EXHIBIT 10.20
[LETTERHEAD APPEARS HERE]
October 2, 1996 2401 Xxxxxx Boulevard
XXX XXXXXXX XXXXXXX/XXXXXXXXX Xxx Xxxxxx, Xxxxxxxxxx 00000-0000
----------------------------- (000) 000-0000
Mr. Xxxxxx Xxxxx
Liquid Audio, Inc.
0000 Xxxxxxxx
Xxxxxxx Xxxx, XX. 00000
Re: Master Equipment Lease Agreement No. 0044
and Ancillary Documents
Dear Xx. Xxxxx:
I enclose for review the following draft documents relating to the Lease
facility that Phoenix Leasing is to extend to Liquid Audio, Inc. described in
our commitment letter dated September 18, 1996.
1. Master Equipment Lease Agreement (the "Lease");
2. Closing Memorandum (Exhibit A to the Lease);
3. Schedule No. 1 to the Lease;
4. Acceptance Notice to Schedule No. 1 of the Lease;
5. Sale Leaseback Addendum with Xxxx of Sale;
6. Real Property Waiver Documents (required if Equipment is deemed to be
fixtures). Please remit to your landlord ASAP for signature;
7. Officer's Certificate;
8. Corporate Resolution to Lease and;
9. Insurance Request: (Please send to your insurance agent along for
processing.)
You have been, or soon will be, contacted by Xxxxxx Xxxxxxx, Contract
Coordinator. Xxxxxx can answer any questions you may have concerning the
equipment to be funded under your lease with PLI. PLI handles its documentation
and equipment funding as parallel procedures. If you wish funding promptly after
signing the lease papers, you should provide Xxxxxx your equipment list and
supporting documentation in tandem with the preparation of this lease. Xxxxxx
can be reached at (000) 000-0000.
I will assist on any questions concerning the enclosed documents and can be
reached directly at (000) 000-0000.
Sincerely,
/s/ X. Xxxxxxxx
Xxxxxxxx Xxxxxxxx
Documentation Manager
Enclosures
cc: Xxxxx Xxxxxxx, ESQ/Fenwick & West
Xxx Xxxxxxxx (w/encl.)
Xxxxxx Xxxxxxxx (w/o encl.)
MASTER EQUIPMENT LEASE NO. 0044
Under this Master Equipment Lease No. 0044 (the "Lease"), dated as of October
15, 1996, PHOENIX LEASING INCORPORATED, a California corporation ("Lessor"),
hereby leases to LIQUID AUDIO, INC., a California corporation ("Lessee"), and
Lessee hereby leases from Lessor, the equipment (herein called "Equipment")
which is described on the schedule attached hereto or any subsequently-executed
schedule entered into by Lessor and Lessee and which incorporates this Lease by
reference. Any such schedules shall hereinafter individually be referred to as a
"Schedule" and collectively be referred to as the "Schedules." Lessor hereby
leases the Equipment to Lessee upon the following terms and conditions:
1. TERM OF AGREEMENT. The term of this Lease begins on the date set forth
above and shall continue thereafter and be in effect so long as and at any time
any Schedule entered into pursuant to this Lease is in effect. The Initial Term
and rent payable with respect to each leased item of Equipment shall be as set
forth in and as stated in the respective Schedule(s). The terms of each Schedule
hereto are subject to all conditions and provisions of this Lease as it may at
any time be amended. Each Schedule shall constitute a separate and independent
lease and contractual obligation of Lessee and shall incorporate the terms and
conditions of this Master Equipment Lease and any additional provisions
contained in such Schedule. In the event of a conflict between the terms and
conditions of this Lease and any additional provisions of such Schedule, the
additional provisions of such Schedule shall prevail with respect to such
Schedule only.
2. NON-CANCELLABLE LEASE. This Lease and any Schedule cannot be cancelled
or terminated except as expressly provided herein. This Lease (including all
Schedules to this Lease) constitutes a net lease and Lessee agrees that its
obligations to pay all rent and other sums payable hereunder (and under any
Schedule) and the rights of Lessor and assignee in and to such rent and other
sums, are absolute and unconditional and are not subject to any abatement,
reduction, setoff, defense, counterclaim or recoupment due or alleged to be due
to, or by reason of, any past, present or future claims which Lessee may have
against Lessor, any assignee, the manufacturer or seller of the Equipment, or
against any person for any reason whatsoever.
3. LESSOR COMMITMENT. So long as no Event of Default or event which with
the giving of notice or passage of time, or both, could become an Event of
Default has occurred or is continuing, Lessor agrees to lease to Lessee the
groups of Equipment described on each Schedule, subject to the following
conditions: (i) that in no event shall Lessor be obligated to lease Equipment to
Lessee hereunder where the aggregate purchase price of all Equipment leased to
Lessee hereunder would exceed $200,000 ("Commitment") of which amount Lessor may
finance soft costs such as installation and delivery costs, purchase tax,
software, tooling and items generally considered fungible or expendable for
lease to Lessee having an aggregate purchase price not exceeding an amount equal
to 10% of the utilized Commitment; (ii) the amount of Equipment purchased by
Lessor at any one time shall be at least equal to $25,000 except for a final
advance which may be less than $25,000; (iii) Lessor shall not be obligated to
purchase Equipment hereunder after June 30, 1997, provided that the funding
period may be extended to July 31, 1997 if Lessor has received and approved in
its sole discretion Lessee's monthly 1997 financial plan; (iv) all Lease
documentation required by Lessor has been executed by Lessee or provided by
Lessee no later than October 31, 1996; (v) the equipment described on the
Schedule is acceptable to Lessor; (vi) with respect to each funding Lessee has
provided to Lessor each of the closing documents and other items described in
Exhibit A hereto (which documents shall be in form and substance acceptable to
Lessor) and which list may be modified for each subsequent funding; (vii) there
is no material adverse change in Lessee's condition, financial or otherwise, as
determined by Lessor, and Lessee so certifies, from
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(yy) the date of the most recent financial statements delivered by Lessee to
Lessor prior to execution of this Lease, to (zz) the date of the proposed lease
of the Equipment; (viii) at all fundings Lessee is performing according to its
business plan referred to as "Projected Cash Flow Position, Income and Cash
Balance Only" dated September 4, 1996, consisting of 2 pages, as may be amended
from time to time by Lessee's 1997 financial plan, and otherwise in form and
substance acceptable to Lessor (collectively, the "Business Plan"); (ix) Lessor
or its agent has inspected and placed identification labels on the Equipment:
and (x) Lessor has received in form and substance acceptable to Lessor: (a)
Lessee's interim financial statements signed by a financial officer of Lessee;
and (b) hard copy evidence of Lessee's $1,700,000 cash position as of June 30,
1996.
4. NO WARRANTIES BY LESSOR. (a) Lessee has selected both (i) the Equipment
and (ii) the suppliers (herein called "Vendor") from whom Lessor is to purchase
the Equipment. LESSOR MAKES NO WARRANTY EXPRESS OR IMPLIED AS TO ANY MATTER
WHATSOEVER, INCLUDING THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS
FITNESS FOR ANY PARTICULAR PURPOSE, AND AS TO LESSOR, LESSEE LEASES THE
EQUIPMENT "AS IS" AND WITH ALL FAULTS. (b) If the Equipment is not properly
installed, does not operate as represented or warranted by Vendor or is
unsatisfactory for any reason, Lessee shall make any claim on account thereof
solely against Vendor and shall, nevertheless, pay Lessor all rent payable under
this Lease, Lessee hereby waiving any such claims as against Lessor. Lessor
hereby agrees to assign to Lessee solely for the purpose of making and
prosecuting any said claim, to the extent assignable, all of the rights which
Lessor has against Vendor for breach of warranty or other representation
respecting the Equipment. Lessor shall have no responsibility for delay or
failure to fill the order. (c) Lessee understands and agrees that neither the
Vendor nor any salesman or other agent of the Vendor is an agent of Lessor. No
salesman or agent of Vendor is authorized to waive or alter any term or
condition of this Lease, and no representations as to the Equipment or any other
matter by the Vendor shall in any way affect Lessee's duty to pay the rent and
perform its others obligations as set forth in this Lease. (d) Lessee hereby
requests Lessor to purchase Equipment from Vendor and to lease Equipment to
Lessee on the terms and conditions of the Lease set forth herein. (e) Lessee
hereby authorizes Lessor to insert in this Lease and each Schedule hereto the
serial numbers and other identification data of the Equipment when determined by
Lessor.
5. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants
that (a) it is a corporation in good standing under the laws of the state of its
incorporation, and duly qualified to do business, and will remain duly qualified
during the term of this Lease, in each state where the Equipment will be
located, as specified on each Schedule hereto; (b) it has full authority to
execute and deliver this Lease and perform the terms hereof, and this Lease has
been duly authorized and constitutes valid and binding obligations of Lessee
enforceable in accordance with its terms; (c) this Lease will not contravene any
law, regulation or judgment affecting Lessee or result in any breach of any
agreement or other instrument binding on Lessee; (d) no consent of Lessee's
shareholders or holder of any indebtedness, or filing with, or approval of, any
governmental agency or commission, is a condition to the performance of the
terms hereof; (e) there is no action or proceeding pending or threatened against
Lessee before any court or administrative agency which might have a materially
adverse effect on the business, financial condition or operations of Lessee; (f)
no deed of trust, mortgage or third party interest arising through Lessee will
attach to the Equipment or the Lease; (g) the Equipment will remain at all times
under applicable law, removable personal property, free and clear of any lien or
encumbrance in favor of Lessee or any other person, notwithstanding the manner
in which the Equipment may be attached to any real property; (h) all credit,
financial and any other information submitted to Lessor herewith or any other
time is true and correct; and (i) Lessee has provided, or will provide if
requested, Lessee's tax identification number.
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6. EQUIPMENT ORDERING. Lessee shall be responsible for all packing,
rigging, transportation and installation charges for the Equipment and Lessor
may separately invoice Lessee for such charges. Lessee has selected the
Equipment itself and shall arrange for delivery of Equipment so that it can be
accepted in accordance with Section 7 hereof. Lessee hereby agrees to indemnify
and hold Lessor harmless from any claims, liabilities, costs and expenses,
including reasonable attorneys' fees, incurred by Lessor arising out of any
purchase orders or assignments executed by Lessor with respect to any Equipment
or services relating thereto.
7. LESSEE ACCEPTANCE. Lessee shall return to Lessor the signed and dated
Acceptance Notice attached to each Schedule hereto (a) acknowledging the
Equipment has been received, installed and is ready for use and (b) accepting it
as satisfactory in all respects for the purposes of this Lease. Lessor is
authorized to fill in the Rent Start Date on each Schedule in accordance with
the foregoing.
8. LOCATION; INSPECTION; LABELS. Equipment shall be delivered to and shall
not be removed from the Equipment "Location" shown on each Schedule without
Lessor's prior written consent, which "Location" shall in all events be within
the United States. Lessor shall have the right to inspect Equipment at any
reasonable time. Lessee shall be responsible for all labor, material and freight
charges incurred in connection with any removal or relocation of such Equipment
which is requested by the Lessee and consented to by Lessor, as well as for any
charges due to the installation or moving of the Equipment. The rental payments
shall continue during any period in which the Equipment is in transit during a
relocation. Lessor or its agent shall xxxx and label Equipment, which labels
shall state Equipment is owned by Lessor, and Lessee shall keep such labels on
the Equipment as labeled by Lessor or its agent.
9. EQUIPMENT MAINTENANCE. (a) General. Lessee will locate or base each
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item of Equipment where designated in an Acceptance Notice and will reasonably
permit Lessor to inspect such item of Equipment and its maintenance records.
Lessee will at its sole expense comply with all applicable laws, rules,
regulations, requirements and orders with respect to the use, maintenance,
repair, condition, storage and operation of each item of Equipment. Except as
required herein, Lessee will not make any addition or improvement to any item of
Equipment that is not readily removable without causing material damage to any
item or impairing its original value or utility. Any addition or improvement
that is so required or cannot be so removed will immediately become the property
of Lessor. (b) Service and Repair. With respect to computer equipment, other
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than personal computers, Lessee has entered into, and will maintain in effect,
Vendor's standard maintenance contract or another contract satisfactory to
Lessor for a period equal to the term of each Schedule and extensions thereto
which provides for the maintenance of the Equipment and repairs and replacement
parts thereof in good condition and working order, all in accordance with the
terms of such maintenance contract. Lessee shall have the Equipment certified
for the Vendor's standard maintenance agreement prior to delivery to Lessor upon
expiration of this Lease. With respect to any other Equipment, Lessee will, at
its sole expense, maintain and service, and repair any damage to, each item of
Equipment in a manner consistent with prudent industry practice and Lessee's own
practice so that such item of Equipment is at all times (i) in the same
condition as when delivered to Lessee, except for ordinary wear and tear, (ii)
in good operating order for the function intended by its manufacturer's
warranties and recommendations.
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10. LOSS OR DAMAGE. Lessee assumes the entire risk of loss to the
Equipment through use, operation or otherwise. Lessee hereby indemnifies and
holds harmless Lessor from and against all claims, loss of rental payments,
costs, damages, and expenses relating to or resulting from any loss, damage or
destruction of the Equipment, any such occurrence being hereinafter called a
"Casualty Occurrence." On the first rental payment date following such Casualty
Occurrence, or, if there is no such rental payment date, thirty (30) days after
such Casualty Occurrence, Lessee shall (i) repair the Equipment, returning it to
good operating condition or (ii) replace the Equipment with identical equipment
in good condition and repair, the title to which shall vest in Lessor and which
thereafter shall be subject to the terms of this Lease; or (iii) pay to Lessor
(a) any unpaid accrued amounts relating to such Equipment due Lessor under this
Lease up to the date of the Casualty Occurrence, and (b) a sum equal to the
Casualty Value as set forth in the Casualty Value table attached to each
Schedule hereto for such Equipment. Upon the making of such payment, the term of
this Lease as to each unit of Equipment with respect to which the Casualty Value
was paid shall terminate.
11. GENERAL INDEMNITY. Lessee will protect, indemnify and save harmless
Lessor from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses, imposed upon or incurred by or
asserted against Lessor or any assignee of Lessor by Lessee or any third party
by reason of the occurrence or existence (or alleged occurrence or existence) of
any act or event relating to or caused by the Equipment, including but not
limited to, consequential or special damages of any kind, or any failure on the
part of Lessee to perform or comply with any of the terms of this Lease. In the
event that any action, suit or proceeding is brought against Lessor by reason of
any such occurrence, Lessee, upon request of Lessor, will at Lessee's expense
resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated and approved by Lessor. Lessee's
obligations under this Section 11 shall survive the expiration of this Lease
with respect to acts or events occurring or alleged to have occurred prior to
the return of the Equipment to Lessor at the end of the Lease term.
12. INSURANCE. Lessee at its expense shall keep the Equipment insured for
the entire term and any extensions of this Lease against all risks for at least
the replacement value of such Equipment and shall provide for a loss payable
endorsement to Lessor or any assignee of Lessor. Lessee shall maintain
comprehensive general public liability insurance with respect to loss or damage
for personal injury, death or property damage in an amount not less than
$1,000,000 per occurrence, naming Lessor and Lessor's assignee as additional
insured. Such insurance shall contain insurer's agreement to give thirty (30)
days written notice to Lessor before cancellation or material change of any
policy of insurance. Lessee will provide Lessor and any assignee of Lessor with
a certificate of insurance from the insurer evidencing Lessor's or such
assignee's interest in the policy of insurance. Such insurance shall cover any
Casualty Occurrence to any unit of Equipment. Notwithstanding anything in
Section 10 or this Section 12 to the contrary, this Lease and Lessee's
obligations hereunder and under each Schedule shall remain in full force and
effect with respect to any unit of Equipment which is not subject to a Casualty
Occurrence. If Lessee fails to provide or maintain insurance as required herein,
Lessor shall have the right, but shall not be obligated to obtain such
insurance. In that event, Lessee shall pay to Lessor the cost thereof.
13. TAXES. Lessee agrees to reimburse Lessor for, (or pay directly if
instructed by Lessor), and agrees to indemnify and hold Lessor harmless from,
all fees (including, but not limited to, license, documentation, recording and
registration fees), and all sales, use, gross receipts, personal property,
occupational, value added or other taxes,
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levies, imposts, duties, assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (all of the foregoing being hereafter referred to as "Impositions")
except same as may be attributable to Lessor's income, arising at any time prior
to or during the term of this Lease, or upon termination or early termination of
this Lease and levied or imposed upon Lessor directly or otherwise by any
Federal, state or local government in the United States or by any foreign
country or foreign or international taxing authority upon or with respect to (i)
the Equipment, (ii) the exportation, importation, registration, purchase,
ownership, delivery, leasing, possession, use, operation, storage, maintenance,
repair, return, sale, transfer of title, or other disposition thereof, (iii) the
rentals, receipts, or earnings arising from the Equipment, or any disposition of
the rights to such rentals, receipts, or earnings, (iv) any payment pursuant to
this Lease, and (v) this Lease or the transaction or any part thereof. Lessee's
obligations under this Section 13 shall survive the expiration of this Lease
with respect to acts or events occurring or alleged to have occurred prior to
the return of the Equipment to Lessor at the end of the Lease term.
14. PAYMENT BY LESSOR. If Lessee shall fail to make any payment or perform
any act required hereunder, then Lessor may, but shall not be required to, after
such notice to Lessee as is reasonable under the circumstances, make such
payment or perform such act with the same effect as if made or performed by
Lessee. Lessee will upon demand reimburse Lessor for all sums paid and all costs
and expenses incurred in connection with the performance of any such act.
15. SURRENDER OF EQUIPMENT. Upon termination or expiration of this Lease,
with respect to each group of Equipment, Lessee will forthwith surrender the
Equipment to Lessor delivered in as good order and condition as originally
delivered, reasonable wear and tear excepted. Lessor may, at its sole option,
arrange for removal and transportation of the Equipment provided that Lessee's
obligations under Sections 10, 11 and 12 shall not be released. Lessee shall
bear all expenses of delivering (which include, but are not limited to, the de-
installation, insurance, packaging and transportation of) the Equipment to
Lessor's location or other location within the United States as Lessor may
request. In the event Lessee fails to deliver the Equipment as directed above,
all obligations of Lessee under this Lease, including rental payments, shall
remain in full force and effect until Lessee delivers the Equipment to Lessor.
16. ASSIGNMENT. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, SUCH CONSENT NOT
TO BE UNREASONABLY WITHHELD, LESSEE SHALL NOT (A) ASSIGN, TRANSFER, PLEDGE,
HYPOTHECATE OR OTHERWISE DISPOSE OF THIS LEASE, EQUIPMENT, OR ANY INTEREST
THEREIN, OR (B) SUBLET OR LEND EQUIPMENT OR PERMIT IT TO BE USED BY ANYONE OTHER
THAN LESSEE OR LESSEE'S EMPLOYEES. LESSOR MAY ASSIGN THIS LEASE OR GRANT A
SECURITY INTEREST IN ANY OR ALL EQUIPMENT, OR BOTH, IN WHOLE OR IN PART TO ONE
OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO LESSEE. If Lessee is
given notice of such assignment it agrees to acknowledge receipt thereof in
writing and Lessee shall execute such additional documentation as Lessor's
assignee shall require. Each such assignee and/or secured party shall have all
of the rights, but none of the obligations, of Lessor under this Lease, unless
such assignee or secured party expressly agrees to assume such obligations in
writing. Lessee shall not assert against any assignee and/or secured party any
defense, counterclaim or offset that Lessee may have against Lessor.
Notwithstanding any such assignment, and providing no Event of Default has
occurred and is continuing, Lessor, or its assignees, secured parties, or their
agents or assigns, shall not interfere with Lessee's right to quietly enjoy use
of Equipment subject to the terms and conditions of this Lease. Subject to the
foregoing, this Lease inures to the benefit of and is binding upon the
successors and assignees of the parties hereto. Lessee acknowledges that any
such assignment by Lessor
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will not materially change Lessee's duties or obligations under the Lease or
increase any burden of risk on Lessee.
17. DEFAULT. (a) Event of Default. Any of the following events or
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conditions shall constitute an "Event of Default" hereunder: (i) Lessee's
failure to pay any monies due to Lessor hereunder or under any Schedule beyond
the fifth (5th) day after the same is due; (ii) Lessee's failure to comply with
its obligations under Section 12 or Section 16; (iii) Lessee's failure to comply
with or perform any term, covenant, condition, warranty or representation of
this Lease or any Schedule hereto or under any other agreement between Lessee
and Lessor or under any lease of real property covering the location of
Equipment if such failure to comply or perform is not cured by Lessee within
thirty (30) days of receipt of notice thereof; (iv) seizure of the Equipment
under legal process; (v) the filing by or against Lessee of a petition for
reorganization or liquidation under the Bankruptcy Code or any amendment thereto
or under any other insolvency law providing for the relief of debtors; (vi) the
voluntary or involuntary making of an assignment of a substantial portion of its
assets by Lessee, or any guarantor ("Guarantor") under any guaranty executed in
connection with this Lease ("Guaranty"), for the benefit of its creditors, the
appointment of a receiver or trustee for Lessee or any Guarantor for any of
Lessee's or Guarantor's assets, the institution by or against Lessee or any
Guarantor of any formal or informal proceeding for dissolution, liquidation,
settlement of claims against or winding up of the affairs of Lessee or any
Guarantor, provided that in the case of all such involuntary proceedings, same
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are not dismissed within sixty (60) days after commencement; or (vii) the making
by Lessee or any Guarantor of a transfer of all or a material portion of
Lessee's or Guarantor's assets or inventory not in the ordinary course of
business.
(b) Remedies. If any Event of Default shall have occurred:
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(i) Lessor may proceed by appropriate court action or actions either at
law or in equity to enforce performance by Lessee, of the applicable covenants
of this Lease, or to recover damages therefor; or
(ii) Lessee will, without demand, on the next rent payment date following
the Event of Default, pay to Lessor as liquidated damages which the parties
agree are fair and reasonable under the circumstances existing at the time this
Lease is entered into, and not as a penalty, an amount equal to the Casualty
Value of the Equipment set forth in Exhibit C together with any rent or other
amounts past due and owing by Lessee hereunder; and
(iii) Lessor may, without notice to or demand upon Lessee;
(a) Take possession of the Equipment and lease or sell the same or
any portion thereof, for such period, amount, and to such entity as Lessor shall
elect. The proceeds of such lease or sale will be applied by Lessor (A) first,
to pay all costs and expenses, including reasonable legal fees and
disbursements, incurred by Lessor as a result of the default and the exercise of
its remedies with respect thereto, (B) second, to pay Lessor an amount equal to
any unpaid rent or other amounts past due and payable plus the Casualty Value,
to the extent not previously paid by Lessee, and (C) third, to reimburse Lessee
for the Casualty Value to the extent previously paid. Any surplus remaining
thereafter will be retained by Lessor.
(b) Take possession of the Equipment and hold and keep idle the same
or any portion thereof.
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Lessee agrees to pay all internal and out-of-pocket costs of
Lessor related to the exercise of its remedies, including direct costs of its
in-house counsel and out-of-pocket legal fees and expenses. At Lessor's request,
Lessee shall assemble the Equipment and make it available to Lessor at such
location as Lessor may designate. Lessee waives any right it may have to redeem
the Equipment.
Repossession of any or all Equipment shall not terminate this
Lease or any Schedule unless Lessor notifies Lessee in writing. Any amount
required to be paid under this Section shall be increased by a service charge at
the rate of 2.0% per month, or the highest rate of interest permitted by
applicable law, whichever is less, accruing from the date the Casualty Value or
other amounts are payable hereunder until such amounts are paid.
None of the above remedies is intended to be exclusive, but each
is cumulative and in addition to any other remedy available to Lessor, and all
may be enforced separately or concurrently.
18. LATE PAYMENTS. Lessee shall pay to Lessor an amount equal to the
greater of 10% of all amounts owed Lessor by Lessee which are not paid when due
or $100, but in no event an amount greater than the highest rate permitted by
applicable law. If such funds have not been received by Lessor at Lessor's place
of business or by Lessor's designated agent by the date such funds are due under
this Lease, Lessor shall xxxx Lessee for such charges. Lessee acknowledges that
invoices for rentals due hereunder are sent by Lessor for Lessee's convenience
only. Lessee's non-receipt of an invoice will not relieve Lessee of its
obligation to make rent payments hereunder.
19. LESSOR'S EXPENSE. Lessee shall pay Lessor all costs and expenses
including reasonable attorney's fees and the fees of the collection agencies,
incurred by Lessor in enforcing any of the terms, conditions or provisions
hereof.
20. OWNERSHIP; PERSONAL PROPERTY. The Equipment shall be and remain
personal property of Lessor, and Lessee shall have no right, title or interest
therein or thereto except as expressly set forth in this Lease, notwithstanding
the manner in which it may be attached or affixed to real property, and upon
termination or expiration of the Lease term, Lessee shall have the duty and
Lessor shall have the right to remove the Equipment from the premises where the
same be located whether or not affixed or attached to the real property or any
building, at the cost and expense of Lessee.
21. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be made
to the Equipment without Lessor's prior written consent, which shall not be
given for changes that will affect the reliability and utility of the Equipment
or which cannot be removed without damage to the Equipment, or which in any way
affect the value of the Equipment for purposes of resale or re-lease.
22. FINANCING STATEMENT. Lessee will execute financing statements pursuant
to the Uniform Commercial Code. Lessee authorizes Lessor to file financing
statements signed only by Lessor (where such authorization is permitted by law)
at all places where Lessor deems necessary.
23. MISCELLANEOUS. (a) Lessee shall provide Lessor with such corporate
resolutions, financial statements and other documents as Lessor shall request
from time to time. (b) Lessee represents that the Equipment is being leased
hereunder for business purposes. (c) Time is of the essence with respect to this
Lease. (d) Lessee shall keep its books and records in accordance with generally
accepted accounting principles and
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practices consistently applied and shall deliver to Lessor its annual audited
financial statements, unaudited monthly financial statements to include any
financial information given to Lessee's Board of Directors, and signed by an
officer of Lessee and such other unaudited financial statements as may be
reasonably requested by Lessor. (e) Any action by Lessee against Lessor for any
default by Lessor under this Lease, including breach of warranty or indemnity,
shall be commenced within one (1) year after any such cause of action accrues.
24. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service and shall be directed, as the
case may be, to Lessor at 0000 Xxxxxx Xxxxxxxxx, Xxx Xxxxxx, Xxxxxxxxxx 00000,
Attention: Account Management and to Lessee at 0000 Xxxxxxxx, Xxxxxxx Xxxx, XX
00000, Attention: Xxxxxx Xxxxx.
25. ENTIRE AGREEMENT. Lessee acknowledges that Lessee has read this Lease,
understands it and agrees to be bound by its terms, and further agrees that it
and each Schedule constitute the entire agreement between Lessor and Lessee with
respect to the subject matter hereof and supersedes all previous agreements,
promises, or representations. The terms and conditions hereof shall prevail
notwithstanding any variance with the terms of any purchase order submitted by
the Lessee with respect to any Equipment covered hereby.
26. AMENDMENT. This Lease may not be changed, altered or modified except
by an instrument in writing signed by an officer of the Lessor and the Lessee.
27. WAIVER. Any failure of Lessor to require strict performance by Lessee
or any waiver by Lessor of any provision herein shall not be construed as a
consent or waiver of any other breach of the same or any other provision.
28. SEVERABILITY. If any provision of this Lease is held invalid, such
invalidity shall not affect any other provisions hereof.
29. JURISDICTION AND WAIVER OF JURY TRIAL. This Lease shall be governed by
and construed under the laws of the State of California. It is agreed that
exclusive jurisdiction and venue for any legal action between the parties
arising out of this Lease shall be in the Superior Court for Marin County,
California, or, in cases where Federal diversity jurisdiction is available, in
the United States District Court for the Northern District of California.
LESSEE, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY
JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS LEASE, ANY SCHEDULE, OR
ANY AGREEMENT EXECUTED IN CONNECTION HEREWITH.
30. NATURE OF TRANSACTION. Lessor makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
31. SECURITY INTEREST. (a) One executed copy of the Lease will be marked
"Original" and all other counterparts will be duplicates. To the extent, if any,
that this Lease constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction) no security
interest in the lease may be created in any documents other than the "Original."
(b) There shall be only one original of each Schedule and it shall be marked
"Original," and all other counterparts will be duplicates. To the extent, if
any, that any Schedule(s) to this Lease constitutes chattel paper (or as such
term is defined in the Uniform Commercial Code as in effect in any
-8-
applicable jurisdiction) no security interest in any Schedule(s) may be created
in any documents other than the "Original."
32. SUSPENSION OF OBLIGATIONS. The obligations of Lessor hereunder will be
suspended to the extent that it is hindered or prevented from complying
therewith because of labor disturbances, including but not limited to strikes
and lockouts, acts of God, fires, storms, accidents, failure of the manufacturer
to delivery any item of Equipment, governmental regulations or interference, or
any cause whatsoever not within the sole and exclusive control of Lessor.
33. SOFTWARE. For the term of this Lease, and so long as no Event of
Default has occurred and is continuing, Lessor hereby assigns to Lessee all of
Lessor's rights under any License Agreement executed by Lessor in connection
with the Equipment (except for any right of Lessor to be reimbursed for the
License Fee). Lessee agrees to be bound by the provisions of any such License
Agreement and to perform all obligations of Lessor (except Lessor's payment
obligations) thereunder. Lessee acknowledges that all of Lessee's obligations
under the Lease with respect to the Equipment will apply equally to the
software, including but not limited to Lessee's obligation to pay rent to
Lessor.
34. COMMITMENT FEE. Lessee has paid to Lessor a commitment fee ("Fee") of
$10,000. The Fee shall be applied by Lessor first to reimburse Lessor for all
out-of-pocket UCC search costs, inspections and appraisal fees incurred by
Lessor, and then proportionally to the first and last month's rent for each
Schedule hereunder in the proportion that the purchase price of the Equipment
leased pursuant to the Schedule bears to Lessor's entire commitment. However,
the portion of the Fee which is not applied to rental shall be non-refundable
except if Lessor defaults in its obligations pursuant to Section 3.
35. FINANCE LEASE. The parties agree that this lease is a "Finance Lease"
as defined by section 10-103(a)(7) of the California Commercial Code
(Cal.Com.C.). Lessee acknowledges either (a) that Lessee has reviewed and
approved any written Supply Contract (as defined by Cal.Com.C. Section 10-
103(a)(25)) covering Equipment purchased from the "Supplier" (as defined by
Cal.Com.C. Section 10-103(a)(24)) thereof for lease to Lessee or (b) that Lessor
has informed or advised Lessee, in writing, either previously or by this Lease
of the following: (i) the identity of the Supplier; (ii) that the Lessee may
have rights under the Supply Contract; and (iii) that the Lessee may contact the
Supplier for a description of any such rights Lessee may have under the Supply
Contract. Lessee hereby waives any rights and remedies Lessee may have under
Cal.Com.C. Sections 10-508 through 522.
36. PURCHASE OR RENEWAL REQUIREMENT FOR ALL SCHEDULES TO MASTER EQUIPMENT
LEASE. At the expiration of the Initial Term for Schedule No. 1, and
notwithstanding anything to the contrary in the Lease, upon 90 days prior
written notice to Lessor, Lessee shall either:
No. 1
-----
Purchase AS-IS, WHERE-IS all, but not less than all, of the Equipment
covered under all Schedules to this Lease at the expiration of the Initial
Term for each such Schedule for an amount equal to fifteen percent (15%) of
the Equipment's original purchase price, whereupon Lessor shall issue to
Lessee a Xxxx of Sale for the Equipment transferring it to Lessee without
any representation or warranty whatsoever, or
-9-
No. 2
-----
Extend the Initial Term of all Schedules to this Lease for an additional
twelve (12) months ("Renewal Term") commencing with the end of the Initial
Term of each Schedule at a rate of 1.5% per month of the Equipment's
original purchase price. Upon expiration of each Renewal Term and Lessee's
payment to Lessor of $1. Lessor shall issue to Lessee a Xxxx of Sale for
the Equipment under the applicable Schedule transferring it to Lessee
without any representation or warranty whatsoever.
In the event Lessee does not provide 90 days prior written notice as specified
above, Lessee shall be deemed to have selected No. 1 above for all Schedules to
the Lease.
Lessee shall be responsible for all applicable taxes in connection with any
purchase of Equipment by Lessee.
IN WITNESS WHEREOF, the parties hereto have executed this Lease.
PHOENIX LEASING INCORPORATED LIQUID AUDIO, INC.
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ [SIGNATURE ILLEGIBLE]
------------------------------- -----------------------------
Title: Contract Administrator Title: CFO
----------------------------- --------------------------
Headquarters Location:
0000 Xxxxxxxx
--------------------------------
Xxxxxx
Xxxxxxx Xxxx, XX 00000
--------------------------------
City, State Zip Code
San Mateo
--------------------------------
County
Exhibit A - Closing Memorandum
-10-
Exhibit A
to MASTER EQUIPMENT LEASE
Dated October 15, 1996
CLOSING MEMORANDUM
------------------
1.* Duly executed Master Equipment Lease marked "Original."
2. Duly executed Schedule marked "Original."
3. Duly executed Certificate of Acceptance. [EXECUTE UPON ACCEPTANCE OF
EQUIPMENT]
4. Insurance Certificates.
5.* Resolutions of Lessee's Board of Directors, including an incumbency
certificate.
6.* Copy of Lessee's articles of incorporation including all amendments,
certified by the Secretary of Lessee as being true and complete and in full
force and effect.
7.* Certificate from the Secretary of State of Lessee's state of incorporation,
from the state in which Lessee's chief executive office is located, if
different, and from each state where Lessee is qualified to do business,
stating Lessee is in good standing or is authorized to transact business,
as the case may be, dated not more than thirty days prior to the first
purchase of Equipment.
8. Real Property Waiver.**
9. UCC Financing Statements.
10. Xxxx of Sale (for Sale-Leaseback Equipment).
11. UCC search.
12. Equipment List, in form and substance satisfactory to Lessor.
13. Lessee's most recent financial statements.
14.* Certificate of Chief Financial Officer stating that no event of default
has occurred, there is no adverse change in the financial condition of
Lessee and that the Equipment is free of any encumbrances.
15. Letter from Software Vendor(s) in the form attached hereto.
16.* California Civil Code Section 3440 Filing and Published Notice.
17. See Section 3 of Master Equipment Lease for additional preconditions to
closing.
* First Schedule Only.
** Required if any Equipment is a fixture, i.e., attached to real property, or
located in certain states.
CORPORATE RESOLUTION TO LEASE
RESOLVED: That this corporation, Liquid Audio, Inc. lease from Phoenix
Leasing Incorporated, a California corporation, hereinafter referred to as
Lessor, such items of personal property, and upon such terms and conditions, as
the officer or officers hereinafter authorized, in their discretion, may deem
necessary or advisable; provided, however, that the original actual cost of such
items of personal property under the lease shall not exceed the sum of $200,000.
RESOLVED FURTHER: That:
XXXXXX XXXXXX the President /s/ Xxxxxx Xxxxxx
--------------------- -----------------------
(Print or type name) (specimen signature)
or XXXXXX XXXXX CHIEF FINANCIAL OFFICER /s/ Xxxxxx Xxxxx
--------------------- -------------------------- -----------------------
(Print or type name) Title of Corporate Officer (specimen signature)
of this corporation (this officer or officers authorized to act pursuant hereto
being hereinafter designated as "authorized officers"), be, and they hereby are,
individually authorized, directed and empowered, in the name of this
corporation, to execute and deliver to Lessor, and Lessor is requested to
accept, any lease that may be required by Lessor in connection with such leasing
of personal property.
RESOLVED FURTHER: That the authorized officers be, and they hereby are,
individually authorized, directed and empowered, in the name of this
corporation, to do or cause to be done all such further acts and things as they
shall deem necessary, advisable, convenient, or proper in connection with the
execution and delivery of any such lease and in connection with or incidental to
the carrying of the same into effect, including, without limitation the
execution, acknowledgment, and delivery of any and all instruments and documents
which may reasonably be required by Lessor under or in connection with any such
lease.
RESOLVED FURTHER: That Lessor is authorized to act upon this resolution
until written notice of its revocation is delivered to Lessor, and that the
authority hereby granted shall apply with equal force and effect to the
successors in office of the officers herein named.
I, XXXXXX XXXXX, Secretary of Liquid Audio, Inc., a corporation
------------
incorporated under the laws of the State of California do hereby certify that
the foregoing is a full, true and correct copy of resolutions of the Board of
Directors of the said corporation, duly and regularly passed or adopted by the
Board of Directors of said corporation as required by law and by the by-laws of
the said corporation on the 15th day of October, 1994.
I further certify that said resolutions are still in full force and effect
and have not been amended or revoked and that the specimen signatures appearing
above are the signatures of the officers authorized to sign for this corporation
by virtue of the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary, and
affixed the corporate seal of the said corporation, this 15th day of October,
1996.
/s/ Signature Illegible
-----------------------
[CORPORATE SEAL] SECRETARY
AMENDMENT NO. 1 TO MASTER EQUIPMENT LEASE AGREEMENT NO. 0044
THIS AMENDMENT NO. 1 TO MASTER EQUIPMENT LEASE AGREEMENT NO. 0044 ("Amendment")
is dated as of August 15, 1997 by and between LIQUID AUDIO, INC. ("Lessee") and
PHOENIX LEASING INCORPORATED ("Lessor").
RECITALS
--------
WHEREAS, Lessee and Lessor entered into that certain Master Equipment Lease
Agreement No. 0044, dated as of October 15, 1996 (the "Lease"), pursuant to
which Lessee is leasing or intends to lease equipment with an aggregate purchase
price of $200,000 (the "Initial Commitment");
WHEREAS, Lessee has requested that Lessor increase the dollar limit on the
aggregate purchase price of equipment which Lessor is willing to lease to Lessee
under the Lease by an additional $350,000, (such increase hereinafter referred
to as the "Additional Commitment");
WHEREAS, Lessor is willing to provide the Additional Commitment, on the terms
set forth herein and Lessee is willing to agree to such terms; and
WHEREAS, Lessee and Lessor now desire to amend the Lease to provide for the
Additional Commitment, and as otherwise provided in this Amendment;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. Unless otherwise indicated, words and terms which are defined
-----------
in the Lease shall have the same meaning where used herein. Upon execution of
this Amendment, (i) the term "Lease" shall be deemed to include this Amendment,
(ii) the term "Equipment" shall be deemed to include the "Additional Equipment"
and (iii) the term "Schedule(s)" shall be deemed to include any "Additional
Commitment Schedule(s)," as these terms are defined herein.
2. Amendments. The Lease is hereby amended as follows:
----------
(a) Following Section 3, a new Section 3A is added as follows:
3A. LESSOR ADDITIONAL COMMITMENT. So long as no Event of Default or
event which with the giving of notice or passage of time, or both, could become
an Event of Default has occurred or is continuing, upon full funding of the
Initial Commitment, Lessor agrees to provide the Additional Commitment and to
lease to Lessee the groups of equipment (the "Additional Equipment") described
on each schedule created pursuant to the Additional Commitment (each an
"Additional Commitment Schedule"), subject to the following conditions: (i) that
in no event shall Lessor be obligated to lease Additional Equipment to Lessee
pursuant to the Additional Commitment where the aggregate purchase price of all
Additional Equipment leased to Lessee pursuant to the Additional Commitment
would exceed $350,000 but in any event, the Initial Commitment together with the
Additional Commitment shall not exceed $550,000; of which amount Lessor may
finance soft costs such as installation and delivery costs, purchase tax,
software, tooling and items generally considered fungible or expendable for
lease to Lessee having an aggregate purchase price not exceeding an amount equal
to 10% of the utilized Additional Commitment; (ii) the amount of Additional
Equipment purchased by Lessor at any one time shall be at least equal to $25,000
except for a final advance which may be less than $25,000; (iii) Lessor shall
not be obligated to purchase Additional Equipment hereunder after December 31,
1997,
-1-
provided that the funding period may be extended to May 31, 1998 if Lessor has
received and approved in its sole discretion Lessee's monthly 1998 financial
plan; (iv) all Lease documentation relevant to the Additional Commitment
required by Lessor has been executed by Lessee or provided by Lessee no later
than September 15, 1997; (v) the equipment described on the Additional
Commitment Schedule is acceptable to Lessor; (vi) with respect to each funding
Lessee has provided to Lessor each of the closing documents and other items
described in Exhibit A hereto (which documents shall be in form and substance
acceptable to Lessor) and which list may be modified for each subsequent
funding; (vii) there is no material adverse change in Lessee's condition,
financial or otherwise, as determined by Lessor, and Lessee so certifies, from
(yy) the date of the most recent financial statements delivered by Lessee to
Lessor prior to execution of this Amendment to (zz) the date of Lessor's
purchase of the Additional Equipment; (viii) at all fundings Lessee is
performing according to its business plan referred to as "1997 Operating Plan,
Income & Cash Flow, 2 pages, dated March 13, 1997 and Balance Sheet, fax dated
June 24, 1997, 1 page" as may be amended by Lessee's 1998 financial plan and
otherwise in form and substance acceptable to Lessor (collectively, "Additional
Commitment Business Plan"); (ix) Lessor or its agent has inspected and placed
identification labels on the Additional Equipment; and (x) Lessor has received
in form and substance acceptable to Lessor: (a) Lessee's interim financial
statements signed by a financial officer of Lessee; and (b) hard copy evidence
satisfactory to Lessor of Lessee's receipt of a minimum of $4,000,000 equity.
(b) Following Section 34, a new Section 34A is added as follows:
34A. ADDITIONAL COMMITMENT FEE. Lessee has paid to Lessor a
commitment fee ("Additional Commitment Fee") of $10,000 with respect to the
Additional Commitment. The Additional Commitment Fee shall be applied by Lessor
first to reimburse Lessor for all out-of-pocket UCC search costs, inspections
and appraisal fees incurred by Lessor, and then proportionally to the first and
last months' rent for each Additional Commitment Schedule, in the proportion
that the purchase price of the Additional Equipment leased pursuant to the
Additional Commitment Schedule bears to the Additional Commitment. However, the
portion of the Additional Commitment Fee which is not applied to rental shall be
non-refundable except if Lessor defaults in its obligations pursuant to Section
3A.
(c) The parties agree that Section 36 shall apply to all Additional
Commitment Schedules.
3. Representations and Warranties. Lessee hereby reconfirms as of the date
------------------------------
hereof, its representations and warranties set forth in Section 5 of the Lease.
4. Continued Validity of Lease. Except as amended by this Amendment, the Lease
---------------------------
shall continue in full force and effect as originally constituted and is
ratified and affirmed by the parties hereto. Such Amendment shall not amend or
otherwise affect any of the Schedules executed and delivered by Lessee prior to
the date hereof.
5. Authorization. Each party represents to the other that the individual
-------------
executing this Amendment on its behalf is the duly appointed signatory of such
party to this Amendment and that such individual is authorized to execute this
Amendment by or on behalf of such party and to take all action required by the
terms of this Amendment.
6. When Amendment is Effective. This Amendment shall be binding and deemed
---------------------------
effective when executed by Lessee and accepted and executed by Lessor. Upon such
effectiveness this Amendment shall be deemed to have amended the Lease as
provided herein.
-2-
7. Captions. Section headings and numbers have been set forth herein for
--------
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Amendment.
8. No Novation. This Amendment is not intended to be, and shall not be
-----------
construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Lease shall remain in full force and effect.
9. Severability. Each provision of this Amendment shall be severable from
------------
every other provision of this Amendment for the purpose of determining the legal
enforceability of any specific provision.
10. Entire Agreement. The Lease as amended by this Amendment constitutes the
----------------
entire agreement between Lessee and Lessor with respect to the subject matter
hereof and supersedes all prior and contemporaneous negotiations,
communications, discussions and agreements concerning such subject matter.
Lessee acknowledges and agrees that Lessor has not made any representation,
warranty or covenant in connection with this Amendment.
11. Conflicts. In the event of any conflict between the terms of this Amendment
---------
and terms of the Master Equipment Lease No. 0044, the terms of this Amendment
shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
LESSOR: LESSEE:
PHOENIX LEASING INCORPORATED LIQUID AUDIO, INC.
By:______________________ By: /s/ [SIGNATURE ILLEGIBLE]
---------------------------
Title:____________________ Title: CEO
-------------------------
-3-
Exhibit A to Amendment No. 1
to MASTER EQUIPMENT LEASE NO. 0044
Dated as of August 15, 1997
CLOSING MEMORANDUM
1.* Duly executed Amendment No. 1 marked "Original."
2. Duly executed Additional Commitment Schedule marked "Original."
3. Duly executed Certificate of Acceptance. [EXECUTE UPON ACCEPTANCE OF
EQUIPMENT]
4. Insurance Certificates.
5.* Resolutions of Lessee's Board of Directors, including an incumbency
certificate.
6. Real Property Waiver.**
7. UCC Financing Statements.
8. Xxxx of Sale (for Sale-Leaseback Equipment).
9. UCC search.
10.* Payment of Commitment Fee.
11. Equipment List, in form and substance satisfactory to Lessor.
12. Lessee's most recent financial statements.
13. Certificate of Chief Financial Officer stating that no event of default has
occurred, there is no adverse change in the financial condition of Lessee
and that the Additional Equipment is free of any encumbrances.
14. See Section 3A of Amendment No. 1 for additional preconditions to closing.
15. Intercreditor Agreement, if applicable.
* First Schedule Only.
** Required if any Equipment is a fixture, i.e., attached to real property, or
located in certain states.
CORPORATE RESOLUTION TO LEASE
RESOLVED: That this corporation, Liquid Audio, Inc. lease from Phoenix
Leasing Incorporated, a California corporation, hereinafter referred to as
Lessor, such items of personal property, and upon such terms and conditions, as
the officer or officers hereinafter authorized, in their discretion, may deem
necessary or advisable; provided, however, that the original actual cost of such
items of personal property under the lease shall not exceed the sum of $550.000.
RESOLVED FURTHER: That:
/s/ Xxxxx Xxxxxx the President /s/ Xxxxxx Xxxxxx
--------------------- ---------------------------
(Print or type name) (specimen signature)
or /s/ Xxxx Xxxxxxx CEO /s/ [Signature Illegible]
---------------------- ---------------------- ---------------------------
(Print or type name) Title of Corporate Officer (specimen signature)
of this corporation (this officer or officers authorized to act pursuant hereto
being hereinafter designated as "authorized officers"), be, and they hereby are,
individually authorized, directed and empowered, in the name of this
corporation, to execute and deliver to Lessor, and Lessor is requested to
accept, any lease that may be required by Lessor in connection with such leasing
of personal property.
RESOLVED FURTHER: That the authorized officers be, and they hereby are,
individually authorized, directed and empowered, in the name of this
corporation, to do or cause to be done all such further acts and things as they
shall deem necessary, advisable, convenient, or proper in connection with the
execution and delivery of any such lease and in connection with or incidental to
the carrying of the same into effect, including, without limitation the
execution, acknowledgment, and delivery of any and all instruments and documents
which may reasonably be required by Lessor under or in connection with any such
lease.
RESOLVED FURTHER: That Lessor is authorized to act upon this resolution
until written notice of its revocation is delivered to Lessor, and that the
authority hereby granted shall apply with equal force and effect to the
successors in office of the officers herein named.
I. Xxxxxx Xxxxx, Secretary of Liquid Audio, Inc., a corporation
------------
incorporated under the laws of the State of California do hereby certify that
the foregoing is a full, true and correct copy of resolutions of the Board of
Directors of the said corporation, duly and regularly passed or adopted by the
Board of Directors of said corporation as required by law and by the by-laws of
the said corporation on the 10/th/ day of October, 1997.
I further certify that said resolutions are still in full force and effect
and have not been amended or revoked and that the specimen signatures appearing
above are the signatures of the officers authorized to sign for this corporation
by virtue of the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary, and
affirmed the corporate seal of the said corporation, this 10th day of October,
1997.
/s/ [SIGNATURE ILLEGIBLE]
---------------------------
[CORPORATE SEAL] SECRETARY
AMENDMENT NO. 2 TO MASTER EQUIPMENT LEASE AGREEMENT NO. 0044
THIS AMENDMENT NO. 2 TO MASTER EQUIPMENT LEASE AGREEMENT NO. 0044 ("Amendment")
is dated as of September 30, 1998, by and between LIQUID AUDIO, INC ("Lessee")
and PHOEND LEASING INCORPORATED ("Lessor").
RECITALS
--------
WHEREAS, Lessee and Lessor entered into that certain Master Equipment Lease
Agreement No. 0044, dated as of October 15, 1996 as amended by Amendment No. 1
dated August 15, 1997 (the "Lease"), pursuant to which Lessee is leasing or
intends to lease equipment with an aggregate purchase price of Five Hundred
Fifty Thousand Dollars ($550,000), (the "Earlier Commitments");
WHEREAS, Lessee has requested that Lessor increase the dollar limit on the
aggregate purchase price of equipment which Lessor is willing to lease to Lessee
under the Lease by an additional Five Hundred Thousand Dollars ($500,000) and
include $37,871 from the Earlier Commitments for a total of Five Hundred Thirty-
seven Thousand Eight Hundred Seventy-one Dollars ($537,871), (such increase
hereinafter referred to as the "Second Additional Commitment");
WHEREAS, Lessor is willing to provide the Second Additional Commitment, on the
terms set forth herein and Lessee is willing to agree to such terms; and
WHEREAS, Lessee and Lessor now desire to amend the Lease to provide for the
Second Additional Commitment, and as otherwise provided in this Amendment;
NOW, THEREFORE, IT IS AGREED THAT
1. Definitions. Unless otherwise indicated, words and terms which are defined
-----------
in the Lease shall have the same meaning where used herein. Upon execution of
this Amendment, (i) the term "Lease" shall be deemed to include this Amendment,
(ii) the term "Equipment" shall be deemed to include the "Second Additional
Commitment Equipment" and (iii) the term "Schedule(s)" shall be deemed to
include any "Second Additional Commitment Schedule(s)," as these terms are
defined herein.
2. Amendments. The Lease is hereby amended as follows:
----------
(a) Following Section 3A, a new Section 3B is added as follows:
3B. LESSOR SECOND ADDITIONAL COMMITMENT. So long as no Event of
Default or event which with the giving of notice or passage of time,
or both, could become an Event of Default has occurred or is
continuing, upon full funding of the Earlier Commitments, Lessor
agrees to provide the Second Additional Commitment and to lease to
Lessee the groups of equipment (the "Second Additional Commitment
Equipment") described on each schedule created pursuant to the Second
Additional Commitment (each a "Second Additional Commitment
Schedule"), subject to the following conditions: (i) that in no event
shall Lessor be obligated to lease Second Additional Commitment
Equipment to Lessee pursuant to the Second Additional Commitment where
the aggregate purchase price of all Second Additional Commitment
Equipment leased to Lessee pursuant to the Second Additional
Commitment would exceed $500,000 but in any event, the Earlier
Commitments together with the Second Additional Commitment shall not
exceed One Million Fifty Thousand Dollars ($1,050,000); of which
amount Lessor may purchase application software for lease to Lessee
having an aggregate purchase price not exceeding an amount equal to
20% of the utilized Second Additional
1
Commitment, (ii) the amount of Second Additional Commitment Equipment
purchased by Lesson at any one time shall be at least equal to $
25,000 except for a final advance which may be less than $ 25,000,
(iii) Lessor shall not be obligated to purchase Second Additional
Commitment Equipment hereunder after December 31, 1998, provided that
the funding period may be extended to April 30, 1999 if Lessor has
received by no later than December 31, 1998 and approved in its sole
discretion Lessee's monthly 1999 Financial Plan financial forecasts
and projections; (iv) all Lease documentation relevant to the Second
Additional Commitment required by Lessor has been executed by Lessee
or provided by Lessee no later than October 31, 1998; (v) the
equipment described on the Second Additional Commitment Schedule is
acceptable to Lessor; (vi) with respect to each funding Lessee has
provided to Lessor each of the closing documents and other items
described in Exhibit A hereto (which documents shall be in form and
substance acceptable to Lessor) and which list may be modified for
each subsequent funding; (vii) there is no material adverse change in
Lessee's condition, financial or otherwise, as determined by Lessor,
and Lessee so certifies, from (yy) the date of the most recent
financial statements delivered by Lessee to Lessor prior to execution
of this Amendment to (zz) the date of Lessor's purchase of the Second
Additional Commitment Equipment; (viii) at all fundings Lessee is
performing according to its financial forecasts and projections
referred to as "Financial Forecasts" 3 pages, dated July 31, 1998, as
may be amended from time to time in form and substance acceptable to
Lessor ("Second Additional Commitment Plan"); (ix) Lessor or its agent
has inspected and placed identification labels on the Second
Additional Commitment Equipment; and (x) Lessor has received in form
and substance acceptable to Lessor; (a) Lessee's interim financial
statements signed by a financial officer of Lessee; (b) evidence of
Lessee's receipt of $20,000,000 equity by August 18, 1998 with new
Capitalization Table; and (c) evidence satisfactory to Lessor of
Lessee's $84,000 cash position as of May 31, 1998.
(b) Following Section 34A, a new Section 34B is added as follows:
34B. SECOND ADDITIONAL COMMITMENT FEE. Lessee has paid to Lessor a
commitment fee ("Second Additional Commitment Fee") of Five Thousand
Dollars ($5,000) with respect to the Second Additional Commitment. The
Second Additional Commitment Fee shall be applied by Lessor first to
reimburse Lessor for all out-of-pocket UCC search costs, inspections
and appraisal fees incurred by Lessor, and then proportionally to the
first month's rent for each Second Additional Commitment Schedule, in
the proportion that the purchase price of the Second Additional
Commitment Equipment leased pursuant to the Second Additional
Commitment Schedule bears to the Second Additional Commitment.
However, the portion of the Second Additional Commitment Fee which is
not applied to rental shall be non-refundable except if Lessor
defaults in its obligations pursuant to Section 3A.
(c) The parties agree that Section 36 shall apply to all Second Additional
Commitment Schedules.
3. Representations and Warranties: Lessee hereby reconfirms as of the date
------------------------------
hereof, its representations and warranties set forth in Section 5 of the Lease.
4. Continued Validity of Lease. Except as amended by this Amendment, the Lease
---------------------------
shall continue in full force and effect as originally constituted and is
ratified and affirmed by the parties hereto. Such Amendment shall not amend or
otherwise affect any of the Schedules executed and delivered by Lessee prior to
the date hereof.
5. Authorization. Each party represents to the other that the individual
-------------
executing this Amendment on its behalf is the duly appointed signatory of such
party to this Amendment and that such individual is authorized to execute this
Amendment by or on behalf of such party and to take all action required by the
terms of this Amendment.
2
6. When Amendment is Effective. This Amendment shall be binding and deemed
---------------------------
effective when executed by Lessee and accepted and executed by Lessor. Upon such
effectiveness this Amendment shall be deemed to have amended the Lease as
provided herein.
7. Captions. Section headings and numbers have been set forth herein for
--------
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Amendment.
8 No Novation. This Amendment is not intended to be, and shall not be
-----------
construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Lease shall remain in full force and effect.
9. Severability. Each provision of this Amendment shall be severable from every
------------
other provision of this Amendment for the purpose of determining the legal
enforceability of any specific provision.
10. Entire Agreement. The Lease as amended by this Amendment constitutes the
-----------------
entire agreement between Lessee and Lessor with respect to the subject matter
hereof and supersedes all prior and contemporaneous negotiations,
communications, discussions and agreements concerning such subject matter.
Lessee acknowledges and agrees that Lessor has not made any representation,
warranty or covenant in connection with this Amendment.
11. Conflicts. In the event of any conflict between the terms of this Amendment
----------
and terms of the Master Equipment Lease Agreement No. 0044, the terms of this
Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
LESSOR: LESSEE:
PHOENIX LEASING INCORPORATED LIQUID AUDIO INC.
By:________________________ By: /s/ [SIGNATURE ILLEGIBLE]
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Name:______________________ Name:/s/ [SIGNATURE ILLEGIBLE]
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Title:_____________________ Title: [ILLEGIBLE]
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3
Exhibit: A to Amendment No. 2
TO MASTER EQUIPMENT LEASE NO 0044
Dated as of October 15, 1996
CLOSING MEMORANDUM
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1.* Duly executed Amendment No. 2 marked "Original."
2. Duly executed Second Additional Commitment Schedule marked "Original."
3. Duly executed Certificate of Acceptance. [EXECUTE UPON ACCEPTANCE OF
EQUIPMENT]
4. Insurance Certificates.
5.* Resolutions of Lessee's Board of Directors, including an incumbency
certificate.
6. Real Property Waiver.**
7. UCC Financing Statements.
8.* Additional Stock Warrant.
9. Xxxx of Sale (for Sale-Leaseback Equipment).
10. UCC search.
11.* Payment of Commitment Fee.
12. Equipment List, in form and substance satisfactory to Lessor.
13. Lessee's most recent financial statements.
14. Certificate of Chief Financial Officer stating that no event of default has
occurred, there is no adverse change in the financial condition of Lessee
and that the Second Additional Commitment Equipment is free of any
encumbrances.
15. See Section 3A of Amendment No. 2 for additional preconditions to closing.
16. Intercreditor Agreement, if applicable.
* First Schedule Only.
** Required if any Equipment is a fixture, i.e., attached to real property, or
located in certain states.
