bear minimum payment
The Bear Minimum
Big Bear Power (Big Bear) is a widely held public utility company that has posted strong financial results for several years. Big Bear has positive cash flow, and it is in compliance with all its debt covenants. Big Bear leases a combustion turbine from Goliath Co. (Goliath) for a 10-year noncancelable term. The lease agreement is signed on December 15, 2010, and Big Bear’s right to use the turbine begins on January 1, 2011. Various provisions and other facts from the lease are listed below.
Provision 1
Big Bear pays Stipe, Berry, Mills and Buck LLP, its external legal counsel, $500,000 in connection with negotiating the lease agreement. Big Bear is also required to pay $1 million of legal fees incurred by Goliath.
840-10-25-5 For a lessee, minimum lease payments comprise the payments that the lessee is obligated to make or can be required to make in connection with the leased property, excluding the following: Any guarantee by the lessee of the lessor 's debt and the lessee 's obligation to pay (apart from the rental payments) executory costs such as insurance, maintenance, and taxes in connection with the leased property.
840-10-25-7 For a lessor, minimum lease payments comprise the payments described in paragraphs 840-10-25-5 through 25-6 for a lessee plus any guarantee of the residual value or of rental payments beyond the lease term by a third party unrelated to either the lessee or the lessor, provided the third party is financially capable of discharging the obligations that may arise from the guarantee.
So Big bear should not include this legal fee in the minimum payment
Provision 2
The stated default provisions in the lease stipulate that Big Bear must purchase the combustion turbine from Goliath (at a price equal to the remaining lease payments) within 30 days if a “change in control” event occurs. Additionally, Big Bear would be required to pay a
Big Bear Power (Big Bear) is a widely held public utility company that has posted strong financial results for several years. Big Bear has positive cash flow, and it is in compliance with all its debt covenants. Big Bear leases a combustion turbine from Goliath Co. (Goliath) for a 10-year noncancelable term. The lease agreement is signed on December 15, 2010, and Big Bear’s right to use the turbine begins on January 1, 2011. Various provisions and other facts from the lease are listed below.
Provision 1
Big Bear pays Stipe, Berry, Mills and Buck LLP, its external legal counsel, $500,000 in connection with negotiating the lease agreement. Big Bear is also required to pay $1 million of legal fees incurred by Goliath.
840-10-25-5 For a lessee, minimum lease payments comprise the payments that the lessee is obligated to make or can be required to make in connection with the leased property, excluding the following: Any guarantee by the lessee of the lessor 's debt and the lessee 's obligation to pay (apart from the rental payments) executory costs such as insurance, maintenance, and taxes in connection with the leased property.
840-10-25-7 For a lessor, minimum lease payments comprise the payments described in paragraphs 840-10-25-5 through 25-6 for a lessee plus any guarantee of the residual value or of rental payments beyond the lease term by a third party unrelated to either the lessee or the lessor, provided the third party is financially capable of discharging the obligations that may arise from the guarantee.
So Big bear should not include this legal fee in the minimum payment
Provision 2
The stated default provisions in the lease stipulate that Big Bear must purchase the combustion turbine from Goliath (at a price equal to the remaining lease payments) within 30 days if a “change in control” event occurs. Additionally, Big Bear would be required to pay a