Exhibit 10.1
[LOGO] GATX CAPITAL CORPORATION
MASTER LEASE AGREEMENT
NO. 1903
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This Master Lease Agreement ("Lease Agreement") is made as of the 30TH day of
JULY ,1999, between GATX CAPITAL CORPORATION of Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Lessor") and RHYTHMS NETCONNECTIONS INC
having its principal offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ (the "Lessee").
TERMS AND CONDITIONS
1. DEFINITIONS.
"Lease Order" shall refer to that document wherein Lessor agrees to
lease to Lessee and Lessee agrees to lease from Lessor certain Equipment. Each
Lease Order shall be signed and submitted by Lessee to Lessor and, when so
submitted, shall constitute a firm irrevocable offer by Lessee to lease the
Equipment identified on the Lease Order subject to the terms of the Lease Order
and this Lease Agreement which, if accepted by Lessor by signing and returning
to Lessee one copy of the same within thirty (30) days of the date of the Lease
Order shall be deemed a duly executed and in force Lease Order.
"Initial Term" shall mean the period beginning on the Commencement Date
and continuing for the number of months set forth in each Lease Order.
"Equipment" shall mean the equipment identified in a duly executed and in
force Lease Order and all related replacements, parts, additions, software,
accessories, alterations and repairs incorporated therein or affixed thereto,
together with any items included on the related Lease Order including, but not
limited to, training, maintenance, license agreements, etc.
"Software" shall mean a computer program in any data, program
description, media or supporting documentation provided by a licensor as part of
the transaction.
"Delivery and Acceptance Date" shall mean the date that the Equipment
listed on the related Lease Order is accepted at Lessee's premises, such date
being specified in the related Delivery and Acceptance Receipt. Unless expressly
agreed otherwise by the parties or Lessee notifies Lessor in writing that the
Equipment has been rejected, the Equipment must be accepted within seven (7)
days after the delivery date, and if not accepted by such time the Delivery and
Acceptance Date shall be deemed to be seven (7) days after the delivery date.
"Commencement Date" means, as to the Equipment designated on any Lease
Order, where the Delivery and Acceptance Date for such Equipment falls on the
first day of the month, that date, or, in any other case, the first day of the
month or calendar quarter if so provided in the Lease Order, following the
Delivery and Acceptance Date, unless otherwise agreed by the parties.
"Progress Payment Rider" shall refer to that document wherein the seller
of the Equipment requires payment prior to the commencement of a Lease Order and
Lessee agrees to make payments prior to the commencement of a Lease Order.
2. NET LEASE.
THIS LEASE AGREEMENT TOGETHER WITH EACH LEASE ORDER CONSTITUTES A NET
LEASE AND LESSEE'S AGREEMENT TO PAY RENT AND ANY OTHER OBLIGATIONS HEREUNDER AND
UNDER ANY APPLICABLE LEASE ORDERS SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL
NOT BE SUBJECT TO ANY ABATEMENT, REDUCTION, SET-OFF, DEFENSE, COUNTERCLAIM,
INTERRUPTION, DEFERMENT OR RECOUPMENT FOR ANY REASON WHATSOEVER. Lessor and
Lessee will enter into one or more Lease Orders pursuant to this Lease
Agreement. Subject to the terms and conditions of this Lease Agreement and a
duly executed and in force Lease Order, Lessor agrees to lease to Lessee and
Lessee agrees to lease from Lessor the Equipment described in each Lease Order.
This Lease Agreement is a master lease and each Lease Order is subject to the
terms of this Lease Agreement. Each Lease Order shall be treated as a separate
lease with respect to the Equipment covered by such Lease Order. In the event of
any conflict between the language of this Lease Agreement and any Lease Order
entered into pursuant hereto, the language of the Lease Order shall prevail with
respect to that Lease Order and the Equipment covered thereby. NO EQUIPMENT
SHALL BE DEEMED LEASED HEREUNDER UNLESS IT IS THE SUBJECT OF A DULY EXECUTED AND
IN FORCE LEASE ORDER.
3. TERM.
The term of this Lease Agreement shall commence on the date set forth
above and shall continue in effect for the Initial Term of any Lease Order and
any extended term as provided herein.
The term of each lease as to any items of Equipment designated on any
Lease Order shall commence on the Delivery and Acceptance Date for such
Equipment, and shall continue for the Initial Term and any extended term
provided herein.
(CONTINUED ON THE FOLLOWING 3 PAGES)
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IN WITNESS WHEREOF, the parties have executed this Lease Agreement effective as
of the date first above written.
LESSOR: GATX CAPITAL CORPORATION LESSEE: RHYTHMS NETCONNECTIONS INC.
SIGNATURE: SIGNATURE: /X/
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BY: BY:
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(PRINT NAME) (PRINT NAME)
TITLE: TITLE:
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DATE: DATE:
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4. RENTAL. Rental shall begin to accrue on the Delivery and Acceptance Date and
Lessee shall pay to Lessor, as rental for the Equipment during the Initial Term,
the rent set forth in the respective Lease Order, which shall be due and payable
in advance on the first day of each calendar month or quarter as specified in
the Lease Order during such Initial Term plus any extended term (each date being
hereinafter called a "Rent Payment Date"), unless modified by a Progress Payment
Rider. If the Delivery and Acceptance Date of any Equipment shall be other than
the first day of the month, Lessee shall make an initial payment based on the
Delivery and Acceptance Date in an amount equal to the fraction of the rent as
specified in the related Lease Order for each day from the Delivery and
Acceptance Date to (but not including) the Commencement Date. Rent shall be paid
to Lessor at the address set forth above or at such other place as Lessor shall
designate in writing, or if to an Assignee of Lessor, at such place as such
Assignee shall designate in writing, and shall be paid free and clear of all
claims, demands or setoffs against Lessor or such Assignee. Whenever any payment
by Lessee (of rent or otherwise) is past due hereunder for more than seven (7)
days, Lessee shall pay to Lessor, as additional rent, interest on such amount
until and including the date of payment, at the lesser of 1.5% per month or the
maximum allowable rate of interest permitted by law.
5. TAXES. Lessee covenants to promptly report, file, pay and indemnify and hold
Lessor harmless with respect to any and all Taxes, as hereinafter defined. The
term "Taxes" as used herein shall mean all taxes (including sales, use, excise,
personal property, ad valorem, stamp, documentary and other taxes), and all
other governmental fees, charges and assessments (general or special) due,
assessed or levied by any foreign, federal, state, county or local government or
taxing authority, and any penalties, fines or interest thereon, which are
imposed against, upon or relating to the Equipment or the use, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇, shipment, transportation, delivery, ownership or operation thereof, and
on or relating to the lease thereof including the rentals or receipts due under
this Lease Agreement, but shall not include any taxes solely based upon or
measured by the income of Lessor. Lessee will, upon request by Lessor, submit to
Lessor written evidence of Lessee's payment of all Taxes due hereunder. Any tax
returns filed by Lessee shall show Lessor as the owner of the Equipment.
6. INSTALLATION, USE, MAINTENANCE AND INSPECTION OF EQUIPMENT.
(a) Lessee shall pay all installation, transportation, rigging, unpacking
and repacking, drayage, handling and insurance charges on the Equipment upon
delivery to Lessee and upon redelivery to Lessor upon the expiration or earlier
termination of the Initial Term or any extension thereof, to such destination as
is specified by Lessor within the continental United States of America ("Return
Location"). Lessee shall furnish appropriate installation facilities for the
Equipment. Lessee represents and warrants that: (i) it has selected all
Equipment based on its own judgment and expressly disclaims any reliance upon
statements made by Lessor; and (ii) as of the Delivery and Acceptance Date, as
between Lessee and Lessor, Lessee shall have unconditionally accepted such
Equipment. Lessee shall execute and deliver to Lessor a Delivery and Acceptance
Receipt which shall be conclusive evidence that, without limitation, Lessee
finds the Equipment complete, in good working order and condition and
satisfactory for its requirements.
(b) Lessee shall comply with all laws, regulations and orders of any
governmental branch or agency which relates to the installation, use, possession
or operation of the Equipment, and shall use the Equipment in the regular course
of its business only, within its normal capacity, without abuse.
(c) Lessee, at its own expense, shall maintain the Equipment in good
operating condition, repair and appearance, and protect the same from
deterioration other than normal wear and tear, and shall enter into, and keep in
force a maintenance agreement with the manufacturer of the Equipment. Lessee
shall cause the manufacturer to keep the Equipment in good and efficient working
order, less normal wear and tear in full compliance and in accordance with the
provisions of such maintenance agreement and shall furnish evidence of such
agreement to Lessor upon request. During Lessee's normal business hours, Lessee
shall provide the manufacturer's field engineering representatives with access
to the equipment to install engineering changes necessary to keep the Equipment
at currently announced engineering change levels. Upon deinstallation of any
Equipment, Lessee shall provide Lessor evidence from the manufacturer stating
the Equipment is at currently announced engineering change levels and is
qualified for the manufacturer's maintenance agreement. The Equipment shall be
returned in the same operating order, repair, condition and appearance as on the
Delivery and Acceptance Date, reasonable wear and tear excepted.
(d) During Lessee's normal business hours, upon prior written notice to
Lessee and subject to Lessee's reasonable security procedures, Lessee shall
permit Lessor or its designee to inspect the Equipment, Lessee's equipment log
and maintenance records.
(e) Prior to delivery of any Equipment, the obligations of Lessor may be
suspended to the extent that Lessor is hindered or prevented from complying
therewith because of labor disturbances, acts of God, fire, storms, accidents,
failure of the manufacturer to deliver any Equipment, governmental regulations
or any cause whatsoever not within the control of Lessor.
7. RELOCATION. Lessee shall not move or permit to be moved any Equipment from
the location set forth in the applicable Lease Order without the prior written
consent of Lessor, which shall not be unreasonably withheld; provided, however,
in no event shall any Equipment be moved to a location outside the United States
of America. Risk of loss and all costs and expenses incurred in connection with
any movement of Equipment shall be the responsibility of Lessee.
8. ALTERATIONS AND MODIFICATIONS. Lessee shall not make modifications,
alterations or additions to Equipment (other than normal operating accessories
or controls) without the prior written consent of Lessor, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, Lessee shall be
entitled to acquire and install, at Lessee's expense, such additional features
or options ("Modifications") which (i) will not impair the originally intended
function or use of the Equipment in which the Modifications are installed, (ii)
will not require removal of any part of the Equipment, (iii) will not interfere
with Lessee's ability to obtain and maintain the maintenance contract required
by Paragraph 6(c), and (iv) the addition of which will not have an adverse
impact upon the value of the underlying Equipment or Lessor's rights therein.
Such Modifications shall be of the type which are readily installed and removed
without damage to the Equipment so as to restore the Equipment to the condition
in which it existed prior to the installation of such Modifications provided,
however, that if Lessor so agrees in writing, Lessee shall not be required to
remove such Modifications. Any Modifications not so removed shall become the
property of Lessor. All Modifications must qualify for the manufacturer's
maintenance agreement and be maintained in accordance with Paragraph 6(c)
hereof. Lessee hereby grants to Lessor the right and opportunity to first submit
or match the last proposal for the lease, financing or supply of any
Modification.
9. SOFTWARE. Lessee and Lessor acknowledge that the Equipment may contain or
include a description of certain Software in which Lessor and Lessee may have no
ownership or other proprietary rights. Where required by the Software owner,
manufacturer or distributor, Lessee shall enter into a license or other
agreement for the use of such Software. Any Software agreement shall be separate
and distinct from this Master Lease and any Lease Order, and Lessor and Assignee
shall not have any obligations thereunder, but shall have the right to require
Lessee to terminate Lessee's use of the Software if an Event of Default shall
occur and shall be continuing hereunder. In the event rent specified in a Lease
Order includes an amount attributable to the financing by Lessor of Lessee's fee
for use of Software, Lessee agrees that such amount shall be deemed rent and
subject to all the provisions of this Lease Agreement. Upon termination of this
Lease Agreement for reasons other than default, Lessee hereby assigns to Lessor,
to the extent assignable, any and all rights and obligations relating to
software and applicable software licenses.
10. OWNERSHIP, SECURITY INTEREST. It is expressly understood that the Equipment
is, and shall at all times remain, personal property of Lessor. Lessee shall
have no right, title or interest in the Equipment except as expressly provided
herein. If requested by Lessor, Lessee will obtain, prior to delivery of any
Equipment, a certificate satisfactory to Lessor from all parties with a real
property interest in the premises where the Equipment shall be located, waiving
any claim with respect to the Equipment. If Lessor supplies Lessee with labels,
plates or other markings stating that the Equipment is owned by Lessor, Lessee
shall attach same in a prominent place on the Equipment. Lessee agrees to
execute Uniform Commercial Code financing statements and any and all additional
instruments requested by Lessor to perfect the interest of Lessor, its
successors or assigns in this Master Lease, any Lease Order, the payments due
hereunder or the Equipment. Lessee authorizes Lessor to file a copy of the
Master Lease or any Lease Order or invoice as a financing statement. Lessee
agrees to reimburse Lessor for all recording and filing fees.
11. ASSIGNMENT OR SUBLETTING BY LESSEE. LESSEE SHALL NOT ASSIGN, TRANSFER,
PLEDGE OR OTHERWISE DISPOSE OF THIS LEASE AGREEMENT, ANY LEASE ORDER OR ANY OF
ITS RIGHTS THEREUNDER NOR SUBLEASE OR LEND ANY OF THE EQUIPMENT TO ANY OTHER
PERSON WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR. ANY PURPORTED ASSIGNMENT,
TRANSFER, PLEDGE, OR OTHER DISPOSITION OF THIS LEASE AGREEMENT, ANY LEASE ORDER
OR ANY OF LESSEE'S RIGHTS THEREUNDER, OR ANY PURPORTED SUBLEASE OR LENDING OF
THE EQUIPMENT, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, AT LESSOR'S OPTION, SHALL
BE VOID AND OF NO EFFECT. FOR THE PURPOSES OF THIS PARAGRAPH 11, ANY PURPORTED
SALE OR OTHER TRANSFER OF A CONTROLLING OWNERSHIP INTEREST OF LESSEE (WHETHER IN
ONE TRANSACTION OR SERIES OF RELATED TRANSACTIONS) SHALL BE DEEMED AN ASSIGNMENT
OF THE LESSEE'S RIGHTS HEREUNDER REQUIRING THE PRIOR WRITTEN CONSENT OF THE
LESSOR. As to any permitted assignment or sublease, the following conditions
shall apply:
(a) Lessee shall remain fully liable for all payments due under each Lease
Order and remain the primary obligor for all remaining obligations under this
Lease Agreement and any Lease Orders hereunder.
(b) Lessee shall give Lessor at least thirty (30) days written notice of
the location of the Equipment and the identity of the assignee or sublessee
prior to the installation at assignee's or sublessee's premises. Lessee shall be
responsible for obtaining any and all financing statements and other
documentation reasonably requested by Lessor.
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(c) Any sublessee's interest in any permitted sublease hereunder shall be
subordinate to the interests of Lessor or any Assignee of Lessor.
12. DISCLAIMER OF WARRANTIES.
(A) LESSEE ACKNOWLEDGES THAT LESSOR IS NOT THE MANUFACTURER OF THE
EQUIPMENT, NOR THE AGENT OF THE MANUFACTURER AND THAT LESSOR HAS MADE NO
REPRESENTATIONS, WARRANTIES OR COVENANTS OF ANY KIND, EXPRESS OR IMPLIED, AS TO
ANY MATTER WHATEVER, INCLUDING BUT NOT LIMITED TO: THE DESIGN, CONDITION OR
PERFORMANCE OF THE EQUIPMENT, ITS MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT. FURTHER,
LESSOR MAKES NO WARRANTIES WITH RESPECT TO THE CONFORMITY OF THE EQUIPMENT TO
THE PROVISIONS AND SPECIFICATIONS OF ANY LAW, RULE, REGULATION, CONTRACT OR
PURCHASE ORDER, OR WITH RESPECT TO PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT
MATTERS OR "YEAR 2000" COMPLIANCE. LESSOR EXPRESSLY DISCLAIMS ANY AND ALL
EXPRESS OR IMPLIED WARRANTIES. AS TO LESSOR, LESSEE LEASES THE EQUIPMENT "AS IS,
WHERE IS".
(B) LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE TO THE LESSEE FOR ANY
CLAIM, LOSS OR DAMAGE, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR OTHERWISE,
INCLUDING WITHOUT LIMITATION, LOSS OF PROFIT, LOSS OF BUSINESS, OR OTHER
FINANCIAL LOSS, WHICH MAY BE CAUSED, DIRECTLY OR INDIRECTLY, BY THE EQUIPMENT,
THE INADEQUACY OF THE EQUIPMENT FOR ANY PURPOSE OR ANY USE THEREOF, BY ANY
DEFICIENCY OR DEFECT THEREIN, OR BY ANY INCIDENT WHATSOEVER IN CONNECTION
THEREWITH, ARISING IN STRICT LIABILITY, NEGLIGENCE, CONTRACT, TORT OR OTHERWISE,
OR IN ANY WAY RELATING TO OR ARISING OUT OF THE EQUIPMENT, THIS LEASE AGREEMENT
OR ANY LEASE ORDER. THE LESSEE AGREES THAT IT WILL, IRRESPECTIVE OF ANY SUCH
CLAIM, LOSS, DAMAGE OR EXPENSE, CONTINUE TO PAY SUCH MONTHLY RENTAL CHARGES AND
OTHER SUMS AS MAY COME DUE UNDER ANY LEASE ORDER HEREUNDER.
13. ASSIGNMENT OF MANUFACTURER'S WARRANTIES. Lessor hereby assigns to Lessee, to
the extent assignable, all manufacturer's warranties, service agreements and
patent indemnities with respect to the Equipment, if any, for the purpose of
making appropriate claims against the manufacturer, provided that the Lessor
shall retain at all times the right to be protected by these warranties,
agreements and indemnities as the owner of the Equipment. The Lessee's sole
remedy for the breach of any such warranty, indemnification or service agreement
shall be against the manufacturer, and not against Lessor or any Assignee of
Lessor, nor shall any such breach have any effect whatsoever on the rights and
obligations of either party with respect to this Lease Agreement. Lessor will,
upon request by Lessee and at Lessee's sole expense, cooperate with Lessee in
the enforcement of any benefit provided in any such warranties, service
agreements and patent indemnities.
14. INDEMNIFICATION. Lessee agrees that it will defend, indemnify and hold
Lessor harmless against any and all claims, demands, liabilities, obligations,
losses, damages, injuries, penalties, actions, costs and expenses, including
reasonable attorney's fees, of whatever kind and nature arising out of or in
connection with the possession, use, condition (including, but not limited to,
latent and other defects, whether or not discoverable by Lessor or Lessee),
operation, ownership by Lessor, selection, delivery, leasing or return of any
item of Equipment leased hereunder, regardless of where, how and by whom
operated, or any failure on the part of Lessee to accept the Equipment or
otherwise to perform or comply with the provisions of this Lease Agreement or
any Lease Order, except for Lessor's gross negligence or willful misconduct. The
indemnities and assumptions of liabilities and obligations herein provided for
shall continue in full force and effect notwithstanding the expiration or
termination of the Initial Term, any renewal or extension thereof, or of any
Lease Order or this Lease Agreement.
15. ASSIGNMENT BY LESSOR. LESSOR MAY ASSIGN OR TRANSFER THIS MASTER LEASE OR ANY
LEASE ORDER HEREUNDER OR LESSOR'S INTEREST IN THE EQUIPMENT OR GRANT A SECURITY
INTEREST THEREIN TO ONE OR MORE ASSIGNEES WITHOUT NOTICE TO LESSEE. Any Assignee
of Lessor shall have all of the rights but none of the obligations of Lessor
hereunder unless expressly agreed in writing, and Lessee agrees that it will not
assert against any Assignee any defense or counterclaim that Lessee may have
against Lessor. Lessee shall have no greater obligations to any Assignee than it
had to Lessor at the time of assignment, and such assignment shall not limit or
otherwise restrict the rights afforded Lessee hereunder. Lessee hereby (i)
consents to such assignments and/or grants, (ii) agrees to promptly execute and
deliver UCC financing statements, an Acknowledgment and Consent of Assignment
and such further acknowledgments, agreements, certificates and other instruments
as may be reasonably requested by Lessor or Assignee to effect such assignments
and/or grants. Lessee acknowledges that any assignment or transfer by Lessor
made in accordance with the provisions of this paragraph shall not materially
change Lessee's duties or obligations under this Lease nor materially increase
the burdens or risks imposed on Lessee. In the event of an assignment, all
references herein to Lessor shall be deemed to include Assignee. Notwithstanding
any such assignment: (i)Lessor shall not be relieved of any of its obligations
hereunder; and (ii) the rights of Lessee to quiet enjoyment and possession of
the Equipment shall not be impaired so long as Lessee is not in default under
this Lease.
16. QUIET POSSESSION AND ENJOYMENT. Lessor covenants that so long as Lessee is
not in default hereunder, neither Lessor nor any Assignee will disturb Lessee's
quiet possession and enjoyment of the Equipment, subject to and in accordance
with the provisions of this Lease Agreement and the applicable Lease Order.
17. DAMAGE, DESTRUCTION OR LOSS.
(a) Upon delivery of the Equipment to Lessee until the Equipment is
redelivered to Lessor, Lessee shall bear the entire risk of loss, damage, or
destruction with respect to the Equipment resulting from any cause whatsoever.
(b) If any Equipment becomes damaged beyond repair, lost, stolen,
destroyed or permanently rendered unfit, or in the event of any condemnation or
taking by any governmental authority (any such occurrence being hereinafter
referred to as an "Event of Loss"), then Lessee shall promptly notify Lessor and
shall do either of the following within thirty (30) days after the occurrence of
an Event of Loss:
(i) At its expense, promptly replace the affected Equipment with like
or better replacement equipment of identical make, model, configuration,
capacity and condition, in good repair, free and clear of all liens, in which
case any such replacement equipment shall become the property of Lessor and for
all purposes of this Master Lease shall be deemed to be the Equipment which it
replaced; or
(ii) Terminate the Lease Order with respect to the affected Equipment
and pay to Lessor on the next payment date, an amount equal to the present value
of the remaining rental payments discounted by five percent (5%), plus the fair
market value in continued use of the Equipment.
18. INSURANCE. Lessee shall, at its expense, insure the Equipment against all
risks and in such amounts as Lessor shall reasonably require (but not less than
the full replacement value) with carriers reasonably acceptable to Lessor, shall
maintain a loss payable endorsement in favor of Lessor and its assigns affording
to Lessor and its assigns such additional protection as Lessor and its assigns
shall reasonably require, and Lessee shall maintain liability insurance
reasonably satisfactory to Lessor and its assigns. All such insurance policies
shall name Lessee, Lessor and its assigns as additional insureds and shall name
Lessor and its assigns as loss payee(s), and shall provide that insurance
coverage shall not be canceled or altered without at least thirty (30) days
prior written notice to Lessor and Assignee, and that no breach of warranty by
Lessor shall invalidate such insurance with respect to any additional insured.
Lessee shall promptly furnish appropriate evidence of such insurance to Lessor
and any Assignee.
19. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee represents and warrants to
Lessor and any Assignees on the date hereof and on the date of each Lease Order
that: (i) the execution and performance of this Lease Agreement and all Lease
Orders are duly authorized and this Lease Agreement and the Lease Orders
constitute legal, valid and binding obligations of Lessee enforceable in
accordance with their terms; (ii) the performance under the Lease Agreement and
all Lease Orders by Lessee will not result in any breach, default or violation
of Lessee's articles of incorporation or by-laws, if applicable, or partnership
agreement, if applicable, or any agreement to which Lessee is a party; (iii)
Lessee is in good standing duly organized, and validly existing in its
jurisdiction of incorporation or organization and in any jurisdiction(s) in
which any of the Equipment is to be located; (iv) there are no actions, suits or
proceedings pending or threatened, before any court, agency, or arbitrator which
will, if determined adversely to Lessee, materially adversely affect its ability
to perform its obligations under this Lease Agreement or any Lease Order; and
(v) any and all information with respect to Lessee heretofore furnished to
Lessor was, when furnished, true and complete.
20. FINANCIAL STATEMENTS, ETC.. During the term of this Lease Agreement, Lessee
shall furnish to Lessor and any Assignee Lessee's audited balance sheet, income
statement and statement of cash flows for its most recent fiscal year, within
ninety days and quarterly statements within forty-five days, all prepared in
accordance with generally accepted accounting principles consistently applied,
and, from time to time, such other information concerning the Equipment as
Lessor or any Assignee may reasonably request.
21. DEFAULT. The occurrence of any of the following events shall constitute an
"Event of Default" hereunder and under each Lease Order entered into pursuant
hereto:
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(a) Lessee shall fail to pay any installment of rent or other charge due
under this Lease Agreement or any Lease Order thereunder within ten (10) days
after the same is due and payable;
(b) Lessee attempts to move, sell, assign, transfer, encumber, dispose of,
sublet or lend any of the Equipment without the prior written consent of Lessor;
(c) Except for defaults covered by Paragraph (a) above, Lessee shall fail
to perform or observe any covenant, condition or agreement to be performed or
observed by it hereunder or under any Lease Order and such failure continues
unremedied for fifteen (15) days after notice thereof to Lessee by Lessor;
(d) Any representation or warranty made by Lessee in this Lease Agreement,
any Lease Order, or in any document or certificate made or furnished to Lessor
in connection herewith or pursuant hereto shall prove to be false at any time in
any material respect;
(e) Lessee ceases doing business as a going concern; makes an assignment
for the benefit of creditors; admits in writing its inability to pay its debts
as they become due; files a voluntary petition in bankruptcy; is adjudicated to
be bankrupt or insolvent; files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of a petition filed against
it in any such proceeding; consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of it or of all or any substantial part of its
assets or properties, or if it or its shareholders shall take any action to
effect a dissolution or liquidation and, in the case of any such proceeding not
being instituted by Lessee, such proceeding is not dismissed or vacated within
thirty (30) days.
22. REMEDIES. Upon the occurrence of any Event of Default and at any time
thereafter, Lessor may, with or without terminating this Lease Agreement, do any
one or more of the following:
(a) Proceed by appropriate court action to enforce performance by Lessee
of the applicable terms of this Lease Agreement or any Lease Order;
(b) Declare immediately payable all sums due and to become due hereunder
for the full term of any and all Lease Orders under this Master Lease;
(c) If the Lease Order provides for a Stipulated Loss Value or other fixed
value of the Equipment, recover (i) any then accrued and unpaid rent plus
interest thereon at the late payment rate, (ii) the Stipulated Loss Value or
other fixed value, at Lessor's option, of the Equipment as of the rent payment
date immediately preceding Lessee's date of default, and (iii) all commercially
reasonable costs and expenses incurred by Lessor in any repossession, recovery,
storage, repair, sale, release or other disposition of the Equipment, including
reasonable attorney's fees and costs incurred in connection therewith or
otherwise resulting from Lessee's default;
(d) If the Lease Order does not provide for a Stipulated Loss Value or
other fixed value for the Equipment, recover from Lessee damages, not as a
penalty, but herein liquidated for all purposes and in an amount equal to the
sum of (i) any then accrued and unpaid Rent plus interest thereon at the Late
Payment Rate, (ii) the present value of all remaining Rent contracted to be paid
over the unexpired portion of the Initial Term or any extended term, discounted
at an interest rate of five percent (5%) per annum plus prepayment penalty fees,
(iii) all commercially reasonable costs and expenses incurred by Lessor in any
repossession, recovery, storage, or repair, sale, re-lease or other disposition
of the Equipment, including reasonable attorney's fees and costs incurred in
connection therewith or otherwise resulting from Lessee's default and (iv) the
fair market residual value in continued use at the time of default of the
Equipment determined by Lessor;
(e) Re-lease or sell any or all of the Equipment at a public or private
sale, with the privilege of becoming the purchaser or Lessee thereof, on such
terms and notice as Lessor shall deem reasonable, and thereafter Lessor shall
apply the proceeds derived therefrom as follows, Lessee remaining liable for any
deficiency: First, to reimburse Lessor for all costs and expenses incurred by
Lessor in any repossession, recovery, storage, repair, sale, re-lease or other
disposition of the Equipment, including reasonable attorney's fees, commissions
and broker's fees and costs incurred in connection therewith or otherwise
resulting from Lessee's default; second, to pay Lessor any amounts owing
hereunder, third, to reimburse Lessee for any amount paid hereunder as a result
of Lessee's default; and fourth, any surplus remaining thereafter to Lessor;
(f) Take immediate possession of any or all of such Equipment wherever
situated, and for such purpose, enter upon any premises (by summary proceedings
or otherwise) where the Equipment is located without prejudice to any other
remedy or claim referred to herein; and
(g) Exercise any other right or remedy which may be available to it under
the Uniform Commercial Code or any other applicable law.
A termination hereunder shall occur only upon notice by Lessor and only as
to such Equipment as Lessor specifically elects to terminate and this Master
Lease and all Lease Orders hereunder shall continue in full force and effect as
to the remaining Equipment, if any. No remedy referred to in this Paragraph 22
is intended to be exclusive, but each 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.
23. LOSS OF ANTICIPATED TAX BENEFITS. Lessee acknowledges that unless otherwise
agreed to in writing by Lessor, Lessor intends to claim all available tax
benefits of ownership with respect to the Equipment (the "Tax Benefits"),
including, but not limited to, cost recovery deductions as provided in Section
168 of the Internal Revenue Code of 1986, as amended (the "Code"), with respect
to each item of Equipment for each of Lessor's taxable years during the Initial
Term and any extended or renewal term. Notwithstanding anything herein to the
contrary, if Lessor shall not be entitled to, or shall be subject to recapture
of the Tax Benefits as a result of any act, omission or misrepresentation of
Lessee, Lessee shall pay to Lessor upon demand an amount sufficient to reimburse
Lessor for such loss, together with any related interest and penalties, based on
the highest marginal corporate income tax rate prevailing at the time of such
loss, regardless of whether Lessor or any member of a consolidated group of
which Lessor is also a member is then subject to any increase in tax as a result
of such loss of Tax Benefits.
24. TERMINATION. Each Lease Order, with respect to all but not less than all of
the Equipment covered thereby, may be terminated by either party at the end of
the Initial Term or any renewal or extended term thereof provided written notice
of termination of a Lease Order is given between one hundred eighty days and
ninety days prior to the termination of the Lease Order. If proper notice of
termination is not given, or if the Equipment is not returned to Lessor as
notified, the term of the Lease Order shall be extended on the same terms and
conditions for six months. Thereafter, the Lease Order as so extended may be
terminated by either party at the end of any calendar month by giving the other
party ninety days prior written notice.
25. GENERAL.
(a) This Lease Agreement and any Lease Order hereunder shall be governed
in all respects by the laws of the State of Florida. Lessor and Lessee agree
that any dispute between them arising under this Lease Agreement or any Lease
Order shall be resolved in the state or federal courts in the State of Florida
having within its jurisdiction the City of Tampa, Florida. Lessee hereby
knowingly and irrevocably waives any objections to an action in such courts in
the State of Florida on the grounds of lack of personal jurisdiction or improper
venue and agrees that effective service of process may be made upon Lessee by
mail under the notice provisions of subparagraph 25(c) hereof. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE SHALL BE
INCORPORATED INTO THIS LEASE AGREEMENT UNLESS EXPRESSLY GRANTED IN THIS LEASE
AGREEMENT OR A LEASE ORDER HEREUNDER.
(b) This Lease Agreement and all Lease Orders constitute the entire
agreement between Lessee and Lessor with respect to the Equipment covered
thereby and supersede any prior or contemporaneous agreements or understandings
relating thereto. No covenant, condition or other term or provision hereof or of
any Lease Order may be waived, changed, amended or modified except by a written
agreement signed by both Lessor and Lessee.
(c) All notices, consents or requests desired or required to be given
hereunder shall be in writing and shall be mailed, via certified mail, return
receipt requested, to the address of the other party set forth on the first page
hereof or to such other address as such party shall have designated by a proper
notice.
(d) This Lease Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
(e) Paragraph headings are for convenience of reference only and shall not
be construed as part of this Lease Agreement. (f) It is expressly
understood that all of the Equipment shall be and remain personal property
of the Lessor notwithstanding the
manner in which the same may be attached or affixed to realty, and Lessee shall
do all acts and execute all documents necessary to insure that the Equipment
remains personal property.
(g) All agreements, representations and warranties contained in this Lease
Agreement, any Lease Order, and in any document delivered pursuant hereto or in
connection herewith shall be for the benefit of Lessor and any Assignee and
shall survive the execution and delivery, and the expiration or other
termination, of this Lease Agreement and any Lease Order.
(h) Time is of the essence of this Lease Agreement and each Lease Order.
(i) Lessee shall, upon request of Lessor, perform all such other acts and
execute and deliver to Lessor all such other documents which Lessor deems
reasonably necessary to implement the provisions of this Lease Agreement or any
Lease Order.
(j) Each Lease Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but there shall be only one executed
original of each Lease Order which shall be marked "Original" (the "Original")
and all other counterparts shall be marked "Duplicate". To the extent, if any,
that a Lease Order constitutes chattel paper (as such term is defined in the
Uniform Commercial Code) no security interest in the Lease Order may be created
through the transfer or possession of any counterpart other than the Original of
the Lease Order accompanied by an Original or certified copy of the Lease
Agreement.
4 of 4
FIRST ADDENDUM TO MASTER LEASE AGREEMENT
DATED AS OF JULY 30, 1999
BETWEEN
GATX CAPITAL CORPORATION
AND
RHYTHMS NETCONNECTIONS INC.
Dated as of July 30, 1999
This First Addendum amends the Master Lease Agreement, dated as of July
30, 1999 (the "Lease"), between GATX Capital Corporation and Rhythms
NetConnections Inc. All capitalized terms used but not defined herein shall have
the respective meanings given thereto in the Lease.
1. FINANCING.
(a) COMMITMENT. Subject to the satisfaction of the conditions set
forth in paragraph 2 below and on the basis set forth in this paragraph, Lessor
has agreed to provide up to $26,000,000 of lease financing to Lessee. The
funding of each Lease Order is subject to the satisfaction of the conditions set
forth in paragraph 3 below. Lessor's commitment to finance Equipment under this
Addendum, shall terminate on the date (the "Commitment Termination Date") that
is the same day of the month in the fifteenth month following the date hereof.
(b) TERM AND LEASE RATE FACTOR. The Initial Term of each Lease Order
financed under this Addendum shall be 36 months and the rental for the initial
Lease Order under this Addendum during the six-month period following the
funding of such initial Lease Order and for each subsequent Lease Order funded
during such six-month period shall be payable in accordance with Section 4 of
the Lease in an amount on each Rent Payment Date equal to the amount funded
under the applicable Lease Order multiplied by 3.0% (the "Lease Rate Factor").
The Lease Rate Factor for all Lease Orders funded following such six-month
period will be determined by calculating a new Lease Rate Factor using as the
implicit interest rate for such Lease Rate Factor the U.S. Treasury note rate
for notes having a 36 month term as quoted in THE WALL STREET JOURNAL on the
date of preparation of the first such Lease Order funded during such subsequent
period; provided, however, that no such adjustment shall be made unless and
until such U.S. Treasury rate shall have increased by more than 25 basis points
above the rate in effect on the date hereof.
(c) END OF TERM OPTIONS. Provided that the Lease has not been
terminated and that no Event of Default or event which, with notice or lapse of
time or both, would become an Event of Default shall have occurred and be
continuing, not more than 180 days and not less than 120 days prior to the
expiration of the Initial Term of each Lease Order funded under this Addendum,
by written notice to Lessor, Lessee shall irrevocably elect either the option
under clause
(i) or a combination of the options under clauses (i), (ii) and (iii) within the
parameters set forth therein:
(i) Lessee may elect to purchase Equipment (excluding Soft
Cost Equipment, as defined in Paragraph 1(d)) having an original total cost
(determined with reference to the Equipment Addendum to the applicable Lease
Order) equal to at least 70% of the aggregate total cost of the Equipment under
such Lease Order for a purchase price equal to the "Fair Market Value" (as
defined below) thereof as of the end of the Initial Term of such Schedule, but
such amount shall not be less than fifteen percent (15%) of the aggregate total
amount originally funded with respect to the Equipment being purchased, nor more
than twenty-five percent (25%) of the aggregate total amount originally funded
with respect to the Equipment being purchased, under such Lease Order, plus any
applicable sales or other transfer tax.
(ii) Lessee may elect to return either (i) one hundred percent
(100%) of the Equipment (other than Soft Cost Equipment, as defined in Paragraph
1(d)), or (ii) Equipment (other than Soft Cost Equipment, as defined in
Paragraph 1(d)) having an original total cost (determined with reference to the
Equipment Addendum to the applicable Lease Order) equal to not more than thirty
percent (30%) of the aggregate total cost of the Equipment subject to such Lease
Order, in each case in the condition required by the Lease.
(iii) Lessee may elect to renew the Lease with respect to any
Equipment not purchased or returned at the end of Initial Term of the applicable
Lease Order, for not less than twelve (12) months or the remainder of an item of
Equipment's remaining useful life if shorter, for a rent equal to the "Fair
Rental Value" (as defined below) of such item for such additional period, which
rent shall be paid monthly in advance.
At the end of the renewal term, Lessee shall elect one of the options set forth
in clauses (i), (ii) or (iii) of this paragraph (c).
"Fair Market Value" shall mean the estimated amount, as of a certain date, at
which the Equipment subject to the Lease may reasonably be valued in the
marketplace by a buyer who could choose not to buy and a seller who could choose
not to sell. In the event that the parties cannot agree on a Fair Market Value
amount, an independent appraiser (mutually acceptable to Lessor and Lessee) with
knowledge of the Equipment, appropriate certification and experience utilizing
Fair Market Value as defined shall be retained to render an opinion.
"Fair Rental Value" shall mean the estimated amount, as of a certain date, at
which the Equipment subject to the Lease may reasonably be valued in the
marketplace by a lessee who could choose not to lease and a lessor who could
choose not to lease. In the event that the parties cannot agree on a Fair Rental
Value amount, an independent appraiser (mutually acceptable to Lessor and
Lessee) with knowledge of the Equipment, appropriate certification and
experience utilizing Fair Rental Value as defined shall be retained to render an
opinion.
(d) PAYMENTS FOR SOFT COSTS. With respect to any Equipment which is
deemed by Lessor to be soft cost equipment, including without limitation
software, software development costs, tooling, tenant improvements, custom-built
equipment, cabling, installation or freight costs (collectively, and excluding
collocation space costs, "Soft Cost Equipment"), at the time of the final
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Rent Payment Date under each Lease Order, Lessee shall make a payment (in
addition to any payment under Paragraph 1(c)(i) or under Paragraph 1(c)(ii)
hereof) equal to fifteen percent (15%) of the total cost of the Soft Cost
Equipment subject to such Lease Order, plus any applicable sales or other
transfer tax.
2. CONDITIONS TO EXECUTION OF THIS ADDENDUM. On or prior to the date of
execution of this Addendum by Lessor and the funding of the first Lease Order
under this Addendum, Lessor shall have received in form and substance
satisfactory to Lessor:
(a) A legal opinion of Lessee's legal counsel in form and substance
reasonably satisfactory to Lessor covering the matters set forth in Exhibit A
hereto.
(b) Copies, certified by the Secretary or Assistant Secretary or
Chief Financial Officer of Lessee, of: (A) the Certificate/Articles of
Incorporation and By-Laws of Lessee (as amended to the date of the Lease); and
(B) the resolutions adopted by Lessee's board of directors authorizing the
execution and delivery of the Lease and this Addendum, the Lease Orders and the
other documents referred to herein and the performance by Lessee of its
obligations hereunder and thereunder.
(c) A good standing certificate (including franchise tax status)
with respect to Lessee from Lessee's state of incorporation, the state where
Lessee's chief executive office is located and each state where Equipment is
expected to be located, each dated a date reasonably close to the date of
acceptance of the Lease by Lessor.
(d) Evidence of the insurance coverage required by Section 18 of the
Lease, if not previously provided to Lessor.
(e) All other documents as Lessor shall have reasonably requested.
3. CONDITIONS TO THE FUNDING OF EACH LEASE ORDER. Prior to the funding
of each Lease Order, Lessee shall have satisfied all of the following
conditions:
(a) Lessor shall have received:
(i) A Landlord's Waiver and Consent of each landlord of
premises on which Equipment will be located, substantially in the form of
Exhibit B hereto.
(ii) To the extent Lessor, in its commercially reasonable
business judgment, deems it necessary, a release or other arrangement with any
other lessor or lender to the Lessee to insure that there will be no impairment
of Lessor's interest in the Equipment subject to the Lease Order.
(iii) Copies of invoices, purchase orders and canceled checks
relating to all Equipment being placed under the Lease pursuant to the Lease
Order and/or a Purchase Order and Invoice Assignment from Lessee to Lessor
substantially in the form of Exhibit C hereto.
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(b) Lessee shall have filed or recorded, to the satisfaction of
Lessor, all instruments and documents, including, but not limited to,
precautionary Financing Statements on Form UCC-1 and releases and termination
statements on Form UCC-2, then deemed necessary by Lessor to preserve and
protect its rights hereunder, under the Uniform Commercial Code (including the
termination of any after-acquired property clause of third parties that might if
in force apply to any Equipment).
(c) Lessor shall have received all other documents and Lessee shall
have performed all other acts as Lessor shall have reasonably requested to
consummate the transaction contemplated by the Lease Order.
(d) Except with the prior consent of Lessor, not to be unreasonably
withheld or delayed, the cost of Soft Cost Equipment which is financed under the
Lease Order shall not exceed fifteen percent (15%) of the total amount of such
Lease Order. Lessee will use its diligent efforts to obtain from the vendor of
any software financed under the Lease a consent to transfer the right to use
such software to a third party without further payment if an Event of Default
under the Lease exists.
(e) On the date of funding of the Lease Order no Event of Default or
event, which with the passage of time or the giving of notice or both would
constitute an Event of Default, shall exist.
(f) Except with the prior written consent of Lessor which shall not
be unreasonably withheld, all of the Equipment subject to the Lease Order shall
consist of routers and ATM switches, DSLAMs, IP concentrators and servers and
related networking and information technology hardware and Soft Cost Equipment.
(g) The amount to be funded under the Lease Order shall not be less
than $4,000,000, as determined by reference to the Equipment Addendum to such
Lease Order.
Lessor may, in its sole discretion, terminate its commitment herein to fund
Lease Orders under the Lease if there is any material adverse change to the
general affairs, management, results of operations, condition (financial or
otherwise) or prospects of Lessee, whether or not arising from transactions in
the ordinary course of business.
4. FINANCIAL COVENANTS
(a) CERTAIN DEFINITIONS. The following capitalized terms shall have
the following respective meanings for purposes of this Lease:
"CONSOLIDATED OPERATING CASH FLOW" shall have the meaning given to
such term in the Indenture.
"INDENTURE" shall mean the Indenture, dated as of May 5, 1998,
between Lessee and State Street Bank and Trust Company of
California, N.A., as trustee.
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(b) CONSOLIDATED OPERATING CASH FLOW. Lessee shall not permit its
Consolidated Operating Cash Flow for the fiscal quarter ending on the date set
forth below to be less than the amount set forth opposite such date below:
September 30, 1999 - 40,000,000
December 31, 1999 - 72,000,000
March 31, 2000 - 91,250,000
June 30, 2000 - 93,850,000
September 30, 2000 - 99,750,000
December 31, 2000 - 103,480,000
March 31, 2001 - 114,600,000
June 30, 2001 - 121,600,000
September 30, 2001 - 119,250,000
December 31, 2001 - 112,250,000
March 31, 2002 - 107,250,000
June 30, 2002 - 103,250,000
September 30, 2002 - 99,300,000
A breach of a financial covenant under this paragraph 4 shall constitute an
"Event of Default" under Section 21 of the Lease.
5. REPORTING. Lessee shall furnish to Lender:
(a) FINANCIAL STATEMENTS. So long as Lessee is not subject to the
reporting requirements of Section 12 or Section 15 of the Securities and
Exchange Act of 1934, as amended, promptly as they are available, unaudited
quarterly and audited annual financial statements of Lessee and such other
financial information as Lender may reasonably request from time to time. From
and after such time as Lessee becomes a publicly reporting company, promptly as
they are available and in any event: (i) at the time of filing of Lessee's Form
10-K with the Securities and Exchange Commission after the end of each fiscal
year of Lessee, the financial statements of Lessee filed with such Form 10-K;
and (ii) at the time of filing of Lessee's Form 10-Q with the Securities and
Exchange Commission after the end of each of the first three fiscal quarters of
Lessee, the financial statements of Lessee filed with such Form 10-Q.
(b) COMPLIANCE STATEMENTS. Within thirty (30) days of the end of
each fiscal quarter of Lessee, a certificate of Lessee's Chief Financial Officer
or other senior officer stating that he or she has reviewed the provisions of
the Lease, this Addendum and any other addendum to the Lease then in effect, and
that Lessee is not in default in the observance or performance of any of the
provisions hereof, or if Lessee shall be so in default, specifying all such
defaults and events of which he or she may have knowledge, and setting forth the
calculation of compliance or noncompliance with each of the financial covenants
set forth in paragraph 4 above.
[caad 234]I -5-
(c) MANAGEMENT REPORTS. Within twenty (20) days of the end of each
month, a management report setting forth by month and year-to-date, (i) new
markets entered and total markets entered, (ii) new central office locations and
total central office locations, and (iii) new lines and total lines.
6. ASSIGNMENT. Section 15 of the Lease shall be deemed amended to add
the following sentence:
"Notwithstanding the foregoing, Lessor shall in all circumstances
retain at least a 20% interest in the Lease, the Lease Orders
thereto and the Equipment. Lessee shall, at the reasonable request
of Lessor, cooperate in the conveyance of Lessor's interest in the
Lease, Lease Orders thereto, related instruments and documents and
the Equipment from Lessor to one or more third parties
("Participants"), or the use thereof as security for financing
obtained from Participants (such conveyance or financing, the
"Syndication"). Without limiting the generality of the foregoing,
Lessee shall execute and deliver such other documents, instruments,
notices, opinions, certificates and acknowledgements as may
reasonably be requested by Lessor or any Participant; PROVIDED,
HOWEVER, that Lessee shall not be required to take or consent to any
action that adversely affects any of its rights as set forth herein.
7. NON-UTILIZATION FEE. Lessee agrees that by execution of the Lease it
has agreed to lease Equipment from Lessor having an aggregate cost of not less
than $15,600,000 hereunder (the "Minimum Funding Amount"). If Lessee fails at
any time to meet the Minimum Funding Amount because (a) it has not requested
funding of Equipment under the Lease in the amount of the Minimum Funding
Amount, or (b) it has failed to satisfy any condition to any funding of Eligible
Equipment, then Lessee shall pay to Lessor upon Lessor's request therefor a
non-utilization fee of 1.25% of the difference between the maximum amount of
financing available hereunder on the date of such request and the aggregate
amount of Lease Orders then outstanding hereunder; provided, however, that
Lessee shall not pay a non-utilization fee upon more than one occasion during
the term of this Addendum. Lessee shall pay such non-utilization fee to Lessor,
as liquidated damages and not as a penalty, within ten business days of
receiving Lessor's request for payment thereof.
8. GOVERNING LAW. The first two sentences of Section 25(a) are amended
to read in their entirety as follows:
This Lease Agreement and any Lease Order hereunder shall be governed
in all respects by the laws of the State of California. Lessor and
Lessee agree that any dispute between them arising under this Lease
or any Lease Order shall be resolved in the state or federal courts
in the State of California located in the City and County of San
Francisco.
9. SURVIVAL OF TAX INDEMNITY. Section 23 shall be amended by adding at
the end thereof:
The provisions of this Section 23 shall survive the termination or
cancellation of this Lease.
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10. MISCELLANEOUS. The following Sections of the Lease are amended as
follows:
SECTION 1: The eleventh line is amended by replacing "seven (7) days"
with "fourteen (14) days" after "accepted within" and "seven (7) days" with
"fourteen (14) days" after "shall be deemed to be".
SECTION 4: The second line is amended by deleting "or quarter" after
"each calendar month".
SECTION 6(c): The second line is amended by inserting "or certified
maintenance provider" after "and keep in force a maintenance agreement with the
manufacturer" and "or certified maintenance provider" after "Lessee shall cause
the manufacturer". The third sentence is deleted in its entirety.
SECTION 7: The first sentence is amended by replacing "not move or
permit to be moved any Equipment from the location set forth in the applicable
Lease Order without the prior written consent of Lessor, which shall not be
unreasonably withheld," with "be permitted to relocate the Equipment within the
State set forth in the applicable Lease Order without the prior written consent
of the Lessor provided Lessee provides Lessor with a quarterly report detailing
any and all relocations of the Equipment".
SECTION 8: The first sentence is amended by replacing "shall not" with
"may" and "which consent shall not be unreasonably withheld" with "provided
Lessee provides Lessor with a quarterly report detailing any and all
modifications, alterations or additions to the Equipment". The second sentence
is amended by deleting "(ii) will not require the removal of any part of the
Equipment" after "use of the Equipment in which the Modifications are
installed," The fourth line is amended by deleting the word "contract" after
"(iii) will not interfere with Lessee's ability to obtain and maintain the
maintenance". The eighth line is amended by changing the word "agreement" to
"requirements" after "All Modifications must qualify for the manufacturer's
maintenance".
SECTION 11: The third line is amended by adding "WHICH SHALL NOT BE
UNREASONABLY WITHHELD" after "THE PRIOR WRITTEN CONSENT OF LESSOR". The sixth
line is amended by inserting "DEFINED AS GREATER THAN 50%" after "CONTROLLING
OWNERSHIP INTEREST OF LESSEE". The seventh line is amended by inserting the
sentence "SUCH CONSENT SHALL NOT BE UNREASONABLY WITHHELD BY LESSOR (i.e. if the
purported assignee has a better credit rating than the Lessee)."
SECTION 14: The fifth line is amended by deleting "gross" after "except
for Lessor's" and deleting "willful" after "negligence or".
SECTION 17(b)(ii): The second line is amended by inserting "end of
term" after "plus the".
SECTION 21(b): The first line is amended by inserting "Equipment out of
the State" after "Lessee attempts to move".
SECTION 23: The fourth line is amended by inserting "material" after
"as a result of any" and "," after "or shall be subject to the recapture of".
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SECTION 24: The fourth line is amended by changing "six" to "three"
after "on the same terms and conditions for".
IN WITNESS WHEREOF, Lessor and Lessee have executed this First Addendum
as of July 30, 1999.
LESSOR: LESSEE:
GATX CAPITAL CORPORATION RHYTHMS NETCONNECTIONS INC.
By: By:
-------------------------- -----------------------------
Name: Name:
------------------------ ---------------------------
Title: Title:
----------------------- --------------------------
-8-
EXHIBIT A
MATTERS TO BE COVERED IN LEGAL OPINION
(a) Lessee is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified to
do business and in good standing in the State of California.
(b) Lessee has and had the requisite corporate power and authority to
execute, deliver and perform the Lease, the First Addendum and the Lease Orders
and to issue the Warrant. All action on the part of Lessee, its directors and
its shareholders necessary for the authorization, execution, delivery and
performance of the Lease, the First Addendum, the Lease Orders and the Warrant,
has been taken. The Transaction Documents have been duly executed and delivered
by an authorized officer of Lessee.
(c) The execution, delivery and performance of the Transaction
Documents (i) do not conflict with or violate any provision of Lessee's Restated
Certificate of Incorporation or Bylaws or of applicable law, (ii) do not
conflict with or constitute a default under any provision of any material
judgment, writ, decree, order or material agreement, indenture, or instrument to
which Lessee is a party or by which it is bound, and (iii) will not cause the
imposition of any Lien upon the assets or properties of Lessee.
(d) The Transaction Documents constitute legal, valid and binding
obligations of Lessee, enforceable in accordance with their respective terms. To
our knowledge, no filing need be made with any governmental authority with
respect to the Transaction Documents.
(e) The shares of Common Stock issuable upon exercise of the Warrant
have been duly authorized and reserved for issuance upon such exercise, and when
issued in accordance with the terms of the Warrant, will be duly authorized,
validly issued, fully paid and non-assessable.
EXHIBIT B
LANDLORD WAIVER
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
GATX CAPITAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Contract Administration
--------------------------------------------------------------------------------
LANDLORD'S WAIVER AND CONSENT
THIS LANDLORD'S WAIVER AND CONSENT (this "Waiver"), dated as of
____________________, 199__ _________, is executed by and between
______________________________, _______________________________ ("Landlord") and
GATX CAPITAL CORPORATION ("Lessor").
RECITALS
Landlord and RHYTHMS NETCONNECTIONS, INC. ("Tenant") are parties to a
_____________________ [Lease Agreement], dated as of _________________________,
19___ (together with any other agreement between Landlord and Tenant relating to
the Premises, as defined below, all as amended from time to time, to be referred
to herein collectively as the "Lease"), pursuant to which Landlord has leased to
Tenant that certain real property commonly known as
_______________________________________________________________________________,
and more particularly described in ATTACHMENT 1 hereto (the "Premises").
Tenant and Lessor intend to or have entered into a Master Lease Agreement, dated
as of July__, 1999, as amended (the "Credit Agreement") pursuant to which Lessor
has agreed or will agree to lease to Tenant from time to time certain equipment
(the "Equipment") which will be located on the Premises.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Lessor hereby agree as follows:
1. WAIVER AND CONSENT. Landlord hereby consents to the location of the
Equipment on the Premises and does irrevocably waive, disclaim and relinquish
and assign to Lessor any and all rights to impose, receive, assert or enforce
any lien, encumbrance, charge, security interest, ownership interest, claim or
demand of any kind against or involving the Equipment, whether arising by common
law, statute or consensually (under the Lease or otherwise) and whether now in
existence or hereafter created, including, but not limited to, those for rent or
other right of payment. This waiver, disclaimer, relinquishment and assignment
shall survive the termination of the Lease. Landlord further agrees that (a)
neither the Equipment nor any item thereof shall become part of, or otherwise be
or become a fixture attached to, the Premises, notwithstanding the manner of the
Equipment's annexation, the Equipment's adaptability to the uses and purposes
for which the Premises are used, and the intentions of the party making the
annexation; (b) the Equipment (or any item thereof) may be repossessed by
Lessor; (c) in connection with such repossession or otherwise, Lessor, and any
of its agents and employees, may enter upon the Premises for the purposes of (i)
guarding and maintaining the Equipment (or any item thereof), (ii) showing the
Equipment (or any item thereof) to prospective lenders, buyers, lessees and
sublessees, as applicable, and any of their respective agents and employees,
(iii) preparing, disassembling, dismantling, loading and/or removing the
Equipment (or any item thereof), and (iv) general inspections of the Equipment
pursuant to the Credit Agreement; and (d) the right of Lessor to enter the
Premises and the other rights granted to Lessor in this Waiver shall not
terminate until thirty (30) days after Lessor receives written notice from
Landlord of the termination of the Lease. If Lessor should exercise its rights
hereunder (and the failure to exercise such rights shall not be construed as a
waiver thereof), Landlord agrees upon receiving prior written notice, to provide
ingress and egress to effect such
exercise as well as provide reasonably adequate space contiguous to the location
of the Equipment to permit the exercise of such rights. Landlord further agrees
that Lessor has no obligation to exercise any right granted to Lessor in this
Waiver and that Lessor may elect to remove only a portion or none of the
Equipment from the Premises.
2. COSTS. Lessor agrees to indemnify and hold the Landlord harmless
from any out-of-pocket costs incurred by Landlord for any physical damage to the
Premises caused by Lessor solely from the exercise of its rights under clause
(b) or (c) of Paragraph 1 above.
3. LEASE DEFAULTS. Landlord further agrees to provide Lessor written
notice of any default or event of default under the Lease (each a "Default
Notice") simultaneously with the giving of notice of the same to Tenant or, if
no such notice is required under the Lease, at least thirty (30) days prior to
the date Landlord would be entitled to terminate the Lease. Each such notice
shall be sent to the address of Lessor set forth below the signature of Lessor
on the last page hereof or such other address as Lessor may from time to time
provide to Landlord, and shall be deemed delivered (i) in the case of notice by
letter, five (5) business days after deposited in the United States mail
registered and return receipt requested, (ii) in the case of notice by overnight
courier, two (2) business days after delivery to such courier and (iii) in the
case of notice given by telex or telecommunication, when given or sent with
electronic confirmation of receipt. During any time period when Tenant is in
default under the Lease, Lessor shall have the option, but not the obligation,
to cure any such default. Landlord shall accept such cure if it occurs within
thirty (30) days after Lessor has received the relevant Default Notice as fully
as if Tenant had fully performed its obligation under the Lease. Upon curing any
such default, Lessor shall be subrogated to the rights of Landlord against
Tenant and, as between Landlord and Tenant, such cured defaults shall no longer
exist.
4. LANDLORD'S REPRESENTATIONS AND WARRANTIES. Landlord hereby warrants
and represents to Lessor that (a) Landlord is the lessor under the Lease; (b)
there are no other agreements between the parties affecting or relating to the
Premises; (c) Landlord has all requisite power and authority to execute and
deliver this Waiver and no consents from any third party are required to do so;
(d) Landlord is the sole owner of the landlord's interest under the Lease and
has not conveyed, transferred or assigned any part of that interest to any other
person or entity; (e) no event of default (nor any event which with the passage
of time would constitute an event of default) has occurred under the Lease; (f)
there exists no litigation affecting title to the Premises or any adverse claim
with respect to the Premises of which Landlord has received notice; (g) there is
no condemnation proceeding pending with respect to any part of the Premises, nor
any threat thereof, of which the Landlord has received notice; (h) the Lease is
in full force and effect; and (i) the Premises are not subject to any mortgage
or other security interest in favor of any person which has not executed an
attornment agreement acceptable to Lessor with respect to this Waiver.
5. MISCELLANEOUS. This Waiver and all rights hereby granted to Lessor
hereunder shall remain in effect so long as there are any obligations owing by
Tenant under the Credit Agreement or any present or future agreement between
Tenant and Lessor which involves the Equipment. All the terms and provisions of
this Waiver shall be binding on and inure to the benefit of the respective
successors and assigns of Landlord and Lessor, and Landlord covenants and agrees
that any assignment, mortgage or other transfer of all or any part of its
interest as the owner and/or landlord of the Premises shall provide and shall be
subject and subordinate to all the terms and provisions hereof. Landlord shall
provide each of Tenant and Lessor a duly executed copy of the agreement
evidencing such subordination. Such agreement shall be in form and substance
reasonably satisfactory to Lessor. The rights and benefits of this Waiver may be
assigned or transferred by Lessor or to third parties who may become the lessor,
directly or indirectly, to Tenant. Lessor shall provide subsequent written
notice to Landlord and Tenant of the assignment or transfer. Headings in this
Waiver are for convenience of reference only and are not part of the substance
hereof. This Waiver shall be governed by and construed in accordance with the
laws of the State of California.
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IN WITNESS WHEREOF, Landlord and Lessor have executed this Waiver as of
the date and year first written above.
_______________________________________
By:
Name________________________________
Title_______________________________
Address:
_______________________________________
_______________________________________
_______________________________________
Attention:
GATX CAPITAL CORPORATION
By:____________________________________
Name
Title_______________________________
Address:
GATX Capital Corporation
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Attention: Contract Administrator
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