corporation in the unbroken chain owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in another corporation in the chain. (d) "Predecessor" or "predecessor corporation" means a corporation which was a party to a transaction described in Section 424(a) of the Code (or which would be so described 7 9 if a substitution or assumption under that section had occurred) with the Corporation, or a corporation which is a parent or subsidiary of the Corporation, or a predecessor of any such corporation. (e) In general, terms used in the Plan shall, where appropriate, be given the meaning ascribed to them under the provisions of the Code applicable to incentive stock Options. 12. STOCK OPTION AGREEMENT The grant of any Option under the Plan shall be evidenced by the execution of an agreement (the "Agreement") between the Corporation and the Optionee. Such Agreement shall set forth the date of grant of the Option, the Option price, the Option period, the designation of the Option as an Incentive Option or a Nonqualified Option, and the time or times when and the conditions upon the happening of which the Option shall become exercisable. Such Agreement shall also set forth the restrictions, if any, with respect to which the shares to be purchased thereunder shall be subject, and such other terms and conditions as the Committee shall determine which are consistent with the provisions of the Plan and applicable law and regulations. 13. RESTRICTIONS ON SHARES The Corporation may impose such restrictions on any shares acquired upon exercise of Options granted under the Plan as it may deem advisable, including, without limitation, restrictions necessary to ensure compliance with the Securities Act of 1933, as amended, under the requirements of any applicable self-regulatory organization and under any blue sky or securities laws applicable to such shares. The Corporation may cause a restrictive legend to be placed on any certificate issued pursuant to the exercise of an Option in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel. 14. AMENDMENT OR TERMINATION The Plan may be amended or terminated by action of the Board; provided, that: (a) Any amendment which would (i) materially increase the aggregate number of shares which may be issued under the Plan (other than changes as described in Section 9), or (ii) materially change the requirements for eligibility to receive Options under the Plan shall be made only with the approval of the shareholders of the Corporation. (b) No outstanding Option shall be amended or terminated (i) without the consent of the Optionee if such amendment or termination would adversely affect the Optionee's rights with respect to such Option; and (ii) if the Option is an Incentive Option, without the opinion of legal counsel to the Corporation that such amendment or termination will not constitute a "modification" within the meaning of Section 424 of the Code if the Committee determines such an opinion is necessary. 15. APPLICABLE LAW Except as otherwise provided herein, the Plan shall be construed and enforced according to the laws of the State of North Carolina. 8 10 16. SECTION 16(b) COMPLIANCE To the extent that participants in the Plan are subject to Section 16(b) of the Exchange Act, it is the intention of the Corporation that transactions under the Plan shall comply with Rule 16b-3 under the Exchange Act and, if any Plan provision is later found not to be in compliance with Section 16 of the Exchange Act, the provision shall be deemed null and void, and in all events the Plan shall be construed in favor of Plan transactions meeting the requirements of Rule 16b-3 or successor rules applicable to the Plan. 9 11 2000 DECLARATION OF AMENDMENT TO 1997 KEY EMPLOYEES' STOCK OPTION PLAN OF RF MICRO DEVICES, INC. THIS 2000 DECLARATION OF AMENDMENT, is made this 3rd day of January, 2000, by RF MICRO DEVICES, INC. (the "Corporation"), to the Corporation's 1997 Key Employees' Stock Option Plan (the "1997 Plan"). R E C I T A L S: WHEREAS, the Board of Directors of the Corporation has deemed it advisable to adopt an amendment to the 1997 Plan providing for the automatic acceleration of outstanding options granted under the 1997 Plan in the event of certain transactions or actions constituting a change of control of the Corporation; and WHEREAS, the Corporation desires to evidence such amendment by this Declaration of Amendment. NOW, THEREFORE, IT IS DECLARED that, effective January 3, 2000, the 1997 Plan shall be and hereby is amended as follows: 1. Adoption of New Section 17. The Plan is hereby amended by adding new Section 17 ("Change of Control") as follows: "SECTION 17. CHANGE OF CONTROL (a) Notwithstanding any other provision of the Plan to the contrary, in the event of a change of control (as defined in Section 17(c) herein), all Options outstanding as of the date of such change of control shall become fully exercisable, whether or not then otherwise exercisable. (b) Notwithstanding the foregoing, in the event of a merger, share exchange, reorganization or other business combination affecting the Corporation or a related corporation, the Committee may, in its sole and absolute discretion, determine that any or all Options granted pursuant to the Plan shall not become exercisable on an accelerated basis, if the Corporation or the board of directors of the surviving or acquiring corporation, as the case may be, shall have taken such action, including but not limited to the assumption of Options granted under the Plan or the grant of substitute awards (in either case, with substantially similar terms as Options granted under the Plan), as in the opinion of the Committee is equitable or appropriate to protect the rights and interests of Optionees under the Plan. For the purposes of making the determinations provided for in this Section 17(b), the Committee shall be appointed by the Board of Directors, two-thirds of the members of which shall have been directors of the Corporation prior to the merger, share exchange, reorganization or other business combinations affecting the Corporation or a related corporation. 12 (c) For the purposes herein, a "change of control" shall be deemed to have occurred on the earliest of the following dates: (d) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation; (e) The date the shareholders of the Corporation approve a definitive agreement (A) to merge or consolidate the Corporation with or into another corporation, in which the Corporation is not the continuing or surviving corporation or pursuant to which any shares of Common Stock of the Corporation would be converted into cash, securities or other property of another corporation, other than a merger or consolidation of the Corporation in which holders of Common Stock immediately prior to the merger or consolidation have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger as immediately before, or (B) to sell or otherwise dispose of all or substantially all the assets of the Corporation; or (f) The date there shall have been a change in a majority of the Board of Directors of the Corporation within a 12-month period unless the nomination for election by the Corporation's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12-month period. (For purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act.)" 2. Continued Effect. Except as set forth herein, the 1997 Plan shall remain in full force and effect. IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf of RF Micro Devices, Inc. as of the day and year first above written. RF MICRO DEVICES, INC. By: ---------------------------- David A. Norbury, President and Chief Executive Officer ATTEST: - - --------------------------------- Powell T. Seymour, Secretary [Corporate Seal] 2 EX-10.5 8 1999 STOCK INCENTIVE PLAN 1 EXHIBIT 10.5 1999 STOCK INCENTIVE PLAN OF RF MICRO DEVICES, INC. 2 1999 STOCK INCENTIVE PLAN OF RF MICRO DEVICES, INC. 1. PURPOSE The purpose of the 1999 Stock Incentive Plan of RF Micro Devices, Inc. (the "Plan") is to encourage and enable selected employees, directors and independent contractors of RF Micro Devices, Inc. (the "Corporation") and its related corporations to acquire or to increase their holdings of common stock of the Corporation (the "Common Stock") and other proprietary interests in the Corporation in order to promote a closer identification of their interests with those of the Corporation and its shareholders, thereby further stimulating their efforts to enhance the efficiency, soundness, profitability, growth and shareholder value of the Corporation. This purpose will be carried out through the granting of benefits (collectively referred to herein as "awards") to selected employees, independent contractors and directors, including the granting of incentive stock options ("incentive options") intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), nonqualified stock options ("nonqualified options"), stock appreciation rights ("SARs"), restricted stock awards ("restricted stock awards"), and restricted units ("restricted units") to such participants. Incentive options and nonqualified options shall be referred to herein collectively as "options." Restricted stock awards and restricted units shall be referred to herein collectively as "restricted awards." 2. ADMINISTRATION OF THE PLAN (a) The Plan shall be administered by the Board of Directors of the Corporation (the "Board" or the "Board of Directors") or, upon its delegation, by the Compensation Committee of the Board of Directors (the "Committee"). Unless the Board determines otherwise, the Committee shall be comprised solely of "non-employee directors," as such term is defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or as may otherwise be permitted under Rule 16b-3. Further, to the extent required by Section 162(m) of the Code and related regulations, the Plan shall be administered by a committee comprised of "outside directors" (as such term is defined in Section 162(m) or related regulations) or as may otherwise be permitted under Section 162(m) and related regulations. For the purposes herein, the term "Administrator" shall refer to the Board and, upon its delegation to the Committee of all or part of its authority to administer the Plan, to the Committee. (b) Any action of the Administrator with respect to the Plan may be taken by a written instrument signed by all of the members of the Board or Committee, as appropriate, and any such action so taken by written consent shall be as fully effective as if it had been taken by a majority of the members at a meeting duly held and called. Subject to the provisions of the Plan, the Administrator shall have full and final authority in its discretion to take any action with respect to the Plan including, without limitation, the authority (i) to determine all matters relating to awards, including selection of individuals to be granted awards, the types of awards, the number of shares of the Common Stock, if any, subject to an award, and all terms, conditions, restrictions and limitations of an award; (ii) to prescribe the form or forms of the agreements evidencing any awards granted under the Plan; (iii) to establish, amend and rescind rules and regulations for the administration of the Plan; and (iv) to construe and interpret the Plan and agreements evidencing awards granted under the Plan, to interpret rules and 3 regulations for administering the Plan and to make all other determinations deemed necessary or advisable for administering the Plan. The Administrator shall also have authority, in its sole discretion, to accelerate the date that any award which was not otherwise exercisable or vested shall become exercisable or vested in whole or in part without any obligation to accelerate such date with respect to any other award granted to any recipient. In addition, the Administrator shall have the authority and discretion to establish terms and conditions of awards as the Administrator determines to be necessary or appropriate to conform to the applicable requirements or practices of jurisdictions outside of the United States. (c) Notwithstanding Section 2(b), the Administrator may delegate to the chief executive officer of the Corporation the authority to grant awards, and to make any or all of the determinations reserved for the Administrator in the Plan and summarized in Section 2(b) herein with respect to such awards, to any individual who, at the time of said grant or other determination, (i) is not deemed to be an officer or director of the Corporation within the meaning of Section 16 of the Exchange Act, (ii) is not deemed to be a covered employee (as defined in Section 18(b) herein), and (iii) is otherwise eligible under Section 5. To the extent that the Administrator has delegated authority to grant awards pursuant to this Section 2(c) to the chief executive officer, references to the Administrator shall include references to such person, subject, however, to the requirements of the Plan, Rule 16b-3, Section 162(m) of the Code and other applicable law. 3. EFFECTIVE DATE The effective date of the Plan shall be July 1, 1999 (the "Effective Date"). Awards may be granted under the Plan on and after the effective date, but no awards will be granted after June 30, 2009. 4. SHARES OF STOCK SUBJECT TO THE PLAN; AWARD LIMITATIONS (a) Subject to adjustments as provided in this Section 4, the number of shares of Common Stock that may be issued pursuant to awards shall be four million (4,000,000) shares. Such shares shall be authorized but unissued shares or shares purchased on the open market or by private purchase. The maximum number of shares of Common Stock that may be issued under the Plan pursuant to the grant of restricted awards shall not exceed 500,000 shares. No participant may be granted awards in any 12- month period for more than 100,000 shares of Common Stock (or the equivalent value thereof based on the fair market value per share of the Common Stock on the date of grant of an award). (b) The Corporation hereby reserves sufficient authorized shares of Common Stock to meet the grant of awards hereunder. Any shares subject to an award which is subsequently forfeited, expires or is terminated may again be the subject of an award granted under the Plan. To the extent that any shares of Common Stock subject to an award are not delivered to a participant (or his beneficiary) because the award is forfeited, canceled, settled in cash or used to satisfy applicable tax withholding obligations, such shares shall not be deemed to have been issued for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan. If the purchase price of an award granted under the Plan is satisfied by tendering shares of Common Stock, only the number of shares issued net of the shares of Common Stock tendered shall be deemed issued for 2 4 purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan. (c) If there is any change in the outstanding shares of Common Stock because of a merger, consolidation or reorganization involving the Corporation or a related corporation, or if the Board of Directors of the Corporation declares a stock dividend or stock split distributable in shares of Common Stock, or if there is a similar change in the capital stock structure of the Corporation or a related corporation affecting the Common Stock, the number of shares of Common Stock reserved for issuance under the Plan shall be correspondingly adjusted, and the Administrator shall make such adjustments to awards or to any provisions of this Plan as the Administrator deems equitable to prevent dilution or enlargement of awards or as may be otherwise advisable. 5. ELIGIBILITY An award may be granted only to an individual who satisfies the following eligibility requirements on the date the award is granted: (a) The individual is either (i) an employee of the Corporation or a related corporation, (ii) a director of the Corporation or a related corporation, or (iii) an independent contractor, consultant or advisor (collectively, "independent contractors") providing services to the Corporation or a related corporation. For this purpose, an individual shall be considered to be an "employee" only if there exists between the individual and the Corporation or a related corporation the legal and bona fide relationship of employer and employee. (b) With respect to the grant of incentive options, the individual does not own, immediately before the time that the incentive option is granted, stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or a related corporation. Notwithstanding the foregoing, an individual who owns more than 10% of the total combined voting power of the Corporation or a related corporation may be granted an incentive option if the option price is at least 110% of the fair market value of the Common Stock (as defined in Section 6(c)(ii) herein), and the option period (as defined in Section 6(d) herein) does not exceed five years. For this purpose, an individual will be deemed to own stock which is attributable to him under Section 424(d) of the Code. (c) With respect to the grant of substitute awards or assumption of awards in connection with a merger, reorganization or similar business combination involving the Corporation or related corporation, the recipient is otherwise eligible to receive the award and the terms of the award are consistent with the Plan and applicable laws, rules and regulations (including, to the extent necessary, the federal securities laws registration provisions and Section 424(a) of the Code). (d) The individual, being otherwise eligible under this Section 5, is selected by the Administrator as an individual to whom an award shall be granted (a "participant"). 3 5 6. OPTIONS (a) Grant of Options: Subject to the limitations of the Plan, the Administrator may in its sole and absolute discretion grant options to such eligible individuals in such numbers, upon such terms and at such times as the Administrator shall determine. Both incentive options and nonqualified options may be granted under the Plan. To the extent that an option is designated as an incentive option but does not qualify as such under Section 422 of the Code, the option (or portion thereof) shall be treated as a nonqualified option. (b) Option Price: The price per share at which an option may be exercised (the "option price") shall be established by the Administrator and stated in the agreement evidencing the grant of the option; provided, that (i) in the case of an incentive option, the option price shall be no less than the fair market value per share of the Common Stock (as determined in accordance with Section 6(c)(ii) on the date the option is granted) and (ii) in no event shall the option price per share of any option be less than the par value per share of the Common Stock. (c) Date of Grant; Fair Market Value (i) An incentive option shall be considered to be granted on the date that the Administrator acts to grant the option, or on any later date specified by the Administrator as the effective date of the option. A nonqualified option shall be considered to be granted on the date the Administrator acts to grant the option or any other date specified by the Administrator as the date of grant of the option. (ii) For the purposes of the Plan, the fair market value per share of the Common Stock shall be established in good faith by the Administrator and, except as may otherwise be determined by the Administrator, the fair market value shall be determined in accordance with the following provisions: (A) if the shares of Common Stock are listed for trading on the New York Stock Exchange or the American Stock Exchange, the fair market value shall be the closing sales price per share of the shares on the New York Stock Exchange or the American Stock Exchange (as applicable) on the date immediately preceding the date the option is granted, or, if there is no transaction on such date, then on the trading date nearest preceding the date the option is granted for which closing price information is available, and, provided further, if the shares are quoted on the Nasdaq National Market or the Nasdaq SmallCap Market of the Nasdaq Stock Market but are not listed for trading on the New York Stock Exchange or the American Stock Exchange, the fair market value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such system on the date immediately preceding the date the option is granted for which such information is available; or (B) if the shares of Common Stock are not listed or reported in any of the foregoing, then the fair market value shall be determined by the Administrator in accordance with the applicable provisions of Section 20.2031-2 of the Federal Estate Tax Regulations, or in any other manner consistent with the Code and accompanying regulations. (iii) In no event shall there first become exercisable by an employee in any one calendar year incentive options granted by the Corporation or any related corporation with 4 6 respect to shares having an aggregate fair market value (determined at the time an incentive option is granted) greater than $100,000. (d) Option Period and Limitations on the Right to Exercise Options (i) The term of an option (the "option period") shall be determined by the Administrator at the time the option is granted and stated in the individual agreement. With respect to incentive options, the option period shall not extend more than 10 years from the date on which the option is granted. Any option or portion thereof not exercised before expiration of the option period shall terminate. The period or periods during which an option may become exercisable shall be determined by the Administrator in a manner consistent with the terms of the Plan. (ii) An option may be exercised by giving written notice to the Corporation at such place as the Corporation or its designee shall direct. Such notice shall specify the number of shares to be purchased pursuant to an option and the aggregate purchase price to be paid therefor, and shall be accompanied by the payment of such purchase price. Unless the individual option agreement provides otherwise, such payment shall be in the form of (A) cash; (B) delivery (by either actual delivery or attestation) of shares of Common Stock owned by the participant at the time of exercise and acceptable to the Administrator; (C) shares of Common Stock withheld upon exercise; (D) delivery of written notice of exercise to the Corporation and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the option price; or (E) a combination of the foregoing methods. Shares tendered or withheld in payment on the exercise of an option shall be valued at their fair market value on the date of exercise, as determined by the Administrator by applying the provisions of Section 6(c)(ii). (iii) Unless an individual option agreement provides otherwise, no option granted to a participant who was an employee at the time of grant shall be exercised unless the participant is, at the time of exercise, an employee as described in Section 5(a), and has been an employee continuously since the date the option was granted, subject to the following: (A) An option shall not be affected by any change in the terms, conditions or status of the participant's employment, provided that the participant continues to be an employee of the Corporation or a related corporation. (B) The employment relationship of a participant shall be treated as continuing intact for any period that the participant is on military or sick leave or other bona fide leave of absence, provided that the period of such leave does not exceed 90 days, or, if longer, as long as the participant's right to reemployment is guaranteed either by statute or by contract. The employment relationship of a participant shall also be treated as continuing intact while the participant is not in active service because of disability. The Administrator shall 5 7 have sole authority to determine whether a participant is disabled and, if applicable, the date of a participant's termination of employment or service for any reason (the "termination date"). (C) Unless an individual option agreement provides otherwise, if the employment of a participant is terminated because of disability, or if the participant dies while he is an employee, the option may be exercised only to the extent exercisable on the participant's termination date, except that the Administrator may in its discretion accelerate the date for exercising all or any part of the option which was not otherwise exercisable on the termination date. The option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (X) the close of the period of 12 months next succeeding the termination date; or (Y) the close of the option period. In the event of the participant's death, such option shall be exercisable by such person or persons as shall have acquired the right to exercise the option by will or by the laws of intestate succession. (D) Unless an individual option agreement provides otherwise, if the employment of the participant is terminated for any reason other than disability, death or for "cause," his option may be exercised to the extent exercisable on his termination date, except that the Administrator may in its discretion accelerate the date for exercising all or any part of the option which was not otherwise exercisable on the termination date. The option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (X) the close of the period of 90 days next succeeding the termination date; or (Y) the close of the option period. If the participant dies following such termination of employment and prior to the earlier of the dates specified in (X) or (Y) of this subparagraph (D), the participant shall be treated as having died while employed under subparagraph (C) immediately preceding (treating for this purpose the participant's date of termination of employment as the termination date). In the event of the participant's death, such option shall be exercisable by such person or persons as shall have acquired the right to exercise the option by will or by the laws of intestate succession. (E) Unless an individual option agreement provides otherwise, if the employment of the participant is terminated for "cause," his option shall lapse and no longer be exercisable as of his termination date, as determined by the Administrator. For purposes of this subparagraph (E) and subparagraph (D), the participant's termination shall be for "cause" if such termination results from the participant's (X) dishonesty; (Y) refusal to perform his duties for the Corporation; or (Z) engaging in conduct that could be materially damaging to the Corporation without a reasonable good faith belief that such conduct was in the best interest of the Corporation. The determination of "cause" shall be made by the Administrator and its determination shall be final and conclusive. 6 8 (F) Notwithstanding the foregoing, the Administrator shall have authority, in its discretion, to extend the period during which an option may be exercised; provided that, in the event that any such extension shall cause an incentive option to be designated as a nonqualified option, no such extension shall be made without the prior written consent of the participant. (iv) Unless an individual option agreement provides otherwise, an option granted to a participant who was a non-employee director of the Corporation or a related corporation at the time of grant may be exercised only to the extent exercisable on the date of the participant's termination of service to the Corporation or a related corporation (unless the termination was for cause), and must be exercised, if at all, prior to the first to occur of the following, as applicable: (X) the close of the period of one year next succeeding the termination date; or (Y) the close of the option period. If the services of such a participant are terminated for cause (as defined in Section 6(d)(iii)(E) herein), his option shall lapse and no longer be exercisable as of his termination date, as determined by the Administrator. Notwithstanding the foregoing, the Administrator may in its discretion accelerate the date for exercising all or any part of an option which was not otherwise exercisable on the termination date or extend the period during which an option may be exercised, or both. (v) Unless an individual option agreement provides otherwise, an option granted to a participant who was an independent contractor of the Corporation or a related corporation at the time of grant (and who does not thereafter become an employee, in which case he shall be subject to the provisions of Section 6(d)(iii) herein) may be exercised only to the extent exercisable on the date of the participant's termination of service to the Corporation or a related corporation (unless the termination was for cause), and must be exercised, if at all, prior to the first to occur of the following, as applicable: (X) the close of the period of 90 days next succeeding the termination date; or (Y) the close of the option period. If the services of such a participant are terminated for cause (as defined in Section 6(d)(iii)(E) herein), his option shall lapse and no longer be exercisable as of his termination date, as determined by the Administrator. Notwithstanding the foregoing, the Administrator may in its discretion accelerate the date for exercising all or any part of an option which was not otherwise exercisable on the termination date or extend the period during which an option may be exercised, or both. (vi) A participant or his legal representative, legatees or distributees shall not be deemed to be the holder of any shares subject to an option and shall not have any rights of a shareholder unless and until certificates for such shares have been issued and delivered to him or them under the Plan. A certificate or certificates for shares of Common Stock acquired upon exercise of an option shall be issued in the name of the participant (or his beneficiary) and distributed to the participant (or his beneficiary) as soon as practicable following receipt of notice of exercise and payment of the purchase price (except as may otherwise be determined by the Corporation in the event of payment of the option price pursuant to Section 6(d)(ii)(D) herein). 7 9 (e) Nontransferability of Options (i) Incentive options shall not be transferable other than by will or the laws of intestate succession. Nonqualified options shall not be transferable other than by will or the laws of intestate succession, except as may be permitted by the Administrator in a manner consistent with the registration provisions of the Securities Act of 1933, as amended (the "Securities Act"). Except as may be permitted by the preceding sentence, an option shall be exercisable during the participant's lifetime only by him or by his guardian or legal representative. The designation of a beneficiary does not constitute a transfer. (ii) If a participant is subject to Section 16 of the Exchange Act, shares of Common Stock acquired upon exercise of an option may not, without the consent of the Administrator, be disposed of by the participant until the expiration of six months after the date the option was granted. 7. STOCK APPRECIATION RIGHTS (a) Grant of SARs: Subject to the limitations of the Plan, the Administrator may in its sole and absolute discretion grant SARs to such eligible individuals, in such numbers, upon such terms and at such times as the Administrator shall determine. SARs may be granted to an optionee of an option (hereinafter called a "related option") with respect to all or a portion of the shares of Common Stock subject to the related option (a "tandem SAR") or may be granted separately to an eligible individual (a "freestanding SAR"). (b) Tandem SARs: A tandem SAR may be granted either concurrently with the grant of the related option or (if the related option is a nonqualified option) at any time thereafter prior to the complete exercise, termination, expiration or cancellation of such related option. Tandem SARs shall be exercisable only at the time and to the extent that the related option is exercisable (and may be subject to such additional limitations on exercisability as the Administrator may provide in the agreement), and in no event after the complete termination or full exercise of the related option. For purposes of determining the number of shares of Common Stock that remain subject to such related option and for purposes of determining the number of shares of Common Stock in respect of which other awards may be granted, a related option shall be considered to have been surrendered upon the exercise of a tandem SAR to the extent of the number of shares of Common Stock with respect to which such tandem SAR is exercised. Upon the exercise or termination of a related option, the tandem SARs with respect thereto shall be canceled automatically to the extent of the number of shares of Common Stock with respect to which the related option was so exercised or terminated. Subject to the limitations of the Plan, upon the exercise of a tandem SAR, the participant shall be entitled to receive from the Corporation, for each share of Common Stock with respect to which the tandem SAR is being exercised, consideration equal in value to the excess of the fair market value of a share of Common Stock on the date of exercise over the related option price per share; provided, that the Administrator may establish a maximum value payable for such SARs. (c) Freestanding SARs: Unless an individual agreement provides otherwise, the base price of a freestanding SAR shall be not less than 100% of the fair market value of the Common Stock (as 8 10 determined in accordance with Section 6(c)(ii) herein) on the date of grant of the freestanding SAR. Subject to the limitations of the Plan, upon the exercise of a freestanding SAR, the participant shall be entitled to receive from the Corporation, for each share of Common Stock with respect to which the freestanding SAR is being exercised, consideration equal in value to the excess of the fair market value of a share of Common Stock on the date of exercise over the base price per share of such freestanding SAR; provided, that the Administrator may establish a maximum value payable for such SARs. (d) Exercise of SARs: (i) Subject to the terms of the Plan, SARs shall be exercisable in whole or in part upon such terms and conditions as may be established by the Administrator and stated in the related agreement. The period during which an SAR may be exercisable shall not exceed 10 years from the date of grant or, in the case of tandem SARs, such shorter option period as may apply to the related option. Any SAR or portion thereof not exercised before expiration of the exercise period established by the Administrator shall terminate. (ii) SARs may be exercised by giving written notice to the Corporation at such place as the Administrator or its designee shall direct. The date of exercise of an SAR shall mean the date on which the Corporation shall have received proper notice from the participant of the exercise of such SAR. (iii) No SAR may be exercised unless the participant is, at the time of exercise, an eligible participant, as described in Section 5, and has been a participant continuously since the date the SAR was granted, subject to the provisions of Sections 6(d)(iii), (iv) and (v) herein. (e) Consideration: The consideration to be received upon the exercise of the SAR by the participant shall be paid in cash, shares of Common Stock (valued at fair market value on the date of exercise of such SAR in accordance with Section 6(c)(ii) herein) or a combination of cash and shares of Common Stock, as elected by the Administrator. The Corporation's obligation arising upon the exercise of the SAR may be paid currently or on a deferred basis with such interest or earnings equivalent, if any, as the Administrator may determine. A certificate or certificates for shares of Common Stock acquired upon exercise of an SAR for shares shall be issued in the name of the participant (or his beneficiary) and distributed to the participant (or his beneficiary) as soon as practicable following receipt of notice of exercise. A participant or his legal representative, legatees or distributees shall not be deemed to be the holder of any shares subject to an SAR and shall not have any rights as a shareholder unless and until certificates for such shares have been issued and delivered to him or them under the Plan. No fractional shares of Common Stock will be issuable upon exercise of the SAR and, unless otherwise provided in the applicable agreement, the participant will receive cash in lieu of fractional shares. (f) Limitations: The applicable SAR agreement shall contain such terms, conditions and limitations consistent with the Plan as may be specified by the Administrator. Unless otherwise provided in the applicable agreement or the Plan, any such terms, conditions or limitations relating to a tandem SAR shall not restrict the exercisability of the related option. 9 11 (g) Nontransferability: (i) SARs shall not be transferable other than by will or the laws of intestate succession. SARs may be exercised during the participant's lifetime only by him or by his guardian or legal representative. The designation of a beneficiary does not constitute a transfer. (ii) If the participant is subject to Section 16 of the Exchange Act, shares of Common Stock acquired upon exercise of an SAR may not, without the consent of the Administrator, be disposed of by the participant until the expiration of six months after the date the SAR was granted. 8. RESTRICTED AWARDS (a) Grant of Restricted Awards: Subject to the limitations of the Plan, the Administrator may in its sole and absolute discretion grant restricted awards to such individuals in such numbers, upon such terms and at such times as the Administrator shall determine. A restricted award may consist of a restricted stock award or a restricted unit, or both. Restricted awards shall be payable in cash or whole shares of Common Stock (including restricted stock), or partly in cash and partly in whole shares of Common Stock, in accordance with the terms of the Plan and the sole and absolute discretion of the Administrator. The Administrator shall determine the nature, length and starting date of the period, if any, during which a restricted award may be earned (the "restriction period"), and shall determine the conditions which must be met in order for a restricted award to be granted or to vest or be earned (in whole or in part), which conditions may include, but are not limited to, attainment of performance objectives, completion of the restriction period (or a combination of attainment of performance objectives and completion of the restriction period), retirement, displacement, disability or death, or any combination of such conditions. In the case of restricted awards based upon performance criteria, or a combination of performance criteria and continued service, the Administrator shall determine the performance objectives to be used in valuing restricted awards and determine the extent to which such awards have been earned. Performance objectives may vary from participant to participant and between groups of participants and shall be based upon such Corporation, business unit and/or individual performance factors and criteria as the Administrator in its sole discretion may deem appropriate, including, but not limited to, sales goals, earnings per share, return on equity, return on assets or total return to shareholders. The Administrator shall have sole authority to determine whether and to what degree restricted awards have been earned and are payable and to interpret the terms and conditions of restricted awards and the provisions herein. The Administrator shall also determine the form and terms of payment of awards. The Administrator, in its sole and absolute discretion, may accelerate the date that any restricted award granted to the participant shall be deemed to be earned in whole or in part, without any obligation to accelerate such date with respect to other restricted awards. (b) Forfeiture of Restricted Awards: Unless an individual agreement provides otherwise, if the employment or service of a participant shall be terminated for any reason and the participant has not yet earned all or part of a restricted award pursuant to the terms of the Plan and the individual agreement, such award to the extent not then earned shall be forfeited immediately upon such termination and the participant shall have no further rights with respect thereto. 10 12 (c) Dividend and Voting Rights; Share Certificates: Unless an individual agreement provides otherwise, (i) a participant shall have no dividend rights or voting rights or other rights as a shareholder with respect to shares subject to a restricted award that has not yet vested; and (ii) a certificate or certificates for shares representing a restricted award payable in shares shall be issued in the name of the participant (or his beneficiary) and distributed to the participant (or his beneficiary) as soon as practicable after the shares subject to the award shall be earned. (d) Nontransferability: (i) The recipient of a restricted award shall not sell, transfer, assign, pledge or otherwise encumber shares subject to the award until all conditions to vesting have been met and shares have been issued and delivered to him. (ii) Restricted awards shall not be transferable other than by will or the laws of intestate succession. The designation of a beneficiary does not constitute a transfer. (iii) If a participant of a restricted award is subject to Section 16 of the Exchange Act, shares of Common Stock subject to such award may not, without the consent of the Administrator, be sold or otherwise disposed of within six months following the date of grant of such award. 9. WITHHOLDING The Corporation shall withhold all required local, state and federal taxes from any amount payable in cash with respect to an award. The Corporation shall require any recipient of an award payable in shares of the Common Stock to pay to the Corporation in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Corporation to such authority for the account of such recipient. Notwithstanding the foregoing, the Corporation may establish procedures to permit a recipient to satisfy such obligation in whole or in part, and any other local, state or federal income tax obligations relating to such an award, by electing (the "election") to have the Corporation withhold shares of Common Stock from the shares to which the recipient is entitled. The number of shares to be withheld shall have a fair market value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator. 10. SECTION 16(b) COMPLIANCE It is the general intent of the Corporation that transactions under the Plan which are subject to Section 16 of the Exchange Act shall comply with Rule 16b-3 under the Exchange Act. Notwithstanding anything in the Plan to the contrary, the Administrator, in its sole and absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to participants who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other participants. 11 13 11. NO RIGHT OR OBLIGATION OF CONTINUED EMPLOYMENT Nothing in the Plan shall confer upon the participant any right to continue in the service of the Corporation or a related corporation as an employee, director, or independent contractor or to interfere in any way with the right of the Corporation or a related corporation to terminate the participant's employment or service at any time. Except as otherwise provided in the Plan or an individual agreement, awards granted under the Plan to employees of the Corporation or a related corporation shall not be affected by any change in the duties or position of the participant, as long as such individual remains an employee of, or in service to, the Corporation or a related corporation. 12. UNFUNDED PLAN; RETIREMENT PLANS (a) Neither a participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Corporation or any related corporation, including, without limitation, any specific funds, assets or other property which the Corporation or any related corporation, in their discretion, may set aside in anticipation of a liability under the Plan. A participant shall have only a contractual right to the Common Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Corporation or any related corporation. Nothing contained in the Plan shall constitute a guarantee that the assets of such corporations shall be sufficient to pay any benefits to any person. (b) In no event shall any amounts accrued, distributable or payable under the Plan be treated as compensation for the purpose of determining the amount of contributions or benefits to which any person shall be entitled under any retirement plan sponsored by the Corporation or a related corporation that is intended to be a qualified plan within the meaning of Section 401(a) of the Code. 13. AMENDMENT AND TERMINATION OF THE PLAN The Plan and any award granted under the Plan may be amended or terminated at any time by the Board of Directors of the Corporation; provided, that (i) approval of an amendment to the Plan by the shareholders of the Corporation shall be required to the extent, if any, that shareholder approval of such amendment is required by applicable law, rule or regulation; and (ii) such amendment or termination of an award shall not, without the consent of a recipient of an award, adversely affect the rights of the recipient with respect to an outstanding award. 14. RESTRICTIONS ON SHARES The Corporation may impose such restrictions on any shares representing awards hereunder as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky or state securities laws applicable to such shares. Notwithstanding any other Plan provision to the contrary, the Corporation shall not be obligated to issue, deliver or transfer shares of Common Stock under the Plan or make any other distribution of benefits under the Plan, or take any other action, unless such delivery, distribution or action is in compliance with all applicable laws, rules and regulations (including but not limited to the requirements of the Securities Act). The Corporation may cause a restrictive legend to be placed 12 14 on any certificate issued pursuant to an award hereunder in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel. 15. APPLICABLE LAW The Plan shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to the conflict of laws provisions of any state. 16. SHAREHOLDER APPROVAL The Plan is subject to approval by the shareholders of the Corporation, which approval must occur, if at all, within 12 months of the effective date of the Plan. Awards granted prior to such shareholder approval shall be conditioned upon and shall be effective only upon approval of the Plan by such shareholders on or before such date. 17. CHANGE OF CONTROL (a) Notwithstanding any other provision of the Plan to the contrary, in the event of a change of control (as defined in Section 17(b) herein): (i) All options and SARs outstanding as of the date of such change of control shall become fully exercisable, whether or not then otherwise exercisable. (ii) Any restrictions including but not limited to the restriction period applicable to any restricted award shall be deemed to have expired, and such restricted awards shall become fully vested and payable to the fullest extent of the original grant of the applicable award. (iii) Notwithstanding the foregoing, in the event of a merger, share exchange, reorganization or other business combination affecting the Corporation or a related corporation, the Administrator may, in its sole and absolute discretion, determine that any or all awards granted pursuant to the Plan shall not vest or become exercisable on an accelerated basis, if the Corporation or the board of directors of the surviving or acquiring corporation, as the case may be, shall have taken such action, including but not limited to the assumption of awards granted under the Plan or the grant of substitute awards (in either case, with substantially similar terms as awards granted under the Plan), as in the opinion of the Administrator is equitable or appropriate to protect the rights and interests of participants under the Plan. For the purposes herein, if the Committee is acting as the Administrator authorized to make the determinations provided for in this Section 17(a)(iii), the Committee shall be appointed by the Board of Directors, two-thirds of the members of which shall have been directors of the Corporation prior to the merger, share exchange, reorganization or other business combinations affecting the Corporation or a related corporation. (b) For the purposes herein, a "change of control" shall be deemed to have occurred on the earliest of the following dates: 13 15 (i) The date any entity or person that is not a shareholder on the effective date of the Plan shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation; (ii) The date the shareholders of the Corporation approve a definitive agreement (A) to merge or consolidate the Corporation with or into another corporation, in which the Corporation is not the continuing or surviving corporation or pursuant to which any shares of Common Stock of the Corporation would be converted into cash, securities or other property of another corporation, other than a merger or consolidation of the Corporation in which holders of Common Stock immediately prior to the merger or consolidation have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger as immediately before, or (B) to sell or otherwise dispose of all or substantially all the assets of the Corporation; or (iii) The date there shall have been a change in a majority of the Board of Directors of the Corporation within a 12-month period unless the nomination for election by the Corporation's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12-month period. (For purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act.) 18. CERTAIN DEFINITIONS In addition to other terms defined in the Plan, the following terms shall have the meaning indicated: (a) "Agreement" means any written agreement or agreements between the Corporation and the recipient of an award pursuant to the Plan relating to the terms, conditions and restrictions of options, SARs, restricted awards and any other awards conferred herein. (b) "Covered employee" shall have the meaning given the term in Section 162(m) of the Code or the regulations thereunder. (c) "Disability" shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than twelve months. (d) "Parent" or "parent corporation" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if each corporation other than the Corporation owns stock possessing 50% or more of the total combined voting power of all classes of stock in another corporation in the chain. 14 16 (e) "Predecessor" or "predecessor corporation" means a corporation which was a party to a transaction described in Section 424(a) of the Code (or which would be so described if a substitution or assumption under Section 424(a) had occurred) with the Corporation, or a corporation which is a parent or subsidiary of the Corporation, or a predecessor of any such corporation. (f) "Related corporation" means any parent, subsidiary or predecessor of the Corporation. (g) "Restricted stock" shall mean shares of Common Stock which are subject to restricted awards payable in shares, the vesting of which is subject to restrictions set forth in the Plan or the agreement relating to such award. (h) "Retirement" shall mean retirement in accordance with the retirement policies and procedures established by the Corporation, unless an individual agreement establishes a different meaning for such term. (i) "Subsidiary" or "subsidiary corporation" means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if each corporation other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in another corporation in the chain. IN WITNESS WHEREOF, this 1999 Stock Incentive Plan of RF Micro Devices, Inc., is, by the authority of the Board of Directors of the Corporation, executed in behalf of the Corporation, the ____ day of _______________, 1999. RF MICRO DEVICES, INC. By: ----------------------------------- Name: _________________________________ Title: ________________________________ ATTEST: - - ---------------------------------- Secretary [Corporate Seal] 15 17 2000 DECLARATION OF AMENDMENT TO 1999 STOCK INCENTIVE PLAN OF RF MICRO DEVICES, INC. THIS 2000 DECLARATION OF AMENDMENT, is made this 3rd day of January, 2000, by RF MICRO DEVICES, INC. (the "Corporation"), to the Corporation's 1999 Stock Incentive Plan (the "1999 Plan"). R E C I T A L S: WHEREAS, the Board of Directors of the Corporation has deemed it advisable to amend Section 17(b)(i) of the 1999 Plan; and WHEREAS, the Corporation desires to evidence such amendment by this Declaration of Amendment. NOW, THEREFORE, IT IS DECLARED that, effective January 3, 2000, the 1999 Plan shall be and hereby is amended as follows: 1. Amendment to Section 17. Section 17 ("Change of Control") of the 1999 Plan is hereby amended by deleting Section 17(b)(i) and inserting the following in lieu thereof: "(i) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation;" 2. Continued Effect. Except as set forth herein, the 1999 Plan shall remain in full force and effect. IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf of RF Micro Devices, Inc. as of the day and year first above written. RF MICRO DEVICES, INC. By: -------------------------------- David A. Norbury, President and Chief Executive Officer ATTEST: - - --------------------------------- Powell T. Seymour, Secretary [Corporate Seal] EX-10.6 9 STOCK OPTION AGREEMENT/WALTER H. WILKINSON, JR. 1 EXHIBIT 10.6 RF MICRO DEVICES, INC. Stock Option Agreement THIS STOCK OPTION AGREEMENT (the "Agreement"), made as of the 27th day of October 1998, between RF MICRO DEVICES, INC., a North Carolina corporation (the "Corporation"), and Walter H. Wilkinson, Jr. (the "Director"); R E C I T A L : To compensate the Director for his service on the Board of Directors and to promote a closer identification of his interests with those of the Corporation, the Corporation and the Director hereby agree as follows: 1. The Corporation hereby grants to the Director as a matter of separate inducement and agreement in connection with his services to the Corporation, the right and option (the "Option") to purchase all or any part of an aggregate of five thousand (5,000) shares of the Common Stock of the Corporation (the "shares"), at the purchase price of $20.875 per share. The Option is designated as a nonqualified stock option and, as such, is not intended to qualify for treatment as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. The Option will expire if not exercised in full on or before the 26th day of October, 2008. 2. The Option shall become exercisable on the dates set forth on Schedule A hereto. To the extent that the Option is exercisable but not exercised, such Option shall accumulate and be exercisable by the Director in whole or in part at any time prior to expiration of the Option. An Option shall be exercised by giving written notice to the Secretary of the Corporation or his designee. Such notice shall specify the number of shares to be purchased pursuant to the Option and the aggregate purchase price to be paid therefor, and shall be accompanied by the payment of such purchase price. Such payment shall be in the form of (i) cash; (ii) shares of Common Stock owned by the Director at the time of exercise; (iii) shares of Common Stock withheld upon exercise; (iv) delivery of written notice of exercise to the Secretary and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option price; or (v) a combination of such methods. Shares of Common Stock tendered or withheld in payment upon the exercise of an Option shall be valued at their fair market value on the date of exercise, as determined by the Corporation. Upon the exercise of an Option in whole or in part and payment of the purchase price to the Corporation in accordance with the foregoing, the Corporation shall as soon thereafter as practicable deliver to the Director a certificate or certificates for the shares purchased. 3. Nothing contained in this Agreement shall require the Corporation or a related corporation to continue the services of the Director as a director for any particular period of time, nor shall it require the Director to remain in service to the Corporation or a related corporation as a director for any particular period of time. Except as otherwise expressly provided below, all rights 2 of the Director under this Agreement with respect to the unexercised portion of his Option shall terminate immediately upon termination of the services of the Director with the Corporation as a director. Notwithstanding the foregoing, (i) if the Director dies while serving as a director, any portion of his Option which was exercisable immediately before his death may be exercised at any time within 180 days of the date of death by such person or persons as shall have acquired the right to exercise the Option by will or the laws of intestate succession; and (ii) if the Director's service on the Board terminates for any reason other than death, that portion of his Option which was exercisable immediately before such termination may be exercised at any time within 30 days following the date of such termination, and after such 30-day period such Option shall terminate. 4. This Option shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession. To the extent required by Rule 16b-3, shares of Common Stock acquired upon exercise of an Option shall not, without the consent of the Corporation, be disposed of by the Director until the expiration of six months after the date the Option was granted. This Option shall be exercisable during the Director's lifetime only by the Director or by his guardian or legal representative. 5. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. 6. The Corporation may impose such restrictions on any shares issued pursuant to the exercise of the Option granted hereunder as it may deem advisable, including without limitation restrictions under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the requirements of any applicable self-regulatory organization and any blue sky or securities laws applicable to such shares. Notwithstanding any other provision herein to the contrary, the Corporation shall not be obligated to issue, deliver or transfer shares of Common Stock under this Agreement or to take any other action unless such action is in compliance with applicable laws, rules and regulations (including but not limited to the requirements of the federal securities laws). The Corporation may cause a restrictive legend to be placed on any certificate issued pursuant to the exercise of an Option granted hereunder in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel to the Corporation. It is the general intent of the Corporation that this Agreement and transactions under this Agreement shall comply in all respects with Rule 16b-3 under the Exchange Act, and, if any provision herein is later found not to be in compliance with Section 16 of the Exchange Act the provision shall be deemed null and void, and in all events this Agreement shall be construed in favor of transactions hereunder meeting the requirements of Rule 16b-3 or successor rules applicable to this Agreement. 7. Notwithstanding any other provision of this Agreement to the contrary, in the event of a Change of Control (as defined below), the Option outstanding as of the date of such Change of Control shall become fully exercisable, whether or not then otherwise exercisable. Notwithstanding 2 3 the foregoing, in the event of a merger, share exchange, reorganization or other business combination affecting the Corporation or a related corporation, the Board of Directors of the Corporation may, in its sole and absolute discretion, determine that any or all of the Option shall not become exercisable on an accelerated basis, if the board of directors of the surviving or acquiring corporation, as the case may be, shall have taken such action, including but not limited to the assumption of the Option or the grant of substitute awards (in either case, with substantially similar terms as the Option), as in the opinion of the Board of Directors is equitable or appropriate to protect the rights and interests of the Director under this Agreement. For the purposes of this Agreement, a "Change of Control" shall be deemed to have occurred on the earliest of the following dates: (i) The date any entity or person that is not a shareholder on the date of this Agreement shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation; (ii) The date the shareholders of the Corporation approve a definitive agreement (A) to merge or consolidate the Corporation with or into another corporation, in which the Corporation is not the continuing or surviving corporation or pursuant to which any shares of Common Stock of the Corporation would be converted into cash, securities or other property of another corporation, other than a merger or consolidation of the Corporation in which holders of Common Stock immediately prior to the merger or consolidation have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger as immediately before, or (B) to sell or otherwise dispose of all or substantially all the assets of the Corporation; or (iii) The date there shall have been a change in a majority of the Board of Directors of the Corporation within a 12-month period unless the nomination for election by the Corporation's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12-month period. For purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act. 8. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina. 3 4 IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Corporation and by the Director on the day and year first above written. RF MICRO DEVICES, INC. By: --------------------------------- David A. Norbury President and Chief Executive Officer Attest: - - ----------------------------- Secretary [Corporate Seal] DIRECTOR ------------------------------------- Walter H. Wilkinson, Jr. 4 5 RF MICRO DEVICES, INC. STOCK OPTION AGREEMENT SCHEDULE A Name of Optionee: Walter H. Wilkinson, Jr. Date Option granted: October 27, 1998. Date Option expires: October 26, 2008. Number of shares subject to Option: 5,000 shares. Option price (per share): $20.875. Date Installment Number of Shares First Exercisable in Installment ----------------- ----------------- October 27, 1999 1,666 October 27, 2000 1,667 October 27, 2001 1,667 6 RF MICRO DEVICES, INC. AMENDMENT TO STOCK OPTION AGREEMENT THIS AMENDMENT TO STOCK OPTION AGREEMENT (the "Amendment"), effective the 3rd day of January, 2000, between RF MICRO DEVICES, INC., a North Carolina corporation (the "Corporation"), and WALTER H. WILKINSON, JR. (the "Optionee"); R E C I T A L S : WHEREAS, the Optionee has been granted an option (the "Option") to purchase shares of the Corporation's common stock (the "Common Stock") pursuant to a certain Stock Option Agreement dated as of October 27, 1998 between the Optionee and the Corporation (the "Option Agreement"), a copy of which is attached hereto as Exhibit A; and WHEREAS, the Corporation and the Optionee have agreed to amend the Option Agreement as provided herein. NOW, THEREFORE, in furtherance of the purposes of the Option Agreement and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Corporation and the Optionee hereby agree as follows: 1. Section 7 of the Option Agreement is hereby amended by amending the second paragraph of Section 7 to delete current subparagraph (i) and insert the following in lieu thereof: "(i) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation;" 2. By entering into this Amendment, the Optionee and the Corporation hereby expressly agree that, except for those changes to the Option Agreement set forth in this Amendment, the Option Agreement shall continue in full force and effect. 3. This Amendment and the Option Agreement may be further modified, amended or terminated only by the written consent of the parties hereto. 4. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. 5. This Amendment shall be construed and enforced according to the laws of the State of North Carolina. 7 IN WITNESS WHEREOF, this Amendment has been executed in behalf of the Corporation and by the Optionee on the day and year first above written. RF MICRO DEVICES, INC. By: ---------------------------------- Name: ________________________________ Title: _______________________________ Attest: - - --------------------------------- Secretary [Corporate Seal] OPTIONEE (SEAL) ------------------------------- Walter H. Wilkinson, Jr. 2 8 EXHIBIT A RF MICRO DEVICES, INC. STOCK OPTION AGREEMENT EX-10.7 10 STOCK OPTION AGREEMENT/ALBERT E. PALADINO 1 EXHIBIT 10.7 RF MICRO DEVICES, INC. Stock Option Agreement THIS STOCK OPTION AGREEMENT (the "Agreement"), made as of the 27th day of October 1998, between RF MICRO DEVICES, INC., a North Carolina corporation (the "Corporation"), and Albert E. Paladino (the "Director"); R E C I T A L : To compensate the Director for his service on the Board of Directors and to promote a closer identification of his interests with those of the Corporation, the Corporation and the Director hereby agree as follows: 1. The Corporation hereby grants to the Director as a matter of separate inducement and agreement in connection with his services to the Corporation, the right and option (the "Option") to purchase all or any part of an aggregate of five thousand (5,000) shares of the Common Stock of the Corporation (the "shares"), at the purchase price of $20.875 per share. The Option is designated as a nonqualified stock option and, as such, is not intended to qualify for treatment as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. The Option will expire if not exercised in full on or before the 26th day of October, 2008. 2. The Option shall become exercisable on the dates set forth on Schedule A hereto. To the extent that the Option is exercisable but not exercised, such Option shall accumulate and be exercisable by the Director in whole or in part at any time prior to expiration of the Option. An Option shall be exercised by giving written notice to the Secretary of the Corporation or his designee. Such notice shall specify the number of shares to be purchased pursuant to the Option and the aggregate purchase price to be paid therefor, and shall be accompanied by the payment of such purchase price. Such payment shall be in the form of (i) cash; (ii) shares of Common Stock owned by the Director at the time of exercise; (iii) shares of Common Stock withheld upon exercise; (iv) delivery of written notice of exercise to the Secretary and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option price; or (v) a combination of such methods. Shares of Common Stock tendered or withheld in payment upon the exercise of an Option shall be valued at their fair market value on the date of exercise, as determined by the Corporation. Upon the exercise of an Option in whole or in part and payment of the purchase price to the Corporation in accordance with the foregoing, the Corporation shall as soon thereafter as practicable deliver to the Director a certificate or certificates for the shares purchased. 3. Nothing contained in this Agreement shall require the Corporation or a related corporation to continue the services of the Director as a director for any particular period of time, nor shall it require the Director to remain in service to the Corporation or a related corporation as a director for any particular period of time. Except as otherwise expressly provided below, all rights 2 of the Director under this Agreement with respect to the unexercised portion of his Option shall terminate immediately upon termination of the services of the Director with the Corporation as a director. Notwithstanding the foregoing, (i) if the Director dies while serving as a director, any portion of his Option which was exercisable immediately before his death may be exercised at any time within 180 days of the date of death by such person or persons as shall have acquired the right to exercise the Option by will or the laws of intestate succession; and (ii) if the Director's service on the Board terminates for any reason other than death, that portion of his Option which was exercisable immediately before such termination may be exercised at any time within 30 days following the date of such termination, and after such 30-day period such Option shall terminate. 4. This Option shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession. To the extent required by Rule 16b-3, shares of Common Stock acquired upon exercise of an Option shall not, without the consent of the Corporation, be disposed of by the Director until the expiration of six months after the date the Option was granted. This Option shall be exercisable during the Director's lifetime only by the Director or by his guardian or legal representative. 5. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. 6. The Corporation may impose such restrictions on any shares issued pursuant to the exercise of the Option granted hereunder as it may deem advisable, including without limitation restrictions under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the requirements of any applicable self-regulatory organization and any blue sky or securities laws applicable to such shares. Notwithstanding any other provision herein to the contrary, the Corporation shall not be obligated to issue, deliver or transfer shares of Common Stock under this Agreement or to take any other action unless such action is in compliance with applicable laws, rules and regulations (including but not limited to the requirements of the federal securities laws). The Corporation may cause a restrictive legend to be placed on any certificate issued pursuant to the exercise of an Option granted hereunder in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel to the Corporation. It is the general intent of the Corporation that this Agreement and transactions under this Agreement shall comply in all respects with Rule 16b-3 under the Exchange Act, and, if any provision herein is later found not to be in compliance with Section 16 of the Exchange Act the provision shall be deemed null and void, and in all events this Agreement shall be construed in favor of transactions hereunder meeting the requirements of Rule 16b-3 or successor rules applicable to this Agreement. 7. Notwithstanding any other provision of this Agreement to the contrary, in the event of a Change of Control (as defined below), the Option outstanding as of the date of such Change of Control shall become fully exercisable, whether or not then otherwise exercisable. Notwithstanding 2 3 the foregoing, in the event of a merger, share exchange, reorganization or other business combination affecting the Corporation or a related corporation, the Board of Directors of the Corporation may, in its sole and absolute discretion, determine that any or all of the Option shall not become exercisable on an accelerated basis, if the board of directors of the surviving or acquiring corporation, as the case may be, shall have taken such action, including but not limited to the assumption of the Option or the grant of substitute awards (in either case, with substantially similar terms as the Option), as in the opinion of the Board of Directors is equitable or appropriate to protect the rights and interests of the Director under this Agreement. For the purposes of this Agreement, a "Change of Control" shall be deemed to have occurred on the earliest of the following dates: (i) The date any entity or person that is not a shareholder on the date of this Agreement shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation; (ii) The date the shareholders of the Corporation approve a definitive agreement (A) to merge or consolidate the Corporation with or into another corporation, in which the Corporation is not the continuing or surviving corporation or pursuant to which any shares of Common Stock of the Corporation would be converted into cash, securities or other property of another corporation, other than a merger or consolidation of the Corporation in which holders of Common Stock immediately prior to the merger or consolidation have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger as immediately before, or (B) to sell or otherwise dispose of all or substantially all the assets of the Corporation; or (iii) The date there shall have been a change in a majority of the Board of Directors of the Corporation within a 12-month period unless the nomination for election by the Corporation's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12-month period. For purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act. 8. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina. 3 4 IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Corporation and by the Director on the day and year first above written. RF MICRO DEVICES, INC. By: ------------------------------- David A. Norbury President and Chief Executive Officer Attest: - - ----------------------------- Secretary [Corporate Seal] DIRECTOR ------------------------------------- Albert E. Paladino 4 5 RF MICRO DEVICES, INC. STOCK OPTION AGREEMENT SCHEDULE A Name of Optionee: Albert E. Paladino Date Option granted: October 27, 1998. Date Option expires: October 26, 2008. Number of shares subject to Option: 5,000 shares. Option price (per share): $20.875. Date Installment Number of Shares First Exercisable in Installment ----------------- ---------------- October 27, 1999 1,666 October 27, 2000 1,667 October 27, 2001 1,667 6 RF MICRO DEVICES, INC. AMENDMENT TO STOCK OPTION AGREEMENT THIS AMENDMENT TO STOCK OPTION AGREEMENT (the "Amendment"), effective the 3rd day of January, 2000, between RF MICRO DEVICES, INC., a North Carolina corporation (the "Corporation"), and ALBERT E. PALADINO (the "Optionee"); R E C I T A L S : WHEREAS, the Optionee has been granted an option (the "Option") to purchase shares of the Corporation's common stock (the "Common Stock") pursuant to a certain Stock Option Agreement dated as of October 27, 1998 between the Optionee and the Corporation (the "Option Agreement"), a copy of which is attached hereto as Exhibit A; and WHEREAS, the Corporation and the Optionee have agreed to amend the Option Agreement as provided herein. NOW, THEREFORE, in furtherance of the purposes of the Option Agreement and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Corporation and the Optionee hereby agree as follows: 1. Section 7 of the Option Agreement is hereby amended by amending the second paragraph of Section 7 to delete current subparagraph (i) and insert the following in lieu thereof: "(i) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation;" 2. By entering into this Amendment, the Optionee and the Corporation hereby expressly agree that, except for those changes to the Option Agreement set forth in this Amendment, the Option Agreement shall continue in full force and effect. 3. This Amendment and the Option Agreement may be further modified, amended or terminated only by the written consent of the parties hereto. 4. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. 5. This Amendment shall be construed and enforced according to the laws of the State of North Carolina. 7 IN WITNESS WHEREOF, this Amendment has been executed in behalf of the Corporation and by the Optionee on the day and year first above written. RF MICRO DEVICES, INC. By: ---------------------------------- Name: ________________________________ Title: _______________________________ Attest: - - --------------------------------- Secretary [Corporate Seal] OPTIONEE (SEAL) ------------------------------ Albert E. Paladino 2 8 EXHIBIT A RF MICRO DEVICES, INC. STOCK OPTION AGREEMENT EX-10.8 11 STOCK OPTION AGREEMENT/ERIK H. VAN DER KAAY 1 EXHIBIT 10.8 RF MICRO DEVICES, INC. Stock Option Agreement THIS STOCK OPTION AGREEMENT (the "Agreement"), made as of the 27th day of October 1998, between RF MICRO DEVICES, INC., a North Carolina corporation (the "Corporation"), and Erik H. van der Kaay (the "Director"); R E C I T A L : To compensate the Director for his service on the Board of Directors and to promote a closer identification of his interests with those of the Corporation, the Corporation and the Director hereby agree as follows: 1. The Corporation hereby grants to the Director as a matter of separate inducement and agreement in connection with his services to the Corporation, the right and option (the "Option") to purchase all or any part of an aggregate of five thousand (5,000) shares of the Common Stock of the Corporation (the "shares"), at the purchase price of $20.875 per share. The Option is designated as a nonqualified stock option and, as such, is not intended to qualify for treatment as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. The Option will expire if not exercised in full on or before the 26th day of October, 2008. 2. The Option shall become exercisable on the dates set forth on Schedule A hereto. To the extent that the Option is exercisable but not exercised, such Option shall accumulate and be exercisable by the Director in whole or in part at any time prior to expiration of the Option. An Option shall be exercised by giving written notice to the Secretary of the Corporation or his designee. Such notice shall specify the number of shares to be purchased pursuant to the Option and the aggregate purchase price to be paid therefor, and shall be accompanied by the payment of such purchase price. Such payment shall be in the form of (i) cash; (ii) shares of Common Stock owned by the Director at the time of exercise; (iii) shares of Common Stock withheld upon exercise; (iv) delivery of written notice of exercise to the Secretary and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option price; or (v) a combination of such methods. Shares of Common Stock tendered or withheld in payment upon the exercise of an Option shall be valued at their fair market value on the date of exercise, as determined by the Corporation. Upon the exercise of an Option in whole or in part and payment of the purchase price to the Corporation in accordance with the foregoing, the Corporation shall as soon thereafter as practicable deliver to the Director a certificate or certificates for the shares purchased. 3. Nothing contained in this Agreement shall require the Corporation or a related corporation to continue the services of the Director as a director for any particular period of time, nor shall it require the Director to remain in service to the Corporation or a related corporation as a director for any particular period of time. Except as otherwise expressly provided below, all rights 2 of the Director under this Agreement with respect to the unexercised portion of his Option shall terminate immediately upon termination of the services of the Director with the Corporation as a director. Notwithstanding the foregoing, (i) if the Director dies while serving as a director, any portion of his Option which was exercisable immediately before his death may be exercised at any time within 180 days of the date of death by such person or persons as shall have acquired the right to exercise the Option by will or the laws of intestate succession; and (ii) if the Director's service on the Board terminates for any reason other than death, that portion of his Option which was exercisable immediately before such termination may be exercised at any time within 30 days following the date of such termination, and after such 30-day period such Option shall terminate. 4. This Option shall not be transferable (including by pledge or hypothecation) other than by will or the laws of intestate succession. To the extent required by Rule 16b-3, shares of Common Stock acquired upon exercise of an Option shall not, without the consent of the Corporation, be disposed of by the Director until the expiration of six months after the date the Option was granted. This Option shall be exercisable during the Director's lifetime only by the Director or by his guardian or legal representative. 5. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. 6. The Corporation may impose such restrictions on any shares issued pursuant to the exercise of the Option granted hereunder as it may deem advisable, including without limitation restrictions under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the requirements of any applicable self-regulatory organization and any blue sky or securities laws applicable to such shares. Notwithstanding any other provision herein to the contrary, the Corporation shall not be obligated to issue, deliver or transfer shares of Common Stock under this Agreement or to take any other action unless such action is in compliance with applicable laws, rules and regulations (including but not limited to the requirements of the federal securities laws). The Corporation may cause a restrictive legend to be placed on any certificate issued pursuant to the exercise of an Option granted hereunder in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel to the Corporation. It is the general intent of the Corporation that this Agreement and transactions under this Agreement shall comply in all respects with Rule 16b-3 under the Exchange Act, and, if any provision herein is later found not to be in compliance with Section 16 of the Exchange Act the provision shall be deemed null and void, and in all events this Agreement shall be construed in favor of transactions hereunder meeting the requirements of Rule 16b-3 or successor rules applicable to this Agreement. 7. Notwithstanding any other provision of this Agreement to the contrary, in the event of a Change of Control (as defined below), the Option outstanding as of the date of such Change of Control shall become fully exercisable, whether or not then otherwise exercisable. Notwithstanding 2 3 the foregoing, in the event of a merger, share exchange, reorganization or other business combination affecting the Corporation or a related corporation, the Board of Directors of the Corporation may, in its sole and absolute discretion, determine that any or all of the Option shall not become exercisable on an accelerated basis, if the board of directors of the surviving or acquiring corporation, as the case may be, shall have taken such action, including but not limited to the assumption of the Option or the grant of substitute awards (in either case, with substantially similar terms as the Option), as in the opinion of the Board of Directors is equitable or appropriate to protect the rights and interests of the Director under this Agreement. For the purposes of this Agreement, a "Change of Control" shall be deemed to have occurred on the earliest of the following dates: (i) The date any entity or person that is not a shareholder on the date of this Agreement shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation; (ii) The date the shareholders of the Corporation approve a definitive agreement (A) to merge or consolidate the Corporation with or into another corporation, in which the Corporation is not the continuing or surviving corporation or pursuant to which any shares of Common Stock of the Corporation would be converted into cash, securities or other property of another corporation, other than a merger or consolidation of the Corporation in which holders of Common Stock immediately prior to the merger or consolidation have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger as immediately before, or (B) to sell or otherwise dispose of all or substantially all the assets of the Corporation; or (iii) The date there shall have been a change in a majority of the Board of Directors of the Corporation within a 12-month period unless the nomination for election by the Corporation's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12-month period. For purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act. 8. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina. 3 4 IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Corporation and by the Director on the day and year first above written. RF MICRO DEVICES, INC. By: ------------------------------------- David A. Norbury President and Chief Executive Officer Attest: - - ----------------------------- Secretary [Corporate Seal] DIRECTOR ----------------------------------------- Erik H. van der Kaay 4 5 RF MICRO DEVICES, INC. STOCK OPTION AGREEMENT SCHEDULE A Name of Optionee: Erik H. van der Kaay Date Option granted: October 27, 1998. Date Option expires: October 26, 2008. Number of shares subject to Option: 5,000 shares. Option price (per share): $20.875. Date Installment Number of Shares First Exercisable in Installment ----------------- ----------------- October 27, 1999 1,666 October 27, 2000 1,667 October 27, 2001 1,667 6 RF MICRO DEVICES, INC. AMENDMENT TO STOCK OPTION AGREEMENT THIS AMENDMENT TO STOCK OPTION AGREEMENT (the "Amendment"), effective the 3rd day of January, 2000, between RF MICRO DEVICES, INC., a North Carolina corporation (the "Corporation"), and ERIK H. VAN DER KAAY (the "Optionee"); R E C I T A L S : WHEREAS, the Optionee has been granted an option (the "Option") to purchase shares of the Corporation's common stock (the "Common Stock") pursuant to a certain Stock Option Agreement dated as of October 27, 1998 between the Optionee and the Corporation (the "Option Agreement"), a copy of which is attached hereto as Exhibit A; and WHEREAS, the Corporation and the Optionee have agreed to amend the Option Agreement as provided herein. NOW, THEREFORE, in furtherance of the purposes of the Option Agreement and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Corporation and the Optionee hereby agree as follows: 1. Section 7 of the Option Agreement is hereby amended by amending the second paragraph of Section 7 to delete current subparagraph (i) and insert the following in lieu thereof: "(i) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, fifty-one percent (51%) or more of the outstanding Common Stock of the Corporation;" 2. By entering into this Amendment, the Optionee and the Corporation hereby expressly agree that, except for those changes to the Option Agreement set forth in this Amendment, the Option Agreement shall continue in full force and effect. 3. This Amendment and the Option Agreement may be further modified, amended or terminated only by the written consent of the parties hereto. 4. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. 5. This Amendment shall be construed and enforced according to the laws of the State of North Carolina. 7 IN WITNESS WHEREOF, this Amendment has been executed in behalf of the Corporation and by the Optionee on the day and year first above written. RF MICRO DEVICES, INC. By: -------------------------------------- Name: ____________________________________ Title: ___________________________________ Attest: - - --------------------------------- Secretary [Corporate Seal] OPTIONEE (SEAL) ----------------------------------- Erik H. van der Kaay 2 8 EXHIBIT A RF MICRO DEVICES, INC. STOCK OPTION AGREEMENT EX-10.9 12 AMENDED, RESTATED PARTICIPATION AGREEMENT 1 EXHIBIT 10.9 - - -------------------------------------------------------------------------------- AMENDED, RESTATED AND REPLACEMENT PARTICIPATION AGREEMENT Dated as of December 31, 1999 among RF MICRO DEVICES, INC., as the Construction Agent and as the Lessee, FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES HERETO FROM TIME TO TIME, as the Holders, THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES HERETO FROM TIME TO TIME, as the Lenders, FIRST UNION NATIONAL BANK, as the Agent for the Lenders and respecting the Security Documents, as the Agent for the Lenders and the Holders, to the extent of their interests and CREDIT SUISSE FIRST BOSTON, as Syndication Agent - - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS PAGE ---- SECTION 1. THE LOANS.........................................................1 SECTION 2. HOLDER ADVANCES...................................................2 SECTION 3. SUMMARY OF TRANSACTIONS...........................................2 3.1. Operative Agreements...........................................2 3.2. Property Purchase..............................................2 3.3. Construction of Improvements; Commencement of Basic Rent.......3 SECTION 4. THE CLOSINGS......................................................3 4.1. Initial Closing Date...........................................3 4.2. Initial Closing Date; Property Closing Dates; Acquisition Advances; Construction Advances..................3 SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS...............................3 5.1. General........................................................3 5.2. Procedures for Funding.........................................4 5.3. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders Relating to the Initial Closing Date and the Advance of Funds for the Acquisition of a Property.......6 5.4. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders Relating to the Advance of Funds after the Acquisition Advance.....................................12 5.5. Additional Reporting and Delivery Requirements on Completion Date and on Construction Period Termination Date........................................................14 5.6. The Construction Agent Delivery of Construction Budget Modifications...............................................15 5.7. Restrictions on Liens.........................................15 5.8. Payments......................................................15 SECTION 6. REPRESENTATIONS AND WARRANTIES...................................16 6.1. Representations and Warranties of the Borrower................16 6.2. Representations and Warranties of the Construction Agent and the Lessee..............................................18 6.3. Representations and Warranties of the Lenders and the Holders.....................................................23 SECTION 7. PAYMENT OF CERTAIN EXPENSES......................................24 7.1. Transaction Expenses..........................................24 7.2. Brokers' Fees.................................................25 7.3. Certain Fees and Expenses.....................................25 7.4. Unused Fee....................................................25 7.5. Other Fees....................................................26 i 3 SECTION 8. OTHER COVENANTS AND AGREEMENTS...................................26 8.1. Cooperation with the Construction Agent or the Lessee........26 8.2. Covenants of the Owner Trustee and the Holders...............26 8.3. The Lessee Covenants, Consent and Acknowledgment.............28 8.3.A Additional Affirmative Covenants of the Lessee...............32 8.3.B Additional Negative Covenants of the Lessee..................35 8.4. Sharing of Certain Payments..................................38 8.5. Grant of Easements, etc. ....................................38 8.6. Appointment by the Agent, the Lenders, the Holders and the Owner Trustee..............................................38 8.7. Collection and Allocation of Payments and Other Amounts......39 8.8. Release of Properties, etc. .................................42 SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT.............................43 9.1. The Construction Agent's and the Lessee's Credit Agreement Rights...........................................43 9.2. The Construction Agent's and the Lessee's Trust Agreement Rights...........................................43 SECTION 10. TRANSFER OF INTEREST............................................44 10.1. Restrictions on Transfer.....................................44 10.2. Effect of Transfer...........................................45 SECTION 11. INDEMNIFICATION.................................................45 11.1. General Indemnity............................................45 11.2. General Tax Indemnity........................................48 11.3. Increased Costs, Illegality, etc. ...........................52 11.4. Funding/Contribution Indemnity...............................54 11.5. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC. ...........................................54 11.6. Indemnity Prior to Completion Date/Construction Period Termination Date...........................................55 SECTION 12. MISCELLANEOUS...................................................55 12.1. Survival of Agreements.......................................55 12.2. Notices......................................................56 12.3. Counterparts.................................................57 12.4. Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters...............................................57 12.5. Headings, etc. ..............................................59 12.6. Parties in Interest..........................................59 12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE..........................................59 12.8. Severability.................................................60 12.9. Liability Limited............................................60 12.10. Rights of the Lessee.........................................61 12.11. Further Assurances...........................................62 12.12. Calculations under Operative Agreements......................62 12.13. Confidentiality..............................................62 12.14. Financial Reporting/Tax Characterization.....................64 ii 4 12.15. Set-off....................................................64 SCHEDULES 1 - Loan Amortization for Equipment 2 - Equipment 3 - Additional Collateral Liens EXHIBITS A - Form of Requisition - Sections 4.2, 5.2, 5.3 and 5.4 B - Form of Outside Counsel Opinion for the Lessee - Section 5.3(j) C - Form of Officer's Certificate - Section 5.3(z) D - Form of Secretary's Certificate - Section 5.3(aa) E - Form of Officer's Certificate - Section 5.3(bb) F - Form of Secretary's Certificate - Section 5.3(cc) G - Form of Outside Counsel Opinion for the Owner Trustee - Section 5.3(dd) H - Form of Outside Counsel Opinion for the Lessee - Section 5.3(ee) I - Form of Officer's Certificate - Section 5.5 J - Description of Material Litigation - Section 6.2(d) K - Form of Officer's Financial Compliance Certificate Appendix A - Rules of Usage and Definitions iii 5 AMENDED, RESTATED AND REPLACEMENT PARTICIPATION AGREEMENT THIS AMENDED, RESTATED AND REPLACEMENT PARTICIPATION AGREEMENT dated as of December 31, 1999 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, this "Agreement") is by and among RF MICRO DEVICES, INC., a North Carolina corporation (the "Lessee" or the "Construction Agent"); FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually (in its individual capacity, the "Trust Company"), except as expressly stated herein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 (the "Owner Trustee", the "Borrower" or the "Lessor"); the various banks and other lending institutions which are parties hereto from time to time as holders of certificates issued with respect to the RFMD Real Estate Trust 1999-1 (subject to the definition of Holders in Appendix A hereto, individually, a "Holder" and collectively, the "Holders"); the various banks and other lending institutions which are parties hereto from time to time as lenders (subject to the definition of Lenders in Appendix A hereto, individually, a "Lender" and collectively, the "Lenders"); and FIRST UNION NATIONAL BANK, a national banking association, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (in such capacity, the "Agent"). Capitalized terms used but not otherwise defined in this Agreement shall have the meanings set forth in Appendix A hereto. In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. THE LOANS. Subject to the terms and conditions of this Agreement and the other Operative Agreements and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, the Lenders have agreed to make Loans to the Lessor from time to time in an aggregate principal amount of up to the aggregate amount of the Commitments of the Lenders in order for the Lessor to acquire the Properties and certain Improvements, to develop and construct certain Improvements in accordance with the Agency Agreement and the terms and provisions hereof and for the other purposes described herein, and in consideration of the receipt of proceeds of the Loans, the Lessor will issue the Notes. The Loans shall be made and the Notes shall be issued pursuant to the Credit Agreement. Pursuant to Section 5 of this Agreement and Section 2 of the Credit Agreement, the Loans will be made to the Lessor from time to time at the request of the Construction Agent in consideration for the Construction Agent agreeing for the benefit of the Lessor, pursuant to the Agency Agreement, to acquire the Properties, to acquire the Equipment, to construct certain Improvements and to cause the Lessee to lease the Properties, each in accordance with the Agency Agreement and the other Operative Agreements. The Loans and the obligations of the Lessor under the Credit Agreement shall be secured by the Collateral. 6 SECTION 2. HOLDER ADVANCES. Subject to the terms and conditions of this Agreement and the other Operative Agreements and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, on each date Advances are requested to be made in accordance with Section 5 hereof, each Holder shall make a Holder Advance on a pro rata basis to the Lessor with respect to the RFMD Real Estate Trust 1999-1 based on its Holder Commitment in an amount in immediately available funds such that the aggregate of all Holder Advances on such date shall be three percent (3%) of the amount of the Requested Funds on such date; provided, that no Holder shall be obligated for any Holder Advance in excess of its pro rata share of the Available Holder Commitment. The aggregate amount of Holder Advances shall be up to the aggregate amount of the Holder Commitments. No prepayment or any other payment with respect to any Advance shall be permitted such that the Holder Advance with respect to such Advance is less than three percent (3%) of the outstanding amount of such Advance, except in connection with termination or expiration of the Term or in connection with the exercise of remedies relating to the occurrence of a Lease Event of Default. The representations, warranties, covenants and agreements of the Holders herein and in the other Operative Agreements are several, and not joint or joint and several. SECTION 3. SUMMARY OF TRANSACTIONS. 3.1. OPERATIVE AGREEMENTS. On the date hereof, each of the respective parties hereto and thereto shall execute and deliver this Agreement, the Lease, each applicable Ground Lease, the Agency Agreement, the Credit Agreement, the Notes, the Trust Agreement, the Certificates, the Security Agreement, each applicable Mortgage Instrument and such other documents, instruments, certificates and opinions of counsel as agreed to by the parties hereto. 3.2. PROPERTY PURCHASE. On each Property Closing Date and subject to the terms and conditions of this Agreement (a) the Holders will each make a Holder Advance in accordance with Sections 2 and 5 of this Agreement and the terms and provisions of the Trust Agreement, (b) the Lenders will each make Loans in accordance with Sections 1 and 5 of this Agreement and the terms and provisions of the Credit Agreement, (c) the Lessor will purchase and acquire good and marketable title to or ground lease pursuant to a Ground Lease, the applicable Property, each to be within an Approved State, identified by the Construction Agent, in each case pursuant to a Deed, Bill of Sale or Ground Lease, as the case may be, and grant the Agent a lien on such Property by execution of the required Security Documents, (d) the Agent, the Lessee and the Lessor shall execute and deliver a Lease Supplement relating to such Property and (e) the Term shall commence with respect to such Property. 2 7 3.3. CONSTRUCTION OF IMPROVEMENTS; COMMENCEMENT OF BASIC RENT. Construction Advances will be made with respect to particular Improvements to be constructed and with respect to ongoing Work regarding the Equipment and construction of particular Improvements, in each case, pursuant to the terms and conditions of this Agreement and the Agency Agreement. The Construction Agent will act as a construction agent on behalf of the Lessor respecting the Work regarding the Equipment, the construction of such Improvements and the expenditures of the Construction Advances related to the foregoing. The Construction Agent shall promptly notify the Lessor upon Completion of the Improvements and the Lessee shall commence to pay Basic Rent as of the Rent Commencement Date. 3.4. [INTENTIONALLY RESERVED]. SECTION 4. THE CLOSINGS. 4.1. INITIAL CLOSING DATE. All documents and instruments required to be delivered on the Initial Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC, Charlotte, North Carolina, or at such other location as may be determined by the Lessor, the Agent and the Lessee. 4.2. INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION ADVANCES; CONSTRUCTION ADVANCES. The Construction Agent shall deliver to the Agent a requisition (a "Requisition"), in the form attached hereto as Exhibit A or in such other form as is satisfactory to the Agent, in its reasonable discretion, in connection with (a) the Transaction Expenses and other fees, expenses and disbursements payable, pursuant to Section 7.1, by the Lessor and (b) each Acquisition Advance pursuant to Section 5.3 and (c) each Construction Advance pursuant to Section 5.4. SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS. 5.1. GENERAL. (a) To the extent funds have been advanced to the Lessor as Loans by the Lenders and to the Lessor as Holder Advances by the Holders, the Lessor will use such funds from time to time in accordance with the terms and conditions of this Agreement and the other Operative Agreements (i) at the direction of the Construction Agent to acquire the Properties in accordance with the terms of this Agreement, the Agency Agreement and the other Operative Agreements, (ii) to make Advances to the Construction Agent to permit the acquisition, testing, engineering, installation, development, construction, modification, design, and renovation, as applicable, of the Properties (or components thereof) in accordance with the terms of the Agency 3 8 Agreement and the other Operative Agreements, and (iii) to pay Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Sections 7.1(a) and 7.1(b). (b) In lieu of the payment of interest on the Loans and Holder Yield on the Holder Advances on any Scheduled Interest Payment Date with respect to any Property during the period prior to the Rent Commencement Date with respect to such Property, (i) each Lender's Loan shall automatically be increased by the amount of interest accrued and unpaid on such Loan for such period (except to the extent that at any time such increase would cause such Lender's Loan to exceed such Lender's Available Commitment, in which case the Lessee shall pay such excess amount to such Lender in immediately available funds on the date such Lender's Available Commitment was exceeded), and (ii) each Holder's Holder Advance shall automatically be increased by the amount of Holder Yield accrued and unpaid on such Holder Advance for such period (except to the extent that at any time such increase would cause the Holder Advance of such Holder to exceed such Holder's Available Holder Commitment, in which case the Lessee shall pay such excess amount to such Holder in immediately available funds on the date the Available Holder Commitment of such Holder was exceeded). Such increases in a Lender's Loan and a Holder's Holder Advance shall occur without any disbursement of funds by any Person. 5.2. PROCEDURES FOR FUNDING. (a) The Construction Agent shall designate the date for Advances hereunder in accordance with the terms and provisions hereof; provided, however, it is understood and agreed that no more than two (2) Advances (excluding any conversion and/or continuation of any Loans or Holder Advances) may be requested during any calendar month. Not less than (i) three (3) Business Days prior to the Initial Closing Date and (ii) three (3) Business Days prior to the date on which any Acquisition Advance or Construction Advance is to be made, the Construction Agent shall deliver to the Agent, (A) with respect to the Initial Closing Date and each Acquisition Advance, a Requisition as described in Section 4.2 hereof (including without limitation a legal description of the Land, if any, a schedule of the Improvements, if any, and a schedule of the Equipment, if any, acquired or to be acquired on such date, and a schedule of the Work, if any, to be performed, each of the foregoing in a form reasonably acceptable to the Agent) and (B) with respect to each Construction Advance, a Requisition identifying (among other things) the Property to which such Construction Advance relates. (b) Each Requisition shall: (i) be irrevocable, (ii) request funds in an amount that is not in excess of the total aggregate of the Available Commitments plus the Available Holder Commitments at such time, and (iii) request that the Holders make Holder Advances and that the Lenders make Loans to the Lessor for the payment of Transaction Expenses, Property Acquisition Costs (in the case of an Acquisition Advance) or other Property Costs (in the case of a Construction Advance) that have 4 9 previously been incurred or are to be incurred on the date of such Advance to the extent such were not subject to a prior Requisition, in each case as specified in the Requisition. (c) Subject to the satisfaction of the conditions precedent set forth in Sections 5.3 or 5.4, as applicable, on each Property Closing Date or the date on which the Construction Advance is to be made, as applicable, (i) the Lenders shall make Loans based on their respective Lender Commitments to the Lessor in an aggregate amount equal to ninety-seven percent (97%) of the Requested Funds specified in any Requisition (ratably between the Tranche A Lenders and the Tranche B Lenders with the Tranche A Lenders funding eighty-five percent (85%) of the Requested Funds and the Tranche B Lenders funding twelve percent (12%) of the Requested Funds), up to an aggregate principal amount equal to the aggregate of the Available Commitments, (ii) each Holder shall make a Holder Advance based on its Holder Commitment in an amount such that the aggregate of all Holder Advances at such time shall be three percent (3%) of the balance of the Requested Funds specified in such Requisition, up to the aggregate advanced amount equal to the aggregate of the Available Holder Commitments; and (iii) the total amount of such Loans and Holder Advances made on such date shall (x) be used by the Lessor to pay Property Costs including Transaction Expenses within three (3) Business Days of the receipt by the Lessor of such Advance or (y) be advanced by the Lessor on the date of such Advance to the Construction Agent or the Lessee to pay Property Costs, as applicable. Notwithstanding that the Operative Agreements state that Advances shall be directed to the Lessor, each Advance shall in fact be directed to the Construction Agent (for the benefit of the Lessor) and applied by the Construction Agent (for the benefit of the Lessor) pursuant to the requirements imposed on the Lessor under the Operative Agreements. (d) With respect to an Advance obtained by the Lessor to pay for Property Costs and/or Transaction Expenses or other costs payable under Section 7.1 hereof and not expended by the Lessor for such purpose on the date of such Advance, such amounts shall be held by the Lessor (or the Agent on behalf of the Lessor) until the applicable closing date or, if such closing date does not occur within three (3) Business Days of the date of the Lessor's receipt of such Advance, shall be applied regarding the applicable Advance to repay the Lenders and the Holders and, subject to the terms hereof, and of the Credit Agreement and the Trust Agreement, shall remain available for future Advances. Any such amounts held by the Lessor (or the Agent on behalf of the Lessor) shall be subject to the lien of the Security Agreement. (e) All Operative Agreements which are to be delivered to the Lessor, the Agent, the Lenders or the Holders shall be delivered to the Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders, and such items (except for Notes, Certificates, Bills of Sale, the Ground Leases and chattel paper originals, with respect to which in each case there shall be only one original) shall be delivered with originals sufficient for the Lessor, the Agent, each Lender and each Holder. All other items which are to be delivered to the Lessor, the Agent, the Lenders or the Holders shall be delivered to the Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders, and such 5 10 other items shall be held by the Agent. To the extent any such other items are requested in writing from time to time by the Lessor, any Lender or any Holder, the Agent shall provide a copy of such item to the party requesting it. (f) Notwithstanding the completion of any closing under this Agreement pursuant to Sections 5.3 or 5.4, each condition precedent in connection with any such closing may be subsequently enforced by the Agent (unless such has previously been expressly waived in writing by the Agent). 5.3. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS RELATING TO THE INITIAL CLOSING DATE AND THE ADVANCE OF FUNDS FOR THE ACQUISITION OF A PROPERTY. The obligations (i) on the Initial Closing Date of the Lessor, the Agent, the Lenders and the Holders to enter into the transactions contemplated by this Agreement, including without limitation the obligation to execute and deliver the applicable Operative Agreements to which each is a party on the Initial Closing Date, (ii) on the Initial Closing Date of the Holders to make Holder Advances, and of the Lenders to make Loans in order to pay Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Section 7.1(a) of this Agreement and (iii) on a Property Closing Date for the purpose of providing funds to the Lessor necessary to pay the Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Section 7.1(b) of this Agreement and to acquire or ground lease a Property (an "Acquisition Advance"), in each case (with regard to the foregoing Sections 5.3(i), (ii) and (iii)) are subject to the satisfaction or waiver of the following conditions precedent on or prior to the Initial Closing Date or the applicable Property Closing Date, as the case may be (to the extent such conditions precedent require the delivery of any agreement, certificate, instrument, memorandum, legal or other opinion, appraisal, commitment, title insurance commitment, lien report or any other document of any kind or type, such shall be in form and substance satisfactory to the Agent, in its reasonable discretion; notwithstanding the foregoing, the obligations of each party shall not be subject to any conditions contained in this Section 5.3 which are required to be performed by such party): (a) the correctness of the representations and warranties of the parties to this Agreement contained herein, in each of the other Operative Agreements and each certificate delivered pursuant to any Operative Agreement on each such date; (b) the performance by the parties to this Agreement of their respective agreements contained herein and in the other Operative Agreements to be performed by them on or prior to each such date; (c) the Agent shall have received a fully executed counterpart copy of the Requisition, appropriately completed (along with the appropriate schedules which shall be appropriately completed in all material respects); 6 11 (d) title to each such Property shall conform to the representations and warranties set forth in Section 6.2(l) hereof; (e) the Construction Agent shall have delivered to the Agent a good standing certificate for the Construction Agent in the state where each such Property is located, the Deed with respect to the Land and existing Improvements (if any), a copy of the Ground Lease (if any), and a copy of the Bill of Sale with respect to the Equipment (if any), respecting such of the foregoing as are being acquired or ground leased on each such date with the proceeds of the Loans and Holder Advances or which have been previously acquired or ground leased with the proceeds of the Loans and Holder Advances and such Land, existing Improvements (if any) and Equipment (if any) shall be located in an Approved State; (f) there shall not have occurred and be continuing any Default or Event of Default under any of the Operative Agreements and no Default or Event of Default under any of the Operative Agreements will have occurred after giving effect to the Advance requested by each such Requisition; (g) the Construction Agent shall have delivered to the Agent title insurance commitments to issue policies respecting each such Property, with such endorsements as the Agent deems reasonably necessary, in favor of the Lessor and the Agent from a title insurance company acceptable to the Agent, but only with such title exceptions thereto as are acceptable to the Agent; (h) the Construction Agent shall have delivered to the Agent an environmental site assessment respecting each such Property prepared by an independent recognized professional acceptable to the Agent and evidencing no pre-existing environmental condition with respect to which there is more than a remote risk of loss; (i) the Construction Agent shall have delivered to the Agent a survey (with a flood hazard certification) respecting each such Property prepared by (i) an independent recognized professional acceptable to the Agent and (ii) in a manner and including such information as is required by the Agent; (j) unless such an opinion has previously been delivered with respect to a particular state, the Construction Agent shall have caused to be delivered to the Agent a legal opinion in the form attached hereto as Exhibit B or in such other form as is acceptable to the Agent with respect to local law real property issues respecting the state in which each such Property is located addressed to the Lessor, the Agent, the Lenders and the Holders, from counsel located in the state where each such Property is located, prepared by counsel acceptable to the Agent; (k) the Agent shall be satisfied that the acquisition, ground leasing and/or holding of each such Property and the execution of the Mortgage Instrument and the other 7 12 Security Documents will not materially and adversely affect the rights of the Lessor, the Agent, the Holders or the Lenders under or with respect to the Operative Agreements; (l) the Construction Agent shall have delivered to the Agent invoices for, or other reasonably satisfactory evidence of, the various Transaction Expenses and other fees, expenses and disbursements referenced in Sections 7.1(a) or 7.1(b) of this Agreement, as appropriate; (m) the Construction Agent shall have caused to be delivered to the Agent a Mortgage Instrument (in such form as is acceptable to the Agent, with revisions as necessary to conform to applicable state law), Lessor Financing Statements and Lender Financing Statements respecting each such Property, all fully executed and in recordable form; (n) the Lessee shall have delivered to the Agent with respect to each such Property a Lease Supplement and a memorandum (or short form lease) regarding the Lease and such Lease Supplement (such memorandum or short form lease to be in the form attached to the Lease as Exhibit B or in such other form as is acceptable to the Agent, with modifications as necessary to conform to applicable state law, and in form suitable for recording); (o) with respect to each Acquisition Advance, the aggregate Available Commitment for all Lenders plus the Available Holder Commitment (after deducting the Unfunded Amount, if any, and after giving effect to the Acquisition Advance for such other Properties) the amount remaining will be sufficient to pay all amounts payable therefrom; (p) if any such Property is subject to a Ground Lease, the Construction Agent shall have caused a lease memorandum (or short form lease) to be delivered to the Agent for such Ground Lease and, if requested by the Agent, a landlord waiver and a mortgagee waiver (in each case, in such form as is acceptable to the Agent); (q) counsel (acceptable to the Agent) for the ground lessor of each such Property subject to a Ground Lease shall have issued to the Lessor, the Agent, the Lenders and the Holders, its opinion; (r) the Construction Agent shall have delivered to the Agent a preliminary Construction Budget for each such Property, if applicable; (s) the Construction Agent shall have provided evidence to the Agent of insurance with respect to each such Property as provided in the Lease; (t) the Construction Agent shall have caused an Appraisal regarding each such Property to be provided to the Agent from an appraiser satisfactory to the Agent; 8 13 (u) the Construction Agent shall cause (i) Uniform Commercial Code lien searches, tax lien searches and judgment lien searches regarding the Lessee to be conducted (and copies thereof to be delivered to the Agent) in such jurisdictions as determined by the Agent by a nationally recognized search company acceptable to the Agent and (ii) the liens referenced in such lien searches which are objectionable to the Agent to be either removed or otherwise handled in a manner satisfactory to the Agent; (v) all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Agreements and/or documents related thereto shall have been paid or provisions for such payment shall have been made to the satisfaction of the Agent; (w) in the opinion of the Agent and its respective counsel, the transactions contemplated by the Operative Agreements do not and will not subject the Lessor, the Lenders, the Agent or the Holders to any adverse regulatory prohibitions, constraints, penalties or fines; (x) each of the Operative Agreements to be entered into on such date shall have been duly authorized, executed and delivered by the parties thereto, and shall be in full force and effect, and the Agent shall have received a fully executed copy of each of the Operative Agreements; (y) since the date of the most recent audited financial statements of the Lessee, there shall not have occurred any event, condition or state of facts which shall have or could reasonably be expected to have a Material Adverse Effect, other than as specifically contemplated by the Operative Agreements; (z) as of the Initial Closing Date only, the Agent shall have received an Officer's Certificate, dated as of the Initial Closing Date, of the Lessee in the form attached hereto as Exhibit C or in such other form as is acceptable to the Agent stating that (i) each and every representation and warranty of the Lessee contained in the Operative Agreements to which it is a party is true and correct on and as of the Initial Closing Date; (ii) no Default or Event of Default has occurred and is continuing under any Operative Agreement; (iii) each Operative Agreement to which the Lessee is a party is in full force and effect with respect to it; and (iv) the Lessee has duly performed and complied with all covenants, agreements and conditions contained herein or in any Operative Agreement required to be performed or complied with by it on or prior to the Initial Closing Date; (aa) as of the Initial Closing Date only, the Agent shall have received (i) a certificate of the Secretary or an Assistant Secretary of the Lessee, dated as of the Initial Closing Date, in the form attached hereto as Exhibit D or in such other form as is acceptable to the Agent attaching and certifying as to (1) the resolutions of its Board of Directors duly authorizing the execution, delivery and performance by the Lessee of each of the Operative Agreements to which it is or will be a party, (2) its articles of 9 14 incorporation certified as of a recent date by the Secretary of State of its state of incorporation and its by-laws and (3) the incumbency and signature of persons authorized to execute and deliver on its behalf the Operative Agreements to which it is or will be a party and (ii) a good standing certificate (or local equivalent) from the appropriate office of the respective states where the Lessee is incorporated and where the principal place of business of the Lessee is located as to its good standing in each such state. To the extent the Lessee is a partnership, a limited liability company or is otherwise organized, such Person shall deliver to the Agent (in form and substance satisfactory to the Agent) as of the Initial Closing Date (A) a certificate regarding such Person and any corporate general partners covering the matters described in EXHIBIT D and (B) a good standing certificate, a certificate of limited partnership or a local equivalent of either of the foregoing as applicable; (bb) as of the Initial Closing Date only, the Agent shall have received an Officer's Certificate of the Lessor dated as of the Initial Closing Date in the form attached hereto as Exhibit E or in such other form as is acceptable to the Agent, stating that (i) each and every representation and warranty of the Lessor contained in the Operative Agreements to which it is a party is true and correct on and as of the Initial Closing Date, (ii) each Operative Agreement to which the Lessor is a party is in full force and effect with respect to it and (iii) the Lessor has duly performed and complied with all covenants, agreements and conditions contained herein or in any Operative Agreement required to be performed or complied with by it on or prior to the Initial Closing Date; (cc) as of the Initial Closing Date only, the Agent shall have received (i) a certificate of the Secretary, an Assistant Secretary, Trust Officer or Vice President of the Trust Company in the form attached hereto as Exhibit F or in such other form as is acceptable to the Agent, attaching and certifying as to (A) the signing resolutions duly authorizing the execution, delivery and performance by the Lessor of each of the Operative Agreements to which it is or will be a party, (B) its articles of association or other equivalent charter documents and its by-laws, as the case may be, certified as of a recent date by an appropriate officer of the Trust Company and (C) the incumbency and signature of persons authorized to execute and deliver on its behalf the Operative Agreements to which it is a party and (ii) a good standing certificate from the Office of the Comptroller of the Currency; (dd) as of the Initial Closing Date only, counsel for the Lessor acceptable to the Agent shall have issued to the Lessee, the Holders, the Lenders and the Agent its opinion in the form attached hereto as Exhibit G or in such other form as is reasonably acceptable to the Agent; (ee) as of the Initial Closing Date only, the Construction Agent shall have caused to be delivered to the Agent a legal opinion in the form attached hereto as Exhibit H or in such other form as is acceptable to the Agent, addressed to the Lessor, the Agent, the Lenders and the Holders, from counsel acceptable to the Agent; 10 15 (ff) the Construction Agent shall have granted and shall maintain a perfected first priority security interest in the Additional Collateral in accordance with Sections 8.3(r) and 8.3(s) hereof; (gg) Loans and Holder Advances for the purchase of Equipment shall only be available for the Equipment described on Schedule 2 hereto (or for items substituted pursuant to Sections 5.3(ii) and 5.4(p); the aggregate amount of Loans and Holder Advances, including without limitation, Loans and Holder Advances requested in a Requisition but not yet funded, used to purchase, acquire, install, or test the Equipment or otherwise related to the Equipment shall not exceed $43,000,000.00; (hh) the aggregate amount of Loans and Holder Advances, including without limitation, Loans and Holder Advances requested in a Requisition but not yet funded, for Property Costs other than Equipment shall not exceed $57,000,000.00 and the aggregate amount of Loans and Holder Advances, including without limitation, Loans and Holder Advances requested in a Requisition but not yet funded shall not exceed $100,000,000.00; (ii) Items of Equipment listed on Schedule 2 to the Participation Agreement may be substituted for other items of Equipment, subject to the provisions of the Operative Agreements, prior to any amounts being expended for such Equipment provided such substitute item of Equipment has: (i) the same use and is of substantially similar type to the substituted item of Equipment; (ii) the same or greater utility; (iii) the same or greater useful life; (iv) the same or greater fair market value as of the date such substitution will occur; and (v) the same or greater estimated fair market value as of the Expiration Date. In addition to the foregoing conditions being met, the Lessee shall deliver an appraisal, in form and substance reasonably acceptable to the Agent, for such substitute item of Equipment; and (jj) Lessee may submit Requisitions requesting funds for deposits to be made on Equipment provided Lessee delivers a certificate, regarding the Equipment upon which deposits are being funded, signed by a Responsible Officer of Lessee and in form and substance reasonably acceptable to the Agent, setting forth (i) the amount previously funded for deposits on the Equipment, (ii) the amount currently being requested for funding of such deposits, (iii) the future amounts necessary to fully fund such Equipment and (iv) upon the final funding for such Equipment, a statement that such Equipment has been fully funded. The certificate shall also represent and warrant that the Lessee has and covenants to maintain Available Commitments and Available Holder Commitments, at 11 16 all times, sufficient to fund all amounts not yet funded for all Equipment upon which deposits are being funded with Loans or Holder Advances. 5.4. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS RELATING TO THE ADVANCE OF FUNDS AFTER THE ACQUISITION ADVANCE. The obligations of the Holders to make Holder Advances, and the Lenders to make Loans in connection with all requests for Advances subsequent to the acquisition of a Property (and to pay the Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Section 7.1 of this Agreement in connection therewith) are subject to the satisfaction or waiver of the following conditions precedent (to the extent such conditions precedent require the delivery of any agreement, certificate, instrument, memorandum, legal or other opinion, appraisal, commitment, title insurance commitment, lien report or any other document of any kind or type, such shall be in form and substance satisfactory to the Agent, in its reasonable discretion; notwithstanding the foregoing, the obligations of each party shall not be subject to any conditions contained in this Section 5.4 which are required to be performed by such party): (a) the correctness on such date of the representations and warranties of the parties to this Agreement contained herein, in each of the other Operative Agreements and in each certificate delivered pursuant to any Operative Agreement; (b) the performance by the parties to this Agreement of their respective agreements contained herein and in the other Operative Agreements to be performed by them on or prior to each such date; (c) the Agent shall have received a fully executed counterpart of the Requisition, appropriately completed; (d) based upon the applicable Construction Budget which shall satisfy the requirements of this Agreement, the Available Commitments and the Available Holder Commitment (after deducting the Unfunded Amount) will be sufficient to complete the Improvements; (e) there shall not have occurred and be continuing any Default or Event of Default under any of the Operative Agreements and no Default or Event of Default under any of the Operative Agreements will have occurred after giving effect to the Construction Advance requested by the applicable Requisition; (f) the title insurance policy delivered in connection with the requirements of Section 5.3(g) shall provide for (or shall be endorsed to provide for) insurance in an amount at least equal to the maximum total Property Cost indicated by the Construction Budget referred to in subparagraph (d) above and there shall be no title change or exception objectionable to the Agent; 12 17 (g) the Construction Agent shall have delivered to the Agent copies of the Plans and Specifications for the applicable Improvements; (h) the Construction Agent shall have delivered to the Agent invoices for, or other reasonably satisfactory evidence of, any Transaction Expenses and other fees, expenses and disbursements referenced in Section 7.1(b) that are to be paid with the Advance; (i) the Construction Agent shall have delivered, or caused to be delivered to the Agent, invoices, Bills of Sale or other documents acceptable to the Agent, in each case with regard to any Equipment or other components of such Property then being acquired with the proceeds of the Loans and Holder Advances and naming the Lessor as purchaser and transferee; (j) all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Agreements shall have been paid or provisions for such payment shall have been made to the satisfaction of the Agent; (k) since the date of the most recent audited financial statements of the Lessee, there shall not have occurred any event, condition or state of facts which shall have or could reasonably be expected to have a Material Adverse Effect, other than as specifically contemplated by the Operative Agreements; (l) in the opinion of the Agent and its counsel, the transactions contemplated by the Operative Agreements do not and will not subject the Lessor, the Lenders, the Agent or the Holders to any adverse regulatory prohibitions, constraints, penalties or fines; (m) the Construction Agent shall have granted and shall maintain a perfected first priority security interest in the Additional Collateral in favor of the Agent for the benefit of the Financing Parties in accordance with Sections 8.3(r) and 8.3(s) hereof; (n) the aggregate amount of Loans and Holder Advances, including without limitation, Loans and Holder Advances requested in a Requisition but not yet funded, used to purchase, acquire, install, or test the Equipment or otherwise related to the Equipment shall not exceed $43,000,000.00; (o) the aggregate amount of Loans and Holder Advances, including without limitation, Loans and Holder Advances requested in a Requisition but not yet funded, for Property Costs other than Equipment shall not exceed $57,000,000.00 and the aggregate amount of Loans and Holder Advances, including without limitation, Loans and Holder Advances requested in a Requisition but not yet funded shall not exceed $100,000,000.00; 13 18 (p) Items of Equipment listed on Schedule 2 to the Participation Agreement may be substituted for other items of Equipment, subject to the provisions of the Operative Agreements, prior to any amounts being expended for such Equipment provided such substitute item of Equipment has: (i) the same use and is of substantially similar type to the substituted item of Equipment; (ii) the same or greater utility; (iii) the same or greater useful life; (iv) the same or greater fair market value as of the date such substitution will occur; and (v) the same or greater estimated fair market value as of the Expiration Date. In addition to the foregoing conditions being met, the Lessee shall deliver an appraisal, in form and substance reasonably acceptable to the Agent, for such substitute item of Equipment; and (q) Lessee may submit Requisitions requesting funds for deposits to be made on Equipment provided Lessee delivers a certificate, regarding the Equipment upon which deposits are being funded, signed by a Responsible Officer of Lessee and in form and substance reasonably acceptable to the Agent, setting forth the (i) the amount previously funded for deposits on the Equipment, (ii) the amount currently being requested for funding of such deposits, (iii) the future amounts necessary to fully fund such Equipment and (iv) upon the final funding for such Equipment, a statement that such Equipment has been fully funded. The certificate shall also represent and warrant that the Lessee has and covenants to maintain Available Commitments and Available Holder Commitments, at all times, sufficient to fund all amounts not yet funded for all Equipment upon which deposits are being funded with Loans or Holder Advances. 5.5. ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION DATE AND ON CONSTRUCTION PERIOD TERMINATION DATE. On or prior to the Completion Date for each Property, the Construction Agent shall deliver to the Agent an Officer's Certificate in the form attached hereto as Exhibit I or in such other form as is acceptable to the Agent specifying (a) the address for such Property, (b) the Completion Date for such Property, (c) the aggregate Property Cost for such Property, (d) detailed, itemized documentation supporting the asserted Property Cost figures and (e) that all representations and warranties of the Construction Agent and Lessee in each of the Operative Agreements and each certificate delivered pursuant thereto are true and correct as of the Completion Date. The Agent shall have the right to contest the information contained in such Officer's Certificate. Furthermore, on or prior to the Completion Date for each Property, the Construction Agent shall deliver or cause to be delivered to the Agent (unless previously delivered to the Agent) originals of the following, each of which shall be in form and substance acceptable to the Agent, in its reasonable discretion: (u) a Lease Supplement and a memorandum (or short form lease) regarding the Lease and such Lease Supplement (such memorandum or short form lease to be in the form attached to the Lease as Exhibit B or in such other form as is 14 19 acceptable to the Agent, with modifications as necessary to conform to applicable state law, and in form suitable for recording), (v) a title insurance endorsement regarding the title insurance policy delivered in connection with the requirements of Section 5.3(g), but only to the extent such endorsement is necessary to provide for insurance in an amount at least equal to the maximum total Property Cost and, if endorsed, the endorsement shall not include a title change or exception objectionable to the Agent; (w) an as-built survey for such Property, (x) insurance certificates respecting such Property as required hereunder and under the Lease Agreement, (y) if requested by the Agent, amendments to the Lessor Financing Statements executed by the appropriate parties and (z) an Appraisal regarding such Property (including without limitation the Equipment); provided, however, such an Appraisal shall not be required if, as of such Completion Date, the Agent has previously received Appraisal(s) pursuant to Section 5.3(t) for Properties that are then subject to the Lease and that have an aggregate value (as established by such Appraisal(s)) of at least $25,000,000.00. In addition, on the Completion Date for such Property the Construction Agent covenants and agrees that the recording fees, documentary stamp taxes or similar amounts required to be paid in connection with the related Mortgage Instrument shall have been paid in an amount required by applicable law, subject, however, to the obligations of the Lenders and the Holders to fund such costs to the extent required pursuant to Section 7.1. 5.6. THE CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET MODIFICATIONS. The Construction Agent covenants and agrees to deliver to the Agent each month notification of any modification to any Construction Budget regarding any Property if such modification increases the cost to construct such Property; provided no Construction Budget may be increased unless (a) the title insurance policies referenced in Section 5.3(g) are also modified or endorsed, if necessary, to provide for insurance in an amount that satisfies the requirements of Section 5.4(f) of this Agreement and (b) after giving effect to any such amendment, the Construction Budget remains in compliance with the requirements of Section 5.4(d) of this Agreement. 5.7. RESTRICTIONS ON LIENS. On each Property Closing Date, the Construction Agent shall cause each Property acquired by the Lessor on such date to be free and clear of all Liens except those referenced in Sections 6.2(r)(i) and 6.2(r)(ii). On each date a Property is either sold to a third party in accordance with the terms of the Operative Agreements or, pursuant to Section 22.1(a) of the Lease Agreement, retained by the Lessor, the Lessee shall cause such Property to be free and clear of all Liens (other than Lessor Liens and such other Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to such Property, to the extent such title commitment has been approved by the Agent). 5.8. PAYMENTS. All payments of principal, interest, Holder Advances, Holder Yield and other amounts to be made by the Construction Agent or the Lessee under this Agreement or any other Operative 15 20 Agreements (excluding Excepted Payments which shall be paid directly to the party to whom such payments are owed) shall be made to the Agent at the office designated by the Agent from time to time in Dollars and in immediately available funds, without setoff, deduction, or counterclaim. Subject to the definition of "Interest Period" in Appendix A attached hereto, whenever any payment under this Agreement or any other Operative Agreements shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time in such case shall be included in the computation of interest, Holder Yield and fees payable pursuant to the Operative Agreements, as applicable and as the case may be. SECTION 6. REPRESENTATIONS AND WARRANTIES. 6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. Effective as of the Initial Closing Date and the date of each Advance, the Trust Company in its individual capacity and as the Borrower, as indicated, represents and warrants to each of the other parties hereto as follows, provided, that the representations in the following paragraphs (h), (j) and (k) are made solely in its capacity as the Borrower: (a) It is a national banking association and is duly organized and validly existing and in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Trust Agreement and (assuming due authorization, execution and delivery of the Trust Agreement by the Holders) has the corporate and trust power and authority to act as the Owner Trustee and to enter into and perform the obligations under each of the other Operative Agreements to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party and each other agreement, instrument and document to be executed and delivered by it on or before such Closing Date in connection with or as contemplated by each such Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party; (b) The execution, delivery and performance of each Operative Agreement to which it is or will be a party, either in its individual capacity or (assuming due authorization, execution and delivery of the Trust Agreement by the Holders) as the Owner Trustee, as the case may be, has been duly authorized by all necessary action on its part and neither the execution and delivery thereof, nor the consummation of the transactions contemplated thereby, nor compliance by it with any of the terms and provisions thereof (i) does or will require any approval or consent of any trustee or holders of any of its indebtedness or obligations, (ii) does or will contravene any Legal Requirement relating to its banking or trust powers, (iii) does or will contravene or result in any breach of or constitute any default under, or result in the creation of any Lien upon any of its property under, (A) its charter or by-laws, or (B) any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement or other agreement or instrument to which it is a party or by which it or its properties may be bound or affected, which contravention, breach, default or Lien under clause (B) 16 21 would materially and adversely affect its ability, in its individual capacity or as the Owner Trustee, to perform its obligations under the Operative Agreements to which it is a party or (iv) does or will require any Governmental Action by any Governmental Authority regulating its banking or trust powers; (c) The Trust Agreement and, assuming the Trust Agreement is the legal, valid and binding obligation of the Holders, each other Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party have been, or on or before such Closing Date will be, duly executed and delivered by the Trust Company or the Owner Trustee, as the case may be, and the Trust Agreement and each such other Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is a party constitutes, or upon execution and delivery will constitute, a legal, valid and binding obligation enforceable against the Trust Company or the Owner Trustee, as the case may be, in accordance with the terms thereof; (d) There is no action or proceeding pending or, to its knowledge, threatened to which it is or will be a party, either in its individual capacity or as the Owner Trustee, before any Governmental Authority that, if adversely determined, would materially and adversely affect its ability, in its individual capacity or as the Owner Trustee, to perform its obligations under the Operative Agreements to which it is a party or would question the validity or enforceability of any of the Operative Agreements to which it is or will become a party; (e) It, either in its individual capacity or as the Owner Trustee, has not assigned or transferred any of its right, title or interest in or under the Lease, the Agency Agreement or its interest in any Property or any portion thereof, except in accordance with the Operative Agreements; (f) No Default or Event of Default under the Operative Agreements attributable to it has occurred and is continuing; (g) Except as otherwise contemplated in the Operative Agreements, the proceeds of the Loans and Holder Advances shall not be applied by the Owner Trustee, either in its individual capacity or as the Owner Trustee, for any purpose other than the purchase and/or lease of the Properties, the acquisition, installation and testing of the Equipment, the construction of Improvements and the payment of Transaction Expenses and the fees, expenses and other disbursements referenced in Sections 7.1(a) and 7.1(b) of this Agreement, in each case which accrue prior to the Rent Commencement Date with respect to a particular Property; (h) Neither the Owner Trustee nor any Person authorized by the Owner Trustee to act on its behalf has offered or sold any interest in the Trust Estate or the Notes, or in any similar security relating to a Property, or in any security the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to 17 22 acquire any of the same from, any Person other than, in the case of the Notes, the Agent, and neither the Owner Trustee nor any Person authorized by the Owner Trustee to act on its behalf will take any action which would subject, as a direct result of such action alone, the issuance or sale of any interest in the Trust Estate or the Notes to the provisions of Section 5 of the Securities Act or require the qualification of any Operative Agreement under the Trust Indenture Act of 1939, as amended; (i) The Owner Trustee's principal place of business, chief executive office and office where the documents, accounts and records relating to the transactions contemplated by this Agreement and each other Operative Agreement are kept are located at 79 South Main Street, Salt Lake City, Utah 84111; (j) The Owner Trustee is not engaged principally in, and does not have as one (1) of its important activities, the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System of the United States), and no part of the proceeds of the Loans or the Holder Advances will be used by it to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or is inconsistent with, the provisions of Regulations T, U, or X of the Board of Governors of the Federal Reserve System of the United States; (k) The Owner Trustee is not an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act; (l) Each Property is free and clear of all Lessor Liens attributable to the Owner Trustee, either in its individual capacity or as the Owner Trustee; and (m) The Owner Trustee, in its trust capacity, is not a party to any documents, instruments or agreements other than the Operative Agreements executed by the Owner Trustee, in its trust capacity. 6.2. REPRESENTATIONS AND WARRANTIES OF THE CONSTRUCTION AGENT AND THE LESSEE. Effective as of the Initial Closing Date, the date of each Advance and the Rent Commencement Date, the Construction Agent and the Lessee represent and warrant to each of the other parties hereto that: (a) [Intentionally Reserved]; (b) The execution and delivery by each of the Construction Agent and the Lessee of this Agreement and the other applicable Operative Agreements as of such date and the performance by each of the Construction Agent and the Lessee of its respective obligations under this Agreement and the other applicable Operative Agreements are 18 23 within the corporate, partnership or limited liability company (as the case may be) powers of each of the Construction Agent and the Lessee, have been duly authorized by all necessary corporate, partnership or limited liability company (as the case may be) action on the part of each of the Construction Agent and the Lessee (including without limitation any necessary shareholder action), have been duly executed and delivered, have received all necessary governmental approval, and do not and will not (i) violate any Legal Requirement which is binding on the Construction Agent, the Lessee or any of their Subsidiaries, (ii) contravene or conflict with, or result in a breach of, any provision of the Articles of Incorporation, By-Laws or other organizational documents of any of the Construction Agent, the Lessee or any of their Subsidiaries or of any agreement, indenture, instrument or other document which is binding on any of the Construction Agent, the Lessee or any of their Subsidiaries or (iii) result in, or require, the creation or imposition of any Lien (other than pursuant to the terms of the Operative Agreements) on any asset of any of the Construction Agent, the Lessee or any of their Subsidiaries; (c) This Agreement and the other applicable Operative Agreements to which the Construction Agent or the Lessee are parties, executed prior to and as of such date, constitute the legal, valid and binding obligation of the Construction Agent or the Lessee, as applicable, enforceable against the Construction Agent or the Lessee, as applicable, in accordance with their terms. The Construction Agent and the Lessee have each executed the various Operative Agreements required to be executed as of such date; (d) There are no material actions, suits or proceedings pending or, to our knowledge, threatened against either the Construction Agent or the Lessee in any court or before any Governmental Authority (nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Authority to set aside, restrain, enjoin or prevent the full performance of any Operative Agreement or any transaction contemplated thereby) that (i) concern any Property or the Lessee's interest therein, (ii) question the validity or enforceability of any Operative Agreement or any transaction described in the Operative Agreements or (iii) shall have or could reasonably be expected to have a Material Adverse Effect; provided, for purposes of disclosure, the Construction Agent and the Lessee have described the litigation set forth on Exhibit J; (e) No Governmental Action by any Governmental Authority or other authorization, registration, consent, approval, waiver, notice or other action by, to or of any other Person pursuant to any Legal Requirement, contract, indenture, instrument or agreement or for any other reason is required to authorize or is required in connection with (i) the execution, delivery or performance of any Operative Agreement, (ii) the legality, validity, binding effect or enforceability of any Operative Agreement, (iii) the acquisition, ownership, construction, completion, occupancy, operation, leasing or subleasing of any Property or (iv) any Advance, in each case, except those which have been obtained and are in full force and effect or will be obtained prior to the time required to be in place; 19 24 (f) Upon the execution and delivery of each Lease Supplement to the Lease, (i) the Lessee will have unconditionally accepted the Property subject to the Lease Supplement and will have a valid and subsisting leasehold interest in such Property, subject only to the Permitted Liens, and (ii) no offset will exist with respect to any Rent or other sums payable under the Lease; (g) Except as otherwise contemplated by the Operative Agreements, the Construction Agent shall not use the proceeds of any Holder Advance or Loan for any purpose other than the purchase and/or lease of the Properties, the acquisition, installation and testing of the Equipment, the construction of Improvements and the payment of Transaction Expenses and the fees, expenses and other disbursements referenced in Sections 7.1(a) and 7.1(b) of this Agreement, in each case which accrue prior to the Rent Commencement Date with respect to a particular Property; (h) All information heretofore or contemporaneously herewith furnished by either the Construction Agent or the Lessee or any of their Subsidiaries to the Agent, the Owner Trustee, any Lender or any Holder for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all information hereafter furnished by or on behalf of the Construction Agent, the Lessee or any of their Subsidiaries to the Agent, the Owner Trustee, any Lender or any Holder pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and such information, taken as a whole, does not and will not omit to state any material fact necessary to make such information, taken as a whole, not misleading; (i) The principal place of business, chief executive office and office of the Construction Agent and the Lessee where the documents, accounts and records relating to the transactions contemplated by this Agreement and each other Operative Agreement are kept are located at 7628 Thorndike Road, Greensboro, NC 27409-9421; (j) The representations and warranties of the Construction Agent and the Lessee set forth in any of the Operative Agreements are true and correct in all material respects on and as of each such date as if made on and as of such date. The Construction Agent and the Lessee are in all material respects in compliance with their respective obligations under the Operative Agreements and there exists no Default or Event of Default under any of the Operative Agreements which is continuing and which has not been cured within any cure period expressly granted under the terms of the applicable Operative Agreement or otherwise waived in accordance with the applicable Operative Agreement. No Default or Event of Default will occur under any of the Operative Agreements as a result of, or after giving effect to, the Advance requested by the Requisition on the date of each Advance; (k) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, each Property then being financed consists of (i) unimproved Land or (ii) Land and existing Improvements thereon which Improvements 20 25 are either suitable for occupancy at the time of acquisition or ground leasing or will be renovated and/or modified in accordance with the terms of this Agreement. Each Property then being financed is located at the location set forth on the applicable Requisition, each of which is in one (1) of the Approved States; (l) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, the Lessor has good and marketable fee simple title to each Property, or, if any Property is the subject of a Ground Lease, the Lessor will have a valid ground leasehold interest enforceable against the ground lessor of such Property in accordance with the terms of such Ground Lease, subject only to (i) such Liens referenced in Sections 6.2(r)(i) and 6.2(r)(ii) on the applicable Property Closing Date and (ii) subject to Section 5.7, Permitted Liens after the applicable Property Closing Date; (m) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, no portion of any Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, or if any such Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, then flood insurance has been obtained for such Property in accordance with Section 14.2(b) of the Lease and in accordance with the National Flood Insurance Act of 1968, as amended; (n) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, each Property complies with all Insurance Requirements and all standards of Lessee with respect to similar properties owned by Lessee; (o) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, each Property complies with all Legal Requirements as of such date (including without limitation all zoning and land use laws and Environmental Laws), except to the extent that failure to comply therewith, individually or in the aggregate, shall not have and could not reasonably be expected to have a Material Adverse Effect; (p) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, all utility services and facilities necessary for the construction and operation of the Improvements and the installation and operation of the Equipment regarding each Property (including without limitation gas, electrical, water and sewage services and facilities) are available at the applicable Land and will be constructed prior to the Completion Date for such Property; (q) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, acquisition, installation and testing of the Equipment (if any) and construction of the Improvements (if any) to such date shall have 21 26 been performed in a good and workmanlike manner, substantially in accordance with the applicable Plans and Specifications; (r) (i) The Security Documents create, as security for the Obligations (as such term is defined in the Security Agreement), valid and enforceable security interests in, and Liens on, all of the Collateral (including without limitation, the Additional Collateral), in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements, and such security interests and Liens are subject to no other Liens other than Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to the applicable Property, to the extent such title commitment has been approved by the Agent. Upon recordation of the Mortgage Instrument in the real estate recording office in the applicable Approved State identified by the Construction Agent or the Lessee, the Lien created by the Mortgage Instrument in the real property described therein shall be a perfected first priority mortgage Lien on such real property (or, in the case of a Ground Lease, the leasehold estate under such Ground Lease) in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements. To the extent that the security interests in the portion of the Collateral comprised of personal property can be perfected by filing in the filing offices in the applicable Approved States or elsewhere identified by the Construction Agent or the Lessee, upon filing of the Lender Financing Statements in such filing offices, the security interests created by the Security Agreement shall be perfected first priority security interests in such personal property in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements; (ii) The Lease Agreement creates, as security for the obligations of the Lessee under the Lease Agreement, valid and enforceable security interests in, and Liens on, each Property leased thereunder, in favor of the Lessor, and such security interests and Liens are subject to no other Liens other than Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to the applicable Property, to the extent such title commitment has been approved by the Agent. Upon recordation of the memorandum of the Lease Agreement and the memorandum of a Ground Lease (or, in either case, a short form lease) in the real estate recording office in the applicable Approved State identified by the Construction Agent or the Lessee, the Lien created by the Lease Agreement in the real property described therein shall be a perfected first priority mortgage Lien on such real property (or, in the case of a Ground Lease, on the leasehold estate under such Ground Lease) in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements. To the extent that the security interests in the portion of any Property comprised of personal property can be perfected by the filing in the filing offices in the applicable Approved State or elsewhere identified by the Construction Agent or the Lessee upon filing of the 22 27 Lessor Financing Statements in such filing offices, a security interest created by the Lease Agreement shall be perfected first priority security interests in such personal property in favor of the Lessor, which rights pursuant to the Lessor Financing Statements are assigned to the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements; (s) The Plans and Specifications for each Property will be prepared prior to the commencement of construction in accordance with all applicable Legal Requirements (including without limitation all applicable Environmental Laws and building, planning, zoning and fire codes), except to the extent the failure to comply therewith, individually or in the aggregate, shall not have and could not reasonably be expected to have a Material Adverse Effect. Upon completion of the Improvements for each Property in accordance with the applicable Plans and Specifications, such Improvements will be within any building restriction lines and will not encroach in any manner onto any adjoining land (except as permitted by express written easements, which have been approved by the Agent); (t) As of the Rent Commencement Date only, each Property shall be improved in accordance with the applicable Plans and Specifications in a good and workmanlike manner and shall be operational; and (u) [Intentionally Reserved] 6.3. REPRESENTATIONS AND WARRANTIES OF THE LENDERS AND THE HOLDERS. Each of the Lenders, with respect to the Notes, and each of the Holders, with respect to the Certificates, represents and warrants that such party (a) understands that the offer and sale of the Notes and the Certificates has not been, and will not be, registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any state securities laws, and that the Notes and the Certificates, to the extent they may be deemed to be "securities," are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering; (b) is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; (c) is acquiring the Notes or Certificates, as the case may be, solely for its own account for investment purposes and not with a view to the distribution of such Notes or Certificates, and will not transfer such Notes or Certificates without compliance with all applicable securities laws; (d) is a sophisticated investor with sufficient knowledge and experience in financial, investment and business affairs to permit it to evaluate the merits and risks involved in purchasing such Notes or Certificates and is able to bear the economic risk and lack of liquidity inherent in holding such Notes or Certificates for an indefinite period of time; and (e) has received information concerning the issuer of such Notes or Certificates and has had the opportunity to ask questions of, and receive answers from, such issuer and its representatives concerning the business of such issuer and the terms of such Notes or Certificates and to obtain additional information as desired in order to evaluate the merits and risks inherent in acquiring and holding such Notes or Certificates. 23 28 SECTION 7. PAYMENT OF CERTAIN EXPENSES. 7.1. TRANSACTION EXPENSES. (a) The Lessor agrees on the Initial Closing Date, to pay, or cause to be paid, all Transaction Expenses arising from the Initial Closing Date, including without limitation all reasonable fees, expenses and disbursements of the various legal counsels for the Lessor and the Agent in connection with the transactions contemplated by the Operative Agreements and incurred in connection with such Initial Closing Date, the initial fees and expenses of the Owner Trustee due and payable on such Initial Closing Date, all fees, taxes and expenses for the recording, registration and filing of documents and all other reasonable fees, expenses and disbursements incurred in connection with such Initial Closing Date; provided, however, the Lessor shall pay such amounts described in this Section 7.1(a) only if (i) such amounts are properly described in a Requisition delivered on or before the Initial Closing Date, and (ii) funds are made available by the Lenders and the Holders in connection with such Requisition in an amount sufficient to allow such payment. On the Initial Closing Date after delivery and receipt of the Requisition referenced in Section 4.2(a) hereof and satisfaction of the other conditions precedent for such date, the Holders shall make Holder Advances and the Lenders shall make Loans to the Lessor to pay for the Transaction Expenses, fees, expenses and other disbursements referenced in this Section 7.1(a). The Lessee agrees to timely pay all amounts referred to in this Section 7.1(a) to the extent not paid by the Lessor. (b) Assuming no Default or Event of Default shall have occurred and be continuing and only for the period prior to the Rent Commencement Date, the Lessor agrees on each Property Closing Date, on the date of any Construction Advance and on the Completion Date to pay, or cause to be paid, all Transaction Expenses including without limitation all reasonable fees, expenses and disbursements of the various legal counsels for the Lessor and the Agent in connection with the transactions contemplated by the Operative Agreements and billed in connection with such Advance or such Completion Date, all amounts described in Section 7.1(a) of this Agreement which have not been previously paid, the annual fees and reasonable out-of-pocket expenses of the Owner Trustee, all fees, expenses and disbursements incurred with respect to the various items referenced in Sections 5.3, 5.4 and/or 5.5 (including without limitation any premiums for title insurance policies and charges for any updates to such policies) and all other reasonable fees, expenses and disbursements in connection with such Advance or such Completion Date including without limitation all expenses relating to and all fees, taxes and expenses for the recording, registration and filing of documents and during the Commitment Period, all fees, expenses and costs referenced in Sections 7.3(a), 7.3(b), 7.3(d) and 7.4; provided, however, the Lessor shall pay such amounts described in this Section 7.1(b) only if (i) such amounts are properly described in a Requisition delivered on the applicable date and (ii) funds are made available by the Lenders and the Holders in connection with such Requisition in an amount sufficient to allow such payment. On 24 29 each Property Closing Date, on the date of any Construction Advance or any Completion Date, after delivery of the applicable Requisition and satisfaction of the other conditions precedent for such date, the Holders shall make a Holder Advance and the Lenders shall make Loans to the Lessor to pay for the Transaction Expenses, fees, expenses and other disbursements referenced in this Section 7.1(b). The Lessee agrees to timely pay all amounts referred to in this Section 7.1(b) to the extent not paid by the Lessor. (c) All fees payable pursuant to the Operative Agreements shall be calculated on the basis of a year of three hundred sixty (360) days for the actual days elapsed. 7.2. BROKERS' FEES. The Lessee agrees to pay or cause to be paid any and all brokers' fees, if any, including without limitation any interest and penalties thereon, which are payable in connection with the transactions contemplated by this Agreement and the other Operative Agreements. 7.3. CERTAIN FEES AND EXPENSES. The Lessee agrees to pay or cause to be paid (a) the initial and annual Owner Trustee's fee and all reasonable expenses of the Owner Trustee and any co-trustees (including without limitation reasonable counsel fees and expenses) or any successor owner trustee and/or co-trustee, for acting as the owner trustee under the Trust Agreement, (b) all reasonable costs and expenses incurred by the Construction Agent, the Lessee, the Agent, the Lenders, the Holders or the Lessor in entering into any Lease Supplement and any future amendments, modifications, supplements, restatements and/or replacements with respect to any of the Operative Agreements, whether or not such Lease Supplement, amendments, modifications, supplements, restatements and/or replacements are ultimately entered into, or giving or withholding of waivers of consents hereto or thereto, which have been requested by the Construction Agent, the Lessee, the Agent, the Lenders, the Holders or the Lessor, (c) all reasonable costs and expenses incurred by the Construction Agent, the Lessee, the Agent, the Lenders, the Holders or the Lessor in connection with any exercise of remedies under any Operative Agreement or any purchase of any Property by the Construction Agent, the Lessee or any third party and (d) all reasonable costs and expenses incurred by the Construction Agent, the Lessee, the Agent, the Lenders, the Holders or the Lessor in connection with any transfer or conveyance of any Property, whether or not such transfer or conveyance is ultimately accomplished. 7.4. UNUSED FEE. During the Commitment Period, the Lessee agrees to pay or to cause to be paid to the Agent for the account of (a) the Lenders, respectively, an unused fee (the "Lender Unused Fee") equal to the product of the average daily Available Commitment of each Lender during the Commitment Period multiplied by the rate per annum set forth as the Unused Fee in the definition of Applicable Percentage and (b) the Holders, respectively, an unused fee (the "Holder Unused Fee") equal to the product of the average daily Available Holder Commitment of each Holder during the Commitment Period multiplied by the rate per annum set forth as the Unused 25 30 Fee in the definition of Applicable Percentage. Such Unused Fees shall be payable quarterly in arrears on each Unused Fee Payment Date. If all or a portion of any such Unused Fee shall not be paid when due, such overdue amount shall bear interest, payable by the Lessee on demand, at a rate per annum equal to the ABR plus the Applicable Percentage (or in the case of Holder Yield, the ABR plus the Applicable Percentage for ABR Holder Advances) plus two percent (2%) from the date of such non-payment until such amount is paid in full (as well as before judgment). 7.5. OTHER FEES. The Lessee shall pay or cause to paid such other fees as set forth and on the terms and conditions provided in the engagement letter dated July 22, 1999 addressed to Mr. Dean Priddy, Chief Financial Officer & Vice President of Administration at RF Micro Devices, Inc. 7628 Thorndike Road Greensboro, NC 27409-9421 from Peter M. Budko, Director, Corporate Real Estate & Asset Finance. SECTION 8. OTHER COVENANTS AND AGREEMENTS. 8.1. COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE. The Holders, the Lenders, the Lessor (at the direction of the Majority Secured Parties) and the Agent shall, at the expense of and to the extent reasonably requested by the Construction Agent or the Lessee (but without assuming additional liabilities on account thereof and only to the extent such is acceptable to the Holders, the Lenders, the Lessor (at the direction of the Majority Secured Parties) and the Agent in their reasonable discretion), cooperate with the Construction Agent or the Lessee in connection with the Construction Agent or the Lessee satisfying its covenant obligations contained in the Operative Agreements including without limitation at any time and from time to time, promptly and duly executing and delivering any and all such further instruments, documents and financing statements (and continuation statements related thereto). 8.2. COVENANTS OF THE OWNER TRUSTEE AND THE HOLDERS. Each of the Owner Trustee and the Holders hereby agrees that so long as this Agreement is in effect: (a) Neither the Owner Trustee (in its trust capacity or in its individual capacity) nor any Holder will create or permit to exist at any time, and each of them will, at its own cost and expense, promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens on the Properties attributable to it; provided, however, that the Owner Trustee and the Holders shall not be required to so discharge any such Lessor Lien while the same is being contested in good faith by appropriate proceedings diligently prosecuted so long as such proceedings shall not materially and adversely affect the rights of the Lessee under the Lease and the other 26 31 Operative Agreements or involve any material danger of impairment of the Liens of the Security Documents or of the sale, forfeiture or loss of, and shall not interfere with the use or disposition of, any Property or title thereto or any interest therein or the payment of Rent; (b) Without prejudice to any right under the Trust Agreement of the Owner Trustee to resign (subject to requirement set forth in the Trust Agreement that such resignation shall not be effective until a successor shall have agreed to accept such appointment), or the Holders' rights under the Trust Agreement to remove the institution acting as the Owner Trustee (after consent to such removal by the Agent as provided in the Trust Agreement), each of the Owner Trustee and the Holders hereby agrees with the Lessee and the Agent (i) not to terminate or revoke the trust created by the Trust Agreement except as permitted by Article VIII of the Trust Agreement, (ii) not to amend, supplement, terminate or revoke or otherwise modify any provision of the Trust Agreement in such a manner as to adversely affect the rights of any such party without the prior written consent of such party and (iii) to comply with all of the terms of the Trust Agreement, the nonperformance of which would adversely affect such party; (c) The Owner Trustee or any successor may resign or be removed by the Holders as the Owner Trustee, a successor Owner Trustee may be appointed and a corporation may become the Owner Trustee under the Trust Agreement, only in accordance with the provisions of Article IX of the Trust Agreement and, with respect to such appointment, with the consent of the Lessee (so long as there shall be no Lease Event of Default that shall have occurred and be continuing), which consent shall not be unreasonably withheld or delayed; (d) The Owner Trustee, in its capacity as the Owner Trustee under the Trust Agreement, and not in its individual capacity, shall not contract for, create, incur or assume any Indebtedness, or enter into any business or other activity or enter into any contracts or agreements, other than pursuant to or under the Operative Agreements; (e) The Holders will not instruct the Owner Trustee to take any action in violation of the terms of any Operative Agreement; (f) Neither any Holder nor the Owner Trustee shall (i) commence any case, proceeding or other action with respect to the Owner Trustee under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, arrangement, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seek appointment of a receiver, trustee, custodian or other similar official with respect to the Owner Trustee or for all or any substantial benefit of the creditors of the Owner Trustee; and neither any Holder nor the Owner Trustee shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in this paragraph; 27 32 (g) The Owner Trustee shall give prompt notice to the Lessee, the Holders and the Agent if the Owner Trustee's principal place of business or chief executive office, or the office where the records concerning the accounts or contract rights relating to any Property are kept, shall cease to be located at 79 South Main Street, Salt Lake City, Utah 84111, or if it shall change its name; and (h) The Owner Trustee shall take or refrain from taking such actions and grant or refrain from granting such approvals with respect to the Operative Agreements and/or relating to any Property in each case as directed in writing by the Agent (until such time as the Loans are paid in full, and then by the Majority Holders) or, in connection with Sections 8.5 and 9.2 hereof, the Lessee; provided, however, that notwithstanding the foregoing provisions of this subparagraph (h) the Owner Trustee, the Agent, the Lenders and the Holders each acknowledge, covenant and agree that neither the Owner Trustee nor the Agent shall act or refrain from acting, regarding each Unanimous Vote Matter, until such party has received the approval of each Lender and each Holder affected by such matter. 8.3. THE LESSEE COVENANTS, CONSENT AND ACKNOWLEDGMENT. (a) The Lessee acknowledges and agrees that the Owner Trustee, pursuant to the terms and conditions of the Security Agreement and the Mortgage Instruments, shall create Liens respecting the various personal property, fixtures and real property described therein in favor of the Agent. The Lessee hereby irrevocably consents to the creation, perfection and maintenance of such Liens. Each of the Construction Agent and the Lessee shall, to the extent reasonably requested by any of the other parties hereto, cooperate with the other parties in connection with their covenants herein or in the other Operative Agreements and shall from time to time duly execute and deliver any and all such future instruments, documents and financing statements (and continuation statements related thereto) as any other party hereto may reasonably request. (b) The Lessor hereby instructs the Lessee, and the Lessee hereby acknowledges and agrees, that until such time as the Loans and the Holder Advances are paid in full and the Liens evidenced by the Security Agreement and the Mortgage Instruments have been released (i) any and all Rent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person shall instead be paid directly to the Agent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) or as the Agent may direct from time to time for allocation and distribution in accordance with the procedures set forth in Section 8.7 hereof, (ii) all rights of the Lessor under the Lease shall be exercised by the Agent and (iii) the Lessee shall cause all notices, certificates, financial statements, communications and other information which are delivered, or are required to be delivered, to the Lessor, to also be delivered at the same time to the Agent. 28 33 (c) The Lessee shall not consent to or permit any amendment, supplement or other modification of the terms or provisions of any Operative Agreement except in accordance with Section 12.4 of this Agreement. (d) The Lessee hereby covenants and agrees to cause an Appraisal or reappraisal (in form and substance satisfactory to the Agent and from an appraiser selected by the Agent) to be issued respecting any Property as requested by the Agent from time to time (i) at each and every time as such shall be required to satisfy any regulatory requirements imposed on the Agent, the Lessor, the Trust Company, any Lender and/or any Holder and (ii) after the occurrence of an Event of Default. (e) The Lessee hereby covenants and agrees that, except for amounts payable as Basic Rent, any and all payment obligations owing from time to time under the Operative Agreements by any Person to the Agent, any Lender, any Holder or any other Person shall (without further action) be deemed to be Supplemental Rent obligations payable by the Lessee. Without limitation, such obligations of the Lessee shall include, without duplication, the Supplemental Rent obligations pursuant to this Section 8.3(e), Section 3.3 of the Lease, arrangement fees, administrative fees, participation fees, commitment fees, unused fees, prepayment penalties, breakage costs, indemnities, trustee fees and transaction expenses incurred by the parties hereto in connection with the transactions contemplated by the Operative Agreements. (f) At any time the Lessor or the Agent is entitled under the Operative Agreements to possession of a Property or any component thereof, each of the Construction Agent and the Lessee hereby covenants and agrees, at its own cost and expense, to assemble and make the same available to the Agent (on behalf of the Lessor). (g) [INTENTIONALLY RESERVED] (h) [INTENTIONALLY RESERVED] (i) The Lessee hereby covenants and agrees that it shall give prompt notice, but in any event within five (5) Business Days, to the Agent if the Lessee's principal place of business or chief executive office, or the office where the records concerning the accounts or contract rights relating to any Property are kept, shall cease to be located at 7628 Thorndike Road, Greensboro, NC 27409-9421 or if it shall change its name. (j) [INTENTIONALLY RESERVED] (k) [INTENTIONALLY RESERVED] (l) The Lessee hereby covenants and agrees that the rights of the Lessee under this Agreement and the Lease shall not impair or in any way diminish the obligations of the Construction Agent and/or the rights of the Lessor under the Agency Agreement. 29 34 (m) The Lessee shall promptly notify the Agent, or cause the Agent to be promptly notified, upon the Lessee gaining knowledge of the occurrence of (i) any Default or Event of Default which is continuing at such time or (ii) any litigation, government or environmental proceeding which could reasonably be expected to have a Material Adverse Effect upon the Lessee. In any event, such notice shall be provided to the Agent within ten (10) days of when the Lessee gains such knowledge. (n) Until all of the obligations under the Operative Agreements have been finally and indefeasibly paid and satisfied in full and the Commitments and the Holder Commitments terminated unless consent has been obtained from the Majority Secured Parties, the Lessee will: (i) except as permitted by the express provisions of the Operative Agreements, preserve and maintain its separate legal existence and all rights, franchises, licenses and privileges necessary to the conduct of its business, and qualify and remain qualified as a foreign corporation (or partnership, limited liability company or other such similar entity, as the case may be) and authorized to do business in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect; (ii) pay and perform all obligations of the Lessee under the Operative Agreements and all other material contractual obligations and pay and perform (A) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (B) all other indebtedness, obligations and liabilities in accordance with customary trade practices, which if not paid would have a Material Adverse Effect; provided that the Lessee may contest any item described in this Section 8.3(n)(ii) in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP; (iii) to the extent failure to do so would have a Material Adverse Effect, observe and remain in compliance with all applicable Laws (including specifically without limitation all applicable Environmental Laws and ERISA) and maintain in full force and effect all Governmental Actions, in each case applicable to the conduct of its business; keep in full force and effect all licenses, certifications or accreditations necessary for any Facility to carry on its business; and not permit the termination of any insurance reimbursement program available to any Facility; and (iv) provided that the Agent, the Lenders and the Holders use reasonable efforts to minimize disruption to the business of the Lessee, permit representatives of the Agent or any Lender or Holder, from time to time, to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including without limitation management letters prepared by independent accountants; and discuss with its principal officers, and its 30 35 independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. (o) Any reprogramming required to permit the proper functioning, before, on and after January 1, 2000, of (i) Lessee's computer-based systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which Lessee's systems interface), and the testing of all such systems and equipment, as so reprogrammed, will be completed by December 31, 1999. The cost to Lessee of such reprogramming and testing and of the reasonably foreseeable consequences of the year 2000 to Lessee (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in a Default, Event of Default or Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of Lessee are and, with ordinary course upgrading and maintenance will continue for the term of this Agreement to be, sufficient to permit Lessee to conduct their respective businesses without a Material Adverse Effect. (p) Lessee shall perform any and all obligations of Lessor under, and cause Lessor to otherwise remain in full compliance with, the terms and provisions of each Ground Lease, if any. (q) Promptly after obtaining any required architectural approvals by any business park or any other applicable entity with oversight responsibility for the applicable Improvements, the Construction Agent shall deliver to the Agent copies of the same. (r) Lessee shall maintain a first priority perfected security interest on the Additional Collateral in favor of the Agent (for the benefit of the Financing Parties), until such time as the Lessee shall have satisfied each of the following conditions (as established by financial statements delivered pursuant to Section 8.3.A(a)-(c) hereof): (i) the sum of consolidated EBITDA for the four immediately preceding fiscal quarters is greater than or equal to $150,000,000.00; (ii) the ratio of Consolidated Total Funded Debt (including all Loans and Holder Advances), as of the date of determination, to EBITDA for the four immediately preceding fiscal quarters period is less than or equal to 2.00:1.00; (iii) the ratio of Consolidated Funded Senior Debt, as of the date of determination, to EBITDA for the four immediately preceding fiscal quarters is less than or equal to 1.00:1.00; (iv) Consolidated Total Funded Debt, as of the date of determination, is less than or equal to forty percent (40%) of Book Capitalization, as of the date of determination; (v) the Completion Date for all Properties (including without limitation the installation and delivery of the Equipment) has occurred, Rent payments 31 36 have commenced for each Property and Lessee shall have caused title to all of the Equipment to be vested in the Lessor; and (vi) no Default or Event of Default has occurred and is continuing. (s) The Lessee will cause all of the owned personal property of each member of the Consolidated Group to be subject at all times to a first priority, perfected Lien in favor of the Agent to secure the Obligations pursuant to the terms and conditions of the Operative Agreements or, with respect to any such property acquired subsequent to the Initial Closing Date, such other additional security documents as the Agent shall reasonably request, subject in any case to Liens that are described in Schedule 3 hereto as of the Initial Closing Date or with respect to any such property acquired subsequent to the Initial Closing Date Liens permitted pursuant to 8.3B(a)(iii) hereof. If, subsequent to the Initial Closing Date, any member of the Consolidated Group shall acquire any asset required to be pledged to the Agent as Collateral by this Section 8.3(s), the Lessee shall promptly notify the Agent of same and shall take such action at its own expense as requested by the Agent to ensure that the Agent has a first priority perfected Lien in such assets to secure the Obligations. 8.3.A ADDITIONAL AFFIRMATIVE COVENANTS OF THE LESSEE. Lessee hereby covenants and agrees that, so long as any Operative Agreement is in effect or any amounts payable under any Operative Agreement shall remain outstanding, and until all of the Commitments and Holder Commitments shall have terminated, Lessee will furnish, or cause to be furnished, to the Agent, the Lenders and the Holders the following information and will comply with each of the covenants set forth below: (a) Annual Financial Statements. As soon as available, and in any event within 90 days after the close of each fiscal year of the Lessee, a consolidated balance sheet and income statement of the Lessee as of the end of such fiscal year, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal year, in each case setting forth in comparative form consolidated figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by independent certified public accountants of recognized national standing reasonably acceptable to the Agent, and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified as to the status of the Lessee as a going concern or any other material qualifications or exceptions. (b) Quarterly Financial Statements. As soon as available, and in any event within 45 days after the close of each fiscal quarter of the Lessee (other than the fourth fiscal quarter, in which case 90 days after the end thereof) a consolidated balance sheet and income statement of the Lessee as of the end of such fiscal quarter, together with related consolidated statements of operations and 32 37 retained earnings and of cash flows for such fiscal quarter, in each case setting forth in comparative form consolidated figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Agent, and accompanied by a certificate of a Responsible Officer of Lessee to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the Lessee and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments. (c) Officer's Financial Compliance Certificate. At the time of delivery of the financial statements provided for in Sections 8.3.A(a) and (b) Financial Compliance above setting forth the calculations described in Sections 8.3(r) and 8.3.A(i)-(m) hereof, a certificate of a Responsible Officer of Lessee substantially in the form of Exhibit K, stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action Lessee proposes to take with respect thereto. (d) Annual Business Plan and Budgets. At least 30 days prior to the end of each fiscal year of the Lessee, an annual business plan and budget of the Lessee containing, among other things, pro forma financial statements for the next fiscal year. (e) Accountant's Certificate. Within the period for delivery of the annual financial statements provided in Section 8.3.A(a), a certificate of the accountants conducting the annual audit stating that they have reviewed the Operative Agreements and stating further whether, in the course of their audit, they have become aware of any Default or Event of Default and, if any such Default or Event of Default exists, specifying the nature and extent thereof. (f) Auditor's Reports. Promptly upon receipt thereof, a copy of any other report or "management letter" submitted by independent accountants to any member of the Lessee in connection with any annual, interim or special audit of the books of such Person. (g) Reports. Promptly upon transmission or receipt thereof, copies of any filings and registrations with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all financial statements, proxy statements, notices and reports as Lessee shall send to its shareholders or to a holder of any Indebtedness owed by Lessee in its capacity as such a holder. (h) Books and Records. The Lessee and each of its Subsidiaries will keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). (i) Other Information. With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of any member of the Lessee as the Agent may reasonably request. (j) Quick Ratio. For each fiscal quarter the ratio of (a) the sum (without duplication) of Lessee's (i) unencumbered cash, (ii) unencumbered short term cash investments, (iii) other 33 38 unencumbered marketable securities which are classified as short term investments and (iv) unencumbered accounts receivable, computed net of reserves for uncollectible amounts, each as classified in accordance with GAAP, to (b) Lessee's current liabilities determined in accordance with GAAP (which shall include, without limitation, that portion of the principal amount of Total Funded Debt which is due on demand or will become due within one year after the date on which the applicable determination of the quick ratio is required hereunder), shall equal or exceed 1.25:1.00. (k) Consolidated Interest Coverage Ratio. At all times, the Consolidated Interest Coverage Ratio shall not be less than 5.0:1.0. (l) Consolidated Total Leverage Ratio. At all times, the Consolidated Total Leverage Ratio shall be not greater than 2.75:1.00. (m) Consolidated Net Worth. As of the end of each fiscal quarter, the Consolidated Net Worth shall be not less than the sum of (i) $229,048,000.00 plus (ii) as of the end of each fiscal quarter to occur after September 26, 1999, an amount equal to seventy-five (75%) of Consolidated Net Income (but not less than zero) for such fiscal quarter, such increases to be cumulative, plus (iii) an amount equal to one hundred percent (100%) of net proceeds from Equity Issuances occurring after September 26, 1999. (n) Capital Expenditures. Lessee will not make, or permit any Subsidiary of the Lessee to make, Consolidated Capital Expenditures in any fiscal year set forth in the table below that exceed, in the aggregate, the amount set forth opposite such fiscal year in such table: Fiscal Year Ending (on or about) Amount -------------------------------- ------ March 31, 2000 $100,000,000.00 March 31, 2001 $125,000,000.00 March 31, 2002 $125,000,000.00 March 31, 2003 $175,000,000.00 March 31, 2004 $175,000,000.00 March 31, 2005 $175,000,000.00 provided, however, that, if during any fiscal year the amount of Consolidated Capital Expenditures permitted for that fiscal year in the table above is not so utilized, such unutilized amount may be utilized in the next succeeding fiscal year but not in any subsequent fiscal year. (o) Domestic Subsidiaries. As soon as practicable and in any event within 30 days after any Person becomes a direct or indirect Domestic Subsidiary of the Lessee, the Lessee shall (i) provide the Agent with written notice thereof setting forth information in reasonable detail describing all of the assets of such Person, (ii) cause such Person to provide a guaranty of the Obligations pursuant to a guaranty agreement in form and substance satisfactory to the Agent, (iii) cause such Person to grant a security interest to the Agent in all of its personal property pursuant to the terms of a security agreement in substantially the form of the Lessee's Security 34 39 Agreement and otherwise in form and substance satisfactory to the Agent, (iv) cause 100% of the issued and outstanding capital stock and other equity interests of such Person to be pledged to the Agent pursuant to a pledge agreement in form and substance satisfactory to the Agent and cause the certificates (or other agreements or instruments), if any, representing such capital stock or other equity interests to be delivered to the Agent (together with undated stock powers signed in blank), and (v) deliver such other documentation as the Agent may reasonably request in connection with the foregoing, including, without limitation, appropriate UCC-1 financing statements, landlord's waivers, certified resolutions and other organizational and authorizing documents of such Person, favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to above and the perfection of the Agent's liens thereunder), all in form, content and scope reasonably satisfactory to the Agent. (p) Foreign Subsidiaries. As soon as practicable and in any event within 30 days after any Person becomes a direct or indirect Foreign Subsidiary of the Lessee, the Lessee shall (i) provide the Agent with written notice thereof setting forth information in reasonable detail describing all of the assets of such Person. 8.3.B ADDITIONAL NEGATIVE COVENANTS OF THE LESSEE. Lessee hereby covenants and agrees that, so long as any Operative Agreement is in effect or any amounts payable under any Operative Agreement shall remain outstanding, and until all of the Commitments and Holder Commitments shall have terminated: (a) Indebtedness. Lessee will not permit any member of the Consolidated Group to contract, create, incur, assume, guaranty or permit to exist any Indebtedness, and Lessee will not except: contract, create, incur, assume, guaranty or permit to exist any Indebtedness except: (i) Indebtedness existing or arising under the Operative Agreements; (ii) Indebtedness consisting of unsecured Subordinated Debt maturing after the Expiration Date not to exceed, in the aggregate, an outstanding amount of $250,000,000.00 at any time, provided further no cash amortization shall occur until after the Expiration Date; (iii) Indebtedness consisting of unsecured senior Funded Debt maturing after the Expiration Date not to exceed, in the aggregate, an outstanding amount of $50,000,000.00 at anytime, provided further, no amortization shall occur until after the Expiration Date; (iv) purchase money Indebtedness (including obligations in respect of Capitalized Leases) hereafter incurred by the Lessee to finance the purchase price of any cost of construction of fixed assets provided that (i) the total of all such Indebtedness for 35 40 the Lessee taken together shall not exceed an aggregate principal amount of $100,000,000.00 at any one time outstanding; (ii) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed; and (iii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; provided, however, that such $100,000,000.00 amount shall not include up to $17,000,000.00 to finance the headquarters building of the Lessee which is located at 7628 Thorndike Road, Greensboro, North Carolina; (v) Indebtedness and other obligations owing under interest rate, commodities and foreign currency exchange protection agreements entered into in the ordinary course of business to manage existing or anticipated risks and not for speculative purposes; (vi) guaranty obligations with respect to Indebtedness of Lessee that are permitted under this Section 8.3.B. (b) Liens. Lessee will not permit any member of the Consolidated Group to contract, create, incur, assume or permit to exist any Lien with respect to any of its property (including without limitation the Property, Equipment, Additional Collateral, whether now owned or after acquired), except for Permitted Liens. (c) Nature of Business. Lessee will not permit any member of the Consolidated Group to substantively alter the character or conduct of the business conducted by such Person as of the Initial Closing Date. (d) Merger and Consolidation; Dissolution. Lessee will not permit any member of the Consolidated Group to merge with or into or consolidate or combine with any other Person or sell, lease, transfer or assign to any other Person or otherwise dispose of (whether in one transaction or a series of transactions) all or substantially all its assets (whether now owned or hereafter acquired); provided, however, that (a) any Subsidiary (direct or indirect) of Lessee may merge with or into or consolidate or combine with or dispose of all or substantially all of its assets to Lessee or any other Subsidiary (direct or indirect) of Lessee, (b) any Subsidiary (direct or indirect) of Lessee may merge, consolidate or combine with another corporation if the surviving corporation in such transaction shall be a wholly-owned Subsidiary (direct or indirect) of Lessee and (c) if no Default or Event of Default shall have occurred at the time of or immediately after giving effect to such transaction, Lessee may merge, consolidate or combine with another corporation, if the surviving corporation shall be Lessee. 36 41 (e) Asset Dispositions. Lessee will not permit any member of the Consolidated Group to make any Asset Disposition (including, without limitation, any sale/leaseback transaction) other than (i) the sale/leaseback transaction to finance the headquarters building of the Lessee which is located at 7628 Thorndike Road, Greensboro, North Carolina for an amount of at least $13,000,000.00, (ii) Asset Dispositions where the assets being disposed of are replaced, within ten (10) days, with assets of equal or greater value and (iii) other Asset Dispositions which in the aggregate constitute less than (A) 10% of the tangible net assets of the Lessee (measured as of the end of the most recent fiscal quarter for which financial statements have been delivered pursuant to Section 8.3A hereof) and (B) 10% of Consolidated EBITDA. (f) Investments. Lessee will not permit any member of the Consolidated Group to make or permit to exist Investments in or to any Person, except for Eligible Investments. (g) Restricted Payments. Lessee will not permit any member of the Consolidated Group to make any cash Restricted Payment. (h) [Intentionally Omitted] [(i) Transactions with Affiliates. Lessee will not permit any member of the Consolidated Group to enter into or permit to exist any transaction or series of transactions with any officer, director, shareholder, Subsidiary or Affiliate of such Person other than (a) advances of working capital to Lessee, (b) transfers of cash and assets to Lessee, (c) transactions permitted by Sections 8.3.B(a), (d), (e), (f) and (g) normal compensation and reimbursement of expenses of officers and directors and (d) except as otherwise specifically limited in the Operative Agreements, other transactions which are entered into in the ordinary course of such Person's business on terms and conditions substantially as favorable to such Person as would be obtainable by it in a comparable arms-length transaction with a Person other than an officer, director, shareholder, Subsidiary or Affiliate. (j) [Intentionally Omitted] (k) Limitation on Restricted Actions. Lessee will not permit any member of the Consolidated Group to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Person to (a) pay dividends or make any other distributions on its capital stock or with respect to any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness or other obligation, (c) make loans or advances, (d) sell, lease or transfer any of its properties or assets, or (e) act as a guarantor or pledge its assets, except for such encumbrances 37 42 or restrictions existing under or by reason of (i) the Operative Agreements or (ii) pursuant to the terms of any purchase money or sale/leaseback Indebtedness (including Capitalized Leases) to the extent permitted under Section 8.3B(a)(iv) to the extent such limitations relate only to the property which is the subject of such financing. (l) Ownership of Subsidiaries. Notwithstanding any other provisions of this Agreement to the contrary, Lessee shall not create or have any Subsidiaries except wholly owned Subsidiaries pursuant to the terms and conditions of the Operative Agreements. 8.4. SHARING OF CERTAIN PAYMENTS. Except for Excepted Payments, the parties hereto acknowledge and agree that all payments due and owing by the Lessee to the Lessor under the Lease or any of the other Operative Agreements shall be made by the Lessee directly to the Agent as more particularly provided in Section 8.3 hereof. The Lessor, the Holders, the Agent, the Lenders and the Lessee acknowledge the terms of Section 8.7 of this Agreement regarding the allocation of payments and other amounts made or received from time to time under the Operative Agreements and agree, that all such payments and amounts are to be allocated as provided in Section 8.7 of this Agreement. 8.5. GRANT OF EASEMENTS, ETC. The Agent, the Lenders and the Holders hereby agree that, so long as no Event of Default shall have occurred and be continuing, the Owner Trustee shall, from time to time at the request of the Lessee (and with the prior consent of the Agent), in connection with the transactions contemplated by the Agency Agreement, the Lease or the other Operative Agreements, (i) grant easements and other rights in the nature of easements with respect to any Property, (ii) release existing easements or other rights in the nature of easements which are for the benefit of any Property, (iii) execute and deliver to any Person any instrument appropriate to confirm or effect such grants or releases, and (iv) execute and deliver to any Person such other documents or materials in connection with the acquisition, development, construction, testing or operation of any Property, including without limitation reciprocal easement agreements, construction contracts, operating agreements, development agreements, plats, replats or subdivision documents; provided, that each of the agreements referred to in this Section 8.5 shall be of the type normally executed by the Lessee in the ordinary course of the Lessee's business and shall be on commercially reasonable terms so as not to diminish the value of any Property in any material respect. 8.6. APPOINTMENT BY THE AGENT, THE LENDERS, THE HOLDERS AND THE OWNER TRUSTEE. The Holders hereby appoint the Agent to act as collateral agent for the Holders in connection with the Lien granted by the Security Documents to secure the Holder Amount. The Lenders and the Holders acknowledge and agree and direct that the rights and remedies of the 38 43 beneficiaries of the Lien of the Security Documents shall be exercised by the Agent on behalf of the Lenders and the Holders as directed from time to time by the Majority Secured Parties or, pursuant to Sections 8.2(h) and 12.4, all of the Lenders and the Holders, as the case may be; provided, in all cases, the Agent shall allocate payments and other amounts received in accordance with Section 8.7. The Agent is further appointed to provide notices under the Operative Agreements on behalf of the Owner Trustee (as determined by the Agent, in its reasonable discretion), to receive notices under the Operative Agreements on behalf of the Owner Trustee and (subject to Sections 8.5 and 9.2) to take such other action under the Operative Agreements on behalf of the Owner Trustee as the Agent shall determine in its reasonable discretion from time to time. The Agent hereby accepts such appointments. For purposes hereof, the provisions of Section 7 of the Credit Agreement, together with such other terms and provisions of the Credit Agreement and the other Operative Agreements as required for the full interpretation and operation of Section 7 of the Credit Agreement are hereby incorporated by reference as if restated herein for the mutual benefit of the Agent and each Holder as if each Holder were a Lender thereunder. Outstanding Holder Advances and outstanding Loans shall each be taken into account for purposes of determining Majority Secured Parties. Further, the Agent shall be entitled to take such action on behalf of the Owner Trustee as is delegated to the Agent under any Operative Agreement (whether express or implied) as may be reasonably incidental thereto. The parties hereto hereby agree to the provisions contained in this Section 8.6. Any appointment of a successor agent under Section 7.9 of the Credit Agreement shall also be effective as an appointment of a successor agent for purposes of this Section 8.6. 8.7. COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS. (a) The Lessee and the Construction Agent have agreed pursuant to Section 5.8 and otherwise in accordance with the terms of this Agreement to pay to (i) the Agent any and all Rent (excluding Excepted Payments) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person and (ii) each Person as appropriate the Excepted Payments. Promptly after receipt, the Agent shall apply and allocate, in accordance with the terms of this Section 8.7, such amounts received from the Lessee or the Construction Agent and all other payments, receipts and other consideration of any kind whatsoever received by the Agent pursuant to the Security Agreement or otherwise received by the Agent, the Holders or any of the Lenders in connection with the Collateral, the Security Documents or any of the other Operative Agreements. Ratable distributions among the Lenders and the Holders under this Section 8.7 shall be made based on (in the case of the Lenders) the ratio of the outstanding Loans to the aggregate Property Cost and (in the case of the Holders) the ratio of the outstanding Holder Advances to the aggregate Property Cost. Ratable distributions among the Tranche A Lenders under this Section 8.7 shall be made based on the ratio of the individual Tranche A Lender's Commitment for Tranche A Loans to the aggregate of all the Tranche A Lenders' Commitments for Tranche A Loans. Ratable distributions among the Tranche B Lenders under this Section 8.7 shall be made based on the ratio of the individual Tranche B Lender's Commitment for Tranche B Loans to the aggregate of all the Tranche B Lenders' Commitments for Tranche B Loans. Ratable distributions among the Lenders (in situations where the Tranche A Lenders are 39 44 not differentiated from the Tranche B Lenders) shall be made based on the ratio of the individual Lender's Commitment to the aggregate of all the Lenders' Commitments. Ratable distributions among the Holders under this Section 8.7 shall be based on the ratio of the individual Holder's Holder Commitment to the aggregate of all the Holders' Holder Commitments. (b) Payments and other amounts received by the Agent from time to time in accordance with the terms of subparagraph (a) shall be applied and allocated as follows (subject in all cases to Section 8.7(c)): (i) Any such payment or amount identified as or deemed to be Basic Rent shall be applied and allocated by the Agent first, ratably to the Lenders and the Holders for application and allocation to the payment of interest on the Loans and thereafter the principal of the Loans which is due and payable on such date and to the payment of accrued Holder Yield with respect to the Holder Advances and thereafter the portion of the Holder Advances which is due on such date; and second, if no Default or Event of Default is in effect, any excess shall be paid to such Person or Persons as the Lessee may designate; provided, that if a Default or Event of Default is in effect, such excess (if any) shall instead be held by the Agent until the earlier of (I) the first date thereafter on which no Default or Event of Default shall be in effect (in which case such payments or returns shall then be made to such other Person or Persons as the Lessee may designate) and (II) the Maturity Date or the Expiration Date, as the case may be (or, if earlier, the date of any Acceleration), in which case such amounts shall be applied and allocated in the manner contemplated by Section 8.7(b)(iv). (ii) If on any date the Agent or the Lessor shall receive any amount in respect of (A) any Casualty or Condemnation pursuant to Sections 15.1(a) or 15.1(g) of the Lease (excluding any payments in respect thereof which are payable to the Lessee in accordance with the Lease), or (B) the Termination Value in connection with the delivery of a Termination Notice pursuant to Article XVI of the Lease, or (C) the Termination Value in connection with the exercise of the Purchase Option under Section 20.1 of the Lease or the exercise of the option of the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of the Lease, or (D) any payment required to be made or elected to be made by the Construction Agent to the Lessor pursuant to the terms of the Agency Agreement, then in each case, the Lessor shall be required to pay such amount received (1) if no Acceleration has occurred, to prepay the principal balance of the Loans and the Holder Advances, on a pro rata basis, a portion of such amount to be distributed to the Lenders and the Holders or (2) if an Acceleration has occurred, to apply and allocate the proceeds respecting Sections 8.7(b)(ii)(A) through 8.7(b)(ii)(D) in accordance with Section 8.7(b)(iii) hereof. (iii) An amount equal to any payment identified as proceeds of the sale or other disposition (or lease upon the exercise of remedies) of the Properties or 40 45 any portion thereof, whether pursuant to Article XXII of the Lease or the exercise of remedies under the Security Documents or otherwise, the execution of remedies set forth in the Lease and any payment in respect of excess wear and tear pursuant to Section 22.3 of the Lease (whether such payment relates to a period before or after the Construction Period Termination Date) shall be applied and allocated by the Agent first, ratably to the payment of the principal and interest of the Tranche B Loans then outstanding, second, ratably to the payment to the Holders of the outstanding principal balance of all Holder Advances plus all outstanding Holder Yield with respect to such outstanding Holder Advances, third, to the extent such amount exceeds the maximum amount to be returned pursuant to the foregoing provisions of this paragraph (iii), ratably to the payment of the principal and interest of the Tranche A Loans then outstanding, fourth, to any and all other amounts owing under the Operative Agreements to the Lenders under the Tranche B Loans, fifth, to any and all other amounts owing under the Operative Agreements to the Holders, sixth, to any and all other amounts owing under the Operative Agreements to the Lenders under the Tranche A Loans, and seventh, to the extent moneys remain after application and allocation pursuant to clauses first through sixth above, to the Owner Trustee for application and allocation to any and all other amounts owing to the Holders or the Owner Trustee and as the Holders shall determine; provided, where no Event of Default shall exist and be continuing and a prepayment is made for any reason with respect to less than the full amount of the outstanding principal amount of the Loans and the outstanding Holder Advances, the proceeds shall be applied and allocated ratably to the Lenders and to the Holders. (iv) An amount equal to (A) any such payment identified as a payment pursuant to Section 22.1(b) of the Lease (or otherwise) of the Maximum Residual Guarantee Amount (and any such lesser amount as may be required by Section 22.1(b) of the Lease) in respect of the Properties and any such payment which derives from the Additional Collateral and (B) any other amount payable upon any exercise of remedies after the occurrence of an Event of Default not covered by Sections 8.7(b)(i) or 8.7(b)(iii) above (including without limitation any amount received in connection with an Acceleration which does not represent proceeds from the sale or liquidation of the Properties), shall be applied and allocated by the Agent first, ratably, to the payment of the principal and interest balance of Tranche A Loans then outstanding, second, ratably to the payment of the principal and interest balance of the Tranche B Loans then outstanding, third, ratably to the payment of the principal balance of all Holder Advances plus all outstanding Holder Yield with respect to such outstanding Holder Advances, fourth, to the payment of any other amounts owing to the Lenders hereunder or under any of the other Operative Agreement, and fifth, to the extent moneys remain after application and allocation pursuant to clauses first through fourth above, to the Owner Trustee for application and allocation to Holder Advances and Holder Yield and any other amounts owing to the Holders or the Owner Trustee as the Holders shall determine. 41 46 (v) An amount equal to any such payment identified as Supplemental Rent shall be applied and allocated by the Agent to the payment of any amounts then owing to the Agent, the Lenders, the Holders and the other parties to the Operative Agreements (or any of them) (other than any such amounts payable pursuant to the preceding provisions of this Section 8.7(b)) as shall be determined by the Agent in its reasonable discretion; provided, however, that Supplemental Rent received upon the exercise of remedies after the occurrence and continuance of an Event of Default in lieu of or in substitution of the Maximum Residual Guarantee Amount or as a partial payment thereon shall be applied and allocated as set forth in Section 8.7(b)(iv). (vi) The Agent in its reasonable judgment shall identify the nature of each payment or amount received by the Agent and apply and allocate each such amount in the manner specified above. (c) Upon the payment in full of the Loans, the Holder Advances and all other amounts then due and owing by the Owner Trustee hereunder or under any Credit Document and the payment in full of all other amounts then due and owing to the Lenders, the Holders, the Agent, the Owner Trustee and the other Financing Parties pursuant to the Operative Agreements, any moneys remaining with the Agent shall be returned to the Lessee. In the event of an Acceleration it is agreed that, prior to the application and allocation of amounts received by the Agent in the order described in Section 8.7(b) above or any distribution of money to the Lessee, any such amounts shall first be applied and allocated to the payment of (i) any and all sums advanced by the Agent in order to preserve the Collateral or to preserve its Lien thereon, (ii) the expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing or realizing on the Collateral, or of any exercise by the Agent of its rights under the Security Documents, together with reasonable attorneys' fees and expenses and court costs and (iii) any and all other amounts reasonably owed to the Agent under or in connection with the transactions contemplated by the Operative Agreements (including without limitation any accrued and unpaid administration fees). 8.8. RELEASE OF PROPERTIES, ETC. If the Lessee shall at any time purchase any Property pursuant to the Lease, or the Construction Agent shall purchase any Property pursuant to the Agency Agreement, or if any Property shall be sold in accordance with Article XXII of the Lease, then, upon satisfaction by the Owner Trustee of its obligation to prepay the Loans, Holder Advances and all other amounts owing to the Lenders and the Holders under the Operative Agreements, the Agent is hereby authorized and directed to release such Properties from the Liens created by the Security Documents to the extent of its interest therein. In addition, upon the termination of the Commitments and the Holder Commitments and the payment in full of the Loans, the Holder Advances and all other amounts owing by the Owner Trustee and the Lessee hereunder or under any other Operative Agreement the Agent is hereby authorized and directed to release all of the 42 47 Properties from the Liens created by the Security Documents to the extent of its interest therein. Upon request of the Owner Trustee following any such release, the Agent shall, at the sole cost and expense of the Lessee, execute and deliver to the Owner Trustee and the Lessee such documents as the Owner Trustee or the Lessee shall reasonably request to evidence such release. SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT. 9.1. THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT RIGHTS. Notwithstanding anything to the contrary contained in the Credit Agreement, the Agent, the Lenders, the Holders, the Construction Agent, the Lessee and the Owner Trustee hereby agree that, prior to the occurrence and continuation of any Default or Event of Default, the Construction Agent or the Lessee, as the case may be, shall have the following rights: (a) the right to designate an account to which amounts funded under the Operative Agreements shall be credited pursuant to Section 2.3(a) of the Credit Agreement; (b) the right to terminate or reduce the Commitments pursuant to Section 2.5(a) of the Credit Agreement; (c) the right to exercise the conversion and continuation options pursuant to Section 2.7 of the Credit Agreement; (d) the right to receive any notice and any certificate, in each case issued pursuant to Section 2.11(a) of the Credit Agreement; (e) the right to replace any Lender pursuant to Section 2.11(b) of the Credit Agreement; (f) the right to approve any successor agent pursuant to Section 7.9 of the Credit Agreement; and (g) the right to consent to any assignment by a Lender to which the Lessor has the right to consent pursuant to Section 9.8 of the Credit Agreement. 9.2. THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT RIGHTS. Notwithstanding anything to the contrary contained in the Trust Agreement, the Construction Agent, the Lessee, the Owner Trustee and the Holders hereby agree that, prior to the occurrence and continuation of any Default or Event of Default, the Construction Agent or the Lessee, as the case may be, shall have the following rights: (a) the right to exercise the conversion and continuation options pursuant to Section 3.8 of the Trust Agreement; 43 48 (b) the right to receive any notice and any certificate, in each case issued pursuant to Section 3.9(a) of the Trust Agreement; (c) the right to replace any Holder pursuant to Section 3.9(b) of the Trust Agreement; (d) the right to exercise the removal options contained in Section 9.1 of the Trust Agreement; provided, however, that no removal of the Owner Trustee and appointment of a successor Owner Trustee by the Holders pursuant to Section 9.1 of the Trust Agreement shall be made without the prior written consent (not to be unreasonably withheld or delayed) of the Lessee. SECTION 10. TRANSFER OF INTEREST. 10.1. RESTRICTIONS ON TRANSFER. Each Lender may participate, assign or transfer all or a portion of its interest hereunder and under the other Operative Agreements in accordance with Sections 9.7 and 9.8 of the Credit Agreement; provided, that each Lender that participates, assigns or transfers all or a portion of its interest hereunder and under the other Operative Agreements shall deliver to the Agent a copy of each Assignment and Acceptance (as referenced in Section 9.8 of the Credit Agreement) for purposes of maintaining the Register. The Holders may, directly or indirectly, assign, convey or otherwise transfer any of their right, title or interest in or to the Trust Estate or the Trust Agreement with the prior written consent of the Agent and the Lessee (which consent shall not be unreasonably withheld or delayed) and in accordance with the terms of Section 11.8(b) of the Trust Agreement. The Owner Trustee may, subject to the rights of the Lessee under the Lease and the other Operative Agreements and to the Lien of the applicable Security Documents but only with the prior written consent of the Agent (which consent may be withheld by the Agent in its sole discretion) and (provided, no Default or Event of Default has occurred and is continuing) with the consent of the Lessee, directly or indirectly, assign, convey, appoint an agent with respect to enforcement of, or otherwise transfer any of its right, title or interest in or to any Property, the Lease, the Trust Agreement and the other Operative Agreements (including without limitation any right to indemnification thereunder), or any other document relating to a Property or any interest in a Property as provided in the Trust Agreement and the Lease. The provisions of the immediately preceding sentence shall not apply to the obligations of the Owner Trustee to transfer Property to the Lessee or a third party purchaser pursuant to Article XXII of the Lease upon payment for such Property in accordance with the terms and conditions of the Lease. Neither the Lessee nor the Construction Agent may assign any of the Operative Agreements or any of their respective rights or obligations thereunder or with respect to any Property in whole or in part to any Person without the prior written consent of the Agent, the Lenders, the Holders and the Lessor. 44 49 10.2. EFFECT OF TRANSFER. From and after any transfer effected in accordance with this Section 10, the transferor shall be released, to the extent of such transfer, from its liability hereunder and under the other documents to which it is a party in respect of obligations to be performed on or after the date of such transfer; provided, however, that any transferor shall remain liable hereunder and under such other documents to the extent that the transferee shall not have assumed the obligations of the transferor thereunder. Upon any transfer by the Owner Trustee, a Holder or a Lender as above provided, any such transferee shall assume the obligations of the Owner Trustee, the Holder or the Lender, as the case may be, and shall be deemed an "Owner Trustee", "Holder", or "Lender", as the case may be, for all purposes of such documents and each reference herein to the transferor shall thereafter be deemed a reference to such transferee for all purposes, except as provided in the preceding sentence. Notwithstanding any transfer of all or a portion of the transferor's interest as provided in this Section 10, the transferor shall be entitled to all benefits accrued and all rights vested prior to such transfer including without limitation rights to indemnification under any such document. SECTION 11. INDEMNIFICATION. 11.1. GENERAL INDEMNITY. Whether or not any of the transactions contemplated hereby shall be consummated, the Indemnity Provider hereby assumes liability for and agrees to defend, indemnify and hold harmless each Indemnified Person on an After Tax Basis from and against any Claims, which may be imposed on, incurred by or asserted against an Indemnified Person by any third party, including without limitation Claims arising from the negligence of an Indemnified Person (but not to the extent such Claims arise from the gross negligence or willful misconduct of such Indemnified Person itself, as determined by a court of competent jurisdiction, as opposed to gross negligence or willful misconduct imputed to such Indemnified Person) in any way relating to or arising or alleged to arise out of the execution, delivery, performance or enforcement of this Agreement, the Lease or any other Operative Agreement or on or with respect to any Property or any component thereof, including without limitation Claims in any way relating to or arising or alleged to arise out of (a) the financing, refinancing, purchase, acceptance, rejection, ownership, design, construction, refurbishment, development, delivery, acceptance, nondelivery, leasing, subleasing, possession, use, occupancy, operation, maintenance repair, modification, transportation, condition, sale, return, repossession (whether by summary proceedings or otherwise), or any other disposition of any Property or any part thereof, including without limitation the acquisition, holding or disposition of any interest in the Property, lease or agreement comprising a portion of any thereof; (b) any latent or other defects in any Property or any portion thereof whether or not discoverable by an Indemnified Person or the Indemnity Provider; (c) a violation of Environmental Laws, Environmental Claims or other loss of or damage to any property or the environment relating to the Property, the Lease, the Agency Agreement or the Indemnity Provider; (d) the Operative Agreements, or any transaction contemplated thereby; (e) any breach by the Indemnity Provider of any of its representations or warranties under the Operative Agreements to which the Indemnity Provider is a party or failure 45 50 by the Indemnity Provider to perform or observe any covenant or agreement to be performed by it under any of the Operative Agreements; (f) the transactions contemplated hereby or by any other Operative Agreement, in respect of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA; (g) personal injury, death or property damage, including without limitation Claims based on strict or absolute liability in tort; and (h) any fees, expenses and/or other assessments by any business park or any other applicable entity with oversight responsibility for the applicable Property. If a written Claim is made against any Indemnified Person or if any proceeding shall be commenced against such Indemnified Person (including without limitation a written notice of such proceeding), for any Claim, such Indemnified Person shall promptly notify the Indemnity Provider in writing and shall not take action with respect to such Claim without the consent of the Indemnity Provider for thirty (30) days after the receipt of such notice by the Indemnity Provider; provided, however, that in the case of any such Claim, if action shall be required by law or regulation to be taken prior to the end of such period of thirty (30) days, such Indemnified Person shall endeavor to, in such notice to the Indemnity Provider, inform the Indemnity Provider of such shorter period, and no action shall be taken with respect to such Claim without the consent of the Indemnity Provider before seven (7) days before the end of such shorter period; provided, further, that the failure of such Indemnified Person to give the notices referred to in this sentence shall not diminish the Indemnity Provider's obligation hereunder except to the extent such failure precludes in all respects the Indemnity Provider from contesting such Claim. If, within thirty (30) days of receipt of such notice from the Indemnified Person (or such shorter period as the Indemnified Person has notified the Indemnity Provider is required by law or regulation for the Indemnified Person to respond to such Claim), the Indemnity Provider shall request in writing that such Indemnified Person respond to such Claim, the Indemnified Person shall, at the expense of the Indemnity Provider, in good faith conduct and control such action (including without limitation by pursuit of appeals) (provided, however, that (A) if such Claim, in the Indemnity Provider's reasonable discretion, can be pursued by the Indemnity Provider on behalf of or in the name of such Indemnified Person, the Indemnified Person, at the Indemnity Provider's request, shall allow the Indemnity Provider to conduct and control the response to such Claim and (B) in the case of any Claim (and notwithstanding the provisions of the foregoing subsection (A)), the Indemnified Person may request the Indemnity Provider to conduct and control the response to such Claim (with counsel to be selected by the Indemnity Provider and consented to by such Indemnified Person, such consent not to be unreasonably withheld; provided, however, that any Indemnified Person may retain separate counsel at the expense of the Indemnity Provider in the event of a conflict of interest between such Indemnified Person and the Indemnity Provider)) by, in the sole discretion of the Person conducting and controlling the response to such Claim (1) resisting payment thereof, (2) not paying the same except under protest, if protest is necessary and proper, (3) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings, or (4) taking such other action as is reasonably requested by the Indemnity Provider from time to time. 46 51 The party controlling the response to any Claim shall consult in good faith with the non-controlling party and shall keep the non-controlling party reasonably informed as to the conduct of the response to such Claim; provided, that all decisions ultimately shall be made in the discretion of the controlling party. The parties agree that an Indemnified Person may at any time decline to take further action with respect to the response to such Claim and may settle such Claim if such Indemnified Person shall waive its rights to any indemnity from the Indemnity Provider that otherwise would be payable in respect of such Claim (and any future Claim, the pursuit of which is precluded by reason of such resolution of such Claim) and shall pay to the Indemnity Provider any amount previously paid or advanced by the Indemnity Provider pursuant to this Section 11.1 by way of indemnification or advance for the payment of an amount regarding such Claim. Notwithstanding the foregoing provisions of this Section 11.1, an Indemnified Person shall not be required to take any action and the Indemnity Provider shall not be permitted to respond to any Claim in its own name or that of the Indemnified Person unless (A) the Indemnity Provider shall have agreed to pay and shall pay to such Indemnified Person on demand and on an After Tax Basis all reasonable costs, losses and expenses that such Indemnified Person actually incurs in connection with such Claim, including without limitation all reasonable legal, accounting and investigatory fees and disbursements and, if the Indemnified Person has informed the Indemnity Provider that it intends to contest such Claim (whether or not the control of the contest is then assumed by the Indemnity Provider), the Indemnity Provider shall have agreed that the Claim is an indemnifiable Claim hereunder, (B) in the case of a Claim that must be pursued in the name of an Indemnified Person (or an Affiliate thereof), the amount of the potential indemnity (taking into account all similar or logically related Claims that have been or could be raised for which the Indemnity Provider may be liable to pay an indemnity under this Section 11.1) exceeds $15,000.00 (or such lesser amount as may be subsequently agreed between the Indemnity Provider and the Indemnified Person), (C) the Indemnified Person shall have reasonably determined that the action to be taken will not result in any material danger of sale, forfeiture or loss of the Property, or any part thereof or interest therein, will not interfere with the payment of Rent, and will not result in risk of criminal liability, (D) if such Claim shall involve the payment of any amount prior to the resolution of such Claim, the Indemnity Provider shall provide to the Indemnified Person an interest-free advance in an amount equal to the amount that the Indemnified Person is required to pay (with no additional net after-tax cost to such Indemnified Person) prior to the date such payment is due, (E) in the case of a Claim that must be pursued in the name of an Indemnified Person (or an Affiliate thereof), the Indemnity Provider shall have provided to such Indemnified Person an opinion of independent counsel selected by the Indemnity Provider and reasonably satisfactory to the Indemnified Person stating that a reasonable basis exists to contest such Claim (or, in the case of an appeal of an adverse determination, an opinion of such counsel to the effect that the position asserted in such appeal will more likely than not prevail) and (F) no Event of Default shall have occurred and be continuing. In no event shall an Indemnified Person be required to appeal an adverse judicial determination to the United States Supreme Court. In addition, an Indemnified Person shall not be required to contest any Claim in its name (or that of an Affiliate) if the subject matter thereof shall be of a continuing nature and shall have previously been decided adversely by a court of competent jurisdiction pursuant to the contest provisions of this Section 11.1, unless there shall 47 52 have been a change in law (or interpretation thereof) and the Indemnified Person shall have received, at the Indemnity Provider's expense, an opinion of independent counsel selected by the Indemnity Provider and reasonably acceptable to the Indemnified Person stating that as a result of such change in law (or interpretation thereof), it is more likely than not that the Indemnified Person will prevail in such contest. In no event shall the Indemnity Provider be permitted to adjust or settle any Claim without the consent of the Indemnified Person to the extent any such adjustment or settlement involves, or is reasonably likely to involve, any performance by or adverse admission by or with respect to the Indemnified Person. 11.2. GENERAL TAX INDEMNITY. (a) The Indemnity Provider shall pay and assume liability for, and does hereby agree to indemnify, protect and defend each Property and all Indemnified Persons, and hold them harmless against, all Impositions on an After Tax Basis, and all payments pursuant to the Operative Agreements shall be made free and clear of and without deduction for any and all present and future Impositions. (b) Notwithstanding anything to the contrary in Section 11.2(a) hereof, the following shall be excluded from the indemnity required by Section 11.2(a): (i) Taxes (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on a Indemnified Person (other than the Lessor, the Owner Trustee and the Trust) by the United States federal government that are based on or measured by the net income (including without limitation taxes based on capital gains and minimum taxes) of such Person; provided, that this clause (i) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (ii) Taxes (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on any Indemnified Person (other than the Lessor, the Owner Trustee and the Trust) by any state or local jurisdiction or taxing authority within any state or local jurisdiction and that are based upon or measured by the net income (including without limitation taxes based on capital gains and minimum taxes) of such Person; provided, further, that this clause (ii) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (iii) any Tax to the extent it relates to any act, event or omission that occurs after the termination of the Lease and redelivery or sale of the Property in accordance with the terms of the Lease (but not any Tax that relates to such termination, redelivery or sale and/or to any period prior to such termination, redelivery or sale); and 48 53 (iv) any Taxes which are imposed on an Indemnified Person as a result of the gross negligence or willful misconduct of such Indemnified Person itself, as determined by a court of competent jurisdiction (as opposed to gross negligence or willful misconduct imputed to such Indemnified Person), but not Taxes imposed as a result of ordinary negligence of such Indemnified Person. (c) (i) Subject to the terms of Section 11.2(f), the Indemnity Provider shall pay or cause to be paid all Impositions directly to the taxing authorities where feasible and otherwise to the Indemnified Person, as appropriate, and the Indemnity Provider shall at its own expense, upon such Indemnified Person's reasonable request, furnish to such Indemnified Person copies of official receipts or other satisfactory proof evidencing such payment. (ii) In the case of Impositions for which no contest is conducted pursuant to Section 11.2(f) and which the Indemnity Provider pays directly to the taxing authorities, the Indemnity Provider shall pay such Impositions prior to the latest time permitted by the relevant taxing authority for timely payment. In the case of Impositions for which the Indemnity Provider reimburses an Indemnified Person, the Indemnity Provider shall do so within thirty (30) days after receipt by the Indemnity Provider of demand by such Indemnified Person describing in reasonable detail the nature of the Imposition and the basis for the demand (including without limitation the computation of the amount payable), accompanied by receipts or other reasonable evidence of such demand. In the case of Impositions for which a contest is conducted pursuant to Section 11.2(f), the Indemnity Provider shall pay such Impositions or reimburse such Indemnified Person for such Impositions, to the extent not previously paid or reimbursed pursuant to subsection (a), prior to the latest time permitted by the relevant taxing authority for timely payment after conclusion of all contests under Section 11.2(f). (iii) At the Indemnity Provider's request, the amount of any indemnification payment by the Indemnity Provider pursuant to subsection (a) shall be verified and certified by an independent public accounting firm mutually acceptable to the Indemnity Provider and the Indemnified Person. The fees and expenses of such independent public accounting firm shall be paid by the Indemnity Provider unless such verification shall result in an adjustment in the Indemnity Provider's favor of fifteen percent (15%) or more of the payment as computed by the Indemnified Person, in which case such fee shall be paid by the Indemnified Person. (d) The Indemnity Provider shall be responsible for preparing and filing any real and personal property or ad valorem tax returns in respect of each Property and any other tax returns required for the Owner Trustee respecting the transactions described in the Operative Agreements. In case any other report or tax return shall be required to be made with respect to any obligations of the Indemnity Provider under or arising out of subsection (a) and of which the Indemnity Provider has knowledge or should have 49 54 knowledge, the Indemnity Provider, at its sole cost and expense, shall notify the relevant Indemnified Person of such requirement and (except if such Indemnified Person notifies the Indemnity Provider that such Indemnified Person intends to prepare and file such report or return) (A) to the extent required or permitted by and consistent with Legal Requirements, make and file in the Indemnity Provider's name such return, statement or report; and (B) in the case of any other such return, statement or report required to be made in the name of such Indemnified Person, advise such Indemnified Person of such fact and prepare such return, statement or report for filing by such Indemnified Person or, where such return, statement or report shall be required to reflect items in addition to any obligations of the Indemnity Provider under or arising out of subsection (a), provide such Indemnified Person at the Indemnity Provider's expense with information sufficient to permit such return, statement or report to be properly made with respect to any obligations of the Indemnity Provider under or arising out of subsection (a). Such Indemnified Person shall, upon the Indemnity Provider's request and at the Indemnity Provider's expense, provide any data maintained by such Indemnified Person (and not otherwise available to or within the control of the Indemnity Provider) with respect to each Property which the Indemnity Provider may reasonably require to prepare any required tax returns or reports. (e) As between the Indemnity Provider on one hand, and each Financing Party on the other hand, the Indemnity Provider shall be responsible for, and the Indemnity Provider shall indemnify and hold harmless each Financing Party (without duplication of any indemnification required by subsection (a)) on an After Tax Basis against, any obligation for United States or foreign withholding taxes or similar levies, imposts, charges, fees, deductions or withholdings (collectively, "Withholdings") imposed in respect of the interest payable on the Notes, Holder Yield payable on the Certificates or with respect to any other payments under the Operative Agreement (all such payments being referred to herein as "Exempt Payments" to be made without deduction, withholding or set off) (and, if any Financing Party receives a demand for such payment from any taxing authority or a Withholding is otherwise required with respect to any Exempt Payment, the Indemnity Provider shall discharge such demand on behalf of such Financing Party); provided, however, that the obligation of the Indemnity Provider under this Section 11.2(e) shall not apply to: (i) Withholdings on any Exempt Payment to any Financing Party which is a non-U.S. Person unless such Financing Party is, on the date hereof (or on the date it becomes a Financing Party hereunder) and on the date of any change in the principal place of business or the lending office of such Financing Party, entitled to submit a Form 1001 (relating to such Financing Party and entitling it to a complete exemption from Withholding on such Exempt Payment) or Form 4224 or is otherwise subject to exemption from Withholding with respect to such Exempt Payment (except where the failure of the exemption results from a change in the principal place of business of the Lessee; provided if a failure of exemption for any Financing Party results from a change in the principal place of business or 50 55 lending office of any other Financing Party, then such other Financing Party shall be liable for any Withholding or indemnity with respect thereto), or (ii) Any U.S. Taxes imposed solely by reason of the failure by a non-U.S. Person to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections with the United States of America of such non-U.S. Person if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such U.S. Taxes. For the purposes of this Section 11.2(e), (A) "U.S. Person" shall mean a citizen, national or resident of the United States of America, a corporation, partnership or other entity created or organized in or under any laws of the United States of America or any State thereof, or any estate or trust that is subject to Federal income taxation regardless of the source of its income, (B) "U.S. Taxes" shall mean any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof or therein, (C) "Form 1001" shall mean Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the United States of America and (D) "Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of Treasury of the United States of America (or in relation to either such Form such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates). Each of the Forms referred to in the foregoing clauses (C) and (D) shall include such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates. If a Financing Party or an Affiliate with whom such Financing Party files a consolidated tax return (or equivalent) subsequently receives the benefit in any country of a tax credit or an allowance resulting from U.S. Taxes with respect to which it has received a payment of an additional amount under this Section 11.2(e), such Financing Party will pay to the Indemnity Provider such part of that benefit as in the opinion of such Financing Party will leave it (after such payment) in a position no more and no less favorable than it would have been in if no additional payment had been required to be paid, provided always that (i) such Financing Party will be the sole judge of the amount of any such benefit and of the date on which it is received, (ii) such Financing Party will have the absolute discretion as to the order and manner in which it employs or claims tax credits and allowances available to it and (iii) such Financing Party will not be obliged to disclose to the Borrower any information regarding its tax affairs or tax computations. Each non-U.S. Person that shall become a Financing Party after the date hereof shall, upon the effectiveness of the related transfer or otherwise upon becoming a Financing Party hereunder, be required to provide all of the forms and statements referenced above or other evidences of exemption from Withholdings. 51 56 (f) If a written Claim is made against any Indemnified Person or if any proceeding shall be commenced against such Indemnified Person (including without limitation a written notice of such proceeding), for any Impositions, the provisions in Section 11.1 relating to notification and rights to contest shall apply; provided, however, that the Indemnity Provider shall have the right to conduct and control such contest only if such contest involves a Tax other than a Tax on net income of the Indemnified Person and can be pursued independently from any other proceeding involving a Tax liability of such Indemnified Person. 11.3. INCREASED COSTS, ILLEGALITY, ETC. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request hereafter adopted, promulgated or made by any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Financing Party of agreeing to make or making, funding or maintaining Advances, then the Lessee shall from time to time, upon demand by such Financing Party (with a copy of such demand to the Agent but subject to the terms of Section 2.11 of the Credit Agreement and 3.9 of the Trust Agreement, as the case may be), pay to the Agent for the account of such Financing Party additional amounts sufficient to compensate such Financing Party for such increased cost. A certificate as to the amount of such increased cost, submitted to the Lessee and the Agent by such Financing Party, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Financing Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law, but in each case promulgated or made after the date hereof) affects or would affect the amount of capital required or expected to be maintained by such Financing Party or any corporation controlling such Financing Party and that the amount of such capital is increased by or based upon the existence of such Financing Party's commitment to make Advances and other commitments of this type or upon the Advances, then, upon demand by such Financing Party (with a copy of such demand to the Agent but subject to the terms of Section 2.11 of the Credit Agreement and 3.9 of the Trust Agreement), the Lessee shall pay to the Agent for the account of such Financing Party, from time to time as specified by such Financing Party, additional amounts sufficient to compensate such Financing Party or such corporation in the light of such circumstances, to the extent that such Financing Party reasonably determines such increase in capital to be allocable to the existence of such Financing Party's commitment to make such Advances. A certificate as to such amounts submitted to the Lessee and the Agent by such Financing Party shall be conclusive and binding for all purposes, absent manifest error. (c) Without limiting the effect of the foregoing, the Lessee shall pay to each Financing Party on the last day of the Interest Period therefor so long as such Financing 52 57 Party is maintaining reserves against "Eurocurrency liabilities" under Regulation D an additional amount (determined by such Financing Party and notified to the Lessee through the Agent) equal to the product of the following for each Eurodollar Loan or Eurodollar Holder Advance, as the case may be, for each day during such Interest Period: (i) the principal amount of such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, outstanding on such day; and (ii) the remainder of (x) a fraction the numerator of which is the rate (expressed as a decimal) at which interest accrues on such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, for such Interest Period as provided in the Credit Agreement or the Trust Agreement, as the case may be (less the Applicable Percentage), and the denominator of which is one (1) minus the effective rate (expressed as a decimal) at which such reserve requirements are imposed on such Financing Party on such day minus (y) such numerator; and (iii) 1/360. (d) Without affecting its rights under Sections 11.3(a), 11.3(b) or 11.3(c) or any other provision of any Operative Agreement, each Financing Party agrees that if there is any increase in any cost to or reduction in any amount receivable by such Financing Party with respect to which the Lessee would be obligated to compensate such Financing Party pursuant to Sections 11.3(a) or 11.3(b), such Financing Party shall use reasonable efforts to select an alternative office for Advances which would not result in any such increase in any cost to or reduction in any amount receivable by such Financing Party; provided, however, that no Financing Party shall be obligated to select an alternative office for Advances if such Financing Party determines that (i) as a result of such selection such Financing Party would be in violation of any applicable law, regulation, treaty, or guideline, or would incur additional costs or expenses or (ii) such selection would be inadvisable for regulatory reasons or materially inconsistent with the interests of such Financing Party. (e) With reference to the obligations of the Lessee set forth in Sections 11.3(a) through 11.3(d), the Lessee shall not have any obligation to pay to any Financing Party amounts owing under such Sections for any period which is more than one hundred eighty (180) days prior to the date upon which the request for payment therefor is delivered to the Lessee. (f) Notwithstanding any other provision of this Agreement, if any Financing Party shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Financing Party to perform its obligations hereunder to make or maintain Eurodollar Loans or Eurodollar Holder Advances, as the case may be, then (i) each Eurodollar Loan or Eurodollar Holder Advance, as the case may be, will automatically, at the earlier of the end of the Interest 53 58 Period for such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, or the date required by law, convert into an ABR Loan or an ABR Holder Advance, as the case may be, and (iii) the obligation of the Financing Parties to make, convert or continue Eurodollar Loans or Eurodollar Holder Advances, as the case may be, shall be suspended until the Agent shall notify the Lessee that such Financing Party has determined that the circumstances causing such suspension no longer exist. 11.4. FUNDING/CONTRIBUTION INDEMNITY. Subject to the provisions of Section 2.11(a) of the Credit Agreement and 3.9(a) of the Trust Agreement, as the case may be, the Lessee agrees to indemnify each Financing Party and to hold each Financing Party harmless from any loss or reasonable expense which such Financing Party may sustain or incur as a consequence of (a) any default in connection with the drawing of funds for any Advance, (b) any default in making any prepayment after a notice thereof has been given in accordance with the provisions of the Operative Agreements or (c) the making of a voluntary or involuntary payment of Eurodollar Loans or Eurodollar Holder Advances, as the case may be, on a day which is not the last day of an Interest Period with respect thereto. Such indemnification shall be in an amount equal to the excess, if any, of (x) the amount of interest or Holder Yield, as the case may be, which would have accrued on the amount so paid, or not so borrowed, accepted, converted or continued for the period from the date of such payment or of such failure to borrow, accept, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, accept, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable Eurodollar Rate plus the Applicable Percentage for such Loan or Holder Advance, as the case may be, for such Interest Period over (y) the amount of interest (as determined by such Financing Party in its reasonable discretion) which would have accrued to such Financing Party on such amount by (i) (in the case of the Lenders) reemploying such funds in loans of the same type and amount during the period from the date of payment or failure to borrow to the last day of the then applicable Interest Period (or, in the case of a failure to borrow, the Interest Period that would have commenced on the date of such failure) and (ii) (in the case of the Holders) placing such amount on deposit for a comparable period with leading banks in the relevant interest rate market. This covenant shall survive the termination of the Operative Agreements and the payment of all other amounts payable hereunder. 11.5. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC. WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION PROVISIONS OF ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING INDEMNIFICATION OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS FOR LOSS OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR OMISSION ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR 54 59 STRICT LIABILITY OF ANY SUCH BENEFICIARY, AND INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES, COSTS, LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT LIMITATION ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH BENEFICIARY (IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE ACTION FOR WHICH INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY. 11.6. INDEMNITY PRIOR TO COMPLETION DATE / CONSTRUCTION PERIOD TERMINATION DATE. Notwithstanding the provisions of Sections 11.1, 11.2, 11.3, 11.4 and 11.5, the Owner Trustee shall be the only beneficiary of the provisions set forth in Sections 11.1, 11.2, 11.3, 11.4 and 11.5 with respect to any Claim arising thereunder for the period prior to the earlier to occur of the applicable Completion Date and the Construction Period Termination Date related to the applicable Property. Notwithstanding the foregoing, to the extent that the Owner Trustee becomes obligated to any Indemnified Person pursuant to the next succeeding paragraph of Section 11.6, the Owner Trustee shall be entitled to further indemnity from the Indemnity Provider under Sections 11.1, 11.2, 11.3, 11.4 and 11.5, as applicable, with respect to all amounts owing or paid by it under this Section 11.6. To the extent the Indemnity Provider is not obligated to indemnify any Indemnified Person with respect to Claims arising under Sections 11.1, 11.2, 11.3, 11.4 or 11.5, prior to the earlier to occur of the applicable Completion Date or Construction Period Termination Date, the Owner Trustee shall provide such indemnities in favor of such Indemnified Person in accordance with the relevant provisions of Sections 11.1, 11.2, 11.3, 11.4 or 11.5 as the case may be. It is acknowledged and agreed that any amount for which the Owner Trustee becomes obligated to any Indemnified Person pursuant hereto shall become a Claim for which the Owner Trustee is entitled to indemnity from the Indemnity Provider. THE INDEMNITY OBLIGATIONS UNDERTAKEN BY THE OWNER TRUSTEE PURSUANT TO THIS SECTION 11.6 ARE IN ALL RESPECTS SUBJECT TO THE LIMITATIONS ON LIABILITY REFERENCED IN SECTION 12.9. SECTION 12. MISCELLANEOUS. 12.1. SURVIVAL OF AGREEMENTS. The representations, warranties, covenants, indemnities and agreements of the parties provided for in the Operative Agreements, and the parties' obligations under any and all thereof, 55 60 shall survive the execution and delivery of this Agreement, the transfer of any Property to the Owner Trustee, the acquisition of any Property (or any of its components), the construction of any Improvements, the Completion of any Property, any disposition of any interest of the Owner Trustee in any Property or any interest of the Holders in the Trust Estate, the payment of the Notes and any disposition thereof and shall be and continue in effect notwithstanding any investigation made by any party and the fact that any party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Agreements. Except as otherwise expressly set forth herein or in other Operative Agreements, the indemnities of the parties provided for in the Operative Agreements shall survive the expiration or termination of any thereof. 12.2. NOTICES. All notices required or permitted to be given under any Operative Agreement shall be in writing. Notices may be served by certified or registered mail, postage paid with return receipt requested; by private courier, prepaid; by telex, facsimile, or other telecommunication device capable of transmitting or creating a written record; or personally. Mailed notices shall be deemed delivered five (5) days after mailing, properly addressed. Couriered notices shall be deemed delivered when delivered as addressed, or if the addressee refuses delivery, when presented for delivery notwithstanding such refusal. Telex or telecommunicated notices shall be deemed delivered when receipt is either confirmed by confirming transmission equipment or acknowledged by the addressee or its office. Personal delivery shall be effective when accomplished or if the addressee refuses delivery, when presented for delivery notwithstanding such refusal. Unless a party changes its address by giving notice to the other party as provided herein, notices shall be delivered to the parties at the following addresses: If to the Construction Agent or the Lessee, to such entity at the following address: 7628 Thorndike Road Greensboro, NC 27409-9421 Attention: William A. Priddy Telephone: 336-931-7063 Telecopy: 336-664-0839 If to the Owner Trustee, to it at the following address: First Security Bank, National Association 79 South Main Street Third Floor Salt Lake City, Utah 84111 Attention: Val T. Orton, Vice President Telephone: (801) 246-5300 Telecopy: (801) 246-5053 56 61 If to any Holder, to each such Holder at the address set forth for such Holder on Schedule I of the Trust Agreement. If to the Agent, to it at the following address: First Union National Bank c/o First Union Securities, Inc. DC-6 301 South College Street Charlotte, North Carolina 28288-0166 Attention: Christy Lee Foster Capital Markets Services Telephone: (704) 383-5398 Telecopy: (704) 383-7989 If to any Lender, to each such Lender at the address set forth for such Lender in Schedule 2.1 of the Credit Agreement. From time to time any party may designate additional parties and/or another address for notice purposes by notice to each of the other parties hereto. 12.3. COUNTERPARTS. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one (1) and the same instrument. 12.4. TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE MATTERS. Each Basic Document may be terminated, amended, supplemented, waived or modified only by an instrument in writing signed by, subject to Article VIII of the Trust Agreement regarding termination of the Trust Agreement, the Majority Secured Parties and the Lessee and/or the Construction Agent (to the extent the Lessee and/or the Construction Agent is a party to such Basic Document); provided, to the extent no Default or Event of Default shall have occurred and be continuing, the Majority Secured Parties shall not amend, supplement, waive or modify any provision of any Basic Document in such a manner as to adversely affect the rights of the Lessee and/or the Construction Agent without the prior written consent (not to be unreasonably withheld or delayed) of the Lessee and/or the Construction Agent. Each Operative Agreement which is not a Basic Document may be terminated, amended, supplemented, waived or modified only by an instrument in writing signed by the parties thereto and (without the consent of any other Financing Party) the Agent. In addition, the Unanimous Vote Matters shall require the consent of each Lender and each Holder affected by such matter. Notwithstanding the foregoing, no such termination, amendment, supplement, waiver or modification shall, without the consent of the Agent and, to the extent affected thereby, each 57 62 Lender and each Holder (collectively, the "Unanimous Vote Matters") (i) reduce the Lender Commitments and/or the Holder Commitments except as otherwise provided in Section 2.5 of the Credit Agreement and Section 3.1(e) of the Trust Agreement, extend the scheduled date of maturity of any Note, extend the scheduled Expiration Date, extend any payment date of any Note or Certificate, reduce the stated rate of interest payable on any Note, reduce the stated Holder Yield payable on any Certificate (other than as a result of waiving the applicability of any post-default increase in interest rates or Holder Yields), modify the priority of any Lien in favor of the Agent under any Security Document, subordinate any obligation owed to such Lender or Holder, reduce any Lender Unused Fees or any Holder Unused Fees payable to such Lender or Holder (as the case may be) under the Participation Agreement, extend the scheduled date of payment of any Lender Unused Fees or any Holder Unused Fees payable to such Lender or Holder (as the case may be) or extend the expiration date of such Lender's Commitment or the Holder Commitment of such Holder, or (ii) terminate, amend, supplement, waive or modify any provision of this Section 12.4 or reduce the percentages specified in the definitions of Majority Lenders, Majority Holders or Majority Secured Parties, or consent to the assignment or transfer by the Owner Trustee of any of its rights and obligations under any Credit Document or release a material portion of the Collateral (except in accordance with Section 8.8) or release the Lessee from its obligations under any Operative Agreement or otherwise alter any payment obligations of the Lessee to the Lessor or any Financing Party under the Operative Agreements, or (iii) terminate, amend, supplement, waive or modify any provision of Section 7 of the Credit Agreement, or (iv) permit Advances for Work in excess of the Construction Budget, or (v) eliminate the automatic option under Section 5.3(b) of the Agency Agreement requiring that the Construction Agent pay certain liquidated damages in exchange for the conveyance of a Property to the Construction Agent. Any such termination, amendment, supplement, waiver or modification shall apply equally to each of the Lenders and the Holders and shall be binding upon all the parties to this Agreement. In the case of any waiver, each party to this Agreement shall be restored to its former position and rights under the Operative Agreements, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. The parties to this Agreement agree that any increase in the Lender Commitment of any Lender and/or any increase in the Holder Commitment of any Holder shall be a matter decided by the Lenders and/or Holders providing such increase together with the Majority Secured Parties and not as a Unanimous Vote Matter. If at a time when the conditions precedent set forth in the Operative Agreements to any Loan are, in the opinion of the Majority Lenders, satisfied, any Lender shall fail to fulfill its obligations to make such Loan (any such Lender, a "Defaulting Lender") then, for so long as such failure shall continue, the Defaulting Lender shall (unless the Lessee and the Majority Lenders, determined as if the Defaulting Lender were not a "Lender", shall otherwise consent in writing) be deemed for all purposes relating to terminations, amendments, supplements, waivers or modifications under the Operative Agreements to have no Loans, shall not be treated as a "Lender" when performing the computation of Majority Lenders or Majority Secured Parties, and shall have no rights under this Section 12.4; provided that any action taken pursuant to the second paragraph of this Section 12.4 shall not be effective as against the Defaulting Lender. 58 63 If at a time when the conditions precedent set forth in the Operative Agreements to any Holder Advance are, in the opinion of the Majority Holders, satisfied, any Holder shall fail to fulfill its obligations to make such Holder Advance (any such Holder, a "Defaulting Holder") then, for so long as such failure shall continue, the Defaulting Holder shall (unless the Lessee and the Majority Holders, determined as if the Defaulting Holder were not a "Holder", shall otherwise consent in writing) be deemed for all purposes relating to terminations, amendments, supplements, waivers or modifications under the Operative Agreements to have no Holder Advances, shall not be treated as a "Holder" when performing the computation of Majority Holders or Majority Secured Parties, and shall have no rights under this Section 12.4; provided that any action taken pursuant to the second paragraph of this Section 12.4 shall not be effective as against the Defaulting Holder. 12.5. HEADINGS, ETC. The Table of Contents and headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. 12.6. PARTIES IN INTEREST. Except as expressly provided herein, none of the provisions of this Agreement are intended for the benefit of any Person except the parties hereto. 12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to this Agreement or any other Operative Agreement may be brought in the courts of the State of North Carolina in Mecklenburg County or of the United States for the Western District of North Carolina, and, by execution and delivery of this Agreement, each of the parties to this Agreement hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. Each of the parties to this Agreement further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 12.2, such service to become effective three (3) days after such mailing. Nothing herein shall affect the right of any party to serve process in any other manner permitted by Law or to commence legal proceedings or to otherwise proceed against any party in any other jurisdiction. (b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE 59 64 LAW, WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO ANY DISPUTE OR THIS AGREEMENT, ANY OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN. (c) Each of the parties to this Agreement hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Operative Agreement brought in the courts referred to in subsection (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Each party to this Agreement agrees that it shall not have a remedy of punitive or exemplary damages against any other party in any Dispute and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute, whether the Dispute is resolved by arbitration or judicially. 12.8. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 12.9. LIABILITY LIMITED. (a) The Lenders, the Agent, the Lessee, the Owner Trustee and the Holders each acknowledge and agree that the Owner Trustee is (except as otherwise expressly provided herein or therein) entering into this Agreement and the other Operative Agreements to which it is a party (other than the Trust Agreement and to the extent otherwise provided in Section 6.1 of this Agreement), solely in its capacity as trustee under the Trust Agreement and not in its individual capacity and that the Trust Company shall not be liable or accountable under any circumstances whatsoever in its individual capacity for or on account of any statements, representations, warranties, covenants or obligations stated to be those of the Owner Trustee, except for its own gross negligence or willful misconduct and as otherwise expressly provided herein or in the other Operative Agreements. (b) Anything to the contrary contained in this Agreement, the Credit Agreement, the Notes or in any other Operative Agreement notwithstanding, no Exculpated Person shall be personally liable in any respect for any liability or obligation arising hereunder or in any other Operative Agreement including without limitation the payment of the principal of, or interest on, the Notes, or for monetary damages for the breach of performance of any of the covenants contained in the Credit Agreement, the 60 65 Notes, this Agreement, the Security Agreement or any of the other Operative Agreements. The Lenders, the Holders and the Agent agree that, in the event any remedies under any Operative Agreement are pursued, neither the Lenders, the Holders nor the Agent shall have any recourse against any Exculpated Person, for any deficiency, loss or Claim for monetary damages or otherwise resulting therefrom and recourse shall be had solely and exclusively against the Trust Estate (excluding Excepted Payments) and the Lessee (with respect to the Lessee's obligations under the Operative Agreements); but nothing contained herein shall be taken to prevent recourse against or the enforcement of remedies against the Trust Estate (excluding Excepted Payments) in respect of any and all liabilities, obligations and undertakings contained herein and/or in any other Operative Agreement. Notwithstanding the provisions of this Section, nothing in any Operative Agreement shall: (i) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Notes and/or the Certificates arising under any Operative Agreement or secured by any Operative Agreement, but the same shall continue until paid or discharged; (ii) relieve any Exculpated Person from liability and responsibility for (but only to the extent of the damages arising by reason of): active waste knowingly committed by any Exculpated Person with respect to any Property, any fraud, gross negligence or willful misconduct on the part of any Exculpated Person; (iii) relieve any Exculpated Person from liability and responsibility for (but only to the extent of the moneys misappropriated, misapplied or not turned over) (A) except for Excepted Payments, misappropriation or misapplication by the Lessor (i.e., application in a manner contrary to any of the Operative Agreements) of any insurance proceeds or condemnation award paid or delivered to the Lessor by any Person other than the Agent, (B) except for Excepted Payments, any deposits or any escrows or amounts owed by the Construction Agent under the Agency Agreement held by the Lessor or (C) except for Excepted Payments, any rent or other income received by the Lessor from the Lessee that is not turned over to the Agent; or (iv) affect or in any way limit the Agent's rights and remedies under any Operative Agreement with respect to the Rents and rights and powers of the Agent under the Operative Agreements or to obtain a judgment against the Lessee's interest in the Properties or the Agent's rights and powers to obtain a judgment against the Lessor (provided, that no deficiency judgment or other money judgment shall be enforced against any Exculpated Person except to the extent of the Lessor's interest in the Trust Estate (excluding Excepted Payments) or to the extent the Lessor may be liable as otherwise contemplated in clauses (ii) and (iii) of this Section 12.9(b)). 12.10. RIGHTS OF THE LESSEE. If at any time all obligations (i) of the Owner Trustee under the Credit Agreement, the Security Documents and the other Operative Agreements and (ii) of the Lessee under the Operative Agreements have in each case been satisfied or discharged in full, then the Lessee shall be entitled to (a) terminate the Lease and (b) receive all amounts then held under the Operative Agreements and all proceeds with respect to any of the Properties. Upon the termination of the Lease pursuant to the foregoing clause (a), the Lessor shall transfer to the Lessee all of its right, title and interest free and clear of the Lien of the Lease, the Lien of the 61 66 Security Documents and all Lessor Liens in and to any Properties then subject to the Lease and any amounts or proceeds referred to in the foregoing clause (b) shall be paid over to the Lessee. 12.11. FURTHER ASSURANCES. The parties hereto shall promptly cause to be taken, executed, acknowledged or delivered, at the sole expense of the Lessee, all such further acts, conveyances, documents and assurances as the other parties may from time to time reasonably request in order to carry out and effectuate the intent and purposes of this Participation Agreement, the other Operative Agreements and the transactions contemplated hereby and thereby (including without limitation the preparation, execution and filing of any and all Uniform Commercial Code financing statements, filings of Mortgage Instruments and other filings or registrations which the parties hereto may from time to time request to be filed or effected). The Lessee, at its own expense and without need of any prior request from any other party, shall take such action as may be necessary (including without limitation any action specified in the preceding sentence), or (if the Owner Trustee shall so request) as so requested, in order to maintain and protect all security interests provided for hereunder or under any other Operative Agreement. In addition, in connection with the sale or other disposition of any Property or any portion thereof, the Lessee agrees to execute such instruments of conveyance as may be reasonably required in connection therewith. 12.12. CALCULATIONS UNDER OPERATIVE AGREEMENTS. The parties hereto agree that all calculations and numerical determinations to be made under the Operative Agreements by the Owner Trustee shall be made by the Agent and that such calculations and determinations shall be conclusive and binding on the parties hereto in the absence of manifest error. 12.13. CONFIDENTIALITY. Each Financing Party severally agrees to use reasonable efforts to keep confidential all non-public information pertaining to the Lessee or any of its Subsidiaries which is provided to it by the Lessee or any of its Subsidiaries and which an officer of the Lessee or any of its Subsidiaries has requested in writing be kept confidential, and shall not intentionally disclose such information to any Person except: (a) to the extent such information is public when received by such Person or becomes public thereafter due to the act or omission of any party other than such Person; (b) to the extent such information is independently obtained from a source other than the Lessee or any of its Subsidiaries and such information from such source is not, to such Person's knowledge, subject to an obligation of confidentiality or, if such information is subject to an obligation of confidentiality, that disclosure of such information is permitted; 62 67 (c) to counsel, auditors or accountants retained by any such Person or any Affiliates of any such Person (if such Affiliates are permitted to receive such information pursuant to clause (f) or (g) below), provided they agree to keep such information confidential as if such Person or Affiliate were party to this Agreement and to financial institution regulators, including examiners of any Financing Party or any Affiliate thereof in the course of examinations of such Persons; (d) in connection with any litigation or the enforcement or preservation of the rights of any Financing Party under the Operative Agreements; (e) to the extent required by any applicable statute, rule or regulation or court order (including without limitation, by way of subpoena) or pursuant to the request of any regulatory or Governmental Authority having jurisdiction over any such Person; provided, however, that such Person shall endeavor (if not otherwise prohibited by Law) to notify the Lessee prior to any disclosure made pursuant to this clause (e), except that no such Person shall be subject to any liability whatsoever for any failure to so notify the Lessee; (f) any Financing Party may disclose such information to another Financing Party or to any Affiliate of a Financing Party that is a direct or indirect owner of any Financing Party; (g) any Financing Party may disclose such information to an Affiliate of any Financing Party to the extent required in connection with the transactions contemplated hereby or to the extent such Affiliate is involved in, or provides advice or assistance to such Person with respect to, such transactions (provided, in each case that such Affiliate has agreed in writing to maintain confidentiality as if it were such Financing Party (as the case may be)); or (h) to the extent disclosure to any other financial institution or other Person is appropriate in connection with any proposed or actual (i) assignment or grant of a participation by any of the Lenders of interests in the Credit Agreement or any Note to such other financial institution (who will in turn be required by the Agent to agree in writing to maintain confidentiality as if it were a Lender originally party to this Agreement) or (ii) assignment by any Holder of interests in the Trust Agreement to another Person (who will in turn be required by the transferring Holder to agree in writing to maintain confidentiality as if it were a Holder originally party to this Agreement). Subject to the foregoing terms of Sections 12.13(a)-12.13(h), under the terms of any one or more of which circumstances disclosure shall be permitted, each Financing Party severally agrees to use reasonable efforts to keep confidential all non-public information pertaining to the financing structure described in the unrecorded Operative Agreements. 63 68 12.14. FINANCIAL REPORTING/TAX CHARACTERIZATION. Lessee agrees to obtain advice from its own accountants and tax counsel regarding the financial reporting treatment and the tax characterization of the transactions described in the Operative Agreements. Lessee further agrees that Lessee shall not rely upon any statement of any Financing Party or any of their respective Affiliates and/or Subsidiaries regarding any such financial reporting treatment and/or tax characterization. 12.15. SET-OFF. In addition to any rights now or hereafter granted under applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Lenders, the Holders, their respective Affiliates and any assignee or participant of a Lender or a Holder in accordance with the applicable provisions of the Operative Agreements are hereby authorized by the Lessee at any time or from time to time, without notice to the Lessee or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, time or demand, including without limitation indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by the Lenders, the Holders, their respective Affiliates or any assignee or participant of a Lender or a Holder in accordance with the applicable provisions of the Operative Agreements to or for the credit or the account of the Lessee against and on account of the obligations of the Lessee under the Operative Agreements irrespective of whether or not (a) the Lenders or the Holders shall have made any demand under any Operative Agreement or (b) the Agent shall have declared any or all of the obligations of the Lessee under the Operative Agreements to be due and payable and although such obligations shall be contingent or unmatured. Notwithstanding the foregoing, neither the Agent nor any other Financing Party shall exercise, or attempt to exercise, any right of setoff, banker's lien, or the like, against any deposit account or property of the Lessee held by the Agent or any other Financing Party, without the prior written consent of the Majority Secured Parties, and any Financing Party violating this provision shall indemnify the Agent and the other Financing Parties from any and all costs, expenses, liabilities and damages resulting therefrom. The contractual restriction on the exercise of setoff rights provided in the foregoing sentence is solely for the benefit of the Agent and the Financing Parties and may not be enforced by the Lessee. [signature pages follow] 64 69 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. CONSTRUCTION AGENT AND LESSEE: RF MICRO DEVICES, INC., as the Construction Agent and as the Lessee By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 70 OWNER TRUSTEE AND LESSOR: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 71 AGENT AND LENDERS: FIRST UNION NATIONAL BANK, as a Lender and as the Agent By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 72 CREDIT SUISSE FIRST BOSTON, as a Lender By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 73 COMERICA BANK, as a Lender By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 74 SUNTRUST BANK, ATLANTA, as a Lender By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 75 CITICORP USA, Inc., as a Lender By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 76 FLEET NATIONAL BANK, as a Lender By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 77 HOLDERS: FIRST UNION NATIONAL BANK, as a Holder By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 78 CREDIT SUISSE LEASING 92A, LP, as a Holder By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages continue] 79 FLEET NATIONAL BANK, as a Holder By: _______________________________________ Name: _____________________________________ Title: ____________________________________ [signature pages end] 80 Schedule 1 Amortization PAYMENT DATE PERCENTAGE ------------ ---------- 3/13/01 1.7111% 4/13/01 1.7111% 5/13/01 1.7111% 6/13/01 1.7111% 7/13/01 1.7111% 8/13/01 1.7111% 9/13/01 1.7111% 10/13/01 1.7111% 11/13/01 1.7111% 12/13/01 1.7111% 1/13/02 1.7111% 2/13/02 1.7111% 3/13/02 1.7111% 4/13/02 1.7111% 5/13/02 1.7111% 6/13/02 1.7111% 7/13/02 1.7111% 8/13/02 1.7111% 9/13/02 1.7111% 10/13/02 1.7111% 11/13/02 1.7111% 12/13/02 1.7111% 1/13/03 1.7111% 2/13/03 1.7111% 3/13/03 1.7111% 4/13/03 1.7111% 5/13/03 1.7111% 6/13/03 1.7111% 7/13/03 1.7111% 8/13/03 1.7111% 9/13/03 1.7111% 10/13/03 1.7111% 11/13/03 1.7111% 12/13/03 1.7111% 1/13/04 1.7111% 2/13/04 1.7111% 3/13/04 1.7111% 4/13/04 1.7111% 5/13/04 1.7111% 6/13/04 1.7111% 7/13/04 1.7111% 8/13/04 1.7111% 9/13/04 1.7111% 10/13/04 1.7111% 11/13/04 1.7111% 81 Schedule 2 Equipment See Attached 82 Schedule 3 Additional Collateral Liens 83 EXHIBIT A REQUISITION FORM (Pursuant to Sections 4.2, 5.2, 5.3 and 5.4 of the Participation Agreement) RF MICRO DEVICES, INC., a [__________] corporation (the "Company") hereby certifies as true and correct and delivers the following Requisition to FIRST UNION NATIONAL BANK, as the agent for the Lenders (hereinafter defined) and respecting the Security Documents, as the agent for the Lenders and the Holders (hereinafter defined), to the extent of their interests (the "Agent"): Reference is made herein to that certain Participation Agreement dated as of [__________, 199__] (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the "Participation Agreement") among the Company, in its capacity as the Lessee and as the Construction Agent, First Security Bank, National Association, as the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders"), and the Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings set forth therefor in the Participation Agreement. Check one: ____ INITIAL CLOSING DATE: _________________ (three (3) Business Days prior notice required for Advance) ____ PROPERTY CLOSING DATE:_________________ (three (3) Business Days prior notice required for Advance) ____ CONSTRUCTION ADVANCE DATE:_____________ (three (3) Business Days prior notice required for Advance) 1. Transaction Expenses and other fees, expenses and disbursements under Sections 7.1(a) or 7.1(b) of the Participation Agreement and any and all other amounts contemplated to be financed under the Participation Agreement including without limitation any Work, broker's fees, taxes, recording fees and the like (with supporting invoices or closing statement attached): Party to Whom Amount Owed Amount is Owed (in U.S. Dollars) -------------- ----------------- ______________ _________________ ______________ _________________ ______________ _________________ ______________ _________________ ______________ _________________ A-1 84 2. Description of Land (which shall be a legal description of the Land in connection with an Advance to pay Property Acquisition Costs): See attached Schedule 1 3. Description of Improvements: See attached Schedule 2 4. Description of Equipment: See attached Schedule 3 5. Description of Work: See attached Schedule 4 6. Aggregate Loans and Holder Advances requested since the Initial Closing Date with respect to each Property for which Advances are requested under this Requisition (listed on a Property by Property basis), including without limitation all amounts requested under this Requisition: [IDENTIFY ON A PROPERTY BY PROPERTY BASIS] $______________ [Property] In connection with this Requisition, the Company hereby requests that the Lenders make Loans to the Lessor in the amount of $______________ and that the Holders make Holder Advances to the Lessor in the amount of $________________. The Company hereby certifies (i) that the foregoing amounts requested do not exceed the total aggregate of the Available Commitments plus the Available Holder Commitments and (ii) each of the provisions of the Participation Agreement applicable to the Loans and Holder Advances requested hereunder have been complied with as of the date of this Requisition. The Company shall use the amounts requested as follows: $______________ Expenditures for Equipment $______________ Expenditures for Property Cost other than Equipment The Company requests the Loans be allocated as follows: $______________ ABR Loans $______________ Eurodollar Loans The Company requests the Holder Advances be allocated as follows: $______________ ABR Holder Advances $______________ Eurodollar Holder Advances A-2 85 The Company has caused this Requisition to the executed by its duly authorized officer as of this _____ day of __________, ______. RF MICRO DEVICES, INC. By: ___________________________________ Name: _________________________________ Title: ________________________________ A-3 86 Schedule 1 Description of Land (Legal Description and Street Address) A-4 87 Schedule 2 Description of Improvements A-5 88 Schedule 3 Description of Equipment ================================================================================ General Make Model Serial Cost Equipment Description Number Schedule (if determined) Reference - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- ================================================================================ A-6 89 Schedule 4 Work Work Performed for which the Advance is requested: _________________________________________________________ _________________________________________________________ A-7 90 EXHIBIT B [Outside Counsel Opinion for the Lessee] (Pursuant to Section 5.3(j) of the Participation Agreement) ------------, ------ TO THOSE ON THE ATTACHED DISTRIBUTION LIST Re: Synthetic Lease Financing Provided in favor of RF Micro Devices, Inc. Dear Sirs: We have acted as special counsel to [IF CREDIT SUPPORT FROM A PARTY OTHER THAN THE LESSEE IS PART OF THE TRANSACTION, THIS OPINION MUST BE MODIFIED TO REFERENCE SUCH PARTY AND THE DOCUMENTS TO WHICH IT IS A PARTY], RF Micro Devices, Inc., a RF Micro Devices, Inc. (the "Lessee") in connection with certain transactions contemplated by the Participation Agreement dated as of [__________, 199__] (the "Participation Agreement"), among the Lessee, First Security Bank, National Association, as the Owner Trustee (the "Owner Trustee"), the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders") and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). This opinion is delivered pursuant to Section 5.3(j) of the Participation Agreement. All capitalized terms used herein, and not otherwise defined herein, shall have the meanings assigned thereto in Appendix A to the Participation Agreement. In connection with the foregoing, we have examined originals, or copies certified to our satisfaction, of [IDENTIFY THE APPLICABLE OPERATIVE AGREEMENTS, INCLUDING EACH MORTGAGE INSTRUMENT, RELATED UCC FIXTURE FILINGS, ADDITIONAL UCCS (HEREINAFTER DEFINED), DEEDS AND MEMORANDA OF LEASE] and such other corporate documents and records of the Lessee, certificates of public officials and representatives of the Lessee as to certain factual matters, and such other instruments and documents which we have deemed necessary or advisable to examine for the purpose of this opinion. With respect to such examination, we have assumed (i) the statements of fact made in all such certificates, documents and instruments are true, accurate and complete; (ii) the due authorization, execution and delivery of the Operative Agreements by the parties thereto; (iii) the genuineness of all signatures, the authenticity and completeness of all documents, certificates, instruments, records and corporate records submitted to us as originals and the conformity to the original instruments of all documents submitted to us as copies, and the authenticity and completeness of the originals of such copies; (iv) that all parties have all B-1 91 requisite corporate power and authority to execute, deliver and perform the Operative Agreements; and (v) except as to the Lessee, the enforceability of the Mortgage Instrument, the Memorandum of Lease and the UCC financing statements against all parties thereto. Based on the foregoing, and having due regard for such legal considerations as we deem relevant, and subject to the limitations and assumptions set forth herein, including without limitation the matters set forth in the last two (2) paragraphs hereof, we are of the opinion that: (a) The Mortgage Instrument and Memorandum of Lease are enforceable in accordance with their respective terms, except as limited by laws generally affecting the enforcement of creditors' rights, which laws will not materially prevent the realization of the benefits intended by such documents. (b) Each form of Mortgage Instrument and UCC fixture filing relating thereto, attached hereto as Schedules 1 and 2, respectively, is in proper form for filing and recording with the offices of [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon filing of each Mortgage Instrument and UCC fixture filing in [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED], the Agent will have a valid, perfected lien and security interest in that portion of the Collateral described in such Mortgage Instrument or UCC fixture filing to the extent such Collateral is comprised of real property and/or fixtures. (c) The forms of UCC financing statements relating to the Security Documents, attached hereto as Schedule 3 (the "Additional UCCs"), are in proper form for filing and recording with the offices of [IDENTIFY (i) THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED AND (ii) THE SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon filing of the Additional UCCs in [IDENTIFY (i) THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED AND (ii) THE SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED], the Agent will have a valid, perfected lien and security interest in that portion of the Collateral which can be perfected by filing UCC-1 financing statements under Article 9 of the UCC. (d) Each form of Deed and Memorandum of Lease is in appropriate form for filing and recording with the [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS FOR THE COUNTIES WHERE THE PROPERTIES ARE TO BE LOCATED]. (e) Each Memorandum of Lease, when filed and recorded with the [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS FOR THE COUNTIES WHERE THE PROPERTIES ARE TO BE LOCATED], will have been filed and recorded in all public offices in the State of [__________] in which filing or recording is necessary to provide constructive notice of the Lease to third Persons and to establish of record the interest of the Lessor thereunder as to the Properties described in each such Memorandum of Lease. B-2 92 (f) Title to the Properties located in the State of [___________] may be held in the name of the Owner Trustee as follows: First Security Bank, National Association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1. (g) The execution and delivery by First Security Bank, National Association, individually or as the Owner Trustee, as the case may be, of the Operative Agreements to which it is a party and compliance by First Security Bank, National Association, individually or as the Owner Trustee, with all of the provisions thereof do not and will not contravene any law, rule or regulation of [IDENTIFY THE STATE]. (h) By reason of their participation in the transaction contemplated under the Operative Agreements, none of the Agent, the Lenders, the Holders or the Owner Trustee has to (a) qualify as a foreign corporation in [IDENTIFY THE STATE], (b) file any application or any designation for service of process in [IDENTIFY THE STATE] or (c) pay any franchise, income, sales, excise, stamp or other taxes of any kind to [IDENTIFY THE STATE]. (i) The provisions in the Operative Agreements concerning Rent, interest, fees, prepayment premiums and other similar charges do not violate the usury laws or other similar laws regulating the use or forbearance of money of [IDENTIFY THE STATE]. (j) If the transactions contemplated by the Operative Agreements are characterized as a lease transaction by a court of competent jurisdiction, the Lease and the applicable Lease Supplement shall demise to the Lessee a valid leasehold interest in the Properties described in such Lease Supplement. (k) If the transactions contemplated by the Operative Agreements are characterized as a loan transaction by a court of competent jurisdiction, the combination of the Mortgage Instruments, the Deeds, the Lease and the applicable Lease Supplements (and the other Operative Agreements incorporated therein by reference) are sufficient to create a valid, perfected lien or security interest in the Properties therein described, enforceable as a mortgage in [IDENTIFY THE STATE]. This opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters stated herein. This opinion is based on and is limited to the laws of the State of [___________] and the federal laws of the United States of America. Insofar as the foregoing opinion relates to matters of law other than the foregoing, no opinion is hereby given. B-3 93 This opinion is for the sole benefit of the Lessee, the Construction Agent, the Owner Trustee, the Holders, the Lenders, the Agent and their respective successors and assigns and may not be relied upon by any other person other than such parties and their respective successors and assigns without the express written consent of the undersigned. The opinions expressed herein are as of the date hereof and we make no undertaking to amend or supplement such opinions if facts come to our attention or changes in the current law of the jurisdictions mentioned herein occur which could affect such opinions. Very truly yours, [LESSEE'S OUTSIDE COUNSEL] B-4 94 Distribution List First Union National Bank, as the Agent, a Holder and a Lender The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Holders The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Lenders [_____________], as the Construction Agent and the Lessee First Security Bank, National Association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 B-5 95 Schedule 1 Form of Mortgage Instrument B-6 96 Schedule 2 Forms of UCC Fixture Filings B-7 97 Schedule 3 Forms of UCC Financing Statements B-8 98 EXHIBIT C RF MICRO DEVICES, INC. OFFICER'S CERTIFICATE (Pursuant to Section 5.3(z) of the Participation Agreement) RF Micro Devices, Inc., a [__________] corporation (the "Company"), DOES HEREBY CERTIFY as follows: 1. Each and every representation and warranty of the Company contained in the Operative Agreements to which it is a party is true and correct on and as of the date hereof. 2. No Default or Event of Default has occurred and is continuing under any Operative Agreement. 3. Each Operative Agreement to which the Company is a party is in full force and effect with respect to it. 4. The Company has duly performed and complied with all covenants, agreements and conditions contained in the Participation Agreement (hereinafter defined) or in any Operative Agreement required to be performed or complied with by it on or prior to the date hereof. Capitalized terms used in this Officer's Certificate and not otherwise defined herein have the respective meanings ascribed thereto in the Participation Agreement dated as of [__________, 199__] among the Company, as the Lessee and as the Construction Agent, First Security Bank, National Association, as the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders") and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly executed and delivered as of this _____ day of __________, ______. RF MICRO DEVICES, INC. By: ___________________________________ Name: _________________________________ Title: ________________________________ C-1 99 EXHIBIT D RF MICRO DEVICES, INC. SECRETARY'S CERTIFICATE (Pursuant to Section 5.3(aa) of the Participation Agreement) RF Micro Devices, Inc., a [__________] corporation (the "Company") DOES HEREBY CERTIFY as follows: 1. Attached hereto as Schedule 1 is a true, correct and complete copy of the resolutions of the Board of Directors of the Company duly adopted by the Board of Directors of the Company on __________. Such resolutions have not been amended, modified or rescinded since their date of adoption and remain in full force and effect as of the date hereof. 2. Attached hereto as Schedule 2 is a true, correct and complete copy of the Articles of Incorporation of the Company on file in the Office of the Secretary of State of __________. Such Articles of Incorporation have not been amended, modified or rescinded since their date of adoption and remain in full force and effect as of the date hereof. 3. Attached hereto as Schedule 3 is a true, correct and complete copy of the Bylaws of the Company. Such Bylaws have not been amended, modified or rescinded since their date of adoption and remain in full force and effect as of the date hereof. 4. The persons named below now hold the offices set forth opposite their names, and the signatures opposite their names and titles are their true and correct signatures. Name Office Signature ------------------- ------------------- -------------------- ------------------- ------------------- -------------------- D-1 100 IN WITNESS WHEREOF, the Company has caused this Secretary's Certificate to be duly executed and delivered as of this _____ day of ___________, ______. RF MICRO DEVICES, INC. By: ___________________________________ Name: _________________________________ Title: ________________________________ D-2 101 Schedule 1 Board Resolutions D-3 102 Schedule 2 Articles of Incorporation D-4 103 Schedule 3 Bylaws D-5 104 EXHIBIT E FIRST SECURITY BANK, NATIONAL ASSOCIATION OFFICER'S CERTIFICATE (Pursuant to Section 5.3(bb) of the Participation Agreement) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually (except with respect to paragraph 1 below, to the extent any such representations and warranties are made in its individual capacity) but solely as the owner trustee under the RFMD Real Estate Trust 1999-1 (the "Owner Trustee"), DOES HEREBY CERTIFY as follows: 1. Each and every representation and warranty of the Owner Trustee contained in the Operative Agreements to which it is a party is true and correct on and as of the date hereof. 2. Each Operative Agreement to which the Owner Trustee is a party is in full force and effect with respect to it. 3. The Owner Trustee has duly performed and complied with all covenants, agreements and conditions contained in the Participation Agreement (hereinafter defined) or in any Operative Agreement required to be performed or complied with by it on or prior to the date hereof. Capitalized terms used in this Officer's Certificate and not otherwise defined herein have the respective meanings ascribed thereto in the Participation Agreement dated as of [__________, 199__] among RF Micro Devices, Inc., as the Lessee and as the Construction Agent, the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders") and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). E-1 105 IN WITNESS WHEREOF, the Owner Trustee has caused this Officer's Certificate to be duly executed and delivered as of this _____ day of __________, ______. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 By: ___________________________________ Name: _________________________________ Title: ________________________________ E-2 106 EXHIBIT F FIRST SECURITY BANK, NATIONAL ASSOCIATION SECRETARY'S CERTIFICATE (Pursuant to Section 5.3(cc) of the Participation Agreement) CERTIFICATE OF ASSISTANT SECRETARY I, ______________________, duly elected and qualified Assistant Secretary of the Board of Directors of First Security Bank, National Association (the "Association"), hereby certify as follows: 1. The Association is a National Banking Association duly organized, validly existing and in good standing under the laws of the United States. With respect thereto the following is noted: A. Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., the Comptroller of the Currency charters and exercises regulatory and supervisory authority over all National Banking Associations; B. On December 9, 1881, the First National Bank of Ogden, Utah was chartered as a National Banking Association under the laws of the United States and under Charter No. 2597; C. On October 2, 1922, in connection with a consolidation of The First National Bank of Ogden, Ogden, Utah, and The Utah National Bank of Ogden, Ogden, Utah, the title was changed to "The First & Utah National Bank of Ogden"; on January 18, 1923, The First & Utah National Bank of Ogden changed its title to "First Utah National Bank of Ogden"; on January 19, 1926, the title was changed to "First National Bank of Ogden"; on February 24, 1934, the title was changed to "First Security Bank of Utah, National Association"; on June 21, 1996, the title was changed to "First Security Bank, National Association"; and D. First Security Bank, National Association, Ogden, Utah, continues to hold a valid certificate to do business as a National Banking Association. 2. The Association's Articles of Association, as amended, are in full force and effect, and a true, correct and complete copy is attached hereto as Schedule A and incorporated herein by reference. Said Articles were last amended October 20, 1975, as required by law on notice at a duly called special meeting of the shareholders of the Association. F-1 107 3. The Association's By-Laws, as amended, are in full force and effect; and a true, correct and complete copy is attached hereto as Schedule B and incorporated herein by reference. Said By-Laws, still in full force and effect, were adopted September 17, 1942, by resolution, after proper notice of consideration and adoption of By-Laws was given to each and every shareholder, at a regularly called meeting of the Board of Directors with a quorum present. 4. Pursuant to the authority vested in it by an Act of Congress approved December 23, 1913 and known as the Federal Reserve Act, as amended, the Federal Reserve Board (now the Board of Governors of the Federal Reserve System) has granted to the Association now known as "First Security Bank, National Association" of Ogden, Utah, the right to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with National Banks are permitted to act under the laws of the State of Utah; and under the provisions of applicable law, the authority so granted remains in full force and effect. 5. Pursuant to authority vested by Act of Congress (12 U.S.C. 92a and 12 U.S.C. 481, as amended) the Comptroller of the Currency has issued Regulation 9, as amended, dealing, in part, with the Fiduciary Powers of National Banks, said regulation providing in subparagraph 9.7 (a) (1-2): (1) The board of directors is responsible for the proper exercise of fiduciary powers by the Bank. All matters pertinent thereto, including the determination of policies, the investment and disposition of property held in fiduciary capacity, and the direction and review of the actions of all officers, employees, and committees utilized by the Bank in the exercise of its fiduciary powers, are the responsibility of the board. In discharging this responsibility, the board of directors may assign, by action duly entered in the minutes, the administration of such of the Bank's fiduciary powers as it may consider proper to assign to such director(s), officer(s), employee(s) or committee(s) as it may designate. (2) No fiduciary account shall be accepted without the prior approval of the board, or of the director(s), officer(s), or committee(s) to whom the board may have designated the performance of that responsibility. . . . 6. A Resolution relating to Exercise of Fiduciary Powers was adopted by the Board of Directors at a meeting held July 26, 1994 at which time there was a quorum present; said resolution is still in full force and effect and has not been rescinded. Said resolution is attached hereto as Schedule C and incorporated herein by reference. F-2 108 7. A Resolution relating to the Designation of Officers and Employees to Exercise Fiduciary Powers was adopted by the Trust Policy Committee at a meeting held February 7, 1996 at which time a quorum was present; said resolution is still in full force and effect and has not been rescinded. Said resolution is attached hereto as Schedule D and is incorporated herein by reference. 8. Attached hereto as Schedule E and incorporated herein by reference, is a listing of facsimile signatures of persons authorized (herein "Authorized Signatory or Signatories") on behalf of the Association and its Trust Group to act in exercise of its fiduciary powers subject to the resolutions in Paragraphs 6 and 7, above. 9. The principal office of the First Security Bank, National Association, Trust Group and of its departments, except for the St. George, Utah, Ogden, Utah, and Provo, Utah, branch offices, is located at 79 South Main Street, Salt Lake City, Utah 84111 and all records relating to fiduciary accounts are located at such principal office of the Trust Group or in storage facilities within Salt Lake County, Utah, except for those of the Ogden, Utah, St. George, Utah, and Provo, Utah, branch offices, which are located at said office. 10. Each Authorized Signatory (i) is a duly elected or appointed, duly qualified officer or employee of the Association; (ii) holds the office or job title set forth below his or her name on the date hereof; (iii) and the facsimile signature appearing opposite the name of each such officer or employee is a true replica of his or her signature. F-3 109 IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Association this __________ day of _________________, ______. (SEAL) ---------------------------------------- R. James Steenblik Senior Vice President Assistant Secretary F-4 110 Schedule A Articles of Association F-5 111 Schedule B Bylaws F-6 112 Schedule C Resolution Relating to Exercise of Fiduciary Powers F-7 113 Schedule D Resolution Relating to the Designation of Officers and Employees to Exercise Fiduciary Powers F-8 114 Schedule E Authorized Signatory or Signatories F-9 115 EXHIBIT G [Outside Counsel Opinion for the Owner Trustee] (Pursuant to Section 5.3(dd) of the Participation Agreement) -----------, ------ TO THOSE ON THE ATTACHED DISTRIBUTION LIST Re: Trust Agreement dated as of [__________, 199__] Dear Sirs: We have acted as special counsel for First Security Bank, National Association, a national banking association, in its individual capacity ("FSB") and in its capacity as trustee (the "Owner Trustee") under the Trust Agreement dated as of [__________, 199__] (the "Trust Agreement") by and among it and the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), in connection with the execution and delivery by the Owner Trustee of the Operative Agreements to which it is a party. Except as otherwise defined herein, the terms used herein shall have the meanings set forth in Appendix A to the Participation Agreement dated as of [__________, 199__] (the "Participation Agreement") by and among RF Micro Devices, Inc. (the "Lessee"), First Security Bank, National Association, as the Owner Trustee, the Holders, the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders") and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or advisable for the purpose of rendering this opinion. Based upon the foregoing, we are of the opinion that: 1. FSB is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America and each of FSB and the Owner Trustee has under the laws of the State of Utah and federal banking law the power and authority to enter into and perform its obligations under the Trust Agreement and each other Operative Agreement to which it is a party. 2. The Owner Trustee is the duly appointed trustee under the Trust Agreement. G-1 116 3. The Trust Agreement has been duly authorized, executed and delivered by one (1) of the officers of FSB and, assuming due authorization, execution and delivery by the Holders, is a legal, valid and binding obligation of the Owner Trustee (and to the extent set forth therein, against FSB), enforceable against the Owner Trustee (and to the extent set forth therein, against FSB) in accordance with its terms, and the Trust Agreement creates under the laws of the State of Utah for the Holders the beneficial interest in the Trust Estate it purports to create and is a valid trust under the laws of the State of Utah. 4. The Operative Agreements to which it is party have been duly authorized, executed and delivered by FSB, and, assuming due authorization, execution and delivery by the other parties thereto, are legal, valid and binding obligations of FSB, enforceable against FSB in accordance with their respective terms. 5. The Operative Agreements to which it is party have been duly authorized, executed and delivered by the Owner Trustee, and, assuming due authorization, execution and delivery by the other parties thereto, are legal, valid and binding obligations of the Owner Trustee, enforceable against the Owner Trustee in accordance with their respective terms. The Notes and Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and the Certificates are entitled to the benefits and security afforded by the Trust Agreement in accordance with its terms and the terms of the Trust Agreement. 6. The execution and delivery by each of FSB and the Owner Trustee of the Trust Agreement and the Operative Agreements to which it is a party, and compliance by FSB or the Owner Trustee, as the case may be, with all of the provisions thereof do not and will not contravene any Laws applicable to or binding on FSB, or as the Owner Trustee, or contravene the provisions of, or constitute a default under, its charter documents or by-laws or, to our knowledge after due inquiry, any indenture, mortgage contract or other agreement or instrument to which FSB or Owner Trustee is a party or by which it or any of its property may be bound or affected. 7. The execution and delivery of the Operative Agreements by each of FSB and the Owner Trustee and the performance by each of FSB and the Owner Trustee of their respective obligations thereunder does not require on or prior to the date hereof the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any action in respect of any Governmental Authority or any court. 8. Assuming that the trust created by the Trust Agreement is treated as a grantor trust for federal income tax purposes within the contemplation of Section 671 through 678 of the Internal Revenue Code of 1986, there are no fees, taxes, or other charges (except taxes imposed on fees payable to the Owner Trustee) payable to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance by the Owner Trustee, the Agent, the Lenders, the Lessee or the Holders, as the case may be, of the Operative Agreements or in connection with the acquisition of any Property by the Owner Trustee or in connection with the making by any Holder of its investment in the Trust or its acquisition of the beneficial G-2 117 interest in the Trust Estate or in connection with the issuance and acquisition of the Certificates, or the Notes, and neither the Owner Trustee, the Trust Estate nor the trust created by the Trust Agreement will be subject to any fee, tax or other governmental charge (except taxes on fees payable to the Owner Trustee) under the laws of the State of Utah or any political subdivision thereof on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Estate by reason of the creation or continued existence of the trust under the terms of the Trust Agreement pursuant to the laws of the State of Utah or the Owner Trustee's performance of its duties under the Trust Agreement. 9. There is no fee, tax or other governmental charge under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof on, based on or measured by any payments under the Certificates, Notes or the beneficial interest in the Trust Estate, by reason of the creation of the trust under the Trust Agreement pursuant to the laws of the State of Utah or the Owner Trustee's performance of its duties under the Trust Agreement within the State of Utah. 10. Upon the filing of the financing statement on form UCC-1 in the form attached hereto as Schedule 1 with the Utah Division of Corporation and Commercial Code, the Agent's security interest in the Trust Estate, for the benefit of the Lenders and the Holders, will be perfected, to the extent that such perfection is governed by Article 9 of the Uniform Commercial Code as in effect in the State of Utah (the "Utah UCC"). Your attention is directed to the Utah UCC, which provides, in part, that a filed financing statement which does not state a maturity date or which states a maturity date of more than five (5) years is effective only for a period of five (5) years from the date of filing, unless within six (6) months prior to the expiration of said period a continuation statement is filed in the same office or offices in which the original statement was filed. The continuation statement must be signed by the secured party, identify the original statement by file number and state that the original statement is still effective. Upon the timely filing of a continuation statement, the effectiveness of the original financing statement is continued for five (5) years after the last date to which the original statement was effective. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the original statement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are attorneys admitted to practice in the State of Utah and in rendering the foregoing opinions we have not passed upon, or purported to pass upon, the laws of any jurisdictions other than the State of Utah and the federal banking law governing the banking and trust powers of FSB. In addition, without limiting the foregoing we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended, (iii) the Federal Communications Act of 1934, as amended, or (iv) state securities or blue sky laws. Insofar as the foregoing opinions relate to the legality, validity, binding effect and enforceability of the documents involved in these transactions, which by their terms are governed by the laws of a state other than Utah, we have G-3 118 assumed that the laws of such state (as to which we express no opinion), are in all material aspects identical to the laws of the State of Utah. B. The opinions set forth in paragraphs 3, 4, and 5 above are subject to the qualification that enforceability of the Trust Agreement and the other Operative Agreements to which FSB and the Owner Trustee are parties, in accordance with their respective terms, may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, receivership or similar laws affecting enforcement of creditors' rights generally, and (ii) general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. C. As to the documents involved in these transactions, we have assumed that each is a legal, valid and binding obligation of each party thereto, other than FSB or the Owner Trustee, and is enforceable against each such party in accordance with their respective terms. D. We have assumed that all signatures, other than those of the Owner Trustee or FSB, on documents and instruments involved in these transactions are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment or property involved in these transactions. F. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment or property involved in these transactions or the priority of any mortgage or security interest. G. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. H. In addition to any other limitation by operation of law upon the scope, meaning, or purpose of this opinion, the opinions expressed herein speak only as of the date hereof. We have no obligation to advise the recipients of this opinion (or any third party) and make no undertaking to amend or supplement such opinions if facts come to our attention or changes in the current law of the jurisdictions mentioned herein occur which could affect such opinions the legal analysis, a legal conclusion or any information confirmation herein. I. This opinion is for the sole benefit of the Lessee, the Construction Agent, the Owner Trustee, the Holders, the Lenders, the Agent and their respective successors and assigns in matters directly related to the Participation Agreement or the transaction contemplated thereunder and may not be relied upon by any other person other than such parties and their respective successors and assigns without the express written consent of the undersigned. The G-4 119 opinions expressed in this letter are limited to the matter set forth in this letter, and no other opinions should be inferred beyond the matters expressly stated. Very truly yours, RAY, QUINNEY & NEBEKER M. John Ashton G-5 120 Distribution List First Union National Bank, as the Agent, a Holder and a Lender The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Holders The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Lenders [_______________], as the Construction Agent and the Lessee First Security Bank, National Association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 G-6 121 Schedule 1 Form of UCC-1 to be Filed in Owner Trustee's Principal Place of Business G-7 122 EXHIBIT H [Outside Counsel Opinion for the Lessee] (Pursuant to Section 5.3(ee) of the Participation Agreement) ------------, ------ TO THOSE ON THE ATTACHED DISTRIBUTION LIST Re: Synthetic Lease Financing Provided in favor of RF Micro Devices, Inc. Dear Sirs: We have acted as special counsel to [IF CREDIT SUPPORT FROM A PARTY OTHER THAN THE LESSEE IS PART OF THE TRANSACTION, THIS OPINION MUST BE MODIFIED TO REFERENCE SUCH PARTY AND THE DOCUMENTS TO WHICH IT IS A PARTY], RF Micro Devices, Inc., a [__________] corporation (the "Lessee") in connection with certain transactions contemplated by the Participation Agreement dated as of [__________, 199__] (the "Participation Agreement"), among the Lessee, First Security Bank, National Association, as the Owner Trustee (the "Owner Trustee"), the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders") and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). This opinion is delivered pursuant to Section 5.3(ee) of the Participation Agreement. All capitalized terms used herein, and not otherwise defined herein, shall have the meanings assigned thereto in Appendix A to the Participation Agreement. In connection with the foregoing, we have examined originals, or copies certified to our satisfaction, of the Operative Agreements, and such other corporate, partnership or limited liability company documents and records of the Lessee, certificates of public officials and representatives of the Lessee as to certain factual matters, and such other instruments and documents which we have deemed necessary or advisable to examine for the purpose of this opinion. With respect to such examination, we have assumed (i) the statements of fact made in all such certificates, documents and instruments are true, accurate and complete; (ii) the due authorization, execution and delivery of the Operative Agreements by the parties thereto other than the Lessee; (iii) the genuineness of all signatures (other than the signatures of persons signing on behalf of the Lessee), the authenticity and completeness of all documents, certificates, instruments, records and corporate records submitted to us as originals and the conformity to the original instruments of all documents submitted to us as copies, and the authenticity and completeness of the originals of such copies; (iv) that all parties other than the Lessee have all H-1 123 requisite corporate power and authority to execute, deliver and perform the Operative Agreements; and (v) the enforceability of the Operative Agreements against all parties thereto other than the Lessee and respecting the opinion set forth below in section (i), First Security Bank, National Association, individually or as the Owner Trustee, as the case may be. We have further assumed that the laws of the States of [STATE OF LAWYER'S admission] and [GOVERNING LAW OF PARTICIPATION AGREEMENT] are substantively identical. Based on the foregoing, and having due regard for such legal considerations as we deem relevant, and subject to the limitations and assumptions set forth herein, including without limitation the matters set forth in the last two (2) paragraphs hereof, we are of the opinion that: (a) The Lessee is a [CORPORATION, PARTNERSHIP OR LIMITED LIABILITY COMPANY] duly [INCORPORATED OR ORGANIZED], validly existing and in good standing under the laws of [__________] and has the power and authority to conduct its business as presently conducted and to execute, deliver and perform its obligations under the Operative Agreements to which it is a party. The Lessee is duly qualified to do business in all jurisdictions in which its failure to so qualify would materially impair its ability to perform its obligations under the Operative Agreements to which it is a party or its financial position or its business as now and now proposed to be conducted. (b) The execution, delivery and performance by the Lessee of the Operative Agreements to which it is a party have been duly authorized by all necessary corporate action on the part of the Lessee and the Operative Agreements to which the Lessee is a party have been duly executed and delivered by the Lessee. (c) The Operative Agreements to which the Lessee is a party constitute valid and binding obligations of the Lessee enforceable against the Lessee in accordance with the terms thereof, subject to bankruptcy, insolvency, liquidation, reorganization, fraudulent conveyance, and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). (d) The execution and delivery by the Lessee of the Operative Agreements to which it is a party and compliance by the Lessee with all of the provisions thereof do not and will not (i) contravene the provisions of, or result in any breach of or constitute any default under, or result in the creation of any Lien (other than Permitted Liens and Lessor Liens) upon any of its property under, its [ARTICLES OF INCORPORATION BY-LAWS, OPERATING AGREEMENT, PARTNERSHIP AGREEMENT OR OTHER SIMILAR DOCUMENT OF FORMATION] or any indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales contract, bank loan or credit agreement or other agreement or instrument to which the Lessee is a party or by which it or any of its property may be bound or affected, or (ii) contravene any Laws or any order of any Governmental Authority applicable to or binding on the Lessee. (e) No Governmental Action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery or performance by the Lessee of any of the H-2 124 Operative Agreements to which it is a party or for the acquisition, ownership, construction and completion of the Properties, except for those which have been obtained. (f) Except as set forth on Schedule 1 hereto, there are no actions, suits or proceedings pending or to our knowledge, threatened against the Lessee in any court or before any Governmental Authority, that concern the Properties or the Lessee's interest therein or that question the validity or enforceability of any Operative Agreement to which the Lessee is a party or the overall transaction described in the Operative Agreements to which the Lessee is a party. (g) Neither the nature of the Properties, nor any relationship between the Lessee and any other Person, nor any circumstance in connection with the execution, delivery and performance of the Operative Agreements to which the Lessee is a party is such as to require any approval of stockholders of, or approval or consent of any trustee or holders of indebtedness of, the Lessee, except for such approvals and consents which have been duly obtained and are in full force and effect. (h) The Security Documents which have been executed and delivered as of the date of this opinion create, for the benefit of the Agent, the security interests in the Collateral described therein which by their terms such Security Documents purport to create. Upon filing of the UCC-1 financing statements (attached hereto as Schedule 2) relating to the Security Documents in the recording offices of (A) the respective county clerk where the principal place of business of the Lessee is located and (B) the Secretary of State where the principal place of business of the Lessee is located, the Agent will have a valid, perfected lien and security interest in that portion of the Collateral which can be perfected by the filing of UCC-1 financing statements under Article 9 of the UCC in [IDENTIFY THE STATE]. (i) The Operative Agreements to which First Security Bank, National Association, individually or as the Owner Trustee, is a party constitute valid and binding obligations of such party and are enforceable against First Security Bank, National Association, individually or as the Owner Trustee, as the case may be, in accordance with the terms thereof, subject to bankruptcy, insolvency, liquidation, reorganization, fraudulent conveyance, and similar laws affecting creditors, rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). (j) The offer, issuance, sale and delivery of the Notes and the offer, issuance, sale and delivery of the Certificates under the circumstances contemplated by the Participation Agreement do not, under existing law, require registration of the Notes or the Certificates being issued on the date hereof under the Securities Act of 1933, as amended, or the qualification of the Loan Agreement under the Trust Indenture Act of 1939, as amended. This opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters stated herein. This opinion is based on and is limited to the laws of the States of [__________], and the federal laws of the United States of America. Insofar as the foregoing opinion relates to matters of law other than the foregoing, no opinion is hereby given. H-3 125 This opinion is for the sole benefit of the Lessee, the Construction Agent, the Owner Trustee, the Holders, the Lenders, the Agent and their respective successors and assigns and may not be relied upon by any other person other than such parties and their respective successors and assigns without the express written consent of the undersigned. The opinions expressed herein are as of the date hereof and we make no undertaking to amend or supplement such opinions if facts come to our attention or changes in the current law of the jurisdictions mentioned herein occur which could affect such opinions. Very truly yours, [LESSEE'S OUTSIDE COUNSEL] H-4 126 Distribution List First Union National Bank, as the Agent, a Holder and a Lender RF Micro Devices, Inc., as the Construction Agent and the Lessee The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Holders The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Lenders First Security Bank, National Association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 H-5 127 Schedule 1 (Litigation) H-6 128 Schedule 2 (UCC-1 Financing Statements) H-7 129 EXHIBIT I RF MICRO DEVICES, INC. OFFICER'S CERTIFICATE (Pursuant to Section 5.5 of the Participation Agreement) RF Micro Devices, Inc., a North Carolina corporation (the "Company") DOES HEREBY CERTIFY as follows: 1. The address for the subject Property is ______________________________ ______________________________________. 2. The Completion Date for the construction of Improvements at the Property occurred on ______________. 3. The aggregate Property Cost for the Property was $___________. 4. Attached hereto as Schedule 1 is the detailed, itemized documentation supporting the asserted Property Cost figures. 5. All representations and warranties of the Company in each Operative Agreement and in each certificate delivered pursuant thereto are true and correct as of the Completion Date. Capitalized terms used in this Officer's Certificate and not otherwise defined have the respective meanings ascribed thereto in the Participation Agreement dated as of __________, 199__ among the Company, as the Lessee and as the Construction Agent, First Security Bank, National Association, as the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders"), First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests. [The remainder of this page has been intentionally left blank.] I-1 130 IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly executed and delivered as of this ____ day of ______________, ______. RF MICRO DEVICES, INC. By: ___________________________________ Name: _________________________________ Title: ________________________________ I-2 131 Schedule I (Itemized Documentation in Support of Asserted Property Cost) I-3 132 EXHIBIT J [Description of Material Litigation] (Pursuant to Section 6.2(d) of the Participation Agreement) J-1 133 Exhibit K Form of Officer's Financial Compliance Certificate This Certificate is delivered in accordance with the provisions of Section 8.3.A(c) of that Participation Agreement dated as of [_________], 1999 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the "Participation Agreement") among the various parties thereto from time to time, as the Lessees and as the Construction Agents, First Security Bank, National Association, as the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders, the various banks and other lending institutions which are parties thereto from time to time, as lenders, the Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings set forth therefor in the Participation Agreement. The undersigned, being an Executive Officer of Lessee hereby certifies, in my official capacity and not in my individual capacity, that: (a) the financial statements accompanying this Certificate fairly present the financial condition of the parties covered by such financial statements in all material respects; (b) the sum of consolidated EBITDA for the four immediately preceding fiscal quarters is __________; (c) the ratio of Consolidated Funded Senior Debt, as of the date of determination, to EBITDA for the four immediately preceding fiscal quarters is ______:1.00; (d) Total Consolidated Funded Debt, as of the date of determination, is __________% of Book Capitalization, as of the date of determination. (e) the Quick Ratio, computed in accordance with Section 8.3A(j) at the end of the most recent fiscal quarter of the Participation Agreement is ______:1.00; (f) the Consolidated Interest Coverage Ratio at the end of the most recent fiscal quarter is ______:1.00; (g) the Consolidated Total Leverage Ratio at the end of the most recent fiscal quarter is ______:1.00; (h) the Consolidated Net Worth at the end of the most recent fiscal quarter is ____________; (i) the aggregate Capital Expenditure for the fiscal year ending is ___________. K-1 134 (j) during the period covered by such financial statements, Lessee observed or performed all of their covenants and other agreements in all material respects, and satisfied in all material respects every material condition, contained in the Operative Agreements to be observed, performed or satisfied by them; and (k) no Default or Event of Default exists. This the _______________ day of ________________________, 199_. RF MICRO DEVICES, INC. By: ___________________________________ Name: _________________________________ Title: ________________________________ K-2 135 - - -------------------------------------------------------------------------------- Appendix A Rules of Usage and Definitions - - -------------------------------------------------------------------------------- I. Rules of Usage The following rules of usage shall apply to this Appendix A and the Operative Agreements (and each appendix, schedule, exhibit and annex to the foregoing) unless otherwise required by the context or unless otherwise defined therein: (a) Except as otherwise expressly provided, any definitions set forth herein or in any other document shall be equally applicable to the singular and plural forms of the terms defined. (b) Except as otherwise expressly provided, references in any document to articles, sections, paragraphs, clauses, annexes, appendices, schedules or exhibits are references to articles, sections, paragraphs, clauses, annexes, appendices, schedules or exhibits in or to such document. (c) The headings, subheadings and table of contents used in any document are solely for convenience of reference and shall not constitute a part of any such document nor shall they affect the meaning, construction or effect of any provision thereof. (d) References to any Person shall include such Person, its successors, permitted assigns and permitted transferees. (e) Except as otherwise expressly provided, reference to any agreement means such agreement as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof. (f) Except as otherwise expressly provided, references to any law includes any amendment or modification to such law and any rules or regulations issued thereunder or any law enacted in substitution or replacement therefor. (g) When used in any document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (h) References to "including" means including without limiting the generality of any description preceding such term and for purposes hereof the rule of ejusdem generis shall not be 136 applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. (i) [INTENTIONALLY RESERVED] (j) Each of the parties to the Operative Agreements and their counsel have reviewed and revised, or requested revisions to, the Operative Agreements, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construction and interpretation of the Operative Agreements and any amendments or exhibits thereto. (k) Capitalized terms used in any Operative Agreements which are not defined in this Appendix A but are defined in another Operative Agreement shall have the meaning so ascribed to such term in the applicable Operative Agreement. II. Definitions "ABR" shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Lending Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus one-half of one percent (0.5%). For purposes hereof: "Prime Lending Rate" shall mean the rate announced by the Agent from time to time as its prime lending rate as in effect from time to time. The Prime Lending Rate is a reference rate and is one of several interest rate bases used by the Agent and does not necessarily represent the lowest or most favorable rate offered by the Agent actually charged to any customer. Any Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. The Prime Lending Rate shall change automatically and without notice from time to time as and when the prime lending rate of the Agent changes. "Federal Funds Effective Rate" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members or the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Lending Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Lending Rate or the Federal Funds Effective Rate, respectively. "ABR Holder Advance" shall mean a Holder Advance bearing a Holder Yield based on the ABR. "ABR Loans" shall mean Loans the rate of interest applicable to which is based upon the ABR. Appendix A-2 137 "Acceleration" shall have the meaning given to such term in Section 6 of the Credit Agreement. "Accounts" shall have the meaning given to such term in Section 1 of the Security Agreement. "Acquisition Advance" shall have the meaning given to such term in Section 5.3 of the Participation Agreement. "Acquisition Loan" shall mean any Loan made in connection with an Acquisition Advance. "Additional Collateral" shall mean the assets of the Lessee pledged by the Lessee to secure the obligations pursuant to the terms of the Lessee Security Agreement, including without limitation, such assets pledged pursuant to 8.3(r) or 8.3(s). "Advance" shall mean a Construction Advance or an Acquisition Advance. "Affiliate" shall mean, with respect to any Person, any Person or group acting in concert in respect of the Person in question that, directly or indirectly, controls or is controlled by or is under common control with such Person. "After Tax Basis" shall mean, with respect to any payment to be received, the amount of such payment increased so that, after deduction of the amount of all taxes required to be paid by the recipient calculated at the then maximum marginal rates generally applicable to Persons of the same type as the recipients with respect to the receipt by the recipient of such amounts (less any tax savings realized as a result of the payment of the indemnified amount), such increased payment (as so reduced) is equal to the payment otherwise required to be made. "Agency Agreement" shall mean the Amended, Restated and Replacement Agency Agreement, dated on or about the Initial Closing Date between the Construction Agent and the Lessor. "Agency Agreement Event of Default" shall mean an "Event of Default" as defined in Section 5.1 of the Agency Agreement. "Agent" shall mean First Union National Bank, as agent for the Lenders pursuant to the Credit Agreement, or any successor agent appointed in accordance with the terms of the Credit Agreement and respecting the Security Documents, for the Lenders and the Holders, to the extent of their interests. "Applicable Percentage" shall mean for any day, the rate per annum set forth below opposite the applicable Consolidated Total Funded Debt to Book Capitalization then in effect, it being understood that the Applicable Percentage for (i) ABR Loans shall be the percentage set forth under the column "ABR Loans", (ii) Eurodollar Loans shall be the percentage set forth Appendix A-3 138 under the column "Eurodollar Loans", (iii) ABR Holder Advances shall be the percentage set forth under the column "ABR Holder Advances", (iv) Eurodollar Holder Advances shall be the percentage set forth under the column "Eurodollar Holder Advances", and (v) the Unused Fee shall be the percentage set forth under the applicable column, based on the percentage of Total Utilization each, labeled "Unused Fee":
===================================================================================================================== Funded Debt to Eurodollar Eurodollar ABR Loans ABR Holder Unused Fee Unused Fee Pricing Book Loans Holder Advances When Total When Total Level Capitalization Advances Utilization is Utilization is Less Than or Greater Than Equal to 25% 25% of the of the Total Total Commitments Commitments - - --------------------------------------------------------------------------------------------------------------------- greater than I or = to 25% 2.250% 3.000% 1.000% 1.750% 0.750% 0.500% - - --------------------------------------------------------------------------------------------------------------------- greater than II or = to 20% 2.000% 2.750% 0.750% 1.500% 0.750% 0.500% - - --------------------------------------------------------------------------------------------------------------------- greater than III or = to 15% 1.750% 2.500% 0.500% 1.250% 0.625% 0.375% - - --------------------------------------------------------------------------------------------------------------------- less than IV or = to 15% 1.500% 2.250% 0.250% 1.000% 0.625% 0.375% =====================================================================================================================
The Applicable Percentage shall be determined and adjusted quarterly on the date (each a "Rate Determination Date") five (5) Business Days after the date by which each annual and quarterly compliance certificate and related financial statements and information are required in accordance with the provisions of Sections 8.3.A(a) - (c) of the Participation Agreement, as appropriate; provided that: (i) the initial Applicable Percentages shall be based on pricing level IV and shall remain in effect at such pricing level until the first Rate Determination Date to occur in connection with the delivery of the quarterly financial statements and appropriate compliance certificate for the fiscal quarter ending December 25, 1999, and (ii) notwithstanding the foregoing, in the event an annual or quarterly compliance certificate and related financial statements and information are not delivered timely to the Agent in accordance with Section 12.2 of the Participation Agreement by the date required by Section 8.3.A(a) - (c) of the Participation Agreement, as appropriate, the Applicable Percentages shall be based on pricing level I until such time as an appropriate compliance certificate and related financial statements and information are delivered, whereupon the applicable pricing level shall be adjusted based on the information contained in such compliance certificate and related financial statements and information. Subject to the qualifications set forth above, each Applicable Percentage shall be effective from a Rate Determination Date until the next such Rate Determination Date. The Agent shall determine the appropriate Applicable Percentages in the pricing matrix promptly upon receipt of and based on the quarterly or annual compliance certificate and related Appendix A-4 139 financial information and shall promptly notify the Lessee, the Lenders and the Holders of any change thereof. Such determinations by the Agent shall be conclusive absent manifest error. Adjustments in the Applicable Percentages shall be effective as to existing Loans and Holder Advances as well as new Loans and Holder Advances made thereafter. "Appraisal" shall mean, with respect to any Property, an appraisal to be delivered in connection with the Participation Agreement or in accordance with the terms of the Lease, in each case prepared by a reputable appraiser reasonably acceptable to the Agent, which in the judgment of counsel to the Agent, complies with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto, and all other applicable Legal Requirements. "Appraisal Procedure" shall have the meaning given such term in Section 22.4 of the Lease. "Approved State" shall mean each of the following: North Carolina and any other state within the continental United States proposed by the Lessee and consented to in writing by the Agent. "Appurtenant Rights" shall mean (a) all agreements, easements, rights of way or use, rights of ingress or egress, privileges, appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to the Land underlying the Improvements or the Improvements, including without limitation the use of any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to the Land and (b) all permits, licenses and rights, whether or not of record, appurtenant to such Land or the Improvements. "Asset Disposition" shall mean and include the sale, lease or other disposition of any property or asset (including the capital stock of a Subsidiary) by any member of the Consolidated Group; but for purposes hereof shall not include, in any event, (A) the sale of inventory in the ordinary course of business, (B) the sale or disposition of machinery and equipment no longer used or useful in the conduct of business or (c) a sale, lease, transfer or disposition of property or assets to any member of the Consolidated Group. "Assignment and Acceptance" shall mean the Assignment and Acceptance in the form attached to the Credit Agreement as Exhibit B. "Available Commitment" shall mean, as to any Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Lender's Commitment over (b) the aggregate principal amount of all Loans made by such Lender as of such date after giving effect to Section 5.2(d) of the Participation Agreement (but without giving effect to any other repayments or prepayments of any Loans hereunder). "Available Holder Commitments" shall mean an amount equal to the excess, if any, of (a) the aggregate amount of the Holder Commitments over (b) the aggregate amount of the Holder Appendix A-5 140 Advances made since the Initial Closing Date after giving effect to Section 5.2(d) of the Participation Agreement (but without giving effect to any other repayments or prepayments of any Holder Advances). "Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled "Bankruptcy," as now or hereafter in effect or any successor thereto. "Basic Documents" shall mean the following: the Participation Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the Credit Agreement, the Notes, the Lease and the Security Agreement. "Basic Rent" shall mean, the sum of (a) the Loan Basic Rent and (b) the Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is due. "Benefitted Lender" shall have the meaning specified in Section 9.10(a) of the Credit Agreement. "Bill of Sale" shall mean a Bill of Sale regarding Equipment in form and substance satisfactory to the Agent. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States (or any successor). "Book Capitalization" shall mean the sum of Consolidated Total Funded Debt and the consolidated net shareholders equity of the Lessee and its Subsidiaries as such amount is determined in accordance with GAAP. "Borrower" shall mean the Owner Trustee, not in its individual capacity but as Borrower under the Credit Agreement. "Borrowing Date" shall mean any Business Day specified in a notice delivered pursuant to Section 2.3 of the Credit Agreement as a date on which the Lessor requests the Lenders to make Loans thereunder. "Budgeted Total Property Cost" shall mean, at any date of determination with respect to any Construction Period Property, an amount equal to the aggregate amount which the Construction Agent in good faith expects to be expended in order to achieve Completion with respect to such Property. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which commercial banks in North Carolina or any other states from which the Agent, any Lender or any Holder funds or engages in administrative activities with respect to the transactions under the Operative Agreements are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. Appendix A-6 141 "Capitalized Lease" shall mean, as applied to any Person, any lease of property (whether real, personal, tangible, intangible or mixed of such Person) by such Person as the lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "Capital Stock" shall mean any nonredeemable capital stock of the Lessee or any of its Subsidiaries, whether common or preferred. "Cash Equivalents" shall mean (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit of (i) any Lender or any Holder, or (ii) any domestic commercial bank of recognized standing (y) having capital and surplus in excess of $500,000,000 and (z) whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Bank"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by a Person with a bank or trust company (including any Lender or any Holder) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (e) obligations of any State of the United States or any political subdivision thereof, the interest with respect to which is exempt from federal income taxation under Section 103 of the Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's, respectively, and maturing within three years from the date of acquisition thereof, (f) Investments in municipal auction preferred stock (i) rated AAA (or the equivalent thereof) or better by S&P or Aaa (or the equivalent thereof) or better by Moody's and (ii) with dividends that reset at least once every 365 days, (g) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $100,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (f) and (h) other Cash Equivalents, if any, as determined in accordance with GAAP. "Casualty" shall mean any damage or destruction of all or any portion of the Property as a result of a fire or other casualty. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986. Appendix A-7 142 "Certificate" shall mean a Certificate in favor of each Holder regarding the Holder Commitment of such Holder issued pursuant to the terms and conditions of the Trust Agreement in favor of each Holder. "Chattel Paper" shall have the meaning given to such term in Section 1 of the Security Agreement. "Claims" shall mean any and all obligations, liabilities, losses, actions, suits, penalties, claims, demands, costs and expenses (including without limitation reasonable attorney's fees and expenses) of any nature whatsoever. "Closing Date" shall mean the Initial Closing Date and each Property Closing Date. "Code" shall mean the Internal Revenue Code of 1986 together with rules and regulations promulgated thereunder, as amended from time to time, or any successor statute thereto. "Collateral" shall mean all assets of the Lessor, the Construction Agent and the Lessee, now owned or hereafter acquired, upon which a Lien is purported to be created by one or more of the Security Documents. "Commencement Date" shall have the meaning specified in Section 2.2 of the Lease. "Commitment" shall mean, as to any Lender, the obligation of such Lender to make the portion of the Loans to the Lessor in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.1 of the Credit Agreement, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements. "Commitment Percentage" shall mean, as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of all of the Loans then outstanding), and such Commitment Percentage shall take into account both the Lender's Tranche A Commitment and the Lender's Tranche B Commitment. "Commitment Period" shall mean the period from and including the Initial Closing Date to and including the Construction Period Termination Date, or such earlier date as the Commitments shall terminate as provided in the Credit Agreement or the Holder Commitment shall terminate as provided in the Trust Agreement. "Completion" shall mean, with respect to a Property, such time as the acquisition, installation, testing and final completion of the Improvements including, without limitation, the Equipment on such Property has been achieved in accordance with the Plans and Specifications, the Agency Agreement and/or the Lease, and in compliance with all Legal Requirements and Insurance Requirements and a certificate of occupancy has been issued with respect to such Appendix A-8 143 Property by the appropriate governmental entity (except if non-compliance, individually or in the aggregate, shall not have and could not reasonably be expected to have a Material Adverse Effect). If the Lessor purchases a Property that includes existing Improvements that are to be immediately occupied by the Lessee without any improvements financed pursuant to the Operative Agreements, the date of Completion for such Property shall be the Property Closing Date. "Completion Date" shall mean, with respect to a Property, the date on which Completion for such Property including, without limitation, installation and testing of the Equipment has occurred. "Condemnation" shall mean any taking or sale of the use, access, occupancy, easement rights or title to any Property or any part thereof, wholly or partially (temporarily or permanently), by or on account of any actual or threatened eminent domain proceeding or other taking of action by any Person having the power of eminent domain (including without limitation an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, any Property or alter the pedestrian or vehicular traffic flow to any Property so as to result in a change in access to such Property, or by or on account of an eviction by paramount title or any transfer made in lieu of any such proceeding or action). "Consolidated Capital Expenditures" means, for any period for the Consolidated Group, without duplication, all expenditures (whether paid in cash or other consideration) during such period that, in accordance with GAAP, are or should be included in additions to property, plant and equipment or similar items reflected in the consolidated statement of cash flows for such period. "Consolidated EBIT" shall mean for any period for the Consolidated Group, the sum of (i) Consolidated Net Income for such period plus (ii) to the extent deducted in determining net income for such period, (A) Consolidated Interest Expense and (B) taxes in each case on a consolidated basis determined in accordance with GAAP. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated EBITDA" shall mean for any period for the Consolidated Group, the sum of (i) Consolidated Net Income for such period plus (ii) to the extent deducted in determining net income for such period, (A) Consolidated Interest Expense, (B) taxes and (C) depreciation and amortization, in each case on a consolidated basis determined in accordance with GAAP. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Funded Senior Debt" shall mean Funded Debt of the Consolidated Group other than Subordinated Debt, determined on a consolidated basis in accordance with GAAP. "Consolidated Group" shall mean the Lessee and its consolidated Subsidiaries, as determined in accordance with GAAP. Appendix A-9 144 "Consolidated Interest Coverage Ratio" shall mean as of the last day of each fiscal quarter, the ratio of Consolidated EBIT plus Consolidated Rent Expense for the period of four consecutive fiscal quarters ending as of such day to Consolidated Interest Expense plus Consolidated Rent Expense for the period of four consecutive fiscal quarters ending as of such day. "Consolidated Interest Expense" shall mean, for any period for the Consolidated Group, all interest expense, including the amortization of debt discount and premium and the interest component under Capital Leases, in each case on a consolidated basis determined in accordance with GAAP applied on a consolidated basis. Except as expressly provided otherwise, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Net Income" shall mean, for any period for the Consolidated Group, net income (or loss) determined on a consolidated basis in accordance with GAAP. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Net Worth" means, as of any date for the Consolidated Group, consolidated shareholder's equity or net worth as determined in accordance with GAAP. "Consolidated Rent Expense" shall mean, for any period, with respect to the Consolidated Group, all rent payable under Operating Leases (whether a lease of real property, personal property or mixed), as determined in accordance with GAAP. "Consolidated Tangible Net Worth" shall mean, as of any date with respect to the Consolidated Group on a consolidated basis, Consolidated Net Worth minus intangible assets as determined in accordance with GAAP. "Consolidated Total Funded Debt" means Funded Debt of the Consolidated Group determined on a consolidated basis in accordance with GAAP. "Consolidated Total Leverage Ratio" means the ratio of Consolidated Total Funded Debt on such day to Consolidated EBITDA for the period of four consecutive fiscal quarters ending as of such day. "Consolidated Subsidiary" shall mean, as to any Person, any Subsidiary of such Person which under the rules of GAAP consistently applied should have its financial results consolidated with those of such Person for purposes of financial accounting statements. "Construction Advance" shall mean an advance of funds to pay Property Costs pursuant to Section 5.4 of the Participation Agreement. "Construction Agent" shall mean RF Micro Devices, Inc., a North Carolina corporation, as the construction agent under the Agency Agreement. Appendix A-10 145 "Construction Budget" shall mean the cost of acquisition, installation, testing, constructing and developing any Property as determined by the Construction Agent in its reasonable, good faith judgment. "Construction Commencement Date" shall mean, with respect to Improvements, the date on which construction of such Improvements commences pursuant to the Agency Agreement. "Construction Contract" shall mean any contract entered into between the Construction Agent or the Lessee with a Contractor for the construction of Improvements or any portion thereof on the Property. "Construction Loan" shall mean any Loan made in connection with a Construction Advance. "Construction Loan Property Cost" shall mean with respect to each Construction Period Property at the date of determination, an amount equal to (a) the aggregate principal amount of Construction Loans made on or prior to such date with respect to the Property minus (b) the aggregate principal amount of prepayments or repayments of the Loans allocated to reduce the Construction Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement. "Construction Period" shall mean, with respect to a Property, the period commencing on the Construction Commencement Date for such Property and ending on the Completion Date for such Property. "Construction Period Property" means, at any date of determination, any Property as to which the Rent Commencement Date has not occurred on or prior to such date. "Construction Period Termination Date" shall mean (a) the earlier of (i) the date that the Commitments have been terminated in their entirety in accordance with the terms of Section 2.5(a) of the Credit Agreement, or (ii) February 13, 2001 or (b) such later date as shall be agreed to by the Majority Secured Parties. "Contractor" shall mean each entity with whom the Construction Agent or the Lessee contracts to construct any Improvements or any portion thereof on the Property. "Controlled Group" shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Lessee, are treated as a single employer under Section 414 of the Code. "Co-Owner Trustee" shall have the meaning specified in Section 9.2 of the Trust Agreement. Appendix A-11 146 "Credit Agreement" shall mean the Amended, Restated and Replacement Credit Agreement, dated on or about the Initial Closing Date, among the Lessor, the Agent and the Lenders, as specified therein. "Credit Agreement Default" shall mean any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Credit Agreement Event of Default. "Credit Agreement Event of Default" shall mean any event or condition defined as an "Event of Default" in Section 6 of the Credit Agreement. "Credit Documents" shall mean the Participation Agreement, the Credit Agreement, the Notes and the Security Documents. "Deed" shall mean a warranty deed regarding the Land and/or Improvements in form and substance satisfactory to the Agent. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Holder" shall have the meaning given to such term in Section 12.4 of the Participation Agreement. "Defaulting Lender" shall have the meaning given to such term in Section 12.4 of the Participation Agreement. "Deficiency Balance" shall have the meaning given in Section 22.1(b) of the Lease Agreement. "Disputes" shall mean, upon demand of any party to the Participation Agreement and/or any other Operative Agreement, whether made before or after institution of a judicial proceeding, any claim or controversy arising out of, or relating to the Operative Agreements between or among the parties to the Participation Agreement. "Documents" shall have the meaning given to such term in Section 1 of the Security Agreement. "Dollars" and "$" shall mean dollars in lawful currency of the United States of America. "Domestic Subsidiary" means any direct or indirect Subsidiary of the Lessee which is incorporated or organized under the laws of any State of the United States or the District of Columbia. "Election Date" shall have the meaning given to such term in Section 20.1 of the Lease. "Election Notice" shall have the meaning given to such term in Section 20.1 of the Lease. Appendix A-12 147 "Eligible Investments" shall mean Investments which are (i) cash and Cash Equivalents; (ii) accounts receivable created, acquired or made in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (iii) Investments consisting of capital stock, obligations, securities or other property received in settlement of accounts receivable (created in the ordinary course of business) from bankrupt obligors; (iv) an amount, at all times, not in excess of $25,000,000.00 Investment in companies in the same lines of business as Lessee; and (v) an amount, at all times, not in excess of $7,000,000.00 of Investments in wholly-owned Foreign Subsidiaries. "Employee Benefit Plan" or "Plan" shall mean an employee benefit plan (within the meaning of Section 3(3) of ERISA, including without limitation any Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code and as interpreted by the Internal Revenue Service and the Department of Labor in rules, regulations, releases or bulletins in effect on any Closing Date. "Environmental Claims" shall mean any investigation, notice, violation, demand, allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or private in nature) arising (a) pursuant to, or in connection with, an actual or alleged violation of, any Environmental Laws, (b) in connection with any Hazardous Substance, (c) from any abatement, removal, remedial, corrective, or other response action in connection with a Hazardous Substance, Environmental Law, or other order of a Tribunal or (d) from any actual damage, injury, or harm to the environment. "Environmental Laws" shall mean any Law, permit, consent, approval, license, award, or other authorization or requirement of any Tribunal relating to emissions, discharges, releases, threatened releases of any Hazardous Substance into ambient air, surface water, ground water, publicly owned treatment works, septic system, or land, or otherwise relating to the handling, storage, treatment, generation, use, or disposal of Hazardous Substances, pollution or to the protection of health or the environment, including without limitation CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., and state statutes analogous thereto. "Environmental Violation" shall mean any activity, occurrence or condition that violates or threatens (if the threat requires remediation under any Environmental Law and is not remediated during any grace period allowed under such Environmental Law) to violate or results in or threatens (if the threat requires remediation under any Environmental Law and is not remediated during any grace period allowed under such Environmental Law) to result in noncompliance with any Environmental Law. "Equipment" shall mean the equipment referenced in Schedule 2 to the Participation Agreement, including without limitation, equipment, apparatus, furnishings, fittings and personal property of every kind and nature whatsoever purchased, leased or otherwise acquired using the proceeds of the Loans or the Holder Advances by the Construction Agent, the Lessee or the Lessor and all improvements and modifications thereto and replacements thereof, whether or not Appendix A-13 148 now owned or hereafter acquired or now or subsequently attached to, contained in or used or usable in any way in connection with any operation of any Improvements, including but without limiting the generality of the foregoing, all equipment described in the Appraisal including without limitation all heating, electrical, and mechanical equipment, lighting, switchboards, plumbing, ventilation, air conditioning and air-cooling apparatus, refrigerating, and incinerating equipment, escalators, elevators, loading and unloading equipment and systems, cleaning systems (including without limitation window cleaning apparatus), telephones, communication systems (including without limitation satellite dishes and antennae), televisions, computers, sprinkler systems and other fire prevention and extinguishing apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of every kind and description. "Equipment Schedule" shall mean (a) each Equipment Schedule attached to the applicable Requisition and (b) each Equipment Schedule attached to the applicable Lease Supplement. "Equity Issuance" shall mean any issuance, other than in connection with exercise by a present or former employee, officer or director under a stock incentive plan, stock option plan or other equity-based compensation plan or arrangement, by any member of the Consolidated Group to any Person other than to the Lessee of (a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of options or warrants, (c) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity or (d) any options or warrants relating to its Capital Stock. The term "Equity Issuance" shall not include any Asset Disposition. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" shall mean an entity which is under common control with Lessee within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes Lessee and which is treated as a single employer under Section 414(b) or (c) of the Code. "ERISA Event" shall mean (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by Lessee, any Subsidiary of Lessee or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of Lessee, any Subsidiary of Lessee or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or Appendix A-14 149 (viii) the adoption of an amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA. "Eurocurrency Reserve Requirements" shall mean for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal) of reserve requirements in effect on such day (including without limitation basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed on eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D) maintained by a member bank of the Federal Reserve System. "Eurodollar Holder Advance" shall mean a Holder Advance bearing a Holder Yield based on the Eurodollar Rate. "Eurodollar Loans" shall mean Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder Advance comprising part of the same borrowing or advance (including without limitation conversions, extensions and renewals), a per annum interest rate equal to the per annum rate determined by the Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), reported on Telerate page 3750 as of 11:00 a.m. (London time) two (2) Business Days before the first day of such Interest Period. In the event no such offered rates appear on Telerate page 3750, "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder Advance comprising part of the same borrowing or advance (including without limitation conversions, extensions and renewals), a per annum interest rate equal to the per annum rate determined by the Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), which appear on the Reuters Screen LIBO Page as of 11:00 a.m. (London time) two (2) Business Days before the first day of such Interest Period (provided that if at least two (2) such offered rates appear on the Reuters Screen LIBO Page, the rate in respect of such Interest Period will be the arithmetic mean of such offered rates). As used herein, "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks) ("RMMRS"). In the event the RMMRS is not then quoting such offered rates, "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder Advance comprising part of the same borrowing or advance (including without limitation conversions, extensions and renewals), the average (rounded upward to the nearest one-sixteenth (1/16) of one percent (1%)) per annum rate of interest determined by the office of the Agent (each such determination to be conclusive and binding) as of two (2) Business Days prior to the first day of such Interest Period, as the effective rate at which deposits in immediately available funds in U.S. dollars are being, have been, or would be offered or quoted by the Agent to major banks in the applicable interbank market for Eurodollar deposits at any time during the Business Day Appendix A-15 150 which is the second Business Day immediately preceding the first day of such Interest Period, for a term comparable to such Interest Period and in the amount of the requested Eurodollar Loan and/or Eurodollar Holder Advance. If no such offers or quotes are generally available for such amount, then the Agent shall be entitled to determine the Eurodollar Rate from another recognized service or interbank quotation, or by estimating in its reasonable judgment the per annum rate (as described above) that would be applicable if such quote or offers were generally available. "Event of Default" shall mean a Lease Event of Default, an Agency Agreement Event of Default or a Credit Agreement Event of Default. "Excepted Payments" shall mean: (a) all indemnity payments (including without limitation indemnity payments made pursuant to Section 11 of the Participation Agreement), whether made by adjustment to Basic Rent or otherwise, to which the Owner Trustee, any Holder or any of their respective Affiliates, agents, officers, directors or employees is entitled; (b) any amounts (other than Basic Rent or Termination Value) payable under any Operative Agreement to reimburse the Owner Trustee, any Holder or any of their respective Affiliates (including without limitation the reasonable expenses of the Owner Trustee, the Trust Company and the Holders incurred in connection with any such payment) for performing or complying with any of the obligations of the Lessee under and as permitted by any Operative Agreement; (c) any amount payable to a Holder by any transferee of such interest of a Holder as the purchase price of such Holder's interest in the Trust Estate (or a portion thereof); (d) any insurance proceeds (or payments with respect to risks self-insured or policy deductibles) under liability policies other than such proceeds or payments payable to the Agent or any Lender; (e) any insurance proceeds under policies maintained by the Owner Trustee or any Holder; (f) Transaction Expenses or other amounts, fees, disbursements or expenses paid or payable to or for the benefit of the Owner Trustee; (g) any payments in respect of interest to the extent attributable to payments referred to in clauses (a) through (f) above; and (h) payment obligations arising from any rights of either the Owner Trustee or the Trust Company to demand, collect, sue for or otherwise receive and enforce payment Appendix A-16 151 of any of the foregoing amounts, provided that such rights shall not include the right to terminate the Lease. "Excess Proceeds" shall mean the excess, if any, of the aggregate of all awards, compensation or insurance proceeds payable in connection with a Casualty or Condemnation over the Termination Value paid by the Lessee pursuant to the Lease with respect to such Casualty or Condemnation. "Exculpated Persons" shall mean the Trust Company (except with respect to the representations and warranties and the other obligations of the Trust Company pursuant to the Operative Agreements expressly undertaken in its individual capacity, including without limitation the representations and warranties of the Trust Company pursuant to Section 6.1 of the Participation Agreement, the obligations of the Trust Company pursuant to Section 8.2 of the Participation Agreement and the obligations of the Trust Company pursuant to the Trust Agreement), the Holders (except with respect to the obligations of the Holders pursuant to the Participation Agreement and the Trust Agreement expressly undertaken in their respective individual capacities), their officers, directors, shareholders and partners. "Exempt Payments" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Expiration Date" shall mean the last day of the Term; provided, in no event shall the Expiration Date be later than November 13, 2004, unless such later date has been expressly agreed to in writing by each of the Lessor, the Lessee, the Agent, the Lenders and the Holders. "Fair Market Sales Value" shall mean, with respect to any Property, the amount, which in any event, shall not be less than zero (0), that would be paid in cash in an arms-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, such Property. Fair Market Sales Value of any Property shall be determined based on the assumption that, except for purposes of Section 17 of the Lease, such Property is in the condition and state of repair required under Section 10.1 of the Lease and the Lessee is in compliance with the other requirements of the Operative Agreements. "Federal Funds Effective Rate" shall have the meaning given to such term in the definition of ABR. "Financing Parties" shall mean the Lessor, the Owner Trustee, in its trust capacity, the Agent, the Holders and the Lenders. "Fixtures" shall mean all fixtures relating to the Improvements, including without limitation all components thereof, located in or on the Improvements, together with all replacements, modifications, alterations and additions thereto. Appendix A-17 152 "Force Majeure Event" shall mean any event beyond the control of the Construction Agent, other than a Casualty or Condemnation, including without limitation strikes, lockouts, adverse soil conditions, acts of God, adverse weather conditions, inability to obtain labor or materials, governmental activities, civil commotion and enemy action; but excluding any event, cause or condition that results from the Construction Agent's financial condition. "Foreign Subsidiary" means any direct or indirect Subsidiary of the Lessee which is not a Domestic Subsidiary. "Form 1001" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Form 4224" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Funded Debt" shall mean, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (iii) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (iv) all obligations of such Person issued or assumed as the deferred purchase price of property or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (v) all Support Obligations of such Person with respect to Funded Debt of another Person, (vi) the maximum available amount of all standby letters of credit or acceptances issued or created for the account of such Person, (vii) all Consolidated Total Funded Debt of another Person secured by a Lien on any property of such Person, whether or not such Consolidated Total Funded Debt has been assumed, provided that for purposes hereof the amount of such Consolidated Total Funded Debt shall be limited to the greater of (A) the amount of such Consolidated Total Funded Debt as to which there is recourse to such Person and (B) the fair market value of the property which is subject to such Lien, (viii) the outstanding attributed principal amount under any securitization transaction, (ix) the principal balance outstanding under any synthetic lease (including without limitation the financing contemplated pursuant to the Operative Agreements), off-balance sheet loan or similar off-balance sheet financing product to which such Person is a party, where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP. The Funded Debt of any Person shall include the Funded Debt of any partnership or joint venture in which such Person is a general partner or joint venturer, but only to the extent to which there is recourse to such Person for the payment of such Funded Debt, (x) all preferred stock or other ownership interests issued by such Person and which by the terms thereof could be (at the request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption or other acceleration, and (xi) all obligations of such Person to repurchase any securities which repurchase obligation is related to the issuance thereof, including, without limitation, obligations commonly known as residual equity appreciation potential shares. Appendix A-18 153 "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the accounting principles board of the American Institute of Certified Public Accountants, and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination. "Governmental Action" shall mean all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Legal Requirement, and shall include, without limitation, all environmental and operating permits and licenses that are required for the full use, occupancy, zoning and operating of the Property. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Ground Lease" shall mean a ground lease (in form and substance satisfactory to the Agent) respecting any Property (a) owned by the Lessee (or a parent corporation or any Subsidiary of the Lessee) and leased to the Lessor where such lease has at least a ninety-nine (99) year term and payments set at no more than $1.00 per year, or (b) where such lease is subject to such other terms and conditions as are satisfactory to the Agent. "Guarantor" means each Person which provides a guaranty of the Obligations pursuant to a guaranty agreement in form and substance satisfactory to the Agent in accordance with Section 8.3A(o) of the Participation Agreement. "Hard Costs" shall mean all costs and expenses payable for supplies, materials, labor and profit with respect to the Improvements under any Construction Contract. "Hazardous Substance" shall mean any of the following: (a) any petroleum or petroleum product, explosives, radioactive materials, asbestos, formaldehyde, polychlorinated biphenyls, lead and radon gas; (b) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste, or pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is defined by or listed pursuant to any Environmental Laws. "Holder Advance" shall mean any advance made by any Holder to the Owner Trustee pursuant to the terms of the Trust Agreement or the Participation Agreement. "Holder Amount" shall mean as of any date, the aggregate amount of Holder Advances made by each Holder to the Trust Estate pursuant to Section 2 of the Participation Agreement Appendix A-19 154 and Section 3.1 of the Trust Agreement less any payments of any Holder Advances received by the Holders pursuant to Section 3.4 of the Trust Agreement. "Holder Commitments" shall mean the aggregate amount set forth in Schedule I to the Trust Agreement, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements; provided, if there shall be more than one (1) Holder, the Holder Commitment of each Holder shall be as set forth in Schedule I to the Trust Agreement as such Schedule I may be amended and replaced from time to time. "Holder Construction Property Cost" shall mean, with respect to each Construction Period Property, at any date of determination, an amount equal to the outstanding Holder Advances made with respect thereto under the Trust Agreement. "Holder Overdue Rate" shall mean the lesser of (a) the then current rate of Holder Yield respecting the particular amount in question plus two percent (2%) and (b) the highest rate permitted by applicable law. "Holder Property Cost" shall mean with respect to a Property an amount equal to the outstanding Holder Advances with respect thereto. "Holder Unused Fee" shall have the meaning given to such term in Section 7.4 of the Participation Agreement. "Holder Yield" shall mean with respect to Holder Advances from time to time either the Eurodollar Rate plus the Applicable Percentage or the ABR plus the Applicable Percentage as elected by the Owner Trustee from time to time with respect to such Holder Advances in accordance with the terms of the Trust Agreement; provided, however, (a) upon delivery of the notice described in Section 3.7(c) of the Trust Agreement, the outstanding Holder Advances of each Holder shall bear a yield at the ABR plus the Applicable Percentage applicable from time to time from and after the dates and during the periods specified in Section 3.7(c) of the Trust Agreement, and (b) upon the delivery by a Holder of the notice described in Section 11.3(f) of the Participation Agreement, the Holder Advances of such Holder shall bear a yield at the ABR plus the Applicable Percentage applicable from time to time after the dates and during the periods specified in Section 11.3(f) of the Participation Agreement. "Holders" shall mean First Union National Bank and shall include the other banks and financial institutions which may be from time to time holders of Certificates in connection with the RFMD Real Estate Trust 1999-1. "Impositions" shall mean any and all liabilities, losses, expenses, costs, charges and Liens of any kind whatsoever for fees, taxes, levies, imposts, duties, charges, assessments or withholdings ("Taxes") including but not limited to (i) real and personal property taxes, including without limitation personal property taxes on any property covered by the Lease that is classified by Governmental Authorities as personal property, and real estate or ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes and other similar taxes (including rent Appendix A-20 155 taxes and intangibles taxes); (iii) excise taxes; (iv) real estate transfer taxes, conveyance taxes, stamp taxes and documentary recording taxes and fees; (v) taxes that are or are in the nature of franchise, income, value added, privilege and doing business taxes, license and registration fees; (vi) assessments on any Property, including without limitation all assessments for public Improvements or benefits, whether or not such improvements are commenced or completed within the Term; and (vii) taxes, Liens, assessments or charges asserted, imposed or assessed by the PBGC or any governmental authority succeeding to or performing functions similar to, the PBGC; and in each case all interest, additions to tax and penalties thereon, which at any time prior to, during or with respect to the Term or in respect of any period for which the Lessee shall be obligated to pay Supplemental Rent, may be levied, assessed or imposed by any Governmental Authority upon or with respect to (a) any Property or any part thereof or interest therein; (b) the leasing, financing, refinancing, demolition, construction, substitution, subleasing, assignment, control, condition, occupancy, servicing, maintenance, repair, ownership, possession, activity conducted on, delivery, insuring, use, operation, improvement, sale, transfer of title, return or other disposition of such Property or any part thereof or interest therein; (c) the Notes, other indebtedness with respect to any Property, or the Certificates, or any part thereof or interest therein; (d) the rentals, receipts or earnings arising from any Property or any part thereof or interest therein; (e) the Operative Agreements, the performance thereof, or any payment made or accrued pursuant thereto; (f) the income or other proceeds received with respect to any Property or any part thereof or interest therein upon the sale or disposition thereof; (g) any contract (including the Agency Agreement) relating to the construction, acquisition or delivery of the Improvements or any part thereof or interest therein; (h) the issuance of the Notes or the Certificates; (i) the Owner Trustee, the Trust or the Trust Estate; or (j) otherwise in connection with the transactions contemplated by the Operative Agreements. "Improvements" shall mean, with respect to the construction, renovations and/or Modifications on any Land, all buildings, structures, Fixtures, and other improvements of every kind existing at any time and from time to time on or under the Land purchased or otherwise acquired using the proceeds of the Loans or the Holder Advances or which is subject to a Ground Lease, together with any and all appurtenances to such buildings, structures or improvements, including without limitation sidewalks, utility pipes, conduits and lines, parking areas and roadways, and including without limitation all Modifications and other additions to or changes in the Improvements at any time, including without limitation (a) any Improvements existing as of the Property Closing Date as such Improvements may be referenced on the applicable Requisition and (b) any Improvements made subsequent to such Property Closing Date. "Indebtedness" of a Person shall mean, without duplication, such Person's: (a) obligations for borrowed money; (b) obligations representing the deferred purchase price of Property (whether real, personal, tangible, intangible or mixed) or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade); Appendix A-21 156 (c) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person; (d) obligations which are evidenced by notes, acceptances or other instruments; (e) Capitalized Lease obligations; (f) net liabilities under interest rate swap, exchange or cap agreements; (g) contingent obligations; (h) all preferred stock or other ownership interests issued by such Person and which by the terms thereof could be (at the request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption or other acceleration; and (i) all obligations of such Person to repurchase any securities which repurchase obligation is related to the issuance thereof, including, without limitation, obligations commonly known as residual equity appreciation potential shares. "Indemnified Person" shall mean the Lessor, the Owner Trustee, in its individual and its trust capacity, the Trust, the Trust Company, the Agent, the Holders, the Lenders and their respective successors, assigns, directors, shareholders, partners, officers, employees, agents and Affiliates. "Indemnity Provider" shall mean, respecting each Property, the Lessee. "Initial Closing Date" shall mean December 31, 1999. "Initial Construction Advance" shall mean any initial Advance to pay for: (a) Property Costs for construction of any Improvements; and (b) the Property Costs of restoring or repairing any Property which is required to be restored or repaired in accordance with Section 15.1(e) of the Lease. "Instruments" shall have the meaning given to such term in Section 1 of the Security Agreement. "Insurance Requirements" shall mean all terms and conditions of any insurance policy either required by the Lease to be maintained by the Lessee or required by the Agency Agreement to be maintained by the Construction Agent, and all requirements of the issuer of any such policy and, regarding self insurance, any other requirements of the Lessee. "Interest Period" shall mean during the Commitment Period and thereafter as to any Eurodollar Loan or Eurodollar Holder Advance (i) with respect to the initial Interest Period, the Appendix A-22 157 period beginning on the date of the first Eurodollar Loan and Eurodollar Holder Advance and ending one (1) month, two (2) months, three (3) months or (to the extent available to all Lenders and all Holders) six (6) months thereafter, as selected by the Lessor (in the case of a Eurodollar Loan) or the Owner Trustee (in the case of a Eurodollar Holder Advance) in its applicable notice given with respect thereto and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Advance and ending one (1) month, two (2) months, three (3) months or (to the extent available to all Lenders and all Holders) six (6) months thereafter, as selected by the Lessor by irrevocable notice to the Agent (in the case of a Eurodollar Loan) or by the Owner Trustee (in the case of a Eurodollar Holder Advance) in each case not less than three (3) Business Days prior to the last day of the then current Interest Period with respect thereto; provided, however, that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (B) no Interest Period shall extend beyond the Maturity Date or the Expiration Date, as the case may be, (C) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month, (D) there shall not be more than four (4) Interest Periods outstanding at any one (1) time, and (E) no Interest Period shall extend beyond any date on which the amounts set forth in Schedule 1 to the Participation Agreement are scheduled to be paid unless the portion of Equipment Loans comprised of ABR Loans and Eurodollar Loans with Interest Periods expiring prior to the date on which the amounts set forth in Schedule 1 to the Participation Agreement are scheduled to be paid is at least equal to the amount of principal amortization due on such date. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, together with the rules and regulations promulgated thereunder. "Investments" in any Person, shall mean any loan or advance to such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of, or equity interest in, such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any guaranty obligation incurred for the benefit of such Person or any assets transferred to such Person. "Land" shall mean a parcel of real property described on (a) the Requisition issued by the Construction Agent on the Property Closing Date relating to such parcel and (b) the schedules to each applicable Lease Supplement executed and delivered in accordance with the requirements of Section 2.4 of the Lease. "Land Cost" shall have the meaning specified in Section 5.4 of the Agency Agreement. "Law" shall mean any statute, law, ordinance, regulation, rule, directive, order, writ, injunction or decree of any Tribunal. Appendix A-23 158 "Lease" or "Lease Agreement" shall mean the Amended, Restated and Replacement Lease Agreement dated on or about the Initial Closing Date, between the Lessor and the Lessee, together with any Lease Supplements thereto. "Lease Default" shall mean any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Lease Event of Default. "Lease Event of Default" shall have the meaning specified in Section 17.1 of the Lease. "Lease Supplement" shall mean each Lease Supplement substantially in the form of Exhibit A to the Lease, together with all attachments and schedules thereto. "Legal Requirements" shall mean all foreign, federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting the Owner Trustee, any Holder, the Lessor, the Lessee, the Agent, any Lender or any Property, Land, Improvement, Equipment or the taxation, demolition, construction, use or alteration of such Improvements, whether now or hereafter enacted and in force, including without limitation any that require repairs, modifications or alterations in or to any Property or in any way limit the use and enjoyment thereof (including without limitation all building, zoning and fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. ss. 12101 et. seq., and any other similar federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including without limitation all Environmental Laws), and all permits, certificates of occupancy, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are either of record or known to the Lessee affecting any Property or the Appurtenant Rights. "Lender Commitments" shall mean the aggregate amount set forth in Schedule 2.1 to the Credit Agreement, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements; provided, if there shall be more than one (1) Lender, the Lender Commitment of each Lender shall be as set forth in Schedule 2.1 to the Credit Agreement as such Schedule 2.1 may be amended and replaced from time to time. "Lender Financing Statements" shall mean UCC financing statements and fixture filings appropriately completed and executed for filing in the applicable jurisdiction in order to procure a security interest in favor of the Agent in the Collateral subject to the Security Documents. "Lender Unused Fee" shall have the meaning given to such term in Section 7.4 of the Participation Agreement. "Lenders" shall mean First Union National Bank and shall include the other banks and financial institutions which may be from time to time party to the Participation Agreement and the Credit Agreement. "Lessee" shall have the meaning set forth in the Lease. Appendix A-24 159 "Lessee Security Agreement" shall mean that certain Security Agreement dated on or about the Initial Closing Date granted by Lessee in favor of the Agent, for the benefit of the Secured Parties, and accepted and agreed by the Agent. "Lessor" shall mean the Owner Trustee, not in its individual capacity, but as the Lessor under the Lease. "Lessor Basic Rent" shall mean the scheduled Holder Yield due on the Holder Advances on any Scheduled Interest Payment Date pursuant to the Trust Agreement (but not including interest on (a) any such scheduled Holder Yield due on the Holder Advances prior to the Rent Commencement Date with respect to the Property to which such Holder Advances relate or (b) overdue amounts under the Trust Agreement or otherwise). "Lessor Financing Statements" shall mean UCC financing statements and fixture filings appropriately completed and executed for filing in the applicable jurisdictions in order to protect the Lessor's interest under the Lease to the extent the Lease is a security agreement or a mortgage. "Lessor Lien" shall mean any Lien, true lease or sublease or disposition of title arising as a result of (a) any claim against the Lessor or the Trust Company, in its individual capacity, not resulting from the transactions contemplated by the Operative Agreements, (b) any act or omission of the Lessor or the Trust Company, in its individual capacity, which is not required by the Operative Agreements or is in violation of any of the terms of the Operative Agreements, (c) any claim against the Lessor or the Trust Company, in its individual capacity, with respect to Taxes or Transaction Expenses against which the Lessee is not required to indemnify the Lessor or the Trust Company, in its individual capacity, pursuant to Section 11 of the Participation Agreement or (d) any claim against the Lessor arising out of any transfer by the Lessor of all or any portion of the interest of the Lessor in the Properties, the Trust Estate or the Operative Agreements other than the transfer of title to or possession of any Properties by the Lessor pursuant to and in accordance with the Lease, the Credit Agreement, the Security Agreement or the Participation Agreement or pursuant to the exercise of the remedies set forth in Article XVII of the Lease. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien, option or charge of any kind. "Limited Recourse Amount" shall mean with respect to all the Properties on an aggregate basis, an amount equal to the sum of the Termination Values with respect to all the Properties on an aggregate basis on each Payment Date, less the Maximum Residual Guarantee Amount as of such date with respect to all the Properties on an aggregate basis. "Loan Basic Rent" shall mean the scheduled interest due on the Loans on any Scheduled Interest Payment Date pursuant to the Credit Agreement and the scheduled principal repayments due on Loans pursuant to Section 2.6(d) of the Credit Agreement (but not including interest on Appendix A-25 160 (a) any such Loan due prior to the Rent Commencement Date with respect to the Property to which such Loan relates or (b) any overdue amounts under Section 2.8(b) of the Credit Agreement or otherwise). "Loan Property Cost" shall mean, with respect to each Property at any date of determination, an amount equal to (a) the aggregate principal amount all Loans (including without limitation all Acquisition Loans and Construction Loans) made on or prior to such date with respect to such Property minus (b) the aggregate amount of prepayments or repayments as the case may be of the Loans allocated to reduce the Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement. "Loans" shall mean the loans extended pursuant to the Credit Agreement. "Majority Holders" shall mean at any time, Holders whose Holder Advances outstanding represent at least sixty-six and two thirds percent (66 2/3%) of (a) the aggregate Holder Advances outstanding or (b) to the extent there are no Holder Advances outstanding, the aggregate Holder Commitments. "Majority Lenders" shall mean at any time, Lenders whose Loans outstanding represent at least sixty-six and two thirds percent (66 2/3%) of (a) the aggregate Loans outstanding or (b) to the extent there are no Loans outstanding, the aggregate of the Lender Commitments. "Majority Secured Parties" shall mean at any time, Lenders and Holders whose Loans and Holder Advances outstanding represent at least sixty-six and two thirds percent (66 2/3%) of (a) the aggregate Advances outstanding or (b) to the extent there are no Advances outstanding, the sum of the aggregate Holder Commitments plus the aggregate Lender Commitments. "Marketing Period" shall mean, if the Lessee has given a Sale Notice in accordance with Section 20.1 of the Lease, the period commencing on the date such Sale Notice is given and ending on the Expiration Date. "Material Adverse Effect" shall, mean a material adverse effect on (a) the business, condition (financial or otherwise), assets, liabilities or operations of the Lessee, (b) the ability of the Lessee to perform its respective obligations under any Operative Agreement to which it is a party, (c) the validity or enforceability of any Operative Agreement or the rights and remedies of the Agent, the Lenders, the Holders, or the Lessor thereunder, (d) the validity, priority or enforceability of any Lien on any Property created by any of the Operative Agreements, or (e) the value, utility or useful life of any Property or the use, or ability of the Lessee to use, any Property for the purpose for which it was intended. "Materials of Environmental Concern" shall mean any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Laws, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. Appendix A-26 161 "Maturity Date" shall mean the Expiration Date. "Maximum Residual Guarantee Amount" shall mean an amount equal to the product of the aggregate Property Cost for all of the Properties times eighty-five percent (85%). "Modifications" shall have the meaning specified in Section 11.1(a) of the Lease. "Mortgage Instrument" shall mean any mortgage, deed of trust or any other instrument executed by the Owner Trustee and the Lessee (or regarding any Property subject to a Ground Lease, the applicable Affiliate of the Lessee) in favor of the Agent (for the benefit of the Lenders and the Holders) and evidencing a Lien on the Property, in form and substance reasonably acceptable to the Agent. "Multiemployer Plan" shall mean any plan described in Section 4001(a)(3) of ERISA to which contributions are or have been made or required by the Lessee or any of its Subsidiaries or ERISA Affiliates. "Multiple Employer Plan" shall mean a plan to which the Lessee or any ERISA Affiliate and at least one (1) other employer other than an ERISA Affiliate is making or accruing an obligation to make, or has made or accrued an obligation to make, contributions. "New Facility" shall have the meaning given to such term in Section 28.1 of the Lease. "Notes" shall mean those notes issued to the Lenders pursuant to the Credit Agreement and shall include both the Tranche A Notes and the Tranche B Notes. "Obligations" shall have the meaning given to such term in Section 1 of the Security Agreement. "Officer's Certificate" with respect to any person shall mean a certificate executed on behalf of such person by a Responsible Officer who has made or caused to be made such examination or investigation as is necessary to enable such Responsible Officer to express an informed opinion with respect to the subject matter of such Officer's Certificate. "Operating Lease" shall mean, as applied to any Person, any lease (including, without limitation, the Lease and leases which may be terminated by the lessee at any time) of any property (whether real, personal or mixed) which is not a capitalized lease. "Operative Agreements" shall mean the following: the Participation Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the Credit Agreement, the Notes, the Lease, the Lease Supplements (and memoranda of the Lease and each Lease Supplement in a form reasonably acceptable to the Agent), the Security Agreement, Lessee Security Agreement, the Mortgage Instruments, the other Security Documents, the Ground Leases, the Deeds and the Bills of Sale and any and all other agreements, documents and instruments executed in connection with any of the foregoing. Appendix A-27 162 "Original Executed Counterpart" shall have the meaning given to such term in Section 5 of Exhibit A to the Lease. "Overdue Interest" shall mean any interest payable pursuant to Section 2.8(b) of the Credit Agreement. "Overdue Rate" shall mean (a) with respect to the Loan Basic Rent, and any other amount owed under or with respect to the Credit Agreement or the Security Documents, the rate specified in Section 2.8(b) of the Credit Agreement, (b) with respect to the Lessor Basic Rent, the Holder Yield and any other amount owed under or with respect to the Trust Agreement, the Holder Overdue Rate, and (c) with respect to any other amount, the amount referred to in clause (y) of Section 2.8(b) of the Credit Agreement. "Owner Trustee", "Borrower" or "Lessor" shall mean First Security Bank, National Association, not individually, except as expressly stated in the various Operative Agreements, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, and any successor, replacement and/or additional Owner Trustee expressly permitted under the Operative Agreements. "Participant" shall have the meaning given to such term in Section 9.7 of the Credit Agreement. "Participation Agreement" shall mean the Amended, Restated and Replacement Participation Agreement dated on or about the Initial Closing Date, among the Lessee, the Owner Trustee, not in its individual capacity except as expressly stated therein, the Holders, the Lenders and the Agent. "Payment Date" shall mean any Scheduled Interest Payment Date and any date on which interest or Holder Yield in connection with a prepayment of principal on the Loans or of the Holder Advances is due under the Credit Agreement or the Trust Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation created by Section 4002(a) of ERISA or any successor thereto. "Pension Plan" shall mean a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA (other than a Multiemployer Plan), and to which the Lessee or any ERISA Affiliate may have any liability, including without limitation any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five (5) years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. "Permitted Facility" shall mean a wafer fabrication facility of the type, size, but in any event at least 220,000 square feet, and production capability customarily used and operated by Appendix A-28 163 the Lessee in its ordinary course of business as of the Initial Closing Date and at all times in accordance with the Plans and Specifications. "Permitted Liens" shall mean: (a) the respective rights and interests of the parties to the Operative Agreements as provided in the Operative Agreements; (b) the rights of any sublessee or assignee under a sublease or an assignment expressly permitted by the terms of the Lease for no longer than the duration of the Lease; (c) Liens for Taxes that either are not yet due or are being contested in accordance with the provisions of Section 13.1 of the Lease; (d) Liens arising by operation of law, materialmen's, mechanics', workmen's, repairmen's, employees', carriers', warehousemen's and other like Liens relating to the construction of the Improvements or in connection with any Modifications or arising in the ordinary course of business for amounts that either are not more than thirty (30) days past due or are being diligently contested in good faith by appropriate proceedings, so long as such proceedings satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 13.1 of the Lease; (e) Liens of any of the types referred to in clause (d) above that have been bonded for not less than the full amount in dispute (or as to which other security arrangements satisfactory to the Lessor and the Agent have been made), which bonding (or arrangements) shall comply with applicable Legal Requirements, and shall have effectively stayed any execution or enforcement of such Liens; (f) Liens arising out of judgments or awards with respect to which appeals or other proceedings for review are being prosecuted in good faith and for the payment of which adequate reserves have been provided as required by GAAP or other appropriate provisions have been made, so long as such proceedings have the effect of staying the execution of such judgments or awards and satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 13.1 of the Lease; and (g) Liens in favor of municipalities to the extent agreed to by the Lessor. (h) Liens securing purchase money and sale/leaseback Indebtedness (including Capitalized Leases) to the extent permitted under Section 8.3.B(a), provided that any such Lien attaches only to the Property financed or leased and such Lien attaches thereto concurrently with or within 90 days after the acquisition thereof in connection with the purchase money transactions and within 30 days after the closing of any sale/leaseback transaction; Appendix A-29 164 "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, governmental authority or any other entity. "Plan" shall mean any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which Lessee, any Subsidiary of Lessee or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. "Plans and Specifications" shall mean, with respect to Improvements, the plans and specifications for such Improvements to be constructed or already existing, as such Plans and Specifications may be amended, modified or supplemented from time to time in accordance with the terms of the Operative Agreements. "Prime Lending Rate" shall have the meaning given to such term in the definition of ABR. "Property" shall mean, with respect to each Permitted Facility that is (or is to be) acquired, constructed and/or renovated pursuant to the terms of the Operative Agreements, the Land and each item of Equipment and the various Improvements, in each case located on such Land, including without limitation each Construction Period Property, each Property subject to a Ground Lease and each Property for which the Term has commenced. "Property Acquisition Cost" shall mean the cost to the Lessor to purchase a Property on a Property Closing Date. "Property Closing Date" shall mean the date on which the Lessor purchases a Property or, with respect to the first Advance, the date on which the Lessor seeks reimbursement for Property previously purchased by the Lessor. "Property Cost" shall mean with respect to a Property the aggregate amount (and/or the various items and occurrences giving rise to such amounts) of the Loan Property Cost plus the Holder Property Cost for such Property (as such amounts shall be increased equally among all Properties respecting the Holder Advances and the Loans extended from time to time to pay for the Transaction Expenses, fees, expenses and other disbursements referenced in Sections 7.1(a) and 7.1(b) of the Participation Agreement). "Purchase Option" shall have the meaning given to such term in Section 20.1 of the Lease. "Purchasing Lender" shall have the meaning given to such term in Section 9.8(a) of the Credit Agreement. "Rate Determination Date" shall have the meaning given to such term in the definition of Applicable Percentage. Appendix A-30 165 "Redelivery Location" shall mean, with respect to any item of Equipment, the location or locations specified for delivery by the Lessor. "Register" shall have the meaning given to such term in Section 9.9(a) of the Credit Agreement. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. "Release" shall mean any release, pumping, pouring, emptying, injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or emission of a Hazardous Substance. "Rent" shall mean, collectively, the Basic Rent and the Supplemental Rent, in each case payable under the Lease. "Rent Commencement Date" shall mean, regarding each Property, the Completion Date. "Reportable Event" shall have the meaning specified in ERISA. "Requested Funds" shall mean any funds requested by the Lessee or the Construction Agent, as applicable, in accordance with Section 5 of the Participation Agreement. "Requisition" shall have the meaning specified in Section 4.2 of the Participation Agreement. "Reportable Event" shall mean any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation. "Responsible Officer" shall mean the Chairman or Vice Chairman of the Board of Directors, the Chairman or Vice Chairman of the Executive Committee of the Board of Directors, the President, any Senior Vice President or Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer, except that when used with respect to the Trust Company or the Owner Trustee, "Responsible Officer" shall also include the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, the Controller and any Assistant Controller or any other officer of the Trust Company or the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Payment" shall mean (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock now or hereafter outstanding, except (A) a dividend Appendix A-31 166 payable solely in shares of that class to the holders of that class and (B) dividends and other distributions payable to Lessee, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock now or hereafter outstanding and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock now or hereafter outstanding. "RF Micro" and "RF Micro Devices" shall mean RF Micro Devices, Inc., a North Carolina corporation, and its successors and permitted assigns. "RFMD Real Estate Trust 1999-1" shall mean the grantor trust created pursuant to the terms and conditions of the Trust Agreement. "Sale Date" shall have the meaning given to such term in Section 20.3(a) of the Lease. "Sale Notice" shall mean a notice given to the Lessor in connection with the election by the Lessee of its Sale Option. "Sale Option" shall have the meaning given to such term in Section 20.1 of the Lease. "Sale Proceeds Shortfall" shall mean the amount by which the proceeds of a sale described in Section 22.1 of the Lease are less than the Limited Recourse Amount with respect to the Properties if it has been determined that the Fair Market Sales Value of the Properties at the expiration of the term of the Lease has been impaired by greater than ordinary wear and tear during the Term of the Lease. "Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar Loan or Eurodollar Holder Advance, the last day of the Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Advance (or respecting any Eurodollar Loan or Eurodollar Holder Advance having an Interest Period of six (6) months, the three (3) month anniversary of such Interest Period), (b) as to any ABR Loan or any ABR Holder Advance, the fifteenth day of each month, unless such day is not a Business Day and in such case on the next occurring Business Day and (c) as to all Loans and Holder Advances, the date of any voluntary or involuntary payment, prepayment, return or redemption, and the Maturity Date or the Expiration Date, as the case may be. "Secured Parties" shall have the meaning given to such term in the Security Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. "Security Agreement" shall mean the Amended, Restated and Replacement Security Agreement dated on or about the Initial Closing Date between the Lessor and the Agent, for the benefit of the Secured Parties, and accepted and agreed to by the Lessee. Appendix A-32 167 "Security Documents" shall mean the collective reference to the Security Agreement, the Lessee Security Agreement, the Mortgage Instruments, (to the extent the Lease is construed as a security instrument) the Lease, the UCC Financing Statements and all other security documents hereafter delivered to the Agent granting a lien on any asset or assets of any Person to secure the obligations and liabilities of the Lessor under the Credit Agreement and/or under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. "Single Employer Plan" shall mean any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan. "Soft Costs" shall mean all costs which are ordinarily and reasonably incurred in relation to the acquisition, development, installation, construction, improvement and testing of the Properties other than Hard Costs, including without limitation structuring fees, administrative fees, legal fees, upfront fees, fees and expenses related to appraisals, title examinations, title insurance, document recordation, surveys, environmental site assessments, geotechnical soil investigations and similar costs and professional fees customarily associated with a real estate closing, the Lender Unused Fee, the Holder Unused Fee, fees and expenses of the Owner Trustee payable or reimbursable under the Operative Agreements and costs and expenses incurred pursuant to Sections 7.3(a) and 7.3(b) of the Participation Agreement. "Subordinated Debt" shall mean any Indebtedness of a member of the Consolidated Group which by its terms is expressly subordinated in right of payment to the prior payment of the obligations of the Lessee under the Operative Agreements on terms and conditions and evidenced by documentation satisfactory to the Agent in its reasonable discretion. "Subsidiary" shall mean, as to any Person, any corporation of which at least a majority of the outstanding stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person, or by one (1) or more Subsidiaries, or by such Person and one (1) or more Subsidiaries. "Supplemental Amounts" shall have the meaning given to such term in Section 9.18 of the Credit Agreement. "Supplemental Rent" shall mean all amounts, liabilities and obligations (other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor, the Trust Company, the Holders, the Agent, the Lenders or any other Person under the Lease or under any of the other Operative Agreements including without limitation payments of the Termination Value and the Maximum Residual Guarantee Amount and all indemnification amounts, liabilities and obligations. "Support Obligations" shall mean, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Funded Debt of any other Person in any manner, whether direct or indirect, and including without limitation Appendix A-33 168 any obligation, whether or not contingent, (i) to purchase any such Funded Debt or any property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Funded Debt or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Funded Debt of such other Person, (iii) to lease or purchase property, securities or services primarily for the purpose of assuring the holder of such Funded Debt, or (iv) to otherwise assure or hold harmless the holder of such Funded Debt against loss in respect thereof. The amount of any Support Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Funded Debt in respect of which such Support Obligation is made. "Taxes" shall have the meaning specified in the definition of "Impositions". "Term" shall have the meaning specified in Section 2.2 of the Lease. "Termination Date" shall have the meaning specified in Section 16.2(a) of the Lease. "Termination Event" shall mean (a) with respect to any Pension Plan, the occurrence of a Reportable Event or an event described in Section 4062(e) of ERISA, (b) the withdrawal of the Lessee or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of a notice of intent to terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate a Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (f) the complete or partial withdrawal of the Lessee or any ERISA Affiliate from a Multiemployer Plan. "Termination Notice" shall have the meaning specified in Section 16.1 of the Lease. "Termination Value" shall mean the sum of (a) either (i) with respect to all Properties, an amount equal to the aggregate outstanding Property Cost for all the Properties, in each case as of the last occurring Payment Date, or (ii) with respect to a particular Property, an amount equal to the Property Cost allocable to such Property, plus (b) respecting the amounts described in each of the foregoing subclause (i) or (ii), as applicable, any and all accrued but unpaid interest on the Loans and any and all Holder Yield on the Holder Advances related to the applicable Property Cost, plus (c) to the extent the same is not duplicative of the amounts payable under clause (b) above, all other Rent and other amounts then due and payable or accrued under the Agency Agreement, Lease and/or under any other Operative Agreement (including without limitation amounts under Sections 11.1 and 11.2 of the Participation Agreement and all costs and expenses referred to in clause FIRST of Section 22.2 of the Lease). Appendix A-34 169 "Total Commitments" shall mean the sum of all Lender Commitments and Holder Commitments. "Total Utilization" shall mean the percentage determined by dividing (a) the sum of all outstanding Loans and Holder Advances by (b) the Total Commitments. "Tranche A Commitments" shall mean the obligation of the Tranche A Lenders to make the Tranche A Loans to the Lessor in an aggregate principal amount at any one (1) time outstanding not to exceed the aggregate of the amounts set forth opposite each Tranche A Lender's name on Schedule 2.1 to the Credit Agreement, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements; provided, no Tranche A Lender shall be obligated to make Tranche A Loans in excess of such Tranche A Lender's share of the Tranche A Commitments as set forth adjacent to such Tranche A Lender's name on Schedule 2.1 to Credit Agreement. "Tranche A Lenders" shall mean First Union National Bank and shall include the several banks and other financial institutions from time to time party to the Credit Agreement that commit to make the Tranche A Loans. "Tranche A Loans" shall mean the Loans made pursuant to the Tranche A Commitment. "Tranche A Note" shall have the meaning given to it in Section 2.2 of the Credit Agreement. "Tranche B Commitments" shall mean the obligation of the Tranche B Lenders to make the Tranche B Loans to the Lessor in an aggregate principal amount at any one (1) time outstanding not to exceed the aggregate of the amounts set forth opposite each Tranche B Lender's name on Schedule 2.1 to the Credit Agreement, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements; provided, no Tranche B Lender shall be obligated to make Tranche B Loans in excess of such Tranche B Lender's share of the Tranche B Commitments as set forth adjacent to such Tranche B Lender's name on Schedule 2.1 to Credit Agreement. "Tranche B Lenders" shall mean First Union National Bank and shall include the several banks and other financial institutions from time to time party to the Credit Agreement that commit to make the Tranche B Loans. "Tranche B Loan" shall mean the Loans made pursuant to the Tranche B Commitment. "Tranche B Note" shall have the meaning given to it in Section 2.2 of the Credit Agreement. "Transaction Expenses" shall mean all Soft Costs and all other costs and expenses incurred in connection with the preparation, execution and delivery of the Operative Agreements Appendix A-35 170 and the transactions contemplated by the Operative Agreements including without limitation all costs and expenses described in Section 7.1 of the Participation Agreement and the following: (a) the reasonable fees, out-of-pocket expenses and disbursements of counsel in negotiating the terms of the Operative Agreements and the other transaction documents, preparing for the closings under, and rendering opinions in connection with, such transactions and in rendering other services customary for counsel representing parties to transactions of the types involved in the transactions contemplated by the Operative Agreements; (b) the reasonable fees, out-of-pocket expenses and disbursements of accountants for the Lessee or the Construction Agent in connection with the transaction contemplated by the Operative Agreements; (c) any and all other reasonable fees, charges or other amounts payable to the Lenders, the Agent, the Holders, the Owner Trustee or any broker which arises under any of the Operative Agreements; (d) any other reasonable fee, out-of-pocket expense, disbursement or cost of any party to the Operative Agreements or any of the other transaction documents; and (e) any and all Taxes and fees incurred in recording or filing any Operative Agreement or any other transaction document, any deed, declaration, mortgage, security agreement, notice or financing statement with any public office, registry or governmental agency in connection with the transactions contemplated by the Operative Agreement. "Tribunal" shall mean any state, commonwealth, federal, foreign, territorial, or other court or government body, subdivision agency, department, commission, board, bureau or instrumentality of a governmental body. "Trust" shall mean the RFMD Real Estate Trust 1999-1. "Trust Agreement" shall mean the Amended, Restated and Replacement Trust Agreement dated on or about the Initial Closing Date between the Holders and the Owner Trustee. "Trust Company" shall mean First Security Bank, National Association, in its individual capacity, and any successor owner trustee under the Trust Agreement in its individual capacity. "Trust Estate" shall have the meaning specified in Section 2.2 of the Trust Agreement. "Type" shall mean, as to any Loan, whether it is an ABR Loan or a Eurodollar Loan. "UCC Financing Statements" shall mean collectively the Lender Financing Statements and the Lessor Financing Statements. Appendix A-36 171 "Unanimous Vote Matters" shall have the meaning given it in Section 12.4 of the Participation Agreement. "Unfunded Amount" shall have the meaning specified in Section 3.2 of the Agency Agreement. "Unfunded Liability" shall mean, with respect to any Pension Plan, at any time, the amount (if any) by which (a) the present value of all benefits under such Pension Plan exceeds (b) the fair market value of all Pension Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Pension Plan, in accordance with the actuarial assumptions then in effect with respect to such Pension Plan (such actuarial assumptions shall be in compliance with all applicable Legal Requirements), but only to the extent that such excess represents a potential liability of the Company or any member of the Controlled Group to the PBGC or such Pension Plan under Title IV of ERISA. "Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial Code as in effect in any applicable jurisdiction. "United States Bankruptcy Code" shall mean Title 11 of the United States Code. "Unused Fee" shall mean, collectively, the Holder Unused Fee and the Lender Unused Fee. "Unused Fee Payment Date" shall mean the last Business Day of each September, December, March and June and the last Business Day of the Commitment Period, or such earlier date as the Commitments shall terminate as provided in the Credit Agreement or the Holder Commitment shall terminate as provided in the Trust Agreement. "U.S. Person" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "U.S. Taxes" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Withholdings" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Work" shall mean the furnishing of labor, materials, components, furniture, furnishings, fixtures, appliances, machinery, equipment, tools, power, water, fuel, lubricants, supplies, goods and/or services with respect to any Property. "Year 2000" shall mean the calendar year beginning January 1, 2000 and ending December 31, 2000. Appendix A-37 EX-10.10 13 AMENDED, RESTATED AND REPLACEMENT LEASE AGREEMENT 1 EXHIBIT 10.10 - - -------------------------------------------------------------------------------- AMENDED, RESTATED AND REPLACEMENT LEASE AGREEMENT Dated as of December 31, 1999 between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, as Lessor and RF MICRO DEVICES, INC., as Lessee - - -------------------------------------------------------------------------------- This Lease Agreement is subject to a security interest in favor of First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent") under an Amended, Restated and Replacement Security Agreement dated as of December 31, 1999, between First Security Bank, National Association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 and the Agent, as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof. This Lease Agreement has been executed in several counterparts. To the extent, if any, that this Lease Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no security interest in this Lease Agreement may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by the Agent on the signature page hereof. 2 TABLE OF CONTENTS ARTICLE I......................................................................1 1.1 Definitions.......................................................1 1.2 Interpretation....................................................2 ARTICLE II.....................................................................2 2.1 Property..........................................................2 2.2 Lease Term........................................................2 2.3 Title.............................................................2 2.4 Lease Supplements.................................................2 ARTICLE III....................................................................3 3.1 Rent..............................................................3 3.2 Payment of Basic Rent.............................................3 3.3 Supplemental Rent.................................................3 3.4 Performance on a Non-Business Day.................................4 3.5 Rent Payment Provisions...........................................4 ARTICLE IV.....................................................................4 4.1 Taxes; Utility Charges............................................4 ARTICLE V......................................................................5 5.1 Quiet Enjoyment...................................................5 ARTICLE VI.....................................................................5 6.1 Net Lease.........................................................5 6.2 No Termination or Abatement.......................................6 ARTICLE VII....................................................................6 7.1 Ownership of the Properties.......................................6 ARTICLE VIII...................................................................7 8.1 Condition of the Properties.......................................7 8.2 Possession and Use of the Properties..............................8 8.3 Integrated Properties.............................................9 ARTICLE IX....................................................................10 9.1 Compliance With Legal Requirements, Insurance Requirements and Manufacturer's Specifications and Standards..........................10 ARTICLE X.....................................................................10 10.1 Maintenance and Repair; Return..................................10 10.2 Environmental Inspection........................................13 ARTICLE XI....................................................................14 11.1 Modifications...................................................14 ARTICLE XII...................................................................15 12.1 Warranty of Title...............................................15 ARTICLE XIII..................................................................16 13.1 Permitted Contests Other Than in Respect of Indemnities.........16 13.2 Impositions, Utility Charges, Other Matters; Compliance with Legal Requirements..............................................16 ARTICLE XIV...................................................................16 14.1 Public Liability and Workers'Compensation Insurance.............16 14.2 Permanent Hazard and Other Insurance............................17 i 3 14.3 Coverage........................................................18 ARTICLE XV....................................................................19 15.1 Casualty and Condemnation.......................................19 15.2 Environmental Matters...........................................21 15.3 Notice of Environmental Matters.................................22 ARTICLE XVI...................................................................22 16.1 Termination Upon Certain Events.................................22 16.2 Procedures......................................................22 ARTICLE XVII..................................................................22 17.1 Lease Events of Default.........................................22 17.2 Surrender of Possession.........................................26 17.3 Reletting.......................................................26 17.4 Damages.........................................................26 17.5 Power of Sale...................................................27 17.6 Final Liquidated Damages........................................27 17.7 Environmental Costs.............................................28 17.8 Waiver of Certain Rights........................................28 17.9 Assignment of Rights Under Contracts............................28 17.10 Remedies Cumulative............................................29 ARTICLE XVIII.................................................................29 18.1 Lessor's Right to Cure Lessee's Lease Defaults..................29 ARTICLE XIX...................................................................29 19.1 Provisions Relating to Lessee's Exercise of its Purchase Option...............................................................29 19.2 No Purchase or Termination With Respect to Less than All of a Property...........................................................29 ARTICLE XX....................................................................30 20.1 Purchase Option or Sale Option-General Provisions...............30 20.2 Lessee Purchase Option..........................................30 20.3 Third Party Sale Option.........................................31 ARTICLE XXI...................................................................32 21.1 [Intentionally Reserved]........................................32 ARTICLE XXII..................................................................32 22.1 Sale Procedure..................................................32 22.2 Application of Proceeds of Sale.................................34 22.3 Indemnity for Excessive Wear....................................35 22.4 Appraisal Procedure.............................................35 22.5 Certain Obligations Continue....................................35 ARTICLE XXIII.................................................................36 23.1 Holding Over....................................................36 ARTICLE XXIV..................................................................36 24.1 Risk of Loss....................................................36 ARTICLE XXV...................................................................37 25.1 Assignment......................................................37 25.2 Subleases.......................................................37 ARTICLE XXVI..................................................................38 26.1 No Waiver.......................................................38 ii 4 ARTICLE XXVII.................................................................38 27.1 Acceptance of Surrender.........................................38 27.2 No Merger of Title..............................................38 ARTICLE XXVIII................................................................38 28.1 [Intentionally Reserved]........................................38 ARTICLE XXIX..................................................................38 29.1 Notices.........................................................38 ARTICLE XXX...................................................................39 30.1 Miscellaneous...................................................39 30.2 Amendments and Modifications....................................39 30.3 Successors and Assigns..........................................39 30.4 Headings and Table of Contents..................................39 30.5 Counterparts....................................................39 30.6 GOVERNING LAW...................................................39 30.7 Calculation of Rent.............................................39 30.8 Memoranda of Lease and Lease Supplements........................40 30.9 Allocations between the Lenders and the Holders.................40 30.10 Limitations on Recourse........................................40 30.11 WAIVERS OF JURY TRIAL..........................................40 30.12 Exercise of Lessor Rights......................................40 30.13 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION.................41 30.14 USURY SAVINGS PROVISION........................................41 EXHIBITS - - -------- EXHIBIT A - Lease Supplement No. ____ EXHIBIT B - Memorandum of Lease and Lease Supplement No. ____ iii 5 AMENDED, RESTATED AND REPLACEMENT LEASE AGREEMENT THIS AMENDED, RESTATED AND REPLACEMENT LEASE AGREEMENT dated as of December 31, 1999 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, this "Lease") is between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, having its principal office at 79 South Main Street, Salt Lake City, Utah 84111, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, as lessor (the "Lessor"), and RF MICRO DEVICES, INC., a North Carolina corporation, having its principal place of business at 7628 Thorndike Road, Greensboro, North Carolina 27409-9421, as lessee (the "Lessee"). W I T N E S S E T H: A. WHEREAS, subject to the terms and conditions of the Participation Agreement and the Agency Agreement, Lessor will (i) purchase or ground lease various parcels of real property, some of which will (or may) have existing Improvements thereon, from one (1) or more third parties designated by Lessee and (ii) fund the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties by the Construction Agent; and B. WHEREAS, the Term shall commence with respect to each Property upon the Commencement Date with respect thereto; Basic Rent with respect thereto shall not be payable until the applicable Rent Commencement Date; and C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor, each Property; NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I 1.1 DEFINITIONS. For purposes of this Lease, capitalized terms used in this Lease and not otherwise defined herein shall have the meanings assigned to them in Appendix A to that certain Amended, Restated and Replacement Participation Agreement dated as of December 31, 1999 (as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof, the "Participation Agreement") among Lessee, Lessor, the various banks and other lending institutions which are parties thereto from time to time, as the 6 Holders, the various banks and other lending institutions which are parties thereto from time to time, as the Lenders, and First Union National Bank, as agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests. Unless otherwise indicated, references in this Lease to articles, sections, paragraphs, clauses, appendices, schedules and exhibits are to the same contained in this Lease. 1.2 INTERPRETATION. The rules of usage set forth in Appendix A to the Participation Agreement shall apply to this Lease. ARTICLE II 2.1 PROPERTY. Subject to the terms and conditions hereinafter set forth and contained in the respective Lease Supplement relating to each Property, Lessor hereby leases to Lessee and Lessee hereby leases from Lessor, each Property. 2.2 LEASE TERM. The term of this Lease with respect to each Property (the "Term") shall begin upon the earlier of (i) the Completion Date for such Property or (ii) the date any Agency Event of Default shall occur (in each case the "Commencement Date") and shall end on November 13, 2004, unless the Term is earlier terminated. Notwithstanding the foregoing, Lessee shall not be obligated to pay Basic Rent until the Rent Commencement Date with respect to such Property. 2.3 TITLE. Each Property is leased to Lessee without any representation or warranty, express or implied, by Lessor and subject to the rights of parties in possession (if any), the existing state of title (including without limitation the Permitted Liens) and all applicable Legal Requirements. Lessee shall in no event have any recourse against Lessor for any defect in Lessor's title to any Property or any interest of Lessee therein other than for Lessor Liens. 2.4 LEASE SUPPLEMENTS. On or prior to each Commencement Date, Lessee and Lessor shall each execute and deliver a Lease Supplement for the Property to be leased effective as of such Commencement Date in substantially the form of Exhibit A hereto. 2 7 ARTICLE III 3.1 RENT. (a) Lessee shall pay Basic Rent in arrears on each Payment Date, and on any date on which this Lease shall terminate with respect to any or all Properties during the Term; provided, however, with respect to each individual Property, Lessee shall have no obligation to pay Basic Rent with respect to such Property until the Rent Commencement Date with respect to such Property (notwithstanding that Basic Rent for such Property shall accrue from and including the Scheduled Interest Payment Date immediately preceding such Rent Commencement Date). (b) Basic Rent shall be due and payable in lawful money of the United States and shall be paid by wire transfer of immediately available funds on the due date therefor (or within the applicable grace period) to such account or accounts at such bank or banks as Lessor shall from time to time direct. (c) Lessee's inability or failure to take possession of all or any portion of any Property when delivered by Lessor, whether or not attributable to any act or omission of Lessor, the Construction Agent, Lessee or any other Person or for any other reason whatsoever, shall not delay or otherwise affect Lessee's obligation to pay Rent for such Property in accordance with the terms of this Lease. (d) Lessee shall make all payments of Rent prior to 12:00 Noon, New York time, on the applicable date for payment of such amount. 3.2 PAYMENT OF BASIC RENT. Basic Rent shall be paid absolutely net to Lessor or its designee, so that this Lease shall yield to Lessor the full amount thereof, without setoff, deduction or reduction. 3.3 SUPPLEMENTAL RENT. Lessee shall pay to the Person entitled thereto any and all Supplemental Rent when and as the same shall become due and payable, and if Lessee fails to pay any Supplemental Rent within three (3) days after the same is due, Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent. All such payments of Supplemental Rent shall be in the full amount thereof, without setoff, deduction or reduction. Lessee shall pay to the appropriate Person, as Supplemental Rent due and owing to such Person, among other things, on demand, (a) any and all payment obligations (except for amounts payable as Basic Rent) owing from time to time under the Operative Agreements by any Person to the Agent, any Lender, any Holder or any other Person, (b) interest at the applicable Overdue Rate on any installment of Basic Rent not paid when due (subject to the applicable grace period) for the period for which the same shall be overdue and on any payment of Supplemental Rent not paid when due or demanded by the appropriate Person (subject to any 3 8 applicable grace period) for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid and (c) amounts referenced as Supplemental Rent obligations pursuant to Section 8.3 of the Participation Agreement. It shall be an additional Supplemental Rent obligation of Lessee to pay to the appropriate Person all rent and other amounts when such become due and owing from time to time under each Ground Lease and without the necessity of any notice from Lessor with regard thereto. The expiration or other termination of Lessee's obligations to pay Basic Rent hereunder shall not limit or modify the obligations of Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in this Lease, in the event of any failure on the part of Lessee to pay and discharge any Supplemental Rent as and when due, Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent. 3.4 PERFORMANCE ON A NON-BUSINESS DAY. If any Basic Rent is required hereunder on a day that is not a Business Day, then such Basic Rent shall be due on the corresponding Scheduled Interest Payment Date or the date any amounts specified in Schedule 1 to the Participation Agreement are due, as the case may be. If any Supplemental Rent is required hereunder on a day that is not a Business Day, then such Supplemental Rent shall be due on the next succeeding Business Day. 3.5 RENT PAYMENT PROVISIONS. Lessee shall make payment of all Basic Rent and Supplemental Rent when due (subject to the applicable grace periods) regardless of whether any of the Operative Agreements pursuant to which same is calculated and is owing shall have been rejected, avoided or disavowed in any bankruptcy or insolvency proceeding involving any of the parties to any of the Operative Agreements. Such provisions of such Operative Agreements and their related definitions are incorporated herein by reference and shall survive any termination, amendment or rejection of any such Operative Agreements. ARTICLE IV 4.1 TAXES; UTILITY CHARGES. Lessee shall pay or cause to be paid all Impositions with respect to the Properties and/or the use, occupancy, operation, repair, access, maintenance or operation thereof and all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents, utilities and operating expenses of any kind or type used in or on any Property and related real property during the Term. Upon Lessor's request, Lessee shall provide from time to time Lessor with evidence of all such payments referenced in the foregoing sentence. Lessee shall be entitled to receive any credit or refund with respect to any Imposition or utility charge paid by Lessee. Unless an Event of Default shall have occurred and be continuing, the amount of any credit or refund received by Lessor on account of any Imposition or utility charge paid by Lessee, net of 4 9 the costs and expenses incurred by Lessor in obtaining such credit or refund, shall be promptly paid over to Lessee. All charges for Impositions or utilities imposed with respect to any Property for a period during which this Lease expires or terminates shall be adjusted and prorated on a daily basis between Lessor and Lessee, and each party shall pay or reimburse the other for such party's pro rata share thereof. ARTICLE V 5.1 QUIET ENJOYMENT. Subject to the rights of Lessor contained in Sections 17.2, 17.3 and 20.3 and the other terms of this Lease and the other Operative Agreements and so long as no Event of Default shall have occurred and be continuing, Lessee shall peaceably and quietly have, hold and enjoy each Property for the applicable Term, free of any claim or other action by Lessor or anyone rightfully claiming by, through or under Lessor (other than Lessee) with respect to any matters arising from and after the applicable Commencement Date. ARTICLE VI 6.1 NET LEASE. This Lease shall constitute a net lease, and the obligations of Lessee hereunder are absolute and unconditional. Lessee shall pay all operating expenses arising out of the use, operation and/or occupancy of each Property. Any present or future law to the contrary notwithstanding, this Lease shall not terminate, nor shall Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall the obligations of Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) for any reason whatsoever, including without limitation by reason of: (a) any damage to or destruction of any Property or any part thereof; (b) any taking of any Property or any part thereof or interest therein by Condemnation or otherwise; (c) any prohibition, limitation, restriction or prevention of Lessee's use, occupancy or enjoyment of any Property or any part thereof, or any interference with such use, occupancy or enjoyment by any Person or for any other reason; (d) any title defect, Lien or any matter affecting title to any Property; (e) any eviction by paramount title or otherwise; (f) any default by Lessor hereunder; (g) any action for bankruptcy, insolvency, reorganization, liquidation, dissolution or other proceeding relating to or affecting the Agent, any Lender, Lessor, Lessee, any Holder or any Governmental Authority; (h) the impossibility or illegality of performance by Lessor, Lessee or both; (i) any action of any Governmental Authority or any other Person; (j) Lessee's acquisition of ownership of all or part of any Property; (k) breach of any warranty or representation with respect to any Property or any Operative Agreement; (l) any defect in the condition, quality or fitness for use of any Property or any part thereof; or (m) any other cause or circumstance whether similar or dissimilar to the foregoing and whether or not Lessee shall have notice or knowledge of any of the foregoing. The parties intend that the obligations of Lessee 5 10 hereunder shall be covenants, agreements and obligations that are separate and independent from any obligations of Lessor hereunder and shall continue unaffected unless such covenants, agreements and obligations shall have been modified or terminated in accordance with an express provision of this Lease. Lessor and Lessee acknowledge and agree that the provisions of this Section 6.1 have been specifically reviewed and subject to negotiation. 6.2 NO TERMINATION OR ABATEMENT. Lessee shall remain obligated under this Lease in accordance with its terms and shall not take any action to terminate, rescind or avoid this Lease, notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting any Person or any Governmental Authority, or any action with respect to this Lease or any Operative Agreement which may be taken by any trustee, receiver or liquidator of any Person or any Governmental Authority or by any court with respect to any Person, or any Governmental Authority. Lessee hereby waives all right (a) to terminate or surrender this Lease (except as permitted under the terms of the Operative Agreements) or (b) to avail itself of any abatement, suspension, deferment, reduction, setoff, counterclaim or defense with respect to any Rent. Lessee shall remain obligated under this Lease in accordance with its terms and Lessee hereby waives any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Lease. Notwithstanding any such statute or otherwise, Lessee shall be bound by all of the terms and conditions contained in this Lease. ARTICLE VII 7.1 OWNERSHIP OF THE PROPERTIES. (a) Lessor and Lessee intend that (i) for financial accounting purposes with respect to Lessee (A) this Lease will be treated as an "operating lease" pursuant to Statement of Financial Accounting Standards No. 13, as amended, (B) Lessor will be treated as the owner and lessor of each Property and (C) Lessee will be treated as the lessee of each Property, but (ii) for federal and all state and local income tax purposes, bankruptcy purposes, regulatory purposes, commercial law and real estate purposes and all other purposes (A) this Lease will be treated as a financing arrangement and (B) Lessee will be treated as the owner of the Properties and will be entitled to all tax benefits ordinarily available to owners of property similar to the Properties for such tax purposes. Notwithstanding the foregoing, neither party hereto has made, or shall be deemed to have made, any representation or warranty as to the availability of any of the foregoing treatments under applicable accounting rules, tax, bankruptcy, regulatory, commercial or real estate law or under any other set of rules. Lessee shall claim the cost recovery deductions associated with each Property, and Lessor shall not, to the extent not prohibited by Law, take on its tax return a position inconsistent with Lessee's claim of such deductions. 6 11 (b) For all purposes other than as set forth in Section 7.1(a)(i), Lessor and Lessee intend this Lease to constitute a finance lease and not a true lease. In order to secure the obligations of Lessee now existing or hereafter arising under any and all Operative Agreements, Lessee hereby conveys, grants, assigns, transfers, hypothecates, mortgages and sets over to Lessor, for the benefit of all Financing Parties, a first priority security interest (but subject to the security interest in the assets granted by Lessee in favor of the Agent in accordance with the Security Agreement) in and lien on all right, title and interest of Lessee (now owned or hereafter acquired) in and to all Properties, to the extent such is personal property and irrevocably grants and conveys a lien and deed of trust on all right, title and interest of Lessee (now owned or hereafter acquired) in and to all Properties to the extent such is real property. Lessor and Lessee further intend and agree that, for the purpose of securing the obligations of Lessee and/or the Construction Agent now existing or hereafter arising under the Operative Agreements, (i) this Lease shall be a security agreement and financing statement within the meaning of Article 9 of the Uniform Commercial Code respecting each of the Properties and all proceeds (including without limitation insurance proceeds thereof) to the extent such is personal property and an irrevocable grant and conveyance of a lien, and deed of trust on each of the Properties and all proceeds (including without limitation insurance proceeds thereof) to the extent such is real property; (ii) the acquisition of title by Lessor (or to the extent applicable, a leasehold interest pursuant to a Ground Lease) in each Property referenced in Article II constitutes a grant by Lessee to Lessor of a security interest, lien, deed of trust and mortgage in all of Lessee's right, title and interest in and to each Property and all proceeds (including without limitation insurance proceeds thereof) of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property, whether in the form of cash, investments, securities or other property, and an assignment of all rents, profits and income produced by each Property; and (iii) notifications to Persons holding such property, and acknowledgments, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of Lessee shall be deemed to have been given for the purpose of perfecting such lien, security interest, mortgage lien and deed of trust under applicable law. Lessee shall promptly take such actions as necessary (including without limitation the filing of Uniform Commercial Code Financing Statements, Uniform Commercial Code Fixture Filings and memoranda (or short forms) of this Lease and the various Lease Supplements) to ensure that the lien, security interest, mortgage lien and deed of trust in each Property and the other items referenced above will be deemed to be a perfected lien, security interest, mortgage lien and deed of trust of first priority under applicable law and will be maintained as such throughout the Term. ARTICLE VIII 8.1 CONDITION OF THE PROPERTIES. LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS-IS WHERE-IS" WITHOUT REPRESENTATION, WARRANTY OR 7 12 COVENANT (EXPRESS OR IMPLIED) BY LESSOR (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR LIENS) AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY STATE OF FACTS REGARDING ITS PHYSICAL CONDITION OR WHICH AN ACCURATE SURVEY MIGHT SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF AND/OR THE DATE OF THE APPLICABLE LEASE SUPPLEMENT. NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR LIENS) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. LESSEE HAS OR PRIOR TO THE COMMENCEMENT DATE WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE (INSOFAR AS LESSOR, THE AGENT, EACH LENDER AND EACH HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS BETWEEN LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS, ON THE ONE HAND, AND LESSEE, ON THE OTHER HAND, ARE TO BE BORNE BY LESSEE. 8.2 POSSESSION AND USE OF THE PROPERTIES. (a) At all times during the Term with respect to each Property, such Property shall be a Permitted Facility and shall be used by Lessee in the ordinary course of its business. Lessee shall pay, or cause to be paid, all charges and costs required in connection with the use of the Properties as contemplated by this Lease. Lessee shall not commit or permit any waste of the Properties or any part thereof. (b) The address stated in Section 29.1 of this Lease is the principal place of business and chief executive office of Lessee (as such terms are used in Section 9-103(3) of the Uniform Commercial Code of any applicable jurisdiction), and Lessee will provide Lessor with prior written notice of any change of location of its principal place of business or chief executive office. Regarding a particular Property, each Lease Supplement correctly identifies the initial location of the related Equipment (if any) and Improvements (if any) and contains an accurate legal description for the related parcel of 8 13 Land or a copy of the Ground Lease (if any). The Equipment and Improvements respecting each particular Property will be located only at the location identified in the applicable Lease Supplement. (c) Lessee will not attach or incorporate any item of Equipment to or in any other item of equipment or personal property or to or in any real property in a manner that could give rise to the assertion of any Lien on such item of Equipment by reason of such attachment or the assertion of a claim that such item of Equipment has become a fixture and is subject to a Lien in favor of a third party that is prior to the Liens thereon created by the Operative Agreements. (d) On the Commencement Date for each Property, Lessor and Lessee shall execute a Lease Supplement in regard to such Property which shall contain an Equipment Schedule that has a general description of the Equipment which shall comprise the Property, an Improvement Schedule that has a general description of the Improvements which shall comprise the Property and a legal description of the Land to be leased hereunder (or in the case of any Property subject to a Ground Lease to be subleased hereunder) as of such date. Each Property subject to a Ground Lease shall be deemed to be ground subleased from Lessor to Lessee as of the Commencement Date, and such ground sublease shall be in effect until this Lease is terminated or expires, in each case in accordance with the terms and provisions hereof. Lessee shall satisfy and perform all obligations imposed on Lessor under each Ground Lease. Simultaneously with the execution and delivery of each Lease Supplement, such Equipment, Improvements, Land, ground subleasehold interest, all additional Equipment and all additional Improvements which are financed under the Operative Agreements after the Commencement Date and the remainder of such Property shall be deemed to have been accepted by Lessee for all purposes of this Lease and to be subject to this Lease (but subject to all rights Lessee, Construction Agent or Lessor may have against vendors, manufacturers, contractors and other third parties with respect to any such Equipment or Improvements). (e) At all times during the Term with respect to each Property, Lessee will comply with all obligations under and (to the extent no Event of Default exists and provided that such exercise will not impair the value, utility or remaining useful life of such Property) shall be permitted to exercise all rights and remedies under, all operation and easement agreements and related or similar agreements applicable to such Property. 8.3 INTEGRATED PROPERTIES. On the Rent Commencement Date for each Property, Lessee shall, at its sole cost and expense, cause such Property and the applicable property subject to a Ground Lease to constitute (and for the duration of the Term shall continue to constitute) all of the equipment, facilities, rights, other personal property and other real property necessary or appropriate to operate, utilize, maintain and control a Permitted Facility in a commercially reasonable manner. 9 14 ARTICLE IX 9.1 COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND MANUFACTURER'S SPECIFICATIONS AND STANDARDS. Subject to the terms of Article XIII relating to permitted contests, Lessee, at its sole cost and expense, shall (a) comply with all applicable Legal Requirements (including without limitation all Environmental Laws) and all Insurance Requirements relating to the Properties, (b) procure, maintain and comply with all licenses, permits, orders, approvals, consents and other authorizations required for the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties, and (c) comply with all manufacturer's specifications and standards, including without limitation the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties, whether or not compliance therewith shall require structural or extraordinary changes in any Property or interfere with the use and enjoyment of any Property unless the failure to procure, maintain and comply with Legal Requirements relating to the Properties other than Environmental Laws or such items identified in subparagraphs (b) and (c), individually or in the aggregate, shall not and could not reasonably be expected to have a Material Adverse Effect. Lessor agrees to take such actions as may be reasonably requested by Lessee in connection with the compliance by Lessee of its obligations under this Section 9.1. ARTICLE X 10.1 MAINTENANCE AND REPAIR; RETURN. (a) Lessee, at its sole cost and expense, shall maintain each Property in good condition, repair and working order (ordinary wear and tear excepted) and in the repair and condition as when originally delivered to Lessor and make all necessary repairs thereto and replacements thereof, of every kind and nature whatsoever, whether interior or exterior, ordinary or extraordinary, structural or nonstructural or foreseen or unforeseen, in each case as required by Section 9.1 and on a basis consistent with the operation and maintenance of properties or equipment comparable in type and function to the applicable Property, such that such Property is capable of being immediately utilized by a third party and in compliance with standard industry practice subject, however, to the provisions of Article XV with respect to Casualty and Condemnation. (b) Lessee shall not use or locate any component of any Property outside of the Approved State therefor. Lessee shall not move or relocate any component of any Property beyond the boundaries of the Land (comprising part of such Property) described in the applicable Lease Supplement, except for the temporary removal of Equipment and other personal property for repair or replacement. 10 15 (c) If any component of any Property becomes worn out, lost, destroyed, damaged beyond repair or otherwise permanently rendered unfit for use, Lessee, at its own expense, will within a reasonable time replace such component with a replacement component which is free and clear of all Liens (other than Permitted Liens and Lessor Liens) and has a value, utility and useful life at least equal to the component replaced (assuming the component replaced had been maintained and repaired in accordance with the requirements of this Lease). All components which are added to any Property shall immediately become the property of (and title thereto shall vest in) Lessor and shall be deemed incorporated in such Property and subject to the terms of this Lease as if originally leased hereunder. (d) Upon reasonable advance notice, Lessor and its agents shall have the right to inspect each Property and all maintenance records with respect thereto at any reasonable time during normal business hours but shall not, in the absence of an Event of Default, materially disrupt the business of Lessee. (e) If, at any time, the aggregate appraised value of Properties then subject to this Lease for which the Agent has received an Appraisal pursuant to the terms of Section 5.3 of the Participation Agreement is less than twenty-five percent (25%) of the aggregate Property Cost at such time (the "Base Amount"), then Lessee will cause an additional. Appraisal or Appraisals to be immediately delivered to Lessor in an amount sufficient to cause such aggregate appraised value to equal or exceed the Base Amount. In addition, Lessee shall cause to be delivered to Lessor (at Lessee's sole expense) one (1) or more Appraisals (or reappraisals of Property) as Lessor may request if any one (1) of Lessor, the Agent, the Trust Company, any Lender or any Holder is required pursuant to any applicable Legal Requirement to obtain such Appraisals (or reappraisals) and upon the occurrence of any Event of Default. (f) Lessor shall under no circumstances be required to build any improvements or install any equipment on any Property, make any repairs, replacements, alterations or renewals of any nature or description to any Property, make any expenditure whatsoever in connection with this Lease or maintain any Property in any way. Lessor shall not be required to maintain, repair or rebuild all or any part of any Property, and Lessee waives the right to (i) require Lessor to maintain, repair, or rebuild all or any part of any Property, or (ii) make repairs at the expense of Lessor pursuant to any Legal Requirement, Insurance Requirement, contract, agreement, covenant, condition or restriction at any time in effect. (g) Lessee shall, upon the expiration or earlier termination of this Lease with respect to a Property, if Lessee shall not have exercised its Purchase Option with respect to such Property and purchased such Property, surrender such Property (i) to Lessor pursuant to the exercise of the applicable remedies upon the occurrence of a Lease Event of Default or (ii) pursuant to the second paragraph of Section 22.1(a) hereof, to Lessor or the third party purchaser, as the case may be, subject to Lessee's obligations under this 11 16 Lease (including without limitation the obligations of Lessee at the time of such surrender under Sections 9.1, 10.1(a) through (f), 10.2, 11.1, 12.1, 22.1 and 23.1). In any event, regarding the surrender of such Property Lessee will at its expense, dismantle, surrender and deliver possession of each item of Equipment to Lessor at the Redelivery Location with a certificate executed by a Responsible Officer of Lessee certifying that the item of Equipment is in the condition required hereunder, a copy of an inventory list for each item of Equipment, all then current plans, specifications and operating, maintenance, and repair manuals and logs relating to each item of Equipment that have been prepared or received by Lessee, and with respect to any item of Equipment which qualifies for or is subject to any manufacturer's maintenance, repair or warranty policy, to the extent reasonably available, 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 Lessor, each item of Equipment (and each part or component thereof) shall (a) meet the original design specifications and operating standards of such item, (b) all software shall be the latest version available, (c) all Equipment shall operate to the highest tolerances and specifications, (d) be in as good operating condition, state of repair and appearance as when delivered to Lessee hereunder, ordinary wear and tear excepted, and in the condition required pursuant to the Lease, (e) have no missing or damaged components such that its value, utility or remaining useful life will be reduced, (f) comply with all laws and rules referred to in Sections 9.1, 10.1, 10.2 hereof and any other applicable provision of any Operative Agreement, (g) have attached or affixed thereto any addition, modification or improvement considered an accession thereto as provided in Section 11.1 hereof and (h) have had removed therefrom in a workmanlike manner, (i) at Lessee's option, any addition, modification or improvement which, as provided in Section 11.1 hereof, is owned by Lessee, 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 the Lessor or the Agent. With respect to any item of Equipment which has an hour meter or similar device affixed to or relating to such Equipment, Lessee must provide evidence of the total operating hours on such item at redelivery, as evidenced by such meter or similar device. All operating licenses and agreements, including without limitation all software licenses pertinent to operation of each Item of Equipment, which are capable of being transferred, shall be fully transferable upon the expiration of the Term to Lessor or its designee. Lessee shall transfer all operating licenses or agreements, including without limitation all software licenses, upon return of the item of Equipment at Lessee's cost and expense. Each item of Equipment that qualified 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 Lessee shall, to the extent reasonably practicable, provide or shall cause a representative of the manufacturer of such item to provide 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. All disassembly and deinstallation of each item of Equipment shall be done in a clean-room environment and each item of Equipment shall be decontaminated and safe for travel pursuant to all Legal Requirements. Upon deinstallation each item of Equipment shall be secured properly for air or overland transport. Each item of Equipment originally delivered to Lessee, 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 12 17 Equipment shall be delivered in the manner in which it was delivered to Lessee or such other manner as is customary for such item of Equipment. Lessee shall pay for any repairs necessary to restore any item of Equipment to the condition required by this Section 10.1. 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, Lessee shall provide any additional documentation reasonably requested by Lessor, at Lessee's cost, relating to the redelivery of or Lessor's interest in each item of Equipment. (h) For the purpose of delivering possession of any item of Equipment to Lessor as above required, Lessee shall at its own cost, expense and risk cause each such item of Equipment to be insured, including insurance during transport, in an amount equal to or in excess of the greater of (i) the Termination Value and (ii) the Fair Market Sales Value and in accordance with Article XIV hereof and stored at the Redelivery Location identified therefor by Lessor at the risk of Lessee without charge to Lessor or any Assignee for insurance, rent or storage until all such items of Equipment have been sold, leased or otherwise disposed of by Lessor; provided however, Lessee's obligations under this Section 10.1(h) 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 10.1 hereof. (i) Each item of Equipment shall be deemed redelivered upon satisfaction of the obligations and conditions set forth in Section 10.1 hereof. Until each such item of Equipment has been returned to Lessor in the condition and as otherwise provided in this Section 10.1, Lessee shall continue to pay Lessor, 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, Lessee shall use its best efforts to secure the return of the Equipment as required under this Section 10.1. The provision for payment pursuant to this Section 10.1 shall not abrogate Lessor's right under this Section 10.1 to have such Equipment returned to it hereunder. (j) The provisions of this Section 10.1 are essential to this Lease, and upon application to any court of equity having jurisdiction in the premises, Lessor shall be entitled to a decree against Lessee requiring specific performance of the covenants of Lessee set forth in this Section 10.1. 10.2 ENVIRONMENTAL INSPECTION. If Lessee has not given notice of exercise of its Purchase Option on the Expiration Date pursuant to Section 20.1 or for whatever reason Lessee does not purchase a Property in accordance with the terms of this Lease, then not more than one hundred twenty (120) days nor less than sixty (60) days prior to the Expiration Date, Lessee at its expense shall cause to be delivered to Lessor a Phase I environmental site assessment recently prepared (no more than thirty (30) days prior to the date of delivery) by an independent recognized professional 13 18 reasonably acceptable to Lessor, and in form, scope and content reasonably satisfactory to Lessor. ARTICLE XI 11.1 MODIFICATIONS. (a) Lessee at its sole cost and expense, at any time and from time to time without the consent of Lessor may make modifications, alterations, renovations, improvements and additions to any Property or any part thereof and substitutions and replacements therefor (collectively, "Modifications"), and Lessee shall make any and all Modifications required to be made pursuant to all Legal Requirements, Insurance Requirements and manufacturer's specifications and standards; provided, that: (i) no Modification shall materially impair the value, utility or useful life of any Property from that which existed immediately prior to such Modification; (ii) each Modification shall be done expeditiously and in a good and workmanlike manner; (iii) no Modification shall adversely affect the structural integrity of any Property; (iv) to the extent required by Section 14.2(a), Lessee shall maintain builders' risk insurance at all times when a Modification is in progress; (v) subject to the terms of Article XIII relating to permitted contests, Lessee shall pay all costs and expenses and discharge any Liens arising with respect to any Modification; (vi) each Modification shall comply with the requirements of this Lease (including without limitation Sections 8.2 and 10.1); and (vii) no Improvement shall be demolished or otherwise rendered unfit for use unless Lessee shall finance the proposed replacement Modification outside of this lease facility; provided, further, Lessee shall not make any Modification (unless required by any Legal Requirement) to the extent any such Modification, individually or in the aggregate, shall or could reasonably be expected to have a Material Adverse Effect. All Modifications shall immediately and without further action upon their incorporation into the applicable Property (1) become property of Lessor, (2) be subject to this Lease and (3) be titled in the name of Lessor. Lessee shall not remove or attempt to remove any Modification from any Property. Each Ground Lease for a Property shall expressly provide for the provisions of the foregoing sentence. Lessee, at its own cost and expense, will pay for the repairs of any damage to any Property caused by the removal or attempted removal of any Modification. Upon redelivery of any item of Equipment Lessee shall, if instructed by Lessor, remove any Modification and repair such item of Equipment to comply with the provisions of Section 9.1, 10.1 and any other applicable provisions in any Operative Agreement. (b) The construction process provided for in the Agency Agreement is acknowledged by Lessor to be consistent with and in compliance with the terms and provisions of this Article XI. 14 19 ARTICLE XII 12.1 WARRANTY OF TITLE. (a) Lessee hereby acknowledges and shall cause title in each Property (including without limitation all Equipment, all Improvements, all replacement components to each Property and all Modifications) immediately and without further action to vest in and become the property of Lessor and to be subject to the terms of this Lease (provided, respecting each Property subject to a Ground Lease, Lessor's interest therein is acknowledged to be a leasehold interest pursuant to such Ground Lease) from and after the date hereof or such date of incorporation into any Property. Lessee agrees that, subject to the terms of Article XIII relating to permitted contests, Lessee shall not directly or indirectly create or allow to remain, and shall promptly discharge at its sole cost and expense, any Lien, defect, attachment, levy, title retention agreement or claim upon any Property, any component thereof or any Modifications or any Lien, attachment, levy or claim with respect to the Rent or with respect to any amounts held by Lessor, the Agent, any Lender or any Holder pursuant to any Operative Agreement, other than Permitted Liens and Lessor Liens. Lessee shall promptly notify Lessor in the event it receives actual knowledge that a Lien other than a Permitted Lien or Lessor Lien has occurred with respect to a Property, the Rent or any other such amounts, and Lessee represents and warrants to, and covenants with, Lessor that the Liens in favor of Lessor and/or the Agent created by the Operative Agreements are (and until the Financing Parties under the Operative Agreements have been paid in full shall remain) first priority perfected Liens subject only to Permitted Liens and Lessor Liens. At all times subsequent to the Commencement Date respecting a Property, Lessee shall (i) cause a valid, perfected, first priority Lien on each applicable Property to be in place in favor of the Agent (for the benefit of the Lenders and the Holders) and (ii) file, or cause to be filed, all necessary documents under the applicable real property law and Article 9 of the Uniform Commercial Code to perfect such title and Liens. (b) Nothing contained in this Lease shall be construed as constituting the consent or request of Lessor, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO ANY PROPERTY. 15 20 ARTICLE XIII 13.1 PERMITTED CONTESTS OTHER THAN IN RESPECT OF INDEMNITIES. Except to the extent otherwise provided for in Section 11 of the Participation Agreement, Lessee, on its own or on Lessor's behalf but at Lessee's sole cost and expense, may contest, by appropriate administrative or judicial proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any Legal Requirement, Imposition or utility charge payable pursuant to Section 4.1 or any Lien, attachment, levy, encumbrance or encroachment, and Lessor agrees not to pay, settle or otherwise compromise any such item, provided, that (a) the commencement and continuation of such proceedings shall suspend the collection of any such contested amount from, and suspend the enforcement thereof against, the applicable Properties, Lessor, each Holder, the Agent and each Lender; (b) there shall not be imposed a Lien (other than Permitted Liens and Lessor Liens) on any Property and no part of any Property nor any Rent would be in any danger of being sold, forfeited, lost or deferred; (c) at no time during the permitted contest shall there be a risk of the imposition of criminal liability or material civil liability on Lessor, any Holder, the Agent or any Lender for failure to comply therewith; and (d) in the event that, at any time, there shall be a material risk of extending the application of such item beyond the end of the Term, then Lessee shall deliver to Lessor an Officer's Certificate certifying as to the matters set forth in clauses (a), (b) and (c) of this Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute and deliver to Lessee such authorizations and other documents as may reasonably be required in connection with any such contest and, if reasonably requested by Lessee, shall join as a party therein at Lessee's sole cost and expense. 13.2 IMPOSITIONS, UTILITY CHARGES, OTHER MATTERS; COMPLIANCE WITH LEGAL REQUIREMENTS. Except with respect to Impositions, Legal Requirements, utility charges and such other matters referenced in Section 13.1 which are the subject of ongoing proceedings contesting the same in a manner consistent with the requirements of Section 13.1, Lessee shall cause (a) all Impositions, utility charges and such other matters to be timely paid, settled or compromised, as appropriate, with respect to each Property and (b) each Property to comply with all applicable Legal Requirements. ARTICLE XIV 14.1 PUBLIC LIABILITY AND WORKERS' COMPENSATION INSURANCE. During the Term for each Property, Lessee shall procure and carry, at Lessee's sole cost and expense, commercial general liability and umbrella liability insurance for claims for injuries or death sustained by persons or damage to property while on such Property or respecting the Equipment and such other public liability coverages as are then customarily carried by similarly situated companies conducting business similar to that conducted by Lessee. Such insurance 16 21 shall be on terms and in amounts that are no less favorable than insurance maintained by Lessee with respect to similar properties and equipment that it owns and are then carried by similarly situated companies conducting business similar to that conducted by Lessee, and in no event shall have a minimum combined single limit per occurrence coverage (i) for commercial general liability of less than $1,000,000.00 and (ii) for umbrella liability of less than $30,000,000.00. The policies shall name Lessee as the insured and shall be endorsed to name Lessor, the Holders, the Agent and the Lenders as additional insureds. The policies shall also specifically provide that such policies shall be considered primary insurance which shall apply to any loss or claim before any contribution by any insurance which Lessor, any Holder, the Agent or any Lender may have in force. In the operation of the Properties, Lessee shall comply with applicable workers' compensation laws and protect Lessor, each Holder, the Agent and each Lender against any liability under such laws. 14.2 PERMANENT HAZARD AND OTHER INSURANCE. (a) During the Term for each Property, Lessee shall keep such Property insured against all risk of physical loss or damage by fire and other risks and shall maintain builders' risk insurance during construction of any Improvements or Modifications in each case in amounts no less than the Property Cost of such Property from time to time and on terms that (i) are no less favorable than insurance covering other similar properties owned by Lessee and (ii) are then carried by similarly situated companies conducting business similar to that conducted by Lessee. The policies shall name Lessee as the insured and shall be endorsed to name Lessor and the Agent (on behalf of the Lenders and the Holders) as a named additional insured and loss payee, to the extent of their respective interests; provided, so long as no Event of Default exists, any loss payable under the insurance policies required by this Section for losses up to $2,000,000.00 will be paid to Lessee. (b) If, during the Term with respect to a Property the area in which such Property is located is designated a "flood-prone" area pursuant to the Flood Disaster Protection Act of 1973, or any amendments or supplements thereto or is in a zone designated A or V, then Lessee shall comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973. In addition, Lessee will fully comply with the requirements of the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as each may be amended from time to time, and with any other Legal Requirement, concerning flood insurance to the extent that it applies to any such Property. During the Term, Lessee shall, in the operation and use of each Property, maintain workers' compensation insurance consistent with that carried by similarly situated companies conducting business similar to that conducted by Lessee and containing minimum liability limits of no less than $100,000.00. In the operation of each Property, Lessee shall comply with workers' compensation laws applicable to Lessee, and protect Lessor, each Holder, the Agent and each Lender against any liability under such laws. 17 22 14.3 COVERAGE. (a) As of the date of this Lease and annually thereafter during the Term, Lessee shall furnish the Agent (on behalf of Lessor and the other beneficiaries of such insurance coverage) with certificates prepared by the insurers or insurance broker of Lessee showing the insurance required under Sections 14.1 and 14.2 to be in effect, naming (to the extent of their respective interests) Lessor, the Holders, the Agent and the Lenders as additional insureds and loss payees and evidencing the other requirements of this Article XIV. All such insurance shall be at the cost and expense of Lessee and provided by nationally recognized, financially sound insurance companies having an A+ or better rating by A.M. Best's Key Rating Guide. Lessee shall cause such certificates to include a provision for thirty (30) days' advance written notice by the insurer to the Agent (on behalf of Lessor and the other beneficiaries of such insurance coverage) in the event of cancellation or material alteration of such insurance. If an Event of Default has occurred and is continuing and the Agent (on behalf of Lessor and the other beneficiaries of such insurance coverage) so requests, Lessee shall deliver to the Agent (on behalf of Lessor and the other beneficiaries of such insurance coverage) copies of all insurance policies required by Sections 14.1 and 14.2. (b) Lessee agrees that the insurance policy or policies required by Sections 14.1, 14.2(a) and 14.2(b) shall include an appropriate clause pursuant to which any such policy shall provide that it will not be invalidated should Lessee or any Contractor, as the case may be, waive, at any time, any or all rights of recovery against any party for losses covered by such policy or due to any breach of warranty, fraud, action, inaction or misrepresentation by Lessee or any Person acting on behalf of Lessee. Lessee hereby waives any and all such rights against Lessor, the Holders, the Agent and the Lenders to the extent of payments made to any such Person under any such policy. (c) Neither Lessor nor Lessee shall carry separate insurance concurrent in kind or form or contributing in the event of loss with any insurance required under this Article XIV, except that Lessor may carry separate liability insurance at Lessor's sole cost so long as (i) Lessee's insurance is designated as primary and in no event excess or contributory to any insurance Lessor may have in force which would apply to a loss covered under Lessee's policy and (ii) each such insurance policy will not cause Lessee's insurance required under this Article XIV to be subject to a coinsurance exception of any kind. (d) Lessee shall pay as they become due all premiums for the insurance required by Section 14.1 and Section 14.2, shall renew or replace each policy prior to the expiration date thereof or otherwise maintain the coverage required by such Sections without any lapse in coverage. 18 23 ARTICLE XV 15.1 CASUALTY AND CONDEMNATION. (a) Subject to the provisions of the Agency Agreement and this Article XV and Article XVI (in the event Lessee delivers, or is obligated to deliver or is deemed to have delivered, a Termination Notice), and prior to the occurrence and continuation of a Default or an Event of Default, Lessee shall be entitled to receive (and Lessor hereby irrevocably assigns to Lessee all of Lessor's right, title and interest in) any condemnation proceeds, award, compensation or insurance proceeds under Sections 14.2(a) or 14.2(b) hereof to which Lessee or Lessor may become entitled by reason of their respective interests in a Property (i) if all or a portion of such Property is damaged or destroyed in whole or in part by a Casualty or (ii) if the use, access, occupancy, easement rights or title to such Property or any part thereof is the subject of a Condemnation; provided, however, if a Default or an Event of Default shall have occurred and be continuing or if such award, compensation or insurance proceeds shall exceed $2,000,000.00, then such award, compensation or insurance proceeds shall be paid directly to Lessor or, if received by Lessee, shall be held in trust for Lessor, and shall be paid over by Lessee to Lessor and held in accordance with the terms of this paragraph (a). All amounts held by Lessor hereunder on account of any award, compensation or insurance proceeds either paid directly to Lessor or turned over to Lessor shall be held as security for the performance of Lessee's obligations hereunder and under the other Operative Agreements and (i) to the extent no Default or Event of Default shall have occurred and be continuing at such time, Lessor shall pay such amounts so held by Lessor (A) from time to time as Lessee either restores and repairs such Property pursuant to Section 15.1(e) and gives Lessor reasonable evidence of such restoration and repair work or (b) promptly to Lessee upon Lessee's payment in full of the Termination Value for such Property pursuant to Article XVI or (ii) to the extent a Default or Event of Default shall have occurred and be continuing at such time, all amounts so held by Lessor shall be paid over to Lessee when all such obligations of Lessee with respect to such matters (and all other obligations of Lessee which should have been satisfied pursuant to the Operative Agreements as of such date) have been satisfied and no Default or Event of Default is then continuing. (b) Lessee may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any such Casualty or Condemnation and shall pay all expenses thereof. At Lessee's reasonable request, and at Lessee's sole cost and expense, Lessor and the Agent shall participate in any such proceeding, action, negotiation, prosecution or adjustment. Lessor and Lessee agree that this Lease shall control the rights of Lessor and Lessee in and to any such award, compensation or insurance payment. (c) If Lessee shall receive notice of a Casualty or a Condemnation of a Property or any interest therein where damage to the affected Property is estimated to equal or exceed fifty percent (50%) of the Property Cost of such Property, Lessee shall give notice thereof to Lessor promptly after Lessee's receipt of such notice. In the event 19 24 such a Casualty or Condemnation occurs (regardless of whether Lessee gives notice thereof), then Lessee shall be deemed to have delivered a Termination Notice to Lessor and the provisions of Sections 16.1 and 16.2 shall apply. (d) In the event of a Casualty or a Condemnation (regardless of whether notice thereof must be given pursuant to paragraph (c)), this Lease shall terminate with respect to the applicable Property in accordance with Section 16.1 if Lessee, within thirty (30) days after such occurrence, delivers to Lessor a notice to such effect. (e) If pursuant to this Section 15.1 this Lease shall continue in full force and effect following a Casualty or Condemnation with respect to the affected Property, Lessee shall, at its sole cost and expense (subject to reimbursement in accordance with Section 15.1(a)) promptly and diligently repair any damage to the applicable Property caused by such Casualty or Condemnation in conformity with the requirements of Sections 10.1 and 11.1, using the as-built Plans and Specifications or manufacturer's specifications for the applicable Improvements, Equipment or other components of the applicable Property (as modified to give effect to any subsequent Modifications, any Condemnation affecting the applicable Property and all applicable Legal Requirements), so as to restore the applicable Property to the same or a greater remaining economic value, useful life, utility, condition, operation and function as existed immediately prior to such Casualty or Condemnation (assuming all maintenance and repair standards have been satisfied). In such event, title to the applicable Property shall remain with Lessor. (f) In no event shall a Casualty or Condemnation affect Lessee's obligations to pay Rent pursuant to Article III unless the Lease is terminated and Lessee has paid all amounts then due and owing. (g) Notwithstanding anything to the contrary set forth in Section 15.1(a) or Section 15.1(e), if during the Term with respect to a Property a Casualty occurs with respect to such Property or Lessee receives notice of a Condemnation with respect to such Property, and following such Casualty or Condemnation, the applicable Property cannot reasonably be restored, repaired or replaced on or before the day one hundred eighty (180) days prior to the Expiration Date or the date nine (9) months after the occurrence of such Casualty or Condemnation (if such Casualty or Condemnation occurs during the Term) to the same or a greater remaining economic value, useful life, utility, condition, operation and function as existed immediately prior to such Casualty or Condemnation (assuming all maintenance and repair standards have been satisfied) or on or before such day such Property is not in fact so restored, repaired or replaced, then Lessee shall be required to exercise its Purchase Option for such Property on the next Payment Date (notwithstanding the limits on such exercise contained in Section 20.2) and pay Lessor the Termination Value for such Property; provided, if any Default or Event of Default has occurred and is continuing, Lessee shall also promptly (and in any event within three (3) Business Days) pay Lessor any award, compensation or insurance proceeds received on account of any Casualty or Condemnation with respect to any Property; provided, further, that if no Default or Event of Default has occurred and is continuing, any Excess 20 25 Proceeds shall be paid to Lessee. If a Default or an Event of Default has occurred and is continuing and any Loans, Holder Advances or other amounts are owing with respect thereto, then any Excess Proceeds (to the extent of any such Loans, Holder Advances or other amounts owing with respect thereto) shall be paid to Lessor, held as security for the performance of Lessee's obligations hereunder and under the other Operative Agreements and applied to such obligations upon the exercise of remedies in connection with the occurrence of an Event of Default, with the remainder of such Excess Proceeds in excess of such Loans, Holder Advances and other amounts owing with respect thereto being distributed to the Lessee. 15.2 ENVIRONMENTAL MATTERS. Within five (5) Business Days of the date any Responsible Officer of Lessee initially had actual knowledge or should have known of the presence of Hazardous Substances in any portion of any Property or Properties in concentrations and conditions that constitute an Environmental Violation and which, in the reasonable opinion of Lessee, the cost to undertake any legally required response, clean up, remedial or other action will or might result in a cost to Lessee of more than $25,000.00, Lessee shall notify Lessor in writing of such condition. In the event of any Environmental Violation (regardless of whether notice thereof must be given), Lessee shall, not later than thirty (30) days after Lessee has actual knowledge of such Environmental Violation, either deliver to Lessor a Termination Notice with respect to the applicable Property or Properties pursuant to Section 16.1, if applicable, or, at Lessee's sole cost and expense, promptly and diligently undertake and diligently complete any response, clean up, remedial or other action (including without limitation the pursuit by Lessee of appropriate action against any off-site or third party source for contamination) necessary to remove, cleanup or remediate the Environmental Violation in accordance with all applicable Environmental Laws. Any such undertaking shall be timely completed in accordance with prudent industry standards. If Lessee does not deliver a Termination Notice with respect to such Property pursuant to Section 16.1, Lessee shall, upon completion of remedial action by Lessee, cause to be prepared by a reputable environmental consultant acceptable to Lessor a report describing the Environmental Violation and the actions taken by Lessee (or its agents) in response to such Environmental Violation, and a statement by the consultant that the Environmental Violation has been remedied in full compliance with applicable Environmental Law. Not less than sixty (60) days prior to any time that Lessee elects to cease operations with respect to any Property or to remarket any Property pursuant to Section 20.1 hereof or any other provision of any Operative Agreement, Lessee at its expense shall cause to be delivered to Lessor a Phase I environmental site assessment respecting such Property recently prepared (no more than thirty (30) days prior to the date of delivery) by an independent recognized professional acceptable to Lessor in its reasonable discretion and in form, scope and content satisfactory to Lessor in its reasonable discretion. Notwithstanding any other provision of any Operative Agreement, if Lessee fails to comply with the foregoing obligation regarding the Phase I environmental site assessment, Lessee shall be obligated to purchase such Property for its Termination Value and shall not be permitted to exercise (and Lessor shall have no obligation to honor any such exercise) any rights under any Operative Agreement regarding a sale of such Property to a Person other than Lessee or any Affiliate of Lessee. 21 26 15.3 NOTICE OF ENVIRONMENTAL MATTERS. Promptly, but in any event within five (5) Business Days from the date a Responsible Officer of the Lessee has actual knowledge or should have known thereof, Lessee shall provide to Lessor written notice of any pending or threatened claim, action or proceeding involving any Environmental Law or any Release on or in connection with any Property or Properties. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and Lessee's proposed response thereto. In addition, Lessee shall provide to Lessor, within five (5) Business Days of receipt, copies of all material written communications with any Governmental Authority relating to any Environmental Law in connection with any Property. Lessee shall also provide, within a reasonable amount of time after Lessor's request, such detailed reports of any such material environmental claims as may reasonably be requested by Lessor. ARTICLE XVI 16.1 TERMINATION UPON CERTAIN EVENTS. If Lessee has delivered, or is deemed to have delivered, written notice of a termination of this Lease with respect to the applicable Property to Lessor in the form described in Section 16.2(a) (a "Termination Notice") pursuant to the provisions of this Lease, then following the applicable Casualty, Condemnation or Environmental Violation, this Lease shall terminate with respect to the affected Property on the applicable Termination Date. 16.2 PROCEDURES. (a) A Termination Notice shall contain: (i) notice of termination of this Lease with respect to the affected Property on a Payment Date not more than sixty (60) days after Lessor's receipt of such Termination Notice (the "Termination Date"); and (ii) a binding and irrevocable agreement of Lessee to pay the Termination Value for the applicable Property and purchase such Property on such Termination Date. (b) On each Termination Date, Lessee shall pay to Lessor the Termination Value for the applicable Property, and Lessor shall convey such Property or the remaining portion thereof, if any, to Lessee (or Lessee's designee), all in accordance with Section 20.2. ARTICLE XVII 17.1 LEASE EVENTS OF DEFAULT. If any one (1) or more of the following events (each a "Lease Event of Default") shall occur: 22 27 (a) Lessee shall fail to make payment of (i) any Basic Rent (except as set forth in clause (ii)) within three (3) Business Days after the same has become due and payable or (ii) any Termination Value, on the date any such payment is due and payable, or any payment of Basic Rent or Supplemental Rent due on the due date of any such payment of Termination Value, or any amount due on the Expiration Date; (b) Lessee shall fail to make payment of any Supplemental Rent (other than Supplemental Rent referred to in Section 17.1(a)(ii)) which has become due and payable within three (3) Business Days after receipt of notice that such payment is due; (c) Lessee shall fail to maintain insurance as required by Article XIV of this Lease or to deliver any requisite annual certificate with respect thereto within ten (10) days of the date such certificate is due under the terms hereof; (d) (i) Lessee shall fail to observe or perform any term, covenant, obligation or condition of Lessee under this Lease or any other Operative Agreement to which Lessee is a party other than those set forth in Sections 17.1(a), (b) or (c) hereof, and such failure shall continue for fifteen (15) days after notice thereof to the Lessee, provided if any such failure other than those set forth in Sections 17.1(a), (b) or (c) hereof is not capable of remedy within such fifteen (15) day period but can be remedied with further diligence and if the Lessee has and continues to pursue diligently such remedy, then the Lessee shall be granted additional time to pursue such remedy but in no event more than an additional fifteen (15) days or (ii) any representation or warranty made by Lessee set forth in this Lease or in any other Operative Agreement or in any document entered into in connection herewith or therewith or in any document, certificate or financial or other statement delivered in connection herewith or therewith shall be false or inaccurate in any material way when made; (e) An Agency Agreement Event of Default shall have occurred and be continuing; (f) Lessee or any of its Subsidiaries shall default (beyond applicable periods of grace and/or notice and cure) in the payment when due of any principal of or interest on any Indebtedness having an outstanding principal amount of at least $10,000,000.00; or any other event or condition shall occur which results in a default of any such Indebtedness or enables the holder of any such Indebtedness or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) The liquidation or dissolution of Lessee, or the suspension of the business of Lessee, or the filing by Lessee of a voluntary petition or an answer seeking reorganization, arrangement, readjustment of its debts or for any other relief under the United States Bankruptcy Code, as amended, or under any other insolvency act or law, state or federal, now or hereafter existing, or any other action of Lessee indicating its consent to, approval of or acquiescence in, any such petition or proceeding; the 23 28 application by Lessee for, or the appointment by consent or acquiescence of Lessee of a receiver, a trustee or a custodian of Lessee for all or a substantial part of its property; the making by Lessee of any assignment for the benefit of creditors; the admission by Lessee in writing of its inability to pay its debts as they mature or Lessee is generally not paying its debts and other financial obligations as they become due and payable; or Lessee taking any corporate action to authorize any of the foregoing; (h) The filing of an involuntary petition against Lessee in bankruptcy or seeking reorganization, arrangement, readjustment of its debts or for any other relief under the United States Bankruptcy Code, as amended, or under any other insolvency act or law, state or federal, now or hereafter existing; or the involuntary appointment of a receiver, a trustee or a custodian of Lessee for all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of Lessee, and the continuance of any of such events for ninety (90) days undismissed or undischarged; (i) The adjudication of Lessee as bankrupt or insolvent; (j) The entering of any order in any proceedings against Lessee or any Subsidiary decreeing the dissolution, divestiture or split-up of Lessee or any Subsidiary, and such order remains in effect for more than sixty (60) days; (k) Any report, certificate, financial statement or other instrument delivered to Lessor by or on behalf of Lessee pursuant to the terms of this Lease or any other Operative Agreement is false or misleading in any material respect when made or delivered; (l) [INTENTIONALLY RESERVED]; (m) A final judgment or judgments for the payment of money shall be rendered by a court or courts against Lessee or any of its Subsidiaries or any of their assets in excess of $2,000,000.00 in the aggregate, and (i) the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within thirty (30) days from the date of entry thereof, or (ii) Lessee or such Subsidiary shall not, within said period of thirty (30) days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal, or (iii) such judgment or judgments shall not be discharged (or provisions shall not be made for such discharge) within thirty (30) days after a decision has been reached with respect to such appeal and the related stay has been lifted; (n) Lessee or any member of the Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of $2,000,000.00 which it shall have become liable to pay to the PBGC or to a Pension Plan under Title IV of ERISA; or notice of intent to terminate a Pension Plan or Pension Plans having aggregate Unfunded 24 29 Liabilities in excess of $2,000,000.00 shall be filed under Title IV of ERISA by Lessee or any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Pension Plan or Pension Plans or a proceeding shall be instituted by a fiduciary of any such Pension Plan or Pension Plans against Lessee or any member of the Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Pension Plan or Pension Plans must be terminated; (o) (i) As a result of one (1) or more transactions after the date of this Lease, any "person" or "group" of persons, shall have "beneficial ownership" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder) of thirty percent (30%) or more of the outstanding common stock of Lessee (excluding any such instances of beneficial ownership arising as a direct result of the solicitation of revocable proxies by or on behalf of the board of directors of Lessee) provided, however, it is agreed that TRW, Inc. shall be permitted to have "beneficial ownership" of up to forty-one percent (41%) of the outstanding common stock of Lessee; or (ii) without limiting the generality of the foregoing, during any period of twelve (12) consecutive months, commencing after the date of this Lease, individuals who at the beginning of such period of twelve (12) months were directors of Lessee shall cease for any reason to constitute a majority of the board of directors of Lessee, provided, that the relationships among the respective shareholders of Lessee on the Initial Closing Date shall not be deemed to constitute all or any combination of them as a "group" for purposes of clause (o)(i); or (p) Any Operative Agreement shall cease to be in full force and effect; then, in any such event, Lessor may, in addition to the other rights and remedies provided for in this Article XVII and in Section 18.1, terminate this Lease by giving Lessee five (5) days notice of such termination (provided, notwithstanding the foregoing, this Lease shall be deemed to be automatically terminated without the giving of notice upon the occurrence of a Lease Event of Default under Sections 17.1(g), (h) or (i)), and this Lease shall terminate, and all rights of Lessee under this Lease shall cease. Lessee shall, to the fullest extent permitted by law, pay as Supplemental Rent all costs and expenses incurred by or on behalf of Lessor or any other Financing Party, including without limitation reasonable fees and expenses of counsel, as a result of any Lease Event of Default hereunder. A POWER OF SALE HAS BEEN GRANTED IN THIS LEASE. A POWER OF SALE MAY ALLOW LEA STROMIRE JOHNSON OR HER SUCCESSORS OR ASSIGNEE, AS TRUSTEE FOR THE BENEFIT OF LESSOR, TO TAKE THE PROPERTIES AND SELL THE PROPERTIES WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE OF A LEASE EVENT OF DEFAULT. 25 30 17.2 SURRENDER OF POSSESSION. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessee shall, upon thirty (30) days written notice, surrender to Lessor possession of the Properties. Lessor may enter upon and repossess the Properties by such means as are available at law or in equity, and may remove Lessee and all other Persons and any and all personal property and Lessee's equipment and personalty and severable Modifications from the Properties. Lessor shall have no liability by reason of any such entry, repossession or removal performed in accordance with applicable law. Upon the written demand of Lessor, Lessee shall return the Properties promptly to Lessor, in the manner and condition required by, and otherwise in accordance with the provisions of, Section 22.1(c) hereof. 17.3 RELETTING. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessor may, but shall be under no obligation to, relet any or all of the Properties, for the account of Lessee or otherwise, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term) and on such conditions (which may include concessions or free rent) and for such purposes as Lessor may determine, and Lessor may collect, receive and retain the rents resulting from such reletting. Lessor shall not be liable to Lessee for any failure to relet any Property or for any failure to collect any rent due upon such reletting. 17.4 DAMAGES. Neither (a) the termination of this Lease as to all or any of the Properties pursuant to Section 17.1; (b) the repossession of all or any of the Properties; nor (c) the failure of Lessor to relet all or any of the Properties, the reletting of all or any portion thereof, nor the failure of Lessor to collect or receive any rentals due upon any such reletting, shall relieve Lessee of its liabilities and obligations hereunder, all of which shall survive any such termination, repossession or reletting. If any Lease Event of Default shall have occurred and be continuing and notwithstanding any termination of this Lease pursuant to Section 17.1, Lessee shall forthwith pay to Lessor all Rent and other sums due and payable hereunder to and including without limitation the date of such termination. Thereafter, on the days on which the Basic Rent or Supplemental Rent, as applicable, are payable under this Lease or would have been payable under this Lease if the same had not been terminated pursuant to Section 17.1 and until the end of the Term hereof or what would have been the Term in the absence of such termination, Lessee shall pay Lessor, as current liquidated damages (it being agreed that it would be impossible accurately to determine actual damages) an amount equal to the Basic Rent and Supplemental Rent that are payable under this Lease or would have been payable by Lessee hereunder if this Lease had not been terminated pursuant to Section 17.1, less the net proceeds, if any, which are actually received by Lessor with respect to the period in question of any reletting of any Property or any portion thereof; provided, that Lessee's obligation to make payments of Basic Rent and Supplemental Rent under this Section 17.4 shall continue only so long as Lessor shall not have 26 31 received the amounts specified in Section 17.6. In calculating the amount of such net proceeds from reletting, there shall be deducted all of Lessor's, any Holder's, the Agent's and any Lender's reasonable expenses in connection therewith, including without limitation repossession costs, brokerage or sales commissions, fees and expenses for counsel and any necessary repair or alteration costs and expenses incurred in preparation for such reletting. To the extent Lessor receives any damages pursuant to this Section 17.4, such amounts shall be regarded as amounts paid on account of Rent. Lessee specifically acknowledges and agrees that its obligations under this Section 17.4 shall be absolute and unconditional under any and all circumstances and shall be paid and/or performed, as the case may be, without notice or demand and without any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever. 17.5 POWER OF SALE. Without limiting any other remedies set forth in this Lease, Lessor and Lessee agree that Lessee has granted, pursuant to Section 7.1(b) hereof and each Lease Supplement, a Lien against the Properties WITH POWER OF SALE, and that, upon the occurrence and during the continuance of any Lease Event of Default, Lea Stromire Johnson, or her successors or assignee, as trustee for the benefit of Lessor, shall have the power and authority, to the extent provided by law, after prior notice and lapse of such time as may be required by law, to foreclose its interest (or cause such interest to be foreclosed) in all or any part of the Properties. 17.6 FINAL LIQUIDATED DAMAGES. If a Lease Event of Default shall have occurred and be continuing, whether or not this Lease shall have been terminated pursuant to Section 17.1 and whether or not Lessor shall have collected any current liquidated damages pursuant to Section 17.4, Lessor shall have the right to recover, by demand to Lessee and at Lessor's election, and Lessee shall pay to Lessor, as and for final liquidated damages, but exclusive of the indemnities payable under Section 11 of the Participation Agreement (which, if requested, shall be paid concurrently), and in lieu of all current liquidated damages beyond the date of such demand (it being agreed that it would be impossible accurately to determine actual damages) the Termination Value. Upon payment of the amount specified pursuant to the first sentence of this Section 17.6, Lessee shall be entitled to receive from Lessor, either at Lessee's request or upon Lessor's election, in either case at Lessee's cost, an assignment of Lessor's entire right, title and interest in and to the Properties, Improvements, Fixtures, Modifications, Equipment and all components thereof, in each case in recordable form and otherwise in conformity with local custom and free and clear of the Lien of this Lease (including without limitation the release of any memoranda of Lease and/or the Lease Supplement recorded in connection therewith) and any Lessor Liens. The Properties shall be conveyed to Lessee "AS-IS, WHERE-IS" and in their then present physical condition. If any statute or rule of law shall limit the amount of such final liquidated damages to less than the amount agreed upon, Lessor shall be entitled to the maximum amount allowable under such statute or rule of law; provided, however, Lessee shall not be entitled to receive an assignment of Lessor's interest in the Properties, the Improvements, Fixtures, Modifications, Equipment or the components thereof unless Lessee shall have paid in full the Termination Value. Lessee specifically acknowledges and agrees that its obligations under this Section 17.6 shall be 27 32 absolute and unconditional under any and all circumstances and shall be paid and/or performed, as the case may be, without notice or demand and without any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever. 17.7 ENVIRONMENTAL COSTS. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessee shall pay directly to a reputable environmental consultant selected by the Agent and reasonably acceptable to the Lessee, such acceptance by Lessee shall not be unreasonably withheld, for the cost of any environmental testing and/or remediation work undertaken respecting any Property, as such testing or work is deemed appropriate in the reasonable judgment of Lessor in consultation with an environmental consultant, and shall indemnify and hold harmless Lessor and each other Indemnified Person therefrom for the costs of the testing or remediation work (the foregoing shall not limit Lessee's obligations pursuant to Section 11 of the Participation Agreement). Lessee shall pay all amounts referenced in the immediately preceding sentence within fifteen (15) days of any written request by Lessor for such payment. The provisions of this Section 17.7 shall not limit the obligations of Lessee under any Operative Agreement regarding indemnification obligations, environmental testing, remediation and/or work. 17.8 WAIVER OF CERTAIN RIGHTS. If this Lease shall be terminated pursuant to Section 17.1, Lessee waives, to the fullest extent permitted by Law, (a) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (b) any right of redemption, re-entry or possession; (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt; and (d) any other rights which might otherwise limit or modify any of Lessor's rights or remedies under this Article XVII. 17.9 ASSIGNMENT OF RIGHTS UNDER CONTRACTS. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessee shall upon Lessor's demand immediately assign, transfer and set over to Lessor all of Lessee's right, title and interest in and to each agreement executed by Lessee in connection with the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties (including without limitation all right, title and interest of Lessee with respect to all warranty, performance, service and indemnity provisions), as and to the extent that the same relate to the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties or any of them. 28 33 17.10 REMEDIES CUMULATIVE. The remedies herein provided shall be cumulative and in addition to (and not in limitation of) any other remedies available at law, equity or otherwise, including without limitation any mortgage foreclosure remedies. ARTICLE XVIII 18.1 LESSOR'S RIGHT TO CURE LESSEE'S LEASE DEFAULTS. Lessor, without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to) remedy any Lease Event of Default for the account and at the sole cost and expense of Lessee, including without limitation the failure by Lessee to maintain the insurance required by Article XIV, and may, to the fullest extent permitted by law, and notwithstanding any right of quiet enjoyment in favor of Lessee, enter upon any Property, and take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed an eviction of any lessee. All out-of-pocket costs and expenses so incurred (including without limitation fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by Lessor, shall be paid by Lessee to Lessor on demand. ARTICLE XIX 19.1 PROVISIONS RELATING TO LESSEE'S EXERCISE OF ITS PURCHASE OPTION. Subject to Section 19.2, in connection with any termination of this Lease with respect to any Property pursuant to the terms of Section 16.2, or in connection with Lessee's exercise of its Purchase Option, upon the date on which this Lease is to terminate with respect to any Property, and upon tender by Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as applicable, Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's cost and expense an assignment (by deed or other appropriate instrument) of Lessor's entire interest in such Property, in each case in recordable form and otherwise in conformity with local custom and free and clear of any Lessor Liens attributable to Lessor but without any other warranties (of title or otherwise) from Lessor. Such Property shall be conveyed to Lessee "AS-IS, "WHERE-IS" and in then present physical condition. 19.2 NO PURCHASE OR TERMINATION WITH RESPECT TO LESS THAN ALL OF A PROPERTY. Lessee shall not be entitled to exercise its Purchase Option or the Sale Option separately with respect to a portion of any Property consisting of Land, Equipment, Improvements and/or any interest pursuant to a Ground Lease but shall be required to exercise its Purchase Option or the Sale Option with respect to an entire Property. 29 34 ARTICLE XX 20.1 PURCHASE OPTION OR SALE OPTION-GENERAL PROVISIONS. Not less than one hundred eighty (180) days and no more than two hundred forty (240) days prior to the Expiration Date or, respecting the Purchase Option only, not less than sixty (60) days and no more than ninety (90) days prior to any Payment Date occurring after August 13, 2001 (such Expiration Date or, respecting the Purchase Option only, any such Payment Date occurring after August 13, 2001 being hereinafter referred to as the "Election Date"), Lessee may give Lessor irrevocable written notice (the "Election Notice") that Lessee is electing to exercise either (a) the option to purchase all, but not less than all, the Properties on the applicable Election Date (the "Purchase Option") or (b) with respect to an Election Notice given in connection with the Expiration Date only, the option to remarket all, but not less than all, the Properties to a Person other than Lessee or any Affiliate of Lessee and cause a sale of such Properties to occur on the applicable Election Date pursuant to the terms of Section 22.1 (the "Sale Option"). If Lessee does not give an Election Notice indicating the Purchase Option or the Sale Option at least one hundred eighty (180) days and not more than two hundred forty (240) days prior to the Expiration Date then Lessee shall be deemed to have elected for the Purchase Option to apply on the Expiration Date. If Lessee shall either (i) elect (or be deemed to have elected) to exercise the Purchase Option or (ii) elect the Sale Option and fail to cause all, but not less than all, the Properties to be sold in accordance with the terms of Section 22.1 on the applicable Election Date, then in either case Lessee shall pay to Lessor on the date on which such purchase or sale is scheduled to occur an amount equal to the Termination Value for all, but not less than all, the Properties (which the parties do not intend to be a "bargain" purchase price) and, upon receipt of such amounts and satisfaction of such obligations, Lessor shall transfer to Lessee all of Lessor's right, title and interest in and to all, but not less than all, the Properties in accordance with Section 20.2. 20.2 LESSEE PURCHASE OPTION. Provided, no Default or Event of Default shall have occurred and be continuing (other than those that will be cured by the payment of the Termination Value for all the Properties) and provided, that the Election Notice has been appropriately given specifying the Purchase Option, Lessee shall purchase all the Properties on the applicable Election Date at a price equal to the Termination Value for such Properties (which the parties do not intend to be a "bargain" purchase price). Subject to Section 19.2, in connection with any termination of this Lease with respect to any Property pursuant to the terms of Section 16.2, or in connection with Lessee's exercise of its Purchase Option, upon the date on which this Lease is to terminate with respect to a Property or all of the Properties, and upon tender by Lessee of the amounts set forth in Section 16.2(b) or this Section 20.2, as applicable, Lessor shall execute, acknowledge (where required) and deliver to Lessee, at Lessee's cost and expense, each of the following: (a) a termination or assignment (as requested by the Lessee) of each applicable Ground Lease and special or limited warranty Deeds 30 35 conveying each Property (to the extent it is real property not subject to a Ground Lease) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (b) a Bill of Sale conveying each Property (to the extent it is personal property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (c) any real estate tax affidavit or other document required by law to be executed and filed in order to record the applicable Deed and/or the applicable Ground Lease termination; and (d) FIRPTA affidavits. All of the foregoing documentation must be in form and substance reasonably satisfactory to Lessor. The applicable Property shall be conveyed to Lessee "AS-IS, WHERE-IS" and in then present physical condition. If any Property is the subject of remediation efforts respecting Hazardous Substances at the applicable Election Date which could materially and adversely impact the Fair Market Sales Value of such Property (with materiality determined in Lessor's discretion), then Lessee shall be obligated to purchase each such Property pursuant to Section 20.2. On the applicable Election Date on which Lessee has elected to exercise its Purchase Option, Lessee shall pay (or cause to be paid) to Lessor, the Agent and all other parties, as appropriate, the sum of all costs and expenses incurred by any such party in connection with the election by Lessee to exercise its Purchase Option and all Rent and all other amounts then due and payable or accrued under this Lease and/or any other Operative Agreement. 20.3 THIRD PARTY SALE OPTION. (a) Provided, that (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Election Notice has been appropriately given specifying the Sale Option, Lessee shall undertake to cause a sale of the Properties on the applicable Election Date (all as specified in the Election Notice), in accordance with the provisions of Section 22.1 hereof. Such Election Date on which a sale is required may be hereafter referred to as the "Sale Date". (b) In the event Lessee exercises the Sale Option then, as soon as practicable and in all events not less than sixty (60) days and not more than ninety (90) days prior to the Sale Date, Lessee at its expense shall cause to be delivered to Lessor a Phase I environmental site assessment for each of the Properties recently prepared (no more than thirty (30) days old prior to the delivery date) by an independent recognized professional reasonably acceptable to Lessor and in form, scope and content reasonably satisfactory to Lessor. In the event that Lessor shall not have received such environmental site assessment by the date sixty (60) days prior to the Sale Date or in the event that such environmental assessment shall reveal the existence of any material violation of Environmental Laws, other material Environmental Violation or potential material Environmental Violation (with materiality determined in each case by Lessor in its reasonable discretion), then Lessee on the Sale Date shall pay to Lessor an amount equal to the Termination Value for all the Properties and any and all other amounts due and owing hereunder. Upon receipt of such payment and all other amounts due under the 31 36 Operative Agreements, Lessor shall transfer to Lessee all of Lessor's right, title and interest in and to all the Properties in accordance with Section 19.1. ARTICLE XXI 21.1 [INTENTIONALLY RESERVED]. ARTICLE XXII 22.1 SALE PROCEDURE. (a) During the Marketing Period, Lessee, on behalf of Lessor, shall obtain bids for the cash purchase of all the Properties in connection with a sale to one (1) or more third party purchasers to be consummated on the Sale Date for the highest price available, shall notify Lessor promptly of the name and address of each prospective purchaser and the cash price which each prospective purchaser shall have offered to pay for each such Property and shall provide Lessor with such additional information about the bids and the bid solicitation procedure as Lessor may reasonably request from time to time. All such prospective purchasers must be Persons other than Lessee or any Affiliate of Lessee. On the Sale Date, Lessee shall pay (or cause to be paid) to Lessor and all other parties, as appropriate, the sum of all costs and expenses incurred by Lessor and/or the Agent (as the case may be) in connection with such sale of one or more Properties, all Rent and all other amounts then due and payable or accrued under this Lease and/or any other Operative Agreement. Lessor may reject any and all bids and may solicit and obtain bids by giving Lessee written notice to that effect; provided, however, that notwithstanding the foregoing, Lessor may not reject the bids submitted by Lessee if such bids, in the aggregate, are greater than or equal to the sum of the Limited Recourse Amount for all the Properties, and represent bona fide offers from one (1) or more third party purchasers. If the highest price which a prospective purchaser or the prospective purchasers shall have offered to pay for all the Properties on the Sale Date is less than the sum of the Limited Recourse Amount for all the Properties or if such bids do not represent bona fide offers from one (1) or more third parties or if there are no bids, Lessor may elect to retain one or more of the Properties by giving Lessee prior written notice of Lessor's election to retain the same, and promptly upon receipt of such notice, Lessee shall surrender, or cause to be surrendered, each of the Properties specified in such notice in accordance with the terms and conditions of Section 10.1. Upon acceptance of any bid, Lessor agrees, at Lessee's request and expense, to execute a contract of sale with respect to such sale, so long as the same is consistent with the terms of this Article 22 and provides by its terms that it is nonrecourse to Lessor. 32 37 Unless Lessor shall have elected to retain one or more of the Properties pursuant to the provisions of the preceding paragraph, Lessee shall arrange for Lessor to sell all the Properties free and clear of the Lien of this Lease and any Lessor Liens attributable to Lessor, without recourse or warranty (of title or otherwise), for cash on the Sale Date to the purchaser or purchasers offering the highest cash sales price, as identified by Lessee or Lessor, as the case may be; provided, however, solely as to Lessor or the Trust Company, in its individual capacity, any Lessor Lien shall not constitute a Lessor Lien so long as Lessor or the Trust Company, in its individual capacity, is diligently and in good faith contesting, at the cost and expense of Lessor or the Trust Company, in its individual capacity, such Lessor Lien by appropriate proceedings in which event the applicable Sale Date, all without penalty or cost to Lessee, shall be delayed for the period of such contest. To effect such transfer and assignment, Lessor shall execute, acknowledge (where required) and deliver to the appropriate purchaser each of the following: (a) special or limited warranty Deeds conveying each such Property (to the extent it is real property titled to Lessor) and an assignment of the Ground Lease conveying the leasehold interest of Lessor in each such Property (to the extent it is real property and subject to a Ground Lease) to the appropriate purchaser free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (b) a Bill of Sale conveying each such Property (to the extent it is personal property) titled to Lessor to the appropriate purchaser free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (c) any real estate tax affidavit or other document required by law to be executed and filed in order to record each Deed and/or each Ground Lease assignment; and (d) FIRPTA affidavits, as appropriate. All of the foregoing documentation must be in form and substance reasonably satisfactory to Lessor. Lessee shall surrender the Properties so sold or subject to such documents to each purchaser in the condition specified in Section 10.1, or in such other condition as may be agreed between Lessee and such purchaser. Lessee shall not take or fail to take any action which would have the effect of unreasonably discouraging bona fide third party bids for any Property. If each of the Properties is not either (i) sold on the Sale Date in accordance with the terms of this Section 22.1, or (ii) retained by Lessor pursuant to an affirmative election made by Lessor pursuant to the second sentence of the second paragraph of this Section 22.1(a), then (x) Lessee shall be obligated to pay Lessor on the Sale Date an amount equal to the aggregate Termination Value for all the Properties less any sales proceeds received, and (y) Lessor shall transfer each applicable Property to Lessee in accordance with Section 20.2. (b) If the Properties are sold on a Sale Date to one (1) or more third party purchasers in accordance with the terms of Section 22.1(a) and the aggregate purchase price paid for all the Properties is less than the sum of the aggregate Property Cost for all the Properties plus all Rent and all other amounts then due and owing pursuant to the Operative Agreements (hereinafter such difference shall be referred to as the "Deficiency Balance"), then Lessee hereby unconditionally promises to pay to Lessor on the Sale Date the lesser of (i) the Deficiency Balance, or (ii) the Maximum Residual Guarantee Amount for all the Properties. On a Sale Date if (x) Lessor receives the aggregate Termination Value for all the Properties from one (1) or more third party purchasers, (y) Lessor and such other parties receive all other amounts specified in the last sentence of the first 33 38 paragraph of Section 22.1(a) and (z) the aggregate purchase price paid for all the Properties on such date exceeds the sum of the aggregate Property Cost for all the Properties, then Lessee may retain such excess. If one or more of the Properties are retained by Lessor pursuant to an affirmative election made by Lessor pursuant to the provisions of Section 22.1(a), then Lessee hereby unconditionally promises to pay to Lessor on the Sale Date all Rent and all other amounts then due and owing pursuant to the Operative Agreements and an amount equal to the Maximum Residual Guarantee Amount for the Properties so retained. Any payment of the foregoing amounts described in this Section 22.1(b) shall be made together with a payment of all other amounts referenced in the last sentence of the first paragraph of Section 22.1(a) (without duplication). (c) In the event that all the Properties are either sold to one (1) or more third party purchasers on the Sale Date or retained by Lessor in connection with an affirmative election made by Lessor pursuant to the provisions of Section 22.1(a), then in either case on the applicable Sale Date Lessee shall provide Lessor or such third party purchaser (unless otherwise agreed by such third party purchaser) with (i) to the extent permitted by applicable Legal Requirements, all permits, certificates of occupancy, governmental licenses and authorizations necessary to use, operate, repair, access and maintain each such Property for the purpose it is being used by Lessee, and (ii) such manuals, permits, easements, licenses, intellectual property, know-how, rights-of-way and other rights and privileges in the nature of an easement as are reasonably necessary or desirable in connection with the use, operation, repair, access to or maintenance of each such Property for its intended purpose or otherwise as Lessor or such third party purchaser(s) shall reasonably request (and a royalty-free license or similar agreement to effectuate the foregoing on terms reasonably agreeable to Lessor or such third party purchaser(s), as applicable). All assignments, licenses, easements, agreements and other deliveries required by clauses (i) and (ii) of this paragraph (c) shall be in form reasonably satisfactory to Lessor or such third party purchaser(s), as applicable, and shall be fully assignable (including without limitation both primary assignments and assignments given in the nature of security) without payment of any fee, cost or other charge. Lessee shall also execute any documentation requested by Lessor or such third party purchaser(s), as applicable, evidencing the continuation or assignment of each Ground Lease. 22.2 APPLICATION OF PROCEEDS OF SALE. Lessor shall apply the proceeds of sale of any Property in the following order of priority: (a) FIRST, to pay or to reimburse Lessor (and/or the Agent, as the case may be) for the payment of all reasonable costs and expenses incurred by Lessor (and/or the Agent, as the case may be) in connection with the sale (to the extent Lessee has not satisfied its obligation to pay such costs and expenses); (b) SECOND, so long as the Credit Agreement is in effect and any Loans or Holder Advances or any amount is owing to the Financing Parties under any Operative 34 39 Agreement, to the Agent to be applied pursuant to intercreditor provisions among Lessor, the Lenders and the Holders contained in the Operative Agreements; and (c) THIRD, to Lessee. 22.3 INDEMNITY FOR EXCESSIVE WEAR. If the proceeds of the sale described in Section 22.1 with respect to the Properties shall be less than the Limited Recourse Amount with respect to the Properties, and at the time of such sale it shall have been reasonably determined (pursuant to the Appraisal Procedure) that the Fair Market Sales Value of the Properties shall have been impaired by greater than expected wear and tear during the term of the Lease, Lessee shall pay to Lessor within ten (10) days after receipt of Lessor's written statement (i) the amount of such excess wear and tear determined by the Appraisal Procedure or (ii) the amount of the Sale Proceeds Shortfall, whichever amount is less. 22.4 APPRAISAL PROCEDURE. For determining the Fair Market Sales Value of the Properties or any other amount which may, pursuant to any provision of any Operative Agreement, be determined by an appraisal procedure, Lessor and Lessee shall use the following procedure (the "Appraisal Procedure"). Lessor and Lessee shall endeavor to reach a mutual agreement as to such amount for a period of ten (10) days from commencement of the Appraisal Procedure under the applicable section of the Lease, and if they cannot agree within ten (10) days, then two (2) qualified appraisers, one (1) chosen by Lessee and one (1) chosen by Lessor, shall mutually agree thereupon, but if either party shall fail to choose an appraiser within twenty (20) days after notice from the other party of the selection of its appraiser, then the appraisal by such appointed appraiser shall be binding on Lessee and Lessor. If the two (2) appraisers cannot agree within twenty (20) days after both shall have been appointed, then a third appraiser shall be selected by the two (2) appraisers or, failing agreement as to such third appraiser within thirty (30) days after both shall have been appointed, by the American Arbitration Association. The decisions of the three (3) appraisers shall be given within twenty (20) days of the appointment of the third appraiser and the decision of the appraiser most different from the average of the other two (2) shall be discarded and such average shall be binding on Lessor and Lessee; provided, that if the highest appraisal and the lowest appraisal are equidistant from the third appraisal, the third appraisal shall be binding on Lessor and Lessee. The fees and expenses of the appraiser appointed by Lessee shall be paid by Lessee; the fees and expenses of the appraiser appointed by Lessor shall be paid by Lessor (such fees and expenses not being indemnified pursuant to Section 11 of the Participation Agreement); and the fees and expenses of the third appraiser shall be divided equally between Lessee and Lessor. 22.5 CERTAIN OBLIGATIONS CONTINUE. During the Marketing Period, the obligation of Lessee to pay Rent with respect to the Properties (including without limitation the installment of Basic Rent due on the Sale Date) shall continue undiminished until payment in full to Lessor of the sale proceeds, if any, the Maximum 35 40 Residual Guarantee Amount, the amount due under Section 22.3, if any, and all other amounts due to Lessor or any other Person with respect to all Properties or any Operative Agreement. Lessor shall have the right, but shall be under no duty, to solicit bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take action in connection with any such sale, other than as expressly provided in this Article XXII. ARTICLE XXIII 23.1 HOLDING OVER. If Lessee shall for any reason remain in possession of a Property after the expiration or earlier termination of this Lease as to such Property (unless such Property is conveyed to Lessee), such possession shall be as a tenancy at sufferance during which time Lessee shall continue to pay Supplemental Rent that would be payable by Lessee hereunder were the Lease then in full force and effect with respect to such Property and Lessee shall continue to pay Basic Rent at the lesser of the highest lawful rate and one hundred ten percent (110%) of the last payment of Basic Rent due with respect to such Property prior to such expiration or earlier termination of this Lease. Such Basic Rent shall be payable from time to time upon demand by Lessor and such additional amount of Basic Rent shall be applied by Lessor ratably to the Lenders and the Holders based on their relative amounts of the then outstanding aggregate Property Cost for all Properties. During any period of tenancy at sufferance, Lessee shall, subject to the second preceding sentence, be obligated to perform and observe all of the terms, covenants and conditions of this Lease, but shall have no rights hereunder other than the right, to the extent given by law to tenants at sufferance, to continue their occupancy and use of such Property. Nothing contained in this Article XXIII shall constitute the consent, express or implied, of Lessor to the holding over of Lessee after the expiration or earlier termination of this Lease as to any Property (unless such Property is conveyed to Lessee) and nothing contained herein shall be read or construed as preventing Lessor from maintaining a suit for possession of such Property or exercising any other remedy available to Lessor at law or in equity. ARTICLE XXIV 24.1 RISK OF LOSS. During the Term, unless Lessee shall not be in actual possession of any Property in question solely by reason of Lessor's exercise of its remedies of dispossession under Article XVII, the risk of loss or decrease in the enjoyment and beneficial use of such Property as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by Lessee, and Lessor shall in no event be answerable or accountable therefor. 36 41 ARTICLE XXV 25.1 ASSIGNMENT. (a) Lessee may not assign this Lease or any of its rights or obligations hereunder or with respect to any Property in whole or in part to any Person without the prior written consent of the Agent, the Lenders, the Holders and Lessor. (b) No assignment by Lessee (referenced in this Section 25.1 or otherwise) or other relinquishment of possession to any Property shall in any way discharge or diminish any of the obligations of Lessee to Lessor hereunder and Lessee shall remain directly and primarily liable under the Operative Agreements as to any rights or obligations assigned by Lessee or regarding any Property in which rights or obligations have been assigned or otherwise transferred. 25.2 SUBLEASES. (a) Promptly, but in any event within five (5) Business Days, following the execution and delivery of any sublease permitted by this Article XXV, Lessee shall notify Lessor of the execution of such sublease. As of the date of each Lease Supplement, Lessee shall lease the respective Property described in such Lease Supplement from Lessor, and any existing tenant respecting such Property shall automatically be deemed to be a subtenant of Lessee and not a tenant of Lessor. (b) Without the prior written consent of the Agent, any Lender, any Holder or Lessor and subject to the other provisions of this Section 25.2, Lessee may sublet any Property or portion thereof to any wholly-owned Subsidiary of Lessee. Except as referenced in the immediately preceding sentence, no other subleases shall be permitted unless consented to in writing by Lessor. All subleasing shall be done on market terms and shall in no way diminish the fair market value or useful life of any applicable Property. (c) No sublease (referenced in this Section 25.2 or otherwise) or other relinquishment of possession to any Property shall in any way discharge or diminish any of Lessee's obligations to Lessor hereunder and Lessee shall remain directly and primarily liable under this Lease as to such Property, or portion thereof, so sublet. The term of any such sublease shall not extend beyond the Term. Each sublease shall be expressly subject and subordinate to this Lease. 37 42 ARTICLE XXVI 26.1 NO WAIVER. No failure by Lessor or Lessee to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Lease, and this Lease shall continue in full force and effect with respect to any other then existing or subsequent default. ARTICLE XXVII 27.1 ACCEPTANCE OF SURRENDER. No surrender to Lessor of this Lease or of all or any portion of any Property or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by Lessor and no act by Lessor or the Agent or any representative or agent of Lessor or the Agent, other than a written acceptance, shall constitute an acceptance of any such surrender. 27.2 NO MERGER OF TITLE. There shall be no merger of this Lease or of the leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Lease or the leasehold estate created hereby or any interest in this Lease or such leasehold estate, (b) any right, title or interest in any Property, (c) any Notes, or (d) a beneficial interest in Lessor. ARTICLE XXVIII 28.1 [INTENTIONALLY RESERVED] ARTICLE XXIX 29.1 NOTICES. All notices required or permitted to be given under this Lease shall be in writing and delivered as provided in the Participation Agreement. 38 43 ARTICLE XXX 30.1 MISCELLANEOUS. Anything contained in this Lease to the contrary notwithstanding, all claims against and liabilities of Lessee or Lessor arising from events commencing prior to the expiration or earlier termination of this Lease shall survive such expiration or earlier termination. If any provision of this Lease shall be held to be unenforceable in any jurisdiction, such unenforceability shall not affect the enforceability of any other provision of this Lease and such jurisdiction or of such provision or of any other provision hereof in any other jurisdiction. 30.2 AMENDMENTS AND MODIFICATIONS. Neither this Lease nor any Lease Supplement may be amended, waived, discharged or terminated except in accordance with the provisions of Section 12.4 of the Participation Agreement. 30.3 SUCCESSORS AND ASSIGNS. All the terms and provisions of this Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 30.4 HEADINGS AND TABLE OF CONTENTS. The headings and table of contents in this Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 30.5 COUNTERPARTS. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one (1) and the same instrument. 30.6 GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA, EXCEPT TO THE EXTENT THE LAWS OF THE STATE WHERE A PARTICULAR PROPERTY IS LOCATED ARE REQUIRED TO APPLY. 30.7 CALCULATION OF RENT. All calculation of Rent payable hereunder shall be computed based on the actual number of days elapsed over a year of three hundred sixty (360) days or, to the extent such Rent is based on the Prime Lending Rate, three hundred sixty-five (365) (or three hundred sixty-six (366), as applicable) days. 39 44 30.8 MEMORANDA OF LEASE AND LEASE SUPPLEMENTS. This Lease shall not be recorded; provided, Lessor and Lessee shall promptly record (a) a memorandum of this Lease and the applicable Lease Supplement (in substantially the form of Exhibit B attached hereto) or a short form lease (in form and substance reasonably satisfactory to Lessor) regarding each Property promptly after the acquisition thereof in the local filing office with respect thereto, in all cases at Lessee's cost and expense, and as required under applicable law to sufficiently evidence this Lease and any such Lease Supplement in the applicable real estate filing records. 30.9 ALLOCATIONS BETWEEN THE LENDERS AND THE HOLDERS. Notwithstanding any other term or provision of this Lease to the contrary, the allocations of the proceeds of the Properties and any and all other Rent and other amounts received hereunder shall be subject to the inter-creditor provisions between the Lenders and the Holders contained in the Operative Agreements (or as otherwise agreed among the Lenders and the Holders from time to time). 30.10 LIMITATIONS ON RECOURSE. Notwithstanding anything contained in this Lease to the contrary, Lessee agrees to look solely to Lessor's estate and interest in the Properties (and in no circumstance to the Agent, the Lenders, the Holders or otherwise to Lessor) for the collection of any judgment requiring the payment of money by Lessor in the event of liability by Lessor, and no other property or assets of Lessor or any shareholder, owner or partner (direct or indirect) in or of Lessor, or any director, officer, employee, beneficiary, Affiliate of any of the foregoing shall be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Lessee under or with respect to this Lease, the relationship of Lessor and Lessee hereunder or Lessee's use of the Properties or any other liability of Lessor to Lessee. Nothing in this Section shall be interpreted so as to limit the terms of Sections 6.1 or 6.2 or the provisions of Section 12.9 of the Participation Agreement. 30.11 WAIVERS OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE AND FOR ANY COUNTERCLAIM THEREIN. 30.12 EXERCISE OF LESSOR RIGHTS. Lessee hereby acknowledges and agrees that the rights and powers of Lessor under this Lease have been assigned to the Agent pursuant to the terms of the Security Agreement and the other Operative Agreements. Lessor and Lessee hereby acknowledge and agree that (a) the 40 45 Agent shall, in its discretion, direct and/or act on behalf of Lessor pursuant to the provisions of Sections 8.2(h) and 8.6 of the Participation Agreement, (b) all notices to be given to Lessor shall be given to the Agent and (c) all notices to be given by Lessor may be given by the Agent, at its election. 30.13 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION. THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS. 30.14 USURY SAVINGS PROVISION. IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO THE EXTENT ANY RENT OR PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS SECTION 30.14 SHALL APPLY. ANY SUCH RENT OR PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS LEASE OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT 41 46 SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND LESSOR DOES NOT INTEND TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO LESSOR SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF THIS LEASE SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW. [signature pages follow] 42 47 IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed and delivered as of the date first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, as Lessor By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [signature pages continue] Lease Agreement RFMD Real Estate Trust 1999-1 48 RF MICRO DEVICES, INC., as Lessee By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [signature pages continue] Lease Agreement RFMD Real Estate Trust 1999-1 49 Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as the date hereof FIRST UNION NATIONAL BANK, as the Agent By: ------------------------------------- Name: ----------------------------------- Title: ----------------------------------- [signature pages end] Lease Agreement RFMD Real Estate Trust 1999-1 50 EXHIBIT A TO THE LEASE LEASE SUPPLEMENT NO. ___ THIS LEASE SUPPLEMENT NO. ___ (this "Lease Supplement") dated as of August __, 1999 between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, as lessor (the "Lessor"), and RF MICRO DEVICES, INC., a [____________] corporation, as lessee (the "Lessee"). WHEREAS, Lessor is the owner or will be the owner of the Property described on Schedule 1 hereto (the "Leased Property") and wishes to lease the same to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Participation Agreement, dated as of August __, 1999, among Lessee, Lessor, not individually, except as expressly stated therein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, the various banks and other lending institutions which are parties thereto from time to time, as the Holders, the various banks and other lending institutions which are parties thereto from time to time, as the Lenders, and First Union National Bank, as the Agent for the Lenders and respecting the Security Documents, as the Agent for the Lenders and Holders, to the extent of their interests, as such may be amended, modified, extended, supplemented, restated and/or replaced from time to time. SECTION 2. THE PROPERTIES. Attached hereto as Schedule 1 is the description of the Leased Property, with an Equipment Schedule attached hereto as Schedule 1-A, an Improvement Schedule attached hereto as Schedule 1-B and [A LEGAL DESCRIPTION OF THE LAND / A COPY OF THE GROUND LEASE] attached hereto as Schedule 1-C. Effective upon the execution and delivery of this Lease Supplement by Lessor and Lessee, the Leased Property shall be subject to the terms and provisions of the Lease. Without further action, any and all additional Equipment funded under the Operative Agreements and any and all additional Improvements made to the Land shall be deemed to be titled to the Lessor and subject to the terms and conditions of the Lease and this Lease Supplement. This Lease Supplement shall constitute a mortgage, deed of trust, security agreement and financing statement under the laws of the state in which the Leased Property is situated. The maturity date of the obligations secured hereby shall be [___________] unless extended to not later than [___________]. 51 For purposes of provisions of the Lease and this Lease Supplement related to the creation and enforcement of the Lease and this Lease Supplement as a security agreement and a fixture filing, Lessee is the debtor and Lessor is the secured party. The mailing addresses of the debtor (Lessee herein) and of the secured party (Lessor herein) from which information concerning security interests hereunder may be obtained are set forth on the signature pages hereto. A carbon, photographic or other reproduction of the Lease and this Lease Supplement or of any financing statement related to the Lease and this Lease Supplement shall be sufficient as a financing statement for any of the purposes referenced herein. SECTION 3. USE OF PROPERTY. At all times during the Term with respect to each Property, Lessee will comply with all obligations under and (to the extent no Event of Default exists and provided, that such exercise will not impair the value of such Property) shall be permitted to exercise all rights and remedies under, all operation and easement agreements and related or similar agreements applicable to such Property. SECTION 4. RATIFICATION; INCORPORATION BY REFERENCE. Except as specifically modified hereby, the terms and provisions of the Lease and the Operative Agreements are hereby ratified and confirmed and remain in full force and effect. The Lease is hereby incorporated herein by reference as though restated herein in its entirety. SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED TO AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF [__________], EXCEPT TO THE EXTENT THE LAWS OF THE STATE WHERE A PARTICULAR PROPERTY IS LOCATED ARE REQUIRED TO APPLY. SECTION 7. MORTGAGE; POWER OF SALE. Without limiting any other remedies set forth in the Lease, in the event that a court of competent jurisdiction rules that the Lease constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties, then Lessor and Lessee agree that Lessee hereby grants a Lien against the Leased Property WITH POWER OF SALE, and that, upon the occurrence of any Lease Event of Default, Lessor shall have the power and authority, to the extent provided by law, after prior notice and lapse of such time as may be required by law, to foreclose its interest (or cause such interest to be foreclosed) in all or any part of the Leased Property. A-2 52 SECTION 8. COUNTERPART EXECUTION. This Lease Supplement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one (1) and the same instrument. For purposes of the provisions of this Lease Supplement concerning this Lease Supplement constituting a security agreement and fixture filing, the addresses of the debtor (Lessee herein) and the secured party (Lessor herein), from whom information may be obtained about this Lease Supplement, are as set forth on the signature pages hereto. [The remainder of this page has been intentionally left blank.] A-3 53 IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, as Lessor By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- First Security Bank, National Association 79 South Main Street Third Floor Salt Lake City, Utah 84111 Attn: Val T. Orton Vice President RF MICRO DEVICES, INC., as Lessee By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [LESSEE ADDRESS] -------------------------------------------- -------------------------------------------- Attn: Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as the date hereof. FIRST UNION NATIONAL BANK, as the Agent By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- First Union National Bank c/o First Union Securities, Inc. 301 South College Street, DC-6 Charlotte, North Carolina 28288-0166 A-4 54 [CONFORM TO STATE LAW REQUIREMENTS] STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of _________________ this _____ day of ______________, by ________________, as __________________ of FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, on behalf of the Owner Trustee. [Notarial Seal] ----------------------------------- Notary Public My commission expires: ____________ STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of _________________ this _____ day of ______________, by ________________, as __________________ of [_______________, a ________________] corporation, on behalf of the corporation. [Notarial Seal] ----------------------------------- Notary Public My commission expires: ____________ STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ________________ this ____ day of ___________, by _____________, as __________________ of FIRST UNION NATIONAL BANK, a national banking association, as the Agent. [Notarial Seal] ----------------------------------- Notary Public My commission expires: ____________ A-5 55 SCHEDULE 1 TO LEASE SUPPLEMENT NO. ____ (Description of the Leased Property) A-6 56 SCHEDULE 1-A TO LEASE SUPPLEMENT NO. ____ (Equipment) A-7 57 SCHEDULE 1-B TO LEASE SUPPLEMENT NO. ____ (Improvements) A-8 58 SCHEDULE 1-C TO LEASE SUPPLEMENT NO. ____ [(LAND)/ (GROUND LEASE)] A-9 59 EXHIBIT B TO THE LEASE [MODIFY OR SUBSTITUTE SHORT FORM LEASE AS NECESSARY FOR LOCAL LAW REQUIREMENTS] Recordation requested by: Moore & Van Allen, PLLC After recordation return to: Moore & Van Allen, PLLC (WMA) 100 North Tryon Street, Floor 47 Charlotte, NC 28202-4003 Space above this line for Recorder's use - - -------------------------------------------------------------------------------- MEMORANDUM OF LEASE AGREEMENT, LEASE SUPPLEMENT NO. ____ AND DEED OF TRUST THIS MEMORANDUM OF LEASE AGREEMENT AND LEASE SUPPLEMENT NO. ____ ("Memorandum"), dated as of [_____________, 199___], is by and between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, with an office at 79 South Main Street, Salt Lake City, Utah 84111 (hereinafter referred to as "Lessor") and [_______________, a __________] corporation, with an office at [___________________] (hereinafter referred to as "Lessee"). WITNESSETH: That for value received, Lessor and Lessee do hereby covenant, promise and agree as follows: 1. DEMISED PREMISES AND DATE OF LEASE. Lessor has leased to Lessee, and Lessee has leased from Lessor, for the Term (as hereinafter defined), certain real property and other property located in [________________], which is described in the attached Schedule 1 (the "Property"), pursuant to the terms of a Lease Agreement between Lessor and Lessee dated as of [__________, 199__] (as such may be amended, modified, extended, supplemented, restated and/or replaced from time to time, "Lease") and a Lease Supplement No. _____ between Lessor and Lessee dated as of ______________ (the "Lease Supplement"). 60 The Lease and the Lease Supplement shall constitute a mortgage, deed of trust and security agreement and financing statement under the laws of the state in which the Property is situated. The maturity date of the obligations secured thereby shall be ___________, unless extended to not later than ___________. For purposes of provisions of the Lease and the Lease Supplement related to the creation and enforcement of the Lease and the Lease Supplement as a security agreement and a fixture filing, Lessee is the debtor and Lessor is the secured party. The mailing addresses of the debtor (Lessee herein) and of the secured party (Lessor herein) from which information concerning security interests hereunder may be obtained are as set forth on the signature pages hereof. A carbon, photographic or other reproduction of this Memorandum or of any financing statement related to the Lease and the Lease Supplement shall be sufficient as a financing statement for any of the purposes referenced herein. 2. TERM, RENEWAL, EXTENSION AND PURCHASE OPTION. The term of the Lease for the Property ("Term") commenced as of __________, 19__ and shall end as of _________, 19__, unless the Term is extended or earlier terminated in accordance with the provisions of the Lease. The Lease contains provisions for renewal and extension. The tenant has a purchase option under the Lease. 3. TAX PAYER NUMBERS. Lessor's tax payer number: __________________. Lessee's tax payer number: __________________. 4. MORTGAGE; POWER OF SALE. Without limiting any other remedies set forth in the Lease, in the event that a court of competent jurisdiction rules that the Lease constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties, then Lessor and Lessee agree that Lessee has granted, pursuant to the terms of the Lease and the Lease Supplement, a Lien against the Property WITH POWER OF SALE, and that, upon the occurrence and during the continuance of any Lease Event of Default, Lessor shall have the power and authority, to the extent provided by law, after prior notice and lapse of such time as may be required by law, to foreclose its interest (or cause such interest to be foreclosed) in all or any part of the Property. 5. EFFECT OF MEMORANDUM. The purpose of this instrument is to give notice of the Lease and the Lease Supplement and their respective terms, covenants and conditions to the same extent as if the Lease and the Lease Supplement were fully set forth herein. This Memorandum shall not modify in any manner the terms, conditions or intent of the Lease or the Lease Supplement and the parties agree that this Memorandum is not intended nor shall it be used to interpret the Lease or the Lease Supplement or determine the intent of the parties under the Lease or the Lease Supplement. B-2 61 [The remainder of this page has been intentionally left blank.] B-3 62 IN WITNESS WHEREOF, the parties hereto have duly executed this instrument as of the day and year first written. LESSOR: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- First Security Bank, National Association 79 South Main Street Third Floor Salt Lake City, Utah 84111 Attn: Val T. Orton Vice President LESSEE: RF MICRO DEVICES, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- [LESSEE ADDRESS] -------------------------------------------- -------------------------------------------- Attn: B-4 63 SCHEDULE 1 (Description of Property) B-5 64 [CONFORM TO STATE LAW REQUIREMENTS] STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Memorandum of Lease Agreement and Lease Supplement No. _____ was acknowledged before me, the undersigned Notary Public, in the County of _________________ this _____ day of ______________, by ________________, as __________________ of FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually, but solely as the Owner Trustee under the [_____ Real Estate Trust _____], on behalf of the Owner Trustee. [Notarial Seal] ------------------------------------ Notary Public My commission expires: ____________ STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Memorandum of Lease Agreement and Lease Supplement No. _____ was acknowledged before me, the undersigned Notary Public, in the County of _________________ this _____ day of ______________, by ________________, as __________________ of [_______________, a __________] corporation, on behalf of the corporation. [Notarial Seal] ------------------------------------ Notary Public My commission expires: ____________ B-6 EX-10.11 14 AMENDED, RESTATED AND REPLACEMENT CREDIT AGREEMENT 1 EXHIBIT 10.11 - - -------------------------------------------------------------------------------- AMENDED, RESTATED AND REPLACEMENT CREDIT AGREEMENT Dated as of December 31, 1999 among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1, as the Borrower, The Several Lenders from Time to Time Parties Hereto, and FIRST UNION NATIONAL BANK, as the Agent - - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS........................................................1 1.1 Definitions.......................................................1 1.2 Interpretation....................................................1 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS....................................1 2.1 Commitments.......................................................1 2.2 Notes.............................................................2 2.3 Procedure for Borrowing...........................................2 2.4 Lender Unused Fees................................................3 2.5 Termination or Reduction of Commitments...........................3 2.6 Prepayments and Payments..........................................4 2.7 Conversion and Continuation Options...............................5 2.8 Interest Rates and Payment Dates..................................6 2.9 Computation of Interest...........................................6 2.10 Pro Rata Treatment and Payments..................................7 2.11 Notice of Amounts Payable; Mandatory Assignment..................8 SECTION 3. REPRESENTATIONS AND WARRANTIES.....................................9 SECTION 4. CONDITIONS PRECEDENT...............................................9 4.1 Conditions to Effectiveness.......................................9 4.2 Conditions to Each Loan...........................................9 SECTION 5. COVENANTS..........................................................9 5.1 Other Activities..................................................9 5.2 Ownership of Properties, Indebtedness............................10 5.3 Disposition of Assets............................................10 5.4 Compliance with Operative Agreements.............................10 5.5 Further Assurances...............................................10 5.6 Notices..........................................................10 5.7 Discharge of Liens...............................................10 5.8 Trust Agreement..................................................11 SECTION 6. EVENTS OF DEFAULT.................................................11 SECTION 7. THE AGENT.........................................................14 7.1 Appointment......................................................14 7.2 Delegation of Duties.............................................14 7.3 Exculpatory Provisions...........................................14 7.4 Reliance by the Agent............................................15 7.5 Notice of Default................................................15 7.6 Non-Reliance on the Agent and Other Lenders......................16 7.7 Indemnification..................................................16 7.8 The Agent in Its Individual Capacity.............................17 7.9 Successor Agent..................................................17 7.10 Actions of the Agent on Behalf of Holders.......................17 7.11 The Agent's Duty of Care........................................17 i 3 SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL........................18 8.1 Collection and Allocation of Payments and Other Amounts..........18 8.2 Certain Remedial Matters.........................................18 8.3 Excepted Payments................................................18 SECTION 9. MISCELLANEOUS.....................................................19 9.1 Amendments and Waivers...........................................19 9.2 Notices..........................................................19 9.3 No Waiver; Cumulative Remedies...................................19 9.4 Survival of Representations and Warranties.......................19 9.5 Payment of Expenses and Taxes....................................19 9.6 Successors and Assigns; Participations and Assignments...........20 9.7 Participations...................................................20 9.8 Assignments......................................................21 9.9 The Register; Disclosure; Pledges to Federal Reserve Banks.......23 9.10 Adjustments; Set-off............................................23 9.11 Counterparts....................................................24 9.12 Severability....................................................24 9.13 Integration.....................................................24 9.14 GOVERNING LAW...................................................25 9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION..................25 9.16 Acknowledgments.................................................25 9.17 WAIVERS OF JURY TRIAL...........................................25 9.18 Nonrecourse.....................................................25 9.19 USURY SAVINGS PROVISION.........................................26 SCHEDULES Schedule 2.1 Commitments and Addresses of Lenders EXHIBITS Exhibit A-1 Form of Tranche A Note Exhibit A-2 Form of Tranche B Note Exhibit B Form of Assignment and Acceptance ii 4 AMENDED, RESTATED AND REPLACEMENT CREDIT AGREEMENT THIS AMENDED, RESTATED AND REPLACEMENT CREDIT AGREEMENT, dated as of December 31, 1999 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the "Agreement") is among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 (the "Owner Trustee" or the "Borrower"), the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders") and FIRST UNION NATIONAL BANK, a national banking association, as a Lender and as the agent for the Lenders (the "Agent"). The parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 DEFINITIONS. For purposes of this Agreement, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in Appendix A to that certain Amended, Restated and Replacement Participation Agreement dated as of December 31, 1999 (as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof, the "Participation Agreement") among RF Micro Devices, Inc., the Borrower, the various banks and other lending institutions which are parties thereto from time to time, as the Holders, the various banks and other lending institutions which are parties thereto from time to time, as the Lenders, and First Union National Bank, as agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests. Unless otherwise indicated, references in this Agreement to articles, sections, paragraphs, clauses, appendices, schedules and exhibits are to the same contained in this Agreement. 1.2 INTERPRETATION. The rules of usage set forth in Appendix A to the Participation Agreement shall apply to this Agreement. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 COMMITMENTS. (a) Subject to the terms and conditions hereof, each of the Lenders severally agrees to make the portion of the Tranche A Loans and the Tranche B Loans to the Borrower from time to time during the Commitment Period in an amount up to such Lender's Commitment as is set forth adjacent to such Lender's name in Schedule 2.1 5 hereto for the purpose of enabling the Borrower to purchase the Properties and to pay Property Acquisition Costs, Property Costs and Transaction Expenses, provided, that the aggregate principal amount at any one (1) time outstanding with respect to each of the Tranche A Loans and the Tranche B Loans shall not exceed the amount of the Tranche A Commitments and the Tranche B Commitments respectively. Any prepayments of the Loans, whether mandatory or at the Borrower's election, shall not be subject to reborrowing except as set forth in Section 5.2(d) of the Participation Agreement. (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans, or (iii) a combination thereof, as determined by the Borrower and notified to the Agent in accordance with Sections 2.3 and 2.7. In the event the Borrower fails to provide notice pursuant to Section 2.3, the Loan shall be an ABR Loan. Further, any Loans by the Lenders on a given date in an aggregate amount less than $100,000.00 shall be ABR Loans, unless the remaining Available Commitment for the Lenders in the aggregate is less than $100,000.00, in which case, the Borrower may elect a Eurodollar Loan for such remaining amount. (c) The Commitment of each Lender to make Tranche A Loans and Tranche B Loans shall be pro rata. 2.2 NOTES. The Loans made by each Lender shall be evidenced by promissory notes of the Borrower, substantially in the form of Exhibit A-1 in the case of the Tranche A Loans (each, a "Tranche A Note") or Exhibit A-2 in the case of the Tranche B Loans (each, a "Tranche B Note," and with the Tranche A Notes, the "Notes"), with appropriate insertions as to payee and date, payable to the order of such Lender and in a principal amount up to the Tranche A Commitment or Tranche B Commitment, as the case may be, of such Lender. Each Lender is hereby authorized to record the date, Type and amount of each Loan made by such Lender, each continuation thereof, each conversion of all or a portion thereof to another Type, and the date and amount of each payment or prepayment of principal thereof on the schedule annexed to and constituting a part of its Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided, that the failure to make any such recordation or any error in such recordation shall not affect the Borrower's obligations hereunder or under such Note. Each Note shall (i) be dated the Initial Closing Date, (ii) be stated to mature on the Maturity Date and (iii) provide for the payment of principal in accordance with Section 2.6(d) and the payment of interest in accordance with Section 2.8. 2.3 PROCEDURE FOR BORROWING. (a) The Borrower may borrow under the Commitments during the Commitment Period on any Business Day that an Advance may be requested pursuant to the terms of Section 5.2 of the Participation Agreement, provided, that the Borrower shall give the Agent irrevocable notice (which must be received by the Agent prior to 12:00 Noon, New York time, at least three (3) Business Days prior to the requested Borrowing 2 6 Date specifying (i) the amount to be borrowed (which on any date shall not be in excess of the then Available Commitments), (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof, (iv) if the borrowing is to be a combination of Eurodollar Loans and ABR Loans, the respective amounts of each Type of Loan and (v) the Interest Period applicable to each Eurodollar Loan. Pursuant to the terms of the Participation Agreement, the Borrower shall be deemed to have delivered such notice upon the delivery of a notice by the Construction Agent or the Lessee containing such required information. Upon receipt of any such notice from the Borrower, the Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Agent for the account of the Borrower at the office of the Agent specified in Section 9.2 prior to 12:00 Noon, New York time, on the Borrowing Date requested by the Borrower in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by the Agent crediting an account designated, subject to Section 9.1 of the Participation Agreement, by the Borrower on the books of such office with the aggregate of the amounts made available to the Agent by the Lenders and in like funds as received by the Agent. No amount of any Loan which is repaid or prepaid by the Borrower may be reborrowed hereunder, except as set forth in Section 5.2(d) of the Participation Agreement. (b) Interest accruing on each Loan during the Construction Period with respect to any Property shall, subject to the limitations set forth in Section 5.1(b) of the Participation Agreement be added to the principal amount of such Loan on the relevant Scheduled Interest Payment Date. On each such Scheduled Interest Payment Date, the Loan Property Cost and Construction Loan Property Cost shall be increased by the amount of interest added to the Loans. 2.4 LENDER UNUSED FEES. Promptly after receipt from the Lessee of the payment of the Lender Unused Fee payable pursuant to Section 7.4 of the Participation Agreement, the Agent shall distribute such payments to the Lenders pro rata in accordance with their respective Commitments. 2.5 TERMINATION OR REDUCTION OF COMMITMENTS. (a) The Borrower shall have the right, upon not less than three (3) Business Days' written notice to the Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments, provided, that (i) after giving effect to such reduction, the aggregate outstanding principal amount of the Loans shall not exceed the aggregate Commitments and (ii) such notice shall be accompanied by a certificate of the Construction Agent stating that the amount equal to ninety-seven percent (97%) of aggregate Budgeted Total Property Costs as of the date of such reduction does not exceed the aggregate amount of Available Commitments as of such date after giving effect to such reduction. Any such reduction (A) shall be in an amount equal to the lesser of (1) $1,000,000.00 (or a positive integer multiple thereof) or (2) the remaining Available 3 7 Commitments, (B) shall reduce permanently the Commitments then in effect and (C) shall be pro rata for the Commitments of all Lenders and pro rata between the Tranche A Loans and the Tranche B Loans. (b) The Commitments respecting any particular Property shall automatically be reduced to zero (0) upon the occurrence of the Rent Commencement Date respecting such Property. On any date on which the Commitments shall automatically be reduced to zero (0) pursuant to Section 6, the Borrower shall prepay all outstanding Loans, together with accrued unpaid interest thereon and all other amounts owing thereunder. 2.6 PREPAYMENTS AND PAYMENTS. (a) Subject to Sections 11.2(e), 11.3 and 11.4 of the Participation Agreement, the Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon at least three (3) Business Days' irrevocable notice to the Agent, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if a combination thereof, the amount allocable to each. Upon receipt of any such notice the Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Amounts prepaid may not be reborrowed, and shall reduce the Commitments and the Available Commitments, except in each case as set forth in Section 5.2(d) of the Participation Agreement. All Loans outstanding shall be due and payable in full on the Maturity Date. (b) If on any date the Agent or the Lessor shall receive any payment in respect of (i) any Casualty, Condemnation or Environmental Violation pursuant to Sections 15.1(a) or 15.1(g) or Article XVI of the Lease (excluding any payments in respect thereof which are payable to the Lessee in accordance with the Lease), or (ii) the Termination Value of any Property in connection with the delivery of a Termination Notice pursuant to Article XVI of the Lease, or (iii) the Termination Value of any Property in connection with the exercise of the Purchase Option under Article XX of the Lease or the exercise of the option of the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of the Lease, or (iv) any payment required to be made or elected to be made by the Construction Agent to the Lessor pursuant to the terms of the Agency Agreement, then in each case, the Borrower shall pay such amounts to the Agent and the Agent shall be required to apply and pay such amounts in accordance with the provisions of Section 8.7(b)(ii) of the Participation Agreement. (c) Each prepayment of the Loans pursuant to Section 2.6(a) shall be allocated to reduce the respective Loan Property Costs of all Properties pro rata according to the Loan Property Costs of such Properties immediately before giving effect to such prepayment. Each prepayment of the Loans pursuant to Section 2.6(b) shall be allocated to reduce the Loan Property Cost of the Property or Properties subject to the respective Casualty, Condemnation, Environmental Violation, termination, purchase, transfer or other circumstance giving rise to such prepayment. Any amounts applied to reduce the 4 8 Loan Property Cost of any Construction Period Property pursuant to this paragraph (c) shall also be applied to reduce the Construction Loan Property Cost of such Property until such Construction Loan Property Cost has been reduced to zero (0). (d) On each date set forth on Schedule 1 to the Participation Agreement, the Borrower shall repay the outstanding principal balance of the Tranche A Loans in part in an amount equal to the product of (i) the percentage set forth beside such date on such Schedule 1 to the Participation Agreement multiplied by (ii) the aggregate principal amount of Loans and Holder Advances expended for Equipment as set forth in the Completion Certificate. In the event the Rent Commencement Date occurs prior to February 13, 2001, then Schedule 1 to the Participation Agreement shall be amended to provide for a straight amortization of seventy-seven percent (77%) of Tranche A Loans expended for Equipment as such amendments are reasonably acceptable to the Agent. All such partial repayments of the principal balance of the Tranche A Loans pursuant to this Section 2.6(d) shall be applied to reduce the Loan Property Cost regarding the Tranche A Loans. If any such principal payment is required on a day that is not a Business Day, then such principal payment shall be due on the next succeeding Business Day. 2.7 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Agent at least three (3) Business Days' prior irrevocable notice of such election, provided, that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto, and provided, further, to the extent an Event of Default has occurred and is continuing on the last day of any such Interest Period, the applicable Eurodollar Loan shall automatically be converted to an ABR Loan. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Agent at least three (3) Business Days' prior irrevocable notice of such election. Upon receipt of any such notice, the Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Loans or ABR Loans may be converted as provided herein, provided, that (i) no ABR Loan may be converted into a Eurodollar Loan after the date that is one (1) month prior to the Maturity Date and (ii) such notice of conversion regarding any Eurodollar Loan shall contain an election by the Borrower of an Interest Period for such Eurodollar Loan to be created by such conversion and such Interest Period shall be in accordance with the terms of the definition of the term "Interest Period" including without limitation subparagraphs (A) through (D) thereof. (b) Subject to the restrictions set forth in Section 2.3 hereof, any Eurodollar Loan may be continued as such upon the expiration of the current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Agent, in accordance with the applicable notice provision for the conversion of ABR Loans to Eurodollar Loans set forth herein, of the length of the next Interest Period to be applicable to such Loans, provided, that no Eurodollar Loan may be continued as such after the date that is one (1) month prior to the Maturity Date, provided, further, no Eurodollar Loans may be 5 9 continued as such if an Event of Default has occurred and is continuing as of the last day of the Interest Period for such Eurodollar Loan, and provided, further, that if the Borrower shall fail to give any required notice as described above or otherwise herein, or if such continuation is not permitted pursuant to the proceeding proviso, such Loan shall automatically be converted to an ABR Loan on the last day of such then expiring Interest Period. 2.8 INTEREST RATES AND PAYMENT DATES. (a) The Loans outstanding hereunder from time to time shall bear interest at a rate per annum equal to either (i) with respect to a Eurodollar Loan, the Eurodollar Rate determined for the applicable Interest Period plus the Applicable Percentage or (ii) with respect to an ABR Loan, the ABR plus the Applicable Percentage, as selected by the Borrower in accordance with the provisions hereof; provided, however, (A) upon delivery by the Agent of the notice described in Section 2.9(c), the Loans of each of the Lenders shall bear interest at the ABR plus the Applicable Percentage applicable from time to time from and after the dates and during the periods specified in Section 2.9(c), (B) upon the delivery by a Lender of the notice described in Section 11.3(f) of the Participation Agreement, the Loans of such Lender shall bear interest at the ABR plus the Applicable Percentage applicable from time to time from and after the dates and during the periods specified in Section 11.3(f) of the Participation Agreement and (C) in such other circumstances as expressly provided herein, the Loans shall bear interest at the ABR plus the Applicable Percentage. (b) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is the lesser of (x) the then current rate of interest respecting such payment plus two percent (2%) and (y) the highest interest rate permitted by applicable law, in each case from the date of such non-payment until such amount is paid in full (whether after or before judgment). (c) Interest shall be payable in arrears on the applicable Scheduled Interest Payment Date, provided, that (i) interest accruing pursuant to paragraph (b) of this Section 2.8 shall be payable from time to time on demand and (ii) each prepayment of the Loans shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid. 2.9 COMPUTATION OF INTEREST. (a) Whenever it is calculated on the basis of the Prime Lending Rate, interest shall be calculated on the basis of a year of three hundred sixty-five (365) days (or three hundred sixty-six (366) days, as the case may be) for the actual days elapsed; and, otherwise, interest shall be calculated on the basis of a year of three hundred sixty (360) days for the actual days elapsed. The Agent shall as soon as practicable notify the 6 10 Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the day on which such change becomes effective. The Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. (c) If the Eurodollar Rate cannot be determined by the Agent in the manner specified in the definition of the term "Eurodollar Rate", the Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. Until such time as the Eurodollar Rate can be determined by the Agent in the manner specified in the definition of such term, no further Eurodollar Loans shall be made or shall be continued as such at the end of the then current Interest Period nor shall the Borrower have the right to convert ABR Loans to Eurodollar Loans. 2.10 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by the Borrower from the Lenders hereunder and any reduction of the Commitments of the Lenders shall be made pro rata according to their respective Commitments. Subject to the provisions of Section 8.7 of the Participation Agreement and Section 2.11(b) hereof, each payment (including without limitation each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts on the Loans then held by the Lenders. All payments (including without limitation prepayments) to be made by the Borrower hereunder and under the Notes, whether on account of principal, interest or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York time, on the due date thereof to the Agent, for the account of the Lenders, at the Agent's office specified in Section 9.2, in Dollars and in immediately available funds. The Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day; provided, however, if such payment includes an amount of interest calculated with reference to the Eurodollar Rate and the result of such extension would be to extend such payment into another calendar month, then such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two (2) sentences, interest thereon shall be payable at the then applicable rate during such extension. (b) Unless the Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make its share of such borrowing available to the Agent, the Agent may assume that such Lender is making such amount available to the Agent, and the Agent may, in reliance upon such assumption, make available to the 7 11 Borrower a corresponding amount. If such amount is not made available to the Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Agent. A certificate of the Agent submitted to any Lender with respect to any amounts owing under this Section 2.10(b) shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Agent by such Lender within three (3) Business Days of such Borrowing Date, the Agent shall also be entitled to recover such amount with interest thereon at the rate as set forth above on demand from the Borrower. 2.11 NOTICE OF AMOUNTS PAYABLE; MANDATORY ASSIGNMENT. (a) In the event that any Lender becomes aware that any amounts are or will be owed to it pursuant to Sections 11.2(e) or 11.3 of the Participation Agreement or that it is unable to make Eurodollar Loans, then it shall promptly notify the Borrower, the Lessee and the Agent thereof and, as soon as possible thereafter, such Lender shall submit to the Borrower (with a copy to the Agent) a certificate indicating the amount owing to it and the calculation thereof. The amounts set forth in such certificate shall be prima facie evidence of the obligations of the Borrower hereunder. (b) In the event that any Lender delivers to the Borrower a certificate in accordance with Section 2.11(a) in connection with amounts payable pursuant to Sections 11.2(e) or 11.3 of the Participation Agreement or such Lender is required to make Loans as ABR Loans in accordance with Section 11.3(d) of the Participation Agreement then, subject to Section 9.1 of the Participation Agreement, the Borrower may, at its own expense (provided, such amounts shall be reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as Supplemental Rent) and in the discretion of the Borrower, (i) require such Lender to transfer or assign, in whole or (with such Lender's consent) in part, without recourse (in accordance with Section 9.8), all or (with such Lender's consent) part of its interests, rights (except for rights to be indemnified for actions taken while a party hereunder) and obligations under this Agreement to a replacement bank or institution if the Borrower (subject to Section 9.1 of the Participation Agreement), with the full cooperation of such Lender, can identify a Person who is ready, willing and able to be such replacement bank or institution with respect thereto and such replacement bank or institution (which may be another Lender) shall assume such assigned obligations, or (ii) during such time as no Default or Event of Default has occurred and is continuing, terminate the Commitment of such Lender and prepay all outstanding Loans of such Lender; provided, however, that (x) subject to Section 9.1 of the Participation Agreement, the Borrower or such replacement bank or institution, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Loans made by it hereunder and all other amounts owed to it hereunder (and, if such Lender is also a Holder, all Holder Advances and Holder Yield accrued and unpaid thereon), (y) any termination of Commitments shall be subject to the terms of Section 2.5(a) and (z) such assignment or termination of the Commitment of 8 12 such Lender and prepayment of Loans does not conflict with any law, rule or regulation or order of any court or Governmental Authority. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Agent and the Lenders to enter into this Agreement and to make the Loans, each of the Trust Company and the Owner Trustee hereby makes and affirms the representations and warranties set forth in Section 6.1 of the Participation Agreement to the same extent as if such representations and warranties were set forth in this Agreement in their entirety. SECTION 4. CONDITIONS PRECEDENT 4.1 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement is subject to the satisfaction of all conditions precedent set forth in Section 5.3 of the Participation Agreement required by said Section to be satisfied on or prior to the Initial Closing Date. 4.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to make any Loan requested to be made by it on any date is subject to the satisfaction of all conditions precedent set forth in Section 5.3 and 5.4 of the Participation Agreement required by said Sections to be satisfied on or prior to the date of the applicable Loan. Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such Loan that the conditions contained in this Section 4.2 have been satisfied. SECTION 5. COVENANTS Unless the Agent and each Lender has otherwise given its express written consent during such period that any Loan or Note remains outstanding and unpaid or any other amount is owing to any Lender or the Agent hereunder: 5.1 OTHER ACTIVITIES. The Borrower shall not conduct, transact or otherwise engage in, or commit to transact, conduct or otherwise engage in, any business or operations other than the entry into, and exercise of rights and performance of obligations in respect of, the Operative Agreements and other activities incidental or related to the foregoing. 9 13 5.2 OWNERSHIP OF PROPERTIES, INDEBTEDNESS. The Borrower shall not own, lease, manage or otherwise operate any properties or assets other than in connection with the activities described in Section 5.1, or incur, create, assume or suffer to exist any Indebtedness or other consensual liabilities or financial obligations other than as may be incurred, created or assumed or as may exist in connection with the activities described in Section 5.1 (including without limitation the Loans and other obligations incurred by the Borrower hereunder). 5.3 DISPOSITION OF ASSETS. The Borrower shall not convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets, whether now owned or hereafter acquired, except to the extent expressly contemplated by the Operative Agreements. 5.4 COMPLIANCE WITH OPERATIVE AGREEMENTS. The Borrower shall at all times (a) observe and perform all of the covenants, conditions and obligations required to be performed by it (whether in its capacity as the Lessor, the Owner Trustee or otherwise) under each Operative Agreement to which it is a party and (b) observe and perform, or cause to be observed and performed, all of the covenants, conditions and obligations of the Lessor under the Lease, even in the event that the Lease is terminated at stated expiration following a Lease Event of Default or otherwise. 5.5 FURTHER ASSURANCES. At any time and from time to time, upon the written request of the Agent, and at the expense of the Borrower (provided, such amounts shall be reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as Supplemental Rent), the Borrower will promptly and duly execute and deliver such further instruments and documents and take such further action as the Agent or the Majority Lenders may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and the other Operative Agreements and of the rights and powers herein or therein granted. 5.6 NOTICES. If on any date, a Responsible Officer of the Borrower shall obtain actual knowledge of the occurrence of a Default or Event of Default, the Borrower will give written notice thereof to the Agent within five (5) Business Days after such date. 5.7 DISCHARGE OF LIENS. Neither the Borrower nor the Trust Company will create or permit to exist at any time, and will, at its own expense, promptly take such action as may be necessary duly to discharge, or cause to be discharged, all Lessor Liens attributable to it, provided, that the Borrower and the 10 14 Trust Company shall not be required to discharge any Lessor Lien while the same is being contested in good faith by appropriate proceedings diligently prosecuted so long as such proceedings shall not involve any material danger of impairment of any of the Liens contemplated by the Security Documents or of the sale, forfeiture or loss of, and shall not materially interfere with the disposition of, any Property or title thereto or any interest therein or the payment of Rent. 5.8 TRUST AGREEMENT. Without prejudice to any right under the Trust Agreement of the Owner Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the trust created by the Trust Agreement except as permitted by Article VIII of the Trust Agreement, (b) agrees not to amend, supplement, terminate, revoke or otherwise modify any provision of the Trust Agreement in any manner which could reasonably be expected to have an adverse effect on the rights or interests of the Agent or the Lenders hereunder or under the other Operative Agreements and (c) agrees to comply with all of the terms of the Trust Agreement. SECTION 6. EVENTS OF DEFAULT Upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Except as provided in Sections 6(c), the Borrower shall default in the payment when due of any principal on the Loans or default in the payment when due of any interest on the Loans, and in either such case, such default shall continue for three (3) or more days; or (b) Except as provided in Sections 6(a) and 6(c), the Borrower shall default, and such default shall continue for three (3) or more days, in the payment of any amount owing under any Credit Document; or (c) (i) The Borrower shall default in the payment of any amount due on the Maturity Date owing under any Credit Document or (ii) the Borrower shall default in the payment when due of any principal or interest on the Loans payable with regard to any obligation of Lessee to pay Termination Value when due or to pay Basic Rent or Supplemental Rent at such time as any Termination Value is due; or (d) The Borrower shall default in the due performance or observance by it of any term, covenant or agreement contained in any Credit Document to which it is a party (other than those referred to in paragraphs (a), (b) and (c) above), provided, that in the case of any such default under Sections 5.4, 5.5 or 5.8(c), such default shall have continued unremedied for a period of at least fifteen (15) days after notice to the Borrower by the Agent or the Majority Lenders, provided, further, if any such default under Sections 5.4, 5.5 or 5.8(c) is not capable of remedy within such fifteen (15) day period but may be remedied with further diligence and if the Borrower has and continues 11 15 to pursue diligently such remedy, then the Borrower shall be granted additional time to pursue such remedy but in no event more than an additional thirty (30) days. (e) Any representation, warranty or statement made or deemed made by the Borrower herein or in any other Credit Document or by the Borrower or the Lessee in the Participation Agreement, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto, shall prove to be untrue in any material respect on the date as of which made or deemed made; or (f) (i) Any Lease Event of Default shall have occurred and be continuing, or (ii) the Owner Trustee shall default in the due performance or observance by it of any term, covenant or agreement contained in the Participation Agreement or in the Trust Agreement to or for the benefit of the Agent or a Lender, provided, that in the case of this clause (ii) such default shall have continued unremedied for a period of at least fifteen (15) days after notice to the Owner Trustee and Lessee by the Agent or the Majority Lenders, provided, further, that in the case of this clause (ii), such default is not capable of remedy within such fifteen (15) day period but may be remedied with further diligence and if the Borrower has and continues to pursue diligently such remedy, then the Borrower shall be granted additional time to pursue such remedy but in no event more than an additional thirty (30) days; or (g) The Borrower shall commence a voluntary case concerning itself under the Bankruptcy Code or an involuntary case is commenced against the Borrower and the petition is not contravened within ten (10) days after commencement of the case or an involuntary case is commenced against the Borrower and the petition is not dismissed within sixty (60) days after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower; or the Borrower commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower, or there is commenced against the Borrower any such proceeding which remains undismissed for a period of sixty (60) days; or the Borrower is adjudicated insolvent or bankrupt, or any order of relief or other order approving any such case or proceeding is entered; or the Borrower suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of sixty (60) days; or the Borrower makes a general assignment for the benefit of creditors; or any corporate or partnership action is taken by the Borrower for the purpose of effecting any of the foregoing; or (h) Any Security Document shall cease to be in full force and effect, or shall cease to give the Agent the Liens, rights, powers and privileges purported to be created thereby (including without limitation a first priority perfected security interest in, and Lien on, all of the Properties), in favor of the Agent on behalf of the Lenders and the Holders, superior to and prior to the rights of all third Persons and subject to no other 12 16 Liens (except in each case to the extent expressly permitted herein or in any Operative Agreement) other than any Ground Lease; or (i) The Lease shall cease to be enforceable against the Lessee; or (j) One (1) or more judgments or decrees shall be entered against the Borrower involving a liability of $100,000.00 or more in the aggregate for all such judgments and decrees for the Borrower and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within sixty (60) days from the entry thereof, then, and in any such event, (A) if such event is an Event of Default specified in paragraph (g) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Agent may, or upon the request of the Majority Lenders, the Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Agent may, or upon the request of the Majority Lenders, the Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable (any of the foregoing occurrences or actions referred to in clause (A) or (B) above, an "Acceleration"). Except as expressly provided above in this Section 6, presentment, demand, protest and all other notices of any kind are hereby expressly waived. Upon the occurrence of any Event of Default and at any time thereafter so long as any Event of Default shall be continuing, the Agent shall, upon the written instructions of the Majority Secured Parties, exercise any or all of the rights and powers and pursue any and all of the remedies available to it hereunder and (subject to the terms thereof) under the other Credit Documents, the Lease and the other Operative Agreements and shall have any and all rights and remedies available under the Uniform Commercial Code or any provision of law. Upon the occurrence of any Event of Default and at any time thereafter so long as any Event of Default shall be continuing, the Agent may, and upon request of the Majority Secured Parties shall, proceed to protect and enforce this Agreement, the Notes, the other Credit Documents and the Lease by suit or suits or proceedings in equity, at law or in bankruptcy, and whether for the specific performance of any covenant or agreement herein contained or in execution or aid of any power herein granted, or for foreclosure hereunder, or for the appointment of a receiver or receivers for the Property or for the recovery of judgment for the indebtedness secured thereby or for the enforcement of any other proper, legal or equitable remedy available under applicable laws. 13 17 The Borrower shall be liable for any and all accrued and unpaid amounts due hereunder before, after or during the exercise of any of the foregoing remedies, including without limitation all reasonable legal fees and other reasonable costs and expenses incurred by the Agent or any Lender by reason of the occurrence of any Event of Default or the exercise of remedies with respect thereto. SECTION 7. THE AGENT 7.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints the Agent as the agent of such Lender under this Agreement and the other Operative Agreements, and each such Lender irrevocably authorizes the Agent, in such capacity, to execute the Operative Agreements as agent for and on behalf of such Lender, to take such action on behalf of such Lender under the provisions of this Agreement and the other Operative Agreements and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and other Operative Agreements, together with such other powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, each of the Lenders hereby specifically acknowledges the terms and provisions of the Participation Agreement and directs the Agent to exercise such powers, make such decisions and otherwise perform such duties as are delegated to the Agent thereunder without being required to obtain any specific consent with respect thereto from any Lender, unless the matter under consideration is a Unanimous Vote Matter or otherwise requires the consent of the Majority Lenders and/or the Majority Secured Parties. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Operative Agreement or otherwise exist against the Agent. 7.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement and the other Operative Agreements by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 7.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Operative Agreement (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or the Lessee or any officer thereof contained in this Agreement or any other Operative Agreement or in any certificate, report, statement or other document referred to or 14 18 provided for in, or received by the Agent under or in connection with, this Agreement or any other Operative Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Operative Agreement or for any failure of the Borrower or the Lessee to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Operative Agreement, or to inspect the properties, books or records of the Borrower or the Lessee. 7.4 RELIANCE BY THE AGENT. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including without limitation counsel to the Borrower or the Lessee), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Operative Agreement unless it shall first receive such advice or concurrence of the Majority Lenders, the Majority Secured Parties or all Secured Parties, as the case may be, as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Operative Agreements in accordance with a request of the Majority Lenders, the Majority Secured Parties or all Secured Parties, as the case may be, and such and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes (or all Secured Parties, as the case may be). 7.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Secured Parties; provided, that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Secured Parties; provided, further, the foregoing shall not limit (a) the rights of the Majority Secured Parties to elect remedies as set forth in Section 6 and/or (b) the rights of the Majority Secured Parties or all Secured Parties, as the case may be, as described in the Participation Agreement (including without limitation Sections 8.2(h) and 8.6 of the Participation Agreement). 15 19 7.6 NON-RELIANCE ON THE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including without limitation any review of the affairs of the Borrower or the Lessee, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and the Lessee and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Operative Agreements, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower and the Lessee. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower or the Lessee which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 7.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent, in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought under this Section 7.7 (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their Commitment Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Notes) be imposed on, incurred by or asserted against any of them in any way relating to or arising out of, the Commitments, this Agreement, any of the other Operative Agreements or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any of them under or in connection with any of the foregoing; provided, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent. The agreements in this Section 7.7 shall survive the payment of the Notes and all other amounts payable hereunder. 16 20 7.8 THE AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower or the Lessee as though the Agent were not the Agent hereunder and under the other Operative Agreements. With respect to its Loans made or renewed by it and any Note issued to it, the Agent shall have the same rights and powers under this Agreement and the other Operative Agreements as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 7.9 SUCCESSOR AGENT. The Agent may resign at any time as the Agent upon thirty (30) days' notice to the Lenders, the Borrower and, so long as no Lease Event of Default shall have occurred and be continuing, the Lessee. If the Agent shall resign as the Agent under this Agreement, the Majority Lenders shall appoint from among the Lenders a successor Agent which successor Agent shall be subject to the approval of the Borrower and, so long as no Lease Event of Default shall have occurred and be continuing, the Lessee, such approval not to be unreasonably withheld or delayed. If no successor Agent is appointed prior to the effective date of the resignation of the resigning Agent, the Agent may appoint, after consulting with the Lenders and subject to the approval of the Borrower and, so long as no Lease Event of Default shall have occurred and be continuing, the Lessee, such approval not to be unreasonably withheld or delayed, a successor Agent from among the Lenders. If no successor Agent has accepted appointment as the Agent by the date which is thirty (30) days following a retiring Agent's notice of resignation, the retiring Agent's notice of resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent until such time, if any, as the Majority Lenders appoint a successor Agent, as provided for above. Upon the effective date of such resignation, only such successor Agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's rights, powers and duties in such capacity shall be terminated. After any retiring Agent resigns hereunder as the Agent, the provisions of this Article VII and Section 9.5 shall inure to their respective benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement. 7.10 ACTIONS OF THE AGENT ON BEHALF OF HOLDERS. The parties hereto specifically acknowledge and consent to the Agent's acting on behalf of the Holders as provided in the Participation Agreement, and, in any such case, the Lenders acknowledge that the Holders shall be entitled to vote as "Secured Parties" hereunder to the extent required or permitted by the Operative Agreements (including without limitation Sections 8.2(h) and 8.6 of the Participation Agreement). 7.11 THE AGENT'S DUTY OF CARE. Other than the exercise of reasonable care to assure the safe custody of the Collateral while being held by the Agent hereunder or under any other Operative Agreement, the Agent 17 21 shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Lessee shall be responsible for preservation of all rights in the Collateral, and the Agent shall be relieved of all responsibility for the Collateral upon surrendering it or tendering the surrender of it to the Lessee. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Agent accords its own property, which shall be no less than the treatment employed by a reasonable and prudent agent in the industry, it being understood that the Agent shall not have responsibility for taking any necessary steps to preserve rights against any parties with respect to any of the Collateral. SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL 8.1 COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS. The Lessee, the Construction Agent, the Agent, the Lenders, the Holders and the Borrower have agreed pursuant to the terms of Section 8.7 of the Participation Agreement to a procedure for the allocation and distribution of certain payments and distributions, including without limitation the proceeds of Collateral. 8.2 CERTAIN REMEDIAL MATTERS. Notwithstanding any other provision of this Agreement or any other Credit Document: (a) the Borrower shall at all times retain to the exclusion of all other parties, all rights to Excepted Payments payable to it and to demand, collect or commence an action at law to obtain such payments and to enforce any judgment with respect thereto; and (b) the Borrower and each Holder shall at all times retain the right, but not to the exclusion of the Agent, (i) to retain all rights with respect to insurance that Article XIV of the Lease specifically confers upon the "Lessor", (ii) to provide such insurance as the Lessee shall have failed to maintain or as the Borrower or any Holder may desire, and (iii) to enforce compliance by the Lessee with the provisions of Articles VIII, IX, X, XI, XIV and XVII of the Lease. 8.3 EXCEPTED PAYMENTS. Notwithstanding any other provision of this Agreement or the Security Documents, any Excepted Payment received at any time by the Agent shall be distributed promptly to the Person entitled to receive such Excepted Payment. 18 22 SECTION 9. MISCELLANEOUS 9.1 AMENDMENTS AND WAIVERS. None of the terms or provisions of this Agreement may be terminated, amended, supplemented, waived or modified except in accordance with the terms of Section 12.4 of the Participation Agreement. 9.2 NOTICES. All notices required or permitted to be given under this Agreement shall be given in accordance with Section 12.2 of the Participation Agreement. 9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by the Borrower under the Operative Agreements shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans hereunder. 9.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees to (with funds provided by the Lessee as Supplemental Rent): (a) pay all reasonable out-of-pocket costs and expenses of (i) the Agent whether or not the transactions herein contemplated are consummated, in connection with the negotiation, preparation, execution and delivery of the Operative Agreements and the documents and instruments referred to therein (including without limitation the reasonable fees and disbursements of Moore & Van Allen, PLLC) and any amendment, waiver or consent relating thereto (including without limitation the reasonable fees and disbursements of counsel to the Agent) and (ii) the Agent and each of the Lenders in connection with the enforcement of the Operative Agreements and the documents and instruments referred to therein (including without limitation the reasonable fees and disbursements of counsel for the Agent and for each of the Lenders) and (b) pay and hold each of the Lenders harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes. 19 23 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agent, all future holders of the Notes and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. 9.7 PARTICIPATIONS. Subject to and in accordance with Section 10.1 of the Participation Agreement, any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one (1) or more banks, financial institutions or other entities (each, a "Participant") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Operative Agreements; provided, that any such sale of a participating interest shall be in a principal amount of at least $2,000,000.00 or such lesser amount constituting such Lender's entire interest in this Agreement and the Notes. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement and the Notes, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the Notes. In no event shall any Participant have any right to approve any amendment or waiver of any provision of this Agreement or any other Operative Agreement, or any consent to any departure by the Borrower or any other Person therefrom, except to the extent that such amendment, waiver or consent would (a) reduce the principal of, or interest on, any Loan or Note, or postpone the date of the final maturity of any Loan or Note, or reduce the amount of any Lender Unused Fee, in each case to the extent subject to such participation or (b) release all or substantially all of the Collateral. The Borrower agrees that, while an Event of Default shall have occurred and be continuing, if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interests in amounts owing directly to it as a Lender under this Agreement or any Note, provided, that in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 9.10(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 11.2(e), 11.3 and 11.4 of the Participation Agreement with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided, that such Participant shall have complied with the requirements of said Sections and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. 20 24 9.8 ASSIGNMENTS. (a) Subject to and in accordance with Section 10.1 of the Participation Agreement, any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate of any Lender or, with the consent, subject to Section 9.1 of the Participation Agreement, of the Borrower and the Agent (which in each case shall not be unreasonably withheld or delayed and which consent of the Borrower shall not be required during the continuation of any Event of Default), to an additional bank, financial institution or other entity that is either organized under the laws of the United States or any state thereof or is a foreign bank that operates a branch office in the United States, (each, a "Purchasing Lender") all or any part of its rights and obligations under this Agreement and the other Operative Agreements pursuant to an Assignment and Acceptance, substantially in the form of Exhibit B, executed by such Purchasing Lender, such assigning Lender (and, in the case of a Purchasing Lender that is not a Lender or an affiliate thereof, subject to Section 9.1 of the Participation Agreement, by the Borrower and the Agent) and delivered to the Agent for its acceptance and recording in the Register; provided, that no such assignment to a Purchasing Lender (other than any Lender or any affiliate thereof) shall be in an aggregate principal amount less than $5,000,000.00 (other than in the case of an assignment of all of a Lender's interests under this Agreement and the Notes). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding anything to the contrary in this Agreement, the consent of the Borrower shall not be required, and, unless requested by the relevant Purchasing Lender and/or assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time when any of the events described in Section 6(g) shall have occurred and be continuing. (b) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and a Purchasing Lender (and, in the case of a Purchasing Lender that is not a Lender or an affiliate thereof, by the Borrower and the Agent) together with payment to the Agent of a registration and processing fee of $2,500.00 (which shall not be payable by the Borrower or the Lessee, except as otherwise provided in connection with an assignment requested in accordance with Section 2.11(b)), the Agent shall (i) promptly accept such Assignment and Acceptance and (ii) promptly after the effective date determined pursuant thereto, record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. On or prior to such effective date, the Borrower, at its own expense, shall execute and deliver 21 25 to the Agent new Notes (in exchange for the Notes of the assigning Lender), each in an amount equal to the Commitment assumed or Loans purchased by the relevant Purchasing Lender pursuant to such Assignment and Acceptance, and, if the assigning Lender has retained a Commitment or any Loan hereunder, new Notes to the order of the assigning Lender, each in an amount equal to the Commitment or Loans retained by it hereunder. Such new Notes shall be dated the effective date of the applicable Assignment and Acceptance and shall otherwise be in the form of the Notes replaced thereby. (c) Each Purchasing Lender (other than any Lender organized and existing under the laws of the U.S. or any political subdivision in or of the U.S.), by executing and delivering an Assignment and Acceptance, (i) agrees to execute and deliver to the Agent, as promptly as practicable, four (4) signed copies (two (2) for the Agent and two (2) for delivery by the Agent to the Borrower) of Form 1001 or Form 4224 (or any successor form or comparable form) (it being understood that if the applicable form is not so delivered, payments under or in respect of this Agreement may be subject to withholding and deduction); (ii) represents and warrants to the Borrower and the Agent that the form so delivered is true and accurate and that, as of the effective date of the applicable Assignment and Acceptance, each of such Purchasing Lender's lending offices is entitled to receive payments of principal and interest under or in respect of this Agreement without withholding or deduction for or on account of any taxes imposed by the U.S. Federal government; (iii) agrees to annually hereafter deliver to each of the Borrower and the Agent not later than December 31 of the year preceding the year to which it will apply, two (2) further properly completed signed copies of Form 1001 or Form 4224 (or any successor form or comparable form), as appropriate, unless an event has occurred which renders the relevant form inapplicable (it being understood that if the applicable form is not so delivered, payments under or in respect of this Agreement may be subject to withholding and deduction); (iv) agrees to promptly notify the Borrower and the Agent in writing if it ceases to be entitled to receive payments of principal and interest under or in respect of this Agreement without withholding or deduction for or on account of any taxes imposed by the U.S. or any political subdivision in or of the U.S. (it being understood that payments under or in respect of this Agreement may be subject to withholding and deduction in such event); (v) acknowledges that in the event it ceases to be exempt from withholding and/or deduction of such taxes, the Agent may withhold and/or deduct the applicable amount from any payments to which such assignee Lender 22 26 would otherwise be entitled, without any liability to such assignee Lender therefor; and (vi) agrees to indemnify the Borrower and the Agent from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs or expenses that result from such assignee Lender's breach of any such representation, warranty or agreement. (d) Any Lender party to this Agreement may, from time to time and without the consent of the Borrower or any other Person, pledge or assign for security purposes any portion of its Loans or any other interests in this Agreement and the other Credit Documents to any Federal Reserve Bank. 9.9 THE REGISTER; DISCLOSURE; PLEDGES TO FEDERAL RESERVE BANKS. (a) The Agent shall maintain for the benefit of the Lenders at its address referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders, the Commitments of the Lenders, and the principal amount of the Loans owing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence of clearly demonstrable error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable notice. (b) Nothing herein shall prohibit any Lender from pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law. 9.10 ADJUSTMENTS; SET-OFF. (a) Except as otherwise expressly provided in Section 8.1 hereof and Section 8.7 of the Participation Agreement where, and to the extent, one (1) Lender is entitled to payments prior to other Lenders, if any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 6(g), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be 23 27 rescinded, and the purchase price and benefits returned, to the event of such recovery, but without interest. (b) In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, the Agent and each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by the Agent or such Lender (including without limitation by branches and agencies of the Agent or such Lender wherever located) or any affiliate of such Lender to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to the Agent or such Lender under this Agreement or under any of the other Operative Agreements, including without limitation all interests in obligations of the Borrower purchased by any such Lender pursuant to Section 9.10(a), and all other claims of any nature or description arising out of or connected with this Agreement or any other Operative Agreement, irrespective or whether or not the Agent or such Lender shall have made any demand and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 9.11 COUNTERPARTS. This Agreement may be executed by one (1) or more of the parties to this Agreement on any number of separate counterparts (including without limitation by telecopy), and all of said counterparts taken together shall be deemed to constitute one (1) and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Agent. 9.12 SEVERABILITY. Any provision of this 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 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. 9.13 INTEGRATION. This Agreement and the other Credit Documents represent the agreement of the Borrower, the Agent, and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 24 28 9.14 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH CAROLINA. 9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION. THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS. 9.16 ACKNOWLEDGMENTS. The Borrower hereby acknowledges that: (a) neither the Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between the Agent and the Lenders, on one (1) hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (b) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 9.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 9.18 NONRECOURSE. In addition to and not in limitation of Section 12.9 of the Participation Agreement, anything to the contrary contained in this Agreement or in any other Operative Agreement notwithstanding, no Exculpated Person shall be personally liable in any respect for any liability or obligation hereunder or under any other Operative Agreement including without limitation the payment of the principal of, or interest on, the Notes, or for monetary damages for the breach of performance of any of the covenants contained in this Agreement, the Notes or any of the other Operative Agreements. The Agent and the Lenders agree that, in the event any of them pursues any remedies available to them under this Agreement, the Notes or any other Operative 25 29 Agreement, neither the Agent nor the Lenders shall have any recourse against the Borrower, nor any other Exculpated Person, for any deficiency, loss or claim for monetary damages or otherwise resulting therefrom and recourse shall be had solely and exclusively against the Trust Estate and the Lessee; but nothing contained herein shall be taken to prevent recourse against or the enforcement of remedies against the Trust Estate in respect of any and all liabilities, obligations and undertakings contained in this Agreement, the Notes or any other Operative Agreement. The Agent and the Lenders further agree that the Borrower shall not be responsible for the payment of any amounts owing hereunder (excluding principal and interest (other than Overdue Interest) in respect of the Loans) (such non-excluded amounts, "Supplemental Amounts") except to the extent that payments of Supplemental Rent designated by the Lessee for application to such Supplemental Amounts shall have been paid by the Lessee pursuant to the Lease (it being understood that the failure by the Lessee for any reason to pay any Supplemental Rent in respect of such Supplemental Amounts shall nevertheless be deemed to constitute a default by the Borrower for the purposes of Section 6). Notwithstanding the foregoing provisions of this Section 9.18, nothing in this Agreement or any other Operative Agreement shall (a) constitute a waiver, release or discharge of any obligation evidenced or secured by this Agreement or any other Credit Document, (b) limit the right of the Agent or any Lender to name the Borrower as a party defendant in any action or suit for judicial foreclosure and sale under any Security Document, or (c) affect in any way the validity or enforceability of any guaranty (whether of payment and/or performance) given to the Lessor, the Agent or the Lenders, or of any indemnity agreement given by the Borrower, in connection with the Loans made hereunder. 9.19 USURY SAVINGS PROVISION. IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT AND THAT N.C. GEN. STAT. ss. 24-9 SHALL APPLY WITH RESPECT TO THIS AGREEMENT. TO THE EXTENT N.C. GEN. STAT. ss. 24-9 IS HEREAFTER DEEMED NOT TO APPLY BY A COURT OF COMPETENT JURISDICTION AND ANY PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THE FOLLOWING PROVISIONS OF THIS SECTION 9.19 SHALL APPLY. ANY SUCH PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH 26 30 CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE AGENT OR ANY LENDER SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO THE BORROWER OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND NEITHER THE AGENT NOR ANY LENDER INTENDS TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO THE AGENT OR ANY LENDER SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF THIS AGREEMENT SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW. [signature pages follow] 27 31 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [signature pages continue] Credit Agreement RFMD Real Estate Trust 1999-1 32 FIRST UNION NATIONAL BANK, as the Agent and a Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Credit Agreement RFMD Real Estate Trust 1999-1 33 CREDIT SUISSE FIRST BOSTON, as a Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [signature pages continue] Credit Agreement RFMD Real Estate Trust 1999-1 34 COMERICA BANK, as a Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [signature pages continue] Credit Agreement RFMD Real Estate Trust 1999-1 35 SUNTRUST BANK, ATLANTA, as a Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [signature pages continue] Credit Agreement RFMD Real Estate Trust 1999-1 36 CITICORP USA, Inc., as a Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [signature pages continue] Credit Agreement RFMD Real Estate Trust 1999-1 37 FLEET NATIONAL BANK, as a Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [signature pages end] Credit Agreement RFMD Real Estate Trust 1999-1 38 Schedule 2.1 ------------ Tranche A Tranche B Commitment Commitment ---------- ---------- Name and Address of Lenders Amount Percentage Amount Percentage - - --------------------------- ------ ---------- ------ ---------- First Union National Bank $21,250,000.00 25.0000% $2,400,000.00 20.0000% First Union Securities, Inc. 301 South College Street, DC6 Charlotte, NC 28288-0166 Attn: Christy Lee Foster Phone: 704-383-5398 Fax: 704-383-7989 Credit Suisse First Boston $17,000,000.00 20.0000% $1,650,000.00 3.7500% Eleven Madison Avenue New York, New York 10010 Attn: Chris Horgan Phone: 212-325-9157 Fax: 212-325-8309 Comerica Bank $14,875,000.00 17.5000% $2,625,000.00 21.8750% U.S. Banking East 500 Woodward Avenue, 9th Floor, MC 3280 Detroit, MI 48275-3280 Attn: Dan M. Roman Phone: 313-222-3803 Fax: 313-222-3330 SunTrust Bank, Atlanta $14,875,000.00 17.5000% $2,625,000.00 21.8750% 200 South Orange Avenue, 11th Floor Orlando, FL 32801 Attn: Andrew J. Hines Phone: 407-237-4839 Fax: 407-237-6894 Citicorp USA, Inc. $8,500,000.00 10.0000% 1,500,000.00 12.5000% 390 Greenwich Street 1st Floor New York, NY 10013 Attn: Nicolas Erni Phone: 212-723-6560 Fax: 212-723-8547 Fleet National Bank $8,500,000.00 10.0000% $1,200,000.00 10.0000% 100 Federal Street MA BOS 01-08-08 Boston, MA 02110 Attn: David Crane Phone: 617-434-5584 Fax: 617-434-0819 TOTAL $85,000,000.00 100% $12,000,000.00 100% 39 Exhibit A-1 TRANCHE A NOTE (RFMD Real Estate Trust 1999-1) December 31, 1999 FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 (the "Borrower"), hereby unconditionally promises to pay to the order of [LENDER] (the "Lender"), at the office of First Union National Bank, located at c/o First Union Securities, Inc., DC-6, 301 South College Street, Charlotte, North Carolina 28288-0166 or at such other address as may be specified by First Union National Bank, in lawful money of the United States of America and in immediately available funds, the respective dates specified in Schedule 1 to the Participation Agreement, the amounts described in such Schedule 1 and on the Maturity Date, the aggregate unpaid principal amount of all Tranche A Loans made by the Lender to the Borrower pursuant to Section 2.1 of the Credit Agreement (as defined below). The Borrower agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 2.8 of such Credit Agreement. The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each Tranche A Loan made pursuant to the Credit Agreement and the date and amount of each payment or prepayment of principal thereof, each continuation thereof and each conversion of all or a portion thereof to another Type. Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in such endorsement shall not affect the obligations of the Borrower in respect of such Loan. This Note (a) is one (1) of the Notes referred to in the Credit Agreement dated as of December 31, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lender, the other banks and financial institutions from time to time parties thereto and First Union National Bank, as the Agent, (b) is subject to the provisions of the Credit Agreement (including without limitation Section 9.18 thereof) and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. Reference is hereby made to the Credit Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof. A1-1 40 Upon the occurrence of any one (1) or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH CAROLINA. IN WITNESS WHEREOF, THE UNDERSIGNED AUTHORIZED OFFICER OF THE BORROWER HAS EXECUTED THIS NOTE AS OF THE DATE FIRST SET FORTH ABOVE. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- A1-2 41 Exhibit A-2 TRANCHE B NOTE (RFMD Real Estate Trust 1999-1) December 31, 1999 FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 (the "Borrower"), hereby unconditionally promises to pay to the order of [LENDER] (the "Lender") at the office of First Union National Bank located at c/o First Union Securities, Inc., DC-6, 301 South College Street, Charlotte, North Carolina 28288-0166 or at such other address as may be specified by First Union National Bank, in lawful money of the United States of America and in immediately available funds, on the Maturity Date, the aggregate unpaid principal amount of all Tranche B Loans made by the Lender to the Borrower pursuant to Section 2.1 of the Credit Agreement (as defined below). The Borrower agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 2.8 of such Credit Agreement. The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each Tranche B Loan made pursuant to the Credit Agreement and the date and amount of each payment or prepayment of principal thereof, each continuation thereof and each conversion of all or a portion thereof to another Type. Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in such endorsement shall not affect the obligations of the Borrower in respect of such Loan. This Note (a) is one (1) of the Notes referred to in the Credit Agreement dated as of December __, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lender, the other banks and financial institutions from time to time parties thereto and First Union National Bank, as the Agent, (b) is subject to the provisions of the Credit Agreement (including without limitation Section 9.18 thereof) and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. Reference is hereby made to the Credit Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof. Upon the occurrence of any one (1) or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. A2-1 42 All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH CAROLINA. IN WITNESS WHEREOF, THE UNDERSIGNED AUTHORIZED OFFICER OF THE BORROWER HAS EXECUTED THIS NOTE AS OF THE DATE FIRST SET FORTH ABOVE. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- A2-2 43 Exhibit B ASSIGNMENT AND ACCEPTANCE THIS ASSIGNMENT AND ACCEPTANCE dated as of ____________, 1999 (as amended, modified, supplemented, restated and/or replaced from time to time, the "Assignment and Acceptance") is between [____________________] (the "Assignor") and [_______________] (the "Assignee"). Reference is made to the Credit Agreement, dated as of August ____, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 (the "Owner Trustee" or the "Borrower"), the Lenders named therein and FIRST UNION NATIONAL BANK, as the Agent. Unless otherwise defined herein, terms defined in the Credit Agreement (or pursuant to Section 1 of the Credit Agreement, defined in other agreements) and used herein shall have the meanings given to them in or pursuant to the Credit Agreement. The Assignor and the Assignee agree as follows: 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), a [___%] interest (the "Assigned Interest") in and to the Assignor's rights and obligations under the Credit Agreement with respect to the credit facility contained in the Credit Agreement as are set forth on Schedule 1 hereto (the "Assigned Facility"), in a principal amount for the Assigned Facility as set forth on Schedule 1. 2. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other Operative Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Operative Agreement or any other instrument or document furnished pursuant thereto, other than that it has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, or any other obligor or the performance or observance by the Borrower, or any other obligor of any of their respective obligations under the Credit Agreement or any other Operative Agreement or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches the Note held by it evidencing the Assigned Facility and requests that the Agent exchange such Note for a new Note payable to the Assignee and (if the Assignor has retained any interest in the Assigned Facility) a new Note payable to the Assignor in the respective amounts B-1 44 which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date). 3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received copies of the Operative Agreements, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Agent or any other Lender 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 Credit Agreement, the other Operative Agreements or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Operative Agreements or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and the other Operative Agreements to which Assignee is a party and will perform in accordance herewith all the obligations which by the terms of the Credit Agreement and the other Operative Agreements to which Assignee is a party are required to be performed by it as a Lender including without limitation, if it is organized under the laws of a jurisdiction outside the U.S., its obligation pursuant to Section 11.2(e) of the Participation Agreement. 4. The effective date of this Assignment and Acceptance shall be [________, 19__] (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance by it and recording by the Agent pursuant to Section 9.9 of the Credit Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Agent, be earlier than five (5) Business Days after the date of such acceptance and recording by the Agent). 5. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including without limitation payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to the Effective Date or accrue subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 6. From and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the other Operative Agreements and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement and the other Operative Agreements. B-2 45 7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. B-3 46 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto. [Name of Assignor] By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [Name of Assignee] By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Consented To: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the RFMD Real Estate Trust 1999-1 By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- FIRST UNION NATIONAL BANK, as the Agent By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [consents required only to the extent expressly provided in Section 9.8 of the Credit Agreement] B-4 47 SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE RELATING TO THE CREDIT AGREEMENT, DATED AS OF AUGUST __, 1999, AMONG FIRST SECURITY BANK, NATIONAL ASSOCIATION NOT INDIVIDUALLY, BUT SOLELY AS THE OWNER TRUSTEE, THE LENDERS NAMED THEREIN AND FIRST UNION NATIONAL BANK, AS THE AGENT FOR THE LENDERS (IN SUCH CAPACITY, THE "AGENT") Name of Assignor: ------------------------------- Name of Assignee: ------------------------------- Effective Date of Assignment: ------------------- Credit Principal Commitment Facility Assigned Amount Assigned Percentage Assigned ----------------- --------------- ------------------- $ % ----------------- ------------ ------------ [Name of Assignor] By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Name of Assignee] By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- B-5 EX-27.1 15 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31,1 999 AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS MAR-25-2000 MAR-28-1999 DEC-25-1999 30,351 0 46,797 0 39,991 163,301 157,377 (16,683) 327,981 42,085 0 0 0 234,279 41,789 327,981 204,131 204,131 110,004 152,720 0 0 (1,087) 54,558 19,095 35,463 0 0 0 35,463 0.45 0.42
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