ENVIRONMENTAL RIDER
RIDER NO. 01
This Rider is a part of that certain Equipment Lease
Agreement dated as of April 6, 1995 (the "Lease") between ALLY
CAPITAL CORPORATION ("Lessor") and ELECTROSOURCE, INC.
("Lessee").
In addition to and without limiting any of the other
provisions of this Lease, Lessee and Lessor hereby agree as
follows:
A. DEFINITIONS AND RULES OF CONSTRUCTION. Section 17 of
this lease is hereby supplemented by adding the following terms,
which when capitalized (or otherwise used) as below, shall have
the following meanings:
"Applicable Law": shall also include any Applicable Permit.
"Applicable Permit": any Permit, including any zoning,
environmental protection, pollution, sanitation, safety, energy,
siting or building Permit that Lessee shall be required to obtain
to comply with Applicable Law, including any Permit that is
necessary to operate, modify, construct, convey, maintain,
acquire, own, lease, sublease or use the Equipment (including any
product thereof), or related property, to own, lease or operate
Lessee's properties, conduct its business or necessary to enter
into any of these Lease Documents or to consummate any of the
transactions contemplated thereby.
"Claims": shall also include all Environmental Claims.
"Environmental Claims": any Claims by a Governmental
Authority or other person that are incurred, arise or effectuated
at any time as a result of the existence of any Environmental
Contamination or violation of any Environmental Law pertaining to
any Equipment or related property, or allegation thereof,
regardless of whether the existence (alleged or otherwise) of
such Environmental Contamination or the violation of
Environmental Law originated or resulted from the Equipment or
related property or arose prior to the present ownership or
operation of the Equipment or related property, including: (a)
Claims for personal injury or injury to or destruction, loss or
diminution in value of property or natural resources occurring
to, upon, near or off any Equipment or related property,
foreseeable or unforeseeable; (b) Claims relating to any Remedial
Action, including any demolition and rebuilding of any
improvements on real property; (c) Claims for indemnity or
reimbursement or for the disgorgement of amounts paid to Lessor
or on its behalf, or resulting from any failure to report
discharges promptly; and (d) Claims incurred for the services of
attorneys, engineers, consultants, contractors, experts,
laboratories and all other costs reasonably incurred in
connection with the investigation or Remedial Actions taken with
respect to Hazardous Substances or violation of Environmental
Law, including the preparation of any feasibility studies or
reports of the performance of any Remedial Action.
"Environmental Contamination": any existence, uncontained
presence, leak, discharge, emission, aggregation, release, or
abandonment, or threat or suspicion of any of the foregoing, or
abandonment of Hazardous Substances in, upon, about, beneath, or
off the Equipment or related property or arising from the
Equipment or related property, that may require Remedial Action
or may result in a violation of any Environmental Law pertaining
to the Equipment or related property, or may result in Claims.
"Environmental Law" or "environmental law": any Applicable
Law relating to safety, land use, pollution or protection of
human health or species of wildlife or plants or the environznent
(including ambient air, surface water, groundwater, land surface
or subsurface strata), including, Laws relating to (a)
maintenance of a public or private nuisance, (b) carrying on of
an abnormally dangerous activity, (c) industrial hygiene, (d)
Environmental Contamination, including to air, water, land,
groundwater or personal property, (e) withdrawal or use of
groundwater, (f) Hazardous Substances, including the treatment,
manufacture, processing, distribution, use, analysis, generation,
storage, disposal, handling or transportation thereof and (g) any
regulation, order, notice or demand issued pursuant to such Laws,
in each case, applicable to Lessee or Lessor, the Equipment or
any related property, or the ownership or operation thereof,
including the following: (i) the Clean Air Act, (ii) the Federal
Water Pollution Control Act, the Clean Water Act and the Safe
Drinking Water Act, (iii) the Toxic Substances Control Act, (iv)
the Comprehensive Environmental Response Compensation Liability
Act of 1980, as amended ("CERCLA"), (v) the Resource Conservation
and Recovery Act ("RCRA"), (vi) the Solid and Hazardous Waste
Amendments of 1984, (vii) the Occupational Safety and Health Act,
(viii) the Emergency Planning and Community Right-to-Know Act of
1978, (ix) the Solid Waste Disposal Act, (x) the Superfund
Amendment and Reauthorization Act ("XXXX"), (xi) the Hazardous
Material Transportation Act, (xii) the Endangered Species Act,
(xiii) the Federal Insecticide, Fungicide and Rodenticide Act,
(xiv) the Environmental Laws listed on Annex No. 2 to each
Equipment Schedule and (xv) any other Applicable Laws addressing
matters similar to the foregoing Laws.
"Hazardous Substances" or "hazardous substances": any and
all hazardous or toxic substances, materials, and wastes,
including any material, waste or substance which is (a) oil or
petrolewn, or their products or by-products (including sludge or
residue), chemical liquids or solid, liquid or gaseous products
or by-products, (b) asbestos, (c) polychlorinated biphenils, or
(d) designated as hazardous or toxic or regulated as such under
any Applicable Law, including RCRA, CERCLA, XXXX, the Clean Water
Act, the United States Department of Transportation Hazardous
Materials Table or by the Environmental Protection Agency, or
defmed as a "hazardous material," "hazardous substance" or
"hazardous waste" under any other Applicable Laws.
"herein" "hereof," "hereunder," etc.: in, of, under, etc.
this Lease (and not merely in, of, under, etc. the section or
provision where the reference occurs).
"related property": with respect to any Equipment, the land
and buildings at which such Equipment is or shall become located
or any personalty or real property (including any body of water)
to or upon which the Equipment may now or hereafter be attached,
situated on or near, or adjacent to.
"Remedial Action": any clean-up, remedial action, removal,
response, abatement, containment, closure, excavation,
restoration or monitoring where undertaken to comply with
Envirorunental Law, whether or not required by any Government
Authority, or reasonably necessary to make full economic use of
the Equipment or related property.
B. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition
to the representations, warranties and covenants provided in
Section 2 of this Lease, Lessee hereby represents, warrants to
and covenants with Lessor that:
With respect to the Equipment covered by each Equipment
Schedule: (i) There are no applicably permitted Hazardous
Substances contained therein or at, upon, under or within any
related property that does or shall cause Lessee to be in
violation of this Lease or Applicable Law; (ii) Lessee has not
caused or permitted to occur, or suffered the occurrence of and
shall not permit to exist, any condition which may cause any
Environmental Contan-dnation of such Equipment or at, upon, under
or within any related property that does or shall cause Lessee to
be in violation of this Lease or result in a violation of
Applicable Law; (iii) neither Lessee, nor any other party has
been, is or will be involved in activities relating to the
Equipment or any related property that could lead to (1) the
imposition of liability on Lessor, Lessee, or on any subsequent
or former owner or operator of the Equipment or (2) the creation
of a Lien on the Equipment under Applicable Law (including any
Environmental Laws); (iv) Lessee has not perznitted, and will not
permit, any person to engage in any activity @ could result in
the imposition of liability under any Environmental Laws on
Lessee, Lessor or any owner or operator of the Equipment, or
would otherwise impair Lessor's rights or title pertaining
thereto; (v) all of the Environmental Laws applicable to the
Equipment, or to the operation or ownership thereof, are listed
on Annex No. I to such Equipment Schedule, and Lessee is in full
compliance therewith; and (vi) all Applicable Permits,
registrations, or notices necessary for Lessee to comply with any
Applicable Laws, are listed on Annex No. 2 to such Equipment
Schedule, Lessee has obtained, completed or given, as the case
may be, and is maintaining in good standing, all such Perraits,
registrations, filings or notices and is 'in full compliance with
all of the terms thereof, all actions necessary for the renewal
thereof have timely been taken (including the filing of any
applications); and all of the foregoing are in full force and
effect and there are no proceedings or investigations pending or,
to the best knowledge of Lessee, threatened that seek the
revocation, cancellation, suspension or adverse modification
thereof.
C. NOTICES. In addition to the notices required by
Section 3 of this Lease, Lessee shall provide, vm'tlen notice to
Lessor (i) promptly upon Lessee becoming aware of (A) any alleged
violation of Applicable Law, or (B) any threatened or actual
suspension, revocation or recision of any Permit necessary for
Lessee to be in compliance with the terms hereof-, and (ii)
promptly after any of the Equipment becomes lost, stolen,
missing, destroyed, materially damaged, wom out, or subject to or
causing, or threatening to cause, any Environmental
Contamination.
D. CONDITIONS PRECEDENT. In addition to the conditions
precedent set forth in Section 4 of this Lease, Lessor's
obligations under each Equipment Schedule (including Lessor's
obligation to purchase and participate in the financing of the
Equipment to be leased thereunder) are conditioned upon Lessor's
having received all of the following, in form and substance
satisfactory to Lessor, at least two (2) business days prior to
the date upon which Lessor purchases the Equipment or has
committed to purchase same (if sooner): (i) to the extent
requested by Lessor, a report, audit or opinion, as the case may
be, from an appraiser, environmental engineer, or other expert,
regarding any matters specified by Lessor (1) including the value
of the Equipment as of the effective date of the Equipment
Schedule, and at the expiration of the Initial Term and any
Renewal Term, or (2) the then existing condition of the Equipment
or any of the related property, including, the absence of any
past or existing violations of Applicable Law (including any
Envirorunental Laws); and (ii) if Lessor is purchasing the
Equipment from Lessee, (1) all of the operating records
pertaining to the storage or transportation of the Equipment and
any Envirorunental Contamination relating to the Equipment or the
related property and (2) copies of all enforcement actions for
alleged violations of Applicable Laws (including Environmental
Laws), and any and all information concerning any pending
investigations pertaining to alleged violations of Applicable
Laws (including any Environmental Laws).
E. USE AND MAINTENANCE. In addition to the requirements
of Section 6 of this Lease, and without limiting the generality
of subsection (a) of Section 4 of this Lease, Lessee agrees to
comply strictly and in all respects with all Applicable Laws
(including all Environmental Laws) pertaining to the Equipment or
related property (without regard to which person such Applicable
Laws shall, by their terms, be nominally imposed), unless Lessee
shall be contesting the validity thereof in good faith and by
appropriate proceedings, but only so long as Lessee's failure to
so comply during the existence of such proceedings shall not (i)
involve any material risk of the sale, forfeiture or loss of such
Equipment, or any part thereof or interest therein, (ii) result
in, or involve any substantial probability of resulting in, the
creation of any Lien (other than a Permitted Lien) on or with
respect to such Equipment, or any part thereof or interest
therein, and (iii) involve the risk of the imposition of civil or
criminal fines or penalties on Lessor, Lessee, or generally to
the operators or holders of title to or other interests in the
Equipment, Lessee will maintain all records, logs and other
materials required by any Governmental Authority having
jurisdiction to be maintained in respect of any Equipment,
without regard to which person any such requirements shall, by
their terms, be nominally imposed. Lessee will procure and pay
for all Permits, franchises, inspections and licenses necessary
or appropriate in connection with any Equipment and any repair,
restoration, replacement,- renewal, addition or improvement
thereof and thereto that may be required pursuant to the first
sentence of this paragraph. Lessee shall promptly forward to
Lessor copies of all orders, notices, Permits, applications or
other communications and reports in connection with any discharge
or the presence of any Hazardous Substances or any other matters
relating to the Environmental Laws or similar Applicable Laws, as
they may affect Lessee, the Equipment or Lessor's or Lessee's
right, title, or interest therein. Promptly upon the written
request of Lessor, from time to time, Lessee shall provide Lessor
with environmental site assessments or environmental audit
reports prepared by an environmental engineering firm acceptable
to Lessor, to assess with a reasonable degree of certainty the
presence or absence of any Hazardous Substances and the potential
cost in connection with any Remedial Action pertaining to the
Equipment or related propertv.
F. DISCLAIMER OF WARRANTIES. In addition to the waivers,
disclaimers and acknowledgements made in the Lease and each
Equipment Schedule, Lessee further acknowledges that: Lessor has
made the Equipment available to Lessee for examination, demanded
that Lessee inspect the Equipment using a professional in the
field of inspections pertaining to such Equipment (including
compliance with the Environmental Laws), and Lessee has, pursuant
to such demand examined the Equipment (using such an experienced
inspector); the Equipment is not to be used, and is not being
acquired hereby, for use in any respect for Lessee's or any other
person's personal or family purposes, and as such, the Equipment
does not constitute "consumer goods" as such term is defined
under Applicable Law; the Equipment was selected by Lessee on the
basis of its own respective judgment, Lessee has not asked for,
been given or relied upon any statements, representations,
guaranties or warranties of Lessor; Lessor is not in the business
of manufacturing or assembling Equipment or otherwise in the
business of being a vendor or supplier, but is instead in the
business of providing financial accommodations including lease
financing; AND THE PROVISIONS OF THIS PARAGRAPH F AND SECTION 7
OF THIS LEASE HAVE BEEN NEGOTIATED BY LESSOR AND LESSEE AND,
EXCEPT FOR THE WARRANTY MADE BY LESSOR IN SECTION 16(d) HEREOF,
ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
REPRESENTATIONS, GUARANTIES, OBLIGATIONS OR WARRANTIES OF LESSOR
EXPRESS OR IMPLIED WITH RESPECT TO THE EQUIPMENT THAT MAY ARISE
PURSUANT TO ANY APPLICABLE LAW (INCLUDING ANY ENVIRONMENTAL LAW)
NOW OR HEREAFTER IN EFFECT.
G. INSURANCE. In addition to the requirements of Section
10 of this Lease, to the extent available, both the casualty and
liability insurance coverage shall insure against loss of or
damage to the Equipment, or liability to Lessor or Lessee,
resulting from Environmental Claims; provided, that Lessee shall
be available at an aggregate cost, with respect to the Equipment,
of no greater than 2.5% of the Total Invoice Cost thereof;
provided, further, that notwithstanding the then current cost of
said coverage, Lessee shall obtain such coverage to the extent it
is typically obtained and maintained by companies and businesses
similar to Lessee, in connection with their ownership or
operation of, or other activities in connection with, equipment
that is the same as or similar to the Equipment, or to the extent
Lessee currently maintains such coverage with respect to its
other similar equipment. All said insurance shall be in form and
amount and with companies reasonably satisfactory to Lessor.
H. REDELIVERY. In addition to the requirements of Section
12 of this Lease, Lessee agrees that with respect to any
Equipment or item thereof that Lessee shall be required to return
or turn over to Lessor, to the extent the continued possession
and operation of the Equipment or item of Equipment is necessary
for Lessee to remain in compliance with Applicable Law, Lessee
shall immediately replace such Equipment or item of Equipment,
and in any event, Lessee shall not upon such removal take any
action or fail to take any action the effect of which will result
in a violation of Applicable Law (including any Environmental
Law); and without limiting the generality of any other provision
hereof, Lessee agrees to return such Equipment or item of
Equipment to Lessor, free from any Hazardous Substances, an
dispose of such Hazardous Substances in compliance with all
Applicable Law.
I. REMEDIES. Section 14 of the Lease shall be
supplemented as follows: (a) Lessee agrees remedies provided in
Section 14 and certain other Sections, of this Lease shall also
expressly include the right to take Remedial Action and be
reimbursed, made whole, indemnified, held harmless and otherwise
protected by Lessee against any resulting or related Claims
incurred or suffered in connection therewith; except that Lessee
agrees that Lessor shall not have any obligation whatsoever to
undertake or consummate the same or to take or refrain from
taking any other action, with respect thereto or otherwise
relating to or arising in connection with any Environmental
Claim, Environmental Contamination, Enviroiunental Law or
Hazardous Substance pursuant to the pertinent terms of this Lease
including Sections 12, 13 and 14;
(b) Lessee agrees that to the extent Lessor's ability to
dispose of the Equipment in a commercially reasonable manner may
be impeded by any violations of Applicable Law that have occurred
with respect thereto, or Lessor's actions with respect to same
might result in an Environmental Claim, Lessee hereby waives,
without limiting the generality of any other waivers, disclaimers
or indemnities herein, any claim, right, action or defense
otherwise available to it against Lessor in connection with such
disposition or Lessor's deficiency claim. Lessee hereby
acknowledges that: (i) Lessor's election to dispose of the
Equipment any any point after a Default has occurred with respect
to an Equipment Schedule may be affected by the Equipment's non-
compliance with the provisions hereof; (ii) Lessee, pursuant to
its represenations, agreements and indemnities hereunder, is
ultimately responsible to Lessor fo xxxx xxxxx (including any
Enviornmental Claims) suffered by Lessor in connection with any
such non-compliance; and (iii) to avoid or mitigate the
imposition of Claims (including Environmental Claims) resulting
from such non-compliance it willbenefit Lessee even if such
efforts (which may include abandoning the Equipment or selling it
expeditiously or after an extended period) result in there being
a deficiency, or greater amount thereof, under the Equipment
Schedules; and (iv) and furtherance thereof, Lessee hereby
waives, without limiting the generality of any other waivers,
disclaimers or indemnities herein, any claim, right, aciton or
defense otherwise available to it against Lessor in connection
with such disposition or deficiency claim.
J. EFFECT OF RIDER. Except as supplemented hereby, this
Lease remains unmodified by the provisions of this Rider, which
provisions are, for all purposes, hereby incorporated into and
made a part of this Lease and each Equipment Schedule.
ALLY CAPITAL CORPORATION ELECTROSOURCE, INC.
By: /s/ By: /s/
Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxx
Title: Vice President-Production Title: Vice President
Finance, Law & Contracts
Annex No. 1
Environmental Laws
1. Resource Conservation and Recovery Act (RCRA)
Section 3010, Subtitle C
Classification: Small Quantity Generator of Hazardous Waste
2. National Pollutant Discharge Elimination System (NPDES)
3. Texas Natural Resource Conservation Commission (TNRCC) Notice of
Registration Section 335, Chapter 31 of Texas Administrative
Code (specifies the notification, recordkeeping, manifesting
and reporting requirements)
4. Occupational Safety and Health Act
Standards for General Industry (29 CFR 1910)
Lead Standard 29 CFR 1910.1025
Annex No. 2
Applicable Permits
1. Environmental Protection Agency
Identification Number: TXD988087219
Region 9
2. National Pollutant Discharge Elimination System (NPDES)
Storm Water General Permit Number TXR00F121
3. Texas Natural Resource Conservation Commission (TNRCC) Notice
of Registration Solid Waste Registration Number: 81162
County: 105 Xxxx
Air Quality Identification Number: HK-0077-L
Constructed under Standard Exemption (SE) 76, and
currently operated under SE 39, 50, 51, 61, 106, and
118 per authorization dated January 9, 1995.
Draft Air Permit Application is expected to be
submitted in final form as New Source Review Permit
to TNRCC before the end of April, 1995.
4. Texas Department of Public Safety
Permit for Precursor Chemicals and/or Laboratory Apparatus
Number 1905
5. City of San Marcos Industrial User Permit
Section 30-94 of Ordinance Number 1991-55 or as amended
Industrial User Permit Number: 930201
National Categorical Standards (battery) CFR 461.35
Rider No. 02
This Rider is a part of that certain Equipment Lease Agreement
dated as of April 6, 1995 (this "Lease") between ALLY CAPITAL
CORPORATION ("Lessor") and ELECTROSOURCE, INC. ("Lessee").
In addition to and without limiting any of the other provisions of
this Lease, Lessee and Lessor hereby agree to the following
covenants:
1) Lessee shall issue to Lessor a Warrant to purchase Lessee's
Common Stock on the terms set forth in the Warrant.
2) Lessee shall, during the full Term of the Lease, provide
financial statements on a quarterly basis to Lessor, within 60
days of said quarter's end.
3) Lessee shall, during the full Term. of the Lease, provide
internal company projections on a semi-annual basis to Lessor,
due by June 30th and December 30th annually. Additionally, a
revised company Business Plan shall be sent to Lessor as often
as it is updated by the company.
4) Lessee shall, during the full Term of the Lease, provide
minutes to the Board of Director's meetings to Lessor, within 5
business days of said meeting. Lessee shall allow Xxxxx
Xxxxxxx, Lessor's designated representative, and/or his
designee to attend Lessee's board meetings. Lessee shall use
its best effort to provide Lessor at least 10 days prior notice
of such meeting.
5) Lessee shall provide Lessor with a 40% security deposit in the
form of a letter of credit in favor of Lessor or, a
certificate: of deposit held by Lessee pledged to Lessor. Upon
Lessee achieving two (2) consecutive quarters of profitability,
the security deposit shall be reduced to 25%. Upon two (2)
additional consecutive quarters of profitability, for a total
of (4) consecutive quarters, the security deposit shall be,
reduced to 15% with the balance released upon (2) additional
consecutive quarters of profitability, for a total of (6)
consecutive quarters or, a secondary public offering by Lessee
raising at least $20,000,000 net to Lessee. These funds shall
be released provide there is no material adverse change in
Lessee's financial position, Lessee is not in default, and
Lessee is generally on plan per its projections dated March 20,
1995. In the event Lessee does not meet the requirements for
early release of the letter of credit or certificate of deposit
during the Term of the Lease, the letter of credit or
certificate of deposit shall be fully discharged at the
successful termination of the Lease
6) Lessee shall not pledge or encumber any of its intellectual
property, including technology licenses, without Lessor's prior
written consent.
7) Lessee shall obtain for Lessor an Intercreditor Agreement to
Lessor's satisfaction between any future secured Lenders and
Lessors of Lessee.
Except as supplemented hereby, this Lease remains unmodified by the
provisions of this Rider, which provisions are, for all purposes,
hereby incorporated into and made a part of this Lease and each
Equipment Schedule.
ALLY CAPITAL CORPORATION ELECTROSOURCE, INC.
By: /s/ By: /s/
Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxx
Title: Vice President-Production Title: Vice President
Finance, Law & Contracts
RIDER NO. 03
TEXAS RIDER
This Rider is a part of that certain Equipment Lease Agreement
dated as of April 6, 1995 (the "Lease") between ALLY CAPITAL
CORPORATION ("Lessor") and ELECTROSOURCE, INC. ("Lessee").
In addition to and without limiting any of the other provisions of
the Lease, Lessee and Lessor hereby agree to the following:
CONTINGENT MAXIMUM INTEREST RATE. Lessor and Lessee are
corporations managed by individuals with substantial business
and commercial experience, and have been represented by
competent counsel at all stages of the negotiation hereof.
Lessor and Lessee desire that their relations be governed by
the laws of the state of California, and particularly that the
law of the state of California rather than the law of the
state of Texas shall control in all respects, especially with
respect to the maximum rate of interest that may be lawfully
charged. Lessee on behalf of itself and its successors and
assigns waives any rights or remedies it may have under any
provision of article 5069 or any successor provisions thereto
of the Texas civil statutes and reiterates that in any event
said provision is without application to the relations of the
parties hereto. This rider is required by Lessor pursuant to
its standard policies and documentation employed in connection
with transactions having any contacts with the state of Texas.
In the event, and only in the event, that Texas law with
respect to interest rates is applied to this transaction, an
event that both lessee and lessor acknowledge would be in
direct violation of their intention at the date hereof and at
any conceivable time thereafter, then regardless of any other
provision hereof, the interest rate contracted for, charged or
received herein shall be the maximum amount permitted
thereunder, and if Lessor is deemed to contract for, charge or
receive amount that could be construed as interest in excess
thereof, then said excess shall in no event be considered as
interest but rather as amounts applied to an early penalties,
and any remaining excess thereafter shall be promptly refunded
to Lessee, and Lessor shall not be subject to any penalties
for contraction for, charging or receiving interest in excess
of the permitted amount. The undersigned representative of
Lessee represents and warrants to Lessor (A) that he/she is
commercially sophisticated (B) has read and understands this
paragraph and (C) that Lessee has no intention of
characterizing any provision hereof as governed by Texas law.
Failure by Lessee to comply with the conditions of this Rider shall
constitute a Default under the Lease.
Except as supplemented hereby, the Lease remains unmodified by the
provisions of this Rider, which provisions are, for all purposes,
hereby incorporated into and made a part of the Lease and each
Equipment Schedule.
ALLY CAPITAL CORPORATION ELECTROSOURCE, INC.
By: /s/ By: /s/
Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxx
Title: Vice President-Production Title: Vice President
Finance, Law & Contracts
