Lease Options DPC leases equipment under the following options:
Leases continue on a month-to-month basis at the end of the primary term. Cancellation during the initial or “evergreen” period requires a thirty-day notice. Lessee has the option at any time during a lease to change the equipment for other size units in inventory. Lessee is responsible for any change-out expenses. Monthly rental rates will be adjusted accordingly. In a situation when the gas production becomes uneconomical to produce, the lessee may return the equipment and cancel the remainder of the lease. Lessee pays the same rate for the equipment for as long as it is in his possession and will not be subject to price increases on a periodic basis. Units may be moved to any of Lessee’s locations with notice to DPC. Restartup assistance is provided at no additional cost.
Qualifications of a Capital Lease
Statements of Financial Accounting Standards No. 13 specifies the accounting principals for leases. A capital lease is defined as a lease that meets the following criteria:
The present value of the minimum lease payments equals or exceeds 90 percent of the fair value of the leased asset less any investment tax credit retained by the Lesser. This criteria is not applicable when the beginning of the lease term falls within the last 25 percent of the total economic life of the leased asset.
DPC uses new or almost new equipment for capital lease applications to insure eligibility with this requirement. The forty-eight month lease term insures that the present value when calculated with at 10% discount rate exceeds the 90 percent of fair value requirement. The purchase price of the new equipment is used as the fair value in this calculation.
Please verify with your own auditors that the capital lease considerations are met prior to proceeding.