Exhibit 10(a)
MASTER LEASE AGREEMENT
No. ▇▇▇-▇▇▇▇▇-▇▇▇
THIRD COAST VENTURE LEASE PARTNERS I, L.P.
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Lessee: SANDBOX ENTERTAINMENT CORPORATION
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Date: March 31,1997
Lessor hereby leases to Lessee and Lessee leases from Lessor, in accordance with
the terms and conditions hereinafter set forth, the Equipment. No respective
Schedule shall be construed as an independent separate lease unless assigned by
Lessor pursuant to Section 15 hereof. In the event of a conflict between the
terms of this Lease and the terms and conditions of a Schedule, the terms and
conditions of the Schedule shall govern and control that Schedule.
1. Definitions.
"Acceptance Date" shall mean (1) the date of delivery of the Equipment
to Lessee; (2) in the case of Equipment which is the subject of a sale and
leaseback between Lessor and Lessee, the date upon which Lessor purchases the
Equipment from Lessee; or (3) in the case of Equipment requiring installation,
the date of installation of the Equipment.
"Additions" shall mean all replacement parts, modifications,
improvements, repairs, additions, accessories and alterations incorporated in
the Equipment as now or hereafter affixed thereto including proceeds thereof.
"Article 2A" shall mean Uniform Commercial Code Article 2A-Leases as
adopted in the State of Illinois.
"Commencement Date" shall mean the Acceptance Date, except that if the
Acceptance Date is other than the first day of a calendar quarter, then the
Commencement Date shall be the first day of the calendar quarter following the
month which includes the Acceptance Date.
"Default Date" shall mean the date of occurrence of an Event of Default
as set forth in Section 13.
"Discount Rate" shall mean the charge on loans to depository
institutions by the Federal Reserve Banks in effect from time to time, as
published in the Wall Street Journal, Midwest Edition.
"Equipment" shall mean the equipment described in each Schedule
together with all Additions.
"Equipment Acceptance" shall mean the written confirmation by Lessee of
unconditional acceptance of the Equipment in form supplied by Lessor.
"Equipment Loss" shall mean the loss, damage, theft or destruction of
the Equipment, or any portion thereof, from any cause whatsoever.
"Event of Default" shall mean those events set forth in Section 13
hereof.
"Fair Market Value" or "Fail Rental Value", as the case may be, shall
mean the value determined on the basis of and equal in amount to the value which
would be obtained in an arm's-length transaction between an informed and willing
buyer-user or lessee-user (other than a used equipment dealer) and an informed
and willing seller or lessor under no compulsion to sell or lease, on the
assumptions that: all such Equipment (a) is being sold "in place and in use";
(b) is free and clear of all liens and encumbrances; (c) is in the condition
required upon the return of the Equipment under Sections 4 and 6 of this Lease;
(d) and does not include any Additions which Lessee may have incorporated into
the Equipment as may be permitted under Section 3 of the Lease. In such
determination, costs of removal of the Equipment from the location of current
use by Lessee shall be in addition to such value(s).
"Initial Lease Term" shall mean the term of this Lease for any item of
Equipment as set forth in the Addendum or Schedule relating to such item of
Equipment.
"Lease" shall mean this Master Lease Agreement No. ▇▇▇-▇▇▇▇▇-▇▇▇ and
any Addenda executed pursuant to Section 24 hereof.
"Lessee" shall mean Sandbox Entertainment Corporation, a corporation
incorporated under the laws of Delaware, with its principal place of business at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Lessor" shall mean Third Coast Venture Lease Partners I, L.P., a
Delaware limited partnership with its principal place of business at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Obligor" shall mean any guarantor or surety of any obligations of
Lessee to Lessor under this Lease and any Schedule hereto.
"Premises" shall mean the premises of Lessee where the Equipment is
located as set forth in the applicable Schedule.
"Prime Rate" shall mean the base rate on corporate loans posted by at
least 75% of the nation's 30 largest banks (or its equivalent) per annum in
effect from time to time, as published in the Wall Street Journal, Midwest
Edition.
"Schedule(s)" shall mean those equipment schedule(s) which may be
executed by Lessor and Lessee from time to time each of which is made a part
hereof.
"Service Charge" shall mean a charge equal to two percent (2%) per
month of the overdue payments or the maximum rate permitted by law, whichever is
less.
"Supplier" shall mean the vendor, dealer, seller, manufacturer or
supplier of the Equipment as defined in Article 2A.
2. Term and Rental. Lessee shall pay to Lessor, in addition to all other sums
due hereunder, an amount equal to the product of (i) the amount funded by
Lessor; multiplied by (ii) one-thirtieth of the applicable Monthly Rent Factor
(as such term is defined in the Addendum); multiplied by the number of days from
and including the date of such funding by Lessor to the Commencement Date of the
Initial Lease Term Lessee agrees to pay the total rental for the entire term
hereof, which shall be the total amount of all rental payments set forth in the
Schedule, plus such additional amounts as may become due hereunder or pursuant
to any written modification hereof or additional written agreement hereto.
Except as otherwise specified in the Schedule, rental payments hereunder shall
be monthly and shall be payable in advance on the first day of each month during
the term of this Lease beginning with the Commencement Date of the Initial Lease
Term and shall be sent to the address of the Lessor specified in this Lease or
in the Schedule or as otherwise directed by the Lessor in writing Rental
payments or any other payments due hereunder not made on or before the due date
shall be overdue and shall be subject to a Service Charge. If Lessor shall at
any time accept a rental payment after it shall become due, such acceptance
shall not constitute or be construed as a waiver of any or all of Lessor's
rights hereunder, including without limitation those rights of Lessor set forth
in Sections 13 and 14 hereof.
3. Title. This is an agreement of lease only. Lessee shall have no right, title
or interest in or to the Equipment leased hereunder, except as to the use
thereof subject to the terms and conditions of this Lease. All of the Equipment
shall remain personal property (whether or not the Equipment may at any time
become attached or affixed to real property). The Equipment is and shall remain
the sole and exclusive property of Lessor or its assignees. This Lease is
intended to constitute a true lease and not a sale of the related Equipment.
However, to the extent, at any time or from time to time, this Lease is
construed to be a transaction intended as security, Lessor retains
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and Lessee hereby grants to Lessor a security interest in and to the Equipment,
the proceeds of any sale thereof, the assignment, lease, or sublease thereof,
any insurance proceeds with respect thereto, and any other rights of Lessee,
tangible or intangible, in and to the Equipment, the Lease, and their proceeds;
provided, further, that Lessee may not, to the extent this Lease is construed to
be a transaction intended as security, sell or otherwise encumber the Equipment
without Lessor's prior written consent. No right, title or interest in the
Equipment shall pass to Lessee other than, conditioned upon Lessee's compliance
with and fulfillment of the terms and conditions of this Lease, the right to
maintain possession and use of the Equipment for the Lease Term as provided in
Schedule(s). Any Additions, whether before or after the Commencement Date, shall
become the property of Lessor upon being so incorporated or affixed and shall be
returned to Lessor as provided in Section 4. Upon the request of Lessor, Lessee
will affix to the Equipment labels or other markings supplied by Lessor
indicating Lessor's ownership of the Equipment and shall keep the same affixed
for the entire term of this Lease. Lessee agrees to promptly execute and deliver
or cause to be executed and delivered to Lessor and Lessor is hereby authorized
to record or file, any statement and/or instrument requested by Lessor for the
purpose of showing Lessor's interest in the Equipment, including without
limitation, financing statements, security agreements, and waivers with respect
to rights in the Equipment from any owners or mortgagees of any real estate
where the Equipment may be located. Lessee hereby appoints Lessor as Lessee's
limited attorney-in-fact to execute and record all documents necessary to
perfect or maintain the perfection of Lessor's interests hereunder or to make
claim for, receive payment of, and execute and endorse all documents, checks or
drafts for loss or damage under any insurance policy. Lessee shall pay Lessor
for any costs and fees relating to any filings hereunder including but not
limited to, costs, fees, searches, document preparation, documentary stamps,
privilege taxes and reasonable attorneys' fees. If any item of Equipment
includes computer software, Lessee shall execute and deliver and shall cause
Supplier (as hereinafter defined) to deliver all such documents as are necessary
to effectuate assignment of all applicable software licenses to Lessor. Lessee
shall at its expense: (a) indemnify, protect and defend Lessor's title to the
Equipment from and against all persons claiming against or through Lessee; (b)
at all times keep the Equipment free from any and all liens, encumbrances,
attachments, levies, executions, burdens, charges or legal process of any and
every type whatsoever; (c) give Lessor immediate written notice of any breach of
this Lease described in clause (b); and (d) indemnify, protect and save Lessor
harmless from any loss, cost or expense (including reasonable attorneys' fees)
caused by the Lessee's breach of any of the provisions of this Lease.
4. Acceptance and Return of Equipment. Lessor shall, at any time prior to
unconditional acceptance of all Equipment by Lessee, have the right to cancel
this Lease with respect to such Equipment (and if the Equipment or any portion
thereof has not previously been accepted, Lessor may refuse to pay for the
Equipment or any portion thereof or refuse to cause the same to be delivered)
if: (a) the Acceptance Date with respect to any item of Equipment to be leased
pursuant to any Schedule has not occurred within sixty (60) days of the
estimated Acceptance Date set forth in such Schedule or (b) there shall be, in
the reasonable judgment of Lessor, a material adverse change in the financial
condition or credit standing of Lessee or of any guarantor of Lessee's
performance under this Lease or failure of Lessee to substantially achieve
operational and financial objectives as set forth in Lessee's most recent
operating plan. Upon any cancellation by Lessor pursuant to this Section or the
provisions of any Schedule, Lessee shall forthwith reimburse to Lessor all sums
paid by Lessor with respect to such Equipment plus all costs and expenses of
Lessor incurred in connection with such Equipment and any interest or rentals
due hereunder in connection with such Equipment and shall pay to Lessor all
other sums then due hereunder, whereupon if Lessee is not then in default and
has fully performed all of its obligations hereunder, Lessor will, upon request
of Lessee, transfer to Lessee without warranty or recourse any rights that
Lessor may then have with respect to such Equipment. Lessee shall execute and
deliver to Lessor the Equipment Acceptance within fifteen (15) days after the
Acceptance Date. Lessee agrees, before execution of the aforesaid Equipment
Acceptance, to inform Lessor in writing of any defects in the Equipment, or in
the installation thereof, which have come to the attention of Lessee or its
agents and which might give rise to a claim by Lessee against the Seller or any
other person. If Lessee fails to give notice to Lessor of any such defects or
fails to deliver to Lessor the Equipment Acceptance as provided herein, it shall
be deemed an acknowledgment by Lessee (for purposes of this Lease only) that no
such defects in the Equipment or its installation exist and it shall be
conclusively presumed, solely as between Lessor and its assignees and Lessee,
that such Equipment has been unconditionally accepted by Lessee for lease
hereunder. Except as otherwise provided in any Schedule, Lessee shall provide
Lessor ninety (90) days prior written notice of its intention to return the
Equipment upon expiration of the Initial Lease Term. Upon expiration or the
cancellation or termination of the Lease with respect to any Equipment, Lessee
shall, at its own expense, assemble, crate, insure and deliver all of the
Equipment and all of the service records and all software and software
documentation subject to this Lease and any Schedules hereto to Lessor in the
same good condition and repair as when received, reasonable wear and tear
resulting only from proper use thereof excepted, to such reasonable destination
within the continental United States as Lessor shall designate. The Equipment
shall be deemed delivered to Lessor upon Lessor's execution of its certificate
of receipt. Lessee shall, immediately prior to such return of each item of
Equipment, provide to Lessor a letter from the manufacturer of the equipment or
another service organization reasonably acceptable to Lessor certifying that
said item is in good working order, reasonable wear and tear resulting only from
proper use thereof excepted, and all software is included thereon. If any
computer software requires relicensing when removed from Lessee's
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premises, Lessee shall bear all costs of such relicensing. If Lessee fails for
any reason to provide the notice set forth above or to re-deliver the Equipment
back to Lessor in accordance with the terms set forth above, Lessee shall pay to
Lessor, at Lessor's election, an amount equal to the highest monthly payment set
forth in the Schedule for a period of not less than three (3) months and at the
end of such period of time, Lessee shall return the Equipment to Lessor as
provided herein. If Lessee fails or refuses to return the Equipment as provided
herein at the end of any holdover period, Lessee shall pay to Lessor, at
Lessor's option, an amount equal to the highest monthly payment set forth in the
Schedule or the highest rate permitted by law, whichever is less, for each month
or portion thereof, until Lessee so returns the Equipment to Lessor.
5. Disclaimer of Warranties. The Lessee and Lessor agree that this Lease is a
Finance Lease as defined in Uniform Commercial Code Article 2A--Leases. The
Lessee also acknowledges that: (a) the Lessee has selected the Supplier and
directed the Lessor to purchase the Equipment from the Supplier; (b) the Lessee
has been informed in writing before signing this Lease, that the Lessee is
entitled under Article 2A to the promises and warranties, including those of any
third party, provided to the Lessor by the Supplier in connection with or as
part of the contract by which the Lessor acquired the Equipment; and (c) the
Lessee may communicate with the Supplier and receive an accurate and complete
statement of those promises and warranties, including any disclaimers and
limitations thereof or of any remedies in connection therewith. LESSEE HAS
EXCLUSIVELY SELECTED AND CHOSEN THE TYPE, DESIGN, CONFIGURATION, SPECIFICATION
AND QUALITY OF THE EQUIPMENT HEREIN LEASED AND THE SUPPLIER THEREOF, AS SET
FORTH IN THE SCHEDULES. LESSOR MAKES NO REPRESENTATION OR WARRANT, EITHER
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION,
THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS,
ADAPTABILITY, ANY IMPLIED WARRANTY OF QUIET ENJOYMENT OR NON-INTERFERENCE OR
SUITABILITY FOR ANY PARTICULAR PURPOSE, AND, LESSEE LEASES, HIRES AND RENTS THE
EQUIPMENT AS IS." Lessee understands and agrees that neither Supplier, nor any
agent of Supplier, is an agent of Lessor or is in any manner authorized to waive
or alter any term or condition of this Lease. Lessor shall not be liable for any
loss or damage suffered by Lessee or by any other person or entity, direct or
indirect or consequential, including, but not limited to, business interruption
and injury to persons or property, resulting from non-delivery or late delivery,
installation, failure or faulty operation' condition, suitability or use of the
Equipment leased by Lessee hereunder, or for any failure of any representations,
warranties or covenants made by the Supplier. Any claims of Lessee shall not be
made against Lessor but shall be made, if at all, solely and exclusively against
Supplier, or any persons other than the Lessor. Lessor hereby authorizes Lessee
to enforce during the term of this Lease, in its name, but at Lessee's sole
effort and expense, all warranties, agreements or representations, if any, which
may have been made by Supplier to Lessor or to Lessee, and Lessor hereby assigns
to Lessee solely for the limited purpose of making and prosecuting any such
claim, all rights which Lessor may have against Supplier for breach of warranty
or other representation respecting the Equipment.
6. Care, Transfer and Use of Equipment. Lessee, at its own expense, shall
maintain the Equipment in good operating condition, repair and appearance in
accordance with Supplier's specifications and in compliance with all applicable
laws and regulations and shall protect the Equipment from deterioration except
for reasonable wear and tear resulting only from proper use thereof. When
generally offered, Lessee shall, at its expense, keep a _______ maintenance
contract (e.g. upgrades) in full force and effect on all Equipment (except
personal computers), throughout the term of this Lease and any Schedule hereto.
The disrepair or inoperability of the Equipment regardless of the cause thereof
shall not relieve Lessee of the obligation to pay rental hereunder. Lessee shall
not make any Addition to the Equipment (other than normal operating accessories
or controls) without prior written consent of Lessor. Lessee will not, and will
not permit anyone other than the authorized field engineering representatives of
Supplier or other maintenance organization reasonably acceptable to Lessor to
effect any inspection, adjustment, preventative or remedial maintenance or
repair to the Equipment. Lessee may not (a) relocate or operate the Equipment at
locations other than the Premises, except with Lessor's prior written consent,
which shall not be unreasonably withheld if such other location within the
continental United States, or (b) SELL, CONVEY, TRANSFER, ASSIGN, SUBLEASE,
ENCUMBER ALL OR ANY OF ITS INTERESTS IN THIS LEASE, ANY SCHEDULE OR ANY ITEMS OF
EQUIPMENT (INCLUDING PARTING WITH POSSESSION OF ANY ITEM OF EQUIPMENT) AND ANY
SUCH PURPORTED TRANSACTION SHALL BE NULL AND VOID AND OF NO FORCE OR EFFECT. In
the event of a relocation of the Equipment or any item thereof to which Lessor
consents, all costs (including, but not limited to, Uniform Commercial Code
filing fees, any additional property taxes or other taxes and any additional
expense of insurance coverage) resulting from any such relocation, shall be
promptly paid by Lessee upon presentation to Lessee of evidence supporting such
cost. Lessor shall have the right during normal hours upon reasonable notice to
Lessee, subject to applicable laws and regulations, to enter Lessee's Premises
in order to inspect, observe, affix labels or other markings, or to exhibit the
Equipment to prospective purchasers or future lessees thereof, or to otherwise
protect Lessor's interest therein.
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7. Net Lease. THIS LEASE AND ANY SCHEDULE HERETO IS A NET LEASE, AND ALL
PAYMENTS HEREUNDER ARE NET TO LESSOR. Al1 taxes, assessments, licenses, and
other charges (including, without limitation personal property taxes and sales,
franchise, gross receipt, use and leasing taxes and penalties and interest on
such taxes) imposed, levied or assessed on the ownership, possession, rental or
use of the Equipment during the term of this Lease and any Schedule hereto
(except for Lessor's federal or state net income taxes) shall be paid by Lessee
when due and before the same shall become delinquent, whether such taxes are
assessed or would ordinarily be assessed against Lessor or Lessee. To the extent
possible under applicable law, for personal property or ad valorem tax return
purposes only, Lessee shall include the Equipment on such returns as may be
required, which returns shall be timely filed by it. In any event, Lessee shall
file all tax returns required for itself or Lessor and Lessor hereby appoints
Lessee as its attorney-in-fact for such purpose. In case of failure by Lessee to
so pay said taxes, assessments, licenses or other charges, Lessor may pay all or
any part of such items, in which event the amount so paid by Lessor including
any interest or penalties thereon and reasonable attorneys' fees incurred by
Lessor shall be immediately paid by Lessee to Lessor as additional rental
hereunder. Lessee shall promptly pay all costs, expenses and obligations of
every kind and nature incurred in connection with the use or operation of the
Equipment which may arise or become due during the term of this Lease and any
Schedule hereto, whether or not specifically mentioned herein. In case of
failure by Lessee to comply with any provision of this Lease and any Schedule
hereto, Lessor shall have the right, but not the obligation, to effect such
compliance on behalf of Lessee. In such event, all costs and expenses incurred
by Lessor in effecting such compliance shall be immediately paid by Lessee to
Lessor as additional rental hereunder.
8. Indemnity. Lessee shall and does hereby agree to indemnify, defend and hold
Lessor and its assigns harmless from and against any and all liability, loss,
costs, injury, damage, penalties, suits, judgments, demands, claims, expenses
and disbursements (including without limitation, reasonable attorneys' fees) of
any kind whatsoever arising out of, on account of, or in connection with this
Lease, any Schedule hereto and the Equipment leased hereunder, including,
without limitation, its manufacture, selection, purchase, delivery, rejection,
installation, ownership, possession, leasing, renting, operation, control, use,
maintenance and the return thereof. Lessee's indemnity shall include any loss of
the tax benefits which Lessor, its affiliates, partners and assignees currently
are entitled to enjoy caused by (a) acts, omissions or misrepresentations of
Lessee and (b) acts of any governmental authority. Such items shall include, but
not be limited to the following if (i) Lessor shall not be entitled to
accelerated cost recover deductions (the "MACRS deductions") as allowed under
Section 168 of the Internal Revenue Code of 1986, as amended, ("the Code") based
on 100% of the Original Cost of the Equipment to Lessor and utilizing the
depreciable life and method referred to in the attached Schedule(s), or (ii) if
Lessor loses any other intended tax benefit as a result of any subsequent change
in the Code, (including a change in the maximum federal corporate income tax
rates from the rates in effect under the Code as of the date of this Lease
hereinafter referred to as a "Tax Rate Change") or rules and regulations
promulgated pursuant thereto, whether or not retroactive, which impacts Lessor's
intended return and economics from this transaction, or (iii) if Lessor is
required to recognize income other than rent as contemplated under the Lease, or
(iv) if any item of income, gain, loss or deduction is treated as having been
derived from or allocable to sources outside the U.S. This indemnity shall
survive the Initial Lease Term or earlier cancellation or termination of this
Lease and any Schedule hereto.
9. Insurance. Commencing on the date that risk of loss or damage passes to
Lessor from the Supplier and continuing until Lessee has re-delivered the
Equipment to Lessor and Lessor has accepted receipt of the Equipment from
Lessee, Lessee shall, at its own expense, keep the Equipment insured against all
risks of loss or damage from every and any cause whatsoever in such amounts (but
in no event less than the greater of the replacement value thereof or the amount
set forth in the applicable casualty schedule, whichever is higher and with a
deductible amount not to exceed $5,000.00) and in such form as is satisfactory
to Lessor. All such insurance policies shall protect Lessor and Lessor's
assignee(s) as principal loss payees as their interests may appear. Lessee shall
also, at its own expense, carry public liability insurance, with Lessor and
Lessor's assignee(s) as an additional insured, in such amounts with such
companies and in such form as is satisfactory to Lessor, with respect to injury
to person or property resulting from or based in any way upon or in any way
connected with or relating to the installation, use or alleged use, or operation
of any or all of the Equipment, or its location or condition. Not less than ten
(10) days prior to the Acceptance Date, Lessee shall deliver to Lessor
satisfactory evidence of such insurance and shall further deliver evidence of
renewal of each such policy not less than thirty (30) days prior to expiration
thereof. Each such policy shall contain an endorsement providing that the
insurer will give Lessor and it's assignees not less than thirty (30) days prior
written notice of the effective date of any alteration, change, cancellation, or
modification of such policy or the failure by Lessee to timely pay all required
premiums, costs or charges with respect thereto. Upon Lessor's request, Lessee
shall cause its insurance agent(s) to execute and deliver to Lessor Loss Payable
Clause Endorsement and Additional Insured Endorsement (bodily injury and
property damage liability insurance) forms provided to Lessee by Lessor and name
any assignees of Lessor designated by Lessor. Each policy shall be primary
without rights of contribution from any other insurance which is carried by
Lessor and shall expressly provide that all of the provisions thereof, except
the limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. Each policy shall provide
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for payment to Lessor and its assignees notwithstanding any action, inaction or
breach of representation or warranty by Lessee or Lessor. In case of the failure
to procure or maintain such insurance, Lessor shall have the right, but not the
obligation, to obtain such insurance and there shall be no recourse against
Lessor or its assignees for payment of such premiums or other amounts with
respect thereto. Any premium paid by Lessor shall be immediately due and payable
by Lessee to Lessor as additional rent hereunder. The maintenance of any policy
or policies of insurance pursuant to this Section shall not limit any obligation
or liability of Lessee pursuant to Sections 8 or 10 or any other provision of
this Lease and any Schedule hereto. Lessee shall, to the extent reasonably
possible, obtain liability insurance required hereunder on an occurrence basis
rather than a claims made basis. To the extent that the Lessee must obtain some
or all of this coverage on a claims made basis, Lessee shall provide Lessor with
satisfactory evidence that the retroactive date of the claims made policy is
prior to the Commencement Date or the date of Delivery and Acceptance by Lessee,
whichever is earlier; that the then remaining aggregate amount of Lessee's
coverage is and will be sufficient to meet the minimum amount of coverage
required hereunder, and that the policy will either remain in force, be renewed,
or a satisfactory discovery period will be purchased to cover any claims which
might arise hereunder in the future. Lessee's obligation to keep the Equipment
insured as provided herein shall continue until the Equipment is returned to
Lessor pursuant to Section 4 hereof.
10. Risk of Loss. Until such time as the Equipment is returned and delivered to
and accepted by Lessor, pursuant to the terms of this Lease and any Schedule
hereto, Lessee hereby assumes and shall bear the entire risk of any Equipment
Loss. Without limitation of the foregoing, no Equipment Loss shall relieve
Lessee in any way from its obligations hereunder. Lessee shall promptly notify
Lessor in writing of any Equipment Loss. In the event of any such Equipment
Loss, Lessee shall: (a) in the event Lessor determines such Equipment to be
repairable, promptly place, at Lessee's expense, the Equipment in good repair,
condition and working order in accordance with Supplier's specifications and to
the satisfaction of Lessor; or (b) in the event of an actual or constructive
total loss of any item of Equipment, at Lessor's option: (i) promptly replace,
at Lessee's expense, the Equipment with like equipment of the same or a later
model with the same Additions as the Equipment, and in good repair, condition
and working order in accordance with the Supplier's specifications and to the
satisfaction of Lessor; or (ii) immediately pay to Lessor the amount obtained by
multiplying the Equipment Cost as specified in the applicable Schedule by the
percentage contained in any casualty schedule for the date of such Equipment
Loss plus, any unpaid rentals or any amounts due hereunder or, if no casualty
schedule has been made a part of any applicable Schedule, an amount equal to the
present value of the total amount of unpaid rentals and all other amounts due
and to become due under any applicable Schedule during the term thereof as of
the date of any payment plus an additional amount equal to the present value of
the estimated residual value of the Equipment at the expiration of the Lease,
all discounted at a rate equal to the Discount Rate in effect as of the
Commencement Date of the Lease with respect to each applicable Schedule, but in
no event shall the amount of such Fair Market Value be less than twenty percent
(20%) of the Equipment Cost as specified in the applicable Schedule. In the
event Lessee is required to repair or replace any such item of Equipment
pursuant to Subsections (a) or (b)(i) of the preceding sentence, the insurance
proceeds received by Lessor and its assignees, if any, pursuant to Section 9,
after the use of such funds to pay any unpaid amounts then due hereunder, shall
be paid to Lessee or, if applicable, to a third party repairing or replacing the
Equipment upon Lessee's furnishing proof satisfactory to Lessor and its assignee
that such repair or replacement has been completed in a satisfactory manner. In
the event Lessor elects the option set forth in Subsection (b)(u), Lessee shall
be entitled to a credit against the payment required by said Subsection in an
amount equal to such insurance proceeds actually received by Lessor and its
assignee pursuant to Section 9 on account of such Equipment, and, upon payment
by Lessee to Lessor of all of the sums required pursuant to Subsection (b)(ii),
the applicable Schedule shall terminate with respect to such item of Equipment
and Lessee shall be entitled to whatever interest Lessor may have in such item
"as is, where is" and "with all faults" in its then condition and location
without warranties of any type whatsoever, express or implied.
11. Covenants of Lessee. Lessee agrees that its obligations under this Lease and
any Schedule hereto, including without limitation, the obligation to pay rental,
are irrevocable and absolute, shall not ▇▇▇▇▇ for any reason whatsoever
(including any claims against Lessor), and shall continue in full force and
effect regardless of any inability of Lessee to use the Equipment or any part
thereof for any reason whatsoever including without limitation, war, act of God,
storms, governmental regulations, strike or other labor troubles, loss, damage,
destruction, disrepair, obsolescence, failure of or delay in delivery of the
Equipment, or failure of the Equipment to properly operate for any cause. In the
event of any alleged claim (including a claim which would otherwise be in the
nature of a set-off) against Lessor, Lessee shall fully perform and pay its
obligations hereunder (including all rents, without set-off or defense of any
kind) and its only exclusive recourse against Lessor shall be by a separate
action. Lessee, if requested, shall provide at Lessee's expense opinions of its
counsel acceptable to Lessor affirming the covenants, representations and
warranties of Lessee under this Lease and any Schedule hereto and any other
documents related hereto or incorporated herein. Lessee shall provide Lessor
with not less than thirty (30) days prior written notice of any material change
in Lessee's financial structure or ownership (e.g., merger, consolidation, sale,
lease or other disposition of assets not in the ordinary course).
-6-
12. Representations and Warranties. In order to induce Lessor in enter into this
Lease and any Schedule hereto and to lease the Equipment to Lessee hereunder,
Lessee represents and warrants that:
(a) Financial Statements. (i) applications, financial statements,
reports and operating plans which have been submitted by Lessee and any
Obligors to Lessor are, and all information hereafter furnished by
Lessee and Obligors to Lessor will be, true and correct in all material
respects as of the date submitted; (ii) as of the date hereof, the date
of any Schedule and any Acceptance Date, there has been no material
adverse change in any matter stated in such applications, financial
statements and reports; (iii) as of the date hereof, the date of any
Schedule and any Acceptance Date, Lessee has not failed to
substantially achieve operational and financial objectives as set forth
in Lessee's operating plan and financial projections furnished to
Lessor in connection with Lessor's approval of this transaction; and,
(iv) none of the foregoing omit or omitted to state any material fact.
(b) Organization. Lessee is an organizational entity described on the
signature page hereof and is duly organized, validly existing and is
duly qualified to do business and is in good standing in each State in
which the Equipment will be located.
(c) Authority. Lessee has full power, authority and right to own and/or
lease property and to execute, deliver and perform this Lease and any
Schedule hereto, and the execution, delivery and performance hereof has
been authorized by all necessary action of Lessee.
(d) Enforceability. This Lease and any Schedule or other document
executed in connection therewith has been duly executed and delivered
by Lessee and any Obligor and constitutes a legal, valid and binding
obligation of Lessee and any Obligor enforceable in accordance with its
terms.
(e) Consents. The execution, delivery and performance of this Lease and
any Schedule hereto does not require any approval or consent of any
stockholders, partners or proprietors or of any trustee or holders of
any indebtedness or obligations of Lessee, and will not contravene any
law, regulation, judgment or decree applicable to Lessee, or the
certificate of incorporation, partnership agreement, by-laws or other
governing documents of Lessee, or contravene the provisions of, or
constitute a default under, or result in the creation of any lien upon
any property of Lessee under any mortgage, instrument or other
agreement to which Lessee is a party or by which Lessee or its assets
may be bound or affected. Except as disclosed, no authorization,
approval, license, filing or registration with any court or
governmental agency or instrumentality is necessary in connection with
the execution, delivery, performance, validity and enforceability of
this Lease and any Schedule hereto.
(f) Title. On each Commencement Date, Lessor shall have good and
marketable title to the items of Equipment which are subject to this
Lease and any Schedule hereto on such date, free and clear of all
liens, except the lien of Supplier which will be released upon receipt
of payment. Lessee warrants that no party has a security interest in
the Equipment which will not be released on or before payment by Lessor
to Supplier of the Equipment and that the Equipment is and shall at all
times remain personal property regardless of how it may be affixed to
any real property.
(g) Litigation. There is no action, suit, investigation or proceeding
by or before any court, arbitrator, agency or governmental authority
pending or threatened against or affecting Lessee: (i) which involves
the Equipment or the transactions contemplated by this Lease and any
Schedule hereto; or (ii) which, if adversely determined, could have a
material adverse effect on the financial condition, business or
operation of Lessee.
13. Events of Default. An Event of Default shall occur hereunder if Lessee or
any Obligor: (a) fails to pay any installment of rent or other payment required
hereunder when due; or (b) attempts to or does remove from the Premises (except
a relocation with Lessor's written consent as provided in Section 6), sell,
transfer, encumber, part with possession of, or sublet any item of the
Equipment; or (c) shall suffer or have suffered, in the reasonable judgment of
Lessor, any event the result of which has caused the Lessor to deem itself to be
insecure including, but not limited to, any of the following (i) a material
adverse change in its financial condition or business prospects; (ii) a material
change in structure (e.g., merger, consolidation, sale, lease or other
disposition of assets not in the ordinary course); (iii) a material change in
ownership (e.g., sale of stock); (iv) failure of Lessee to substantially achieve
operational and financial objectives as set forth in Lessee's operating plan and
financial projections furnished to Lessor in connection with Lessor's approval
of this transaction; or (v) any of the statements or other documents or
information submitted at any time heretofore or hereafter by Lessee or Obligor
to Lessor has misstated or shall misstate or has failed or shall fail to state a
material fact; or (d) breaches or shall have breached
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any representation or warranty made or given by Lessee or Obligor in this Lease
or in any other document furnished to Lessor in connection herewith, or any such
representation or warranty shall be untrue or, by reason of failure to state a
material fact or otherwise, shall be misleading; or (e) fails to perform or
observe any other covenant, condition or agreement to be performed or observed
by it hereunder, and such failure or breach shall continue unremedied for a
period of ten (10) days after the earlier of (i) the date on which Lessee
obtains, or should have obtained knowledge of such failure or breach, or (ii)
the date on which notice thereof shall be given by Lessor to Lessee; or (f)
shall become insolvent or bankrupt or make an assignment for the benefit of
creditors or consent to the appointment of a trustee or receiver, or a trustee
or receiver shall be appointed for a substantial part of its property without
its consent, or bankruptcy or reorganization or insolvency proceeding shall be
instituted by or against Lessee or obligor; or (g) conveys, sells, refers,
subleases or assigns substantially all of Lessee's or Obligor's assets or ceases
doing business as a going concern, or, if a corporation, ceases to be in good
standing or files a statement of intent to dissolve, or abandons any or all of
the Equipment; or (h) shall be in breach of or default under any lease or other
agreement at any time executed with Lessor or any other lessor or with any
lender to Lessee or Obligor.
14. Remedies. From and after the Default Date, Lessor may, in its sole and
absolute discretion, do any one or more of the following: (a) upon notice to
Lessee, cancel all or any portion of this Lease and some or all Schedules
executed pursuant thereto; (b) enter Lessee's Premises and without removal of
the Equipment, render the Equipment unusable or, require Lessee to assemble the
Equipment and make it available to Lessor at a place designated by Lessor,
and/or dispose of the Equipment by sale or otherwise (all of which
determinations may be made by Lessor in its sole and absolute discretion)
without any duty to account for such action or inaction or for any proceeds or
profits with respect thereto; (c) declare immediately due and payable all sums
due and to become due hereunder for the full term of the Lease (including any
renewal or purchase obligations which Lessee has contracted to pay); (d) with or
without canceling this Lease, recover from Lessee damages, in an amount equal to
the sum of: (i) all unpaid rent and other amounts that became due and payable
on, or prior to, the Default Date; (ii) the present value of al1 future rentals
and other amounts described in the Lease and not included in (i) above
discounted to the Default Date at a rate equal to the Discount Rate as of the
Commencement Date of the Lease with respect to each Schedule (which Discount
Rate, Lessee agrees is a commercially reasonable rate which takes into account
the facts and circumstances at the time such Schedule commenced); (iii) all
commercially reasonable costs and expenses incurred by Lessor in enforcing
Lessor's rights under this Lease, including but not limited to, costs of
repossession, recovery, storage, repair, sale, re-lease and reasonable
attorneys' fees; (iv) the present value of the estimated residual value of the
Equipment as of the expiration of the Lease discounted at a rate equal to the
Discount Rate in effect as of the Commencement Date of the Lease with respect to
each applicable Schedule, but in no event shall the amount of such Fair Market
Value be less than twenty percent (20%) of the Equipment Cost as specified in
the applicable Schedule; (v) any indemnity amount payable to Lessor; and (vi)
interest on all of the foregoing from the Default Date until the date payment is
received by Lessor at 2-1/2% in excess of the Prime Rate in effect on the date
of such payment, or the highest rate permitted by law, whichever is less; (e)
exercise any other right or remedy which may be available to it under the
Uniform Commercial Code or any other applicable law. Lessor reserves the right,
in its sole and absolute discretion, to release or sell any or all of the
Equipment at a public auction or in a private sale, at such time, on such terms
and with such notice as Lessor shall in its sole and absolute discretion deem
reasonable. In such event, without any duty on Lessor's part to effect any such
re-lease or sale of the Equipment, Lessor will credit the present value of any
proceeds from such sale or re-lease actually received and retainable by it (net
of any and all costs or expenses) discounted from the date of Lessor's receipt
thereof to the Default Date at 2-1/2% in excess of the Prime Rate in effect on
the date of such payment, or the highest rate permitted by law, whichever is
less to the amounts due to Lessor from Lessee under the provisions of (c), (d)
and/or (e) above. A cancellation of this Lease shall occur only upon notice by
Lessor and only as to such items of Equipment as Lessor specifically elects to
cancel and this Lease shall continue in full force and effect as to the
remaining items of Equipment, if any. If this Lease and/or any Schedule is
deemed at any time to be one intended as security, Lessee agrees that the
Equipment shall secure, in addition to the indebtedness set forth herein, any
other indebtedness at any time owing by Lessee to Lessor. No remedy referred to
in this Section is intended to be exclusive, but shall be cumulative and in
addition to any other remedy referred to above or otherwise available to Lessor
at law or in equity. No express or implied waiver by Lessor of any default shall
constitute a waiver of any other default by Lessee or a waiver of any of
Lessor's rights.
15. Assignment by Lessor. LESSOR MAY (WITH OR WITHOUT NOTICE TO LESSEE) SELL,
TRANSFER, ASSIGN OR GRANT A SECURITY INTEREST IN ALL OR ANY PART OF ITS INTEREST
IN THIS LEASE, ANY SCHEDULE, ANY ITEMS OF EQUIPMENT OR ANY AMOUNT PAYABLE
HEREUNDER. In such an event, Lessee shall, upon receipt of notice, acknowledge
any such sale, transfer, assignment or grant of a security interest and shall
pay its obligations hereunder or amounts equal thereto to the respective
transferee, assignee or secured party in the manner specified in any
instructions received from Lessor. Notwithstanding any such sale, transfer,
assignment or grant of a security interest by Lessor and so long as no event of
default shall have occurred hereunder,
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neither Lessor nor any transferee, assignee or secured party shall interfere
with Lessee's right of use or quiet enjoyment of the Equipment. In the event of
such sale, transfer, assignment or grant of security interest in all or any part
of this Lease and any Schedule hereto, or in the Equipment or in sums payable
hereunder, as aforesaid, Lessee agrees to execute such documents as may be
reasonably necessary to evidence, secure and complete such sale, transfer,
assignment or grant of a security interest and to perfect the transferee's,
assignee's or secured Party's interest therein and Lessee further agrees that
the rights of any transferee, assignee or secured party shall not be subject to
any defense, set-off or counterclaim that Lessee may have against Lessor or any
other party, including the Supplier, which defenses, set-offs and counterclaims
shall be asserted only against such party, and that any such transferee,
assignee or secured party shall have all of Lessor's rights hereunder, but shall
assume none of Lessor's obligations hereunder. Lessee acknowledges that any
assignment or transfer by Lessor shall not materially change Lessee' duties or
obligations under this Lease nor materially increase the burdens and risks
imposed on Lessee. Lessee agrees that Lessor may assign or transfer this Lease
or Lessor's interest in the Equipment even if said assignment or transfer could
be deemed to materially affect the interests of Lessee. Nothing in the preceding
sentence shall affect or impair the provisions of Section 4, Section 10 or any
other provision of this Lease.
16. Amendments. This Lease and any Schedules hereto contain the entire agreement
between the parties with respect to the Equipment, this Lease and any Schedules
hereto and there is no agreement or understanding, oral or written, which is not
set forth herein. This Lease and any Schedules hereto may not be altered,
modified, terminated or discharged except by a writing signed by the party
against whom such alteration, modification, termination or discharge is sought.
Lessee's Initials /s/
-----------
17. Law. This Lease and any Schedules hereto shall be binding only when accepted
by Lessor at its principle place of business in Illinois and shall in all
respects be governed and construed, and the rights and the liabilities of the
parties hereto determined, except for local filing requirements, in accordance
with the laws of the State of Illinois. LESSEE WAIVES TRIAL BY JURY AND SUBMITS
TO THE JURISDICTION OF THE FEDERAL DISTRICT COURTS OF COMPETENT JURISDICTION OR
ANY STATE COURT WITHIN THE STATE OF ILLINOIS AND WAIVES ANY RIGHT TO ASSERT THAT
ANY ACTION INSTITUTED BY LESSOR IN ANY SUCH COURT IS IN THE IMPROPER VENUE OR
SHOULD BE TRANSFERRED TO A MORE CONVENIENT FORUM.
18. Invalidity. In the event that any provision of this Lease and any Schedule
hereto shall be unenforceable in whole or in part, such provision shall be
limited to the extent necessary to render the same valid, or shall be excised
from this Lease or any Schedule hereto, as circumstances may require, and this
Lease and the applicable Schedule shall be construed as if said provision had
been incorporated herein as so limited, or as if said provision had not been
included herein, as the case may be without invalidating any of the remaining
provisions hereof.
19. Miscellaneous. All notices and demands relating hereto shall be in writing
and mailed by certified mail, return receipt requested, to Lessor or Lessee at
their respective addresses above or shown in the Schedule, or at any other
address designated by notice served in accordance herewith Notice shall become
effective when deposited in the United States mail, with proper postage prepaid,
addressed to the party intended to be served at the address designated herein.
All obligations of Lessee shall survive the termination or expiration of this
Lease and any Schedule hereto. Should Lessor permit use by Lessee of any
Equipment beyond the Initial Lease Term, or, if applicable, any exercised
extension or renewal term, the lease obligations of Lessee shall continue and
such permissive use shall not be construed as a renewal of the term thereof, or
as a waiver of any right or continuation of any obligation of Lessor hereunder,
and Lessor may take possession of any such Equipment at any time upon demand. If
more than one Lessee is named in this Lease, the liability of each shall be
joint and several. Lessee shall, upon request of Lessor from time to time,
perform all acts and execute and deliver to Lessor all documents which Lessor
deems reasonably necessary to implement this Lease and any Schedule hereto,
including, without limitation, certificates addressed to such persons as Lessor
may direct stating that this Lease and the Schedule hereto is in full force and
effect, that there are no amendments or modifications thereto, that Lessor is
not in default hereof or breach hereunder, setting forth the date to which
rentals due hereunder have been paid, and stating such other matters as Lessor
may request. This Lease and any Schedule hereto shall be binding upon the
parties and their successors, legal representatives and assigns. Lessee's
successors and assigns shall include, without limitation, a receiver,
debtor-in-possession, or trustee of or for Lessee. If any person, firm,
corporation or other entity shall guarantee this Lease and the performance by
Lessee of its obligations hereunder, all of the terms and provisions hereof
shall be duly applicable to such Obligor.
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20. Lessee's Waivers. To the extent permitted by applicable law, Lessee hereby
waives any and all rights and remedies conferred upon a Lessee by Article 2A of
the Uniform Commercial Code as adopted in any jurisdiction, including but not
limited to Lessee's rights to: (a) cancel this Lease; (b) repudiate this Lease;
(c) reject the Equipment; (d) revoke acceptance of the Equipment; (e) recover
damages from Lessor for any breaches of warranty or for any other reason; (f)
claim a security interest in the Equipment in Lessee's possession or control for
any reason (g) deduct all or any part of any claimed damages resulting from
Lessor's default, if any, under this Lease; (h) accept partial delivery of the
Equipment; (i) "cover" by making any purchase or lease of or contract to
purchase or lease Equipment in substitution for those due from Lessor; (j)
recover any general, special, incidental, or consequential damages for any
reason whatsoever; and (k) specific performance, replevin, detinue,
sequestration, claim, and delivery of the like for any Equipment identified to
this Lease. To the extent permitted by applicable law, Lessee also hereby waives
any rights now or hereafter conferred by statute or otherwise which may require
Lessor to sell, lease or otherwise use any Equipment in mitigation of Lessor's
damages as set forth in Paragraph 14 or which may otherwise limit or modify any
of Lessor's rights or remedies under Paragraph 14. Any action by Lessee against
Lessor for any default by Lessor under this Lease, including breach of warranty
or indemnity, shall be commenced within one (1) year after any such cause of
action accrues.
21. Reports. So long as this Lease is in effect or Lessor holds any unexpired
and unexercised warrants, Lessee shall provide Lessor with the following: (a)
annual financial statements of Lessee (and of any Obligors), prepared in
accordance with generally accepted accounting principles and certified by
independent certified public accountants within ninety (90) days after Lessee's
(and any Obligor's) fiscal year end, (b) monthly financial and operating
performance data as and when provided to members of Lessee's Board of Directors,
investors and, if applicable, the S.E.C.; and (3) prompt written notice of any
material adverse change in Lessee's financial condition, operating plan or
business prospects.
22. Tax Benefits. All Equipment shall be tangible personal property eligible for
MACRS depreciation under the Internal Revenue Code of 1986, as amended. The
depreciation benefits arising from the Equipment will be for the account of
Lessor.
23. Counterparts. This Lease may be executed in any number of counterparts, each
of which shall be deemed an original. Each Schedule shall be executed in three
(3) counterparts each of which shall be deemed an original but only counterpart
number 1 shall constitute "chattel paper" or "collateral" within the meaning of
the Uniform Commercial Code in any jurisdiction.
24. Addendum. ("X" if applicable) [ X ] See Addenda attached hereto and made a
part of this Lease. In the event of a conflict between the terms and conditions
of this Lease and the terms and conditions of an Addendum, the terms and
conditions of the Addendum shall govern and control.
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The person executing this Lease for and on behalf of Lessee represents and
warrants, which representation and warranty shall survive the expiration or
termination of this Lease, that this Lease and the execution hereof has been
duly and validly authorized by Lessee, constitutes a valid and binding
obligation of Lessee and that he has authority to make such execution for and on
behalf of Lessee.
IN WITNESS WHEREOF, this Lease has been executed by Lessee this 6th day of May,
1997.
SANDBOX ENTERTAINMENT CORPORATION, Lessee
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(a Delaware corporation)
By: /s/▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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ACCEPTED AT CHICAGO, ILLINOIS
THIRD COAST VENTURE LEASE PARTNERS I, L.P., Lessor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By its General Partner, Third Coast GP-I, L.L.C.
By: /s/ Miroslav Anic
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Name: Miroslav Anic
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Title: Manager
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