Exhibit 10(ai)
OPERATING EQUIPMENT LEASE
THIS LEASE is made as of the 26 day of April, 1996, by and between TETRA
LAVAL CREDIT INC., with offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter "Lessor"), and PLAYTEX MANUFACTURING, INC., a
Delaware corporation and wholly-owned subsidiary of Playtex Products, Inc.
(hereinafter "Lessee").
1. Lease of Equipment: Subject to the terms and conditions of this Lease,
Lessor hereby agrees to lease to Lessee and Lessee hereby agrees to lease from
Lessor certain items of machinery, equipment and spare parts (herein referred to
collectively as the "Equipment" and individually as an "Item" or "Item of
Equipment") more fully described in Exhibit A hereto. A portion of such
Equipment constitutes two separate thermoforming, stacking and packing lines
which are intended to be separately moved from France to a manufacturing
facility to be located in the United States and operated by Playtex or its
subcontractor (the "U.S. Plant"), the first such line to be moved being herein
referred to as the "First Line" and the second such line to be moved being
herein referred to as the "Second Line".
2. Term: The term of this Lease (the "Lease Term") shall commence as of
the Acceptance Date (as hereinafter defined) of First Line and shall expire on
the fifth anniversary of the last day of the calendar quarter during which the
Acceptance Date of the Second Line occurs. For purposes of this Lease, the
"Acceptance Date" shall have the meaning ascribed to such term in the Warranty
Services Agreement (the "Services Agreement") dated the date hereof among Lessee
and Tetra Pak Plastic Packaging R&D GmbH.
3. Rent: A. For the first and second year of the Lease Term, the rent for
the Equipment shall be $[0.003] per Insert produced by the Equipment which
complies with Playtex specifications, subject to a minimum annual rent of
$[300,000] (such minimum to be reduced pro rata to an annualized minimum of
$[150,000] per annum for any portion of such years during which only the First
Line is operating at the U.S. Plant) and a maximum annual rent of $[600,000].
For the third, fourth and fifth years of the Lease Term, rent for the Equipment
shall be $[0.003] per Insert produced by the Equipment which complies with
Playtex specifications subject to a minimum annual rent of $[450,000] and a
maximum annual rent of $[900,000]. Notwithstanding the foregoing, if Playtex
accepts either the First Line and/or the Second Line despite the fact that
Minimum Performance Level (as defined in the Services Agreement) has not been
achieved as contemplated by Article 4 of the Service Agreement, then the
foregoing rental rates and minimum rent amounts shall be reduced on a pro rata
basis with respect to each quarterly rental period during which such Line or
Lines continue to perform below the Minimum Performance Level, provided,
however, that if any such reduction occurs and during any later quarterly rental
period included in the Lease Term such underperforming Line or Lines operate
above the Minimum Performance Level then the foregoing rental rates shall during
such later quarterly rental periods be increased on a pro rata basis but such
increased rental rates shall only apply until such point as Lessor has recovered
the rental amounts which it would
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have otherwise earned if the rental rates and minimum rent amounts had never
been reduced in accordance with the foregoing (none of the foregoing having any
effect on the maximum rent amounts described above).
B. All rent shall be payable in quarterly installments in arrears within
30 days after the first day of January, April, July and October of each year
during the Lease Term. On each rent payment date, Lessee shall pay (i) during
the first and second year of the Lease Term, quarterly installments of
$[150,000] each and (ii) during the third, fourth and fifth year of the Lease
Term, quarterly installments of $[225,000] each. From the Acceptance Date of the
First Line until the commencement of the first complete calendar quarter of the
Lease Term and from the date of the end of the last complete calendar quarter of
the Lease Term until the end of the Lease Term, the rent shall be pro rated
(based on the number of days in each such period) using the above rates.
C. Within 60 days after the end of each year of the Lease Term, Lessee
shall deliver to Lessor a certificate of an officer of Lessee which states the
number of Inserts complying with Playtex specifications which were produced by
the Equipment during such year. Lessor shall be entitled to audit such
statements, on reasonable notice to Lessee, during Lessee's normal business
hours. In the event the actual earned annual rent, calculated using the
information on Lessee's officer's certificate (or such corrected information
resulting from audit) and the rates, minimums (subject to subparagraphs 3.A
above and 3.D below) and maximums set forth in subparagraph 3.A above, is less
than the amount of the rent payments made with respect to such year under
subparagraph 3.B above, Lessee shall be entitled to a refund of such difference,
provided that the refund will not reduce the total amount of rent paid during
such year below any minimum rent amount that may then be in effect. At Lessee's
option, such refund shall either be applied to future rental installments or
paid by Lessor to Lessee in cash within 30 days of Lessee's written request
therefor. All payments provided for in this Lease shall be made to Lessor, or,
if applicable, to Lessee at its respective address for notices provided herein
or such other address as may be designated by such party in writing.
D. If at any time during the period from the date hereof through the end
of the Lease Term, Lessor, Tetra Laval Holdings & Finance S.A., Tetra Pak
Plastic Packaging R&D GmbH, or one of their affiliates licenses or otherwise
grants or gives any rights or interest in the technology used to produce Inserts
or any part thereof to any party other than Lessee (including, without
limitation, to the Unidentified Licensee as defined in the Technology and Patent
License Agreement dated the date hereof between Lessee and Tetra Laval Holdings
& Finance S.A. and Tetra Pak Plastic Packaging R&D GmbH) for use in connection
with unfilled containers for infant feeding (the "Other License"), then for the
year during which such Other License is granted or rights given and for all
years thereafter there shall be no minimum amount of rent payable by Lessee
under this Lease and the minimum annual rent amounts set forth in subparagraph A
above shall be of no further force or effect.
E. Taxes: Lessee will pay any fees, assessments, and taxes, including
sales, use, and property tax, and any interest thereon, lawfully levied against
or upon the
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Equipment, its use or its rental, or otherwise arising out of this Agreement
(except foreign taxes, duties, and Lessor's income taxes and personal property
ad valorem taxes);
F. Late Charge: Any amounts due and owing by either party under this
Agreement by more than seven days after written notice will bear interest at the
lesser of one percent per month or the highest rate allowed by law. Either party
may take any steps, including without limitation (i) classifying payments as
expenses or premiums, (ii) segregating prepayments, or (iii) spreading total
interest charges evenly throughout the Lease Term, as are necessary to reduce
any interest paid or payable under this Agreement below any such statutory
maximum rate.
4. Purchase Option: Lessee may elect to purchase all but not less than all
of the Equipment, by giving written notice to Lessor, (a) at any time during the
Lease Term but prior to the end of the Lease Term and by paying to Lessor,
within 30 days after the date of such notice, the amount contemplated by Exhibit
C hereto, or (b) at the end of the Lease Term and by paying to Lessor within 30
days of the last day of the Lease Term an amount equal to the difference between
$3,410,000 and the principal portion of the rent installments paid hereunder
through the end of the Lease Term. If the Equipment is so purchased by Lessee,
Lessor will convey to Lessee good title to the Equipment, free and clear of any
liens or encumbrances. Lessor and Lessee reasonably believe that the useful life
of the Equipment is at least seven years from the commencement of the Lease
Term.
5. Return of Equipment: Upon the expiration or termination of this Lease,
unless lessee shall have exercised its option to purchase the Equipment, Lessor
shall be entitled to retake the Equipment at its own cost and expense and Lessee
shall make its manufacturing facility reasonably available to Lessor for such
purpose. Lessor shall use all reasonable care not to damage or disrupt the U.S.
Plant or Lessee's other equipment during any such removal of the Leased
Equipment. At the time of such return, the Equipment shall be free and clear of
all liens, security interests, encumbrances and rights of others, other than
those referred to in Article 9 hereof, and shall be in good operating condition,
ordinary wear and tear excepted. Any costs incurred to restore the Equipment to
good working order will be paid by Lessee.
6. Representations and Warranties of Lessor: A. Lessor warrants that it
has good title to the Equipment and transfers possession of the Equipment to
Lessee free of liens and encumbrances. Lessor further warrants that during the
term of the Lease, if no Event of Default has occurred, Lessee's use of the
Equipment shall not be interrupted by Lessor or anyone claiming solely through
or under Lessor.
▇. ▇▇▇▇▇▇ authorizes Lessee, at Lessee's expense, provided that no Event
of Default shall have occurred and be continuing, to assert for Lessor's
account, during the term of this Lease, all of Lessor's rights under any
manufacturer's, vendor's or dealer's warranty on the Equipment, and Lessor
agrees to cooperate with Lessee in asserting such rights at Lessee's expense.
Any amount received by Lessee as payment under any warranty pursuant to the
above authorization shall be applied to restore the
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Equipment to as good a condition as it was or should have been (but for defects
giving rise to such payment under warranty) when delivered to Lessee, ordinary
wear and tear excepted, with the balance of such amount, if any, to be paid over
to Lessor.
C. Limited Remedy: Lessee's sole and exclusive remedy for breach of any
manufacturer warranty, if any, will be as specified by the manufacturer during
the applicable warranty period. Lessor shall have no liability to Lessee or to
any third party as a result of any Equipment failure or any defects in material
or workmanship of the Equipment, if any.
7. Representations and Warranties of Lessee: A. Lessee is a corporation
duly organized and validly existing under the laws of the state of its
incorporation, and is fully qualified to do business in those jurisdictions
(including those where the Equipment will be located) where such qualification
is necessary to authorize Lessee to carry on its present business and
operations;
B. Lessee has full power, authority and legal right to execute, deliver
and perform the terms of this Lease. This Lease has been duly authorized by all
necessary corporate action on the part of Lessee, and does not require the
approval of, or the giving of notice to, any federal, state, local, or foreign
governmental authority and does not contravene any law binding on Lessee or
contravene Lessee's certificate or articles of incorporation or by-laws or any
indenture, credit agreement or other agreement to which Lessee is a party or by
which it is bound;
C. This Lease constitutes a legal, valid and binding obligation of Lessee,
enforceable in accordance with its terms; and
D. There are no pending or threatened actions or proceedings before any
court, administrative agency or other tribunal or body which may materially
adversely affect Lessee's ability to perform its obligations under this Lease.
8. Title Retained by Lessor: A. Lessor shall be deemed to have retained
title to the Equipment at all times prior to a purchase of the Equipment by
Lessee in accordance with Section 4 above. The Equipment shall be deemed to be
personal property of Lessor, regardless of the manner in which it may be
attached to any other property. Lessee shall deliver to Lessor a waiver from any
landlord or mortgagee of any property at which the Equipment may be located on
or before the Equipment is installed at such property. Any spare parts will
become the property of Lessor immediately upon installation as part of the
Equipment. Lessee authorizes Lessor to file or record this Agreement or copy
thereof or any UCC statement showing Lessor's interest in the Equipment in all
jurisdictions where the Equipment or Lessee may be located and Lessee will sign
all such statements at Lessor's request.
B. Lessee may from time to time add further parts or accessories to any
Item of Equipment provided that such addition does not impair the value or
utility of remaining useful life of such Item and Equipment; and any parts or
accessories so added shall remain the property of Lessee and may be removed by
Lessee at any time
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prior to the expiration of the Lease with respect to such Item or Items of
Equipment, provided such removal does not impair the value or utility or
remaining useful life of such Item of Equipment.
9. Mortgages, Liens, etc. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any mortgage, security interest, pledge, lien,
charge, encumbrance or claim on or with respect to the Equipment, title thereto
or any interest therein (other than any collateral assignment of this Lease
Agreement to Lessee's principal bank lender or lenders) (and Lessee will
promptly, at its own expense, take such action as may be necessary to duly
discharge any such mortgage, security interest, pledge, lien, charge,
encumbrance or claim) except (a) the respective rights of Lessor and Lessee as
herein provided, (b) liens or encumbrances which result from claims against
Lessor except to the extent that such liens and encumbrances arise from failure
of Lessee to perform any of Lessee's obligations hereunder, (c) liens for taxes
either not yet due or being contested in good faith and by appropriate
proceedings, and (d) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees', or other like liens arising in the ordinary course of business and
not delinquent. Notwithstanding anything to the contrary contained herein,
Lessee shall not have the right to challenge such liens if there exists a
material risk of loss, sale or forfeiture of the Equipment.
10. Site; Condition: Lessee is responsible for Site condition, including
adequate flooring, drainage, HVAC, and lighting. Lessee will provide at its cost
adequate utility connections and service to the Site prior to installation,
including electrical circuits, outlets, and breakers, compressed air, water, and
other services required for proper installation and operation of the Equipment.
11. Use, Maintenance, and Operation; Identification: Lessee agrees that
the Equipment will be used solely in the conduct of its business and in
compliance in all material respects with the statutes, laws, ordinances and
regulations of any governmental agency applicable to the use of the Equipment,
and will remain in the possession and control of Lessee or its sub-contractor at
the location of its installation with respect to each Item of Equipment (Lessor
acknowledges that the installation site may be the premises of Lessee's
sub-contractor). Lessee will use reasonable efforts: (i) to operate the
Equipment with properly trained employees and to follow relevant operating,
maintenance, and instruction manuals provided by the manufacturer or Lessor;
(ii) to keep the Equipment in good working order and perform appropriate
maintenance, repairs, and service using appropriate spare parts and service
personnel; and (iii) not to alter or modify the Equipment or Lessee's use
thereof in a manner that would materially damage the Equipment or reduce its
ability to operate properly. Lessor may inspect the Equipment at reasonable
times on reasonable notice to ensure Lessee's compliance with this article.
12. Limitation of Liability: In no event will Lessor's liability for any
failure of performance or other breach of this Agreement or of any warranty
hereunder exceed the total amount of Base Rentals previously paid by Lessee for
the Equipment, and Lessee hereby waives and releases any claims against Lessor
in excess of such amount.
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13. Consequential Damages: Lessor will not be liable for and Lessee hereby
waives and releases any claims against Lessor for any special, incidental,
indirect, exemplary, or consequential damages, including lost sales, revenues or
profit, loss or return of or damage to product, loss of facilities, inventory,
work-in-process, or time and materials, or loss of prospective economic
advantage, arising from any performance or failure to perform under this
Agreement, or from the breach of any warranty hereunder.
14. Indemnification: Lessee will defend, indemnify, and hold harmless
Lessor, its officers, employees, and agents (collectively "Lessor") against and
from any and all liability, claims, suits, judgments, losses, damages, or costs
(including reasonable attorneys' fees and expenses) resulting from any claim,
suit or demand by any third party for injuries to or deaths of persons or loss
of or damage to property arising out of (i) installation, use, operation,
maintenance, or repair of the Equipment by Lessee, (ii) use of facilities,
services, materials, data, or information not provided by Lessor, or (iii) any
packaging, labelling, processing, delivery, or sale of products or services by
Lessee, except to the extent caused by the negligence or willful misconduct of
Lessor. This indemnification will survive termination of this Agreement.
15. Risk of Loss; Insurance: A. Lessee bears the entire risk of loss with
respect to any damage, destruction, loss, theft, or government taking of the
Equipment or any part thereof. Regardless of the occurrence of such loss or
other event, Lessee will remain fully liable to Lessor for and will pay promptly
when due all rentals and other charges under this Agreement.
B. Lessee at its expense will obtain from a Bests B+ rated insurer and
will maintain in full force and effect (i) comprehensive general liability
insurance of at least $1,000,000 for public liability, and (ii) risk of loss
property damage insurance for the replacement value of the Equipment. Such
insurance will be endorsed to name Lessor as loss payee to the extent of the
risk of loss and indemnification obligations assumed by Lessee under this
Agreement. Upon receipt of such insurance proceeds, Lessor will use reasonable
efforts diligently to obtain repair or replacement of the Equipment up to the
amount or value of such insurance proceeds, with Lessee making up any shortfall.
Certificates evidencing such coverage will be provided to Lessor prior to
delivery of the Equipment and will provide that such insurance coverage will not
be cancelled or modified except upon 30 days prior written notice to Lessor.
16. Force Majeure: Neither party will be liable for delays in or
suspension of performance (other than the obligation to pay amounts when due)
caused by acts of God or governmental authority, strikes or labor disputes,
accident, flood, fires or other loss of manufacturing facilities, lack of
adequate fuel, power, raw materials, labor, or transportation facilities, breach
by suppliers of supply agreements, or any other cause, whether similar or
dissimilar, beyond the reasonable control of that party.
17. Remedies for Non-Payment; Breach: A. Lessor hereby waives any right to
terminate this Agreement earlier than as provided in Term, above, including the
right to terminate in the event of breach of this Agreement by Lessee. Upon
receipt of
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written notice from Lessor asserting a breach of this Agreement by Lessee,
Lessee has the option, exercisable by Lessee in writing within 72 hours of
Lessee's receipt of the notice to Lessor, either to terminate this Agreement or
to require that Lessor continue this Agreement and all performance hereunder in
full force and effect. Upon exercise of the option of non-termination by Lessee
(failure of Lessee to notify Lessor of its election within the 72 hour period
will be deemed an election of non-termination), Lessor will have the following
rights as provided in paragraphs B and C below.
B. In any proceeding by Lessor against Lessee seeking injunctive relief
under this Agreement, Lessor will be entitled to seek appropriate injunctive
relief upon a showing by Lessor of likelihood of success on the merits and, in
the case of a willful refusal by Lessee to perform its material obligations
under this Lease, without a showing of irreparable harm, balancing of ▇▇▇▇▇, or
consideration of the public interest, and Lessee will stipulate in such
proceeding that each of the three latter elements will be deemed to be found in
favor of Lessor.
C. If Lessee exercises its right under paragraph A of this Article to have
the Agreement continue in full force and effect, and if Lessor ultimately
prevails on the merits of any claim against Lessee for willful refusal by Lessee
to perform its material obligations under this Lease, and if Lessor would have
been entitled under common law to terminate this Agreement thereby, then Lessor
will be entitled to recover both direct damages and also any consequential
damages (including lost revenues or lost profits) suffered as a result of such
breach. The remedies under paragraphs B and C of this Article are in addition to
any other rights or remedies that Lessor may have at law or otherwise.
18. Binding Effect: The provisions of this Lease shall inure to the
benefit of and shall be binding upon Lessor and Lessee and their respective
successors and assigns permitted hereunder.
19. Assignment: Either party may assign this Agreement to a parent,
subsidiary, affiliate, or financial concern, or to a successor in interest of
all or substantially all of its assets. This Agreement may not be otherwise
assigned in whole or in part, and any such assignment will be null and void and
of no force or effect. Nothing in this section will preclude Lessee from
installing the Equipment at the premises of its sub-contractor selected in
accordance with the provisions of the Technology and Patent License Agreement
between Lessee and Tetra Laval Holdings & Finance S.A. and Tetra Pak Plastic
Packaging R&D GmbH,
20. Notices: Notices under the terms of this Agreement will be in writing
and sent by prepaid certified mail, return receipt requested, or by facsimile or
telecopy, to the addresses provided below. Notices will be effective on the
first business day following receipt thereof. Notices sent by certified mail
will be deemed received on the date of delivery as indicated on the return
receipt; notices sent by facsimile or telecopy will be deemed received on the
date transmitted if transmitted by 3:30 pm time of recipient, otherwise on the
next business day.
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If to Lessee:
Playtex Manufacturing Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President Operations
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Playtex Products, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Lessor:
Tetra Laval Credit Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Managing Director
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as such party shall from time to time designate for
itself by like notice to the other party.
21. Severability; Blue-Penciling: If any provision of this Agreement is
held by a court or agency of competent jurisdiction to be invalid or overly
broad and therefore not reasonably necessary to protect Lessor's business
interests and for that reason to be unenforceable, all other provisions hereof
will remain in full force and effect and the unenforceable provision shall be
deemed modified to such extent as to make it enforceable by such court or agency
or, if necessary, shall be deemed deleted and replaced by the most restrictive
provision (either by time, location, or subject matter) permitted under
applicable law.
22. General: This Agreement may be amended only by written agreement of
the parties executed by their authorized representatives. This Agreement will
not create any right in or obligation to any third party. No waiver by either
party of any default or breach by the other party will operate as or be deemed a
waiver of any subsequent default or breach. This Agreement, and any dispute
arising under or with respect to this Agreement will be construed and governed
in accordance with the internal laws of Delaware. The parties hereby consent to
the jurisdiction of the state and federal courts in Chicago, Illinois and
Wilmington, Delaware.
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23. Entirety of Agreement: This Agreement, together with the other
agreements executed herewith, supersedes all prior oral or written
representations, communications, or agreements between the parties, and,
together with any attachments, constitutes the final and entire understanding of
the parties, regarding the subject matter of this Agreement.
THEREFORE, the parties by their authorized representatives have executed
this Agreement effective on the date first provided above.
LESSEE TETRA LAVAL CREDIT INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Vice President Title: Controller
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