EXHIBIT 10.08
ALLSTATE LEASING, INC.
MASTER LEASE AGREEMENT
Number: E-385 Date: July 17, 2001
This is a Master Lease Agreement between Allstate Leasing, Inc.
("Lessor") and, Avatech Solutions, Inc. ("Lessee"), a Delaware corporation.
1. LEASE. Subject to the terms hereof, Lessor hereby leases to
Lessee, and Lessee hereby leases from Lessor, the equipment and/or other
property ("Equipment") described on Schedules to this Lease executed from time
to time by Lessor and Lessee. Each Schedule shall incorporate all the terms of
this Lease and shall constitute a separate agreement (each a "Lease") for the
lease of the Equipment. Terms defined in a Schedule and not otherwise defined
herein shall have the meanings ascribed to them in such Schedule.
2. TERM; AUTOMATIC EXTENSION. The term of this Lease ("the Lease
Term") for all items of Equipment included on any Schedule shall begin on the
date the first of such items is accepted by Lessee, or such other date as may be
specified on such Schedule ("Acceptance Date") and, subject to the terms hereof,
shall continue for the period of time set forth on said Schedule, plus any
agreed renewal period. Upon acceptance of each Item of Equipment, Lessee shall
execute and deliver to Lessor, Lessor's form of Schedule or Acceptance
Certificate. Notwithstanding the expiration of the Basic Term as to any
Equipment, the Lease Term for such Equipment will be automatically extended for
90 days after such expiration date unless Lessor or Lessee has given the other
party at least 90 days prior written notice of termination, and shall continue
after such initial 90 day period until either party gives the other at least 90
days prior written notice of termination, unless Lessee has exercised a purchase
option or lease renewal option in accordance with its terms. During the
extension period, all the terms of this Lease, including Base Rent, shall remain
in effect. Lessee shall have no right to terminate this Lease as to any
Equipment before the expiration of the Basic Term, except in accordance with a
written agreement signed by Lessor.
3. (a) RENT. With respect to each Schedule, Lessee shall pay to
Lessor as "Rent," all Interim Rent specified on any Schedule, plus as Base Rent
an amount equal to the product of (i) the periodic Base Rent payments specified
on such Schedule and (ii) the number of rental payments specified on such
Schedule, plus all other amount due or to become due under this Lease or any
Schedule to this Lease. All Rent shall be paid to Lessor at the address
specified by Lessor.
All Rent shall be paid without notice or demand, and Lessee's
obligation to pay such Rent shall be absolute and unconditional and not subject
to any abatement, reduction, set-off, defense, counterclaim or recoupment
("Abatements") for any reason whatsoever (including, without limitation,
Abatements due to any present or future claims of Lessee against Lessor under
this Lease or otherwise, or against the manufacturer or vendor of the
Equipment), nor except as other expressly provided herein upon a Total Loss,
shall this Lease terminate or the obligations of Lessee hereunder be affected by
reason of any defect in or damage to, or any loss or destruction of, any
Equipment from any cause whatsoever, or the interference with the use thereof by
any private person, corporation or governmental authority, or the invalidity or
unenforceability or lack of due authorization of this Lease or lack of right,
power or authority to enter into the Lease, or for any other cause, whether
similar or dissimilar to the foregoing, any present or future law or regulation
to the contrary notwithstanding.
(b) EXCESSIVE RENT. If a court determines that Lessor has received
any payments which are determined to be interest and which result in interest
charges to Lessee in excess of the highest rate permitted by applicable law,
such payments, to the extent they result in such excess, shall be deemed to have
been payments on account of Base Rent and shall be so credited. If such credit
results in Lessee having paid to Lessor any sum in excess of Base Rent plus
interest charges at the highest rate allowed by law, then such sum shall be
refunded to Lessee and Lessee hereby waives any further remedy or claim against
Lessor on account of Lessor having received such sum.
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4. LATE PAYMENTS. If Lessee does not pay any Rent when the same is
due and payable, then Lessor at its option may charge and Lessee agrees to pay,
a late payment charge in an amount equal to Five Percent (5%) of the amount
which is not paid, for each month or part of a month after the date the same is
due until paid, as liquidated damages. This provision does not waive Lessor's
rights to exercise any other remedy available to it hereunder upon a default in
payment.
5. DISCLAIMER OF WARRANTIES. LESSOR LEASES THE EQUIPMENT "AS IS".
LESSOR MAKES NO WARRANTIES WITH RESPECT TO THE EQUIPMENT, EITHER EXPRESS OR
IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. Lessor assumes no liability and makes no representations as
to the treatment by Lessee of this Lease, the Equipment or the rental payments
for financial statement or tax purposes. Lessee acknowledges that each unit of
the Equipment has been selected by the Lessee and that Lessee is satisfied that
the Equipment is suitable for Lessee's purposes. Subject to Lessor's right to do
so, Lessor hereby assigns and agrees to use its best efforts to otherwise make
available to Lessee for the term of this Lease any warranty which has been
extended to Lessor by the manufacturer or vendor of the Equipment; however,
Lessee's sole remedy in the event of the breach of any warranty shall be against
the manufacturer or vendor and not against Lessor. Any amounts received by
Lessee as payment under any such warranty shall be applied to restore the
Equipment to the condition required by this Lease, with the balance of such
amount, if any, to be paid over to Lessor. Lessee shall not take any action or
fail to take any action, the effect of which would be to invalidate such
warranty.
6. OWNERSHIP. The parties intend that this Lease is a true lease and
in no event shall this agreement be construed as a sale of the Equipment. Title
to the Equipment shall at all times remain in Lessor, and Lessee shall acquire
no ownership, title, property, right, equity, or interest in the Equipment other
than its leasehold interest solely as Lessee subject to all the terms and
conditions hereof. Notwithstanding the express intent of the parties, if a court
determines that this agreement is not a true lease, but rather one intended as
security, then solely in that event and for the expressly limited purposes
thereof, Lessee shall be deemed to have hereby granted Lessor a security
Interest in the Equipment, and all accessions thereto, substitutions and
replacements thereof, and cash and non-cash proceeds (including insurance
proceeds) thereof (but without power of sale), to secure the prompt payment and
performance as and when due of all obligations and indebtedness of Lessee to
Lessor arising under this Lease. At Lessor's request, Lessee will place markings
on the Equipment indicating that Lessor is the owner thereof and Lessee will not
remove the same. The Equipment shall always remain and be deemed personal
property even though attached to realty.
7. RETURN OF EQUIPMENT. Upon the expiration, earlier termination, or
casualty loss to equipment subject to this Lease, Lessee shall, at its own
expense, return the Equipment to Lessor within ten (10) days in the same
condition as when delivered to Lessee, ordinary wear and tear resulting from
proper use thereof alone excepted, and free and clear of all liens, encumbrances
or rights of others whatsoever, by whichever of the following means Lessor may
specify (after first storing the Equipment, at Lessor's request, at the place
where the Equipment is to be located hereunder, free of charge for a period not
to exceed 90 days, during which time Lessor or its agent will be allowed
reasonable access to the Equipment);
(a) the delivery of the Equipment at Lessee's premises; (b) the
delivery of the Equipment at Lessee's expense to such place as Lessor shall
specify; or (c) the loading of the Equipment on board such carrier as Lessor
shall specify to such destination as Lessor may designate with freight charges
prepaid by Lessee. In the event that the Equipment is shipped pursuant to clause
(b) of the preceding sentence, Lessee shall obtain and pay for a policy of
transit insurance in an amount equal to the replacement value of the Equipment
and Lessor shall be named as the loss payee on all such policies of insurance.
Lessor shall have the right to inspect the Equipment prior to or after its
return, and Lessee shall pay the reasonable costs of such inspection if the
Equipment is not in the condition required by this Lease. In addition, if
repairs are necessary, in the reasonable opinion of Lessor, to place the
Equipment in the condition required by this Lease, Lessee agrees to pay the cost
of such repairs and further agrees to pay Lessor Rent for the period of time
reasonably necessary to accomplish such repairs, based on a daily pro-rated
amount of the previous Rent. Rent shall accrue at a daily pro-rated amount of
the previous Rent, for each day the Lessee does not return the Equipment as
required, but such payment of Rent does not extend the term of this Lease.
Notwithstanding the foregoing, upon expiration of the term or upon earlier
termination of this Lease, Lessee shall return the Equipment in good repair,
condition and working order, ordinary wear and tear resulting from normal use
accepted, together with a reinstallation fee of five percent (5%) of the
original cost of said equipment. Lessor shall be reimbursed for expenses by
Lessee within five (5) days of receipt of an invoice. Any outstanding balance
shall be subject to a late fee of five percent (5%) per month on such delinquent
payment from and including the due date to an including the date of receipt of
such delinquent payment.
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8. INDEMNITY. Lessee hereby assumes and agrees to indemnify,
protect, save, and keep harmless Lessor, its agents and employees, from and
against any and all losses, damages, injuries, claims, demands, expenses,
including legal expenses, or liabilities, including negligence, tort and strict
liability, of whatsoever kind and nature, arising on account of: the ordering,
acquisition, delivery, installation or rejection of the Equipment; the
possession, maintenance, use, condition (including without limitation, latent
and other defects and whether or not discoverable by Lessor or Lessee, and any
claim for patent, trademark or copyright infringement) or operation of any item
of the Equipment, during the term of this Lease with respect to that item of the
Equipment; or the loss, damage, destruction, removal, return, surrender, sale or
other disposition of the Equipment, or any item thereof, during the term of this
Lease. These indemnities shall remain in full force and effect despite the
expiration, cancellation or earlier termination of this Lease.
9. USE AND MAINTENANCE. Lessee shall use the Equipment solely in the
conduct of its business and in a careful and proper manner consistent with the
requirements of all applicable insurance policies relating to the Equipment.
Lessee will not change the location of any Equipment as specified in the
Schedule without the prior written consent of Lessor, which consent shall not be
unreasonably withheld. Lessee shall not attach or incorporate the Equipment to
or in any other item of Equipment in such a manner that the Equipment becomes or
may in Lessor's opinion be deemed to have become an accession to or a part of
such other item of equipment.
All Equipment shall be continually serviced, maintained, repaired, and
improved in accordance with the requirements, guidelines and recommendations of
its manufacturer and/or applicable regulatory bodies, and as Lessor may
reasonably consider customary and in accordance with then current practices of
users of similar equipment, and in any event sufficient to preserve any
applicable warranty. Unless Lessor otherwise agrees in writing, Lessee shall, at
its sole expense, enter into and maintain in force, a maintenance contract with
the manufacturer of the Equipment or such other party as shall be acceptable to
Lessor, and shall provide Lessor with a copy of such contract and all
supplements thereto which are applicable to the Equipment.
In addition, if any parts or accessories forming part of the Equipment
shall from time to time become worn out, lost, destroyed, damaged beyond repair
or otherwise permanently rendered unfit for use, Lessee, at its own expense,
will within a reasonable time replace such parts or accessories, or cause the
same to be replaced, by replacement parts or accessories which are free and
clear of all liens, encumbrances or rights of others and have a value and
utility at least equal to the parts or accessories replaced. All equipment,
accessories, parts and replacements for or which are added to or become attached
to the Equipment which are essential to the operation of the Equipment or which
cannot be detached from the Equipment without materially interfering with the
operation of the Equipment or adversely affecting the value and utility which
the Equipment would have had without the addition thereof, shall immediately
become the property of Lessor, and shall be deemed incorporated in the Equipment
subject to the terms of this Lease as if originally leased thereunder. Lessee
shall not make any material alterations to the Equipment without the prior
written consent of Lessor. Lessor may inspect the Equipment and all related
records at any time.
10. INSURANCE. Lessee shall maintain in force during the terms of
this Lease public liability insurance in an amount satisfactory to Lessor
covering the Equipment and insuring both Lessee and Lessor against any loss,
damage, claim, suit, action or liability arising out of the ownership,
possession, maintenance, use or operation of the Equipment. In addition, Lessee
agrees to keep the Equipment insured against loss or damage from every cause
whatsoever, with one or more insurance companies satisfactory to Lessor, such
policies to contain loss payable clauses in favor of the Lessor as its interest
may appear, in an amount not less than the greater of (i) the Casualty Loss
Value and (ii) the full insurable value of said Equipment, said insurance policy
or policies to contain not less than thirty (30) days notice of cancellation to
the Lessor. Lessee shall provide Lessor with satisfactory evidence of insurance
coverage as provided herein at least thirty (30) days prior to the expiration
date of any current policy. In the event of any loss, damage, injury or accident
involving any item of Equipment, Lessee shall promptly provide Lessor with
written notice thereof and make available to Lessor all information and
documentation relating thereto. Lessee hereby appoints Lessor as its
attorney-in-fact to make claim for and to receive payments of and to execute and
endorse all documents, checks or drafts for loss or damage to the Equipment.
Lessee hereby directs any insurance company which insures the Equipment to make
payment for all claims for physical damage to the Equipment solely to Lessor and
not jointly to Lessee and Lessor, and hereby holds harmless such insurance
company for making such payment. Lessee agrees to hold in trust for Lessor any
payments received by it from the insurance company. Lessee will pay Lessor, on
demand, the amount of any expenses (including legal fees) incurred by Lessor in
adjusting or setting any insurance claim.
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11. LOSS AND DAMAGE. Lessee hereby assumes and shall bear the entire
risk of direct and consequential loss and damage to the Equipment from any and
every cause whatsoever. Except as provided in this Section for discharge upon
payment of Casualty Loss Value, no loss or damage to the Equipment or any part
thereof shall release or impair any obligations of Lessee under this Lease,
which shall continue in full force and effect and shall be absolute during the
term hereof. Lessee agrees that Lessor shall not incur any liability to Lessee
for any loss of business, loss of profits, expenses, or any other damages
resulting to Lessee by reason of any delay in delivery or any delay caused by
any non-performance, defective performance, or breakdown of the Equipment, nor
shall Lessor at any time be responsible for personal injury or the loss or
destruction of any other property resulting from the Equipment. In the event of
loss or damage of any kind to any item of the Equipment, Lessee shall give
prompt notice thereof to Lessor and then Lessee shall, at the option of Lessor,
at Lessee's expense (less any insurance proceeds actually paid): (a) place the
same in good repair, condition and working order; or (b) replace the same with
like Equipment of the same or equivalent make and of the same or later model,
and with equal or greater value and utility, and in good repair, condition and
working order.
The foregoing notwithstanding, in the event that any item of the
Equipment shall become, in Lessor's judgment, worn out, lost, stolen, taken by
any governmental authority, destroyed or irreparably damaged (any such
occurrence being herein referred to as a "Total Loss") during the term of this
Lease, then on the next date for the payment of Rent after Lessor makes such
judgment, Lessee shall pay to Lessor the Rent due on that date plus the Casualty
Loss Value of the item or items of the Equipment with respect to which the Total
Loss has occurred and any other sums due hereunder with respect to that
Equipment (less any insurance proceeds actually paid to Lessor). Upon making
such payment in respect of any item of the Equipment, this Lease and the
obligation to make future Rent payments shall terminate solely with respect to
the items of Equipment paid for.
As used in this Lease, "Casualty Loss Value" shall mean the product of
the Acquisition Cost for the item of Equipment and the applicable percentage
factor set forth on the Casualty Loss Schedule attached to such Schedule.
Casualty Loss Value shall be determined as of the next date on which a payment
of Rent is or would be due after a Total Loss or other termination of this
Lease, after payment of any Rent due on such date, and the applicable percentage
factor shall be that which is set forth with respect to such Rent payment date.
If a Total Loss occurs after the last Rent payment date in the Basic Term, then
the applicable percentage factor shall be the last percentage factor set forth
on the Casualty Loss Schedule, and the Casualty Loss Value shall be payable on
the first to occur of either the expiration date of the Lease Term, or the next
date for the payment of Rent after the Total Loss, or thirty (30) days after the
Total Loss occurs.
12. LIENS; TAXES. Lessee shall not create or suffer to exist any lien
of any kind or security interest on the Equipment or this Lease or any of
Lessor's interests hereunder, including those which are subordinate to Lessor's
rights in the Equipment. Lessee shall pay all license fees, registration and
recording fees, assessments, charges and taxes (municipal, state and federal),
if any, which may now or hereafter be imposed upon the ownership, leasing, sale,
possession or use of the Equipment which are payable for any period of time
during which this Lease is in effect, whether payable by Lessor or Lessee under
applicable law, including but not limited to (a) sales taxes imposed on the
purchase of the Equipment by Lessor and the rental payments under this Lease,
and (b) personal property taxes on the Equipment. Lessee will furnish to Lessor
evidence of payment of such taxes as soon as Lessee has paid them, and will
provide Lessor immediately upon receipt with a copy of all bills for such taxes.
Lessee will pay all interest and penalties due upon its failure to pay any such
taxes when due and otherwise in accordance with applicable laws. If Lessee fails
to pay any said fees, assessments, charges or taxes, Lessor shall have the
right, but shall not be obligated, to pay the same, in which event the cost
thereof shall be repayable to Lessor on demand. Lessee's obligations hereunder
shall continue after the expiration of the Lease Term as to those expenses
incurred or accrued during such term.
13. TAX INDEMNITY. (a) Lessee agrees that Lessor is entitled to and
shall have the right to claim the following tax benefits ("Tax Benefits") with
respect to the Equipment or any item thereof;
(i) depreciation deductions ("Depreciation Deductions") for
Federal income tax purposes pursuant to Section 168 of the Internal Revenue Code
of 1986 ("Code") and depreciation or cost recovery deductions for Maryland and
other applicable state income tax purposes with respect to the Equipment based
upon an unadjusted tax basis equal to the Acquisition Cost of the Equipment
beginning in the taxable year in which Acceptance Date for such Equipment
occurs, with deductions allowable based upon the Recovery Period which is
specified on the Equipment Schedule for the Equipment leased under that Schedule
(the "Recovery Period"):
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(ii) Treatment of all items of income and deduction
relating to this Lease as from sources wholly within the United States; and
(iii) Lessor will not be required to include any amounts in
its gross income as a result of this Lease other than the Rent payable hereunder
at such times as such Rent is due hereunder, and any other payment with respect
to which Lessor shall be entitled to a contemporaneous and offsetting deduction
from, or reduction in, its net income.
(b) If (1) on account of any act or failure to act by Lessee,
the Lessor shall lose the right to claim, shall not claim (as the result of a
good faith determination based upon the advice of independent tax counsel for
Lessor that there is not reasonable basis in law or fact for the allowance of
such claim), or shall not be allowed to claim any of the Tax Benefits, or shall
be required to recapture all or any portion of the Depreciation Deductions, or
shall be required to recognize gross income at times or in amounts other than as
specified above or, (2) as a result of any amendment, modification, repeal or
other change of or to applicable federal or Maryland law which is enacted or
adopted after the date of the Equipment Lease there is an increase in the
highest marginal statutory rate applicable to Lessor of the federal corporate
income tax or the Maryland corporate income tax or in the alternative minimum
tax rate applicable to Lessor or in the rate applicable to Lessor for federal or
Maryland income tax purposes of any federal, state or local tax which is,
directly or indirectly, imposed on, based on or measured by the income of Lessor
(as determined for regular tax purposes or alternative minimum tax purposes or
for any other purposes), at a time when gross rental income under the Lease
exceeds all deductions allowable to Lessor under the Code with respect to the
Lease or an item of Equipment (any such increase that results in the Lessor's
income being taxed at such higher rate being herein called a "Tax Rate
Increase"), (any such loss, failure to have or loss of the right to claim,
disallowance, recapture, delay in claiming, treatment, or Tax Rate Increase
referred to in any of the foregoing clauses is hereinafter called a "Tax Loss"),
then, the Rent for such Equipment shall, on the Rent payment date next following
the date of the Tax Loss and on each succeeding Rent Payment date, be increased
by the amount which, after deduction of all taxed to be paid by Lessor with
respect to the receipt of such amount, will maintain Lessor's Net Economic
Return at a level which is equal to the level that would have been available if
such Tax Loss had not occurred, plus an amount which after the deduction of any
additional taxed required to be paid to Lessor in respect of Lessor's receipt of
such amount, shall be equal to the amount of any interest, penalty or addition
to tax which may be imposed by the taxing authority. However, if this Lease has
terminated with respect to any item of Equipment prior to the time Lessee is
obligated to make the increased Rent payments to Lessor with respect to such
item of Equipment, Lessee shall pay Lessor, within 30 days from the date of
written notice by Lessor to Lessee, such lump sum as, after deduction of all
taxes required to be paid by Lessor with respect to the receipt of such amount,
shall be necessary to maintain Lessor's Net Economic Return in respect to such
Item of Equipment at a level which is equal to the level which would have been
available if such Tax Loss had not occurred, plus an amount which after
deduction of any additional taxes required to be paid to Lessor in respect of
Lessor's receipt of such amount, shall be equal to the amount of any interest,
penalty or addition to tax which may be imposed by a taxing authority having
jurisdiction in connection with such Tax Loss. A Tax Loss shall conclusively be
deemed to have occurred if either (a) deficiency shall have been proposed by the
Internal Revenue Service or other taxing authority having jurisdiction, or (b)
Lessor shall pay to the Internal Revenue Service or other taxing authority
having jurisdiction, a tax increase resulting from such Tax Loss, or (c)
Lessor's independent tax counsel shall have rendered its written opinion to
Lessor to the effect that such Tax Loss has occurred. The Casualty Loss Values
will be adjusted as necessary upon payment by Lessee of a Tax Loss.
(c) All demands for amounts payable to the Lessor hereunder
shall be accompanied by a written statement describing in reasonable detail the
related Tax Loss and the amounts so payable. Lessee agrees it will have no right
to inspect the tax returns of Lessor in order to verify the basis or the
accuracy of the calculations so made or the amounts set forth in any such
statement. Lessor hereby agrees to exercise in good faith its best efforts
(determined in the sole discretion of Lessor's independent tax counsel to be
reasonable, proper and consistent with the overall tax interest of Lessor) to
avoid a Tax Loss; provided, however, the Lessor has the sole discretion to
determine whether or not to undertake judicial or administrative proceedings
beyond the level of a federal or state auditing agent; and provided, further,
that Lessor shall not be required to take any action pursuant to this Section
unless and until Lessee irrevocably acknowledges in writing its obligation to
indemnify Lessor for the Tax Loss and any liability or loss which Lessor may
incur as a result of contesting such Tax Loss and shall have paid Lessor on
demand all costs and expenses which Lessor may incur in contesting such Tax
Loss.
(d) As used in this Section, the term "Lessor" includes the
affiliated group of corporations making a consolidated income tax return of
which Lessor is a member, and their respective successors and assigns. The term
"Net Economic Return" means Lessor's after-tax economic yield and periodic
recovery of after-tax cash flows on its investment, computed on the basis of the
same assumptions as were used by Lessor in originally evaluating this
transaction.
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(e) The representations, warranties, indemnities and agreements
of Lessee provided in this Section, and Lessee's obligations under any and all
thereof, shall survive delivery of the Equipment, and the expiration or
termination of this Lease.
14. ASSIGNMENT. (a) LESSOR MAY ASSIGN OR GRANT A SECURITY INTEREST IN
ALL OR ANY PORTION OF ITS RIGHTS UNDER THIS LEASE, OR UNDER ONE OR MORE
SCHEDULES (EACH OF WHICH SHALL BE CONSIDERED A SEPARATE LEASE) WITHOUT ANY
NOTICE TO OR CONSENT OF LESSEE. Lessee agrees that any grant of a security
interest or assignment or transfer by Lessor shall not materially change
Lessee's duties or obligations under this Lease, nor materially increase the
burdens or risks imposed on Lessee. After receiving due notice of any such
assignment, Lessee will warrant to "Assignee" (which term means any secured
party or any assignee, and their respective successors and assigns) such factual
matters concerning this Lease as the Assignee may request, and will acknowledge
in writing such assignment and promptly pay to Assignee, when due, the Rent and
any other payments that thereafter will become due to the Lessor hereunder,
despite any defense, setoff or counterclaim whatsoever, whether arising from any
breach or default by Lessor under this Lease or otherwise, that Lessee may from
time to time have against Lessor, but Lessee reserves its rights to have
recourse directly against Lessor on account of any such defense, setoff or
counterclaim. Any payments made by Lessee to Assignee pursuant hereto shall, to
the extent thereof, discharge the obligations of Lessee to Lessor hereunder.
Lessee agrees that any such transfer or assignment or grant of a security
interest shall be permitted even if it could be deemed to materially affect the
interests of Lessee. Lessee will not require Assignee to perform any obligations
of Lessor hereunder, but Lessor shall not be relieved of any such obligations to
Lessee by reason of any such assignment. Any Assignee will take such rights and
interests subject to the rights of Lessee to the Equipment during the term of
this Lease so long as Lessee is not in default hereunder. Any Assignee may
reassign the rights and interests assigned to it with the same effect as the
original assignment.
(b) LESSEE SHALL NOT RELINQUISH ITS POSSESSION OF THE EQUIPMENT, NOR
SHALL LESSEE ASSIGN, SUBLET, LEASE, SELL OR OTHERWISE DISPOSE OF THE EQUIPMENT
OR ANY INTEREST THEREIN, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT. No assignment
or sublease, if permitted by Lessor, shall release Lessee of its obligations
hereunder, and no consent to any one assignment or sublease, shall constitute
consent to any other or further assignments or subleases. This Lease and any
rights hereunder to the Equipment shall not inure to the benefit of any trustee
in bankruptcy, receiver, creditor, or trustee of Lessee or its property whether
by operation of law or otherwise without the written consent of Lessor, except
as otherwise provided by law.
15. DEFAULT. Any of the following events or conditions shall
constitute a "Default" hereunder: (a) Nonpayment of Rent or any other amount due
hereunder after the same becomes due, or default by Lessee in the performance of
any other obligation, term or condition of this Lease; (b) The entry of any
material judgment against Lessee or the issuance of any garnishment, attachment,
distraint, execution, tax lien, levy, charge or other writ of process against
any property of Lessee; (c) Death or legal incompetency of any individual
Lessee, or liquidation, dissolution, consolidation or termination of existence
of any Lessee which is a corporation, partnership or other business association
or entity; (d) The filing by or against Lessee of any petition under the
Bankruptcy Act, or any chapter thereof or any other federal or state statute or
rule providing for relief of debtors, arrangement, reorganizations,
receiverships, or the like; (e) Any assignment for the benefit of creditors,
agreement or composition with creditors or breach by Lessee of any of the terms
of any loan or credit agreement or default thereunder; (f) Any statement,
representation or warranty furnished by or on behalf of Lessee proving to have
been false, erroneous or misleading in any material respect at the time such
facts set forth were made; (g) A default occurs under any guaranty executed in
connection with this Lease. If Lessee's obligations hereunder are guaranteed by
any individual or entity, reference in this paragraph to "Lessee" shall also be
deemed to include a separate reference to each such Guarantor, as if the same
were expressly set forth this Lease.
16. REMEDIES. (a) Upon a Default, Lessor may, at its option, without
notice of its election and without demand, take any one or more of the
following, actions:
(i) declare due and payable and recover from Lessee the
Casualty Loss Value of the Equipment (determined as of the next date on which
payment is or would have been due after the declaration of a Default), together
with all other sums due hereunder with respect to such Equipment up to the date
of such declaration (the parties agree that such amount best reflects the
damages Lessor would sustain in the event of Lessee's bankruptcy or insolvency
and this Lease were not assumed and is intended to constitute liquidated damages
and not a penalty); (ii) declare due and payable, ▇▇▇ for and recover all Rent
and other payments hereunder, then accrued or thereafter due, with respect to
any or all of the Equipment, with Rent not yet due at the time of payment being
discounted to present value at an annual rate equal to one percent plus the
discount rate of the Federal Reserve Bank of Richmond in effect on the date of
such Default; (iii) take possession of and render unusable any or all of the
Equipment, wherever it may be located, without any court order or other process
of law
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and without liability for any damages occasioned by such taking of possession
(any such taking of possession shall constitute an automatic termination of
Lessee's rights under this Lease as it applies to those items taken without
further notice, and such taking of possession shall not prohibit Lessor from
exercising its other remedies hereunder); (iv) require Lessee to assemble any or
all of the Equipment at the location to or from which the Equipment may have
been moved by Lessee or such other location in reasonable proximity to either of
the foregoing as Lessor shall designate, or to return promptly, at Lessee's
expense, any or all of the Equipment to Lessor at a location designated by
Lessor, in the condition required by the terms of this Lease; (v) sell, lease or
otherwise dispose of any or all of the Equipment, whether or not in Lessor's
possession, at public or private sale and with or without notice to Lessee, and
apply the net proceeds of such sale, after deducting all costs of such sale
(including but not limited to costs of transportation, possession, storage,
refurbishing, advertising and brokers' fees), to the obligations of Lessee
hereunder with Lessee remaining liable for any deficiency and with any excess
being retained by Lessor; (vi) retain any repossessed Equipment and credit the
Reasonable Value thereof to the obligations of Lessee hereunder with Lessee
remaining liable for any deficiency and with Lessor having no obligation to
reimburse Lessee on account of any excess of such Reasonable Value over such
obligations; (viii) terminate or cancel this Lease as to any or all of the
Equipment; or (viii) exercise any other right or remedy available to Lessor at
law or in equity. As used herein, the term "Reasonable Value" means the fair
market value of such Equipment at the time of Default, taking into account a
reasonable estimate of all expenses necessary to effect a sale and the other
expenses recoverable by Lessor hereunder.
(b) If Lessee fails to pay any amounts which it has agreed to
pay, Lessor may at its sole option pay such amounts, and Lessee shall repay such
amounts to Lessor upon Lessor's demand. Lessee agrees to pay interest on any
amount due under this Section 15 from the date the same become due until the
date paid, at a rate equal to five percent (5%), per month on all sums remaining
unpaid.
(c) Unless otherwise provided above, a cancellation or
termination hereunder shall occur only upon written notice by Lessor to Lessee
and only with respect to such items of the Equipment as Lessor specifically
elects to terminate or cancel in such notice. Except as to such items of the
Equipment with respect to which there is a cancellation or termination, this
Lease shall remain in full force and effect and Lessee shall be and remain
liable for the full performance of all its obligations hereunder. Lessor may at
its option exercise all rights and remedies hereunder independently with respect
to each Equipment Schedule, and may declare a Default and exercise remedies with
respect to any one or more of such Equipment Schedules. However, unless
otherwise expressly agreed by Lessor, the occurrence of a Default with respect
to any Equipment Schedule shall constitute a Default with respect to all
Equipment Schedules.
(d) Lessee shall pay for any and all legal fees and other costs
and expenses incurred by Lessor in connection with the return of any Equipment
in accordance with the terms of this Lease, or in placing such Equipment in the
condition required by this Lease, or in collecting any amounts due under this
Lease. In the event that any court determines that any provision of this Section
is invalid or unenforceable in whole or in part, such determination shall not
prohibit Lessor from establishing its damages sustained as a result of any
breach of this Lease in any action or proceeding in which Lessor seeks to
recover such damages.
(e) CONFESSION OF JUDGMENT. Upon the happening of a Default, the
Lessee hereby authorizes and empowers any attorney of any court within the
United States to appear for each such person or any one or more of them in any
court in any one or more proceedings, or before any clerk thereof, and confess
judgment against such person, without prior notice or opportunity for a prior
hearing, in favor of Lessor for all amounts due hereunder, hereby waiving and
releasing to the extent permitted by law all errors and all rights of exemption,
appeal, stay of execution, inquisition and extension upon any levy on real
estate or personal property to which each such person may otherwise be entitled
under the laws of the United States or in any state thereof, now in force or
which may hereafter be passed.
(f) The parties agree that any action or proceeding arising out
of or relating to this Lease may be commenced in any state or Federal court of
competent jurisdiction in the State of Maryland and each party waives any
objection to venue. Each party agrees that a summons and complaint commencing an
action or proceeding in any such court shall be properly served and shall confer
personal jurisdiction if served personally or by certified mail to it at its
address designated pursuant hereto, or as otherwise provided under the laws of
the State of Maryland.
(g) All of the rights and remedies given to Lessor herein or by
law are cumulative and not alternative, may be exercised concurrently or
separately, and Lessor's bringing or any action for Lessee's obligations
hereunder or Lessor's exercise of any other remedy provided herein, shall not be
considered as an election of remedies or a waiver of Lessor's right to
possession of the Equipment. To the extent permitted by law, Lessee hereby
waives any rights now or hereafter conferred by statute or otherwise which may
obligate Lessor to sell, lease
7
or otherwise use the Equipment in mitigation of Lessor's damages or which may
otherwise limit or modify any of Lessor's rights and remedies.
(h) The omission by Lessor at any time to enforce any right
reserved to it upon a default, or to require performance of any of the terms,
covenants or provisions hereof by Lessee at any time, shall not be a waiver of
any such default or right to which Lessor is entitled nor shall in any way
affect the right of Lessor to enforce such provisions thereafter. The acceptance
of Rent by Lessor shall not be deemed a waiver of any prior existing breach, and
the acceptance by Lessor of a partial payment of Rent shall not be deemed to
waive Lessor's right to payment in full.
17. LESSEE WARRANTIES. Lessee warrants that this Lease and all
related documents are enforceable against the Lessee in accordance with their
terms. Lessee represents that it is not in default under any material agreement
by which it or any of its property is bound. Lessee agrees that the application,
statements and financial reports submitted by it to Lessor are material
inducements to the execution by Lessor of this Lease, and Lessee warrants that
such applications, statements and reports are, and all information hereafter
furnished by Lessee to Lessor will be, true and correct in all material respects
as of the date submitted. Lessee warrants that this Lease has been duly
authorized, and that no provision of this Lease is inconsistent with Lessee's
charter, bylaws, or any loan or credit agreement or other instrument to which
Lessee is a party or by which Lessee or its property may be bound or affected.
Lessee warrants that it has leased the Equipment solely for use in its business.
18. FURTHER ASSURANCE; FINANCIAL INFORMATION. Lessee will promptly
and duly execute and deliver to Lessor such further documents and assurances and
take such further action as Lessor may from time to time reasonably request in
order to carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
Lessor hereunder, including but not limited to the obtaining of waivers of any
interest in the Equipment from Lessee's landlord or secured creditors. Lessee
also agrees to furnish Lessor: (a) An audit report prepared by independent
certified public accountants, or other accountants acceptable to Lessor within
one hundred twenty (120) days after the close of each fiscal year of Lessee
occurring after the date of this Lease; (b) Balance sheets and statements of
cash flows as of the end of each quarterly period of Lessee's fiscal years
certified as accurate by an officer of Lessee within forty-five (45) days after
the close of each such quarterly period, and (c) From time to time such other
information as Lessor may reasonably request.
19. NOTICES. All notices required under this Lease shall be in
writing, and any notice shall become effective when deposited in the United
States mail, with proper postage for ordinary mail prepaid, addressed as
indicated below or at such other address as such party shall from time to time
designate for itself in writing to the other party. Any notice actually received
by any Lessee shall be effective as to that Lessee and all other Lessees.
20. LESSEE'S WAIVERS; LIMITATIONS. To the extent permitted by
applicable law, Lessee hereby waives any and all rights and remedies conferred
upon a Lessee by sections 2A-508 through 2A-522 of the UCC, including but not
limited to Lessee's rights to (i) cancel or repudiate this Lease; (ii) reject or
revoke acceptance of the Equipment; (iii) recover damages from Lessor for any
breaches of warranty or for any other reason; (iv) grant a security interest in
the Equipment in Lessee's possession or control for any reason; (v) deduct all
or any part of any claimed damages resulting from Lessor's default, if any,
under this Lease; (vi) accept partial delivery of the Equipment; (vii) "cover"
by making any purchase or lease of or contract to purchase or lease Equipment in
substitution for those due from Lessor; (viii) recover any general, special,
incidental or consequential damages, for any reason whatsoever, and (ix)
specific performance, replevin, detinue, sequestration, claim and delivery or
the like for any Equipment identified to this Lease. To the extent permitted by
applicable law, Lessee also hereby waives any rights now or hereafter conferred
by statute or otherwise which may require Lessor to sell, lease or otherwise use
any Equipment in mitigation of Lessor's damages as set forth in Paragraph 16 of
this Lease or which may otherwise limit or modify any of Lessor's rights or
remedies under Paragraph 16. Any action by Lessee against Lessor for any default
by Lessor under this Lease shall be commenced within one year after any such
cause of action accrues.
21. JURY TRIAL WAIVER. LESSEE AND LESSOR WAIVE ALL RIGHT TO TRIAL BY
JURY OF ALL CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS OF ANY KIND ARISING FROM
OR RELATING TO THIS LEASE. LESSEE AND LESSOR ACKNOWLEDGE THAT THIS IS A WAIVER
OF A LEGAL RIGHT AND THAT EACH MAKES THIS WAVIER VOLUNTARILY AND KNOWINGLY.
LESSEE AND LESSOR AGREE THAT ALL SUCH CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS
SHALL BE TRIED BEFORE A JUDGE, NOT A JURY.
8
22. SECURITY DEPOSIT. Lessee agrees to make a security deposit in the
amount, if any, set forth in the Lease Schedule prior to or concurrent with the
date of delivery, which security deposit Lessor may commingle freely with other
monies in its possession; however, at any time upon request of Lessee, Lessor
shall provide Lessee a statement as to sums presently on deposit. Lessor may, at
its election, use any portion of the security deposit to satisfy any of Lessee's
obligations hereunder including but not limited to the payment of Rent when due,
the reimbursement to Lessor of any sums paid by Lessor which under the terms of
this Lease are the obligations of Lessee, and the repair of Equipment upon
expiration of the term of said Lease. If, during the term of this Lease, it is
necessary for Lessor to make payments on behalf of Lessee to satisfy any of
Lessee's obligations hereunder, Lessee shall repay the amount of such payment
plus a finance charge computed at the rate of eighteen percent (18%) per anum
compounded monthly from the date of payment to the date of reimbursement (or
other such maximum under applicable law) to the Security Deposit on demand but
in no event later than the next Rent payment due date. Lessor shall credit that
amount to the security deposit in Lessee's name. Upon termination of the Lease
term, after Lessor or its agent has inspected the Equipment, Lessor will either
make full payment to Lessee of the security deposit without interest or pay to
the Lessee such sums as remain credited to said security deposit after Lessor
has fulfilled Lessee's obligation to return the Equipment in the manner
specified. A statement of the actual cost of such repairs or other necessary
maintenance or parts shall accompany any such payment.
23. LIMITED POWER OF ATTORNEY. The undersigned officer, does hereby
grant unto Lessor Power of attorney to sign and execute on Lessee's behalf,
documents which may be necessary to title any and all equipment, referred to in
this Master Lease Agreement, more fully described in the schedules executed by
Lessee, in the name of Lessor, or to otherwise secure Lessor's interest in the
equipment.
24. DUE ON SALE. The entire indebtedness under this agreement shall
become due and payable and in full at the option of Lessor, without notice, upon
a transfer, sale or conveyance of more than forty-nine percent (49%) of the
common or other voting stock of Lessee. The non-payment of such shall constitute
an additional event of default entitling Lessor to enforce the provisions of
paragraph 16 of the Master Lease Agreement.
25. PERSONAL PROPERTY TAXES. (Applicable in Jurisdictions Permitting
Lessee to List Equipment): Lessee agrees that it will (a) list all such
Equipment leased from Lessor, (b) report all property taxes assessed against
such Equipment and (c) pay all such taxes when due directly to the appropriate
taxing authority until Lessor shall otherwise direct in writing.
26. MISCELLANEOUS. This instrument constitutes the entire agreement
between the parties hereto. No representation or statement made by any
representative of Lessor not set forth in writing and signed by Lessor shall be
binding. Whenever the word "Lessor" is used herein, it shall include all
assignees of Lessor. If there is more than one Lessee which signs below, their
liability shall be joint and several. This Lease has been delivered and accepted
by Lessor in Maryland and the rights and obligations of the parties hereto in
the interpretation of this Lease shall be in accordance with the laws of the
State of Maryland.
WITNESS, the execution of this Master Lease Agreement, under seal, by
Lessor and Lessee.
LESSOR: LESSEE:
ALLSTATE LEASING, INC. AVATECH SOLUTIONS, INC.
By: /s/ [ILLEGIBLE] By: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------------------- ---------------------------
Title: [ILLEGIBLE] Title: CFO
------------------------ ------------------------
Address: ▇▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Owings Mills, MD. 21117
9
CASUALTY LOSS AND EARLY TERMINATION SCHEDULE
TO
MASTER LEASE AGREEMENT NO. E-385
LESSEE: AVATECH SOLUTIONS, INC.
This Schedule is attached to and made a part of the Master Lease
Agreement described above between Allstate Leasing, Inc. (Lessor) and Lessee and
applies to the equipment subject to the Master Lease Agreement described above.
The Casualty Value of any Unit shall be an amount equal to the product of the
Acquisition Cost of such unit times the percentage below corresponding to the
number of the last Rent payment received by Lessor, plus any unpaid Rent with
respect to the Rent payment period during which the applicable Event of Loss or
other termination occurred.
AFTER RENT AFTER RENT
PAYMENT NO. PERCENT OF COST PAYMENT NO. PERCENT OF COST
1 103.44 19 69.60
2 101.79 20 67.48
3 100.12 21 65.33
4 98.41 22 63.14
5 96.68 23 60.94
6 94.93 24 58.71
7 93.14 25 57.10
8 91.34 26 55.20
9 89.50 27 52.67
10 87.63 28 49.10
11 85.74 29 47.54
12 83.82 30 10.00
13 81.87
14 79.90
15 77.89
16 75.86
17 73.79
18 71.71
LESSOR: LESSEE:
Allstate Leasing, Inc. Avatech Solutions, Inc.
By: /s/ [ILLEGIBLE] By: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------------------- ---------------------------
Title: [ILLEGIBLE] Title: CFO
------------------------ ------------------------
FAIR MARKET VALUE PURCHASE OPTION
MASTER LEASE AGREEMENT NO. E-385
LESSEE: AVATECH SOLUTIONS, INC.
This Addendum is attached to and made a part of the
Master Lease
Agreement described above between Allstate Leasing, Inc. ("Lessor") and Lessee.
1. Provided that no Default has occurred and is continuing, the
Lessee shall have the right to purchase all but not less than all of the
Equipment at the expiration of the Basic Term at a price equal to the "Fair
Market Sales Value" (as defined below). Lessee shall give Lessor written notice
one hundred eighty (180) days prior to the end of the Basic Term of its election
to exercise or not to exercise the purchase option. If Lessee does not give
Lessor such notice, then Lessee shall have no further option under this
Addendum. If Lessee does give such notice, then it shall be bound to purchase
the Equipment for its Fair Market Sales Value. If Lessor and Lessee have not
agreed to the Fair Market Sales Value by the date which is one hundred twenty
(120) days before the Basic Term expires, then the Fair Market Sales Value shall
be determined by the Appraisal Procedure.
2. On the last day of the Basic Term, Lessee shall pay to Lessor the
purchase price, plus all sales taxes, and any other amounts then due and unpaid
under the Lease, upon delivery of a ▇▇▇▇ of Sale transferring and assigning to
Lessee the interest of Lessor in and to the Equipment which was originally
conveyed to Lessor, and containing a warranty against claims of persons claiming
by, through or under Lessor except claims which the Lessee assumed or is
obligated to discharge under the Lease. Lessor shall expressly disclaim any
representation or warranty as to the condition of the Equipment or any other
matters.
3. "Fair Market Sales Value" of the Equipment as of the expiration
of the Basic Term shall mean the open market cash purchase price that an
informed and willing person (other than a lessee-user in possession) would pay
for the Equipment in an arms-length transaction with a willing informed owner
under no compulsion to sell, assuming the Lessee has fully observed and
performed its obligation hereunder.
4. Appraisal Procedure" shall mean the following procedure for
determining Fair Market Sales Value of the Equipment. If Fair Market Sales Value
has not been agreed to by the date which is one hundred twenty (120) days before
the Basic Term expires, or if Lessee requests the Appraisal Procedure, then each
party shall select an appraiser within ten (10) business days of the giving of
such notice. If one party shall fail to appoint an appraiser within the required
time, the decision of the appraiser appointed by the other party shall be final.
If two appraisers are appointed, they shall confer and agree upon Fair Market
Sales Value. If they do not agree within twenty (20) business days after the
latter of them is appointed, then such two appraisers shall within five (5)
business days after such twentieth business day agree upon a third independent
appraiser who shall independently determine Fair Market Sales Value within (20)
business days of his acceptance of his appointment, and his determination shall
be final. If such two appraisers do not agree upon such third appraiser within
the time prescribed then either party may request the American Arbitration
Association to appoint such a third appraiser within twenty (20) business days
after such request is made, and both parties shall be bound by any appointment
made within such period. If no such appraiser shall have been appointed within
twenty (20) business days of such request to the American Arbitration
Association, either party may apply to any court having jurisdiction to make
such appointment. Any appraiser appointed pursuant to the foregoing procedure
shall be instructed to determine, within twenty (20) business days after his
appointment, Fair Market Sales Value of the Equipment then subject to this
Equipment Lease and his determination thereof shall be final. All expenses and
costs relating to the Appraisal Procedure shall be borne solely by the Lessee.
Fair Market Sales Value will not exceed ten percent (10%) of the original
acquisition cost.
LESSOR: LESSEE:
ALLSTATE LEASING, INC. AVATECH SOLUTIONS, INC.
By: /s/ [ILLEGIBLE] By: /s/ A. ▇▇▇▇ ▇▇▇▇▇ CFO
--------------------------- ---------------------------
1
OFFICER'S CERTIFICATE
The undersigned, V. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, of, Avatech Solutions, Inc., certifies that
the following persons are duly qualified and acting officers or authorized
agents of the Corporation, duly elected or appointed to the offices or positions
set forth opposite their respective names, and are authorized to execute on
behalf of the corporation, the Master Lease Agreement No. E-385, Equipment
Schedules with Exhibits and Riders, and any and all related documents, between
Allstate Leasing, Inc. and Avatech Solutions, Inc.
NAME TITLE SIGNATURE
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ CEO /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------- ------------- --------------------
▇▇▇▇▇ ▇▇▇▇▇ President /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------- ------------- --------------------
▇▇▇▇ ▇▇▇▇▇ CFO /s/ ▇▇▇▇ ▇▇▇▇▇
--------------- ------------- --------------------
In WITNESS HEREOF, the undersigned officer has executed this Certificate as of
July 17, 2001.
By: /s/ V. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------
Executive VP.