exv10w1






Exhibit 10.1




BB&T EQUIPMENT FINANCE CORPORATION




 





MASTER LEASE AGREEMENT




     THIS
MASTER LEASE AGREEMENT (this “Lease”) is made as of
November 25, 2009, between BB&T
EQUIPMENT FINANCE CORPORATION, its successors and assigns (“Lessor”), and POWERSECURE, INC., its
successors and permitted assigns (“Lessee”).



     Lessee desires to lease from Lessor the equipment and other property (the “Equipment”)
described in each Equipment Schedule executed pursuant to this Lease (each, a “Schedule”)
incorporating by reference the terms and conditions of this Lease (the term “Lease” shall also
include any Riders to this Lease entered into with respect to such Schedule). Certain definitions
and construction of certain of the terms used in this Lease are provided in Section 19 hereof.



     For good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Lease agree as follows:


1. AGREEMENT TO LEASE; TERM. This Lease is effective as of the date specified above. By entering
into a Schedule, Lessor leases the Equipment described therein to Lessee, and Lessee leases such
Equipment from Lessor, in each case, subject to the terms and conditions in this Lease and such
Schedule and all of the other documents and agreements executed in connection herewith
(collectively, the “Lease Documents”). Each Schedule, incorporating the terms and conditions of
this Lease, will constitute a separate instrument of lease. The term of lease with respect to each
item of Equipment leased under a Schedule shall commence on the date of execution of such Schedule
and continue for the term provided in that Schedule.



2. RENT. Lessee shall pay Lessor (a) the rental installments (“Basic Rent”) as and when specified
in each Schedule, without demand, and (b) all of the other amounts payable in accordance with this
Lease, such Schedule and/or any of the other Lease Documents (“Other Payments”, and together with
the Basic Rent, collectively, the “Rent”). Upon Lessee’s execution thereof, the related Schedule
shall constitute a non-cancelable net lease, and Lessee’s obligation to pay Rent, and otherwise to
perform its obligations under or with respect to such Schedule and all of the other Lease
Documents, are and shall be absolute and unconditional and shall not be affected by any
circumstances whatsoever, including any right of setoff, counterclaim, recoupment, deduction,
defense or other right which Lessee may have against Lessor, the manufacturer or vendor of the
Equipment (the “Suppliers”), or anyone else, for any reason whatsoever (each, an “Abatement”).
Lessee agrees that all Rent shall be paid in accordance with Lessor’s or Assignee’s written
direction. Time is of the essence. If any Rent is not paid within five (5) days of the due date,
Lessee shall pay a late charge equal to five (5) percent of the amount in arrears.



3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Lessee represents, warrants and agrees that, as of
the effective date of this Lease and of each Schedule: (a) Lessee has the form of business
organization indicated, and is and will remain duly organized and existing in good standing under
the laws of the state specified, under Lessee’s signature and is duly qualified to do business
wherever necessary to perform its obligations under the Lease Documents, including each
jurisdiction in which the Equipment is or will be located. Lessee’s legal name is as shown in the
preamble of this Lease; and Lessee’s Federal Employer Identification Number and organizational
number are as set forth under Lessee’s signature. Within the previous six (6) years, Lessee has
not changed its name, done business under any other name, or merged or been the surviving entity of
any merger, except as disclosed to Lessor in writing. (b) The Lease Documents (i) have been duly
authorized by all necessary action consistent with Lessee’s form of organization, (ii) do not
require the approval of, or giving notice to, any governmental authority, (iii) do not contravene
or constitute a default under any applicable law, Lessee’s organizational documents, or any
agreement, indenture, or other instrument to which Lessee is a party or by which it may be bound,
and (iv) constitute legal, valid and binding obligations of Lessee enforceable against Lessee, in
accordance with the terms thereof. (c) 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 have a Material Adverse Effect. As used herein, “Material Adverse Effect”
shall mean (i) a materially adverse effect on the business, condition (financial or otherwise),
operations, performance or properties of Lessee, or on Lessor’s rights and remedies under this
Lease, or (ii) a




 









 







material impairment of the ability of Lessee to perform its obligations under or remain in
compliance with such Schedule or any of the other Lease Documents. Further, Lessee is not in
default under any financial or other material agreement that, either individually, or in the
aggregate, would have the same such effect. (d) All of the Equipment covered by such Schedule is
located solely in the jurisdiction(s) specified in such Schedule. (e) Under the applicable laws of
each such jurisdiction, such Equipment consists (and shall continue to consist) solely of personal
property and not fixtures. Such Equipment is removable from and is not essential to the premises
at which it is located. (f) The financial statements of PowerSecure International, Inc.
(“Guarantor”) (copies of which have been furnished to Lessor, or have been made publicly available
in filings with the Securities and Exchange Commission (“SEC”)) have been prepared in accordance
with generally accepted accounting principles consistently applied (“GAAP”), and fairly present, in
all material respects, Guarantor’s financial condition and the results of its operations as of the
date of and for the period covered by such statements, and since the date of such statements there
has been no material adverse change in such conditions or operations. (g) With respect to any
Collateral, Lessee has good title to, rights in, and/or power to transfer all of the same. (h)
The Supplier is not an affiliate of Lessee. (i) The Supply Contract (as such term is hereinafter
defined) represents an arms’ length transaction and the purchase price for the Equipment specified
therein is the amount obtainable in an arms’ length transaction between a willing and informed
buyer and a willing and informed seller under no compulsion to sell.



4. FURTHER ASSURANCES AND OTHER COVENANTS. Lessee agrees as follows: (a) Lessee will furnish
Lessor with (1) Guarantor’s balance sheet, statement of income and statement of retained earnings,
prepared in accordance with GAAP, certified by a recognized firm of certified public accountants,
within one hundred twenty (120) days of the close of each fiscal year of Guarantor, (2) Guarantor’s
quarterly financial report certified by the chief financial officer of Guarantor, within sixty (60)
days of the close of each fiscal quarter of Guarantor, and (3) all of Guarantor’s Forms 10-K and
10-Q, if any, filed with the SEC as and when filed (by filing these SEC forms, or making them
publicly available in electronic form, in each case, within the time periods set forth in clauses
(1) and (2), Lessee shall be deemed to have satisfied the requirements of clauses (1), (2) and
(3)). (b) Lessee shall obtain and deliver to Lessor and/or promptly execute or otherwise
authenticate any documents, filings, waivers (including any landlord and mortgagee waivers),
releases and other records, and will take such further action as Lessor may reasonably request in
furtherance of Lessor’s rights under any of the Lease Documents. Lessee irrevocably authorizes
Lessor to file UCC financing statements (“UCCs”), and other filings with respect to the Equipment
or any Collateral. Without Lessor’s prior written consent, Lessee agrees not to file any
corrective or termination statements or partial releases with respect to any UCCs filed by Lessor
pursuant to this Lease. (c) Lessee shall provide written notice to Lessor: (1) thirty (30) days
prior to any change in Lessee’s name or jurisdiction or form of organization; (2) promptly upon the
occurrence of any Event of Default (as defined in Section 15) or event which, with the lapse of
time or the giving of notice, or both, would become an Event of Default (a “Default”); and (3)
promptly upon Lessee becoming aware of any alleged material violation of applicable law relating to
the Equipment or this Lease. (d) Lessee has been advised by Lessor that the USA Patriot Act
establishes minimum standards of account information to be collected and maintained by Lessor, and
that to help the government fight the funding of terrorism and money laundering activities, Federal
law requires all financial institutions to obtain, verify and record information that identifies
each person who opens an account; and specifically, this means that when Lessee executes this
Lease, Lessor may ask for Lessee’s name and address, the date of birth of the officers executing
this Lease, and other information that will allow Lessor to identify Lessee; and that Lessor may
also ask to see the driver’s license or other identifying documents of the officers of Lessee
executing this Lease. (e) Lessee is and will remain in compliance in all material respects with all
applicable laws including, without limitation, (i) ensuring that no person who owns a controlling
interest in or otherwise controls Lessee is or shall be (A) listed on the Specially Designated
Nationals and Blocked Person List maintained by the Office of Foreign Assets Control (“OFAC”),
Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any
authorizing statute, Executive Order or regulation, or (B) a person designated under Sections 1(b),
(c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or
any other similar Executive Orders, and (ii) compliance with all applicable Bank Secrecy Act
(“BSA”) laws, regulations and government guidance on BSA compliance and on the prevention and
detection of money laundering violations.



5. CONDITIONS PRECEDENT. Lessor’s agreement to purchase and lease any Equipment under a Schedule,
is conditioned upon Lessor’s determination that all of the following have been satisfied: (a)
Lessor having received the following, in form and substance reasonably satisfactory to Lessor: (1)
evidence as to due compliance with the insurance provisions of Section 11; (2) if requested, lien
searches in the jurisdiction of Lessee’s organization, and wherever else Lessor deems appropriate;
(3) UCCs and all other filings required by Lessor; (4) a certificate of an appropriate officer of
Lessee certifying: (A) resolutions duly authorizing the transactions contemplated in the applicable
Lease Documents, and (B) the incumbency and signature of the officers of Lessee authorized to
execute such documents; (5) if requested by Lessor, an opinion of counsel for Lessee as to each of
the matters set forth in sub-parts (a) through (c) of Section 3; (6) the only manually executed
original of the Schedule, and counterpart originals of all other Lease Documents; (7) all purchase
documents pertaining to the Equipment (collectively, the “Supply Contract”); (8) if requested by
Lessor, good




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standing certificates from the jurisdiction of Lessee’s organization and the location of the
Equipment, and evidence of Lessee’s organizational number; (9) a true and complete copy of the Load
Curtailment Services Agreement or substantially similar agreement (the “Services Agreement”) then
having been executed between Lessee and its customer (a “Customer”) requiring the deployment of the
Equipment described on the Schedule, certified by an appropriate officer of Lessee, which Services
Agreement shall include a provision providing to Lessee access to the location at which the
Equipment will be used (the “Premises”) (provided, however, that the Services Agreement shall be
held and treated as confidential information as and to the same extent that Lessor treats its own
confidential information, and the Services Agreement will not be provided to any Assignee (as such
term is hereinafter defined) unless such Assignee agrees to hold and treat the Services Agreement
confidentially as and to the same extent that such Assignee treats its own confidential
information); (10) the Master Lease Guaranty (the “Guaranty”), in form and substance satisfactory
to Lessor, duly executed by Guarantor; (11) a certificate of Guarantor’s secretary certifying: (A)
resolutions duly authorizing the undertaking to guarantee the payment and performance of the
obligations of Lessee under this Lease, and (B) the incumbency and signature of the officers of
Guarantor authorized to execute the Guaranty; (12) an opinion of counsel for Guarantor as to each
of the matters set forth in Subparts (a)(1) and (2), (b) and (c) of Section 4 of the Guaranty; (13)
with respect to each Premises: (A) an Agreement executed by the applicable Customer (the
“Agreement”) consenting to the assignment by Lessee to Lessor of Lessee’s rights to access the
Premises pursuant to the Services Agreement; and (B) if the Premises are not owned by the
applicable Customer, either a real property waiver or evidence that the real property lease with
respect to the Premises expressly acknowledges that the nature of the Equipment does not constitute
real property fixtures, permitting Lessor to access the Premises to remove the Equipment after the
occurrence of an Event of Default, in either case reasonably satisfactory to Lessor; and (14) such
other documents, agreements, instruments, certificates, opinions, and assurances, as Lessor
reasonably may require. (b) All representations and warranties provided by Lessee in favor of
Lessor in any of the Lease Documents shall be true and correct on the effective date of the related
Schedule (Lessee’s execution and delivery of the Schedule shall constitute Lessee’s acknowledgment
of the same). (c) There shall be no Default or Event of Default under the Schedule or any other
Lease Documents. The Equipment shall have been delivered to and accepted by Lessee, as evidenced by
the Schedule, and shall be in the condition and repair required hereby; and on the effective date
of such Schedule Lessor shall have received good title to the Equipment described therein, free and
clear of any claims, liens, attachments, rights of others and legal processes (“Liens”).



6. ACCEPTANCE UNDER LEASE. Upon delivery, Lessee shall inspect and, if conforming to the condition
required by the applicable Supply Contract, accept the Equipment and execute and deliver to Lessor
a Schedule describing such Equipment. The Schedule will evidence Lessee’s unconditional and
irrevocable acceptance under the Schedule of the Equipment described therein. However, if Lessee
fails to accept delivery of any item of the Equipment, or accepts such Equipment but fails to
satisfy any or all of the other conditions set forth in Section 5, Lessor shall have no obligation
to purchase or lease such Equipment. In such event, Lessor’s rights shall include, among other
things, the right to demand that Lessee (a) fully assume all obligations as purchaser of the
Equipment, with the effect of causing Lessor to be released from any liability relating thereto,
(b) immediately remit to Lessor an amount sufficient to reimburse it for all advance payments,
costs, taxes or other charges paid or incurred with respect to the Equipment (including any of such
amounts paid by Lessor to Supplier under the Supply Contract or as a reimbursement to Lessee),
together with interest at the Default Rate accruing from the date or dates such amounts were paid
by Lessor until indefeasibly repaid by Lessee in full, and (c) take all other actions necessary to
accomplish such assumption.



7. USE AND MAINTENANCE. (a) Lessee shall (1) use the Equipment solely in the continental United
States and in the conduct of its business, for the purpose for which the Equipment was designed, in
a careful and proper manner, and shall not permanently discontinue use of the Equipment; (2)
operate, maintain, service and repair the Equipment, and maintain all material records and other
materials relating thereto, (A) in accordance and consistent with (i) the Supplier’s
recommendations and all maintenance and operating manuals or service agreements, whenever furnished
or entered into, including any subsequent amendments or replacements thereof, issued by the
Supplier or service provider, (ii) the requirements of all applicable insurance policies, (iii) the
Supply Contract, so as to preserve all of Lessee’s and Lessor’s rights thereunder, including all
rights to any warranties, indemnities or other rights or remedies, (iv) all applicable laws, and
(v) the prudent practice of other similar companies in the same business as Lessee, but in any
event, to no lesser standard than that employed by Lessee for comparable equipment owned or leased
by it; and (B) without limiting the foregoing, so as to cause the Equipment to be in good repair
and operating condition and in at least the same condition as when delivered to Lessee hereunder,
except for ordinary wear and tear resulting despite Lessee’s full compliance with the terms hereof;
(3) provide written notice to Lessor not less than thirty (30) days after any change of the
location of any Equipment (or the location of the principal garage of any Equipment, to the extent
that such Equipment is mobile equipment) as specified in the Schedule; and (4) not attach or
incorporate the Equipment to or in any other property in such a manner that the Equipment is an
inseparable accession to or a part of such other property. (b) Within a




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reasonable time, Lessee will replace any parts of the Equipment which become worn out, lost,
destroyed, damaged beyond repair or otherwise unfit for use, by new or reconditioned replacement
parts which are free and clear of all Liens and have a value, utility and remaining useful life at
least equal to the parts replaced (assuming that they were in the condition required by this
Lease). Any modification or addition to the Equipment that is required by this Lease shall be made
by Lessee. Title to all such parts, modifications and additions to the Equipment which are
essential to the operation of the Equipment or the absence of which would materially adversely
affect the value, utility or remaining useful life of the Equipment (“Non-Severable Improvements”),
immediately shall vest in Lessor, without any further action by Lessor or any other person, and
they shall be deemed incorporated in the Equipment for all purposes of the related Schedule.
Unless replaced in accordance with this Section, Lessee shall not remove any parts originally or
from time to time attached to the Equipment, if such parts are essential to the operation of the
Equipment, are required by any other provision of this Lease or cannot be detached from the
Equipment without materially interfering with the operation of the Equipment or materially
adversely affecting the value, utility and remaining useful life which the Equipment would have had
without the addition of such parts. Except as permitted in this Section, Lessee shall not make any
material alterations to the Equipment, except to improve the performance of the Equipment, or
compensate or correct for any deficiencies in the Equipment causing performance issues in the
application for which the Equipment is deployed. (c) Upon three (3) business days’ notice, Lessee
shall afford Lessor and/or its designated representatives access to the premises where the
Equipment is located for the purpose of inspecting such Equipment and all applicable maintenance or
other records relating thereto at any reasonable time during normal business hours; provided,
however, if a Default or Event of Default shall have occurred and then be continuing, no notice of
any inspection by Lessor shall be required. If any discrepancies are found that materially
adversely affect the value, utility or remaining useful life of the Equipment, Lessor will
communicate these discrepancies to Lessee in writing. Lessee shall then have sixty (60) days to
rectify these discrepancies at its sole expense, or Lessee may determine that such item of the
Equipment has suffered a Total Loss (as such term is hereinafter defined), in which case the
provisions of Section 12 hereof shall apply. Lessee shall pay all expenses of a re-inspection by
Lessor’s appointed representative, if corrective measures were required.



8. DISCLAIMER; QUIET ENJOYMENT. (a) THE EQUIPMENT IS LEASED HEREUNDER “AS IS, WHERE IS”. LESSOR
SHALL NOT BE DEEMED TO HAVE MADE, AND HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED, AS TO THE EQUIPMENT, INCLUDING ANY PART, OR ANY MATTER WHATSOEVER, INCLUDING,
AS TO EACH ITEM OF EQUIPMENT, ITS DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR
PURPOSE, TITLE, ABSENCE OF ANY PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OR LATENT DEFECT
(WHETHER OR NOT DISCOVERABLE BY LESSEE), COMPLIANCE OF SUCH ITEM WITH ANY APPLICABLE LAW,
CONFORMITY OF SUCH ITEM TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE DOCUMENT OR TO THE
DESCRIPTION SET FORTH IN THE RELATED SCHEDULE OR ANY OF THE OTHER LEASE DOCUMENTS, OR ANY
INTERFERENCE OR INFRINGEMENT (EXCEPT AS EXPRESSLY PROVIDED IN SECTION 8(b)), OR ARISING FROM ANY
COURSE OF DEALING OR USAGE OF TRADE, NOR SHALL LESSOR BE LIABLE, FOR ANY INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY IN TORT; AND LESSEE HEREBY
WAIVES ANY CLAIMS ARISING OUT OF ANY OF THE FOREGOING. Without limiting the foregoing, Lessor will
not be responsible to Lessee or any other person with respect to, and Lessee agrees to bear sole
responsibility for, any risk or other matter that is the subject of Lessor’s disclaimer; and
Lessor’s agreement to enter into this Lease and any Schedule is in reliance upon the freedom from
and complete negation of liability or responsibility for the matters so waived or disclaimed herein
or covered by the indemnity in this Lease. So long as no Event of Default has occurred, Lessee may
exercise Lessor’s rights, if any, under any warranty with respect to the Equipment. Lessee’s
exercise of such rights shall be at its sole risk, shall not result in any prejudice to Lessor, and
may be exercised only during the term of the related Schedule. Lessee shall not attempt to enforce
any such warranty by legal proceeding without Lessor’s prior written approval (which approval shall
not unreasonably be withheld). (b) Lessor warrants that during the term of each Schedule, so long
as no Event of Default has occurred, Lessee’s possession and use of the Equipment leased thereunder
shall not be interfered with by Lessor or anyone rightfully claiming an interest through Lessor.
The preceding warranty is in lieu of all other warranties by Lessor, whether written, oral or
implied, with respect to this Lease or the Equipment. Any actual or purported breach of this
warranty shall not give rise to any Abatement, but Lessee may bring a direct cause of action
against Lessor for any actual damages directly resulting from any such breach.



9. FEES AND TAXES. Lessee agrees to: (a) (1) if permitted by law, file in Lessee’s own name or on
Lessor’s behalf, directly with all appropriate taxing authorities all declarations, returns,
inventories and other documentation with respect to any personal property taxes (or any other taxes
in the nature of or imposed in lieu of property taxes) due or to become due with respect to the
Equipment, and if not so permitted by law, to promptly notify Lessor and provide it with all
information required in order for Lessor to timely file all such declarations, returns,
inventories, or other documentation, and (2) pay on or before the date when due all such taxes
assessed, billed or otherwise payable with respect to the




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Equipment directly to the appropriate taxing authorities; (b) (1) pay when due as requested by
Lessor, and (2) defend and indemnify Lessor on a net after-tax basis against liability for all
license and/or registration fees, assessments, and sales, use, property, excise, privilege, value
added and other taxes or other charges or fees now or hereafter imposed by any governmental body or
agency upon the Equipment or with respect to the manufacture, shipment, purchase, ownership,
delivery, installation, leasing, operation, possession, use, return, or other disposition thereof
or the Rent hereunder (other than taxes on or measured solely by the net income of Lessor); and (c)
indemnify Lessor against any penalties, charges, interest or costs imposed with respect to any
items referred to in clauses (a) and (b) above (the items referred to in clauses (a), (b), and (c)
above being referred to herein as “Impositions”). Any Impositions which are not paid when due and
which are paid by Lessor shall, at Lessor’s option, become immediately due from Lessee to Lessor.



10. TITLE; GRANTING CLAUSE. (a) Lessee and Lessor intend that: (1) each Schedule, incorporating by
reference the terms of this Lease, constitutes a true “lease” and a “finance lease” as such terms
are defined in Article 2A and not a sale or retention of a security interest; and (2) Lessor is and
shall remain the owner of each item of Equipment (unless sold by Lessor pursuant to any Lease
Document), and Lessee shall not acquire any right, title or interest in or to such Equipment except
the right to use it in accordance with the terms of the related Schedule. (b) In order to secure
the prompt payment of the Rent and all of the other amounts from time to time outstanding with
respect hereto and to each Schedule, and the performance and observance by Lessee of all of the
provisions hereof and thereof and of all of the other Lease Documents, Lessee hereby collaterally
assigns, grants and conveys to Lessor a security interest in and lien on all of Lessee’s right,
title and interest in and to all of the following (whether now existing or hereafter created, and
including any other collateral described on any rider hereto; the “Collateral”): (1) (if contrary
to the parties’ intentions a court determines that such Schedule is not a true “lease” under the
UCC) the Equipment described in such Schedule or otherwise covered thereby, together with all
software furnished by the Supplier and Non-Severable Improvements, and any and all substitutions,
replacements or exchanges for any such item of Equipment, in each such case in which Lessee shall
from time to time acquire an interest; (2) the rights of Lessee to access the Premises and to
remove the Equipment pursuant to all Service Agreements now or hereafter executed with respect to
the Equipment; and (3) any and all insurance and/or other proceeds of the property and other
collateral in and against which a security interest is granted hereunder. (c) The collateral
assignment, security interest and lien granted herein shall survive the termination, cancellation
or expiration of each Schedule until such time as Lessee’s obligations thereunder are fully and
indefeasibly discharged. (d) If contrary to the parties’ intentions a court determines that any
Schedule is not a true “lease”, the parties agree that in such event Lessee agrees that: (1) with
respect to the Equipment, in addition to all of the other rights and remedies available to Lessor
hereunder upon the occurrence of a Default, Lessor shall have all of the rights and remedies of a
first priority secured party under the UCC; and (2) any obligation to pay Basic Rent or any Other
Payment, to the extent constituting the payment of interest, shall be at an interest rate that is
equal to the lesser of the maximum lawful rate permitted by applicable law or the effective
interest rate used by Lessor in calculating such amounts.



11. INSURANCE. Upon acceptance under a Schedule, until the Equipment is returned to Lessor in
accordance with this Lease, Lessee shall maintain insurance coverage with respect to the Equipment
insuring against customary risks, including: (a) any casualty to the Equipment (or any portion
thereof), including loss or damage due to fire and the risks normally included in extended
coverage, malicious mischief and vandalism, for not less than the full replacement value of the
Equipment; and (b) any commercial liability arising in connection with the Equipment, including
both bodily injury and property damage with a combined single limit per occurrence of not less than
the amount specified in the Schedule; having a deductible reasonably satisfactory to Lessor. The
required insurance policies (including endorsements) shall (i) be in form and amount reasonably
satisfactory to Lessor, and written by insurers of recognized reputation and responsibility
satisfactory to Lessor (but such insurer shall carry a current rating by A.M. Best Company of at
least “A-” for a general policyholder and a financial rating of at least “VIII”), (ii) be endorsed
to name Lessor as an additional insured (but without responsibility for premiums), (iii) provide
that any amount payable under the required casualty coverage shall be paid directly to Lessor as
sole loss payee, and (iv) provide for thirty (30) days’ written notice by such insurer of
cancellation, material change, or non-renewal.



12. LOSS AND DAMAGE. (a) At all times until the Equipment is returned to Lessor in accordance
with this Lease, Lessee shall bear the risk of loss, theft, confiscation, taking, unavailability,
damage or partial destruction of the Equipment and shall not be released from its obligations under
any Schedule or other Lease Document in any such event. (b) Lessee shall provide prompt written
notice to Lessor of any Total Loss or any material damage to the Equipment. Any such notice must
be provided together with any damage reports provided to any governmental authority, the insurer or
Supplier, and any documents pertaining to the repair of such damage, including copies of work
orders, and all invoices for related charges. (c) Without limiting any other provision hereof,
Lessee shall repair all material damage to any item of Equipment from any and all causes, other
than a Total Loss, so as to cause it to be in the condition and repair required by this Lease. (d)
A “Total Loss” shall be deemed to have occurred to an item of Equipment upon: (1) the actual or
constructive total loss of any item




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of the Equipment, (2) the loss, disappearance, theft or destruction of any item of the Equipment,
or damage to any item of the Equipment that is uneconomical to repair or renders it unfit for
normal use, or (3) the condemnation, confiscation, requisition, seizure, forfeiture or other taking
of title to or use of any item of the Equipment or the imposition of any Lien thereon by any
governmental authority. On the next rent payment date following a Total Loss (a “Loss Payment
Date”), Lessee shall either: (x) replace the item or items of the Equipment with respect to which
the Total Loss has occurred (the “Lost Equipment”) with replacement items, provided that (A) such
replacement item is free and clear of all Liens, (B) such replacement item has a value, utility and
remaining useful life at least equal to, and is in as good an operating condition as, the Lost
Equipment (assuming that such item of Lost Equipment was in the condition and repair required by
the terms hereof immediately prior to the occurrence of such Total Loss), and (C) Lessee, at its
own cost and expense, furnishes to Lessor such documents evidencing such conveyance, and makes such
filings, as Lessor shall reasonably request to subject such replacement item to this Lease; or (y)
pay to Lessor the Basic Rent due on that date plus the Stipulated Loss Value of the Lost Equipment,
together with any Other Payments due hereunder with respect to the Lost Equipment. Upon making
such payment, (i) Lessee’s obligation to pay future Basic Rent shall terminate solely with respect
to the items of Lost Equipment so paid for, but Lessee shall remain liable for, and pay as and when
due, all Other Payments, and (ii) Lessor shall convey to Lessee all of Lessor’s right, title and
interest in the Lost Equipment, “AS IS WHERE IS”, but subject to the requirements of any third
party insurance carrier in order to settle an insurance claim. As used in this Lease, “Stipulated
Loss Value” shall mean the product of the Total Invoice Cost of the Lost Equipment, times the
percentage factor applicable to the Loss Payment Date, as set forth in the Schedule of Stipulated
Loss Values incorporated in such Schedule. After the final rent payment date of the original term
or any renewal term of a Schedule, the Stipulated Loss Value shall be determined as of the last
rent payment date during the applicable term of such Schedule, and the applicable percentage factor
shall be the last percentage factor set forth in the Schedule of Stipulated Loss Values
incorporated in such Schedule. (e) Lessor shall be under no duty to Lessee to pursue any claim
against any person in connection with a Total Loss or other loss or damage. (f) If Lessor receives
a payment under an insurance policy required under this Lease in connection with any Total Loss or
other loss of or damage to an item of Equipment, and such payment is both unconditional and
indefeasible, then provided Lessee shall have complied with the applicable provisions of this
Section, Lessor shall either (1) if received pursuant to a Total Loss, remit such proceeds to
Lessee up to an amount equal to the amount paid by Lessee to Lessor as the Stipulated Loss Value,
or credit such proceeds against any amounts owed by Lessee pursuant to Section 12(d), or (2) if
received with respect to repairs made pursuant to Section 12(c), remit such proceeds to Lessee up
to an amount equal to the amount of the costs of repair actually incurred by Lessee, as established
to Lessor’s satisfaction. Any excess insurance proceeds shall be returned to Lessee, so long as no
Default or Event of Default has occurred and is continuing.



13. REDELIVERY. (a) Lessee shall provide written notice to Lessor not less than one hundred
eighty (180) days and not more than three hundred sixty-five (365) days prior to the expiration of
the term of any Schedule (or of any renewal thereof, if applicable) of Lessee’s intent to return
the Equipment described on such Schedule to Lessor upon the expiration of the term of such
Schedule. IF LESSEE FAILS TO PROVIDE THE FOREGOING NOTICE IN A TIMELY MANNER, THE TERM OF THE
APPLICABLE SCHEDULE AUTOMATICALLY SHALL BE DEEMED TO HAVE BEEN EXTENDED, WHICH EXTENSION SHALL
CONTINUE UNTIL ONE HUNDRED EIGHTY (180) DAYS AFTER THE DATE ON WHICH LESSEE PROVIDES THE REQUIRED
NOTICE, DURING WHICH EXTENSION PERIOD LESSEE SHALL CONTINUE TO PAY TO LESSOR PER DIEM RENT AT THE
LAST PREVAILING LEASE RATE UNDER THE APPLICABLE SCHEDULE; provided, however that Lessor may elect
to terminate such extension at any time upon ten (10) days written notice to Lessee. During such
extension period, the terms and conditions of this Lease (including, without limitation, the
provisions of this Section 13) shall continue to be applicable. Solely for purposes of the
definition of Stipulated Loss Value in Section 12(d) hereof, any such extension shall be deemed a
renewal of the term of such Schedule. (b) Upon the expiration or earlier cancellation or
termination of any Schedule, Lessee shall return the Equipment described on such Schedule to
Lessor free and clear of all Liens whatsoever, to such place(s) within North America as Lessor
shall specify. Lessee shall provide, at its expense, transit insurance for the redelivery period
in an amount equal to the replacement value of such Equipment and Lessor shall be named as the
loss payee on all such policies of insurance. Lessee shall cause: (1) the Supplier’s
representative or other qualified person reasonably acceptable to Lessor (the “Designated Person”)
to de-install such Equipment in accordance with the Supplier’s specifications (as applicable) and
pack such Equipment properly and in accordance with the Supplier’s recommendations (as
applicable); and (2) such Equipment to be transported in a manner consistent with the Supplier’s
recommendations and practices (as applicable). Upon return, such Equipment shall be: (i) in the
same condition as when delivered to Lessee under the related Schedule, ordinary wear and tear
excepted; (ii) mechanically and structurally sound, capable of performing the functions for which
such Equipment was originally designed, in accordance with the Supplier’s published and
recommended specifications (as applicable); (iii) redelivered with all component parts in good
operating condition (and all components must meet or exceed the Supplier’s minimum recommended
specifications, unless otherwise agreed by Lessor in writing); (iv) redelivered with all software
and documentation necessary for the operation of such Equipment




6









 







for the performance of the functions for which such Equipment was originally designed (whether or
not such software is embedded in or otherwise is a part of such Equipment); and (v) cleaned and
cosmetically acceptable, with all Lessee-installed markings removed and all material rust,
corrosion or other contamination having been removed or properly treated, and in such condition so
that it may be immediately installed and placed in service by a third party. Upon delivery, such
Equipment shall be in compliance with all applicable Federal, state and local laws, and health and
safety guidelines. Lessee shall be responsible for the cost of all repairs, alterations,
inspections, appraisals, storage charges, insurance costs, demonstration costs and other related
costs necessary to cause such Equipment to be in full compliance with the terms of this Lease.
(c) If requested by Lessor, Lessee shall also deliver all related records and other data to
Lessor, including all records of major maintenance, modifications, additions and major repairs,
computerized maintenance history, and any maintenance and repair manuals (collectively, the
“Records”). All manuals or other documents delivered to Lessor that are subject to periodic
revision will be fully up-to-date and current to the latest revision standard of any particular
manual or document. In the event any such Records are missing or incomplete, Lessor shall have the
right to cause the same to be reconstructed at Lessee’s expense. (d) In addition to Lessor’s other
rights and remedies hereunder, if such Equipment is not returned in a timely fashion, or if
repairs are necessary to place any item of Equipment in the condition required in this Section,
Lessee shall (i) continue to pay to Lessor per diem rent at the last prevailing lease rate under
the applicable Schedule with respect to such item of Equipment, for the period of delay in
redelivery, and/or for the period of time reasonably necessary to accomplish such repairs, and
(ii) pay to Lessor an amount equal to the aggregate cost of any such repairs. Lessor’s acceptance
of such rent on account of such delay and/or repair does not constitute an extension or renewal of
the term of the related Schedule or a waiver of Lessor’s right to prompt return of such Equipment
in proper condition. Such amount shall be payable upon the earlier of Lessor’s demand or the
return of such Equipment in accordance with this Lease. (e) Without limiting any other terms or
conditions of this Lease, the provisions of this Section are of the essence of each Schedule, and
upon application to any court of equity having jurisdiction, Lessor shall be entitled to a decree
against Lessee requiring Lessee’s specific performance of its agreements in this Section.



14. INDEMNITY. (a) General. Lessee shall indemnify, defend and keep harmless Lessor and
any Assignee (as defined in Section 17), and their respective agents and employees (each, an
“Indemnitee”), from and against any and all Claims (other than such as may directly and proximately
result from the actual, but not imputed, gross negligence or willful misconduct of such
Indemnitee), by paying, on a net after-tax basis, or otherwise discharging same, when and as such
Claims shall become due. Lessee agrees to indemnify each such Indemnitee with respect to Claims
for which such Indemnitee is strictly liable. Lessor shall give Lessee prompt notice of any Claim
hereby indemnified against and Lessee shall be entitled to control the defense of and/or to settle
any Claim, in each case, so long as (1) no Default or Event of Default has occurred and is then
continuing, (2) Lessee confirms, in writing, its unconditional and irrevocable commitment to
indemnify each Indemnitee with respect to such Claim in accordance with the terms of this Lease,
(3) Lessee is financially capable of satisfying its obligations under this Section, (4) Lessor
approves the defense counsel selected by Lessee (which approval shall not unreasonably be
withheld), and (5) there is no reasonable risk of criminal liability being imposed on Lessor or any
of its directors, officers or employees as a result of such Claim. The term “Claims” shall mean
all claims, allegations, harms, judgments, settlements, suits, actions, debts, obligations, damages
(whether incidental, consequential or direct), demands (for compensation, indemnification,
reimbursement or otherwise), losses, penalties, fines, liabilities (including strict liability),
charges that Lessor has incurred or for which it is responsible, in the nature of interest, Liens,
and costs (including attorneys’ fees and disbursements and any other legal or non-legal expenses of
investigation or defense of any Claim, whether or not such Claim is ultimately defeated or
enforcing the rights, remedies or indemnities provided for hereunder, or otherwise available at law
or equity to Lessor), of whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, by or against any person, arising on account of (A) any Lease
Document, including the performance, breach (including any Default or Event of Default) or
enforcement of any of the terms thereof, or (B) the Equipment, or any part or other contents
thereof, any substance at any time contained therein or emitted therefrom, including any hazardous
substances, or the premises at which the Equipment may be located from time to time, or (C) the
ordering, acquisition, delivery, installation or rejection of the Equipment, the possession of any
property to which it may be attached from time to time, maintenance, use, condition, ownership or
operation of any item of Equipment, and by whomsoever owned, used, possessed or operated, during
the term of any Schedule with respect to that item of Equipment, the existence of latent and other
defects (whether or not discoverable by Lessor or Lessee) any claim in tort for negligence or
strict liability, and any claim for patent, trademark or copyright infringement, or the loss,
damage, destruction, theft, removal, return, surrender, sale or other disposition of the Equipment,
or any item thereof, including, Claims involving or alleging environmental damage, or any criminal
or terrorist act, or for whatever other reason whatsoever. If any Claim is made against Lessee or
an Indemnitee, the party receiving notice of such Claim shall promptly notify the other, but the
failure of the party receiving notice to so notify the other shall not relieve Lessee of any
obligation hereunder except as and to the extent that any delay or failure by an Indemnitee to
notify Lessee of a Claim materially adversely prejudices or affects
Lessee’s ability to defend
against such Claim. Notwithstanding the foregoing, Lessee shall have no duty or obligation under
this Section 14 with respect to Claims (i) to


7









 






the extent such Claims are otherwise covered by insurance proceeds, or (ii) for any loss of income,
profits, sales or savings or other similar damages, or (iii) that are caused by the gross
negligence, willful misconduct, recklessness or fraud of the applicable Indemnitee.




     (b) Tax Indemnity. (1) Lessee represents and warrants that: (A) it believes that it
is reasonable to estimate that the useful life of the Equipment exceeds the lease term (including
any interim and fixed rental renewal periods) by the greater of one (1) year or twenty (20) percent
of such estimated useful life, and that said Equipment will have a value at the end of the lease
term, including any fixed rate renewal period, of at least twenty (20) percent of the Total Invoice
Cost of the Equipment, without including in such value any increase or decrease for inflation or
deflation during the original lease term; and (B) the Equipment is, and will be used by Lessee so
as to remain, property eligible for the MACRS Deductions (as defined below).



          (2) (A) If by reason by (i) any act or failure to act of Lessee (including a breach of any
covenant or agreement of Lessee set forth in this Lease), or (ii) the misrepresentation of or
breach by Lessee of any of the warranties and representations set forth in Section 14(b)(1) of this
Lease, Lessor in computing its taxable income or liability for tax, shall lose, or shall not have,
or shall lose the right to claim or there shall be disallowed or recaptured for Federal and/or
state income tax purposes, in whole or in part, the benefit of MACRS Deductions; or (B) Lessor
shall become liable for additional tax as a result of Lessee having added an attachment or made an
alteration to the Equipment, including (without limitation) any such attachment or alteration which
would increase the productivity or capability of the Equipment so as to violate the provisions of
Rev. Proc. 2001-28, 2001-1 C.B. 1156 (as it may hereafter be modified or superseded); hereinafter
referred to as a “Loss”; then Lessee shall pay Lessor the Tax Indemnification Payment as additional
rent and Lessor shall revise the Schedule(s) of Stipulated Loss Values to reflect the Loss. As
used herein, “MACRS Deductions” shall mean the deductions under Section 167 of the Internal Revenue
Code of 1986, as now or hereafter amended (the “Code”), determined in accordance with the modified
Accelerated Cost Recovery System with respect to the Total Invoice Cost of any item of the
Equipment using the accelerated method set forth in Section 168(b)(1) or 168(b)(2) of the Code as
in effect on the date of this Lease for property assigned to the class of property specified in the
Schedule pertaining thereto and taking into account, unless otherwise stated on such Schedule, the
fifty (50) percent special depreciation allowance and basis adjustment under Section 168(k)(1) of
the Code; “Lessor” shall be deemed to include the consolidated Federal taxpayer group of which
Lessor is a member; and “Tax Indemnification Payment” shall mean such amount as, after
consideration of (i) all taxes required to be paid by Lessor in respect of the receipt thereof
under the laws of any governmental or taxing authority in the United States, and (ii) the amount of
any interest or penalty which may be payable by Lessor in connection with the Loss, shall be
required to cause Lessor’s after-tax net return (the “Net Return”) to be equal to, but no greater
than, the Net Return computed consistently with current tax laws (and with the assumption that
Lessor is taxed at the highest marginal Federal and state tax rates) as of the date of this Lease
that would have been available to Lessor had the Loss not occurred.



          (3) Lessor promptly shall notify Lessee in writing of such Loss and Lessee shall pay to Lessor
the Tax Indemnification Payment within thirty (30) days of such notice. For these purposes, a Loss
shall occur upon the earliest of: (A) the happening of any event (such as disposition or change in
use of any item of the Equipment) which will cause such Loss, (B) the payment by Lessor to the
Internal Revenue Service or state taxing authority of the tax increase (including an increase in
estimated taxes) resulting from such Loss; (C) the date on which the Loss is realized by Lessor; or
(D) the adjustment of the tax return of Lessor to reflect such Loss.


15. DEFAULT. (a) A default shall be deemed to have occurred hereunder and under a Schedule upon
the occurrence of any of the following (each, an “Event of Default”): (1) non-payment of Basic
Rent on the applicable rent payment date within five (5) days after it is due; (2) non-payment of
any Other Payment within ten (10) days after it is due; (3) failure to maintain, use or operate the
Equipment in material compliance with applicable law; (4) breach by Lessee of its covenants
pursuant to Section 4(e) hereof; (5) failure to obtain, maintain and comply with all of the
insurance coverages required under this Lease; (6) any transfer or encumbrance that is prohibited
by this Lease; (7) the existence of any Lien that is prohibited by this Lease which continues for
fifteen (15) days after Lessee has actual knowledge thereof; (8) a payment or other default by
Lessee after applicable notice and grace periods under any loan, lease, guaranty or other financial
obligation to Lessor or its affiliates which default entitles the other party to such obligation to
exercise remedies; (9) a payment or other default by Lessee after applicable notice and grace
periods under any material (that is, for an amount in excess of $5,000,000.00) loan, lease,
guaranty or other material financial obligation to any third party which default has been declared;
(10) a material inaccuracy in any representation or breach of warranty by Lessee (including any
false or misleading representation or warranty) in any financial statement or Lease Document,
including any omission of any substantial contingent or unliquidated material liability or material
claim against Lessee; (11) the commencement of any bankruptcy, insolvency, receivership or similar
proceeding by or against Lessee or any of its properties or business (unless, if involuntary,




8









 







the proceeding is dismissed within sixty (60) days of the filing thereof) or the rejection of this
Lease or any other Lease Document in any such proceeding; (12) the failure by Lessee generally to
pay its debts as they become due or its admission in writing of its inability to pay the same; (13)
Lessee shall (x) enter into any transaction of merger or consolidation, unless Lessee shall be the
surviving entity (such actions being referred to as an “Event”), unless the surviving entity is
organized and existing under the laws of the United States or any state, and prior to such Event:
(A) such person executes and delivers to Lessor (i) an agreement satisfactory to Lessor, in its
sole discretion, containing such person’s effective assumption, and its agreement to pay, perform,
comply with and otherwise be liable for pursuant to the terms and conditions of this Lease, all of
Lessee’s obligations having previously arisen, or then or thereafter arising, under any and all of
the Lease Documents, and (ii) any and all other documents, agreements, instruments, certificates,
opinions and filings reasonably requested by Lessor; and (B) Lessor is satisfied as to the
creditworthiness of such person, and as to such person’s conformance to the other standard criteria
then used by Lessor when approving transactions similar to the transactions contemplated in this
Lease; (y) cease to do business as a going concern, liquidate, or dissolve; or (z) sell, transfer,
or otherwise dispose of all or substantially all of its assets or property; (14) effective control
of Lessee’s voting capital stock, issued and outstanding from time to time, is not retained by the
present holders (unless Lessee shall have provided thirty (30) days’ prior written notice to Lessor
of the proposed disposition and Lessor shall have consented thereto in writing); or (15) breach by
Lessee of any other covenant, condition or agreement (other than those in items (a)(1)-(14)) under
this Lease or any of the other Lease Documents that continues for thirty (30) days after Lessor’s
written notice to Lessee (but such notice and cure period will not be applicable unless such breach
is curable by practical means within such notice period).




     (b) The occurrence of an Event of Default with respect to any Schedule shall, at the sole
discretion of Lessor, constitute an Event of Default with respect to any or all Schedules to which
it is then a party. Notwithstanding anything to the contrary set forth herein, Lessor may exercise
all rights and remedies hereunder independently with respect to each Schedule.


16. REMEDIES. (a) If an Event of Default occurs with respect to any Schedule, the Lessor
thereunder may (in its sole discretion) exercise any one or more of the following remedies with
respect to such Schedule and any or all other Schedules to which such Lessor is then a party: (1)
proceed at law or in equity, to enforce specifically Lessee’s performance or to recover damages;
(2) declare each such Schedule in default, and cancel each such Schedule or otherwise terminate
Lessee’s right to use the Equipment and Lessee’s other rights, but not its obligations, thereunder
and Lessee shall immediately assemble, make available and, if Lessor requests, return the Equipment
to Lessor in accordance with the terms of this Lease; (3) enter any premises where any item of
Equipment is located and take immediate possession of and remove (or disable in place) such item
(and/or any unattached parts) by self-help, summary proceedings or otherwise without liability; (4)
use Lessee’s premises for storage without liability; (5) sell, re-lease or otherwise dispose of any
or all of the Equipment, whether or not in Lessor’s possession, at public or private sale, with or
without notice to Lessee, and apply or retain the net proceeds of such disposition, with Lessee
remaining liable for any deficiency and with any excess being retained by Lessor; (6) enforce any
or all of the preceding remedies with respect to any related Collateral, and apply any deposit or
other cash collateral, or any proceeds of any such Collateral, at any time to reduce any amounts
due to Lessor; (7) demand and recover from Lessee all Liquidated Damages and all Other Payments
whenever the same shall be due; and (8) exercise any and all other remedies allowed by applicable
law, including the UCC. As used herein, “Liquidated Damages” shall mean the liquidated damages
(all of which, Lessee hereby acknowledges, are damages to be paid in lieu of future Basic Rent and
are reasonable in light of the anticipated harm arising by reason of an Event of Default, and are
not a penalty) described in the first sentence of parts (1) or (2) of Section 16(b), depending upon
the recovery and disposition of the Equipment leased under the applicable Schedule. Upon the
occurrence of the Event of Default described in Section 15(a)(11) hereof, the remedy provided in
Clause (7) above shall be automatically exercised without the requirement of prior written notice
to Lessee or of any other act or declaration by Lessor, and the Liquidated Damages described
therein shall be immediately due and payable.




     (b) (1) If an Event of Default occurs with respect to any Schedule, if Lessor recovers the
Equipment and disposes of it by a lease or elects not to dispose of the Equipment after recovery,
upon demand, Lessee shall pay to Lessor an amount equal to the sum of (A) any accrued and unpaid
Rent as of the date Lessor recovers possession of the Equipment, plus (B) the present value
as of such date of the total Basic Rent for the then remaining term of such Schedule, minus
(C) either, as applicable, (i) the present value, as of the commencement date of any substantially
similar re-lease of the Equipment, of the re-lease rent payable for that period, commencing on such
date, which is comparable to the then remaining term of such Schedule or (ii) the present value, as
of that certain date which may be determined by taking into account Lessor’s having a reasonable
opportunity to remarket the Equipment, of the “market rent” for such Equipment (as computed
pursuant to Article 2A) in the continental United States on that date, computed for that period,
commencing on such date, which is comparable to the then remaining term of such Schedule; provided,
however, Lessee



9









 




acknowledges that if Lessor is unable after reasonable effort to dispose of the Equipment at a
reasonable price and pursuant to other reasonable terms, or the circumstances reasonably indicate
that such an effort will be unavailing, the “market rent” in such event will be deemed to be $0.00,
but in the event that Lessor does eventually re-lease or otherwise dispose of the Equipment, it
will apply the net proceeds of such disposition, to the extent received in good and indefeasible
funds, as a credit or reimbursement, as applicable, in a manner consistent with the applicable
provisions of Article 2A. Any amounts discounted to present value, shall be discounted at the rate
of three percent (3%) per annum, compounded annually.




          (2) If an Event of Default occurs with respect to any Schedule, if Lessee fails to return the
Equipment in the manner and condition required by this Lease, or Lessor recovers and sells the
Equipment, upon demand, Lessee shall pay to Lessor an amount calculated as the Stipulated Loss
Value of the Equipment (determined as of the next rent payment date after the date of the
occurrence of the subject Event of Default), together with all other Rent due with respect to the
related Schedule as of such determination date, and all Enforcement Costs (defined in Section
16(c)), less a credit for any disposition proceeds, if applicable pursuant to the application
provisions in the next sentence. If Lessor demands the Liquidated Damages under this part (2), and
recovers and sells the Equipment, any proceeds received in good and indefeasible funds shall be
applied by Lessor, with respect to the related Schedule: first, to pay all Enforcement
Costs, to the extent not previously paid; second, to pay to Lessor an amount equal to any
unpaid Basic Rent due and payable, together with the liquidated damage amounts specified in this
part (2), to the extent not previously paid; third, to pay to Lessor any interest accruing
on the amounts covered by the preceding clauses, at the Default Rate, from and after the date the
same becomes due, through the date of payment; and fourth, (A) if the Lessor under such
Schedule is also the Lessor under any other Schedules (whether by retaining the same, or as
Assignee), to satisfy any remaining obligations under any or all such other Schedules, or (B) if
such Lessor is not the Lessor under any other Schedule, or if Lessee’s obligations to such Lessor
under such other Schedules have been fully and indefeasibly satisfied, to reimburse Lessee for such
amounts to the extent paid by Lessee as liquidated damages pursuant to this part (2).




     (c) A cancellation of any Schedule shall occur only upon written notice by Lessor to Lessee.
Unless already specifically provided for in Section 16(b), if an Event of Default occurs with
respect to any Schedule, Lessee shall also be liable for all of the following (“Enforcement
Costs”): (1) all unpaid Rent due before, during or after exercise of any of the foregoing remedies,
and (2) all reasonable legal fees (including consultation, drafting notices or other documents,
expert witness fees, sending notices or instituting, prosecuting or defending litigation or
arbitration) and other enforcement costs and expenses incurred by reason of any Default or Event of
Default or the exercise of Lessor’s rights or remedies, including all expenses incurred in
connection with the return or other recovery of any Equipment in accordance with the terms of this
Lease or in placing such Equipment in the condition required hereby, or the sale, re-lease or other
disposition (including but not limited to costs of transportation, possession, storage, insurance,
taxes, lien removal, repair, refurbishing, advertising and brokers’ fees), and all other
pre-judgment and post-judgment enforcement related actions taken by Lessor or any actions taken by
Lessor in any bankruptcy case involving Lessee, the Equipment, or any other person. From and after
the date on which an Event of Default occurs, Lessee shall pay interest to Lessor with respect to
all amounts due hereunder until such amounts are received by Lessor in good funds at a per annum
interest rate that is the lesser of eighteen (18) percent or the maximum rate permitted by
applicable law (the “Default Rate”). No right or remedy is exclusive and each may be used
successively and cumulatively. Any failure to exercise the rights granted hereunder upon any
Default or Event of Default shall not constitute a waiver of any such right. No extension of time
for payment or performance of any of Lessee’s obligations hereunder shall operate to release,
discharge, modify, change or affect the original liability of Lessee for such obligations, either
in whole or in part. In any action to repossess any Equipment or other Collateral, Lessee waives
any bonds and any surety or security required by any applicable laws as an incident to such
repossession. Notices of Lessor’s intention to accelerate, acceleration, nonpayment, presentment,
protest, dishonor or any other notice whatsoever (other than as expressly set forth herein) are
waived by Lessee. Any notice given by Lessor of any disposition of the Equipment or any Collateral
or other intended action of Lessor which is given in accordance with this Lease at least five (5)
business days prior to such action, shall constitute fair and reasonable notice of such action. The
execution of a Schedule shall not constitute a waiver by Lessor of any pre-existing Default or
Event of Default. With respect to any disposition of any Equipment or Collateral pursuant to this
Section, (i) Lessor shall have no obligation, subject to the requirements of commercial
reasonableness, to clean-up or otherwise prepare the same for disposition, (ii) Lessor may comply
with any Applicable Law in connection with any such disposition, and any actions taken in
connection therewith shall not be deemed to have adversely affected the commercial reasonableness
of any disposition thereof, (iii) Lessor may disclaim any title or other warranties in connection
with any such disposition, and (iv) Lessee shall remain responsible for any deficiency remaining
after Lessor’s exercise of its remedies and application of any funds or credits against Lessee’s
obligations under any Schedule, and Lessor shall retain any excess after such application.



10









 




17. ASSIGNMENT. (a) WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (WHICH CONSENT SHALL NOT
UNREASONABLY BE WITHHELD), LESSEE SHALL NOT ASSIGN, DELEGATE, TRANSFER OR ENCUMBER ANY OF ITS
RIGHTS OR OBLIGATIONS HEREUNDER OR UNDER ANY SCHEDULE, OR ITS LEASEHOLD INTEREST OR ANY COLLATERAL,
SUBLET THE EQUIPMENT OR OTHERWISE PERMIT THE EQUIPMENT TO BE OPERATED OR USED BY, OR TO COME INTO
OR REMAIN IN THE POSSESSION OF, ANYONE BUT LESSEE; provided, however, that notwithstanding the
foregoing, Lessee may permit the Equipment to be operated or used by PowerSecure, Inc. in the
ordinary course of its business pursuant to a Services Agreement with its customer. Without
limiting the foregoing, (1) Lessee may not attempt to dispose of any of the Equipment, and (2)
Lessee shall (A) maintain the Equipment free from all Liens, other than Permitted Liens, (B) notify
Lessor immediately upon receipt of notice of any Lien affecting the Equipment, and (C) defend
Lessor’s title to the Equipment. A “Permitted Lien” shall mean any Lien for Impositions, Liens of
mechanics, materialmen, or suppliers and similar Liens arising by operation of law, provided that
any such Lien is incurred by Lessee in the ordinary course of business, for sums that are not yet
delinquent or are being contested in good faith and with due diligence, by negotiations or by
appropriate proceedings which suspend the collection thereof and, in Lessor’s sole discretion, (i)
do not involve any substantial danger of the sale, forfeiture or loss of the Equipment or any
interest therein, and (ii) for the payment of which adequate assurances or security have been
provided to Lessor. No disposition referred to in this Section shall relieve Lessee of its
obligations, and Lessee shall remain primarily liable under each Schedule and all of the other
Lease Documents. (b) Lessor may at any time with or without notice to Lessee grant a security
interest in, sell, assign, delegate or otherwise transfer (an “Assignment”) all or any part of its
interest in the Equipment, this Lease or any Schedule and any related Lease Documents or any Rent
thereunder, or the right to enter into any Schedule, and Lessee shall perform all of its
obligations thereunder, to the extent so transferred, for the benefit of the beneficiary of such
Assignment (such beneficiary, including any successors and assigns, an “Assignee”); provided,
however, that such Assignee is not a direct competitor of Lessee. Lessee agrees not to assert
against any Assignee any Abatement (without limiting the provisions of Section 2) or Claim that
Lessee may have against Lessor, and Assignee shall not be bound by, or otherwise required to
perform any of Lessor’s obligations, unless expressly assumed by such Assignee. Lessor shall be
relieved of any such assumed obligations. If so directed in writing, Lessee shall pay all Rent and
all other sums that become due under the assigned Schedule and other Lease Documents directly to
the Assignee or any other party designated in writing by Lessor or such Assignee. Lessee
acknowledges that Lessor’s right to enter into an Assignment is essential to Lessor and,
accordingly, waives any restrictions under applicable law with respect to an Assignment and any
related remedies. Upon the request of Lessor or any Assignee, Lessee also agrees (i) to promptly
execute and deliver to Lessor or to such Assignee an acknowledgment of the Assignment in form and
substance satisfactory to the requesting party, an insurance certificate and such other documents
and assurances reasonably requested by Lessor or Assignee, and (ii) to comply with all other
reasonable requirements of any such Assignee in connection with any such Assignment. Upon such
Assignment and except as may otherwise be provided herein, all references in this Lease to “Lessor”
shall include such Assignee. (c) Subject
always to the foregoing, this Lease and each Schedule
shall inure to the benefit of, and are binding upon, Lessee’s and Lessor’s respective successors
and assigns.



18. MISCELLANEOUS. (a) This Lease, each Schedule, any Riders hereto or thereto and any commitment
letter between the parties, constitute the entire agreement between the parties with respect to the
subject matter hereof and thereof and shall not be amended or modified in any manner except by a
document in writing executed by both parties. (b) Any provision of this Lease that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. (c) The representations, warranties and
agreements of Lessee herein shall be deemed to be continuing and to survive the execution and
delivery of this Lease, each Schedule and any other Lease Documents. With respect to each
Schedule, the obligations of Lessee under Sections 8, 9, 10, 12, 13 and 14 hereof, together with
any of Lessee’s obligations under the other provisions of this Lease (as incorporated therein)
which have accrued but not been fully satisfied, performed or complied with prior to the expiration
or earlier cancellation or termination of such Schedule, shall survive the expiration or earlier
cancellation or termination thereof. (d) All of Lessee’s obligations hereunder and under any
Schedule shall be performed at Lessee’s sole expense. Lessee shall reimburse Lessor promptly upon
demand for all reasonable expenses incurred by Lessor in connection with (1) any action taken by
Lessor at Lessee’s request, or in connection with any option, (2) the filing or recording of real
property waivers and UCCs, (3) any Enforcement Costs not recovered pursuant to Section 16, (4) all
inspections, and (5) all lien search reports (and copies of filings) requested by Lessor. If
Lessee fails to perform any of its obligations with respect to a Schedule, Lessor shall have the
right, but shall not be obligated, to effect such performance, and Lessee shall reimburse Lessor,
upon demand, for all expenses reasonably incurred by Lessor in connection with such performance.
Lessor’s effecting such compliance shall not be a waiver of Lessee’s default. (e) Lessee
irrevocably appoints Lessor as Lessee’s attorney-in-fact (which power shall be deemed coupled with
an interest) to: (1) make minor corrections to manifest errors in factual data in any Schedule
and/or any addenda, attachments, exhibits and/or riders to this Lease or any Schedule; and (2)
execute, endorse and deliver any




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documents and checks or drafts relating to or received in payment for any loss or damage under the
policies of insurance required by this Lease, but only to the extent that the same relates to the
Equipment, or are required by titling agencies in order to reflect Lessor as the owner and/or
lienholder with respect to certificates of title pertaining to motor vehicles (if any) comprising
the Equipment. (f) LESSOR AND LESSEE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH LESSEE AND/OR LESSOR MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS LEASE.
(g) All notices (excluding billings and communications in the ordinary course of business)
hereunder shall be in writing, personally delivered, delivered by overnight courier service, sent
by facsimile transmission (with confirmation of receipt), or sent by certified mail, return receipt
requested, addressed to the other party at its respective address stated below the signature of
such party or at such other address as such party shall from time to time designate in writing to
the other party; and shall be effective from the date of receipt. (h) This Lease shall not be
effective unless and until accepted by execution by an officer of Lessor at the address, in the
State of Maryland (the “State”), as set forth below the signature of Lessor. THIS LEASE AND ALL OF
THE OTHER LEASE DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER,
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF THE STATE), INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT. The parties
agree that any action or proceeding arising out of or relating to this Lease may be commenced in
any state or Federal court in the State, and agree that a summons and complaint commencing an
action or proceeding in any such court shall be properly served and shall confer personal
jurisdiction if served personally or by certified mail to it at the mailing address below Lessee’s
signature, or as it may provide in writing from time to time, or as otherwise provided under the
laws of the State. (i) This Lease and all of the other Lease Documents may be executed in
counterparts. Photocopies or facsimile transmissions of signatures shall be deemed original
signatures and shall be fully binding on the parties to the same extent as original signatures.
The transfer or possession of the “Original” of this Lease shall be irrelevant to the full or
collateral assignment of, or grant of security interest in, any Schedule; provided, however, no
security interest in any Schedule may be created through the transfer, possession or control, as
applicable, of any counterpart of such Schedule other than the original thereof, which shall be
identified as the document or record (as applicable) marked “Original” and all other counterparts
shall be marked “Duplicate”. (j) If Lessor is required by the terms hereof to pay to or for the
benefit of Lessee any amount received as a refund of an Imposition or as insurance proceeds, Lessor
shall not be required to pay such amount, if any Default has occurred and not been cured or any
Event of Default shall have occurred and not been waived by Lessor. In addition, if Lessor is
required by the terms hereof to cooperate with Lessee in connection with certain matters, such
cooperation shall not be required if a Default or Event of Default has then occurred and is
continuing. (k) To the extent Lessor is required to give its consent or approval with respect to
any matter, the reasonableness of Lessor’s withholding of such consent shall be determined based on
the then existing circumstances; provided, that Lessor’s withholding of its consent shall be deemed
reasonable for all purposes if (i) the taking of
the action that is the subject of such request,
might result (in Lessor’s discretion), in (A) an impairment of Lessor’s rights, title or interests
hereunder or under any Schedule or other Lease Document, or to the Equipment, or (B) expose Lessor
to any Claims or Impositions, or (ii) Lessee fails to provide promptly to Lessor any filings,
certificates, opinions or indemnities required by Lessor as a condition to such consent. (l) There
is no restriction (either express or implied) on any disclosure or dissemination of the tax
treatment or tax structure of the transactions contemplated by this Lease or any documents executed
in connection herewith. Further, each party hereto acknowledges that it has no proprietary rights
to any tax matter or tax idea or to any element of the transaction structure contemplated by this
Lease; and each party hereto (and any employee, representative or agent of any party hereto) may
disclose to any and all persons (without limitation of any kind), the Federal tax treatment and
Federal tax structure of the transaction contemplated by this Lease. This Section 18(l) is
intended to cause the transaction contemplated by this Lease to be treated as not having been
offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any
successor provision) of the Treasury Regulations promulgated under Section 6011 of the Code and
Section 6111 of the Code and the Treasury Regulations promulgated thereunder; and shall be
construed in a manner consistent with such purpose.



19. DEFINITIONS AND RULES OF CONSTRUCTION. (a) The following terms when used in this Lease or in
any of the Schedules have the following meanings: (1) “affiliate”: with respect to any given
person, shall mean (i) each person that directly or indirectly owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, five (5) percent or more of the voting
stock, membership interest or similar equity interest having ordinary voting power in the election
of directors or managers of such person, (ii) each person that controls, is controlled by, or is
under common control with, such person, or (iii) each of such person’s officers, directors,
members, joint venturers and partners. For the purposes of this definition, “control” of a person
means the possession, directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by contract or
otherwise; (2) “applicable law” or “law”: any law, rule, regulation, ordinance, order, code, common
law, interpretation, judgment,




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directive, decree, treaty, injunction, writ, determination, award, permit or similar norm or
decision of any governmental authority; (3) “AS IS, WHERE IS”: AS IS, WHERE IS, without warranty,
express or implied, with respect to any matter whatsoever; (4) “business day”: any day, other than
a Saturday, Sunday, or legal holiday for commercial banks under the laws of the state of the
Lessor’s notice address; (5) “governmental authority”: any federal, state, county, municipal,
regional or other governmental authority, agency, board, body, instrumentality or court, in each
case, whether domestic or foreign; (6) “person”: any individual, corporation, limited liability
entity, partnership, joint venture, or other legal entity or a governmental authority, whether
employed, hired, affiliated, owned, contracted with, or otherwise related or unrelated to Lessee or
Lessor; and (7) “UCC” or “Uniform Commercial Code”: the Uniform Commercial Code as in effect in the
State or in any other applicable jurisdiction; and any reference to an article (including Article
2A) or section thereof shall mean the corresponding article or section (however termed) of any such
applicable version of the Uniform Commercial Code. (b) The following terms when used herein or in
any of the Schedules shall be construed as follows: (1) “herein,” “hereof,” “hereunder,” etc.: in,
of, under, etc. this Lease or such other Lease Document in which such term appears (and not merely
in, of, under, etc. the section or provision where the reference occurs); (2) “including”: means
including without limitation unless such term is followed by the words “and limited to,” or similar
words; and (3) “or”: at least one, but not necessarily only one, of the alternatives enumerated.
Any defined term used in the singular preceded by “any” indicates any number of the members of the
relevant class. Any Lease Document or other agreement or instrument referred to herein means such
agreement or instrument as supplemented and amended from time to time. Any reference to Lessor or
Lessee shall include their permitted successors and assigns. Any reference to an applicable law
shall also mean such law as amended, superseded or replaced from time to time.




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     IN WITNESS WHEREOF, the parties hereto have caused this Master Lease Agreement to be duly
executed, under seal, as of the day and year first above set forth.



	 	 	 	 	 	 	 	 	 	 	 
	BB&T EQUIPMENT FINANCE CORPORATION	 	 	 	POWERSECURE, INC.	 	 
	Lessor	 	 	 	Lessee	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By: 

	/s/ Stephen Gray	[SEAL]		By: 	/s/ Christopher T. Hutter	[SEAL]	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	Name: 	Stephen Gray
	 	 	Name: 	Christopher T. Hutter	 
	 

	Title:	Senior Vice President
	 	 	Title:	Chief Financial Officer	 






	 	 	 
	600 Washington Avenue

	 	1609 Heritage Commerce Court

	Suite 201

	 	Wake Forest, North Carolina 27587

	Towson, Maryland 21204

	 	Facsimile: 919-453-1768

	Facsimile: 410-825-1691
	 	 






	 	 	 
	 

	 	Form of Organization: Corporation
	 

	 	Jurisdiction of Organization: Delaware
	 

	 	Organizational No.: 3278285
	 

	 	Federal Employer Identification No.: 84-1557738







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