MASTER EQUIPMENT LEASE AGREEMENT
LESSEE: American Communications LESSOR: AT&T Credit Corporation
Services, Inc.
Street Address: 131 National Business Address: 00 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxx 000 Xxxxxxxxxx, XX 00000-0000
City, State, Zip: Annapolis Junction, Lease Number: 960823
Maryland 20701
1. AGREEMENT. Lessor agrees to lease to Lessee and Lessee
agrees to lease from Lessor the equipment (Equipment) described in any schedule
(Schedule) that incorporates this Master Equipment Lease Agreement (Agreement)
by reference. The Equipment to be leased under the Schedules shall be up to
eight Network Systems 5ESS Systems with total purchase prices not to exceed
$11,700,000 in the aggregate, subject to upward adjustment by Lessor in its
discretion. A Schedule shall incorporate this Agreement by reference by listing
the above-referenced Lease Number thereon. Such lease shall be governed by the
terms and conditions of this Agreement, as well as by the terms and conditions
set forth in the applicable Schedule. Each Schedule shall constitute an
agreement separate and distinct from this Agreement and any other Schedule. In
the event of a conflict between the provisions of this Agreement and a Schedule,
the provisions of the Schedule shall govern.
2. ASSIGNMENT OF PURCHASE DOCUMENTS; TRANSACTION COSTS. (a)
Lessee shall execute and deliver to Lessor a writing acceptable to Lessor
whereby Lessee: (1) confirms Lessor's title to, and ownership of, the Equipment
described in the applicable Schedule and (2) assigns all of Lessee's rights and
interest in and to any purchase order, contract or other documents
(collectively, Purchase Documents) relating thereto that Lessee has entered into
with Lucent Technologies Inc. (Seller) solely as such rights and interest relate
to such Equipment. By executing the applicable Schedule, Lessee represents and
warrants (i) that Lessee has reviewed, approved and received a copy of the
applicable Purchase Documents, (ii) that Lessee may have rights under the
Purchase Documents and (iii) that Lessee may contact Seller for a description of
such rights.
(b) If any funding of the purchase price of any item of
Equipment occurs on any "Funding Date" (as defined in Section 4 below), Lessor
will be responsible for and provide the funds to pay transaction expenses
(Transaction Expenses), including the reasonable attorneys' fees and expenses of
counsel to Lessor and the Lessee and the fees and expenses of Lessee's financial
advisor, solely to the extent that the Transaction Expenses do not exceed those
set forth in the Pricing Assumptions on Appendix A hereto. Lessee shall be
responsible for and provide the funds to pay Transaction Expenses in excess of
such amount and shall pay all Transaction Expenses if no funding of the purchase
price of items of Equipment occurs prior to October 31, 1996 (other than as a
result of a breach of this Agreement by Lessor) or if Lessee decides not to
proceed with the transactions contemplated herein as a result of any event
described in Section 4(iv) or 4(v).
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3. DELIVERY; ACCEPTANCE. Lessee shall cause the Equipment to
be delivered to Lessee and installed at the Equipment Location (as specified in
the applicable Schedule) and Lessee shall promptly begin acceptance testing
pursuant to agreed upon test plans and procedures with Seller to determine
whether the Equipment meets acceptance criteria. Final acceptance shall be
deemed to occur upon the earliest of the following (Final Acceptance Date): (i)
successful completion of acceptance testing; (ii) the end of the forty-fifth day
following the date installation is completed, unless, prior to such date,
acceptance testing has disclosed the existence of any material defect affecting
the ability of the Equipment to perform as warranted by Seller, at which time
the testing period will be suspended, with testing to resume upon correction of
the material defect; (iii) Lessee's failure to commence acceptance testing
within five working days after the date installation is completed; (iv) Lessee's
failure after commencement of acceptance testing to continue acceptance testing
in accordance with the acceptance procedures agreed upon with the Seller; or (v)
Lessee's written acknowledgment of acceptance of the Equipment. At Lessor's
option, if the Equipment has not been accepted within 180 days after delivery of
the Equipment to the Equipment Location, the Equipment shall be deemed to have
suffered an "Event of Loss" (as defined in Section 13 below). Lessee shall
evidence its final acceptance of the Equipment by executing and delivering to
Lessor an acceptance certificate (Acceptance Certificate) in the form of Exhibit
D attached hereto, which shall establish Lessee's irrevocable acceptance of such
Equipment.
4. CONDITIONS PRECEDENT; PURCHASE OF EQUIPMENT. Lessor shall
have no obligation to purchase items of Equipment from Seller unless on the date
of the execution and delivery of the Schedule relating thereto all of the
following conditions shall be satisfied: (i) no "Event of Default" (as defined
in Section 19) exists; (ii) no event has occurred and is continuing that with
notice or the lapse of time or both would constitute an Event of Default
("Potential Default"); (iii) on or prior to the date of the execution of the
initial Schedule, Lessee's counsel has delivered to Lessor opinion letters in
form and substance satisfactory to Lessor with respect to the transactions
contemplated herein; (iv) on or prior to the date of the execution of the
initial Schedule, no change in law shall have occurred that, in the reasonable
judgment of Lessor or Lessee renders the transactions contemplated herein
uneconomic; (v) Lessor shall have received certificates of insurance
demonstrating compliance by Lessee with the requirements of Section 8; (vi) on
or prior to the date of the execution of the initial Schedule, Lessor shall have
received a certificate of the Secretary of the Lessee as to the incumbency of
the officers of the Lessee, the due authorization of the transactions
contemplated by this Agreement, and the accuracy of Lessee's by-laws, a copy of
which shall be attached thereto; (vii) Lessee shall have executed and delivered
to Lessor appropriate Uniform Commercial Code Financing Statements to be filed
for precautionary purposes with respect to the Equipment Location; (viii) Lessee
shall have delivered to Lessor landlord waivers in form and substance
satisfactory to Lessor with respect to the Equipment Location; (ix) Seller shall
have consented in writing to the assignment of the Purchase Documents to Lessor;
(x) Lessee shall have executed and delivered to Lessor the Schedule and
Commencement Certificate in the form of Exhibit C attached hereto ("Commencement
Certificate") relating to the items of Equipment to be purchased by Lessor from
Seller, which Commencement Certificate shall be dated as of the date such
Equipment is delivered by Seller to Lessee (Commencement Date); and (xi) on or
prior to the date of the execution of the initial Schedule, Seller shall execute
in favor of Lessee a Confirmation Agreement in form and substance satisfactory
to Lessee. Upon satisfaction of all the conditions precedent, Lessor shall be
obligated to purchase the Equipment from Seller in accordance with the terms of
the Purchase Documents, including the payment to Seller for each item of
Equipment, of thirty-seven and one-half percent (37.5%) of the purchase price
thereof thirty days after shipment, thirty-seven and one-half percent (37.5%) of
the purchase price thereof thirty
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days after the date installation thereof is completed, and twenty-five percent
(25%) of the purchase price thereof thirty days after the Final Acceptance Date
(each of the above payment dates being a "Funding Date") and to lease the
Equipment to Lessee.
5. TERM. The initial term of each Schedule (Initial Term)
shall begin on the Commencement Date (regardless of whether the Final Acceptance
Date has occurred) and shall continue for the period specified in such Schedule.
Any renewal term of a Schedule (Renewal Term) shall begin on the expiration of,
as applicable, the Initial Term or any preceding Renewal Term (collectively,
Term). The then current Initial Term or the Renewal Term is sometimes referred
to hereinafter as the Applicable Term.
6. RENT; LATE CHARGES. Lessee shall pay Lessor the periodic
Rental Payments specified in the applicable Schedule quarterly in arrears
beginning three months after the applicable Commencement Date, regardless of
whether Lessee has received notice that such Rental Payments are due.
Additionally, if pursuant to this Agreement or the applicable Schedule the term
is extended or a renewal option exercised, Lessee shall also pay all Rental
Payments required with respect thereto. All Rental Payments will be sent to
Lessor's above-referenced address, or to such other address as specified by
Lessor in writing. The Rental Payments are based on the methodology and
assumptions set forth in Appendix A (the "Pricing Assumptions") subject to
adjustment as set forth in Section 7. Lessee agrees to pay Lessor interest on
any Rental Payment (or other amount due hereunder) that is not paid within ten
days of its due date at the rate of 1 1/2% per month on any such amounts (or
such lesser rate as is the maximum rate allowable under applicable law). Also,
in the event that more than one Schedule is entered into hereunder, the parties
will use their best efforts to implement a common billing date for all
Schedules.
7. TAX INDEMNITY; ADJUSTMENTS. (a) This Agreement has been
entered into on the basis of the following Tax Assumptions:
(1) the Federal rate of income tax on Lessor's taxable income will be
35% and the assumed state tax rate on Lessor's taxable income will be 7% (the
"State Rate");
(2) Lessor will have sufficient taxable income to utilize all
deductions arising hereunder;
(3) Lessor will be entitled, for Federal income tax purposes, to
depreciation deductions with respect to each item of Equipment, computed on the
basis that the Equipment is "5-year property" within the meaning of section
168(e) of the Internal Revenue Code of 1986, as amended and in effect on the
date hereof (the "Code") by using the 200% declining balance method, switching
to the straight-line method for the first taxable year of Lessor for which such
method yields a larger allowance, by assuming the salvage value is zero, by
using a 5-year recovery period and a half-year convention, and by assuming a
full first tax year ("Depreciation Deductions");
(4) the initial tax basis of the Equipment for purposes of computing
Depreciation Deductions will be equal to the Total Purchase Prices thereof set
forth on the Schedules;
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(5) Lessor will be entitled to amortize the Transaction Expenses on a
straight-line basis over a period not longer than the initial Terms for the
Schedules (the "Amortization Deductions");
(6) at all times during any Applicable Term, Lessor will be treated as
the owner and lessor of the Equipment for Federal and state income tax purposes,
Lessee, as the lessee thereof, and the lease as a "true lease";
(7) Lessor will be entitled to claim depreciation and amortization
deductions for state income tax purposes to the same extent and at the same time
as the Depreciation Deductions and the Amortization Deductions are deducted for
Federal income tax purposes (the "State Tax Deductions");
(8) Lessor will not at any time during any Applicable Term be required
to include in its gross income for Federal, state, local or foreign income tax
purposes any amounts attributable to the Equipment or the transactions and
activities contemplated by this Agreement other than: (i) Rental Payments, in
the amounts and at the times accrued in accordance with the terms of the
Schedules, (ii) Stipulated Loss Value or Termination Value, in each case reduced
as appropriate by Lessor's adjusted tax basis in the Equipment, (iii) any amount
to the extent offset by deductions (other than Depreciation Deductions,
Amortization Deductions or State Tax Deductions) of the same character in the
taxable year of Lessor in which such amounts are included in income, (iv) any
amount paid by Lessee pursuant to the exercise of any purchase option to the
extent the amount exceeds Lessor's adjusted tax basis in the Equipment, and (v)
any other amounts to the extent such amounts are calculated so as to include an
indemnification for taxes payable by Lessor as a consequence of the receipt or
accrual thereof (the inclusion in Lessor's gross income of any amount not
described in clauses (i) through (v) being hereinafter referred to as an "Income
Inclusion");
(9) in each of Lessor's tax years during any Applicable Term, one
hundred percent of the aggregate income, gain, loss and deductions with respect
to the transactions contemplated by this Agreement will be treated as derived
from, or allocable to, sources within the United States of America within the
meaning of section 861 of the Code; and
(10) Lessor is an accrual basis calendar year taxpayer.
(b) Lessee represents and warrants that during the Applicable Term of
each Schedule:
(1) assuming that Lessor is and will remain the owner of, and is and
will remain in a trade or business with respect to, the Equipment, the Equipment
in the hands of Lessor, after delivery and acceptance under Section 3 of the
Agreement, will have been "placed in service" within the meaning of sections 167
and 168 of the Code and will not require additions or modifications to make it
suitable for its intended use;
(2) the initial tax basis of the Equipment for purposes of computing
Depreciation Deductions will be equal to the Total Purchase Prices thereof set
forth on the Schedules;
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(3) the factual information about the Equipment provided in writing to
Lessor by Lessee or any officer, employee, agent, servant or affiliate of Lessee
was accurate upon delivery and on the Commencement Date for the initial
Schedule;
(4) on the applicable Funding Date, no member of the Lessee Group (as
defined in Revenue Procedure 75-21, 1975-1 C.B. 715, as modified by Revenue
Procedure 79-48, 1979-2 C.B. 529) of which Lessee is a member will have, nor
will it acquire at any time during any Applicable Term, any investment in any
item of Equipment within the meaning of Section 4(4) of Revenue Procedure 75-21,
1975-1 C.B. 715, as modified by Revenue Procedure 79-48, 1979-2 C.B. 529, that
is not permitted thereunder;
(5) neither Lessee, any sublessee of any item of Equipment or any other
person using or possessing an item of Equipment, including any trustee,
receiver, liquidator, or debtor in possession (other than the Lessor, or a
person acting through the Lessor) or any affiliate, transferee, agent,
sublessee, employee, successor or assign of any of the forgoing (a "Lessee
Person") will claim depreciation deductions as owner of the Equipment for
Federal and state income tax purposes unless the Internal Revenue Service has
made a final determination that Lessor is not the owner of the Equipment for
Federal income tax purposes (except as to severable modifications not financed
by Lessor);
(6) the Equipment will not constitute "tax-exempt use property" as
defined in section 168(h) of the Code solely as a result of the status of (i)
Lessee or (ii) any assignee or sublessee of Lessee's interest in the Equipment
(other then Lessor, any affiliate of Lessor, or any person claiming use of any
item of Equipment by or through Lessor);
(7) the Equipment will not be utilized in foreign service beyond that
which is permitted under section 861(c) of the Code to meet one hundred percent
United States source requirements;
(8) assuming that Lessor is treated as the owner of the Equipment for
Federal income tax purposes, such Equipment will qualify for 5-year Depreciation
Deductions;
(9) the Equipment will not be "limited use property" (as defined in
Revenue Procedure 75-28, 1975-1 C.B. 752 and Revenue Procedure 76-30, 1976-2
C.B. 647), and no Lessee Person will make any improvement, modification, or
addition to any item of Equipment to cause such Equipment to become limited use
property;
(10) no Lessee Person will use any item of Equipment in a way that will
cause the Equipment to be deemed used predominantly outside the United States of
America; and
(11) no Lessee Person shall at any time during any Applicable Term
either abandon any item of Equipment or cease to use any item of Equipment in
its normal business activities (except during temporary periods of non-use which
are normal in Lessee's business).
(c) (1) If as a result of (i) any act or omission (other than an act or
omission which is expressly required by the terms of this Agreement), (ii) the
failure of any Lessee Person to take any action required under the terms of this
Agreement (other than an omission which is expressly required by the terms of
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this Agreement), (iii) the breach or inaccuracy of any representation, covenant
or warranty contained in Section 7(b), or (iv) any replacement, modification,
substitution or improvement of the Equipment whether or not required or
permitted, Lessor shall lose the right to claim or shall not claim (as the
result of advice by independent tax counsel, selected by Lessor, to the effect
that there is no substantial authority (as defined in Treasury Regulation
Section 1.6662-4(d)) for such claim), shall suffer a disallowance of, or shall
be required to recapture, all or any portion of any tax benefit with respect to
any item of Equipment, or shall be required to make an Income Inclusion (any
such event hereinafter referred to as a "Tax Loss"), then Lessee shall indemnify
Lessor for such Tax Loss as provided in Sections 7(c)(2) and (3) hereof. It
shall be conclusively presumed that Lessor shall have suffered a loss of State
Tax Deductions at the State Rate in the event Lessor suffers a loss of
Depreciation Deductions or Amortization Deductions.
(2) In the event Lessor shall suffer a Tax Loss as described in Section
7(c)(1), Lessee shall pay to Lessor as an indemnity, on the next succeeding
Payment Date after written notice to Lessee by Lessor of such Tax Loss such
amount or amounts as, in the reasonable opinion of Lessor, shall cause Lessor's
net after-tax cash flows and net after-tax yield (the "Net Economic Return") to
equal the Net Economic Return that would have been realized by Lessor if such
Tax Loss had not occurred, and shall be based upon the same assumptions,
specifically including the assumptions set forth in Section 7(a) hereof (except
as such assumptions should be modified as a result of such Tax Loss) and pricing
analysis used by Lessor in determining the amount of the periodic Rental
Payments, and such amount or amounts shall take into account any subsequent or
offsetting tax benefits realized or to be realized by Lessor as a result of such
Tax Loss; provided, however, that if all Applicable Terms under the Schedules
shall have expired prior to the time any such payment would be due, all such
payments shall be payable by Lessee in a lump sum not later than 30 days after
written demand by Lessor.
(3) The accuracy of the calculation set forth in Section 7(c)(2) shall
be subject to verification, upon the request of Lessee, by an accounting firm
selected by Lessor and approved by Lessee, which approval shall not be
unreasonably withheld. In order to enable such accountants to verify such
calculations, Lessor shall provide to such accountants (for their own
confidential use and not to be disclosed to Lessee or any other person and
subject to the execution of a satisfactory confidentiality agreement) all
information reasonably necessary for such verification, including any computer
analyses used by Lessor to calculate such amount or amounts. Such accountants'
determination shall be binding upon Lessor and Lessee. The cost of such
verification shall be borne by Lessee unless it is determined that the actual
amount payable deviates by more than 10% from the amount originally determined
by Lessor, in which case such costs will be borne by Lessor.
(d) Notwithstanding anything to the contrary set forth in Section 7(c),
Lessor shall not be entitled to any payment under Section 7(c) in respect of any
Tax Loss arising as a direct result of one or more of the following events:
(1) an amendment to, or change in, the Code, any Regulation thereunder,
any published Revenue Ruling or other document of the Treasury or the Internal
Revenue Service, any applicable state statutes, regulations, or similar
documents, or the rate of tax under the laws of the United States or of any
state on the taxable income of corporations, which is promulgated or enacted
after the Commencement Date;
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(2) the imposition of the provisions of the alternative minimum tax
pursuant to section 55 of the Code or any other minimum tax or alternative
minimum tax under applicable state or local income tax laws;
(3) a claim or determination that the lease is not a "true lease" for
tax purposes or that Lessor is not the owner or lessor of any item of Equipment,
other than as a direct result of a breach of any of Lessee's representations,
covenants or warranties under this Agreement, or as a direct result of any act
or omission of Lessee (other than an act or omission which is expressly required
by the terms of this Agreement);
(4) the failure of Lessor to claim in a timely or proper manner any
Depreciation Deductions or Amortization Deductions (unless Lessor obtains an
opinion of independent tax counsel, selected by Lessor, to the effect that
substantial authority, as defined in Treas. Reg. Section 1.6662-4(d), to so
claim does not exist);
(5) a failure of Lessor to have sufficient taxable income to utilize
the Depreciation Deductions or Amortization Deductions or the inability of
Lessor to utilize such Deductions;
(6) a sale, transfer or other disposition by Lessor of any interest in
any item of Equipment other than a sale or other transfer pursuant to Lessor's
exercise of remedies following an Event of Default;
(7) any claim or assessment of Lessor for the environmental tax
imposed by section 57 of the Code to which Lessor is subject from time to time;
(8) the application of section 465, 467 or 469 of the Code;
(9) any tax election made by Lessor or any status of Lessor that is
inconsistent with the Tax Assumptions; or
(10) a claim or determination that Lessor is not holding the Equipment
in the ordinary course of a trade or business or that Lessor did not enter into
the transaction for profit.
(e) If, by reason of any indemnity payment made by Lessee to Lessor
pursuant to this Section 7, Lessor subsequently realizes a Federal, state or
local income tax benefit not previously taken into account in computing the
amount of such indemnity payment (and provided that no Event of Default shall
have occurred and be continuing and that Lessee shall have made all payments
then due and owing to Lessor under this Agreement), Lessor shall pay to Lessee
an amount equal to the sum of (1) the actual reduction in Federal, state and
local income taxes realized by Lessor and attributable to such tax benefit, and
(2) the actual reduction in Federal, state and local income taxes realized by
Lessor as a result of its payment pursuant to this Section 7(e); provided,
however, that Lessor shall not be obligated to make any payment pursuant to this
Section 7(e) in excess of the amount of all prior indemnity payments from Lessee
to Lessor pursuant to this Section 7, less all prior payments from Lessor to
Lessee pursuant to this Section 7(e).
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(f) In the event a claim shall be made by the Internal Revenue Service
which, if successful, would result in a Tax Loss under circumstances which would
require Lessee to indemnify Lessor for such Tax Loss, Lessor hereby agrees to
notify Lessee promptly in writing of such claim, to forebear payment of the tax
claimed for at least 30 days after such notice, to give to Lessee any relevant
information requested by it relating to such claim which may be particularly
within the knowledge of Lessor, other than Lessor's tax returns, and, if Lessee
shall request, within 30 days after such notice, that such claim be contested,
to take such action in connection with contesting such claim as Lessee shall
reasonably request in writing from time to time, but only if Lessee shall,
contemporaneously with such initial request, have (1) acknowledged its
obligation to indemnify Lessor for such claim pursuant to this Section 7 in the
event that the contest is unsuccessful, (2) made provision for Lessor's
indemnification in a manner reasonably satisfactory to Lessor for any liability
or loss which Lessor may from time to time incur as a result of contesting such
claim, and reimbursement, on an After-Tax Basis (as defined below), for all
costs and expenses including (without limitation) reasonable legal fees and
expenses, which Lessor may incur in connection with contesting such claim, and
(3) furnished Lessor with an opinion of independent tax counsel, reasonably
satisfactory to Lessor, to the effect that there is substantial authority within
the meaning of Treas. Reg. ss.1.6662-4(d) in favor of the allowance of the item
proposed to be adjusted. Lessor shall make reasonable efforts to advise Lessee
of all action taken or proposed to be taken by the Internal Revenue Service and
of all action proposed to be taken by Lessor, and shall consider in good faith
any suggestions of Lessee relating to the conduct of any contest hereunder and
shall use its best efforts to permit Lessee upon request reasonable opportunity
to review the content of documentation, protests, memoranda of fact and law,
briefs, and stipulations of fact, each relating exclusively to a proposed
adjustment in the income taxes of Lessor for which Lessee would be required to
indemnify Lessor pursuant to this Section 7. In no event shall Lessor be
required to contest any claim if an Event of Default shall have occurred and be
continuing, nor shall Lessor be required, whether or not an Event of Default has
occurred and is continuing, to continue any contest of any claim beyond the
level of administrative proceedings with the Internal Revenue Service unless the
amount of the indemnity payment Lessee would be obligated to make hereunder with
respect to the claim being contested shall exceed $100,000, in which case Lessor
shall not be required to continue such contest beyond a Federal court of primary
jurisdiction; provided, however, that if Lessor prevails in a Federal court of
primary jurisdiction and the Internal Revenue Service files an appeal, Lessor
shall make reasonable efforts to sustain the decision of the Federal Court of
primary jurisdiction. Lessor shall not be required to contest any claim if the
subject matter thereof shall be of a continuing nature and shall have previously
been decided adversely in a contest conducted pursuant to this Agreement.
Notwithstanding anything to the contrary in this Section 7(f), Lessor need not
initiate or continue any contest of a claim with respect to which it has waived
in writing its right to any indemnity under Section 7(c) of this Agreement. In
the event that Lessor is obligated hereunder to proceed to a Federal court of
primary jurisdiction and a decision is made to pay the tax and xxx for a refund,
Lessee shall make Lessor an interest-free loan in the amount of such tax and, to
the extent attributable to a disallowance for which Lessee is obligated to
indemnify Lessor under this Section 7, related interest, fines, penalties and
additions to tax.
(g) Economic Factors Adjustment. In addition, the amount of
each periodic Rental Payment remaining to be paid during the Applicable Term,
the Stipulated Loss Value Factors, the early buyout amount and the Termination
Value Factors described in the Schedules (collectively, the Economic Factors)
(and for any adjustments set forth in (i) below, the EBO Date (as defined in
Section
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18(a)) will also be adjusted) may be adjusted upwards or downwards, as the case
may be to preserve the Lessor's Net Economic Return, through both the EBO Date,
and the expiration of the Initial Term, as initially anticipated by the Lessor
in approving the transactions contemplated by this Agreement in the event that
(i) with respect to any Schedule, on or prior to its Commencement Date, the
Pricing Assumptions described on Appendix A hereto (other than that the Lessor
is the owner of the Equipment for federal or state tax purposes) are other than
as originally assumed; or (ii) the actual amount and timing of the Transaction
Expenses are different than as assumed in the Pricing Assumptions.
(h) Purchase Price Adjustment. The Total Purchase Price (as
specified in the applicable Schedule) and Rental Payment set forth in each
Schedule are estimates, and if the final invoice from Seller specifies a Total
Purchase Price (including taxes, delivery, installation and other charges) that
is greater or less than such estimated Total Purchase Price, Lessee hereby
authorizes Lessor to adjust the Total Purchase Price and Rental Payment on the
applicable Schedule to reflect the final invoice amount (Final Invoice Amount).
However, if the Final Invoice Amount exceeds the estimated Total Purchase Price
by more than 10%, Lessor will notify Lessee and obtain Lessee's prior written
approval of the aforementioned adjustments; provided, however that such written
approval shall not be required when such adjustments are caused by Equipment
changes or system reconfigurations requested or caused by Lessee. All references
in this Agreement and in any Schedule to Total Purchase Price and Rental Payment
shall mean the estimates thereof specified in the applicable Schedule, as
adjusted pursuant to this Section 7.
(i) Interest Rate Adjustment. On the first Funding Date with
respect to each Schedule the Lessor will adjust the Lessee's implicit interest
rate (upwards or downwards) with respect to the Equipment being funded on such
date by eighty-five percent (85%) of any change in the ask yield for U.S.
Treasury Notes maturing in the month and year closest to four years after the
applicable Funding Date) equal to or greater than fifteen (15) basis points from
6.7% per annum and maintain a similar rental pattern, as set forth in the
Eastern Edition of The Wall Street Journal two business days prior to such
Funding Date.
(j) FAS 13. No adjustment to the Economic Factors shall be
permitted to cause the lease of any Equipment hereunder not to be treated with
respect to the Lessee as an operating lease under Financial Accounting Standard
13.
8. INSURANCE. At its own expense, Lessee shall provide and
maintain, with carriers rated A or better by A.M. Best, with respect to the
Equipment, commercial general liability and property insurance in such amounts,
against such risks and with such deductibles as are typical in the industry for
telecommunications lease transactions, and as are acceptable to Lessor. In no
event shall the amount of property insurance coverage for the Equipment be less
than the Stipulated Loss Value of the Equipment. Self-insurance shall be
permitted only with the prior written approval of Lessor. Lessor shall be named
as an additional insured on all liability insurance policies. Each property
insurance policy shall contain the insurer's agreement to give Lessor 30 days'
prior written notice before cancellation or material change thereof, and shall
name Lessor as loss payee with respect to any aggregate claim thereunder in
excess of $500,000. Each property insurance policy shall also provide that as to
the Lessor insurance shall not be invalidated by any act, omission or breach by
Lessee. Any proceeds of property insurance carried and paid for by Lessee in
excess of the Stipulated
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Loss Value of the Equipment shall be for the benefit of the Lessee. Each
commercial general liability insurance policy shall name Lessor as an additional
insured. Lessee shall deliver to Lessor the insurance policies or copies thereof
or certificates of such insurance on or before the Commencement Date of the
applicable Schedule, and/or before renewal.
9. TAXES. (a) Lessee shall reimburse, protect, save and keep
harmless Lessor, its affiliates and their directors, officers, employees, agents
and representatives, on an After-Tax Basis (as defined below), against (or pay
directly, but only if instructed by Lessor) all taxes, fees, duties,
governmental charges and assessments, of any nature whatsoever, including
interest, fines, additions to tax, and penalties thereon, imposed by any taxing
authority with respect to the Equipment, on its purchase, ownership, delivery,
possession, transportation, operation, rental, return to Lessor or its purchase
by Lessee, transfer of title, registration, or otherwise with respect to or in
connection with the transactions contemplated by this Agreement, including, but
not limited to, sales and use taxes, property taxes and all license and
registration fees (collectively, "Taxes"). Lessee shall reimburse Lessor for
(or, with Lessor's consent, directly pay) these Taxes pursuant to this Section 9
whether they are imposed upon Lessor, any other indemnified person, Lessee, the
Equipment or this Agreement. Lessee shall not be required to reimburse Lessor
pursuant to this Section 9 for the following: (1) taxes based upon, measured by,
or with respect to net or gross income, receipts, minimum tax, capital,
franchise or net worth imposed by the United States of America or by any state,
local or foreign jurisdiction (other than sales, use, property, rental, lease,
ad valorem or value-added taxes (other than a value-added tax that replaces a
tax imposed on net or gross income)); (2) taxes on items of tax preference or
any minimum tax; (3) taxes resulting from Lessor's disposition (whether
voluntary or involuntary) of the Equipment or of any interest therein (other
than taxes resulting from a transfer or disposition after an Event of Default
has occurred and while such Event of Default is continuing, or in connection
with a Loss, or from any replacement of the Equipment by Lessee, or from any
voluntary termination of this Agreement by Lessee); (4) taxes resulting from
either the willful misconduct or gross negligence of Lessor or from the breach
of Lessor's representations, warranties or obligations under this Agreement; (5)
taxes which arise out of or are caused by any act or omission of Lessor where
such act or omission is expressly prohibited by this Agreement; (6) taxes
related to the Equipment in respect of any period after the expiration or early
termination of the Applicable Term relating thereto and return of the Equipment
in accordance with Section 18 hereof; and (7) taxes imposed against a transferee
or assignee, if any, of Lessor to the extent of the excess of such taxes over
the amount of taxes which would have been imposed had there not been such an
assignment or transfer.
(b) Notwithstanding Section 9(a) above, Lessee's obligation to pay,
reimburse or hold harmless Lessor for Taxes in the nature of or in lieu of
sales, use, transfer or similar types of Taxes, including interest, fines,
additions to tax and penalties, if any, thereon (collectively, "Sales Tax"),
arising out of Lessor's acquisition and leasing of the Equipment, or any
replacement of the Equipment by Lessee, shall be conditioned upon Lessor's
delivering to the Seller (in the case of Lessor's acquisition of the Equipment)
and to Lessee (in the case of any replacement by Lessee) such properly completed
and validly executed resale certificates or similar documents as may timely be
reasonably requested in writing by Lessee, within 10 business days of such
request. Lessor shall register for Sales Tax purposes with the taxing
authorities in all applicable jurisdictions as necessary to permit Lessor to
perform its obligations under this Section 9(b).
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(c) Where required by an applicable jurisdiction, Lessee shall pay to
Lessor Sales Tax on that portion of the total amount of each Rental Payment
allocable to each item of Equipment calculated at the tax rate applicable to the
jurisdiction in which each respective item of Equipment is located on the
Commencement Date. Lessor shall report and remit such Sales Tax as required by
the applicable jurisdiction. In the event that Sales Tax is imposed by any state
taxing authority attributable to the Rental Payments, in excess of that paid by
Lessee to Lessor pursuant to this Section 9(c), Lessee shall reimburse Lessor
(or pay directly, but only if instructed by Lessor), on an After-Tax Basis, for
all such additional taxes, including, interest, fines, additions to tax and
penalties thereon.
(d) Unless otherwise required by law, upon commencement of the
Applicable Term, Lessee shall be responsible for reporting the Equipment for ad
valorem property tax purposes where applicable and Lessor shall not include the
Equipment in any ad valorem or other similar tax returns filed by Lessor.
(e) If any claim is made against Lessor, by commencement of proceedings
against Lessor or otherwise, for Taxes, including interest, fines, additions to
tax, and penalties thereon for which Lessee would have a reimbursement or
payment obligation pursuant to this Section 9, Lessor shall as soon as
reasonably practical notify Lessee of such claim in writing; provided, however,
that Lessor's failure to provide such notice shall not reduce Lessee's
obligations under this Section 9 except to the extent that such failure
materially prejudices Lessee's ability to pursue its contest rights hereunder.
Lessee may, at its expense, in good faith and by appropriate administrative or
legal proceedings, contest or defend an asserted claim or liability for which it
is indemnifying Lessor under this Section 9, so long as (1) no Event of Default
shall have occurred and be continuing, and (2) in the reasonable opinion of
Lessor, such contest or defense is being diligently conducted by persons
reasonably satisfactory to Lessor. To the extent permitted by law, any contest
or defense conducted pursuant to this Section 9(e) may be conducted by Lessee
either in its own name or, if required by the applicable jurisdiction, in
Lessor's name. Lessee shall reimburse Lessor, on an After-Tax Basis, for all
costs and expenses, including (without limitation) reasonable legal fees and
expenses, which Lessor may incur in connection with such contest or defense.
Lessor agrees to offer its good faith cooperation and assistance, at no cost or
expense to Lessor, in Lessee's conduct of such contest or defense.
(f) "After-Tax Basis" shall mean an amount which, after deduction of
all Taxes (without respect to any exclusion provided in Section 9(a) hereof)
imposed by any and all jurisdictions that are required to be paid by the
recipient in respect of the receipt or accrual of such amount, and after
consideration of any current deduction, credit or other tax benefit realized by
the recipient and attributable to the indemnified Tax, cost or expense, is equal
to the amount required to be indemnified against on an After-Tax Basis.
10. REPAIRS; USE; LOCATION; LABELS. Lessee shall: (a) at its
own expense, keep the Equipment in good repair, condition and working order and
maintained in accordance with the manufacturer's recommended engineering and
maintenance standards; (b) use the Equipment lawfully and exclusively in
connection with its business operations and for the purpose for which the
Equipment was designed and intended; and (c) not move the Equipment from the
Equipment Location (i) to any location outside the United States of America or
(ii) without providing Lessor with at least ten days prior written notice
thereof, payment of any filing fees and taxes for filing Uniform Commercial Code
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Financing Statements, and landlord waivers substantially in the form of Exhibit
D hereto with respect to any such location, to any other location within the
United States of America. If Lessor supplies Lessee with labels stating that the
Equipment is owned by Lessor, Lessee shall affix such labels to the Equipment
pursuant to Lessor's instructions.
11. MAINTENANCE; ALTERATIONS; INSPECTION. At its own expense,
Lessee shall: (a) maintain the Equipment in the same condition as when
delivered, subject only to ordinary wear and tear, and in good operating order
and appearance, and consistent with Seller's specifications as set forth in the
Purchase Documents, and shall properly handle and dispose of batteries and other
hazardous materials; (b) make all alterations or additions to the Equipment that
may be required or supplied by the Seller or legally necessary, including
upgrading the Equipment at no expense to Lessor with Seller's then current
generic software release not later than one year after the initial release of
such software, which software shall remain the property of the Lessor unless
Lessee acquires the Equipment pursuant to Section 13 or Section 18(a)(1),(2) or
(4); and (c) make no other alterations or additions to the Equipment (except for
alterations or additions that will not decrease or impair the fair market-value,
useful life, condition, performance or residual value of any item of Equipment,
or that will not cause such item of Equipment to become "limited use property"
(as defined in Rev. Proc. 75-28). Any modifications, alterations or additions
that Lessee makes to the Equipment shall become Lessor's property and shall also
be deemed to be Equipment unless such modifications, alterations or additions
are readily removable without damage to the Equipment. Upon request, Lessor, or
any party designated by Lessor, shall have the right to inspect the Equipment
and Lessee's records at any reasonable time upon reasonable notice or upon the
occurrence and during the continuance of an Event of Default, at any time
without notice.
12. PERSONAL PROPERTY; LIENS AND ENCUMBRANCES; TITLE;
SUBSTITUTION. The Equipment shall at all times remain personal property,
notwithstanding that the Equipment, or any part thereof, may be (or becomes)
affixed or attached to real property or any improvements thereon. Except for the
interest of Lessor, Lessee shall keep the Equipment free and clear of all
levies, liens and encumbrances of any nature whatsoever. Except as expressly set
forth in this Agreement, the Equipment shall at all times remain the property of
Lessor and Lessee shall have no right, title or interest therein. Lessee shall
have the right, for any valid business reason in the Lessee's reasonable
opinion, to substitute any item of Equipment with a similar piece of equipment
having a fair market value, residual value, utility and remaining useful life at
least equal to the replaced item of Equipment's fair market value, residual
value, utility and remaining useful life, assuming the replaced item of
Equipment was in the condition required by this Agreement. Prior to such
substitution, Lessee will, with respect to a substitution for items of Equipment
with an aggregate original cost in excess of $50,000, (i) furnish Lessor with a
full warranty xxxx of sale and an assignment of warranties with respect to the
replacement item of Equipment, (ii) cause a Schedule supplement, subjecting such
replacement item of Equipment to the applicable Schedule, duly executed by
Lessee, to be delivered to Lessor for execution and, upon such execution, to be
filed for recordation if requested by Lessor, (iii) furnish Lessor with an
opinion of Lessee's counsel, to the effect that (x) the xxxx of sale referred to
in clause (i) above constitutes an effective instrument for the conveyance of
title to the replacement item of Equipment to Lessor, (y) legal title to the
replacement item of Equipment has been delivered to Lessor, free and clear of
all liens, and (z) all filings, recordings and other action necessary or
appropriate to perfect and protect Lessor's interest in the replacement item of
Equipment have been
- 13 -
accomplished, and (iv) indemnify in accordance with the tax indemnity provisions
of Section 7 and the provisions of Section 9, Lessor for any risk of adverse tax
consequences as a result of or relating to such substitution.
13. RISK OF LOSS. As between Lessor and Lessee, Lessee shall
bear the entire risk of loss, theft, destruction or damage to the Equipment from
any cause whatsoever or requisition of the Equipment by any governmental entity
or the taking of title to the Equipment by eminent domain or otherwise. Lessee
shall advise Lessor in writing within 10 days of any such occurrence. Except as
provided below, no such occurrence shall relieve Lessee of the obligation to pay
Lessor Rental Payments and all other amounts owed hereunder. In the event of any
such occurrence, Lessee may if such occurrence has not materially impaired the
Equipment (in Lessor's reasonable judgment) place the Equipment in good
condition and repair reasonably satisfactory to Lessor and continue making
Rental Payments. An item of Equipment shall be deemed to have suffered an Event
of Loss if (a) such item of Equipment suffers an actual or constructive total
loss or insurance proceeds are received on that basis with respect to such item
of Equipment; (b) such item of Equipment is lost or stolen for a period
exceeding one hundred and twenty (120) days; (c) such item of Equipment is
damaged beyond economic repair or is permanently unfit for commercial use for
its intended purpose; (d) title to such item of Equipment is taken or such item
of Equipment requisitioned for use by any governmental authority for a period
extending beyond the earlier of 270 days or the remainder of the Applicable
Term. Upon the occurrence of any Event of Loss, Lessee may elect either to pay
the Stipulated Loss Value of the affected item of Equipment as set forth on the
Schedule or replace the item of Equipment in accordance with the substitution
procedures described in Section 12. Any Stipulated Loss Value payment shall
occur on the next Rental Payment Date. Upon Lessor's full receipt of such
Stipulated Loss Value and any other amounts owing hereunder or under the
applicable Schedule with respect to such item of Equipment: (y) the applicable
Schedule shall terminate, and except as provided in Section 25, Lessee shall be
relieved of all obligations under the applicable Schedule; and (z) Lessor shall
transfer all of its interest in the affected items of Equipment to Lessee "AS
IS, WHERE IS," and without any warranty, express or implied from Lessor, other
than the absence of any liens or claims by, through, or under Lessor. If Lessee
elects to substitute Equipment, then upon completion of all the substitution
procedures set forth in Section 12, Lessor shall release to Lessee any property
insurance payments received by Lessor in connection with such Event of Loss.
14. NON-CANCELABLE NET LEASE. ALL LEASES HEREUNDER SHALL BE
NON-CANCELABLE NET LEASES, AND LESSEE AGREES THAT IT HAS AN UNCONDITIONAL
OBLIGATION TO PAY ALL RENTAL PAYMENTS AND OTHER AMOUNTS WHEN DUE ON OR PRIOR TO
THE TERMINATION OF THE LEASES. LESSEE IS NOT ENTITLED TO XXXXX OR REDUCE RENTAL
PAYMENTS OR ANY OTHER AMOUNTS DUE, OR TO SET OFF ANY CHARGES AGAINST THOSE
AMOUNTS. LESSEE IS NOT ENTITLED TO RECOUPMENTS, CROSS-CLAIMS, COUNTERCLAIMS OR
ANY OTHER DEFENSES TO ANY RENTAL PAYMENTS OR OTHER AMOUNTS DUE HEREUNDER,
WHETHER THOSE DEFENSES ARISE OUT OF CLAIMS BY LESSEE AGAINST LESSOR, SELLER,
THIS AGREEMENT, ANY SCHEDULE OR OTHERWISE. NEITHER DEFECTS IN EQUIPMENT, DAMAGE
TO IT, NOR ITS LOSS, DESTRUCTION OR LATE DELIVERY SHALL TERMINATE THIS AGREEMENT
OR ANY SCHEDULE, OR AFFECT LESSEE'S OBLIGATIONS HEREUNDER. UNLESS LESSEE'S
OBLIGATION TO
- 14 -
PAY RENTAL PAYMENTS AND OTHER AMOUNTS HAS BEEN TERMINATED PURSUANT TO THE
EXPRESS TERMS OF THIS AGREEMENT, ALL RENTAL PAYMENTS AND OTHER AMOUNTS SHALL
CONTINUE TO BE DUE AND PAYABLE HEREUNDER.
15. LESSOR DISCLAIMERS; LIMITATION OF REMEDIES. IT IS
SPECIFICALLY UNDERSTOOD AND AGREED THAT: (A) LESSOR SHALL NOT BE DEEMED TO HAVE
MADE ANY REPRESENTATION, WARRANTY OR PROMISE MADE BY SELLER, NEITHER SELLER NOR
LESSOR SHALL ACT AS, OR BE DEEMED TO BE, AN AGENT OF THE OTHER, AND LESSOR SHALL
NOT BE BOUND BY, OR LIABLE FOR, ANY REPRESENTATION OR PROMISE MADE BY SELLER
(EVEN IF LESSOR IS AFFILIATED WITH SELLER); (B) LESSOR SHALL NOT BE LIABLE FOR
ANY FAILURE OF ANY EQUIPMENT OR ANY DELAY IN ITS DELIVERY OR INSTALLATION; (C)
LESSOR SHALL NOT BE LIABLE FOR ANY BREACH OF ANY WARRANTY THAT SELLER MAY HAVE
MADE; (D) LESSEE HAS SELECTED ALL EQUIPMENT WITHOUT LESSOR'S ASSISTANCE; (E)
LESSOR IS NOT A MANUFACTURER OF ANY EQUIPMENT; AND (F) LESSOR HAS NOT MADE AND
DOES NOT NOW MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE DESIGN, COMPLIANCE WITH SPECIFICATIONS, OPERATION, OR CONDITION
OF ANY EQUIPMENT (OR ANY PART THEREOF), THE MERCHANTABILITY OR FITNESS OF
EQUIPMENT FOR A PARTICULAR PURPOSE, OR ISSUES REGARDING PATENT INFRINGEMENT,
TITLE AND THE LIKE. IT IS FURTHER AGREED THAT LESSOR SHALL HAVE NO LIABILITY TO
LESSEE, LESSEE'S CUSTOMERS, OR ANY THIRD PARTIES FOR ANY DIRECT, INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR ANY SCHEDULE
OR CONCERNING ANY EQUIPMENT, OR FOR ANY DAMAGES BASED ON STRICT OR ABSOLUTE TORT
LIABILITY OR LESSOR'S NEGLIGENCE; PROVIDED, HOWEVER, THAT NOTHING IN THIS
AGREEMENT SHALL DEPRIVE LESSEE OF ANY RIGHTS IT MAY HAVE AGAINST ANY PERSON
OTHER THAN LESSOR. LESSEE SHALL LOOK SOLELY TO SELLER FOR ANY AND ALL CLAIMS AND
WARRANTIES RELATING TO THE EQUIPMENT. Lessor hereby assigns to Lessee for the
Term
of the applicable Schedule the right to enforce, provided Lessor has not
exercised any of its remedies under Section 20, and such enforcement is pursued
in Lessee's name, any representations, warranties and agreements made by Seller
pursuant to the Purchase Documents, and Lessee may retain any recovery resulting
from any such enforcement efforts. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
LESSEE WAIVES ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY ARTICLE
2A OF THE UCC AND ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE OR OTHERWISE
THAT MAY LIMIT OR MODIFY LESSOR'S RIGHTS AS DESCRIBED IN THIS SECTION OR OTHER
SECTIONS OF THIS AGREEMENT.
16. LESSEE REPRESENTATIONS AND WARRANTIES. Lessee represents,
warrants and covenants to Lessor on the date of the execution and delivery of
this Agreement and on each Commencement Date that: (a) Lessee is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware, has all requisite corporate power and authority to own its property
and assets and to carry on its business as now conducted, is qualified to do
business in every jurisdiction where such qualification or registration is
required, except where the failure so to qualify would not
- 15 -
materially adversely affect the financial condition of Lessee, and has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement, all Schedules and all other related documents or
instruments (collectively, Fundamental Agreements) to which it is or will be a
party; (b) this Agreement and each other Fundamental Agreement to which it its a
party have been duly authorized by all necessary corporate action, and have
been, or prior to the applicable Commencement Date will have been, duly executed
and delivered by it, and neither the execution and delivery thereof, nor the
consummation of the transactions on its part contemplated hereby and thereby,
nor compliance by it with any of the terms and provisions hereof or thereof, (i)
requires any approval of its stockholders or approval or consent of any trustee
or holders of any indebtedness or obligations of Lessee, except for such
approvals and consents as have been duly obtained, and are in full force and
effect, (ii) contravenes, as to Lessee, any existing law, or (iii) in any way
contravenes its governing corporate documents or by-laws; (c) this Agreement and
each other Fundamental Agreement to which it is a party are, or upon due
execution and delivery thereof by all other parties thereto will be, its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability; (d) the execution and
delivery by Lessee of each Fundamental Agreement to which it is a party, the
consummation of the transactions contemplated thereby and its compliance with
the terms thereof do not require the consent or the approval or authorization
of, or filing, except as contemplated in the Fundamental Agreements,
registration or qualification with, any governmental authority on the part of
Lessee as a condition to such execution, delivery and compliance, except such as
have been made or obtained and are in full force and effect; (e) Lessee has
delivered to Lessor copies of (i) the consolidated balance sheet of Lessee and
its consolidated subsidiaries as of June 30, 1995, and related consolidated
statements of operations and stockholders' equity for the fiscal year then
ended, accompanied by the report of KPMG Peat Marwick, independent auditors; and
(ii) the unaudited consolidated balance sheet of Lessee and its consolidated
subsidiaries as of March 31, 1996, and the related unaudited consolidated
statements of operations and stockholders' equity for the nine-month period then
ended, and in the case of the statements referred to in clause (i), such
statements fairly present, in accordance with generally accepted accounting
principles, the financial position of Lessee and its consolidated subsidiaries
as of such date and, in the case of the statements referred to in clause (ii),
have been prepared on a basis consistent with that employed in the preparation
of the financial statements referred to in clause (i), and in the opinion of
management of Lessee reflect all adjustments necessary for a fair presentation
of the results for the interim period presented, and since June 30, 1995, there
has been no material adverse change in the condition (financial or otherwise),
operations, properties or prospects of the Lessee (Material Adverse Change); (f)
except as set forth in Schedule 16, there are no actions, suits or proceedings
at law or in equity pending or, in the case of actions or proceedings by a
governmental authority, to the knowledge of Lessee, threatened against or
affecting Lessee or any business, property or rights of Lessee (A) which involve
any Fundamental Agreement or the transactions contemplated thereby or (B) as to
which there is a reasonable possibility of an adverse determination and which,
if adversely determined, would reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Change or in the inability of Lessee
to perform its obligations under any Fundamental Agreement to which it is a
party, or adversely affect the value of the Equipment in any material respect;
(g) Lessee has filed or caused to be filed all federal, state and local tax
returns required to have been filed by it and has paid or caused to be paid all
taxes as shown on such returns or on any assessment received by it to the extent
that such taxes have become due, except such taxes the amount, applicability
- 16 -
or validity of which are being contested in good faith by appropriate
proceedings and with respect to which Lessee shall have set aside on its books
adequate reserves as are required by generally accepted accounting principles;
(h) as of any Commencement Date, the chief executive office of Lessee shall be
located at the address set forth on the cover page hereof or such other location
that an officer of Lessee has certified to Lessor in writing; (i) ALL EQUIPMENT
IS LEASED FOR BUSINESS PURPOSES ONLY, AND NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES; and (k) all Equipment is tangible personal property and shall not
become a fixture or real property under Lessee's use thereof.
17. GENERAL INDEMNITY. Lessee shall indemnify, hold harmless,
and, if so requested by Lessor, defend Lessor against all claims (Claims)
directly or indirectly arising out of or connected with the Equipment or any
Fundamental Agreement but not Claims arising solely from the gross negligence or
willful misconduct of the Lessor. Claims refers to all losses, liabilities,
damages, penalties, expenses (including legal fees and costs), claims, actions,
and suits, whether in contract or in tort, whether caused by Lessor's negligence
or otherwise, and whether based on a theory of strict liability of Lessor or
otherwise, and includes, but is not limited to, matters regarding: (a) the
selection, manufacture, purchase, acceptance, rejection, ownership, delivery,
lease, possession, maintenance, use, condition, return or operation of the
Equipment; (b) any latent defects or other defects in any Equipment, whether or
not discoverable by Lessor or by Lessee; (c) any patent, trademark, or copyright
infringement; and (d) the condition of any Equipment arising or existing during
Lessee's use.
18. OPTIONS; SURRENDER. (a) Options. Lessee shall have the
options specified below. Upon payment of the amount described in clauses (1),
(2) or (3) below and any other amounts owing with respect to the items of
Equipment subject to such options under this Agreement or the applicable
Schedules (other than future Rental Payments), and return of the Equipment to
Lessor if the Termination Option is exercised, the applicable Schedule shall
terminate, and except as provided in Section 25, Lessee shall be relieved of all
obligations under the applicable Schedule, and if the Early Buyout Option or the
Fair Market Value Purchase Option has been exercised, Lessor shall transfer all
of its interest in the affected items of Equipment to Lessee "AS IS, WHERE IS,"
and without any warranty, express or implied from Lessor, other than the absence
of any liens or claims by, through, or under Lessor.
(1) Early Buyout Option. Provided that no Event of Default or
Potential Default has then occurred and is continuing, Lessee shall have the
option to purchase all, but not less than all of the items of Equipment
constituting an individual 5ESS switch on the date (EBO Date) and for a purchase
price specified by Lessor in the applicable Schedule for such items of
Equipment. Such option will be exercisable upon irrevocable written notice to
Lessor from Lessee given at least ninety (90) days prior to the applicable EBO
Date.
(2) Fair Market Value Purchase Option. Provided that no Event
of Default or Potential Default has then occurred and is continuing, Lessee
shall have the option to purchase all, but not less than all, of the items of
Equipment constituting an individual 5ESS switch at the end of the applicable
Term for its then Fair Market Value, which shall mean the cash purchase price
which would be obtained in an arm's-length transaction between an informed and
willing buyer and an informed and willing seller, under no compulsion to sell,
excluding any value attributable to improvements which may
- 17 -
be removed by Lessee pursuant to Section 11, without consideration of Lessee's
purchase or renewal options and on an uninstalled basis, but assuming (other
than in the case of an exercise of remedies hereunder) that such item of
Equipment was in the condition required hereunder, together with any other
payments then due and owing under the applicable Schedule. The Fair Market Value
shall be subject to a cap ("FMV Cap") set forth in the applicable Schedule.
Lessee shall provide Lessor with at least 180 days prior written notice of its
intent to purchase Equipment for Fair Market Value. Such notice shall be
irrevocable unless the Fair Market Value is more than fifteen percent (15%)
above any estimate thereof provided by Lessee in such written notice and Lessee
notifies Lessor in writing not later than five days after the determination of
Fair Market Value of its decision to revoke exercise of the Fair Market Value
purchase option. If Lessor and Lessee cannot agree on such Fair Market Value,
the Fair Market Value shall be determined by an independent appraiser selected
by Lessor and Lessee, provided, however, that if Lessor and Lessee are unable to
agree upon an independent appraiser, each shall select an independent appraiser,
and such independent appraiser shall select a third independent appraiser which
shall determine the Fair Market Value. Lessee shall be responsible for and shall
pay all costs and expenses associated with any appraisal.
(3) Termination Option. Provided that no Event of Default or
Potential Default has then occurred and is continuing, Lessee will have the
right, upon provision of 180 days irrevocable written notice, to terminate a
Schedule with respect to all, but not less than all, of the items of Equipment
constituting an individual 5ESS switch on any Rental Payment Date occurring on
or after the third anniversary of the Commencement Date for such items of
Equipment if Lessee determines in good faith (and, upon request, provides an
officer's certificate to such effect), without discriminating among items of
Equipment or other similar equipment owned or leased by Lessee, that such items
of Equipment have become obsolete or surplus to its needs. If requested by
Lessor, Lessee will use commercially reasonable efforts to sell the applicable
items of Equipment to an unrelated third party but the failure to consummate
such a sale shall not relieve Lessee of any payment obligations set forth in the
next sentence. Upon such a termination, Lessee will pay to Lessor an amount
equal to any deficiency between the Termination Value for such items of
Equipment, determined as set forth on the applicable Schedule, and the net cash
proceeds of any sale of such items of Equipment received by Lessor from Lessee
and shall surrender the affected items of Equipment to Lessor in accordance with
the provisions of Section 18(b).
(4) Renewal Option. Provided that no Event of Default or
Potential Default has then occurred and is continuing, Lessee shall have the
option upon provision of irrevocable written notice delivered at least 120 days
prior to the expiration of the Applicable Term and upon execution of appropriate
documentation, to renew any Schedule with respect to all, but not less than all,
of the items of Equipment constituting an individual 5ESS switch for a Renewal
Term of not less than one year or the remainder of the useful life of such items
of Equipment, whichever period is shorter, for the then Fair Market Rental Value
of such items of Equipment, payable quarterly in arrears. Fair Market Rental
Value shall mean with respect to an item of Equipment, the cash rental which
would be obtained in an arm's-length transaction between an informed and willing
lessee (other than a lessee in current possession) and an informed and willing
lessor, under no compulsion to lease, excluding any value attributable to
improvements that Lessee is permitted to remove pursuant to Section 11, and on
an uninstalled basis, but assuming (other than in the case of an exercise of
remedies hereunder) that such
- 18 -
item of Equipment was in the condition required hereunder. Fair Market Rental
Value shall be determined in the same manner as Fair Market Value, at the sole
cost and expense of Lessee.
(b) Surrender. Unless Lessee exercises one of the options set
forth in Section 18(a)(1), (2) or (4), or acquires the Equipment pursuant to
Section 13 hereof, Lessee shall at its expense, reinstall, inspect, test and
properly pack the Equipment, and return the Equipment at the expiration of the
Term in the condition and with the software required by Section 11, free of all
liens and rights of others, by delivering it on board such common carrier as
Lessor may specify with freight prepaid to not more than two (2) locations
within the continental United States of America specified by Lessor and
reasonably acceptable to Lessee. If Lessee so agrees, Lessor and its agents
shall have the right to enter upon any premises where Equipment may be located
to perform any of Lessee's tasks noted above in this Section 18, and Lessee
shall reimburse Lessor for all costs and expenses Lessor incurs in fulfilling
such tasks. Lessee agrees that the Equipment, when returned to Lessor, shall be
in the same condition as when delivered to Lessee, reasonable wear and tear
excepted. (If the Equipment is not in such condition, Lessee shall be liable for
all costs and expenses Lessor incurs to place the Equipment in such condition.)
If requested by Lessor, Lessee, at its sole risk and expense, shall store the
Equipment at any of the two above described locations for a period not to exceed
sixty (60) days, during which period the Equipment shall be subject to all of
the terms and conditions hereof, except for the obligation to make Rental
Payments. At Lessor's risk and expense, Lessor shall be entitled to require
Lessee to store the Equipment at such locations for an additional period of
ninety (90) days.
19. EVENTS OF DEFAULT. Any of the following shall constitute
an Event of Default under this Agreement and all Schedules: (a) Lessee fails to
pay any Rental Payment, Stipulated Loss Value payment, early buyout amount or
Termination Value payment within five days after its due date; or (b) Lessee
fails to pay any other amount payable to Lessor hereunder within fifteen (15)
days after its due date; or (c) any representation or warranty made by the
Lessee in any Fundamental Agreement shall prove to have been untrue when made in
any material respect; or (d) Lessee fails to maintain in full force and effect
any insurance required by Section 8; or (e) a loss by Lessor of title to the
Equipment occurs (other than as a result of action or inaction by Lessor); or
(f) Lessee fails to perform or observe any other covenant, condition or
agreement to be performed or observed by Lessee hereunder or in any other
Fundamental Agreement, and Lessee fails to cure any such breach within thirty
(30) days after notice thereof; provided, however, that if such failure is not
likely to result in the forfeiture or loss of title to any item of Equipment and
is capable of cure but cannot be cured by payment of money or by diligent
efforts within such thirty (30) day period but such diligent efforts shall be
properly commenced within the cure period and Lessee is diligently pursuing, and
shall continue to pursue diligently, remedy of such failure, the cure period
shall be extended for an additional period of time as may be necessary to cure,
not to exceed an additional 150 days or to extend beyond the then Applicable
Term; or (g) Lessee makes an assignment for the benefit of creditors, whether
voluntary or involuntary; or (h) a proceeding under any bankruptcy,
reorganization, arrangement of debts, insolvency or receivership law is filed by
or against Lessee or Lessee takes any action to authorize any of the foregoing
matters and with respect to any such proceeding filed against Lessee, either
such proceeding remains undismissed or unstayed for a period of sixty (60) days
or the relief sought in such proceeding is granted; or (i) Lessee becomes
insolvent or fails generally to pay its debts as they become due; or (j) the
Equipment is levied against, seized or attached (other than by a commercial
creditor of Lessor), or Lessee seeks to effectuate a bulk sale of Lessee's
inventory or assets; or (k) Lessee voluntarily or
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involuntarily dissolves or is dissolved, or terminates or is terminated; or (l)
any final judgments, decrees, writs of execution, attachments or garnishments or
any liens or any other legal processes shall be issued or levied against Lessee
or any of its assets in amounts which in the aggregate would result in a
Material Adverse Change with respect to Lessee.
20. REMEDIES. If an Event of Default occurs, Lessor may, in
its sole discretion, exercise one or more of the following remedies: (a)
terminate this Agreement or any or all Schedules; or (b) take possession of, or
render unusable, any Equipment wherever the Equipment may be located, without
demand or notice, without any court order or other process of law and without
liability to Lessee for any damages occasioned by such action, and no such
action shall constitute a termination of any Schedule; or (c) require Lessee to
deliver the Equipment at a location designated by Lessor; or (d) declare the
Stipulated Loss Value (as calculated by Lessor as of the date of the Event of
Default) for each applicable Schedule due and payable as liquidated damages for
loss of a bargain and not as a penalty and in lieu of any further Rental
Payments under the applicable Schedule; or (e) proceed by court action to
enforce performance by Lessee of any Schedule and/or to recover all damages and
expenses incurred by Lessor by reason of any Event of Default; or (f) terminate
any other Fundamental Agreement that Lessor may have with Lessee; or (g)
exercise any other right or remedy available to Lessor at law or in equity.
Also, Lessee shall pay Lessor all costs and expenses (including legal fees and
costs and fees of collection agencies) incurred by Lessor in enforcing any of
the terms, conditions or provisions of this Agreement. Upon repossession or
surrender of any Equipment, Lessor shall lease, sell or otherwise dispose of the
Equipment in a commercially reasonable manner, with or without notice and at
public or private sale, and apply the net proceeds thereof (after deducting all
expenses (including legal fees and costs) incurred in connection therewith) to
the amounts owed to Lessor hereunder; provided, however, that Lessee shall
remain liable to Lessor for any deficiency that remains after any sale or lease
of such Equipment. Lessee agrees that with respect to any notice of a sale
required by law to be given, ten days' notice shall constitute reasonable
notice. These remedies are cumulative of every other right or remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise, and may be enforced concurrently therewith or from time to time.
21. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee
fails to perform any of its obligations hereunder, Lessor may perform any act or
make any payment that Lessor deems reasonably necessary for the maintenance and
preservation of the Equipment and Lessor's interests therein; provided, however,
that the performance of any act or payment by Lessor shall not be deemed a
waiver of, or release Lessee from, the obligation at issue. All sums so paid by
Lessor, together with expenses (including legal fees and costs) incurred by
Lessor in connection therewith, shall be paid to Lessor by Lessee immediately
upon demand.
22. COVENANTS. (a) Reporting Requirements. Lessee shall
furnish to Lessor:
(1) as soon as available and in any event within fifty (50)
days after the end of each of the first three fiscal quarters of each
fiscal year of Lessee, consolidated balance sheets of the Lessee and
its subsidiaries as of the end of such fiscal quarter and consolidated
statements of operations of Lessee and its subsidiaries for such fiscal
quarter and for the period commencing at the end of the previous fiscal
year and ending with the end of such fiscal quarter, all in
- 20 -
accordance with generally accepted accounting principles, certified by
the chief financial officer of Lessee;
(2) as soon as available and in any event within 120 days
after the end of each fiscal year of Lessee, a copy of the annual audit
report for such fiscal year for Lessee and its subsidiaries, including
therein consolidated balance sheets of Lessee and its subsidiaries as
of the end of such fiscal year and consolidated statements of
operations of Lessee and its subsidiaries for such fiscal year, all in
accordance with generally accepted accounting principles, in each case
certified (without qualification) by nationally recognized independent
public accountants, to the effect that, in making the examination
necessary for the signing of such annual report by such accountants,
they have not become aware of any Event of Default or Potential Default
that has occurred and is continuing, or, if they have become aware of
such Event of Default or Potential Default, describing such Event of
Default or Potential Default and the steps, if any, being taken to cure
it;
(3) as soon as possible and in any event within five (5) days,
in the case of an Event of Default, and ten (10) days, in the case of a
Potential Default, after an officer of Lessee shall have obtained
knowledge thereof, notice of the occurrence of such Event of Default or
Potential Default, and a statement of the chief financial officer of
Lessee setting forth details of such Event of Default or Potential
Default and the action which Lessee has taken and proposes to take with
respect thereto;
(4) prompt written notice of the filing or commencement of, or
any notice of intention of any individual or entity to file or
commence, any action, suit or proceeding, whether at law or in equity
or by or before any governmental authority against Lessee as to which
there is a reasonable possibility of an adverse determination and
which, if adversely determined, could result in a Material Adverse
Change or in the inability of Lessee to perform its obligations under
any Fundamental Agreement;
(5) as soon as possible and in any event within five (5) days
after receipt thereof, copies of any material notices received by
Lessee from Seller relating to noncompliance with any of the Purchase
Documents; and
(6) such other information respecting the condition or
operations, financial or otherwise, of Lessee or any of its
subsidiaries or the Equipment as Lessor may from time to time
reasonably request; provided, however, that any information which the
Lessee regards as valuable and confidential and identified in writing
as such by the Lessee (the "Confidential Information") will be used by
the Lessor solely for purposes of the transactions contemplated by this
Agreement and the other Fundamental Agreements and will be kept
confidential by Lessor and Lessor will not disclose any of the
Confidential Information to any person or entity; provided, further,
that such confidentiality obligation shall not apply to (i) any
information disclosed to persons or entities employed by or expected to
become engaged in evaluating, approving, structuring, auditing or
administering lease transactions hereunder who agree to comply with
this confidentiality provision, including, without limitation, the
Lessor's representatives, attorneys, advisors, accountants, and rating
agencies, (ii) any information which
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is or becomes available to the Lessor from a source other than the
Lessee or its subsidiaries (iii) any information which is or becomes
available to the public other than as a result of disclosure by Lessor
or its above-described representatives or agents, (iv) any information
required or requested by any governmental agency or representative
thereof or pursuant to legal process, or (v) any information in
connection with the exercise of any remedy under this Agreement; and
provided, further, that nothing herein shall prevent Lessor from
disclosing such information to any bona fide assignee, or prospective
assignee, or any of their respective representatives that have agreed
to comply with this confidentiality provision in connection with the
contemplated assignment of any Schedule hereunder.
.
(b) Merger or Consolidation. Lessee shall not merge into or
consolidate with any other entity unless (i) the surviving or successor entity
expressly assumes in writing all of the obligations of Lessee hereunder, under
the Schedules and under the other Fundamental Agreements, (ii) the surviving or
successor entity has a net worth determined in accordance with generally
accepted accounting principles, after giving effect to such consolidation or
merger at least equal to that of Lessee prior to such consolidation or merger,
(iii) no Event of Default or Potential Default shall occur or exist after giving
effect to such merger or consolidation, and (iv) at the sole cost and expense of
the surviving or successor entity, the surviving or successor entity shall have
executed, delivered and recorded all Uniform Commercial Code Financing
Statements and made such other filings or recordings requested by Lessor to
protect Lessor's ownership interest in the Equipment.
(c) Sale of Assets. Lessee shall not sell, lease, transfer or
otherwise dispose of a substantial portion of its assets for less than the fair
market value or fair market rental value, thereof, as applicable, as determined
by the board of directors of Lessee in good faith and certified in writing to
Lessor that such determination was made in the best business judgment of such
board of directors.
(d) Corporate and Franchise Existence. Lessee shall preserve
and maintain its corporate existence, rights, franchises and privileges in its
jurisdiction of its organization, and in all other jurisdictions in which such
qualification is necessary in view of its business and operations and property
and preserve, protect and keep in full force and effect its rights, licenses,
permits, franchises, authorizations, patents, trademarks, copyrights and
tradenames material to its business and to the use of the Equipment.
(e) Compliance with Laws, Etc. Lessee shall comply with all
laws and regulations applicable to it and to the Equipment and all material
contractual obligations applicable to it and to the Equipment.
(f) Obligations and Taxes. Lessee shall pay all of its
indebtedness and obligations promptly and in accordance with their terms and pay
and discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a lien upon
such properties or any part thereof; provided, however, that Lessee shall not be
required to pay and discharge or to cause to be paid and discharged any such
tax, assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings diligently pursued,
and Lessee shall set aside
- 22 -
on its books such reserves as are required by generally accepted accounting
principles with respect to any such tax, assessment, charge, levy or claim so
contested.
23. ASSIGNMENT BY LESSOR. Lessor shall have the unqualified
right to assign, pledge, transfer, mortgage or otherwise convey any of its
interests hereunder or in any Schedule, in whole but not in part, without notice
to, or consent of, Lessee to (1) any Permitted Assignee, and (2) if an Event of
Default has occurred and Lessor is exercising any of its remedies hereunder, to
any person or entity. A Permitted Assignee shall be (1) any subsidiary or
affiliate of Lessor, or (2) an institutional lender or investor (i) whose
business includes loans or leases to telecommunications companies or the
purchase of securities of telecommunications companies, (ii) which, in the event
Lessor's obligations to Lessee are being assumed by such Permitted Assignee, has
a tangible net worth determined in accordance with generally accepted accounting
principles of at least $50,000,000 or provides a guaranty in form and substance
satisfactory to Lessee of all of its obligations to Lessee by an entity having
such tangible net worth, and (iii) which is not a competitor of either (1)
Lessee in the telecommunications market for the provision of competitive local
exchange services or (2) any telecommunications long distance or inter-exchange
carrier (solely with respect to the market for provision of long distance or
telecommunications services) which is a customer of Lessee, which customer
accounted for more than five percent (5%) of Lessee's consolidated revenues in
its then most recent four fiscal quarters. If a Permitted Assignee does not
assume Lessor's obligations to Lessee with respect to the items of Equipment or
Schedule being assigned to such Permitted Assignee, then Lessor shall continue
to remain liable to Lessee for the performance of such obligations. If any
Schedule is assigned, Lessee shall: (a) unless otherwise specified by the Lessor
and the Permitted Assignee specified by Lessor, pay all amounts due under the
applicable Schedule to such Permitted Assignee, notwithstanding any defense,
setoff or counterclaim whatsoever that Lessee may have against Lessor or
Permitted Assignee; (b) not permit the applicable Schedule to be amended or the
terms thereof waived without the prior written consent of the Permitted
Assignee; (c) not require the Permitted Assignee to perform any obligations of
Lessor, other than those that are expressly assumed in writing by such Permitted
Assignee; and (d) execute such acknowledgments thereto as may be requested by
Lessor. It is further agreed that: (x) each Permitted Assignee shall be entitled
to all of Lessor's rights, powers and privileges under the applicable Schedule,
to the extent assigned; (y) any Permitted Assignee may reassign its rights and
interests under the applicable Schedule to another Permitted Assignee with the
same force and effect as the assignment described herein; and (z) any payments
received by the Permitted Assignee from Lessee with respect to the assigned
portion of the Schedule shall, to the extent thereof, discharge the obligations
of Lessee to Lessor with respect to the assigned portion of the Schedule.
24. ASSIGNMENT OR SUBLEASE BY LESSEE. WITHOUT LESSOR'S PRIOR
WRITTEN CONSENT, LESSEE SHALL NOT ASSIGN THIS AGREEMENT OR ANY SCHEDULE OR
ASSIGN ITS RIGHTS IN OR SUBLET THE EQUIPMENT OR ANY INTEREST THEREIN; provided,
however, that as long as no Event of Default or Potential Default has occurred
and is continuing, Lessee may sublease or assign a Schedule to an affiliate,
joint venture or a wholly-owned subsidiary of Lessee that is an entity duly
organized under the laws of one of the states of the United States of America or
the District of Columbia and is not the subject of a bankruptcy proceeding if on
or prior to the date of such sublease or assignment: (a) Lessee and such
sublessee or assignee execute and deliver to Lessor a writing (to be provided by
Lessor if an assignment or in the
- 23 -
form of Exhibit A hereto if a sublease) whereby the sublessee or assignee agrees
to assume joint and several liability with Lessee for the full and prompt
payment, observance and performance when due of all of the obligations of the
Lessee under such Schedule; (b) no such assignment or sublease causes the
affected items of Equipment to be "tax-exempt use property" as such term is
defined in Section 168(h) of the Code; (c) the term of any such sublease does
not extend beyond the then Applicable Term; (d) any such sublease shall be
subject and subordinate to this Agreement and any applicable Schedule and shall
be consistent with the provisions hereof and thereof; (e) any such sublease
shall prohibit further subleasing; (f) Lessee at its sole cost and expense makes
all filings and recordations requested by Lessor to protect Lessor's ownership
interest in the affected items of Equipment; and (g) Lessee shall provide Lessor
with a landlord waiver substantially in the form of Exhibit B attached hereto
with respect to each new Equipment Location. In no event, however, shall any
such sublease or assignment discharge or diminish any of Lessee's obligations to
Lessor under such Schedule. So long as no Event of Default exists and sublessees
are not in default of their sublease obligations, sublessees shall be entitled
to quiet enjoyment of the items of Equipment they have subleased. Lessor
acknowledges that any resale of capacity to customers of Lessee or any of
Lessee's affiliates with respect to any Equipment or partitioning of Equipment
by provision of dedicated use thereof to customers of Lessee or Lessee's
affiliates shall not constitute an assignment or a sublease of a Schedule or any
Equipment. Lessee covenants and agrees that any such resale or partitioning will
be expressly subject to and subordinate to the terms of this Agreement.
25. SURVIVAL; QUIET ENJOYMENT. All representations, warranties
and covenants made by Lessee hereunder shall survive the termination of this
Agreement and shall remain in full force and effect. All of Lessor's rights,
privileges, and indemnities, to the extent they are fairly attributable to
events or conditions occurring or existing on or prior to the termination of
this Agreement, shall survive such termination and be enforceable by Lessor and
any successors and assigns. So long as no Event of Default exists, neither
Lessor nor any Permitted Assignee will interfere with Lessee's quiet enjoyment
of the Equipment.
26. TRUE LEASE; FILING FEES; FURTHER ASSURANCES; NOTICES.
Lessor and Lessee intend the transactions described herein and in any Schedule
to be a true lease, and Lessee hereby authorizes Lessor to file financing
statements to give public notice of Lessor's ownership of the Equipment. If any
such transaction is deemed by a court of competent jurisdiction to be a lease
intended for security, to secure payment and performance of Lessee's obligations
under this Agreement and any Schedule, Lessee grants Lessor and its assigns a
purchase money security interest in the Equipment and in all attachments,
accessories, additions, substitutions, products, replacements, rentals and
proceeds (including insurance proceeds) (collectively, Collateral). Lessee shall
execute and timely deliver to Lessor financing statements or any other documents
Lessor deems necessary to perfect or protect Lessor's security interest in the
Collateral. If Lessee fails to execute any such document, Lessor or Lessor's
agent is hereby authorized to file any of the foregoing signed only by Lessor or
by Lessor's agent. Lessor or Lessor's agent may file as a financing statement
any Fundamental Agreement Lessor deems necessary to perfect or protect Lessor's
security interest in the Collateral, and Lessee agrees that a carbon,
photographic or other reproduction of any Fundamental Agreement or any financing
statement is sufficient as a financing statement. Lessee will promptly reimburse
Lessor for any filing or recordation fees or expenses (including lien search
fees, legal fees and costs) incurred by Lessor in perfecting or protecting its
interests in the Equipment and under this Agreement. Lessee shall promptly
- 24 -
execute and deliver to Lessor such documents 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 Agreement and to protect the rights and remedies of Lessor
created or intended to be created hereunder. All notices under this Agreement
shall be sent to the respective party at its address set forth on the front page
of this Agreement or on the applicable Schedule or at such other address as the
parties may provide to each other in writing from time to time. Any such notice
mailed to said address shall be effective when deposited in the United States
mail, duly addressed and with first class postage prepaid.
27. WAIVER OF JURY TRIAL; SUCCESSORS. LESSEE AND LESSOR EACH
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM OR ANY OTHER LITIGATION OR PROCEEDING UPON, ARISING OUT OF, OR
RELATED TO THIS AGREEMENT, ANY OTHER FUNDAMENTAL AGREEMENT, OR THE DEALINGS OR
RELATIONSHIP BETWEEN OR AMONG LESSOR, LESSEE, SELLER OR ANY OTHER PERSON. This
Agreement and all Schedules inure to the benefit of and are binding upon the
permitted successors or assigns of Lessor and Lessee.
28. NO WAIVER; LESSOR APPROVAL. Any failure of Lessor to
require strict performance by Lessee, or any written waiver by Lessor of any
provision hereof, shall not constitute consent or waiver of any other breach of
the same or any other provision hereof. Neither this Agreement nor any other
Fundamental Agreement shall be binding upon Lessor unless and until executed by
Lessor.
29. CAPTIONS; COUNTERPARTS; LESSOR'S AFFILIATES. The captions
contained in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement. Only one counterpart of the Schedule shall be
marked "Original" (Original), and all other counterparts thereof shall be marked
as, and shall be, duplicates. To the extent that any Schedule constitutes
chattel paper (as such term is defined in the Uniform Commercial Code in effect
in any applicable jurisdiction), no security interest in such Schedule may be
created through the transfer or possession of any counterpart other than the
Original. Lessee understands and agrees that AT&T Capital Corporation or any
affiliate or subsidiary thereof may, as lessor, execute Schedules under this
Agreement, in which event the terms and conditions of the applicable Schedule
and this Agreement as it relates to the lessor under such Schedule shall be
binding upon and shall inure to the benefit of such entity executing such
Schedule as lessor, as well as any successors or assigns of such entity.
30. CHOICE OF LAW; INTEGRATION; ENTIRE AGREEMENT. EACH
LEASE UNDER THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW JERSEY (STATE). If any
provision of this Agreement or such Schedule shall be prohibited by or invalid
under that law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement or such Schedule.
Lessor and Lessee consent to the jurisdiction of any local, state or Federal
court located within the State, and waive any objection relating to improper
venue or forum non conveniens to the conduct of any proceeding in any such
court. This Agreement and all other Fundamental Agreements executed by both
Lessor and Lessee constitute the entire agreement between Lessor and Lessee
relating to the leasing of the Equipment, and supersede all prior agreements
relating
- 25 -
thereto, whether written or oral, and may not be amended or modified except in a
writing signed by the parties hereto.
AMERICAN COMMUNICATIONS AT&T CREDIT CORPORATION
SERVICES, INC.
/s/ XXXXXXX X. XXXXX
By: Xxxxxxx X. Xxxxx
(Lessee Authorized Signature) (Lessor Authorized Signature)
/s/ XXXXXXX X. XXXXX /s/ XXXXXX X. XXXXXX
C.E.O and President
(Type/Print Name) (Type/Print Name)
------------------------------------- -----------------------------------
C.E.O. and President -----------------------------------
(Title) (Title)
------------------------------------- -----------------------------------
August 26, 1996 -----------------------------------
(Date) (Date)
