SUN FINANCIAL GROUP, INC.
MASTER LEASE AGREEMENT
NO. 1642
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This Master Lease Agreement ("Lease Agreement") is made as of the 19th day of
November , 1997, between SUN FINANCIAL GROUP, INC of 0000 X. Xxxxx Xxxxx Xxxxx,
Xxxxx 000 Xxxxx, XX 00000 (the "Lessor") and RHYTHMS NETCONNECTIONS INC having
Its principal offices at 0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000 Xxxxxxxxx, XX
00000 (the "Lessee").
TERMS AND CONDITIONS
1. DEFINITIONS.
"Lease Order" shall refer to that document wherein Lessor agrees to lease
to Lessee and Lessee agrees to lease from Lessor certain Equipment. Each Lease
Order shall be signed and submitted by Lessee to Lessor and, when so submitted,
shall constitute a firm irrevocable offer by Lessee to lease the Equipment
identified on the Lease Order subject to the terms of the Lease Order and this
Lease Agreement which, if accepted by Lessor by signing and returning to Lessee
one copy of the same within thirty (30) days of the date of the Lease Order
shall be deemed a duly executed and in force Lease Order.
"Initial Term" shall mean the period beginning on the Commencement Date and
continuing for the number of months set forth in each Lease Order.
"Equipment" shall mean the equipment identified in a duly executed and in
force Lease Order and all related replacements, parts, additions, software,
accessories, alterations and repairs incorporated therein or affixed thereto,
together with any Items included on the related Lease Order including, but not
limited to, training, maintenance, license agreements, etc.
"Software" shall mean a computer program in any data, program description,
media or supporting documentation provided by a licensor as part of the
transaction.
"Delivery and Acceptance Date" shall mean the date that the Equipment
listed on the related Lease Order is accepted at Lessee's premises, such date
being specified in the related Delivery and Acceptance Receipt. Unless
expressly agreed otherwise by the parties or Lessee notifies Lessor in writing
that the Equipment has been rejected, the Equipment must be accepted within
seven (7) days after the delivery date, and if not accepted by such time the
Delivery and Acceptance Date shall be deemed to be seven (7) days after the
delivery date.
"Commencement Date" means, as to the Equipment designated on any Lease
Order, where the Delivery and Acceptance Date for such Equipment falls on the
first day of the month, that date or, in any other case, the first day of the
month or calendar quarter if so provided in the Lease Order following the
Delivery and Acceptance Date, unless otherwise agreed by the parties.
"Progress Payment Rider" shall refer to that document wherein the seller of
the Equipment requires payment prior to the commencement of a Lease Order and
Lessee agrees to make payments prior to the commencement of a Lease Order.
2. NET LEASE.
THIS LEASE AGREEMENT TOGETHER WITH EACH LEASE ORDER CONSTITUTES A NET LEASE
AND LESSEE'S AGREEMENT TO PAY RENT AND ANY OTHER OBLIGATIONS HEREUNDER AND UNDER
ANY APPLICABLE LEASE ORDERS SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE
SUBJECT TO ANY ABATEMENT, REDUCTION, SET-OFF, DEFENSE, COUNTERCLAIM,
INTERRUPTION, DEFERMENT OR RECOUPMENT FOR ANY REASON WHATSOEVER. Lessor and
Lessee will enter into one or more Lease Orders pursuant to this Lease
Agreement. Subject to the terms and conditions of this Lease Agreement and a
duly executed and in force Lease Order, Lessor agrees to lease to Lessee and
Lessee agrees to lease from Lessor the Equipment described in each Lease Order.
This Lease Agreement is a master lease and the terms and conditions of this
Lease Agreement shall be incorporated into and be a part of each Lease Order.
Each Lease Order shall be treated as a separate lease with respect to the
Equipment covered by such Lease Order. In the event of any conflict between the
language of this Lease Agreement and any Lease Order entered into pursuant
hereto, the language of the Lease Order shall prevail with respect to that Lease
Order and the Equipment covered thereby. NO EQUIPMENT SHALL BE DEEMED LEASED
HEREUNDER UNLESS IT IS THE SUBJECT OF A DULY EXECUTED AND IN FORCE LEASE ORDER.
3. TERM.
The term of this Lease Agreement shall commence on the date set forth above
and shall continue in effect for the Initial Term of any Lease Order and any
extended term as provided herein.
The term of each lease as to any items of Equipment designated on any Lease
Order shall commence on the Delivery and Acceptance Date for such Equipment, and
shall continue for the Initial Term and any extended term provided herein.
(CONTINUED ON THE FOLLOWING 3 PAGES)
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IN WITNESS WHEREOF, the parties have executed this Lease Agreement effective as
of the date first above written.
LESSOR: SUN FINANCIAL GROUP, INC. LESSEE: RHYTHMS NETCONNECTIONS INC.
Signature: /s/ Xxxxx X. Xxxxxxxx Signature: /s/ Xxxxxx X. X'Xxxxxx
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By: Xxxxx X. Xxxxxxxx By: Xxxxxx X. X'Xxxxxx
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Title: Vice President Marketing Title: Vice President & General Manager
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Date: January 15, 1998 Date: 31 December 1997
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4. RENTAL. Rental shall begin to accrue on the Delivery and Acceptance Date
and Lessee shall pay to Lessor, as rental for the Equipment during the Initial
Term, the rent set forth in the respective Lease Order, which shall be due and
payable in advance on the first day of each calendar month or quarter as
specified in the Lease Order during such Initial Term plus any extended term
(each date being hereinafter called a "Rent Payment Date"), unless modified by a
Progress Payment Rider. If the Delivery and Acceptance Date of any Equipment
shall be other than the first day of the month, Lessee shall make an initial
payment based on the Delivery and Acceptance Date in an amount equal to the
fraction of the rent as specified in the related Lease Order for each day from
the Delivery and Acceptance Date to (but not including) the Commencement Date.
Rent shall be paid to Lessor at the address set forth above or at such other
place as Lessor shall designate in writing, or if to an Assignee of Lessor, at
such place as such Assignee shall designate in writing, and shall be paid free
and clear of all claims, demands or setoffs against Lessor or such Assignee.
Whenever any payment by Lessee (of rent or otherwise) is past due hereunder for
more than seven (7) days, Lessee shall pay to Lessor, as additional rent,
interest on such amount until and including the date of payment, at the lesser
of 1.5% per month or the maximum allowable rate of interest permitted by law.
5. TAXES. Lessee covenants to promptly report, file, pay and indemnify and
hold Lessor harmless with respect to any and all Taxes, as hereinafter defined.
The term "Taxes" as used herein shall mean all taxes (including sales, use,
excise, personal property, ad valorem, stamp, documentary and other taxes), and
all other governmental fees, charges and assessments (general or special) due,
assessed or levied by any foreign, federal, state, county or local government or
taxing authority, and any penalties, fines or interest thereon, which are
imposed against, upon or relating to the Equipment or the use, xxxxxxxxxxxx,
xxxxxx, shipment, transportation, delivery, ownership or operation thereof, and
on or relating to the lease thereof including the rentals or receipts due under
this Lease Agreement, but shall not include any taxes solely based upon or
measured by the income of Lessor. Lessee will, upon request by Lessor, submit
to Lessor written evidence of Lessee's payment of all Taxes due hereunder. Any
tax returns filed by Lessee shall show Lessor as the owner of the Equipment.
6. INSTALLATION, USE, MAINTENANCE AND INSPECTION OF EQUIPMENT.
(a) Lessee shall pay all installation, transportation, rigging, unpacking
and repacking, drayage, handling and insurance charges on the Equipment upon
delivery to Lessee and upon redelivery to Lessor upon the expiration or earlier
termination of the Initial Term or any extension thereof, to such destination as
is specified by Lessor within the continental United States of America ("Return
Location"). Lessee shall furnish appropriate Installation facilities for the
Equipment. Lessee represents and warrants that: (i) it has selected all
Equipment based on its own judgment and expressly disclaims any reliance upon
statements made by Lessor, and (ii) as of the Delivery and Acceptance Date, as
between Lessee and Lessor, Lessee shall have unconditionally accepted such
Equipment. Lessee shall execute and deliver to Lessor a Delivery and Acceptance
Receipt which shall be conclusive evidence that, without limitation, Lessee
finds the Equipment complete, in good working order and condition and
satisfactory for its requirements.
(b) Lessee shall comply with all laws, regulations and orders of any
governmental branch or agency which relates to the installation, use, possession
or operation of the Equipment, and shall use the Equipment in the regular course
of its business only, within its normal capacity, without abuse.
(c) Lessee, at its own expense, shall maintain the Equipment in good
operating condition, repair and appearance, and protect the same from
deterioration other than normal wear and tear, and shall enter into, and keep in
force a maintenance agreement with the manufacturer of the Equipment. Lessee
shall cause the manufacturer to keep the Equipment in good and efficient working
order, less normal wear and tear in full compliance and in accordance with the
provisions of such maintenance agreement and shall furnish evidence of such
agreement to Lessor upon request. During Lessee's normal business hours, Lessee
shall provide the manufacturer's field engineering representatives with access
to the equipment to install engineering changes necessary to keep the Equipment
at currently announced engineering change levels. Upon deinstallation of any
Equipment, Lessee shall provide Lessor evidence from the manufacturer stating
the Equipment is at currently announced engineering change levels and is
qualified for the manufacturer's maintenance agreement. The Equipment shall be
returned in the same operating order, repair, condition and appearance as on the
Delivery and Acceptance Date, reasonable wear and tear excepted.
(d) During Lessee's normal business hours, upon prior written notice to
Lessee and subject to Lessee's reasonable security procedures, Lessee shall
permit Lessor or its designee to inspect the Equipment, Lessee's equipment log
and maintenance records.
(e) Prior to delivery of any Equipment, the obligations of Lessor may be
suspended to the extent that Lessor is hindered or prevented from complying
therewith because of labor disturbances, acts of God, fire, storms, accidents,
failure of the manufacturer to deliver any Equipment, governmental regulations
or any cause whatsoever not within the control of Lessor.
7. RELOCATION. Lessee shall not move or permit to be moved any Equipment from
the location set forth in the applicable Lease Order without the prior written
consent of Lessor, which shall not be unreasonably withheld, provided, however,
in no event shall any Equipment be moved to a location outside the United States
of America. Risk of loss and all costs and expenses incurred in connection with
any movement of Equipment shall be the responsibility of Lessee.
8. ALTERATIONS AND MODIFICATIONS. Lessee shall not make modifications,
alterations or additions to Equipment (other than normal operating accessories
or controls) without the prior written consent of Lessor, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, Lessee shall be
entitled to acquire and install, at Lessee's expense, such additional features
or options ("Modifications") which (i) will not impair the originally intended
function or use of the Equipment in which the Modifications are Installed, (ii)
will not require removal of any part of the Equipment, (iii) will not interfere
with Lessee's ability to obtain and maintain the maintenance contract required
by Paragraph 6(c), and (iv) the addition of which will not have an adverse
impact upon the value of the underlying Equipment or Lessor's rights therein.
Such Modifications shall be of the type which are readily installed and removed
without damage to the Equipment so as to restore the Equipment to the condition
in which it existed prior to the installation of such Modifications provided,
however, that if Lessor so agrees in writing, Lessee shall not be required to
remove such Mortifications. Any Modifications not so removed shall become the
property of Lessor. All Modifications must qualify for the manufacturer's
maintenance agreement and be maintained in accordance with Paragraph 6(c)
hereof. Lessee hereby grants to Lessor the right and opportunity to first
submit or match the last proposal for the lease, financing or supply of any
Modification.
9. SOFTWARE. Lessee and Lessor acknowledge that the Equipment may contain or
encode a description of certain Software in which Lessor and Lessee may have no
ownership or other proprietary rights where required by the Software owner,
manufacturer or distributor. Lessee shall enter into a license or other
agreement for the use of such Software. Any Software agreement shall be
separate and distinct from this Master Lease and any Lease Order, and Lessor and
Assignee shall not have any obligations thereunder, but shall have the right to
require Lessee to terminate Lessee's use of the Software if an Event of Default
shall occur and shall be continuing hereunder. In the event rent specified in a
Lease Order includes an amount attributable to the financing by Lessor of
Lessee's fee for use of Software, Lessee agrees that such amount shall be deemed
rent and subject to all the provisions of this Lease Agreement. Upon
termination of this Lease Agreement for reasons other than default, Lessee
hereby assigns to Lessor, to the extent assignable, any and all rights and
obligations relating to software and applicable software licenses.
10. OWNERSHIP, SECURITY INTEREST. It is expressly understood that the
Equipment is, and shall at all times remain, personal property of Lessor.
Lessee shall have no right, title or interest in the Equipment except as
expressly provided herein. If requested by Lessor, Lessee will obtain, prior to
delivery of any Equipment, a certificate satisfactory to Lessor from all parties
with a real property interest in the premises where the Equipment shall be
located waiving any claim with respect to the Equipment. If Lessor supplies
Lessee with labels, plates or other markings stating that the Equipment is owned
by Lessor, Lessee shall attach same in a prominent place on the Equipment.
Lessee agrees to execute Uniform Commercial Code financing statements and any
and all additional instruments requested by Lessor to perfect the interest of
Lessor, its successors or assigns in this Master Lease, any Lease Order, the
payments due hereunder or the Equipment Lessee authorizes Lessor to file a copy
of the Master Lease or any Lease Order or invoice as a financing statement.
Lessee agrees to reimburse Lessor for all recording and filing fees.
11. ASSIGNMENT OR SUBLETTING BY LESSEE. LESSEE SHALL NOT ASSIGN, TRANSFER,
PLEDGE OR OTHERWISE DISPOSE OF THIS LEASE AGREEMENT, ANY LEASE ORDER OR ANY OF
ITS RIGHTS THEREUNDER NOR SUBLEASE OR LEND ANY OF THE EQUIPMENT TO ANY OTHER
PERSON WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR ANY PURPORTED ASSIGNMENT,
TRANSFER, PLEDGE, OR OTHER DISPOSITION OF THIS LEASE AGREEMENT, ANY LEASE ORDER
OR ANY OF LESSEE'S RIGHTS THEREUNDER, OR ANY PURPORTED SUBLEASE OR LENDING OF
THE EQUIPMENT, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, AT LESSOR'S OPTION, SHALL
BE VOID AND OF NO EFFECT. FOR THE PURPOSES OF THIS PARAGRAPH 11, ANY PURPORTED
SALE OR OTHER TRANSFER OF A CONTROLLING OWNERSHIP INTEREST OF LESSEE (WHETHER IN
ONE TRANSACTION OR SERIES OF RELATED TRANSACTIONS) SHALL BE DEEMED AN ASSIGNMENT
OF THE LESSEE'S RIGHTS HEREUNDER REQUIRING THE PRIOR WRITTEN CONSENT OF THE
LESSOR. As to any permitted assignment or sublease, the following conditions
shall apply.
(a) Lessee shall remain fully liable for all payments due under each Lease
Order and remain the primary obligor for all remaining obligations under this
Lease Agreement and any Lease Order hereunder.
(b) Lessee shall give Lessor at least thirty (30) days written notice of
the location of the Equipment and the identity of the assignee or sublessee
prior to the installation at assignee's or sublessee's premises. Lessee shall
be responsible for obtaining any and all financing statements and other
documentation reasonably requested by Lessor.
(c) Any sublessee's interest in any permitted sublease hereunder shall be
subordinate to the interests of Lessor or any Assignee of Lessor.
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12. DISCLAIMER OF WARRANTIES.
(a) LESSEE ACKNOWLEDGES THAT LESSOR IS NOT THE MANUFACTURER OF THE
EQUIPMENT, NOR THE AGENT OF THE MANUFACTURER AND THAT LESSOR HAS MADE NO
REPRESENTATIONS, WARRANTIES OR COVENANTS OF ANY KIND, EXPRESS OR IMPLIED, AS TO
ANY MATTER WHATEVER. INCLUDING BUT NOT LIMITED TO: THE DESIGN, CONDITION OR
PERFORMANCE OF THE EQUIPMENT, ITS MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT, THE
CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY LAW,
RULE, REGULATION, CONTRACT OR PURCHASE ORDER, OR WITH RESPECT TO PATENT,
TRADEMARK OR COPYRIGHT INFRINGEMENT OR THE LIKE, OR LATENT DEFECTS. LESSOR
EXPRESSLY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES. AS TO LESSOR,
LESSEE LEASES THE EQUIPMENT "AS IS, WHERE IS".
(b) LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE TO THE LESSEE FOR ANY
CLAIM, LOSS OR DAMAGE, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR OTHERWISE,
INCLUDING WITHOUT LIMITATION, LOSS OF PROFIT, LOSS OF BUSINESS, OR OTHER
FINANCIAL LOSS, WHICH MAY BE CAUSED, DIRECTLY OR INDIRECTLY, BY THE EQUIPMENT,
THE INADEQUACY OF THE EQUIPMENT FOR ANY PURPOSE OR ANY USE THEREOF, BY ANY
DEFICIENCY OR DEFECT THEREIN, OR BY ANY INCIDENT WHATSOEVER IN CONNECTION
THEREWITH, ARISING IN STRICT LIABILITY, NEGLIGENCE, CONTRACT, TORT OR OTHERWISE,
OR IN ANY WAY RELATING TO OR ARISING OUT OF THE EQUIPMENT, THIS LEASE AGREEMENT
OR ANY LEASE ORDER. THE LESSEE AGREES THAT IT WILL, IRRESPECTIVE OF ANY SUCH
CLAIM, LOSS, DAMAGE OR EXPENSE, CONTINUE TO PAY SUCH MONTHLY RENTAL CHARGES AND
OTHER SUMS AS MAY COME DUE UNDER ANY LEASE ORDER HEREUNDER.
13. ASSIGNMENT OF MANUFACTURER'S WARRANTIES. Lessor hereby assigns to Lessee,
to the extent assignable, all manufacturers warranties, service agreements and
patent indemnities with respect to the Equipment, if any, for the purpose of
making appropriate claims against the manufacturer, provided that the Lessor
shall retain at all times the right to be protected by these warranties,
agreements and indemnities as the owner of the Equipment. The Lessee's sole
remedy for the breach of any such warranty, indemnification or service agreement
shall be against the manufacturer, and not against Lessor or any Assignee of
Lessor, nor shall any such breach have any effect whatsoever on the rights and
obligations of either party with respect to this Lease Agreement. Lessor will,
upon request by Lessee and at Lessee's sole expense, cooperate with Lessee in
the enforcement of any benefit provided in any such warranties, service
agreements and patent indemnities.
14. INDEMNIFICATION. Lessee agrees that it will defend, indemnify and hold
Lessor harmless against any and all claims, demands, liabilities, obligations,
losses, damages, injuries, penalties, actions, costs and expenses, including
reasonable attorney's fees, of whatever kind and nature arising out of or in
connection with the possession, use, condition (including, but not limited to,
latent and other defects, whether or not discoverable by Lessor or Lessee),
operation, ownership by Lessor, selection, delivery, leasing or return of any
item of Equipment leased hereunder, regardless of where, how and by whom
operated, or any failure on the part of Lessee to accept the Equipment or
otherwise to perform or comply with the provisions of this Lease Agreement or
any Lease Order, except for Lessor's gross negligence or willful misconduct.
The indemnities and assumptions of liabilities and obligations herein provided
for shall continue in full force and effect notwithstanding the expiration or
termination of the Initial Term, any renewal or extension thereof, or of any
Lease Order or this Lease Agreement.
15. ASSIGNMENT BY LESSOR. LESSOR MAY ASSIGN OR TRANSFER THIS MASTER LEASE OR
ANY LEASE ORDER HEREUNDER OR LESSOR'S INTEREST IN THE EQUIPMENT OR GRANT A
SECURITY INTEREST THEREIN TO ONE OR MORE ASSIGNEES WITHOUT NOTICE TO LESSEE.
Any Assignee of Lessor shall have all of the rights but none of the obligations
of Lessor hereunder unless expressly agreed in writing, and Lessee agrees that
it will not assert against any Assignee any defense or counterclaim that Lessee
may have against Lessor. Lessee shall have no greater obligations to any
Assignee than it had to Lessor at the time of assignment and such assignment
shall not limit or otherwise restrict the rights afforded Lessee hereunder.
Lessee hereby (i) consents to such assignments and/or grants, (ii) agrees to
promptly execute and deliver UCC financing statements, an Acknowledgment and
Consent of Assignment and such further acknowledgments, agreements, certificates
and other instruments as may be reasonably requested by Lessor or Assignee to
effect such assignments and/or grants. Lessee acknowledges that any assignment
or transfer by Lessor made in accordance with the provisions of this paragraph
shall not materially change Lessee's duties or obligations under this Lease nor
materially increase the burdens or risks imposed on Lessee. In the event of an
assignment all references herein to Lessor shall be deemed to include Assignee.
Notwithstanding any such assignment: (i) Lessor shall not be relieved of any of
its obligations hereunder; and (ii) the rights of Lessee to quiet enjoyment and
possession of the Equipment shall not be impaired so long as Lessee is not in
default under this Lease.
16. QUIET POSSESSION AND ENJOYMENT. Lessor covenants that so long as Lessee is
not in default hereunder, neither Lessor nor any Assignee will disturb Lessee's
quiet possession and enjoyment of the Equipment subject to and in accordance
with the provisions of this Lease Agreement and the applicable Lease Order.
17. DAMAGE DESTRUCTION OR LOSS.
(a) Upon delivery of the Equipment to Lessee until the Equipment is
redelivered to Lessor, Lessee shall bear the entire risk of loss, damage, or
destruction with respect to the Equipment resulting from any cause whatsoever.
(b) if any Equipment becomes damaged beyond repair, lost, stolen, destroyed
or permanently rendered unfit or in the event of any condemnation or taking by
any governmental authority (any such occurrence being hereinafter referred to as
an "Event of Loss"), then Lessee shall promptly notify Lessor and shall do
either of the following within thirty (30) days after the occurrence of an Event
of Loss:
(i) At its expense, promptly replace the affected Equipment with like
or better replacement equipment of identical make, model, configuration,
capacity and condition, in good repair, free and clear of all liens, in which
case any such replacement equipment shall become the property of Lessor and for
all purposes of this Master Lease shall be deemed to be the Equipment which it
replaced; or
(ii) Terminate the Lease Order with respect to the affected Equipment
and pay to Lessor on the next payment date, an amount equal to the present value
of the remaining rental payments discounted by five percent (5%) plus the fair
market value in continued use of the Equipment.
18. INSURANCE. Lessee shall at its expense insure the Equipment against all
risks and in such amounts as Lessor shall reasonably require (but not less than
the full replacement value) with carriers reasonably acceptable to Lessor, shall
maintain a loss payable endorsement in favor of Lessor and its assigns affording
to Lessor and its assigns such additional protection as Lessor and its assigns
shall reasonably require, and Lessee shall maintain lability insurance
reasonably satisfactory to Lessor and its assigns. All such Insurance policies
shall name Lessee, Lessor and its assigns as additional insureds and shall name
Lessor and its assigns as loss payee(s), and shall provide that insurance
coverage shall not be canceled or altered without at least thirty (30) days
prior written notice to Lessor and Assignee, and that no breach of warranty by
Lessor shall invalidate such insurance with respect to any additional insured.
Lessee shall promptly furnish appropriate evidence of such insurance to Lessor
and any Assignee.
19. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee represents and warrants
to Lessor and any Assignees on the date hereof and on the date of each Lease
Order that: (i) the execution and performance of this Lease Agreement and all
Lease Orders are duly authorized and this Lease Agreement and the Lease Orders
constitute legal, valid and binding obligations of Lessee enforceable in
accordance with their terms, (ii) the performance under the Lease Agreement and
all Lease Orders by Lessee will not result in any breach, default or violation
of Lessee's articles of incorporation or by-laws, if applicable, or partnership
agreement, if applicable, or any agreement to which Lessee is a party, (iii)
Lessee is in good standing duly organized, and validly existing in its
jurisdiction of incorporation or organization and in any jurisdiction(s) in
which any of the Equipment is to be located, (iv) there are no actions, suits or
proceedings pending or threatened, before any court, agency, or arbitrator which
will, if determined adversely to Lessee, materially adversely affect its ability
to perform its obligations under this Lease Agreement or any Lease Order, and
(v) any and all information with respect to Lessee heretofore furnished to
Lessor was, when furnished, true and complete.
20. FINANCIAL STATEMENTS ETC. During the term of this Lease Agreement, Lessee
shall furnish to Lessor and any Assignee Lessee's audited balance sheet, income
statement and statement of cash flows for its most recent fiscal year, within
ninety days and quarterly statements within forty-five days, all prepared in
accordance with generally accepted accounting principles consistently applied,
and, from time to time, such other information concerning the Equipment as
Lessor or any Assignee may reasonably request.
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21. DEFAULT. The occurrence of any of the following events shall constitute an
"Event of Default" hereunder and under each Lease Order entered into pursuant
hereto.
(a) Lessee shall fail to pay any installment of rent or other charge due
under this Lease Agreement or any Lease Order thereunder within ten (10) days
after the same is due and payable.
(b) Lessee attempts to move, sell, assign, transfer, encumber, dispose of,
sublet or lend any of the Equipment without the prior written consent of Lessor.
(c) Except for defaults covered by Paragraph (a) above, Lessee shall fail
to perform or observe any covenant, condition or agreement to be performed or
observed by it hereunder or under any Lease Order and such failure continues
unremedied for fifteen (15) days after notice thereof to Lessee by Lessor.
(d) Any representation or warranty made by Lessee in this Lease Agreement,
any Lease Order or in any document or certificate made or furnished to Lessor in
connection herewith or pursuant hereto shall prove to be false at any time in
any material respect;
(e) Lessee ceases doing business as a going concern; makes an assignment
for the benefit of creditors; admits in writing its inability to pay its
debts as they become due; files a voluntary petition in bankruptcy; is
adjudicated to be bankrupt or insolvent; files a petition seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar arrangement under any present or future statute, law
or regulation or files an answer admitting the material allegations of a
petition filed against it in any such proceeding; consents to or acquiesces
in the appointment of a trustee receiver or liquidator of it or of all or any
substantial part of its assets or properties, or if it or its shareholders
shall take any action to effect a dissolution or liquidation and, in the case
of any such proceeding not being instituted by Lessee, such proceeding is not
dismissed or vacated within thirty (30) days.
22. REMEDIES. Upon the occurrence of any Event of Default and at any time
thereafter, Lessor may with or without terminating this Lease Agreement do any
one or more of the following:
(a) Proceed by appropriate court action to enforce performance by Lessee of
the applicable terms of this Lease Agreement or any Lease Order.
(b) Declare immediately payable all sums due and to become due hereunder
for the full term of any and all Lease Orders under this Master Lease.
(c) If the Lease Order provides for a Stipulated Loss Value or other fixed
value of the Equipment, recover (i) any then accrued and unpaid rent plus
interest thereon at the late payment rate, (ii) the Stipulated Loss Value or
other fixed value at Lessor's option of the Equipment as of the rent payment
date immediately preceding Lessee's date of default, and (iii) all commercially
reasonable costs and expenses incurred by Lessor in any repossession, recovery,
storage, repair, sale, release or other disposition of the Equipment, including
reasonable attorney's fees and costs incurred in connection therewith or
otherwise resulting from Lessee's default.
(d) if the Lease Order does not provide for a Stipulated Loss Value or
other fixed value for the Equipment, recover from Lessee damages not as a
penalty but herein liquidated for all purposes and in an amount equal to the sum
of (i) any then accrued and unpaid Rent plus interest thereon at the Late
Payment Rate, (ii) the present value of all remaining Rent contracted to be paid
over the unexpired portion of the Initial Term or any extended term, discounted
at an interest rate of five percent (5%) per annum plus prepayment penalty fees,
(iii) all commercially reasonable costs and expenses incurred by Lessor in any
repossession, recovery, storage, or repair, sale, re-tease or other disposition
of the Equipment, including reasonable attorney's fees and costs incurred in
connection therewith or otherwise resulting from Lessee's default and (iv) the
fair market residual value in continued use at the time of default of the
Equipment determined by Lessor.
(e) Re-lease or sell any or all of the Equipment at a public or private
sale with the privilege of becoming the purchaser or Lessee thereof, on such
terms and notice as Lessor shall deem reasonable, and thereafter Lessor shall
apply the proceeds derived therefrom as follows, Lessee remaining liable for any
deficiency: First, to reimburse Lessor for all costs and expenses incurred by
Lessor in any repossession, recovery, storage, repair, sale, re-lease or other
disposition of the Equipment, including reasonable attorney's fees, commissions
and broker's fees and costs incurred in connection therewith or otherwise
resulting from Lessee's default; second, to pay Lessor any amounts owing
hereunder; third, to reimburse Lessee for any amount paid hereunder as a result
of Lessee's default; and fourth, any surplus remaining thereafter to Lessor.
(f) Take immediate possession of any or all of such Equipment wherever
situated, and for such purpose, enter upon any premises (by summary proceedings
or otherwise) where the equipment is located without prejudice to any other
remedy or claim referred to herein; and
(g) Exercise any other right or remedy which may be available to it under
the Uniform Commercial Code or any other applicable law.
A termination hereunder shall occur only upon notice by Lessor and only as
to such Equipment as Lessor specifically elects to terminate and this Master
Lease and all Lease Orders hereunder shall continue in full force and effect as
to the remaining Equipment, if any. No remedy referred to in this Paragraph 22
is intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity. No express or implied waiver by Lessor of any default shall constitute
a waiver of any other default by Lessee or a waiver of any of Lessor's rights.
23. LOSS OF ANTICIPATED TAX BENEFITS. Lessee acknowledges that unless
otherwise agreed to in writing by Lessor, Lessor intends to claim all available
tax benefits of ownership with respect to the Equipment (the "Tax Benefits"),
including, but not limited to, cost recovery deductions as provided in Section
168 of the Internal Revenue Code of 1986, as amended (the "Code"), with respect
to each item of Equipment for each of Lessor's taxable years during the Initial
Term and any extended or renewal term. Notwithstanding anything herein to the
contrary, if Lessor shall not be entitled to or shall be subject to recapture of
the Tax Benefits as a result of any act, omission or misrepresentation of
Lessee, Lessee shall pay to Lessor upon demand an amount sufficient to reimburse
Lessor for such loss, together with any related interest and penalties based on
the highest marginal corporate income tax rate prevailing at the time of such
loss, regardless of whether Lessor or any member of a consolidated group of
which Lessor is also a member is then subject to any increase in tax as a result
of such loss of Tax Benefits.
24. TERMINATION. Each Lease Order may be terminated by either party at the end
of the Initial Term or any renewal or extended term thereof provided written
notice of termination of a Lease Order is given between one hundred eighty days
and ninety days prior to the termination of the Lease Order. If proper notice
of termination is not given, or if the Equipment is not returned to Lessor as
notified, the term of the Lease Order shall be extended on the same terms and
conditions for six months. Thereafter, the Lease Order as so extended may be
terminated by either party at the end of any calendar month by giving the other
party ninety days prior written notice.
25. GENERAL
(a) This Lease Agreement and any Lease Order hereunder shall be governed in
all respects by the laws of the State of Florida. Lessor and Lessee agree that
any dispute between them arising under this Lease Agreement or any Lease Order
shall be resolved in the state or federal courts in the State of Florida having
within its jurisdiction the City of Tampa, Florida. Lessee hereby knowingly and
irrevocably waives any objections to an action in such courts in the State of
Florida on the grounds of lack of personal jurisdiction or improper venue and
agrees that effective service of process may be made upon Lessee by mail under
the notice provisions of subparagraph 25(c) hereof. NO RIGHTS OR REMEDIES
REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE SHALL BE INCORPORATED
INTO THIS LEASE AGREEMENT UNLESS EXPRESSLY GRANTED IN THIS LEASE AGREEMENT OR A
LEASE ORDER HEREUNDER.
(b) This Lease Agreement and all Lease Orders now or hereafter becoming a
part of this Lease Agreement constitute the entire agreement between Lessee and
Lessor with respect to the Equipment covered thereby and supersede any prior or
contemporaneous agreements or understandings relating thereto. No covenant,
condition or other term or provision hereof or of any Lease Order may be waived,
changed, amended or modified except by a written agreement signed by both Lessor
and Lessee.
(c) All notices, consents or requests desired or required to be given
hereunder shall be in writing and shall be mailed, via certified mail, return
receipt requested, to the address of the other party set forth on the first page
hereof or to such other address as such party shall have designated by a proper
notice.
(d) This Lease Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
(e) Paragraph headings are for convenience of reference only and shall not
be construed as part of this Lease Agreement
(f) It is expressly understood that all of the Equipment shall be and
remain personal property of the Lessor notwithstanding the manner in which the
same may be attached or affixed to realty, and Lessee shall do all acts and
execute all documents necessary to insure that the Equipment remains personal
property.
(g) All agreements, representations and warranties contained in this Lease
Agreement, any Lease Order, and in any document delivered pursuant hereto or in
connection herewith shall be for the benefit of Lessor and any Assignee and
shall survive the execution and delivery, and the expiration or other
termination, of this Lease Agreement and any Lease Order.
(h) Time is of the essence of this Lease Agreement and each Lease Order.
(i) Lessee shall, upon request of Lessor, perform all such other acts and
execute and deliver to Lessor all such other documents which Lessor deems
reasonably necessary to implement the provisions of this Lease Agreement or any
Lease Order.
(j) Each Lease Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but there shall be only one executed
original of each Lease Order which shall be marked "Original" (the "Original")
and all other counterparts shall be marked "Duplicate". To the extent, if any,
that a Lease Order constitutes chattel paper (as such term is defined in the
Uniform Commercial Code) no security interest in the Lease Order may be created
through the transfer or possession of any counterpart other than the Original of
the Lease Order accompanied by an Original or certified copy of the Lease
Agreement.
4 of 4
ADDENDUM TO MASTER LEASE AGREEMENT
DATED
NOVEMBER 19, 1997
BETWEEN
SUN FINANCIAL GROUP, INC.
AND
RHYTHMS NETCONNECTIONS INC.
SECTION 1.
The eleventh line is amended by replacing "seven (7) days" with "fourteen
(14) days" after "accepted within" and seven (7) days" with "fourteen (14) days"
after "shall be deemed to be".
SECTION 4.
The second line is amended by deleting "or quarter" after "each calendar
month".
SECTION 6(c).
This second line is amended by inserting "or certified maintenance
provider" after "and keep in force a maintenance agreement with the
manufacturer" and "or certified maintenance provider" after "Lessee shall cause
the manufacturer".
SECTION 6(c).
The third sentence is deleted in its entirety.
SECTION 7.
The first sentence is amended by replacing "not move or permit to be moved
any Equipment from the location set forth in the applicable lease Order without
the prior written consent of Lessor, which shall not be unreasonably withheld;"
with "be permitted to relocate the Equipment within the State set forth in the
applicable Lease Order without the prior written consent of the Lessor provided
Lessee provides Lessor with a quarterly report detailing any and all relocation
of the Equipment."
SECTION 8.
The first sentence is amended by replacing "shall not" with "may" and ",
which consent shall not be unreasonably withheld" with "provided Lessee provides
Lessor with a quarterly report detailing any and all modifications, alterations
or additions to the Equipment".
The second sentence is amended by deleting "(ii) will not require the
removal of any part of the Equipment." after "use of the Equipment in which the
Modifications are installed.".
The fourth line is amended by deleting the word "contract" after "(iii)
will not interfere with Lessee's ability to obtain and maintain the
maintenance".
The seventh line is amended by changing the word "agreement" with
"requirements" after "All Modifications must qualify for the manufactures
maintenance".
SECTION 11.
The second line is amended by adding "WHICH SHALL NOT BE UNREASONABLY
WITHHELD" after "THE PRIOR WRITTEN CONSENT OF LESSOR"
The fifth line is amended by inserting ", DEFINED AS GREATER THAN 50%."
after "CONTROLLING OWNERSHIP INTEREST OF LESSEE".
The seventh line is amended by inserting the sentence "SUCH CONSENT SHALL
NOT BE UNREASONABLY WITHHELD BY LESSOR (ie, If the purported assignee has a
better credit rating than the Lessee).".
PAGE TWO
ADDENDUM TO MASTER LEASE AGREEMENT
RHYTHMS NETCONNECTIONS INC.
DATED NOVEMBER 19, 1997
SECTION 14.
The fifth line is amended by deleting "gross" after "except for Lessor's"
and deleting "willful" after "negligence or".
SECTION 17(b)(ii).
The second line is amended by inserting "end of term" after "plus the".
SECTION 21(b).
The first line is amended by inserting "Equipment out of the State" after
"Lessee attempts to move".
SECTION 23.
The fourth line is amended by inserting "material" after "as a result of
any" and "." after "or shall be subject to the recapture of"
SECTION 24.
The third line is amended by changing "six" with "three" after "on the same
terms and conditions for", with respect to Lease Order No. 1 only.
LESSOR: SUN FINANCIAL GROUP, INC. LESSEE: RHYTHMS NETCONNECTIONS INC.
SIGNATURE: /s/ Xxxxx X. Xxxxxxxx SIGNATURE: /s/ Xxxxxx X. X'Xxxxxx
-------------------------- ------------------------------
BY: XXXXX X. XXXXXXXX BY: Xxxxxx X. X'Xxxxxx
--------------------------------- -------------------------------------
TITLE: VICE PRESIDENT TITLE: Vice President & GM
------------------------------ ----------------------------------
DATE: 6-16-98 DATE: 31 December 1997
------------------------------- -----------------------------------
SUN FINANCIAL GROUP, INC.
LEASE ORDER NO. 1
----------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Reference is made to that certain Master Lease Agreement Number 1642,
between SUN FINANCIAL GROUP, INC., as Lessor, and RHYTHMS NETCONNECTIONS INC.,
as Lessee. The terms used herein shall have the same meaning as such terms have
in such Master Lease Agreement.
NOW, THEREFORE, Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor the Equipment identified below on the terms and conditions as stated
below:
EQUIPMENT
See Equipment Addendum attached hereto and made a part hereof.
LEASE TERMS:
INITIAL TERM: 36 MONTHS;
--------
BILLED: MONTHLY [X] QUARTERLY [ ] OTHER [ ]
RENTAL RATE: $64,000.00, Plus Tax.
ADDITIONAL PROVISIONS:
Fair Market Value exercisable only at the end of Initial Term and further
provided Lessee is not in default. First and Last months rent payments due upon
commencement of the lease. Fair Market Value is defined as the estimated
amount, as of a certain date, at which the equipment subject to the lease may
reasonably be valued in the marketplace by a buyer who could choose not to buy
and a seller who could choose not to sell. In the event that the parties cannot
agree on a Fair Market Value amount, an independent appraiser with knowledge of
the equipment, appropriate certification and experience utilizing Fair Market
Value as defined shall be retained to render an opinion. Lessee may extend the
lease, purchase the Equipment or return the Equipment only at the end of the
Initial Term and provided Lessee is not in default.
This Lease Order shall not be binding upon Lessor until accepted by Lessor
in writing at its offices as first set forth in the Master Lease Agreement.
Lessee acknowledges that on or before signing this Lease Order, the Lessee has
either received a copy of the purchase agreement between the vendor or supplier
and the Lessor for the purchase of the Equipment or that the Lessee is aware
that it may have certain rights pursuant to the terms of such purchase agreement
and may contact such vendor or supplier directly for a description of any such
rights.
IN WITNESS WHEREOF, the parties have executed this Lease Order on the date
written below.
Signature: /s/ Xxxxx X. Xxxxxxxx Signature: /s/ Xxxxxx X. X'Xxxxxx
----------------------------- ------------------------------
By: Xxxxx X. Xxxxxxxx By: Xxxxxx X. X'Xxxxxx
------------------------------------ -------------------------------------
(Print Name) (Print Name)
Title: Vice President Marketing Title: Vice President & GM
--------------------------------- ----------------------------------
Date: January 15, 1998 Date: 31 December 1997
---------------------------------- -----------------------------------
/s/ (illegible)
EQUIPMENT ADDENDUM
TO LEASE ORDER NO. 1
BETWEEN
SUN FINANCIAL GROUP, INC., AS LESSOR
AND
RHYTHMS NETCONNECTIONS INC., AS LESSEE
QTY MODEL DESCRIPTION COST
--------------------------------------------------------------------------------
1 DATA COMMUNICATION EQUIPMENT
AND RELATED IT EQUIPMENT INCLUDING
NETWORK INSTALLATION COST AND
OPERATING SYSTEM SOFTWARE
TOTAL COST $2,000,000.00
EQUIPMENT LOCATION:
0000 Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, XX. 00000
SUN FINANCIAL GROUP, INC.
DELIVERY AND ACCEPTANCE RECEIPT
TO LEASE ORDER NO. 1
----------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Reference is made to that certain Master Lease Agreement Number 1642,
between SUN FINANCIAL GROUP, INC., as Lessor, and RHYTHM NETCONNECTIONS, INC.,
as Lessee.
The undersigned hereby acknowledges receipt in good condition and accepts
as satisfactory all of the following Equipment and certifies that such Equipment
has been properly installed and has been accepted by Lessee for leasing under
the Master Lease Agreement and applicable Lease Order, that such Equipment has
become subject to and governed by the provisions of the Master Lease Agreement
and applicable Lease Order, and that Lessee is obligated to pay the rentals and
all other sums provided for in the applicable Lease Order with respect to such
Equipment subject to the terms and conditions of the Master Lease Agreement and
the Lease Order.
EQUIPMENT
As set forth on applicable Lease Order Equipment Addendum.
The Delivery and Acceptance Date in respect to such Equipment is 13 February
1998.
IN WITNESS WHEREOF, the undersigned has executed this Delivery and
Acceptance Receipt as of the Delivery and Acceptance Date set forth above.
LESSEE: RHYTHMS NETCONNECTIONS, INC.
Signature: /s/ Xxxxxx X. X'Xxxxxx
-----------------------------------
By: Xxxxxx X. X'Xxxxxx
-----------------------------------
(Print Name)
Title: Chief Financial Officer
-----------------------------------
Date: 13 February 1998
-----------------------------------
SUN FINANCIAL GROUP, INC.
DELIVERY AND ACCEPTANCE RECEIPT
TO LEASE ORDER NO.
----------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Reference is made to that certain Master Lease Agreement Number 1642,
between SUN FINANCIAL GROUP, INC., as Lessor, and RHYTHMS NETCONNECTIONS INC.,
as Lessee.
The undersigned hereby acknowledges receipt in good condition and accepts
as satisfactory all of the following Equipment and certifies that such Equipment
has been properly installed and has been accepted by Lessee for leasing under
the Master Lease Agreement and applicable Lease Order, that such Equipment has
become subject to and governed by the provisions of the Master Lease Agreement
and applicable Lease Order, and that Lessee is obligated to pay the rentals and
all other sums provided for in the applicable Lease Order with respect to such
Equipment subject to the terms and conditions of the Master Lease Agreement and
the Lease Order.
EQUIPMENT
As set forth on applicable Lease Order Equipment Addendum
The Delivery and Acceptance Date in respect to such Equipment is February 16,
1998.
IN WITNESS WHEREOF, the undersigned has executed this Delivery and
Acceptance Receipt as of the Delivery and Acceptance Date set forth above.
LESSEE: RHYTHMS NETCONNECTIONS, INC.
Signature: /s/ Xxxx X. Xxxx
-----------------------------------
By: Xxxx X. Xxxx
-----------------------------------
(Print Name)
Title: VP & GM
-----------------------------------
Date: 2/16/98
-----------------------------------
EQUIPMENT DESCRIPTION AND LOCATION
The equipment located and described below, leased pursuant to Lease Order No. 1,
under Master Lease Agreement dated November 19, 1997 between Rhythms
Netconnections Inc., as Lessee and Sun Financial Group, Inc., as Lessor. This
filing is for information purposes only. The transactions covered by this UCC
filing arc considered to be a true lease, by the parties hereto.
QTY MODEL DESCRIPTION COST
--------------------------------------------------------------------------------
1 DATA COMMUNICATION EQUIPMENT
AND RELATED IT EQUIPMENT INCLUDING
NETWORK INSTALLATION COST AND
OPERATING SYSTEM SOFTWARE
TOTAL COST $2,000,000.00
EQUIPMENT LOCATION:
0000 Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, XX. 00000
SUN FINANCIAL
GROUP, INC.
ADDENDUM NO. 1
TO
LEASE ORDER NO. 1
DATED DECEMBER 31, 1997
BETWEEN
SUN FINANCIAL GROUP, INC., AS LESSOR
AND
RHYTHMS NETCONNECTIONS, INC., AS LESSEE
Provided Lessee is not in default and with one hundred
twenty (120) days notice, Lessee has the option of
terminating the lease within the first twelve (12) months by
paying Sun Financial Group, Inc., or its assignee, a sum
which, when combined with the accumulated rental under the
Lease at the time of termination, present values, at the
Lessor's actual debt rate, to 89.9% of the Equipment cost.
Lessor: Sun Financial Group, Inc. Lessee: Rhythms NetConnections, Inc.
Signature: /s/ Xxxxx X. Xxxxxxxx Signature: /s/ Xxxxxx X. X'Xxxxxx
-------------------------- -------------------------
By: XXXXX X. XXXXXXXX By: Xxxxxx X. X'Xxxxxx
--------------------------------- --------------------------------
Title: VICE PRESIDENT Title: Chief Financial Officer
------------------------------ -----------------------------
Date: 6/16/98 Date: 6 March 1998
------------------------------- ------------------------------
Four Xxxxxxxxxxx Xxxxxx, Xxxxx 0000 - Xxx Xxxxxxxxx, XX 00000
(000) 000-0000 - FAX: (000) 000-0000
SECOND ADDENDUM TO MASTER LEASE AGREEMENT
DATED AS OF NOVEMBER 19, 1997
BETWEEN
SUN FINANCIAL GROUP, INC.
AND
RHYTHMS NETCONNECTIONS INC.
Dated as of May 19, 1998
This Addendum amends the Master Lease Agreement, dated as of November 19,
1997 (the "Lease"), between Sun Financial Group, Inc. and Rhythms NetConnections
Inc. All capitalized terms used but not defined herein shall have the
respective meanings given thereto in the Lease.
1. ADDITIONAL FINANCING.
(a) COMMITMENT. Subject to the satisfaction of the conditions set forth
in paragraph 2 below, Lessor has agreed to provide up to $24,500,000 of lease
financing in addition to that previously provided to Lessee. The funding of
each Lease Order is subject to the satisfaction of the conditions set forth in
paragraph 3 below. Lessor's commitment to finance Equipment under this
Addendum, shall terminate on the same day of the month in the fifteenth month
following the date hereof.
(b) TERM AND LEASE RATE FACTOR. The Initial Term of each Lease Order
financed under this Addendum shall be 36 months and the rental for the initial
Lease Order under this Addendum and each subsequent Lease Order funded during
the six month period following the funding of such initial Lease Order shall be
payable in accordance with Section 4 of the Lease in an amount equal to the
amount funded under the applicable Lease Order multiplied by 3.0% (the "Lease
Rate Factor"). The Lease Rate Factor for all Lease Orders funded following the
first six month period will be adjusted by calculating a new Lease Rate Factor
using as the implicit interest rate for such Lease Rate Factor the U.S. Treasury
note rate for notes having a 36 month term as quoted in THE WALL STREET JOURNAL
on the date of preparation of the first such Lease Order funded during such
subsequent period.
(c) END OF TERM OPTIONS. Provided that the Lease has not been terminated
and that no Event of Default or event which, with notice or lapse of time or
both, would become an Event of Default shall have occurred and be continuing,
not more than 180 days and not less than 120 days prior to the expiration of the
Initial Term of each Lease Order funded under this Addendum, by written notice
to Lessor, Lessee shall irrevocably elect either the option under clause (i) or
a combination of the options under clauses (i), (ii) and (iii) within the
parameters set forth therein:
(i) Lessee may elect to purchase Equipment having an original total
cost (determined with reference to the Equipment Addendum to the applicable
Lease Order) equal to at least 70% of the aggregate total cost of the
Equipment under such Lease Order for a purchase price equal to the "Fair
Market Value" (as defined below) thereof as of the end of the Initial Term
of such Schedule, but such amount shall not be less than fifteen percent
(15%) of the aggregate total amount originally funded with respect to the
Equipment being purchased, nor more than twenty-five percent (25%) of the
aggregate total amount originally funded with respect to the Equipment
being purchased, under such Lease Order, plus any applicable sales or other
transfer tax.
(ii) Lessee may elect to return either (i) one hundred percent (100%)
of the Equipment subject to such Lease Order, or (ii) Equipment having an
original total cost (determined with reference to the Equipment Addendum to
the applicable Lease Order) equal to not more than thirty percent (30%) of
the aggregate total cost of the Equipment subject to such Lease Order, in
each case in the condition required by the Lease.
(iii) Lessee may elect to renew the Lease with respect to any
Equipment not purchased or returned at the end of Initial Term of the
applicable Lease Order, for not less than twelve (12) months or the
remainder of an item of Equipment's remaining useful life if shorter, for a
rent equal to the "Fair Rental Value" (as defined below) of such item for
such additional period, which rent shall be paid monthly in advance. At
the end of the renewal term, Lessee shall elect one of the options set
forth in clauses (i), (ii) or (iii) of this paragraph (c).
"Fair Market Value" shall mean the estimated amount, as of a certain date,
at which the Equipment subject to the Lease may reasonably be valued in the
marketplace by a buyer who could choose not to buy and a seller who could
choose not to sell. In the event that the parties cannot agree on a Fair
Market Value amount, an independent appraiser (mutually acceptable to
Lessor and Lessee) with knowledge of the Equipment, appropriate
certification and experience utilizing Fair Market Value as defined shall
be retained to render an opinion.
"Fair Rental Value" shall mean the estimated amount, as of a certain date,
at which the Equipment subject to the Lease may reasonably be valued in the
marketplace by a lessee who could choose not to lease and a lessor who
could choose not to lease. In the event that the parties cannot agree on a
Fair Rental Value amount, an independent appraiser (mutually acceptable to
Lessor and Lessee) with knowledge of the Equipment, appropriate
certification and experience utilizing Fair Rental Value as defined shall
be retained to render an opinion.
(d) EARLY TERMINATION. Provided that the Lease has not been terminated
and that no Event of Default or event which, with notice or lapse of time or
both, would become an Event of Default shall have occurred and be continuing,
and with not less than 120 days prior written notice, Lessee may elect to
terminate Lease Order No. 1 or Lease Order No. 2 prior to the first anniversary
date of the commencement of the Initial Term of each by paying to Lessor a sum
which, when combined with the accumulated rental under the Lease at the time of
termination, present values, at Lessor's actual debt rate, to 89.9% of the
Equipment cost.
2. CONDITIONS TO EXECUTION OF THIS ADDENDUM. On or prior to the date of
execution of this Addendum by Lessor and the funding of the first Lease Order
under this Addendum, Lessor shall have received in form and substance
satisfactory to Lessor:
(a) A legal opinion of Lessee's legal counsel in form and substance
reasonably satisfactory to Lessor covering the matters set forth in
Exhibit A hereto.
(b) Copies, certified by the Secretary or Assistant Secretary or Chief
Financial Officer of Lessee, of: (A) the Certificate/Articles of
Incorporation and By-Laws of Lessee (as amended to the date of the
Lease) and (B) the resolutions adopted by Lessee's board of directors
authorizing the execution and delivery of the Lease and this Addendum,
the Lease Orders and the other documents referred to herein and the
performance by Lessee of its obligations hereunder and thereunder.
2
(c) A good standing certificate (including franchise tax status) with
respect to Lessee from Lessee's state of incorporation, the state
where Lessee's chief executive office is located and each state where
Equipment is expected to be located, each dated a date reasonably
close to the date of acceptance of the Lease by Lessor.
(d) Evidence of the insurance coverage required by Section 18 of the
Lease, if not previously provided to Lessor.
(e) All other documents as Lessor shall have reasonably requested.
3. CONDITIONS TO THE FUNDING OF EACH LEASE ORDER. Prior to the funding
of each Lease Order, Lessee shall have satisfied all of the following
conditions:
(a) Lessor shall have received:
(i) A Landlord's Waiver and Consent of each landlord of premises on
which Equipment will be located, substantially in the form of Exhibit B
hereto.
(ii) To the extent Lessor, in its commercially reasonable business
judgment, deems it necessary, a release or other arrangement with any other
lessor or lender to the Lessee to insure that there will be no impairment
of Lessor's interest in the Equipment subject to the Lease Order.
(iii) Copies of invoices, purchase orders and canceled checks relating
to all Equipment being placed under the Lease pursuant to the Lease Order
and/or a Purchase Order and Invoice Assignment from Lessee to Lessor
substantially in the form of Exhibit C hereto.
(b) Lessee shall have filed or recorded, to the satisfaction of Lessor,
all instruments and documents, including, but not limited to, precautionary
Financing Statements on Form UCC-1 and releases and termination statements on
Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights
hereunder, under the Uniform Commercial Code (including the termination of any
after-acquired property clause of third parties with respect to any Unit).
(c) Lessor shall have received all other documents and Lessee shall have
performed all other acts as Lessor shall have reasonably requested to consummate
the transaction contemplated by the Lease Order.
(d) Except with the prior consent of Lessor, not to be unreasonably
withheld or delayed, the cost of installation, stand-alone software and services
of the Equipment which is financed under the Lease Order shall not exceed
fifteen percent (15%). Lessee will use its diligent efforts to obtain from the
vendor of any software financed under the Lease a consent to transfer the right
to use such software to a third party without further payment if an Event of
Default under the Lease exists.
(e) On the date of funding of the Lease Order no Event of Default or
event, which with the passage of time or the giving of notice or both would
constitute an Event of Default, shall exist.
(f) Except with the prior written consent of Lessor which shall not be
unreasonably withheld, all of the Equipment subject to the Lease Order shall
consist of routers and ATM switches, DSLAMs, IP concentrators and servers and
related networking and information technology hardware and software.
(g) The amount to be funded under the Lease Order shall not be less than
$2,000,000.
3
Lessor may, in its sole discretion, terminate its commitment herein to fund
Lease Orders under the Lease if there is any material adverse change to the
general affairs, management, results of operations, condition (financial or
otherwise) or prospects of Lessee, whether or not arising from transactions in
the ordinary course of business.
4. FINANCIAL COVENANTS
(a) CERTAIN DEFINITIONS. The following capitalized terms shall have
the following respective meanings for purposes of this Section 4:
"CONSOLIDATED OPERATING CASH FLOW" shall have the meaning given
to such term in the Indenture.
"INDENTURE" shall mean the Indenture, dated as of May 5, 1998,
between Lessee and State Street Bank and Trust Company of
California, N.A., as trustee.
(b) CONSOLIDATED OPERATING CASH FLOW. Lessee shall not permit its
Consolidated Operating Cash Flow for the fiscal quarter ending on the date set
forth below to be less than the amount set forth opposite such date below:
June 30, 1998 $ - 8,275.80
September 30, 1998 -11,937.90
December 31, 1998 -15,031.90
March 31, 1999 -18,070.00
June 30, 1999 -19,912.10
September 30, 1999 -23,523.50
December 31, 1999 -27,801.80
March 31, 2000 -32,670.30
June 30, 2000 -31,320.90
September 30, 2000 -30,158.70
December 31, 2000 -29,810.30
March 31, 2001 -27,838.20
June 30, 2001 -18,479.50
September 30, 2001 - 8,686.60
December 31, 2001 - 1,599.00
A breach of a financial covenant under this paragraph 4 shall constitute an
"Event of Default" under Section 21 of the Lease.
5. REPORTING. Lessee shall furnish to Lender:
(a) FINANCIAL STATEMENTS. So long as Lessee is not subject to the
reporting requirements of Section 12 or Section 15 of the Securities and
Exchange Act of 1934, as amended, promptly as they are available, unaudited
quarterly and audited annual financial statements of Lessee and such other
financial information as Lender may reasonably request from time to time. From
and after such time as Lessee becomes a publicly reporting company, promptly as
they are available and in any event: (i) at the time of filing of Lessee's Form
10-K with the Securities and Exchange Commission after the end of each fiscal
year
4
of Lessee, the financial statements of Lessee filed with such Form 10-K; and
(ii) at the time of filing of Lessee's Form 10-Q with the Securities and
Exchange Commission after the end of each of the first three fiscal quarters of
Lessee, the financial statements of Lessee filed with such Form 10-Q.
(b) COMPLIANCE STATEMENTS. Within thirty (30) days of the end of each
fiscal quarter of Lessee, a certificate of Lessee's Chief Financial Officer or
other senior officer stating that he or she has reviewed the provisions of the
Lease and this Addendum and that Lessee is not in default in the observance or
performance of any of the provisions hereof, or if Lessee shall be so in
default, specifying all such defaults and events of which he or she may have
knowledge, and setting forth the calculation of compliance or noncompliance with
each of the financial covenants set forth in paragraph 4 above.
(c) MANAGEMENT REPORTS. Within twenty (20) days of the end of each month,
a management report setting forth by month and year-to-date, (i) new markets
entered and total markets entered, (ii) new central office locations and total
central office locations, and (iii) new lines and total lines.
6. ASSIGNMENT. Section 15 of the Lease shall be deemed amended to add
the following sentence:
"Notwithstanding the foregoing, Lessor shall in all circumstances
retain at least a 25% interest in the Lease, the Lease Orders thereto
and the Equipment.
5
IN WITNESS WHEREOF, Lessor and Lessee have executed this Addendum as of May
19, 1998.
LESSOR LESSEE:
SUN FINANCIAL GROUP, INC. RHYTHMS NETCONNECTIONS INC.
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxxx X. X'Xxxxxx
------------------------------- -------------------------------------
Name: Xxxxxxx Xxxxxxx Name: Xxxxxx X. X'Xxxxxx
------------------------------ -----------------------------------
Title: Vice President Title: VP and GM Eastern Region
----------------------------- ----------------------------------
