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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-707
KANSAS CITY POWER & LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Missouri 44-0308720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Walnut, Kansas City, Missouri 64106-2124
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 556-2200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes (X) No ( )
The number of shares outstanding of the registrant's Common stock at
July 31, 1994 was 61,898,726 shares.
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
June 30 December 31
1994 1993
ASSETS (Thousands)
UTILITY PLANT, at original cost
Electric $ 3,266,190 $ 3,240,384
Less-Accumulated depreciation 1,056,379 1,019,714
Net utility plant in service 2,209,811 2,220,670
Construction work in progress 75,953 67,766
Nuclear fuel, net of amortization of
$82,147,000 and $76,722,000 40,312 29,862
Total 2,326,076 2,318,298
REGULATORY ASSET - DEFERRED WOLF CREEK COSTS 23,934 29,118
REGULATORY ASSET - RECOVERABLE TAXES 122,000 122,000
INVESTMENTS AND NONUTILITY PROPERTY 52,647 28,454
CURRENT ASSETS
Cash 7,508 1,539
Special deposits - 60,118
Receivables
Customer accounts receivable 37,366 29,320
Other receivables 24,035 19,340
Fuel inventories, at average cost 14,884 14,550
Materials and supplies, at average cost 45,030 44,157
Prepayments 4,054 4,686
Deferred income taxes 6,287 3,648
Total 139,164 177,358
DEFERRED CHARGES
Regulatory Assets
Settlement of fuel contracts 18,434 20,634
KCC Wolf Creek carrying costs 8,208 9,575
Other 30,047 31,899
Other deferred charges 7,786 17,732
Total 64,475 79,840
Total $ 2,728,296 $ 2,755,068
LIABILITIES
CAPITALIZATION (Note 2)
Common stock-authorized 150,000,000 shares
without par value-61,908,726 shares issued
-stated value $ 449,697 $ 449,697
Retained earnings 405,441 418,201
Capital stock premium and expense (1,736) (1,747)
Common stock equity 853,402 866,151
Cumulative preferred stock 89,000 89,000
Cumulative preferred stock (redeemable) 1,596 1,756
Long-term debt 717,301 733,664
Total 1,661,299 1,690,571
CURRENT LIABILITIES
Notes payable to banks 2,000 4,000
Commercial paper 60,000 25,000
Current maturities of long-term debt 82,750 134,488
Accounts payable 42,290 59,421
Dividends payable 423 423
Accrued taxes 34,634 27,800
Accrued interest 11,759 15,575
Accrued payroll and vacations 20,226 20,127
Accrued refueling outage costs 13,487 7,262
Other 9,293 8,531
Total 276,862 302,627
DEFERRED CREDITS
Deferred income taxes 634,465 627,819
Deferred investment tax credits 85,012 87,185
Other 70,658 46,866
Total 790,135 761,870
COMMITMENTS AND CONTINGENCIES (Note 1)
Total $ 2,728,296 $ 2,755,068
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
1994 1993 1994 1993 1994 1993
(Thousands)
ELECTRIC OPERATING REVENUES $ 223,108 $ 208,323 $ 422,403 $ 399,703 $ 880,150 $ 825,844
OPERATING EXPENSES
Operation
Fuel 35,331 28,239 73,340 59,564 143,893 126,414
Purchased power 8,065 6,610 14,547 12,385 33,565 24,529
Other (Note 3) 56,451 46,276 115,013 90,444 209,202 181,335
Maintenance 20,114 20,047 38,930 38,149 79,331 77,206
Depreciation 23,451 22,635 46,782 45,146 92,746 89,615
Taxes
Income 16,521 17,003 23,269 28,165 64,606 60,452
General 23,779 23,592 47,247 47,261 95,645 95,189
Amortization of
MPSC rate phase-in plan - 1,768 - 3,536 3,536 7,072
Deferred Wolf Creek costs 3,275 3,275 6,551 6,551 13,102 13,102
Total 186,987 169,445 365,679 331,201 735,626 674,914
OPERATING INCOME 36,121 38,878 56,724 68,502 144,524 150,930
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds
used during construction 639 709 1,112 1,251 2,707 2,324
Miscellaneous (2,008) (848) (1,885) (1,108) (3,263) (209)
Income taxes 1,324 383 1,403 545 2,407 520
Total (45) 244 630 688 1,851 2,635
INCOME BEFORE INTEREST CHARGES 36,076 39,122 57,354 69,190 146,375 153,565
INTEREST CHARGES
Long-term debt 10,387 12,810 20,767 26,591 44,294 53,754
Short-term notes 398 223 736 421 1,065 935
Miscellaneous 1,131 1,027 2,319 1,928 4,504 2,734
Allowance for borrowed funds
used during construction (616) (669) (1,135) (1,281) (2,396) (2,067)
Total 11,300 13,391 22,687 27,659 47,467 55,356
PERIOD RESULTS
Net income 24,776 25,731 34,667 41,531 98,908 98,209
Preferred stock
dividend requirements 835 775 1,642 1,602 3,193 3,246
Earnings available for
common stock $ 23,941 $ 24,956 $ 33,025 $ 39,929 $ 95,715 $ 94,963
Average number of common
shares outstanding 61,902,133 61,908,726 61,905,411 61,908,726 61,907,082 61,908,726
Earnings per common share $ 0.38 $ 0.40 $ 0.53 $ 0.64 $ 1.55 $ 1.53
Cash dividends per
common share $ 0.37 $ 0.36 $ 0.74 $ 0.72 $ 1.48 $ 1.44
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended Twelve Months Ended
June 30 June 30
1994 1993 1994 1993
(Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 34,667 $ 41,531 $ 98,908 $ 98,209
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 46,782 45,146 92,746 89,615
Amortization of:
Nuclear fuel 5,425 3,065 11,065 8,665
Deferred Wolf Creek costs 6,551 6,551 13,102 13,102
MPSC rate phase-in plan - 3,536 3,536 7,072
Other 5,136 4,029 9,341 7,012
Deferred income taxes (net) 4,007 22,675 6,834 36,172
Investment tax credit (net) (2,173) (2,173) (4,345) (4,379)
Allowance for equity funds used
during construction (1,112) (1,251) (2,707) (2,324)
Cash flows affected by changes in:
Receivables (12,741) (7,150) (15,836) (15,683)
Fuel inventories (334) 923 4,818 4,059
Materials and supplies (873) 1,006 (773) 1,246
Accounts payable (17,131) (33,311) (1,561) 5,105
Accrued taxes 6,834 8,153 6,617 (42)
Accrued interest (3,816) 1,983 (3,173) 1,995
Wolf Creek refueling outage
accrual 6,225 (11,500) 12,387 (4,914)
Early retirement program costs 24,227 - 24,227 -
Other operating activities 8,180 7,100 7,499 11,250
Net cash provided by operating
activities 109,854 90,313 262,685 256,160
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (62,453) (60,764) (130,888) (138,192)
Allowance for borrowed funds used
during construction (1,135) (1,281) (2,396) (2,067)
Purchases of investment securities (21,011) (2,854) (21,279) (2,854)
Other investing activities 2,539 (3,042) 9,009 (8,122)
Net cash used in investing
activities (82,060) (67,941) (145,554) (151,235)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 48,955 233,000 140,801 352,500
Retirement of long-term debt (117,170) (232,000) (156,650) (342,230)
Special deposits 60,118 - - 11,157
Premium on reacquired stock and
long-term debt - (3,717) (360) (5,626)
Increase (decrease) in short-term
borrowings 33,000 28,000 1,000 (26,000)
Dividends paid (47,427) (46,202) (94,781) (92,412)
Other financing activities 699 (519) (695) (1,393)
Net cash used in financing
activities (21,825) (21,438) (110,685) (104,004)
NET INCREASE IN CASH 5,969 934 6,446 921
CASH AT BEGINNING OF PERIOD 1,539 128 1,062 141
CASH AT END OF PERIOD $ 7,508 $ 1,062 $ 7,508 $ 1,062
CASH PAID DURING THE PERIOD FOR:
Interest, net of amount capitalized $ 25,186 $ 24,570 $ 47,977 $ 51,381
Income taxes $ 23,143 $ 9,779 $ 53,505 $ 34,334
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Six Months Ended Twelve Months Ended
June 30 June 30
1994 1993 1994 1993
(Thousands)
Beginning balance $ 418,201 $ 405,985 $ 401,314 $ 395,517
Net income 34,667 41,531 98,908 98,209
452,868 447,516 500,222 493,726
Dividends declared 47,427 46,202 94,781 92,412
Ending balance $ 405,441 $ 401,314 $ 405,441 $ 401,314
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
KANSAS CITY POWER & LIGHT COMPANY
Notes to Consolidated Financial Statements
In management's opinion, the consolidated interim financial statements
reflect all adjustments (which include only normal recurring adjustments)
necessary to present fairly the results of operations for the interim
periods presented. These statements and notes should be read in conjunction
with the financial statements and the notes thereto, included in the
Company's annual report to the Securities and Exchange Commission on Form
10-K for the year 1993.
1. COMMITMENTS AND CONTINGENCIES
TAX MATTERS
The Company's federal income tax returns for the years 1985 through
1990 are presently under examination by the Internal Revenue Service (IRS).
The IRS has issued Revenue Agent's Reports for the years 1985 through 1990.
The Reports include proposed adjustments that would reduce the Company's
Wolf Creek investment tax credit (ITC) by 25% or approximately $20 million
and tax depreciation by 23% or approximately $200 million. These amounts
include the continuing effect of the adjustments through June 30, 1994.
These adjustments, principally, are based upon the IRS's contention that
(i) certain start-up and testing costs considered by the Company to be costs
of the plant should be treated as licensing costs, which do not qualify for
ITC or accelerated depreciation, and (ii) certain cooling and generating
facilities should not qualify for ITC or accelerated depreciation.
If the IRS were to prevail on all of these proposed adjustments, the
Company would be obligated to make cash payments, calculated through June
30, 1994, of approximately $100 million for additional federal and state
income taxes and $50 million for corresponding interest. After offsets for
deferred income taxes, these payments would reduce net income by
approximately $30 million.
The Company has filed a protest with the appeals division of the IRS.
Based upon their interpretation of applicable tax principles and the tax
treatment of similar costs and facilities with respect to other plants, it
is the opinion of management and outside tax counsel that the IRS's proposed
Wolf Creek adjustments are substantially overstated. Management believes
any additional taxes, together with interest, resulting from the final
resolution of these matters will not be material to the Company's financial
condition or results of operations.
ENVIRONMENTAL MATTERS
Interstate Power Company of Dubuque, Iowa (Interstate) filed a lawsuit
in 1989 against the Company in the Federal District Court for the District
of Iowa seeking from the Company contribution and indemnity under the
Federal Comprehensive Environmental Response, Compensation and Liability
Act, (the Superfund law) for cleanup costs of hazardous substances at the
site of a demolished gas manufacturing plant in Mason City, Iowa. The plant
was operated by the Company for very brief periods of time before it was
demolished in 1952. The site and all other properties the Company owned in
Iowa were sold to Interstate in 1957. The Company estimates that the
cleanup could cost up to $10 million. The Company's estimate is based upon
an evaluation of available information from on-going site investigation and
assessment activities, including the costs of such activities.
In August 1993, the Company, along with other parties to the lawsuit,
received a letter from the Environmental Protection Agency (EPA) notifying
each such party that it was considered a potentially responsible party for
cleanup costs at the site. The EPA has also proposed to list the site on
the National Priorities List.
The Company believes it has several valid defenses to this action
including the fact that the 1957 sales documents includes clauses which
require Interstate to indemnify the Company from and against all claims and
damages arising after the sale. However, in 1993 the Court rejected this
position, ruling that the indemnity clauses were not sufficiently broad to
indemnify for environmental cleanup. This order will be final for appeal
after a trial to allocate the cleanup costs among the parties, which is
expected in 1994. Even if unsuccessful on the liability issue, the Company
does not believe its allocated share of the cleanup costs will be material
to its financial condition or results of operations.
2. CAPITALIZATION
During the second quarter, the Company reacquired 10,000 shares of its
common stock to be used for future distribution. The cost of the reacquired
shares has been included in Investments and Nonutility Property on the
Consolidated Balance Sheets.
In February 1994, the Company issued $35.9 million of its General
Mortgage Bonds ($21.9 million due 2018 and $14.0 million due 2015) at a
variable rate to support $35.9 million City of LaCygne, Kansas Environmental
Improvement Revenue Refunding Bonds (Kansas City Power & Light Company
Project) Series 1994. The proceeds from the issuance were used to redeem at
par value the $21.9 million City of LaCygne, Kansas Pollution Control
Revenue Refunding Bonds collateralized with the Company's 5 7/8% First
Mortgage Bonds due 2007, and the $14.0 million 5 3/4% City of LaCygne,
Kansas Pollution Control Revenue Bonds due 2003.
Under the Indenture of Mortgage and Deed of Trust dated December 1,
1946, as supplemented, a portion of retained earnings was not available for
cash dividends on common stock. Following the redemption of the 5 7/8%
First Mortgage Bond, this Indenture was retired. The remaining restriction
relating to the payment of dividends is set forth in the Restated Articles
of Consolidation and would apply in the event common equity falls to 25% of
total capitalization.
3. EARLY RETIREMENT
In March 1994, the Company offered a voluntary early retirement program
to 411 eligible management and union employees. Of the 411 eligible
employees, 332, or 81%, elected to participate in the program. Based on an
actuarial valuation, the Company expensed $10 million ($0.10 per share) in
the second quarter, resulting in total program costs of $24 million ($0.24
per share) recorded in the six months ended June 30, 1994.
It is expected that future savings of payroll and benefits will offset
the program costs in less than two years assuming minimal replacements of
retiring employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three month period - three months ended June 30, 1994
compared to three months ended
June 30, 1993.
Six month period - six months ended June 30, 1994
compared to six months ended
June 30, 1993.
Twelve month period - twelve months ended June 30, 1994
compared to twelve months ended
June 30, 1993.
KILOWATT (KWH) SALES AND OPERATING REVENUES
Sales and revenue data:
Increase (Decrease)
From Prior Year
Three Month Six Month Twelve Month
Period Period Period
KWH Revenues KWH Revenues KWH Revenues
(Millions) (Millions) (Millions)
Retail sales:
Residential 10 % $ 5 5 % $ 4 10 % $ 25
Commercial 6 % 3 4 % 2 3 % 7
Industrial 2 % (1) 3 % - 3 % 1
Other (4)% - (4)% - (4)% -
Total retail 6 % 7 4 % 6 5 % 33
Sales for resale:
Bulk power sales 64 % 8 66 % 17 40 % 21
Other (7)% - (3)% - - % -
Total operating
revenues $ 15 $ 23 $ 54
Effective January 1, 1994, Missouri jurisdictional retail rates were
reduced 2.66%, or approximately $12.5 million annually, primarily to reflect
the end of the Missouri Public Service Commission (MPSC) rate phase-in
amortization. This agreement with the MPSC and public counsel also includes
a provision whereby none of the parties can unilaterally file for a general
increase or decrease in Missouri retail electric rates prior to January 1,
1996. Approximately two-thirds of total retail sales are from Missouri
customers.
Other tariffs have not changed materially since 1988. Less than 1% of
the Company's revenues are affected by an automatic fuel adjustment
provision.
Residential and commercial sales increased for the three and six month
periods reflecting warmer temperatures during the 1994 periods. While the
1994 twelve months ended reflects relatively mild weather, temperatures were
closer to normal than the unseasonably mild weather during the prior twelve
month period. Based on the Company's records of cooling degree days above
65 degrees Fahrenheit, the summer of 1992 was the coolest since 1950. In
addition, the three, six and twelve month periods reflect basic load growth.
Bulk power sales reflect the Company's high unit availability and its
greater emphasis on entering new interchange markets.
The level of future kwh sales will depend upon weather conditions,
customer conservation efforts, competing fuel sources and the overall
economy of the Company's service territory. Sales to industrial customers,
such as steel and auto manufacturers, are also affected by the national
economy. The level of bulk power sales in the future will depend upon the
availability of generating units, fuel costs, requirements of other electric
systems and the Company's system requirements. Sales could also be affected
by issues facing the electric utility industry such as transmission access,
demand-side management programs, increased competition and retention of
large industrial customers. Alternative sources of electricity, such as
cogeneration, could affect the retention of, and future sales to, large
industrial customers.
FUEL, PURCHASED POWER AND OTHER OPERATION EXPENSES
Combined fuel and purchased power expenses increased for the three, six
and twelve month periods to support additional sales. Fuel costs for all
1994 periods reflect reduced coal costs.
Other operation expenses increased for the three, six and twelve month
periods due to the costs associated with the voluntary early retirement
program. The Company expensed $10 million ($0.10 per share) in the second
quarter, resulting in total program costs of $24 million ($0.24 per share)
recorded in the six and twelve months ended June 30, 1994. See Note 3 to
the Consolidated Financial Statements - Early Retirement for more detail
including future savings of the program.
The Company continues to place emphasis on cost control. Processes are
being reviewed and changed to provide increased efficiencies and improved
operations. This will also allow the Company to assimilate work performed
by those who elected to participate in the early retirement program.
INCOME TAXES
In addition to reflecting an increase in income subject to tax, income
tax expense for the twelve month period increased by approximately $2
million due to changes in federal and Missouri income tax laws.
The Company estimates 1994 state income tax expense will increase
approximately $1 million over 1993 reflecting a change in the Missouri state
income tax law.
INTEREST CHARGES
The decrease in interest charges for the three, six and twelve month
periods reflects lower average levels of long-term debt outstanding and the
refinancing of long-term debt with lower fixed or variable rate debt.
EARNINGS PER SHARE (EPS)
EPS was reduced $0.10 for the quarter ended June 30, 1994 and $0.24 for
the six and twelve month periods reflecting the cost of the voluntary early
retirement program. (See Note 3 to the Consolidated Financial Statements -
Early Retirement for more detail including future savings of the program.)
The effects of weather increased the 1994 twelve month EPS over 1993 by
approximately $0.15. Although the twelve months ended June 30, 1994 and
1993 were both affected by milder than normal temperatures, the 1994 twelve
months ended reflects closer to normal temperatures compared to the same
period last year. Based on a statistical relationship between sales and the
differences in actual and normal temperatures for the year, the Company
estimates the effects of abnormal weather were as follows:
Twelve Months Ended
June 30
1994 1993
Estimated effects of
abnormal weather on EPS $(0.07) $(0.22)
EPS for the three, six and twelve month periods also reflects increased
bulk power sales, decreased coal costs, and reduced interest costs resulting
from the refinancing of a significant portion of the Company's long-term
debt.
ENVIRONMENTAL MATTERS
The Company's policy is to act in an environmentally responsible manner
and utilize the latest technological processes possible to avoid and treat
contamination. The Company continually conducts environmental audits
designed to assure compliance with governmental regulations and detect
contamination. However, these regulations are constantly evolving;
governmental bodies may impose additional or more rigid environmental
regulations which could require substantial changes to the Company's
operations or facilities.
See Note 1 to the Consolidated Financial Statements-Commitments and
Contingencies-Environmental Matters for a discussion of costs of compliance
with environmental laws and regulations and a potential liability (which the
Company believes is not material to its financial condition or results of
operations) for cleanup costs under the Superfund law.
WOLF CREEK
Wolf Creek is one of the Company's principal generating facilities
representing approximately 17% of the Company's accredited generating
capacity and 26% of the Company's annual kwh generation and has the lowest
fuel cost of any of its generating facilities.
An extended shut-down of the unit could have a substantial adverse
effect on the Company's business, financial condition and results of
operations. Higher replacement power and other costs would be incurred as a
result. Although not expected, an abnormal shut-down of the plant could be
caused by adverse incidents at the plant or by actions of the Nuclear
Regulatory Commission reacting to safety concerns at the plant or other
similar nuclear facilities. If a long-term shut-down occurred, the state
regulatory commissions could consider reducing rates by excluding Wolf Creek
investment from rate base.
Ownership and operation of a nuclear generating unit exposes the
Company to potential retroactive assessments and property losses in excess
of insurance coverage.
CAPITAL REQUIREMENTS AND LIQUIDITY
See Note 2 to the Consolidated Financial Statements - Capitalization
regarding the refinancing of long-term debt.
The Company currently uses an accelerated depreciation method for tax
purposes. The accelerated depreciation on the Wolf Creek plant has reduced
the Company's tax payments during the last three years by approximately $30
million per year. Accelerated depreciation on Wolf Creek ends in 1994. The
Company is investigating and implementing various tax planning strategies to
minimize future tax payments resulting from the loss of this deduction.
See Note 1 to the Consolidated Financial Statements-Commitments and
Contingencies-Tax Matters for a discussion of the Company's federal income
tax returns for the years 1985 through 1990 which are presently under audit
by the Internal Revenue Service.
In order to take advantage of the potential benefits inherent in a
larger energy system, the Company might incur additional debt and/or issue
additional equity to finance system growth or new growth opportunities,
through business combinations or other investments.
PART II - OTHER INFORMATION
Item 4. Submission of matters to a Vote of Security Holders.
The Company held its Annual Meeting on May 3, 1994. The following
directors were elected by cumulative voting to hold office until
the next Annual Meeting of Shareholders in 1995.
Abstentions
(Withheld Authority
Votes Cast to Vote For All
For Directors)
David L. Bodde 55,397,900 467,198
William H. Clark 55,544,111 467,198
Robert J. Dineen 55,621,392 467,198
Arthur J. Doyle 55,492,770 467,198
W. Thomas Grant II 54,452,076 467,198
Drue Jennings 55,673,334 467,198
George E. Nettels, Jr. 55,683,968 467,198
Linda Hood Talbott 55,639,355 467,198
Robert H. West 55,680,493 467,198
The appointment of Coopers & Lybrand as independent auditors was
also ratified by the following vote:
For 55,105,136
Against 269,260
Abstentions 668,957
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10 - Copy of Railcar Lease dated as of April 15,
1994, between Shawmut Bank Connecticut, National
Association, as Lessor and Kansas City Power & Light
Company, as Lessee
(b) No reports of Form 8-K have been filed for the quarter
ended June 30, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KANSAS CITY POWER & LIGHT COMPANY
Dated: August 2, 1994
/s/Drue Jennings
(Drue Jennings)
(Chief Executive Officer)
Dated: August 2, 1994
/s/Neil Roadman
(Neil Roadman)
(Principal Accounting Officer)
RAILCAR LEASE
Dated as of April 15, 1994
Between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Owner Trustee under the Trust Agreement
dated as of April 15, 1994 with
BNY Capital Funding Corp.,
as Lessor
And
KANSAS CITY POWER & LIGHT COMPANY,
as Lessee
This Lease has been executed in several counterparts. To the
extent, if any, that this Lease constitutes chattel paper (as such term
is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease may be created through
the transfer or possession of any counterpart hereof other than the
"Counterpart No. 1." This Counterpart is Counterpart No. 7 of 11.
Certain rights of Lessor under this Railcar Lease have been assigned as
security to, and are subject to a security interest in favor of
Wilmington Trust Company, as Security Trustee under the Security
Agreement-Trust Deed dated as of the date hereof between Lessor and the
Security Trustee, for the benefit of the holders of the Notes referred
to therein.
Table of Contents
SECTION HEADING PAGE
Section 1. Definitions 1
Section 2. Agreement for Lease of Equipment 1
Section 3. Delivery and Acceptance of Equipment 1
Section 4. Lease Term 2
Section 5. Return of Equipment 2
Section 6. Rent 4
Section 7. Net Lease 7
Section 8. Lessor's Title; Equipment to Be and
Remain Personal Property 8
Section 9. Use of Equipment; Compliance with Laws 8
Section 10. Maintenance and Repair of Equipment 10
Section 11. Replacements; Alterations; Modifications 10
Section 12. Identification Marks; Inspection 11
Section 13. Assignments and Subleases 12
Section 14. Liens 13
Section 15. Loss, Damage or Destruction 13
Section 16. Insurance 17
Section 17. No Warranties 19
Section 18. Events of Default 21
Section 19. Remedies upon Default 22
Section 20. Lessor's Right to Perform for Lessee 24
Section 21. Late Charges 24
Section 22. Covenant of Quiet Enjoyment 24
Section 23. Other Documents 25
Section 24. Notices and Requests 25
Section 25. Lessee's Renewal and Purchase Options 25
Section 26. Financial Information; Reports 28
Section 27. Voluntary Termination for Obsolescence 29
Section 28. Consolidation, Merger and Sale of
All Assets 30
Section 29. Special Termination 31
Section 30. Miscellaneous 33
Section 31. Third-Party Beneficiaries 33
Section 32. Liability of Lessor Limited 34
Section 33. Execution 34
Signature 35
ATTACHMENTS TO RAILCAR LEASE:
Annex 1 - Definitions
Annex 2 - Pricing Assumptions
EXHIBITS
A - Equipment Description
B - Lease Supplement
C - Fixed Rent
D - Stipulated Loss Value and Termination Value
RAILCAR LEASE
This RAILCAR LEASE dated as of April 15, 1994 (the "Lease"), by and
between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement dated as of April 15, 1994 with BNY
CAPITAL FUNDING CORP., a New York corporation (the "Lessor"), and KANSAS
CITY POWER & LIGHT COMPANY, a Missouri corporation (the "Lessee").
WHEREAS, Lessee has selected 380 new 120-ton high side rotary dump
aluminum gondola railcars as more specifically described in the Lease
Supplements to be delivered on each Closing Date for purchase from
Seller and intends to assign to Lessor, pursuant to the Acquisition
Agreement, its right to purchase such railcars; and
WHEREAS, Lessee has previously purchased 120 120-ton high side
rotary dump aluminum gondola railcars as more specifically described in
the Lease Supplements to be delivered on each Closing Date and intends
to sell such railcars to Lessor; and
WHEREAS, Lessor will purchase such railcars on each Closing Date;
In consideration of the mutual covenants and agreements hereinafter
set forth, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
For purposes of this Lease, capitalized terms used herein shall
have the meanings assigned to them in Annex 1 hereto, as the same may be
amended from time to time (such definitions to be equally applicable to
both the singular and plural forms of the terms defined). Any term
defined by reference to an agreement, instrument or other document shall
have the meaning so assigned to it whether or not such document is in
effect. Unless otherwise indicated, references without qualification in
this Lease to sections, paragraphs, clauses, appendices, schedules and
exhibits are to the same contained in or attached to this Lease.
SECTION 2. AGREEMENT FOR LEASE OF EQUIPMENT.
Subject to, and upon all of the terms and conditions of this Lease,
Lessor hereby agrees to lease to Lessee and Lessee hereby agrees to
lease from Lessor each Item of Equipment for the Lease Term.
SECTION 3. DELIVERY AND ACCEPTANCE OF EQUIPMENT.
Lessor shall not be liable to Lessee for any failure or delay in
obtaining any Item of Equipment or making delivery thereof. Upon
execution and delivery of a Lease Supplement substantially in the form
attached hereto as Exhibit B by Lessor and Lessee, the Items described
therein shall be deemed to have been delivered to and accepted by Lessee
as agent for Lessor under the Acquisition Agreements and for all
purposes of this Lease, and thereupon shall be subject to all of the
terms, provisions and conditions of this Lease.
Lessee's execution and delivery of a Lease Supplement shall be
evidence that the Items of Equipment listed therein have been subjected
to this Lease on the terms hereof. Lessee's execution and delivery of a
Lease Supplement with respect to an Item of Equipment pursuant to this
Section 3 shall conclusively establish that, as between Lessor and
Lessee, but without limiting or otherwise affecting Lessor's or Lessee's
rights, if any, against any other Person, such Item of Equipment is
acceptable to and irrevocably accepted by Lessee under the Lease,
notwithstanding any defect with respect to design, manufacture,
condition or any other matter or the failure of any such Item of
Equipment to comply to the specifications applicable thereto or to all
applicable federal or state governmental standards including, without
limitation, any imposed by the United States Department of
Transportation and ICC requirements and specifications, if any, or to
all standards recommended by the AAR applicable to railroad equipment of
the character of the Equipment as of the date hereof, and that, as
between Lessor and Lessee, such Item of Equipment is in good order and
condition.
SECTION 4. LEASE TERM.
The interim term (the "Interim Term") for each Item of Equipment
shall commence on the Acceptance Date for such Item of Equipment and
shall terminate on September 29, 1994 unless this Lease is sooner
terminated with respect to such Item pursuant to the provisions hereof.
The basic term (the "Basic Term") for each Item of Equipment shall
commence on September 30, 1994 (the "Basic Term Commencement Date") for
such Item and, unless this Lease is sooner terminated with respect to
such Item (or all Equipment) pursuant to the provisions hereof, shall
terminate on September 30, 2014. If not sooner terminated pursuant to
the provisions hereof, the Lease Term for each Item of Equipment shall
end on the last day of the Basic Term thereof, or if this Lease is
renewed pursuant to Section 25(a) hereof, on the last day of the last
Renewal Term thereof.
SECTION 5. RETURN OF EQUIPMENT.
(a) Return of Equipment upon Expiration of Term. Upon the
expiration or earlier termination of the Lease Term with respect to each
Item of Equipment and so long as no Default or Event of Default has
occurred and is continuing (and provided, in the case of the expiration
of the Lease Term, that Lessee has not exercised its purchase option
under Section 25(b) hereof), Lessee will deliver possession of each Item
of Equipment to Lessor, at up to two (2) locations specified by Lessor
within fifty (50) miles of Kansas City, Missouri or at such other
mutually agreed to locations, in the condition described in Section 10
hereof. Delivery shall be in groups of at least 100 Items of Equipment.
Each such group of Items of Equipment shall be returned to the Lessor on
the expiration or earlier termination of the Lease Term with respect to
such Items of Equipment. The location where each such Item shall be
returned shall be specified in a written notice given by Lessor to
Lessee at least sixty (60) days prior to such redelivery (each, a
"Redelivery Location"). Any Item of Equipment delivered to a Redelivery
Location shall be deemed to be redelivered hereunder on the date on
which all of the Equipment shall have been delivered to such Redelivery
Location in the condition described in Section 10 hereof, provided that
Lessor has given the notice set forth above. During the period of 240
days prior to the end of the Lease Term or any Renewal Term, Lessee will
permit Lessor or any person designated by it, including the authorized
representative or representatives of any prospective purchaser or user
of such Items of Equipment to inspect any or all of such Items of
Equipment. Subject to the following paragraph, Fixed Rent or Renewal
Rent, as the case may be, with respect to any Item of Equipment so
deemed to have been redelivered shall cease to accrue.
(b) Return of Equipment upon Default. If the Lessor shall
terminate this Lease pursuant to Section 19 hereof, the Lessee shall
forthwith deliver possession of the Equipment to the Lessor. For the
purpose of delivering possession of any Item to the Lessor as above
required, the Lessee shall at its own cost, expense and risk: (i)
forthwith deliver such Items to not more than two (2) locations as the
Lessor shall designate, and (ii) permit the Lessor to store such Items
for a period of 360 days at such locations without charge for insurance,
rent or storage, and during such period of storage the Lessee shall
continue to maintain all insurance required by Section 16 hereof.
Each such Item will, when placed in storage and at all times while
in storage, be in the condition required by Section 10 hereof and the
Lessee shall take such actions as may be required by the Lessor to
enable the Items to be sold or leased to a third party for use in
interchange service under the Interchange Rules. Lessee agrees that no
Item shall be considered to have been returned under this Section 5(b)
until the Lessee has returned such Item in such condition.
Without in any way limiting the obligation of the Lessee under the
foregoing provisions of this Section 5(b), the Lessee hereby irrevocably
appoints the Lessor as the agent and attorney of the Lessee, with full
power and authority (which power is coupled with an interest), at any
time while the Lessee is obligated to deliver possession of any Items of
Equipment to the Lessor after the occurrence of an Event of Default, to
demand and take possession of such Item in the name and on behalf of the
Lessee from whomsoever shall be at the time in possession of such Item.
(c) Holdover Rent; Storage Charges. In the event any Item of
Equipment is not returned as hereinabove provided as a result of any
action or inaction on the part of Lessee as of the date of the
expiration of the Lease Term or the Renewal Term with respect to such
Item of Equipment, Lessee shall pay to Lessor, for each day thereafter
as liquidated damages, and not as a penalty, for the failure of Lessee
to return such Item of Equipment to Lessor at the expiration of the
Lease Term as required by the provisions of Section 5(a), an amount
equal to the daily equivalent of the arithmetic average of the Fixed
Rent during the Basic Term for such Item of Equipment or, if the failure
to return occurs after a Renewal Term, the arithmetic average of the
rent paid during the Renewal Term for such Item of Equipment. Lessee
shall also reimburse Lessor, upon demand, for all storage charges
incurred by Lessor if any Item of Equipment is redelivered after the end
of the Lease Term, until such time as all Items of Equipment shall have
been returned to Lessor as required hereby. The provision for such
payment of such Rent and storage charges shall not be in abrogation of
Lessor's right under Section 5(a) to have such Item of Equipment
returned to it hereunder.
(d) Essence of Lease. The assembling and delivery of the
Equipment as hereinbefore provided are of the essence of this Lease, and
upon application to any court of equity having jurisdiction in the
premises, the Lessor shall be entitled to a decree against the Lessee
requiring specific performance of the covenants of the Lessee so to
assemble and deliver the Equipment.
SECTION 6. RENT.
(a) Interim Rent. Lessee hereby agrees to pay Lessor Interim Rent
for the use by Lessee of each Item of Equipment during the Interim Term
in one installment payable on September 30, 1994 in an amount equal to
the difference between (i) the amount that the Owner Participant shall
be obligated to pay under and pursuant to Section 2.1(b) of the
Participation Agreement, and (ii) the amount actually paid to the
Security Trustee by the Owner Participant under and pursuant to Section
2.1(b) of the Participation Agreement. Subject to the provisions of
Section 6(e), in the event that Lessee shall make a payment of Interim
Rent hereunder due to Owner Participant's failure to pay the full amount
required to be paid by the Owner Participant under Section 2.1(b) of the
Participation Agreement, Lessee shall be entitled to offset such amount
plus interest thereon at a rate per annum equal to the Late Rate against
payments of Fixed Rent until such time as Lessee has been paid or shall
have so offset the amount of such Interim Rent payment; provided that
Lessee shall not have such right of offset if a Default or Event of
Default hereunder shall have occurred and be continuing.
(b) Fixed Rent. Lessee hereby agrees to pay Lessor Fixed Rent for
the use by Lessee of each Item of Equipment during the Basic Term, in
consecutive semiannual installments, due and payable on each Rent
Payment Date and continuing until the expiration or earlier termination
of the Basic Term, with each such installment to be in an amount equal
to the product obtained by multiplying (i) the Purchase Price of such
Item of Equipment by (ii) the applicable percentages set forth in
Exhibit C attached hereto. Lessee hereby agrees to pay Lessor Fixed
Rent for each Item of Equipment during each Renewal Term thereof as
specified in Section 25(a) hereof.
(c) Supplemental Rent. Lessee also agrees to pay to Lessor, or to
whomever shall be entitled thereto, all Supplemental Rent, as the same
shall become due and owing. Lessee shall also pay to Lessor (and, in
the case of payments of Supplemental Rent payable to other Persons
hereunder, such other Persons) on demand, as Supplemental Rent, to the
extent permitted by applicable law, interest at the Late Rate on any
part of any installment of Interim Rent or Fixed Rent or any amount due
under Section 19 hereof not paid when due at or prior to the time
specified for such payment for any period for which the same shall be
overdue and on any payment of Supplemental Rent payable to the Note
Purchaser or the Security Trustee and not paid when due for the period
from the due date thereof until the same shall be paid and at a rate per
annum equal to 1% plus the Prime Rate on any payment of Supplemental
Rent payable to the Owner Participant or the Owner Trustee and not paid
when due for the period from the due date thereof until the same shall
be paid. The payment or satisfaction of Lessee's obligation with respect
to Fixed Rent or any installment thereof shall not limit any obligation
of Lessee which may have accrued during the Lease Term with respect to
Supplemental Rent. In the event of any failure on the part of Lessee to
pay any such Supplemental Rent hereunder Lessor shall have all rights,
powers and remedies provided for herein or by law or equity or otherwise
in the case of nonpayment of Rent.
(d) Method of Payment. All payments of Interim Rent, Fixed Rent
and Supplemental Rent required to be made by Lessee to Lessor shall be
made by 11:00 A.M. Wilmington, Delaware time on the date payment is due
in United States dollars and in immediately available funds. If any
such date is not a Business Day, then payment shall be due on the next
succeeding Business Day and if paid on such Business Day by 11:00 A.M.
Wilmington, Delaware time, such payment shall be without interest or
penalty. In the event of any assignment pursuant to Section 13(b)
hereof, all payments or right to payments which are properly assigned
thereunder, whether Interim Rent, Fixed Rent, Supplemental Rent or
otherwise, shall be paid to such address as shall be designated by
Lessor and any such assignee. All payments of Rent (other than payments
with respect to Excepted Rights in Collateral, which shall be paid to
the Person entitled thereto) shall be paid by Lessee to Lessor at its
office at Shawmut Bank Connecticut, National Association, Hartford,
Connecticut, ABA. No. 011900445, Attention: Corporate Trust
Administration, or as Lessor may otherwise direct from time to time in
writing; provided, that so long as the Security Agreement shall not have
been discharged pursuant to Section 12.4 thereof, Lessor hereby directs,
and Lessee agrees, that all payments of Rent and all other amounts
payable to Lessor hereunder (other than payments with respect to
Excepted Rights in Collateral, which shall be paid to the Person
entitled thereto) shall be paid directly to the Security Trustee at its
office at Rodney Square North, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration, or as the Security Trustee may otherwise
direct, at such time so as to be received by the Security Trustee prior
to 11:00 A.M. Wilmington, Delaware time on the date of payment.
(e) Minimum Payments. Notwithstanding anything to the contrary
contained herein or in any other Operative Agreement, in all events and
irrespective of any adjustment thereto, (i) the installment of Interim
Rent payable on September 30, 1994 shall be at least equal to the amount
of accrued interest due and payable on such date in respect of all Notes
then outstanding less the amount paid in respect thereof by Owner
Participant, (ii) each installment of aggregate Fixed Rent payable with
respect to all Items of Equipment then subject to this Lease on each
Rent Payment Date shall be at least equal to the aggregate amount of
principal and accrued interest due and payable on such date in respect
of all Notes then outstanding and (iii) each payment of Stipulated Loss
Value and Termination Value (when added to all other amounts required to
be paid by the Lessee under this Lease in respect of any Event of Loss
or termination of this Lease) shall be at least equal to an amount
sufficient, as of the date of payment, to pay in full the principal of
and premium, if any, and interest on all Notes due under the Security
Agreement on account of such Event of Loss or termination. Nothing in
this Section 6(e) shall be deemed to constitute a guarantee by Lessee of
the indebtedness evidenced by the Notes or a guarantee of the residual
value of any Item of Equipment.
(f) Adjustments to Rent. The FPPO and the percentages for Fixed
Rent, Stipulated Loss Value and Termination Value set forth in Exhibits
C and D, have been calculated in part on the basis of the Pricing
Assumptions. If any such Pricing Assumption proves to have been
incorrect, then such FPPO and such percentages for Fixed Rent,
Stipulated Loss Value and Termination Value shall be adjusted (the FPPO
upward only and such percentages upward or downward) so as to preserve
Owner Participant's Net Economic Return. Any adjustments pursuant to
this Section 6(f) shall (A) satisfy the provisions of Revenue Procedure
75-28 and any other applicable statutes, regulations, revenue
procedures, revenue rulings or technical information releases relating
to the subject matter of such Revenue Procedure, (B) be made in a manner
designed to avoid application of Section 467(b)(2) of the Code and any
regulations thereunder or any other similar provision of Federal income
tax law and not otherwise cause any adverse effect under any Federal
income tax law in effect at the time of such adjustment, (C) not adjust
the Fixed Rent or the Stipulated Loss Values and Termination Values to
an amount less than the Fixed Rent and Stipulated Loss Values and
Termination Values required to enable Lessor to satisfy in full its
obligations in respect of the Notes, (D) to the extent possible and not
inconsistent with the foregoing, minimize the net present value of the
remaining Fixed Rent (using a discount rate equal to the interest rate
on the Notes) to the extent the foregoing criteria are met (subject to
the requirements of Section 6(e) hereof) and (E) be made on or prior to
the Basic Term Commencement Date. Lessor shall furnish to each holder
of a Note and to the Security Trustee, at least ten (10) days prior to
any adjustment of the FPPO, Fixed Rent, Stipulated Loss Values and
Termination Value pursuant to this Section 6(f), revised schedules of
such FPPO, Fixed Rent, Stipulated Loss Values and Termination Value, as
so adjusted in such form as is provided to the Lessor by the Owner
Participant.
(g) Computation of Adjustments. (i) Upon the occurrence of an
event requiring adjustments to the FPPO and the percentages for Fixed
Rent, Stipulated Loss Value and Termination Value pursuant to Section
6(f), Owner Participant shall make the necessary computations on a basis
consistent with that used by Owner Participant in the computation of the
FPPO and the percentages for Fixed Rent, Stipulated Loss Value and
Termination Value in connection with the execution and delivery of the
Participation Agreement and this Lease, taking into account only the
event giving rise to the adjustments. Subject to paragraph (ii) of this
Section 6(g), such adjustments shall be effective on the date Owner
Participant shall have furnished to Lessee a certificate signed on
behalf of Owner Participant by a responsible officer confirming that
such adjustments have been properly computed in accordance with the
provisions of this Lease, and shall remain effective until changed in
consequence of any inaccuracy discovered in the course of any
verification procedure conducted pursuant to paragraph (ii) of this
Section 6(g); provided that any such notice of adjustment shall be given
to Lessee at least 30 days prior to the Rent Payment Date next following
such notice.
(ii) Within 30 days after Owner Participant shall have
provided Lessee with a certificate pursuant to paragraph (i) of this
Section 6(g), Lessee either shall confirm the accuracy of such
computation or shall notify Owner Participant that such computation, and
the resulting adjustments proposed by Owner Participant, are inaccurate.
In the latter event, Owner Participant and Lessee agree to submit the
matter to a nationally recognized independent accounting firm selected
by the Owner Participant and reasonably acceptable to the Lessee, and
the conclusion of such firm as to the proper adjustments shall be
conclusive and binding on Lessee, Owner Participant and Lessor. All
expenses incurred by Owner Participant and Lessee in connection with the
verification procedures described in this paragraph (ii) shall be paid
by Lessee, unless the adjustments of the percentages for Fixed Rent
proposed by Owner Participant shall exceed the actual adjustments of
such percentages, properly computed and confirmed, by more than 5%, in
which case all such expenses shall be paid by Owner Participant. Each
adjustment of the FPPO and the percentages for Fixed Rent, Stipulated
Loss Value and Termination Value shall be evidenced by the execution and
delivery of a supplement to this Lease in form and substance
satisfactory to Lessee, Lessor and Owner Participant, and shall be
effective as provided herein without regard to the date on which such
supplement to this Lease is so executed and delivered. So long as the
Lien of the Security Agreement shall remain outstanding, copies of the
certificates, proposed adjustments and final adjustments shall be
forwarded by the Owner Participant to the Security Trustee.
SECTION 7. NET LEASE.
This Lease is a net lease and Lessee acknowledges and agrees that
Lessee's obligations hereunder shall be absolute and unconditional under
any and all circumstances and shall be paid without notice or demand and
without any abatement, reduction, suspension, diminution, deferral,
setoff, defense, counterclaim or recoupment whatsoever, including,
without limitation, any abatement, reduction, suspension, diminution,
deferral, setoff, 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, Owner Participant, any assignee,
Security Trustee, any vendor or manufacturer of the Equipment or any
part or Item thereof, the holders from time to time of the Notes, or any
other Person, either under this Lease or otherwise, for any reason
whatsoever; nor, except as otherwise expressly provided herein, shall
this Lease terminate, or the obligations of Lessee be otherwise affected
for any reason whatsoever, including any defect in or damage to or loss
of possession or loss of use or destruction of the Equipment or any part
or Item thereof, the condition, design, operation or fitness for use
thereof, any Liens or rights of others with respect to the Equipment or
any part or Item thereof, any prohibition or interruption of or other
restriction against Lessee's use, operation or possession of the
Equipment or any part or Item thereof, or any interference with such
use, operation or possession by any Person or entity (including
confiscation, requisition or other taking by any governmental authority,
any person acting under governmental authority or otherwise, or action
of any public or private person, whether by eviction by paramount title
or for any other reason whatsoever), the invalidity or unenforceability
or lack of due authorization of this Lease, or any other Operative
Agreement, any defect in the title to, compliance with plans or
specifications for condition, design or fitness for use of all or any of
the Items of Equipment, any insolvency of or any bankruptcy,
reorganization or other proceeding against Lessee, Lessor or any other
person, or for any other cause whether similar or dissimilar to the
foregoing, any present or future law to the contrary notwithstanding, it
being the intention and agreement of the parties hereto, and the basis
of the bargain, that (to the extent permitted by applicable law) Interim
Rent, Fixed Rent, Renewal Rent, Supplemental Rent and other amounts
payable by Lessee hereunder shall continue to be payable in all events
in the manner and at the times herein provided unless and until the
obligation to pay the same shall be terminated pursuant to the express
provisions of this Lease (in the case of any return of the Equipment to
the Lessor, any item of Equipment shall not be deemed to have been
returned to the Lessor's possession until all of the Lessee's
obligations with respect to the return thereof have been performed). To
the extent permitted by applicable law, Lessee hereby waives any and all
rights which it may now have or which at any time hereafter may be
conferred upon it, by statute or otherwise, to terminate, cancel, quit
or surrender this Lease of any of the Items of Equipment except in
accordance with the express terms hereof. Each Interim Rent, Fixed
Rent, Renewal Rent, Supplemental Rent or other payment made by Lessee
hereunder shall be final and Lessee shall not seek to recover all or any
part of such payment (except for any excess payment made in error) from
Lessor, Owner Participant, Security Trustee, or any holder or former
holder of a Note for any reason whatsoever.
Without limiting the generality of the foregoing, Lessee covenants
that it will remain obligated under this Lease in accordance with its
terms, and will not take any action to terminate (except in accordance
with the express provisions hereof), rescind or avoid this Lease for any
reason, notwithstanding any insolvency, bankruptcy, reorganization or
other proceeding affecting Lessor or Owner Participant, or any property
of Lessor or Owner Participant, or any action which may be taken by any
receiver, trustee or liquidator (or other similar official) or by any
court.
Nothing in this Section or in any other provision of this Lease
shall preclude any separate, independent claim (not by way of abatement
or reduction of any amount at any time payable by Lessee hereunder) by
Lessee for the breach of any representation, covenant, undertaking or
agreement made herein and in any other Operative Agreement for the
benefit of Lessee by Lessor or Owner Participant.
SECTION 8. LESSOR'S TITLE; EQUIPMENT TO BE AND REMAIN PERSONAL
PROPERTY.
Title to the Equipment shall at all times remain in Lessor and at
no time during the Lease Term shall title become vested in Lessee. This
Lease is and is intended to be a true lease and not a lease intended as
security or a lease in the nature of a security interest. Lessee shall
acquire no right, title or interest in or to the Equipment, except the
right to use the same pursuant to the terms of this Lease. It is the
intention and understanding of both Lessor and Lessee that the Equipment
shall be and at all times remain personal property and be treated as a
lease for federal income tax purposes.
SECTION 9. USE OF EQUIPMENT; COMPLIANCE WITH LAWS.
Lessee shall pay all costs, expenses, fees and charges incurred in
connection with the use and operation of the Equipment during the lease
thereof. Lessee agrees that the Equipment will be used and operated
solely in the regular course of its or any affiliate's business and in
compliance with all statutes, laws, ordinances, rules and regulations of
any Federal, state or local governmental body, agency or authority
applicable to the use and operation of the Equipment. If such laws or
rules require any alteration, replacement or addition of or to any part
on any Item of Equipment, Lessee will conform therewith at its own
expense. Lessee agrees not to operate or locate any Item of Equipment,
or to suffer any Item of Equipment to be operated or located, in any
area excluded from coverage by any insurance policy required by the
terms of Section 16 hereof or to operate or locate any Item of Equipment
in such a manner as to violate the terms of any insurance policy
required by the terms of said Section 16, except in the case of a
requisition for use by the United States Government where Lessee (or any
sublessee) has obtained, prior to the operation or location of the Item
of Equipment in such area, indemnification or insurance in lieu of such
indemnification from the United States Government against the risks and
in the amounts required by, and in compliance with, Section 16 hereof
covering such area.
Lessee shall procure and maintain in effect all licenses,
registrations, certificates, permits, approvals and consents required by
Federal, state or local laws or by any governmental body, agency or
authority in connection with the use and operation of each Item of
Equipment, including any instruments required by the AAR.
Notwithstanding the foregoing sentence, however, Lessee will cause this
Lease and the Security Agreement to be filed and recorded with the ICC
in accordance with Section 20c of the Interstate Commerce Act, and will
do and perform any other act and will execute, acknowledge, deliver,
file, register, record (and will refile, reregister, deposit and
redeposit or rerecord whenever required) this Lease and any and all
amendments or supplements to this Lease, or otherwise with respect to or
including any other Operative Agreement, in connection with any
assignment or sublease pursuant to Section 13(a) or otherwise, any
financing statements or similar instruments, and any and all further
instruments required by law or reasonably requested by Lessor, for the
purpose of protecting Lessor's title to any Item of Equipment to the
satisfaction of Lessor and Lessor's counsel or for the purpose of
carrying out the intention of this Lease, including, without limitation,
any such filings and recordings as shall be necessary to evidence any
change in name of Lessee or Lessor, or any merger or consolidation
thereof. Lessee will pay all costs, charges and expenses incident to
any such filing, refiling, recording and re-recording or depositing and
redepositing of any such instruments or incident to the taking of such
action, other than the fees and expenses of the Owner Participant and
the Owner Trustee in connection with any such instruments requested by
the Owner Participant solely for the benefit of the Owner Participant
and not otherwise required under or anticipated by the Operative
Agreements. This Lease shall be filed and recorded with the ICC prior
to the delivery and acceptance hereunder of any Item.
The Equipment will at all times during the Lease Term be and remain
in the possession and control of Lessee, subject to the terms of Section
13(a) hereof. Lessee shall operate the Equipment and permit the
Equipment to be located only in the contiguous forty-eight states of the
United States. Lessee shall not use and will not permit any other
person to use any Equipment or allow the same to be used for any
unlawful purpose. Lessee shall use and operate the Equipment or cause
it to be used and operated only by personnel authorized by Lessee, and
Lessee shall use every reasonable precaution to prevent loss or damage
to each Item of Equipment from fire and other hazards. Lessee shall use
the Equipment only in the manner for which it was designed and intended
and so as to subject it only to ordinary wear and tear; provided, that
the Lessee shall not use the Equipment and shall not permit the
Equipment to be used to transport or store hazardous or toxic substances
or materials or other substances or materials containing or contaminated
by hazardous or toxic substances or materials.
SECTION 10. MAINTENANCE AND REPAIR OF EQUIPMENT.
Lessee shall, at its own expense, (i) maintain and keep the
Equipment in good physical condition and working order consistent with
standard industry maintenance practice, and as otherwise may be required
by any insurance policies maintained pursuant to Section 16 or to
enforce warranty claims against each vendor and manufacturer of each
Item of Equipment, ordinary wear and tear excepted; (ii) maintain the
Equipment in accordance with the standards then in effect under (A) the
Interchange Rules or similar successor guidelines of the AAR (the
"Interchange Rules") and (B) regulations of the Federal Railway
Administration, and at least equal to the standards of maintenance which
Lessee performs on similar equipment owned or leased by Lessee, without
discriminating in any way between equipment of similar type that is
owned or leased; (iii) comply with all requirements of law applicable to
the maintenance and condition of the Equipment; and (iv) maintain the
Equipment in good operating condition commercially suitable for carrying
the commodities for which such Equipment was designed.
SECTION 11. REPLACEMENTS; ALTERATIONS; MODIFICATIONS.
Lessee shall, at its sole expense, make all alterations,
modifications, additions or attachments required by applicable law or
deemed necessary by any Federal, state or local governmental agency for
the continued usefulness of the Equipment. Lessee may, at its sole
expense, make other alterations, modifications, additions or attachments
to the Equipment as it may deem desirable in the conduct of its business
so long as (x) the value, utility or condition of the Equipment is not
diminished materially below the value, utility, or condition thereof
immediately prior to such alteration, modification, addition or
attachment, assuming the Equipment was then in at least the condition
and repair required to be maintained by the terms of this Lease, and (y)
such alterations, modifications, additions or attachments do not cause
any such Item to become a limited use property within the meaning of
Revenue Procedure 76-30, 1976-2 C.B. 647 (or such other successor tax
provision). So long as no Event of Default has occurred and is
continuing, and so long as the value, utility and condition of the
Equipment (exclusive of any such alterations, modifications, additions
or attachments) is not reduced thereby, any such alteration,
modification, addition or attachment, which was paid for by Lessee and
not reimbursed or otherwise compensated for by Lessor, shall (subject to
the last two sentences of this Section 11) remain the property of Lessee
and may be removed by Lessee prior to return of the Equipment pursuant
to Section 5 hereof. If any alteration, modification, addition or
attachment to an Item of Equipment (i) is a replacement of existing
parts constituting part of the Items of Equipment, (ii) was made in the
course of ordinary and proper maintenance of the Items of Equipment,
(iii) is required by Federal, state or local law in order to permit the
continued usefulness of the Equipment; or (iv) cannot physically be
removed without damage to the Equipment, it shall become the property of
Lessor, and shall be subject to all the terms of this Lease. Upon
termination of this Lease, Lessor shall have the option to purchase from
Lessee any alterations, modifications, additions or attachments to any
Item of Equipment not described in the preceding sentence at the Fair
Market Sales Value of such alterations, modifications, additions or
attachments, as the case may be.
SECTION 12. IDENTIFICATION MARKS; INSPECTION.
Lessee agrees, at Lessee's cost and expense and on or before the
Acceptance Date for each Item of Type A Equipment and as soon as
practicable and in any event within 60 days after the First Closing Date
for each Item of Type B Equipment, to place markings on the Equipment by
stencil or by a metal tag or plate affixed thereto in letters not less
than one inch in height, a legend substantially as follows:
"OWNERSHIP SUBJECT TO A SECURITY AGREEMENT FILED
WITH THE INTERSTATE COMMERCE COMMISSION"
with appropriate changes thereof and additions thereto as from time to
time may be required by law in order to protect Lessor's title thereto
and ownership thereof and the Security Trustee's interest therein;
provided, however, that such identification markings are to be placed so
as not to interfere with the usefulness and utility of such Item of
Equipment. If during the Lease Term any such identification marking
shall be defaced or destroyed, Lessee shall cause such defaced or
destroyed identification marking to be restored or replaced. Lessee
will cause each Item of Equipment to be kept numbered with the road
number and serial number as shall be set forth in any Lease Supplement
hereto extending this Lease to cover such Item of Equipment. Lessee
shall not allow the name of any other Person to be placed on any Item of
Equipment as a designation that might be identified as a claim of
ownership or any other interest therein; provided that nothing herein
contained shall prohibit Lessee or its permitted sublessees from placing
its customary colors and insignia on any Item of Equipment or from
naming each Item of Equipment. Lessee will not change the
identification number of any Item of Equipment unless and until (i) a
statement of a new number or numbers to be substituted therefor shall
have been delivered to Security Trustee and Lessor and filed, recorded
and deposited by Lessee in all appropriate public offices, including the
public offices where this Lease and the Security Agreement shall have
been filed, recorded and deposited, and (ii) Lessee shall have furnished
Lessor and Security Trustee an opinion of counsel in form and substance
reasonably satisfactory to them to the effect that such statement has
been so filed, recorded and deposited and that such filing, recordation
and deposit will protect Lessor's interest in such Items of Equipment
and the security interest of the Security Trustee under the Security
Agreement. Upon the reasonable request of Lessor, Lessee shall make the
Equipment available to Lessor for inspection and shall also make
Lessee's records pertaining to the Equipment reasonably available to
Lessor for inspection, it being understood and agreed that Lessor shall
have no obligation to make such inspection and shall incur no liability
for failure to do so. During the continuance of a Default or an Event
of Default, such inspection shall be at Lessee's expense.
SECTION 13. ASSIGNMENTS AND SUBLEASES.
(a) By Lessee. Lessee will not, without the prior written consent
of Lessor and the Security Trustee, assign its lease of any Item of
Equipment, or transfer or encumber its rights or obligations hereunder,
and any attempted assignment, transfer or encumbering by Lessee shall be
null and void; provided, however, subject to the receipt of any
necessary regulatory approvals, Lessee may, so long as no Default or
Event of Default shall have occurred and be continuing, assign its lease
of any Item of Equipment to an Affiliate with the prior written consent
of Lessor and the Security Trustee, which consent will not be
unreasonably withheld; provided, further, subject to the receipt of any
necessary regulatory approvals, Lessee may so long as no Default or
Event of Default shall have occurred and be continuing without the prior
consent of Lessor or the Security Trustee, sublease any Item of
Equipment to any Affiliate, railroad company or other Person for a
period not to exceed twelve months in accordance with customary industry
practice so long as such assignment or sublease does not cause the Items
of Equipment to be "tax-exempt use property" within the meaning of
Section 168(h) of the Code and so long as such assignment or sublease
does not extend beyond the end of the Lease Term. Any such sublease or
assignment shall not be in conflict with any of the terms and conditions
of this Lease and Lessee's obligations hereunder shall continue in full
force and effect as the obligations of a principal and not of a surety
irrespective of such sublease or assignment. Each sublease or
assignment permitted by this paragraph shall be expressly subject and
subordinate to all of the provisions of this Lease and to the rights and
remedies of the Security Trustee under the Security Agreement and Lessor
under this Lease in respect of the Items of Equipment covered by such
sublease or assignment.
(b) Transfers by Lessor or Owner Participant. Lessor and Owner
Participant shall not be entitled to transfer their respective interests
in this Lease and the Trust Estate other than the assignment of this
Lease by the Lessor to the Security Trustee pursuant to the Security
Agreement except in compliance with Section 3.11 of the Trust Agreement,
with respect to Lessor, and Section 3.6(d) of the Participation
Agreement, with respect to Owner Participant. No such transfer by
Lessor or Owner Participant shall interfere with Lessee's rights under
this Lease with respect to Lessee's use of the Items of Equipment.
Lessee shall provide such information concerning the location of the
Equipment as Lessor may reasonably request in connection with any such
transfer.
Upon written notice by Lessor to Lessee of any such sale or
assignment, Lessee shall thereafter make payments of all Fixed Rent and
other sums due hereunder to the party specified in such notice and such
payments shall discharge the obligation of Lessee to Lessor hereunder to
the extent of such payments. Lessee shall be under no obligation to any
assignee of Lessor, except upon written notice of such assignment to
Lessee. Lessee hereby acknowledges and consents to the security
interest and other rights and interests granted to the Security Trustee
pursuant to the Security Agreement. Such notice is hereby given of the
assignment of this Lease and all Rent and other payments to be made to
the Lessor hereunder (other than Excepted Rights in Collateral) to the
Security Trustee under and pursuant to the Security Agreement, and the
Lessee agrees to make all payments of Rent in accordance with the
provisions of Section 6(d). Upon any such sale or assignment under this
Section 13(b), Lessee shall not be required to execute any documents in
connection therewith other than a form of acknowledgment, any required
Uniform Commercial Code Financing Statements or any filings required by
the ICC or AAR. Any expenses incurred in connection with any such sale
or assignment shall be borne solely by Lessee if an Event of Default has
occurred and is continuing, otherwise solely by Lessor. Lessee shall
not be required to prepare any documents in connection with any such
sale or assignment.
SECTION 14. LIENS.
Assuming that the Lease has been filed with the ICC, Lessee
represents and warrants to Lessor that at the time an Item of Equipment
is accepted by it under the Lease, such Item will be free and clear of
all Liens except Permitted Encumbrances described in clauses (i) and
(iv) of the definition thereof, it being understood that a claim by the
Seller against the Equipment, even if not 30 days past due, is not a
Permitted Encumbrance. Lessee will not create, incur, assume or suffer
to exist any Lien on or with respect to the Equipment or any part or
Item thereof, Lessor's title thereto, or any interest therein, except
Permitted Encumbrances. Lessee, at its own expense, will pay, satisfy
and otherwise take such actions as may be necessary to keep the
Equipment free and clear of, and to duly discharge or eliminate or bond
in a manner satisfactory to Lessor, any such Lien other than Permitted
Encumbrances if the same shall arise at any time during the Lease Term.
Lessee will notify Lessor upon becoming aware of any tax or other Lien
(other than any Lien excepted above) that shall attach to the Equipment
or any Item of Equipment.
SECTION 15. LOSS, DAMAGE OR DESTRUCTION.
(a) Risk of Loss, Damage or Destruction. Lessee hereby assumes
all risk of loss, damage, theft, taking, destruction, confiscation or
requisition, partial or complete, of or to each Item of Equipment,
however caused or occasioned, such risk to be borne by Lessee with
respect to each Item of Equipment from the Acceptance Date, and
continuing until the expiration or early termination of the Lease Term.
Lessee shall promptly notify Lessor of any loss or casualty damage
(other than any such loss or damage which constitutes an Event of Loss)
to any Item or Items of Equipment where such loss or damage is estimated
to exceed the amount of self-insurance or deductible amount maintained
by the Lessee pursuant to and in accordance with Section 16 hereof.
Lessee shall, within 90 days of notifying Lessor of such loss or
casualty damage, notify Lessor that Lessee intends to repair such Item
or Items of Equipment and provide Lessor with an estimated cost and time
frame with respect to such repairs.
(b) Replacement or Payment of Stipulated Loss Value upon an Event
of Loss. If an Event of Loss occurs with respect to an Item or Items of
Equipment during the Lease Term, Lessee shall, promptly and in any event
within forty-five (45) days after the occurrence of such Event of Loss,
inform Lessor and Owner Participant in regard thereto and of its
election to perform one of the following options (it being agreed that
if Lessee shall not have given notice of such election within forty-five
(45) days after such notice of such occurrence or if a Default or an
Event of Default then exists, Lessee shall be obligated to perform the
option set forth in the following paragraph (ii)):
(i) as promptly as practicable, and in any event on or
before the Business Day next preceding the 136th day following the date
of such notice, in replacement for such Item of Equipment, Lessee shall
comply with Section 15(d) hereof and shall convey or cause to be
conveyed to Lessor a Replacement Item to be leased to Lessee hereunder,
such Replacement Item to be free and clear of all Liens (other than
Permitted Encumbrances referred to in clauses (i) and (iv) of the
definition of such term), to be of the same type and a similar make and
model to the Item so replaced and to have a fair market value, utility
and remaining useful life at least equal to the Item so replaced
(assuming such Item was in the condition required to be maintained by
the terms of this Lease); provided that, as a condition to Lessee's
election to replace any Item of Equipment pursuant to this paragraph
(i), on the Rent Payment Date next following such notice of such Event
of Loss, Lessee shall pay the Stipulated Loss Value for such Item
(computed as of such Rent Payment Date) to Lessor or, so long as the
Lien of the Security Agreement shall not have been satisfied and
discharged, to the Security Trustee to be held in escrow (but as part of
the Collateral) pending the replacement of such Item in compliance with
this paragraph (i) and Section 15(d) hereof (it being agreed that, upon
the replacement of such Item in compliance with this paragraph (i) and
Section 15(d) hereof, such Stipulated Loss Value shall be returned to
Lessee); and provided further that if Lessee shall not perform its
obligation to effect such replacement under this paragraph (i) during
the period of time provided herein, then such Stipulated Loss Value
shall be retained by Lessor or, so long as the Lien of the Security
Agreement shall not have been satisfied and discharged, the Security
Trustee for application in accordance with Section 5.1(d) of the
Security Agreement and Lessee shall pay, on the next succeeding Rental
Payment Date after the end of such period, to Lessor or, in the case of
Supplemental Rent, to the person entitled thereto, the amounts specified
in clauses (B) and (C) of paragraph (ii) below; or
(ii) on the Rent Payment Date next following such notice of
such Event of Loss, Lessee shall pay (A) the Stipulated Loss Value for
such Item (computed as of such Rent Payment Date), plus (B) the Fixed
Rent and any Supplemental Rent due for such Item of Equipment on such
Rent Payment Date, plus (C) all accrued and unpaid Fixed Rent and any
Supplemental Rent owing for such Item of Equipment through any prior
Rent Payment Date.
Lessee agrees (i) to indemnify the Owner Participant on an
after-tax-basis for any adverse tax consequences resulting from the
replacement of any Item pursuant to this Section 15 and (ii) to pay all
legal and other expenses in connection with the replacement of any Item
pursuant to this Section 15.
(c) Rent Termination. Upon the sale, retention or replacement of
any Item or Items of Equipment in compliance with this Section 15 or
upon the payment of all sums required to be paid pursuant to Section
15(b)(ii) hereof in respect of any Item or Items for which the Lessee
has elected to pay or has been deemed to have elected to pay pursuant to
the proviso to Section 15(b)(i) the amounts specified in Section
15(b)(ii), the Lease Term with respect to such Item or Items and the
obligation to pay Rent for such Item or Items accruing subsequent to the
date of payment of the Stipulated Loss Value for such Item or Items
pursuant to Section 15(b)(ii) shall terminate; provided that Lessee
shall be obligated to pay all Rent in respect of such Item or Items
which has accrued up to and including the date of payment of such
Stipulated Loss Value pursuant to Section 15(b)(ii).
(d) Disposition of Equipment; Replacement of Item. (i) Upon the
payment of all sums required to be paid pursuant to this Section 15 in
respect of any Item or Items of Equipment, Lessor will convey to Lessee
or its designee all right, title and interest of Lessor in and to such
Item or Items, "as is", "where is", without recourse or warranty, except
for a warranty against Lessor's Liens, and shall execute and deliver to
Lessee or its designee such bills of sale and other documents and
instruments as Lessee or its designee may reasonably request to evidence
such conveyance. As to each separate Item so disposed of, so long as no
Default or Event of Default shall have occurred and be continuing, any
payments received by Lessor or by Lessee from any insurer or other party
(except Lessee) as a result of the occurrence of such Event of Loss will
be applied in reduction of Lessee's obligation to pay the amounts
described in Section 15(b)(ii)(A), if not already paid by Lessee, or, if
already paid by Lessee, will be applied to reimburse Lessee for its
payment of such amount, and any such payments in excess of the amounts
described in Section 15(b)(ii)(A) shall be paid to or retained by
Lessor, and after the occurrence and continuance of a Default or an
Event of Default such payments shall be paid to the Security Trustee so
long as the Lien of the Security Agreement shall not have been
discharged and thereafter shall be paid to the Lessor; provided however,
that Lessee shall be entitled to share in any excess such that Lessee's
share will be calculated as the product of (x) any excess of the amounts
described above and (y) one minus a fraction having as its numerator the
number of years of the Basic Term, together with any fractions thereof,
which have elapsed to the date of availability of any such excess funds
and a denominator equal to the total number of years of the Basic Term.
(ii) At the time of or prior to any replacement of any Item,
Lessee, at its own expense, will (A) furnish Lessor with a bill of sale
and an assignment of warranties with respect to the Replacement Item,
(B) cause a Lease Supplement substantially in the form of Exhibit B
hereto, subjecting such Replacement Item to this Lease, duly executed by
Lessee, to be delivered to Lessor for execution and, upon such
execution, to be filed for recordation in the same manner as the
original Lease Supplement, (C) so long as the Lien of the Security
Agreement shall not have been satisfied and discharged, cause a Security
Agreement Supplement substantially in the form of Exhibit B to the
Security Agreement for such Replacement Item, to be delivered to Lessor
and to the Security Trustee for execution and, upon such execution, to
be filed for recordation in the same manner as the original Security
Agreement Supplement, (D) so long as the Lien of the Security Agreement
shall not have been satisfied and discharged, cause a financing
statement or statements with respect to the Replacement Item to be filed
in such place or places as necessary in order to perfect the security
interest therein created by or pursuant to the Security Agreement and
precautionary Uniform Commercial Code financing statements naming Lessee
as debtor, the Owner Trustee as secured party and the Security Trustee
as assignee of the secured party to be filed in such public offices as
are deemed necessary or appropriate by the Security Trustee, the Owner
Trustee and the Owner Participant to perfect the right, title and
interest of the Security Trustee as assignee of the Owner Trustee in the
Equipment, (E) furnish Lessor with an opinion of Lessee's counsel, to
the effect that (x) the bill of sale referred to in clause (A) above
constitutes an effective instrument for the conveyance of title to the
Replacement Item to Lessor, (y) good and marketable title to the
Replacement Item has been delivered to Lessor, free and clear of all
Liens (other than Permitted Encumbrances referred to in clauses (i) and
(iv) of the definition of such term), and (z) all filings, recordings
and other action necessary or appropriate to perfect and protect the
Lessor's and the Security Trustee's respective interests in the
Replacement Item have been accomplished and (F) furnish Lessor with a
certificate of a qualified independent appraiser (or such other Person
as shall be mutually agreed to by Lessee and Lessor and, if so mutually
agreed to, may be the system chief mechanical officer of Lessee)
certifying that the Replacement Item has a fair market value, utility
and remaining useful life at least equal to the Item so replaced
(assuming such Item was in the condition required to be maintained by
the terms of this Lease) and setting forth a reasonable basis for such
conclusion in reasonable detail. For all purposes hereof, upon passage
of title thereto to Lessor, the Replacement Item shall be deemed part of
the property leased hereunder and the Replacement Item shall be deemed
an "Item" of Equipment as defined herein. Upon passage of title to any
Item of Equipment, whether in connection with the replacement of such
Item of Equipment or in connection with the payment of all sums required
to be paid pursuant to Section 15(b)(ii) hereof with respect to such
Item of Equipment, Lessor will transfer to Lessee, without recourse or
warranty (except as to Lessor's Liens), all Lessor's right, title and
interest in and to such Item, and upon such transfer, Lessor will
request in writing that the Security Trustee execute and deliver to
Lessee an appropriate instrument releasing such Item from the lien of
the Security Agreement and releasing the Assignment of Warranties with
respect to such Item from the assignment and pledge under the Security
Agreement. As to each separate replaced Item, so long as no Default or
Event of Default shall have occurred and be continuing, Lessee or its
designee shall be entitled to any awards, insurance or other proceeds
and damages received by Lessee, Lessor or the Security Trustee with
respect to such replaced Item after having replaced such Item.
(e) Application of Payments Not Relating to an Event of Loss. So
long as no Default or Event of Default shall have occurred and be
continuing, any payments (including, without limitation, insurance
proceeds) received at any time by Lessor or Lessee from any governmental
authority or other party with respect to any loss or damage to any Item
or Items of Equipment not constituting an Event of Loss will be applied
directly in payment of repairs or for replacement of property in
accordance with the provisions of Sections 10, 11 and 16 hereof, if not
already paid by Lessee, or if already paid by Lessee, shall be applied
to reimburse Lessee for such payment, and any balance remaining after
compliance with said Sections with respect to such loss or damage shall
be retained by Lessor, and after the occurrence and continuance of a
Default or an Event of Default such payments shall be paid to the
Security Trustee so long as the Lien of the Security Agreement shall not
have been discharged and thereafter shall be paid to the Lessor;
provided, however, that Lessee shall be entitled to share in any excess
such that Lessee's share will be calculated as the product of (x) any
excess of the amounts described above and (y) one minus a fraction
having as its numerator the number of years of the Basic Term, together
with any fractions thereof, which have elapsed to the date of
availability of any such excess funds and a denominator equal to the
total number of years of the Basic Term. Lessee's obligation to pay all
installments of Rent and other sums shall continue for the duration of
such requisitioning or taking unless and until the same shall become an
Event of Loss.
SECTION 16. INSURANCE.
As part of an insurance program including risk retention and
self-insurance, Lessee will, at all times prior to the return of the
Equipment to Lessor, at its own expense, cause to be carried and
maintained (i) property damage insurance in respect of the Equipment at
the time subject hereto and (ii) public liability insurance with respect
to third-party personal and property damage, and Lessee will continue to
carry such insurance in such amounts and for such risks and with such
insurance companies and subject to such self-insurance consistent with
prudent industry practice by Lessee, but in any event not less
comprehensive in amounts and against risks customarily insured against
by Lessee in respect of equipment owned or leased by it similar in type
to the Equipment.
Lessee may from time to time self-insure in accordance with its
then-current fleet wide practice by way of deductible, premium
adjustment or franchise provisions or otherwise in respect of the
insurance policies covering the risks required to be insured against
pursuant to this Section 16; provided, however, that during any period
when (a) any debt security issued by Lessee is rated lower than Baa3 by
Moody's Investors Service, Inc., lower than BBB- by Standard & Poor's
Corporation, or lower than the equivalent of either thereof by any other
nationally recognized rating agency, or (b) no such debt security is
outstanding or rated, the public liability insurance required hereunder
shall provide a minimum coverage of $50,000,000 and Lessee may not so
self-insure in aggregate policy year amounts in excess of $10,000,000.
If Lessee shall lose the right to self-insure without restriction under
this Section 16 and shall subsequently be able to self-insure without
restriction under this Section 16, Lessee shall give Lessor not less
than ninety (90) days' prior written notice of the commencement of any
self-insurance program permitted by this Section 16, which notice shall
include such details about such self-insurance as Lessor may reasonably
request. In addition, Lessee shall cooperate with all reasonable
requests of Lessor for such information and documentation about such
self-insurance program. All such self-insurance assumed by Lessee
pursuant to this Section 16 in respect of property damage and public
liability shall not be in amounts greater than that under any other
insurance coverage in respect of any railcar owned, operated or leased
by Lessee or any Affiliate of Lessee. Upon request by Lessor, Lessee
shall, at Lessor's sole cost and expense for premiums, arrange for and
place insurance coverage on the Equipment, assuming such insurance can
be obtained, for the benefit of Lessor, under then-existing policies and
with Lessee's then-existing insurance brokers with deductibles,
coverages and other terms as Lessor shall request.
Any such insurance policies shall: (i) name and insure the Lessor,
in its individual and trust capacities, Owner Participant, Security
Trustee and each holder of a Note as additional insureds under the
comprehensive public liability insurance and under the property
insurance, (ii) insure the Security Trustee or, in the event the Lien of
the Security Agreement has been discharged, the Lessor, as sole loss
payee under a standard loss payee clause satisfactory to the Security
Trustee or the Lessor, as the case may be, under the property insurance,
(iii) with respect to property insurance, provide insurer's waiver of
its right of subrogation, set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
liability against any additional insured except for claims as shall
arise from the willful misconduct or gross negligence of such additional
insured, (iv) provide that such insurance as to the interest of the
Lessor, Owner Participant, Security Trustee and each holder of a Note
shall not be invalidated by any action or inaction of Lessee or any
other Person (other than such claimant), regardless of any breach or
violation of any warranty, declaration or condition contained in such
policies by the Lessee or any other Person (other than such claimant),
(v) provide that all such insurance is primary without right of
contribution from any other insurance which might otherwise be
maintained by the Lessor or any assignee under Section 13(b) and shall
expressly provide that all provisions except the limits of liability,
shall operate in the same manner as if there were a separate policy
covering each such additional insured, (vi) provide therein or by
endorsement that thirty (30) days prior written notice of expiration,
cancellation or modification shall be given to the Lessor, Owner
Participant, Security Trustee and each holder of a Note and shall
provide that such cancellation, change or modification shall not be
effective during such 30 day period as to any of the Lessor, Owner
Participant, Security Trustee and each holder of a Note, and (vii)
provide that no additional insured shall have any obligation or
liability for premiums in connection with such insurance.
Lessee shall furnish the Lessor, Owner Participant, Security
Trustee and each holder of a Note with certificates or other
satisfactory evidence of maintenance of the insurance so required and
shall furnish binders or other formal confirmation reasonably acceptable
to the Lessor evidencing renewals thereof as soon as practicable and
certificates of insurance within twenty (20) days after such renewal is
effected or the expiration date of the original policy or policies, as
the case may be. All other terms of insurance shall be in accordance
with such insurance carried by Lessee or its Affiliates with respect to
other railcars in its fleet. Upon the execution and delivery of this
Lease, certificates of the insurance coverage required by this Section
16 shall be delivered by Lessee to Lessor. Lessee shall furnish written
notice to the Lessor, Owner Participant, Security Trustee and each
holder of a Note of any notice of cancellation, material modification,
termination or lapse for non-payment of premiums with respect to any of
the liability insurance provided pursuant to this Section 16 within 5
Business Days after the earlier of (i) the date on which Lessee receives
such notice from the insurance company providing such insurance, and
(ii) the date on which Lessee has actual knowledge of any such
cancellation, material modification, termination or lapse for
non-payment of premiums.
If the loss (or losses from a single incident or cause) covered by
said physical damage insurance is less than $1,000,000, the proceeds of
such insurance shall be payable to Lessee provided that no Default or
Event of Default shall have occurred and be continuing and after the
occurrence and continuance of a Default or an Event of Default such
proceeds shall be paid to the Security Trustee so long as the Lien of
the Security Agreement shall not have been discharged and thereafter
shall be paid to the Lessor. If such loss equals or exceeds $1,000,000,
the proceeds of such insurance shall be payable to the Security Trustee
or, in the event that the Lien of the Security Agreement has been
discharged, the Lessor provided that the Security Trustee or the Lessor,
as the case may be, shall, so long as no Default or Event of Default has
occurred or is continuing, remit all such insurance proceeds to Lessee
at such time as Lessee either (i) provides Lessor evidence that the
damage has been repaired and the Equipment has been restored to good
working order and condition or (ii) has paid to Lessor or Security
Trustee, as the case may be, the amounts otherwise due to Lessor on loss
of such Equipment pursuant to Section 15(b) hereof. Lessee's obligation
to maintain insurance with respect to any Item of Equipment shall
commence on the Acceptance Date of such Item of Equipment and shall run
until the earliest to occur of (x) the date on which such Item of
Equipment is sold, pursuant to Section 19 hereof, (y) the termination of
this Lease with respect to such Items of Equipment pursuant to and in
accordance with Section 27 hereof, or (z) the return of the Equipment to
the Lessor in accordance with Section 5 hereof. Lessee covenants that
it will not use or operate or permit the use or operation of any Item of
Equipment at any time when the insurance required by this Section 16 is
not in force with respect to such Item of Equipment and will not use the
Equipment in a manner which would violate the terms and provisions of
such insurance policies. If Lessee shall fail to cause the insurance
required under this Section 16 to be carried and maintained, Lessor may
provide such insurance and Lessee shall reimburse Lessor upon demand for
the cost thereof as Supplemental Rent hereunder.
Nothing in this Section 16 shall prohibit Lessor, Owner
Participant, Security Trustee or a holder of a Note from obtaining
insurance for its own account and any proceeds payable thereunder shall
be as provided in the insurance policy relating thereto; provided that
no such insurance may be obtained that would limit or otherwise
adversely affect the coverage of any insurance to be obtained or
maintained by Lessee pursuant to this Section 16.
SECTION 17. NO WARRANTIES.
LESSEE LEASES THE EQUIPMENT AS-IS, WHERE-IS WITH ALL FAULTS, AND IN
WHATEVER CONDITION IT MAY BE. NEITHER LESSOR, NOT BEING THE
MANUFACTURER OR VENDOR OF THE EQUIPMENT, NOR OWNER PARTICIPANT NOR
SECURITY TRUSTEE MAKES OR HAS MADE OR SHALL BE DEEMED TO MAKE OR HAVE
MADE, ANY REPRESENTATIONS OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS
TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN,
OPERATION OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, VALUE,
DURABILITY, SUITABILITY OR ITS FITNESS FOR ANY PARTICULAR USE OR
PURPOSE, LESSOR'S TITLE THERETO, LESSEE'S RIGHT TO THE QUIET ENJOYMENT
THEREOF, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT, OR
THE CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF
ANY PURCHASE ORDER OR ORDERS RELATING THERETO, AND EACH OF LESSOR, OWNER
PARTICIPANT AND SECURITY TRUSTEE HEREBY DISCLAIMS ANY SUCH
REPRESENTATION OR WARRANTY (WHICH DISCLAIMER LESSEE HEREBY
ACKNOWLEDGES). WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
NEITHER LESSOR NOR OWNER PARTICIPANT NOR SECURITY TRUSTEE SHALL BE
LIABLE OR RESPONSIBLE FOR ANY DEFECTS, EITHER PATENT OR LATENT (WHETHER
OR NOT DISCOVERABLE BY LESSEE), IN THE EQUIPMENT, OR FOR ANY
INTERRUPTION IN LESSEE'S BUSINESS CAUSED BY LESSEE'S INABILITY TO USE
THE EQUIPMENT FOR ANY REASON WHATSOEVER, ALL OF WHICH ITEMS OF EQUIPMENT
WERE SELECTED BY LESSEE ON THE BASIS OF ITS OWN JUDGMENT WITHOUT
RELIANCE UPON ANY STATEMENTS, REPRESENTATIONS OR WARRANTIES MADE BY
OWNER TRUSTEE, OWNER PARTICIPANT OR SECURITY TRUSTEE, IT BEING AGREED
THAT ALL SUCH RISKS, AS BETWEEN LESSOR, WHETHER IN ITS INDIVIDUAL
CAPACITY OR AS TRUSTEE, OWNER PARTICIPANT, SECURITY TRUSTEE AND THE
HOLDER OF ANY NOTE ON THE ONE HAND AND LESSEE ON THE OTHER HAND, ARE TO
BE BORNE BY LESSEE.
Neither Lessor, Owner Participant nor Security Trustee shall have
any responsibility or liability to Lessee or any other person with
respect to any of the following: (i) any liability, loss or damage
caused or alleged to be caused directly or indirectly by any Item of
Equipment or by any inadequacy thereof or deficiency or defect therein
or by any other circumstances in connection therewith; (ii) the use,
operation or performance of any Item of Equipment or any risks relating
thereto; (iii) any interruption of service, loss of business or
anticipated profits or consequential damages; or (iv) the delivery,
operation, servicing, maintenance, repair, improvement or replacement of
any Item of Equipment. Lessee's delivery of a Lease Supplement relating
to an Item of Equipment shall be conclusive evidence as between Lessee
and Lessor that such Item of Equipment is in all respects satisfactory
to Lessee, and Lessee will not assert any claim of any nature whatsoever
against Lessor, Owner Participant or Security Trustee based on any of
the foregoing matters.
So long as an Event of Default shall not have occurred and be
continuing, and so long as the Equipment shall be subject to this Lease
and Lessee shall be entitled to possession of the Equipment hereunder,
Lessor authorizes Lessee, at Lessee's expense, to assert for Lessor's
account, all rights and powers of Lessor under any manufacturer's,
vendor's or dealer's warranty on the Equipment or any part thereof;
provided, however, that Lessee shall indemnify, protect, save, defend
and hold harmless Lessor from and against any and all claims, and all
costs, expenses, damages, losses and liabilities incurred or suffered by
Lessor in connection therewith, as a result of, or incident to, any
action by Lessee pursuant to the foregoing authorization, and that
Lessee shall provide Lessor with prior written notice of any action
Lessee proposes to take on Lessor's behalf pursuant to the foregoing
authorization. Any payments made by any such vendor or manufacturer
pursuant to such warranty for any Item of Equipment shall be payable to
Lessee so long as no Default or Event of Default shall have occurred and
be continuing and after the occurrence and continuance of a Default or
an Event of Default shall be paid to the Security Trustee so long as the
Lien of the Security Agreement shall not have been discharged and
thereafter shall be paid to the Lessor. Such payment is to be used to
repair or replace damaged components in accordance with Section 11
hereof, if feasible, and if not used, such amount shall be paid promptly
to Lessor.
SECTION 18. EVENTS OF DEFAULT.
Any of the following events shall constitute an Event of Default:
(a) Lessee shall fail to make any payment of Interim Rent, Fixed
Rent, Stipulated Loss Value, Termination Value or Make-Whole Premium
within ten (10) Business Days after the same is due and payable or any
Supplemental Rent (other than Stipulated Loss Value or Termination Value
or Make-Whole Premium) within thirty (30) days after receipt of written
notice by Lessee; or
(b) Lessee shall fail to observe or perform any of the covenants
or agreements of Lessee set forth in the first and second paragraphs of
Section 16; or
(c) any representation or warranty made by Lessee herein, or in
any Lessee Agreement (other than the Tax Indemnification Agreement) or
any certificate furnished in connection herewith or therewith shall
prove to have been incorrect in any material respect when such was made;
or
(d) Lessee shall fail to perform or observe any covenant,
condition, or agreement to be performed or observed by it under any
Lessee Agreement, or in any agreement or certificate furnished in
connection herewith, and such failure shall continue unremedied for
thirty (30) days after receipt of written notice by Lessee specifying
such failure and demanding the same to be remedied; provided that, no
such default shall be deemed an Event of Default if (i) such default is
curable other than by the payment of money but cannot be cured within
such thirty (30) day period, (ii) such default does not impair in any
material respect the Lessor's interest in the Equipment or the security
interest of the Security Trustee created pursuant to the Security
Agreement, and (iii) Lessee is diligently pursuing such cure and effects
such cure within 180 days of the date of such default or before the last
day of the Lease Term, whichever shall occur first; or
(e) Lessee becomes insolvent (however such insolvency may be
evidenced) or admits insolvency or bankruptcy or its inability to pay
its debts as they mature, makes an assignment for the benefit of
creditors or applies for or consents to the appointment of a custodian,
trustee or receiver for Lessee, or for the major part of its property or
commences a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect; or
(f) a proceeding shall have been instituted in a court having
jurisdiction in the premises, seeking a decree or order (i) for relief
in respect of Lessee in an involuntary case under any applicable
bankruptcy, reorganization, insolvency or other similar law now or
hereafter in effect or (ii) for the appointment of a custodian,
receiver, trustee or similar official of Lessee or of its property, or
(iii) for the winding up or liquidation of the affairs of Lessee, and
either (I) any such proceeding shall remain undismissed or unstayed and
in effect for a period of 90 consecutive days or (II) such court shall
enter a decree or order granting the relief sought in such proceeding or
Lessee shall consent to such entry.
SECTION 19. REMEDIES UPON DEFAULT.
Upon the occurrence of any Event of Default, and at any time
thereafter so long as such Event of Default shall not have been
remedied, Lessor may, at its option, by written notice to Lessee,
exercise any one or more of the following remedies as Lessor in its sole
discretion shall elect (provided that this Lease shall automatically be
deemed to be declared in default without the necessity of such written
notice upon the occurrence of any Event of Default described in Section
18(e) or (f)):
(a) Lessor may terminate or cancel this Lease, without prejudice
to any other remedies of Lessor hereunder, with respect to all or any
Item of Equipment, and may enter the premises of Lessee to take
immediate possession of the Equipment and remove all or any Item of
Equipment by summary proceedings or otherwise, or may cause Lessee, at
Lessee's expense, to surrender and deliver possession of the Equipment
or such Item in the same manner as provided in Section 5 hereof;
(b) Lessor may hold, keep idle or lease to others the Equipment or
any Item of Equipment, as Lessor in its sole discretion may determine,
free and clear of any rights of Lessee and without any duty to account
to Lessee with respect to such action or inaction or for any proceeds
with respect thereto, except that Lessee's obligation to pay Fixed Rent
payable after Lessee shall have been deprived of possession pursuant to
this Section 19 shall be reduced by the net proceeds, if any, received
by Lessor from leasing the Equipment or such Item to any Person other
than Lessee after Lessee shall have been so deprived of possession;
(c) Lessor may sell any Item of Equipment at public or private
sale as Lessor may determine, free and clear of any rights of Lessee,
and Lessee shall pay to Lessor all unpaid Fixed Rent payable up to and
including the date on which such sale occurs (computed on a daily
equivalent basis for the period from and including the Rent Payment Date
immediately preceding the date of such sale on which Fixed Rent was paid
to and including the date of such sale), plus, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Fixed Rent for
such Item sold payable after the date on which such sale occurs), an
amount equal to the excess, if any, of (i) the Stipulated Loss Value of
such Item so sold, computed as of the Rent Payment Date coincident with
or immediately preceding the date of such sale, over (ii) the net
proceeds of such sale;
(d) Lessor, by written notice to Lessee, may demand that Lessee
pay to Lessor, and Lessee shall pay to Lessor all unpaid Fixed Rent
payable therefor up to and including the date of such notice plus, as
liquidated damages for loss of a bargain and not as a penalty (in lieu
of the Fixed Rent for any Item of Equipment payable after the date of
such notice and in lieu of the exercise by Lessor of its rights under
such subsection (c) above with respect to such Item of Equipment),
whichever of the following amounts Lessor, in its sole discretion, shall
specify in such notice: (i) an amount, with respect to such Item of
Equipment, equal to the excess, if any, of the Fixed Rent payable for
such Item of Equipment for the remainder of the then current Lease Term,
over the Fair Market Rental Value of such Item of Equipment for the
remainder of the then current Lease Term, after discounting such excess
to present worth as of the payment date specified in such notice at the
lower of (I) the Prime Rate and (II) the interest rate of the Notes; or
(ii) an amount, with respect to each Item of Equipment, equal to the
excess, if any, of the Stipulated Loss Value of such Item of Equipment
computed as of the Rent Payment Date coincident with or next following
the Event of Default, over the Fair Market Sales Value of the Equipment
as of the said date;
(e) Lessor may proceed by appropriate court action to enforce the
terms hereof or to recover damages for the breach hereof or to rescind
this Lease; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
No remedy referred to in this Section 19 is intended to be
exclusive, but each shall be cumulative and may be exercised
concurrently or consecutively and shall be in addition to any other
remedy referred to above or otherwise available to Lessor at law or in
equity, and the exercise in whole or in part by Lessor of any one or
more of such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all such other remedies. Lessee hereby
waives any mandatory requirements of law, now or hereafter in effect,
which might limit or modify the remedies herein provided, to the extent
that such waiver is effective under applicable law. Lessee hereby
waives any and all existing or future claims to any offset against the
Rent payments due hereunder, and agrees to make such payments regardless
of any offset or claim which may be asserted by Lessee or on its behalf.
Except as otherwise provided in this Lease, Lessee, to the full extent
effective under applicable law, hereby waives all statutory or other
legal requirements for any notice of any kind, any other requirements
with respect to the enforcement of Lessor's rights under this Lease and
any and all rights of redemption. No waiver by Lessor of any Event of
Default hereunder shall in any way be, or be construed to be, a waiver
of any future or subsequent Event of Default.
In addition, the Lessee shall be liable for any and all unpaid Rent
due hereunder before or during the exercise of any of the foregoing
remedies, including during the appeal or enforcement of any judgment,
and for all reasonable legal fees and other costs and expenses incurred
by reason of the occurrence of any Default or Event of Default or the
exercise of the Lessor's remedies with respect thereto, including
without limitation, the repayment in full of any costs and expenses
necessary to be expended in repairing or modifying any Item in order to
cause it to be in compliance with all maintenance and regulatory
standards imposed by this Lease.
Upon the date of termination of this Lease by Lessor pursuant to
Section 19(a), Lessee shall, without expense to the Lessor, promptly
redeliver the Items of Equipment or cause the Items of Equipment to be
redelivered, to the Lessor with all reasonable dispatch, in the same
manner and in the same condition as if such Items of Equipment were
being redelivered on the last day of the Lease Term in accordance with
the provisions of Section 5, and all obligations of the Lessee under
Section 5 shall apply to such redelivery. Lessor, without further
notice, may, but shall be under no obligation to, retake such Items of
Equipment wherever found, without the Lessor incurring any liability by
reason of such retaking, whether for the restoration of damage to
property caused by such retaking or otherwise.
Without in any way limiting the obligation of Lessee under the
foregoing provisions of this Section, Lessee hereby irrevocably appoints
Lessor as the agent and attorney of Lessee with full power and authority
to, upon the occurrence and continuance of an Event of Default
hereunder, exercise Lessor's rights under this Section, at any time
while Lessee is obligated to deliver possession of any Item of Equipment
to Lessor, to demand and take possession of such Item of Equipment in
the name and on behalf of Lessee from whomever shall then be in
possession of such Item.
SECTION 20. LESSOR'S RIGHT TO PERFORM FOR LESSEE.
If Lessee fails to perform or comply with any of its agreements or
covenants contained herein, Lessor may (but shall not be obligated to)
itself, after notice to Lessee, perform or comply with such agreement or
covenant or make advances to perform the same, and the amount of the
reasonable expenses of Lessor incurred in connection with the
performance of or compliance with such agreement or covenants, shall, if
not paid by Lessee to Lessor on demand, be payable as Supplemental Rent
hereunder.
SECTION 21. LATE CHARGES.
Lessee shall pay to Lessor as Supplemental Rent, to the extent
permitted by applicable law, interest on any amount of Interim Rent,
Fixed Rent and any Supplemental Rent which is not paid when due, for any
period for which the same is overdue (without regard to any grace
period) at a rate equal to the Late Rate.
SECTION 22. COVENANT OF QUIET ENJOYMENT.
During the Lease Term of any Item of Equipment hereunder and so
long as no Default or Event of Default has occurred and is continuing,
Lessor covenants and agrees that Lessee shall have the right to
uninterrupted use and enjoyment of such Item on the terms and conditions
provided herein without any interference from Lessor or Owner
Participant or those claiming through or against Lessor (other than
claims of mechanics, suppliers, materialmen and laborers for work or
services performed or materials furnished in connection with the
Equipment or any Item thereof which are claims by or through the
Lessor), including, but not limited to any assignee or lender or
mortgagee of Lessor or Owner Participant. For purposes of this Section
22, the delivery of notices of default or nonperformance delivered under
and pursuant to Section 18 shall not be deemed to constitute a violation
of this Section 22.
SECTION 23. OTHER DOCUMENTS.
Except as otherwise provided herein, Lessee will, at Lessee's
expense, execute and deliver to Lessor such other documents as may be
reasonably required by Lessor, including, without limitation, such
amendments to this Lease, and Uniform Commercial Code financing
statements and continuation statements and any filings required by the
ICC or the AAR.
SECTION 24. NOTICES AND REQUESTS.
Unless otherwise expressly specified or permitted by the terms
hereof, all communications and notices provided for herein shall be in
writing or by a telecommunications device capable of creating a written
record, and any such notice shall become effective upon receipt by the
addressee or, if such receipt is rejected, upon rejection, at its
address set forth below or, in the case of any such party hereto, at
such other address as such party may from time to time designate by
written notice to the other parties hereto:
If to Lessee: Kansas City Power & Light Company
1201 Walnut Street
Kansas City, Missouri 64106-2124
Attention: Treasurer
Fax No.: (816) 556-2992
Confirmation No.: (816) 556-2059
If to Lessor: Shawmut Bank Connecticut, National Association,
as Trustee
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Fax No.: (203) 240-7920
All notices required to be delivered under this Lease to Lessor
shall, so long as the Lien of the Security Agreement shall not have been
discharged, also be delivered to the Security Trustee.
SECTION 25. LESSEE'S RENEWAL AND PURCHASE OPTIONS.
(a) Lessee's Renewal Option. If no Default or Event of Default
shall have occurred and be continuing, and this Lease shall not have
been earlier terminated, Lessee shall be entitled, at its option upon
written notice to Lessor, as hereinafter provided, to renew this Lease
in accordance with the following terms:
(i) commencing at the end of the Basic Term, Lessee shall
have the option to renew this Lease for a period of not less than one
year nor more than four years and six months (1) with respect to all of
the Items of Equipment then subject to this Lease and the Fixed Rent
payable during the first Renewal Term for any Item of Equipment shall be
at a rate equal to 50% of the average amount of each installment of
Fixed Rent payable in respect of such Item of Equipment during the Basic
Term ("Fixed Rate Renewal Rent Rate") or (2) with respect to all, or if
less than all not less than 25% nor more than 75%, of the Items of
Equipment then subject to this Lease, pro rata among the Items of Type A
Equipment and the Items of Type B Equipment then subject to this Lease,
chosen on a random basis within each type of Equipment, and the Fixed
Rent payable during the first Renewal Term for any Item of Equipment
shall be at a rate equal to such Item of Equipment's Fair Market Rental
Value ("Fair Market Renewal Rent Rate");
(ii) commencing at the end of the first Renewal Term, Lessee
shall have the option to renew this Lease for a period of at least one
year, as selected by Lessee, but in no event shall (1) such Renewal Term
when added to the Interim Term, the Basic Term and the first Renewal
Term exceed 80% of the economic life of such Item(s) of Equipment and
(2) the expected residual value of such Equipment at the end of such
second Renewal Term be an amount less than 20% of the Purchase Price of
such Equipment (without regard to inflation or deflation occurring or
expected to occur from the Acceptance Date until the end of the second
Renewal Term) determined in each case in the manner described in Section
25(c) hereof, provided that (A) if the Lessee shall have elected the
Fixed Rate Renewal Rent Rate during the first Renewal Term, the Lessee
may elect to renew this Lease (x) with respect to all of the Items of
Equipment then subject to this Lease and that the Fixed Rent payable
during the second Renewal Term for any Item of Equipment shall be at a
rate equal to the Fixed Rate Renewal Rent Rate or (y) with respect to
all, or if less than all not less than 25% nor more than 75%, of the
Items of Equipment then subject to this Lease, pro rata among the Items
of Type A Equipment and the Items of Type B Equipment then subject to
this Lease, chosen on a random basis within each type of Equipment, and
the Fixed Rent payable during the second Renewal Term for any Item of
Equipment shall be at a rate equal to such Item of Equipment's Fair
Market Rental Value or (B) if the Lessee shall have elected the Fair
Market Renewal Rent Rate during the first Renewal Term, the Lessee may
elect to renew this Lease with respect to all, or if less than all not
less than 25% nor more than 75%, of the Items of Equipment subject to
this Lease at the end of the Basic Term, pro rata among the Items of
Type A Equipment and the Items of Type B Equipment then subject to this
Lease, chosen on a random basis within each type of Equipment, and the
Fixed Rent payable during the second Renewal Term for any Item of
Equipment shall be at a rate equal to such Item of Equipment's Fair
Market Rental Value; provided that if the Lessee shall have elected to
renew this Lease pursuant to this clause (B) with respect to less than
all of the Items of Equipment then subject to this Lease, the maximum
amount of Items of Equipment that the Lessee may renew this Lease with
respect to shall not exceed the amount of Items of Equipment subject to
this Lease at the end of the first Renewal Term minus 25% of the amount
of Items of Equipment subject to the Lease at the end of the Basic Term;
and
(iii) commencing at the expiration of the second Renewal
Term and at the expiration of each Renewal Term thereafter, Lessee shall
have the option to renew this Lease with respect to all, or if less than
all not less than 25% nor more than 75%, of the Items of Equipment
subject to the Lease at the end of the Basic Term, pro rata among the
Items of Type A Equipment and the Items of Type B Equipment then subject
to this Lease, chosen on a random basis within each type of Equipment,
for periods of integral multiples of six months (provided no such
Renewal Term be less than one year), but in no event shall (1) such
Renewal Term when added to the Interim Term, the Basic Term and all
preceding Renewal Terms exceed 80% of the economic life of such Item(s)
of Equipment and (2) the expected residual value of such Equipment at
the end of such Renewal Term be an amount less than 20% of the Purchase
Price of such Equipment (without regard to inflation or deflation
occurring or expected to occur from the Acceptance Date until the end of
such Renewal Term) determined in each case in the manner described in
Section 25(c) hereof, and the Fixed Rent payable during any such Renewal
Term for any Item of Equipment shall be at a rate equal to the Fair
Market Rental Value of such Item of Equipment determined in accordance
with Section 25(c) hereof; provided that if the Lessee shall have
elected to renew this Lease pursuant to this clause (iii) with respect
to less than all of the Items of Equipment then subject to this Lease,
the maximum amount of Items of Equipment that the Lessee may renew this
Lease with respect to shall not exceed the amount of Items of Equipment
subject to this Lease at the end of the second Renewal Term or any such
Renewal Term thereafter minus 25% of the amount of Items of Equipment
subject to the Lease at the end of the Basic Term.
Except as stated above, all of the provisions of this Lease (other than
Section 27) shall be applicable during each Renewal Term for each Item
of Equipment. Stipulated Loss Values and Termination Values for each
Item of Equipment on any Rent Payment Date during any Renewal Term shall
be an amount equal to Stipulated Loss Value or the Termination Value, as
the case may be, for such Item of Equipment determined as of the last
Rent Payment Date of the Basic Term. If Lessee will exercise said
renewal option with respect to any of said Renewal Terms, Lessee shall
give irrevocable written notice to Lessor to such effect at least two
hundred and forty (240) days prior to the expiration of the Basic Term
and any Renewal Term.
(b) Lessee's Purchase Option. If (i) no Default or Event of
Default shall have occurred and be continuing, and (ii) this Lease shall
not have been earlier terminated, Lessee shall be entitled, at its
option, upon irrevocable written notice to Lessor as hereinafter
provided, to purchase all, or if less than all not less than 25% nor
more than 75%, of the Items of Equipment then subject to this Lease, pro
rata among the Items of Type A Equipment and the Items of Type B
Equipment then subject to this Lease, chosen on a random basis within
each type of Equipment, on the date immediately following the date of
the expiration of the Basic Term of each such Item of Equipment, for an
amount, with respect to each such Item of Equipment, payable in
immediately available funds, equal to the lesser of (i) the Fair Market
Sales Value thereof determined in accordance with Section 25(c) hereof
or (ii) 50.39% of the Purchase Price of such Item(s) of Equipment (the
"FPPO"), plus any applicable sales, use, transfer, documentary,
recording excise or other taxes imposed as a result of such sale (other
than net income taxes attributable to such sale). In addition, Lessee
shall have the option to purchase at the end of any Renewal Term those
Items of Equipment which the Lessee has not elected to renew the Lease
for the Fair Market Sales Value of such Item(s) of Equipment.
If Lessee intends to exercise said purchase options, Lessee shall
give irrevocable written notice to Lessor to such effect at least two
hundred and forty (240) days prior to the expiration of the Basic Term
or Renewal Term of such Item(s) of Equipment. In the event that Lessee
exercises its purchase options under this Section 25(b), Lessor shall
execute and deliver to Lessee a bill of sale, in which Lessor transfers
the Item to Lessee "as is" and represents only that it is transferring
whatever title was transferred to it, free and clear of all liens in
favor of any person claiming by, through or under Lessor, in a form
reasonably acceptable to Lessee, upon payment of the sale price by
Lessee.
(c) Determination of Fair Market Sales Value and Fair Market
Rental Value; Appraisal Procedure. If Lessee intends to exercise its
renewal option, as provided in Section 25(a) hereof, or intends to
exercise its purchase option, as provided in Section 25(b) hereof, then
at least 260 days prior to the expiration of the Basic Term or any
Renewal Term, Lessee shall select an appraiser mutually acceptable to
Lessor for the purpose of determining the Fair Market Rental Value or
Fair Market Sales Value, as the case may be, of each such Item of
Equipment as of the end of the Basic Term thereof, or, if this Lease has
been renewed pursuant to Section 25(a) hereof, then as of the end of the
then current Renewal Term thereof, and in the event this Lease is being
renewed pursuant to Section 25(a)(ii), the economic life and residual
value of such Equipment as set forth in Section 25(a). For the purposes
of determining the economic life and the residual value of the Equipment
pursuant to Section 25(a)(ii) hereof, all non-severable improvements
made by the Lessee, other than improvements required by law or required
to maintain the Equipment in the condition required by this Lease, shall
be ignored.
In the event Lessor and Lessee fail to agree upon a qualified
independent appraiser within 30 days of Lessee's notice of intent to
exercise either its renewal or purchase option, each party shall appoint
an independent appraiser (an "Independent Appraiser") within 15 Business
Days after such notice is given, and the two appraisers so appointed
shall within 30 Business Days after such notice is given appoint a third
independent appraiser (the "Consensus Appraiser") who shall determine
within 90 days the Fair Market Rental Value or Gwithin 30 days after
such notice is given, either party may request the American Arbitration
Association to determine the appraisal values and amounts, and both
parties shall be bound by any such determination.
Any appraiser or appraisers appointed pursuant to the foregoing
procedure shall be instructed to determine the Fair Market Sales Value
and/or the Fair Market Rental Value, as the case may be, and the
economic life or residual value, if applicable, of such Item(s) of
Equipment within 90 days after the appointment of such appraiser(s). If
the parties shall have appointed either a single appraiser or a
Consensus Appraiser, such appraiser's determination of such values and
economic life shall be final. The fees and expenses of any appraiser
appointed under this Section 25(c) shall be paid for as follows: (i) if
the parties shall have elected a single appraiser, the appraisal fees
and expenses incurred in connection with such appraiser shall be paid by
Lessee, (ii) if Lessee and Lessor each select an Independent Appraiser,
each party shall pay the respective fees and expenses incurred in
connection with such Independent Appraiser selected by it, and (iii) the
fees and expenses incurred in connection with any Consensus Appraiser
and in connection with any American Arbitration Association
determination shall be shared equally by Lessee and Lessor. The
above-described procedure shall be from time to time referred to as the
"Appraisal Procedure".
SECTION 26. FINANCIAL INFORMATION; REPORTS.
(a) Lessee agrees to furnish Lessor, the Owner Participant, the
Security Trustee and each holder of a Note (1) within 90 days after the
close of its fiscal year, an annual report of Lessee, consisting of its
audited financial statements including balance sheets as of the end of
such fiscal year, statements of income and cash flows for the year then
ended with all notes thereto in each case certified as true and correct
by the auditor thereof; (2) within 45 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 comparative
statements of income and cash flows for such quarter; (3) promptly upon
Lessee obtaining knowledge that there has occurred and is continuing any
condition, event, act or omission which constitutes a Default or an
Event of Default or a Lien (other than Permitted Encumbrances) on the
Equipment, notice of such condition, event, act or omission and the
steps which Lessee has taken or is taking to remedy the same; and (4)
such additional information concerning the location, condition, use and
operation of the Equipment and financial condition and operations of
Lessee as Lessor, Security Trustee or such holder may from time to time
reasonably request.
(b) Lessee shall permit any person designated by Lessor to visit
and inspect the Equipment and the records (and to make copies thereof)
maintained in connection therewith, all at such reasonable times as
Lessor may reasonably request.
SECTION 27. VOLUNTARY TERMINATION FOR OBSOLESCENCE.
(a) Right of Termination. So long as no Default or Event of
Default shall have occurred and be continuing hereunder, Lessee shall
have the right, by giving at least one hundred twenty (120) days' prior
written notice to Lessor, at its option, to terminate this Lease on or
after March 31, 2002 with respect to all Items of Equipment then leased
hereunder if, in Lessee's good faith opinion as evidenced by a
certificate of the President, any Vice President or the Chairman of the
Board of the Lessee, such Items shall have become no longer useful in,
or surplus to, Lessee in its business, such termination to be effective
on the Rent Payment Date specified in such notice (for purposes of this
Section 27, called the "termination date"), upon payment to Lessor of
the sum of (i) the installment of Fixed Rent due on such termination
date, (ii) any other Rent or other sums due and owing on or in respect
of the Equipment, (iii) an amount equal to the Termination Value of such
Equipment as of the termination date, and (iv) an amount equal to the
Make Whole Premium then due and payable by Lessor on the Notes under and
pursuant to Section 6.2(a) of the Security Agreement. If Lessee shall
fail to pay all amounts due under and pursuant to this Section 27(a),
this Lease shall continue in full force and effect and it shall be
deemed that Lessee has rescinded its notice of termination. Lessee
shall not be entitled to give notice of its intention to terminate this
Lease pursuant to this Section 27 and/or Section 29 hereof more than one
time during any 12 consecutive month period during the Lease Term and a
maximum of three times during the Lease Term. During the period from
the giving of such notice until the termination date, Lessee, as
non-exclusive agent for Lessor, shall use its reasonable efforts to
secure the highest obtainable bids for the purchase of such Items and in
the event it receives any bid during such period, Lessee shall promptly
certify to Lessor in writing the amount and terms of such bid and the
name and address of the party submitting such bid. Lessor or the Owner
Participant may obtain bids, but shall be under no duty to solicit bids,
inquire into the efforts of Lessee to obtain bids or otherwise take any
action in connection with arranging such sale. Neither Lessee nor any
person, firm or corporation, affiliated with Lessee, may purchase any
such Item(s) of Equipment.
(b) Sale of Equipment and Termination of Lease. Upon, but not
until, payment by the Lessee of all sums required to be paid pursuant to
Section 27(a), including without limitation the Make Whole Premium
payable thereunder, Lessor shall sell the Equipment for cash to the
highest bidder certified by Lessee or obtained by Lessor or the Owner
Participant and the net proceeds realized at such sale (after deduction
of all reasonable out-of-pocket costs incurred by the Lessor or the
Owner Participant) in an amount equal to the sum of the amounts
specified in clauses (iii) and (iv) of the first sentence of the first
paragraph of this Section 27 shall be retained by Lessee and any
proceeds in excess of such amounts specified in such clauses shall be
retained by Lessor. On the termination date, upon payment in full of
the sums required by this Section 27, Lessee shall request the Security
Trustee, so long as the Lien of this Security Agreement remains
undischarged, to execute a release of such Item(s) from the Lien of the
Security Agreement and Lessee shall deliver possession of such Item(s)
to the bidder, if any, which shall have submitted the highest bid during
such period, and Lessor shall, without recourse or warranty,
simultaneously therewith sell such Item(s) on an "as-is", "where-is"
basis for cash to such bidder. Upon, but not until, disposition of the
Equipment and payment of the sums required by this Section 27, including
without limitation the Make Whole Premium payable thereunder, this Lease
shall terminate with respect to the Equipment. In disposing of the
Equipment pursuant to this Section, Lessee shall take such action as
Lessor or the Owner Participant shall reasonably request to terminate
any contingent liability which Lessor or the Owner Participant might
have arising after such disposition.
(c) Right of Lessor to Retain Terminated Items. Notwithstanding
the foregoing provisions of this Section 27(a) and (b), Lessor may,
within 60 days after Lessee's certification under this Section 27 of a
bid or, if Lessee does not certify any such bids, at any time up to 30
days prior to the termination date, notify the Lessee in writing of its
preemptive election to take possession of such Items of Equipment on the
termination date; provided that Lessor may not so elect unless it shall
simultaneously (i) agree to provide the funds necessary to pay in full
the Notes on or before the termination date, and (ii) provide to Lessee
evidence to Lessee's satisfaction that funds have been set aside for the
payment provided in clause (i) above. Lessee shall pay the premium, if
any, on the Notes required to be paid by the Lessor pursuant to Section
6.2(a) of the Security Agreement. If Lessor has not, after making its
preemptive election referred to above, caused the Notes (including,
without limitation, premium, if any) to be paid on or before the
termination date and thereby caused this Lease to terminate, the Lessee
shall on the termination date pay the amounts required to be paid by the
first sentence of Section 27(a) hereof, and thereupon this Lease shall
terminate with respect to such Items of Equipment. Upon receipt of
such notice (and, in the case of the Lessee, evidence that the
conditions of the proviso to the second preceding sentence have been
satisfied), Lessee and Lessor shall cease efforts to obtain bids as
provided above and shall reject all other bids theretofore or thereafter
received. If the Lessor shall have made such election, on the
termination date, Lessee shall deliver the Equipment to Lessor in
accordance with Section 5(a) hereof and shall pay all Fixed Rent due on
the termination date with respect to the Equipment, whereupon the
obligation of Lessee to pay Fixed Rent due and payable after the
termination date with respect to such Equipment shall cease and from and
after the termination date such Equipment shall no longer be subject to
this Lease. It shall be an absolute condition precedent to Lessee's
right to terminate this Lease and Lessor's right to make its preemptive
election under this Section 27(c) that on the termination date the
Lessor shall have received and paid to the Security Trustee funds of the
type specified in this Section 27 in an amount sufficient to enable it
to pay in full the unpaid principal amount of all Notes which may be
outstanding on such date with respect to the terminated Equipment,
together with accrued interest thereon to such date and premium, if any,
pursuant to Section 6.2(a) of the Security Agreement, plus all other
sums then due and payable by the Lessee or the Lessor on such date under
the Operative Agreements. If Lessee or the Lessor, as the case may be,
shall fail to pay all amounts due and owing under the provisions of this
Section 27(c), this Lease shall continue in full force and effect and it
shall be deemed that Lessee has rescinded its notice of termination.
SECTION 28. CONSOLIDATION, MERGER AND SALE OF ALL ASSETS.
Lessee will not merge or consolidate with any other corporation or
sell, lease or otherwise dispose of all or substantially all of its
assets to any person, firm or corporation unless (a) immediately after
such transaction, no Default or Event of Default shall have occurred and
be continuing, (b) such consolidation, merger or sale will not
materially and adversely affect the ability of the surviving or
acquiring corporation to perform its obligations under the Operative
Agreements and (c) the corporation which is to be the surviving or
acquiring corporation in such transaction (i) shall be a corporation
organized and existing under the laws of the United States of America or
a state thereof, and (ii) shall, if the surviving or acquiring
corporation is other than Lessee, by agreement in writing, satisfactory
to the Participants, expressly assume the due and punctual payment of
the Rent and other sums due and to become due under this Lease, the
Participation Agreement and the Tax Indemnification Agreement and the
Participants shall have received an opinion of counsel reasonably
satisfactory to the Participants, in form and substance reasonably
satisfactory to them, to the effect that the instrument of assumption
has been duly authorized, executed and delivered and constitutes the
legal, valid and binding contract and agreement of the surviving
corporation enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
SECTION 29. SPECIAL TERMINATION.
(a) Right of Termination. So long as no Default or Event of
Default shall have occurred and be continuing hereunder, if any event
shall occur that results in an increase of 15% or more in the average
annual Rent that is payable by Lessee hereunder (as evidenced by a
certificate of the President, any Vice President or the Chairman of the
Board of the Lessee), Lessee shall have the right on at least one
hundred twenty (120) days' prior written notice to Lessor, to terminate
this Lease with respect to all Items of Equipment then leased hereunder,
such termination to be effective on the Rent Payment Date specified in
such notice (for purposes of this Section 29, called the "special
termination date"), upon payment to Lessor of the sum of (i) the
installment of Fixed Rent due on such special termination date, (ii) any
other Rent or other sums due and owing on or in respect of the
Equipment, (iii) an amount equal to the greater of the Termination Value
and the Fair Market Sales Value (as determined in accordance with
Section 25(c) hereof) of such Equipment as of the special termination
date, and (iv) an amount equal to the Make Whole Premium then due and
payable by Lessor on the Notes under and pursuant to Section 6.2(b) of
the Security Agreement. If Lessee shall fail to pay all amounts due
under and pursuant to this Section 29(a), this Lease shall continue in
full force and effect and it shall be deemed that Lessee has rescinded
its notice of termination. Lessee shall not be entitled to give notice
of its intention to terminate this Lease pursuant to this Section 29
and/or Section 27 hereof more than one time during any 12 consecutive
month period during the Lease Term and a maximum of three times during
the Lease Term. During the period from the giving of such notice until
the special termination date, Lessee, as non-exclusive agent for Lessor,
shall use its reasonable efforts to secure the highest obtainable bids
for the purchase of such Items and in the event it receives any bid
during such period, Lessee shall promptly certify to Lessor in writing
the amount and terms of such bid and the name and address of the party
submitting such bid. Lessor or the Owner Participant may obtain bids,
but shall be under no duty to solicit bids, inquire into the efforts of
Lessee to obtain bids or otherwise take any action in connection with
arranging such sale. Neither Lessee nor any person, firm or
corporation, affiliated with Lessee, may purchase any such Item(s) of
Equipment.
(b) Sale of Equipment and Termination of Lease. Upon, but not
until, payment by the Lessee of all sums required to be paid pursuant to
Section 29(a), including without limitation the Make Whole Premium
payable thereunder, Lessor shall sell the Equipment for cash to the
highest bidder certified by Lessee or obtained by Lessor or the Owner
Participant and the net proceeds realized at such sale (after deduction
of all reasonable out-of-pocket costs incurred by the Lessor or the
Owner Participant) in an amount equal to the sum of the amounts
specified in clauses (iii) and (iv) of the first sentence of the first
paragraph of this Section 29 shall be retained by Lessee and any
proceeds in excess of such amounts specified in such clauses shall be
retained by Lessor. On the special termination date, upon payment in
full of the sums required by this Section 29, Lessee shall request the
Security Trustee, so long as the Lien of this Security Agreement remains
undischarged, to execute a release of such Item(s) from the Lien of the
Security Agreement and Lessee shall deliver possession of such Item(s)
to the bidder, if any, which shall have submitted the highest bid during
such period, and Lessor shall, without recourse or warranty,
simultaneously therewith sell such Item(s) on an "as-is", "where-is"
basis for cash to such bidder. Upon, but not until, disposition of the
Equipment and payment of the sums required by this Section 29, including
without limitation the Make Whole Premium payable thereunder, this Lease
shall terminate with respect to the Equipment. In disposing of the
Equipment pursuant to this Section, Lessee shall take such action as
Lessor or the Owner Participant shall reasonably request to terminate
any contingent liability which Lessor or the Owner Participant might
have arising after such disposition.
(c) Right of Lessor to Retain Terminated Items. Notwithstanding
the foregoing provisions of this Section 29(a) and (b), Lessor may,
within 60 days after Lessee's certification under this Section 29 of a
bid or, if Lessee does not certify any such bids, at any time up to 30
days prior to the special termination date, notify the Lessee in writing
of its preemptive election to take possession of such Items of Equipment
on the special termination date; provided that Lessor may not so elect
unless it shall simultaneously (i) agree to provide the funds necessary
to pay in full the Notes on or before the special termination date, and
(ii) provide to Lessee evidence to Lessee's satisfaction that funds have
been set aside for the payment provided in clause (i) above. Lessee
shall pay the premium, if any, on the Notes required to be paid by the
Lessor pursuant to Section 6.2(b) of the Security Agreement. If Lessor
has not, after making its preemptive election referred to above, caused
the Notes (including, without limitation, premium, if any) to be paid on
or before the special termination date and thereby caused this Lease to
terminate, the Lessee shall on the special termination date pay the
amounts required to be paid by the first sentence of Section 29(a)
hereof, and thereupon this Lease shall terminate with respect to such
Items of Equipment. Upon receipt of such notice (and, in the case of
the Lessee, evidence that the conditions of the proviso to the second
preceding sentence have been satisfied), Lessee and Lessor shall cease
efforts to obtain bids as provided above and shall reject all other bids
theretofore or thereafter received. If the Lessor shall have made such
election, on the special termination date, Lessee shall deliver the
Equipment to Lessor in accordance with Section 5(a) hereof and shall pay
all Fixed Rent due on the special termination date with respect to the
Equipment, whereupon the obligation of Lessee to pay Fixed Rent due and
payable after the special termination date with respect to such
Equipment shall cease and from and after the special termination date
such Equipment shall no longer be subject to this Lease. It shall be an
absolute condition precedent to Lessee's right to terminate this Lease
and Lessor's right to make its preemptive election under this Section
29(c) that on the special termination date the Lessor shall have
received and paid to the Security Trustee funds of the type specified in
this Section 29 in an amount sufficient to enable it to pay in full the
unpaid principal amount of all Notes which may be outstanding on such
date with respect to the terminated Equipment, together with accrued
interest thereon to such date and premium, if any, pursuant to Section
6.2(b) of the Security Agreement, plus all other sums then due and
payable by the Lessee or the Lessor on such date under the Operative
Agreements. If Lessee or the Lessor, as the case may be, shall fail to
pay all amounts due and owing under the provisions of this Section
29(c), this Lease shall continue in full force and effect and it shall
be deemed that Lessee has rescinded its notice of termination.
SECTION 30. MISCELLANEOUS.
Each party agrees that the other party shall not by act, delay,
omission or otherwise be deemed to have waived any of its rights or
remedies hereunder unless such waiver is given in writing. A waiver on
one occasion shall not be construed to be a waiver on any other
occasion. The captions in this Lease are for convenience of reference
only and shall not be deemed to affect the meaning or construction of
any of the provisions hereof. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating or diminishing Lessor's or
Lessee's rights under the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. No
term or provision of this Lease may be amended, altered, waived,
discharged or terminated orally, but may be amended, altered, waived,
discharged or terminated only by an instrument in writing signed by a
duly authorized officer of the party against which the enforcement of
the amendment, alteration, waiver, discharge or termination is sought.
All of the covenants, conditions and obligations contained in this Lease
shall be binding upon and shall inure to the benefit of the respective
successors and assigns of Lessor and Lessee. This Lease, each Lease
Supplement and each related instrument, document, agreement and
certificate, collectively constitute the entire agreement of Lessor and
Lessee with respect to the acquisition and leasing of the Equipment, and
cancel and supersede any and all prior oral or written understandings
with respect thereto. This Lease shall in all respects be governed by,
and construed in accordance with, the laws of the State of Missouri,
including all matters of construction, validity and performance.
SECTION 31. THIRD-PARTY BENEFICIARIES.
Nothing in this Lease shall be deemed to create any right in any
person not a party hereto (other than Owner Participant, Security
Trustee and each holder from time to time of a Note and the permitted
successors and assigns of any such person and any party hereto) and this
instrument shall not be construed in any respect to be a contract in
whole or in part for the benefit of a third party except as aforesaid.
SECTION 32. LIABILITY OF LESSOR LIMITED.
It is expressly agreed, anything herein to the contrary
notwithstanding, that each and all of the representations, warranties,
covenants, undertakings and agreements herein made on the part of Lessor
are made and intended not as personal representations, warranties,
covenants, undertakings and agreements by Shawmut Bank Connecticut,
National Association or for the purpose or with the intention of binding
Shawmut Bank Connecticut, National Association personally, but are made
and intended for the purpose of binding only the Trust Estate, and this
Lease is executed and delivered by Shawmut Bank Connecticut, National
Association not in its own right but solely in the exercise of the
powers expressly conferred upon it as trustee under the Trust Agreement;
and no personal liability or personal responsibility in the case of
willful misconduct or gross negligence (other than with respect to the
handling of funds, in which case Lessor shall be accountable for its
failure to exercise ordinary care), is assumed by or shall at any time
be asserted or enforceable against Shawmut Bank Connecticut, National
Association on account of this Lease or on account of any
representation, warranty, covenant, undertaking or agreement of Lessor,
either expressed or implied herein, all such personal liability, if any,
being expressly waived and released by Lessee and by all persons
claiming by, through or under it, and that all recourse against Shawmut
Bank Connecticut, National Association under this Lease shall be limited
to the Trust Estate.
SECTION 33. EXECUTION.
This Lease may be executed in any number of counterparts and by the
different parties hereto on separate counterparts (or upon separate
signature pages bound together into one or more counterparts), each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
To the extent, if any, that this Lease or any Lease Supplement
constitutes chattel paper or other collateral within the meaning of the
Uniform Commercial Code (or other law respecting security interests) as
in effect in any applicable jurisdiction, no security interest in
Lessor's interest under this Lease or any such Lease Supplement may be
created through the transfer or possession of any counterpart of this
Lease or such Supplement other than the original executed Counterpart
No. 1 hereof or thereof which shall be identified on the cover, the
receipt of which is acknowledged by the Security Trustee.
IN WITNESS WHEREOF, Lessor and Lessee have caused this instrument
to be executed, all as of the day and year first above written.
KANSAS CITY POWER & LIGHT COMPANY,
a Missouri corporation
By /s/ B. J. Beaudoin
Its Senior Vice President
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not individually
but solely as Owner Trustee
By /s/ Pablo de la Canal
Its Corporate Trust Officer
STATE OF MISSOURI )
) SS.:
COUNTY OF JACKSON )
On this, the 15th day of April, 1994, before me, a Notary Public
in and for said County and State, personally appeared B. J. Beaudoin,
the Senior Vice President of KANSAS CITY POWER & LIGHT COMPANY, who
acknowledged himself to be a duly authorized officer of KANSAS CITY
POWER & LIGHT COMPANY, and that, as such officer, being authorized to do
so, he executed the foregoing instrument for the purposes therein
contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
on the date above mentioned.
/s/ Janee C. Rosenthal
Name: Janee C. Rosenthal
Notary Public
My Commission Expires: 2/25/95
Residing in Clay County, Missouri
STATE OF CONNECTICUT )
) SS.:
COUNTY OF HARTFORD )
On this, the ______ day of April, 1994, before me, a Notary Public
in and for said County and State, personally appeared Pablo de la Canal,
the Corporate Trust Officer of SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, who acknowledged himself to be a duly authorized officer of
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, and that, as such
officer, being authorized to do so, he executed the foregoing instrument
for the purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
on the date above mentioned.
/s/ Cynthia L. Essay
Name: Cynthia L. Essay
Notary Public
My Commission Expires: Feb. 28, 1998
Residing in Colchester, CT
DEFINITIONS
Re: KANSAS CITY POWER & LIGHT COMPANY
ANNEX 1
TABLE OF CONTENTS
(Not a part of the Agreement)
HEADING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE
GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . .1
DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
AAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Acceptance Date. . . . . . . . . . . . . . . . . . . . . . . . .1
Acquisition Agreements . . . . . . . . . . . . . . . . . . . . .1
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
After-Tax Basis. . . . . . . . . . . . . . . . . . . . . . . . .1
Appraisal Procedure. . . . . . . . . . . . . . . . . . . . . . .2
Assigned Agreement . . . . . . . . . . . . . . . . . . . . . . .2
Bankruptcy Code. . . . . . . . . . . . . . . . . . . . . . . . .2
Basic Term . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Basic Term Commencement Date . . . . . . . . . . . . . . . . . .2
Beneficial Interest. . . . . . . . . . . . . . . . . . . . . . .2
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . .2
Closing Dates. . . . . . . . . . . . . . . . . . . . . . . . . .2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Debtor . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Default under the Lease. . . . . . . . . . . . . . . . . . . . .2
Default under the Security Agreement . . . . . . . . . . . . . .2
Employee benefit plan. . . . . . . . . . . . . . . . . . . . . .2
Enforcement Date . . . . . . . . . . . . . . . . . . . . . . . .2
Enforcement Notice . . . . . . . . . . . . . . . . . . . . . . .3
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Equipment Cost . . . . . . . . . . . . . . . . . . . . . . . . .3
Equipment Lease. . . . . . . . . . . . . . . . . . . . . . . . .3
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Event of Default under the Lease . . . . . . . . . . . . . . . .3
Event of Default under the Security Agreement. . . . . . . . . .3
Event of Loss. . . . . . . . . . . . . . . . . . . . . . . . . .3
Excepted Rights in Collateral. . . . . . . . . . . . . . . . . .3
Fair Market Sales Value. . . . . . . . . . . . . . . . . . . . .3
Fair Market Rental Value . . . . . . . . . . . . . . . . . . . .4
Final Determination. . . . . . . . . . . . . . . . . . . . . . .4
First Closing Date . . . . . . . . . . . . . . . . . . . . . . .4
Fixed Rent . . . . . . . . . . . . . . . . . . . . . . . . . . .4
FPPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ICC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Indebtedness Hereby Secured. . . . . . . . . . . . . . . . . . .4
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . .4
Indemnitors. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Independent Tax Counsel. . . . . . . . . . . . . . . . . . . . .5
Interchange Rules. . . . . . . . . . . . . . . . . . . . . . . .5
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Interim Rent . . . . . . . . . . . . . . . . . . . . . . . . . .5
Interim Rent Payment Date. . . . . . . . . . . . . . . . . . . .5
Interim Term . . . . . . . . . . . . . . . . . . . . . . . . . .5
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Late Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Lease or Equipment Lease . . . . . . . . . . . . . . . . . . . .5
Lease Supplement . . . . . . . . . . . . . . . . . . . . . . . .5
Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Lessee Agreements. . . . . . . . . . . . . . . . . . . . . . . .5
Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Lessor's Liens . . . . . . . . . . . . . . . . . . . . . . . . .5
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Loan Value . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Make Whole Premium . . . . . . . . . . . . . . . . . . . . . . .6
Net Economic Return. . . . . . . . . . . . . . . . . . . . . . .6
Note and Notes . . . . . . . . . . . . . . . . . . . . . . . . .7
Noteholder . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Note Purchaser . . . . . . . . . . . . . . . . . . . . . . . . .7
Officer's Certificate. . . . . . . . . . . . . . . . . . . . . .7
Operative Agreements . . . . . . . . . . . . . . . . . . . . . .7
Owner Participant. . . . . . . . . . . . . . . . . . . . . . . .7
Owner Participant Agreements . . . . . . . . . . . . . . . . . .8
Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . .8
Owner Trustee Agreements . . . . . . . . . . . . . . . . . . . .8
Participants . . . . . . . . . . . . . . . . . . . . . . . . . .8
Participation Agreement. . . . . . . . . . . . . . . . . . . . .8
Permitted Contest. . . . . . . . . . . . . . . . . . . . . . . .8
Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . .8
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Pricing Assumptions. . . . . . . . . . . . . . . . . . . . . . .8
Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . .9
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . .9
Reasonable Basis . . . . . . . . . . . . . . . . . . . . . . . .9
Register . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . .9
Renewal Term . . . . . . . . . . . . . . . . . . . . . . . . . .9
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Rent Payment Dates . . . . . . . . . . . . . . . . . . . . . . .9
Replacement Item . . . . . . . . . . . . . . . . . . . . . . . .9
Responsible Officer of the Owner Trustee . . . . . . . . . . . .9
Responsible Officer of the Security Trustee. . . . . . . . . . 10
Second Closing Date. . . . . . . . . . . . . . . . . . . . . . 10
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Security Agreement . . . . . . . . . . . . . . . . . . . . . . 10
Security Agreement Supplement. . . . . . . . . . . . . . . . . 10
Security Trustee . . . . . . . . . . . . . . . . . . . . . . . 10
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
separate account . . . . . . . . . . . . . . . . . . . . . . . 10
Stipulated Loss Value. . . . . . . . . . . . . . . . . . . . . 10
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Supplemental Rent. . . . . . . . . . . . . . . . . . . . . . . 10
Tax Assumptions. . . . . . . . . . . . . . . . . . . . . . . . 11
Tax Indemnification Agreement. . . . . . . . . . . . . . . . . 11
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Termination Value. . . . . . . . . . . . . . . . . . . . . . . 11
Transaction Costs. . . . . . . . . . . . . . . . . . . . . . . 11
Treasury Rate. . . . . . . . . . . . . . . . . . . . . . . . . 11
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . 11
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . 11
Type A Equipment . . . . . . . . . . . . . . . . . . . . . . . 11
Type B Equipment . . . . . . . . . . . . . . . . . . . . . . . 12
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . 12
Warranty Bill of Sale. . . . . . . . . . . . . . . . . . . . . 12
Weighted Average Life to Maturity. . . . . . . . . . . . . . . 12
DEFINITIONS
Re: Kansas City Power & Light Company
GENERAL PROVISIONS
The following terms shall have the following meanings for all
purposes of the Operative Agreements referred to below, unless otherwise
defined in an Operative Agreement or the context thereof shall otherwise
require. In the case of any conflict between the provisions of this
Definition Annex and the provisions of the main body of any Operative
Agreement, the provisions of the main body of such Operative Agreement
shall control the construction of such Operative Agreement.
Unless the context otherwise requires, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be
amended and supplemented from time to time, and (ii) references to
parties to agreements shall be deemed to include the successors and
permitted assigns of such parties.
DEFINED TERMS
"AAR" shall mean the Association of American Railroads of any
successor thereto.
"Acceptance Date" for each Item of Equipment means the date on
which Lessee has accepted such Item for lease under the Lease, as
evidenced by Lessee's execution and delivery of a Lease Supplement for
such Item dated such date.
"Acquisition Agreements" shall mean (i) the Purchase Agreement, as
assigned by the Purchase Agreement Assignment dated the First Closing
Date from the Lessee to the Owner Trustee, substantially in the form of
Exhibit B to the Participation Agreement, in the case of the Type A
Equipment and (ii) the Warranty Bill of Sale dated the First Closing
Date from the Lessee to the Owner Trustee, in the case of the Type B
Equipment.
"Affiliate" shall mean any person, firm or corporation who or
which, directly or indirectly, through one or more intermediaries
controls, or is controlled by, or is under common control with, another
person, firm or corporation. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a person, firm or corporation, whether
though the ownership of voting securities, by contract or otherwise.
"After-Tax Basis" means on a basis such that any payment to be
received or deemed to be received shall be supplemented by a further
payment so that the sum of the two payments, after deducting from such
payments the amount of all taxes resulting from receipt or accrual of
such payments (net of any current credits or deductions or other tax
benefits arising therefrom, to the extent actually realized), assuming
that the Person receiving such payments is subject to taxes at the
highest marginal rate applicable to corporations, shall be equal to the
payments to be received or deemed to have been received.
"Appraisal Procedure" shall have the meaning specified in Section
25(c) of the Lease.
"Assigned Agreement" shall mean the Lease and all of the other
agreements referred to in Division III of the Granting Clauses of the
Security Agreement.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code as amended
from time to time, 11 U.S.C. paragraph 101 et seq.
"Basic Term" shall have the meaning specified in Section 4 of the
Lease.
"Basic Term Commencement Date" shall have the meaning specified in
Section 4 of the Lease.
"Beneficial Interest" shall mean the interest of the Owner
Participant under the Trust Agreement.
"Business Day' shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in the State of Connecticut,
Delaware, Missouri or New York are authorized or required to be closed.
"Closing Dates" shall have the meaning specified in Section 2.3(a)
of the Participation Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor code.
"Collateral" shall have the meaning specific in the Granting
Clauses of the Security Agreement.
"Debtor" shall mean the Owner Trustee, as debtor under the Security
Agreement.
"Default" under the Lease shall mean any event which would
constitute an Event of Default under the Lease if any requirement in
connection therewith for the giving of notice or the lapse of time, or
both, had been satisfied.
"Default" under the Security Agreement shall mean any event which
would constitute an Event of Default under the Security Agreement if any
requirement in connection therewith for the giving of notice, or the
lapse of time, or both, had been satisfied.
"Employee benefit plan" has the meaning specified in Section 3 of
ERISA.
"Enforcement Date" shall have the meaning specified in Section 7.3
of the Security Agreement.
"Enforcement Notice" shall have the meaning specified in Section
7.3 of the Security Agreement.
"Equipment" shall mean collectively those items (and "Item" or
"Item of Equipment" shall mean individually each item) of railroad
rolling stock described in the Lease Supplement delivered on each
Closing Date, together with any and all accessions, additions,
improvements and replacements from time to time incorporated or
installed on any item thereof which are the property of the Owner
Trustee pursuant to the terms of the Lease.
"Equipment Cost" shall mean the aggregate cost of all Items of
Equipment subject to the Lease.
"Equipment Lease" -- See "Lease".
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor law.
"Event of Default" under the Lease is defined in Section 18
thereof.
"Event of Default" under the Security Agreement is defined in
Section 7.1 thereof.
"Event of Loss" with respect to any Item of Equipment shall mean
(i) the loss of such Item of Equipment or any substantial part thereof
or of the use thereof due to theft or disappearance for a period in
excess of 180 days during the Lease Term, or existing at the expiration
or earlier termination of the Lease Term, (ii) the destruction, or
damage beyond repair which, in Lessee's good faith opinion, makes such
Item of Equipment or any substantial part thereof permanently unfit for
normal use for any reason whatsoever, (iii) the condemnation,
confiscation, seizure, or requisition of use by any governmental
authority under the power of eminent domain or otherwise for a period in
excess of 180 days during the Lease Term, or existing at the expiration
or earlier termination of the Lease Term, or (iv) the requisition of
title to such Item of Equipment or any substantial part thereof by any
governmental authority under the power of eminent domain or otherwise.
"Excepted Rights in Collateral" shall have the meaning specified in
the Granting Clauses of the Security Agreement.
"Fair Market Sales Value" shall be determined on the basis of, and
shall equal in value, the retail amount (as opposed to the wholesale
amount) which would be obtained in an arm's-length transaction between
an informed and willing buyer-user (other than a lessee currently in
possession) and an informed and willing seller under no compulsion to
sell, and in such determination, costs of removal from the location of
current use shall not be a deduction from such value. Any such
determination made (i) under Section 11 or 19 of the Lease shall be made
on the assumption that the Equipment is sold on an "as-is, where-is"
basis, and (ii) at any other time shall be made on the assumption that
the Equipment is in the condition and state of repair required by the
terms and provisions of the Lease.
"Fair Market Rental Value" shall be determined on the basis of, and
shall equal in value, the amount which would be obtained in an arm's-
length transaction between an informed and willing lessee (other than a
lessee currently in possession) and an informed and willing lessor under
no compulsion to lease, and in such determination, costs of removal from
the location of current use shall not be a deduction from such value.
Any such determination made (i) under Section 11 or 19 of the Lease
shall be made on the assumption that the Equipment is leased on an "as-
is, where-is" basis, and (ii) at any other time shall be made on the
assumption that the Equipment is in the condition and state of repair
required by the terms and provisions of the Lease.
"Final Determination", with respect to a Loss, shall have the
meaning specified in Section 8(f)10 of the Tax Indemnification
Agreement.
"First Closing Date" shall have the meaning specified in
Section 2.3(a) of the Participation Agreement.
"Fixed Rent" shall mean all rent payable pursuant to Section 6(b)
of the Lease for the Basic Term and all Rent payable pursuant to
Section 25(a) of the Lease for the Renewal Term, if any.
"FPPO" shall have the meaning set forth in Section 25(b) of the
Lease.
"Guidelines" shall mean the guidelines set forth in Revenue
Procedure 75-21, 1975-1 C.B. 715, as further set forth in Revenue
Procedure 75-28, 1975-1 C.B. 752, and as modified in Revenue Procedure
76-30, 1976-2 C.B. 647 and Revenue Procedure 79-48, 1979-2 C.B. 529 that
are applied by the Internal Revenue Service in determining, for advance
ruling purposes, whether leveraged lease transactions (other than
transactions which are treated as leases pursuant to Section 168(f)(8)
of the Code) are leases for Federal income tax purposes.
"ICC" means the Interstate Commerce Commission or any successor
thereto.
"Indebtedness Hereby Secured" shall mean the outstanding Notes and
all principal thereof (and premium, if any) and interest thereon and all
additional amounts and other sums at any time due and owing from or
required to be paid by the Owner Trustee under the terms of the
outstanding Notes, the Security Agreement or the Participation
Agreement.
"Indemnified Parties" shall mean the Participants, the Owner
Trustee (in its individual or trust capacities), the Trust Estate and
the Security Trustee (in its individual or trust capacities), and
successors, assigns, agents, servants, officers, directors and employees
of each of the foregoing.
"Indemnitors" shall have the meaning specified in Section 8 of the
Participation Agreement.
"Independent Tax Counsel" means independent tax counsel selected by
Owner Participant and reasonably acceptable to Lessee.
"Interchange Rules" shall have the meaning specified in Section 10
of the Lease.
"Interest" shall mean the Beneficial Interest or a Note,
individually, and "Interests" shall mean the Beneficial Interest and the
Notes, collectively.
"Interim Rent" shall mean for the Equipment, the aggregate amounts
payable for such Equipment pursuant to Section 6(a) of the Lease during
the Interim Term.
"Interim Rent Payment Date" shall mean September 30, 1994.
"Interim Term" shall have the meaning specified in Section 4 of the
Lease.
"IRS" shall mean the Internal Revenue Service or any successor
agency.
"Late Rate" shall mean interest at the annual rate equal to the
higher of (i) 8.23%, and (ii) the Prime Rate plus 1%.
"Lease" or "Equipment Lease" shall mean the Railcar Lease dated as
of April 15, 1994 between the Lessor, as lessor, and the Lessee, as
lessee, as amended or supplemented from time to time.
"Lease Supplement" shall mean each Lease Supplement, substantially
in the form of Exhibit B to the Lease, entered into between the Lessor
and the Lessee pursuant to Section 3 of the Lease on each Closing Date,
and shall include any supplement, amendment or restatement thereof.
Each Lease Supplement shall contain a description of the Equipment to be
delivered on such Closing Date, shall confirm that the Equipment has
been accepted by the Lessee and shall set forth a summary of the
Purchase Price of the Equipment. Each reference to "the Lease" shall
include the Lease and the Lease Supplements.
"Lease term" shall mean the Interim Term, the Basis Term and each
Renewal Term.
"Lessee" shall mean Kansas City Power & Light Company, a Missouri
corporation, and any corporation which succeeds thereto by merger or
consolidation or which acquires all or substantially all of the assets
thereof subject to Section 28 of the Lease.
"Lessee Agreements" shall mean the Operative Agreements to which
the Lessee is a party.
"Lessor" shall mean the Owner Trustee, as lessor under the Lease.
"Lessor's Liens" shall mean the Liens arising as a result of
(i) claims against Lessor, in its individual capacity or as Owner
Trustee or Owner Participant not related to the transactions
contemplated by the Participation Agreement, (ii) acts of Lessor in its
individual capacity or as Owner Trustee, and in the case of Lessor
arising out of its gross negligence or willful misconduct either not
related to the transactions contemplated by the Participation Agreement
or expressly prohibited under the Lease or under the Participation
Agreement, (iii) "taxes, fees or other charges" as defined in
Section 6(a) of the Participation Agreement imposed against Lessor, in
its individual capacity or as Owner Trustee, Owner Participant, the
Trust or the Trust Estate which are not indemnified against by Lessee
pursuant to Section 6 of the Participation Agreement other than Liens
which are not due and payable or the amount or validity of which are
being contested in good faith by appropriate legal proceedings which
will not result in the forfeiture or sale of the Equipment or materially
and adversely affect Owner Trustee's title thereto or interfere with the
due payment by the Lessee to the Security Trustee, the Owner Trustee or
the Owner Participant of any Rent or the due application by the Security
Trustee of any such Rent pursuant to the Security Agreement and which do
not otherwise materially and adversely affect the interest and rights of
the Security Trustee in the Collateral or (iv) claims against Lessor
arising out of the voluntary transfer by Lessor or Owner Participant of
its interest in the Equipment other than a transfer of the Equipment
pursuant to Sections 15, 25 or 27 and other than a transfer made while
an Event of Default under the Lease has occurred and is continuing.
"Lien" shall mean any mortgage, pledge, security interest, lien,
encumbrance or other charge of any kind on property.
"Loan Value" shall have the meaning specified in Section 5.1(d) of
the Security Agreement.
"Loss" shall have the meaning given in Section 6 of the Tax
Indemnification Agreement.
"Make Whole Premium" shall mean, with respect to the termination of
the Lease pursuant to Section 27 of the Lease or a refinancing pursuant
to Section 2.7 of the Participation Agreement and the prepayment of the
Notes under Section 6.2 of the Security Agreement, the excess of (a) the
present value of the principal and interest payments on and in respect
of the Notes being prepaid or paid, as the case may be, that would
otherwise become due and payable (without giving effect to such
prepayment or payment) (including the final payment on the maturity date
of Notes), all determined by discounting such payments and prepayments
quarterly at a rate which is equal to the Treasury Rate over (b) the
aggregate principal amount of the Notes then to be paid or prepaid. To
the extent that the Treasury Rate at the time of such payment is equal
to or higher than 7.23%, the Make Whole Premium is zero.
"Net Economic Return" means the Owner Participant's anticipated
after-tax yield and aggregate after-tax cash flow, utilizing the
multiple investment sinking fund method of analysis, computed on the
basis of the same methodology and assumptions as were utilized by the
Owner Participant in determining Interim Rent, Fixed Rent, Stipulated
Loss Values, Termination Values and the FPPO as of the First Closing
Date and maintaining the general pattern of FASB Statement No. 13
accounting over the remainder of the Term. Net Economic Return shall
not mean or include Owner Participant's return on equity or return on
assets.
"Note" shall mean any of, and "Notes" shall mean all of, the then
outstanding Notes, and "outstanding", when used with reference to Notes
shall mean, as of any particular time, all Notes delivered by the Debtor
and secured by the Security Agreement, except:
(a) Notes theretofore cancelled by the Security Trustee or
delivered to the Security Trustee for cancellation;
(b) Notes for the payment of prepayment of which moneys in the
necessary amount shall have been deposited in trust with the Security
Trustee; provided that if such Notes are to be prepaid prior to the
maturity thereof, notice of such prepayment shall have been given as
provided in Section 6.4 of the Security Agreement, or provision
satisfactory to the Security Trustee shall have been made for giving
such notice; and
(c) Notes in lieu of or in substitution for which other Notes
shall have been delivered pursuant to the terms of Section 2.4 of the
Security Agreement.
"Noteholder" shall mean the holder of any Note issued and
outstanding under the Security Agreement.
"Note Purchaser" shall mean the Note Purchaser named in Schedule 2
to the Participation Agreement and its successors and assigns, including
successive holders of the Notes.
"Officer's Certificate" shall mean a certificate signed in the case
of a corporation by the Chairman of the Board, the President or any Vice
President, the Treasurer or an Assistant Treasurer of such corporation,
in the case of a partnership by the Chairman of the Board, the President
or any Vice President, the Treasurer or an Assistant Treasurer of a
corporate general partner, and in the case of a commercial bank or trust
company, the Chairman or Vice Chairman of the Executive Committee, or
the Treasurer, any Trust Officer, any Vice President, any Executive or
Senior or Second or Assistant Vice President, Secretary or Assistant
Secretary, or any other officer or assistant officer customarily
performing the functions similar to those performed by the Persons who
at the time shall be such officers, or to whom any corporate trust
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Operative Agreements" shall mean and include the Participation
Agreement, the Warranty Bill of Sale, the Acquisition Agreements, the
Trust Agreement, the Lease, the Lease Supplements, the Notes outstanding
at the time of reference, the Security Agreement, the Security Agreement
Supplements and the Tax Indemnification Agreement.
"Owner Participant" shall mean BNY Capital Funding Corp., a New
York corporation, and its successors and permitted assigns of its
Beneficial Interest.
"Owner Participant Agreements" shall mean the Operative Agreements
to which the Owner Participant is a party.
"Owner Trustee" shall mean Shawmut Bank Connecticut, National
Association not in its individual capacity but solely in its capacity as
trustee under the Trust Agreement and its successors in trust
thereunder.
"Owner Trustee Agreements" shall mean the Operative Agreements to
which Shawmut Bank Connecticut, National Association, either in its
individual or trust capacity, is a party.
"Participants" shall mean the Note Purchaser and the Owner
Participant.
"Participation Agreement" shall mean the Participation Agreement
dated as of April 15, 1994, among the Lessee, the Participants, the
Owner Trustee and the Security Trustee.
"Permitted Contest" shall mean a good-faith contest conducted in a
manner so as to prevent the imposition of any criminal penalty on, or
adverse effect on the title, property or right of, such Indemnified
Party, of the legality or validity of any of the taxes, assessments,
levies, fees or other governmental charges, or other claims, Liens or
impositions which, under the terms of the Lease, are required to be paid
or discharged by the Lessee or the Lessor, as the case may be, but for
such contest.
"Permitted Encumbrances" which respect to the Equipment and each
Item thereof, shall mean (i) the interest of the Lessee and the Owner
Trustee, respectively, under the Lease; (ii) any Liens thereon for
taxes, assessments, levies, fees and other governmental and similar
charges not due and payable or the amount or validity of which is being
contested by a Permitted Contest; (iii) any Liens of mechanics,
suppliers, materialmen and laborers for work or services performed or
materials furnished in connection with the Equipment or any Item thereof
which are not more than 30 days past due or the amount or validity of
which is being contested by a Permitted Contest; (iv) the Lien and
security interest granted to the Security Trustee under and pursuant to
the Security Agreement; and (v) the rights of any sublessee or assignee
pursuant to Section 13 of the Lease in respect of the Equipment.
"Person" shall mean an individual, partnership, corporation, firm,
trust or unincorporated organization, and a government or agency or
political subdivision thereof.
"Pricing Assumptions" shall mean the assumptions set forth in
Annex 2 to the Lease.
"Prime Rate" shall mean for any day the rate announced by The Bank
of New York, from time to time at its principal office in New York, New
York, as its prime rate for domestic (United States) commercial loans in
effect on such day (such Prime Rate is not necessarily intended to be
the lowest rate of interest charged by The Bank of New York in
connection with the extensions of credit).
"Purchase Agreement" shall mean the written agreement between the
Lessee and the Seller with respect to the Type A Equipment, as amended
or modified.
"Purchase Price" shall mean $21,700,000; provided that, with
respect to any calculation under any Operative Agreement affecting less
than all of the Items of Equipment, the Purchase Price shall be the
product of (i) the quotient of (A) the number of affected Items of
Equipment involved in such calculation divided by (b) 500, multiplied by
(ii) the Purchase Price. In the event that any Item or Items of
Equipment shall have been removed from the Lease and no Replacement Item
or Replacement Items shall have been substituted therefor, then from and
after the date of such removal the Purchase Price shall mean the product
of (i) the quotient of (A) the number of Items of Equipment subject to
the Lease immediately following such removal divided by (B) the number
of Items of Equipment subject to the Lease immediately prior to such
removal, multiplied by (ii) the Purchase Price immediately prior to such
removal.
"Reasonable Basis" for a position shall exist if tax counsel may
properly advise reporting such position on a tax return in accordance
with Formal Opinion 85-352 issued by the Standing Committee on Ethics
and Professional Responsibility of the American Bar Association.
"Register" shall mean the register caused to be kept by the Owner
Trustee at the principal office of the Security Trustee for the purpose
of recording the registration and transfer of the Notes.
"Regulations" shall mean the income tax regulations issued,
published or promulgated under the Code.
"Renewal Term" shall mean any term in respect of which the Lessee
shall have exercised its option to renew the Lease pursuant to
Section 25(a) thereof.
"Rent" shall mean Interim Rent, Fixed Rent and Supplemental Rent.
"Rent Payment Dates" shall mean for each Item of Equipment (i) for
the Basic Term thereof, March 31, 1995 and the last day of each
September and March thereafter throughout, to and including
September 30, 2014, and (ii) for each Renewal Term thereof, each date on
which a payment of Fixed Rent is due and payable for such Item as
provided in Section 25(a) of the Lease.
"Replacement Item" shall mean an item of railroad rolling stock of
the same type as the Item of Equipment for which it is a replacement and
which shall have been leased under the Lease pursuant to Section 15
thereof.
"Responsible Officer" of the Owner Trustee shall mean any Officer
in the Corporate Trust Administration department of the Owner Trustee.
"Responsible Officer" of the Security Trustee shall mean the
President, any Vice President, Trust Officer, Corporate Trust Officer or
any other Officer of the Corporate Trust Administration department of
the Security Trustee.
"Second Closing Date" shall have the meaning specified in
Section 2.3(a) of the Participation Agreement.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Security Agreement" shall mean the Security Agreement - Trust Deed
dated as of April 15, 1994 between the Owner Trustee, as debtor, and the
Security Trustee, as secured party, as amended or supplemented from time
to time.
"Security Agreement Supplement" shall mean each Security Agreement
Supplement, substantially in the form of Exhibit B to the Security
Agreement, entered into between the Debtor and the Security Trustee on
each Closing Date, covering the Equipment to be delivered on such
Closing Date.
"Security Trustee" shall mean Wilmington Trust Company and its
successors in trust not in its individual capacity but solely as
security trustee under the Security Agreement.
"Seller" shall mean Johnstown America Corporation.
The term "separate account" shall have the meaning specified in
Section 3 of ERISA.
"Stipulated Loss Value" of an Item as of any Rent Payment Date
shall mean the amount determined in accordance with Exhibit C of the
Lease as such percentage or percentages may be adjusted in accordance
with the provisions of Section 6(f) of the Lease. Notwithstanding any
other provision of the Lease, the Participation Agreement or the
Security Agreement, each Stipulated Loss Value for the Equipment shall
be, under any circumstances and in any event, an amount, together with
Fixed Rent due and owing through the date of such Stipulated Loss Value,
at least equal to the aggregate unpaid principal amount of and accrued
interest on the Notes outstanding on such date.
"Subsidiary" shall mean any corporation, trust or association of
which more than 50% (by number of votes) of the Voting Stock at the time
outstanding shall at the time be owned, directly or indirectly, by the
Lessee or by any other corporation, association or trust which is itself
a Subsidiary within the meaning of this definition, or collectively by
the Lessee and any one or more such Subsidiaries.
"Supplemental Rent" shall mean all amounts, liabilities and
obligations (other than Fixed Rent) which the Lessee is obligated to pay
under the Lease or the Participation Agreement, including, but not
limited to, Stipulated Loss Value and Termination Value payments,
payment of the Make Whole Premium under Section 27 of the Lease, and
amounts, if any, payable under Section 2.6 of the Participation
Agreement (to the extent such payment does not give rise to a rental
adjustment under Section 6(f) of the Lease) by the Lessee.
"Tax Assumptions" shall have the meaning given in Section 2 of the
Tax Indemnification Agreement.
"Tax Indemnification Agreement" shall mean the Tax Indemnification
Agreement dated as of April 15, 1994 between the Lessee and the Owner
Participant.
"Term" shall mean the Lease Term.
"Termination Value" of an Item of Equipment as of any Rent Payment
Date shall mean with respect to such Item of Equipment an amount
determined in accordance with Exhibit C of the Lease as such percentage
or percentages may be adjusted in accordance with the provisions of
Section 6(f) of the Lease. Notwithstanding any other provision of the
Lease, the Participation Agreement or the Security Agreement, each
Termination Value for the Equipment shall be, under any circumstances
and in any event, an amount, together with Fixed Rent due and owing
through the date of such Termination Value, at least equal to the
aggregate unpaid principal amount of and accrued interest on the Notes
outstanding on such date of payment.
"Transaction Costs" shall have the meaning set forth in Section 2.6
of the Participation Agreement.
"Treasury Rate" shall mean at any time with respect to the Notes
being prepaid the sum of (i) .50%, plus (ii) the weekly average of the
yield to maturity on the United States Treasury obligations with a
constant maturity (as compiled by and published in the most recently
published issue of the United States Federal Reserve Statistical Release
designated H.15(519) or its successor publication) most nearly equal to
(by rounding to the nearest month) the Weighted Average Life to Maturity
of the Notes then being prepaid. If no maturity exactly corresponding
to such Weighted Average Life to Maturity of the Notes shall appear
therein, the weekly average yields for the two most closely
corresponding published maturities shall be calculated pursuant to the
foregoing sentence and the Treasury Rate shall be interpolated from such
yields on a straight-line basis (rounding, in the case of relevant
periods, to the nearest month).
"Trust" shall have the meaning specified in the Trust Agreement.
"Trust Agreement" shall mean the Trust Agreement dated as of
April 15, 1994 between the Owner Participant and Shawmut Bank
Connecticut, National Association.
"Trust Estate" shall have the meaning specified in Section 1.2 of
the Trust Agreement.
"Type A Equipment" shall mean the 380 new 120-ton high side rotary
dump aluminum gondola railcars to be purchased by the Owner Trustee from
the Seller on the First Closing Date and/or the Second Closing Date, as
described in Exhibit A to the Railcar Lease and the Lease Supplement
delivered on each Closing Date.
"Type B Equipment" shall mean the 120 used 120-ton high side rotary
dump aluminum gondola railcars to be purchased by the Owner Trustee from
the Lessee on the First Closing Date and/or the Second Closing Date, as
described in Exhibit A to the Railcar Lease and the Lease Supplement
delivered on each Closing Date.
"Voting Stock" shall mean Securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or persons performing similar functions).
"Warranty Bill of Sale" shall mean each Warranty Bill of Sale dated
a Closing Date from the Seller or the Lessee, as the case may be, to the
Owner Trustee pursuant to which the Seller or the Lessee, as the case
may be, shall convey to the Owner Trustee title to the Equipment for
which settlement is being made on such date.
"Weighted Average Life to Maturity" with respect to the Notes shall
mean, as at the time of determination, the number of years obtained by
dividing the then Remaining Dollar-years of the Notes by the sum of the
remaining scheduled principal payments on such Notes. The term
"Remaining Dollar-years" of the Notes means the product obtained by
(1) multiplying (A) the amount of each then scheduled required principal
payment (including payment at final maturity), by (B) the number of
years (calculated to the nearest one-twelfth) which will elapse between
the date of determination of the Weighted Average Life to Maturity of
the Notes and the date of such required payment is due, and
(2) totalling all the products obtained in (1).
PRICING ASSUMPTIONS
CLOSING DATE: First Closing Date: April 19, 1994 - 95 Items of
Type A Equipment and 120 Items of Type B Equipment
Second Closing Date: May 5, 1994 - 285 Items of
Type A Equipment
ASSETS: 380 new 120-ton high side rotary dump aluminum
gondola railcars and 120 used 120-ton high side
rotary dump aluminum gondola railcars, as listed in
Exhibit B to the Railcar Lease
PURCHASE PRICE
OF ASSETS: $21,700,000
INTERIM TERM
COMMENCEMENT
DATE: First Closing: April 19, 1994
Second Closing: May 5, 1994
BASIC TERM
COMMENCEMENT
DATE: September 30, 1994
BASIC TERM: Twenty years
INTERIM RENT: Interest only on Notes, payable by the Lessor on the
Basic Term Commencement Date
FIXED RENT
DURING THE
BASIC TERM: As set forth in Exhibit C to the Railcar Lease.
INTEREST RATE
ON NOTES: 7.23%
PERCENTAGE OF
PURCHASE PRICE
OF ASSETS
FUNDED BY NOTES: 73.03%
AMORTIZATION
OF NOTES: As set forth in Annex II of the Security Agreement.
TAX ASSUMPTIONS: As set forth in Section 2 of the Tax Indemnification
Agreement.
ASSUMED
TRANSACTION
COSTS: 1.4%
ANNEX 2
(to Railcar Lease)
DESCRIPTION OF EQUIPMENT
380 new 120-ton high side rotary dump aluminum gondola railcars and
120 used 120-ton high side rotary dump aluminum gondola railcars, as
more specifically described in the Lease Supplements delivered on each
Closing Date.
EXHIBIT A
(to Railcar Lease)
LEASE SUPPLEMENT NO. ______
THIS LEASE SUPPLEMENT NO. _____ dated _________, 1994 between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not individually but
solely as Owner Trustee ("Lessor"), and KANSAS CITY POWER & LIGHT
COMPANY, a Missouri corporation ("Lessee"),
WITNESSETH:
1. Lessor and Lessee have heretofore entered into a Railcar Lease
dated as of April 15, 1994 (the "Lease") providing for the execution and
delivery of Lease Supplements substantially in the form hereof. The
terms defined in the Lease shall have the same meanings when used
herein.
2. Lessee hereby acknowledges and confirms that on or prior to the
date hereof, the Equipment described in Schedule 1 attached hereto has
been delivered and accepted by the Lessee. Lessee represents that the
Equipment is free and clear of all liens and encumbrances (except
Permitted Encumbrances) and in a condition which in all respects is
satisfactory to the Lessee and in compliance with the Lease.
3. Lessee hereby certifies that the date of acceptance of the
Equipment and commencement of the Basic Term with respect thereto is the
date of this Lease Supplement No. ____.
4. Lessee hereby certifies that such Purchase Price for the
Equipment is $__________________.
5. Interim Rent for the Equipment is payable in the amount set
forth in Section 6(a) of the Lease on September 30, 1994. Fixed Rent,
Stipulated Loss Values and Termination Values for the Equipment is
payable in the amounts and on the Rent Payment Dates set forth in
Schedule 2 attached hereto.
Counterpart No. ______ of 11.
EXHIBIT B
(to Railcar Lease)
IN WITNESS WHEREOF, Lessor and Lessee have caused this instrument to be
executed, all as of the day and year first above written.
KANSAS CITY POWER & LIGHT COMPANY,
a Missouri corporation
By
Its
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not individually
but solely as Owner Trustee
By
Its
-2-
STATE OF ________________ )
) SS.:
COUNTY OF _______________ )
On this, the _______ day of _____________,1994, before me, a Notary
Public in and for said County and State, personally appeared ________,
the _________________ of KANSAS CITY POWER & LIGHT COMPANY, who
acknowledged himself to be a duly authorized officer of KANSAS CITY
POWER & LIGHT COMPANY, and that, as such officer, being authorized to do
so, he executed the foregoing instrument for the purposes therein
contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
Name:
Notary Public
My Commission Expires:
Residing in
STATE OF ________________ )
) SS.:
COUNTY OF _______________ )
On this, the _________ day of _____________, 1994, before me, a
Notary Public in and for said County and State, personally appeared
______________, the _____________ of SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, who acknowledged himself to be a duly authorized officer of
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, and that, as such
officer, being authorized to do so, he executed the foregoing instrument
for the purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
Name:
Notary Public
My Commission Expires:
Residing in
-3-
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged this ______ day of ___________, 1994.
WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely
as Security Trustee
By
Its
-4-
DESCRIPTION OF EQUIPMENT
SCHEDULE 1
(to Lease Supplement No. ____)
SCHEDULE OF FIXED RENT, STIPULATED LOSS VALUE
AND TERMINATION VALUE RATE FACTORS
I. FIXED RENT
RENT INSTALLMENT
FOR THE ITEM OF EQUIPMENT
EQUAL TO PURCHASE PRICE OF THE
RENT EQUIPMENT TIMES THE
PAYMENT DATE FOLLOWING FIXED RENT FACTOR
SCHEDULE 2
(to Lease Supplement No. ____)
II. STIPULATED LOSS VALUE AND TERMINATION VALUE
STIPULATED LOSS VALUE OR
TERMINATION VALUE, AS A
PERCENT OF THE PURCHASE PRICE
OF THE ITEM OF EQUIPMENT
(IN ADDITION TO FIXED RENT
RENT INSTALLMENT FOR SUCH ITEM OF
PAYMENT DATE EQUIPMENT DUE ON SUCH DATE)
-2-
SCHEDULE OF FIXED RENT
RENT INSTALLMENT
FOR THE ITEM OF EQUIPMENT
EQUAL TO PURCHASE PRICE OF THE
EQUIPMENT TIMES THE
FOLLOWING FIXED RENT FACTORS
RENT
PAYMENT DATE ARREARS ADVANCE TOTAL
09/30/94 0.00000000% 0.00000000% 0.00000000%
03/30/95 1.32004180% 1.32004180% 2.64008359%
09/30/95 4.40661055% 0.66002092% 5.06663147%
03/30/96 0.00000000% 2.55236392% 2.55236392%
09/30/96 3.83430945% 0.63809097% 4.47240041%
03/30/97 0.00000000% 2.48295456% 2.48295456%
09/30/97 3.92564862% 0.62073866% 4.54638728%
03/30/98 0.00000000% 2.40836147% 2.40826147%
09/30/98 4.01759406% 0.60209037% 4.61968442%
03/30/99 0.00000000% 2.32842217% 2.32842217%
09/30/99 4.11618171% 0.58210553% 4.69828724%
03/30/2000 0.00000000% 2.24275152% 2.24275152%
09/30/2000 4.22183710% 0.56068788% 4.78252498%
03/30/2001 0.00000000% 2.15093871% 2.15093871%
09/30/2001 4.33506756% 0.53773470% 4.87280226%
03/30/2002 0.00000000% 2.05254336% 2.05254336%
09/30/2002 4.45641618% 0.51313585% 4.96955203%
03/30/2003 0.00000000% 2.13310323% 2.13310323%
09/30/2003 4.40045512% 0.48677336% 4.88722848%
03/30/2004 0.00000000% 4.52399143% 4.52399143%
09/30/2004 2.03592940% 0.44367447% 2.47960387%
03/30/2005 0.00000000% 5.62050046% 5.62050046%
09/30/2005 2.54844972% 0.41104525% 2.95949498%
03/30/2006 0.00000000% 5.45148009% 5.45148009%
09/30/2006 2.75009926% 0.38060613% 3.13070539%
03/30/2007 0.00000000% 7.23039733% 7.23039733%
09/30/2007 1.00162124% 0.33387373% 1.33549498%
03/30/2008 0.00000000% 7.40738263% 7.40738263%
09/30/2008 0.87136829% 0.29045608% 1.16182438%
03/30/2009 0.00000000% 7.62606194% 7.62606194%
09/30/2009 0.69610664% 0.23203553% 0.92814217%
03/30/2010 0.00000000% 7.87276862% 7.87276862%
09/30/2010 0.50782041% 0.16927350% 0.67709392%
03/30/2011 0.00000000% 8.13780931% 8.13780931%
09/30/2011 0.30554180% 0.10184728% 0.40738908%
03/30/2012 0.00000000% 8.42254654% 8.42254654%
09/30/2012 0.08823088% 0.02941028% 0.11764115%
03/30/2013 0.00000000% 8.58321438% 8.58321438%
09/30/2013 0.00000000% 0.00000000% 0.00000000%
03/30/2014 0.00000000% 8.61262465% 8.61262465%
09/30/2014 0.00000000% 0.00000000% 0.00000000%
TOTALS 48.83932977% 106.75385862% 156.59318839%
EXHIBIT C
(to Railcar Lease)
SCHEDULE OF
STIPULATED LOSS VALUE AND TERMINATION VALUE
STIPULATED LOSS VALUE OR
TERMINATION VALUE, AS A
PERCENT OF THE PURCHASE PRICE
OF THE ITEM OF EQUIPMENT
(IN ADDITION TO FIXED RENT)
RENT INSTALLMENT FOR SUCH ITEM OF
PAYMENT DATE EQUIPMENT DUE ON SUCH DATE)
09/30/94 104.80515078%
03/30/95 107.72196041%
09/30/95 106.04026853%
03/30/96 109.07283843%
09/30/96 106.21119253%
03/30/97 108.84265392%
09/30/97 105.58726180%
03/30/98 107.91691097%
09/30/98 104.36311387%
03/30/99 106.46812894%
09/30/99 102.66223742%
03/30/2000 104.54899479%
09/30/2000 100.48435714%
03/30/2001 102.14777111%
09/30/2001 97.84828558%
03/30/2002 99.36926373%
09/30/2002 94.92668645%
03/30/2003 96.39988032%
09/30/2003 91.86536212%
03/30/2004 93.28433935%
09/30/2004 88.55587673%
03/30/2005 89.93279857%
09/30/2005 83.48445230%
03/30/2006 84.77269673%
09/30/2006 78.18108986%
03/30/2007 79.38418498%
09/30/2007 72.58727986%
03/30/2008 73.77931115%
09/30/2008 66.85595558%
03/30/2009 68.02045571%
09/30/2009 61.01213963%
03/30/2010 62.20677069%
09/30/2010 55.10771705%
03/30/2011 56.34800129%
09/30/2011 49.16534525%
03/30/2012 50.46904627%
09/30/2012 43.21145613%
03/30/2013 44.59869581%
09/30/2013 37.13671498%
03/30/2014 38.42643253%
09/30/2014 31.00000000%
EXHIBIT D
(to Railcar Lease)