PARTICIPATION AGREEMENT (REMEC, Inc. Trust 1998-A) Dated as of August 25, 1998

PARTICIPATION AGREEMENT

(REMEC, Inc. Trust 1998-A)

Dated as of August 25, 1998

Among

REMEC, INC., as Lessee,

UNION BANK OF CALIFORNIA, N.A.,
not in its individual capacity except as expressly
stated herein, but solely as Certificate Trustee,

THE PERSONS NAMED ON SCHEDULE I-A,
as Certificate Purchasers,

THE PERSONS NAMED ON SCHEDULE I-B,
as Lenders,

and

UNION BANK OF CALIFORNIA, N.A.,
as Agent,

Arranged by
UNION BANK OF CALIFORNIA, N.A.

Participation Agreement

TABLE OF CONTENTS
(Participation Agreement)

Page

ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

ARTICLE II EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL PROVISIONS. . . . . . . . . . . . . .1
SECTION 2.1. Effectiveness of Agreement. . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 2.2. Acquisition of Leased Property; Grants of Liens . . . . . . . . . . . . . .2
SECTION 2.3. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 2.4. Application of Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
SECTION 2.5. Advance Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
SECTION 2.6. Lender Commitments and Notations of Fundings. . . . . . . . . . . . . . . .4
SECTION 2.7. Participants' Instructions to Certificate Trustee and Payments to
Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.8. Nature of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 2.9. Amounts Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 2.10. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.11. Determination of Interest Rate and Yield Rate . . . . . . . . . . . . . . .6
SECTION 2.12. Obligations Several . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.13. Highest Lawful Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.14. Extension of Lease Expiration Date and Final Maturity Date. . . . . . . . .8
SECTION 2.15. Collateralization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

ARTICLE III CONDITIONS TO ADVANCE AND COMPLETION . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 3.1. Conditions to the Advance . . . . . . . . . . . . . . . . . . . . . . . . .9

ARTICLE IV REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.1. Representations and Warranties of Lessee. . . . . . . . . . . . . . . . . 14
SECTION 4.2. Representations and Warranties of each Participant. . . . . . . . . . . . 19
SECTION 4.3. Representations and Warranties of Certificate Trustee . . . . . . . . . . 20
SECTION 4.4. Representations and Warranties of Agent . . . . . . . . . . . . . . . . . 22

ARTICLE V COVENANTS OF LESSEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.1. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.2. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.3. Change of Name or Address . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.4. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.5. Investigation and Litigation. . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.6. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.7. Quick Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.8. Tangible Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.9. Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.10. Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.11. Funded Debt to EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.12. Supplemental Environmental Information. . . . . . . . . . . . . . . . . . 26
SECTION 5.13. Lease Defaults, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.14. Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

SECTION 5.15. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.16. Conduct of Business and Maintenance of Existence. . . . . . . . . . . . . 26
SECTION 5.17. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . 27
SECTION 5.18. Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.19. Loans, Advances and Guaranties. . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.20. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.21. Changes/Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.22. Transactions With Related Persons . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.23. Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE VI OTHER COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.1. Cooperation with Lessee . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.2. Restrictions on and Effect of Transfer. . . . . . . . . . . . . . . . . . 28
SECTION 6.3. Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.4. Covenants of Certificate Trustee, Agent and the Participants. . . . . . . 30
SECTION 6.5. Enforcement of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE VII INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.1. General Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.2. General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.3. Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.4. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.5. Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.6. Gross Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.7. LIBO Rate Illegal, Unavailable or Impracticable . . . . . . . . . . . . . 39
SECTION 7.8. Leased Property Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.9. Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 40

ARTICLE VIII AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.1. Appointment of Agent; Powers and Authorization to Take Certain Actions. . 42
SECTION 8.2. Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.3. Action Upon Instructions Generally. . . . . . . . . . . . . . . . . . . . 43
SECTION 8.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.5. Independent Credit Investigation. . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.6. Refusal to Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.7. Resignation or Removal of Agent; Appointment of Successor . . . . . . . . 45
SECTION 8.8. Separate Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.9. Termination of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.10. Compensation of Agency . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.11. Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.1. Survival of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.2. No Broker, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.4. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.5. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.6. Headings, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

SECTION 9.7. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.9. Payment of Transaction Costs and Other Costs. . . . . . . . . . . . . . . 49
SECTION 9.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.11. Limited Liability of Certificate Trustee. . . . . . . . . . . . . . . . . 50
SECTION 9.12. Liabilities of the Participants . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.13. Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . 50
SECTION 9.14. Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.15. Consideration for Consents to Waivers and Amendments. . . . . . . . . . . 51
SECTION 9.16. Role of UBOC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.17. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

iii

APPENDIX 1 Definitions
APPENDIX 2 Conditions Precedent to Document Closing Date

SCHEDULE I-A Certificate Purchaser Commitments
SCHEDULE I-B Lender Commitments
SCHEDULE II Addresses For Notice; Wire Instructions
SCHEDULE 4.1A Filings and Recordings
SCHEDULE 4.1B Governmental Actions

EXHIBIT A Form of Lease
Exhibit A - Legal Description
Exhibit B-1 - Form of Land Supplement
Exhibit B-2 - Form of Improvements Supplement
EXHIBIT B Form of Advance Request
EXHIBIT C Form of Loan Agreement
EXHIBIT D Form of Deed of Trust
EXHIBIT E Form of Trust Agreement
EXHIBIT F Form of Lessee Guarantee
EXHIBIT G-1 Form of Opinion of Special California Counsel for
Certificate Trustee
EXHIBIT G-2 Form of Opinion of Lessee's Counsel
EXHIBIT H-1 Form of Officer's Certificate of Lessee
EXHIBIT H-2 Form of Officer's Certificate of Certificate Trustee
EXHIBIT I Form of Hazardous Substances Undertaking and Unsecured
Indemnity
EXHIBIT J Form of Investor's Letter
EXHIBIT K Form of Assignment of Sublease
EXHIBIT L Form of Estoppel Certificate

THIS PARTICIPATION AGREEMENT (REMEC, Inc. Trust 1998-A) dated as of
August 25, 1998 (this "AGREEMENT" or "PARTICIPATION AGREEMENT"), is among
REMEC, INC., a California corporation, as Lessee; UNION BANK OF CALIFORNIA,
N.A., not in its individual capacity except as expressly stated herein but
solely as Certificate Trustee; the Persons named on SCHEDULE I-A hereto
(together with their respective permitted successors, assigns and
transferees), as Certificate Purchasers; the Persons listed on SCHEDULE I-B
hereto (together with their respective permitted successors, assigns and
transferees), as Lenders; and UNION BANK OF CALIFORNIA, N.A., as Agent.

PRELIMINARY STATEMENT

- Lessee desires to enter into the Overall Transaction for the
purpose of financing the Purchase Price of the Leased Property and certain of
the Transaction Costs.

- Subject to the terms and conditions of this Participation
Agreement and the other Operative Documents, on the Advance Date, Certificate
Trustee will: (i) acquire record title to the Leased Property, and (ii) lease
the Leased Property to Lessee pursuant to the Lease for the Lease Term.

- Subject to the terms and conditions of this Participation
Agreement and the other Operative Documents, Participants are willing to
advance funds for the financing described herein.

D. To secure the payment of the Certificate Amounts, the Loans
and other amounts due and payable to the Participants, Agent, on behalf of
the Participants, will have the benefit of a Lien on the Leased Property,
Lessor's interest in the Lease, the other Lease Collateral and the Trust
Estate.

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

ARTICLE I
DEFINITIONS

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

ARTICLE II
EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL PROVISIONS

SECTION 2.1 EFFECTIVENESS OF AGREEMENT. This Agreement shall be
effective as of the Document Closing Date.

SECTION 2.2 ACQUISITION OF LEASED PROPERTY; GRANTS OF LIENS. Subject
to the terms and

conditions of this Participation Agreement: (i) on the Document Closing Date,
Certificate Trustee and Lessee will enter into the Operative Documents
including the Lease pursuant to which Certificate Trustee shall lease to
Lessee and Lessee shall lease from Certificate Trustee the Leased Property,
and (ii) on the Advance Date: (A) Agent shall make the Advance, the proceeds
of which shall be used to pay the Purchase Price and the Transaction Costs,
(B) Certificate Trustee shall acquire such Leased Property and (C)
Certificate Trustee and Lessee shall enter into and record the Lease
Supplements, the Deed of Trust and the Financing Statements.

SECTION 2.3 FUNDING.

(a) AMOUNT OF FUNDINGS. Subject to the terms and
conditions of this Agreement and in reliance on the representations and
warranties of each of the parties hereto contained herein or made pursuant
hereto, upon receipt of the Advance Request, on the proposed Advance Date
specified therein, each Certificate Purchaser shall acquire its interest in
the Trust Estate and each Lender shall make its Loan to Fund the Advance by
making available to Certificate Trustee (in accordance with Certificate
Trustee's payment instructions set forth on SCHEDULE II) an amount in
immediately available funds on the proposed Advance Date equal to such
Participant's Commitment Percentage of the aggregate amount of the requested
Advance (up to such Participant's Loan Commitment) to be used and applied
pursuant to SECTION 2.4.

(b) NOTES AND CERTIFICATES. Each Lender's Loan shall be
evidenced by a Note issued by Certificate Trustee, as Borrower, to such
Lender and repayable in accordance with and with interest accruing pursuant
to the terms for the Loan set forth in the Loan Agreement. The amounts made
available by each Certificate Purchaser on the Advance Date shall be
evidenced by a Certificate issued by Certificate Trustee to each Certificate
Purchaser. Each Certificate shall accrue Yield at the Yield Rate on the
Certificate Amount thereof, payable as more fully set forth in the Trust
Agreement.

(c) LIMITATIONS ON DISBURSEMENTS. The aggregate amount
Funded by the Participants hereunder on the Advance Date shall not exceed
$17,057,000, which shall include not more than $16,639,118.57 to finance the
Purchase Price and not more than $417,881.43 for Transaction Costs. The
proceeds of all amounts Funded by the Participants on the Advance Date shall
be used solely for the acquisition of the Leased Property and the payment or
reimbursement of Transaction Costs. Notwithstanding anything in this
Agreement to the contrary, none of Certificate Trustee, Agent or any
Participant shall be obligated to make any Funding or the Advance pursuant to
this Agreement, the Trust Agreement, or the Loan Agreement after 1:00 p.m.
Los Angeles, California time, on September 1, 1998, and no Advance shall
occur following such date and time.

(d) ADVANCES. Certificate Trustee hereby directs and the
parties acknowledge that all amounts to be Funded by the Participants to
Certificate Trustee and to be advanced by Certificate Trustee to Lessee or
any third party as herein provided shall be Funded by the Participants to
Agent, and Agent shall make such Advance on behalf of Certificate Trustee as
required herein and as directed in the Advance Request.

SECTION 2.4 APPLICATION OF FUNDS. Subject to the terms and
conditions of this Agreement, on the Advance Date, Certificate Trustee shall:
(i) based on a purchase price of $13,155,957.03 under the Transcontinental
Acquisition Agreement, pay $7,006,886.98 to the seller, pay $5,949,070.05 to
the lender holding a first priority lien on the property to be

purchased and sold under the Transcontinental Acquisition Agreement to pay
off the loan secured by such lien plus $1,324.53 for each day after September
1, 1998 until such loan repayment occurs, and pay $200,000.00 to Lessee to
reimburse Lessee for its good faith deposit under the Transcontinental
Acquisition Agreement, (ii) based on a purchase price of $3,496,061.84 under
the Montpelier Acquisition Agreement, pay $356,250.00 to Lessee to reimburse
Lessee for its good faith deposit in the escrow established under the
Montpelier Acquisition Agreement, and pay $3,139,811.84 to the lender holding
a first priority lien on the property to be purchased and sold under the
Montpelier Acquisition Agreement to pay off the loan secured by such lien
plus $800.38 for each day after August 31, 1998 until such loan repayment
occurs, (iii) acquire the Leased Property from Sellers, and (iv) advance
funds as directed by Lessee to pay certain Transaction Costs, in each case
from funds made available by the Participants through the Agent pursuant to
SECTION 2.3 and pursuant to the directions set forth in the Advance Request,
whereupon Lessor shall lease to Lessee the Leased Property and Lessee shall
accept transfer and delivery of and lease from Lessor the Leased Property
pursuant to the Lease.

SECTION 2.5 ADVANCE DATE.

(a) NOTICE AND CLOSING. At least two (2) Business Days
prior to the proposed Advance Date, Lessee shall deliver to Agent,
Certificate Trustee and each of the Participants an irrevocable written
notice substantially in the form of EXHIBIT B-1 (the "ADVANCE REQUEST"),
setting forth:

(i) the proposed Advance Date;

(B) a statement of the amount of the requested Advance and an
allocation of such amount among the Purchase Price and the Transaction
Costs;

(ii) in the case of Transaction Costs, a general description of the
types or categories of Transaction Costs, being paid with the Advance; and

(iii) wire transfer instructions for the disbursement of funds to
Lessee, Sellers and any third party payee to whom Transaction Costs are
due and payable.

The delivery by Lessee of the Advance Request shall be deemed a certification
by Lessee that such Advance complies with the limitations and conditions set
forth at SECTION 2.3(c). All documents and instruments required to be
delivered on the Advance Date pursuant to this Agreement shall be delivered
at the offices of Xxxxx, Xxxxx & Xxxxx, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, or at such other location as the Required Participants and
Lessee may agree. On the scheduled Advance Date, and subject to the terms
and conditions of this Agreement, and upon receipt of funds by Agent from the
Participants sufficient therefor, Agent shall make the requested Advance.

(b) POSTPONEMENT OF ADVANCE DATE. If the Participants are
instructed to make the Funding requested pursuant to the Advance Request and
the Advance shall not occur for any reason whatsoever on the date specified
in the Advance Request, Lessee shall pay Agent, for the benefit of each
Participant which has funded, interest on the amount funded by each Lender at
the Interest Rate and Yield on the amount funded by each Certificate
Purchaser at the Yield Rate, less any interest earned on behalf of the
Participants by investing such funded

amounts; PROVIDED, that this provision shall not be construed to place any
liability on Agent to invest such funds in interest-bearing accounts. Such
interest and Yield payable by Lessee shall be due and payable by Lessee upon
the consummation of the postponed Advance Date and such payment shall be an
additional condition precedent to such Advance; PROVIDED, HOWEVER, that no
additional Advance Request shall be required to be given if such Advance is
consummated on the Business Day immediately following the Advance Date
proposed in the Advance Request; PROVIDED, FURTHER, that if such Advance Date
shall not have occurred on the Business Day immediately following the Advance
Date proposed in the Advance Request, then all such interest and Yield shall
be due and payable as of the close of business on such date, and Agent shall
refund to each Participant all amounts funded by such Participant together
with all accrued interest and Yield, as the case may be, allocable to such
Participant. If the Agent wire transfers funds to the Title Insurance
Company, then the Advance Date shall be deemed to have occurred, whether or
not the conditions set forth in SECTIONS 3.1(i) and 3.1(l) shall have been
satisfied; PROVIDED, HOWEVER, that if such conditions are not satisfied
within one (1) Business Day after the funds are so wire transferred, then a
Lease Event of Default shall be deemed automatically to have occurred,
without any further action, notice or opportunity to cure, and the Agent
shall be entitled to exercise all rights and remedies as if a Lease Event of
Default of the type described in CLAUSE (g) or (h) of Article XVI of the
Lease shall have occurred.

SECTION 2.6 LENDER COMMITMENTS AND NOTATIONS OF FUNDINGS.

(a) Subject to compliance by Lessee with the terms of this
Participation Agreement and the other Operative Documents and the
satisfaction or waiver of the conditions set forth in this ARTICLE II and in
ARTICLE III, the Participants shall disburse the respective amounts of their
Commitments in accordance with the requirements of this Participation
Agreement. No amounts paid or prepaid with respect to any Advance or any
Note or Certificate shall be reborrowed or readvanced.

(b) Each Participant is hereby authorized to record the
date and amount of the Funding by it, each payment or repayment of principal
or Certificate Amount (as the case may be) and the length of each Payment
Period with respect thereto, on the grid annexed to and constituting a part
of each Note and/or Certificate held by such Participant, and any such
recordation, shall constitute, in the absence of manifest error, rebuttable
presumptive evidence of the accuracy of the information so recorded;
PROVIDED, that the failure to make any such recordation or any errors in such
recordation shall not affect the actual obligation of Certificate Trustee
under such instrument or the corresponding actual obligation of Lessee to pay
Rent (including any Lease Balance).

SECTION 2.7 PARTICIPANTS' INSTRUCTIONS TO CERTIFICATE TRUSTEE AND
PAYMENTS TO PARTICIPANTS.

(a) Each Participant agrees that the making of its monies
available pursuant to SECTION 2.3 shall constitute, without further act,
authorization and direction by such Participant to Certificate Trustee to
take the actions specified in Section 1.1 of the Trust Agreement.

(b) The parties to this Participation Agreement hereby
agree that any payment required to be made to the Participants by Certificate
Trustee pursuant to any Operative Document may be made directly to the
Participants by Agent from amounts received from Lessee and, except as
specifically provided for in the Operative Documents, all payments

required to be made by Lessee shall be made directly to Agent for the benefit
of the Participants, in lieu of the corresponding payment required to be made
by Lessee to Certificate Trustee pursuant to any Operative Document. Such
payment by Lessee to Agent shall be deemed to constitute the required payment
from Lessee to Certificate Trustee and the corresponding payment by
Certificate Trustee to the Participants.

SECTION 2.8 NATURE OF TRANSACTION. It is the intention of the
parties that:

(a) the Overall Transaction constitutes an operating lease
from Certificate Trustee to Lessee for purposes of Lessee's financial
reporting;

(b) for federal and state income tax, bankruptcy (including
the substantive law upon which bankruptcy proceedings are based), and real
estate, commercial law and UCC purposes:

(i) the Overall Transaction constitutes a financing by Participants to
Lessee and preserves beneficial ownership in the Leased Property in
Lessee, and the obligations of Lessee to pay Basic Rent shall be treated
as payments of interest to the Participants, and the payment by Lessee of
any amounts in respect of the Lease Balance shall be treated as payments
of principal to the Participants; and

(ii) the Deeds together with the Lease create a Lien in the Leased
Property and the other Lease Collateral in favor of Lessor, and the Deed
of Trust creates a lien and a security interest in the Mortgaged Property
defined therein in favor of Agent for the benefit of all of the
Participants.

Nevertheless, Lessee acknowledges and agrees that none of Certificate
Trustee, Agent, Arranger or any Participant has made any representations or
warranties concerning the tax, accounting or characterization of: (i) the
Operative Documents, (ii) the tax treatment for any of Lessee, Certificate
Trustee or the Seller thereunder of the transaction described in the
Montpelier Acquisition Agreement, which Montpelier Acquisition Agreement was
negotiated by and is the sole responsibility of Lessee and the Seller
thereunder, or (iii) any aspect of the Overall Transaction; and that Lessee
has obtained and relied upon such tax, accounting, and legal advice from its
own advisors concerning the Operative Documents and the Overall Transaction
as it deems appropriate.

SECTION 2.9 AMOUNTS DUE. Anything else herein or elsewhere to the
contrary notwithstanding, it is the intention of Lessee, Lessor, and
Participants 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 and payable in respect of interest accrued on
the Notes and Yield accrued on the Certificates on each Payment Date; (ii) if
Lessee becomes obligated to purchase all of the Leased Property under the
Lease, the principal of the Notes, the Certificate Amounts, all interest and
Yield thereon and all other obligations of Lessee owing to Participants,
Agent and Lessor shall be paid in full by Lessee in accordance with all of
Article XX of the Lease; (iii) if Lessee properly elects the Sale Option and
markets the Leased Property in accordance with ARTICLE XXI of the Lease,
Lessee shall only be required to pay an amount (not to exceed the Lease
Balance) equal to the sum of (a) the Sale Proceeds, (b) the Sale Recourse
Amount, and (c) any amounts due pursuant to SECTION 7.8 and Section 22.3 of

the Lease (which aggregate amounts may be less than the Lease Balance); and
(iv) upon a Lease Event of Default resulting in an acceleration of Lessee's
obligation to purchase the Leased 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 outstanding principal under the Notes, the Certificate
Amounts and all accrued interest and Yield thereon, plus all other amounts
then payable by Lessee to Participants, Agent and Lessor under the Operative
Documents.

SECTION 2.10 COMPUTATIONS. For all purposes under the Operative
Documents and except as specifically provided for at SECTION 7.7 and Section
2.6 of the Loan Agreement, all computations of interest, Yield, and other
accrued amounts (including the Overdue Rate) shall be made on the basis of 30
day months, a 360-day year and the actual days elapsed.

SECTION 2.11 DETERMINATION OF INTEREST RATE AND YIELD RATE. The
amount of principal outstanding on the Notes shall accrue interest at the per
annum rate equal to the Interest Rate. The amount of Certificate Amounts
outstanding from time to time shall accrue Yield at the per annum rate equal
to the Yield Rate. Accrued interest and Yield shall be due and payable by
Lessee as Basic Rent on each applicable Payment Date and on the Lease
Expiration Date. If all or any portion of the principal under the Notes, the
Certificate Amounts, any interest or Yield payable thereon or any other
amount payable hereunder, shall not be paid when due (whether at stated
maturity, the acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum which is equal to the Overdue Rate and shall be
payable from time to time on demand as Supplemental Rent. If at any time the
rate at which interest accrues cannot be determined by reference to a London
interbank offered rate, or if such rate becomes unavailable or illegal, then
such rate shall be determined by the Alternate Base Rate as provided at
SECTION 7.7.

SECTION 2.12 OBLIGATIONS SEVERAL. The obligations of the Participants
hereunder or elsewhere in the Operative Documents shall be several and not
joint; and no Participant shall be liable or responsible for the acts or
defaults of any other party hereunder or under any other Operative Document.

SECTION 2.13 HIGHEST LAWFUL RATE. It is the intention of the parties
hereto to conform strictly to Applicable Laws regarding usury and, anything
herein to the contrary notwithstanding, the obligations of: (x) Lessee to
Lessor under this Participation Agreement and the Lease, (y) Certificate
Trustee to the Certificate Purchasers under the Trust Agreement and the
Certificates and to the Lenders under the Loan Agreement and the Notes, and
(z) of either Lessee or Certificate Trustee or any other party under any
other Operative Document, shall be subject to the limitation that payments of
interest or of other amounts constituting interest under Applicable Laws
shall not be required to the extent that receipt thereof would be in excess
of the Highest Lawful Rate (as defined below), or otherwise contrary to
provisions of law applicable to the recipient limiting rates of interest
which may be charged or collected by the recipient. Accordingly, if the
transactions or the amount paid or otherwise agreed to be paid for the use,
forbearance or detention of money under this Participation Agreement, the
Lease, the Trust Agreement, the Certificates, the Loan Agreement, the Notes
or any other Operative Document would exceed the Highest Lawful Rate or
otherwise be usurious under Applicable Laws (including the federal and state
laws of the United States of America, or of any other jurisdiction whose laws
may be mandatorily applicable) with respect to the recipient of any such
amount, then, notwithstanding anything to the contrary in this Participation
Agreement, the Lease, the

Trust Agreement, the Certificates, the Loan Agreement, the Notes or any other
Operative Document, it is agreed as follows as to the recipient of any such
amount:

(a) the provisions of this SECTION 2.13 shall govern and
control over any other provision in this Participation Agreement, the Lease,
the Trust Agreement, the Certificates, the Loan Agreement, the Notes and any
other Operative Document and each provision set forth therein is hereby so
limited;

(a) the aggregate of all consideration which constitutes
interest under Applicable Laws that is contracted for, charged or received
under this Participation Agreement, the Lease, the Trust Agreement, the
Certificates, the Loan Agreement, the Notes or any other Operative Document
shall under no circumstances exceed the maximum amount of interest allowed by
Applicable Laws (such maximum lawful interest rate, if any, with respect to
such recipient herein called the "HIGHEST LAWFUL RATE"), and all amounts owed
under this Participation Agreement, the Lease, the Trust Agreement, the
Certificates, the Loan Agreement, the Notes and any other Operative Document
shall be held subject to reduction and: (i) the amount of interest which
would otherwise be payable to the recipient hereunder and under the Lease,
the Trust Agreement, the Certificates, the Loan Agreement, the Notes and any
other Operative Document, shall be automatically reduced to the amount
allowed under Applicable Laws, and (ii) any unearned interest paid in excess
of the Highest Lawful Rate shall be credited to the payor by the recipient
(or, if such consideration shall have been paid in full, refunded to the
payor);

(c) all sums paid, or agreed to be paid for the use,
forbearance and detention of the money under this Participation Agreement,
the Lease, the Trust Agreement, the Certificates, the Loan Agreement, the
Notes or any other Operative Document shall, to the extent permitted by
Applicable Laws be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the actual rate
of interest is uniform throughout the full term thereof;

(d) if at any time the interest, together with any other
fees, late charges and other sums payable pursuant to or in connection with
this Participation Agreement, the Lease, the Trust Agreement, the
Certificates, the Loan Agreement, the Notes and any other Operative Document
executed in connection herewith or therewith, and deemed interest under
Applicable Laws exceeds that amount which would have accrued at the Highest
Lawful Rate, the amount of interest and any such fees, charges and sums to
accrue to the recipient of such interest, fees, charges and sums pursuant to
the Operative Documents shall be limited, notwithstanding anything to the
contrary in the Operative Documents to that amount which would have accrued
at the Highest Lawful Rate for the recipient, but any subsequent reductions,
as applicable, shall not reduce the interest to accrue pursuant to the
Operative Documents below the recipient's Highest Lawful Rate until the total
amount of interest payable to the recipient (including all consideration
which constitutes interest) equals the amount of interest which would have
been payable to the recipient (including all consideration which constitutes
interest), PLUS the amount of fees which would have been received but for the
effect of this SECTION 2.13.

SECTION 2.14 EXTENSION OF LEASE EXPIRATION DATE AND FINAL MATURITY DATE.

(a) Subject to the satisfaction of the conditions and
requirements set forth in this SECTION 2.14 including the receipt of the
consent of the Participants, Lessee may request in writing (an "EXTENSION
OPTION REQUEST") to the Agent, Certificate Trustee and each of the

Participants that each of the Participants agrees that Lessee may extend the
Lease Term (the "EXTENSION OPTION") for one (1) additional period of up to
five (5) years commencing on the last day of the then Base Term (the "RENEWAL
TERM") and that the Final Maturity Date be correspondingly extended to the
extended Lease Expiration Date. The Extension Option Request must be
delivered in writing to Certificate Trustee, Agent and each Participant not
later than 270 days nor more than 360 days prior to the expiration of the
then current Lease Term. Each Participant will notify the Agent in writing
of whether or not it has consented to such Extension Option Request not later
than 45 days after receipt of the Extension Option Request (the "EXTENSION
OPTION RESPONSE DATE"). Any Participant who does not so notify Agent by the
Extension Option Response Date will be deemed to have not consented to such
Extension Option Request. Any Participant that has notified the Certificate
Trustee that it has not consented to an Extension Option Request or that is
deemed not to have consented, as provided in the preceding sentence, shall be
deemed a "NON-CONSENTING PARTICIPANT". Each Participant's determination with
respect to an Extension Option Request shall be a new credit determination
and within such Participant's sole and absolute discretion and may be
conditioned on different pricing, modification of the Sale Recourse Amount
and receipt of such financial information, documentation or other information
or conditions as may be requested by such Participant including satisfactory
appraisals of the Leased Property.

The Extension Option contemplated by the Extension Option
Request shall become effective as of the first date (the "EXTENSION OPTION
EFFECTIVE DATE") on or after the Extension Response Date on which all of the
Participants (other than Non-Consenting Participants who have been replaced
by Replacement Participants in accordance with SECTION 2.14(b)) and
Replacement Participants shall have consented to such Extension Request;

PROVIDED that on both the date of the Extension Option Request
and the Extension Option Effective Date: (w) each of the
representations and warranties made by the Certificate Trustee and
Lessee in or pursuant to the Operative Documents shall be true and
correct in all material respects as if made on and as of each such
date, (x) Lessee shall not have elected or been deemed to have elected
the Purchase Option or Sale Option, (y) no Lease Default or Lease
Event of Default shall have occurred and be continuing, and (z) the
Certificate Trustee shall have received a certificate of Lessee as to
the matters set forth in CLAUSES (w),(x) AND (y) above; and

PROVIDED FURTHER that in no event shall the Extension Option
Effective Date occur unless each of the Participants (other than
Non-Consenting Participants who have been replaced in accordance with
SECTION 2.14(b)) and the Replacement Participants shall have consented
to the Extension Option Request on or before the expiration of the
then current Lease Term.

(b) At any time after the Extension Option Response Date
and up to 90 days before the then current Lease Expiration Date, Lessee shall
be permitted to elect to replace any Non-Consenting Participant with a
replacement bank or other financial institution (a "REPLACEMENT
PARTICIPANT"); PROVIDED that: (i) such replacement does not conflict with any
Applicable Laws and Regulations, (ii) such Non-Consenting Participant shall
sell (without recourse) to the Replacement Participant all Loans and
Certificate Amounts of such Non-Consenting Participant for an amount equal to
the aggregate outstanding principal amount of such Loans and Certificate
Amounts plus accrued interest and Yield to (but not including) the date of
sale, (iii) the Lessee shall pay to such Non-Consenting Participant any
amounts arising under SECTION 7.5 if any Loan or Certificate Amount owing to
such Non-Consenting Participant

shall be purchased other than on the last day of the Payment Period relating
thereto, (iv) such replacement shall be made in accordance with the
provisions of SECTION 6.3 (PROVIDED that the relevant Replacement Participant
or Lessee shall be obligated to pay the transaction costs arising in
connection therewith), (v) the Replacement Participant shall have agreed to
be subject to all of the terms and conditions of the Operative Documents, and
(vi) such replacement must be consummated no later than thirty (30) days
prior to the expiration of the then current Lease Term. A Non-Consenting
Participant's rights under the indemnification provisions of the Operative
Documents shall survive any sale of its Loans and Certificate Amounts to a
Replacement Participant.

(c) If the Participants (including any Replacement
Participants) have not approved the Extension Option Request by at least 30
days prior to the then current Lease Expiration Date, Lessee shall be deemed
to have elected the Purchase Option.

SECTION 2.15 COLLATERALIZATION. Lessee shall have the right to elect
to collateralize the outstanding principal amounts of the Notes and thereby
reduce the Applicable Margin by pledging Liquid Assets pursuant to a
Custodial Agreement.

ARTICLE III
CONDITIONS TO ADVANCE AND COMPLETION

SECTION 3.1 CONDITIONS TO THE ADVANCE. The obligation of each
Participant to perform its obligations on the Advance Date shall be subject
to the satisfaction of (including, with respect to writings, such writings
being in form and substance reasonably satisfactory to the addressee or
beneficiary thereof), or the waiver in writing by, such Participant of the
conditions precedent set forth in this SECTION 3.1 on or prior to the Advance
Date (except that the obligation of any party hereto shall not be subject to
such party's own performance or compliance):

(a) ADVANCE REQUEST. Lessee shall have delivered the
Advance Request conforming with the requirements of SECTION 2.5 in respect of
the Advance Date.

(b) PERFORMANCE. Each party to any Operative Document
shall have performed and complied with all agreements and conditions
contained herein and in any other Operative Document to which it is a party
required to be performed or complied with by it on or prior to the Advance
Date.

(c) CONSENTS AND APPROVALS. All Governmental Actions and
other approvals and consents required to be taken, given or obtained, as the
case may be, by or from any Authority or another Person, or by or from any
trustee or holder of any Indebtedness or obligation of Lessee, that are
necessary or, in the reasonable opinion of any Participant or counsel to such
Participant, advisable in connection with the execution, delivery and
performance of the Operative Documents shall have been taken, given or
obtained as the case may be, shall be in full force and effect.

(d) REPRESENTATIONS AND WARRANTIES TRUE; ABSENCE OF
DEFAULTS AND MATERIAL ADVERSE EFFECT. Each representation and warranty of
Lessee contained herein or in any other Operative Document shall be true and
correct in all material respects as though made on and as of the Advance
Date, except that any such representation or warranty which is expressly made
only as of a specified date need be true only as of such date. No Lease
Default or Lease Event

of Default shall have occurred and be continuing. Since May 1, 1998, no
change or changes, effect or effects or condition or conditions has occurred
that individually or in the aggregate are or are likely to have a Material
Adverse Effect.

(e) TRANSACTION COSTS. Lessee shall have paid and/or
Lessee shall have requested that the Advance include a Funding for all
Transaction Costs invoiced through the Business Day immediately preceding the
date of the Advance. Such payments shall be made by wire transfer of
immediately available funds.

(f) PROCEEDINGS SATISFACTORY, ETC. All proceedings taken
in connection with the Advance Date and all documents relating thereto shall
be reasonably satisfactory to each Participant and its counsel, and each
Participant and its counsel shall have received copies of such documents as
such Participant or its counsel may reasonably request in connection
therewith, all in form and substance reasonably satisfactory to such
Participant and its counsel.

(g) TAXES. All taxes, charges, fees and costs, if any,
payable in connection with the execution, delivery, recording and filing of
the Operative Documents and the transactions contemplated to be consummated
on the Advance Date shall have been paid in full by Lessee (it being
understood such amounts may be paid with the Advance, subject to the
limitations herein and to the extent such amounts constitute Transaction
Costs), or arrangements for such payment shall have been made by Lessee to
the satisfaction of the Participants.

(h) APPRAISAL AND IMPROVEMENTS MATTERS. Prior to the
Advance Date, the Participants shall have obtained an appraisal for the
Leased Property in form and substance satisfactory to each of the
Participants (the "APPRAISALS") which shall establish (by the use of
appraisal methods satisfactory to the Participants) or in the case of item
(iii) provide a statement from Appraiser: (i) the individual and combined
Fair Market Value of the Leased Property as of the Advance Date, (ii) the
separate valuations of the land and improvements for the Leased Property,
and (iii) assuming no change in current conditions, that the appraiser does
not expect the combined Fair Market Value of the Leased Property will
decrease from the current combined Fair Market Value as of the last day of
the Lease Term. The portion of the Appraisals establishing Fair Market Value
for the Leased Property as of the Advance Date shall be prepared in
accordance with FIRREA and be performed by an independent appraisal company
chosen by the Arranger.

(i) FILINGS AND RECORDINGS. Certificate Trustee and Agent
shall have received evidence reasonably satisfactory that all filings or
recordings enumerated and described in SCHEDULE 4.1A including the Deeds, the
Lease Supplements and the Deed of Trust, as well as all other filings and
recordings necessary or advisable, including precautionary financing
statements and mortgage and deed of trust filings, in the opinion of counsel
to the Participants, to perfect the rights, titles and interests of
Certificate Trustee, the Participants and Agent intended to be created by the
Operative Documents shall have been or are being recorded in the offices of
the appropriate Authorities, including any recordings and filings necessary
to create, perfect, preserve and protect: (i) Certificate Trustee's interest
in the Leased Property, the other Lease Collateral and any other property and
interests included in the Trust Estate, (ii) a first deed of trust Lien and
deed of trust of record on the Mortgaged Property, subject to Permitted
Exceptions, and (iii) a first priority perfected security interest in the
Lease Collateral, subject to Permitted Exceptions. All recording and filing
fees and taxes with respect to

any recordings or filings made pursuant to this SECTION 3.1(i) shall have
been paid in full by Lessee, and satisfactory evidence thereof shall have
been delivered to Certificate Trustee and Agent, or arrangements for such
payment shall have been made by Lessee to the satisfaction of the
Participants.

(j) OPINIONS OF COUNSEL. Certificate Trustee, Agent and
the Participants shall have received opinions of counsel dated the Advance
Date substantially in the forms of EXHIBITS H-1 and H-2 with respect to the
Operative Documents executed and delivered in connection with the Advance
Date and the perfection and validity of Agent's Liens in the Leased Property
and the other Lease Collateral.

(k) SURVEY. Lessee shall have delivered, or shall have
caused to be delivered, to Certificate Trustee, Agent and to the Title
Insurance Company an ALTA survey of the Leased Property in a form
satisfactory to the Title Insurance Company (and including any applicable
flood zone designation (with property annotations based on Federal Flood
Insurance Rate Maps or the local equivalent) by scaled map location and
graphic plotting) in order to issue the Title Policies and showing no state
of facts unsatisfactory to any Participant.

(l) TITLE AND TITLE INSURANCE. Certificate Trustee shall
have received from the Title Insurance Company an ALTA 1970 owner's policy of
title insurance (or an irrevocable commitment for the issuance thereof),
acceptable in form and substance to each Participant (the "OWNER'S POLICY"),
insuring that Certificate Trustee has good and marketable title to the Leased
Property, subject to the Lease and such other exceptions to title as are
acceptable to each Participant. Agent, for the benefit of the Participants,
shall have received from the Title Insurance Company (or an irrevocable
commitment for the issuance thereof), an ALTA 1970 form of loan policy of
title insurance (the "LENDER'S POLICY"; together with the Owner's Policy, the
"TITLE POLICIES"), acceptable in form and substance to the Participants,
insuring the creation under the Deed of Trust in favor of Agent of valid
first priority Liens against the Mortgaged Property, subject to such
exceptions to title as are acceptable to the Participants. Each Title Policy
shall be in an amount equal to the aggregate Commitments, together with
complete, legible copies of all encumbrances, maps, surveys, and plats of
record. The Title Policies shall be dated as of the Advance Date and, to the
extent permitted under Applicable Laws, shall (w) contain affirmative
endorsements as to mechanics' liens, doing business, usury, Form 3.0 zoning,
easements and rights-of-way, Form B-1 comprehensive coverage, encroachments,
the nonviolation of covenants and restrictions, rights of access and survey
matters, (x) delete the creditors' rights and survey exclusions, (y) contain
endorsements regarding the effect of recharacterization, and (z) contain such
other endorsements reasonably requested by the Required Participants.

(m) ENVIRONMENTAL REVIEW. Prior to the Advance Date, each
Participant, Lessor and Agent shall have received the Environmental Audit for
the Leased Property, each of which shall be dated not earlier than June 1,
1998, and addressed to Lessor, Agent and each Participant and which shall
have been approved by Lessor and each Participant in each of their sole and
absolute discretion.

(n) LEASE SUPPLEMENTS. Each Participant and Lessor shall
receive an original counterpart of the Lease Supplement for the Land and
another for the Improvements executed by Lessee and Lessor with respect to
such Land and Improvements; PROVIDED, that

only Agent shall receive the copies thereof marked as the sole original
counterparts for UCC purposes.

(o) PROPERTY ACQUISITION MATTERS. Lessor shall receive:
(i) an assignment of lease in the form of EXHIBIT L ("ASSIGNMENT OF
SUBLEASE") executed by Lessee to Lessor with respect to the Standard
Industrial Lease -Multi-Tenant dated September 12, 1994, by and between
Transcontinental Realty Investors, a California business trust, as lessor,
and West Capital Financial Services Corp., a California corporation (the
"SUBLEASE"); (ii) an estoppel certificate in the form of EXHIBIT M ("ESTOPPEL
CERTIFICATE") from West Capital Financial Services Corp., the tenant under
the Sublease who occupies all of the improvements located at 0000 Xxxxxx
Xxxxx, Xxx Xxxxx, Xxxxxxxxxx, addressed to Lessor showing no defaults by
landlord or tenant thereunder or defenses to the payment of rent and
otherwise setting forth such details concerning the status of West Capital
Financial Services Corp.'s occupancy under the Sublease as of the Document
Closing Date as are acceptable to Lessor; (iii) pay-off demands from the
lenders holding first priority liens on the Leased Property setting forth the
total amount required to pay off the loans secured by such first priority
liens in full, including all interest, principal, prepayment penalties, fees,
expenses and other amounts of any kind or description due and payable
thereunder as of the Document Closing Date, together with per diem amounts
for a payoff up to and including August 20, 1998; and (iv) a statement from
Lessee of the amount required to reimburse Lessee for the value of the
capital stock of Lessee deposited in the escrow established pursuant to the
Montpelier Purchase Agreement.

(p) NO CASUALTY OR CONDEMNATION. No Casualty and no
Condemnation shall have occurred. No action shall be pending or threatened
by an Authority to initiate a Condemnation.

(q) LITIGATION. No action or proceeding shall have been
instituted or threatened nor shall any Governmental Action be instituted or
threatened before any Authority, nor shall any order, judgment or decree have
been issued or proposed to be issued by any Authority, to set aside,
restrain, enjoin or prevent the performance of this Agreement or any
transaction contemplated hereby or by any other Operative Document or which
is reasonably likely, in the sole opinion of the Required Participants to
have a Material Adverse Effect.

(r) LEGALITY. In the opinion of each Participant or its
counsel, the transactions described in the Operative Documents shall not
violate any Applicable Laws and no change shall have occurred or been
proposed in Applicable Laws that would make it uneconomic or illegal for any
party to any Operative Document to participate in any of the transactions
described in the Operative Documents or otherwise would prohibit the
consummation of any transaction described in the Operative Documents or
expand the duties, obligations and risks of such Participant.

(s) ARRANGEMENT FEE. Lessee shall have paid to Arranger
the Arrangement Fee which may be paid by Lessee out of the Advance.

(t) FIRPTA AFFIDAVIT. Lessee shall have caused each of
the Sellers of the Leased Property to deliver to Certificate Trustee and
Agent with respect to the Leased Property either: (i) a FIRPTA Affidavit in
customary form executed by each Seller, or (ii) if any Seller is a "foreign
person" as defined in Section 1445 of the Code, evidence that a portion of
the Purchase

Price to be paid to such Seller has been withheld, if so required, in
accordance with the provisions of the Code and Regulations.

(u) CALIFORNIA FORM 590-RE. Lessee shall have caused each
of the Sellers of the Leased Property to deliver to Certificate Trustee and
Agent with respect to the Leased Property either: (i) a California Form
590-RE executed by each Seller, or (ii) if any Seller is not a "California
resident" or otherwise exempt, evidence that a portion of the Purchase Price
to be paid to such Seller has been withheld, as required in accordance with
Applicable Laws.

(v) ACQUISITION DOCUMENTS. The Required Participants shall
be reasonably satisfied with: (i) the documents which grant Certificate
Trustee the right to acquire, or which designate Certificate Trustee as the
party to take title to, the Leased Property on the Advance Date, (ii) the
escrow instructions or other arrangement for the repayment of the first
priority liens on the Leased Property it being understood that the portion of
the Advance to be used for such purpose will be deposited into the escrow on
the Advance Date and used by the escrow holder to repay (x) on the Advance
Date, the loan secured by a first priority lien on the real property to be
purchased and sold under the Transcontinental Acquisition Agreement and (y)
on the first Business Day immediately following the Advance Date, the loan
secured by a first priority lien on the real property to be purchased and
sold under the Montpelier Acquisition Agreement, and (iii) the escrow
instructions or other arrangement for the payment to Lessee for the capital
stock of Lessee issued to the Seller as part of the consideration to be paid
the Seller under the Montpelier Acquisition Agreement.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES

SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF LESSEE. As of the date
of its execution of this Agreement and the Advance Date, Lessee makes the
representations and warranties set forth in this SECTION 4.1 to each of the
other parties hereto.

(a) DUE ORGANIZATION, ETC. It is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California and each has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as presently conducted, to own or hold under lease its properties,
to enter into and perform its obligations under the Operative Documents to
which it is or is to be a party and each other agreement, instrument and
document to be executed and delivered by it on or before the Document Closing
Date and the Advance Date in connection with or as described in each such
Operative Document to which it is or is to be a party. It is duly qualified
as a foreign corporation authorized to do business in every jurisdiction in
which a failure to be so qualified in each such other jurisdiction could have
a Material Adverse Effect.

(b) AUTHORIZATION; NO CONFLICT. The execution, delivery
and performance by it of each of the Operative Documents to which it is or is
to be a party and the performance by it of its obligations under such
Operative Documents are within its corporate powers, have been duly
authorized by all necessary corporate action (including any necessary
stockholder, policyholder or member action) on the part of it and do not and
will not: (i) contravene any Applicable Laws currently in effect applicable
to or binding on it or the Leased Property; (ii) violate any provision of its
charter, bylaws or other governing documents; (iii) result in a breach of or
constitute a

default under any indenture, loan or credit agreement, or any other agreement
or instrument to which it is a party or by which it or its properties is
bound or affected, except where any such breach or default would not
reasonably be likely to result in a Material Adverse Effect; (iv) result in,
or require, the creation or imposition of any Lien of any nature upon or with
respect to the Leased Property or the other Lease Collateral (other than the
Liens created pursuant to the Operative Documents) or any other property now
owned or hereafter acquired by it or any of its Subsidiaries; or (v) require
any Governmental Action by any Authority, except for: (A) the filings and
recordings listed on SCHEDULE 4.1A to perfect the rights of Certificate
Trustee and Agent on behalf of the Participants intended to be created by the
Operative Documents, and (B) those Governmental Actions required with respect
to it (which are all described in SCHEDULE 4.1B), each of which have been
duly effected and are, or on the Advance Date will be, in full force and
effect; and it is not in default under or in violation of its charter, bylaws
or other governing documents.

(c) ENFORCEABILITY, ETC. This Agreement constitutes the
legal, valid and binding agreement of it, and each Operative Document to
which it is a party, if and when executed and delivered in accordance with
this Agreement, will constitute its legal, valid and binding obligation,
enforceable against it in accordance with the terms thereof, except as such
enforceability may be limited by applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and by general equitable
principles.

(d) LITIGATION. There is no action, suit, proceeding or
investigation pending against or (to its Actual Knowledge) threatened which
questions the validity of the Operative Documents to which it is a party or
any action taken or to be taken pursuant to the Operative Documents to which
it is a party, and there is no action, proceeding or investigation pending or
(to its Actual Knowledge) threatened which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.

(e) TAXES. Lessee and its Subsidiaries have filed or
caused to be filed all United States Federal and all other material tax
returns that are required to be filed by it, and it has paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessment received by it to the extent that such taxes have become due and
payable except to the extent that taxes due, but unpaid, are being contested
in good faith by it by appropriate action or proceeding and, to the extent
(if any) that such taxes are not due and payable, it has established or
caused to be established reserves that are adequate for the payment thereof
in accordance with GAAP.

(f) RIGHTS IN RESPECT OF THE LEASED PROPERTY. The
Acquisition Documents are in full force and effect and permit Lessee to
assign to Lessor the right to acquire the Leased Property as described in
this Participation Agreement. Except for the Acquisition Documents, Lessee
is not a party to any other contract or agreement to sell, transfer or
encumber any interest in the Lease Collateral or any part thereof other than
pursuant to this Agreement and the Lease. Lessor will assume no obligations
under the Acquisition Agreements.

(g) NO LEASE DEFAULT, LOSS, ETC. No Lease Default, Lease
Event of Default, Condemnation or Casualty has occurred and is continuing;
there is no action pending or, to the best of its knowledge, threatened by an
Authority to initiate a Condemnation. No condition exists that constitutes,
or with the giving of notice or lapse of time or both would constitute an
event of default by it under any indenture, mortgage, chattel mortgage, deed
of trust, lease,

conditional sales contract, loan or credit arrangement or other material
agreement or instrument to which it is a party or by which it or any of its
properties or the Leased Property is bound, which is reasonably likely to
result in a Material Adverse Effect.

(h) SUBJECTION TO GOVERNMENT REGULATION. Neither
Certificate Trustee, Agent nor any Participant will become: (i) solely by
reason of entering into the Operative Documents or consummation of the
transactions contemplated thereby (other than Lessor upon the exercise by
Lessor of remedies under the Lease) subject to ongoing regulation of its
operations by an Authority; or (ii) except for banking regulations and for
regulation the applicability of which depends upon the existence of facts in
addition to the ownership of, or the holding of any interest in, the Leased
Property or any interest therein upon the exercise of remedies under the
Lease, subject to ongoing regulation of its operations by any Authority.

(i) CHIEF EXECUTIVE OFFICE OF LESSEE. Its principal place
of business and chief executive office, as such terms are used in Section
9-103(3) of the UCC, is located at 0000 Xxxxxxxxxx Xxxxx, Xxx Xxxxx,
Xxxxxxxxxx, 00000.

(j) INVESTMENT COMPANY ACT. It is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.

(k) PRIVATE OFFERING. The issuance, sale and delivery of
the Certificates, the Notes and the interests in the Operative Documents
under the circumstances contemplated hereby do not require the registration
or qualification of such Certificates, Notes or interests under the
Securities Act, any state securities laws, or the Trust Indenture Act of 1939.

(l) PUBLIC UTILITY HOLDING COMPANY. It is not subject to
regulation as a "holding company," an "affiliate" of a "holding company", or
a "subsidiary company" of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or otherwise subject
to any regulatory scheme which restricts its ability to incur debt.

(m) LICENSES, REGISTRATIONS AND PERMITS. All material
licenses, approvals, authorizations, consents, permits (including building,
demolition and environmental permits, licenses, approvals, authorizations and
consents), easements and rights-of-way, including proof and dedication,
required for the use and occupancy of the Leased Property and for the
operation thereof have either been obtained from the appropriate Authorities
having jurisdiction or from private parties, as the case may be, or will be
obtained from the appropriate Authorities having jurisdiction or from private
parties, as the case may be, prior to commencing any such construction or use
and operation, as applicable.

(n) NATURE, CONDITION AND USE OF THE LEASED PROPERTY.
Lessee's principal purpose for the Leased Property is to conduct the
administrative, marketing, research, and development and manufacturing
activities of Lessee and its Subsidiaries. The Leased Property, and any
present use and presently anticipated future use thereof by Lessee and its
agents, assignees, employees, invitees, lessees, licensees and tenants comply
with all Applicable Laws (including zoning and land use laws and
Environmental Laws) and insurance requirements, except for such instances of
non-compliance that could not have, individually or in the aggregate, a
Material Adverse Effect. No notices, complaints or orders of violation or
non-compliance or liability have been issued or, to the best of Lessee's
knowledge, threatened by

any Person with respect to the Leased Property or the present or intended
future use thereof, except for such violations and instances of
non-compliance as could not have, individually or in the aggregate, a
Material Adverse Effect, and Lessee is not aware of any circumstances which
could give rise to the issuance of any such notices, complaints or orders.

(o) TITLE TO LEASED PROPERTY; SECURITY. On the Advance
Date, except for the filings and recordings listed in SCHEDULE 4.1A (which
filings or recordings shall have been duly made on the Advance Date, or shall
have been arranged to be made promptly thereafter (including the payment of
any fees or taxes relating to any of the foregoing) in a manner satisfactory
to each Participant), no other filings or recordings are necessary to validly
and effectively convey to Certificate Trustee good and marketable title to
the Leased Property, and Agent has a valid and enforceable first priority
Lien for the benefit of the Participants on the Leased Property and the other
Lease Collateral free and clear of all other Liens, other than Permitted
Liens. Neither it nor its Affiliates has taken or caused to be taken any
action which would have an adverse effect on Certificate Trustee's title to
the Leased Property as described in the Operative Documents and, in the case
of the Leased Property, from that indicated in the Owner's Policy to be
delivered pursuant to SECTION 3.1(l). Neither Lessee nor any of its
Affiliates has created, consented to, incurred or suffered to exist any Lien
upon the Leased Property other than Permitted Liens.

(p) INSURANCE. It carries insurance with reputable
insurers in respect of its material assets, in such manner, in such amounts
and against such risks as is customarily maintained by other Persons of
similar size engaged in similar business.

(q) FLOOD HAZARD AREAS. Except as otherwise identified on
the applicable survey delivered pursuant to SECTION 3.1(k), no portion of the
Leased Property is located in an area identified as a special flood hazard
area by the Federal Emergency Management Agency or other applicable
Authority. If the Leased Property is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or other
applicable Authority, then, to the extent required by Applicable Law, flood
insurance has been obtained for the Leased Property in accordance with the
National Flood Insurance Act of 1968, as amended.

(r) FEDERAL RESERVE REGULATIONS. Neither it nor its
Affiliates will, directly or indirectly, use any of the proceeds from the
Funding made by the Participants with respect to the issuance of the
Certificates and the Notes or the Advance for the purpose of purchasing or
carrying any "margin stock" or "margin security" within the meaning of
Regulation T, U or X of the Board of Governors of the Federal Reserve System
or to extend credit to others for such purpose or for any purpose which
violates or which would be inconsistent with, the provisions of Regulation T,
U or X of the Board of Governors of the Federal Reserve System.

(s) DISCLOSURE. All information in any exhibit, report,
certificate or written statement heretofore furnished by it and any of its
Affiliates (including any Person authorized or employed by any such Person as
agent or otherwise) to the Participants for purposes of or in connection with
the negotiation and preparation of the Operative Documents and the
transactions contemplated thereby, when taken as a whole with all other
written disclosures to such parties, do not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading; PROVIDED, HOWEVER, that the foregoing
representation and warranty shall be deemed limited to Lessee's Actual
Knowledge to the extent it relates to

information prepared by an independent third party and which is not the
subject of any other representation and warranty made by Lessor in this
Agreement.

(t) APPRAISAL DATA. Taken as a whole, the information
provided or to be provided by it and its Affiliates to the Appraiser and
forming the basis for the conclusions set forth in each Appraisal was or when
provided will be true and correct in all material respects and did not or
when provided will not omit any information known to it regarding the title,
physical condition, or use of the Leased Property which it or any of its
Affiliates knew or should reasonably have known was necessary to make the
information provided not materially misleading; PROVIDED, HOWEVER, that the
foregoing representation and warranty shall be deemed limited to Lessee's
Actual Knowledge to the extent it relates to information prepared by an
independent third party and which is not the subject of any other
representation and warranty made by Lessor in this Agreement.

(u) SOLVENCY. The consummation by it of the transactions
described in the Operative Documents does and will not render it insolvent,
nor was it made in contemplation of its insolvency; the value of its assets
and properties at fair valuation and at their then present fair salable value
is and, immediately following the Advance, will be greater than its total
liabilities, including contingent liabilities and liabilities incurred
pursuant to the Operative Documents, as they become due; and the property
remaining in its hands was not and, immediately following the Advance, will
not be an unreasonably small amount of capital.

(v) ENVIRONMENTAL MATTERS. Lessee has reasonably concluded
that the liabilities and costs associated with the effect of Environmental
Laws on its business, operations and properties and its Subsidiaries
(including any capital or operating expenditures required for clean-up or
closure of properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license, permit
or contract, any related constraints on operating activities, including any
periodic or permanent shutdown of any facility or reduction in the level of
or change in the nature of operations conducted thereat, any costs or
liabilities in connection with off-site disposal of wastes or Hazardous
Materials, and any actual or potential liabilities to third parties,
including employees, and any related costs and expenses) could not reasonably
be expected to have a Material Adverse Effect.

(w) TITLE TO PROPERTIES. Lessee and its Consolidated
Subsidiaries have good and marketable title to all of their material assets
reflected on the balance sheets referred to in CLAUSE (y) of this SECTION
4.1, except for such assets as have been disposed of in the ordinary course
of business. Lessee has such trademarks, trademark rights, trade names,
trade name rights, franchises, copyrights, patents, patent rights and
licenses as to allow it to conduct its business as now operated, without
known conflict with the rights of others, except to the extent that such
conflicts would not have a Material Adverse Effect.

(x) ERISA.

(A) 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, except if no Material Adverse Effect could reasonably be
expected to result therefrom. No member of the ERISA Group has: (i)
sought a waiver of the minimum funding standards 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, except if no Material Adverse Effect could reasonably be
expected to result therefrom.

(B) The execution and delivery of the Operative Documents,
including the issuance and sale of the Certificates and Notes and the
consummation of the transactions contemplated hereby and thereby under
the Operative Documents, will not involve any prohibited transactions,
within the meaning of Section 406 of ERISA or in connection with which a
tax could be imposed pursuant to Section 4975 of the Code.

(y) FINANCIAL INFORMATION.

(A) The consolidated balance sheet of Lessee and its Consolidated
Subsidiaries as of January 31, 1998, and the related consolidated
statements of operations and cash flows for the fiscal year then ended,
reported on by Ernst & Young, a copy of which has been delivered to each
of the Participants, fairly present, in conformity with GAAP, the
consolidated financial position of Lessee and its Consolidated
Subsidiaries as of such date and cash flows for such fiscal year.

(B) The unaudited consolidated balance sheet of Lessee and its
Consolidated Subsidiaries as of May 1, 1998, and the related unaudited
consolidated statements of operations and cash flows for the portion of
Lessee's fiscal year ended at the end of such quarter, a copy of which
has been delivered to each of the Participants, fairly present, in
conformity with GAAP, the consolidated financial position of Lessee and
its Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such fiscal quarter.

(C) Since May 1, 1998, no change or changes, effect or effects, or
condition or conditions (financial or otherwise) have occurred that
individually or in the aggregate are or could have a Material Adverse
Effect.

(z) YEAR 2000. Lessee has developed and is presently
implementing a comprehensive, detailed program to address on a timely
basis the "Year 2000 Problem" (that is, the risk that computer
applications used by Lessee and its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999) and
reasonably anticipates that it will successfully resolve the Year 2000
Problem on a timely basis for all material computer applications used
by it.

SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF EACH PARTICIPANT.
As of the date of its execution of this Agreement, each Participant
represents and warrants severally and only as to itself to each of the
other parties hereto as follows:

(a) DUE ORGANIZATION, ETC. It is duly organized and
validly existing under the laws of the jurisdiction of its organization
and has full corporate power and authority to enter into and perform
its obligations as either a Lender or a Certificate Purchaser (as the
case may be) under each Operative Document to which it is or is to be a
party and each other agreement,

instrument and document to be executed and delivered by it on or before
the Advance Date in connection with or as described in each such
Operative Document to which it is or is to be a party.

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

(c) ERISA. It is purchasing its interest in the
Certificate(s) and the Notes with assets that are either: (i) not
assets of any Plan (or its related trust) which is subject to Title I
of ERISA or Section 4975 of the Code; or (ii) assets of any Plan (or
its related trust) which is subject to Title I of ERISA or Section 4975
of the Code, but there is available an exemption from the prohibited
transaction rules under Section 406(a) of ERISA and Section 4975 of the
Code and such exemption is immediately applicable to each transaction
described in the Operative Documents to the extent that any other party
to such transaction is a "party in interest" as defined in Section
3(14) of ERISA with respect to such plan assets.

(d) INVESTMENT IN NOTES AND CERTIFICATES. It is
acquiring its interest in the Note(s) and/or Certificate(s) and the
Operative Documents for its own account for investment and not with a
view to any distribution (as such term is used in Section 2(11) of the
Securities Act) thereof, and if in the future it should decide to
dispose of its interest in the Notes and/or Certificates and the
Operative Documents, it understands that it may do so only in
compliance with the Securities Act and the rules and regulations of the
SEC thereunder and any applicable state securities laws. Each
Participant is aware that the Notes and Certificates and its interests
in the Operative Documents have not been registered under the
Securities Act or qualified or registered under any state or other
jurisdiction's securities laws. Neither it nor anyone authorized to
act on its behalf has taken or will take any action which would subject
the issuance or sale of any Note or Certificate or any interest in the
Operative Documents or the Leased Property, the Trust Estate, the Lease
Collateral, the Mortgaged Property or the Lease to the registration
requirements of Section 5 of the Securities Act. No representation or
warranty contained in this SECTION 4.2(d) shall include or cover any
action or inaction of Lessee or any Affiliate thereof whether or not
purportedly on behalf of any Participant, Agent, Certificate Trustee or
any of their Affiliates. Notwithstanding the foregoing, but subject to
the provisions of Article V of the Trust Agreement and of ARTICLE VI,
it is understood among the parties that the disposition of each
Participant's property shall be at all times within its control. Each
Participant and its respective agents and representatives have such
knowledge and experience in financial and business matters as to enable
them to utilize the information made available to them in connection
with the transactions contemplated hereby, to evaluate the merits and
risk of an investment in Notes and/or Certificates and the Operative
Documents and to make an informed decision with respect thereto and
such an evaluation and informed decision have been made.

Each Participant understands and agrees that the Certificates
and Notes will bear a legend that shall read substantially as follows:

"THIS [CERTIFICATE] [NOTE] HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES OR "BLUE SKY" LAW, AND MAY
NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN
VIOLATION OF SUCH ACT OR LAWS."

SECTION 4.3 REPRESENTATIONS AND WARRANTIES OF CERTIFICATE TRUSTEE. As
of the date of its execution of this Agreement and as of the Advance Date,
Certificate Trustee, in its individual capacity, represents and warrants to each
of the other parties hereto as follows:

(a) CORPORATE TRUST OFFICE. The Corporate Trust
Office and principal place of business and the place where the
documents, accounts and records relating to the Overall Transaction are
kept is located at 000 Xxxxx Xxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000.

(b) DUE ORGANIZATION, ETC. Certificate Trustee is a
national banking association duly organized and validly existing in
good standing under the laws of the United States and has full power
and authority to execute, deliver and perform its obligations: (i) in
its individual capacity under the Trust Agreement and, to the extent it
is a party hereto in its individual capacity, this Agreement, and (ii)
acting as Certificate Trustee under the Trust Agreement, under this
Agreement and each other Operative Document to which it is or will be a
party as Certificate Trustee.

(c) DUE AUTHORIZATION; ENFORCEABILITY, ETC. This
Agreement and the Trust Agreement have been or will be duly authorized,
executed and delivered by or on behalf of Certificate Trustee, in its
individual capacity, and are, or upon execution and delivery will be,
legal, valid and binding obligations of Certificate Trustee, in its
individual capacity enforceable against it in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting creditors'
rights generally and by general equitable principles.

(d) NO CONFLICT. The execution and delivery by: (a)
Certificate Trustee, in its individual capacity, of the Trust Agreement
and this Agreement, and (b) Certificate Trustee, of each other
Operative Document to which it is or will be a party, in its capacity
as Certificate Trustee, are not and will not be, and the performance by
Certificate Trustee, and to the extent it is to be a party thereto in
its individual capacity, in its individual capacity, of its obligations
under each are not and will not be inconsistent with the articles of
association or by-laws of Certificate Trustee, do not and will not
contravene any Applicable Laws of the United States of America or the
State of California relating to the banking or trust powers of
Certificate Trustee, and to the extent it is to be a party thereto in
its individual capacity, in its individual capacity, and, to the best
knowledge of Certificate Trustee, and to the extent it is to be a party
thereto in its individual capacity, in its individual capacity, do not
and will not contravene any provision of, or constitute a default
under, any indenture, mortgage, chattel mortgage, deed of trust, lease,
conditional sales contract, loan or credit arrangement or other
agreement or instrument to which Certificate Trustee, and to the extent
it is to be a party thereto in its individual capacity, in its
individual capacity, is a party or by which Certificate Trustee, and to
the extent it is to be a party thereto in its individual capacity, in
its individual capacity, or its properties may be bound or affected.

(e) NO APPROVALS, ETC. Neither the execution and
delivery by Certificate Trustee, and to the extent it is to be a party
thereto in its individual capacity, in its individual capacity, under
the Trust Agreement or (assuming the due authorization, execution and
delivery of the Trust Agreement by each Certificate Purchaser) as
Certificate Trustee under the Participation Agreement, as the case may
be, of any of the Operative Documents to which Certificate Trustee is a
party requires the consent or approval of, or the giving of notice to
or

registration with, or the taking of any other action in respect of, any
Authority or other United States of America or California body governing its
banking practices.

(f) LITIGATION. There is no action, proceeding or
investigation pending or, to its knowledge, threatened against Certificate
Trustee, and to the extent it is to be a party thereto in its individual
capacity, in its individual capacity, which questions the validity of the
Operative Documents, and there is no action, proceeding or investigation served
and pending or threatened which is likely to result, either in any case or in
the aggregate, in any material adverse change in the ability of Certificate
Trustee, and to the extent it is to be a party thereto in its individual
capacity, in its individual capacity, to perform its obligations (in either
capacity) under the Operative Documents to which Certificate Trustee, and to the
extent it is to be a party thereto in its individual capacity, in its individual
capacity, is a party.

(g) LESSOR LIENS. The Leased Property is free and clear of
all Lessor Liens attributable to Certificate Trustee (in its individual
capacity) and no act or omission by Certificate Trustee has occurred which would
cause a Lessor Lien.

(h) SECURITIES ACT. Neither Certificate Trustee (in its
individual capacity or as a Certificate Trustee) nor anyone authorized to act on
Certificate Trustee's behalf has, directly or indirectly, in violation of
Section 5 of the Securities Act or any state securities laws, offered or sold
any interest in the Certificates, the Notes, the Leased Property, the Lease, or
any of the other Operative Documents or in any security or lease the offering of
which, for purposes of the Securities Act or any state securities laws, would be
deemed to be part of the same offering as the offering of the aforementioned
securities or leases, or solicited any offer to acquire any of the
aforementioned securities or leases.

(i) TAXES. There are no taxes payable by Certificate Trustee
imposed by the State of California or any political subdivision thereof or by
the United States of America in connection with the execution and delivery by
Certificate Trustee of this Participation Agreement, the other Operative
Documents to be delivered on the Document Closing Date solely because
Certificate Trustee is a national banking association with its principal place
of business in the State of California and performs certain of its duties as
Certificate Trustee in the State of California and there are no taxes payable by
Certificate Trustee imposed by the State of California or any political
subdivision thereof or by the United States of America in connection with the
acquisition of its interest in the Trust Estate, and its execution, delivery and
performance of the Trust Agreement and any other Operative Document (other than
franchise or other taxes based on or services rendered in connection with the
transactions contemplated hereby), solely because Certificate Trustee is a
national banking association with its principal place of business in the State
of California and performs certain of its duties as Certificate Trustee in the
State of California.

SECTION 4.4 REPRESENTATIONS AND WARRANTIES OF AGENT. Agent, in its
individual capacity, hereby represents and warrants to the Participants as set
forth in this SECTION 4.4.

(a) ORGANIZATION AND AUTHORITY. Agent is a national banking
association duly organized and validly existing in good standing under the laws
of the United States and has the power and authority to enter into and perform
its obligations under the Operative Documents.

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

(c) NON-CONTRAVENTION. Neither the execution and delivery by
Agent of the Operative Documents to which it is or will be a party, either in
its individual capacity, as Agent, or both, nor compliance with the terms and
provisions thereof, conflicts with, results in a breach of, constitutes a
default under (with or without the giving of notice or lapse of time or both),
or violates any of the terms, conditions or provisions of: (i) the articles of
association or by-laws of Agent; (ii) any bond, debenture, note, mortgage,
indenture, agreement, lease or other instrument to which Agent, either in its
individual capacity, as Agent, or both, is now a party or by which it or its
property, either in its individual capacity, as Agent, or both, is bound or
affected, where such conflict, breach, default or violation would be reasonably
likely to materially and adversely affect the ability of Agent, either in its
individual capacity, as Agent or both, to perform its obligations under any
Operative Document to which it is or will be a party, either in its individual
capacity, as Agent, or both; or (iii) any of the terms, conditions or provisions
of any Applicable Laws of the United States of America or California relating to
its banking or trust powers or any order, injunction or decree of any Authority
applicable to it in its individual capacity, as Agent, or both, where such
conflict, breach, default or violation would be reasonably likely to materially
and adversely affect the ability of Agent, either in its individual capacity, as
Agent or both, to perform its obligations under any Operative Document to which
it is or will be a party.

(d) ABSENCE OF LITIGATION, ETC. There is no litigation
(including derivative actions), arbitration or governmental proceedings pending
or, to the best knowledge of Agent, threatened against it which would be
reasonably likely to adversely affect Agent's ability to perform its obligations
under the Operative Documents to which it is party.

(e) CONSENTS, ETC. No authorization, consent, approval,
license or formal exemption from, nor any filing, declaration or registration
with, any Authority of the United States of America or California governing its
banking practices, is or will be required in connection with the execution and
delivery by Agent of the Operative Documents to which it is party or the
performance by Agent of its obligations under such Operative Documents.

ARTICLE V
COVENANTS OF LESSEE

SECTION 5.1 FURTHER ASSURANCES. Lessee, at its own cost and expense,
will cause to be promptly and duly taken, executed, acknowledged and delivered
all such further acts, documents and assurances as Certificate Trustee, Agent or
any Participant reasonably may request from time to time in order to carry out
more effectively the intent and purposes of this Agreement, the other Operative
Documents and the Overall Transaction. In connection with any deliveries made
to Certificate Trustee or Agent, Lessee shall, at Lessee's sole cost and

expense, provide sufficient copies of such delivered item such that copies are
available to distribute to each Participant. Lessee, at its own cost and
expense, will cause all financing statements (including precautionary financing
statements), fixture filings, mortgages, deeds of trust and other documents, to
be recorded or filed at such places and times in such manner, and will take all
such other actions or cause such actions to be taken, as may be necessary or as
may be reasonably requested by Agent, any Participant or Certificate Trustee in
order to establish, preserve, protect and perfect the title and Lien of
Certificate Trustee and/or Agent in the Leased Property and the other Lease
Collateral and such parties' rights under this Agreement and the other Operative
Documents.

SECTION 5.2 LIENS. Lessee will not create, assume or suffer to exist
any mortgage, pledge, security interest, encumbrance, or lien (other than for
taxes not delinquent and for taxes and other items being contested in good
faith) on property of any kind, whether real, personal or mixed, now owned or
hereafter acquired, or upon the income or profits thereof, except for minor
encumbrances and easements on real property which do not affect its market
value, and except for existing liens on Lessee's personal property and future
purchase money security interests encumbering only the personal property
purchased. Notwithstanding the foregoing, Lessee shall not incur or suffer to
exist any Lien on the Leased Property or other Lease Collateral other than
Permitted Liens.

SECTION 5.3 CHANGE OF NAME OR ADDRESS. Lessee shall provide Agent and
Certificate Trustee thirty (30) days' prior written notice of any change in
name, identity or the address of its chief executive office and principal place
of business or the office where it keeps its records concerning its accounts and
the Leased Property.

SECTION 5.4 COMPLIANCE WITH LAW. Lessee shall comply and shall cause
each of the Subsidiaries to comply with all Applicable Laws in respect to the
conduct of its business, the ownership of its properties or which otherwise
affect the Leased Property, except: (i) where such noncompliance is not
reasonably likely to result in a Material Adverse Effect, or (ii) where
compliance is being contested by Lessee pursuant to a Permitted Contest.

SECTION 5.5 INVESTIGATION AND LITIGATION. Lessee shall deliver a
written notice to Agent and Certificate Trustee promptly upon Lessee's receiving
notice or Actual Knowledge of (x) the intent by an Authority to take an action
which would constitute a Condemnation, investigate the Leased Property for a
material violation of any Applicable Laws on or at the Leased Property,
including any Environmental Law, under which liability may be imposed upon
Certificate Trustee, Agent, any Participant or Lessee, or investigate the Leased
Property (other than routine fire, life-safety and similar inspections) for any
violation of Applicable Laws under which criminal liability may be imposed upon
Certificate Trustee, Agent, any Participant, or Lessee, or (y) the commencement
of, or any adverse development with respect to, any litigation, action,
proceeding or labor controversy affecting or which could have a Material Adverse
Effect or result in a Significant Condemnation.

SECTION 5.6 INFORMATION. Lessee will deliver to Agent on behalf of
Lessor and each of the Participants:

(a) Within forty-five (45) days after the close of each
fiscal quarter, except for the final quarter of each fiscal year, Lessee's
unaudited balance sheets as of the close of such fiscal quarter, and unaudited
income and expense statements with supportive schedules and

statements of retained earnings for such fiscal quarter, in each case
prepared in accordance with GAAP and accompanied by a consolidating schedule;

(b) Within ninety (90) days after the close of each fiscal
year, a copy of Lessee's consolidated state of financial condition including at
least its balance sheet as of the close of such fiscal year, and its outcome and
expense statement and retained earnings statement for such fiscal year, examined
and prepared on an audited basis by independent certified public accountants
selected by Lessee and reasonably satisfactory to Agent in accordance with GAAP,
accompanied by an unaudited consolidating schedule;

(c) As soon as available, copies of such financial statements
and reports as Lessee may file with any state or federal agency, including its
10-K and 10-Q reports;

(d) Such other financial statements and information as Agent
may reasonably request from time to time;

(e) In connection with each financial statement provided
hereunder, a statement executed by the president or chief financial officer of
Lessee certifying that no Lease Default or Lease Event of Default has occurred;

(f) In connection with each fiscal year-end statement
required hereunder, any management letter of Lessee's certified public
accountants;

(g) Within forty-five (45) days after each fiscal quarter, a
certification of compliance with all covenants under the Operative Documents,
executed by Lessee's chief financial officer or other duly authorized officer of
Lessee, in form acceptable to Agent;

(h) Prompt written notice to Agent of any Lease Default or
Lease Event of Default or any default or event of default under any other
agreement, contract, document or instrument entered or to be entered into with
any financial institution (including the Credit Agreement), any litigation in
excess of One Million Dollars ($1,000,000) which, if decided adversely to
Lessee, would have a Material Adverse Effect, and any other matter which has
resulted in, or is likely to result in, a material adverse change in Lessee's
financial condition or operations; and

(i) Prior written notice to Agent of any changes in Lessee's
officers and other senior management.

(j) Lessee will furnish to Agent, as soon as possible and in
any event within fifteen (15) days after Lessee knows or has reason to know that
any event or condition with respect to any defined benefit pension plans of
Lessee described in SECTION 4.1(x) has occurred, a statement by the president or
chief financial officer of Lessee describing such event or condition and the
action, if any, which Lessee proposes to take with respect thereto.

SECTION 5.7 QUICK RATIO. Lessee shall maintain at all times a ratio of
cash, accounts receivable and marketable securities to current liabilities of
not less than 1.5:1.0, as such terms are defined by GAAP.

SECTION 5.8 TANGIBLE NET WORTH. Lessee will at all times maintain a
Tangible Net Worth of not less than the sum of (a) One Hundred Fifty-Five
Million Dollars ($155,000,000), (b) fifty percent (50%) of Lessee's net profit
after taxes for each fiscal year of Lessee ending after January 31, 1998, and on
or before the date of computation, and (c) one hundred percent (100%) of the net
proceeds of any equity securities issued by Lessee on or after July 1, 1998.

SECTION 5.9 LIQUIDITY. Lessee will at all times maintain a ratio of
Liquid Assets to the unsecured portion of the Lease Balance of not less than
1.5:1.0.

SECTION 5.10 FIXED CHARGE COVERAGE RATIO. Lessee will maintain a ratio
of EBITDA, plus Rent and all operating and capital lease payments for real
property, to Fixed Charges of not less than 2:1. Compliance with this SECTION
5.10 shall be measured as of the end of each of Lessee's fiscal quarters, for
the immediately preceding twelve (12) month period then ending.

SECTION 5.11 FUNDED DEBT TO EBITDA. Lessee will maintain at all times a
ratio of Funded Debt to EBITDA of not more than 1.5:1.0.

SECTION 5.12 SUPPLEMENTAL ENVIRONMENTAL INFORMATION. Promptly upon
receipt thereof, Lessee shall deliver to Agent copies of all updates, if any, to
the Environmental Audit.

SECTION 5.13 LEASE DEFAULTS, ETC. As soon as practicable, but in any
event within three (3) Business Days after Lessee becomes aware of the existence
of any Lease Default, Lease Event of Default, Event of Loss, Condemnation,
Casualty or any development that would result in a Material Adverse Effect
(other than developments that affect the economy of the United States generally
or the insurance industry generally), Lessee shall notify Certificate Trustee,
Agent and each Participant by telephone or facsimile of such event and the
anticipated effect thereof, and within two (2) Business Days thereafter, Lessee
shall furnish to Certificate Trustee, Agent and each Participant an Officer's
Certificate of Lessee signed by a Responsible Officer of Lessee which such
certificate shall describe such Lease Default, Lease Event of Default, Event of
Loss, Condemnation, Casualty or development in reasonable detail, with a
statement of Lessee's action with respect thereto taken or proposed to be taken.

SECTION 5.14 SECURITIES. Lessee shall not, nor shall it permit anyone
authorized to act on its behalf to, take any action which would subject the
issuance or sale of the Notes or Certificates, the Leased Property or the
Operative Documents, or any security or lease the offering of which, for
purposes of the Securities Act or any state securities laws, would be deemed to
be part of the same offering as the offering of the aforementioned securities or
leases to the registration requirements of Section 5 of the Securities Act, any
state securities laws, or the Trust Indenture Act of 1939. Lessee makes no
covenant with respect to any actions of Certificate Trustee, Agent or any
Participant.

SECTION 5.15 RATES. With respect to each determination of Interest and
Yield pursuant to this Agreement, the Loan Agreement, the Trust Agreement and
Basic Rent under the Lease, Lessee agrees to be bound by Sections 2.5 and 2.6 of
the Loan Agreement, Sections 2.4 and 2.5 of the Trust Agreement, and SECTIONS
2.10 and 2.11 and the applicable definitions in APPENDIX 1.

SECTION 5.16 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Lessee
will continue to engage in business in the same industry or industries as the
industry or industries which the

business now conducted by Lessee is in, and will preserve, renew and keep in
full force and effect its corporate existence and its rights, privileges and
franchises necessary or desirable in the normal conduct of business.

SECTION 5.17 INSPECTION OF PROPERTY, BOOKS AND RECORDS. Lessee will
keep, and will cause each Subsidiary to keep, proper books or records and
accounts in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, representatives of any Participant at
such Participant's expense to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, all at
such reasonable times during normal business hours and as often as may
reasonably be desired; provided so long as no Lease Event of Default has
occurred, each such Participant shall not exercise the right of inspection
granted pursuant to this Section more than once in any consecutive twelve month
period.

SECTION 5.18 BORROWINGS. Lessee will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to UBOC or a financial institution at face value for
deposit or collection purposes only and without any fee other than fees normally
charged by the financial institution for deposit or collection services. Lessee
will not borrow any money, become contingently liable to borrow money, nor enter
any agreement to directly or indirectly obtain borrowed money, except pursuant
to agreements made with UBOC.

SECTION 5.19 LOANS, ADVANCES AND GUARANTIES. Lessee will not, except in
the ordinary course of business as currently conducted, make any loans or
advances, become a guarantor or surety, pledge its credit or properties in any
manner or extend credit except up to an aggregate maximum of $10,000,000 of
loans or extensions of credit may be made by Lessee to its Affiliates or
Subsidiaries for property, plant and equipment.

SECTION 5.20 INVESTMENTS. Lessee will not purchase the debt or
equity of another person or entity except for savings accounts and
certificates of deposit of UBOC, direct U.S. Government obligations and
commercial paper issued by corporations with the top ratings of Xxxxx'x or
Standard & Poor's, provided all such permitted investments shall mature
within one year of purchase.

SECTION 5.21 CHANGES/MERGERS. Lessee will not: change its name;
liquidate or dissolve; enter into any consolidation, merger, partnership, joint
venture or other combination; redeem, purchase, retire or otherwise acquire any
shares of any class of capital stock of Lessee in excess of Ten Million Dollars
($10,000,000); prepay any subordinated debt, debt for borrowed money, or debt
secured by any permitted Lien, or enter into or modify any agreement as a result
of which the terms of payment of any such debt are waived or modified.

SECTION 5.22 TRANSACTIONS WITH RELATED PERSONS. Lessee will not
directly or indirectly enter into any transaction with or for the benefit of
a Related Person on terms more favorable to the Related Person than would
have been obtainable in an "arms length" dealing.

SECTION 5.23 LOSSES. Lessee will not incur a cumulative net loss, after
provision for income taxes, for an amount in excess of Five Hundred Thousand
Dollars ($500,000) for any two or more consecutive fiscal quarters, nor incur a
net loss for any fiscal year.

ARTICLE VI
OTHER COVENANTS AND AGREEMENTS

SECTION 6.1 COOPERATION WITH LESSEE. Certificate Trustee, Agent and
each Participant shall, to the extent reasonably requested by Lessee (but
without assuming additional liability or obligation on account thereof), at
Lessee's expense, cooperate to allow Lessee to: (a) perform its covenants
contained in ARTICLE V including at any time and from time to time, upon the
reasonable 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 property perform such covenants, and (b) fulfill Lessee's requirements
as lessee of the Leased Property, including to file any statement with respect
to any tax abatements or other requirements. Each Participant hereby expressly
authorizes the Certificate Trustee to execute and deliver the waiver forms and
releases as may be requested by Lessee pursuant to the last sentence of Article
III of the Lease.

SECTION 6.2 RESTRICTIONS ON AND EFFECT OF TRANSFER. No Participant
shall assign, convey or otherwise transfer all or any portion of its right,
title or interest in, to or under any Note or Certificate without the prior
written consent of Agent (who may condition its approval upon the satisfaction
of any or all of the conditions of subsections (a) through (g) below), and, so
long as no Lease Event of Default exists, Lessee, except that without the prior
written consent of Agent or Lessee, (w) any Participant may pledge or encumber
its interest in all or any portion of a Note or a Certificate to another Person;
PROVIDED, that no transfer upon a foreclosure pursuant to such a pledge or
encumbrance may occur unless the other provisions of this Section are complied
with, (x) any Participant may transfer all or any portion of its interest to a
member of its Consolidated Group, (y) any Participant may transfer all or any
portion of its interest to any other existing Participant or to a Prequalified
Transferee upon compliance with SUBSECTIONS (a), (b), (c), (d), and (e) below,
and (z) any Participant may transfer its interest upon compliance with
SUBSECTIONS (a) through (e) below; and PROVIDED, FURTHER, that the restrictions
set forth in this SECTION 6.2 shall not apply to a Participation, with respect
to which SECTION 6.3 shall apply:

(a) REQUIRED NOTICE AND EFFECTIVE DATE. Upon a transfer
pursuant to which this SECTION 6.2(a) applies, the Participant desiring to
effect a transfer of all or any portion of its interest shall give written
notice of such proposed transfer to Lessee, Agent and each other Participant at
least ten (10) days prior to such proposed transfer, setting forth the name of
such proposed transferee, the percentage or interest to be retained by such
Participant, if any, and the date on which such transfer is proposed to become
effective. Any expenses incurred by the transferee in connection with the
transfer of a Participant's interest shall be borne by such transferee or the
relevant Participant, as they may determine, but shall not be considered costs
and expenses which Lessee is obligated to pay or reimburse under SECTION 9.9,
except in the case of a transfer made pursuant to SECTION 9.9(c)(v).

(b) ASSUMPTION OF OBLIGATIONS. Any transferee with respect
to a transfer to which this SECTION 6.2(b) applies shall have executed and
delivered to Certificate Trustee and Agent the investor's letter (the
"INVESTOR'S LETTER") substantially in the form of EXHIBIT K with appropriate
insertions, and from and after such date the obligations of the transferring
Participant under the Operative Documents shall be proportionately released and
reduced to the extent of such transfer. Upon any such transfer as above
provided, the transferee shall be

deemed to be bound by all obligations (whether or not yet accrued) under, and
to have become a party to, all Operative Documents to which its transferor
was a party, shall be deemed the pertinent "Participant" for all purposes of
the Operative Documents and shall be deemed to have made that portion of the
payments pursuant to this Agreement previously made or deemed to have been
made by the transferor represented by the interest being conveyed; and each
reference herein and in the other Operative Documents to the pertinent
"Participant" shall thereafter be deemed a reference to the transferee, to
the extent of such transfer, for all purposes. Upon any such transfer,
Certificate Trustee shall deliver to Agent, each "Participant" and Lessee an
amended SCHEDULE I-A and SCHEDULE I-B to the Participation Agreement, revised
to reflect the relevant information for such new Participant and the
commitment of such new Participant (and the revised Commitment of the
transferor Participant if it shall not have transferred its entire interest).

(c) EMPLOYEE BENEFIT PLANS. No Participant may make any such
assignment, conveyance or transfer to or in connection with any arrangement or
understanding in any way involving any employee benefit plan (or its related
trust), as defined in Section 3(3) of ERISA, or with the assets of any such plan
(or its related trust), as defined in Section 4975(e)(1) of the Code (other than
a governmental plan, as defined in Section 3(32) of ERISA), with respect to
which Lessee or such Participant or any of their Affiliates is a party in
interest within the meaning of ERISA or a "disqualified person" within the
meaning of the Code.

(d) REPRESENTATIONS AND WARRANTIES. Notwithstanding anything
to the contrary set forth above, no Participant may assign, convey or transfer
its interest to any Person unless such Person shall have delivered to
Certificate Trustee and Lessee a certificate (with a copy to Agent) confirming
the accuracy of the representations and warranties set forth in SECTION 4.2 of
the Participation Agreement with respect to such Person (other than as such
representation or warranty relates to the execution and delivery of Operative
Documents).

(e) FINANCIAL CONDITION OF TRANSFEREE. No transfer by a
Participant shall be effective against the other parties to this Agreement
unless the transferee represents in writing to Agent that it is: (A) a bank or
other financial institution with a combined capital, surplus and undivided
profits (or its equivalent) of at least $50,000,000, OR (B) any subsidiary of
such a bank, financial institution or corporation, PROVIDED that such bank,
financial institution or corporation furnishes a guaranty with respect to the
transferee's obligations as a Participant.

(f) TRANSFEREE INDEMNITIES. Each transferee shall be
entitled to the benefits of ARTICLE VII with respect to its Notes or
Certificates or participation in the Notes or Certificates outstanding from time
to time.

(g) FUTURE PARTICIPANTS. Each Participant by its acceptance
of its Note and/or Certificate, shall be deemed to be bound by and, upon
compliance with the applicable requirements of SECTION 6.3, will be entitled to
all of the benefits of the provisions of this Agreement.

SECTION 6.3 PARTICIPATIONS. Each Participant may sell, transfer or
assign a participation in all or a portion of the interests represented by its
Notes and Certificates or any right to payment thereunder (a "PARTICIPATION") to
any Person (a "PARTICIPATION HOLDER"). Upon any such sale by a Participant of a
Participation to a Participation Holder, such obligations under this
Participation Agreement and under the other Operative Documents shall remain
unchanged,

such Participant shall remain solely responsible for the performance thereof,
such Participant shall remain the holder of its Note and Certificate for all
purposes under this Participation Agreement and under the other Operative
Documents, and Certificate Trustee and Agent shall continue to deal solely
and directly with such Participant in connection with such Participation
Holder's rights and obligations under this Trust Agreement and under the
other Operative Documents. In connection with any Participation, the
Participant shall obtain from such Participation Holder, if such
Participation Holder is not an Affiliate, a certificate containing the
following representations and warranties from such Participation Holder:

(a) The Participation Holder satisfies one of the criteria
for a transferee in ITEMS (A), (B) or (C) of SECTION 6.2(e). It is acquiring
the Participation for its own account for investment and not with a view to any
distribution (as such term is used in Section 2(11) of the Securities Act)
thereof and if in the future it should decide to dispose of its interest in the
Participation, it understands that it may do so only in compliance with the
Securities Act and the rules and the regulations of the SEC thereunder and any
applicable state securities laws, if applicable. It is aware that the
Participation has not been registered under the Securities Act or qualified or
registered under any state or other jurisdiction's securities laws.

(b) The Participant understands and agrees that any
documentation providing for the Participation will contain a paragraph that
shall read substantially as follows:

THIS PARTICIPATION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES OR "BLUE SKY" LAW, AND MAY NOT
BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT OR
LAWS.

SECTION 6.4 COVENANTS OF CERTIFICATE TRUSTEE, AGENT AND THE
PARTICIPANTS.

(a) DISCHARGE OF LIENS. Each of the Participants covenants
as to itself, and not jointly with any other Participant, that it 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 attributable to it and will cause restitution to
be made to the Trust Estate in the amount of any diminution of the value thereof
as a result of its failure to comply with its obligations under this SECTION
6.4(a). Certificate Trustee, in its individual capacity or in its trust
capacity, will not create or permit to exist at any time, and will promptly take
such action as may be necessary duly to discharge, or to cause to be discharged,
all Lessor Liens attributable to it and will cause restitution to be made to the
Trust Estate in the amount of any diminution of the value thereof as a result of
its failure to comply with its obligations under this SECTION 6.4(a). Agent, in
its individual capacity, 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 attributable
to it and will cause restitution to be made to the Trust Estate in the amount of
any diminution of the value thereof as a result of its failure to comply with
its obligations under this SECTION 6.4(a). Notwithstanding the foregoing, none
of the Participants, Certificate Trustee, in its individual capacity or in its
trust capacity, or Agent shall 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
meaningful danger of the sale, forfeiture or loss of, and shall not interfere
with the use or disposition of, any part of the Leased Property, the Lease or
the Trust Estate or title thereto or any interest therein or the payment of
Rent;

PROVIDED, HOWEVER, that each Participant, Agent, and Certificate Trustee, in
its individual capacity or in its trust capacity, shall discharge any such
Lessor Lien attributable to it, whether or not subject to contest as provided
above, upon the purchase of the Leased Property, by Lessee pursuant to the
Lease or a sale pursuant to the Sale Option.

(b) TRUST AGREEMENT. Without prejudice to any right under
the Trust Agreement of Certificate Trustee to resign, or the Certificate
Purchasers' right under the Trust Agreement to remove Certificate Trustee, each
of the Certificate Purchasers and Certificate Trustee hereby agrees with Lessee:
(i) except as permitted by the Trust Agreement, not to terminate or revoke the
trust created by the Trust Agreement prior to the Lease Expiration Date, (ii)
not to amend, supplement, terminate or revoke or otherwise modify any provision
of the Trust Agreement prior to the Lease Expiration Date in such a manner as to
materially and adversely affect the rights of any such party, (iii) except as
otherwise expressly authorized under the Operative Documents, not to withdraw
from the Trust Estate any funds other than amounts payable to it by Certificate
Trustee as distributions of Basic Rent and Supplemental Rent without the prior
written consent of each such party and (iv) to comply with all of the terms of
the Trust Agreement applicable to it the nonperformance of which would adversely
affect such party.

(c) SUCCESSOR CERTIFICATE TRUSTEE. Certificate Trustee or
any successor may resign or be removed by the Certificate Purchasers as
Certificate Trustee, a successor Certificate Trustee may be appointed, and a
corporation may become Certificate Trustee under the Trust Agreement, only in
accordance with the provisions of ARTICLE IV of the Trust Agreement.

(d) INDEBTEDNESS; OTHER BUSINESS. Certificate Trustee on
behalf of the Trust shall not contract for, create, incur or assume any
indebtedness, or enter into any business or other activity, other than pursuant
to or under and in accordance with the Operative Documents and, for the benefit
of Lessee, agrees to be bound by Section 1.2(b) of the Trust Agreement.

(e) CHANGE OF PRINCIPAL PLACE OF BUSINESS. Certificate
Trustee shall give prompt notice to the Participants and Lessee, if Certificate
Trustee's principal place of business or chief executive office, or the office
where the records concerning the accounts or contract rights relating to the
Leased Property or the Overall Transaction are kept, shall cease to be located
at its address in Los Angeles, California set forth on SCHEDULE II or if it
shall change its name or identity.

(f) DEPRECIATION. Prior to the Lease Expiration Date,
neither Certificate Trustee nor any Participant shall claim any federal or state
tax attributes or benefits (including depreciation) relating to the Leased
Property unless required to do so by an appropriate taxing authority or after a
clearly applicable change in Applicable Laws or as a protective response to a
proposed adjustment by an Authority; PROVIDED, HOWEVER, that if an appropriate
taxing authority shall require Certificate Trustee or any Participant to claim
any such federal or state tax attributes or benefits, such Person shall promptly
notify Lessee thereof and shall permit Lessee to contest such requirement in a
manner similar to the contest rights provided in, and subject to any applicable
limitation to a context contained in, SECTION 7.2(b).

(g) ADDITIONAL COVENANTS. Other than distributions
specifically permitted by the Loan Agreement and Trust Agreement, Certificate
Trustee shall not make any distributions.

SECTION 6.5. ENFORCEMENT OF REMEDIES. Notwithstanding any provision in
any Operative Document to the contrary, no Participant shall exercise, or
attempt to exercise any cause of action or remedy against Lessee, Certificate
Trustee, UBOC, in its individual capacity, or any Affiliate of any thereof
(including any right of setoff, banker's lien, or the like), against any deposit
account or property of the Lessee or any of its Affiliates held or maintained by
such Participant without the prior written consent of the Agent at the written
direction of the Required Participants.

ARTICLE VII
INDEMNIFICATION

SECTION 7.1. GENERAL INDEMNIFICATION. Lessee agrees, whether or not
any of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee from and against any and all Claims that may be imposed on,
incurred by or asserted against such Indemnitee (whether because of action or
omission by such Indemnitee or otherwise), whether or not such Indemnitee
shall also be indemnified as to any such Claim by any other Person and
whether or not such Claim arises or accrues prior to the Document Closing
Date, the Advance Date or after the Lease Expiration Date, in any way
relating to or arising out of: (a) any of the Operative Documents or any of
the transactions contemplated thereby or any investigation, litigation or
proceeding in connection therewith, and any amendment, modification or waiver
in respect thereof; or (b) the Leased Property or any part thereof or
interest therein; or (c) the acquisition, mortgaging, design, construction,
preparation, installation, inspection, delivery, non-delivery, acceptance,
rejection, purchase, ownership, possession, rental, lease, sublease,
repossession, maintenance, repair, alteration, modification, addition or
substitution, storage, transfer or title, redelivery, use financing,
refinancing, operation, condition, sale (including any sale or other transfer
pursuant to Articles XIV, XX or XXI of the Lease), return or other
disposition of all or any part of any interest in the Leased Property or the
imposition of any Lien (or incurring of any liability to refund or pay over
any amount as a result of any Lien) thereon, including: (i) Claims or
penalties arising from any violation of law or in tort (strict liability or
otherwise), (ii) loss of or damage to the environment (including
investigation costs, cleanup costs, response costs, remediation and removal
costs, costs of corrective action, costs of financial assurance, and all
other damages, costs, fees and expenses, fines and penalties, including
natural resource damages), or death or injury to any Person, and all expenses
associated with the protection of wildlife, aquatic species, vegetation,
flora and fauna, and any mitigative action required by or under any
Environmental Laws, (iii) latent or other defects, whether or not
discoverable, (iv) any Claims resulting from the existence or Release of any
Hazardous Materials at or from the Leased Property, and (v) any Claim for
patent, trademark or copyright infringement; (d) the offer, issuance, sale,
transfer or delivery of the Notes or Certificates; (e) the breach or alleged
breach by Lessee of any representation or warranty made by it or deemed made
by it in any Operative Document; (f) the transactions contemplated hereby or
by any other Operative Document, in respect of the application of Parts 4 and
5 of Subtitle B of Title I of ERISA and any prohibited transaction described
in Section 4975(c) of the Code, (g) any repayment or refinancing of the
Loans, (h) any Claim of Sellers or any third party arising with any
obligation undertaken by Lessor under the Acquiition Documents, including (i)
any claim by the Seller under the Montpelier Acquisition Agreement that the
tax treatment such Seller desired was not available or was adversely affected
by any action or failure to act of Lessor, Agent or any Participant, or (ii)
any claim related in any way to the capital stock of Lessee issued to such
Seller under the

Montpelier Acquisition Agreement, including, without limitation, the
issuance, sale or conveyance of such capital stock, or (i) any other
agreement entered into or assumed by Lessee in connection with the Leased
Property (including, in connection with each of the matters described in this
SECTION 7.1 to which this indemnity shall apply, matters based on or arising
from the negligence of any Indemnitee); PROVIDED, HOWEVER, Lessee shall not
be required to indemnify under this SECTION 7.1 for (1) as to an Indemnitee,
any Claim to the extent resulting from the willful misconduct or gross
negligence of such Indemnitee (or, with respect to Certificate Trustee or
Agent only, the negligent mishandling of funds) (it being understood that no
Indemnitee shall be deemed to be negligent, grossly negligent or to have
acted with wilful misconduct, and the parties acknowledge that this indemnity
shall apply fully, in connection with any Claim of Sellers for a breach or
liability of the Acquisition Documents if Certificate Trustee fails to
purchase the Leased Property upon the failure of any condition set forth in
ARTICLE III), (2) any Claims in respect of Taxes (such Claims to be subject
to SECTION 7.2), other than a payment necessary to make payments under this
SECTION 7.1 on an after-tax basis; PROVIDED, that the exclusion set forth in
this CLAUSE (2) does not apply to any taxes or penalties included in Claims
against which the Indemnitee is provided an indemnification under CLAUSE (f)
of this SECTION 7.1, (3) as to any Indemnitee, any Claim resulting from
Lessor Liens which such Indemnitee is responsible for discharging under the
Operative Documents, (4) as to any Indemnitee, any Claim to the extent
resulting from any written misrepresentation, breach of written warranty or
breach of written covenant by such Indemnitee, and (5) as to any Indemnitee,
any Claim against such Indemnitee by another Indemnitee if such Claim is not
related or connected in any way with any action, inaction, breach or omission
of or caused by Lessee or its Affiliates or any Claim by or against Lessee or
its Affiliates or for which Lessee is otherwise liable under the Operative
Documents.

SECTION 7.2. GENERAL TAX INDEMNITY.

(a) TAX INDEMNITY. Lessee shall pay on an after-tax basis,
and on written demand shall indemnify and hold each Indemnitee harmless from and
against, any and all Taxes, howsoever imposed, on or with respect to any
Indemnitee, the Leased Property or any portion thereof, any Operative Document
or Lessee or any sublessee or user of the Leased Property, by the United States
or by any state or local government or other taxing authority in the United
States, or by any taxing authority outside the United States, in connection with
or in any way relating to: (i) the acquisition, mortgaging, design,
construction, preparation, installation, inspection, delivery, non-delivery,
acceptance, rejection, purchase, ownership, possession, rental, lease, sublease,
repossession, maintenance, repair, alteration, modification, addition or
substitution, storage, transfer of title, redelivery, use, financing,
refinancing, operation, condition, purchase, repurchase, sale, return or other
application or disposition of all or any part of the Leased Property or the
imposition of any Lien (or incurrence of any liability to refund or pay over any
amount as a result of any Lien) thereon, (ii) Basic Rent or Supplemental Rent or
the receipts or earnings arising from or received with respect to the Leased
Property or any part thereof, or any interest therein or any applications or
dispositions thereof, (iii) any other amount paid or payable pursuant to the
Certificates or any other Operative Documents, the property or the income or
other proceeds with respect to the property held in the Trust Estate, (iv) the
Leased Property or any part thereof or any interest therein, (v) all or any of
the Operative Documents, any other documents contemplated thereby and any
amendments and supplements thereto, and (vi) otherwise with respect to or in
connection with the transactions described in the Operative Documents or the
enforcement thereof; PROVIDED, HOWEVER, that the indemnification obligation of
this first sentence of SECTION 7.2(a) shall not apply to (1) Taxes which are
based upon or

measured by the Indemnitee's net income (except (x) that Lessee shall pay or
reimburse, and indemnify and hold harmless, any Indemnitee which is not
incorporated under the laws of the United States, or a state thereof, and
which has complied with SECTION 7.3, from any deduction or withholding of any
United States Federal income tax, and (y) to the extent necessary that
payments under this SECTION 7.2 are made to an Indemnitee on a grossed-up
basis within the meaning of SECTION 7.6, and (z) Lessee shall pay or
reimburse and indemnify and hold Indemnitee harmless against taxes imposed by
a state taxing jurisdiction solely as a result of: (A) the operating,
registration, location, presence or use of the Leased Property or any part
thereof in such jurisdiction, or (B) the place of incorporation, principal
office, corporate domicile or the activities of Lessee in such jurisdiction),
(2) Taxes characterized under local law as franchise, net worth, or
shareholder's capital (excluding, however, any value-added, sales, use,
rental, license, property or similar Taxes); (3) Taxes based upon the
voluntary transfer, assignment or disposition by Lessor or any Participant of
any interest in the Leased Property (other than a transfer pursuant to the
exercise of remedies under the Operative Documents, transfers pursuant to the
exercise of the Sale Option or Purchase Option, a transfer to Lessee or
otherwise pursuant to the Lease); and (4) Taxes imposed on an Indemnitee to
the extent that such Taxes would not have been imposed on such Indemnitee but
for the willful misconduct or gross negligence of such Indemnitee. Lessee
shall pay or reimburse and indemnify and hold harmless any Indemnitee for any
Taxes or any increase in Taxes imposed on such Indemnitee net of any decrease
in Taxes realized by such Indemnitee, to the extent that such tax increase or
decrease would not have occurred if on the Advance Date the Participant had
advanced funds to Lessee in the form of a loan to Lessee secured by the
Leased Property in an amount equal to the Advance funded on such date, with
the interest component of debt service for such loan equal to the Basic Rent
payable on each scheduled Payment Date and a principal balance at the
maturity of such loan in an amount equal to the then outstanding amount of
the Certificate Amounts and Loans at the end of the term of the Lease.

(b) CONTESTS. Lessee shall pay on or before the time or
times prescribed by law any Taxes (except any Taxes excluded by the proviso to
SECTION 7.2(a)). If any claim or claims is or are made against any Indemnitee
solely for any Tax which is subject to indemnification as provided in
SECTION 7.2(a), Indemnitee shall as soon as practicable, but in no event more
than 30 days after receipt of formal written notice of the Tax or proposed
Tax, notify Lessee and if, in the reasonable opinion of Lessee and (in the
case of any Tax which may reasonably be expected to exceed $50,000 in the
aggregate) tax counsel acceptable to the Indemnitee, there exists a
reasonable basis to contest such Tax which satisfies the requirements of ABA
Formal Opinion 85-352 (and if the PROVISOS of the definition of "Permitted
Contest" continue to be satisfied and so long as no Lease Event of Default
exists), Lessee at its expense may, to the extent permitted by applicable
law, contest such Tax, in the appropriate administrative and legal forums;
PROVIDED, that in all other circumstances, upon notice from Lessee to such
Indemnitee that there exists a reasonable basis to contest any such Tax which
satisfies the requirements of ABA Formal Opinion 85-352 (as supported by an
opinion of tax counsel to Lessee reasonably acceptable to the Indemnitee),
the Indemnitee, at Lessee's expense, shall contest any such Tax (so long as
the PROVISOS of the definition of "Permitted Contest" continue to be
satisfied and so long as no Lease Event of Default exists). Lessee shall pay
all expenses incurred by the Indemnitee in contesting any such Tax (including
all reasonable attorneys' and accountants' fees, including the reasonable
allocated costs of internal counsel), upon demand by the Indemnitee. Lessee
shall have the right to participate in the conduct of any proceedings
controlled by the Indemnitee to the extent that such participation by such
Person does not interfere with the Indemnitee's control of such contest and
Lessee shall in

all events be kept informed, to the extent practicable, of material
developments relative to such proceedings. The Indemnitee shall have the
right to participate in the conduct of any proceedings controlled by Lessee
and the Indemnitee shall in all events be kept informed, to the extent
practicable, of material developments relative to such proceedings. The
Indemnitees agree that a contested claim for which Lessee would be required
to make a reimbursement payment hereunder will not be settled or compromised
without Lessee's prior written consent (which consent shall neither be
unreasonably delayed nor withheld), unless the PROVISOS of the definition of
"Permitted Contest" would not continue to be satisfied. Indemnitee shall
endeavor to settle or compromise any such contested claim in accordance with
written instructions received from Lessee; PROVIDED, that (x) Lessee on or
before the date the Indemnitee executes a settlement or compromise pays the
contested Tax to the extent agreed upon or makes an indemnification payment
to the Indemnitee in an amount acceptable to the Indemnitee; and (y) the
settlement or compromise does not, in the reasonable opinion of the
Indemnitee materially adversely affect the right of Lessor or such Indemnitee
to receive Rent or the Lease Balance or any other payment pursuant to the
Operative Documents, or involve a material risk of sale, forfeiture or loss
of the Leased Property or any interest therein or any matter described in the
PROVISOS to the definition of "Permitted Contest". The failure of an
Indemnitee to contest timely a claim against such Indemnitee for any Tax
which is subject to indemnification under SECTION 7.2(a) and for which such
Indemnitee has an obligation to Lessee to contest under this SECTION 7.2(b)
in the manner required by Applicable Laws where Lessee has timely requested
that such Indemnitee contest such claim shall relieve Lessee of its
obligations to such Indemnitee under SECTION 7.2(a) with respect to such
claim only to the extent such failure results in the loss of an effective
contest. If Applicable Laws require the payment of a contested Tax as a
condition to, or regardless of, its being contested, and Lessee chooses to
contest such Tax or to direct the Indemnitee to contest such Tax in
accordance with this Section, then Lessee shall provide the Indemnitee with
the funds to pay such Tax, such provision of funds to be deemed a
non-interest bearing loan by Lessee to the Indemnitee to be repaid by any
recovery of such Tax from such contest and any remaining unpaid amount not
recovered to offset Lessee's obligation to indemnify the Indemnitee for such
Tax. Lessee shall indemnify the Indemnitee on a grossed-up basis in
accordance with SECTION 7.6 for and against any adverse consequences of any
such interest-free loan. If the Indemnitee receives a refund (or like
adjustment) in respect of any Tax for which the Indemnitee has been
reimbursed by Lessee, the Indemnitee shall promptly remit the amount of such
refund (or like adjustment) to Lessee, net of all costs and expenses incurred
by such Indemnitee; PROVIDED, HOWEVER, that the Indemnitee shall not be
required to remit any amount pursuant to this sentence in excess of the
amounts previously paid by Lessee to, or on behalf of, such Indemnitee with
respect to such Tax pursuant to this ARTICLE VII.

(c) PAYMENTS. Any Tax indemnifiable under SECTION 7.2(a)
shall be paid by Lessee directly when due to the applicable taxing authority
if direct payment is practicable and permitted. If direct payment to the
applicable taxing authority is not permitted or is otherwise not made, any
amount payable to an Indemnitee pursuant to SECTION 7.2(a) shall be paid
within thirty (30) days after receipt of a written demand therefor from such
Indemnitee accompanied by a written statement describing in reasonable detail
the amount so payable, but not before the date that the relevant Taxes are
due. Any payments made pursuant to SECTION 7.2(a) directly to the Indemnitee
entitled thereto or Lessee, as the case may be, shall be made in immediately
available funds at such bank or to such account as specified by the payee in
written directions to the payor, or, if no such direction shall have been
given, by check of the payor payable to the order of the payee by certified
mail, postage prepaid at its address as set forth in this Participation
Agreement. Upon the request of any Indemnitee with respect to a Tax that
Lessee

is required to pay, Lessee shall furnish to such Indemnitee the original or a
certified copy of a receipt for Lessee's payment of such Tax or such other
evidence of payment as is reasonably acceptable to such Indemnitee.

(d) REPORTS. If any report, return or statement is required
to be filed with respect to any Taxes that are subject to indemnification
under SECTION 7.2(a), Lessee shall, if Lessee is permitted by Applicable
Laws, timely prepare and file such report, return or statement; PROVIDED,
HOWEVER, that if Lessee is not permitted by Applicable Laws to file any such
report, return or statement, Lessee will promptly so notify the appropriate
Indemnitee, in which case the Indemnitee, at Lessee's expense, may file any
such report after preparation thereof by Lessee.

SECTION 7.3. WITHHOLDING TAX EXEMPTION. At least five (5) Business
Days prior to the first date on which any payment is due under any Note or
Certificate for the account of any Participant not organized or incorporated
under the laws of the United States or a state thereof, such Participant
agrees that it will have delivered to each of Lessee, Certificate Trustee and
Agent, two duly completed copies of United States Internal Revenue Service
Form 1001 or 4224, certifying in either case that such Participant is
entitled to receive payments of interest or Yield, as applicable under the
Operative Documents without deduction or withholding of any United States
Federal income taxes. Each Participant which so delivers a Form 1001 or 4224
further undertakes to deliver to each of Lessee, Certificate Trustee, and
Agent, two additional copies of such form (or a successor form) on or before
the date that such form expires (currently, three successive calendar years
for Form 1001 and one calendar year for Form 4224) or becomes obsolete or
after the occurrence of any event requiring a change in the most recent forms
so delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by Lessee, Certificate Trustee and
Agent, in each case certifying that such Participant is entitled to receive
payments of interest or Yield, as applicable, under the Operative Documents
without deduction or withholding of any United States Federal income taxes,
unless an event (including any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent
such Participant from duly completing and delivering any such form with
respect to it and such Participant advises Lessee, Agent and Certificate
Trustee that it is not capable of receiving payments without any withholding
of United States Federal income tax.

SECTION 7.4. INCREASED COSTS. If any change in, adoption,
effectiveness, interpretation, reinterpretation or phase-in of, any law or
regulation, directive, guideline, decision or request (whether or not having
the force of law) of any court, central bank, regulator or other Authority
("CHANGE IN LAW") imposes, modifies, affects or deems applicable any reserve,
special deposit, capital adequacy or other requirement required or expected
to be maintained by any Participant directly or by its parent company or by
its principal bank Affiliate (including any reserve requirements specified
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System and then applicable to assets or liabilities
consisting of and including "Eurocurrency Liabilities" as defined in
Regulation D of such Board of Governors), or shall impose on any Participant
or its principal bank Affiliate (or the LIBOR Office of either) or on the
London interbank market any other condition or any tax, duty or other charge
with respect to or otherwise affecting the maintenance of its Loan principal
or Certificate Amounts on a LIBO Rate basis, and such Participant determines
(in its sole and absolute discretion) that the rate of return on its, its
parent's or its principal bank Affiliate's capital as a consequence of the
Funding made by such Participant hereunder to pay its share of the Advance is
reduced to a level below

that which such Participant, principal bank Affiliate or parent could have
achieved but for the occurrence of any such circumstances, then, in any such
case, upon written notification from time to time by such Participant to
Certificate Trustee and Lessee, Lessee shall, within fifteen (15) days
following receipt of the statement referred to in the next sentence, pay to
Certificate Trustee, as Supplemental Rent, additional amounts sufficient to
compensate such Participant or its parent for such reduction in rate of
return (on an after-tax basis), which amounts shall thereupon be paid
directly by Certificate Trustee to such Participant. A statement of a
Participant as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall, in the absence of manifest
error, be conclusive and binding on Lessee, provided that such calculations
are made in good faith. In determining such amount, each Participant shall
use any method of averaging or attribution that it (in its reasonable
discretion) shall deem applicable. Each Participant will notify Lessee, as
soon as practicable after it has Actual Knowledge thereof, of any event
occurring after the date hereof that would entitle such Participant to
compensation pursuant to this SECTION 7.4; PROVIDED, HOWEVER that so long as
the foregoing notice is provided to Lessee within ninety (90) days after such
Participant has obtained Actual Knowledge thereof, any failure to provide
earlier notice shall not affect such Participant's rights to such
compensation and shall not relieve Lessee of its obligations hereunder; and
provided, further, that in all events such Participant shall be entitled to
whatever compensation it is otherwise entitled to hereunder from the date it
provides notice of any event entitling such Participant to compensation
pursuant to this SECTION 7.4.

Each Participant shall use reasonable efforts (including reasonable
efforts to change its LIBOR Office) to avoid or minimize any amounts which
might otherwise be payable pursuant to this SECTION 7.4; PROVIDED, HOWEVER,
that such efforts shall not be deemed by such Participant, in its good faith
determination, to be disadvantageous to it. If such efforts are insufficient
to avoid or minimize such amounts that might be payable pursuant to this
SECTION 7.4, then such Participant (the "AFFECTED PARTICIPANT") shall use its
reasonable efforts to transfer to any other Participant (which itself is not
then an Affected Participant) its Notes and Certificates in compliance with
the restrictions on transfer in this Agreement; PROVIDED, HOWEVER, that such
transfer shall not be deemed by such Affected Participant, in its good faith
determination, to be disadvantageous to it (other than the economic
disadvantage of ceasing to be a Participant). If the Affected Participant is
unable so to transfer its rights and obligations, Lessee may designate an
alternate financial institution to purchase the Affected Participant's Notes
and Certificates and, subject to the provisions of SECTIONS 7.5 and 6.3, the
Affected Participant shall transfer its rights and obligations to such
alternate financial institution and such alternate financial institution
shall become a Participant hereunder; PROVIDED that the reasonable costs of
such transfer to either another Participant or an alternate financial
institution shall be borne by Lessee.

SECTION 7.5. FUNDING LOSSES. Lessee shall pay to Certificate
Trustee, as Supplemental Rent, such amounts as may be necessary to reimburse
any Participant for any loss or reasonable expense (including any
administration costs) incurred (including any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by such Participant to make, continue or maintain any portion of its
investment in any Note or Certificate on a LIBO Rate basis) as a result of:
(i) the failure of the Advance Date to occur on the date specified therefor
in the Advance Request, or (ii) any payment of all or any portion of the
Lease Balance for any reason on a date other than a Payment Date, including
by reason of acceleration (the amount of such loss or expense is called the
"BREAK FUNDING AMOUNT"). Any Participant shall promptly notify Certificate
Trustee and Agent in writing of the amount of any claim under this SECTION 7.5,
the reason or reasons therefor and the additional amount required

fully to compensate such Participant for such loss or expense. Such written
notice (which shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on Lessee, provided such
calculations are made in good faith.

SECTION 7.6. GROSS UP. If an Indemnitee shall not be entitled to a
corresponding and equal deduction with respect to any payment or Tax which
Lessee is required to pay or reimburse under any other provision of this
ARTICLE VII (each such payment or reimbursement under this ARTICLE VII, an
"original payment") and which original payment constitutes income to such
Indemnitee when accrued or received, then Lessee shall pay to such Indemnitee
on demand the amount of such original payment on a grossed-up basis such
that, after subtracting all Taxes imposed on such Indemnitee with respect to
such grossed-up payment by Lessee (including any Taxes otherwise excluded by
SECTION 7.2(b) and assuming for this purpose that such Indemnitee was subject
to taxation at the highest Federal and applicable, state and local marginal
rates applicable to widely held for-profit corporations for the year in which
such income is taxable and at an assumed state and local income tax rate of
12.8%) such amount (i.e., the grossed-up payment minus the taxes thereon)
shall be equal to the original payment to be received or reimbursed (net of
any credits, deductions or other tax benefits then actually recognized that
arise from the payment by such Indemnitee of any amount, including taxes, for
which the payment to be received is made).

SECTION 7.7. LIBO RATE ILLEGAL, UNAVAILABLE OR IMPRACTICABLE.

(a) If at any time:

(i) any Participant shall determine in good faith (which
determination shall, upon notice thereof to Lessee, be conclusive and
binding on Lessee) that:

(A) a Change in Law makes it unlawful, or the central
bank or other Authority asserts that it is unlawful, for such
Participant or its principal bank Affiliate to make, continue or
maintain any amount of such Participant's investment in the Notes
or Certificates on a LIBO Rate basis, or

(B) deposits in Dollars (in the applicable amounts)
are not being offered to such Participant or its principal bank
Affiliate in the relevant market for the applicable Payment
Period, or that, by reason of circumstances affecting the
interbank Eurodollar market, adequate and reasonable means do not
exist for ascertaining the applicable LIBO Rate, OR

(ii) Agent determines in good faith (which determination shall,
upon notice thereof to Lessee, be conclusive and binding upon Lessee)
that the LIBO Rate, as determined by Agent, will not adequately and
fairly reflect the cost to any Participant or its principal bank
Affiliate of maintaining or funding its investments for the applicable
Payment Period, or that the making or funding of such Participant's
investment hereunder on a LIBO Rate basis has become impracticable as a
result of an event occurring after the date of this Lease which in the
opinion of such Participant materially changes such investment, or

(iii) A Loan Event of Default shall have occurred and be continuing,

then the obligations of such Participant to make, continue or maintain any
such investment shall, upon such determination, forthwith be suspended until
such Participant shall notify Lessee that such circumstances no longer exist,
and all Basic Rent (or interest and Yield) allocable to such Participant
shall automatically be determined on an Alternate Base Rate basis beginning
on the next immediately succeeding Payment Date with respect thereto or
sooner, if required by such law, assertion or determination.

(b) During such time as the Alternate Base Rate determined by
reference to the Reference Rate applies to any of the Notes or Certificates,
interest in respect of such Notes and Yield in respect of such Certificates
shall be calculated on the basis of a 365 (or 366, as applicable) day year and
the actual days elapsed. During such time as the Alternate Base Rate determined
by reference to the Federal Funds Effective Rate applies to any of the Notes or
Certificates, interest in respect of such Notes and Yield in respect of such
Certificates shall be calculated on the basis of a 360-day year, the actual days
elapsed and the Applicable Margin.

SECTION 7.8. LEASED PROPERTY INDEMNITY. In the event that (a)
Lessee elects the Sale Option; and (b) after paying to Certificate Trustee,
for the benefit of the Participants, any amounts due under Article XXI of the
Lease, the Lease Balance shall not have been reduced to zero, then Lessee
shall promptly pay over to Lessor on the Lease Expiration Date the shortfall
unless Lessee delivers a report from an Appraiser using appraisal methods
satisfactory to the Required Participants, which establishes that the reasons
for the actual Fair Market Value of the Leased Property as of the Lease
Expiration Date being less than the Fair Market Value anticipated for such
date in the Appraisal delivered pursuant to SECTION 3.1(h) was not due to any
of the following events, circumstances or conditions, whether or not
permitted under the Lease (i) the failure to maintain and use the Leased
Property or any portion thereof as required by the Lease and the other
Operative Documents, and to keep the Leased Property or any portion thereof
in at least as good a condition as it was in on the Advance Date, ordinary
wear and tear excepted; (ii) the carrying out of or the failure to undertake
any modifications, improvements or alterations whether or not permitted
pursuant to the Operative Documents; (iii) the existence of any environmental
condition at or affecting the Leased Property whether or not such condition
existed on the Advance Date; (iv) any defect, exception, easement,
restriction or other encumbrance on or title to for the Leased Property or
any portion thereof whether or not created or existing on the Advance Date;
(v) the dependence of the Leased Property on any improvement or facility not
fully located on the Leased Property; (vi) the existence of any sublease of
the Leased Property or any portion thereof, whether or not permitted under
the Operative Documents; or (vii) any other cause or condition within the
power of Lessee to control or affect other than ordinary wear and tear.

SECTION 7.9. ENVIRONMENTAL INDEMNITY. Without limitation of the
other provisions of this ARTICLE VII, Lessee hereby agrees to indemnify, hold
harmless and defend each Indemnitee from and against any and all Claims
(including third party claims for personal injury or real or personal
property damage), losses, damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including informal proceedings) and
orders, judgments, remedial action, requirements, enforcement actions of any
kind, and all reasonable and documented costs and expenses incurred in
connection therewith (including reasonable and documented attorneys' and/or
paralegals' fees and expenses), including all costs incurred in connection
with any investigation or monitoring of Leased Property conditions or any
clean-up, remedial, removal or restoration work by any federal, state or
local government agency, arising in whole or in part, out of

(a) the presence on, under or around the Leased Property or
any portion thereof of any Hazardous Materials, or any releases or
discharges of any Hazardous Materials on, under, from, onto or around
the Leased Property or any portion thereof,

(b) any activity, including construction, carried on or
undertaken on or off the Leased Property or any portion thereof, and
whether by Lessee or any of its Affiliates or any predecessor in title
or any employees, agents, sublessees, contractors or subcontractors of
Lessee, any of its Affiliates or any predecessor in title, or any
other Persons (including such Indemnitee), in connection with the
handling, treatment, removal, storage, decontamination, clean-up,
transport or disposal of any Hazardous Materials that at any time are
located or present on, under or around or that at any time migrate,
flow, percolate, diffuse or in any way move onto or under the Leased
Property or any portion thereof,

(c) loss of or damage to any property or the environment arising
from or in any way related to the Leased Property or Lessee or any of
its Affiliates (including clean-up costs, response costs, remediation
and removal costs, cost of corrective action, costs of financial
assurance, fines and penalties and natural resource damages), or death
or injury to any Person, and all expenses associated with the protection
of wildlife, aquatic species, vegetation, flora and fauna, and any
mitigative action required by or under Environmental Laws, in each case
arising from or in any way related to the Leased Property, Lessee, any
of its Affiliates or the Overall Transaction or any portion thereof,

(d) any claim concerning lack of compliance with Environmental
Laws, or any act or omission causing an environmental condition that
requires remediation or would allow any Authority to record a Lien
against the Leased Property or any portion thereof, or

(e) any residual contamination on or under any of the Leased
Property, or affecting any natural resources, and any contamination of
any property or natural resources arising in connection with the
generation, use, handling, storage, transport or disposal of any such
Hazardous Materials, in each case arising from or in any way related to
the Leased Property, Lessee, any of its Affiliates, or the Overall
Transaction or any portion thereof, and irrespective of whether any of
such activities were or will be undertaken in accordance with applicable
laws, regulations, codes and ordinances;
PROVIDED, HOWEVER, that Lessee shall not be required to indemnify any Indemnitee
under this SECTION 7.9 for any Claim to the extent resulting from the willful
misconduct or gross negligence of such Indemnitee.

ARTICLE VIII
AGENT

SECTION 8.1. APPOINTMENT OF AGENT; POWERS AND AUTHORIZATION TO TAKE
CERTAIN ACTIONS.

(a) Each Participant irrevocably appoints and authorizes
Agent, to act as its agent hereunder, with such powers as are specifically
delegated to Agent by the terms hereof, together with such other powers as are
reasonably incidental thereto. Each Participant authorizes and directs Agent
to, and Agent agrees for the benefit of the Participant, that, on the Document
Closing Date and each Advance Date it will accept the documents described in
ARTICLE III. Agent accepts the agency hereby created applicable to it and
agrees to receive all

payments and proceeds pursuant to the Operative Documents and disburse such
payments or proceeds in accordance with the Operative Documents. Agent shall
have no duties or responsibilities except those expressly set forth in the
Loan Agreement and this Participation Agreement. Agent shall not be
responsible to any Participant (or to any other Person): (i) for any
recitals, statements, representations or warranties of any party contained in
the Loan Agreement, this Participation Agreement, or in any certificate or
other document referred to or provided for in, or received by any of them
under, the Operative Documents, other than the representations and warranties
made by Agent in SECTION 4.4, or (ii) for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Mortgaged Property or the
title thereto (subject to Agent's obligations under SECTION 4.4) or of the
Loan Agreement or any other document referred to or provided for therein or
(iii) for any failure by any Lessee, Lessor or any other third party (other
than Agent) to perform any of its obligations under any Operative Document.
Agent may employ agents, trustees or attorneys-in-fact, may vest any of them
with any property, title, right or power deemed necessary for the purposes of
such appointment and shall not be responsible for the negligence or
misconduct of any of them selected by it with reasonable care. Except as
provided for at SECTION 8.1(c) below, neither Agent nor any of its directors,
officers, employees or agents shall be liable or responsible for any action
taken or omitted to be taken by it or them hereunder, or in connection
herewith.

(b) Agent shall not have any duty or obligation to manage,
control, use, operate, store, lease, sell, dispose of or otherwise deal with
the Leased Property, any Mortgaged Property or any lease, or to otherwise
take or refrain from taking any action under, or in connection with, this
Participation Agreement or any related document to which Agent is a party,
except as expressly provided by the terms hereof, and no implied duties of
any kind shall be read into any Operative Document against Agent. The
permissive right of Agent to take actions enumerated in this Participation
Agreement or any other Operative Document shall never be construed as a duty,
unless Agent is instructed or directed to exercise, perform or enforce one or
more rights by the Required Participants (provided that Agent has received
indemnification reasonably satisfactory to it). Subject to SECTION 8.1(c)
below, no provision of the Operative Documents shall require Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its obligations under the Operative Documents, or in
the exercise of any of its rights or powers thereunder. It is understood and
agreed that the duties of Agent are ministerial in nature.

(c) Except as specifically provided herein, Agent is acting
hereunder solely as agent and, except as specifically provided herein, is not
responsible to any party hereto in its individual capacity, except with
respect to any claim arising from Agent's gross negligence or willful
misconduct, or its negligence in the handling of funds or any breach of a
representation or covenant made in its individual capacity.

(d) Agent may accept deposits from, lend money to and
otherwise deal with Lessee or any of its Affiliates with the same rights as
it would have if it were not the named Agent hereunder.

SECTION 8.2. RELIANCE. Agent may rely upon, and shall not be bound
or obligated to make any investigation into the facts or matters stated in,
any certificate, notice or other communication (including any communication
by telephone, telecopy, telex, telegram or cable) reasonably believed by it
to be genuine and correct and to have been made, signed or sent by or on
behalf of the proper Person or Persons, and upon advice and statements of
legal counsel,

independent accountants and other experts selected by Agent with due care
(including any expert selected by Agent to aid Agent in any calculations
required in connection with its duties under the Operative Documents).

SECTION 8.3 ACTION UPON INSTRUCTIONS GENERALLY. Subject to SECTIONS
8.4 and 8.6, upon written instructions of the Required Participants, Agent
shall, on behalf of the Participants, give such notice or direction, exercise
such right, remedy or power hereunder or in respect of the Leased Property,
and give such consent or enter into such amendment to any document to which
it is a party as Agent as may be specified in such instructions. Agent shall
deliver to each Participant and to the Certificate Trustee a copy of each
notice, report and certificate received by Agent pursuant to the Operative
Documents. Agent shall have no obligation to investigate or determine
whether there has been a Lease Event of Default or a Lease Default. Agent
shall not be deemed to have notice or knowledge of a Lease Event of Default
or Lease Default unless a Responsible Officer of Agent is notified in writing
of such Lease Event of Default or Lease Default; PROVIDED that Agent shall be
deemed to have been notified in writing of any failure of Lessee to pay Rent
in the amounts and at the times set forth in Article IV of the Lease. If
Agent receives notice of a Lease Event of Default, Agent shall give prompt
notice thereof, at Lessee's expense, to each Participant. Subject to
SECTIONS 8.4, 8.6 and 9.5, Agent shall take action or refrain from taking
action with respect to such Lease Event of Default as directed by the
Required Participants or, in the case of a Payment Default, as directed by
any Participant; PROVIDED that, unless and until Agent receives such
directions, Agent may refrain from taking any action with respect to such
Lease Event of Default or Payment Default. Prior to the date the Lease
Balance shall have become due and payable by acceleration pursuant to Section
17.1 of the Lease, the Required Participants may deliver written instructions
to Agent to waive, and Agent shall waive pursuant thereto, any Lease Event of
Default and its consequences; PROVIDED that in the absence of written
instructions from all Participants, Agent shall not waive any: (i) Payment
Default or (ii) covenant or provision which, under SECTION 9.5, cannot be
modified or amended without the consent of all Participants. As to any
matters not expressly provided for by this Participation Agreement, Agent
shall in all cases be fully protected in acting, or in refraining from
acting, hereunder in accordance with instructions signed by the Required
Participants and such instructions of the Required Participants and any
action taken or failure to act pursuant thereto shall be binding on each
Participant.

SECTION 8.4 INDEMNIFICATION. Each Participant shall reimburse and
hold Agent harmless, ratably in accordance with its Commitment at the time
the indemnification is required to be given, (but only to the extent that any
such indemnified amounts have not in fact been paid to Agent by, or on behalf
of, Lessee in accordance with SECTION 7.1) from any and all claims, losses,
damages, obligations, penalties, liabilities, demands, suits, judgments, or
causes of action, and all legal proceedings, and any reasonable costs or
expenses in connection therewith, including allocated charges, costs and
expenses of internal counsel of Agent and all other reasonable attorneys'
fees and expenses incurred by Agent, in any way relating to or arising in any
manner out of: (i) any Operative Document, the enforcement hereof or thereof
or the consummation of the transactions contemplated thereby, or (ii)
instructions from the Required Participants (including the costs and expenses
that Lessee is obligated to and does not pay hereunder, but excluding normal
administrative costs and expenses incident to the performance by Agent of its
agency duties hereunder other than materially increased administrative costs
and expenses incurred as a result of a Lease Event of Default); PROVIDED that
no Participant shall be liable for any of the foregoing to the extent they
arise from: (a) the gross negligence or willful misconduct of Agent, (b) the
inaccuracy of any representation or

warranty or breach of any covenant given by Agent in SECTION 4.4 or in the
Loan Agreement, (c) in the case of Agent's handling of funds, the failure to
act with the same care as Agent uses in handling its own funds, (d) any
taxes, fees or other charges payable by Agent based on or measured by any
fees, commissions or compensation received by it for acting as Agent in
connection with the transactions described in the Operative Documents or (e)
any other matter as to which Lessee is not obligated to indemnify Agent
hereunder.

SECTION 8.5 INDEPENDENT CREDIT INVESTIGATION. Each Participant by
entering into this Participation Agreement agrees that it has, independently
and without reliance on Agent or Arranger or any other Participant and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of Lessee and its own decision to enter into this
Participation Agreement and each of the other Operative Documents to which it
is a party and that it will, independently and without reliance upon Agent,
Arranger or any other Participant and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis
and decisions in taking action under this Participation Agreement and any
related documents to which it is a party. Agent shall not be required to
keep itself informed as to the performance or observance by Lessee of any
other document referred to (directly or indirectly) or provided for herein or
to inspect the properties or books of Lessee. Except for notices or
statements which Agent is expressly required to give under this Participation
Agreement and for notices, reports and other documents and information
expressly required to be furnished to Agent alone (and not also to each
Participant and the Certificate Trustee, it being understood that Agent shall
forward copies of same to each Participant and the Certificate Trustee)
hereunder or under any other Operative Document, Agent shall not have any
duty or responsibility to provide any Participant with copies of notices or
with any credit or other information concerning the affairs, financial
condition or business of Lessee (or any of its Affiliates) that may come into
the possession of Agent or any of its Affiliates.

SECTION 8.6 REFUSAL TO ACT. Except for notices and actions expressly
required of Agent hereunder and except for the performance of its covenants
in SECTION 4.4, Agent shall in all cases be fully justified in failing or
refusing to act unless: (a) it is indemnified to its reasonable satisfaction
by the Participants against any and all liability and reasonable expense
which may be incurred by it by reason of taking or continuing to take any
such action (provided that such indemnity shall be subject to each of the
limitations set forth at SECTION 8.4, including CLAUSES (a) through (d) of
SECTION 8.4, it being understood that no action taken by Agent in accordance
with the instructions of the Required Participants shall be deemed to
constitute any such matter), and (b) it is reasonably satisfied that such
action is not contrary to any Operative Document or to any Applicable Law.

SECTION 8.7 RESIGNATION OR REMOVAL OF AGENT; APPOINTMENT OF
SUCCESSOR. Subject to the appointment and acceptance of a successor Agent as
provided below, Agent may resign at any time by giving notice thereof to each
Lessor and Lessee or may be removed at any time by written notice from the
Required Participants. Upon any such resignation or removal, the Required
Participants at the time of the resignation or removal shall have the right
with the consent of Lessee so long as no Lease Event of Default exists (which
consent shall not be unreasonably withheld or delayed) to appoint a successor
Agent which shall be an Eligible Assignee Agent. If, within 30 calendar days
after the retiring Agent's giving of notice of resignation or receipt of a
written notice of removal, a successor Agent is not so appointed and does not
accept such appointment, then the retiring or removed Agent after consulting
with Lessee and the Participants may appoint a successor Agent and transfer
to such successor

Agent all rights and obligations of the retiring Agent. Such successor Agent
shall be an Eligible Assignee Agent. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring or removed Agent and the retiring or removed Agent
shall be discharged from duties and obligations as Agent thereafter arising
hereunder and under any related document. If the retiring Agent does not or
is not able to appoint a successor, any Participant, and in the case where
the retiring Agent is unable to appoint a successor, Agent, shall be entitled
to apply to a court of competent jurisdiction for such appointment, and such
court may thereupon appoint a successor to act until such time, if any, as a
successor shall have been appointed as above provided.

SECTION 8.8 SEPARATE AGENT. The Required Participants may, and if
they fail to do so at any time when they are so required, Agent may, for the
purpose of meeting any Federal, state or local legal requirements of any
jurisdiction in which the Leased Property or Mortgaged Property may be
located, appoint one or more individuals or corporations either to act as
co-agent jointly with Agent or to act as separate agent of all or any part of
the Mortgaged Property, and vest in such individuals or corporations, in such
capacity, such title to such Mortgaged Property or any part thereof, and such
rights or duties as Agent may consider necessary or desirable. Agent shall
not be required to qualify to do business in any jurisdiction where it is not
now so qualified. Agent shall execute, acknowledge and deliver all such
instruments as may be required by any such co-agent or separate agent more
fully confirming such title, rights or duties to such co-agent or separate
agent. Upon the acceptance in writing of such appointment by any such
co-agent or separate agent, it, she or he shall be vested with such interest
in the Mortgaged Property or any part thereof, and with such rights and
duties, not inconsistent with the provisions of the Operative Documents, as
shall be specified in the instrument of appointment, jointly with Agent
(except insofar as Applicable Laws makes it necessary for any such co-agent
or separate agent to act alone), subject to all terms of the Operative
Documents. Any co-agent or separate agent, to the fullest extent permitted
by legal requirements of the relevant jurisdiction, at any time, by an
instrument in writing, shall constitute Agent its attorney-in-fact and agent,
with full power and authority to do all acts and things and to exercise all
discretion on its behalf and in its name. If any co-agent or separate agent
shall die, become incapable of acting, resign or be removed, the interest in
the Mortgaged Property and all rights and duties of such co-agent or separate
agent shall, so far as permitted by law, vest in and be exercised by Agent,
without the appointment of a successor to such co-agent or separate agent.

SECTION 8.9 TERMINATION OF AGENCY. The agency created hereby shall
terminate upon the final disposition by Agent of all Mortgaged Property at
any time subject hereto and the final distribution by Agent of all monies or
other property or proceeds received pursuant to the Lease in accordance with
their terms; PROVIDED, that at such time Lessee shall have complied fully
with all the terms hereof.

SECTION 8.10 COMPENSATION OF AGENCY. Lessee shall pay Agent its
reasonable fees, costs and expenses for the performance of Agent's
obligations hereunder in connection with any amendments, modifications, or
waivers requested by Lessee under any of the Operative Documents.

SECTION 8.11 LIMITATIONS. It is expressly understood and agreed by
and among the parties hereto that, except as otherwise provided herein or in
the other Operative Documents: (a) this Participation Agreement and the
other Operative Documents to which Agent is a party

are executed by Agent, not in its individual capacity (except with respect to
the representations and covenants of Agent in SECTION 4.4), but solely as
Agent under the Operative Documents in the exercise of the power and
authority conferred and vested in it as such Agent; (b) each and all of the
undertakings and agreements herein made on the part of Agent are each and
every one of them made and intended not as personal undertakings and
agreements by Agent, or for the purpose or with the intention of binding
Agent personally, but are made and intended for the purpose of binding only
the Mortgaged Property unless expressly provided otherwise; (c) actions to be
taken by Agent pursuant to its obligations under the Operative Documents may,
in certain circumstances, be taken by Agent only upon specific authority of
the Participants; (d) except as set forth in the proviso below, nothing
contained in the Operative Documents shall be construed as creating any
liability on Agent, individually or personally, or any incorporator or any
past, present or future subscriber to the capital stock of, or stockholder,
officer or director, employee or agent of, Agent to perform any covenants
either express or implied contained herein, all such liability, if any, being
expressly waived by the other parties hereto and by any Person claiming by,
through or under them; and (e) so far as Agent, individually or personally,
is concerned, the other parties hereto and any Person claiming by, through or
under them shall look solely to the Mortgaged Property and Lessee for the
performance of any obligation under any of the instruments referred to
herein; PROVIDED, HOWEVER, that nothing in this SECTION 8.11 shall be
construed to limit in scope or substance the general corporate liability of
Agent in respect of its gross negligence or willful misconduct, negligence in
the handling of funds or for those representations, warranties and covenants
of Agent in its individual capacity set forth herein or in any of the other
agreements contemplated hereby.

ARTICLE IX
MISCELLANEOUS

SECTION 9.1 SURVIVAL OF AGREEMENTS. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery and the termination or expiration of
this Agreement and any of the Operative Documents, the transfer of the
interest in the Leased Property as provided herein or in any other Operative
Documents (and shall not be merged into any deed, ground lease or any other
conveyance or transfer document), any disposition of any interest of
Certificate Trustee in the Leased Property, the purchase and sale of the
Notes or Certificates, payment therefor and any disposition thereof and shall
be and continue in effect notwithstanding any investigation made by any party
hereto or to any of the other Operative Documents and the fact that any such
party may waive compliance with any of the other terms, provisions or
conditions of any of the Operative Documents.

SECTION 9.2 NO BROKER, ETC. Except for Lessee's dealing with UBOC,
as Arranger, each of the parties hereto represents to the others that it has
not retained or employed any arranger, broker, finder or financial advisor to
act on its behalf in connection with this Agreement, nor has it authorized
any arranger, broker, finder or financial adviser retained or employed by any
other Person so to act, nor has it incurred any fees or commissions to which
Certificate Trustee, Agent or any Participant might be subjected by virtue of
their entering into the transactions described in this Agreement. UBOC's
sole compensation for acting hereunder other than as an Arranger is the
receipt of the amounts, including reimbursement of expenses, provided for in
the Operative Documents, and the Arrangement Fee. Any party who is in breach
of this representation shall

indemnify and hold the other parties harmless from and against any liability
arising out of such breach of this representation.

SECTION 9.3 NOTICES. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been given: (i) in the case of notice by
letter, the earlier of when delivered to the addressee by hand or courier if
delivered on a Business Day and, if not delivered on a Business Day, the
first Business Day thereafter or on the third Business Day after depositing
the same in the mails, registered or certified mail, postage prepaid, return
receipt requested, and (ii) in the case of notice by facsimile or bank wire,
when receipt is confirmed if delivered on a Business Day and, if not
delivered on a Business Day, the first Business Day thereafter, addressed as
provided on SCHEDULE II hereto, or to such other address as any of the
parties hereto may designate by written notice.

SECTION 9.4 COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same agreement.

SECTION 9.5 AMENDMENTS. No Operative Document nor any of the terms
thereof may be terminated, amended, supplemented, waived or modified without
the written agreement or consent of Certificate Trustee, Agent, Lessee and
the Required Participants; PROVIDED, HOWEVER, that SECTION 3.1(s) and SECTION
9.16 may not be terminated, amended, supplemented, waived or modified without
the written agreement or consent of the Arranger; and PROVIDED, FURTHER, that
such termination, amendment, supplement, waiver or modification shall require
the written agreement or consent of each Participant if such termination,
amendment, supplement, waiver or modification would:

(a) modify any of the provisions of this SECTION 9.5, change the
definition of "Required Participants", or modify or waive any provision
of any Operative Document requiring action by any of the foregoing, or
release any collateral (except as otherwise specifically provided in any
Operative Document);

(b) reduce the amount or change the time of payment of any
amount of principal owing or payable under any Note, Certificate or
interest or Yield owing or payable on any Note or Certificate, or modify
any of the provisions of Article III of the Loan Agreement or Article
III of the Trust Agreement;

(d) modify, amend, waive or supplement any of the provisions of
the Guarantee;

(e) reduce, modify, amend or waive any indemnities in favor of any
Participant, or increase any of the duties, obligations or liabilities
of any Participant;

(f) reduce the amount or change the time of payment of Rent, the
Lease Balance or the Applicable Margin;

(g) modify or change the definition of the Sale Recourse Amount;

(h) modify any provision of any Operative Document that expressly
requires the unanimous consent of the Participants;

(i) consent to modification, amendment or waiver releasing Lessee
from its obligations to pay Rent, the Lease Balance, Sale Proceeds, the
Applicable Margin or changing the absolute and unconditional character
of such obligations; or

(j) permit the creation of any Lien on the Trust Estate or any
part thereof except as described in the Operative Documents, or deprive
any Participant of the benefit of the security interest and lien secured
by the Mortgaged Property or the Trust Estate.

SECTION 9.6 HEADINGS, ETC. The Table of Contents and headings of the
various Articles and Sections of this Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof.

SECTION 9.7 PARTIES IN INTEREST. Except as set forth in SECTION 9.16
and as otherwise expressly provided herein, none of the provisions of this
Agreement is intended for the benefit of any Person except the parties
hereto, their successors and permitted assigns.

SECTION 9.8 GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED IN, AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF, THE STATE OF CALIFORNIA.

SECTION 9.9 PAYMENT OF TRANSACTION COSTS AND OTHER COSTS.

(a) TRANSACTION COSTS. Whether or not the transactions
described in this Agreement and by the other Operative Documents are
consummated, as and when any portion of Transaction Costs becomes due and
payable, Lessee shall promptly pay such costs following its receipt of an
invoice therefor directly or furnish Agent funds sufficient to, and Agent
shall promptly make payment of such portion to the Person or Persons entitled
to payment upon presentation to Agent of bills or invoices for the amount of
such payment. The Arrangement Fee shall be paid by Lessee to the Arranger on
the Advance Date.

(b) CONTINUING EXPENSES. The continuing fees, expenses and
disbursements (including reasonable counsel fees) of Certificate Trustee, as
lessor under the Lease and as trustee under the Trust Agreement with respect
to the administration of the Trust Estate and Agent under the Operative
Documents shall be paid by Lessee as Supplemental Rent.

(c) AMENDMENTS, SUPPLEMENTS AND APPRAISAL. Without
limitation of the foregoing, Lessee agrees to pay to the Participants,
Certificate Trustee and Agent all out-of-pocket and internally allocated
costs and expenses (including reasonable legal fees and expenses of local
counsel, special counsel and allocated costs of internal counsel to Agent and
Certificate Trustee and the document counsel for the Participants) incurred
by any of them in connection with: (i) the considering, evaluating,
investigating, negotiating and entering into or giving or withholding of any
amendments or supplements or waivers or consents with respect to any
Operative Document; (ii) any Casualty, Condemnation, or termination of the
Lease or any other Operative Document; (iii) the negotiation and
documentation of any restructuring or "workout," whether or not consummated,
of any Operative Document; (iv) the enforcement of the rights or remedies
under the Operative Documents; or (v) any transfer by Certificate Trustee

or a Participant of any interest in the Operative Documents during the
continuance of a Lease Event of Default.

SECTION 9.10 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 9.11 LIMITED LIABILITY OF CERTIFICATE TRUSTEE. The parties
hereto agree that Certificate Trustee, in its individual capacity, shall have
no personal liability whatsoever to Lessee, Agent, the Participants or any of
their respective successors and assigns for any Claim based on or in respect
of this Agreement or any of the other Operative Documents or arising in any
way from the transactions contemplated hereby or thereby; PROVIDED, HOWEVER,
that Certificate Trustee shall be liable in its individual capacity: (a) for
its own willful misconduct or gross negligence (or negligence in the handling
of funds) and, to each Participant for the breach of its obligations to the
Participants in respect of the Trust Agreement and the Trust Estate to the
extent provided in the Trust Agreement, (b) for liabilities that may result
from the incorrectness of any representation or warranty expressly made by it
in its individual capacity in SECTION 4.3 or from the failure of the UBOC to
perform the covenants and agreements set forth in ARTICLE VI, (c) for any Tax
based on or measured by any fees, commission or compensation received by it
for actions described in the Operative Documents, or (d) breach of SECTION
9.17. The parties hereby acknowledge that any provision of the Operative
Documents requiring a determination or approval to be made by Certificate
Trustee or Lessor may be made by Certificate Trustee based upon a
determination of the Required Participants. In no event shall Certificate
Trustee, in its individual capacity, be liable for any indirect, special,
consequential, incidental or punitive damages.

SECTION 9.12 LIABILITIES OF THE PARTICIPANTS. No Participant shall
have any obligation to any other Participant or to Lessee, Certificate
Trustee or Agent with respect to the transactions described in the Operative
Documents except those obligations of such Participant expressly set forth in
the Operative Documents or except as set forth in the instruments delivered
in connection therewith, and no Participant shall be liable for performance
by any other party hereto of such other party's obligations under the
Operative Documents except as otherwise so set forth.

SECTION 9.13 SUBMISSION TO JURISDICTION; WAIVERS.

(a) Each party hereto irrevocably and unconditionally:

(i) submits for itself and its property in any legal action
or proceeding relating to this Agreement or any other Operative Document, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the United States District Court for
the Southern District of California and of any California state court sitting
in San Diego, County, and appellate courts from any thereof;

(ii) consents that any such action or proceedings may be
brought to such courts, and waives any objection that it may now or hereafter
have to the venue of any such action or

proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same;

(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage prepaid,
to such party at its address set forth on SCHEDULE II or at such other
address of which the other parties hereto shall have been notified pursuant
to SECTION 9.3; and

(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to xxx in any other jurisdiction.

(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THE
OPERATIVE DOCUMENTS AND FOR ANY COUNTERCLAIM THEREIN.

SECTION 9.14 REPRODUCTION OF DOCUMENTS. This Agreement, all
documents constituting an Appendix, Schedule or Exhibit hereto, and all
documents relating hereto received by a party hereto, including: (a)
consents, waivers and modifications that may hereafter be executed; (b)
documents received by the Participants, or Certificate Trustee in connection
with the receipt and/or acquisition of the Leased Property; and (c) financial
statements, certificates, and other information previously or hereafter
furnished to Certificate Trustee, Agent or any Participant may be reproduced
by the party receiving the same by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. Each of the
parties hereto agrees and stipulates that, to the extent permitted by law,
any such reproduction shall be admissible in evidence as the original itself
in any judicial or administrative proceeding (whether or not the original is
in existence and whether or not such reproduction was made by such party in
the regular course of business) and that, to the extent permitted by law, any
enlargement, facsimile, or further reproduction of such reproduction shall
likewise be admissible in evidence.

SECTION 9.15 CONSIDERATION FOR CONSENTS TO WAIVERS AND AMENDMENTS.
Lessee hereby agrees that it will not, and that it will not permit any of its
Affiliates to, offer or give any consideration or benefit of any kind
whatsoever to any Participant in connection with, in exchange for, or as an
inducement to, such Participant's consent to any waiver in respect of, any
modification or amendment of, any supplement to, or any other consent or
approval under, any Operative Document unless such consideration or benefit
is offered ratably to all Participants.

SECTION 9.16 ROLE OF UBOC. Each party hereto acknowledges hereby
that it is aware of the fact that UBOC has acted as an "arranger" with
respect to the transactions described in the Operative Documents and that, as
of the Document Closing Date, it or its affiliate will be a Participant.
Each party releases UBOC and its Affiliates from any liability as a result of
its acting simultaneously as "arranger" (on the one hand) and as a
Participant (on the other hand) and waives any potential conflict of interest
arising therefrom. The parties hereto acknowledge and agree that Arranger has
not made any representations or warranties concerning, and that they have not
relied upon Arranger as to, the tax, accounting or legal characterization or
validity of: (i) the Operative Documents or (ii) any aspect of the Overall
Transaction. The parties hereto acknowledge and agree that Arranger has no
duties, express or implied, under the Operative Documents in its capacity as
Arranger. The parties hereto further agree that SECTION 2.8, the

second sentence of SECTION 3.1(h), SECTION 3.1(s), SECTION 8.5, SECTION 9.2,
the first proviso in the first sentence of SECTION 9.5, SECTION 9.9(a) and
this SECTION 9.16 are for the express benefit of Arranger, and Arranger shall
be entitled to rely thereon as if it were a party hereto.

SECTION 9.17 CONFIDENTIALITY. Certificate Trustee, Agent and each
Participant each agree to take normal and reasonable precautions and exercise
due care to maintain the confidentiality of all nonpublic information
provided to it by or on behalf of Lessee or any Subsidiary in connection with
this Agreement or any other Operative Document, and agree not to use any such
information for any purpose or in any manner other than pursuant to the terms
described in this Agreement; PROVIDED, HOWEVER, that Certificate Trustee,
Agent or any Participant may disclose such information: (i) to its directors,
employees, affiliates and agents and to its auditors, counsel and other
professional advisors (provided that such Persons have been made aware by
Certificate Trustee, Agent or such Participant of the nonpublic and
confidential nature of such information and of the restrictions herein
against such disclosure thereof), (ii) at the demand or request of any bank
regulatory authority, or any court or other Authority having or asserting
jurisdiction over Certificate Trustee, Agent or such Participant as may be
required pursuant to subpoena or other legal process, or otherwise in order
to comply with any Applicable Laws (provided that notice of any such subpoena
or other legal process shall be furnished to Lessee unless such notice is
legally prohibited or such Authority requests that such notice not be
furnished to Lessee), (iii) in connection with any proceeding to enforce its
rights hereunder or other litigation or proceeding related hereto, (iv) to
either Certificate Trustee, Agent or any other Participant, (v) to the extent
the same has become publicly available other than as a result of a breach of
this Agreement, (vi) pursuant to and in accordance with the provisions of
SECTION 6.5, and (vii) to any potential transferee or Participation Holder,
PROVIDED that, prior to any such disclosure, each Participant shall require
any such potential transferee or Participation Holder receiving a disclosure
of nonpublic information to agree in writing to be bound by this SECTION 9.17.

[SIGNATURES ON NEXT PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.

LESSEE: REMEC, INC., as Lessee

By: /s/ Xxxxxxx XxXxxxxx
----------------------------------
Name Printed: Xxxxxxx XxXxxxxx
Title: Chief Financial Officer

CERTIFICATE TRUSTEE: UNION BANK OF
CALIFORNIA, N.A., not in its individual
capacity except as expressly stated
herein, but solely as Certificate Trustee

By: /s/ Xxxxxx X. Xxxx
---------------------------------
Name Printed: Xxxxxx X. Xxxx
Title: Vice President

AGENT: UNION BANK OF CALIFORNIA, N.A.,
not in its individual capacity except as
expressly stated herein, but solely as
Agent

By: /s/ Xxxx XxXxxx
---------------------------------
Name Printed: Xxxx XxXxxx
Title: Vice President

CERTIFICATE PURCHASER: BANKERS
COMMERCIAL CORPORATION, as Certificate
Purchaser

By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------
Name Printed: Xxxxx X. Xxxxxxxxx
Title: President

LENDER: UNION BANK OF CALIFORNIA, N.A.,
not in its individual capacity except as
expressly stated herein, but solely as
Lender

By: /S/ Xxxx XxXxxx
---------------------------------
Name Printed: Xxxx XxXxxx
Title: Vice President

APPENDIX 1
to
PARTICIPATION AGREEMENT

(REMEC, Inc. Trust 1998-A)

In the Participation Agreement and each other Operative Document, unless
the context otherwise requires:

(a) any term defined below by reference to another instrument or
document shall continue to have the meaning ascribed thereto whether or not
such other instrument or document remains in effect;

(b) words importing the singular include the plural and vice versa;

(d) a reference to a part, clause, section, article, exhibit or
schedule is a reference to a part, clause, section and article of, and
exhibit and schedule to, such Operative Document;

(e) a reference to any statute, regulation, proclamation, ordinance or
law includes all statutes, regulations, proclamations, ordinances or laws
amending, supplementing, supplanting, varying, consolidating or replacing
them, and a reference to a statute includes all regulations, proclamations
and ordinances issued or otherwise applicable under that statute;

(f) a reference to a document includes any amendment or supplement to,
or replacement or novation of, that document;

(g) a reference to a party to a document includes that party's
successors and permitted assigns;

(h) financial concepts and terms not otherwise defined herein shall
have the meanings commonly understood for such terms under GAAP; and

(i) references to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof the
rule of EJUSDEM GENERIS shall not be applicable to limit a general statement
followed by or referable to an enumeration of specific matters to matters
similar to those specifically mentioned.

Further, each of the parties to the Operative Documents and their
counsel have reviewed and revised the Operative Documents, or requested
revisions thereto, and the usual rule of construction that any ambiguities
are to be resolved against the drafting party shall be inapplicable in
construing and interpreting the Operative Documents.

"ACQUISITION AGREEMENTS" shall mean:(a) the Agreement for Purchase and
Sale and Joint Escrow Instructions dated as of June 12, 1998, amended as of
July 17, 1998 and August 14, 1998, by and between Transcontinental Chesapeake
Corporation and REMEC, Inc., with respect to the property commonly known as
the Xxxxxxxxxx Xxxxx Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 (the
"TRANSCONTINENTAL ACQUISITION AGREEMENT"), and (b) the Agreement for Purchase
and Sale and Joint Escrow Instructions dated as of August 26, 1998, amended
as of August 26, 1998, by and between

App. 1-1

Montpelier Pacific, Inc. and REMEC, Inc., with respect to the property
commonly known as 0000 Xxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 (the
"MONTPELIER ACQUISITION AGREEMENT").

"ACQUISITION DOCUMENTS" shall mean the Acquisition Agreements and all
other documents to be assigned to or executed by Lessor in connection with
the consummation of the acquisitions described in the Transcontinental
Acquisition Agreement and the Montpelier Acquisition Agreement, respectively,
together with any such instruments of assignment.

"ACTUAL KNOWLEDGE" shall mean, as to any matter with respect to any
Person, the actual knowledge of such matter by a Responsible Officer of such
Person or, in the case of the Certificate Trustee, by an Authorized Officer
of the Certificate Trustee.

"ADDITIONAL COSTS" shall mean (i) the amounts payable pursuant to
Sections 7.4, 7.5 and 7.6 of the Participation Agreement and (ii) any other
amounts due and payable by Lessee under any Operative Document or the Trust
Agreement other than Basic Rent.

"ADVANCE" shall mean the advance of funds to pay the Purchase Price and
the Transaction Costs by Certificate Trustee pursuant to Article II of the
Participation Agreement.

"ADVANCE DATE" shall mean the actual date on which the Advance occurs.

"ADVANCE REQUEST" shall have the meaning provided in Section 2.5(a) of
the Participation Agreement.

"AFFECTED PARTICIPANT" shall have the meaning provided in Section 7.4 of
the Participation Agreement.

"AFFILIATE" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with such
Person. For purposes of this definition, the term "control" (including the
correlative meanings of the terms "controlling," "controlled by," and "under
common control with") as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or otherwise; PROVIDED (but
without limiting the foregoing) that no pledge of voting securities of any
Person without the current right to exercise voting rights with respect
thereto shall by itself be deemed to confer control over such Person upon the
pledgee.

"AGENT" shall mean UBOC.

"ALTERATIONS" shall have the meaning provided in Section 9.2(a) of the
Lease.

"ALTERNATE BASE RATE" shall mean, for any period, an interest rate per
annum equal to the higher of (A) the Federal Funds Effective Rate most
recently determined by Agent plus the Applicable Margin and (B) the Reference
Rate. If either of the aforesaid rates or equivalent changes from time to
time after the Document Closing Date, the Alternate Base Rate shall be
automatically increased or decreased, if appropriate and as the case may be,
without notice to Lessee or Borrower, as of the effective time of each change.

"APPLICABLE LAWS" shall mean as of any date all applicable laws, rules,
regulations (including Environmental Laws), statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Authority, and applicable judgments, decrees, injunctions, writs,
orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction
(including those pertaining to health, safety or the environment and those
pertaining to the construction, use, occupancy or subdivision of the Leased
Property) and any restrictive covenant or deed restriction or easement of
record affecting the Leased Property.

App. 1-2

"APPLICABLE MARGIN" means, at any time the Interest Rate is determined
by reference to the LIBO Rate or to the Federal Funds Effective Rate, a
margin determined from time-to-time during any Payment Period in accordance
with the following:

------------------------------------------------------------------------------
Lessee's Notes
Funded Debt/EBDITA (basis points/annum)
------------------------------------------------------------------------------

.50 or less : 1 115
------------------------------------------------------------------------------
.51 to 1.00 : 1 125
------------------------------------------------------------------------------
1.01 to 1.50 : 1 150
------------------------------------------------------------------------------

Notwithstanding the foregoing, for any day during an Interest Period with
respect to the portion of the outstanding principal amount of the Notes
which, on such day, are collateralized pursuant to the Pledge Agreement or
the Custodial Agreement with Liquid Assets acceptable to Agent, the
Applicable Margin for such day shall be 0.75% (75 basis points). For
purposes of the foregoing sentence, the "portion of the outstanding principal
amount of the Notes" which Lessee has "collateralized with Liquid Assets" for
each Lender shall be deemed to equal 95% of such Lender's Commitment
Percentage of the Value (as defined in the Custodial Agreement) of Securities
Collateral or 100% of the Cash (as defined in the Custodial Agreement)
pledged by Lessee pursuant to the Pledge Agreement as of the applicable
Payment Date.

"APPRAISALS" shall have the meaning provided in Section 3.1(h) of the
Participation Agreement.

"APPRAISER" shall mean (i) with respect to the Appraisals to be
delivered prior to the Advance, Xxxxxx X. Xxxxxxx, MAI, of Lipman, Stevens,
Xxxxxxxx & Thene, Inc., and (ii) with respect to any other appraisal, a
reputable appraiser selected by Lessor and satisfactory to the Required
Participants.

"APPURTENANT RIGHTS" shall have the meaning provided in the Deed of
Trust.

"ARRANGEMENT FEE" shall mean the fee payable to Arranger pursuant to
that certain letter agreement between Arranger and Lessee dated August 25,
1998.

"ARRANGER" shall mean UBOC.

"ASSIGNMENT OF LEASE" shall mean that certain Assignment of Lease dated
as of August 25, 1998, from Certificate Trustee to Agent.

"ASSIGNMENT OF SUBLEASES" shall mean that certain Assignment of Sublease
dated as of August 25, 1998, from Lessee to Agent.

"AUTHORITY" shall mean any applicable foreign, Federal, state, county,
municipal or other government or governmental, quasi-governmental or
regulatory authority, agency, board, body, commission, instrumentality, court
or tribunal, or any political subdivision of any thereof, or arbitrator or
panel of arbitrators.

"AUTHORIZED OFFICER" shall mean, as to Certificate Trustee, any officer
in the Corporate Trust Department who shall be duly authorized to execute the
Operative Documents.

"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978.

"BASE TERM" shall mean the initial five-year period of the term of the
Lease commencing on the Advance Date and ending on the day preceding the
fifth (5th) anniversary of the Advance Date.

App. 1-3

"BASIC RENT" shall mean for any Payment Date with regard to a Payment
Period then ended, an amount equal to the sum of (A) the aggregate amount of
interest payable on such Payment Date on the Notes, plus (B) the aggregate
amount of Yield payable on such Payment Date on the Certificates.

"BENEFICIARY" shall have, in respect of either Guarantee, the meaning
provided in Section 1 of such Guarantee.

"BENEFIT ARRANGEMENT" shall mean at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.

"BENEFITTED LENDER" shall have the meaning provided in Section 7.4 of
the Loan Agreement.

"BOARD OF DIRECTORS" shall mean, with respect to a corporation, either
the board of directors or any duly authorized committee of that board of
directors which, pursuant to the by-laws of such corporation, has the same
authority as that board of directors as to the matter at issue.

"BORROWER" shall have the meaning provided in the preamble to the Loan
Agreement.

"BORROWER LIABILITIES" shall have the meaning provided in Section 1 to
the Guarantee.

"BREAK FUNDING AMOUNT" shall have the meaning provided in Section 7.5
of the Participation Agreement.

"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in Los Angeles, California and solely with
respect to the definition of LIBO Rate, London, England are authorized or
required by law to close.

"CASUALTY" shall mean an event of damage or casualty relating to any
portion or all of the Improvements.

"CERTIFICATE" shall have the meaning provided in Section 2.1(a) of the
Trust Agreement.

"CERTIFICATE AMOUNT" shall mean, with respect to any Certificate
Purchaser as of any date of determination, the aggregate amount advanced by
such Certificate Purchaser for the purchase of Certificates pursuant to
Section 2.3 of the Participation Agreement, net of any distributions (other
than distributions of Yield) with respect thereto.

"CERTIFICATE PURCHASER" shall have the meaning provided in the preamble
to the Trust Agreement.

"CERTIFICATE PURCHASER COLLATERAL" shall mean any collateral granted to
the Certificate Purchaser pursuant to the Lease.

"CERTIFICATE REGISTER" shall have the meaning provided in Section 2.8(a)
of the Trust Agreement.

"CERTIFICATE TRUSTEE" shall mean UBOC, not in its individual capacity
but solely as trustee under the Trust Agreement, together with any individual
trustee or co-trustee appointed pursuant to the terms of the Trust Agreement.

"CERTIFICATES" shall mean those certain certificates issued to the
Certificate Purchasers pursuant to the Trust Agreement, substantially in the
form of Exhibit A thereto, and any and all Certificates issued in replacement
or exchange therefor.

App. 1-4

"CHANGE IN CONTROL" means any of the following: (a) any person or group
(within the meaning of Rule 13d-5 of the SEC as in effect on the date hereof)
shall acquire ownership directly or indirectly, beneficially or of record, of
shares representing in excess of 50% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Guarantor; or
(b) a majority of the seats (other than vacant seats) on the board of
directors of the Guarantor shall at any time become occupied by persons who
were neither (i) nominated by the management of the Guarantor, nor (ii)
appointed by directors so nominated.

"CHANGE IN LAW" shall have the meaning provided in Section 7.4 of the
Participation Agreement.

"CLAIMS" shall mean liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, judgments, settlements, utility
charges, costs, fees, expenses and disbursements (including legal fees and
expenses and costs of investigation which, in the case of counsel or
investigators retained by an Indemnitee, shall be reasonable) of any kind and
nature whatsoever.

"CODE" shall mean the Internal Revenue Code of 1986.

"COMMITMENT" shall mean as to any Certificate Purchaser or Lender, its
obligation to make Certificate Amounts or Loans available to the Certificate
Trustee in an aggregate amount not to exceed at any one time outstanding the
amount set forth opposite such Certificate Purchaser's or Lender's name on
Schedule I-A and Schedule I-B, as amended from time to time, to the
Participation Agreement.

"COMMITMENT PERCENTAGE" shall mean as to any Participant, at a
particular time, the percentage of the aggregate Commitments in effect at
such time represented by such Participant's Commitment, as such percentage is
shown on Schedule I-A or Schedule 1-B, as amended from time to time, to the
Participation Agreement.

"CONDEMNATION" shall mean any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, occupancy or title to the Leased
Property or any part thereof in, by or on account of any eminent domain
proceeding or other action by any Authority or other Person under the power
of eminent domain or otherwise or any transfer in lieu of or in anticipation
thereof. A Condemnation shall be deemed to have "occurred" on the earliest
of the dates that use, occupancy or title is taken.

"CONSOLIDATED GROUP" shall mean, as to any Participant, all those other
Persons (whether now existing or hereafter acquired), the financial
statements of which shall be (or should have been) consolidated with the
financial statements of such Participant in accordance with GAAP.

"CONSOLIDATED SUBSIDIARY" shall mean, at any date, any Subsidiary or
other entity the accounts of which would be consolidated with those of Lessee
in its consolidated financial statements if such statements were prepared as
of such date.

"CONTRACTUAL REQUIREMENTS" shall mean all terms and conditions of any
contract affecting the Leased Property to which Lessee is a party (other than
the Operative Documents).

"CORPORATE TRUST DEPARTMENT" shall mean the principal corporate trust
office of UBOC, located at 000 Xxxxx Xxx Xxxxx Xxxxxx, 0xx Xxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attn.: Corporate Trust Dept. or at such other
office at which the corporate trust business of Certificate Trustee shall be
administered which shall have been specified by notice in writing to Lessee
and each Participant.

"CREDIT AGREEMENT" shall mean that certain Second Amended and Restated
Loan Agreement dated as of June 25, 1998, among REMEC, Inc. and UBOC.

"CUSTODIAL AGREEMENT" shall mean a Custodial Agreement among Lessee,
Agent, the custodian thereunder, and the Participants in form and substance
satisfactory to Agent and the Participants under

App. 1-5

which Lessee pledges Liquid Assets to collateralize the Lease Balance and
thereby reduce the Applicable Margin.

"DEED" shall mean any of the deeds and assignments from Sellers to
Certificate Trustee conveying the Leased Property.

"DEED OF TRUST" shall mean, with respect to the Leased Property, a Deed
of Trust, Security Agreement and Fixture Filing Statement executed by Lessor
and Lessee, as trustor, to Title Insurance Company, as trustee, in favor of
Agent for the ratable benefit of the Participants, as beneficiary,
substantially in the form of Exhibit D to the Participation Agreement.

"DOCUMENT CLOSING DATE" shall mean the earliest date on or prior to
September 1, 1998, on which all of the conditions precedent thereto set forth
in Appendix 2 hereto have been satisfied or waived by the applicable parties
as set forth therein.

"DOLLARS" or "$" shall mean United States Dollars.

"EBITDA" shall mean income from operations after deducting all expenses
other than interest, taxes, depreciation, and amortization.

"ELIGIBLE ASSIGNEE AGENT" shall mean (i) a commercial bank organized
under the laws of the United States of America, or any state thereof, and
having a combined capital and surplus of at least $75,000,000; (ii) a
commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development (the
"OECD"), or a political subdivision of any such country, and having a
combined capital and surplus of at least $75,000,000; PROVIDED that such bank
is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of OECD; or (iii) a
Person that is primarily engaged in the business of commercial banking and
that is (A) a Subsidiary of a Participant, (B) a Subsidiary of a Person of
which a Participant is a Subsidiary or (C) a Person of which a Participant is
a Subsidiary.

"EMERGENCY" shall mean a condition or event creating an imminent threat
to human health and safety or imminent threat of loss, damage or destruction
to the real or personal property of any Person.

"EMPLOYEE BENEFIT PLAN" shall mean an employee benefit plan (within the
meaning of Section 3(3) of ERISA, including any multiemployer plan (within
the meaning of Section 3(37)(A) of ERISA)), or any "plan" as defined in
Section 4975(e)(1) of the Code and as interpreted by the Internal Revenue
Service and the Department of Labor in rules, regulations, releases or
bulletins in effect at the time of any determination under the Operative
Documents. The assets of an Employee Benefit Plan shall be determined using
the foregoing criteria, including on the date hereof the Department of Labor
plan asset regulation (29 C.F.R. Section 2510.3-101).

"ENVIRONMENTAL AUDIT" shall mean a Phase One Environmental Site
Assessment (the scope and performance of which meets or exceeds ASTM Standard
Practice E1527-93 Standard Practice for Environmental Site Assessments:
Phase One Environmental Site Assessment Process) for the Leased Property and
any additional environmental assessments requested by the Required
Participants in good faith, including a Phase II Environmental Site
Assessment if recommended by the Phase I Environmental Site Assessment.

"ENVIRONMENTAL LAWS" shall mean and include the Resource Conservation
and Recovery Act of 1976, (RCRA) 42 U.S.C. Sections 6901-6987, as amended by
the Hazardous and Solid Waste Amendments of 1984, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections
9601-9657, (CERCLA), the Hazardous Materials Transportation Act of 1975, 49
U.S.C. Sections 1801-1812, the Toxic Substances Control Act, 15 U.S.C.
Sections 2601-2671, the Clean Air Act, 42 U.S.C. Sections 7401 et seq., the
Federal Insecticide,

App. 1-6

Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 et seq. and all similar
federal, state and local environmental laws, ordinances, rules, orders,
statutes, decrees, judgments, injunctions, codes and regulations, and any
other federal, state or local laws, ordinances, rules, codes and regulations,
and any other federal, state or local laws, ordinances, rules, codes and
regulations relating to the environment, human health or natural resources or
the regulation or control of or imposing liability or standards of conduct
concerning human health, the environment, Hazardous Materials or the clean-up
or other remediation of the Leased Property, or any part thereof.

"ENVIRONMENTAL PERMITS" shall mean all permits, licenses,
authorizations, registrations, certificates and approvals of Authorities
required by Environmental Laws.

"ENVIRONMENTAL VIOLATION" shall mean an activity, occurrence or
condition that violates or results in non-compliance with any Environmental
Laws.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
and any rule or regulation issued therefrom.

"ERISA GROUP" shall mean Lessee, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with Lessor or any
Subsidiary, are treated as a single employer under Section 414 of the Code.

"ESTOPPEL CERTIFICATE" shall mean that certain Estoppel Certificate to
be executed by the tenant occupying the 0000 Xxxxxx Xxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000 dated as of August 25, 1998, from such Tenant to Certificate
Trustee.

"EXCESS CASUALTY/CONDEMNATION PROCEEDS" shall mean the excess, if any,
of: (x) the aggregate of all awards, compensation and/or insurance proceeds
payable in connection with a Casualty or Condemnation MINUS (y) the portion
of the Lease Balance paid by Lessee pursuant to Article XIV of the Lease with
respect to such Casualty or Condemnation, and MINUS (z) any Rent due and
payable.

"EXCLUDED AMOUNTS" shall mean:

(a) all indemnity payments and expenses to which Certificate
Trustee or Agent in their respective individual capacities or any
Participant (or any of their respective successors, assigns, agents,
officers, directors or employees) is entitled pursuant to the Operative
Documents;

(b) any amounts payable under any Operative Documents to
reimburse Certificate Trustee or Agent or any Participant (including the
reasonable expenses incurred in connection with any such payment) for
performing or complying with any of the obligations of Lessee under and
as permitted by any Operative Document;

(c) any insurance proceeds (or payments with respect to
policy deductibles) under liability policies payable to Certificate
Trustee or Agent in their respective individual capacities or any
Participant (or their respective successors, assigns, agents, officers,
directors or employees);

(d) any insurance proceeds under policies maintained by
Certificate Trustee, Agent or any Participant and not required to be
maintained by Lessee under the Lease;

(e) any amount payable to Certificate Trustee, Agent, or the
Participants pursuant to Section 9.9 of the Participation Agreement; and

App. 1-7

(f) any payments of interest or yield on payments referred to
in CLAUSES (a) through (e) above.

"EXISTING LEASE" shall mean the Standard Industrial Lease - Multi-Tenant
dated September 12, 1994, by and between Transcontinental Realty Investors, a
California business trust, as lessor, and West Capital Financial Services
Corp., a California corporation with respect to the 5775 Roscoe Site existing
on the Advance Date, so long as such Existing Lease is not amended or
modified in any way.

"EXTENSION OPTION" shall have the meaning provided in Section 2.14(a) of
the Participation Agreement.

"EXTENSION OPTION EFFECTIVE DATE" shall have the meaning provided in
Section 2.14(a) of the Participation Agreement.

"EXTENSION OPTION RESPONSE DATE" shall have the meaning provided in
Section 2.14(a) of the Participation Agreement.

"FAIR MARKET VALUE" shall mean with respect to the Leased Property or
any portion thereof, as of the date of the determination, the fair market
value (which in any event shall not be less than zero) as determined by an
independent appraiser chosen by Lessor (at the direction of the Required
Participants) that would be obtained in an arm's-length transaction between
an informed and willing buyer (other than a buyer currently in possession)
and an informed and willing seller, under no compulsion to buy or sell, and
neither of which is related to Certificate Trustee, Agent or Lessee or any
Affiliate thereof, for the purchase of the Leased Property. Such fair market
value shall be calculated as the value for the use of the Leased Property,
assuming, in the determination of such fair market value (including for
purposes of Section 21.4 of the Lease), that the Leased Property is in the
condition and repair required to be maintained by the terms of the Lease
(unless such fair market value is being determined for purposes of the
Appraisal to be delivered prior to the Advance Date or for evaluating the
items described in the indemnity set forth in Section 21.4 of the lease or
the appraiser's report required pursuant to Section 7.8 of the Participation
Agreement, in which case this assumption shall not be made).

"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the rate set
forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New York
(including any such successor, "H.15(519)") on the preceding Business Day
opposite the caption "Federal Funds (Effective)"; or, if for any relevant day
such rate is not so published on any such preceding Business Day, the rate
for such day will be the arithmetic mean as determined by the Agent of the
rate for the last transaction in the overnight Federal funds arranged prior
to 9:00 a.m. (New York City time) on that day by each of three leading
brokers of Federal funds transactions in New York City selected by Agent.

"FINAL MATURITY DATE" shall mean the day immediately preceding the fifth
anniversary of the Advance Date, or if extended pursuant to Section 2.14 of
the Participation Agreement, the day immediately preceding the tenth
anniversary of the Advance Date.

"FINANCING STATEMENTS" shall mean all such UCC-1 Financing Statements
required by Agent or Certificate Trustee to be executed by Lessee or
Certificate Trustee in connection with the perfection of any security
interests granted by Certificate Trustee or Lessee, as the case may be, under
the Operative Documents.

"FIRPTA AFFIDAVIT" shall mean an affidavit delivered by a transferor of
real property interests in accordance with Section 1445 of the Code to inform
the transferee of such real property interest that the withholding of tax
pursuant to Section 1445 of the Code will not be required.

"FIRREA" shall mean The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989.

App. 1-8

"FIXED CHARGES" shall mean the sum of: (i) that portion of term
obligations (including principal and interest), (ii) and capital lease
payments on real property, (iii) income taxes and (iv) dividends, all during
the twelve (12) months preceding the date of calculation.

"FUND," "FUNDED" or "FUNDING" shall mean a funding by a Participant of
the principal under any Note or its Certificate Amount (as the case may be)
constituting a portion of an Advance as described in Article II of the
Participation Agreement.

"FUNDED DEBT" shall mean all funds borrowed by Lessee and its
consolidated Subsidiaries, including loans and capital leases, whether senior
or subordinated, plus the Lease Balance.

"GAAP" shall mean generally accepted accounting principles in the United
States as in effect from time to time consistently applied.

"GOVERNMENTAL ACTION" shall mean all applicable permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, decrees, licenses, exemptions, publications, filings, notices to
and declarations of or with, or required by, any Authority, or required by
any Applicable Laws, and shall include, all citings, Environmental Permits
and operating permits and licenses that are required for the use, occupancy,
zoning and operation of the Leased Property.

"HAZARDOUS MATERIAL" shall mean any substance, waste or material which
is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous by listing characteristic or
definition under any Environmental Law, including petroleum, crude oil or any
fraction thereof, petroleum derivatives, by-products and other hydrocarbons
and is or becomes regulated by any Authority, including any agency,
department, commission, board or instrumentality of the United States or the
State of California or any political subdivision of either of the foregoing
and also including asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls ("PCBS") and radon gas.

"HAZARDOUS SUBSTANCES UNDERTAKING AND UNSECURED INDEMNITY" shall mean
that certain Hazardous Substances Undertaking and Unsecured Indemnity dated
as of August 25, 1998, made by Lessee substantially in the form of Exhibit J
to the Participation Agreement.

"HIGHEST LAWFUL RATE" shall have the meaning provided in Section 2.13 of
the Participation Agreement.

"IMPROVEMENTS" shall mean any and all buildings, fixtures and
improvements located on the Land from time to time, including improvements
hereinafter constructed on the Land by Lessee as permitted by the Operative
Documents and including mechanical, electrical, HVAC and other building
systems attached to any buildings or improvements presently existing or to be
constructed on the Land, but shall not include personal property not
incorporated into the buildings located on the Land.

"IMPROVEMENTS BALANCE" means the product obtained by multiplying the
Lease Balance as of any date of determination by the Improvements Percentage.

"IMPROVEMENTS LEASE SUPPLEMENT" shall mean the Improvements Lease
Supplement substantially in the form of Exhibit B-2 to the Lease.

"IMPROVEMENTS PERCENTAGE" means the percentage of the Fair Market Value
of the Leased Property attributable to the Improvements related thereto, as
specified in the Appraisal delivered pursuant to Section 3.1(h) of the
Participation Agreement.

"IMPROVEMENTS PROCEEDS" means the product obtained by multiplying the
Net Sale Proceeds by the Improvements Percentage.

App. 1-9

"INDEMNITEE" shall mean each Participant, Certificate Trustee (in its
individual capacity and as trustee), Agent (in its individual capacity and as
Agent), Arranger, any additional, separate or co-trustee or co-agent
appointed in accordance with the terms of the Trust Agreement or the
Participation Agreement, and the respective Affiliates, successors, permitted
assigns, permitted transferees, employees, officers, directors, partners,
representatives and agents of each of the foregoing Persons; PROVIDED,
HOWEVER, that in no event shall Lessee or its Affiliates be an Indemnitee.

"INSOLVENCY EVENT" shall mean with respect to any Person, any event
pursuant to which such Person makes an assignment for the benefit of
creditors, files or has filed against it a petition in bankruptcy, petitions
or applies to or suffers any petition or application to any tribunal for the
appointment of a custodian, receiver or any trustee for it or for a
substantial part of its property, commences or has commenced against it any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, consents or acquiesces in the filing of any such
petition, application, proceeding or appointment of or taking possession by
the custodian, receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of such Person or any substantial part of its
property, or admits its inability to pay its debts generally as they become
due, or authorizes any of the foregoing to be done or taken on behalf of such
person.

"INSPECTING PARTIES" shall have the meaning provided in Section 9.8 of
the Lease.

"INSURANCE REQUIREMENTS" shall mean all terms and conditions of any
insurance policy required by the Lease to be maintained by Lessee and all
requirements of the issuer of any such policy.

"INTEREST RATE" shall mean with respect to each Loan for any Payment
Period and subject to Section 7.7 of the Participation Agreement, the sum of
the LIBO Rate for such Payment Period plus the Applicable Margin in effect
from time-to-time during such Payment Period PROVIDED that the Interest Rate
for the initial Payment Period commencing on the Advance Date shall be a rate
per annum equal to the Reference Rate.

"INVESTOR'S LETTER" shall have the meaning provided in Section 6.3(b) of
the Participation Agreement.

"INVOICE" shall have the meaning provided in Section 4.1 of the Lease.

"LAND" means the real property described on Schedule 1 to the Land Lease
Supplement, excluding any Improvements.

"LAND BALANCE" means the product obtained by multiplying the Lease
Balance as of any date of determination by the Land Percentage.

"LAND LEASE SUPPLEMENT" shall mean the Land Supplement substantially in
the form of Exhibit B-1 to the Lease.

"LAND PERCENTAGE" means the percentage of the Fair Market Value of the
Leased Property attributable to the Land, as specified in the Appraisal
delivered pursuant to Section 3.1(h) of the Participation Agreement.

"LAND PROCEEDS" means the product obtained by multiplying the Net Sale
Proceeds by the Land Percentage.

App. 1-10

"LEASE" shall mean that certain Master Lease dated as of August 25,
1998, between Lessor and Lessee, substantially in the form of Exhibit A to
the Participation Agreement, including each Lease Supplement entered into
pursuant thereto.

"LEASE BALANCE" shall mean, as of any date of determination, an amount
equal to the aggregate sum of the outstanding principal amount of the Loans
of all of the Lenders, and the outstanding Certificate Amounts of all of the
Certificate Purchasers.

"LEASE COLLATERAL" shall mean all of Lessee's right, title and interest
in the Leased Property together with replacements and substitutes thereof and
the proceeds thereof.

"LEASE DEFAULT" or "DEFAULT" shall mean any event, condition or failure
which, with notice or lapse of time or both, would become a Lease Event of
Default.

"LEASE EVENT OF DEFAULT" shall mean any event, condition or failure
designated as a "Lease Event of Default" in Article XVI of the Lease.

"LEASE EXPIRATION DATE" shall have the meaning provided in Section
2.3(a) of the Lease.

"LEASED PROPERTY" shall mean, collectively, the Land and the
Improvements.

"LEASE SUPPLEMENT" shall mean either the Land Supplement substantially
in the form of Exhibit B-1 to the Lease or the Improvement Supplement
substantially in the form of Exhibit B-2 to the Lease.

"LEASE TERM" shall have the meaning provided in Section 2.3 of the Lease.

"LENDERS" shall mean the holders of the Notes.

"LENDER'S POLICY" shall have the meaning provided in Section 3.1(l) of
the Participation Agreement.

"LESSEE" shall mean REMEC, Inc., a California corporation.

"LESSEE AFFILIATE" shall mean Lessee or any of its Subsidiaries.

"LESSEE GUARANTEE" shall mean that certain Guarantee dated as of August
25, 1998, made by Lessee substantially in the form of Exhibit G to the
Participation Agreement.

"LESSOR" shall mean Certificate Trustee.

"LESSOR LIENS" shall mean Liens on or against the Leased Property, the
Lease, the Trust Estate or any payment of Rent (a) which result from any act
of, or any Claim against Lessor (in its individual capacity or in its trust
capacity), Agent, or any Participant, in either case, unrelated to the
transactions contemplated by the Operative Documents or (b) which result from
any tax owed by Lessor (in its individual capacity), Agent, or any
Participant, except any Tax for which Lessee is obligated to indemnify.

"LIBO RATE" shall mean the applicable London interbank offered rate for
deposits in U.S. dollars appearing on Telerate Page 3750 as of 11:00 a.m.
(London time) two (2) Business Days prior to the first day of such Payment
Period, and having a maturity approximately equal to such Payment Period; or
if no London interbank offered rate of such maturity then appears on Telerate
Page 3750, then the rate equal to the London interbank offered rate for
deposits in U.S. dollars maturing immediately before or immediately after
such maturity, whichever is higher, as determined by the Agent from Telerate
Page 3750; or if Telerate Page 3750 is not available, the applicable LIBO
Rate for the relevant Payment Period shall be the rate determined by Agent to
be the arithmetic mean (rounded upward to the next 1/16 of 1%)

App. 1-11

of the values of interest per annum at which deposits in U.S. dollars are
offered by UBOC's London Branch to first-class banks in the London interbank
market at approximately 11:00 a.m. (London time) two (2) Business Days prior
to the first day of such Payment Period, in the approximate amount of the
UBOC's or its Affiliate's portion of the aggregate outstanding principal
amount of the Notes and Certificate Amounts and having a maturity
approximately equal to such Payment Period.

"LIBOR OFFICE" shall mean initially, the funding office of each
Participant (or the principal bank Affiliate of such Participant) designated
as such in Schedule II to the Participation Agreement; and thereafter, such
other office of such Participant (or the principal bank Affiliate of such
Participant), if any, which shall be making or maintaining such Participant's
investment in Certificates and Notes.

"LIEN" shall mean, with respect to any asset, any lien, mortgage, deed
of trust, encumbrance, pledge, charge, lease, easement, servitude, right of
others or security interest of any kind, including any thereof arising under
any conditional sale, capital lease or other title retention agreement.

"LIQUID ASSETS" shall mean cash and short term investments consisting of
commercial paper, U.S. Treasury Bills, corporate bonds and notes, and
municipal bonds and notes, all with maturities of less than 12 months.

"LOAN" shall have the meaning provided in Section 2.1 of the
Participation Agreement..

"LOAN AGREEMENT" shall mean the Loan Agreement dated as of August 25,
1998, among Certificate Trustee, Agent and the Lenders, substantially in the
form of Exhibit C to the Participation Agreement.

"LOAN DEFAULT" shall mean any event, condition or failure which, with
notice or lapse of time or both, would become a Loan Event of Default.

"LOAN DOCUMENTS" shall mean the Loan Agreement, the Notes, the Deed of
Trust, UCC financing statements, the Assignment of Lease and all documents
and instruments executed and delivered in connection with each of the
foregoing.

"LOAN EVENT OF DEFAULT" shall mean any event, condition or failure
designated as a "Loan Event of Default" in Section 6.1 of the Loan Agreement.

"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, operations, property, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, (ii) the
transactions contemplated by the Operative Documents, (iii) the validity or
enforceability of any of the Operative Documents or (iv) any rights or
remedies of the Administrative Agent or the Lenders under any thereof.

"MATERIAL INDEBTEDNESS" shall mean (i) the Credit Agreement and (ii) any
other indebtedness aggregating at least $500,000.

"MATERIAL PLAN" shall mean at any time one or more Plan or Plans having
aggregate Unfunded Liabilities in excess of $1,000,000.

"MATERIAL SUBSIDIARY" shall mean, at any time, a Subsidiary of Lessee
(or any group of Subsidiaries of Lessee who are parties to the same contract,
commitment or agreement): (i) to which more than fifteen percent (15%) of
Lessee's consolidated revenues in the prior fiscal year are attributable, or
(ii) whose assets constitute more than fifteen percent (15%) of Lessee's
consolidated assets as of the end of the most recent fiscal quarter, in each
case determined in accordance with GAAP.

App. 1-12

"MINIMUM AMOUNT" shall have the meaning provided in Section 5.14 of the
Participation Agreement.

"MORTGAGED PROPERTY" shall mean, as applicable, the property and rights
and interests defined as "Mortgaged Property" in the Deed of Trust.

"MULTIEMPLOYER PLAN" shall mean at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
those purposes any Person which ceased to be a member of the ERISA Group during
such five-year period.

"NET CASUALTY PROCEEDS" shall mean all amounts paid in connection with
any Casualty, and all interest earned thereon, less the expense of claiming
and collecting such amounts, including all costs and expenses in connection
therewith.

"NET CASUALTY/CONDEMNATION PROCEEDS" shall mean Net Casualty Proceeds or
Net Condemnation Proceeds, as applicable.

"NET SALE PROCEEDS" shall mean the Sale Proceeds less the costs of such
sale approved by Lessor as provided in Section 21.1 of the Lease.

"NET CONDEMNATION PROCEEDS" shall mean all amounts paid in connection
with any Condemnation, and all interest earned thereon, less the expense of
claiming and collecting such amounts, including all costs and expenses in
connection therewith.

"NON-CONSENTING PARTICIPANT" shall have the meaning provided in Section
2.14(a) of the Participation Agreement.

"NON-PARTY" shall mean any Person other than a Party.

"NONSEVERABLE" shall describe an alteration or part of an alteration
which cannot be readily removed from the Leased Property without causing
material damage to or materially impairing the value of the Leased Property.

"NOTE" shall mean a note evidencing a Loan issued by Borrower under the
Loan Agreement and denominated as such, substantially in the form of Exhibit
A to the Loan Agreement, and any and all Notes issued in replacement or
exchange therefor in accordance with the provisions thereof.

"OFFICER'S CERTIFICATE" of a Person shall mean a certificate signed by
the Chairman of the Board of Directors or the President or any Executive Vice
President or any Senior Vice President or any other Vice President of such
Person signing with the Treasurer or any Assistant Treasurer or the
Controller or any Assistant Controller, Cashier, Assistant Cashier or the
Secretary or any Assistant Secretary of such Person, or by any Vice President
who is also Controller, Treasurer or Cashier signing alone.

"OPERATIVE DOCUMENTS" shall mean the Participation Agreement, the Lease,
the Lease Supplements, each of the Loan Documents, the Lessee Guarantee, the
Certificates, the Trust Agreement, the Hazardous Substances Undertaking and
Unsecured Indemnity and each other agreement executed and delivered by Lessee
in connection with the consummation of the Overall Transaction.

"OVERALL TRANSACTION" shall mean all the transactions and activities
referred to or described in the Operative Documents, including the purchase
of the Leased Property and the transactions described in the Acquisition
Documents.

App. 1-13

"OVERDUE RATE" shall mean the lesser of (a) the highest interest rate
permitted by Applicable Laws and (b) an interest rate per annum equal to, in
the case of the Notes, the rate of interest otherwise payable with respect
thereto PLUS 2% and, in the case of the Certificates, the Yield Rate PLUS 2%.

"OWNER'S POLICY" shall have the meaning provided in Section 3.1(l) of
the Participation Agreement.

"PARTICIPANTS" shall mean the Certificate Purchasers and the Lenders,
collectively.

"PARTICIPATION" shall have the meaning provided in Section 6.3 of the
Participation Agreement.

"PARTICIPATION AGREEMENT" shall mean the Participation Agreement dated
as of August 25, 1998, among Lessee, Certificate Trustee, Agent, and the
Participants.

"PARTICIPATION HOLDER" shall have the meaning provided in Section 6.3 of
the Participation Agreement.

"PARTY" shall mean Lessor, Agent and/or any Participant, as applicable.

"PAYMENT DATE" shall mean with respect to the payment of interest or
Yield on the Loans or on Certificate Amounts, the last day of each applicable
Payment Period.

"PAYMENT DEFAULT" shall mean a Lease Event of Default described in
clause (a) of Article XVI of the Lease.

"PAYMENT PERIOD" shall mean with respect to any Loan or Certificate
Amount:

(a) initially, the period commencing on the Advance Date and ending on
the third (3rd) Business Day thereafter; and

(b) thereafter, each period commencing on the last day of the next
preceding Payment Period and ending one, three, six, nine or twelve months
thereafter,

PROVIDED that, the foregoing provisions relating to Payment Periods are
subject to the following:

(i) if any Payment Period would otherwise end on a day
that is not a Business Day, such Payment Period shall be extended
to the next succeeding Business Day unless the result of such
extension would be to carry such Payment Period into another
calendar month in which event such Payment Period shall end on
the immediately preceding Business Day;

(ii) any Payment Period that would otherwise extend
beyond the Final Maturity Date shall end on the Final maturity
Date; and

(iii) not more than one Payment Period shall exist at
the same time.

"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

"PERIL" shall have the meaning provided in Section 11.1(b) of the Lease.

"PERMITTED CONTEST" shall mean actions taken by a Person to contest in
good faith, by appropriate proceedings initiated timely and diligently
prosecuted, the legality, validity, amount or applicability to the Leased
Property or any interest therein of any Person of: (a) any law, regulation,
rule, judgment, order, or

App. 1-14

other legal provision or judicial or administrative requirements; (b) any
term or condition of, or any revocation or amendment of, or other proceeding
relating to, any Governmental Action; or (c) any Lien or Tax; PROVIDED that
the initiation and prosecution of such contest: (A) stays the enforcement,
application or any foreclosure proceeding of or with respect to any such
matter described in clauses (a) through (c) above, and (B) would not, in the
reasonable opinion of the Required Participants: (i) result in, or
materially increase the risk of, the imposition of any criminal liability on
any Indemnitee; (ii) materially and adversely affect the security interests
created by the Operative Documents or the right, title or interest of Lessor
in or to the Leased Property or the right of Lessor, or any Participant to
receive payment of the Certificate Amount of or Yield on any Certificate, the
principal of or interest on any Note, Rent, the Lease Balance, or any
interest therein; or (iii) materially and adversely affect the Fair Market
Value, utility or remaining useful life of the Leased Property or any
interest therein or the continued economic operation thereof; and PROVIDED
FURTHER that in any event adequate reserves in accordance with GAAP are
maintained against any adverse determination of such contest.

"PERMITTED EXCEPTIONS" shall mean, with respect to the Leased Property,
the exceptions set forth in the Owner's Policy and the Lender's Policy on the
Advance Date and accepted by the Participants pursuant to Section 3.1(l) of
the Participation Agreement.

"PERMITTED INVESTMENTS" shall mean (i) full faith and credit obligations
of the United States of America, or fully guaranteed as to interest and
principal by the full faith and credit of the United States of America,
maturing in not more than one year from the date such investment is made,
(ii) certificates of deposit having a final maturity of not more than one
year after the date of issuance thereof of a Participant or of any other
commercial bank incorporated under the laws of the United States of America
or any state thereof or the District of Columbia, which bank is a member of
the Federal Reserve System and has a combined capital and surplus of not less
than $500,000,000 and with a senior unsecured debt credit rating of at least
"A" by Xxxxx'x Investors Service, Inc. and "A" by Standard & Poor's Ratings
Group, (iii) commercial paper of companies, banks, trust companies or
national banking associations (in each case excluding Lessee and its
Affiliates) incorporated or doing business under the laws of the United
States or one of the States thereof, in each case having a remaining term
until maturity of not more than 180 days from the date such investment is
made and rated at least "P-1" by Xxxxx'x Investors Service, Inc. or at least
"A-1" by Standard & Poor's Ratings Group, (iv) repurchase agreements maturing
within one year with any financial institution having combined capital and
surplus of not less than $500,000,000 with any of the obligations described
in CLAUSES (I) through (III) as collateral so long as title to the underlying
obligations pass to Agent and such underlying securities shall be segregated
in a custodial or trust account for the benefit of Agent, and (v) money
market funds which invest solely in the investments described in CLAUSES (I)
and (IV) including any such funds advised, managed or sponsored by the
Certificate Trustee or an affiliate.

"PERMITTED LIENS" shall mean: (a) the respective rights and interests of
Lessee, the Participants, Agent and Certificate Trustee, as provided in the
Operative Documents, (b) Lessor Liens, (c) Liens for Taxes either not yet due
or being contested in good faith and by appropriate proceedings diligently
conducted and in any event constituting a Permitted Contest, so long as: (i)
no Lease Event of Default shall have occurred and be continuing, (ii) such
proceedings shall not involve any meaningful risk of the sale, forfeiture or
loss of any part of the Leased Property, the Trust Estate, title thereto or
any interest therein and shall not interfere with the use or disposition of
the Leased Property, the Trust Estate or the payment of Rent, and (iii) any
reserve or other appropriate provision required by GAAP shall have been made
in respect of the Lien, (d) materialmen's, mechanics', workers', repairmen's,
employees' or other like Liens arising in the ordinary course of business for
amounts either not yet due or being contested in good faith and by
appropriate proceedings and which in the aggregate do not exceed $50,000 so
long as: (i) no Lease Event of Default shall have occurred and be continuing,
(ii) such proceedings shall not involve any meaningful risk of the sale,
forfeiture or loss of any part of the Leased Property, the Trust Estate,
title thereto or any interest therein and shall not interfere with the use or
disposition of the Leased Property, the Trust Estate, or the payment of Rent,
and (iii) any reserve or other appropriate provision required by GAAP shall
have been made in respect of the Lien, (e) Liens arising after the Advance
Date

App. 1-15

out of judgments or awards not otherwise constituting a Lease Event of
Default under clause (i) of Article XVI of the Lease and with respect to
which at the time an appeal or proceeding for review is being prosecuted in
good faith and either have been bonded to the satisfaction of Lessor and the
Required Participants or the enforcement of such Lien has been stayed pending
such appeal or revew, and (f) Permitted Exceptions.

"PERSON" shall mean an individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization or Authority.

"PLAN" shall mean at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the Code and either (i)
is maintained, or contributed to, by any member of the ERISA Group or (ii)
has at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the ERISA
Group for employees of any Person which was at such time a member of the
ERISA Group.

"PREQUALIFIED TRANSFEREE" shall mean any financial institutions or
institutions approved of in writing by Lessee prior to the Advance Date.

"PROHIBITED TRANSACTION" shall mean a transaction that is prohibited
under Code Section 4975 or ERISA Section 406 and not exempt under Code
Section 4975 or ERISA Section 408.

"PURCHASE AMOUNT" shall mean, as of any date of determination, (a) the
Lease Balance, PLUS (b) all accrued but unpaid Rent, PLUS (c) all other sums
then due and payable under the Operative Documents by Lessee or any of its
Affiliates, including the Break Funding Amount and any other amounts due and
owing pursuant to Article VII of the Participation Agreement.

"PURCHASE OPTION" shall have the meaning provided in Section 20.1(b) of
the Lease.

"PURCHASE PRICE" shall mean the aggregate cash amounts to be paid to
Sellers, the aggregate cash paid in respect of repayment of loans secured by
liens on the Leased Property, and the aggregate cash paid in respect of
other consideration delivered to Sellers to acquire all of the Leased
Property pursuant to the Acquisition Documents, as follows: $7,206,886.98 to
the seller under the Transcontinental Acquisition Agreement, $5,949,070.05 to
the lender holding a first priority lien on the property to be purchased and
sold under the Transcontinental Acquisition Agreement to pay off the loan
secured by such lien plus $1,324.53 for each day after August 31, 1998 until
such loan repayment occurs, $200,000.00 to Lessee to reimburse Lessee for its
good faith deposit under the Transcontinental Acquisition Agreement,
$356,250.00 to Lessee to reimburse Lessee for its good faith deposit in the
escrow established under the Montpelier Acquisition Agreement, and
$3,139,811.84 to the lender holding a first priority lien on the property to
be purchased and sold under the Montpelier Acquisition Agreement to pay off
the loan secured by such lien plus $800.38 for each day after August 31, 1998
until such loan repayment occurs.

"RATE DETERMINATION DATE" shall mean with respect to any Payment Period,
the date which is two (2) Business Days prior to the Payment Date of the
Payment Period immediately preceding such Payment Period.

"REFERENCE RATE" shall mean the rate of interest most recently announced
by UBOC in the United States from time to time as its "reference rate" or
corporate base rate for calculating interest on certain loans, which need not
be the lowest interest rate charged by UBOC.

App. 1-16

"REGULATIONS" shall mean the income tax regulations promulgated from
time to time under and pursuant to the Code.

"RELATED PERSON" shall mean any Affiliate of Lessee, or any officer,
employee, director or shareholder of Lessee or any Affiliate, or a relative of
any of the foregoing.

"RELEASE" shall mean the release, deposit, disposal or leak of any
Hazardous Material into or upon or under any land or water or air, or otherwise
into the environment, including by means of burial, disposal, discharge,
emission, injection, spillage, leakage, seepage, leaching, dumping, pumping,
pouring, escaping, emptying, placement and the like.

"RENEWAL TERM" shall mean the additional five-year period of the term of
the Lease, commencing, if the Extension Option Request is approved by the
Participants in accordance with Section 2.14 of the Participation Agreement and
a Renewal Option is exercised in accordance with Section 20.1 of the Lease, on
the fifth anniversary of the Advance Date and ending on the day preceding the
tenth anniversary of the Advance Date.

"RENT" shall mean Basic Rent and Supplemental Rent, collectively.

"REPLACEMENT PARTICIPANT" shall have the meaning provided at Section
2.14(b) of the Participation Agreement.

"REPORTABLE EVENT" shall mean a "reportable event" described in Section
4043(b) of ERISA and the regulations thereunder.

"REQUIRED CERTIFICATE PURCHASERS" shall mean, as of any date of
determination, Certificate Purchasers having unpaid Certificate Amounts equal to
at least sixty-six and two-thirds percent (66-2/3%) of the aggregate unpaid
Certificate Amounts.

"REQUIRED LENDERS" shall mean, as of the date of the determination,
Lenders having aggregate investments in the Overall Transaction (as measured by
the outstanding principal amount of the Loans then outstanding) equal to at
least sixty-six and two-thirds percent (66-2/3%)of all such investments.

"REQUIRED PARTICIPANTS" shall mean, as of the date of the determination,
Lenders (and, so long as no Loan Event of Default not arising from a Lease Event
of Default shall have occurred and be continuing, Certificate Purchasers) having
aggregate investments in the Overall Transaction (as measured by the outstanding
principal amount of the Notes then outstanding and, so long as no Loan Event of
Default not arising from a Lease Event of Default shall have occurred and be
continuing, the Certificate Amounts then outstanding) equal to at least
sixty-six and two-thirds percent (66-2/3%) of the aggregate total of all such
investments.

"RESPONSIBLE OFFICER" of any Person shall mean the Chairman or Vice
Chairman of the Board of Directors, the Chairman or Vice Chairman of the
Executive Committee of the Board of Directors, the President, any Senior Vice
President or Executive Vice President, any Vice President, any Assistant Vice
President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant
Treasurer or Comptroller.

"SALE OPTION" shall have the meaning provided in Section 20.1(c) of the
Lease.

App. 1-17

"SALE PROCEEDS" shall mean the gross sale proceeds from a sale of all of
the Leased Property pursuant to Article XXI of the Lease.

"SALE RECOURSE AMOUNT" shall mean, as of any date of determination, the
product obtained by multiplying: (i) the aggregate sum of the amounts Funded by
the Participants on the Advance Date by (ii) the Improvements Percentage, and by
(iii) seventy-five percent (75%).

"SEC" shall mean the United States Securities and Exchange Commission.

"SECURITIES" shall mean common and preferred stock, partnership units
and participations, certificates of equity contribution, notes, bonds,
debentures, surplus debentures or notes, trust receipts and other obligations,
instruments or evidences of indebtedness, including debt instruments of public
and private issuers and tax-exempt securities (including warrants, rights, put
and call options and other options relating thereto or any combination thereof),
guarantees of indebtedness, chooses in action, other property or interests
commonly regarded as securities or any form of interest or participation therein
(whether certificated or uncertificated) or any instruments convertible into any
of the foregoing. Except where otherwise expressly indicated, references to
"Securities of" any Person or such Person's Securities shall mean Securities
issued by such Person.

"SECURITIES ACT" shall mean the Securities Act of 1933.

"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act of
1934.

"SELLERS" shall mean (a) Transcontinental Chesapeake Corporation, with
respect to the property commonly known as the Xxxxxxxxxx Xxxxx Xxxxxxxx Xxxx,
Xxx Xxxxx, Xxxxxxxxxx, 00000, and (b) Montpelier Pacific, Inc., with respect to
the property commonly known as 0000 Xxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx,
00000.

"SETTLEMENT ACTIONS" shall have the meaning provided in Section 6.2 of
the Trust Agreement.

"SIGNIFICANT CASUALTY" shall mean a Casualty that in the reasonable,
good faith judgment of the Required Participants: (i) renders the Leased
Property unsuitable for continued use as a property of the type of the Leased
Property immediately prior to such Condemnation, or (ii) is so substantial in
nature that restoration of the related property to substantially its condition
as it existed immediately prior to such Casualty would be impracticable or
impossible.

"SIGNIFICANT CONDEMNATION" shall mean (a) a Condemnation that involves a
taking of the Lessor's entire title to the Leased Property, or (b) a
Condemnation that in the reasonable, good faith judgment of the Required
Participants (i) renders the Leased Property unsuitable for continued use a
property of the type of the Leased Property immediately prior to such
Condemnation, or (ii) is so substantial in nature that restoration of the
related property to substantially its condition as it existed immediately prior
to such Condemnation would be impracticable or impossible.

"SITES" or "SITE" shall mean the Land and Improvements constituting: (a)
that certain real property commonly known as 0000 Xxxxxx Xxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000, together with the Improvements located thereon, (b) that
certain real property commonly known as 5785

App. 0-00

Xxxxxx Xxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, together with the
Improvements located thereon, (c) that certain real property commonly known
as 0000 Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, together with the
Improvements located thereon, and (d) that certain real property commonly
known as 0000 Xxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, together with
the Improvements located thereon, all of which are more particularly
described on Exhibit A to the Lease.

"STOCK" shall mean all shares, options, interests or other equivalents
(howsoever designated) of or in a corporation, whether voting or non-voting,
including common stock, warrants, preferred stock, convertible debentures and
all agreements, instruments and documents convertible, in whole or in part,
into any one or more of all of the foregoing. Except where otherwise expressly
indicated, references to "Stock of" any Person or such Person's Stock shall mean
Stock issued by such Person.

"SUBLEASE" shall have the meaning provided at Section 3.1(o) of the
Participation Agreement.

"SUBSIDIARY" shall mean for any Person any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "SUBSIDIARY" means a Subsidiary of Lessee.

"SUPPLEMENTAL RENT" shall mean any and all amounts, liabilities and
obligations other than Basic Rent which Lessee assumes or agrees or is otherwise
obligated to pay under the Lease or any other Operative Document (whether or not
designated as Supplemental Rent) to Certificate Trustee, Agent, any Participant,
or any other Person, including Purchase Amount, Break Funding Amounts,
Additional Costs, indemnities and damages for breach of any covenants,
representations, warranties or agreements.

"TANGIBLE NET WORTH" shall mean net worth, as defined under GAAP,
decreased by patents, licenses, trademarks, trade names, goodwill and other
similar intangible assets, organizational expenses, and monies due from
affiliates (including officers, shareholders and directors), all in accordance
with GAAP.

"TAXES" and "TAX" shall mean any and all fees (including documentation,
recording, license and registration fees), taxes (including income (whether net,
gross or adjusted gross), gross receipts, sales, rental, use, turnover,
value-added, property, excise and stamp taxes), levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever, together with any
penalties, fines or interest thereon or additions thereto.

"TERMINATION DATE" shall have the meaning provided at Sections 14.2 and
17.1(d) of the Lease.

"TERMINATION NOTICE" shall have the meaning provided at Section 14.1 of
the Lease.

"TITLE INSURANCE COMPANY" shall mean Chicago Title Insurance Company and
its successors and assigns.

App. 1-19

"TITLE POLICIES" shall have the meaning provided at Section 3.1(l) of
the Participation Agreement.

"TRANSACTION COSTS" shall mean (a) transaction costs and expenses
incurred by Arranger, Certificate Trustee and Agent in connection with the
consummation of the transactions described in the Operative Documents, and the
preparation, negotiation, execution and delivery of the Operative Documents,
including: (1) the reasonable fees, expenses and disbursements of Xxxxx, Xxxxx &
Xxxxx, document counsel; (2) the allocated costs (including allocated internal
costs) of internal counsel to Arranger; (3) costs of title insurance; (4) the
initial and ongoing fees and reasonable expenses of Certificate Trustee, Agent
and their special counsel; (5) all appraisal fees and reasonable expenses; (6)
all recording and filing fees incurred in connection with the filing of the
Deeds, the Lease Supplements, the Deed of Trust, all financing statements and
any other documents, including fees and expenses of the Title Insurance Company;
(7) costs (including allocated internal costs) and expenses for the review of
the environmental condition of the Leased Property;(8) all costs and expenses of
each company engaged to survey the Leased Property; (9) all real estate broker's
fees arising from the purchase of the Leased Property, and (10) all transfer
taxes arising from the purchase of the Leased Property.

"TRUST" shall mean the trust created by the Trust Agreement.

"TRUST AGREEMENT" shall mean the Trust Agreement, dated as of even date
with the Lease, between Certificate Trustee and the Certificate Purchasers,
substantially in the form of Exhibit F to the Participation Agreement.

"TRUSTEE" shall have the meaning provided in Section 17.1(j) of the
Lease.

"TRUST ESTATE" shall mean all estate, right, title and interest of
Certificate Trustee in, to and under the Leased Property, the Lease Collateral,
the Trust Agreement, the Lease, and all of the other Operative Documents,
including (i) all amounts (other than Excluded Amounts) of Rent and other
payments due or to become due of any kind for or with respect to the Leased
Property or payable under any of the foregoing, (ii) any or all payments or
proceeds received by Certificate Trustee after the termination of the Lease with
respect to the Leased Property as the result of the sale, lease or other
disposition thereof and (iii) proceeds of the investments in the Certificates
together with any other moneys, proceeds or property at any time received by
Certificate Trustee under or in connection with the Operative Documents.

"UBOC" shall mean Union Bank of California, a national banking
association, and its successors and assigns.

"UCC" shall mean the Uniform Commercial Code of California or any other
applicable jurisdiction.

"UNFUNDED LIABILITIES" shall mean, with respect to any Plan, at any
time, the amount, if any, by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all such Plan assets allocable to such liabilities under
Title IV of ERISA (excluding any accrued but unpaid contributions), all
determined as of the then most recent valuation date for such Plan, but only to
the extent that such excess

App. 1-20

represents a potential liability of a member of the ERISA Group to the PBGC
or any other Person under Title IV of ERISA.

"YIELD" shall mean with respect to each Payment Period (a) the Yield
Rate for such Payment Period multiplied by (b) the aggregate Certificate Amounts
outstanding.

"YIELD RATE" shall mean, with respect to each Payment Period, the
applicable rate at which Yield shall accrue and be payable from time to time on
the Certificates, which rate shall be the rate per annum equal to the sum of (i)
the Interest Rate for such Payment Period plus (ii) an additional 100 basis
points.

"5775 ROSCOE SITE" shall mean the Site commonly known as 0000 Xxxxxx
Xxxxx, Xxx Xxxxx, Xxxxxxxxxx and included within the real property legally
described on Exhibit A to the Lease.

App. 1-21

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PARTICIPATION AGREEMENT (REMEC, Inc. Trust 1998-A) Dated as of August 25, 1998

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