Harry E. Peaden, Jr. - Page 7




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          following additional information as to the particular truck:                
          (1) The term of the lease; (2) the base rent;5 and (3) the                  
          monthly rental charge.                                                      
               The base rent represents the sum of all of the monthly rent            
          due throughout the lease transaction for the particular truck.              
          The base rent is dependent on the lessor's cost of obtaining the            
          truck and refitting it to petitioner's specifications, which                
          could include the purchase and attachment of the refrigeration              
          units.  Over the lease term, a fixed portion of the monthly rent            
          is applied to reduce the base rent.  The amount of the reduction            
          is calculated to be equal to an amount that, at the end of the              
          lease term, effectively reduces the base rent to zero.6  The                
          remaining portion of the monthly rent is a service and                      
          administrative charge that is not applied to reduce the base                
          rent.7                                                                      


          5    The ARI master lease refers to this figure as the                      
          Capitalized Value.                                                          
          6    The ARI master lease reaches the same result by providing              
          that, upon the termination of the lease period, the Capitalized             
          Value is reduced by the "total depreciation reserve".  The "total           
          depreciation reserve" is determined by multiplying:  (1) The                
          number of months a vehicle is billed in service and paid by the             
          Lessee, times (2) the Capitalized Value, times (3) the monthly              
          depreciation percentage, which is determined at the outset of the           
          lease.  The monthly depreciation percentage is calculated to be             
          equal to an amount that, at the end of the lease term,                      
          effectively reduces the Capitalized Value of the truck to zero.             
          7    Under the ARI master lease this is the portion of the                  
                                                             (continued...)           




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Last modified: May 25, 2011