Exhibit 10.64
--------------------------------------------------------------------------------
LEASE
between
HANOVER EQUIPMENT TRUST 2001A
as Lessor,
and
HANOVER COMPRESSION LIMITED PARTNERSHIP
as Lessee
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Dated as of August 31, 2001
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THIS LEASE IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF WILMINGTON TRUST FSB,
AS COLLATERAL AGENT (THE "COLLATERAL AGENT") UNDER AN INDENTURE, DATED AS OF
AUGUST 30, 2001 AMONG HANOVER EQUIPMENT TRUST 2001A AND THE INDENTURE TRUSTEE,
AS AMENDED OR SUPPLEMENTED. THIS LEASE HAS BEEN EXECUTED IN SEVERAL
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE COLLATERAL AGENT ON
THE SIGNATURE PAGE HEREOF.
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS
1.1 Defined Terms..................................................... 1
SECTION 2. EQUIPMENT AND TERM
2.1 Equipment......................................................... 1
2.2 Lease Term........................................................ 1
2.3 Title............................................................. 1
SECTION 3. RENT
3.1 Rent.............................................................. 2
3.2 Supplemental Rent................................................. 2
SECTION 4. WARRANTIES
4.1 Warranties........................................................ 2
SECTION 5. QUIET ENJOYMENT
5.1 Quiet Enjoyment................................................... 3
SECTION 6. NET LEASE
6.1 Net Lease; No Setoff; Etc......................................... 3
6.2 No Termination or Abatement....................................... 4
SECTION 7. OWNERSHIP OF EQUIPMENT
7.1 Ownership of the Equipment........................................ 4
SECTION 8. CONDITION OF EQUIPMENT
8.1 Disclaimer of Warranties.......................................... 6
8.2 Possession and Use of the Equipment............................... 7
SECTION 9. COMPLIANCE
9.1 Compliance with Legal Requirements and Insurance Requirements..... 7
9.2 Environmental Matters............................................. 7
SECTION 10. MAINTENANCE, REPAIR AND RETURN REQUIREMENTS
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10.1 Maintenance and Repair............................................ 8
10.2 Return Requirements............................................... 9
10.3 Right of Inspection and Location.................................. 10
SECTION 11. MODIFICATIONS
11.1 Modifications..................................................... 10
SECTION 12. TITLE
12.1 Warranty of Title................................................. 11
12.2 Identification.................................................... 11
SECTION 13. PERMITTED CONTESTS
13.1 Permitted Contests Other Than in Respect of Impositions........... 11
SECTION 14. INSURANCE
14.1 Public Liability and Workers' Compensation Insurance.............. 12
14.2 Hazard and Other Insurance........................................ 12
14.3 Coverage.......................................................... 12
SECTION 15. CONDEMNATION AND CASUALTY
15.1 Casualty and Condemnation......................................... 13
SECTION 16. LEASE TERMINATION
16.1 Termination upon Certain Events................................... 15
16.2 Procedures........................................................ 15
SECTION 17. DEFAULT
17.1 Lease Events of Default........................................... 16
17.2 Final Liquidated Damages.......................................... 17
17.3 Remedies.......................................................... 17
17.4 Additional Remedies............................................... 19
17.5 Proceeds of Sale; Deficiency...................................... 19
17.6 Waiver of Certain Rights.......................................... 19
17.7 Assignment of Rights Under Contracts.............................. 19
SECTION 18. LESSOR'S RIGHT TO CURE
18.1 Lessor's Right to Cure Lessee's Lease Defaults.................... 20
SECTION 19. LEASE TERMINATION
19.1 Provisions Relating to Lessee's Termination of this Lease or
Exercise of Purchase Option....................................... 20
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SECTION 20. PURCHASE OPTION
20.1 Purchase Option................................................... 20
20.2 Expiration Date Purchase Option................................... 22
20.3 Obligation to Purchase All Equipment.............................. 22
SECTION 21. SALE OF EQUIPMENT
21.1 Sale Procedure.................................................... 23
21.2 Application of Proceeds of Sale................................... 23
21.3 Indemnity for Excessive Wear...................................... 24
21.4 Appraisal Procedure............................................... 24
21.5 Certain Obligations Continue...................................... 24
SECTION 22. HOLDING OVER
22.1 Holding Over...................................................... 24
SECTION 23. RISK OF LOSS
23.1 Risk of Loss...................................................... 25
SECTION 24. SUBLETTING AND ASSIGNMENT
24.1 Subletting and Assignment......................................... 25
24.2 Subleases or Licenses............................................. 25
SECTION 25. ESTOPPEL CERTIFICATES
25.1 Estoppel Certificates............................................. 25
SECTION 26. NO WAIVER
26.1 No Waiver......................................................... 26
SECTION 27. ACCEPTANCE OF SURRENDER
27.1 Acceptance of Surrender........................................... 26
SECTION 28. OWNERSHIP, GRANT OF SECURITY INTEREST AND FURTHER ASSURANCES
28.1 Grant of Security Interest........................................ 26
28.2 UCC Remedies...................................................... 27
28.3 Deficiency........................................................ 28
28.4 Trustee's Appointment as Attorney-in-Fact; Trustee's
Performance of Lessee's Obligations............................... 28
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SECTION 29. NOTICE
29.1 Notices........................................................... 29
SECTION 30. SUBSTITUTION
30.1 Substitution...................................................... 31
SECTION 31. SUBORDINATION
31.1 Agreement to Subordinate.......................................... 32
31.2 Liquidation, Dissolution, Bankruptcy.............................. 32
31.3 Default on Guarantor Senior Indebtedness of Lessee................ 33
31.4 Acceleration of Payment of Rent................................... 34
31.5 When Rents Must be Paid Over...................................... 34
31.6 Subrogation....................................................... 35
31.7 Relative Rights................................................... 35
31.8 Subordination May Not Be Impaired by Lessee....................... 35
31.9 Distribution or Notice to Representative.......................... 35
31.10 Section 31 Not to Prevent Events of Default or Limit Right to
Accelerate........................................................ 35
31.11 Reliance by Holders of Guarantor Senior Indebtedness on
Subordination Provisions.......................................... 35
SECTION 32. MISCELLANEOUS
32.1 Miscellaneous..................................................... 35
32.2 Amendments and Modifications...................................... 35
32.3 Successors and Assigns............................................ 35
32.4 Headings and Table of Contents.................................... 36
32.5 Counterparts...................................................... 36
32.6 GOVERNING LAW..................................................... 36
32.7 Limitations on Recourse........................................... 36
32.8 Priority.......................................................... 36
Description of Equipment............................................ Schedule A
Form of Lease Supplement............................................. Exhibit A
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LEASE (this "Lease"), dated as of August 31, 2001, between HANOVER
EQUIPMENT TRUST 2001A, a Delaware business trust, having its principal office at
c/o Wilmington Trust Company, Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000-0000, as lessor (the "Lessor"), and HANOVER
COMPRESSION LIMITED PARTNERSHIP, a Delaware limited partnership, having its
principal office at 00000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxxxx, Xxxxx 00000, as lessee
(the "Lessee").
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used herein but not otherwise
defined in this Lease shall have the respective meanings specified in Annex A to
the Participation Agreement dated as of the date hereof among Lessee, Lessor,
Wilmington Trust FSB, the Indenture Trustee, the Collateral Agent, the Trust
Company, the Certificate Holders, and the Guarantors, as such Participation
Agreement may be amended, supplemented or otherwise modified from time to time.
Section 2. EQUIPMENT AND TERM
2.1 Equipment. Subject to the terms and conditions hereinafter set
forth, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
each Unit described on Schedule A attached hereto. Schedule A shall be revised
from time to time to add each Replacement Equipment and delete each Unit
released from this Lease.
2.2 Lease Term. The Equipment is leased for the Term, unless earlier
terminated in accordance with the provisions of this Lease.
2.3 Title. Except as otherwise expressly set forth in the Operative
Agreements, the Equipment is leased to Lessee without any representation or
warranty, express or implied, by Lessor and subject to the rights of parties in
possession, the existing state of title (including, without limitation, the
Permitted Exceptions) and all applicable Legal Requirements. Lessee shall in no
event have any recourse against Lessor for any defect in title to the Equipment
unless such defect was the result of an act or omission of Lessor or its
Affiliates giving rise to a Lessor Lien. Lessor and Lessee hereby declare that
it is their mutual intent that the Equipment is to be considered movable
(personal) property, severable from the improvements in which it may be located,
and not immovables or components of immovables, for all purposes of this Lease.
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Section 3. RENT
3.1 Rent. (a) On each applicable Scheduled Interest Payment Date
after the Release Date, Lessee shall pay the Basic Rent.
(b) Basic Rent shall be due and payable in Dollars and shall be paid
by wire transfer of immediately available funds on the due date therefor to such
account or accounts at such bank or banks or to such other Person or in such
other manner as Lessor shall from time to time direct.
(c) Lessee's inability or failure to take possession of all, or any
Unit, of the Equipment when delivered by Lessor shall not delay or otherwise
affect Lessee's obligation to pay Rent in accordance with the terms of this
Lease.
3.2 Supplemental Rent. Lessee shall pay to Lessor or the Person
entitled thereto any and all Supplemental Rent timely (subject to Section 13
hereof) as the same shall become due and payable, and if Lessee fails to pay any
Supplemental Rent, Lessor shall have all rights, powers and remedies provided
for herein or by law or equity or otherwise in the case of nonpayment of Basic
Rent. The expiration or other termination of Lessee's obligations to pay Basic
Rent hereunder shall not limit or modify the obligations of Lessee with respect
to Supplemental Rent. Unless expressly provided otherwise in this Lease or any
other Operative Agreement, in the event of any failure on the part of Lessee to
pay and discharge any Supplemental Rent as and when due, Lessee shall also
promptly pay and discharge any fine, penalty, interest or cost which may be
assessed or added for nonpayment or late payment of such Supplemental Rent, all
of which shall also constitute Supplemental Rent.
3.3 Legal Holiday. A "Legal Holiday" is a Saturday, a Sunday, or
other day on which commercial banking institutions are authorized or required to
be closed in New York City. If any payment is required hereunder to be made on a
Legal Holiday, payment shall be made on the next succeeding day that is not a
Legal Holiday.
Section 4. WARRANTIES
4.1 Warranties. So long as no Lease Event of Default shall have
occurred and be continuing (or if a Lease Event of Default shall have occurred
and is continuing, if Lessee has timely delivered a Purchase Notice or
Substitution Notice and the purchase or substitution thereby would cure such
Lease Event of Default), Lessor agrees to take all such actions as may be
reasonably necessary to insure that Lessee is the beneficiary of any and all
warranties with respect to the Equipment, provided, however, the reasonable
costs of any such actions shall be borne by Lessee.
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Section 5. QUIET ENJOYMENT
5.1 Quiet Enjoyment. So long as no Lease Event of Default shall have
occurred and be continuing, Lessee shall peaceably and quietly have, hold and
enjoy the Equipment for the Term, free of any claim or other action by Lessor or
anyone claiming by, through or under Lessor.
Section 6. NET LEASE
6.1 Net Lease; No Setoff; Etc. This Lease shall constitute a net
lease and, except as otherwise provided herein or in the other Operative
Agreements, it is intended that Basic Rent and Supplemental Rent shall be paid
without counterclaim, setoff, deduction or defense of any kind and without
abatement, suspension, deferment, diminution or reduction of any kind, and
Lessee's obligation to pay all such amounts is absolute and unconditional,
provided that if at any time the Lessee is required to make a payment of (i)
Termination Value or (ii) an indemnity payment pursuant to Section 13 of the
Participation Agreement to the Certificate Holders, and there shall exist any
Lessor Liens attributable to the Certificate Holders (and the Lessee shall have
previously incurred a charge to discharge any Lessor Liens attributable to the
Certificate Holders), then the Lessee shall be entitled to deduct from the
portion required to be paid to the Certificate Holders of Termination Value or
payment of indemnity, as the case may be, an amount sufficient to so reimburse
the Lessee for the cost of discharging such Lessor Liens, as the case may be.
The obligations and liabilities of Lessee hereunder shall in no way be released,
discharged or otherwise affected for any reason, including, without limitation,
to the maximum extent permitted by law: (a) any defect in the condition,
merchantability, design, quality or fitness for use of any portion of any
Equipment, or any failure of any Equipment to comply with all Legal
Requirements, including any inability to use any Equipment by reason of such
non-compliance; (b) any damage to, abandonment, loss, contamination of or
Release from or destruction of or any requisition or taking of any Equipment or
any part thereof; (c) any restriction, prevention or curtailment of or
interference with any use of any Equipment or any part thereof; (d) any defect
in title to or rights to any Equipment or any Lien on such title or rights or on
any Equipment; (e) any change, waiver, extension, indulgence or other action or
omission or breach in respect of any obligation or liability of or by Lessor,
Certificate Holders, Trustee, Indenture Trustee or any Securityholder; (f) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceedings relating to Lessee, Lessor, Certificate
Holders, the Trust Company, Trustee, Indenture Trustee, any Securityholder or
any other Person, or any action taken with respect to this Lease by any trustee
or receiver of Lessee, Lessor, Certificate Holders, the Trust Company, Trustee,
Indenture Trustee, any Securityholder or any other Person, or by any court, in
any such proceeding; (g) any claim that Lessee has or might have against any
Person, including, without limitation, Lessor, Certificate Holders, the Trust
Company, Trustee, Indenture Trustee or any Securityholder; (h) any failure on
the part of Lessor to perform or comply with any of the terms of this Lease, any
other Operative Agreement or of any other agreement; (i) any invalidity or
unenforceability or disaffirmance against or by Lessee of this Lease or any
provision hereof or any of the other Operative Agreements or any provision of
any thereof; (j) the impossibility of performance by Lessee, Lessor or both; (k)
any action by any court, administrative agency or
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other Governmental Authority; any restriction, prevention or curtailment of or
any interference with the construction on or any use of any Equipment or any
part thereof; or (m) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not Lessee shall have notice or
knowledge of any of the foregoing. This Lease shall be noncancellable by Lessee
for any reason whatsoever except as expressly provided herein or in the other
Operative Agreements, and Lessee, to the extent permitted by Legal Requirements,
waives all rights now or hereafter conferred by statute or otherwise to quit,
terminate or surrender this Lease, or to any diminution, abatement or reduction
of Rent payable by Lessee hereunder. If for any reason whatsoever this Lease
shall be terminated in whole or in part by operation of law or otherwise, except
as otherwise expressly provided herein or in the other Operative Agreements,
Lessee shall, unless prohibited by Legal Requirements, nonetheless pay to Lessor
(or, in the case of Supplemental Rent, to whomever shall be entitled thereto) an
amount equal to each Rent payment at the time and in the manner that such
payment would have become due and payable under the terms of this Lease if it
had not been terminated in whole or in part, and in such case, so long as such
payments are made and no Lease Event of Default shall have occurred and be
continuing, Lessor will deem this Lease to have remained in effect. Each payment
of Rent made by Lessee hereunder shall be final and, absent manifest error in
the computation of the amount thereof, Lessee shall not seek or have any right
to recover all or any part of such payment from Lessor, Certificate Holders,
Indenture Trustee, Trustee, or any party to any agreements related thereto for
any reason whatsoever. Lessee assumes the sole responsibility for the condition,
use, operation, maintenance, and management of the Equipment and Lessor shall
have no responsibility in respect thereof and shall have no liability for damage
to the property of Lessee or any subtenant of Lessee on any account or for any
reason whatsoever other than resulting from Lessor's gross negligence or willful
misconduct.
6.2 No Termination or Abatement. Lessee shall remain obligated under
this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting Lessor, or any action with respect to this Lease which may
be taken by any trustee, receiver or liquidator of Lessor or by any court with
respect to Lessor, except as otherwise expressly provided herein. Lessee hereby
waives all right (i) to terminate or surrender this Lease, except as otherwise
expressly provided herein or in the other Operative Agreements, or (ii) to avail
itself of any abatement, suspension, deferment, reduction, setoff, counterclaim
or defense with respect to any Rent. Lessee shall remain obligated under this
Lease in accordance with its terms and, to the extent permitted by law, Lessee
hereby waives any and all rights now or hereafter conferred by statute or
otherwise to modify or to avoid strict compliance with its obligations under
this Lease. Notwithstanding any such statute or otherwise, to the extent
permitted by law, Lessee shall be bound by all of the terms and conditions
contained in this Lease.
Section 7. OWNERSHIP OF EQUIPMENT
7.1 Ownership of the Equipment. (a) Lessor and Lessee intend that (i)
for financial accounting purposes with respect to Lessee (A) this Lease will be
treated as an "operating lease" pursuant to Statement of Financial Accounting
Standards (SFAS) No. 13, as
4
amended, (B) Lessor will be treated as the owner and lessor of the Equipment and
(C) Lessee will be treated as the lessee of the Equipment but (ii) for federal,
state and local income tax and state law purposes (A) this Lease will be treated
as a financing arrangement, (B) the Securityholders will be treated as senior
lenders making loans to Lessee in an amount equal to the principal amount of the
Securities, which Securities will be secured by the Equipment, (C) the
Certificate Holders will be treated as subordinated lenders making loans to
Lessee in an aggregate amount equal to the Certificate Holder Contribution,
which loans are secured by the Equipment, and (D) Lessee will be treated as the
owner of the Equipment and will be entitled to all tax benefits ordinarily
available to an owner of property like the Equipment for such tax purposes.
(b) Lessor and Lessee further intend and agree that, for the purpose
of securing Lessee's obligations for the repayment of the above-described loans,
(i) this Lease shall also be a security agreement (as defined in Section
1-201(37) of the Uniform Commercial Code) and financing statement within the
meaning of Article 9 of the Uniform Commercial Code; (ii) the conveyance
provided for in Section 2 shall be deemed a grant of, and Lessee hereby grants
to Lessor, a security interest in Lessee's right, title and interest in the
Equipment and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, investments, securities or other property, whether in the
form of cash, investments, securities or other property, for the benefit of the
Lessor to secure the Lessee's payment of all amounts owed by, and the
performance of all obligations of, the Lessee under this Lease and the other
Operative Agreements and Lessor holds title to the Equipment so as to create and
grant a first lien and prior security interest in the Equipment (A) pursuant to
this Lease for the benefit of the Collateral Agent under the Assignment of
Lease, to secure to the Collateral Agent the obligations of the Lessee under the
Lease for the benefit of the Securityholders and the Certificate Holders and (B)
pursuant to the Security Agreement to secure to the Collateral Agent the
obligations of the Lessor under the Indenture and the Notes for the benefit of
the Securityholders and the Certificate Holders; (iii) the possession by Lessor
or any of its agents of notes and such other items of property as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-313 of the Uniform Commercial Code; and (iv)
notifications to Persons holding such property, and acknowledgments, receipts or
confirmations from financial intermediaries, bankers or agents (as applicable)
of Lessee shall be deemed to have been given for the purpose of perfecting such
security interest under applicable law. Lessor and Lessee shall take such
actions as may be necessary to ensure that such security interest is a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the Term. Nevertheless, Lessee acknowledges and agrees that
none of Lessor, Certificate Holders, Trustee, the Trust Company, Indenture
Trustee, or any Securityholder has provided or will provide tax, accounting or
legal advice to Lessee regarding this Lease, the Operative Agreements or the
transactions contemplated hereby and thereby, or made any representations or
warranties concerning the tax, accounting or legal characteristics of the
Operative Agreements, and that Lessee has obtained and relied upon such tax,
accounting and legal advice concerning the Operative Agreements as it deems
appropriate.
(c) Lessor and Lessee further intend and agree that in the event of
any insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State or
5
Commonwealth thereof affecting Lessee or Lessor, the transactions evidenced by
this Lease shall be regarded as loans made by an unrelated third party lender to
Lessee.
Section 8. CONDITION OF EQUIPMENT
8.1 Disclaimer of Warranties. WITHOUT LIMITING ANY CLAIM LESSEE MAY
HAVE AGAINST ANY CONTRACTOR, SUBCONTRACTOR, SUPPLIER OR MANUFACTURER, LESSEE
EXPRESSLY ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT ANY ASSISTANCE
FROM THE LESSOR, THE TRUSTEE OR THE CERTIFICATE HOLDERS OR THEIR RESPECTIVE
AGENTS OR EMPLOYEES, AND LESSEE AGREES THAT (I) EACH UNIT IS OF A SIZE, DESIGN,
AND CAPACITY SELECTED BY AND ACCEPTABLE TO LESSEE, (II) LESSEE IS SATISFIED THAT
EACH ITEM OF EQUIPMENT IS SUITABLE FOR ITS PURPOSES, (III) THE EQUIPMENT IS
LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS NOW
IN EFFECT OR HEREAFTER ADOPTED, (IV) IT IS LEASING THE EQUIPMENT FROM LESSOR IN
AN "AS IS", "WHERE IS" AND "WITH ALL FAULTS" CONDITION AND (V) NEITHER LESSOR
NOR THE CERTIFICATE HOLDERS IS A MANUFACTURER OR DEALER IN EQUIPMENT OF SUCH
KIND. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE OPERATIVE AGREEMENTS,
NEITHER LESSOR NOR THE CERTIFICATE HOLDERS SHALL BE DEEMED TO HAVE MADE, AND
LESSEE HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER LESSOR NOR THE
CERTIFICATE HOLDERS HAVE MADE, ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR
IMPLIED, AS TO THE EQUIPMENT, ANY PART THEREOF, OR ANY RECORDS OR ANY OTHER
MATTER WHATSOEVER WITH RESPECT THERETO, INCLUDING, WITHOUT LIMITATION, THE
DESIGN, CONDITION OR CAPACITY OF THE EQUIPMENT, THEIR MERCHANTABILITY OR THEIR
FITNESS FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE MATERIALS OR WORKMANSHIP
OF THE EQUIPMENT, THEIR VALUE, TITLE OR SAFETY, THE ABSENCE OF ANY PATENT,
TRADEMARK OR COPYRIGHT INFRINGEMENT OR LATENT DEFECT (WHETHER OR NOT
DISCOVERABLE), COMPLIANCE OF THE EQUIPMENT WITH THE REQUIREMENTS OF ANY
APPLICABLE LAWS (INCLUDING ENVIRONMENTAL LAWS) PERTAINING THERETO, OR THE
CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY
CONSTRUCTION OR PURCHASE DOCUMENT RELATING THERETO OR ANY COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE, NOR SHALL LESSOR OR THE CERTIFICATE HOLDERS
BE LIABLE TO LESSEE FOR ANY DEFECTS, EITHER PATENT OR LATENT (WHETHER OR NOT
DISCOVERABLE (IN THE EQUIPMENT OR ANY PART THEREOF OR ANY DIRECT OR INDIRECT
DAMAGE TO PERSONS OR PROPERTY RESULTING THEREFROM OR FOR ANY DIRECT, INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY
IN TORT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LESSEE HEREBY WAIVES
ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR
INFRINGEMENT) IT MIGHT HAVE AGAINST LESSOR OR THE CERTIFICATE HOLDERS FOR ANY
LOSS, DAMAGE (INCLUDING, WITHOUT LIMITATION, DIRECT,
6
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE
EQUIPMENT OR BY LESSEE'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER OTHER
THAN WITH RESPECT TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LESSOR OR
CERTIFICATE HOLDERS. LESSEE AND ANYONE CLAIMING BY, THROUGH OR UNDER LESSEE
HEREBY FULLY AND IRREVOCABLY RELEASES LESSOR, THE CERTIFICATE HOLDERS AND EACH
OTHER PERSON PARTY TO THE OPERATIVE AGREEMENTS, AND EACH OF THEIR EMPLOYEES,
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, SERVANTS, ATTORNEYS, AFFILIATES,
PARENT COMPANIES, SUBSIDIARIES, SUCCESSORS AND ASSIGNS, AND ALL PERSONS ACTING
ON THEIR BEHALF, FROM ANY AND ALL CLAIMS THAT IT MAY NOW HAVE OR HEREAFTER
ACQUIRE AGAINST THE CERTIFICATE HOLDERS, LESSOR OR ANY OTHER SUCH PERSON, FOR
ANY COSTS, LOSS, LIABILITY, DAMAGE, EXPENSES, DEMAND, ACTION OR CAUSE OF ACTION
ARISING FROM OR RELATED TO THE RELEASE OR DISCHARGE FROM THE EQUIPMENT AT ANY
TIME OF ANY HAZARDOUS MATERIALS OTHER THAN A RELEASE OR DISCHARGE OCCURRING
AFTER LESSEE IS NO LONGER IN POSSESSION OF THE EQUIPMENT AND RESULTING SOLELY
FROM ACTS OR OMISSIONS OF LESSOR, THE CERTIFICATE HOLDERS OR ANY OTHER SUCH
PERSON. THIS RELEASE INCLUDES CLAIMS OF WHICH LESSEE IS PRESENTLY UNAWARE OR
WHICH LESSEE DOES NOT PRESENTLY SUSPECT TO EXIST WHICH, IF KNOWN BY LESSEE,
WOULD MATERIALLY AFFECT LESSEE'S RELEASE OF LESSOR AND THE OTHER PERSONS
RELEASED HEREBY.
8.2 Possession and Use of the Equipment. Lessee shall use the
Equipment solely in the United States and in the conduct of its business, and
shall not permanently discontinue the use of the Equipment. Each Unit shall be
used by Lessee in a manner consistent with its intended purpose and in
accordance with its specification. Subject to the terms of Section 13 relating
to permitted contests, Lessee shall pay, or cause to be paid, all charges and
costs required in connection with the use of the Equipment. Lessee shall not
commit or permit any waste of any Equipment or any part thereof.
Section 9. COMPLIANCE
9.1 Compliance with Legal Requirements and Insurance Requirements.
Subject to the terms of Section 13 relating to permitted contests, Lessee, at
its sole cost and expense, shall, in all material respects, (a) comply with all
Legal Requirements (including all Environmental Laws) and Insurance Requirements
relating to each Unit, including the use, construction, operation, maintenance,
repair and restoration thereof, whether or not compliance therewith shall
require extraordinary changes in the Equipment or interfere with the use and
enjoyment of the Equipment, and (b) procure, maintain and comply with all
licenses, permits, orders, approvals, consents and other authorizations required
for the construction, renovation, use, repair, maintenance and operation of each
Unit.
9.2 Environmental Matters. (a) Promptly upon Lessee's actual
knowledge of the presence of Hazardous Substances with respect to any Unit in
concentrations and conditions
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that constitute an Environmental Violation, Lessee shall notify Lessor in
writing of such condition. In the event of such Environmental Violation, Lessee
shall, not later than thirty (30) days after Lessee has actual knowledge of such
Environmental Violation, either, in Lessee's sole discretion, (i) if permitted
pursuant to Section 20.1(a), exercise the Purchase Option thereunder to purchase
such Unit, (ii) exercise its Expiration Date Purchase Option, (iii) deliver to
Lessor and the Indenture Trustee an Officer's Certificate and a Substitution
Notice with respect to such Unit pursuant to Sections 16.1, or, (iv) at Lessee's
sole cost and expense, promptly and diligently undertake any response, clean up,
remedial or other action necessary to remove, cleanup or remediate the
Environmental Violation in accordance with the terms of Section 9.1. If Lessee
does not either purchase such Unit as permitted under Section 20.1(a), exercise
the Expiration Date Purchase Option or deliver a Substitution Notice with
respect to such Unit pursuant to Sections 16.1, Lessee shall, upon completion of
remedial action by Lessee, so inform Lessor in writing and upon Lessor's written
request therefor cause to be prepared by an environmental consultant reasonably
acceptable to Lessor a report describing the Environmental Violation and the
actions taken by Lessee (or its agents) in response to such Environmental
Violation, and a statement by the consultant that such Environmental Violation
has been remedied in full compliance with applicable Environmental Laws. The
foregoing provisions of this Section 9.2(a) notwithstanding, Lessee shall not be
required to take any of the actions described in clauses (i) - (ii) of this
Section 9.2(a) if such Environmental Violation would not reasonably be expected
to have a material adverse affect on the Equipment.
(b) In addition, Lessee shall provide to Lessor, within five (5)
Business Days of receipt, copies of all significant written communications with
any Governmental Authority relating to any Environmental Claim in connection
with any Unit. Lessee shall also promptly provide such detailed reports of any
such Environmental Claims to Lessor and the Indenture Trustee.
Section 10. MAINTENANCE, REPAIR AND RETURN REQUIREMENTS
10.1 Maintenance and Repair. (a) Lessee shall, at its sole cost and
expense, (i) take good care of the Equipment and keep the same and all parts
thereof in good and safe order and condition, with all mechanical devices,
electronic systems and component parts in good working order, normal wear and
tear excepted, consistent with maintenance practices used by Lessee with respect
to equipment similar in type owned or leased by Lessee and consistent with
customary industry standards, and in any event in a manner so as to preserve the
availability of any manufacturer's or supplier's warranty with respect to the
Equipment, and Lessor's rights under such warranty, and (ii) promptly make all
needed repairs, restorations and replacements of parts in and to the Equipment
or any part thereof, including, without limitation, overhaul of any Unit
requiring overhaul in Lessee's commercially prudent judgment. All such repairs,
restorations and replacements of parts shall be of a standard and quality
consistent with customary industry standards and sufficient for the proper
maintenance and operation of the Equipment and shall be constructed and
installed in a good and workmanlike manner in compliance with Legal Requirements
and Insurance Requirements. In carrying out its obligations under this Section
10.1, Lessee shall not discriminate in any way in the maintenance
8
of the Equipment as compared with other similar equipment owned or leased by
Lessee and shall use the Equipment in a manner consistent with sound operating
practices thereof.
(b) Lessor shall under no circumstances be required to furnish any
services or facilities with respect to the Equipment or make any repairs,
replacements, alterations or renewals of any nature or description to any
Equipment, make any expenditure whatsoever in connection with this Lease or
maintain any Equipment in any way except as otherwise provided in the Operative
Agreements. Lessor shall not be required to maintain, repair or rebuild all or
any part of any Equipment, and Lessee waives the right to (i) require Lessor to
maintain, repair, or rebuild all or any part of any Equipment, or (ii) make
repairs at the expense of Lessor pursuant to any Legal Requirement, Insurance
Requirement, contract, agreement, covenants, condition or restriction at any
time in effect.
10.2 Return Requirements. (a) Unless Lessee shall have sold such
Equipment pursuant to Section 21 or exercised its Purchase Option or Expiration
Date Purchase Option or exercised its right of substitution with respect thereto
pursuant to Section 30, Lessee shall, upon the expiration or earlier termination
of the Term with respect to each Unit, surrender and transfer such Unit to
Lessor, at Lessee's own expense, free and clear of all Liens other than the
following items set forth under the definition of Permitted Exceptions: (i),
(ii), (iv), (v) (provided that Lessee shall pay to Lessor, on or before such
transfer, any portion of such Taxes referred to in clause (v) to the extent
relating to a period prior to the date of such transfer) and (vi), in as good
condition as they were on the Lease Commencement Date with respect to each Unit,
ordinary wear and tear excepted, and in compliance with all Legal Requirements
(including all Environmental Laws) and the other requirements of this Lease,
including, without limitation, Section 10.1 (and in any event without (x) any
asbestos installed or maintained in any part of such Equipment, (y) any
polychlorinated byphenyls (PCBs) in, on or used with respect to such Equipment,
and (z) any other Hazardous Substances). Unless Lessee has exercised the
Purchase Option or the Expiration Date Purchase Option, Lessee shall provide, or
cause to be provided or accomplished, at the sole cost and expense of Lessee, to
or for the benefit of Lessor or a purchaser, at least thirty (30) Business Days
prior to the expiration or earlier termination of the Term with respect to each
Unit, each of the following: (i) a Lien search showing (A) no Liens other than
the type set forth as clauses (A) and (B) in the first sentence of this Section
10.2(a) and (B) the Security Agreement as creating a valid and perfected first
security interest in the Equipment; (ii) an assignment of all of the Lessee's
right, title and interest in and to each agreement executed by Lessee in
connection with the renovation, development, use, maintenance or operation of
the Equipment (including all warranty, performance, service and indemnity
provisions); (iii) an assignment of all permits, licenses, approvals and other
authorizations from all Governmental Authorities in connection with the
operation and use of the Equipment; and (iv) copies of all books and records,
with respect to the renovation, maintenance, repair, operation or use of the
Equipment. Lessee shall cooperate with any independent purchaser of the
Equipment in order to facilitate the ownership and operation by such purchaser
of the Equipment after such expiration or earlier termination of the Term,
including providing all books, reports and records regarding the maintenance,
repair and ownership of the Equipment and all data and technical information
relating thereto, granting or assigning all licenses necessary for the operation
and maintenance of the Equipment and cooperating in seeking and obtaining all
necessary licenses, permits and approvals of Governmental Authorities. Lessee
shall have also paid the total cost for the completion of all Modifications
whether or not commenced prior to
9
such expiration or earlier termination of the Term if such Modifications are
required to be completed within six months after the expiration or earlier
termination of the Term. The obligation of Lessee under this Section 10.2(a)
shall survive the expiration or termination of this Lease.
(b) Lessee, on the expiration or earlier termination of the Term, if
requested by Lessor, shall, at Lessee's sole cost and expense (or, to the extent
Lessee can so arrange, at the cost and expense of Lessee's customers) dismantle
and crate each Unit that Lessor shall designate and, at Lessee's sole cost and
expense transport such Equipment to a commercially reasonable location
designated by Lessor, provided that in no event shall the cost of transporting
such Equipment exceed $1,000,000 in the aggregate.
10.3 Right of Inspection and Location. (a) Lessor or its agents may,
at reasonable times and with reasonable prior notice and without unreasonably
interfering with the operations of Lessee's customers, inspect and examine at
its own cost and expense (unless a Lease Event of Default exists, in which case
the reasonable out-of-pocket costs and expenses of Lessor shall be paid by
Lessee), any Unit. Lessee may accompany Lessor on any such inspections.
(b) Lessee shall furnish to Lessor and the Collateral Agent, not less
than once every six months during the Term, an Officer's Certificate, accurate
in all material respects, stating the location of each Unit, noting whether any
Equipment has been relocated and if so the correct address of the relocated
Equipment. Lessor shall have no duty to make any such inspection or inquiry and
shall not incur any liability or obligation by reason of not making any such
inspection or inquiry.
Section 11. MODIFICATIONS
11.1 Modifications. (a) Lessee, at its sole cost and expense, shall
from time to time make alterations, renovations, improvements and additions to a
Unit or any part thereof (collectively, "Modifications") which are required to
be made pursuant to a Legal Requirement or an Insurance Requirement, and may at
any time and from time to time make other Modifications; provided that: (i)
except for any Modification required to be made pursuant to a Legal Requirement
or an Insurance Requirement, no Modification, individually, or when aggregated
with any other Modification shall impair the value of such Equipment or the
utility or useful life of such Equipment from that which existed immediately
prior to such Modification; (ii) the Modification shall be performed in a timely
manner and in a good and workmanlike manner; (iii) Lessee shall comply in all
material respects with all Legal Requirements (including all Environmental Laws)
and Insurance Requirements applicable to the Modification, including the
obtaining of all permits, and the structural integrity of such Equipment shall
not be adversely affected in any material respect; (iv) subject to the terms of
Section 13 relating to permitted contests, Lessee shall pay all costs and
expenses and discharge any Liens arising with respect to the Modification; and
(v) such Modifications shall comply with Section 10.1 and shall not change the
primary character of such Equipment or intended use of such Equipment. All
10
Modifications shall remain part of the Equipment and shall be subject to this
Lease, and title thereto shall immediately vest in Lessor.
(b) Lessee shall notify Lessor of the undertaking of any
Modifications the cost of which is anticipated to exceed $500,000.
(c) Lessee shall not without the consent of Lessor (which consent
will not be unreasonably withheld or delayed) undertake any Modifications to any
Unit (other than Modifications required to be made pursuant to a Legal
Requirement) if such Modifications cannot, in the reasonable judgment of Lessee,
be completed on or prior to the date that is one month prior to the Expiration
Date.
(d) Lessee, at its sole cost and expense, shall overhaul
substantially all of the Equipment during the Term, consistent with Lessee's
normal business practices.
Section 12. TITLE
12.1 Warranty of Title. (a) Lessee agrees that, except as otherwise
provided herein (i.e. with respect to Lessor Liens) and subject to the terms of
Section 13 relating to permitted contests, Lessee shall not directly or
indirectly create or allow to remain, and shall promptly discharge at its sole
cost and expense, any Lien, defect, attachment, levy, title retention agreement
or claim upon any Unit or any Modifications or any Lien, attachment, levy or
claim with respect to the Rent or with respect to any amounts held by the
Indenture Trustee pursuant to the Indenture, other than Permitted Exceptions
and/or Lessor Liens. Lessee shall promptly notify Lessor in the event it has
actual knowledge that a Lien (other than a Permitted Exception and/or a Lessor
Lien) exists with respect to the Equipment.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied, to or for
the performance by any contractor, mechanic, laborer, materialman, supplier or
vendor of any labor or services or for the furnishing of any materials for any
alteration, addition, repair or demolition of or to any Unit or any part
thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR
ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO
ANYONE HOLDING ANY EQUIPMENT OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND
THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO ANY EQUIPMENT.
12.2 Identification. Lessee shall not allow the name of any Person to
be placed upon any portion of any Unit as a designation that might be
interpreted as indicating a claim of ownership thereof or security interest
therein by any Person other than Lessee.
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Section 13. PERMITTED CONTESTS
13.1 Permitted Contests Other Than in Respect of Impositions. Except
to the extent otherwise provided for in Section 13.2(g) of the Participation
Agreement, Lessee, on its own or on Lessor's behalf but at Lessee's sole cost
and expense, may contest, by appropriate administrative or judicial or other
proceedings or processes (such as settlement or mediation) conducted in good
faith and with due diligence, the amount, validity or application, in whole or
in part, of any Legal Requirement, or any Lien, attachment, levy, encumbrance or
encroachment or any Supplemental Rent that is payable to a third party (and not
the Securityholders or any parties to the Operative Agreements), and Lessor
agrees not to pay, settle or otherwise compromise any such item, provided that
(a) the commencement and continuation of such proceedings shall suspend the
collection from, and suspend the enforcement against the applicable Equipment,
Lessor, Trustee, the Indenture Trustee, the Trust Company, the Certificate
Holders and the Securityholders; (b) there shall be no risk of the imposition of
a Lien (other than a Permitted Exception) on any Unit and no part of any Unit
nor any Rent would be in any danger of being sold, forfeited, lost or deferred;
(c) at no time during the permitted contest shall there be a risk of the
imposition of criminal liability or civil liability on Lessor, Trustee, the
Indenture Trustee, Trust Company, any Certificate Holder or any Securityholder
for failure to comply therewith; and (d) in the event that, at any time, there
shall be a material risk of extending the application of such item beyond the
earlier of the Expiration Date, then Lessee shall deliver to Lessor an Officer's
Certificate certifying as to the matters set forth in clauses (a), (b) and (c)
of this Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute
and deliver to Lessee such authorizations and other documents as may reasonably
be required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.
Section 14. INSURANCE
14.1 Public Liability and Workers' Compensation Insurance. During the
Term, Lessee shall procure and carry, at Lessee's sole cost and expense,
commercial general liability insurance for claims for injuries or death
sustained by persons or damage with respect to the use or operation of the
Equipment. Such insurance shall be on terms and in amounts that are no less
favorable than insurance maintained by owners of similar equipment which are in
Lessee's line of business, that are in accordance with normal industry practice.
The policy shall be endorsed to name Lessor, the Trust Company, the Certificate
Holders, the Trustee, the Indenture Trustee and the Collateral Agent as
additional insureds. The policy shall also specifically provide that the policy
shall be considered primary insurance which shall apply to any loss or claim
before any contribution by any insurance which Lessor, the Trust Company, the
Certificate Holders, the Trustee, the Indenture Trustee or the Collateral Agent
may have in force. Lessee shall, in the operation of the Equipment, comply with
the applicable workers' compensation laws and protect Lessor against any
liability under such laws.
14.2 Hazard and Other Insurance. During the Term, Lessee shall keep
each Unit insured against loss or damage by fire and other risks on terms and in
amounts that are no less favorable than insurance maintained by owners of
similar equipment, that are in accordance
12
with normal industry practice and are in amounts equal to the greater of (i)
Termination Value and (ii) the actual replacement cost of the Equipment. So long
as no Lease Event of Default exists, any loss payable under the insurance policy
required by this Section will be paid to and adjusted solely by Lessee, subject
to Section 15.
14.3 Coverage. (a) Lessee shall furnish Lessor with certificates
showing the insurance required under Sections 14.1 and 14.2 to be in effect and
naming each of the Indenture Trustee, the Collateral Agent, the Lessor, the
Certificate Holders, the Trustee, and the Trust Company as an additional insured
with respect to liability insurance and showing the endorsement required by
Section 14.3(c). All such insurance shall be at the cost and expense of Lessee.
Such certificates shall include a provision in which the insurer agrees to
provide 30 days' advance written notice by the insurer to Lessor and the
Collateral Agent in the event of cancellation or modification of such insurance
that would reasonably be expected to be adverse to the interests of Lessor, the
Trust Company, the Certificate Holders, the Trustee or the Indenture Trustee. If
a Lease Event of Default has occurred and is continuing and Lessor so requests,
Lessee shall deliver to Lessor copies of all insurance policies required by this
Lease.
(b) Lessee agrees that the insurance policy or policies required by
this Lease shall include an appropriate clause pursuant to which such policy
shall provide that it will not be invalidated should Lessee waive, in writing,
prior to a loss, any or all rights of recovery against any party for losses
covered by such policy. Lessee hereby waives any and all such rights against
Lessor, the Trust Company, the Certificate Holders, the Trustee, the Collateral
Agent, the Indenture Trustee and the Securityholders to the extent of payments
made under such policies.
(c) All insurance policies required by Section 14.2 shall include a
loss payee endorsement in favor of the Collateral Agent.
(d) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Lease except that Lessor may carry separate
liability insurance so long as (i) Lessee's insurance is designated as primary
and in no event excess or contributory to any insurance Lessor may have in force
which would apply to a loss covered under Lessee's policy and (ii) each such
insurance policy will not cause Lessee's insurance required under this Lease to
be subject to a coinsurance exception of any kind.
(e) Lessee shall pay as they become due all premiums for the
insurance required by this Lease, shall renew or replace each policy prior to
the expiration date thereof and shall promptly deliver to Lessor and the
Collateral Agent certificates for renewal and replacement policies.
(f) Lessee shall use commercially reasonable effort to cause all
insurance policies required by this Section 14, to the extent available at
commercially reasonable rates, to (i) insure the interest of Lessor, the
Indenture Trustee, the Collateral Agent, the Certificate Holders, the Trustee
and the Trust Company, as applicable, regardless of any breach or violation by
Lessee of any warranties, declarations or conditions in such policies; (ii)
include a severability of interest clause providing that such policy shall
operate in the same manner as if there were a separate policy covering each
insured (provided, however, that such policies shall
13
not operate to increase the insurer's limit of liability); (iii) waive any right
of set-off due to Lessee's actions or inactions (except with respect to unpaid
premiums); (iv) waive any right of subrogation against the Indenture Trustee,
the Collateral Agent, the Lessor, the Certificate Holders, the Trustee and the
Trust Company; and (v) not be subject to any co-insurance clause, provided that
such insurance may contain such reasonable deductibles as Lessee determines are
appropriate in accordance with customary market practice for such insurance.
Section 15. CONDEMNATION AND CASUALTY
15.1 Casualty and Condemnation. (a) Subject to the provisions of this
Section 15 and Section 16 (in the event Lessee delivers, or is obligated to
deliver, a Substitution Notice), and prior to the occurrence and continuation of
a Lease Event of Default, Lessee shall be entitled to receive (and Lessor hereby
irrevocably assigns to Lessee all of Lessor's right, title and interest in) any
award, compensation or insurance proceeds to which Lessee or Lessor may become
entitled by reason of their respective interests in the Equipment (i) if all or
a portion of such Equipment is damaged or destroyed in whole or in part by a
Casualty or (ii) if the use, access, easement rights or title to such Equipment
or any part thereof is the subject of a Condemnation; provided, however, if a
Lease Event of Default shall have occurred and be continuing such award,
compensation or insurance proceeds shall be paid directly to Lessor or, if
received by Lessee, shall be held in trust for Lessor, and shall be paid over by
Lessee to Lessor.
(b) So long as no Lease Event of Default has occurred and is
continuing, Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or insurance
payment on account of any such Casualty or Condemnation and shall pay all
expenses thereof. At Lessee's reasonable request, and at Lessee's sole cost and
expense, Lessor and the Collateral Agent shall participate in any such
proceeding, action, negotiation, prosecution or adjustment. Lessor and Lessee
agree that this Lease shall control the rights of Lessor and Lessee in and to
any such award, compensation or insurance payment.
(c) If Lessor or Lessee shall receive notice of a Casualty or a
possible Condemnation of a Unit or any interest therein, Lessor or Lessee, as
the case may be, shall give notice thereof to the other and to the Collateral
Agent promptly after the receipt of such notice.
(d) In the event of a Casualty or receipt of notice by Lessee or
Lessor of a Condemnation, Lessee shall, not later than thirty (30) days after
such occurrence, deliver to Lessor and the Collateral Agent an Officer's
Certificate stating that either (i) (x) such Casualty is not a Significant
Casualty or (y) such Condemnation is neither a Total Condemnation nor a
Significant Condemnation and that this Lease shall remain in full force and
effect with respect to the applicable Unit and, at Lessee's sole cost and
expense, Lessee shall promptly and diligently restore the applicable Unit in
accordance with the terms of Section 15.1(e) or (ii) this Lease shall terminate
with respect to the applicable Equipment in accordance with Section 16.1.
(e) If pursuant to this Section 15.1, this Lease shall continue in
full force and effect following a Casualty or Condemnation with respect to the
affected Unit, Lessee shall, at its sole cost and expense, promptly and
diligently repair any damage to the applicable Unit caused
14
by such Casualty or Condemnation in conformity with the requirements of
Sections 10.1 and 11.1 so as to restore the applicable Unit to the same
condition, operation, function and value as existed immediately prior to such
Casualty or Condemnation. In such event, title to the applicable Unit shall
remain with Lessor.
(f) In no event shall a Casualty or Condemnation with respect to
which this Lease remains in full force and effect under this Section 15.1 affect
Lessee's obligations to pay Rent pursuant to Section 3.1.
(g) Notwithstanding anything to the contrary set forth in Section
15.1(a) or Section 15.1(e), if during the Term a Casualty occurs with respect to
a Unit or Lessee receives notice of a Condemnation with respect to a Unit, and
following such Casualty or Condemnation, such Unit cannot reasonably be restored
on or before the date which is twelve months after Lessee's collection of the
insurance proceeds or condemnation awards as a result of such Casualty or
Condemnation to substantially the same condition as existed immediately prior to
such Casualty or Condemnation or before such day such Unit is not in fact so
restored, then, on or before such day, Lessee shall either (i) if permitted
pursuant to Section 20.1(a) exercise the Purchase Option thereunder to purchase
such Unit, (ii) exercise its Expiration Date Purchase Option or (iii) deliver to
Lessor and the Collateral Agent an Officer's Certificate and a Substitution
Notice with respect to such Unit pursuant to Sections 16 and 30 and, in any such
event, such remaining Casualty or Condemnation proceeds shall be paid to the
Collateral Agent, which shall pay such funds to Lessee upon the closing of the
purchase of such Unit or the substitution therefor of Replacement Equipment.
Section 16. LEASE TERMINATION
16.1 Termination upon Certain Events. (a) If Lessor or Lessee shall
have received notice of a Total Condemnation, then, subject to the provisions of
Section 30 hereof, Lessee shall be obligated, within thirty (30) days after
Lessee receives notice thereof, to deliver a written notice in the form
described in Section 16.2(a) (a "Substitution Notice") with respect to the
affected Unit.
(b) If either: (i) Lessee or Lessor shall have received notice of a
Condemnation, and Lessee shall have delivered to Lessor an Officer's Certificate
that such Condemnation is a Significant Condemnation; or (ii) a Casualty occurs,
and Lessee shall have delivered to Lessor an Officer's Certificate that such
Casualty is a Significant Casualty; or (iii) an Environmental Violation occurs
or is discovered and Lessee shall have delivered to Lessor an Officer's
Certificate stating that, in the reasonable, good-faith judgment of Lessee, the
cost to remediate the same will exceed 10% of the Equipment Cost of such Unit;
then, Lessee shall, simultaneously with the delivery of the Officer's
Certificate pursuant to the preceding clause (i), (ii) or (iii), as applicable,
deliver a Substitution Notice with respect to the affected Unit.
16.2 Procedures. (a) A Substitution Notice shall contain notice of
Lessee's election (i) if permitted pursuant to Section 20.1(a), and in
accordance with the terms and conditions thereof, to exercise the Purchase
Option with respect to the applicable Unit or Units
15
that are subject to the Total Condemnation, Significant Condemnation,
Significant Casualty or material Environmental Violation described in Section
16.1(b)(iii) (the "Affected Equipment"), or any Units of the Affected Equipment
designated by Lessee, or (ii) to exercise its rights under, and in accordance
with the terms and conditions of, Section 30 to substitute for the Affected
Equipment (other than Units for which the Purchase Option was exercised under
Section 16.2(a)) Replacement Equipment, in each case on a date not more than 30
days after Lessor's receipt of such Substitution Notice (the "Substitution
Date").
(b) If the Substitution Notice contains notice of Lessee's election
to exercise its right to substitute Replacement Equipment for the Affected
Equipment or any Units thereof, then, on the Substitution Date, Lessee shall
effect such substitution in accordance with Section 30. If the Substitution
Notice contains notice of Lessee's election to exercise the Purchase Option for
the Affected Equipment or any Units thereof, then, on the Substitution Date,
Lessee shall effect such purchase in accordance with Section 20.1(a).
Section 17. DEFAULT
17.1 Lease Events of Default. If any one or more of the following
events (each a "Lease Event of Default") shall occur:
(i) Lessee shall fail to make payment of (i) any Basic Rent
within thirty (30) days after the same has become due and payable or
(ii) Final Rent Payment, Purchase Option Price, Equity Proceeds
Purchase Option Price, Control Purchase Price, Excess Proceeds Purchase
Price or Termination Value after the same has become due and payable;
or
(ii) Lessee shall fail to make payment of any Supplemental
Rent due and payable to a Securityholder, Certificate Holder, Lessor,
the Indenture Trustee, the Collateral Agent or the Trust Company within
thirty (30) days after receipt of notice thereof (other than
Supplemental Rent that is permitted to be and is actually being
contested pursuant to Section 13 hereof); or
(iii) Lessee shall fail to maintain insurance as required by
Section 14; or
(iv) Lessee or any Guarantor shall default in the observance
or performance of any term, covenant or condition of Lessee or of such
Guarantor, respectively, under this Lease, the Participation Agreement,
the Guarantee or any other Operative Agreement to which it is a party
(other than those set forth in Section 17.1(a)(i), (ii) or (iii)
hereof) and such default shall continue unremedied for a period of 30
days after receipt of notice thereof from Lessor, Indenture Trustee,
Collateral Agent or the Trust Company, or any representation or
warranty by Lessee or any Guarantor, respectively, set forth in this
Lease, the Guarantee or in any other Operative Agreement or in any
document entered into in connection herewith or therewith or in any
document, certificate or financial or other statement delivered in
connection herewith or therewith shall be false or inaccurate in any
material respect; or
16
(v) an Indenture Event of Default that is caused by, or
results from, the action or inaction of Lessee or any Guarantor or
relates to Lessee or any Guarantor (that is, Indenture Sections 6.1(3),
(7) but only to the extent caused by the actions or inactions of
Lessee, (8), (9) but only as it relates to Lessee or any Guarantor,
(10) and (11)) shall have occurred and be continuing.
then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this Section 17 and in Section 18.1, terminate this
Lease by giving Lessee five (5) days notice of such termination, and this Lease
shall terminate. Lessee shall, to the fullest extent permitted by law, pay as
Supplemental Rent all costs and expenses incurred by or on behalf of Lessor, the
Indenture Trustee, the Collateral Agent, the Certificate Holders, the Trustee
and/or the Trust Company, including fees and expenses of counsel, as a result of
any Lease Event of Default hereunder.
17.2 Final Payment. If a Lease Event of Default shall have occurred
and be continuing, Lessor shall have the right to recover, by demand to Lessee
and at Lessor's election, and Lessee shall pay to Lessor, as and for a final
payment, but exclusive of the indemnities payable under Section 13 of the
Participation Agreement (to the extent any such liabilities do not constitute
Supplemental Rent), and in lieu of all damages beyond the date of such demand
(i) for any Lease Event of Default that is not a Limited Recourse Event of
Default, the sum of (a) the Termination Value, plus (b) all other amounts owing
in respect of Rent and Supplemental Rent theretofore accruing under this Lease
and (ii) for any Limited Recourse Event of Default (provided no other Lease
Event of Default has occurred and is then continuing), the Final Rent Payment
for all of the Equipment; provided, however, if a Lease Event of Default has
occurred pursuant to Section 17.1(v) as the result of a default under Section
6.1(9) of the Indenture, such final payment shall be immediately due and payable
without demand or notice. Upon payment of the amount specified pursuant to
clause (i) of the first sentence of this Section 17.2, Lessee shall be entitled
to receive from Lessor, at Lessee's request and cost, an assignment of Lessor's
right, title and interest in the Equipment, in each case in conformity with
local custom and free and clear of the Lien of the Security Agreement and any
Lessor Liens. The Equipment shall be quitclaimed to Lessee (or Lessee's
designee) "AS IS" and in its then present physical condition. If any statute or
rule of law shall limit the amount of such final payment to less than the amount
agreed upon, Lessor shall be entitled to the maximum amount allowable under such
statute or rule of law.
17.3 Remedies. If any Lease Event of Default shall have occurred and
be continuing, Lessor may exercise in any order one or more or all of the
remedies set forth in this Section 17.3 (it being understood that no remedy
herein conferred is intended to be exclusive of any other remedy or remedies,
but each and every remedy shall be cumulative and shall be in addition to every
other remedy given herein or now or hereafter existing at law or in equity or by
statute).
(a) Lessor may proceed by appropriate court action or actions, either
at law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof;
17
(b) Lessor may by notice in writing to Lessee terminate this Lease
but Lessee shall remain liable as hereinafter provided; and Lessor may, at its
option, do any one or more of the following: (i) (A) for any Lease Event of
Default that is not a Limited Recourse Event of Default, declare the Termination
Value, plus all other amounts owing in respect of Rent or Supplemental Rent
theretofore accruing under the Lease, all other amounts then payable by Lessee
under this Lease and the other Operative Agreements to be immediately due and
payable, and recover any other damages and expenses in addition thereto which
Lessor shall have sustained by reason of such Lease Event of Default and (B) for
any Limited Recourse Event of Default (provided no other Lease Event of Default
has occurred and is then continuing), declare the Final Rent Payment for all of
the Equipment to be immediately due and payable; (ii) enforce the security
interest given hereunder pursuant to the Uniform Commercial Code as provided in
Section 28 or any other law; (iii) enter upon the premises where the Equipment
is located and take possession of it; and (iv) require Lessee to return the
Equipment as provided in Section 10.2; or
(c) For any Lease Event of Default which is not a Limited Recourse
Event of Default, Lessor may require Lessee immediately to purchase the
Equipment for a purchase price
18
equal to the sum of the Termination Value, plus all other amounts owing in
respect of Rent or Supplemental Rent theretofore accruing under this Lease and
all other amounts then due and payable under the Operative Agreements.
17.4 Additional Remedies. In addition to the remedies set forth in
Sections 17.2 and 17.3, if any Lease Event of Default shall have occurred and be
continuing, Lessor may, but is not required to, sell the Equipment in one or
more sales, and Lessor may purchase all or any part of the Equipment at such
sale. Lessee acknowledges that sales for cash or on credit to a wholesaler,
retailer or user of such Equipment, at a public or private auction, are all
commercially reasonable. Any notice required by law of intended disposition by
Lessor shall be deemed reasonable and properly given if given at least ten (10)
Business Days before such disposition.
17.5 Proceeds of Sale; Deficiency. All payments received and amounts
held or realized by the Lessor at any time when a Lease Event of Default shall
have occurred and be continuing and after the Termination Value shall have been
accelerated pursuant to Section 17.2 or 17.3 as well as all payments or amounts
then held or thereafter received by Lessor shall be conveyed to the Collateral
Agent as required by the Assignment of Lease and distributed pursuant to Section
6.10 of the Indenture.
17.6 Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 17.1(a), Lessee waives, to the fullest extent permitted by
law, (a) any notice of re-entry or the institution of legal proceedings to
obtain re-entry or possession; (b) any right of redemption, re-entry or
repossession; (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt; and (d) any other rights which
might otherwise limit or modify any of Lessor's rights or remedies under this
Section 17.
17.7 Assignment of Rights Under Contracts. If a Lease Event of Default
shall have occurred and be continuing, and whether or not this Lease shall have
been terminated pursuant to Section 17.1(a) and provided that Lessee shall not
have purchased the Equipment pursuant to Section 20, Lessee shall upon Lessor's
demand immediately assign, transfer and set over to Lessor, to the extent
transferable, all of Lessee's right, title and interest in and to each agreement
executed by Lessee in connection with the use or operation of the Equipment
(including all right, title and interest of Lessee with respect to all warranty,
performance, service and indemnity provisions), as and to the extent that the
same relate to the use, maintenance or operation of the Equipment.
17.8 Lessee's Interest. If pursuant to Section 17.3, Lessee pays to
Lessor the Termination Value plus either, at Lessor's election, (a) all other
amounts Lessor declared to be due and payable pursuant to Section 17.3(b)(i)(A)
and all damages and expenses to which Lessor is entitled to thereunder or (b)
all amounts included in the purchase price for the Equipment pursuant to Section
17.3(c), then Lessor shall transfer the Equipment to Lessee in accordance with
the provisions of Section 19.1.
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Section 18. LESSOR'S RIGHT TO CURE
18.1 Lessor's Right to Cure Lessee's Lease Defaults. Lessor, without
waiving or releasing any obligation or Lease Event of Default, may (but shall be
under no obligation to) remedy any Lease Event of Default for the account and at
the sole cost and expense of Lessee, including the failure by Lessee to maintain
any insurance required by Section 14, and may, to the fullest extent permitted
by law, and notwithstanding any right of quiet enjoyment in favor of Lessee,
enter upon the premises where the Equipment is located for such purpose and take
all such action thereon as may be necessary or appropriate therefor. No such
entry shall be deemed an eviction of Lessee. All reasonable out-of-pocket costs
and expenses so incurred (including the reasonable fees and expenses of
counsel), together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid by Lessor, shall be paid by Lessee to
Lessor on demand as Supplemental Rent.
Section 19. LEASE TERMINATION
19.1 Provisions Relating to Lessee's Termination of this Lease or
Exercise of Purchase Option. (a) In connection with any purchase of Equipment
pursuant to Section 20 or 17.3(c), (b) in connection with any substitution of
Units pursuant to Section 30, and (c) upon the payment of all amounts set forth
in Section 17.3(b)(i), upon the date of purchase, the date of substitution or
the date of payment, as applicable, upon tender by Lessee of the amounts
required under Section 20, 17.3(c) or 17.3(b)(i), as applicable, or the
substitution of the Replacement Equipment pursuant to Section 30, as applicable:
(i) Lessor shall execute and deliver to Lessee (or to Lessee's
designee) at Lessee's cost and expense an assignment of Lessor's entire
interest in the applicable Unit being purchased or replaced, in each
case in recordable form and otherwise in conformity with local custom
and free and clear of the Lien of the Security Agreement and any Lessor
Liens;
(ii) the applicable Unit being purchased replaced shall be
conveyed to Lessee "AS IS" "WHERE IS" and in then present physical
condition; and
(iii) this Lease shall terminate with respect to the applicable
Unit being purchased or replaced.
Section 20. PURCHASE OPTION
20.1 Purchase Option. (a) Except as provided in Section 20.1(b), (c)
or (d), Lessee shall not have an option to purchase the Equipment before
September 1, 2005. On or after September 1, 2005, Lessee shall have the option
(exercisable by giving Lessor irrevocable written notice (the "Purchase Notice")
of Lessee's election to exercise such option not less than thirty (30) nor more
than sixty (60) days prior to the date of purchase pursuant to such option) to
purchase one or more Units on the date specified in such Purchase Notice, at a
price equal to the
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Termination Value (the "Purchase Option Price") (which the parties do not intend
to be a "bargain" purchase price) of such Unit or Units; provided, however, that
Lessee shall only have such option with respect to less than all of the
Equipment if no Lease Default or Lease Event of Default shall have occurred and
be continuing and that during the twelve month period prior to the Expiration
Date the Lessor can only purchase less than all of the Equipment if Lessee has
exercised its Expiration Date Purchase Option, or such purchase cures a Lease
Default or Lease Event of Default. If Lessee exercises its option to purchase
one or more of the Units pursuant to this Section 20.1(a) (the "Purchase
Option"), Lessor shall transfer to Lessee or Lessee's designee all of Lessor's
right, title and interest in and to such Unit as of the date specified in the
Purchase Notice upon receipt of the Purchase Option Price and all Rent and other
amounts then due and payable by Lessee under this Lease and any other Operative
Agreement, in accordance with Section 19.1, and this Lease shall terminate with
respect to such Unit or Units on the date of such transfer of such Unit or
Units.
(b) Notwithstanding the provisions of Section 20.1(a), if, prior to
September 1, 2004 the Lessee, if no Lease Default or Lease Event of Default
shall have occurred and be continuing, may use Net Cash Proceeds to purchase
(after delivery to Lessor of irrevocable written notice not less than thirty
(30) nor more than sixty (60) days prior to the date of such Equity Proceeds
Purchase) one or more Units of the Equipment at a purchase price equal to the
Termination Value of such Unit or Units (the "Equity Proceeds Purchase Price")
(which the parties do not intend to be a "bargain" purchase price), provided
that in no event shall Lessee be permitted to purchase Equipment having an
aggregate Termination Value in excess of the sum of principal amount of the
Securities being redeemed and the amount of the Certificate Holder Contributions
being repaid from such Net Cash Proceeds (without regard to any premiums being
paid) or that exceeds thirty-five (35%) percent of the aggregate Termination
Value of all the Equipment. If Lessee purchases one or more of the Units
pursuant to this Section 20.1(b) (the "Equity Proceeds Purchase"), Lessor shall
transfer to Lessee or Lessee's designee all of Lessor's right, title and
interest in and to such Unit as of the date specified in the notice upon receipt
of the Equity Proceeds Purchase Price and all Rent and other amounts then due
and payable under this Lease and any other Operative Agreement, in accordance
with Section 19.1. The payment by Lessee of the Equity Proceeds Purchase Price
shall be credited towards Lessee's obligation to pay Supplemental Rent relating
to Lessor's obligations to the Securityholders and the Certificate Holders in
connection with the redemption and repayment referred to above, but Lessee shall
remain liable for any deficiency.
(c) Notwithstanding the provisions of Section 20.1(a), in the event
that Lessor is required to pay any Change of Control Payment upon the occurrence
of a Change of Control, Lessee shall purchase (after delivery to Lessor of
irrevocable written notice not less than ten (10) days prior to the date of the
Control Purchase) one or more Units of the Equipment on the date of such payment
at a purchase price equal to the Termination Value of such Unit or Units (the
"Control Purchase Price") (which the parties do not intend to be a "bargain"
purchase price), provided that in no event shall Lessee be permitted to purchase
Equipment having an aggregate Termination Value in excess of the applicable
Change of Control Payment. If Lessee purchases one or more of the Units pursuant
to this Section 20.1(c) (the "Control Purchase"), Lessor shall transfer to
Lessee or Lessee's designee all of Lessor's right, title and interest in and to
such Unit as of the date specified in the notice upon receipt of the Control
Purchase Price and all Rent and other amounts then due and payable under this
Lease and any other Operative Agreement, in
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accordance with Section 19.1. The payment by Lessee of the Control Purchase
Price shall be credited towards Lessee's obligation to pay Supplemental Rent
relating to Lessor's obligations to the Securityholders and the Certificate
Holders in connection with the applicable Change in Control, but Lessee shall
remain liable for any deficiency.
(d) Notwithstanding the provisions of Section 20.1(a), in the event
that Lessor is required to pay any Asset Disposition Offer Amount following the
occurrence of an Asset Disposition, Lessee shall purchase on the Asset
Disposition Purchase Date one or more Units of the Equipment at a purchase price
equal to the Termination Value of such Unit or Units (the "Excess Proceeds
Purchase Price") (which the parties do not intend to be a "bargain" purchase
price), provided that in no event shall Lessee be permitted to purchase
Equipment having an aggregate Termination Value in excess of the applicable
Disposition Offer Amount. If Lessee purchases one or more of the Units pursuant
to this Section 20.1(d) (an "Excess Proceeds Purchase"), Lessor shall transfer
to Lessee or Lessee's designee all of Lessor's right, title and interest in and
to such Unit as of the date specified in the notice upon receipt of the Excess
Proceeds Purchase Price and all Rent and other amounts then due and payable
under this Lease and any other Operative Agreement, in accordance with Section
19.1. The payment by Lessee of the Excess Proceeds Purchase Price shall be
credited towards Lessee's obligation to pay Supplemental Rent relating to
Lessor's obligations to the Securityholders and the Certificate Holders in
connection with the applicable Asset Disposition, but Lessee shall remain liable
for any deficiency.
20.2 Expiration Date Purchase Option. Not less than twelve (12) months
prior to the Expiration Date, Lessee may give Lessor and the Indenture Trustee
irrevocable written notice (the "Expiration Date Election Notice") that Lessee
is electing to exercise the Expiration Date Purchase Option. If Lessee does not
give an Expiration Date Election Notice on or before the date twelve (12) months
prior to the Expiration Date or if Lessee has not exercised the Purchase Option
with respect to all of the Equipment, then Lessee shall be obligated to remarket
the Equipment pursuant to Section 21. If Lessee has elected to exercise the
Expiration Date Purchase Option, then on the Expiration Date Lessee shall pay to
Lessor an amount equal to the Termination Value for all the Equipment (which the
parties do not intend to be a "bargain" purchase price) and, upon receipt of
such amount plus all Rent and other amounts then due and payable under this
Lease and any other Operative Agreement, Lessor shall transfer to Lessee or
Lessee's designee all of Lessor's right, title and interest in and to the
Equipment in accordance with Section 19.1.
20.3 Obligation to Purchase All Equipment. If twelve (12) months prior
to the Expiration Date, the then Termination Value of all the Equipment is less
than the Maximum Purchase Option Amount, then on the Expiration Date Lessee
shall be required to exercise its Expiration Date Purchase Option on the
Expiration Date with respect to all remaining Equipment.
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Section 21. SALE OF EQUIPMENT
21.1 Sale Procedure. (a) With respect to each Unit (unless Lessee
shall have elected to (x) purchase such Equipment and has paid the relevant
purchase price pursuant to Section 20.1 or 20.2 with respect thereto, or (y)
otherwise terminated this Lease and paid the Termination Value with respect
thereto) Lessee shall (i) pay to Lessor the Final Rent Payment for such Unit as
provided for in Section 21.1(c), and (ii) sell such Unit, to one or more third
parties for cash in accordance with Section 21.1(b).
(b) During the Marketing Period, Lessee, as nonexclusive broker for
Lessor, shall use its best efforts to obtain bids for the cash purchase of each
Unit, being sold for the highest price available in the relevant market, shall
notify Lessor promptly of the name and address of each prospective purchaser and
the cash price which each prospective purchaser shall have offered to pay for
such Unit and shall provide Lessor with such additional information about the
bids and the bid solicitation procedure as Lessor may reasonably request from
time to time. Lessor may reject any and all bids and may assume sole
responsibility for obtaining bids by giving Lessee written notice to that
effect; provided, however, that notwithstanding the foregoing, Lessor may not
reject a bid if such bid, together with any amounts to be paid pursuant to
Section 21.3, is greater than or equal to the sum of the Limited Deficiency
Amount and all costs and expenses referred to in Section 21.2(i) and is a bona
fide offer by a third party purchaser who is not an Affiliate of Lessee. If the
price which a prospective purchaser shall have offered to pay for all or any of
the Equipment is less than the sum of the Limited Deficiency Amount and all
costs and expenses referred to in Section 21.2(i), Lessor may elect to retain
the Equipment by giving Lessee at least two Business Days' prior written notice
of Lessor's election to retain the Equipment, and upon receipt of such notice,
Lessee shall surrender the Equipment to Lessor pursuant to Section 10.2. Unless
Lessor shall have elected to retain the Equipment pursuant to the preceding
sentence, following the Expiration Date Lessor shall sell the Equipment free of
any Lessor Liens attributable to it, without recourse or warranty, for cash to
the purchaser or purchasers identified by Lessee or Lessor, as the case may be.
Lessee shall surrender the Equipment so sold to each purchaser in the condition
specified in Section 10.2 and this Lease shall terminate with respect to such
Equipment.
(c) On each date during the Marketing Period on which a Unit is sold
pursuant to Section 21.1(b), and on the Expiration Date with respect to any
Equipment remaining unsold, Lessee shall pay to Lessor the Final Rent Payment
for such Equipment.
21.2 Application of Proceeds of Sale. Lessor shall apply the proceeds
of sale of each Unit and the Final Rent Payment paid by Lessee in conjunction
therewith in the following order of priority:
(i) FIRST, to pay or to reimburse Lessor and Lessee for the
payment of all reasonable costs and expenses incurred by Lessor and
Lessee in connection with the sale; and
(ii) SECOND, the balance shall be paid to the Indenture Trustee
to be applied pursuant to the provisions of Section 8.4 of the
Indenture.
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21.3 Indemnity for Excessive Wear. If the proceeds of the sale
described in Section 21.1(b) with respect to any Unit, less all expenses
incurred by Lessor or Lessee in connection with such sale, shall be less than
the Limited Deficiency Amount for such Unit at the time of such sale and if it
shall have been determined (pursuant to the Appraisal Procedure) that the Fair
Market Sales Value of such Unit shall have been impaired by greater than
expected wear and tear during the Term, Lessee shall pay to Lessor within ten
(10) days after receipt of Lessor's written statement (i) the amount of such
excess wear and tear determined by the Appraisal Procedure or (ii) the amount of
the Net Sale Proceeds Shortfall, whichever amount is less.
21.4 Appraisal Procedure. For determining excessive wear and tear, if
any, or the Fair Market Sales Value of a Unit or any other amount which may,
pursuant to any provision of any Operative Agreement, be determined by an
appraisal procedure but with respect to which no appraisal or valuation method
is specified, Lessor and Lessee shall use the following procedure (the
"Appraisal Procedure"). Lessor and Lessee shall endeavor to reach a mutual
agreement as to such amount for a period of ten (10) days from commencement of
the Appraisal Procedure, and if they cannot agree within ten (10) days, then two
qualified appraisers, one chosen by Lessee and one chosen by Lessor, shall
mutually agree thereupon, but if either party shall fail to choose an appraiser
within twenty (20) days after notice from the other party of the selection of
its appraiser, then the appraisal by such appointed appraiser shall be binding
on Lessee and Lessor. If the two appraisers cannot agree within twenty (20) days
after both shall have been appointed, then a third appraiser from a nationally
recognized independent appraisal firm (with at least 15 years of experience
appraising equipment similar to and used in the same industry as the Equipment)
shall be selected by the two appraisers or, failing agreement as to such third
appraiser within thirty (30) days after both shall have been appointed, by the
American Arbitration Association. The decisions of the three appraisers shall be
given within twenty (20) days of the appointment of the third appraiser and the
decision of the appraiser most different from the average of the other two shall
be discarded and such average shall be binding on Lessor and Lessee; provided
that if the highest appraisal and the lowest appraisal are equidistant from the
third appraisal, the third appraisal shall be binding on Lessor and Lessee. The
fees and expenses of all of the appraisers shall be paid by the Lessee.
21.5 Certain Obligations Continue. During the Marketing Period, the
obligation of Lessee to pay Rent with respect to each Unit (including the
installment of Basic Rent due on the Expiration Date) shall continue
undiminished until payment in full to Lessor of the sale proceeds, the Final
Rent Payment, if any, the amount due under Section 21.3, if any, and all other
amounts due to Lessor with respect to the Unit. Lessor shall have the right, but
shall be under no duty, to solicit bids, to inquire into the efforts of Lessee
to obtain bids or otherwise to take action in connection with any such sale,
other than as expressly provided in this Section 21.
Section 22. HOLDING OVER
22.1 Holding Over. If Lessee shall for any reason remain in possession
of a Unit after the expiration or earlier termination of this Lease (unless the
Unit is conveyed to Lessee), such possession shall be as a tenancy at sufferance
during which time Lessee shall continue to pay Supplemental Rent that would be
payable by Lessee hereunder were the Lease
24
then in full force and effect with respect to such Unit and Lessee shall
continue to pay Basic Rent at an annual rate equal to two hundred percent (200%)
of the Basic Rent payable hereunder immediately preceding such expiration or
earlier termination. Such Basic Rent shall be payable from time to time upon
demand by Lessor. During any period of tenancy at sufferance, Lessee shall,
subject to the second preceding sentence, be obligated to perform and observe
all of the terms, covenants and conditions of this Lease, but shall have no
rights hereunder other than the right, to the extent given by law to tenants at
sufferance, to continue its occupancy and use of the Unit. Nothing contained in
this Section 22 shall constitute the consent, express or implied, of Lessor to
the holding over of Lessee after the expiration or earlier termination of this
Lease as to any Unit and nothing contained herein shall be read or construed as
preventing Lessor from maintaining a suit for possession of any Unit or
exercising any other remedy available to Lessor at law or in equity.
Section 23. RISK OF LOSS
23.1 Risk of Loss. The risk of loss of or decrease in the enjoyment
and beneficial use of the Equipment as a result of the damage or destruction
thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is
assumed by Lessee, and Lessor shall in no event be answerable or accountable
therefor (except specifically with respect to its gross negligence or willful
misconduct).
Section 24. SUBLETTING AND ASSIGNMENT
24.1 Subletting and Assignment. Lessee may not assign this Lease or
any of its rights or obligations hereunder in whole or in part other than as
permitted by the Operative Agreements. Lessee may, without the consent of
Lessor, sublease or license the Equipment or any Unit to any Person; provided
that as of the Expiration Date unless Lessee has exercised an option to purchase
pursuant to Section 20 with respect to the Equipment subject to a sublease or
license, no sublease or license shall provide for a purchase option on behalf of
the sublessee or licensee nor have a remaining term. No sublease, license or
other relinquishment of possession of the Equipment shall in any way discharge
or diminish any of Lessee's obligations to Lessor hereunder and Lessee shall
remain directly and primarily liable under this Lease as to the Equipment so
sublet or licensed.
24.2 Subleases or Licenses. Promptly following the execution and
delivery of any sublease or license permitted by this Section 24, Lessee shall
deliver an executed copy thereof to Lessor and the Indenture Trustee if
requested by either.
Section 25. ESTOPPEL CERTIFICATES
25.1 Estoppel Certificates. At any time and from time to time upon not
less than twenty (20) days' prior request by Lessor, the Lessee shall furnish to
the Lessor a certificate
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signed by an individual having the office of vice president or higher with
Lessee certifying, to the extent accurate, that this Lease is in full force and
effect (or that this Lease is in full force and effect as modified and setting
forth the modifications); the dates to which the Basic Rent and Supplemental
Rent have been paid; to the best knowledge of the signer of such certificate,
whether or not the Lessor is in default under any of its obligations hereunder
(and, if so, the nature of such alleged default); and such other matters under
this Lease as the Lessor may reasonably request. Any such certificate furnished
pursuant to this Section 25 may be relied upon by the Lessor, and any existing
or prospective purchaser or lender, and any accountant or auditor, of, from or
to the Lessor (or any Affiliate thereof).
Section 26. NO WAIVER
26.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
upon a default hereunder, and no acceptance of full or partial payment of Rent
during the continuance of any such default, shall constitute a waiver of any
such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
Section 27. ACCEPTANCE OF SURRENDER
27.1 Acceptance of Surrender. (a) As of the Expiration Date, if any
Lease Default shall have occurred and be continuing under the Lease, then Lessee
shall be deemed to have irrevocably exercised the Expiration Date Purchase
Option pursuant to Section 20.2.
(b) Except as otherwise expressly provided in this Lease, no
surrender to Lessor of this Lease or of all or any portion of the Equipment or
of any interest therein shall be valid or effective prior to the payment or
performance of all obligations under the Operative Agreements, the Trustee, and
no act by Lessor, the Indenture Trustee or the Collateral Agent or any
representative or agent of Lessor, the Indenture Trustee or the Collateral
Agent, other than a written acceptance, shall constitute an acceptance of any
such surrender.
Section 28. OWNERSHIP, GRANT OF SECURITY
INTEREST AND FURTHER ASSURANCES
28.1 Grant of Security Interest. Other than Equipment purchased by
Lessee pursuant to Section 20 and subject to Section 7.1, title to the Equipment
shall remain in Lessor as security for the obligations of the Guarantors under
the Guarantee and the obligations of Lessee hereunder and under each of the
other Operative Agreements to which it is a party, until such time as Lessee and
the Guarantors have fulfilled all of their obligations hereunder and under such
other Operative Agreements. Lessee hereby assigns, grants and pledges to Lessor
for the benefit
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of Lessor a security interest in all of Lessee's right, title and interest,
whether now or hereafter existing or acquired, in the Equipment (other than
Equipment purchased by Lessee pursuant to Section 20 or replaced by Replacement
Equipment pursuant to Section 30), including, without limitation, all subleases
and proceeds thereof, to secure the payment and performance of all obligations
of Lessee now or hereafter existing under this Lease or any other Operative
Agreement and of the Guarantors under the Guarantee (the "Lease Secured
Obligations"). Lessee shall, at its expense, do any further act and execute,
acknowledge, deliver, file, register and record any further documents which
Lessor may reasonably request in order to protect Lessor's title to and
perfected security interest in the Equipment, subject to no Liens other than
Permitted Exceptions, and Lessor's rights and benefits under this Lease. Subject
to the provisions of Section [10.3(b)] of the Lease, Lessee shall promptly and
duly execute and deliver to Lessor such documents and assurances and take such
further action as Lessor may from time to time reasonably request in order to
carry out more effectively the intent and purpose of this Lease and the other
Operative Agreements, to establish and protect the rights and remedies created
or intended to be created in favor of Lessor hereunder and thereunder, and to
establish, perfect and maintain the right, title and interest of Lessor, in and
to the Equipment, subject to no Lien other than Permitted Exceptions and Lessor
Liens, or of such financing statements or fixture filings or other documents
with respect hereto as Lessor may from time to time reasonably request, and
Lessee agrees to execute and deliver promptly such of the foregoing financing
statements and fixture filings or other documents as may require execution by
Lessee.
28.2 UCC Remedies. If a Lease Event of Default shall occur and be
continuing, Lessor may exercise, in addition to all other rights and remedies
granted to it in this Lease and in any other Operative Agreement, all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, Lessor, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon Lessee or any other Person (all
and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Equipment, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Equipment or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of Lessor or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
Lessor shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Equipment so sold, free of any right or equity of
redemption in which right or equity is hereby waived or released. Lessee further
agrees, at Lessor's request, to assemble the Equipment and make it available to
the Lessor at places which the Lessor shall reasonably select, whether at
Lessee's premises or elsewhere. Lessor shall apply the net proceeds of any
action taken by it pursuant to this subsection, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Equipment or in any way relating to the
Equipment (including, without limitation, costs of transportation, possession,
storage, refurbishing, advertising and brokers' fees) or the rights of Lessor,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Lease Secured Obligations, in such order
as Lessor may elect, and only after such application and after the payment by
Lessor of any other amount required by any provision of law,
27
including, without limitation, Section 9-615(a)(3) of the UCC, need Lessor
account for the surplus, if any, to Lessee. If any notice of a proposed sale or
other disposition of the Equipment shall be required by law, such notice shall
be deemed reasonable and proper if given at least 10 Business Days before such
sale or other disposition.
28.3 Deficiency. Lessee shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Equipment pursuant to this
Section 28 are insufficient to pay the Lease Secured Obligations and the
reasonable fees and disbursements of any attorneys employed by Lessor or the
Collateral Agent to collect such deficiency.
28.4 Collateral Agent's Appointment as Attorney-in-Fact; Collateral
Agent's Performance of Lessee's Obligations. Lessee hereby irrevocably
constitutes and appoints the Collateral Agent and any officer or agent thereof,
as assignee of all of Lessor right under this Lease pursuant to the Assignment
of Lease, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Lessee and in the name of Lessee or in its own name, from time to time
in the Collateral Agent's discretion, for the purpose of carrying out the terms
of this Lease, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Lease, and, without limiting the generality of the foregoing,
Lessee hereby gives the Collateral Agent, the power and right, on behalf of
Lessee, without notice to or assent by Lessee, to do any or all of the
following:
(a) in the name of Lessee or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under or with respect to the
Equipment and file any claim or take any other action or proceeding in any court
of law or equity or otherwise deemed appropriate by the Collateral Agent for the
purpose of collecting any and all such moneys due under or with respect to the
Equipment whenever payable;
(b) pay or discharge taxes and Liens levied or placed on or
threatened against the Equipment, effect any repairs or any insurance called for
by the terms of this Lease and to pay all or any part of the premiums therefor
and the costs thereof;
(c) execute, in connection with the sale provided for in Section 28.2
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Equipment; and
(d) (1) direct any party liable for any payment under any of the
Equipment to make payment of any and all moneys due or to become due thereunder
directly to the Collateral Agent or as the Collateral Agent shall direct; (2)
ask or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in respect of
or arising out of any Equipment; (3) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Equipment; (4) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
enforce any other right in respect of any Equipment; (5) defend any suit, action
or proceeding brought against Lessee with respect to any Equipment; (6) settle,
28
compromise or adjust any such suit, action or proceeding and, in connection
therewith, to give such discharges or releases as the Collateral Agent may deem
appropriate; and (7) generally, sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Equipment as fully and
completely as though the Collateral Agent were the absolute owner thereof for
all purposes, and do, at the Collateral Agent's option and the Lessee's expense,
at any time, or from time to time, all acts and things which the Trustee
reasonably deems necessary to protect, preserve or realize upon the Equipment
and the Collateral Agent's security interests therein and to effect the intent
of this Lease, all as fully and effectively as the Lease might do.
Anything in this Section 28.4 to the contrary notwithstanding, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 28.4 unless a Lease Event of Default shall have
occurred and be continuing.
28.5 Execution of Financing Statements. Pursuant to and to the extent
permitted by Section 9-502 of the Code, the Lessee authorizes the Lessor and the
Collateral Agent to file Lessee Financing Statements without signature of the
Lessee in such form and in such filing offices as the Lessor and/or the
Collateral Agent reasonably determine appropriate to perfect the security
interest of the Lessor under this Lease.
Section 29. NOTICES
29.1 Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person to be effective shall be in writing (including by facsimile transmission)
and shall be deemed to have been duly given or made (a) when delivered by hand,
(b) one Business Day after delivery to such nationally recognized courier
service specifying overnight delivery, (c) three Business Days after being
deposited in the mail, certified or registered, postage prepaid or (d) in the
case of facsimile notice, when received, addressed to such Person as indicated:
If to Lessee: Hanover Compression Limited Partnership
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Telecopy: (000) 000-0000
29
With a copy to: Xxxxxx & Xxxxxxx
Sears Tower, Suite 5800
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx and
Xxxxxxx X. Pucker
Telecopy: (000) 000-0000
If to Lessor: Hanover Equipment Trust 2001A
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Telecopy: (000) 000-0000
With a copy to the
Indenture Trustee
and the Collateral Agent: Wilmington Trust FSB
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Telecopy: (000) 000-0000
and
Wilmington Trust FSB
0000 Xxxxxx Xxxxxx Xxxxxxx
Xxxxx 000X
Xxx Xxxxx, Xxxxxx 00000
Telecopy: (000) 000-0000
with a copy to the Certificate Holders:
General Electric Capital Corporation
000 Xxxxxxx Xxxxx, Xxxxx 00
Xxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Xxxxx XxXxxxx
Telecopy: (000) 000-0000
or such additional parties and/or other address as such party may hereafter
designate.
30
Section 30. SUBSTITUTION
30.1 Substitution. Lessee shall be entitled to convey to Lessor one or
more Units ("Replacement Equipment") to be leased to Lessee hereunder in
substitution for Equipment then subject to this Lease (i) in the ordinary course
of business or (ii) as substitution for Equipment which is (a) the subject of a
Total Condemnation, Significant Casualty, Significant Condemnation or
Environmental Violation, (b) purchased by the sublessee of such Equipment, or
(c) purchased by or on behalf of Lessee as permitted by Section 20.1(a) hereof;
provided that such Replacement Equipment be free and clear of all Liens (other
than Permitted Exceptions) and have a value, utility and remaining economic
useful life at least equal to the Equipment being replaced (assuming the
Equipment being replaced was in the condition required to be maintained by the
terms of this Lease) as of the applicable Replacement Equipment Closing Date;
and, provided, further, that no Equipment shall be replaced unless the following
conditions are met as of the applicable Replacement Equipment Closing Date:
(a) no Lease Event of Default shall have occurred and be continuing
unless such Replacement Equipment shall cure such Lease Event of Default;
(b) the aggregate Fair Market Sales Value of all Replacement
Equipment since the Lease Commencement Date shall not exceed 25% of the
Termination Value of all of the Equipment at any time leased hereunder;
(c) the representations and warranties of the Lessee contained in
Subsection 7.4 of the Participation Agreement shall be true and correct in all
material respects as of the date such substitution occurs;
(d) the following conditions shall have been met with respect to the
Replacement Equipment:
(i) There shall have been delivered to the Lessor a Xxxx of
Sale in form and substance reasonably acceptable to the Lessor with
respect to each Unit of Replacement Equipment being conveyed to Lessor
on the applicable Equipment purchased on such Replacement Equipment
Closing Date, conveying title to such Unit of Replacement Equipment to
the Lessor, subject only to the Permitted Exceptions;
(ii) The Lessor shall have good and valid title to the
Replacement Equipment being acquired on such Replacement Equipment
Closing Date subject only to the Permitted Exceptions, and the Lessor
shall have granted the security interest pursuant to the Security
Agreement with respect to the Replacement Equipment.
(iii) The Lessee shall have delivered to the Lessor and the
Collateral Agent, a Lease Supplement executed by the Lessee, which
Lessor agrees to execute, with respect to all Replacement Equipment
being acquired on such Replacement Equipment Closing Date;
(iv) The Lessee shall have delivered to the Lessor and the
Collateral Agent a supplement to the Security Agreement, which Lessor
agrees to execute, with respect to each Unit of Replacement Equipment
being acquired on such Replacement
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Equipment Closing Date that is not already subject to the Security
Agreement. The Lien of the Security Agreement, as supplemented, shall
conform to the representations and warranties set forth in Section
7.4(u) of the Participation Agreement;
(v) The Lessee shall have delivered to the Lessor and the
Collateral Agent an original Supplement to Assignment of Lease executed
by the Lessor with respect to each piece of Replacement Equipment being
acquired on such Replacement Equipment Closing Date that is not already
subject to the Assignment of Lease;
(vi) To the extent required by Section 10.7 of the
Participation Agreement, the Collateral Agent and the Certificate
Holders shall have received an Appraisal of the Replacement Equipment
being acquired on such Replacement Equipment Closing Date and such
Appraisal shall be in form and substance reasonably acceptable to the
Collateral Agent, the Certificate Holders and the Lessor;
(vii) With respect to each piece of Replacement Equipment being
acquired by Lessor on such Replacement Equipment Closing Date;
(A) the Collateral Agent, the Lessee and the Certificate
Holders shall have received the executed legal
opinion of special Delaware counsel to Lessor and the
Trust Company, in form and substance reasonably
acceptable to the Collateral Agent; and
(B) the Collateral Agent and the Certificate Holders
shall have received the executed legal opinion of
counsel to Lessee and the Guarantors, substantially
in form and substance reasonably acceptable to the
Collateral Agent; and
(e) the Lessee shall have delivered an Officer's Certificate to the
Lessor, Collateral Agent and the Certificate Holders at least five (5) days
prior to the date such substitution shall occur, setting forth the location of
the Replacement Equipment and certifying that the conditions set forth in
paragraphs (a) through (d) above have been satisfied; and
(f) the Lessee shall be responsible for the reasonable fees and
expenses incurred by the Lessor, the Collateral Agent and/or the Certificate
Holders in connection with each such replacement.
Section 31. SUBORDINATION
31.1 Agreement to Subordinate. Lessor agrees that the obligations of
Lessee under this Lease are subordinated in right of payment to the prior
payment in full in cash or Cash Equivalents of all Guarantor Senior Indebtedness
of Lessee and that the subordination is for the benefit of and enforceable by
the holders of Guarantor Senior Indebtedness of Lessee. This Lease shall in all
respects rank pari passu with all other Guarantor Senior Subordinated
32
Indebtedness of Lessee and only Indebtedness of Lessee that is Guarantor Senior
Indebtedness of Lessee will rank senior to the Lease in accordance with the
provisions set forth herein.
31.2 Liquidation, Dissolution, Bankruptcy. Upon any payment or
distribution of the assets of Lessee to creditors upon a total or partial
liquidation or a total or partial dissolution of Lessee or in a reorganization,
bankruptcy, insolvency, receivership or similar proceeding relating to Lessee or
its properties or an assignment for the benefit of creditors or marshalling of
Lessee's assets or liabilities:
(a) holders of Guarantor Senior Indebtedness of Lessee shall
be entitled to receive payment in full in cash or Cash Equivalents of
all Guarantor Senior Indebtedness of Lessee before Lessor shall be
entitled to receive any payment of Rent or other amounts with respect
to this Lease; and
(b) until the Guarantor Senior Indebtedness of Lessee is paid
in full in cash or Cash Equivalents, any payment or distribution to
which Lessor would be entitled but for this Section 31 shall be made to
holders of Guarantor Senior Indebtedness of Lessee, as their respective
interests may appear.
31.3 Default on Guarantor Senior Indebtedness of Lessee. Lessee shall
not pay Rent or any other payment obligations in respect of the Lease
(collectively, "pay Rent") if (A) any Guarantor Senior Indebtedness of Lessee is
not paid when due in cash or Cash Equivalents or (B) any other default on
Guarantor Senior Indebtedness of Lessee occurs and the maturity of such
Guarantor Senior Indebtedness of Lessee is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived and any
such acceleration has been rescinded in writing or (y) such Guarantor Senior
Indebtedness of Lessee has been paid in full in cash or Cash Equivalents;
provided, however, that Lessee may pay Rent, without regard to the foregoing, if
Lessee and Lessor receive written notice approving such payment from any
Representative of the Guarantor Senior Indebtedness of Lessee with respect to
which either of the events set forth in clause (A) or (B) of this sentence has
occurred and is continuing. During the continuance of any default (other than a
default described in clause (A) of the preceding sentence or a default resulting
in acceleration described in clause (B) of the preceding sentence) with respect
to any Designated Senior Indebtedness of Lessee pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, Lessee may not pay Rent for a period (a "Payment
Blockage Period") commencing upon the receipt by Lessor of written notice (a
"Blockage Notice") of such default from the Representative(s) of the holders of
such Designated Senior Indebtedness of Lessee specifying an election to effect a
Payment Blockage Period and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated (i) by written notice to Lessor from the
Person or Persons who gave such Blockage Notice, (ii) because the default giving
rise to such Blockage Notice is no longer continuing or (iii) because such
Designated Senior Indebtedness of Lessee has been repaid in full in cash or Cash
Equivalents). Notwithstanding the provisions of the immediately preceding
sentence, unless (i) the holders of such Designated Senior Indebtedness of
Lessee or the Representative(s) of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness or (ii) any Guarantor Senior
Indebtedness of Lessee is not paid when due in cash or Cash Equivalents, Lessee
may resume Rent payments after the end of such Payment Blockage
33
Period. Not more than one Blockage Notice may be given, and not more than one
Payment Blockage may occur, in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness of Lessee
during such period.
31.4 Acceleration of Payment of Rent. If payment of Rent is
accelerated because of a Lease Event of Default, Lessee shall promptly notify
the holders of the Designated Senior Indebtedness of Lessee (or their
Representatives) of the acceleration; provided, however, that Lessee shall be
obligated to notify such a Representative only if such Representative has
delivered or caused to be delivered to Lessee an address for service of such a
notice (and Lessee shall only be obligated to deliver the notice to the address
so specified). If any Designated Senior Indebtedness of Lessee is outstanding,
Lessee shall not pay Rent until five (5) Business Days after the holders or
Representative(s) of such Designated Senior Indebtedness of Lessee receive
notice of such acceleration and, thereafter, may pay Rent, only if this Section
31 otherwise permits payments at that time.
31.5 When Rents Must be Paid Over. If Rent is paid (or a distribution
is made in respect thereof) to Lessor or any other Person that because of this
Section 31 should not have been made, Lessor or such other Person shall hold
such payment or distribution in trust for holders of Guarantor Senior
Indebtedness of Lessee and promptly pay it over to them as their respective
interests may appear.
31.6 Subrogation. After all Guarantor Senior Indebtedness of Lessee is
paid in full in cash or Cash Equivalents and until the Rents under the Lease are
paid in full, Lessor shall be subrogated to the rights of holders of Guarantor
Senior Indebtedness of Lessee to receive payments applicable to Guarantor Senior
Indebtedness of Lessee. Any payment made under this Section 31 to holders of
Guarantor Senior Indebtedness of Lessee which otherwise would have been made to
Lessor is not, as between Lessee and Lessor, a payment by Lessee of its
obligations hereunder.
31.7 Relative Rights. This Section 31 defines the relative rights of
Lessor and holders of Lessee's Guarantor Senior Indebtedness with respect to
payment of obligations of Lessee under this Lease. Nothing in this Section 31
shall:
(a) impair, as between Lessee and Lessor, the obligation of
Lessee which is absolute and unconditional, to pay Rent under the Lease
in accordance with its terms;
(b) prevent Lessor from exercising its available remedies upon
a Lease Default or Lease Event of Default, subject to the rights of
holders of Lessee's Guarantor Senior Indebtedness to receive payments
and distributions otherwise payable to Lessor; or
(c) be construed as a subordination of the priority of the
security interest of the Lessor and/or the Collateral Agent in the
Equipment, the subleases and the proceeds thereof, or to prevent Lessor
or the Collateral Agent from exercising its available remedies with
respect to the Equipment, the subleases or the proceeds thereof upon a
Lease Default or Lease Event of Default and applying the proceeds of
disposition thereof to the obligations of Lessee hereunder.
34
31.8 Subordination May Not Be Impaired by Lessee. No right of any
holder of Guarantor Senior Indebtedness of Lessee to enforce the subordination
of the obligations under the Lease shall be impaired by any act or failure to
act by Lessee or by the failure to comply with the terms of this Lease.
31.9 Distribution or Notice to Representative. Whenever a payment or
distribution is to be made or a notice given to holders of Guarantor Senior
Indebtedness of Lessee, the payment or distribution may be made and the notice
given to their Representative (if any).
31.10 Section 31 Not to Prevent Events of Default or Limit Right to
Accelerate. The failure to make a Rent payment, by reason of any provision in
this Section 31, shall not be construed as preventing the occurrence of a Lease
Default or Lease Event of Default. Nothing in this Section 31 shall have any
effect on the right of Lessor to accelerate the Rents or exercise any other
remedies in connection therewith.
31.11 Reliance by Holders of Guarantor Senior Indebtedness on
Subordination Provisions. Lessor acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Guarantor Senior Indebtedness of Lessee,
whether such Guarantor Senior Indebtedness was created or acquired before or
after the date hereof, to acquire, or to continue to hold, such Guarantor Senior
Indebtedness and such holder of Guarantor Senior Indebtedness of Lessee shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Guarantor Senior
Indebtedness.
Section 32. MISCELLANEOUS
32.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against and liabilities of Lessee or Lessor arising
from events commencing prior to the expiration or earlier termination of this
Lease shall survive such expiration or earlier termination. If any term or
provision of this Lease or any application thereof shall be declared invalid or
unenforceable, the remainder of this Lease and any other application of such
term or provision shall not be affected thereby.
32.2 Amendments and Modifications. Neither this Lease nor any
provision hereof may be amended, waived, discharged or terminated except by an
instrument in writing signed by Lessor and Lessee.
32.3 Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The Lessee shall maintain at its address
referred to in Section 29.1 a register (the "Register") for the recordation of
the names and addresses of the Lessor and the Lessor's assignees (if any). The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Lessee, the Lessor and any assignees of the Lessor shall treat each
person whose name is recorded in the Register as the owner of the Lease recorded
therein for all purposes of this Agreement. Any
35
assignment of the Lease shall be effective only upon appropriate entries with
respect thereto being made in the Register.
32.4 Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
32.5 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
32.6 GOVERNING LAW. THIS LEASE HAS BEEN DELIVERED IN, AND SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE.
32.7 Limitations on Recourse. Except as expressly set forth in the
Operative Agreements, Lessee agrees to look solely to Lessor's estate and
interest in the Equipment, the proceeds of sale thereof, any insurance proceeds
or any other award or any third party proceeds received by Lessor in connection
with the Equipment for the collection of any judgment requiring the payment of
money by Lessor in the event of liability by Lessor, and no other property or
assets of Lessor, the Trust Company member, partner or other owner of an
interest, direct or indirect, in Lessor, or any director, officer, shareholder,
employee, beneficiary, Affiliate of any of the foregoing shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Lessee's
remedies under or with respect to this Lease, the relationship of Lessor and
Lessee hereunder or Lessee's use of the Equipment or any other liability of
Lessor to Lessee. Nothing in this Section shall be interpreted so as to limit
the terms of Section 6.1 or 6.2.
32.8 Priority. On and prior to the Expiration Date, the Security
Agreement shall be subject and subordinate to this Lease and following the
Expiration Date, the Security Agreement, at the sole election of the Collateral
Agent, shall be senior to this Lease without any further act by any Person.
36
IN WITNESS WHEREOF, the parties have caused this Lease be duly executed
and delivered as of the date first above written.
HANOVER COMPRESSION LIMITED
PARTNERSHIP
By: _________________________________
Name:
Title:
HANOVER EQUIPMENT TRUST 2001A
By: Wilmington Trust Company, not
individually but solely as Trustee
By: _________________________________
Name:
Title:
The undersigned agrees to the provisions of Section 28.4 and
acknowledges receipt of this original counterpart of the foregoing Lease on this
31st day of August, 2001.
WILMINGTON TRUST FSB, as Collateral Agent
By: _________________________________
Name:
Title:
37
Exhibit A to the Lease
LEASE SUPPLEMENT NO. __
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of
_______________, between HANOVER EQUIPMENT TRUST 2001A, a Delaware business
trust, as lessor (the "Lessor"), and HANOVER COMPRESSION LIMITED PARTNERSHIP, a
[ ], as lessee (the "Lessee").
WHEREAS, the Lessor is the owner of the Equipment described on Schedule
I hereto (the "Leased Equipment") and wishes to lease the same to the Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions; Rules of Usage. For purposes of this Lease Supplement,
capitalized terms used herein and not otherwise herein shall have the meanings
assigned to them in Annex A to the Participation Agreement, dated as of August
31, 2001, among the Lessee, the Lessor, the Indenture Trustee, the Trust
Company, the Collateral Agent, the Certificate Holders named therein, and the
Guarantors named therein, as such Partnership Agreement may be amended,
supplemented or otherwise modified from time to time.
2. The Equipment. Attached hereto as Schedule I is the description of
the Leased Equipment. Effective upon the execution and delivery of this Lease
Supplement by the Lessor and the Lessee, the Leased Equipment shall be subject
to the terms and provisions of the Lease.
3. Ratification. Except as specifically modified hereby, the terms and
provisions of the Lease are hereby ratified and confirmed and remain in full
force and effect.
4. Original Lease Supplement. The single executed original of this
Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART"
on the signature page thereof and containing the receipt of the Collateral Agent
therefor on or following the signature page thereof shall be the Original
Executed Counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
5. GOVERNING LAW. THIS LEASE HAS BEEN DELIVERED IN, AND SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE.
1
6. Counterpart Execution. This Lease Supplement may be executed in any
number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
2
IN WITNESS WHEREOF, the parties have caused this Lease Supplement No.
__ be duly executed and delivered as of the date first above written.
HANOVER COMPRESSION LIMITED
PARTNERSHIP
By: ___________________________________
Name:
Title:
HANOVER EQUIPMENT TRUST 2001A
By: Wilmington Trust Company, not in its
individual capacity but solely as
Trustee
By: ___________________________________
Name:
Title:
3
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this ___ day of ______, _____.
WILMINGTON TRUST FSB, as the Collateral
Agent
---------------------------------------
Name:
Title:
4
