EXHIBIT 10.10
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of 09/02/97 ("AGREEMENT"), between
GENERAL ELECTRIC CAPITAL CORPORATION, with an office at 0000 XXXXXX XXXXXX XXXXX
000, XXXXXXXXXX, XX 00000 (hereinafter called, together with its successors and
assigns, if any, "LESSOR"), and HEADWAY TECHNOLOGIES, INC., a corporation
organized and existing under the laws of the state of California with its
mailing address and chief place of business at 000 X. XXXXXXXX XXXXX, XXXXXXXX,
XX 00000 (hereinafter called "LESSEE").
WITNESSETH:
I. LEASING:
(a) Subject to the terms and conditions set forth below, Lessor agrees to
lease to Lessee, and Lessee agrees to lease from Lessor, the equipment
("EQUIPMENT") described in Annex A to any schedule hereto ("SCHEDULE") or, if
applicable, to Section A of any Schedule. Terms defined in a SCHEDULE and not
otherwise defined herein shall have the meanings ascribed to them in such
Schedule.
(b) The obligation of Lessor to purchase Equipment from the manufacturer or
supplier thereof ("SUPPLIER") and to lease the same to LESSEE under any Schedule
shall be subject to receipt by Lessor, prior to the Lease Commencement Date
(with respect to such Equipment), of each of the following documents in form and
substance satisfactory to Lessor: (i) a Schedule relating to the Equipment then
to be leased hereunder, (ii) a Purchase Order Assignment and Consent in the form
of Annex B to the applicable Schedule, unless Lessor shall have delivered its
purchase order for such Equipment, (iii) evidence of insurance which complies
with the requirements of Section X, and (iv) such other documents as Lessor may
reasonably request. As a further condition to such obligations of Lessor,
Lessee shall, upon delivery of such Equipment (but not later than the Last
Delivery Date specified in the applicable Schedule) execute and deliver to
Lessor a Certificate of Acceptance (which may be in the form of Annex C to the
applicable Schedule) covering such Equipment, and, if requested by Lessor,
deliver to Lessor a xxxx of sale therefor (in form and substance satisfactory to
Lessor). Lessor hereby appoints Lessee its agent for inspection and acceptance
of the Equipment from the Supplier. Upon execution by Lessee of any Certificate
of Acceptance, the Equipment described thereon shall be deemed to have been
delivered to, and irrevocably accepted by, Lessee for lease hereunder.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder and Lessee's right to use the Equipment
shall commence on the date of execution by Lessee of the Certificate of
Acceptance for such Equipment ("LEASE COMMENCEMENT DATE"). The term of this
Agreement shall be the period specified in the applicable Schedule. If any term
is extended, the word "term" shall be deemed to refer to all extended terms, and
all provisions of this Agreement shall apply during any extended terms, except
as may be otherwise specifically provided in writing.
(b) Rent shall be paid to Lessor at its address stated above, except as
otherwise directed by Lessor. Payments of rent shall be in the amount set forth
in, and due in accordance with, the provisions of the applicable Schedule. If
one or more Advance Rents are payable, such Advance Rent shall be (i) set forth
on the applicable Schedule, (ii) due upon acceptance by Lessor of such Schedule,
and (iii) when received by Lessor, applied to the first rent payment and the
balance, if any, to the final rental payment(s) under such Schedule. In no event
shall any Advance Rent or any other rent payments be refunded to Lessee. If rent
is not paid within ten days of its due date, Lessee agrees to pay a late charge
of five cents ($.05) per dollar on, and in addition to, the amount of such rent
but not exceeding the lawful maximum, if any.
III. RENT ADJUSTMENT:
(a) The periodic rent payments in each Schedule have been calculated on the
assumption (which, as between Lessor and Lessee, is mutual) that the maximum
effective corporate income tax rate (exclusive of any minimum tax rate) for
calendar-year taxpayers ("EFFECTIVE RATE") will be thirty-five percent (35%)
each year during the lease term.
(b) If, solely as a result of Congressional enactment of any law
(including, without limitation, any modification of, or amendment or addition
to, the Internal Revenue Code of 1986, as amended, (the "CODE"), the Effective
Rate is higher than thirty-five percent (35%) for any year during the lease
term, then Lessor shall have the right to increase such rent payments by
requiring payment of a single additional sum equal to the product of (i) the
Effective Rate (expressed as a decimal) for such year less .35 (or, in the event
that any adjustment has been made hereunder for any previous year, the Effective
Rate (expressed as a decimal) used in calculating the next previous adjustment)
times (ii) the adjusted Termination Value, divided by (iii) the difference
between the new Effective Tax Rate (expressed as a decimal) and one (1). The
adjusted Termination Value shall be the Termination Value (calculated as of the
first rental due in the year for which such adjustment is being made) less the
Tax Benefits that would be allowable under Section 168 of the Code (as of the
first day of the year for which such adjustment is being made and all subsequent
years of the lease term). Lessee shall pay to Lessor the full amount of the
additional rent payment on the later of (i) receipt of notice or (ii) the first
day of the year for which such adjustment is being made.
(c) Lessee's obligations under this Section III shall survive any
expiration or termination of this Agreement.
IV. TAXES: Except as provided in Sections III and XV(c), Lessee shall have no
liability for taxes imposed by the United States of America or any State or
political subdivision thereof which are on or measured by the net income of
Lessor. Lessee shall report (to the extent that it is legally permissible) and
pay promptly all other taxes, fees and assessments due, imposed, assessed or
levied against any Equipment (or the purchase, ownership, delivery, leasing,
possession, use or operation thereof), this Agreement (or any rentals or
receipts hereunder), any Schedule, Lessor or Lessee by any foreign, federal,
state or local government or taxing authority during or related to the term of
this Agreement, including, without limitation, all license and registration
fees, and all sales, use, personal property, excise, gross receipts, franchise,
stamp or other taxes, imposts, duties and charges, together with any penalties,
fines or interest thereon (all hereinafter called "TAXES"). Lessee shall (i)
reimburse Lessor upon receipt of written request for reimbursement for any Taxes
charged to or assessed against Lessor, (ii) on request of Lessor, submit to
Lessor written evidence of Lessee's payment of Taxes, (iii) on all reports or
returns show the ownership of the Equipment by Lessor, and (iv) send a copy
thereof to Lessor.
V. REPORTS:
(a) Lessee will notify Lessor in writing, within ten (10) days after any
tax or other lien shall attach to any Equipment, of the full particulars thereof
and of the location of such Equipment on the date of such notification.
(b) Lessee will within ninety (90) days of the close of each fiscal year of
Lessee, deliver to Lessor, Lessee's balance sheet and profit and loss statement,
certified by a recognized firm of certified public accountants. Upon request
Lessee will deliver to Lessor quarterly, within ninety (90) days of the close of
each fiscal quarter of Lessee, in reasonable detail, copies of Lessee's
quarterly financial report certified by the chief financial officer of LESSEE.
(c) Lessee will permit Lessor to inspect any Equipment during normal
business hours.
(d) Lessee will keep the Equipment at the Equipment Location (specified in
the applicable Schedule) and will promptly notify Lessor of any relocation of
Equipment. Upon the written request of Lessor, Lessee will notify Lessor
forthwith in writing of the location of any Equipment as of the date of such
notification.
(e) Lessee will promptly and fully report to Lessor in writing if any
Equipment is lost or damaged (where the estimated repair costs would exceed ten
percent (10%) of its then fair market value), or is otherwise involved in an
accident causing personal injury or property damage.
(f) Within sixty (60) days after any request by Lessor, Lessee will furnish
a certificate of an authorized officer of Lessee stating that he has reviewed
the activities of Lessee and that, to the best of his knowledge, there exists no
default (as described in Section XII) or event which with notice or lapse of
time (or both) would become such a default.
VI. DELIVERY, USE AND OPERATION:
(a) All Equipment shall be shipped directly from the Supplier to Lessee.
(b) Lessee agrees that the Equipment will be used by Lessee solely in the
conduct of its business and in a manner complying with all applicable federal,
state, and local laws and regulations.
(c) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET OR HYPOTHECATE ANY EQUIPMENT,
OR THE INTEREST OF LESSEE HEREUNDER, NOR SHALL LESSEE REMOVE ANY EQUIPMENT FROM
THE CONTINENTAL UNITED STATES, WITHOUT THE PRIOR WRITTEN CONSENT OF THE LESSOR.
(d) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those which result from acts of Lessor.
VII. SERVICE:
(a) Lessee will, at its sole expense, maintain each unit of Equipment in
good operating order, repair, condition and appearance in accordance with
manufacturer's recommendations, normal wear and tear excepted. Lessee shall, if
at any time requested by Lessor, affix in a prominent position on each unit of
Equipment plates, tags or other identifying labels showing ownership thereof by
Lessor.
(b) Lessee will not, without the prior consent of Lessor, affix or install
any accessory, equipment or device on any Equipment if such addition will impair
the originally intended function or use of such Equipment. All additions,
repairs, parts, supplies, accessories, equipment, and devices furnished,
attached or affixed to any Equipment which are not readily removable shall be
made only in compliance with applicable law, including Internal Revenue Service
guidelines, and shall become the property of Lessor. Lessee will not, without
the prior written consent of Lessor and subject to such conditions as Lessor may
impose for its protection, affix or install any Equipment to or in any other
personal or real property.
(c) Any alterations or modifications to the Equipment that may, at any time
during the term of this Agreement, be required to comply with any applicable
law, rule or regulation shall be made at the expense of Lessee.
VIII. STIPULATED LOSS VALUE: Lessee shall promptly and fully notify Lessor in
writing if any unit of Equipment shall be or become worn out, lost, stolen,
destroyed, irreparably damaged in the reasonable determination of Lessee, or
permanently rendered unfit for use from any cause whatsoever (such occurrences
being hereinafter called "CASUALTY OCCURRENCES"). On the rental payment date
next succeeding a Casualty Occurrence (the "PAYMENT DATE"), Lessee shall pay
Lessor the sum of (x) the Stipulated Loss Value of such unit calculated as of
the rental next preceding such Casualty Occurrence ("CALCULATION DATE"); and (y)
all rental and other amounts which are due hereunder as of the Payment Date.
Upon payment of all sums due hereunder, the term of this lease as to such unit
shall terminate and (except in the case of the loss, theft or complete
destruction of such unit) Lessor shall be entitled to recover possession of such
unit.
IX. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the entire risk of any
loss, theft, damage to, or destruction of, any unit of Equipment from any cause
whatsoever from the time the Equipment is shipped to Lessee.
X. INSURANCE: Lessee agrees, at its own expense, to keep all Equipment insured
for such amounts and against such hazards as Lessor may require, including, but
not limited to, insurance for damage to or loss of such Equipment and liability
coverage for personal injuries, death or property damage, with Lessor named as
additional insured and with a loss payable clause in favor of Lessor, as its
interest may appear, irrespective of any breach of warranty or other act or
omission of Lessee. The insurance shall provide (i) liability coverage in an
amount equal to at least ONE MILLION U.S. DOLLARS ($1,000,000.00) total
liability per occurrence, unless otherwise stated in any Schedule, and (ii)
casualty/property damage coverage in an amount equal to the higher of the
Stipulated Loss Value or the full replacement cost of the Equipment; or at such
other amounts as may be required by Lessor. All such policies shall be with
companies, and on terms, satisfactory to Lessor. Lessee agrees to deliver to
Lessor evidence of insurance satisfactory to Lessor. No insurance shall be
subject to any co-insurance clause. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make proof of loss and claim for insurance, and to make
adjustments with insurers and to receive payment of and execute or endorse all
documents, checks or drafts in connection with payments made as a result of such
insurance policies. Any expense of Lessor in adjusting or collecting insurance
shall be borne by Lessee. Lessee will not make adjustments with insurers except
(i) with respect to claims for damage to any unit of Equipment where the repair
costs do not exceed ten percent (10%) of such unit's fair market value, or (ii)
with Lessor's written consent. Said policies shall provide that the insurance
may not be altered or canceled by the insurer until after thirty (30) days
written notice to Lessor. Lessor may, at its option, apply proceeds of
insurance, in whole or in part, to (i) repair or replace Equipment or any
portion thereof, or (ii) satisfy any obligation of Lessee to Lessor hereunder.
XI. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or any Schedule,
Lessee shall promptly, at its own cost and expense: (i) perform any testing and
repairs required to place the affected units of Equipment in the same condition
and appearance as when received by Lessee (reasonable wear and tear excepted)
and in good working order for their originally intended purpose; (ii) if
deinstallation, disassembly or crating is required, cause such units to be
deinstalled, disassembled and crated by an authorized manufacturer's
representative or such other service person as is satisfactory to Lessor; and
(iii) return such units to a location within the continental United States as
Lessor shall direct; (iv) ensure all Lessee installed markings which are not
necessary for the operation, maintenance or repair of the Equipment are properly
removed; (v) provide that all Equipment will be cleaned and cosmetically
acceptable, and in such condition as to be immediately installed and put into
use in a similar environment for which the Equipment was originally intended to
be used; (vi) remove all waste material and fluid from the Equipment and dispose
of in accordance with then current waste disposal laws; and (vii) obtain and pay
for a policy of transit insurance for the redelivery period in an amount equal
to the replacement value of the Equipment, and name Lessor as the loss payee on
all such policies of insurance.
(b) Until Lessee has fully complied with the requirements of Section XI(a)
above, Lessee's rent payment obligation and all other obligations under this
Agreement shall continue from month to month notwithstanding any expiration or
termination of the lease term. Lessor may terminate such continued leasehold
interest upon ten (10) days notice to Lessee.
(c) At least ninety (90) days and not more than one hundred twenty (120)
days prior to lease termination, Lessee shall: (i) provide to Lessor a detailed
inventory of all components of the Equipment including model and serial numbers;
and (ii) provide an up-to-date copy of all documentation pertaining to the
Equipment including, but not limited to service manuals, blue prints, process
flow diagrams, operating manuals and maintenance records.
(d) At least one hundred twenty (120) days prior to and continuing up to
lease termination, Lessee shall, upon receiving reasonable notice from Lessor,
make the Equipment available for on-site operational inspections by potential
purchasers. Lessee shall provide personnel, power and other requirements
necessary to demonstrate electrical, hydraulic and mechanical systems for each
item of Equipment.
XII. DEFAULT:
(a) Lessor may in writing declare this Agreement in default if: Lessee
breaches its obligation to pay rent or any other sum when due and fails to cure
the breach within ten (10) days; Lessee breaches any of its insurance
obligations under Section X; Lessee breaches any of its other obligations and
fails to cure that breach within thirty (30) days after written notice thereof;
any representation or warranty made by Lessee in connection with this Agreement
shall be false or misleading in any material respect; Lessee becomes insolvent
or ceases to do business as a going concern; any Equipment is illegally used; or
a petition is filed by or against Lessee or any Guarantor of Lessee's
obligations to Lessor under any bankruptcy or insolvency laws. Such declaration
shall apply to all Schedules except as specifically excepted by Lessor.
(b) After default, at the request of Lessor, Lessee shall comply with the
provisions of Section XI(a). Lessee hereby authorizes Lessor to enter, with or
without legal process, any premises where any Equipment is believed to be and
take possession thereof. Lessee shall, without further demand, forthwith pay to
Lessor (i) as liquidated damages for loss of a bargain and not as a penalty, the
Stipulated Loss Value of the Equipment (calculated as of the rental next
preceding the declaration of default), and (ii) all rentals and other sums then
due hereunder. Lessor may, but shall not be required to, sell Equipment at
private or public sale, in bulk or in parcels, with or without notice, and
without having the Equipment present at the place of sale; or Lessor may, but
shall not be required to, lease, otherwise dispose of or keep idle all or part
of the Equipment; and Lessor may use Lessee's premises for any or all of the
foregoing without liability for rent, costs, damages or otherwise. The proceeds
of sale, lease or other disposition, if any, shall be applied in the following
order of priorities: (1) to pay all of Lessor's costs, charges and expenses
incurred in taking, removing, holding, repairing and selling, leasing or other
wise disposing of Equipment; then, (2) to the extent not previously paid by
Lessee, to pay Lessor all sums due from Lessee hereunder; then (3) to reimburse
to Lessee any sums previously paid by Lessee as liquidated damages; and (4) any
surplus shall be retained by Lessor. Lessee shall pay any deficiency in (1) and
(2) forthwith.
(c) the foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition
(and the time and place thereof), and the manner and place of any advertising.
Lessee shall pay Lessor's actual attorney's fees incurred in connection with the
enforcement, assertion, defense or preservation of Lessor's rights and remedies
hereunder, or if prohibited by law, such lesser sum as may be permitted. Waiver
of any default shall not be a waiver of any other or subsequent default.
(d) Any default under the terms of this or any other agreement between
Lessor and Lessee may be declared by Lessor a default under this and any such
other agreement.
XIII. ASSIGNMENT: Lessor may, without the consent of Lessee, assign this
Agreement or any Schedule. Lessee agrees that if Lessee receives written notice
of an assignment from Lessor, Lessee will pay all rent and all other amounts
payable under any assigned Equipment Schedule to such assignee or as instructed
by Lessor. Lessee further agrees to confirm in writing receipt of the notice of
assignment as may be reasonably requested by assignee. Lessee hereby waives and
agrees not to assert against any such assignee any defense, set-off, recoupment
claim or counterclaim which Lessee has or may at any time have against Lessor
for any reason whatsoever.
XIV. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease. Lessee's
obligation to pay rent and other amounts due hereunder shall be absolute and
unconditional. Lessee shall not be entitled to any abatement or reductions of,
or set-offs against, said rent or other amounts, including, without limitation,
those arising or allegedly arising out of claims (present or future, alleged or
actual, and including claims arising out of strict tort or negligence of Lessor)
of Lessee against Lessor under this Agreement or otherwise. Nor shall this
Agreement terminate or the obligations of Lessee be affected by reason of any
defect in or damage to, or loss of possession, use or destruction of, any
Equipment from whatsoever cause. It is the intention of the parties that rents
and other amounts due hereunder shall continue to be payable in all events in
the manner and at the times set forth herein unless the obligation to do so
shall have been terminated pursuant to the express terms hereof.
XV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep harmless Lessor, its
agents, employees, successors and assigns from and against any and all losses,
damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature, in contract or tort, whether caused
by the active or passive negligence of Lessor or otherwise, and including, but
not limited to, Lessor's strict liability in tort, arising out of (i) the
selection, manufacture, purchase, acceptance or rejection of Equipment, the
ownership of Equipment during the term of this Agreement, and the delivery,
lease, possession, maintenance, uses, condition, return or operation of
Equipment (including, without limitation, latent and other defects, whether or
not discoverable by Lessor or Lessee and any claim for patent, trademark or
copyright infringement or environmental damage) or (ii) the condition of
Equipment sold or disposed of after use by Lessee, any sublessee or employees of
Lessee. Lessee shall, upon request, defend any actions based on, or arising out
of, any of the foregoing.
(b) Lessee hereby represents, warrants and covenants that (i) on the Lease
Commencement Date for any unit of Equipment, such unit will qualify for all of
the items of deduction and credit specified in Section C of the applicable
Schedule ("TAX BENEFITS") in the hands of Lessor (all references to Lessor in
this Section XV include Lessor and the consolidated taxpayer group of which
Lessor is a member), and (ii) at no time during the term of this Agreement will
Lessee take or omit to take, nor will it permit any sublessee or assignee to
take or omit to take, any action (whether or not such act or omission is
otherwise permitted by Lessor or the terms of this Agreement), which will result
in the disqualification of any Equipment for, or recapture of, all or any
portion of such Tax Benefits.
(c) If as a result of a breach of any representation, warranty or covenant
of the Lessee contained in this Agreement or any Schedule (x) tax counsel of
Lessor shall determine that Lessor is not entitled to claim on its Federal
income tax return all or any portion of the Tax Benefits with respect to any
Equipment, or (y) any such Tax Benefit claimed on the Federal income tax return
of Lessor is disallowed or adjusted by the Internal Revenue Service, or (z) any
such Tax Benefit is recomputed or recaptured (any such determination,
disallowance, adjustment, recomputation or recapture being hereinafter called a
"LOSS"), then Lessee shall pay to Lessor, as an indemnity and as additional
rent, such amount as shall, in the reasonable opinion of Lessor, cause Lessor's
after-tax economic yields and cash flows, computed on the same assumptions,
including tax rates (unless any adjustment has been made under Section III
hereof, in which case the Effective Rate used in the next preceding adjustment
shall be substituted), as were utilized by Lessor in originally evaluating the
transaction (such yields and flows being hereinafter called the "NET ECONOMIC
RETURN") to equal the Net Economic Return that would have been realized by
Lessor if such Loss had not occurred. Such amount shall be payable upon demand
accompanied by a statement describing in reasonable detail such Loss and the
computation of such amount.
(d) All of Lessor's rights, privileges and indemnities contained in this
Section XV shall survive the expiration or other termination of this Agreement
and the rights, privileges and indemnities contained herein are expressly made
for the benefit of, and shall be enforceable by Lessor, its successors and
assigns.
XVI. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT
ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS
NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY
OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All
such risks, as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing, Lessor shall have no responsibility or liability to
Lessee or any other person with respect to any of the following, regardless of
any negligence of Lessor (i) any liability, loss or damage caused or alleged to
be caused directly or indirectly by any Equipment, any inadequacy thereof, any
deficiency or defect (latent or otherwise) therein, or any other circumstance in
connection therewith, (ii) the use, operation or performance of any Equipment or
any risks relating thereto; (iii) any interruption of service, loss of business
or anticipated profits or consequential damages; or (iv) the delivery,
operation, servicing, maintenance, repair, improvement or replacement of any
Equipment. If, and so long as, no default exists under this Lease, Lessee shall
be, and hereby is, authorized during the term of this Lease to assert and
enforce at Lessee's sole cost and expense, from time to time, in the name of and
for the account of Lessor and/or Lessee, as their interests may appear, whatever
claims and rights Lessor may have against any Supplier of the Equipment.
XVII. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby represents and
warrants to Lessor that on the date hereof and on the date of execution of each
Schedule:
(a) Lessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "DOCUMENTS") and
is duly qualified to do business wherever necessary to carry on its present
business and operations, including the jurisdiction(s) where the Equipment is or
is to be located.
(b) The Documents have been duly authorized, executed and delivered by
Lessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into or
performance by Lessee of the Documents except such as have already been
obtained.
(d) The entry into and performance by Lessee of the Documents will not: (i)
violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's Certificate of Incorporation or By-Laws; or (ii) result in
any breach of, constitute a default under or result in the creation of any lien,
charge, security interest or other encumbrance upon any Equipment pursuant to
any indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument (other than this Agreement) to which Lessee is a party.
(e) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Lessee, which will have a material adverse effect on the ability of Lessee to
fulfill its obligations under this Agreement.
(f) The Equipment accepted under any Certificate of Acceptance is and will
remain tangible personal property.
(g) Each Balance Sheet and Statement of Income delivered to Lessor has been
prepared in accordance with generally accepted accounting principles, and since
the date of the most recent such Balance Sheet and Statement of Income, there
has been no material adverse change.
(h) Lessee is and will be at all times validly existing and in good
standing under the laws of the State of its incorporation (specified in the
first sentence of this Agreement).
(i) The Equipment will at all times be used for commercial or business
purposes.
XVIII. EARLY TERMINATION:
(a) On or after the First Termination Date (specified in the applicable
Schedule), Lessee may, so long as no default exists hereunder, terminate this
Agreement as to all (but not less than all) of the Equipment on such Schedule as
of a rent payment date ("TERMINATION DATE") upon at least ninety (90) days prior
written notice to Lessor.
(b) Lessee shall, and Lessor may, solicit cash bids for the Equipment on an
AS IS, WHERE IS BASIS without recourse to or warranty from Lessor, express or
implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall (i)
certify to Lessor any bids received by Lessee and (ii) pay to Lessor (A) the
Termination Value (calculated as of the rental due on the Termination Date) for
the Equipment, and (B) all rent and other sums due and unpaid as of the
Termination Date.
(c) Provided that all amounts due hereunder have been paid on the
Termination Date, Lessor shall (i) sell the Equipment on an AS IS BASIS for cash
to the highest bidder and (ii) refund the proceeds of such sale (net of any
related expenses) to Lessee up to the amount of the Termination Value. If such
sale is not consummated, no termination shall occur and Lessor shall refund the
Termination Value (less any expenses incurred by Lessor) to Lessee.
(d) Notwithstanding the foregoing, Lessor may elect by written notice, at
any time prior to the Termination Date, not to sell the Equipment. In that
event, on the Termination Date Lessee shall (i) return the Equipment (in
accordance with Section XI) and (ii) pay to Lessor all amounts required under
Section XVIII(b) less the amount of the highest bid certified by Lessee to
Lessor.
XIX. PURCHASE OPTION:
(a) So long as no default exists hereunder and the lease has not been
earlier terminated, Lessee may at lease expiration, upon at least one hundred
eighty (180) days prior written notice to Lessor, purchase all (but not less
than all) of the Equipment in any Schedule on an AS IS WHERE IS BASIS, without
recourse to or warranty from Lessor, express or implied, for cash equal to its
then Fair Market Value (plus all applicable sales taxes).
(b) "FAIR MARKET VALUE" shall mean the price which a willing buyer (who is
neither a lessee in possession nor a used equipment dealer) would pay for the
Equipment in an arm's-length transaction to a willing seller under no compulsion
to sell; provided, however, that in such determination: (i) the Equipment shall
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be assumed to be in the condition in which it is required to be maintained and
returned under this Agreement; (ii) in the case of any installed Equipment, that
Equipment shall be valued on an installed basis; and (iii) costs of removal from
current location shall not be a deduction from such valuation. If Lessor and
Lessee are unable to agree on the Fair Market Value at least one hundred thirty-
five (135) days before lease expiration, Lessor shall appoint an independent
appraiser (reasonably acceptable to Lessee) to determine Fair Market Value, and
that determination shall be final, binding and conclusive. Lessee shall bear all
costs associated with any such appraisal.
(c) Lessee shall be deemed to have waived this option unless it provides
Lessor with written notice of its irrevocable election to exercise the same
within fifteen (15) days after Fair Market Value is determined (by agreement or
appraisal).
XX. MISCELLANEOUS:
(a) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY,
THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY
RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS LEASE
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(b) Unless and until Lessee exercises its rights under Section XIX above,
nothing herein contained shall give or convey to Lessee any right, tide or
interest in and to any Equipment except as a lessee. Any cancellation or
termination by Lessor, pursuant to the provision of this Agreement, any
Schedule, supplement or amendment hereto, or the lease of any Equipment
hereunder, shall not release Lessee from any then outstanding obligations to
Lessor hereunder. All Equipment shall at all times remain personal property of
Lessor regardless of the degree of its annexation to any real property and shall
not by reason of any installation in, or affixation to, real or personal
property become a part thereof.
(c) Time is of the essence of this Agreement. Lessor's failure at any time
to require strict performance by Lessee of any of the provisions hereof shall
not waive or diminish Lessor's right thereafter to demand strict compliance
therewith. Lessee agrees, upon Lessor's request, to execute any instrument
necessary or expedient for filing, recording or perfecting the interest of
Lessor. All notices required to be given hereunder shall be deemed adequately
given if sent by registered or certified mail to the addressee at its address
stated herein, or at such other place as such addressee may have designated in
writing. This Agreement and any Schedule and Annexes thereto constitute the
entire agreement of the parties with respect to the subject matter hereof. NO
VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF IT'S
PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
(d) In case of a failure of Lessee to comply with any provision of this
Agreement, Lessor shall have the right, but shall not be obligated, to effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Lessor in effecting such compliance shall
constitute additional rent due to Lessor within five days after the date Lessor
sends notice to Lessee requesting payment. Lessor's effecting such compliance
shall not be a waiver of Lessee's default.
(e) Any rent or other amount not paid to Lessor when due hereunder shall
bear interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent (18%) per annum or the maximum rate allowed by law.
Any provisions in this Agreement and any Schedule which are in conflict with any
statute, law or applicable rule shall be deemed omitted, modified or altered to
conform thereto.
(f) Adjustment to Capitalized Lessor's Cost. Lessee hereby irrevocably
authorizes Lessor to adjust the Capitalized Lessor's Cost up or down by no more
than ten percent (10%) within each Schedule to account for equipment change
orders, equipment returns, invoicing errors, and similar matters. Lessee
acknowledges and agrees that the Rent shall be adjusted as a result of such
change in the Capitalized Lessor's Cost. Lessor shall send Lessee a written
notice seating the final Capitalized Lessor's Cost, if different from that
disclosed on the Schedule.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION HEADWAY TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------- -------------------------------
Name: XXXX X. XXXXXXX Name: XXXXXX X. XXXXX
-------------------------- -----------------------------
Title: CREDIT ANALYST Title: CHIEF FINANCIAL OFFICER
------------------------- ----------------------------
(4/94) 1st Amendment/Electronics
ADDENDUM
TO SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF September 2, 1997
THIS ADDENDUM (this "ADDENDUM") amends and supplements the above schedule
(the "SCHEDULE") to the above lease (the "LEASE"), between GENERAL ELECTRIC
CAPITAL CORPORATION ("LESSOR") and HEADWAY TECHNOLOGIES, INC. ("LESSEE") and is
hereby incorporated into the Schedule as though fully set forth therein.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Lease.
1. For purposes of this Schedule only, the following additional Financial
Terms are added to Paragraph B of the Schedule:
Secondary Term Lease Rate Factor: 1.725567
Secondary Term (No. of Months): 14
Secondary Term Commencement Date: 09/15/02
2. For purposes of this Schedule only, the following is added to Paragraph D
of the Schedule:
4. Secondary Term Rent. Unless the Schedule has been earlier terminated
as provided therein, commencing on the Secondary Term Commencement Date and
on the same day of each month thereafter (each, a "RENT PAYMENT DATE")
during the Secondary Term, Lessee shall pay as rent ("SECONDARY TERM RENT")
the product of the Secondary Term Lease Rate Factor times the Capitalized
Lessor's Cost of all Equipment on this Schedule.
3. For purposes of the Schedule only, Section XIX(a) of the Lease is hereby
deleted in its entirety and the following is substituted therefor:
(a) So long as no default exists hereunder and the Lease has not been
earlier terminated, Lessee may at the expiration of the Secondary Term upon
at least one hundred eighty (180) days but no more than two hundred seventy
(270) days written notice to Lessor prior to the expiration of the
Secondary Term, purchase all (but not less than all) of the Equipment in
this Schedule on an AS IS, WHERE IS BASIS, without recourse to or warranty
from Lessor, express or implied ("AS IS BASIS") for cash equal to its then
Fair Market Value (plus all applicable sales taxes).
4. For purposes of the Schedule only, the following is added to the end
thereof:
END OF BASIC TERMS OPTIONS:
At the expiration of the Basic Term (the "BASIC TERM EXPIRATION DATE"), so
long as no default has occurred and is continuing hereunder and this Lease
has not been earlier terminated, Lessee shall exercise one of the following
options:
(1) Extension Option. Lessee may extend the Lease beyond the Basic
----------------
Term Expiration Date with respect to all (but not less than all) of the
Equipment covered by this Schedule through the Secondary Term set forth in
this Schedule and Lessee shall pay Secondary Term Rent as set forth in this
Schedule.
(2) Purchase Option. Upon at least one hundred eighty (180) but
---------------
not more than two hundred seventy (270) days written notice to Lessor prior
to the Basic Term Expiration Date, Lessee may purchase all (but not less
than all) of the Equipment covered by this Schedule on an AS IS BASIS for
cash equal to the greater of (A) Thirty percent (30%) of the Capitalized
Lessor's Cost (plus all applicable sales taxes) or (B) the then Fair Market
Value of the Equipment (plus all applicable sales taxes). On the Basic Term
Expiration Date, Lessor shall receive in cash the full purchase price (plus
all applicable sales taxes) together with any rent or other sums then due
under the Lease on such date. Lessee shall be deemed to have waived its
purchase option if it fails to (a) timely provide Lessor with the required
written notice of its election to exercise the same or (b) provide Lessor
with written notice of its irrevocable election to exercise the same within
fifteen (15) days after Fair Market Value is determined (by agreement or
appraisal).
(3) Cancellation Option. Upon at least one hundred eighty (180)
-------------------
days but not more than two hundred seventy (270) days written notice to
Lessor prior to the Basic Term Expiration Date (the "NOTICE DATE"), Lessee
may cancel the Lease (the "CANCELLATION OPTION") with respect to all (but
not less than all) of the Equipment on this Schedule. If all of the terms
and conditions of this Section are not fulfilled, this Lease shall continue
in full force and effect and Lessee shall continue to be liable for all
obligations thereunder, including, without limitation, the obligation to
continue paying rent. Lessee shall be deemed to have waived this option of
it fails to timely provide Lessor with the required written notice of its
election to exercise the same.
(a) Prior to the date Lessee gives notice to Lessor of its
intention to exercise the Cancellation Option as provided
herein, Lessee shall:
(i) contact the original manufacturer of the Equipment
(the "MANUFACTURER") and arrange for the Manufacturer to
inspect the Equipment; and
(ii) obtain, at Lessee's expense, a written determination
from the Manufacturer, which determination shall be final,
binding and conclusive, that the Equipment's condition is in
full compliance with Section XI of the Lease and that:
(x) the Equipment is complete and fully operational
in compliance with the Manufacturer's
specifications; and
(y) the Equipment contains all field engineering
changes required by the Manufacturer to meet the
Manufacturer's then current maintenance contract
requirements.
(iii) if the written determination from the Manufacturer
required by subsection (ii) above is unavailable for any
reason, obtain, at Lessee's expense, a verification by an
independent appraiser selected by Lessor (reasonably
acceptable to Lessee), which verification shall be final,
binding and conclusive, that the Equipment's condition is
in full compliance with Section XI of the Lease and that:
(x) the Equipment is complete and fully operational
in compliance with the Manufacturer's
specifications; and
(y) the Equipment contains all field engineering
changes required by the Manufacturer to meet the
Manufacturer's then current maintenance contract
requirements.
(b) Prior to the Basic Term Expiration Date, Lessee shall:
(i) deliver to Lessor the written determinations of the
Manufacturer or the independent appraiser as required
above;
(ii) pay to Lessor, as additional rent, TWENTY-THREE POINT
NINE ZERO SEVEN PERCENT (23.907%) of the Capitalized
Lessor's Cost of the Equipment, plus all rent and all other
sums due and unpaid as of the Basic Term Expiration Date
(including, but not limited to, any rent payment due and
payable on the Basic Term Expiration Date and any sales
taxes and property taxes); and
(iii) return the Equipment, all documentation related to
the Equipment including, but not limited to, all operating,
software and maintenance manuals and schematics and any and
all spare parts and nonconsumables originally provided with
the Equipment or, to the extent such parts or
nonconsumables were replaced, such replacements) in full
compliance with Section XI of the Lease.
(c) From the applicable Notice Date through the Basic Term
Expiration Date, Lessee shall:
(i) continue to comply with all of the terms and
conditions of the Lease, including, but not limited to
Lessee's obligation to pay rent, and
(ii) cooperate with Lessor in remarketing the Equipment,
including, but not limited to (A) keeping the Equipment at
Lessee's premises in service and in working order so as to
allow Lessor to market and demonstrate the Equipment to
potential purchasers or lessees from such premises, and (B)
upon reasonable notice from Lessor, to provide Lessee's
operations personnel to assist Lessor in demonstrating
Equipment to potential purchasers or lessees all at no cost
to Lessor; provided, however, that, subject to Lessor's
-------- -------
rights set forth in this subsection, Lessee may still use
the Equipment until the Basic Term Expiration Date.
(d) Lessee shall, from the applicable Basic Term Expiration
Date through the earlier of the date the Equipment is sold
by Lessor to a third party or 90 days following the Basic
Term Expiration Date, comply with the following terms and
conditions:
(i) continue to provide insurance for the Equipment in
compliance with the terms found in Section X of the Lease,
and
(ii) cooperate with Lessor in remarketing the Equipment,
including, but not limited to (A) keeping the Equipment at
Lessee's premises in service and in working order so as to
allow Lessor to market and demonstrate the Equipment to
potential purchasers or lessees from such premises and (B)
upon reasonable notice from Lessor, to provide Lessee's
operations personnel to assist Lessor in demonstrating the
Equipment to potential purchasers or lessees, all at no
cost to Lessor.
(e) The proceeds of any sale or re-lease of the Equipment after
Lessee has exercised its Cancellation Option shall be for
the sole benefit of Lessor and Lessee shall have no
interest nor any claim upon any of such proceeds.
Except as expressly modified hereby, all terms and provisions of the Lease
shall remain in full force and effect. This Addendum is not binding or effective
with respect to the Lease or the Equipment until executed on behalf of Lessor
and Lessee by authorized representatives of Lessor and Lessee.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Addendum to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION HEADWAY TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxx
------------------------------------- --------------------------------
Name: XXXX X. XXXXXXX Name: Xxxxxx X. Xxxxxx
----------------------------------- ------------------------------
Title: CREDIT ANALYST Title: Chief Financial Officer
---------------------------------- -----------------------------
ATTEST
By: /s/ Xxxxxxx Xxxxx Xxxx
--------------------------------
Name: Xxxxxxx Xxxxx Xxxx
------------------------------
CORPORATE LESSEE'S
BOARD OF DIRECTORS RESOLUTION
The undersigned hereby certifies: (i) that she/he is the Secretary of
HEADWAY TECHNOLOGIES, INC.; (ii) that the following is a true and correct copy
of Resolutions duly adopted at a meeting of the Board of Directors of said
Corporation duly held on the 23rd day of April, 1997; and (iii) that said
resolutions have not been amended, rescinded, modified or revoked, and are in
full force and effect:
"RESOLVED, that each of the officers of this Corporation, whose name
appears below:
/s/ Xxxx X. Xxxxx
-------------------------------------
President _______________________________
Treasurer
[SIGNATURE ILLEGIBLE]
_____________________________________ -------------------------------
Vice President Secretary
or the duly elected or appointed successor in office of any or all of them, be,
and hereby is, authorized and empowered in the name and on behalf of this
Corporation to enter into, execute and deliver a master lease agreement with
GENERAL ELECTRIC CAPITAL CORPORATION ("LESSOR") as Lessor, providing for the
leasing to (or sale and leaseback by) this Corporation, from time to time, of
certain equipment, and further providing for this Corporation to indemnify said
Lessor against certain occurrences and against the loss of contemplated tax
treatment; and
FURTHER RESOLVED, that each officer of this Corporation be, and hereby is,
authorized and empowered in the name and on behalf of this Corporation to enter
into, execute and deliver any documents and to do and perform all other acts and
deeds which may be necessary or appropriate to effectuate the lease (or sale and
leaseback) of equipment from Lessor; and
FURTHER RESOLVED, that the Lessor may rely upon the aforesaid resolutions
until receipt by it of written notice of any change.
IN WITNESS WHEREOF, I have set my hand and affixed the seal of said
Corporation this __________________ day of _______________, 19___.
(CORPORATE SEAL)
[SIGNATURE ILLEGIBLE]
-------------------------------------
Secretary
