1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1994
REGISTRATION NO. 33-56287
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNION TANK CAR COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3104688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
------------------------
225 WEST WASHINGTON STREET
CHICAGO, ILLINOIS 60606
(312) 372-9500
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
William M. Holzman, Esq.
Neal Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
(312) 269-8000
(Name, address, including zip code, and telephone number
area code, of agent for service)
Copies to:
Barry P. Biggar, Esq.
Mayer, Brown & Platt
787 Seventh Avenue
New York, New York 10019
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
AMOUNT PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------
Pass Through Certificates,
Series 1994-A......................... $100,000,000 100% $100,000,000 $34,483
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated in accordance with Rule 457 solely for the purpose of determining
the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION
DECEMBER 5, 1994
PROSPECTUS
$95,000,000
UNION TANK CAR COMPANY
1994-A PASS THROUGH TRUST
PASS THROUGH CERTIFICATES, SERIES 1994-A
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in the Union Tank Car Company 1994-A Pass Through Trust (the
"Pass Through Trust") to be formed pursuant to a pass through trust agreement
between Union Tank Car Company (the "Company") and The First National Bank of
Chicago (the "Pass Through Trustee"), as trustee under the Pass Through Trust.
The property of the Pass Through Trust will consist of equipment notes (the
"Equipment Notes") to be issued on a nonrecourse basis by the trustee of two
separate owner trusts (each, an "Owner Trustee") in connection with two separate
leveraged lease transactions to finance not more than 80% of the cost of certain
tank cars and covered hopper cars (each rail car a "Unit" and, collectively, the
"Equipment") that will be purchased by the Owner Trustees from the Company and
leased to the Company. Amounts unconditionally payable under the leases will be
sufficient to pay in full when due all payments of principal of, Make-Whole
Amount (as hereinafter defined), if any, and interest on the Equipment Notes
held in the Pass Through Trust. However, neither the Pass Through Certificates
nor the Equipment Notes are obligations of, or guaranteed by, the Company.
Each Equipment Note will be issued under one of two indentures, each between an
Owner Trustee and an indenture trustee (an "Indenture Trustee"). The Equipment
Notes acquired by the Pass Through Trust will mature on or before the final
distribution date for the Pass Through Certificates. The Equipment Notes issued
under each indenture will be secured by a security interest in the Equipment
leased by the Company under the lease relating to such indenture and by an
assignment of certain of the Owner Trustee's rights under such lease, including
the right to receive rentals payable by the Company in respect of such Equipment
pursuant to such lease.
Interest paid on the Equipment Notes held in the Pass Through Trust will be
passed through to the Certificateholders on January 2 and July 2 of each year,
commencing on July 2, 1995, at the rate per annum set forth below until the
final distribution date for the Pass Through Trust. Principal paid on the
Equipment Notes held in the Pass Through Trust will be passed through to the
Certificateholders in scheduled amounts on January 2 or July 2, or both, of each
year, commencing on , and continuing until the final distribution
date for the Pass Through Trust. The Equipment Notes may be prepaid under
certain circumstances.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------------------------------------------
FINAL
PRINCIPAL INTEREST DISTRIBUTION PRICE TO
AMOUNT RATE DATE PUBLIC(1)(2)
1994-A......................... $95,000,000 % 100%
- ----------------------------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from December , 1994.
(2) The underwriting commission is $ , which constitutes % of the
principal amount of the Pass Through Certificates. The underwriting
commission, and certain other expenses estimated at $ , will be payable
by the Owner Trustees in the leveraged lease transactions. All of the
proceeds from the sale of the Pass Through Certificates will be used to
purchase the Equipment Notes from the Owner Trustees.
The Pass Through Certificates are offered by the Underwriter subject to prior
sale, when, as and if accepted by the Underwriter and subject to approval of
certain legal matters by Mayer, Brown & Platt, counsel for the Underwriter. It
is expected that delivery of the Pass Through Certificates in book-entry form
will be made on or before December , 1994 through the facilities of The
Depository Trust Company, against payment therefor in immediately available
funds.
- -------------------------------------------------
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
The date of this Prospectus is December , 1994.
3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE PASS THROUGH
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
Union Tank Car Company (with its wholly-owned subsidiaries herein
collectively referred to, unless the context otherwise requires, as the
"Company") has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Pass Through Certificates. This Prospectus, which forms a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information pertaining to the Pass Through Certificates and the Company,
reference is made to the Registration Statement. Any statement contained herein
concerning the provisions of any document is not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Information
concerning the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and New York Regional Office, 7 World Trade Center, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
REPORTS TO CERTIFICATEHOLDERS BY THE TRUSTEE
The First National Bank of Chicago, as trustee under the Pass Through Trust
Agreement, will provide to Certificateholders certain periodic statements
concerning distributions made with respect to the Pass Through Trust. See
"Description of the Pass Through Certificates--Reports to Certificateholders."
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and its Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994, and September 30, 1994, each as filed with the Commission
pursuant to the Exchange Act, are incorporated herein by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Pass Through Certificates shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written request of such person, a copy (without
exhibits) of any or all documents incorporated by reference in this Prospectus.
Requests for such copies should be directed to the General Counsel and
Secretary, Union Tank Car Company, 225 West Washington Street, Chicago, Illinois
60606, telephone (312) 372-9500.
2
4
SUMMARY
The following summary of provisions relating to the Pass Through
Certificates does not purport to be complete and is qualified in its entirety by
the detailed information appearing elsewhere or incorporated by reference in the
Prospectus.
Glossary........................ Included at the end of this Prospectus as
Appendix I is a Glossary of certain of the
significant defined terms used herein.
Pass Through Trust.............. The Union Tank Car Company 1994-A Pass
Through Trust (the "Pass Through Trust") is
to be formed pursuant to a Pass Through
Trust Agreement (the "Agreement") between
Union Tank Car Company (the "Company") and
The First National Bank of Chicago (the
"Pass Through Trustee"), as trustee of the
Pass Through Trust.
Pass Through Trust Property..... The property of the Pass Through Trust will
consist of equipment notes (the "Equipment
Notes") issued on a nonrecourse basis by
State Street Bank and Trust Company, as
owner trustee (each, an "Owner Trustee") of
two separate trusts for the benefit of
certain institutional investors (each, an
"Owner Participant"), in connection with two
separate leveraged lease transactions to
finance not more than 80% of the cost to
such Owner Trustees of certain tank cars and
covered hopper cars (each rail car a "Unit"
and, collectively, the "Equipment") which
will be purchased by such Owner Trustees, on
behalf of certain Owner Participants, from
the Company and leased to the Company. Each
Equipment Note will be issued in connection
with such leveraged lease transactions under
one of two indentures (each, an
"Indenture"). See "Use of Proceeds" for
additional information concerning the
Equipment.
The Pass Through Certificates, Series 1994-A
(the "Pass Through Certificates"), that will
be issued by the Pass Through Trust will
bear interest at the same rate as the rate
on the Equipment Notes. The Equipment Notes
will mature on or before the final
distribution date of the Pass Through
Certificates. The aggregate principal amount
of the Equipment Notes to be held in the
Pass Through Trust will be the same as the
aggregate principal amount of the Pass
Through Certificates issued by the Pass
Through Trust.
Pass Through Certificates;
Book-Entry Registration...... Each Pass Through Certificate will represent
a fractional undivided interest in the Pass
Through Trust. The Pass Through Certificates
will be issued in fully registered form
only. See "Description of the Pass Through
Certificates--General." The Pass Through
Certificates will be registered in the name
of Cede & Co. ("Cede"), as the nominee of
The Depository Trust Company ("DTC"). No
person acquiring an interest in the Pass
Through
3
5
Certificates will be entitled to receive a
definitive certificate (a "Registered
Certificate") representing such person's
interest in the Pass Through Trust, except
in the event that Registered Certificates
are issued under the limited circumstances
described herein. See "Description of the
Pass Through Certificates--Book-Entry
Registration" and "--Registered
Certificates."
Denominations................... The Pass Through Certificates will be issued
in minimum denominations of $1,000 and any
integral multiple of $1,000 in excess
thereof. See "Description of the Pass
Through Certificates--General."
Regular Distribution Dates...... January 2 and July 2.
Special Distribution Dates...... Regular Distribution Dates or in certain
cases any Business Day.
Record Dates.................... The fifteenth day preceding a Regular
Distribution Date or a Special Distribution
Date.
Initial Average Life Date....... The initial average life date of the Pass
Through Certificates is .
Distributions................... Payments of interest on the Equipment Notes
held in the Pass Through Trust are scheduled
to be received in specified amounts by the
Pass Through Trustee on January 2 and July 2
of each year, commencing July 2, 1995, and
are to be distributed to the
Certificateholders on the corresponding
Regular Distribution Dates. Payments of
principal on the Equipment Notes are
scheduled to be received in specified
amounts by the Pass Through Trustee on
January 2 or July 2, or both, of each year,
commencing , and are to be
distributed to the Certificateholders on the
corresponding Regular Distribution Dates.
Payments of principal of, Make-Whole Amount,
if any, and interest on the Equipment Notes
resulting from prepayments thereof, if any,
will be distributed on a Special
Distribution Date after not less than 15
days' notice from the Pass Through Trustee
to the Certificateholders. For a discussion
of distributions upon an Event of Default,
see "Description of the Pass Through
Certificates--Events of Default and Certain
Rights Upon an Event of Default."
To the extent that Equipment Notes are not
purchased by the Pass Through Trustee on or
prior to December 30, 1994, the unexpended
proceeds, together with interest thereon at
the rate applicable to the Pass Through
Certificates, will be distributed to
Certificateholders on January 2, 1995. See
"Description of the Pass Through
Certificates--Special Payments Under Certain
Circumstances."
Method of Distributions......... So long as the Pass Through Certificates are
registered in the name of Cede, as the
nominee of DTC, distributions by the Pass
Through Trustee will be made in same-day
4
6
funds to DTC, which in turn will make
distributions to participants in DTC ("DTC
Participants") in same-day funds. The final
distribution of principal with respect to
the Pass Through Certificates will be made
by DTC to DTC Participants in same-day
funds. Responsibility for distributions by
DTC Participants to beneficial owners of the
Pass Through Certificates will be the
responsibility of such DTC Participants and
will be made in accordance with customary
industry practices. See "Description of the
Pass Through Certificates--Payments and
Distributions." At such time, if any, as
Registered Certificates are issued
representing the Pass Through Certificates
and are not registered in the name of Cede,
as the nominee of DTC, distributions by the
Pass Through Trustee to Certificateholders,
other than the final distribution, will be
made by check mailed to each
Certificateholder of record on the
applicable record date at its address
appearing on the register. The final
distribution with respect to the Pass
Through Certificates will be made only upon
surrender and presentation thereof at the
office or agency of the Pass Through
Trustee. See "Description of the Pass
Through Certificates--Payments and
Distributions."
Interest........................ Interest on the Pass Through Certificates
will be passed through to the
Certificateholders at the rate per annum
indicated on the cover of this Prospectus,
which is the interest rate borne by the
Equipment Notes to be held in the Pass
Through Trust. Interest is calculated on the
basis of a 360-day year consisting of twelve
30-day months. See "Description of the Pass
Through Certificates--General."
Principal....................... The principal of the Equipment Notes is
payable in scheduled amounts on January 2 or
July 2, or both, of each year, commencing
. See "Description of the
Pass Through Certificates--Payments and
Distributions" and "Description of the
Equipment Notes--Principal Payments."
Equipment Notes: General........ Interest will be payable in arrears on the
Equipment Notes on the unpaid principal
amount thereof on January 2 and July 2 of
each year, commencing on July 2, 1995. The
principal of each Equipment Note is payable
in accordance with the principal repayment
schedule set forth herein under "Description
of the Equipment Notes--Principal Payments."
Equipment Notes: Prepayment..... One or more of the Equipment Notes may be
prepaid, in whole or in part, under the
following circumstances:
(a) If an Event of Loss to a Unit shall
occur and the Company does not
substitute like kind equipment of equal
or greater value for such Unit, it is
obligated to pay the Stipulated Loss
Value of such Unit. Such payment will be
used to prepay a portion of the
5
7
Equipment Notes issued under the
Indenture relating to such Unit on (i)
the next Regular Distribution Date
following the election by the Company
to make such payment rather than
substitute like kind equipment or (ii)
in the case of the
occurrence of an Event of Loss in respect
of more than ten Units since the end of
the last six month reporting period under
a Lease (a "Multiple Loss"), on the first
Business Day succeeding the 60th day
following the date on which the Company
is required to report such Multiple Loss.
The amount prepaid will be equal to the
sum of (i) as to principal, an amount
equal to the product obtained by
multiplying the aggregate unpaid
principal amount of the Equipment Notes
issued under the Indenture to which such
Unit relates as of the prepayment date
(after deducting therefrom the scheduled
principal installment, if any, due on the
prepayment date) by a fraction, the
numerator of which shall be the Equipment
Cost of such Unit and the denominator of
which shall be the aggregate Equipment
Cost of all Equipment securing such
Indenture immediately prior to the
prepayment date, and (ii) as to interest,
the aggregate amount of interest accrued
and unpaid to but not including the
prepayment date in respect of the
principal amount to be prepaid pursuant
to clause (i) above on such prepayment
date. No Make-Whole Amount will be
payable in the event of a prepayment
under such circumstances.
(b) If (i) on or after July 2, 2002 the
Company elects to exercise its right to
terminate a Lease pursuant to the terms
thereof with respect to some or all of
the Units leased thereunder, (ii) on
January 2, 2005 with respect to certain
Units and January 2, 2006 with respect
to all other Units the Company exercises
its option to purchase some or all of
the Units in accordance with the terms
of the applicable Lease or (iii) the
Company elects to exercise its right
under a Participation Agreement to
purchase Equipment as a result of an
Owner Participant (or an affiliate
thereof) engaging in a business that is
in competition with the Company's full
service railcar leasing business, a
portion of the proceeds from the
Company's payment of the Termination
Value of such Unit or the exercise price
of the purchase option, as the case may
be, will be used to prepay Equipment
Notes relating to such Equipment, unless
the Company elects in connection with
the exercise of a purchase option to
assume on a full recourse basis all of
the Owner Trustee's obligations in
respect of the related Equipment Notes
and acquires such purchased Units
subject to the lien of the related
Indenture. Any such prepayment will be
in an amount at least equal to the
6
8
principal and accrued interest thereon,
computed as provided in paragraph (a)
above, plus, if such prepayment is made
prior to , , a
Make-Whole Amount. See "Description of
the Equipment Notes--Prepayment" for a
description of the manner of computing
the Make-Whole Amount.
(c) Subject to certain restrictions, the
Company may require an Owner Trustee to
effect a prepayment of the Equipment
Notes issued under an Indenture at a
price equal to the aggregate unpaid
principal amount thereof, together with
accrued interest thereon, plus, if such
prepayment is made prior to
, , a Make-Whole
Amount, as part of a refunding or
refinancing which will result in the
prepayment of the Pass Through
Certificates.
(d) If under any Indenture an Indenture
Default shall have occurred and be
continuing and (i) the Indenture Trustee
shall give notice of its intent to
accelerate the Equipment Notes
thereunder or to exercise other remedies
available to it or (ii) the Indenture
Trustee shall not have taken action with
respect to such Indenture Default for a
period of not less than 180 days, the
applicable Owner Trustee may elect to
prepay or purchase all of the then
outstanding Equipment Notes issued under
such Indenture at a price equal to the
unpaid principal amount thereof,
together with accrued interest thereon
to the date of prepayment or purchase,
but without any Make-Whole Amount.
See "Description of the Equipment
Notes--Prepayment."
Equipment Notes: Security....... The Equipment Notes issued under each
Indenture will be secured by a security
interest in the Equipment leased by the
Company under the Lease relating to such
Indenture and an assignment to the Indenture
Trustee of certain of the Owner Trustee's
rights under the Lease covering such
Equipment, including the right to receive
rent payable by the Company thereunder.
Equipment Notes issued under the Indentures
are not cross-collateralized and,
consequently, the Equipment Notes issued
under one Indenture are not secured by any
of the Equipment securing the other
Indenture or by the Lease related thereto.
There are no cross-default provisions in the
Indentures and, consequently, if the
Equipment Notes issued under one Indenture
are in default, the Equipment Notes issued
under the other Indenture may not be in
default and, if not in default, no remedies
will be exercisable under such Indenture.
See "Description of the Equipment
Notes--Security."
7
9
In the event of the bankruptcy of an Owner
Participant, it is possible that,
notwithstanding that the Equipment is owned
by an Owner Trustee in trust for the benefit
of such Owner Participant, the Equipment and
the related Lease and Equipment Notes might
become part of the bankruptcy proceeding. In
such event, payments on the Equipment Notes
might be interrupted and the ability of the
Indenture Trustee to exercise its remedies
under the Indenture might be restricted,
although the Indenture Trustee would retain
its status as a secured creditor in respect
of such Lease and the Equipment subject
thereto. See "Description of the Equipment
Notes--Remedies."
Although the Equipment Notes are not direct
obligations of, or guaranteed by, the
Company, the amounts unconditionally payable
by the Company under the Leases will be
sufficient to pay in full when due all
payments of principal of, Make-Whole Amount,
if any, and interest on the Equipment Notes.
See "Description of the Equipment
Notes--General."
Use of Proceeds................. The proceeds from the sale of the Pass
Through Certificates will be used by the
Pass Through Trustee to purchase the
Equipment Notes from the Owner Trustees. The
Owner Trustees will use such proceeds to
finance not more than 80% of the Equipment
Cost of the Equipment, representing in the
aggregate the entire debt portion of the two
separate leveraged lease transactions. The
net proceeds to the Company from the sale of
the Equipment will be used by the Company
for general corporate purposes. See "Use of
Proceeds."
Pass Through Trustee............ The First National Bank of Chicago will act
as trustee under the Pass Through Agreement
and as paying agent and registrar for the
Pass Through Certificates. The First
National Bank of Chicago also will act as
the Indenture Trustee under each Indenture.
Federal Income Tax
Consequences.................. The Pass Through Trust should be classified
as a grantor trust for federal income tax
purposes, and each Certificate Owner should
be treated as the owner of a pro rata
undivided interest in each of the Equipment
Notes and any other property held in the
Pass Through Trust and should report on its
federal income tax return its pro rata share
of income from such Equipment Notes in
accordance with such Certificate Owner's
method of accounting. See "Certain Federal
Income Tax Consequences."
ERISA Considerations............ The Pass Through Certificates, with certain
limited exceptions, are eligible for
purchase by employee benefit plans. See
"ERISA Considerations."
8
10
FORMATION OF THE PASS THROUGH TRUST
The Pass Through Trust will be formed pursuant to a Pass Through Trust
Agreement (the "Agreement") by and between the Company and the Pass Through
Trustee. Upon or prior to the execution and delivery of the Agreement, the Pass
Through Trustee, on behalf of the Pass Through Trust, will enter into two
separate participation agreements with the Company, the Indenture Trustee, the
applicable Owner Trustee and the applicable Owner Participant (in each case, a
"Participation Agreement") pursuant to which it will, among other things,
purchase the Equipment Notes, which notes will bear interest at the same rate as
the rate on the Pass Through Certificates and will mature on or before the final
distribution date of the Pass Through Certificates. The Pass Through Trust will
hold all of the Equipment Notes originally issued, representing in the aggregate
the entire debt portion of the two separate leveraged lease transactions. The
Pass Through Trustee will distribute the payments of principal, Make-Whole
Amount, if any, and interest received by it as the holder of the Equipment Notes
to the Certificateholders. See "Description of the Pass Through
Certificates--General" and "Description of the Equipment Notes--General."
9
11
DESCRIPTION OF PAYMENT FLOWS
The following diagram illustrates certain aspects of the payment flows in
each separate leveraged lease transaction among the Company, an Owner Trustee,
an Owner Participant, the Indenture Trustee, the Pass Through Trustee and the
Certificateholders.
In each of the two separate leveraged lease transactions, the Company will
lease certain Equipment from an Owner Trustee, as lessor of such Equipment under
a Lease. Equipment Notes with respect to such Equipment will be issued under an
Indenture by the Owner Trustee and will be purchased by the Pass Through Trustee
for the benefit of the Certificateholders. Rent is payable under the Lease to
the Owner Trustee, as lessor. However, as a result of the assignment of the
Lease to the Indenture Trustee, the Company will make rental payments directly
to the Indenture Trustee. From these rental payments the Indenture Trustee will,
on behalf of the Owner Trustee, first make payments to the Pass Through Trustee
as required to meet the Owner Trustee's obligations under the Equipment Notes
relating to such Equipment and will pay the remaining balance to the Owner
Trustee, for the benefit of the Owner Participant. The Pass Through Trustee will
distribute payments received in respect of the Equipment Notes relating to such
Equipment (together with payments received in respect of the Equipment Notes
relating to the other Equipment which is the subject of the other lease
transactions) held in the Pass Through Trust to the Certificateholders as
required under the terms of the Pass Through Certificates. The First National
Bank of Chicago will act initially both as Pass Through Trustee of the Pass
Through Trust and as Indenture Trustee under the Indentures.
|------------------------|
| Union Tank Car Company |
|------------------------|
|
| Lease Rental Payments
| Assigned by Owner Trustee
| to Indenture Trustee
|
\|/
|------------------------|
| Indenture |
| Trustee |
|------------------------|
| |
| |
Excess | | Equipment
Payments | | Note Payments
| |
|-------------------- --------------------|
\|/ \|/
|--------------| |----------------------|
| Owner | | Pass Through Trustee |
| Trustee | |----------------------|
|--------------| |
| |
| | Pass Through
| Excess | Certificate
| Payments | Distributions
| |
\|/ \|/
|--------------| |----------------------|
| Owner | | Holders of Pass |
| Participant | | Through |
|--------------| | Certificates |
|----------------------|
10
12
USE OF PROCEEDS
The Pass Through Certificates are being issued in order to facilitate the
financing by the Owner Trustees (as defined below) on behalf of certain Owner
Participants (as defined below) of their purchase of the Equipment to be leased
to the Company. All of the proceeds from the sale of Pass Through Certificates
will be used by the Pass Through Trustee to purchase Equipment Notes issued by
the Owner Trustees which, in turn, will use the proceeds, together with funds
provided by the Owner Participants, to purchase the Equipment from the Company,
on behalf of the Owner Participants.
The Equipment Notes will be issued under two separate Trust Indenture and
Security Agreements (each an "Indenture"), each such Indenture being between The
First National Bank of Chicago, as trustee thereunder (in such capacity, the
"Indenture Trustee"), and State Street Bank and Trust Company, not in its
individual capacity (except as expressly set forth therein) but solely as owner
trustee (each, an "Owner Trustee") of a separate trust for the benefit of an
institutional investor (the "Owner Participant"). Each Owner Participant will
provide from sources other than the Equipment Notes at least 20% of the
Equipment Cost of the related Equipment as an equity investment. No Owner
Participant, however, will be liable for any amount payable under the related
Indenture or any Equipment Notes issued thereunder.
The net proceeds to the Company from the sale of the Equipment will be used
by the Company for general corporate purposes.
The following table sets forth information with respect to the Equipment
(consisting of an aggregate of 2,261 rail cars, all of which were manufactured
in 1993 or 1994) expected to be purchased by the Owner Trustees and leased to
the Company:
TYPE OF CAR NO. OF CARS
------------------------------------------------------------- -----------
Covered Hopper (5,800 cu. ft.)............................... 548
Covered Hopper (3,000 cu. ft.)............................... 24
Tank (general purpose)....................................... 1,226
Tank (pressure).............................................. 463
-----------
Total........................................................ 2,261
=========
The following table sets forth information with respect to each of the
Leases:
AGGREGATE COST
OF EQUIPMENT PRINCIPAL
TO OWNER AMOUNT OF
LEASE NO. TRUSTEES EQUIPMENT NOTES
------------------------------------------- -------------- ---------------
1.......................................... $ $
2..........................................
Total................................. $ $
============ =============
11
13
THE COMPANY
The Company is principally engaged in the leasing of railway tank cars and
other rail cars to United States, Canadian and Mexican manufacturers and other
shippers of chemical products, including liquid fertilizers, petroleum products,
including liquid petroleum gas, food products and bulk plastics. The Company
owns and operates one of the largest fleets of privately-owned railway tank cars
in the world.
The Company, which was incorporated in Delaware in 1980 and is the
successor to a business which was incorporated in New Jersey in 1891 and
reincorporated in Delaware in 1968, is a wholly-owned subsidiary of Marmon
Industrial Corporation, an indirect wholly-owned subsidiary of Marmon Holdings,
Inc. Substantially all the stock of Marmon Holdings, Inc. is owned, directly or
indirectly, by trusts for the benefit of certain members of the Pritzker family.
As used herein, "Pritzker family" refers to the lineal descendants of Nicholas
J. Pritzker, deceased.
The Company's principal executive offices are located at 225 West
Washington Street, Chicago, Illinois 60606, and its telephone number is (312)
372-9500.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at September 30, 1994. The table does not give effect to the sale of the
Pass Through Certificates because the Pass Through Certificates are not direct
obligations of the Company. In addition, because the Leases are expected to be
classified as operating, rather than capital, leases, there will be no related
obligation recorded on the Company's consolidated balance sheet.
AMOUNT
OUTSTANDING AT
SEPTEMBER 30,
1994
--------------
(DOLLARS IN
THOUSANDS)
Borrowed debt:
Equipment obligations, payable periodically through 2009 at 6.50%-15.55%
(average rate 9.37%)..................................................... $ 737,546
Senior notes, 9.75% due in 1997............................................. 143,000
Other long-term borrowings (average rate 12.20%)............................ 28,776
--------------
Total borrowed debt...................................................... 909,322
Stockholder's equity:
Common stock, no par value: 1,000 shares authorized and issued.............. 106,689
Additional capital.......................................................... 4,652
Retained earnings........................................................... 388,746
--------------
Total stockholder's equity............................................... 500,087
--------------
Total capitalization................................................... $1,409,409
============
12
14
SELECTED FINANCIAL INFORMATION
The selected financial information set forth below as of December 31, 1989
through 1993 and for the years then ended, with the exception of the operating
fleet data, has been derived from the Company's audited financial statements
contained in the Company's Annual Reports on Form 10-K. The audited financial
statements contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, together with the report of the Company's independent
auditors, Ernst & Young LLP, are incorporated herein by reference. See
"Documents Incorporated by Reference." The selected financial data set forth
below as of September 30, 1994 and 1993 and for the nine months then ended, with
the exception of the ratios of earnings to fixed charges and the operating fleet
data, were extracted from the Company's unaudited financial statements contained
in the Company's Quarterly Reports on Form 10-Q for the quarters ended September
30, 1994 and September 30, 1993, the former of which is incorporated herein by
reference. Interim results are not necessarily indicative of the results for the
full year. The selected financial information should be read in conjunction with
such financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993 and in
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994.
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
INCOME STATEMENT
Services and net sales(1).......... $ 430,489 $ 373,518 $ 504,823 $ 618,007 $ 483,416 $ 462,684 $ 477,388
Other income....................... 11,691 13,860 18,272 22,718 37,406 44,503 36,664
Total revenues..................... 442,180 387,378 523,095 640,725 520,822 507,187 514,052
Cost of services and sales......... 257,037 208,505 281,400 400,521 269,748 251,793 251,581
General and administrative......... 40,207 40,566 54,629 53,609 52,560 55,117 61,034
Interest expense................... 70,007 72,693 96,584 105,417 117,263 115,584 100,119
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes,
extraordinary loss and cumulative
effect of change in accounting
principle........................ 74,929 65,614 90,482 81,178 81,251 84,693 101,318
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before extraordinary loss
and cumulative effect of change
in accounting principle.......... 45,457 33,959 49,730 48,382 45,024 40,072 62,351
Extraordinary loss(2).............. -- -- -- -- -- (15,292) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
a change in accounting
principle........................ 45,457 33,959 49,730 48,382 45,024 24,780 62,351
Cumulative effect of a change in
accounting principle(3).......... -- 80,000 80,000 -- -- (2,640) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income......................... $ 45,457 $ 113,959 $ 129,730 $ 48,382 $ 45,024 $ 22,140 $ 62,351
========= ========= ========= ========= ========= ========= =========
BALANCE SHEET(4)
Total assets....................... 2,047,940 2,084,877 2,054,867 2,063,267 2,253,760 2,195,171 1,958,406
Borrowed debt...................... 909,322 991,950 951,031 942,907 1,131,558 1,107,746 906,647
Stockholder's equity............... 500,087 480,859 485,630 445,900 430,518 416,494 410,354
OTHER
Ratio of earnings to fixed
charges(5)....................... 2.01x 1.86x 1.89x 1.76x 1.69x 1.73x 2.00x
OPERATING FLEET(4)
Tank cars.......................... 51,885 50,549 51,021 49,580 48,837 47,998 48,288
Other railway cars................. 13,391 13,428 13,515 13,633 14,334 13,694 13,378
- ---------------
(1) In May 1992, the Company entered into several sale-leaseback transactions
pursuant to which it sold (at approximately book value) approximately 2,100
rail cars. As a result of these transactions, the Company recorded sales
revenue of $124.9 million which accounts for the unusually high sales and
cost of sales figures in 1992 as compared to other periods.
(2) Extraordinary loss resulted from the early extinguishment of debt and is net
of $9,183 of income tax benefit.
13
15
(3) The $80 million cumulative effect of a change in accounting principle for
the year ended December 31, 1993 resulted from the Company's adoption of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." As more fully discussed in the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, effective January 1, 1993,
the Company prospectively adopted the provisions of this new accounting
standard and, accordingly, changed to the asset and liability approach of
accounting for income taxes. The cumulative effect of this change in
accounting principle was an $80 million non-cash credit to earnings, which
represents the new, lower net deferred income tax liability calculated under
the new accounting method as compared to the net liability recorded under
the former income tax accounting method. Adoption of the new accounting
method had no impact on pre-tax income and has not and will not impact cash
flows related to income taxes. The $2.6 million cumulative effect of a
change in accounting principle (net of $1.4 million tax benefit) for the
year ended December 31, 1990 represents a charge to earnings for the
adoption of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits."
(4) As of the end of the period indicated.
(5) The ratio of earnings to fixed charges represents the number of times that
interest expense, amortization of debt discount and the interest component
of rent expense were covered by income before income taxes and such
interest, amortization and the interest component of rentals. In addition to
fluctuations in the ratio of earnings to fixed charges resulting from
changes in the Company's operations, the ratio of earnings to fixed charges
for the periods after 1989 was reduced because of the incurrence of
additional interest expense relating to the Company's commercial paper
program, which program was discontinued effective May 1994.
14
16
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The Pass Through Certificates offered hereby will be issued pursuant to the
Agreement to be entered into between the Company and the Pass Through Trustee.
The Agreement will be qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The statements under this caption are a
summary only and do not purport to be complete. The summary makes use of terms
defined in the Agreement and is qualified in its entirety by reference to all of
the provisions of the Agreement. Except as otherwise indicated, the following
summary relates to the Agreement, the Pass Through Trust formed thereby and the
Pass Through Certificates issued by the Pass Through Trust. Citations to the
relevant sections of the Agreement appear below in parentheses unless otherwise
indicated.
GENERAL
The Pass Through Certificates will be issued in fully registered form only.
Each Pass Though Certificate will represent a fractional, undivided interest in
the Pass Through Trust. The property of the Pass Through Trust will include the
Equipment Notes held in such Pass Through Trust, all monies at any time paid
with respect to such Equipment Notes, all monies due and to become due
thereunder and funds from time to time deposited with the Pass Through Trustee
in accounts relating to the Pass Through Trust. Each Pass Through Certificate
will correspond to a pro rata share of the outstanding principal amount of the
Equipment Notes to be held in the Pass Through Trust and will be issued in
minimum denominations of $1,000 or any integral multiple of $1,000 in excess
thereof. (Sections 2.1 and 3.1) The Pass Through Certificates will be registered
in the name of Cede & Co. ("Cede") as the nominee of The Depository Trust
Company ("DTC"). No person acquiring an interest in the Pass Through
Certificates (a "Certificate Owner") will be entitled to receive a certificate
representing such persons interest in the Pass Through Certificates, except as
set forth below under "Registered Certificates." Unless and until Registered
Certificates are issued under the limited circumstances described herein, all
references to actions by Certificateholders shall refer to actions taken by DTC
upon instructions from DTC Participants (as defined below), and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer, as the case may be, to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Pass Through
Certificates, or to DTC Participants for distribution to Certificate Owners in
accordance with DTC procedures. See "Book-Entry Registration." (Section 3.9)
Interest will be passed through to Certificateholders of the Pass Through
Trust at the rate per annum set forth on the cover page of this Prospectus,
which is calculated on the basis of a 360-day year of twelve 30-day months.
The Pass Through Certificates represent interests in the Pass Through Trust
and do not represent an interest in or obligation of the Company, the Pass
Through Trustee, any Owner Participant, any Owner Trustee in its individual
capacity, or any affiliate of any such person. (Section 3.8)
The Agreement and the Indentures do not contain any financial or operating
covenants nor any "event risk" provisions specifically designed to afford
Certificate Owners protection in the event of a highly leveraged transaction
which may or may not result in a change of control of the Company. However, the
Certificate Owners have the indirect benefit of, among other things, a lien on
the Equipment and an assignment of rights to lease payments securing the
respective Equipment Notes.
BOOK-ENTRY REGISTRATION
DTC has advised the Company that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing
15
17
agency" registered pursuant to Section 17A of the Exchange Act. DTC was created
to hold securities for its participants ("DTC Participants") and to facilitate
the clearance and settlement of securities transactions between DTC Participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. DTC Participants include securities brokers and
dealers (including Salomon Brothers Inc), banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant either directly or indirectly
("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Pass Through Certificates may do so only through DTC Participants
and Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Pass Through Trustee through
DTC Participants or Indirect Participants, as the case may be. Under a
book-entry format, Certificate Owners may experience some delay in their receipt
of payments, as such payments will be forwarded by the Pass Through Trustee to
Cede, as nominee for DTC. DTC will forward such payments to DTC Participants,
which thereafter will forward them to Indirect Participants or Certificate
Owners, as the case may be, in accordance with customary industry practices. The
forwarding of such distributions to the Certificate Owners will be the
responsibility of such DTC Participants. The only "Certificateholder" will be
Cede, as nominee of DTC. Certificate Owners will not be recognized by the Pass
Through Trustee as Certificateholders, as such term is used in the Agreements,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Pass Through Certificates among DTC Participants on whose behalf it acts with
respect to the Pass Through Certificates and to receive and transmit
distributions of principal of, Make-Whole Amount, if any, and interest on, the
Pass Through Certificates. DTC Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Pass Through Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Pass Through Certificates, the
Rules provide a mechanism by which Certificate Owners will receive payments and
will be able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
Pass Through Certificates to persons or entities that do not participate in the
DTC system, or to otherwise act with respect to such Pass Through Certificates,
may be limited due to the lack of a physical certificate for such Pass Through
Certificates.
DTC has advised the Company that it will take any action permitted to be
taken by a Certificateholder under the Agreements only at the direction of one
or more DTC Participants to whose accounts with DTC the Pass Through
Certificates are credited, which DTC Participants represent the percentage
interest of the Pass Through Trust necessary to provide such direction under the
Agreements. Additionally, DTC may take conflicting actions with respect to an
undivided interest held by a DTC Participant to the extent that it is directed
to do so by such DTC Participant as a result of instructions from various
Certificate Owners.
Neither the Company nor the Pass Through Trustee will have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of the Pass Through Certificates held by Cede, as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
16
18
REGISTERED CERTIFICATES
The Pass Through Certificates will be issued in fully registered,
certificated form ("Registered Certificates") to Certificate Owners or their
nominees, rather than to DTC or its nominee, only if (i) the Company advises the
Pass Through Trustee in writing that DTC (or a successor thereto) is no longer
willing or able to discharge properly its responsibilities as depository with
respect to the Pass Through Certificates and the Pass Through Trustee or the
Company is unable to locate a qualified successor, (ii) the Company, at its
option, elects to terminate the book-entry system through DTC (or a successor
thereto) or (iii) after the occurrence of an Event of Default, Certificate
Owners representing an aggregate percentage interest in the Pass Through Trust
of not less than a majority advise the Pass Through Trustee through DTC in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the Certificate Owners best interest. (Section 3.9)
Upon the occurrence of any event described in the immediately preceding
paragraph, the Pass Through Trustee will be required to notify all Certificate
Owners through DTC Participants of the availability of Registered Certificates.
Upon surrender by DTC of the certificates representing the Pass Through
Certificates and receipt of instructions for re-registration, the Pass Through
Trustee will reissue the Pass Through Certificates as Registered Certificates to
Certificate Owners or their nominees. (Section 3.9)
Distribution of principal of, Make-Whole Amount, if any, and interest on
the Pass Through Certificates will thereafter be made by the Pass Through
Trustee directly to holders of Registered Certificates in accordance with the
procedures set forth in the Agreement. Such distributions will be made by check
mailed to the address of such holder as it appears on the register maintained by
the Pass Through Trustee. The final payment on any Pass Through Certificate,
however, will be made only upon presentation and surrender of such Pass Through
Certificate at the office or agency specified in the notice of final
distribution to Certificateholders. (Sections 4.2 and 11.1)
Registered Certificates will be freely transferable and exchangeable at the
office of the Pass Through Trustee upon compliance with the requirements set
forth in the related Agreements. No service charge will be imposed for any
registration of transfer or exchange, but payment of a sum sufficient to cover
any tax or other governmental charge will be required. (Sections 3.4 and 11.1)
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Pass Through Certificates will be required to be made in
immediately available funds. All payments made by the Company to each Indenture
Trustee as assignee of an Owner Trustee's rights under the corresponding Lease
will be in immediately available funds and will be passed through to DTC in
immediately available funds to the extent such payments are required to pay
principal of, Make-Whole Amount, if any, or interest on the Equipment Notes.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. Secondary trading in pass
through certificates such as the Pass Through Certificates is generally settled
in immediately available funds. The Pass Through Certificates will trade in
DTC's Same-Day Funds Settlement System until maturity, and secondary market
trading activity in the Pass Through Certificates will therefore be required by
DTC to settle in immediately available funds.
PAYMENTS AND DISTRIBUTIONS
Payments of principal of, Make-Whole Amount, if any, and interest on the
Equipment Notes will be distributed by the Pass Through Trustee to
Certificateholders on the date such receipt is confirmed, except in certain
cases when some or all of such Equipment Notes are in default. See "Description
of the Pass Through Certificates--Events of Default and Certain Rights Upon an
Event of Default." Payments of interest on the unpaid principal amount of the
Equipment Notes are
17
19
scheduled to be received by the Pass Through Trustee on January 2 and July 2 of
each year, commencing July 2, 1995, until the final distribution date for the
Pass Through Trust, and payments of principal of the Equipment Notes are
scheduled to be received by the Pass Through Trustee on January 2 or July 2 or
both, of each year, commencing (such scheduled payments of
interest on and principal of the Equipment Notes are herein referred to as
"Scheduled Payments", and January 2 and July 2 of each year, commencing July 2,
1995, are herein referred to as "Regular Distribution Dates"). The Pass Through
Trustee will distribute on each Regular Distribution Date to the
Certificateholders all Scheduled Payments the receipt of which is confirmed by
the Pass Through Trustee on such Regular Distribution Date. Each such
distribution of Scheduled Payments will be made by the Pass Through Trustee to
the holders of record of the Pass Through Certificates as of the Record Date
preceding such Regular Distribution Date. (Sections 4.1 and 4.2) If a Scheduled
Payment is not received by the Pass Through Trustee on a Regular Distribution
Date, it will be distributed on the date received to such holders of record.
(Section 4.2)
Each Certificate Owner will be entitled to receive a pro rata share of any
distribution in respect of Scheduled Payments of principal and interest made on
the Equipment Notes. Scheduled Payments of principal of the Equipment Notes are
set forth below under "Description of the Equipment Notes--Principal Payments."
After a prepayment or default in respect of some or all of such Equipment Notes,
a Certificate Owner should refer to the information with respect to the Pool
Balance and the Pool Factor reported periodically by the Pass Through Trustee.
See "Description of the Pass Through Certificates--Pool Factors" and
"Description of the Pass Through Certificates--Reports to Certificateholders."
Payments of principal, Make-Whole Amount, if any, and interest received by
the Pass Through Trustee on account of the prepayment, if any, of the Equipment
Notes relating to certain Equipment, and payments received by the Pass Through
Trustee following a default in respect of the Equipment Notes relating to
certain Equipment (including payments received by the Pass Through Trustee on
account of the purchase by the Owner Trustee of such Equipment Notes or payments
received on account of the sale of such Equipment Notes by the Pass Through
Trustee) ("Special Payments") will be distributed (i) in the case of prepayments
with respect to a voluntary termination of a Lease, the purchase of any Units by
the Company or an ordinary Event of Loss, on a Regular Distribution Date, (ii)
in the case of prepayments with respect to a Multiple Loss (as hereinafter
defined), a refunding or refinancing of the Equipment Notes or a purchase of the
Equipment by the Company from an Owner Trustee of a competitor Owner
Participant, on any Business Day following 15 days notice from the Pass Through
Trustee to DTC and (iii) in the case of payments received following a default in
respect of any Equipment Note, on the second day of any month (each, a "Special
Distribution Date"). The Pass Through Trustee will mail notice to the
Certificateholders of record not less than 15 days prior to the Special
Distribution Date on which any Special Payment is scheduled to be distributed by
the Pass Through Trustee stating such anticipated Special Distribution Date.
(Section 4.2) Each distribution of a Special Payment, other than a final
distribution, on a Special Distribution Date will be made by the Pass Through
Trustee to the holders of record of the Pass Through Certificates as of the
Record Date preceding such Special Distribution Date. See "Description of the
Equipment Notes--Prepayment" and "Description of the Pass Through
Certificates--Events of Default and Certain Rights Upon an Event of Default."
The Agreement requires that the Pass Through Trustee establish and
maintain, for the Pass Through Trust and for the benefit of the
Certificateholders, one or more non-interest bearing accounts (the "Certificate
Account") for the deposit of payments representing Scheduled Payments. The
Agreement also requires that the Pass Through Trustee establish and maintain,
for the Pass Through Trust and for the benefit of the Certificateholders, one or
more non-interest bearing accounts (the "Special Payments Account") for the
deposit of payments representing Special Payments. Pursuant to the terms of the
Agreement, the Pass Through Trustee is required to deposit any Scheduled
Payments received by it in the Certificate Account and to deposit any Special
Payments so received by it in the Special Payments Account. (Section 4.1) All
amounts so
18
20
deposited will be distributed by the Pass Through Trustee on a Regular
Distribution Date or a Special Distribution Date, as appropriate. (Section 4.2)
At such time, if any, as the Pass Through Certificates are issued in the
form of Registered Certificates and not to Cede, as nominee for DTC,
distributions by the Pass Through Trustee from the Certificate Account or the
Special Payments Account on a Regular Distribution Date or a Special
Distribution Date will be made by check mailed to each Certificateholder of
record on the applicable record date at its address appearing on the register
maintained with respect to the Pass Through Trust. (Section 4.2) The final
distribution for the Pass Through Trust, however, will be made only upon
presentation and surrender of the Pass Through Certificates at the office or
agency of the Pass Through Trustee specified in the notice given by the Pass
Through Trustee of such final distribution. The Pass Through Trustee will mail
such notice of the final distribution to the Certificateholders, specifying the
date set for such final distribution and the amount of such distribution.
(Section 11.1) See "Description of the Pass Through Certificates--Termination of
the Pass Through Trusts."
If any Regular Distribution Date or Special Distribution Date is not a
Business Day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date may be made on the next succeeding Business
Day without any additional interest. (Section 12.11)
POOL FACTORS
Unless there has been a prepayment, purchase or default, in respect of any
Equipment Notes held in the Pass Through Trust, as described below in
"Description of the Equipment Notes--Prepayment" and "Description of the Pass
Through Certificates--Events of Default and Certain Rights Upon an Event of
Default," the Pool Factor for the Pass Through Trust will decline in proportion
to the scheduled repayments of principal on the Equipment Notes as described
under "Description of the Equipment Notes--Principal Payments." In the event of
such a prepayment, purchase or default, the Pool Factor and the Pool Balance
will be recomputed after giving effect thereto and notice thereof will be mailed
to Certificateholders.
The "Pool Balance" indicates, as of any Regular Distribution Date or
Special Distribution Date, the aggregate unpaid principal amount of the
Equipment Notes held in the Pass Through Trust on such date plus any amounts in
respect of principal on such Equipment Notes held by the Pass Through Trustee
and not yet distributed. The Pool Balance as of any Regular Distribution Date or
Special Distribution Date, if any, shall be computed after giving effect to the
payment of principal, if any, of the Equipment Notes and distribution thereof to
be made on that date. (Section 1.1)
The "Pool Factor" as of any Regular Distribution Date or Special
Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance by (ii) the aggregate original
principal amount of the Pass Through Certificates. The Pool Factor as of any
Regular Distribution Date or Special Distribution Date shall be computed after
giving effect to the payment of principal, if any, on the Equipment Notes and
distribution thereof to be made on that date. (Section 1.1) The Pool Factor for
the Pass Through Trust will initially be 1.0000000; thereafter, the Pool Factor
will decline as described above to reflect reductions in the Pool Balance. The
amount of a Certificateholder's pro rata share of the Pool Balance can be
determined by multiplying the original denomination of such holder's Pass
Through Certificate by the Pool Factor as of the Regular Distribution Date or
Special Distribution Date. The Pool Factor and the Pool Balance will be mailed
to Certificateholders of record on each Regular Distribution Date and Special
Distribution Date.
As of the date of issuance of the Pass Through Certificates and assuming
that all proceeds are used to purchase Equipment Notes on or before December 30,
1994, and that no prepayment, purchase or default in respect of any Equipment
Notes shall occur, the scheduled payment of
19
21
principal of such Equipment Notes and the resulting Pool Factors after taking
into account each such payment are set forth below:
EQUIPMENT NOTES
SCHEDULED PASS THROUGH
PRINCIPAL TRUST POOL
REGULAR DISTRIBUTION DATE PAYMENTS FACTOR
- --------------------------------------------------------------- --------------- ------------
$
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date or Special Distribution Date, the Pass
Through Trustee will include with each distribution of a Scheduled Payment or
Special Payment to Certificateholders of record a statement, giving effect to
such distribution to be made on such Regular Distribution Date or Special
Distribution Date, setting forth the following information (per a $1,000
principal amount Pass Through Certificate, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the amount
allocable to Make-Whole Amount, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor. (Section 4.3)
So long as any Pass Through Certificates are registered in the name of
Cede, as nominee for DTC, on the Record Date prior to each Regular Distribution
Date and Special Distribution Date, the Pass Through Trustee will request from
DTC a securities position listing setting forth the names of
20
22
all participants reflected on DTC's books as holding interests in the Pass
Through Certificates on such Record Date. On each Regular Distribution Date and
Special Distribution Date, the Pass Through Trustee will mail to each such DTC
Participant the statement described above, and will make available additional
copies as requested by such DTC Participant, to be available for forwarding to
Certificate Owners. (Section 3.9)
In addition, after the end of each calendar year, the Pass Through Trustee
will prepare for each Certificateholder of record at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Pass Through Trust
for such calendar year or, in the event such person was a Certificateholder of
record during a portion of such calendar year, for the applicable portion of
such calendar year, and such other items as are readily available to the Pass
Through Trustee and which a Certificateholder shall reasonably request as
necessary for the purpose of such Certificateholders' preparation of its federal
income tax returns. (Section 4.3) Such report and such other items shall be
prepared on the basis of information supplied to the Pass Through Trustee by the
DTC Participants, and shall be delivered by the Pass Through Trustee to such DTC
Participants to be available for forwarding by such DTC Participants to
Certificate Owners.
At such time, if any, as the Pass Through Certificates are issued in the
form of Registered Certificates, the Pass Through Trustee will prepare and
deliver the information described above to each Certificateholder of record as
the name of such Certificateholder appears on the records of the registrar of
the Pass Through Certificates.
VOTING OF EQUIPMENT NOTES
The Pass Through Trustee, as holder of the Equipment Notes held in the Pass
Through Trust, has the right to vote and give consents and waivers in respect of
such Equipment Notes under the Indentures. The Agreement sets forth the
circumstances in which the Pass Through Trustee shall direct any action or cast
any vote as the holder of the Equipment Notes held in the Pass Through Trust at
its own discretion and the circumstances in which the Pass Through Trustee shall
seek instructions from the Certificateholders. Prior to an Event of Default (as
defined below) under the Agreement, all Equipment Notes shall be voted for or
against any action in the same proportion as the Pass Through Certificates held
by the Certificateholders were actually voted. (Sections 6.1 and 10.1) Whenever
the Agreement requires or permits actions to be taken based upon instructions or
directions of Certificateholders holding a specified percentage interest of the
Pass Through Trust, DTC shall be deemed to represent such percentage interest
only to the extent that it has received instructions to such effect from
Certificate Owners and/or DTC Participants owning or representing, respectively,
such required percentage interest and has delivered such instructions to the
Pass Through Trustee. (Section 3.9)
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
An event of default under the Agreement (an "Event of Default") is defined
as the occurrence and continuance of an event of default under one or more of
the Indentures (an "Indenture Default"). For a description of the Indenture
Defaults under the Indentures, see "Description of the Equipment
Notes--Indenture Defaults, Notice and Waiver." The Pass Through Trust will hold
Equipment Notes issued pursuant to each of the Indentures, which means a
continuing Indenture Default under any one Indenture will result in an Event of
Default under the Agreement. There are, however, no cross-default provisions in
the Indentures and events resulting in an Indenture Default under any particular
Indenture will not necessarily result in an Indenture Default occurring under
any other Indenture. See "Description of the Equipment Notes--Indenture
Defaults, Notice and Waiver." If an Indenture Default occurs with respect to
fewer than all of the Indentures, the Equipment Notes issued pursuant to the
Indentures with respect to which an Indenture Default has not occurred will
continue to be held in the Pass Through Trust, and payments of principal and
interest on such
21
23
Equipment Notes will continue to be distributed to the holders of the Pass
Through Certificates as originally scheduled.
Under each Indenture, the Owner Trustee and the Owner Participant have the
right under certain circumstances to cure Indenture Defaults that result from
the occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee or the Owner Participant chooses to exercise such cure right, the
Indenture Default and consequently the Event of Default under the Agreement will
be deemed to be cured. In addition, in circumstances where (i) the Indenture
Trustee has given notice of its intent to accelerate the Equipment Notes issued
under such Indenture or to exercise other remedies or (ii) the Indenture Trustee
shall not have taken action for a period of not less than 180 days with respect
to such Indenture Default, the Owner Trustee has the option to prepay or
purchase such Equipment Notes at a price equal to the unpaid principal amount
thereof together with accrued interest thereon to the date of prepayment or
purchase, but without Make-Whole Amount. See "Description of the Equipment
Notes--Indenture Defaults, Notice and Waiver."
The Agreement provides that, so long as an Indenture Default under any
Indenture shall have occurred and be continuing, the Pass Through Trustee may
vote all of the Equipment Notes issued under such Indenture, and upon the
direction of the holders of Pass Through Certificates evidencing fractional
undivided interests aggregating not less than a majority in interest of the Pass
Through Trust, the Pass Through Trustee shall vote a corresponding majority of
such Equipment Notes in favor of directing the Indenture Trustee to declare the
unpaid principal amount of all Equipment Notes issued under such Indenture and
any accrued and unpaid interest thereon to be due and payable. The Agreement
also provides that, if an Indenture Default under any Indenture shall have
occurred and be continuing, the Pass Through Trustee may, and upon the direction
of the holders of the Pass Through Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of the Pass Through
Trust shall, vote all of the Equipment Notes issued under such Indenture in
favor of directing the Indenture Trustee as to the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee or
of exercising any trust or power conferred on the Indenture Trustee under such
Indenture. (Sections 6.1 and 6.4)
Each Indenture provides that, if an Indenture Default shall occur and be
continuing thereunder, the Indenture Trustee may, and upon the instructions of
the holders of a majority in aggregate principal amount of the Equipment Notes
outstanding under such Indenture shall, declare the unpaid principal amount of
the Equipment Notes issued under such Indenture to be immediately due and
payable, together with any accrued and unpaid interest thereon. Each Indenture
further provides that, if an Indenture Default shall occur and be continuing
thereunder, the holders of a majority in aggregate principal amount of the
Equipment Notes outstanding under such Indenture may direct the Indenture
Trustee with respect to the exercise of remedies thereunder. See "Description of
the Equipment Notes--Remedies."
As an additional remedy, if an Indenture Default under an Indenture shall
have occurred and be continuing, the Agreement provides that the Pass Through
Trustee may, and upon the direction of the holders of Pass Through Certificates
evidencing fractional undivided interests aggregating not less than a majority
in interest of the Pass Through Trust shall, sell all or part of the Equipment
Notes issued under such Indenture for cash to any person. In addition, if an
Owner Trustee elects to purchase all of the outstanding Equipment Notes issued
under such Indenture in lieu of prepayment, the Pass Through Trustee shall sell
such Equipment Notes to such Owner Trustee at a price equal to the unpaid
principal amount thereof together with accrued and unpaid interest thereon.
(Sections 6.1 and 6.2) Any proceeds received by the Pass Through Trustee upon
any such sale shall be deposited in the Special Payments Account and shall be
distributed to the Certificateholders on a Special Distribution Date. (Sections
4.1 and 4.2) The market for Equipment Notes in default may be very limited and
there can be no assurance that they could be sold for a reasonable price. If the
Pass Through Trustee sells any Equipment Notes with respect to which an
Indenture Default exists for less than their outstanding principal amount, the
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against the
22
24
Company, the applicable Owner Participant, the applicable Owner Trustee in its
individual capacity or any affiliate thereof, or the Pass Through Trustee.
Furthermore, neither the Pass Through Trustee nor the Certificateholders could
take any action with respect to any remaining Equipment Notes so long as no
Indenture Defaults existed with respect thereto. (Sections 4.1 and 4.2)
Any amount distributed to the Pass Through Trustee by the Indenture Trustee
under any Indenture on account of the Equipment Notes following an Indenture
Default under such Indenture shall be deposited in the Special Payments Account
and shall be distributed to the Certificateholders on a Special Distribution
Date. In addition, if, following an Indenture Default under any Indenture, the
applicable Owner Trustee exercises its option to prepay or purchase the
outstanding Equipment Notes issued under such Indenture as described below under
"Description of the Equipment Notes--Prepayment," the amount paid by such Owner
Trustee to the Pass Through Trustee for the Equipment Notes issued under such
Indenture shall be deposited in the Special Payments Account and shall be
distributed to the Certificateholders on a Special Distribution Date. (Sections
4.1 and 4.2)
Any funds representing payments received with respect to any Equipment
Notes in default, or the proceeds from the sale by the Pass Through Trustee of
any such Equipment Notes, held by the Pass Through Trustee in the Special
Payments Account shall, to the extent practicable, be invested and reinvested by
the Pass Through Trustee in Permitted Investments pending the distribution of
such funds on a Special Distribution Date. (Sections 1.1 and 4.4)
The Agreement provides that the Pass Through Trustee shall, within 30 days
after the occurrence of a default (as defined below) in respect of the Pass
Through Trust, give to the Certificateholders notice, transmitted by mail, of
all uncured or unwaived defaults under the Agreement known to it; provided that,
except in the case of default in the payment of principal of, Make-Whole Amount,
if any, or interest on any of the Equipment Notes, the Pass Through Trustee
shall be protected in withholding such notice if it in good faith determines
that the withholding of such notice is in the interests of the
Certificateholders. The term "default," for the purpose of the provision
described in this paragraph only, shall mean the occurrence of any Event of
Default under the Agreement, except that in determining whether any such Event
of Default has occurred any grace period or notice in connection therewith shall
be disregarded. (Section 7.2)
The Agreement contains a provision entitling the Pass Through Trustee,
subject to the duty of the Pass Through Trustee during a default to act with the
required standard of care, to obtain security from or be indemnified by the
holders of the Pass Through Certificates before proceeding to exercise any right
or power under the Agreement at the request of such Certificateholders. (Section
7.3)
The holders of Pass Through Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of the Pass Through
Trust may on behalf of the holders of all Pass Through Certificates instruct the
Pass Through Trustee to waive any past default or Event of Default under the
related Agreement and thereby annul any direction given by the Pass Through
Trustee to the Indenture Trustee with respect thereto, except (i) a default in
payment of principal of, Make-Whole Amount, if any, or interest on, any of the
Equipment Notes and (ii) a default in respect of any covenant or provision of
the related Agreement that cannot be modified or amended without the consent of
each Certificateholder affected thereby. (Section 6.5) Each Indenture provides
that, with certain exceptions, the holders of a majority in aggregate unpaid
principal amount of the Equipment Notes thereunder may on behalf of all such
holders waive any past default or Indenture Default thereunder. (Indentures,
Section 5.06) For a discussion of waivers of Indenture Defaults under the
Indentures, see "Description of the Equipment Notes--Indenture Defaults, Notice
and Waiver."
MODIFICATION OF THE AGREEMENT
The Agreement contains provisions permitting the Company and requiring the
Pass Through Trustee to enter into supplements to the Agreement, without the
consent of the holders of any of the
23
25
Pass Through Certificates, among other things (i) to evidence the succession of
another corporation to the Company and the assumption by such corporation of the
Company's obligations under the Agreement, (ii) to add to the covenants of the
Company for the benefit of holders of the Pass Through Certificates or to
surrender any of the Company's rights under the Agreement and (iii) to cure any
ambiguity, to correct any manifest error, to correct or supplement any defective
or inconsistent provision of the Agreement or any supplement to the Agreement,
or to make any other provisions with respect to matters or questions arising
under the Agreement, provided such action shall not adversely affect the
interests of the holders of the Pass Through Certificates. (Section 9.1)
The Agreement also contains provisions permitting the Company and the Pass
Through Trustee, with the consent of the holders of Pass Through Certificates
evidencing fractional undivided interests aggregating not less than a majority
in interest of the Pass Through Trust to enter into supplements to the Agreement
adding any provisions to or changing or eliminating any of the provisions of the
Agreement or modifying the rights of the Certificateholders, except that no such
supplement to the Agreement may without the consent of each Certificateholder so
affected (i) reduce in any manner the amount of, or delay the timing of, any
receipt by the Pass Through Trustee of payments on the Equipment Notes, or
distributions in respect of any Pass Through Certificate, or change any date of
payment on any Pass Through Certificate, or make distributions payable at a
place, or in coin or currency, other than that provided for in such Pass Through
Certificates, or impair the right of any Certificateholder to institute suit for
the enforcement of any such payment when due, (ii) permit the disposition of any
Equipment Note, except as provided in the Agreement or (iii) reduce the
percentage of the aggregate fractional undivided interests of the Pass Through
Trust provided for in the Agreement, the consent of the holders of which is
required for any such supplement to the Agreement or for any waiver provided for
in such Agreement. (Section 9.2)
MODIFICATION OF LEVERAGED LEASE AGREEMENTS
In the event that the Pass Through Trustee, as the holder of any Equipment
Notes, receives a request for its consent to any amendment, modification or
waiver under the Indenture, Lease or other document relating to such Equipment
Notes, the Pass Through Trustee shall mail a notice of such proposed amendment,
modification or waiver to each Certificateholder as of the date of such notice.
The Pass Through Trustee shall request instructions from the Certificateholders
as to whether or not to consent to such amendment, modification or waiver. The
Pass Through Trustee shall vote or consent with respect to all such Equipment
Notes in the same proportion as the Pass Through Certificates were actually
voted by the holders thereof by a certain date. Notwithstanding the foregoing,
if any Event of Default under the Agreement shall have occurred and be
continuing, the Pass Through Trustee may in its own discretion consent to such
amendment, modification or waiver, and may so notify the Indenture Trustee to
which such consent relates. (Section 10.1)
TERMINATION OF THE PASS THROUGH TRUST
The Agreement will terminate upon the distribution to all
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held in the Pass Through
Trust. The Pass Through Trustee will mail to each Certificateholder of record
notice of the termination of the Pass Through Trust, the amount of the proposed
final payment and the proposed date for the distribution of such final payment.
The final distribution to any Certificateholder will be made only upon surrender
of such Certificateholder's Pass Through Certificates at the office or agency of
the Pass Through Trustee specified in such notice of termination. (Section 11.1)
SPECIAL PAYMENTS UNDER CERTAIN CIRCUMSTANCES
To the extent that the full amount of the proceeds from the sale of the
Pass Through Certificates is not used to purchase Equipment Notes on or prior to
December 30, 1994, whether due to the physical unavailability of Units, the
failure by an Owner Trustee to issue Equipment Notes on or prior
24
26
to such date or otherwise, an amount equal to the unexpended proceeds, together
with interest thereon, from the date of issuance of the Pass Through
Certificates to but not including January 2, 1995, at the rate applicable to the
Pass Through Certificates, but without premium, will be distributed on January
2, 1995 to the Certificateholders of record as of December 30, 1994. (Section
2.1(b)).
THE PASS THROUGH TRUSTEE
The First National Bank of Chicago will be the Pass Through Trustee for the
Pass Through Trust. The Pass Through Trustee and any of its affiliates may hold
Pass Through Certificates in their own names. (Section 7.5) With certain
exceptions, the Pass Through Trustee makes no representations as to the validity
or sufficiency of the Agreement, the Pass Through Certificates, the Equipment
Notes, the Indentures, the Leases or other related documents. (Section 7.4) The
First National Bank of Chicago also will initially be the Indenture Trustee of
each of the Indentures under which the Equipment Notes are issued.
The Pass Through Trustee may resign as such at any time, in which event the
Company will be obligated to appoint a successor trustee. If the Pass Through
Trustee fails to comply with certain provisions of the Trust Indenture Act;
ceases to be eligible to continue as Pass Through Trustee under the Agreement;
becomes incapable of acting as Pass Through Trustee; or becomes adjudged a
bankrupt or insolvent, the Company may remove the Pass Through Trustee, or any
holder of Pass Through Certificates for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Pass Through Trustee and the appointment of
a successor trustee. Any resignation or removal of the Pass Through Trustee and
appointment of a successor trustee for the Pass Through Trust does not become
effective until acceptance of the appointment by the successor trustee. (Section
7.9) Pursuant to such resignation and successor trustee provisions, it is
possible that a different trustee could be appointed to act as the successor
trustee under the Agreement.
The Agreement provides that the Company will pay the Pass Through Trustee's
fees and expenses, other than initial fees and reasonable actual disbursements
of the Pass Through Trustee, which shall be paid by the Owner Trustees. The
Agreement further provides that the Pass Through Trustee will be entitled to
indemnification by the Company for, and will be held harmless against, any loss,
liability or expense incurred by the Pass Through Trustee (other than through
its own wilful misconduct, bad faith or negligence or by reason of a breach of
any of its representations or warranties set forth in the Agreement), except to
the extent that such loss, liability or expense is for or with respect to taxes,
in which case the Pass Through Trustee may be entitled to be reimbursed by the
Pass Through Trust. (Section 7.7)
The First National Bank of Chicago serves as trustee under various
equipment trust certificates and other secured obligations of the Company. The
First National Bank of Chicago also provides customary banking services,
including commercial credit facilities and standby letters of credit, to the
Company and certain of its affiliates.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements under this caption are a summary only and do not purport to
be complete. The summary makes use of terms defined in, and is qualified in its
entirety by reference to all of the provisions of, the Equipment Notes, the
Indentures, the Leases and the Participation Agreements, the forms of which are
available without charge to each person to whom this Prospectus is delivered,
upon request of such person to the General Counsel and Secretary, Union Tank Car
Company, 225 West Washington Street, Chicago, Illinois 60606 (telephone
312/372-9500). Except as otherwise indicated, the following summary relates to
the Equipment Notes, the Indentures, the Leases and the Participation
Agreements.
25
27
GENERAL
Each Equipment Note will be issued under one of two Indentures between
State Street Bank and Trust Company, as Owner Trustee of an owner trust for the
benefit of an Owner Participant, and The First National Bank of Chicago, as
Indenture Trustee.
Each Owner Trustee will lease Equipment to the Company pursuant to a Lease
under which the Company is obligated to pay rent to such Owner Trustee in
respect of the Equipment covered thereby. The amounts unconditionally payable
under each Lease will be sufficient to pay when due all payments of principal
of, Make-Whole Amount, if any, and interest on the Equipment Notes issued in
respect of the Equipment subject to such Lease. The Equipment Notes are not,
however, obligations of, or guaranteed by, the Company. The Company's rental
obligations under each Lease are general obligations of the Company.
PRINCIPAL PAYMENTS
The aggregate principal amounts of the Equipment Notes issued with respect
to the Equipment covered by each Lease are as follows:
LEASE
NO. % EQUIPMENT NOTES
- --- --------------------
1 $
2
Total $
==================
Interest will be payable on each Equipment Note at the rate applicable to
such Equipment Note on the unpaid principal amount thereof on January 2 and July
2 of each year, commencing July 2, 1995. Such interest will be computed on the
basis of a 360-day year of twelve 30-day months. The principal of each Equipment
Note will be payable as follows:
26
28
% EQUIPMENT NOTES
LEASE NO. 1 LEASE NO. 2
----------------------------------- -----------------------------------
EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT
PAYMENT DATES GROUP A GROUP B GROUP C GROUP A GROUP B GROUP C TOTAL
- -------------------- --------- --------- --------- --------- --------- --------- ------
Total........ $ $ $ $ $ $ $
======== ======== ======== ======== ======== ======== ======
If any date scheduled for any payment of principal of, Make-Whole Amount,
if any, or interest on the Equipment Notes is not a Business Day, such payment
may be made on the next Business Day without any additional interest.
27
29
PREPAYMENT
The Equipment Notes may be prepaid under the following circumstances:
Mandatory Prepayments. If an Event of Loss to a Unit shall occur and like
kind equipment of equal or greater fair market sales value, utility, remaining
economic useful life, residual value and condition (assuming such Unit was in
the condition required to be maintained) is not substituted for the affected
Unit in accordance with the terms of the applicable Lease, then the Company is
obligated to pay the Stipulated Loss Value of such Unit. Such payment will be
used to prepay a portion of the Equipment Notes issued with respect to the
Equipment of which such Unit is a part on (i) the next Regular Distribution Date
following the election by the Company to pay the Stipulated Loss Value of such
Units rather than substitute like kind equipment or (ii) in the case of the
occurrence of an Event of Loss in respect of more than ten Units since the end
of the last six month reporting period under a Lease (a "Multiple Loss"), on the
first Business Day succeeding the 60th day following the date on which the
Company is required to report such Multiple Loss. The amount prepaid will be
equal to the sum of (i) as to principal, an amount equal to the product obtained
by multiplying the aggregate unpaid principal amount of the Equipment Notes
issued under the Indenture to which such Equipment relates as of the prepayment
date (after deducting therefrom the scheduled principal installment, if any, due
on the prepayment date) by a fraction, the numerator of which shall be the
Equipment Cost of such Unit and the denominator of which shall be the aggregate
Equipment Cost of all Equipment securing such Indenture immediately prior to the
prepayment date, and (ii) as to interest, the aggregate amount of interest
accrued and unpaid to but not including the prepayment date in respect of the
principal amount to be prepaid pursuant to clause (i) above on such prepayment
date. No Make-Whole Amount (as defined below) will be payable in the event of a
prepayment under such circumstances. See "Description of the Equipment
Notes--The Leases--Events of Loss." (Leases, Section 11; Indentures, Section
2.10)
In addition, under the Leases the Company may, so long as no Lease Event of
Default has occurred and is continuing, terminate a Lease at its option (i) at
any time after July 2, 2002, with respect to any Unit, if the Company determines
in good faith that (A) such Unit has become obsolete or surplus to its
requirements, or (B) any modification to a Unit required by law would be
economically impractical, (ii) on January 2, 2005 with respect to any or all of
certain Units or on January 2, 2006 with respect to any or all of the other
Units (each, an "Early Purchase Date") if the Company exercises its option to
purchase such Units or (iii) if the Company elects to exercise its right to
purchase Equipment as a result of an Owner Participant (or an affiliate thereof)
engaging in a business that is in competition with the Company's full service
railcar leasing business. Unless the Company elects in connection with the
exercise of a purchase option to assume on a full recourse basis all of the
Owner Trustee's obligations in respect of the related Equipment Notes and
acquires the purchased Units subject to the lien of the related Indentures, the
amount of Equipment Notes to be prepaid in the event of any such Lease
termination will be equal to the sum of (i) as to principal, an amount equal to
the product obtained by multiplying the aggregate unpaid principal amount of the
Equipment Notes issued under the Indenture to which such Unit relates as of the
prepayment date (after deducting therefrom the scheduled principal installment,
if any, due on the prepayment date) by a fraction, the numerator of which shall
be the Equipment Cost of such Unit and the denominator of which shall be the
aggregate Equipment Cost of all Equipment securing such Indenture immediately
prior to the prepayment date, and (ii) as to interest the aggregate amount of
interest accrued and unpaid to but not including the prepayment date in respect
of the principal amount to be prepaid pursuant to clause (i) of this sentence on
such prepayment date, plus, if such prepayment is made prior to ,
, a premium as set forth below (a "Make-Whole Amount"). Such
prepayment is to be made on the date which is the Lease termination date for
such Unit. See "Description of the Equipment Notes--The Leases--Termination."
(Leases, Section 10 and 22.1; Indentures, Section 2.10; Participation
Agreements, Section 6.9)
Voluntary Prepayments. Subject to certain restrictions, the Company may
require the relevant Owner Participant, Owner Trustee and Pass Through Trustee
to effect an optional prepayment of
28
30
the Equipment Notes at a price equal to the unpaid principal amount thereof,
together with accrued but unpaid interest thereon to but not including the
specified prepayment date (which shall be a Special Distribution Date), plus, if
such prepayment is made prior to , , a Make-Whole
Amount, as part of a refunding or refinancing which will result in the
prepayment of the Pass Through Certificates. (Participation Agreements, Section
10.2; Indentures, Section 2.10)
The Equipment Notes are also subject to purchase in whole by the Owner
Trustee upon at least 30 days' notice on a Special Distribution Date, in the
case of (i) any acceleration of such Equipment Notes, (ii) the Indenture
Trustee, as assignee of a Lease, having exercised (or given notice of its
intention to exercise) any remedy in respect of the Units under such Lease,
(iii) one or more Lease Events of Default having occurred under a Lease and
continuing for a period of 180 days or more during which period such Equipment
Notes could, but shall not, have been accelerated by the Indenture Trustee or
(iv) the Indenture Trustee having commenced foreclosure of the lien of the
Indenture or otherwise exercised remedies which would result in the exclusion of
the Owner Trustee from any property subject to the lien of the Indenture or any
part thereof (or given notice of its intention to foreclose or exercise
remedies). Such purchase would be at a price equal to the unpaid principal
amount thereof and accrued interest on such Equipment Notes to the date of
payment, but without the payment of any Make-Whole Amount except in the case of
a purchase of the Equipment Notes pursuant to clause (iv) above, if the right to
exercise any remedies arises from action attributable to the Owner Trustee or
the Owner Participant. (Indentures, Section 5.04(b))
The term "Make-Whole Amount" means, with respect to the principal amount of
any Equipment Note to be prepaid on any prepayment date, the amount to be
determined as of the third Business Day prior to the applicable prepayment date,
equal to the product obtained by multiplying (a) the excess, if any, of (i) the
sum of the present values of all the remaining scheduled payments of principal
and interest from the prepayment date to maturity of such Equipment Note,
discounted semi-annually on each July 2 and January 2 at a rate equal to the
Treasury Rate, based on a 360-day year of twelve 30-day months, over (ii) the
aggregate unpaid principal amount of such Equipment Note plus any accrued but
unpaid interest thereon by (b) a fraction the numerator of which shall be the
principal amount of such Equipment Note to be prepaid on such prepayment date
and the denominator of which shall be the aggregate unpaid principal amount of
such Equipment Note; provided that the aggregate unpaid principal amount of such
Equipment Note for the purpose of clause (a)(ii) and (b) of this definition
shall be determined after deducting the principal installment, if any, due on
such prepayment date. The Make-Whole Amount will be calculated by an independent
investment banking institution of national standing appointed by the Company or,
if the Indenture Trustee does not receive notice of such appointment at least
ten days prior to a scheduled prepayment date or if a Lease Event of Default
under the applicable Lease shall have occurred and be continuing, appointed by
the Indenture Trustee (an "Independent Investment Banker"). In calculating the
Make-Whole Amount, the Independent Investment Banker will first determine the
Treasury Rate applicable to the relevant Equipment Note.
For purposes of determining the Make-Whole Amount, "Treasury Rate" means,
with respect to prepayment of each Equipment Note, a per annum rate (expressed
as a semiannual equivalent and as a decimal and, in the case of United States
Treasury bills, converted to a bond equivalent yield), determined to be the per
annum rate equal to the semiannual yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note, as
determined by interpolation between the most recent weekly average yields to
maturity for two series of United States Treasury securities, (A) one maturing
as close as possible to, but earlier than, the Average Life Date of such
Equipment Note and (B) the other maturing as close as possible to, but later
than, the Average Life Date of such Equipment Note, in each case as published in
the most recent H.15(519) (or, if a weekly average yield to maturity for United
States Treasury securities maturing on the Average Life Date of such Equipment
Note is reported in the most recent H.15(519), as published in H.15(519)).
H.15(519) means "Statistical Release H.15(519), Selected Interest Rates," or any
successor publication, published by the Board of Governors of the Federal
Reserve
29
31
System. The most recent H.15(519) means the latest H.15(519) which is published
prior to the close of business on the third Business Day preceding the scheduled
prepayment date. As used herein, "Remaining Weighted Average Life" means, with
respect to any date of prepayment or any date of determination of any Equipment
Note, the number of days equal to the quotient obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
principal payment on such Equipment Note by (ii) the number of days from and
including the prepayment date or date of determination to but excluding the
scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note. As used herein, "Average Life Date" means, with
respect to an Equipment Note, the date which follows the prepayment date or, in
the case of an Equipment Note not being prepaid, the date of such determination,
by a period equal to the Remaining Weighted Average Life of such Equipment Note.
SECURITY
The Equipment Notes issued with respect to the Equipment purchased by each
Owner Trustee will be secured by (i) an assignment by such Owner Trustee to the
Indenture Trustee of such Owner Trustee's rights (other than certain excepted
rights reserved to the Owner Trustee) under the Lease relating to such Equipment
including the right to receive payments of rent thereunder and (ii) a security
interest held by the Indenture Trustee in all such Equipment, subject to the
rights of the Company under such Lease.
Unless and until an Indenture Default has occurred and is continuing, the
Indenture Trustee may not exercise certain rights of the Owner Trustee under the
related Lease; however, for so long as Equipment Notes under such Indenture are
outstanding, the Indenture Trustee shall retain the right to receive payments of
rent due under such Lease. The assignment by the Owner Trustee to the Indenture
Trustee of its rights under each Lease excludes certain rights of the Owner
Trustee and the applicable Owner Participant including rights relating to
indemnification by the Company for certain matters and to insurance proceeds
payable to such Owner Trustee in its individual capacity and as Owner Trustee
and to such Owner Participant under liability insurance maintained by the
Company under such Lease. (Indentures, Granting Clauses)
Funds, if any, held from time to time by the Indenture Trustee with respect
to any Equipment, including funds held as the result of an Event of Loss to such
Equipment or termination of the Lease relating thereto, will be invested and
reinvested by the Indenture Trustee, at the direction of the Company (except in
the case of a Lease Event of Default under the applicable Lease), in certain
investments described in such Lease. The Company will pay the amount of any loss
resulting from any such investment directed by it. (Indentures, Section 7.04)
LIMITATION OF LIABILITY
The Equipment Notes are nonrecourse notes. All payments of principal of,
Make-Whole Amount, if any, and interest on the Equipment Notes (other than
payments made in connection with an optional prepayment or purchase by the Owner
Trustee) will be made only from the assets subject to the lien of the Indenture
with respect to such Equipment or the income and proceeds received by the
Indenture Trustee therefrom (including rent payable by the Company under the
Lease with respect to such Equipment). The Equipment Notes are not obligations
of, or guaranteed by, the Company. None of the Owner Participants or the
Indenture Trustee, or any affiliates thereof, shall be liable to any holder of
an Equipment Note or, in the case of the Owner Participants, to the Indenture
Trustee for any amounts payable under the Equipment Notes or, except as provided
in each Indenture, for any liability under such Indenture. (Indentures, Section
2.03)
Except as otherwise provided in the Indentures, the Owner Trustee in its
individual capacity shall not be answerable or accountable under the Indentures
or under the Equipment Notes under any circumstances except for its own wilful
misconduct or gross negligence. None of the Owner
30
32
Participants will have any duty or responsibility under any of the Indentures or
the Equipment Notes to the Indenture Trustee or to any holder of any Equipment
Note. (Indentures, Section 2.03)
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Events of Default under each Indenture include: (a) a Lease Event
of Default, (b) default by the Owner Trustee in making payments when due of
principal of, Make-Whole Amount, if any, or interest on any Equipment Note and
continuance of that default for 10 Business Days, (c) failure by the Owner
Trustee or the Owner Participant to perform any covenant contained in the
Indenture, the Equipment Notes or in the Participation Agreement continuing for
a period of 30 days after written notice by the Indenture Trustee or any holder
of an Equipment Note issued under such Indenture, (d) any representation or
warranty made by the Owner Trustee in such Indenture or made by the Owner
Trustee (except to the extent made with respect to State Street Bank and Trust
Company in its individual capacity) or the Owner Participant in the
Participation Agreement or in any document or certificate furnished to the
Indenture Trustee being incorrect in any material respect as of the date made
and remaining material and continuing unremedied for a period of 30 days after
written notice to the Owner Trustee and Owner Participant, and (e) the
occurrence of certain events of bankruptcy, reorganization or insolvency of the
Owner Participant or the Owner Trustee. (Indentures, Section 5.01)
In the event that (i) at any time one or more Lease Events of Default shall
occur and shall have continued for a period of 180 days or more during which
time the Equipment Notes could, but shall not, have been accelerated, (ii) the
Equipment Notes shall have been accelerated, (iii) the Indenture Trustee, as
assignee of such Lease, shall have exercised (or given notice of its intention
to exercise) any remedies in respect of the Units under such Lease or (iv) the
Indenture Trustee shall commence foreclosure of the lien of the Indenture or
otherwise exercise remedies which would result in the exclusion of the Owner
Trustee from any property subject to the lien of the Indenture or any part
thereof (or given notice of its intention to foreclose or exercise remedies),
upon 30 days' notice the Owner Trustee may elect to purchase all, but not less
than all, of the Equipment Notes then outstanding under such Indenture from the
holders thereof by paying to each such holder an amount equal to the aggregate
unpaid principal amount of all such Equipment Notes then held by such holder,
together with accrued and unpaid interest thereon to the date of payment, but
without the payment of any Make-Whole Amount except in the case of a purchase of
the Equipment Notes pursuant to clause (iv) above if the right to exercise any
remedies arises because of action attributable to the Owner Trustee or the Owner
Participant. (Indentures, Section 5.04(b))
In the event the Company fails to make any semiannual basic rental payment
within 10 Business Days after the date the same shall become due under a Lease,
then and as long as no other Indenture Event of Default under the Indenture
(which is not being concurrently cured) shall have occurred and be continuing
the Owner Participant or the Owner Trustee may, during the 10 Business Days
after receiving written notice of such failure from the Indenture Trustee, pay
to the Indenture Trustee the amount of such rental payment together with any
interest thereon on account of the delayed payment thereof, in which event such
payment by the Owner Participant or the Owner Trustee shall be deemed to cure
any Indenture Event of Default which arose from such failure of the Company (but
such cure shall not relieve the Company of any of its obligations); provided,
that the Owner Participant and the Owner Trustee, collectively, shall not be
entitled to cure more than three consecutive or six total failures to make
semiannual basic rental payments. In the event there shall occur a Lease Event
of Default under a Lease in respect of any other payment of rent, or which is
curable by the payment of money, then and as long as no other Indenture Event of
Default under the Indenture (which is not being concurrently cured) shall have
occurred and be continuing the Owner Participant or the Owner Trustee may,
during the 30 days after receiving written notice of such Lease Event of Default
from the Indenture Trustee, pay to the Indenture Trustee the amount of such
rental payment together with any interest thereon on account of the delayed
payment thereof, or otherwise make such payment as shall effect such cure, in
which event such payment by the Owner
31
33
Participant or the Owner Trustee shall be deemed to cure any Indenture Event of
Default which arose as a result of such Lease Event of Default (but such cure
shall not relieve the Company of any of its obligations); provided, that the
Owner Participant and the Owner Trustee, collectively, shall not be entitled to
cure such other Lease Events of Default if the unreimbursed amount of such
payments shall exceed in the aggregate $5,000,000, as adjusted annually for
inflation. (Indentures, Section 5.04(a))
Each Indenture provides that the Indenture Trustee shall, upon the
occurrence of any event known to it that is an Indenture Default or Indenture
Event of Default thereunder, give notice thereof to the holders of the Equipment
Notes issued thereunder, the Company, the Owner Trustee and the Owner
Participant. (Indentures, Section 6.01)
The holders of a majority in aggregate principal amount of the outstanding
Equipment Notes issued under an Indenture, by notice to the Indenture Trustee,
may on behalf of all holders waive any past default under the Indenture except a
default in the payment of the principal of, Make-Whole Amount, if any, or
interest on any such Equipment Note or a default in respect of any covenant or
provision of such Indenture that cannot be modified or amended without the
consent of each holder of an Equipment Note affected thereby. (Indentures,
Section 5.06)
REMEDIES
If an Indenture Default shall occur and be continuing under an Indenture,
the Indenture Trustee may, and when instructed by the holders of at least a
majority in aggregate principal amount of the Equipment Notes outstanding under
such Indenture shall, declare the unpaid principal of all such Equipment Notes
outstanding under such Indenture immediately due and payable, together with all
accrued but unpaid interest thereon. The holders of a majority in aggregate
principal amount of Equipment Notes outstanding under such Indenture may rescind
any such declaration by the Indenture Trustee or by the holders at any time
prior to the sale of the Equipment covered by such Indenture after such an
Indenture Default if (i) there has been paid to or deposited with the Indenture
Trustee an amount sufficient to pay all due or overdue installments of principal
of, Make-Whole Amount, if any, and interest on any such Equipment Notes that
have become due otherwise than by such declaration of acceleration, (ii) the
rescission would not conflict with any judgment or decree and (iii) all other
Indenture Defaults under such Indenture have been cured or waived except
nonpayment of principal of, Make-Whole Amount, if any, or interest on any such
Equipment Notes that have become due solely because of acceleration.
(Indentures, Section 5.02)
Each Indenture provides that if any Indenture Default under such Indenture
has occurred and is continuing the Indenture Trustee may exercise certain rights
or remedies available to it under applicable law, including (if the
corresponding Lease has been declared in default) one or more of the remedies
under such Indenture or such Lease. The Indenture Trustee's right to exercise
remedies under an Indenture is subject in certain circumstances to its having
proceeded to exercise one or more remedies under the Lease with respect to the
Equipment, unless at the time, the Indenture Trustee is stayed or otherwise
prevented from doing so by operation of law, in which case the Indenture Trustee
has agreed to refrain from exercising remedies under such Indenture for a period
of 90 days. Further, the Indenture Trustee may not exercise remedies under an
Indenture in those circumstances in which the Company, as the debtor in a
bankruptcy proceeding, shall have affirmed the Lease and no Lease Event of
Default (other than a Lease Event of Default arising from the bankruptcy of the
Company) has occurred and is continuing. See "Description of the Equipment
Notes--The Lease--Lease Events of Default." Such remedies may be exercised by
the Indenture Trustee to the exclusion of the Owner Trustee and, subject to the
terms of the Lease, the Company. Any Equipment sold in the exercise of such
remedies will be free and clear of any rights of those parties including the
rights of the Company under the Lease with respect to such Equipment; provided
that no exercise of any remedies by the Indenture Trustee may affect the rights
of the Company under the Lease unless a Lease Event of Default under the Lease
has occurred and is continuing. (Indentures, Sections 5.03(a) and (c), 5.04(c)
and 5.05; Leases, Section 15)
32
34
The holders of a majority in aggregate principal amount of the Equipment
Notes outstanding under the Indenture may instruct the Indenture Trustee to give
such notice, direction or consent, or exercise such right, remedy or power under
the Indenture or the Lease or in respect of the property subject to the lien of
the Indenture or take such other action as shall be specified in such
instructions, but in such event the Indenture Trustee shall not be required to
take or refrain from taking any action in connection therewith if it shall have
reasonable grounds to believe that adequate indemnity against such risk is not
reasonably assured to it. (Indentures, Sections 6.02 and 6.03)
If an Indenture Event of Default occurs and is continuing under the
Indenture and the Indenture Trustee (as security assignee) has declared the
Lease to be in default or the Equipment Notes outstanding under the Indenture
have been accelerated or the Indenture Trustee has exercised any remedies under
the Indenture, any sums held or received by the Indenture Trustee may be applied
to reimburse the Indenture Trustee for any tax, expense or other loss incurred
by it and to pay any other amounts then due the Indenture Trustee prior to any
payments to holders of the Equipment Notes. (Indentures, Section 3.03)
In the event of a bankruptcy or reorganization of the Company, the right of
the Indenture Trustee to repossess or dispose of the Equipment would be subject
to the provisions of the Bankruptcy Code applicable to industrial companies
generally, and not those provisions applicable to railroads, particularly
Section 1168 of the Bankruptcy Code.
In the event of the bankruptcy of an Owner Participant, it is possible
that, notwithstanding that the applicable Equipment is owned by the Owner
Trustee in trust for the benefit of such Owner Participant, such Equipment and
the related Lease and Equipment Notes might become part of the bankruptcy
proceeding. In such event, payments under such Lease or on such Equipment Notes
might be interrupted and the ability of the Indenture Trustee to exercise its
remedies under the applicable Indenture might be restricted, although the
Indenture Trustee would retain its status as a secured creditor in respect of
the Lease and the Equipment subject thereto.
If the Company were to become a debtor in a bankruptcy or reorganization
case under the Bankruptcy Code, the Company or its bankruptcy trustee could
reject any or all Leases to which it is a party. In such event, there could be
no assurance that the amount of any claim for damages under such Leases that
would be allowed in such bankruptcy case would be in an amount sufficient to
provide for the repayment of the applicable Equipment Notes. In any case,
rejection of a Lease by the Company or its bankruptcy trustee would not deprive
the Indenture Trustee of its security interest in the applicable Units.
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in unpaid principal amount of
the Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and the Lease and the Participation Agreement corresponding thereto
may not be amended or modified, except to the extent indicated below.
Certain provisions of each Lease and Participation Agreement may be amended
or modified by the parties thereto without the consent of any holders of the
Equipment Notes outstanding under the Indenture so long as no Indenture Event of
Default shall have occurred and be continuing. In the case of each Lease, such
provisions include, among others, provisions relating to (i) rental payments and
other payments, except to the extent indicated in clause (a) of the following
paragraph, (ii) the maintenance of the Equipment covered by such Lease,
modifications to the Units and the return to the Owner Trustee of the Equipment
at the end of the term of the Lease and (iii) the renewal of such Lease and the
option of the Company at the end of the term of the Lease to purchase any or all
of the Equipment subject to such Lease. (Indentures, Section 10.05)
Without the consent of the holder of each Equipment Note outstanding under
an Indenture, no amendment or modification of such Indenture may (a) change the
final maturity of, or reduce the
33
35
principal amount of, or Make-Whole Amount, if any, or interest payable on any
Equipment Notes issued under such Indenture or impair the right to institute
suit for the enforcement of any such payment or change the date on which any
principal or Make-Whole Amount, if any, or interest is due and payable, (b)
create any lien with respect to the property subject to the Lien of the
Indenture ranking prior to or on a parity with the security interest created by
the Indenture, except as permitted in the Indenture, or deprive any holder of
any Equipment Note issued under such Indenture of the benefit of the Lien of the
Indenture or (c) reduce the percentage in principal amount of outstanding
Equipment Notes issued under such Indenture necessary to modify or amend any
provision of the Indenture or to waive compliance therewith. (Indentures,
Section 10.01)
THE LEASES
Terms and Rentals. The Equipment subject to each Lease will be leased by
the Owner Trustee to the Company for a term commencing on the delivery date
thereof and expiring on July 2, 2010, unless previously terminated as permitted
by each Lease. The rent payments under each Lease will be payable on January 2
and July 2 (or, if such day is not a Business Day, on the next succeeding
Business Day), commencing on January 2, 1996, and will be used to make payments
of principal of and interest due on the Equipment Notes issued under the
Indenture corresponding to such Lease, which will in turn furnish the funds to
be distributed by the Pass Through Trustee to the Certificateholders on January
2 and July 2 of each year. (Leases, Section 3.2; Indentures, Section 3.01) The
Company has also agreed to pay under each Lease on July 2, 1995 such amounts (to
the extent not paid by the Owner Participant) as necessary to enable the
Indenture Trustee to receive the scheduled payment of principal and interest on
the Equipment Notes relating to such Lease. (Leases, Section 3.5) Rental
payments that the Company is obligated to make or cause to be made under each
Lease will not be less than the scheduled payments of principal of and interest
on the Equipment Notes under the Indenture. In certain cases, the semi-annual
basic rent payments under a Lease may be adjusted, but, except as described
below, under no circumstances will such rent payments be less than the
corresponding scheduled payments of principal of and interest on the Equipment
Notes issued under the Indenture corresponding to such Lease. (Participation
Agreements, Section 2.6; Leases, Section 3) The balance of any such semi-annual
rent payment under a Lease, after payment of the scheduled principal of, and
interest on the Equipment Notes issued under the Indenture corresponding to such
Lease, will be paid over to or for the account of the applicable Owner
Participant as the beneficial owner of the Equipment covered by the Lease.
(Leases, Section 3)
Net Lease; Modifications. The Company's obligations in respect of the
Equipment are those of a lessee under a "net lease." Accordingly, the Company is
and will be obligated, at its expense, to pay all costs and expenses of
operating the Equipment and to maintain, service and repair the Equipment so as
to keep the Units included therein in good operating order, ordinary wear and
tear excepted. (Leases, Sections 8 and 19)
Subject to certain exceptions, the Company will, at its expense, make all
alterations, replacements or modifications required to be made by the
Association of American Railroads, the United States Department of
Transportation, or any other United States, state or local governmental agency
or other applicable law. The Company will have the right, at its expense, to
make other modifications, alterations and improvements, provided that such
modifications do not diminish the value, utility or remaining useful life of
such Unit or cause it to become "limited use" property. Severable modifications
that are not required by law will remain the property of the Company but may be
purchased by the Owner Trustee at fair market value upon termination of the
Lease. The Owner Trustee will acquire title to all nonseverable modifications
and severable modifications required by law. (Leases, Section 9)
Sublease; Possession and Use. The Company is in the business of leasing
railway tank cars and other railcars to third parties under full-service
operating leases. These leases vary in nature based on the needs of the
sublessee and the Company. The Company shall have the right to use the
34
36
Equipment, subject to the applicable Lease, and to sublease the Equipment to any
railroad company incorporated in the United States, Canada or Mexico or to any
other responsible company which is not a railroad company for use in its
business; provided that the Units are used primarily on domestic routes in the
United States and that at no time shall more than 20% of the Units be used (as
determined by mileage records) outside the continental United States (exclusive
of Alaska) during any taxable year in which certain specified events occur; and
further provided that if the Company subleases any Units to a sublessee which
operates primarily in Mexico, subject to the provisions of each Lease, the
Company shall make all registration filings and deposits necessary or advisable
under then-current prudent industry practice (including any actions reasonably
requested by the Owner Trustee or the Indenture Trustee) to protect the interest
of the Owner Trustee under the Lease and the Indenture Trustee under the
Indenture corresponding to such Lease. The Company may not sublease any Unit for
a term that extends beyond the term of the Lease nor may it sublease any Unit on
terms and conditions that are not consistent with the terms of the Lease unless
the Company replaces such Unit on or prior to the expiration of the Lease term
in accordance with the provisions of the Lease. No sublease will discharge the
Company of its obligations under the Lease (Leases, Sections 8.2 and 8.3) If any
Unit is leased or the possession is otherwise transferred, such Unit will remain
subject to the lien of the related Indenture.
Maintenance. The Company, at its own cost and expense, shall maintain,
repair and keep each Unit (i) according to prudent industry practice, in good
working order, and in good physical condition for railcars of a similar age and
usage, normal wear and tear excepted, (ii) in a manner consistent with
maintenance practices used by the Company in respect of equipment owned or
leased by the Company similar in type to such Unit, (iii) in accordance in all
material respects with all manufacturers' warranties and in accordance with all
applicable provisions, if any, of insurance policies required to be maintained
pursuant to the Lease and (iv) in compliance in all material respects with all
applicable laws and regulations other than those being contested in good faith
in any reasonable manner which does not create any risk or danger of (x)
material interference with the use, possession, operation or return of any Unit,
or materially adversely affecting the rights or interests of the Company and the
Indenture Trustee in the Equipment, (y) the imposition of any criminal sanctions
on the part of the Owner Trustee, the Indenture Trustee or the Owner
Participant, or (z) the release of the Company from the obligation to return the
Equipment in compliance with the Lease. (Leases, Section 8)
Liens. The Equipment will be maintained free of any liens, other than the
respective rights of the Owner Participants, the Owner Trustee, the Indenture
Trustee, the holders of the Equipment Notes, the Company and any permitted
sublessee arising under the Leases, the Indentures, the Participation Agreements
and the separate Trust Agreements between the Owner Trustee and the Owner
Participants pursuant to which the Owner Trustee acts as trustee for the benefit
of the Owner Participants, and other than, in the case of the Equipment, certain
limited liens permitted under the Leases and the Indentures, including liens for
taxes either not yet due and payable or being contested in good faith (so long
as there exists no material risk of sale, forfeiture, loss or loss of use of the
Equipment or any interest therein), materialmen's, mechanics' and other similar
liens arising in the ordinary course of business and either not yet due and
payable or being contested (so long as there exists no material risk of sale,
forfeiture, loss or loss of use of the Equipment or any interest therein),
judgment liens that are being appealed in good faith and whose enforcement has
been stayed pending such appeal, and salvage rights of insurers under insurance
policies maintained pursuant to the Lease. (Leases, Section 7)
Insurance. The Company will at all times prior to the return of the
Equipment to the Owner Trustee, at its own expense, cause to be carried and
maintained insurance in respect of the Equipment in amounts and against such
risks and with deductibles and terms and conditions not less than the insurance,
if any, maintained by the Company in respect of similar equipment owned or
leased by the Company, but in no event shall such coverage be for amounts or
against risks less than the prudent industry standard for companies engaged in
full service leasing of tank and hopper
35
37
cars. (Leases, Section 12) The Company does not maintain casualty insurance with
respect to the Equipment.
Termination. So long as no Lease Event of Default or event which, with
notice or the lapse of time or both, would become a Lease Event of Default
thereunder shall have occurred and be continuing, the Company may, upon at least
120 days prior written notice, terminate each Lease with respect to specific
groups of Equipment subject to such Lease (provided that if such termination is
for less than all of the Units in any one specific group of Equipment (as set
forth in the Leases), the determination as to which Units are subject to
termination shall be made by the Company on a random or other reasonable basis
without regard to maintenance status or operating condition) (the "Terminated
Units"), at its option any time after July 2, 2002, if the Company determines in
good faith (as evidenced by a certified copy of a resolution adopted by its
Board of Directors and a certificate executed by the Chief Financial Officer of
the Company) that such Terminated Units have become obsolete or surplus to its
requirements for any reason or that any modification required by law to such
Terminated Units would be economically impractical. The Company will act as
agent for the Owner Trustee in obtaining bids for the Terminated Units and, if
the Company succeeds in locating the eventual purchaser of the Terminated Units,
the Owner Trustee shall transfer all of its right, title and interest in and to
the Terminated Units to the bidder which has submitted the highest cash bid (who
may not be the Company or any affiliate of the Company but who may be the Owner
Trustee or any affiliate of the Owner Trustee) on the termination date. The net
proceeds of such sale shall be paid to the Owner Trustee. If the net proceeds
received from such sale are less than the Termination Value for the Terminated
Units, the Company shall pay to the Owner Trustee an amount equal to the
difference between such proceeds and such Termination Value, together with
certain other amounts including, if such payment is made prior to ,
, the Make-Whole Amount. All funds to be paid to or deposited with
the Owner Trustee as described in this paragraph shall, so long as the Indenture
shall not have been discharged, be deposited directly with the Indenture
Trustee. Amounts in excess of the outstanding principal amount of the Equipment
Notes issued in respect of such Terminated Units, the Make-Whole Amount, if
applicable, and the then accrued and unpaid interest thereon will be distributed
by the Indenture Trustee in accordance with the terms of the Indenture. The lien
of the Indenture shall terminate with respect to the Terminated Units after the
full Termination Value and any rent due has been received by the Indenture
Trustee and, if all amounts due such Owner Participant have also been paid, the
Lease with respect to such Terminated Units shall terminate and the obligation
of the Company thereafter to make rent payments with respect thereto shall
cease. (Leases, Sections 3.6, 10.1, 10.2 and 10.4, Indentures, Section 3.02)
The Owner Trustee shall have the option to retain the Terminated Units, but
it may do so only if the Owner Trustee shall pay, or cause to be paid, to the
Indenture Trustee funds in an amount equal to the principal of and accrued
interest on the outstanding Equipment Notes with respect to such Terminated
Units and, if applicable, an amount equal to the Make-Whole Amount. (Leases,
Section 10.3)
Purchase Options. So long as no Lease Event of Default or event which, with
notice or the lapse of time or both, would become a Lease Event of Default
thereunder, shall have occurred and be continuing, the Company shall have the
right to purchase, on January 2, 2005 with respect to certain Units and on
January 2, 2006 with respect to the other Units any or all of such Units subject
to each Lease at the option prices set forth in the Leases. The Company may
exercise its early purchase option in whole or in part by giving written notice
to the Owner Trustee at least 90 days prior to the Early Purchase Date. If the
Company exercises its early purchase option, a portion of the purchase price
shall be used to prepay the Equipment Notes relating to the purchased Units
unless the Company elects to assume on a full recourse basis all of the Owner
Trustee's obligations in respect of the related Equipment Notes and acquires the
purchased Units subject to the lien of the related Indenture. (Leases, Section
22.1) See "Description of the Equipment Notes--Prepayment."
36
38
Events of Loss. If an Event of Loss occurs with respect to a Unit, the
Company shall give notice to the Owner Trustee in accordance with the terms of
the related Lease and, if the Indenture has not been discharged, to the
Indenture Trustee, and shall either (i) pay to the Owner Trustee the Stipulated
Loss Value of such Unit or (ii) substitute for such Unit like kind equipment, of
equal or greater fair market sales value, utility, remaining economic useful
life and residual value as the Unit being replaced (assuming such Unit was in
the condition required under the Lease). If the Company elects not to substitute
for the applicable Unit, Stipulated Loss Value will be paid on (i) the next
Regular Distribution Date following the election by the Company to pay the
Stipulated Loss Value of such Unit rather than substitute like kind Equipment or
(ii) in the case of the occurrence of a Multiple Loss, on the first Business Day
succeeding the 60th day following the date on which the Company is required to
report such Multiple Loss. If the Company elects to substitute for the
applicable Unit, it shall so substitute for such Unit on the Rent Payment Date
immediately following the date the Company delivers notice of such election. All
funds to be paid or deposited with the Owner Trustee as described in this
paragraph shall, so long as the applicable Indenture shall not have been
discharged, be deposited directly with the Indenture Trustee and shall be
applied to prepay all or a portion of the Equipment Notes as provided in the
Indenture. See "Description of the Equipment Notes--Prepayment." If the Company
pays the Stipulated Loss Value of a Unit subject to an Event of Loss and any
rent due, the lien of the Indenture and the Lease relating to such Unit shall
terminate with respect to such Unit, title thereto shall be transferred to the
Company and the obligation of the Company thereafter to make rent payments with
respect thereto shall cease, except for indemnification obligations which
otherwise may have accrued. (Leases, Section 11) Amounts in excess of the
amounts applied to prepay Equipment Notes in accordance with the Indenture will
be distributed by the Indenture Trustee in accordance with the terms of the
Indenture.
An Event of Loss with respect to any Unit shall mean any of the following
events: (i) damage or contamination of such Unit which, in the Company's
reasonable judgment (as evidenced by an Officers' Certificate to such effect),
makes repair uneconomic or renders such Unit unfit for commercial use, (ii)
destruction of such Unit or theft or disappearance thereof for a period
exceeding twelve months, (iii) the permanent return of such Unit to the
manufacturer pursuant to any patent indemnity provisions, (iv) the taking or
appropriating of title to such Unit by any governmental authority under the
power of eminent domain or otherwise, (v) the actual or constructive total loss
of the Unit, (vi) in the normal course of interstate rail transportation, the
Unit shall be prohibited from being used for a continuous period in excess of
six months as a result of any rule, regulation, order or other action by the
United States government or any agency or instrumentality thereof, (vii) the
Unit shall be subject to a sublease with any person which operates primarily
outside of the United States and shall not be returned to the Company within 60
days of a demand by the Company for return of such Unit following the
termination of such sublease or (viii) the taking or requisitioning of such Unit
for use by any governmental authority or any agency or instrumentality thereof
under the power of eminent domain or otherwise and such taking or requisition is
for a period that exceeds the remaining Basic Term or any Renewal Term then in
effect (unless such taking or requisition is by Mexico or any governmental
authority, agency or instrumentality thereof, in which case such period shall be
the lesser of the period described above or 365 days). (Leases, Section 11.1)
Lease Events of Default. Events of default (each, a "Lease Event of
Default") under the Lease include, among other things: (a) failure by the
Company to make any payment of Basic Rent, any purchase price to be paid by the
Company for any Units pursuant to the Lease or the Participation Agreement,
Stipulated Loss Value or Termination Value, within 10 Business Days after the
same shall have become due, (b) failure by the Company to make any payment of
Supplemental Rent, including indemnity or tax indemnity payments, but not
including any purchase price to be paid by the Company for any Units pursuant to
the Lease or the Participation Agreement, Stipulated Loss Value or Termination
Value, after the same shall become due and such failure shall continue
unremedied for 10 Business Days after receipt by the Company of written notice
of such failure from the Owner Trustee or Indenture Trustee, (c) failure to
maintain in effect insurance as required by
37
39
the Lease, such failure not having been waived, (d) the Company shall make or
permit any possession of the Equipment of any portion thereof not permitted by
the Lease, provided that such unauthorized possession shall not constitute a
Lease Event of Default for a period of 45 days after the occurrence thereof, or
the Company shall make or permit an unauthorized assignment or transfer of the
Lease, (e) failure by the Company to observe or perform any of the agreements or
covenants relating to the merger, consolidation or transfer of assets of the
Company and such failure continues unremedied for 30 days, (f) failure by the
Company to perform or observe any other covenant or agreement to be performed or
observed by it in connection with the Lease (other than under the Tax Indemnity
Agreement) continuing for a period of 30 days after notice of such failure from
the Owner Trustee or the Indenture Trustee, or, if such failure is capable of
being remedied (and the remedy requires an action other than, or in addition to,
the payment of money), for a period of 90 days after receipt of such notice so
long as the Company is diligently proceeding to remedy such failure, (g) any
representation or warranty made by the Company in any Lessee Agreement (other
than the Tax Indemnity Agreement) being untrue or incorrect in any material
respect at the time made and such untruth or incorrectness continues to be
material and unremedied for a period of 30 days after notice thereof or, if such
untruth or incorrectness is capable of being remedied, for a period of 60 days
after receipt of such notice so long as the Company is diligently proceeding to
remedy such untruth or incorrectness and any adverse effects thereof, and (h)
the occurrence of certain events of bankruptcy, reorganization or insolvency of
the Company. (Leases, Section 14)
If a Lease Event of Default under a Lease has occurred and is continuing,
and such Lease has been declared to be in default, the Indenture Trustee, as
assignee of the Owner Trustee's rights under the Lease, may exercise one or more
of the remedies provided in the Lease with respect to the Equipment subject
thereto. These remedies include the right to repossess and use or operate the
Equipment to sell or release the Equipment free and clear of The Company's
rights and retain the proceeds and to require the Company to pay liquidated
damages specified therein. (Leases, Section 15)
THE PARTICIPATION AGREEMENTS
The Company is required to indemnify each Owner Participant, the Owner
Trustee, the Indenture Trustee and the Pass Through Trustee for certain losses
and claims and for certain other matters. In addition, the Company is required
under certain circumstances to indemnify each Owner Participant against the loss
of depreciation deductions and certain other benefits allowable for certain
income tax purposes with respect to the applicable Equipment. (Participation
Agreements, Section 7) Subject to certain restrictions, each Owner Participant
may transfer its beneficial interest in the related owner trust.
Each Participation Agreement provides that if the Owner Participant or any
affiliate thereof is or acquires, is acquired by, merges or otherwise
consolidates with any company or affiliate thereof engaged in full service
railcar leasing, whether or not a direct competitor of the Company or any
affiliate of the Company, or any person that has a material interest in an
enterprise that engages in a business that is in competition with the Company's
full service railcar operating leasing business, the Company may purchase the
applicable Equipment for a purchase price equal to the greater of the
Termination Value or the then appraised fair market value, each calculated as of
such Special Distribution Date, plus certain other amounts including, if
applicable, the Make-Whole Amount. If the Company elects to exercise its right
to purchase the applicable Equipment, unless the Company elects to assume the
related Equipment Notes on a full recourse basis, the purchase price shall be
used to prepay the related Equipment Notes and if such prepayment is prior to
, the applicable Make-Whole Amount shall be paid. See "Description
of the Equipment Notes--Prepayment." (Participation Agreements, Section 6.9)
Under each Participation Agreement, the Company will be prohibited from
consolidating or merging with or into any other corporation or transferring
substantially all of its assets to another
38
40
corporation unless (a) the successor corporation, if other than the Company,
shall be a corporation organized and existing under the laws of the United
States or any state or the District of Columbia and shall expressly assume the
due and punctual performance and observance of all the covenants and conditions
of the operative agreements to be performed by the Company, (b) immediately
prior to and immediately after giving effect to such transaction, no Lease Event
of Default, or event which with notice or the passage of time or both would
become a Lease Event of Default, shall have occurred, whether as a result of
such transaction or otherwise, and (c) the Company shall have made all filings
necessary or appropriate in the reasonable opinion of the Owner Trustee and the
Indenture Trustee in order to preserve and protect the rights of the Owner
Trustee under the related Lease and of the Indenture Trustee under the related
Indenture. (Participation Agreements, Section 6.8)
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion by the Company of the anticipated
material federal income tax consequences of the purchase, ownership and
disposition of Pass Through Certificates. This summary is based on laws,
regulations, rulings and court decisions now in effect, all of which are subject
to change by legislative, administrative or judicial action, which change may be
retroactive. The statements of law and legal conclusions contained herein are
based on the opinion of Neal Gerber & Eisenberg, counsel to the Company. The
discussion below does not purport to address federal income tax consequences
applicable to particular categories of investors, some of which (for example,
banks, tax exempt organizations, insurance companies or foreign investors) may
be subject to special rules. Investors should consult their own tax advisors in
determining the federal, state, local and foreign tax consequences to them of
the purchase, ownership and disposition of Pass Through Certificates, including
the advisability of making any election discussed below. Prospective investors
should note that no rulings have been or will be sought from the Internal
Revenue Service (the "IRS") with respect to any of the federal income tax
consequences discussed below and no assurance can be given that the IRS will not
take contrary positions. The Pass Through Trust is not indemnified for any
federal income taxes that may be imposed upon it, the imposition of which could
significantly reduce the amounts available for distribution to the Certificate
Owners. For purposes of this "Certain Federal Income Tax Consequences" section,
the terms "Pass Through Certificate" and "Certificate" also refer to an indirect
interest in a Pass Through Certificate held by a Certificate Owner.
GENERAL
Based upon an interpretation of analogous authorities under currently
applicable law, the Pass Through Trust should not be classified as an
association taxable as a corporation, but rather should be classified as a
grantor trust for purposes of Sections 671 through 679 of the Code, and each
Certificate Owner should be treated as owning a pro rata undivided interest in
each Equipment Note and any other property held in the Pass Through Trust.
The Company believes that each Certificate Owner will be required to report
on its federal income tax return its pro rata share of the entire income from
the Equipment Notes and any other property in the Pass Through Trust, in
accordance with such Certificate Owner's method of accounting. A Certificate
Owner using the cash method of accounting should take into account its pro rata
share of income as and when received by the Pass Through Trustee. A Certificate
Owner using the accrual method of accounting should take into account its pro
rata share of income as it accrues or is received by the Pass Through Trustee,
whichever is earlier. Although Treasury Regulations characterizing contingent
obligations such as the Make-Whole Amount have yet to be finalized, Proposed
Treasury Regulations provide that contingent payments are treated entirely as
interest in the year in which the amount of such payments becomes fixed. As
such, the Company believes that the Make-Whole Amount described under
"Description of the Equipment
39
41
Notes--Prepayment" should be taxed as contingent interest when it becomes fixed
and unconditionally payable.
A purchaser of a Pass Through Certificate should be treated as purchasing
an interest in each Equipment Note and any other property in the Pass Through
Trust at a price determined by allocating the purchase price paid for the Pass
Through Certificate among the related Equipment Notes and other property in
proportion to their fair market values at the time of purchase of the Pass
Through Certificate. The Company believes that when the Pass Through Trust has
acquired all the Equipment Notes, the purchase price paid for a Pass Through
Certificate by an original purchaser of such certificate will be allocated among
the Equipment Notes in the Pass Through Trust in proportion to their respective
principal amounts.
SALES OF PASS THROUGH CERTIFICATES
A Certificate Owner that sells or exchanges a Pass Through Certificate will
recognize gain or loss (in the aggregate) equal to the difference between its
adjusted tax basis in the Pass Through Certificate and the amount realized
(except to the extent attributable to accrued interest, which would be taxable
as interest income). Subject to the market discount provisions of the Code
(described below), if the Certificate Owner held such Pass Through Certificate
as a capital asset, any such gain or loss should be capital gain or loss, which
will be long-term capital gain or loss if the Pass Through Certificate was held
for more than one year (but only to the extent the Pass Through Trust also held
the underlying Equipment Notes for more than one year). Any long term capital
gains realized on a sale or exchange of Pass Through Certificates will be
taxable under current law to corporate taxpayers at the rates applicable to
ordinary income, and to individual taxpayers at their applicable marginal rate
for capital gains. Any capital losses realized generally will be deductible by a
corporate taxpayer only to the extent of capital gains and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
ORIGINAL ISSUE DISCOUNT
It is anticipated that the Equipment Notes will not be issued with original
issue discount.
MARKET DISCOUNT
A subsequent purchaser of a Pass Through Certificate will be considered to
have acquired an interest in an Equipment Note held in the Pass Through Trust at
a "market discount" to the extent the remaining principal amount of such
Equipment Note exceeds the Certificate Owner's tax basis allocable to such
Equipment Note, provided such excess exceeds a prescribed de minimis amount. If
such excess exceeds the de minimis amount, the Certificate Owner will be subject
to the market discount rules of Section 1276 of the Code with regard to its
interest in the Equipment Note.
In the case of a sale or other disposition by a domestic taxpayer of
indebtedness subject to the market discount rules, Section 1276 of the Code
requires that gain, if any, from such sale or other disposition be treated as
ordinary income to the extent such gain represents market discount that has
accrued during the period in which the indebtedness was held.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, Section 1276 of the Code requires that such payment be
included in gross income of domestic taxpayers as ordinary income to the extent
such payment does not exceed the market discount that has accrued during the
period such indebtedness was held. The amount of any accrued market discount
later required to be included in income upon a disposition, or subsequent
partial principal payment, will be reduced by the amount of accrued market
discount previously included in income.
Market discount generally accrues under either a straight line method or,
at the election of the taxpayer, a constant interest rate method. However, in
the case of installment obligations (such as the Equipment Notes), determination
of the manner in which market discount is to be accrued has
40
42
been left to Treasury regulations not yet issued. Until such Treasury
regulations are issued, the Conference Committee Report to the Tax Reform Act of
1986 (the "Conference Report") indicates that holders of installment obligations
with market discount may elect to accrue market discount either (i) on the basis
of a constant interest rate or (ii) by treating as accrued market discount an
amount equal to total remaining market discount times a fraction, the numerator
of which is the amount of stated interest paid in the accrual period and the
denominator of which is the total amount of stated interest remaining to be paid
on the installment obligation as of the beginning of such period.
Under Section 1277 of the Code, if, in any taxable year, interest paid or
accrued on indebtedness incurred or continued to purchase or carry indebtedness
subject to the market discount rules exceeds the interest currently includible
in income with respect to such indebtedness, deduction of the excess interest
must be deferred to the extent of the market discount allocable to the taxable
year. The deferred portion of any interest expense will generally be deductible
when such market discount is included in income upon the sale or other
disposition (including repayment) of the indebtedness.
A taxpayer may elect to include market discount in gross income currently.
If such election is made, the rules of Sections 1276 and 1277 (described above)
will not apply to the taxpayer.
PREMIUM
A Certificate Owner will generally be considered to have acquired an
interest in an Equipment Note at a premium to the extent the purchaser's tax
basis allocable to such interest exceeds the remaining principal amount of the
Equipment Note allocable to such interest. In that event, a Certificate Owner
who holds a Pass Through Certificate as a capital asset may elect to amortize
that premium as an offset to interest income under Section 171 of the Code, with
corresponding reductions in the Certificate Owner's tax basis in its interest in
the Equipment Note. Generally, such amortization is on a constant yield basis.
However, in the case of installment obligations (such as the Equipment Notes),
the Conference Report indicates a Congressional intent that amortization will be
in accordance with the same rules that will apply to the accrual of market
discount on installment obligations (see the discussion above).
In the case of obligations that may be called at a premium prior to
maturity (such as the Equipment Notes), amortizable bond premium may be
determined by reference to an early call date. Due to the complexities of the
amortizable premium rules, particularly where there is more than one possible
call date and the amount of any premium is uncertain, Certificate Owners are
urged to consult their own tax advisors as to the amount of any amortizable
premium.
BACKUP WITHHOLDING
Payments made on the Pass Through Certificates and proceeds from the sale
of the Pass Through Certificates to or through certain brokers may be subject to
a "backup" withholding tax of 31% unless the Certificate Owner complies with
certain reporting procedures or is an exempt recipient under Section 6049(b)(4)
of the Code. Any such withheld amounts will be allowed as a credit against the
Certificate Owner's federal income tax.
CERTAIN ILLINOIS TAXES
The Pass Through Trustee is a national banking association with its
principal corporate trust office in Illinois. Neal Gerber & Eisenberg, counsel
to the Company, has advised the Company that, in its opinion, under currently
applicable law, assuming that the Pass Through Trust is not taxable as a
corporation, but, rather, is classified as a grantor trust under subpart E, Part
I of Subchapter J of the Code, (i) the Pass Through Trust will not be subject to
any tax (including, without limitation, net or gross income, tangible or
intangible property, net worth, capital, franchise or doing business tax),
41
43
fee or other governmental charge under the laws of the State of Illinois or any
political subdivision thereof and (ii) Certificate Owners who are not residents
of or otherwise subject to tax in Illinois will not be subject to any tax
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax), fee or other
governmental charge under the laws of the State of Illinois or any political
subdivision thereof solely as a result of purchasing, holding (including
receiving payments with respect to) or disposing of a Pass Through Certificate,
except to the extent the Indenture Trustee forecloses on the Equipment and any
of the Equipment is located in Illinois or to the extent the indenture trust or
the Pass Through Trust engages in business in Illinois as a result of such
foreclosure. Neither the Pass Through Trust nor the Certificate Owners will be
indemnified for any state or local taxes imposed on them, the imposition of
which on the Pass Through Trust could reduce the amounts available for
distribution to the Certificate Owners of the Pass Through Trust. In general,
should a Certificate Owner or the Pass Through Trust be subject to any state or
local tax which would not be imposed if the Pass Through Trustee were located in
a different jurisdiction in the United States, the Pass Through Trustee will
resign and a new Pass Through Trustee in such other jurisdiction will be
appointed.
ERISA CONSIDERATIONS
Pass Through Certificates may be purchased by an employee benefit plan (a
"Plan") subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). A fiduciary of a Plan must determine that the purchase of a
Pass Through Certificate is consistent with its fiduciary duties under ERISA and
does not result in a non-exempt prohibited transaction as defined in Section 406
of ERISA or Section 4975 of the Code. Employee benefit plans which are
governmental plans (as defined in Section 3(33) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) are not subject to the fiduciary
responsibility provisions of ERISA. Any Plan that purchases a Pass Through
Certificate must be an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D promulgated under the Securities Act.
The United States Department of Labor has granted to Salomon Brothers Inc
an administrative exemption (Prohibited Transaction Exemption 89-89, Exemption
Application No. D-6446, 54 Fed. Reg. 42,589 (1989) as amended, 55 Fed. Reg.
48,939 (1990)) (the "Exemption") from certain of the prohibited transaction
rules of ERISA and the Code with respect to the initial purchase, the holding
and the subsequent resale by a Plan of certificates in certain pass through
trusts, the assets of which consist of secured credit instruments that bear
interest, including qualified equipment notes secured by leases. A number of
conditions must be satisfied in order for the Exemption to apply, including the
requirement that at the time of their purchase by a Plan the Pass Through
Certificates have a specified credit rating. Under the Exemptions an equipment
note secured by a lease will be considered qualified only if it is a note (a)
which is secured by equipment which is leased, (b) which is secured by the
obligation of the lessee to pay rent under the equipment lease and (c) with
respect to which the trust's security interest is at least as protective of the
rights of the trust as the trust would have if the equipment note were secured
only by the equipment and not by the lease.
It is not clear whether the Exemption applies to participant directed plans
described in Section 404(c) of ERISA or plans that are subject to Section 4975
of the Code but not Title I of ERISA, such as individual retirement plans and
certain plans for self-employed individuals. In addition, there are various
other terms and conditions to the applicability of the Exemption. Accordingly,
each fiduciary of a Plan should independently determine if its purchase of a
Pass Through Certificate will require an exemption, and if so, whether the
Exemption applies to the purchase, or whether any other prohibited transaction
exemption is available.
42
44
UNDERWRITING
Under the terms of and subject to the conditions contained in an
Underwriting Agreement dated the date hereof, Salomon Brothers Inc (the
"Underwriter") has agreed to purchase from the Pass Through Trustee the entire
$95,000,000 aggregate principal amount of Pass Through Certificates.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Pass Through Certificates is subject to,
among other things, the approval of certain legal matters by its counsel and
certain other conditions. The Underwriter is obligated to take and pay for all
of the Pass Through Certificates to be purchased by it if any are taken.
The Underwriter proposes to offer all or part of the Pass Through
Certificates directly to the public at the public offering price per Pass
Through Certificate set forth on the cover page of this Prospectus and may offer
a portion of the Pass Through Certificates to dealers at a price which
represents a concession not in excess of %. The Underwriter may allow, and
such dealers may reallow, concessions not in excess of % to certain other
dealers. After the initial public offering, the public offering price and such
concessions may be changed.
The Company has agreed to indemnify the Underwriter and the Underwriter has
agreed to indemnify the Company against certain liabilities, including
liabilities under the Securities Act.
The Company does not intend to apply for listing of the Pass Through
Certificates on a national securities exchange, but has been advised by the
Underwriter that the Underwriter presently intends to make a market in the Pass
Through Certificates, as permitted by applicable laws and regulations. The
Underwriter is not obligated, however, to make a market in the Pass Through
Certificates and any such market making may be discontinued at any time at the
sole discretion of the Underwriter. Accordingly, no assurance can be given as to
the liquidity of, or trading markets for, the Pass Through Certificates.
LEGAL OPINIONS
The validity of the Pass Through Certificates is being passed upon for the
Company by Neal Gerber & Eisenberg, Chicago, Illinois, and for the Underwriters
by Mayer, Brown & Platt, New York, New York. Both Neal Gerber & Eisenberg and
Mayer, Brown & Platt will rely on the opinion of the Law Department of The First
National Bank of Chicago as to matters relating to the authorization, execution,
authentication, issuance and delivery of the Pass Through Certificates under the
Agreement.
EXPERTS
The consolidated financial statements and the related schedules of Union
Tank Car Company included in its Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 have been audited by Ernst & Young LLP, independent
auditors, as set forth in its report thereon which is incorporated herein by
reference. The report on such consolidated financial statements and related
schedules is incorporated herein by reference in reliance upon the authority of
such firm as experts in accounting and auditing.
43
45
APPENDIX I
GLOSSARY OF CERTAIN TERMS
The following is a glossary of certain terms used in this Prospectus. The
definitions of terms used in this glossary that are also used in the Agreements,
Indentures, Leases or Participation Agreements are qualified in their entirety
by reference to the definitions of such terms contained therein.
"Agreement" means the Pass Through Trust Agreement by and among The First
National Bank of Chicago, as Pass Through Trustee, and the Company, pursuant to
which the Union Tank Car Company 1994-A Pass Through Trust will be formed.
"Basic Rent" means, with respect to any Unit, all scheduled rent payable by
the Company pursuant to each Lease.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, Chicago,
Illinois, the city and state (if different from the foregoing) in which the
principal corporate trust office of the Owner Trustee is located, or, until the
lien of the Indenture has been discharged, the city and state (if different from
the foregoing) in which the principal corporate trust office of the Indenture
Trustee is located.
"Certificate Account" means the one or more accounts established and
maintained pursuant to an Agreement for the benefit of the Certificateholders of
the Pass Through Trust, for the deposit of payments representing Scheduled
Payments on the Equipment Notes held in the Pass Through Trust.
"Certificate Owner" means a person acquiring an interest in a Pass Through
Certificate registered in the name of Cede & Co. as the nominee of The
Depository Trust Company.
"Certificateholder" means any holder of a Pass Through Certificate.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Equipment Cost" means the cost to an Owner Trust of Equipment purchased by
it from the Company.
"Equipment Notes" means the equipment notes issued on a nonrecourse basis
by the Owner Trustees pursuant to the Indentures and Indenture Supplements.
"Event of Default" means, with respect to an Agreement, the occurrence and
continuance of an Indenture Default under one or more of the Indentures.
"Event of Loss" means each of the events designated as such in a Lease.
"Indenture" means each of the two separate Trust Indenture and Security
Agreements to be entered into with respect to certain designated groups of
Equipment between an Owner Trustee and the Indenture Trustee and pursuant to
which such Owner Trustee will issue the Equipment Notes with respect to such
groups of Equipment, as such Trust Indenture and Security Agreements may from
time to time be amended or supplemented.
"Indenture Default" means each of the events designated as an "Indenture
Event of Default" in an Indenture. For a description of certain events
constituting Indenture Defaults, see "Description of the Equipment
Notes--Indenture Defaults, Notice and Waiver."
"Indenture Trustee" means The First National Bank of Chicago, in its
capacity as indenture trustee under each Indenture, and its successors and
assigns thereunder.
I-1
46
"Lease" means each of the two separate Lease Agreements to be entered into
with respect to the Equipment subject thereto between an Owner Trustee and the
Company, as such Lease Agreements may from time to time be amended or
supplemented.
"Lease Default" means any event which, with notice or the passage of time
or both, would become a Lease Event of Default.
"Lease Event of Default" means each of the events designated as an event of
default in a Lease. For a description of certain events constituting Lease
Events of Default, see "Description of the Equipment Notes--The Leases--Lease
Events of Default."
"Owner Participant" means the owner participant for whose benefit an Owner
Trustee owns Equipment leased to the Company pursuant to a Lease and its
permitted successors and assigns.
"Owner Trustee" means State Street Bank and Trust Company, not in its
individual capacity but solely as trustee of two separate owner trusts, each for
the benefit of an Owner Participant, its successors and assigns.
"Participation Agreement" means each of the two separate Participation
Agreements to be entered into in connection with the leveraged lease financing
of the Equipment, as such Participation Agreements may from time to time be
amended or supplemented.
"Pass Through Certificate" means each of the Pass Through Certificates,
Series 1994-A to be issued by the Pass Through Trustee pursuant to the
Agreement.
"Pass Through Trust" means the Union Tank Car Company 1994-A Pass Through
Trust to be formed pursuant to the Agreement.
"Pass Through Trustee" means The First National Bank of Chicago, in its
capacity as Pass Through Trustee under the Agreement, and each other person
which may from time to time act as successor Pass Through Trustee under the
Agreement.
"Permitted Investment" means each of (i) direct obligations of the United
States of America and agencies thereof, (ii) obligations fully guaranteed by the
United States of America, (iii) certificates of deposit issued by, or bankers'
acceptances of, or time deposits with, any bank, trust company or national
banking association incorporated or doing business under the laws of the United
States of America or one of the States thereof having combined capital and
surplus and retained earnings of at least $100,000,000, having general
obligations rated at least A1 by Moody's Investors Service, Inc. or A+ by
Standard & Poor's Corporation (but excluding any new investment as to which
there is a public announcement by the rating agency providing a rating thereon
that such rating is under consideration for a possible downgrade below A1 or A+,
as the case may be), including the Owner Trustee in its individual capacity or
the Indenture Trustee in its individual capacity if such conditions are met,
(iv) commercial paper of any holding company of a bank, trust company or
national banking association described in clause (iii), (v) bearer note deposits
with, or certificates of deposit issued by, or promissory notes of, any
subsidiary incorporated under the laws of Canada (or any province thereof) of
any bank, trust company or national banking association described in clause
(iii), (vi) commercial paper of companies having a rating of A-1/P-1 or better
assigned to such commercial paper by Standard & Poor's Corporation or Moody's
Investors Service, Inc. (or, if neither such organization shall rate such
commercial paper at any time, by any nationally recognized rating organization
in the United States of America), (vii) U.S. dollar-denominated certificates of
deposit issued by, or time deposits with, the European subsidiaries of any bank,
trust company or national banking association described in clause (iii), (viii)
Canadian Treasury Bills fully hedged to U.S. dollars, (ix) bonds, notes or other
obligations of any state of the United States of America, or any political
subdivision of any such state, or any agencies or other instrumentalities of any
such state, including, but not limited to, industrial development bonds,
pollution control revenue bonds, public power bonds, housing bonds, other
revenue bonds or any general obligation bonds; provided that, at the time of
their purchase, such obligations are rated in the highest rating category by
I-2
47
Standard & Poor's Corporation or Moody's Investors Service, Inc. (or, if neither
such organization shall rate such obligations at such time, by any nationally
recognized rating organization in the United States of America), and (x) bonds
or other debt instruments of any company, if such bonds or other debt
instruments, at the time of their purchase, are rated in the highest rating
category by Standard & Poor's Corporation or Moody's Investors Service, Inc.
(or, if neither such organization shall rate such obligations at such time, by
any nationally recognized rating organization in the United States of America);
provided that no investment shall be eligible as and included within the
definition of the term "Permitted Investment" unless either (x) the final
maturity or date of return of such investment is equal to one year or less from
the date of purchase thereof or (y) in the case of any investment referred to in
the foregoing clause (i) or (ii) only, such investment has a final maturity or
date of return greater than one year from the date of purchase thereof and
closing prices on a national securities exchange or bid and asked prices,
closing prices or yields to maturity for such investment are reported in The
Wall Street Journal (or if The Wall Street Journal is not at the time published
or ceases to report such prices, such prices are reported by any other
publication of nationally recognized standing of general circulation in New York
City).
"Pool Balance" means, for the Pass Through Trust, as of any Regular
Distribution Date or Special Distribution Date, the aggregate unpaid principal
amount of the Equipment Notes held in the Pass Through Trust plus any amounts in
respect of principal on such Equipment Notes held by the Pass Through Trustee
and not yet distributed plus any proceeds of the sale of the Pass Through
Certificates held in the Pass Through Trust and not yet used to purchase
Equipment Notes. The Pool Balance as of any Regular Distribution Date or Special
Distribution Date shall be computed after giving effect to the payment of
principal, if any, of the Equipment Notes and distribution thereof to be made on
that date.
"Pool Factor" means, for the Pass Through Trust, as of any Regular
Distribution Date or Special Distribution Date, if any, the quotient (rounded to
the seventh decimal place) computed by dividing (i) the Pool Balance by (ii) the
aggregate original principal amount of Pass Through Certificates issued by the
Pass Through Trust. The Pool Factor for the Pass Through Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes held in the
Pass Through Trust and distribution thereof to be made on that date.
"Record Date" means the fifteenth day preceding a Regular Distribution Date
or Special Distribution Date.
"Regular Distribution Date" means January 2 and July 2 of each year,
commencing July 2, 1995.
"Scheduled Payment" means each payment of principal of or interest on an
Equipment Note scheduled to be received by the Pass Through Trustee on January 2
or July 2 of each year, commencing July 2, 1995 until the final distribution
date for the Pass Through Trust, which payment represents the payment of
principal at stated maturity of, or the scheduled repayment of principal of,
such Equipment Note, or the regularly scheduled payment of interest accrued on
such Equipment Note.
"Special Distribution Date" means each day on which a Special Payment will
be distributed as specified in the Prospectus.
"Special Payment" means any payment of principal, Make-Whole Amount, if
any, and interest received by the Pass Through Trustee on account of the
prepayment, if any, of the Equipment Notes (or portion thereof) held in the Pass
Through Trust; any payment received by the Pass Through Trustee following an
Indenture Default in respect of the Equipment Notes held in the Pass Through
Trust, including payments received by the Pass Through Trustee on account of the
purchase by the applicable Owner Trustee of such Equipment Notes; payments
received by the Pass Through Trustee on account of the sale by it of such
Equipment Notes; and any return of escrowed funds
I-3
48
which have not been used to purchase Equipment Notes plus any payment of amounts
received by the Pass Through Trustee representing interest that would have been
paid on such escrowed funds had Equipment Notes been purchased with such
escrowed funds.
"Specified Investments" means (i) direct obligations of the United States
of America and agencies thereof for which the full faith and credit of the
United States of America is pledged, (ii) obligations fully guaranteed by the
United States of America, (iii) certificates of deposit issued by, or bankers'
acceptances of, or time deposits with, any bank, trust company or national
banking association incorporated or doing business under the laws of the United
States of America or one of the States thereof having combined capital and
surplus and retained earnings of at least $500,000,000 (including any Indenture
Trustee or Owner Trustee, in their respective individual capacities if such
conditions are met), (iv) commercial paper of companies, banks, trust companies
or national banking associations incorporated or doing business under the laws
of the United States of America or one of the States thereof and in each case
having a rating of A-1/P-1 or better assigned to such commercial paper by
Standard & Poor's Corporation or Moody's Investors Service, Inc. (or, if neither
such organization shall rate such commercial paper at any time, by any
nationally recognized rating organization in the United States of America) and
(v) repurchase agreements with any financial institution having a combined
capital and surplus of at least $750,000,000 fully collateralized by obligations
of the type described in clauses (i) through (iv) above; provided, however, that
if all of the above investments are unavailable, the entire amount to be
invested may be used to purchase Federal Funds from an entity described in (iii)
above; and provided, further, that no investment shall be eligible as a
"Specified Investment" unless the final maturity or date of return of such
investment occurs no later than December 31, 1994.
"Special Payment Account" means the one or more accounts established and
maintained pursuant to the Agreement and for the benefit of the
Certificateholders of such Pass Through Trust, for the deposit of payments
representing Special Payments.
"Stipulated Loss Value" means, as to a Unit, the amount payable under a
Lease upon the occurrence of an Event of Loss with respect to such Unit subject
to such Lease.
"Termination Value" means, as to a Unit, the amount required to be received
by an Owner Trustee under a Lease following certain early terminations of such
Lease with respect to such Unit.
I-4
49
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
PAGE
----------
Available Information............ 2
Reports to Certificateholders by
the Trustee.................... 2
Documents Incorporated by
Reference...................... 2
Summary.......................... 3
Formation of the Pass Through
Trust.......................... 9
Description of Payment Flows..... 10
Use of Proceeds.................. 11
The Company...................... 12
Capitalization................... 12
Selected Financial Information... 13
Description of the Pass Through
Certificates................... 15
Description of the Equipment
Notes.......................... 25
Certain Federal Income Tax
Consequences................... 39
Certain Illinois Taxes........... 41
ERISA Considerations............. 42
Underwriting..................... 43
Legal Opinions................... 43
Experts.......................... 43
Glossary of Certain Terms........ Appendix I
------------------
UNTIL MARCH , 1995 (90 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE PASS THROUGH CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$95,000,000
UNION TANK CAR COMPANY
1994-A
PASS THROUGH
TRUST
PASS THROUGH CERTIFICATES,
SERIES 1994-A
- ----------------------------------------------------
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
PROSPECTUS
DATED DECEMBER , 1994
50
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses (other than
underwriting discounts and commissions) to be incurred by the registrant in
connection with the offering described in this Registration Statement:
Securities and Exchange Commission registration fee...... $ 34,483
Blue Sky filing and counsel fees......................... 2,000
Trustees' fees and expenses.............................. 5,000
Printing expenses........................................ 35,000
Auditors' fees and expenses.............................. 20,000
Attorneys' fees and expenses............................. 100,000
Rating agency fees....................................... 55,000
Miscellaneous............................................ 8,517
--------
Total............................................. $260,000
- ---------------
* Estimate
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, Article Sixth of the
Company's Restated Certificate of Incorporation and Article VIII of the
Company's By-Laws authorize and empower the Company to indemnify its directors,
officers, employees and agents against liabilities incurred in connection with,
and related expenses resulting from, any claim, action or suit brought against
any such person as a result of such person's relationship with the Company,
provided that such persons acted in accordance with a stated standard of conduct
in connection with the acts or events on which such claim, action or suit is
based. The finding of either civil or criminal liability on the part of such
persons in connection with such acts or events is not necessarily determinative
of the question of whether such persons have met the required standard of
conduct and are, accordingly, entitled to be indemnified.
Reference is made to Section 8 of the form of Underwriting Agreement filed
as Exhibit 1 hereto for provisions regarding indemnification of the Company and
its officers, directors and controlling persons against certain liabilities.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- --------- ---------------------------------------------------------------------------------
1 Form of Underwriting Agreement.+
4(a)(1) Form of Pass Through Trust Agreement between the Pass Through Trustee and the
Company relating to the Pass Through Certificates.+
4(a)(2) Form of Pass Through Certificates (included in Exhibit 4(a)(1)).
4(b)(1) Form of Participation Agreement among the Company, the Owner Participant, the
Indenture Trustee, the Owner Trustee and the Pass Through Trustee relating to
each separate leveraged lease transaction.+*
4(b)(2) Form of Lease Agreement between the Company and the Owner Trustee.*
4(b)(3) Form of Trust Indenture and Security Agreement between the Indenture Trustee and
the Owner Trustee.+*
4(b)(4) Form of Equipment Note (included in Exhibit 4(b)(3)).
4(b)(5) Form of Trust Agreement between the Owner Participant and the Owner Trustee.*
II-1
51
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- --------- ---------------------------------------------------------------------------------
5(a) Opinion of Neal Gerber & Eisenberg, counsel for the Company.
5(b) Opinion of the Law Department of The First National Bank of Chicago.
8 Tax Opinion of Neal Gerber & Eisenberg, counsel for the Company.
12 Computation of Ratios of Earnings to Fixed Charges.**
23(a) Consent of Ernst & Young LLP, Independent Auditors.
23(b) Consent of Neal Gerber & Eisenberg (included in Exhibits 5 and 8).
23(c) Consent of the Law Department of The First National Bank of Chicago (included in
Exhibit 5(b).
24 Powers of Attorney.+
25 Statement of Eligibility of Pass Through Trustee on Form T-1.
- ---------------
+ Previously filed.
* Two separate Participation Agreements, Trust Indentures and Security
Agreements, Trust Agreements and Lease Agreements will be entered into with
respect to two separate leveraged lease transactions. Except for differences
in parties, dollar amounts, interest rates, percentages and the like, there
are no material details in which the indicated agreements relating to such
equipment not filed herewith differ from the corresponding exhibit for the
form of such document.
** The computation for each of the five fiscal years ended December 31, 1993,
1992, 1991, 1990 and 1989 is incorporated herein by reference to Exhibit 12
to the Company's Annual Report on Form 10-K for the year ended December 31,
1993.
ITEM 17. UNDERTAKINGS
A. UNDERTAKING REGARDING DOCUMENTS SUBSEQUENTLY FILED UNDER THE EXCHANGE
ACT.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
B. UNDERTAKING IN RESPECT OF INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described under Item 15 above, or otherwise,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
C. UNDERTAKINGS PURSUANT TO RULE 430A
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon
II-2
52
Rule 430A and contained in a form of prospectus filed by the Company pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Union Tank Car
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois on the 1st day of
December, 1994.
UNION TANK CAR COMPANY
/s/ ROBERT C. GLUTH
------------------------------------
Robert C. Gluth,
Executive Vice President,
Treasurer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 1st day of December, 1994.
SIGNATURE TITLE
- --------------------------------------------- --------------------------------------------
* /s/ JAY A. PRITZKER Chairman of the Board
- --------------------------------------------- and Director
Jay A. Pritzker
* /s/ ROBERT A. PRITZKER President and Director
- --------------------------------------------- (principal executive officer)
Robert A. Pritzker
/s/ ROBERT C. GLUTH Executive Vice President,
- --------------------------------------------- Treasurer and Director
Robert C. Gluth (principal financial and accounting officer)
* /s/ KENNETH P. FISCHL Director
- ---------------------------------------------
Kenneth P. Fischl
*By: /s/ ROBERT C. GLUTH
- ---------------------------------------------
Robert C. Gluth
Attorney-in-Fact
II-4