Exhibit 10.48
2/98(R062700)114264724 *LEAS1998*
MASTER LEASE AGREEMENT
Dated as of 6/29/01 ("Agreement")
THIS AGREEMENT is between General Electric Capital Corporation (together with
its successors and assigns, if any, "Lessor") and Star Scientific, Inc.
("Lessee"). Lessor has an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Lessee is a corporation organized and existing under the
laws of the state of Delaware. Lessee's mailing address and chief place of
business is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. This Agreement contains the
general terms that apply to the leasing of Equipment from Lessor to Lessee.
Additional terms that apply to the Equipment (term, rent, option, etc.) shall be
contained on a schedule ("Schedule").
1. LEASING:
(a) Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor,
the equipment ("Equipment") described in any Schedule signed by both parties.
(b) Lessor shall purchase Equipment from the manufacturer or supplier
("Supplier") and lease it to Lessee if on or before the Last Delivery Date
Lessor receives (i) a Schedule for the Equipment, (ii) evidence of insurance
which complies with the requirements of Section 9, and (iii) such other
documents as Lessor may reasonably request. Each of the documents required above
must be in form and substance satisfactory to Lessor. Lessor hereby appoints
Lessee its agent for inspection and acceptance of the Equipment from the
Supplier. Once the Schedule is signed, the Lessee may not cancel the Schedule.
2. TERM, RENT AND PAYMENT:
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(a) The rent payable for the Equipment and Lessee's right to use the Equipment
shall begin on the earlier of (i) the date when the Lessee signs the Schedule
and accepts the Equipment or (ii) when Lessee has accepted the Equipment under a
Certificate of Acceptance ("Lease Commencement Date"). The term of this
Agreement shall be the period specified in the applicable Schedule. The work
"term" shall include all basic and any renewal terms.
(b) Lessee shall pay rent to Lessor at its address stated above, except as
otherwise directed by Lessor. Rent payments shall be in the amount set forth in
and due as stated in the applicable Schedule. If any Advance Rent (as stated in
the Schedule) is payable, it shall be due when the Lessee signs the Schedule.
Advance Rent shall be applied to the first rent payment and the balance, if any,
to the final rent payment(s) under such Schedule. In no event shall any Advance
Rent of any other rent payments be refunded to Lessee. If rent is not paid
within ten (10) days of its due date, Lessee agrees to pay a late charge of five
cents ($.05) per dollar on, and in addition to, the amount of such rent but not
exceeding the lawful maximum, if any.
3. RENT ADJUSTMENT:
(a) If, solely as a result of Congressional enactment of any law (including,
without limitation, any modification of, or amendment or addition to, the
Internal Revenue Code of 1986, as amended, ("Code")), the maximum effective
corporate income tax rate (exclusive of any maximum tax rate) for calendar-year
taxpayers ("Effective Rate") is higher than thirty-five percent (35%) for any
year during the lease term, then Lessor shall have the right to increase such
rent payments by requiring payment of a single additional sum. The additional
sum shall be equal to the product of (i) the Effective Rate (expressed as a
decimal) for such year less .35 (or, in the event that any adjustment has been
made hereunder for any previous year, the Effective Rate (expressed as a
decimal) used in calculating the next previous adjustment) times (ii) the
adjusted Termination Value (defined below), divided by (iii) the difference
between the new Effective Rate (expressed as a decimal) and one (1). The
adjusted Termination Value shall be the
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Termination Value (calculated as of the first rent due in the year for which the
adjustment is being made) minus the Tax Benefits that would be allowable under
Section 168 of the Code (as of the first day of the year for which such
adjustment is being made and all future years of the lease term). The
Termination Values and Tax Benefits are defined on the Schedule. Lessee shall
pay to Lessor the full amount of the additional rent payment on the later of (i)
receipt of notice or (ii) the first day of the year for which such adjustment is
being made.
(b) Lessee's obligations under this Section 3 shall survive any expiration or
termination of this Agreement.
4. TAXES:
(a) If permitted by law, Lessee shall report and pay promptly all taxes, fees
and assessments due, imposed, assessed or levied against any Equipment (or
purchase, ownership, delivery, leasing, possession, use or operation thereof),
this Agreement (or any rents or receipts hereunder), any Schedule, Lessor or
Lessee by any governmental entity 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, imports, duties and charges, together
with any penalties, fines or interest thereon (collectively "Taxes"). Lessee
shall have no liability for Taxes imposed by the United States of America or any
state or political subdivision thereof which are on or measured by the net
income of Lesser except as provided in Sections 3 and 14(c). Lessee shall
promptly reimburse Lessor (on an after tax basis) for any Taxes charged to or
assessed against Lessor. Lessee shall show Lessor as the owner of the Equipment
on all tax reports or returns, and send Lessor a copy of each report or return
and evidence of Lessee's payment of Taxes upon request.
(b) Lessee's obligations, and Lessor's rights and privileges, contained in this
Section 4 shall survive the expiration or other termination of this Agreement.
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5. REPORTS:
(a) If any tax or other lien shall attach to any Equipment, Lessee will notify
Lessor in writing, within ten (10) days after Lessee becomes aware of the tax or
lien. The notice shall include the full particulars of the tax or lien and the
location of such Equipment on the date of the notice.
(b) Lessee will deliver to Lessor Lessee's complete financial statements,
certified by a recognized firm of certified public accountants within ninety
(90) days of the close of each fiscal year of Lessee. Lessee will deliver to
Lessor copies of Lessee's quarterly financial report certified by the chief
financial officer of Lessee, within ninety (90) days of the close of each fiscal
quarter of Lessee. Lessee will deliver to Lessor all Forms 10-K and 10-Q, if
any, filed with the Securities and Exchange Commission within thirty (30) days
after the date on which they are filed.
(c) Lessor may inspect any Equipment during normal business hours after giving
Lessee reasonable prior notice.
(d) Lessee will keep the Equipment at the Equipment Location (specified in the
applicable Schedule) and will give Lessor prior written notice of any relocation
of Equipment. If Lessor asks, Lessee will promptly notify Lessor in writing of
the location of any Equipment.
(e) If any Equipment is lost or damaged (where the estimated repair costs would
exceed the greater of ten percent (10%) of the original Equipment cost or ten
thousand and 00/100 dollars ($10,000)), or is otherwise involved in an accident
causing personal injury or property damage, Lessee will promptly and fully
report the event to Lessor in writing.
(f) 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
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default or event which with notice or lapse of time (or both) would become such
a default within thirty (30) days after any request by Lessor.
6. 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 laws,
regulations and insurance policies and Lessee shall not discontinue use of the
Equipment.
(c) Lessee will not move any Equipment from the location specified on the
Schedule, without the prior written consent of Lessor.
(d) Lessee will keep the Equipment free and clear of all liens and encumbrances
other than those which result from acts of Lessor.
(e) Lessor shall not disturb Lessee's quiet enjoyment of the Equipment during
the term of the Agreement unless a default has occurred and in continuing under
this Agreement.
7. MAINTENANCE:
(a) Lessee will, at its sole expense, maintain each unit of Equipment in good
operating order and repair, normal wear and tear excepted. The Lessee shall also
maintain the Equipment in accordance with manufacturer's recommendations. Lessee
shall make all alterations or modifications required to comply with any
applicable law, rule or regulation during the term of this Agreement. If Lessor
requests, Lessee shall affix plates, tags or other identifying labels showing
ownership thereof by Lessor. The tags or labels shall be placed in a prominent
position on each unit of Equipment.
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(b) Lessee will not attach or install anything on any Equipment that will impair
the originally intended function or use of such Equipment without the prior
written consent of Lessor. All additions, parts, supplies, accessories, and
equipment ("Additions") furnished or attached to any Equipment that are not
readily removable shall become the property of Lessor. All Additions shall be
made only in compliance with applicable law. Lessee will not attach or install
any Equipment to or in any other personal or real property without the prior
written consent of Lessor.
8. STIPULATED LOSS VALUE: If for any reason any unit of Equipment becomes worn
out, lost, stolen, destroyed, irreparably damaged or unusable ("Casualty
Occurrences") Lessee shall promptly and fully notify Lessor in writing. Lessee
shall pay Lessor the sum of (i) the Stipulated Loss Value (see Schedule) of the
affected unit determined as of the rent payment date prior to the Casualty
Occurrence; and (ii) all rent and other amounts which are then due under this
Agreement on the Payment Date (defined below) for the affected unit. The Payment
Date shall be the next rent payment date after the Casualty Occurrence. Upon
payment of all sums due hereunder, the term of this lease as to such unit shall
terminate.
9. INSURANCE:
(a) Lessee 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 is shipped to Lessee.
(b) Lessor agrees, at its own expense, to keep all Equipment insured for such
amounts and against such hazards as Lessor may reasonably require. All such
policies shall be with companies, and on terms, reasonably satisfactory to
Lessor. The insurance shall include coverage for damage to or loss of the
Equipment, liability for personal injuries, death or property damage. Lessor
shall be named as additional insured 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. The insurance shall provide for liability
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coverage in an amount equal to at least ONE MILLION U.S. DOLLARS ($1,000,000.00)
total liability per occurrence, unless otherwise stated in any Schedule. The
casualty/property damage coverage shall be in an amount equal to the higher of
the Stipulated Loss Value or the full replacement cost of the Equipment. No
insurance shall be subject to any co-insurance clause. The insurance policies
shall provide that the insurance may not be altered or canceled by the insurer
until after thirty (30) days written notice to Lessor. Lessee agrees to deliver
to Lessor evidence of insurance reasonably satisfactory to Lessor.
(c) 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 insurance payments. Lessor shall not act as Lessee's
attorney-in-fact unless Lessee is in default. Lessee shall pay any reasonable
expenses of Lessor in adjusting or collecting insurance. Lessee will not make
adjustments with insurers except with respect to claims for damage to any unit
of Equipment where the repair costs are less than the lesser of ten percent
(10%) of the original Equipment cost or ten thousand and 00/100 dollars
($10,000). 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 under this Agreement.
10. RETURN OF EQUIPMENT:
(a) At the expiration or termination of this Agreement or any Schedule, Lessee
shall perform any testing and repairs required to place the units of Equipment
in the same condition and appearance as when received by Lessee (reasonable wear
and tear excepted) and in good working order for the original intended purpose
of the Equipment. If required the units of Equipment shall be deinstalled,
disassembled and crated by an authorized manufacturer's representative or such
other service person as is reasonably satisfactory to Lessor. Lessee shall
remove installed markings that are not necessary for the operation, maintenance
or repair of the Equipment. All Equipment will be cleaned,
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cosmetically acceptable, and in such condition as to be immediately installed
into use in a similar environment for which the Equipment was originally
intended to be used. All waste material and fluid must be removed from the
Equipment and disposed of in accordance with then current waste disposal laws.
Lessee shall return the units of Equipment to a location within the continental
United States as Lessor shall direct. Lessee shall obtain and pay for a policy
of transit insurance for the redelivery period in an amount equal to the
replacement value of the Equipment. The transit insurance must name Lessor as
the loss payee. The Lessee shall pay for all costs to comply with this section
(a).
(b) Until Lessee has fully complied with the requirements of Section 10(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 lease term. Lessor may terminate the Lessee's right to use
the Equipment upon ten (10) days notice to Lessee.
(c) Lessee shall provide the Lessor a detailed inventory of all components of
the Equipment including model and serial numbers. Lessee shall also provide an
up-to-date copy of all other documentation pertaining to the Equipment. All
service manuals, blue prints, process flow diagrams, operating manuals,
inventory and maintenance records shall be given to Lessor at least ninety (90)
days and not more than one hundred twenty (120) days prior to lease termination.
(d) Lessee shall make the Equipment available for on-site operational
inspections by potential purchasers at least one hundred twenty (120) days prior
to and continuing up to lease termination. Lessor shall provide Lessee with
reasonable notice prior to any inspection. Lessee shall provide personnel, power
and other requirements necessary to demonstrate electrical, hydraulic and
mechanical systems for each item of Equipment.
11. DEFAULT AND REMEDIES:
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(a) Lessor may in writing declare this Agreement in default if: (i) Lessee
breaches its obligation to pay rent or any other sum when due and fails to cure
the breach within ten (10) days; (ii) Lessee breaches any of its insurance
obligations under Section 9; (iii) Lessee breaches any of its other obligations
and fails to cure that breach within thirty (30) days after written notice from
Lessor; (iv) any representation or warranty made by Lessee in connection with
the Agreement shall be false or misleading in any material respect; (v) Lessee
or any guarantor or other obligor for the Lessee's obligations hereunder
("Guarantor") becomes insolvent or ceases to do business as a going concern;
(vi) any Equipment is illegally used; (vii) if Lessee or any Guarantor is a
natural person, any death or incompetency of Lessee or such Guarantor or (viii)
a petition is filed by or against Lessee or any Guarantor under any bankruptcy
or insolvency laws and in the event of an involuntary petition, the petition is
not dismissed within forty-five (45) days of the filing date. The default
declaration shall apply to all Schedules unless specifically excepted by Lessor.
(b) After a default, at the request of Lessor, Lessee shall comply with the
provisions of Section 10(a). Lessee hereby authorizes Lessor to peacefully enter
any premises where any Equipment may be and take possession of the Equipment.
Lessee shall immediately pay to Lessor without further demand as liquidated
damages for loss of a bargain and not as a penalty, the Stipulated Loss Value of
the Equipment (calculated as of the rent payment date prior to the declaration
of default), and all rents and other sums then due under this Agreement and all
Schedules. Lessor may terminate this Agreement as to any or all of the
Equipment. A termination shall occur only upon written notice by Lessor to
Lessee and only as to the units of Equipment specified in any such notice.
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. Lessor may also, but shall not be
required to, lease, otherwise dispose of or keep idle all or part of the
Equipment. Lessor may use Lessee's premises for a reasonable period of time for
any or all of the purposes stated above without liability for rent, costs,
damages or otherwise. The proceeds of sale, lease or other disposition, if any,
shall be applied in the following order of priorities: (i) to pay all of
Lessor's costs, charges and expenses
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incurred in taking, removing, holding, repairing and selling, leasing or
otherwise disposing of Equipment; then, (ii) to the extent not previously paid
by Lessee, to pay Lessor all sums due from Lessee under this Agreement; then
(iii) to reimburse to Lessee any sums previously paid by Lessee as liquidated
damages; and (iv) any surplus shall be retained by Lessor. Lessee shall
immediately pay any deficiency in (i) and (ii) above.
(c) The foregoing remedies are cumulative, and any or all thereof may be
exercised instead 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. Lessee
shall pay Lessor's actual attorney's fees incurred in connection with the
enforcement, assertion, defense or preservation of Lessor's rights and remedies
under this Agreement, or if prohibited by law, such lesser sum as may be
permitted. Waiver of any default shall not be a waiver of any other or
subsequent default.
(d) Any default under the terms of this or any other agreement between Lessor
and Lessee may be declared by Lessor a default under this and any such other
agreement.
12. ASSIGNMENT: LESSEE SHALL NOT SELL, TRANSFER, ASSIGN, ENCUMBER OR SUBLET ANY
EQUIPMENT OR THE INTEREST OF LESSEE IN THE EQUIPMENT WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR. Lessor may, without the consent of Lessee, assign this
Agreement, any Schedule or the right to enter into a Schedule. Lessee agrees
that if Lessee receives written notice of an assignment from Lessor, Lessee will
pay all rent and all other amounts payable under any assigned Schedule to such
assignee or as instructed by Lessor. Lessee also agrees to confirm in writing
receipt of the notice of assignment as may be reasonably requested by assignee.
Lessee hereby waives and agrees not to assert against any such assignee any
defense, set-off, recoupment claim or counterclaim which Lessee has or may at
any time have against Lessor for any reason whatsoever.
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13. NET LEASE: Lessee is unconditionally obligated to pay all rent and other
amounts due for the entire lease term no matter what happens, even if the
Equipment is damaged or destroyed, if it is defective or if Lessee no longer can
use it. Lessee is not entitled to reduce or set-off against rent or other
amounts due to Lessor or to anyone to whom Lessor assigns this Agreement or any
Schedule whether Lessee's claim arises out of this Agreement, any Schedule, any
statement by Lessor, Lessor's liability or any manufacturer's liability, strict
liability, negligence or otherwise.
14. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify Lessor, its agents, employees, successors
and assigns (on an after tax basis) from and against any and all losses,
damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature arising out of or relating to the
Equipment or this Agreement, except to the extent the losses, damages,
penalties, injuries, claims, actions, suits or expenses result from Lessor's
gross negligence or willful misconduct ("Claims"). This indemnity shall include,
but is not limited to, Lessor's strict liability in tort and Claims, arising out
of (i) the selection, manufacture, purchase, acceptance or rejection of
Equipment, the ownership of Equipment during the term of this Agreement, and the
delivery, lease, possession, maintenance, uses, condition, return or operation
of Equipment (including, without limitation, latent and other defects, whether
or not discoverable by Lessor or Lessee and any claim for patent, 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. Lessee shall, upon request, defend any actions based on, or arising out
of, any of the foregoing.
(b) Lessee hereby represents, warrants and covenants that (i) on the Lease
Commencement Date for any unit of Equipment, such unit will qualify for all of
the items of deduction and credit specified in Section C of the applicable
Schedule ("Tax Benefits") in the hands of Lessor, and (ii) at no time during the
term of the Agreement will Lessee take or
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omit to take, nor will it permit any sublessee or assignee to take or omit to
take, any action (whether or not such act or omission is otherwise permitted by
Lessor or by this Agreement), which will result in the disqualification of any
Equipment for, or recapture of, all or any portion of such Tax Benefits.
(c) If as a result of a breach by any representation, warranty or covenant of
the Lessee contained in this Agreement or any Schedule (i) tax counsel of Lessor
shall determine that Lessor is not entitled to claim on its Federal income tax
return all or any portion of the Tax Benefits with respect to any Equipment, or
(ii) any Tax Benefit claimed on the Federal income tax return of Lessor is
disallowed or adjusted by the Internal Revenue Service, or (iii) any Tax Benefit
is recalculated or recaptured (any determination, disallowance, adjustment,
recalculation or recapture being a "Loss"), then Lessee shall pay to Lessor, as
an indemnity and as additional rent, an amount that shall, in the reasonable
opinion of Lessor, cause Lessor's after-tax economic yields and cash flows 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. The economic yields and cash flows shall be computed on the same
assumptions, including tax rates as were used by Lessor in originally evaluating
the transaction ("Net Economic Return"). If an adjustment has been made under
Section 3 then the Effective Rate used in the next preceding adjustment shall be
substituted.
(d) All references to Lessor in this Section 14 include Lessor and the
consolidated taxpayer group of which Lessor is a member. All of Lessor's rights,
privileges and indemnities contained in this Section 14 shall survive the
expiration or other termination of this Agreement. The rights, privileges and
indemnities contained herein are expressly made for the benefit of, and shall be
enforceable by Lessor, its successors and assigns.
15. 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
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REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED UNDER THIS AGREEMENT 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) of the Equipment, or any other circumstance in connection with the
Equipment; (ii) the use, operation or performance of any Equipment or any risks
relating to it; (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 Agreement, Lessee shall be, and
hereby is, authorized during the term of this Agreement to assert and enforce
whatever claims and rights Lessor may have against any Supplier of the Equipment
at Lessee's sole cost and expense, in the name of and for the account of Lessor
and/or Lessee, as their interests may appear.
16. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee makes each of the following
representations and warranties to Lessor 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"). Lessee is
duly qualified to do business wherever necessary to carry on its present
business and operations, including the jurisdiction(s) where the Equipment is or
is to be located.
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(b) The Documents have been duly authorized, executed and delivered by Lessee
and constitute valid, legal and binding agreements, enforceable in accordance
with their terms, except to the extent that the enforcement of remedies may be
limited under applicable bankruptcy and insolvency laws.
(c) No approval, consent or withholding of objections is required from any
governmental authority or entity 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 Certificate of Incorporation or bylaws; 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 if decided against Lessee will have a material adverse effect on
the ability of Lessee to fulfill its obligations under this Agreement.
(f) The Equipment accepted under any Certificate of Acceptance is and will
remain tangible personal property.
(g) Each financial statement delivered to Lessor has been prepared in accordance
with generally accepted accounting principles consistently applied. Since the
date of the most recent financial statement, there has been no material adverse
change.
(h) 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).
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(i) The Equipment will at all times be used for commercial or business purposes.
17. EARLY TERMINATION:
(a) On or after the First Termination Date (specified in the applicable
Schedule), Lessee may, so long as no default exists hereunder, terminate this
Agreement as to all (but not less than all) of the Equipment on such Schedule as
of a rent payment date ("Termination Date"). Lessee must give Lessor at least
ninety (90) days prior written notice of this termination.
(b) Lessee shall, and Lessor may, solicit cash bids for the Equipment on an AS
IS, WHERE IS BASIS without recourse to or warranty from Lessor, express or
implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall (i) certify
to Lessor any bids received by Lessee and (ii) pay to Lessor (A) the Termination
Value (calculated as of the rent due on the Termination Date) for the Equipment,
and (B) all rent and other sums due and unpaid as of the Termination Date.
(c) If all amounts due hereunder have been paid on the Termination Date, Lessor
shall (i) sell the Equipment on an AS IS BASIS for cash to the highest bidder
and (ii) refund the proceeds of such sale (net of any related expenses) to
Lessee up to the amount of the Termination Value. If such sale is not
consummated, no termination shall occur and Lessor shall refund the Termination
Value (less any expenses incurred by Lessor) to Lessee.
(d) Notwithstanding the foregoing, Lessor may elect by written notice, at any
time prior to the Termination Date, not to sell the Equipment. In that event, on
the Termination Date Lessee shall (i) return the Equipment (in accordance with
Section 10) and (ii) pay to Lessor all amounts required under Section 17(b) less
the amount of the highest bid certified by Lessee to Lessor.
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18. PURCHASE OPTION:
(a) Lessee may at lease expiration purchase all (but not less than all) of the
Equipment in any Schedule on an AS IS BASIS for cash equal to its then Fair
Market Value (plus all applicable sales taxes). Lessee must notify Lessor of its
intent to purchase the Equipment in writing at least one hundred eighty (180)
days in advance. If Lessee is in default or if the lease has already been
terminated Lessee may not purchase the Equipment.
(b) "Fair Market Value" shall mean the price that 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. In determining the Fair Market Value the Equipment shall be assumed to
be in the condition in which it is required to be maintained and returned under
this Agreement. If the Equipment is installed it shall be valued on an installed
basis. The costs of removal from current location shall not be a deduction from
the value of the Equipment. If Lessor and Lessee are unable to agree on the Fair
Market Value at least one hundred thirty-five (135) days before lease
expiration, Lessor shall appoint an independent appraiser (reasonably acceptable
to Lessee) to determine Fair Market Value. The independent appraiser's
determination shall be final, binding and conclusive. Lessee shall bear all
costs associated with any such appraisal.
(c) Lessee shall be deemed to have waived this option unless it provides Lessor
with written notice of its irrevocable election to exercise the same within
fifteen (15) days after Fair Market Value is told to Lessee.
19. MISCELLANEOUS:
(a) LESSEE AND LESSOR UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE
RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE
SUBJECT
16
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. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY
OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY RELATED DOCUMENTS,
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY
RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
(b) The Equipment shall remain Lessor's property unless Lessee purchases the
Equipment from Lessor and until such time Lessee shall only have the right to
use the Equipment as a lessee. Any cancellation or termination by Lessor of 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. All Equipment shall at all times remain
personal property of Lessor even though it may be attached to real property. The
Equipment shall not become part of any other property by reason of any
installation in, or attachment to, other real or personal property.
(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 at any other time to demand strict compliance
with this Agreement. Lessee agrees, upon Lessor's request, to execute any
instrument necessary or expedient for filing, recording or perfecting the
interest of Lessor. All notices required to be given hereunder shall be deemed
adequately given if sent by registered or certified mail to the addressee at its
address stated herein, or at such other place as such addressee may have
specified in writing. This Agreement and any Schedule and Annexes thereto
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
17
ANY OF ITS PROVISIONS OR CONDITIONS SHALL BE VALID UNLESS IN WRITING AND SIGNED
BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
(d) If Lessee does not 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. All reasonable amounts spent and obligations incurred or assumed by
Lessor in effecting such compliance shall constitute additional rent due to
Lessor. Lessee shall pay the additional rent within five 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.
(e) Any rent or other amount not paid to Lessor when due shall bear interest
from the due date until paid, at the lesser of eighteen percent (18%) per annum
or the maximum rate allowed by law. Any provisions in this Agreement and any
Schedule that are in conflict with any statute, law or applicable rule shall be
deemed omitted, modified or altered to conform thereto.
(f) Lessee hereby irrevocably authorized Lessor to adjust the Capitalized
Lessor's Cost up or down by no more than ten percent (10%) within each Schedule
to account for equipment change orders, equipment returns, invoicing errors, and
similar matters. Lessee acknowledges and agrees that the rent shall be adjusted
as a result of the change in the Capitalized Lessor's Cost. Lessor shall send
Lessee a written notice stating the final Capitalized Lessor's Cost if it has
changed.
(g) 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 CONNECTICUT (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.
18
(h) Any cancellation or termination by Lessor, pursuant to the provisions of
this Agreement, any Schedule, supplement or amendment hereto, of the lease of
any Equipment hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder.
(i) To the extent that any 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 Agreement in and of itself without the transfer or
possession of the original of a Schedule executed pursuant to this Agreement and
incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
LESSOR:
General Electric Capital Corporation
By: ▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Risk Analyst
LESSEE:
Star Scientific, Inc.
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
19
NOTICE AND ACKNOWLEDGMENT OF ASSIGNMENT
Reference is hereby made to that certain Master Lease Agreement dated as of June
29, 2001 (the "Lease"), between General Electric Capital Corporation ("Lessor")
and Star Scientific, Inc. ("Lessee").
Lessor hereby gives Lessee notice, and Lessee hereby acknowledges receipt of
notice, that Lessor has assigned to American Equipment Leasing a Division Of EAB
Leasing Corp. ("Assignee"), whose offices are at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇, all right, title, interest and obligations of Lessor (i) to acquire
and lease the equipment generally described as Schedule No. AEL-1("Equipment"),
and (ii) under the Lease (insofar as the Lease relates to the Equipment and the
Designated Schedule (as hereinafter defined). Pursuant to such Assignment, it is
contemplated that Assignee will acquire from Lessee and lease to Lessee the
Equipment and that the Equipment will be described on one or more Equipment
Schedules executed pursuant to the Lease by Assignee and Lessee (collectively,
the "Designated Schedule"). Lessee agrees to make all payments of rent and other
sums now or hereafter becoming due pursuant to the Designated Schedule or with
respect to the equipment described on the Designated Schedule directly to
Assignee as Assignee shall direct in Assignee's invoices.
In recognition of Assignee's reliance upon this Notice and Acknowledgment of
Assignment, Lessee certifies, confirms and agrees as follows:
1. The Lease and the Designated Schedule have been duly authorized, executed and
delivered by Lessee; constitute the legal, valid and binding obligation of
Lessee, enforceable against Lessee in accordance with the terms thereof; are in
full force and effect on the date of execution of this notice by such party; are
free from all defenses, set-offs and counterclaims; and no default or event
which, with the passage of time or the giving of notice, or both, would
constitute a default under the Lease has occurred.
20
2. There are no modifications, amendments or supplements to the Lease which
relate to the Designated Schedule; and any future modification, termination,
amendment or supplement to the Lease which relates to the Designated Schedule,
or settlement of amounts due thereunder which relates to the Designated
Schedule, shall be ineffective without Assignee's prior written consent.
3. There has been no prepayment of rent or other sums payable under the
Designated Schedule and no casualty has occurred with respect to the Equipment.
4. As of November 1, 2001 there are 36 remaining rental payments of $62,996.11
per month net of taxes under the Designated Schedule. The next rental payment is
due on November 1, 2001.
5. Lessee acknowledges and agrees that (i) Assignee shall be the owner of the
Equipment and Lessor shall have no interest or authority of any nature regarding
the Equipment or the Designated Schedule, (ii) Lessee will deal exclusively with
respect to the Designated Schedule with Assignee, and Lessee will deliver all
payments and copies of all notices and other communications given or made by
Lessee relating to the Designated Schedule and the Equipment to Assignee at the
address listed above, (iii) so far as the enforcement of the Designated Schedule
is concerned, notwithstanding the existence of other schedules or supplements
thereto, the Designated Schedule is separate and severable and Assignee may take
enforcement action independently of other lessors, equipment owners or financing
parties having an interest in the Lease and other equipment schedules not
included in the Designated Schedule, and (iv) Lessee will execute such other
instruments and take such actions as Assignee reasonably may require to further
confirm the vesting of rights under the Lease in Assignee and Assignee's
ownership of the Equipment.
6. Lessee has not received notice of a prior sale, transfer, assignment,
hypothecation or pledge of the Designated Schedule or the rents reserved
thereunder.
21
7. Lessee will keep the Lease, the Designated Schedule and the Equipment free
and clear of all liens and encumbrances (other than the interest of Lessor,
Assignee or parties claiming by, through or under them).
8. All representations and duties of Lessor intended to induce Lessee to enter
into the Lease, whether required by the Lease or otherwise, have been fulfilled.
9. Lessee has executed one (1) original each of the Lease and the Designated
Schedule (which were delivered to Lessor), and currently has no original of
either in its possession.
10. All representations and warranties of the Lessee in the Lease are true and
correct.
Accepted and agreed to on this 31st day of October, 2001.
GENERAL ELECTRIC CAPITAL CORPORATION
Lessor
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Transaction and Syndication Mgr.
STAR SCIENTIFIC, INC.
Lessee
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
November 5, 2001
VIA FEDERAL EXPRESS-PRIORITY
Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
22
Star Scientific, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RE: MASTER LEASE AGREEMENT DATED AS OF JUNE 29, 2001 BETWEEN GENERAL ELECTRIC
CAPITAL CORPORATION AND STAR SCIENTIFIC, INC.
Dear ▇▇. ▇▇▇▇▇▇:
This letter will serve to amend Equipment Schedule No. AEL-1 as follows:
The date at the top of the schedule will now read November 5, 2001;
The Interim Rent due date referenced in Section B. 11 will now read November 30,
2001; The Base Lease Commencement date referenced in Sections B. 5 and B. 12
will now read December 1, 2001.
All other terms and conditions remain unchanged and in full force and effect.
Please indicate your acknowledgment and acceptance of these changes by signing
the bottom portion of this letter and returning it to me.
Sincerely yours,
▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Transaction Coordinator
ACKNOWLEDGED & AGREED:
STAR SCIENTIFIC, INC.
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
23
Date: 5 Nov 01
EQUIPMENT SCHEDULE
QUASI
SCHEDULE NO. AEL-1
DATED THIS October____, 2001
TO MASTER LEASE AGREEMENT
DATED AS OF June 29, 2001
Lessor & Mailing Address:
American Equipment Leasing, a Division of EAB Leasing Corp.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Lessee & Mailing Address:
Star Scientific, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
This 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").
A. Equipment: Subject to the terms and conditions of the Lease, Lessor agrees to
Lease to Lessee the Equipment described below (the "Equipment").
Number of Units Capitalized Lessor's Cost Manufacturer Serial Number
Model and Type of Equipment
▇▇▇▇▇▇ Maxi-Miser tobacco curing barns (including containers/curing bins,
furnaces and air circulation/heat exchanger systems) more fully described on
Annex A attached hereto and made a part hereof.
24
B. Financial Terms
1. Advance Rent (if any): $62,996.11
2. Capitalized Lessor's Cost: $1,998,643.04
3. Basic Term (No. of Months): 36 Months
4. Basic Term Lease Rate Factor: 3.151944%
5. Basic Term Commencement Date: November 1, 2001
6. Lessee Federal Tax ID No.: ▇▇-▇▇▇▇▇▇▇
7. Last Delivery Date: October 31, 2001
8. Daily Lease Rate Factor: .1050648%
9. Option Payment: $1.00
10. First Termination Date: Thirty-six (36) months after the Basic Term
Commencement Date.
11. Interim Rent: For the period from and including the Lease Commencement Date
to but not including the Basic Term Commencement Date ("Interim Period"), Lessee
shall pay as rent ("Interim Rent") for each unit of Equipment, the product of
the Daily Lease Rate Factor times the Capitalized Lessor's Cost of such unit
times the number of days in the Interim Period. Interim Rent shall be due on
October 31, 2001.
12. Basic Term Rent: Commencing on November 1, 2001 and on the same day of each
month thereafter (each, a "Rent Payment Date") during the Basic Term, Lessee
shall pay 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.
C. Property Tax
APPLICABLE TO EQUIPMENT LOCATED IN Virginia: Lessee agrees that it will not list
any of such Equipment for property tax purposes or report any property tax
assessed against such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax ▇▇▇▇ pertaining to such Equipment from the
appropriate taxing authority, Lessor will pay such tax and will invoice Lessee
for the expense. Upon receipt of such invoice, Lessee will promptly reimburse
Lessor for such expense.
25
Lessor may notify Lessee (and Lessee agrees to follow such notification)
regarding any changes in property tax reporting and payment responsibilities.
D. Article 2A Notice
IN ACCORDANCE WITH THE REQUIREMENTS OF ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE
AS ADOPTED IN THE APPLICABLE STATE, LESSOR HEREBY MAKES THE FOLLOWING
DISCLOSURES TO LESSEE PRIOR TO EXECUTION OF THE LEASE. (A) THE PERSON(S)
SUPPLYING THE EQUIPMENT IS Various (THE "SUPPLIER(S)"), (B) LESSEE IS ENTITLED
TO THE PROMISES AND WARRANTIES, INCLUDING THOSE OF ANY THIRD PARTY, PROVIDED TO
THE LESSOR BY SUPPLIER(S), WHICH IS SUPPLYING THE EQUIPMENT IN CONNECTION WITH
OR AS PART OF THE CONTRACT BY WHICH LESSOR ACQUIRED THE EQUIPMENT AND (C) WITH
RESPECT TO SUCH EQUIPMENT, LESSEE MAY COMMUNICATE WITH SUPPLIER(S) AND RECEIVE
AN ACCURATE AND COMPLETE STATEMENT OF SUCH PROMISES AND WARRANTIES, INCLUDING
ANY DISCLAIMERS AND LIMITATIONS OF THEM OR REMEDIES. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, LESSEE HEREBY WAIVES ANY AND ALL RIGHTS AND REMEDIES CONFERRED
UPON A LESSEE IN ARTICLE 2A AND ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY LIMIT OR MODIFY ANY OF LESSOR'S RIGHTS OR REMEDIES UNDER
THE DEFAULT AND REMEDIES SECTION OF THE AGREEMENT.
E. Stipulated Loss and Termination Value Table*
26
Payment Termination Stipulated
Number Value Loss Value
1 102.827 102.827
2 100.244 100.244
3 97.643 97.643
4 95.022 95.022
5 92.383 92.383
6 89.725 89.725
7 87.047 87.047
8 84.35 84.35
9 81.633 81.633
10 78.897 78.897
11 76.141 76.141
12 73.365 73.365
13 70.568 70.568
14 67.752 67.752
15 64.915 64.915
16 62.057 62.057
17 59.178 59.178
18 56.279 56.279
19 53.358 53.358
20 50.417 50.417
21 47.453 47.453
22 44.469 44.469
23 41.462 41.462
24 38.434 38.434
25 35.383 35.383
26 32.31 32.31
27 29.215 29.215
28 26.097 26.097
29 22.956 22.956
30 19.793 19.793
31 16.606 16.606
32 13.396 13.396
27
33 10.162 10.162
34 6.905 6.905
35 3.624 3.624
36 0.319 0.319
*The Stipulated Loss Value or Termination Value for any unit of Equipment shall
be 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 last percentage figure shown above shall control
throughout any such extended term.
F. Modifications and Additions for This Schedule Only
For purposes of this Schedule only, the Agreement is amended as follows:
1. The LEASING Section subsection (b) of the Lease is hereby deleted in its
entirety and the following substituted in its stead:
b) The obligation of Lessor to purchase the Equipment from Lessee and to lease
the same to Lessee shall be subject to receipt by Lessor, on or prior to the
earlier of the Lease Commencement Date or Last Delivery Date therefor, of each
of the following documents in form and substance satisfactory to Lessor: (i) a
Schedule for the Equipment, (ii) evidence of insurance which complies with the
requirements of the INSURANCE Section of the Lease, and (iii) such other
documents as Lessor may reasonably request. Once the Schedule is signed, the
Lessee may not cancel the Lease.
2. THE RENT ADJUSTMENT Section of the Lease is hereby deleted in its entirety.
3. The DELIVERY, USE AND OPERATION Section subsection (a) of the Lease shall be
deleted and the following substituted in its stead:
28
The parties acknowledge that this is a sale/leaseback transaction and the
Equipment is in Lessee's possession as of the Lease Commencement Date.
4. ▇▇▇▇ OF SALE
Lessee, in consideration of the Lessor's payment of the amount set forth in B 2.
above, which includes any applicable sales taxes (which payment Lessee
acknowledges), hereby grants, sells, assigns, transfers and delivers to Lessor
the Equipment along with whatever claims and rights Seller may have against the
manufacturer and/or Supplier of the Equipment, including but not limited to all
warranties and representations. At Lessors request Lessee will cause supplier to
deliver to Lessor a written statement wherein the Supplier (i) consents to the
assignment to Lessor of whatever claims and rights Lessee may have against the
Supplier, (ii) agrees not to retain any security interest, lien or other
encumbrance in or upon the Equipment at any time, and to execute such documents
as Lessor may request to evidence the release of any such encumbrance, and (iii)
represents and warrants to Lessor (x) that Supplier has previously conveyed full
title to the Equipment to Lessee, (y) that the Equipment was delivered to Lessee
and installation completed, and (z) that the final purchase price of the
Equipment (or a specified portion of such purchase price) has been paid by
Lessee.
Lessor is purchasing the Equipment for leasing back to Lessee pursuant to the
Lease. Lessee represents and warrants to Lessor that (i) Lessor will acquire by
the terms of this ▇▇▇▇ of Sale good title to the Equipment free from all liens
and encumbrances whatsoever, (ii) Lessee has the right to sell the Equipment;
and (iii) the Equipment has been delivered to Lessee in good order and
condition, and conforms to the specifications, requirements and standards
applicable thereto.
Lessee agrees to save and hold harmless Lessor from and against any and all
federal, state, municipal and local license fees and taxes of any kind or
nature, including, without limiting the generality of the foregoing, any and all
excise, personal property, use and sales taxes, and from and against any and all
liabilities, obligations, losses, damages,
29
penalties, claims, actions and suits resulting therefrom and imposed upon,
incurred by or asserted against Lessor as a consequence of the sale of the
Equipment to Lessor.
5. ACCEPTANCE
Pursuant to the provisions of the Lease, as it relates to this Schedule, Lessee
hereby certifies and warrants that (i) all Equipment listed above has been
delivered and installed (if applicable); (ii) Lessee has inspected the
Equipment, and all such testing as it deems necessary has been performed by
Lessee, Supplier or the manufacturer; and (iii) 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.
6. EQUIPMENT SPECIFIC PROVISIONS
RETURN PROVISIONS: In addition to the provisions provided for in Section 10
("Return of Equipment") of the Lease, and provided that Lessee has elected not
to exercise its option to purchase or renew the Equipment, Lessee shall, at its
expense:
(A) at least one hundred eighty (180) days and not more than two hundred forty
(240) days prior to the expiration of the term of this Lease, provide to lessor
a detailed inventory of all components of the Equipment. The inventory should
include, but not be limited to, a listing of model, serial numbers, and size
description (length, width, height, diameter) for all items of Equipment;
(B) at least one hundred twenty (120) days prior to the expiration of the term
of this Lease, upon reasonable notice by Lessor, make the Equipment available
for on site
30
operational inspections by potential purchasers and provide personnel, power and
other requirements necessary to demonstrate electrical, mechanical and
computerized systems for each item of the Equipment;
(C) at least one hundred twenty (120) days prior to expiration or earlier
termination of the Lease, upon receiving reasonable notice from Lessor, provide
or cause the vendor(s) or manufacturer(s) to provide to Lessor the following
documents: (1) one set of service manuals, blue prints, process flow diagrams
and operating manuals including replacements and/or additions thereto, such that
all documentation is completely up-to-date; (2) one set of documents, detailing
equipment configuration, operating requirements, maintenance records, and other
technical data concerning the set-up and operation of the Equipment, including
replacements and/or additions thereto, such that all documentation is completely
up-to-date;
(D) at least ninety (90) days prior to the redelivery of the Equipment, Lessee
shall at its own expense, have a manufacturer's representative(s) or a qualified
equipment maintenance provider(s), acceptable to Lessor, perform a comprehensive
physical inspection(s) to: (1) ensure the equipment is clean and cosmetically
acceptable, (2) that the equipment will operate or is capable of being operated
in accordance with the manufacturer's recommendations, and (3) in such condition
so that it may be immediately installed and placed into use in a similar
environment. There shall be no missing screws, bolts, fasteners, etc. The
Equipment will be free from all large scratches and dents. All Equipment will be
in good working condition and conform to all applicable local, state, federal
laws, and health and safety guidelines. There shall be no evidence of extreme
use, abuse or overloading, i.e. bowed, cracked, bent or sagging racking,
shelving and/or conveyor sections, etc. Any equipment enhancements or additions
will revert to the Lessor upon expiration or earlier termination of the lease
and shall not effect, in an adverse manner, the Fair Market Value of the
Equipment at Lease Expiration. Such additions and enhancements shall be made
only with prior written approval of the Lessor whose approval will not be
unnecessarily withheld;
31
(E) provided that, if during such inspection, the Authorized Inspector finds the
Equipment not in compliance with Subsection (d) above, then Lessee shall repair
or replace any such Equipment with identical or better quality and, after
corrective measures are completed, Lessee will provide for a follow-up
inspection of the Equipment by the Authorized Inspector as outlined in
Subsection (d) above;
(F) permit Lessor or Lessor's authorized representative to video tape the
Equipment "under power" at the lessee's facility at a time during normal working
hours mutually agreeable to the Lessor and Lessee prior to de-installation;
(G) properly remove all Lessee installed markings which are not necessary for
the installation, operation, maintenance or repair of the Equipment;
(H) at Lessor's choice, either (1) allow Lessor, at Lessor's expense, and
provided Lessor has provided reasonable notice to Lessee, to arrange for an
on-site auction of the Equipment in an assembled and functional state. Any such
auction will be conducted no more than sixty (60) days prior to Lease
termination and will be conducted in a manner which will not interfere with
Lessee's business operations, or (2) at Lessee's expense, provide for the
de-installation, packing, and transporting of the Equipment to include, but not
limited to, the following: (a) the manufacturer's representative(s) or other
person(s) acceptable to Lessor, shall de-install all Equipment including all
wire, cable, and mounting hardware; (b) if applicable, the Lessee shall ensure
all necessary permits and labor are obtained to redeliver the Equipment; (c) the
Equipment shall be packed properly and in accordance to the manufacturer's
recommendations; (d) the Lessee shall transport the Equipment in a manner
consistent with the manufacturer's recommendations and practices to anywhere
within the continental United States as Lessor shall direct, and shall have the
equipment unloaded at such location; (e) obtain and pay for a policy(s) of
transit insurance for the Equipment in an amount equal to the replacement value
of the Equipment and Lessor shall be named as the loss payee on all such
policies of insurance, (3) provide free safe storage for the Equipment for a
period not to exceed sixty (60) days from Lease expiration or earlier return of
the equipment.
32
7. THE DEFAULT AND REMEDIES Section subsection (b) of the Lease is hereby
amended by deleting "retained by Lessor" in the last line thereof and
substituting "for the account of Lessee" in its stead.
8. THE INDEMNIFICATION Section subsection (b) and subsection (c) of the Lease
are hereby deleted in their entirety and subsection (d) is re-designated
subsection (b).
9. END OF BASIC TERM OPTIONS
The PURCHASE OPTION Section subsection (a) of the Lease is hereby deleted in its
entirety and the following substituted in its stead:
END OF LEASE PURCHASE OPTION: Lessee may, at lease expiration, purchase all (but
not less than all) of the Equipment on any Schedule on an AS IS BASIS for cash
equal to the amount indicated on such Schedule (the "Option Payment"), plus all
applicable sales taxes. The Option Payment, plus all applicable sales taxes,
shall be due and payable in immediately available funds on the expiration date
of such Schedule. Lessee must notify Lessor of its intent to purchase the
Equipment in writing at least one hundred eighty (180) days prior to the
expiration date of the Schedule. If Lessee is in default, or if the Schedule or
this Agreement has already been terminated, Lessee may not purchase the
Equipment.
10. The following Section is inserted into the Lease after the MISCELLANEOUS
Section:
OWNERSHIP FOR TAX PURPOSES, GRANT OF SECURITY INTEREST: USURT SAVINGS:
33
(a) For income tax purposes, the parties hereto agree that it is their mutual
intention that Lessee shall be considered the owner of the Equipment.
Accordingly, Lessor agrees (i) to treat Lessee as the owner of the Equipment on
its federal income tax return, (ii) not to take actions or positions
inconsistent with such treatment on or with respect to its federal income tax
return, and (iii) not to claim any tax benefits available to an owner of the
Equipment on or with respect to its federal income tax return. The foregoing
undertakings by Lessor shall not be violated by Lessor's taking a tax position
inconsistent with the foregoing sentence to the extent such a position is
required by law or is taken through inadvertence so long as such inadvertent tax
position is reversed by Lessor promptly upon its discovery. Lessor shall in no
event be liable to Lessee if Lessee fails to secure any of the tax benefits
available to the owner of the Equipment.
(b) Lessee hereby grants to Lessor a first security interest in the Equipment,
together with all additions, attachments, accessions, accessories and accessions
thereto whether or not furnished by the Supplier of the Equipment and any and
all substitutions, replacements or exchanges therefor, and any and all insurance
and/or other proceeds of the property in and against which a security interest
is granted hereunder. Notwithstanding anything to the contrary contained
elsewhere in this Agreement, to the extent that Lessor asserts a purchase money
security interest in any items of Equipment ("PMSI Equipment"): (i) the PMSI
Equipment shall secure only those sums which have been advanced by Lessor for
the purchase of the PMSI Equipment, or the acquisition of rights therein, or the
use thereof (the "PMSI Indebtedness"), and (ii) no other Equipment shall secure
the PMSI indebtedness.
(c) It is the intention of the parties hereto to comply with any applicable
usury laws to the extent that any Schedule is determined to be subject to such
laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in any Schedule or this Agreement, in no event shall any Schedule
require the payment or permit the collection of interest in excess of the
maximum amount permitted by applicable law. If any such excess interest is
contracted for, charged or received under any Schedule or this Agreement, or in
the event that all of the principal balance shall be prepaid, so that under
34
any of such circumstances the amount of interest contracted for, charged or
received under any Schedule or this Agreement shall exceed the maximum amount of
interest permitted by applicable law, then in such event (i) the provisions of
this paragraph shall govern and control, (ii) neither Lessee nor any other
person or entity now or hereafter liable for the payment hereof shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the maximum amount of interest permitted by applicable law, (iii) any such
excess which may have been collected shall be either applied as a credit against
the then unpaid principal balance or refunded to Lessee, at the option of the
Lessor, and (iv) the effective rate of interest shall be automatically reduced
to the maximum lawful contract rate allowed under applicable law as now or
hereafter construed by the counts having jurisdiction thereof. It is further
agreed that without limitation of the foregoing, all calculations of the rate of
interest contracted for, charged or received under any Schedule or this
Agreement which are made for the purpose of determining whether such rate
exceeds the maximum lawful contract rate, shall be made, to the extent permitted
by applicable law, by amortizing, prorating, allocating and spreading in equal
parts during the period of the full stated term of the indebtedness evidenced
hereby, all interest at any time contracted for, charged or received from Lessee
or otherwise by Lessor in connection with such indebtedness; provided, however,
that if any applicable state law is amended or the law of the United States of
America preempts any applicable state law, so that it becomes lawful for Lessor
to receive a greater interest per annum rate than is presently allowed, the
Lessee agrees that, on the effective date of such amendment or preemption, as
the case may be, the lawful maximum hereunder shall be increased to the maximum
interest per annum rate allowed by the amended state law or the law of the
United States of America.
G. Payment Authorization
Lessor is hereby irrevocably authorized and directed to deliver and apply the
proceeds due under this Schedule as follows:
35
Company Name
Star Scientific, Inc.
Wire Transfer Instructions
Sun Trust Bank, Central Virginia
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA # 051 000 020
Account Name: Star Scientific, Inc.
Account # 702 182 591
Amount
$1,998,643.04
First month's rent and interim rent, if any, may be deducted from this amount.
Lessor is also authorized to insert certain factually correct information into
the Schedule and ancillary documents, including the dates of execution, in order
to complete the required documentation. This authorization and direction is
given pursuant to the same authority authorizing the above-mentioned financing.
Lessee hereby authorizes Lessor to file a financing statement and amendments
thereto describing the Equipment described in this Schedule and adding any other
collateral described herein and containing any other information required by the
applicable Uniform Commercial Code. Further, Lessee irrevocably grants to lessor
the power to sign Lessee's name and generally to act on behalf of Lessee to
execute and file financing statements and other documents pertaining to any or
all of the Equipment.
H. Authorization to File Uniform Commercial Code Financing Statements and
Amendments
36
Lessee hereby authorizes Lessor to file financing statements and amendments
thereto describing the Equipment described in this Schedule and adding any other
collateral described herein and containing any other information required by the
applicable Uniform Commercial Code.
Except as expressly modified hereby, all terms and provisions of the Agreement
shall remain in full force and effect. 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.
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:
AMERICAN EQUIPMENT LEASING,
A DIVISION OF EAB LEASING CORP.
By: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Supervisor
LESSEE:
STAR SCIENTIFIC, INC.
By: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
EQUIPMENT SCHEDULE
SCHEDULE NO. S-1
DATED THIS ______________________, 2001
TO MASTER LEASE AGREEMENT
DATED AS OF June 29, 2001
37
Lessor & Mailing Address:
Southern Pacific Bancapital
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Lessee & Mailing Address:
Star Scientific, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
This Schedule is executed pursuant to, and incorporated 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 Schedule, incorporating by reference the Agreement, constitutes a
separate instrument of lease.
A. Equipment: Subject to the terms and conditions of the Lease, Lessor agrees to
Lease to Lessee the Equipment described below (the "Equipment").
Number of Units Capitalized Lessor's Cost Manufacturer Serial Number
Model and Type of Equipment ▇▇▇▇▇▇
Maxi-Miser tobacco curing barns (including containers/curing bins, furnaces and
air circulation heat exchanger systems) more fully described on Annex A attached
hereto and made a part hereof.
B. Financial Terms
1. Advance Rent (if any): $69,974.83
2. Capitalized Lessor's Cost: $2,991,144.10
3. Basic Term (No. of Months): 48 Months
38
4. Basic Term Lease Rate Factor: 2.3394%
5. Basic Term Commencement Date: September 1, 2001
6. Lessee Federal Tax ID No.: ▇▇-▇▇▇▇▇▇▇
7. Last Delivery Date: August 31, 2001
8. Daily Lease Rate Factor: 0.078%
9. First Termination Date: N/A.
10. Interim Rent: For the period from and including the Lease Commencement Date
to but not including the Basic Term Commencement Date ("Interim Period"). Lessee
shall pay as rent ("Interim Rent") for each unit of Equipment, the product of
the Daily Lease Rate Factor times the Capitalized Lessor's Cost of such unit
times the number of days in the Interim Period. Interim Rent shall be due on
August 31, 2001.
11. Basic Term Rent. Commencing on September 1, 2001 and on the same day of each
month thereafter (each, a "Rent Payment Date") during the Basic Term. Lessee
shall pay 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.
C. Tax Benefits Depreciation Deductions:
1. Depreciation method is the 200% declining balance method, switching to
straight line method for the 1st 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.
2. Recovery Period: 7 years.
3. Basis: 100% of the Capitalized Lessor's Cost.
D. Property Tax
39
APPLICABLE TO EQUIPMENT LOCATED IN Virginia: Lessee agrees that it will not list
any of such Equipment for property tax purposes or report any property tax
assessed against such Equipment until otherwise directed in writing by Lessor.
Upon receipt of any property tax ▇▇▇▇ pertaining to such Equipment from the
appropriate taxing authority, Lessor will pay such tax and will invoice Lessee
for the expense. Upon receipt of such invoice, Lessee will promptly reimburse
Lessor for such expense.
Lessor may notify Lessee (and Lessee agrees to follow such notification)
regarding any changes in property tax reporting and payment responsibilities.
E. Article 2A Notice
IN ACCORDANCE WITH THE REQUIREMENTS OF ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE
AS ADOPTED IN THE APPLICABLE STATE, LESSOR HEREBY MAKES THE FOLLOWING
DISCLOSURES TO LESSEE PRIOR TO EXECUTION OF THE LEASE, (A) THE PERSON(S)
SUPPLYING THE EQUIPMENT IS Various (THE "SUPPLIER(S)"), (B) LESSEE IS ENTITLED
TO THE PROMISES AND WARRANTIES INCLUDING THOSE OF ANY THIRD PARTY, PROVIDED TO
THE LESSOR BY SUPPLIER(S), WHICH IS SUPPLYING THE EQUIPMENT IN CONNECTION WITH
OR AS PART OF THE CONTRACT BY WHICH LESSOR ACQUIRED THE EQUIPMENT AND (C) WITH
RESPECT TO SUCH EQUIPMENT, LESSEE MAY COMMUNICATE WITH SUPPLIER(S) AND RECEIVE
AN ACCURATE AND COMPLETE STATEMENT OF SUCH PROMISES AND WARRANTIES, INCLUDING
ANY DISCLAIMERS AND LIMITATIONS OF THEM OR OF REMEDIES. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, LESSEE HEREBY WAIVES ANY AND ALL RIGHTS AND REMEDIES
CONFERRED UPON A LESSEE IN ARTICLE 2A AND ANY RIGHTS NOW OR HEREAFTER CONFERRED
BY STATUTE OR OTHERWISE WHICH MAY LIMIT OR MODIFY ANY OF LESSOR'S RIGHTS OR
REMEDIES UNDER THE DEFAULT AND REMEDIES SECTION OF THE AGREEMENT.
40
F. Stipulated Loss and Termination Value Table*
Payment Stipulated Loss Value
Number % of Cost
1 107.966
2 106.578
3 105.175
4 103.754
5 102.315
6 100.861
7 99.391
8 97.906
9 96.406
10 94.892
11 93.363
12 91.817
13 90.256
14 88.681
15 87.089
16 85.481
17 83.859
18 82.219
19 80.580
20 78.927
21 77.260
22 75.578
23 73.880
24 72.168
25 70.440
26 68.697
27 66.939
41
28 65.165
29 63.375
30 61.569
31 59.747
32 57.909
33 56.055
34 54.185
35 52.298
36 50.394
37 48.473
38 46.536
39 44.581
40 42.609
41 40.620
42 38.613
43 36.589
44 34.546
45 32.486
46 30.408
47 28.311
48 26.196
*The Stipulated Loss Value or Termination Value for any unit of Equipment shall
be 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 last percentage figure shown above shall control
throughout any such extended term.
7. Modifications and Additions for This Schedule Only
For purposes of this Schedule only, the Agreement is amended as follows:
42
1. The LEASING Section subsection (b) of the Lease is hereby deleted in its
entirety and the following substituted in its stead:
b) The obligation of Lessor to purchase the Equipment from Lessee and to lease
the same to Lessee shall by subject to receipt by Lessor, on or prior to the
earlier of the Lease Commencement Date or Last Delivery Date therefor, of each
of the following documents in form and substance satisfactory to Lessor: (i) a
Schedule for the Equipment (ii) evidence of insurance which complies with the
requirements of the INSURANCE Section of the Lease, and (iii) such other
documents as Lessor may reasonably request. Once the Schedule is signed, the
Lessee may not cancel the Lease.
2. The DELIVERY, USE AND OPERATION Section subsection (a) of the Lease shall be
deleted and the following substituted in its stead:
The parties acknowledge that this is a sale/leaseback transaction and the
Equipment is in Lessee's possession as of the Lease Commencement Date.
3. ▇▇▇▇ OF SALE
Lessee, in consideration of the Lessor's payment of the amount set forth in B 2.
above, which includes any applicable sales taxes (which payment Lessee
acknowledges), hereby grants, sells, assigns, transfers and delivers to Lessor
the Equipment along with whatever claims and rights Seller may have against the
manufacturer and/or Supplier of the Equipment, including but not limited to all
warranties and representations. At Lessors request Lessee will cause Supplier to
deliver to Lessor a written statement wherein the Supplier (i) consents to the
assignment to Lessor of whatever claims and rights Lessee may have against the
Supplier, (ii) agrees not to retain any security interest, lien or other
encumbrance in or upon the Equipment at any time, and to execute such documents
as Lessor may request to evidence the release of any such encumbrance, and (iii)
represents and warrants to Lessor (x) that Supplier has previously conveyed full
title to the Equipment to Lessee, (y) that the Equipment was delivered to Lessee
and installation
43
completed, and (z) that the final purchase price of the Equipment (or a
specified portion of such purchase price) has been paid by Lessee.
Lessor is purchasing the Equipment for leasing back to Lessee pursuant to the
Lease. Lessee represents and warrants to Lessor that (i) Lessor will acquire by
the terms of this ▇▇▇▇ of Sale good title to the Equipment free from all liens
and encumbrances whatsoever; (ii) Lessee has the right to sell the Equipment;
and (iii) the Equipment has been delivered to Lessee in good order and
condition, and conforms to the specifications, requirements and standards
applicable thereto; and (iv) the equipment has been accurately labeled,
consistent with the requirements of 40 CFR part 82 Subpart E, with respect to
products manufactured with a controlled (ozone-depleting) substance.
Lessee agrees to save and hold harmless Lessor from and against any and all
federal, state, municipal and local license fees and taxes of any kind or
nature, including, without limiting the generality of the foregoing, any and all
excise, personal property, use and sales taxes, and from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions and suits
resulting therefrom and imposed upon, incurred by or asserted against Lessor as
a consequence of the sale of the Equipment to Lessor.
4. ACCEPTANCE
Pursuant to the provisions of the Lease, as it relates to this Schedule, Lessee
hereby certifies and warrants that (i) all Equipment listed above has been
delivered and installed (if applicable); (ii) Lessee has inspected the
Equipment, and all such testing as it deems necessary has been performed by
Lessee, Supplier or the manufacturer, and (iii) 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
44
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.
5. EQUIPMENT SPECIFIC PROVISIONS
RETURN PROVISIONS: In addition to the provisions provided for in Section 10
("Return of Equipment") of the Lease, and provided that Lessee has elected not
to exercise its option to purchase or renew the Equipment, Lessee shall, at its
expense:
(A) at least one hundred eighty (180) days and not more than two hundred forty
(240) days prior to the expiration of the term of this Lease, provide to lessor
a detailed inventory of all components of the Equipment. The inventory should
include, but not be limited to, a listing of model, serial numbers, and size
description (length, width, height, diameter) for all items of Equipment;
(B) at least one hundred twenty (120) days prior to the expiration of the term
of this Lease, upon reasonable notice by Lessor, make the Equipment available
for on site operational inspections by potential purchasers and provide
personnel, power and other requirements necessary to demonstrate electrical,
mechanical and computerized systems for each item of the Equipment;
(C) at least one hundred twenty (120) days prior to expiration or earlier
termination of the Lease, upon receiving reasonable notice from Lessor, provide
or cause the vendor(s) or manufacturer(s) to provide to Lessor the following
documents: (1) one set of service manuals, blue prints, process flow diagrams
and operating manuals including replacements and/or additions thereto, such that
all documentation is completely up-to-date; (2) one set of documents, detailing
equipment configuration, operating requirements, maintenance records, and other
technical data concerning the set-up and operation of the Equipment, including
replacements and/or additions thereto, such that all documentation is completely
up-to-date;
45
(D) at least ninety (90) days prior to the redelivery of the Equipment, Lessee
shall at its own expense, have a manufacturer's representative(s) or a qualified
equipment maintenance provider(s), acceptable to Lessor, perform a comprehensive
physical inspection(s) to: (1) ensure the equipment is clean and cosmetically
acceptable, (2) that the equipment will operate or is capable of being operated
in accordance with the manufacturer's recommendations, and (3) in such condition
that it may be immediately installed and placed into use in a similar
environment. There shall be no missing screws, bolts, fasteners, etc. The
Equipment will be free from all large scratches and dents. All Equipment will be
in good working condition and conform to all applicable local, state, federal
laws, and health and safety guidelines. There shall be no evidence of extreme
use, abuse or overloading, i.e. bowed, cracked, bent or sagging racking shelving
and/or conveyer sections, etc. Any equipment enhancements or additions will
revert to the Lessor upon expiration or earlier termination of the lease and
shall not effect, in an adverse manner, the Fair Market Value of the Equipment
at Lease Expiration. Such additions and enhancements shall be made only with
prior written approval of the Lessor whose approval will not be unnecessarily
withheld;
(E) provided that, if during such inspection, the Authorized Inspector finds the
Equipment not in compliance with Subsection (d) above, then Lessee shall repair
or replace any such Equipment with identical or better quality and, after
corrective measures are completed, Lessee will provide for a follow-up
inspection of the Equipment by the Authorized Inspector as outlined in
Subsection (d) above;
(F) permit Lessor or Lessor's authorized representative to video tape the
Equipment "under power" at the lessee's facility at a time during normal working
hours mutually agreeable to the Lessor and Lessee prior to de-installation;
(G) properly remove all Lessee installed markings which are not necessary for
the installation, operation, maintenance or repair of the Equipment;
46
(H) at Lessor's choice, either (1) allow Lessor, at Lessor's expense, and
provided Lessor has provided reasonable notice to Lessee, to arrange for an
on-site auction of the Equipment in an assembled and functional state. Any such
auction will be conducted no more than sixty (60) days prior to Lease
termination and will be conducted in a manner which will not interfere with
Lessee's business operations, or (2) at Lessee's expense, provide for the
de-installation, packing, and transporting of the Equipment to include, but not
limited to, the following: (a) the manufacturer's representative(s) or other
person(s) acceptable to Lessor, shall de-install all Equipment including all
wire, cable, and mounting hardware; (b) if applicable, the Lessee shall ensure
all necessary permits and labor are obtained to redeliver the Equipment; (c) the
Equipment shall be packed properly and in accordance to the manufacturer's
recommendations; (d) the Lessee shall transport Equipment in a manner consistent
with the manufacturer's recommendations and practices to anywhere within the
continental United States as Lessor shall direct, and shall have the equipment
unloaded at such location; (e) obtain and pay for a policy(s) of transit
insurance for the Equipment in an amount equal to the replacement value of the
Equipment and Lessor shall be named as the loss payee on all such policies of
insurance, (3) provide free safe storage for the Equipment for a period not to
exceed sixty (60) days from Lease expiration or earlier return of the equipment.
6. LEASE TERM OPTIONS
Early Lease Term Option
Cancellation Option:
Only on the business day after the twelfth payment is due, and only at 12:01
p.m. Eastern Standard Time, Lessee can terminate the lease agreement under the
following conditions: i) Lessee will notify Lessor of such termination in
writing 120 days prior to the twelfth payment; ii) Lessee will pay Lessor a
termination penalty equal to 67.73% of the original Capitalized Lessor's Cost
plus any executory/removal fees and storage costs solely determined by Lessor;
iii) Lessee will package and ship all but not less than all, of the Equipment to
a destination designated by Lessor, and iv) Lessee shall provide storage at
their sole cost, if requested by Lessor. If any piece of Equipment from this
Equipment
47
Schedule is not returned on the referenced day and time, then the Lease will
automatically continue for the duration of the term.
7. END OF BASIC TERM OPTIONS
The PURCHASE OPTION Section subsection (a) of the Lease is hereby amended to
read in its entirety as follows:
Purchase Option:
At the expiration of the Base Lease Term, provided Lessee gives one hundred
twenty (120) days prior written notice, Lessee shall have the following options
with regard to all but not less than all, of the Equipment per schedule (unless
otherwise authorized by Lessor): i) Purchase the Equipment for an amount equal
to 10% of the original Capitalized Lessor's Cost; ii) Renew the lease for 12
months at a monthly Rental amount equal to .9149% of the original Capitalized
Lessor's Cost.
Thereafter, at the end of such Renewal Term, Lessee may a) Purchase the
Equipment for its then fair market value; or b) Renew the Lease for the
Equipment's then fair market value; or c) Return the Equipment to Lessor to a
destination designated by Lessor free of all mortgages, liens, security
interest, charges, encumbrances or other claims, in accordance with the terms of
the lease.
8. ACCELERATION CLAUSE
In addition to the standard Lease language, Lessor and Lessee agree to the
following: If at any time during the term of this Lease Agreement, i) the
contract between ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ Tobacco Corp. and Lessee is not renewed or
is cancelled for any reason; and/or ii) the Lessee does not maintain a ratio of
Adjusted Cash Flow to Fixed Charges that exceeds 1.25x for each fiscal year end
over the life of the Lease, then the Lessor has a right to accelerate all
outstanding lease payments with 30 days notice from Lessor, which is to include,
but not limited to, Lease Payments, Taxes and the remaining Balloon. Adjusted
Cash Flow defined as earnings, plus interest expense (all interest expense paid
48
or accrued, but not on zero coupon debt), plus taxes, plus depreciation and
amortization, plus lease payments. Fixed Charges defined as current portion of
long-term debt, plus interest expense (see above), plus dividends, plus capital
expenditures (not including lease equipment), plus annual calculated payments
under the Master Settlement Agreement due for the current year, plus lease
payments.
H. Payment Authorization
Lessor is hereby irrevocably authorized and directed to deliver and apply the
proceeds due under this Schedule as follows:
Company Name
Star Scientific, Inc.
Wire Transfer Instructions
SunTrust Bank, Central Virginia
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA # 051 000 020
Account Name: Star Scientific, Inc.
Account # 702 182 591
Amount
$2,991,144.10
49