EXHIBIT 99.I
LEASE OF RAILROAD EQUIPMENT
DATED AS OF NOVEMBER 1, 1991,
BETWEEN
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY,
A DELAWARE CORPORATION (THE "LESSEE"),
AND
NATIONAL RAILWAY EQUIPMENT COMPANY (THE "LESSOR")
The Lessee desires to lease from Lessor the units of Railroad Equipment
described in Schedule A hereto (each a "Unit" and collectively the "Equipment")
upon the terms and conditions hereinafter provided.
Accordingly, in consideration of the premises and of the rentals to be
paid and the covenants hereinafter mentioned to be kept and performed by the
Lessee, the Lessor hereby leases the Units to the Lessee upon the following
terms and conditions:
SECTION 1. NET LEASE. This Lease is a net lease and the Lessee shall
not be entitled to any abatement or rent or additional rent, or setoff against
or recoupment or reduction of rent or additional rent, including, but not
limited to, abatements, setoffs, reductions or recoupments due or alleged to be
due by reason of any past, present or future claims or counterclaims of the
Lessee against the Lessor under this Lease or otherwise. The Lessee's
obligations hereunder, including its obligations to pay all rentals, additional
rentals and other accounts hereunder, shall be absolute and unconditional under
any and all circumstances, and, except as otherwise expressly provided herein,
this Lease shall not terminate, nor shall the respective obligations of the
Lessor or the Lessee be otherwise affected, by reason of any defect, whether
latent or patent, in or damage to or loss of possession or loss of use or
destruction of all or any of the Units from whatsoever cause, any liens,
encumbrances or rights of others with respect to any of the Units, the
prohibition of or other restriction against the Lessee's use of all or any of
the Units, the interference with such use by any corporation, association,
individual, unit of government or other entity (each a "Person"), the invalidity
or unenforceability or lack of due authorization of this Lease, any insolvency
of or any bankruptcy, reorganization or similar proceeding against the Lessee,
or for any other cause whether similar or dissimilar to the foregoing, any
present or future law to the contrary notwithstanding, it being the intention of
the parties hereto that the rents and other amounts payable by the Lessee
hereunder shall continue to be payable in all events in the manner and at the
time herein provided unless the obligation to pay the same shall be terminated
pursuant to the express provisions of this Lease. To the extent permitted by
applicable law, the Lessee hereby waives any and all rights which it may now
have or which at any time hereafter may be conferred upon it, by statute or
otherwise, to terminate, cancel, quit or surrender the
lease of any of the Units except in accordance with the express terms hereof.
Each rental or other payment made by the Lessee hereunder shall be final and the
Lessee shall not seek to recover all or any part of such payment from the Lessor
for any reason whatsoever.
SECTION 2. DELIVERY AND ACCEPTANCE OF UNITS. Acceptance of the Units by
Lessee shall be deemed to be a delivery by the Lessor to the Lessee under this
Lease at the point or points within the United States of America at which such
Unit is so delivered to the Lessee. Upon such delivery, the Lessee will cause an
employee of the Lessee to inspect the same and, if such Unit is found to be
acceptable, to accept delivery of such Unit and execute and deliver to the
Lessor a certificate of inspection and acceptance (the "Certificate of
Inspection and Acceptance") whereupon, except as provided in the next sentence,
such Unit shall be deemed to have been delivered to and accepted by the Lessee
hereunder and shall be subject thereafter to all the terms and conditions of
this Lease. Lessor agrees to deliver all of the Unites between November 15, 1991
and March 31, 1992, inclusive.
SECTION 3. RENTALS. The Lessee agrees to pay to the Lessor, as rental
for each Unit, 48 consecutive quarterly rental payments in advance of $17,795
per Unit, the first such payment being due April 1, 1992 and subsequent
quarterly payments being due on the first day of each succeeding quarter (each
such date being hereinafter called a "Rental Payment Date"). Additionally,
Lessee agrees to pay Lessor on April 1, 1992 interim rental for all Units
accepted by Lessee at the rate of $195 per day from the date of acceptance or
January 1, 1992, whichever is later, through March 31, 1992.
If any of the Rental Payment Dates referred to above is not a business
day, the rental payment otherwise payable on such date shall be payable on the
next succeeding business day. The term "business day" as used herein means a
calendar day, excluding Saturdays, Sundays and any other day on which banking
institutions in Chicago, Illinois, are authorized or obligated to be closed.
The Lessor irrevocably instructs the Lessee to make all the payments
provided for in this Lease to be made by the Lessee, including, but not limited
to, the payments provided for in this Section 3 and in Section 7 hereof, as
follows: ________________________________. The Lessee agrees to make such
payment provided for in this Lease in Federal or other funds immediately
available by 11:00 a.m., Chicago time, on the date such payment is due.
SECTION 4. TERMS OF LEASE. The term of this Lease as to each Unit shall
begin on the date of delivery and acceptance of such Unit hereunder and, subject
to the provisions of Sections 7,
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10 and 13 hereof, shall terminate on March 31, 2004. The obligations of the
Lessee hereunder (including, but not limited to, the obligations under Sections
3, 6, 7, 9 and 14 hereof) shall survive the expiration or termination of the
term of this Lease and the full payment of all amounts payable under this Lease.
So long as no Event of Default exists hereunder, this Lease may not be
terminated and the Lessee shall be entitled to the rights of possession and use
provided under section 12 hereof.
SECTION 5. IDENTIFICATION MARKS. The Lessee will cause each Unit to be
kept numbered with the identification number set forth in schedule A hereto, and
will keep and maintain plainly, distinctly, permanently and conspicuously marked
on each side of each Unit, in letters not less than one inch in height, the
words "Ownership Subject to a Security Agreement Filed with the Interstate
Commerce Commission", with appropriate changes thereof as from time to time may
be required by law, in the opinion of the Lessor, in order to protect the
Lessor's rights to and interests in such unit. The Lessee will replace promptly
any such markings which may be removed, defaced, obliterated or destroyed.
Except as provided in the preceding paragraph, the Lessee will not
allow the name of any Person to be placed on any Unit as a designation that
might be interpreted as a claim of ownership; PROVIDED, HOWEVER, that the Units
may be lettered with the names or initials or other insignia customarily used by
the Lessee or its affiliates.
SECTION 6. TAXES. Whether or not any of the transactions contemplated
hereby are consummated, the Lessee agrees to pay, or cause to be paid, and to
indemnify and hold the Lessor and its respective successors, affiliates,
assigns, agents and servants (collectively "Indemnified Persons") harmless from,
all taxes (including without limitation taxes on income, gross receipts,
franchise sales, use, property [real or personal, tangible or intanqible], and
stamp taxes), assessments, fees and charges of any nature and whatsoever,
together with any penalties, fines, additions to tax or interest thereon,
howsoever imposed, whether levied or imposed upon the Equipment, the Lessor or
otherwise, by any Federal, state or local government or governmental subdivision
in the United States of America or by any foreign country or subdivision
thereof, upon or with respect to: any Unit or any part thereof; the manufacture,
purchase, ownership, delivery, nondelivery, rejection, leasing, possession,
sale, use, operation, rebuilding, replacement, transfer of title, return or
other disposition thereof; the rentals, receipts or earnings arising therefrom;
or this Lease, any payment made pursuant to such agreement, or THE property, the
income or other
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proceeds received with respect to any Unit (all such taxes, assessments, fees,
charges, penalties, fines, additions to tax and interest imposed as aforesaid
being hereinafter called "Taxes"), EXCLUDING, HOWEVER: (i) Taxes of the United
States of America or any state or political subdivision thereof imposed on or
measured solely by the net income or excess profits of the lessor or value-added
taxes in lieu of any such net income or excess profits taxes, other than Taxes
arising out of or imposed in respect of the receipt of indemnification payments
pursuant to this Lease; (ii) any Taxes imposed on or measured by an fees or
compensation received by the Lessor; (iii) franchise taxes based on the
corporate characteristics of the Lessor; (iv) any tax or similar charge included
in the Original Fair Market Value of the Units; and (v) Taxes imposed by a
foreign government or taxing authority or governmental subdivision of a foreign
country to the extent such Taxes are utilized by the Lessor as a credit against
United States Federal income taxes otherwise payable by the Lessor; PROVIDED,
HOWEVER, that the Lessee shall not be required to pay any Taxes during the
period it may be contesting the same in the manner provided below in this
Section 6.
In the event any returns, statements or reports with respect to any
Taxes are required to be made, the Lessee will make such returns, statements and
reports in such manner as to show the interest of the Lessor in such Units, as
shall be satisfactory to the Lessor or, where not so permitted, will notify the
Lessor of such requirement and will prepare and deliver such reports to the
Lessor within a reasonable period of time prior to the time such reports are to
be filed in such manners as shall be satisfactory to the Lessor.
In the event that, with respect to any period during the continuance of
this Lease, the Lessee becomes liable for the payment or reimbursement of any
Taxes, pursuant to this Section 6, such liability shall continue,
notwithstanding the expiration or termination of this Lease, until all such
Taxes are paid or reimbursed by the Lessee.
If claim is made against any Indemnified Person for any Taxes
indemnified against this Section 6, such party shall promptly notify the Lessee
in writing. If reasonably requested by the Lessee in writing and so long as the
Lessee is prohibited or impaired from doing so in its own name, such Indemnified
Person shall, upon receipt of indemnity reasonably satisfactory to it for all
costs, expenses, losses, legal and accountants, fees and disbursements,
penalties, fines, additions to tax and interest, and at the expense of the
Lessee, contest in good faith the validity, applicability or amount of such
Taxes by (a) resisting payment thereof if legally permissable (provided that the
nonpayment thereof does not, in the opinion of such Indemnified Person adversely
effect the interests of such Indemnified Person in and to the Units) and/or (b)
not paying the
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same except under protest, if protest is necessary and proper and/or
(c) if payment is made, filing for and making reasonable efforts to obtain a
refund thereof by appropriate administration or judicial proceedings, or both.
At the request of the Lessee, such Idemnified Person shall keep the Lessee
informed of the status of such contest and, at the Lessee's expense, supply
copies of briefs and other pleadings with respect to such contest to the extent
they do not relate to claims not indemnified by the Lessee hereunder. The Lessee
may also contest, at its own expense, the applicability or amount of such Taxes
in the name of such Indemnified Person; PROVIDED, HOWEVER, that no proceeding or
action relating to such contest shall be commenced (nor shall any pleading,
motion, brief or other paper be submitted or filed in the name of such
Indemnified capital person in any such proceeding or action) without the prior
written consent of such Indemnified Person. If such Indemnified Person shall
obtain a refund of all or any part of such Taxes previously reimbursed by the
Lessee in connection with any such contest or an amount representing interest
thereon, such Indemnified Person shall, within 30 days, pay the Lessee the
amount of such refund or interest net of expenses; PROVIDED, HOWEVER, that no
Event of Default (as defined in Section 10), or event which with notice or lapse
of time or both would become an Event of Default (a "Default"), shall have
occurred and be continuing.
The Lessee shall, whenever reasonably requested by an Indemnified
Person or the Lessor, submit to such party copies of returns, statements,
reports, billings and remittances, or furnish other evidence satisfactory to
such party of the Lessee's performance of its duties under this Section 6. The
Lessee shall also furnish promptly upon request such data as such party
reasonably may require to permit such party's compliance with the requirements
of taxing jurisdictions, including data available to the Lessee relating to use
of any Unit outside the United States.
The amount which the Lessee shall be required to pay with respect to
any Taxes which are subject to indemnification under this Section 6 shall be an
amount sufficient to restore the Indemnified Person to the same net after-tax
rate of return and after-tax cash position, after considering the effect of such
payment on its United States Federal income taxes and state and city income
taxes or franchise taxes based on net income and foreign taxes, that such
Indemnified Person would have been in had such Taxes not been imposed.
The indemnities shall be available hereunder to any Indemnified Person
irrespective of the negligence or misconduct of any other Indemnified Person.
SECTION 7. MAINTENANCE; CASUALTY OCCURRENCES; INSURANCE; TERMINATION.
The Lessee at its own expense will maintain, service, test, repair and overhaul
each Unit (including
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any parts installed or replacements made to any Unit and considered an Addition
(as defined in Section 9 hereof) hereunder) so that it will remain (a) in good
operating order, repair and condition, reasonable wear and tear excepted, (b) in
compliance with all Applicable Law (as defined in Section 9 hereof) and (c)
eligible for railroad interchange in the hands of the Lessee or Lessor in
accordance with the interchange rules of the Federal Railroad Administration and
the Association of American Railroads, if any, to the extent such rules are
applicable.
In the event that any Unit shall (i) become, in the reasonable opinion
of the Lessee, worn out from any cause whatsoever (except by reason of a breach
of the obligations of the Lessee under the preceding paragraph), (ii) suffer an
event which involves an actual, constructive or compromised total loss as a
result of an insurance settlement or be returned permanently to the builder
thereof in connection with a warranty or patent indemnity settlement; (iii) be
destroyed or damaged beyond economic repair such that the Lessee will lose the
use thereof for a period of equal to the lesser of 60 consecutive days and the
number of days then remaining in the term of this Lease for such Unit; (iv) be
stolen or disappear so that the Lessee will lose the use thereof for a period
equal to the lesser of 60 consecutive days and the number of days remaining in
the term of this Lease for such Unit; (v) be condemned, confiscated, seized or
title taken for use by a foreign government for a period equal to the lesser of
180 consecutive days and the number of days remaining in the term of this Lease
for such Unit or by a government of or in the United States (the "Government")
for a stated period which shall exceed the then remaining term of this Lease for
such Unit or for an indefinite period (or, if such taking, requisition or
condemnation shall occur during a renewal term, for a stated period which shall
exceed such then remaining renewal term or for an indefinite period) (such
occurrences being hereinafter called "Casualty Occurrences"), prior to the
return of such Unit in the manner set forth in Section 14 hereof, the Lessee
shall promptly and fully notify the Lessor with respect thereto. On the Rental
Payment Date next succeeding such Casualty Occurrence (or on the following
Rental Payment Date, if such next Rental Payment Date is less than fifteen days
after such Casualty Occurrence), the Lessee (subject to the next paragraph)
shall pay to the Lessor an amount equal to the rental payment or payments in
respect of such Unit due and payable through and including such date of payment
plus a sum equal to the Casualty Value (as hereinafter defined) of such Unit as
of such date. The "Casualty Value" of any Unit as of any Rental Payment Date
shall be an amount equal to that percentage of the Original Fair Market Value of
such Unit set forth opposite such Rental Payment Date in Schedule B hereto. Upon
the making of such payment, the rental for such Unit shall cease to accrue, the
term of this Lease as to such Unit shall terminate, and, except
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in the case of the loss, theft, or complete destruction of such Unit, the Lessor
shall be entitled to recover possession of such Unit.
Unless an Event of Default or an event that, with the passage of time
or the giving of notice, would become an Event of Default ("Default") shall have
occurred and be continuing, by notice to the Lessor not less than 15 days prior
to the date such Casualty Value is required to be paid, the Lessee may elect to
substitute for the Unit having suffered such Casualty Occurrence another
locomotive (other than a passenger or work locomotive) with fair market value,
useful life and utility equal to or exceeding that of the Unit having suffered
such casualty occurrence, provided that such substitution does not result in any
adverse tax or other adverse consequences to the Lessor. If such substitution is
effected (as set forth below) prior to the date the casualty Value is required
to be paid, the Lessee shall be relieved of its obligation to pay such Casualty
Value. If such substitution cannot be so effected prior to the date that the
casualty Value is required to be paid, the Lessee shall deposit with the Lessor
on or prior to such date an amount equal to the casualty Value, with
instructions to the Lessor to hold such amount pending delivery of a locomotive
for substitution. If and so long as no Event of Default or event that, with the
passage of time or the giving of notice, would become an Event of Default shall
have occurred and shall be continuing, the Lessor shall invest such amounts in
"Permitted Investments," as defined below, at the expense end risk and for
account of the Lessee, and shall disburse such amounts and any earnings and gain
from such investments to the Lessee upon effectiveness of much substitution. If
such an Event of Default or Default shall occur, any amounts so held will be
applied to the payment or the Casualty Value at the Unit for which substitution
was contemplated and any surplus shall be applied to damages pursuant to Section
10. If such substitution shall not be effected prior to the Rental Payment Date
next succeeding such deposit, the Casualty Value (of the Unit for which
substitution was contemplated) shall be due on much Rental Payment Date, and any
amounts so held by the Lessor shall be applied to the payment thereof with any
excess being paid to the Lessee.
Any such substitution shall be effected by:
(a) preparation, execution and delivery of suitable amendments
or supplements including such substituted unit as a Unit hereunder and
recording or depositing the same in all public offices where this Lease
shall have been recorded or deposited hereunder;
(b) delivery to the Lessor of a certificate of an officer of
the Lessee certifying that no Event of Default or Default has occurred
and is continuing and
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that such substitute unit is a locomotive (other than a passenger or
work locomotive) with a fair market value, useful life and utility
equal to or exceeding the Unit for which substitution is being made,
accompanied by a bill of sale and opinion of counsel with respect
thereto of the same scope and tenor as that delivered in connection
with the original delivery of the Unit for which substitution is being
made.
Upon completion of such steps, the substitute unit shall be regarded as a Unit
hereunder having the same Original Fair Market Value as the Unit having suffered
the Casualty Occurrence. The Lessee shall pay all costs and expenses related to
such substitution.
The term "Permitted Investment," as used herein shall mean (i) direct
obligations of the United States of America or obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, (ii) open market commercial paper rated A-1
by Standard & Poor's Corporation ("STP") or prime-1 by NCO---Moody's Commercial
Paper Division of Moody's Debt Participants Service, Inc., or equivalent ratings
of the successor of either of them, or (iii) certificates of deposit or banker's
acceptances of domestic banks having total assets in excess of $1,000,000,000
and which has outstanding at least one issue of securities rated in at least one
of the three highest categories by STP or Moody's Investors Service, Inc., in
each case maturing in not more than 95 days from the data of such investment.
Whenever any Unit shall suffer a Casualty Occurrence after the final
payment of rent in respect thereof is due and has been paid pursuant to Section
3 hereof and before (a) such Unit shall have been returned in the manner
provided in Section 14 hereof and (b) the storage period therein provided with
respect to such Unit shall have expired, the Lessee shall promptly (as provided
above) and fully notify the Lessor with respect thereto and pay to the Lesser an
amount equal to the Casualty Value of such Unit, which shall, except as
otherwise provided in Section 13 hereof, be an amount equal to the last Casualty
Value for such Unit shown on Schedule B hereto. Upon the making of any such
payment by the Lessee in respect of any Unit (except in the case of the loss,
theft or complete destruction of such Unit), the Lessor shall be entitled to
recover possession of such Unit.
In the event of the requisition (other than a requisition which
constitutes a Casualty Occurrence) for use by the Government of any Unit during
the term of this Lease, all of the Lessee's obligations (including, without
limitation, the obligation to pay rent) under this Lease with respect to such
Unit shall continue to the same extent as if such requisition had not occurred,
except that if such Unit is returned by the
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Government at any time after the end of the term of this Lease, the Lessee shall
be obligated to return such Unit to the Lessor pursuant to Section 11 or 14
hereof, as the case may be, promptly upon such return by the Government rather
than at the end of the term of this Lease, but the Lessee shall in all other
respects comply with the provisions of said Section 11 or 14, as the case may
be, with respect to such Unit. All payments received by the Lessor or the Lessee
from the Government for the use of such Unit in respect of the term of this
Lease shall be paid over to, or retained by, the Lessee, provided no Event or
Default or Default shall have occurred and be continuing; and all payments
received by the Lessor of the Lessee from the Government for the use of such
Unit in respect of the period after the term of this Lease shall be paid over
to, or retained by, the Lessor.
The Lessor hereby appoints the Lessee its agent to dispose of any Unit
suffering a Casualty Occurrence, or any component thereof, at the best price
obtainable on an "as is, where is" basis and the Lessee shall notify the Lessor
prior to any such sale. Provided that the Lessee has previously paid the
Casualty Value to the Lessor or has effected substitution for such Unit and
provided no Event of Default or Default shall have occurred and be continuing,
the Lessee shall be entitled to the proceeds of such sale to the extent they do
not exceed the Casualty Value of such Unit plus the Lesse's out-of-pocket
expenses in connection with such sale and any excess shall be paid to the
Lessor. The Lessee will pay all costs and expenses in connection with the sale
of any Unit pursuant to a Casualty Occurrence. The Lessee shall be entitled to
credit against the Casualty Value payable in respect of any Unit permanently
returned to its builder pursuant to any patent indemnity provision of any
purchase agreement covering such Unit an amount equal to any net patent
indemnity payment in respect of such Unit made by the builder to the Lessor.
Except as hereinabove to this Section 7 provided, the Lessee shall not
be released from its obligations hereunder in the event of, and shall bear the
risk of, any Casualty Occurrence or other damage to or destruction or loss of
any Unit from and after delivery and acceptance thereof by the Lessee hereunder.
The Lessee will, at all times prior to the return of the Equipment to
the Lessor, at its own expense, cause to be carried and maintained (and shall
furnish to the Lessor an insurer's or broker's certificate evidencing) property
insurance and public liability insurance in respect of the Units at the time
subject hereto, in amounts (subject to customary deductibles) and against risks
customarily insured against by the Lessee on locomotives owned or leased by the
Lessee but in any event consistent with prudent industry standards. Any policies
of insurance carried in accordance with this paragraph, including, without
limitation, liability insurance obtained after
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the date hereof, shall in effect name the Lessor as an additional insureds as
its interests may appear and shall provide for 30 days, prior written notice to
the Lessee of any material change or cancellation. If the Lessor shall receive
any property insurance proceeds or condemnation payments in respect of a Unit
suffering a Casualty Occurrence, the Lessor shall, subject to the Lessee's
having made payment of the Casualty Value in respect of such Unit and provided
no event of Default or Default shall have occurred and be continuing, pay such
proceeds or condemnation payments to the Lessee up to an amount equal to the
Casualty Value with respect to such Unit paid by the Lessee and any balance of
such proceeds or condemnation payments shall remain the property of the Lessor.
Provided no Event of Default or Default shall have occurred and be continuing,
all insurance proceeds received by the Lessor from the Lessee's property
insurance coverage in respect of any Unit not suffering a Casualty Occurrence
shall be paid to the Lessee upon proof satisfactory to the Lessor that any
damage to such Unit in respect of which such proceeds were paid has been fully
repaired.
Nothing herein shall be construed to prohibit the Lessor from carrying
any insurance on the Equipment for its own benefit; PROVIDED, HOWEVER, that any
such insurance shall not require any premiums to be paid by the Lessee nor shall
any such insurance require the Lessee to carry additional insurance not
specifically required of the Lessee herein.
In the event that the Lessee shall, in its reasonable judgment,
determine that one or more of the Units have become economically obsolete in the
Lessee,s business or shall be surplus to its requirements or it is not feasible
to comply with the provisions of paragraph (C) of Section 9 hereof with respect
thereto, the Lessee shall have the right, on at least 180 days, (and not more
than 360 days,) prior irrevocable written notice to the Lessor to terminate this
Lease as to such Units as of the succeeding Rental Payment Date specified in
such notice (hereinafter called the "Termination Date"); PROVIDED, HOWEVER, that
(i) no Event of Default or Default shall have occurred and be continuing (other
than pursuant solely to a violation of paragraph (I) of Section 9 hereof) and
(ii) on the Termination Date each such Unit shall be in the same condition as if
redelivered pursuant to Section 14 hereof. During the period from the date of
termination notice until the fifth business day preceding the Termination Date,
the Lessee shall use its best efforts to, and the Lessor say if it so chooses,
obtain bids for the purchase of all such Units, and the Lessee shall at least
five business days prior to the Termination Date certify to the Lessor the
amount of each such bid and the name and address of the party submitting such
bid. On the Termination Date the Lessor may elect to sell all such Units for
cash to the bidder
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(who shall not be the Lessee or any affiliate thereof) who shall have submitted
the highest bid prior to the Termination Date. The total sale price realized at
any such sale shall be retained by the Lessor and on the Termination Date the
Lessee shall pay to the Lessor (a) the excess, if any, of the Casualty Value for
each such unit computed as of such date over the sale price of such Unit after
the deduction of all expenses incurred by the Lessor in connection with the
sale, and (b) the rental payment due on the Termination Date. The Lessor may,
however, by irrevocable written notice to the Lessee given prior to the
Termination Date, elect to retain all such Units, in which case (1) the Lessee
shall pay to the Lessor (a) the excess, if any, of the Casualty Value for each
such Unit computed as of the Termination Date over the assumed net sales value
of each such Unit (as determined by mutual agreement or by an appraisal agreed
to by the Lessor and the Lessee), and (b) the rental payment due on the
Termination Date and (2) the Lessee shall deliver all such Units to the Lessor
in accordance with the provisions of Section 14 hereof.
SECTION 8. REPORTS AND INSPECTION. On or before March 31 in each year,
commencing with 1993, the Lessee will furnish to the Lessor an accurate
statement (i) setting forth as at the preceding December 31 the amount,
description and numbers of all Units then leased hereunder, the amount,
description and numbers of all Units that have suffered a Casualty Occurrence
during the preceding calendar year or are then undergoing repairs (other than
running repairs) or then withdrawn from use pending such repairs (other than
running repairs) and such other information regarding the condition and state of
repair of the Units as the Lessor may reasonably request, and (ii) stating that,
in the case of all Units repainted or repaired during the period covered by each
statement, the numbers and markings required by Section 5 hereof have been
preserved or replaced. In addition, within 30 days following the renewal date of
any insurance coverage hereunder, the Lessee shall so furnish a verification or
certification of insurance coverage from the Lessee's insurer or independent
broker stating the amounts of such insurance in effect and the amounts of
deductibles. The Lessor, at its sole cost end expense, shall have the right by
its agents to inspect the Units and the Lessee's records with respect thereto at
such reasonable times as the Lessor may request during the continuance of this
Lease, but the Lessor shall not have any obligation to do so. The Lessee shall
promptly notify the Lessor of any material changes or any material proposed
changes of which the Lessee has knowledge in its insurance coverage in effect
with respect to the Units pursuant to Section 7 hereof.
The Lessee shall promptly notify the Lessor of any occurrence of an
event of Default or Default, specifying such Event of Default or Default and the
nature and status thereof.
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SECTION 9. WARRANTIES; COMPLIANCE WITH LAWS AND RULES; INDEMNIFICATION.
(A) Lessee hereby acknowledges that Lessee has had or will
have the opportunity to inspect the Equipment prior to accepting
delivery of same, and that acceptance of delivery of the Equipment by
Lessee constitutes acknowledgement that they have been received in good
condition and repair.
(B) Delivery to and acceptance of the Equipment by, and
execution of an acceptance certificate with respect thereto by Lessee
shall constitute Lessee's acknowledgement that the Equipment is of the
manufacture, design and utility, quality and capacity selected by the
Lessee, that Lessee is satisfied that the same is suitable for Lessee's
purpose and that, LESSOR MAKES NO REPRESENTATION OR WARRANTY EXPRESS OR
IMPLIED, WITH RESPECT TO THE CONDITION, MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE OF THE EQUIPMENT, except as otherwise stated
herein or in any express warranty to Lessee.
(C) The Lessee agrees, for the benefit of the Lessor at all
times to comply in all respects (including, without limitation, with
respect to the use, maintenance and operation of each Unit) with all
applicable laws of the jurisdictions in which operations involving the
Units extend, with the interchange rules or the Association of American
Railroads (which term shall include any successor organization thereof)
to the extent applicable, and with all lawfu1 rules of the United
States Department of Transportation, the Interstate Commerce Commission
and any other legislative, executive, administrative or judicial body
exercising any power or jurisdiction over the Units, to the extent that
such laws and rules affect the title, operation or use of the Units
(all such laws and rules to such extent being hereinafter called the
"Applicable Laws"), and in the event that, prior to the expiration of
the term of this Lease, any Applicable Law requires any alteration,
replacement, addition or modification of or to any part on any Unit the
Lessee will conform therewith at its own expense; PROVIDED, HOWEVER,
that the Lessee may at its own expense, in good faith, contest the
validity or application of any Applicable Law in any reasonable manner
which does not, in the opinion of the Lessor adversely affect the
property or riqhts of the Lessor under this Lease. The Lessee, at its
own cost and expense, may furnish other additions, modifications and
improvements (including, without limitation, any
12
special devices, assemblies or racks at any time attached or affixed to
any Unit, the cost of which is not included in the Original Fair Market
Value of such Unit and which are not required for the operation or use
of such Unit by the United States Department of Transportation, the
Interstate Commerce Commission or any other legislative, executive,
administrative or judicial body exercising any power or jurisdiction
over such Unit) (collectively "Additions") to the Units as the Lessee
may deem desirable in the proper conduct of its business so long as
such Additions shall not be inconsistent with the continuing operation
of the Units, shall not diminish the value, utility or condition of the
Units below the value, utility and condition thereof immediately prior
to the making of such Additions, assuming the Units were then in the
condition required to be maintained by the terms of this Lease, and
shall not render the Units ineligible for interchange service under the
rules of the Association of American Railroads to the extent
applicable. Title to all Parts (as herein below defined) incorporated
in or installed as part of the Units shall without further act vest in
the Lessor in the following cases: (i) such Part is in replacement of
or in substitution for, and not in addition to, any Part originally
incorporated in or installed as part of a Unit at the time of the
acceptance thereof hereunder or any Part in replacement of, or in
substitution for, any such original or replaced or substituted Part;
(ii) such Part is required to be incorporated in or installed as part
of the Units pursuant to the provisions of the first paragraph of
Section 7 hereof or the first sentence of this paragraph; or (iii) such
Part cannot be readily removed from the Unit to which it relates
without material damage thereto and without diminishing or impairing
the value or utility which such Unit shall have had at such time had
such alteration or addition not occurred. In all other cases, if no
Event of Default or Default shall have occurred and be continuing,
title to Parts incorporated in or installed as parts of the Units as a
result of such alterations or additions shall vest in the Lessee and
may be removed by the Lessee at any time during the term of this Lease
and prior to the return of the Units to the Lessor pursuant to Section
14 hereof. The term "Part" for the purposes of this paragraph shall
mean any appliance, part, instrument, accessory, furnishing or other
equipment of any nature which may from time to time be incorporated in
or installed as part of any Unit.
13
(D) The Lessee agrees to indemnify, protect and hold harmless
each Indemnified Person from and against all losses, damages, injuries,
liabilities, claims (including, without limitation, claims for strict
liability in tort and claims based on the passive or active negligence
of an Indemnified Person) and demands whatsoever, regardless of the
cause thereof, and expenses in connection therewith, including, but not
limited to, counsel fees and expenses, the annual fees, costs and
disbursements of the Lessor, and patent, trademark or copyright
liabilities, penalties and interest, arising out of or alleged to arise
out of or as the result of the entering into or the performance of, or
the occurrence of a default, a Default or an Event of Default under
this Lease or any sublease entered into pursuant to Section 12 hereof,
the ownership of any Unit, the ordering, acquisition, replacement,
operation, use, condition (including any latent or patent defects in
any Unit), purchase, delivery, rejection, storage or return of any Unit
or any accident resulting in damage to or loss of property or injury or
death to any Person in connection with, or alleged to have occurred in
connection with, the ordering, acquisition, replacement, operation,
use, condition, purchase, delivery, possession, storage or return of
any Unit (except as otherwise expressly provided in Section 14 of this
Lease), the transfer of title to the Equipment by the Lessor pursuant
to any provisions of this Lease or the alleged violation of the terms
of any agreement, this Lease or any law, regulation, ordinance or
restriction affecting the Units, or the insolvency, bankruptcy,
reorganization, recapitalization or restructuring of the Lessee or this
transaction, except any matter otherwise indemnified by the Lessee
caused by any act or omission of such Indemnified Person not related to
the transactions contemplated by this Lease (all of which matters
indemnified against pursuant to the above being hereinafter called the
"Indemnified Matters"). The amount the Lessee shall be required to pay
with respect to any Indemnified Matter shall include a payment to the
Indemnified Person sufficient to restore such Person to the same
position, after considering the effect of such payment on its United
States Federal income taxes and state and city income taxes or
franchise taxes based on net income, that the Indemnified Person would
have been in had the Indemnified Matter not occurred. The Lessee shall
be obligated under this Section 9 irrespective of whether any
Indemnified Person shall also be indemnified with respect to the same
matter under any other agreement by any other Person and irrespective
of the negligence or
14
conduct of any other Person, and the Indemnified Person seeking to
enforce the indemnification may proceed directly against the Lessee
under this Section 9 without first resorting to any such other rights
of indemnification.
(E) The Lessee shall not be released from its obligations
hereunder in the event of any damage to or the destruction or loss of
any or all of the Units.
(F) The Lessee agrees to prepare and deliver to the Lessor,
within a reasonable time prior to the required filing date (or, to the
extent permissible, file on behalf of the Lessor and furnish copies
thereof to the Lessor upon request) any and all reports (other than tax
returns, except as otherwise provided in Section 6 hereof) to be filed
by the Lessor with any Federal, State or other regulatory authority by
reason of the Ownership by the Lessor of the Units or the leasing
thereof to the Lessee.
(G) None of the indemnities in this Section 9 shall be deemed
to create any rights of subrogation, from or under any Indemnified
Person, in any insurer or third party against the Lessee or the Lessor
therefor, whether because of any claim paid or defense provided for the
benefit thereof or otherwise. The indemnities contained in this Section
9 shall survive the expiration or termination of this Lease and return
of the Units as provided in Section 11 or 14 hereof with respect to all
events, facts, conditions or other circumstances occuring or existing
prior to such expiration or termination and are expressly made for the
benefit of, and shall be enforceable by, any Indemnified Person.
(H) Upon the payment in full of any indemnities as contained
in this Section 9 by the Lessee, and provided that no Event of Default
or Default shall have occurred and be continuing (i) the Lessee shall
be subrogated to any right of such Indemnified Person (except against
another Indemnified Person) in respect of the matter against which
indemnity has been given and (ii) any payments received by such
Indemnified Person from any Person (except the Lessee) as a result of
any matter with respect to which such Indemnified Person has been
indemnified by the Lessee pursuant to this Section 9 shall be paid over
to the Lessee to the extent necessary to reimburse the Lessee for
indemnification payments previously made in respect of such matter.
15
SECTION 10. EVENT OF DEFAULT. If, during the continuance of this Lease,
one or more of the following events (each such event being herein sometimes
called an "Event of Default") shall occur:
(A) default shall be made in the payment of any rent due
hereunder and such default shall continue for five days or default
shall be made in the payment of any other amount due hereunder and such
default shall continue for ten days;
(B) the Lessee shall make or permit any unauthorized
assignment or transfer of this Lease or of its leasehold interest in
the Units hereunder; or the Lessee shall make or permit any
unauthorized use or transfer of the possession of any Unit and shall
fail to recover such Unit within 30 days;
(C) the Lessee shall fail to maintain (i) the public liability
insurance coverage required by Section 7 hereof or (ii) the property
insurance coverage required by Section 7 hereof and such failure shall
continue for 20 days;
(D) default shall be made in the observance or performance of
any other of the covenants, conditions and agreements on the part of
the Lessee contained in or contemplated by this Lease (other than as
described in the last paragraph of Section 9 hereof), and such default
shall continue for 30 days after the earlier of (i) knowledge of such
Default by a Responsible Officer of the Lessee or (ii) written notice
from the Lessor to the Lessee specifying the default and demanding that
the same be remedied (Responsible Officer shall mean the Senior Vice
President-Finance and Accounting, the Treasurer, the Vice President or
the Assistant Vice President-Motive Power or any other officer whose
position and responsibilities require that such officer know the
requirements of this Lease);
(E) a petition for reorganization under Title 11 of the United
States Code, as now constituted or as may hereafter be amended, shall
be filed by or against the Lessee and, unless such petition shall have
been dismissed, nullified, stayed or otherwise rendered ineffective
(but then only so long as such stay shall continue in force or such
ineffectiveness shall continue), all the obligations of the Lessee
under this Lease shall not have been or shall not continue thereafter
to be duly assumed in writing, pursuant to a court order or decree, by
a trustee or trustees appointed (whether or not subject to
ratification) in
16
such proceedings in such manner that such obligations shall have the
same status as expenses of administration and obligations incurred by
such trustee or trustees, within 60 days after such petition shall have
been filed and otherwise in accordance with the provisions of 11 U.S.C.
Section 1168, or any successor provision; or
(F) any other proceeding shall be commenced by or against the
Lessee for any relief which includes, or might result in, any
modification of the obligations of the Lessee hereunder, under any
bankruptcy or insolvency laws, or laws relating to the relief of
debtors, readjustments of indebtedness, reorganizations, arrangements,
compositions or extensions (other than a law which does not permit the
liquidation of the Lessee or any readjustments of the obligations of
the Lessee hereunder), and, unless such proceedings shall have been
dismissed, nullified, stayed or otherwise rendered ineffective (but
then only so long as such stay shall continue in force or such
ineffectiveness shall continue), all such obligations shall not have
been or shall not continue thereafter to be duly assumed in writing
pursuant to a court order or decree, by a trustee or trustees or
receiver or receivers appointed (whether or not subject to
ratification) for the Lessee, or for the property of the Lessee, in
connection with any such proceedings in such manner that such
obligations shall have the same status as expenses of administration
and obligations incurred by such trustee or trustees or receiver or
receivers, within 60 days after such proceedings shall have been
commenced;
then, in any such case, the Lessor, at its option, may do any one or more of the
following:
(a) proceed by appropriate court action or actions either at
law or in equity to enforce performance by the Lessee of the applicable
covenants of this Lease or to recover damages for the breach thereof;
or
(b) by notice in writing to the Lessee terminate this Lease,
whereupon all rights of the Lessee to the use of the Units shall
absolutely cease and terminate as though this Lease had never been
made, but the Lessee shall remain liable as herein provided; the Lessor
may by its agents, subject to compliance with all mandatory
requirements of law, enter upon the premises of the Lessee or other
premises where any of the Units may be and take possession of all or
any such
17
Units and thenceforth hold, possess, sell, operate, lease to others and
enjoy the same free from any right of the Lessee, or its successors or
assigns, use the Units for any purposes whatever and without any duty
to account to the Lessee for such action or inaction or for any
proceeds arising therefrom; the Lessor shall, nevertheless, have a
right to recover from the Lessee damages for the breach of the
covenants hereof and any Event of Default and any and all amounts which
under the terms of this Lease may be then due or which may have accrued
to the data of such termination (computinq the rental for any number of
days less than a full rental period [based on a 360 day year] by
multiplying the rental for such full rental period by a fraction of
which the numerator is such number of days and the denominator is the
total number of days in such full rental period) and also to recover
forthwith from the Lessee as damages for loss of the bargain for future
rents and not as a penalty whichever of the following amounts the
Lessor, in its sole discretion, shall specify: (x) a sum, with respect
to each Unit, equal to (A) the excess of the present value, at the time
of such termination, of the entire unpaid balance of all rental for
such Unit which would otherwise have accrued hereunder from the date of
such termination to the end of the term of this Lease as to such Unit
over (B) the present value of the rental which the Lessor reasonably
estimates to be obtainable for the Unit during such period (such
present value to be computed in each case on the basis of a 10% per
annum discount, compounded semi-annually from the respective dates upon
which rentals would have been payable hereunder had this Lease not been
terminated) or (y) an amount equal to the excess, if any, of the
Casualty Value of such Unit as of the Rental Payment Date on or next
precedinq the date of termination over tbe amount the Lessor reasonably
estimates to be the net sales value of such Unit at such time (after
deduction of all estimated expenses of such sale); PROVIDED, HOWEVER,
that in the event the Lessor shall have sold any Unit, the Lessor, in
lieu of collecting any amounts payable to the Lessor by the Lessee
pursuant to the preceding clause (y) with respect to such Unit, may, if
it shall so elect, demand that the Lessee pay the Lessor and the Lessee
shall pay to the Lessor an the date of such sale, as liquidated damages
for loss of a bargain for future rents and not as a penalty, an amount
equal to the excess., if any, of the Casualty Value for such Unit, as
of the Rental Payment Date on or next preceding the date of
termination, over the net proceeds of such sale.
18
The Lessor may collect, receive and apply to the obligations of the Lessee
hereunder any proceeds from the use or sublease of the Units or other proceeds
from or with respect to the Units and any amounts held by the Lessor pending
substitution for Units having suffered a Casualty Occurrence. In addition, the
Lessee shall be liable, except as otherwise provided above, for any and all
unpaid amounts due hereunder before, during or after the exercise of any of the
foregoing remedies and for all reasonable attorneys, fees and other costs and
expenses incurred in the enforcement of this Lease or by reason of the
occurrence of any Default or Event of Default or the exercise of the Lessor's
remedies with respect thereto, including all costs and expenses incurred in
connection with the return of any Unit.
Each of the foregoing amounts payable by the Lessee shall bear interest
("Overdue Rate") at the higher of (a) the rate payable with respect to amounts
overdue on the Certificates and (b) the prime rate of interest per annum
announced by Continental Bank N.A. from time to time in effect (regardless of
whether such bank actually charges such rate to any customer) plus a 1.5% per
annum from the date such amount was due hereunder to the date of payment
thereof, in either case to the extent permitted by law.
The remedies in this Lease provided in favor of the Lessor shall not be
deemed exclusive, but shall be cumulative and may be exercised concurrently or
consecutively, and shall be in addition to all other remedies in its favor
existing at law or in equity. The Lessee hereby waives any mandatory
requirements of law, now or hereafter in effect, which might limit or modify the
remedies herein provided, to the extent that such waiver is not, at the time in
question, prohibited by law. The Lessee hereby waives any and all existing or
future claims to any offset against the rental payments due hereunder, and
agrees to make such payments regardless of any offset or claims which may be
asserted by the Lessee or on its behalf. The, Lessee hereby waives any and all
claims against the Lessor and its agent or agents for damages of whatever nature
in connection with any retaking of any Unit in any reasonable manner.
No failure to exercise, and no delay in exercising, any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other or further
exercise thereof, or the exercise of any other right, power or privilege.
SECTION 11. RETURN OF UNITS UPON EVENT OF DEFAULT. If this Lease shall
terminate pursuant to Section 10 hereof, the Lessee shall forthwith deliver
possession of the Units to the Lessor. Except as hereinafter provided, each Unit
so delivered shall be in the condition required by the first paragraph of
19
Section 7 hereof. For the purpose of delivering possession, the Lessee shall:
(a) forthwith and in the usual manner (including, but not by
way of limitation, giving prompt telegraphic and written notice to the
Association of American Railroads and all railroads to which any Unit
or Units have been interchanged or which may have possession thereof to
return the Unit or Units) place such Units upon such storage tracks of
the Lessee or any of its affiliates as the Lessor reasonably may
designate;
(b) permit the Lessor to store such Units on such tracks at
the risk of the Lesee without charge for insurance (which shall conform
to the provisions of Section 7 hereof), rent or storage until such
Units have been sold, leased or otherwise disposed of by the Lessor;
and
(c) transport the same to any place on the lines of railroad
operated by the Lessee or any of its affiliates or to any connecting
carrier for shipment, all as directed by the Lessor.
The assembling, delivery, storage, insurance and transporting of the Units as
hereinbefore provided shall be at the expense and risk of the Lessee and are of
the essence of this Lease, and, upon application to any court having
jurisdiction, the Lessor shall be entitled to a decree against the Lessee
requiring specific performance of the covenants of the Lessee so to assemble,
deliver, store and transport the Units. Except as hereinaftar provided, during
any storage period, the Lessee will, at its own expense, maintain and keep the
Equipment in the condition required by the first paragraph of Section 7 hereof
and will permit the Lessor or any Person designated by it, including the
authorized representative or representatives of any prospective purchaser,
lessee or user of any such Unit, to inspect the same. All rent earned in respect
of the Units after the date of termination of this Lease shall belong to the
Lessor and, if received by the Lessee, shall be promptly turned over to the
Lessor.
Without in any way limiting the foregoing obligations of the Lessee
under this Section 11, the Lessee hereby irrevocably appoints the Lessor as the
agent and attorney of the Lessee, with full power and authority, at any time
while the Lessee is obligated to deliver possession of any Unit to the Lessor,
to demand and take possession of such Unit in the name and on behalf of the
Lessee from whosoever shall be in possession of such Unit at the time.
20
SECTION 12. POSSESSION AND USE. So long as (i) no Event of Default
exists hereunder, and (ii) the Lessee is complying with the provisions hereof,
the Lessee shall be entitled to the possession and use of the Units in
accordance with the terms of this Lease. Without the prior written consent of
the Lessor, the Lessee may not sublease any Unit, except that, subject to the
conditions of the preceding sentence, the Lessee may sublease (which sublease by
its terms shall be subject and subordinate to this Lease and the rights and
remedies of the Lessor), the Units to, or permit their use by, a railroad
company incorporated in the United States of America (or any State thereof or
the District of Columbia) upon lines of railroad owned or operated by the Lessee
or by a railroad company or companies incorporated in the United States of
America (or any State thereof or the District of Columbia) or over which the
Lessee or such railroad company or companies have trackage rights or rights for
operation of their trains or over which their equipment is regularly operated
pursuant to contract, and upon the lines of railroad of connecting and other
carriers in the usual interchange of traffic or in through or run-through
service, but only upon and subject to all the terms and conditions of this
Lease; PROVIDED, HOWEVER, that (a) the Lessor's consent, not to be unreasonably
withheld, must be obtained for any sublease that, taken together with all
renewal terms provided for therein, would he longer than six months during any
period of 12 consecutive months.
The Lessee shall not use, sublease or permit the sublease or use of any
Unit in service involving operation or maintenance outside the United States of
America except that occasional service in Canada and Mexico shall be permitted
so long as such service in Canada and Mexico is on a temporary basis which is
not expected to exceed a total of 90 days in any taxable year of the Lessor. The
Lessee shall not sublease to or permit the sublease or use of any Unit by any
person in whose hands such Unit would qualify as tax-exempt use property under
Section 168(g) of the Internal Revenue Code of 1986, as amended to the date
hereof. No such assignment or sublease shall relieve the Lessee of its
obligations hereunder, which shall be and remain those of a principal and not a
surety.
Nothing in the first paragraph of this Section 12 shall be deemed to
restrict the right of the Lessee to assign or transfer its leasehold interest
under this Lease in the Units or possession of the Units to any railroad
corporation incorporated under the laws of the United States of America or any
State thereof or the District of Columbia (which shall have duly assumed the
obligations of the Lessee hereunder) into or with which the Lessee shall have
become merged or consolidated or which shall have acquired or leased all or
substantially all the lines of railroad of the Lessee; PROVIDED, HOWEVER, that
the Lessee is not in default under any provision of this Lease
21
immediately before the effectiveness of such merger, consolidation, lease or
acquisition and that such assignee, lessee or transferee, immediately after the
effectiveness of such merger, consolidation, lease or acquisition (i) will have
a net worth of not less than the net worth of the Lessee immediately before such
effectiveness, and (ii) will not be in default under any provision of this
Lease.
The Lessee will not create or suffer to exist and as soon as possible,
at its own expense, will cause to be duly discharged, any lien, charge, security
interest or other encumbrance (except any sublease as aforesaid and other than
an encumbrance created by the Lessor which is not contemplated by this Lease or
results from claims against the Lessor not related to the ownership or leasing
of the Units) which may at any time be imposed on or with respect to any Unit
including any Addition, Part or accession thereto or the interest of the Lessor
therein; except that this covenant will not be breached by reason of liens for
taxes, assessments or governmental charges or levies, in each case not due and
delinquent, or undetermined or inchoate materialmen's, mechanics', workmen's,
repairmen's or other like liens arising in the ordinary course of business and,
in each case, not delinquent and any lien of any mortgage or security agreement
of the Lessee that may attach to the Lessee's leasehold interest in and to the
Units and shall, in accordance with the terms of such instruments, be
subordinate to the interests of the Lessor hereunder (collectively, the
"Permitted Liens"); and the Lessee shall be under no obligation to discharge any
such lien, charge, security interest or encumbrance so long as it is diligently
contesting the same in good faith and by appropriate legal proceedings and the
failure to discharge the same does not, in the opinion of the Lessor adversely
affect the title, property or rights of the Lessor.
SECTION 13. RIGHT OF RENEWAL; PURCHASE OPTION. Provided that this Lease
has not been earlier terminated and no Event of Default or Default exists, the
Lessee may, by irrevocable written notice delivered to the Lessor not less than
180 days (nor more than 360 days) prior to the end of the original term of this
lease, elect to extend the term of this Lease in respect of all of the Units
then subject to this Lease, for a period acceptable to both the lessor and the
Lessee at tile Fair Market Rental (as hereinafter defined).
Provided that this Lease has not been earlier terminated and no Event
of Default or Default exists, the Lessee may by irrevocable written notice
delivered to the Lessor not less than 180 days (nor more than 360 days) prior to
the end of the original term of the renewal term, if elected, of this Lease
elect to purchase all of the Units then subject to this Lease at a Fair Market
Purchase Price payable in immediately available funds on the expiration of the
original term or renewal term, as
22
the case may be. Upon payment of the Fair Market Purchase Price of any Unit
pursuant to such exercise by the Lessee of its right to purchase such Units, the
Lessor shall execute and deliver to the Lessee, or upon request of the Lessee,
to the Lessee's assignee or nominee, a bill of sale (without warranties except
as hereinafter provided in this sentence) for such Units such as will transfer
to the Lessee title to such Units free and clear of all claims, liens, security
interests and other encumbrances created by or arising through the Lessor, other
than claims, liens, security interests and encumbrances which the Lessee is
obligated to pay or discharge under or pursuant to this Lease. Such bill of sale
shall be accompanied by an opinion of Lessor's legal counsel to the effect that
the Lessor is authorized to complete such transaction and that the bill of sale
is effective to accomplish that which is set forth therein.
The Fair Market Rental and Fair Market Purchase Price shall be
determined on the basis of, and shall be equal in amount to, the cash rental, or
the purchase price (as of such date as the context herein requires), as the case
may be, which would obtain in an arm's-length transaction between an informed
and willing lessee or purchaser, as the case may be, and an informed and willing
lessor or seller, as the case may be (other than a lessee currently in
possession), under no compulsion to lease or sell, as the case may be, but there
shall be excluded from such determination any rental or purchase value
attributable to additions, modifications and improvements which the Lessee is
entitled to remove pursuant to Section 9 hereof and without consideration of the
Lessee's purchase or renewal option; PROVIDED, HOWEVER, that Fair Market Rental
shall be determined on the basis of the term and other terms and conditions of
the lease being considered. In making such determination, costs of removal from
the location of current use shall not be a deduction from such rental or
purchase price and it shall be assumed that the Units have been collected in one
place on the lines of the Lessee as directed by the Lessor. If, after 20 days
from the giving of notice by the Lessee of the Lessee's election to extend the
term of this Lease or the giving of notice by the Lessee that it intends to
purchase Units, as aforesaid, the Lessor and the Lessee are unable to agree upon
a determination of the Fair Market Rental or Original Fair Market Value of the
Units, such rental or purchase price shall be determined in accordance with the
foregoing definition by the following procedure: If either the Lessor or the
Lessee shall have given written notice to the other requesting determination of
such rental or purchaser price by this appraisal procedure, such parties shall
consult for the purpose of appointing a qualified independent appraiser by
mutual agreement. If no such appraiser is appointed within 15 business days
after such notice is given, each such party shall appoint an independent
appraiser within 20 business days after such notice is given, and the two
appraisers so appointed shall within 25 business days after such notice is given
appoint a third
23
independent appraiser. If no such third appraiser is appointed within 25
business days after such notice is given, either such party may request the
American Arbitration Association to make such appointment, and both parties
shall be bound by any appointment so made. Any appraiser or appraisers appointed
pursuant to the foregoing procedure shall be instructed to determine the Fair
Market Rental or the Fair Market Purchase Price, as the case may be, of the
units then to be appraised, within 30 days after his or their appointment. If
such parties shall have appointed a single appraiser or if either such party
shall have failed to appoint an appraiser, the determination of Fair Market
Rental or Fair Market Purchase Price, as the case may be, of the single
appraiser appointed shall be final. If three appraisers shall be appointed, the
determination of the appraiser which differs most from that of the other two
appraisers shall be excluded, the remaining two determinations shall be averaged
and such latter average shall be final and binding as the Fair Market Rental or
Fair Market Purchase Price, as the case may be. The appraisal proceedings shall
be conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association as in effect on the date hereof, except as modified
hereby. The provision for this appraisal procedure shall be the exclusive means
of determining Fair Market Rental or Original Fair Market Value, as the case may
be, and shall be in lieu of any judicial or other procedure for the
determination thereof, and each party hereto hereby consents and agrees not to
assert any judicial or other procedures. Except as otherwise provided herein,
the Lessee and the Owner shall equally share all appraisal procedure expenses.
SECTION 14. RETURN OF UNITS UPON EXPIRATION OF TERM. As soon as
practicable on or after the expiration of the original or any renewal term of
this Lease with respect to any Unit and in any event within 60 days thereof, the
Lessee will, at its own cost and expense, at the request of the Lessor, deliver
possession of such Unit (if not purchased by the Lessee to the Lessor upon such
storage tracks of the Lessee as the Lessee nay reasonably designate and as shall
be acceptable to the Lessor at a location east of the Missouri River and permit
the Lessor to store such Unit on such tracks for a period not exceeding 90 days
following notification to the Lessor by the Lessee that 80% of the Units have
been assembled and delivered for storage (or, with respect to any Unit not
delivered at the time of such notification, 90 days following notification from
the Lessee to the Lessor that such Unit has been delivered for storage) and upon
not less than 30 days prior written notice from the Lessor to the Lessee,
transport the same, at any time within such 90-day period but not more than one
time, to any reasonable place on the lines of railroad operated by the Lessee,
or to any connecting carrier for shipment, all as reasonably directed by the
Lessor and as acceptable to the Lessee, the movement and storage of such Units
to be at the expense and risk of the Lessee (which shall
24
during such period maintain the insurance required by Section 7 hereof); and in
the event that any Unit shall suffer a Casualty Occurrence during such storage
period, the Lessee shall pay the Lessor the Casualty Value thereof as provided
in Section 7 hereof. During any such storage period the Lessee will permit the
Lessor or any Person designated by the Lessor, including the authorized
representatives of any prospective purchaser, lessee or user of such Unit, to
inspect the same; PROVIDE, HOWEVER, that the Lessee shall not be liab1e, except
in the case of willful misconduct, negligence or strict liability of the Lessee
or of its employees or agents, for any injury to, or the death of, any Person
exercising, on behalf of either the Lessor, the Owner, the Security Trustee or
any prospective purchaser, lessee or user, such rights of inspection. Except as
hereinafter provided in this Section 14, each Unit returned to the Lessor
pursuant to this Section 14 shall (except for additions, modifications and
improvements which the Lessee is entitled to remove and does remove pursuant to
Section 9 hereof) be in the condition required by the first sentence of Section
7 hereof. The assembling, delivery, storage and transporting of the Units as
hereinbefore provided are of the essence of this Lease and, upon application to
any court of equity having jurisdiction in the premises, the Lessor shall be
entitled to a decree against the Lessee requiring specific performance thereof.
During any storage period, the Lessee will, at its own expense, maintain and
keep the Units (except for additions, modifications and improvements which the
Lessee is entitled to remove and does remove pursuant to Section 9 hereof) in
the condition required by the first sentence of Section 7 hereof.
Notwithstanding anything to the contrary contained in this Section 14, the
Lessee shall have no obligation under clauses (b) through (d) of the first
sentence of Section 7 hereof after return of a Unit upon expiration of the
original or any renewal term of this Lease or with respect to a termination of
the nature described in the last paragraph of Section 7 hereof. All rent earned
in respect of the Units after the date of termination of this Lease shall belong
to the Lessor and, if received by the Lessee, shall be promptly turned over to
the Lessor. If any Unit is not returned on a date within 30 days of the
expiration of the original or any renewal term of this Lease, the Lessee will
pay to the Lessor as rental for such Unit from such date until such Unit is
returned an amount equal to (a) the average quarterly rental payment payable
with respect to such Unit during the original term hereof times (b) a fraction
the numerator of which is the actual number of days from such date until the
return of such Unit and the denominator of which is 90. Concurrently with each
delivery of a Unit to the Lessor hereunder, the Lessee will deliver to the
Lessor all records in its possession relating to the repair end maintenance
history of such Unit, including without limitation all logs, schedules and
computer data relating to such history of the type maintained in the ordinary
course of business of the Lessee with respect to locomotives owned or leased by
the Lessee.
25
After the 90-day storage period described above, the Lessee will store any such
Unit at the risk of the Lessor and at then prevailing storage rates for 180 days
or for such longer period as the parties may agree.
SECTION 15. RECORDING. The Lessee, at its own expense, will cause this
Lease to be recorded at the Interstate Commerce Commission pursuant to 49 U.S.C.
Section 11303. The Lessee will from time to time do and perform any other act
and will execute, acknowledge, deliver, file, register, record (and will refile,
reregister, deposit and redeposit or rerecord whenever required) any and all
further instruments required by law or reasonably requested by the Lessor for
the purpose of proper protection, to its satisfaction, of the Lessor's
respective rights in the Units, or for the purpose of carrying out the intention
of this Lease; and the Lessee will promptly furnish to the Lessor evidence of
all such filing, registering, depositing, recording and other acts which nay be
required under this Section 15, and an opinion or opinions of counsel for the
Lessee with respect thereto satisfactory to the Lessor. This Lease shall be
filed with the Interstate Commerce Commission prior to the delivery and
acceptance hereunder of any Unit.
SECTION 16. INTEREST ON OVERDUE RENTALS. Anything to the contrary
herein contained notwithstanding, any nonpayment of rent or other obligation due
hereunder shall result in the obligation on the part of the Lessee promptly to
pay, to the extent legally enforceable, an amount on the overdue rentals and
other obligations for the period of time during which they are overdue at the
Overdue Rate as defined in Section 10.
SECTION 17. NOTICES. All communications and notices provided for herein
shall be in writing and shall become effective when delivered by mail, by hand
or by any other means of communication of written notice, addressed as follows:
(a) if to the Lessor, at 14400 South Robey Street, P.O. Box
2270, Dixmoor, Illinois 60426, Attention: President;
(b) If to the Lessee, at One North Western Center, 165 Worth
Canal Street, Chicago, Illinois 60606, Attention: Vice President -
Finance;
or addressed to either party at such other address as such party shall hereafter
furnish to the other party in writing.
SECTION 18. SEVERABILITY; EFFECT AND MODIFICATION OF LEASE; THIRD-PARTY
BENEFICIARIES. Any provision of this Lease which is prohibited or unenforceable
in any jurisdiction shall be, as to such jurisdiction, ineffective to the extent
of such prohibition or unenforceability without invalidating the
26
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
This Lease exclusively and completely states the rights of the Lessor
and the Lessee with respect to the leasing of the Units and supersedes all other
agreements, oral or written, with respect thereto. No variation or modification
of this Lease and no waiver of any of its provisions or conditions shall be
valid unless in writing and signed by duly authorized signatories for the Lessor
and the Lessee.
The parties hereto intend this instrument to be a true lease and that
the rights conferred upon the Lessee in the Units are only a leasehold interest
for the term of this Lease.
SECTION 19. EXECUTION. This Lease may be executed in several
counterparts, such counterparts together constituting but one and the same
instrument. It shall not be necessary that any counterpart be signed by both
parties hereto so long as each party hereto shall have executed and delivered
one counterpart hereof. Although for convenience this Lease is dated as of the
date first set forth above, the actual date or dates of execution hereof by the
parties hereto is or are, respectively, the date or dates shown below their
signatures.
SECTION 20. LAW GOVERNING. The terms of this Lease and all rights and
obligations hereunder shall he governed by the laws of the State of Illinois;
PROVIDED, HOWEVER, that the parties shall be entitled to all rights, conferred
by 49 U.S.C. Section 11303 and such additional rights arising out of the filing
or deposit hereof, if any, and of any assignment hereof and any markings on the
Units as shall be conferred by the laws of the several jurisdictions in which
this Lease or any assignment hereof shall be filed or deposited.
SECTION 21. LESSOR'S RIGHT TO PERFORM. If the Lessee fails to perform
or comply with any of its agreements contained herein, the Lessor may (but shall
have no obligation to do so) upon notice to the Lessee, and without releasing
the Lease from any of its obligations hereunder, perform or comply with such
agreement, and the amount of the reasonable costs and expenses (including
reasonable counsel fees, if any) incurred in connection with such performance or
compliance, together with interest on such amount at the Overdue Rate, shall be
payable by the Lessee upon demand. No such performance or compliance by the
Lessor shall be deemed a waiver of any rights and remedies against the Lessee
hereunder nor be deemed to ours any default by the Lessee hereunder.
27
IN WITNESS WHEREOF, the parties hereto have each caused this agreement
to be duly executed by their respective officers thereunto duly authorized.
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By: /s/ DENNIS E. WALLER
-----------------------------
Name: Dennis E. Waller
Title: Vice President -
Engineering & Materials
NATIONAL RAILWAY EQUIPMENT COMPANY
By: /s/ L. J. BEAL
-----------------------------
Name: L. J. Beal
Title: President
28
STATE OF ILLINOIS )
) SS:
COUNTY OF COOK )
On this 7th day of November, 1991, before me personally appeared Dennis
E. Waller, to me personally known, who, by me being duly sworn, says that he is
a Vice President - Engineering & Materials of Chicago and North Western
Transportation Company, and that the foregoing instrument was signed on behalf
of said corporation by authority of its Board of Directors, and he acknowledged
that the execution of the foregoing instrument was the free act and deed of said
corporation.
/s/ JUDITH A. SIMM
----------------------------
Notary Public
My commission expires: 6-7-93
STATE OF ILLINOIS )
) SS:
COUNTY OF COOK )
On this 7th day of November, 1991, before me personally appeared L. J.
Beal, to me personally known, who, by me being duly sworn, says that he is a
President of National Railway Equipment Company, and that the foregoing
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
/s/ JUDITH A. SIMM
----------------------------
Notary Public
My commission expires: 6-7-93
29
SCHEDULE A
TO
LEASE
DESCRIPTION OF EQUIPMENT
Type and General Description of Locomotive Unit, Marks and Numbers:
UNIT NO. TYPE GENERAL DESCRIPTION
- -------- ------- --------------------------
CNW 4701 GP-38-2 General Purpose Locomotive
CNW 4702 GP-38-2 General Purpose Locomotive
CNW 4703 GP-38-2 General Purpose Locomotive
CNW 4704 GP-38-2 General Purpose Locomotive
CNW 4705 GP-38-2 General Purpose Locomotive
CNW 4706 GP-38-2 General Purpose Locomotive
CNW 4707 GP-38-2 General Purpose Locomotive
CNW 4708 GP-38-2 General Purpose Locomotive
CNW 4709 GP-38-2 General Purpose Locomotive
CNW 4710 GP-38-2 General Purpose Locomotive
CNW 4711 GP-38-2 General Purpose Locomotive
LEASE RATE
ORIGINAL FAIR PER LOCOMOTIVE
MARKET VALUE TERM QUARTERLY DAILY
- ------------ ---------- ---------- -------
$600,000.00 144 Months $17,795.90 $195.00
30
SCHEDULE B
TO
LEASE
CASUALTY VALUE PER UNIT
PAYMENT NUMBER PAYMENT DATE CASUALTY VALUE PERCENTAGE
- -------------- ------------ -------------------------
1 04/01/92 100.00%
2 07/01/92 98.98%
3 10/01/92 97.93%
4 01/01/93 96.87%
5 04/01/93 95.78%
6 07/01/93 94.68%
7 10/01/93 93.55%
8 01/01/94 92.40%
9 04/01/94 91.23%
10 07/01/94 90.04%
11 10/01/94 88.82%
12 01/01/95 87.58%
13 04/01/95 86.31%
14 07/01/95 85.02%
15 10/01/95 83.71%
16 01/01/96 82.37%
17 04/01/96 81.00%
18 07/01/96 79.61%
19 10/01/96 78.19%
20 01/01/97 76.74%
21 04/01/97 75.27%
22 07/01/97 73.76%
23 10/01/97 72.23%
24 01/01/98 70.67%
25 04/01/98 69.07%
26 07/01/98 67.45%
27 10/01/98 65.79%
28 01/01/99 64.10%
29 04/01/99 62.38%
30 07/01/99 60.63%
31 10/01/99 58.84%
32 01/01/00 57.02%
33 04/01/00 55.16%
34 07/01/00 53.26%
35 10/01/00 51.33%
36 01/01/01 49.36%
37 04/01/01 47.35%
38 07/01/01 45.31%
39 10/01/01 43.22%
40 01/01/02 41.10%
41 04/01/02 38.93%
42 07/01/02 36.72%
43 10/01/02 34.47%
44 01/01/03 32.17%
45 04/01/03 29.83%
46 07/01/03 27.44%
47 10/01/03 25.01%
48 01/01/04 22.53%
(LAW-2) A:\C17688.002
31
CERTIFICATE OF ACCEPTANCE
I. John E. Voldseth, Vice President - Finance, as the duly authorized
representative of Chicago and North Western Transportation Company ("CNW") do
hereby certify that I have inspected and accepted the following Units on behalf
of CNW in accordance with the terms of that certain Lease of Railroad Equipment
Agreement dated as of November 1, 1991 ("Lease Agreement"). All capitalized
terms used herein shall have the same meaning as in the Lease Agreement:
TYPE OF EQUIPMENT: EMD GP38-2 Locomotive Units
(2,000 horsepower)
DATE ACCEPTED: December 12, 1991
NUMBER OF UNITS: Five (5)
IDENTIFYING NUMBERS: CNW 4701, CNW 4702, CNW 4703,
CNW 4704 and CNW 4706
I do further certify that the foregoing Units are in Acceptable
Condition and conform to the specifications, requirements and standards
applicable thereto as provided in the Lease Agreement.
/s/ JOHN E. VOLDSETH
---------------------------
John E. Voldseth
Chicago and North Western
Transportation Company
Date: December 12, 1991
(LAW) A:\L352\L352-6.815 (9)
Exhibit "B"
PURCHASE AGREEMENT
THIS AGREEMENT dated as of October 22, 1991 is by and between CHICAGO
AND NORTH WESTERN TRANSPORTATION COMPANY ("CNW") and NATIONAL RAILWAY EQUIPMENT
CO. ("NRE").
WITNESSETH:
WHEREAS, CNW desires to sell to NRE eighteen (18) used EMD GP3O
locomotives, twenty-five (25) used EMD 6P35 locomotives and ten (10) used EMD
SD4O locomotives (collectively called the "Units") currently owned by CNW
currently bearing the CNW-assigned road numbers as listed on Exhibit "A" hereto:
and
WHEREAS, NRE desires to purchase the Units from CNW.
NOW, THEREFORE, in consideration of the terms, conditions and covenants
contained in this Agreement, the adequacy of which being hereby acknowledged by
both CNW and NRE, it is hereby agreed as follows:
1. AUTHORITY. CNW hereby agrees to sell to NRE the Units pursuant
to authority given by CNW's Board of Directors.
2. PURCHASE PRICE. The Purchase Price ("Purchase Price") for the
Units shall be $397,675 for the eighteen (18) EMD GP30 locomotives, $552,325 for
the twenty-five (25) EMD GP35 locomotives and $1,750,000 for the ten (10)
operable EMD SD40 locomotives in legal currency of the USA.
3. DELIVERY. The Units shall be delivered to NRE in Lots (as
hereinafter defined) A-IS F.0.T. CNW's Des Moines Short Line Yard at Des Moines,
Iowa (the "Interchange Point"). CNW shall use its best efforts to deliver the
first Lot of Units to NRE within fifteen (15) days following final execution of
this Agreement and remaining Lots on or before December 9, 1991. CNW agrees to
move the Units without cost to NRE to the Interchange Point.
4. PAYMENT. The Purchase Price is to be paid to CMW in not more
than three (3) installments. The first installment shall be $397,675 payable in
cash (via bank wire transfer) within ten (10) working days from date of delivery
at the Interchange Point for the eighteen (18) GP30 locomotives. The second
installment shall be $552,325 payable in cash (via bank wire transfer) within
ten (10) working days from date of delivery at the Interchange Point for the
twenty-five (25) GP35 locomotives. The third and final payment shall be
$1,750,000 payable in cash (via bank wire transfer) within ten (10) working days
from date of delivery at the Interchange Point for the ten (10) SD4O
locomotives. The 10th calendar day after delivery of a Lot of the Units to NRE
at the Interchange Point shall be the "Closing Date" and all payments and all
closing documents for such Lot shall be exchanged between CNW and NRE on such
Closing Date. If a Closing Date falls on a weekend or national holiday, the
closing shall occur on the next succeeding business day. Each payment for the
- 2 -
Units will be made by wire transfer in immediately available funds on the
applicable due date of closing by 11:00 a.m., Chicago time, to CNW account
number 07-00010 at The First National Bank of Chicago (the "Bank"), Wire ABA
Bank #071000013, or otherwise in accordance with CNW's instructions. NRE will
pay, to the extent legally enforceable, interest upon all amounts remaining
unpaid after the same shall have become due and payable pursuant to the terms of
this Agreement at the rate of (a) 10% per annum or (b) 2% over the prime
commercial rate of the Bank, whichever is higher.
5. INSPECTIONS. On or prior to delivery, NRE shall deliver to CNW
an Acceptance Certificate in the form of Exhibit "B" hereto signed by a duly
authorized NRE officer identifying all such Units as accepted. NRE will take
delivery of and settle on the applicable Closing Date for all accepted Units
delivered to the Interchange Point. The Units will be moved to the Interchange
Point and delivered to NRE in no more than three (3) Lots, the first Lot
consisting of eighteen (18) GP30 locomotives, the second Lot consisting of
twenty-five (25) GP35 locomotives and the third Lot consisting of ten (10) SD40
locomotives, each being (a "Lot"). Nothing in this Agreement shall preclude CNW
from delivering and closing on Lots on a more expeditious basis provided both
CNW and NRE mutually agree to any such acceleration.
6. DISCLAIMER OF WARRANTY. CNW HAS NOT MADE AND DOES NOT MAKE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR INPLIED, AS TO TITLE (EXCEPT SUCH
WARRANTY OF TITLE AS IS EXPRESSLY PROVIDED IN THE BILL OF SALE REFERRED TO
BELOW), CONDITION, COMPLIANCE WITH SPECIFICATIONS, QUALITY, DURABILITY,
SUITABILITY, MERCHANTABILITY OR FITNESS FOR USE OR FITNESS FOR A PARTICULAR
PURPOSE OR ANY OTHER WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE UNITS. THE UNITS ARE SOLD HEREUNDER BY CNW "AS-IS" AND "WITH ALL FAULTS"
F.O.T. THE INTERCHANGE POINT. NRE will have no right hereunder or othwerwise
(and waives all rights) to make any claim against CNW for breach of warranty of
any kind whatsoever (except for breach of CNW's title warranty) or for
ajdustment in the price of the Units delivered to an accepted by NRE hereunder.
7. RISK OF LOSS AND NRE'S INDEMNITY. On delivery of each Unit CNW
will have no further responsibility for such Unit. Except for damage or loss in
transportation on CNW's lines, NRE assumes all risk of loss, damage or
destruction of each delivered Unit and any component or part thereof, and
commencing upon delivery by CNW, NRE will indemnify, protect and hold harmless
CNW from and against all losses, damages, injuries, liabilities, claims
(including, without limitation, claims for strict liability tort) and demands
whatsoever, regardless of the cause thereof, including the sole negligence of
CNW, its employees or agents, and any expenses in connection therewith,
including but not limited to counsel fees and expenses, arising out of or as a
result of the condition, purchase, use, or storage of any Unit delivered to this
Interchange Point or any accident (except in the aforesaid transportation by
CNW) in connection with the inspection, operation, use, condition, possession,
storage, or return of any such Unit resulting in damage to property or injury or
death to any person.
8. CLOSING DOCUMENTS. CNW will deliver to NRE on or before the
applicable Closing Date for Units for which CNW has received an Acceptance
Certificate from NRE as provided in this Agreement the following documents:
- 3 -
(a) Bill of Sale in the form of Exhibit "C" attached hereto,
evidencing transfer to NRE on the Closing Date of title to the Units
and warranting that at the time of delivery of such Units and
warranting that at the time of delivery of such Units, CNW had legal
title thereto and good and lawful right to sell such Units and that
such Units were at such time free of all claims, liens and encumbrances
of any nature.
(b) Invoice for Units to be closed for in the form of Exhibit
"D" attached hereto.
(b) Invoice for Units to be closed for in the form of Exhibit
"D" attached hereto.
9. COSTS
(a) BROKERS. CNW shall in no event be liable to any party for
any commission, finder's fee, attorney's fee or similar expense arising
out of the sale and assignment effected thereby, except for fees or
charges for which CNW shall expressly contract.
(b) EXPENSES. Except as otherwise provided, all legal,
accounting and other costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid
by the party incurring such expenses.
(c) SALES, EXCISE, TRANSFER AND PROPERTY TAXES. NRE shall bear
and pay all local, state or federal tax (other than federal, state or
city net income taxes or franchise taxes measured by net income on such
receipts) or license or registration fees, assessments, charges, fines,
levies, imposts, duties, withholdings, stamp taxes and penalties levied
or imposed on or in connection with the sale of the Units, and any
filing or recording fees payable in connection with the instruments or
transfer provided for herein.
10. FORM OF AGREEMENT.
(a) SECTION HEADINGS. The subject headings to the paragraphs
and subparagraphs of this Agreement is included for purposes of
convenience only, and shall not affect the construction or
interpretation of any of its provisions.
(b) ENTIRE AGREEMENT: MODIFICATION; WAIVER. This Agreement
constitutes the entire Agreement between the parties pertaining to the
subject matter contained in it and supersedes all prior and
contemporary agreements, representations, and understandings of the
parties. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by all parties. No waiver
of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar,
- 4 -
nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
11. ASSIGNMENT. This Agreement shall be binding on, and shall
inure to the benefit of, the parties to is and their respective successors and
assigns; provided, however, CNW may not assign any of its rights under it,
except to a wholly-owned subsidiary corporation of CNW or to any corporation
which shall acquire all or substantially all of the stock or assets of CNW or
unless NRE consents in writing to such assignment, which consent shall not be
unreasonably withheld. Any assignment by CNW and/or NRE shall not relieve either
CNW and/or NRE of any of their obligations or duties under this Agreement. NRE
may not assign any of its rights or delegate any of its duties under this
Agreement without the consent in writing from CNW, which consents shall not be
unreasonably withheld.
12. PARTIES IN INTEREST. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any person other than parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third person to any
party to this Agreement or the property of any such party, nor shall any
provision give any third persons any right of subrogation or action over or
against any party to this Agreement or the property of any such party.
13. GOVERNING LAW. This Agreement shall be construed in accordance
with and be governed by the laws in effect in the State of Illinois.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NATIONAL RAILWAY EQUIPMENT CO. CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By: /s/ [illegible] By: /s/ D. E. WELLER
------------------------------- --------------------------------
Title: [illegible] Title: Vice President -
Engineering and Materials
Date: [illegible] Date: November 7, 1991
L352-6 (1-4)
EXHIBIT "A"
GP35 LOCOMOTIVES SD40 LOCOMOTIVES GP30 LOCOMOTIVES
(25) (10) (18)
- ---------------- ---------------- ----------------
CNW 824 CNW 869 CNW 802
CNW 825 CNW 870 CNW 803
CNW 826 CNW 872 CNW 804
CNW 827 CNW 878 CNW 805
CNW 828 CNW 882 CNW 806
CNW 829 CNW 886 CNW 807
CNW 830 CNW 889 CNW 808
CNW 833 CNW 892 CNW 809
CNW 836 CNW 923 CNW 810
CNW 838 CNW 926 CNW 811
CNW 841 CNW 812
CNW 843 CNW 813
CNW 847 CNW 816
CNW 848 CNW 818
CNW 849 CNW 819
CNW 850 CNW 821
CNW 851 CNW 822
CNW 852 CNW 823
CNW 853
CNW 854
CNW 855
CNW 861
CNW 863
CNW 864
CNW 865
L352-6 (5.*)
EXHIBIT "B"
CERTIFICATE OF ACCEPTANCE
I, _____________________________, _________________________________,
(Name) (Title)
as the duly authorized representative of National Railway Equipment Co. ("NRE"),
do hereby certify that I have inspected and accepted the following Units on
behalf of NRE in accordance with the terms of that certain Purchase Agreement
dated as of October 22, 1991 ("Purchase Agreement"). All capitalized terms used
herein shall have the same meaning as in the Purchase Agreement:
TYPE OF EQUIPMENT:
DATE ACCEPTED:
NUMBER OF UNITS:
IDENTIFYING NUMBERS:
I do further certify that the foregoing Units are in Acceptable
Condition and conform to the specifications, requirements and standards
applicable thereto as provided in the Purchase Agreement.
------------------------------
Authorized Representative
National Railway Equipment Co.
Date: ______________________
L352-6 (6.*)
EXHIBIT "C"
BILL OF SALE
FOR AN IN CONSIDERATION and upon the payment of Ten Dollars ($10.00)
and other good and valuable consideration, the adequacy of which is hereby
acknowledged, CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY, a Delaware
Corporation (the Seller), does hereby grant, bargain, sell, transfer and deliver
unto NATIONAL RAILWAY EQUIPMENT CO. (the Buyer), its successors and assigns, all
of the Seller's right, title to and interest in the equipment described on
Schedule A attached hereto and made a part hereof (the Units).
The Seller hereby warrants that at the time of delivery of the Units
to the Buyer, the Seller had legal title thereto and good and lawful right to
sell the Units and that the Units were at such time free of all claims, liens
and encumbrances of any nature: and the Seller covenants to defend such title
against the lawful claims and demands of any persons whomsoever based on claims
originating prior to such delivery of the Units.
IN WITNESS WHEREOF, Chicago and North Western Transportation Company
has executed this Bill of Sale this ______ day of _____________, 1991.
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
/s/ J. E. VOLDSETH
-------------------------------
J. E. Voldseth
Vice President-Finance
ATTEST:
/s/
- ----------------------------
Assistant Secretary
L352-6 (7.*)
EXHIBIT "D"
NORTH WESTERN LEASING COMPANY
and
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
One North Western Center
Chicago, Illinois 60606
I N V O I C E
Date:
SOLD TO: * NATIONAL RAILWAY EQUIPMENT CO.
o In accordance with the Purchase Agreement (Agreement) dated as of
October 22, 1991 between NATIONAL RAILWAY EQUIPMENT CO. (NRE) and
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY (CNW).
DESCRIPTION:
For description of equipment see the attached Schedule.
PAYMENT TERMS:
First National Bank of Chicago Account No. 07-00010 Chicago and North Western
Transportation Company
Chicago, Illinois
WIRE: ABA Bank #07100013
L352-6 (8.*)
Chicago and NorthWestern
Transportation Company
[LOGO OMITTED]
October 30, 1991
Mr. L. J. Beal
President
National Railway Equipment Co.
14400 S. Robey Street
P.O. Box 2270
Dixmoor, IL 60426
Dear Mr. Beal:
This letter confirms the agreement between Chicago and North Western
Transportation Company ("CNW") and National Railway Equipment Company ("NRE") to
enter into (i) a lease agreement (the "Lease") in the form of Exhibit "A"
hereto, covering the lease for a period of not less than twelve (12) years from
NRE as Lessor to CNW as Lessee of eleven (11) GP38-2 locomotives (the "Lease
Locomotives") consisting of: three (3) units built in 1979, being original
GP38-2 locomotives with extended range dynamics, one (1) unit built in 1974,
being an original GP38-2 locomotive without dynamics, and seven (7) units that
are GP38-2 conversion units, these locomotives being equipped with standard
range dynamics (see Schedule "As" hereto), and (ii) a purchase agreement (the
"Purchase Agreement") in the form of Exhibit "B" hereto, covering the purchase
by NRE from CNW of eighteen (18) used EMD GP30 locomotives for $397,675,
twenty-five (25) used EMD GP35 locomotives for $552,325 and ten (10) used EMD
SD40 locomotives for $1,750,000 (collectively the "Purchase Locomotives"). The
final closing under the Purchase Agreement for the Purchase Locomotives shall
take place on or before December 23, 1991.
As specified in the Lease, NRE will provide the Lease Locomotives at a daily
rate of $195.00 per day per unit for a period of twelve (12) years. The Lease
Locomotives will include four (4) units that have recently completed totally
rebuilt engines and three (3) units just have been recently completely repacked.
As for the balance of the Lease Locomotives, all engines will be qualified and
checked for excessive wear and/or damage as outlined in Schedule "B" prior to
delivery.
National Railway Equipment Company
October 30, 1991
Page 2
NRE fully warrants all replacement components in the Lease Locomotives to be
free from all defects in material and workmanship for a period of two (2) years
commencing upon acceptance of all such Lease Locomotives by CNW under the Lease.
This warranty also includes the replacement of all such failed replacement
components. In addition, with regard to each Lease Locomotive, NRE warrants (i)
all traction motors and replacements therefor to be free from all defects in
material and workmanship for a period of six (6) years, (ii) all AR-10
alternators and replacements therefor for a period of twelve (12) years against
any major failure and (iii) all crankshafts and replacements therefor to be free
from all defects in material and workmanship for a period of twelve (12) years.
This warranty also includes the replacement of all such failed components. NRE
has the option to replace such failed components with qualified, rebuilt or take
out components. NRE agrees to apply "electronic temperature control" mechanism
to all leased locomotives. NRE will provide for purchase by CNW at NRE's cost,
all items for the Lease Locomotives that are recommended on Schedule "C" hereto
for changeout at the stated periodical basis. NRE will replace the failed
components only, no freight or labor to be included.
This warranty does not apply to any other parts of the Lease Locomotives, and
CNW shall be responsible for the repair and maintenance of any part not so
covered. Moreover, NRE shall have the option, if any of the parts covered by
this warranty in the preceding paragraph above fails to furnish qualified
rebuilt parts. If NRE cannot provide qualified rebuilt parts, NRE has the right
to secure said part from a dealer of its choice at the right to secure said part
from a dealer of its choice at NRE's sole cost and expense. NRE shall use its
best efforts to prevent service interruptions which may be incurred by CNW as a
result of delays incurred by NRE while NRE secures parts from the dealer of its
choice. Such best efforts shall include the provision of replacement locomotives
on a temporary basis if NRE is unable to provide qualified parts within fifteen
(15) working days from receipt of notice from CNW.
It is expressly understood that the terms of this letter agreement and these
warranty obligations of NRE are supplementary to the provisions of the Lease and
that these warranty obligations may not be assigned or delegated by NRE to a
third party without CNW's express written consent.
All Lease Locomotives are to be delivered by NRE to CNW between November 15,
1991 and March 31, 1992, inclusive. Interim rental for Lease Locomotives and
delivered and accepted under the Lease may not begin to accrue until January 1,
1992.
National Railway Equipment Company
October 30, 1991
Page 3
It is expressly understood by both CNW and NRE that (i) CNW shall have no
obligation to enter into the Lease unless and until CNW has received applicable
authority from its Board of Directors, (ii) CNW shall have no obligation to pay
and rental for any Lease Locomotive nor perform any other obligation under the
Lease unless and until NRE has closed for all of the Purchase Locomotives under
the Purchase Agreement on or prior to December 23, 1991 and (iii) if CNW does
not secure applicable authority from its Board of Directors, NRE has no
obligation under the Purchase Agreement.
If NRE concurs with the foregoing please so indicate by signing, dating and
returning to me the duplicate original of this letter agreement.
Sincerely,
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By: /s/ D. E. WALLER
---------------------------
Vice President -
Engineering & Materials
AGREED TO AND ACCEPTED this 7th day of November, 1991.
NATIONAL RAILWAY EQUIPMENT COMPANY
By: /s/ L. J. BEAL
---------------------------
L. J. Beal
Its: President
L352-5 (1-3)
SCHEDULE "A"
Type and General Description of Locomotive Unit, Marks and Numbers:
UNIT NO. TYPE GENERAL DESCRIPTION
- -------- ------ --------------------------
CNW 4701 GP38-2 General Purpose Locomotive
CNW 4702 GP38-2 General Purpose Locomotive
CNW 4703 GP38-2 General Purpose Locomotive
CNW 4704 GP38-2 General Purpose Locomotive
CNW 4705 GP38-2 General Purpose Locomotive
CNW 4706 GP38-2 General Purpose Locomotive
CNW 4707 GP38-2 General Purpose Locomotive
CNW 4708 GP38-2 General Purpose Locomotive
CNW 4709 GP38-2 General Purpose Locomotive
CNW 4710 GP38-2 General Purpose Locomotive
CNW 4711 GP38-2 General Purpose Locomotive
LEASE RATE
ORIGINAL FAIR PER LOCOMOTIVE
MARKET VALUE TERM QUARTERLY DAILY
- ------------ ---- --------- -----
$600,000.00 144 MONTHS $17,795.00 $195.00
L352-5 (4.*)
SCHEDULE "B"
QUALIFICATION WORK SCOPE
A. ENGINES
1. Cylinders to be inspected for scoring, scuffing, broken rings,
and high ring land wear per OEM specs. All defects will be
corrected. (This is for engines not receiving rebuilt power
assemblies).
2. Leads to be taken on each assembly. All lead readings to be
within .020 to .68, but not to exceed .05 side to side, for
all power assemblies.
3. Lube oil samples taken prior to start up and after load test,
results will be made available at your request.
4. Rods and main bearings visually inspected and spot checks
made. (All rebuilt engines and engines receiving rebuilt power
assemblies will receive new bearings).
5. Injectors, rockers, and valve bridges replaced as required.
6. Roots blowers monitored for oil leakage. (Rebuilt engines will
receive rebuilt blowers).
7. Engine load tested and governors and racks set to gain proper
horsepower.
8. Major oil leaks corrected and tightened up.
B. TRUCKS
1. Wheels to be 2 inch minimum (usable rim) with a maximum flange
reading of .04.
2. Bad order brake shoes renewed with new.
3. Bent or off running shoes and rigging to be repaired.
4. Bad order pedestal liners replaced when cracked or out of
limits with new.
5. Traction motors, D77's or as in units, will be run checked,
inspected and completely rebrushed.
6. Motor supports and J-boxes will be serviced and inspected. New
wicks to be supplied.
-2-
7. Gear case leakage deemed excessive will be corrected and all
relubed per standards.
8. Outboard sanders will be repaired in kind.
9. Center bearing and side bearing clearances to be within
specifications.
10. Trucks cleaned as necessary.
C. MAIN GENERATOR
1. Electrically qualified for service.
2. Brushes renewed as required.
3. Commutators to meet specification.
4. Interior cleaned as practical.
5. Armature bearing monitored for noise.
D. ELECTRICAL SYSTEM
1. Will be inspected for defects and corrected.
2. Free locomotive of grounds, low voltage system to be a minimum
of 500,000 OHM above ground and high voltage to be a minimum
of 3 meg OHM above ground.
3. System function test all circuits.
4. Cycle and recalibrate transition circuits.
5. Batteries to meet a specific gravity level of 1125 or greater
when fully charged or be replaced with new.
6. Set voltage regulation.
7. Apply all missing covers.
8. Apply all light bulbs as necessary.
9. Load test system.
10. Replace brushes as required.
E. AIR BRAKE
1. Give fresh 1092 day FRA.
-3-
2. Inspect air compressor for pumping oil, repair as necessary.
3. Renew air intake filters.
F. COOLING
1. Inspect for leaks while under hydro test and correct defects.
2. Load test and monitor all systems.
G. LUBE SYSTEM
1. Repair leaks as necessary.
2. Load test and monitor temperature difference on lube oil
coolers.
H. FUEL
1. 60 lb. test engine fuel lines and injectors for leakage.
2. Change all filters.
I. ENGINE AIR FILTERS
1. Renew all filters on engine air intake.
2. Carbody filter will be renewed.
J. UNDER FRAME
1. Inspect draft gear and draft pocket for damage and correct as
required.
2. Inspect safety appliances repair or replace as required.
K. LOAD TEST
1. Do standard 4 hour load test. Supply horsepower test date
sheet to Lessee.
2. Adjust and correct defects.
L. PAINTING
1. Interior and exterior to be steam cleaned.
2. Unit to be sanded and primed.
3. Unit to be painted to customer specifications using enamel
paint.
M. 1. All locomotives to be in compliance with all FRA Regulations.
N. 1. Major component serial numbers as required by Lessee to be
supplied.
L352-5 (4.*-8.*)
SCHEDULE "C"
PERIODICAL CHANGE-OUT FOR GP38-2 LOCOMOTIVES
Components used during 12 year cycle of 16 cylinder "E" GP Locomotive.
Valve Bridge 6 years
Head-liner-piston-thrust washer 6 years
upper con-lower mains-thrust collars
(or according to lab reports) 6 years
Engine blower 6 years
Water pumps 6 years
Oil pumps 12 years
Engine governor 6 years
Stack base gasket 12 years
Lube oil cooler 6 years
Fuel injectors 3 years
Fuel pump and motor 6 years
Top deck cover seals 2 years
Complete retorque of engine 1 year
Air compressor valves 2 years
Air compressor bearing 4 years
Air compressor drive bushings 6 years
Air brake equipment 3 years
Auxiliary generator (rebearing-qualify) 6 years
Wheels 5-6 years
(depending on
track service)
Traction motor (rebearing-qualify) 5-6 years
Alternator bearing repack 6 years
L352-5 (9.*)