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Exhibit 10.19
MASTER LEASE AGREEMENT
Agreement No. 10950 Dated as of March 16, 1999
between
DOMINION VENTURE FINANCE L.L.C.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
as Lessor
and
QUALITY CARE SOLUTIONS, INC.
a Nevada corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
as Lessee
Master Lease Line: $750,000
Initial Rent Factor: 3.16% Initial Lease Term 36 Months
Treasury Base Rate: 4.80% Treasury Note Maturity 36 Months
Initial Implicit Rate: 9.0%
$ 23,700.00
Advance Rental: (PLUS APPLICABLE TAXES) Security Deposit: $0
Minimum Funding Amount: $75,000.00 Maximum Funding Frequency: monthly
Funding Expiration Date: December 15, 1999
Eligible Equipment: New and/or used furniture, computers, and office equipment.
Softcosts (for purposes of this Lease "softcosts" shall include only software,
but shall not include taxes, labor, shipping and other similar costs) not to
exceed 10% of the Master Lease Line. All Equipment to be purchased must be
approved by Lessor.
ORIGINAL COUNTERPART NO.
The terms and information set forth on this cover page are a part of
the Master Lease Agreement, dated as of the date first written above (this
"Lease"), entered into by and between DOMINION VENTURE FINANCE L.L.C. ("Lessor")
and the Lessee set forth above, the terms and conditions of which are as
follows:
LESSOR'S OBLIGATIONS UNDER THIS LEASE AND EACH SCHEDULE ARE SUBJECT TO THE PRIOR
SATISFACTION OF THE CONDITIONS SET FORTH ON ADDENDUM I HERETO.
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1. DEFINITIONS: Unless otherwise defined in this Lease (which term shall include
the cover page, any Addendum, any Exhibit and any Schedule hereto), capitalized
terms shall have the following meanings:
(a) "Acceptance Certificate" means the Certificate of Inspection
and Acceptance in the form attached hereto as Exhibit D.
(b) "Acceptance Date" means, with respect to each Schedule, the
date of the Acceptance Certificate executed in connection with
such Schedule.
(c) "Additional Information" has the meaning set forth in
Paragraph 19.
(d) "Advance Rental" has the meaning set forth in Paragraph 5(a)
and is in the amount as set forth on the cover page; Lessor
acknowledges receipt of a $5,000 commitment fee paid by Lessee
which shall be applied by Lessor to the Advance Rental.
(e) "Assignee" has the meaning set forth in Paragraph 11(b).
(f) "▇▇▇▇ of Sale" means a ▇▇▇▇ of sale in the form attached
hereto as Exhibit C.
(g) "Claim" has the meaning set forth in Paragraph 13.
(h) "Code" has the meaning set forth in Paragraph 20.
(i) "Commencement Date" has the meaning set forth in Paragraph 4.
(j) "Cost" means the cost to Lessor of purchasing one or more
Units of Equipment including any sales taxes and other charges
paid by Lessor and net of any discounts and rebates.
(k) "Discount Rate" means, as of any date of determination, the
lesser of (i) the then current per annum interest rate for
one-year United States treasury bills as set forth in the Wall
Street Journal on such date and (ii) six percent (6%).
(1) "Eligible Equipment" means Equipment of the types listed
following such term on the cover page of this Lease to the
extent acceptable to Lessor.
(m) "Environmental Law" means the Resource Conservation and
Recovery Act of 1987, the Comprehensive Environmental
Response, Compensation and Liability Act, and any other
Federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree (in each case having the force of
law) regulating or imposing liability or standards of conduct
concerning any Hazardous Materials or other hazardous, toxic
or dangerous waste, constituent, or other substance, whether
solid, liquid or gas, as now or at any time hereafter in
effect.
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(n) "Equipment" means all Units listed in any Schedule together
with all replacement parts, additions, accessions and
accessories to such Units.
(o) "Event of Default" shall have the meaning set forth in
Paragraph 24 hereof.
(p) "Fair Market Value" has the meaning set forth in Paragraph 17.
(q) "Financial Statements" has the meaning set forth in Paragraph
19(a).
(r) "Funding Expiration Date" means the date set forth opposite
such term on the cover page of this Lease or such earlier date
on which Lessor terminates its commitment to fund Schedules
pursuant to the terms of this Lease.
(s) "Hazardous Material" means any hazardous or toxic substance,
material, pollutant or waste, whether solid, liquid or
gaseous, which is regulated by any Federal, state or local
governmental authority.
(t) "Holdover Period" has the meaning set forth in Paragraph 18.
(u) "Implicit Rate" means, with respect to a Schedule, an implicit
interest rate used in calculating the Rent Factor applicable
to such Schedule, calculated as set forth in Section 5(c) of
this Lease.
(v) "Initial Rent Factor" means the rent factor set forth
following such term on the cover page of this Lease.
(w) "Initial Implicit Rate" means the implicit interest rate set
forth following such term on the cover page of this Lease.
(x) "Initial Lease Term" means, with respect to each Schedule, the
period beginning on the first day of the calendar month
following the Acceptance Date for such Schedule and continuing
for the number of months set forth following such term on the
cover page of this Lease.
(y) "Interim Rent" shall have the meaning set forth in Paragraph
5(b) of this Lease.
(z) "Lease Term" means, with respect to each Schedule, the
Noncancellable Term and any Holdover Period.
(aa) "Master Lease Line" means the amount set forth following such
term on the cover page of this Lease.
(bb) "Maximum Funding Frequency" means the time interval specified
opposite such term on the cover page hereof.
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(cc) "Minimum Funding Amount" means the amount set forth following
such term on the cover page of this Lease.
(dd) "Noncancellable Term" means, with respect to each Schedule,
the period from the Acceptance Date for such Schedule through
the end of the Initial Lease Term for such Schedule.
(ee) "Purchase Order Assignment" means a purchase order assignment
in the form of Exhibit B hereto.
(ff) "Rent Factor" means, with respect to a Schedule, the rent
factor calculated using the Implicit Rate applicable on the
date of preparation of such Schedule.
(gg) "Rental Payment" means, for any Schedule, the monthly rent
payment for the Units identified in such Schedule in
accordance with Paragraph 5(c).
(hh) "Residual Value" has the meaning set forth in Paragraph 22(b)
of this Lease.
(ii) "Schedule" means a schedule in the form of Exhibit F to this
Lease identifying this Lease and incorporating this Lease by
reference, which is executed by both parties hereto.
(jj) "Softcosts" has the meaning set forth in Paragraph 17.
(kk) "Supply Contract" has the meaning set forth in Paragraph 6.
(ll) "Tax Benefits" has the meaning set forth in Paragraph 20.
(mm) "Treasury Base Rate" means the interest rate set forth
following such term on the cover page of this Lease.
(nn) "Treasury Note Maturity" means the period of time set forth
following such term on the cover page of this Lease.
(oo) "UCC" means the Uniform Commercial Code as in effect in the
State of California from time to time.
(pp) "Unit" means an item of Equipment.
2. LEASE. Lessor leases to Lessee, and Lessee hires and takes from Lessor,
subject to the terms and conditions set forth in this Lease, the Units described
in the Schedules executed hereunder. Each Schedule shall constitute a separate
and independent lease and contractual obligation of Lessee incorporating the
terms of this Lease. Lessor's commitment to fund Schedules under this Lease
continues through the Funding Expiration Date and is limited to the
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amount of the Master Lease Line; provided, however, that Lessor, acting in its
sole discretion, may terminate or modify its funding commitment at any time if:
(a) there is any material adverse change in the business, management, results of
operations or condition (financial or otherwise) of Lessee, whether or not
arising from transactions in the ordinary course of business, (b) there is any
material adverse deviation by Lessee from the business plan (as it may have been
supplemented in writing) of Lessee presented to Lessor, since the date first
written on the cover page of this Lease, (c) any Event of Default or event which
with the passage of time or notice or both would constitute an Event of Default
exists, or (d) if any term or condition in any Schedule is not satisfied prior
to the Acceptance Date with respect to such Schedule. Each Schedule shall be
funded in an amount not less than the Minimum Funding Amount and not more
frequently than the Maximum Funding Frequency. No Unit of Equipment shall have a
unit cost of less than $1,000 or be subject to a single invoice of less than
$5,000.
3. EQUIPMENT SUBJECT TO LEASE. Lessee shall select the type and quantity of
Equipment (which Equipment shall in each case be Eligible Equipment acceptable
to Lessor) to be subject to each Schedule. Subject to the terms and conditions
of this Lease: (i) if such Equipment is not previously owned by Lessee and is
not subject to a purchase order issued by Lessee, Lessor shall at Lessee's
direction order each Unit from the respective suppliers, and upon delivery and
acceptance by Lessee each such Unit shall be leased to Lessee hereunder, (ii) if
Lessee has previously issued its purchase order to a supplier, Lessee shall
execute a Purchase Order Assignment assigning such purchase order to Lessor and
the Units subject to such purchase order, upon delivery and acceptance by
Lessee, shall be leased to Lessee hereunder; or (iii) if Lessee owns the
Equipment which it intends to make subject to this Lease,, Lessee shall execute
a ▇▇▇▇ of Sale transferring title to such Equipment to Lessor at the purchase
price agreed to between Lessor and Lessee according to an appraisal undertaken
at the expense of Lessee (except in the case of Equipment placed in service by
Lessee not more than sixty (60) days prior to the date of any Schedule for which
the purchase price shall be the original cost to Lessee thereof (net of freight,
taxes, installation and similar costs). Lessee acknowledges that Lessor may have
the ability to obtain discounts or rebates not available to Lessee from
suppliers from which Lessor buys in volume. Any discounts or rebates remitted to
Lessee shall be turned over to Lessor and Cost of the Equipment set forth on any
Schedule shall be deemed to be the Cost net of such discount or rebate. Any
request by Lessee to Lessor to purchase Equipment directly or by assignment of a
purchase order shall be irrevocable.
4. TERM. This Lease is effective upon execution hereof by Lessor and Lessee and
shall continue until full performance of every provision of this Lease; provided
that Lessor's obligations to fund any Schedule are subject to the prior
satisfaction by Lessee of the conditions set forth in Part I of Addendum I to
this Lease. All obligations under each Schedule shall commence upon Lessee's
execution of an Acceptance Certificate and Schedule for the Units to be subject
to such Schedule and Lessor's countersignature on such Schedule; provided that
Lessor's obligation to fund such Schedule is subject to the prior satisfaction
by Lessee of the conditions set forth in Part 2 of Addendum I to this Lease. The
Initial Lease Term with respect to each Schedule shall begin on the first day of
the calendar month following the Acceptance Date (the "Commencement Date").
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5. RENTAL PAYMENTS.
(a) Advance Rental. Upon execution of this Lease, Lessee shall pay to
Lessor an advance payment in an amount equal to the Rent Factor multiplied by
the Master Lease Line (plus applicable taxes) (the "Advance Rental"). A pro-rata
portion of the Advance Rental shall be deemed to prepay as of the date of this
Lease the last Rental Payment for each Schedule. If the Master Lease Line has
not been fully expended by the Funding Expiration Date, Lessor shall retain the
unutilized portion of the Advance Rental as compensation for expenses.
(b) Interim Rent. If the Acceptance Date with respect to any Schedule
shall be other than the first day of the calendar month, Lessee shall make
interim rental payments ("Interim Rent") for each day from and including the
Acceptance Date, through and including the last day of the calendar month prior
to the beginning of the Initial Lease Term in an amount equal to one-thirtieth
of the monthly Rental Payment set forth on the Schedule. Such Interim Rent shall
be due and payable on the first day of the calendar month following the month
for which such payment is assessed.
(c) Rental Payments. Lessee shall pay to Lessor, as rental for
Equipment during each month of the Initial Lease Term of any Schedule and during
any Holdover Period, an amount equal to the Rent Factor multiplied by the total
Cost of the Equipment to Lessor, which amount shall be due and payable in
advance on the first day of each calendar month during the Initial Lease Term
and during any Holdover Period. The Rent Factor will be calculated for each
Schedule (and such Rent Factor shall be fixed for such Schedule's Initial Lease
Term) based on a basis point for basis point adjustment (if any) to the Initial
Implicit Rate equal to the change from the Treasury Base Rate in the U.S.
Treasury note rate for notes of a term equal to the Treasury Note Maturity as
quoted in The Wall Street Journal three days prior to the date such Schedule is
funded. It is not the intent of the parties to create rent or other payment
obligations of Lessee which will be considered usurious under applicable law.
However, if any such payment shall be found to be usurious by a court of
competent jurisdiction, then Rental Payments or such other amounts shall
automatically be reduced to the highest rate or amounts permitted by applicable
law and the usurious portion of the Rental Payments or such other amounts shall
be applied to the Lessee's remaining obligations under the Lease in a manner
reasonably determined by Lessor. In addition to any other remedies that Lessor
may have under this Lease, if Lessee fails to pay any Rental Payment or Interim
Rent or other amount herein provided within five (5) business days after the
same is due, Lessee shall pay to Lessor a late charge calculated daily from the
due date until the date of payment, at the rate of two percent (2%) of such
amount per month, or at the highest rate permitted by applicable law, whichever
is less, to compensate Lessor for additional bookkeeping and collection expense.
All Rental Payments, Advance Rental, Interim Rent, late charges and other
amounts for which Lessee is liable shall be paid to Lessor at its address as set
forth above or as otherwise directed by Lessor.
(d) Automatic Transfers. If Lessee so agrees, Lessor will initiate
monthly debit entries to Lessee's bank account for payment of Rental Payments on
the fifth business day of each month. If Lessee agrees to automatic transfers,
Lessee will provide depository and account information to Lessor and shall
execute or cause to be executed such supplemental agreements as
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Lessor deems necessary in order to instate and maintain automatic transfer
payments by Lessee to Lessor. Other amounts due hereunder will be invoiced to
Lessee by Lessor and shall be due and payable within five (5) business days of
receipt of invoice.
6. CHARACTERIZATION OF LEASE; WARRANTIES; WAIVERS; LIABILITY.
(a) Characterization of Lease. It is the intent of Lessor and Lessee
that this Lease be a true lease and not a lease intended as security or a
conditional sales agreement. Lessor and Lessee agree to treat this Lease as a
true lease for income tax purposes. Lessor and Lessee agree that this Lease is a
"finance lease" as that term is defined by Section 10103(a)(7) of the UCC. With
respect to the Equipment subject to each Schedule, Lessee acknowledges and
warrants as of the date of such Schedule that (i) Lessee has received a copy of
the contract(s) pursuant to which Lessor acquired the Equipment (the "Supply
Contract"), or (ii) Lessee has reviewed and approved the Supply Contract, or
(iii) Lessor has informed Lessee in writing that Lessee may have rights under
the Supply Contract and that Lessee should contact the supplier for a
description of any such rights. LESSOR AND LESSEE AGREE THAT THIS LEASE IS A
"NET" LEASE, AND LESSEE'S OBLIGATION TO MAKE RENTAL PAYMENTS AND PAY OTHER SUMS
WHEN DUE AND OTHERWISE PERFORM ITS OBLIGATIONS UNDER THIS LEASE SHALL BE
ABSOLUTE AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO OR AFFECTED BY OR
REDUCED BY ANY ABATEMENT, REDUCTION, SET-OFF, DEFENSE, COUNTERCLAIM,
INTERRUPTION, DEFERMENT, RECOUPMENT OR OTHER RIGHT WHICH LESSEE MAY HAVE AGAINST
LESSOR, THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT OR ANY OTHER PERSON.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NO DEFECT OR UNFITNESS OF ANY
ITEM OF EQUIPMENT NOR OTHER CLAIM REGARDING CONDITION OR USE OF THE EQUIPMENT
SHALL RELIEVE LESSEE OF THE OBLIGATION TO MAKE RENTAL PAYMENTS, PAY ANY OTHER
SUM WHEN DUE OR OTHERWISE PERFORM ANY OTHER OBLIGATION DUE TO LESSOR AND ITS
SUCCESSORS AND ASSIGNS UNDER THIS LEASE.
(b) Warranties. Lessor warrants that, so long as no Event of Default
has occurred and is continuing, neither Lessor nor its successors or Assignees
or anyone acting or claiming through Lessor will interfere with Lessee's quiet
enjoyment and use of the Equipment. EXCEPT FOR LESSOR'S WARRANTY OF QUIET
ENJOYMENT, LESSEE HAS NOT RELIED UPON LESSOR IN SELECTING THE EQUIPMENT AND
ACKNOWLEDGES THAT LESSOR HAS MADE NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, INCLUDING WITHOUT LIMITATION
ITS CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. Until the
Lease is terminated, Lessor hereby assigns to Lessee and Lessee shall have the
benefit of, any and all manufacturers warranties, service agreements and
intellectual property indemnities, if any, with respect to each Unit. Lessee's
sole remedy for the breach of any such warranty, indemnification or service
agreement shall be against the manufacturer or supplier of such Equipment and
not against Lessor, nor shall any such breach have any effect whatsoever on the
rights and obligations of Lessor or Lessee hereunder.
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(c) Waivers. Lessee hereby specifically waives any and all rights and
remedies conferred upon Lessee by UCC Sections 10508 through 10522, including
(without limitation) Lessee's rights to (i) cancel or repudiate this Lease, (ii)
reject or revoke acceptance of any Unit, (iii) recover damages from Lessor for
breach of warranty or for any other reason, (iv) claim a security interest in
any rejected property in Lessee's possession or control, (v) deduct from Rental
Payments all or any part of any claimed damages resulting from 'Lessor's default
under this Lease, (vi) accept partial delivery of the Equipment, (vii) "cover"
by making any purchase or lease of other property in substitution for property
due from Lessor, (viii) recover from the Lessor any general, special, incidental
or consequential damages, for any reason whatsoever, and (ix) seek specific
performance, replevin or the like for any of the Units. To the extent permitted
by applicable law, Lessee also hereby waives any rights now or hereafter
conferred by statute or otherwise which may require Lessor to sell, lease or
otherwise use any Equipment in mitigation of Lessor's damages except as set
forth in Paragraph 26 of this Lease or which may otherwise limit or modify any
of Lessor's rights or remedies under Paragraph 25. Notwithstanding the
foregoing, nothing in this Lease shall be construed as a waiver of Lessee's
right to seek a separate recovery of any Rental Payment that is not due and
payable under this Lease, and Lessee retains the right to seek damages or other
remedies on account of Lessor's failure to perform its obligations under this
Lease.
(d) Liability. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT THE MANUFACTURER,
SUPPLIER OR DISTRIBUTOR OF THE EQUIPMENT, THAT SAID ENTITIES ARE NOT AGENTS OF
LESSOR, THAT LESSEE RENTS THE EQUIPMENT "AS IS", AND THAT LESSOR HAS ACCEPTED NO
RESPONSIBILITY FOR THE TRANSPORTATION, INSTALLATION OR REQUIRED LICENSING
NECESSARY FOR THE TRANSFER, INSTALLATION OR USE OF THE EQUIPMENT. LESSEE HEREBY
WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN
TORT) WHICH IT MIGHT HAVE AGAINST LESSOR FOR ANY LOSS, DAMAGE (INCLUDING
INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED DIRECTLY OR INDIRECTLY BY
THE EQUIPMENT, ITS USE OR MAINTENANCE, OR ANY DELAY OR FAILURE TO PROVIDE ANY
UNIT OF EQUIPMENT, OR ANY INTERRUPTION OF SERVICE OR LOSS OF USE OF THE
EQUIPMENT. If any Unit is unsatisfactory for any reason, Lessee shall make any
claim solely against the manufacturer or supplier of the Unit. Lessor shall not
be liable for specific performance of this Lease or for damages if for any
reason a supplier declines, delays or fails to fill any order.
7. ADJUSTMENTS FOR ACTUAL COST. Upon Lessee's request, Lessor may, but shall
have no obligation to, fund a Schedule which would cause the aggregate Cost of
Equipment on all Schedules funded under this Lease to exceed the Master Lease
Line. If at any time the actual aggregate Cost of all Equipment exceeds the
Master Lease Line, the Advance Rental shall be increased proportionately. Lessee
shall pay any additional sums for Advance Rental due under this Lease within
five (5) business days after receiving notice from Lessor. Lessee may not
request funding for a Schedule which would cause the aggregate Cost of Equipment
under all Schedules funded under this Lease to exceed the Master Lease Line by
more than ten percent (10%).
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8. TITLE. All Equipment shall remain personal property, and the title thereto
shall remain exclusively in Lessor notwithstanding the manner in which any Unit
may be attached to realty. Lessee agrees, upon the request of Lessor at any time
during the Lease Term, to affix or permit Lessor to affix, in a permanent place
on any Unit, labels supplied by Lessor identifying the Equipment as property of
Lessor, and shall not alter or remove any such label from any Unit. Lessee shall
keep the Equipment free from any and all liens and encumbrances except those
created by Lessor. Lessee shall give Lessor immediate notice of any judicial
process or encumbrance affecting the Equipment and shall indemnify and save
Lessor harmless from any loss or damage caused thereby, including without
limitation court costs, reasonable attorney fees and expenses.
9. FILING. Lessee shall execute or cause to be executed, at Lessee's sole
expense, such supplemental instruments, financing statements and landlord's
waivers as Lessor deems necessary or advisable and shall cooperate to defend the
title of Lessor in the Equipment by filing or otherwise. Lessee authorizes
Lessor to record in any state, this Lease and any financing statements, security
agreements and landlord's waivers with respect to the Equipment or any
collateral provided by Lessee to Lessor. Lessee agrees to give Lessor thirty
(30) days written notice of any change in Lessee's name or place of business.
Lessee agrees to give written notice to Lessor as soon as Lessee has knowledge
of any change of ownership of the real property upon which or within which the
Equipment is located.
10. TAXES. Lessee shall pay in a timely fashion, and shall indemnify and hold
Lessor harmless against all federal, state and local taxes, assessments, license
and registration fees, and other governmental charges of any kind, including,
without limitation, those levied on motor vehicles or trailers, and any interest
or penalties thereon, which may be levied, directly or indirectly, against the
Equipment or with respect to its ordering, purchasing, delivery, ownership,
possession, use, leasing, documentation, and return or other disposition
thereof, regardless of whether such taxes and fees are levied against Lessor or
Lessee. Such taxes and fees to be paid by Lessee shall include, without
limitation, property, sales, rent, franchise, gross receipts, lease, and use
taxes, and any other tax measured by gross Rental Payments, but shall not
include income or franchise taxes based on Lessor's net income and payable by
Lessor on its receipt of Rental Payments hereunder. Personal property taxes
shall be reasonably estimated by Lessor and billed to Lessee as of the date of
assessment each year. Upon receipt by Lessor of the final personal property tax
assessment and invoice, Lessor shall invoice or credit Lessee, as applicable,
for any differences of such final assessment and Lessor's original estimate.
Lessor shall have the right, but not the obligation, to pay any such taxes or
fees regardless of whether levied against Lessor or Lessee. Any and all sales or
use taxes levied against Lessor's purchase of Equipment shall be added to the
total Cost of such Equipment as specified on the Schedule under which such
Equipment is added to this Lease. With the exception of taxes and fees which are
added to the total Cost of Equipment hereunder, Lessee shall reimburse Lessor
within five (5) business days after receipt of invoice from Lessor specifying
the amount of, and reason for, any payment by Lessor of amounts for which Lessee
is liable under this Paragraph 10. Lessee shall timely prepare and file all
reports and returns which are required to be made with respect to such taxes
and/or fees, and all such reports shall show Lessor as owner of the Equipment.
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11. ASSIGNMENTS AND SUBLEASES.
(a) WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, LESSEE SHALL NOT
ASSIGN, PLEDGE, GRANT A SECURITY INTEREST IN, OTHERWISE ENCUMBER, SUBLEASE OR
TRANSFER, OR IN ANY WAY DISPOSE OF OR OTHERWISE RELINQUISH POSSESSION OR CONTROL
OVER (COLLECTIVELY, A "TRANSFER") ITS RIGHTS WITH RESPECT TO ANY UNIT OF
EQUIPMENT OR ALL OR ANY PART OF ITS RIGHTS AND OBLIGATIONS UNDER THIS LEASE. If
notwithstanding the foregoing, a Transfer by Lessee takes place, the rights of
the sublessee or other transferee will be subject and subordinate to all of the
terms of this Lease, including Lessor's right of repossession on the occurrence
of an Event of Default. Lessee will remain primarily liable for the performance
of all of the terms of this Lease to the same extent as if the sublease or
transfer of possession had not occurred. Lessor and Lessee agree that any
purchase of all or substantially all of Lessee's assets, any merger or
consolidation into or with Lessee regardless of whether Lessee is the surviving
entity or any entity acquiring more than forty percent (40%) of Lessee's voting
securities shall be deemed to be a Transfer under this Lease.
(b) Lessor shall have the right, in its sole discretion, to assign,
sell, pledge, grant a security interest in or otherwise encumber its rights
under this Lease or one or more Schedules and/or with respect to the Equipment
subject to this Lease or such Schedule(s) to one or more persons or entities
(each, an "Assignee"), provided that Lessor shall promptly provide Lessee with
written notice of any assignment of the lease or any Schedule. Lessee
acknowledges that an assignment, sale or other encumbrance by Lessor would not
materially change Lessee's duties under the Lease or materially increase its
burdens or risks. Even if such an assignment, sale or other encumbrance could be
deemed to have that effect, Lessee agrees that the assignment, sale or other
encumbrance will nevertheless be permitted. Without prejudice to any rights that
Lessee may have against Lessor, Lessee agrees that it will not assert against an
Assignee any claim or defense that it may have against Lessor.
(c) Subject to the foregoing, this Lease inures to the benefit of, and
is binding upon, the heirs, legatees, representatives, successors and assigns of
Lessee and Lessor.
12. REPRESENTATIONS AND WARRANTIES.
(a) Lessee warrants and represents the following as of the date hereof:
(i) Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is duly qualified
and authorized to do business in the state(s) where the Equipment will be
located; (ii) Lessee has the full corporate power, authority and legal right and
has obtained all approvals and consents and has given all notices necessary to
execute and deliver this Lease and perform the terms hereof and of each
Schedule; (iii) there is no action, proceeding or claim pending or, insofar as
Lessee knows, threatened against Lessee or any of its subsidiaries before any
court or administrative agency which might have a material adverse effect on the
business, condition or operations of Lessee or any subsidiary; and (iv) this
Lease has been and
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each Schedule will be duly executed and delivered by Lessee and constitute or
will constitute the valid, binding and enforceable obligations of Lessee.
(b) Lessee agrees that by its signature on each Schedule it shall be
deemed to have warranted and represented the following as of the Acceptance Date
of such Schedule: (i) all of the Units subject to such Schedule are accurately
described in Annex A attached to such Schedule, have been fully assembled and
conform to all applicable performance criteria; (ii) the requirements of this
Lease and of Lessor with respect to the identification of the Units have been
met; and (iii) each of the representations and warranties set forth in clause
(a) of this Section 12 remains true and correct.
13. USE AND INDEMNITY. Lessee shall use the Equipment only in Lessee's
business. Lessee agrees not to allow the Equipment to be used by other than its
employees, consultants and agents. Lessee acknowledges that the Equipment is
leased for commercial purposes and not for personal, family or household use.
Lessee agrees to indemnify and hold Lessor, and Lessor's officers, directors,
shareholders, partners, affiliates, agents, servants, successors and Assignees,
harmless against any and all liabilities, losses, damages, actions, claims and
expenses of any kind and nature, including, without limitation, court costs and
reasonable attorneys' fees and expenses (each, a "Claim"), directly or
indirectly related to or arising in connection with the breach of any
representation or warranty of Lessee under this Lease or the manufacture,
purchase (other than any Claim resulting from Lessor's breach of its obligations
under any Purchase Order Assignment), licensing, lease (other than any Claim
resulting from Lessor's breach of its obligations under the Lease) or sublease,
delivery, installation, operation, use, ownership, maintenance, storage,
relocation, return or condition of any Unit of the Equipment (regardless of
whether such Unit is at the time in the possession or control of Lessee), except
to the extent any such claims, actions, liabilities and expenses result from the
gross negligence or willful misconduct of Lessor. The foregoing indemnity shall
cover, without limitation, (i) any Claim in connection with a design or other
defect (latent or patent) in any Unit, (ii) any Claim for infringement of any
patent, copyright, trademark or other intellectual property right, (iii) any
Claim resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release from any Unit of any Hazardous
Materials, including, without limitation, any Claims asserted or arising under
any Environmental Law, or (iv) any Claim for negligence (other than relating to
the gross negligence of Lessor) or strict or absolute liability in tort. Upon
Lessor's written demand, Lessee shall assume and diligently conduct, at its sole
cost and expense, the entire defense of Lessor and its agents, employees,
successors and assigns against any indemnified Claim described in this Paragraph
13. Lessee shall not settle or compromise any Claim against or involving Lessor
without first obtaining Lessor's written consent thereto, which consent shall
not be unreasonably withheld. The foregoing indemnity shall continue in full
force and effect notwithstanding the termination or cancellation of this Lease,
whether by expiration of time, operation of law or otherwise.
14. LOCATION. Lessee shall keep the Equipment at its place of business as
specified above or on the Schedules. Lessee shall not permit any Equipment to be
moved to a new location without the prior written consent of Lessor which
consent shall not be unreasonably withheld.
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15. RIGHT OF INSPECTION. Lessor and its agents shall have the right, at any time
during normal business hours, to inspect and photograph the Equipment, to review
all maintenance records related to the Equipment and, during the last ninety
(90) days of the Noncancellable Term of each respective Schedule, to demonstrate
the Equipment specified thereon to prospective purchasers; provided, however,
Lessor shall give five (5) days' notice to Lessee of any such demonstration.
16. MAINTENANCE. Lessee shall exercise due and proper care in the use, repair
and servicing of the Equipment. Lessee shall, at its own expense, make all
repairs and replacements required to maintain the Equipment in good working
condition in accordance with manufacturers' specifications and Lessor's
requirements, and shall pay all other operating expenses relating to the
Equipment. Lessee shall have the right, upon ten (10) days' prior written notice
to Lessor, to make any alterations, additions or improvements to any Unit,
provided that such alterations, additions or improvements (i) do not reduce the
Fair Market Value of such Unit, (ii) do not impair the originally intended
function or use of such Unit, (iii) do not render such Unit in such a condition
that it cannot, prior to the expiration, cancellation or other termination of
the Lease for such Unit, be restored to its original condition, reasonable wear
and tear alone excepted, and (iv) do not result in the cancellation or
termination of any warranties made by the supplier of such Unit. If Lessee does
not exercise its option to purchase the Equipment, as specified in Paragraph 17,
or if this Lease shall be earlier terminated or cancelled for any reason, Lessee
shall restore each Unit to its original condition, reasonable wear and tear
alone excepted, prior to the expiration, cancellation or other termination of
each respective. Schedule. All replacement parts and additions incorporated into
a Unit shall become the property of Lessor immediately upon incorporation;
provided, however, that Lessor shall transfer to Lessee title to any
alterations, additions and improvements which were made by Lessee at its own
expense to each item of Equipment purchased by Lessee pursuant to the provisions
of Paragraph 17. Lessee agrees to maintain and provide upon request of Lessor
all internal maintenance reports relating to the Equipment.
17. PURCHASE OPTION. Upon written notice to Lessor not less than ninety (90)
days nor more than one hundred eighty (180) days prior to the last day of the
Noncancellable Term of the first Schedule executed pursuant to this Lease, if
Lessee has fulfilled all of its obligations hereunder, Lessee shall have the
right to purchase all, but not less than all, of the Equipment under all
Schedules, for the aggregate Fair Market Value of such Equipment (plus
applicable taxes). Should Lessor and Lessee fail to agree upon the Fair Market
Value of the Equipment, said price shall be determined by an independent
appraiser, and the cost of the appraisal shall be borne equally by both Lessor
and Lessee. Notwithstanding anything contained in this Paragraph 17, upon the
expiration of the Noncancellable Term of each Schedule, Lessee shall be required
to purchase all Equipment consisting of software ("Softcosts") under such
Schedule at fifteen percent (15%) of total cost of such Softcosts to Lessor.
Notwithstanding the date on which Lessee exercises this purchase option or
satisfies its purchase obligations with respect to Software, Lessee shall
acquire no rights of title to any Equipment, nor shall title to any Unit be
transferred to Lessee after the exercise of this purchase option or satisfaction
of Lessees' purchase obligation until the expiration of the Noncancellable Term
for the Schedule on which such Unit is specified. Lessee shall remain liable for
all Rental Payments and other obligations
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due under each Schedule until the expiration of the Noncancellable Term of such
Schedule. Any Equipment sold by Lessor shall be sold "AS IS", "WHERE IS", and
with no warranties, express or implied, including without limitation implied
warranties of merchantability and fitness for any particular purpose. "Fair
Market Value" is defined as the estimated amount at which the property might be
expected to exchange in an arm's length transaction between a willing buyer
(other than a used equipment dealer) and a willing seller, neither being under
compulsion, each having reasonable knowledge of all relevant facts, and with
equity to both, with the assumptions that the Units (i) are being sold "in place
and in use, (h) are free and clear of all liens and encumbrances, and (iii) are
in the condition required by Paragraph 16 of this Lease.
18. RETURN OF EQUIPMENT. Upon ninety (90) days' written notice to Lessor, in the
event Lessee has not exercised its purchase option as specified in Paragraph 17,
after such notification and upon the expiration, cancellation or other
termination of the Noncancellable Term of each Schedule, Lessee shall, at
Lessee's sole expense, properly pack and return the Equipment, insured,
unencumbered and in the same condition as when received by Lessee, reasonable
wear and tear alone excepted, by such carriers as Lessor shall approve and to
such place as designated by Lessor. Should Lessee fail to give notice of its
intent to return or fail to return the Equipment as directed above, all
obligations of Lessee under this Lease, including Rental Payments, shall remain
in full force and effect for the period from the end of the Initial Lease Term
until ninety (90) days after notice is given to Lessor of Lessee's intent to
return or purchase the Equipment (the "Holdover Period").
19. FINANCIAL STATEMENTS; OTHER INFORMATION.
(a) Lessee shall provide to Lessor the financial statements specified
in this Paragraph 19 (a), prepared in accordance with generally accepted
accounting principles, consistently applied (the "Financial Statements");
provided, however, that after the effective date of the initial registration
statement covering a public offering of Lessee's securities, the term "Financial
Statements" shall be deemed to refer only to those statements required to be
filed by the Securities and Exchange Commission, to be provided no less
frequently than quarterly.
(i) As soon as practicable (and in any event within thirty
(30) days after the end of each month), a reasonably detailed balance sheet as
of the end of such month and the related statements of income or loss, cash flow
and stockholders' equity of the Lessee during such month (including notification
of the commencement of any material litigation by or against Lessee), certified
by Lessee's Chief Executive Officer or Chief Financial Officer fairly to present
the data reflected therein.
(ii) As soon as practicable (and in any event within ninety
(90) days after the end of each fiscal year), audited balance sheets as of the
end of such year (consolidated if applicable), and related statements of income
or loss, retained earnings or deficit, cash flows and stockholders' equity of
Lessee for such year, setting forth in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by an audit report and
opinion of the independent certified public accountants of recognized national
standing selected by Lessee.
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(b) Lessee shall promptly provide to Lessor copies of all notices,
minutes, consents and other material that it provides to its shareholders at the
same time they are delivered to the shareholders. Lessee shall promptly furnish
to Lessor any additional information (including but not limited to tax returns,
income statements, balance sheets, and names of principal creditors) as Lessor
reasonably believes necessary to evaluate Lessee's continuing financial
obligations (the "Additional Information").
(c) Lessor agrees to preserve the confidentiality of all information
provided to it hereunder by Lessee regarding the Lessee and its business which
Lessee designates in writing as confidential and which is otherwise not
generally known (except to the extent any disclosure of such information is
required by a court of competent jurisdiction or governmental authority).
20. TAX INDEMNIFICATION. Lessee acknowledges that this Lease has been entered
into on the basis that Lessor or Lessor's Assignee intends to claim such
depreciation, interest deductions and other tax benefits (the "Tax Benefits") as
are provided to an owner of Equipment under the Internal Revenue Code of 1986,
as amended (the "Code") and corresponding provisions of state law. If Lessor or
Lessor's Assignee shall not have the right to claim or there shall be
disallowed, deferred, recaptured or otherwise made unavailable with respect to
Lessor or Lessor's Assignee all or any portion of the Tax Benefits as a result
of an act or failure to act by Lessee in contravention of any of the terms and
conditions of the Lease, Lessee shall promptly pay to Lessor or Lessor's
Assignee, an amount which, on an after-tax basis, will compensate Lessor or
Lessor's Assignee for the value of the lost Tax Benefits. The Tax Benefits shall
be deemed to have been disallowed or recaptured upon the earliest of (i) the
adjustment by a taxing authority of the tax return of Lessor to reflect such
loss; or (ii) the payment by Lessor to the Internal Revenue Service or state
taxing authority of the tax increase resulting from such lost Tax Benefits.
Lessor or Lessor's Assignee shall be deemed not to have the right to claim the
Tax Benefits if, in the opinion of Lessor's independent tax counsel, reasonably
acceptable to Lessee, there is no reasonable basis for claiming the Tax
Benefits.
21. ADDITIONAL LESSOR RIGHTS.
(a) A representative of Lessor shall have the right to meet with
Lessee's Chief Executive Officer and Chief Financial Officer once each quarter
throughout the lease term to review and discuss the operating performance and
financial condition of the Company.
22. RISK OF LOSS. Lessee assumes the entire risk of loss, theft and damage of
the Equipment from any cause whatsoever, and no such event shall relieve Lessee
of any obligation under this Lease. Lessee shall notify Lessor in writing within
ten (10) days after any such event. Lessee agrees that Lessor shall have the
following remedies upon each occurrence of the following events:
(a) In the case of damage of any kind whatsoever to any Unit (unless
such Unit is damaged beyond repair), Lessee shall, at Lessee's sole expense and
with Lessor's reasonable consent, (i) restore such Equipment to its original
condition, reasonable wear and tear alone excepted, or (ii) replace it with like
equipment of the same or later model in good condition.
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Upon Lessee's replacement of any Equipment as specified in clause (ii) of this
Paragraph 22(a), Lessee shall transfer title to such replaced Equipment to
Lessor.
(b) If any Unit is reasonably determined by Lessor to be damaged beyond
repair, or if any Unit is stolen or lost and such Unit is not returned to its
proper location within thirty (30) days after notice thereof to Lessee, Lessee
shall, with Lessor's reasonable consent, immediately pay to Lessor: (i) the
amount required to replace such Unit with like equipment of the same or later
model in good condition, in which case such Unit shall be substituted for the
damaged Unit on the relevant Schedule, and Rental Payments shall continue
throughout the Lease Term of the Schedule to which the Unit becomes subject
without any interruption, or (ii) the sum of (A) the aggregate unpaid rent due
for the balance of the Noncancellable Term for the Unit involved, discounted to
present value at the Discount Rate; plus (B) the then estimated Fair Market
Value of the Unit involved, calculated as of the expiration of the
Noncancellable Term (the "Residual Value"), discounted to present value at the
Discount Rate; plus (C) any tax payments or indemnification for which Lessee is
liable under Paragraphs 10 and 20; plus any other amounts with respect to such
Unit for which Lessee is liable under this Lease; provided, however, the option
specified in clause (i) of this Paragraph 22(b) shall not be available if an
Event of Default has occurred and is continuing. Upon payment under clause (ii)
of Paragraph 22(b), this Lease shall terminate with respect to the Unit(s) paid
for, and Lessee shall become entitled to such Unit(s) "AS IS" and "WHERE IS"
WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(c) Any proceeds paid to Lessor from the personal property insurance
specified in Paragraph 23(a)(i) shall be applied to Lessee's obligations under
this Paragraph 22.
23. INSURANCE.
(a) Lessee shall, at its own expense, maintain the following types of
insurance, with companies with an A-5 Best rating or better, acceptable to
Lessor, until such time as Lessee has returned the Equipment as specified in
Paragraph 18 or taken title to the Equipment pursuant to Paragraph 17:
(i) Personal property insurance on all property owned by
Lessee (including without limitation all of the Equipment) in an agreed amount
based upon the following:
(1) Standard "all risk" property insurance, including
boiler and machinery insurance, earthquake insurance, if applicable, and flood
insurance if any Equipment is located in an identified "flood hazard area," in
which flood insurance has been made available pursuant to the National Flood
Insurance Act of 1968;
(2) The amount of such insurance shall be not less
than the greater of the fair market value or the full undepreciated replacement
value of the Equipment. The amount of such insurance allocable to loss or damage
or personal property shall not have a deductible in excess of one thousand
dollars ($ 1,000.00) per occurrence.
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(3) Such insurance shall name Lessor as loss payee
with respect to the Equipment, and shall set aside the amount stated in
Paragraph 23(a)(i)(2) for the sole benefit of, and payable directly to, Lessor.
(ii) Employee dishonesty insurance payable to Lessor with
respect to the theft of the Equipment.
(iii) Business interruption insurance in an amount at all
times equal to the total Rental Payments to become due during the six months
following the date of calculation. In the event of any interruption of Lessee's
business, the amount payable to Lessor shall be equal to the actual loss of
Rental Payments suffered by Lessor as the result of such interruption, and shall
be payable to Lessor within thirty (30) days from the date of loss, and on a
month-to-month basis thereafter, until Lessee's business is returned to a fully
operational state, plus ninety (90) days.
(iv) Commercial general liability insurance covering bodily
injury (including death) and property damage, naming Lessor, its directors,
officers, agents and employees as an Additional Insureds on all policies
(evidenced by an endorsement issued by the insurer (as opposed to a certificate
issued by an agent of the insurer)), and providing total limits in amounts as
are at the time carried by entities engaged in the same or similar business and
which are similarly situated, but in no event less than two million dollars
($2,000,000.00) for combined single limit occurrence. All such policies shall
cover any injury or damage occasioned by, or occurring upon, Lessee's premises,
products, operations and, at Lessor's option, explosion, collapse and
underground hazards. All such policies shall contain contractual liability
coverage including all liability assumed under this agreement, and a cross
liability clause providing that such insurance shall, except with respect to the
limits of liability, apply separately to each insured.
(v) Workers compensation insurance.
(b) All insurance specified in this Paragraph 23 shall be primary over,
and in no event shall, any insurance carried by Lessor be called upon to
contribute to any loss relating to or arising out of this Lease. All insurance
shall be in effect, and shall be evidenced by a certificate of insurance with
all required endorsements as required pursuant to this Paragraph 23 delivered to
Lessor on or prior to the date upon which Lessee executes this Lease.
Notwithstanding anything to the contrary contained in this Lease, Lessor shall
have no obligation to purchase any Equipment until all policies are in place.
All such policies shall provide for at least thirty (30) days' prior written
notice to Lessor in the event of any cancellation, non-renewal or material
change in coverage, and upon request by Lessor shall provide a copy of any and
all endorsements or other documentation relating to such policies.
(c) Should Lessee, at any time during the Lease Term, be without
sufficient insurance, as determined by Lessor in accordance with the provisions
of this Paragraph 23, Lessee appoints Lessor as its agent to obtain such
coverage, and promises to pay to Lessor the entire cost of such coverage.
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24. DEFAULT. Each of the following events shall constitute an "Event of Default"
under this Lease:
(a) Nonpayment, by the due date specified herein, of any Rental Payment
or other payment required of Lessee under the terms of this Lease, and such
nonpayment shall continue for a period of five (5) business days;
(b) Noncompliance with any or all of the provisions of Paragraph 23,
and such noncompliance shall continue for a period of five (5) days after notice
thereof is given to Lessee;
(c) If Lessor shall reasonably determine that Lessee has made a
misstatement or false statement of, or omitted to state, a material fact in
connection with the execution, performance or nonperformance of this Lease or
any Schedule, or if any representation or warranty of Lessee in this Lease, any
Schedule or any Acceptance Certificate is inaccurate or false in any material
respect;
(d) If Lessee, without Lessor's prior written consent, shall have
removed, parted possession with, sold, transferred, encumbered, assigned or
sublet the Equipment or Lessee's interest under this Lease or attempted to do
any of the foregoing; or if Lessee shall have converted any interest of Lessor
arising under this Lease or any purchase order, or resulting from the purchase
of Equipment or attempted to convert any of the foregoing;
(e) If any of Lessee's credit or financial information submitted to
Lessor at any time (including but not limited to due diligence materials,
Financial Statements and Additional Information) contains any misstatement or
false statement of a material fact, or fails to state therein any material fact
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading;
(f) If any single judgment for payment of money damages in excess of
twenty-five thousand dollars ($25,000.00), or aggregate judgments for payment of
money damages in excess of fifty thousand dollars ($50,000.00), shall be
rendered against Lessee and shall remain undischarged for a period of thirty
(30) days during which execution shall not be effectively stayed;
(g) If any substantial part of Lessee's property shall be subjected to
any levy, seizure, involuntary assignment, attachment, application or sale for
or by any creditor or governmental agency;
(h) If any single indebtedness of Lessee exceeding the sum of
twenty-five thousand dollars ($25,000,00), or aggregate indebtedness exceeding
the sum of fifty thousand dollars ($50,000.00), under any other lease or
contract for the borrowing of money or on account of the deferred purchase price
of property shall be accelerated, or subject to acceleration upon the giving of
notice, passage of time or both as a result of a default by Lessee, or the
obligee with
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respect to such indebtedness shall exercise any other remedy it may have as a
result of such default;
(i) If an order, judgment or decree shall be entered by any court
having jurisdiction for (i) relief in respect of Lessee in an involuntary case
under any applicable bankruptcy, insolvency or other similar law (as now or
hereafter in effect), (ii) appointing of receiver, liquidator, assignee,
trustee, custodian, sequestrator (or similar official) for Lessee or for any
substantial part of its property, or sequestering any substantial part of the
property of Lessee, or (iii) liquidating of Lessee's affairs, and any such
order, judgment or decree shall remain in force undismissed, unstayed or
unvacated for a period of sixty (60) days after the date of entry thereof, or if
Lessee shall become insolvent or generally not pay, or shall be unable to pay,
or shall admit in writing its inability to pay its debts as such debts become
due; or if Lessee shall seek relief of any kind under any such law or consent to
any of the foregoing; or
(j) Nonperformance of any of Lessee's obligations under this Lease
other than those described elsewhere in this Paragraph 24, and such
nonperformance shall continue for a period of ten (10) days after notice thereof
is given to Lessee.
25. REMEDIES. Upon the occurrence and during the continuance of any Event of
Default, with or without canceling or terminating this Lease, Lessor or its
agent shall have the right, without demand or prior notice, in Lessor's sole
discretion, to exercise any one or more of the following remedies:
(a) To cancel this Lease and all Schedules;
(b) To declare the damages specified in Paragraph 26 to be immediately
due and payable;
(c) To take possession of any or all Units of Equipment with or without
any court order or other process of law, and for this purpose Lessor and/or its
agents may enter upon any premises of or under the control or jurisdiction of
Lessee or any agent of Lessee, without liability for suit, action or other
proceeding by Lessee and remove the Equipment therefrom; Lessee further agrees,
on demand, to assemble the Equipment and make it available to Lessor at a place
to be designated by Lessor which is reasonably convenient to Lessor and Lessee;
notwithstanding the foregoing, such taking of possession shall not relieve
Lessee of its obligations to pay damages as set forth in Paragraph 26. Lessee
further waives any and all damages occasioned by such taking of possession.
(d) To exercise any other right or remedy which may be available to
Lessor under the UCC or any other applicable law.
26. DAMAGES. Lessor's damages, in the event of default by Lessee, shall include
(in addition to all other damages available to Lessor under applicable law): (i)
the due and unpaid balance of Rental Payments and all other amounts payable
hereunder plus late charges and interest due under Paragraph 5(c) (but not more
than the maximum rate permitted by law) for the
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period after the date such payments were due, (ii) the aggregate of all
remaining Rental Payments through the end of the Noncancellable Term of each
Schedule, discounted to present value at the Discount Rate, (iii) the Residual
Value, discounted to present value at the Discount Rate, (iv) any
indemnification payments due hereunder plus interest at a rate equal to the
lesser of 1.5% per month or the maximum rate permitted by law for the period
after the date such payments were due, (v) costs of repossession, recovery,
storage and repairs and of lease or sale to a third party, plus (vi) all other
expenses including court costs and reasonable attorneys' fees and expenses.
Lessor's obligation to mitigate said damages and any reduction of the amounts
due to Lessor shall be limited as follows:
(a) Lessor shall make best efforts to mitigate its damages by either
selling or re-leasing the Equipment to a third party for the highest net cash
proceeds available on the date of sale or re-lease. In the case of a sale of the
Equipment to a third party, any amounts received from the sale (or any loan
proceeds received by Lessor from financing a re-lease with a third party lender)
shall be applied to Lessor's damages as specified in this Paragraph 26. In the
case of a re-lease of the Equipment to a third party, any rentals received in
consideration for such third party's use of said Equipment during any of the
remaining Noncancellable Term of the original Schedule shall be applied only to
that portion of Lessor's damages resulting from loss of rentals that Lessor
would have received from Lessee during the same period had Lessee not become in
default. Amounts received from such third party shall be applied in mitigation
of Lessor's damages only to the extent such amounts are payable in connection
with such third party's periodic rental obligations as specified in the
preceding sentence; in no event shall any other amount received from such third
party, including without limitation as a security deposit or as an advance on
periodic rental obligations, be applied in mitigation of Lessor's damages
hereunder.
27. MISCELLANEOUS.
(a) If more than one Lessee is named in or added to this Lease, the
liability of each shall be joint and several.
(b) All notices related hereto shall be mailed to Lessor or Lessee at
its respective address as specified on the cover page of this Lease, or at such
other address as either party may designate upon ten days written notice to the
other party.
(c) Paragraph titles are solely for convenience and are not an aid in
the interpretation of this Lease.
(d) Time is of the essence of this Lease and each of its provisions.
(e) If notwithstanding the intent of the parties this Lease and any
Schedules hereto are determined to be a lease for security or a security
agreement, Lessee shall have been deemed to have granted to Lessor a security
interest in all of Lessee's right, title and interest in and to the Equipment
and the proceeds thereof to secure all of Lessee's obligations to Lessor arising
hereunder or otherwise.
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(f) This Lease may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered together shall
constitute one and the same instrument. Any Schedule to this Lease may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered together shall constitute one and the same instrument.
To the extent that this Lease and any Schedule constitute chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), only the copy of each Schedule that is executed and marked
"Original Counterpart No. 1", when held by an Assignee as secured party,
together with a machine copy of this executed Lease, shall enable such holder to
perfect by possession a security interest in such Schedule and this Lease as it
relates to such Schedule, and any other copies of the Schedule shall not enable
the holder thereof to perfect by possession a security interest therein.
28. RIGHT OF FIRST OFFER. During the lease term, Lessee shall provide Lessor
with all requests for additional debt or lease financing prior to the time that
such requests are provided to other financing sources. Should Lessor and Lessee
fail to agree on the terms and conditions of such financing, then Lessee may
accept a funding source other than Lessor.
29. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee shall fail duly and
promptly to perform any of its obligations under this Lease, Lessor may, at its
option and at any time, perform the same without waiving any default on the part
of Lessee, or any of Lessor's rights. Lessee shall reimburse Lessor, within five
(5) business days after notice thereof is given to Lessee, for all expenses and
liabilities incurred by Lessor in the performance of Lessee's obligations.
30. NONWAIVER; RIGHTS AND REMEDIES CUMULATIVE. Lessor's failure at any time to
require strict performance by Lessee shall not constitute waiver of, or
diminish, Lessor's right to demand strict compliance with any provision of this
Lease. Waiver by Lessor of any default shall not constitute waiver of any other
default. No rights or remedies referred to herein shall be exclusive, but shall
be cumulative and in addition to any other right or remedy set forth herein or
otherwise available to Lessee at law or in equity.
31. SURVIVAL OF OBLIGATIONS; LIMITATIONS ON ACTIONS. All agreements, covenants,
representations and warranties of Lessee contained in this Lease or in the
Schedules or other documents delivered pursuant hereto or in connection herewith
shall survive the execution and delivery, and the expiration, cancellation or
other termination of this Lease. Any action by Lessee against Lessor for any
default by Lessor under this Lease shall be commenced within one (1) year after
any such cause of action accrues.
32. SEVERABILITY. If any provision or remedy herein provided is determined
invalid under applicable law, such provision shall be inapplicable and deemed
omitted; but the remaining provisions, including remaining default remedies,
shall be given effect in accordance with their terms.
33. UPGRADES, ADDITIONS AND ATTACHMENTS. Any added memory, upgrades, additions
and attachments to Equipment previously placed under this Lease shall, upon
approval
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by Lessor, be included on a Schedule, with a Noncancellable Term that is
coterminous with the Equipment to which such added memory, upgrade, addition or
attachment is being attached.
34. CHOICE OF LAW. THIS LEASE SHALL BE DEEMED TO HAVE BEEN MADE AND ACCEPTED AND
PERFORMED IN THE COUNTY OF SAN FRANCISCO, IN THE STATE OF CALIFORNIA, WHERE THE
LESSOR'S PRINCIPAL PLACE OF BUSINESS IS LOCATED. THIS LEASE AND ALL TRANSACTIONS
HEREUNDER, AND ALL RIGHTS AND LIABILITIES OF THE PARTIES HERETO, SHALL BE
DETERMINED AND GOVERNED AS TO THE VALIDITY, INTERPRETATION, ENFORCEMENT AND
EFFECT BY THE LAWS OF THE STATE OF CALIFORNIA. THE LESSEE HEREBY CONSENTS, IN
ALL ACTIONS AND PROCEEDINGS ARISING DIRECTLY OR INDIRECTLY FROM THIS LEASE, TO
THE EXCLUSIVE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE NORTHERN
DISTRICT OF CALIFORNIA OR ANY STATE COURT LOCATED WITHIN SAN FRANCISCO COUNTY IN
THE STATE OF CALIFORNIA. LESSEE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS LEASE.
Lessee Initials: _____ Lessor Initials: _____
35. ENTIRE AGREEMENT. This instrument constitutes the entire agreement between
the parties and may not be modified except in writing executed by Lessor and
Lessee. No supplier or agent of Lessor is authorized to bind Lessor or to waive
or modify any term of this Lease.
Lessee Initials: _____ Lessor Initials: _____
The undersigned representative of Lessee affirms that he or she has
read and understood this Lease and is duly authorized to execute this Lease on
behalf of Lessee and that, if Lessee is a corporation, this Lease is entered
into with consent of Lessee's Board of Directors and stockholders if so
required.
IN WITNESS WHEREOF, the parties hereto execute this noncancellable
Lease as of the date on the cover page hereof.
LESSEE: LESSOR:
DOMINION VENTURE FINANCE L.L.C.
QUALITY CARE SOLUTIONS, By: DOMINION CAPITAL
MANAGEMENT L.L.C.,
as Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name: Name:
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Title: President and CEO Title: Vice President
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This Lease incorporates the following Addenda as if fully set forth herein:
Addendum 1.
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ADDENDUM I
TO MASTER EQUIPMENT
LEASE AGREEMENT NO. 10950
DATED March 16, 1999
Conditions to Lessors Obligations
By their initials below and on the signature page of the
Master Lease Agreement referenced in the upper right corner of this page, Lessor
and Lessee agree that the Lease incorporates the following terms:
Part 1: On or prior to the date of execution of the Lease by Lessor,
Lessor shall have received in form and substance satisfactory
to Lessor:
(a) Copies, certified, in substantially the manner set
forth in Exhibit E to the Lease, by the Secretary or
Assistant Secretary of. (A) the Articles of
Incorporation and By-Laws of Lessee (as amended to
the date of the Lease) and (B) the resolutions
adopted by Lessee's board of directors authorizing
the transaction and the documents being executed in
connection therewith.
(b) A Good Standing Certificate (including tax status if
available) with respect to Lessee from Lessee's state
of incorporation, dated a date reasonably close to
the date of acceptance of the Lease by Lessor.
(c) A Certificate of Insurance evidencing the insurance
coverage required by Paragraph 23 of the Lease.
(d) All necessary consents of shareholders and other
third parties with respect to the subject matter of
the Lease and the other documents being executed in
connection therewith.
(e) Landlord waiver(s) in the form of Exhibit A.
(f) The Advance Rental plus applicable taxes.
(g) All other documents as Lessor shall have reasonably
requested.
Part 2: Prior to any funding of a Schedule, each of the conditions
set forth in Part I of this Addendum I shall have been
satisfied and Lessor shall have received in form and substance
satisfactory to Lessor:
(a) Such documentation as Lessor may request with respect
to invoices, purchase orders, canceled checks and the
like relating to the Equipment to be subject to the
Schedule.
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(b) A Purchase Order Assignment or ▇▇▇▇ of Sale if
applicable.
(c) A UCC-1 financing statement duly executed by Lessee.
(d) An Acceptance Certificate with respect to the
Equipment to be subject to the Schedule.
Initials (Lessor)
---------
Initials (Lessee)
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ADDENDUM I
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INDEX OF EXHIBITS
TO
MASTER LEASE AGREEMENT
Exhibit A - Landlord Waiver
Exhibit B - Purchase Order Assignment
Exhibit C - ▇▇▇▇ of Sale
Exhibit D - Certificate of Inspection and Acceptance
Exhibit E - Secretary's or Assistant Secretary's Certificate
Exhibit F - Form of Schedule
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FIRST AMENDMENT TO MASTER LEASE AGREEMENT NO. 10950
This First Amendment dated October 5, 1999, to Master Lease Agreement No. 10950
dated March 16, 1999 (the "Lease"), is entered into by and between Quality Care
Solutions, Inc., a Nevada corporation (the "Lessee") and Dominion Venture
Finance, L.L.C. (the "Lessor").
WHEREAS, Lessee has requested an increase in Master Lease Line to allow
additional Equipment to be purchased pursuant to the terms of the Lease; and
WHEREAS, Lessor has agreed to extend the Master Lease Line to allow for the
purchase of additional Equipment, subject to the approval of Lessor and pursuant
to the terms of the Lease. All capitalized terms used and not otherwise defined
herein shall have the meanings given in the Lease.
NOW THEREFORE, the parties hereto agree to amend the Lease as follows:
1. The Master Lease Line shall be increased by $500,000.00 for a
total of $1,250,000.00.
2. The Funding Expiration Date of December 15, 1999, as set forth
in the Master Lease, shall be extended to September 15, 2000.
3. The Advance Rental Amount of $23,700.00 as specified in the
Master Lease, shall be increased by $15,800.00 (plus
applicable taxes) for a total of $39,500.00 (plus applicable
taxes). The increase in the Advance Rental shall be paid to
Lessor upon execution of this First Amendment and shall be
credited to the last complete calendar month's rent for each
item of Equipment, subject to the conditions set forth in
paragraph 5 of the Lease.
4. The Rent Factor for the additional Equipment shall remain at
3.16% for a 36 month Lease. A rent factor adjustment will
apply at each funding under the Lease. The Rental Factor will
be adjusted based on the change in yield, if any, for U.S.
Treasury Notes of comparable maturity as quoted in the Wall
Street Journal three days before the date of funding. The
initial Treasury Rate assumed for this Amendment is 5.75%. For
each basis point change from this Treasury Rate, the rate of
the Rental Factor will be adjusted by one basis point and a
new Rental Factor calculated. The Rental Factor for each
funding shall be fixed for the Lease Term.
Except as specifically provided herein, all terms and conditions of the
Lease shall remain in full force and effect, without waiver or modification.
ORIGINAL COUNTERPART NO. 2
Page 1 of 2
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IN WITNESS WHEREOF, the parties hereto have caused this amendment to be executed
as of the date first written above.
LESSEE: QUALITY CARE SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Its: CFO
----------------------------
LESSOR: DOMINION VENTURE FINANCE L.L.C.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Its: VP Finance
----------------------------
Page 2 of 2
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EQUIPMENT SCHEDULE
No. 10950-1
to Master Lease Agreement Number 10950 Dated March 16,1999
LESSOR: DOMINION VENTURE FINANCE, LESSEE: QUALITY CARE SOLUTIONS,
L.L.C. INC., a Nevada corporation
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and conditions
of the Lease are hereby expressly incorporated into this Schedule and made a
part hereof by this reference. By their execution of this Schedule, the parties
reaffirm all terms and conditions of the Master Lease Agreement except as they
may be modified hereby. This Schedule shall become effective on the later of the
date executed by Lessor or the date on which each of the conditions set forth in
Part 2 of Addendum I to the Lease are satisfied or waived. Capitalized terms
used in this Schedule and not otherwise defined herein shall have the respective
meanings set forth in the Lease.
TOTAL EQUIPMENT COST $386,375.92
FUNDING EXPIRATION DATE December 15, 1999
RENTAL AMOUNT $12,259.71
RENT FACTOR 3.173%
FREQUENCY Monthly, in advance
INITIAL TERM 36 Months
COMMENCEMENT DATE April 1, 1999
ADVANCE RENTAL $12,259.71
SECURITY DEPOSIT $0.00
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EQUIPMENT LOCATION QUALITY CARE SOLUTION INCORPORATED
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
LESSEE CONTACT ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, CFO
(▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of
the date set forth below.
LESSEE: LESSOR:
QUALITY CARE SOLUTIONS, INC. DOMINION VENTURE FINANCE, L.L.C.
(a Nevada corporation)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------- -------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------- -----------------------
Title: CFO Title: VP Finance
------------------------ ----------------------
Date: 3/24/99 Date: 3/26/99
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