MASTER LEASE AGREEMENT
dated as of December 19, 1996
between
GENERAL ELECTRIC CAPITAL CORPORATION, as Lessor,
and
XXXXXXXXXX TECHNOLOGY INCORPORATED, as Lessee
MASTER LEASE AGREEMENT
TABLE OF CONTENTS
Page
I. LEASING..............................................................2
II. TERM, RENT AND PAYMENT...............................................6
III. [INTENTIONALLY OMITTED]..............................................6
IV. TAXES................................................................7
V. REPORTS..............................................................7
VI. DELIVERY, USE AND OPERATION..........................................8
VII. SERVICE..............................................................9
VIII. STIPULATED LOSS VALUE...............................................10
IX. LOSS OR DAMAGE......................................................10
X. INSURANCE...........................................................10
XI. RETURN OF EQUIPMENT.................................................11
XII. DEFAULT.............................................................12
XIII. ASSIGNMENT..........................................................13
XIV. NET LEASE; NO SET-OFF, ETC..........................................14
XV. INDEMNIFICATION.....................................................15
XVI. DISCLAIMER..........................................................21
XVII. REPRESENTATIONS AND WARRANTIES OF LESSEE............................22
XVIII. INTENT; TITLE; SECURITY DEPOSIT.....................................23
XIX. OPTIONS AT END OF BASIC TERM........................................24
XX. MISCELLANEOUS.......................................................26
XXI. CHOICE OF LAW.......................................................28
XXII. CHATTEL PAPER.......................................................28
XXIII. SPECIAL PURCHASE OPTION.............................................29
XXIV. FINANCIAL COVENANTS.................................................30
XXV. SPECIAL LESSOR OPTION...............................................32
XXVI. LICENSE OF INTELLECTUAL PROPERTY....................................33
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MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of December 19, 1996 ("AGREEMENT"),
between GENERAL ELECTRIC CAPITAL CORPORATION with an office at 0 Xxxxxxxxx
Xxxxx, Xxxxx 000, Xxxx Xxxxxx, Xxxxxxxx 00000 (hereinafter called, together with
its successors and assigns, if any, "LESSOR"), and HUTCHINSON TECHNOLOGY
INCORPORATED, a Minnesota corporation with its mailing address and chief place
of business at 00 Xxxx Xxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxx 00000-0000
(hereinafter called "LESSEE").
WITNESSETH:
I. LEASING:
(a) This Agreement shall be effective from and after the date of execution
hereof. Subject to the terms and conditions set forth below, Lessor agrees to
lease to Lessee, and Lessee agrees to lease from Lessor, certain assembly
equipment and etching equipment ("EQUIPMENT") described in Annex A to any
schedule hereto (each and collectively, the "SCHEDULE"). Each Schedule shall be
in the form of Exhibit A attached hereto, appropriately completed. Terms defined
in a Schedule and not otherwise defined herein shall have the meanings ascribed
to them in such Schedule.
(b)(i) Subject to satisfaction of the terms and conditions specified
herein, Lessor agrees to acquire and lease to Lessee on the terms set forth
herein Equipment having an aggregate Capitalized Lessor's Cost not in excess of
Twenty-five Million Dollars ($25,000,000.00) during the period commencing on the
date of this Agreement through and including September 30, 1997 (the "INITIAL
COMMITMENT PERIOD"). Future commitment(s) by Lessor for the acquisition and
leasing of additional Equipment during a subsequent twelve (12) month period(s)
(each, an "ADDITIONAL COMMITMENT PERIOD"; and together with the Initial
Commitment Period being hereinafter referred to as a "COMMITMENT PERIOD") is
subject to Lessor's approval upon expiration of the then current Commitment
Period. On or before July 1, 1997, Lessee shall notify Lessor of the
anticipated Capitalized Lessor's Cost of Equipment which Lessee desires to
finance pursuant to this Agreement during the first Additional Commitment
Period. Upon receipt of Lessee's notice, and in any event on or before August
15, 1997, Lessor shall notify Lessee whether Lessor has approved a commitment
for such first Additional Commitment Period and the amount of such approval. If
Lessor does not timely provide a commitment for the full amount requested by
Lessee, Lessee may accept a partial commitment expressed by Lessor or,
notwithstanding the last sentence of Section I(b)(iii) hereof, Lessee may
arrange for a third party to provide any or all lease financing requirements of
Lessee with respect to assembly and/or etching equipment for the balance of the
period of three (3) years after the date of this Agreement or thereafter. On or
before July 1, 1998, Lessee shall notify Lessor of the anticipated Capitalized
Lessor's Cost of Equipment which
Lessee desires to finance pursuant to this Agreement during the second
Additional Commitment Period. Upon receipt of Lessee's notice, and in any event
on or before August 15, 1998, Lessor shall notify Lessee whether Lessor has
approved a commitment for such second Additional Commitment Period and the
amount of such approval. If Lessor does not timely provide a commitment for the
full amount requested by Lessee, Lessee may accept a partial commitment
expressed by Lessor or, notwithstanding the last sentence of Section I(b)(iii)
hereof, Lessee may arrange for a third party to provide any or all lease
financing requirements of Lessee with respect to assembly and/or etching
equipment for the balance of the period of three (3) years after the date of
this Agreement or thereafter. Lessor's obligations hereunder ("LESSOR'S
COMMITMENT") are subject to there then being no material adverse change in
Lessee's business or financial condition from that disclosed in Lessee's
financial statements referred to in Section XVII (g) hereof, as determined by
Lessor in its reasonable discretion.
(ii) In consideration of the foregoing, Lessee agrees to pay to
Lessor an administrative and executory fee calculated as one-quarter of one
percent (0.25%) of the amount of Lessor's Commitment with respect to a
particular Commitment Period, which fee shall be payable with respect to the
Initial Commitment Period concurrently with execution of this Agreement, and
shall be payable with respect to each Additional Commitment Period (if any) upon
any subsequent approval by Lessor of a future commitment with respect to any
such Additional Commitment Period.
(iii) In the event that, by December 15, 1996, Equipment having an
aggregate Capitalized Lessor's Cost less than Twenty Million Dollars
($20,000,000.00) has then been leased hereunder (as evidenced by the
satisfaction of all conditions specified in Paragraph (d) hereof), then Lessee
will pay to Lessor a non-use fee of One Hundred Thousand Dollars ($100,000.00)
on December 15, 1996. The parties acknowledge and agree that Lessee has paid to
Lessor a good faith deposit in the amount of Seventy-five Thousand Dollars
($75,000.00) and that any portion of such good faith deposit as has not then
been applied pursuant to the terms of that certain proposal letter dated
December 25, 1995, between the parties will be applied in partial satisfaction
of Lessee's obligation with respect to such non-use fee. Further in
consideration of the foregoing, Lessee agrees that Lessor shall have the
exclusive right to provide all lease financing requirements of Lessee with
respect to assembly and/or etching equipment for a period of three (3) years
after the date of this Agreement.
(c) Lessor and Lessee acknowledge and agree that the Basic Term Lease Rate
Factors and the FMV Special Purchase Option Price factors are shown as a
percentage of the Capitalized Lessor's Cost in Exhibit B attached hereto, which
percentages and the Schedule of Stipulated Loss Values attached hereto as
Exhibit C have been calculated based on the 15.75% November, 2001 U.S. Treasury
Note having an ask yield of 5.97% as published in the November 11, 1996 edition
of THE WALL STREET JOURNAL. Actual Basic Term Lease Rate factors and actual FMV
Special Purchase Option Price factors and
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related Stipulated Loss Values will be determined based on the Applicable
Treasury Yield (as hereinafter defined) on the date Lessor prepares the
applicable Schedule for sending to and signature by Lessee as contemplated below
(the "SCHEDULE PREPARATION DATE") so as to maintain Lessor's pre-tax yield at
the same spread over the Applicable Treasury Yield as when the Applicable
Treasury Yield was 5.97%.
The "APPLICABLE TREASURY YIELD" as of each Schedule Preparation Date means
the ask yield as quoted in THE WALL STREET JOURNAL as of the next previous day
of a U.S. Treasury Note maturing in the month that is five (5) years from such
Schedule Preparation Date, or, if there is no such Note maturing in such month,
then of a U.S. Treasury Note maturing in the month that is closest to but
earlier than such month. If there is more than one class of U.S. Treasury Notes
maturing in the month of maturity to be used for purposes of the preceding
sentence, then the Applicable Treasury Yield shall be the average of the ask
yields of such Notes.
Lessor and Lessee contemplate that Lessee will submit documentation to
Lessor required by Paragraph (d) below in sufficient time before the end of a
calendar quarter to enable Lessor to prepare a related Schedule for sending to
Lessee for signature and for Lessee to verify the economics thereof and sign and
return the same to Lessor before the end of such quarter.
Lessee recognizes that Lessor's formula for determining Lessor's pre-tax
yield is complicated and not easily set forth in this Agreement. However,
Lessor has furnished Lessee with Lessor's internal rate of return ("IRR")
calculated as described below for an Applicable Treasury Yield of 5.97% and
Lessor and Lessee agree that as a means of Lessee verifying Lessor's
determination of Basic Term Lease Rate factors and the FMV Special Purchase
Option Price factors and related Stipulated Loss Value, Lessor's IRR is expected
to change by only 50-80% of the change in the Applicable Treasury Yield
depending on the particular calendar quarter involved. For example, a change of
10 basis points in the Applicable Treasury Yield from 5.97% is expected to
change the Lessor's IRR by 5-8 basis points. For this purpose, Lessor's IRR
shall be based on gross cash flow, the amount funded, the quarterly payments of
Basic Rent, and as if the FMV Special Purchase Option were exercised.
Nevertheless, whether or not Lessor's IRR is within the foregoing parameters,
Lessor agrees that Lessee may in its sole discretion and at Lessee's expense
have Lessee itself or an accounting firm chosen by Lessee verify that Lessor has
calculated Basic Term Lease Rate factors and the FMV Special Purchase Option
Price factors and related Stipulated Loss Values so as to maintain Lessor's
pre-tax yield at the same spread over the Applicable Treasury Yield as when the
Applicable Treasury Yield was 5.97%. Lessor agrees to make available such of
its records and appropriate access to its employees for the purposes of such
verification.
(d) The obligation of Lessor to purchase Equipment components from the
manufacturer or supplier thereof ("SUPPLIER") and, after assembly and
configuration thereof by Lessee, to lease the Equipment to Lessee under any
Schedule shall be subject to
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satisfaction of the following conditions: (1) receipt by Lessor, prior to the
Lease Commencement Date (with respect to such Equipment), of each of the
following documents in form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased hereunder, (ii) an Agency
Agreement in the form of Exhibit D attached hereto, unless Lessor shall have
delivered its purchase order for such Equipment, (iii) evidence of insurance
which complies with the requirements of Section IX, (iv) an Estoppel/Waiver
Agreement in the form of Annex D to the applicable Schedule, (v) the security
deposit required pursuant to Section XVIII(c) hereof, (vi) the Equipment
Substantiation with respect to the applicable Equipment, (vii) an appraisal with
respect to the Equipment issued by such appraiser as reasonably is satisfactory
to Lessor, stating the fair market value of the Equipment and that the
Capitalized Lessor's Cost of the Equipment is not more than the fair market
value of the Equipment, that the Equipment will have an uninflated fair market
value of at least twenty percent (20%) of Capitalized Lessor's Cost as of the
end of the Term, an inflated fair market value on the FMV Special Purchase
Option Date of not more than the FMV Special Purchase Option Price, and that the
useful life of the Equipment exceeds the Term by the greater of one (1) year or
twenty percent (20%) of such estimated useful life, and (viii) such other
documents as Lessor reasonably may request; and (2) the Equipment must consist
of either assembly or etching equipment and the aggregate Capitalized Lessor's
Cost of all Equipment to be leased during the Initial Commitment Period shall
not exceed Twenty-five Million Dollars ($25,000,000.00) and during any
Additional Commitment Period (if applicable) shall not exceed the amount of any
such future commitment by Lessor; (3) the Purchase Price (as such term is
defined in the Agency Agreement) and the Capitalized Lessor's Cost of each item
of Equipment must be not more than the then current Fair Market Value (as such
term is hereinafter defined) of such item of Equipment; and (4) the Equipment
must be delivered to, and accepted for purposes of this Agreement by, Lessee on
or before the expiration of the Initial Commitment Period (or of any Additional
Commitment Period, if applicable). As used herein, "EQUIPMENT SUBSTANTIATION"
shall mean the Project Reports, tied to specific asset numbers, together with a
complete description with respect to not less than ten percent (10%) and not
more than fifteen percent (15%) of the Equipment, provided that Lessor is
reasonably satisfied with the Equipment Substantiation provided with respect to
such portion of the Equipment, including: make (manufacturer), model numbers,
serial numbers, age, original cost breakdown, equipment specifications and
applicable capitalized costs of modification, together with copies of the
original purchase orders and invoices. As a further condition to such
obligations of Lessor, Lessee shall, upon delivery of such Equipment (but not
later than the Last Delivery Date specified in the applicable Schedule) execute
and deliver to Lessor a Certificate of Acceptance (in the form of Annex B to the
applicable Schedule) covering such Equipment, and deliver to Lessor a xxxx of
sale therefor (in form and substance satisfactory to Lessor). Upon execution by
Lessee of any Certificate of Acceptance,
5
then, and only then, shall the Equipment described thereon be deemed to have
been delivered to, and irrevocably accepted by, Lessee for lease hereunder.
(e) Lessee may execute not more than one (1) Schedule per calendar quarter
with respect to assembly Equipment to be leased for a term of twenty-one (21)
quarters, and not more than one (1) Schedule per calendar quarter with respect
to etching Equipment to be leased for a term of twenty-five (25) quarters. The
aggregate Capitalized Lessor's Cost of the Equipment described on all Schedules
(but not each Schedule) executed in a calendar quarter shall be not less than
One Million Dollars ($1,000,000). As used herein, "CAPITALIZED LESSOR'S COST" of
an item of Equipment means the aggregate purchase price of the components of the
item actually paid by Lessee plus Lessee's charge for assembly and
configuration.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder (the "RENT") and Lessee's right to use the
Equipment shall commence on the date of execution by Lessee of the Certificate
of Acceptance for such Equipment ("LEASE COMMENCEMENT DATE"). The term of this
Agreement (the "TERM") with respect to such Equipment shall be the period
specified in the applicable Schedule, which shall be twenty-one (21) quarters
with respect to assembly equipment and twenty-five (25) quarters with respect to
etching Equipment. If any Term is extended, the word "Term" shall be deemed to
refer to all extended terms, and all provisions of this Agreement shall apply
with respect to such Equipment during any extended terms, except as otherwise
may be specifically provided in writing.
(b) Rent shall be paid to Lessor by wire transfer of immediately available
funds to: Bankers Trust Xxx Xxxx, Xxx Xxxx, Xxx Xxxx 00000, Account No.
00-000-000, ABA No. 000-000-000, or to such other account as Lessor may direct
in writing; and shall be effective upon receipt. Payments of Rent shall be in
the amount set forth in, and due in accordance with, the provisions of the
applicable Schedule. In no event shall any Rent payments be refunded to Lessee.
III. [INTENTIONALLY OMITTED]
IV. TAXES:
Except as provided in Section XV(c) hereof, Lessee shall have no liability
for taxes imposed by (a) the United States of America or any State or political
subdivision thereof which are on or measured by the net income of Lessor or any
Participant (as such term is hereinafter defined), and (b) any foreign
government or political subdivision thereof which are on or measured by the net
income of Lessor or any Participant. Lessee shall report (to the
6
extent that it is legally permissible) and pay promptly all other taxes, fees
and assessments due, imposed, assessed or levied against any Equipment (or the
purchase, ownership, delivery, leasing, possession, use or operation thereof),
this Agreement (or any rentals or receipts hereunder), any Schedule, Lessor or
Lessee by any foreign, federal, state or local government or taxing authority
during or related to the term of this Agreement, including, without limitation,
all license and registration fees, and all sales, use, personal property,
excise, gross receipts, franchise, stamp or other taxes, imposts, duties and
charges, together with any penalties, fines or interest thereon (all hereinafter
called "TAXES"). Lessee shall (i) reimburse Lessor upon receipt of written
request for reimbursement for any Taxes charged to or assessed against Lessor,
together with a statement from Lessor that such Taxes have been paid by Lessor,
(ii) on reasonable written request of Lessor, submit to Lessor written evidence
of Lessee's payment of Taxes, (iii) on all reports or returns show the ownership
of the Equipment by Lessor, and (iv) upon reasonable written request of Lessor,
send a copy thereof to Lessor. Promptly upon Lessor's receipt of notice of any
Taxes for which Lessor seeks or is entitled to seek reimbursement from Lessee,
Lessor shall give to Lessee prompt written notice of such Taxes and copies of
all related documents then having been received by Lessor, and (at Lessee's
expense) Lessor shall cooperate in a timely manner in any abatement, refund,
defense or other actions by Lessee with respect thereto.
V. REPORTS:
(a) Lessee will notify Lessor in writing, within ten (10) business days
after Lessee's receipt of notice, or actual knowledge, that any tax or other
lien shall have attached to any Equipment, of the full particulars thereof and
of the location of such Equipment on the date of such notification.
(b) Lessee will deliver to Lessor, within ninety (90) days of the close of
each fiscal year of Lessee, Lessee's consolidated balance sheet and consolidated
statement of operations, prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied, in each case except as
otherwise stated therein, certified by a recognized firm of certified public
accountants, together with Lessee's Form 10K filed with the Securities and
Exchange Commission ("SEC") and Lessee's annual report. Lessee will deliver to
Lessor quarterly, within forty-five (45) days of the close of each fiscal
quarter of Lessee, in reasonable detail, copies of Lessee's consolidated
quarterly financial report, together with Lessee's Form 10Q filed with the SEC.
(c) Lessee will permit Lessor to inspect the Equipment and all maintenance
records with respect thereto during normal business hours upon reasonable
notice.
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(d) Lessee will keep the Equipment within the Continental United States
and will not move any of the Equipment outside the Continental United States
without the prior written consent of Lessor. If Lessor moves any Equipment from
the Equipment Location (specified in the applicable Schedule), within ninety
(90) days thereafter, Lessee promptly shall notify Lessor thereof and shall
furnish to Lessor such Uniform Commercial Code financing statements or
statements of amendment (if any) as Lessor reasonably may request to maintain
the status of Lessor's interest in such Equipment. Upon Lessor's request,
Lessee promptly will notify Lessor in writing of the location of any Equipment
as of the date of such notification.
(e) Lessee will promptly and fully report to Lessor in writing if any
Equipment is lost or damaged (where the estimated repair costs would exceed
$100,000 in the aggregate with respect to all Equipment then having been lost or
damaged, or is otherwise involved in an accident causing personal injury or
property damage.
(f) Within ninety (90) days of the close of each fiscal year of Lessee,
and within thirty (30) days after any request by Lessor (provided, however, that
Lessor shall not make any such request more than four (4) times during any
consecutive twelve (12) month period), Lessee will furnish a certificate of an
authorized officer of Lessee stating that he has reviewed the activities of
Lessee and that, to the best of his knowledge, there exists no Default (as
hereinafter defined) or event which, with the giving of notice or the lapse of
time (or both), would become a Default.
VI. DELIVERY, USE AND OPERATION:
(a) All Equipment shall be shipped directly from the Supplier to Lessee.
(b) Lessee agrees that the Equipment will be used by Lessee solely in the
conduct of its business and in a manner complying with all applicable Federal,
state, and local laws and regulations and any applicable insurance policies, and
Lessee shall not discontinue use of the Equipment for a period in excess of six
(6) consecutive months (provided, however, that notwithstanding such
discontinuance of use, Lessee shall continue to be required to perform its
obligations under this Agreement with respect to such Equipment, including,
without limitation, its obligations pursuant to Section VII hereof).
(c) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those created by or arising through (except those
created by Lessee) Lessor and those that are temporary liens or encumbrances
imposed by law for personal property taxes or other charges and are discharged
in due course by timely payment without delinquency.
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VII. SERVICE:
(a) Lessee will, at its sole expense, maintain each unit of Equipment in
good operating order, repair, condition and appearance in accordance with
standards consistent with and customary to industry practice and, in all events,
consistent with Lessee's practices with respect to similar equipment owned by
Lessee. Lessee shall, if at any time reasonably requested by Lessor, affix in a
prominent position on each unit of Equipment plates, tags or other identifying
labels showing the unit is leased and not owned by Lessee.
(b) Lessee will not, without the prior consent of Lessor, affix or install
any accessory, equipment or device on any Equipment if such addition will impair
the value, originally intended function or use of such Equipment. All
additions, repairs, parts, supplies, accessories, equipment, and devices
furnished, attached or affixed to any Equipment which are not readily removable
shall be made only in compliance with applicable law, including Internal Revenue
Service guidelines, shall be free and clear of all liens, encumbrances or rights
of others, and shall become the property of Lessor.
(c) It is the intention of the parties that all Equipment shall at all
times remain personal property of Lessor regardless of the degree of its
annexation to any real property and shall not by reason of any installation in,
or affixation to, real or personal property become a part thereof. Upon
Lessor's reasonable request, Lessee shall obtain and deliver to Lessor (to be
recorded at Lessee's expense) from any person having an interest in the property
where the Equipment is to be located, waivers of any lien, encumbrance or
interest which such person might have or hereafter obtain or claim with respect
to the Equipment. Lessee will not, without the prior written consent of Lessor
and subject to such conditions as Lessor may impose for its protection, affix or
install any Equipment to real property in such manner that the Equipment would
become a real property fixture.
(d) Any alterations or modifications to the Equipment that may, at any
time during the term of this Agreement, be required to comply with any
applicable law, rule or regulation shall be made at the expense of Lessee.
VIII. STIPULATED LOSS VALUE:
Lessee shall promptly and fully notify Lessor in writing if any unit of
Equipment then having a value exceeding One Hundred Thousand Dollars
($100,000.00) shall be or become worn out, lost, stolen, destroyed, irreparably
damaged in the reasonable determination of Lessee, or permanently rendered unfit
for use from any cause whatsoever (such occurrences being hereinafter called
"CASUALTY OCCURRENCES"). On the Rent Payment Date next succeeding
9
a Casualty Occurrence (the "PAYMENT DATE"), Lessee shall pay Lessor the sum of
(x) the Stipulated Loss Value of such unit calculated in accordance with Annex C
to the applicable Schedule as of the Rent Payment Date next preceding such
Casualty Occurrence ("CALCULATION DATE"); and (y) all rental and other amounts
which are due hereunder as of the Payment Date. Upon payment of all sums due
hereunder, the Term as to such unit shall terminate and (except in the case of
the loss, theft or complete destruction of such unit) Lessor shall be entitled
to recover possession of such unit.
IX. LOSS OR DAMAGE:
Lessee hereby assumes and shall bear the entire risk of any loss, theft,
damage to, or destruction of, any unit of Equipment from any cause whatsoever
from the time the Equipment becomes subject to this Agreement.
X. INSURANCE:
Lessee agrees, at its own expense, to keep all Equipment insured for such
amounts as specified in Paragraph D of the applicable Schedule and against such
hazards as Lessor may require, including, but not limited to, insurance for
damage to or loss of such Equipment and liability coverage for personal
injuries, death or property damage, with Lessor named as additional insured and
with a loss payable clause in favor of Lessor, as its interest may appear,
irrespective of any breach of warranty or other act or omission of Lessee. All
such policies shall be with companies, and on terms, satisfactory to Lessor; and
such insurance with respect to property damage may have a deductible not in
excess of Fifty Thousand Dollars ($50,000.00). Lessee agrees to deliver to
Lessor evidence of insurance satisfactory to Lessor. No insurance shall be
subject to any co-insurance clause. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make proof of loss and claim for insurance, and to make
adjustments with insurers and to receive payment of and execute or endorse all
documents, checks or drafts in connection with payments made as a result of such
insurance policies; provided, however, that, so long as no Default has then
occurred hereunder and is continuing, Lessee shall have the exclusive right to
settle claims for loss or damage to the Equipment of Fifty Thousand Dollars
($50,000) or less. Any expense of Lessor in adjusting or collecting insurance
shall be borne by Lessee. Lessee will not make adjustments with insurers except
as expressly permitted above or with Lessor's written consent. Said policies
shall provide that the insurance may not be altered or canceled by the insurer
until after thirty (30) days' written notice to Lessor. Lessor may, at its
option, apply proceeds of insurance, in whole or in part, to (i) repair or
replace Equipment or any portion thereof, or (ii) satisfy any obligation of
Lessee to Lessor hereunder.
10
XI. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or any Schedule,
Lessee shall promptly, at its own cost and expense: (i) perform any testing and
repairs required to place the affected units of Equipment in the same condition
and appearance as when received by Lessee (reasonable and ordinary wear and tear
excepted) and in good working order for their originally intended purpose; (ii)
if deinstallation, disassembly or crating is required, cause such units to be
deinstalled, disassembled and crated in accordance with the manufacturer's
recommendations (if any); and (iii) return such units, free and clear of all
liens and encumbrances (other than Lessor Liens), to a location within the
continental United States as Lessor shall direct. As used herein, "LESSOR
LIENS" means any lien on or with respect to the Equipment which results from:
(1) non-payment by Lessor of any Taxes other than any Taxes the payment of or
indemnification for which is Lessee's obligation hereunder; (2) claims against
or acts or omissions of Lessor arising out of events or conditions that are not
related to the transaction contemplated by the terms of this Agreement or are in
violation of any of the obligations of Lessor under the terms of this Agreement;
(3) claims against Lessor arising out of any transfer (whether voluntary or
involuntary) by Lessor of any portion of its interest in the Equipment or its
rights under this Agreement prior to the occurrence of a Default; or (4) any
other act of, claim against or lien created by, Lessor that does not result from
any action or omission of Lessee.
(b) Until Lessee fully has complied with the requirements of Paragraph (a)
above, Lessee's Rent payment obligation and all other obligations under this
Agreement shall continue from month to month notwithstanding any expiration or
termination of the Term. Lessor may terminate such continued leasehold interest
upon ten (10) days' notice to Lessee, whereupon Lessee's obligation to pay Rent
hereunder shall terminate. In addition to these rents, Lessor shall have all of
its other rights and remedies available as a result of the nonperformance of
Paragraph (a) above.
XII. DEFAULT:
(a) Each of the following is a "DEFAULT" under this Agreement: (1) Lessee
breaches its obligation to pay Rent or any other sum payable hereunder when due
and fails to cure the breach within ten (10) days; (2) Lessee breaches any of
its insurance obligations under Section X hereof; (3) Lessee breaches any of its
other obligations hereunder and fails to cure that breach within thirty (30)
days after Lessee's receipt of written notice thereof from Lessor; (4) any
representation or warranty made by Lessee in connection with this Agreement
(other than any such representation or warranty made in Section XV(c) hereof, as
to which Lessor's sole remedy shall be pursuant to Section XV(d) hereof) shall
be false or
11
misleading in any material respect; (5) Lessee becomes insolvent or ceases to do
business as a going concern; (6) a petition is filed by or against Lessee under
any bankruptcy or insolvency laws and, if such petition is filed against Lessee,
such petition is not dismissed within ninety (90) days; (7) Lessee shall have
terminated its corporate existence, consolidated with, merged into, or conveyed
or leased substantially all of its assets as an entirety to any person where
Lessee is not the surviving entity (such actions being referred to as an
"EVENT"), unless: (x) such person is organized and existing under the laws of
the United States or any state, and not later than the date of the consummation
of the Event such person executes and delivers to Lessor an agreement containing
an effective assumption by such person of the due and punctual performance of
this Agreement; and (y) not less than ten (10) days prior to such Event, Lessee
notifies Lessor of the anticipated Event and provides to Lessor such information
as reasonably may be required by Lessor with respect to such person, and Lessor
is reasonably satisfied as to the creditworthiness of such person; (8) Lessee
shall be in default under any obligation for borrowed money, for the deferred
purchase price of property or any lease agreement for an original amount in
excess of Five Million Dollars ($5,000,000.00) ("MATERIAL INDEBTEDNESS") and as
a result of such default, the creditor has declared immediately due and payable
an amount in excess of Five Million Dollars ($5,000,000.00); or (9) Lessee shall
be in default under any other agreement between Lessor and Lessee having a then
current unpaid balance in excess of One Million Five Hundred Thousand Dollars
($1,500,000). Any provision of this Agreement to the contrary notwithstanding,
Lessor may exercise all rights and remedies hereunder independently with respect
to each Schedule.
(b) After Default, at the request of Lessor, Lessee shall comply with the
provisions of Section XI(a) hereof. Lessor may enter, with or without legal
process, any premises where any Equipment is located and take possession
thereof. Lessor may declare the following amount to be due and payable by
Lessee, and Lessee shall pay, immediately, the sum of: (i) as liquidated damages
for loss of a bargain and not as a penalty, the Stipulated Loss Value of the
Equipment (calculated in accordance with Annex D to the applicable Schedule as
of the Rent Payment Date next preceding the declaration of Default), and (ii)
all Rent and other sums then due hereunder. Lessor may, but shall not be
required to, sell Equipment at private or public sale, in bulk or in parcels,
with or without notice, and without having the Equipment present at the place of
sale; or Lessor may, but shall not be required to, lease, otherwise dispose of
or keep idle all or part of the Equipment (provided, however, that Lessor shall
in all events act in a commercially reasonable manner with respect to the
Equipment). The proceeds of sale, lease or other disposition, if any, shall be
applied in the following order of priorities: (1) to pay all of Lessor's costs,
charges and expenses incurred in taking, removing, holding, repairing and
selling, leasing or otherwise disposing of Equipment; then; (2) to the extent
not previously paid by Lessee,
12
to pay Lessor all sums due from Lessee hereunder; then (3) to reimburse to
Lessee any sums previously paid by Lessee as liquidated damages; and (4) any
surplus shall be retained by Lessor. Lessee shall pay any deficiency in clauses
(1) and (2) forthwith.
(c) In addition to the foregoing rights, Lessor may cancel the lease as to
any or all of the Equipment.
(d) The foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition
(and the time and place thereof), and the manner and place of any advertising.
If permitted by law, Lessee shall pay reasonable attorney's fees actually
incurred by Lessor in enforcing the provisions of this Lease and any ancillary
documents. Waiver of any Default shall not be a waiver of any other or
subsequent default.
XIII. ASSIGNMENT:
(a) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET OR HYPOTHECATE ANY EQUIPMENT
OR THE INTEREST OF LESSEE HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR,
except that Lessee may assign or sublease any or all of the interest of Lessee
hereunder (1) in connection with an Event permitted by Section XII (a)(7)
hereof, and/or (2) to any entity that is a wholly-owned subsidiary of Lessee
(provided that such entity is then solvent) or of which Lessee is then a
wholly-owned subsidiary.
(b) Lessor may, without the consent of Lessee, assign this Agreement or
any Schedule, or the right to enter into any Schedule; provided however, that
each such assignee (or the parent of such assignee) shall have a net worth or
combined capital and surplus of not less than Fifty Million Dollars
($50,000,000.00), and the interest in this Agreement or any Schedule assigned to
such assignee shall be not less than One Million Five Hundred Thousand Dollars
($1,500,000.00). General Electric Capital Corporation (or a financial
institution designated to serve as trustee) shall serve as fiscal agent for
Lessor and any assignee; and Lessee and Lessor each agrees that Lessee will pay
all Rent and other amounts payable under each Schedule only to such fiscal
agent. Each Schedule, incorporating by reference the terms and conditions of
this Agreement, constitutes a separate instrument of lease, and the Lessor named
therein or its assignee shall have all rights as "Lessor" thereunder separately
exercisable by such named Lessor or assignee as the case may be, exclusively and
independently of Lessor or any assignee with respect to other Schedules executed
pursuant hereto. Lessee further agrees to confirm in writing receipt of a
notice of assignment as reasonably may be requested by assignee. Lessee hereby
waives and agrees not to assert against any such assignee any defense, set-off,
recoupment claim or
13
counterclaim which Lessee has or may at any time have against Lessor or any
other person for any reason whatsoever (no such assignment shall relieve Lessor
any such other person from any such defense, set-off, recoupment claim or
counter-claim with respect to such Lessor or any such other person, and Lessor
and each such other person shall remain subject thereto).
(c) Subject always to the foregoing, this Agreement inures to the benefit
of, and is binding upon, the successors and assigns of the parties hereto.
XIV. NET LEASE; NO SET-OFF, ETC.:
This Agreement is a net lease. Lessee's obligation to pay Rent and other
amounts due hereunder shall be absolute and unconditional; provided, however,
that Lessee shall be entitled to the benefit of any contest rights set forth
herein. Lessee shall not be entitled to any abatement or reductions of, or
set-offs against, said Rent or such other amounts, including, without
limitation, those arising or allegedly arising out of claims (present or future,
alleged or actual, and including claims arising out of strict tort or negligence
of Lessor) of Lessee against Lessor under this Agreement or otherwise. This
Agreement shall not terminate and the obligations of Lessee shall not be
affected by reason of any defect in or damage to, or loss of possession, use or
destruction of, any Equipment from whatsoever cause. It is the intention of the
parties that Rents and such other amounts due hereunder shall continue to be
payable in all events in the manner and at the times set forth herein unless the
obligation to do so shall have been terminated pursuant to the express terms
hereof. Notwithstanding the foregoing, Lessee shall have the right to assert
(a) in an independent action against Lessor any rights Lessee may have against
Lessor, or (b) in an independent action against any assignee of Lessor or any
other person, any rights Lessee may have against such assignee of Lessor or such
other person.
XV. INDEMNIFICATION:
(a) GENERAL INDEMNITY. (1) Lessee hereby agrees to indemnify, save and
keep harmless Lessor, its agents, employees, successors and assigns, from and
against any and all losses, damages, penalties, injuries, claims, actions and
suits, including legal expenses, of whatsoever kind and nature, in contract or
tort, and including, but not limited to, Lessor's strict liability in tort,
arising out of (i) the selection, manufacture, purchase, acceptance or rejection
of Equipment, the ownership of Equipment during the Term, and the delivery,
lease, possession, maintenance, uses, condition, return or operation of the
Equipment (including, without limitation, latent and other defects, whether or
not discoverable by Lessor or Lessee and any claim for patent,
14
trademark or copyright infringement or environmental damage), or (ii) the
condition of Equipment sold or disposed of after use by Lessee, any sublessee or
employees of Lessee (except, in each case, for such as may be caused by Lessor's
or its agent's gross negligence, wilful misconduct or illegal act). Lessee
shall, upon request, defend any actions based on, or arising out of, any of the
foregoing.
(2) In any event, Paragraph (a)(1) shall not apply to claims based on
any of the following: (i) indemnity for income taxes, that matter being covered
in Section XV(c) hereof; (ii) indemnity for income and other taxes for which
Lessee is not responsible hereunder; (iii) acts or events occurring with respect
to an item of Equipment after possession of such item of the Equipment has been
redelivered to Lessor at a time when a Default shall not have occurred and be
continuing (other than any such acts or events allegedly relating to or arising
out of actions or omissions by Lessee prior to the time when possession of the
item of Equipment has been redelivered to Lessor); (iv) breach of any agreement
made by Lessor hereunder or in any related documents executed pursuant hereto;
(v) any Lessor Lien; or (vi) any indemnity for environmental claims, those
matters being covered by Section XV(b) hereof.
(3) Lessee and Lessor agree to give each other, promptly upon
obtaining knowledge thereof, written notice of any claim or liability
indemnified against pursuant to Paragraph (a)(1) hereof; provided, however, that
the failure to provide such notice shall not release Lessee from its obligations
pursuant thereto except to the extent that such failure results in actual
prejudice to Lessee with respect to such claim or liability (and then Lessee
shall be released from its obligations pursuant hereto only to the extent of
such prejudice). Upon the payment in full of any indemnities as contained in
Paragraph (a)(1) hereof by Lessee, and provided that no Default shall then have
occurred and be continuing, Lessee shall be subrogated to any right of the
indemnified person (except against another indemnified person) with respect to
the matter against which indemnity has been given. Provided that no Default
shall then have occurred and be continuing, any payments received by such an
indemnified person from any person (except Lessee) as a result of any matter
with respect to which such indemnified person has been indemnified by Lessee
pursuant hereto, shall be paid over to Lessee to the extent necessary to
reimburse Lessee for indemnification payments previously made pursuant to this
Section XV(a). Nothing in this Section XV(a) shall constitute a guaranty by
Lessee of the residual value of any item of the Equipment at the end of the
Term.
(b) ENVIRONMENTAL INDEMNITY. Lessee shall defend, indemnify and hold
harmless Lessor and its Affiliates, successors and assigns, directors, officers,
employees and agents, from and against any Environmental Claim or Environmental
Loss and, unless Lessee is then contesting in good faith such Environmental
Claim or
15
Environmental Loss and Lessee has set aside on its books appropriate reserves
therefor, Lessee shall fully and promptly pay, perform and discharge any such
Environmental Claim or Environmental Loss.
As used herein,
(1) "ADVERSE ENVIRONMENTAL CONDITION" shall refer to (i) the
existence or the continuation of the existence, of an Environmental
Emission (including, without limitation, a sudden or non-sudden
accidental or non-accidental Environmental Emission), of, or exposure
to, any Contaminant, odor or audible noise in violation of any
Applicable Environmental Law, at, in, by, from or related to any
Equipment, (ii) the environmental aspect of the transportation,
storage, treatment or disposal of materials in connection with the
operation of any Equipment in violation of any Applicable
Environmental Law, or (iii) the violation, or alleged violation, of
any Environmental Law connected with any Equipment.
(2) "AFFILIATE" shall refer, with respect to any given Person,
to any Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person.
(3) "CONTAMINANT" shall refer to those substances which are
regulated by or form the basis of liability under any Environmental
Law, including, without limitation, asbestos, polychlorinated
biphenyls ("PCBs"), and radioactive substances.
(4) "ENVIRONMENTAL CLAIM" shall refer to any accusation,
allegation, notice of violation, claim, demand, abatement or other
order or direction (conditional or otherwise) by any governmental
authority or any Person for personal injury (including sickness,
disease or death), tangible or intangible property damage, damage to
the environment or other adverse effects on the environment, or for
fines, penalties or restrictions, resulting from or based upon any
Adverse Environmental Condition.
(5) "ENVIRONMENTAL EMISSION" shall refer to any actual or
threatened release, spill, omission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, or into or out of any of the
Equipment, including, without limitation, the movement of any
Contaminant or other substance through or in the air, soil, surface
water, groundwater, or property.
16
(6) "ENVIRONMENTAL LAW" shall mean any Federal, foreign, state or
local law, rule or regulation pertaining to the protection of the
environment, including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section
9601 ET SEQ.), the Hazardous Material Transportation Act (49 U.S.C. Section
1801 ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C. Section
1251 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.),
the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 1361
ET SEQ.), and the Occupational Safety and Health Act (19 U.S.C. Section
651 ET SEQ.), as these laws have been amended or supplemented, and any
analogous foreign, Federal, state or local statutes, and the regulations
promulgated pursuant thereto.
(7) "ENVIRONMENTAL LOSS" shall mean any loss, cost, damage,
liability, deficiency, fine, penalty or expense (including, without
limitation, reasonable attorneys' fees, engineering and other professional
or expert fees), investigation, removal, cleanup and remedial costs
(voluntarily or involuntarily incurred) and damages to, loss of the use of
or decrease in value of the Equipment arising out of or related to any
Adverse Environmental Condition.
(8) "PERSON" shall include any natural person, corporation, firm,
joint venture, partnership, limited liability company, association,
enterprise, trust, or other entity or organization, or any government or
political subdivision or any agency, department or instrumentality thereof.
(c) INCOME TAX INDEMNIFICATION. This Agreement has been entered into on
the assumption that this Agreement will be treated for Federal income tax
purposes as a true lease and Lessor will be treated as the owner and lessor of
the Equipment and Lessee will be treated as the lessee of the Equipment.
(1) TAX REPRESENTATIONS. Lessee hereby represents, warrants and
covenants that (i) assuming (without representing) that this Lease is a true
lease for Federal income tax purposes, on the Lease Commencement Date for any
unit of Equipment, such unit will qualify for all of the depreciation deductions
specified in Section C of the applicable Schedule ("TAX BENEFITS") in the hands
of Lessor (all references to Lessor in this Section include Lessor and each
assignee of Lessor and the consolidated taxpayer group of which Lessor and each
assignee of Lessor is a member), (ii) the Equipment does not and will not
constitute "limited use property"
17
as provided in Rev. Proc. 76-30 (or any successor provision), (iii) each item of
Equipment has a recovery period within the meaning of Section 168(c) of the
Internal Revenue Code of 1986, as amended (the "CODE"), as set forth in Section
C of the applicable Schedule, (iv) throughout the Term hereof, no item of
Equipment shall be used in a way that results in the creation of an item of
income, gain, deduction, loss or credit to or for Lessor, the source of which is
outside the United States, (v) Lessor will not be required to include in its
gross income (A) any amount of Rent prior to the period for which such amount is
payable in accordance with the terms of this Agreement as a result of the
payment by Lessee prior to its due date, or (B) with respect to any such item of
Equipment, all or any part of the cost of any repairs, maintenance, alterations,
modifications, improvements or additions thereto, or any other expenditures by
Lessee with respect thereto, (vi) Lessee has not taken and will not take any
action in connection with filing its Federal, state or local income tax returns
that is inconsistent with the assumption set forth in the first paragraph of
this Paragraph (c) or with any of Lessee's representations set forth in this
subparagraph (1) of this Paragraph (c), (vii) at all times during the Term
hereof, none of the Equipment will constitute "public utility property" within
the meaning of Section 168(i)(10) of the Code, (viii) Lessee will not permit any
item of Equipment to be used by a tax-exempt entity within the meaning of
Section 168(h)(2) of the Code, (ix) on the Lease Commencement Date of each item
of Equipment, no improvements, modifications or additions to any item of
Equipment are required in order to render such item of Equipment complete for
its intended use, and Lessee will not have furnished any cost of the Equipment
or have any investment in the Equipment for which it has not been fully
reimbursed, and (x) at no time during the Term of this Agreement will Lessee
take or omit to take, nor will it permit any permitted sublessee, affiliate or
assignee to take or omit to take, any action (whether or not such action or
omission is otherwise permitted by Lessor or the terms of this Agreement), which
will result in the disqualification of any Equipment for, or recapture of, all
or any portion of such Tax Benefits.
(2) If (i) by reason of any breach by Lessee of any of the covenants,
warranties and representations set forth in Paragraph (c)(1) above, (A) tax
counsel of Lessor shall determine that there is no Reasonable Basis (as such
term is hereinafter defined) for Lessor to claim on its Federal income tax
return all or any portion of the Tax Benefits with respect to any Equipment, or
(B) any Tax Benefit claimed on the Federal income tax return of Lessor is
disallowed or adjusted by the Internal Revenue Service, or (C) any Tax Benefit
is recomputed or recaptured, or (ii) Lessor shall become liable for additional
tax (an "INCOME INCLUSION") as a result of Lessee having added an attachment or
made an alteration to the Equipment, including (without limitation) any such
attachment or alteration which would increase the productivity or capability of
the Equipment so as to violate the provisions of Rev. Proc. 75-21, 1975-1 C.B.
715, or Rev. Proc. 79-48, 1979 -2 C.B. 529
18
(as either or both may hereafter be modified or superseded); (any such
determination, disallowance, adjustment, recomputation, recapture or Income
Inclusion being hereinafter called a "LOSS"); then Lessee shall pay to Lessor,
as an indemnity and as additional rent, such amount as shall, in the reasonable
opinion of Lessor, cause Lessor's after-tax economic yields and cash flows,
computed on the same assumptions, including tax rates, and were utilized by
Lessor in originally evaluating the transaction (such yields and flows being
hereinafter called the "NET ECONOMIC RETURN") to equal the Net Economic Return
that would have been realized by Lessor if such Loss had not occurred. Such
amount shall be payable upon demand accompanied by a statement describing in
reasonable detail such Loss and the computation of such amount. As used herein,
"REASONABLE BASIS" means that tax counsel may properly advise reporting a
particular position on a tax return in accordance with applicable opinions of
the American Bar Association from time to time in effect. The applicable
opinion as of the date of this Agreement is formal Opinion 85-352 issued by the
Standing Committee on Ethics and Professional Responsibility.
(3) If, at the conclusion of an audit and of such administrative
proceedings within the Internal Revenue Service, if any, as tax counsel of
General Electric Company shall determine in his sole discretion to take, the
Internal Revenue Service proposes an adjustment to a tax return of Lessor for
which Lessee would be required to indemnify Lessor pursuant to this Section
XV(c), and the amount of the indemnity which Lessee would be required to pay
would exceed Fifty Thousand Dollars ($50,000.00), Lessor promptly shall notify
Lessee of the proposed adjustment. If, within ten (10) days thereafter, Lessee
sends a written request to Lessor, Lessor promptly shall request Xxxxxxxx &
Xxxxxxxx (or other independent tax counsel selected by Lessor and reasonably
approved by Lessee) for such counsel's opinion whether the basis in law and in
fact in favor of allowance of the item proposed to be adjusted outweighs the
basis in law and in fact to the contrary. If the opinion is to that effect and
Lessee promptly requests Lessor to do so, Lessor shall contest the adjustment in
a court of competent jurisdiction selected by tax counsel of General Electric
Company in his sole discretion. Lessor shall not be required to take any action
set forth in this Paragraph (c)(3) unless and until Lessee shall have agreed to
indemnify Lessor in a manner satisfactory to Lessor for any liability or loss
which Lessor may incur as a result of taking such action and shall have agreed
to pay Lessor on demand all out-of-pocket costs and expenses (including the fees
and disbursements of independent tax counsel) incurred by Lessor in connection
with taking such action and, if tax counsel of General Electric Company
determines in his sole discretion to contest the adjustment by a proceeding for
refund of amounts paid based on the adjustment, Lessee shall have paid to Lessor
an amount equal to the sum of any tax, interest, penalties and additions to tax
which are required to be paid. Upon receipt by Lessor of a refund of any
amounts paid by it based on the adjustment in respect of which amounts it shall
have been paid an equivalent amount by Lessee,
19
Lessor shall pay to Lessee the amount of such refund together with any interest
received by it on such amount. At any time, whether before or after commencing
to take the action set forth in this Paragraph (c)(3), Lessor may decline to
take any such action with respect to all or any portion of a proposed adjustment
by notifying Lessee in writing that Lessee is relieved of its obligation to
indemnify Lessor with respect to the adjustment or such portion, as the case may
be. Nothing in the foregoing shall require Lessor to appeal any adverse
judicial decision.
(4) Notwithstanding anything to the contrary in this Section XV(c),
Lessee shall not be obligated to indemnify Lessor with respect to a particular
Loss to the extent that the same occurred as a result of one or more of the
following events: (i) a transfer by Lessor of its interest in the Equipment or
this Agreement, in each case other than after the occurrence of a Default that
was not waived by Lessor; (ii) a Casualty Occurrence and the actual payment of
the applicable Stipulated Loss Value of the item of items of Equipment involved
in accordance with the terms of this Agreement, or an event that requires Lessee
to pay an amount determined with reference to the Stipulated Loss Value and the
actual payment of such amount or greater amount at the time required to be paid
by this Agreement; (iii) the failure by Lessor timely or properly to claim any
Tax Benefit on its tax return, or Lessor including in its gross income an Income
Inclusion, unless in each case (A) Lessor and Lessee have agreed that Lessor is
not entitled to claim such Tax Benefit or to exclude such Income Inclusion from
its gross income, as the case may be, or (B) Lessor shall have received an
opinion of tax counsel to Lessor that there is no Reasonable Basis for claiming
such Tax Benefit or for excluding such Income Inclusion from its gross income,
as the case may be; (iv) a loss or deferral of Tax Benefits resulting from the
application of Section 168(d)(3) of the Code; (v) the failure of Lessor to have
sufficient taxable income or liability for Federal income tax purposes against
which to benefit from the Tax Benefits; (vi) the failure of this Agreement to be
treated as a true lease for Federal income tax purposes other than as a result
of a breach of Lessee's representation made in Paragraph (c)(1); (vii) the
application of Section 467 of the Code or the Treasury Regulations thereunder;
(viii) any change in the Code or in the Treasury Regulations thereunder or in
Revenue Rulings or Revenue Procedures of the Internal Revenue Service, adopted
after the Lease Commencement Date; (ix) the application of Sections 55, 56, 57,
58, 59A, 465 and 469 of the Code or any successor provisions or any Treasury
Regulations thereunder; or (x) the status of Lessor for Federal income tax
purposes. In applying Paragraph (c)(2) above and this Paragraph (c)(4), there
shall first be determined whether indemnity is payable under Paragraph (c)(2)
without regard to this Paragraph (c)(4) and thereafter this Paragraph (c)(4)
shall be applied to determine if indemnity otherwise payable is nonetheless not
payable or the extent to which such indemnity shall be reduced.
20
(d) SURVIVAL. All of Lessor's rights, privileges and indemnities
contained in this Section shall survive the expiration or other termination of
this Agreement and the rights, privileges and indemnities contained herein are
expressly made for the benefit of, and shall be enforceable by Lessor and its
successors and assigns.
XVI. DISCLAIMER:
LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT ANY
ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS NOT
MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION,
EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE EQUIPMENT LEASED
HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR
WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY,
PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as
between Lessor and Lessee, are to be borne by Lessee. Without limiting the
foregoing, Lessor shall have no responsibility or liability to Lessee or any
other person with respect to any of the following (i) any liability, loss or
damage caused or alleged to be caused directly or indirectly by any Equipment,
any inadequacy thereof, any deficiency or defect (latent or otherwise) therein,
or any other circumstance in connection therewith; (ii) the use, operation or
performance of any Equipment or any risks relating thereto; (iii) any
interruption of service, loss of business or anticipated profits or
consequential damages; or (iv) the delivery, operation, servicing, maintenance,
repair, improvement or replacement of any Equipment. If, and so long as, no
Default exists under this Lease, Lessee shall be, and hereby is, authorized
during the term of this Lease to assert and enforce, at Lessee's sole cost and
expense, from time to time, in the name of and for the account of Lessor and/or
Lessee, as their interests may appear, whatever claims and rights Lessor or
Lessee may have against any Supplier of the Equipment.
XVII. REPRESENTATIONS AND WARRANTIES OF LESSEE:
Lessee hereby represents and warrants to Lessor that on the date hereof and
on the date of execution of each Schedule:
(a) Lessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "DOCUMENTS") and
is duly qualified to do business in the jurisdiction(s) where the Equipment is
or is to be located and in those other jurisdictions where the failure to be so
qualified would have a material adverse effect on Lessee's ability to carry on
its present business and operations.
(b) The Documents have been duly authorized, executed and delivered by
Lessee and (assuming due execution and delivery by Lessor) constitute valid,
legal and binding agreements, enforceable
21
in accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into or
performance by Lessee of the Documents except such as have already been
obtained.
(d) The entry into and performance by Lessee of the Documents will not:
(i) violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's articles of incorporation, charter or by-laws; or (ii)
result in any breach of, constitute a default under or result in the creation of
any lien, charge, security interest or other encumbrance upon any Equipment
pursuant to any indenture, mortgage, deed of trust, bank loan or credit
agreement or other instrument (other than this Agreement) to which Lessee is a
party.
(e) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Lessee, which will have a material adverse effect on the ability of Lessee to
fulfill its obligations under this Agreement.
(f) The audited financial statements of Lessee for the fiscal year ended
September29, 1996, delivered to Lessor have been prepared in accordance with
GAAP consistently applied, and sinceSeptember 29, 1996, there has been no
material adverse change.
(g) Lessee is and will be at all times validly existing and in good
standing under the laws of the state of its incorporation (specified in the
first sentence of this Agreement).
(h) Subject to Section VI(b) hereof, the Equipment will at all times be
used for commercial or business purposes.
XVIII. INTENT; TITLE; SECURITY DEPOSIT:
(a) It is the express intent of the parties that this Agreement constitute
a true lease and not a sale of the Equipment. Title to the Equipment shall at
all times remain in Lessor, and Lessee shall acquire no ownership, title,
property, right, equity, or interest in the Equipment other than its leasehold
interest solely as Lessee subject to all the terms and conditions hereof.
Lessee hereby waives any and all rights and remedies conferred upon a lessee in
Section 2A-508(5) of Uniform Commercial Code Article 2A-Leases.
(b) Notwithstanding the express intent of the parties, should a court of
competent jurisdiction determine that this Agreement is
22
not a true lease, but rather one intended as security, then solely in that event
and for the expressly limited purposes thereof, Lessee shall be deemed to have
hereby granted Lessor a security interest in the Equipment, and all accessions
thereto, substitutions and replacements therefor, and proceeds (including
insurance proceeds) thereof (but without power of sale); to secure the prompt
payment and performance as and when due of all obligations and indebtedness of
Lessee to Lessor under this Agreement and under any Schedule, now existing or
hereafter created. For the purposes of this Paragraph (b), this Agreement, the
Equipment Schedule, or a photocopy of either may be filed as a financing
statement under the Uniform Commercial Code.
(c) To secure the prompt payment and performance as and when due of all
obligations and indebtedness of Lessee to Lessor under this Agreement and under
any Schedule, now existing or hereafter created; Lessee: (1) shall pay to
Lessor, concurrently with the execution of such Schedule, a security deposit in
an amount calculated as the product of the percentage specified in such Schedule
and the Capitalized Lessor's Cost of the Equipment; and (2) hereby grants Lessor
a security interest in the cash comprising the security deposit from time to
time, proceeds (cash and non-cash) thereof, including any account into which
such cash may be deposited, and Lessee shall execute and deliver to Lessor, to
be recorded at Lessee's expense, such Uniform Commercial Code financing
statements with respect thereto as Lessor reasonably may require. Any interest
accrued with respect to the cash comprising the security deposit from time to
time shall be for the account of Lessor and shall not be added to the security
deposit. Upon indefeasible payment and performance in full of all obligations
of Lessee under this Agreement related to such Schedule and such Schedule,
Lessor promptly shall terminate the security interest granted herein with
respect to the applicable portion of the security deposit relating to such
Schedule and shall refund the applicable portion of the then current balance of
such security deposit to Lessee.
XIX. OPTIONS AT END OF BASIC TERM:
The provisions of this Section XIX and the options provided herein shall be
applicable to and exercisable with respect to all Schedules executed pursuant to
this Agreement during, respectively, (1) the Initial Commitment Period and (2)
any separate individual Additional Commitment Period, as to which the same
Person is the "Lessor" (either by being specified as the Lessor upon execution
of the Schedule or by assignment from the originally specified Lessor) (with
respect to the related Commitment Period, the "APPLICABLE SCHEDULES"). Lessee
shall have the option upon the expiration of the Basic Term of the first of such
Applicable Schedules to be executed pursuant to this Agreement, to renew the
Term of this Agreement with respect to, or to purchase, all (but not less than
23
all) of the Equipment leased under all such Applicable Schedules executed
hereunder upon the following terms and conditions.
(a) Provided that Lessee is not then in Default under this Agreement with
respect to such Applicable Schedule(s), Lessee may elect to renew the Term with
respect to all, but not less than all, of the Equipment leased under all such
Applicable Schedules executed hereunder for a renewal term (the "RENEWAL TERM")
of not less than twelve (12) months or such longer term as may mutually be
acceptable to Lessor and Lessee, at a quarterly rent, payable in arrears, on the
first day of each calendar quarter, equal to the greater of (1) the Fair Market
Rental Value of the Equipment, or (2) one-half (1/2) the average quarterly Basic
Term Rent (provided, however, that in calculating such average quarterly Basic
Term Rent, the Rent due on the first Rent Payment Date shall not be included).
(b) Provided that Lessee is not then in Default under Section XII(a)(1) of
this Agreement with respect to such Applicable Schedule(s), Lessee may elect to
purchase on the Basic Term Expiration Date with respect to each such Applicable
Schedule all (but not less than all) of the Equipment leased under all such
Applicable Schedules executed hereunder on an AS IS BASIS, WHERE IS BASIS
without recourse to or warranty from Lessor express or implied ("AS IS BASIS")
(except that Lessor will warrant that the Equipment is free and clear of any
Lessor Liens), for cash equal to the greater of: (1) seven and one-half percent
(7.5%) of the Capitalized Lessor's Cost of the Equipment, or (2) the then Fair
Market Value of the Equipment, plus (in any event) all applicable sales taxes.
On the applicable Basic Term Expiration Date, Lessor shall receive in cash the
full purchase price (plus all applicable sales taxes), together with any Rent or
other sums then due hereunder on such date.
(c) "FAIR MARKET RENTAL VALUE" shall mean the rental which a willing
lessee (who is neither a Lessee in possession nor a used equipment dealer) would
pay for the rental of the Equipment in an arms'-length transaction to a willing
lessor under no compulsion to lease for a period similar to the Renewal Term.
If Lessor and Lessee are unable to agree on the Fair Market Rental Value at
least two hundred ten (210) days before expiration of the Basic Term, Lessor and
Lessee mutually shall agree and appoint an independent appraiser to determine
Fair Market Rental Value (provided, however, that if the parties are unable
mutually to agree on an independent appraiser, then each party shall appoint an
independent appraiser and such independent appraisers so appointed shall appoint
a third independent appraiser, and the average Fair Market Rental Value as
determined by such three independent appraisers shall be final, binding and
conclusive. Lessee shall bear all costs associated with any such appraisal.
"FAIR MARKET VALUE" shall mean the price which a willing buyer (who is neither a
lessee in possession nor a used equipment dealer) would pay for the Equipment in
an arm's-length transaction to a willing seller under no compulsion to sell;
24
provided, however, that in such determination: (i) the Equipment shall be
assumed to be in the condition in which it is required to be maintained and
returned under this Agreement; (ii) in the case of any installed Equipment, that
Equipment shall be valued on an installed basis; and (iii) costs of removal from
the current location shall not be a deduction from such valuation. If Lessor
and Lessee are unable to agree on the Fair Market Value at least two hundred ten
(210) days before expiration of the Term, Lessor shall appoint an independent
appraiser (reasonably acceptable to Lessee) to determine Fair Market Value, and
that determination shall be final, binding and conclusive. Lessee shall bear
all costs associated with any such appraisal.
(d) If Lessee timely elects to renew the Term pursuant to Paragraph (a)
above, then upon expiration of the Renewal Term, provided that Lessee is not
then in Default under Section XII(a)(1) of this Agreement, Lessee shall have the
option pursuant to Paragraph (b) to purchase all (but not less than all) of the
Equipment leased under all such Applicable Schedules executed hereunder upon one
hundred eighty (180) days' irrevocable written notice to Lessor prior to the
expiration of the Renewal Term. If Lessee timely elects such purchase option,
then on the date of expiration of the Renewal Term, Lessor shall receive in cash
the full purchase price of the Equipment, equal to the then Fair Market Value of
the Equipment, plus all applicable sales taxes, together with any Rent or other
sums then due hereunder.
(e) If at the end of the Basic Term, Lessee neither renews the Lease nor
purchases the Equipment pursuant to its options to do so under Paragraphs (a)
and (b) above (either because Lessee is not entitled to, or elects not to, orif
Lessee fails timely to, do so), of if Lessee renews the Term and at the end of
the Renewal Term Lessee does not purchase the Equipment pursuant to its option
to do so under Paragraph (d) above (either because Lessee is not entitled to, or
elects not to, or fails timely to, do so), then on the date of expiration of the
Term with respect to the Applicable Schedule(s), Lessee shall return the
Equipment leased thereunder in full compliance with Section XI of this
Agreement. Lessee shall bear all costs associated with such appraiser's
determination and such costs, if any, to cause such Equipment to be in full
compliance with Section XI of this Agreement on or prior to the date of
expiration of the Term.
(f) Lessee may exercise its options pursuant to Paragraphs (a) or (b)
above upon at least two hundred forty (240) days' revocable written notice to
Lessor prior to the Basic Term Expiration Date with respect to each such
Schedule. Such revocable notice by Lessee to Lessor shall become irrevocable
unless Lessee provides written notice to Lessor expressly revoking such notice
on or before the later of (1) one hundred eighty (180) days prior to the Basic
Term Expiration Date with respect to each such Schedule, or (2) fifteen (15)
days after the date Fair Market Rental Value or Fair Market Value (as
applicable) is determined (whether by
25
agreement or appraisal). If Lessee fails timely to elect either option pursuant
to Paragraphs (a) or (b) above, Lessee shall comply with its obligations
pursuant to Paragraph (e) above. If Lessee timely elects to renew the Term
pursuant to Paragraph (a) above, but fails timely to elect to purchase the
Equipment pursuant to Paragraph (d) above, Lessee shall comply with its
obligations pursuant to Paragraph (e) above.
(g) If Lessee elects to purchase items of the Equipment pursuant to the
option specified in this Section XIX, and satisfies all of its obligations with
respect thereto as specified herein, Lessor shall execute and deliver to Lessee
a xxxx of sale with respect to such Equipment, conveying title thereto on an AS-
IS BASIS (except that Lessor will warrant that the Equipment is free and clear
of any Lessor Liens).
XX. MISCELLANEOUS:
(a) EACH OF LESSOR AND LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF,
DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS
BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR
ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
BETWEEN LESSEE AND LESSOR. The scope of this waiver is intended to be all
encompassing of any and all disputes that may be filed in any court (including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims). THIS WAIVER IS IRREVOCABLE MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
(b) Any cancellation or termination by Lessor that is permitted by and in
accordance with this Agreement, any Schedule, supplement or amendment hereto, or
the lease of any Equipment hereunder, shall not release Lessee from any then
outstanding obligations to Lessor hereunder.
(c) Time is of the essence of this Agreement. Lessor's failure at any
time to require strict performance by Lessee of any of the provisions hereof
shall not waive or diminish Lessor's right thereafter to demand strict
compliance therewith.
(d) Lessee agrees, upon Lessor's request, to execute any UCC financing
statement or similar instrument necessary or expedient for filing, recording or
perfecting the interest of Lessor.
26
(e) All notices required to be given hereunder shall be in writing,
personally delivered, delivered by overnight courier service, sent by facsimile
transmission (with confirmation of receipt), or sent by certified mail, return
receipt requested, addressed to the other party at its respective address stated
above or at such other address as such party shall from time to time designate
in writing to the other party; and shall be effective from the date of receipt.
(f) This Agreement and any Schedule and Annexes constitute the entire
agreement of the parties with respect to the subject matter hereof. NO
VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS
PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF EACH OF THE PARTIES HERETO. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(g) The representations, warranties and covenants of Lessee herein shall
be deemed to survive the closing hereunder. Lessor's obligations to acquire and
lease specific items of Equipment shall be conditioned upon Lessee providing to
Lessor such information with respect to Lessee's financial condition as Lessor
may require, and Lessor being satisfied that there shall have been no material
adverse change in the business or financial condition of Lessee from the date of
execution hereof. The obligations of Lessee under Sections IV, XI, and XV which
accrue during the term of this Agreement and obligations which by their express
terms survive the termination of this Agreement, shall survive the termination
of this Agreement.
(h) In case of a failure of Lessee to comply with any provision of this
Agreement, Lessor shall have the right, but shall not be obligated, to effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Lessor in effecting such compliance (together
with interest thereon at the rate specified in Paragraph (j) of this Section)
shall constitute additional Rent due to Lessor within five (5) days after the
date Lessor sends notice to Lessee requesting payment. Lessor's effecting such
compliance shall not be a waiver of Lessee's default.
(i) Any Rent or other amount not paid to Lessor when due hereunder shall
bear interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent (18%) per annum or the maximum rate allowed by law.
27
(j) Any provisions in this Agreement and any Schedule which are in
conflict with any statute, law or applicable rule shall be deemed omitted,
modified or altered to conform thereto.
(k) So long as no Default shall have occurred and be continuing hereunder,
and conditioned upon Lessee performing all of the covenants and conditions
hereof, as to claims of Lessor or persons claiming under Lessor, Lessee shall
peaceably and quietly hold, possess and use the Equipment during the Term of
this Agreement subject to the terms and conditions hereof.
(l) Whether or not any Equipment is leased hereunder, Lessee shall pay
upon demand as additional Rent hereunder all reasonable and necessary documented
transaction expenses which are (1) incurred by General Electric Capital
Corporation in connection with the preparation, negotiation and execution of
this Agreement; (2) incurred as a result of or in connection with any Default or
the exercise of remedies hereunder; (3) incurred as a result of the failure of
Lessee fully and timely to perform its obligations hereunder; and/or (4)
incurred upon receipt of a request from Lessee hereunder; including, but not
limited to, expenses of counsel, due diligence, appraisals, lien searches,
Uniform Commercial Code and/or Estoppel/Waiver Agreement filing fees, and field
audits.
XXI. CHOICE OF LAW:
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT.
XXII. CHATTEL PAPER:
To the extent that any Equipment Schedule would constitute chattel paper,
as such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction, no security interest therein may be created through the
transfer or possession of this Lease in and of itself without the transfer or
possession of the original of an Equipment Schedule executed pursuant to this
Lease and incorporating the Lease by reference; and no security interest in this
Lease and an Equipment Schedule may be created by the transfer or possession of
any counterpart of the Equipment Schedule other than the original thereof, which
shall be identified as the document marked "Original" and all other counterparts
shall be marked "Duplicate".
XXIII. SPECIAL PURCHASE OPTION:
28
(a) The provisions of this Section XXIII and the option provided herein
shall be applicable to and exercisable with respect to all Schedules executed
pursuant to this Agreement during, respectively, (1) the Initial Commitment
Period, and (2) any Additional Commitment Period as to which the same Person is
the "Lessor" (either by being specified as the Lessor upon execution of the
Schedule or by assignment from the originally specified Lessor). Provided that
Lessee is not than in Default under Section XII(a)(1) of this Agreement and the
Term has not been earlier terminated, Lessee may upon at least thirty (30) days'
but not more than two hundred seventy (270) days' prior written irrevocable
notice to Lessor, purchase all (but not less than all) of the Equipment
described in such Applicable Schedules on an AS IS BASIS, on the FMV Special
Purchase Option Date specified in such Schedule, for cash equal to the FMV
Special Purchase Option Price of such Equipment (as specified in such Schedule).
Lessor and Lessee agree that the FMV Special Purchase Option Price is a
reasonable prediction of the Fair Market Value of the Equipment at the time the
option is exercisable. Lessor and Lessee agree that if Lessee makes any non-
severable improvement to the Equipment which increases the value of the
Equipment, then at the time of such option being exercised, Lessor and Lessee
shall adjust the FMV Special Purchase Option Price to reflect any addition to
the price anticipated to result from such improvement.
(b) If Lessee exercises the option specified in Paragraph (a) hereof, then
on the FMV Special Purchase Option Date, Lessee shall pay to Lessor any accrued
but unpaid Rent then due and any other sums due and unpaid on the FMV Special
Purchase Option Date, together with the FMV Special Purchase Option Price, plus
all applicable sales taxes, in cash.
(c) If Lessee elects to purchase items of the Equipment pursuant to the
option specified in this Section XXIII, and satisfies all of its obligations
with respect to such option as specified herein, Lessor shall execute and
deliver to Lessee a xxxx of sale with respect to such Equipment, conveying title
thereto on an AS-IS BASIS (except that Lessor will warrant that the Equipment is
free and clear of any Lessor Liens).
XXIV. FINANCIAL COVENANTS: So long as any payment or performance obligation of
Lessee hereunder remains unsatisfied, Lessee shall:
(a) maintain, as at the last day of each fiscal quarter, a Leverage Ratio
of not more than .45:1.0;
(b) maintain, as at the last day of each fiscal quarter, a ratio of (1)
earnings before interest and taxes for the most recently ended twelve (12) month
period, to (2) Interest Expense
29
for the most recently ended twelve (12) month period of not less than 4.0:1.0;
and
(c) maintain, as at the last day of each fiscal quarter, a Fixed Charge
Coverage Ratio of not less than 1.5:1.0.
As used in this Section, the following terms shall have the following meanings:
"AGREEMENT ACCOUNTING PRINCIPLES" means GAAP as in effect from time to
time, applied in a manner consistent with that used in preparing the financial
statements referred to in Section V(b) hereof.
"CAPITALIZATION" means, as of any date of determination, Total Debt of
Lessee and its Subsidiaries plus total equity in Lessee (determined in
accordance with Agreement Accounting Principles).
"CAPITALIZED LEASE" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract, or application for a Letter of Credit.
"FIXED CHARGE COVERAGE RATIO" means, as of the fiscal quarter-end of
determination thereof, the ratio of (i) the sum of earnings before Interest
Expense, taxes, and non-cash charges other than depreciation and amortization
(determined in accordance with Agreement Accounting Principles) and Rentals, all
for the most recently ended twelve-month period, to (ii) the sum of payments of
Interest Expense and Rentals, both for the most recently ended twelve-month
period, and current maturities of long-term debt as of such fiscal quarter-end;
all calculated for Lessee and its Subsidiaries on a consolidated basis.
"INDEBTEDNESS" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of Property or
services (other than accounts payable
30
arising in the ordinary course of such Person's business payable on terms
customary in the trade), (iii) obligations, whether or not assumed, secured by
Liens or payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person, (iv) obligations which are evidenced
by notes, acceptances, or other instruments, (v) Capitalized Lease Obligations,
(vi) net liabilities under interest rate swap, exchange or cap agreements, and
(vii) Contingent Obligations.
"INTEREST EXPENSE" means, for any period of determination, all interest
(without duplication), whether paid in cash or accrued as a liability, on
Indebtedness of the Lessee and its Subsidiaries on a consolidated basis during
such period (including imputed interest on Capitalized Lease Obligations) net of
capitalized interest.
"LETTER OF CREDIT" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"LEVERAGE RATIO" means, as of any date of determination, the ratio of (i)
Total Debt as of such date to (ii) Capitalization as of such date; all
calculated for Lessee and its Subsidiaries on a consolidated basis.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"PROPERTY" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"RENTALS" of a Person means the aggregate fixed amounts payable by such
Person under any lease of Property having an original term (including any
required renewals or any renewals at the option of the lessor or lessee) of one
year or more but does not include any amounts payable under Capitalized Leases
of such Person.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interest having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all
31
references herein to a "Subsidiary" shall mean a Subsidiary of Lessee.
"TOTAL DEBT" means Indebtedness for borrowed money, guarantees, Letters of
Credit, obligations under non-compete agreements and Capitalized Lease
Obligations of Lessee and its Subsidiaries.
XXV. SPECIAL LESSOR OPTION: Lessee promptly will give notice to Lessor of the
occurrence of a Prepayment Event. If, within sixty (60) days after the later of
the occurrence of a Prepayment Event or the date on which Lessor has received
notice from Lessee that a Prepayment Event has occurred, Lessor notifies Lessee
in writing that Lessor desires the prepayment and cancellation of this Agreement
(such notice is hereafter referred to as a "CANCELLATION NOTICE"), then (a)
Lessee shall, on the Rent Payment Date next succeeding that date which is thirty
(30) days after its receipt of the Cancellation Notice, prepay in full the
greater of: (1) the then Fair Market Value of the Equipment, or (2) the then
applicable Stipulated Loss Value of the Equipment, calculated as of such Rent
Payment Date, together with all Rent and its other obligations then due
hereunder, and (b) effective upon the giving of such Cancellation Notice, any
unfunded portion of Lessor's Commitment automatically and permanently shall be
terminated and reduced to zero. Upon payment of such amount (plus all
applicable sales taxes) in cash, Lessor shall execute and deliver to Lessee a
xxxx of sale with respect to the Equipment leased hereunder, conveying title
thereto on an AS IS BASIS (except that Lessor will warrant that the Equipment is
free and clear of any Lessor Liens). As used herein, "PREPAYMENT EVENT" means:
(i) the acquisition by any Person (other than a holding company owning one
hundred percent)(100%) of the outstanding shares of voting stock of Lessee after
giving effect to such acquisition), or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13D-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of more than
fifty percent (50%) of the outstanding shares of voting stock of Lessee (or more
than fifty percent (50%) of the outstanding shares of any holding company owning
one hundred percent (100%) of the outstanding shares of voting stock of Lessee);
or (ii) individuals who are Continuing Directors fail to constitute a majority
of the Board of Directors of Lessee. As used herein, "CONTINUING DIRECTOR"
means an individual who is a member of the Board of Directors of Lessee on the
date of this Agreement or who shall have become a member of the Board of
Directors of Lessee subsequent to such date and who shall have been nominated or
elected by the Board of Directors of Lessee at a time that a majority of the
members of the Board of Directors of Lessee are Continuing Directors.
XXVI. LICENSE OF INTELLECTUAL PROPERTY:
32
(a) Lessee represents, warrants and covenants to Lessor as follows:
(i) with respect to each item of Equipment that Lessee is operating
as of the date hereof, the Related Intellectual Property (as hereinafter
defined) is sufficient for the purpose of operating each item of Equipment as
currently operated by Lessee for manufacturing suspensions;
(ii) with respect to each item of Equipment that Lessee is operating
as of the date hereof, Lessee owns (or holds a valid license or other rights to
use) the Related Intellectual Property;
(iii) with respect to each item of Equipment that Lessee is
operating as of the date hereof, Lessee has, and on the Return Date (as
hereinafter defined) Lessee shall have, the right to sublicense (or otherwise
assign or transfer rights to) the Related Intellectual Property to the extent
such Related Intellectual Property is not owned by Lessee;
(iv) with respect to each item of Equipment that Lessee is operating
Lessee shall take all such actions as reasonably may be necessary to preserve
the Related Intellectual Property so that such item of Equipment will be capable
of being operated for manufacturing suspensions on the Return Date; and
(v) with respect to the Related Intellectual Property described in
clause (e)(i) below, Lessee diligently shall pursue such applications in
accordance with its regular business practices.
(b) With respect to each item of Equipment that Lessee places into
operation after the date hereof:
(i) on the date on which such item of Equipment is initially
operated hereunder, Lessee shall have acquired such Related Intellectual
Property (or rights to use such Related Intellectual Property) as then is
reasonably necessary for the purposes for which such item is then used in
manufacturing suspensions; and
(ii) on the Return Date Lessee shall have the right to sublicense
(or otherwise assign or transfer rights to) the Related Intellectual Property
with respect to such item of Equipment to the extent such Related Intellectual
Property is not owned by Lessee.
(c) With respect to each item of Equipment, Lessor and Lessee acknowledge
that:
33
(i) under certain circumstances specified in this Agreement, Lessor
may repossess such item of Equipment or Lessee may return such item of
Equipment to Lessor (in lieu of purchasing such item of Equipment); and
(ii) on the date on which such repossession or return occurs (the
"Return Date") Lessee may own or otherwise have an interest in the Related
Intellectual Property (as defined below) for such item of Equipment.
(d) With respect to each item of Equipment, Lessee hereby grants to Lessor
a paid-up, royalty-free, non-exclusive, worldwide license to use the Related
Intellectual Property in connection with operating such item of Equipment for
manufacturing suspensions (subject in each case to such limitations, if any, as
may restrict Lessee's use of the Related Intellectual Property), but not for any
other purpose. On the Return Date, Lessee shall deliver to Lessor copies of all
documentation with respect to the Related Intellectual Property, including all
updates and any source code with respect to all software. Lessor agrees to
protect the confidentiality of all Related Intellectual Property disclosed to
Lessor by using the same degree of care, but not less than a reasonable degree
of care, as Lessor uses to protect its own confidential information of a like
nature, to prevent the disclosure thereof. The term of this license shall
commence on the Return Date and continue until such item of Equipment is
dismantled, destroyed, abandoned or otherwise taken out of service by Lessor or
its assignee, at which time such license shall expire as to such item of
Equipment. Lessor may assign or transfer this license to any subsequent owner
or user of the item of Equipment (but not otherwise) and any such assignment or
transfer shall specifically reference this Section XXVI and be governed hereby.
(e) For each item of Equipment, the "Related Intellectual Property" shall
mean (in each case to the extent (1) used in connection with such item of
Equipment on the Return Date or (2) necessary for the operation of the Equipment
for manufacturing suspensions) all patents, computer software, instructions,
documentation, copyrights, trade secrets and other property and rights in the
nature of intellectual property used in connection with operating such item of
Equipment for manufacturing suspensions, including without limitation:
(i) the patents evidenced by Lessee's U.S. Application Serial Nos.
08/655,849, 08/656,639 and 08/657,778 filed on May 31, 1996, all U.S.
patents issuing from such applications and all U.S. and foreign
applications and patents claiming priority from such applications;
(ii) the application software embedded or stored in the item of
Equipment and executed to provide primary-control functions for the item of
Equipment; and
34
(iii) the trade secrets that are by their nature incorporated into,
and part of, such item of Equipment;
(provided, however, that the Related Intellectual Property shall not include any
manufacturing execution system (MES) software such as that known to Lessee as
ADARS and Cell Control or SCADA; any product data management (PDM) software such
as that known to Lessee as PIMS; any manufacturing resource planning (MRP)
software; any enterprise resource planning (ERP) software; or any other
high-level enterprise software providing manufacturing set-up, operational
status, quality management or other non-primary-control functions, in each case
regardless of whether it may interface with such application software or reside
on the item of Equipment).
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
35
IN WITNESS WHEREOF, Lessee and Lessor have caused this Master Lease
Agreement to be executed by their duly authorized representatives as of the date
first above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL XXXXXXXXXX TECHNOLOGY INCORPORATED
CORPORATION
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxx X. Xxxxxxxx
---------------------------- ------------------------------
Name: Xxxxx Xxxxxxx Name: Xxxx X. Xxxxxxxx
-------------------------- ----------------------------
Title: Transaction & Title: CFO
Syndication Senior ---------------------------
Manager
--------------------------
36
EXHIBIT A
EQUIPMENT SCHEDULE
SCHEDULE NO. _______________
DATED THIS ___________ DAY OF ____________, 199__
TO MASTER LEASE AGREEMENT DATED AS OF DECEMBER __, 1996
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital Xxxxxxxxxx Technology Incorporated
Corporation 00 Xxxx Xxxxxxxx Xxxx
0 Xxxxxxxxx Xxxxx Xxxxxxxxxx, Xxxxxxxxx 00000-0000
Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxx 00000
This Equipment Schedule is executed pursuant to, and incorporates by reference
the terms and conditions of, and capitalized terms not defined herein shall have
the meanings assigned to them in, the Master Lease Agreement identified above
("AGREEMENT;" said Agreement and this Schedule being collectively referred to as
"LEASE"). This Equipment Schedule, incorporating by reference the Agreement,
constitutes a separate instrument of lease.
A. EQUIPMENT.
Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to
Lessee the Equipment listed on Annex A attached hereto and made a part hereof.
B. FINANCIAL TERMS.
1. Capitalized Lessor's Cost: $ ________________________________________.
2. Basic Term Lease Rate Factor: ______________________________________%.
3. Daily Lease Rate Factor: ___________________________________________%.
4. Basic Term (No. of Quarters): _______________________________________.
5. Basic Term Commencement Date: ________________________________, 199 .
6. Equipment Location: __________________________________________________
7. Lessee Federal Tax ID No.: ___________________________________________
8. Last Delivery Date: __________________________________________, 199 .
9. Stipulated Loss Value: See Annex D attached for calculation of the
Stipulated Loss Value of the Equipment during the Term.
10. Assumed Interest Rate: _________%.
C. TAX BENEFITS.
Depreciation Deductions:
a. Depreciation Method: 200% declining balance method, switching to
straight line method for the first taxable year for which using the
straight line method with
respect to the adjusted basis as of the beginning of such year will
yield a larger allowance.
b. Recovery Period: five (5) years. .
c. Basis: 100% of Capitalized Lessor's Cost.
D. TERM AND RENT.
1. Basic Term Rent. Commencing on ___________, 199__, and on the same
day of each calendar quarter thereafter during the Basic Term, Lessee shall pay,
in arrears, as Rent ("BASIC TERM RENT") the product of the Basic Term Lease Rate
Factor times the Capitalized Lessor's Cost of all Equipment on this Schedule.
Each date for the payment of Rent during the Basic Term and any Renewal Term is
herein referred to as a "RENT PAYMENT DATE". The Basic Term Lease Rate Factor
has been calculated and the Renewal Term lease rate factor will be calculated on
the basis of the Assumed Interest Rate which has been determined in accordance
with the Lease. Upon the occurrence of a Default, from and after the date on
which Lessor declares such Default and throughout the continuance thereof, the
Basic Term Lease Rate Factor or the Renewal Term lease rate factor, as
applicable, shall be recalculated on the basis of the Assumed Interest Rate plus
two hundred (200) basis points.
2. If any Rent Payment Date is not a Business Day, the Rent otherwise due
on such date shall be payable on the immediately preceding Business Day. As
used herein, "BUSINESS DAY" shall mean any day other than Saturday, Sunday, and
any day on which banking institutions located in the States of Connecticut,
Maryland or Minnesota are authorized by law or other governmental action to
close.
3. Contingent Rent. Contingent Rent calculated as hereinafter specified
shall accrue on a calendar quarterly basis and shall be payable by Lessee to
Lessor upon return of the Equipment pursuant to Section XIX(e). As used herein,
"CONTINGENT RENT" shall be calculated as the product of (x) sixty-five percent
(65%) of any per annum increase in the Consumer Price Index for all Items as
published by the Department of Labor Bureau of Economics and Statistics reported
during the preceding calendar quarter, and (y) the Capitalized Lessor's Cost of
the Equipment; provided, however, that the maximum Contingent Rent shall not
exceed that amount calculated as seven and one-half (7.5%) percent of the
Capitalized Lessor's Cost of the Equipment.
E. INSURANCE.
1. Public Liability: $2,000,000.00 primary coverage, plus $20,000,000.00
umbrella coverage, total liability per occurrence.
2. Casualty and Property Damage: An amount equal at all times to the
then Stipulated Loss Value of the Equipment.
2
F. FMV SPECIAL PURCHASE OPTION DATE AND PRICE.
The FMV Special Purchase Option Date with respect to the Equipment
described on this Schedule shall be the [twenty-first (21st)/seventeenth (17th)]
Rent Payment Date. The FMV Special Purchase Option Price of the Equipment shall
be calculated as the product of _________ percent and the Capitalized Lessor's
Cost of the Equipment, plus all applicable sales taxes.
G. SECURITY DEPOSIT PERCENTAGE. The percentage of the Capitalized Lessor's
Cost of the Equipment required to be paid as a security deposit pursuant to
Section XVIII(c) of the Agreement is ___________ percent (__________ %).
This Schedule is not binding or effective with respect to the Agreement or
Equipment until executed on behalf of Lessor and Lessee by authorized
representatives of Lessor and Lessee, respectively.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL XXXXXXXXXX TECHNOLOGY INCORPORATED
CORPORATION
By: By:
---------------------------- ------------------------------
Name: Name:
-------------------------- ----------------------------
Title: Title:
-------------------------- ---------------------------
4
ANNEX A
TO
SCHEDULE NO. ______________________________________
DATED THIS _____ DAY OF ________, 199__
TO MASTER LEASE AGREEMENT DATED AS OF DECEMBER __, 1996
DESCRIPTION OF EQUIPMENT
Serial Type and Model Number Capitalized
Numbers or Description of Lessor's Cost per
of Equipment Units Unit
----------------------------------------------------------------------
[See Attachment]
Initials: __________ ____________
Lessor Lessee
ANNEX B
TO
SCHEDULE NO. ___________
DATED THIS ___ DAY OF ______, 199__
TO MASTER LEASE AGREEMENT DATED AS OF DECEMBER ___, 1996
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation, its successors and assigns
Pursuant to the provisions of the above referenced Schedule and Master
Lease Agreement (collectively, the "LEASE"), Lessee hereby certifies and
warrants that: (a) all Equipment listed below has been delivered and installed
(if applicable); (b) Lessee has inspected the Equipment, and all such testing as
it deems necessary has been performed by Lessee, Supplier or the manufacturer;
and (c) Lessee accepts the Equipment for all purposes of the Lease, the purchase
documents and all attendant documents.
Lessee does further certify that as of the date hereof (i) Lessee is not in
default under the Lease; (ii) the representations and warranties made by Lessee
pursuant to or under the Lease are true and correct on the date hereof; and
(iii) Lessee has reviewed and approves of the purchase documents for the
Equipment, if any.
DESCRIPTION OF EQUIPMENT
MANUFACTURER SERIAL NUMBERS TYPE AND MODEL OF EQUIPMENT
-------------------------------------------------------------------------------
[See Attached Annex A]
___________________________________
Lessee's Authorized Representative
Dated: __________ ___, 1996
ANNEX C
TO
SCHEDULE NO. ________________
DATED THIS _____ DAY OF _________, 199__
TO MASTER LEASE AGREEMENT DATED AS OF DECEMBER ___, 1996
STIPULATED LOSS VALUE TABLE*
Initials: _____________ ___________
Lessor Lessee
___________________
*The Stipulated Loss Value for any unit of Equipment shall be equal to the
Capitalized Lessor's Cost of such unit multiplied by the appropriate percentage
derived from the above table. In the event that the Lease is for any reason
extended, then the parties mutually shall agree upon a revised Stipulated Loss
Value Table to be applicable during such extended term.
ANNEX D
TO
SCHEDULE NO. ________________
DATED THIS ________ DAY OF ______________, 199__
TO MASTER LEASE AGREEMENT DATED AS OF DECEMBER ___, 1996
ESTOPPEL/WAIVER AGREEMENT
_____________________, 1996
___________________________
___________________________
___________________________
Gentlemen/Ladies:
General Electric Capital Corporation ("Lessor") has entered into, or is
about to enter into, a lease or similar agreement (the "Lease") with Xxxxxxxxxx
Technology Incorporated ("Lessee"), pursuant to which Lessee has leased or will
lease from Lessor certain personal property (such property, together with any
replacements thereof, being referred to as the "Personal Property"). Some or
all of the Personal Property is, or will be, located at certain premises
described on Annex A (the "Premises"). This letter is being sent to you because
of your interest in the Premises.
By your signature below, you hereby agree (and we shall rely on your
agreement) that: (i) the Personal Property is, and shall remain, personal
property regardless of the method by which it may be, or become, affixed to the
Premises; (ii) your interest in the Personal Property and any proceeds thereof
(including, without limitation, proceeds of any insurance therefor) shall be,
and remain, subject to the ownership interests of Lessor (until and unless
Lessor shall formally release or transfer its interest in the Personal Property
to Lessee); (iii) Lessor, and its employees and agents, shall have the right
with prior notice, from time to time, to enter the Premises for the purpose of
inspecting the Personal Property; and (iv) Lessor, and its employees and agents,
shall have the right, upon any default by Lessee under the Lease, to enter the
Premises and to remove the Personal Property from the Premises. Lessor agrees
to reimburse you for any damages actually caused to the Premises by Lessor, or
its employees or agents, during any such removal. These agreements shall be
binding upon, and shall inure to the benefit of, any successors and assigns of
the parties hereto.
We appreciate your cooperation in this matter of mutual interest.
GENERAL ELECTRIC CAPITAL CORPORATION
By:
----------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
AGREED TO AND ACCEPTED BY:
By:
----------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Date: _____________, 1996
Interest in the Premises (check applicable box)
/ / Owner
/ / Mortgagee
/ / Landlord
/ / Realty Manager
EXHIBIT B
SCHEDULE OF RENTAL FACTORS
ETCHING EQUIPMENT:
------------------
25 QUARTER TERM: FPO AT QUARTER #21
------------------------------------
MONTH FACTOR AS A % OF EQUIPMENT COST FPO
----- ------------------------------- ---
DECEMBER Quarter # 1: 0.0%
Xxxxxxx # 0-00: 4.252202%
Quarter #14-25: 5.197136% 27.006342%
APRIL Quarter #1: 0.0%
Xxxxxxx # 0-00: 4.276789%
Quarter #14-25: 5.227186% 28.182698%
JULY Quarter #1: 0.0%
Xxxxxxx # 0-00: 4.274188%
Quarter #14-25: 5.224008% 27.662669%
OCTOBER Quarter #1: 0.0%
Xxxxxxx # 0-00: 4.263002%
Quarter #14-25: 5.210336% 27.036784%
ASSEMBLY EQUIPMENT:
-------------------
00 XXXXXXX XXXX: FPO AT QUARTER #17
------------------------------------
MONTH FACTOR AS A % OF EQUIPMENT COST FPO
----- ------------------------------- ---
DECEMBER Quarter # 1: 0.0%
Xxxxxxx # 0-00: 5.060681%
Quarter #12-21: 6.185276% 32.300254%
APRIL Quarter #1: 0.0%
Xxxxxxx # 0-00: 5.156284%
Quarter #12-21: 6.302125% 32.736245%
JULY Quarter #1: 0.0%
Xxxxxxx # 0-00: 5.126401%
Quarter #12-21: 6.265600% 32.706969%
OCTOBER Quarter #1: 0.0%
Xxxxxxx # 0-00: 5.092821%
Quarter #12-21: 6.224559% 32.423786%
EXHIBIT C
SAMPLE SCHEDULE OF STIPULATED LOSS VALUES
With respect to the etching equipment (twenty-five quarter term)
Rent Payment SLV Percent
------------ -----------
1 104.507602
2 102.762345
3 100.870833
4 98.945480
5 96.683475
6 94.403339
7 92.018805
8 89.529824
9 86.934208
10 84.241991
11 81.452805
12 78.590414
13 75.622883
14 71.619970
15 67.502629
16 63.261340
17 58.893504
18 54.409557
19 49.822761
20 45.118410
21 40.294040
22 35.360925
23 30.335092
24 25.197136
25 20.000000
With respect to assembly equipment (twenty-one quarter term)
Rent Payment SLV Percent
1 104.571100
2 102.094777
3 99.461350
4 96.681477
5 93.752278
6 90.713023
7 87.562797
8 84.298792
9 80.918772
10 77.435984
11 73.865963
12 69.071383
13 64.143065
14 59.074888
15 53.886995
16 48.565585
17 43.108032
18 37.510345
19 31.802892
20 25.966952
21 20.000000
2
EXHIBIT D
AGENCY AGREEMENT
THIS AGENCY AGREEMENT ("Agreement"), dated as of the _____ day of December,
1996, between GENERAL ELECTRIC CAPITAL CORPORATION, its successors and assigns
("Lessor"), and XXXXXXXXXX TECHNOLOGY INCORPORATED, its successors and assigns
("Lessee"). Capitalized terms not defined herein shall have the meanings
assigned to them in the Lease (as that term is defined below).
RECITALS:
WHEREAS, General Electric Capital Corporation and Lessee have entered into
a Master Lease Agreement dated as of December , 1996, which contemplates
the execution of one or more Schedules incorporating by reference the terms and
conditions of the Master Lease Agreement. Each Schedule, incorporating by
reference the Master Lease Agreement, is hereinafter referred to as the "Lease".
WHEREAS, the equipment to be leased under the Lease will consist (a) in
part of various components ("Components") supplied by various vendors
("Suppliers") which will then be reconfigured and assembled by Lessee to produce
a unit of completed equipment intended to be leased, and (b) in part of
completed items of equipment supplied by various vendors (also referred to as
"Suppliers") that need no reconfiguration or assembly before they constitute
units of completed equipment intended to be leased ("Completed Items").
Components, when reconfigured and assembled by Lessee, and Completed Items, that
Lessee wishes to be covered by the Lease are referred to as "Equipment For
Lease".
WHEREAS, Lessor and Lessee desire to set forth the basis on which Lessee
shall issue its purchase orders with respect to Components and Completed Item
which Lessee wishes to be brought under the Lease.
WHEREAS, Lessor desires to appoint Lessee its agent to order, receive and
pay for, in the name and on behalf of Lessor, Components and Completed Item.
NOW, THEREFORE, in consideration of the above premises and the mutual
promises contained herein, as well as other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
GENERAL UNDERTAKING
Section 1.01 Ordering of Equipment. From time to time, Lessee shall issue
its purchase orders to, or shall enter into purchase agreements with, Suppliers.
Section 1.02 Appointment. Lessor hereby appoints Lessee, and Lessee
hereby accepts such appointment, as the agent of Lessor, without any fee for
acting as such agent, pursuant to the terms and conditions of this Agreement,
for the purpose of (a) subject to the conditions set forth in Section 2.01
hereof, accepting Components and Completed Items on Lessor's behalf for leasing
to Lessee under the Lease; and (b) paying, on behalf of Lessor, any and all
amounts required to purchase the same from the respective Suppliers thereof
("Purchase Price"). It is specifically agreed that all of the power and
authority vested to Lessee herein shall be subject to any modifications as may
from time to time be made by Lessor.
Section 1.03 Powers. Except as otherwise may be expressly provided in
this Agreement, Lessee is hereby granted the authority to act, and hereby agrees
to act, on behalf of Lessor and in the name of Lessor, solely to the extent
necessary to carry out its duties under this Agreement.
Section 1.04 Lease. This Agreement is entered into in connection with and
subject to the terms of the Lease and in the event of a conflict between the
terms of this Agreement and the Lease, the Lease shall control. Lessee and
Lessor may from time to time hereafter enter into Schedules to the Lease, and it
is the intent of the parties that this Agreement facilitate the leasing of
Equipment under the Lease. NOTHING IN THIS AGREEMENT SHALL BE OR SHALL BE
DEEMED TO BE, A COMMITMENT ON THE PART OF LESSOR TO EXECUTE OR OTHERWISE ENTER
INTO ANY SCHEDULES AFTER THE DATE OF THIS AGREEMENT. Lessor's commitment to
enter into Schedules is set forth in the Lease.
ARTICLE II
DUTIES OF AGENT
Section 2.01 Equipment Orders.
(a) Lessee, pursuant to the agency granted to it by Lessor in Article
I hereof, may receive, accept and pay for Components and Completed Items. It is
contemplated that, upon reconfiguration and assembly of Components and the
purchase of Completed Items, Lessee will, on a quarterly basis, prepare and
submit to Lessor a list of Equipment For Lease that Lessee wishes to be covered
by the Lease and thereupon Lessee shall be unconditionally obligated to lease
such Components and Completed Items from Lessor pursuant to the terms and
conditions of the Lease and the applicable Schedule. Upon and as of the date of
acceptance by Lessee of Equipment For Lease as "Equipment" under the Lease and
satisfaction of the conditions precedent provided for herein and in the Lease,
upon satisfaction of the conditions of the Lease for subjecting such Equipment
For Lease to the terms of the Lease as "Equipment" thereunder, Lessor shall be
unconditionally obligated to purchase such Equipment for Lease pursuant to the
terms of the applicable purchase order and to lease such Equipment For Lease to
Lessee pursuant to the terms and conditions of the Lease and the applicable
Schedule, and the same shall thereupon become "Equipment"
2
under the Lease and under this Agreement. Lessor may refuse to purchase
Equipment For Lease pursuant to such agency if Lessor determines, in its sole
discretion, that the foregoing conditions have not been satisfied; and such
refusal shall not constitute a breach by Lessor hereunder or under the Lease.
(b) Lessee must disclose in writing to all Suppliers that it is
ordering Components and Completed Items "as agent for a third party leasing
company to be designated". Lessee additionally agrees that all purchase orders
executed by Lessee shall: (1) not permit passage of title for Components or
Completed Items earlier than such acceptance by Lessee; and (2) not permit the
Supplier or any other person or entity to retain any security interest in, or
lien on, any Components or Completed Items. Prior to passage of risk of loss of
Components or Completed Items under the terms of the purchase orders, Lessee
shall insure the Equipment For Lease, and provide to Lessor evidence of
insurance, in accordance with the provisions of the Lease.
Section 2.02 Receipt of and Payment for Equipment. With respect to any
purchase order issued by Lessee pursuant hereto, Lessee agrees to pay and
perform all obligations of the purchaser in the time and manner required
thereby. Without limiting the foregoing, on a quarterly basis, Lessee shall
submit a list to Lessor of all Equipment For Lease that Lessee wishes to lease
pursuant to the Lease, and Lessee shall execute and deliver to Lessor a Schedule
describing such units of Equipment For Lease prepared by Lessor in accordance
with the Lease and submitted to Lessee, and Lessee shall also satisfy each of
the conditions of the Lease for subjecting such Equipment For Lease to the terms
of the Lease as "Equipment" thereunder.
Section 2.03 Reimbursement to Lessee. Lessee shall present to Lessor
documentation ("Purchase Documentation"), in form and substance satisfactory to
Lessor in its sole discretion, which includes (1) a list of Equipment For Lease
in connection with preparation of a related schedule, (2) the purchase orders
issued by Lessee with respect to the Components and Completed Items (which
purchase orders contain terms and conditions acceptable to Lessor in its sole
discretion), together with invoices issued in the name of Xxxxxxxxxx Technology
Incorporated, as agent for a third party leasing company to be designated,
issued by Suppliers of Components and Completed Items stating the purchase price
of the same, together with invoices from Lessee for charges for reconfiguration
and assembly of Components, (3) evidence of the payment of the purchase price
paid to Suppliers of Components and Completed Items, and (4) a representation by
Lessee that such Equipment For Lease has then been or is ready to be placed in
service by Lessee in its business. The requirements of clauses (2) and (3)
above shall be deemed satisfied if Lessee provides such items with respect to
not less than ten percent (10%) and not more than fifteen percent (15%) of the
Components and Completed Items, provided that Lessor is reasonably satisfied
with such items provided with respect to such portion of the Components and
Completed Items. If the conditions of the Lease for subjecting such Equipment
For Lease to the terms
3
of the Lease as "Equipment" thereunder have been satisfied on or before the Last
Delivery Date, promptly upon Lessor's receipt of the Purchase Documentation, if
no default pursuant to Section XII of the Lease Agreement or event which, with
the giving of notice or the lapse of time, or both, would constitute such a
default (a "Default"), has then occurred, Lessor shall reimburse Lessee for the
aggregate Purchase Price paid by Lessee for all Components and Completed Items
purchased hereunder in connection with such Schedule, plus Lessee's related
charges for reconfiguration and assembly as evidenced by Lessee's invoices
accepted by Lessor.
Section 2.04 Books and Records. Lessee shall maintain full and accurate
books and records of all related purchase orders, receipts and payments. All
such books and records shall be maintained in a form acceptable to Lessor in its
sole discretion. Such books and records shall be open for inspection and
examination by Lessor and its respective representatives and/or accountants
during Lessee's normal business hours.
ARTICLE III
TERMINATION
Section 3.01 Termination.
(a) Either party may terminate this Agreement at any time upon thirty
(30) days' prior written notice to the other party, which shall be effective
upon the receipt of such written notice. Notwithstanding the foregoing, if
Lessee invokes the protection of any bankruptcy or insolvency law, or any such
law is invoked against or with respect to Lessee or its property, without
further action this Agreement automatically shall terminate. Upon any such
termination, Lessor shall have no continuing obligation under Section 2.03
hereof.
(c) Any termination under this Section 3.01 automatically shall
result in the immediate revocation of all authority vested in Lessee under this
Agreement to order, accept or pay for any Components or Completed Items on
behalf of Lessor.
ARTICLE IV
EXCLUDED EQUIPMENT
Section 4.01 Excluded Equipment. If Equipment For Lease has been acquired
by Lessee hereunder as agent for Lessor and been paid for by Lessee but Lessee
has not been reimbursed or paid for the same by Lessor, and it is thereafter
determined for any reason that such Equipment For Lease will not be subjected to
the Lease (and, therefore, Lessor has and will have no obligation to pay for the
same), then as of the date such determination is made, such Equipment For Lease
automatically shall be deemed to have been excluded from the operation of this
Agreement, and this Agreement shall be ineffective to create or transfer any
legal or beneficial interest in such Equipment For Lease in Lessor, and Lessor
hereby disclaims any interest in such Equipment For Lease. Lessor agrees
4
upon request by Lessee to execute and deliver to Lessee such bills of sale or
other instruments of transfer or disclaimer as Lessee reasonably may request for
the purpose of carrying out the provisions of this Section.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agency Agreement as of the date
first above written.
GENERAL ELECTRIC CAPITAL XXXXXXXXXX TECHNOLOGY INCORPORATED
CORPORATION
By: By:
---------------------------- ------------------------------
Name: Name:
-------------------------- ----------------------------
Title: Title:
-------------------------- ---------------------------
6
