MASTER LEASE AGREEMENT

Exhibit 10.41

Execution Copy

MASTER EQUIPMENT LEASE

Among

WISE ALLOYS LLC

Lessee

and

WILMINGTON TRUST COMPANY,

not in its individual capacity except as expressly

set forth herein, but solely as Owner Trustee

Lessor

and

THE EMPLOYEES’ RETIREMENT SYSTEM OF ALABAMA

and

THE TEACHERS’ RETIREMENT SYSTEM OF ALABAMA

collectively, Owner Participant

Date: November 13, 2006

TABLE OF CONTENTS

 

 

 

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MASTER EQUIPMENT LEASE

THIS MASTER EQUIPMENT LEASE is made as of the 9th day of November, 2006, by and among THE EMPLOYEES’ RETIREMENT SYSTEM OF ALABAMA and THE TEACHERS’ RETIREMENT SYSTEM OF ALABAMA (collectively, the “Owner Participant”), WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity, except as expressly stated herein, but solely as owner trustee (“Owner Trustee” and in its role as lessor hereunder “Lessor”), and WISE ALLOYS LLC, a Delaware limited liability company (“Lessee”). Unless otherwise defined herein, capitalized terms shall have the meaning assigned to such term in Exhibit B hereto.

The parties agree that, subject to the terms and conditions set forth herein and in the Equipment Schedules, Owner Participant agrees to make an equity investment in the Trust in an aggregate amount not to exceed $30,000,000, Lessor agrees to purchase from and lease to Lessee, and Lessee agrees to sell to and lease from Lessor an aggregate amount of Equipment, the Lessor’s Cost for which shall not exceed $30,000,000, as more fully described in the Equipment Schedules to be executed pursuant hereto.

 

1.

TERM.

The Term of this Lease with respect to any item of the Equipment shall consist of the Basic Term set forth in the Equipment Schedule relating thereto.

 

2.

AUTHORIZATION AND CONDITIONS.

(a) At least 3 Business Days prior to each Funding Date, Lessee shall deliver written notice to Owner Participant and Lessor which shall identify the Equipment to be included on the Equipment Schedule to be executed and delivered as of such Funding Date, its manufacturer, model, serial number, its location and Lessor’s Cost.

(b) The Owner Participant’s obligation to make an equity investment in the Trust and Lessor’s obligations to purchase Equipment from Lessee and to lease the same to Lessee under the Equipment Schedules shall be conditioned upon and subject to satisfaction of the terms of Section 2(a) and the receipt by Owner Participant and Lessor prior to the Closing Date and, if applicable, each Funding Date of the following, in form and substance reasonably satisfactory to Owner Participant and Lessor:

(i) prior to each Funding Date, evidence as to due compliance with the insurance provisions hereof, including a certificate of insurance and copies of the applicable insurance policies;

(ii) prior to each Funding Date, precautionary Uniform Commercial Code financing statements as are reasonably required by Lessor;

(iii) prior to the Closing Date, a certificate of each of Guarantor’s and Lessee’s Secretary or Assistant Secretary dated as of the Closing Date certifying:

(A) resolutions of each of Guarantor and of Lessee duly authorizing (x) in the case of Lessee, the leasing of the Equipment hereunder and the execution, delivery and performance of this Lease and the Equipment Schedules and all other Operative Documents to which Lessee is a party and (y) in the case of Guarantor, the Guaranty, and

(B) the incumbency and signature of the officers of Guarantor and Lessee authorized to execute such documents;

(iv) prior to each Funding Date, a certificate of a Responsible Officer of Lessee dated as of such Funding Date, certifying on behalf of Lessee that to the knowledge of such officer, after due inquiry, no Default or Potential Default has occurred and is continuing;

(v) on the Closing Date, opinions of special counsel for Guarantor and Lessee substantially in the form set forth on Exhibit D hereto and on each Funding Date an opinion of special counsel for Guarantor and Lessee substantially in the form set forth on Exhibit D hereto relating to those documents executed and delivered on such Funding Date;

(vi) on each Funding Date the execution and delivery of an Equipment Schedule for such Equipment together with the Bill of Sale as Lessee is required to execute and deliver as of such Funding Date;

(vii) on or prior to each Funding Date, Owner Participant shall have received an Appraisal with respect to such Equipment in form and substance reasonably satisfactory to Owner Participant; and

(viii) all such other documents, instruments and other actions as Owner Participant, Lessor or Lessee may reasonably request in connection with the consummation of the transactions contemplated herein and consistent with the terms hereof shall be complete and reasonably satisfactory to each of Owner Participant, Lessor and Lessee.

(c) Lessee’s obligations to sell Equipment to Lessor and to lease the same from Lessor under the Equipment Schedules shall be conditioned upon and subject to the receipt by Lessee on or prior to the applicable Funding Date of the following in form and substance reasonably satisfactory to Lessee:

(i) funds in the aggregate amount equal to the Lessor’s Cost of such Equipment have been paid to Lessee or as Lessee shall direct in the manner provided in Section 3 hereof;

 

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(ii) the representations and warranties of Owner Participant in Section 5(b) hereof and of Owner Trustee in Section 5(c) hereof are true and correct on and as of such Funding Date as though made on and as of such date (except to the extent that such representations and warranties expressly relate to a specified earlier date, in which case such representations and warranties were true and correct as of such earlier date);

(iii) a certificate of Lessor’s Secretary dated as of the Closing Date certifying:

(A) resolutions of Lessor’s Board of Directors duly authorizing the execution and delivery of this Lease and all other Operative Documents to which Lessor is a party;

(B) the incumbency and signature of the officers of Lessor authorized to execute such documents;

(iv) (Intentionally Left Blank)

(v) on the Closing Date, opinions of counsel for Lessor, substantially in the form set forth as Exhibit E hereto and of in-house counsel for Owner Participant substantially in the form set forth as Exhibit F hereto;

(vi) execution and delivery of each Operative Document which Lessor or Owner Participant is required to execute and deliver as of such Funding Date; and

(vii) all such other documents, instruments and other actions as Lessee may reasonably request in connection with the consummation of the transactions contemplated herein and consistent with the terms hereof shall be complete and satisfactory to Lessee.

 

3.

DELIVERY.

Lessor and Lessee shall execute and deliver an Equipment Schedule containing the information specified on Exhibit A hereto for each item of Equipment to be leased hereunder as of each Funding Date. Simultaneously therewith, Lessor shall purchase such Equipment from Lessee by paying to Lessee (to such account as Lessee shall specify) by wire transfer of immediately available funds equal to the Lessor’s Cost of such Equipment, such purchase to be evidenced by a Bill of Sale from Lessee to Lessor covering such Equipment; whereupon, as between Lessor and Lessee, such Equipment shall be deemed to have been accepted by Lessee and subject to this Lease.

 

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4.

RENT.

(a) Basic Rent . On each Rent Payment Date during the Basic Term, Lessee shall pay to Lessor Basic Rent in the amount specified on the Equipment Schedules for such Rent Payment Date for the Equipment then subject to this Lease.

(b) Supplemental Rent . Lessee shall pay to Lessor, or to whomever shall be entitled thereto as expressly provided herein or in any other Operative Document, any and all Supplemental Rent promptly as the same shall become due and payable. In the event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have the same rights, powers and remedies provided herein or by law or equity in the case of nonpayment of Basic Rent (except for the difference in grace periods provided in Section 15 hereof).

(c) Method of Payment . Rent due and owing from Lessee to Lessor under or in connection with this Lease is payable as and when specified herein, in the Equipment Schedule or any other Operative Document by wire transfer of immediately available funds to Lessor’s account at Wilmington Trust Company, Wilmington, Delaware, ABA No. 031-100-092, Account No. 078632-000, Ref: [Wise Alloys], or to such other account as Lessor may specify in writing from time to time. Any Supplemental Rent payments for the account of the Owner Participant shall be made by wire transfer of immediately available funds to account of Lessor noted above or to such other account as Owner Participant may specify in writing from time to time. If any payment of Rent is not paid on the due date, Lessor may collect, and Lessee agrees to pay, a charge calculated as the product of the Late Charge Rate specified in the applicable Equipment Schedule and the amount in arrears for the period such amount remains unpaid.

(d) Net Lease; No Setoff; etc. This Lease is a net lease and, notwithstanding any other provision of this Lease, it is intended that Lessee’s obligations to pay Basic Rent and Supplemental Rent hereunder shall be absolute and unconditional and shall not be affected by any circumstance whatsoever and shall be paid without notice, demand, counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction. The obligations and liabilities of Lessee hereunder shall in no way be released, discharged or otherwise affected (except as may be expressly provided herein) for any reason, including, without limitation: (i) any defect in the condition, quality or fitness for use of any item of Equipment or any part thereof; (ii) any damage to, removal, abandonment, salvage, loss, scrapping or destruction of or any requisition or taking of any item of Equipment or any part thereof; (iii) any restriction, prevention or curtailment of or interference with any use of any item of Equipment or any part thereof; (iv) any defect in title to or any Lien on such title; (v) any change, waiver, extension, indulgence or other action or omission in respect to any obligation or liability of Lessor or Owner Participant; (vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to Lessee, Lessor, Owner Participant or any other Person, or any action taken with respect to this Lease by any trustee or receiver of Lessee, Lessor, Owner Participant or any other Person, or by any court, in any such proceeding; (vii) any claim that Lessee has or might have against any Person, including, without limitation, Lessor or Owner Participant; (viii) any failure on the part of Lessor or Owner Participant to perform or comply with any of the terms hereof or of any other agreement; (ix) any invalidity or unenforceability or disaffirmance of this Lease against or by

 

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Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof; or (x) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not Lessee shall have notice or knowledge of any of the foregoing. This Lease shall be noncancelable by Lessee and, except as expressly provided herein, Lessee, to the extent permitted by law, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Lease, or to any diminution or reduction of Rent payable by Lessee hereunder. If for any reason whatsoever this Lease shall be terminated in whole or in part by operation of law or otherwise, except as expressly provided herein, Lessee shall nonetheless pay to Lessor (or, in the case of Supplemental Rent, to whomever shall be entitled thereto as expressly provided herein or in any other Operative Document) an amount equal to each Basic Rent payment at the time and in the manner that such payment would have become due and payable under the terms of this Lease if it had not been terminated in whole or in part. Nothing in this Lease shall be construed as a guaranty by Lessee of any Residual Value or Remaining Life of any item of Equipment.

 

5.

REPRESENTATIONS AND WARRANTIES.

(a) Lessee represents and warrants that, as of the date hereof:

(i) Corporate Power . Lessee is a limited liability company duly organized and validly existing in good standing under the laws of the state of its organization and is in good standing and qualified as a foreign corporation in Alabama.

(ii) Execution, Delivery, etc . The execution, delivery and performance of this Lease and the other Operative Documents to which Lessee is a party: (A) have been duly authorized by all necessary limited liability company action on the part of Lessee; (B) do not require the approval of any member, trustee or holder of any obligations of Lessee except such as have been duly obtained; and (C) do not contravene any law, governmental rule, regulation or order now binding on Lessee, or the organizational documents of Lessee, or contravene the provisions of, or constitute a default under, or result in the creation of any lien or encumbrance upon the property of Lessee under, any indenture, mortgage, contract or other agreement to which Lessee is a party or by which it or its property is bound which, either individually or in the aggregate, would materially and adversely affect the financial condition of Lessee or the ability of Lessee to perform its obligations hereunder.

(iii) Binding Obligations . This Lease and the other Operative Documents to which Lessee is a party, when entered into, will constitute legal, valid and binding obligations of Lessee enforceable against Lessee in accordance with the terms thereof, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally.

(iv) Litigation . There are no pending actions or proceedings to which Lessee is a party, and there are no other pending or threatened actions or proceedings of which Lessee has knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would materially and adversely affect the financial

 

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condition of Lessee or the ability of Lessee to perform its obligations hereunder. Further, Lessee is not in default under any obligation for the payment of borrowed money, for the deferred purchase price of property or for the payment of any rent under any lease agreement which, in each case either individually or in the aggregate, would materially and adversely affect the financial condition of Lessee or the ability of Lessee to perform its obligations hereunder.

(v) Address . The location (as such term is used in Section 9-307 of the Uniform Commercial Code) of Lessee is the State of Delaware. The Lessee’s full and correct legal name is Wise Alloys LLC, and its address is set forth below the signature of Lessee on the signature page of this Lease.

(vi) Liens . Immediately prior to the execution and delivery of the applicable Bill of Sale, the Equipment subject to such Bill of Sale shall be free of all liens, claims and encumbrances other than Permitted Liens and except for the financing statements listed on Annex C to the Equipment Schedule, releases for which will be delivered to Lessor at or prior to the closing of the transactions contemplated to occur on such Funding Date, no effective financing statement or other form of lien notice covering all or any part of the Equipment is on file in any recording office except those in favor of Lessor.

(vii) Title to Equipment . Each Bill of Sale executed by the Lessee shall transfer to Lessor good title to the Equipment described on the schedule attached thereto free and clear of any and all encumbrances, liens, charges or defects other than Permitted Liens.

(viii) Filings . Upon execution and delivery of the applicable Bill of Sale, no further action, including the filing or recording of any document, is required to transfer to the Lessor all right, title and interest in and to the Equipment.

(b) Owner Participant represents and warrants that, as of the date hereof:

(i) Power . Owner Participant is duly organized and validly existing in good standing under the laws of the State of Alabama and has full power authority and legal right to enter into and carry out the transactions contemplated by this Lease and the Operative Documents to which it is to be a party.

(ii) Execution, Delivery, etc . The execution, delivery and performance of this Lease and the other Operative Documents to which Owner Participant is a party (A) have been duly authorized by all necessary action on the part of Owner Participant; (B) do not require the approval of any stockholder, trustee or holder of any obligations of Owner Participant except such as have been duly obtained; and (C) do not contravene any law, governmental rule, regulation or order now binding on Owner Participant, or the organizational documents of Owner Participant, or contravene the provisions of, or constitute a default under, or result in the creation of any lien or encumbrance upon the property of Owner Participant under, any indenture, mortgage, contract or other agreement to which Owner Participant is a party or by which it or its property is bound

 

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which, either individually or in the aggregate, would materially and adversely affect the financial condition of Owner Participant or the ability of Owner Participant to perform its obligations hereunder.

(iii) Binding Obligations . This Lease and the other Operative Documents to which Owner Participant is a party when entered into, will constitute legal, valid and binding obligations of Owner Participant enforceable against Owner Participant in accordance with the terms thereof, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally.

(iv) Litigation . There are no pending actions or proceedings to which Owner Participant is a party, and there are no other pending or threatened actions or proceedings of which Owner Participant has knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would materially and adversely affect the financial condition of Owner Participant or the ability of Owner Participant to perform its obligations hereunder. Further, Owner Participant is not in default under any obligation for the payment of borrowed money, for the deferred purchase price of property or for the payment of any rent under any lease agreement which, in each case either individually or in the aggregate, would materially and adversely affect the financial condition of Owner Participant or the ability of Owner Participant to perform its obligations hereunder.

(v) Offering . (A) The interest in the Trust and this Lease being acquired by Owner Participant is being acquired by it for its own account for investment and not with a view to any resale or distribution and (B) Owner Participant agrees that it has not offered, and neither it nor any authorized person acting on its behalf will hereafter offer, any such interests for sale to, or solicit any offers to buy any thereof from, or otherwise approach or negotiate in respect thereof with, any Person or Persons whomever, so as thereby to result in the making and delivery of such interests being in violation of the provisions of Section 5 of the Securities Act of 1933, as amended.

(c) Owner Trustee represents and warrants that, as of the date hereof (provided that the representations in clause (vii) are made solely in its trust capacity):

(i) Due Organization, etc. It is a Delaware banking corporation duly organized and validly existing and in good standing under the laws of the State of Delaware and the Trust Company has the power and authority to enter into and perform its obligations under the Trust Agreement and (assuming due authorization, execution and delivery of the Trust Agreement by the Owner Participant) has the corporate and trust power and authority to enter into and perform its obligations under each of the other Operative Documents to which it is or is to be a party and each other agreement, instrument and document to be executed and delivered by it in connection with or as contemplated by each such Operative Document to which it is or is to be a party.

 

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(ii) Authorization; No Conflict . The execution, delivery and performance of each Operative Document to which it is or is to be a party, either in its individual capacity or (assuming due authorization, execution and delivery of the Trust Agreement by the Owner Participant) as Owner Trustee, as the case may be, has been duly authorized by all necessary action on its part and neither the execution and delivery thereof, nor the consummation of the transactions contemplated thereby, nor compliance by the Trust Company with any of the terms and provisions thereof (A) does or will require any approval or consent of any trustee or holders of any of its indebtedness or obligations, (B) does or will contravene any current United States or Delaware law, governmental rule or regulation relating to the Trust Company’s banking or trust powers or any United States or Delaware Applicable Laws relating to its banking or trust powers, (C) does or will contravene or result in any breach of or constitute any default under, or result in the creation of any Lien upon any of the Trust Company’s property under, its charter or by-laws, or any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement or other agreement or instrument to which it is a party or by which it or its properties may be bound or affected or (D) does or will require any action by any Governmental Authority of the State of Delaware.

(iii) Enforceability, etc. The Trust Agreement and, assuming the Trust Agreement is the legal, valid and binding obligation of the Owner Participant, each other Operative Document to which the Trust Company is or will be a party have been, or prior to execution by the Owner Trustee will be, duly executed and delivered by the Trust Company and the Trust Agreement and each such other Operative Document to which the Trust Company is a party in its individual capacity and as Owner Trustee constitutes, or upon execution and delivery of will constitute, its legal, valid and binding obligation enforceable against it in accordance with the terms thereof.

(iv) Litigation . There are no actions or proceedings pending or, to Trust Company’s knowledge, threatened to which Trust Company is or will be a party, either in its individual capacity or as Owner Trustee, before any Governmental Authority that, if adversely determined, would materially and adversely affect its ability, in its individual capacity or as Owner Trustee to perform its obligations under the Operative Documents to which it is a party, would have a material adverse effect on the financial condition of the Trust Company or would question the validity or enforceability of any of the Operative Documents to which Trust Company is or is to become a party.

(v) Lessor Liens . There are no Lessor Liens on or with respect to the Equipment attributable to Trust Company and there will not be any Lessor’s Liens attributable to the Trust Company on or with respect to the Equipment on any Funding Date.

(vi) Assignment . Neither Trust Company nor Owner Trustee has assigned or transferred any of its right, title or interest in or under this Lease or its interest in any Equipment or Equipment Schedule.

 

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(vii) Enforceability . Assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant and of the other Operative Documents by each of the parties thereto (other than the Trust Company), the Operative Documents to which the Owner Trustee is a party not in its individual capacity but solely as Owner Trustee are legal, valid and binding obligations of the Owner Trustee, enforceable against the Owner Trustee in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors generally and by general equitable principles.

 

6.

COVENANTS.

(a) Lessee covenants and agrees as follows:

(i) Officer’s Certificate . Lessee will furnish Lessor and Owner Participant, promptly upon any Responsible Officer of Lessee obtaining knowledge of any condition or event which constitutes a Default or a Potential Default hereunder, prompt written notice specifying such condition and what action Lessee intends to take with respect thereto.

(ii) Further Assurances . Lessee will promptly execute and deliver to Lessor or Owner Participant such further documents, instruments and assurances and take such further action as Lessor from time to time may reasonably request in order to carry out the intent and purpose of this Lease and to establish and protect the rights and remedies created or intended to be created in favor of Lessor or Owner Participant hereunder.

(iii) Fixtures . Without limiting the provisions of Section 10 hereof, Lessee agrees that if the manner in which any item of Equipment is attached to or incorporated in any other item of equipment or to or in any real property gives rise to the assertion of any Lien on such item of Equipment by reason of such attachment or the assertion of a claim that such item of Equipment has become a fixture, Lessee will purchase any such item of Equipment which Lessor notifies Lessee in writing is subject to the assertion of any such Lien within ninety (90) days of such notice for the Stipulated Loss Value thereof in accordance with Section 19 hereof unless it has removed or otherwise resolved any such asserted Lien to the reasonable satisfaction of Lessor prior to the required purchase date.

(iv) Merger . Lessee shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless Lessee is the surviving corporation, or the corporation formed by such consolidation or merger, is an Affiliate of the Guarantor and the Guaranty remains in full force and effect, or shall have a net worth at least equal to that of Guarantor immediately prior thereto and is by operation of law or contract liable for the performance of all the disappearing corporation’s obligations under this Lease and the other Operative Documents or the Person which acquired by conveyance, transfer or lease substantially all of such assets as an entirety shall execute and deliver to Lessor and Owner Participant an agreement reasonably satisfactory in form and substance to Lessor and Owner Participant containing an effective assumption by such Person of the due and punctual

 

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performance and observance of each covenant and condition of this Lease and the other Operative Documents to be performed or observed by Lessee. However, nothing set forth in this Lease shall restrict or prohibit any such merger, conveyance, transfer or lease from a Consolidated Subsidiary of Guarantor into Lessee or from Lessee into one of Guarantor’s Consolidated Subsidiaries.

Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all the assets of Lessee as an entirety in accordance with this Section 6(a)(iv), the successor corporation formed by such consolidation or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of Lessee under this Lease and the other Operative Documents with the same effect as if such successor corporation or such Person, as the case may be, had been named as Lessee herein. Nothing contained herein shall permit any lease, sublease or other arrangement for the use, operation or possession of the Equipment except in compliance with the applicable provisions of this Lease.

(v) Use of Proceeds . Lessee shall use the proceeds of the sale of the Equipment on (A) the first Funding Date to fund inventory (metal supply) for current and near term business opportunities; and (B) the Final Funding Date to provide incremental vendor support and to establish letters of credit to retain and attract additional credit support.

(b) Owner Trustee (both in its individual capacity and in its trust capacity) covenants and agrees as follows:

(i) Lessor’s Liens . Owner Trustee (both in its individual capacity and in its trust capacity) agrees that Owner Trustee (both in its individual capacity and in its trust capacity) will, at its own cost and expense, take such action as may be necessary to duly discharge and satisfy in full, promptly after the same first becomes known to Owner Trustee, any Lessor’s Lien on or with respect to the Equipment attributable to Owner Trustee in its individual or trust capacity; provided, however, that unless and until Owner Trustee is required by the terms of this Lease to transfer title to any item of Equipment, Owner Trustee shall not be required to so discharge or satisfy any such Lessor’s Lien while it is contesting such Lessor’s Lien in good faith by appropriate proceedings diligently prosecuted so long as there is no material risk of the sale, forfeiture or loss of such Equipment, no risk of criminal liability or material civil liability on Lessee and, in the reasonable opinion of Lessee, such contest does not interfere with Lessee’s right of quiet enjoyment under Section 22 hereof.

(ii) Lessor’s Lien Indemnity . Owner Trustee (both in its individual capacity and in its trust capacity) agrees to indemnify and hold harmless Lessee from and against any loss, cost, expense, claim or damage which may be suffered by Lessee or any Affiliate of Lessee as the result of the failure of Owner Trustee to discharge and satisfy any Lessor’s Liens as described in this Section 6(b).

(c) Owner Participant covenants and agrees as follows:

(i) Lessor’s Liens . Owner Participant agrees that Owner Participant will, at its own cost and expense, take such action as may be necessary to duly discharge and satisfy in full, promptly after the same first becomes known to Owner Participant, any Lessor’s Lien on or with respect to the Equipment attributable to the Owner Participant; provided, however, Owner Participant shall not be required to so discharge or satisfy any such Lessor’s Lien while it is contesting such Lessor’s Lien in good faith by appropriate proceedings diligently prosecuted so long as there is no material risk of the sale, forfeiture or loss of such Equipment, no risk of criminal liability or material civil liability on Lessee and, in the reasonable opinion of Lessee, such contest does not interfere with Lessee’s right of quiet enjoyment under Section 22 hereof.

 

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(ii) Lessor’s Lien Indemnity . Owner Participant agrees to indemnify and hold harmless Lessee from and against any loss, cost, expense, claim or damage which may be suffered by Lessee or any Affiliate of Lessee as the result of the failure of Owner Participant to discharge and satisfy any Lessor’s Liens as described in this Section 6(c).

(d) Trust Agreement . Without prejudice to any right under the Trust Agreement of the Owner Trustee to resign, or the Owner Participant’s right under the Trust Agreement to remove the institution acting as Owner Trustee, each of the Owner Participant and the Owner Trustee hereby (i) agrees with the Lessee not to terminate or revoke the trust created by the Trust Agreement except as permitted by Section 11.1 of the Trust Agreement, (ii) agrees with the Lessee not to amend, supplement, terminate or revoke or otherwise modify any provision of the Trust Agreement in such a manner as to adversely affect the rights of Lessee without the prior written consent of Lessee and (iii) agrees to comply with all of the terms of the Trust Agreement applicable to it the nonperformance of which would adversely affect Lessee.

(e) Successor Owner Trustee . The Owner Trustee or any successor may resign or be removed by the Owner Participant as Owner Trustee, a successor Owner Trustee may be appointed, and a corporation may become the Owner Trustee under the Trust Agreement, only in accordance with the provisions of Section 9.1 of the Trust Agreement. The Owner Participant further agrees not to remove the institution acting as Owner Trustee, and not to replace the institution acting as Owner Trustee in the event that such institution resigns as Owner Trustee, unless the Owner Participant shall have received the consent of the Lessee, which will not be unreasonably withheld or delayed; provided that no consent of the Lessee shall be required if a Default shall have occurred and be continuing. So long as no Default shall have occurred and be continuing, the Owner Trustee and the Owner Participant agree that no co-trustee or separate trustee shall be appointed pursuant to Section 9.2 of the Trust Agreement without the Lessee’s prior written consent, such consent not to be unreasonably withheld or delayed.

(f) Indebtedness; Other Business . The Owner Trustee shall not contract for, create, incur or assume any indebtedness, or enter into any business or other activity, other than pursuant to or under the Operative Documents.

 

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(g) No Violation . The Owner Participant will not instruct the Owner Trustee to take any action in violation of the terms of any Operative Document or any other related documents.

(h) No Voluntary Bankruptcy . The Owner Trustee shall not (i) commence any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, arrangement, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seek appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial benefit of its creditors; and the Owner Trustee shall not take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in this paragraph.

(i) Change of Chief Place of Business . The Owner Trustee shall give prompt notice to the Lessee if the Owner Trustee’s chief place of business or the office where the records concerning the accounts or contract rights relating to the Equipment are kept, shall cease to be located in Wilmington, Delaware or if it shall change its name, identity or corporate structure.

 

7.

USE AND MAINTENANCE.

(a) Use . Lessee may use the Equipment in the conduct of its business, in a manner so as to maintain the Equipment in good working order and condition, ordinary wear and tear excepted, consistent with the requirements of all applicable insurance policies, and in compliance with all Applicable Laws the non-compliance with which (x) would have a material adverse effect on the financial condition of Guarantor and its Consolidated Subsidiaries taken as a whole or the ability of Lessee to perform its obligations hereunder or (y) in the reasonable opinion of Lessor would involve a material risk of any of the items enumerated in clauses (i) and (ii) of the following sentence. Notwithstanding the foregoing, Lessee shall not be deemed to be in default hereof as long as Lessee is contesting the application of any Applicable Law if such test, challenge or appeal for review shall be prosecuted by Lessee in good faith and such test, challenge or appeal shall not involve a material risk of:

(i) foreclosure, sale, forfeiture or loss of the Equipment; or

(ii) criminal liability on Lessor or Owner Participant or a material claim against Lessor or Owner Participant.

(b) Location of Equipment . Lessee may not move or relocate the Equipment from the location identified on the Equipment Schedule for such item of Equipment.

(c) Marking . If requested by Lessor, Lessee will cause each principal item of the Equipment to be continually marked, in a plain and distinct manner, with an inventory control tag furnished by Lessor.

 

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(d) Maintenance . At its own expense, Lessee will cause the Equipment to be kept and maintained in as good operating condition as when delivered to Lessee hereunder, ordinary wear and tear excepted, and in compliance with all Applicable Laws the non-compliance with which would violate the restriction of subclauses (x) and (y) of Section 7(a) above, and will provide all maintenance and service and make all repairs or replacements reasonably necessary for such purpose.

(e) Parts . If any parts of the Equipment become worn out, lost, destroyed, damaged beyond repair or otherwise permanently rendered unfit for use, Lessee, at its own expense, will replace such parts with replacement parts which are free and clear of all Liens (other than Permitted Liens) and have a value, utility and useful life at least equal to the parts replaced. All parts which are added to the Equipment which are required by Applicable Law, in replacement of or substitution for, and not in addition to any part constituting part of the Equipment on the Funding Date or which cannot be detached from the Equipment without materially adversely affecting the value, utility and useful life which the Equipment would have had without the addition thereof, shall immediately become the property of Lessor, and shall be deemed incorporated in the Equipment and subject to the terms of this Lease as if originally leased hereunder. Title to all other parts added to the Equipment shall be and remain the property of Lessee and shall not be deemed to constitute part of the Equipment or be subject to this Lease.

(f) Inspection . Upon reasonable advance notice, Owner Participant, Lessor and its agents shall have the right to inspect the Equipment and all maintenance records with respect thereto at any reasonable time during normal business hours.

(g) Alterations . (i)  Required Alterations . Lessee, at its sole cost and expense, shall make such alterations, modifications and additions (collectively “Alterations”) to the Equipment as may be required from time to time to meet the requirements of Applicable Laws.

(ii) Optional Alterations. Lessee may, at its own expense, from time to time make such Alterations to the Equipment as Lessee may deem desirable in the proper conduct of its business; provided, however, that any such Alteration made pursuant to this clause (ii) shall not materially adversely affect the value, utility and useful life of such Equipment assuming that immediately prior to such Alteration such Equipment was in the condition required by this Lease.

(iii) Title to Alterations . Title to all Alterations required by clause (i) above or made pursuant to clause (ii) above which cannot be detached from the Equipment without materially adversely affecting the value, utility and useful life which the Equipment would have without such Alteration, shall immediately vest with Lessor, and shall be deemed incorporated in the Equipment and subject to the terms of this Lease as if originally leased hereunder. Title to all other Alterations shall be and remain the property of Lessee and shall not be deemed to constitute part of the Equipment.

 

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8.

DISCLAIMER OF WARRANTIES.

OWNER PARTICIPANT AND LESSOR, NEITHER BEING A SELLER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE IN EFFECT IN ANY APPLICABLE JURISDICTION), NOR A SELLER’S AGENT, EXPRESSLY DISCLAIM AND MAKE TO LESSEE NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO: THE FITNESS FOR USE, DESIGN OR CONDITION OF THE EQUIPMENT; THE QUALITY OR CAPACITY OF THE EQUIPMENT; THE WORKMANSHIP IN THE EQUIPMENT; THAT THE EQUIPMENT WILL SATISFY THE REQUIREMENTS OF ANY LAW, RULE, SPECIFICATION OR CONTRACT PERTAINING THERETO; AND ANY GUARANTY OR WARRANTY AGAINST PATENT INFRINGEMENT OR LATENT DEFECTS, it being agreed that all such risks, as between Lessor, Owner Participant and Lessee, are to be borne by Lessee. Neither Owner Participant nor Lessor is responsible for any direct, indirect, incidental or consequential damage to or losses resulting from the installation, operation or use of the Equipment or any products manufactured thereby. All assignable warranties made by the Manufacturer or other supplier to Lessee are hereby assigned by Lessee to Lessor and in turn are assigned by Lessor to Lessee for and during the Term of this Lease. Lessee agrees to resolve all such claims directly with the Manufacturer or other supplier. Owner Participant and Lessor shall cooperate fully with Lessee with respect to the resolution of such claims, in good faith and by appropriate proceedings at Lessee’s expense. Any such claim shall not affect in any manner the unconditional obligation of Lessee to make Rent payments hereunder.

 

9.

GENERAL TAX INDEMNITY.

(a) General Taxes . Subject to the provisions of this Section 9, the Lessee agrees to indemnify the Lessor on an After-Tax Basis against, and hold the Trust Company, Lessor and Owner Participant harmless from, the actual amount of any and all Taxes imposed by the United States of America or by any state or local taxing authority within the United States or any foreign or international taxing authority against the Trust Company, Lessor or Owner Participant or the Lessee or withheld from any payment, or imposed against the Equipment after its delivery under the Lease, in connection with or relating to or on or with respect to (i) the Lease or any of the other Operative Documents or any amendment, supplement, waiver or consent thereto or the execution, delivery or performance of any thereof; (ii) the Equipment or any interest therein; (iii) the construction, purchase, acceptance, possession, rejection, ownership, delivery, nondelivery, return, refinancing, use, nonuse, operation, leasing, subleasing, hire, condition, maintenance, modification, repair, sale, abandonment, redelivery, location, transfer of title or other application or disposition of the Equipment or any interest therein; (iv) the payment by the Lessee of Rent or other amounts, receipts, income or earnings arising from the Equipment with respect to the Lease or any other Operative Document; or (v) otherwise with respect to or in connection with the transactions contemplated by the Operative Documents.

(b) Exclusions . Notwithstanding anything to the contrary contained herein, Lessee will have no obligation under this Section 9 with respect to any one or more of the following:

(i) Taxes imposed against or payable by the Trust Company, Lessor or Owner Participant (other than, in each case, Taxes that are, or are in the nature of, sales, use, rental, transfer or property taxes) that are, or are in the nature of, franchise taxes, value added taxes that are in the nature of or have the same effect as a net income tax, Taxes on doing business or Taxes that are based upon, measured by or imposed with respect to capital, net worth, net receipts, net income (including without limitation minimum taxes, tax preference items, alternative minimum taxes, capital gains taxes, personal holding company taxes and excess profits taxes), gross income or gross receipts;

 

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(ii) Taxes imposed against or payable by the Trust Company, Lessor or Owner Participant to any jurisdiction to the extent such Taxes are not increased by the Lessor’s, Owner Participant’s or Trust Company’s engaging in such jurisdiction in the transactions contemplated by the Operative Documents (assuming for this purpose that the Lessor’s, Owner Participant’s or Trust Company’s engaging in activities in such jurisdiction other than such transactions is sufficient to establish a nexus for the imposition of such Taxes);

(iii) Taxes imposed on or payable by the Trust Company, Lessor or Owner Participant attributable to any voluntary sale, assignment, transfer or other disposition (including a transfer under section 338 of the Code, if applicable) of any interest in the Equipment or the Operative Documents or any interests or obligations arising under the Operative Documents except Taxes resulting from a transfer in connection with the exercise of remedies set forth in Section 15(c) hereof by reason of a default by the Lessee under Section 15(a) hereof;

(iv) any Tax imposed against or payable by the Trust Company, Lessor, Owner Participant or their respective successors and assigns (each an “Indemnitee”), to the extent that the amount of such Tax exceeds the amount of such Tax that would have been imposed against or payable by such Indemnitee if such Indemnitee were not a direct or indirect successor, transferee or assign of the original Trust Company, Lessor or Owner Participant, as the case may be;

(v) Taxes attributable to any period after the expiration or earlier termination of the Lease; provided, that there shall not be excluded under this subparagraph (v) any Taxes to the extent such Taxes relate to events or circumstances occurring or matters arising prior to such expiration, termination or return;

(vi) any Taxes imposed against or payable by the Lessor resulting from, or that would not have been imposed but for, the gross negligence or willful misconduct of such Indemnitee or any Affiliate thereof;

(vii) Taxes imposed on or with respect to or payable by such Indemnitee that would not have been imposed but for an amendment, supplement, modification, consent or waiver to any Operative Document not initiated, requested or consented to by the Lessee;

 

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(viii) Taxes imposed on or with respect to or payable by such Indemnitee or any Affiliate thereof because such Indemnitee or any Affiliate thereof is not a United States person within the meaning of section 7701(a)(30) of the Code;

(ix) Taxes imposed on or payable by such Indemnitee to the extent such Taxes would not have been imposed but for a breach by such Indemnitee or any Affiliate thereof of any representations, warranties or covenants set forth in the Operative Documents; and

(x) any interest, penalties or additions to Tax imposed on such Indemnitee that would not have been imposed or incurred but for the failure of such Indemnitee or any of its Affiliates to file any return or other document timely and in the form prescribed by law.

(c) Reimbursement . If the Lessee (or a Person making payment on behalf of the Lessee) shall have paid any amount pursuant to the Lease or any other Operative Document with respect to or on account of taxes not subject to indemnification pursuant to this Section 9, such Indemnitee shall pay to the Lessee, within 30 days of receipt of written notice from the Lessee of such payment, the amount so paid by Lessee (or such Person making payment on behalf of the Lessee).

(d) Calculation of General Tax Indemnity Payments; Tax Savings . Any payment or indemnity to or for the benefit of an Indemnitee with respect to any Tax which is subject to indemnification under Section 9(a) hereof shall (A) reflect the combined net savings realized by such Indemnitee and any Affiliate(s) thereof resulting from the current deduction of such indemnified Tax and (B) include, after taking into account the savings described in clause (A), the amount necessary to hold such Indemnitee harmless on an After-Tax Basis; provided, however , that each Indemnitee and each Affiliate thereof shall provide such certifications, information and documentation within their control as shall be reasonably requested by the Lessee to minimize any payment pursuant to this Section 9. If, by reason of any Tax payment made to or for the account of an Indemnitee by or on behalf of the Lessee pursuant to this Section 9 (or the circumstances or event giving rise thereto,) such Indemnitee or any Affiliate thereof realizes a net Tax benefit, refund, saving, deduction or credit not previously taken into account in computing such payment, such Indemnitee shall promptly pay to the Lessee an amount equal to the sum of (I) the net reduction in Taxes, if any, realized by such Indemnitee and its Affiliates which is attributable to such net Tax benefit, refund, saving, deduction or credit and (II) the net reduction in any Taxes realized by such Indemnitee and its Affiliates as the result of any payment made by such Indemnitee. For purposes of the preceding sentence and to the extent permitted by Applicable Laws, such Indemnitee shall be deemed to realize, first, all items of deduction, credit or carryover other than those referred to in the next clause, and, then, pro rata all such items attributable to any leasing transaction entered into by such Indemnitee for which such Indemnitee is entitled to indemnification. Such Indemnitee agrees in good faith to pursue diligently any refunds, deductions, Tax benefits or other savings that would reduce the Lessee’s indemnity obligation or would be required to be paid by such Indemnitee to the Lessee as soon as they are available.

 

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10.

LIENS.

The parties intend and agree that for all purposes, Lessee will treat the Equipment as personal property and will not take any actions or positions inconsistent therewith, notwithstanding the manner in which it may be affixed to any real property. Lessee further agrees to maintain the Equipment free from all Liens of Persons claiming by, through or under Lessee other than:

(a) the respective rights of Owner Participant, Lessor and Lessee provided herein and in the other Operative Documents;

(b) Lessor’s Liens;

(c) Liens for fees, taxes, levies, duties or other governmental charges of any kind, liens of mechanics, materialmen, laborers, employees or suppliers and similar liens arising by operation of law in each case incurred by Lessee in the ordinary course of business for sums that are not yet delinquent or are being contested in good faith by negotiations or by appropriate proceedings (provided, however, that such proceedings do not involve any material risk of the sale, forfeiture or loss of the Equipment or any interest therein); and

(d) Liens arising out of any judgments or awards against Lessee which have been adequately bonded to protect Lessor’s interests or with respect to which a stay of execution has been obtained pending an appeal or a proceeding for review.

 

11.

INSURANCE.

(a) Coverages . Lessee shall obtain and maintain during the Term, at its own expense, (i) “all risk” insurance against loss or damage to the Equipment and (ii) commercial general liability insurance (including contractual liability, products liability and completed operations coverages) with insurers of generally recognized standing, in amounts and with coverages consistent with that as maintained by Lessee on similar equipment owned by Lessee.

(b) Coverage Amounts . The amount of the “all risk” insurance required by clause (a)(i) above shall be at least equal to the Stipulated Loss Value of the Equipment. The amount of commercial general liability insurance required by clause (a)(ii) above shall not be less than the amount of coverage certified by Lessee to Lessor in writing on the Funding Date.

(c) Deductibles . The deductible with respect to “all risk” insurance required by clause (a)(i) above shall not exceed $1,000,000, and the deductible with respect to commercial general liability insurance required by clause (a)(ii) above shall not exceed $1,000,000.

(d) Endorsements . Each “all risk” policy shall: (i) name Lessor as sole loss payee with respect to the Equipment, (ii) provide for each insurer’s waiver of its right of subrogation against Lessor and (iii) provide that such insurance (A) shall not be invalidated by any action of, or breach of warranty by, Lessee of a provision of any of its insurance policies and

 

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(B) shall waive set-off, counterclaim or offset against Lessor. Each liability policy shall (w) name Owner Participant, the Trust Company and Lessor as additional insureds and (x) provide that such insurance shall have cross-liability and severability of interest endorsements (which shall not increase the aggregate policy limits of Lessee’s insurance). All insurance policies shall (y) provide that Lessee’s insurance shall be primary without a right of contribution of Lessor’s, the Trust Company’s or Owner Participant’s insurance, if any, or any obligation on the part of Lessor, the Trust Company or Owner Participant to pay premiums of Lessee, and (z) shall contain a clause requiring the insurer to give Lessor at least 30 days’ prior written notice of its cancellation (other than cancellation for non-payment for which 10 days’ notice shall be sufficient). Lessee shall, upon each policy renewal, furnish to Lessor, the Trust Company and Owner Participant certificates of insurance evidencing coverages in compliance with the requirements of this Section 11.

(e) Payment of Proceeds . All insurance proceeds received by or payable to Lessor on account of any damage to or destruction of the Equipment or any part thereof (less the actual costs, fees and expenses incurred in the collection thereof), other than any damage or destruction constituting a Total Loss which shall be subject to Section 12(c) hereof, shall be paid over to Lessee or as it may direct from time to time as repair and restoration progresses to pay (or reimburse Lessee for) the cost of repair and restoration of the Equipment, but only upon the written request of Lessee accompanied by appropriate evidence reasonably satisfactory to Lessor that the sum requested has been paid or will be applied to the payment of a sum then due and payable; provided, however, that if a Default shall have occurred and be continuing any such amount shall not be paid over to Lessee, but shall be applied as provided in Section 24 hereof. Upon receipt by Lessor of evidence reasonably satisfactory to it that repair and restoration has been completed and the cost thereof paid in full, the balance, if any, of such proceeds shall be promptly paid over or assigned to Lessee or as it may direct unless a Default shall have occurred and be continuing, in which case such balance shall be applied as provided in Section 24 hereof.

 

12.

LOSS AND DAMAGE.

(a) Loss, Damage or Destruction Not Constituting a Total Loss . In the event of loss or damage to the Equipment which does not constitute a Total Loss, Lessee shall, at its sole cost and expense, promptly repair and restore such item of the Equipment to the condition required by this Lease. Provided that Lessee is not then in Default, upon receipt of evidence reasonably satisfactory to Lessor of completion of such repairs, Lessor will apply any insurance proceeds received by Lessor on account of such loss to the cost of repairs or shall reimburse Lessee for any amounts so expended.

(b) Total Loss . Upon the occurrence of a Total Loss, during the Term of this Lease, Lessee shall give prompt notice thereof to Lessor and by written notice to Lessor given within 60 days after the occurrence of such Total Loss, Lessee may elect one of the following two (2) options (failure by Lessee to make such election within 60 days being deemed to be an election of alternative (i)):

(i) pay to Lessor on the next Rent Payment Date for such Equipment occurring at least 90 days after the date of the Total Loss the Basic Rent then due plus the

 

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Stipulated Loss Value of the item or items of the Equipment with respect to which the Total Loss has occurred and any other sums then due hereunder with respect to that Equipment (less any insurance proceeds or condemnation award actually paid to Lessor). Upon making such payment, this Lease and the obligation to make future Rent payments shall terminate solely with respect to the Equipment or items thereof so paid for and (to the extent applicable) Lessee shall become entitled to such Equipment and the right to receive any future insurance premiums or condemnation award in respect thereof as is where is without warranty, express or implied except as to the absence of Lessor’s Liens, and Lessor shall deliver to Lessee a bill of sale transferring and assigning to Lessee without recourse or warranty (except as to the absence of Lessor’s Liens) all of Lessor’s right, title and interest in and to such Equipment; or

(ii) Lessee may at its own cost and expense, including all reasonable and documented costs and expenses of Lessor, replace any item of Equipment which may from time to time suffer a Total Loss or otherwise become worn out, inoperable or technologically obsolete for Lessee’s purposes with a replacement item of equipment. All such replacement Equipment shall be free and clear of all Liens (other than Permitted Liens) and shall be of the same or a more recent date of manufacture and in at least as good operating condition and have a value, utility and remaining useful life at least equal to the Equipment being replaced, assuming such replaced Equipment was in the condition and repair required by the terms of this Lease. Prior to the time of any replacement of an item of Equipment pursuant to this Section 12(b), Lessee will at its sole cost and expense, including all reasonable and documented costs and expenses of Lessor:

(A) furnish Lessor with a Bill of Sale with respect to such replacement Equipment;

(B) cause an Equipment Schedule amendment covering such replacement Equipment to be duly executed and delivered;

(C) furnish Lessor with such evidence of compliance with the insurance provisions of Section 11 hereof with respect to such replacement Equipment as Lessor may request;

(D) furnish Lessor with a certificate of an officer of Lessee certifying that such replacement Equipment has a value, utility and useful life at least equal to that of the Equipment replaced, assuming such replaced Equipment was in the condition required by this Lease; and