1
EXHIBIT 10.6
EXECUTION COPY
SUBLEASE AGREEMENT
SUBLEASE AGREEMENT, made this 4th day of September, 1997, by and
between MID-AMERICA DAIRYMEN, INC., a Kansas corporation with its principal
place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter referred "Sublessor"), and SOUTHERN FOODS GROUP, L.P., a Delaware
limited partnership with its principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred "Sublessee").
W I T N E S S E T H:
WHEREAS, Sublessor and BLC Corporation (hereinafter referred "BLC")
entered into a Master Leasing Agreement dated as of August 15, 1997
(hereinafter, as amended and supplemented from time to time to also include all
Individual Leasing Records (as defined in the Lease), amendments, supplements,
exhibits and addenda executed pursuant thereto, the "Lease"); and,
WHEREAS, BLC has agreed to permit Sublessor to (i) sublease to Milk
Products, LLC, a Delaware limited liability company, under a separate Sublease
Agreement, certain equipment leased under the Lease, and (ii) sublease certain
equipment leased under the Lease, as hereinafter specified, to Sublessee under
this Sublease Agreement, on the terms and conditions set forth herein;
1. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor the equipment listed on Exhibit A attached hereto and
made a part hereof (herein called the "Subleased Equipment"), which Subleased
Equipment has been leased by BLC to Sublessor under the Lease. Sublessee
acknowledges receipt of a true copy of the Lease, together with all applicable
Schedules attached thereto.
2. BLC is the owner of the Subleased Equipment, and neither
Sublessor nor Sublessee has any right, title, interest or equity in the
Subleased Equipment whatsoever, except, in the case of Sublessor, for
Sublessor's rights to use the Subleased Equipment under, and subject to all of
the terms of, the Lease, and except, in the case of Sublessee, for Sublessee's
right to use the Subleased Equipment on the terms herein set forth.
3. This Sublease Agreement and the rights of Sublessor and
Sublessee hereunder shall be subject and subordinate in all respects to the
terms, conditions and provisions of the Lease, and to the rights of BLC
thereunder, and no provision of this Sublease Agreement shall be deemed to
a. impair any right, title or interest, under the Lease
or applicable law, of BLC in and to the Subleased
Equipment;
b. amend or waive any provision of the Lease;
1
2
c. impair, limit or release any right of BLC, or any
obligation, accrued and executory, of Sublessor to
BLC under the Lease; or
d. permit Sublessee to make or consent to any use of the
Subleased Equipment in a manner inconsistent with the
terms and provisions of the Lease.
4. Sublessee shall make all payments of rent for the Subleased
Equipment in the amounts provided for in the Lease with respect to the
Subleased Equipment, and all other payments with respect to the Subleased
Equipment as provided in the Lease, directly to BLC. Notwithstanding the
subleasing of the Subleased Equipment, and, without limiting the generality of
the provisions of paragraph 3(c) above, Sublessor shall at all times be and
remain primarily and not secondarily liable to BLC for the payment and
performance of all accrued and executory obligations of Sublessor under the
Lease with respect to the Subleased Equipment.
5. The sublease term of the Subleased Equipment shall not exceed
the remaining lease term of the Subleased Equipment under the Lease, as of the
date hereof.
6. The Subleased Equipment will at all times be used in the
business and garaged as indicated on the lease supplements to the Lease.
7. This Sublease Agreement shall be binding upon, and inure to
the benefit of, Sublessor, Sublessee, and their respective successors and
assigns.
8. This Sublease Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
MID-AMERICA DAIRYMEN, INC.
"Sublessor"
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
---------------------------------------
Its Vice President
--------------------------------------
SOUTHERN FOODS GROUP, L.P.
"Sublessee"
By: SFG Management Limited Liability
Company, its sole General Partner
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Its President and CEO
------------------------------
2
3
EXHIBIT A
SUBLEASED EQUIPMENT
See Exhibit A-1 attached hereto for list of used motor vehicles, and
see Exhibit A-2 attached hereto for list of used other equipment.
4
8/19/97
-----------------------------------------------------------------------------
MASTER LEASING AGREEMENT
Dated as of August 15, 1997
Between
BLC Corporation,
as Lessor
and
Mid-America Dairymen, Inc.,
as Lessee
-----------------------------------------------------------------------------
5
TABLE OF CONTENTS
(Master Leasing Agreement)
Section Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Agreement for Lease of Equipment; Unconditional Obligation. . 4
3. Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. Use of Equipment . . . . . . . . . . . . . . . . . . . . . . 6
7. Improvements and Repair of Equipment . . . . . . . . . . . . 7
8. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. Sale or Disposition of Equipment; Adjustment of Rent . . . . 9
11. Loss or Destruction of the Equipment . . . . . . . . . . . . 11
12. Surrender of Equipment . . . . . . . . . . . . . . . . . . . 11
13. Events of Default . . . . . . . . . . . . . . . . . . . . . 11
14. Rights of Lessor upon Default of Lessee . . . . . . . . . . . 12
15. Equipment To Be and Remain Personal Property . . . . . . . . 13
16. Termination . . . . . . . . . . . . . . . . . . . . . . . . 13
17. Purchase of Equipment; Extended Term . . . . . . . . . . . . 14
18. Finance Lease Status . . . . . . . . . . . . . . . . . . . . 14
19. Disclaimer of Warranties . . . . . . . . . . . . . . . . . . 15
20. Assignment by Lessor . . . . . . . . . . . . . . . . . . . . 15
i
6
21. Leasing of Components . . . . . . . . . . . . . . . . . . . . . 16
22. Rebuilds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
23. Reports and Certificates . . . . . . . . . . . . . . . . . . . . 17
24. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 17
- Signature Lines . . . . . . . . . . . . . . . . . . . . . . 18
- Lessee Certification; Notice of Tax Ownership . . . . . . . 19
- Exhibit A - List of Used Equipment
ii
7
MASTER LEASING AGREEMENT
Master Leasing Agreement, dated as of August 15, 1997, by and between BLC
Corporation of Foster City, California (herein called "Lessor") and Mid-America
Dairymen, Inc. (herein called "Lessee").
In consideration of the mutual covenants hereinafter contained, Lessor and
Lessee agree as follows:
1. Definitions. As herein used:
(a) "Acquisition Cost" of Equipment is an amount equal to the sum of the
vendor's delivered price, dealer's delivery and handling charges, the cost of
any original equipment which may be added, excise tax on the Equipment, any
sales and use taxes, expenses of installation and freight, and other expenses
required to effect delivery of the Equipment to Lessee, less purchase discounts
obtained. Notwithstanding the foregoing, in the case of Used Equipment, the
Acquisition Cost of such Equipment is an amount equal to the fair market value
of such Equipment on August 31, 1997, as stated in Exhibit A hereto plus any
applicable sales and use and excise taxes thereon.
(b) The "Aggregate Amortization" of any Equipment is an amount equal to
the sum total of the Monthly Amortization Figures for each of the months for
which Rent for the Equipment has been paid.
(c) The "Base Amount" means, as to any Equipment sold one (1) year from
the last day of the month in which its lease term commences, the Acquisition
Cost of such Equipment, and as to any Equipment sold more than one (1) year
after the last day of the month in which its lease term commences, the
Unamortized Value of such Equipment at the termination of its lease term. As to
any Motor Vehicle purchased or sold by Lessee pursuant to the provisions of
Sections 11 or 15 prior to one (1) year from the commencement of the lease
term for such Motor Vehicle, "Base Amount" shall mean the then Unamortized
Value of such Motor Vehicle.
(d) "Basic Term" shall mean as to any item of Equipment the amortization
period for such Equipment, selected by Lessee and approved by Lessor, as stated
in the applicable Individual Leasing Record. Lessee shall select amortization
periods based on the following table:
Type of Equipment No. of Months
----------------- -------------
Equipment listed in Subsection 1(f) 36-120
Notwithstanding anything to the contrary contained herein, the Basic Term
for the Used Equipment shall commence on September 1, 1997 and the Basic Term
for each unit of Used Equipment shall be the number of months remaining in the
original Basic Term for such unit of Used Equipment as of August 31, 1997 under
the Master Leasing Agreement, dated as of June 1, 1990, by and between BLC
Corporation, as Lessor, and ▇▇▇▇▇▇, Inc., as Lessee.
All other Equipment shall have a Basic Term as approved by Lessor.
In determining the Basic Term of Equipment, the anticipated useful life of
such Equipment as it will be used by Lessee shall be considered, and upon
request, Lessee will furnish Lessor with information with respect thereto.
1
8
(e) (1) "Contingent Rent" shall mean the amount by which the proceeds of
sale of any unit of Equipment pursuant to Section 10 of this Master Leasing
Agreement are less than they would have been because of abuse, damage,
extraordinary wear and tear or excessive usage or because the Equipment has not
been maintained in accordance with the provisions of Sections 6 and 7 hereof. In
the event Lessor and Lessee cannot agree on the amount of Contingent Rent due,
if any, they shall utilize the appraisal procedure provided for in Section 10,
with the consequences set forth therein.
(2) If the sale proceeds of any unit of Equipment transmitted to
Lessor are less than the Unguaranteed Residual, Lessee shall, in addition, be
obligated to pay, and shall pay to Lessor, the amount (if any) of Contingent
Rent with respect to such Equipment as is then determined in accordance with
Subsection 1(e)(1), provided, however, that the amount of any Contingent Rent
will not be greater than the amount by which the Unguaranteed Residual exceeds
such proceeds of sale.
(f) "Equipment" means the following types of property owned or to be
owned by Lessor and leased by Lessor to Lessee or ordered by Lessor for lease
to Lessee as provided herein:
(i) New or used vehicles, including, but not limited to, passenger
cars, light, medium and heavy trucks, tractors, trailers, vans, and buses;
related equipment attached to such vehicles;
(ii) certain units of used equipment previously leased by ▇▇▇▇▇▇,
Inc. for its dairy operations from Lessor, as further described in Exhibit
A hereto (for purposes of this Subsection, Exhibit A-1 shall list the
units of used Motor Vehicles and Exhibit A-2 shall list the units of used
Other Equipment) (any such used units of Equipment may be referred to
herein as "Used Equipment"); and
(iii) any other property agreed upon by Lessor and Lessee.
The Equipment listed in Subsections 1(f)(i) and (iii) above may be
referred to herein as "New Equipment."
(g) "Expected Residual" for any Equipment shall be the amount selected by
the Lessee and approved by the Lessor in the applicable Individual Leasing
Record. The execution of an Individual Leasing Record shall represent the
agreement of Lessor and Lessee that the Expected Residual stated therein is not
greater than a reasonable estimate of the expected fair market value for such
Equipment at the end of the applicable Basic Term; provided that the Expected
Residual for any Equipment shall not exceed 20% of the Acquisition Cost.
Notwithstanding anything to the contrary contained herein, the Expected
Residual for each unit of Used Equipment shall be the dollar amount as set
forth in Exhibit A hereto.
(h) "Extended Term" shall have the meaning specified in Subsection 17(b)
hereof.
(i) "Individual Leasing Record" is a record with respect to Equipment
dated the date of the delivery of the Equipment to Lessee and setting forth a
full description of the Equipment, its Acquisition Cost, the location and such
other details as the parties may agree. With respect to Used Equipment, the
date of delivery of such Equipment shall be deemed to be September 1, 1997. As
between Lessor and Lessee the signature of Lessee on an Individual Leasing
Record shall constitute acknowledgement by Lessee that the Equipment has been
delivered in good condition and accepted for lease by Lessee as of the date of
the Individual Leasing Record. The Individual Leasing Record
2
9
shall contain a short form of lease to be executed by each of the parties
reading substantially as follows:
"The undersigned Lessor hereby leases to the undersigned Lessee, and
Lessee acknowledges delivery to it in good condition of, the Equipment
described above. The covenants, terms and conditions of this lease are
those appearing in a Master Leasing Agreement between the undersigned
Lessor and Lessee dated August 15, 1997, which covenants, terms and
conditions are hereby incorporated by reference."
Any Motor Vehicle leased hereunder shall be leased under an Individual
Leasing Record in any form for the leasing of Motor Vehicles provided by Lessor
(called herein "Motor Vehicle ILR") and any Other Equipment leased hereunder
shall be leased under an Individual Leasing Record in any form for the leasing
of Other Equipment provided by Lessor (called herein "Other Equipment ILR").
(j) "Interim Rent" for any Equipment acquired during any partial first
month during the term of the lease of such Equipment shall be determined in the
manner that Rent is determined under Subsection l(n) hereof, but based on the
product of
(1) the Acquisition Cost of the Equipment, multiplied by
(2) a fraction having a numerator equal to the number of days
remaining in such partial month and a denominator of 360, multiplied by
(3) the applicable percentage provided in Subsection l(n)(3).
(k) "Monthly Amortization Figure" for any Equipment for each full month
during the Basic Term for such Equipment is an amount equal to (i) the
Acquisition Cost less the Expected Residual for such Equipment divided by (ii)
the number of months in the Basic Term for such Equipment; provided that such
Basic Term shall not exceed the amortization period referred to in the table
set forth in Subsection 1(d) hereof
The "Monthly Amortization Figure" for any Equipment for each full month
during the Extended Term for such Equipment shall be equal to the Unamortized
Value of such Equipment at the end of the Basic Term divided by the number of
months in the Extended Term selected by Lessee and approved by Lessor plus the
additional amount described in Subsection 17(b) hereof (if any).
Monthly amortization shall be taken as of the close of business of the
last day of each full month of the lease of the Equipment until the Unamortized
Value of the Equipment has reached zero.
(l) "Motor Vehicle" shall, for the purposes of this Master Leasing
Agreement, mean any Equipment (i) which is an automobile, van, bus, light,
medium or heavy duty truck, tractor, trailer, any other vehicle which can be
used on a highway (regardless of whether such vehicle is licensed for such
USE), OR ANY RELATED ITEM ATTACHED to such Equipment and (ii) for which Lessee
shall have executed a MOTOR VEHICLE ILR, including without limitation, units of
Used Equipment.
(m) "Other Equipment" shall mean any Equipment which is not a Motor
Vehicle, including without limitation, units of Used Equipment.
(n) "Rent" for any Equipment for any month during the term of the lease
of such Equipment will be the sum of the Monthly Amortization Figure for such
Equipment, plus Contingent Rent for such Equipment (if any), plus an amount
computed by multiplying the following:
3
10
(1) the Unamortized Value of such Equipment on the first day of such
month, by
(2) a fraction having a numerator equal to the number of days in
such month and a denominator of 360, by
(3) a percentage (the "Percentage Rental Factor") equal to the sum
of (i) 1.50% per annum for Motor Vehicles, and (ii) 2.00% per annum for
Other Equipment plus the rate per annum obtained by dividing (y) the rate
per annum at which deposits in U.S. dollars are offered by Citibank, N.A.
to prime banks in the London Interbank Market for a period equal to one
month, as quoted at 11:00 a.m. (London time) two Business Days (as such
term is defined in Section 5 hereof) prior to the 1st day of the current
month, by (z) a percentage equal to 100% minus the Reserve Percentage for
such one-month period.
(o) "Reserve Percentage" shall mean the reserve percentage applicable
during such month under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of the
Federal Reserve System in New York City that Citibank, N.A. is required to
maintain with respect to liabilities or assets consisting of or including
Eurocurrency liabilities, having a term equal to one (1) month.
(p) "UCC" shall mean the Uniform Commercial Code including the provisions
of the Uniform Personal Property Leasing Act as adopted in the applicable
state.
(q) "Unamortized Value" of Equipment is the Acquisition Cost of the
Equipment less its Aggregate Amortization.
(r) "Unguaranteed Residual" shall mean 13% of the Base Amount for any
unit of Equipment.
2. Agreement for Lease of Equipment: Unconditional Obligation. (a)
Subject to the terms and conditions of this Master Leasing Agreement and upon
execution and delivery by the Lessor and the Lessee of an Individual Leasing
Record evidencing the mutual agreement of the parties hereto with respect to
the lease of specific units of Equipment, Lessor shall lease to Lessee such
units of Equipment as set forth in such Individual Leasing Record. No
Individual Leasing Record shall be effective and Lessor shall have no
obligation to lease any particular unit of equipment hereunder unless and until
such applicable Individual Leasing Record is executed by Lessor and in no event
shall the Lessee execute and deliver to Lessor an Individual Leasing Record
which, if executed and funded by Lessor, would result in the aggregate
Unamortized Value of Equipment leased by Lessor to Lessee hereunder exceeding
$25,000,000. All items of Used Equipment shall be acquired for lease hereunder
on September 1, 1997. Lessor and Lessee hereby declare that this Master Leasing
Agreement is, and is intended to be, an agreement to lease, and that every
Individual Leasing Record executed by the parties pursuant to this Master
Leasing Agreement is a lease. Lessor has or will have title to and will be the
owner of the Equipment to be leased, and Lessee does not hereby acquire any
right, equity, title or interest in the Equipment, except the right, as Lessee,
to use the same under the terms hereof. If this Master Leasing Agreement is
deemed at any time to be one intended as security, Lessee agrees that the
Equipment shall secure all amounts owed by Lessee to Lessor as set forth
herein. With respect to Motor Vehicles, the parties hereto agree that the
Lessor will be treated as the owner for Federal income tax purposes. With
respect to Motor Vehicles and Other Equipment the parties agree to treat this
Master Leasing Agreement as a lease for all other purposes, including without
limitation, accounting, commercial law or otherwise.
4
11
(b) Lessor hereby covenants that, as long as Lessee is not in default
hereunder, Lessee shall be entitled to the uninterrupted use and quiet
enjoyment of the Equipment on the terms and conditions herein provided.
(c) LESSEE HEREBY CONFIRMS THAT THIS MASTER LEASING AGREEMENT CANNOT BE
CANCELED OR TERMINATED, EXCEPT AS EXPRESSLY PROVIDED HEREIN AND THAT LESSEE'S
OBLIGATION TO PAY RENT, INTERIM RENT AND ANY OTHER AMOUNTS DUE HEREUNDER ARE
ABSOLUTE AND UNCONDITIONAL UNDER ANY AND ALL CIRCUMSTANCES AND SHALL BE PAID
WITHOUT NOTICE OR DEMAND AND WITHOUT ANY ABATEMENT, REDUCTION, DIMINUTION, SET
OFF, DEFENSE, COUNTERCLAIM OR RECOUPMENT DUE OR ALLEGED TO BE DUE TO, OR BY
REASON OF, ANY PAST, PRESENT OR FUTURE CLAIMS WHICH LESSEE MAY HAVE AGAINST
LESSOR, ANY VENDOR OR MANUFACTURER OF THE EQUIPMENT OR ANY PART THEREOF, OR ANY
OTHER PERSON OR ANY REASON WHATSOEVER.
3. Delivery. Lessor shall not be liable to Lessee for any failure or
delay in obtaining Equipment or making delivery thereof. Upon delivery of
Equipment to Lessee and receipt by Lessor of vendor's invoice approved by Lessee
together with an Individual Leasing Record with respect to the Equipment,
mutually acceptable to Lessee and Lessor, duly executed by Lessee and, if
requested by Lessor, appropriate title papers for such Equipment, Lessor shall,
subject to the provisions of this Master Leasing Agreement, execute such
Individual Leasing Record and remit to the vendor or, at the request of Lessee,
shall remit directly to the Lessee a check for the total of the vendor's invoice
for such Equipment provided that the total amount paid by Lessor shall not
exceed the Acquisition Cost of the Equipment. If the amount paid to the vendor
by Lessor is less than the Acquisition Cost of the Equipment, to the extent that
delivery costs or cost of additions to the Equipment have been met by Lessee,
and do not exceed the Acquisition Cost, Lessor shall reimburse Lessee for such
payment made by Lessee up to the amount of the Acquisition Cost.
4. Lease Term. The lease hereunder of New Equipment shall be effective
from the date of delivery of such New Equipment and the Individual Leasing
Record shall be dated such date. With respect to the Used Equipment, Lessee
shall execute and provide to Lessor one Motor Vehicle ILR and one Other
Equipment ILR, each to be dated as of September 1, 1997, and Lessor shall,
subject to the provisions of this Master Leasing Agreement, execute such
Individual Leasing Records. The lease hereunder of such Used Equipment shall be
effective from the date of the two Individual Leasing Records. The lease term
for each unit of Equipment shall be for a period beginning with the effective
date thereof and ending one (1) year after the last day of the month in which
the effective date of the lease occurs. At the end of such one (1) year period
and thereafter, the lease term shall be extended from month to month until
terminated, as provided in Sections 10, 11, 14, 15, 16 or 17 hereof.
Notwithstanding the foregoing, at least the provisions of Section 9 and the
first sentence of Section 11 of this Master Leasing Agreement shall apply as
between Lessor and Lessee with respect to any Equipment from the time the
Equipment is ordered by Lessor pursuant to a request from Lessee. Upon
expiration of the Basic Term or the Extended Term for each item of Equipment,
unless Lessee shall have purchased such Equipment pursuant to Subsection 17(a),
extended the lease term of such Equipment pursuant to Subsection 17(b) or sold
such Equipment to an unrelated third party pursuant to Section 10, it shall be
assumed that Lessee elected to extend the lease of such Equipment as described
in Subsection 17(b) hereof.
5. Rent. Lessee shall pay Rent and Interim Rent monthly in arrears on
the 25th day of the current month. If Lessor shall not receive payment of Rent
or Interim Rent when due hereunder, Lessee shall pay a late payment charge to
Lessor on such late payment at a rate equal to the applicable Percentage Rental
Factor (as provided in Subsection I (n)(3)) plus 3 % per annum (but in
5
12
no event shall such rate be greater than that rate permitted by applicable law)
for the period during which such late payment remains due and unpaid. Invoices
from Lessor shall be rendered within a reasonable period of time after the
Rent and Interim Rent can be determined. Such invoices shall cover the
computation of Rent and other payments due hereunder for the month, adjustments
to the preceding month's Rent resulting from commencement or termination of the
lease of any Equipment during such month and other appropriate items, if any.
All payments of Rent and Interim Rent and all other payments made by Lessee to
Lessor pursuant to this Master Leasing Agreement shall be paid to Lessor in
lawful money of the United States in immediately available funds by wire
transfer to Lessor's Account No. 3846-9701 at Citibank, N.A., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. If the date for the payment or determination of Rent
and Interim Rent shall not occur on a day when banks in New York, New York are
generally open for business (a "Business Day"), such payment shall be due and
such determination shall be made on the immediately preceding Business Day.
6. Use of Equipment. (a) Lessor and Lessee hereby acknowledge and agree
that the Equipment leased hereunder shall at all times be the sole and
exclusive property of Lessor, and Lessee shall have no right, title or property
therein but only the right to use the same as Lessee as herein provided. So
long as Lessee is not in default in any obligation to Lessor, Lessee may use
the Equipment in the regular course of its business or the business of any
subsidiary or affiliate of Lessee and may permit others to use same for any
lawful purpose. Such use shall be confined to the United States. Lessee shall
promptly and duly execute, deliver, file and record all such documents,
statements, filings and registrations, and take such further action as Lessor
shall from time to time reasonably request in order to establish, perfect and
maintain Lessor's title to and interest in the Equipment as against Lessee or
any third party. Lessee shall provide Lessor with all license, registration and
vehicle identification numbers relating to automotive equipment leased
hereunder. Lessee shall provide Lessor with prior notice in writing of any
change in the principal location of any unit of Equipment, of any change in the
primary business address of Lessee in any particular jurisdiction or of any
change in the legal name or business structure of the Lessee. Notwithstanding
the foregoing, no such changes shall be undertaken unless and until all legal
requirements shall have been met or obtained. Upon the Lessor's request, Lessee
shall advise Lessor in writing where all Equipment leased hereunder as of such
date is principally located. Lessee shall not use any Equipment or allow the
same to be used for any unlawful purpose. Lessee shall use every reasonable
precaution to prevent loss or damage to Equipment and to prevent injury to
third persons or property of third persons. Lessee shall cooperate fully with
Lessor and all insurance companies providing insurance under Section 8 hereof
in the investigation and defense of any claims and suits. Lessee shall comply
and shall cause all persons operating Equipment to comply with all insurance
policy conditions and with all statutes, decrees, ordinances and regulations
regarding acquiring, titling, registering, leasing, insuring, using, operating,
and disposing of Equipment, including all local, state and federal
environmental laws and regulations of whatever kind which relate in any way to
the use of the Equipment, and the licensing of operators thereof. Lessor or any
authorized representative of Lessor may during reasonable business hours from
time to time inspect Equipment wherever the same be located. Lessee shall
register and title all automotive Equipment in the manner requested by Lessor.
If requested by Lessor, Lessee shall cause one of its authorized employees to
hold in his custody and control all registration certificates and certificates
of title covering automotive Equipment, as custodian for Lessor, and, if
further requested by Lessor, Lessee shall cause such employee to certify
annually in a written report to Lessor that all certificates of title required
by applicable law and regulations have been obtained and are being held on
behalf of Lessor. Pursuant to the provisions of the Truth in Mileage Act of
1986 (the "Act") and the regulations relating thereto, certain odometer
disclosures must be made by the transferor at the time the title to any motor
vehicle is transferred. Lessor hereby appoints Lessee, and Lessee hereby agrees
to act, as its agent to make all such disclosures, In addition, the regulations
described above require the Lessor to inform the Lessee and Lessor hereby so
informs Lessee that failure to comply with the Act and the regulations
6
13
relating thereto may result in fines and/or imprisonment for the party making
the false disclosure or failing to make the required disclosure. Lessee upon
written request from Lessor, or if necessary or advisable under applicable law,
shall attach to each unit of Equipment in a place designated by Lessor (or if
no such place has been designated, in a prominent place), a sign, stencil,
plaque, or legend disclosing the ownership of Lessor and the interest of any
mortgagee or assignee in the Equipment.
(b) Lessor shall have the right to make any security filings necessary or
desirable to protect its interest in the Equipment, including, but not limited
to, UCC personal property filings, and shall have the right to make UCC
personal property filings without the Lessee's signature where authorized by
law. Lessee shall cooperate with Lessor and shall pay all costs and expenses
incurred by Lessor in completing and making all such filings.
(c) LESSEE SHALL NOT WITHOUT PRIOR WRITTEN CONSENT OF LESSOR SUBLEASE ANY
EQUIPMENT NOR PERMIT, OR SUFFER TO EXIST, ANY LIEN OR ENCUMBRANCE OTHER THAN
THOSE PLACED THEREON BY LESSOR OR BY PERSONS CLAIMING ONLY AGAINST LESSOR AND
NOT AGAINST LESSEE, NOR SHALL LESSEE ASSIGN ANY RIGHT OR INTEREST HEREIN OR IN
ANY EQUIPMENT, PROVIDED, HOWEVER, THAT LESSEE MAY SUBLET EQUIPMENT TO SOUTHERN
FOODS GROUP, L.P., MILK PRODUCTS, LLC, OR ANY SUBSIDIARY, AFFILIATE, OFFICER OR
EMPLOYEE OF LESSEE, OR TO ANY CONTRACTOR FOR USE IN PERFORMING WORK FOR LESSEE,
PROVIDED THAT SUCH SUBLETTING SHALL IN NO WAY AFFECT THE OBLIGATIONS OF LESSEE
HEREUNDER, OR THE RIGHTS OF LESSOR HEREUNDER. THE RIGHTS OF THE LESSEE TO
ASSIGN ITS INTEREST AS LESSEE HEREUNDER, AS DESCRIBED IN SECTION 303 OF THE
LEASING ARTICLE OF THE UCC, ARE HEREBY WAIVED BY LESSEE.
7. Improvements and Repair of Equipment. Lessee shall pay all costs,
expenses, fees and charges incurred in connection with the use and operation of
Equipment during the lease thereof Lessee shall at all times, at its own
expense, keep Equipment in good condition and repair, and in good and efficient
working order, reasonable wear and tear only excepted. This provision shall
apply regardless of the cause of damage and all risks with respect thereto are
assumed by Lessee. At its own expense, Lessee shall supply and replace all
parts to the Equipment and shall supply the necessary power and other items
required in the operation of the Equipment. In the case of motor vehicles or
other automotive Equipment, Lessee shall supply and replace all items required
in the operation of such Equipment, including, without limitation, all parts,
tires and tubes, gasoline, oil, and grease; shall put and keep such Equipment
in condition to meet foreseeable climatic conditions; and shall arrange for the
satisfactory storage of such Equipment. All improvements and additions to any
of the Equipment shall become and remain the property of Lessor, except that
any improvements or additions for which Lessor has not made a payment under
Section 3 of this Master Leasing Agreement, Which constitute severable
improvements and which when attached to or removed from the Equipment will not
diminish the value or usefulness of such Equipment, shall become and remain the
property of Lessee.
8. Insurance. Lessee shall, at its own expense, with respect to
Equipment maintain insurance insuring the respective interests of Lessor and
Lessee and covering (i) physical damage to Equipment and (ii) liability for
personal injury, death and property damage resulting from the operation,
ownership, use and possession of Equipment including all environmental or
pollution liability. Policies covering physical damage risks shall be in an
amount not less than the Unamortized Value of Equipment. Lessee shall maintain
third-party liability insurance covering personal injury, death and property
damage Lability as a result of one accident including all environmental or
pollution Lability in the same amount as that insurance coverage maintained by
Lessee with respect to Lessee's
7
14
owned equipment of the same types as the Equipment leased hereunder, but in no
event shall such coverage be less than $25,000,000. All policies covering
physical damage risks and all third party liability insurance required
hereunder shall be subject to the same self-insured retention or deductible
amounts as are applicable to Lessee's owned equipment of the same types as the
Equipment leased hereunder; provided, however, that if any such self-insured
retention amount is greater than $250,000, Lessee may self-insure only such
portions of the foregoing coverage as Lessor may approve in writing. The above
insurance shall also include the following for all automotive equipment leased
hereunder, in amounts not less than the applicable minimum legal requirements:
(a) uninsured/underinsured motorist coverage and (b) no fault protection.
Lessor and its direct affiliates shall be named as additional insureds as their
interests may appear in all insurance policies required under this Section. All
such policies shall provide for at least thirty (30) days' written notice to
Lessor of any cancellation or material alteration of such policies. Lessee
shall furnish Lessor certificates or other evidence satisfactory to Lessor of
compliance by Lessee with the provisions hereof, but Lessor shall be under no
duty to examine such certificates or to advise Lessee in the event its
insurance is not in compliance herewith. Lessee covenants that it will not use
or operate or permit the use or operation of any Equipment at any time when the
insurance required by this Section is not in force with respect to such
Equipment. Lessee's obligation to maintain insurance with respect to any
Equipment shall commence on the actual day of delivery of the Equipment and
shall continue until the Equipment is sold or the lease of the Equipment
terminates, whichever is sooner.
9. Indemnity.
(a) Lessee agrees to indemnify and hold harmless Lessor, any employee of
Lessor and any parent, subsidiary or affiliate of Lessor against any and all
claims, demands and liabilities of whatsoever nature (including all negligence,
tort and strict liability claims), judgments, suits and all legal proceedings,
and all costs and expenses (including litigation expenses) relating to or in
any way arising out of
(i) the selection, manufacture, purchase, acceptance, ownership,
ordering, delivery, non-delivery, acquisition, making of payments (by
electronic transfer, check or other means), rejection, installation,
possession, leasing, titling, registration, re-registration, custody by
Lessee of title and registration documents, use, non-use, misuse,
operation, condition, servicing, maintenance, transportation, repair,
improvement, alteration, replacement, storage, control or disposition of
Equipment leased or requested by Lessee to be leased hereunder, except to
the extent that such costs are included in the Acquisition Cost of such
Equipment within the dollar limit provided in Section 2 hereof (or within
any change of such limit agreed to in writing by Lessor and Lessee) and
except for any general administrative or overhead expenses of Lessor;
(ii) all recording and filing fees, stamp taxes and like expenses
with respect to security filings on the Equipment incurred by Lessor or
its agent;
(iii) all costs, charges, damages or expenses for royalties and
claims and expenses arising out of or necessitated by the assertion of any
claim or demand based upon any infringement or alleged infringement of any
patent or other right, by or in respect of any Equipment, provided,
however, that Lessor will to the extent permissible make available to
Lessee Lessor's fights under any similar indemnification arising by
contract or operation of law from the manufacturer of Equipment;
(iv) all federal, state, county, municipal, foreign or other fees and
taxes of whatsoever nature, including but not limited to license,
qualification, franchise, sales, use,
8
15
gross receipts, ad valorem, business, property (real or personal), excise,
motor vehicle, and occupation fees and taxes, and penalties and interest
thereon, whether assessed, levied against or payable by Lessor or
otherwise, with respect to Equipment or the acquisition, purchase, sale,
rental, use, operation, control, ownership or disposition of Equipment or
measured in any way by the value thereof or by the business of, investment
in, or ownership by Lessor with respect thereto, excepting only net income
taxes on the net income of Lessor determined substantially in the same
manner as net income is presently determined under the Federal Internal
Revenue Code, and any excise, sales or use taxes included in the
Acquisition Cost of the Equipment;
(v) any violation, or alleged violation, by Lessee of this Master
Leasing Agreement or of any contracts or agreements to which Lessee is a
party or by which it is bound, or any laws, rules, regulations, orders,
writs injunctions, decrees, consents, approvals, exemptions,
authorizations, licenses and withholdings of objection, of any
governmental or public body or authority and all other requirements having
the force of law applicable at any time to Equipment or any action or
transaction by Lessee with respect thereto or pursuant to this Master
Leasing Agreement, including, but not limited to, any costs, expenses or
liabilities arising from Lessee's failure to comply with the provisions of
the Act and the regulations relating thereto or the violation of any
local, state or federal environmental laws or regulations of whatever kind
which relate in any way to the use of the Equipment; or
(vi) tort claims of any kind (whether based on strict liability or
otherwise) including claims for injury to or death of persons (including
Lessee's employees) and for damage to property related directly or
indirectly in any way to the ownership, maintenance, use and operation of
any Equipment.
(b) Lessee shall forthwith upon demand reimburse Lessor for any sum or
sums expended with respect to any of the foregoing, or shall pay such amounts
directly upon request from Lessor. Lessee shall be subrogated to Lessor's right
in the affected transaction and shall have a right to determine the settlement
of claims therein but in the best interests of Lessor. The foregoing indemnity
in this Section shall survive the expiration or earlier termination of this
Master Leasing Agreement or any lease of Equipment hereunder.
(c) If any claim is made or action commenced against Lessor for death,
personal injury or property damage resulting from the ownership, maintenance,
use or operation of any Equipment, Lessor shall promptly notify Lessee thereof
and forward to Lessee a copy of every demand, notice, summons or other process
received in connection therewith. Lessee hereby agrees that it shall fully
defend and indemnify Lessor and handle all aspects of any such claim or action.
Lessee further agrees to keep Lessor reasonably informed as to the progress of
any such claim or action. Lessor shall have the right to arrange for its own
defense against any such claim or action if, in lessor's reasonable discretion,
Lessor believes a separate defense would be in its best interests.
10. Sale or Disposition of Equipment; Adjustment of Rent. (a) After the
expiration of one (1) year from the last day of the month in which the lease of
any Equipment is effective, if such Equipment with respect to the Lessee has
become no longer useful in Lessee's business, and provided that Lessee is not
in default hereunder, Lessee may arrange for the termination of the lease of
such Equipment in the manner and with the consequences hereinafter set forth.
Lessee shall deliver written notice to Lessor, signed by an authorized officer
of Lessee, identifying the Equipment the lease of which Lessee proposes to
terminate, the proposed sale price and the terms of the proposed sale. Such
notice shall constitute a certificate of Lessee that such Equipment has become
no longer useful in Lessee's business. After delivery of such notice, Lessee,
on behalf of and in cooperation with
9
16
Lessor, shall proceed directly with negotiating the sale or disposition of such
Equipment to a third party unrelated to Lessor or Lessee and Lessor shall
execute and transmit to Lessee all papers needed to effectuate such sale or
disposition. In arranging such sale or disposition of any Equipment pursuant to
this Section 10, Lessee shall use its best efforts to obtain sale proceeds not
less than such Equipment's retail fair market value, delivered to a purchaser
or purchasers unrelated to Lessee, giving due consideration to whether the
Equipment's value is higher as an aggregate, or as two or more lots of
equipment. If the parties cannot agree upon such fair market value or values,
they shall appoint a qualified independent appraiser to determine the amount
and his decision shall be final; and, if the parties are unable to agree on a
single qualified independent appraiser, each shall appoint one qualified
independent appraiser and the two so appointed shall, if they are unable to
agree on the fair market value, jointly name a third, in which event the
decisions of a majority of the appraisers as to the fair market value shall be
final. All fees and expenses of the appraiser(s) shall be borne by Lessee. If
the proposed sale price specified in such notice is less than the Unguaranteed
Residual of such Equipment, Lessee shall not proceed to sell the Equipment
until it has received the consent of Lessor, which consent shall not be
unreasonably withheld.
Lessee shall cause the sale proceeds of such Equipment to be transmitted
promptly to Lessor. The lease of such Equipment and Lessee's obligation to pay
Rent shall continue until such sale proceeds and additional Rent, if any, are
received by Lessor, or Lessor's assignee, and shall thereupon terminate. If the
sale proceeds of such Equipment are less than the Unamortized Value of such
Equipment at the time of the termination of the lease of such Equipment
hereunder, Lessee shall forthwith pay as additional Rent an amount equal to
such deficiency. If the sale proceeds of such Equipment are more than the
Unamortized Value of such Equipment at the time of the termination of the lease
of such Equipment hereunder, Lessor, in consideration of Lessee's agreement
hereunder to repair, maintain and insure the Equipment, shall as an adjustment
of Rent forthwith pay to Lessee or, at the option of Lessee, credit Lessee's
account in an amount equal to the difference between said sale proceeds and
said Unamortized Value. If for any month funds are payable by Lessor to Lessee
under this Section, the amount so payable may be deducted by Lessee from funds
payable during the same month by Lessee for Rent of Equipment.
Notwithstanding the foregoing, if the sale proceeds of any unit of
Equipment are less than the Unamortized Value of such Equipment but equal to or
greater than the Unguaranteed Residual of such Equipment, Lessee shall at the
same time pay Lessor a sum equal to the difference between the amount of the
sale proceeds (which proceeds for purposes of determining Lessee's liability
may be reduced due to prior or subsequent sales of other units of Equipment as
hereinafter described) and the Unamortized Value. If the sale proceeds of any
unit of Equipment plus Contingent Rent are less than the Unguaranteed Residual
of such Equipment Lessee shall at the same time pay Lessor a sum equal to the
Unamortized Value of such Equipment less the Unguaranteed Residual of such
Equipment. In the event a deficiency arises because Lessor does not receive the
Unguaranteed Residual, to the extent that in any prior or subsequent sale of
any unit of Equipment, sale proceeds were received or will be received in
excess of the Unguaranteed Residual, such excess sale proceeds shall be paid to
Lessor, with respect to future sales, upon the sale of any unit of Equipment,
and with respect to prior equipment sales resulting in excess proceeds, at the
time the deficiency arises. Any sale proceeds of Equipment in excess of the
Unamortized Value of the Equipment after the expiration of the lease terms of
all Equipment will be for the account of Lessee.
The term "sale proceeds" for purposes of this Master Leasing Agreement
shall mean the gross purchase price paid by the purchaser, without charge or
reduction in any manner on account of any costs or expenses of sale, removal,
transportation, repair, storage, delivery or similar costs or expenses, and all
of such costs and expenses (if any) shall be borne by Lessee.
10
17
(b) If Lessee shall, pursuant to the provisions of this Master Leasing
Agreement, exercise an option to purchase any Equipment for its fair market
value, such purchase shall be treated as a sale of such Equipment under
Subsection 10(a) above.
11. Loss or Destruction of the Equipment. Lessee hereby assumes all risks
of loss or damage to the Equipment howsoever the same may be caused. Lessee
shall notify Lessor immediately of any loss or of any damage to any Equipment
in an amount in excess of $5,000 and shall keep Lessor informed of all
developments and correspondence regarding insurance rights and other rights and
liabilities arising out of the loss or damage. In the event of total
destruction of any of the Equipment or damage beyond repair or the
commandeering, conversion or other such loss of any of the Equipment, or if the
use thereof by Lessee in its regular course of business is prevented by the act
of any third person or persons, or any governmental instrumentality, for a
period exceeding ninety (90) days, or if any of the Equipment is attached
(other than on a claim against Lessor but not Lessee) or is seriously damaged
and the attachment is not removed or the Equipment not repaired, as the case
may be, in a period of ninety (90) days, then in any such event:
(a) Lessee shall promptly notify Lessor in writing of such fact;
(b) Within ten (10) days thereafter Lessee shall (i), in the case of Other
Equipment, pay to Lessor, or Lessor's assignee, an amount equal to the
Unamortized Value of such Other Equipment at the time of payment and (ii), in
the case of Motor Vehicles, either arrange for and effect a sale of such Motor
Vehicle pursuant to the provisions of Section 10 or purchase such Motor Vehicle
for the greater of its then fair market value or its then Unamortized Value;
(c) The lease of such Equipment shall continue until such payment has
been received by Lessor, or Lessor's assignee, and shall thereupon terminate;
and
(d) Upon such payment all of Lessor's title to and rights in such
Equipment and any insurance thereon shall automatically pass to Lessee or its
designee.
12. Surrender of Equipment. Upon the final termination of the lease as to
any Equipment (other than a termination as provided for in Sections 10, 11, 14,
15, 16, or 17), Lessee shall surrender such Equipment to Lessor at Lessee's
property where the Equipment is then located or at such other place as may be
agreed upon. Following such surrender, Lessor, or Lessor's agent, shall effect
a sale of such Equipment to a third party. The sales proceeds from any such
sale shall be treated in the same manner as the sale proceeds from a sale made
pursuant to the terms and provisions of Section 10 hereof. Lessee shall
cooperate with Lessor in effecting removal of the Equipment from Lessee's
property.
13. Events of Default. The following events of default by Lessee ("Events
of Default") shall give rise to rights on the part of Lessor described in
Section 14:
(a) Default in the payment of Rent, Interim Rent or any other payment due
from Lessee hereunder beyond ten (10) days from the date the Rent, Interim Rent
or other payment is due; or
(b) Default in the covenant of Lessee in Section 8 hereof as to non-use
of any Equipment as to which the required liability insurance is not in force;
or
(c) Default in the payment or performance of any other liability,
obligation, or covenant, condition or agreement to be performed or observed by
Lessee hereunder or breaches of any representation or provision contained
herein or in any other document furnished to Lessor in
11
18
connection herewith, and such failure or breach shall continue unremedied for
thirty (30) days after written notice to Lessee sent by registered or certified
mail by Lessor; or
(d) The termination of existence, the termination of the business of, or
the making of an assignment for the benefit of creditors by, Lessee; or
(e) The institution of bankruptcy, reorganization, liquidation or
receivership proceedings by or against Lessee and, if instituted against
Lessee, its consent thereto or the pendency of such proceedings for at least
sixty (60) days; or
(f) Lessee shall admit in writing its inability to pay its debts
generally when due; or
(g) Lessee shall create, incur, assume or suffer to exist any mortgage,
lien, pledge or other encumbrance or attachment of any kind whatsoever upon,
affecting or with respect to the Equipment or this Master Leasing Agreement or
any of Lessor's interests hereunder; or
(h) The dissolution, merger, reorganization or sale of all or
substantially all of the assets of Lessee without the prior written approval of
Lessor, which approval shall not be unreasonably withheld provided that the
Lessee or any surviving entity of such dissolution, merger, reorganization or
sale of all or substantially all of the assets of Lessee shall be rated at
least BBB by Standard and Poor's Corporation or Baa2 by ▇▇▇▇▇'▇ Investors
Services.
Lessee shall be obligated to provide Lessor with written notice of any
Event of Default and of any event which, with notice, or the lapse of time, or
both, would constitute an Event of Default promptly upon Lessee becoming aware
of any such event.
14. Rights of Lessor upon Default of Lessee. Upon the occurrence of any
of the Events of Default and at any time thereafter Lessor may, with or without
terminating the Master Leasing Agreement, in its discretion do one or more of
the following:
(a) Terminate the lease of any or all Equipment upon five (5) days'
written notice to Lessee sent by certified mail;
(b) Whether or not any lease is terminated, take immediate possession of
any or all of the Equipment, including substituted parts, accessories or
equipment and/or other equipment or property of Lessor in the possession of
Lessee, wherever situated and for such purpose, enter upon any premises without
liability for doing so;
(c) Whether or not any action has been taken under Subsections 14(a) or
(b) above, Lessor may sell any Equipment (with or without the concurrence or
request of Lessee) and Lessor shall retain all proceeds from such sale. In
addition, if the sales proceeds (reduced by any legal costs or any costs or
expenses of sale, removal, transportation, repair, storage, delivery, or
similar costs and expenses) are less than the Unamortized Value of the
Equipment sold, Lessee shall pay to Lessor any such shortfall;
(d) Hold, use or lease any Equipment as Lessor in its sole discretion may
decide, and continue to hold Lessee liable for any deficiency between the rent
received by Lessor from others and the Rent and Interim Rent payable hereunder
for the balance of the term of the lease of such Equipment;
12
19
(e) Invoke and exercise any other remedy or remedies available to Lessor
by law or in equity.
No remedy referred to in this Section is intended to be exclusive, but
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lessor at law or in equity. No express or implied waiver
by Lessor of any default shall constitute a waiver of any other default by
Lessee or a waiver of any of Lessor's rights.
If after default Lessee fails to deliver or converts the Equipment or the
Equipment is destroyed, Lessee shall be liable to Lessor for all unpaid Rent
and Interim Rent to the date of such failure to deliver, conversion or
destruction of such Equipment plus its Unamortized Value at the time and all
loss and damages sustained and all costs and expenses incurred by reason of the
default. If after default Lessee delivers Equipment to Lessor or if Lessor
repossesses Equipment, Lessee shall be liable for and Lessor may recover from
Lessee all unpaid Rent and Interim Rent to the date of such delivery or
repossession plus all loss and damages sustained and all costs and expenses
incurred by reason of the default.
15. Equipment To Be and Remain Personal Property. It is the intention and
understanding of both Lessor and Lessee that all Equipment shall be and at all
times remain personal property. Lessee will obtain and record such instruments
and take such steps as may be necessary to prevent any person from acquiring
any rights in the Equipment paramount to the rights of Lessor, by reason of
such Equipment being deemed to be real property. If, notwithstanding the
intention of the parties and the provisions of this Section 15, any person
acquires or claims to have acquired any rights in any Equipment paramount to
the rights of Lessor, by reason of such Equipment being deemed to be real
property, and such person seeks in any manner to interfere with the continued
quiet enjoyment of the Equipment by Lessee as contemplated by this Master
Leasing Agreement, then Lessee shall promptly notify Lessor in writing of such
fact (unless the basis for such interference is waived or eliminated to the
satisfaction of Lessor within a period of ninety (90) days from the date it is
asserted) and Lessee shall within ninety (90) days after such notice (i), as to
Other Equipment, pay to Lessor or Lessor's assignee an amount equal to the
Unamortized Value of such Other Equipment at the time of payment and (ii), as
to Motor Vehicles, either arrange for and effect a sale of such Equipment
pursuant to the provisions of Section 10 or purchase such Equipment pursuant to
the provisions of Subsection 17(a). The lease of the Equipment shall continue
until such payment has been received and shall thereupon terminate; and upon
such payment all of Lessor's title to and rights in such Equipment shall
automatically pass to Lessee or its designee.
16. Termination. Either Lessor or Lessee may terminate this Master Leasing
Agreement at any time with respect to any equipment not yet leased hereunder
effective upon the delivery of notice in writing to the other party of such
termination, provided, however, neither such notice nor termination shall
affect any transactions entered into or rights created or obligations incurred
prior to such termination. In the event of any such termination, Lessee shall
arrange for and effect not later than one (1) year from the termination date or
upon the expiration of the Basic Term, whichever occurs first, a termination of
the lease of all Equipment hereunder and a sale of all Equipment in the manner
and with the consequences as provided in Section 10 hereof provided that in the
event of any such termination and sale, the Unguaranteed Residual shall equal
$0. In addition, in the event Lessor exercises its right to terminate under
this Section 16, Lessee shall also have the right to purchase all such
Equipment for its then Unamortized Value not later than one (1) year from the
termination date or upon the expiration of the Basic Term, whichever occurs
first. Notwithstanding the provisions of Section 4 hereof, the lease term for
all Equipment, the lease of which is terminated under this Section, and
Lessee's obligation to pay Rent and Interim Rent shall continue until Lessor
receives the sale proceeds or the purchase price of such Equipment.
13
20
17. Purchase of Equipment, Extended Term. (a) After the expiration of the
Basic Term of any Equipment leased hereunder, and provided that Lessee is not
in default hereunder, Lessee may purchase such Equipment for the greater of its
then fair market value or its then Unamortized Value. The lease of such
Equipment and Lessee's obligation to pay Rent therefor shall continue until the
purchase price, any due and unpaid Rent and any other amounts due hereunder
with respect to such Equipment have been transmitted to Lessor and shall
thereupon terminate. If the parties cannot agree on the fair market value of
any such Equipment, they shall follow the appraisal procedures provided in
Section 10.
(b) Upon expiration of the Basic Term for any Equipment leased hereunder,
and provided that an event of default has not occurred and is continuing,
Lessee, with Lessor's consent, may extend the term of this Master Leasing
Agreement for such Equipment for an additional term to be agreed to by Lessor
and Lessee (the"Extended Term"). During such Extended Term the Rent payable for
such Equipment shall equal the fair market rental value for such Equipment as
agreed to by Lessor and Lessee and as determined at the commencement of such
Extended Term (the "Fair Market Rent"); provided, however;
(i) With respect to Equipment for which Lessee shall have selected
an Expected Residual, if during any month during the Extended Term such
Fair Market Rent shall be less than an amount calculated in accordance
with Subsection 1(n) (based on an amortization period as agreed to by
Lessor and Lessee, as determined at the commencement of such Extended Term
and based on an Expected Residual of 0% at the end of such Extended Term)
(the "Minimum Rent"), Lessee shall pay such Minimum Rent instead of the
Fair Market Rent. That portion of any Fair Market Rent paid during any
month which is in excess of the applicable Minimum Rent shall be deemed to
be the additional monthly amortization for such Equipment until such time
as the Aggregate Amortization for such Equipment equals the Acquisition
Cost of such Equipment;
(ii) If the Aggregate Amortization of any Other Equipment leased
hereunder equals the Acquisition Cost of such Other Equipment, the Fair
Market Rent for such Equipment thereafter will be an amount equal to one
half of one percent (0.5%) of the Acquisition Cost of such Other
Equipment; and
(iii) If the parties cannot agree on such Fair Market Rent, they
shall follow the appraisal procedures provided in Section 10.
(c) If on or prior to the expiration of the Basic Term for any Equipment
Lessee shall fail to elect to purchase such Equipment pursuant to Subsection
17(a), sell such Equipment to an unrelated third party pursuant to Section 10,
or extend the term of the lease of such Equipment at the Fair Market Rent
pursuant to Subsection 17(b), it shall be assumed that Lessee elected to extend
the lease of such Equipment pursuant to Subsection 17(b).
18. Finance Lease Status. The parties agree that this lease and each
Individual Leasing Record hereunder is a "Finance Lease" AS defined by the UCC.
Lessee acknowledges that Lessee has reviewed and approved any written "Supply
Contract" (as such term is defined in the UCC), covering the Equipment
purchased from the "Supplier" (as such term is defined in the UCC), thereof for
lease to Lessee. Lessee also acknowledges the following:
(a) Lessor has not selected, manufactured, or supplied the Equipment;
14
21
(b) Lessor acquired or will acquire the Equipment or the right to
possession and use of the Equipment in connection with the Individual Leasing
Record; and
(c) Lessor provides no warranties or other rights with respect to the
purchase of the Equipment and any and all rights Lessee has with respect to the
purchase of the Equipment are solely against Supplier.
19. Disclaimer of Warranties. LESSEE AGREES AND ACKNOWLEDGES THAT
ACCEPTANCE OF THE EQUIPMENT FOR LEASE SHALL CONSTITUTE LESSEE'S ACKNOWLEDGEMENT
AND AGREEMENT THAT LESSEE HAS FULLY INSPECTED SUCH EQUIPMENT, AND THAT THE
EQUIPMENT IS IN GOOD ORDER AND CONDITION AND IS OF THE MANUFACTURE, DESIGN,
SPECIFICATIONS AND CAPACITY SELECTED BY LESSEE, THAT LESSEE IS SATISFIED THAT
THE SAME IS SUITABLE FOR ITS PURPOSE, THAT LESSOR IS NOT ENGAGED IN THE SALE OR
DISTRIBUTION OF EQUIPMENT, THAT LESSOR HAS NOT SELECTED, MANUFACTURED OR
SUPPLIED SUCH EQUIPMENT, THAT LESSOR HAS PURCHASED THE EQUIPMENT FROM VENDORS
OF LESSEE'S CHOICE, AND THAT LESSOR HAS NOT MADE AND DOES NOT HEREBY MAKE ANY
REPRESENTATION, EXPRESS WARRANTY, IMPLIED WARRANTY, OR COVENANT WHATSOEVER WITH
RESPECT TO TITLE, MERCHANTABILITY, CONDITION, QUALITY, DURABILITY, SUITABILITY,
OPERATION OR FITNESS OF THE EQUIPMENT IN ANY RESPECT OR IN CONNECTION WITH, OR
FOR ANY PURPOSE OR USE OF LESSEE, OR ANY OTHER REPRESENTATION, WARRANTY OR
COVENANT OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT THERETO.
Lessor shall, at Lessee's sole expense take all action reasonably requested by
Lessee to make available to Lessee any rights of Lessor under any express or
implied warranties of any manufacturer or vendor of the Equipment. The Lessee
acknowledges and agrees that neither the manufacturer, the supplier, nor any
salesman, representative or other agent of the manufacturer or supplier, is an
agent of Lessor. No salesman, representative or agent of the manufacturer or
supplier is authorized to waive or alter any term or condition of this Master
Leasing Agreement and no representation as to the Equipment or any other matter
by the manufacturer or supplier shall in any way affect Lessee's duty to pay
Rent and perform its other obligations as set forth in this Master Leasing
Agreement.
20. Assignment by Lessor. LESSEE ACKNOWLEDGES NOTICE THAT LESSOR MAY,
IN CONNECTION WITH FINANCING ITS ACQUISITION AND OWNERSHIP OF SOME OR ALL OF
THE EQUIPMENT, GRANT PARTICIPATIONS OR SECURITY INTERESTS IN OR SELL OR ASSIGN
ITS INTERESTS IN SUCH EQUIPMENT, THIS MASTER LEASING AGREEMENT OR ANY RENT,
INTERIM RENT OR OTHER AMOUNTS DUE HEREUNDER. Any instrument executed in
connection with such assignment shall contain a provision to the effect that as
long as Lessee is not in default hereunder or under any lease executed pursuant
hereto, it shall be entitled to uninterrupted use and quiet enjoyment of the
Equipment on the terms herein provided. After such assignment the terms and
provisions of this Master Leasing Agreement may not be altered, modified or
waived without the written consent of such assignee. In connection with such
assignment Lessee agrees to execute such documents as Lessor or its assignee
may reasonably request, including notices, acknowledgements and financing
statements. Lessee agrees to permit Lessor to record this Master Leasing
Agreement. Upon the written request of such assignee, the Lessee shall make
payment of all Rent, Interim Rent and other payments due hereunder with respect
to such assignment to the assignee without abatement, deduction or set off.
Such payments shall discharge the obligations of the Lessee to the Lessor
hereunder to the extent of such payments. Lessee further covenants and agrees
that it will not assert against Lessor's assignee any defense, counterclaim or
set off due to a breach of warranty or otherwise in any action for Rent,
Interim Rent or any other amounts due hereunder or for possession of the
Equipment which is
15
22
brought by Lessor's assignee. The assignment by the Lessor to the assignee of
rights hereunder shall not impose on the assignee any of the duties or
obligations of the Lessor hereunder, but in all other respects the assignee
shall have all the rights of the Lessor hereunder to the extent necessary to
realize upon Rent, Interim Rent and other amounts due hereunder and to protect
the assignee's security interest in Equipment resulting from such assignment.
21. Leasing Of Components. (a) Lessee may lease components of Equipment,
no one of which constitutes a completed unit of Equipment but all of which
shall be assembled into a completed unit of Equipment. The completed unit of
Equipment and each of the components thereof shall be owned by Lessor and
leased to Lessee hereunder. A component Individual Leasing Record shall be
executed for each component of Equipment leased hereunder, and each such
component Individual Leasing Record shall be clearly designated as such on the
form of such Individual Leasing Record. The lease of each component shall be
effective from the date of delivery of such component and the component
Individual Leasing Record for such component shall be dated as of such date.
When delivery is made on one or more components constituting less than a
completed unit of Equipment, Lessee shall cause all such delivered components
to be assembled into a completed unit of Equipment within six (6) months after
the first day of the calendar month following the first of any such deliveries
or within such longer period as may be agreed upon in writing by Lessor.
(b) Lessee shall pay Interim Rent to Lessor on a monthly basis for all
components not yet assembled into a completed unit of Equipment beginning on
the date of the applicable component Individual Leasing Record and continuing
to and including the day before the commencement date of the applicable final
Individual Leasing Record. As used in this Section "Interim Rent" for components
shall equal the product of (i) The aggregate Acquisition Cost of the components,
multiplied by (ii) a fraction having a numerator equal to the number of days
such components are under lease during such month and a denominator of 360,
multiplied by (iii) the Percentage Rental Factor as provided for in Subsection
I (n)(3).
(c) Upon assembly into a completed unit of Equipment, a final Individual
Leasing Record shall be executed, the Monthly Amortization Figure and Rent
shall be computed, and the lease term shall be deemed to commence for such unit
of Equipment as of the date of the final Individual Leasing Record. The final
Individual Leasing Record shall be dated as of the first day of the next
succeeding month following assembly of the components into a completed unit of
Equipment. The component Individual Leasing Records for the components of the
completed units of Equipment shall be canceled on the same date the final
Individual Leasing Record shall be dated. The Acquisition Cost of the completed
unit of Equipment shall be the sum of the Acquisition Costs of the components
thereof and all reasonable labor and other expenses incurred in assembling the
unit of Equipment, and shall be amortized as provided in Subsections 1(d) and
1(k).
(d) Notwithstanding the foregoing, at least the provisions of Section 9
and the first sentence of Section 11 of this Master Leasing Agreement shall
apply as between Lessor and Lessee with respect to all components from the time
such components are ordered by Lessor pursuant to a request from lessee or from
the time such components are delivered to Lessee, whichever shall first occur.
22. Rebuilds. Lessee may, subject to Lessor's approval, prior to the
expiration of the lease of any Equipment, rebuild such Equipment if the
remaining life thereof is thereby extended, and if such rebuilt Equipment and
all components thereof are owned by Lessor and leased to Lessee hereunder. When
the rebuilt Equipment is delivered and accepted, a new Individual Leasing
Record shall be substituted for the original Individual Leasing Record which
shall be canceled. The new Individual Leasing Record shall be dated and the
original Individual Leasing Record canceled as of Leasing Record canceled as of
16
23
the date of such delivery. The cost of such rebuild, if approved by Lessor,
shall be paid by Lessor and added to the Unamortized Value, if any, of the
Equipment at the time the new Individual Leasing Record is substituted, and the
sum thereof shall be the Acquisition Cost of the rebuilt Equipment. The maximum
number of months over which the Acquisition Cost of the rebuilt Equipment may
be amortized shall be determined in accordance with Subsection 1(d) and as
though the rebuilt Equipment were a new unit of Equipment leased on the date
the Individual Leasing Record is substituted.
23. Reports and Certificates. At all times during the continuance of this
Master Leasing Agreement and so long as any amount remains due and owing to
Lessor under this Master Leasing Agreement, the Lessee shall furnish to Lessor:
(a) Within one hundred twenty (120) days after the close of its fiscal year, an
annual report of Lessee consisting of (i) its financial statements including a
balance sheet of Lessee as of the end of such fiscal year, and (ii) statements
of income for the year then ended, with all notes thereto in each case
certified as true and correct by the chief financial officer of Lessee;
provided that if Lessee shall have independent certified accountants prepare
such financial statements, Lessee shall furnish such financials to Lessor when
available, (b) Within ninety (90) days after the close of each of the first
three quarterly periods of Lessee's fiscal year, a balance sheet of Lessee as
of the end of such quarter, and a statement of income and earnings for such
quarter in reasonable detail and scope and setting forth the corresponding
figure for the similar quarter certified as true and correct by the chief
financial officer of Lessee.
24. Miscellaneous. (a) THIS MASTER LEASING AGREEMENT AND ALL RIGHTS
HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BUT WITHOUT REFERENCE TO ITS
PRINCIPLES GOVERNING CONFLICTS OF LAWS.
(b) Each of the parties hereto acknowledges that the other party shall
not by act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder or under any other instrument given hereunder
unless such waiver is given in writing and the same shall be binding to the
extent therein provided and only upon the parties signing the same. A waiver on
any one occasion shall not be construed as a waiver on any future occasion.
(c) This Master Leasing Agreement shall be binding upon and inure to the
benefit of the parties hereto, their permitted successors and assignees.
(d) All rights, remedies and powers granted herein, or in any other
instrument given in connection herewith, shall be cumulative and may be
exercised singularly or cumulatively.
(e) This Master Leasing Agreement constitutes the entire understanding or
agreement between Lessor and Lessee and there is no understanding or agreement,
oral or written, which is not set forth herein. The Lessee agrees to do such
further acts and things and to execute and deliver to the Lessor such
additional agreements, powers and instruments as the Lessor may reasonably
require or deem advisable to carry into effect the purposes of this Master
Leasing Agreement or to better assure and confirm to the Lessor its rights,
powers and remedies under this Master Leasing Agreement.
(f) Notices to Lessee required pursuant to this Master Leasing Agreement
shall be delivered to MidAmerica Dairymen, Inc. at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Corporate Controller,
or at such other location as Lessee may direct in writing. Notices to Lessor
required pursuant to this Master Leasing Agreement shall be delivered
17
24
to BLC Corporation at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, Attention: Contract Services Department, or at such other location as
Lessor may direct in writing.
(g) This Master Leasing Agreement may be executed in two or more
counterparts, each of which, when taken together, shall constitute a single
agreement binding upon all the parties hereto.
(h) If any provision of this Master Leasing Agreement is in conflict with
any statute or rule of law in the jurisdiction where it is sought to be
enforced, then such provision shall be deemed null and void to the extent that
it may be in conflict therewith, but without invalidating the remaining
provisions hereof
(i) No provisions of this Master Leasing Agreement are to be interpreted
for or against any party because that party or that party's legal counsel or
representative drafted such provision.
(j) LESSOR AND LESSEE HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS MASTER
LEASING AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LESSOR AND
LESSEE TO ENTER INTO THIS MASTER LEASING AGREEMENT.
(k) NO EXECUTORY AGREEMENT SHALL BE EFFECTIVE TO CHANGE, MODIFY OR
DISCHARGE, IN WHOLE OR IN PART, THIS MASTER LEASING AGREEMENT, OR ANY OTHER
INSTRUMENT GIVEN IN CONNECTION HEREWITH UNLESS SUCH AGREEMENT IS IN WRITING AND
SIGNED BY LESSOR AND LESSEE.
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Master
Leasing Agreement as of the day and year first above written.
BLC CORPORATION, Lessor
Attest:
By /s/ By /s/
--------------------------- ----------------------------
Secretary Title President
-------------------------
MID-AMERICA DAIRYMEN, INC.,
Lessee
Attest:
By /s/ By /s/
--------------------------- ----------------------------
Assistant Secretary Title Vice President
18
25
LESSEE CERTIFICATION, NOTICE OF TAX OWNERSHIP
With respect to each Motor Vehicle, as part of the agreement made by
this Master Leasing Agreement together with the applicable Motor Vehicle
ILR or other supplement hereunder, it is stated as follows:
(a) Lessee hereby certifies, under penalty of perjury, that
Lessee intends that more than 50% of the use of each Motor Vehicle
that is at any time subject to such agreement is to be in a trade or
business of the Lessee.
(b) Lessee has been advised that Lessee will not be treated as
the owner for Federal income tax purposes of any Motor Vehicle
subject to such agreement.
MID-AMERICA DAIRYMEN, INC., as
Lessee
By /s/
-------------------------------
Title Vice President
----------------------------