EXHIBIT 10.19
MASTER PURCHASE AGREEMENT
This MASTER PURCHASE AGREEMENT (the "Agreement"), effective as of
December 22, 2000 is by and between ZHONE TECHNOLOGIES, INC., a corporation
formed under the laws of the State of Delaware ("Seller"), and CIT VENTURE
LEASING FUND, LLC, a limited liability company formed under the laws of the
State of Delaware ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller desires to sell or cause the sale to Purchaser, and
Purchaser desires to purchase from Seller, certain assets and interests, from
time to time, pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and other valuable consideration, and subject to the terms and
conditions herein, Seller and Purchaser agree as follows:
1. DEFINITIONS
The parties agree that the following terms used in this Agreement shall
have the following meanings:
"Acquisition Fee" means, with respect to a Closing, the acquisition fee
to be paid by Purchaser for the assets described in the Schedule of Assets to be
sold at a Closing, as referred to in Section 3 hereof.
"Agreement" means this Master Purchase Agreement, as amended and in
effect from time to time.
"Applicable Law" means any law, rule, regulation, order, judgment or
decree issued or promulgated by any Governmental Authority.
"Assets" means all of the following assets:
(a) all of Seller's title to, interest in and rights under the
Equipment;
(b) all of Seller's title to, interest in and rights under the
Lease;
(c) all of Seller's title to, interest in and rights under the Lease
Documents;
"Assignment" means an instrument in the form attached hereto as Exhibit
C or other form acceptable to Purchaser in its sole discretion reasonably
exercised.
"Bankruptcy Event" means (i) when a Person (a) commences a voluntary
case, (b) consents to the entry of an order for relief against it in an
involuntary case, (c) consents to
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the appointment of a Custodian of it or for all or substantially all of its
property, (d) makes a general assignment for the benefit of its creditors, (e)
is the debtor in an involuntary case which is not dismissed within sixty (60)
days of the commencement thereof, or (f) the taking of corporate, company or
partnership action by a Person in furtherance of any of the foregoing; or (ii)
when a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (x) provides for relief against a Person in an involuntary
case, (y) appoints a Custodian of a Person for all or substantially all of its
property, or (z) orders the liquidation of a Person.
"Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code or any similar
federal or state law for the relief of debtors.
"Xxxx of Sale" means an instrument in the form attached hereto as
Exhibit B or other form acceptable to Purchaser in its sole discretion,
reasonably exercised.
"Borrower" means with respect to a Closing, the borrower under the Loan,
if any, described in the Schedule of Assets relating to such Closing
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required to close in New York City,
New York under the laws of the State of New York.
"Buy Rate" means the interest rate per annum expressed as the amount of
basis points plus the stated Treasury Note Yield in determining the Purchase
Price and in accordance with the Tiers of the Lease customers as set forth in
Section 3.1.
"Certificate of Delivery and Acceptance" means the certificate of
delivery and acceptance executed by a lessee at the commencement of a Lease with
respect to the Equipment which is subject to a Lease indicating that such
Equipment has been accepted by the lessee, and affirming that such Lease is in
full force and effect.
"Claim" has the meaning set forth in Section 10.1 hereof.
"Closing" means a closing at which Seller and Purchaser transfer and
deliver all documents and instruments necessary to consummate the purchase and
sale of the Assets described in each Schedule of Assets executed and delivered
by the parties during the previous month.
"Closing Date" means the date on which the parties hereto shall close
the purchase and sale of the Assets set forth on each Schedule of Assets
executed and delivered pursuant hereto, which date shall be set forth on each
such Schedule of Assets.
"Commitment Letter" means a letter issued by Seller to a lessee which is
a binding commitment for Seller to enter into one or more Leases.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
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"Default" shall mean any event which, but for the giving of notice, or
the passage of time, or both, would constitute an event of default.
"Effective Date" means the effective date as set forth in the preamble
to this Agreement.
"Equipment" means, with respect to a Closing, the equipment described in
the Schedule of Assets relating to such Closing.
"Equipment Cost" means the original cost of the Equipment, including any
delivery and installation costs, broker fees, and any sales taxes and other
similar "soft" costs.
"Excluded Assets" means (a) ordinary building materials incorporated
into an improvement on land; and (b) rights under real property mortgages or
deeds of trust; and (c) assets which may be deemed to be real property fixtures
in which a security interest must be perfected by recordation of documents in
the real estate records.
"Fair Market Value" means, in connection with the price of the warrants:
(i) the closing price per share of the issuer's common stock
on the principal national securities exchange on which the common stock is
listed or admitted to trading or,
(ii) if not listed or traded on any such exchange, the last
reported sales price per share on the Nasdaq National Market or the Nasdaq
Small-Cap Market (collectively, "Nasdaq") or,
(iii) if not listed or traded on any such exchange or Nasdaq,
the average of the bid and asked price per share as reported in the "pink
sheets" published by the National Quotation Bureau, Inc. (the "pink sheets") or,
(iv) as to Seller's Warrants, if the above referenced
quotations are not available, the market value per share of the seller's common
stock on the applicable date as determined in good faith by the Board of
Directors of the Seller; or
(v) as to any particular Lessee's Warrants, if the above
referenced quotations are not available, the market value per share of such
Lessee's common stock as determined by the Review Committee, and, if necessary,
by arbitration, as referenced in another context in Section 3.2.4
"GAAP" means United States Generally Accepted Accounting Principals
consistently applied.
"Governmental Authority" means any federal, state or local governmental
body, including any court, administrative board, general commission or
arbitrator or otherwise.
"Guarantor" means any guarantor providing a guaranty of the obligations
of Borrower or lessee, as applicable.
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"Investment Balance" means the sum of:
(i) any amounts due and owing under the applicable lease(s),
plus
(ii) the present value of the remaining unpaid lease payments
discounted at the implicit rate in the applicable Lease.
"Lease" means, with respect to a Closing, the lease described in the
Schedule of Assets relating to such Closing, including, to the extent
applicable, a certified copy (only) of the master equipment lease, if any, an
original of the applicable Rental Schedule (but not other rental schedules), if
any, but in any event all documents and instruments of similar tenor which
constitute chattel paper under the applicable Uniform Commercial Code, and any
modifications and amendments to the foregoing.
"Lease Documents" means, as applicable and to the extent they exist,
originals or certified photostatic copies of the Commitment Letter, Lease,
Certificate of Delivery and Acceptance, Warrants, guaranty, financing
statements, opinion(s) of counsel, corporate or other diligence documents,
certificates of title, insurance certificates or letter of self-insurance,
vendor documents, compliance certificates, landlord's estoppel certificates,
together with any and all modifications and amendments to the foregoing.
"Lessee" means, with respect to a Closing, the lessee under the Lease
described in the Schedule of Assets relating to such Closing.
"Lien" means any mortgage, deed of trust, pledge, hypothetication,
security interest, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement and any lease in the nature of a grant of a security
interest or lien).
"Lease Rate" means the rate imputed on all noncancelable rents inclusive
of the lesser of (a) any purchase put amount, or (b) the present value of the
noncancelable rents during any renewal put to the lessee.
"Loss" means Purchaser's Investment Balance in a lease, which has past
due payments of 90 or more days, including the actual costs of collection
thereof, provided Purchaser has taken affirmative steps in declaring a default
under the applicable Lease in accordance with its terms.
"Material Adverse Effect" shall mean an effect on the specified Person
which could materially and adversely affect the business, assets or condition,
financial or otherwise, or the results of operations, of the specified Person or
any subsidiary (on any individual basis) or the Person and its subsidiaries (on
a consolidated basis), or the ability of the specified Person to meet its
obligations under the Lease Documents, or Seller Documents (or similar
instruments), as applicable, or the validity or enforceability of any of the
foregoing.
"Notice of Assignment" means the notice of assignment executed by
Seller, as lessor, and Purchaser, in connection with the assignment of the
applicable Lease, in the form
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attached hereto as Exhibit E or in a form otherwise acceptable to Purchaser in
its sole discretion, reasonably exercised.
"Permitted Liens" means liens as expressly contemplated by the Lease
Documents.
"Person" means an individual person, corporation, company, association,
partnership, joint venture, trust, business trust, trustee, organization,
business, or government or any governmental agency or political subdivision
thereof.
"Portfolio" means the aggregate Leases under the Program.
"Program" means the within described relationship between the Seller and
Purchaser and the respective rights, duties, and obligations of the parties as
described herein.
"Purchase Price" means the present value of the payment stream of a
Lease or Leases discounted in accordance with the Buy Rates set forth in Section
3.1, minus, in each case, the appropriate Reserve Pool amount. Any amount of
security deposits, prepaid rent, commitment fees, or origination fees, or other
similar amounts and fees shall be remitted by Seller to Purchaser and added to
the Purchase Price.
"Purchase Price Basis" means the present value of the payment stream of
a Lease or Leases discounted in accordance with the Buy Rates set forth in
Section 3.1.
"Purchaser" has the meaning set forth in the preamble hereof.
"Rental Schedule" means that rental schedule, if any, executed by a
Lessee pursuant to a master lease, if any, all as further described on the
Schedule of Assets relating to a Closing.
"Registration Rights Agreement" means a registration rights agreement or
other similar agreement, if any, which grants to the holder of securities issued
upon exercise of Warrants certain rights in respect of the registration of such
securities and other rights commonly granted to a warrant holder.
"Review Committee" has the meaning set forth in Section 3.2.4."Schedule
of Assets" means the schedule, in substantially the form of Exhibit A attached
hereto, which sets forth a description of the assets to be sold at a particular
Closing, the Purchase Price for such assets, the description of the Lease, as
applicable, the Closing Date and any other pertinent information.
"Seller" has the meaning set forth in the preamble hereof.
"Seller Documents" means this Agreement, the Assignment, the Xxxx of
Sale, the Notice of Assignment, financing statements, if applicable, and any
other document, instrument or agreement attached to any of the foregoing.
"Tier" means the credit ranking determined solely by Purchaser to
prospective lessees in accordance with the guidelines set forth on Exhibit F
hereto.
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"Warrants" means warrants to purchase securities of a lessee or Seller,
as applicable, which have been issued in conjunction with a Lease or as a
condition of this Agreement, all as further described in Section 3 herein or on
the Schedule of Assets relating to a Closing and any and all rights of Seller
associated with such Warrants or underlying securities, including any such
rights evidenced by a Registration Rights Agreement, if any.
2. CREDIT EVALUATION; PROCEDURES; SUSPENSION; TERMINATION;
REPORTING.
2.1 Commitments
Subject to the terms and conditions hereof, Seller hereby agrees to
sell, transfer and deliver to Purchaser from time to time, and Purchaser hereby
agrees to purchase, acquire and take assignment and delivery from Seller,
various Assets originated by Seller after the Effective Date or otherwise as
agreed to by the parties. Except as provided herein, Seller shall have no
obligation to sell Assets to Purchaser, and Purchaser shall have no obligation
to purchase Assets from Purchaser; however, Seller shall submit to Purchaser,
for Purchaser's evaluation as set forth below, all financing opportunities for
prospective transactions ranging from $100,000 to $20,000,000 as structured as
full payout leases.
2.2 Procedure
2.2.1 Procedure for Determining Whether Purchaser is to
Acquire Lease. The procedure for determining whether Seller is to sell an Asset
to Purchaser, and Purchaser is to acquire such asset, is as follows:
(a) Seller shall submit to Purchaser credit
applications/packages from prospective Lessees, and Purchaser shall have seven
Business Days to evaluate such credit submission and either approve or reject
the prospective transaction. Such approval or rejection shall be communicated by
Purchaser to Seller by the end of the seven Business Day evaluation period. The
decision to decline or purchase the prospective Lease shall be within the sole
discretion of Purchaser.
(b) If Purchaser declines the credit submission,
Seller shall have no obligation to sell applicable Lease to Purchaser.
(c) If Purchaser approves the prospective Lessee,
Purchaser shall deliver via fax to Seller a specification as to the particular
Tier ranking of the Lessee, along with the Buy Rate, Purchase Price and Reserve
amount required for the particular transaction in accordance with Sections 3.1
and 3.2.2. Thereupon, Seller shall issue a term sheet to the prospective Lessee,
on Seller's letterhead, that shall be drafted by Purchaser and will expressly
state that Seller intends to assign all of its rights as Lessor to Purchaser.
The term sheet shall state further that the credit approval, if granted to the
prospective lessee, shall be available for ninety (90) days, subject to
cancellation upon a material adverse change in the credit profile, management,
or ownership of the prospective Lessee. Upon Seller's receipt of the
acknowledged and agreed upon term sheet from the
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prospective Lessee, Seller shall commence to close and fund the transaction
using Purchaser's Lease Documents. Seller agrees that it will not materially
revise any Lease Document in any manner, and further, any request for a revision
in the Lease Documents by a prospective Lessee shall be immediately communicated
by Seller to Purchaser for consent thereto.
2.2.2 Documents to be Transferred for Lease Purchased by
Purchaser. As to each Lease purchased by Purchaser pursuant to this Agreement,
Seller shall deliver to Purchaser the following documents:
(a) a Schedule of Assets (in the form set forth on Exhibit
A) setting forth a description of the Assets to be sold to Purchaser and the
amount of the Purchase Price and the Reserve Pool Amount, calculated in
accordance with Section 3 hereof,
(b) an original or certified copy, as applicable, of each
Lease Document relevant to the proposed transaction,
(c) an original of each Seller Document relevant to the
proposed transaction.
(d) a Xxxx of Sale (in the form set forth on Exhibit B); and
(e) an Assignment and Assumption Agreement (in the form set
forth on Exhibit C).
2.3 Suspension and Termination
This Agreement shall continue until the later of December 31, 2005 or
such date which shall be set forth in a written notice given by one party to the
other indicating the noticing party's desire to cease consideration of funding
additional Leases under this Agreement ("Suspension"), which date shall not be
earlier than sixty (60) days after the date of such notice, and which decision
to so suspend may be made by either party in its sole discretion, or that date
on which the Parties shall mutually agree. Notwithstanding the foregoing, either
party, in its sole discretion, may cease consideration of funding additional
Leases under this Agreement immediately upon written notice to the other party
in the event of: (i) a Bankruptcy Event involving the non-suspending party, or
(ii) fraud by Seller as to any material matter, or (iii) a breach, in any
material respect, of any representation, warranty, covenant or agreement
contained herein by Seller. Upon the Suspension of this Agreement, Seller shall
have no obligation to submit credit applications, master equipment lease
agreements, leases, or schedules to Purchaser. Notwithstanding a Suspension of
this Agreement, the parties shall retain all obligations that exist under this
Agreement for Purchaser to purchase, and Seller to sell, any lease schedules
that Purchaser had agreed, prior to the Suspension of this Agreement, to
purchase. This Agreement shall terminate at such time as the final Lease funded
pursuant to this Agreement has terminated and all Reserve Funds distributed as
set forth in 3.2.5.
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3. PURCHASE PRICE; RESERVE POOL AMOUNT FOR LOSSES; WARRANTS
3.1. Purchase Price, etc.
At a Closing, Purchaser shall pay to Seller, or to such Person
designated by Seller, the Purchase Price for the applicable Assets. All such
amounts shall be paid by wire transfer of immediately available funds in U.S.
dollars to an account or accounts specified by Seller. The Buy Rates for the
different Tiers are as follows:
TIER BUY RATE
---- --------
1 350 Basis Points over the yield on Like Term Treasury Note
2 450 Basis Points over the yield on Like Term Treasury Note
3 600 Basis Points over the yield on Like Term Treasury Note
4 700 Basis Points over the yield on Like Term Treasury Note
Purchaser shall have the right to purchase Leases from Seller at
different Buy Rates from time to time based upon prevailing market conditions,
volume of Leases purchased under this Agreement, and the man-hours necessary by
Purchaser to support the Program.
3.2 Reserve Loss Pool; Warrants
3.2.1 Creation, Purpose and Maintenance of Reserve Loss Pool.
Purchaser shall create and maintain a reserve loss pool (the "Reserve Pool") in
accordance with the funding and accounting terms and conditions described below.
The purpose of the Reserve Pool shall be to set aside an appropriate amount of
funds to offset potential losses under the Program and prudently manage the risk
of defaults under the Leases that shall comprise the Portfolio under the
Program. In the event of default under a Lease, Purchaser shall use the funds in
the Reserve Pool to recover its Investment Balance in the defaulted Leases. The
Reserve Pool shall be maintained and documented on Purchaser's "books" and a
report thereof shall be delivered to Seller by Purchaser within ten Business
Days following the end of each month. Seller may request, in writing, a copy of
a Reserve Pool report on an interim basis, and Purchaser shall deliver such
report within ten Business Days after receipt of Seller's written request,
provided, however, that Seller shall use reasonable discretion with respect to
the number of interim reports requested. Purchaser shall provide reasonable
assistance to Seller in the verifying the information contained in the reports,
shall maintain records and supporting documentation relating to this Agreement
and the transactions funded hereunder and, if requested by Seller, make such
information available to Seller for purposes of auditing the reports.
3.2.2 Funding the Reserve Pool; Losses. The actual funding of
the Reserve Pool shall be accomplished by Purchaser's holdback of the requisite
Reserve amount from each purchase of a Lease from Seller hereunder. Each
Customer shall have a separate
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credit ranking and be designated as a certain Tier by Purchaser. The amount to
be reserved initially by Purchaser for each Lease shall be based upon the Tier
designation of the Customer and shall equal the applicable percentage of the
Purchase Price Basis, as stated below:
TIER 24 MONTH TERM 36 MONTH TERM 48 MONTH TERM
---- ------------- ------------- -------------
1 Up to 60 months, zero reserve.
2 15% 15% 20%
3 25% 30% 35%
4 35% 40% 45%
Once the Reserve Pool amount reaches the amount of $10,000,000 (based upon a
funded portfolio of $50,000,000), Purchaser shall reduce the percentage required
for each new transaction by five percent (5%) less than the reserve amounts
stated above (e.g., a Tier 3 Customer with a 24 month lease shall have 20% of
the funded Lease set aside in the Reserve Pool). For purposes of this Agreement,
Purchaser shall have sustained a Loss upon any Lease payment that becomes 90
days past due, and Purchaser shall have the right to charge such Loss against
the Reserve Pool thereupon, provided, however, that Purchaser has defaulted the
applicable Lease in accordance with its terms. Purchaser shall use the Reserve
Pool to recover its Losses in the following order: first, from funds that were
set aside at Closings to fund the Reserve Pool;second, from proceeds obtained as
a result of remarketing the Equipment; third, from proceeds from the Zhone
Warrants; and fourth, from proceeds from Customer Warrants.
3.2.3 Warrants as Enhancements to the Reserve Pool; Limitation
of Seller's Credit Loss Liability. In addition to the above described amounts to
be set aside from funded transactions and maintained in the Reserve Pool, all
Warrants shall be held by Purchaser for the purpose of potentially enhancing the
Reserve Pool, including Purchaser's warrant to purchase 110,000 shares of
Seller's common stock, which shall be delivered to Purchaser by Seller
simultaneously with the execution and delivery of this Agreement. The exercise
price of such Seller warrant to purchase common stock shall be $9.50 per share.
Seller's liability for losses due to defaulted Leases shall be limited to the
amount established and maintained in the Reserve Pool. The parties hereto
acknowledge that both the Warrants issued by the Customers and the Warrants
issued to Purchaser by Seller may not have any value, or may change in value
from time to time, due to many factors outside of the control of either party,
and therefore such Warrants may not provide an appropriate credit loss mitigant.
Accordingly, the Warrants shall be viewed merely as potential enhancements to
the Reserve Pool, and not a substitution or replacement for the cash component
thereof; provided, however, that upon the establishment of a Fair Market Value
("FMV") of the common stock represented by Warrants, Purchaser will credit the
Reserve Pool in an amount equal to fifty percent (50%) of the FMV of the
applicable common stock represented by Warrants, less Purchaser's exercise
price, so long as such Warrants are completely unrestricted from sale or other
disposition) Upon Purchaser's exercise and sale thereof, the proceeds of such
sale shall be applied to and included in the
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Reserve Pool.
3.2.4 Distribution of Excess Reserve Pool Funds. Purchaser
shall have the right to make a distribution of funds from the Reserve Pool at
any time upon its reasonable determination that the Reserve Pool is sufficiently
"funded" to mitigate losses. As a general guideline, but not a binding
condition, such reasonable determination will occur when the actual amount
reserved exceeds by more than twenty percent (20%) the required Reserve Pool
amount stated in Section 3.2.2. (Attached hereto as Exhibit G is an example of
the Reserve Pool calculations.) Notwithstanding the foregoing, the parties shall
nominate from time to time an equal number of its officers to form a committee
(the "Review Committee") to determine (a) whether there exists an excess amount
in the Reserve Pool and, if such a determination is affirmatively made then, (b)
when and how such excess amount shall be distributed and/or accounted for. In
the event that the Review Committee cannot agree upon the foregoing matters, the
parties agree to submit such dispute to an arbitrator who is knowledgeable in
the areas of equipment leasing and dispute resolution, the results of which
shall be binding upon the parties. All costs associated with said arbitration
shall be borne equally by the parties.
3.2.5 Liquidation of Reserve Pool Upon Termination of Program.
Upon termination of the Program, the Reserve Pool shall be liquidated as
follows:
(i) Purchaser shall receive proceeds for any Losses incurred not
previously compensated;
(ii) Seller shall receive proceeds up to the aggregate amount set
aside in the Portfolio; then
(iii) Any remaining proceeds shall be distributed to the parties on a
"50/50" basis.
4. CLOSING; REMARKETING
4.1 Closing In General
Subject to the satisfaction or written waiver of the conditions set
forth in Sections 7 and 8 hereof, Purchaser and Seller shall close the purchase
by Purchaser of the Assets as follows: Purchaser shall pay Seller the Purchase
Price for the Assets within two (2) Business Days after all conditions to a
Closing have been satisfied or waived in writing by Purchaser, however Purchaser
shall use its good faith efforts (but shall not be obligated in any way) to pay
Purchaser the Purchase Price within one (1) Business Day thereafter. The
Purchase Price shall be paid by means of a wire transfer at the direction of
Seller.
4.2 Closing Costs
Except to the extent expressly set forth herein, each party hereto shall
be liable for its own costs and expenses, including attorneys' fees, in
connection with this Agreement and the transactions contemplated hereby.
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4.3 Remarketing
Pursuant to the Remarketing Agreement attached hereto as Exhibit D,
Purchaser hereby appoints Seller as Purchaser's exclusive agent for remarketing
all Equipment purchased by Purchaser in connection with the Program described
herein.
4.3.1 Remarketing Proceeds
None of the proceeds obtained in connection with the remarketing and
sale of Equipment from a non-defaulted Lease pursuant to the Remarketing
Agreement shall be used in any way for Reserve Pool purposes. In the event
of a Lease default, the net proceeds of any remarketing shall be applied to
the Reserve Pool in accordance with Section 4 (a) of the Remarketing
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date of this Agreement and as of each Closing Date, Seller
represents and warrants to Purchaser as follows:
5.1. Organization
Seller is a corporation duly formed, validly existing under the laws of
the State of Delaware and is qualified to do business and in good standing as a
foreign corporation under the laws of each jurisdiction where its ownership,
lease or operation of property and the conduct of its business requires such
qualification, except where the failure to be so qualified would not result in a
Material Adverse Effect. Seller has full power, authority and legal right to (i)
execute and deliver, and to perform and observe the provisions of each of the
Seller Documents to which it is a party, (ii) execute and deliver, and to
perform and observe the provisions of each of the Lease Documents, as
applicable, to which it is a party, (iii) acquire, hold, and lease the Equipment
(iv) acquire, hold and convey the Warrants, if applicable, and (v) carry out the
transactions contemplated in the Seller Documents to which it is a party.
5.2. Authority
(a) The execution and delivery of the Seller Documents to which it
is a party, and the consummation of each of the transactions contemplated
thereby, have been duly and validly authorized by or on behalf of Seller; and
such Seller Documents have been, or will be when executed, duly executed and
delivered by Seller and constitute the valid and legally binding obligations of
Seller, enforceable in accordance with their terms, except as enforcement may be
limited by bankruptcy, insolvency or similar laws or general principles of
equity affecting the enforcement of creditors' rights generally from time to
time in effect.
(b) The execution and delivery of the Seller Documents to which
Seller is a party, compliance with the provisions thereof, and the consummation
of the transactions
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therein contemplated have not and will not result in (1) a breach or violation
of (i) any Applicable Law applicable to Seller, (ii) any provision of the
constituent documents of Seller, (iii) any agreement or instrument to which
Seller is a party or by which it is bound, (2) the acceleration of any
obligation of Seller, or (3) the creation of any Lien (other than the Lease)
upon the Equipment.
5.3. Title to Assets
(a) Immediately prior to the time of a Closing or contemporaneously
with the payment of the Purchase Price by Purchaser, Seller will have good and
marketable indefeasible title to and shall be the sole owner of the Assets
listed on the Schedule of Assets except for Excluded Assets, and there shall
have been no other sale, assignment, encumbrance or pledge thereof by Seller,
except Permitted Liens, and immediately upon the transfer and assignment
contemplated by this Agreement, Purchaser shall have good and marketable
indefeasible title to, and will be the sole owner of, the Assets listed on the
Schedule of Assets (except for Excluded Assets), subject to Permitted Liens.
(b) The information set forth in each Schedule of Assets is true,
correct and complete in all respects.
5.4. Litigation
There are no actions, suits or proceedings or investigations at law or
in equity pending or, to the reasonable knowledge of Seller, threatened, before
any Governmental Authority against or affecting Seller or any of its Affiliates
which, if decided adversely, could have a Material Adverse Effect on such
Person.
5.5. Compliance With Law, Etc.
Seller is not (i) in violation of any term or provision of its charter
or bylaws, or (ii) in violation of or default under any term or provision of any
security agreement, or other agreement or other instrument or document by which
Seller is bound or affected which could reasonably be expected to have a
Material Adverse Effect, or (iii) in violation of any judgment, order, writ,
injunction, decree or demand of any court or Governmental Authority which could
reasonably be expected to have a Material Adverse Effect, or (iv) in violation
of any Applicable Law by which Seller is bound or affected which could
reasonably be expected to have a Material Adverse Effect. The execution,
delivery and performance of this Agreement and each of the Seller Documents and
the consummation of the transactions contemplated thereby will not violate or
constitute a default under the charter or bylaws or any term or provision of any
such security agreement, or other agreement, instrument or document to which any
Seller is a party, and none of such agreements, instruments or documents imposes
or is made in contemplation of any obligation which is or will be inconsistent
with any other obligation imposed upon Seller under this Agreement and the other
Seller Documents. No approval by, authorization of, or filing with any
Governmental Authority or any third party is necessary in connection with the
execution and delivery of this Agreement or any of the other Seller Documents by
Seller.
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5.6. Leases
(a) Each of the Lease and the other Lease Documents to be assigned
at a Closing has been duly authorized, executed and delivered by Seller, and
Lessee has accepted the Equipment under such Lease, and the Lease and the other
Lease Documents are and will, at the time of such Closing, be valid, binding and
enforceable against the lessee in accordance with their terms and in full force
and effect. To the best of Seller's knowledge, the representations and
warranties made by the Lessee in the Lease Documents are true and correct in all
material respects on and as of the Closing Date as if made thereon (unless such
representations and warranties specifically relate to an earlier date); to the
best of Seller's knowledge, the lessee has not taken any action which might
result in the creation of any Lien on the Equipment, except Permitted Liens;
Seller has not breached any of its obligations under any of the Lease Documents;
to the best of Seller's knowledge, there has been no material damage or event of
loss with respect to the Equipment nor is there any condemnation proceeding
pending with respect thereto; no Default exists under the Lease or the other
Lease Documents; Lessee executed only one (1) original counterpart of the Lease,
except for counterparts marked "Duplicate"; the Lease is not a "consumer lease"
as defined in Section 2A-103(1)(e) of the Uniform Commercial Code; and the
Lessee under the Lease is responsible for the maintenance of the Equipment and
such Lease requires the lessee to assume all risk of loss for such Equipment.
(b) Seller has delivered to Purchaser two days before the applicable
Closing Date, the originals of the applicable Lease and the Lease Documents.
(c) The Lessee's obligations under the Leases are absolute and
unconditional and are not subject to any reductions, abatements, set offs,
defenses or counterclaims and, to Seller's knowledge, no such rights have been
asserted or threatened with respect to such Leases.
(d) Seller has complied in all material respects in connection with
the transactions contemplated by the Lease Documents and will continue to so
comply as of the Closing Date with all Applicable Laws, including, without
limitation, usury, equal credit opportunity, truth-in-lending, disclosure, and
recording laws.
(e) The Lessee under the Lease, as applicable, is required to
maintain casualty insurance with respect to the Equipment; as of the Closing
Date, all policies of insurance required by this Agreement and the Financing
Documents have been validly issued and remain in full force and effect; and
Seller has caused or will cause to be performed any and all acts required to
assign to Purchaser its rights under the insurance policy as they relate to the
Lease, and the related Equipment, sold to Purchaser.
(f) All brokers and other persons having a claim for a commission,
fee or like arrangement arising out of any Lease have been fully paid and
satisfied, and all such brokers or other Persons are duly licensed and
authorized to refer such transactions to Seller.
(g) As of the Closing Date, the Lessee under the Lease, is not
subject to any proceedings under any Bankruptcy Law.
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(h) The Lease is a United States dollar-denominated obligation.
(i) The Lease does not require the prior consent of or notification
to the lessee or contain any other restriction on the transfer or assignment of
such Lease (other than a consent or waiver of any such restriction that has been
obtained prior to the Closing Date, and a copy of which has been provided to
Purchaser prior to the Closing Date).
(j) The Lease is not an obligation of any Governmental Authority.
(k) Seller has provided to Purchaser a notification of assignment of
such Lease to Purchaser, in form sufficient for Purchaser to provide to the
lessee.
5.7. Financial Statements
All financial statements of Seller furnished to Purchaser in connection
herewith were prepared in accordance with GAAP (except as therein otherwise set
forth), and fairly present the financial condition of Seller at the dates
thereof and the results of its operations for the periods covered thereby
(subject to year-end adjustments in the case of interim financial statements),
and Seller does not have any known contingent liabilities of any material amount
which are not referred to in such financial statements or in the notes thereto.
The assets of Seller are set forth in such statements.
5.8. Changes in Condition
Since the date of the most recently delivered financial statements
referred to in Section 5.7 hereof, there has been no material adverse change in
the business, assets, or condition, financial or otherwise, or the results of
operations, of Seller. Since such date, Seller has not entered into any material
transaction outside of the ordinary course of business.
5.9. Tax Returns
Seller has filed all tax returns which are required to be filed, and, if
applicable, has paid, or made adequate provision for the payment of, all taxes
which have or may become due pursuant to such returns, to assessments received
or as a result of any matters raised by audits or other causes known to Seller.
The charges, accruals and reserves on the books of Seller in respect of any
taxes or other governmental charges are adequate.
5.10. Ability to Carry Out Business
(a) The assets of Seller do not as of the date hereof and will not,
immediately following each Closing and after giving effect to the application of
the proceeds of such Closing, constitute unreasonably small capital to carry out
its business as conducted or as proposed to be conducted.
(b) Seller does not intend to or believe that it will, incur debts
beyond its ability to pay such debts as they mature taking into account the
timing of and amounts of cash to be received by Seller and the timing of and
amounts of cash to be payable on or in respect of indebtedness of Seller.
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5.11. No Liability
Seller has no liabilities or obligations to any Person in connection
with its acquisition and holding of Assets other than obligations with respect
to the applicable Assets that will be satisfied prior to or simultaneously with
payment of the Purchase Price.
5.12. Disclosure
Neither this Agreement nor any Seller Document or any Lease Document
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
5.13. Incorporation by Reference
The representations and warranties of Seller contained in each of the
Seller Documents and Lease Documents are true and correct, and such
representations and warranties are incorporated in this Agreement as though
fully set forth herein.
5.14. Disclaimer
EXCEPT AS SPECIFICALLY SET FORTH HEREIN AND IN THE EXHIBITS HERETO, THE
FOREGOING REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY IN LIEU OF ANY OTHER
EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF SELLER OF ANY KIND,
INCLUDING, WITHOUT LIMITATION, THE SELECTION, QUALITY OR CONDITION OF THE
ASSETS, THEIR MERCHANTABILITY, THEIR SUITABILITY, THEIR FITNESS FOR A PARTICULAR
PURPOSE, THE OPERATION OR PERFORMANCE OF THE ASSETS OR THE MAINTENANCE THEREOF
OR PATENT INFRINGEMENT OR THE LIKE. THE EQUIPMENT IS SOLD "AS IS" AND "WHERE
IS" WITH ALL FAULTS. PURCHASER ACKNOWLEDGES THAT IT HAS MADE THE SELECTION OF
SAID EQUIPMENT BASED ON ITS OWN JUDGMENT.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the date of this
Agreement and as of each Closing Date as follows:
6.1. Organization
Purchaser is a limited liability company duly formed and validly
existing under the laws of the State of Delaware. It has full power, authority
and legal right to execute and deliver, and to perform and observe the
provisions of this Agreement, and each of the Seller Documents to which it is a
party.
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6.2. Authority
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by Purchaser; and this Agreement has been duly executed and delivered
by Purchaser and constitutes the valid and legally binding obligations of
Purchaser, enforceable in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency or similar, laws or general principles of
equity affecting the enforcement of creditors' rights generally from time to
time in effect.
(b) The execution and delivery of this Agreement, compliance with
the provisions hereof, and the consummation of the transactions herein
contemplated have not and will not result in a breach or violation of (i) any
Applicable Law applicable to Purchaser now in effect, (ii) any provision of the
constituent documents of Purchaser, or (iii) any agreement or instrument to
which Purchaser is a party or by which it is bound.
6.3. Litigation
There are no actions, suits or proceedings or investigations at law or
in equity, pending or, to the reasonable knowledge of Purchaser, threatened
before Governmental Authority against or affecting Purchaser which, if decided
adversely to Purchaser, would have a Material Adverse Effect on Purchaser.
6.4. No Consent
No approval, consent or withholding of objection is required from any
Governmental Authority with respect to the entering into or performance by
Purchaser of this Agreement and the transactions contemplated hereby.
6.5 Available Funds
Purchaser has funds available for purposes of consummating the
transactions contemplated hereby.
6.6 Resale Certificate.
Purchaser will timely execute and deliver to Seller valid resale
certificates to exempt the purchase by Purchaser of the Leases and the related
Equipment from sales taxes in states where any Equipment, or lessee is located.
6.7 Compliance with Law, Etc.
Purchaser is not (i) in violation of any term or provision of its
charter or bylaws, or (ii) in violation of or in default under any term or
provision of any security agreement, or other agreement or other instrument or
document by which Purchaser is bound or affected which could reasonably be
expected to have a Material Adverse Effect, or (iii) in violation of any
judgment, order, writ, injunction, decree or demand of any court or Governmental
Authority which could reasonably be expected to have a Material Adverse Effect,
or (iv) in violation of any Applicable Law by which Purchaser is bound or
affected which could
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reasonably be expected to have a Material Adverse Effect. The execution,
delivery and performance of this Agreement and each of the documents to be
executed by Purchaser in connection therewith, and the consummation of the
transactions contemplated thereby will not violate or constitute a default under
the charter or bylaws or any term or provision of any such security agreement,
or other agreement, instrument or document to which any Purchaser is a party,
and none of such agreements, instruments or documents imposes or is made in
contemplation of any obligation which is or will be inconsistent with any other
obligation imposed upon Purchaser under this Agreement and the other Purchaser
Documents. No approval by, authorization of, or filing with any Governmental
Authority or any third party is necessary in connection with the execution and
delivery of this Agreement or any of the other Purchaser Documents by Purchaser.
7. CONDITIONS PRECEDENT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT
7.1 Purchaser's Obligation. The obligation of Purchaser to execute
and deliver this Agreement shall be subject to the satisfaction at or prior to
the date of such execution of each of the following conditions:
7.1.1 Representations and Warranties
The representations and warranties of Seller as to its status
contained in this Agreement shall be true and correct on and as of the Effective
Date, as if such representations and warranties had been made on and as of the
Effective Date.
7.1.2 Covenants and Agreements
Seller shall have performed and complied, in all material
respects, with all of its obligations under this Agreement that are to be
performed or complied with by it on or prior to the Effective Date.
7.1.3 Authority; Incumbency
Seller shall have delivered to Purchaser a resolution of its
Board of Directors authorizing this Agreement and the transactions contemplated
hereby, together with an incumbency certificate regarding incumbency and
authority of the officers of Seller in connection with the transactions
contemplated hereby.
7.1.4 Approvals
All required licenses, approvals, consents and notifications
necessary in respect of the execution and delivery of this Agreement and the
transactions contemplated hereby shall have been obtained or made, and executed
or certified copies thereof shall have been delivered to Purchaser.
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7.1.5 Proceedings
No action or proceeding shall have been instituted nor shall any
action or proceeding be threatened before any Governmental Authority at the time
of the Effective Date to set aside, restrain, enjoin or prevent the execution
and delivery of this Agreement or any Closing or the completion and consummation
of the transactions contemplated hereby.
7.2 Seller's Obligation.
The obligation of Seller to execute and deliver this Agreement shall be
subject to the satisfaction at or prior to the date of such execution of each of
the following conditions:
7.2.1 Representations and Warranties
The representations and warranties of Purchaser as to its status
contained in this Agreement shall be true and correct on and as of the Effective
Date, as if such representations and warranties had been made on and as of the
Effective Date.
7.2.2 Covenants and Agreements
Purchaser shall have performed and complied, in all material
respects, with all of its obligations under this Agreement that are to be
performed or complied with by it at or prior to the Effective Date.
7.2.3 Authority; Incumbency
Purchaser shall have delivered to Seller a resolution of its
Board of Managers authorizing this Agreement and the transactions contemplated
hereby, together with an incumbency certificate regarding the incumbency and
authority of the officers of Purchaser in connection with the transactions
contemplated hereby and by each Closing.
7.2.4 Approvals
All required licenses, approvals, consents and notifications
necessary in respect of the execution and delivery of this Agreement and the
transactions contemplated hereby shall have been obtained or made, and executed
or certified copies thereof shall have been delivered to Seller.
7.2.5 Proceedings
No action or proceeding shall have been instituted nor shall any
action or proceeding be threatened before any Governmental Authority at the time
of the Effective Date to set aside, restrain, enjoin or prevent the execution
and delivery of this Agreement or any Closing or the completion and consummation
of the transactions contemplated hereby.
7.2.6 Delivery of Financing Statement
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Seller shall execute and deliver to Purchaser a financing
statement granting to Purchaser a security interest in the Assets to be sold and
assigned to Purchaser from time to time in connection with this Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS FOR EACH CLOSING
8.1 Purchaser's Obligation.
The obligation of Purchaser to consummate a Closing hereunder shall be
subject to the satisfaction at or prior to such Closing of each of the following
conditions:
8.1.1 Representations and Warranties
The representations and warranties of Seller contained in this
Agreement and of Seller contained in each of the Seller Documents and Financing
Documents to which it is a party delivered in respect of a Closing, if
applicable, shall be true and correct in all material respects on and as of the
Closing Date, as if such representations and warranties had been made on and as
of the Closing Date, except to the extent that such representations and
warranties relate solely to an earlier date (in which case such representations
and warranties shall be correct on and as of such earlier date).
8.1.2 Covenants and Agreements
Seller shall have performed and complied, in all material
respects, with all of its obligations under this Agreement and each of the
Seller Documents to which it is a party that are to be performed or complied
with by it on or prior to the Closing Date.
8.1.3 Documents
Seller shall have delivered or caused to be delivered to
Purchaser the Commitment Letter and each of the documents and instruments set
forth and described in Section 2.2 hereof, duly executed by Seller, and if
applicable, the Lessee.
8.1.4 Filings
Seller shall have delivered to Purchaser, in a form suitable for
filing or recordation as applicable, any Seller Documents or Lease Documents to
the extent filing or recording thereof shall be required. All financing
statements on Form UCC-1 naming a Lessee as debtor and Seller as secured party
shall have named Purchaser as assignee on the face thereof.
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8.1.5 Authority; Incumbency
At the request of Purchaser, Seller shall have delivered to
Purchaser a resolution of its Board of Directors authorizing the transactions
contemplated hereby, together with an incumbency certificate regarding
incumbency and authority of the officers of Seller in connection with the
transactions contemplated hereby. Separate resolutions and incumbency
certificates shall not be required for Closings that occur after the execution
of this Agreement.
8.1.6 Approvals
All required licenses, approvals, consents and notifications
necessary in respect of the execution and delivery of the Seller Documents and
the transactions contemplated hereby shall have been obtained or made, and
executed or certified copies thereof shall have been delivered to Purchaser.
8.1.7 Proceedings No action or proceeding shall have been
instituted nor shall any action or proceeding be threatened before any
Governmental Authority at the time of the Closing Date to set aside, restrain,
enjoin or prevent the Closing or the completion and consummation of the
transactions contemplated hereby.
8.1.8 Opinion of Counsel
At the request of Purchaser, Seller shall have delivered to
Purchaser an opinion of recognized outside counsel covering such matters as
Purchaser may require. Separate opinions shall not be necessary for Closings
that occur after the execution of this Agreement.
8.1.9 Releases
Prior to or contemporaneously with the payment of the Purchase
Price, Seller shall or shall have caused to be filed all releases or termination
statements with respect to any preexisting Liens on the Assets except with
respect to Excluded Assets and Permitted Liens, and taken all such other actions
as may be required to release and terminate such Liens that are consistent with
the quality of title required hereby.
8.1.10 Defaults
No material breach or default or event of default shall have
occurred and be continuing under the Lease Documents.
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8.1.11 Insurance
Seller has caused or will cause to be performed any and all acts
required to assign to Purchaser its rights under the insurance policy as they
relate to the Lease, and the related Equipment, sold to Purchaser.
8.2 Seller's Obligation.
The obligation of Seller to consummate a Closing hereunder shall be
subject to the satisfaction of the following conditions:
8.2.1 Representations and Warranties
The representations and warranties of Purchaser contained in
this Agreement and of Purchaser contained in each of the Seller Documents to
which it is a party delivered in respect of a Closing, if applicable, shall be
true and correct in all material respects on and as of the Closing Date, as if
such representations and warranties had been made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be
correct on and as of such earlier date).
8.2.2 Covenants and Agreements
Purchaser shall have performed and complied, in all material
respects, with all of its obligations under this Agreement and each of the
Seller Documents to which it is a party that are to be performed or complied
with by it on or prior to the Closing Date.
8.2.3 Documents
Any and all documents delivered by Purchaser to Seller in
connection with a Closing and the transactions contemplated by this Agreement
shall be reasonably satisfactory in all respects to Seller and Seller's counsel.
8.2.4 Authority; Incumbency
Purchaser shall have delivered to Seller a resolution of its
Board of Managers authorizing the transactions contemplated by the Closing,
together with an incumbency certificate regarding the incumbency and authority
of the officers of Purchaser in connection with the transactions contemplated by
the Closing. Separate resolutions and incumbency certificates shall not be
required for Closings that occur after the execution of this Agreement.
8.2.5 Approvals
All required licenses, approvals, consents and notifications
necessary in respect of the execution and delivery of the documents to be
delivered by Purchaser and the transactions contemplated hereby shall have been
obtained or made, and executed or certified copies shall have been delivered to
Seller.
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8.2.6 Proceedings
No action or proceeding shall have been instituted nor shall any
action or proceeding be threatened before any Governmental Authority at the time
of the Closing Date to set aside, restrain, enjoin or prevent the execution and
delivery of the Closing or the completion and consummation of the transactions
contemplated hereby.
8.2.7 Purchase Price
Purchaser shall have paid to Seller or such other Person
designated by Seller the Purchase Price by wire transfer of immediately
available funds to an account or accounts designated in writing by Seller.
8.2.8 Resale Exemption.
If applicable, Purchaser shall have (i) delivered to Seller a
resale exemption certificate or the like as and for each jurisdiction in which a
lessee or related Equipment is located or pursuant to which Seller foreseeably
may or could have sales or other similar tax liability in connection with the
transactions contemplated at the Closing, or (ii) paid any such tax, or (iii)
paid over to Seller an amount equal to any such liability.
8.2.9 Certificate of Purchaser
Seller shall have received a certificate of Purchaser signed by
a duly authorized officer of Purchaser, dated the Closing Date, certifying as to
the fulfillment, on the Closing Date, of the conditions specified in Sections
8.2.1 and 8.2.2.
9. COVENANTS OF PURCHASER.
Purchaser hereby covenants and agrees as follows:
9.1 Delivery of Items at Closing. Purchaser will timely
deliver to Seller the items which it is obligated to deliver to Seller.
9.2 Return of Documents. If for any reason a Closing under
this Agreement does not occur, Purchaser shall return all documents received
from Seller and shall keep confidential any information supplied by Seller with
respect to the proposed Closing pursuant to the terms of this Agreement. The
foregoing does not apply to information readily ascertainable from public or
published information or trade sources.
9.3 Access to Documents. From and after the Closing Date,
Purchaser shall, upon request, provide Seller with copies of the books and
records pertaining to the Leases and Warrants to allow Seller to gather
information needed for: (a) determining the status of the Leases and Warrants;
(b) the preparation of tax returns; (c) compliance with any governmental orders
or regulations; and (d) the defense or prosecution of claims. In addition, to
the extent necessary or
22
appropriate, and at reasonable times and locations, Purchaser will make
available for inspection by Seller the originals of such books and records.
9.4 Assumption of Obligations Under Leases. On the Closing Date with
respect to particular Leases, Purchaser shall assume the obligations of the
Lessor under the Leases including, but not limited to, the following: (a) to the
extent provided under the Leases, and to the extent Seller has assigned a
security deposit to Purchaser, Purchaser shall return security deposits it
receives to the Lessees; (b) Purchaser shall allow the Lessees to purchase
Equipment, if so provided in the applicable Leases; (c) Purchaser shall allow
the Lessees to use the Equipment in the manner provided in the Leases; (d)
Purchase shall act with respect to the Equipment as provided in the Leases; (e)
Purchaser shall give notices to lessees as required by the Leases; (f) Purchaser
shall comply with any confidentiality requirements that exist in the Leases; and
(g) Purchaser shall allow the Lessees to prepay the Leases under the terms and
conditions specified in the Leases.
9.5 Servicing by Purchaser. Purchaser, at its sole cost and expense,
shall act as servicer for the Leases after the Closing Date, shall send the
Notices of Assignment to the Lessees and shall send invoices to Lessees in a
form as will adequately and accurately describe the Leases. After the Closing
Date, Purchaser shall be responsible for all billing, collecting, accounting,
tax reporting and remittances with respect to sales, use and personal property
taxes for all Leases.
9.6 Payments Due before Closing Date. Unless expressly agreed
otherwise with respect to the sale of a particular Lease, Purchaser will hold in
trust for Seller any payment due to Seller on any Lease prior to the Closing
Date for such Lease that is received by Purchaser and, within three Business
Days after receipt thereof, Purchaser shall remit such sum to Seller.
10. INDEMNIFICATION
10.1 Seller's Indemnity
Seller hereby agrees to indemnify and hold Purchaser, its partners,
officers, directors, managers, equity holders, employees, agents or attorneys,
harmless from and against any and all claims, liabilities, losses, damages,
costs and expenses, including, without limitation, the reasonable fees and
disbursements of counsel (collectively, "Claims" and, individually, a "Claim"),
resulting or arising from any breaches or inaccuracies in any certification,
representation or warranty made by Seller in or pursuant to this Agreement or
any of the Seller Documents to which Seller is a party or any failure or breach
by Seller of any covenant, obligation, or undertaking made by Seller in this
Agreement or any of the Seller Documents to which Seller is a party, except any
such Claims resulting from Purchaser's gross negligence or willful misconduct.
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10.2 Purchaser's Indemnity
Purchaser hereby agrees to indemnify and hold Seller, its partners,
officers, directors, managers, equity holders, employees, agents or attorneys,
harmless from and against any and all Claims resulting or arising from any
breaches or inaccuracies in any certification, representation or warranty made
by Purchaser in or pursuant to this Agreement or any of the Seller Documents to
which Purchaser is a party or any failure or breach by Purchaser of any
covenant, obligation, or undertaking made by Purchaser in this Agreement or any
of the Seller Documents to which Purchaser is a party, except any such Claims
resulting from Seller's gross negligence or willful misconduct.
10.3 Claims
(a) In the event that a party (the "Indemnified Party") desires to
make a claim against the other party hereto (the "Indemnifying Party") under
this Section 10 in connection with any action, suit, proceeding or demand at any
time instituted against or made upon the Indemnified Party for which the
Indemnified Party may seek indemnification hereunder, the Indemnified Party
shall notify the Indemnifying Party of such Claim and of the Indemnified Party's
claim of indemnification with respect thereto, provided that failure of the
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations under this Section 10 except to the extent, if at all, that
the Indemnifying Party shall have been prejudiced thereby. Upon receipt of such
notice from Indemnified Party, the Indemnifying Party shall be entitled to
participate in the defense of such Claim and shall be entitled to fully assume
the defense of such Claim, and in the case of such an assumption upon written
notice to the Indemnified Party of its intention to do so, the Indemnifying
Party shall have the authority to negotiate, compromise and settle such Claim,
provided that no such settlement impose on the Indemnified Party any cost,
expense or liability which the Indemnifying Party is not indemnifying under
Section 10 hereof. The Indemnified Party shall retain the right to employ its
own counsel and to participate in the defense of any Claim, the defense of which
has been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation, unless (a) the employment thereof has
been specifically authorized by the Indemnifying Party, (b) such Indemnified
Party has been advised by counsel reasonably satisfactory to the Indemnifying
Party that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying Party and in
the reasonable judgment of such counsel it is advisable for such Indemnified
Party to employ separate counsel, or (c) the Indemnifying Party has failed to
assume the defense of such action in accordance herewith and employ counsel
reasonably satisfactory to the Indemnified Party.
(b) In the event of any Claim under this Section 10, the Indemnified
Party shall advise the Indemnifying Party in writing of the amount and
circumstances surrounding such Claim. With respect to a liquidated Claim, if
within thirty days after receiving written notice from the Indemnified Party,
the Indemnifying Party has not contested such Claim in writing, the Indemnifying
Party will pay the full amount thereof within ten days after the expiration of
such period.
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10.4 Jurisdiction
(a) Each of the parties hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
10.5 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
11. MISCELLANEOUS
11.1 Expenses
All expenses (except for those expenses which are part of the Purchase
Price as set forth in Section 3 or which are covered by a particular party's
indemnity as set forth in Section 9) of the preparation, execution and
consummation of this Agreement and the transactions contemplated hereby,
including, without limitation, attorneys', accountants', and outside advisers'
fees and disbursements, shall be borne by the party incurring such expenses.
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11.2 Communications
All notices, demands and other communications hereunder shall be in
writing or by written telecommunications, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid, or sent by written telecommunications, receipt
confirmed, as follows:
If to Purchaser, to:
CIT Venture Leasing Fund, LLC
000 XXX Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
With a copy to:
CIT Venture Leasing Fund, LLC
000 XXX Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
Telephone: (000) 000-0000
If to Seller, to:
Zhone Technologies, Inc.
Zhone Way
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
11.3 Entire Agreement and Amendment
This Agreement, together with the Schedules and Exhibits attached hereto
contains the entire understanding of the parties, supersedes all prior
agreements and understandings relating to the subject matter hereof and shall
not be amended except by a written instrument hereafter signed by all of the
parties hereto.
26
11.4 Governing Law
THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY, EFFECT AND PERFORMANCE.
11.5 Sections and Section Headings
All enumerated subdivisions of this Agreement are herein referred to as
"section" or "subsection." The headings of sections and subsections are for
reference only and shall not limit or control the meaning thereof.
11.6 Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Neither this
Agreement nor the obligations of any party hereunder shall be assignable or
transferable by such party without the prior written consent of the other party
hereto.
11.7 Survival of Representations and Warranties
The representations and warranties of the parties hereto contained in
this Agreement and the attachments hereto, together with the transactions
contemplated hereby, shall survive each Closing and the consummation of the
transactions contemplated hereby.
11.8 Counterparts
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
11.9 Further Assurances
The parties hereto agree to execute and deliver, or to be caused to be
executed and delivered, such further instruments or documents and to take such
other action as may be reasonably required to carry on the transactions
contemplated herein.
27
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto
have caused this Agreement to be duly executed and delivered by their respective
duly authorized officers as an instrument under seal as of the date and year
first above written.
PURCHASER:
CIT VENTURE LEASING FUND, LLC
By:
---------------------------------
Title:
------------------------------
SELLER:
ZHONE TECHNOLOGIES, INC.
By:
---------------------------------
Title:
------------------------------
28
EXHIBIT A
SCHEDULE OF ASSETS
Dated as of _______________, 200_
Pursuant to the Master Purchase Agreement
(the "Master Purchase Agreement"),
Dated as of December 22, 2000, between
Zhone Technologies, Inc. ("Seller") and
CIT Venture Leasing Fund, LLC ("Purchaser")
All capitalized terms used herein and not otherwise expressly defined
herein shall have the meanings ascribed to them in the Master Purchase
Agreement.
Lease:
Equipment:
Due Date of First Payment by Lessee under Lease:
Warrants:
29
Date of Origination of Lease:
Date Commitment Letter Received by Purchaser:
Name of Originating Party:
Location of Lessee:
Proposed Closing Date:
Purchase Price: $______________
[Set forth on an attachment to this Schedule is the
calculation by which the Purchase Price and Reserve Pool
Allocation has been determined.]
Reserve Pool Allocation: $_____________
[Set forth on an attachment to this Schedule is the
calculation by which the Purchase Price and Reserve Pool
Allocation has been determined.]
Other Information:
The undersigned hereby certifies that the transaction described herein meets the
Underwriting Guidelines or, if it does not do so, the discrepancies are set
forth below:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
30
The undersigned hereby further certifies as to the fulfillment, on the date
hereof and on the Closing Date, of the conditions set forth in Sections 8.1.1,
8.1.2 and 8.1.10 of the Master Purchase Agreement and the truth and accuracy of
all of the foregoing information.
SELLER:
ZHONE TECHNOLOGIES, INC.
By:
---------------------------------
Title:
------------------------------
31
EXHIBIT B
TO MASTER PURCHASE AGREEMENT
DATED AS OF DECEMBER 22, 2000
BETWEEN
ZHONE TECHNOLOGIES, INC.
AND
CIT VENTURE LEASING FUND, LLC
Xxxx of Sale
KNOW ALL MEN BY THESE PRESENTS THAT ZHONE TECHNOLOGIES, INC., a Delaware
corporation ("Seller"), for good and valuable consideration paid to it by CIT
Venture Leasing Fund, LLC, a limited liability company formed under the laws of
the State of Delaware ("Purchaser"), does hereby grant, bargain, sell, convey,
transfer, assign and deliver unto Purchaser, its successors and assigns, all
right, title and interest in and to the equipment (the "Equipment") described on
the schedule attached hereto.
TO HAVE AND TO HOLD all and singular the Equipment unto Purchaser, its
successors and assigns, to its and their own use and behalf forever.
EXCEPT AS EXPRESSLY SET FORTH HEREIN AND ON THE SCHEDULE ATTACHED
HERETO, SELLER MAKES NO OTHER EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES
OF ANY KIND, INCLUDING ANY REPRESENTATIONS OR WARRANTIES AS TO THE SELECTION,
QUALITY OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, SUITABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, THE OPERATION OR PERFORMANCE OF THE EQUIPMENT
OR THE MAINTENANCE THEREOF OR PATENT INFRINGEMENT OR THE LIKE. THE EQUIPMENT IS
BEING SOLD "AS IS" AND "WHERE IS" WITH ALL FAULTS. PURCHASER ACKNOWLEDGES THAT
IT HAS MADE THE SELECTION OF THE EQUIPMENT BASED ON ITS OWN JUDGMENT.
Seller, for itself, its successors and assigns, does hereby represent
and warrant to and covenant with Purchaser that at the time of the sale
evidenced hereby, Seller has and hereby conveys to Purchaser good and marketable
title to all the Equipment, free and clear of all liens and encumbrances (except
any lease to which the Equipment is subject and any liens and encumbrances
permitted pursuant to the terms thereof).
This instrument shall be governed and construed in accordance with the
laws of the State of New York.
32
IN WITNESS WHEREOF, Seller has caused this Xxxx of Sale to be executed
as an instrument under seal this ______ day of ______________, 200_.
SELLER:
ZHONE TECHNOLOGIES, INC.
By:
---------------------------------
Title:
------------------------------
33
EXHIBIT C
TO MASTER PURCHASE AGREEMENT
DATED AS OF DECEMBER 19, 2000
BETWEEN
ZHONE TECHNOLOGIES, INC.
AND
CIT VENTURE LEASING FUND, LLC
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Lease)
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into as of the ____
day of _______________ 200_, between Zhone Technologies, Inc., a corporation
formed under the laws of the State of _______________ ("Assignor") and CIT
Venture Leasing Fund, LLC, a limited liability company formed under the laws of
the State of Delaware ("Assignee").
R E C I T A L S:
WHEREAS, Assignor has committed to sell certain assets (the "Transferred
Assets") to Assignee pursuant to that certain Master Purchase Agreement, dated
as of December 19, 2000 (the "Master Purchase Agreement") by and between
Assignor and Assignee;
WHEREAS, the Transferred Assets include all of Assignor's right, title
and interest in and to a certain equipment lease, a copy of which is attached as
Exhibit 1 hereto (the "Lease");
WHEREAS, the parties hereto desire to effect (a) the transfer by
Assignor to Assignee of all of the right, title and interest of the Assignor in,
under and with respect to the Lease, together with the Financing Documents
related thereto and (b) the assumption by Assignee of the obligations of
Assignor accruing thereunder from and after the date hereof.
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meaning ascribed thereto in the Master Purchase Agreement.
2. Assignment. Effective as of the date hereof (the "Cut-off
Date"), Assignor does hereby sell, convey, assign, transfer and set over, unto
Assignee all of its right, title and interest in, under and with respect to the
Lease and the Equipment subject thereto, together with all related Financing
Documents, but excluding any rights to indemnity relating to periods prior to
the Cut-off Date.
34
3. Assumption. Assignee hereby undertakes all of the duties and
obligations of Assignor under the Lease and related Financing Documents which
arise on and after the Cut-off Date.
4. Representations and Warranties of Assignor. Assignor, in order
to induce Assignee to enter into this Agreement, hereby represents and warrants
to Assignee that the Lease, together with this Agreement and the Notice and
Acknowledgment of Assignment, represent the entire agreement, effective as of
the date hereof, between Assignor, as lessor, and lessee, as lessee, with
respect to the leasing of the Equipment; that of the only duplicate originals of
the Lease, one has been delivered to the lessee and any other originals thereof
will be delivered to Assignee promptly after the Closing (as defined in the
Master Purchase Agreement); that the Lease is in full force and effect, without
modification or amendment, except for the documents set forth above; that to the
best of Assignor's knowledge, no event of default or event which with the
passage of time or the giving of notice or both would constitute an event of
default has occurred and is continuing thereunder; that the rents payable under
the Lease are not subject to any defenses, set-offs or counterclaims which are
solely the result of any act or omission on the part of Assignor; that Assignor
has not received any prepayments of rent or other amounts from lessee under the
Lease and other than as noted on Schedule of Assets there is no Lien on the
rents payable under the Lease; and that as of the date hereof there are no sales
taxes or other governmental charges due with respect to the Equipment other than
those payable by lessee under the Lease and excluding any taxes that are based
on or measured by the net income of lessor under the Lease.
5. Indemnity.
(a) Assignee shall indemnify and hold Assignor harmless from
and against any and all Claims arising under the Financing Documents to the
extent such Claims arise on or after the Cut-off Date, except for Claims
resulting from Assignor's gross negligence or willful misconduct.
(b) Assignor shall indemnify and hold Assignee harmless from
and against any and all Claims arising under the Financing Documents to the
extent such liabilities or obligations arise prior to the Cut-off Date, except
for Claims resulting from Assignee's gross negligence or willful misconduct.
6. Miscellaneous. This Agreement shall be governed and interpreted
under the laws of the State of New York. Except to the extent expressly
inconsistent with any term or provision hereof, this instrument shall be subject
to the terms and provisions of the Master Purchase Agreement.
35
IN WITNESS WHEREOF, the undersigned have caused this instrument to be
duly executed under seal as of the date above written.
ASSIGNOR:
ZHONE TECHNOLOGIES, INC.
By:
---------------------------------
Title:
------------------------------
ASSIGNEE:
CIT VENTURE LEASING FUND, LLC
By:
---------------------------------
Title:
------------------------------
36
EXHIBIT D
REMARKETING AGREEMENT
This Remarketing Agreement (the "Agreement"), dated as of December 22,
2000, is entered into by and between ZHONE TECHNOLOGIES, INC., a Delaware
corporation, having its principal office and place of business at 0000 Xxxxxxx
Xxxxxx, Xxxxxxx, XX 00000 ("Seller"), and CIT VENTURE LEASING FUND, LLC, a
Delaware limited liability company having its principal office and place of
business at 000 XXX Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("Purchaser").
1. Background.
Purchaser and Seller are parties to a Master Purchase Agreement of even
date herewith (the "Purchase Agreement"), pursuant to which Purchaser agrees
from time to time, subject to the terms and conditions of the Purchase
Agreement, to acquire from Seller certain equipment described therein (the
"Equipment"). The Equipment is, or will be, leased to third parties
(collectively, "Lessees," and individually, a "Lessee") pursuant to individual
leases (collectively, the "Leases," and individually, a "Lease") for a term set
forth in the applicable Lease (the "Lease Term").
2. Definitions.
"Lease Proceeds" means with respect to any Equipment that is re-leased
hereunder, the aggregate amount of the payments that are to be made by the
lessee under such re-lease, determined as of the date of such re-lease,
including any mandatory purchase price payment at the end of the lease term,
with the lease payments discounted to present value at the rate of five_ percent
(5%) per annum.
"Off-Lease Equipment" means Equipment purchased pursuant to the Purchase
Agreement for which (i) the Lease Term relating thereto has expired and for
which monthly rental is not being paid, or (ii) the Lease has been terminated
for any reason whatsoever, or (iii) the Lease or applicable law permits removal
and Remarketing because of a Lessee's default under the Lease; and in any such
event neither a new lease for the Equipment has become effective nor a sale of
the Equipment pursuant hereto has occurred.
"Remarket" and "Remarketing" means to re-lease or sell Off-Lease
Equipment and shall include, in addition, shipping, packing, refurbishing,
reconditioning, installation, training, insuring and other activities essential
to re-leasing or selling Off-Lease Equipment.
Unless the context otherwise indicates, all capitalized terms not defined in
this Agreement shall have the meanings set forth in the Purchase Agreement.
3. Remarketing.
(a) Purchaser appoints Seller as its exclusive agent for Remarketing all
Equipment purchased by Purchaser from time to time pursuant to the Purchase
Agreement. Upon written notice from Purchaser to Seller delivered within thirty
(30) days of an item (or items) of Equipment purchased by Purchaser pursuant to
the Purchase Agreement becoming Off-Lease Equipment, Seller agrees to use
reasonable efforts to Remarket such
37
Equipment to a new lessee or potential purchaser. Seller shall act as
Remarketing agent for as long as Purchaser owns any Equipment that has been
purchased in accordance with the terms of the Purchase Agreement. Seller agrees
to implement and maintain a formal used equipment sales program to provide for
the Remarketing of Equipment as required by this Agreement.
(b) If Equipment becomes Off-Lease Equipment for any reason, including the
default of the Lessee, Seller agrees that, subject to payment by Purchaser of
the costs and fees to be paid to Seller pursuant to Section 4 of this Agreement,
it will retrieve the Equipment on behalf of Purchaser, store it until it is
Remarketed, cosmetically refurbish it to place it in marketable condition, and
sell or lease it as used equipment at used equipment retail prices (as
reasonably determined by Seller) on behalf of Purchaser, all at Purchaser's
expense. Seller agrees that all Off-Lease Equipment shall be provided with a
standard warranty for used equipment (on terms and conditions determined by
Seller in its reasonable discretion) at Seller's expense for the benefit of any
subsequent lessee or purchaser of the Remarketed Equipment.
(c) If Purchaser determines that it is in its best interests to Remarket the
Equipment itself, then Purchaser shall have the option to do so on its own
behalf upon prompt written notice to Seller, and Seller's obligations hereunder
with respect to such Equipment shall thereafter cease. Seller's obligation to
Remarket other Equipment shall not be diminished as a result of Purchaser's
election to Remarket any item of Equipment. Seller shall not receive any
Remarketing fee for Equipment Remarketed by Purchaser. Purchaser shall reimburse
Seller for any costs incurred associated with the Remarketing of Equipment that
is subsequently Remarketed by Purchaser.
(d) In connection with the Remarketing of Equipment, the parties shall
execute a Remarketing Schedule in substantially the form set forth as Exhibit A
which sell set forth a description of the Equipment, date available for
Remarketing, Seller's fees and any other Remarketing terms.
(e) As Purchaser's agent, Seller will promptly prepare and arrange for the
execution of commercially standard documentation for the sale or re-lease of the
Off-Lease Equipment, the terms and conditions of which shall be within the sole
and reasonable discretion of Seller. Purchaser hereby appoints Seller its agent
to execute on its behalf the sale and/or re-lease documents in connection with
the accepted sale and/or re-lease of the Off-Lease Equipment. Purchaser shall be
responsible for billing and collecting those amounts attributable to such sale
or re-lease from the purchaser or lessee, including all applicable taxes.
Additionally, Purchaser shall be responsible for the filing of all sales, use
and property tax returns relating to the Off-Lease Equipment.
Purchaser shall use its best efforts to timely invoice and collect the
proceeds relating to the Off-Lease Equipment and shall promptly remit to Seller
those fees and reimbursable costs set forth in Section 4.
4. Fees and Reimbursement of Costs.
The fees established below are based on current market value for similar
services.
38
(a) For all Equipment Remarketed by Seller, pursuant to a defaulted Lease,
Seller shall receive a Remarketing fee in the amount of three percent (3%) of
the Off-Lease Equipment selling price received by Purchaser, or in the case of a
re-lease of a defaulted Lease, three percent (3%) of the Lease Proceeds thereof.
In connection with the remarketing of Equipment subject to a defaulted Lease,
the proceeds of any such Remarketing efforts, less Seller's fees and costs,
shall be remitted to Purchaser and credited 100% to the Reserve Loss Pool.
(b) In connection with the remarketing of a Lease that has been paid off in
full, the parties shall share equally (i.e. 50/50) in the net proceeds thereof.
(c) The cost of Remarketing, including, but not limited to, the costs of
installation and de-installation, maintenance and servicing, refurbishment,
storage, transportation, insurance, taxes, and other similar costs and expenses
shall be paid by Purchaser from time to time as such services are provided by
Seller, provided that any such costs greater than ten percent (10%) of the
Off-Lease selling price shall first be offset against Seller's Remarketing Fee.
Such costs shall not include any sales or leasing commissions paid by Seller or
any of Seller's overhead costs.
(d) In calculating the fees earned by Seller pursuant to paragraphs (a) and
(b) above, the costs and expenses incurred by Seller, and reimbursed to Seller
by Purchaser, in Remarketing the Equipment, shall be deducted from the sales
price or Lease Proceeds, as the case may be, in calculating such commission.
5. Representations of Seller.
Seller, by its acceptance hereof, represents, warrants, covenants and agrees
with Purchaser as follows:
(a) It has full power and authority to take all actions
required or permitted to be taken by it or under, and to perform and observe the
covenants and agreements on its part contained in, this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by Seller.
(c) This Agreement constitutes Seller's legal, valid and
binding obligations, enforceable against Seller in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws, or equitable principles relating to or limiting
creditors' rights generally.
(d) Seller will use its reasonable efforts to Remarket the
Equipment pursuant to this Agreement.
6. Representations of Purchaser.
Purchaser, by its acceptance hereof, represents, warrants, covenants, and agrees
with
39
Seller as follows:
(a) It has full power and authority to take all actions
required or permitted to be taken by it or under, and to perform and observe the
covenants and agreements on its part contained in this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by Purchaser.
(c) This Agreement constitutes Purchaser's legal, valid and
binding obligations, enforceable against Purchaser in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws, or equitable principles relating to or limiting
creditors' rights generally.
(d) Purchaser will cooperate with Seller in Remarketing the
Equipment.
7. Conditions To Remarketing Agent's Obligations.
The obligations of Seller under this Agreement have been undertaken in reliance
on, and shall be subject to, the due performance by Purchaser of its obligations
and agreements to be performed hereunder and to the accuracy of and compliance
with the representations, warranties, covenants and agreements of Purchaser
contained herein, on and as of the date of execution of this Agreement.
40
8. Miscellaneous.
(a) Successors and Assigns. The rights and obligations of the parties
hereunder shall inure to the benefit of, and shall be binding and enforceable
upon, their respective successors, assigns and transferees of either party
hereto. If Purchaser sells or assigns any of its interest in the Equipment and
Leases, it may also assign this Agreement or its obligations hereunder by giving
written notice of such assignment to Seller. Seller may assign this Agreement to
a party of its choosing only upon Purchaser's prior written consent, given in
its sole discretion. Any assignee of part or all of Purchaser's interest
hereunder shall take "subject to" Seller's rights hereunder.
(b) Notices. Any notice, request or other communication to either party by
the other hereunder shall be given in writing and shall be deemed given on the
date the same is mailed by certified mail, return receipt requested, postage
prepaid and addressed to the party for which it is intended at the address set
forth at the head of this Agreement together with a copy thereof to one
additional addressee (if previously designated by the party to receive the
notice hereunder). The place to which notices or copies of notices are to be
given to either party may be changed from time to time by such party by written
notice to the other party.
(c) Governing Law. This Agreement shall be governed by and interpreted under
the law of the State of California applicable to contracts made and to be
performed therein without giving effect to the principles of conflict of laws
thereof.
(d) Captions. Captions used herein are inserted for reference purposes only
and shall not affect the interpretation or construction of this Agreement.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
(f) Amendments. This Agreement may be amended or varied only by a document
in writing executed by Purchaser and Seller.
(g) Attorney's Fees. If either party hereto institutes legal proceedings
against the other party hereto alleging a breach of this Agreement, the losing
party shall be responsible for and shall pay the reasonable attorney's fees of
the prevailing party.
41
IN WITNESS WHEREOF, the Purchaser and Seller have executed this Agreement to be
effective as of the day and year first above written.
ZHONE TECHNOLOGIES, INC.
By:
----------------------------
Title:
-------------------------
CIT VENTURE LEASING FUND, LLC
By:
----------------------------
Title:
-------------------------
42
EXHIBIT E
TO MASTER PURCHASE AGREEMENT
DATED AS OF DECEMBER 22, 2000
BETWEEN
ZHONE TECHNOLOGIES, INC.
AND
CIT VENTURE LEASING FUND, LLC
NOTICE AND ACKNOWLEDGMENT OF ASSIGNMENT
______________, 200_
[Lessee's Name and Address]
Attn: _____________________
Re: _________________________________(the "Lease Schedule") to
______________________________ dated as of ________________ (as
incorporated into the Lease Schedule, the "Lease") between Zhone
Technologies, Inc. ("Lessor") and _______________________
("Lessee") relating to certain equipment (the "Equipment")
Ladies and Gentlemen:
The undersigned hereby give Lessee notice, and Lessee hereby
acknowledges receipt of such notice, that Lessor has sold the Equipment to CIT
Venture Leasing Fund, LLC ("Purchaser") and assigned the Lease to Purchaser all
as of the date hereof. Lessee hereby agrees that from and after the date hereof,
until written notice to the contrary from Purchaser, all payments of rent and
other sums now or hereafter becoming due pursuant to the Lease shall be paid
directly to Purchaser as follows:
[Name and Address]
In order to induce Lessee to execute this Notice and Acknowledgment of
Assignment, Purchaser hereby confirms and agrees that it shall be bound by the
terms and provisions of the Lease with respect to Lessee's quiet enjoyment.
In recognition of the undersigned's reliance upon this letter, by its
execution hereof, Lessee hereby represents, warrants, covenants and agrees as
follows:
1. The Lease is in full force and effect on the date of execution
of this instrument.
43
2. A true, correct and complete copy of the Lease is annexed hereto
as Exhibit 1. Any further modification, termination, amendment
or supplement to the Lease, or settlement of amounts due
thereunder, shall be ineffective without Lessee's prior written
consent.
3. Lessee has executed only one (1) original counterpart of the
Lease, denominated as counterpart no. 1.
4. All of the information contained in the Rental Schedule,
including schedules and exhibits thereto, is true, accurate and
complete.
5. No Event of Loss has occurred with respect to the Equipment.
6. Lessee's obligations to make payments under the Lease are
absolute and unconditional and are not subject to any
deductions, abatement, set-off, defense or counterclaim for any
reason whatsoever.
7. Lessee has not prepaid any rents under the Lease and there are
________________ monthly rental payments of $ ___________
outstanding.
8. No Default under the Lease has occurred and is continuing.
9. Lessee acknowledges and agrees that from and after the date
hereof Lessee will deliver copies of all notices and other
communications desired to be given or made by it under the Lease
to Purchaser at the address of Purchaser as set forth below.
10. Lessee has not received notice of a prior sale, transfer,
assignment, hypothecation or pledge by Lessor of the Lease or
any rights therein that is presently effective, including the
rent reserved thereunder.
11. Lessee shall promptly cause Purchaser to be added as an
additional insured and loss payee on any and all insurance
required for the benefit of Lessor under the Lease relating to
the Equipment.
44
If you are in agreement with the terms and provisions hereof, please
execute the enclosed copies of this letter in the space indicated.
Very truly yours,
ZHONE TECHNOLOGIES, INC., as Lessor
By:
---------------------------------
Its:
--------------------------------
CIT VENTURE LEASING FUND, LLC, as
Purchaser
By:
---------------------------------
Its:
--------------------------------
Address: CIT Venture Leasing Fund, LLC
000 XXX Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
ACKNOWLEDGED AND AGREED:
_______________________________, as Lessee
By:
----------------------------
Its:
---------------------------
45
EXHIBIT F
[LOGO OF ZHONE]
Tier 1 is for established investment grade companies, or companies whose credit
would qualify under normal industry credit standards. Tiers 2 through 4
represent lease transactions that will be classified as full payment leases and
generally identified by the criteria set forth below:
CRITERIA:
TIER 2
Investors in the Company include a
prominent, "Tier 1" type venture capital
firm.
2 Experienced Management Team The management team of the company is in
place and includes the following:
- management experience in this
sector, at a senior level
- experience in working with start
up companies
- experience in raising money
- experience in marketing
Additionally, the Company's board
includes a partner from the lead VC.
3. Market position The Company maintains a leading market
position in their sector or
geographically in the area that they
serve. Based on their position, should
they run into difficulty, it is
reasonable to assume that they would be
acquired by a competitor as opposed to
going out of business. The company does
not have any weakness in its key
customer or supplier base.
4. Network architecture The company's network is in place and
operational.
5. Performance to plan The company is meeting expectations.
6. Time in business/pay history The Company has been in business at
least two years and has a clean credit
history to date.
7. Financing raised The Company has been successful in
raising financing, has raised a minimum
of two rounds of equity, and has a
valuation based on its' last round of
financing of at least $50,000,000.
8. Other Financing raised The Company has been successful in
raising lease
46
debt to finance other equipment
purchases. This may come from 3rd party
financing sources or other vendors.
9. Liquidity The Company maintains cash on its
balance sheet sufficient to cover its
"cash burn rate" for the next Twelve
(12) months based on its plan. The
Company has a minimum Quick Ratio of
1:1. (Cash Burn shall be defined as the
summation of i) net income, excluding
any non-recurring charges, plus
depreciation, amortization and any other
such non-cash charges plus; ii)
projected debt service over the coming
12 month period plus; iii) actual
capital expenditures. All of the
foregoing should be measured over a
financial period of not less than six
months and normalized to a monthly
amount. The sum shall be divided into
the current cash position as of the same
period financial statement to yield the
number of months of remaining cash.)
10. Revenue Generation The Company has a diversified revenue
stream and has been generating revenues
for at least 1 year. The company is
projecting to be EBITDA positive in 12
months.
11. Outstanding Litigation There is no outstanding litigation that
would impair the Company's ability to
execute on its business plan or be
unsuccessful in raising any additional
capital if needed.
12. Critical use equipment The equipment being supplied is critical
to the ongoing operations of the
Company.
TIER 3
1. Investors in the Company Investment comes from a VC firm dot
rated as a Tier1 VC
2. Experienced Management Team The management team of the company is in
place and includes some but not all of
the following:
- management experience in this
sector, at a senior level
- experience in working with
start up companies
- experience in raising money
- experience in marketing
Board representation by the VC is
desirable but not a requirement.
3. Market position The Company's position in the market is
not dominant as a Tier 2 Company's. The
Company has established presence and
given the size of the market has a
reasonably good chance of maintaining
market share. Additionally, the
Company's product/service or customer
base is of value to a competitor so that
should they run into difficulty, it is
reasonable to assume that the company
may be a candidate for acquisition by a
competitor, as opposed to going out of
business.
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4. Network architecture The Company's network design is in place
and they are currently building out.
5. Performance to plan The Company is meeting expectations
6. Time in business/pay history The Company has been in business for at
least one year and may have some
slowness in their payment history, (but
not chronic), nor is there evidence of a
payment default.
7. Financing raised The Company has been successful in
raising financing, has raised at least
one or two rounds of financing, and has
a valuation based on its' last round of
financing of at least $25,000,000 The
Company has a minimum Quick Ratio of
1.5:1
8. Other Financing raised The Company has been successful in
raising lease debt to finance other
equipment purchases. This may come from
3rd party financing sources or other
vendors.
9. Liquidity The Company maintains cash on its
balance sheet to cover its cash burn for
the next nine months based on its plan
Additionally, there are strong
assurances that additional financing
will be raised as needed.
10. Revenue Generation The Company has been generating revenues
for twelve months or less. The company
has positive gross margins and is
projecting to be EBITDA positive in 18
months
11. Outstanding Litigation There is no outstanding litigation that
would impair the Company's ability to
execute on its business plan or be
unsuccessful in raising any additional
capital needed.
12. Critical use equipment The equipment being supplied is critical
to the ongoing operations of the.
TIER 4
1. Investors in the Company Investment comes from a Institutional or
Accredited investors via a Private
Placement Offering and/ or mandatory
redeemable subordinated debt provided by
a vendor or other source There is no
recognized sources of Venture Capital.
2. Experienced Management Team The management team of the company is
either not fully in placed or lacks in
at least half of the following areas:
- management experience in this
sector, at a senior level
- experience in working with
start up
48
companies
- experience in raising money
- experience in marketing
3. Market position The Company's position in the market is
not dominant, its presence is evolving
and it has other, larger, recognizable
competitors that it will have to compete
with for sales. Based on this there are
no assurances that should they run into
difficulty they would be acquired by a
competitor as opposed to going out of
business.
4. Network architecture The Company's network design is in place
and they are preparing to build their
network.
5. Performance to plan The Company has not implemented its
plan.
6. Time in business The Company has been in business for
less one year and may have a history of
slowness in their payment history (but
not chronic).
7. Financing raised The Company has raised minimal financing
to date. Is currently seeking financing
actively in order to finance its
operating plan and has a valuation of
greater than $15,000,000.
8. Other Financing raised The Company has either closed on or is
negotiating terms for lease debt to
finance other equipment purchases.
9. Liquidity The Company has at least six months cash
on its balance sheet to cover its "cash
burn", and has raised at least one round
of equity (including Angel investors).
Its aged accounts payable, in aggregate
are in excess of 90 days but less than
150 days and while there are plans for
future equity to be raised there are no
assurances that can be verified.
10. Revenue Generation The Company is not generating revenues
but is negotiating the required
interconnect agreements with revenue
projected within the next twelve months
11. Outstanding Litigation There maybe outstanding litigation that
would impair the Company's ability to
execute on its business plan or be
unsuccessful in raising any capital
needed. In discussions with management
there is a reasonable belief that the
litigation will be settled.
12. Critical use equipment The equipment being supplied is of
essential use to the Company
* Characteristics of desirable Venture Capital firm.
. Firm has raised and managed at least two funds
. Funds have at least $ 50 Million Dollars under management
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. The fund has at least 15% availability for follow on investments
. The managers of the fund have significant industry experience
. The fund raised capital from significant well experienced
institutional investors
. The firm is well known in the industry and has a successful track
record of funding companies in the industry
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