EXECUTION COPY
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EXHIBIT 10.43
LEASE
between
HANOVER EQUIPMENT TRUST 2000A
as Lessor,
and
HANOVER COMPRESSION INC,
as Lessee
___________________________
Dated as of March 13, 2000
___________________________
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THIS LEASE IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF THE CHASE MANHATTAN
BANK, AS AGENT (THE "AGENT"), UNDER A CREDIT AGREEMENT, DATED AS OF MARCH 13,
2000 AMONG HANOVER EQUIPMENT TRUST 2000A, THE LENDERS, AND THE AGENT, AS AMENDED
OR SUPPLEMENTED. THIS LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO THE
EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE OF THE STATES OF ALABAMA, LOUISIANA, NEW
MEXICO, OKLAHOMA, WYOMING OR TEXAS), NO SECURITY INTEREST IN THIS LEASE MAY BE
CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE
ORIGINAL COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS
1.1 Defined Terms...................................................... 1
SECTION 2. EQUIPMENT AND TERM
2.1 Equipment.......................................................... 1
2.2 Lease Term......................................................... 1
2.3 Title.............................................................. 1
2.4 Lease Supplements.................................................. 1
SECTION 3. RENT
3.1 Rent............................................................... 2
3.2 Supplemental Rent.................................................. 2
3.3 Performance on a Non-Business Day.................................. 2
SECTION 4. WARRANTIES
4.1 Warranties......................................................... 2
SECTION 5. QUIET ENJOYMENT
5.1 Quiet Enjoyment.................................................... 3
SECTION 6. NET LEASE
6.1 Net Lease; No Setoff; Etc.......................................... 3
6.2 No Termination or Abatement........................................ 4
SECTION 7. OWNERSHIP OF EQUIPMENT
7.1 Ownership of the Equipment......................................... 4
SECTION 8. CONDITION OF EQUIPMENT
8.1 Disclaimer of Warranties........................................... 6
8.2 Possession and Use of the Equipment................................ 7
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SECTION 9. COMPLIANCE
9.1 Compliance with Legal Requirements and Insurance Requirements...... 7
9.2 Environmental Matters.............................................. 7
SECTION 10. MAINTENANCE, REPAIR AND RETURN REQUIREMENTS
10.1 Maintenance and Repair............................................. 8
10.2 Return Requirements................................................ 9
10.3 Right of Inspection and Location................................... 9
10.4 Environmental Inspection........................................... 10
SECTION 11. MODIFICATIONS
11.1 Modifications...................................................... 10
SECTION 12. TITLE
12.1 Warranty of Title.................................................. 11
12.2 Identification..................................................... 11
SECTION 13. PERMITTED CONTESTS
13.1 Permitted Contests Other Than in Respect of Impositions............ 11
SECTION 14. INSURANCE
14.1 Public Liability and Workers' Compensation Insurance............... 12
14.2 Hazard and Other Insurance......................................... 12
14.3 Coverage........................................................... 12
SECTION 15. CONDEMNATION AND CASUALTY
15.1 Casualty and Condemnation.......................................... 13
SECTION 16. LEASE TERMINATION
16.1 Termination upon Certain Events.................................... 14
16.2 Procedures......................................................... 15
SECTION 17. DEFAULT
17.1 Lease Events of Default............................................ 15
17.2 Final Liquidated Damages........................................... 16
17.3 Remedies........................................................... 16
17.4 Additional Remedies................................................ 17
17.5 Proceeds of Sale; Deficiency....................................... 17
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17.6 Waiver of Certain Rights........................................... 17
17.7 Assignment of Rights Under Contracts............................... 17
SECTION 18. LESSOR'S RIGHT TO CURE
18.1 Lessor's Right to Cure Lessee's Lease Defaults..................... 18
SECTION 19. LEASE TERMINATION
19.1 Provisions Relating to Lessee's Termination of this Lease
or Exercise of Purchase Option..................................... 18
19.2 Aggregate Tranche A Percentage..................................... 18
SECTION 20. PURCHASE OPTION
20.1 Purchase Option.................................................... 18
20.2 Maturity Date Purchase Option...................................... 19
20.3 Obligation to Purchase All Equipment............................... 19
21. SALE OF EQUIPMENT
21.1 Sale Procedure..................................................... 19
21.2 Application of Proceeds of Sale.................................... 20
21.3 Indemnity for Excessive Wear....................................... 20
21.4 Appraisal Procedure................................................ 21
21.5 Certain Obligations Continue....................................... 21
SECTION 22. HOLDING OVER
22.1 Holding Over....................................................... 21
SECTION 23. RISK OF LOSS
23.1 Risk of Loss....................................................... 22
SECTION 24. SUBLETTING AND ASSIGNMENT
24.1 Subletting and Assignment.......................................... 22
24.2 Subleases or Licenses.............................................. 22
SECTION 25. ESTOPPEL CERTIFICATES
25.1 Estoppel Certificates.............................................. 22
SECTION 26. NO WAIVER
26.1 No Waiver......................................................... 23
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SECTION 27. ACCEPTANCE OF SURRENDER
27.1 Acceptance of Surrender........................................... 23
SECTION 28. OWNERSHIP, GRANT OF SECURITY INTEREST AND
FURTHER ASSURANCES
28.1 Grant of Security Interest........................................ 23
28.2 UCC Remedies...................................................... 24
28.3 Waiver; Deficiency................................................ 25
28.4 Agent's Appointment as Attorney-in-Fact; Agent's
Performance of Lessee's Obligations............................... 25
SECTION 29. NOTICES
29.1 Notices........................................................... 26
SECTION 30. MISCELLANEOUS
30.1 Miscellaneous..................................................... 27
30.2 Amendments and Modifications...................................... 27
30.3 Successors and Assigns............................................ 27
30.4 Headings and Table of Contents.................................... 27
30.5 Counterparts...................................................... 27
30.6 GOVERNING LAW..................................................... 28
30.7 Limitations on Recourse........................................... 28
30.8 Priority.......................................................... 28
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Exhibits
Exhibit A Lease Supplement
vi
LEASE (this "Lease"), dated as of March 13, 2000, between HANOVER EQUIPMENT
TRUST 2000A, a Delaware business trust, having its principal office at c/o
Wilmington Trust Company, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as lessor (the "Lessor"), and HANOVER COMPRESSION
INC., a Delaware corporation, having its principal office at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, as lessee (the "Lessee").
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used herein but not otherwise
defined in this Lease shall have the respective meanings specified in Annex A to
the Participation Agreement dated as of the date hereof among Lessee, Lessor,
Agent, the Investor and the Lenders named therein, as such Participation
Agreement may be amended, supplemented or otherwise modified from time to time.
SECTION 2. EQUIPMENT AND TERM
2.1 Equipment. Subject to the terms and conditions hereinafter set
forth and contained in the respective Lease Supplement relating to each piece of
Equipment, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
each piece of Equipment.
2.2 Lease Term. The Equipment is leased for the Term, unless
extended or earlier terminated in accordance with the provisions of this Lease.
2.3 Title. Except as otherwise expressly set forth in the
Operative Agreements, the Equipment is leased to Lessee without any
representation or warranty, express or implied, by Lessor and subject to the
rights of parties in possession, the existing state of title (including, without
limitation, the Permitted Exceptions) and all applicable Legal Requirements.
Lessee shall in no event have any recourse against Lessor for any defect in
title to the Equipment unless such defect was the result of an act or omission
of Lessor or its Affiliates. Lessor and Lessee hereby declare that it is their
mutual intent that the Equipment is to be considered movable (personal)
property, severable from the improvements in which it may be located, and not
immovables or components of immovables, for all purposes of this Lease.
2.4 Lease Supplements. On each Equipment Closing Date, Lessee and
Lessor shall each execute and deliver a Lease Supplement for the Equipment to be
leased on such date in substantially the form of Exhibit A hereto and thereafter
such Equipment shall be subject to the terms of this Lease.
2
SECTION 3. RENT
3.1 Rent. (a) On each applicable Payment Date after the Equipment
Closing Date with respect to a piece of Equipment, Lessee shall pay the Basic
Rent attributable to such Equipment.
(b) Basic Rent shall be due and payable in Dollars and shall be paid
by wire transfer of immediately available funds on the due date therefor to such
account or accounts at such bank or banks or to such other Person or in such
other manner as Lessor shall from time to time direct.
(c) Lessee's inability or failure to take possession of all, or any
piece, of the Equipment when delivered by Lessor shall not delay or otherwise
affect Lessee's obligation to pay Rent in accordance with the terms of this
Lease.
3.2 Supplemental Rent. Lessee shall pay to Lessor or the Person
entitled thereto any and all Supplemental Rent promptly as the same shall become
due and payable, and if Lessee fails to pay any Supplemental Rent, Lessor shall
have all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Lessee shall pay to Lessor
as Supplemental Rent, among other things, on demand, to the extent permitted by
applicable Legal Requirements, interest at the applicable Overdue Rate on any
installment of Basic Rent not paid when due for the period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due or
demanded by Lessor for the period from the due date or the date of any such
demand, as the case may be, until the same shall be paid. The expiration or
other termination of Lessee's obligations to pay Basic Rent hereunder shall not
limit or modify the obligations of Lessee with respect to Supplemental Rent.
Unless expressly provided otherwise in this Lease or any other Operative
Agreement, in the event of any failure on the part of Lessee to pay and
discharge any Supplemental Rent as and when due, Lessee shall also promptly pay
and discharge any fine, penalty, interest or cost which may be assessed or added
for nonpayment or late payment of such Supplemental Rent, all of which shall
also constitute Supplemental Rent.
3.3 Performance on a Non-Business Day. If any payment is required
hereunder on a day that is not a Business Day, then such payment shall be due on
the next succeeding Business Day, unless, in the case of payments based on the
Eurodollar Rate, the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
SECTION 4. WARRANTIES
4.1 Warranties. Lessor agrees to take all such actions as may be
reasonably necessary to insure that Lessee is the beneficiary of any and all
warranties with respect to the Equipment, provided, however, the reasonable
costs of any such actions shall be borne by Lessee.
SECTION 5. QUIET ENJOYMENT
5.1 Quiet Enjoyment. So long as no Lease Event of Default shall
have occurred and be continuing, Lessee shall peaceably and quietly have, hold
and enjoy the Equipment for the Term, free of any claim or other action by
Lessor or anyone claiming by, through or under Lessor.
SECTION 6. NET LEASE
6.1 Net Lease; No Setoff; Etc. This Lease shall constitute a net
lease and, except as otherwise provided herein or in the other Operative
Agreements, it is intended that Basic Rent and Supplemental Rent shall be paid
without counterclaim, setoff, deduction or defense of any kind and without
abatement, suspension, deferment, diminution or reduction of any kind, and
Lessee's obligation to pay all such amounts is absolute and unconditional,
provided, that if at any time the Lessee is required to make a payment of (i)
Termination Value or (ii) an indemnity payment pursuant to Section 12 of the
Participation Agreement to the Investor, and there shall exist any Lessor Liens
attributable to the Investor (and the Lessee shall have previously incurred a
charge to discharge any Lessor Liens attributable to the Investor), then the
Lessee shall be entitled to deduct from the portion required to be paid to the
Investor of Termination Value or payment of indemnity, as the case may be, an
amount sufficient to so reimburse the Lessee for the cost of discharging such
Lessor Liens, as the case may be. The obligations and liabilities of Lessee
hereunder shall in no way be released, discharged or otherwise affected for any
reason, including, without limitation, to the maximum extent permitted by law:
(a) any defect in the condition, merchantability, design, quality or fitness for
use of any portion of any Equipment, or any failure of any Equipment to comply
with all Legal Requirements, including any inability to use any Equipment by
reason of such non-compliance; (b) any damage to, abandonment, loss,
contamination of or Release from or destruction of or any requisition or taking
of any Equipment or any part thereof; (c) any restriction, prevention or
curtailment of or interference with any use of any Equipment or any part
thereof; (d) any defect in title to or rights to any Equipment or any Lien on
such title or rights or on any Equipment; (e) any change, waiver, extension,
indulgence or other action or omission or breach in respect of any obligation or
liability of or by Lessor, Investor, Agent or any Lender; (f) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to Lessee, Lessor, Investor, Agent, any Lender
or any other Person, or any action taken with respect to this Lease by any
trustee or receiver of Lessee, Lessor, Investor, Agent, any Lender or any other
Person, or by any court, in any such proceeding; (g) any claim that Lessee has
or might have against any Person, including, without limitation, Lessor,
Investor, Agent or any Lender; (h) any failure on the part of Lessor to perform
or comply with any of the terms of this Lease, any other Operative Agreement or
of any other agreement; (i) any invalidity or unenforceability or disaffirmance
against or by Lessee of this Lease or any provision hereof or any of the other
Operative Agreements or any provision of any thereof; (j) the impossibility of
performance by Lessee, Lessor or both; (k) any action by any court,
administrative agency or other Governmental Authority; any restriction,
prevention or curtailment of or any interference
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with the construction on or any use of any Equipment or any part thereof; or (m)
any other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Lessee shall have notice or knowledge of any of the foregoing.
This Lease shall be noncancellable by Lessee for any reason whatsoever except as
expressly provided herein or in the other Operative Agreements, and Lessee, to
the extent permitted by Legal Requirements, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this Lease, or
to any diminution, abatement or reduction of Rent payable by Lessee hereunder.
If for any reason whatsoever this Lease shall be terminated in whole or in part
by operation of law or otherwise, except as otherwise expressly provided herein
or in the other Operative Agreements, Lessee shall, unless prohibited by Legal
Requirements, nonetheless pay to Lessor (or, in the case of Supplemental Rent,
to whomever shall be entitled thereto) an amount equal to each Rent payment at
the time and in the manner that such payment would have become due and payable
under the terms of this Lease if it had not been terminated in whole or in part,
and in such case, so long as such payments are made and no Lease Event of
Default shall have occurred and be continuing, Lessor will deem this Lease to
have remained in effect. Each payment of Rent made by Lessee hereunder shall be
final and, absent manifest error in the computation of the amount thereof,
Lessee shall not seek or have any right to recover all or any part of such
payment from Lessor, Investor, Agent or any party to any agreements related
thereto for any reason whatsoever. Lessee assumes the sole responsibility for
the condition, use, operation, maintenance, and management of the Equipment and
Lessor shall have no responsibility in respect thereof and shall have no
liability for damage to the property of Lessee or any subtenant of Lessee on any
account or for any reason whatsoever other than resulting from Lessor's gross
negligence or wilful misconduct.
6.2 No Termination or Abatement. Lessee shall remain obligated
under this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting Lessor, or any action with respect to this Lease which may
be taken by any trustee, receiver or liquidator of Lessor or by any court with
respect to Lessor, except as otherwise expressly provided herein. Lessee hereby
waives all right (i) to terminate or surrender this Lease, except as otherwise
expressly provided herein or in the other Operative Agreements, or (ii) to avail
itself of any abatement, suspension, deferment, reduction, setoff, counterclaim
or defense with respect to any Rent. Lessee shall remain obligated under this
Lease in accordance with its terms and, to the extent permitted by law, Lessee
hereby waives any and all rights now or hereafter conferred by statute or
otherwise to modify or to avoid strict compliance with its obligations under
this Lease. Notwithstanding any such statute or otherwise, to the extent
permitted by law, Lessee shall be bound by all of the terms and conditions
contained in this Lease.
SECTION 7. OWNERSHIP OF EQUIPMENT
5
7.1 Ownership of the Equipment. (a) Lessor and Lessee intend that
(i) for financial accounting purposes with respect to Lessee (A) this Lease will
be treated as an "operating lease" pursuant to Statement of Financial Accounting
Standards (SFAS) No. 13, as amended, (B) Lessor will be treated as the owner and
lessor of the Equipment and (C) Lessee will be treated as the lessee of the
Equipment, but (ii) for federal, state and local income tax and state law
purposes (A) this Lease will be treated as a financing arrangement, (B) the
Lenders will be treated as senior lenders making loans to Lessee in an amount
equal to the Loans, which Loans will be secured by the Equipment, (C) Lessor
will be treated as a subordinated lender making a loan to Lessee in an amount
equal to the Investor Contribution, which loan is secured by the Equipment, and
(D) Lessee will be treated as the owner of the Equipment and will be entitled to
all tax benefits ordinarily available to an owner of property like the Equipment
for such tax purposes.
(b) Lessor and Lessee further intend and agree that, for the purpose
of securing Lessee's obligations for the repayment of the above-described loans,
(i) this Lease shall also be a security agreement (as defined in Section
1-201(37) of the Uniform Commercial Code) and financing statement within the
meaning of Article 9 of the Uniform Commercial Code; (ii) the conveyance
provided for in Section 2 shall be deemed a grant of a security interest in
Lessee's right, title and interest in the Equipment (including the right to
exercise all remedies as are contained herein upon the occurrence of a Lease
Event of Default) and all proceeds of the conversion, voluntary or involuntary,
of the foregoing into cash, investments, securities or other property, whether
in the form of cash, investments, securities or other property, for the benefit
of the Lessor to secure the Lessee's payment of all amounts owed by the Lessee
under this Lease and the other Operative Agreements and Lessor holds title to
the Equipment so as to create and grant a first lien and prior security interest
in the Equipment (A) pursuant to this Lease for the benefit of the Agent under
the Assignment of Lease, to secure to the Agent the obligations of the Lessee
under the Lease and (B) pursuant to the Security Agreement to secure to the
Agent the obligations of the Lessor under the Credit Agreement and the Notes;
(iii) the possession by Lessor or any of its agents of notes and such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (iv) notifications to Persons holding such
property, and acknowledgments, receipts or confirmations from financial
intermediaries, bankers or agents (as applicable) of Lessee shall be deemed to
have been given for the purpose of perfecting such security interest under
applicable law. Lessor and Lessee shall take such actions as may be necessary
to ensure that such security interest is a perfected security interest of first
priority under applicable law and will be maintained as such throughout the
Term. Nevertheless, Lessee acknowledges and agrees that none of Lessor,
Investor, the Trust Company, Agent, or any Lender has provided or will provide
tax, accounting or legal advice to Lessee regarding this Lease, the Operative
Agreements or the transactions contemplated hereby and thereby, or made any
representations or warranties concerning the tax, accounting or legal
characteristics of the Operative Agreements, and that Lessee has obtained and
relied upon such tax, accounting and legal advice concerning the Operative
Agreements as it deems appropriate.
6
(c) Lessor and Lessee further intend and agree that in the event of
any insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State or Commonwealth thereof affecting Lessee or
Lessor, the transactions evidenced by this Lease shall be regarded as loans made
by an unrelated third party lender to Lessee.
SECTION 8. CONDITION OF EQUIPMENT
7
8.1 Disclaimer of Warranties. WITHOUT LIMITING ANY CLAIM LESSEE
MAY HAVE AGAINST ANY CONTRACTOR, SUBCONTRACTOR, SUPPLIER OR MANUFACTURER, LESSEE
EXPRESSLY ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT ANY ASSISTANCE
FROM THE LESSOR, THE AGENT OR THE INVESTOR OR THEIR RESPECTIVE AGENTS OR
EMPLOYEES, AND LESSEE AGREES THAT (I) EACH PIECE OF EQUIPMENT IS OF A SIZE,
DESIGN, AND CAPACITY SELECTED BY AND ACCEPTABLE TO LESSEE, (II) LESSEE IS
SATISFIED THAT EACH ITEM OF EQUIPMENT IS SUITABLE FOR ITS PURPOSES, (III) THE
EQUIPMENT IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL
REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, (IV) IT IS LEASING THE EQUIPMENT
FROM LESSOR IN AN "AS IS", "WHERE IS" AND "WITH ALL FAULTS" CONDITION AND (V)
NEITHER LESSOR NOR THE INVESTOR IS A MANUFACTURER OR DEALER IN EQUIPMENT OF SUCH
KIND. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE OPERATIVE AGREEMENTS,
NEITHER LESSOR NOR THE INVESTOR SHALL BE DEEMED TO HAVE MADE, AND LESSEE HEREBY
EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED,
AS TO THE EQUIPMENT, ANY PART THEREOF, OR ANY RECORDS OR ANY OTHER MATTER
WHATSOEVER WITH RESPECT THERETO, INCLUDING, WITHOUT LIMITATION, THE DESIGN,
CONDITION OR CAPACITY OF THE EQUIPMENT, THEIR MERCHANTABILITY OR THEIR FITNESS
FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE MATERIALS OR WORKMANSHIP OF THE
EQUIPMENT, THEIR VALUE, TITLE OR SAFETY, THE ABSENCE OF ANY PATENT, TRADEMARK OR
COPYRIGHT INFRINGEMENT OR LATENT DEFECT (WHETHER OR NOT DISCOVERABLE BY LESSEE),
COMPLIANCE OF THE EQUIPMENT WITH THE REQUIREMENTS OF ANY APPLICABLE LAWS
(INCLUDING ENVIRONMENTAL LAWS) PERTAINING THERETO, OR THE CONFORMITY OF THE
EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY CONSTRUCTION OR PURCHASE
DOCUMENT RELATING THERETO OR ANY COURSE OF PERFORMANCE, COURSE OF DEALING OR
USAGE OF TRADE, NOR SHALL LESSOR NOR THE INVESTOR BE LIABLE TO LESSEE, FOR ANY
DEFECTS, EITHER PATENT OR LATENT (WHETHER OR NOT DISCOVERABLE BY LESSEE), IN THE
EQUIPMENT OR ANY PART THEREOF OR ANY DIRECT OR INDIRECT DAMAGE TO PERSONS OR
PROPERTY RESULTING THEREFROM OR FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY IN TORT. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, LESSEE HEREBY WAIVES, ANY CLAIM
(INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR
INFRINGEMENT) IT MIGHT HAVE AGAINST LESSOR, OR THE INVESTOR FOR ANY LOSS, DAMAGE
(INCLUDING, WITHOUT LIMITATION, DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE EQUIPMENT OR BY LESSEE'S LOSS OF
USE THEREOF FOR ANY REASON WHATSOEVER OTHER THAN WITH RESPECT TO THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT OF LESSOR OR INVESTOR. LESSEE AND ANYONE
CLAIMING BY, THROUGH OR UNDER LESSEE HEREBY FULLY AND IRREVOCABLY RELEASES
LESSOR, THE INVESTOR AND EACH OTHER PERSON PARTY TO THE OPERATIVE AGREEMENTS,
AND EACH
8
OF THEIR EMPLOYEES, OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, SERVANTS,
ATTORNEYS, AFFILIATES, PARENT COMPANIES, SUBSIDIARIES, SUCCESSORS AND ASSIGNS,
AND ALL PERSONS ACTING ON THEIR BEHALF, FROM ANY AND ALL CLAIMS THAT IT MAY NOW
HAVE OR HEREAFTER ACQUIRE AGAINST THE INVESTOR, LESSOR OR ANY OTHER SUCH PERSON,
FOR ANY COSTS, LOSS, LIABILITY, DAMAGE, EXPENSES, DEMAND, ACTION OR CAUSE OF
ACTION ARISING FROM OR RELATED TO THE RELEASE OR DISCHARGE FROM THE EQUIPMENT AT
ANY TIME OF ANY HAZARDOUS MATERIALS OTHER THAN A RELEASE OR DISCHARGE OCCURRING
AFTER LESSEE IS NO LONGER IN POSSESSION OF THE EQUIPMENT AND RESULTING SOLELY
FROM ACTS OR OMISSIONS OF LESSOR, THE INVESTOR OR ANY OTHER SUCH PERSON. THIS
RELEASE INCLUDES CLAIMS OF WHICH LESSEE IS PRESENTLY UNAWARE OR WHICH LESSEE
DOES NOT PRESENTLY SUSPECT TO EXIST WHICH, IF KNOWN BY LESSEE, WOULD MATERIALLY
AFFECT LESSEE'S RELEASE OF LESSOR AND THE OTHER PERSONS RELEASED HEREBY.
8.2 Possession and Use of the Equipment. Each piece of Equipment
shall be used by Lessee in a manner consistent with its intended purpose and in
accordance with its specification. Subject to the terms of Section 13 relating
to permitted contests, Lessee shall pay, or cause to be paid, all charges and
costs required in connection with the use of the Equipment. Lessee shall not
commit or permit any waste of any Equipment or any part thereof.
SECTION 9. COMPLIANCE
9.1 Compliance with Legal Requirements and Insurance Requirements.
Subject to the terms of Section 13 relating to permitted contests, Lessee, at
its sole cost and expense, shall, in all material respects, (a) comply with all
Legal Requirements (including all Environmental Laws) and Insurance Requirements
relating to each piece of Equipment, including the use, construction, operation,
maintenance, repair and restoration thereof, whether or not compliance therewith
shall require extraordinary changes in the Equipment or interfere with the use
and enjoyment of the Equipment, and (b) procure, maintain and comply with all
licenses, permits, orders, approvals, consents and other authorizations required
for the construction, renovation, use, repair, maintenance and operation of each
piece of Equipment.
9.2 Environmental Matters. (a) Promptly upon Lessee's actual
knowledge of the presence of Hazardous Substances with respect to any piece of
Equipment in concentrations and conditions that constitute an Environmental
Violation, Lessee shall notify Lessor in writing of such condition. In the
event of such Environmental Violation, Lessee shall, not later than thirty (30)
days after Lessee has actual knowledge of such Environmental Violation, either
deliver to Lessor and the Agent an Officer's Certificate and a Termination
Notice with respect to such piece of Equipment pursuant to Section 16.1, if
applicable, or, at Lessee's sole cost and expense, promptly and diligently
undertake any response, clean up, remedial or other action necessary to remove,
cleanup or remediate the Environmental Violation in accordance with the terms of
Section 9.1. If Lessee does not deliver a Termination Notice with respect to
such
9
Equipment pursuant to Section 16.1, Lessee shall, upon completion of remedial
action by Lessee, so inform Lessor in writing and upon Lessor's written request
therefor cause to be prepared by an environmental consultant reasonably
acceptable to Lessor a report describing the Environmental Violation and the
actions taken by Lessee (or its agents) in response to such Environmental
Violation, and a statement by the consultant that such Environmental Violation
has been remedied in full compliance with applicable Environmental Laws. The
foregoing provisions of this Section 9.2(a) notwithstanding, Lessee shall not be
required to deliver a Termination Notice if such Environmental Violation would
not reasonably be expected to have a material adverse affect on the Equipment.
(b) In addition, Lessee shall provide to Lessor, within five (5)
Business Days of receipt, copies of all significant written communications with
any Governmental Authority relating to any Environmental Claim in connection
with any piece of Equipment. Lessee shall also promptly provide such detailed
reports of any such Environmental Claims as reasonably may be requested by
Lessor and the Agent.
SECTION 10. MAINTENANCE, REPAIR AND RETURN REQUIREMENTS
10.1 Maintenance and Repair. (a) Lessee shall, at its sole cost
and expense, (i) take good care of the Equipment and keep the same and all parts
thereof in good and safe order and condition, with all mechanical devices,
electronic systems and component parts in good working order, normal wear and
tear excepted, consistent with maintenance practices used by Lessee with respect
to equipment similar in type owned or leased by Lessee and consistent with
customary industry standards, and (ii) promptly make all needed repairs,
restorations and replacements of parts in and to the Equipment or any part
thereof, including, without limitation, overhaul of any piece of Equipment
requiring overhaul in Lessee's commercially prudent judgment. All such repairs,
restorations and replacements of parts shall be of a standard and quality
consistent with customary industry standards and sufficient for the proper
maintenance and operation of the Equipment and shall be constructed and
installed in a good and workmanlike manner in compliance with Legal Requirements
and Insurance Requirements. In carrying out its obligations under this Section
10.1, Lessee shall not discriminate in any way in the maintenance of the
Equipment as compared with other similar equipment owned or leased by Lessee and
shall use the Equipment in a manner consistent with sound operating practices
thereof.
(b) Lessor shall under no circumstances be required to furnish any
services or facilities with respect to the Equipment or make any repairs,
replacements, alterations or renewals of any nature or description to any
Equipment, make any expenditure whatsoever in connection with this Lease or
maintain any Equipment in any way except as otherwise provided in the Operative
Agreements. Lessor shall not be required to maintain, repair or rebuild all or
any part of any Equipment, and Lessee waives the right to (i) require Lessor to
maintain, repair, or rebuild all or any part of any Equipment, or (ii) make
repairs at the expense of Lessor pursuant to any Legal Requirement, Insurance
Requirement, contract, agreement, covenants, condition or restriction at any
time in effect.
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10.2 Return Requirements. (a) Unless Lessee shall have exercised
its Purchase Option or Maturity Date Purchase Option, Lessee shall, upon the
expiration or earlier termination of the Term with respect to each piece of
Equipment, surrender and transfer such Equipment to Lessor, at Lessee's own
expense, free and clear of all Liens other than (A) the following items set
forth under the definition of Permitted Liens: (i), (ii), (viii) and (ix) and
(B) Lessor Liens, in as good condition as they were on the Equipment Closing
Date with respect to each piece of Equipment, ordinary wear and tear excepted,
and in compliance with all Legal Requirements and the other requirements of this
Lease, including, without limitation, Section 10.1 (and in any event without (x)
any asbestos installed or maintained in any part of such Equipment, (y) any
polychlorinated byphenyls (PCBs) in, on or used with respect to such Equipment,
and (z) any other Hazardous Substances). Unless Lessee has exercised the
Purchase Option or the Maturity Date Purchase Option, Lessee shall provide, or
cause to be provided or accomplished, at the sole cost and expense of Lessee, to
or for the benefit of Lessor or a purchaser, at least thirty Business Days prior
to the expiration or earlier termination of the Term with respect to each piece
of Equipment, each of the following: (i) a Lien search showing (A) no Liens
other than the type set forth as clauses (A) and (B) in the first sentence of
this Section 10.2(a) and (B) the Security Agreement as creating a valid and
perfected first security interest in the Equipment; (ii) an environmental
assessment for the Equipment satisfying the requirements set forth in Section
10.4 below; (iii) an assignment of all of the Lessee's right, title and interest
in and to each agreement executed by Lessee in connection with the renovation,
development, use, maintenance or operation of the Equipment (including all
warranty, performance, service and indemnity provisions); (iv) an assignment of
all permits, licenses, approvals and other authorizations from all Governmental
Authorities in connection with the operation and use of the Equipment; and (v)
copies of all books and records, with respect to the renovation, maintenance,
repair, operation or use of the Equipment. Lessee shall cooperate with any
independent purchaser of the Equipment in order to facilitate the ownership and
operation by such purchaser of the Equipment after such expiration or earlier
termination of the Term, including providing all books, reports and records
regarding the maintenance, repair and ownership of the Equipment and all data
and technical information relating thereto, granting or assigning all licenses
necessary for the operation and maintenance of the Equipment and cooperating in
seeking and obtaining all necessary licenses, permits and approvals of
Governmental Authorities. Lessee shall have also paid the total cost for the
completion of all Modifications commenced prior to such expiration or earlier
termination of the Term. The obligation of Lessee under this Section 10.2(a)
shall survive the expiration or termination of this Lease.
(b) Lessee, on the expiration or earlier termination of the Term, if
requested by Lessor, shall, at Lessee's sole cost and expense dismantle and
crate each piece of Equipment that Lessor shall designate and, at Lessee's sole
cost and expense transport such Equipment to a location designated by Lessor.
10.3 Right of Inspection and Location. (a) Lessor may, at
reasonable times and with reasonable prior notice and without interfering with
the operations of Lessee's customers, inspect and examine at its own cost and
expense (unless a Lease Event of Default exists, in
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which case the reasonable out-of-pocket costs and expenses of Lessor shall be
paid by Lessee), any piece of Equipment. Lessee may accompany Lessor on any such
inspections.
(b) Lessee shall furnish to Lessor not less than once every six months
during the Term, an Officer's Certificate, accurate in all material respects,
stating the location of each piece of Equipment, noting whether any Equipment
has been relocated and if so the correct address of the relocated Equipment.
Lessor shall have no duty to make any such inspection or inquiry and shall not
incur any liability or obligation by reason of not making any such inspection or
inquiry.
10.4 Environmental Inspection. Not less than six months prior to
the Maturity Date (unless Lessee has previously irrevocably exercised the
Maturity Date Purchase Option), and not more than thirty Business Days prior to
surrender of possession of a piece of Equipment, Lessor shall, at Lessee's sole
cost and expense, obtain a report by an environmental consultant selected by
Lessor certifying that each piece of Equipment (i) does not contain Hazardous
Substances under circumstances or in concentrations that would reasonably be
expected to result in a violation of or liability under any Environmental Law
and (ii) is in compliance with all Environmental Laws. If such is not the case
on either such date, then Lessee shall be deemed to have irrevocably exercised
the Maturity Date Purchase Option pursuant to Section 20.2.
SECTION 11. MODIFICATIONS
11.1 Modifications. (a) Lessee, at its sole cost and expense, may
at any time and from time to time make alterations, renovations, improvements
and additions to a piece of Equipment or any part thereof (collectively,
"Modifications"); provided, that: (i) except for any Modification required to be
made pursuant to a Legal Requirement or an Insurance Requirement, no
Modification, individually, or when aggregated with any other Modification shall
impair the value of such Equipment or the utility or useful life of such
Equipment from that which existed immediately prior to such Modification; (ii)
the Modification shall be performed in a timely manner and in a good and
workmanlike manner; (iii) Lessee shall comply with all Legal Requirements
(including all Environmental Laws) and Insurance Requirements applicable to the
Modification, including the obtaining of all permits, and the structural
integrity of such Equipment shall not be adversely affected; (iv) subject to the
terms of Section 13 relating to permitted contests, Lessee shall pay all costs
and expenses and discharge any Liens arising with respect to the Modification;
and (v) such Modifications shall comply with Section 10.1 and shall not change
the primary character of such Equipment or intended use of such Equipment. All
Modifications shall remain part of the Equipment and shall be subject to this
Lease, and title thereto shall immediately vest in Lessor.
(b) Lessee shall notify Lessor of the undertaking of any Modifications
the cost of which is anticipated to exceed $500,000.
(c) Lessee shall not without the consent of Lessor (which consent will
not be unreasonably withheld or delayed) undertake any Modifications to any
piece of Equipment if
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such Modifications cannot, in the reasonable judgement of Lessee, be completed
on or prior to the date that is one month prior to the Expiration Date.
(d) Lessee, at its sole cost and expense, shall overhaul
substantially all of the Equipment during the Term, consistent with Lessee's
normal business practices.
SECTION 12. TITLE
12.1 Warranty of Title. (a) Lessee agrees that, except as
otherwise provided herein (i.e. with respect to Lessor Liens) and subject to the
terms of Section 13 relating to permitted contests, Lessee shall not directly or
indirectly create or allow to remain, and shall promptly discharge at its sole
cost and expense, any Lien, defect, attachment, levy, title retention agreement
or claim upon any piece of Equipment or any Modifications or any Lien,
attachment, levy or claim with respect to the Rent or with respect to any
amounts held by the Agent pursuant to the Credit Agreement, other than Permitted
Liens and/or Lessor Liens. Lessee shall promptly notify Lessor in the event it
has actual knowledge that a Lien (other than a Permitted Lien and/or a Lessor
Lien) exists with respect to the Equipment.
(b) Nothing contained in this Lease shall be construed as constituting
the consent or request of Lessor, expressed or implied, to or for the
performance by any contractor, mechanic, laborer, materialman, supplier or
vendor of any labor or services or for the furnishing of any materials for any
alteration, addition, repair or demolition of or to any piece of Equipment or
any part thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE
LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO
LESSEE, OR TO ANYONE HOLDING ANY EQUIPMENT OR ANY PART THEREOF THROUGH OR UNDER
LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO ANY
EQUIPMENT.
12.2 Identification. Lessee shall not allow the name of any Person
to be placed upon any portion of any piece of Equipment as a designation that
might be interpreted as indicating a claim of ownership thereof or security
interest therein by any Person other than Lessee.
SECTION 13. PERMITTED CONTESTS
13.1 Permitted Contests Other Than in Respect of Impositions.
Except to the extent otherwise provided for in Section 12.2(g) of the
Participation Agreement, Lessee, on its own or on Lessor's behalf but at
Lessee's sole cost and expense, may contest, by appropriate administrative or
judicial proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Legal Requirement, or any
Lien, attachment, levy, encumbrance or encroachment, and Lessor agrees not to
pay, settle or otherwise compromise any such item, provided that (a) the
commencement and continuation of
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such proceedings shall suspend the collection from, and suspend the enforcement
against the applicable Equipment, Lessor, the Agent, the Investor and the
Lenders; (b) there shall be no risk of the imposition of a Lien (other than a
Permitted Lien) on any piece of Equipment and no part of any piece of Equipment
nor any Rent would be in any danger of being sold, forfeited, lost or deferred;
(c) at no time during the permitted contest shall there be a risk of the
imposition of criminal liability or civil liability on Lessor, the Agent or any
Lender for failure to comply therewith; and (d) in the event that, at any time,
there shall be a material risk of extending the application of such item beyond
the earlier of the Maturity Date and the Expiration Date for the applicable
Equipment, then Lessee shall deliver to Lessor an Officer's Certificate
certifying as to the matters set forth in clauses (a), (b) and (c) of this
Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute and
deliver to Lessee such authorizations and other documents as may reasonably be
required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.
SECTION 14. INSURANCE
14.1 Public Liability and Workers' Compensation Insurance. During
the Term, Lessee shall procure and carry, at Lessee's sole cost and expense,
commercial general liability insurance for claims for injuries or death
sustained by persons or damage with respect to the use or operation of the
Equipment. Such insurance shall be on terms and in amounts that are no less
favorable than insurance maintained by owners of similar equipment which are in
Lessee's line of business, that are in accordance with normal industry practice.
The policy shall be endorsed to name Lessor, the Trust Company, the Investors,
the Agent and the Lenders as additional insureds. The policy shall also
specifically provide that the policy shall be considered primary insurance which
shall apply to any loss or claim before any contribution by any insurance which
Lessor, the Trust Company, the Agent or the Lenders may have in force. Lessee
shall, in the operation of the Equipment, comply with the applicable workers'
compensation laws and protect Lessor against any liability under such laws.
14.2 Hazard and Other Insurance. During the Term, Lessee shall
keep each piece of Equipment insured against loss or damage by fire and other
risks on terms and in amounts that are no less favorable than insurance
maintained by owners of similar equipment, that are in accordance with normal
industry practice, are in amounts equal to the greater of (i) Termination Value
and (ii) the actual replacement cost of the Equipment. So long as no Lease
Event of Default exists, any loss payable under the insurance policy required by
this Section will be paid to and adjusted solely by Lessee, subject to Section
15.
14.3 Coverage. (a) Lessee shall furnish Lessor with certificates
showing the insurance required under Sections 14.1 and 14.2 to be in effect and
naming Agent, the Lenders, the Lessor, the Investors and the Trust Company as an
additional insured with respect to liability insurance and showing the
endorsement required by Section 14.3(c). All such insurance shall be at the
cost and expense of Lessee. Such certificates shall include a provision in
which the insurer agrees to provide thirty (30) days' advance written notice by
the insurer to Lessor and the Agent in the event of cancellation or modification
of such insurance that would reasonably be expected
14
to be adverse to the interests of Lessor, the Trust Company or the Agent. If a
Lease Event of Default has occurred and is continuing and Lessor so requests,
Lessee shall deliver to Lessor copies of all insurance policies required by this
Lease.
(b) Lessee agrees that the insurance policy or policies required by
this Lease shall include an appropriate clause pursuant to which such policy
shall provide that it will not be invalidated should Lessee waive, in writing,
prior to a loss, any or all rights of recovery against any party for losses
covered by such policy. Lessee hereby waives any and all such rights against
Lessor, the Trust Company, the Investor, the Agent and the Lenders to the extent
of payments made under such policies.
(c) All insurance policies required by Section 14.2 shall include a
loss payee endorsement in favor of the Agent.
(d) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Lease except that Lessor may carry separate
liability insurance so long as (i) Lessee's insurance is designated as primary
and in no event excess or contributory to any insurance Lessor may have in force
which would apply to a loss covered under Lessee's policy and (ii) each such
insurance policy will not cause Lessee's insurance required under this Lease to
be subject to a coinsurance exception of any kind.
(e) Lessee shall pay as they become due all premiums for the insurance
required by this Lease, shall renew or replace each policy prior to the
expiration date thereof and shall promptly deliver to Lessor and the Agent
certificates for renewal and replacement policies.
SECTION 15. CONDEMNATION AND CASUALTY
15.1 Casualty and Condemnation. (a) Subject to the provisions of
this Section 15 and Section 16 (in the event Lessee delivers, or is obligated to
deliver, a Termination Notice), and prior to the occurrence and continuation of
a Lease Event of Default, Lessee shall be entitled to receive (and Lessor hereby
irrevocably assigns to Lessee all of Lessor's right, title and interest in) any
award, compensation or insurance proceeds to which Lessee or Lessor may become
entitled by reason of their respective interests in the Equipment (i) if all or
a portion of such Equipment is damaged or destroyed in whole or in part by a
Casualty or (ii) if the use, access, easement rights or title to such Equipment
or any part thereof is the subject of a Condemnation; provided, however, if a
Lease Event of Default shall have occurred and be continuing such award,
compensation or insurance proceeds shall be paid directly to Lessor or, if
received by Lessee, shall be held in trust for Lessor, and shall be paid over by
Lessee to Lessor.
(b) So long as no Lease Event of Default has occurred and is
continuing, Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or insurance
payment on account of any such Casualty or Condemnation and shall pay all
expenses thereof. At Lessee's reasonable request, and at Lessee's
15
sole cost and expense, Lessor and the Agent shall participate in any such
proceeding, action, negotiation, prosecution or adjustment. Lessor and Lessee
agree that this Lease shall control the rights of Lessor and Lessee in and to
any such award, compensation or insurance payment.
(c) If Lessor or Lessee shall receive notice of a Casualty or a
possible Condemnation of a piece of Equipment or any interest therein, Lessor or
Lessee, as the case may be, shall give notice thereof to the other and to the
Agent promptly after the receipt of such notice.
(d) In the event of a Casualty or receipt of notice by Lessee or
Lessor of a Condemnation, Lessee shall, not later than thirty (30) days after
such occurrence, deliver to Lessor and the Agent an Officer's Certificate
stating that either (i) (x) such Casualty is not a Significant Casualty or (y)
such Condemnation is neither a Total Condemnation nor a Significant Condemnation
and that this Lease shall remain in full force and effect with respect to the
applicable piece of Equipment and, at Lessee's sole cost and expense, Lessee
shall promptly and diligently restore the applicable piece of Equipment in
accordance with the terms of Section 15.1(e) or (ii) this Lease shall terminate
with respect to the applicable Equipment in accordance with Section 16.1.
(e) If pursuant to this Section 15.1, this Lease shall continue in
full force and effect following a Casualty or Condemnation with respect to the
affected piece of Equipment, Lessee shall, at its sole cost and expense,
promptly and diligently repair any damage to the applicable piece of Equipment
caused by such Casualty or Condemnation in conformity with the requirements of
Sections 10.1 and 11.1 so as to restore the applicable piece of Equipment to the
same condition, operation, function and value as existed immediately prior to
such Casualty or Condemnation. In such event, title to the applicable piece of
Equipment shall remain with Lessor.
(f) In no event shall a Casualty or Condemnation with respect to which
this Lease remains in full force and effect under this Section 15.1 affect
Lessee's obligations to pay Rent pursuant to Section 3.1.
(g) Notwithstanding anything to the contrary set forth in Section
15.1(a) or Section 15.1(e), if during the Term a Casualty occurs with respect to
a piece of Equipment or Lessee receives notice of a Condemnation with respect to
a piece of Equipment, and following such Casualty or Condemnation, such piece of
Equipment cannot reasonably be restored on or before the date which is six
months prior to the Maturity Date to substantially the same condition as existed
immediately prior to such Casualty or Condemnation or before such day such piece
of Equipment is not in fact so restored, then Lessee shall exercise its Purchase
Option with respect to such piece of Equipment, on the next Payment Date or
irrevocably agree in writing to exercise the Maturity Date Purchase Option with
respect to such piece of Equipment and in either such event such remaining
Casualty or Condemnation proceeds shall be paid to the Agent, which shall pay
such funds to Lessee upon the closing of the purchase of such piece of
Equipment.
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SECTION 16. LEASE TERMINATION
16.1 Termination upon Certain Events. (a) If Lessor or Lessee
shall have received notice of a Total Condemnation, then Lessee shall be
obligated, within thirty (30) days after Lessee receives notice thereof, to
deliver a written notice in the form described in Section 16.2(a) (a
"Termination Notice") of the termination of this Lease with respect to the
applicable piece of Equipment.
(b) If either: (i) Lessee or Lessor shall have received notice of a
Condemnation, and Lessee shall have delivered to Lessor an Officer's Certificate
that such Condemnation is a Significant Condemnation; or (ii) a Casualty occurs,
and Lessee shall have delivered to Lessor an Officer's Certificate that such
Casualty is a Significant Casualty; or (iii) an Environmental Violation occurs
or is discovered and Lessee shall have delivered to Lessor an Officer's
Certificate stating that, in the reasonable, good-faith judgment of Lessee, the
cost to remediate the same will exceed 10% of the Equipment Cost of such piece
of Equipment; then, Lessee shall, simultaneously with the delivery of the
Officer's Certificate pursuant to the preceding clause (i), (ii) or (iii),
deliver a Termination Notice with respect to the affected piece of Equipment.
16.2 Procedures. (a) A Termination Notice shall contain: (i)
notice of termination of this Lease with respect to the affected piece of
Equipment on a date not more than thirty (30) days after Lessor's receipt of
such Termination Notice (the "Termination Date"); (ii) a binding and irrevocable
agreement of Lessee to pay the Termination Value and purchase such piece of
Equipment or substitute such piece of Equipment in accordance with Section 30 on
such Termination Date and (iii) the Officer's Certificate described in Section
16.1(b).
(b) On the Termination Date, Lessee shall (i) pay to Lessor the
Termination Value for the applicable piece of Equipment, plus all amounts owing
in respect of Rent for such piece of Equipment (including Supplemental Rent)
theretofore accruing and Lessor shall convey such piece of Equipment to Lessee
(or Lessee's designee) all in accordance with Section 19.1 or (ii) substitute
such piece of Equipment in accordance with Section 30.
SECTION 17. DEFAULT
17.1 Lease Events of Default. If any one or more of the following
events (each a "Lease Event of Default") shall occur:
(a) Lessee shall fail to make payment of (i) any Basic Rent within
five (5) Business Days after the same has become due and payable or (ii)
any Maximum Residual Guarantee Amount, Purchase Option Price or Termination
Value after the same has become due and payable; or
(b) Lessee shall fail to make payment of any Supplemental Rent due and
payable within five (5) Business Days after receipt of notice thereof; or
17
(c) Lessee shall fail to maintain insurance as required by Section 14;
or
(d) Guarantors shall default in the observance or performance of any
agreement contained in Sections 10 and 11 of the Guarantee; or
(e) Lessee or any Guarantor shall default in the observance or
performance of any term, covenant or condition of Lessee or of such
Guarantor, respectively, under this Lease, the Participation Agreement, the
Guarantee or any other Operative Agreement to which it is a party (other
than those set forth in Section 17.1(a), (b), (c) or (d) hereof) and such
default shall continue unremedied for a period of 30 days or any
representation or warranty by Lessee or any Guarantor, respectively, set
forth in this Lease, the Guarantee or in any other Operative Agreement or
in any document entered into in connection herewith or therewith or in any
document, certificate or financial or other statement delivered in
connection herewith or therewith shall be false or inaccurate in any
material respect; or
(f) a Credit Agreement Event of Default (other than those set forth in
Sections 6.1 (a), (b), (d), (f), (g), (h), (i) or (p) of the Credit
Agreement) shall have occurred and be continuing; or
(g) an event of default under the Corporate Credit Agreement or any
Equipment Lease (other than this Lease) shall have occurred and be
continuing;
then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this Section 17 and in Section 18.1, terminate this
Lease by giving Lessee five (5) days notice of such termination, and this Lease
shall terminate. Lessee shall, to the fullest extent permitted by law, pay as
Supplemental Rent all costs and expenses incurred by or on behalf of Lessor,
including fees and expenses of counsel, as a result of any Lease Event of
Default hereunder.
17.2 Final Liquidated Damages. If a Lease Event of Default shall
have occurred and be continuing, Lessor shall have the right to recover, by
demand to Lessee and at Lessor's election, and Lessee shall pay to Lessor, as
and for final liquidated damages, but exclusive of the indemnities payable under
Section 13 of the Participation Agreement (to the extent any such liabilities do
not constitute Supplemental Rent), and in lieu of all damages beyond the date of
such demand the sum of (a) the Termination Value, plus (b) all other amounts
owing in respect of Rent and Supplemental Rent theretofore accruing under this
Lease. Upon payment of the amount specified pursuant to the first sentence of
this Section 17.2, Lessee shall be entitled to receive from Lessor, at Lessee's
request and cost, an assignment of Lessor's right, title and interest in the
Equipment, in each case in conformity with local custom and free and clear of
the Lien of the Security Agreement and any Lessor Liens. The Equipment shall be
quitclaimed to Lessee (or Lessee's designee) "AS IS" and in its then present
physical condition. If any statute or rule of law shall limit the amount of
such final liquidated damages to less than the amount agreed upon, Lessor shall
be entitled to the maximum amount allowable under such statute or rule of law.
18
17.3 Remedies. If any Lease Event of Default shall have occurred
and be continuing, Lessor may exercise in any order one or more or all of the
remedies set forth in this Section 17.3 (it being understood that no remedy
herein conferred is intended to be exclusive of any other remedy or remedies,
but each and every remedy shall be cumulative and shall be in addition to every
other remedy given herein or now or hereafter existing at law or in equity or by
statute).
(a) Lessor may proceed by appropriate court action or actions, either
at law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof;
(b) Lessor may by notice in writing to Lessee terminate this Lease but
Lessee shall remain liable as hereinafter provided; and Lessor may, at its
option, do any one or more of the following: (i) declare the Termination
Value, plus all other amounts owing in respect of Rent or Supplemental Rent
theretofore accruing under the Lease, all other amounts then payable by
Lessee under this Lease and the other Operative Agreements to be
immediately due and payable, and recover any other damages and expenses in
addition thereto which Lessor shall have sustained by reason of such Event
of Default; (ii) enforce the security interest given hereunder pursuant to
the Uniform Commercial Code as provided in Section 28 or any other law;
(iii) enter upon the premises where the Equipment is located and take
possession of it; and (iv) require Lessee to return the Equipment as
provided in Section 10.2; or
(c) Lessor may require Lessee immediately to purchase the Equipment
for a purchase price equal to the sum of the Termination Value, plus all
other amounts owing in respect of Rent or Supplemental Rent theretofore
accruing under the Lease and all other amounts then due and payable under
the Operative Agreements.
17.4 Additional Remedies. In addition to the remedies set forth in
Sections 17.2 and 17.3, if any Lease Event of Default shall have occurred and be
continuing, Lessor may, but is not required to, sell the Equipment in one or
more sales, and Lessor may purchase all or any part of the Equipment at such
sale. Lessee acknowledges that sales for cash or on credit to a wholesaler,
retailer or user of such Equipment, at a public or private auction, are all
commercially reasonable. Any notice required by law of intended disposition by
Lessor shall be deemed reasonable and properly given if given at least ten (10)
Business Days before such disposition.
17.5 Proceeds of Sale; Deficiency. All payments received and
amounts held or realized by the Lessor at any time when a Lease Event of Default
shall have occurred and be continuing and after the Termination Value shall have
been accelerated pursuant to Section 17.2 or 17.3 as well as all payments or
amounts then held or thereafter received by Lessor shall be conveyed to the
Agent as required by the Assignment of Lease and distributed pursuant to Section
8.2 of the Credit Agreement.
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17.6 Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 17.1, Lessee waives, to the fullest extent permitted by law,
(a) any notice of re-entry or the institution of legal proceedings to obtain re-
entry or possession; (b) any right of redemption, re-entry or repossession; (c)
the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt; and (d) any other rights which might otherwise
limit or modify any of Lessor's rights or remedies under this Section 17.
17.7 Assignment of Rights Under Contracts. If a Lease Event of
Default shall have occurred and be continuing, and whether or not this Lease
shall have been terminated pursuant to Section 17.1 and provided that Lessee
shall not have purchased the Equipment pursuant to Section 20, Lessee shall upon
Lessor's demand immediately assign, transfer and set over to Lessor, to the
extent transferable, all of Lessee's right, title and interest in and to each
agreement executed by Lessee in connection with the use or operation of the
Equipment (including all right, title and interest of Lessee with respect to all
warranty, performance, service and indemnity provisions), as and to the extent
that the same relate to the use, maintenance or operation of the Equipment.
SECTION 18. LESSOR'S RIGHT TO CURE
18.1 Lessor's Right to Cure Lessee's Lease Defaults. Lessor,
without waiving or releasing any obligation or Lease Event of Default, may (but
shall be under no obligation to) remedy any Lease Event of Default for the
account and at the sole cost and expense of Lessee, including the failure by
Lessee to maintain any insurance required by Section 14, and may, to the fullest
extent permitted by law, and notwithstanding any right of quiet enjoyment in
favor of Lessee, enter upon the premises where the Equipment is located for such
purpose and take all such action thereon as may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Lessee. All reasonable
out-of-pocket costs and expenses so incurred (including the reasonable fees and
expenses of counsel), together with interest thereon at the Overdue Rate from
the date on which such sums or expenses are paid by Lessor, shall be paid by
Lessee to Lessor on demand as Supplemental Rent.
SECTION 19. LEASE TERMINATION
19.1 Provisions Relating to Lessee's Termination of this Lease or
Exercise of Purchase Option. In connection with any termination of this Lease
with respect to any Equipment pursuant to the terms of Section 16.2, or in
connection with Lessee's exercise of its Purchase Option or Maturity Date
Purchase Option, upon the date on which this Lease is to terminate with respect
to the applicable piece of Equipment or upon the Expiration Date with respect to
the applicable piece of Equipment, and upon tender by Lessee of the amounts set
forth in Section 16.2(b), 20.1 or 20.2, as applicable:
(a) Lessor shall execute and deliver to Lessee (or to Lessee's
designee) at Lessee's cost and expense an assignment of Lessor's entire
interest in the applicable
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Equipment, in each case in recordable form and otherwise in conformity with
local custom and free and clear of the Lien of the Security Agreement and
any Lessor Liens; and
(b) The applicable Equipment shall be conveyed to Lessee "AS IS" and
in then present physical condition.
19.2 Aggregate Tranche A Percentage. Notwithstanding any other
provision of this Lease or the other Operative Agreements, the Lessee shall not
be permitted to terminate this Lease with respect to a piece of Equipment
pursuant to Section 16 or exercise its Purchase Option with respect to a piece
of Equipment pursuant to Section 20.1 if the Aggregate Tranche A Percentage,
after giving effect to the termination of this Lease with respect to such piece
of Equipment would be less than [85]%.
SECTION 20. PURCHASE OPTION
20.1 Purchase Option. Lessee shall have the option (exercisable by
giving Lessor irrevocable written notice (the "Purchase Notice") of Lessee's
election, to exercise such option not less than ten (10) days prior to the date
of purchase pursuant to such option) to purchase one or more of the pieces of
Equipment on the date specified in such Purchase Notice, which date must occur
prior to the date which is six months prior to the Maturity Date, at a price
equal to the Termination Value (the "Purchase Option Price") (which the parties
do not intend to be a "bargain" purchase price) of such piece of Equipment;
provided, however, that Lessee shall only have such option with respect to less
than all of the Equipment if no Lease Default or Lease Event of Default shall
have occurred and be continuing. If Lessee exercises its option to purchase one
or more of the pieces of Equipment pursuant to this Section 20.1 (the "Purchase
Option"), Lessor shall transfer to Lessee or Lessee's designee all of Lessor's
right, title and interest in and to such piece of Equipment as of the date
specified in the Purchase Notice upon receipt of the Purchase Option Price and
all Rent and other amounts then due and payable under this Lease and any other
Operative Agreement, in accordance with Section 19.1. Notwithstanding the
foregoing, (A) Lessee on not less than three (3) days prior notice may exercise
the Purchase Option to purchase one or more pieces of Equipment if the purchase
of such Equipment will cure an Event of Default and (B) if a purchase option
held by a sublessee or licensee of a piece of Equipment has been exercised, then
Lessee may exercise the Purchase Option with respect to such piece of Equipment
even if a Lease Default or Lease Event of Default has occurred.
20.2 Maturity Date Purchase Option. Not less than six months prior
to the Maturity Date, Lessee may give Lessor and Agent irrevocable written
notice (the "Maturity Date Election Notice") that Lessee is electing to exercise
the Maturity Date Purchase Option. If Lessee does not give a Maturity Date
Election Notice on or before the date six months prior to the Maturity Date or
if Lessee has not exercised the Purchase Option with respect to all of the
Equipment, then Lessee shall be obligated to remarket the Equipment pursuant to
Section 21. If Lessee has elected to exercise the Maturity Date Purchase
Option, then on the Maturity Date
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Lessee shall pay to Lessor an amount equal to the Termination Value for all the
Equipment (which the parties do not intend to be a "bargain" purchase price)
and, upon receipt of such amount plus all Rent and other amounts then due and
payable under this Lease and any other Operative Agreement, Lessor shall
transfer to Lessee or Lessee's designee all of Lessor's right, title and
interest in and to the Equipment in accordance with Section 19.1.
20.3 Obligation to Purchase All Equipment. If six months prior to
the Maturity Date, the then Termination Value of all the Equipment is less than
the Maximum Purchase Option Amount, then on the Maturity Date Lessee shall be
required to exercise its Maturity Date Purchase Option on the Maturity Date with
respect to all remaining Equipment.
21. SALE OF EQUIPMENT
21.1 Sale Procedure. (a) With respect to each piece of Equipment
(unless Lessee shall have elected to (x) substitute such Equipment pursuant to
Section 30, (y) purchase such Equipment and has paid the relevant purchase price
pursuant to Section 20.1 or 20.2 with respect thereto, or (z) otherwise
terminated this Lease and paid the Termination Value with respect thereto)
Lessee shall (i) pay to Lessor the Maximum Residual Guarantee Amount for such
piece of Equipment as provided for in Section 21.1(c), and (ii) sell such piece
of Equipment, to one or more third parties for cash in accordance with Section
21.1(b).
(b) During the Marketing Period, Lessee, as nonexclusive broker for
Lessor, shall use its best efforts to obtain bids for the cash purchase of each
piece of Equipment, being sold for the highest price available in the relevant
market, shall notify Lessor promptly of the name and address of each prospective
purchaser and the cash price which each prospective purchaser shall have offered
to pay for such piece of Equipment and shall provide Lessor with such additional
information about the bids and the bid solicitation procedure as Lessor may
reasonably request from time to time. Lessor may reject any and all bids and
may assume sole responsibility for obtaining bids by giving Lessee written
notice to that effect; provided, however, that notwithstanding the foregoing,
Lessor may not reject a bid if such bid, together with any amounts to be paid
pursuant to Section 21.3, is greater than or equal to the sum of the Limited
Deficiency Amount and all costs and expenses referred to in Section 21.2(i) and
is a bona fide offer by a third party purchaser who is not an Affiliate of
Lessee. If the price which a prospective purchaser shall have offered to pay
for all or any of the Equipment is less than the sum of the Limited Deficiency
Amount and all costs and expenses referred to in Section 21.2(i), Lessor may
elect to retain the Equipment by giving Lessee at least two Business Days' prior
written notice of Lessor's election to retain the Equipment, and upon receipt of
such notice, Lessee shall surrender the Equipment to Lessor pursuant to Section
10.2. Unless Lessor shall have elected to retain the Equipment pursuant to the
preceding sentence, following the Maturity Date Lessor shall sell the Equipment
free of any Lessor Liens attributable to it, without recourse or warranty, for
cash to the purchaser or purchasers identified by Lessee or Lessor, as the case
may be. Lessee shall surrender the Equipment so sold to each purchaser in the
condition specified in Section 10.2.
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(c) On each date during the Marketing Period on which a piece of
Equipment is sold pursuant to Section 21.1(b), and on the Maturity Date with
respect to any Equipment remaining unsold, Lessee shall pay to Lessor the
Maximum Residual Guarantee Amount for such Equipment.
21.2 Application of Proceeds of Sale. Lessor shall apply the
proceeds of sale of each piece of Equipment in the following order of priority:
(i) FIRST, to pay or to reimburse Lessor and Lessee for the
payment of all reasonable costs and expenses incurred by Lessor and Lessee
in connection with the sale; and
(ii) SECOND, the balance shall be paid to the Agent to be applied
pursuant to the provisions of Section 8 of the Credit Agreement.
21.3 Indemnity for Excessive Wear. If the proceeds of the sale
described in Section 21.1(b) with respect to any piece of Equipment, less all
expenses incurred by Lessor or Lessee in connection with such sale, shall be
less than the Limited Deficiency Amount for such piece of Equipment at the time
of such sale and if it shall have been determined (pursuant to the Appraisal
Procedure) that the Fair Market Sales Value of such piece of Equipment shall
have been impaired by greater than expected wear and tear during the Term,
Lessee shall pay to Lessor within ten (10) days after receipt of Lessor's
written statement (i) the amount of such excess wear and tear determined by the
Appraisal Procedure or (ii) the amount of the Net Sale Proceeds Shortfall,
whichever amount is less; provided that such Wear and Tear Payments shall not
prevent Lessee from accounting for this Lease as an operating lease under SFAS
NO. 13.
21.4 Appraisal Procedure. For determining the Fair Market Sales
Value of a piece of Equipment or any other amount which may, pursuant to any
provision of any Operative Agreement, be determined by an appraisal procedure
but with respect to which no appraisal or valuation method is specified, Lessor
and Lessee shall use the following procedure (the "Appraisal Procedure").
Lessor and Lessee shall endeavor to reach a mutual agreement as to such amount
for a period of ten (10) days from commencement of the Appraisal Procedure, and
if they cannot agree within ten (10) days, then two qualified appraisers, one
chosen by Lessee and one chosen by Lessor, shall mutually agree thereupon, but
if either party shall fail to choose an appraiser within twenty (20) days after
notice from the other party of the selection of its appraiser, then the
appraisal by such appointed appraiser shall be binding on Lessee and Lessor. If
the two appraisers cannot agree within twenty (20) days after both shall have
been appointed, then a third appraiser from a nationally recognized independent
appraisal firm (with at least 15 years of experience appraising equipment
similar to and used in the same industry as the Equipment) shall be selected by
the two appraisers or, failing agreement as to such third appraiser within
thirty (30) days after both shall have been appointed, by the American
Arbitration Association. The decisions of the three appraisers shall be given
within twenty (20) days of the appointment of the third appraiser and the
decision of the appraiser most different from the average of the other two shall
be discarded and such average shall be binding on Lessor and Lessee; provided
that if the highest appraisal and the lowest appraisal are equidistant from
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the third appraisal, the third appraisal shall be binding on Lessor and Lessee.
The fees and expenses of all of the appraisers shall be paid by the Lessee.
21.5 Certain Obligations Continue. During the Marketing Period,
the obligation of Lessee to pay Rent with respect to each piece of Equipment
(including the installment of Basic Rent due on the Maturity Date) shall
continue undiminished until payment in full to Lessor of the sale proceeds, the
Maximum Residual Guarantee Amount, if any, the amount due under Section 21.3, if
any, and all other amounts due to Lessor with respect to the piece of Equipment.
Lessor shall have the right, but shall be under no duty, to solicit bids, to
inquire into the efforts of Lessee to obtain bids or otherwise to take action in
connection with any such sale, other than as expressly provided in this Section
21.
SECTION 22. HOLDING OVER
22.1 Holding Over. If Lessee shall for any reason remain in
possession of a piece of Equipment after the expiration or earlier termination
of this Lease (unless the piece of Equipment is conveyed to Lessee), such
possession shall be as a tenancy at sufferance during which time Lessee shall
continue to pay Supplemental Rent that would be payable by Lessee hereunder were
the Lease then in full force and effect with respect to such piece of Equipment
and Lessee shall continue to pay Basic Rent at an annual rate equal to the rate
payable hereunder immediately preceding such expiration or earlier termination;
provided, however, that from and after the sixtieth (60th) day Lessee shall
remain in possession of such piece of Equipment after such expiration or earlier
termination, Lessee shall pay Basic Rent at an annual rate equal to two hundred
percent (200%) of the Basic Rent payable hereunder immediately preceding such
expiration or earlier termination. Such Basic Rent shall be payable from time
to time upon demand by Lessor. During any period of tenancy at sufferance,
Lessee shall, subject to the second preceding sentence, be obligated to perform
and observe all of the terms, covenants and conditions of this Lease, but shall
have no rights hereunder other than the right, to the extent given by law to
tenants at sufferance, to continue its occupancy and use of the piece of
Equipment. Nothing contained in this Section 22 shall constitute the consent,
express or implied, of Lessor to the holding over of Lessee after the expiration
or earlier termination of this Lease as to any piece of Equipment and nothing
contained herein shall be read or construed as preventing Lessor from
maintaining a suit for possession of any piece of Equipment or exercising any
other remedy available to Lessor at law or in equity.
SECTION 23. RISK OF LOSS
23.1 Risk of Loss. The risk of loss of or decrease in the
enjoyment and beneficial use of the Equipment as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise is assumed by Lessee, and Lessor shall in no event be answerable or
accountable therefor (except specifically with respect to its gross negligence
or wilful misconduct).
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SECTION 24. SUBLETTING AND ASSIGNMENT
24.1 Subletting and Assignment. Lessee may not assign this Lease
or any of its rights or obligations hereunder in whole or in part other than as
permitted by the Operative Agreements. Lessee may, without the consent of
Lessor, sublease or license the Equipment or any piece of Equipment to any
Person; provided that as of the Expiration Date unless Lessee has exercised its
Purchase Option or Maturity Date Purchase Option with respect to the Equipment
subject to a sublease or license, no sublease or license shall provide for a
purchase option on behalf of the sublessee or licensee nor have a remaining term
of more than six months. No sublease, license or other relinquishment of
possession of the Equipment shall in any way discharge or diminish any of
Lessee's obligations to Lessor hereunder and Lessee shall remain directly and
primarily liable under this Lease as to the Equipment so sublet or licensed.
24.2 Subleases or Licenses. Promptly following the execution and
delivery of any sublease or license permitted by this Section 24, Lessee shall
deliver an executed copy thereof to Lessor and the Agent if requested by either.
SECTION 25. ESTOPPEL CERTIFICATES
25.1 Estoppel Certificates. At any time and from time to time upon
not less than twenty (20) days' prior request by Lessor, the Lessee shall
furnish to the Lessor a certificate signed by an individual having the office of
vice president or higher with Lessee certifying, to the extent accurate, that
this Lease is in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications); the dates to which the
Basic Rent and Supplemental Rent have been paid; to the best knowledge of the
signer of such certificate, whether or not the Lessor is in default under any of
its obligations hereunder (and, if so, the nature of such alleged default); and
such other matters under this Lease as the Lessor may reasonably request. Any
such certificate furnished pursuant to this Section 25 may be relied upon by the
Lessor, and any existing or prospective purchaser or lender, and any accountant
or auditor, of, from or to the Lessor (or any Affiliate thereof).
SECTION 26. NO WAIVER
26.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
upon a default hereunder, and no acceptance of full or partial payment of Rent
during the continuance of any such default, shall constitute a waiver of any
such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
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SECTION 27. ACCEPTANCE OF SURRENDER
27.1 Acceptance of Surrender. (a) As of the Expiration Date, if
any Lease Default shall have occurred and be continuing under the Lease or the
representations and warranties set forth in Section 7.5(h)-(m) of the
Participation Agreement shall not be true and correct in any material respects,
then Lessee shall be deemed to have irrevocably exercised the Maturity Date
Purchase Option pursuant to Section 20.2.
(b) Except as otherwise expressly provided in this Lease, no surrender
to Lessor of this Lease or of all or any portion of the Equipment or of any
interest therein shall be valid or effective unless agreed to and accepted in
writing by Lessor and, prior to the payment or performance of all obligations
under the Credit Documents, the Agent, and no act by Lessor or the Agent or any
representative or agent of Lessor or the Agent, other than a written acceptance,
shall constitute an acceptance of any such surrender.
SECTION 28. OWNERSHIP, GRANT OF SECURITY
INTEREST AND FURTHER ASSURANCES
28.1 Grant of Security Interest. Other than Equipment purchased by
Lessee pursuant to Section 20 and subject to Section 7.1, title to the equipment
shall remain in Lessor as security for the obligations of the Guarantors under
the Guarantee and the obligations of Lessee hereunder and under each of the
other Operative Agreements to which it is a party, until such time as Lessee and
the Guarantors have fulfilled all of their obligations hereunder and under such
other Operative Agreements. Lessee hereby assigns, grants and pledges to Lessor
for the benefit of Lessor a security interest in all of Lessee's right, title
and interest, whether now or hereafter existing or acquired, in the Equipment
(other than Equipment purchased by Lessee pursuant to Section 20), to secure the
payment and performance of all obligations of Lessee now or hereafter existing
under this Lease or any other Operative Agreement and of the Guarantors under
the Guarantee (the "Lease Secured Obligations"). Lessee shall, at its expense,
do any further act and execute, acknowledge, deliver, file, register and record
any further documents which Lessor may reasonably request in order to protect
Lessor=s title to and perfected security interest in the Equipment, subject to
no Liens other than Permitted Liens, and Lessor's rights and benefits under this
Lease. Subject to the provisions of Section 10.3(b) of the Lease, Lessee shall
promptly and duly execute and deliver to Lessor such documents and assurances
and take such further action as Lessor may from time to time reasonably request
in order to carry out more effectively the intent and purpose of this Lease and
the other Operative Agreements, to establish and protect the rights and remedies
created or intended to be created in favor of Lessor hereunder and thereunder,
and to establish, perfect and maintain the right, title and interest of Lessor,
in and to the Equipment, subject to no Lien other than Permitted Liens and
Lessor Liens, or of such financing statements or fixture filings or other
documents with respect hereto as Lessor may from time to time reasonably
request, and Lessee agrees to execute and deliver promptly such of the foregoing
financing statements and fixture filings or other documents as may require
execution by Lessee. To the extent permitted by applicable laws, Lessee hereby
authorizes any such financing statements and fixture filings to be filed without
the necessity of the signature of Lessee, if
Lessee has failed to sign any such instrument within 10 Business Days after
written request therefor by Lessor.
28.2 UCC Remedies. If a Lease Event of Default shall occur and be
continuing, Lessor may exercise, in addition to all other rights and remedies
granted to it in this Lease and in any other Operative Agreement, all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, Lessor, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon Lessee or any other Person (all
and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Equipment, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Equipment or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of Lessor or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
Lessor shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Equipment so sold, free of any right or equity of
redemption in which right or equity is hereby waived or released. Lessee
further agrees, at Lessor's request, to assemble the Equipment and make it
available to the Lessor at places which the Lessor shall reasonably select,
whether at Lessee's premises or elsewhere. Lessor shall apply the net proceeds
of any action taken by it pursuant to this subsection, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Equipment or in any way
relating to the Equipment or the rights of Lessor, including, without
limitation, reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Lease Secured Obligations, in such order as Lessor may
elect, and only after such application and after the payment by Lessor of any
other amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the UCC, need Lessor account for the surplus, if any, to
Lessee. If any notice of a proposed sale or other disposition of the Equipment
shall be required by law, such notice shall be deemed reasonable and proper if
given at lease 10 Business Days before such sale or other disposition.
28.3 Waiver; Deficiency. Lessee waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the UCC.
Lessee shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Equipment are insufficient to pay the Lease Secured
Obligations and the reasonable fees and disbursements of any attorneys employed
by Lessor to collect such deficiency.
28.4 Agent's Appointment as Attorney-in-Fact; Agent's Performance of
Lessee's Obligations. Lessee hereby irrevocable constitutes and appoints the
Agent and any officer or agent thereof, as assignee of all of Lessor right under
this Lease pursuant to the Assignment of Lease, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Lessee and in the name of Lessee or in its
own name, from time to time in the Agent's discretion, for the purpose of
carrying out the terms of
27
this Lease, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Lease, and, without limiting the generality of the foregoing,
Lessee hereby gives the Agent the power and right, on behalf of Lessee, without
notice to or assent by Lessee, to do any or all of the following:
(a) in the name of Lessee or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under or
with respect to the Equipment and file any claim or take any other action
or proceeding in any court of law or equity or otherwise deemed appropriate
by the Agent for the purpose of collecting any and all such moneys due
under or with respect to the Equipment whenever payable;
(b) pay or discharge taxes and Liens levied or placed on or threatened
against the Equipment, effect any repairs or any insurance called for by
the terms of this Lease and to pay all or any part of the premiums therefor
and the costs thereof;
(c) execute, in connection with the sale provided for in Section 28.2
hereof, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Equipment; and
(d) (1) direct any party liable for any payment under any of the
Equipment to make payment of any and all moneys due or to become due
thereunder directly to the Agent or as the Agent shall direct; (2) ask or
demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Equipment; (3) sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Equipment; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to enforce any other right in respect of
any Equipment; (5) defend any suit, action or proceeding brought against
Lessee with respect to any Equipment; (6) settle, compromise or adjust any
such suit, action or proceeding and, in connection therewith, to give such
discharges or releases as the Agent may deem appropriate; and (7)
generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Equipment as fully and completely as thought
the Agent were the absolute owner thereof for all purposes, and do, at the
Agent's option and the Lessee's expense, at any time, or from time to time,
all acts and things which the Agent reasonably deems necessary to protect,
preserve or realize upon the Equipment and the Agent's security interests
therein and to effect the intent of this Lease, all as fully and
effectively as the Lease might do.
Anything in this subsection to the contrary notwithstanding, the Agent
agrees that it will not exercise any rights under the power of attorney provided
for in this subsection unless a Lease Event of Default shall have occurred and
be continuing.
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SECTION 29. NOTICES
29.1 Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person to be effective shall be in writing (including by facsimile transmission)
and shall be deemed to have been duly given or made (a) when delivered by hand,
(b) one Business Day after delivery to such nationally recognized courier
service specifying overnight delivery, (c) three Business Days after being
deposited in the mail, certified or registered, postage prepaid or (d) in the
case of facsimile notice, when received, addressed to such Person as indicated:
If to Lessee: Hanover Compression Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Sears Tower, Suite 5800
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. Pucker
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lessor: Hanover Equipment Trust ▇▇▇▇▇
▇/▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to the Agent:
The Chase Manhattan Bank
Loan and Agency Services Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Agency Services
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
Credit and Lending
The Chase Manhattan Bank
29
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or such additional parties and/or other address as such party may hereafter
designate.
SECTION 30. SUBSTITUTION
30.1 Substitution. Lessee shall be entitled to convey to Lessor
one or more pieces of Equipment ("Replacement Equipment") to be leased to Lessee
hereunder as substitution for Equipment which is (i) the subject of a
Significant Casualty or Significant Condemnation, (ii) purchased by the
sublessee of such Equipment or (iii) purchased by or on behalf of Lessee as
permitted by Section 20.1(A) hereof; provided, such Replacement Equipment to be
free and clear of all Liens (other than Permitted Liens) and to have a value,
utility and remaining economic useful life at least equal to the Equipment being
replaced (assuming the Equipment being replaced was in the condition required to
be maintained by the terms of this Lease) as of the Replacement Equipment
Closing Date; provided, further, that no Equipment shall be replaced unless the
following conditions are met as of the Replacement Equipment Closing Date:
(a) no Event of Default shall have occurred and be continuing;
(b) no more than 5% of the Equipment (including the Replacement
Equipment) will be located in an Unperfected Jurisdiction;
(c) the aggregate amount of Replacement Equipment since the Initial
Closing Date shall not exceed 25% of the Termination Value;
(d) the representations and warranties of the Lessee contained in
Subsection 7.5 of the Participation Agreement and in Section 9 of the Guarantee
shall be true and correct in all material respects as of the date such
substitution occurs;
(e) Subsections 6.2(a)-(f) to the Participation Agreement shall have
been satisfied or waived with respect to such Replacement Equipment; and
(f) the Lessee shall have delivered an Officer's Certificate to the
Lessor, Agent and the Investor at least five (5) days prior to the date such
substitution shall occur, setting forth the location of the Replacement
Equipment and certifying that the conditions set forth in paragraphs (a) through
(e) above have been satisfied.
SECTION 31. MISCELLANEOUS
30
31.1 Miscellaneous. Anything contained in this Lease to the
contrary notwithstanding, all claims against and liabilities of Lessee or Lessor
arising from events commencing prior to the expiration or earlier termination of
this Lease shall survive such expiration or earlier termination. If any term or
provision of this Lease or any application thereof shall be declared invalid or
unenforceable, the remainder of this Lease and any other application of such
term or provision shall not be affected thereby.
31.2 Amendments and Modifications. Neither this Lease nor any
provision hereof may be amended, waived, discharged or terminated except by an
instrument in writing signed by Lessor and Lessee.
31.3 Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
31.4 Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
31.5 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
31.6 GOVERNING LAW. THIS LEASE HAS BEEN DELIVERED IN, AND SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE.
31.7 Limitations on Recourse. Except as expressly set forth in the
Operative Agreements, Lessee agrees to look solely to Lessor's estate and
interest in the Equipment, the proceeds of sale thereof, any insurance proceeds
or any other award or any third party proceeds received by Lessor in connection
with the Equipment for the collection of any judgment requiring the payment of
money by Lessor in the event of liability by Lessor, and no other property or
assets of Lessor, the Trust Company member, partner or other owner of an
interest, direct or indirect, in Lessor, or any director, officer, shareholder,
employee, beneficiary, Affiliate of any of the foregoing shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Lessee's
remedies under or with respect to this Lease, the relationship of Lessor and
Lessee hereunder or Lessee's use of the Equipment or any other liability of
Lessor to Lessee. Nothing in this Section shall be interpreted so as to limit
the terms of Section 6.1 or 6.2.
31.8 Priority. On and prior to the Maturity Date, the Security
Agreement shall be subject and subordinate to this Lease and following the
Maturity Date, the Security Agreement, at the sole election of the Agent, shall
be senior to this Lease without any further act by any Person.
IN WITNESS WHEREOF, the parties have caused this Lease be duly
executed and delivered as of the date first above written.
HANOVER COMPRESSION INC.
By: ____________________________________
Name:
Title:
HANOVER EQUIPMENT TRUST 2000A
By: Wilmington Trust Company, not individually
but solely as Trustee
By: ____________________________________
Name:
Title:
The undersigned agrees to the provisions of Section 28.4 and
acknowledges receipt of this original counterpart of the foregoing Lease on this
13th day of March, 2000.
THE CHASE MANHATTAN BANK, as the
Agent for the Lenders
By: ____________________________________
Name:
Title:
EXHIBIT A
LEASE SUPPLEMENT NO. __
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of
_______________, between [HANOVER EQUIPMENT TRUST 2000A], a Delaware business
trust, as lessor (the "Lessor"), and HANOVER COMPRESSION INC., a Delaware
corporation, as lessee (the "Lessee").
WHEREAS, the Lessor is the owner of the Equipment described on
Schedule I hereto (the "Leased Equipment") and wishes to lease the same to the
Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions; Rules of Usage. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise herein shall have
the meanings assigned to them in Annex A to the Participation Agreement, dated
as of [ ], among the Lessee, the Lessor, the Investors, the Agent, and
the Lenders, as it may be amended, supplemented or otherwise modified from time
to time.
2. The Equipment. Attached hereto as Schedule I is the description
of the Leased Equipment. Effective upon the execution and delivery of this
Lease Supplement by the Lessor and the Lessee, the Leased Equipment shall be
subject to the terms and provisions of the Lease.
3. Ratification. Except as specifically modified hereby, the terms
and provisions of the Lease are hereby ratified and confirmed and remain in full
force and effect.
4. Original Lease Supplement. The single executed original of this
Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART"
on the signature page thereof and containing the receipt of the Agent therefor
on or following the signature page thereof shall be the Original Executed
Counterpart of this Lease Supplement (the "Original Executed Counterpart"). To
the extent that this Lease Supplement constitutes chattel paper, as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest in this Lease Supplement may be created
through the transfer or possession of any counterpart other than the Original
Executed Counterpart.
5. GOVERNING LAW. THIS LEASE HAS BEEN DELIVERED IN, AND SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE.
6. Counterpart Execution. This Lease Supplement may be executed in
any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
7. Recordation. The Lessor and the Lessee agree that a memorandum of
this Lease Supplement No. __ shall be recorded at the Lessee's sole cost and
expense as required by the Lease.
IN WITNESS WHEREOF, the parties have caused this Lease Supplement No. __ be duly
executed and delivered as of the date first above written.
HANOVER COMPRESSION INC.
By: ___________________________________
Name:
Title:
HANOVER EQUIPMENT TRUST 2000A
By: Wilmington Trust Company, not in its
individual capacity but solely as Trustee
By: _____________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this ___ day of ______, _____.
THE CHASE MANHATTAN BANK, as the Agent for the
Lenders
By: ___________________________________
Name:
Title: