Exhibit 10(b)
EQUIPMENT LEASING AGREEMENT
dated as of September 8, 1998
between
CCG TRUST CORPORATION,
as the Lessor
and
KANSAS CITY POWER & LIGHT COMPANY,
as the Lessee
THIS IS COUNTERPART NO. 2 OF 5 SERIALLY NUMBERED MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES
CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY
INTEREST IN THIS DOCUMENT MAY BE PERFECTED THROUGH THE POSSESSION
OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
TABLE OF CONTENTS
1. Definitions; Construction. . . . . . . . . . . . . . .1
2. Agreement for Purchase and Lease of Equipment. . . . 10
(a) Purchase. . . . . . . . . . . . . . . . . . . . 10
(b) Lease . . . . . . . . . . . . . . . . . . . . . 10
3. Conditions Precedent . . . . . . . . . . . . . . . . 10
4. Delivery, Acceptance and Leasing of Equipment;
Funding . . . . . . . . . . . . . . . . . . . . . . 11
(a) Delivery, Acceptance and Leasing. . . . . . . . 11
(b) Funding . . . . . . . . . . . . . . . . . . . . 12
(c) Characterization. . . . . . . . . . . . . . . . 12
5. Term . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Return of Equipment. . . . . . . . . . . . . . . . . 12
7. Basic Rent and Other Payments. . . . . . . . . . . . 14
(a) Basic Rent. . . . . . . . . . . . . . . . . . . 14
(b) Supplemental Payments . . . . . . . . . . . . . 15
(c) Method of Payment . . . . . . . . . . . . . . . 15
8. Net Lease. . . . . . . . . . . . . . . . . . . . . . 15
9. Use of Equipment; Compliance with Laws . . . . . . . 16
10. Maintenance and Repair of Equipment. . . . . . . . . 17
11. Replacements; Alterations: Modifications . . . . . . 17
12. Identification Marks; Inspection . . . . . . . . . . 18
13. Assignment and Subleasing; Quiet Enjoyment . . . . . 19
(a) By the Lessee . . . . . . . . . . . . . . . . . 19
(b) By the Lessor . . . . . . . . . . . . . . . . . 19
(c) Quiet Enjoyment . . . . . . . . . . . . . . . . 20
14. Liens. . . . . . . . . . . . . . . . . . . . . . . . 21
15. Loss, Damage or Destruction. . . . . . . . . . . . . 21
ii
(a) Risk of Loss, Damage or Destruction . . . . . . 21
(b) Payment of Casualty Loss Value Upon an Event
of Loss . . . . . . . . . . . . . . . . . . . . 21
(c) Substitution. . . . . . . . . . . . . . . . . . 22
(d) Application of Payments Not Relating to an
Event of Loss . . . . . . . . . . . . . . . . . 23
16. Insurance. . . . . . . . . . . . . . . . . . . . . . 23
17. General Tax Indemnity. . . . . . . . . . . . . . . . 23
18. Indemnification. . . . . . . . . . . . . . . . . . . 27
19. No Warranties. . . . . . . . . . . . . . . . . . . . 29
20. Lessee's Representations and Warranties. . . . . . . 29
21. Events of Default. . . . . . . . . . . . . . . . . . 31
22. Remedies Upon Default. . . . . . . . . . . . . . . . 32
23. Lessor's Right to Perform for the Lessee . . . . . . 34
24. Late Charges . . . . . . . . . . . . . . . . . . . . 35
25. Further Assurances . . . . . . . . . . . . . . . . . 35
26. Notices. . . . . . . . . . . . . . . . . . . . . . . 35
27. Lessee's Renewal, Purchase and Sale Options. . . . . 35
(a) Lessee's Renewal Option . . . . . . . . . . . . 35
(b) Lessee's Purchase Option. . . . . . . . . . . . 36
(c) Third Party Sale of Equipment . . . . . . . . . 37
(i) Remarketing Obligations . . . . . . . . . . . . 37
(ii) Sale of Equipment . . . . . . . . . . . . . . . 37
28. End-of-Term Rental Adjustment - Third Party Sale
of Equipment . . . . . . . . . . . . . . . . . . . . 38
29. Covenants of the Lessee. . . . . . . . . . . . . . . 38
(a) Financial Information . . . . . . . . . . . . . 38
(b) Mergers, etc. . . . . . . . . . . . . . . . . . 39
(c) ERISA . . . . . . . . . . . . . . . . . . . . . 39
(d) ERISA Information . . . . . . . . . . . . . . . 39
(e) ERISA Notice. . . . . . . . . . . . . . . . . . 40
(f) Litigation. . . . . . . . . . . . . . . . . . . 40
iii
30. Payment of Transaction Expenses. . . . . . . . . . . 40
31. Owner for Income Tax Purposes. . . . . . . . . . . . 40
32. Governing Law; Waiver of Jury Trial; Submission
to Jurisdiction . . . . . . . . . . . . . . . . . . 40
33. Miscellaneous. . . . . . . . . . . . . . . . . . . . 41
34. Registered Instrument. . . . . . . . . . . . . . . . 41
SCHEDULE I - NOTICE OF INFORMATION
SCHEDULE II - PRINCIPAL COMPONENT, UNAMORTIZED LEASE
BALANCE AND BASIC RENT PAYMENT
SCHEDULE III - FORM OF PURCHASE AGREEMENT ASSIGNMENT
EXHIBIT A - FORM OF LEASE SUPPLEMENT
EXHIBIT B - FORM OF FUNDING NOTICE
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EQUIPMENT LEASING AGREEMENT
EQUIPMENT LEASING AGREEMENT dated as of September 8, 1998
(herein, as amended and supplemented from time to time, called
"this Lease"), between CCG Trust Corporation, a Barbados
corporation (together with its successors and permitted assigns
herein called the "Lessor"), having its principal place of
business at #1 Chelston Park, Collymore Rock, St. Michael,
Barbados, West Indies, and KANSAS CITY POWER & LIGHT COMPANY, a
Missouri corporation (together with its successors and permitted
assigns herein called the "Lessee"), having its principal place of
business at 1201 Walnut Street, Kansas City, Missouri 64106.
In consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. Definitions; Construction.
(a) Definitions. Unless the context otherwise
requires, the following terms shall have the following
meanings for all purposes of this Lease and shall be equally
applicable to both the singular and the plural forms of the
terms herein defined:
"AAR" means the Association of American Railroads or any
successor thereto.
"Acceptance Date" for any Item of Equipment means the date
on which the Lessee has unconditionally accepted such Item for
lease hereunder, as evidenced by the Lessee's execution and
delivery of a Lease Supplement for such Item dated such date.
"Acquisition Cost" of each Item of Equipment means an amount
as reflected on Schedule II to the Lease Supplement equal to one-
hundred one percent (101%) of the total cost paid by the Lessor to
the Manufacturer for such Item.
"Affected Party" means the Lessor or any of its successors
and permitted assigns.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with
such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by"
and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether
through the ownership of voting securities or by contract or
otherwise.
"After Tax Basis" means, with respect to any payment to be
received, the amount of such payment increased so that, after
deduction of the amount of all taxes required to be paid by the
recipient (less any tax savings actually realized and the present
value (discounted at the then-prevailing Applicable Rate) of any
tax savings projected to be actually realized by the recipient as
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a result of, in the case of a cash basis taxpayer, the payment,
or, in the case of an accrual taxpayer, the accrual of the amount
in respect of which the indemnity payment is being made and in
respect of the indemnity amount) with respect to the receipt or
accrual by the recipient of such amounts, such increased payment
(as so reduced) is equal to the payment otherwise required to be
made.
"Applicable Law" shall mean all applicable laws, statutes,
treaties, rules, codes, ordinances, regulations, certificates,
orders, interpretations, licenses and permits of any Governmental
Authority (including the DOT, the FRA and the AAR Interchange
Rules) and judgments, decrees, injunctions, writs, orders or like
action of any court, arbitrator or other administrative, judicial
or quasi-judicial tribunal or agency of competent jurisdiction.
"Applicable Rate" means a per annum rate equal to 6.09% per
annum (calculated on the basis of a 30-day month and a 360-day
year).
"Appraisal" means, with respect to any Item, an appraisal of
the Fair Market Sales Value of such Item.
"Assignee" shall have the meaning given to such term in
Section 13(b) hereof.
"Basic Rent" means the rent payable for each Item of
Equipment during (i) the Basic Term thereof pursuant to Section
7(a) hereof and (ii) each Renewal Term thereof (if this Lease is
renewed) pursuant to Section 27(a) hereof.
"Basic Term" for each Item of Equipment means the period
commencing on the Basic Term Commencement Date and ending on the
first anniversary of such date unless extended by a Renewal Term
or earlier terminated in accordance with the provisions hereof.
"Basic Term Commencement Date" for each Item of Equipment
means the Acceptance Date.
"Business Day" means any day other than a day on which
banking institutions in the State of New York, Barbados, West
Indies, or the State of Missouri are authorized or required by law
to close.
"Casualty Loss Value" with respect to any Item of Equipment
as of the Casualty Loss Value Payment Date with respect to such
Item means an amount determined by multiplying the Acquisition
Cost of such Item of Equipment by the percentage set forth
opposite such Casualty Loss Value Payment Date on Schedule I
attached to the Lease Supplement for such Item.
"Casualty Loss Value Payment Date" with respect to any Item
of Equipment shall mean the earlier of (i) the day that is 90 days
after the date of the Event of Loss applicable to such Item or
(ii) the Rent Payment Date next following the date of the Event of
Loss applicable to such Item (or the last day of the Term, if
sooner) and shall be as set forth in the Schedule of Casualty Loss
2
Values attached to the Lease Supplement for such Item but in no
event shall the Casualty Loss Value Payment date be sooner than
the first to occur of (a) receipt of the insurance proceeds or (b)
45 days after the date of the Event of Loss.
"Change in Withholding Tax Law" means (A) the enactment of
any amendment to the Code or the enactment of any other United
States Federal statute relating to Federal income tax regarding
withholding requirements for interest paid to non-United States
entities, (B) the adoption of any regulation to the Code, or any
amendment of any regulation to the Code, in temporary or final
form (that is, in a form that is effective) regarding withholding
requirements for interest paid to non-United States entities,
(C) the entry into force of any new income tax convention to which
the United States is a party or any amendment or supplement to, or
revocation of, any income tax convention to which the United
States is a party regarding withholding requirements for interest
paid to non-United States entities.
"Closing Date" means the date of the execution and delivery
of this Lease by the parties hereto.
"Code" means the Internal Revenue Code of 1986, as the same
may be amended from time to time, or any comparable successor law.
"Commitment Amount" means $12,710,071.20 plus the amounts
described in the definition of Transaction Expenses in an
aggregate maximum amount not to exceed that Maximum Acquisition
Cost.
"Default" means any condition or event that after notice or
lapse of time or both would constitute an Event of Default.
"Disclosure Documents" means the Lessee's (i) Annual Report
on Form 10-K for the year ended December 31, 1997, and
(ii) Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
"DOT" means the U.S. Department of Transportation or any
successor thereto.
"Equipment" means the Freight Car Services, Inc. aluminum
gondola railcars of the type(s) described on each consecutively
numbered Lease Supplement and leased or to be leased by the Lessor
to the Lessee hereunder, together with any and all accessions,
additions, improvements, appliances, parts, instruments,
appurtenances, accessories, furnishings, replacements and other
equipment of whatever nature from time to time incorporated or
installed therein which are or become the property of the Lessor
pursuant to the terms of this Lease.
"Equipment Documents" means the disclosure materials related
to the description and specifications of the Equipment, as such
documents may be amended or supplemented from time
3
to time provided to the Lessor by the Lessee, and identified as such
by the parties hereto on the Closing Date.
"Estimated Residual Value" for any Item of Equipment means
the amount obtained by multiplying (a) the percentage set forth in
the Lease Supplement for such Item under the caption "Estimated
Residual Value Percentage" applicable to the Basic Term or Renewal
Term then ending, by (b) the Acquisition Cost for such Item.
"Event of Default" means any of the events referred to in
Section 21 hereof.
"Event of Loss" with respect to any Item of Equipment means
(except as caused by the Lessor's gross negligence or willful
misconduct, other than any such negligence or misconduct as may be
imputed to Lessor solely by reason of its interest in the
Equipment) (i) the permanent loss of such Item of Equipment,
(ii) unless the Lessee has irrevocably exercised its purchase
option as to that Item under Section 27(b) hereof or the Lessee
has irrevocably exercised its sale option as to that Item under
Section 27(c) hereof, the loss of the use of such Item of
Equipment due to theft or disappearance for a period in excess of
90 days or the remainder of the then applicable Term, whichever is
less, (iii) the destruction, the determination that such Item of
Equipment is damaged beyond repair, or rendition of such Item of
Equipment permanently unfit for normal use for any reason
whatsoever, (iv) the condemnation, confiscation, seizure, or
requisition of title to such Item of Equipment by any Governmental
Authority under the power of eminent domain or otherwise, (v) the
confiscation, condemnation, seizure of or requisition of use of
such Item of Equipment by any Governmental Authority other than
the United States (which shall only be an Event of Loss if
continuing at the end of the then-applicable Term) for a period in
excess of 360 days (or the remainder of the then-applicable Term,
whichever is less), (vi) the use of such Item of Equipment shall
have been prohibited in interstate commerce for a continuous
period in excess of the lesser of 360 days or the balance of the
then-applicable Term as a result of any rule, regulation or order
of, or other action by, the U.S. government or any agency or
instrumentality thereof or (vii) damage to such Item or any part
thereof or any other event that results in an insurance settlement
on the basis of a total loss or constructive or compromised total
loss.
"Expenses" shall mean liabilities, obligations, losses
(excluding loss of anticipated profits, provided that such
exclusion shall not affect Lessor's right to any Make Whole Amount
required to be paid under this Lease), damages, claims, actions,
suits, judgments, fees, charges (including demurrage charges),
penalties and costs, expenses and disbursements (including
reasonable out-of-pocket legal fees and expenses) of any kind and
nature whatsoever.
"Fair Market Sales Value" means, with respect to any Item,
the amount that would be paid in cash in an arm's-length
transaction between an informed and willing purchaser and an
informed and willing seller, neither of whom is under any
compulsion to purchase or sell, respectively, for the ownership of
such Item based on the actual condition of such Item.
"FRA" means the Federal Railroad Administration or any
successor thereto.
4
"Funding" means the payment of the aggregate Acquisition
Cost for all Items of Equipment covered by the initial Lease
Supplement.
"Funding Date" means the date on which the Funding occurs.
"Funding Notice" is defined in Section 4(b) hereof.
"Governmental Authority" shall mean any Federal, state,
county, municipal or regional governmental authority, agency,
board, body, instrumentality or court (including the DOT and
AAR).
"[I]ncluding" means including, without limitation.
"Indemnified Party" is defined in Section 18 hereof.
"Internal Revenue Service" means the United States Internal
Revenue Service or any Successor agency or regulatory authority.
"Item of Equipment or "Item" means one of the units of
Equipment more specifically described in a Lease Supplement and
leased to the Lessee hereunder, together with the related
appurtenances, additions, improvements, equipment and replacements
thereto.
"Lease Supplement" means a Lease Supplement substantially in
the form attached hereto as Exhibit A, to be executed by the
Lessor and the Lessee with respect to the Items of Equipment
covered thereby as provided in Section 4 hereof, evidencing that
each such Item is leased hereunder.
"Lessee" is defined in the preamble of this Lease.
"Lessor" is defined in the preamble of this Lease.
"Lien" means liens, mortgages, encumbrances, pledges,
claims, leases, charges and security interests of any kind.
"Make Whole Amount" means, as of the date of any purchase
option pursuant to Section 27(b) hereof, the excess, if any, of
(i) the present value, as of such date of purchase, of the
remaining Principal Components and Interest Components with
respect to such Item that, but for such purchase, would have been
payable under this Lease on the Rent Payment Dates after such
purchase over (ii) the purchase aggregate Unamortized Lease
Balance remaining to be paid under this Lease with respect to such
item. Such present value shall be determined by discounting the
amounts of such installments semi-annually from their respective
payment dates to the date of purchase at a rate equal to the
Treasury Rate (as defined below) plus 0.50% per annum. "Treasury
Rate" with respect to the Make Whole Amount means the weekly
average of the yield
5
on a hypothetical United States Treasury
security with a constant maturity matching the remaining average
life to maturity of such Principal Component. The hypothetical
Treasury security is to be derived by referring to the most
recently available information (by not more than ten (10) nor less
than five (5) Business Days preceding the date of the purchase)
contained in the Federal Reserve Board's Statistical Release
H.15 (519) (or its successor publication). If there is a Treasury
constant maturity listed in said Federal Reserve Release H.
15 (519) with a maturity equal to the then-remaining average life
to maturity of such Principal Component then the yield on such
Treasury security shall be the Treasury Rate. If no such Treasury
constant maturity exists, then the weekly average yield on such
Treasury security shall be linearly interpolated from the weekly
average yields on (a) the Treasury security with constant maturity
closest to and greater than the then-remaining average life to
maturity of such Principal Component and (b) the Treasury security
with a constant maturity closest to and less than the
then-remaining average life to maturity of such Principal
Component. If there shall be no Treasury security with a constant
maturity less than the then-remaining average life to maturity on
such Principal Component, then the Treasury Rate shall mean the
weekly average yield on the Treasury security with the shortest
Treasury constant maturity. If said Federal Reserve Release
H.15 (519) or a successor publication refers to no applicable
yield on Treasury securities, then the Treasury Rate shall be
determined in any manner mutually acceptable to the Lessor and the
Lessee.
"Manufacturer" means, with respect to each Item of
Equipment, the manufacturer or supplier thereof specified in the
Lease Supplement with respect to such Item.
"Maximum Acquisition Cost" means $12,837,171.91.
"Maximum Lessee Risk Amount" for any Item of Equipment shall
mean the percentage set forth in the Lease Supplement for such
Item under the caption "Maximum Lessee Risk Percentage" applicable
to the Basic Term or any Renewal Term then ending, multiplied by
the Acquisition Cost for such Item.
"Maximum Lessor Risk Amount" for any Item of Equipment shall
mean the percentage set forth in the Lease Supplement for such
Item under the caption "Maximum Lessor Risk Percentage" applicable
to the Basic Term or any Renewal Term then ending, multiplied by
the Acquisition Cost for such Item.
"Maximum Term" for each Item of Equipment shall mean the
twentieth anniversary of the Closing Date.
"Multiemployer Plan" shall have the meaning assigned to the
term "multiemployer plan" in Section 3(37) of ERISA.
"Net Proceeds of Sale" is defined in Section 28.
"1935 Act" means the Public Utility Holding Company Act of
1935, as amended.
6
"Permitted Liens" shall mean:
(a)(i) any rights in favor of the Lessor or any
Assignee under the Lease and the related documents and (ii)
any rights of any Persons entitled to use of the Equipment
in accordance with this Lease;
(b) any Lien on the Lessee's rights in this Lease
and Lessee's interest in the Equipment contained in
mortgages granted by the Lessee which cover after acquired
property of the Lessee and which otherwise subject all or
substantially all of the Lessee's assets to such mortgage,
provided that any such Lien on the Equipment is subordinate
to and does not adversely affect Lessor's interest in the
Equipment under this Lease, and in connection therewith
Lessee warrants that no one other than Lessor has made any
filing with the Surface Transportation Board or the
Interstate Commerce Commission covering any of the Equipment
subject to this Lease (except for Freight Car Services, Inc.
whose filing is being terminated contemporaneously
herewith), and in the event that the mortgagee under any of
Lessee's mortgages claims that it has an interest in such
Equipment which is superior to Lessor's interest therein,
such claim shall constitute an Event of Default under
Section 21(c) of this Lease;
(c) any Lien (including Liens of landlords,
carriers, warehousemen, mechanics or materialmen) in favor
of any Person securing payment of the price of goods or
services provided in the ordinary course of business for
amounts the payment of which is not overdue or is being
contested in good faith by appropriate proceedings
diligently prosecuted so long as such proceedings do not
involve any material risk of the sale, forfeiture or loss of
one or more Items of Equipment or any part thereof and such
proceedings do not involve any material risk of civil
lability to Lessor or any risk of criminal liability to
Lessor (other than minor fines which do not adversely affect
Lessor);
(d) any Lien arising out of any act of, or any
failure to act by, or any claim (including any claim for
taxes) against, the Lessor, any Assignee or any of their
Affiliates which is either not required to be indemnified by
Lessee under this Lease or unrelated to the transactions
contemplated by this Lease or any Lien arising out of any
breach by the Lessor, any Assignee or any of their
Affiliates of their obligations under this Lease or any
related documents;
(e) any Lien for taxes, assessments or other
governmental charges which are not delinquent or the
validity of which is being contested in good faith by
appropriate proceedings diligently prosecuted so long as
such proceedings do not involve any material risk of the
sale, forfeiture or loss of one or more Items of Equipment
or any part thereof and such proceedings do not involve any
material risk of civil liability to Lessor or any risk of
criminal liability to Lessor (other than minor fines which
do not adversely affect Lessor); and
7
(f) attachments, judgments and other similar Liens
arising in connection with court proceedings, provided that
within ninety (90) days of the attachment thereof (or
fifteen (15) days prior to any execution or sale pursuant
thereto), the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are
being contested in good faith and by appropriate proceedings
so long as such proceedings do not involve any material risk
of the sale, forfeiture or loss of one or more Items of
Equipment or any part thereof and such proceedings do not
involve any material risk of civil liability to Lessor or
any risk of criminal liability to Lessor (other than minor
fines which do not adversely affect Lessor).
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint
stock company, trust, trustee(s) of a trust, unincorporated
organization, or Governmental Authority.
"Plan" shall mean (a) with respect to the Lessee, any plan
described in Section 3(3) of ERISA under which the Lessee or any
ERISA Affiliate of the Lessee has any liability, and (b) with
respect to any other person, any employee benefit plan or other
plan established or maintained by such person for the benefit of
such person's employees and to which Title IV of ERISA applies.
"Remarketing Period" shall have the meaning given to such
term in Section 27(c) hereof.
"Renewal Term" for any Item of Equipment, means each one
year period (not to exceed nineteen consecutive one year periods)
following the end of the Basic Term for such Item with respect to
which the Lessee has the option to renew this Lease pursuant to
Section 27(a) hereof. Notwithstanding anything to the contrary
which may be contained in this Lease, the Basic Term of this Lease
with respect to any Item of Equipment shall in no event exceed the
Maximum Term.
"Rent Payment Date" shall mean March 8, 1999, and each
six-month anniversary of such date through the Term of the Lease.
"Rental Period" for each Item of Equipment means
(i) initially, the period commencing on the Funding Date for the
applicable Lease Supplement and ending on the immediately
succeeding Rent Payment Date and (ii) thereafter, each period
beginning on the first day after the last day of the preceding
Rental Period and ending on the next succeeding Rent Payment Date.
"Responsible Officer" means, with respect to the subject
matter of any covenant, agreement or obligation of any Person
contained herein in the related transaction documents, the
President, any Vice President, the Chief Financial Officer or the
Treasurer who, in the normal performance of such person's
operational responsibility, would have knowledge of such matter
and the requirements with respect thereto.
"SEC" means the United States Securities and Exchange
Commission or any successor agency or regulatory authority.
8
"Supplemental Payments" means without duplication all
amounts, liabilities and obligations which the Lessee assumes or
agrees to pay hereunder to the Lessor or others, including
payments of Casualty Loss Value and any indemnities that may
become payable by the Lessee hereunder, but excluding Basic Rent.
"Tax Indemnitee" is defined in Section 17 hereof.
"Term" means the full term of this Lease with respect to any
Item of Equipment, including the Basic Term and each Renewal Term
(if any).
"Termination Date" for any Item of Equipment, means the last
day of the Basic Term of such Item, or if the Term of such Item
has been renewed pursuant to Section 27(a) or 27(d), the last day
of the Renewal Term of such Item.
"Transaction Expenses" means all costs and expenses incurred
in connection with the preparation, execution and delivery of this
Lease and the transaction documents and the transactions
contemplated thereby including:
(a) the reasonable fees, out-of-pocket expenses and
disbursements of any law firm or other external counsel of
the Lessor in connection with the negotiation and
documentation of this Lease and the transactions
contemplated hereby; and
(b) any and all taxes and fees incurred in
recording, registering or filing this Lease, any Lease
Supplement or any other transaction document, any deed,
declaration, mortgage, security agreement, notice or
financing statement with any public office, registry or
governmental agency in connection with the transactions
contemplated by the transaction documents.
"Unamortized Lease Balance" means the sum reflected on
Schedule II to this Lease for the relevant date of determination.
"Western Resources Merger Transaction" means, collectively,
the mergers and related transactions contemplated by the Amended
and Restated Plan of Merger, dated as of March 18, 1998, by and
among Western Resources, Inc., Kansas Gas & Electric Company, NKC,
Inc. and the Borrower.
(b) Construction. The words "this Lease", "herein",
"hereunder", "hereof" or other like words mean this
Equipment Leasing Agreement (including each schedule,
exhibit, and other attachment), as from time to time
supplemented and amended.
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2. Agreement for Purchase and Lease of Equipment.
(a) Purchase. Subject to the terms and conditions
of this Lease, on the Funding Date the Lessor shall purchase
the Items of Equipment listed on the initial Lease
Supplement for the aggregate Acquisition Cost specified in
such Lease Supplement. The Lessor will pay the invoiced
cost of the Equipment to the Manufacturer and the remainder
of the Acquisition Cost to the Persons entitled to such
payments as part of Transaction Expenses by wire transfer of
immediately available funds to such account in the United
States as designated in writing to the Lessor at least two
Business Days prior to the Funding Date.
(b) Lease. Subject to, and upon all of the terms
and conditions of this Lease, the Lessor hereby agrees to
lease to the Lessee and the Lessee hereby agrees to lease
from the Lessor each Item of Equipment listed on a Lease
Supplement for the Term with respect to such Item. Provided
that no Event of Default has occurred and is continuing
hereunder, neither the Lessor or any Assignee, nor anyone
claiming through or under the Lessor or any Assignee, shall
cause or allow any Lien attributable to it to exist or arise
against any of the Equipment (except for Permitted Liens
(other than those described in (d) of the definition of
Permitted Liens) and Liens which are required to be removed
by Lessee under the terms of this Lease) or interfere with
the Lessee's quiet enjoyment and use of any Item of
Equipment by the Lessee (or any permitted transferee from
the Lessee) during the Term therefor, except as otherwise
expressly permitted hereunder.
3. Conditions Precedent. The Lessor shall have no
obligation to purchase any Item of Equipment nor to lease the same
to the Lessee unless each of the following conditions are
fulfilled to the satisfaction of the Lessor on or prior to the
Funding Date:
(a) this Lease shall have been executed and
delivered by the parties hereto, and no Default or Event of
Default shall have occurred and be continuing;
(b) no material adverse change in the financial
condition of the Lessee which, in the Lessor's reasonable
opinion, would impair the ability of the Lessee to pay and
perform its obligations under this Lease has occurred,
except as expressly contemplated and disclosed under the
Disclosure Documents, since the date of the Disclosure
Documents;
(c) such Item of Equipment shall be free from all
damage and be acceptable to the Lessor, and free and clear
of all Liens, other than any Permitted Lien;
(d) [Intentionally Omitted];
(e) after giving effect to such purchase, the
aggregate Acquisition Cost of all Equipment subject to this
Lease shall not exceed the Maximum Acquisition Cost;
10
(f) the Lessor shall have received an invoice or a
bill of sale for such Item of Equipment from the
Manufacturer thereof, approved for payment by the Lessee,
showing the Lessor as the purchaser of such Item;
(g) the Lessor shall have received a Lease
Supplement for such Item, duly executed by the Lessee, and
dated the Acceptance Date for such Item;
(h) a memorandum of this Lease and the Lease
Supplement covering such Item, shall have been duly filed
with the Surface Transportation Board of the DOT and Uniform
Commercial Code financing statements covering such Item in
form and substance satisfactory to Lessor shall have been
filed in such jurisdictions as may be necessary or
appropriate;
(i) the Lessor shall have received a copy of
resolutions of the Lessee's board of directors authorizing
the execution, delivery and performance by the Lessee of
this Lease;
(j) the Lessor shall have received a fully executed
Funding Notice with respect to the initial Lease Supplement;
(k) if the Funding Date does not occur on the date
hereof, the Lessor shall have received a certificate from
the Lessee (executed on its behalf by a Responsible Officer
of the Lessee) to the effect that the representations and
warranties of the Lessee contained herein shall be true and
correct on and as of the Funding Date with the same effect
as though made on and as of the Funding Date;
(l) the Lessor shall have received certificates of
insurance, loss payable endorsements and other evidence that
the Lessee has complied with the provisions of Section 16;
and
(m) the Lessee and the Lessor shall have executed
and delivered the Purchase Agreement Assignment in
substantially the form of Schedule III hereto.
4. Delivery, Acceptance and Leasing of Equipment;
Funding.
(a) Delivery, Acceptance and Leasing. The Lessor
shall not be liable to the Lessee for any failure or delay
in obtaining any Item of Equipment or making delivery
thereof. Forthwith upon delivery of each Item of Equipment
to the Lessee, the Lessee or its agents will promptly
inspect such Item, and unless the Lessee gives the Lessor
prompt written notice of any defect in or other proper
objection to such Item, the Lessee shall promptly upon
completion of such inspection execute and deliver to the
Lessor a Lease Supplement for such Item, dated the
Acceptance Date of such Item. The execution by the
11
Lessor and the Lessee of a Lease Supplement for an Item of
Equipment shall (a) evidence that such Item is leased under,
and is subject to all of the terms, provisions and
conditions of, this Lease, and (b) constitute the Lessee's
unconditional acceptance of such Item for all purposes of
this Lease.
(b) Funding. The Funding shall be made on notice
from the Lessee to the Lessor received by the Lessor not
later than two Business Days prior to the proposed Funding
Date; provided, however, that (i) the Funding shall be for
an aggregate Acquisition Cost equal to the Commitment Amount
with respect to the initial Lease Supplement or such lesser
amount which shall be acceptable to the Lessee and the
Lessor, and (ii) the aggregate of all Acquisition Costs paid
for by the Lessor, after giving effect to the Funding, shall
not exceed the Maximum Acquisition Cost. The notice of
Funding shall be in the form of Exhibit B (each a "Funding
Notice"), and shall specify the date of the proposed
Funding, the aggregate Acquisition Cost for the Items
covered by the initial Lease Supplement (including
Transaction Expenses) to be funded on such date and the list
of Equipment to be funded by the Lessor on such date, and
shall be accompanied by the Manufacturer's invoices and/or
bills of sale for the Equipment to be funded.
(c) Characterization. As further described herein,
the Lessee and the Lessor hereby agree to treat the
arrangement created pursuant to this Lease as a financing or
conditional sale for Federal income tax purposes.
5. Term. The Basic Term for each Item of Equipment shall
commence on the Basic Term Commencement Date thereof and, unless
this Lease is sooner terminated with respect to such Item (or all
Equipment) pursuant to the provisions hereof, shall end on the
last day of the Basic Term thereof, as specified in the applicable
Lease Supplement, or if this Lease is renewed with respect to such
Item pursuant to Section 27(a) hereof, on the last day of the last
Renewal Term thereof or if this Lease is extended with respect to
such Item pursuant to Section 27(d) hereof, for one or more
Additional Terms as specified therein.
6. Return of Equipment. Upon the expiration or earlier
termination of the Term with respect to each Item of Equipment
(unless the Lessee has exercised its purchase option with respect
thereto pursuant to Section 27(b) hereof or a third party sale
thereof has been consummated on the Termination Date with respect
thereto pursuant to Section 27(c) hereof), the Lessee will, at its
expense, surrender and deliver possession of each Item of
Equipment to the Lessor or the Lessor's agent on the Termination
Date at such location(s) in the continental United States, no
greater than fifty (50) miles from Kansas City, Missouri or in
route between Lessee's facilities and the Powder River Basin in
Wyoming as shall be designated by the Lessor (not to exceed two
(2) locations) in writing at least sixty (60) days prior to the
termination or expiration of the applicable Term or in the absence
of such designation, at the then location of each such Item. At
the time of such return to the Lessor, each Item of Equipment (and
each part or component thereof) shall:
12
(a) be in as good condition, state of repair, and
appearance as when delivered to the Lessee hereunder,
ordinary wear and tear excepted, and not in immediate need
of any further repair or reconditioning,
(b) comply with all laws and rules referred to in
Sections 9 and 10 hereof, shall have been maintained in
accordance with the terms of this Lease (and all
modifications or alterations of such Equipment that were
undertaken prior to the Termination Date shall have been
fully accomplished and completed), and no Default or Event
of Default shall have occurred and be continuing hereunder,
(c) conform to and comply with all applicable
Governmental Authority (including DOT and FRA) safety rules
and regulations (without exemption, waiver or deferment),
(d) be suitable for interchange under the rules and
regulations of the AAR and FRA, to the extent the Equipment
was originally designed and approved, provided that the
Lessee shall not be required to make any modifications which
would not be required of the Lessee if the Lessee were to
continue to operate the Equipment,
(e)(i) have attached or affixed thereto any
addition, modification or improvement considered an
accession thereto as provided in Section 11 hereof,
(ii) have removed therefrom in a workmanlike manner if so
requested by the Lessor or any Assignee at the Lessee's
expense any addition, modification or improvement which, as
provided in Section 11 hereof, is owned by the Lessee, and
(iii) have removed therefrom, or painted over, in either
case in a workmanlike manner, any insignia or marking
permitted pursuant to Section 12 hereof,
(f) be suitable for hauling coal,
(g) be free from all material accumulations or
deposits from commodities transported in or on it while in
the service of the Lessee and be free of corrosion, ordinary
wear and tear excepted,
(h) shall not have any missing or damaged parts or
any structural or mechanical damage on any surface or
device, ordinary wear and tear excepted, and
(i) be free and clear of all Liens, other than the
Permitted Liens specified in clause (a)(i) or clause (d) of
the definition thereof.
The Lessee shall pay for any repairs necessary to restore
any Item of Equipment to the condition required by this Lease.
13
For the purpose of delivering possession of any Items of
Equipment as above required, the Lessee shall at its own cost,
expense and risk:
(i) forthwith and in the usual manner (including, to
the extent legally required by Applicable Law,
to protect the Lessor's or any Assignee's
interest in the Items of Equipment) give prompt
electronic and written notice to all railroads
to which any Items of Equipment have been
interchanged or which may have possession
thereof to return the Items of Equipment and
place such Items of Equipment upon such storage
tracks along the rail routes then used by the
Lessee in the ordinary usage of the Equipment as
the Lessor reasonably may designate;
(ii) if requested by Lessor, cause such Items of
Equipment to be stored on such tracks at the
risk of the Lessee without charge to the Lessor
or any Assignee for insurance, rent or storage
until all such Items of Equipment have been
sold, leased or otherwise disposed of by the
Lessor for a period not to exceed thirty (30)
days after the Termination Date; and
(iii) deliver to the Lessor, if requested, all manuals
and inspection, modification, overhaul and
maintenance records applicable to such Items of
Equipment (which records may exclude the cost of
repairs, maintenance, modifications and
overhauls).
During any storage period, the Lessee will maintain and keep
the Items of Equipment in the manner set forth in Section 10
hereof and permit the Lessor or any Person designated by it,
including the authorized representative or representatives of any
prospective purchaser, lessee or other user of any Items of
Equipment, to inspect the same during normal business hours at
such inspector's own risk, cost and expense.
Until the Equipment has been returned to the Lessor in the
condition and as otherwise provided in this Section 6 hereof,
purchased under Section 27(b) hereof or sold under Section 27(c)
hereof, the Lessee shall continue to pay the Lessor rent at a per
diem rate equal to the daily equivalent of the Basic Rent that was
payable on the last Rent Payment Date until such Items of
Equipment are returned to the Lessor; provided that during such
holdover period, the Lessee shall use its best efforts to secure
the return of the Equipment as required under this Section 6.
Lessee shall pay all rent payable pursuant to this Section 6 on a
monthly basis, with all amounts being paid within thirty (30) days
after all Items of Equipment have been returned to Lessor in
accordance with this Section 6, in each case after Lessee has
received from Lessor an invoice for such amount. The provision
for payment pursuant to this Section 6 shall not be in abrogation
of the Lessor's right under this Section 6 to have such Equipment
returned to it hereunder.
14
7. Basic Rent and Other Payments.
(a) Basic Rent. The Lessee hereby agrees to pay to
the Lessor Basic Rent semi-annually, in arrears, for each
Item of Equipment during the Basic Term thereof on each Rent
Payment Date during the Basic Term in the respective amounts
set forth opposite such Rent Payment Date on Schedule II
hereto.
(b) Supplemental Payments. The Lessee also agrees
to pay to the Lessor, or to whomsoever shall be entitled
thereto as expressly provided herein, all Supplemental
Payments, promptly as the same shall become due and owing,
and in the event of any failure on the part of the Lessee so
to pay any such Supplemental Payment hereunder, the Lessor
shall (except as otherwise specified herein) have all
rights, powers and remedies provided for herein or by law or
equity or otherwise in the case of nonpayment of Basic Rent.
(c) Method of Payment. All payments of Basic Rent
and Supplemental Payments required to be made by the Lessee
to the Lessor shall be made by wire transfer of immediately
available funds no later than 12:00 noon, New York time, to
such account of the Lessor as specified on Schedule I hereto
(or such other account as Lessor may hereafter designate in
writing to Lessee). If the date that any payment of Basic
Rent is due is other than a Business Day, the payment of
Basic Rent otherwise payable on such date shall be payable
on the next succeeding Business Day with no adjustment to
the payment amount. In the event of any assignment to an
Assignee pursuant to Section 13(b) hereof in accordance with
Section 34, all payments which are assigned to such
Assignee, whether Basic Rent, Supplemental Payments or
otherwise, shall be paid by wire transfer of immediately
available funds to an account designated by the Person
entitled to receipt thereof.
8. Net Lease. This Lease is a net lease. Except as may
otherwise be provided for in this Lease, the Lessee acknowledges
and agrees that the Lessee's obligations to pay Basic Rent for all
Equipment leased hereunder, and to pay all Supplemental Payments
payable hereunder shall be unconditional and irrevocable under any
and all circumstances, shall not be subject to cancellation,
termination, modification or repudiation by the Lessee, and shall
be paid and performed by the Lessee without notice or demand and
without any abatement, reduction, diminution, setoff, or
recoupment whatsoever, including any abatement, reduction,
diminution, setoff, or recoupment due or alleged to be due to, or
by reason of, any past, present or future claims which the Lessee
may have against the Lessor, any Assignee, any Manufacturer of the
Equipment or any Item thereof, or any other Person for any reason
whatsoever, or any defect in the Equipment or any Item thereof, or
the condition, design, operation or fitness for use thereof, any
damage to, or any loss or destruction of, the Equipment or any
Item thereof, or any Liens or rights of others with respect to the
Equipment or any Item thereof, or any prohibition or interruption
of or other restriction against the Lessee's use, operation or
possession of the Equipment or any Item thereof, for any reason
whatsoever, or any interference with such use,
15
operation or possession by any Person or entity, or any default by the
Lessor in the performance of any of its obligations herein contained,
or any other indebtedness or liability, howsoever and whenever
arising, of the Lessor, or of any Assignee, or of the Lessee to
any other Person, or by reason of insolvency, bankruptcy or
similar proceedings by or against the Lessor, any Assignee or the
Lessee, or for any other reason whatsoever, whether similar or
dissimilar to any of the foregoing, any present or future law to
the contrary notwithstanding; it being the intention of the
parties hereto that all Basic Rent and Supplemental Payments
payable by the Lessee hereunder shall continue to be payable in
all events and in the manner and at the times herein provided,
without notice or demand, unless the obligation to pay the same
shall be terminated pursuant to the express provisions of this
Lease. However, nothing in this Section 8 shall prevent the
Lessee from separately pursuing any rights it might have against
the Lessor or any other Person. Notwithstanding the foregoing,
this Lease is intended to and shall be construed as an operating
lease for financial accounting purposes. If this Lease is
determined not to be a true lease for purposes of the Uniform
Commercial Code, Lessee's interest in the Equipment shall serve as
security for the obligations of the Lessee hereunder.
9. Use of Equipment; Compliance with Laws. The Lessee
agrees that the Equipment will be used and operated solely in the
conduct of its business or as otherwise provided by Section 13(a)
hereof and in compliance with any and all applicable insurance
policy terms, conditions, and provisions for the insurance
required by Section 16 hereof and with all Applicable Laws of any
Governmental Authority applicable to the use and operation of the
Equipment, including the AAR Interchange Rules, the rules and
regulations of the FRA, the DOT and the Surface Transportation
Board, and environmental, noise and pollution laws (including
notifications and reports); provided, however, that the Lessee
shall not be obligated to so comply with laws, rules or
regulations (i) whose application or validity is being contested
diligently and in good faith by appropriate proceedings, so long
as such proceedings do not involve any material risk of the sale,
forfeiture or loss of one or more Items of Equipment or any part
thereof and such proceedings do not involve any material risk of
civil liability to Lessor or any risk of criminal liability to
Lessor (other than minor fines which do not adversely affect
Lessor and which are indemnified for by Lessee), (ii) compliance
with which shall have been excused or exempted (subject to
Section 6(c)) by a nonconforming use permit, waiver, extension or
forbearance exempting it from such laws, rules or regulations,
(iii) if failure to comply shall impose no material risk of civil
liability or any risk of criminal lability on the Lessor (other
than minor fines which do not adversely affect Lessor and which
are indemnified for by Lessee), or (iv) if failure of compliance
would impose no additional liability on the Lessor or adverse
consequences of the Lessor's rights under this Lease or its
interest in the Equipment. The Equipment shall in no event be
used or located outside of the continental limits of the United
States, Canada, Mexico and Alaska unless at least thirty (30)
days' prior written notice of such use or location is provided to
Lessor, Lessor shall have consented thereto and all filings,
recordings, deposits, or giving of notice necessary to protect the
rights of the Lessor in or to the Lease and the Equipment shall
have been made, such consent not to be unreasonably withheld;
provided, however, Lessee shall give Lessor thirty (30) days'
notice prior to first operating the Equipment in Canada and, in
connection therewith, Lessee shall execute and deliver to Lessor
all documents Lessor may
16
reasonably request to protect the rights of Lessor in or to this
Lease and the Equipment. The Lessee shall not use any Item of
Equipment, or permit any Item of Equipment to be used, for the
transportation or storage of any substance which is any substance
which is specifically listed or designated as "oil" under Section
1001 of the Oil Pollution Act of 1990 and which is subject to the
provisions of that Act or which is categorized as, or required to
be labeled as, "poison" or "poisonous", "explosive" or "radioactive"
(or any categories or labels substituted for such categories or
labels as in effect on the day hereof) under 49 CFR 171 or other
applicable Federal rules in effect from time to time regulating
the transportation of hazardous or toxic materials, including
nuclear fuels, radioactive products, asbestos, PCB's or nuclear
wastes, nor will the Lessee permit the Equipment to engage in any
unlawful trade or violate any law or carry any unlawful cargo that
will expose the Equipment to penalty, forfeiture or capture.
10. Maintenance and Repair of Equipment. The Lessee
agrees, at its own cost and expense, to keep, repair, maintain and
preserve the Equipment in good order and operating condition, and
in compliance with such maintenance and repair standards, ordinary
wear and tear excepted, as set forth in the applicable AAR and FRA
rules and regulations and as otherwise may be required to enforce
warranty claims against each Manufacturer of each Item of
Equipment, and except as otherwise permitted by Section 9 hereof
but subject to Section 6 hereof) in compliance with all Applicable
Laws relating to the maintenance and condition of the Equipment,
including environmental, noise and pollution laws and regulations
(including notifications and reports), and suitable for
interchange under the rules of the AAR, to the extent the
Equipment was originally designed and approved and with all lawful
rules of the DOT, the Surface Transportation Board and any other
legislative, executive, administrative or judicial body exercising
any power or jurisdiction over the Equipment, to the extent that
such laws and rules affect the title, operation, maintenance or
use of the Equipment, and in the event that such laws or rules
require any alteration, replacement or addition of or to any part
on any Equipment the Lessee will conform therewith at its own
expense. The Lessee agrees to prepare and deliver to the Lessor
and any Assignee within a reasonable time prior to the required
date of filing (or, to the extent permissible, file on behalf of
the Lessor and any Assignee) any and all reports (other than
income and franchise tax returns and those required under banking
and similar laws) to be filed by the Lessor or any Assignee with
any Federal or state regulatory authority by reason of the
ownership by the Lessor or any Assignee of the Items of Equipment
or the leasing thereof to the Lessee. The Lessee agrees to
maintain all records, logs and other materials required by the AAR
or DOT, or any other Governmental Authority having jurisdiction
over the Items of Equipment or the Lessee, to be maintained in
respect of each Item of Equipment. The Lessee shall, at its own
cost and expense, supply the necessary power and other items
required in the operation of the Equipment. The Lessee hereby
waives any right now or hereafter conferred by law to make repairs
on the Equipment at the expense of the Lessor.
17
11. Replacements; Alterations: Modifications. ln case any
Item of Equipment (or any equipment, part or appliance therein) is
required to be altered, added to, replaced or modified in order to
comply with any Applicable Laws or pursuant to Section 9 or 10
hereof (each, a "Required Alteration"), the Lessee agrees to make
such Required Alteration at its own expense and the same shall
immediately become subject to the terms of this Lease. The Lessee
or any permitted sublessee may make any optional alteration to any
Item of Equipment (each, an "Optional Alteration") provided such
Optional Alteration does not impair the condition, value, use or
remaining useful life of such Item of Equipment. In the event
such Optional Alteration (i) is readily removable without causing
material damage to the Item of Equipment, (ii) is not a part, item
of equipment or appliance which replaces any part, item of
equipment or appliance originally incorporated or installed in or
attached to such Item of Equipment on the Acceptance Date therefor
or any part, item of equipment or appliance in replacement of or
substitution for any such original part, item of equipment or
appliance, and (iii) is not a Required Alteration, so long as no
Default or Event of Default shall have occurred and be continuing,
the Lessee may, as its sole cost and expense, remove such Optional
Alteration. Upon the removal thereof as provided above, such
Optional Alteration shall no longer be deemed subject to this
Lease or part of the Equipment from which it was removed. Any
Optional Alteration not removed as above provided prior to the
return of the Equipment to the Lessor hereunder shall remain the
property of the Lessor. The Lessee agrees that, within thirty
days after the Lessor so requests (but not more frequently than
once per year), the Lessee will give written notice to the Lessor
describing, in reasonable detail, the Required Alterations and
specifying the cost thereof with respect to each Item of Equipment
and the date or dates when made. Any parts installed or
replacements made by the Lessee upon any Item of Equipment
pursuant to its obligation to maintain and keep the Equipment in
good order, operating condition and repair under Section 10 hereof
shall be considered accessions to such Item of Equipment and a
security interest therein shall be immediately vested in the
Lessor. Except as required or permitted by the provisions of this
Section 11, the Lessee shall not modify an Item of Equipment
without the prior written authority and approval of the Lessor.
12. Identification Marks; Inspection. The Lessee will
cause each Item to be kept numbered with the identification number
as shall be set forth on the Lease Supplement therefor, and the
Lessee will keep and maintain, plainly, distinctly, durably, and
conspicuously marked on each side of each Item, in letters not
less than one inch in height, the words "Subject to Lease or
security interest filed with the U.S. Surface Transportation
Board", with appropriate changes thereof and additions thereto as
from time to time may be required by law in order to protect the
Lessor's title to and interests in such Item and the rights of the
Lessor and of any Assignee. The Lessee will replace promptly any
such words which may be removed, defaced, obliterated or
destroyed. The Lessee will not change the identification number
of any Item unless and until a statement of new number or numbers
to be substituted therefor shall have been deposited by the Lessee
in all public offices where this Lease shall have been filed,
recorded and deposited. As promptly as practicable after any
change in identification number, Lessee shall notify Lessor of
such change. The Items of Equipment may be lettered with the
names or initials or other insignia customarily used by the Lessee
or any permitted sublessee. The Lessee shall not allow the name
18
of any Person to be placed upon any Item of Equipment as a
designation that might reasonably be interpreted as indicating a
claim of ownership thereto or a security interest therein by any
Person other than the Lessor or any Assignee. The Lessor shall
have the right (at its risk and expense, or at the Lessee's
expense if a Default or Event of Default exists) to inspect the
Equipment and the Lessee's records pertaining to the Equipment no
more frequently than once in any twelve consecutive months, so
long as no Default or Event of Default shall have occurred and be
continuing, at such reasonable times as it shall request during
the Term, not to interfere with Lessee's operations.
13. Assignment and Subleasing; Quiet Enjoyment.
(a) By the Lessee. The Lessee may, without any
consent of the Lessor, so long as no Default or Event of
Default shall have occurred and be continuing, sublease any
Item of Equipment to any U.S.-based operator, provided,
however, that the following conditions shall apply thereto:
(i) any sublease shall be expressly subject to and
subordinate to the terms and conditions of this Lease;
(ii) THE LESSEE'S OBLIGATIONS (FINANCIAL OR OTHERWISE) UNDER
THIS LEASE SHALL CONTINUE IN THEIR ENTIRETY IN FULL FORCE
AND EFFECT AS THE OBLIGATIONS OF A PRINCIPAL AND NOT OF A
SURETY; (iii) the sublessee shall not engage in activities
with the Equipment substantially different from the Lessee's
activities without prior consent from the Lessor, which
consent shall not be unreasonably withheld; (iv) the
sublease does not adversely affect the Lessor's interest and
rights in this Lease nor the Lessor's interest and rights in
the Equipment; (v) the Lessee shall provide the Lessor
prompt written notice, not to exceed ten (10) Business Days
after execution of such sublease, of any such sublease of
any Item of Equipment, which notice shall describe the
parties, term and applicable Items of Equipment subject to
any such agreement or arrangement; and (vi) the term of such
sublease (including all available renewal terms) shall not
extend beyond the termination date of the last Renewal Term
for which Lessee has exercised its renewal option. THE
LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
LESSOR, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD,
ASSIGN, TRANSFER OR ENCUMBER (EXCEPT FOR PERMITTED LIENS AND
AS MAY OTHERWISE BE PERMITTED HEREBY) ITS RIGHTS, INTERESTS
OR OBLIGATIONS UNDER THIS LEASE AND ANY SUCH ASSIGNMENT,
TRANSFER OR ENCUMBERING (EXCEPT FOR THE PERMITTED LIENS AND
AS MAY OTHERWISE BE PERMITTED HEREBY) BY THE LESSEE SHALL BE
NULL AND VOID. Lessee may enter into a joint venture or
pooling arrangement or create a special purpose subsidiary
to operate such railcars, and, so long as Lessee remains
bound to pay and perform all of the obligations of Lessee
under this Lease, any such arrangements will not be deemed
to have relinquished control or violated this Section 13(a)
of the Lease.
(b) By the Lessor. The Lessor may, at any time,
without the consent of the Lessee, sell, assign or transfer
to any Person all or any part of the Lessor's rights,
19
obligations, or interest in, to and under the Equipment or
any Item(s) thereof, this Lease, any Lease Supplement and/or
any Basic Rent and Supplemental Payments payable under this
Lease or any Lease Supplement so long as (a) such Person is
an institutional investor (organized under the laws of the
United States or any state thereof) and, at the time of
transfer, shall not be the subject of any bankruptcy,
insolvency or other similar proceedings; (b) such Person (or
a guarantor acceptable to Lessee) shall have a tangible net
worth in excess of $50 million; (c) the transfer shall not
result in a violation of any Applicable Law; (d) 30 days
prior written notice shall be given to Lessee by Lessor of
any proposed transfer; (e) Lessor (or such Person) shall pay
all expenses of Lessee; and (f) Lessor must transfer not
less than all of the Equipment then remaining under the
Lease. The Lessor shall obtain the approval of the Lessee,
which such approval shall not be unreasonably withheld or
delayed, prior to the time the Lessor sells, assigns or
transfers all or any part of the Lessor's rights,
obligations, title or interest in, to and under the
Equipment or any Item(s) thereof, this Lease, any Lease
Supplement and/or any Basic Rent and Supplemental Payments
payable under this Lease or any Lease Supplement to any
Person other than as provided in the immediately preceding
sentence. Any Person to whom any such sale, assignment or
transfer is made in accordance with the terms of this Lease
is herein called an "Assignee" and any such sale, assignment
or transfer is herein called an "assignment". The Lessee
agrees to execute any and all related acknowledgments,
consents, amendments (necessary or appropriate to reflect
such assignment) and other documents, and to make any and
all registrations and filings (including filings under the
Uniform Commercial Code) that may be reasonably requested by
the Lessor or an Assignee, all at the Lessor's expense, in
connection with any such assignment. Each Assignee shall
have and may enforce all of the rights and benefits of the
Lessor hereunder with respect to the Item(s) of Equipment
and related Lease Supplement(s) covered by the assignment.
Each such assignment shall be subject to the Lessee's rights
hereunder. Notwithstanding anything to the contrary in this
Lease, the Lessee shall be under no obligation to any
Assignee except upon written notice of such assignment from
the Lessor and compliance with the terms of Section 34
below; provided, however, that until such notice and
compliance with Section 34, Lessee shall deem and treat
Lessor as the Party entitled to the rights and benefits of
"Lessor" hereunder. Upon written notice to the Lessee of an
assignment and compliance with the terms of Section 34
below, the Lessee agrees to pay the Basic Rent and
Supplemental Payments with respect to the Item(s) of
Equipment covered by such assignment to such Assignee to a
United States bank account in accordance with the
instructions specified in such notice without any abatement,
setoff, or recoupment whatsoever, and to otherwise comply
with all notices, directions and demands which shall be
properly given by the Lessor or such Assignee with respect
to such Item(s), in accordance with the provisions of this
Lease. Notwithstanding any such assignment, all obligations
of the Lessor to the Lessee under this Lease shall be and
remain enforceable by the Lessee against the Lessor (unless
and until Lessee has notice of such assignment and such
assignment has been made in accordance with the terms of
this Section 13 and Section 34 below and thereafter against
any Assignee to whom an assignment has been made).
20
(c) Quiet Enjoyment. So long as no Default or Event
of Default shall have occurred and be continuing hereunder,
the Lessee and its Affiliates (to the extent permitted by
the terms hereof) shall be entitled to the possession and
use of the Items of Equipment upon lines of railroad over
which the Lessee or its Affiliates has or have trackage or
other operating rights or over which railroad equipment of
the Lessee or its Affiliates is operated pursuant to
contract and shall be entitled to permit the use of the
Items of Equipment by connecting and other carriers in the
usual interchange of traffic or pursuant to run-through or
trip-lease agreements, provided, however, that the LESSEE'S
OBLIGATIONS (FINANCIAL OR OTHERWISE) UNDER THIS LEASE SHALL
CONTINUE IN THEIR ENTIRETY IN FULL FORCE AND EFFECT AS THE
OBLIGATIONS OF A PRINCIPAL AND NOT OF A SURETY. The Lessee
may receive and retain compensation for the use of any of
the Items of Equipment from railroads or other entities so
using such Items of Equipment.
14. Liens. The Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with
respect to (i) the Equipment or any Item thereof, or the Lessor's
interest therein, or (ii) this Lease or any of the Lessor's
interests hereunder, except in the case of either clause (i) or
(ii), Permitted Liens. The Lessee, at its own expense, will
promptly pay, satisfy and otherwise take such actions as may be
necessary to keep this Lease and the Equipment free and clear of,
and to duly discharge or eliminate or bond in a manner
satisfactory to the Lessor and each Assignee, if any, any such
Lien not excepted above if the same shall arise at any time. The
Lessee will notify the Lessor and each Assignee, if any, in
writing promptly upon becoming aware of any tax or other Lien
(other than any Permitted Lien excepted above) that shall attach
to the Equipment or any Item of Equipment, in reasonable detail.
15. Loss, Damage or Destruction.
(a) Risk of Loss, Damage or Destruction. The Lessee
hereby assumes all risk of loss, damage, theft, taking,
destruction, confiscation, requisition or commandeering,
partial or complete, of or to each Item of Equipment,
however caused or occasioned (except as caused or occasioned
by the Lessor's or any Assignee's gross negligence or
willful misconduct), such risk to be borne by the Lessee
with respect to each Item of Equipment from the date of this
Lease, and continuing until such Item of Equipment has been
returned to the Lessor in accordance with the provisions of
Section 6 hereof or has been purchased by the Lessee or sold
in accordance with the provisions of Section 27 hereof. The
Lessee agrees that no occurrence specified in the preceding
sentence shall impair, in whole or in part, any obligation
of the Lessee under this Lease, including the obligation to
pay Basic Rent, until such obligation is terminated in
accordance with the terms of this Lease.
(b) Payment of Casualty Loss Value Upon an Event of
Loss. Subject to Section 15(c), if an Event of Loss occurs
with respect to an Item of Equipment during the
21
Term, the Lessee shall, within thirty (30) days after such
Event of Loss, give the Lessor written notice thereof and shall
pay to the Lessor on the applicable Casualty Loss Value Payment
Date the sum of (i) all unpaid Basic Rent payable for such
Item of Equipment for any Rental Period in which the Event
of Loss has occurred, plus (ii) the Casualty Loss Value of
such Item of Equipment determined as of the immediately
preceding Rent Payment Date plus interest thereon at the
Applicable Rate from such preceding Rent Payment Date
through the Applicable Casualty Loss Value Payment Date,
plus (iii) all other Supplemental Payments due for such Item
of Equipment as of the date of payment of the amounts
specified in the foregoing clauses (i) and (ii). Any
payments received at any time by the Lessor or by the Lessee
from any insurer or other party as a result of the
occurrence of such Event of Loss will be applied in
reduction of the Lessee's obligation to pay the foregoing
amounts, if not already paid by the Lessee, or, if already
paid by the Lessee, will be applied to reimburse the Lessee
for its payment of such amount (unless a Default or Event of
Default exists, in which case the Lessor may first apply any
such payments in reduction of the Lessee's obligation to pay
any other amounts due from the Lessee). Upon payment in
full of such Casualty Loss Value and Basic Rent, (A) the
obligation of the Lessee to pay Basic Rent hereunder with
respect to such Item of Equipment shall terminate and the
Term of this Lease with respect to such Item shall
terminate, and (B) the Lessor shall transfer to the Lessee,
"as is, where is" without recourse or warranty except as to
the absence of Liens described in clause (d) of the
definition of Permitted Liens, all right, title and interest
conveyed to the Lessor in and to such Item of Equipment.
(c) Substitution. Provided no Default or Event of
Default shall have occurred and be continuing, Lessee may,
in lieu of payment of the Casualty Loss Value for any Item
of Equipment due and owing as provided in Section 15(b),
convey or cause to be conveyed to Lessor within 180 days of
the occurrence of the applicable Event of Loss (or such
longer period as Lessor may reasonably agree), as
replacement for any lost or destroyed Item of Equipment,
title to a replacement Item of Equipment of the same or
similar type, free and clear of all liens and having a
value, utility, remaining useful life and estimated residual
value at least equal to, and being in good operating
condition as, such Item of Equipment, assuming such Item of
Equipment was in the condition and repair required by the
terms hereof immediately prior to the loss or destruction
(such replacement car being hereinafter referred to as a
"Replacement Car"). Prior to or at the time of any such
conveyance, the Lessee, at its own expense, will furnish
Lessor with (i) a warranty bill of sale in form and
substance satisfactory to Lessor, with respect to such
Replacement Car, (ii) a Lease Supplement and an Acceptance
Certificate, subjecting such Replacement Car to this Lease,
duly executed by Lessee, suitable for execution by Lessor
and, upon such execution, for filing for recordation in the
same manner as provided for herein (and Lessee shall
promptly file the same for recordation and furnish to Lessor
satisfactory evidence thereof), (iii) an opinion of counsel
to the effect that (x) the bill of sale referred to in
clause (i) above constitutes a legal, valid, binding and
enforceable obligation of the seller, (y) such Replacement
Car has been subjected to this Lease free
22
and clear of all liens, and (z) all filings, recordings and
other action necessary or appropriate to perfect and protect
the Lessor's interests in the Replacement Car have been
accomplished, (iv) an acknowledgment by Lessee to Lessor, in
form and substance reasonably satisfactory to Lessor, that
Lessee will indemnify Lessor for any loss or deferral of
depreciation or other adverse tax consequences resulting
from such replacement, (v) an officer's certificate
addressed to Lessor certifying that as of said date, and
upon consummation of the replacement, no Default exists, and
(vi) such other documents and evidence as Lessor may
reasonably request in order to establish the consummation of
the transactions contemplated by this Section 15(c). For
all purposes hereof, upon passage of title thereto to
Lessor, the Replacement Car shall be deemed part of the
property leased hereunder and the Replacement Car shall be
deemed an "Item of Equipment" as defined herein. Upon full
compliance by Lessee with the terms of this Section 15(c) as
determined by Lessor in good faith, Lessor will transfer to
Lessee or its designee, without recourse or warranty (except
as to the absence of Lessor's Liens) all of Lessor's right,
title and interest in and to such destroyed Item of
Equipment.
(d) Application of Payments Not Relating to an Event
of Loss. Any payments (including insurance proceeds)
received at any time by the Lessor or the Lessee from any
party with respect to any loss or damage to any Item or
Items of Equipment not constituting an Event of Loss will be
paid to or retained by the Lessee (unless an Event of
Default exists, in which case the Lessor may first apply any
such payments in reduction of the Lessee's obligation to pay
any other amounts due from the Lessee).
16. Insurance. The Lessee will at its sole expense and at
all times during the Term or, if applicable, until the pertinent
Items of Equipment are returned to the Lessor or the Lessor's
agent pursuant to Section 6 hereof, whichever is longer, cause to
be carried and maintained (i) public liability insurance with
respect to third party personal injury and property damage in an
amount per occurrence of not less than $10,000,000 and
(ii) property insurance in respect of all Items of Equipment in an
amount not less than the Casualty Loss Value for such Item of
Equipment (subject, in the case of clause (ii), to such per
occurrence limits as may be specified in the applicable policies
of insurance). The Lessee will carry such insurance as is
required hereunder in such amounts and for such risks consistent
with prudent industry practice (which industry means major
creditworthy U.S. electric utilities and which own or use railcars
for the transportation of coal) and at least comparable in amounts
and against risks customarily insured against by the Lessee in
respect of equipment owned or leased by it similar in nature to
the Equipment; provided that the Lessee may in any event
self-insure or carry deductibles for up to $5,000,000 per
occurrence for public liability and $5,000,000 per occurrence for
property insurance (or such higher amounts as shall be consistent
with prudent industry practice at the time). The proceeds of any
such property insurance as is required hereunder shall be payable
to the Lessor, each Assignee and the Lessee, as their respective
interests may appear. Each policy required hereunder (i) shall
provide thirty days' prior notice of cancellation or material
change and (ii) shall include the Lessor and each Assignee, if
any, as loss payee and/or additional insured as their respective
interests may appear, and the Lessee shall endeavor to obtain a
waiver by such
23
insurance company of any right to claim any
premiums or commissions against the Lessor and each Assignee.
Prior to the Funding Date and thereafter on the expiration dates
of the expiring policies theretofore delivered, the Lessee shall
deliver to the Lessor and each Assignee, if any, certificates of
insurance issued by the insurer(s) for the insurance required to
be maintained hereunder. If the Lessee shall fail to cause the
insurance required under this Section to be carried and
maintained, the Lessor or any Assignee may, after prior written
notice to the Lessee, provide such insurance, and the Lessee shall
reimburse the Lessor or such Assignee, as the case may be, upon
demand for the cost thereof as a Supplemental Payment hereunder.
17. General Tax Indemnity.
(a) The Lessee agrees to pay, defend and indemnify
and hold the Lessor and each Assignee and Affected Party
(each, a "Tax Indemnitee") harmless on an After-Tax Basis
from any and all U.S. Federal, U.S. state and local taxes,
including sales, use, ad valorem and property taxes,
together with any penalties, fines or interest thereon
(herein called "taxes or other impositions") howsoever
imposed, whether levied or imposed upon or asserted against
the Lessor, Tax Indemnitee, the Lessee, the Equipment, any
Item of Equipment, or any part thereof, by any Federal,
state or local government or taxing authority in the United
States, upon or with respect to (i) the Equipment, or any
Item of Equipment or any part thereof, or (ii) the ownership
and operation of the Equipment, or any Item of Equipment or
any part thereof; provided, however, that the foregoing
indemnity shall not apply to
(i) any tax or other imposition based on or measured
by net income or in the nature of a net income
tax or imposed in lieu of a net income tax,
including any franchise tax and any such similar
tax based on capital, receipts, net worth or
comparable basis of measurement, unless such
taxes or other impositions are (i) imposed
solely by reason of the use, location, or
presence of the Equipment in, or the presence or
activities of the Lessee in, or the making of
payments by the Lessee from, the jurisdiction
imposing such taxes or impositions or (ii) are
in the nature of sales, use, property, ad
valorem or value added taxes, provided the
foregoing indemnity shall not apply if such
taxes would not have been required to be paid if
Lessor had not assigned any interest under or
related to the Lease;
(ii) other than as expressly provided in Section
27(b) hereof, any taxes or other impositions in
respect of this Lease of any Item of Equipment
that results from any act, event or omission
that occurs after the termination of this Lease
in respect of such Item of Equipment and the
payment in full of all amounts due under this
Lease;
24
(iii) any taxes or other impositions that are imposed
on any Tax Indemnitee as a result of the gross
negligence or willful misconduct of such Tax
Indemnitee or its Affiliate;
(iv) any taxes or other impositions that are imposed
on any Tax Indemnitee that are a result of such
Tax Indemnitee not being a resident of, or not
being organized under the laws of, the United
States or any political subdivision thereof;
provided, however, that proviso (v) and not this
proviso (iv) shall govern U.S. Federal income
taxes imposed by withholding;
(v) U.S. Federal income taxes imposed by
withholding; provided, however, that this
exclusion shall not apply if the tax required to
be deducted and withheld would not have been
required to be so deducted and withheld but for
a Change in Withholding Tax Law that occurs
after the date on which the Tax Indemnitee
acquires its interest in the Lease;
(vi) any taxes or other impositions that have not
been paid and that are being contested in
accordance with clause (b) below; provided that
this exclusion shall apply only during the
conduct of such contest;
(vii) any taxes or other impositions that result from
any transfer by any Tax Indemnitee of any
interest in an Item of Equipment or any interest
arising under this Lease (other than as set
forth in Section 11, Section 27(b) and
Section 27(c) hereof, or in connection with the
occurrence of an Event of Default, or an Event
of Loss or as otherwise required by this Lease);
(viii) any tax that is enacted or adopted as a
substitute for or in lieu of any tax that
would not have been indemnified against
pursuant to Section 17(a);
(ix) taxes on any items of tax preference or any
minimum tax of such Tax Indemnitee;
(x) taxes which are gross income or gross receipts
taxes, unless (i) such taxes are imposed solely
by reason of the use, location, or presence of
the Equipment in, or the presence or activities
of the Lessee in, or the making of payments by
the Lessee from, the jurisdiction imposing such
taxes or (ii) such taxes are in the nature of
sales, use, property, ad valorem or value added
taxes; provided, the immediately foregoing
indemnity shall not apply if such taxes would
not have been required to be paid if Lessor had
not assigned any interest under or related to
the Lease; and
25
(xi) taxes or other impositions imposed on any Tax
Indemnitee as a result of, or in connection
with, any "prohibited transaction" within the
meaning or the provisions of the Code or
regulations thereunder or as set forth in
Section 406 of ERISA or the regulations
implementing ERISA, engaged in by any Tax
Indemnitee.
Notwithstanding the foregoing provisos (i) through (xi), the
Lessee shall indemnify each Tax Indemnitee for any taxes
identified in provisos (i), (iv) or (vii) (or any increase in such
taxes) imposed on such Tax Indemnitee net of any decrease in such
taxes actually realized by such Tax Indemnitee, to the extent that
such tax or tax increase would not have occurred if on each
Funding Date the Lessor had advanced funds to the Lessee in the
form of a loan secured by the Equipment in an amount equal to the
amount funded on such Funding Date, with debt service for such
loan equal to the Basic Rent payable on each Rent Payment Date and
a principal balance at the maturity of such loan in an amount
equal to the amount of the Acquisition Cost then outstanding at
the end of the term of this Lease.
The Lessee will prepare and file any reports or returns
required to be made with respect to any tax or other imposition
for which the Lessee is responsible, directly or indirectly, if
permitted by applicable law to file the same, and if not so
permitted, the Lessee shall, at its sole cost, prepare such
reports or returns for signature by the Tax Indemnitee or, upon
request of the Tax Indemnitee, will promptly provide the Tax
Indemnitee with all information necessary for the making and
timely filing of such reports or returns by the Tax Indemnitee,
and shall forward the same, together with immediately available
funds for payment of any tax or other imposition due, to the Tax
Indemnitee, at least ten days in advance of the date such payment
is to be made. Upon written request, the Lessee shall furnish the
Tax Indemnitee with copies of all paid receipts or other
appropriate evidence of payment for all taxes or other impositions
paid by the Lessee pursuant to this Section 17. All of the
indemnities contained in this Section 17 in respect of (i) any
act, event, omission or tax period that occurs on or prior to
termination of this Lease and (ii) any sale described in
Section 27(b) hereof shall continue in full force and effect
notwithstanding the expiration or earlier termination of this
Lease in whole or in part, including the expiration or termination
of the Term with respect to any Item (or all) of the Equipment,
and are expressly made for the benefit of, and shall be
enforceable by, the Lessor and each Assignee.
The Lessee shall have no obligation to pay any amount under
this Section 17 to any Lessor other than CCG Trust Corporation
that is greater than the amount that would have been payable to
CCG Trust Corporation if it were the Lessor (the Lessee being
obligated only to pay to such Lessor the amount it would have paid
to CCG Trust Corporation).
(b) In the event any claim, action, proceeding or
suit is brought against any Tax Indemnitee with respect to
which the Lessee would be required to indemnify such Tax
Indemnitee, such Tax Indemnitee shall promptly give written
notice of any such claim, action, proceeding or suit to the
Lessee. The Lessee may, and upon the Lessee's request any
such Tax Indemnitee will, at the Lessee's expense, resist
and defend such action, suit
26
or proceeding, or cause the same to be resisted or defended
by counsel selected by the Lessee and reasonably satisfactory
to such Tax Indemnitee, and the Lessee shall pay all costs
and expenses (including attorney's fees and expenses)
reasonably incurred by such Tax Indemnitee in connection
with such action, suit or proceeding; provided that no Tax
Indemnitee shall compromise or settle any such actions for
which it has assumed the responsibility of defense without
consent of the Lessee (not unreasonably to be withheld),
and provided further, that the failure of any Tax Indemnitee
to give such notice to the Lessee shall not relieve the
Lessee from any of its obligations to provide indemnification
to any Tax Indemnitee under this Section 17, except to the
extent that the Lessee's right to contest or defend is
adversely affected by such Tax Indemnitee's failure to give
notice; provided further, that the Lessee shall be relieved
of its obligations to provide indemnification under this
Section 17 with respect to any Tax Indemnitee, to the extent
that such Tax Indemnitee shall deliver to the Lessee a written
notice waiving the benefits of the indemnification of such Tax
Indemnitee provided by this Section 17 in connection with
such claim, action, proceeding or suit. In such event the
Tax Indemnitee shall reimburse the Lessee for all amounts
paid by the Lessee with respect to such non-contested claim,
action, proceeding, or suit. If any Tax Indemnitee actually
obtains a refund (or would have actually received such a
refund but for offset by matters not indemnifiable by the
Lessee under Section 17(a)) of all or any part of any tax
paid or reimbursed by the Lessee, such Tax Indemnitee shall
promptly pay to the Lessee the amount of such refund (or the
amount of such offset) plus any interest thereon (less any
taxes imposed on such Tax Indemnitee with respect to such
interest) received from the relevant taxing authority (or
which would have been received with respect to the amount of
such an offset) plus the amount of any tax benefits realized
by such Tax Indemnitee as a result of such payment (net of
any net tax detriment resulting from the receipt of the
refund and interest on the refund (after giving effect to
such Tax Indemnitee's obligations to make payments to the
Lessee under this sentence)).
(c) On the Funding Date but in any event at least
five Business Days prior to the first date on which any
payment is due hereunder for the account of any Affected
Party not incorporated under the laws of the United States
or a state thereof, such Affected Party agrees that it will
have delivered to each of the Lessee and the Lessor two duly
completed copies of United States Internal Revenue Service
Form 1001, W-8 or 4224, certifying that such Affected Party
is entitled to receive payments of interest and/or yield and
a return of the principal amount of the Acquisition Cost
under the transaction documents without deduction or
withholding of any United States Federal income taxes. Each
Affected Party which so delivers a Form 1001, W-8 or 4224
further undertakes to deliver to each of the Lessee and the
Lessor two additional copies of such form (or a successor
form) on or before the date that such form expires
(currently, three successive calendar years for Forms 1001
and W-8 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a
change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may
be reasonably requested by the Lessee or the Lessor, in each
case certifying that such
27
Affected Party is entitled to receive payments under the
transaction documents without deduction or withholding of
any United States Federal income taxes, unless any change
in treaty, law or regulation has occurred prior to the date
on which any delivery of such additional forms would
otherwise be required which changes such Affected Party's
entitlement to receive any payments without withholding and
such Affected Party advises the Lessee that it is no longer
entitled to receive payments without any withholding of
United States Federal income tax.
18. Indemnification. The Lessee hereby assumes liability
for, and does hereby agree to indemnify, protect, save, defend,
and hold harmless the Lessor, each Assignee and their respective
officers, directors, employees, successors, permitted assigns, and
agents (each such party being herein, for purposes of this
Section 18, called an "Indemnified Party") on an After-Tax Basis
for, from and against any and all Expenses of every kind and
nature whatsoever, imposed on, incurred by, or asserted against
any Indemnified Party, in any way relating to or arising out of
(a) the manufacture, construction, ordering, purchase, acceptance
or rejection, ownership, titling or retitling, registration or
reregistration, delivery, leasing, subleasing, releasing,
possession, use, operation, storage, removal, return,
repossession, sale or other disposition of the Equipment or any
Item of Equipment, or any part thereof as may arise from (i) the
transactions contemplated by this Lease, (ii) the loss or damage
to any property or death or injury to any persons, (iii) patent or
latent defects in any Item of Equipment (whether or not
discoverable by the Lessee or any Indemnified Party), (iv) any
claims based on strict liability in tort, (v) any claims based on
patent, trademark, tradename or copyright infringement, (vi) any
claims based upon any non-compliance with or violation of any
environmental control, noise or pollution laws or requirements,
including fines and penalties arising from violations of or
noncompliance with such requirements or failure to report
discharges, and costs of clean-up of any discharge, and (vii) any
loss or damage to any commodities loaded or shipped in the
Equipment; or (b) any failure on the part of the Lessee to perform
or comply with any of the terms of this Lease; or (c) any power of
attorney issued to the Lessee in connection with this Lease (all
the foregoing being "Liabilities"). The Lessee shall give each
Indemnified Party prompt notice of any occurrence, event or
condition known to the Lessee as a consequence of which any
Indemnified Party may be entitled to indemnification hereunder.
The Lessee shall forthwith upon demand of any such Indemnified
Party reimburse such Indemnified Party for amounts reasonably
expended by it in connection with any of the foregoing or pay such
amounts directly; provided, however, that the Lessee's Liability
for taxes, imposts and similar matters (other than taxes arising
against the Lessee under Section 4975 of the Code) are expressly
limited to the terms of Section 17 hereof and Lessee shall not be
liable to such Indemnified Party under this Section 18 for any of
the Liabilities to the extent they arise from the gross
negligence, willful misconduct, or breach of such Indemnified
Party's obligations under this Lease, or to the extent that they
arise from or after any transfer of the Lessor's interest in any
Item or this Lease (other than arising directly in connection with
a transfer resulting from an Event of Default, an Event of Loss,
or a sale made under Section 27 hereof, or any transfer made at
the Lessee's request or direction). The Lessee shall be
subrogated to an Indemnified Party's rights in any matter with
respect to which the Lessee has actually reimbursed such
Indemnified Party for amounts expended by it or has actually paid
such amounts directly. If any claim for a
28
Liability is made against the Lessee or any Indemnified Party and
such party has received notice thereof, such party receiving notice of
such Liability shall promptly notify the Lessee; provided that the
failure to provide such notice promptly shall not release the
Lessee from any of its obligations to indemnify hereunder, except
to the extent that such failure adversely affects any applicable
defense or counterclaim, or otherwise increases the amount the
Lessee would have been liable for in the absence of such failure.
Subject to the rights of any insurer under any policy of insurance
maintained pursuant to this Lease, and if no Default or Event of
Default shall exist, the Lessee shall have the right to
investigate and defend or compromise any Liability for which it
may be required to indemnify, and each Indemnified Party agrees to
cooperate with all responsible requests of the Lessee in
connection therewith. Notwithstanding any of the foregoing to the
contrary, the Lessee shall not be entitled to assume
responsibility for and control of any such judicial or
administrative proceedings if (i) any Event of Default shall
exist, (ii) such proceedings will involve a material risk of the
sale, forfeiture, or loss of, or the creation of any Lien (other
than a Permitted Lien) on, any Item, unless the Lessee posts a
bond or other security satisfactory to the relevant Indemnified
Party in respect to such risk, or (iii) such proceedings would
involve the imposition of criminal liability (other than minor
fines which have no adverse effect on any Indemnified Party which
are indemnified for by Lessee) on an Indemnified Party or if such
contest will, in the reasonable opinion of such Indemnified Party,
be inappropriate under applicable standards of professional
conduct. An Indemnified Party may participate at its own expense
and with its own counsel in any judicial proceeding controlled by
the Lessee pursuant to the preceding provisions. In the case of
any Liability covered by any policy of insurance maintained
pursuant to this Lease, each Indemnified Party shall cooperate
with all reasonable requests of the insurers in the exercise of
their rights to investigate, defend, or compromise such claim as
may be required by such policy to maintain the insurance coverage
provided to the parties thereunder. The provisions of this
Section 18, and the obligations of the Lessee under this Section
18, shall apply from the date of the execution of this Lease
notwithstanding that the Term may not have commenced with respect
to any Item of Equipment, and shall survive and continue in full
force and effect (as to any event occurring or condition existing
during the Term) notwithstanding the expiration or earlier
termination of this Lease or the Termination Date.
19. No Warranties. THE LESSOR LEASES AND THE LESSEE TAKES
THE EQUIPMENT "AS-IS, WHERE-IS." THE LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN THE LESSOR AND THE LESSEE (A) THE EQUIPMENT
IS OF DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE
TO THE LESSEE, (B) THE LESSEE IS SATISFIED THAT THE EQUIPMENT IS
SUITABLE FOR ITS PURPOSES, (C) THE LESSOR IS NOT A MANUFACTURER OR
A DEALER IN PROPERTY OF SUCH KIND, AND (D) THE LESSOR HAS NOT
MADE, OR DEEMED TO HAVE MADE, AND THE LESSOR EXPRESSLY DISCLAIMS
AND MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR
IMPLIED, AS TO THE DESIGN, CONDITION, QUALITY, CAPACITY,
MERCHANTABILITY, DURABILITY, SUITABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE EQUIPMENT, AS TO THE ABSENCE OF LATENT
OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE
OF ANY INFRINGEMENT OF ANY PATENT,
29
TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT, OR ANY OTHER IMPLIED REPRESENTATION OR
WARRANTY CONCERNING THE EQUIPMENT.
20. Lessee's Representations and Warranties. The Lessee
hereby represents and warrants, as of the date hereof and on the
Funding Date, that:
(a) the Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Missouri, and is qualified to do business in, and
is in good standing in, each state or other jurisdiction in
which the nature of its business makes such qualification
necessary;
(b) the Lessee has the corporate power and authority
to execute and perform this Lease and to lease the Equipment
hereunder, and has duly authorized the execution, delivery
and performance of this Lease;
(c) the leasing of the Equipment from the Lessor by
the Lessee, the Lessee's execution and delivery of this
Lease, each Lease Supplement, the Purchase Agreement
Assignment and other related instruments, documents and
agreements, and the compliance by the Lessee with the terms
hereof and thereof, and the payments and performance by the
Lessee of all of its obligations hereunder and thereunder
(i) have been duly and legally authorized by appropriate
corporate action taken by the Lessee, (ii) are not in
contravention of, and will not result in a violation or
breach of, any of the terms of the Lessee's Articles of
Incorporation, its By-Laws, or of any provisions relating to
shares of the capital stock of the Lessee, and (iii) will
not violate or constitute a breach of any provision of law,
any order of any court or other Governmental Authority, or
any indenture, agreement or other instrument to which the
Lessee is a party, or by or under which the Lessee or any of
the Lessee's property is bound, or be in conflict with,
result in a breach of, or constitute (with due notice and/or
lapse of time) a default under any such indenture, agreement
or instrument, or result in the creation or imposition of
any Lien upon any of the Lessee's property or assets other
than the Liens contemplated hereby and the Permitted Liens;
(d) this Lease has been executed by the duly
authorized officer or officers of the Lessee and delivered
to the Lessor and constitutes, when executed by the duly
authorized officer or officers of the Lessee and delivered
to the Lessor, each Lease Supplement and related
instruments, documents and agreements with respect to each
Item of Equipment will constitute, the legal, valid and
binding obligations of the Lessee, enforceable against the
Lessee in accordance with their terms (subject to such
bankruptcy and similar laws affecting the rights of
creditors generally);
30
(e) the Lessee holds all material licenses,
certificates and permits from Governmental Authorities
necessary to use and operate the Equipment in accordance
with the provisions of this Lease;
(f) there is no litigation or other proceeding now
pending or, to the best of the Lessee's knowledge,
threatened against or affecting the Lessee, in any court or
before any regulatory commission, board or other
administrative Governmental Authority (i) which would
directly or indirectly adversely affect or impair the title
of the Lessor to the Equipment, or (ii) which, except as may
be contemplated and disclosed under the Disclosure
Documents, would materially adversely affect the financial
condition of the Lessee;
(g) all balance sheets, statements or profit and
loss and other financial statements set forth in the
Disclosure Documents fairly present the financial condition
of the Lessee on the dates for which, and the results of its
operations for the periods for which, the same have been
furnished, and have been prepared in accordance with
generally accepted accounting principles consistently
followed throughout the periods covered thereby (except as
noted therein); and there has been no material adverse
change in the financial condition of the Lessee, since the
date of the Disclosure Documents, except as may be disclosed
under the Disclosure Documents;
(h) no approval that has not been obtained by the
Lessee as of the date of this representation and warranty is
required from any regulatory body, board, authority or
commission, nor from any other administrative or
governmental agency, nor from any other Person, with respect
to the Lessee's execution, delivery and performance of this
Lease;
(i) the Disclosure Documents and the Equipment
Documents are true and correct in all material respects and
do not omit any information necessary to make the
information provided, in light of the circumstances under
which such information was provided, not materially
misleading;
(j) the Lessee is not an "investment company" or a
company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended;
and
(k) any Lien on the Lessee's interest in the
Equipment contained in mortgages granted by the Lessee which
cover after acquired property of the Lessee and which
otherwise subject all or substantially all of the Lessee's
assets to such mortgage, is subordinate to and does not
adversely affect Lessor's interest in the Equipment under
this Lease, and no one other than Lessor has made any filing
with the Surface Transportation
31
Board or the Interstate Commerce Commission covering any of
the Equipment subject to this Lease.
21. Events of Default. Any of the following events shall
constitute an Event of Default
(a) the Lessee shall fail to make any payment of
Basic Rent or any Supplemental Payment on the date due, and
that failure shall continue for at least ten (10) Business
Days after the due date for such payment in the case of
Basic Rent or thirty (30) days after receipt of written
notice from Lessor, in the case of any other amount,
including Supplemental Payments; or
(b) the Lessee shall fail to perform or observe any
other covenant, condition, or agreement to be performed or
observed by it under this Lease, or in any agreement or
certificate furnished to the Lessor or any Assignee in
connection herewith, and such failure shall continue
unremedied for ten (10) days (if not capable of being cured)
or thirty (30) days (if capable of being cured) after the
first to occur of (i) an officer of Lessee with express
authority to make decisions regarding this Lease has actual
specific knowledge thereof or (ii) Lessor provides written
notice to the Lessee specifying such failure and demanding
the same to be remedied; or
(c) any representation or warranty made by the
Lessee under this Lease or in any Lease Supplement or in any
document or certificate furnished to the Lessor or any
Assignee in connection herewith or pursuant hereto, shall
prove to be untrue or incorrect in any material respect when
made; provided that if the effect of such misrepresentation
or warranty is reasonably curable, the Lessee shall have
thirty (30) days after notice from the Lessor to effect a
cure; or
(d) the Lessee shall (i) generally fail to pay, or
admit in writing its inability to pay, its debts as they
become due, or shall voluntarily commence any case or
proceeding or file any petition under any bankruptcy,
insolvency or similar law or seeking dissolution,
liquidation or reorganization or the appointment of a
receiver, trustee, custodian or liquidator for itself or a
substantial portion of its property, assets or business or
to effect a plan or other arrangement with its creditors, or
shall file any answer admitting the jurisdiction of the
court and the material allegations of any involuntary
petition filed against it in any bankruptcy, insolvency or
similar case or proceeding, or shall be adjudicated
bankrupt, or shall make a general assignment for the benefit
of creditors, or shall consent to, or acquiesce in the
appointment of, a receiver, trustee, custodian or liquidator
for itself or substantially all of its property, assets or
business; or
(e) involuntary proceedings or an involuntary
petition shall be commenced or filed against the Lessee
under any bankruptcy, insolvency or similar law or seeking
the dissolution, liquidation or reorganization of the Lessee
or the appointment of a receiver,
32
trustee, custodian or liquidator for the Lessee or of
substantially all of the property, assets or business of
the Lessee, or any writ, judgment, warrant of attachment,
execution or similar process shall be issued or levied
against substantially all of the property, assets or
business of the Lessee, and such proceedings or petition
shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be stayed,
released, vacated or fully bonded, within ninety (90)
consecutive days after commencement, filing or levy, as
the case may be.
22. Remedies Upon Default.
(a) Upon the occurrence of any Event of Default and
at any time thereafter so long as the same shall be
continuing, the Lessor may exercise one or more of the
following remedies as the Lessor in its sole discretion may
elect:
(i) the Lessor may terminate or cancel this Lease,
without prejudice to any other remedies of the
Lessor hereunder, with respect to all or any
Item of Equipment, and whether or not this Lease
has been so terminated, may enter the premises
of the Lessee or any other party to take
immediate possession of the Equipment and remove
all or any Item of Equipment by summary
proceedings or otherwise, or may cause the
Lessee, to store, maintain, surrender and
deliver possession of the Equipment or such Item
in the same manner as provided in Section 6
hereof;
(ii) the Lessor may lease to others the Equipment or
any Item of Equipment, as the Lessor in its sole
discretion may determine, free and clear of any
rights of the Lessee and without any duty to
account to the Lessee with respect to such
action or inaction or for any proceeds with
respect thereto, except as required by this
Lease or by law;
(iii) the Lessor may sell the Equipment or any Item
of Equipment at public or private sale as the
Lessor may determine, free and clear of any
rights of the Lessee (except as required by
law), and the Lessee shall pay to the Lessor, as
liquidated damages for loss of a bargain and not
as a penalty (in lieu of the Basic Rent due for
the Equipment or Item(s) so sold for any Rental
Period commencing after the date on which such
sale occurs), the difference, if any of (A) the
sum of (x) all unpaid Basic Rent payable for
each Item of Equipment for all Rental Periods
through the date on which such sale occurs, plus
(y) the Casualty Loss Value of the Item(s) of
Equipment so sold, computed as of the Rent
Payment Date coincident with (or, if the sale is
not on a Rent Payment Date, next preceding) the
date of such sale, plus (z) all unpaid
Supplemental Payments (including Make Whole
Amount, if any) due with respect to each Item of
Equipment so sold
33
minus (B) the net proceeds of such sale (exclusive
of any costs, fees and expenses incurred in
connection with such sale);
(iv) whether or not the Lessor shall have exercised,
or shall thereafter at any time exercise, any of
its rights under clause (i) or (ii) above with
respect to any Item(s) of Equipment, the Lessor,
by written notice to the Lessee specifying a
payment date, may demand that the Lessee pay to
the Lessor, and the Lessee shall pay to the
Lessor, on the payment date specified in such
notice, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the
Basic Rent due for any Item(s) of Equipment for
any Rental Period commencing after the payment
date specified in such notice and in lieu of the
exercise by the Lessor of its remedies under
clause (ii) above in the case of a re-lease of
such Item(s) or under clause (iii) above with
respect to a sale of such Item(s)), the sum of
(i) all unpaid Basic Rent payable for such
Item(s) for all Rental Periods through the
payment date specified in such notice, plus
(ii) all unpaid Supplemental Payments (including
Make Whole Amount, if any) due with respect to
such Item(s) as of the payment date specified in
such notice, plus (iii) an amount, with respect
to each such Item, equal to the Casualty Loss
Value of such Item(s) computed as of the Rent
Payment Date coincident with (or, if the payment
date specified is not a Rent Payment Date, next
preceding) the payment date specified in such
notice; provided, however, that with respect to
any such Item(s) returned to or repossessed by
the Lessor, the amount recoverable by the Lessor
pursuant to the foregoing shall be reduced (but
not below zero) by an amount equal to the Fair
Market Sales Value of such Item(s) as of the
date on which the Lessor has obtained possession
of such Item(s) and shall not exceed the Maximum
Lessee Risk Amount plus the Make Whole Amount
due to Lessor, if any, for such date;
(v) unless the Equipment has been sold in its
entirety, the Lessor may, whether or not the
Lessor shall have exercised or shall thereafter
at any time exercise any of its rights under
clause (ii), (iii) or (iv) of this Section 22
with respect to the Equipment or portions
thereof, demand, by written notice to the Lessee
specifying a date not earlier than ten days
after the date of such notice, that the Lessee
purchase, on such date, the Equipment (or the
remaining portion thereof) in accordance with
the provisions of Section 27(b)(i); provided,
however that no such written notice shall be
required upon the occurrence of any Event of
Default described in clause (d) or (e) of
Section 21; and
(vi) the Lessor may exercise any other right or
remedy which may be available to it under
Applicable Law or proceed by appropriate court
action to
34
enforce the terms hereof or to recover
damages for the breach hereof or to rescind this
Lease.
In addition, the Lessee shall be liable for all Expenses,
including attorneys' fees and Appraisal costs and expenses,
reasonably incurred by the Lessor or any Assignee by reason of the
occurrence of any Event of Default or the exercise of the Lessor's
remedies with respect thereto, including all Expenses incurred in
connection with the return of the Equipment in accordance with
Section 6 hereof or in placing the Equipment in the condition
required by Section 6. For the purpose of clause (iv) above, the
"Fair Market Sales Value" of any Item of Equipment shall mean such
value as has been determined by averaging the valuations of an
independent qualified appraiser selected by each of the Lessor and
the Lessee. The exercise or beginning of exercise by the Lessor
of any one or more of its remedies shall not constitute the
exclusive election of such remedies. No express or implied waiver
by the Lessor of any Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent Event of
Default.
(b) After the sale of all of the Equipment pursuant
to the exercise of the Lessor's remedies under this Lease,
any amounts collected by the Lessor in such sale or sales
which exceed the sum of (i) the applicable Casualty Loss
Values for all Items of Equipment subject to this Lease,
plus but without duplication (ii) any amounts owed by the
Lessee to the Lessor under this Lease, plus but without
duplication (iii) the costs incurred by the Lessor in
consummating such sale, shall be paid to the Lessee by the
Lessor.
23. Lessor's Right to Perform for the Lessee. If the
Lessee fails to make any Supplemental Payment required to be made
by it hereunder or fails to perform or comply with any of its
agreements contained herein, the Lessor may itself, after at least
five (5) Business Days' prior written notice to the Lessee, make
such payment or perform or comply with such agreement, and the
amount of such payment and the amount of the reasonable Expenses
of the Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may
be, together with interest thereon at the rate specified in
Section 24 hereof, shall, if not paid by the Lessee to the Lessor
on demand, be deemed a Supplemental Payment hereunder.
24. Late Charges. The Lessee shall pay to the Lessor,
upon demand, to the extent permitted by applicable law, interest
on any installment of Basic Rent not paid when due, and on any
Supplemental Payment or other amount payable under this Lease
which is not paid when due, for any period for which any of the
same is overdue (without regard to any grace period) at a rate
equal to the lesser of (a) the Applicable Rate plus two percent
per annum, or (b) the maximum rate of interest permitted by law.
35
25. Further Assurances. The Lessee will promptly and duly
execute and deliver to the Lessor and any Assignee such other
documents and assurances and filings (including with the Surface
Transportation Board and under the Uniform Commercial Code), and
will take such further action as the Lessor or any Assignee may
from time to time reasonably request in order to carry out more
effectively the intent and purposes of this Lease and to establish
and protect the rights and remedies created or intended to be
created in favor of the Lessor and of any Assignee and their
respective rights, title and interests in and to the Equipment.
26. Notices. All notices provided for or required under
the terms and provisions hereof shall be in writing (including
facsimile) and addressed, delivered or transmitted to the
appropriate party at its address or facsimile number as set forth
on Schedule I hereto, or in the case of any Assignee, to the
address or facsimile number as such Assignee shall designate in
writing to the Lessor and the Lessee, or in each case at such
other address or facsimile number as an addressee shall designate
in writing to the other parties. Any notice, if mailed or sent by
courier service, shall be deemed given when delivered; any notice,
if transmitted by facsimile, shall be deemed given when
transmitted and electronically confirmed.
27. Lessee's Renewal, Purchase and Sale Options.
(a) Lessee's Renewal Option. With respect to each
Lease Supplement, the Lessee shall be entitled, at its
option, to renew this Lease for a Renewal Term with respect
to all or any portion of the Items of Equipment then subject
to such Lease Supplement (provided that the balance of the
Equipment not so renewed is purchased), unless (i) an Event
of Default exists, or (ii) this Lease shall have been
earlier terminated. The first Renewal Term with respect to
each such Item of Equipment will commence at the expiration
of the Basic Term of such Item, and each succeeding Renewal
Term will commence at the expiration of the next preceding
Renewal Term. All of the provisions of this Lease,
including Basic Rent, Casualty Loss Value and the Applicable
Rate, shall be applicable during each Renewal Term for each
such Item of Equipment. If the Lessee intends not to
exercise said renewal option with respect to all of such
Items of Equipment for the next following Renewal Term with
respect thereto, the Lessee shall give written notice to the
Lessor to such effect at least 180 days prior to the
expiration of the Basic Term, in the case of the first
Renewal Term, and at least 180 days prior to the expiration
of the then current Renewal Term of said Item(s) of
Equipment, in the case of the then next succeeding Renewal
Term. If the Lessee fails to give such written notice to
the Lessor with respect to all of the Items of Equipment
covered by any Lease Supplement, it shall be conclusively
presumed that the Lessee has elected to exercise said
renewal option with respect to all of such Items of
Equipment for said Renewal Term. In the event the Lessee
elects not to exercise said renewal option, the Lessee shall
be deemed to have exercised its purchase option under
Section 27(b) hereof (unless Lessee elects to sell such Item
to a third party in accordance with Section 27(c) hereof).
36
(b) Lessee's Purchase Option. (I) With respect to
each Lease Supplement, the Lessee shall be entitled, at its
option at the end of the Basic Term and any Renewal Term
(notwithstanding that Lessee may have previously agreed to
renew this Lease for subsequent Renewal Terms), upon written
notice to the Lessor as hereinafter provided, to purchase
all, but not less than all, Items of Equipment then subject
to such Lease Supplement for which Lessee has not opted to
renew this Lease, unless (i) a Default or Event of Default
exists, or (ii) this Lease shall have been earlier
terminated. Such purchase shall be consummated, and the
Lessee shall pay the purchase price therefor to the Lessor
in immediately available funds, on the Rent Payment Date
specified in the Lessee's notice to the Lessor. The date of
purchase shall be no earlier than the first anniversary of
the Funding Date with respect to such Items of Equipment.
The purchase price for each such Item shall be an amount
(each, an "EBO Purchase Option Amount") equal to the
Unamortized Lease Balance for such Items of Equipment. In
addition, the Lessee shall pay to the Lessor on the early
buyout date, in immediately available funds, (x) any
applicable sales, excise or other taxes imposed as a result
of such sale (other than gross or net income or similar
taxes attributable to such sale), plus (y) the Make Whole
Amount, if any, required to be paid under the terms of this
Lease and any other Supplemental Payments then due and owing
to the Lessor hereunder. The Lessor's sale of each Item of
Equipment shall be on an "as-is, where-is" basis, without
any representation or warranty by, or recourse to, the
Lessor except that the Lessor shall warrant that each such
Item of Equipment shall be returned free and clear of all
Liens of the sort described in clause (d) of the definition
of Permitted Liens. If the Lessee intends to exercise said
early buyout option, the Lessee shall provide the Lessor
with 180 days' prior written notice thereof.
(II) In addition to Lessee's purchase option under
clause (I) above, if either (x) this Lease is not construed
as an operating lease for financial accounting purposes by
Lessee's independent accountants or (y) any Required
Alteration under Section 11 is reasonably determined by
Lessee to be economically impractical, then, with respect to
each Lease Supplement, the Lessee shall be entitled, upon
not less than ninety (90) days prior written notice to the
Lessor as hereinafter provided, to purchase all, but not
less than all, Items of Equipment then subject to such Lease
Supplement, unless (i) a Default or Event of Default exists,
or (ii) this Lease shall have been earlier terminated. Such
purchase shall be consummated, and the Lessee shall pay the
purchase price therefor to the Lessor in immediately
available funds, on the Business Day (the "Payment Date")
specified in the Lessee's notice to the Lessor. The
purchase price for each such Item shall be an amount (each,
an "EBO Purchase Option Amount") equal to the Unamortized
Lease Balance for such Items of Equipment as of the
immediately preceding Rent Payment Date plus interest
accrued thereon at the Applicable Rate from such preceding
Rent Payment Date through such Payment Date. In addition,
the Lessee shall pay to the Lessor on the Payment Date, in
immediately available funds, (x) any applicable sales,
excise or other taxes imposed as a result of such sale
(other than gross or net income or similar taxes
attributable to such sale), plus (y) the Make Whole Amount,
if any, required to be paid under the terms of this Lease
and any other Supplemental Payments then due and owing to
37
the Lessor hereunder. The Lessor's sale of each Item of
Equipment shall be on an "as-is", "where-is" basis, without
any representation or warranty by, or recourse to, the
Lessor except that the Lessor shall warrant that each such
Item of Equipment shall be returned free and clear of all
Liens of the sort described in clause (d) of the definition
of Permitted Liens.
(c) Third Party Sale of Equipment.
(i) Remarketing Obligations. In the event the
Lessee (x) delivers notice to the Lessor that it
has elected not to renew this Lease with respect
to all Items of Equipment then subject to this
Lease in accordance with Section 27(a) hereof
and (y) has not exercised its option to purchase
all of the Items of Equipment then subject to
this Lease pursuant to Section 27(b), then the
Lessee shall have the obligation during the last
180 days of the Basic Term (after exercise of
the maximum number of Renewal Terms permitted
hereby) (the "Remarketing Period"), to obtain
(at the cost of the Lessee) bona fide bids for
not less than all Items of Equipment then
subject to this Lease from prospective
purchasers (who are not, and are not acting on
behalf of, Lessee or any Affiliate of Lessee)
who are financially capable of purchasing such
Items of Equipment for cash. Any such sale
shall be on an "as-is, where-is" basis, without
recourse or warranty except that the Lessor
shall warrant that each such Item of Equipment
shall be returned free and clear of all Liens of
the sort described in clause (d) of the
definition of Permitted Liens. All such bids
received by the Lessee during such Remarketing
Period of such Items of Equipment shall be
immediately certified to the Lessor in writing,
setting forth the amount of such bid and the
name and address of the person or entity
submitting such bid. Notwithstanding the
foregoing, the Lessor shall have the right, but
not the obligation, to seek bids for the
Equipment during the Remarketing Period.
(ii) Sale of Equipment. On the Termination Date,
provided that all the conditions hereof have
been met, the Lessor shall sell (or cause to be
sold) all Items of Equipment then subject to
this Lease, for cash to the bidder, if any,
selected by the Lessee on an "as-is, where-is"
basis and without recourse or warranty except
that the Lessor shall warrant that each such
Item of Equipment shall be returned free and
clear of all Liens of the sort described in
clause (d) of the definition of Permitted Liens,
and upon receipt by the Lessor of the sales
price, the Lessor shall instruct the Lessee to
deliver and the Lessee shall deliver such
Item(s) of Equipment to such bidder; provided
that (x) any such sale shall be consummated, and
the sales price for such Item (and any amounts
payable by Lessee pursuant to Section 28) shall
be paid to the Lessor in immediately available
funds, on or before the Termination Date, and
(y) the Lessor shall not be obligated
38
to sell such Equipment if (i) the Net Proceeds of
Sale of such Items are less than the aggregate
Maximum Lessor Risk Amount applicable to such
Items as of the Termination Date, and (ii) the
Lessor has not received the amounts, if any,
payable by the Lessee pursuant to Section 28;
provided further that if such sale shall not be
consummated on such date and the Term shall not
have been extended or renewed, Lessee shall be
deemed to have exercised its purchase option
pursuant to Section 27(b)(i) and shall pay
Lessor the amounts specified therein on the
Termination Date. Except as expressly set forth
herein, the Lessee shall have no right, power or
authority to bind the Lessor in connection with
any proposed sale of the Equipment.
28. End-of-Term Rental Adjustment - Third Party Sale of
Equipment. If the aggregate proceeds of sale of the Equipment
pursuant to Section 27(c) after deducting therefrom the aggregate
amount of all costs (other than sales commissions or similar
third-party fees, unless approved in writing by the Lessee)
incurred by the Lessor in connection with such sale (such net
amount being hereinafter referred to as "Net Proceeds of Sale")
are less than the aggregate Estimated Residual Value of the
Equipment as of such Termination Date, the Lessee shall, on the
Termination Date, pay to the Lessor, in immediately available
funds, to the Lessor's account specified pursuant to Section 7(c)
hereof, (x) an amount equal to such deficiency (a "Deficiency")
plus (y) the Basic Rent due and payable for such Items of
Equipment on the Termination Date plus (z) any other Supplemental
Payments then due and owing to the Lessor hereunder; provided,
however, that if no Default or Event of Default shall exist, the
amount of the Deficiency payable by the Lessee with respect to the
Items covered by such Lease Supplement shall not exceed the
Maximum Lessee Risk Amount as set forth in such Lease Supplement
for such Termination Date. If the Net Proceeds of Sale of such
Items of Equipment exceed the aggregate Estimated Residual Value
of such Items, then the Lessor shall apply that excess to any
amounts that the Lessee then owes to the Lessor hereunder with
respect to such Items (or, if an Event of Default exists, to any
other amount that the Lessee then owes to the Lessor), and shall
pay to the Lessee the remainder of such excess as an adjustment to
the Basic Rent payable under this Lease for such Items.
29. Covenants of the Lessee. The Lessee agrees, for the
benefit of the Lessor and each Assignee, as follows:
(a) Financial Information. During the Term, the
Lessee will furnish or cause to be furnished to the Lessor
(a) within one hundred twenty (120) days after the end of
each of its fiscal years, its consolidated balance sheet and
related consolidated statements of income and cash flows, in
each case certified by independent certified public
accountants of nationally recognized standing, showing its
financial position at the close of such year and the results
of its operations and cash flows for such year; (b) within
sixty (60) days after the end of each of the first three (3)
quarters in each of its fiscal years, its unaudited
condensed consolidated balance sheet and related condensed
consolidated statements of income and cash flows, such
balance sheets to be as of the end of such quarter and such
39
statements of income and cash flows to be for the period
from the beginning of the fiscal year to the end of such
quarter, in each case in the forms included in its Quarterly
Report on Form 10-Q for such quarter filed with the SEC
pursuant to the Securities Exchange Act of 1934, as amended,
and subject to audit and year-end adjustments; and (c) such
other information respecting the Lessee's business,
properties or its condition or operations, financial or
otherwise, as the Lessor may from time to time reasonably
request.
In the event the Lessee is no longer obligated to file
Forms 10-K and 10-Q with the SEC, the Lessee shall furnish
to the Lessor the financial statements required to be filed
under such Forms on or prior to the dates specified in the
preceding sentence.
(b) Mergers, etc. The Lessee shall not merge with
or into or consolidate with or into any other Person (other
than the Western Resources Merger Transaction, which merger
Lessor and Lessee agree complies with clauses (1) and (2)
below) or sell, transfer, or otherwise dispose of
substantially all the Lessee's assets unless, immediately
after giving effect thereto, (1) the Lessee is the surviving
corporation, or the surviving (if not the Lessee) or
resulting corporation shall have assumed, in writing, the
obligations of the Lessee under this Lease pursuant to
documentation reasonably satisfactory to the Lessor and each
Assignee (if any), and (2) the surviving entity or resulting
entity or transferee, as applicable, will have a credit
rating from Standard & Poor's Rating Group for its senior
unsecured debt of BBB or better (or an equivalent rating
from Moody's Investors Service).
(c) ERISA. As soon as possible and in any event
(A) within the time notice to the PBGC is required as to any
ERISA Event described in clause (i) of the definition of
ERISA Event with respect to any Plan of the Lessee or any
ERISA Affiliate of the Lessee has occurred and (B) within
ten days after any other ERISA Event with respect to any
Plan of the Lessee or any ERISA Affiliate of the Lessee has
occurred, the Lessee shall deliver to the Lessor a statement
if the Lessee (signed on its behalf by a Responsible Officer
of the Lessee) describing such ERISA Event and the action,
if any, which the Lessee or such ERISA Affiliate proposes to
take with respect thereto.
(d) ERISA Information. Promptly after receipt
thereof' by the Lessee or any of its ERISA Affiliates from
the PBGC, the Lessee shall deliver to the Lessor copies of
each notice received by the Lessee or such ERISA Affiliate
of the PBGC's intention to terminate any Plan if the Lessee
or such ERISA Affiliate or to have a trustee appointed to
administer any such Plan.
(e) ERISA Notice. Promptly after receipt thereof by
the Lessee or any ERISA Affiliate of the Lessee from a
Multiemployer Plan sponsor, the Lessee shall deliver to the
Lessor copy of each notice received by the Lessee or such
ERISA Affiliate concerning the imposition or amount of
withdrawal liability in an aggregate principal amount of at
least
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$10 million pursuant to Section 4202 of ERISA in
respect of which the Lessee or such ERISA Affiliate is
reasonably expected to be liable.
(f) Litigation. The Lessee shall deliver to the
Lessor, promptly after the Lessee becomes aware of the
occurrence thereof, notice of all actions, suits,
proceedings or other events for which the Lessor will be
entitled to indemnity hereunder.
30. Payment of Transaction Expenses. The Lessor shall be
responsible for the reasonable fees and expenses of its counsel
and special Surface Transportation Board counsel incurred in
connection with the negotiation and initial documentation of this
transaction. The Lessee shall be responsible for the reasonable
fees and expenses of its counsel.
31. Owner for Income Tax Purposes. The Lessor agrees that
the Lessee shall be deemed the owner of the Equipment for Federal,
state and local income tax purposes and that, so long as no Event
of Default shall have occurred and be continuing, the Lessor shall
take no action inconsistent with such ownership for income tax
purposes.
32. Governing Law; Waiver of Jury Trial; Submission to
Jurisdiction. This Lease shall in all respects be governed by,
and construed in accordance with, the laws of the State of
Illinois, including all matters of construction, validity and
performance. The Lessee and the Lessor hereby waive any right to
a trial by jury in any dispute arising under or in any way
relating to the transactions contemplated by this Lease. Each of
the Lessor and the Lessee (a) irrevocably submits itself to the
non-exclusive jurisdiction of the Courts of the State of Illinois,
Cook County and the United States District Court for the Northern
District of Illinois for the purposes of any suit, action or other
proceeding arising out of this Lease, or the subject matter hereof
or the transaction contemplated hereby, (b) irrevocably agrees
that all claims in respect of such action or proceeding may be
heard and determined in such Illinois State or United States
Federal court and (c) agrees not to assert, by way of motion, as a
defense or otherwise, in any such suit, action or proceeding any
claim that is not personally subject to the jurisdiction of the
above-named Illinois State or United States Federal courts, that
the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is
improper, or that this Lease or the subject matter hereof may not
be enforced in or by such courts under any applicable law. The
Lessee agrees that its submission to jurisdiction is made for the
express benefit of the Lessor and its successors and permitted
assigns. Lessee hereby agrees that service of process may be made
upon Lessee by written notice. Nothing in this Section 32 shall
affect the right of the Lessor or its successors or assigns to
serve legal process in any other manner permitted by law or affect
the right of the Lessor or its successors or permitted assigns to
bring any action or proceeding against the Lessee or its property
in the courts of other jurisdictions.
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33. Miscellaneous. 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 any party'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. To the extent permitted by applicable law, the
Lessee and the Lessor hereby waive any provision of law which
renders any provision of this Lease prohibited or unenforceable in
any respect. 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. A waiver on any one
occasion shall not be construed as a waiver on a future occasion.
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 permitted assigns of the Lessor and the
Lessee (subject to the restrictions of Section 13 above and
Section 34 below). This Lease, each Lease Supplement and each
related instrument, document, agreement and certificate,
collectively constitute the complete and exclusive statement of
the terms of the agreement between the Lessor and the 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 and each Lease
Supplement may be executed in counterparts, each of which shall
constitute an original document but all of which together shall
constitute a single instrument.
34. Registered Instrument. This Lease is a registered
instrument. A manually signed copy of this Lease shall be
evidence only of Lessor's and Lessee's rights and is not a bearer
instrument. The Lessor agrees with the Lessee that the Lessee
shall keep books of registry by which Lessee will register by book
entry, and register by book entry any transfer of, Lessor's
interest in this Lease and in the right to receive any payments
under this Lease. Prior to the due presentment for registration
of any transfer of Lessor's interest in this Lease, the Lessee and
the Lessor shall deem and treat the Person in whose name this
Lease is registered in the books of registry as the absolute owner
of this Lease and the holder of this Lease for the purpose of
receiving payment of all amounts payable with respect to this
Lease. Lessor's interest in this Lease and in the rights to
receive any payments under the Lease may be transferred only
pursuant to and in compliance with the provisions of this Lease,
which transfers shall be registered by book entry made by the
Lessee in its books of registry. No transfer by Lessor (whether
or not with Lessee's consent) of any interest in this Lease or in
the right to receive any payments hereunder shall be permitted
unless a book entry of such transfer is made upon such registry
and such transfer is otherwise in accordance with the terms of
this Lease.
IN WITNESS WHEREOF, the parties hereto have caused this
Equipment Leasing Agreement to be duly executed by their duly
authorized representatives as of the date first above written.
[SIGNATURES ARE ON ATTACHED PAGES]
42
[Equipment Leasing Agreement]
Attest: Lessee:
KANSAS CITY POWER & LIGHT COMPANY
By: /s/Jeanie Sell Latz By: /s/Andrea F. Bielsker
Name: Jeanie Sell Latz Name: Andrea F. Bielsker
Title: Title:
Senior Vice President- Treasurer
Corporate Services, Corporate
Secretary & Chief Legal Officer
(Corporate Seal)
Lessor:
CCG TRUST CORPORATION
Attest:
By: /s/M. Hafiz Khan By: /s/John R. Walker
Name: M. Hafiz Khan Name: John R. Walker
Title: Title:
Attorney at Law Managing Director
(Corporate Seal)
THIS IS COUNTERPART NO. __ OF ____ SERIALLY NUMBERED MANUALLY
EXECUTED COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT
CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO
SECURITY INTEREST IN THIS DOCUMENT MAY BE PERFECTED THROUGH THE
POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
43