File No. 70-8335
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM U-1
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
OHIO VALLEY ELECTRIC CORPORATION
P.O. Box 468, Piketon, Ohio 45661
(Name of company filing this statement and
address of principal executive offices)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
ALLEGHENY POWER SYSTEM, INC.
12 East 49th Street, New York, New York 10017
(Name of top registered holding company
parent of each applicant or declarant)
* * *
G. P. Maloney, Executive Vice President
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
A. Joseph Dowd, General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)<PAGE>
The undersigned Ohio Valley Electric Corporation ("OVEC")
hereby amends its Application or Declaration on Form U-1 in File
No. 70-8335 as follows:
1. By adding the following paragraph at the end of ITEM 1.
DESCRIPTION OF PROPOSED TRANSACTIONS:
"At any given time, the number of railcars OVEC
subleases will not exceed fifty percent (50%) of the
railcars OVEC owns or leases.
It is proposed that Certificates of Notification
under Rule 24 shall be filed yearly with respect to any
sublease of OVEC's railcars. Each such certificate
will include the following information regarding any
sublease of railcars: (1) the term of any sublease;
(2) the number of cars subleased; (3) the revenues
earned from such sublease; (4) the variable costs and
contribution to fixed costs created by subleasing
railcars to non-affiliates."
2. By amending and restating ITEM 6. EXHIBITS AND
FINANCIAL STATEMENTS as follows:
"The following exhibits and financial statements are filed
as part of this statement:
Exhibit B Copy of form of Lease
Exhibit E None
Exhibit F Opinion of Counsel<PAGE>
Balance Sheets as of March 31, 1994 and Statements of
Income and Retained Earnings, per books, for the 12 months ended
March 31, 1994 of OVEC.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
statement to be signed on its behalf by the undersigned thereunto
duly authorized.
OHIO VALLEY ELECTRIC CORPORATION
By_/s/ G. P. Maloney____________
Vice President
Dated: July 12, 1994
railcars.ovc\amendu-1.#2
Exhibit B
RAILCAR LEASE
Dated as of ____________ 1, 1994
Between
PITNEY BOWES CREDIT CORPORATION,
as Lessor
And
OHIO VALLEY ELECTRIC CORPORATION,
as Lessee<PAGE>
This Railcar Lease dated as of ____________, 1, 1994 (the
"Lease"), by and between PITNEY BOWES CREDIT CORPORATION, a
Delaware corporation (the "Lessor"), and OHIO VALLEY ELECTRIC
CORPORATION, an Ohio corporation (the "Lessee").
In consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
Section 1. Definitions.
For purposes of this Lease, capitalized terms used herein
shall have the meanings assigned to them in Annex 1 hereto, as
the same may be amended from time to time (such definitions to be
equally applicable to both the singular and plural forms of the
terms defined). Any term defined by reference to an agreement,
instrument or other document shall have the meaning so assigned
to it whether or not such document is in effect. Unless
otherwise indicated, references without qualification in this
Lease to sections, paragraphs, clauses, appendices, schedules and
exhibits are to the same contained in or attached to this Lease.
Section 2. Agreement for Lease of Equipment.
Subject to, and upon all of the terms and conditions of this
Lease, Lessor hereby agrees to lease to Lessee and Lessee hereby
agrees to lease from Lessor each Item of Equipment for the Lease
Term.
Section 3. Delivery and Acceptance of Equipment.
Lessor shall not be liable to Lessee for any failure or
delay in obtaining any Item of Equipment or making delivery
thereof. Upon execution and delivery of a Lease Supplement
substantially in the form attached hereto as Exhibit B by Lessor
and Lessee, the Items described therein shall be deemed to have
been delivered to and accepted by Lessee as agent for Lessor
under the respective Acquisition Agreement and for all purposes
of this Lease, and thereupon shall be subject to all of the
terms, provisions and conditions of this Lease.
Lessee's execution and delivery of a Lease Supplement shall
be evidence that the Items of Equipment listed therein have been
subjected to this Lease on the terms hereof. Lessee's execution
and delivery of a Lease Supplement with respect to an Item of
Equipment pursuant to this Section 3 shall conclusively establish
that, as between Lessor and Lessee, but without limiting or
otherwise affecting Lessor's or Lessee's rights, if any, against
any other Person, such Item of Equipment is acceptable to and
irrevocably accepted by Lessee as agent for Lessor under the
respective Acquisition Agreement and under the Lease, notwith-
standing any defect with respect to design, manufacture,
condition or any other matter or the failure of any such Item of
Equipment to comply to the specifications applicable thereto, and<PAGE>
that, as between Lessor and Lessee, such Item of Equipment is in
good order and condition.
Section 4. Lease Term.
The interim term (the "Interim Term") for each Item of
Equipment shall commence on the Acceptance Date for such Item of
Equipment and shall terminate at the end of the day on
December 29, 1994 unless this Lease is sooner terminated with
respect to such Item pursuant to the provisions hereof. The
basic term (the "Basic Term") for each Item of Equipment shall
commence on December 30, 1994 (the "Basic Term Commencement
Date") for such Item and, unless this Lease is sooner terminated
with respect to such Item (or all Equipment) pursuant to the
provisions hereof, shall terminate on December 30, 2005. If not
sooner terminated pursuant to the provisions hereof, the Lease
Term for each Item of Equipment shall end on the last day of the
Basic Term thereof, or if this Lease is renewed pursuant to
Section 25(a) hereof, on the last day of the last Renewal Term
thereof.
Section 5. Return of Equipment.
(a) Return of Equipment upon Expiration of Term. Upon
the expiration or earlier termination of the Lease Term with
respect to each Item of Equipment and so long as no Default or
Event of Default has occurred and is continuing (and provided, in
the case of the expiration of the Lease Term, that Lessee has not
exercised its purchase option under Section 25(b) hereof), Lessee
will undertake to deliver possession of each Item of Equipment to
Lessor, at one of two locations mutually agreed upon by Lessor
and Lessee (the "Redelivery Location"). Lessee at Lessee's
expense and risk shall permit Lessor to store the Equipment at
the Redelivery Location for a period not exceeding 30 days. In
addition, Lessee will use reasonable efforts to assist the Lessor
in securing storage space at Lessor's expense and risk for an
additional period of time. Any Item of Equipment delivered to a
Redelivery Location shall be deemed to be redelivered hereunder
on the date on which such Item of Equipment shall have been
delivered to any Redelivery Location, and Fixed Rent or Renewal
Rent, as the case may be, with respect to any Item of Equipment
shall cease to accrue.
(b) Return of Equipment upon Default. If the Lessor
shall terminate this Lease pursuant to Section 19 hereof, the
Lessee shall forthwith deliver possession of the Equipment to the
Lessor. For the purpose of delivering possession of any Item to
the Lessor as above required, the Lessee shall at its own cost,
expense and risk: (i) forthwith deliver such Items to not more
than two (2) locations as the Lessor shall designate, and
(ii) permit the Lessor to store such Item for a period of 360
days and so store at such locations without charge for insurance,
rent or storage, and during such period of storage the Lessee<PAGE>
shall continue to maintain all insurance required by Section 16
hereof.
Without in any way limiting the obligation of the
Lessee under the foregoing provisions of this Section 5(b), the
Lessee hereby irrevocably appoints the Lessor as the agent and
attorney of the Lessee, with full power and authority (which
power is coupled with an interest), at any time while the Lessee
is obligated to deliver possession of any Items of Equipment to
the Lessor after the occurrence of an Event of Default, to demand
and take possession of such Item in the name and on behalf of the
Lessee from whomsoever shall be at the time in possession of such
Item.
(c) Essence of Lease. The assembling, delivery,
storage and transporting of the Equipment as hereinbefore
provided are of the essence of this Lease, and upon application
to any court of equity having jurisdiction in the premises, the
Lessor shall be entitled to a decree against the Lessee requiring
specific performance of the covenants of the Lessee so to
assemble, deliver, store and transport the Equipment.
Section 6. Rent.
(a) Interim Rent. Lessee shall not be liable for any
Interim Rent.
(b) Fixed Rent. Lessee hereby agrees to pay Lessor
Fixed Rent for the use by Lessee of each Item of Equipment during
the Basic Term, in consecutive semi-annual installments, in
arrears, due and payable on each Rent Payment Date and continuing
until the expiration or earlier termination of the Basic Term,
with each such installment to be in an amount equal to the
product obtained by multiplying (i) the Purchase Price of such
Item of Equipment by (ii) the applicable percentages set forth in
Exhibit C attached hereto. Lessee hereby agrees to pay Lessor
Fixed Rent for each Item of Equipment during each Renewal Term
thereof as specified in Section 25(a) hereof.
(c) Supplemental Rent. Lessee also agrees to pay to
Lessor, or to whomever shall be entitled thereto, all
Supplemental Rent, as the same shall become due and owing.
Lessee shall also pay to Lessor (and, in the case of payments of
Supplemental Rent payable to other Persons hereunder, such other
Persons) on demand, as Supplemental Rent, to the extent permitted
by applicable law, interest at the Late Rate on any part of any
installment of Fixed Rent or any amount due under Section 19
hereof not paid when due at or prior to the time specified for
such payment for any period for which the same shall be overdue.
The payment or satisfaction of Lessee s obligation with respect
to Fixed Rent or any installment thereof shall not limit any
obligation of Lessee which may have accrued during the Lease Term
with respect to Supplemental Rent. In the event of any failure
on the part of Lessee to pay any such Supplemental Rent hereunder<PAGE>
Lessor shall have all rights, powers and remedies provided for
herein or by law or equity or otherwise in the case of nonpayment
of Rent.
(d) Method of Payment. All payments of Fixed Rent and
Supplemental Rent required to be made by Lessee to Lessor shall
be made by 11:00 A.M. Atlanta, Georgia time on the date payment
is due in United States dollars and in immediately available
funds. If any such date is not a Business Day, then payment
shall be due on the next succeeding Business Day and if paid on
such Business Day by 11:00 A.M. Atlanta, Georgia time, such
payment shall be without interest or penalty. In the event of
any assignment pursuant to Section 13(b) hereof, all payments or
right to payments which are properly assigned thereunder, whether
Fixed Rent, Supplemental Rent or otherwise, shall be paid to such
address as shall be designated by Lessor and any such assignee.
All payments of Rent shall be paid by Lessee to Lessor at its
office at ______________________________________________________,
or as Lessor may otherwise direct from time to time in writing.
(e) Adjustments to Rent. The percentages for Fixed
Rent, Stipulated Loss Value and Termination Value set forth in
Exhibits C and D, have been calculated in part on the basis of
the Pricing Assumptions. If any such Pricing Assumption proves
to have been incorrect, then such percentages for Fixed Rent,
Stipulated Loss Value and Termination Value shall be adjusted
(upward or downward) so as to preserve Lessor's Net Economic
Return. Any adjustments pursuant to this Section 6(e) shall
(A) satisfy the provisions of Revenue Procedure 75-28 and any
other applicable statutes, regulations, revenue procedures,
revenue rulings or technical information releases relating to the
subject matter of such Revenue Procedure, (B) be made in a manner
designed to avoid application of Section 467(b)(2) of the Code
and any regulations thereunder or any other similar provision of
Federal income tax law and not otherwise cause any adverse effect
under any Federal income tax law in effect at the time of such
adjustment, and (C) to the extent possible and not inconsistent
with the foregoing, minimize the net present value of the
remaining Fixed Rent.
(f) Computation of Adjustments.
(i) Upon the occurrence of an event requiring
adjustments to the percentages for Fixed Rent, Stipulated
Loss Value and Termination Value pursuant to Section 6(e),
Lessor shall make the necessary computations on a basis
consistent with that used by Lessor in the computation of
the percentages for Fixed Rent, Stipulated Loss Value and
Termination Value in connection with the execution and
delivery of this Lease, taking into account only the event
giving rise to the adjustments. Subject to paragraph (ii)
of this Section 6(f), such adjustments shall be effective 30
days after the date Lessor shall have furnished to Lessee a
certificate signed on behalf of Lessor by a responsible<PAGE>
officer confirming that such adjustments have been properly
computed in accordance with the provisions of this Lease,
and shall remain effective until changed in consequence of
any inaccuracy discovered in the course of any verification
procedure conducted pursuant to paragraph (ii) of this
Section 6(f).
(ii) Within 30 days after Lessor shall have
provided Lessee with a certificate pursuant to paragraph (i)
of this Section 6(f), Lessee either shall confirm the
accuracy of such computation or shall notify Lessor that
such computation, and the resulting adjustments proposed by
Lessor, are inaccurate. In the latter event, Lessor and
Lessee agree to submit the matter to an investment banker or
another Person which specializes in the pricing and
financial analysis of leveraged leases, and the conclusion
of such firm or other Person as to the proper adjustments
shall be conclusive and binding on Lessee and Lessor. All
expenses incurred by Lessor and Lessee in connection with
the verification procedures described in this
paragraph (ii) shall be shared equally by Lessee and Lessor.
Each adjustment of the percentages for Fixed Rent,
Stipulated Loss Value and Termination Value shall be
evidenced by the execution and delivery of a supplement to
this Lease in form and substance satisfactory to Lessee and
Lessor, and shall be effective as provided herein without
regard to the date on which such supplement to this Lease is
so executed and delivered.
Section 7. Net Lease.
This Lease is a net lease and Lessee acknowledges and agrees
that Lessee's obligations hereunder shall be absolute and
unconditional under any and all circumstances and shall be paid
without notice or demand and without any abatement, reduction,
suspension, diminution, deferral, setoff, defense, counterclaim
or recoupment whatsoever, including, without limitation, any
abatement, reduction, suspension, diminution, deferral, setoff,
defense, counterclaim or recoupment due or alleged to be due to,
or by reason of, any past, present or future claims which Lessee
may have against Lessor, any assignee, any vendor or manufacturer
of the Equipment or any part or Item thereof, or any other
Person, either under this Lease or otherwise, for any reason
whatsoever; nor, except as otherwise expressly provided herein,
shall this Lease terminate, or the obligations of Lessee be
otherwise affected for any reason whatsoever, including any
defect in or damage to or loss of possession or loss of use or
destruction of the Equipment or any part or Item thereof, the
condition, design, operation or fitness for use thereof, any
Liens or rights of others with respect to the Equipment or any
part or Item thereof, any prohibition or interruption of or other
restriction against Lessee's use, operation or possession of the
Equipment or any part or Item thereof, or any interference with
such use, operation or possession by any Person or entity<PAGE>
(including confiscation, requisition or other taking by any
governmental authority, any person acting under governmental
authority or otherwise, or action of any public or private
person, whether by eviction by paramount title or for any other
reason whatsoever), the invalidity or unenforceability or lack of
due authorization of this Lease, any defect in the title to,
compliance with plans or specifications for all or any of the
Items of Equipment, any insolvency of or any bankruptcy,
reorganization or other proceeding against Lessee, Lessor or any
other person, or for any other cause whether similar or
dissimilar to the foregoing, any present or future law to the
contrary notwithstanding, it being the intention and agreement of
the parties hereto, and the basis of the bargain, that (to the
extent permitted by applicable law) Fixed Rent, Renewal Rent,
Supplemental Rent and other amounts payable by Lessee hereunder
shall continue to be payable in all events in the manner and at
the times herein provided unless and until the obligation to pay
the same shall be terminated pursuant to the express provisions
of this Lease.
Without limiting the generality of the foregoing, Lessee
covenants that it will remain obligated under this Lease in
accordance with its terms, and will not take any action to
terminate (except in accordance with the express provisions
hereof), rescind or avoid this Lease for any reason,
notwithstanding any insolvency, bankruptcy, reorganization or
other proceeding affecting Lessor or any property of Lessor, or
any action which may be taken by any receiver, trustee or
liquidator (or other similar official) or by any court.
Nothing in this Section or in any other provision of this
Lease shall preclude any separate, independent claim (not by way
of abatement or reduction of any amount at any time payable by
Lessee hereunder) by Lessee for the breach of any representation,
covenant, undertaking or agreement made herein for the benefit of
Lessee by Lessor.
Section 8. Lessor's Title; Equipment to Be and Remain
Personal Property.
Title to the Equipment shall at all times remain in Lessor
and at no time during the Lease Term shall title become vested in
Lessee. This Lease is and is intended to be a true lease and not
a lease intended as security or a lease in the nature of a
security interest. Lessee shall acquire no right, title or
interest in or to the Equipment, except the right to use the same
pursuant to the terms of this Lease. It is the intention and
understanding of both Lessor and Lessee that the Equipment shall
be and at all times remain personal property.
Section 9. Use of Equipment; Compliance with Laws.
Lessee shall pay all costs, expenses, fees and charges
incurred in connection with the use and operation of the<PAGE>
Equipment during the lease thereof. Lessee agrees that the
Equipment will be used and operated solely in the regular course
of its business and in compliance with all statutes, laws,
ordinances, rules and regulations of any Federal, state or local
governmental body, agency or authority applicable to the use and
operation of the Equipment. If such laws or rules require any
alteration, replacement or addition of or to any part on any Item
of Equipment, Lessee will conform therewith at its own expense.
Lessee agrees not to operate or locate any Item of Equipment, or
to suffer any Item of Equipment to be operated or located, in any
area excluded from coverage by any insurance policy required by
the terms of Section 16 hereof or to operate or locate any Item
of Equipment in such a manner as to violate the terms of any
insurance policy required by the terms of said Section 16.
Lessee shall procure and maintain in effect all licenses,
registrations, certificates, permits, approvals and consents
required by Federal, state or local laws or by any governmental
body, agency or authority in connection with the use and
operation of each Item of Equipment, including any instruments
required by the AAR. Notwithstanding the foregoing sentence,
however, Lessee will cause this Lease and the Warranty Bill of
Sale to be filed and recorded with the Interstate Commerce
Commission ("ICC") in accordance with Section 20c of the
Interstate Commerce Act, and will do and perform any other act
and will execute, acknowledge, deliver, file, register, record
(and will refile, reregister, deposit and redeposit or rerecord
whenever required) this Lease and any and all amendments or
supplements to this Lease, in connection with any assignment or
sublease pursuant to Section 13(a) or otherwise, any financing
statements or similar instruments, and any and all further
instruments required by law or reasonably requested by Lessor,
for the purpose of protecting Lessor's title to any Item of
Equipment to the satisfaction of Lessor or for the purpose of
carrying out the intention of this Lease, including, without
limitation, any such filings and recordings as shall be necessary
to evidence any change in name of Lessee or Lessor, or any merger
or consolidation thereof. Lessee will pay all costs, charges and
expenses incident to any such filing, refiling, recording and
re-recording or depositing and redepositing of any such
instruments or incident to the taking of such action, other than
the fees and expenses of the Lessor in connection with any such
instruments requested by the Lessor. This Lease shall be filed
and recorded with the ICC prior to the delivery and acceptance
hereunder of any Item.
The Equipment will at all times during the Lease Term be and
remain in the possession and control of Lessee, subject to the
terms of Section 13(a) hereof. Lessee shall operate the
Equipment and permit the Equipment to be located only in the
contiguous forty-eight states of the United States. Lessee shall
not use and will not permit any other person to use any Equipment
or allow the same to be used for any unlawful purpose. Lessee
shall use and operate the Equipment or cause it to be used and<PAGE>
operated only by personnel authorized by Lessee, and Lessee shall
use every reasonable precaution to prevent loss or damage to each
Item of Equipment from fire and other hazards. Lessee shall use
the Equipment only in the manner for which it was designed and
intended.
Section 10. Maintenance and Repair of Equipment.
Lessee shall, at its own expense, (i) keep the Equipment in
satisfactory repair, condition and working order, and as
otherwise may be required by any insurance policies maintained
pursuant to Section 16 or to enforce warranty claims against each
vendor and manufacturer of each Item of Equipment, ordinary wear
and tear excepted; (ii) maintain the Equipment in accordance with
the standards then in effect under the Interchange Rules or
similar successor guidelines of the AAR (the "Interchange
Rules"), and at least equal to the standards of maintenance which
Lessee performs on similar equipment owned or leased by Lessee;
and (iii) comply with all requirements of law applicable to the
maintenance and condition of the Equipment.
Section 11. Replacements; Alterations; Modifications.
Lessee shall make all alterations, modifications, additions
or attachments deemed necessary by any Federal, state or local
governmental agency for the continued usefulness of the
Equipment. Lessee may, at its sole expense, make other
alterations, modifications, additions or attachments to the
Equipment so long as the value and general usefulness of the
Equipment is not reduced thereby and so long as such alterations,
modifications, additions or attachments do not cause such Items
to become a limited use property within the meaning of Revenue
Procedure 76-30, 1976-2 C.B. 647 (or such other successor tax
provision). So long as no Event of Default has occurred and is
continuing, and so long as the value and usefulness of the
Equipment (exclusive of any such alterations, modifications,
additions or attachments) is not reduced thereby, any such
alteration, modification, addition or attachment, which was paid
for by Lessee and not reimbursed or otherwise compensated for by
Lessor, shall remain the property of Lessee and may (subject to
the last two sentences of this Section 11), be removed by Lessee
prior to return of the Equipment pursuant to Section 5 hereof.
If any alteration, modification, addition or attachment to an
Item of Equipment (i) is a replacement of existing parts
constituting part of the Items of Equipment, (ii) was made in the
course of ordinary and proper maintenance of the Items of
Equipment, (iii) is required by Federal, state or local law in
order to permit the continued usefulness of the Equipment; or
(iv) cannot physically be removed without material damage to the
Equipment, it shall become the property of Lessor, and shall be
subject to all the terms of this Lease. Upon termination of this
Lease, Lessor shall have the option to purchase from Lessee any
alterations, modifications, additions or attachments to any Item
of Equipment not described in the preceding sentence at the Fair<PAGE>
Market Sales Value of such alterations, modifications, additions
or attachments, as the case may be.
Section 12. Identification Marks; Inspection.
Lessee agrees, at Lessee s cost and expense, to place
markings on the Equipment by stencil or by a metal tag or plate
affixed thereto showing Lessor's title thereto and ownership
thereof; provided, however, that such identification markings are
to be placed so as not to interfere with the usefulness and
utility of such Item of Equipment. If during the Lease Term any
such identification marking shall be defaced or destroyed, Lessee
shall cause such defaced or destroyed identification marking to
be restored or replaced. Lessee will cause each Item of
Equipment to be kept numbered with the road number and serial
number as shall be set forth in any Lease Supplement hereto
extending this Lease to cover such Item of Equipment. Lessee
shall not allow the name of any other Person to be placed on any
Item of Equipment as a designation that might be identified as a
claim of ownership or any other interest therein; provided, that
nothing herein contained shall prohibit Lessee or its permitted
sublessees from placing its customary colors and insignia on any
Item of Equipment or from naming each Item of Equipment. Lessee
will not change the identification number of any Item of
Equipment unless and until (i) a statement of a new number or
numbers to be substituted therefor shall have been delivered to
Lessor and filed, recorded and deposited by Lessee in all
appropriate public offices, including the public offices where
this Lease shall have been filed, recorded and deposited, and
(ii) Lessee shall have furnished Lessor an opinion of counsel in
form and substance reasonably satisfactory to them to the effect
that such statement has been so filed, recorded and deposited and
that such filing, recordation and deposit will protect Lessor's
interest in such Items of Equipment. Upon the reasonable request
of Lessor, Lessee shall make the Equipment available to Lessor
for inspection and shall also make Lessee's records pertaining to
the Equipment reasonably available to Lessor for inspection, it
being understood and agreed that Lessor shall have no obligation
to make such inspection and shall incur no liability for failure
to do so.
Section 13. Assignments and Subleases.
(a) By Lessee. Lessee will not, without the prior
written consent of Lessor, assign its lease of any Item of
Equipment, or transfer or encumber its rights or obligations
hereunder, and any attempted assignment, transfer or encumbering
by Lessee shall be null and void; provided, however, subject to
the receipt of any necessary regulatory approvals, Lessee may, so
long as no Default or Event of Default shall have occurred and be
continuing, assign its lease of any Item of Equipment to an
Affiliate without the prior consent of Lessor if Lessee gives
written notice and a copy of such assignment to Lessor within 45
days after such assignment; provided, further, subject to the<PAGE>
receipt of any necessary regulatory approvals, Lessee may so long
as no Default or Event of Default shall have occurred and be
continuing without the prior consent of Lessor, sublease any Item
of Equipment to any Affiliate, railroad company or other Person
for a period not to exceed one year in accordance with customary
industry practice so long as such assignment or sublease does not
cause the Items of Equipment to be 'tax-exempt use property'
within the meaning of Section 168(h) of the Code and so long as
such assignment or sublease does not extend beyond the end of the
Lease Term. Any such sublease or assignment shall be subject to
all the terms and conditions of this Lease and Lessee's
obligations hereunder shall continue in full force and effect as
the obligations of a principal and not of a surety irrespective
of such sublease or assignment. Each sublease or assignment
permitted by this paragraph shall be expressly subject and
subordinate to all of the provisions of this Lease and to the
rights and remedies of Lessor under this Lease in respect of the
Items of Equipment covered by such sublease or assignment.
(b) Transfers by Lessor. Lessor may, with the consent
of Lessee, which consent shall not be unreasonably withheld,
assign this Lease (or grant a security interest in the Equipment
in connection therewith) to any lending institution or other
Person, with a tangible net worth of at least $25 million.
Upon written notice by Lessor to Lessee of any such
sale or assignment, Lessee shall thereafter make payments of all
Fixed Rent and other sums due hereunder to the party specified in
such notice and such payments shall discharge the obligation of
Lessee to Lessor hereunder to the extent of such payments.
Lessee shall be under no obligation to any assignee of Lessor,
except upon written notice of such assignment to Lessee. Upon
any such sale or assignment under this Section 13(b), Lessee
shall not be required to execute any documents in connection
therewith other than a form of acknowledgment or any filings
required by the ICC or AAR. Any expenses incurred in connection
with any such sale or assignment shall be borne by Lessor.
Lessee shall not be required to prepare any documents in
connection with any such sale or assignment.
Section 14. Liens.
Assuming that the Lease has been filed with the ICC, Lessee
represents and warrants to Lessor that at the time an Item of
Equipment is accepted by it under the Lease, such Item will be
free and clear of all Liens except Permitted Encumbrances
described in clauses (i) and (iv) of the definition thereof.
Lessee will not create, incur, assume or suffer to exist any Lien
on or with respect to the Equipment or any part or Item thereof,
Lessor s title thereto, or any interest therein, except Permitted
Encumbrances. Lessee, at its own expense, will pay, satisfy and
otherwise take such actions as may be necessary to keep the
Equipment free and clear of, and to duly discharge or eliminate
or bond in a manner satisfactory to Lessor, any such Lien other<PAGE>
than Permitted Encumbrances if the same shall arise at any time
during the Lease Term. Lessee will notify Lessor upon becoming
aware of any tax or other Lien (other than any Lien excepted
above) that shall attach to the Equipment or any Item of
Equipment.
Section 15. Loss, Damage or Destruction.
(a) Risk of Loss, Damage or Destruction. Lessee
hereby assumes all risk of loss, damage, theft, taking,
destruction, confiscation or requisition, partial or complete, of
or to each Item of Equipment, however caused or occasioned, such
risk to be borne by Lessee with respect to each Item of Equipment
from the Acceptance Date, and continuing until the expiration or
early termination of the Lease Term. Lessee shall promptly
notify Lessor of any loss or casualty damage (other than any such
loss or damage which constitutes an Event of Loss) to any Item or
Items of Equipment where such loss or damage is estimated to
exceed the amount of self-insurance or deductible amount
maintained by the Lessee pursuant to and in accordance with
Section 16 hereof. Lessee shall, within 90 days of notifying
Lessor of such loss or casualty damage, notify Lessor that Lessee
intends to repair such Item or Items of Equipment and provide
Lessor with an estimated cost and time frame with respect to such
repairs.
(b) Payment of Stipulated Loss Value upon an Event of
Loss. If an Event of Loss occurs with respect to an Item or
Items of Equipment during the Lease Term, Lessee shall, within
thirty (30) days after the occurrence of such Event of Loss,
inform Lessor in regard thereto and Lessee shall, on the Rent
Payment Date next following such notice, pay (i) the sum of
(a) Stipulated Loss Value for such Item (computed as of such Rent
Payment Date) plus (b) 50% of the excess, if any, of (I) the
settlement amount for such Item determined in accordance with
Rule 107 of the Field Manual of the Interchange Rules of the AAR
(or any successor procedure for the settlement for cars destroyed
in interchange service) over (II) Stipulated Loss Value for such
Item, plus (ii) the Fixed Rent and any Supplemental Rent due for
such Item or Items of Equipment on such Rent Payment Date, plus
(iii) all accrued and unpaid Fixed Rent and any Supplemental Rent
owing for such Item or Items of Equipment through any prior Rent
Payment Date. So long as no Default or Event of Default has
occurred and is continuing, any payments received by Lessor or by
Lessee from any insurer or other party (except Lessee) as a
result of the occurrence of such Event of Loss will be applied in
reduction of Lessee's obligation to pay the amounts described in
the foregoing clause (i), if not already paid by Lessee, or, if
already paid by Lessee, will be applied to reimburse Lessee for
its payment of such amount, and any such payments in excess of
the amounts described in clause (i)(b)(I) of the first sentence
of this Section 15(b) shall be paid to or retained by Lessor.
Upon payment in full of the amounts described in the first
sentence of this Section 15(b), (A) the obligation of Lessee to<PAGE>
pay Fixed Rent hereunder with respect to such Item or Items of
Equipment for all Rental Periods commencing after the date of the
payment of such amounts shall terminate and the Lease Term of
such Item or Items shall thereupon terminate, (B) Lessor shall
execute a release with respect to such Item or Items of Equipment
releasing such Equipment from the Lease and (C) Lessee shall, as
agent for Lessor, as soon as practicable, dispose of such Item or
Items of Equipment in a manner reasonably acceptable to Lessor.
(c) Application of Payments Not Relating to an Event
of Loss. So long as no Default or Event of Default shall have
occurred and be continuing, any payments (including, without
limitation, insurance proceeds) received at any time by Lessor or
Lessee from any governmental authority or other party with
respect to any loss or damage to any Item or Items of Equipment
not constituting an Event of Loss will be applied directly in
payment of repairs or for replacement of property in accordance
with the provisions of Sections 11, 12 and 16 hereof, if not
already paid by Lessee, or if already paid by Lessee, shall be
applied to reimburse Lessee for such payment, and any balance
remaining after compliance with said Sections with respect to
such loss or damage shall be retained by Lessor. Lessee's
obligation to pay all installments of Rent and other sums shall
continue for the duration of such requisitioning or taking unless
and until the same shall become an Event of Loss.
Section 16. Insurance.
Lessee will cause to be carried and maintained with good and
responsible insurance companies, at its sole expense, with
respect to the Equipment, (a) physical damage insurance insuring
against physical loss or damage to the Equipment, in an amount
equal to the lower of (1) the full insurable value of the
Equipment, and (2) the Stipulated Loss Value of the Equipment,
and (b) insurance against liability for bodily injury, death and
property damage resulting from the use, operation, ownership and
possession of the Equipment in an amount not less than
$10,000,000 per occurrence.
Such insurance policies shall: (i) name and insure the
Lessor as additional insured under the commercial public
liability insurance, (ii) insure the Lessor, as sole loss payee
under the property insurance, (iii) with respect to property
insurance, provide insurer's waiver of its right of subrogation,
set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability against any
additional insured except for claims as shall arise from the
willful misconduct or gross negligence of such additional
insured, (iv) provide that such insurance as to the interest of
the Lessor shall not be invalidated by any action or inaction of
Lessee or any other Person (other than such claimant), regardless
of any breach or violation of any warranty, declaration or
condition contained in such policies by the Lessee or any other
Person (other than such claimant), (v) provide that all such<PAGE>
insurance is primary without right of contribution from any other
insurance which might otherwise be maintained by the Lessor or
any assignee under Section 13(b) and shall expressly provide that
all provisions except the limits of liability, shall operate in
the same manner as if there were a separate policy covering each
such additional insured, (vi) with respect to the property
insurance, provide therein or by endorsement that thirty (30)
days prior written notice of expiration, cancellation or
modification shall be given to the Lessor and shall provide that
such cancellation, change or modification shall not be effective
during such 30 day period as to the Lessor, (vii) with respect to
the liability insurance, provide therein or by endorsement that
the company providing coverage will endeavor to give thirty (30)
days advance written notice to the Lessor should the policy be
cancelled, assigned or materially changed, and (viii) provide
that no additional insured shall have any obligation or liability
for premiums in connection with such insurance.
Lessee shall furnish the Lessor with certificates or other
satisfactory evidence of maintenance of the insurance so required
and shall furnish binders or other formal confirmation reasonably
acceptable to the Lessor evidencing renewals thereof as soon as
practicable but in no event later than three (3) Business Days
prior to such renewal and certificates of insurance within twenty
(20) days after such renewal is effected or the expiration date
of the original policy or policies, as the case may be. All
other terms of insurance shall be in accordance with such
insurance carried by Lessee with respect to other railcars in its
fleet. Upon the execution and delivery of this Lease,
certificates of the insurance coverage required by this
Section 16 shall be delivered by Lessee to Lessor. Lessee shall
furnish written notice to the Lessor of any notice of
cancellation, material modification, termination or lapse for
non-payment of premiums with respect to any of the liability
insurance provided pursuant to this Section 16 within 5 Business
Days after the earlier of (i) the date on which Lessee receives
such notice from the insurance company providing such insurance,
and (ii) the date on which Lessee has actual knowledge of any
such cancellation, material modification, termination or lapse
for non-payment of premiums.
If the loss covered by said physical damage insurance is
less than $2,500,000, the proceeds of such insurance shall be
payable to Lessee provided that no Default or Event of Default
shall have occurred and be continuing and after the occurrence
and continuance of a Default or an Event of Default. If such
loss equals or exceeds $2,500,000, the proceeds of such insurance
shall be payable to Lessor provided that Lessor shall, so long as
no Default or Event of Default has occurred or is continuing,
remit all such insurance proceeds to Lessee at such time as
Lessee either (i) provides Lessor evidence that the damage has
been repaired and the Equipment has been restored to satisfactory
working order and condition or (ii) has paid to Lessor the
amounts otherwise due to Lessor on loss of such Equipment<PAGE>
pursuant to Section 15(b) hereof. Lessee s obligation to
maintain insurance with respect to any Item of Equipment shall
commence on the Acceptance Date of such Item of Equipment and
shall run until the earliest to occur of (x) the date on which
such Item of Equipment is sold, pursuant to Section 19 hereof,
(y) the termination of this Lease with respect to such Items of
Equipment pursuant to and in accordance with Section 27 hereof,
or (z) the return of the Equipment to the Lessor in accordance
with Section 5 hereof. Lessee covenants that it will not use or
operate or permit the use or operation of any Item of Equipment
at any time when the insurance required by this Section 16 is not
in force with respect to such Item of Equipment and will not use
the Equipment in a manner which would violate the terms and
provisions of such insurance policies. If Lessee shall fail to
cause the insurance required under this Section 16 to be carried
and maintained, Lessor may provide such insurance and Lessee
shall reimburse Lessor upon demand for the cost thereof as
Supplemental Rent hereunder. So long as no Event of Default has
occurred and is continuing, Lessee may self-insure or maintain
deductible provisions for the first $2,500,000 of the coverages
specified in clauses (a) and (b) of the first sentence of this
Section 16, or in such greater amount if in accordance with
general insurance standards prevalent in the utility industry.
Nothing in this Section 16 shall prohibit Lessor from
obtaining insurance for its own account and any proceeds payable
thereunder shall be as provided in the insurance policy relating
thereto; provided that no such insurance may be obtained that
would limit or otherwise adversely affect the coverage of any
insurance to be obtained or maintained by Lessee pursuant to this
Section 16.
Section 17. No Warranties.
LESSEE LEASES THE EQUIPMENT AS-IS, WHERE-IS WITH ALL FAULTS,
AND IN WHATEVER CONDITION IT MAY BE. LESSOR, NOT BEING THE
MANUFACTURER OR VENDOR OF THE EQUIPMENT, DOES NOT MAKE AND HAS
NOT MADE OR BE DEEMED TO MAKE OR HAVE MADE, ANY REPRESENTATIONS
OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN, OPERATION
OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, VALUE,
DURABILITY, SUITABILITY OR ITS FITNESS FOR ANY PARTICULAR USE OR
PURPOSE, LESSOR'S TITLE THERETO, THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT
TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER OR
ORDERS RELATING THERETO, AND LESSOR HEREBY DISCLAIMS ANY SUCH
REPRESENTATION OR WARRANTY (WHICH DISCLAIMER LESSEE HEREBY
ACKNOWLEDGES). WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
LESSOR SHALL NOT BE LIABLE OR RESPONSIBLE FOR ANY DEFECTS, EITHER
PATENT OR LATENT (WHETHER OR NOT DISCOVERABLE BY LESSEE), IN THE
EQUIPMENT, OR FOR ANY INTERRUPTION IN LESSEE'S BUSINESS CAUSED BY
LESSEE'S INABILITY TO USE THE EQUIPMENT FOR ANY REASON
WHATSOEVER, ALL OF WHICH ITEMS OF EQUIPMENT WERE SELECTED BY
LESSEE ON THE BASIS OF ITS OWN JUDGMENT WITHOUT RELIANCE UPON ANY<PAGE>
STATEMENTS, REPRESENTATIONS OR WARRANTIES MADE BY LESSOR, IT
BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN LESSOR ON THE ONE
HAND AND LESSEE ON THE OTHER HAND, ARE TO BE BORNE BY LESSEE.
Lessor shall have no responsibility or liability to Lessee
or any other person with respect to any of the following:
(i) any liability, loss or damage caused or alleged to be caused
directly or indirectly by any Item of Equipment or by any
inadequacy thereof or deficiency or defect therein or by any
other circumstances in connection therewith; (ii) the use,
operation or performance of any Item of Equipment or any risks
relating thereto; (iii) any interruption of service, loss of
business or anticipated profits or consequential damages; or
(iv) the delivery, operation, servicing, maintenance, repair,
improvement or replacement of any Item of Equipment. Lessee s
delivery of a Lease Supplement relating to an Item of Equipment
shall be conclusive evidence as between Lessee and Lessor that
such Item of Equipment is in all respects satisfactory to Lessee,
and Lessee will not assert any claim of any nature whatsoever
against Lessor based on any of the foregoing matters.
So long as an Event of Default shall not have occurred and
be continuing, and so long as the Equipment shall be subject to
this Lease and Lessee shall be entitled to possession of the
Equipment hereunder, Lessor authorizes Lessee, at Lessee's
expense, to assert for Lessor's account, all rights and powers of
Lessor under any manufacturer's, vendor's or dealer's warranty on
the Equipment or any part thereof; provided, however, that Lessee
shall indemnify, protect, save, defend and hold harmless Lessor
from and against any and all claims, and all costs, expenses,
damages, losses and liabilities incurred or suffered by Lessor in
connection therewith, as a result of, or incident to, any action
by Lessee pursuant to the foregoing authorization, and that
Lessee shall provide Lessor with prior written notice of any
action Lessee proposes to take on Lessor's behalf pursuant to the
foregoing authorization. Any payments made by any such vendor or
manufacturer pursuant to such warranty for any Item of Equipment
shall be payable to Lessee so long as no Default or Event of
Default shall have occurred and be continuing. Such payment is
to be used to repair or replace damaged components in accordance
with Section 11 hereof, if feasible, and if not used, such amount
shall be paid promptly to Lessor.
Section 18. Events of Default.
Any of the following events shall constitute an Event of
Default:
(a) Lessee shall fail to make any payment of Fixed
Rent, Stipulated Loss Value or Termination Value within ten (10)
Business Days after the same is due and payable or any
Supplemental Rent (other than Stipulated Loss Value or
Termination Value) within thirty (30) days after receipt of
written notice by Lessee; or<PAGE>
(b) any representation or warranty made by Lessee
herein or any certificate furnished in connection herewith or
therewith shall prove to have been incorrect in any material
respect when such was made and shall remain material and
materially incorrect at the time in question, unless the fact,
circumstance or condition that is the subject of such
representation or warranty is made true within 30 days after
notice thereof shall have been given to Lessee; or
(c) Lessee shall fail to perform or observe any
covenant, condition, or agreement to be performed or observed by
it herein, or in any agreement or certificate furnished in
connection herewith, and such failure shall continue unremedied
for thirty (30) days after receipt of written notice by Lessee
specifying such failure and demanding the same to be remedied;
provided that, no such default shall be deemed an Event of
Default if (i) such default is curable but cannot be cured within
such thirty (30) day period, and (ii) Lessee is diligently
pursuing such cure and effects such cure within 360 days of the
date of such default or before the last day of the Lease Term,
whichever shall occur first; or
(d) Lessee becomes insolvent (however such insolvency
may be evidenced) or admits insolvency or bankruptcy or its
inability to pay its debts as they mature, makes an assignment
for the benefit of creditors or applies for or consents to the
appointment of a custodian, trustee or receiver for Lessee, or
for the major part of its property or commences a voluntary case
under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or
(e) a proceeding shall have been instituted in a court
having jurisdiction in the premises, seeking a decree or order
(i) for relief in respect of Lessee in an involuntary case under
any applicable bankruptcy, reorganization, insolvency or other
similar law now or hereafter in effect or (ii) for the
appointment of a custodian, receiver, trustee or similar official
of Lessee or of its property, or (iii) for the winding up or
liquidation of the affairs of Lessee, and either (I) any such
proceeding shall remain undismissed or unstayed and in effect for
a period of 60 consecutive days or (II) such court shall enter a
decree or order granting the relief sought in such proceeding or
Lessee shall consent to such entry.
Section 19. Remedies upon Default.
Upon the occurrence of any Event of Default, Lessor may
exercise one or more of the following remedies as Lessor in its
sole discretion shall elect:
(a) Lessor may terminate this Lease, without prejudice
to any other remedies of Lessor hereunder, with respect to all or
any Item of Equipment, and may enter the premises of Lessee to
take immediate possession of the Equipment and remove all or any<PAGE>
Item of Equipment by summary proceedings or otherwise, or may
cause Lessee, at Lessee's expense, to surrender and deliver
possession of the Equipment or such Item;
(b) Lessor may hold, keep idle or lease to others the
Equipment or any Item of Equipment, as Lessor in its sole
discretion may determine, free and clear of any rights of Lessee
and without any duty to account to Lessee with respect to such
action or inaction or for any proceeds with respect thereto,
except that Lessee's obligation to pay Fixed Rent payable after
Lessee shall have been deprived of possession pursuant to this
Section 19 shall be reduced by the net proceeds, if any, received
by Lessor from leasing the Equipment or such Item to any Person
other than Lessee after Lessee shall have been so deprived of
possession;
(c) Lessor may sell any Item of Equipment at public or
private sale as Lessor may determine, free and clear of any
rights of Lessee, and Lessee shall pay to Lessor all unpaid Fixed
Rent payable up to and including the date on which such sale
occurs (computed on a daily equivalent basis for the period from
and including the Rent Payment Date immediately preceding the
date of such sale to and including the date of such sale), plus,
as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Fixed Rent for such Item sold payable after the
date on which such sale occurs), an amount equal to the excess,
if any, of (i) the Stipulated Loss Value of such Item so sold,
computed as of the Rent Payment Date coincident with or
immediately preceding the date of such sale, over (ii) the net
proceeds of such sale;
(d) Lessor may proceed by appropriate court action to
enforce the terms hereof or to recover damages for the breach
hereof or to rescind this Lease; and
(e) Lessor may exercise any other right or remedy
which may be available to it under applicable law.
No remedy referred to in this Section 19 is intended to be
exclusive, but each shall be cumulative and may be exercised
concurrently or consecutively and shall be in addition to any
other remedy referred to above or otherwise available to Lessor
at law or in equity, and the exercise in whole or in part by
Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by Lessor of any or all such other
remedies. Lessee hereby waives any mandatory requirements of
law, now or hereafter in effect, which might limit or modify the
remedies herein provided, to the extent that such waiver is
effective under applicable law. Lessee hereby waives any and all
existing or future claims to any offset against the Rent payments
due hereunder, and agrees to make such payments regardless of any
offset or claim which may be asserted by Lessee or on its behalf.
Except as otherwise provided in this Lease, Lessee, to the full
extent effective under applicable law, hereby waives all<PAGE>
statutory or other legal requirements for any notice of any kind,
any other requirements with respect to the enforcement of
Lessor s rights under this Lease and any and all rights of
redemption. No waiver by Lessor of any Event of Default
hereunder shall in any way be, or be construed to be, a waiver of
any future or subsequent Event of Default.
In addition, the Lessee shall be liable for any and all
unpaid Rent due hereunder before or during the exercise of any of
the foregoing remedies, including during the appeal or
enforcement of any judgment, and for all reasonable legal fees
and other costs and expenses incurred by reason of the occurrence
of any Default or Event of Default or the exercise of the
Lessor s remedies with respect thereto, including without
limitation, the repayment in full of any costs and expenses
necessary to be expended in repairing or modifying any Item in
order to cause it to be in compliance with all maintenance and
regulatory standards imposed by this Lease.
Upon the date of termination of this Lease by Lessor
pursuant to Section 19(a), Lessee shall, without expense to the
Lessor, promptly redeliver the Items of Equipment or cause the
Items of Equipment to be redelivered, to the Lessor with all
reasonable dispatch, in the same manner and in the same condition
as if such Items of Equipment were being redelivered on the last
day of the Lease Term in accordance with the provisions of
Section 5, and all obligations of the Lessee under Section 5(b)
shall apply to such redelivery. Lessor, without further notice,
may, but shall be under no obligation to, retake such Items of
Equipment wherever found, without the Lessor incurring any
liability by reason of such retaking, whether for the restoration
of damage to property caused by such retaking or otherwise.
Without in any way limiting the obligation of Lessee under
the foregoing provisions of this Section, Lessee hereby
irrevocably appoints Lessor as the agent and attorney of Lessee
with full power and authority to, upon the occurrence and
continuance of an Event of Default hereunder, exercise Lessor s
rights under this Section, at any time while Lessee is obligated
to deliver possession of any Item of Equipment to Lessor, to
demand and take possession of such Item of Equipment in the name
and on behalf of Lessee from whomever shall then be in possession
of such Item.
Section 20. Lessor's Right to Perform for Lessee.
If Lessee fails to perform or comply with any of its
agreements or covenants contained herein, Lessor may (but shall
not be obligated to) itself, after notice to Lessee, perform or
comply with such agreement or covenant or make advances to
perform the same, and the amount of the reasonable expenses of
Lessor incurred in connection with the performance of or
compliance with such agreement or covenants, shall, if not paid<PAGE>
by Lessee to Lessor on demand, be payable as Supplemental Rent
hereunder.
Section 21. Late Charges.
Lessee shall pay to Lessor as Supplemental Rent, to the
extent permitted by applicable law, interest on any amount of
Fixed Rent and any Supplemental Rent which is not paid when due,
for any period for which the same is overdue (without regard to
any grace period) at a rate equal to the Late Rate.
Section 22. Covenant of Quiet Enjoyment.
During the Lease Term of any Item of Equipment hereunder and
so long as no Default or Event of Default has occurred and is
continuing, Lessor covenants and agrees that Lessee shall have
the right to uninterrupted use and enjoyment of such Item on the
terms and conditions provided herein without any interference
from Lessor or those claiming through or against Lessor (other
than claims of mechanics, suppliers, materialmen and laborers for
work or services performed or materials furnished in connection
with the Equipment or any Item thereof which are claims by or
through the Lessor), including, but not limited to any assignee
or lender or mortgagee of Lessor. For purposes of this
Section 22, the delivery of notices of default or nonperformance
delivered under and pursuant to Section 18 shall not be deemed to
constitute a violation of this Section 22.
Section 23. Other Documents.
Except as otherwise provided herein, Lessee will, at
Lessee s expense, execute and deliver to Lessor such other
documents as may be reasonably required by Lessor, including,
without limitation, such amendments to this Lease and any filings
required by the ICC or the AAR.
Section 24. Notices and Requests.
Unless otherwise expressly specified or permitted by the
terms hereof, all communications and notices provided for herein
shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become
effective upon receipt by the addressee or, if such receipt is
rejected, upon rejection, at its address set forth below or, in
the case of any such party hereto, at such other address as such
party may from time to time designate by written notice to the
other parties hereto:
If to Lessee: Ohio Valley Electric Corporation
c/o American Electric Power
Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
Attention: Vice President<PAGE>
Fax No.: 614/223-1094
Confirmation No.: (614) 223-1090
If to Lessor:
Section 25. Lessee's Renewal and Purchase Options.
(a) Lessee's Renewal Option. If no Default or Event
of Default shall have occurred and be continuing, and this Lease
shall not have been earlier terminated, Lessee shall be entitled,
at its option upon written notice to Lessor, as hereinafter
provided, to renew this Lease in accordance with the following
terms: the first, second and third Renewal Terms of any Item of
Equipment shall each be for a period of five years and the Fixed
Rent payable during such Renewal Term shall be at a rate equal to
such Item of Equipment's Fair Market Rental Value.
Except as stated above, all of the provisions of this
Lease shall be applicable during each Renewal Term for each Item
of Equipment. Stipulated Loss Values and Termination Values for
each Item of Equipment on any Rent Payment Date during any
Renewal Term shall be an amount equal to Stipulated Loss Value or
the Termination Value, as the case may be, for such Item of
Equipment determined as of the last Rent Payment Date of the
Basic Term. If Lessee intends to exercise said renewal option
with respect to any of said Renewal Terms, Lessee shall give
written notice to Lessor to such effect at least one hundred and
eighty (180) days prior to the expiration of the Basic Term or
Renewal Term of such Item(s) of Equipment, provided, however,
that the Lessee may withdraw its election to renew the lease of
any Item(s) of Equipment at any time before the 90th day prior to
the expiration of the Basic Term or Renewal Term of such Item(s)
of Equipment.
(b) Lessee's Purchase Option. If (i) no Default or
Event of Default shall have occurred and be continuing, and
(ii) this Lease shall not have been earlier terminated, Lessee
shall be entitled, at its option, upon written notice to Lessor
as hereinafter provided, to purchase any of the Items of
Equipment then subject to this Lease for an amount, with respect
to each such Item of Equipment, payable in immediately available
funds, equal to the lesser of (i) the Fair Market Sales Value
thereof determined in accordance with Section 25(c) hereof or
(ii) 65% of the Purchase Price of such Item(s) of Equipment, plus
any applicable sales, excise or other taxes imposed as a result
of such sale (other than gross or net income taxes attributable
to such sale). In addition, Lessee shall have the option to
purchase at the end of any Renewal Term any Item(s) of Equipment<PAGE>
still under lease for the Fair Market Sales Value of such Item(s)
of Equipment.
If Lessee intends to exercise said purchase options,
Lessee shall give written notice to Lessor to such effect at
least one hundred and eighty (180) days prior to the expiration
of the Basic Term or Renewal Term of such Item(s) of Equipment,
provided, however, that the Lessee may withdraw its election to
purchase such Item(s) at any time before the 90th day prior to
the expiration of the Basic Term or Renewal Term of such Item(s)
of Equipment. In the event that Lessee exercises its purchase
options under this Section 25(b), Lessor shall execute and
deliver to Lessee a bill of sale, in which Lessor transfers the
Item to Lessee as is and represents only that it is
transferring whatever title was transferred to it, free and clear
of all liens in favor of any person claiming by, through or under
Lessor, in a form reasonably acceptable to Lessee, upon payment
of the sale price by Lessee.
(c) Determination of Fair Market Sales Value and Fair
Market Rental Value; Appraisal Procedure. If Lessee has elected
to exercise its renewal option, as provided in Section 25(a)
hereof, or has elected to exercise its purchase option, as
provided in Section 25(b) hereof, then as soon as practicable
following Lessor's receipt of the written notice from Lessee of
Lessee's intent to exercise such option with respect to any
Item(s) of Equipment, Lessor and Lessee shall consult for the
purpose of determining the Fair Market Rental Value or Fair
Market Sales Value, as the case may be, of each such Item of
Equipment as of the end of the Basic Term thereof, or, if this
Lease has been renewed pursuant to Section 25(a) hereof, then as
of the end of the then current Renewal Term thereof, and any
values agreed upon in writing shall constitute such Fair Market
Rental Value or Fair Market Sales Value of each such Item of
Equipment for the purposes of this Section 25. If Lessor and
Lessee fail to agree upon such values one hundred and fifty (150)
days prior to the expiration of the Basic Term, or, if this Lease
has been so renewed, the then current Renewal Term, of such
Item(s) of Equipment, either party may request, by written notice
to the other, that such values be determined by the appraisal
procedure hereinafter specified.
In the event Lessor and Lessee fail to agree upon such
Fair Market Sales Value or Fair Market Rental Value, as the case
may be, of any Item(s) of Equipment, and either Lessor or Lessee
shall have requested a determination of such values, Lessor and
Lessee shall consult for the purpose of appointing a qualified
independent appraiser by mutual agreement. If no such appraiser
is so appointed within 5 Business Days after such notice is
given, each party shall appoint an independent appraiser within
10 Business Days after such notice is given, and the two
appraisers so appointed shall within 15 Business Days after such
notice is given appoint a third independent appraiser. If no
such third appraiser is appointed within 15 Business Days after<PAGE>
such notice is given, either party may request the American
Arbitration Association to make such appointment, and both
parties shall be bound by any such appointment.
Any appraiser or appraisers appointed pursuant to the
foregoing procedure shall be instructed to determine the Fair
Market Sales Value and/or the Fair Market Rental Value, as the
case may be, of such Item(s) of Equipment within 30 days after
the appointment of such appraiser(s). Lessor and Lessee agree
that the purpose of the above-described procedure is to identify
the Fair Market Sales Value or the Fair Market Rental Value of
such Item(s) of Equipment within 90 days of the original notice
so as to permit Lessee sufficient time to withdraw its election
to renew or purchase. If the parties shall have appointed a
single appraiser, its determination of such values shall be
final. If three appraisers shall be appointed, the values
determined by the three appraisers shall be averaged, and, unless
such average shall equal the values, determined by the middle
appraisal (in which event such average shall be final), the
determination which differs most from such average shall be
excluded, the remaining two determinations shall be averaged and
such average shall be final. The fees and expenses of any
appraiser appointed under this Section 25(c) shall be paid for as
follows (i) if Lessee fails to exercise its renewal or purchase
option with respect to any Item of Equipment included in the
appraisal procedure, the appraisal fees and expenses incurred in
connection with such Item of Equipment shall be paid by Lessee
and (ii) if Lessee exercises its renewal or purchase option with
respect to all Items of Equipment included in the appraisal
procedure the appraisal fees and expenses incurred shall be
shared equally by Lessor and Lessee. The above-described
procedure shall be from time to time referred to as the
"Appraisal Procedure".
Section 26. Financial Information Reports.
(a) Lessee agrees to furnish Lessor (1) within 180
days after the close of its fiscal year, an annual report of
Lessee, consisting of its audited financial statements including
balance sheets as of the end of such fiscal year, statements of
income and cash flows for the year then ended with all notes
thereto in each case certified as true and correct by the auditor
thereof; (2) within 90 days after the close of each of the first
three quarterly periods of Lessee s fiscal year, a balance sheet
of Lessee as of the end of such quarter, and comparative
statements of income for such quarter; (3) promptly upon Lessee's
obtaining knowledge that there has occurred and is continuing any
condition, event, act or omission which constitutes a Default or
an Event of Default or a Lien (other than Permitted Encumbrances)
on the Equipment, notice of such condition, event, act or
omission and the steps which Lessee has taken or is taking to
remedy the same; and (4) such additional information concerning
the location, condition, use and operation of the Equipment and<PAGE>
financial condition and operations of Lessee as Lessor may from
time to time reasonably request.
(b) Lessee shall permit any person designated by
Lessor to visit and inspect the Equipment and the records (and to
make copies thereof) maintained in connection therewith, all at
such reasonable times as Lessor may reasonably request.
Section 27. Voluntary Termination for Obsolescence.
So long as no Default or Event of Default shall have
occurred and be continuing hereunder, Lessee shall have the right
at its option after December 30, 1999 on at least ninety (90)
days' prior written notice to Lessor, to terminate this Lease
with respect to any Item of Equipment then leased hereunder if,
in Lessee's good faith opinion as evidenced by a certificate of
the President, any Vice President or the Chairman of the Board of
the Lessee, such Items shall have become no longer useful in, or
surplus to, Lessee in its business, such termination to be
effective on the Rent Payment Date specified in such notice (for
purposes of this Section 27, called the "termination date"), upon
payment to Lessor of the sum of (i) the installment of Fixed Rent
due on such termination date, (ii) any other Rent or other sums
due and owing on or in respect of the Equipment, and (iii) an
amount equal to the Termination Value of such Equipment as of the
termination date. If Lessee shall fail to pay all amounts due
under and pursuant to this Section 27, this Lease shall continue
in full force and effect and it shall be deemed that Lessee has
rescinded its notice of termination. During the period from the
giving of such notice until the termination date, Lessee, as
non-exclusive agent for Lessor, shall use its reasonable efforts
to secure the highest obtainable bids for the purchase of such
Items and in the event it receives any bid during such period,
Lessee shall promptly certify to Lessor in writing the amount and
terms of such bid and the name and address of the party
submitting such bid. Lessor may obtain bids, but shall be under
no duty to solicit bids, inquire into the efforts of Lessee to
obtain bids or otherwise take any action in connection with
arranging such sale. Neither Lessee nor any person, firm or
corporation, affiliated with Lessee, may purchase any such
Item(s) of Equipment.
Upon payment by the Lessee of all sums required to be paid
pursuant to this Section 27, Lessor shall sell the Equipment for
cash to the highest bidder certified by Lessee or obtained by
Lessor and the net proceeds realized at such sale (after
deduction of all reasonable out-of-pocket costs incurred by the
Lessor) in an amount up to the sum of the amounts specified in
clause (iii) of the first sentence of the first paragraph of this
Section 27 shall be retained by Lessee and any proceeds in excess
of such amounts specified in such clauses shall be retained by
Lessor. On the termination date, upon payment in full of the
sums required by this Section 27, Lessee shall request Lessor,
without recourse or warranty, simultaneously therewith to sell<PAGE>
such Item(s) on an 'as-is', 'where-is' basis for cash to such
bidder. Upon payment of the sums required by this Section 27,
this Lease shall terminate with respect to the Equipment.
Section 28. Miscellaneous.
Each party agrees that the other party shall not by act,
delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder unless such waiver is given in
writing. A waiver on one occasion shall not be construed to be a
waiver on any other occasion. The captions in this Lease are for
convenience of reference only and shall not be deemed to affect
the meaning or construction of any of the provisions hereof. Any
provision of this Lease which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without
invalidating or diminishing Lessor's or Lessee's rights under the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
No term or provision of this Lease may be amended, altered,
waived, discharged or terminated orally, but may be amended,
altered, waived, discharged or terminated only by an instrument
in writing signed by a duly authorized officer of the party
against which the enforcement of the amendment, alteration,
waiver, discharge or termination is sought. All of the
covenants, conditions and obligations contained in this Lease
shall be binding upon and shall inure to the benefit of the
respective successors and assigns of Lessor and Lessee. This
Lease, each Lease Supplement and each related instrument,
document, agreement and certificate, collectively constitute the
entire agreement of Lessor and Lessee with respect to the
acquisition and leasing of the Equipment, and cancel and
supersede any and all prior oral or written understandings with
respect thereto. This Lease shall in all respects be governed
by, and construed in accordance with, the laws of the State of
Ohio, including all matters of construction, validity and
performance.
Section 29. Third-Party Beneficiaries.
Nothing in this Lease shall be deemed to create any right in
any person not a party hereto and this instrument shall not be
construed in any respect to be a contract in whole or in part for
the benefit of a third party except as aforesaid.
Section 30. Execution.
This Lease may be executed in any number of counterparts and
by the different parties hereto on separate counterparts (or upon
separate signature pages bound together into one or more
counterparts), each of which when so executed and delivered shall
be an original, but all such counterparts shall together
constitute but one and the same instrument. To the extent, if<PAGE>
any, that this Lease or any Lease Supplement constitutes chattel
paper or other collateral within the meaning of the Uniform
Commercial Code (or other law respecting security interests) as
in effect in any applicable jurisdiction, no security interest in
Lessor's interest under this Lease or any such Lease Supplement
may be created through the transfer or possession of any
counterpart of this Lease or such Supplement other than the
original executed Counterpart No. 1 hereof or thereof which shall
be identified on the cover, the receipt of which is acknowledged
by the Lessor.
Section 31. General Representations and Warranties. Lessee
hereby represents and warrants as follows:
(a) Organization and Qualifications. Lessee is a
corporation duly organized and existing in good standing under
the laws of the State of its incorporation and is duly qualified
to do business and is in good standing in each State where the
character of its properties or the nature of its activities makes
such qualification necessary.
(b) Corporate Power. Lessee has full corporate power,
authority and legal right to execute, deliver and perform this
Lease and the execution, delivery and performance hereof has been
duly authorized by all necessary corporate action of Lessee.
(c) Enforceability. This Lease has been duly executed
and delivered by Lessee and constitutes a legal, valid and
binding obligation of Lessee enforceable in accordance with its
terms.
(d) Financial Statements. The financial statements of
the Lessee heretofore furnished to Lessor are complete and
correct and fairly present the financial condition of Lessee and
the results of its operations for the respective periods covered
thereby; there are no known contingent liabilities of a material
nature or liabilities for taxes of Lessee which are not reflected
in said financial statements and since December 31, 1993, there
has been no material adverse change in such financial condition,
business or operation of Lessee which would affect the ability of
Lessee to perform its obligations under the Lease.
(e) Actions Pending. There is no action, suit,
investigation or proceeding pending or, to the knowledge of
Lessee, threatened against Lessee, or any properties or rights of
Lessee before any court, arbitrator or administrative or
governmental body which if determined adversely to Lessee would
materially and adversely affect the ability of Lessee to perform
its obligations under this Lease.
(f) Title to Properties. Lessee has good and
marketable title to its real properties other than properties
which it leases (other than properties and assets disposed of in
the ordinary course of business) subject to no lien of any kind.<PAGE>
(g) Taxes. Lessee has filed all Federal, state and
other income tax returns which, to the best knowledge of the
officers of Lessee, are required to be filed, and has paid all
taxes as shown on said returns and on all assessments received by
it to the extent that such taxes have become due and are not
otherwise being contested by Lessee in good faith.
(h) Conflicting Agreements and Other Matters. Lessee
is not a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and
adversely affects its business, property or assets, or financial
condition, and which would affect the ability of Lessee to
perform under this Lease. Neither the execution nor delivery of
this Lease, nor fulfillment of nor compliance with the terms and
provisions hereof will conflict with, or result in a breach of
the terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the creation
of any lien upon any of the properties or assets of Lessee
pursuant to, the charter or by-laws of Lessee, any award of any
arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which Lessee is subject.
(i) Governmental Consent. Neither the nature of
Lessee nor its business or properties nor any relationship
between Lessee and any other person, nor any circumstance in
connection with this Lease is such as to require any consent,
approval or other action by or any notice to or filing with any
court or administrative or governmental body in connection with
the execution and delivery of this Lease or fulfillment of
compliance with the terms and provisions hereof and thereof,
except for consents, approvals or other actions which have been
previously obtained.
Section 32. General Indemnity. Lessee agrees to indemnify and
hold harmless Lessor, and its respective directors, officers and
employees, successors and assigns, and all companies, persons or
firms controlling, controlled by or under common control with any
of them, against any and all claims, demands and liabilities of
whatsoever nature and all costs and expenses (including but not
limited to reasonable attorneys' fees) directly or indirectly
relating to or in any way arising out of:
(a) the ordering, delivery, acquisition, title on
acquisition, rejection, installation, possession, titling,
retitling, registration, reregistration, custody by Lessee of
title and registration documents, use, non-use, misuse,
operation, transportation, inspection, repair, control or
disposition of Equipment leased or to be leased hereunder, except
to the extent that such costs are included in the Purchase Price
of such Equipment and except for any general administrative
expenses of Lessor;<PAGE>
(b) all costs, charges, damages or expenses for
royalties and claims and expenses of litigation (including but
not limited to reasonable attorneys' fees) arising out of or
necessitated by the assertion of any claim or demand based upon
any infringement or alleged infringement of any patent or other
right, by or in respect of any Equipment, provided, however, that
Lessor will make available to Lessee Lessor's rights under any
similar indemnification from the manufacturer of Equipment;
(c) all Federal, state, county, municipal, foreign or
other fees and taxes of whatsoever nature, including but not
limited to license, qualification, franchise, sales, gross
receipts, ad valorem, business, property (real or personal),
excise, motor vehicle, State and Federal Highway Use Tax, and
occupation fees and taxes, and penalties and interest thereon,
whether assessed, levied against or payable by Lessor or
otherwise, with respect to Equipment or the acquisition,
purchase, sale, rental, use, operation, control, ownership or
disposition of Equipment or measured in any way by the value
thereof or by the business of, investment in, or ownership by
Lessor with respect thereto and, excepting only taxes measured by
the net income of Lessor determined substantially in the same
manner as net income is presently determined under the Code;
provided, however, that, Lessee, upon notice to Lessor, may, in
Lessee's own name where permitted, or, where not so permitted, in
Lessor's name, contest or protest any fees or taxes for which it
has provided an indemnity, and Lessor shall honor any such notice
except when in Lessor's sole opinion such contest is futile or
will cause a levy or lien to arise on the Equipment or jeopardize
Lessor's title thereto; and provided further that Lessee shall
not be required to indemnify Lessor as to the amount that may be
reasonably contested with respect to taxes or fees for which
Lessee is otherwise liable if Lessee is unable to adequately
protest, defend, answer or appeal any such tax or fees solely
because of Lessor's failure to notify Lessee thereof.
For purposes of this Section, the amount that may be
reasonably contested with respect to taxes or fees shall be
determined as follows: (i) Lessee shall notify Lessor in writing
of the amount Lessee believes may be reasonably contested; (ii)
if Lessor disagrees with said amount, the Lessor and Lessee shall
appoint a mutually agreed upon independent tax counsel to render
a written opinion, binding on the Lessor and Lessee, which
addresses the reasonably contestable amount; and (iii) if said
opinion of counsel substantially agrees with Lessee's
determination, then the Lessor shall pay the fee for such
counsel's services; if said opinion of counsel substantially
disagrees with Lessee's determination, then Lessee shall pay the
fee for such counsel's services.
(d) any violation, or alleged violation, of this Lease
by Lessee or any laws, rules, regulations, orders, writs,
injunctions, decrees, consents, approvals, exemptions,
authorizations, licenses and withholdings of objection, of any<PAGE>
governmental or public body or authority and all other
requirements having the force of law applicable at any time to
Equipment or any action or transaction by Lessee with respect
thereto or pursuant to this Lease.
Lessee shall forthwith upon demand reimburse Lessor on
an After-Tax Basis for any sum or sums expended with respect to
any of the foregoing, or shall pay such amounts directly upon
request from Lessor. To the extent that Lessee in fact
indemnifies Lessor under the indemnity provisions of this Lease,
Lessee shall be subrogated to Lessor's right in the affected
transaction and shall have a right to determine the settlement of
claims therein. The foregoing indemnity shall not be affected by
any termination of this Lease as a whole or in respect to any
Item of Equipment leased hereunder.
In Witness Whereof, Lessor and Lessee have caused this
instrument to be executed, all as of the day and year first above
written.
PITNEY BOWES CREDIT CORPORATION
LESSOR
By:______________________
Its:
OHIO VALLEY ELECTRIC CORPORATION
LESSEE
By:______________________
Its:
State of _________________)
) SS.:
County of _______________ )
On this, the _____ day of ___________, 1994, before me, a
Notary Public in and for said County and State, personally
appeared _____________, the _______________ of Ohio Valley
Electric Corporation, who acknowledged himself to be a duly
authorized officer of Ohio Valley Electric Corporation, and that,
as such officer, being authorized to do so, he executed the
foregoing instrument for the purposes therein contained.<PAGE>
In Witness Whereof, I have hereunto set my hand and official
seal on the date above mentioned.
______________________________
Notary Public
State of _________________)
) SS.:
County of _______________ )
On this, the ______ day of __________, 1994, before me, a
Notary Public in and for said County and State, personally
appeared ____________, the _____________ of Pitney Bowes Credit
Corporation, who acknowledged himself to be a duly authorized
officer of Pitney Bowes Credit Corporation, and that, as such
officer, being authorized to do so, he executed the foregoing
instrument for the purposes therein contained.
In Witness Whereof, I have hereunto set my hand and official
seal on the date above mentioned.
______________________________
Notary Public
Annex 1
DEFINITIONS
"AAR" shall mean the Association of American Railroads or
any successor thereto.
"Acceptance Date" for each Item of Equipment means the date
on which Lessee has accepted such Item for lease under the Lease,
as evidenced by Lessee's execution and delivery of a Lease
Supplement for such Item dated such date.
"Acquisition Agreements" shall mean the Partial Assignments
dated as of each Closing Date from the Lessee to the Lessor.
"Affiliate" shall mean any person, firm or corporation who
or which, directly or indirectly, through one or more
intermediaries controls, or is controlled by, or is under common
control with, another person, firm or corporation. The term<PAGE>
"control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a person, firm, or corporation, whether through the
ownership of voting securities, by contract or otherwise.
"After-Tax Basis" means on a basis such that any payment to
be received or deemed to be received shall be supplemented by a
further payment so that the sum of the two payments, after
deducting from such payments the amount of all taxes resulting
from receipt or accrual of such payments (net of any current
credits or deductions or other tax benefits arising therefrom, to
the extent actually realized), assuming that the Person receiving
such payments is subject to taxes at the highest marginal rate
applicable to corporations such as the Lessor, shall be equal to
the payments to be received or deemed to have been received.
"Appraisal Procedure" shall have the meaning specified in
Section 25(c) of the Lease.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code as
amended from time to time, 11 U.S.C. 101 et seq.
"Basic Term" shall have the meaning specified in Section 4
of the Lease.
"Basic Term Commencement Date" shall have the meaning
specified in Section 4 of the Lease.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which banking institutions in the state of
Georgia or New York are authorized or required to be closed.
"Closing Dates" shall mean the date Lessor pays for any Item
of Equipment.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor code.
"Default" shall mean any event which would constitute an
Event of Default under the Lease if any requirement in connection
therewith for the giving of notice or the lapse of time, or both,
had been satisfied.
"Equipment" shall mean collectively those items and "Item"
or "Item of Equipment" shall mean individually each item of
railroad rolling stock described in the Lease Supplement
delivered on each Closing Date, together with any and all
accessions, additions, improvements and replacements from time to
time incorporated or installed on any item thereof which are the
property of the Lessor pursuant to the terms of the Lease.
"Equipment Lease" - See "Lease."<PAGE>
"Event of Loss" with respect to any Item of Equipment shall
mean (i) the loss of such Item of Equipment or any substantial
part thereof or of the use thereof due to theft or disappearance
for a period in excess of 180 days during the Lease Term, or
existing at the expiration or earlier termination of the Lease
Term, (ii) the destruction, damage beyond repair, or rendition of
such Item of Equipment or any substantial part thereof
permanently unfit for normal use for any reason whatsoever, (iii)
the condemnation, confiscation, seizure, or requisition of use by
any governmental authority under the power of eminent domain or
otherwise for a period in excess of 180 days during the Lease
Term, or existing at the expiration or earlier termination of the
Lease Term, or (iv) the requisition of title to such item of
Equipment or any substantial part thereof by any governmental
authority under the power of eminent domain or otherwise.
"Fair Market Sales Value" shall be determined on the basis
of, and shall equal in value, the retail amount (as opposed to
the wholesale amount) which would be obtained in an arm's-length
transaction between an informed and willing buyer-user (other
than a lessee currently in possession) and an informed and
willing seller under no compulsion to sell, and in such
determination, costs of removal from the location of current use
shall not be a deduction from such value. Any such determination
made (i) under Section 11 or 19 of the Lease shall be made on the
assumption that the Equipment is sold on an "as-is, where-is"
basis, and (ii) at any other time shall be made on the assumption
that the Equipment is in the condition and state of repair
required by the terms and provisions of the Lease.
"Fair Market Rental Value" shall be determined on the basis
of, and shall equal in value, the amount which would be obtained
in an arm's length transaction between an informed and willing
lessee (other than a lessee currently in possession) and an
informed and willing lessor under no compulsion to lease, and in
such determination, costs of removal from the location of current
use shall not be a deduction from such value. Any such
determination made (i) under Section 11 or 19 of the Lease shall
be made on the assumption that the Equipment is leased on an "as-
is, where-is" basis, and (ii) at any other time shall be made on
the assumption that the Equipment is in the condition and state
of repair required by the terms and provisions of the Lease.
"Final Determination", with respect to a Loss, shall have
the meaning specified in Section 8 of the Tax Indemnification
Agreement.
"Fixed Rent" shall mean all rent payable pursuant to Section
6(b) of the Lease for the Basic Term and all Rent payable
pursuant to Section 25(a) of the Lease for the Renewal Term, if
any.
"Guidelines" shall mean the guidelines set forth in Revenue
Procedure 75-21, 1975-1 C.B. 715, as further set forth in Revenue<PAGE>
Procedure 75-28, 1975-1 C.B. 752, and as modified in Revenue
Procedure 76-30, 1976-2 C.B. 647 and Revenue Procedure 79-48,
1979-2 C.B. 529 that are applied by the Internal Revenue Service
in determining, for advance ruling purposes, whether leveraged
lease transactions (other than transactions which are treated as
leases pursuant to Section 168(f)(8) of the Code) are leases for
Federal income tax purposes.
"ICC" means the Interstate Commerce Commission or any
successor thereto.
"Independent Tax Counsel" means independent tax counsel
selected by Lessor and reasonably acceptable to Lessee.
"Interchange Rules" shall have the meaning specified in
Section 10 of the lease.
"Investment Grade Quality", when used with respect to any
class of securities, means (i) if such securities are rated by
Moody's Investors Service, Inc., Standard & Poor's Corporation or
any successor of either that issues nationally accepted
securities ratings, the rating is at least "Baa" (or such other
rating which at the time is the equivalent thereof) by Moody's
Investors Service, Inc., or "BBB" (or such other rating which at
the time is the equivalent thereof) by Standard & Poor's
Corporation, or (ii) if such securities are not rated by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, they
are of a credit quality equivalent to the ratings specified in
clause (i) above.
"IRS" shall mean the Internal Revenue Service or any
successor agency.
"Late Rate" shall mean interest at the annual rate equal to
the prime rate as announced from time to time by _______________
Bank as its prime rate.
"Lease" or "Equipment Lease" shall mean the Railcar Lease
dated as of _____________ 1, 1994 between the Lessor, as lessor,
and the Lessee, as lessee, as amended or supplemented from time
to time.
"Lease Supplement" shall mean each Lease Supplement,
substantially in the form of Exhibit B to the Lease, entered into
between the Lessor and the Lessee pursuant to Section 3 of the
Lease on each Closing Date, and shall include any supplement,
amendment or restatement thereof. Each Lease Supplement shall
contain a description of the Equipment to be delivered on such
Closing Date, shall confirm that the Equipment has been accepted
by the Lessee and shall set forth a summary of the Purchase Price
of the Equipment. Each reference to "the Lease" shall include
the Lease and the Lease Supplements.<PAGE>
"Lease Term" shall mean the Basic Term and each Renewal
Term.
"Lessee" shall mean Ohio Valley Electric Corporation, an
Ohio corporation, and any corporation which succeeds thereto by
merger or consolidation.
"Lessor's Liens" shall mean Liens arising as a result of (i)
claims against Lessor, (ii) acts of Lessor, (iii) taxes, fees or
other charges imposed against Lessor, which are not indemnified
against by Lessee pursuant to the Lease other than Liens which
are not due and payable or the amount or validity of which are
being contested in good faith by appropriate legal proceedings
which will not result in the forfeiture or sale of the Equipment
or materially and adversely affect Lessor's title thereto or (iv)
claims against Lessor arising out of the voluntary transfer by
Lessor of its interest in the Equipment other than a transfer of
the Equipment pursuant to Sections 15,25 or 27 and other than a
transfer made while an Event of Default under the Lease has
occurred and is continuing.
"Lien" shall mean any mortgage, pledge, security interest,
lien, encumbrance or other charge of any kind on property.
"Loss" shall have the meaning given in Section 6 of the Tax
Indemnification Agreement.
"Permitted Contest" shall mean a good-faith contest
conducted in a manner so as to prevent the imposition of any
criminal penalty on, or adverse effect on the title, property or
right of, Lessor, of the legality or validity of any of the
taxes, assessments, levies, fees or other governmental charges,
or other claims, Liens or impositions which, under the terms of
the Lease, are required to be paid or discharged by the Lessee or
the Lessor, as the case may be, but for such contest.
"Permitted Encumbrances" with respect to the Equipment and
each Item thereof, shall mean (i) the interest of the Lessee and
the Lessor, respectively, under the Lease; (ii) any Liens thereon
for taxes, assessments, levies, fees and other governmental and
similar charges not due and payable or the amount or validity of
which is being contested by a Permitted Contest; (iii) any Liens
of mechanics, suppliers, materialmen and laborers for work or
services performed or materials furnished in connection with the
Equipment or any Item thereof which are not more than 30 days
past due or the amount or validity of which is being contested by
Permitted Contest; and (iv) the rights of any sublessee or
assignee pursuant to Section 13 of the Lease in respect of the
Equipment.
"Person" shall mean an individual, partnership, corporation,
firm, trust or unincorporated organization, and a government or
agency or political subdivision thereof.<PAGE>
"Pricing Assumptions" shall mean the assumptions set forth
in Annex 2 to the Lease.
"Prime Rate" shall mean for any day the rate announced by
_________________, from time to time at its principal office in
________________________, as its prime rate for domestic (United
States) commercial loans in effect on such day (such Prime Rate
is not necessarily intended to be the lowest rate of interest
charged by _________________, in connection with the extensions
of credit).
"Purchase Price" shall mean with respect to an Item of
Equipment $_________________.
"Reasonable Basis" for a position shall exist if tax counsel
may properly advise reporting such position on a tax return in
accordance with Formal Opinion 85-352 issued by the Standing
Committee on Ethics and Professional Responsibility of the
American Bar Association.
"Regulations" shall mean the income tax regulations issued,
published or promulgated under the Code.
"Renewal Term" shall mean any term in respect of which the
Lessee shall have exercised its option to renew the Lease
pursuant to Section 25(a) thereof.
"Rent" shall mean Fixed Rent and Supplemental Rent.
"Rent Payment Dates" shall mean for each Item of Equipment
(i) for the Basic Term thereof, December 30, 1994 and the
thirtieth day of each June and December thereafter throughout, to
and including December 30, 2005, and (ii) for each Renewal Term
thereof, each date on which a payment of Fixed Rent is due and
payable for such Item as provided in Section 25(a) of the Lease.
"Stipulated Loss Value" of an Item as of any Rent Payment
Date shall mean the amount determined in accordance with Exhibit
C of the Lease as such percentage or percentages may be adjusted
in accordance with the provisions of Section 6(f) of the Lease.
"Supplemental Rent" shall mean all amounts, liabilities and
obligations (other than Fixed Rent) which the Lessee is obligated
to pay under the Lease, including, but not limited to, Stipulated
Loss Value and Termination Value payments.
"Tax Assumptions" shall have the meaning given in Section 2
of the Tax Indemnification Agreement.
"Term" shall mean the Lease Term.
"Termination Value" of an Item of Equipment as of any Rent
Payment Date shall mean with respect to such Item of Equipment an
amount determined in accordance with Exhibit C of the Lease as<PAGE>
such percentage or percentages may be adjusted in accordance with
the provisions of Section 6(f) of the Lease.
Annex 2
PRICING ASSUMPTIONS
Closing Date: October 21, 1994
Assets: 500 new open hopper railcars, as
listed in Exhibit B to the Railcar
Lease
Purchase Price of Assets: $43,500 per railcar
Interim Term
Commencement Date: October 21, 1994
Basic Term
Commencement Date: December 30, 1994
Basic Term: Eleven years
Interim Rent: None.
Fixed Rent During The
Basic Term: As set forth in Exhibit C to the
Railcar Lease.
Description of Equipment: 500 new open hopper railcars as
more specifically described in the
Lease Supplements delivered on each
Closing Date.
This Lease Supplement No. _____ dated as of ____________,
1994 between Pitney Bowes Credit Corporation, ("Lessor"), and
Ohio Valley Electric Corporation, an Ohio corporation ("Lessee"),
W I T N E S S E T H:
1. Lessor and Lessee have heretofore entered into a
Railcar Lease dated as of ____________ 1, 1994 (the "Lease")
providing for the execution and delivery of Lease Supplements<PAGE>
substantially in the form hereof. The terms defined in the Lease
shall have the same meanings when used herein.
2. Lessee hereby acknowledges and confirms that on or
prior to the date hereof, the Equipment described in Schedule 1
attached hereto has been delivered and assembled. Lessee
represents that the Equipment is free and clear of all liens and
encumbrances.
3. Lessee hereby certifies that the date of acceptance of
the Equipment and commencement of the Lease Term with respect
thereto is ____________, 1994.
4. Lessee hereby certifies that such Purchase Price for
the Equipment as of the date hereof is $__________________.
5. Fixed Rent, Stipulated Loss Values and Termination
Values for the Equipment is payable in the amounts and on the
Rent Payment Dates set forth in Schedule 2 attached hereto.
State of _________________)
) SS.:
County of _______________ )
On this, the _____ day of ___________, 1994, before me, a
Notary Public in and for said County and State, personally
appeared _____________, the _______________ of Ohio Valley
Electric Corporation, who acknowledged himself to be a duly
authorized officer of Ohio Valley Electric Corporation, and that,
as such officer, being authorized to do so, he executed the
foregoing instrument for the purposes therein contained.
In Witness Whereof, I have hereunto set my hand and official
seal on the date above mentioned.
______________________________
Notary Public
State of _________________)
) SS.:
County of _______________ )
On this, the ______ day of __________, 1994, before me, a
Notary Public in and for said County and State, personally
appeared ____________, the _____________ of Pitney Bowes Credit
Corporation, who acknowledged himself to be a duly authorized<PAGE>
officer of Pitney Bowes Credit Corporation, and that, as such
officer, being authorized to do so, he executed the foregoing
instrument for the purposes therein contained.
In Witness Whereof, I have hereunto set my hand and official
seal on the date above mentioned.
______________________________
Notary Public
Exhibit F
614/223-1648
Securities and Exchange Commission
Office of Public Utility Regulation
450 Fifth Street, N.W.
Washington, D.C.
July , 1994
Gentlemen:
With respect to the Application or Declaration on Form U-1 of
Ohio Valley Electric Corporation (the "Company") relating to the
subleasing of railcars, I wish to advise you as follows:
I am of the opinion that the Company is a corporation validly
organized and duly existing under the laws of the State of Ohio.
I am further of the opinion that, in the event that the proposed
transactions are consummated in accordance with said Application
or Declaration, as the same may be amended, and when appropriate
action has been taken by the Board of Directors of the Company
with respect to the transactions described in said Application or
Declaration:
(a) All state laws applicable to the proposed transactions
will have been complied with:
(b) The Company will legally acquire the railcars pursuant
to such sublease; and
(c) Consummation of the proposed transactions will not
violate the legal rights of the holders of any
securities issued by the Company or any associate
company thereof.<PAGE>
I hereby consent to the filing of this opinion as an exhibit to
the above-mentioned Application or Declaration.
Very truly yours,
/s/ Thomas G. Berkemeyer
Thomas G. Berkemeyer
Counsel for
Ohio Valley Electric Corporation
TGB/mms
railcars.ovc\opincoun.u-1
<TABLE>
OHIO VALLEY ELECTRIC CORPORATION
AND SUBSIDIARY COMPANY
CONSOLIDATING BALANCE SHEET - MARCH 31, 1994
<CAPTION>
Indiana-
Ohio Valley Kentucky
Eliminations Electric Electric
ASSETS Consolidated (Deduct) Corporation Corporation
<S> <C> <C> <C> <C>
ELECTRIC PLANT--at original cost- $ 567,450,288.24 $ - $ 263,295,658.93 $ 304,154,629.31
Less - Accumulated provisions for
depreciation and amortization 562,295,332.60 - 259,600,356.77 302,694,975.83
Total Plant 5,154,955.64 - 3,695,302.16 1,459,653.48
Construction work in progress 54,455,023.42 - 4,490,229.64 49,964,793.78
Net Plant In Service 59,609,979.06 - 8,185,531.80 51,424,447.26
INVESTMENTS AND OTHER:
Special funds held by trustee 38,477,802.07 - 38,477,802.07 -
Investment in subsidiary company - (3,400,000.00) 3,400,000.00 -
Advances to subsidiary company - (52,151,266.00) 52,151,266.00 -
Total Investments And Other 38,477,802.07 (55,551,266.00) 94,029,068.07 -
CURRENT ASSETS:
Cash and cash equivalents 2,391,187.57 - 2,065,546.79 325,640.78
Accounts receivable 12,998,782.18 (7,142,438.83) 13,063,983.38 7,077,237.63
Interest receivable 372,837.37 - - 372,837.37
Coal in storage, at average cost 22,929,982.26 - 11,016,629.90 11,913,352.36
Materials and supplies, at average cost 17,792,478.44 - 9,540,526.92 8,251,951.52
Property taxes applicable to
subsequent years 3,239,726.04 - 3,239,726.04 -
Refundable Federal income taxes 779,240.09 - 779,240.09 -<PAGE>
Prepaid expenses and other 506,776.21 - 225,536.18 281,240.03
Total Current Assets 61,011,010.16 (7,142,438.83) 39,931,189.30 28,222,259.69
DEFERRED CHARGES AND OTHER:
Debt expense, being amortized 491,557.02 - 491,557.02 -
Unrecognized postretirement
benefits expense 28,610,000.00 - 28,610,000.00 -
Future Federal income tax benefits 34,375,471.15 - 14,244,078.15 20,131,393.00
Unrecognized pension expense 9,925,255.00 - 9,925,255.00 -
Prepaids and other 1,570,282.03 - 1,568,034.31 2,247.72
Total Deferred Charges 74,972,565.20 - 54,838,924.48 20,133,640.72
TOTAL ASSETS $ 234,071,356.49 $ (62,693,704.83) $ 196,984,713.65 $ 99,780,347.67
</TABLE>
<TABLE>
OHIO VALLEY ELECTRIC CORPORATION
AND SUBSIDIARY COMPANY
CONSOLIDATING BALANCE SHEET - MARCH 31, 1994
<CAPTION>
Indiana-
Ohio Valley Kentucky
Eliminations Electric Electric
CAPITALIZATION AND LIABILITIES Consolidated (Deduct) Corporation Corporation
<S> <C> <C> <C> <C>
CAPITALIZATION:
Common Stock, $100 par value-
Authorized, 300,000 shares;
outstanding, 100,000 shares $ 10,000,000.00 $ - $ 10,000,000.00 $ -
Common stock, without par value,
stated at $200 per share-
Authorized, 100,000 shares;
outstanding, 17,000 shares - (3,400,000.00) - 3,400,000.00
Senior secured notes 80,000,000.00 - 80,000,000.00 -
Retained earnings 950,824.92 - 950,824.92 -
Total Capitalization 90,950,824.92 (3,400,000.00) 90,950,824.92 3,400,000.00
CURRENT LIABILITIES:
Lines-of-credit borrowings 5,000,000.00 - 5,000,000.00 -
Note payable maturing in one year 9,500,000.00 - 9,500,000.00 -
Accounts payable 24,650,751.81 (7,142,438.83) 17,333,452.62 14,459,738.02
Accrued taxes 9,383,945.57 - 6,620,815.76 2,763,129.81
Accrued interest and other 783,361.96 - 769,602.31 13,759.65
Total Current Liabilities 49,318,059.34 (7,142,438.83) 39,223,870.69 17,236,627.48
DEFERRED CREDITS:
Investment tax credits 10,610,317.91 - 10,610,317.91 -
Accrued pension liability 9,925,255.00 - 9,925,255.00 -
Customer advances for construction 7,627,000.00 (52,151,266.00) 3,605,000.00 56,173,266.00
Postretirement benefit obligation 28,610,000.00 - 28,610,000.00 -
Net antitrust settlement 4,111,809.45 - 1,517,347.62 2,594,461.83
Deferred Credit - tax benefits 32,432,560.56 - 12,301,167.56 20,131,393.00
Deferred Credit - allowances 434,267.31 - 189,667.95 244,599.36
Other 51,262.00 - 51,262.00 -
Total Deferred Credits 93,802,472.23 (52,151,266.00) 66,810,018.04 79,143,720.19 <PAGE>
TOTAL CAPITALIZATION AND LIABILITIES $ 234,071,356.49 $ (62,693,704.83) $ 196,984,713.65 $ 99,780,347.67
</TABLE>
<TABLE>
OHIO VALLEY ELECTRIC CORPORATION
AND SUBSIDIARY COMPANY
CONSOLIDATING STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR TO DATE AS OF
MARCH 31, 1994
<CAPTION>
Indiana-
Ohio Valley Kentucky
Eliminations Electric Electric
Consolidated (Deduct) Corporation Corporation
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Sales of electric energy to:
Department of Energy $ 57,682,532.87 $ - $ 57,682,532.87 $ -
Ohio Valley Electric Corp. - (32,013,247.52) - 32,013,247.52
Sponsoring Companies 9,643,823.40 - 9,643,823.40 -
Other 183,944.25 - 167,201.25 16,743.00
Total operating revenues 67,510,300.52 (32,013,247.52) 67,493,557.52 32,029,990.52
OPERATING EXPENSES:
Fuel consumed in operation 44,919,704.24 - 22,143,104.29 22,776,599.95
Purchased power 314,055.94 (32,013,247.52) 32,327,303.46 -
Other operation 7,528,215.49 - 3,916,367.50 3,611,847.99
Maintenance 10,180,873.32 - 5,410,178.22 4,770,695.10
Taxes, other than Federal income taxes 2,278,422.80 - 1,395,586.11 882,836.69
Federal income taxes 449,500.43 - 449,500.43 -
Total operating expenses 65,670,772.22 (32,013,247.52) 65,642,040.01 32,041,979.73
Operating income 1,839,528.30 - 1,851,517.51 (11,989.21)
INTEREST INCOME AND OTHER 511,395.85 - 498,628.64 12,767.21
Income before interest charges 2,350,924.15 - 2,350,146.15 778.00
INTEREST EXPENSE 1,478,364.48 - 1,477,586.48 778.00
Net Income $ 872,559.67 $ - $ 872,559.67 $ -
RETAINED EARNINGS, JAN. 1, 1994 378,265.25 - 378,265.25 -
CASH DIVIDENDS ON COMMON STOCK (300,000.00) - (300,000.00) -
RETAINED EARNINGS, MARCH 31, 1994 $ 950,824.92 $ - $ 950,824.92 $ - <PAGE>
</TABLE>
