1
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of ;June6, 1997 ("Agreement"), between
General Electric Capital Corporation, with an office at ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter called, together with its successors and
assigns. if any, "Lessor"), and Telco Systems, Inc., a corporation organized and
existing under the laws of the State of Delaware with its mailing address and
chief place of business at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter
called "Lessee").
WITNESSETH:
I. LEASING:
(a) Subject to the terms and conditions set forth below, Lessor agrees to
lease to LESSEE, AND LESSEE AGREE TO LEASE FROM LESSOR, THE EQUIPMENT
("EQUIPMENT") described in Annex A to any schedule hereto ("Schedule")
or, if applicable, to Section A of any Schedule. TERMS DEFINED IN A
SCHEDULE AND NOT OTHERWISE DEFINED herein shall have the meanings
ascribed to them in such Schedule.
(b) The obligation of Lessor to purchase Equipment from the manufacturer or
supplier thereof ("Supplier") and to lease the same to Lessee under any
Schedule shall be subject to receipt by Lessor, prior to the Lease
Commencement Date (with respect to such Equipment), of each of the
following documents in form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased hereunder, (ii) a
Purchase Order Assignment and Consent in the form of Annex B to the
applicable Schedule, unless Lessor shall have delivered its purchase
order for such Equipment, (iii) evidence of insurance which complies
with the requirements of Section X and (iv) such other documents as
Lessor may reasonably request. As a further condition to such
obligations of Lessor, Lessee shall, upon delivery of such Equipment
(but not later than the Last Delivery Date specified in the applicable
Schedule) execute and deliver to Lessor a Certificate of Acceptance
(which may be in the form of Annex C to the applicable Schedule)
covering such Equipment, and, if requested by Lessor,-deliver to Lessor
a ▇▇▇▇ of sale therefor (in form and substance satisfactory to Lessor).
Lessor hereby appoints Lessee its agent for inspection and acceptance
of the Equipment from the Supplier. Upon execution by Lessee of any
Certificate of Acceptance, the Equipment described thereon shall be
deemed to have been delivered to, and irrevocably accepted by, Lessee
for lease hereunder
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder and Lessee's right to use the Equipment
shall commence on the date of execution by Lessee of the Certificate of
Acceptance for such Equipment ("Lease Commencement Date"). The term of
this Agreement shall be the period specified in the applicable
Schedule. If any term is extended, the word "term" shall be deemed to
refer to all extended term, and all provision of this Agreement shall
apply during any extended term, except as may be otherwise specifically
provided in writing.
(b) Rent shall be paid to Lessor at its address stated above, except as
otherwise directed by Lessor. Payments of rent shall be in the amount
set forth in, and due in accordance with, the provisions of the
applicable Schedule. If one or more Advance Rents are payable, such
Advance Rent shall be (i) set forth on the applicable Schedule, (ii)
due upon acceptance by Lessor of such Schedule, and (iii) v hen
received by Lessor, applied to the first rent payment
55
2
and the balance, if any, to the final rental payment(s) under such
Schedule. In no event shall any Advance Rent or any other rent payments
be refunded to Lessee. If rent is not paid within ten days of its due
date, Lessee agrees to pay a late charge of five cents ($.05) per
dollar on, and in addition to, the amount of such rent but not
exceeding the lawful maximum, if any.
III. RENT ADJUSTMENT:
(a) The periodic rent payments m each Schedule have been calculated on the
assumption (which, as between Lessor and Lessee, is mutual) that the
maximum effective corporate income tax rate (exclusive of any minimum
tax rate) for calendar-year taxpayer ("Effective Rate") will be
thirty-five percent (35%) each year during the lease term.
(b) If, solely as a result of Congressional enactment of any law
(including, without limitation, any modification of, or amendment or
addition to, the Internal Revenue Code of 1986, as amended, (the
"Code")), the Effective Rate is higher than thirty-five percent (35%)
for any year during the lease term, then Lessor shall have the right to
increase such rent payments by requiring payment of a single additional
sum equal to the product of (i) the Effective Rate (expressed as a
decimal) for such year less .35 (or, in the event that any adjustment
has been made hereunder for any previous year, the Effective Rate
(expressed as a decimal) used in calculating the next previous
adjustment) times (ii) the adjusted Termination Value, divided by (iii)
the difference between the new Effective Tax Rate (expressed as a
decimal) and one ( I ). The adjusted Termination Value shall be the
Termination Value (calculated as of the first rental due in the year
for which such adjustment is being made) less the Tax Benefits that
would be allowable under Section 168 of the Code (as of the first day
of the year for which such adjustment is being made and all subsequent
years of the lease term). Lessee shall pay to Lessor the full amount of
the additional rent payment on the later of (i) receipt of notice or
(ii) the first day of the year for which such adjustment is being made.
(c) Lessee's obligations under this Section lll shall survive any
expiration or termination of this Agreement.
IV. TAXES: Except as provided in Sections lll and XV(c), Lessee shall have
no liability for taxes imposed by the United States of America or any
State or political subdivision thereof which are on or measured by the
net income of Lessor. Lessee shall report (to the extent that it is
legally permissible) and pay promptly all other taxes, fees and
assessments due, imposed, assessed or levied against any Equipment (or
the purchase, ownership, delivery, leasing, possession, use or
operation thereof), this Agreement (or any rentals or receipts
hereunder), any Schedule, Lessor or Lessee by any foreign, federal,
state or local government or taxing authority during or related to the
term of this Agreement, including, without limitation, all license and
registration fees, and all sales, use, personal property, excise, gross
shall (i) reimburse Lessor upon receipt of written request for
reimbursement for any Taxes charged to or assessed against Lessor, (ii)
on request of Lessor, submit to Lessor written evidence of Lessee's
payment of Taxes, (iii) on all reports or returns show the ownership of
the Equipment by Lessor, and (iv) send a copy thereof to Lessor.
V. REPORTS:
(a) Lessee will notify Lessor in writing, within ten (10) days after any
tax or other lien shall attach to any Equipment, of the full
particulars thereof and of the location of such equipment on the date
of such notification .
56
3
(b) Lessee will within ninety (90) days of the close of each fiscal year of
Lessee, deliver to Lessor, Lessee's balance sheet and profit and loss
statement, certified by a recognized firm of certified public
accountants. Upon request Lessee will deliver to Lessor quarterly,
within ninety (90) days of the close of each fiscal quarter of Lessee,
in reasonable detail, copies of Lessee's quarterly financial report
certified by the chief financial officer of Lessee.
(c) Lessee will permit Lessor to inspect any Equipment during normal
business hours.
(d) Lessee will keep the Equipment at the Equipment Location (specified in
the applicable Schedule) and will promptly notify Lessor of any
relocation of Equipment. Upon the written request of Lessor. Lessee
will notify Lessor forthwith in writing of the location of any
Equipment as of the date of such notification.
(e) Lessee will promptly and fully report to Lessor in writing if any
Equipment is lost or damaged (where the estimated repair costs would
exceed ten percent ( 10%) of its then fair market value), or is
otherwise involved in an accident causing personal injury or property
damage.
(f) Within sixty (60) days after any request by Lessor, Lessee will furnish
a certificate of an authorized officer of Lessee stating that he has
reviewed the activities of Lessee and that, to the best of his
knowledge, there exists no default (as described in Section Xll) or
event which with notice or lapse of time (or both) would become such a
default.
VI. DELIVERY, USE AND OPERATION:
(a) All Equipment shall be shipped directly from the Supplier to Lessee.
(b) Lessee agrees that the Equipment shall be used by Lessee solely in the
conduct of its business and in a manner complying with all applicable
federal, state, and local laws and regulations.
(c) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET OR HYPOTHECATE ANY EQUIPMENT,
OR THE INTEREST OF LESSEE HEREUNDER. NOR SHALL LESSEE REMOVE ,ANY
EQUIPMENT FROM THE CONTINENTAL UNITED STATES. WITHOUT THE PRIOR WRITTEN
CONSENT OF THE LESSOR.
(d) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those which result from acts of Lessor
VII. SERVICE:
(a) Lessee will, at its sole expense, maintain each unit of Equipment in
good operating order, repair, condition and appearance in accordance
with manufacturer's recommendations, normal wear and tear excepted.
Lessee shall, if at any time requested by Lessor, affix in a prominent
position on each unit of Equipment plates, tags or other identifying
labels showing ownership thereof by Lessor
(b) Lessee will nor, without the prior consent of Lessor, affix or install
any accessory, equipment or device on any Equipment if such addition
will impair the originally intended function or use of such Equipment.
All additions, repairs, parts, supplies, accessories, equipment, and
devices furnished, attached or affixed to any Equipment which are not
readily removable shall be made only in compliance with applicable law,
including Internal
57
4
Revenue Service guidelines, and shall become the property of Lessor.
Lessee will not, without the prior written consent of Lessor and
subject to such conditions as Lessor may impose for its protection,
affix or install any Equipment to or in any other personal or real
property.
(c) Any alterations or modifications to the Equipment that may, at any time
during the term of this Agreement, be required to comply with any
applicable law, rule or regulation shall be made at the expense of
Lessee.
VIII. STIPULATED LOSS VALUE: Lessee shall promptly and fully notify Lessor in
writing if any unit of Equipment shall be or become worn out, lost,
stolen, destroyed, irreparably damaged in the reasonable determination
of Lessee, or permanently rendered unfit for use from any cause
whatsoever (such occurrences being hereinafter called "Casualty
Occurrences"). On the rental payment date next succeeding a Casualty
Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of (x)
the Stipulated Loss Value of such unit calculated as of the rental next
preceding such Casualty Occurrence (-CALCULATION Date-); and (y) all
rental and other amounts which are due hereunder as of the Payment
Date. Upon payment of all sums due hereunder, the term of this lease as
to such unit shall terminate and (except in the case of the loss, theft
or complete destruction of such unit) Lessor shall be entitled to
recover possession of such unit
IX. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the entire risk of
any loss, theft, damage to, or destruction of, any unit of Equipment.
X. INSURANCE: Lessee agrees, at is own expense, to keep all Equipment
insured for such amounts and against such hazards as Lessor may
require, including, but not limited to, insurance for damage to or loss
of such Equipment and liability coverage for personal injuries, death
or property damage! with Lessor named as additional insured and with a
loss payable clause in favor of Lessor, as is interest may appear,
irrespective of any breach of warranty or other act or omission of
Lessee. The insurance shall provide (i) liability coverage in an amount
equal to at least ONE MILLION U S. DOLLARS ($1,000,000.00) total
liability per occurrence, unless otherwise stated in any Schedule, and
(ii) casualty /property damage coverage in an amount equal to the
higher of the Stipulated Loss Value or the full replacement cost of the
Equipment; or at such other amounts as may be required by Lessor. All
such policies shall be with companies, and on terms, satisfactory to
Lessor. Lessee agrees to deliver to Lessor evidence of insurance
satisfactory to Lessor. No insurance shall be subject to any
co-insurance clause. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make proof of loss and claim for insurance, and to
make adjustments with insurers and to receive payment of and execute or
endorse all documents, checks or drafts in connection with payments
made as a result of such insurance policies. Any expense of Lessor in
adjusting or collecting insurance shall be become by Lessee. Lessee
will not make adjustments with insurers except (i) with respect to
claims for damage to any unit of Equipment where the repair costs do
not exceed ten percent (10%) of such unit's fair market value, or (ii)
with Lessors written consent. Said policies shall provide that the
insurance may not be altered or canceled by the insurer until after
shiny (30) days written notice to Lessor. Lessor may, at is option,
apply proceeds of insurance, whole or in pan, to (i) repair or replace
Equipment or any portion thereof, or (ii) satisfy any obligation of
Lessee to Lessor hereunder.
XI. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or any Schedule,
Lessee shall promptly, at its own cost and expense: (i) perform any
testing and repairs required to place
58
5
the affected units of Equipment in the same condition and appearance as
when received by Lessee (reasonable wear and tear excepted) and in good
working order for their originally intended purpose; (ii) if
deinstallation, disassembly or crating is required, cause such units to
be deinstalled, disassembled and crated by an authorized manufacture's
representative or such other service person as is satisfactory to
Lessor; and (iii) return such units to a location within the
continental United States as Lessor shall direct; (iv) ensure all
Lessee installed markings which are not necessary for the operation,
maintenance or repair of the Equipment are properly removed; (v)
provide that all Equipment will be cleaned and cosmetically acceptable,
and in such condition as to be immediately installed and put into use
in a similar environment for which the Equipment was originally
intended to be used; (vi) remove all waste material and fluid from the
Equipment and dispose of in accordance with then current waste disposal
laws; and (vii) obtain and pay for a policy of transit insurance for
the redelivery period in an amount equal to the replacement value of
1he equipment and name Lessor as the loss payee on all such policies of
insurance.
(b) Until Lessee has fully complied with the requirements of Section Xl(a)
above, Lessee's rent payment obligation and all other obligations under
this Agreement shall continue from month to month notwithstanding any
expiration or termination of the lease term. Lessor may terminate such
continued leasehold interest upon ten (10) days notice to Lessee.
(c) At least ninety (90) days and not more than one hundred twenty (120)
days prior to lease termination. Lessee shall: (i) provide to Lessor a
detailed inventory of all component of the Equipment including model
and serial numbers; and (ii) provide an up-to-date copy of all
documentation pertaining to the Equipment including, but not limited to
service manuals, blue pants, process flow,, diagrams, operating manuals
and maintenance records.
(d) At least one hundred twenty (120) days prior to and continuing up to
lease termination. Lessee shall, upon receiving reasonable notice from
Lessor, make the Equipment available for on-site operational
inspections by potential purchasers. Lessee shall provide personnel,
power and other requirements necessary to demonstrate electrical,
hydraulic and mechanical systems for each item of Equipment.
XII. DEFAULT:
(a) Lessor may in writing declare this Agreement in default if Lessee
breaches its obligation to pay rent or any other sum when due and fails
to cure the breach within ten ( 10) days; Lessee breaches any of its
insurance obligations under Section X; Lessee breaches any of is other
obligations and fails to cure that breach within thirty (30) days after
written notice thereof; any representation or warranty made by Lessee
in connection with this Agreement shall be false or misleading in any
material respect; Lessee becomes insolvent or ceases to do business as
a going concern; any Equipment is illegally used; or a petition is
filed by or against Lessee or any Guarantor of Lessee's obligations to
Lessor under any bankruptcy or insolvency laws. Such declaration shall
apply to all Schedules except as specifically excepted by Lessor.
(b) After default, at the request of Lessor, Lessee shall comply with the
provisions of Section Xl(a). Lessee hereby authorizes Lessor to enter,
with or without legal process, any premises where any Equipment is
believed to be and take possession thereof. Lessee shall, without
further demand, forthwith pay to Lessor (i) as liquidated damages for
loss of a bargain and not as a penalty, the Stipulated Loss Value of
the Equipment (calculated as of the rental next preceding the
declaration of default), and (ii) all rentals and other sums then due
hereunder. Lessor may, but shall not be required to, sell Equipment at
private or public sale, in bulk or in parcels, with or without notice,
and without having the Equipment
59
6
present at the place of sale; or Lessor may, but shall not be required
to, lease, otherwise dispose of or keep idle all or part of the
Equipment; and Lessor may use Lessee's premises for any or all of the
foregoing without liability for rent. costs, damages or otherwise. The
proceeds of sale, lease or other disposition, if any, shall be applied
in the following order of priorities: (1) to pay all of Lessor's cost,
charges and expenses incurred in taking, removing, holding, repairing
and selling, leasing or otherwise disposing of Equipment; then, (2) to
the extent not previously paid by Lessee, to pay Lessor all sums due
from Lessee hereunder; then (3) to reimburse to Lessee any sums
previously paid by Lessee as liquidated damages; and (4) any surplus
shall be retained by Lessor. Lessee shall pay any deficiency in ( I )
and (2) forthwith
(c) The foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies at
law, in equity, or under statute. Lessee waives notice of sale or other
disposition (and the time and place thereof), and the manner and place
of any advertising. Lessee shall pay Lessor's annual attorney's fees
incurred in connection with the enforcement, assertion defense or
preservation of Lessor's rights and remedies hereunder, or if
prohibited by law, such lesser sum as may be permitted. Waiver of any
default shall not be a waiver of any other or subsequent default.
(d) Any default under the terms of this or any other agreement between
Lessor and Lessee may be declared by Lessor a default under this and
any such other agreement.
XIII. ASSIGNMENT: Lessor may, without the consent of Lessee, assign this
Agreement or any Schedule. Lessee agrees that if Lessee receives
written notice of an assignment from Lessor, Lessee will pay all rent
and all other amounts payable under any assigned Equipment Schedule to
such assignee or as instructed by Lessor. Lessee further agrees to
confirm in writing receipt of the notice of assignment as may be
reasonably requested by assignee. Lessee hereby waives and agrees not
to assert against any such assignee any defense, set-off, recoupment
claim or counterclaim which Lessee has or may at any time have against
Lessor for any reason whatsoever.
XIV. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease. Lessee's
obligation to pay rent and other amount due hereunder shall be absolute
and unconditional. Lessee shall not be entitled to any abatement or
reductions of, or set-offs against said rent or other amounts,
including. without limitation, those arising or allegedly arising out
of claims (present or future, alleged or annual and including claims
arising out of strict tort or negligence of Lessor) of Lessee against
Lessor under this Agreement or otherwise. Nor shall this Agreement
terminate or the obligations of Lessee be affected by reason of any
defect in or damage to, or loss of possession, use or destruction of,
any Equipment from whatsoever cause. It is the intention of the parties
that rents and other amounts due hereunder shall continue to be payable
in all events in the manner and at the times set forth herein unless
the obligation to do so shall have been terminated pursuant to the
express terms hereof
XV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep harmless Lessor, its
agents, employees, successors and assigns from and against any and all
losses, damages, penalties, injuries, claims, anions and suits,
including legal expenses, of whatsoever kind and nature, in contract or
tort (but excluding all losses, damages, penalties, injuries, claims,
anions and suits arising solely from willful misconduct or gross
negligence of Lessor) including, but not limited to, Lessor's strict
liability in tort, arising out of (i) the selection, manufacture,
purchase, acceptance or rejection of Equipment, the ownership of
Equipment during the term of this Agreement, and the delivery, lease,
possession, maintenance, uses, condition,
60
7
return or operation of Equipment (including, without limitation, latent
and other defects, whether or not discoverable by Lessor or Lessee and
any claim for patent. trademark or copyright infringement or
environmental damage) or (ii) the condition of Equipment sold or
disposed of after use by Lessee any sublessee or employees of Lessee.
Lessee shall. upon request. defend any actions based on. or arising out
of any of the foregoing
(b) Lessee hereby represents, warrants and covenants that (i) on the Lease
Commencement Date for any unit of Equipment, such unit will qualify for
all of the items of deduction and credit specified in Section C of the
applicable Schedule ("Tax Benefits") in the hands of Lessor (all
references to Lessor in this Section XV include Lessor and the
consolidated taxpayer group of which Lessor is a member), and (ii) at
no time during the term of this Agreement will Lessee take or omit to
take, nor will it permit any sublessee or assignee to take or omit to
take, any action (whether or not such an or omission is otherwise
permitted by Lessor or the terms of this Agreement), which will result
in the disqualification of any Equipment for, or recapture of, all or
any portion of such Tax Benefits.
(c) If as a result of a breach of any representation, warranty or covenant
of the Lessee contained in this Agreement or any Schedule (x) tax
counsel of Lessor shall determine that Lessor is not entitled to claim
on its Federal income tax return all or any portion of the Tax Benefits
with respect to any Equipment, or (y) any such Tax Benefit claimed on
the Federal income tax return of Lessor is disallowed or adjusted by
the Internal Revenue Service, or (z) any such Tax Benefit is recomputed
or recaptured (any such determination, disallowance, adjustment,
recomputation or recapture being hereinafter called a "Loss"), then
Lessee shall pay to Lessor, as an indemnity and as additional rent,
such amount as shall, in the reasonable opinion of Lessor, cause
Lessor's after-tax economic yields and cash flows, computed on the same
assumptions, including tax rates (unless any adjustment has been made
under Section 111 hereof, in which case the Effective Rate used in the
next preceding adjustment shall be substituted), as were utilized by
Lessor in originally evaluating the transaction (such yields and flows
being hereinafter called the "NET ECONOMIC Return") to equal the Net
Economic Return that would have been realized by Lessor if such Loss
had not occurred. Such amount shall be payable upon demand accompanied
by a statement describing in reasonable detail such Loss and the
computation of such amount.
(d) All of Lessor's rights, privileges and indemnities contained in this
Section XV shall survive the expiration or other termination of this
Agreement and the rights, privileges and indemnities contained herein are
expressly made for the benefit of, and shall be enforceable by Lessor, is
successors and assigns.
XVI. DISCLAIMER: LESSEE ACKNOWLEDGES THAT TT HAS SELECTED THE EQUIPMENT
WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR
DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE,
ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR
ORAL, WITH RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT
THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN,
COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP,
▇▇▇▇▇▇▇'TABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY,
PATENT, TRADEMARK OR COPYRIGHT INFRINGEMEN'T, OR TITLE. All such risks,
as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing. Lessor shall have no responsibility or
liability to Lessee or any other person with respect to any of the
following, regardless of any negligence of Lessor (i) any liability,
loss or damage caused or alleged to be caused directly or indirectly by
any Equipment, any inadequacy thereof, any deficiency or defect (latent
or otherwise) therein, or any other circumstance in connection
therewith; (ii) the use, operation or performance of any Equipment or
any risks
61
8
relating thereto; (iii) any interruption of service, loss of business or
anticipated profits or consequential damages; or (iv) the delivery,
operation, servicing, maintenance, repair, improvement or replacement of
any Equipment. If, and so long as, no default exists under this Lease,
Lessee shall be, and hereby is, authorized during the term of this Lease
to assert and enforce. at Lessee's sole cost and expense. from time to
time. in the name of and for the account of Lessor and or Lessee. as their
interests may
XVII. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby
represents and warrants to Lessor that on the date hereof and on the
date of execution of each Schedule
(a) Lessee has adequate power and capacity to enter into, and perform under,
this Agreement and ail related documents (together, the "DOCUMENTS") AND
IS DULY qualified to do business wherever necessary to y on its present
business and operations, including the jurisdiction(s) where the Equipment
is or is to be located.
(b) The Documents have been duly authorized, executed and delivered by Lessee
and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into
or performance by Lessee of the Documents except such as have already
herein obtained
(d) The entry into and performance by Lessee of the Documents will not:
(i) violate any judgment, order, law or regulation applicable to Lessee
or any provision of Lessee's Certificate of Incorporation or by-laws;
or (ii) result in any breach of, constitute a default under or result
in the creation of any lien, charge, security interest or other
encumbrance upon any Equipment pursuant to any indenture, mortgage,
deed of trust, bank loan or credit agreement or other instrument (other
than this Agreement) to which Lessee is a party
(e) There are no suits or proceedings pending or threatened in court or before
any commission, board or other administrative agency against or affecting
Lessee, which will have a material adverse effect on the ability of Lessee
to fulfill its obligations under this Agreement.
(f) The Equipment accepted under any Certificate of Acceptance is and will
remain tangible personal property.
(g) Each Balance Sheet and Statement of Income delivered to Lessor has been
prepared in accordance with generally accepted accounting principles, and
since the date of the most recent such Balance Sheet and Statement of
Income, there has been no material adverse change.
(h) Lessee is and will be at all times validly existing and in good standing
under the laws of the State of its incorporation (specified in the first
sentence of this Agreement).
(i) The Equipment will at all times be used for commercial or business
purposes.
XVIII. EARLY TERMINATION:
(a) On or after the First Termination Date (specified in the applicable
Schedule), Lessee may, so long as no default exists hereunder, terminate
this Agreement as to all (but not less than
62
9
all) of the Equipment on such Schedule as of a rent payment date
("Termination Date") upon at least ninety (90) days prior written notice
to Lessor.
(b) Lessee shall, and Lessor may, solicit cash bids for the Equipment on an AS
IS, WHERE IS BASIS without recourse to or warranty from Lessor, express or
implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall (i)
certify to Lessor any bids received by Lessee and (ii) pay to Lessor (A)
the Termination Value (calculated as of the rental due on the Termination
Date) for the Equipment. and (B) all rent and other sums due and unpaid as
of the Termination Date.
(c) Provided that all amounts due hereunder have been paid on the Termination
Date, Lessor shall (i) sell the Equipment on an AS IS BASIS for cash to
the highest bidder and (ii) refund the proceeds of such sale (net of any
related expenses) to Lessee up to the amount of the Termination Value. If
such sale is not consummated, no termination shall occur and Lessor shall
refund the Termination Value (less any expenses incurred by Lessor) to
Lessee.
(d) Notwithstanding the foregoing, Lessor may elect by written notice, at any
time prior to the Termination Date, not to sell the Equipment In that
event on the Termination Date Lessee shall (i) return the Equipment (in
accordance with Section XI) and (ii) pay to Lessor all amounts required
under Section XVIII(B) LESS THE amount of the highest bid certified by
Lessee to Lessor.
XIX. PURCHASE OPTION:
(a) So long as no default exists hereunder and the lease has not been earlier
terminated, Lessee may at lease expiration, upon at least one hundred
eighty ( 180) days prior written notice to Lessor, purchase all (but not
less than all) of the Equipment in any Schedule on an AS IS WHERE IS
BASIS, without recourse to or warranty from Lessor, express or implied,
for cash equal to its then Fair Market Value (plus all applicable sales
taxes).
(b) "FAIR MARKET VALUE" SHALL mean the price which a willing buyer (who is
neither a lessee in possession nor a used equipment dealer) would pay
for the Equipment in an arm's-length transaction to a willing seller
under no compulsion to sell; PROVIDED, HOWEVER, that in such
determination: (i) the Equipment shall be assumed to be in the
condition in which it is required to be maintained and resumed under
this Agreement; (ii) in the case of any installed Equipment that
Equipment shall be valued on an installed basis; and (iii) costs of
removal from current location shall not be a deduction from such
valuation. If Lessor and Lessee are unable to agree on the Fair Market
Value at least one hundred thirty-five (135) days before lease
expiration, Lessor shall appoint an independent appraiser (reasonably
acceptable to Lessee) to determine Fair Market Value, and that
determination shall be final, binding and conclusive. Lessee shall bear
all costs associated with any such appraisal.
(c) Lessee shall be deemed to have waived this option unless it provides
Lessor with written notice of its irrevocable election to exercise the
same within fifteen (15) days after Fair Market Value is determined (by
agreement or appraisal).
XX. MISCELLANEOUS:
(a) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, TIHIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS
BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER
63
10
OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY
BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY
RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO
THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION,
THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT
(b) Unless and until Lessee exercises its rights under Section XIX above,
nothing herein contained shall give or convey to Lessee any right title
or interest in and to any Equipment except as a lessee. Any
cancellation or termination by Lessor, pursuant to the provision of
this Agreement, any Schedule, supplement or amendment hereto, or the
lease of any Equipment hereunder, shall not release Lessee from any
then outstanding obligations to Lessor hereunder. All Equipment shall
at all times remain personal property of Lessor regardless of the
degree of its annexation to any real property and shall not by reason
of any installation in, or affixation to, real or personal property
become a part thereof.
(c) Time is of the essence of this Agreement Lessor's failure at anytime to
require strict performance by Lessee of any of the provisions hereof
shall not waive or diminish Lessor's right thereafter to demand strict
compliance therewith. Lessee agrees, upon Lessor's request, to execute
any instrument necessary or expedient for filing, recording or
perfecting the interest of Lessor. All notices required to be given
hereunder shall be deemed adequately given if sent by registered or
certified mail to the addressee at its address stated herein, or at
such other place as such addressee may have designated in writing. This
Agreement and any Schedule and Annexes thereto constitute the entire
agreement of the parties with respect to the subject matter hereof NO
VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF
ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND
SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
(d) In case of a failure of Lessee to comply with any provision of this
Agreement, Lessor shall have the right, but shall not be obligated, to
effect such compliance, in whole or in part; and all moneys spent and
expenses and obligations incurred or assumed by Lessor in effecting
such compliance shall constitute additional rent due to Lessor within
five days after the date Lessor sends notice to Lessee requesting
payment. Lessor's effecting such compliance shall not be a waiver of
Lessee's default.
(e) Any rent or other amount not paid to Lessor when due hereunder shall bear
interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent (18%) per annum or the maximum rate allowed by
law. Any provisions in this Agreement and any Schedule which are in
conflict with any statute, law or applicable rule shall be deemed omitted
modified or altered to conform thereto.
(f) Adjustment to Capitalized Lessor's Cost Lessee hereby irrevocably
authorizes Lessor to adjust the Capitalized Lessor's Cost up or down by
no more than ten percent (10%) within each Schedule to account for
equipment change orders, equipment returns, invoicing errors, and
similar manner. Lessee acknowledges and agrees that the Rent shall be
adjusted as a
64
11
result of such change in the Capitalized Lessor's Cost. Lessor shall send
Lessee a written notice stating the final Capitalized Lessor's Cost, if
different from that disclosed on the Schedule.
IN WITNESS WEIEREOF, Lessee and Lessor have caused this Schedule to be executed
by their duly authorized representatives as of the date first above written
LESSOR: LESSEE:
General Electric Capital Corporation Telco Systems, Inc.
By; ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Credit Analyst VP & CFO
65