MASTER LEASE AGREEMENT

 

                                                                   Exhibit 10.8a

 

                             MASTER LEASE AGREEMENT

 

This Master Lease Agreement ("Lease") is entered into as of December 22, 2003 by

and between The Walden Asset Group, LLC, a Delaware limited liability company

("Lessor") having its principal place of business at 1 Hollis St., Wellesley, MA

02482 and Playboy Entertainment Group, Inc, a Delaware corporation ("Lessee")

having its principal place of business at 680 North Lake Shore Drive, Chicago,

Illinois 60611.

 

As used in this Master Equipment Lease, the terms "Estimated Delivery Date",

"Acceptance Date", "Basic Rent Date", "Monthly Lease Factor", "Daily Lease

Factor", "Lessor's Cost", "Casualty Value", "Casualty Overdue Rate", "Overdue

Rate", "Installation Site", Manufacturer", "Machine Type", "Model Number" and

"Serial Number" shall have the meanings with respect to each Item of Equipment

set forth on the Equipment Schedule which describes that Item of Equipment. If

not set forth in an Equipment Schedule, capitalized terms shall have the meaning

set forth in this Lease.

 

1. LEASE OF EQUIPMENT: Subject to the terms and conditions, contained herein,

Lessor hereby leases to Lessee, and Lessee leases from Lessor, the items of

personal property (herein referred to collectively as the "Equipment," or

individually, as an "Item of Equipment") described more fully in one or more

Equipment Schedules executed by Lessor and Lessee, designated Exhibit A and

numbered sequentially.

 

Each Equipment Schedule shall be considered a separate and enforceable lease

incorporating the terms and conditions of this Lease. An executed counterpart of

this Lease (including any supplements, addenda, or riders hereto) or photocopy

hereof, together with an executed Equipment Schedule, marked "Original", shall

be the original of the lease for the Equipment described on such Schedule and

together they constitute and shall be referred to herein as the "Lease" with

respect to such Equipment. All other executed counterparts of the Equipment

Schedule shall be marked "Duplicate". To the extent that this Lease constitutes

chattel paper, as such term is defined in the Uniform Commercial Code of the

applicable jurisdiction, no security interest in this Lease may be created

through the transfer of possession of any counterpart other than the Original of

an Equipment Schedule. Notwithstanding the delivery of the Equipment to, and its

possession and use by Lessee, Lessor shall retain the full legal title to the

Equipment, it being expressly understood that this Lease is an agreement of

lease only.

 

2. TERM AND RENEWAL. At such time as all Equipment listed on an Equipment

Schedule is operational, in good working order and available for use by Lessee,

Lessee shall complete and deliver to Lessor an executed equipment acceptance

("Equipment Acceptance"). Lessee shall make available to Lessor such information

as Lessor shall reasonably request from time to time in respect of the

installation of the Equipment. In the event (a) Lessee shall fail timely to

execute and deliver to Lessor such Equipment Acceptance or (b) Lessee shall

reject the Equipment, in either case for any reason whatsoever other than the

fault of Lessor, all obligations, if any, of Lessor to each vendor with

 

 

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                                                                   Exhibit 10.8a

 

respect to the Equipment shall be deemed those of Lessee and Lessee shall

indemnify and hold Lessor harmless from any and all liability, damages, and

reasonable expenses including reasonable attorneys' fees arising therefrom.

 

The lease term ("Term") shall commence as of the date specified on the

applicable Equipment Acceptance (as to such Equipment Schedule, the

"Commencement Date") and continue through the last day of the final month of the

number of months provided in the Equipment Schedule unless theretofore extended

pursuant to its terms or terminated pursuant to or upon the occurrence of an

Event of Default (the "Expiration Date"). Lessee shall give Lessor notice of

Lessee's intention to return the Equipment at least 60 days prior to the

Expiration Date of the applicable Equipment Schedule, and the term of such

Equipment Schedule shall automatically be extended one month for each thirty-day

period or portion thereof Lessee fails to give such notice.

 

Upon 60 days prior written notice to Lessor, Lessee may, at its option ("Renewal

Option"), renew the Equipment Schedule in respect of all, but not less than all,

of the Equipment covered under the Equipment Schedule upon the same terms and

conditions as provided for in the Lease Agreement and the Equipment Schedule

(other than Term and Rent), upon the following terms and conditions: (a) The

Basic Rent due in respect of the Equipment shall be the fair market monthly rent

for continued use by Lessee as determined by agreement between Lessor and Lessee

(or, in the absence of such an agreement, by an independent appraisal at

Lessee's expense by an appraiser mutually acceptable to Lessee and Lessor) and

(b) the Casualty Value during the term of such renewed Equipment Schedule shall

be 100% of the fair market value of the Equipment at the Expiration Date of the

applicable Equipment Schedule as determined by agreement between Lessor and

Lessee (or, in the absence of such an agreement, by an independent appraisal at

Lessee's expense by an appraiser mutually acceptable to Lessee and Lessor), and

(c) the term shall be agreed by the parties and in no case less than twelve

months.

 

The terms of each Equipment Schedule hereto are subject to all conditions and

provisions of this Lease as it may at any time be amended in accordance with the

terms hereof.

 

3. NON-CANCELABLE LEASE. This Lease cannot be canceled or terminated during the

Term except as expressly provided herein.

 

4. NET LEASE. This Lease is a net lease and Lessee agrees that its obligations

to pay all rent and other sums payable hereunder and the rights of Lessor and

Assignee (defined in Section 18) in and to such rent, are absolute and

unconditional and are not subject to any abatement, reduction, setoff, defense,

counterclaim or recoupment due or alleged to be due to, or by reason of, any

past, present or future claims which Lessee may have against Lessor, any

Assignee, the manufacturer or seller of the Equipment. Lessee shall maintain in

effect all licensing and registration of the Equipment as may, from time to

time, be required by federal, state or local law or regulation and shall

operate, maintain and use the Equipment in accordance with all applicable

federal, state or local laws or regulations, including without limitation all

applicable rules and regulations of the Federal Communications Commission. The

provisions of this Section shall survive the expiration or earlier

 

 

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                                                                   Exhibit 10.8a

 

termination of each Equipment Schedule.

 

5. RENT: The Lessee shall pay to the Lessor or its Assignee the following

amounts ("Basic Rent"), for each item of Equipment:

 

(a) On the Commencement Date (but only if the Commencement Date occurs on the

first day of a calendar month) and on each successive Basic Rent Date

thereafter, an amount equal to the Monthly Lease Factor multiplied by Lessor's

Cost of the Item of Equipment. In addition, on the Commencement Date, unless the

Commencement Date occurs on the first day of a calendar month, Lessee shall pay

to Lessor an amount equal to the product of (a) the Daily Lease Factor

multiplied by (b) the number of days from (and including) the Commencement Date

to (and excluding) the First Basic Rent Date multiplied by (c) Lessor's Cost of

the Item of Equipment; and

 

(b) In the event of a Casualty Occurrence (as defined in Section 13 of this

Lease), on the date provided herein, any amount payable hereunder as Casualty

Value and any other amounts payable pursuant to the Equipment Schedule; and

 

(c) within 10 days of demand therefor by Lessor, any other amount payable

hereunder by Lessee, to the Lessor or others; and

 

(d) on demand, to the extent permitted by applicable law, interest at the

Overdue Rate (as provided in the appropriate Equipment Schedule) on any payment

of Basic Rent or other monies which have not been received by the Lessor or its

assignee in available funds on the applicable due date. Such interest shall

accrue on any unpaid amount at the Overdue Rate from the applicable due date

until paid, and shall be paid by Lessee within 10 days of receipt of written

notice that such payment is past due.

 

6. LESSOR COMMITMENT. So long as Lessee complies with all of its obligations

hereunder and Lessor has not given notice (or been deemed to have given notice)

of an Event of Default pursuant to Section 19, Lessor agrees to lease to Lessee

the Items of Equipment described on each Equipment Schedule and agrees that

neither Lessor or anyone acting at Lessor's direction, nor Assignee or anyone

acting at Assignee's direction) shall disturb Lessee's quiet and peaceful

possession and use of such Equipment for its intended purpose, provided,

however, Lessor shall have no obligation hereunder until the execution and

delivery of each such Equipment Schedule and Equipment Acceptance by Lessor and

Lessee.

 

7. NO WARRANTIES BY LESSOR. (a) Lessee acknowledges and agrees that it has made

the selection of the Equipment based upon its own judgment, that the Equipment

is of a size, design, capacity, condition, quality, durability and manufacture

selected by Lessee, and that the Equipment is suitable for Lessee's purposes.

Lessee expressly disclaims any reliance upon any statements or representations

made by Lessor EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN. LESSOR MAKES NO

REPRESENTATIONS OR WARRANTIES TO LESSEE OR ANY OTHER PERSON OF ANY KIND, EXPRESS

OR IMPLIED, AS TO ANY MATTER

 

 

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                                                                   Exhibit 10.8a

 

WHATSOEVER, INCLUDING WITHOUT LIMITATION WITH RESPECT TO THE SIZE, DESIGN

CAPACITY, CONDITION, QUALITY, DURABILITY, SUITABILITY, MANUFACTURE OR

PERFORMANCE OF THE EQUIPMENT, ITS MERCHANTABILITY OR FITNESS FOR A PARTICULAR

PURPOSE OR WITH RESPECT TO INFRINGEMENT (INCLUDING WITHOUT LIMITATION

INFRINGEMENT OF PATENTS OR TRADEMARKS) OR THE LIKE. LESSOR SHALL HAVE NO

LIABILITY TO LESSEE OF ANY KIND OR NATURE WHATSOEVER, NOR SHALL THERE BE ANY

ABATEMENT OF RENTAL, ARISING OUT OF OR IN CONNECTION WITH (I) ANY DEFICIENCY OR

DEFECT IN THE EQUIPMENT, (II) THE USE OR PERFORMANCE OF THE EQUIPMENT OR (III)

ANY LOSS OF BUSINESS OR OTHER CONSEQUENTIAL LOSS OR DAMAGE WHETHER OR NOT

RESULTING FROM ANY OF THE FOREGOING. SUBJECT TO THE LIMITATIONS SET FORTH IN

SECTION 15, LESSEE WILL DEFEND, INDEMNIFY AND HOLD LESSOR HARMLESS AGAINST ANY

AND ALL DEMANDS, CLAIMS, COSTS, LOSSES, DAMAGES AND LIABILITIES ARISING OUT OF

OR IN CONNECTION WITH THE DESIGN, MANUFACTURE, POSSESSION, OPERATION OR USE OF

THE EQUIPMENT. Lessee agrees to look solely to the manufacturer or vendor of the

Equipment for all warranties made by manufacturer or vendor. Any such warranties

are hereby assigned to Lessee for the term of this Lease. Lessor appoints Lessee

as its agent and confers on Lessee the authority to settle any and all warranty

claims with respect to the Equipment arising during the Term, on Lessor's

behalf. Lessee agrees to inform Lessor, or its Assignee, as to the extent and

kind of all claims made against vendors or manufacturers under the warranties

issued on the Equipment. Lessee further agrees that any Equipment, which is

exchanged for Equipment under the Lease, shall become the property of the

Lessor, or its Assignee, for the purpose of this Lease. No warranty settlement

in excess of $10,000.00 may be made for cash without the approval of the Lessor

or its Assignee.

 

(b) Lessee understands and agrees that neither the vendor, the manufacturer nor

any representative or other agent of the vendor or manufacturer is an agent of

Lessor. Neither the vendor nor the manufacturer, nor any representative or agent

of either is authorized to waive or alter any term or condition of this Lease,

and no representations as to the Equipment or any other matter by the vendor or

the manufacturer shall in any way affect Lessee's duty to pay the Basic Rent and

perform its other obligations as set forth in this Lease.

 

(c) Lessee hereby authorizes Lessor to insert in this Lease and each Equipment

Schedule hereto the serial numbers, and other identification data, of the

Equipment when determined by Lessor.

 

8. REPRESENTATIONS AND WARRANTIES. (a) Lessee represents and warrants that:

 

      (i) it is a corporation, is duly organized, validly existing and in good

standing under laws of the state of its incorporation, and is duly aqualified to

do business in each state where the Equipment will be located;

 

      (ii) it has full power and authority to execute and deliver this Lease and

perform its obligations hereunder and this Lease has been duly authorized and

constitutes the legal, valid and

 

 

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                                                                   Exhibit 10.8a

 

binding obligations of Lessee enforceable in accordance with its terms;

 

      (iii) this Lease will not contravene any law, regulation or judgment

affecting Lessee or result in any breach of any agreement or other instrument

binding on Lessee;

 

      (iv) no consent of Lessee's shareholders or holder of any indebtedness, or

filing with, or approval of, any governmental agency or commission, is a

condition to the performance of the provisions hereof;

 

      (v) there is no action or proceeding pending or threatened against Lessee

before any court or administrative agency which might have a materially adverse

effect on the business, financial condition or operations of Lessee;

 

      (vi) no deed of trust, mortgage or third party interest (other than

Permitted Liens) has attached to the Equipment; and

 

      (vii) the Equipment will remain at all times, under applicable law,

removable personal property notwithstanding the manner in which the Equipment

may be attached to any real property, free and clear of any lien or encumbrance

in favor of Lessee or any other person other than (A) any lien or encumbrance,

to the extent created by or through Lessor or any Assignee (a "Lessor Lien") and

(B) any lien or encumbrance that is (i) created or expressly permitted by the

Lease or any another agreement or instrument executed or approved in writing by

Lessor and Lessee; (ii) unindemnified Taxes or Taxes (as defined below) either

not yet due and payable or being contested in good faith in accordance with

Section 16; (iii) construction materialmen's, mechanics', workers', repairmen's,

employees' or other like levy, lien or encumbrance arising in the ordinary

course of business for amounts either not overdue for a period of more than 60

days or being contested in good faith by appropriate proceedings provided that

there is no risk of imminent foreclosure or seizure; or (iv) arising out of

judgments or awards against Lessee which at the time are being contested in good

faith by appropriate proceedings provided that there is no risk of imminent

foreclosure or seizure (collectively, "Permitted Liens").

 

(b) Lessor represents and warrants that:

 

      (i) it is a limited liability company, is duly organized, validly existing

and in good standing under laws of the state of its organization, and is duly

qualified and in good standing in all jurisdictions where necessary to enter

into this Lease;

 

      (ii) it has full power and authority to execute and deliver this Lease and

perform its obligations hereunder and this Lease has been duly authorized and

constitutes the legal, valid and binding obligations of Lessor enforceable in

accordance with its terms;

 

      (iii) this Lease will not contravene any law, regulation or judgment

affecting Lessor or result in any breach of any agreement or other instrument

binding on Lessor;

 

 

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                                                                   Exhibit 10.8a

 

      (iv) no consent of Lessor's shareholders or holder of any indebtedness, or

filing with, or approval of, any governmental agency or commission, is a

condition to the performance of the provisions hereof; and

 

      (v) there is no action or proceeding pending or threatened against Lessee

before any court or administrative agency which might have a materially adverse

effect on the business, financial condition or operations of Lessor.

 

9. EQUIPMENT ORDERING. Lessee shall be responsible for all packing, rigging,

transportation and installation charges for the Equipment. Lessee shall arrange

for delivery of Equipment, unless otherwise specified in the Equipment Schedule,

so that it can be accepted in accordance with Section 10 hereof. Lessee hereby

agrees to indemnify and hold Lessor harmless from any claims, liabilities, costs

and expenses, including reasonable attorney fees, incurred by Lessor arising out

of any purchase orders or assignments executed by Lessor with respect to any

Equipment or services relating thereto.

 

10. LESSEE ACCEPTANCE. Lessee shall return to Lessor the signed and dated

Acceptance Certificate attached hereto as Exhibit "B":

 

(a) acknowledging the Equipment has been received, installed and is ready for

use and

 

(b) accepting it as satisfactory in all respects for the purposes of the Lease.

 

11. OWNERSHIP, LOCATION AND INSPECTION OF EQUIPMENT.

 

(a) Nothing contained in this Lease or in any Equipment Schedule shall give or

convey to Lessee any right, title or interest in or to the Equipment, except the

right to retain, possess and use the Equipment as a lessee for the Term (and the

right to exercise any purchase option contained in any Equipment Schedule). Upon

the request of Lessor made at any time during the Term of any Equipment

Schedule, Lessee shall affix and maintain on the Equipment leased pursuant to

such Equipment Schedule, tags, decals, plates or labels (supplied by Lessor)

indicating the interest of Lessor in the Equipment.

 

(b) Lessee shall at all times keep the Equipment free and clear from any liens

or encumbrances of Lessee's creditors or other persons (other than Permitted

Liens). At Lessor's request, Lessee shall provide Lessor from each owner or

mortgagee of any premises in which any Item of Equipment is located a written

waiver of any rights of such owner or mortgagee in and to the Equipment or any

part or item thereof, in form and substance reasonably acceptable to Lessor.

Lessee agrees that the Equipment shall always remain and be deemed personal and

moveable property; Lessee shall not enter into any agreement or take any action

inconsistent with the foregoing. Under no circumstances shall Lessee remove or

permit removal of any Equipment from the Installation Site shown on the

Equipment Schedule therefor unless (a) Lessee shall give Lessor at least 20 days

prior written notice

 

 

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                                                                   Exhibit 10.8a

 

thereof, and (b) Lessee, at Lessee's cost, shall have provided Lessor with

appropriate Uniform Commercial Code financing statements and other documents

requested by Lessor to maintain perfection of its interest in the Equipment and

the applicable Equipment Schedule. Under no circumstances shall any Equipment be

removed to a location which is not within the continental United States or in

which the Uniform Commercial Code is not in effect.

 

(c) Lessor at a time mutually agreed upon by the parties, and at its own risk,

shall have the right to inspect the Equipment which is the subject of this Lease

for the purpose of ensuring compliance by Lessee with its obligations under this

Lease. Such inspection right shall be subject to Lessee's standard security

procedures and shall occur during normal business hours.

 

12. EQUIPMENT MAINTENANCE. Lessee shall enter into, and will maintain in effect,

where applicable and if available, manufacturer's standard maintenance contract

or any other service agreement reasonably satisfactory to Lessor. Lessee may

comply with the requirements of this section through a program of

self-maintenance. Any maintenance arrangement entered into by Lessee pursuant to

this Section 12 shall provide for the maintenance of the Equipment in good

condition and working order and repairs and replacement of parts thereof.

 

13. LOSS OR DAMAGE. Lessee shall bear the entire risk of loss or damage to the

Equipment or caused by the Equipment, from the Commencement Date until the

Lessor takes possession of the Equipment after the Expiration Date or earlier

termination of this Lease.

 

In the event any Item of Equipment is damaged to a material extent while Lessee

bears the risk of loss, Lessee shall promptly notify Lessor and shall determine

within 10 days of the date of such notice whether such Item of Equipment can be

repaired. If the Item of Equipment can be repaired, Lessee shall at its expense

repair such Item to its condition immediately prior to the damage.

 

In the event any Item of Equipment shall be lost, stolen, destroyed, damaged

beyond repair, or rendered permanently unfit or unavailable for use for any

reason whatsoever (any such occurrence being referred to as a "Casualty

Occurrence"), Lessee shall promptly notify Lessor. Lessee shall then terminate

this Lease in respect to the Item of Equipment by paying to Lessor on any Basic

Rent Date occurring not more than 90 days after such Casualty Occurrence an

amount equal to the Casualty Value (as determined in the Equipment Schedule)

applicable to such Item of Equipment on the Basic Rent Date immediately

preceding the Basic Rent Date upon which such payment is made. After the payment

of such Casualty Value and all Rent which becomes due and payable on or before

the Basic Rent Date immediately preceding the date on which Casualty Value is

paid with respect to such Casualty Occurrence, the Lessee's obligation to pay

further Basic Rent for such item of Equipment shall cease, but the Lessee's

obligation to pay all other sums, if any, for such Item of Equipment shall

remain unchanged.

 

Following payment of the Casualty Value and Basic Rent for an Item of Equipment

in accordance with the provisions of the preceding paragraph, Lessee may dispose

of such item of Equipment as soon as it is able to do so for the best price

obtainable. Any such disposition shall be on an "as is,

 

 

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                                                                   Exhibit 10.8a

 

where is" basis without representation or warranty, express or implied save

those warranties which Lessee wishes to give. For each Item of Equipment so

disposed, Lessee may, after paying Lessor the amounts specified in the preceding

paragraph and other amounts required to be paid by Lessee pursuant to this Lease

with respect to such Item of Equipment, retain all of such sale proceeds.

 

The proceeds of insurance (if any) covering an Item of Equipment to which a

Casualty Occurrence has occurred shall be paid to and retained by Lessor to the

extent that Lessor has not previously received all Casualty Value and other

payments required to be made by Lessee pursuant to this Lease.

 

14. INSURANCE.

 

 (a) Lessee will insure for the following risks with insurers of recognized

responsibility: (i) All risk of loss and physical damage (including earthquake

insurance) to the Equipment in amounts not less than the greater of the fair

market replacement value or the aggregate Casualty Value of all Equipment from

time to time and shall be subject to a deductible up to $250,000 per occurrence

(up to $2,000,000 deductible for earthquake insurance); (ii) comprehensive

public liability and property damage insurance with respect to the condition,

possession, maintenance, operation and use of the Equipment, in an amount not

less than $2,000,000 for each occurrence and shall be subject to a deductible up

to $250,000 per occurrence, provided that Lessee maintains the same insurance

deductible levels for all of its other equipment located in the same state the

Equipment is located.

 

(b) Lessee shall deliver to Lessor and any Assignee(s) a valid certificate of

insurance for each such insurance policy upon the execution thereof and a

certificate of insurance for each renewal polic