EXHIBIT 10.22
MASTER EQUIPMENT LEASE AGREEMENT
THIS AGREEMENT is entered into the 31st day of July, 1998 between
METLIFE CAPITAL, LIMITED PARTNERSHIP ("Lessor") whose address is 00000 X.X. 0xx
Xx., Xxxxx 000, mailing address C-97550, Xxxxxxxx, Xxxxxxxxxx 00000 and POWER
INTEGRATIONS, INC. ("Lessee") whose address is 000 XXXXX XXXXXXXX XXXXXX,
XXXXXXXXX, XX 00000
1. LEASE OF EQUIPMENT
This Master Equipment Lease Agreement ("Agreement") contains general
terms and conditions applying to each Equipment Lease ("Lease") between Lessor
and Lessee that incorporates this Agreement by reference. The equipment or
other personal property covered by all Leases, together with all components,
parts, additions, accessions, attachments, substitutions therefor and
replacements thereof is collectively called the "Equipment" and individually
called an "Item." Each Lease will contain terms and conditions applying only to
the Equipment covered by that Lease and will constitute a separate lease of that
Equipment.
To accept an Item under a Lease, Lessee will sign and deliver to
Lessor a Certificate of Acceptance for the Item in a form provided by Lessor.
When Lessor has confirmed that all of its requirements and conditions have been
met, it will promptly pay the Total Cost of the Item specified in the
Certificate of Acceptance, as directed by Lessee. Lessor requirements and
conditions shall include, but not be limited to, receipt from Lessee of such
instruments, documents, and certifications as Lessor reasonably may request,
including without limitation evidences of authority (such as corporate
certificates, corporate resolutions, and partnership authorizations), evidence
of insurance, purchase orders and acceptances thereof, purchase and sale
agreements, guarantees or other credit enhancements, if any, required by Lessor
and financial information and instruments and documents to implement, perfect or
continue the perfection of Lessor's rights and remedies as owner and Lessor of
the Equipment, including Uniform Commercial Code forms. Notwithstanding the
execution, delivery or filing of any instruments or documents, it is agreed that
this transaction is a lease and is not intended as security.
Following the date ("Closing Date") which is the earlier of: (i) the
date Lessee gives Lessor a Certificate of Acceptance for the last Item; (ii) the
Purchase Cut-Off Date; or (iii) on such other day as is mutually agreed, Lessor
shall send Lessee a Closing Schedule, setting forth any adjustments to payment
schedules, stipulated loss values or other matters. Such Closing Schedule and
the facts and determinations set forth therein shall upon execution by Lessee
and Lessor be conclusive as to the matters therein. Alternatively, in lieu of
signing the Closing Schedule, Lessee may, within thirty (30) days after the
Closing Schedule is sent by Lessor to Lessee, give Lessor written notice
identifying any claimed error therein. Notwithstanding any such notice, Lessee
shall pay all rentals as they become due. If Lessee establishes an error that
affects the amount of rentals, Lessor shall give Lessee a credit for any
overpayment of rentals, and Lessee promptly shall pay to Lessor on demand any
underpayments. If Lessee neither signs the Closing Schedule nor gives written
notice of claimed errors, the Closing Schedule shall be conclusively deemed to
be accurate thirty (30) days after the Closing Schedule is sent by Lessor to
Lessee.
Lessee authorizes Lessor to insert in the Lease or the Closing
Schedule, dates, models, serial numbers, and other pertinent data relative to
the proper identification of Equipment and/or the Lessee.
If by the "Purchase Cut-Off Date" set forth in a Lease, Lessee shall
not have given Lessor written notice of acceptance of an Item, Lessor shall have
no obligation to purchase the Item or to lease it to Lessee. In such event
Lessee shall immediately pay all accrued Interim Rental and reimburse Lessor for
all sums Lessor may have paid for or with respect to the Item and for all
Lessor's costs and expenses with respect thereto, and Lessee shall indemnify and
defend Lessor against and hold Lessor harmless from any and all cost, expense,
loss, liability and damage that Lessor may suffer or may be asserted against
Lessor by reason of Lessor's failure or refusal to purchase such Item. Any such
item shall be deemed to be deleted from the Lease and no longer included as an
Item of Equipment.
2. NON-CANCELLABLE NET LEASE
EACH LEASE IS A NON-CANCELLABLE NET LEASE. WHEN LESSEE SIGNS AND
DELIVERS A CERTIFICATE OF ACCEPTANCE FOR ANY ITEM, ITS OBLIGATION TO PAY ALL
RENT AND OTHER AMOUNTS WHEN DUE FOR THE ITEM AND OTHERWISE TO PERFORM AS
REQUIRED UNDER THE RELATED LEASE IS UNCONDITIONAL, IRREVOCABLE AND INDEPENDENT.
THESE OBLIGATIONS ARE NOT SUBJECT TO CANCELLATION, TERMINATION, MODIFICATION,
REPUDIATION, EXCUSE OR SUBSTITUTION BY LESSEE. LESSEE IS NOT ENTITLED TO ANY
ABATEMENT, REDUCTION, OFFSET, DEFENSE OR COUNTERCLAIM WITH RESPECT TO THESE
OBLIGATIONS FOR ANY REASON, WHATSOEVER, WHETHER ARISING OUT OF DEFAULT OR OTHER
CLAIMS AGAINST LESSOR OR THE MANUFACTURER OR SUPPLIER OF THE ITEM, DEFECTS IN OR
DAMAGE TO THE ITEM, ITS LOSS OR DESTRUCTION, OR OTHERWISE. EACH LEASE IS
INTENDED TO CONSTITUTE A TRUE LEASE AND NOT A SALE OF THE RELATED EQUIPMENT.
TITLE TO THE EQUIPMENT WILL REMAIN WITH LESSOR AT ALL TIMES. LESSEE'S INTEREST
IN THE EQUIPMENT IS LIMITED TO A LEASEHOLD.
3. LESSEE'S WARRANTIES AND COVENANTS
Lessee represents and warrants to Lessor upon execution of this
Agreement and each Lease, that: (i) unless Lessee is a sole proprietorship it is
a corporation, limited liability company or partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and that it is qualified to do business in every jurisdiction where
the failure to qualify would have a material adverse effect on Lessor's rights
hereunder; (ii) it has taken all corporate, company or partnership action which
may be required to authorize the execution, delivery and performance of this
Agreement and each Lease; (iii) such execution, delivery and performance will
not conflict with or violate any provision of its Charter or Articles or
Certificate of Incorporation, By-laws, operating agreement or similar governing
document, or any provisions thereof, or in the case of a partnership, its
Certificate of Partnership or Limited Partnership and its Partnership Agreement,
or in the case of a limited liability
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company, its Articles of Organization, or result in a default or acceleration of
any obligation under any agreement, order, decree or judgment to which it is a
party or by which it is bound; (iv) it is not now in default under any of the
same; (v) there is no litigation or proceeding pending or threatened against it
which if decided adverse to Lessee's interests may have a material adverse
effect on Lessee or which would prevent or hinder the performance by it of its
obligations hereunder; (vi) this Agreement, each Lease and the attendant
documents constitute valid obligations of the Lessee, binding and enforceable
against it in accordance with their respective terms; (vii) no action by or with
any commission or administrative agency is required in connection herewith;
(viii) it has the power to own its assets and to transact business in which it
is engaged; (ix) it will give to Lessor prompt notice of any change in its name,
identity or structure; (x) each Lease will be effective against all creditors of
Lessee under applicable law, including fraudulent conveyance and bulk transfer
laws; (xi) the financial statements and any other information furnished and to
be furnished to Lessor are and will be true and correct at the time of delivery;
(xii) as long as any Lease is in effect, Lessee will promptly furnish Lessor
with annual balance sheets and profit and loss statements of Lessee and any
guarantor of Lessee's obligations accompanied, at Lessor's request, by the audit
reports of an independent certified public accountant acceptable to Lessor and
such other information as Lessor may reasonably request at any time concerning
Lessee and its affairs; (xiii) each Item shall be personal property and in good
order and condition and, unless Lessor otherwise agrees in writing, has not been
used prior to the time of Lessee's execution of the Certificate of Acceptance
pertaining thereto; (xiv) at all times Lessee shall keep the Equipment in
Lessee's possession at the address specified in the Lease unless Lessor shall
otherwise consent in writing (the only requirement with respect to rolling stock
is that it remain within the continental United States); (xv) Lessee shall not
cause, suffer or permit any Item to be attached or affixed to real property or
improvements thereon (collectively, "Realty") unless Lessor first shall consent
thereto in writing and Lessee shall have obtained from all persons having any
interest in the Realty written consents in form satisfactory to Lessor which
approve such attachment, waive any claims to or encumbrances upon attached Items
and consent to the detachment and removal of such Items at any time by Lessor or
Lessee; and (xvi) notwithstanding attachment of any Items to Realty, all the
Equipment at all times shall be and remain personal property.
4. TERM OF LEASE
The term of each Lease ("Term") shall consist of an "Interim Term" and
a "Basic Term." The Interim Term shall begin on the date that Lessee first
gives Lessor written notice of acceptance of an Item or written approval for
partial payment, whichever is earlier, and shall continue until the time the
Basic Term begins. The Basic Term shall begin on the Closing Date and shall
continue for the length of the Basic Term set forth in the respective Lease.
5. INTERIM RENTAL
During the Interim Term, Lessee shall pay rent monthly ("Interim
Rental"), on a calendar month basis, in an amount determined by Lessor by
applying the "Interim Rental Rate" set forth in the Lease to portions of the
Total Cost then or theretofore expended by Lessor, for the number of days such
sums are outstanding during such calendar month. Lessee shall pay Lessor each
installment of Interim Rental on the fifteenth day after the end of such
calendar month.
6. PERIODIC RENTAL
Lessee shall pay rent ("Periodic Rental") for the Basic Term in an
amount calculated by multiplying the Total Cost by the Periodic Rental Rate set
forth in the Lease multiplied by the number of periods constituting the length
of the Basic Term. Lessee shall pay installments of Periodic Rental to Lessor
in accordance with the payment schedule set forth in the Lease.
7. LATE PAYMENT
If any installment of rent or other sum owing under the Lease shall
not be paid when due and shall remain unpaid for ten (10) days, Lessee shall pay
Lessor a late charge equal to five percent (5%) of the amount delinquent, but in
no event at a rate greater than limited by any applicable law. Such late charge
is in addition to and not in lieu of other rights and remedies Lessor may have.
8. NO LESSOR EQUIPMENT WARRANTIES
LESSOR LEASES THE EQUIPMENT AS-IS AND EXPRESSLY DISCLAIMS AND MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION, DESIGN, QUALITY, CAPACITY,
MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE OF, OR ANY OTHER MATTER,
CONCERNING THE EQUIPMENT. LESSEE HEREBY WAIVES ANY CLAIM (INCLUDING ANY CLAIM
BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT) IT MAY HAVE AGAINST LESSOR FOR
ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE
CAUSED BY OR RELATING TO THE EQUIPMENT. LESSEE HAS SELECTED OR WILL SELECT BOTH
THE EQUIPMENT OF THE TYPE AND QUANTITY WHICH IS THE SUBJECT HEREOF AND THE
SUPPLIER FROM WHOM LESSOR PURCHASED THE EQUIPMENT.
9. INSURANCE
Lessee shall at all times prior to return of an Item to Lessor procure
and continuously carry, maintain and pay for: (A) physical damage insurance
providing "all risks" coverage for the Item in an amount not less than the full
replacement value thereof and (B) bodily injury and property damage combined
single limit liability insurance, all in such amounts and against such risks and
hazards and with insurance companies and pursuant to contract or policies and
with exclusions and deductibles thereon satisfactory to Lessor. All contracts
and policies: (i) shall include provisions for the protection of Lessor
notwithstanding any act or neglect of or breach or default by Lessee; (ii) shall
provide that they may not be modified, terminated or canceled unless Lessor is
given at least thirty (30) days advance written notice thereof; (iii) shall
contain endorsements (x) naming Lessor (and if Lessor requests at any time, any
successor, assignee, or secured party of Lessor) as loss payee for physical
damage insurance and as additional insured for liability insurance, (y)
providing that such insurance is primary as to the Item without right of
contribution from any other insurance, (z) providing thirty (30) days prior
written notice to Lessor (and any successor, assignee, or secured party) before
coverage lapses or is cancelled or materially changed, or before there is a
change in insurer. Lessee shall promptly notify
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any appropriate insurer and Lessor of each and every occurrence which may
become the basis of a claim or cause of action against the insureds and
provide Lessor with all data pertinent to such occurrence. Lessee will send
Lessor a certificate evidencing such insurance and endorsements or copies of
the policies upon request before the Item's Acceptance Date and whenever the
insurance is renewed. As long as no Event of Default exists, Lessor will remit
any physical damage insurance proceeds for an Item to Lessee when Lessee
either (A) provides evidence that the Item has been repaired and restored to
the good operating order and condition required under Section 11, or (B) pays
Lessor the amount due upon an Event of Loss as provided in Section 13.
10. LESSEE TAX INDEMNITIES
(a) GENERAL. Lessee will pay and defend, indemnify and hold harmless
Lessor and any successor, assignee or secured party of Lessor on an after-tax
basis from any and all Taxes (as defined below) on or relating to: (i) the
Equipment; (ii) its ordering, purchase by Lessor, acceptance, delivery,
installation, ownership, leasing, possession, maintenance, documentation, use,
operation, transportation, return or other disposition; (iii) its rentals,
receipts or earnings; and (iv) any Lease. "Taxes" means taxes, fees, or other
governmental charges that are not based on the net income of the indemnified
party, whether they are assessed to or payable by Lessee or an indemnified
party, and includes without limitation: (A) franchise, business and occupation,
gross receipts, sales, use, licensing, registration, titling, stamp and personal
property taxes; (B) levies, imposts, duties, charges and withholdings; and (C)
penalties, fines, and additions to tax and interest. Lessee shall not be
obligated to pay any amount under this section so long as it shall in good faith
and by appropriate proceedings contest the validity or the amount thereof,
unless such contest would adversely affect the title of Lessor to any Item of
Equipment or would subject any Item to forfeiture or sale. Lessee shall
indemnify and hold harmless Lessor, on an after-tax basis, against any and all
loss, claims, demands and expenses, including legal expenses, resulting from any
such non-payment or contest.
Unless Lessor elects otherwise, Lessor will prepare and file all
reports and returns relating to Taxes covered by this Section and will pay all
such Taxes to the appropriate taxing authority. Lessee will reimburse Lessor
for all such payments promptly on request. However, if Lessor elects, upon
written notice to Lessee, Lessee will prepare and file all such reports and
returns, pay all such Taxes directly to the taxing authority and deliver to
Lessor reasonable evidence thereof.
Upon termination of this Lease as to any Item, Lessee will, on
request, advance to Lessor the amount estimated by Lessor to equal personal
property taxes on the Item which are not yet payable but for which Lessee will
afterward become liable hereunder. Lessor will account to Lessee for such
advances.
(b) FEDERAL TAX INDEMNITIES. If Lessor shall lose the right to claim,
suffer a disallowance of or be required to recapture all or any portion of the
accelerated cost recovery deductions pursuant to Internal Revenue Code Section
168 with respect to the Total Cost for property with recovery period(s) referred
to in the Lease; then, unless such result is due to Lessor's act or omission
(other than its exercise of remedies after default) or to a loss for which
Lessee pays the Stipulated Loss Value of the affected Equipment, Lessee shall
pay to Lessor on demand a sum equal to the amount of deductions or credits lost
by Lessor as a result of such event, plus the amount of any interest, penalties
and additions to tax payable by Lessor as a result of such event. The amount of
lost deductions and credits to be paid by Lessee pursuant to this Section shall
be computed by Lessor so as to cause Lessor's after-tax rate of return on
investment and after-tax cash flows in respect of the Lease to equal that which
would have been realized by Lessor if such event had not occurred, but without
regard to whether Lessor has or would have had taxable income sufficient to use
the lost deductions or credits. Lessee shall indemnify and hold harmless Lessor
from and against any and all taxes, assessments and other charges imposed upon
Lessor under the laws of any federal, state, local or foreign government or
taxing authority, as a result of any payment made by Lessee pursuant to this
Section 10.
11. MAINTENANCE AND ALTERATIONS
(a) Lessee at its expense at all times shall maintain, service and
repair any damage to the Equipment so as to: (i) keep the Equipment in good and
efficient working order, condition and repair, ordinary wear and tear resulting
from proper use excepted, and make all inspections and repairs, including
replacement of worn parts (which replacement parts shall be free and clear of
all liens and encumbrances and shall, upon incorporation into the Item, become
the property of Lessor free and clear of any and all liens and encumbrances and
subject to the related Lease), to effect the foregoing and to comply with
requirements of laws, regulations, rules and provisions and conditions of
insurance policies; and (ii) pay all costs, expenses, fees and charges incurred
in connection with the use or operation of the Equipment and of each Item,
including but not limited to repairs, maintenance, storage and servicing.
Lessee will maintain in effect a warranty by or maintenance contract with the
manufacturer or other recognized maintenance provider of the Equipment, and will
send Lessor a copy of such warranty or contract on request. If Lessee has the
Equipment maintained by someone other than the manufacturer, Lessee will pay any
costs necessary to have the manufacturer re-certify the Equipment for continued
maintenance at the expiration of its Lease Term or any Renewal Term. Lessee
shall not make any alterations, substitutions, improvements or additions to the
Equipment or Items, except those required in order to comply with laws,
regulations, rules and insurance policies, unless Lessor first shall have
consented thereto in writing. Notwithstanding any consent by Lessor, Lessee
shall pay all costs and expenses of the foregoing. All replacements, repairs,
improvements, alterations, substitutions and additions shall constitute
accessions to the Equipment and title thereto shall vest in Lessor, and shall be
free of any and all liens. In performing its obligations under this Section,
Lessee will not treat the Equipment less favorably than similar equipment that
it owns or leases, or reduce its performance in contemplation of expiration of
the Term or any Renewal Term.
(b) Lessor hereby transfers and assigns to Lessee, for so long during
the Term and any Renewal Term as Lessee is not in default, Lessor's right,
title and interest in, under and to any assignable factory and dealer
warranty, whether express or implied, with respect to the Equipment. All
claims and actions upon any warranty shall be made and prosecuted by Lessee at
its sole cost and expense. Lessor shall have no obligation to make or
prosecute any claim upon or under a warranty.
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12. USE; QUIET ENJOYMENT
So long as Lessee shall not be in default, Lessee shall be entitled to
the possession, use and quiet enjoyment of the Equipment during the Term and any
Renewal Term in accordance with the terms of the Lease. Unless a purchase
option is exercised, Lessee shall deliver and surrender the Equipment to Lessor
at the end of the Term or Renewal Term in accordance with Section 16 hereof.
Lessee warrants that the Equipment will at all times be used and operated solely
in the conduct of Lessee's business in a careful and proper manner for the
purpose for which it was designed and intended and under and in compliance with
manufacturer's specifications and applicable laws and all lawful acts, rules,
regulations and orders of any governmental bodies or officers having power to
regulate or supervise the use of such property, except that Lessee may in good
faith and by appropriate proceedings contest the application of any such rule,
regulation or order in any reasonable manner that will not adversely affect the
title of Lessor to any Equipment or subject the same to forfeiture or sale.
Lessee will not permit its rights or interest hereunder to be subject to any
lien, charge or encumbrance and will keep the Equipment free and clear of any
and all liens, charges, encumbrances and adverse claims (except those arising
from acts of Lessor). Lessor may inspect the Equipment and its maintenance
records on reasonable notice and subject to Lessee's security procedures. All
such inspection rights are for the sole benefit of Lessor and shall not be
construed to impose any obligation on Lessor, whether or not Lessor makes any
inspections or receives any reports.
13. EVENT OF LOSS
Each Lease is a net lease. Lessee assumes all risk of and shall
indemnify and hold harmless Lessor from and against all damage to and loss of
the Equipment from any cause whatsoever, whether or not such loss or damage is
or could have been covered by insurance (an "Event of Loss"). Except as
otherwise specifically provided herein, neither this Agreement nor related Lease
shall terminate and there shall be no abatement, reduction, suspension or
deferment of Interim or Periodic Rental for any reason, including damage to or
loss of the Equipment or any one or more Items. Lessee promptly shall give
Lessor written notice of any material loss or damage, describing completely and
in detail the cause and the extent of loss and damage. Upon the occurrence of
an Event of Loss, at its option Lessee shall: (i) repair or restore the damaged
or lost Items to good condition and working order; or (ii) replace the damaged
or lost Items with similar equipment of equal value in good condition and
working order; or (iii) pay Lessor in cash the Stipulated Loss Value, as defined
below of the damaged or lost Items. Upon Lessee's complying with the foregoing,
Lessor shall pay or cause to be paid over to Lessee the net proceeds of
insurance, if any, with respect to such damage or loss. "Damage" and "loss"
shall include damages and losses of any kind whatsoever including, without
limitation, physical damage and partial or complete destruction, including
intentionally caused damage and destruction, and theft. Upon payment by Lessee
of the Stipulated Loss Value for an Item, along with any rent, late charges,
taxes, or other amounts then due and owing, Lessor will then deliver a Xxxx of
Sale for the Item, and Lessee's obligation to pay rent for the Item will
terminate.
The Stipulated Loss Value of an Item as of any date shall equal a sum
computed by Lessor, which shall not exceed the amount determined by multiplying
the Total Cost of the Item by the Stipulated Loss Factor as set forth in the
applicable Closing Schedule for the Lease year during which the loss of the Item
occurs.
14. OWNERSHIP AND MARKING
Lessee has not and by execution and performance hereof will not have
or obtain any title to the Equipment or any other interest therein except as
Lessee hereunder and subject to all the terms hereof. Title to the Equipment
shall at all times remain in Lessor and Lessee at its expense shall protect and
defend the title of Lessor and keep it free of all claims and liens other than
the rights of Lessee hereunder and claims and liens created by or arising
through Lessor. Lessee will treat this transaction as a lease for tax purposes
and will not claim any credit or deduction inconsistent with Lessor's ownership
of the Equipment. If Lessor supplies Lessee with labels designating its
interest in the Equipment, Lessee shall affix the same to and keep them in a
prominent place on the Equipment.
Notwithstanding the express intent of the parties, should a court of
competent jurisdiction determine that this Agreement is not a true lease, but
rather one intended as security, then solely in that event and for the expressly
limited purposes hereof, Lessee shall be deemed to have hereby granted Lessor a
security interest in this Lease, the Equipment, and all accessions thereto,
substitutions and replacements therefor, and proceeds (including insurance
proceeds) thereof, to secure the prompt payment and performance as and when due
of all obligations and indebtedness of Lessee to Lessor, now existing, or
hereafter created; provided however, that the foregoing shall not apply if such
determination is made solely for purposes of federal tax laws and regulations.
15. LESSEE'S GENERAL INDEMNITIES
Lessee will pay and defend, indemnify and hold harmless Lessor and any
successor, assignee or secured party of Lessor, on an after-tax basis from and
against any claim, cause of action, damage, liability, cost or expense
(including but not limited to legal fees and costs) which may be asserted
against or incurred in any manner by or for the account of Lessor: (i) relating
to the Equipment or any part thereof, including without limitation the
manufacture, construction, purchase, delivery, acceptance or rejection,
installation, ownership, sale, leasing, removal or return of the Equipment, or
as a result of the use, maintenance, repair, replacement, operation or the
condition thereof (whether defects are latent or discoverable); (ii) by reason
or as a result of any act or omission of Lessee for itself or as agent or
attorney-in-fact for Lessor hereunder; (iii) as a result of claims for patent,
trademark or copyright infringement; (iv) as a result of product liability
claims or claims for strict liability; or (v) resulting from claims for personal
injury, death or property damage.
16. LESSEE OPTIONS AT EXPIRATION OF LEASE TERM
(a) At least One Hundred Twenty (120) days before the expiration of
the Term of the first Item accepted under each Lease, Lessee will give Lessor
written notice electing one of the following options with respect to all (but
not less than all) Items covered by the Lease, to be performed with respect to
each Item at the expiration of its Term: (i) renew the Lease as to all such
Items at their Fair Market Rental Value (as defined below) subject to the
provisions of the next paragraph;
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(ii) purchase all such Items for their Fair Market Value (as defined below) on
the last day of the Term; or (iii) return all such Items to Lessor in accordance
with (b) below.
If Lessee purchases an Item, it will also pay all sales, use and
similar taxes imposed in connection with the purchase. When Lessor receives the
Item's purchase price and any such taxes, and all other amounts due under the
Lease it will deliver to Lessee a Xxxx of Sale for the Item "AS IS - WHERE IS"
without recourse to or representation or warranty by Lessor except for a
warranty that the Item is free and clear of liens, claims and encumbrances
created by contract by Lessor or arising out of claims against Lessor unrelated
to its ownership or leasing of the Equipment.
Lessee's renewal option is for a single renewal term (the "Renewal
Term") of one year unless otherwise agreed by Lessor and Lessee in writing, but
is not available if an Event of Default, or an event which would become an Event
of Default with passage of time or giving of notice or both, exists or if there
has been a material adverse change in Lessor's sole discretion since the date of
the Lease in the financial condition of Lessee or any guarantor of Lessee's
obligations under the Lease. The terms and conditions under the Lease shall
continue to apply to the Items during any Renewal Term except that rent payable
for each Item shall be its then Fair Market Rental Value. At least one hundred
twenty (120) days before the expiration of any Renewal Term, Lessee will give
Lessor written notice electing one of the following options with respect to all
(but not less than all) Items covered by the renewal, to be performed with
respect to each Item at the expiration of its renewal term: (i) purchase all
such Items for their then Fair Market Value; or (ii) return all such Items to
Lessor.
Each notice delivered by Lessee required above will constitute
Lessee's irrevocable agreement to perform the action elected in the notice.
(b) At the expiration of the Term or Renewal Term of each Item that
Lessee does not purchase, Lessee will at its sole expense and risk de-install,
pack, and crate such Items and return them to Lessor (all in accordance with
industry standards and the manufacturer's recommendations and maintenance
certification standards) at any location in the continental United States
designated by Lessor in the good operating order and condition required under
Section 11, free of all liens, claims and encumbrances as provided in Section
14, together with all related plans, specifications, operating manuals,
maintenance records and similar documents. If for any reason Lessee fails to
return any Item as required in the condition required, Lessee's obligations
under the related Lease shall continue in full force and effect on a month to
month basis as to the Item and Lessee will continue to pay the current rent for
the Item.
(c) The "Fair Market Value" and "Fair Market Rental Value" of any
Item shall be the amount that would be paid for an Item in an arm's length
transaction between an informed and willing buyer or lessee (other than a used
equipment dealer) to an informed and willing seller or lessor, neither under any
compulsion to buy, sell or lease. Costs of removal from the location of use
shall not be deducted from such value. If Lessee has not maintained the Item to
the standards required by this Agreement, Fair Market Value or Fair Market
Rental Value shall be determined as though the Item had been maintained to those
standards. If Lessor and Lessee have not agreed on the Fair Market Value or
Fair Market Rental Value of an Item by the sixtieth (60th) day before its Term
or Renewal Term expires, it shall be determined by averaging the determinations
(disregarding the one that differs most from the other two) of three qualified
independent appraisers, one appointed by Lessor, the second by Lessee, and the
third by the first two appraisers or by a court having jurisdiction. Lessor
and Lessee shall each pay the cost of its appointed appraiser and shall each pay
half of the cost of the third appraiser.
17. LESSOR MAY PERFORM
If Lessee at any time shall fail to pay any sum which Lessee is
required by this Agreement to pay or shall fail to do or perform any other act
Lessee is required by this Agreement to do or perform, Lessor at its option may
pay such sum or do or perform such act, and Lessee shall reimburse Lessor on
demand for the amount of such payment and for the cost and expense which may be
incurred by Lessor for such acts or performance, together with interest thereon
at the Default Rate from the date of demand until paid.
18. DEFAULT
(a) EVENTS OF DEFAULT. Each of the following shall constitute an
event of default ("Event of Default"): (i) failure to perform and comply with
the provisions and conditions of Section 9 hereof or to pay any sum, including
installments of rental, within ten (10) days of the date when due; (ii) failure
to perform and comply with any other provision or condition of this Agreement
within thirty (30) days after Lessor shall have given Lessee written notice of
default with respect thereto, or failure to make good, within thirty (30) days
after written notice by Lessor to Lessee, any representation or warranty,
whether made in this Agreement or any Lease or in any certificate, agreement,
instrument or statement, including income and financial statements, which shall
prove to have been incorrect in any material respect when made; (iii) any event
of default occurs with respect to any obligations of Lessee to Lessor on or with
respect to any transactions, debts, undertakings or agreements other than this
Agreement; (iv) the failure of Lessee generally to pay its debts as they become
due in the ordinary course of business, or the filing of any application for the
appointment of a receiver for a major part of Lessee's assets or the filing of
any petition or application by or against Lessee under any present or future
laws for the relief of debtors or for the subjection of the property of a debtor
to the control of any court, tribunal or agency for the benefit of creditors,
including proceedings under the Bankruptcy Code, if the proceeding commenced by
such filing, if instituted against Lessee, shall not be dismissed for a period
of sixty (60) days; (v) the execution by Lessee of a general assignment for the
benefit of creditors; (vi) Lessee winds up, dissolves or otherwise terminates
its corporate, partnership or limited liability company existence, or
consolidates with or merges with or into any entity, or sells, leases or
otherwise transfers substantially all of its assets to any entity, or incurs a
substantial amount of indebtedness other than in the ordinary course of its
business, or engages in a leveraged buy-out or any other form of corporate
reorganization, including conversions to Sub "S" corporation status.
(b) EFFECT ON LESSOR'S OBLIGATION. Upon the occurrence of an Event of
Default, Lessor shall have no further obligation to Lessee to purchase Equipment
or Items or to lease any thereof to Lessee.
(c) REMEDIES.
Upon the occurrence of an Event of Default as provided above, Lessor
may at its option:
Page 5 of 8
(i) proceed by appropriate court action or actions, either at law or
in equity, to enforce performance by the Lessee of the applicable covenants of
this Agreement and applicable Lease or to recover damages for the breach
thereof; or
(ii) by notice in writing to the Lessee terminate Lessee's right of
possession of the Equipment, whereupon all rights of the Lessee to possess and
use the Equipment shall absolutely cease and terminate, but Lessee shall remain
liable as follows:
Upon such a termination, Lessee at its expense shall immediately
redeliver the Equipment to Lessor at the location specified in Section 16 (b)
hereof. If Lessee shall fail to do so, Lessor may retake possession of the
Equipment by entering upon any premises at any reasonable time and thereafter
Lessor may hold, possess, sell, upgrade, lease to others or enjoy the same, free
from any right of Lessee, or its successors or assigns. If Lessor so retakes
possession, Lessee upon demand shall reimburse Lessor for all costs and expenses
relating thereto. Notwithstanding such redelivery or retaking Lessor shall have
a right to recover from Lessee any and all amounts which under the terms of this
Agreement may be then due or which may have accrued to the date of such
termination, and also to recover forthwith from the Lessee its damages for loss
of a bargain and not as a penalty, an amount equal to the higher of Fair Market
Value or the Stipulated Loss Value of the Equipment as of the rent payment date
on or next preceding the date of default, less:
(A) the amount Lessor in fact receives from the sale of the
Equipment, after deduction of all estimated expenses of such sale (Equipment
which Lessor is unable to recover shall at Lessor's option be deemed
worthless); or
(B) at Lessor's election, the present value of the non-
cancellable regularly scheduled rentals receivable from a subsequent lease of
all or part of the Equipment entered into by Lessor (discounted at the Default
Rate), and taking into account only the rentals receivable from the
commencement date of such subsequent lease until the end of the Term for such
Equipment.
In addition to all amounts and damages to which Lessor is entitled as
set forth above, Lessee shall be liable to Lessor for all costs and expenses
incurred by Lessor by reason of Lessee's breach or default. Lessee shall also
be liable for interest on any of the above referenced amounts from and after the
due date at the Default Rate, or the legal limit, whichever is smaller.
Lessor's costs and expenses incurred by reason of Lessee's breach or
default shall include, without limitation, costs and expenses of receiving or
retaking possession of the Equipment, storing, holding, transporting, insuring,
caring for, servicing, maintaining and renting the Equipment or Items and
collecting rents and professional fees and expenses with respect to or incurred
by reason of the breach or default, including legal fees and expenses for advice
and legal services in any actions or proceedings which Lessor may commence or in
which Lessor may appear or participate to exercise or enforce any rights or
remedies or to protect or preserve any rights or interests, including but not
limited to attorneys' fees and costs incurred for representation in matters
arising under the bankruptcy statutes, including relief from stay motions and
motions concerning the assumption or rejection of executory contracts and leases
and in all reviews of and appeals from any such actions or proceedings.
The "Default Rate" of interest shall be a rate per annum computed
monthly which shall be five (5) percentage points above the prime rate, but not
greater than the maximum rate, if any, limited by applicable law. The "prime
rate" referred to in this Agreement shall mean the rate per annum announced by
Chase Manhattan Bank, New York City, from time to time as its prime rate,
whether or not such rate is applied by said bank to any then outstanding loans,
changing with each announced change of such prime rate.
19. RIGHTS CUMULATIVE
Unless otherwise expressly provided herein, all rights and remedies of
Lessor are concurrent and cumulative. The exercise or partial exercise of any
remedy shall not restrict Lessor from further exercise of that remedy or any
other remedy.
20. NON-WAIVER
Neither the acceptance by Lessor of any payment or any other
performance, nor any act or failure of Lessor to act or to exercise any rights,
remedies or options in any one or more instances shall constitute a waiver of
any such right, remedy or option or of any other then existing or thereafter
accruing right, remedy or option, or of any breach or default then existing or
thereafter occurring. No purported waiver by Lessor of any right, remedy,
option, breach or default shall be binding unless in writing and signed by an
officer of Lessor. A written waiver by Lessor of any right, remedy, option,
breach or default shall not constitute a waiver of any other then existing or
thereafter accruing right, remedy or option or of any other then existing or
thereafter occurring breach or default.
21. NOTICES; PAYMENTS
(a) A written notice may be given: (i) by personal delivery of the
same to a corporate officer of the party to whom it is directed (the
"Addressee"), or to a general partner if the Addressee is a partnership, or to a
member of a limited liability company, or to the owner if the Addressee is a
sole proprietorship; (ii) by mailing the notice to the Addressee by first class
mail, registered or certified, with postage prepaid, addressed to the Addressee
at the address following its name in the opening paragraph of this Agreement or
to such other address as Addressee may specify by notice in writing given in
accordance with this Section; or (iii) by overnight courier service. Notice
shall be effective upon delivery if sent pursuant to (i), effective three (3)
days after mailing, or effective the next day if sent by overnight courier. A
"business day" shall be any day that is not a Saturday or Sunday or a legal
holiday.
(b) The Lessee shall make all payments to Lessor at the place where
the notice is to be mailed to Lessor pursuant to (a). Payments are deemed paid
when received by Lessor.
Page 6 of 8
22. ASSIGNMENT
(a) LESSEE WILL NOT SUBLEASE OR LEND ANY ITEM OR SELL, ASSIGN,
TRANSFER OR GRANT A SECURITY INTEREST IN ALL OR ANY PART OF ITS INTERESTS IN THE
EQUIPMENT OR ANY LEASE WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR. Lessor's
consent to an assignment, sublease, transfer, sale or grant in any one or more
instances shall not impose any obligation upon Lessor to consent to any other or
further assignments. Lessor's consent to an assignment, sublease, transfer,
sale or grant shall not release Lessee from any obligations with respect to the
Lease unless expressly so stated in the written consent.
(b) All rights of Lessor hereunder may be assigned, pledged,
mortgaged, transferred or otherwise disposed of, either in whole or in part,
without notice to Lessee but subject always to the rights of Lessee under this
Lease. If Lessee is given notice of any such assignment, Lessee shall
acknowledge receipt thereof in writing. If Lessor assigns this Agreement or any
Lease or the rent due or to become due hereunder or any other interest herein,
whether as security for any of its indebtedness or otherwise, no breach or
default by Lessor hereunder or pursuant to any other agreement between Lessor
and Lessee, shall excuse performance by Lessee of any provision hereof or give
rise to any defense, counterclaim or set off, with respect to Lessee's
obligations under the Lease, it being understood that in the event of such
default or breach by Lessor that Lessee shall pursue any rights on account
thereof solely against Lessor through a claim for damages. No such assignee
shall be obligated to perform any duty, covenant or condition required to be
performed by Lessor under the terms of this Agreement.
23. SURVIVAL
The representations, warranties, indemnities and agreements of Lessee,
and Lessee's obligations under any and all provisions of this Agreement, shall
survive the expiration or other termination of this Agreement, shall be binding
upon its successors and assigns and are expressly made for the benefit of and
shall be enforceable by Lessor and its successors and assigns.
24. MISCELLANEOUS
(a) The term "Lessor" shall mean the Lessor named herein and its
successors and assigns.
(b) Whenever the context so requires, any pronoun gender includes all
other genders, and the singular includes the plural. If more than one person
constitute Lessee, whether as a partnership or otherwise, all such persons are
and shall be jointly and severally liable for all agreements, undertakings and
obligations of Lessee.
(c) All captions and section, paragraph and other divisions and
subdivisions are for convenience of reference only and shall not affect the
construction, interpretation or meaning of this Agreement or any Lease or of any
of the provisions thereof.
(d) THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF WASHINGTON, WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS THEREOF.
(e) This Lease shall be binding upon and, except as limited in Section
22 hereof, shall inure to the benefit of Lessor and Lessee and their respective
successors and assigns.
(f) THIS LEASE CANNOT BE CANCELLED OR TERMINATED EXCEPT AS EXPRESSLY
PROVIDED HEREIN.
(g) Lessee's obligation to pay or reimburse Lessor for expenses as
provided hereunder shall be limited to reasonable expenses.
(h) LESSEE AND LESSOR EACH WAIVES FOR ITSELF AND ITS RESPECTIVE
SUCCESSORS AND ASSIGNS ANY RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY MATTER
ARISING UNDER THIS AGREEMENT, ANY LEASE OR OTHER RELATED DOCUMENT.
(i) Lessee hereby authorizes Lessor, in such jurisdictions where
such action is authorized by law, to execute financing statements regarding the
Equipment on Lessee's behalf or to effect recordation or filing of such
financing statements without Lessee's signature thereon.
(j) For all purposes hereof, "day" shall mean a calendar day.
25. ARTICLE 2A WAIVERS
If Article 2A of the Uniform Commercial Code is adopted under
applicable state law and applies to this Agreement or to any Lease, then Lessee,
to the extent permitted by law, waives any and all rights and remedies conferred
upon a lessee by Sections 2A-508 through 2A-522 of such Article 2A, including,
but not limited to, Lessee's rights to:
(i) cancel or repudiate this Agreement or a Lease;
(ii) reject or revoke acceptance of the Equipment;
(iii) claim, grant or permit attachment of a security interest in
the Equipment in Lessee's possession or control for any reason;
(iv) deduct from Interim or Periodic Rental payments, or other
amounts due hereunder, all or any part of any claimed damages resulting from
Lessor's default, if any, under this Agreement or any Lease;
(v) accept partial delivery of the Equipment or an Item
thereof;
(vi) "cover" by making any purchase or lease of or contract to
purchase or lease equipment in substitution for Equipment designated in this
Agreement or any Lease; and
(vii) obtain specific performance, replevin, detinue,
sequestration, claim and delivery or the like for any Equipment identified in
any Lease. To the extent permitted by applicable law, Lessee also hereby waives
any rights now or hereafter conferred by statute or otherwise which may require
Lessor to sell, lease or otherwise use or dispose of any Equipment in mitigation
of Lessor's damages or which may otherwise limit or modify any of Lessor's
rights or remedies.
Page 7 of 8
26. ENTIRE AGREEMENT
This Agreement, applicable Leases, Certificates of Acceptance and
Closing Schedules shall constitute the entire agreement between the parties and
shall not be altered or amended except by an agreement in writing signed by the
parties hereto or their successors or assigns.
IN WITNESS WHEREOF Lessor and Lessee have signed this agreement as of
the day and year first hereinabove written.
LESSOR: LESSEE:
METLIFE CAPITAL, LIMITED POWER INTEGRATIONS, INC.
PARTNERSHIP
By: MetLife Capital Corporation
Its: General Partner
/s/ Xxxxxxxx X. Xxxxxxx /s/ Xxxxxx X.Xxxxxxx
By: ________________________________ By: _______________________________
Vice President
Its: _______________________________ Its: ______________________________
By: _______________________________
Its:_______________________________
Date Signed: July 31, 1998
________________________
EQUIPMENT LEASE NO. ONE
Incorporating
Master Equipment Lease Agreement dated ____________________
THIS EQUIPMENT LEASE is entered into the ______ day of _______________,
19___ between METLIFE CAPITAL CORPORATION ("Lessor") whose mailing address is C-
97550, Xxxxxxxx, Xxxxxxxxxx 00000 and POWER INTEGRATIONS, INC. ("Lessee") whose
address is 000 XXXXX XXXXXXXX XXXXXX, XXXXXXXXX, XX 00000
1. General
-------
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor each
Item accepted under this Lease on the terms and conditions set forth in
this Lease and the above Master Equipment Lease Agreement (the
"Agreement"). Lessor and Lessee hereby affirm the Agreement and
incorporate its terms in this Lease by this reference. Various terms used
in each of the two documents are defined with reference to the other.
2. Equipment Description
---------------------
Set forth below or in Exhibit A attached hereto:
NAME AND ADDRESS COMPLETE DESCRIPTION OF EQUIPMENT
OF SUPPLIER QUANTITY (NEW UNLESS OTHERWISE SPECIFIED) PRICE
-----------------------------------------------------------------------------------------------------------------------------
---------------
TOTAL PRICE
----------------------------------------------------------------------------
FED. EXCISE TAX $
----------------------------------------------------------------------------
TRANSPORTATION $
----------------------------------------------------------------------------
OTHER $
-----------------------------------------------------------------------------------------------------------------------------
3. Recovery Period Category for Federal Tax Purposes: Five (5) year property
--------------------------------------------------
(See Section 10(b) of the Agreement)
4. Cost and Date Limitations
-------------------------
The Total Cost of all Equipment accepted under this Lease (including
manufacturer's invoice cost plus taxes, freight, installation and related
costs approved by Lessor) shall not exceed _____________. No Item may be
accepted under this Lease after _________, ("Purchase Cut-Off Date").
5. Rent
----
Lessee will pay rent for each Item in the number of consecutive payments as
shown below. Rent payments will be due and payable on each rent payment date
during the Item's Lease Term. Each periodic rent payment will equal the
Item's Total Cost (as specified in its Certificate of Acceptance) times the
Periodic Rental Rate shown below.
Interim Rent:
Interim Rental Rate: ______________ (____%) percentage point(s) above
------------------- ----------------------
30 Day Commercial Paper
Periodic Rent:
-------------
Number of rent payments: _____ (__)
----------
Rent Payment Factor (for each installment): _______% percent (%) of
--------
Lessor's Cost of the Equipment**
Payment Schedule: MONTHLY IN ARREARS
-------------------------------------
Basic Term Length:
-------------------------------------
**RENTAL ADJUSTMENT: The rental factor(s) expressed above as a
percentage of Equipment Cost will be adjusted at lease closing in
accordance with the following formula:
The rental factor will be converted to a simple interest equivalent rate
that is then increased or decreased 1% for each 1% (or pro rata for any
fraction of 1%) change in the average yield of Three year U.S. Treasury
Constant Maturities (as published in Federal Reserve Statistical Release
H.15[519]) from the complete one week period immediately preceding the
date of lease closing.
Section 16. LESSEE'S OPTIONS AT EXPIRATION OF LEASE TERM of the Master
--------------------------------------------
Equipment Lease Agreement, and only with respects to Equipment Lease No.
One, is amended to include the following changes:
(a) The reference to "One Hundred Twenty (120) days" is amended to "Ninety
(90)" and the reference of "Lease" in the following sentence,
"...following options with respect to all (but not less than all)
Items covered by the Lease,..." is change to "Lease Closing
Schedules".
(b) The reference to "the continental United States" is amended to
"California".
Section 16. LESSEE'S OPTIONS AT EXPIRATION OF LEASE TERM of the Master
--------------------------------------------
Equipment Lease Agreement, and only with respects to Equipment Lease No.
One, is amended to include the following additional paragraph:
(d) Provided that the lease term of the Equipment described in the
Schedule has not been terminated and that no Event of Default under the
Lease has occurred and is continuing, Lessee shall have the option to
purchase all but not less than all of the Equipment at the end of the 48th
month thereof (the "Early Purchase Option Date") for an amount (the "Early
--------------------------- -----
Purchase Option Price"), payable in immediately available funds, equal to
---------------------
THIRTY-ONE AND 09/100 percent (31.09%) of the Acquisition Cost, plus an
amount equal to all sales or excise taxes on or measured by the sale of the
Equipment to Lessee, and provided further that Lessee shall have notified
Lessor in writing of Lessee's intention to exercise such option not more
than ninety (90) nor less than sixty (60) days prior to the Early Purchase
Option Date. Such option shall be exercisable only on the Early Purchase
Option Date and at no other time. If the Early Purchase Option Price of
the Equipment has not been paid to Lessor on the Early Purchase Option
Date, Lessee shall continue to pay rent for the Equipment as specified in
the Lease.
A COMPLETE EQUIPMENT LIST WILL BE REVIEWED BY LESSOR'S ASSET MANAGEMENT
DEPARTMENT PRIOR TO CLOSING TO ENSURE THAT THE ECONOMICS OF THE TRANSACTION
HAVE BEEN MAINTAINED. A CHANGE IN THE ECONOMICS MAY RESULT IN AN ADJUSTMENT
OF THE RENTAL FACTOR AND/OR THE EARLY PURCHASE OPTION PRICE DISCLOSED ABOVE.
6. Sales/Use Tax
-------------
Sales or use tax shall be payable by Lessee on or along with each rent
payment or upfront or Lessee will attach its sales/use tax exemption
certificate, if applicable.
7. Required Documents
------------------
Unless Lessor shall have given written approval for partial payment, Lessor
will be obligated to pay the Total Cost of any Item only when it has received
and approved the following true and correct documents:
(a) A Certificate of Acceptance for the Item signed by Lessee.
(b) An original invoice from the vendor of the Item showing its Total
Cost, or from Lessee if the transaction is a sale and leaseback of the
Item.
(c) If the invoice for the Item shows Lessee rather than Lessor as the
"sold to" party, an assignment of the Lessee's purchase order, or, in
Lessor's discretion a xxxx of sale for the Item from the vendor of the Item
to Lessor, or from Lessee if the transaction is a sale and leaseback of the
Item, in form and substance satisfactory to Lessor.
(d) An authorizing board resolution and incumbency certificates or other
authorization acceptable to Lessor.
(e) If required by Lessor, a Guaranty of Lessee's obligations under this
Lease together with authorizing board or partnership resolution of the
guarantor.
(f) The certificates of insurance or copies of policies required by
Section 9 of the Agreement.
(g) Uniform Commercial Code Financing Statement(s) as prepared by Lessor
and signed by Lessee.
(h) Such other documents as Lessor may reasonably request, including
without limitation appropriate filings and notices if the transaction is a
sale and leaseback of the Item.
(i) Partial Payment Authorization (if applicable).
8. Closing Schedules.
------------------
Lessor shall send Lessee one or more Closing Schedules with respect to this
Lease setting forth any adjustments to Equipment description, payment
schedules, stipulated loss values and other matters.
LESSOR: LESSEE:
METLIFE CAPITAL CORPORATION POWER INTEGRATIONS, INC.
By: ________________________________ By:_________________________________
Vice President
Its:________________________________ Its:________________________________
Date Signed:________________________
