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Exhibit 4(b)(2)
EQUIPMENT LEASE AGREEMENT
(UTC TRUST NO. 1996-A)
(L-14_)
Dated May __, 1996
Between
_____________________________________,
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, _____________________________, NOT IN ITS INDIVIDUAL
CAPACITY BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY
AGREEMENT (UTC TRUST NO. 1996-A) (L-14_), DATED May __, 1996 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 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........................... 10
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; Replacement of Units................... 12
SECTION 9. MODIFICATIONS.............................................. 13
Section 9.1 Required Modifications........................... 13
Section 9.2 Optional Modifications........................... 13
Section 9.3 Removal of Property; Replacements................ 14
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........................................... 17
Section 11.1 Event of Loss................................................... 17
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.................................................................. 22
Section 12.1 Physical Damage and Public Liability Insurance.................. 22
Section 12.2 Physical Damage Insurance....................................... 23
Section 12.3 Public Liability Insurance...................................... 24
Section 12.4 Certificate of Insurance........................................ 25
Section 12.5 Additional Insurance............................................ 25
Section 12.6 Pollution Coverage.............................................. 26
SECTION 13. REPORTS; INSPECTION........................................................ 26
Section 13.1 Duty of Lessee to Furnish....................................... 26
Section 13.2 Lessor's Inspection Rights...................................... 27
SECTION 14. LEASE EVENTS OF DEFAULT.................................................... 27
SECTION 15. REMEDIES................................................................... 29
Section 15.1 Remedies........................................................ 29
Section 15.2 Cumulative Remedies............................................. 32
Section 15.3 No Waiver....................................................... 32
Section 15.4 Notice of Lease Default......................................... 32
Section 15.5 Lessee's Duty to Furnish Information with Respect to Subleases.. 32
Section 15.6 Lessee's Duty to Return Equipment Upon Default.................. 33
Section 15.7 Specific Performance; Lessor Appointed Lessee's Agent........... 33
SECTION 16. FILINGS; FURTHER ASSURANCES................................................ 34
Section 16.1 Filings......................................................... 34
Section 16.2 Further Assurance............................................... 34
Section 16.3 Other Filings................................................... 35
Section 16.4 Expenses........................................................ 35
SECTION 17. LESSOR'S RIGHT TO PERFORM.................................................. 35
SECTION 18. ASSIGNMENT................................................................. 35
Section 18.1 Assignment by Lessor............................................ 35
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TABLE OF CONTENTS (cont'd)
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Section 18.2 Assignment by Lessee............................................. 36
Section 18.3 Sublessee's Performance and Rights............................... 36
SECTION 19. NET LEASE, ETC.............................................................. 37
SECTION 20. NOTICES..................................................................... 38
SECTION 21. CONCERNING THE INDENTURE TRUSTEE............................................ 39
Section 21.1 Limitation of the Indenture Trustee's Liabilities............... 39
Section 21.2 Right, Title and Interest of the Indenture Trustee Under Lease.. 39
SECTION 22. PURCHASE OPTIONS; RENEWAL OPTIONS........................................... 39
Section 22.1 Early Purchase Option........................................... 39
Section 22.2 Election to Retain or Return Equipment at End of Basic or
Renewal Term.................................................... 40
Section 22.3 Purchase Options................................................ 41
Section 22.4 Renewal Options................................................. 41
Section 22.5 Appraisal....................................................... 42
Section 22.6 Stipulated Loss Value and Termination Value During Renewal
Term............................................................ 43
SECTION 23. LIMITATION OF LESSOR'S LIABILITY............................................ 43
SECTION 24. INVESTMENT OF SECURITY FUNDS................................................ 43
SECTION 25. MISCELLANEOUS............................................................... 44
Section 25.1 Governing Law; Severability..................................... 44
Section 25.2 Execution in Counterparts....................................... 44
Section 25.3 Headings and Table of Contents; Section References.............. 44
Section 25.4 Successors and Assigns.......................................... 44
Section 25.5 True Lease...................................................... 44
Section 25.6 Amendments and Waivers.......................................... 44
Section 25.7 Survival........................................................ 45
Section 25.8 Business Days................................................... 45
Section 25.9 Directly or Indirectly.......................................... 45
Section 25.10 Incorporation by Reference...................................... 45
Section 25.11 Lessee's Right of Quiet Enjoyment............................... 45
Section 25.12 Entire Agreement................................................ 45
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TABLE OF CONTENTS (cont'd)
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Attachments to Equipment Lease Agreement:
Exhibit A -- Form of Lease Supplement A-1
Appendix A -- Definitions
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EQUIPMENT LEASE AGREEMENT
(UTC TRUST NO. 1996-A)
(L-14_)
THIS EQUIPMENT LEASE AGREEMENT (UTC Trust No. 1996-A) (L-14_), dated
May __, 1996 (the "Lease"), between _________________, a______________, 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 for each Unit
covered by a Lease Supplement executed and delivered on the Initial Closing Date
shall commence on the Initial Closing Date and shall terminate on the day before
the Basic Term Commencement Date. The interim term of this Lease for each Unit
covered by a Lease Supplement executed and delivered on the Subsequent Closing
Date shall commence on the Subsequent Closing Date and terminate on the day
before the Basic Term Commencement Date. The basic term of this
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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.
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 Schedules
3A and 3B, as applicable, to the Participation Agreement (as such Schedules 3A
and 3B 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 Schedules 3A and
3B to the Participation Agreement, as so adjusted, such Schedules 3A and 3B 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 (without taking into account any
principal amount required to be prepaid on the Mandatory Refinancing Date
pursuant to Section 2.10(f) of the Indenture).
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 hereof 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
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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.
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 ___________, 1996 or the
Basic Term Commencement Date, as the case may be, if the funds for the payment
of interest on the Equipment Notes contemplated to be made by Owner Trustee on
either such date 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 ___________, 1996
or the Basic Term Commencement Date, as the case may be, 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 ___________, 1996 or the Basic Term Commencement Date, as
the case may be, an amount, if any, equal to such deficiency (either 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.
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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 _______, _______,
________ Attention: _______________. 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 Section 3.6 at the office of the Indenture Trustee at ,
ABA No. ____________, Corporate Trust Clearing Account No. ___________, for
credit to trust number _____________, Attention: ____________________ UTC Trust
No. 1996-A (L-14_), 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 Equipment. With respect to the Units to be
delivered on the Initial 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 the Units to be delivered on the Subsequent Closing Date or
Replacement Units pursuant to Section 11.2, Lessee will cause, each Unit to be
numbered with its reporting xxxx shown on the Lease Supplement dated the date on
which such Unit was delivered and covering such Unit. Lessee will not change the
reporting xxxx 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 second 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 Initial Closing Date or
the Subsequent Closing Date, as the case may be, Lessor shall have received
whatever title to the Equipment as was conveyed to Lessor by Lessee on such date
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
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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 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 a list specifying 21 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. Not less than 10 days
prior to the date on which any Unit is to be returned to the location specified
pursuant to Section 6.1(b) or delivered and stored for Lessor pursuant to
Section 6.1(c), Lessee shall give Lessor irrevocable written notice specifying
the number and type of Units which are to be returned or delivered and stored,
the location of such return or delivery and storage and the date on which the
Inspection Period is scheduled to commence with respect to each such Unit. Upon
the arrival of the Units at the return or delivery location(s) described in the
foregoing notice, Lessee will give Lessor prompt written confirmation of the
number and type of Units returned or delivered and the date on which the
Inspection Period commences with respect to the Inspectable
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Group(s) (hereinafter defined) of which such Units are a part. In the event
that, subsequent to the date an Inspection Period commences for any Inspectable
Group, additional Units are delivered to such location, unless Lessor is at that
time still conducting its inspection at such location pursuant to Section
6.1(h), a new Inspection Period will commence upon receipt of notice that an
Inspectable Group made up of such subsequently delivered Units has been
assembled; provided, however, that if less than 25 additional Units are to be
subsequently returned or delivered to such location, such new Inspection Period
will commence upon receipt of notice that all of such subsequently delivered
Units have been assembled.
(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 21 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 shall specify the total number and
type of Units to be delivered to each location. Maintenance records with respect
to each Unit shall be delivered 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 30 days after the later of (A) the
date of commencement of the Inspection Period for the Inspectable Group of which
such Unit is a part 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 the storage location'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 the storage location's business and shall be subject to 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,
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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 any Unit 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 21 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 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 commencing on the date after the expiration
or termination of the Lease Term 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. Nothing herein shall be in
abrogation of Lessor's right to have such Unit returned to it for possession or
storage.
(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) in the event that such Unit was delivered to the
location specified pursuant to Section 6.1(b) or 6.1(c), as appropriate, after
the date on which this Lease expires or terminates with respect to such Unit,
the number of days elapsed between the delivery of the Unit to the location so
specified and the commencement of the Inspection Period for the Inspectable
Group of which such Unit is a part, (ii) one-half of the number of days elapsed
between the commencement of the Inspection Period for the Inspectable Group of
which such Unit is a part and the date on which Lessee receives notice from
Lessor, which is given no later than the date specified in the second sentence
of Section 6.1(h), that such Unit is not in the condition specified in Section
6.2 (provided, however, that in no event shall the number determined pursuant to
this clause (ii) exceed 30), plus (iii) the
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number of days following receipt by Lessee of notice from Lessor, which is given
no later than the date specified in the second sentence of Section 6.1(h), that
such Unit is not in the condition specified by Section 6.2 that are 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 $2,500, 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 6.1(f)
with respect thereto solely as a result of the condition of such 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 30-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 the case may be (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 10 Business Days following receipt by
a Responsible Officer of the Owner Participant of a final report relating to 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. The inspection of all
redelivered Units 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 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, subject to the last sentence of Section 6.1(f),
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(f) pay,
in addition to Holdover Rent otherwise owing under this Section 6.1, 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 reinspection
pursuant to this Section 6.1(h) 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.
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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 manufacturers 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 by the date specified
in the second sentence of 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.
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 manufacturers' 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
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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 Initial Closing Date or the Subsequent Closing Date, as applicable,
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 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
losses for federal or state income tax purposes. 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 or 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.
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Section 8.3 Sublease; Replacement of Units. 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 Initial 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 or any 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. Notwithstanding the foregoing, in the event Lessee (A)
desires to sublease one or more Units for a term which extends beyond the Basic
Term or any 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 (provided that in no event shall the existence of
such inconsistent term or condition relieve Lessee of any of its obligations
hereunder or constitute a waiver by Lessor of compliance by Lessee with such
obligations), Lessee may do so without violating this Lease and 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 (and in any event shall
effect such replacement prior to the time that such inconsistent term or
condition results in a breach of any provision of this Lease) 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 Unit to be replaced will be so replaced; provided that if replacement
is to be made pursuant to the 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
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therefor. In the event Lessee exercises its option pursuant to the 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 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
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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 any 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 an Equipment Group, the
determination as to which Units are subject to termination shall be made by
Lessee on a random or other reasonable basis (including, without limitation, on
the basis of car type) 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
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Lessee's requirements, or (b) in the circumstances described in 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 an
Equipment Group are designated as Terminated Units, describing the
nondiscriminatory manner (including, without limitation, on the basis of car
type) in which Lessee proposes to determine which Units in that Equipment 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 condition specified in Section 6.2 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.
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The net proceeds of sale realized at such sale shall be paid to 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 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 with respect to such Terminated Units. 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 the
proposed Termination Date, Lessor shall (x) thereafter
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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 Units specifying a proposed Termination
Date occurring on a Determination Date that is not less than 25 days after 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
sale of Terminated Units 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 of all amounts required to be paid pursuant to 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 payment of all amounts required to be paid in respect of any Terminated Unit
or Units, Lessor will convey to Lessee or its designee all right, title and
interest of Lessor in and to such Terminated 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 Officer's 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 promulgated, or any other action taken, 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 Unit 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
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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.
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 that since the end of the last period for which a report was
delivered to Lessor under this Section 11.2 ten 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 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 Replacement 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 and Lessee
shall pay to Lessor on such Rent Payment Date (or, in the case of a
Multiple Loss, on the first
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Business Day succeeding the 60th day following the date on which Lessee
is required to report such loss pursuant to this 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 and provided further that the Lessee may
substitute fewer or more Replacement Units than the number of Units
which have suffered an Event of Loss so long as (A) such Replacement
Unit(s) have in the aggregate a Fair Market Sales Value, utility,
remaining economic useful life, residual value and condition at least
equal to the aggregate Fair Market Sales Value, utility, remaining
economic useful life, residual value and condition of the Unit(s) so
replaced (assuming such Unit(s) were in at least the condition required
to be maintained by the terms of this Lease), (B) each such Replacement
Unit has a utility and condition not materially worse than that of each
of the Units so replaced, (C) each such Replacement Unit has an
estimated residual value as of the end of the Basic Term (determined at
the date of such replacement) of at least 20% (without giving effect to
inflation or deflation) of the Fair Market Sales Value of such
Replacement Unit as of the date of such replacement, and (D) such
Replacement Unit(s) otherwise meet the requirements of this paragraph
(i); 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, an amount equal to (A) the Stipulated Loss Value of each
such Unit suffering an Event of Loss or deemed Event of Loss determined
as of 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 Unit, 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, in lieu of the amounts otherwise required to be paid in
respect of each such Unit as provided above, Lessee shall pay or cause
to be paid on the first Business Day succeeding the 60th day following
the date on which Lessee is required to report such loss pursuant to
this Section 11.2 (the "Multiple Loss Payment Date"), (A) an amount
equal to the Stipulated Loss Value of each such Unit determined as of
(i) the second day of the month in which the Multiple Loss Payment Date
occurs or (ii) the second day of the immediately preceding month if the
Multiple Loss Payment Date is the first day of a month (the second day
of any such month a "Multiple Loss Determination Date"), (B) an amount
of accrued and unpaid Basic Rent, if any, in respect of each such Unit
equal to the product of (x) the daily equivalent of the amount of Basic
Rent scheduled to be paid with respect to each such Unit on the Rent
Payment Date next succeeding such Multiple Loss Determination Date and
(y) the number of days from and including such Multiple Loss
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Determination Date to but excluding the Multiple Loss Payment Date (but
in no event less than the amount of accrued and unpaid interest, if
any, in respect of the principal amount of Equipment Notes to be
prepaid as a result of such Multiple Loss) and (C) all other Rent then
due and payable hereunder, 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 made, 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 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 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 Xxxx 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
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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 Xxxx 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, remaining
useful life and condition 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 Xxxx, Xxxxxx & Xxxxxxxxx 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 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 of 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
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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 the requisitioning 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 xxxxxx railcars. Without limiting the foregoing,
Lessee will in any event:
(a) (i) for so long as a Lease Event of Default shall have occurred
and be continuing, or (ii) if required by the Letter Agreement dated as of the
Closing between Lessee and the Owner Participant (in the circumstances set forth
therein), keep each Unit 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
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(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 paid 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 damage 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 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.
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Section 12.3 Public Liability Insurance. (a) The public liability
insurance referred to in paragraph 12.1(b) shall (i) provide that inasmuch 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 that, as a
result of Lessee's waiver of subrogation contained in Section 12.3(d), the
insurers shall have no rights of subrogation 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 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
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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.
(d) Lessee hereby waives (on behalf of itself and its insurers) all
of Lessee's and Lessee's insurers' rights of subrogation against the Owner
Participant, Lessor, as lessor of the Equipment and in its individual capacity,
and the Indenture Trustee with respect to all matters relating to or arising out
of the Units, the Operative Documents or the transactions contemplated thereby.
Section 12.4 Certificate of Insurance. Lessee shall, prior to the
Initial Closing Date and the Subsequent 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 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
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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 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, 1997,
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 ended on such
December 31 (or since the Initial 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 reporting
xxxx 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
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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, 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
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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 demand
therefor 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
(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
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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
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;
or
(k) The mandatory refinancing of the Equipment Notes required to be
effected on the Mandatory Refinancing Date pursuant to Section 10.2 of the
Participation Agreement shall not have occurred for any reason whatsoever;
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:
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(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;
(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
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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 interest of Lessor in
and to such Unit to Lessee or as it may direct, Lessor shall execute and deliver
such documents evidencing such transfer as Lessee shall reasonably request, the
obligation of Lessee to pay Basic Rent hereunder for such Units shall cease and
the Lease Term for such Units shall end;
(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
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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.
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
regarding such Units and the most recent known location of such Units.
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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 within the continental United States (excluding Alaska), as
Lessor may reasonably 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 within the continental United States
(excluding Alaska), all as Lessor may reasonably direct in writing.
All Equipment returned shall be in the condition required by Section 6.2 hereof.
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
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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 (a) the Initial
Closing Date and the Subsequent Closing Date, as the case may be, Lessee will
(a) cause this Lease, the Lease Supplements dated the Initial Closing Date or
the Subsequent Closing Date, as the case may be, the Indenture and the Indenture
Supplements dated the Initial Closing Date or the Subsequent Closing Date, as
the case may be, to be (i) duly filed and recorded with the STB in accordance
with ___ U.S.C. Section _____, 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 Supplements dated the
Initial Closing Date or the Subsequent Closing Date, as the case may be, the
Indenture and the Indenture Supplements dated the Initial Closing Date or the
Subsequent Closing Date, as the case may be, to be filed in the appropriate
offices in the Canadian provinces of Ontario, Manitoba, Saskatchewan, Alberta,
British Columbia, Quebec and New Brunswick, 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 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 Officer's 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
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and of the Indenture Trustee in the Indenture Estate in respect of Units having
a 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 the Canadian province of Nova Scotia
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 of the Operative Agreements required to be recorded under such system
to be so recorded 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 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
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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, Owner
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, 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
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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
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
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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: ________________________________
________________________________
________________________________
Attention: _____________________
Fax No.: ______________________
Confirmation No.: ______________
With copies to Owner Participant.
If to Owner Participant: ________________________________
________________________________
________________________________
Attention: ____________________
Fax No.: ______________________
Confirmation No.: _____________
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If to the Indenture Trustee: ________________________________
________________________________
________________________________
Attention: ____________________
Fax No.: ______________________
Confirmation No.: _____________
If to Lessee: Union Tank Car Company
000 Xxxx Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel and Secretary
(UTC Trust No. 1996-A) (L-14_)
Fax No.: (000) 000-0000
Confirmation No.: (000) 000-0000
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.
SECTION 22. PURCHASE OPTIONS; RENEWAL OPTIONS.
Section 22.1 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 Equipment Group
the determination as to which Units are to be purchased
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shall be made on a random or other reasonable basis (including, without
limitation, on the basis of car type) 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 Equipment 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, 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. Lessee will make such
required payments on the Early Purchase Date in the manner specified in Section
3.6 hereof against delivery of a Xxxx 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)
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 other indebtedness
secured by such Units is then 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 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 on 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
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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 an Equipment Group, the determination as to which
Units are to be retained shall be made on a random or other reasonable basis
(including, without limitation, on the basis of car type) 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 Equipment 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
____________, ____ (the "Outside Date") at a price equal to the Outside Date
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 Operative Agreements, shall be made at the place
of payment specified in Section 3.6 hereof in immediately available funds
against delivery of a Xxxx 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
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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.
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.
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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 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 24, and any
gain from the investment thereof, may be applied to Lessee's obligations
hereunder.
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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 ___________; 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 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
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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 Initial Closing Date and the Subsequent 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:
________________________________________,
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:
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State of )
) SS
County of )
On this ____ day of May, 1996, before me personally appeared
______________________, to me personally known, who being by me duly sworn, say
that he is __________________________ of , 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 Xxxx )
On this ___ day of May, 1996, 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:
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EXHIBIT A
LEASE SUPPLEMENT NO. ___
(UTC TRUST NO. 1996-A) (L-14_)
This Lease Supplement No. , dated , 1996 between_________________, a
__________________, 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. 1996-A) (L-14_) dated May __, 1996 (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 ______________;
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
54
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written and to be
delivered on the date first above written.
_______________________________________,
not in its individual capacity but solely
as Owner Trustee
By:______________________________________
Name:
Title:
UNION TANK CAR COMPANY
By:______________________________________
Name:
Title:
A-2
55
State of )
) SS
County of )
On this ____ day of May, 1996, before me personally appeared
__________________, to me personally known, who being by me duly sworn, say that
he is ________________________ of , 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 Xxxx )
On this ____ day of May, 1996, 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:
A-3
