MASTER LEASE AGREEMENT
This Master Lease Agreement (the "Lease") is made the 19th day of October, 1998
between Leasing Technologies International, Inc., with its principal office at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Lessor"), and Netstakes, Inc., with its
principal office at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Lessee"). The parties hereto agree as follows:
1. Lease:
This Lease establishes the general terms and conditions by which Lessor may
lease to Lessee the Equipment (the "Equipment") listed on each Equipment
Schedule executed periodically pursuant to this Lease. Each such Equipment
Schedule shall incorporate by reference the terms of this Lease, and shall be a
separate lease agreement as to the Equipment listed thereon for all purposes,
including default. In the event of any conflict between the terms and conditions
of this Lease and the terms and conditions of any Equipment Schedule(s) or
Rider(s) thereto, the terms and conditions of such Equipment Schedule(s) or
Rider(s) shall prevail.
2. Definitions:
(a) The "Installation Date" means the date determined in accordance with
the applicable Equipment Schedule.
(b) The "Commencement Date" means, as to any item of Equipment designated
on any Equipment Schedule where the Installation Date for such item of Equipment
falls on the first day of the month, that date, or, in any other case, the first
day of the month following the month in which such Installation Date falls.
(c) The "Daily Rental" means 1/30th of the amount set forth as the monthly
rental in the applicable Equipment Schedule.
3. Term of Lease:
The term of this Lease, as to all Equipment designated on any Equipment
Schedule, shall commence on the Installation Date for such Equipment, and shall
continue for an initial period ending that number of months as is specified on
the applicable Equipment Schedule from the Commencement Date for the last item
of Equipment to be installed (the "Initial Term"). The term of this Lease for
all such Equipment shall be automatically extended for successive monthly
periods until terminated in accordance with Section 13 of this Lease. Any
termination shall be effective only on the last day of the Initial Term or the
last day of any such successive period.
4. Rental:
The monthly rental payable hereunder is as set forth in the Equipment
Schedule(s). Rental shall begin to accrue on the Installation Date for each item
of Equipment and shall be due and payable by Lessee in advance on the first day
of each month. If the Installation Date does not fall on the first day of a
month, the rental for that period of time from the Installation Date until the
Commencement Date shall be an amount equal to the Daily Rental multiplied by the
number of days from (and including) the Installation Date to (but not including)
the Commencement Date and shall be due and payable on the Installation Date. In
addition to the monthly rental set forth in the Equipment Schedule(s), Lessee
shall pay to Lessor an amount equal to all taxes paid, payable or required to be
collected by Lessor, however designated, which are levied or based on the
rental, on the Lease or on the Equipment or on its purchase for lease hereunder,
or on its use, lease, operation, control or value (including, without
limitation, state and local privilege or excise taxes based on gross revenue),
any penalties or interest in connection therewith which are attributable to
Lessee's negligence or taxes or amounts in lieu thereof paid or payable by
Lessor in respect of the foregoing, but excluding taxes based on Lessor's net
income. Personal property taxes assessed on the Equipment during the term hereof
shall be paid by Lessee. Lessee agrees that Lessor, or Lessor's agent shall file
all required property tax returns and reports and pay all taxes thereon
pertaining to the Equipment. In such event, Lessee shall reimburse Lessor or
Lessor's agent for all costs and expenses incurred in connection therewith,
provided that such costs and expenses (including property taxes) shall not
exceed the property taxes pursuant to statutory tax rates and regulations. If
requested by Lessor, Lessee agrees to file, on behalf of Lessor, all required
property tax returns and reports concerning the Equipment with all appropriate
governmental agencies, and, within not more than thirty (30) days after the due
date of such filing to send Lessor confirmation of such filing.
Interest on any past due payments, including but not limited to
administrative charges and any other charges or fees arising out of or related
to this Lease, shall accrue at the rate of 1 1/2% per month, or if such rate
shall exceed the maximum rate allowed by law, then at such maximum rate, and
shall be payable on demand. Charges for taxes, penalties and interest shall be
promptly paid by Lessee when invoiced by Lessor.
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As security for the full performance of all of Lessee's obligations under
each Equipment Schedule, Lessee shall, simultaneously with the execution and
delivery of each Equipment Schedule, deposit with Lessor the amount set forth on
such Equipment Schedule. The security deposit shall be promptly returned to
Lessee by Lessor upon the expiration of such Equipment Schedule and return or
purchase of all Equipment, as the case may be, provided that all Lessee
obligations under such Equipment Schedule have been fulfilled.
5. Installation, Use and Quiet Possession of Equipment:
(a) Lessee, at its own expense, will provide the required suitable electric
current to operate the Equipment and appropriate installation facilities as
specified by the manufacturer.
(b) Any equipment, cards, disks, tapes or other items not specified in the
Equipment Schedule(s) which are used on or in connection with the Equipment must
meet the specifications of the manufacturer and shall be acquired by Lessee at
its own expense.
(c) Lessee shall use the Equipment solely in connection with Lessee's
business and for no other purpose. Subject to the preceding sentence, Lessee
shall be entitled to unlimited usage of the Equipment without extra charge by
Lessor.
(d) Unless otherwise set forth in the applicable Equipment Schedule, Lessee
will at all times keep the Equipment in its sole possession and control. The
Equipment shall not be moved from the location stated in the applicable
Equipment Schedule without the prior written consent of Lessor.
(e) After prior notice to Lessor, Lessee may, at its own expense, make
alterations in or add attachments to the Equipment provided, such alterations or
attachments do not interfere with the normal and satisfactory operation or
maintenance of the Equipment or with Lessee's ability to obtain and maintain the
maintenance contract required by Section 5(h) hereof. The manufacturer or other
organization selected by Lessee and approved in writing by Lessor to maintain
the Equipment ("Maintenance Organization") may incorporate engineering changes
or make temporary alterations to the Equipment upon request of Lessee. All such
alterations and attachments shall be and become the property of Lessor or, at
the option of Lessee, shall be removed by Lessee and the Equipment restored, at
Lessee's expense, to its original condition as of the Installation Date thereof,
reasonable wear and tear only excepted, and upon the removal and restoration,
the alteration and/or attachment which was made by Lessee shall become the
property of Lessee.
(f) So long as Lessee is not in default hereunder, neither Lessor nor any
party claiming through or under Lessor shall interfere with Lessee's use or
possession of any Equipment during the term of this Lease.
(g) Lessee shall, during the term of this Lease, at its expense, keep the
Equipment in good working order and condition and make all necessary
adjustments, repairs and replacements and shall not use or permit the
Equipment to be used in any manner or for any purpose for which, in the opinion
of the manufacturer, the Equipment is not designed or reasonably suitable.
(h) Unless otherwise set forth in the applicable Equipment Schedule, Lessee
shall, during the term of this Lease, at its own expense, enter into and
maintain in force a contract with the manufacturer or the Maintenance
Organization covering at least prime shift maintenance of each item of
Equipment. Such contract ▇▇▇▇▇ commence upon expiration of the manufacturer's
warranty period, if any, relating to such item. Lessee shall furnish Lessor
with a copy of such contract(s).
(i) At the termination of the applicable Equipment Schedule, Lessee at its
expense shall return, if permitted by the applicable Equipment Schedule, not
less than all the Equipment subject thereto to Lessor (at the location
designated by Lessor within the Continental United States) in good operating
order, repair, condition and appearance as on the Installation Date, reasonable
wear and tear only excepted, with all engineering and safety changes prescribed
by the manufacturer or Maintenance Organization incorporated therein. Lessee
shall, prior to such termination, arrange and pay for any repairs, changes and
manufacturer's certifications as are necessary for the manufacturer or
Maintenance Organization to accept the Equipment under contract maintenance at
its then standard rates. Lessee shall return all accessories supplied with the
Equipment, including but not limited to all manuals, cables and software
diskettes. Lessee shall provide within ten days after the effective date of
termination of each Equipment Schedule, certification to Lessor from the
manufacturer or maintenance organization that the Equipment being returned to
Lessor is in good operating order, repair and condition and appearance,
reasonable wear and tear only excepted. In the event such certification is not
provided as set forth in the preceding sentence, or if the certification
discloses any missing items or items requiring repair, Lessee shall promptly
pay, after receipt of an invoice therefore, all costs and expenses pertaining to
the replacement of any missing items and for the repair of any Equipment. Lessee
shall also promptly pay any audit or inspection charges reasonably incurred by
Lessor, or if the certification set forth in this section is not provided as set
forth in this section, Lessee shall also pay any certification charges
reasonably incurred by Lessor in connection with the Equipment.
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6. Leasehold Rights and Inspection:
(a) Lessee shall have no interest in the Equipment other than the rights
acquired as a lessee hereunder and the Equipment shall remain personalty
regardless of the manner in which it may be installed or attached. Lessee shall,
at Lessor's request, affix to the Equipment, tags, decals or plates furnished by
Lessor, indicating Lessor's ownership and Lessee shall not permit their removal
or concealment. Lessee shall replace any such tag, decal or plate which may be
removed or destroyed or become illegible. Lessee shall keep all Equipment free
from any marking or labeling which might be interpreted as a claim of ownership
thereof by Lessee or any party other than Lessor or anyone claiming through
Lessor.
(b) Lessee shall keep the Equipment free and clear of all liens and
encumbrances except liens or encumbrances arising through the actions or
omissions of Lessor. LESSEE SHALL NOT ASSIGN OR OTHERWISE ENCUMBER THIS LEASE OR
ANY OF ITS RIGHTS HEREUNDER OR SUBLEASE THE EQUIPMENT WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR except that Lessee may assign this Lease or sublease the
Equipment to its parent or any subsidiary corporation, or to a corporation which
shall have acquired all or substantially all of the property of Lessee by
merger, consolidation or purchase. No permitted assignment or sublease shall
relieve Lessee of any of its obligations hereunder.
(c) Lessor or its agents shall have free access to the Equipment at all
reasonable times upon two (2) days notice for the purpose of inspection and for
any other purpose contemplated by this Lease. No notice shall be required in the
event of emergency or if an Event of Default has occurred. Lessor or its agent
shall not cause any material interference with the normal business operation of
Lessee.
(d) Lessee shall immediately notify Lessor of all details concerning any
material damage to, or material loss of, the Equipment arising out of any event
or occurrence whatsoever, including but not limited to, the alleged or apparent
improper manufacture, functioning or operation of the Equipment.
7. No Warranties By Lessor:
Lessee represents that, at the Installation Date thereof, it shall have (a)
thoroughly inspected the Equipment; and (b) determined for itself that all items
of Equipment are of a size, design, capacity and manufacture selected by it.
Lessee represents that within ten (10) days after the Installation Date thereof,
it shall have satisfied itself that the Equipment is suitable for Lessee's
purposes. LESSOR SUPPLIES THE EQUIPMENT AS IS AND NOT BEING THE MANUFACTURER OF
THE EQUIPMENT, THE MANUFACTURER'S AGENT OR THE SELLER'S AGENT, MAKES NO WARRANTY
OR REPRESENTATION, EITHER EXPRESS OR IMPLIED AS TO THE EQUIPMENT'S
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESIGN, CONDITION, QUALITY,
CAPACITY, MATERIAL OR WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR THE LIKE, it
being agreed that all such risks, as between Lessor and Lessee, are to be borne
by Lessee. Lessee agrees to look solely to the manufacturer or to suppliers of
the Equipment for any and all warranty claims and any and all warranties made by
the manufacturer or the supplier of Lessor are, to the extent to which the same
may be assignable, hereby assigned to Lessee for the term of the applicable
Equipment Schedule. To the extent such warranty claims or warranties are not
assignable to Lessee, Lessor shall, at Lessee's request and expense, pursue for
the benefit of Lessee all rights and remedies available to it under such
warranty claim or warranty. Lessee agrees that Lessor shall not be responsible
for the delivery, installation, maintenance, operation or service of the
Equipment or for delay or inadequacy of any or all of the foregoing. Lessor
shall not be responsible for any direct or consequential loss or damage
resulting from the installation, operation or use of the Equipment or otherwise.
Lessee will defend, indemnify and hold Lessor harmless against any and all
claims, demands and liabilities arising out of or in connection with the design,
manufacture, possession or operation of the Equipment.
8. Risk of Loss on Lessee:
(a) Beginning on the Installation Date thereof and continuing until the
Equipment is either returned to Lessor or purchased by Lessee as provided in
this Lease, Lessee relieves Lessor of responsibility for all risks of physical
damage to or loss or destruction of the Equipment, howsoever caused. During the
term of this Lease as to any Equipment Schedule, Lessee shall, at its own
expense, keep in effect "all risk" property insurance and public liability
insurance policies covering the Equipment designated in each Equipment Schedule.
The public liability insurance policy shall be in such amount as is reasonably
acceptable to Lessor. The "all risk" property insurance policy shall be for an
amount not less than the replacement cost of the Equipment. Lessor, its
successors and assigns and/or such other party as may be designated by any
thereof to Lessee, in writing, shall be named as additional insureds and loss
payees on such policies, which shall be written by an insurance company of
recognized responsibility which is reasonably acceptable to Lessor. Evidence of
such insurance coverage shall be furnished to Lessor no later than the
Installation Date set forth in the Equipment Schedule(s) and, from time to time,
thereafter as Lessor may request. Such policies shall provide that no less than
ten days written notice shall be given Lessor and any other party named as loss
payee prior to cancellation of such policies for any reason. To the extent of
Lessor's interest therein, Lessee hereby irrevocably appoints Lessor or any
other party named as loss payee
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as Lessee's attorney-in-fact coupled with an interest to make claim for, receive
payment of, and execute any and all documents that may be required to be
provided to the insurance carrier in substantiation of any such claim for loss
or damage under said insurance policies, and to endorse Lessee's name to any and
all drafts or checks in payment of the loss proceeds.
(b) If any item of Equipment is rendered unusable as a result of any
physical damage to, or destruction of, the Equipment, Lessee shall give to
Lessor prompt notice thereof and this Lease shall continue in full force and
effect without any abatement of rental. Lessee shall determine, within thirty
(30) days after the date of occurrence of such damage or destruction, whether
such item of Equipment can be repaired. In the event Lessee determines that the
item of Equipment cannot be repaired, Lessee shall either, at its expense,
promptly replace such item of Equipment and convey title to such replacement to
Lessor free and clear of all liens and encumbrances, and this Lease shall
continue in full force and effect as though such damage or destruction had not
occurred, or pay Lessor therefor in cash the Stipulated Loss Value (defined
below) within sixty (60) days of such loss or damage at which time all
obligations under this Lease as it relates to such item of Equipment shall
terminate except with respect to any unsatisfied obligations which have accrued
with respect to such item of Equipment prior to such termination. "Stipulated
Loss Value," as used herein, shall be an amount as shown on Exhibit A to the
applicable Equipment Schedule. In the event Lessee determines that such item of
Equipment can be repaired, Lessee shall cause such item of Equipment to be
promptly repaired. All proceeds of insurance received by Lessor, the designated
loss payee or Lessee under the policy referred to in the preceding paragraph of
this Section shall be applied to reimburse Lessee for (i) the cost of any such
repair or replacement as long as Lessee shall not be in default for payment of
any of its obligations hereunder, (ii) the Stipulated Loss Value paid to Lessor
and (iii) any rental installments paid to Lessor for such item of Equipment
during the time Equipment was unusable as a result of such physical damage or
destruction.
9. Events of Default and Remedies:
The occurrence of any one of the following shall constitute an Event of
Default hereunder:
(a) Lessee fails to pay an installment of rent on or before the date when
the same becomes due and payable and such failure continues for a period of ten
days;
(b) Lessee attempts to remove, sell, transfer, encumber, sublet or part
with possession of the Equipment or any items thereof, except as expressly
permitted herein;
(c) Lessee shall fail to observe or perform any of the other obligations
required to be observed or performed by Lessee hereunder and such failure shall
continue uncured for ten (10) days after written notice thereof to Lessee by
Lessor or the then assignee hereof;
(d) Lessee ceases doing business as a going concern, makes an assignment
for the benefit of creditors, admits in writing its inability to pay its debts
as they become due, files a voluntary petition of bankruptcy, is adjudicated a
bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of the petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets or properties, or if it or its shareholders shall take any action looking
to its dissolution or liquidation;
(e) Within thirty (30) days after the commencement of any proceedings
against Lessee seeking reorganization, arrangement, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such proceedings shall not have been dismissed, or if within thirty
(30) days after the appointment without Lessee's consent or acquiescence of any
trustee, receiver or liquidator of it or of all or any substantial part of its
assets and properties, such appointment shall not be vacated; and
(f) Lessee defaults in the performance or observation of any material term,
condition or covenant of any loan agreement, indenture, trust agreement, lease
or similar agreement to which Lessee is a party involving an obligation by
Lessee to pay more than $100,000 and such default continues beyond any
applicable cure period; provided however, that if such default should occur and
be cured in accordance with the terms of such similar agreements, or if a waiver
of default is provided with respect to such default, no Event of Default shall
be deemed to have occurred under this Section 9(f).
Upon the occurrence of an Event of Default, Lessor may at its option do any
one or more of the following: (i) by notice to Lessee terminate this Lease as to
any or all Equipment Schedules; (ii) whether or not this Lease is terminated as
to any or all Equipment Schedules, take possession on not less than three (3)
days' notice of any or all of the Equipment listed on any or all Equipment
Schedules, wherever situated, and for such purpose, enter upon any premises
without liability for so doing (except for Lessor's gross negligence or
intentional misconduct) or Lessor may cause Lessee and Lessee hereby agrees, to
return said
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Equipment to Lessor as provided in this Lease; (iii) recover from Lessee, as
liquidated damages for loss of a bargain and not as a penalty, all past due
amounts as well as an amount equal to the present value of all monies to be paid
by Lessee during the remaining Initial Term or any successive period then in
effect, calculated by discounting at the rate of six percent (6%) per annum
compounded monthly, which payment shall become immediately due and payable; and
(iv) sell, dispose of, hold, use or lease any Equipment as Lessor in its sole
discretion may determine (and Lessor shall not be obligated to give preference
to the sale, lease or other disposition of the Equipment over the sale, lease or
other disposition of similar equipment owned or leased by Lessor).
In the event that Lessee shall have first paid to Lessor or its assigns the
liquidated damages referred to in (iii) above, Lessee shall thereafter be
entitled to receive all rentals or proceeds received from any reletting or sale
of the Equipment during the balance of the Initial Term (after deduction of
Lessor's expected residual value of the Equipment at the expiration of the
Initial Term or any extension thereof and of all reasonable expenses incurred in
connection therewith) said amount never to exceed the amount of the liquidated
damages paid by Lessee. Lessee agrees that Lessor shall have no obligation to
sell the Equipment. Lessor shall mitigate damages in accordance with applicable
law. Lessee shall in any event remain fully liable for reasonable damages as
provided by law and for all reasonable costs and expenses incurred by Lessor or
its assigns on account of such default including but not limited to all court
costs and reasonable attorney's fees. Lessee hereby agrees that, in any event,
it will be liable for any deficiency after any lease or other disposition of the
Equipment. The rights afforded Lessor hereunder shall not be deemed to be
exclusive, but shall be in addition to any rights or remedies provided by law.
10. Net Lease:
Except as otherwise specifically provided in this Lease, it is understood
and agreed that this is a net lease, and that, as between Lessor and Lessee,
Lessee shall be responsible for all costs and expenses of every nature
whatsoever arising out of or in connection with or related to this Lease or the
Equipment (including, but not limited to, equipment inspection, tagging,
transportation in and out, rigging, manufacturer's approved packing,
installation, certification costs and disconnect charges). Lessee hereby agrees
that in the event that Lessee fails to pay or perform any obligation under this
Lease, Lessor may, at its option, pay or perform said obligation and any payment
made or expense incurred by Lessor in connection therewith shall become
additional rent which shall be due and payable by Lessee upon demand. Lessee
acknowledges that Lessor may, from time to time, and at Lessee's request,
execute and deliver purchase orders pertaining to the purchase of equipment to
be leased pursuant to this Lease. Lessee agrees that it will indemnify and hold
Lessor harmless from and against any and all loss, cost, liability and expense
that Lessor may incur as a result of the execution and delivery of such purchase
orders.
11. Assignment:
Lessee agrees that Lessor may transfer or assign all or any part of
Lessor's right, title, and interest in, under or to the Equipment and this Lease
and any or all sums due or to become due pursuant to any of the above, to any
third party (the "Assignee") for any reason and that the Assignee may so
re-assign and transfer. Lessee agrees that upon receipt of written notice from
Lessor or Assignee of such assignment, Lessee shall perform all of its
obligations hereunder for the benefit of Assignee and any successor assignee
and, if so directed, shall pay all sums due or to become due thereunder directly
to the Assignee or to any other parry designated by the Assignee. Lessee hereby
covenants, represents and warrants as follows and agrees that the Assignee and
any successor assignee shall be entitled to rely on and shall be considered a
third party beneficiary of the following covenants, representations and
warranties: (i) Lessee's obligations hereunder are absolute and unconditional
and are not subject to any abatement, reduction, recoupment, defense, offset or
counterclaim available to Lessee for any reason whatsoever including operation
of law, defect in the Equipment, failure of Lessor or Assignee to perform any of
its obligations hereunder or for any other cause or reason whatsoever, whether
similar or dissimilar to the foregoing; (ii) Lessee shall not look to Assignee
or any successor assignee to perform any of Lessor's obligations hereunder;
(iii) Lessee will not amend or modify this Agreement without the prior written
consent of the Assignee and any successor assignee; and (iv) Lessee will send a
copy to Assignee and any successor assignee of each notice which Lessee sends to
Lessor. Lessor hereby agrees that the Lease shall not be amended or modified
without Lessee's consent.
12. Representations and Warranties of Lessee and Lessor:
Lessee represents and warrants to Lessor and its assigns, as follows:
1. The execution, delivery and performance of this Lease has been duly
authorized and, upon execution by Lessor and Lessee, will constitute a valid
obligation binding upon and enforceable against Lessee in accordance with its
terms, subject to laws governing creditors' rights;
2. The performance by Lessee will not result in any breach, default or
violation of, Lessee's certificate of incorporation or by-laws or any agreement
to which Lessee is a party;
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3. Lessee is in good standing in its jurisdiction of incorporation and in
any jurisdiction in which any of the Equipment is to be located; and
4. Any and all financial statements or other information with respect to
Lessee heretofore furnished by Lessee to Lessor was, when furnished, and remains
at the time of execution of this Lease, true and complete.
Lessor represents and warrants to Lessee as follows:
1. The execution, delivery and performance of this Lease has been duly
authorized and, upon execution by Lessor and Lessee, will constitute a valid
obligation binding upon and enforceable against Lessor in accordance with its
terms, subject to laws governing creditors' rights; and
2. The performance by Lessor will not result in any breach, default or
violation of, Lessor's certificate of incorporation or by-laws or any agreement
to which Lessor is a party;
The foregoing representations and warranties shall survive the expiration
or termination of this Lease.
13. End of Lease:
Provided (i) no Event of Default has occurred and is continuing and (ii)
Lessee has made all payments in accordance with the Lease, upon written notice
furnished by Lessee no later than four (4) months prior to the expiration of the
Initial Term, Lessee shall, with respect to each Equipment Schedule elect only
such alternatives as may be set forth on the Equipment Schedule.
To the extent that any of such alternatives involves a determination of
Fair Market Value, the Fair Market Value shall be defined and determined by the
provisions of this Section. For purposes hereof, Fair Market Value shall mean
the amount that would obtain in a retail arm's length transaction between an
informed and willing lessee-buyer in possession and an informed and willing
lessor-seller. Rental charges previously paid pursuant to the applicable
Equipment Schedule shall have no effect on the determination of Fair Market
Value. Unless otherwise stated in the Equipment Schedule: the Fair Market Value
for items set forth on the Equipment Schedule which do not have a readily
ascertainable market value, (including but not limited to software, cabling and
certain equipment) shall be determined by multiplying the Lessor's acquisition
cost of such items by a fraction, the numerator of which shall be the Fair
Market Value of the other items and the denominator of which shall be the
Lessor's acquisition cost of such other items; and the determination of Fair
Market Value shall be based upon the assumption that all items set forth on the
Equipment Schedule or included with the Equipment may be transferred to, and
used by, a third party user. In such determination, all alternative uses in the
hands of each buyer or lessee, including, without limitation, the further
leasing of the Equipment shall be taken into account in making such
determination.
Not less than ninety (90) days prior to the end of the Initial Term, Lessee
may provide written notice to Lessor of Lessee's intention to exercise the
purchase or extension option described above. If, on or before a date sixty (60)
days prior to the expiration of the Initial term Lessor and Lessee are unable to
agree upon a determination of the fair market value of the Equipment, such Fair
Market Value shall be determined in accordance with the procedure for appraisal
as described below. After a determination of the Fair Market Value of the
Equipment has been made in accordance with the procedure described below, Lessee
may exercise its option to purchase the Equipment for the Fair Market Value
thereof by delivering written notice to Lessor not more than ten (10) days after
completion of appraisal as described below.
Appraisal shall mean a procedure whereby two independent appraisers,
neither of whom shall be a manufacturer of such Items of Equipment, one chosen
by Lessee and one by Lessor, shall mutually agree upon the amount in question
based upon the definition set forth below. Each party shall deliver a written
notice to the other party appointing its appraiser on or before a date sixty
days prior to the expiration of the Initial Term. If within fifteen (15) days
after appointment of the two appraisers as described above, the two appraisers
are unable to agree upon the amount in question, a third independent appraiser,
who shall not be a manufacturer of such Items of Equipment, shall be chosen
within five (5) business days thereafter by the mutual consent of such first two
appraisers or, if such first two appraisers fail to agree upon the appointment
of a third appraiser, such appointment shall be made by an authorized
representative of the American Arbitration Association or any organization
successor thereof. The decision of the third appraiser so appointed and chosen
shall be given ten (10) business days after the selection of such third
appraiser. The decision of the third appraiser shall solely determine the amount
in question. The costs of such appraisers shall be shared equally by Lessee and
Lessor. The Lease, including the obligation to pay monthly rentals, shall remain
in effect pending the determination of Fair Market Value.
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14. Additional Collateral:
In order to secure the prompt and full performance of all of Lessee's
obligations (the "Obligations") arising under the Lease, the Lessee hereby
grants to Lessor a first priority security interest in the assets set forth on
Exhibit A annexed hereto and made a part hereof, as additional collateral (the
"Collateral") for the performance of the Obligations. Lessee agrees to deliver
to Lessor, at any time or times hereafter, any Uniform Commercial Code financing
statements and amendments and all other agreements, documents and instruments
requested by Lessor to perfect and maintain Lessor's security interest in the
Collateral and pay any cost incurred in connection with the filing or recording
of such documents, agreements or instruments. Lessee represents and warrants
that it has title to the equipment, free and clear of all liens, claims or
encumbrances and that the obligations pertaining to the other Equipment subject
to this Lease shall apply to the Collateral, including but not limited to the
obligation to adequately insure and maintain the Collateral and to inform Lessor
of any change in the location of the Collateral. Upon a default under the Lease
in the payment or performance of any of the Obligations which continues beyond
any grace or cure periods, Lessor shall have all of the rights of a secured
party under the Uniform Commercial Code. The lien set forth herein shall be
released by Lessor when Lessee achieves net income in excess of $100,000 in each
of two consecutive calendar quarters.
15. Miscellaneous:
(a) During the term of this Lease, Lessee hereby agrees to deliver to
Lessor or Assignee and any successor assignee a copy of Lessee's monthly
unaudited financial statements, and the annual financial budget for the upcoming
year as soon as available and as it may be adjusted during the year. Lessee
shall also furnish, as soon as available and in any event within ninety (90)
days after the last day of Lessee's fiscal year a copy of Lessee's annual
audited statements and consolidating and consolidated balance sheet, if any, as
of the end of such fiscal year, accompanied by the opinion of an independent
certified public accounting firm of recognized standing. The Lessee shall
furnish such other financial information as may be reasonably requested by
Lessor, including but not limited to any material changes in budgets or
financial reports furnished to the Lessee's Board of Directors or Shareholders.
Notwithstanding the foregoing, after Lessee has completed an initial public
offering of not less than fifteen million dollars ($15,000,000), Lessee shall
only be required to deliver (1) a copy of Lessee's quarterly unaudited financial
statements, (2) a copy of Lessee's annual audited statements and consolidating
and consolidated balance sheet, if any, as of the end of such fiscal year,
accompanied by the opinion of an independent certified public accounting firm of
recognized standing, and (3) all public filings made by Lessee with the
Securities and Exchange Commission.
(b) This Lease constitutes the entire agreement between Lessee and Lessor
with respect to the Equipment, and except as agreed upon in writing no covenant,
condition or other term or provision hereof may be waived or modified orally.
(c) All notices hereunder shall be in writing and shall be delivered in
person or sent by registered or certified mail, postage prepaid, or by facsimile
transmission (confirmed by registered mail as set forth in this section) to the
address of the other party as set forth herein or to such other address as such
party shall have designated by proper notice.
(d) This Lease shall be binding upon and inure to the benefit of Lessor and
Lessee and their respective successors and assigns (including any subsequent
assignee of Assignee).
(e) If any term or provision of this Lease or the application thereof to
any person is, to any extent, invalid or unenforceable, the remainder of this
Lease, or the application of such provision to the person other than those to
which it is invalid or unenforceable, shall not be affected thereby, and each
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
(f) No waiver of any of the terms and conditions hereof shall be effective
unless in writing and signed by the party against whom such waiver is sought to
be enforced. Any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given. The subsequent acceptance
of rental payments hereunder by Lessor shall be deemed a waiver of any prior
existing breach by Lessee relating to the payment of rent, provided (a) Lessor
has knowledge of such prior existing breach at the time of such rental payments
and (b) at the time Lessor accepts such rental payments, Lessee is not then in
default under any other obligations arising under the Lease.
(g) Lessor is hereby authorized by Lessee to cause this Lease or other
instruments, including Uniform Commercial Code Financing Statements to be filed
or recorded for the purpose of showing Lessor's interest in the Equipment and
Lessee agrees that Lessor may execute such instruments for and on behalf of
Lessee. All filing fees reasonably incurred by Lessor in connection therewith
and filing fees incurred by Lessor's assignees in perfecting security interests
shall be paid by Lessee or reimbursed to Lessor by Lessee.
7
(h) No consent or approval provided for herein shall be binding upon Lessor
unless signed on its behalf by an officer of Lessor. THIS LEASE AND EACH
EQUIPMENT SCHEDULE SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF CONNECTICUT
AND SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF SUCH STATE. The Lessee
accepts for itself the non-exclusive jurisdiction of any Federal or State court
of competent jurisdiction in the State of Connecticut in any action, suit or
proceeding of any kind against it which arises out of or by reason of this Lease
or any Equipment Schedule.
(i) Lessee acknowledges that the late payment by Lessee to Lessor of
monthly rental and other sums due hereunder will cause Lessor harm and to incur
costs not contemplated by this Lease, the precise amount and severity of which
will be difficult to ascertain. Such costs include, but are not limited to,
administrative, accounting and legal charges which Lessor may incur due to such
late payment. Accordingly, if any monthly rent or any other sum due from Lessee
shall not be received by Lessor or Lessor's assignee within twenty (20) days
after the same is due, Lessee shall pay to Lessor or Lessor's assignee a late
charge equal to five per cent (5%) of such overdue amount monthly until such
overdue amount is paid. Lessee acknowledges that such late charge represents a
fair and reasonable estimate of the cost Lessor will incur by reason of a late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's default, if any, with respect to such overdue
amounts, nor prevent Lessor from exercising any of the other rights and remedies
which Lessor may have pursuant to this Lease.
(j) The obligations which Lessee and Lessor are required to perform during
the term of this Lease shall survive the expiration or other termination of this
Lease.
(k) Notwithstanding anything to the contrary in this Lease, wherever
consent or approval of Lessor or Lessee is required hereunder such consent or
approval shall not be unreasonably withheld or delayed.
(l) Lessee will promptly execute and deliver to Lessor such further
documents and assurances and take such further action as Lessor may reasonably
request in order to effectuate the intent and purpose of this Lease and to
establish and protect the rights, interests and remedies intended to be created
in favor of Lessor hereunder, including without limitation, the execution and
filing of financing statements and continuation statements with respect to this
Lease, the Equipment and any Equipment Schedule. Lessee authorizes Lessor to
effect any such filing and Lessor's reasonable expenses (together with the
reasonable expenses of Lessor's assignees in this regard) shall be payable by
Lessee on demand.
LESSOR: LESSEE:
Leasing Technologies Netstakes, Inc.
International, Inc.
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ BY: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------- ------------------------
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ NAME: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
TITLE: Executive Vice President TITLE: CFO
DATE: 4/8/99 DATE: 3/9/99
8
EXHIBIT A
TO
MASTER LEASE AGREEMENT DATED OCTOBER 19, 1998 (THE "LEASE")
BETWEEN LEASING TECHNOLOGIES INTERNATIONAL, INC. (THE "LESSOR")
AND NETSTAKES, INC. (THE "LESSEE")
Collateral
Accounts receivable now owned or hereafter acquired and all proceeds
thereof, but in no case exceeding 50% of the Purchase Price of the Equipment
subject to the Lease, but in no case in excess of $500,000. "Accounts
Receivable" means all accounts receivable of Debtor, including but not limited
to (i) all notes, drafts, acceptances and other instruments representing or
evidencing a right to payment for goods sold or leased, or services rendered,
whether or not earned by performance; (ii) all general intangibles of Debtor
that constitute debts, obligations or liabilities owed to Debtor arising out of
or in connection with such accounts receivable; (iii) all of Debtor's chattel
paper of every kind and description from account debtors including all additions
thereto and substitutions therefor; (iv) all files, records (including, without
limitation computer programs, disks, tapes and related electronic data
processing media) and writings of Debtor or in which Debtor has an interest in
any way relating to the foregoing property and all rights of Debtor to the
retrieval from third parties of electronically processed and recorded
information pertaining to any of such property; (v) all of Debtor's documents
and instruments constituting or evidencing the foregoing and (vi) all guaranties
and securities for, and all proceeds of any of the foregoing.
LESSOR: LESSEE:
Leasing Technologies Netstakes, Inc.
International, Inc.
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ BY: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------- ------------------------
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ NAME: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
TITLE: Executive Vice President TITLE: CFO
DATE: 4/8/99 DATE: 3/9/99
