PARTICIPATION AGREEMENT DATED AS OF DECEMBER 17, 2002 AMONG QUANTUM CORPORATION, AS LESSEE SELCO SERVICE CORPORATION, AS LESSOR AND AS A PARTICIPANT, COMERICA BANK-CALIFORNIA, FLEET NATIONAL BANK AND KEYBANK NATIONAL ASSOCIATION AS PARTICIPANTS, AND KEYBANK NATIONAL ASSOCIATION, AS AGENT SPECIALTY STORAGE PRODUCT GROUP FACILITIES

   THIS PARTICIPATION AGREEMENT, dated as of December 17, 2002 (this "Participation Agreement"), is entered into by and among QUANTUM CORPORATION, a Delaware corporation, as Lessee (together with its permitted successors and assigns, the "Lessee"); SELCO SERVICE CORPORATION, an Ohio corporation, as Lessor (together with its permitted successors and assigns, the "Lessor") COMERICA BANK-CALIFORNIA, FLEET NATIONAL BANK and KEYBANK NATIONAL ASSOCIATION as Participants (together with their permitted successors and assigns and SELCO SERVICE CORPORATION, in its capacity as a Participant, each a "Participant" and collectively the "Participants"); and KEYBANK NATIONAL ASSOCIATION (in such capacity, together with its successors in such capacity, the "Agent") for the Participants.

A.   

In accordance with the terms of the Participation Agreement dated as of August 22, 1997, among Lessee, Lease Plan North America, Inc., as lessor and a participant (the "Original Lessor"), ABN AMRO Bank N.V., San Francisco International Branch, as a participant, and ABN AMRO Bank N.V., San Francisco International Branch, as agent (the "Original Agent"), as amended by the First Amendment to Participation Agreement dated as of June 26, 1998, the Second Amendment to Participation Agreement dated as of December 18, 1998, the Third Amendment to Participation Agreement dated as of August 31, 1999, and the Fourth Amendment to Participation Agreement dated as of November 8, 1999 (said participation agreement, as so amended, the "Original Participation Agreement"), and the lease and the other operative documents executed thereunder,

(i)   

Original Lessor purchased certain parcels of land designated by Lessee located in Colorado Springs, Colorado;

(ii)   

Using Advances from Original Lessor, Lessee, as Construction Agent, built administration, manufacturing, design, research and development and warehouse facilities on such parcels of land for Original Lessor, acquired certain items of Equipment to be used in connection with such Improvements and leased, as Lessee, such Equipment, Improvements and Land Interest from Original Lessor; and

(iii)   

Original Lessor obtained financing from the Original Participants of the funding of the costs of acquisition of such Land Interest, the construction of the Improvements and the acquisition of such Equipment through the purchase of Participation Interests.

B.   

 In accordance with the terms of the Amended and Restated Participation Agreement dated July 12, 2000, (as amended by the First Amendment to Amended and Restated Participation Agreement dated as of March 28, 2001, and by the Second Amendment to Amended and Restated Participation Agreement dated as of April 19, 2002, the "Amended Participation Agreement") Lessee, Lessor, and The Bank of Nova Scotia, as a participant and as agent (the "Successor Agent"), and Union Bank of California, N.A., as a participant, and KeyBank National Association, as a participant, amended the Original Participation Agreement in certain respects, and at the same time Lessor acquired Original Lessor's interests in the Land Interest, Improvements, Fixtures and Equipment and Lessor and certain participants acquired the participation interests of ABN AMRO Bank N.V., San Francisco International Branch.

1.

C.   

Lessee and Participants have requested that the Amended Participation Agreement be entirely amended and restated and that the Participants refinance the existing synthetic lease contemplated therein (the “Existing Synthetic Lease”) by entering into this Participation Agreement and other Operative Documents.

In consideration of the mutual agreements contained in this Participation Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Amended Participation Agreement shall be amended and restated as of the date hereof to read in its entirety as follows:

Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix 1 hereto for all purposes hereof; and the rules of interpretation set forth in Appendix 1 hereto shall apply to this Participation Agreement.

The closing date (the "Closing Date") shall occur on the earliest date on which all the conditions precedent thereto set forth in Sections 6.1 and 6.2 hereof shall have been satisfied or waived by the applicable parties as set forth therein.

Section 3.1   

Lessor Commitment.   Subject to the conditions and terms hereof, Lessor shall on the Closing Date make the Refinancing Advance (out of funds provided by the Participants) for the purpose of refinancing the Existing Synthetic Lease.  The Refinancing Advance will be applied to repay the various holders of interests in the principal balance of the Existing Synthetic Lease, and on the Closing Date Lessee will repay any other amounts owed by it under the Existing Synthetic Lease.

Section 3.2

Participants' Commitments.    Subject to the terms and conditions hereof, each Participant severally shall purchase a Participation Interest in the Refinancing Advance being made by Lessor at the request of Lessee by making available to Lessor on the Closing Date an amount in immediately available funds equal to such Participants' Commitment Percentage of the amount of the Refinancing Advance being funded on the Closing Date.  Notwithstanding any other provision hereof, no Participant shall be obligated to purchase its Participation Interest in the Refinancing Advance if (i) the amount of such purchase would exceed its Participant's Commitment, or (ii) the Refinancing Advance exceeds $50,000,000 in aggregate.

Section 3.3

Procedures for Refinancing Advance.  Lessee shall give Lessor and Agent prior written notice not later than 10:00 a.m., San Francisco time, three (3) Business Days prior to the proposed Closing Date, pursuant to the Funding Request substantially in the form of Exhibit A (the "Funding Request"), specifying or confirming with respect to such Refinancing Advance:

(i)   the proposed Closing Date,

(ii)   the amount of the Refinancing Advance ($50,000,000),

(iii)   the initial Offshore Rate Period Election, including the duration of the first Interest Period,

(iv) the Persons to whom the Refinancing Advance is to be paid.

Agent shall promptly forward a copy of such Funding Request to each Participant.  Subject to the satisfaction or waiver of the conditions precedent to the Refinancing Advance set forth in Section 6, each Participant shall purchase its Participation Interest in the Refinancing Advance by making available to Lessor its proportionate share of the Refinancing Advance in immediately available federal funds by wire transfer to Agent for deposit to Lessee's demand deposit account with Agent not later than 12:00 noon, San Francisco time, on the Closing Date.  Upon (i) Lessee's receipt of the funds provided by the Participants with respect to the Refinancing Advance, and (ii) satisfaction or waiver of the conditions precedent to the Refinancing Advance set forth in Section 6, Lessee shall pay the Refinancing Advance to the Successor Agent in accordance with the terms and provisions of the Amended Participation Agreement.

3.

Section 3.4

Intentionally deleted.

Section 3.5

Allocation of Commitments.  Schedule I hereto contains an allocation for each Participant of (i) the amount of its Commitment to fund the purchase of its Tranche A Participation Interest ("Tranche A Participation Interest Commitment"), (ii) the amount of its Commitment to purchase its Tranche B Participation Interest ("Tranche B Participation Interest Commitment"), (iii) in the case of Lessor as the Tranche C Participant, the amount of its Commitment to fund the equity investment representing its Tranche C Participation Interest ("Tranche C Participation Interest Commitment"), (iv) the amount of its Commitment (and allocation to its Tranche A Participation Interest Commitment, Tranche B Participation Interest Commitment and, in the case of Lessor, Tranche C Participation Interest Commitment), and (v) the percentage referred to in the definition of the term "Participation Interest."  Lessee, Lessor and the other Participants have approved all such allocations and percentages.  Schedule I shall be amended as required to reflect changes in the allocations set forth thereon due to the addition of additional Participants pursuant to Section 12.1.

Section 3.6

Intentionally deleted.

Section 3.7

Intentionally deleted.

Section 3.8

Interest Rates; Yield; Payment Dates; and Calculations Related to the Initial Adjustment and the Adjusted Lease Balance.

(a)

The nonequity portion of the Adjusted Lease Balance (consisting of the Adjusted Tranche A Balance and the Tranche B Balance) shall bear interest during each Interest Period at a rate per annum equal to the Effective Rate for such Interest Period plus the Applicable Margin.  The equity portion of the Adjusted Lease Balance (consisting of the Tranche C Balance) shall accrue equity yield (the "Yield") during each Interest Period at a rate equal to the Effective Rate plus the Applicable Margin.

(b)

If all or a portion of (i) the Adjusted Lease Balance (including the Adjusted Tranche A Balance, the Tranche B Balance and the Tranche C balance), (ii) any interest or Yield payable thereon or (iii) any other amount payable by Lessee hereunder or under the Lease is not 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 equal to the Overdue Rate.

(c)

All interest and Yield accruing during each Interest Period shall be due and payable as Basic Rent in arrears on the last day of such Interest Period, except as follows:

(i)   Any interest or Yield accruing at the Overdue Rate pursuant to subsection (c) of this Section 3.8 shall be payable from time to time on demand.

(ii)   Any prepayment of any part of the Adjusted Lease Balance shall be accompanied by accrued interest and Yield to the date of such prepayment on the amount of the Adjusted Lease Balance so prepaid.

(iii)   For each Interest Period after Lessee pays the Initial Adjustment, an amount (the “Initial Adjustment Amortization”) will accrue equal to the sum of (1) the Adjusted Tranche A (KeyBank) Percentage, times the interest accruing during such Interest Period on the Adjusted Tranche A Balance, plus (2) the product of 47.53927% times the interest accruing during such Interest Period on the Tranche B Balance, plus (3) the Yield accruing during such Interest Period on the Tranche C Balance.  In no event, however, will the accrual of Initial Adjustment Amortization for any Interest Period exceed the Remaining Unamortized Initial Adjustment, if any, determined as of the last day of such period (before the deduction of such Initial Adjustment Amortization and after any Proportionate Reductions which may occur on such date as described in the next clause). The Initial Adjustment Amortization accruing during each Interest Period will be deducted automatically from the Remaining Unamortized Initial Adjustment on the Payment Date upon which such Interest Period ends, and at the same time, a corresponding, equal credit (the “Basic Rent Credit”) against accrued interest and Yield on the Adjusted Lease Balance will be given as if Lessee had made an additional timely payment of Basic Rent equal to such Initial Adjustment Amortization.  Thus, the actual out-of-pocket payment of Basic Rent required of Lessee for each Interest Period will equal the total interest and Yield accruing as described in clauses (a) above, less the Initial Adjustment Amortization which accrues during such Interest Period.

4.

(d)

When any Lease Related Payment is applied to reduce the Lease Balance, the Remaining Unamortized Initial Adjustment will also be reduced automatically by a percentage equal to a fraction, the numerator of which is the dollar amount of the reduction of the Lease Balance resulting from such application, and denominator of which is the Adjusted Lease Balance just prior to the reduction.  At the same time, the Lease Balance will be deemed further reduced by a sum equal to the dollar amount (if any) by which the Remaining Unamortized Initial Adjustment is automatically reduced.  Such further reduction of the Lease Balance and the corresponding automatic reduction of the Remaining Unamortized Initial Adjustment when a Lease Related Payment is applied to the Lease Balance are referenced herein as “Proportionate Reductions.”  (The following examples are provided only to illustrate the types of calculations required for Proportionate Reductions:

      Example #1:  Assume that prior to the application of property insurance proceeds resulting from a Casualty, the Lease Balance is $50,000,000 and the Remaining Unamortized Lease Balance is $2,000,000, leaving an Adjusted Lease Balance of $48,000,000.  Assume also that $12,000,000 of property insurance proceeds [i.e., a Lease Related Payment] are paid to Agent and applied against the Lease Balance, thereby reducing the Lease Balance to $38,000,000 and also reducing the Adjusted Lease Balance from $48,000,000 to $36,000,000 [a reduction of 25%].  Under these assumptions, the Remaining Unamortized Initial Adjustment will be reduced automatically by 25%, from $2,000,000 to $1,5000,000, which is a reduction of $500,000.  At the same time, the Lease Balance will be further reduced by $500,000, from $38,000,000 to $37,500,000.  In this example, the “Proportionate Reductions” are the automatic $500,000 reduction of the Remaining Unamortized Initial Adjustment and $500,000 reduction of the Lease Balance.  After giving effect to all of these adjustments, the Adjusted Lease Balance will equal the $37,500,000 Lease Balance, less the $1,500,000 Remaining Unamortized Initial Adjustment, or $36,000,000.

      Example #2:  Assume that immediately following the application of insurance proceeds as described in the preceding example, Lessee purchases Lessor’s interest in the Property pursuant to the Lease and pays (in addition to any Basic Rent or other Supplemental Rent then due) a purchase price equal to the Adjusted Lease Balance, or $36,000,000.  The $36,000,000 payment will initially reduce the Lease Balance to $1,500,000 and also reduce the Adjusted Lease Balance from $36,000,000 to $0 [a reduction of 100%].  Under these assumptions, the Remaining Unamortized Initial Adjustment will be reduced automatically by 100%, from $1,500,000 to $0, which is a reduction of $1,500,000.  At the same time, the Lease Balance will be further reduced by same dollar amount, from $1,500,000 to $0.  In this example, the “Proportionate Reductions” are the automatic $1,500,000 reduction of the Remaining Unamortized Initial Adjustment and $1,500,000 reduction of the Lease Balance.)

(e)

As reasonably requested by Lessee from time to time, Lessor will provide Lessee with a confirmation of the amount of, and a calculation in reasonable detail of, the Remaining Unamortized Initial Adjustment and of the Lease Balance, the Tranche A Balance, the Adjusted Lease Balance and allocation of the Adjusted Lease Balance among the Adjusted Tranche A Balance, the Tranche B Balance and the Tranche C Balance.

5.

Section 3.9

Computation of Interest and Yield.

(a)

Whenever it is calculated on the basis of the Alternate Base Rate, interest and Yield shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and, otherwise, interest and Yield shall be calculated on the basis of a 360-day year for the actual days elapsed.  Agent shall as soon as practicable after the commencement of each Interest Period notify Lessor, Lessee and the Participants of each determination of a Offshore Rate.  Any change in the interest rate or Yield rate on the Refinancing Advance resulting from a change in the Alternate Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective.  Agent shall as soon as practicable notify Lessor, Lessee and the Participants of the effective date and the amount of each such change in interest rate or Yield rate.

(b)

Each determination of an interest rate or Yield rate by Agent pursuant to any provision of this Participation Agreement shall be conclusive and binding on Lessor, Lessee and the Participants in the absence of manifest error.  Agent shall, at the request of such parties, deliver to such parties a statement showing the quotations used by Agent in determining any interest rate pursuant to Section 3.9(a).

Section 3.10

Allocation and Timing of Payments; the Account.

(a)

If, other than by a distribution received from Agent as hereinafter provided, any Participant (including Lessor) receives any Lease Related Payment, or if any Participant realizes the equivalent of a Lease Related Payment by way of offset against other amounts it owes to Lessee, then such Participant must promptly pay an equal amount to Agent for application and distribution as provided in this Participation Agreement.  Any such payment to Agent will be considered a payment on account of the Lessee Obligations, and any such payment received by Agent from any Participant and any other Lease Related Payment made directly to Agent shall reduce the Lease Balance, unless and except to the extent applied to satisfy Lessee’s obligation for Basic Rent or for other Supplemental Rent.

(b)

Also, a payment to Agent of any amount made by or on behalf of Lessee on account of the Lessee Obligations (including payments made by Participants to Agent in respect of Lease Related Payments as provided above) shall be considered effective to satisfy Lessee’s liability for such amount (regardless of whether Lessee owes the amount to Agent, Lessor or another Participant according to the Operative Documents) upon the date of receipt of the same by Agent in immediately available funds if such receipt by Agent occurs on a Business Day before noon San Francisco time, and otherwise on the next following Business Day after such receipt by Agent.  Without limiting the foregoing, any delay by Agent following Agent’s receipt of a payment on account of the Lease Obligations in distributing the payment to Participants (including any delay authorized by the following provisions of this Section 3 or by Section 11.10 below) will not defer or impair the effectiveness of the payment for purposes of determining whether Lessee has satisfied the Lessee Obligations and for purposes of computing Basic Rent accruals or other amounts owing by Lessee under the Operative Documents.   Lessor and other Participants agree that Lessee may pay or cause the payment of any Lease Related Payment directly to Agent for distribution as provided herein, after which Lessee will have no obligation to account to Lessor or other Participants for any failure of Agent to distribute such Lease Related Payment in accordance with the requirements of this Agreement.

6.

(c)

Except as otherwise provided in Sections 3.11--3.23, Agent may apply payments made to it on account of the Lease Obligations to cover accrued, unpaid Basic Rent, to repay and reduce the Lease Balance or to cover other Supplemental Rent then due in any order Agent deems appropriate and in the best interests of Participants, collectively.

(d)

Except as provided in Sections 3.11--3.23, (1) each Lease Related Payment (including any prepayment) made to Agent or to Lessor which constitutes a repayment by or on behalf of Lessee of the Adjusted Lease Balance or any part thereof shall be allocated among, and ratably reduce, the Adjusted Tranche A Balance, the Tranche B Balance and the Tranche C Balance, and (2) each such repayment and all other payments representing interest or Yield on the Adjusted Lease Balance shall be distributed pro rata among the Tranche A Participants, Tranche B Participants and the Tranche C Participant according to the respective Participation Interests of each such Participant.  Any such repayment or payment that is, according to this Participation Agreement, to be applied or distributed “pro rata” to Tranche A Participants will be made to such Participants without priority of one over the other (except as provided in the next clause (e), regarding adjustments required because of the Basic Rent Credits) in the proportion to their respective Tranche A Participation Interests in such payment.  Any such repayment or payment that is, according to this Participation Agreement, to be applied or distributed “pro rata” to Tranche B Participants will be made to such Participants without priority of one over the other (except as provided in the next clause (e)) in the proportion to their respective Tranche B Participation Interests in such payment.  Any such repayment or payment that is, according to this Participation Agreement, to be applied or distributed “pro rata” to both Tranche A Participants and Tranche B Participants will be made to such Participants without priority of one over the other (except as provided in the next clause (e)) in the proportion to the sum of their respective Tranche A Participation Interests and Tranche B Participation Interests in such payment.

(e)

For purposes of determining the proper distribution of payments of Basic Rent among Participants, any Basic Rent Credit given on any Payment Date pursuant to Section 3.8(c)(iii) will be considered as a receipt or realization of a payment of Basic Rent equal to such Basic Rent Credit by KeyBank National Association, in its capacity as a Tranche A Participant and Tranche B Participant.  Thus, on the Payment Date upon which any Basic Rent Credit becomes effective, KeyBank National Association will be required by subsection (a) above to pay to Agent an amount equal to such credit for distribution (along with actual payment of Basic Rent made by Lessee) as provided in Section 3.12.  In the event KeyBank National Association fails to pay such amounts to Agent, the remedies of the other Participants shall be solely against KeyBank National Association and not against Lessee.  (The following example is provided only to illustrate the types of calculations required with respect to Basic Rent Credits and the distribution of Basic Rent among Participants:

      Example:  Assume that the total interest and Yield accruing as described in Section 3.8(a) on the Adjusted Lease Balance for a given Interest Period is $100,000, and $52,000 of Initial Adjustment Amortization also accrues for such Interest Period, resulting in a Basic Rent Credit of $52,000, of which $5,000 is attributable to Yield accrued on the Tranche C Balance and the remainder is attributable to interest accrued on the Adjusted Tranche A Balance and on the Tranche B Balance.  Assume also that Lessee makes a timely payment of Basic Rent for such Interest Period in the amount of the remaining $48,000 payable by Lessee (after application of the Basic Rent Credit).  Under these assumptions, KeyBank National Association, as a Participant, will be deemed to have received a direct payment of Basic Rent of $52,000, which in accordance with subsection (a) of this Section must be paid over to Agent.  Such amount, together with the $48,000 of Basic Rent actually paid by Lessee, will give Agent $100,000 to be distributed in accordance with Section 3.12.  Section 3.12 will require that Agent distribute the $47,000 to KeyBank National Association and $48,000 to other Tranche A Participants and Tranche B Participants, and then distribute the remaining $5,000 to Lessor as the Tranche C Participant.)

7.

(f)

Subject to any contrary requirements of Applicable Law and to the rights of the Participants under other provisions of the Operative Documents or provisions of other agreements binding upon Lessee (including the Loan Documents), if Agent or Lessor should receive Lease Related Payments in excess of all then outstanding Lessee Obligations, then Agent or Lessor (as the case may be) must pay such excess to, or as directed by, Lessee.

(g)

If any payment under the Operative Documents, other than the Initial Adjustment or payments representing the repayment of the Lease Balance or any part thereof, becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day.  If any payment of the Initial Adjustment or representing a repayment of the Lease Balance or any part thereof becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day.  In the case of any extension or shortening of the due date of any payment which will reduce the Adjusted Lease Balance pursuant to the preceding two sentences, interest or Yield thereon shall be payable at the then applicable rate during such extension or until such shortened due date, as the case may be.

(h)

The Agent may, if it so desires to do so, establish an account (the "Account") into which Agent shall deposit all Lease Related Payments or other payments, receipts and other consideration of any kind whatsoever received by Agent pursuant to this Participation Agreement, the Lease and any other Operative Document.  Agent shall make distributions of such payments, receipts and other consideration (and, if an Account is used, from the Account) pursuant to the requirements of Sections 3.11--3.23 hereof.

Section 3.11

The Initial Adjustment.   The payments of Initial Adjustment will not reduce the Lease Balance, but will reduce the Adjusted Lease Balance.  The payment of the Initial Adjustment shall be applied and distributed by Agent as promptly as possible (it being understood that any such payment received by Agent on a timely basis and in accordance with the provisions of the Lease shall be applied and distributed on the date received in the funds so received) to KeyBank National Association, as a Tranche A Participant, whereupon the entire reduction in the Adjusted Tranche A Balance resulting from such payment shall be allocated to and reduce the Participation Interest of KeyBank National Association in the Adjusted Lease Balance.  As subsequent accruals of Initial Adjustment Amortization are deducted from the Remaining Unamortized Initial Adjustment, thereby increasing the Adjusted Lease Balance, the entire amount of the increases will be allocated to and increase the Participation Interest of KeyBank National Association in the Adjusted Tranche A Balance.

8.

Section 3.12

Basic Rent.   Payments of Basic Rent will not reduce the Lease Balance or Adjusted Lease Balance.  Each payment (or portion thereof) of Basic Rent shall be applied and distributed by Agent as promptly as possible (it being understood that any payments of such component of Basic Rent received by Agent on a timely basis and in accordance with the provisions of the Lease shall be applied and distributed on the date received in the funds so received) in the following order of priority:

(a)

first, pro rata among the Tranche A Participants and the Tranche B Participants until the aggregate of all payments of Basic Rent which they have received equals the aggregate of all interest which has accrued on the Tranche A Balance and Tranche B Balance pursuant to Section 3.8(a), and

(b)

second, to Lessor as the Tranche C Participant as the payment of the Yield on the Tranche C Participation Interest.

Section 3.13

Proceeds of a Purchase by Lessee.   Any payment of all or part of the Asset Termination Value received by Agent (whether by way of offset against the Cash Collateral or by reason of the application of the Cash Collateral or of proceeds drawn under the Letter of Credit or otherwise) as a result of:

(a)

the purchase of Lessor's interest in all of the Property in connection with Lessee's exercise of its Purchase Option under Section 20.1 of the Lease, or

(b)

Lessee's compliance with its obligation to purchase Lessor's interest in the Property in accordance with Section 20.2 of the Lease, or

(c)

the payment of the Asset Termination Value in accordance with Sections 16.2(b), 16.3 or 16.4 of the Lease, or

(d)

Lessee failing to fulfill one or more of the conditions to exercise of the Remarketing Option pursuant to Section 22.1 of the Lease and Agent's receipt pursuant to the next-to-last paragraph of Section 22.1 of the Lease of the Asset Termination Value in accordance with Section 20.2 of the Lease, shall be applied and distributed by Agent as promptly as possible (it being understood that any such payment received by Agent on a timely basis and in accordance with the provisions of the Lease shall be applied and distributed on the date on which such funds are so received) in the following order of priority:

(1)   first, without reduction of the Lease Balance, to cover any Excepted Payments owed by Lessee, with distributions made in accordance with Section 3.17;

(2)   second, without reduction of the Lease Balance, to cover any accrued, unpaid Basic Rent, with distributions made in accordance with Section 3.8;

9.

(3)   third, with a corresponding reduction of the Lease Balance, to repay the Adjusted Tranche A Balance and the Tranche B Balance, with distributions made pro rata among the Tranche A Participants and the Tranche B Participants until their Participation Interests in the Adjusted Tranche A Balance and the Tranche B Balance have been repaid in full, and

(4)   fourth, with a corresponding reduction to the Lease Balance, to repay the Tranche C Balance, with distributions to Lessor (as the Tranche C Participant); and

(5)   finally, after the Lease Balance has been repaid in full by the foregoing allocations, any remaining balance of such a payment (e.g., any amounts attributable to interest accruing on past due payments of Basic Rent) will be distributed as Agent determines to be appropriate under this Agreement and the other Operative Documents, taking into account the reasons why such remaining balance exists.

Section 3.14

Residual Value Guarantee Amount Payment by Lessee.  The payment by Lessee of the Residual Value Guarantee Amount to Agent in accordance with Section 15.4 or Article XXII of the Lease, in the event of Lessee's exercise of the Remarketing Option, shall be applied and distributed by Agent as promptly as possible (it being understood that any such payment received by Agent on a timely basis in accordance with the provisions of the Lease shall be applied and distributed on the date on which such funds are so received) to repay the Adjusted Tranche A Balance, with a corresponding reduction of the Lease Balance and with distributions made pro rata among the Tranche A Participants.

Section 3.15

Sales Proceeds of Remarketing of Property.  Any payments received by Agent as proceeds from a sale of the Property because of Lessee's exercise of the Remarketing Option pursuant to Article XXII of the Lease, together with any payment made by Lessee as a result of an appraisal pursuant to Section 13.2 of this Participation Agreement, shall be applied and distributed by Agent as promptly as possible (it being understood that any such payment received by Agent on a timely basis and in accordance with the provisions of the Lease shall be applied and distributed on the date on which the funds are so received) in the same order of priority and with the same application to the Lease Balance as is listed in Section 3.13, except that if the aggregate amount of such sales proceeds and any such payment made by Lessee exceeds the Adjusted Lease Balance and all amounts otherwise due or owing by Lessee under this Agreement, under the Lease or under any of the other Operative Documents, then such excess shall be promptly distributed to, or as directed by, Lessee.

Section 3.16

Supplemental Rent.  All payments of Supplemental Rent received by Agent (excluding any amounts applied and distributed pursuant to the other provisions of this Section 3) shall be distributed promptly by Agent upon receipt thereof to the Persons entitled thereto pursuant to the Operative Documents.  Supplemental Rent shall not, except as provided in the other provisions of this Section 3, reduce the Lease Balance or Adjusted Lease Balance.

Section 3.17

Excepted Payments.  Notwithstanding any other provision of this Participation Agreement or the Operative Documents, any Excepted Payment received at any time by Agent shall be distributed promptly to the Person entitled to receive such Excepted Payment pursuant to the Operative Documents.  Excepted Payments shall not reduce the Lease Balance or Adjusted Lease Balance.

10.

Section 3.18

Distribution of Payments During the Continuation of an Accelerated Purchase Event.  Notwithstanding the foregoing provisions of Sections 3.11 through 3.15, this section 3.18 will govern the application of any and all Lease Related Payments, other than Excepted Payments, paid to or realized by Lessor or Agent during the continuation of an Accelerated Purchase Event.  All such amounts shall, if received by Lessor, be paid to Agent as promptly as possible and shall be applied and distributed by Agent as promptly as possible (it being understood that any such payment received by Agent on a timely basis and in accordance with the provisions of the Operative Documents shall be applied and distributed on the date received in the funds so received) in the following order of priority:

(a)

first, without reduction of the Lease Balance, so much of such payment or amount as shall be required to reimburse Lessor or Agent for any costs incurred by them to enforce the Operative Documents against Lessee or to or enforce, protect, preserve or maintain any Security or property covered thereby (including, to the extent not previously reimbursed, those costs incurred in connection with any duties of Agent as Agent) and any unpaid ongoing fees of Lessor and Agent shall be distributed to each of them for its own account;

(b)

second, without reduction of the Lease Balance, so much of such payments or amounts as shall be required to repay the then existing or prior Participants for payments made by them to reimburse Lessor for costs incurred by Lessor pursuant to Section 18.1 of the Lease (to the extent such Participants have not already been repaid such amounts) and to pay such then existing or prior Participants the amounts payable to them pursuant to any expense reimbursement or indemnification provisions of the Operative Documents shall be distributed to each such Participant without priority of one over the other in accordance with and proportion to the amounts of such payment or payments payable to each such Person;

(c)

third, in the same order of priority and with the same application to the Lease Balance that is listed in Section 3.13, until the entire Adjusted Lease Balance has been repaid and all amounts otherwise due or owing by Lessee under this Agreement, the Lease or any of the other Operative Documents have been paid in full;

(d)

lastly, to, or as directed by, Lessee or as otherwise required by Applicable Law.

Section 3.19

Proceeds from any Foreclosure of the Mortgage.   As among Lessor, Agent and Participants, it is understood and agreed that proceeds of any foreclosure sale under the Mortgage which are received by Agent shall be applied and distributed by Agent as promptly as possible (it being understood that any such payment received by Agent on a timely basis and in accordance with the provisions of the Operative Documents shall be applied and distributed on the date received in the funds so received) in the following order of priority:

(a)

first, so much of such payment or amount as shall be required to reimburse Agent for any cost incurred by it in connection with its duties of Agent and for any unpaid ongoing fees of Agent shall be retained by Agent for its own account;

11.

(b)

second, pro rata among the Tranche A Participants and the Tranche B Participants until they have been repaid in full their Participation Interests, including their  Tranche A Participation Interests and the Tranche B Participation Interests;

(c)

lastly, to, or as directed by, Lessor or as otherwise required by law.

With the understanding that any such foreclosure sale will be subject in all respects to (and thus will not cut off or otherwise affect) the Lease and Lessee's rights under the other Operative Documents, Lessee agrees that it will have no claim to or interest in any such foreclosure proceeds.  Further, Lessee agrees that as between it and Lessor and its successors and assigns (including the purchaser at any such foreclosure sale), neither the Lease Balance nor the Adjusted Lease Balance will be reduced by any such foreclosure proceeds.  Thus, neither Basic Rent, nor Asset Termination Value nor the Residual Value Guarantee Amount nor any other amount, the calculation of which is dependent upon the Lease Balance or the Adjusted Lease Balance, will be reduced by reason of any such foreclosure or distributions made pursuant to this section, and all such amounts will be calculated after any foreclosure under the Mortgage as if there had been no foreclosure.  Further, after any such foreclosure, Lessee's obligations under the Operative Documents will continue to be secured by the Letter of Credit or any Cash Collateral Agreement to the same extent and in the same manner as before the foreclosure, and any purchaser at such foreclosure sale will acquire all rights of Lessor and the Participants under this Agreement and the Lease, including (1) the right to receive payments of Basic Rent and  any repayments of the Lease Balance made after the foreclosure by or on behalf of Lessee pursuant to the Lease or this Agreement, and (2) the right to be indemnified by Lessee for claims, damages or expenses arising after the foreclosure to the same extent that Lessor or other Participants would have been entitled to indemnity hereunder if they had suffered such claims, damages or expenses and there had been no foreclosure.

Section 3.20

Partial Purchase Option Price.   Any Partial Purchase Option Price paid to Agent shall be applied and distributed by Agent as promptly as possible (it being understood that any such payment received by Agent on a timely basis and in accordance with the provisions of the Lease shall be applied and distributed on the date received in the funds so received) in the following order of priority:

(a)

first, without reduction of the Lease Balance, so much of such payment or amount as shall be required to reimburse Lessor or Agent for any costs incurred by Lessor or Agent in connection with the sale for which such Partial Purchase Option Price is paid (to the extent such costs are not otherwise paid or reimbursed by Lessee as provided in the Lease);

(b)

second, without reduction of the Lease Balance, to cover any other amounts (excluding the Adjusted Lease Balance) then due and payable by Lessee under this Agreement, the Lease or any of the other Operative Documents, with distributions made among Lessor and other Participants in accordance with other provisions of this Section 3, until all such amounts have been paid in full;

(c)

third, to prepay the Adjusted Lease Balance and any Basic Rent accrued on the portion of the Adjusted Lease Balance so prepaid and any Funding Losses associated with such prepayment, with distributions of said amount made pro rata among all Participants (including Lessor) in proportion to their Participation Interests in the amounts so paid, and with any reduction of the Adjusted Lease Balance applied ratably to each of the Adjusted Tranche A Balance, the Tranche B Balance and the Tranche C Balance, until the entire Adjusted Lease Balance and all accrued Basic Rent and any such Funding Losses have been paid in full; and

12.

(d)

lastly, the balance, if any, shall be promptly distributed to, or as directed by, Lessee.

Section 3.21

Other Payments.  Any sums received by Agent, Lessor or another Participant for which provision as to the application thereof is expressly made in an Operative Document, but not elsewhere in this Section 3, shall be applied and distributed forthwith by Agent, Lessor or such other Participant (as applicable) to the Person and for the purpose for which such payment was made in accordance with the terms of such Operative Document.

Section 3.22

Casualty and Condemnation Amounts.  Any Net Proceeds made to Lessor or Agent as a result of a Casualty or Condemnation pursuant to Section 15.1 of the Lease (but excluding any amounts payable pursuant to Section 16.2 of the Lease) shall, if no Accelerated Purchase Event exists, be paid over to Lessee for (and over the course of) the rebuilding or restoration of that portion of the Property affected by such Casualty or Condemnation as necessary to cover the actual, out-of-pocket cost to Lessee of such rebuilding or restoration.  (Pending the payment of such amounts to Lessee for rebuilding or restoration or the application and distribution of such amounts as set forth below in this Section, any such amounts will be held in an interest bearing deposit account maintained by Agent, and the interest that accrues on such account pending disbursement from such account will accrue to the benefit of Lessee and be added to and applied in the same manner as the principal deposited therein.  So long as Net Proceeds are held in such an account, they will not be considered Lease Related Payments for purposes of this Agreement.)  Notwithstanding the foregoing, but without limiting Lessee's obligation to rebuild and restore the Property as provided in the Lease, any such amounts shall, upon request by Lessee, be applied and distributed by Lessor or Agent as set forth below in this Section.  Also, if an Accelerated Purchase Event exists, then during the continuance of such Accelerated Purchase Event, all such amounts (not only those in excess of the cost of rebuilding or restoration) shall, at the option of Agent, either be held and used for rebuilding or restoration  or applied and distributed as set forth below in this Section.

Following any determination that any Net Proceeds paid to Lessor or Agent as a result of a Casualty or Condemnation pursuant to the Lease (but excluding any amounts payable pursuant to Sections 15.4 or 16.2 of the Lease, the application and distribution of which will be governed by other provisions of this Section 3) need not and will not be paid to Lessee or held by Agent or Lessor for rebuilding or restoration as aforesaid; however, all such Net Proceeds which constitute Lease Related Payments (as provided in the definition thereof), will be applied and distributed by Agent or Lessor as promptly as possible following such a determination in the following order of priority:

(a)

first, without reduction of the Lease Balance, so much of such amounts as shall be required to reimburse Lessor or Agent for any costs incurred by Lessor or Agent in connection with the Casualty or Condemnation which generated such amounts (to the extent such costs are not otherwise paid or reimbursed by Lessee as provided in the Lease);

13.

(b)

second, without reduction of the Lease Balance, to cover any other amounts (excluding the Adjusted Lease Balance) then due and payable by Lessee under this Agreement, the Lease or any of the other Operative Documents, with distributions made among Lessor and other Participants in accordance with other provisions of this Section 3, until all such amounts have been paid in full;

(c)

third, to prepay the Adjusted Lease Balance and any Basic Rent accrued on the portion of the Adjusted Lease Balance so prepaid and any Funding Losses associated with such prepayment, with distributions of said amount made pro rata among all Participants (including Lessor) in proportion to their Participation Interests in the amounts so paid, and with any reduction of the Adjusted Lease Balance applied proportionately to each of the Adjusted Tranche A Balance, the Tranche B Balance and the Tranche C Balance, until the entire Lease Balance and all accrued Basic Rent and any such Funding Losses have been paid in full; and

(d)

lastly, the balance, if any, shall be promptly distributed to, or as directed by, Lessee.

Section 3.23

Credits for Available Cash Collateral and Letter of Credit Proceeds.  Notwithstanding any other provision in this Participation Agreement, the Lease or any other Operative Document to the contrary, Lessee, Agent, the Participants and Lessor agree that upon the maturity or acceleration of Lessee's obligation to pay the Asset Termination Value, Residual Value Guarantee Amount or Purchase Option Price, any and all amounts of Cash Collateral previously deposited by Lessee pursuant to the Cash Collateral Agreement and any or all proceeds drawn on the Letter of Credit may be applied by Agent to satisfy Lessee's obligation to pay the Asset Termination Value, Purchase Option Price or Residual Value Guarantee, as applicable.  Further, Lessee itself may direct and require such application of the Cash Collateral or the proceeds of the Letter of Credit at any time, provided that (1) Lessee gives such direction by an irrevocable, unconditional written notice to Agent and the Participants (including Lessor), and (2) no such direction by Lessee will be effective with regard to such amounts or proceeds which have already been returned or paid to Lessee or offset or applied by Agent, Lessor or any other Participant against any Lessee Obligations.  If, at the time Lessee gives any such direction, any such amounts of Cash Collateral or proceeds of the Letter of Credit which have not previously been paid or returned to Lessee or offset or applied against Lessee Obligations are not actually available for payment of the Asset Termination Value, Purchase Option Price or Residual Value Guarantee for reasons attributable to Lessor, Agent or any Participant, then Lessee will nonetheless be entitled to a credit against such payment for such unavailable amounts or proceeds; provided, however, that Lessee assigns to Agent (for the benefit of Lessor and Participants) all right, title and interest of Lessee in and to such unavailable amounts or proceeds.  For purposes of the preceding sentence, “reasons attributable to Lessor, Agent or any Participant” shall include, without limitation, any fraud or misapplication of funds by Lessor, Agent or any Participant or the filing by or against Lessor, Agent or any Participant of any insolvency, bankruptcy, dissolution, liquidation, reorganization or similar proceeding.

14.

Section 4.1   

Administrative Fee.  Lessee shall pay an administrative fee (the "Administrative Fee") to Agent for its own account payable annually on each anniversary of the Closing Date as specified in the Fee Letter.

Section 4.2

Overdue Fees.  If all or a portion of any fee due hereunder shall not be paid when due, such overdue amount shall bear interest, payable by Lessee on demand, at a rate per annum equal to the Default Rate from the date of such nonpayment until such amount is paid in full (as well after as before judgment).

Section 5.1   

Nature of Transaction.

(a)

It is the intent of the parties hereto that:  (i) the Lease constitutes an "operating lease" pursuant to Statement of Financial Accounting Standards No. 13, as amended, for purposes of Lessee's financial reporting, and (ii) for purposes of federal, state and local income or franchise taxes and for any other tax imposed on or measured by income, the transaction contemplated hereby is a financing arrangement and preserves ownership in the Property in Lessee.  Nevertheless, Lessee acknowledges and agrees that neither Agent, Lessor nor any Participant has made any representations or warranties to Lessee concerning the tax, accounting or legal characteristics of the Operative Documents and that Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents as it deems appropriate.  Notwithstanding any provision of this Participation Agreement to the contrary, the parties hereto agree and declare that:  (i) the transactions contemplated by the Lease are intended to have a dual, rather than single, form; and (ii) all references in this Participation Agreement to the "lease" of the Property which fail to reference such dual form do so as a matter of convenience only and do not reflect the intent of the parties hereto as to the true form of such arrangements.  The parties hereto agree that, in accordance with their intentions expressed herein and the substance of the transactions contemplated hereby, Lessee (and not Lessor) shall be treated as the owner of the Property for federal, state, and local income and property tax purposes and the Lease shall be treated as a financing arrangement.  Lessee shall be entitled to take any deduction, credit, allowance or other reporting, filing or other tax position consistent with such characterizations.  Lessor and the Participants shall file any federal, state or local income tax returns, reports or other statements in a manner which is consistent with the foregoing provisions of this Section 5.1; provided, that Lessor and any Participant may take a position that is inconsistent with Lessee's status as owner of the Property if:  (x) there has been a change in law or regulation so requiring as supported by an opinion of counsel reasonably acceptable to Lessee that there is not substantial authority for such a consistent reporting position; or (y) (A) there has been an administrative or judicial holding that Lessee is not the owner of the Property for such tax purposes, (B) Lessee has no right to contest such holding pursuant to Section 13.5 of the Participation Agreement, and (C) Lessee's lack of right to contest is not the result of an Indemnitee's waiver of its right to indemnification pursuant to [Section 13.5(f)(iii) of the Participation Agreement or failure of the amount at issue to exceed the minimum amount set forth in Section 13.5(f)(iv)(B) of the Participation Agreement.

15.

(b)

Specifically, without limiting the generality of subsection (a) of this Section 5.1, the parties hereto intend and agree that with respect to the nature of the transactions evidenced by the Lease in the context of the exercise of remedies under the Operative Documents, including, without limitation, in the case of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting Lessee, Lessor or any Participant or any enforcement or collection actions, (i) the transactions evidenced by the Operative Documents are loans made by Lessor and the Participants as unrelated third party lenders to Lessee secured by the Property and the Collateral, (ii) the obligations of Lessee under the Lease to pay Basic Rent and Supplemental Rent or Asset Termination Value in connection with any purchase of the Property pursuant to the Lease shall be treated as payments of interest on and principal of, respectively, loans from Lessor and the Participants to Lessee, (iii) the Lease grants a security interest and deed of trust or lien, as the case may be, in the Property and the collateral described in the Mortgage to Lessor, Agent and the Participants to secure Lessee's performance and payment of all amounts under the Lease and the other Operative Documents.

Section 5.2

Amounts Due Under Lease.  Subject to Section 3.19, but anything else herein or elsewhere to the contrary notwithstanding, it is the intention of Lessee, Lessor, the Participants and Agent that:  (i) the amount and timing of installments of Basic Rent due and payable from time to time from Lessee under the Lease shall be equal to the aggregate payments due to the Participants in respect of their Participation Interests on each Payment Date; (ii) if Lessee elects the Purchase Option or becomes obligated to purchase the Property under the Lease, the entire Adjusted Lease Balance and the Participants’ Participation Interests therein, all fees and all of the interest on overdue amounts thereon and all other obligations of Lessee owing to Lessor, the Participants and Agent shall be paid in full by Lessee; (iii) if Lessee properly elects the Remarketing Option, Lessee shall only be required to pay to Lessor the proceeds of the sale of the Property, the Residual Value Guarantee Amount and any amounts due pursuant to Section 13 of this Participation Agreement and Section 22.2 of the Lease (which aggregate amounts may be less than the Asset Termination Value); and (iv) upon a Lease Event of Default resulting in an acceleration of Lessee's obligation to purchase the Property under the Lease, the amounts then due and payable by Lessee under the Lease shall include all amounts necessary to pay in full the Asset Termination Value, plus all other amounts then due from Lessee to the Participants, Agent and Lessor under the Operative Documents.

Section 6.1   

Conditions Precedent--Documentation.  The obligation of Lessor to make the Refinancing Advance in respect of such Property on the Closing Date and the obligation of each Participant to purchase its Participation Interest in, and to make available to Lessor its related portion of, the Refinancing Advance on the Closing Date are subject to satisfaction or waiver of the following conditions precedent and the conditions precedent set forth in Section 6.2 (it being understood that Lessor's obligation to make the Refinancing Advance shall not be subject to the conditions precedent set forth in this Section 6.1 or Section 6.2 to the extent such conditions are actions required of Lessor) on or prior to the Closing Date:

16.

(a)

Funding Request.  Prior to the Closing Date, Agent and Lessor shall have received a fully executed counterpart of the Funding Request, appropriately completed by Lessee, in accordance with Section 3.3.

(b)

Operative Documents.  Each of the Operative Documents to be entered into on the Closing Date shall have been duly authorized, executed and delivered by the parties thereto, and shall be in full force and effect, including, without limitation, (i) this Participation Agreement, (ii) the Lease, (iii) the Mortgage, (v) the Assignment of Lease and Consent to Assignment, (vi) the Cash Collateral Agreement and (vii) the Letter of Credit.  If Cash Collateral is selected by Lessee pursuant to Section 7.1, such Cash Collateral shall have been deposited pursuant to the Cash Collateral Agreement.  No Potential Lease Default or Lease Event of Default shall exist thereunder and be continuing (both before and after giving effect to the transactions contemplated by the Operative Documents), and Lessor, Agent and each Participant shall each have received a fully executed copy of each of such Operative Documents (other than the Lease, of which Agent shall receive the original and Lessor and the Participants shall receive specimens).  On or prior to the Closing Date, the Operative Documents (or memoranda thereof), any supplements thereto and any financing statements in connection therewith required under the Uniform Commercial Code shall have been recorded, registered and filed, if necessary, in such manner as to enable Lessee's counsel to render its opinion referred to in clauses 6.l(ij(A) and (B) below.

(c)

Environmental Certificate.  Agent, each Participant and Lessor shall have received an Environmental Certificate substantially in the form of Exhibit C (an "Environmental Certificate") with respect to the Property, provided that such Environmental Certificate shall be delivered not less than five (5) Business Days prior to the Closing Date and shall have been approved by Agent, the Required Participants and Lessor, and accompanied by the Environmental Audit for the Property prepared by Harding Lawson Associates, dated August 13, 1997 and a Phase I Update and Sampling Analysis report by Harding ESE, dated March 9, 2000.

(d)

Financial Statements.  Lessee shall have delivered to Agent copies of Lessee's Financial Statements as described in Section 8.3(m) and an duly executed Compliance Certificate in the form attached as Exhibit L.

(e)

Survey and Title Insurance.  Lessee shall have delivered (i) an ALTA (1992) owners title insurance policy with extended coverage over the general exceptions, insuring fee title in Lessor to the Property, subject only to the Permitted Exceptions and (ii) an ALTA (1992) Loan Policy insuring Agent that the Lien of the Mortgage is a first and primary lien in Lessor's interest in the Master Lease and in the fee title to the Property, subject only to the Master Lease and the Permitted Exceptions, and (iii) an ALTA (1992) Leasehold Policy insuring leasehold title in Lessee, such policies each in an amount not less than the Refinancing Advance and to be reasonably satisfactory to Lessor, Agent and the Participants with extended coverage, access, tax parcel, variable rate, future advances, usury, comprehensive, doing business, mechanics liens and zoning endorsements and such other endorsements as and to the extent available in such jurisdiction where the Property is located, if requested by Agent.

17.

(f)

Evidence of Recording and Filing.  On the Closing Date, Agent shall have received evidence reasonably satisfactory to it that each of the Lease Supplement, the Assignment of Leaseand Consent to Assignment and the Mortgage shall have been or are being recorded with the appropriate Governmental Authorities in the order in which such documents are listed in this clause, and the UCC Financing Statements with respect to the Property shall have been or are being filed with the appropriate Governmental Authorities.

(g)

Evidence of Insurance.  Agent, Lessor and each Participant shall have received evidence of insurance with respect to the Property required to be maintained pursuant to the Lease, setting forth the respective coverages, limits of liability, carrier, policy number and period of coverage and naming Lessor as an additional insured thereunder.

(h)

Unrestricted Cash Certificate.  On the Closing Date, Lessee shall have delivered to Agent, Lessor and each Participant a certificate in form and substance satisfactory to Agent certifying that Lessee and its Subsidiaries on a consolidated basis held unrestricted cash (and cash equivalents) of $100,000,000 or more as of the last day of the month immediately preceding the Closing Date.

(i)

Taxes.   All taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Documents shall have been paid or provisions for such payment shall have been made to the satisfaction of Agent, each Participant and Lessor.

(j)

Opinions of Counsel.  On the Closing Date, (i) Lessee shall have delivered to Agent, each Participant and Lessor (A) an opinion of Wilson, Sonsini, Goodrich & Rosati, counsel to Lessee, as to the matters set forth in Exhibit D; and (B) an opinion of local counsel licensed to practice in the jurisdiction where the Property is located as to the matters set forth in Exhibit E; and (ii) Lessor shall have delivered to Agent and each Participant (A) an opinion of special counsel in the form set forth on Exhibit F; and (B) an opinion of internal counsel to Lessor to the effect and in the form set forth in Exhibit G.

(k)

Approvals.  All necessary (or, in the reasonable opinion of Lessor, the Participants or Agent or any of their respective counsel, advisable) Governmental Actions and covenants and approvals of or by any Governmental Authority or other Person, in each case required by any Requirement of Law, covenant or restriction affecting the Property or the transactions contemplated thereby to have been obtained by such date shall have been obtained or made and be in full force and effect.

(l)

Litigation.  No action or proceeding shall have been instituted, nor shall any action or proceeding be threatened, before any Governmental Authority, nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Authority (i) to set aside, restrain, enjoin or prevent the full performance of this Participation Agreement, the Lease or any other Operative Document or any transaction contemplated hereby or thereby or (ii) which is reasonably likely to have a Material Adverse Effect.

18.

(m)

Requirements of Law.  In the reasonable opinion of Lessor, the Participants, Agent and their respective counsel, the transactions contemplated by the Operative Documents do not and will not violate any Requirement of Law and do not and will not subject Lessor, Agent or any Participant to any adverse regulatory or tax prohibitions or constraints.

(n)

Responsible Officer's Certificate of Lessee.   On or prior to the Closing Date, Lessor, each Participant and Agent shall each have received a Responsible Officer's Certificate, dated as of the Closing Date, of Lessee stating that (i) each and every representation and warranty of Lessee contained in the Operative Documents to which it is a party is true and correct on and as of the Closing Date; (ii) no Potential Lease Default or Lease Event of Default under the Lease has occurred and is continuing; (iii) each Operative Document to which Lessee is a party is in full force and effect with respect to it; and (iv) Lessee has duly performed and complied with all covenants, agreements and conditions contained herein or in any Operative Document required to be performed or complied with by it on or prior to the Closing Date.

(o)

Lessee's Resolutions and Incumbency Certificate, Etc.  Lessor, each Participant and Agent shall each have received (i) a certificate of the Secretary or an Assistant Secretary of Lessee attaching and certifying as to (A) the resolutions of the Board of Directors of Lessee, duly authorizing the execution, delivery and performance by Lessee of documents and agreements of the type represented by each Operative Document to which it is or will be a party, (B) its articles of incorporation and bylaws, and (C) the incumbency and signature of persons authorized to execute and deliver on its behalf the Operative Documents to which it is a party, and (ii)  good standing certificates from the appropriate officer of the states of California, Colorado and Delaware.

(p)

Intentionally Deleted.

(q)

No Material Adverse Effect.  As of the Closing Date, there shall not have occurred any Material adverse change in Lessee's and its Subsidiaries' capital structure, ownership or consolidated assets, liabilities, results of operations, or financial condition taken as a whole from that set forth or contemplated in the most recent Financial Statements referred to in Section 8.3(m), and no event or condition shall have occurred that would result in a Material Adverse Effect.

(r)

Responsible Officer's Certificate of Lessor.  On or prior to the closing Date, Lessee, Agent and each Participant shall have received a certificate of an authorized officer of Lessor, dated as of the Closing Date, stating that (i) each and every representation and warranty of Lessor contained in the Operative Documents to which it is a party is true and correct on and as of the Closing Date, (ii) each Operative Document to which Lessor is a party is in full force and effect with respect to it, and (iii) Lessor has duly performed and complied with all covenants, agreements and conditions contained herein or in any Operative Document required to be performed or complied with by it on or prior to the Closing Date.

(s)

Lessor's Resolutions and Incumbency Certificate, Etc.  Lessee, Agent and each Participant shall have received a certificate of the Secretary or an Assistant Secretary of Lessor attaching and certifying as to (i) the resolutions of the Board of Directors duly authorizing the execution, delivery and performance by Lessor of documents and agreements of the type represented by each Operative Document to which it is or will be a party, (ii) the pertinent provisions of its by-laws and (iii) the incumbency and signature of persons authorized to execute and deliver on its behalf the Operative Documents to which it is a party.

19.

(t)

Termination of Liens.   Agent, each Participant and Lessor shall have received a pay-off letter from the Successor Agent, together with duly executed UCC-3 termination statements, mortgage releases and such other instruments, in form and substance satisfactory to Agent, each Participant and Lessor, as shall be necessary to terminate and satisfy all Liens created pursuant to the Existing Financing and all other Liens except Permitted Exceptions.

Section 6.2

Further Conditions Precedent.  The obligation of Lessor to make the Refinancing Advance on the Closing Date and the obligation of each Participant to purchase its Participation Interest in, and to make available its related portion of, such Refinancing Advance on the Closing Date are subject to satisfaction or waiver of the following conditions precedent and to satisfaction on or before the Closing Date of the conditions precedent set forth in Section 6.1 (it being understood that Lessor's obligations to make the Refinancing Advance to Lessee and each Participant's obligation to fund the purchase of its Participation Interest in the Refinancing Advance shall not be subject to the conditions precedent set forth in Section 6.1 and this Section 6.2 to the extent such conditions are actions required of Lessor or such Participant):

(a)

Representations and Warranties.  On the Closing Date, the representations and warranties of Lessee, Lessor and each Participant contained herein and in each of the other Operative Documents shall be true and correct as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct on and as of such earlier date.

(b)

Performance of Covenants.  On the Closing Date, the parties hereto shall have performed their respective agreements contained herein and in the other Operative Documents to be performed by them on or prior to such date.

(c)

Title.   Title to the Property shall conform to the representations and warranties set forth in Section 8.4(c).

(d)

No Default.  There shall not have occurred and be continuing any Potential Lease Default, Accelerated Purchase Event  or Lease Event of Default under any of the Operative Documents, and no Potential Lease Default, Accelerated Purchase Event or Lease Event of Default under any of the Operative Documents will have occurred after the making of the Refinancing Advance.

Section 7.1   

Lessee Obligations.

(a)

Property.  To the extent that the transaction evidenced by the Lease and the Operative Documents is treated as a loan by the Participants (through Lessor) to Lessee secured by the Property, with Lessee as owner of the Property pursuant to Section V hereof, the Lessee Obligations shall be secured by the Property as provided in the Lease.

20.

(b)

Other Collateral.  In addition to a security interest in the Property, the Lessee Obligations shall be secured initially either by (i) a Cash Collateral Agreement in the form of Exhibit M, duly executed and delivered by Lessee and Cash Collateral delivered to Agent or its assignee pursuant to the Cash Collateral Agreement, or (ii) a Letter of Credit in the form of Exhibit N (or such other form as Agent may approve) issued in favor of Agent or Lessor (collectively, the "Collateral").  The Collateral shall on the closing date be in an amount equal to the Lease Balance and at no time shall be less than the Lease Balance.  Lessee shall select the initial Collateral by notice to Agent not less than three (3) Business Days before the Closing Date.  If Lessee delivers a Letter of Credit, Agent shall not draw upon the Letter of Credit (other than as may be requested or directed by Lessee) until the Expiration Date or the occurrence of an Accelerated Purchase Event.  In any event, Lessee may not withdraw any Collateral required to be delivered pursuant to this Section 7.1(b) until the Expiration Date and satisfaction in full of all Lessee Obligations, but Lessee may require the application of any available Collateral to satisfy the Obligations on and subject to the conditions set forth in Section 3.23, and Lessee may substitute Collateral to the extent permitted by Section 7.1(c).  At the time Lessee delivers any Cash Collateral to Agent pursuant to this Section 7.1(b), Lessee also shall deliver to Lessor a favorable written opinion of its counsel, in form and substance reasonably satisfactory to Lessor and Agent but subject to customary qualifications and assumptions, to the effect that the Cash Collateral Agreement is a legal, valid and binding agreement of Lessee, enforceable in accordance with its terms, and that Lessor has a perfected security interest in the Cash Collateral.

(c)

Substitution of Collateral.  If Lessee has delivered a Cash Collateral Agreement and Cash Collateral at the Closing Date or has during the Term (subject to the provisions of this Section 7.1(c)) has substituted a Cash Collateral Agreement and Cash Collateral for a Letter of Credit, Lessee may at any time thereafter during the Term so long as no Potential Lease Default exists under any of the Operative Documents substitute a new Letter of Credit in place of such Cash Collateral Agreement and Cash Collateral on ten (10) Business Days prior written notice to Lessor and Agent.  If at the Closing Date or at any time during the Term Lessee has delivered a Letter of Credit to Lessor in satisfaction of Lessee's obligations under this Section 7.1, not later than twenty (20) Business Days before expiration of such Letter of Credit Lessee shall deliver to Lessor a replacement Letter of Credit.  Notwithstanding the immediately preceding sentence, if at the Closing Date or at any time during the Term Lessee has delivered a Letter of Credit to Lessor in satisfaction of Lessee's obligations under this Section 7.1, Lessee may replace such Letter of Credit with Cash Collateral under and pursuant to a Cash Collateral Agreement delivered to Agent not later than one hundred twenty (120) days before expiration of such Letter of Credit; however, during such one hundred twenty (120) day period, Agent will  have the benefit of both the Cash Collateral and the Letter of Credit to be replaced, and if bankruptcy or other legal proceedings are instigated or continued by or against Lessee during such period, leaving Agent unsure whether the pledge of the Cash Collateral will be effective to secure Lessee’s Obligations, then Agent may draw upon such Letter of Credit before it expires.  Any failure of Lessee to deliver either (i) a replacement Letter of Credit at least twenty (20) Business Days prior to the expiration of an existing Letter of Credit or (ii) Cash Collateral pledged pursuant to such a Cash Collateral Agreement at least one hundred twenty (120) days prior to the expiration of an existing Letter of Credit will constitute a Lease Event of Default, whereupon Agent or Lessor may immediately draw upon the existing Letter of Credit.

Section 7.2

Lessor Obligations to Participants.  The obligations of Lessor to the Participants under the Operative Documents shall be secured by the Mortgage and the Assignment of Lease.

Section 8.1   

Representations of Lessor.   Lessor represents and warrants to each of the other parties hereto as follows:

(a)

Due Organization, Etc.   It is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio and has the corporate power and authority to enter into and perform its obligations under each of the Operative Documents to which it is or will be a party and each other agreement, instrument and document to be executed and delivered by it in connection with or as contemplated by each such Operative Document to which it is or will be a party.

(b)

Authorization; No Conflict.   The execution, delivery and performance of each Operative Document to which it is or will be a party 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 current United States, Colorado or California law, governmental rule or regulation, (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, its articles of incorporation or by-laws, or any indenture, mortgage, deed of trust, conditional sales contract, 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 or (iv) does or will require any Governmental Action by any Governmental Authority, except such as have been obtained on Lessee's or Lessor's behalf.

(c)

Enforceability, Etc.   Each Operative Document to which Lessor is or will be a party has been duly executed and delivered by Lessor and each such Operative Document to which Lessor is a party constitutes, or upon execution and delivery will constitute, a legal, valid and binding obligation enforceable against Lessor in accordance with the terms thereof, except as the same may be limited by insolvency, bankruptcy, reorganization or other laws relating to or affecting creditors' rights or by general equitable principles.

(d)

Litigation.   There is no action or proceeding pending or, to its knowledge, threatened to which it is a party, before any Governmental Authority that, if adversely determined, would materially and adversely affect its ability to perform its obligations under the Operative Documents to which it is a party, would have a material adverse effect on the financial condition of Lessor or would question the validity or enforceability of any of the Operative Documents to which it is or will become a party.

22.

(e)

Assignment.   It has not assigned or transferred any of its right, title or interest in or under the Lease except to Agent, for the benefit of the Participants, in accordance with this Participation Agreement and the other Operative Documents.

(f)

Defaults.   No Potential Lease Default or Lease Event of Default under the Operative Documents attributable to it has occurred and is continuing.

(g)

Use of Proceeds.   The proceeds of the purchase of the Participation Interests shall be applied by Lessor solely in accordance with the provisions of the Operative Documents.

(h)

Securities Act.  Neither Lessor nor any Person authorized by Lessor to act on its behalf has offered or sold any interest in the Lease, or in any similar security relating to the 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 acquire any of the same from, any Person other than Agent and the Participants, and neither Lessor nor any Person authorized by Lessor to act on its behalf will take any action which would subject the issuance or sale of any interest in the Lease or the Property to the provisions of Section 5 of the Securities Act or require the qualification of any Operative Document under the Trust Indenture Act of 1939, as amended.

(i)

Chief Place of Business.   Lessor's chief place of business, chief executive office and office where the documents, accounts and records relating to the transactions contemplated by this Participation Agreement and each other Operative Document are kept are located at 66 Pearl Street, Albany, New York 12207.

(j)

Federal Reserve Regulations.  Lessor is not engaged principally in, and does not have as one 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), and no part of the proceeds of the purchase of the Participation Interests 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 Regulation T, U, or X of the Board.

(k)

Investment Company Act.  Lessor is not an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act.

(l)

No Plan Assets.  Lessor is not acquiring its interests in the Property with the assets of any "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in Section 4975(e)(1) of the Code).

(m)

Equity Source.   The source of its 3.5% minimum equity investment in the Tranche C Participation Interest is full recourse debt, the obligee of which is KeyBank National Association, the ultimate parent of Lessor; (ii) Lessor will not obtain residual insurance or any other residual guarantee to ensure recovery of its equity investment; and (iii) Lessor will bear the loss attributable to any decline in the fair value of the residual interest (to the extent, if any, such loss is not recovered from payments required by the terms of the Lease) and has, and is expected to continue to have during the term of the Lease, other significant assets, in addition to and of a value that exceeds its equity investment, that are at risk.

23.

Section 8.2

Representations of the Participants.   Each Participant represents and warrants to Lessor, each of the other Participants and Lessee as follows:

(a)

No Plan Assets.  Such Participant is not and will not be funding its purchase of a Participation Interest hereunder, and is not performing its obligations under the Operative Documents, with the assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in Section 4975(e)(1) of the Code).  The advancing of any amount with respect to its Participation Interest on any Funding Date shall constitute an affirmation by the subject Participant of the preceding representation and warranty.

(b)

Due Organization, Etc.  It is either (i) a duly organized and validly existing corporation in good standing under the laws of the state of its incorporation, or (ii) a national banking association duly organized and validly existing under the laws of the United States or (iii) a banking corporation duly organized and validly existing under the laws of the jurisdiction of its organization, and, in each case, has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Operative Documents to which it is a party.

(c)

Authorization; No Conflict.  The execution, delivery and performance of each Operative Document to which it is or will be a party 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 current law, governmental rule or regulation of the United States or the state or country of its organization, (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, its certificate of incorporation or bylaws, articles of association or other organizational documents or any indenture, mortgage, deed of trust, conditional sales contract, 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 or (iv) does or will require any Governmental Action by any Governmental Authority.

(d)

Enforceability, Etc.  Each Operative Document to which it is a party has been, or on or before the Closing Date or applicable Funding Date or Land Interest Acquisition Date will be, duly executed and delivered by it and each such Operative Document to which it is a party constitutes, or upon execution and delivery will constitute, a legal, valid and binding obligation enforceable against it in accordance with the terms thereof, except as the same may be limited by insolvency, bankruptcy, reorganization or other laws relating to or affecting creditors' rights or by general equitable principles.

(e)

Litigation.  There is no action or proceeding pending or, to its knowledge, threatened to which it is or will be a party before any Governmental Authority that is reasonably likely to be adversely determined and, if adversely determined, would materially and adversely affect its ability to perform its obligations under the Operative Documents to which it is a party.

24.

Section 8.3

Representations of Lessee.  Lessee represents and warrants to each of the other parties hereto that:

(a)

Corporate Status.  Lessee (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and (ii) has duly qualified and is authorized to do business and has obtained a certificate of authority to transact business as a foreign corporation in the States of California and Colorado and in each other jurisdiction where the failure to so qualify is reasonably likely to be Material.

(b)

Corporate Power and Authority.  Lessee has corporate power and authority to execute, deliver and carry out the terms and provisions of the Operative Documents to which it is or will be a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Operative Documents to which it is or will be a party and has or will have duly executed and delivered each Operative Document required to be executed and delivered by it and, assuming the due authorization, execution and delivery thereof on the part of each other party thereto, each such Operative Document constitutes or will constitute a legal, valid and binding obligation enforceable against it in accordance with its terms, except as the same may be limited by insolvency, bankruptcy, reorganization or other laws relating to or affecting the enforcement of creditors' rights or by general equitable principles.

(c)

No Violation.  Neither the execution, delivery and performance by Lessee of the Operative Documents to which it is or will be a party nor compliance with the terms and provisions thereof, nor the consummation by Lessee of the transactions contemplated therein (i) will result in a violation by Lessee of any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality having jurisdiction over Lessee or the Property that would (x) adversely affect the validity or enforceability of the Operative Documents to which Lessee is a party, or the title to, or value or condition of, the Property, or (y) have a Material Adverse Effect on the consolidated financial position, business or consolidated results of operations of Lessee, or (z) have an adverse effect on the ability of Lessee to perform its obligations under the Operative Documents, (ii) will conflict with or result in any breach under, or (other than pursuant to the Operative Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of Lessee pursuant to the terms of, any indenture, loan agreement or other agreement for borrowed money to which Lessee is a party or by which it or any of its property or assets is bound or to which it may be subject (other than Permitted Liens), or (iii) will violate any provision of the certificate or articles of incorporation or bylaws of Lessee.

(d)

Litigation.  There are no actions, suits or proceedings pending or, to the knowledge of Lessee, threatened (i) that are reasonably likely to have a Material Adverse Effect or (ii) that question the validity of the Operative Documents or the rights or remedies of Lessor, Agent or the Participants with respect to Lessee or the Property under the Operative Documents.

25.

(e)

Governmental Approvals.  No Governmental Action by any Governmental Authority having jurisdiction over Lessee or the Property is required to authorize or is required in connection with (i) the execution, delivery and performance by Lessee of any Operative Document or (ii) the legality, validity, binding effect or enforceability against Lessee of any Operative Document, except for the filing or recording of the Operative Documents hereof with the appropriate Governmental Authorities.

(f)

Investment Company Act.   Lessee is not an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act.

(g)

Public Utility Holding Company Act.  Lessee is not a "holding company, or a "subsidiary company," or an "affiliate" of a "holding company," or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended.

(h)

Accuracy of Information Furnished.  None of the Operative Documents and none of the other certificates, statements or information furnished to Lessor, Agent or any Participant by or on behalf of Lessee or any of its Subsidiaries in connection with the Operative Documents or the transactions contemplated thereby (taken together with all such Operative Documents, certificates, statements or information) contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood by Lessor, Agent or any Participant that the projections and forecasts provided by Lessee are not to be viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

(i)

Taxes.  All United States federal income tax returns and all other Material tax returns which are required to have been filed have been or will be prepared in accordance with applicable law and filed by or on behalf of Lessee by the respective due dates, including extensions, and all taxes due with respect to Lessee pursuant to such returns or pursuant to any assessment received by Lessee have been or will be paid.  The charges, accruals and reserves on the books of Lessee in respect of taxes or other governmental charges are, in the opinion of Lessee, adequate.

(j)

Compliance with ERISA.  Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all Material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan.  No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.

26.

(k)

Environmental and Other Regulations.  Except as set forth in Schedule IV attached hereto, Lessee and the Property are in compliance with all Environmental Laws relating to pollution and environmental control or employee safety in the jurisdiction in which the Property is located and in all other domestic jurisdictions, other than, with respect to such other jurisdictions, those Environmental Laws the non-compliance with which would not have a Material Adverse Effect.

(l)

Offer of Securities, Etc.  Neither Lessee nor any Person authorized to act on their behalf has, directly or indirectly, offered any interest in the Property or the Lease or any other interest similar thereto (the sale or offer of which would be integrated with the sale or offer of such interest in the Property or the Lease), for sale to, or solicited any offer to acquire any of the same from, any Person other than the Participants, Lessor and other "accredited investors" (as defined in Regulation D of the Securities and Exchange Commission).

(m)

Financial Statements.  The audited Financial Statements of Lessee and its consolidated Subsidiaries as of March 31, 2002, and the related consolidated statements of income, shareholder's equity and cash flows for the fiscal year then ended, reported on by Ernst & Young, LLP, and the unaudited Financial Statements for the quarter ended September 30, 2002 copies of which have been delivered to each of Lessor, the Participants and Agent, present fairly in all material respects, in conformity with generally accepted accounting principles, the financial position of Lessee as of such date and its results of operations and cash flows for such fiscal year.  Since the date of the audited Financial Statements, there has been no event or circumstance which has a Material Adverse Effect.

(n)

No Violation or Default.  Neither Lessee nor any of Lessee's Subsidiaries is in violation of or in default with respect to (i) any Requirement of Law applicable to such Person or (ii) any Contractual Obligation of such Person, where, in each case, such violation or default is reasonably likely to have a Material Adverse Effect.  Without limiting the generality of the foregoing, neither Lessee nor any of Lessee's Subsidiaries (A) is in violation of any Environmental Laws, (B) to the best of Lessee's knowledge, has any liability or potential liability under any Environmental Laws or (C) has received written notice or other written communication of an investigation or is under investigation by any Governmental Authority having jurisdiction over Lessee or any of Lessee's Subsidiaries having authority to enforce Environmental Laws, where, in each case, such violation, liability or investigation could reasonably be expected to have a Material Adverse Effect, nor, to the best of Lessee's knowledge, have any Hazardous Materials been released or disposed of on any of the properties owned by Lessee or Lessee's Subsidiaries which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.  No Lease Event of Default or Potential Lease Default has occurred and is continuing.

(o)

Title; Possession Under Leases.  Lessee and Lessee's Subsidiaries (i) own and have good title (without regard to minor defects of title), or leasehold interests in, all their other respective properties and assets which are material to the business of Lessee and its Subsidiaries taken as a whole as reflected in the most recent Financial Statements delivered to Agent (except those assets and properties disposed of since the date of such Financial Statements in compliance with this Participation Agreement) and (ii) own and have good title (without regard to minor defects of title) to, or leasehold interests in, all respective properties and assets acquired by Lessee and Lessee's Subsidiaries since such date which are material to the business of Lessee and its Subsidiaries taken as a whole (except those assets and properties disposed of in compliance with this Participation Agreement).  Such assets and properties are subject to no Lien, except for Permitted Liens.

27.

(p)

Patent and Other Rights.  Lessee and Lessee's Subsidiaries own or license under validly existing agreements (or could obtain such ownership, possession or license on terms not materially adverse to Lessee and its Subsidiaries, taken as a whole, and under circumstances that could not reasonably be expected to have a Material Adverse Effect), and have the full right to license without the consent of any other Person, all patents, licenses, trademarks, trade names, trade secrets, service marks, copyrights and all rights with respect thereto, which are material to conduct the businesses of Lessee and its Subsidiaries (taken as a whole) as now conducted.

(q)

Solvency, Etc.  Lessee and each of its Material Subsidiaries is Solvent and, after the execution and delivery of the Operative Documents and the consummation of the transactions contemplated thereby, will be Solvent.

(r)

Catastrophic Events.  Neither Lessee nor any of Lessee's Subsidiaries and none of their properties is affected by any fire, explosion, strike, lockout or other labor dispute, earthquake, embargo or other casualty that is reasonably likely to have a Material Adverse Effect.  As of the Closing Date, there are no disputes presently subject to grievance procedure, arbitration or litigation under any of the collective bargaining agreements, employment contracts or employee welfare or incentive plans to which Lessee or any of Lessee's Subsidiaries is a party, an there are no strikes, lockouts, work stoppages or slowdowns, or, to the best knowledge of Lessee, jurisdictional disputes or organizing activities occurring or threatened which alone or in the aggregate are reasonably likely to have a Material Adverse Effect.

(s)

Disclosure.  No statement, information, report, representation, or warranty made by the Lessee in any Operative Document or furnished to the Agent, the Lessor or any Participant in connection with any Operative Document contains any untrue statement of a material fact or, when viewed together with the Lessee's periodic reports filed under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, omits to state any material fact necessary to make the statements herein or therein not misleading.

Section 8.4

Representations of Lessee With Respect to the Property on the Closing Date.  Lessee hereby represents and warrants as follows:

(a)

Property.  The Property consists of the Land Interest, and the Improvements and Equipment thereon and all Appurtenant Rights thereto.  Such Property is located in the State of Colorado.  The use of the Property by Lessee and its agents, assignees, employees, invitees, lessees, licensees, contractors and tenants complies in all material respects with all Requirements of Law (including, without limitation, Title III of the Americans with Disabilities Act, all zoning and land use laws and Environmental Laws) and Insurance Requirements, except for such Requirements of Law as Lessee shall be contesting in good faith by appropriate proceedings.  The Improvements on such Property do not encroach in any manner onto any adjoining land (except as permitted by express written easements or as insured by appropriate title insurance) and the Property complies in all Material respects with all applicable Requirements of Law (including, without limitation, Title III of the Americans with Disabilities Act, all applicable Environmental Laws and building, planning, zoning and fire codes).  The Improvements including, without limitation, structural members, the plumbing, heating, air conditioning and electrical systems thereof, and all water, sewer, electric, gas, telephone and drainage facilities are, in all material respects,  in first class working condition and fit for use as administration, manufacturing design and warehouse facilities, and all other utilities required to adequately service the Improvements for their intended use are available and "tapped on" and hooked up pursuant to adequate permits (including any that may be required under applicable Environmental Laws).  There is no action, suit or proceeding (including any proceeding in condemnation or eminent domain or under any Environmental Law) pending or, to the best of Lessee's knowledge, threatened with respect to Lessee, its Affiliates or such Property which adversely affects the title to, or the use, operation or value of, the Property.  As of the Closing Date, no fire or other casualty with respect to the Property shall have occurred.  The Property has available all material services of public facilities and other utilities necessary for use and operation of such facility and the other Improvements for their primary intended purposes, including, without limitation, adequate water, gas and electrical supply, storm and sanitary sewerage facilities, telephone, other required public utilities and means of access to such facility from publicly dedicated streets and public highways for pedestrians and motor vehicles.  All utilities serving such Property are located in, and vehicular access to the Improvements on such Property is provided by, either public rights-of-way abutting such Property or Appurtenant Rights.  All material licenses, approvals, authorizations, consents, permits (including, without limitation, building, demolition and environmental permits, licenses, approvals, authorizations and consents), easements and rights-of-way, including proof and dedication, required for the use, treatment, storage, transport, disposal or disposition of any Hazardous Substance on, at, under or from such Property have either been obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, or will be obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, prior to commencing any such construction or use and operation, as applicable and will in each case be maintained by Lessee during the periods for which they are required by Applicable Law or such Governmental Authorities.

28.

(b)

Title.   Lessor has fee simple title in the Land Interest and any Improvements and has the right to grant the Mortgage on the Property.

(c)

Insurance.  Lessee has obtained insurance coverage covering the Property which meets the requirements of Article XIV of the Lease, and such coverage is in full force and effect.

(d)

Lease.  On the Closing Date:

(i)     Lessee has a valid leasehold interest in the Property, subject only to the Permitted Exceptions;

(ii)     Lessee's obligation to pay Rent is an independent covenant and no right of deduction or offset will exist with respect to any Rent or other sums payable under the Lease; and

(iii)    no Rent under the Lease has been prepaid and Lessee will have no right to prepay the Rent, except as specifically set forth in the Lease.

29.

(e)

Protection of Interests.   (i) On the Closing Date, the Assignment of Lease and Consent to Assignment and the Mortgage are each in a form sufficient, and have been recorded in all recording offices necessary, to grant perfected first priority liens on the Property to Agent or Lessor, as the case may be, (ii) Agent Financing Statements are each in a form sufficient, and have been filed in all filing offices necessary, to create a valid and perfected first priority security interest in Lessor's interest in all Equipment, if any, to be located on the Property and the Improvements; and (iii) Lessor Financing Statements are each in a form sufficient, and have been filed in all filing offices necessary, to perfect Lessor's interest under the Lease to the extent the Lease is a security agreement.

(f)

Flood Hazard Areas.  No portion of the Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, or if any portion of the Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, then flood insurance has been obtained for the Property or such portion thereof in accordance with Section 14.2(b) of the Lease and in accordance with the National Flood Insurance Act of 1968, as amended.

(g)

Conditions Precedent.  All conditions precedent contained in this Participation Agreement and in the other Operative Documents relating to the refinancing of the Property by Lessor have been satisfied in full or waived.

Lessee agrees, for the benefit of Lessor, Agent and the Participants, that:

Section 9.1   

Transaction Expenses.

(a)

Lessee shall pay, or cause to be paid, from time to time all Transaction Expenses in respect of the transactions consummated on the Closing Date, it being understood and agreed that neither Agent, Lessor nor any Participant shall be required to advance any Transaction Expenses in connection with the closing.

(b)

Lessee shall pay or cause to be paid (i) all Transaction Expenses of Lessor, (ii) the Administrative Fee, (iii) all Transaction Expenses reasonably incurred by Lessee, Agent or Lessor in entering into any future amendments or supplements with respect to any of the Operative Documents, whether or not such amendments or supplements are ultimately entered into, or giving or withholding of waivers or consents hereto or thereto, in each case (except after the occurrence of a Lease Event of Default) which have been requested by or approved by Lessee, (iv) all Transaction Expenses incurred by Lessor, Lessee or Agent in connection with any purchase of the Property by Lessee or other Person pursuant to Articles XVI, XVII, XX or XXII of the Lease, and (v) all Transaction Expenses incurred by any of the other parties hereto in respect of enforcement of any of their rights or remedies against Lessee in respect of the Operative Documents.

Section 9.2

Brokers' Fees and Stamp Taxes.  Lessee shall pay or cause to be paid any brokers' fees and any and all stamp, transfer and other similar taxes, fees and excises, if any, including any interest and penalties, which are payable in connection with the transactions contemplated by this Participation Agreement and the other Operative Documents.

30.

Section 10.1   

Affirmative Covenants of Lessee.  So long as this Participation Agreement is in effect, Lessee shall, and shall (except in the case of Lessee's reporting covenants set forth in Sections 10.1(a), 10.1(b)(i) and 10.1(b)(ii)) cause each Subsidiary, to:

(a)

Financial Statements.  Deliver to Agent and each Participant, in form and detail satisfactory to Agent and the Required Participants:

(i)     as soon as available, but in any event within (A) ninety (90) days after the end of each fiscal year of Lessee, or, (B) if Lessee has been granted an extension by the Securities and Exchange Commission permitting the late filing by Lessee of any annual report on form 10-K, the earlier of (x) 120 days after the end of each fiscal year of Lessee or (y) the last day of any such extension, a consolidated balance sheet of Lessee and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing, which report and opinion shall be prepared in accordance with GAAP and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualifications and exceptions not reasonably acceptable to the Required Participants;

(ii)    as soon as available, but in any event within (A) forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of Lessee, or, (B) if Lessee has been granted an extension by the Securities and Exchange Commission permitting the late filing by Lessee of any quarterly report on form 10-Q, the earlier of (x) sixty (60) days after the end of each of the first three fiscal quarters of each fiscal year of Lessee or (y) the last day of any such extension, a consolidated balance sheet of Lessee and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income and cash flows for such fiscal quarter and for the portion of Lessee's fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of Lessee as fairly presenting the financial condition, results of operations and cash flows of Lessee and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; and

(iii)    Reports required to be delivered pursuant to clauses (i) and (ii) of this Section 10.1(a) shall be deemed to have been delivered on the date on which Lessee posts such reports on Lessee's website on the Internet at the website address listed on Schedule III hereof or when such report is posted on the Securities and Exchange Commission's website at www.sec.gov.; provided that (A) Lessee shall deliver paper copies of the reports referred to in such clauses (i) and (ii) of this Section 10.1(a) to Agent or any Participant who requests Lessee to deliver such paper copies until written request to cease delivering paper copies is given by Agent or such Participant, (B) Lessee shall notify Agent and the Participants of the posting of any such new material, and (C) in every instance Lessee shall provide paper copies of the Compliance Certificates required by clause (i) of Section 10.1(b) to Agent and each Participant.  Except for the Compliance Certificates referred to in such clause (i) of Section 10.1(b), Agent shall have no obligation to request the delivery or to maintain copies of the reports referred to in clauses (i) and (ii) of this Section 10.1(a), and in any event shall have no responsibility to monitor compliance by Lessee with any such request for delivery, and each Participant shall be solely responsible for requesting delivery to it or maintaining its copies of such reports.

31.

(b)

Certificates, Notices and Other Information.  Deliver to Agent and each Participant, in form and detail satisfactory to Agent and the Required Participants:

(i)      concurrently with the delivery of the Financial Statements referred to in clauses (i) and (ii) of Section 10.1(a), a duly completed Compliance Certificate signed by a Responsible Officer of Lessee;

(ii)     monthly on or before the tenth Business Day of each calendar month, certified copies of reports or account statements signed by a Responsible Officer of Lessee detailing (i) the total amount of unrestricted cash (and cash equivalents) held by Lessee and its Subsidiaries on a consolidated basis as of the last day of the immediately preceding calendar month. ("Consolidated Cash Balance"), and (ii) the portion(s) of such Consolidated Cash Balance deposited in domestic accounts subject to any deposit account control agreement agreements;

(iii)    promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of Lessee, and copies of all annual, regular, periodic and special reports and registration statements which Lessee may file or be required to file with the Securities and Exchange Commission under Sections 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to Agent pursuant hereto;

(iv)    promptly after the occurrence thereof, notice of any Potential Lease Default or Lease Event of Default;

(v)     notice of any change in accounting policies or financial reporting practices by Lessee or any Subsidiary that is material to Lessee or to Lessee and its Subsidiaries on a consolidated basis;

(vi)    promptly after the commencement thereof, notice of any litigation, investigation or proceeding affecting Lessee where the reasonably expected damages to Lessee exceed the Threshold Amount, or in which injunctive relief or similar relief is sought, which relief, if granted, has a Material Adverse Effect;

32.

(vii)    promptly after the occurrence thereof, notice of any Reportable Event with respect to any Plan or the intent to terminate any Plan, or the institution of proceedings or the taking or expected taking of any other action to terminate any Plan or withdraw from any Plan;

(viii)   promptly after the occurrence thereof, notice of any Material Adverse Effect; and

(ix)     promptly, such other data and information as from time to time may be reasonably requested by Agent, or, through Agent or any Participant.  Notwithstanding any provision of this Participation Agreement to the contrary, so long as no Potential Lease Default or Lease Event of Default shall have occurred and be continuing, neither Lessee nor any of its Subsidiaries shall be required to disclose, permit the inspection, examination, photocopying or making extracts of, or discuss, any document, information or other matter that (A) constitutes non-financial trade secrets or non-financial proprietary information, or (B) the disclosure of which to any Participant, or their designated representative, is then prohibited by law or any agreement binding on Lessee or any of its Subsidiaries that was not entered into by Lessee or any such Subsidiary for the purpose of concealing information from the Participants.

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of Lessee setting forth details of the occurrence referred to therein and stating what action Lessee has taken and proposes to take with respect thereto.  The annual reports, proxies, financial statements or other communications required by Section 10.1(b)(iii) above shall be deemed to have been delivered on the date on which Lessee posts such reports on Lessee’s website on the Internet at the website address listed on Schedule 10.02 hereof or when such report is posted on the Securities and Exchange Commission’s website at www.sec.gov.; provided that (y) Lessee shall deliver paper copies of the reports referred to in Section 10.1(b)(iii) to Administrative Agent or any Lender who requests Lessee to deliver such paper copies until written request to cease delivering paper copies is given by Administrative Agent or such Lender, and (z) Lessee shall notify Administrative Agent and Lenders of the posting of any such new material.  Administrative Agent shall have no obligation to request the delivery or to maintain copies of the reports and communications referred to in Section 10.1(b)(iii), and in any event shall have no responsibility to monitor compliance by Lessee with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such reports and communications.

(c)

Payment of Taxes.  Pay and discharge when due all material taxes, assessments, and governmental charges, except for any such tax, assessment, charge, or levy which is an Ordinary Course Lien under subsection (b) of the definition of such term and except as otherwise provided in Section 13 hereof or Article XIII of the Lease.

(d)

Preservation of Existence.  Preserve and maintain its existence, licenses, permits, rights, franchises and privileges necessary or desirable in the normal conduct of its business, except (i) as permitted by Section 10.2(c), or (ii) where failure to do so cannot reasonably be expected to have a Material Adverse Effect.

33.

(e)

Maintenance of Properties.  Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good order and condition, subject to wear and tear in the ordinary course of business, and not permit any waste of its properties, except where failure to do so would not reasonably be expected to have a Material Adverse Effect.

(f)

Maintenance of Insurance.  Maintain liability and casualty insurance with responsible insurance companies satisfactory to Agent in such amounts and against such risks as is customary for similarly situated businesses.

(g)

Compliance with Requirements of Law.

(i)     Comply with all Requirements of Law, noncompliance with which would not reasonably to be expected to have a Material Adverse Effect; and

(ii)    conduct its operations and keep and maintain its property in material compliance with all Environmental Laws.

(h)

Inspection Rights.  At any time during regular business hours and as often as reasonably requested upon reasonable notice, permit Agent or any Participant, or any employee, agent or representative thereof, to examine, audit and make copies and abstracts from Lessee's records and books of account and to visit and inspect its properties and to discuss its affairs, finances and accounts with any of its officers and key employees, and, upon request, furnish promptly to Agent or any Participant true copies of all financial information and internal management reports made available to their senior management.  Notwithstanding any provision of this Agreement to the contrary, so long as no Potential Lease Default or Lease Event of Default shall have occurred and be continuing, neither Lessee nor any of its Subsidiaries shall be required to disclose, permit the inspection, examination, photocopying or making extracts of, or discuss, any document, information or other matter that (i) constitutes non-financial trade secrets or non-financial proprietary information, or (ii) the disclosure of which to the Lessor, Agent or any Participant, or their designated representative, is then prohibited by law or any agreement binding on Lessee or any of its Subsidiaries that was not entered into by Lessee or any such Subsidiary for the purpose of concealing information from the Lessor, Agent or any Participant.  Lessee shall, however, furnish to Agent such information concerning Lessee's intellectual property (including, without limitation, application and registration numbers for any filings in connection with such intellectual property) as is reasonably necessary to permit Agent (on behalf of itself and the other Participants) to perfect a security interest in such intellectual property.

(i)

Keeping of Records and Books of Account.  Keep adequate records and books of account reflecting all financial transactions in conformity with GAAP, consistently applied, and in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over Lessee or any applicable Subsidiary.

(j)

Compliance with ERISA.  Cause, and cause each of its ERISA Affiliates to:  (i) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (ii) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (iii) make all required contributions to any Plan subject to Section 412 of the Code.

34.

(k)

Compliance With Agreements.  Promptly and fully comply with all Contractual Obligations to which any one or more of them is a party, except for any such Contractual Obligations (i) the nonperformance of which would not cause a Potential Lease Default or Lease Event of Default, (ii) then being contested by any of them in good faith by appropriate proceedings, or (iii) if the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

(l)

ALTA Survey.  Not later than January 15, 2003, Lessee shall have delivered to Agent for the benefit of Lessor and the Participants an ALTA/ACSM (1992)(Urban) Survey of the Property, including Table A numbers 1, 2, 3, 4, 6, 8, 9, 10 and 11, certified to Lessor, the Participants and the title company and otherwise in form reasonably acceptable to the Participants, together with endorsements to the title insurance policies delivered pursuant to Section 6.1(e) hereof removing any survey exceptions, adding endorsements that the real property shown on such Survey is identical to the Property and such other endorsements as Lessor, Agent and the Participants may reasonably require.

Section 10.2

Negative Covenants of Lessee.  So long as this Participation Agreement is in effect, Lessee shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:

(a)

Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness, except for the following ("Permitted Indebtedness"):

(i)     The obligations of Lessee under the Operative Documents and the Loan Documents;

(ii)     Indebtedness outstanding on the date hereof and listed on Schedule 10.2 and any refinancings, refundings, renewals or extensions thereof, provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the premium or other amount paid, and fees and expenses incurred, in connection with such refinancing and by an amount equal to any utilized commitments thereunder, and (ii) the material terms of any such refinanced, refunded, renewed or extended Indebtedness shall be no less favorable to Lessee than the terms of such Indebtedness  immediately prior to such refinancing, refunding, renewal or extension;

(iii)    Ordinary Course Indebtedness;

(iv)    Indebtedness of Lessee under the Convertible Subordinated Debentures;

(v)    Indebtedness of Lessee under any letter of credit facility other than a Letter of Credit (a "Permitted LC Agreement"); provided that (A) the sum at any time of the aggregate face amount of all letters of credit issued and outstanding under all Permitted LC Agreements, plus the aggregate amount of all unremedied drawings under such letters of credit, does not exceed $10,000,000, and (B) the Indebtedness of Lessee under any Permitted LC Agreement is at all times either unsecured or secured by Liens permitted pursuant to Section 10.2(b).

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(vi)    Indebtedness of Lessee and its Subsidiaries under loans and Capital Leases incurred by Lessee or any of its Subsidiaries to finance the acquisition by such Person of real property, improvements, fixtures, equipment or other fixed assets (together with attachments, ascensions, additions, "soft costs" and proceeds thereof), provided that in each case, (A) such Indebtedness is incurred by such Person at the time of, or not later than six (6) months after, the acquisition by such Person of the property so financed, and (B) such Indebtedness does not exceed the purchase price of the property so financed;

(vii)    Indebtedness of Lessee and any of its Subsidiaries under Synthetic Lease Obligations;

(viii)   Indebtedness of Lessee and its Subsidiaries under initial or successive refinancings, refundings, renewals or extensions of any Indebtedness permitted by clauses (v), (vi) and (vii) above, provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the premium or other amount paid, and fees and expenses incurred, in connection with such refinancing, and (ii) the material terms of any such refinanced, refunded, renewed or extended indebtedness shall be no less favorable to Lessee than the terms of such Indebtedness immediately prior to such refinancing, refunding, renewal, or extension;

(ix)    Indebtedness of Lessee to any of Lessee's Subsidiaries, Indebtedness of any of Lessee's Subsidiaries to Lessee or Indebtedness of any of Lessee's Subsidiaries to any of Lessee's other Subsidiaries;

(x)     Subordinated Indebtedness of Lessee to any Person, provided that (A) such Indebtedness contains subordination provisions no less favorable to Agent and the Participants than those set forth in Exhibit O or as otherwise approved by the Required Participants and (B) the aggregate principal amount of all Subordinated Debt of Lessee outstanding (including the Convertible Subordinated Debentures) does not exceed $350,000,000 at any time, and

(xi)    Other Indebtedness not included in (i) through (xi) above and not exceeding, in the aggregate at any time, ten percent (10%) of the total consolidated assets of Lessee and its Subsidiaries determined as of the end of the most recent fiscal quarter.

(b)

Liens.  Incur, assume or suffer to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for the following ("Permitted Liens"):

(i)     Liens in favor of any of Agent or any Participant securing the obligations of Lessee under the Operative Documents;

(ii)    Liens existing on the date hereof and listed on Schedule 10.2 and any renewals or extensions thereof, provided that the property covered thereby is not increased and any renewal or extension of the obligations secured or benefited thereby is permitted by Section 10.2(a);

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(iii)     Ordinary Course Liens;

(iv)     Liens securing Investments which constitute Permitted Investments under Section 10.1(p);

(v)      Liens on cash or cash equivalents securing reimbursement obligations of Lessee under letters of credit (other than any Letters of Credit) in an aggregate amount of all such cash and cash equivalents not to exceed $10,000,000;

(vi)     Liens on the property or assets of any corporation which becomes a Subsidiary of Lessee after the date of this Participation Agreement, provided that (A) such Liens exist at the time such corporation became a Subsidiary, and (B) such Liens were not created in contemplation of such acquisition by Lessee;

(vii)    Rights of vendors or lessors under conditional sale agreements, Capital Leases or other title retention agreements, provided that in each case, (A) such rights secure or otherwise relate to Permitted Indebtedness, (B) such rights do not extend to any property other than property acquired with the proceeds of such Permitted Indebtedness (together with accessions, additions, replacements and proceeds thereof), and (z) such rights do not secure any Indebtedness other than Permitted Indebtedness;

(viii)    Liens securing Indebtedness and any related obligations of Lessee or any of its Subsidiaries which constitutes Permitted Indebtedness under clause (vi) of Section 10.2(a) (or refinancings of such Indebtedness under clause (viii) of Section 10.2(a)), provided that such Liens cover only those assets subject to Synthetic Lease Obligations (together with accessions, additions, replacements and proceeds thereof);

(ix)     Liens incurred in connection with leases, subleases, licenses and sublicenses granted to Persons not interfering in any material respect with the business of Lessee and its Subsidiaries and any interest or title of a lessee or licensee under any such leases, subleases, licenses or sublicenses;

(x)      Liens in favor of the Lenders in connection with the letter of credit cash collateral account established in accordance with the Loan Documents;

(xi)     Liens arising in connection with judgments not constituting a Lease Event of Default; and

(xii)     Liens not otherwise permitted hereunder on the property or assets of Lessee and any of its Subsidiaries securing (A) borrowed money Indebtedness or (B) all obligations of Lessee arising other than in connection with any securitization which are evidenced by bonds, debentures, notes or other similar instruments, provided that, in each case, the aggregate principal amount of all Indebtedness secured by such Liens does not exceed at any time ten percent (10%) of the Consolidated Tangible Net Worth of Lessee and its Subsidiaries determined as of the end of the fiscal quarter immediately preceding the date of determination;

37.

(c)

Fundamental Changes.  Merge or consolidate with or into any Person or liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or dissolution or sell all or substantially all of its assets, except that:

(i)      any Subsidiary may merge with (A) Lessee, provided that Lessee shall be the continuing or surviving corporation, (B) any one or more Subsidiaries, and (C) any joint venture, partnership or other Person, so long as such joint venture, partnership and other Person will, as a result of making such merger and all other contemporaneous related transactions, become a Subsidiary;

(ii)     any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to Lessee or to another Subsidiary;

(iii)    Lessee may merge into or consolidate with any other Person, provided that (A) Lessee is the surviving corporation, and (B) immediately after giving effect to such merger or consolidation, no Potential Lease Default or Lease Event of Default shall have occurred and be continuing; and

(iv)    any Subsidiary may merge or consolidate with or into any other Person or sell all or substantially all of its assets to the extent such transaction is a Disposition otherwise permitted under Section 10.2(d) or an Investment otherwise permitted under Section 10.2(e) and immediately after giving effect to such merger or consolidation, no Potential Lease Default or Lease Event of Default shall have occurred and be continuing.

(d)

Dispositions.  Make any Dispositions, except:

(i)     Ordinary Course Dispositions;

(ii)    Dispositions permitted by Section 10.2(c);

(iii)    Dispositions permitted by the Lease; and

(iv)    Dispositions not otherwise permitted hereunder provided that such Dispositions do not exceed in the aggregate 10% of the Consolidated Tangible Net Worth for the fiscal quarter ending December 31, 2002 as determined in the financial statements delivered in accordance with Section 10.1(a).

(e)

Investments.  Make any Investments, except for the following ("Permitted Investments"):

(i)     Investments existing on September 30, 2002;

(ii)    Ordinary Course Investments;

(iii)    Investments permitted by Section 10.2(a) or Section 10.2(c);

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(iv)     Investments arising from rights received by Lessee and its Subsidiaries upon the required payment of any permitted contingent obligations of Lessee and its Subsidiaries;

(v)      Investments in the nature of Acquisitions, provided that the aggregate amount of such Acquisitions in any period of four consecutive fiscal quarters does not exceed ten percent (10%) of Consolidated Tangible Net Worth as determined as of the fiscal quarter immediately preceding the date of determination;

(vi)     Investments of Lessee and its Subsidiaries in Swap Contracts, provided that all such arrangements are entered into in connection with bona fide hedging operations and not for speculation;

(vii)    Investments not otherwise permitted hereunder, provided that the aggregate amount of such other Investments made after September 30, 2002 (less any return on any such Investments) does not exceed ten percent (10%) of Consolidated Tangible Net Worth as determined as of the fiscal quarter immediately preceding the date of determination.

(f)

Restricted Payments.  Make any Restricted Payments, except as follows:

(i)      Lessee may pay dividends or other distributions payable solely in shares of capital stock of Lessee or any Subsidiary or payable by any Subsidiary to Lessee or another Subsidiary;

(ii)     Lessee may distribute rights pursuant to a shareholder rights plan or redeem such rights, provided that such redemption is in accordance with the terms of such shareholder rights plan;

(iii)    Lessee may make Restricted Payments in connection with or pursuant to any of its Employee Benefits Plans or in connection with the employment, termination or compensation of its employees, officers or directors;

(iv)    Lessee may make Restricted Payments with the Net Security Proceeds received from a substantially concurrent issuance of Equity Securities or capital stock or with its Equity Securities or capital stock or Lessee may convert any Equity Securities in accordance with their terms into other Equity Securities, provided, however, that the cash amount of any such Restricted Payment shall be limited to the cash portion of the Net Proceeds received from the concurrent issuance of Equity Securities or capital stock;

(v)    Lessee may purchase Equity Securities pursuant to one or more stock repurchase programs, provided that (A) no Potential Lease Default or Lease Event of Default shall have occurred and be continuing, (B) after giving effect to any such repurchases Lessee shall be in compliance with Section 10.2(k), and (C) when combined with the amount of all dividends, purchases or redemptions made under Section 10.2(f)(vi), the total of all such purchases of Equity Securities shall not exceed the sum of $5,000,000 in the aggregate over the life of this Agreement; and

(vi)    Lessee may declare or pay any dividends in respect of its Equity Securities or purchase or redeem shares of its Equity Securities or make distributions to shareholders not otherwise permitted hereunder, provided that (i) the aggregate amount paid or distributed in any period of four consecutive quarters (excluding any amounts covered by clause (ii) above) does not exceed five percent (5%) of Consolidated Tangible Net Worth as determined as of the fiscal quarter immediately preceding the date of determination; and (ii) when combined with the amount of all purchases of Equity Securities made under Section 10.2(f)(v), the total of all such dividends, purchases or redemptions shall not exceed the sum of $5,000,000 in the aggregate over the life of this Agreement.

39.

(g)

ERISA.  At any time engage in a transaction which could be subject to Sections 4069 or 4212(c) of ERISA, or permit any Pension Plan to (i) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (ii) fail to comply with ERISA or any other applicable Requirements of Law; or (iii) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), which, with respect to each event listed above, has a Material Adverse Effect.

(h)

Change in Nature of Business.  Engage, either directly or indirectly through Affiliates, in any line of business other than the digital storage business, any other business incidental or reasonably related thereto, or any businesses that are, as determined by the Board of Directors of Lessee, appropriate extensions thereof.

(i)

Transactions with Affiliates.   Enter into any transaction of any kind with any Affiliate (other than transactions among Lessee or any of its Subsidiaries and any Subsidiary) of Lessee other than arm's-length transactions with Affiliates that are otherwise permitted hereunder.

(j)

Certain Indebtedness Payments, Etc.  Neither Lessee nor any of its Subsidiaries shall pay, prepay, redeem, purchase, defease or otherwise satisfy in any manner prior to the scheduled payment thereof any Subordinated Debt except as otherwise permitted under this Section 10.2(j); amend, modify or otherwise change the terms of any document, instrument or agreement evidencing Subordinated Debt such that such amendment, modification or change would (i) cause the outstanding aggregate principal amount of all such Subordinated Debt so amended, modified or changed to be increased as a consequence of such amendment, modification or change, (ii) cause the subordination provisions applicable to such Subordinated Debt to be less favorable to Agent and the Participants than those set forth on Exhibit O, (iii) increase the interest rate applicable thereto, or (iv) accelerate the scheduled payment thereof.  Lessee shall not cause or permit any of its obligations, except the obligations constituting Senior Indebtedness to constitute "Designated Senior Indebtedness" under the Indenture governing the Convertible Subordinated Debentures (it being understood that the obligations of Lessee under the Operative Documents shall at all times constitute "Designated Senior Indebtedness" thereunder).  Notwithstanding the foregoing, Lessee may conduct an exchange offer (whether public, private or on a 3(a)(9) basis) of all or part of the Lessee’s Convertible Subordinated Debentures for one or more of the following: (a) new securities (“New Securities”) that are subordinated in right of payment to the obligations of Lessee under the Operative Documents to the same extent as the existing Convertible Subordinated Debentures; provided that (w) the aggregate annual interest obligation of Lessee under the New Securities shall be equal to or less than the aggregate annual interest obligation under the existing Convertible Subordinated Debentures, (x) the maturity date of the New Securities shall not be earlier than the maturity date of the existing Convertible Subordinated Debentures, (y) the total principal amount of the obligations represented by Lessee's Subordinated Debt shall not be increased by means of any exchange of New Securities for all or part of the Lessee’s Convertible Subordinated Debentures and (z) the New Securities shall not permit any amortization of the principal amount of the obligations represented thereby prior to the maturity of the existing Convertible Subordinated Debentures; or (b) new securities issued by Maxtor ("Maxtor Securities").  No exchange or series of exchanges of New Securities or Maxtor Securities for all or any part of Lessee’s Convertible Subordinated Debentures pursuant to this Section 10.2(j) shall be deemed to permit any reduction in the amount of Maxtor's reimbursement obligations under the Maxtor Reimbursement Agreement except on a dollar-for-dollar basis to the extent that the obligations represented by Lessee's Subordinated Debt are reduced by means of such exchange or series of exchanges.  Lessee may (A) convert, or honor a conversion request with respect to, any such Subordinated Debt into Equity Securities of Lessee in accordance with the terms thereof, (B) pay cash to holders of such Subordinated Debt in connection with such a conversion but solely to the extent representing the value of any fractional shares; and (C) make other payments, repayments, redemptions, purchases, defeasance or other satisfaction of Subordinated Debt not to exceed $5,000,000 in the aggregate.

40.

(k)

Financial Covenants.

(i)  Consolidated Tangible Net Worth.  Permit Consolidated Tangible Net Worth on the last day of any fiscal quarter commencing with the fiscal quarter ended December 31, 2002, to be less than $190,000,000.

(ii)  Minimum Quick Ratio.   Permit the Quick Ratio determined as of the last day of any fiscal quarter of Lessee (commencing with the quarter ending December 31, 2002) to be less than 1.00:1.00.

(iii)  Adjusted Leverage Ratio.  Permit the Adjusted Leverage Ratio, determined as of the last day of any fiscal quarter of Lessee, commencing with the fiscal quarter ending June 30, 2003 (measured on a rolling four quarter basis for the four fiscal quarters ending on such dates), to be greater than the following:  (i) for the fiscal quarters ending June 30, 2003 and September 30, 2003, 2.50:1.00; and (ii) for the fiscal quarters ending December 31, 2003 and all fiscal quarters thereafter, 2.00:1.00.

(iv)  Minimum Consolidated EBITDA.  Permit Consolidated EBITDA, determined as of the last day of any fiscal quarter of Lessee commencing with the fiscal quarter ending December 31, 2002, to be less than the following: (i) for the fiscal quarter ending December 31, 2002, $1.00; (ii) for the fiscal quarter ending March 31, 2003, $18,000,000; (iii) for the fiscal quarter ending June 30, 2003, $14,000,000; (iv) for the fiscal quarter ending September 30, 2003, $11,000,000; (v) for the fiscal quarter ending December 31, 2003, $12,500,000; and (vi) for the fiscal quarter ending March 31, 2004, $13,000,000.

41.

(v)  Maximum Senior Indebtedness.  Permit Lessee's Senior Indebtedness to exceed at any time the sum of $125,000,000 from the Closing Date through March 31, 2003.

(vi)  Maximum Capital Expenditures.  Permit Lessee's capital expenditures (as determined pursuant to GAAP) to exceed $10,000,000 for each fiscal quarter of Lessee or $30,000,000 for each fiscal year of Lessee.

(viii)  Minimum Unrestricted Cash.  Permit Lessee's Consolidated Cash Balance (as defined in Section 10.1(b)(ii))  at any time to fall below $100,000,000.  During any period in which the Consolidated Cash Balance is less than $200,000,000, Lessee shall maintain a minimum Consolidated Cash Balance of $100,000,000 deposited in domestic accounts subject to a deposit account control agreement satisfactory to Agent.  During any period in which the Consolidated Cash Balance is equal to or greater than $200,000,000, Lessee shall maintain a minimum Consolidated Cash Balance of $50,000,000 deposited in domestic accounts subject to such deposit account control agreement.  The Consolidated Cash Balance covenants set forth in this Section 10.2(k)(vii) shall be tested monthly in accordance with the reports to be delivered to Lessor, Agent and each Participant pursuant to Section 10.1(b)(ii) of this Agreement.

(l)

Accounting Changes.   Change (i) its fiscal year (currently April 1 to March 31), or (ii) its accounting practices except as permitted by GAAP.

(m)

No Impairment of Deposits.  Lessee shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into or become bound by any agreement, instrument, indenture or other obligation which could directly or indirectly restrict, prohibit or require the consent of any Person to the making by Lessee of any deposit of Cash Collateral or the realization thereon or utilization thereof (or of any earnings thereon or of any other Collateral) by Lessor, Agent or any of the Participants.

(n)

Tax Losses.  Alone or together with one or more of its Subsidiaries or Affiliates, incur a Tax Loss the uninsured or unreimbursed portion of which (individually, or together with all other prior Tax Losses) exceeds the Threshold Amount, where (i) an "uninsured" Tax Loss means a Tax Loss which is not the subject of a bona fide insurance policy or contract with an insurer or syndicate of insurers of national repute or as to which such insurer or insurers have disputed or disclaimed contractual liability for such Tax Loss or otherwise breached the terms of such policy or contract, and (ii) an "unreimbursed" Tax Loss means a Tax Loss not reimbursed by Maxtor in accordance with the terms of the Maxtor Reimbursement Agreement.[subject to review]

Section 10.3

Cooperation with Lessee.  Lessor, the Participants and Agent shall, to the extent reasonably requested by Lessee (but without assuming additional liabilities, duties or other obligations on account thereof), at Lessee's expense, cooperate with Lessee in connection with its covenants contained herein including, without limitation, at any time and from time to time, upon the request of Lessee, to promptly and duly execute and deliver any and all such further instruments, documents and financing statements (and continuation statements related thereto) as Lessee may reasonably request in order to perform such covenants.

42.

Section 10.4

Covenants of Lessor.  Lessor hereby agrees that so long as this Participation Agreement is in effect:

(a)

Discharge of Liens.  Lessor will not create or permit to exist at any time, and will, at its own cost and expense, promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens on the Property attributable to it; provided, however, that Lessor 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 involve any material danger of impairment of the Liens of the Lease or the Security Documents or of the sale, forfeiture or loss of, and shall not interfere with the use or disposition of, the Property or title thereto or any interest therein or the payment of Rent.

(b)

Change of Chief Place of Business.  Lessor shall give prompt notice to Lessee and Agent if Lessor's chief place of business or chief executive office, or the office where the records concerning the accounts or contract rights relating to the Property are kept, shall cease to be located at 66 South Pearl Street, Albany, New York 12207, or if it shall change its name, identity or corporate structure.

Section 11.1   

Amendments; Actions on Default.

(a)

Lessor shall have the right to forebear from exercising rights against Lessee to the extent Lessor shall determine in good faith that such forbearance is appropriate and is permitted by Section 15.5 and Sections 11.1, 11.2 and 11.3.  Upon the direction of the Required Participants, Lessor shall execute any waiver, modification or amendment of the Lease requested by Lessee; provided, that:  (i) the waiver, modification or amendment is not prohibited by the forgoing provisions of this Participation Agreement, (ii) the waiver, modification or amendment does not (A) increase the amount Lessor may be required to pay to Lessee or anyone else, or (B) reduce or postpone (and cannot reasonably be expected to reduce or postpone) any payments that Lessor would, but for such modification or amendment, be expected to receive, or (C) release Lessor's interest in all or a substantial part of the Property; and (iii) Lessor is not excused from executing the waiver, modification or amendment by Section 11.3

(b)

Lessor will, with reasonable promptness, provide each Participant with copies of all default notices it sends or receives under the Lease and notify each Participant of any Lease Event of Default under the Lease of which it is aware and of any other matters which, in Lessor's reasonable judgment, are likely to materially affect the payments each Participant will be required to make or be entitled to receive under this Participation Agreement, but Lessor will not in any event be liable to any Participant for Lessor's failure to do so unless such failure constitutes gross negligence or willful misconduct on the part of Lessor.

(c)

Before taking possession of the Property or exercising foreclosure or offset rights against the Property or filing any lawsuit against Lessee because of any breach by Lessee of the Operative Documents or if requested in writing by any Participant at any time when a Lease Event of Default has occurred and is continuing, Lessor shall promptly call a meeting with each Participant and Agent to discuss what, if anything, Lessor should do.  Such meeting shall be scheduled during regular business hours in the offices of Agent, or another appropriate location in San Francisco, California, not earlier than five (5) and not later than twenty (20) Business Days after Lessor's receipt of the written request from a Participant.  If the Required Participants shall direct Lessor in writing to (a) send any default notices required before a Potential Lease Default can become a Lease Event of Default, or (b) bring a lawsuit against Lessee to enforce the Operative Documents when a Lease Event of Default has occurred and is continuing, then Lessor shall send the notice or bring the suit, and Lessor shall prosecute any such suit with reasonable diligence using reputable counsel.  However, if Agent is not a member of the Required Participants voting pursuant to this subsection 11.1(d) in favor of the giving of any such notice or the bringing of any such suit, then Lessor may require that it first receive the written agreement (in form reasonably acceptable to Lessor) of the members of the Required Participants so voting to indemnify Agent and Lessor from and against all costs, liabilities and claims that may be incurred by or asserted against Lessor because of the action the Required Participants direct Agent or Lessor to take.  In no event shall any Participant instigate any suit or other action directly against Lessee with respect to the Operative Documents or the Property, even if such Participant would, but for this Participation Agreement, be entitled to do so as a third party beneficiary or otherwise under the Operative Documents.

43.

(d)

In the event Lessee or its designee fails to purchase the Property after any exercise of its Purchase Option or Expiration Date Purchase Obligation or following the occurrence and continuance of a Lease Event of Default, Lessor shall, if the Required Participants shall agree in writing, bring suit against Lessee to enforce the Operative Documents in such form as shall be recommended by reputable counsel, and thereafter Lessor shall prosecute the suit with reasonable diligence in accordance with the advice of reputable counsel.  If Lessor acquires the interests of Lessee in any of the Property as a result of such suit or otherwise, Lessor shall thereafter proceed with reasonable diligence to sell the Property in a commercially reasonable manner to one or more bona fide third party purchasers and shall in any event endeavor to consummate the sale of the entire Property (through a single sale of the entire Property or a series of sales of parts) within five (5) years following the date Lessor recovers possession of the Property at the best price or prices Lessor believes are reasonably attainable within such time.  Further, after the Designated Payment Date and prior to Lessor's sale of the entire Property, Lessor shall retain a property management company experienced in the area where the Property is located to manage the operation of the Property and pursue the leasing of any completed Improvements which are part of the Property.  Lessor shall not retain an Affiliate of Lessor to act as the property manager except under a bona fide, arms-length management contract containing commercially reasonable terms.  Further, after the Designated Payment Date and until Lessor sells the Property, Lessor shall (i) endeavor in good faith to maintain, or shall obtain the agreement of one or more of such tenants to maintain, the Property in good order and repair, (ii) procure and maintain casualty insurance against risks customarily insured against by owners of comparable properties, in amounts sufficient to eliminate the effects of coinsurance, (iii) keep and allow each Participant to review accurate books and records covering the operation of the Property, and (iv) pay prior to delinquency all taxes and assessments lawfully levied against the Property.

(e)

Notwithstanding the foregoing, Defaulting Participants shall have no voting or consent rights under this Section 11.1 and no rights to require Lessor to call a meeting pursuant to Section 11.1(d) until they cease to be Defaulting Participants.  During any period that any Defaulting Participants have no voting rights under this Section 11.1, only the Commitment Percentages of the other Participants that still have voting rights will be considered for purposes of determining the Required Participants.