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EXHIBIT 4(b)(2)
EQUIPMENT LEASE AGREEMENT
(UTC TRUST NO. 1994-A_)
Dated as of December ___, 1994
Between
STATE STREET BANK AND TRUST COMPANY
not in its individual capacity except
as expressly provided herein but
solely as Owner Trustee,
Lessor
And
UNION TANK CAR COMPANY,
Lessee
COVERED HOPPERS AND TANK CARS
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO THIS LEASE, THE
EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN
ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN
FAVOR OF, THE FIRST NATIONAL BANK OF CHICAGO, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT
(UTC TRUST NO. 1994-A ), DATED AS OF DECEMBER __, 1994 BETWEEN SAID INDENTURE
TRUSTEE, AS SECURED PARTY, AND LESSOR, AS DEBTOR. INFORMATION CONCERNING SUCH
SECURITY INTEREST MAY BE OBTAINED FROM THE INDENTURE TRUSTEE AT ITS ADDRESS SET
FORTH IN SECTION 20 OF THIS LEASE. SEE SECTION 25.2 FOR INFORMATION CONCERNING
THE RIGHTS OF THE ORIGINAL HOLDER AND HOLDERS OF THE VARIOUS COUNTERPARTS
HEREOF.
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. ACCEPTANCE AND LEASING OF EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. TERM AND RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3.1 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3.2 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.3 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.4 Adjustment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.5 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.6 Manner of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4. OWNERSHIP AND MARKING OF EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.1 Retention of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.2 Duty to Number and Mark Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.3 Prohibition Against Certain Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5. DISCLAIMER OF WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 6. RETURN OF EQUIPMENT; STORAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6.1 Return; Holdover Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6.2 Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 7. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 8. MAINTENANCE; POSSESSION; COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.1 Maintenance and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8.3 Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 9. MODIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.1 Required Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.2 Optional Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 10. VOLUNTARY TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10.1 Right of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10.2 Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10.3 Retention of Equipment by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10.4 Termination of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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TABLE OF CONTENTS (cont'd)
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SECTION 11. LOSS, DESTRUCTION OR REQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.2 Replacement or Payment upon Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.3 Rent Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 11.4 Disposition of Equipment; Replacement of Unit . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 11.5 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 12. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.1 Physical Damage and Public Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.2 Physical Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 12.3 Public Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 12.4 Certificate of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 12.5 Additional Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 12.6 Pollution Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 13. REPORTS; INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.1 Duty of Lessee to Furnish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.2 Lessor's Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 14. LEASE EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 15. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 15.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 15.2 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 15.3 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 15.4 Notice of Lease Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 15.5 Lessee's Duty to Furnish Information with Respect to Subleases . . . . . . . . . . . . . . . . . 34
Section 15.6 Lessee's Duty to Return Equipment Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 15.7 Specific Performance; Lessor Appointed Lessee's Agent . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 16. FILINGS; FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.1 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.2 Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 16.3 Other Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 16.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 17. LESSOR'S RIGHT TO PERFORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 18. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 18.1 Assignment by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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TABLE OF CONTENTS (cont'd)
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Section 18.2 Assignment by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 18.3 Sublessee's Performance and Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 19. NET LEASE, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 20. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 21. CONCERNING THE INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 21.1 Limitation of the Indenture Trustee's Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 21.2 Right, Title and Interest of the Indenture Trustee Under Lease . . . . . . . . . . . . . . . . . 41
SECTION 22. PURCHASE OPTIONS; RENEWAL OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 22.1 Early Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 22.2 Election to Retain or Return Equipment at End of Basic or Renewal Term . . . . . . . . . . . . . 43
Section 22.3 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 22.4 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 22.5 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 22.6 Stipulated Loss Value and Termination Value During Renewal Term . . . . . . . . . . . . . . . . . 45
SECTION 23. LIMITATION OF LESSOR'S LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 24. INVESTMENT OF SECURITY FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 25. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.1 Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.2 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.3 Headings and Table of Contents; Section References . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.5 True Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.8 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.9 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.11 Lessee's Right of Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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TABLE OF CONTENTS (cont'd)
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Attachments to Equipment Lease:
Exhibit A -- Form of Lease Supplement A-1
Appendix A -- Definitions
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EQUIPMENT LEASE AGREEMENT
(UTC TRUST NO. 1994-A )
THIS EQUIPMENT LEASE AGREEMENT (L- ) (UTC Trust No. 1994-A ), dated as of
December __, 1994 (the "Lease"), between STATE STREET BANK AND TRUST COMPANY, a
Massachusetts banking corporation, not in its individual capacity except as
expressly provided herein, but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and UNION TANK CAR COMPANY, a Delaware corporation
("Lessee").
W I T N E S S E T H:
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, all capitalized terms used herein
without definition shall have the respective meanings set forth in Appendix A
hereto for all purposes of this Lease.
SECTION 2. ACCEPTANCE AND LEASING OF EQUIPMENT.
Lessor hereby agrees (subject to satisfaction or waiver of the conditions
set forth in Sections 4.1 and 4.3 of the Participation Agreement) to accept
delivery of each Unit from Lessee and to lease such Unit to Lessee hereunder,
and Lessee hereby agrees (subject to satisfaction or waiver of the conditions
set forth in Section 4.4 of the Participation Agreement), immediately following
such acceptance by Lessor, to lease from Lessor hereunder such Unit. Such
acceptance by Lessor and lease by Lessee is to be evidenced by the execution
and delivery by Lessee and Lessor of a Lease Supplement covering such Unit, all
in accordance with Section 2.3(b) of the Participation Agreement. Lessee
hereby agrees that its execution and delivery of a Lease Supplement covering
any Unit shall, without further act, irrevocably constitute acceptance by
Lessee of such Unit for all purposes of this Lease.
SECTION 3. TERM AND RENT.
Section 3.1 Lease Term. The interim term of this Lease (the "Interim
Term") for each Unit shall commence on the Closing Date and shall terminate on
the day before the Basic Term Commencement Date. The basic term of this Lease
(the "Basic Term") shall commence on the Basic Term Commencement Date and,
subject to earlier termination pursuant to Sections 10, 11, 15 and 22 shall
expire at 11:59 P.M. (Chicago time) on the Basic Term Expiration Date. Subject
and pursuant to Section 22.4, Lessee may elect one or more Renewal Terms.
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Section 3.2 Basic Rent. Lessee hereby agrees to pay Lessor as Basic Rent
for each Unit throughout the Basic Term applicable thereto Basic Rent in
consecutive semi-annual installments payable on each Rent Payment Date. Each
such semi-annual payment of Basic Rent shall be in an amount equal to the
product of the Equipment Cost for such Unit multiplied by the Basic Rent
percentage for such Unit set forth opposite such Rent Payment Date on Schedule
3 to the Participation Agreement (as such Schedule 3 shall be adjusted pursuant
to Section 2.6 of the Participation Agreement). Basic Rent shall be payable in
advance on certain Rent Payment Dates and in arrears on certain Rent Payment
Dates, as specified in Schedule 3 to the Participation Agreement, as so
adjusted, such Schedule 3 as so adjusted from time to time being incorporated
herein by reference.
Anything contained herein or in the Participation Agreement to the contrary
notwithstanding, each installment of Basic Rent (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) shall be,
under any circumstances and in any event, in an amount at least sufficient for
Lessor to pay in full as of the due date of such installment, any payment of
principal of and interest on the Equipment Notes required to be paid by Lessor
pursuant to the Indenture on such due date.
Section 3.3 Supplemental Rent. Lessee also agrees to pay to Lessor, or to
whomsoever shall be entitled thereto, any and all Supplemental Rent, promptly
as the same shall become due and owing, or where no due date is specified,
promptly after demand by the Person entitled thereto, and in the event of any
failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have
all rights, powers and remedies provided for herein or by law or equity or
otherwise as in the case of nonpayment of Basic Rent. Lessee will also pay, as
Supplemental Rent, (a) on demand, to the extent permitted by applicable law, an
amount equal to interest at the Late Rate on any part of any installment of
Basic Rent not paid when due for any period for which the same shall be overdue
and on any payment of Supplemental Rent not paid when due or demanded, as the
case may be, for the period from such due date or demand until the same shall
be paid, (b) in the case of the termination of this Lease with respect to any
Unit pursuant to Section 10, on the applicable Termination Date, an amount
equal to the Make-Whole Amount, if any, with respect to the principal amount of
each Equipment Note to be prepaid as a result of such termination, (c) in the
case of the purchase of any Unit pursuant to Section 22.1 or Section 6.9 of the
Participation Agreement, on such date of purchase, an amount equal to the
Make-Whole Amount, if any, with respect to the principal amount of each
Equipment Note to be prepaid as a result of such purchase, (d) an amount equal
to any other amount payable by Lessor on the Equipment Notes in excess of the
principal and interest payments due thereunder, as and when such amount shall
be due and payable, in accordance with the terms of the Equipment Notes and the
Indenture, and (e) in the case of any refinancing of the Equipment Notes
pursuant to Section 10.2 of the Participation Agreement, on the Refunding Date,
an amount equal to the Make-Whole Amount, if any, with respect to the aggregate
principal amount of the Equipment Notes being prepaid. All Supplemental Rent
to be paid pursuant to this Section 3.3 shall be payable in the type of funds
and in the manner set forth in Section 3.6.
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Section 3.4 Adjustment of Rent. Lessee and Lessor agree that the Basic
Rent, Stipulated Loss Value and Termination Value percentages and the Early
Purchase Price and Basic Term Purchase Price shall be adjusted to the extent
provided in Section 2.6 of the Participation Agreement, subject in all cases to
the limitation set forth in the second paragraph of Section 3.2.
Section 3.5 Advances. Lessor agrees to give notice to Lessee and the
Indenture Trustee at least five Business Days prior to the Basic Term
Commencement Date if the funds for the payment of interest on the Equipment
Notes contemplated to be made by Owner Trustee pursuant to Section 2.2(c) of
the Participation Agreement will not be paid by Owner Trustee to the Indenture
Trustee in an amount equal to the amount contemplated to be paid pursuant to
Section 2.2(c) of the Participation Agreement. If and to the extent that the
Indenture Trustee on the Basic Term Commencement Date shall not have received
funds from Owner Trustee sufficient for the payment in full of the interest
then due and owing on the Equipment Notes, Lessee shall pay as Supplemental
Rent, in one installment due on the Basic Term Commencement Date, an amount, if
any, equal to such deficiency (such payment being referred to herein as an
"Advance"). In the event Lessee makes any Advance pursuant to this Section 3.5
and is not promptly reimbursed therefor by Owner Participant after demand for
such reimbursement in the manner set forth in Section 20 and provided no Lease
Default shall have occurred and be continuing, Lessee shall be entitled to
offset and deduct (without duplication) against that portion of each succeeding
payment of Basic Rent, Stipulated Loss Value or Termination Value which becomes
payable to or to the order of Owner Trustee under the Indenture and
distributable to Owner Participant under the Trust Agreement, an amount equal
to such Advance plus interest on such amount at the Late Rate until Lessee has
been fully reimbursed for such Advance plus such interest and in each such
case, such offset shall be deemed to constitute a reduction in the amount of
such Advance so payable. No such offset or aggregate combined effect of
separate offsets shall reduce the amount of any indemnity or other claim
payable by Lessee to any holder of an Equipment Note, the Indenture Trustee or
Owner Trustee in its individual capacity, nor reduce any installment of Basic
Rent, or any payment of Stipulated Loss Value or Termination Value, to an
amount that is insufficient to pay in full the payments then required to be
made on account of the principal and interest on the Equipment Notes then
outstanding.
Section 3.6 Manner of Payments. All Rent (other than Supplemental Rent
payable to Persons other than Lessor, which shall be payable to such other
Persons in accordance with written instructions furnished to Lessee by such
Persons, as otherwise provided in any of the Operative Agreements or as
required by law) shall be paid by Lessee to Lessor at its office at 225
Franklin Street, Boston, Massachusetts 02110, Attention: Corporate Trust
Department. All Rent shall be paid by Lessee in funds consisting of lawful
currency of the United States of America, which shall be immediately available
to the recipient not later than 12:00 noon (New York City time) on the date of
such payment, provided, that so long as the Indenture shall not have been
discharged pursuant to the terms thereof, Lessor hereby directs, and Lessee
agrees, that all Rent (excluding Excepted Property) payable to Lessor shall be
paid directly to the Indenture Trustee at the times and in funds of the type
specified in this
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Section 3.6 at the office of the Indenture Trustee at The First National Bank
of Chicago, One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126,
ABA No. [070100013], Corporate Trust Clearing Account No. [48115377], For
credit to trust number ____________________, Attention:
______________________-UTC Trust No. 1994-A Trust No. 1994-1, or at such other
location in the United States of America as the Indenture Trustee may otherwise
direct.
SECTION 4. OWNERSHIP AND MARKING OF EQUIPMENT.
Section 4.1 Retention of Title. Lessor shall and hereby does retain full
legal title to and beneficial ownership of the Equipment notwithstanding the
delivery to and possession and use of the Equipment by Lessee hereunder or any
sublessee under any sublease permitted hereby.
Section 4.2 Duty to Number and Mark Equipment. With respect to the Units
to be delivered on the Closing Date, Lessee has caused, and as soon as
practicable after the date on which a Lease Supplement is executed and
delivered in respect of a Replacement Unit pursuant to Section 11.2, Lessee
will cause, each Unit to be numbered with its reporting mark shown on the Lease
Supplement dated the date on which such Unit was delivered and covering such
Unit, and will from and after such date keep and maintain, plainly, distinctly,
permanently and conspicuously marked by a plate or stencil printed in
contrasting colors upon each side of each Unit, in letters not less than one
inch in height, a legend substantially as follows:
"OWNERSHIP SUBJECT TO A SECURITY AGREEMENT FILED WITH THE
INTERSTATE COMMERCE COMMISSION"
with appropriate changes thereof and additions thereto as from time to time may
be required by law in order to protect Lessor's right, title and interest in
and to such Unit, its rights under this Lease and the rights of the Indenture
Trustee. Except as provided hereinabove, Lessee will not place any such Units
in operation or exercise any control or dominion over the same until the
required legend shall have been so marked on both sides thereof, and will
replace promptly any such word or words in such legend which may be removed,
defaced, obliterated or destroyed. Lessee will not change the reporting mark
of any Unit except in accordance with a statement of new reporting marks to be
substituted therefor, which statement shall be delivered by Lessee to Lessor
and, so long as the Indenture shall not have been discharged pursuant to its
terms, to the Indenture Trustee prior to or contemporaneously with such change.
A supplement to this Lease and, if not so discharged, the Indenture, with
respect to such new reporting marks, shall, prior to or contemporaneously with
the substitution of such reporting marks, be filed or recorded in all public
offices where this Lease and the Indenture shall have been filed or recorded
and in such other places, if any, where Lessor and, so long as the Indenture
shall not have been discharged pursuant to its terms, the Indenture Trustee may
reasonably request in order to protect, preserve and maintain its right, title
and interest in the Units. The costs and expenses of all such supplements,
filings and recordings shall be borne by Lessee.
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Section 4.3 Prohibition Against Certain Designations. Except as above
provided, Lessee will not allow the name of any Person to be placed on any Unit
as a designation that might reasonably be interpreted as a claim of ownership;
provided, however, that subject to the delivery of the new reporting marks
statement specified in the third sentence of Section 4.2, Lessee may cause the
Equipment to be lettered with the names or initials or other insignia
customarily used by Lessee or any permitted sublessees or any of their
respective Affiliates on railroad equipment used by it of the same or a similar
type for convenience of identification of the right of Lessee to use the
Equipment hereunder or any permitted sublessee to use the Equipment pursuant to
a sublease permitted hereby.
SECTION 5. DISCLAIMER OF WARRANTIES.
Without waiving any claim Lessee may have against any seller, supplier or
manufacturer, LESSEE ACKNOWLEDGES AND AGREES THAT, (i) EACH UNIT IS OF A SIZE,
DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii)
LESSEE IS SATISFIED THAT EACH UNIT IS SUITABLE FOR ITS PURPOSES AND LESSEE HAS
ACCEPTED EACH UNIT, (iii) NEITHER LESSOR NOR OWNER PARTICIPANT IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND OR HAS INSPECTED THE UNITS
PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE, (iv) EACH UNIT IS LEASED
HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS NOW IN
EFFECT OR HEREAFTER ADOPTED, AND (v) LESSOR LEASES AND LESSEE TAKES EACH UNIT
"AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", IN WHATEVER CONDITION IT MAY BE, AND
LESSEE ACKNOWLEDGES THAT NEITHER LESSOR, AS LESSOR OR IN ITS INDIVIDUAL
CAPACITY, NOR OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND
EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR
REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS
FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO
THE TITLE, OF THE EQUIPMENT, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF
OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR
TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR
NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
WHATSOEVER WITH RESPECT THERETO AND EACH OF LESSOR AND OWNER PARTICIPANT
EXPRESSLY DISCLAIMS SELECTION OF THE UNITS, except that Lessor, in its
individual capacity, represents and warrants that on the Closing Date, Lessor
shall have received whatever title to the Equipment as was conveyed to Lessor
by Lessee and each Unit will be free of Lessor's Liens attributable to Lessor
and provided that the foregoing disclaimer in clause (v) shall not extend to
Owner Participant's representation and warranty contained in Section 3.6(e) of
the Participation Agreement. Lessor hereby appoints and constitutes Lessee its
agent and attorney-in-fact during the Lease Term to assert and enforce, from
time to time, in the name and for the account of Lessor and Lessee, as their
interests may appear, but in all cases at the sole
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cOst and expense of Lessee, whatever claims and rights Lessor may have as owner
of the Equipment against the manufacturers or any prior owner thereof;
provided, however, that if at any time a Lease Event of Default shall have
occurred and be continuing, at Lessor's option, such power of attorney shall
terminate, and Lessor may assert and enforce, at Lessee's sole cost and
expense, such claims and rights. Lessor shall have no responsibility or
liability to Lessee or any other Person with respect to any of the following:
(i) any liability, loss or damage caused or alleged to be caused directly or
indirectly by any Unit, or by any of the commodities, items or materials from
time to time contained therein, whether or not permitted by the terms hereof,
or by any inadequacy thereof or deficiency or defect therein or by any other
circumstances in connection therewith; (ii) the use, operation or performance
of any Unit or any risks relating thereto; (iii) any interruption of service,
loss of business or anticipated profits or consequential damages; or (iv) the
delivery, operation, servicing, maintenance, repair, improvement or replacement
of any Unit. Lessee's delivery of a Lease Supplement shall be conclusive
evidence as between Lessee and Lessor that all Units described therein are in
all the foregoing respects satisfactory to Lessee, and Lessee will not assert
any claim of any nature whatsoever against Lessor based on any of the foregoing
matters.
SECTION 6. RETURN OF EQUIPMENT; STORAGE.
Section 6.1 Return; Holdover Rent.
(a) Not less than 120 days prior to the end of the Basic Term, the end of
any Fixed Rate Renewal Term, or the end of any Fair Market Renewal Term, in
each case with respect to any Units which Lessee has elected to return under
Section 22.2, Lessee will provide Lessor with [_______]1 storage locations used
for the storage of rolling stock within the continental United States
(excluding Alaska), which locations, to the extent practicable, shall be
geographically diverse. Not less than 90 days prior to the end of the Lease
Term with respect to any Unit which has not been purchased by Lessee, Lessor
will give Lessee irrevocable notice of its decision either to take possession
of or store such Unit. If Lessor shall have decided to take possession of such
Unit, the terms of Section 6.1(b) will apply. If Lessor shall have decided to
store such Unit, the terms of Section 6.1(c) hereof will apply.
(b) If Lessor shall have decided to take possession of such Unit, Lessee
will, at its own cost and expense, deliver possession of such Unit at any track
location, f.o.b. such location, (i) as may be agreed upon by Lessor and Lessee
in writing, or (ii) in the absence of such agreement, as Lessor may reasonably
select by written notice to Lessee delivered on or before the 90th day before
the end of the Lease Term; provided, that (x) there shall be no more than
[______]1 such locations designated by Lessor (each of which shall be located
within the continental United States, exclusive of Alaska), (y) there shall be
no less than [25] Units (any group of 25 Units, an "Inspectable Group")
returned to each location, and (z) Lessor's notice
_______________
1 There will be a total of 21 return locations, allocated proportionately
between the two Leases based on the number of Units subject to each Lease.
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shall specify the total number and type of Units to be delivered to each
location. Upon the request of Lessor, maintenance records with respect to any
Unit shall be made available to Lessor or its designee upon the return of such
Unit.
(c) (i) If Lessor shall have elected to store any Unit upon the expiration
of the Lease Term with respect thereto, Lessee shall store such Unit, free of
charge for a period (the "Storage Period") beginning on the expiration of the
Lease Term and ending not more than 60 days after the later of (A) the date
of such expiration of the Lease Term and (B) the date on which such Unit is
in compliance with the conditions set forth in Section 6.2. Any storage
provided by Lessee during the Storage Period shall be at the sole risk and
expense of Lessee and Lessee shall maintain the insurance required by Section
12.1 with respect to all stored Units. During the Storage Period, Lessee
will permit Lessor or any person designated by it, including the authorized
representative or representatives of any prospective purchaser or user of
such Unit, to restencil the marks on such Unit and to inspect the same during
Lessee's normal business hours upon at least three Business Days' prior
telephonic notice; provided, however, that such inspection and restenciling
shall not unreasonably interfere with the normal conduct of Lessee's business
and shall be subject to Lessee's and the storage location's standard security
and safety rules and regulations; and provided, further, that (x) such
inspection and restenciling shall be at such Person's own risk, (y) Lessee
shall be protected against any loss or damage incurred by it in connection
with any such inspection or restenciling by such Person through
indemnification, insurance or other means reasonably satisfactory to Lessee
and (z) Lessee (except in the case of Lessee's gross negligence or wilful
misconduct) shall not be liable for any injury to, or the death of, any
Person exercising, either on behalf of Lessor or any prospective purchaser or
user, the rights of inspection and restenciling granted pursuant hereto.
Lessee shall not be required to store the Equipment after the Storage Period.
If Lessee does store any Unit after the expiration of the Storage Period,
such storage shall be at the sole risk and expense of Lessor.
(ii) Upon the request and direction of Lessor (and at Lessor's sole risk
and expense), on not more than one occasion with respect to each stored Unit
and upon not less than 30 days' prior written notice from Lessor to Lessee,
Lessee will, on or before the expiration of the Storage Period, transport
such Units to any railroad interchange point or points (not to exceed
[______]2 in total), within the continental United States (except Alaska),
with a minimum of at least an Inspectable Group delivered to each interchange
point on any railroad lines or to any connecting carrier for shipment,
whereupon Lessee shall have no further liability or obligation with respect
to such Units.
(d) Provided no Lease Default referred to in Section 14(g) or (h) or Lease
Event of Default shall have occurred and be continuing, all amounts
earned in respect of a Unit subsequent to the expiration of the Lease Term
with respect to such Unit and prior to the return
_______________
2 See footnote 1 on previous page.
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of the Unit hereunder shall belong to Lessee and, if received by Lessor, shall
be promptly turned over to Lessee.
(e) Subject to the other provisions of this Section 6.1 with respect to
additional Holdover Rent, Lessee shall pay Holdover Rent (hereinafter defined)
for each Unit for each day from the date of expiration or termination of the
Lease with respect to such Unit to the date such Unit is (i) returned to the
location specified pursuant to Section 6.1(b) or (ii) delivered and stored for
Lessor pursuant to Section 6.1(c). During such holdover period, Lessee shall
use its reasonable best efforts to secure the return of the Equipment as
required under this Section 6.
(f) In the event any Unit is not returned to Lessor in the condition
specified in Section 6.2, Lessee shall pay to Lessor the daily equivalent of
the rental rate in effect at the expiration or termination of the most recent
Lease Term with respect to such Unit (the "Holdover Rent") multiplied by the
number of days equal to the sum of (i) one-half of the number of days elapsed
between the delivery of the Unit to the location specified in Section 6.1(b) or
6.1(c), as appropriate, and the date on which such Unit was inspected by Lessor
(provided, however, that in no event shall the number determined pursuant to
this clause (i) exceed 30), plus (ii) the number of days following receipt by
Lessee of notice from Lessor, which is given within the three-day period
specified in Section 6.1(h), that such Unit is not in the condition specified
by Section 6.2 required by Lessee to restore such Unit to such condition.
Notwithstanding the foregoing, if the reasonable cost of repairs required to
restore any Unit to the condition set forth in Section 6.2 is less than $500,
then (A) Lessor shall be responsible for making such repairs, the cost of which
shall be reimbursed by Lessee, and (B) the Unit shall be deemed to comply with
the conditions set forth in Section 6.2 and no additional Holdover Rent shall
be payable under this Section 6.2(d) with respect thereto solely as a result of
the condition of the Unit.
(g) Holdover Rent shall be paid monthly in arrears, by payment from Lessee
to Lessor on or before the fifth day following the end of each calendar month,
in the manner specified in Section 3.6 hereof, such payment to be accompanied
by a statement setting forth in reasonable detail the calculation of such
payment on a per Unit basis.
(h) During the 60-day period commencing on the date on which a minimum of
at least an Inspectable Group is delivered, pursuant to Section 6.1 (b) or (c),
to Lessor or to a storage location, as appropriate (the "Inspection Period"),
Lessor shall be entitled to inspect any Unit so delivered to ensure that such
Unit is in the condition required under Section 6.2. Lessor shall promptly
(but in no event later than three Business Days following the foregoing
inspection) notify Lessee if any Units are not in compliance with the
conditions specified in Section 6.2. Subject to Section 6.1(f), no Holdover
Rent shall be payable by Lessee during the Inspection Period. All inspections
of any redelivered Unit shall be performed at Lessor's sole cost, expense and
risk (including, without limitation, the risk of personal injury or death), by
its authorized representatives. Lessee shall not be liable for any injury to,
or the death of, any Person exercising, on behalf of Lessor, the rights of
inspection granted under this Section 6.1
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unless caused by Lessee's gross negligence or wilful misconduct. If such Unit
is not in compliance with the conditions set forth in Section 6.2, then Lessee
shall promptly take such steps as are necessary to bring such Unit into such
compliance and shall, subject to the last sentence of Section 6.1(e) pay, in
addition to Holdover Rent otherwise owing under this Section 6.1, if any, the
reasonable cost and expense of any reinspection of such Unit conducted by
Lessor required because of such non-compliance with Section 6.2. No inspection
pursuant to this Section 6.1(f) shall unreasonably interfere with the normal
conduct of business by Lessee, any sublessee or the location to which such Unit
is returned. Lessee shall provide (or cause any sublessee or owner of the
return location to provide) reasonable cooperation to Lessor and its
representatives in connection with such inspection, but Lessee shall not be
required to undertake or incur any additional liabilities in connection
therewith. A Unit shall not be deemed to have been returned to Lessor for
purposes of this Lease unless and until it is in compliance with the conditions
set forth in Section 6.2.
Section 6.2 Condition of Equipment. Each Unit, when returned to Lessor
pursuant to Section 6.1, shall be (a) capable of performing the functions for
which it was designed, with all loading and unloading components operating in
good working order with allowance for normal wear and tear, (b) suitable for
use in interchange in accordance with the Field Manual of the AAR and FRA rules
and regulations, (c) suitable for continued commercial use in the commodity
last carried immediately prior to such return, (d) in all material respects, in
the condition required by Section 8.1, (e) in conformance with any requirement
pertaining to warranties of the manufacturer of the Units during the warranty
period, (f) fit for loading and acceptable for interchange service generally in
the transportation industry after giving effect to a transfer or change in
ownership (in accordance with applicable interchange rules), (g) empty, (h)
steam cleaned or otherwise cleaned in a comparable commercially acceptable
manner, and (i) free and clear of all Liens except Lessor's Liens and Permitted
Liens of the type described in clause (iii) of the definition of Permitted
Liens to the extent arising as a result of a fleet wide action which includes
such Unit; provided, however, that in the event Lessor fails to inspect any
Unit during the Inspection Period and/or fails to notify Lessee prior to the
end of the three-Business Day period specified in Section 6.1(h), that such
Unit is not in the condition specified by Section 6.2, Lessee's obligation to
comply with the conditions set forth in this Section 6.2 shall terminate.
SECTION 7. LIENS.
Lessee will not directly or indirectly create, incur, assume, permit or
suffer to exist any Lien on or with respect to any Units or Lessee's leasehold
interest therein under this Lease, except Permitted Liens, Lessor's Liens and
Liens described in Section 6.4(a) and 6.4(b) of the Participation Agreement,
and Lessee shall promptly, at its own expense, take such action or cause such
action to be taken as may be necessary to duly discharge (by bonding or
otherwise) any such Lien not excepted above if the same shall arise at any
time.
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SECTION 8. MAINTENANCE; POSSESSION; COMPLIANCE WITH LAWS.
Section 8.1 Maintenance and Operation. (a) Lessee, 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 Lessee in respect of
equipment owned or leased by Lessee similar in type to such Unit, (iii) in
accordance in all material respects with all manufacturer's warranties and in
accordance with all applicable provisions, if any, of insurance policies
required to be maintained pursuant to Section 12, and (iv) in compliance in all
material respects with any applicable laws and regulations, including, without
limitation, the Field Manual of the AAR, FRA rules and regulations and
Interchange Rules as they apply to the maintenance and operation of the
Equipment in interchange regardless of upon whom such applicable laws and
regulations are nominally imposed; provided, however, that Lessee may, in good
faith and by appropriate proceedings diligently conducted, contest the
validity or application of any such standard, rule or regulation in any
reasonable manner which does not materially interfere with the use, possession,
operation or return of any of the Units or materially adversely affect the
rights or interests of Lessor and the Indenture Trustee in the Equipment or
hereunder or otherwise expose Lessor, the Indenture Trustee or any Participant
to criminal sanctions or release Lessee from the obligation to return the
Equipment in compliance with the provisions of Section 6.2. Lessee shall
provide Lessor and the Indenture Trustee with notice of any contest of the type
described in the preceding sentence in detail sufficient to enable Lessor and
the Indenture Trustee to ascertain whether such contest may have an effect of
the type described in the preceding sentence. In no event shall Lessee
discriminate as to the use or maintenance of any Unit (including the
periodicity of maintenance or record keeping in respect of such Unit) as
compared to equipment of a similar nature which Lessee owns or leases. Lessee
will maintain all records, logs and other materials required by relevant
industry standards or any governmental authority having jurisdiction over the
Units required to be maintained in respect of any Unit, all as if Lessee were
the owner of such Units, regardless of whether any such requirements, by their
terms, are nominally imposed on Lessee, Lessor or Owner Participant.
(b) Lessee shall not or expressly permit any sublessee to change a DOT
classification (as provided for in 49 C.F.R. Part 179 or any successor
thereto), or expressly permit any sublessee to operate any Unit under a
different DOT classification, from that classification in effect for such Unit
on the Closing Date, except for any change in tank test pressure rating
provided such change does not increase the pressure rating of the Unit above
the tank test pressure to which the Unit was manufactured; provided however,
that in the event Lessor shall not have provided Lessee with a written waiver
or consent to such a reclassification or operation of any Unit within 10
Business Days of Lessee's written request therefor (or Lessor expressly rejects
such a request by Lessee), Lessee may replace such Unit in accordance with and
subject to the provisions of Section 11.2(i), 11.3 and 11.4.
Section 8.2 Possession. Lessee shall be entitled to the possession and use
of the Equipment by it or any Affiliate, in the United States, Canada and
Mexico, only in the manner
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for which it was designed and intended and so as to subject it only to ordinary
wear and tear. In no event shall Lessee make use of any Equipment in any
jurisdiction not included in the insurance coverage required by Section 12.
The Equipment shall be used primarily on domestic routes in the United States,
and in no event 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 the transaction generates tax losses. Nothing
in this Section 8.2 shall be deemed to constitute permission by Lessor to any
Person that acquires possession of any Unit to take any action inconsistent
with the terms and provisions of this Lease and any of the other Operative
Agreements. The rights of any Person that acquires possession of any Unit
pursuant to this Section 8.2 shall be subject and subordinate to the rights of
Lessor hereunder.
Section 8.3 Sublease. Provided Lessor shall not have declared the Lease to
be in default (or the Lease shall not be deemed to have been declared in
default) pursuant to Section 15.1 hereof, Lessee shall be entitled, without the
prior approval of Lessor, to enter into a sublease for any Unit or Units
(pursuant to a car service contract or otherwise) to, or to grant permission
for the use thereof under car contracts by, (a) a railroad company or companies
incorporated under the laws of the United States or any state thereof or the
District of Columbia, Canada or any province thereof, or Mexico or any state
thereof, upon lines of railroad owned or operated by such railroad company or
companies or over which such railroad company or companies have trackage rights
or rights for operation of their trains, and upon connecting and other carriers
in the usual interchange of traffic or (b) responsible companies other than
railroad companies for use in their business (leases to such sublessees being
herein referred to as "Permitted Subleases"); provided, however, that if Lessee
subleases any Unit to a sublessee which operates primarily in Mexico (or any
state thereof), Lessee shall first have made all registrations, filings and
deposits which are necessary or advisable under then-current prudent industry
practice (including any actions reasonably requested by Lessor or the Indenture
Trustee) to protect the right, title and interest of Lessor under this Lease
and the Indenture Trustee under the Indenture in and to the Units to be so
subleased. All subleases shall include appropriate provisions so that such
subleases, (i) shall in all events be subject and subordinate to this Lease and
the rights and interests of Lessor and its respective successors and assigns
hereunder and shall confirm such subordination by a provision substantially in
the form currently contained in Lessee's standard car service contract
delivered to Lessor and the Indenture Trustee prior to the Closing Date, or
otherwise as satisfactory to Lessor and the Indenture Trustee, (ii) shall not
be for a term which extends beyond the Basic Term and any agreed upon Renewal
Term, and (iii) shall not include any term or provision which could reasonably
be expected to result in material adverse consequences to Lessor, Owner
Participant or the Indenture Trustee. In the event Lessee (A) desires to
sublease one or more Units for a term which extends beyond the Basic Term or
Renewal Term, or (B) enters into a sublease with respect to one or more Units,
which sublease contains terms and conditions that are not consistent with the
requirements hereof, Lessee will have the option to replace such Unit on or
prior to the expiration of the Basic Term or any Renewal Term with another Unit
in accordance with and subject to the provisions hereof and of Section 11.2(i),
11.3 and 11.4 by delivering to Lessor, not less than 15 days prior to such
replacement a notice stating that Lessee has exercised its option hereunder and
advising Lessor of the date on which the replaced Unit will be so replaced;
provided that
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if replacement is made pursuant to foregoing clause (B), such notice shall be
accompanied by an Officer's Certificate (executed by Lessee's President or any
Vice President) stating that such replacement is required for valid business
reasons arising in the ordinary course of Lessee's business as an operating
lessor and briefly setting forth the reasons therefor. In the event Lessee
exercises its option pursuant to foregoing clause (A) or (B), on the date
specified for replacement in the notice delivered by Lessee in connection
therewith, Lessee shall transfer title of the replacement Unit to Lessor,
Lessor shall transfer title of the replaced Unit to Lessee, and Lessee and
Lessor shall deliver to each other such documents and other instruments as are
required by Section 11.4(b). Except in connection with an assignment pursuant
to a transaction permitted by Section 6.8 of the Participation Agreement, no
sublease entered into by Lessee hereunder shall relieve Lessee of any liability
or obligation hereunder, which shall be and remain those of a principal and not
a surety. Nothing in this Section 8.3 shall be deemed to constitute permission
to any Person in possession of any Unit pursuant to any such sublease to take
any action inconsistent with the terms and provisions of this Lease or any of
the other Operative Agreements.
SECTION 9. MODIFICATIONS.
Section 9.1 Required Modifications. In the event the AAR, the United
States Department of Transportation, or any other United States, state or local
governmental agency or any other applicable law requires that any Unit be
altered, replaced or modified (a "Required Modification"), Lessee agrees to
make such Required Modification at its own expense; provided, however, that
Lessee may, in good faith and by appropriate proceedings diligently conducted,
contest the validity or application of any such law, regulation, requirement or
rule in any reasonable manner which does not materially interfere with the use,
possession, operation or return of any Unit or materially adversely affect the
rights or interests of Lessor and the Indenture Trustee in the Equipment or
hereunder or otherwise expose Lessor, the Indenture Trustee or any Participant
to criminal sanctions or relieve Lessee of the obligation to return the
Equipment in compliance with the provisions of Section 6.2. Title to any
Required Modification shall immediately vest in Lessor. Notwithstanding
anything herein to the contrary, if Lessee determines in good faith that any
Required Modification to a Unit would be economically impractical, in lieu of
making the Required Modification as provided above, Lessee may provide written
notice of such determination to Lessor and either (i) treat such Unit as if an
Event of Loss had occurred as of the date of such written notice with respect
to such Unit; provided that upon such occurrence Lessee shall have only the
right to replace such Unit under the provisions of Section 11.2(i), 11.3 and
11.4, or (ii) if such determination is made on or after the seventh anniversary
of the Basic Term Commencement Date, either treat such Unit as provided in
clause (i) above or treat such Unit as a Terminated Unit on the terms and
conditions set forth in Section 10.1; provided that Lessee shall not
discriminate against such Unit in making such determination of economic
impracticality as compared with other equipment of the same type as such Unit
which is owned or leased by Lessee.
Section 9.2 Optional Modifications. Lessee at any time may in its
discretion and at its own cost and expense modify, alter or improve any Unit in
a manner which is not required
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by Section 9.1 (a "Modification"); provided that no Modification shall diminish
the fair market value, utility, or remaining useful life of such Unit below the
value, utility, or remaining useful life thereof immediately prior to such
Modification, other than in a de minimis manner, assuming such Unit was then in
the condition required to be maintained by the terms of this Lease, or cause
such Unit to become Limited Use Property. Title to any Non-Severable
Modification shall be immediately vested in Lessor. Title to any Severable
Modification shall remain with Lessee unless it is a Required Modification, in
which case title shall vest in Lessor pursuant to Section 9.1. If Lessee, at
its cost and expense, shall cause such Severable Modifications (which are not
Required Modifications) to be made to any Unit, Lessor shall have the right,
upon 90 days prior written notice in the case of a return other than pursuant
to Section 15.6, prior to the return of such Unit to Lessor hereunder, to
purchase such Severable Modifications (other than Severable Modifications
consisting of proprietary or communications equipment) at their then Fair
Market Sales Value (taking into account their actual condition). If Lessor
does not so elect to purchase such Severable Modifications, Lessee may remove
such Severable Modifications at Lessee's cost and expense and, if requested
(which request shall be made by not less than 90 days prior written notice in
the case of a return other than pursuant to Section 15.6) by Lessor will, so
remove such Severable Modifications at Lessee's cost and expense.
Section 9.3 Removal of Property; Replacements. Lessee may, in the ordinary
course of maintenance or repair of any Unit, remove any item of property
constituting a part of such Unit, and, unless the removal of such item is
required by Section 9.1 hereof, Lessee shall replace such item as promptly as
practicable with an item of property that is free and clear of all Liens (other
than Permitted Liens) and in as good operating condition as, and with a value,
utility and useful life at least equal to, the item of property being replaced,
assuming that such replaced item was in the condition required to be maintained
by the terms of this Lease. Any item of property removed from such Unit as
provided in the preceding sentence shall remain the property of Lessor free and
clear of all rights of Lessee until replaced in accordance with the terms of
such sentence, but shall then, without further act, become the property of
Lessee. Any such replacement property shall, without further act, become the
property of Lessor and be deemed part of such Unit for all purposes hereof.
SECTION 10. VOLUNTARY TERMINATION.
Section 10.1 Right of Termination. So long as no Lease Default or Lease
Event of Default shall have occurred and be continuing, Lessee shall have the
right, at its option at any time or from time to time during the Basic Term on
or after the seventh anniversary of the Basic Term Commencement Date, to
terminate the Lease Term with respect to any or all of the Units (provided
that, if such termination is for less than all Units in a Functional Group, the
determination as to which Units are subject to termination shall be made by
Lessee on a random or other reasonable basis without discrimination based on
maintenance status or operating condition of the Units in question) (the
"Terminated Units") if Lessee determines in good faith (as evidenced by a
certified copy of a resolution adopted by Lessee's Board of Directors and a
certificate executed by the Chief Financial Officer of Lessee) either (a) that
such Units have become obsolete or surplus to Lessee's requirements, or (b) in
the circumstances described in
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clause (ii) of the last sentence of Section 9.1, that a Required Modification
to such Units would be economically impractical. Lessee shall be entitled to
exercise its termination rights under this Section 10.1 by delivering at least
120 days' prior notice to Lessor, the Indenture Trustee and the Pass Through
Trustee (i) specifying a proposed date of termination for such Units (the
"Termination Date"), which date shall, except as provided in the last sentence
of Section 10.3, be a Rent Payment Date, any such termination to be effective
on the Termination Date, and (ii) if some but less than all of the Units in a
Functional Group are designated as Terminated Units, describing the
nondiscriminatory manner in which Lessee proposes to determine which Units in
that Functional Group are to be Terminated Units. Except as expressly provided
herein, there will be no conditions to Lessee's right to terminate this Lease
with respect to the Terminated Units pursuant to this Section 10.1. So long as
(A) Lessor shall not have given Lessee a notice of election to retain the
Terminated Units in accordance with Section 10.3, or (B) notice of prepayment
of the Equipment Notes shall not have been given pursuant to Section 2.10 of
the Indenture, Lessee may withdraw the termination notice referred to above at
any time prior to the Termination Date, whereupon this Lease shall continue in
full force and effect; provided that Lessee (1) may not exercise its right to
withdraw such a termination notice more than once annually, and (2) may not
withdraw any termination notice with respect to any Terminated Units after
receipt by Lessee of a bid equal to or greater than the Termination Value with
respect to such Terminated Units or later than sixty (60) days prior to the
scheduled Termination Date. Lessee agrees that if it withdraws a termination
notice it will reimburse Lessor, Owner Participant and the Indenture Trustee
for all reasonable out-of-pocket costs and expenses (including reasonable legal
fees and expenses) incurred by any thereof in connection therewith.
Section 10.2 Sale of Equipment. During the period from the date of such
notice given pursuant to Section 10.1 to the Termination Date, Lessee, as agent
for Lessor and, except as provided in Section 10.3, at Lessee's sole cost and
expense, shall use its reasonable best efforts to obtain bids from Persons
other than Lessee or Affiliates thereof for the cash purchase of the Terminated
Units, and Lessee shall promptly, and in any event at least five Business Days
prior to the proposed date of sale, certify to Lessor in writing the amount and
terms of each such bid, the proposed date of such sale and the name and address
of the party submitting such bid. Unless Lessor shall have elected to retain
the Terminated Units in accordance with Section 10.3, on the Termination Date:
(a) Lessee shall, subject to the prior or concurrent receipt (x) by Lessor of
all amounts owing to Lessor pursuant to the next sentence, and (y) by the
Persons entitled thereto of all unpaid Supplemental Rent due on or before the
Termination Date, deliver the Terminated Units (excluding any optional
Severable Modifications removed by Lessee pursuant to Section 9.2) to the
bidder (which shall not be Lessee or any Affiliate thereof), if any, which
shall have submitted the highest cash bid prior to such date (or to such other
bidder as Lessee and Lessor shall agree), in the same manner and condition as
if delivery were made to Lessor pursuant to Section 6 and (b) Lessor shall,
without recourse or warranty (except as to the absence of any Lessor's Lien)
simultaneously therewith transfer all of its right, title and interest in and
to the Terminated Units to such bidder. The net proceeds of sale realized at
such sale shall be paid to and retained by Lessor and, in addition, on the
Termination Date, Lessee shall pay to Lessor, (i) all unpaid Rent with respect
to such Terminated Units due and payable on or prior to the Termination Date
(exclusive of any in advance Basic Rent due on such date), (ii) the
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excess, if any, of (A) the Termination Value for the Terminated Units computed
as of the Termination Date, over (B) the net cash sales proceeds (after the
deduction of all reasonable costs and expenses of Lessor and Owner Participant
in connection with such sale) of the Terminated Units, and (iii) an amount
equal to the Make-Whole Amount, if any, in respect of the principal amount of
the Equipment Notes to be prepaid in accordance with Section 2.10(a) of the
Indenture. If no sale shall have occurred, whether as a result of Lessee's
failure to pay all of the amounts hereinabove required or otherwise, this Lease
shall continue in full force and effect with respect to such Units and Lessee
agrees to reimburse Lessor, Owner Participant and the Indenture Trustee for all
reasonable costs and expenses (including reasonable legal fees and expenses)
incurred by any thereof in connection therewith; provided that if such sale
shall not have occurred solely because of Lessee's failure to pay the amounts
hereinabove required, Lessee shall have no further right to terminate this
Lease with respect to such Units. Lessee, in acting as agent for Lessor, shall
have no liability to Lessor for failure to obtain the best price, shall act in
its sole discretion and shall be under no duty to solicit bids publicly or in
any particular market. Lessee's sole interest in acting as agent shall be to
use its reasonable best efforts to sell the Units at the highest price then
obtainable consistent with the terms of this Lease.
Section 10.3 Retention of Equipment by Lessor. Notwithstanding the
provisions of Sections 10.1 and 10.2, Lessor may irrevocably elect by written
notice to Lessee, no later than 60 days after receipt of Lessee's notice of
termination, not to sell the Terminated Units on the Termination Date,
whereupon Lessee shall (a) deliver the Terminated Units to Lessor in the same
manner and condition as if delivery were made to Lessor pursuant to Section 6,
treating the Termination Date as the termination date of the Lease Term with
respect to the Terminated Units, and (b) pay to Lessor, or to the Persons
entitled thereto, all Basic Rent and all Supplemental Rent due and owing on the
Termination Date and unpaid (exclusive of any in advance Basic Rent due on such
date but inclusive of any Supplemental Rent measured by the Make-Whole Amount).
If Lessor elects not to sell the Terminated Units as provided in this Section
10.3, then Lessor shall pay, or cause to be paid, to the Indenture Trustee in
funds of the type and in an amount equal to the outstanding principal amount of
the Equipment Notes issued in respect of such Terminated Units and all accrued
and unpaid interest to the date of prepayment of such Equipment Notes on such
Termination Date and an amount equal to the Make-Whole Amount, if any, in
respect of the principal amount of the Equipment Notes to be prepaid without in
any manner relieving Lessee of its obligation to pay any such amount pursuant
to the preceding sentence; provided that unless Lessor shall have paid all such
amounts to the Indenture Trustee on the Termination Date, this Lease shall
continue in full force and effect. If Lessor shall fail to pay the amounts
required pursuant to this Section 10.3 and as a result thereof this Lease shall
not be terminated with respect to the Terminated Units on a proposed
Termination Date, Lessor shall (x) thereafter no longer be entitled to exercise
its election to retain such Terminated Units, and (y) reimburse Lessee for any
expenses (including reasonable legal fees and expenses) incurred by it in
attempting to sell the Terminated Units pursuant to Section 10.2 immediately
prior to Lessor's exercise of such preemptive election, and Lessee may at its
option at any time thereafter prior to the immediately following Rent Payment
Date submit a new termination notice pursuant to Section 10.1 with respect to
such Terminated
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Units specifying a proposed Termination Date occurring on a Business Day
occurring not earlier than 25 days from the date of such notice; provided that
for purposes of determining the amount to be paid by Lessee pursuant to Section
10.2, the Termination Date shall be deemed to be the Termination Date on which
Lessor failed to make the payments provided in this Section 10.3.
Section 10.4 Termination of Lease. In the event of either (a) any such
sale and receipt by Lessor and the Indenture Trustee of all of the amounts
provided in Section 10.2 or (b) retention of the Equipment and payment in full
by Lessor in compliance with Section 10.3, and upon compliance by Lessee with
the other provisions of this Section 10, the obligation of Lessee to pay Basic
Rent hereunder for such Terminated Units shall cease and the Lease Term for
such Terminated Units shall end. Upon the conveyance of a Replacement Unit or
the payment of all sums required to be paid in respect of any Unit or Units,
Lessor will convey to Lessee or its designee all right, title and interest of
Lessor in and to such Unit or Units, "as is", "where is", without recourse or
warranty, except for a warranty against Lessor's Liens, and shall execute and
deliver to Lessee or its designee such bills of sale and other documents and
instruments as Lessee or its designee may reasonably request to evidence such
conveyance.
SECTION 11. LOSS, DESTRUCTION OR REQUISITION.
Section 11.1 Event of Loss. In the event that any Unit shall (a) suffer
damage or contamination which, in Lessee's reasonable judgment (as evidenced by
an Officers' Certificate to such effect), makes repair uneconomic or renders
such Unit unfit for commercial use, (b) suffer destruction, or shall suffer
theft or disappearance for a period exceeding 12 months, (c) be permanently
returned to the manufacturer pursuant to any patent indemnity provisions, (d)
have title thereto taken or appropriated by any governmental authority, agency
or instrumentality under the power of eminent domain or otherwise, (e) suffer
an actual or constructive total loss, (f) in the normal course of interstate
rail transportation, have been 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, (g) be subject to a sublease with any Person which operates primarily
outside the United States and shall not be returned to Lessee within 60 days of
a demand by Lessee for return of such Units following the termination or other
expiration of the term of such sublease, or (h) be taken or requisitioned 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 as aforesaid or 365 days) (any such occurrence
being hereinafter called an "Event of Loss"), Lessee, in accordance with the
terms of Section 11.2, shall promptly and fully inform Lessor and the Indenture
Trustee of such Event of Loss; provided, however, that if any Unit shall suffer
a theft or disappearance as described in clause (b) above for a period
exceeding 6 months, Lessee shall use its reasonable best efforts to inform
Lessor and the Indenture Trustee of such theft or disappearance as an Event of
Loss once it has knowledge thereof, regardless of whether the 12-month period
referred to in said clause (b) has run.
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Section 11.2 Replacement or Payment upon Event of Loss. Lessee shall
report, by written notice to Lessor given (a) on the date that is 60 days prior
to each Rent Payment Date, or (b) promptly, but in no event later than 30 days,
after the date on which a Responsible Officer of Lessee shall have obtained
actual knowledge since the end of the last period for which a report was
delivered to Lessor under this Section 11.2 that 10 or more Units have suffered
an Event of Loss (a "Multiple Loss"), any and all occurrences of an Event of
Loss and shall notify Lessor of its election to perform one of the following
options with respect to each such Unit:
(i) on the Rent Payment Date immediately following delivery of the
foregoing notice (or, in the case of a Multiple Loss, on the first Business
Day succeeding the 60th day following the date on which Lessee is required to
report such Multiple Loss pursuant to this Section 11.2), Lessee shall comply
with Section 11.4 and shall convey or cause to be conveyed to Lessor a
Replacement Unit to be leased to Lessee hereunder, such Replacement Unit to
be of the same car type, the same or later year of manufacture of the Unit
replaced and free and clear of all Liens (other than Permitted Liens of the
type described in clause (ii) with respect to sublessees, and in clauses
(iii), (iv), (vi) and (vii) of the definition thereof) and to have a Fair
Market Sales Value, utility, remaining economic useful life, residual value
and condition at least equal to the Unit so replaced (assuming such Unit was
in the condition required to be maintained by the terms of this Lease);
provided that if at the time of such replacement, only railcars (x) of a
later year of manufacture or (y) with a greater Fair Market Sales Value than
the replaced Units are available as Replacement Units, Lessee shall convey
such Replacement Units to Lessor as set forth above but Lessee may, at a
later date, replace such Relacement Units with other Units that are closer in
Fair Market Sales Value to the original replaced Units; provided further that
if Lessee shall either fail to elect an option under clause (i) or (ii) of
this Section 11.2 by the applicable date, or timely elects the option under
this clause (i) but shall fail to perform its obligation to effect such
replacement under this paragraph (i) on a timely basis, then (except in the
case of a failure to perform an election to replace pursuant to Section
8.1(b), Section 8.3 or Section 9.1) Lessee shall immediately give Lessor, the
Indenture Trustee and the Pass Through Trustee notice of such failure Lessee
shall pay to Lessor on such Rent Payment Date (or, in the case of Multiple
Loss, on the first Business Day succeeding the 60th day following the date of
which Lessee is required to report such loss pursuant to Section 11.2), or in
the case of Supplemental Rent, to the Person entitled thereto, the amounts
specified in clause (ii) below; and provided further that Lessee shall have
no right to elect replacement under this clause (i) if at the time Lessee
delivers the notice described in the first sentence of this Section 11.2, a
Lease Event of Default or a Lease Default described in Section 14(a), Section
14(g) or Section 14(h) shall have occurred and be continuing; or
(ii) on the Rent Payment Date immediately following the delivery of the
notice described in the first sentence of this Section 11.2, Lessee shall pay
or cause to be paid to Lessor (or in the case of Supplemental Rent, to the
Person entitled thereto) in funds of the type specified in Section 3.6, (A)
an amount equal to the Stipulated Loss Value of each such Unit suffering an
Event of Loss or deemed Event of Loss determined as of
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such Rent Payment Date, (B) all Basic Rent payable on such date in respect of
such Unit (exclusive of any in advance Basic Rent due on such date), and (C)
all other Rent then due and payable hereunder with respect to such Units, it
being understood that until such Stipulated Loss Value and other sums are
paid, there shall be no abatement or reduction of Basic Rent; provided,
however, that in the event of a Multiple Loss, the amounts specified in the
foregoing clause (A) of this Section 11.2(ii) shall be paid by Lessee on the
first Business Day next succeeding the 60th day following the date on which
Lessee is required to report such Multiple Loss pursuant to Section 11.2,
together with (1) if such Business Day is also a Rent Payment Date, all Basic
Rent payable on such day in respect of such Unit, or, if such Business Day is
not a Rent Payment Date, an amount of Basic Rent equal to the product of (x)
the daily equivalent of the amount of Basic Rent scheduled to be paid with
respect to such Unit on the Rent Payment Date next succeeding such Business
Day and (y) the number of days from and including the Rent Payment Date next
preceding such Business Day to but excluding such Business Day and (2) to the
extent not previously paid, all other Supplemental Rent due on or prior to
such Business Day, it being understood that until such Stipulated Loss Value
and other sums are paid, there shall be no abatement or reduction of Basic
Rent; provided, further, that if Lessee elects the option under this clause
(ii), it shall notify the Lessor, the Indenture Trustee and the Pass Through
Trustee thereof at least 20 days prior to the date such payment is to be,
which election shall be irrevocable on the 15th day prior to the date payment
is required hereunder.
Section 11.3 Rent Termination. Upon the replacement of any Unit or Units
in compliance with Section 11.2(i) (but only as to replaced Units and not any
Replacement Unit) or upon the payment of all sums required to be paid pursuant
to Section 11.2 in respect of any Unit or Units, the Lease Term with respect to
such Unit or Units and the obligation to pay Basic Rent for such Unit or Units
accruing subsequent to the date of payment of Stipulated Loss Value or date of
conveyance of such Replacement Unit or Units pursuant to Section 11.2(ii) shall
terminate; provided that Lessee shall be obligated to pay all Rent in respect
of such Unit or Units which is payable under Section 11.2 with respect to such
payment of Stipulated Loss Value or such replacement of such Unit or Units and
in respect of all other Units then continuing to remain subject to this Lease;
provided further that it is understood and agreed that, in the event of a
replacement in compliance with Section 11.2(i), the Rent paid with respect
thereto on the Rent Payment Date next following the conveyance of the
Replacement Unit or Units shall be deemed paid in respect of, and allocated
between, both the Replacement Unit or Units and the original Unit or Units it
or they replaced.
Section 11.4 Disposition of Equipment; Replacement of Unit. (a) Upon the
payment of all sums required to be paid pursuant to Section 11.2 in respect of
any Unit or Units, Lessor will convey to Lessee or its designee all right,
title and interest of Lessor in and to such Unit or Units, "as is", "where is",
without recourse or warranty, except for a warranty against Lessor's Liens, and
shall execute and deliver to Lessee or its designee such bills of sale and
other documents and instruments as Lessee or its designee may reasonably
request to evidence such conveyance. As to each separate Unit so disposed of,
so long as no Lease Event of Default
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shall have occurred and be continuing, Lessee or its designee shall be entitled
to any amounts arising from such disposition, plus any awards, insurance or
other proceeds and damages received by Lessee, Lessor or the Indenture Trustee
by reason of such Event of Loss after having paid the Stipulated Loss Value
attributable thereto.
(b) At the time of or prior to any replacement of any Unit, Lessee, at its
own expense, will (i) furnish Lessor with a Bill of Sale with respect to the
Replacement Unit substantially in the form delivered pursuant to Section 4.1(g)
of the Participation Agreement, (ii) cause a Lease Supplement substantially in
the form of Exhibit A hereto, subjecting such Replacement Unit to this Lease,
and duly executed by Lessee, to be delivered to Lessor for execution and, upon
such execution, to be filed for recordation as required in Section 16.1, (iii)
so long as the Indenture shall not have been satisfied and discharged, cause an
Indenture Supplement substantially in the form of Exhibit A to the Indenture
for such Replacement Unit, to be delivered to Lessor and to the Indenture
Trustee for execution and, upon such execution, to be filed for recordation as
required in Section 16.1, (iv) furnish Lessor with an opinion of Lessee's
counsel (which may be Lessee's General Counsel or Assistant General Counsel),
to the effect that (A) the Bill of Sale referred to in clause (i) above
constitutes an effective instrument for the conveyance of title to the
Replacement Unit to Lessor, (B) legal and beneficial title to the Replacement
Unit has been delivered to Lessor, free and clear of all Liens (other than
Permitted Liens of the type described in clause (ii) with respect to
sublessees, and in clauses (iii), (iv), (v) and (vi) of the definition
thereof), and (C) all filings and recordings and other action necessary or
appropriate to protect the respective interests of Lessor and the Indenture
Trustee in the Replacement Units (to the extent required by the provisions of
this Lease) have been accomplished, (v) furnish Lessor with an engineer's
certificate (which may be from an employee of Lessee) certifying as to the
value, utility and remaining useful life required under clause (i) of Section
11.2, (vi) furnish to Lessor and the Indenture Trustee an Officer's Certificate
certifying that the Replacement Unit is free and clear of all Liens (other than
Permitted Liens of the type described in clause (ii) with respect to
sublessees, and in clauses (iii), (iv), (v) and (vi) of the definition
thereof), (vii) furnish to Owner Participant an agreement to indemnify Owner
Participant against any adverse tax consequences suffered as a result of such
replacement, and (viii) furnish such other documents and evidence as Owner
Participant, Lessor or the Indenture Trustee, or their respective counsel, may
reasonably request in order to establish the consummation of the transactions
contemplated by this Section 11.4. In addition, if in connection with any
substitution pursuant to this Section 11.4, Owner Participant's internal tax
counsel shall notify Lessee in writing that such substitution may not qualify
for like kind exchange treatment under the Code (which notice shall indicate
the basis for such counsel's opinion), Lessee shall elect, in its sole
discretion, to furnish (i) a tax opinion from Neal Gerber & Eisenberg or other
independent tax counsel reasonably acceptable to Owner Participant to the
effect that Owner Participant has a reasonable basis, within the meaning of
Section 6662(d)(2)(B)(ii) of the Code, for the opinion that Owner Participant
will not be required to recognize gain or loss for Federal income tax purposes
with respect to such replacement or (ii) in the event such reasonable basis tax
opinion cannot be furnished and Lessee wishes to make such replacement, Lessee
will, at such time as Lessee receives written notice from Owner Participant
that Owner Participant has filed its Federal income tax returns wherein such
gain or
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loss is recognized, make an indemnity payment to Owner Participant in the
incremental amount of such adverse tax consequence (on a net after-tax basis)
attributable to the conveyance of such Replacement Unit. For all purposes
hereof, upon passage of title thereto to Lessor, the Replacement Unit shall be
deemed part of the property leased hereunder and the Replacement Unit shall be
deemed a "Unit" of Equipment as defined herein. Upon such passage of title,
Lessor will transfer to Lessee, without recourse or warranty (except as to
Lessor's Liens), all Lessor's right, title and interest in and to the replaced
Unit (and shall execute and deliver to Lessee or its designee such bills of
sale and other documents and instruments as Lessee may reasonably request to
evidence such conveyance), and upon such transfer, Lessor will request in
writing that the Indenture Trustee execute and deliver to Lessee an appropriate
instrument releasing such replaced Unit from the lien of the Indenture. Lessee
shall pay all reasonable out-of-pocket costs and expenses (including reasonable
legal fees and expenses) incurred by Lessor, Owner Participant and the
Indenture Trustee in connection with any replacement pursuant to this Section
11.4.
Section 11.5 Eminent Domain. In the event that during the Lease Term the
use of any Unit is requisitioned or taken by any governmental authority under
the power of eminent domain or otherwise for a period which does not constitute
an Event of Loss, all of Lessee's obligations under the Operative Agreements,
including without limitation, Lessee's obligation to pay all installments of
Basic Rent, shall continue for the duration of such requisitioning or taking.
Lessee shall be entitled to receive and retain for its own account all sums
payable for any such period by such governmental authority as compensation for
requisition or taking of possession. Any amount referred to in this Section
11.5, 11.4(a) or 12 which is payable to Lessee shall not be paid to Lessee, or
if it has been previously paid directly to Lessee, shall not be retained by
Lessee, if at the time of such payment a Lease Default under Section 14(g) or
Section 14(h) or a Lease Event of Default shall have occurred and be
continuing, but shall be paid to and held by Lessor pursuant to Section 24, or
if the Indenture shall not then have been discharged pursuant to its terms, to
the Indenture Trustee, as security for the obligations of Lessee under this
Lease, and at such time as there shall not be continuing any such Lease Default
or Lease Event of Default, such amount shall be paid to Lessee.
SECTION 12. INSURANCE.
Section 12.1 Physical Damage and Public Liability Insurance. Lessee will
at all times after delivery and acceptance of each Unit and until such Unit is
returned to Lessor, at its own expense, keep such Unit or cause such Unit to be
kept insured by a reputable insurance company or companies, in amounts and
against risks and with deductibles and terms and conditions not less than the
insurance, if any, maintained by Lessee with respect to similar equipment which
it owns or leases, 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 railcars. Without limiting the
foregoing, Lessee will in any event:
(a) for so long as a Lease Event of Default shall have occurred and be
continuing, and as required by the Letter Agreement dated as of the Closing
between Lessee and
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the Owner Participant (in the circumstances set forth therein), keep each Unit
of the Equipment insured against physical damage in an amount not less than the
Stipulated Loss Value attributable thereto as shown on Schedule 4 to the
Participation Agreement, subject to a limit of not less than $10 million per
occurrence (except for a $10 million annual aggregate for flood and earth
movement); provided that such coverage may provide for deductible amounts or
self-insured retention of not more than $1,000,000 per occurrence; and
(b) maintain public liability insurance naming Owner Participant, Lessor,
as Lessor of the Equipment and in its individual capacity, and the Indenture
Trustee as additional insureds (but only with respect to liability arising out
of or related to the Operative Agreements and the Equipment) against bodily
injury, death or property damage arising out of the use or operation of the
Equipment with general and excess liability limits of not less than
$100,000,000 per occurrence and annually in the aggregate; provided that such
coverage may provide for deductible amounts or self-insured retention not
exceeding $25,000,000.
It is understood and agreed that the insurance required hereunder may be
part of a group-wide insurance program, including risk-retention and
self-insurance. Any policy of insurance maintained in accordance with this
Section 12.1 and any policy purchased in substitution or replacement for any of
such policies shall provide that if any such insurance is cancelled or
terminated, for any reason whatever (other than upon normal policy expiration
or non-payment of premiums), Lessor, the Indenture Trustee and Owner
Participant shall receive 30 days' prior written notice of such cancellation or
termination and shall further provide that if any such insurance is cancelled
or terminated for non-payment of premiums, the Indenture Trustee and Owner
Participant shall receive 10 days' prior written notice of such cancellation or
termination.
Section 12.2 Physical Damage Insurance. (a) The insurance maintained
pursuant to Section 12.1(a) shall provide that (i) so long as the Equipment
Notes remain outstanding, the proceeds up to the Stipulated Loss Value for any
loss or damage to any Unit shall be made to the Indenture Trustee under a
standard mortgage loss payable clause, and thereafter to Lessor and (ii) so
long as no Lease Event of Default shall have occurred and be continuing, Lessee
will be entitled, at its own expense, to make all proofs of loss and take all
other steps necessary to collect the proceeds of such insurance.
(b) The entire proceeds of any property insurance or third party payments
for damages to any Unit received by Lessor or the Indenture Trustee shall be
held by such party until, with respect to such Unit, the repairs referred to in
clause (i) below are made as specified therein or payment of the Stipulated
Loss Value is made, and such entire proceeds will be paid, so long as no Lease
Event of Default shall have occurred and be continuing, either:
(i) to Lessee promptly following receipt by the Indenture Trustee or
Lessor, as the case may be, of a written application signed by Lessee for
payment to Lessee for repairing or restoring the Units which have been
damaged so long as (1) Lessee shall
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have complied with the applicable provisions of the Lease, and (2) Lessee
shall have certified that any damage to such Units shall have been fully
repaired or restored; or
(ii) if this Lease is terminated with respect to such Unit because of an
Event of Loss and Lessee has paid the Stipulated Loss Value due as a result
thereof, such proceeds shall promptly paid over to, or retained by, Lessee.
Section 12.3 Public Liability Insurance. (a) The public liability
insurance referred to in paragraph 12.1(b) shall (i) provide that in as much as
such policies cover more than one insured, all terms, conditions, insuring
agreements and endorsements, with the exception of limits of liability and
liability for premiums, commissions, assessments or calls (which shall be
solely a liability of Lessee), shall operate in the same manner as if there
were a separate policy or policies covering each insured, (ii) provide for and
the insurers shall acknowledge and recognize that Lessee has waived any rights
of subrogation of the insurers against Owner Participant, Lessor, as Lessor of
the Equipment and in its individual capacity, and the Indenture Trustee, (iii)
provide that neither Owner Participant, Lessor, as Lessor of the Equipment and
in its individual capacity, or the Indenture Trustee shall have any
responsibility for any insurance premiums, whether for coverage before or after
cancellation or termination of any such policies as to Lessee and (iv) be
primary without contribution from any similar insurance maintained by Owner
Participant, Lessor or the Indenture Trustee.
(b) Lessee shall use its reasonable best efforts to obtain public
liability insurance policies stipulating that coverage thereunder will not be
invalidated (as to Owner Participant, Lessor, as Lessor of the Equipment and in
its individual capacity, and the Indenture Trustee) due to any action or
inaction of Lessee or any other Person (other than Owner Participant, Lessor or
the Indenture Trustee, but only in respect of their respective coverages), but
shall be under no obligation to obtain such policies containing such
stipulations if they are not available to Lessee at commercially reasonable
rates in the markets in which Lessee has then placed its insurance program.
(c) In the event any public liability insurance policy or coverage
thereunder which are required to be maintained under Section 12.1(b) shall not
be available to Lessee in the commercial insurance market on commercially
reasonable terms, Lessor shall not unreasonably withhold its agreement to waive
such requirement to the extent the maintenance thereof is not so available upon
application therefore as set forth herein. Lessee shall make written request
for any such waiver in writing, accompanied by written reports prepared, at
Lessee's option, either by (i) one independent insurance advisor chosen by
Lessee and Lessor or (ii) three independent insurance advisors, one chosen by
Lessor, one chosen by Lessee and one chosen by the other two advisors (one of
which may be the regular insurance broker or brokers of Lessee), in either
case, such independent insurance advisors being of recognized national
standing. The fees and expenses of all such advisors shall be paid by Lessee.
The written reports required hereunder shall (x) state that such insurance (or
the required coverage thereunder) is not reasonably available to Lessee at
commercially reasonable premiums in the commercial insurance markets within
which Lessee normally purchases its insurance from
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insurers, acceptable to Lessee, with a Best's rating of A- or better for
railcars of similar type and capacity and (y) explain in detail the basis for
such conclusions. Upon the granting of any such waiver, Lessee shall within 15
days thereafter certify to Lessor in writing the cost (on a fleet-wide basis)
of liability insurance premiums for the coverage required by Section 12.1(b)
for the immediately preceding fiscal year; and in the event that any such
certificate is not received by Lessor within such 15 day period, any such
waiver shall be deemed revoked. At any time after the granting of such waiver,
but not more often than once a year, Lessor may make a written request for a
supplemental report (in form reasonably acceptable to Lessor) from such
insurance advisor(s) updating the prior report and reaffirming the conclusions
set forth therein. Lessee shall provide any such required supplemental report
within 60 days after receipt of the written request therefor. Any such waiver
shall be effective for only as long as such insurance is not reasonably
available to Lessee in the commercial markets in which Lessee normally
purchases its insurance at commercially reasonable rates, it being understood
that the failure of Lessee to furnish timely any such supplemental report shall
be conclusive evidence that such condition no longer exists. If such
supplemental report shows that such coverage is available, Lessee shall within
90 days of such report obtain such insurance coverage. During any period with
respect to which such waiver has been granted and remains in effect under this
Section 12.3(c), Lessee shall obtain public liability insurance as set forth in
Section 12.1(b) from such carriers, in such amounts and with coverage limits
and deductibles as is prudent under the circumstances, but in any event in an
amount that may be purchased for a premium equal to 110% of Lessee's cost (on a
fleet-wide basis) of public liability insurance premiums for the coverage
required by Section 12.1(b) for the fiscal year immediately preceding the
fiscal year in which such waiver first was granted.
Section 12.4 Certificate of Insurance. Lessee shall, prior to the Closing
Date and when the renewal certificate referred to below is sent (but in any
event not less than annually), furnish Lessor, the Indenture Trustee and the
Owner Participant with a certificate signed by the insurer or an independent
insurance broker showing the insurance then maintained by Lessee pursuant to
Section 12.1 and, with respect to any renewal policy or policies, furnish
certificates or binders evidencing such renewal as soon as practicable, but in
no event later than 30 days after the earlier of the date such renewal is
effected or the expiration date of the original policy or policies.
Simultaneously, with the furnishing of such certificate, Lessee will provide
appropriate evidence, reasonably satisfactory to Lessor and the Indenture
Trustee, that all premiums due on such insurance have been paid.
Section 12.5 Additional Insurance. In the event that Lessee shall fail to
maintain insurance as herein provided in Section 12.1 or, if applicable,
Section 12.3, Lessor may at its option, upon prior written notice to Lessee,
provide such insurance and, in such event, Lessee shall, upon demand from time
to time reimburse Lessor for the cost thereof together with interest from the
date of payment thereof at the Late Rate, on the amount of the cost to Lessor
of such insurance which Lessee shall have failed to maintain. If after Lessor
has provided such insurance, Lessee then obtains the coverage provided for in
Section 12.1 which was replaced by the insurance provided by Lessor, and Lessee
provides Lessor with evidence of such coverage reasonably satisfactory to
Lessor, Lessor shall cancel the insurance it has provided pursuant to
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the first sentence of this Section 12.5. In such event, Lessee shall reimburse
Lessor for all costs to Lessor of cancellation, including without limitation
any short rate penalty, together with interest from the date of Lessor's
payment thereof at the Late Rate. In addition, at any time Lessor (either
directly or in the name of Owner Participant) may at its own expense carry
insurance with respect to its interest in the Units, provided that such
insurance does not interfere with Lessee's ability to insure the Equipment as
required by this Section 12 or adversely affect Lessee's insurance or the cost
thereof, it being understood that all salvage rights to each Unit shall remain
with Lessee's insurers at all times. Any insurance payments received from
policies maintained by Lessor pursuant to the previous sentence shall be
retained by Lessor without reducing or otherwise affecting Lessee's obligations
hereunder, other than with respect to Unit(s) with respect to which such
payments have been made.
Section 12.6 Pollution Coverage. The public liability insurance policy
that is maintained pursuant to Section 12.1 on the date hereof includes
coverage for pollution incidents (other than as may occur on property owned,
leased, controlled or occupied by Lessee) of a sudden and accidental nature,
including, without limiting the generality of the foregoing, collision and
overturn of railcars arising out of the use or operation of the Units; provided
however, that such insurance shall cover third-party bodily injury and property
damage claims and shall not cover property owned, leased or occupied by Lessee.
Such insurance provides coverage for clean up should Lessee become legally
obligated to pay, subject to a limit of not less than $5,000,000 per occurrence
and annual aggregate. The coverage under such insurance shall be maintained as
long as it remains available at a reasonable cost under such public liability
insurance policy.
SECTION 13. REPORTS; INSPECTION.
Section 13.1 Duty of Lessee to Furnish. On or before May 31, 1995, and on
or before each May 31 thereafter, Lessee will furnish to Lessor, Owner
Participant and the Indenture Trustee an accurate statement, as of the
preceding December 31, (a) showing the amount, description and reporting marks
of the Units then leased hereunder, the amount, description and reporting marks
of all Units that may have suffered an Event of Loss during the 12 months
ending on such December 31 (or since the Closing Date, in the case of the first
such statement), and such other information regarding the condition or repair
of the Equipment as Lessor may reasonably request, (b) stating that, in the
case of all Equipment repainted during the period covered by such statement,
the markings required by Section 4.2 hereof shall have been preserved or
replaced, and (c) showing the percentage of use in both Canada and Mexico based
on the total mileage travelled by all railcars in Lessee's fleet for the prior
calendar year as reported to Lessee by railroads, and stating that Lessee is
not aware of any condition of any Unit which would cause such Unit not to
comply in any material respect with the rules and regulations of the FRA and
the Interchange Rules as they apply to the maintenance and operation of the
Equipment in interchange.
Section 13.2 Lessor's Inspection Rights. Lessor, Owner Participant and the
Indenture Trustee each shall have the right, but not the obligation, at their
respective sole cost,
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expense and risk (including, without limitation, the risk of bodily injury or
death), by their respective authorized representatives, to inspect (a) the
Equipment and Lessee's records with respect thereto, and (b) following the
occurrence of a Lease Default and during the continuance thereof, or following
notice by Lessee that it will be returning any Unit to Lessor pursuant to
Section 10 or Section 22, any sublease of the Equipment and Lessee's records
with respect thereto. All inspections shall be conducted during Lessee's
normal business hours and upon reasonable prior notice to Lessee. Lessee shall
not be liable for any injury to, or the death of, any Person exercising, either
on behalf of Lessor, any Owner Participant, the Indenture Trustee or any
prospective user, the rights of inspection granted under this Section 13.2
unless caused by Lessee's gross negligence or wilful misconduct. No inspection
pursuant to this Section 13.2 shall interfere with the use, operation or
maintenance of the Equipment or the normal conduct of Lessee's business, and
Lessee shall not be required to undertake or incur any additional liabilities
in connection therewith. Upon request by Lessor, which request shall not be
made more than once in any calendar year, Lessee, upon three Business Days'
prior notice from Lessor, will provide Lessor with reasonable access at
Lessee's office where such information is located to information regarding the
location and Person in possession of any or all Units as specified in such
request; provided that, prior to providing Lessor with access to such
information, Lessee and Lessor shall have executed a confidentiality agreement
in form and substance reasonably satisfactory to Lessee with respect to such
information.
SECTION 14. LEASE EVENTS OF DEFAULT.
The following events shall constitute Lease Events of Default hereunder
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Lease Event of Default shall
be deemed to exist and continue so long as, but only as long as, it shall not
have been remedied:
a. Lessee shall fail to make any payment of Basic Rent, Early Purchase
Price, Basic Term Purchase Price or any other purchase price to be paid by
Lessee for any Units pursuant to this Lease or the Participation Agreement,
Stipulated Loss Value or Termination Value within 10 Business Days after the
same shall have become due; or
b. Lessee shall fail to make any payment of Supplemental Rent, including
indemnity or tax indemnity payments, but not including Stipulated Loss Value,
Early Purchase Price, Basic Term Purchase Price or any other purchase price to
be paid by Lessee for any Units pursuant to this Lease or the Participation
Agreement, Stipulated Loss Value or Termination Value, after the same shall
have become due and such failure shall continue unremedied for 10 Business Days
after receipt by Lessee of written notice of such failure from Lessor or the
Indenture Trustee; or
c. Lessee shall fail to maintain in effect the insurance required by
Section 12 and such failure shall not have been waived as provided for therein;
or
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(d) Lessee shall make or permit any possession of the Equipment or any
portion thereof not permitted by this 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 Lessee shall make or permit any
unauthorized assignment or transfer of this Lease in violation of Section 18.2;
or
(e) Lessee shall fail to observe or perform any of the covenants or
agreements to be observed or performed by Lessee in Section 6.8 of the
Participation Agreement, and such failure shall continue unremedied for 30
days; or
(f) any representation or warranty made by Lessee in any Lessee Agreement
(other than the Tax Indemnity Agreement) is untrue or incorrect in any material
respect as of the date of making thereof and such untruth or incorrectness
shall continue to be material and unremedied for a period of 30 days after
receipt by Lessee of written notice thereof from Lessor or the Indenture
Trustee; provided that, if such untruth or incorrectness is capable of being
remedied, no such untruth or incorrectness shall constitute a Lease Event of
Default hereunder for a period of 60 days after receipt of such notice so long
as Lessee is diligently proceeding to remedy such untruth or incorrectness and
shall in fact remedy such untruth or incorrectness within such period; provided
that such untrue or incorrect representation or warranty shall be deemed to be
remedied only after all adverse consequences thereof, if any, have been
remedied; or
(g) Lessee shall (i) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or (ii) consent to any such relief or to the appointment of or taking
possession by any such official in any voluntary case or other proceeding
commenced against it, or (iii) admit in writing its inability to pay its debts
generally as they come due, or (iv) make a general assignment for the benefit
of creditors, or (v) take any corporate action to authorize any of the
foregoing; or
(h) an involuntary case or other proceeding shall be commenced against
Lessee seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or
(i) Lessee shall fail to observe or perform any other of the covenants or
agreements to be observed or performed by Lessee under any Lessee Agreement
(other than the Tax Indemnity Agreement) and such failure shall continue
unremedied for 30 days after notice from Lessor or the Indenture Trustee to
Lessee, specifying the failure and demanding the same to be remedied; provided
that, if such failure is capable of being remedied, and the remedy
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requires an action other than, or in addition to, the
payment of money, no such failure (other than one relating to the payment of
such money) shall constitute a Lease Event of Default hereunder for a period of
90 days after receipt of such notice so long as Lessee is diligently proceeding
to remedy such failure and shall in fact remedy such failure within such
period; or
(j) Lessee shall have given notice of its intention to retain any Units at
the end of the Basic Term or any Renewal Term and, prior to the last day of the
Basic Term or such Renewal Term, as the case may be, Lessee shall not have
notified Lessor of its election to purchase or continue leasing such Unit;
provided that, notwithstanding anything to the contrary contained in this
Lease, any failure of Lessee to perform or observe any covenant or agreement
herein shall not constitute a Lease Event of Default if such failure is caused
solely by reason of an event referred to in the definition of "Event of Loss"
so long as Lessee is continuing to comply with the applicable terms of Section
11.
SECTION 15. REMEDIES.
Section 15.1. Remedies. Upon the occurrence of any Lease Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor may,
at its option, declare this Lease to be in default by a written notice to
Lessee (except that this Lease shall, without any action on the part of
Lessor, be automatically deemed to have been declared in default upon the
occurrence of a Lease Event of Default described in Section 14(g) or (h)); and
at any time thereafter, unless Lessee shall have remedied all outstanding Lease
Events of Default prior to the commencement of the exercise by Lessor of any of
its remedies hereunder, Lessor may do one or more of the following as Lessor in
its sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect:
(a) proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by Lessee of the applicable covenants of this
Lease or to recover damages for the breach thereof;
(b) by notice in writing to Lessee, Lessor may demand that Lessee, and
Lessee shall, upon written demand of Lessor and at Lessee's expense, forthwith
return all or any part of the Equipment to Lessor or its order in the manner
and condition required by, and otherwise in accordance with all of the
provisions of Section 15.6; or Lessor with or without notice or judicial
process may by its agents enter upon the premises of Lessee or other premises
where any of the Equipment may be located and take possession of and remove all
or any of the Units, and Lessor may use and employ in connection with such
removal any services, aids, equipment, trackage and other facilities of Lessee
as is reasonably required to remove such Units and thenceforth hold, possess
and enjoy the same free from any right of Lessee, or its successor or assigns,
to use such Units for any purpose whatever, and in connection with the
foregoing, Lessee hereby agrees that it will, if requested by Lessor, give
prompt notice of such demand for return of the Equipment to the AAR and all
railroads having possession of any such Unit;
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(c) sell any Unit at public or private sale by such advertisement or
publication, if any, as Lessor may determine, free and clear of any rights of
Lessee and without any duty to account to Lessee with respect to such sale or
for the proceeds thereof (except to the extent required by paragraph (f) below
if Lessor elects to exercise its rights under said paragraph), in which event
Lessee's obligation to pay Basic Rent with respect to such Unit hereunder due
for any periods subsequent to the date of such sale shall terminate (except to
the extent that Basic Rent is to be included in computations under paragraph
(e) or (f) below if Lessor elects to exercise its rights under either of said
paragraphs);
(d) hold, keep idle or lease to others any Unit as Lessor in its sole
discretion may determine, free and clear of any rights of Lessee and without
any duty to account to Lessee with respect to such action or inaction or for
any proceeds with respect thereto;
(e) whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under paragraph (a), (b), (c) or (d) above
with respect to any Unit, Lessor, by written notice to Lessee specifying a
payment date (which date shall be a Determination Date for the purposes of
computing Stipulated Loss Value), which shall be not earlier than 30 days after
the date of such notice, may demand that Lessee pay to Lessor, and Lessee shall
pay to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent
for such Unit due after the payment date specified in such notice), all Rent
due and payable, or accrued, for such Unit as of the payment date specified in
such notice (exclusive of any in advance Basic Rent due on such date) plus
whichever of the following amounts Lessor, in its sole discretion, shall
specify in such notice: (i) an amount with respect to each such Unit which
represents the excess of the present value, at the time of such payment date,
of all rentals for such Unit which would otherwise have accrued hereunder from
such payment date for the remainder of the Basic Term or any Renewal Term then
in effect over the then present value of the then Fair Market Rental Value of
such Unit (taking into account its actual condition) for such period computed
by discounting from the end of such Term to such payment date rentals which
Lessor reasonably estimates to be obtainable for the use of such Unit during
such period, such present value to be computed in each case on a basis of a per
annum discount at the Debt Rate, compounded semiannually from the respective
dates upon which rentals would have been payable hereunder had this Lease not
been terminated; or (ii) an amount equal to the excess, if any, of the
Stipulated Loss Value for such Unit computed as of the payment date specified
in such notice over the Fair Market Sales Value of such Unit (taking into
account its actual condition) as of the payment date specified in such notice;
or (iii) if Lessor shall not have sold such Unit pursuant to the exercise of
its rights under paragraph (c) above with respect to such Unit, an amount equal
to the higher of Stipulated Loss Value for such Unit computed as of the payment
date specified in such notice or the Fair Market Sales Value of such Unit
(assuming it is in the condition required by this Lease) as of the payment date
specified in such notice, and upon payment by Lessee pursuant to this clause
(iii) of such Stipulated Loss Value or Fair Market Sales Value, as the case may
be, and of all other amounts payable by Lessee under this Lease and under the
other Operative Agreements in respect of such Unit, Lessor shall transfer
without recourse or warranty all right, title and
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interest of Lessor in and to such Unit to Lessee or as it may direct, and
Lessor shall execute and deliver such documents evidencing such transfer as
Lessee shall reasonably request;
(f) if Lessor shall have sold any Unit pursuant to paragraph (c) above,
Lessor, in lieu of exercising its rights under paragraph (e) above with respect
to such Unit may, if it shall so elect, demand that Lessee pay to Lessor, and
Lessee shall pay to Lessor, as liquidated damages for loss of a bargain and not
as a penalty (in lieu of the Basic Rent for such Unit due subsequent to the
Rent Payment Date next preceding such sale), any accrued and unpaid Rent for
such Unit as of the date of such sale (Basic Rent for this purpose accruing at
a per diem rate equal to the semiannual amount due on the next following Rent
Payment Date divided by 180) and, if that date is a Rent Payment Date, the
Basic Rent due on that date (exclusive of any in advance Basic Rent due on such
date), plus the amount, if any, by which the Stipulated Loss Value of such Unit
computed as of the Rent Payment Date next preceding the date of such sale or,
if such sale occurs on a Rent Payment Date, then computed as of such Rent
Payment Date, exceeds the net proceeds of such sale, plus interest on such
amounts from the date of such sale to the date of payment at the Late Rate; and
(g) Lessor may terminate the leasing of any or all Units under this Lease or
may exercise any other right or remedy that may be available to it under
applicable law.
In addition, Lessee shall be liable, except as otherwise provided above, for
any and all unpaid Rent due hereunder before or during the exercise of any of
the foregoing remedies (exclusive of any in advance Basic Rent due on such
date), and for legal fees and other costs and expenses incurred by reason of
the occurrence of any Lease Event of Default or the exercise of Lessor's
remedies with respect thereto, including without limitation the repayment in
full of any costs and expenses necessary to be expended in repairing any Unit
in order to cause it to be in compliance with all maintenance and regulatory
standards imposed by this Lease.
Section 15.2. Cumulative Remedies. The remedies in this Lease provided in
favor of Lessor shall not be deemed exclusive, but shall be cumulative and
shall be in addition to all other remedies in its favor existing at law or in
equity. Lessee hereby waives any mandatory requirements of law, now or
hereafter in effect, which might limit or modify any of the remedies herein
provided, to the extent that such waiver is permitted by law. Lessee hereby
waives any and all existing or future claims of any right to assert any offset
or counterclaim against the Rent payments due hereunder, and agrees to make the
rent payments regardless of any offset or counterclaim or claim which may be
asserted by Lessee on its behalf in connection with the lease of the Equipment.
To the extent permitted by applicable law, Lessee hereby waives any rights now
or hereafter conferred by statute or otherwise that may require Lessor to sell,
lease or otherwise use the Equipment in mitigation of Lessor's damages as set
forth in Section 15.1 or that may otherwise limit or modify any of Lessor's
rights and remedies provided in this Section 15.
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Section 15.3. No Waiver. No delay or omission to exercise any right, power
or remedy accruing to Lessor upon any breach or default by Lessee under this
Lease shall impair any such right, power or remedy of Lessor, nor shall any
such delay or omission be construed as a waiver of any breach or default, or of
any similar breach or default hereafter occurring; nor shall any waiver of a
single breach or default be deemed a waiver of any subsequent breach or
default.
Section 15.4. Notice of Lease Default. Lessee agrees to furnish to Lessor,
Owner Participant and the Indenture Trustee, promptly upon any officer
acquiring actual knowledge of any condition which constituted or constitutes a
Lease Default under this Lease, written notice specifying such condition and
the nature and status thereof.
Section 15.5. Lessee's Duty to Furnish Information with Respect to
Subleases. Upon the occurrence of a Lease Event of Default pursuant to Section
14(a), (b), (g) or (h), Lessor may request that Lessee deliver to Lessor,
and upon such request Lessee agrees that it will promptly provide to Lessor, a
detailed list of all Units that are then being subleased by Lessee, the
identity of the sublessees with respect to such Units, the identity of an
employee or other agent of each such sublessee with whom Lessee regularly
communicates with in respect of such Units and the most recent known location
of such Units.
Section 15.6. Lessee's Duty to Return Equipment Upon Default. If Lessor or
any assignee of Lessor shall terminate the leasing of any or all Units pursuant
to this Section 15 and shall have provided to Lessee the written demand
specified in Section 15.1(b) with respect to such Units, Lessee shall forthwith
deliver possession of such Units to Lessor (except where Lessor has received
all amounts payable by Lessee pursuant to any notice provided by Lessor under
Section 15.1(e)(iii)). For the purpose of delivering possession of any Unit to
Lessor as above required, Lessee shall at its own cost, expense and risk
(except as hereinafter stated):
(a) Forthwith place such Equipment upon such storage tracks of Lessee or any
of its Affiliates or, at the expense of Lessee, on any other storage tracks, as
Lessor may designate or, in the absence of such designation, as Lessee may
select;
(b) permit Lessor to store such Equipment on such tracks without charge for
insurance, rent or storage until such Equipment has been sold, leased or
otherwise disposed of by Lessor and during such period of storage Lessee shall
continue to maintain all insurance required by Section 12.1 hereof; and
(c) transport the Equipment to any place on any lines of railroad or to any
connection carrier for shipment, all as Lessor may direct in writing.
All Equipment returned shall be in the condition required by Section 6.2
hereof.
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All amounts earned in respect of the Equipment after the date of termination
of this Lease pursuant to this Section 15, but not exceeding amounts actually
received therefor, shall be paid to Lessor or, so long as the Indenture shall
not have been discharged pursuant to its terms, the Indenture Trustee, and, if
received by Lessee, shall be promptly turned over to Lessor or the Indenture
Trustee as aforesaid. In the event any Unit is not assembled, delivered and
stored as hereinabove provided within 15 days after the termination of the
leasing of such Unit pursuant to Section 15, Lessee shall, in addition, pay to
Lessor or the Indenture Trustee as aforesaid as liquidated damages and not as a
penalty, for each day thereafter an amount equal to the amount, if any, by
which the higher of (i) an amount equal to 110% of the daily equivalent of the
Basic Rent in effect immediately prior to the expiration of the Lease for such
Unit and (ii) 125% of the Fair Market Rental Value for such Unit for each such
day exceeds the amount, if any, received by Lessor or the Indenture Trustee as
aforesaid (either directly or from Lessee) for such day for such Unit pursuant
to the preceding sentence.
Section 15.7. Specific Performance; Lessor Appointed Lessee's Agent. The
assembling, delivery, storage and transporting of the Equipment as provided in
Section 15.6 are of the essence of this Lease and, upon application to any
court of equity having jurisdiction in the premises, Lessor shall be entitled
to a decree against Lessee requiring specific performance of the covenants of
Lessee so to assemble, deliver, store and transport the Equipment. Without in
any way limiting the obligation of Lessee under the provisions of Section 15.6,
Lessee hereby irrevocably appoints Lessor as the agent and attorney of Lessee,
with full power and authority, at any time while Lessee is obligated to deliver
possession of any Units to Lessor pursuant to this Section 15, to demand and
take possession of such Unit in the name and on behalf of Lessee from whosoever
shall be at the time in possession of such Unit.
SECTION 16. FILINGS; FURTHER ASSURANCES.
Section 16.1. Filings. This Lease or a counterpart or copy hereof or
evidence hereof may be filed or recorded in any public office as may be
necessary or appropriate to protect the interest of Lessor, Owner Participant
or the Indenture Trustee herein or in the Units. On or prior to the Closing
Date Lessee will (a) cause this Lease, the Lease Supplements dated the Closing
Date, the Indenture and the Indenture Supplements dated the Closing Date to be
(i) duly filed and recorded with the ICC in accordance with 49 U.S.C. Section
11303, and (ii) deposited with the Registrar General of Canada pursuant to
Section 90 of the Railway Act of Canada (and all necessary actions shall have
been taken for publication of such deposit in The Canada Gazette in accordance
with said Section 90), and (b) cause notice of the security interests created
in this Lease, the Lease Supplement dated the Closing Date, the Indenture and
the Indenture Supplement to be filed in the appropriate offices in the Canadian
provinces of Ontario, Manitoba, Saskatchewan, Alberta and British Columbia, and
(c) furnish Lessor, the Indenture Trustee and Owner Participant proof thereof.
Section 16.2. Further Assurances. Lessee will duly execute and deliver to
Lessor such further documents and assurances and take such further action as
Lessor may from time to time reasonably request or as may be required by
applicable law or regulation in order to
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effectively carry out the intent and purpose of this Lease and to
establish and protect the rights and remedies created or intended to be
created in favor of Lessor, Owner Participant and the Indenture Trustee
hereunder, including, without limitation, the execution and delivery of
supplements or amendments hereto, in recordable form, subjecting to this Lease
any Replacement Unit and the recording or filing of counterparts hereof or
thereof in accordance with the laws of such jurisdiction as Lessor may from
time to time deem advisable; provided, however that Lessee shall not be
required to make any recording or filing in any province in Canada (or any
political subdivision thereof) or in Mexico (or any political subdivision
thereof) in respect of a Replacement Unit if (a) Lessee in good faith (as
evidenced by an Officers' Certificate to such effect) deems such action unduly
burdensome and (b) after giving effect to the failure to take such action,
Lessee has taken all action required by law so as to perfect and protect the
right, title and interests of Owner Trustee and Owner Participant in the Trust
Estate and of the Indenture Trustee in the Indenture Estate in respect of Units
having the Stipulated Loss Value of not less than 90% of the aggregate
Stipulated Loss Value of the Equipment.
Section 16.3. Other Filings. If, at any time during the Lease Term, Mexico,
or one or more states in Mexico, or any of the Canadian provinces of Quebec,
Nova Scotia or New Brunswick or the Canadian territory of the Northwest
Territories, establishes a state or provincial system for filing and perfecting
the security and/or ownership interests of entities such as Lessor and/or the
Indenture Trustee, Lessee shall cause any and all of the Operative Agreements
to be recorded with or under such system and shall cause all other filings and
recordings and all such other action required under such system to be effected
and taken, in order to perfect and protect the respective right, title and
interests of Lessor, Owner Participant and the Indenture Trustee.
Notwithstanding anything contained herein to the contrary, Lessee's obligations
in this Section 16.3 shall be subject in all respects to the provisions of
Section 16.2.
Section 16.4. Expenses. Except as provided in Section 2.5(a) of the
Participation Agreement, Lessee will pay all costs, charges and expenses
(including reasonable attorneys fees) incident to any such filing, refiling,
recording and rerecording or depositing and re-depositing of any such
instruments or incident to the taking of such action.
SECTION 17. LESSOR'S RIGHT TO PERFORM.
If Lessee fails to make any payment required to be made by it hereunder or
fails to perform or comply with any of its other agreements contained herein,
Lessor may itself make such payment or perform or comply with such agreement,
after giving not less than five Business Days' prior notice thereof to Lessee
(except in the event that an Indenture Default resulting from a Lease Default
or a Lease Event of Default shall have occurred and be continuing, in which
event Lessor may effect such payment, performance or compliance to the extent
necessary to cure such Indenture Default with notice given concurrently with
such payment, performance or compliance), but shall not be obligated hereunder
to do so, and the amount of such payment and of the reasonable expenses of
Lessor incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Late Rate from such date of payment, to the extent permitted
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by applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to
Lessor on demand.
SECTION 18. ASSIGNMENT.
Section 18.1. Assignment by Lessor. Lessee and Lessor hereby confirm that
concurrently with the execution and delivery of this Lease, Lessor has executed
and delivered to the Indenture Trustee the Indenture, which assigns as
collateral security and grants a security interest in favor of the Indenture
Trustee in, to and under this Lease and certain of the Rent payable hereunder
(excluding Excepted Property), all as more explicitly set forth in the
Indenture. Lessor agrees that it shall not otherwise assign or convey its
right, title and interest in and to this Lease, the Equipment or any Unit,
except as expressly permitted by and subject to the provisions of the
Participation Agreement, the Trust Agreement and the Indenture.
Section 18.2. Assignment by Lessee. Except as otherwise provided in Section
8.3 or in the case of any requisition for use by any governmental authority or
any agency or instrumentality thereof referred to in Section 11.5, Lessee will
not, without the prior written consent of Lessor and the Indenture Trustee,
assign any of its rights hereunder, except as provided herein and in the
Participation Agreement; provided that Lessee may assign its rights and/or
obligations hereunder to any corporation in accordance with the provisions of
Section 6.8 of the Participation Agreement or to any corporation which is an
Affiliate of Lessee, provided that in the case of an assignment to an
Affiliate, (a) Lessor shall have received an instrument or instruments
reasonably satisfactory to it, Owner Participant and the Indenture Trustee
under which such Affiliate assumes the obligations of Lessee hereunder, and (b)
Lessee irrevocably and unconditionally guarantees, pursuant to an agreement in
form and substance reasonably satisfactory to Lessor, Owner Participant and the
Indenture Trustee, such assignee's performance of all of such obligations as
primary obligor and not as a surety.
Section 18.3. Sublessee's Performance and Rights. Any obligation imposed on
Lessee in this Lease shall require only that Lessee perform or cause to be
performed such obligation, even if stated herein as a direct obligation, and
the performance of any such obligation by any permitted assignee, sublessee or
transferee under an assignment, sublease or transfer agreement then in effect
and permitted by the terms of this Lease shall constitute performance by Lessee
and discharge such obligation by Lessee. Except as otherwise expressly
provided herein, any right granted to Lessee in this Lease shall grant Lessee
the right to (a) exercise such right or permit such right to be exercised by
any such assignee or transferee, or (b) in Lessee's capacity as sublessor
pursuant to any sublease permitted pursuant to Section 8.3 hereof, permit any
sublessee to exercise substantially equivalent rights under any such sublease
as are granted to Lessee under this Lease; provided, however, that Lessee's
right to terminate this Lease pursuant to Sections 10 and 11 and Lessee's
purchase and renewal options set forth in Section 22 may be exercised only by
Lessee itself or by any assignee or transferee of, or successor to, Lessee in a
transaction permitted by Section 6.8 of the Participation Agreement; provided,
further, that nothing in this Section 18.3 shall or shall be deemed to (i)
create any privity of contract between any such sublessee, on the one hand, and
any of Lessor, any Owner
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Participant or any subsequent transferee or Affiliate of any such
Person, on the other hand, (ii) create any duty or other liability of any
nature whatsoever on the part of any of Lessor, any Owner Participant or any
subsequent transferee or Affiliate of any such Person, to any such sublessee or
any Affiliate thereof, or (iii) modify or waive any term or provision of
Section 8.3 hereof, which Section 8.3 shall control if any conflict arises
between any of the provisions thereof and this Section 18.3. The inclusion of
specific references to obligations or rights of any such assignee, sublessee or
transferee in certain provisions of this Lease shall not in any way prevent or
diminish the application of the provisions of the two sentences immediately
preceding with respect to obligations or rights in respect of which specific
reference to any such assignee, sublessee or transferee has not been made in
this Lease.
SECTION 19. NET LEASE, ETC.
This Lease is a net lease and Lessee's obligation to pay all Rent payable
hereunder shall, subject to Section 3.5, be absolute, unconditional and
irrevocable and shall not be affected by any circumstance of any character
including, without limitation, (a) any set-off, abatement, counterclaim,
suspension, recoupment, reduction, rescission, defense or other right that
Lessee may have (other than pursuant to Section 3.5 hereof) against Lessor,
Owner Participant, the Indenture Trustee or any holder of an Equipment Note or
Pass Through Certificate, any vendor or manufacturer of any Unit, or any other
Person for any reason whatsoever, (b) any defect in or failure of title,
merchantability, condition, design, compliance with specifications, operation
or fitness for use of all or any part of any Unit, (c) any damage to, or
removal, abandonment, requisition, taking, condemnation, loss, theft or
destruction of all or any part of any Unit or any interference, interruption,
restriction, curtailment or cessation in the use or possession of any Unit by
Lessee or any other Person for any reason whatsoever or of whatever duration,
(d) any insolvency, bankruptcy, reorganization or similar proceeding by or
against Lessee, Lessor, Owner Participant, the Indenture Trustee, any holder of
an Equipment Note or Pass Through Certificate or any other Person, (e) the
invalidity, illegality or unenforceability of this Lease, any other Operative
Agreement, or any other instrument referred to herein or therein or any other
infirmity herein or therein or any lack of right, power or authority of Lessee,
Lessor, Owner Participant, the Indenture Trustee, any holder of an Equipment
Note or Pass Through Certificate or any other Person to enter into this Lease
or any other Operative Agreement or to perform the obligations hereunder or
thereunder or consummate the transactions contemplated hereby or thereby or any
doctrine of force majeure, impossibility, frustration or failure of
consideration, (f) the breach or failure of any warranty or representation made
in this Lease or any other Operative Agreement by Lessee, Lessor, Owner
Participant, the Indenture Trustee, any holder of an Equipment Note or Pass
Through Certificate or any other Person, (g) the requisitioning, seizure or
other taking of title to or use of such Unit by any government or governmental
authority or otherwise, whether or not by reason of any act or omission of
Lessor, Lessee or the Indenture Trustee, or any other deprivation or limitation
of use of such Unit in any respect or for any length of time, whether or not
resulting from accident and whether or not without fault on the part of Lessee,
or (h) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, any present or future law to the contrary
notwithstanding to the extent permitted by applicable law. To the extent
permitted by applicable
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law, Lessee hereby waives any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease with respect to any Unit,
except in accordance with the express terms hereof. If for any reason
whatsoever this Lease shall be terminated in whole or in part by operation of
law or otherwise, except as specifically provided herein, Lessee nonetheless
agrees, subject to Section 3.5, to the maximum extent permitted by law, to pay
to Lessor or to the Indenture Trustee, as the case may be, an amount equal to
each installment of Basic Rent and all Supplemental Rent due and owing, at the
time such payment would have become due and payable in accordance with the
terms hereof had this Lease not been terminated in whole or in part. Each
payment of Rent made by Lessee hereunder shall be final and Lessee shall not
seek or have any right to recover all or any part of such payment from Lessor
or any Person for any reason whatsoever. Nothing contained herein shall be
construed to waive any claim which Lessee might have under any of the Operative
Agreements or otherwise or to limit the right of Lessee to make any claim it
might have against Lessor or any other Person or to pursue such claim in such
manner as Lessee shall deem appropriate, except in the manners precluded by
this Section 19.
SECTION 20. NOTICES.
Unless otherwise expressly specified or permitted by the terms hereof, all
communications and notices provided for herein shall be in writing or by
facsimile capable of creating a written record, and any such notice shall
become effective (a) upon personal delivery thereof, including, without
limitation, by overnight mail or courier service, (b) in the case of notice by
United States mail, certified or registered, postage prepaid, return receipt
requested, upon receipt thereof, or (c) in the case of notice by such
facsimile, upon confirmation of receipt thereof, provided such transmission is
promptly further confirmed in writing by either of the methods set forth in
clause (a) or (b), in each case addressed to the following Person at its
respective address set forth below or at such other address as such Person may
from time to time designate by written notice to the other Persons listed
below:
If to Lessor: State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Fax No.: (617) 664-5371
Confirmation No.: (617) 664-5677
With copies to Owner Participant.
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If to Owner Participant: BNY Capital Funding Corp.
c/o BNY Leasing Corporation
1290 Avenue of the Americas
29th Floor
New York, New York 10104
Attention: Chief Financial Officer
Fax No.: (212) 246-1803
Confirmation No.: (212) 408-4917
If to the Indenture Trustee: The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention:
(UTC Trust No. 1994-A )
Fax No.:
Confirmation No.:
If to Lessee: Union Tank Car Company
225 West Washington Street, 19th Floor
Chicago, Illinois 60606
Attention: General Counsel and Secretary
(UTC Trust No. 1994-A )
Fax No.: (312) 845-5305
Confirmation No.: (312) 372-9500
SECTION 21. CONCERNING THE INDENTURE TRUSTEE.
Section 21.1. Limitation of the Indenture Trustee's Liabilities.
Notwithstanding any provision herein or in any of the Operative Agreements to
the contrary, the Indenture Trustee's obligation to take or refrain from taking
any actions, or to use its discretion (including, but not limited to, the
giving or withholding of consent or approval and the exercise of any rights or
remedies under such Operative Agreements), and any liability therefor, shall,
in addition to any other limitations provided herein or in the other Operative
Agreements, be limited by the provisions of the Indenture, including, but not
limited to, Article VI thereof.
Section 21.2. Right, Title and Interest of the Indenture Trustee Under
Lease. It is understood and agreed that the right, title and interest of the
Indenture Trustee in, to and under this Lease and the Rent due and to become
due hereunder shall by the express terms granting and conveying the same be
subject to the interest of Lessee in and to the Equipment.
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SECTION 22. PURCHASE OPTIONS; RENEWAL OPTIONS.
Section 21.1. Early Purchase Option. (a) Provided that no Lease Event of
Default shall have occurred and be continuing either at the time of the notice
described below or on the Early Purchase Date (unless Lessor shall have waived
such Lease Event of Default solely for the purpose of this Section 22.1) and
Lessee shall have duly given the notice required by the next succeeding
sentence, Lessee shall have the right and, upon the giving of such notice, the
obligation to purchase any or all of the Units then leased hereunder (as
specified in such notice) on the Early Purchase Date; provided that if Lessee
elects to purchase some but less than all of the Units in any Functional Group
the determination as to which Units are to be purchased shall be made on a
random or other reasonable basis without discrimination based on maintenance
status or operating condition of the Units in question and such notice shall
describe such manner in which Lessee proposes to determine the Units in such
Functional Group which will be purchased. Lessee shall give Lessor, the
Indenture Trustee and the Pass Through Trustee written notice not less than 90
days prior to the Early Purchase Date of its election to exercise the purchase
option provided for in this Section 22.1, which notice shall be irrevocable.
(b) If Lessee elects to exercise the purchase option provided for in this
Section 22.1 with respect to any Units, Lessee shall, as the purchase price
therefor, in the sole discretion of Lessee, either (i) pay the Early Purchase
Price of such Units, together with all other amounts due and owing by Lessee
under the Operative Agreements with respect to such Units, including, without
limitation, all unpaid Basic Rent therefor due and payable on or prior to the
Early Purchase Date (exclusive of any in advance Basic Rent due on such date)
and any Make-Whole Amount with respect to the Equipment Notes then being
prepaid, payable at the place of payment specified in Section 3.6 hereof in
immediately available funds, or (ii) pay to Owner Trustee an amount equal to
the difference between the Early Purchase Price and the outstanding principal
amount of the related Equipment Notes as of the Early Purchase Date and assume,
on a full recourse basis, and agree to indemnify Lessor against, all of
Lessor's obligations in respect of the related Equipment Notes; provided, that,
following such assumption, the purchased Units shall remain subject to the Lien
of the related Indenture. Lessee will make the payments required by the
foregoing clause (i) or make the payments and assume the Equipment Notes as
provided in the foregoing clause (ii) on the Early Purchase Date in the manner
specified in Section 3.6 hereof against delivery of a Bill of Sale transferring
and assigning to Lessee all right, title and interest of Lessor in and to such
Units on an "as-is" "where-is" basis and containing a warranty against Lessor's
Liens; provided, however, that Lessee shall have the option of specifying in
such notice under this Section 22.1 its election to defer payment of the
Deferred Portion of the Early Purchase Price, which shall be paid in four (4)
equal installments on the Quarterly Dates occurring in the 12 months
immediately following the Early Purchase Date, which Deferred Portion (A) may
be prepaid by Lessee at any time in whole and (B) will be secured, at the
option of Lessee, by (1) a first lien on the purchased Units (but only if no
Equipment Note with respect to such Units are outstanding), (2) a letter of
credit in favor of Lessor in a form, and issued by a financial institution,
reasonably acceptable to Lessor, or (3) such other collateral as may be
mutually acceptable to Lessee and Lessor; and provided, further, that, unless
Lessee assumes Lessor's obligations in respect of the related
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Equipment Notes, the portion of the Early Purchase Price payable by
Lessee on the Early Purchase Date, together with other amounts of Supplemental
Rent paid by Lessee on such date will be under any circumstances and in any
event, at least sufficient to pay in full, as of the date of payment thereof,
the aggregate unpaid principal of, the Make Whole Amount, if any, and all
unpaid interest of the Equipment Notes issued in respect of such Units and all
other amounts owed by Lessee under the Operative Agreements with respect to
such Units. Lessor shall not be required to make any other representation or
warranty as to the condition of such Units or any other matters, and may
specifically disclaim any such representations or warranties. In the event of
any such purchase and receipt by Lessor and the Indenture Trustee of all of the
amounts provided in this Section 22.1, the obligation of Lessee to pay Basic
Rent hereunder for such Units shall cease and the Lease Term for such Units
shall end.
Section 22.2. Election to Retain or Return Equipment at End of Basic or
Renewal Term. Not less than 120 days prior to the end of the Basic Term, the
end of any Fixed Rate Renewal Term or the end of any Fair Market Renewal Term
(as the latter two terms are defined in Section 22.4), Lessee shall give Lessor
irrevocable written notice of its decision to return or retain any or all of
the Units at the end of the Basic Term or such Renewal Term; provided that if
Lessee elects to retain less than all of the Units in a Functional Group, the
determination as to which Units are to be retained shall be made on a random or
other reasonable basis without discrimination based on maintenance status or
operating condition of the Units in question, and Lessee shall describe in such
notice such manner in which it proposes to determine the Units in such
Functional Group which will be retained. If Lessee elects to retain some or
all of the Units, Lessee shall comply with Section 22.3 and/or 22.4 hereof, as
it may elect in accordance with the provisions thereof including the notice
requirements stated therein. If Lessee fails to give the 120 days' notice
required by this Section 22.2, Lessee shall be deemed to have irrevocably
elected to return the Units at the end of the Basic Term or the applicable
Renewal Term, as the case may be, in accordance with Section 6.
Section 22.3. Purchase Options. Provided that no Lease Event of Default
shall have occurred and be continuing either at the time of notice or the
expiration of the Lease Term (unless Lessor shall have waived such Lease Event
of Default solely for the purpose of this Section 22.3) and Lessee shall have
duly given the notice required by Section 22.2 and by the next succeeding
sentence of this Section 22.3, Lessee shall have the right and, upon the giving
of such notice under this Section 22.3, the obligation to purchase any or all
of the Units (as specified in such notice) (a) at the expiration of the Basic
Term at a price equal to the Basic Term Purchase Price of such Units; (b) on
July 2, 2017 (the "Outside Date") at a price equal to the Fixed Rate Purchase
Price of such Units; provided that with respect to such Units Lessee shall have
renewed this Lease through the Outside Date on one or more occasions pursuant
to Section 22.4(a) or (b); or (c) at the expiration of the Basic Term or any
Renewal Term at a price equal to the Fair Market Sales Value of such Units.
Lessee shall give Lessor written notice not less than 90 days prior to the end
of the Basic Term, the Outside Date, the Fixed Rate Renewal Term or the Fair
Market Renewal Term, as the case may be, of its election to exercise the
purchase option provided for in this Section 22.3, which notice shall be
irrevocable. Payment of the purchase price, together with all other amounts
due and owing by Lessee under the
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Operative Agreements, shall be made at the place of payment specified
in Section 3.6 hereof in immediately available funds against delivery of a Bill
of Sale transferring and assigning to Lessee all right, title and interest of
Lessor in and to such Units on an "as-is" "where-is" basis and containing a
warranty against Lessor's Liens. Lessor shall not be required to make any
other representation or warranty as to the condition of such Units or any other
matters, and may specifically disclaim any such representations or warranties.
Section 22.4. Renewal Options. Provided that no Lease Event of Default
shall have occurred and be continuing either at the time of notice or the
expiration of the Lease Term (unless Lessor shall have waived such Lease Event
of Default solely for the purpose of this Section 22.4) and Lessee shall
have duly given the notice required by Section 22.2, Lessee shall have the
right and, upon the giving of a notice under this Section 22.4 as below
provided, the obligation to lease pursuant to this Lease any or all of the
Units at the expiration of the Basic Term or any applicable Renewal Term which
Lessee has not elected to purchase pursuant to Section 22.3, which obligation
may be fulfilled by Lessee electing to renew this Lease under either of the
following Section 22.4(a) or (b):
(a) Fixed Rate. Lessee may give Lessor written notice not less than 90 days
prior to the end of the Basic Term (or, in the circumstances described in the
third sentence of this Section 22.4(a), the then Fixed Rate Renewal Term) that
Lessee elects to renew this Lease under this Section 22.4(a) with respect to
any or all of the Units then leased hereunder, which notice shall be
irrevocable. The foregoing notice from Lessee shall specify the term (the
"Fixed Rate Renewal Term") that Lessee selects for its initial renewal under
this Section 22.4(a), which shall be for one or more years as Lessee shall
select; provided that such Fixed Rate Renewal Term in no event shall extend
beyond the Outside Date. If Lessee selects a Fixed Rate Renewal Term such that
the period following such term until the Outside Date is at least one year,
then Lessee may elect one or more further renewals of one or more years
pursuant to this Section 22.4(a) so long as no such term extends beyond the
Outside Date. The Basic Rent for each Unit during any Fixed Rate Renewal Term
shall be 50% of the average of the semiannual Basic Rent installments payable
hereunder for such Unit during the Basic Term, payable semiannually in arrears.
Each Fixed Rate Renewal Term shall commence immediately upon the expiration of
the Basic Term or the preceding Fixed Rate Renewal Term, as the case may be.
(b) Fair Market. Lessee may give Lessor written notice not less than 90
days prior to the end of the Basic Term, a Fixed Rate Renewal Term or a Fair
Market Renewal Term (subject to the limitations otherwise provided in this
Section 22.4(b)), regardless of whether Lessee is then entitled to renew this
Lease for a Fixed Rate Renewal Term, that Lessee elects to renew this Lease
under this Section 22.4(b) with respect to any or all of the Units then leased
hereunder for a term of one or more years as Lessee shall specify in such
notice (the "Fair Market Renewal Term"), which notice shall be irrevocable.
The Basic Rent for the Units leased during the Fair Market Renewal Term shall
be the Fair Market Rental Value thereof, payable semiannually in arrears. The
Fair Market Renewal Term shall commence immediately upon the expiration of the
Base Term or the preceding Fixed Rate Renewal Term or Fair Market Renewal Term,
as the case may be.
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Section 22.5. Appraisal. Promptly following Lessee's written notice
pursuant to Section 22.2 of its election to retain any Units at the end of the
Basic Term or a Renewal Term, as the case may be, Lessor and Lessee shall
determine the useful life (based on the actual condition of a reasonable
sampling of such Units), Fair Market Sales Value and Fair Market Rental Value
of the Units to be retained, in each case assuming the Units are in the
condition required by this Lease.
Section 22.6. Stipulated Loss Value and Termination Value During Renewal
Term. All of the provisions of this Lease, other than Section 10, shall be
applicable during any renewal term for such Units, except as specified in the
next sentence. During any Renewal Term, the Stipulated Loss Value and
Termination Value of any Unit shall be determined on the basis of the Fair
Market Sales Value of such Unit as of the first day of such Renewal Term,
reduced in equal monthly increments to the Fair Market Sales Value of such Unit
as of the last day of such Renewal Term; provided that in no event during any
Fixed Rate Renewal Term shall the Stipulated Loss Value and Termination Value
of any Unit be less than 20% of the Equipment Cost of such Unit.
SECTION 23. LIMITATION OF LESSOR'S LIABILITY.
It is expressly agreed and understood that all representations, warranties
and undertakings of Lessor hereunder (except as expressly provided herein)
shall be binding upon Lessor only in its capacity as Owner Trustee under the
Trust Agreement and in no case shall State Street Bank and Trust Company be
personally liable for or on account of any statements, representations,
warranties, covenants or obligations stated to be those of Lessor hereunder,
except that Lessor (or any successor Owner Trustee) shall be personally liable
for its gross negligence or wilful misconduct and for its breach of its
covenants, representations and warranties contained herein to the extent
covenanted or made in its individual capacity.
SECTION 24. INVESTMENT OF SECURITY FUNDS.
Any moneys received by Lessor or the Indenture Trustee pursuant to Section
12.2 which are required to be paid to Lessee after completion of repairs to be
made pursuant to Section 12.2 or pursuant to Section 11.2, as the case may be,
until paid to Lessee as provided in Section 11.4(a), 11.5 or 12.2 or the curing
of Lease Default or a Lease Event of Default or otherwise applied as provided
herein or in the Trust Agreement and Indenture, shall be invested at the risk
and expense of Lessee in Specified Investments by Lessor (unless the Indenture
shall not have been discharged, in which case, by the Indenture Trustee as
provided in Section 6.04(b) of the Indenture) from time to time as directed by
telephone (and confirmed promptly thereafter in writing) by Lessee if such
investments are reasonably available for purchase. There shall be promptly
remitted to Lessee, so long as no Lease Default relating to Section 14(a), (b),
(g) or (h) or Lease Event of Default shall have occurred and be continuing, any
gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred
in connection with such investment) and Lessee will promptly pay to Lessor or
the Indenture Trustee, as the case may be, on demand, the amount of any loss
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realized as the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection with such
investment), such amount to be disposed of in accordance with the terms of the
Trust Agreement and the Indenture. If a Lease Event of Default shall have
occurred and be continuing, any moneys held pursuant to this Section 25, and
any gain from the investment thereof, may be applied to the Lessee's
obligations hereunder.
SECTION 25. MISCELLANEOUS.
Section 25.1. Governing Law; Severability. This Lease, and any extensions,
amendments, modifications, renewals or supplements hereto shall be governed by
and construed in accordance with the internal laws and decisions of the State
of New York; provided, however, that the parties shall be entitled to all
rights conferred by any applicable Federal statute, rule or regulation.
Whenever possible, each provision of this Lease shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Lease shall be prohibited by or invalid under the laws of any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Lease in any
other jurisdiction.
Section 25.2. Execution in Counterparts. This Lease may be executed in any
number of counterparts, each executed counterpart constituting an original and
in each case such counterparts shall constitute but one and the same
instrument; provided, however, that to the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code) no
security interest in this Lease may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page
hereof, which counterpart shall constitute the only "original" hereof for
purposes of the Uniform Commercial Code.
Section 25.3. Headings and Table of Contents; Section References. The
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof. All references herein
to numbered sections, unless otherwise indicated, are to sections of this
Lease.
Section 25.4. Successors and Assigns. This Lease shall be binding upon and
shall inure to the benefit of, and shall be enforceable by, the parties hereto
and their respective permitted successors and assigns.
Section 25.5. True Lease. It is the intent of the parties to this Lease
that it will be a true lease and not a "conditional sale," and that Lessor
shall at all times be considered to be the owner of each Unit which is
the subject of this Lease for the purposes of all Federal, state, city and
local income taxes or for franchise taxes measured by income, and that this
Lease conveys to Lessee no right, title or interest in any Unit except as
lessee. Nothing contained in
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this Section 25.5 shall be construed to limit Lessee's use or
operation of any Unit or constitute a representation, warranty or covenant by
Lessee as to tax consequences.
Section 25.6. Amendments and Waivers. No term, covenant, agreement or
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and except as may be permitted by the terms of the Indenture.
Section 25.7. Survival. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by such party or on the behalf of any such party under
this Lease, shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either such
party or on behalf of either such party, and to the extent having accrued and
not been paid or relating to or otherwise arising in connection with the
transactions contemplated by the Operative Agreements during the Lease Term,
shall survive the expiration or other termination of this Lease or any other
Operative Agreement.
Section 25.8. Business Days. If any payment is to be made hereunder or any
action is to be taken hereunder on any date that is not a Business Day, such
payment or action otherwise required to be made or taken on such date shall be
made or taken on the immediately succeeding Business Day with the same force
and effect as if made or taken on such scheduled date and as to any payment
(provided any such payment is made on such succeeding Business Day) no interest
shall accrue on the amount of such payment from and after such scheduled date
to the time of such payment on such next succeeding Business Day.
Section 25.9. Directly or Indirectly. Where any provision in this Lease
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
Section 25.10. Incorporation by Reference. The payment obligations set
forth in Sections 7.1 and 7.2 of the Participation Agreement are hereby
incorporated by reference.
Section 25.11. Lessee's Right of Quiet Enjoyment. So long as no Lease
Event of Default has occurred and is continuing, Lessor shall not take, or
cause to be taken, any action contrary to Lessee's rights under this Lease,
including, without limitation, the right to possession and use by Lessee or any
permitted sublessee of the Equipment.
Section 25.12. Entire Agreement. This Lease, together with the schedules,
exhibits and documents delivered hereunder, and the other Operative Agreements
contain the entire agreement between the parties with respect to the subject
matter covered herein and therein, and supersede all prior agreements (oral or
written), negotiations and discussions between the parties relating thereto.
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IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly
executed and delivered on the day and year first above written.
Lessor:
State Street Bank and Trust Company,
not in its individual capacity except
as otherwise expressly provided but
solely as Owner Trustee
By:___________________________________
Name:
Title:
Lessee:
Union Tank Car Company
By:_____________________________________
Name:
Title:
49
State of )
) SS
County of )
On this ____ day of December, 1994, before me personally appeared
______________, to me personally known, who being by me duly sworn, say that he
is __________________________ of State Street Bank and Trust Company, that said
instrument was signed on such date on behalf of said corporation by authority
of its Board of Directors, and he acknowledged that the execution of the
foregoing instrument was the free act and deed of said corporation.
____________________________
Notary Public
[Notarial Seal]
My commission expires:
State of Illinois )
) SS
County of Cook )
On this ___ day of December, 1994, before me personally appeared
________________, to me personally known, who being by me duly sworn, say that
he is the _________________ of Union Tank Car Company, that said instrument was
signed on such date on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
____________________________
Notary Public
[Notarial Seal]
My commission expires:
50
EXHIBIT A
LEASE SUPPLEMENT NO. _______
(UTC TRUST NO. 1994-A_)
This Lease Supplement No. , dated as of ,
1994 between State Street Bank and Trust Company, a Massachusetts banking
corporation, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement ("Lessor"), and Union Tank Car Company, a Delaware
corporation ("Lessee");
Witnesseth:
Lessor and Lessee have heretofore entered into that certain
Equipment Lease Agreement (UTC Trust No. 1994-A ) dated as of December , 1994
(the "Lease"). The terms used herein are used with the meanings specified in
the Lease.
The Lease provides for the execution and delivery of one or more
Lease Supplements substantially in the form hereof for, among other things, the
purpose of particularly describing all or a portion of the Units of Equipment
to be leased to Lessee under the Lease.
Now, Therefore, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, Lessor and
Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease as herein supplemented, the
Units described in Schedule 1 hereto.
2. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
3. To the extent that this Lease Supplement constitutes chattel
paper (as such term is defined in the Uniform Commercial Code) no security
interest in this Lease Supplement may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page
hereof, which counterpart shall constitute the only "original" hereof for
purposes of the Uniform Commercial Code.
4. This Lease Supplement shall be governed by and construed in
accordance with the internal laws and decisions of the State of Illinois;
provided, however, that the parties shall be entitled to all rights conferred
by any applicable Federal statute, rule or regulation.
5. This Lease Supplement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
A-1
51
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed as of the day and year first above written and
to be delivered as of the date first above written.
State Street Bank and Trust Company,
not in its individual capacity but
solely as Owner Trustee
By:_________________________________
Name:
Title:
Union Tank Car Company
By:_________________________________
Name:
Title:
A-2
52
State of )
) SS
County of )
On this ____ day of December, 1994, before me personally appeared
__________________, to me personally known, who being by me duly sworn, say
that he is ________________________ of State Street Bank and Trust Company,
that said instrument was signed on such date on behalf of said corporation by
authority of its Board of Directors, and he acknowledged that the execution of
the foregoing instrument was the free act and deed of said corporation.
____________________________
Notary Public
[Notarial Seal]
My commission expires:
State of Illinois )
) SS
County of Cook )
On this ____ day of December, 1994, before me personally appeared
______________________, to me personally known, who being by me duly sworn,
say that he is _____________ of Union Tank Car Company, that said instrument
was signed on such date on behalf of said corporation by authority of its Board
of Directors, and he acknowledged that the execution of the foregoing
instrument was the free act and deed of said corporation.
____________________________
Notary Public
[Notarial Seal]
My commission expires: