EXHIBIT 10.7
XXXX XXXXXX SR. TRUST
XXXX XXXXXX, TRUSTEE
000 XXXX XXXXXX
XXXXXXXX, XX 00000
JULY 13, 1998
TO: TESORO CORPORATION
X/X XXXX XXXXXXXXXX
X.X. XXX 000
XXXXXXXXX, XX 00000
XXX SUN RISE
X/X XXXX XXXXXXXXXX
X.X. XXX 000
XXXXXXXXX, XX 00000
Gentlemen:
This letter is to memorialize my intent concerning the sale of water,
the hauling of that water, the leasing of equipment for bottling and
miscellaneous procedures and the leasing of a building for the water bottling
plant. A formal water sales agreement, hauling contract, equipment lease and
building lease will be entered into when USA Sun Rise and Tesoro possess the
necessary capitalization and income projections to comply with the basics of our
agreement as expressed in this letter. The parties recognize that a more formal
agreement will be entered into setting forth in greater detail typical and usual
business agreements. We all acknowledge that we are sophisticated business
people and understand that this letter of intent is to express the basics of our
business arrangements.
SALE OF WATER: The Xxxx Xxxxxx Sr. Trust will sell water to Tesoro for
the sum of $0.7 per gallon. USA Sun Rise will guarantee the payment or $0.7 per
gallon. Tesoro will purchase water exclusively from Xxxxxx up to 23 million
gallons annually. The parties have tested the water and determined that the
water is fit for the uses intended by USA Sun Rise and Tesoro.
HAULING CONTRACT: The Trust will deliver to USA Sun Rise the water sold
to Tesoro for $0.3 a gallon. Tesoro will be responsible for paying the $0.3 per
gallon and USA Sun Rise shall guarantee the payment. This agreement may be
terminated by the Trust upon 90 days notice.
EQUIPMENT LEASE: The Trust will lease to USA Sun Rise a bottling unit, tanks and
miscellaneous equipment having a maximum value of $150,000.00. USA Sun Rise will
maintain, repair or replace the equipment during the term of the lease at their
cost. USA Sun Rise will have an option to purchase all the equipment or the
replacement equipment for $75,000.00 in the tax year after the 84th month. The
rental fee will be as follows.
1 - 3 months $3,000.00 per month
4 - 6 months $4,000.00 per month
7 - 9 months $5,000.00 per month
10 - 12 months $5,000.00 per month
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13 to 36 months $7,250.00 per month
37 - 84 month $6,250.00 per month
During the 84th month, USA Sun Rise may renew this lease from year to year for
the sum of $25,000.00 per year payable in 12 equal annual installments.
BUILDING LEASE: USA Sun Rise will lease the building located in
Spearfish, South Dakota, from the Trust. USA Sun Rise will be leasing the
building and property "AS IS"'. Any improvements required by USA Sun Rise's
business shall be paid for completely by USA Sun Rise. All leasehold
improvements attached to foundation(s) or the structure(s) located thereon
affixed to the ground or the structures (not movables) shall, at the end of the
lease, becomes the sole property of the Xxxx Xxxxxx Sr. Trust. If the Trust
receives, during the term of the lease, a bona fide offer to purchase that the
Trust will accept, the Trust is obligated to submit the bona fide offer to USA
Sun Rise and USA Sun Rise shall have ninety (90) days in which to meet the terms
of the bona fide offer. If USA Sun Rise shall not do so, then Xxxx Xxxxxx may,
at his sole option, sell to the bona fide purchaser. USA Sun Rise will agree to
pay as and for lease payments as follows:
1st year through the 3rd year $1,417.00 per month
4th year through the 5th year $1,487.00 per month
7th year through the 9th year $1,562.00 per month
10th year $1,640.00 per month
AGREEMENTS GLOBAL IN NATURE: The Sale of Water Agreement, the equipment
Lease Agreement and the Building Lease are global in nature. If Tesoro or USA
Sun Rise shall default or breach any of these agreements, then such breach shall
be a breach of all of the agreements.
USA Sun Rise or Tesoro will have a fifteen (15) day grace period during
the term of these agreements to make the payments set forth. If payment is not
received by the Trust on the due date or within the 15 day grace period, then
the agreement and all other agreements will terminate immediately and USA Sun
Rise and Tesoro will peacefully surrender possession of the property and
premises. As to all other terms and conditions in the agreements, Xxxx Xxxxxx
will give 15 days notice of delinquency and USA Sun Rise or Tesoro will have 15
days in which to correct the breach or delinquency.
No additional buy-outs or options will be available to USA Sun Rise or
Tesoro except for those expressly set forth above. There will be no buy out of
the equipment lease or the building lease.
If you agree that this letter sets forth the basic agreements between
the parties, please affix your signature. By my signature, I so agree.
Sincerely yours,
XXXX X. XXXXXX XX. TRUST
By: /s/ Xxxx X. Xxxxxx, Trustee
Xxxx X. Xxxxxx, Xx. , Trustee
ACCEPTED AND AGREED to this 14th day of July 1998
TESORO CORPORATION
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By: /s/ Xxxx Xxxxxxxxxx
Its President
ATTEST
Secretary
ACCEPTED AND AGREED to this 14th day of July 1998
USA SUN RISE
By: /s/ Xxxx Xxxxxxxxxx
Its President
ATTEST
Secretary
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