Document:

Exhibit 10.6

 

C#: 13581[ILLEGIBLE]

L#: 13581[ILLEGIBLE]

 

Master Equipment Lease Agreement

 

[LOGO]

 

THIS MASTER EQUIPMENT LEASE AGREEMENT dated
as of June 25, 2003 (“Master Lease”) is made by and between KEY EQUIPMENT
FINANCE, a Division of Key Corporate Capital Inc., having an address at 68
South Pearl Street, Albany, NY 12207 (“Lessor”), and BLUE RIDGE PAPER PRODUCTS
INC. with its chief executive offices located at 41 Main Street, Canton, NC
28718 (“Lessor”).

 

1.             Lease.
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
Equipment, subject to and upon the terms set forth herein and in any Equipment
Schedule executed in connection herewith (each, a “Schedule”).  Each Schedule shall constitute a separate
and enforceable [ILLEGIBLE] incorporating of the terms of this Master Lease
(each Schedule, together with this Master Lease as it relates to such Schedule,
is referred to herein as a “Lease”).  If
any term of a Schedule conflicts or is inconsistent with any term of this
Master Lease, the terms of such Schedule shall govern.

 

2.             Definitions.  Unless the context otherwise requires, as
used in the Lease, the following terms shall have the respective meanings
indicated below and shall be equally applicable to both the singular and the
plural forms thereof:

 

“Equipment” means each
item of property designated on a Schedule that will be leased by Lessee
pursuant to the Lease, together with all replacement parts, additions and
accessories incorporated therein or affixed thereto.  Where rights to receive license fees for Software and charges for
Services supplied or to be supplied to Lessee are included in the amount
financed by Lessor under the Lease, references to leasing, purchases, ownership
and administration of “Equipment” under the Lease shall be broadly interpreted
to include such Financed Fees.

 

“Fair Market Rental Value”
or “Fair Market Sale Value” means the value of Equipment for lease or
sale.  In place and in continued use,
which would be obtained in an arm’s length transaction between an informed and
willing retail lessor or seller (under no compulsion to lease or sell) and an
informed and willing retail [ILLEGIBLE] or buyer (under no compulsion to lease
or purchase), assuming that Equipment is in the condition specified by Sections
10 and 11 hereof, as determined by the parties or, if the parties cannot agree,
by an American Society of Appraisers certified appraiser selected by Lessor and
paid for by Lessee.

 

“Financed Fees” means
the Software license, usage, or other fees and the charges for Services, if
any, specified on a Schedule.

 

“Guarantor” means any
guarantor of Lessor’s obligations hereunder.

 

“Initial Term Expiration
Date” shall have the meaning specified in the applicable Schedule.

 

“Lease Documents” means
this Master Lease, a Schedule and all other documents relating to or provided
in connection with a Lease, prepared by Lessor, and now or hereafter executed
in connection herewith or therewith, as the same may be modified, amended,
extended or replaced.

 

“License Agreement”
means the software license agreement(s) between Lessee and Licensor relating to
Software.

 

“Licensor” means the
Supplier(s) of Software, solely in its (their) capacity as licensor of such
Software.

 

“Purchase Agreement”
means any purchase agreement or other contract between a Supplier and Lessee
for the acquisition of Equipment to be leased or financed under a Lease.

 

“Rent” means the
periodic payments due for the leasing of Equipment as set forth on the related
Schedule and, where the cont??t hereof requires, all such additional amounts as
may, from time to time, be payable under a Lease.  The term “Rent” shall include interim rent, if any, as described
in Section 5 hereof.

 

“Rent Commencement Date”
means, with respect to Equipment, the date on which (a) Lessor receives an
executed Certificate of Acceptance for Equipment from Lessee or (b) Lessor
disburses funds for the purchase of Equipment, as determined by Lessor in its
sole discretion.

 

“Rent Payment Date”
shall have the meaning specified in the applicable Schedule.

 

“Services” means all
training, installation, transportation, handling, maintenance, custom
programming, integration, technical consulting and support services relating to
Equipment and specified on a Schedule.

 

“Software” means the
software and all related documentation, corrections, updates and revisions used
in connection with Equipment financed under a Schedule.

 

“Stipulated Loss Value”
shall have the meaning specified in the applicable Schedule.

 

“Supplier” means the
manufacturer or the vendor of the Equipment.

 

“Term” means the Initial
Term or any Renewal Term, each as defined in Section 6 hereof, and any Extended
Lease Term or interim Term, as defined in the applicable Schedule.

 

3.             Ordering Equipment.  Lessee hereby assigns to Lessor all of Lessee’s
rights, but none of its obligations, under any Purchase Agreement related to a
Lease.  Lessor may (a) accept such
assignment from Lessee of Lessee’s rights, but none of Lessee’s obligations,
under any such Purchase Agreement and/or (b) issue a purchase order for the
Equipment to the Supplier, Lessee shall arrange for delivery of Equipment.  If Equipment is subject to an existing
Purchase Agreement between Lessee and the Supplier, and Equipment has been
delivered to Lessee as of the date of the Schedule applicable thereto, Lessee
warrants that it has advised Lessor of the delivery date(s) of such Equipment
Lessee hereby authorizes Lessor to complete each Schedule with the serial
numbers and other identification data of Equipment associated therewith as such
data is received by Lessor.

 

4.             Delivery and Acceptance.  Upon delivery to and acceptance by Lessee of
any Equipment, Lessee shall execute and deliver to Lessor a Certificate of
Acceptance in form acceptable to Lessor (“Certificate of Acceptance”).  LESSOR SHALL HAVE NO OBLIGATION TO ADVANCE
ANY FUNDS HEREUNDER UNLESS AND UNTIL LESSOR RECEIVES A CERTIFICATE OF
ACCEPTANCE FOR SUCH EQUIPMENT EXECUTED BY LESSEE.

 

5.             Rent Delinquent Payments.
(a) Lessee shall pay Rent commencing on the Rent Commencement Date, and, unless
otherwise set forth on the applicable Schedule, on the same day of each payment
period thereafter for the balance of the Term Rent shall be due whether or not
Lessee has received any notice that it is due, and all Rent shall be paid to
Lessor at its address set forth on the Schedule, or as otherwise directed by
Lessor in writing.

 

(b) 
If Lessee fails to pay any Rent or other sums under the Lease on or
before the date when the same becomes due, Lessee shall pay to Lessor (in
addition to and not in lieu of other rights of Lessor) a late charge equal to
the lessor of five percent of such delinquent amount or the maximum permitted
by law.  Such late charge shall be
payable by Lessee upon demand by Lessor and shall be deemed Rent
hereunder.  Lessee acknowledges and
agrees that the late charge (i) does not constitute interest, (ii) is an
estimate of the costs Lessor will incur as a result of the late payment and
(iii) is reasonable in amount.

 

6.             Term; Survival.  With respect to any Equipment, unless
otherwise specified on a Schedule, the initial term of the Lease (the “Initial
Term”) shall commence on the earlier of (a) the date risk of loss is
transferred from the Supplier to Lessee or Lessor or (b) the date on which such
Equipment is delivered to Lessee and, unless earlier terminated as provided
herein, shall expire on the Initial Term Expiration Date.  Any renewal term of the Lease (individually,
a “Renewal Term”) shall commence immediately upon the expiration of the Initial
Term or any prior Renewal Term, as the case may be, and, unless earlier
terminated as provided herein, shall expire on the last day of the period for
which the final payment of Rent is due. 
All obligations of Lessee hereunder shall survive the expiration,
cancellation or other termination of the Term of each Lease.

 

7.             Location; Inspection; Labels.  Equipment shall be delivered to the location
specified in the Schedule and shall not be removed therefrom without Lessor’s
prior written consent.  Lessor shall
have the right to enter upon the premises where the Equipment is located and
inspect the Equipment at any reasonable time. 
At Lessor’s request, Lessee shall (a) [ILLEGIBLE] permanent labels in a
prominent place on Equipment stating Lessor’s interest in the Equipment, (b)
keep such labels in good repair and condition and (c) provide Lessor with an
inventory listing of all labeled Equipment within thirty days of such request.

 

8.             Non-Cancelable Lease.  THE LEASE IS A NET LEASE.  LESSEE’S OBLIGATION TO PAY RENT AND PERFORM
ITS OBLIGATIONS HEREUNDER ARE ABSOLUTE, IRREVOCABLE AND UNCONDITIONAL AND SHALL
NOT BE SUBJECT TO ANY RIGHT OF SET OFF, COUNTERCLAIM, DEDUCTION, DEFENSE OR
OTHER RIGHT LESSEE MAY HAVE AGAINST THE SUPPLIER, LESSOR OR ANY OTHER PARTY
PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL PRECLUDE LESSEE FROM ASSERTING ANY
SUCH CLAIMS IN A SEPARATE CAUSE OF ACTION. 
LESSEE UNDERSTANDS AND AGREES THAT NEITHER THE SUPPLIER NOR ANY SALES
REPRESENTATIVE OR OTHER AGENT OF THE SUPPLIER IS AN AGENT OF LESSOR OR IS
AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THE LEASE, AND NO SUCH
WAIVER OR ALTERATION SHALL VARY THE TERMS OF THE LEASE, LESSOR IS NEITHER A
SUPPLIER NOR A LICENSOR, AND LESSOR IS NOT RESPONSIBLE FOR REPAIRS, SERVICE OR
DEFECTS IN EQUIPMENT, LESSEE AGREES NOT TO ASSERT AGAINST LESSOR ANY CLAIMS OR

 

Form No.: 94-100MELA.403a

 

1

 

INDICATIVE TERMS & CONDITIONS

(This is not
a commitment)

 

 

	
  Date:

  	
   

  	
  6/24/2003

  
	
   

  	
   

  	
   

  
	
  Lessee:

  	
   

  	
  Blue Ridge
  Paper Products, Inc.

  
	
   

  	
   

  	
   

  
	
  Lessor:

  	
   

  	
  Key Equipment Finance, a Division of Key Corporate Capital Inc. (Its
  successors or assigns)

  
	
   

  	
   

  	
   

  
	
  Lease Type:

  	
   

  	
  Capital Lease

  
	
   

  	
   

  	
   

  
	
  Equipment Description:

  	
   

  	
  Various
  pieces of manufacturing equipment

  
	
   

  	
   

  	
   

  
	
  Financed Amount:

  	
   

  	
  $1,400,000.00

  
	
   

  	
   

  	
   

  
	
  Lease Commencement Date:

  	
   

  	
  June 30,
  2003

  
	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  48-months

  
	
   

  	
   

  	
   

  
	
  Payment Amount/Frequency:

  	
   

  	
  48 equal
  monthly payments equal to 2.324606% of Financed Amount ($32,544.49 based on a
  Financed Amount of $1,400,000.00) payable monthly in advance.

  
	
   

  	
   

  	
   

  
	
  Payment Type:

  	
   

  	
  Fixed rate
  of 5.72%

  
	
   

  	
   

  	
   

  
	
  End of Lease Option:

  	
   

  	
  Lessee may
  purchase the Equipment for $1.00.

  
	
   

  	
   

  	
   

  
	
  Net Lease:

  	
   

  	
  Maintenance,
  Taxes and Insurance are the responsibility of the Lessee

  
	
   

  	
   

  	
   

  
	
  Documentation Fees:

  	
   

  	
  At closing,
  Lessee will pay a Documentation Fee of $500.00.

  
	
   

  	
   

  	
   

  
	
  Comments:

  	
   

  	
  At closing
  Lessor will refund Lessee’s Application Deposit of $25,000.00.

  
	
   

  	
   

  	
   

  
	
  IMPORTANT REMINDER:

  	
   

  	
  This term sheet is subject to formal
  approval of Lessor and execution of documentation acceptable to Lessor and
  Lessee.  It should not be construed as
  a commitment by Lessor to engage in this financing.

  

 

 

Agreed and Accepted this 25 day
of June, 2003

 

Blue Ridge Paper Products, Inc.

 

 

	
  By:

  	
  /s/ John
  Wadsworth

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   John
  Wadsworth

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   CFO

  	
   

  
				

 

 

DEFENSES LESSEE MAY HAVE WITH
RESPECT TO EQUIPMENT, AND UNDERSTANDS THAT IT MAY ASSERT SUCH CLAIMS AGAINST
SUPPLIE? OR LICENSOR.

 

9.             Use; Alterations.  (a) Lessee shall use Equipment lawfully and
only in the manner for which it was designed and intended and so as to subject
it [ILLEGIBLE] to ordinary wear and tear, Lessee shall comply with all
applicable laws, Lessee shall immediately notify Lessor, in writing, upon
becoming aware of any [ILLEGIBLE] ?? threatened investigation, claim or action
by any governmental authority that could adversely affect Equipment, Lessor or
the Lease.  Lessee, at its own expense?
shall make such alterations, additions or modifications (each, a “Required
Alteration”) to Equipment as may be required from time to time to meet the
requirements of applicable law or a governmental body. All such Required
Alterations shall immediately, and without further act, be deemed to
[ILLEGIBLE] “Equipment” and be fully subject to the Lease as if originally
leased hereunder. Except as otherwise permitted herein, Lessee shall not make any
alterations ?? Equipment without Lessor’s prior written consent.

 

(b) Lessee, at
its own expense, may from time to time add or install upgrades or attachments
(each an “Upgrade”) to Equipment during the Term provided, that such Upgrades
(i) are readily removable without causing material damage to Equipment, (ii) do
not materially adversely affect the Fair Market Sale Value, the Fair Market
Rental Value, residual value, productive capacity, utility or remaining useful
life of Equipment and (iii) do not cause Equipment to become “limited use
property” within the meaning of Revenue Procedure 2001-28, 2001-19 I.R.B. 1158
(or such other successor tax provision), as of the date ?? installation of such
Upgrade. Any such Upgrades shall remain the property of Lessee.  Upon the expiration or earlier cancellation
of the Lease, Lessee may, at its option, remove any such Upgrades and, upon
such removal, shall restore Equipment to the condition required hereunder.

 

(c) If any
Equipment covered under any Lease becomes attached or affixed to, or used in
connection with, Equipment covered under another Le???? hereunder (a “Related
Lease”), Lessee agrees that, if Lessee elects to exercise a purchase or renewal
option under any such Lease, or if Lessee elects to return Equipment under any
such Lease, then Lessor, in its sole discretion, may require that all Equipment
leased under all Related Leases be similarly disposed of.

 

10.          Repairs and Maintenance.
Lessee, at Lessee’s cost and expense, shall (a) keep Equipment in good repair,
good operating condition, appearance and working order in compliance with the
manufacturer’s recommendations and Lessee’s standard practices (but in no event
less than industry practices), (b) take all actions necessary to ensure that
the Equipment will be eligible, at the expiration of the Initial Term and any
Renewal Term, for a standard, full service maintenance contract with the
manufacturer, (c) property service all components of Equipment following the
manufacturer’s written operating and servicing procedures, (d) enter into and
keep in full force and effect during the Term a maintenance agreement covering
the Equipment with the manufacturer, or a manufacturer-approved maintenance
organization, to maintain, service and repair such Equipment, as otherwise
required herein (but an alternate source of maintenance may be used by Lessee
with Lessor’s prior written consent), (e) upon Lessor’s request furnish Lessor
with an executed copy of any such maintenance agreement, and (f) replace any
part of the Equipment that becomes unfit or unavailable for use from any cause
(whether or not such replacement is covered by a maintenance agreement) with a
replacement part that, in Lessor’s sole opinion, is of the same manufacture,
value, remaining useful life and utility as the replaced part immediately
preceding the replacement, assuming that such replaced part was in the
condition required by this Lease. Replacement parts shall be free and clear of
all liens, constitute Equipment and be fully subject to this Lease as if
originally leased hereunder.

 

11.          Return of Equipment.  Except as otherwise provided in a Schedule,
upon the expiration or earlier termination or cancellation of each Lease,
Lessee, at its sole expense, shall de-install, assemble, pack properly and in
accordance with the manufacturer’s instructions (under the supervision of
persons acceptable to Lessor), including labeling of all components and
hardware, and return to Lessor all, but not less than all, Equipment by
delivering the Equipment to and unloading it at such location or with such
carrier as Lessor shall specify, Lessee agrees that (a) Equipment, when
returned, shall be in the condition required by the Lease, and (b) upon
Lessor’s request, Lessee will obtain from the manufacturer (or other maintenance
service provider previously approved by Lessor or manufacturer) a certificate
stating that such Equipment qualifies for full maintenance service at the
standard rules and terms then in effect. 
If, in the opinion of Lessor, any Equipment fails to meet the standards
set forth above.  Lessee agrees to pay,
on demand, all costs and expenses incurred in connection with the repairing and
restoring of such Equipment so as to meet such standards. If Lessee fails to return
any Equipment as required hereunder, then all of Lessee’s obligations under the
Lease (including, without limitation, Lessee’s obligation to pay Rent for the
Equipment at the rental then applicable under the Lease) shall continue in full
force and effect until such Equipment shall have been returned in the condition
required under the Lease.

 

12.          Sublease and Assignment.  (a) LESSEE SHALL NOT, WITHOUT LESSOR’S PRIOR
WRITTEN CONSENT, (i) SELL, ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE
DISPOSE OF THE LEASE, EQUIPMENT OR ANY INTEREST THEREIN, (ii) RENT, SUBLET OR
LEND EQUIPMENT TO ANYONE OTHER THAN LESSEE OR LESSEE’S AFFILIATES OR (iii)
PERMIT EQUIPMENT TO BE USED BY ANYONE OTHER THAN THEIR RESPECTIVE QUALIFIED
EMPLOYEES.

 

(b) Lessor, at
any time with or without notice to Lessee, may sell, transfer, assign and/or
grant a security interest in all or any part of Lessor’s interest in each Lease
or any Equipment (each, a “Lessor Transfer”). Any purchaser, transferee,
assignee or secured party of Lessor (each a “Lessor Assignee”) shall have and
may exercise all of Lessor’s rights hereunder with respect to the items to
which any such Lessor Transfer relates, and Lessee shall not assert against any
Lessor Assignee any claim that Lessee may have against Lessor provided, Lessee
may assert any such claim in a separate action against Lessor.  Upon written notice of a Lessor Transfer,
Lessee shall promptly acknowledge in writing its obligations under the
applicable Lease, shall comply with the written directions or demands of any
Lessor Assignee and shall make all payments due under the applicable Schedule
as directed in writing by the Lessor Assignee. Following such Lessor Transfer,
the term “Lessor” shall be deemed to include or refer to each Lessor Assignee.
Lessee will provide reasonable assistance to Lessor to complete any transaction
contemplated by this subsection (b).

 

(c) Subject to
the restriction on assignment contained in subsection (a), the Lease Documents
shall inure to the benefit of, and are binding upon, the successors and assigns
of the parties thereto including, without limitation, each person who becomes
bound thereto as a “new debtor” as set forth in the Uniform Commercial Code
(“UCC”).

 

13.          Risk of Loss; Damage to Equipment.
(a) Lessee shall bear the entire risk of loss (including without limitation,
theft, destruction, disappearance of or damage to Equipment from any cause
whatsoever), whether or not insured against, during the Term of each Lease and
until Equipment is returned to Lessor in accordance with Section 11 hereof. No
such loss shall relieve Lessee of the obligation to pay Rent or of any other
obligation under the related Lease.

 

(b) If any
Equipment is lost, stolen or damaged beyond repair, or [ILLEGIBLE], seized or
the use and/or title thereof requisitioned to someone other than Lessee (any
such event being a “Total Loss”), Lessee shall immediately notify Lessor of
such event. On the next Rent Payment Date following the occurrence of the Total
Loss, at Lessor’s option, Lessee shall either (i) replace Equipment with equipment
that, in Lessor’s sole opinion, is of the same manufacture, value, remaining
useful life and utility as the replaced Equipment immediately preceding the
replacement, assuming such replaced Equipment was in the condition required by
the Lease or (ii) pay to Lessor the sum of (A) all Rent due and owing under the
Lease with respect to such Equipment (at the time of such payment) plus (B) the
Stipulated Loss Value for the Equipment as of that Rent Payment Date. If Lessor
elects to allow replacement of Equipment as set forth in subsection (i) above,
Lessee shall cause the Supplier of such replacement equipment to deliver to
Lessor a bill of sale for such equipment free and clear of all liens and
encumbrances, and such replacement equipment shall become Equipment subject to
the applicable Lease.  Upon Lessor’s
receipt of the bill of sale or the amounts specified in subsection (?)
above.  Lessee shall be entitled to
Lessor’s interest in the replaced Equipment, in its then condition and
location, “as is” and “where is,” without any warranties, express or implied.

 

14.          Insurance.  (a) Lessee shall, at all times during the
Term of each Lease and at Lessee’s own cost and expense, maintain (i) insurance
against all risks of physical loss or damage to Equipment for the greater of
the full replacement value or the Stipulated Loss Value thereof, and (ii)
commercial general liability insurance (including blanket contractual liability
coverage and products liability coverage) for personal and bodily injury and
property damage per occurrence as stated in each Schedule.

 

(b) All
insurance policies required hereunder shall include terms, and be with
insurance carriers, reasonably satisfactory to Lessor. Without limiting the
generality of the foregoing, each policy shall include the following terms: (i)
all physical damage insurance shall name Lessor and its assigns as loss payee,
(ii) all liability insurance shall name Lessor and its assigns as additional
insureds, (iii) the policy shall not be canceled or altered without at least
thirty days advance notice to Lessor and its assigns and (iv) coverage shall
not be invalidated against Lessor or its assigns because of any violation of
any condition or warranty contained in any policy or application therefor by
Lessee or by reason of any action or inaction of Lessee. On each anniversary of
the Rent Commencement Date during the term hereof, Lessee shall deliver to
Lessor certificates or other proof of insurance satisfactory to Lessor
evidencing the coverage required by this section.

 

15.          Taxes.  Lessee shall pay when due and shall
indemnify and hold harmless Lessor (on an after-tax basis) from and against any
and all taxes, fees, withholdings, levies, imposts, duties, assessments and
charges of every kind and nature whatsoever (including any related penalties
and interest) imposed upon

 

2

 

or against Lessor, any Lessor
Assignee, Lessee or any Equipment by any [ILLEGIBLE] authority in connection
with, arising out of or otherwise related to Equipment, the Lease Documents or
the Rent and receipts or earnings arising therefrom and excepting only all
Federal, state and local taxes on or measured by Lessor’s net income.  Whenever each Lease expires, terminates or
is canceled as to any Equipment, Lessee, upon written request by Lessor, shall
advance to Lessor the amount estimated by Lessor to be the taxes on said
Equipment that are not yet payable, but for which Lessee is responsible.  At Lessee’s request, Lessor shall provide
Lessee with Lessor’s method of computation of any such estimated taxes.

 

16.          Lessor’s Right to Perform for Lessee.  If Lessee fails to perform any of its
obligations contained herein, Lessor may (but shall not be obligated to) itself
perform such obligations, and the amount of the reasonable costs and expenses
of Lessor incurred in connection with such performance, together with interest
on such amount at the lessor of eighteen percent per annum or the maximum
permitted by law, shall be payable by Lessee to Lessor upon demand.  No such performance by Lessor shall be deemed
a waiver of any rights or remedies of Lessor or be deemed to cure the default
of Lessee hereunder.

 

17.          Personal Property; Liens.  Lessee represents and warrants that the
Equipment is, and shall at all times remain, fully removable personal property
notwithstanding any affixation or attachment to real property or
improvements.  Lessee shall at all times
keep Equipment free and clear from all liens and encumbrances of any kind or
nature other than those created by, through or under Lessor.  If, in violation of the foregoing covenant,
any prohibited lien or encumbrance shall attach to Equipment, Lessee shall (a)
give Lessor immediate written notice thereof and (b) promptly, at Lessee’s sole
cost and expense, take such action as may be necessary to discharge such lien.

 

18.          Default; Remedies.
(a) As used herein, the term “Default” means any of the following events:  (i) Lessee fails to pay any Rent or other
amount due under a Lease within ten days after the same shall have become due;
(ii) Lessee or any Guarantor becomes insolvent or makes an assignment for the
benefit of its creditors; (iii) a receiver, trustee, conservator or liquidator
of Lessee or any Guarantor of all or a substantial part of Lessee’s or such Guarantor’s
assets is appointed with or without the application or consent of Lessee or
such Guarantor, respectively; (iv) a petition is filed by or against Lessee or
any Guarantor under any bankruptcy, insolvency or similar law; (v) Lessee or
any Guarantor violates or fails to perform any provision of either this Lease
or any other loan, lease or credit agreement or any acquisition or purchase
agreement with Lessor or any other party; (vi) any warranty or representation
made by Lessee herein proves to have been false or misleading when made; (vii)
there is a material adverse change in Lessee’s or any Guarantor’s financial
condition since the related Rent Commencement Date; (viii) Lessee or any
Guarantor merges or consolidates with any other corporation or entity, or
sells, leases or disposes of all or substantially all of its assets without the
prior written consent of Lessor; (ix) Lessee or any Guarantor, if an
individual, dies or, if not an individual is dissolved; or (x) any filing by
Lessee of a termination statement for any financing statement filed by Lessor
while any obligations are owed by Lessee under a Lease.  A Default with respect to any Lease shall,
at Lessor’s option, constitute a Default for all Leases and any other
agreements between Lessor and Lessee.

 

(b)  Upon the occurrence of a Default, Lessor may
do one or more of the following as Lessor in its sole discretion shall elect:
(i) proceed by appropriate court action to enforce performance by Lessee of the
related Lease or to recover damages, including incidental and consequential
damages, for the breach thereof; (ii) cause Lessee, at its expense, promptly to
assemble Equipment and return the same to Lessor at such place as Lessor may
designate in writing: (iii) by notice in writing to Lessee, cancel or terminate
the related Lease, without prejudice to any other remedies hereunder; (iv)
enter upon the premises of Lessee or other premises where any Equipment may be
located and, without notice to Lessee and with or without legal process, take
possession of and remove all or any such Equipment without liability to Lessee
by reason of such entry or taking possession, and without such action
constituting a cancellation or termination of the Lease unless Lessor notifies
Lessee in writing to such effect: (v) by written notice to Lessee specifying a
payment date (the “Remedy Date”), demand that Lessee pay to Lessor, and Lessee
shall pay to Lessor, on the Remedy Date, as liquidated damages for loss of a
bargain and not as a penalty, a sum equal to (A) any unpaid Rent due prior to
the Remedy Date (together with interest on such amount of the lesser of
eighteen percent per annum or the maximum permitted by law from the Remedy Date
to the date of actual payment), plus (B) the Stipulated Loss Value; (vi) sell
Equipment at public or private sale or hold, keep idle or lease to others any
Equipment; and (vii) exercise any other right or remedy available to Lessor
under applicable law.  In addition,
Lessee shall be liable for all reasonable costs, expenses, and legal fees
incurred in enforcing Lessor’s rights under the Lease, before or in connection
with litigation or arbitration and for any deficiency in the disposition of the
Equipment.  Lessor’s recovery hereunder
shall in no event exceed the maximum recovery permitted by law.

 

(c)  If a Default occurs, Lessee hereby agrees
that ten days+ prior notice to Lessee of any public sale or of the
terms after which a private sale may be negotiated shall be conclusively deemed
reasonable notice.  None of Lessor’s
rights or remedies hereunder are intended to be exclusive, but each shall be
cumulative and in addition to any other right or remedy referred to hereunder
or otherwise available to Lessor at law or in equity, and no express or implied
waiver by Lessor of any Default shall constitute a waiver of any other Default
or a waiver of any of Lessor’s rights.

 

(d)  With respect to any exercise by Lessor of
its right to recover and/or dispose of any Equipment or any other collateral
securing Lessee’s obligations under any Lease, Lessee acknowledges and agrees
that Lessor may dispose of Equipment on an “AS-IS, WHERE-IS” basis, in
compliance with applicable law and with such preparation (if any) as Lessor
determines to be commercially reasonable; Lessee shall remain liable for any deficiency
in the disposition of the Equipment, and any purchase by Lessor of the
Equipment may be through a credit to some or all of Lessee’s obligations under
any Lease.

 

19.          Notices.  All notices and other communications
hereunder shall be in writing and shall be transmitted by hand, overnight
courier or certified mail (return receipt requested), US postage prepaid.  Such notices and other communications shall
be addressed to the respective party at the address set forth above or at such
other address as any party may, from time to time, designate by notice duly
given in accordance with this section. 
Such notices and other communications shall be effective upon the
earlier of receipt or three days after mailing if mailed in accordance with the
terms of this section.

 

20.          Indemnity.
Lessee shall indemnify and hold harmless Lessor and each Lessor Assignee, on an
after tax basis, from and against any and all liabilities, causes of action,
claims, suits, penalties, damages, losses, costs or expenses (including
attorneys’ fees), obligations, liabilities, demands and judgments
(collectively, ? “Liability”) arising out of or in any way related to: (a)
Lessee’s failure to perform any covenant under the Lease Documents, (b) the
untruth of any representation or warranty made by Lessee under the Lease
Documents, (c) the order, manufacture, purchase, ownership, selection,
acceptance, rejection, possession, rental, sublease, operation, use,
maintenance, control, loss, damage, destruction, removal, storage, surrender, sale,
condition, delivery, return or other disposition of or any other matter
relating to any Equipment or (d) injury to persons, property or the environment
including any Liability based on strict liability in ?ort, negligence, breach
of warranties or Lessee’s failure to comply fully with applicable law or
regulatory requirements; provided,
that the foregoing indemnity shall not extend to any Liability to the extent
resulting [ILLEGIBLE] from the gross negligence or willful misconduct of
Lessor.

 

21.          Fees and Expenses.  Lessee shall pay all reasonable costs and
expenses of Lessor, including, without limitation, attorneys’ and other
professional fees, returned check or non-sufficient funds charges, the fees of
any collection agencies and appraisers and all other costs and expenses related
to any sale or re-lease of Equipment (including storage costs) incurred by
Lessor in enforcing any of the terms, conditions or provisions hereof or in
protecting Lessor’s rights hereunder.

 

22.          Financial and Other Data.  During the Term hereof, Lessee shall furnish
Lessor (a) as soon as available, and in any event within one hundred twenty
days after the last day of each fiscal year, financial statements of Lessee and
each Guarantor and (b) from time to time as Lessor may reasonably request,
other financial reports, information or data (including federal and state
income tax returns) and quarterly or interim financial statements of Lessee and
each Guarantor.  All such information
shall be audited (or if audited information is not available, compiled or
reviewed) by an independent certified public accountant.

 

23.          Representations and Warranties of
Lessee.  Lessee
represents and warrants that (a) the address stated above is the chief place of
business and chief executive office of Lessee, Lessee’s full and accurate legal
name is as stated above and the information describing Lessee set forth under
Lessee’s signature below is accurate in all respects; (b) Lessee is either (i)
an individual and the sole proprietor of its business which is located at the
address set forth above and doing business only under the names disclosed
herein, or (ii) a limited liability company or corporation duly organized and
validly existing in good standing under the laws of the state of its
organization or incorporation, or (iii) a general or limited partnership
organized under the laws of the state of its principal place of business set
forth in the Lease or the Lease Documents and the individual general partner
executing this Master Lease has the full authority to represent, sign for and
bind Lessee in all respects; (c) the execution, delivery and performance of
this Master Lease and all related instruments and documents (i) have been duly
authorized by all necessary action on the part of Lessee, (ii) do not require
the approval of any stockholder, partner, manager, trustee, or holder of any
obligations of Lessee except such as have been duly obtained, and (iii) do not
and will not contravene any law, governmental rule, regulation or order now
binding on Lessee, or contravene the operating agreement, charter or by-laws of
Lessee, or constitute a default under, or result in the creation of any lien or
encumbrance upon the property of Lessee under, any indenture, mortgage,
contract or other agreement to which Lessee is a party or by which it or its
property is bound; (d) the Lease Documents when entered into will constitute
legal, valid and binding obligations of Lessee enforceable against Lessee in
accordance with their terms; (e) there are no actions or proceedings to which
Lessee is a party, and there are no other threatened actions or proceedings of
which Lessee has knowledge, before any governmental authority which, either
individually or in the aggregate, would adversely affect the financial
condition of Lessee or the ability

 

3

 

[ILLEGIBLE] hereunder; (f)
Lessee is not in default under any obligation for the payment of borrowed
money, for the deferred purcha? price of property or for the payment of any
rent under any lease agreement which, either individually or in the aggregate,
would adversely affect the financi? condition of Lessee or the ability of
Lessee to perform its obligations hereunder and (g) the financial statements of
Lessee (copies of which have been furnished to Lessor) have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present Lessee’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 [ILLEGIBLE] material adverse
change in such conditions or operations.

 

24.          Lessee’s Waivers.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,
LESSEE WAIVES (a) ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY
ARTICLE 2A OF THE UCC AND (b) ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE TO RECOVER INCIDENTAL OR CONSEQUENTIAL DAMAGES FROM LESSOR FOR ANY
BREACH OF WARRANTY OR FOR ANY OTHER REASON OR TO SET OFF OR DEDUCT ALL OR ANY
PART OF ANY CLAIMED DAMAGES RESULTING FROM LESSOR’S DEFAULT, IF ANY UNDER THE
RELATED LEASE.

 

25.          UCC Filings.  LESSEE HEREBY AUTHORIZES LESSOR TO
AUTHENTICATE AND/OR FILE ALL UCC FINANCING STATEMENTS AND AMENDMENTS THAT IN
LESSOR’S SOLE DISCRETION ARE DEEMED NECESSARY OR PROPER TO SECURE OR PROTECT
LESSOR’S INTEREST IN EQUIPMENT IN ALL APPLICABLE JURISDICTIONS.  Lessee hereby ratifies, to the extent
permitted by law, all that Lessor shall lawfully and in good faith [ILLEGIBLE]
or cause to be done by reason of and in compliance with this section.  Lessee shall provide written notice to
Lessor at least thirty days prior to any contemplate change in Lessee’s name,
jurisdiction of organization or chief executive office address.

 

26.          Miscellaneous; Governing Law.  Time is of the essence with respect to each
Lease.  Any failure of Lessor to require
strict performance by Lessee ? any waiver by Lessor of any provision of a Lease
shall not be construed as a consent or waiver of any provision of such
Lease.  The Lease will be binding upon
Lessor only if executed by a duly authorized officer or representative of
Lessor at Lessor’s address set forth above. 
An authorized signer of Lessee shall execute the Lease Documents on
Lessee’s behalf.  Any provision of a Lease
that is prohibited or unenforceable shall be ineffective to the extent of such
prohibition [ILLEGIBLE] unenforceability without invalidating the remaining
provisions thereof.  Captions are
intended for convenience or reference only, and shall not be construed
[ILLEGIBLE] define, limit or describe the scope or intent, of any provisions
hereof, Lessee will promptly execute or otherwise authenticate and deliver to
Lessor such further documents, instruments, assurances and other records and
take such further action as Lessor may reasonably request in order to carry out
the intent and purpose of this agreement and each Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
Lessor hereunder and thereunder.  EACH
LEASE IS BEING DELIVERED IN, AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAWS.  LESSOR AND
LESSEE HEREBY EACH WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO EQUIPMENT OR EACH
LEASE.  THIS WAIVER IS MADE KNOWINGLY,
WILLINGLY AND VOLUNTARILY BY LESSOR AND LESSEE WHO EACH ACKNOWLEDGE THAT NO
REPRESENTATIONS HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL
BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO EACH LEASE AND THE LEASE
DOCUMENTS.

 

27.          Quiet Enjoyment.  So long as no Default has occurred and is
continuing, Lessee shall peaceably hold and quietly enjoy Equipment without
interruption by Lessor or any person or entity claiming through Lessor.

 

28.          Entire Agreement.  Each Lease, together with all other Lease
Documents, constitutes the entire understanding or agreement between Lessor and
Lessee with respect to the leasing of Equipment covered thereby, and there is
no understanding or agreement, oral or written, which is not set forth herein
or therein.  No Lease may be amended
except by a writing signed by Lessor and Lessee.  Delivery of an executed Lease Document by facsimile or any other
reliable means shall be deemed as effective for all purposes as delivery of a
manually executed copy.  Lessee shall
provide to Lessor the manually executed original of any Lease Document
delivered by facsimile within five days.

 

29.          More than One Lessee.  If more than one person or entity executes
the Lease Documents as “Lessee”, the obligations of “Lessee” shall be deemed
joint and several and all references to “Lessee” shall apply both individually
and jointly.

 

30.          Disclaimer of Warranties.  LESSOR MAKES NO WARRANTIES, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, TITLE TO,
DESIGN, OPERATION, CONDITION, OR QUALITY OF THE MATERIAL OR WORKMANSHIP IN,
EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE
ABSENCE OF LATENT OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE), LACK OF
INFRINGEMENT ON ANY PATENT, TRADEMARK OR COPYRIGHT, AND LESSOR HEREBY DISCLAIMS
ALL SUCH WARRANTIES; IT BEING UNDERSTOOD THAT THE EQUIPMENT IS LEASED TO LESSEE
“AS IS, WHERE IS.” LESSEE HAS MADE THE SELECTION OF THE EQUIPMENT FROM THE SUPPLIER
BASED ON ITS OWN JUDGMENT AND EXPRESSLY DISCLAIMS ANY RELIANCE ON ANY
STATEMENTS OR REPRESENTATIONS MADE BY LESSOR. 
IN NO EVENT SHALL LESSOR BE LIABLE FOR ANY INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES, LESSOR HEREBY ASSIGNS TO LESSEE FOR THE TERM OF EACH
LEASE WITHOUT RECOURSE AND FOR SO LONG AS LESSEE IS NOT IN DEFAULT UNDER ANY
LEASE, ANY WARRANTY PROVIDED BY THE SUPPLIER.

 

31.          Execution in Counterparts.  The Master Lease and all other Lease
Documents may be executed in several counterparts and by different parties
hereto or thereto on separate counterparts, each of which when so executed or
otherwise authenticated and delivered shall be an original, but all such
counterparts shall together consist of one and the same instrument; except, to
the extent that any Lease Documents constitute chattel paper under the UCC, no
security interest therein may be created other than through the transfer or
possession of the original counterpart, which shall be identified by Lessor.

 

32.          Software.  To the extent that any Schedule relates to
Software:

 

(a)  Lessee acknowledges that (i) all Software is
furnished to Lessee under one or more separate License Agreements governing
Lessee’s rights thereto, (ii) the Lease does not convey any explicit or
implicit license for the use of Software or other intellectual property
relating to Equipment, and (iii) Lessor does not hold title to any Software and
Lessee is or shall be the licensee of such Software directly from the Licensor.

 

(b)  Lessee shall not amend, modify or otherwise
alter, any term or condition of any License Agreement, including, without
limitation, any such term or condition related to (i) payment of any amounts
due thereunder, (ii) any liabilities or obligations of Lessee as Licensee,
(iii) the payment of late fees on past due amounts, or (iv) the payment of
applicable taxes: provided, however, that this provision shall not apply to
those terms or conditions relating solely to amounts owing to Licensor which
have not been financed under the Lease.

 

IN WITNESS WHEREOF,
Lessor and Lessee have executed this Master Lease as of the day and year first
above written.

 

	
  Lessor:

  	
  Lessee:

  
	
   

  	
   

  
	
  KEY
  EQUIPMENT FINANCE, a Division of

  	
  BLUE RIDGE
  PAPER PRODUCTS INC.

  
	
  Key
  Corporate Capital Inc.

  	
   

  
	
   

  	
  /s/ John
  Wadsworth

  	
   

  
	
  By:

  	
   

  	
   

  	
  Name:

  	
  John
  Wadsworth

  
	
  NAME:

  	
  Title:

  	
  CFO

  
	
  TITLE:

  	
   

  
	
   

  	
  Organization
  Type: Corporation

  
	
   

  	
  Jurisdiction
  of Delaware

  
	
   

  	
  Organizational
  No.: 0493776

  
						

 

4

 

C#: 135?10

L#: 135?11

Ls#: 8800022974

 

Equipment Schedule No. 01

Standard CSA

 

This EQUIPMENT
SCHEDULE NO. 01 (“Schedule”) between Key Equipment Finance, a Division of Key
Corporate Capital Inc., (“Lessor”), and BLUE RIDGE PAPER PRODUCTS INC. a
Delaware corporation (“Lessee”) is dated as of June 25, 2003 and is issued in
connection with the Master Equipment Lease Agreement dated as of June 25, 2003
Unless otherwise defined, capitalized terms used herein shall have the meanings
specified in the Master Lease.

 

EQUIPMENT
& INVOICING TERMS

 

1.             EQUIPMENT.  Pursuant to the terms and conditions of this
Lease, Lessor leases to Lessee and Lessee leases from Lessor, the equipment
listed on Exhibit A attached hereto (the “Equipment”).  The aggregate cost of such Equipment is
$1,400,000.00 (“Total Cost”).

 

2.             TERM.  The Initial Term of this Lease expires on
the date that is 48 months after the Rent Commencement Date (the “Initial Term
Expiration Date”).

 

3.             RENT PAYMENT DATES; RENT.  Lessee hereby agrees to pay Rent for the
Equipment throughout the Initial Term in forty-eight (48) consecutive monthly
installments payable in advance on the Rent Commencement Date and on the same
day each month thereafter (each, a “Rent Payment Date”).  Each such installment of Rent shall be in an
amount equal to $32,544.4?.  In
addition, Lessee hereby agrees to pay Rent for the period commencing on the
Interim Rent Commencement Date (as hereinafter defined) and ending on the day
before the Rent Commencement Date in an amount equal to $1,084.62 per day, and
agrees that with respect to the Equipment described on this Schedule, the
following modifications are hereby made to the Master Lease: (a) “Rent
Commencement Date” means the 1st day of the first month following the date
on which Lessor disburses funds for the purchase of the Equipment, as
determined by Lessor in its sole discretion, (b) “Interim Rent Commencement
Date” means the date on which Lessor disburses funds for the purchase of
the Equipment, as determined by Lessor in its sole discretion, and (c) the
Section of the Master Lease captioned “Default; Remedies” is hereby amended to
delete the term “Rent Commencement Date” where it appears and to substitute the
phrase “Rent Commencement Date or Interim Rent Commencement Date, as the case
may be,” in its place.

 

4.             EQUIPMENT LOCATION; BILLING
ADDRESS. 
Equipment described on this Schedule shall be located at, and except as
otherwise provided in this Lease, shall not be removed from, the following
address: See Exhibit A, Attached hereto. 
The billing address of Lessee is: BLUE RIDGE PAPER PRODUCTS INC.41 Main
Street, Canton, NC 28716

 

TRANSACTION
TYPE TERMS

 

5.             PURCHASE, RENEWAL AND OPTION TERMS.

 

a)             Dollar Purchase Option.  With respect to Equipment described on this
Schedule, on the Initial Term Expiration Date and so long as no Default shall
have occurred and be continuing, Lessee shall pay to Lessor an amount equal to
$1.00.  Upon payment in full by Lessee
of all Rent (and all other sums) payable to Lessor hereunder, Lessor shall
release its interest in the Equipment.

 

6.             NATURE OF TRANSACTION; SECURITY
AGREEMENT.  (a)
General.  To secure the prompt
payment and performance as and when due of all obligations and Indebtedness of
Lessee, now existing or hereafter created, to Lessor pursuant to this Lease or
otherwise, Lessee hereby grants to Lessor a first priority security interest in
the Equipment and all related accessions, substitutions, replacements and
proceeds.  The parties intend to comply
with an applicable laws, and if it is determined that any payment under the Lease
exceeds any amount allowed by applicable law, then the excess portion shall be
applied to the repayment of principal, and any interest will be charged at the
at the highest rate allowed by law.

 

(b) Property Tax.  Unless otherwise directed in writing by
Lessor or required by applicable law, Lessee will list itself as owner of all
Equipment for property tax purposes and will promptly pay all such taxes when
due.  In those jurisdictions in which
Lessor is required to list itself as owner of Equipment, upon receipt by Lessee
of any property tax bill pertaining to Equipment, Lessee will promptly forward
the property tax bill and related payment to Lessor.  Upon receipt by Lessor of a property tax bill (whether from
Lessee or directly from the taxing authority), Lessor will pay the tax and
invoice Lessee for the expense if Lessee has not submitted its payment with the
bill.

 

(c) Disclaimer.  LESSEE HEREBY ACKNOWLEDGES THAT LESSOR HAS
NOT MADE, AND HEREBY DISCLAIMS ANY ADVICE, REPRESENTATIONS, WARRANTIES AND
COVENANTS, EITHER EXPRESSED OR IMPLIED, WITH RESPECT TO ANY LEGAL, ECONOMIC,
ACCOUNTING, TAX OR OTHER EFFECTS OF THE LEASE AND THE TRANSACTION(S)
CONTEMPLATED HEREBY, AND LESSEE HEREBY DISCLAIMS ANY RELIANCE ON ANY SUCH
WARRANTIES, STATEMENTS OR REPRESENTATIONS MADE BY LESSOR WITH RESPECT THERETO.

 

MISCELLANEOUS
TERMS & CONDITIONS

 

7.             INSURANCE; STIPULATED LOSS VALUE.  (a) Lessee shall arrange and pay for
commercial general liability insurance in an amount not less than $1,000.000.

 

(b) As to any affected Equipment leased
pursuant to this Schedule, “Stipulated Loss Value” means as of the date of its
calculation, the sum of the present value of all future Rent owed discounted to
the date of payment by Lessee at a per annum rate of interest equal to 3%.

 

8.             COUNTERPARTS; DOCUMENT DELIVERY.
(a) This Schedule may be executed in any number of counterparts, each of which
when executed or otherwise authenticated and delivered constituting an
original, but all together one and the same instrument, Notwithstanding the
foregoing, Lessor and Lessee agree that they intend that there shall be only
one manually executed original of this Schedule and, to the extent that this
document constitutes chattel paper under the UCC, no security interest herein
may be created by the transfer or possession of any counterpart other than the
original hereof.

 

(b) Lessee represents and warrants that the
Lease Documents have not been, and shall not be, altered or modified by Lessee
regardless of whether such documentation was transmitted to Lessee via electronic or analog means.

 

9.             RELATIONSHIP TO MASTER LEASE;
FURTHER ASSURANCES. 
The terms of the Master Lease are incorporated herein by reference and
Lessee hereby reaffirms all terms of the Master Lease.  If any of the terms of this Schedule are
contrary to or inconsistent with any terms of the Master Lease, the teems of
this Schedule shall govern.  This
Schedule together with the Master Lease as incorporated herein, shall
constitute a separate lease

 

Form No.: 96-101NOM.403a

 

1

 

Exhibit A

 

EQUIPMENT DESCRIPTION

 

	
  Lessor:

  	
   

  	
  Key
  Equipment Finance, a Division of Key Corporate Capital Inc.

  
	
   

  	
   

  	
   

  
	
  Lessee:

  	
   

  	
  BLUE RIDGE
  PAPER PRODUCTS INC.

  
	
   

  	
   

  	
   

  
	
  Lease:

  	
   

  	
  Equipment
  Schedule No. 01 dated as of June 25, 2003 to Master Lease Agreement Dated as
  of June 25, 2003

  
	
   

  	
   

  	
   

  
	
  Equipment

  Location:  

  	
   

  	
  1329 Howell
  Mill Road

  Waynesville, NC 287?6

  Haywood County

  

 

	
  Vendor:

  	
   

  	
  Various

  
	
   

  	
   

  	
   

  
	
  Quantity:

  	
   

  	
  Description:

  	
   

  	
  VIN or Serial No.

  	
   

  	
  Invoice No.

  
	
  1

  	
   

  	
  L2 and L3
  Gauging Systems

  	
   

  	
   

  	
   

  	
  n/a

  

 

	
  Equipment

  Location:  

  	
   

  	
  600 Dairypak
  Road

  Athens, GA 30607

  Clarke County

  

 

	
  Vendor:

  	
   

  	
  Various

  
	
   

  	
   

  	
   

  
	
  Quantity:

  	
   

  	
  Description:

  	
   

  	
  VIN or Serial No.

  	
   

  	
  Invoice No.

  
	
  1

  	
   

  	
  Digital
  Plate System

  	
   

  	
   

  	
   

  	
  n/a

  

 

 

This financing statement covers all of Debtor’s right, title and
interest, now owned or hereafter acquired, in and to the one (1) digital plate
system and two (2) L2 and L3 gauging systems, including without limitation all
of the components of such equipment installed, assembled or provided therewith
as more fully described in Equipment Schedule No. 1 dated as of the June 25,
2003 which incorporate? by reference the Master Equipment Lease Agreement dated
as of June 25, 2003 together with any and all (1) substitutions, replacements
or exchanges therefor, (2) replacement parts, additions, attachments and
accessories incorporated therein or affixed thereto, or used in connection
therewith, and (3) proceeds thereof (both cash and non-cash), including
insurance proceeds, (but without power of sale by Debtor), and also including,
without limitation, claims of the Debtor against third parties for loss or
damage to, or destruction of, such Equipment. 
Debtor has no right to dispose of the equipment.

 

 

[ILLEGIBLE] LESSOR THAT THE
REPRESENTATIONS AND WARRANTIES MADE BY LESSEE IN THE MASTER LEASE ARE TRUE AND
CORRECT IN ALL MATERIAL RESPECTS AS OF THE DATE OF THIS SCHEDULE.  Lessee will promptly execute or otherwise
authenticate and deliver to Lessor such further documents, instruments,
assurances and other records and take such further action [ILLEGIBLE] Lessor
may reasonably request in order to carry out the intent and purpose of this
Lease and to establish and protect the rights and remedies created [ILLEGIBLE]
intended to be created in favor of Lessor under this Lease.

 

IN WITNESS
WHEREOF, Lessor and Lessee have caused this Schedule to be duly authenticated
and delivered on the day and year [ILLEGIBLE] above written.

 

 

	
  Lessor:

  	
   

  	
  Lessee:

  
	
   

  	
   

  	
   

  
	
  Key
  Equipment Finance, a Division of Key Corporate Capital Inc.

  	
   

  	
  BLUE RIDGE
  PAPER PRODUCTS INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  /s/ John
  Wadsworth

  	
   

  
	
  Name:

  	
   

  	
  Name:

  	
  John
  Wadsworth

  
	
  Title:

  	
   

  	
  Title:

  	
  CFO

  
							

 

2Exhibit 10.7

 

MASTER
LEASE

 

Master
Lease Agreement (“Master Lease”) dated as of September 1, 1994 between GENERAL
ELECTRIC CAPITAL CORPORATION (“Lessor”), with offices at 44 Old Ridgebury Road,
Danbury, Connecticut 06810 and CHAMPION INTERNATIONAL CORPORATION (“Lessee”),
with offices at One Champion Plaza, Stamford, Connecticut 06921.

 

IN
CONSIDERATION of the mutual promises contained in this Master Lease the parties
agree as follows:

 

1.                                      Property Leased and Title

 

(a)
Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, such
equipment and features (collectively called “Equipment” and individually called
a “Leased Item”) described in each Equipment Schedule executed from time to
time pursuant to this Master Lease and substantially in the form attached as
Exhibit A (each an “Equipment Schedule”). 
Each Equipment Schedule shall be deemed to incorporate all of the terms
and conditions of this Master Lease, contain such additional terms as Lessor
and Lessee shall agree upon and constitute an agreement separate and distinct
from this Master Lease and any other Equipment Schedule.  In the event of a conflict between
provisions of this Master Lease and an Equipment Schedule, the provisions of
the Equipment Schedule shall apply.

 

(b)
It is expressly understood that the Equipment is, and will at all times remain,
personal property.  Lessor shall have
full legal title to the Equipment and Lessee shall have no right, title or
interest in the Equipment except as expressly provided in this Master Lease.  In the event Lessee is supplied by Lessor
with a label showing the ownership of the Equipment, Lessee agrees to attach
such label in a prominent place on the Equipment.

 

2.                                      Term of Master Lease and Equipment Schedules

 

(a)
The term of this Master Lease shall commence on the date set forth above and
shall continue in effect so long as any Equipment Schedule entered into
pursuant to this Master Lease remains in effect.

 

(b)
The term of each Equipment Schedule shall (i) commence upon execution thereof
by Lessor and Lessee and extend for the period set forth thereon (the “Initial
Lease Term”) from the first day of the next succeeding month after the
execution of such Equipment Schedule; and (ii) include any Renewal Term
pursuant to the applicable

 

1

 

Equipment Schedule.  The Initial Lease Term and any Renewal Terms are collectively,
the “Lease Term”.

 

3.                                       Rent, Payment and Late Payment Rate

 

(a) This Master Lease and each Equipment
Schedule constitute a net lease.  Each
Equipment Schedule shall specify the rent for each Leased Item (“Basic Rent”),
and any other payment terms.  Lessee
agrees to pay all Basic Rent and other sums payable (“Additional Rent”)
hereunder. (Basic Rent and Additional Rent are collectively, the “Rent”.)

 

(b) Except as set forth herein, the rights of
Lessor and of any Assignee (as defined in Section 19) in and to such Rent are
absolute and unconditional and are not subject to any abatement, reduction,
setoff, defense, counterclaim or recoupment, by reason of any claims which
Lessee may have against Lessor, the Assignee, or the Equipment supplier or
manufacturer.  Lessee agrees to make the
Basic Rent payments by check, as and when specified in the Equipment Schedule,
by mail to Lessor at such address as specified by Lessor in writing from time
to time.

 

(c) Lessor shall send to Lessee prior to each
date due an invoice for Rent (and in the case of any Basic Rent installment,
such invoice shall be sent at least forty-five (45) days prior to the respective
due date).  If any payment of Rent is
not paid within five (5) days after the date due, then Lessor may collect, and
Lessee agrees to pay, a charge determined as the product of the Late Payment
Rate and the amount in arrears for the period such amount remains due and
unpaid.  “Late Payment Rate” shall be
the lesser of (i) the then prime rate of Chemical Bank, New York, New York,
plus four percent (4%) or (ii) the maximum rate allowed by applicable law.

 

4.                                      Selection and Acceptance 
Lessee acknowledges that: (a) it has made the selection of each Leased
Item based on its own judgment and expressly disclaims any reliance upon
Lessor, and (b) as between Lessee and Lessor, Lessee has unconditionally
accepted the Leased Items.

 

5.                                         Lessee’s Representations, Warranties and
Covenants

 

(a) Lessee represents and warrants to Lessor
that:

 

(i) Lessee has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of New York, and has all corporate powers and material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.

 

(ii) This Master Lease has been, and each
Equipment

 

2

 

schedule at the time of execution thereof will have been, duly
authorized, executed and delivered by Lessee, and constitute the legal, valid
and binding agreements of Lessee, enforceable against Lessee in accordance with
their terms (assuming due authorization, execution and delivery thereof by
Lessor), except to the extent that (i) the enforceability thereof may be
limited by principles of equity, regardless of whether enforceability is
considered in a proceeding in law or equity, and (ii) the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, foreclosure or other laws affecting the enforcement of
creditors’ rights generally.

 

(iii) The execution, delivery and performance
by the Lessee of the Master Lease and the Equipment Schedules are within the
Company’s corporate powers, and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the Restated
Certificate of Incorporation, as amended, or By-Laws, as amended, of Lessee or
any agreement, judgment, injunction, order, decree or other instrument binding
upon Lessee, or result in the creation of any lien or other encumbrance on any
asset of Lessee.

 

(iv) No consent or approval is required to be
obtained from, and no action need be taken by, any governmental body, agency or
official in connection with the execution, delivery and performance by Lessee
of the Master Lease and the Equipment Schedules, except for any such consents,
approvals or actions as have been obtained or taken on or before the date
hereof, provided that no opinion is expressed herein regarding consents,
approvals, filings, registrations or actions under state securities or blue sky
laws.

 

(v) There are no actions, suits or
proceedings pending or threatened against Lessee in any court or before any
arbitrator or before or by any governmental body, agency or office in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, financial position or results of operations of
Lessee and its subsidiaries, considered as a whole, except as discussed in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
1993 or the Company’s Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1994, or which in any manner raises any question
affecting the validity of the Master Lease or the Equipment Schedules.

 

(b) Lessee covenants to Lessor that:

 

(i) Lessee will deliver to Lessor, within 120
days after the end of each of its fiscal years, copies of the

 

3

 

consolidated balance sheet of Lessee and its consolidated subsidiaries
as at the end of, and the related consolidated statements of income, retained
earnings and changes in financial position for, such year, certified by
independent public accountants, all prepared in accordance with generally
accepted accounting principles.

 

(ii) Lessee shall execute UCC financing
statements necessary to perfect Lessor’s interest in this Master Lease, any Equipment
Schedule(s) and any Leased Item.

 

(iii) The Equipment will be operated and
maintained so as to substantially comply with all material applicable
environmental laws, rules and regulations.

 

6.                                   Lessor’s Representations, Warranties,
Covenants, Disclaimer of Warranties and Limitation of Damages

 

(a) Lessor covenants, represents and warrants
to Lessee that:

 

(i) Lessee shall enjoy quiet possession of
the Equipment throughout the Lease Term. 
Lessor shall keep this Master Lease, each Equipment Schedule and the
Equipment free and clear of all liens and encumbrances and shall not transfer,
lend, pledge or assign, or grant a security interest in this Master Lease, an
Equipment Schedule or any Leased Item, except as specifically permitted under
this Master Lease.  In the event of any
interference with Lessee’s use of any Leased Item (A) by Lessor (except as
permitted pursuant to this Master Lease), (B) by any Assignee or anyone
claiming by or through Lessor or any Assignee, or (C) resulting from any lien,
claim, encumbrance or legal process of a creditor of Lessor or an Assignee,
then Rent payments hereunder shall abate. 
Lessor shall indemnify, defend and hold Lessee harmless from and against
anyone claiming an interest in this Master Lease, any Equipment Schedule or any
Leased Item by, through or under Lessor, its successors or any Assignee or the
agents or employees of any of them (except if such claim results from the acts
of Lessee or its successors or assigns or the agents or employees of any of
them);

 

(ii) Lessor is a legal entity, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and in each jurisdiction where the Equipment
will be located and has adequate power to enter into and perform this Master
Lease and each Equipment Schedule executed hereunder; and

 

(iii) This Master Lease has been, and each
Equipment Schedule at the time of execution thereof will have been, duly
authorized, executed and delivered by Lessor and constitute valid, legal and binding
agreements of Lessor

 

4

 

enforceable in accordance
with their terms.

 

(b)  LESSOR
MAKES NO OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND
RELATING TO THE EQUIPMENT, INCLUDING BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR USE.

 

(c) Lessor shall have no liability to Lessee
for any claim, loss or damage caused or alleged to be caused directly or
indirectly by the Equipment, including by any inadequacy thereof or deficiency
or defect therein. Notwithstanding the foregoing, Lessor shall be liable to
Lessee for, and to the extent of, any damages suffered by Lessee resulting from
breach or non-performance of this Master Lease or any Equipment Schedule by, or
for any negligent or intentional acts or omissions of, Lessor, its successors
or any Assignee or the employees, agents or subcontractors of any of them.

 

(d) The rights and obligations of the parties
in the fourth sentence of Section 6(a)(i) shall survive the expiration or other
termination of the applicable Equipment Schedule.

 

7.                                       Assignment of Manufacturer’s Warranties 
Lessor hereby assigns to Lessee for the Lease Term and for each Leased
Item purchased by Lessee, all of the manufacturer’s warranties,
representations, covenants, indemnifications and agreements for all Leased
Items.  Lessee may enforce the foregoing
in its own name or in Lessor’s name as the Lessor’s attorney-in-fact, for which
purpose Lessor hereby appoints Lessee. 
Lessor, at the sole expense of Lessee, shall provide reasonable
assistance to Lessee in enforcing such warranties.

 

8.                                       Incumbency Certificates and Opinion of
Counsel  Lessee agrees to provide to Lessor, if
requested:

 

(a) For this Master Lease and for each
Equipment Schedule, an Incumbency Certificate, substantially in the form of
Exhibit B attached hereto, identifying the signatures and establishing the
authority of the signers of such documents; and

 

(b) For this Master Lease, an opinion of
counsel substantially in the form of Exhibit C attached hereto.

 

9.                                       Liens and Taxes

 

(a) Lessee shall, at its expense, keep the
Equipment free and clear of all liens and encumbrances except for: (i) liens
and encumbrances (including the underlying claim) being contested diligently
and in good faith by Lessee, provided that such contest does not create a
substantial risk of sale, forfeiture or loss of the

 

5

 

Equipment (or title thereto or any interest therein) and (ii) liens and
encumbrances of creditors of Lessor or an Assignee or anyone claiming by or
through Lessor or an Assignee.  Lessee
shall indemnify and hold Lessor harmless from all liens and encumbrances on the
Equipment except as specified in clause (ii) and Lessor shall defend any liens
and encumbrances specified in clause (ii), at its expense, and shall indemnify
and hold Lessee harmless therefrom. The rights and obligations of the parties
in the immediately preceding sentence shall survive the expiration or other
termination of the applicable Equipment Schedule.

 

(b) General Tax Indemnity:  Lessee will indemnify and make whole on an
after-tax basis Lessor against the actual amount of taxes, fees and other
governmental charges such as sales, use, excise, personal property and other
taxes imposed by the United States, any state where the Equipment is located or
any local tax authority in a state where the Equipment is located (together
with any related penalties, additions to tax and interest, unless resulting
from Lessor’s action or failure to act) imposed in connection with the
Equipment, or the purchase, ownership, delivery, leasing, use, possession or
operation thereof or the rentals or receipts payable under this Lease, before
expiration of the Initial Lease Term or any Renewal Term (as defined
below).  Notwithstanding the foregoing,
Lessee will not indemnify for the following federal, state or local taxes:  (i) franchise taxes, taxes on doing business,
capital taxes, value added taxes; (ii) taxes imposed on, based on or measured
by, gross or net income (including minimum and alternative minimum taxes
measured by any items of tax preference), gross or net receipts, capital or net
worth, franchise, excess profits or conduct of business (other than sales or
use taxes); (iii) taxes that would not have been imposed if Lessor had not
engaged in activities in the jurisdiction imposing such taxes, which activities
are unrelated to the transactions contemplated hereby; (iv) taxes which became
payable as a result of a voluntary or involuntary transfer by Lessor other than
a transfer resulting from a default by Lessee; (v) taxes imposed because the
Lessor is not a U.S. person; (vi) taxes resulting from misconduct or negligence
of Lessor; and (vii) taxes with respect to any period after the termination of
the applicable Equipment Schedule.  The
rights and obligations of the parties contained in this Section 9(b) shall
survive the expiration or other termination of the applicable Equipment
Schedule.

 

(c) Income Tax Indemnity:  If, as the direct result of (i) the failure
of any of Lessee’s Income Tax Representations (as defined in subsection (e)
below) to be true and correct, or (ii) an act or omission (other than (A) the
execution and delivery of the documents related to this transaction or (B) an
act or omission required or

 

6

 

permitted by the documents related to this transaction (except for a
“nonseverable improvement” as defined in Section 3 of Revenue Procedure 79-48,
1979-2, C.B. 529) of the Lessee, Lessor suffers a loss of any of the assumed
tax benefits, if any, set forth on an Equipment Schedule (the “Assumed Tax
Benefits”), then, to the extent such Loss is caused by clauses (i) or (ii) of
this subsection (c), the Lessee will indemnify and make whole the Lessor, on an
after-tax basis, for the resulting actual increase in Lessor’s (X) federal
income tax liability (but the amount indemnified shall not exceed such
increased liability calculated using the federal income tax rate reflected in the
Basic Rent) and (Y) income tax liability for the state in which the Equipment
is located. Notwithstanding the foregoing, Lessee will not indemnify Lessor
with respect to a loss or tax consequences resulting from or related to (i) a
change in the Internal Revenue Code of 1986, as amended (the “Code”), the
regulations thereunder and/or administrative or judicial interpretations
thereof, enacted, adopted or effective on or subsequent to the date hereof;
(ii) a determination resulting from the status of Lessor; (iii) a determination
with respect to the timing of the recognition of Rent under Section 467 of the
Code; (iv) the failure of this Master Lease or any Equipment Schedule to be a
“true lease” for federal income tax purposes or any other determination based
upon the structure of this transaction; (v) application Sections 168(d)(3) or
861 of the Code or regulations thereunder; (vi) payments of Stipulated Loss
Value or amounts calculated by reference thereto that are actually paid; (vii)
any direct or indirect sale, assignment, transfer or other disposition of any
Leased Item or any portion thereof by Lessor, its successors or any Assignee
other than after an Event of Default by Lessee; (viii) the failure of Lessor to
claim any deduction or other tax attribute properly or timely (unless such
failure is based upon an opinion of independent tax counsel reasonably
satisfactory to Lessee that there is not a reasonable basis upon which Lessor
is entitled to claim any of such Assumed Tax Benefits as a result of a failure
of any of Lessee’s Income Tax Representations to be true and correct or an act
or omission of Lessee for which Lessee has agreed to indemnify Lessor pursuant
to this Section); (ix) the failure of Lessor to comply with the contest
provisions set forth in subsection (d); (x) misconduct or negligence of Lessor;
(xi) penalties, interest or additions to tax to the extent based upon issues
unrelated to the transactions contemplated herein; (xii) a short taxable year
of Lessor; (xiii) any tax election made by, or action of Lessor that is
inconsistent with Lessor’s Assumed Tax Benefits; or (xiv) the applicability to
Lessor of Sections 55, 56, 57, 58, 168(f)(5), 291, 465 or 469 of the Code or
any successor provisions.  Except for
income tax for the state in which the Equipment is located, Lessee will not

 

7

 

indemnify for any state or local income taxes.  The rights and obligations of the parties in
this Section 9(c) shall survive the expiration or other termination of the
applicable Equipment Schedule.

 

(d) Lessee, at its option and expense, may
contest or require Lessor to contest (including appeals) any claim that might
be subject to indemnification by Lessee, provided that the amount of the
indemnity which Lessee would be required to pay would exceed $25,000 and
further provided that the Lessee has furnished Lessor with an opinion of
independent tax counsel reasonably satisfactory to Lessor that there is a
reasonable basis to defend such claim and Lessee shall have agreed to pay
Lessor on demand all reasonable costs and expenses (including the fees and
disbursements of independent tax counsel) incurred by Lessor in taking such
action.  Lessor shall permit Lessee to
direct any such contest; provided that, at any time, Lessor may require that
the tax contest not be pursued with respect to all or any portion of a proposed
adjustment by notifying Lessee in writing that Lessee is relieved of its
obligation to indemnify Lessor with respect to that adjustment or such portion,
as the case may be.  Lessee will have
the right to verify the calculation of amounts payable to Lessor pursuant to
Section 9(c), such verification to be provided by a nationally recognized firm
of independent public accountants selected by Lessor and reasonably acceptable
to Lessee, whose fees and expenses shall be borne by Lessee and whose
determination shall be conclusive and binding upon the parties.  Lessee agrees that it shall not have any
right to inspect the tax returns, books, records or any other documents,
records or proprietary information of Lessor in order to verify the amounts
payable to Lessor under Section 9(c). 
No assignment or other transfer by Lessor shall cause Lessee’s
indemnification obligations pursuant to this Section 9 to be greater than such
obligations would have been had the interest of Lessor not been assigned or
otherwise transferred.  Appropriate
adjustments will be made to the Stipulated Loss Value for any tax loss in order
to reflect properly the loss of tax benefits at each point in time shown on
such schedule. This tax indemnity is the sole remedy for misrepresentation of
any Income Tax Representation, and any such misrepresentation will not
constitute a default or Event of Default.

 

(e) Lessee’s federal income tax representations
(the “Income Tax Representations”) will be limited to the following:

 

(i) as of the date of the applicable
Equipment Schedule, and at all times during the term of the applicable
Equipment Schedule, the Equipment is not tax-exempt use property as a result of
the status of Lessee or

 

8

 

the status of any assignee, successor or sublessee of Lessee or as a
result of the use of the Equipment during the term of this Lease;

 

(ii) after the date of the applicable
Equipment Schedule, Lessee will not claim depreciation deductions with respect
to any Leased Items covered thereby;

 

(iii) each Leased Item has been delivered to
Lessee and is installed and has been placed in service by Lessee on or before
the commencement date of the Initial Lease Term of the applicable Equipment
Schedule;

 

(iv) the tax basis of the Leased Items
subject to a particular Equipment Schedule, for federal income tax depreciation
purposes, is the amount shown on the applicable Equipment Schedule as the basis
for Lessor’s Assumed Tax Benefits;

 

(v) at no time during the term of this Lease
will Lessee take or omit to take, nor will it permit any sublessee, renter or
assignee to take or omit to take, any action which will cause the Equipment to
be subject to the Alternative Depreciation System pursuant to Section
168(g)(1)(A) or Section 168(g)(1)(B) of the Code or any successor section; and

 

(vi) at no time during the term of this Lease
will Lessee take or omit to take, nor will it permit any sublessee, renter or
assignee to take or omit to take, any action that will result in the Equipment
constituting “limited use property” within the meaning of Revenue Procedure
75-21 or 76-30.

 

(f) Lessor shall give Lessee prompt written
notice of any taxes due by Lessee hereunder, and Lessor shall timely file all
tax returns and pay when due all federal, state and local taxes attributable to
Lessee’s use or possession of the Equipment (together with any related interest
or penalties arising from an act or omission of Lessee).  For those years which are under audit or may
still be audited and which are not barred by the statute of limitations, Lessor
will make available to Lessee, upon its request, evidence of all tax filings
and payments.  Lessee shall not be
obligated to pay any tax under this Master Lease so long as Lessee, by
appropriate proceedings, shall contest the validity or amount thereof in
accordance with the provisions of Sections 9(a) and 9(d), as applicable.  If Lessor shall obtain any refund of any tax
paid by Lessee (or by Lessor and reimbursed by Lessee), Lessor will promptly
pay such refund to Lessee, together with any interest thereon paid, credited or
offset.

 

(g) If Lessee shall fail to pay when due any
tax, except if such tax is being contested by Lessee in

 

9

 

accordance with the provisions of Sections 9(a) and 9(d), as
applicable, Lessor may at its option pay such tax, in which event the amount so
paid (including any penalty or interest incurred as a result of Lessee’s
failure), plus interest thereon at the Late Payment Rate, shall be paid by
Lessee to Lessor as Additional Rent within thirty (30) days after written
demand therefore.

 

10.                                 Installation,
Maintenance and Repair  Lessee shall
be responsible for the expense of delivery, installation, repair and
maintenance of the Equipment.  Lessee
agrees to keep the Equipment in normal working order, ordinary wear and tear
excepted, and to furnish all parts which may be required in the course of so
doing.  To the extent Lessee does so
with other similar equipment owned or leased by it, Lessee, at its sole
expense, shall enter into and keep in force a maintenance agreement with the
manufacturer of the Equipment or such other party reasonably acceptable to
Lessee and shall provide a copy of such agreement upon the request of Lessor.

 

11.                                 Equipment
Inspection and Use  Lessor may
inspect the Equipment and Lessee’s maintenance records upon reasonable prior
written notice to Lessee, during normal business hours and in accordance with
Lessee’s security procedures.

 

12.                                 Damage
or Destruction

 

(a) If any Leased Item is damaged, which
damage does not constitute an “Event of Loss” (as defined below), Lessee shall
promptly notify Lessor and within sixty (60) days of such damage, or as soon
thereafter as practical, proceed diligently to make any repairs necessary to
return the Leased Item to its condition immediately prior to such damage.  As between Lessor and Lessee, such repairs
shall be made at Lessee’s expense.  Any
insurance proceeds received by Lessee in connection with such damage shall be
applied: (i) first, to reimburse Lessee for all costs and expenses incurred by
Lessee related to such damage, and (ii) second, with any surplus promptly paid
to Lessor.

 

(b) In the event that any Leased Item is
taken or condemned by a governmental authority, destroyed, lost, stolen or, in
Lessee’s judgment, damaged to an extent that repair is not economical or as to
render it unfit for normal use (each, an “Event of Loss”), Lessee will promptly
notify Lessor, and Lessee shall pay to Lessor in cash within sixty (60) days
following the Event of Loss, an amount equal to the Stipulated Loss Value of
the Leased Item subject to the Event of Loss (calculated based on the Stipulated
Loss Value for the month preceding the month in which the Event of Loss
occurred), minus all insurance proceeds or other recovery received by Lessor or
any Assignee with respect to the Event of Loss.  Upon such payment by Lessee in full, Lessee’s obligations (except

 

10

 

for such obligations that expressly survive expiration or termination
of the applicable Equipment Schedule) with respect to such Leased Item,
including but not limited to the obligation to pay Rent for the Leased Item,
shall cease and Lessor shall deliver to Lessee a bill of sale conveying to
Lessee all of Lessor’s right, title and interest to such Leased Item, including
such title as Lessor acquired at the inception of the applicable Equipment
Schedule, free of any liens and encumbrances by, through or under Lessor, its
successors or any Assignee or the agents or employees of any of them (except
for Lessee, its successors or assigns or the agents or employees of any of
them).  Any insurance proceeds or
recovery received by Lessee in connection with such Event of Loss shall be
applied: (i) first, to payment of the Stipulated Loss Value amount payable to
Lessor pursuant to this Section (to the extent not previously paid by Lessee),
(ii) second, to reimburse Lessee for that portion of the Stipulated Loss Value
amount paid by Lessee, (iii) third, to reimburse Lessee for all costs and
expenses incurred by Lessee related to such Event of Loss, and (iv) fourth,
with any surplus promptly paid to Lessor.

 

(c) In the event of (i) damage to a Leased
Item pursuant to paragraph 12(a), or (ii) an Event of Loss pursuant to
paragraph 12(b), then in either such event any insurance proceeds or other
recovery received by Lessor or any Assignee in connection therewith shall be
applied: (i) first, to payment of the Stipulated Loss Value amount payable to
Lessor or to the payment of the cost to repair, as provided in Section 12(a)
and (b) as the case may be (to the extent not previously paid by Lessee), (ii) second,
to reimburse Lessee for that portion of the Stipulated Loss Value amount or
that portion of the cost to repair, paid by Lessee, (iii) third, to reimburse
Lessee for all costs and expenses incurred by Lessee related to such damage or
Event of Loss, and (iv) fourth, with any surplus retained by Lessor.  Payment by Lessor to Lessee under clauses
(ii) or (iii) shall be made promptly upon Lessee’s request.

 

13.                                 Insurance

 

(a) At all times during the Lease Term,
Lessee shall, at its sole expense, carry (i) property damage insurance on the
Equipment in an amount not less than the Stipulated Loss Value for each Leased
Item, and (ii) liability insurance for personal injury, property damage and
death, with a $1 million limit of liability. 
Lessor shall be named as an additional insured, as its interest may
appear, and loss payee on the property damage policy. This insurance shall
apply irrespective of any breach of warranty or other act or omission by
Lessee.  Lessor shall also be named as
an additional insured on the liability policy.   Lessee agrees to deliver to Lessor evidence of

 

11

 

the required insurance.  Lessee
will request its insurers to specify that such insurance policies may not be
altered or cancelled by the insurer until after 30 days written notice to
Lessor.  Notwithstanding anything to the
contrary, all insurance shall be subject to Lessee’s normal deductibles, and
Lessee may act as a self-insurer with respect to (i) liability insurance
subject, in Lessee’s reasonable determination, to insurance market conditions
or industry practice; and (ii) property damage insurance.  Lessee may carry the insurance under a
policy covering other property and equipment leased or owned by Lessee.  Upon an assignment by Lessee of this Master
Lease or an Equipment Schedule, the insurance policies provided by such
assignee shall be with companies and on terms reasonably satisfactory to
Lessor.

 

(b) Upon the occurrence of an “Insurance
Event” (as hereinafter defined), Lessee shall be deemed to have irrevocably
appointed Lessor as Lessee’s attorney-in-fact to make proof of loss and claim
of insurance, and to make adjustments with insurers and to receive payment of
and execute or endorse all documents, checks or drafts in connection with
payments made as a result of such insurance policies.  An Insurance Event shall exist when, an Event of Default having
occurred and Lessee having failed to exercise its option pursuant to Section
16(a), Lessor has commenced an action to enforce any of its remedies under
Section 16(b).

 

14.                                 Indemnity

 

(a) Subject to Section 9, Lessor and Lessee
shall each indemnify, defend and hold the other, and each party’s respective
agents, employees, successors and permitted assigns, harmless, on an after-tax
basis, from and against any loss, claims, costs, expenses, damages and
liabilities, including reasonable attorneys’ fees, resulting from breach of
this Master Lease or the negligence or wrongful acts or omissions of a party,
its employees or agents, in connection with this Master Lease, each Equipment
Schedule, or any Leased Item.  In
addition, Lessee shall indemnify, defend and hold Lessor and its agents,
employees, successors and permitted assigns harmless, on an after tax basis,
from and against any loss, claims, costs, expenses, damages and liabilities
(whether in contract, tort, strict liability in tort or otherwise), including
reasonable attorneys’ fees, arising out of the delivery, lease, possession,
maintenance, use, operation or condition of any Leased Item, and any claim for
patent, trademark or copyright infringement or environmental damage.

 

(b) The indemnifications in this Section 14
shall be contingent on the prompt written notice by the party seeking
indemnification of any claim or proceeding subject

 

12

 

to indemnity; provided, however, that the failure to give such notice
shall not affect such indemnification obligations unless and to the extent such
failure materially and adversely prejudices the rights of the indemnifying
party.  The party seeking such
indemnification will cooperate in the defense of such claim or proceeding at
the expense of the indemnifying party. 
The indemnifying party will have the sole right to defend, settle or
otherwise dispose of any such claim or proceeding, on such terms as it, in its
sole discretion, shall deem appropriate; provided, however, that the
indemnifying party shall not be entitled to control or assume the defense of
any such claim or proceeding, if and to the extent that in the opinion of
independent counsel, mutually agreed to by the indemnifying and indemnified
parties, the claims shall involve the imposition of criminal liability on such
indemnified party, in which event the indemnified party shall have the right to
approve defense counsel selected by the indemnifying party (which approval
shall not unreasonably be withheld). The expenses of such independent counsel
will be borne by the indemnifying party. 
In the event the indemnifying party assumes the defense of any such
action, any indemnified party shall have the right to employ separate counsel
in such action and participate therein, but the fees and expenses of such
separate counsel shall be at the expense of such indemnified party, unless (i) the
employment of such separate counsel has been specifically authorized by the
indemnifying party, or (ii) the counsel employed by the indemnifying party has
advised such indemnified party that (x) representation of such indemnified
party by the same counsel would be inappropriate under the applicable standards
of professional conduct due to actual or potential conflicts of interest or (y)
such counsel’s representation of such indemnified party would be likely to
involve such counsel in representing differing interests which could adversely
affect either the judgment or loyalty of such counsel to such indemnified
party, whether it be a conflicting, inconsistent or diverse interest (in which
case the indemnifying party shall not have the right to assume the defense of
such action on behalf of such indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action,
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys, and of any local counsel retained by said firm, at any one time for
each such indemnified party, which firm shall be designated in writing by such
indemnified party).  In any settlement
of any claim, dispute or other proceeding giving rise to any claim for
indemnification hereunder, the indemnifying party shall not make any admission,
on behalf of any indemnified party, of: (i) criminal

 

13

 

liability or (ii) liability arising under any environmental law or
regulation, without the prior written consent of such indemnified party (which
consent shall not be unreasonably withheld with respect to environmental
liability). Each party’s obligations hereunder shall survive the expiration of
the applicable Lease Term for a Leased Item with respect to acts or events
occurring or alleged to have occurred, or conditions existing, on or prior to
the expiration of the Lease Term for such Leased Item.

 

15.                                 Default

 

(a) The occurrence of any of the following
events shall constitute an event of default (“Event of Default”) under the
applicable Equipment Schedule:

 

(i) the nonpayment by Lessee of any Rent
under an Equipment Schedule;

 

(ii) the failure by Lessee to perform or
observe any other material term, covenant, or condition of this Master Lease or
any Equipment Schedule;

 

(iii) the filing of any involuntary petition
against Lessee or the filing of a voluntary petition by Lessee, under any
bankruptcy, reorganization, insolvency, arrangement, liquidation or
dissolution, or any other law for the relief of or relating to debtors which is
not stayed or dismissed within sixty (60) days thereafter, or the appointment
of any receiver, liquidator, or trustee to take possession of substantially all
of the properties of Lessee, unless the appointment is set aside or expires
within sixty (60) days from the date of said filing or appointment; or

 

(iv) the material untruth, when made, of any
representation or warranty by Lessee in this Master Lease or in any Equipment
Schedule or in any document furnished by Lessee to Lessor in connection with
this Master Lease or any Equipment Schedule.

 

(b) Notwithstanding anything to the contrary
in this Section 15, Lessee shall not be in breach or default under this Master
Lease, and no Event of Default shall be deemed to have occurred, until Lessee
has received prior written notice thereof from Lessor, which notice shall
specify the breach or default, and Lessee has been given thirty (30) days from
receipt of such notice to cure such breach or default (ten (10) days in the
case of either a breach or default under subsection (a)(i) above or a failure
to provide insurance to the extent required pursuant to Section 13(a));
provided, however, that no Event of Default (except under subsection (a)(i)
above) will be deemed to have occurred if a breach or default is curable

 

14

 

but cannot be cured during the applicable cure period and Lessee is
diligently attempting to cure.

 

(c) Any breach by a Lessee with respect to an
Equipment Schedule shall be a breach with respect to that Equipment Schedule
only.

 

16.                                 Remedies

 

(a) 
Upon the happening of any Event of Default, Lessor, by written notice to
Lessee, shall give Lessee the option to cure the Event of Default by paying to
Lessor, within thirty (30) days after receipt of such notice, the amount
specified in this subsection (a).  If
Lessee so elects to cure the Event of Default, the amount payable by Lessee
under this subsection (a) shall be (A) any accrued and unpaid Basic Rent and
other sums then due under the applicable Equipment Schedule, plus (B) the
greater of “Fair Market Value” or the Stipulated Loss Value of the Leased Items
subject to the Event of Default (Stipulated Loss Value to be determined as of
the month preceding the month in which the event triggering the Event of
Default occurred), plus all applicable sales taxes, if any.  Upon payment of such amount, Lessor shall
deliver to Lessee a bill of sale conveying to Lessee all of Lessor’s right,
title and interest, including such title as Lessor acquired at the inception of
the applicable Equipment Schedule, to such Leased Items, free of all liens and
encumbrances by, through or under Lessor, its successors or any Assignee or the
agents or employees of any of them (excluding Lessee, its successors and
assigns).  “Fair Market Value” is the
purchase price that would be obtained in an arm’s length transaction as of the
date of the Event of Default between informed and willing parties under no
compulsion to buy or sell, assuming the applicable Leased Items are maintained
in the condition as required under this Master Lease and, in the case of
installed Leased Items, the Leased Items shall be valued on an installed
basis.  If, within thirty (30) days
after receipt of Lessor’s notice of such option, Lessee does not elect to so
cure such Event of Default and pay the amounts provided herein within such
period, then Lessor may exercise any remedy specified in subsection (b) below.

 

(b) If Lessee fails to exercise the option in
subsection (a) above, Lessor may terminate, on five (5) days prior written
notice, all of Lessee’s rights to possession of the Leased Items covered by the
applicable Equipment Schedule and either (i) require Lessee to return the
Leased Items in accordance with the return provisions of this Master Lease, at
Lessee’s expense, or (ii) enter upon Lessee’s premises and take possession of
the Leased Items which are the subject of the Event of Default, and lease or
sell (in a commercially reasonable manner at public or private sale with at
least ten (10) days prior

 

15

 

written notice of such sale to Lessee) the same, or any portion
thereof.  Lessor may use Lessee’s
premises for storage or to show the Leased Items for sale or lease, without
charge, for a period not to exceed one hundred eighty (180) days following the
expiration of the option period specified in subsection (a) above; provided,
however, that any showing of the Leased Items shall be on reasonable prior
written notice to Lessee by Lessor.  The
proceeds of such sale will be applied by Lessor as follows:  (i) first, to pay all costs and expenses,
including reasonable legal fees and disbursements, incurred by Lessor as a
result of the Event of Default; (ii) second, to the obligations of Lessee
pursuant to Section 16(c), with Lessee remaining liable for any deficiency; and
(iii) third, to reimburse Lessee for any portion of the Stipulated Loss Value
or other damages paid by Lessee.  Any
surplus remaining thereafter will be paid to Lessor.  Lessor may also retain the Leased Items and recover from Lessee
as damages, not as a penalty, but as liquidated damages, the amount set forth
in Section 16(c). Lessor may elect not to repossess the Leased Items and may
instead recover from Lessee damages as provided in Section 16(c)(iii).  Lessor will use reasonable efforts to
mitigate its damages.

 

(c) The damages which Lessor shall be
entitled to recover pursuant to Section 16(b) are as follows:

 

(i) if Lessor elects to dispose of the Leased
Items pursuant to a lease which is substantially similar to this Master Lease
(including the applicable Equipment Schedule) and the new lease is made in good
faith and in a commercially reasonable manner, in an amount equal to the sum of
(A) any accrued and unpaid Basic Rent under the applicable Equipment Schedule
as of the date of commencement (the “Commencement Date”) of the term of the new
lease, and (B) the Stipulated Loss Value thereof (determined as of the
Commencement Date) and (C) any incidental damages allowed under Article 2A of
the Uniform Commercial Code (“Article 2A”) less expenses saved by Lessor in
consequence of the Event of Default (“Incidental Damages”) minus: (X) the
present value, determined as of the Commencement Date, of the rent under the
new lease applicable to that period of the new lease term which is comparable to
the then Remaining Initial Lease Term or Renewal Term, as the case may be, of
the applicable Equipment Schedule (the “Remaining Term”), (Y) the present
value, determined as of the Commencement Date, of Lessor’s booked residual for
such new lease (determined pursuant to Lessor’s customary residual setting
procedure) and (Z) the present value, determined as of the Commencement Date,
of the tax benefits which Lessor receives in connection with such new lease;

 

(ii) if Lessor elects to retain the Leased
Items or

 

16

 

to dispose of the Leased Items by sale, by re-lease (pursuant to a
lease which is not substantially similar to this Master Lease, including the
applicable Equipment Schedule), or otherwise, in an amount equal to the sum of
(A) any accrued and unpaid Basic Rent as of the date Lessor repossesses the
Leased Items or such earlier date as Lessee tenders possession of the Leased
Items to Lessor, (B) the Stipulated Loss Value, determined as of the date determined
under clause (c)(ii)(A), and (C) any Incidental Damages, minus: (X) the present
value as of the same date of the “market rent” (as defined in Article 2A) at
the place where the Leased Items were located on that date computed for the
same lease term, (Y) in the event a new lease is entered into, the present
value, determined as of such date provided under clause (c)(ii)(A), of Lessor’s
booked residual for such new lease (determined following Lessor’s customary
residual setting procedures) and (Z) the present value, determined as of such
date, of the tax benefits which Lessor receives in connection with such new
lease or disposition and those to which Lessor is legally entitled from the
date determined pursuant to clause (c)(ii)(A) through the date of disposition;
or

 

(iii) if Lessor has not repossessed the
Leased Items, or if Lessor has repossessed the Leased Items or Lessee has
tendered possession of the Leased Items to Lessor and Lessor is unable after
reasonable effort to dispose of the Leased Items at a reasonable price, in an
amount equal to the sum of (A) accrued and unpaid Basic Rent as of the date of
entry of judgment in favor of Lessor, (B) the Stipulated Loss Value thereof,
determined as of such date and (C) any Incidental Damages.  Lessor may dispose of the Leased Items at
any time before collection of a judgment for damages.  If the disposition is before the end of the Remaining Term,
Lessor’s recovery against Lessee for damages will be governed by subsection
(c)(i) or (ii) (as applicable), and the amount payable by Lessee pursuant to
such judgment shall be reduced to the extent that the amount of the judgment
exceeds the applicable recovery pursuant to subsection (c)(i) or (ii) .

 

(d) Upon payment by Lessee of the damages
pursuant to Section 16(c), the applicable Equipment Schedule shall be deemed
cancelled as to such Leased Items and Lessee shall have no further obligations
hereunder with respect to such Leased Items except for such obligations which
expressly survive expiration or termination as provided in this Lease.  All amounts to be present valued shall be
discounted at a rate equal to: (i) with respect to Section (c)(i) above,
Lessor’s pre-tax yield under such re-lease and (ii) with respect to Section
(c)(ii), above 175 basis points over the US Treasury obligations with a
comparable term as the term of the payments being presently valued.

 

17.                                 Performance
of Lessee’s Obligations  In the
event

 

17

 

Lessee shall fail to do any act required in this Master Lease or any
Equipment Schedule (other than the payment of Rent), for a period of thirty
(30) days following receipt of written notice from Lessor, Lessor shall have
the right, but not the obligation, to do the same upon giving written notice to
Lessee.  In exercising any such rights,
Lessor may expend any reasonable amounts it deems necessary.  All sums incurred and expended by Lessor
pursuant to this Section shall be immediately payable as Additional Rent.

 

18.                                 Deinstallation
and Return of Equipment  Upon the
expiration or earlier termination of the Lease Term (the “Expiration Date”)
with respect to any Leased Items, and if Lessee shall not have elected to
purchase such Leased Items, Lessee shall, at its sole expense, deinstall and
return such Leased Items to Lessor in normal condition, ordinary wear and tear
excepted, to a location in the continental United States specified by
Lessor.  In the event Lessee keeps such
Leased Items ten (10) business days beyond the Expiration Date, Lessee shall pay
to Lessor daily rent from the Expiration Date for the Leased Items not timely
returned.  Daily rent is determined by
dividing the amount of the last Basic Rent installment for the Leased Items by
the appropriate denominator to arrive at a per diem rental amount.

 

19.                                 Assignment
by Lessor

 

(a) Lessor at any time may, in one or more
transactions, assign, pledge, mortgage, transfer, sell or grant a security
interest or otherwise dispose of (collectively an “Assignment” and each party
to whom an Assignment is made, an “Assignee”) all or part of Lessor’s interest
in any Equipment Schedule, this Master Lease, or any one or more Leased
Items.  Such Assignments shall be made
subject to all rights of Lessee under this Master Lease and the applicable
Equipment Schedule.  No Assignment shall
relieve Lessor of its obligations under this Master Lease and the Equipment
Schedules, and Lessor shall be responsible to Lessee for the acts of an
Assignee.

 

(b) Each Assignee shall be entitled to all of
the rights, powers and privileges of Lessor under the applicable Equipment
Schedule to the extent these have been assigned.  The rights of an Assignee shall not be subject to any defense,
counterclaim or setoff which Lessee may have against Lessor.

 

(c) No Assignment by Lessor or an Assignee
shall be effective until:  (i) receipt
by Lessee from Lessor of written notice thereof at least thirty (30) days prior
to the effective date of the Assignment; and (ii) delivery to Lessee by the
proposed Assignee of a signed statement pursuant to which such proposed
Assignee agrees to be

 

18

 

bound by the terms of this Master Lease and the applicable Equipment
Schedule and agrees that Lessee may continue to enjoy quiet possession of the
Equipment.

 

20.                                 Assignment,
Subleasing and Relocation by Lessee

 

(a) Assignment:  Upon thirty (30) days prior written notice to Lessor, Lessee may
assign its rights, powers, privileges and obligations under this Master Lease
and/or one or more Equipment Schedules provided that: (i) such assignee shall
agree to be bound by the terms of this Master Lease and the applicable
Equipment Schedule; and (ii) Lessee shall comply with the provisions of Section
20(c) regarding relocation of the Equipment; (iii) the assignee is a U.S.
person; (iv) such assignment will not cause any Leased Item to be considered
tax exempt use property as provided in Section 168 of the Code (or any
successor provision); (v) such assignment will not cause any loss of or
otherwise adversely affect any of Lessor’s Assumed Tax Benefits (it being
agreed that notwithstanding any provision of this Master Lease to the contrary,
any assignment by Lessee, whether or not in compliance with this Section, shall
constitute an act of Lessee for purposes of Section 9(c)(ii) of this Master
Lease for which Lessee shall be required to indemnify Lessor pursuant to the
terms of such Section); (vi) such assignment will not cause any Rent or other
amounts payable to Lessor in connection with this Master Lease to be subject to
any withholding taxes; and (vii) no assignment shall relieve Lessee of its
obligations under this Master Lease and the applicable Equipment Schedule, and
Lessee shall be responsible to Lessor for the acts of such assignee.  Notwithstanding anything to the contrary,
acts by the Lessee pursuant to this subsection shall constitute an act for
purposes of Section 9(c)(ii) for which Lessee shall be required to indemnify
Lessor pursuant to the terms of such Section.

 

(b) Subleasing:  Lessee may sublease any or all of the Equipment upon thirty (30)
days prior written notice to Lessor provided that: (i) such sublessee is a U.S.
person; (ii) such sublease will not cause any Leased Item to be considered tax
exempt use property as provided in Section 168 of the Code (or any successor
provision); (iii) such sublease will not cause any loss of or otherwise
adversely affect any of Lessor’s Assumed Tax Benefits (it being agreed that
notwithstanding any provision of this Master Lease to the contrary, any
sublease by Lessee, whether in compliance with this Section or otherwise, shall
constitute an act of Lessee for purposes of Section 9(c)(ii) of this Master
Lease for which Lessee shall be required to indemnify Lessor pursuant to the
terms of such Section); (iv) such sublease will not cause any Rent or other
amounts payable to Lessor in connection with this Master Lease to be subject to
any

 

19

 

withholding taxes; (v) if, and only if, Lessee’s (or any successor’s)
credit rating is BB or lower (as rated by Standard & Poor’s Corporation),
Lessee will grant to Lessor a security interest in any such sublease and the
payments thereunder and the proceeds thereof (including insurance proceeds) to
secure Lessee’s obligations hereunder, it being understood that a sublessee
shall pay Lessee all rentals and other sums payable under a sublease until (x)
an Event of Default occurs with respect to the subleased Leased Items, (y)
expiration of all applicable notice and cure periods under this Master Lease
have occurred and (z) Lessor has issued a notice to the sublessee to pay such
payments to Lessor, and that so long as there is no Event of Default hereunder
with respect to subleased Leased Items, Lessor will not disturb a sublessee’s
right to quiet use and possession under its sublease; (vi) during the term of a
sublease, the rent payable by a sublessee is equal to or greater than the Basic
Rent payable by Lessee to Lessor for such subleased Leased Items; (vii) during
the term of a sublease, the rent payable by a sublessee to Lessee is payable on
the same dates as the Basic Rent payable by Lessee to Lessor for such subleased
Leased Items; and (viii) to the extent any sublease may constitute chattel
paper, no security interest in any sublease may be perfected except through the
possession of counterpart No. 1 of any sublease, which counterpart will be
delivered to Lessor upon the request of Lessor. Such notice shall specify the
name and address of the proposed sublessee, and location and movement date for
the Equipment.  Lessee may not sublease
the Equipment unless such notice has been given to Lessor and unless Lessee
shall comply with the provisions of Section 20(c) regarding relocation of the
Equipment.  No sublease shall discharge
or diminish Lessee’s obligations under this Master Lease and any Equipment
Schedule, and sublessee’s rights with respect to the Equipment shall be
expressly made subject and subordinate to the rights of Lessor. Notwithstanding
anything to the contrary, acts by the Lessee pursuant to this subsection shall
constitute an act for purposes of Section 9(c)(ii) for which Lessee shall be
required to indemnify Lessor pursuant to the terms of such Section.

 

(c) Relocation:  Upon thirty (30) days prior written notice to Lessor, Lessee may
relocate any of the Leased Items within the continental United States provided:
(i) upon Lessor’s request, Lessee files or cooperates in filing financing
statements or other documents necessary to continue in effect any security
interests in the Leased Items; (ii) upon Lessor’s request, Lessee shall provide
proof of insurance for transportation; and (iii) Lessee promptly pays all
costs, including additional property or use taxes, resulting from
relocation.  In no event shall any of
the Leased Items be relocated or used outside the continental United
States.  Notwithstanding anything to

 

20

 

the contrary, acts by the Lessee pursuant to this subsection shall
constitute an act for purposes of Section 9(c)(ii) for which Lessee shall be
required to indemnify Lessor pursuant to the terms of such Section.

 

21.                                 Upgrades   At any time, Lessee may modify the
Equipment, or acquire and install additional features, options or upgrades,
provided that such modification, feature, option or upgrade does not interfere
with Lessee’s ability to maintain the Equipment as required under this Master
Lease.  If, at the end of the Lease
Term, Lessee is not purchasing the Equipment, Lessee shall remove all
modifications, features, options and upgrades which are readily removable
without causing material damage to the Equipment.  Upgrades, modifications, features and options which are not so
removable will become the Lessor’s property (lien free) at the end of the Lease
Term.  Notwithstanding anything to the
contrary, acts by the Lessee pursuant to this Section shall constitute an act
or omission pursuant to Section 9(c)(ii)

 

22.                                 Miscellaneous

 

(a) Lessee agrees promptly to furnish, upon
request, financial statements for the most recent period for which available.

 

(b) No delay or failure to exercise any right
or remedy accruing to Lessor or Lessee shall be a waiver of any such right or
remedy, nor will a waiver of any single breach or default be deemed a waiver of
any other breach or default.  ANY
WAIVER, PERMIT, CONSENT, OR APPROVAL ON THE PART OF LESSOR OR LESSEE OF ANY
BREACH OR DEFAULT UNDER THIS MASTER LEASE OR ANY EQUIPMENT SCHEDULE, MUST BE IN
WRITING.  

 

	
  Initials:

  	
  /s/ Frank Kneisel

  	
  /

  	
  /s/ Christopher Ziluca

  

 

 

(c) Any notices provided for under this
Master Lease shall be given in writing by certified or registered mail, return
receipt requested, or by overnight mail (e.g., Federal Express or Express Mail)
which provides evidence of receipt by an addressee, to the respective party at
the address set forth below or at any other address as the respective party may
designate by notice delivered pursuant hereto:

 

To Lessee:

 

Champion International Corporation

One Champion Plaza

Stamford, CT 
06921

Attn: Senior Vice President-Finance

 

21

 

To Lessor:

 

General Electric Capital Corporation

44 Old Ridgebury Road

Danbury, CT 06810

Attn: Manager-Operations

 

(d) In no event shall either party be liable
to the other for special, indirect, incidental or consequential damages of any
nature or kind whatsoever in connection with this Master Lease, any Equipment
Schedule or the Equipment.

 

(e) Lessor and Lessee shall reimburse the
other for all costs and expenses (including attorneys’ fees) incurred in
connection with the enforcement by a party of any right, remedy or obligation
under this Master Lease or pursuant to law.

 

(f) In the event of a breach or
non-performance of any provision or obligation of this Master Lease by the
Lessor or an Assignee, the Lessee shall be entitled to exercise all rights and
remedies under this Master Lease and pursuant to law, including, but not
limited to, the right to cease performance during the period of such breach or
non-performance.

 

(g) This Master Lease and each Equipment
Schedule shall be governed by, and construed in accordance with, the laws
applicable to contracts made or performed in the State of New York, without
giving effect to the principles of conflict of laws.  Any and all proceedings relating to the subject matter of this
Master Lease and each Equipment Schedule shall be maintained in the courts of
New York located in New York County or the federal district courts sitting in
New York County, which courts shall have exclusive jurisdiction for such purpose.

 

(h)  LESSOR
AND LESSEE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION ARISING OUT OF THIS MASTER
LEASE.

 

(i) Lessor and Lessee acknowledge that there
are no agreements or understandings, written or oral, between them with respect
to this Master Lease or the Equipment, other than as set forth herein and in
each Equipment Schedule, and that this Master Lease and each Equipment Schedule
contain the entire agreement between Lessor and Lessee.  Neither this Master Lease nor any Equipment
Schedule may be altered, modified, terminated, or discharged except by a
writing signed by the party against whom enforcement of such alteration,
modification, termination or discharge is sought.

 

(j) Any provision of this Master Lease and
any Equipment Schedule prohibited by or unlawful or unenforce-

 

22

 

able under any applicable law of any
jurisdiction shall be ineffective as to such jurisdiction without invalidating
the remaining provisions of this Master Lease.

 

(k) This Master Lease and each Equipment
Schedule shall be binding upon and inure to the benefit of Lessor, Lessee,
their respective successors, and assigns, subject to and except as expressly
provided for herein.

 

(l) In no event shall any provision of this
Master Lease act as a waiver of subrogation, in whole or in part, by Lessee, or
act to limit liability of either party for indemnification or contribution.

 

(m) Section headings are for convenience only
and shall not be construed as part of this Master Lease or any Equipment
Schedule.

 

(n) Each party shall be responsible for its
own expenses incurred in connection with this transaction, except as
specifically provided herein.

 

IN WITNESS WHEREOF, Lessee and Lessor have
caused this Master Lease to be executed as set forth below.

 

	
  Lessee:

  	
   

  	
  Lessor:

  
	
   

  	
   

  	
   

  
	
  CHAMPION
  INTERNATIONAL

  CORPORATION

  	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Frank
  Kneisel

  	
   

  	
  By:

  	
  /s/ Christopher Ziluca

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Frank Kneisel

  	
   

  	
   

  	
  Christopher Ziluca

  
	
   

  	
  (Printed Name)

  	
   

  	
   

  	
  (Printed Name)

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President
  and Treasurer

  	
   

  	
  Title:

  	
  Senior Credit
  Analyst

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  September 1,1994

  	
   

  	
  Date:

  	
  9/1/94

  
							

 

29:Lease.630

(see 29:Exhibit.630)

 

23

 

EQUIPMENT SCHEDULE

 

EQUIPMENT
SCHEDULE NUMBER 1 effective September 30, 1994 (the “date hereof”) to the
Master Lease dated as of September 1, 1994 (“Master Lease”).

 

	
  LESSEE:

  	
   

  	
  LESSOR:

  
	
   

  	
   

  	
   

  
	
  CHAMPION INTERNATIONAL

  CORPORATION
One Champion Plaza
Stamford, CT 06921

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION
44 Old Ridgebury Road
Danbury, CT 06810

  

 

1.                             Location of Equipment: Lessee’s paper mill in
Canton, North Carolina.

 

2.                             Initial Lease Term: 120 months, from the
first day of the next succeeding month after the day hereof.

 

3.                             Equipment:  
The Equipment leased hereunder shall be as set forth on Annex A attached
hereto.

 

4.                             Total Invoice Cost of Equipment:
$7,347,765.90 (also referred to as “Capitalized Lessor’s Cost”).

 

5.                             Stipulated Loss Values:  The schedule of Stipulated Loss Values
attached hereto as Annex D is incorporated herein by reference.

 

6.                             Rent:

 

(a) 
Interim Rent: During the period from the date hereof to the last day of
this month, the daily rent for the Equipment leased hereunder shall be computed
as the product of the Total Invoice Cost specified above and the Prime Rate
divided by three hundred sixty five (365) days. As used herein, “Prime Rate”
shall mean the prime rate of Chemical Bank, New York, New York, in effect on
the date of execution hereof. This pro-rated payment shall be made on the last
day of the month.

 

(b) 
Basic Rent: Commencing on April 1, 1995 and continuing on the same day
of each calendar year thereafter during the Initial Lease Term, rent for said
Equipment during the Initial Lease Term shall be as specified in Rider 4 to
this Equipment Schedule.

 

 

	
  Initials:  

  	
  /s/ Frank Kneisel

  	
   

  	
  /s/
  Christopher Ziluca

  	
   

  
	
   

  	
  Lessee

  	
   

  	
  Lessor

  	
   

  

 

1

 

7.                             Options at End of Initial Lease Term: See
Rider 3 to this Equipment Schedule.

 

8.                             Assumed Tax Benefits:

 

(a) Depreciation Deductions: 200% declining balance method switching to
straight line method for the first taxable year for which using the straight
line method with respect to the adjusted basis as of the beginning of such year
would yield a larger allowance.

 

(b) Recovery Period: seven (7) years.

 

(c) Basis: 
100% of Capitalized Lessor’s Cost.

 

9.                             Special terms: The following terms set forth
below or attached hereto, shall be applicable to and shall constitute a part of
this Equipment Schedule.

 

 

Master Lease: This Equipment
Schedule is issued pursuant to the Master Lease identified on Page 1. All of
the terms and conditions of the Master Lease are incorporated herein and made a
part hereof as if such terms and conditions were set forth in this Equipment
Schedule. By their execution and delivery of this Equipment Schedule, the
parties hereby reaffirm all of the terms and conditions of the Master Lease
except as modified hereby.

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  
	
   

  	
   

  	
   

  
	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION

  	
   

  	
  CHAMPION
  INTERNATIONAL

  CORPORATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Christopher Ziluca

  	
   

  	
  By:

  	
  /s/ Frank
  Kneisel

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Christopher Ziluca

  	
   

  	
  Name:

  	
  Frank Kneisel

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Senior Credit
  Analyst

  	
   

  	
  Title:

  	
  Vice President
  & Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  September 30, 1994

  	
   

  	
  Date:

  	
  September 30, 1994

  
									

 

 

	
   

  	
  Initials:

  	
  /s/ Frank Kneisel

  	
   

  	
  /s/
  Christopher Ziluca

  	
   

  
	
   

  	
  Lessee

  	
   

  	
  Lessor

  	
   

  

 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}]]