Banc of America Leasing & Capital, LLC

Schedule to
Lease Agreement

Schedule
Number 002

 

This Schedule

("Schedule"), dated as of December 21, 2004 between Banc of America Leasing &
Capital, LLC ("Lessor") and Tor Minerals International, Inc. ("Lessee") is
executed pursuant to Lease Agreement Number 09920-00400 dated August 09, 2004
incorporated in this Schedule by this reference (the "Lease Agreement"). Unless
otherwise defined in this Schedule, capitalized terms used in this Schedule have
the respective meanings assigned to such terms in the Lease Agreement. If any
provision of this Schedule conflicts with any provision of the Lease Agreement,
the provisions contained in this Schedule shall prevail. Lessee hereby
authorizes Lessor to insert the serial numbers and other identification data of
the Units, dates, and other omitted factual matters or descriptions in this
Schedule.

1. Description of Units. The Units subject to this Schedule ("Units"), which
have a cost to Lessor ("Lessor's Cost") in the aggregate of $246,808.00,
inclusive of taxes, shipping, installation and other related expenses, if any
("Soft Costs"), are as follows:

Quantity

Description

SerialNum

Lessor's Cost
(Including Soft Costs)

1

997-PM-MS3739
One (1) Drais fully continuous processing plant based on the Drais DDA system
and Drais Perl Mill, type pmh-250 tex/rf pmh-250 tex/rf serial number: 24-309
Drais DDA system serial number: 24-310

 

$242,500.00

1

99-85 Freight charges for delivery of one (1) Drais processing plant via
dedicated truck

 

$3,300.00

1

99-85 Freight charges for delivery of DDA system

 

$1,008.00

 

 

 

 

 

 

Equipment Total:

$246,808.00

 

 

Payment Total:

$3,132.24

 

 

Grand Total:

$246,808.00

 

2. Acceptance

. Lessee acknowledges and represents that the Units (a) have been delivered to,
received and inspected by Lessee, (b) are in good operating order, repair,
condition and appearance, (c) are of the manufacture, design and capacity
selected by Lessee and are suitable for the purposes for which the Units are
leased, and are acceptable and satisfactory to Lessee, (d) do not require any
additions or modifications to make them suitable for use, other than ancillary
modifications or additions normally made by lessees of similar assets, and are
available for use and lease by Lessee and Lessor, and (e) have been irrevocably
accepted as "Units" leased by Lessee under this Schedule as of the date written
below (the "Acceptance Date").

3. Term. The term of the Lease for the Units is for an "Interim Term" (if any)
beginning on the Acceptance Date, and continuing through and including the day
preceding the Base Date; and for a "Base Term" of Eighty Four (84) months,
beginning on the first to occur of the 5th day of the calendar month during or
following the Acceptance Date (the "Base Date").

4. Rental. Interim Rent shall be due Lessor for each day in the Interim Term and
shall equal the daily equivalent of the initial Base Rent. Interim Rent shall be
payable on the Base Date.

Base Rent shall be payable in Eighty Four (84) consecutive monthly installments
of $3,132.24 each, the first Base Rent installment being payable on the Base
Date and the remaining Base Rent installments being payable on the 5th day of
each succeeding month.

5. Stipulated Loss Value. After Lessor's receipt of notice of the occurrence of
any Total Loss or other relevant event relating to any Unit, Lessor shall
calculate the Stipulated Loss Value for such Unit and give Lessee notice
thereof. Such "Stipulated Loss Value", as of any particular date, shall be the
product obtained by multiplying the Lessor's Cost for the Unit in question by
the percentage, as set forth in the "Schedule of Stipulated Loss Values"
attached as Annex I, specified opposite the rent installment number (or date)
becoming due immediately after the date Lessee gives or is required to give
Lessor notice requiring payment of the Stipulated Loss Value. If only a portion
of the Units is affected by any event causing calculation of Stipulated Loss
Value, and the cost of such portion cannot be readily determined from the
Lessor's Cost set forth above, then the Lessor's Cost for such portion shall be
as reasonably calculated by Lessor, and notified to Lessee.

6. Tax Matters. Lessee represents, warrants and agrees that (a) the Units
qualify under asset guideline class 28 and constitute "7 -year property" within
the meaning of Section 168 of the Code; (b) the Lessor is the owner of the Units
and is entitled to annual accelerated cost recovery deductions for each Unit as
provided by Section 168(a) of the Code; (c) the Lessee and all direct or
indirect assignees and sublessees of Lessee shall treat this Lease as a "true
lease" for income tax purposes and will not claim any depreciation or other tax
attributes associated with ownership of the Units; (d) in any taxable year of
Lessor, no deductions or losses arising from this Lease will arise from sources
without the United States under Section 863 of the Code; (e) the Units are
eligible for the additional first-year depreciation deduction or "bonus
allowance" equal to fifty percent (50%) of the capitalized Lessor's Cost of the
Units contemplated by the Job Creation and Worker Assistance Act of 2002 (which
added new Sections 168(k) and 1400L(b) to the Code); (f) the Units shall be
treated as originally placed in service not earlier than the date of the
execution and delivery of this Schedule, or in the event the transaction is a
sale-leaseback transaction, Lessee shall not have placed in service the Units
subject to this Lease at any time prior to ninety (90) days before the execution
and delivery of this Schedule; and (g) Lessee has not arranged to purchase, and
Lessor is not purchasing the Units pursuant to a binding written contract
entered into before May 5th , 2003.

7. Location of Units

. Units will be located at:

Location

Address

City

County

State

ZIP

A

722 Burleson Street

Corpus Christi

Nueces

Texas

78411

8. Further Representations and Agreements.

Lessee represents, warrants and agrees as follows:

(a) All representations and warranties of Lessee contained in the Lease
Agreement are restated as of the Acceptance Date and are true and correct as of
such date.

(b) There has been no material adverse change in the operations, business,
properties or condition (financial or otherwise) ("Material Adverse Change") of
Lessee or any Guarantor since December 31, 2003. There is not pending against
Lessee any litigation, proceeding, dispute or claim that may result in a
Material Adverse Change as to Lessee or that may call into question or impair
Lessee's legal or other ability to enter into and perform its obligations under
this Lease.

(c) The operation and maintenance of any Unit in the ordinary course by Lessee
do not require the entry into any software or other intellectual property rights
agreement with any licensor or other person, except as disclosed to Lessor in
writing prior to the Acceptance Date.

9. Miscellaneous.

(a) Early Buy-Out. If no event of Default exists, Lessee may purchase all, but
not less than all, Units subject to this Schedule as of the 72nd scheduled Base
Rent installment date of the Base Term of each such Unit ( the "Early Buy-Out
Date"), by notice to Lessor not less than 180 days prior to the early Buy-Out
Date. On the Early Buy-Out Date, Lessee shall pay to Lessor the Base Rent
installment due, together with all other amounts then owing, plus an amount
equal to $64,392.21 plus any applicable taxes. Upon such payment, the obligation
of Lessee to pay rent hereunder with respect to the Units after the Early
Buy-Out Date shall cease, the lease term for the Units shall end on the
respective Early Buy-Out Date, and Lessor shall execute and deliver to Lessee a
quitclaim bill of sale for the Units.

(b) Extension; Purchase. In lieu of Lessee's obligation to return the Units to
Lessor upon expiry of the Base Term, Lessee may, if no Event of Default exists,
and upon Lessee having provided to Lessor notice not less than 180 days prior to
such expiry, irrevocably elect to:

(i)

extend the Base Term as to all and not less than all of the Units under this
Schedule for a period to be agreed upon by Lessee and Lessor for an amount equal
to the Units then fair market rental value as determined by Lessor. The fair
market rental value shall be payable monthly by Lessee to Lessor on the first
day of each month during the extension term, or

(ii)

purchase all of Lessors right, title and interest in and to all, but not less
than all, of the Units under this Schedule on an "as-is, where-is," quitclaim
basis, for a purchase price equal to the then Fair Market Value of the Units.
"Fair Market Value" shall mean an amount equal to the value of the Units that
would be received in an arms-length transaction between an informed and willing
buyer/user and an informed and willing seller under no compulsion to sell, as
determined by mutual agreement of Lessor and Lessee or, failing such agreement,
by an independent, qualified appraiser selected by Lessor, with the cost of such
appraisal to be borne by Lessee. Lessee shall pay Lessor the purchase price plus
any applicable taxes on the expiration of the Base Term in immediately available
funds.

 

If Lessee fails to provide notice of its election to either renew or purchase
pursuant to clause (i) or (ii) above, respectively, at least 180 days before
expiration of the Base Term, this Schedule and the Base Term shall, at the
option of Lessor, renew for a period of three months at the same rental as was
most recently payable during the Base Term or terminate upon expiration of the
Base Term. Lessee shall reimburse Lessor for all costs and expenses (including
Attorney Costs) incurred in connection with any extension or purchase hereunder.

 

Banc of America Leasing & Capital, LLC

 

Tor Minerals International, Inc.

 

 

 

 

 

 

 

 

 

 

By:

_______________________________

 

By:

_______________________________

Printed Name:

 

 

Printed Name:

RICHARD BOWERS

Title:

 

 

Title:

President & CEO

 

 

 

Acceptance Date:

December 21, 2004

Attachments:

 

Annex I:

Schedule of Stipulated Loss Values

 

Annex II:

Supplemental Return Requirements