Master Equipment Lease - Pentech Financial Services Inc. and Arbinet-thexchange Inc.
PENTECH FINANCIAL SERVICES, INC.
Lease No. 302001
MASTER EQUIPMENT LEASE
This is a Master Equipment Lease between PENTECH FINANCIAL SERVICES, INC., a
California corporation, whose principal office is located at 310 West Hamilton
Avenue, Suite 202, Campbell, California 95008 ("Lessor") and ARBINET-THEXCHANGE,
INC., a Delaware corporation whose principal office address is 75 Broad Street,
New York, NY 10004 ("Lessee"), with effective date of March 1, 2002 ("Effective
Date").
SUMMARY OF TERMS AND CONDITIONS:
A. Commitment Amount. $1,200,000
B. Minimum Supplement Amount. $100,000
C. Equipment. computers, servers, telecommunication equipment and other related
Equipment to be approved by Lessor.
D. Exclusions/Soft Costs. 15% of line; 15% per supplement, for custom use
equipment, software, installation and delivery costs, purchase tax, tooling
equipment, tenant improvements and items generally considered fungible or
expendable. Ten percent (10%) of all furniture costs will be considered soft and
will be allocated to soft costs. Equipment over 3 months old at time of funding
will be subject to depreciation.
E. Term. 36 months.
F. Monthly Lease Rate Factor. 3.228%, indexed to LIBOR
G. LIBOR Floor. 1.84000%
H. Lease Deposit. $12,000
I. Commitment Expiration Date. January 31, 2003
J. Lessee's Costs & Expenses. $5,000
K. Residual Option Charges. So Song as no default exists, Lessee shall have the
option to purchase, renew, or return the Equipment at the expiration of the
Lease as set forth in the applicable Supplement.
1. Purchase. 10.0% of original Equipment cost.
2. Renewal. 12 months at 45% of original rental amount, after which Lessor
agrees to sell Equipment to Lessee for $1.00.
3. Remarket. 8% of original Equipment cost
L. Equity Investment Amount. Lessee grants Lessor the right, but not the
obligation, to purchase up to an aggregate of $1,000,000 of the securities
issued in the Lessee's future private equity financings. Any such purchase shall
be on the same terms and conditions as those offered to the investors in such
financing.
M. No Dividends. No dividends on preferred stock can be paid prior to Lessor
being repaid in full without Pentech's prior written consent.
GENERAL PROVISIONS:
1. LEASE. Lessor agrees to lease to Lessee and Lessee agrees to lease from
Lessor, subject to the terms and conditions of this Master Equipment Lease
("Lease"), the personal property ("Equipment") described in Acceptance
Supplements ("Supplements") executed from time to time by Lessor and Lessee
pursuant to the terms of this Lease. Each Supplement shall be substantially in
the form attached hereto as Exhibit A or in the form prescribed by Lessor and,
upon execution and delivery, shall refer to and incorporate by reference all of
the terms and conditions of this Lease. In the event of a conflict between this
Lease and any Supplement, the language of the Supplement will prevail. The terms
"Agreement", "hereof," "herein," and "thereunder," when used in this Lease shall
mean this Lease, and any and all Supplements to the Lease.
2. SELECTION OF EQUIPMENT. Lessee acknowledges that it has selected the type,
quantity and supplier of the Equipment referred to herein and that it has
requested Lessor to purchase the same under a contract for leasing to Lessee
(the "Supply Contract"). Lessee agrees that the Equipment and each part or unit
thereof is of a design, size, quality and capacity required by Lessee and is
suitable for its purposes. Lessee acknowledges (i) that Lessor has not selected,
manufactured or supplied the Equipment, (ii) that, previously or by this Lease,
Lessee has received or approved of the terms of the Supply Contract, (iii) that
the Lessee may have rights under the Supply Contract; and (iv) that the Lessee
may contact the supplier for a description of any such rights Lessee may have
under the Supply Contract. Lessor hereby assigns to Lessee all rights, which
Lessor has or may acquire against any manufacturer, supplier, or contractor with
respect to any warranty or representation relating to the Equipment leased
hereunder.
3. OWNERSHIP; PERSONAL PROPERTY; LOCATION, IDENTIFICATION; INSPECTION; QUIET
ENJOYMENT. Ownership of the Equipment remains with Lessor and nothing herein
contained shall be construed as conveying to Lessee any right, title or interest
in the Equipment except as a Lessee only. Lessee represents that the Equipment
shall be and at all times remain separately identifiable personal property.
Lessee shall, at its own expense, take such action as may be necessary to
prevent any third party from acquiring any right to or interest in the Equipment
by virtue of the Equipment being deemed to be real property or a part of other
personal property, and shall indemnify Lessor against any loss which it may
sustain by reason of Lessee's failure to do so. The Equipment may not be removed
from the location specified in the Supplement pertaining thereto without
Lessor's prior written consent, which will not be unreasonably withheld. If
requested by Lessor, Lessee shall attach to and maintain on each item of
Equipment a conspicuous plate or marking disclosing Lessor's ownership thereof.
Lessor or its representatives may, after reasonable notice to Lessee, inspect
the Equipment during normal business hours. Lessee shall promptly advise Lessor
of any circumstances that may materially affect any item of Equipment or in any
manner affect Lessor's title thereto. So long as no Event of Default exists,
neither the Lessor nor any party claiming by or through the Lessor shall disturb
the Lessee's quiet and peaceful possession, and unrestricted use, of the
Equipment.
4. EXECUTION OF FURTHER DOCUMENTATION. Lessee will, at its own expense, promptly
execute and deliver to Lessor such further documentation and assurances and take
such further action as Lessor may from time to time require in order to more
effectively carry out the intent and purpose of this Agreement so as to
establish and protect the rights, interests and remedies intended to be created
in favor of Lessor hereunder, including, without limitation, the execution and
filing of UCC financing statements and continuation statements with respect to
the Equipment and Agreement Lessee hereby irrevocably appoints Lessor as
Lessee's attorney-in-fact, with full authority in the place and stead of Lessee
and in the name of Lessee, from time to time in Lessor's discretion, to take any
action and to execute any instrument which Lessor may deem necessary or
advisable to accomplish the purposes of this paragraph. The Lessor may search
all public records and filings of Lessee to locate and identify any conflicting
liens against the Equipment. UCC releases from any intervening parties holding a
security interest in said Equipment shall be required prior to funding any
Supplement. The form, substance and sufficiency of all documents employed in
documenting the Lease and Supplements contemplated hereby must be acceptable to
Lessor and its counsel.
5. DISCLAIMER OF IMPLIED WARRANTIES. THE EQUIPMENT WILL BE LEASED "AS IS" AND
"WHERE IS". (A) THE LESSOR HAS NOT MADE, MAY NOT BE CONSIDERED TO HAVE MADE, AND
SPECIFICALLY DISCLAIMS, OTHER THAN THE WARRANTY OF QUIET ENJOYMENT:
(1) ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE
EQUIPMENT, REGARDING TITLE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY,
FREEDOM FROM CLAIMS OF INFRINGEMENT OR THE LIKE,
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FITNESS FOR USE FOR A PARTICULAR PURPOSE, QUALITY OF MATERIALS OR WORKMANSHIP,
ABSENCE OF DISCOVERABLE OR NONDSCOVERABLE DEFECTS, OR THAT THE EQUIPMENT IS IN
COMPLIANCE WITH ANY APPLICABLE GOVERNMENT REQUIREMENTS OR REGULATIONS; AND
(2) ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE
EQUIPMENT (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A COURSE OF PERFORMANCE,
COURSE OF DEALING, OR USAGE OF TRADE); AND
(3) ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY REGARDING THE
CHARACTERIZATION OF THIS LEASE FOR TAX, ACCOUNTING, OR OTHER PURPOSES.
THE LESSEE WAIVES, RELEASES, RENOUNCES, AND DISCLAIMS EXPECTATION OF OR RELIANCE
ON ANY SUCH WARRANTY OR WARRANTIES.
(B) THE LESSOR WILL NOT HAVE ANY RESPONSIBILITY OR LIABILITY TO THE LESSEE OR
ANY OTHER PERSON, WHETHER IN CONTRACT OR TORT, ARISING OUT OF ORDINARY
NEGLIGENCE OR STRICT LIABILITY OF THE LESSOR OR OTHERWISE (OTHER THAN BY REASON
OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), FOR:
(1) ANY LIABILITY, LOSS, OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR
INDIRECTLY BY THE EQUIPMENT; BY ANY INADEQUACY, DEFICIENCY OR DEFECT OF THE
EQUIPMENT; OR BY ANY OTHER CIRCUMSTANCES IN CONNECTION WITH THIS LEASE;
(2) THE USE, OPERATION, OR PERFORMANCE OF THE EQUIPMENT OR ANY RISKS RELATING TO
IT;
(3) ANY CONSEQUENTIAL DAMAGES, INCLUDING THOSE FOR INTERRUPTION OF SERVICE, LOSS
OF BUSINESS, OR ANTICIPATED PROFITS; OR
(4) THE DELIVERY, OPERATION, MAINTENANCE, REPAIR, IMPROVEMENT, OR REPLACEMENT OF
THE EQUIPMENT.
6. TERM; ACCEPTANCE; RENT. The term of lease of each item of Equipment shall
commence on the Commencement Date specified in the Supplement pertaining to such
Equipment and, unless earlier terminated pursuant to the provisions hereof,
shall continue for the term specified in such Supplement. Lessee's execution and
delivery of each Supplement shall constitute Lessee's irrevocable acceptance of
the Equipment covered thereby for all purposes of this Agreement. Lessee shall
pay to Lessor, at the addresses specified above or at such other address as may
be provided by Lessor from time to time, rent as specified in each Supplement.
Each date on which an installment of rent is payable is designated herein as
"Rent Payment Date". As to each Supplement, the first Rent Payment Date shall be
the Rent Payment Date set forth therein, with the succeeding Rent Payment Date
on the corresponding day of each month thereafter. In addition, if applicable,
Lessee shall pay interim rent for the period between the actual commencement of
the rent under each Supplement and the date designated as the Rent Payment Date,
based on a 30- day month and the number of days between the actual commencement
date and the first rent payment date, at the daily equivalent of the Monthly
Lease Rate Factor. Should any payment not be made by Lessee on or before the
applicable Rent Payment Date, Lessor shall be entitled to a late payment charge
in addition to the actual rent due of 5% of the late rent and any other amount
due but unpaid under this Agreement.
7. LESSEE'S OBLIGATIONS IRREVOCABLE. The Lessee's obligation to pay all rent
will be absolute and unconditional and will not be affected or reduced by any
circumstance, including:
(1) Any setoff, counterclaim, recoupment, defense, or other right that the
Lessee may have for any reason against the Lessor, the manufacturer, any seller
of the Equipment, any person providing services with respect to the Equipment,
or any other party;
(2) Any defect in the title, condition, design, operation, or fitness for use of
the Equipment; any damage to, or loss or destruction of, the Equipment; or any
interruption or cessation in its use or possession by the Lessee for any reason,
whether arising out of or related to an act or omission of the Lessor or any
other person;
(3) Any liens with respect to the Equipment;
(4) The invalidity or unenforceability of this Agreement or any absence of
right, power or authority of the Lessor or Lessee to enter into this Lease;
(5) Any insolvency, bankruptcy, reorganization, or similar proceedings by or
against the Lessor or Lessee; or
Lessee acknowledges that Lessee will, upon demand by Lessor, pay directly to the
appropriate party the amount of any invoice that may be furnished to Lessor
subsequent to inclusion of the applicable item of Equipment on a Supplement.
Lessee acknowledges that Lessor will have no further obligations hereunder as to
any item of Equipment not included on any Supplement under the Lease at the
expiration of the Lease term set forth in the Supplement.
THE LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, ALL RIGHTS THAT IT MAY
NOW HAVE OR LATER ACQUIRE, BY ORDER OR OTHERWISE, TO TERMINATE THIS AGREEMENT OR
ANY OBLIGATION IMPOSED ON THE LESSEE IN RELATION TO THIS AGREEMENT.
8. RESTRICTIONS ON TRANSFER. THE LESSEE MAY NOT (i) SUBLET OR TRANSFER
POSSESSION OF THE EQUIPMENT OTHER THAN IN THE ORDINARY COURSE OF BUSINESS, OR
(ii) MERGE INTO, CONSOLIDATE WITH OR TRANSFER ITS ASSETS SUBSTANTIALLY AS AN
ENTIRETY TO ANOTHER PARTY WITHOUT THE LESSOR'S PRIOR WRITTEN CONSENT GIVEN IN
THE LESSOR'S SOLE AND ABSOLUTE DISCRETION. THE LESSEE MAY NOT ASSIGN, PLEDGE, OR
OTHERWISE ENCUMBER THIS LEASE OR THE EQUIPMENT.
With respect to any authorized sublease or transfer of possession of the
Equipment, the rights of the sublessee or transferee will be subject and
subordinate to all the terms of this Agreement, including the Lessor's right of
repossession on the occurrence of an Event of Default. The Lessee will remain
primarily liable for the performance of all the terms of this Agreement to the
same extent as if the sublease or transfer of possession had not occurred.
The Lessor will have the right, at its sole expense, to assign, sell, or
encumber any part of its interest in the Equipment or in this Agreement and any
proceeds of the disposition of that interest, subject to the Lessee's rights
under this Lease. To effect or facilitate such assignment, sale or encumbrance,
the Lessee agrees to provide all agreements, consents, conveyances or documents
that may be reasonably requested by the Lessor, including an unrestricted
release of the Lessor from its obligations under this Agreement. That release
will not release the Lessor from any liability that arose before the assignment
or sale.
The Lessee acknowledges that an assignment, sale, or encumbrance of the Lessor's
interest would not materially change the Lessee's duties under the Agreement or
materially increase its burdens or risks.
Without prejudice to any rights that the Lessee may have against the Lessor, the
Lessee agrees that it will not assert against an assignee any claim or defense
that it may have against the Lessor.
9. MAINTENANCE COVENANT. The Lessee will:
(1) Furnish all labor and parts required for maintaining, repairing, and
replacing component parts of the Equipment to keep it in good operating
condition and appearance;
(2) Use, operate, maintain, and store the Equipment in a careful and proper
manner;
(3) Protect the Equipment from deterioration, other than that resulting from
ordinary wear and tear;
(4) Comply with the manufacturer's operating procedures and warranty
restrictions and all laws, ordinances, and regulations applicable to the
Equipment or its use and in compliance with the insurance policies required to
be maintained thereunder;
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(5) Put the Equipment only to the use contemplated by the manufacturer; and
(6) Maintain accurate and complete records of all repairs and maintenance of the
Equipment and allow the Lessor to inspect those records at any time upon
reasonable notice and during normal business hours.
(7) Comply with the maintenance requirements of any maintenance schedule
recommended by the manufacturer or attached as a part of any Supplement.
The Lessee will not make any alterations, additions, or improvements to the
Equipment without the Lessor's prior written consent, which will not be
unreasonably withheld. All repairs, replacement parts, additions, alterations,
and improvements made to the Equipment by the Lessee will be considered to be
the Lessor's property and subject to the terms of this Agreement.
10. RISK OF LOSS COVENANT. The Lessee will bear the entire risk of destruction,
loss, theft, requisition of title, or use, confiscation, taking, or damage
(collectively, Casualty Loss) of the Equipment from any cause during the period
commencing when the Equipment is placed in transit to the Lessee and ending when
the Equipment is returned to the Lessor or its designee following termination as
provided herein. If during that period the Equipment suffers any Casualty Loss,
the Lessee will notify the Lessor in writing within five days following the
Casualty Loss. On demand by the Lessor, the Lessee will:
(1) If Lessor determines that the damage constituting the Casualty Loss is
repairable, repair the Equipment to the condition in which the Equipment is
required to be maintained under this Agreement;
(2) If the damaged Equipment is not repairable, replace the Equipment at the
Lessee's sole expense with like Equipment approved by the Lessor and take all
actions and make all payments that may be required to vest in the Lessor title
to the replacement Equipment, free and clear of all liens, encumbrances, or
security interests other than Permitted Liens (as defined in Section 15); or
(3) Pay to the Lessor the stipulated loss value as set forth in the applicable
Supplement (the "Casualty Value") and all other amounts then due under the
Supplement, upon which payment the Supplement will terminate with respect to the
Equipment paid for and Lessor shall transfer ownership of such Equipment to
Lessee.
11. INSURANCE. Lessee shall maintain at all times on the Equipment, at Lessee's
expense, property damage, direct damage, and liability insurance in such
amounts, against such risks, and in such form and with such insurers as shall be
satisfactory to Lessor. The required insurance shall be as specified in the
applicable Supplement; provided, however, that the amount of direct damage
insurance shall not on any date be less than the greater of the full replacement
value or the Casualty Value of the Equipment as of such date. Each insurance
policy will name Lessor as additional insured and as loss payee, and shall
contain a clause requiring the insurer to give to Lessor at least 30 days prior
written notice of any alteration in or cancellation of the terms of such policy.
Lessee shall furnish to Lessor a certificate or other evidence satisfactory to
Lessor that such insurance coverage is in effect, provided, however, that Lessor
shall be under no duty to ascertain the existence or adequacy of such insurance.
12. TAXES; INDEMNITY. Lessee agrees to pay, and to indemnify and hold Lessor
harmless from, all license fees, assessments, and sales, use, property, excise,
and other taxes and charges (other than federal or state income taxes and taxes
imposed by any other jurisdiction which are based on, or measured by, the net
income of Lessor for reasons other than the ownership or leasing of the
Equipment in such jurisdiction) imposed upon or with respect to (a) the
Equipment or any part thereof arising out of or in connection with the shipment
of Equipment or the possession, ownership, use or operation thereof, or (b) this
Agreement or the consummation of the transactions herein contemplated. The
agreements and indemnities contained in this paragraph shall survive the
expiration or earlier termination of this Agreement.
13. DEPRECIATION INDEMNITY.
(1) Lessor, as the owner of the Equipment, shall be entitled to such deductions,
credits and other benefits as are provided by the Internal Revenue Code of 1986,
as amended (the "IRC"), to an owner of property.
(2) Lessee agrees that it will not at any time take any action or file any
returns or other documents inconsistent with the foregoing and that Lessee will
file such returns, take such action, and execute such documents as may be
reasonable and necessary to facilitate accomplishment of the intent thereof.
Lessee agrees to copy and make available for inspection and copying by Lessor
such records as will enable Lessor to determine whether it is entitled to the
benefit of any amortization or depreciation deduction, or other deduction or
credit which may be available from time to time with respect to the Equipment.
(3) Lessee hereby indemnifies Lessor, its successors and assigns, from and
against any loss, disallowance, unavailability or recapture of its depreciation
deductions based on Lessor's cost of the Equipment resulting from any action or
failure to act of Lessee, including replacement of the Equipment without
Lessor's consent, plus all interest, penalties, costs or additions to tax
resulting from such loss, disallowance, unavailability or recapture. The
provisions of this paragraph shall survive the expiration or earlier termination
of this Agreement.
14. INDEMNIFICATION COVENANT. The Lessee agrees to indemnify, reimburse, and
hold harmless Lessor, its successors and assigns from and against all claims,
damages, losses, liabilities (including negligence, tort and strict liability,
but excluding gross negligence and willful misconduct), demands, suits,
judgments, and all legal proceedings, and any and all costs and expenses in
connection therewith (including reasonable attorneys' fees) arising out of or in
any manner connected with:
(1) The breach of any representation, warranty, or covenant made by the Lessee
under this Agreement;
(2) The manufacture, purchase, lease, delivery, nondelivery, acceptance,
rejection, ownership, possession, use, storage, operation, return, repair or
other disposition of the Equipment;
(3) Patent, copyright or trademark infringement related to the Equipment;
(4) The Equipment's condition or any discoverable or nondiscoverable defect in
it arising from its design, testing, or construction; any article used in the
Equipment; or any maintenance, service, or repair, whether or not the Equipment
is in the Lessee's possession and regardless of where the Equipment is located;
or
(5) Any transaction, approval, or document contemplated by this Agreement.
Lessee agrees to give Lessor prompt notice of any such claim or liability. The
Lessee waives and releases Lessor, its successors and assigns from any existing
or future claims in any way connected with injury to or death of the Lessee's
personnel, loss or damage of the Lessee's property, or loss of use of any
property, which may:
(a) Result from or arise in any manner out of the ownership, leasing, condition,
use, or operation of the Equipment; or
(b) Be caused by any defect in the Equipment; its design, testing, or
construction; any article used in the Equipment; or any maintenance, service, or
repair, whether or not the Equipment is in the Lessee's possession and
regardless of where the Equipment is located. The indemnities described in this
clause will continue in full force and effect notwithstanding the expiration or
other termination of this Agreement and are expressly made for the benefit of
and will be enforceable by Lessor, and its successors and assigns.
15. COVENANT TO KEEP FREE OF LIENS. The Lessee will not directly or indirectly
create, incur, assume, or suffer to exist any lien on the Equipment, its title,
or any interest therein, except for:
(1) The respective rights of the Lessor and Lessee under this Agreement;
(2) Liens granted by the Lessor with respect to the Equipment;
(3) Liens for taxes either not yet due or being contested in good faith by the
Lessee as long as adequate reserves are maintained with respect to those liens
and the Equipment is not, in the Lessor's reasonable opinion, in danger of being
sold, confiscated, forfeited, or seized as a result of the liens; and
(4) Inchoate materialmen's, mechanics', workmen's, repairmen's, employees', or
other like liens arising in the ordinary course of business, which either are
not delinquent or are being contested in good faith by the Lessee, and for which
adequate reserves are maintained in connection with such contest, as long as the
Equipment is not, in the Lessor's reasonable opinion, in danger of being sold,
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confiscated, forfeited, or seized as a result of the Liens. The preceding items
(1) through (4) are referred to as "Permitted Liens".
The Lessee will promptly, at its sole expense, take any action that may be
necessary to discharge any lien except for the liens referred to in paragraphs
(1) and (2) arising at any time with respect to the Equipment.
16. LESSOR'S RIGHT TO PERFORM. If Lessee fails to make any payment required to
be made hereunder or fails to comply with any other provisions of this
Agreement, Lessor may make such payment or comply wish such provisions, and the
amount of such payment and the reasonable expenses of Lessor incurred in
connection with such payment or compliance, shall be immediately payable by
Lessee to Lessor.
17. DEFAULT. Any one of the following occurrences shall, in the Lessor's sole
discretion, constitute an Event of Default by Lessee of this Agreement:
(1) Failure by Lessee to make any payment of rent or other amount owing
hereunder within 5 days after the date upon which said amounts are due;
(2) Failure of Lessee to perform or observe any other covenant, agreement, or
condition hereunder, provided such failure should continue for 30 days after
notice from Lessor;
(3) Proof that any representation or warranty made by Lessee herein or in any
document or certificate furnished to Lessor in connection herewith is or was
materially incorrect when made;
(4) Lessee's insolvency or assignment by Lessee for the benefit of creditors or
consent to the appointment of a trustee or receiver, or the appointment of a
trustee or receiver for Lessee or for a substantial part of its property or for
the Equipment, or reorganization, arrangement, insolvency, dissolution, or
liquidation proceedings instituted by or against Lessee, if such proceedings are
not dismissed or discharged within 60 days of filing;
(5) The occurrence of a material adverse change, in Lessor's sole discretion, in
Lessee's business or financial condition or Lessee's probable ability to perform
its obligations under the Lease and Supplements.
In any such event, Lessor may declare this Agreement to be in default, and may
proceed in accordance with the provisions of Paragraph 18 hereof.
18. REMEDIES.
(1) Remedies. Upon the occurrence and during the continuance of any Event of
Default, the Lessor may declare this Agreement to be in default, and at its
option and without notice to the Lessee, exercise one or more of the following
remedies:
(a) Declare the then Casualty Value immediately due and payable with respect to
any or all items of Equipment without notice or demand to Lessee;
(b) Sue for and recover all rent and other payments, then accrued or thereafter
accruing, with respect to any or all items of Equipment;
(c) Take possession of and render unusable any or all items of Equipment,
without demand or notice, wherever same may be located, without any court order
or other process of law and without liability for any damages occasioned by such
taking of possession (any such taking of possession will not constitute a
termination of this Lease as to any or all items of Equipment unless Lessor
expressly so notifies Lessee in writing);
(d) Require Lessee to assemble any or all items of Equipment at the original
Equipment location, such location to which the Equipment may have been moved
with the prior written consent of Lessor, or such other location in reasonable
proximity to either of the foregoing as Lessor designates;
(e) Sell or otherwise dispose of any or all items of Equipment whether or not in
Lessor's possession, in a commercially reasonable manner at public or private
sale and with or without notice to Lessee and apply the net proceeds of such
sale, after deducting all costs of such sale, including, but not limited to,
costs of transportation, repossession, storage, refurbishing, advertising and
broker's fees, to the obligations of Lessee thereunder with Lessee remaining
liable for any deficiency and with any excess being retained by Lessor;
(f) Retain any repossessed items of Equipment and credit the reasonable value
thereof, after deducting all such sales related costs incurred to the date of
crediting, to the obligations of Lessee hereunder with Lessee remaining liable
for any deficiency and with Lessor having no obligation to reimburse Lessee on
account of any excess of such reasonable value over such obligations;
(g) Terminate this Lease as to any or all items of Equipment or Lease funding
commitments; and
(h) Utilize any other remedy available to Lessor at law or in equity.
In the event Lessor elects to terminate its obligation to Lessee as described in
paragraph (g), above, Lessee shall purchase all of Lessor's right, title and
interest in any Equipment subject to any Supplements to the Lease for the amount
equal to the remaining unpaid rental payments, taxes and fees, plus the purchase
option amount set forth in the applicable Supplement. Except as to such items
with respect to which there is a termination, this Lease will remain in full
force and effect and Lessee will be and remain liable for the full performance
of all its obligations hereunder
In addition to the foregoing, the Lessee will be liable for interest on unpaid
amounts at an annual interest rate of eighteen percent (18%) from the date the
same became due until payment in full, and for all reasonable legal fees and
other reasonable costs and expenses incurred by the Lessor in connection with
the occurrence of any Event of Default or the exercise of its remedies.
In any such event, Lessee will be liable for the amount, if any, as reasonably
calculated by the Lessor, required for the Lessor to receive the same after tax
economic return from this Lease that the Lessor would have received if the
Lessee had performed all of its obligations under this Agreement through the end
of the Lease term.
No right or remedy conferred herein is exclusive of any right or remedy
conferred herein or by law; but all such rights and remedies are cumulative of
every other right or remedy conferred hereunder or at law or in equity, by
statute or otherwise, and may be exercised concurrently or separately from time
to time.
(2) In effecting any repossession, the Lessor and its representatives and
agents, to the extent permitted by law, will:
(a) Have the right to enter on any premises where the Lessor reasonably believes
the Equipment is located;
(b) Not be liable, in conversion or otherwise, for the taking of any personal
property of the Lessee that is in or attached to the repossessed Equipment as
long as the Lessor promptly returns that properly to the Lessee;
(c) Not be liable in any manner for any damage to any of the Lessee's property
in repossessing and holding the Equipment, except for damage caused by the
Lessor's gross negligence or willful misconduct; and
(d) Have the right to maintain possession of and dispose of the Equipment on any
premises owned by the Lessee or under the Lessee's contra!.
If the Equipment is returned to or repossessed by the Lessor, any rights in any
express or implied warranty previously assigned to the Lessee or otherwise held
by it will without further act, notice, or writing be assigned or reassigned to
the Lessor, if assignable. The Lessee will be liable to the Lessor for all
reasonable expenses, costs, and fees incurred in (1) repossessing, storing,
preserving, shipping, maintaining, repairing, and refurbishing the Equipment to
the condition required by this Agreement; and (2) preparing the Equipment for
sale or lease, advertising the sale or lease, and selling or re-letting the
Equipment.
No express or implied waiver by the Lessor of any default or Event of Default
will be construed as a waiver of any future or subsequent default or Event of
Default.
19. CONDITIONS PRECEDENT. The obligation of Lessor contained in paragraph 1 of
this Agreement shall be subject to the following conditions precedent:
(1) There shall have occurred no material adverse change in Lessee's business or
financial condition or Lessee's probable ability to perform its obligations
under the Lease from the date hereof until the Commencement Date of any
Supplement;
(2) Lessee shall have furnished Lessor with a certificate or other evidence
satisfactory to Lessor that insurance coverage as required by
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this Agreement is in effect as to any and all item(s) of Equipment desired to be
leased;
(3) Unless specifically waived by Lessor, Lessee shall have furnished waivers,
in form and substance acceptable to Lessor, of all rights in or to the Equipment
of any landlord or mortgagee of any real property upon which the Equipment is or
is to be situated; and
(4) All other instruments and legal and corporate proceedings in connection with
the transactions contemplated by this Agreement shall be satisfactory in form
and substance to Lessor, and counsel to Lessor shall have received copies of all
documents which it may have requested in connection therewith.
If any of the above conditions is not satisfied at the time Lessee submits any
Supplement, Lessor, in its sole discretion, shall have no obligation under this
Agreement to lease the Equipment covered thereby to Lessee.
20. FINANCIALS. Lessee agrees that for so long as any item of Equipment shall be
leased under the Agreement, Lessee will deliver or cause to be delivered to
Lessor (a) within 45 days after the end of each month, monthly financial
statements for the month just closed, including balance sheet, and related
statements of income and expense for such month, all in reasonable detail
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved and certified by Lessee's
chief financial officer; and (b) as soon as practicable, and in any event within
120 days after the close of each fiscal year of Lessee, the audited balance
sheet of Lessee as of the end of such fiscal year together with the related
statements of income and expense for such fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved and certified by an
independent certified public accountant acceptable to Lessor. In addition,
through the term of any warrant issued by Lessee to Lessor, Lessee shall provide
Lessor with quarterly financial statements, including an updated capitalization
table showing changes to the capital structure, and audited annual financial
statements.
21. REPRESENTATIONS, WARRANTIES AND COVENANTS. Lessee represents, warrants, and
covenants as follows:
(1) If Lessee is a corporation, or a limited liability company, Lessee is duly
organized and validly existing and is in good standing under the laws of the
state of its incorporation, and is duly qualified and licensed to do business as
a foreign corporation and is in good standing in those jurisdictions where such
qualifications are necessary to authorize Lessee to carry on its present
business and operations, and to own its properties or to perform its obligations
thereunder;
(2) If Lessee is a partnership, Lessee is duly organized and validly existing
under the partnership laws of its state of domicile and is duly authorized in
any foreign jurisdiction where such qualification is necessary to authorize
Lessee to carry on its present business and operations and to own its properties
and to perform its obligations thereunder;
(3) Lessee has full power, authority, and legal right to execute, deliver, and
carry out as Lessee the terms and provisions of this Agreement, and any other
necessary documents in connection with this transaction;
(4) If Lessee is a corporation or limited liability company, Lessee's execution,
delivery, and performance of this Agreement and the other documents and
agreements referred to herein, and the performance of its obligations under this
Agreement have all been authorized by all necessary corporate or company action,
do not require the approval or consent of stockholders, or of any trustee or
holders of any indebtedness or obligation of Lessee and will not violate any
law, governmental rule, regulation or order binding upon Lessee or any provision
of any indenture, mortgage, contract, or other agreement to which Lessee is a
party or by which it is bound or to which it is subject, and will not violate
any provision of the Certificate or Articles of Incorporation, Bylaws, any
preferred stock agreement, Articles of Organization or Operating Agreement of
Lessee;
(5) If Lessee is a partnership, Lessee's execution, delivery and performance of
this Agreement and the other documents and agreements referred to herein, and
the performance of its obligations under this Agreement have all been authorized
by all necessary partnership actions;
(6) There are no pending or, to Lessee's knowledge, threatened investigations,
actions, or proceedings before any court or administrative agency or other
tribunal body, which seek to question or set aside any of the transactions
contemplated by this Agreement, or which, if adversely determined, would
materially affect the condition, business, or operation of Lessee;
(7) Lessee is not in default in any material manner in the payment or
performance of any of its obligations or in the performance of any contract,
agreement, or other instrument to which it is a party or by which it or any of
its assets may be bound;
(8) The balance sheet of Lessee as of the end of its most recent fiscal year and
the related profit and loss statement of the Lessee for the fiscal year ended on
said date, including the related schedules and notes, together with the report
of an independent certified public accountant, heretofore delivered to Lessor,
are all true and correct and present fairly (I) the financial position of Lessee
as of the date of said balance sheet and (ii) the results of the operations of
Lessee for said fiscal year;
(9) All proceedings required to be taken to authorize the lease of the Equipment
from Lessor and to protect Lessor's interest in such Equipment, free and clear
of all liens and encumbrances whatsoever, other than Permitted Liens, have been
taken;
(10) Lessee has no significant liabilities (contingent or otherwise) which are
not disclosed by or reserved against the financial statements referred to in (8)
above;
(11) No authorization, consent, approval, license, exemption of or filing or
registration with any court, governmental unit or department, commission, board,
bureau, agency, instrumentality or the like is required or necessary for the
valid execution and delivery of the Agreement, any bill of sale, and the other
documents and agreements referred to herein;
(12) This Master Lease, the Supplements, and any accompanying documents, having
been duly authorized, executed and delivered to Lessor, constitute legal, valid
and binding obligations of Lessee, enforceable against Lessee in accordance with
the terms hereof except as such terms may be limited by bankruptcy, insolvency,
or similar laws affecting the enforcement of creditor's rights generally;
(13) The Equipment is personal property and neither real property nor a fixture;
(14) The Equipment will be used for commercial operations only, not for
personal, family, or household purposes.
22. INVESTMENT. Lessee grants Lessor the right, but not the obligation, to
purchase up to an aggregate of $1,000,000 of securities issued in the Lessee's
future private equity financings. Any such purchase shall be on the same terms
and conditions as those offered to the investors in such financing. Lessee shall
deliver a notice to Lessor by confirmed facsimile transmission, certified mail
or a nationally recognized overnight courier service stating the anticipated
closing date for such equity financing, and the price and summary of the terms
for the equity financing. Lessor may exercise its right to invest by giving a
written election to Lessee within a reasonable time after receipt of Lessee's
notice.
23. CHOICE OF LAW; JURY TRIAL WAIVER. THE RIGHTS AND LIABILITIES OF THE PARTIES
UNDER THIS AGREEMENT, AND EACH SUPPLEMENT, SHALL BE INTERPRETED, ENFORCED AND
GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO CONFLICTS OF LAW PRINCIPLES. LESSEE HEREBY CONSENTS AND SUBJECTS
ITSELF TO THE JURISDICTION OF EVERY LOCAL, STATE, AND FEDERAL COURT WITHIN SANTA
CLARA COUNTY, CALIFORNIA, AND AGREES THAT EXCEPT AS OTHERWISE REQUIRED BY LAW,
LESSEE SHALL NEVER FILE OR MAINTAIN ANY ACTION OR PROCEEDING IN CONNECTION WITH
THIS AGREEMENT, OR ANY SUPPLEMENT IN ANY COURT OUTSIDE THE STATE OF CALIFORNIA.
Lessee hereby agrees that service of process in connection with any such action
upon Lessee may be in the manner provided by the laws of the State of
California. LESSEE WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR
WITH RESPECT TO THIS AGREEMENT.
24. ATTORNEY FEES AND COSTS. Lessee shall reimburse Lessor for all reasonable
charges, costs, expenses and attorneys' fees incurred by Lessor in (a) defending
or protecting its interest in the Equipment; (b) the administration, amendment
and enforcement of this
Master Equipment Lease
-5-
<PAGE>
Lease or the collection of any installment of rent under this Lease or any
Supplement; and (c) any lawsuit or other legal proceeding to which this Lease
gives rise, including, but not limited to, actions in tort.
25. HEADINGS FOR CONVENIENCE ONLY. The headings for the paragraphs and
provisions in this Master Lease, as well as the other documents constituting the
Agreement, are intended solely for convenience of reference and are not intended
nor shall they be used to construe, explain, modify or place any meaning upon
any provisions hereof.
26. MODIFICATION. Neither this Master Lease nor any other document or Supplement
constituting the Agreement can be modified or amended except by written
agreement signed and dated by both Lessor and Lessee.
27. COUNTERPARTS. This Master Lease and any other document or Supplement
constituting the Agreement may be executed in any number of counterparts. Any
document executed in counter parts shall remain one document. Each counterpart
is an original instrument.
28. PROVISIONS SEVERABLE. Should any provision of the Agreement be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect the remaining provisions hereof.
29. ENTIRE AGREEMENT. This Master Lease, the Supplements and any accompanying
documents constitute the entire agreement between the parties and no other
representation or statements shall be deemed binding, nor shall there be any
reliance by either Lessor or Lessee upon any representations, agreements,
statements, promises, understandings, or inducements made which are not embodied
in the written Agreement.
30. TIME. Time is of the essence of this Agreement and each and all of its
provisions.
Executed on April 16th, 2002
<PAGE>
By execution hereof, the undersigned hereby certifies that (s)he has
read this Agreement, and that (s)he is duly authorized to execute this
Master Equipment Lease on behalf of Lessee.
LESSEE:
ARBINET-THEXCHANGE, INC., a Delaware corporation
By:
---------------------------
Name: Peter P. Sach
Title: CAO & Tresurer
LESSOR:
PENTECH FINANCIAL SERVICES, INC.,
a California corporation
By: Norman H. Nelson
---------------------------
Title: President & COO
Master Equipment Lease
-6-
<PAGE>
PENTECH FINANCIAL SERVICES, INC.
ACCEPTANCE SUPPLEMENT
Supplement No 1 to Master Equipment Lease No. 302001
Commencement Date May 1, 2002 Expiration Date April 30 2005.
Total Supplement Amount $696,257.61 Monthly Lease Rate Factor used: 3.228%
THIS ACCEPTANCE SUPPLEMENT is executed and delivered by PENTECH FINANCIAL
SERVICES, INC.("Lessor") and ARBINET-THEXCHANGE, INC. ("Lessee"), pursuant to
and in accordance with the Master Equipment Lease with effective date of March
1, 2002 between Lessor and Lessee (the "Agreement"), terms defined therein being
used herein with the same definitions.
A. The Equipment covered by this Acceptance Supplement is described on the
Equipment Schedule attached hereto as Exhibit A and made a part hereof by
reference.
B. LESSEE CONFIRMS THAT ON THE DATE OF EXECUTION OF THIS ACCEPTANCE SUPPLEMENT,
THE EQUIPMENT LISTED ON THE ATTACHED EQUIPMENT SCHEDULE (EXHIBIT A) HAS BEEN
DELIVERED TO IT, DULY ASSEMBLED AND INSTALLED IN GOOD WORKING ORDER AND
CONDITION, IN THE LOCATION SPECIFIED ON THE ATTACHED EQUIPMENT SCHEDULE (EXHIBIT
A).
C. Lessee hereby: (a) confirms that said Equipment is of the size, design,
capacity and manufacture selected by it and meets the provisions of any purchase
order pursuant to which Lessor has acquired title thereto; and (b) irrevocably
accepts said Equipment as-is, where-is for all purposes of the Agreement as of
the Commencement Date set forth above.
D. The term of lease of said Equipment under the Agreement shall commence as of
the Commencement Date set forth above and, unless earlier terminated pursuant to
the provisions of the Agreement, shall expire on the Expiration Date set forth
above.
E. As rent for said Equipment throughout the term of lease referred to in the
preceding paragraph D, Lessee shall pay to Lessor in accordance with the terms
of the Agreement, 36 consecutive rental payments of $22,475.20. Rental payments
shall be made monthly. The first Rent Payment Date shall be May 1, 2002, with
subsequent rental payments commencing June 1, 2002, and continuing thereafter to
and including April 1, 2005. Lessee shall pay an Interim Rent of $0 plus tax for
the period from the Commencement Date to the first Rent Payment Date. Lessee
shall pay a sales or use tax of $0 which shall be added to each Rent Payment.
F. The insurance required pursuant to Paragraph 11 of the Agreement shall
include:
1. PHYSICAL DAMAGE TO ALL EQUIPMENT LEASED UNDER THIS SUPPLEMENT:
a. Minimum Scope of Coverage: Fire, extended coverage, employee fidelity,
vandalism, theft and malicious mischief;
b. Minimum Dollar Limits of Coverage. Not less than the higher of the
Stipulated Loss Value at the time of payment to Lessor of insurance proceeds or
fair market value immediately prior to the physical damage of each item of
Equipment leased hereunder for fire, extended coverage, vandalism, theft and
malicious mischief, and a minimum of 25% coverage on employee fidelity;
c. Maximum Deductibles: Not more than $1,000 per occurrence. Lessee is
liable for all deductible amounts.
2. PUBLIC LIABILITY.
a. Minimum Scope of Coverage: Public liability including bodily injury and
property damage;
Arbinet-theXchange
302001.1
<PAGE>
b. Minimum Dollar Limits of Coverage: (i) Bodily Injury: $1,000,000. per
person per occurrence and $1,000,000.00. aggregate per occurrence; and (ii)
Property Damage: $1,000,000 per occurrence;
c. Maximum Deductibles: Not more than $1,000 per occurrence. Lessee is
liable for all deductible amounts.
G. Lessor has made certain tax assumptions pursuant to Section 13 of the
Agreement. These assumptions are as follows:
1. The Accelerated Cost Recovery System (ACRS) property class for the
Equipment is five (5) years.
2. The Depreciation Method is the method selected by the Lessor's tax
department as being more favorable to Lessor, given the facts and circumstances
of each transaction.
H. So long as no default shall have occurred and be continuing, Lessee shall
have the following three options at the end of the initial term:
a) Purchase all but not less than all, of the equipment at its then Fair
Market Value (FMV), $69,625.76; or
b) Renew the lease for a 12-month period at its Fair Market Rental Value
(FMRV), 45% of the original rental amount after which Lessor agrees to sell the
equipment to Lessee for $1.00; or
c) Return all, but not less than all, of the equipment covered under the
lease subject to a remarketing charge equal to 8% of its original cost.
To exercise any of the above options, Lessee must give Lessor written
notice of its election of (a), (b) or (c) above at least 90 days prior to
the expiration of the lease term; and on the first day of the month
following the last month of the initial term, do one of the following:
(i) remit the purchase price to Lessor or its assigns in cash or
certified funds; or
(ii) commence paying the renewal rental amount on the first day of the
month following the last month of the initial term; or
(iii) pay the remarketing charge to Lessor or its assigns and return
the Equipment, freight charges paid, to Lessor or its assigns, to a location
designated by Lessor, packed safely in the original shipping boxes to avoid
damage, along with all software and instruction manuals pertaining to the
equipment.
Any of the above payments which is not received by Lessor within 10 days of
the due date will be considered in default. Upon the expiration of the term of
this Acceptance Supplement, if Lessor has received no notice of Lessee's
election under this paragraph, at the option of Lessor, Lessor may demand
payment under the purchase option in section (i) above.
I. All provisions of the Agreement are hereby incorporated by reference in this
Acceptance Supplement to the same extent as if they were set forth at length
herein.
APPROVED AND AGREED to by the parties hereto as of the Commencement Date set
forth above.
LESSOR: LESSEE:
PENTECH FINANCIAL ARBINET-THEXCHANGE, INC.
SERVICES, INC. a California corporation a Delaware corporation
The undersigned affirms that he is
duly authorized to execute and deliver
this Acceptance Supplement on behalf
of Lessee.
By: /s/ Norman H. Nelson By: /s/ Peter P. Sach
---------------------------------- ----------------------------------
Norman H. Nelson Name: Peter P. Sach
Title: President & COO Title: SVP. CAO & Treasurer
Arbinet-theXchange
302001.1
<PAGE>
AMENDMENT TO MASTER EQUIPMENT LEASE 302001
ACCEPTANCE SUPPLEMENT 001
This Amendment (the "Amendment"), effective as of June 19, 2002 ("Effective
Date"), is to Acceptance Supplement 001 of Master Equipment Lease 302001, dated
May 1, 2002 (the "Supplement 001"), by and between Pentech Financial Services,
Inc., a California corporation ("Lessor") and ARBINET-THEXCHANGE, INC., a
Delaware corporation ("Lessee"). This Amendment shall amend and modify the terms
and conditions of Supplement 001, and, to the extent that any of the terms and
conditions of this Amendment conflict with the terms and conditions set forth in
Supplement 001, the terms and conditions of this Amendment shall control. Except
as expressly modified herein, all terms and conditions of Supplement 001 are
confirmed as contained therein.
1. Commencement Date. The Commencement Date of Supplement 001 is hereby
amended to be July 1, 2002, and the Expiration Date is hereby amended to be June
30, 2005.
2. Payment Schedule. Section E is hereby amended to provide that the First
Rent Payment Date is July 1, 2002, with subsequent rental payments commencing
August 1, 2002, and continuing thereafter to and including June 1, 2005.
Executed on July 1, 2002.
PENTECH FINANCIAL SERVICES, INC.
By: /s/ Norman H. Nelson
-----------------------------------
Norman H. Nelson
President & COO
ARBINET-THEXCHANGE, INC.
By: /s/ Peter P. Sach
-----------------------------------
Name: Peter P. Sach
Title: CAO & Treasurer
<PAGE>
Master Equipment Lease
302001 Acceptance
Supplement Nos. 1
HOLD HARMLESS AGREEMENT
This Hold Harmless Agreement (the "Agreement") is entered into this First
day of May. 2002("Effective Date") by and between PENTECH FINANCIAL SERVICES,
INC., a California corporation ("Lessor") and ARBINET-THEXCHANGE, INC., a
Delaware corporation ("Lessee") with respect to Master Equipment Lease No.
302001 (the "Lease"), and Acceptance Supplement No. 1 (the "Transaction").
RECITALS
A. Lessor and Lessee desire to enter into a Transaction pursuant to the
terms of the Lease pursuant to which Lessee will lease certain equipment
("Equipment") from Lessor, and Lessor will lease the Equipment to Lessee.
B. Lessee has paid no sales tax to the vendor for the Equipment, as Lessee
is exempt from sales tax liability in the states in which it has purchased
equipment. Lessee agrees that Lessor will not include sales tax in the payments
to be made by Lessee in the Transaction for any of the Equipment.
C. Lessor has agreed to lease the Equipment to Lessee on the condition that
Lessee enter into this Hold Harmless Agreement.
The parties therefore agree as follows:
1. Lessee will indemnify and hold Lessor harmless from and against any
sales tax liability arising from the Transaction which may be found due from
Lessor, or for which Lessor may be held liable by any state agency or regulatory
body, whether by audit or otherwise, including any penalty and interest which
may be charged or imposed on Lessor.
2. Lessee will pay to Lessor the full amount of such sales tax (and penalty
and interest, if applicable) within ten (10) days after written demand from
Lessor to Lessee for such payment.
3. This Agreement shall be appended as an addendum to the Acceptance
Supplement in the Transaction, and shall be subject to all the terms and
conditions of the Lease dated March 1, 2002.
Dated: May 1, 2002
LESSOR: PENTECH FINANCIAL SERVICES, INC.
a California corporation
By: /s/ Norman H. Nelson
----------------------------------
Norman H. Nelson
Its: President & COO
LESSEE: ARBINET-THEXCHANGE, INC.
A Delaware corporation
By: /s/ Peter P. Sach
----------------------------------
Name: Peter P. Sach
Its: CAO & Tresurer
ARBINET-THEXCHANGE, INC.
<PAGE>
PENTECH FINANCIAL SERVICES, INC.
ACCEPTANCE SUPPLEMENT
Supplement No. 2 to Master Equipment Lease No. 302001
Commencement Date: May 1, 2003 Expiration Date: April 30 2006.
Total Supplement Amount: $537,029.00 Monthly Lease Rate Factor used: 3.228%
THIS ACCEPTANCE SUPPLEMENT is executed and delivered by PENTECH FINANCIAL
SERVICES, INC. ("Lessor") and ARBINET-THEXCHANGE, INC. ("Lessee"), pursuant to
and in accordance with the Master Equipment Lease with effective date of March
1, 2002 between Lessor and Lessee (the "Agreement"), terms defined therein being
used herein with the same definitions.
A. The Equipment covered by this Acceptance Supplement is described on the
Equipment Schedule attached hereto as Exhibit A and made a part hereof by
reference.
B. LESSEE CONFIRMS THAT ON THE DATE OF EXECUTION OF THIS ACCEPTANCE SUPPLEMENT,
THE EQUIPMENT LISTED ON THE ATTACHED EQUIPMENT SCHEDULE (EXHIBIT A) HAS BEEN
DELIVERED TO IT, DULY ASSEMBLED AND INSTALLED IN GOOD WORKING ORDER AND
CONDITION, IN THE LOCATION SPECIFIED ON THE ATTACHED EQUIPMENT SCHEDULE (EXHIBIT
A).
C. Lessee hereby: (a) confirms that said Equipment is of the size, design,
capacity and manufacture selected by it and meets the provisions of any purchase
order pursuant to which Lessor has acquired title thereto; and (b) irrevocably
accepts said Equipment as-is, where-is for all purposes of the Agreement as of
the Commencement Date set forth above.
D. The term of lease of said Equipment under the Agreement shall commence as of
the Commencement Date set forth above and, unless earlier terminated pursuant to
the provisions of the Agreement, shall expire on the Expiration Date set forth
above.
E. As rent for said Equipment throughout the term of lease referred to in the
preceding paragraph D, Lessee shall pay to Lessor in accordance with the terms
of the Agreement, 36 consecutive rental payments of $17,335.30. Rental payments
shall be made monthly. The first Rent Payment Date shall be May 1, 2003, with
subsequent rental payments commencing June 1, 2003, and continuing thereafter to
and including April 1, 2006. Lessee shall pay an Interim Rent of $0 plus tax for
the period from the Commencement Date to the first Rent Payment Date. Lessee
shall pay a sales or use tax of $0 which shall be added to each Rent Payment.
F. The insurance required pursuant to Paragraph 11 of the Agreement shall
include:
1. PHYSICAL DAMAGE TO ALL EQUIPMENT LEASED UNDER THIS SUPPLEMENT:
a. Minimum Scope of Coverage: Fire, extended coverage, employee fidelity,
vandalism, theft and malicious mischief;
b. Minimum Dollar Limits of Coverage: Not less than the higher of the
Stipulated Loss Value at the time of payment to Lessor of insurance proceeds or
fair market value immediately prior to the physical damage of each item of
Equipment leased hereunder for fire, extended coverage, vandalism, theft and
malicious mischief, and a minimum of 25% coverage on employee fidelity;
c. Maximum Deductibles: Not more than $1,000 per occurrence. Lessee is
liable for all deductible amounts.
2. PUBLIC LIABILITY.
a. Minimum Scope of Coverage: Public liability including bodily injury and
property damage;
<PAGE>
b. Minimum Dollar Limits of Coverage: (i) Bodily injury: $1,000,000. per
person per occurrence and $1,000,000.00. aggregate per occurrence; and (ii)
Property Damage: $1,000,000 per occurrence;
c. Maximum Deductibles; Not more than $1,000 per occurrence. Lessee is
liable for all deductible amounts.
G. Lessor has made certain tax assumptions pursuant to Section 13 of the
Agreement. These assumptions are as follows:
1. The Accelerated Cost Recovery System (ACRS) property class for the
Equipment is five (5) years.
2. The Depreciation Method is the method selected by the Lessor's tax
department as being more favorable to Lessor, given the facts and circumstances
of each transaction.
H. So long as no default shall have occurred and be continuing, Lessee shall
have the following three options at the end of the initial term:
a) Purchase all but not less than all, of the equipment at its then Fair
Market Value (FMV), $53,702.90; or
b) Renew the lease for a 12-month period at its Fair Market Rental Value
(FMRV), 45% of the original rental amount after which Lessor agrees to sell the
equipment to Lessee for $1.00; or
c) Return all, but not less than all, of the equipment covered under the
lease subject to a remarketing charge equal to 8% of its original cost.
To exercise any of the above options, Lessee must give Lessor written
notice of its election of (a), (b) or (c) above at least 90 days prior to the
expiration of the lease term; and on the first day of the month following the
last month of the initial term, do one of the following:
(i) remit the purchase price to Lessor or its assigns in cash or
certified funds; or
(ii) commence paying the renewal rental amount on the first day of the
month following the last month of the initial term; or
(iii) pay the remarketing charge to Lessor or its assigns and return
the Equipment, freight charges paid, to Lessor or its assigns, to a location
designated by Lessor, packed safely in the original shipping boxes to avoid
damage, along with all software and instruction manuals pertaining to the
equipment.
Any of the above payments which is not received by Lessor within 10 days of
the due date will be considered in default. Upon the expiration of the term of
this Acceptance Supplement, if Lessor has received no notice of Lessee's
election under this paragraph, at the option of Lessor, Lessor may demand
payment under the purchase option in section (i) above.
I. All provisions of the Agreement are hereby incorporated by reference in this
Acceptance Supplement to the same extent as if they were set forth at length
herein.
APPROVED AND AGREED to by the parties hereto as of the Commencement Date set
forth above.
LESSOR: LESSEE:
PENTECH FINANCIAL SERVICES, INC. ARBINET-THEXCHANGE, INC.
a California corporation a Delaware corporation
The undersigned affirms that he is duly
authorized to execute and deliver this
Acceptance Supplement on behalf of
Lessee.
By: /s/ Norman H Nelson By: /s/ Peter P. Sach
--------------------------------- ------------------------------------
Norman H Nelson Name: Peter P. Sach
President & COO Title: CAO & Treasurer
--------------------------------------------------------------------------------
THIS DOCUMENT MAY HAVE ONE OR MORE COUNTERSPARTS. THIS IS COUNTERPART NUMBER 1
OF 2. A SECURITY INTEREST CAN ONLY BE CREATED IN FAVOUR OF THE PARTY IN
POSSESSION OF COUNTERPART NUMBER 1.
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------------------------------------------------------
PENTECH
FINANCIAL
SERVICES, INC.
--------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT SCHEDULE
--------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A Attachment to Supplement No. 2, dated May 1, 2003, to Master Equipment Lease No. 302001 between
--------------------------------------------------------------------------------------------------------------------------------
Pentech Financial Services, Inc., as Lessor, and Arbinet-TheXchange, Inc., as Lessee, with Effective Date of
March 1, 2002.
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Equipment Location 460 Herndon Parkway, Suite 150, Herndon, VA 20170
--------------------------------------------------------------------------------------------------------------------------------
75 Broad Street, 20th Floor, New York, NY 10004
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Vendor Name Inv date Inv # qty part # Description Serial # Hard Soft Inv Total
--------------------------------------------------------------------------------------------------------------------------------
STP Pair for Herndon, VA
with attachments,
accessories & inclusions
Tekelec 03/26/03 100745/763 1 per attached packing list NT00000197 150,678.48
--------------------------------------------------------------------------------------------------------------------------------
Tekelec 03/26/03 100745/763 tax 6,780.56
--------------------------------------------------------------------------------------------------------------------------------
STP Pair for New York, NY
with attachments,
accessories & inclusions
Tekelec 03/26/03 100745/763 1 per attached packing list NT02374024 350,642.00
--------------------------------------------------------------------------------------------------------------------------------
Tekelec 03/26/03 100745/763 tax 28,927.96
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
501,320.48 35,708.52 537,029.00
--------------------------------------------------------------------------------------------------------------------------------
LESSOR: Pentech Financial Services, Inc. LESSEE: Arbinet-theXchange, Inc.
a California corporation a Delaware corporation
By: /s/ Norman H. Nelson By: /s/ Peter P. Sach
------------------------------------ ---------------------------------
Name: Norman H. Nelson Name: Peter P. Sach
Title: President & COO Title: CAO & Treasurer
Z302001.2 Arbinet theXchange.sls supplement no.2
1 of 1
04.30.03
<PAGE>
PENTECH FINANCIAL SERVICES, INC.
MASTER EQUIPMENT LEASE NO. 302001 ACCEPTANCE
SUPPLEMENT NO. 2
SCHEDULE C
STIPULATED LOSS PERCENTAGE VALUE
Terms defined in the Agreement shall have the same meanings when used herein.
--------------------------------------------------------------------------------
Stipulated Loss
Value
Rent Payment Stipulated Loss Value Percentage Rent Payment Percentage
------------ -------------------------------- ------------ ---------------
1 120.00 22 78.00
2 118.00 23 76.00
3 116.00 24 74.00
4 114.00 25 72.00
5 112.00 26 70.00
6 110.00 27 68.00
7 108.00 28 66.00
8 106.00 29 64.00
9 104.00 30 62.00
10 102.00 31 60.00
11 100.00 32 58.00
12 98.00 33 56.00
13 96.00 34 54.00
14 94.00 35 52.00
15 92.00 36 50.00
16 90.00
17 88.00
18 86.00
19 84.00
20 82.00
21 80.00
Dated as of May 1, 2003
LESSOR: LESSEE:
PENTECH FINANCIAL SERVICES, INC. ARBINET-THEXCHANGE, INC.
a California corporation a Delaware corporation
The Undersigned affirms that he is duly
authorized to execute and deliver this
Schedule C to Acceptance Supplement on
behalf of Lessee.
By: /s/ Norman H. Nelson By: /s/ Peter P. Sach
---------------------------------- -----------------------------------
Norman H. Nelson Name: Peter P. Sach
Title: President & COO Title: CAO & Treasurer
ARBINET-THEXCHANGE, INC. 302001.2