Exhibit 10.4
------------
FORM OF
-------------------------------------------------------
EQUIPMENT LEASE AGREEMENT
(1998-1)
Dated as of August 1, 1998
Between
[OWNER TRUSTEE],
not in its individual capacity except as
expressly provided herein but solely as Owner Trustee,
Lessor
GENERAL AMERICAN RAILCAR CORPORATION II,
Lessee
Tank Cars and Covered ▇▇▇▇▇▇ Cars
-------------------------------------------------------
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
Chicago, Illinois
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO THIS LEASE,
THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE
BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST
IN FAVOR OF, THE FIRST NATIONAL BANK OF CHICAGO, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT
(1998-1), DATED AS OF AUGUST 1, 1998 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
TABLE OF CONTENTS
-----------------
Page
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. Manner of Payments....................................... 3
SECTION 4. Ownership and Marking of Equipment...................................... 3
Section 4.1. Retention of Title....................................... 3
Section 4.2. Duty to Number and ▇▇▇▇ Equipment........................ 3
Section 4.3. Prohibition Against Certain Designations................. 4
SECTION 5. Disclaimer of Warranties................................................ 5
Section 5.1. Disclaimer of Warranties................................. 5
SECTION 6. Return of Equipment; Storage............................................ 6
Section 6.1. Return; Holdover Rent.................................... 6
Section 6.2. Condition of Equipment................................... 9
Section 6.3. Assignment of Management Contract........................ 10
SECTION 7. Liens................................................................... 10
SECTION 8. Maintenance; Possession; Compliance with Laws........................... 10
Section 8.1. Maintenance and Operation................................ 10
Section 8.2. Possession and Use....................................... 11
Section 8.3. Sublease................................................. 12
SECTION 9. Modifications........................................................... 13
Section 9.1. Required Modifications................................... 13
Section 9.2. Optional Modifications................................... 14
Section 9.3. Removal of Property; Replacements........................ 14
SECTION 10. Voluntary Termination................................................... 15
Section 10.1. Right of Termination..................................... 15
Section 10.2. Sale of Equipment........................................ 16
Section 10.3. Retention of Equipment by Lessor......................... 17
Section 10.4. Termination of Lease..................................... 18
TABLE OF CONTENTS (con't)
-----------------
Page
----
SECTION 11. Loss, Destruction, Requisition, Etc......................................... 18
Section 11.1. Event of Loss................................................ 18
Section 11.2. Replacement or Payment upon Event of Loss.................... 18
Section 11.3. Rent Termination............................................. 20
Section 11.4. Disposition of Equipment; Replacement of Unit................ 20
Section 11.5. Eminent Domain............................................... 22
SECTION 12. Insurance................................................................... 22
Section 12.1. 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 13. Reports; Inspection......................................................... 26
Section 13.1. Duty of Lessee to Furnish.................................... 26
Section 13.2. Lessor's Inspection Rights................................... 26
SECTION 14. Lease Events of Default..................................................... 27
SECTION 15. Remedies.................................................................... 29
Section 15.1. Remedies..................................................... 29
Section 15.2. Cumulative Remedies.......................................... 31
Section 15.3. No Waiver.................................................... 32
Section 15.4. Notice of Lease Default...................................... 32
Section 15.5. Lessee's Duty to Return Equipment Upon Default............... 32
Section 15.6. Specific Performance; Lessor Appointed Lessee's Agent........ 33
SECTION 16. Filings; Further Assurances................................................. 33
Section 16.1. Filings...................................................... 33
Section 16.2. Further Assurances........................................... 34
Section 16.3. Other Filings................................................ 34
Section 16.4. Expenses..................................................... 34
SECTION 17. Lessor's Right to Perform................................................... 34
SECTION 18. Assignment.................................................................. 35
Section 18.1. Assignment by Lessor......................................... 35
Section 18.2. Assignment by Lessee......................................... 35
Section 18.3. Sublessee's or Others Performance and Rights................. 35
ii
TABLE OF CONTENTS(cont'd)
-----------------
Page
----
SECTION 19. Net Lease, etc............................................................... 36
SECTION 20. Notices...................................................................... 37
SECTION 21. Concerning the Indenture Trustee............................................. 38
Section 21.1. Limitation of the Indenture Trustee's Liabilities............. 38
Section 21.2. Right, Title and Interest of the Indenture Trustee Under
Lease......................................................... 38
SECTION 22. Purchase Options; Renewal Options; and Deemed Renewals....................... 38
Section 22.1. Early Purchase Option......................................... 38
Section 22.2. Election to Retain or Return Equipment at End of Basic or
Renewal Term.................................................. 40
Section 22.3. Purchase Option............................................... 40
Section 22.4. Renewal Option................................................ 41
Section 22.5. Appraisal; Outside Renewal Date............................... 42
Section 22.6. Stipulated Loss Value and Termination Value During
Renewal Term.................................................. 42
Section 22.7. Deemed Renewals............................................... 42
SECTION 23. Limitation of Lessor's Liability............................................. 43
SECTION 24. Investment of Security Funds................................................. 43
SECTION 25. Miscellaneous................................................................ 43
Section 25.1. Governing Law; Severability................................... 43
Section 25.2. Execution in Counterparts..................................... 43
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...................................................... 44
Section 25.8. Business Days................................................. 44
Section 25.9. Directly or Indirectly; Performance by Managers............... 45
Section 25.10. Incorporation by Reference.................................... 45
iii
TABLE OF CONTENTS(cont'd)
-----------------
APPENDICES AND EXHIBITS
Page
----
Exhibit A -- Form of Lease Supplement .......................................... A-1
Appendix A -- Definitions
iv
EQUIPMENT LEASE AGREEMENT
(1998-1)
This Equipment Lease Agreement (1998-1), dated as of August 1, 1998 (this
"Lease"), is by and between [Owner Trustee], not in its individual capacity
except as expressly provided herein, but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and General American Railcar Corporation II, a Delaware
corporation ("Lessee").
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. Definitions.
-----------
Unless otherwise defined herein or required by the context, all capitalized
terms used herein shall have the respective meanings assigned to such terms 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 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 basic term of this Lease (the "Basic Term")
----------
shall commence on the Basic Term Commencement Date and, subject to earlier
termination pursuant to Section 10, 11, 15 or 22.1, shall expire at 11:59 p.m.
(Chicago, Illinois time) on the Basic Term Expiration Date. Subject and
pursuant to Section 22.4, Lessee may elect one or more Renewal Terms and, as
provided in Section 22.7 hereof, in certain circumstances a Renewal Term shall
be deemed to have occurred with respect to some or all of the Units.
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 monthly installments payable on each Rent Payment Date. Each such
monthly payment of Basic Rent shall be in an amount equal to the product of the
Equipment Cost for such Unit multiplied by the Basic Rent percentage for such
Unit set forth opposite such Rent Payment Date on Schedule 3 to the
Participation Agreement (as such Schedule 3 shall be adjusted pursuant to
Section 2.6 of the Participation Agreement). Basic Rent shall be payable in
advance on certain Rent Payment Dates and in arrears on certain Rent Payment
Dates, as specified in Schedule 3 to the Participation Agreement, as so
adjusted, such Schedule 3 as so adjusted from time to time being incorporated
herein by reference. Each installment of Basic Rent that is indicated as
payable in advance will be allocated over the month beginning on the Rent
Payment Date on which such advance payment is scheduled to be made, and each
installment of Basic Rent that is indicated as payable in arrears will be
accrued over the month ending on the Rent Payment Date on which such arrears
payment is scheduled to be made. It is the intention of Lessor and Lessee that
the allocations of Basic Rent set forth on Schedule 3 to the Participation
Agreement constitute specific allocations of fixed rent within the meaning of
Prop. Treas. Reg. (S) 1.467(1)(c).
Notwithstanding anything to the contrary contained herein or in the
Participation Agreement, 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 in accordance with the Scheduled
Amortization.
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, (i) on demand, to the extent permitted by applicable law, an
amount equal to Late Payment Interest 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,
(ii) 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 and any Late
Payment Interest, (iii) in the case of the purchase of any Unit pursuant to
Section 22.1 or Section 6.9 of the Participation Agreement, on such date of
purchase, an amount equal to the Make-Whole Amount, if any, with respect to the
principal amount of each Equipment Note to be prepaid as a result of such
purchase and any Late Payment Interest, (iv) an amount equal to any other amount
payable by Lessor on the Equipment Notes in excess
2
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 (v) 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 and any Late Payment
Interest. 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 3.5.
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 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. 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 to the recipient not later
than ______ __m. [New York, New York time] on the date of such payment in funds
consisting of lawful currency of the United States of America, which shall be
immediately available, provided, that so long as the Indenture shall not have
--------
been discharged pursuant to the terms thereof, Lessor hereby directs, and Lessee
hereby agrees, that all Rent (excluding Excepted Property) payable to Lessor
shall be paid from the Payment Account directly to the Indenture Trustee at the
times and in funds of the type specified in this Section 3.5 at the office of
the Indenture Trustee at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, ABA No. [_____________], Attn: Corporate Trust Services Division,
Account # [______________] or at such other location in the United States of
America as the Indenture Trustee may otherwise direct.
SECTION 4. Ownership and Marking of Equipment.
----------------------------------
Section 4.1. Retention of Title. Lessor shall and hereby does retain
------------------
full legal title to and beneficial ownership of the Equipment notwithstanding
the delivery to and possession and use of the Equipment by Lessee hereunder or
any sublessee under any sublease permitted hereby.
Section 4.2. Duty to Number and ▇▇▇▇ Equipment. With respect to the
---------------------------------
Units to be delivered on the Closing Date, Lessee represents that GATC has
caused, and as soon as practicable after the date on which a Lease Supplement is
executed and delivered in respect of a Replacement Unit pursuant to Section
11.4(b), Lessee will cause, each Unit to be numbered with its reporting ▇▇▇▇
shown on the Lease Supplement dated the date on which such Unit was delivered
and covering such Unit, and will from and after such date keep and maintain,
plainly,
3
distinctly, permanently and conspicuously marked by a plate or stencil
printed in contrasting colors upon each side of each Unit, in letters not less
than one inch in height, a legend substantially as follows:
"OWNERSHIP SUBJECT TO A SECURITY AGREEMENT
FILED WITH THE SURFACE TRANSPORTATION BOARD"
with appropriate changes thereof and additions thereto as from time to time may
be required by law in order to protect Lessor's right, title and interest in and
to such Unit, its rights under this Lease and the rights of the Indenture
Trustee. Except as provided hereinabove, Lessee will not place any such Units
in operation or exercise any control or dominion over the same until the
required legend shall have been so marked on both sides thereof, and will
replace promptly any such word or words in such legend which may be removed,
defaced, obliterated or destroyed. In the event of a change in the reporting
▇▇▇▇ of any Unit, within 60 days after a Responsible Officer or the Manager has
received notice of any such changed ▇▇▇▇, a statement of the new reporting ▇▇▇▇
to be substituted therefor, 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. As soon as practicable after the delivery of such statement
a supplement to this Lease and, if not so discharged, the Indenture, with
respect to such new reporting marks, shall 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.
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 statement of new
reporting marks specified in 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.
4
SECTION 5. Disclaimer of Warranties.
------------------------
Section 5.1. Disclaimer of Warranties. Without waiving any claim Lessee
------------------------
may have against any seller, supplier or manufacturer, LESSEE ACKNOWLEDGES AND
AGREES THAT, (i) EACH UNIT IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED THAT EACH UNIT IS
SUITABLE FOR ITS PURPOSES AND LESSEE HAS ACCEPTED EACH UNIT, (iii) NEITHER
LESSOR NOR OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH
KIND OR HAS INSPECTED THE UNITS PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE,
(iv) EACH UNIT IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND
GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, AND (v) LESSOR
LEASES AND LESSEE TAKES EACH UNIT "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", IN
WHATEVER CONDITION IT MAY BE, AND LESSEE ACKNOWLEDGES THAT NEITHER LESSOR, AS
LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR OWNER PARTICIPANT MAKES NOR SHALL BE
DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS,
WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE, OF THE EQUIPMENT, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM
FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR
OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO AND EACH OF LESSOR
AND OWNER PARTICIPANT EXPRESSLY DISCLAIMS SELECTION OF THE UNITS, except that
Lessor, in its individual capacity, represents and warrants that on the Closing
Date, Lessor shall have received whatever title to the Equipment as was conveyed
to Lessor by Lessee and each Unit will be free of Lessor's Liens attributable to
Lessor and provided that the foregoing disclaimer in clause (v) shall not extend
to Owner Participant's representation and warranty contained in Section 3.6(e)
of the Participation Agreement. Lessor hereby appoints and constitutes Lessee
its agent and attorney-in-fact during the Lease Term to assert and enforce, from
time to time, in the name and for the account of Lessor and Lessee, as their
interests may appear, but in all cases at the sole 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
5
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 180 days prior to
---------------------
the end of the Basic Term or the end of any 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 of alternative storage locations used for
the storage of rolling stock within the Contiguous United States sufficient to
store the returned Units and the available storage capacities of such locations.
Not less than 90 days prior to the end of the Lease Term with respect to any
Unit which has not been purchased by Lessee, Lessor will give Lessee irrevocable
notice of its decision either to take possession of or store such Unit. If
Lessor shall have decided to take possession of such Unit, the terms of Section
6.1(b) will apply. If Lessor shall have decided to store such Unit, the terms
of Section 6.1(c) hereof will apply.
(b) If Lessor shall have decided to take possession of such Unit,
Lessee will, at its sole risk and expense, deliver possession of such Unit at
any storage 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 on or before the 90th day before
the end of the Lease Term; provided, that (x) there shall be no less than the
Minimum Units returned to each of no more than five (5) locations (each of which
shall be located within the Contiguous United States), and (y) Lessor's notice
shall specify the total number and type of Units to be delivered to each
location.
(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 and at the risk and expense of the Lessee for a period
(the "Storage Period") beginning, for any particular storage location, on
the expiration of the Lease Term (the "Storage Period Commencement Date")
and ending not more than 30 days after the later of (A) the date on which
50% of the total number of Units being returned (excluding in such 50%
determination any Units then under a Sublease which is subject to the
deemed renewal provisions of Section 22.7 hereof), and stored at such
location have arrived at such location and (B) the date on which such Unit
is in compliance with the conditions set forth in Section 6.2, and for an
additional 30 days thereafter at the sole risk and expense
6
of Lessor. On or before the 90th day before the end of the Lease Term,
Lessor shall provide Lessee with written notice designating its choices
from among the alternative storage locations provided by Lessee pursuant to
Section 6.1(a). Any storage provided by Lessee during the Storage Period
(except for such additional 30-day period referred to above) 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 Persons designated by
it, including the authorized representative or representatives of any
prospective purchaser or user of such Unit, to restencil the marks on such
Unit and to inspect the same during Lessee's normal business hours upon at
least three Business Days' prior written or telephonic notice; provided,
however, that such inspection and restenciling shall not interfere with the
normal conduct of Lessee's business; 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 negligence or wilful
misconduct) shall not be liable for any injury to, or the death of, any
person exercising, either on behalf of Lessor or any prospective purchaser
or user, the rights of inspection and restenciling granted pursuant hereto.
Lessee shall not be required to store the Equipment after the Storage
Period. If Lessee does store any Unit after the expiration of the Storage
Period, such storage shall be at the sole risk and expense of Lessor.
(ii) Upon the request and direction of Lessor (and at Lessor's
sole risk and expense), on not more than one occasion with respect to each
stored Unit and upon not less than 30 days' prior written notice from
Lessor to Lessee, Lessee will, on or before the expiration of the Storage
Period, transport such Units to any railroad interchange point or points
within the Contiguous United States with no fewer than the Minimum Units
per 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.
(iii) Upon receipt of Lessor's written notice designating its
choices from among the alternative storage locations provided by Lessee
under Section 6.1(a), Lessee shall have the option to store such Units at
such storage locations anywhere within the Contiguous United States as it
shall choose (provided that there shall be no less than the Minimum Units
stored at each such location) in which case the Storage Period shall be at
the sole risk and expense of Lessee for a period of 60 days, during which
period the Lessee shall be obligated to insure such Units as provided in
Section 12. Upon receipt of such notice, Lessee will promptly give notice
to Lessor of the locations at which Lessee will store such Units. If
Lessee shall exercise such option, Lessee shall on or before the expiration
of the Storage Period transport the Equipment to any railroad interchange
point or points within the Contiguous United States with no fewer than the
7
Minimum Units per interchange point, designated by Lessor upon not less
than 30 days' prior written notice. The movement of any Unit from such
Unit's location as designated by Lessee pursuant to this Section
6.1(c)(iii) to an interchange point thereafter designated by Lessor in
accordance with the foregoing sentence will be at the risk and expense of
Lessor; provided, however, that any incremental costs associated with
movement from the storage facility designated by the Lessee pursuant to
this clause (iii) over the costs that would be incurred in movement from
the storage facility designated by the Lessor pursuant to Section 6.1(a)
shall be for the account of the Lessee. During any Storage Period, Lessee
shall store the Equipment in such manner as Lessee or the Manager normally
stores similar units of railroad equipment owned or leased by it.
(d) Upon the latest of (i) expiration of the Lease Term with respect
to a Unit, (ii) tender of such Unit at the location determined in accordance
with Section 6.1(b) or, as applicable, the tender of such Unit for storage in
accordance with Section 6.1(c), and (iii) compliance by such Unit with Section
6.2, this Lease and the obligation to pay Basic Rent for such Unit accruing
subsequent to the expiration of the Lease Term with respect to such Unit shall
terminate.
(e) So long as no Lease Event of Default has occurred and is
continuing, all amounts earned in respect of a Unit after the date of expiration
of the Lease Term with respect to such Unit and prior to the return of such Unit
hereunder shall belong to Lessee, and if received by Lessor, shall be promptly
turned over to Lessee. In the event any Unit is not returned to Lessor in
accordance with the provisions of Section 6.1(b) (the "Holdover Period") on the
last day of the Lease Term with respect thereto, or, if requested by Lessor
pursuant to Section 6.1(c), delivered and stored on such last day of the Lease
Term, and, in either case, in the condition specified in Section 6.2, Lessee
shall pay to Lessor for each such day from the expiration of the Lease Term with
respect to such Unit until the date on which such Unit is returned to Lessor in
accordance with the provisions of Section 6.1(b) and in the condition specified
in Section 6.2, an amount equal to the daily equivalent of the average Basic
Rent for the Basic Term or the Renewal Term as applicable to such Unit (the
"Holdover Rent"). If such Unit is not returned to Lessor in accordance with the
provisions of Section 6.1(b) and in the condition specified in Section 6.2 on or
prior to the 180th day after the expiration of the Lease Term with respect to
such Unit, Lessor shall have the right to require Lessee to purchase such Unit
for a purchase price equal to the higher of (x) the Fair Market Sales Value and
(y) the Stipulated Loss Value of such Unit as of the 181st day after the
expiration of such Lease Term, together with the unpaid amount, if any, of such
daily Holdover Rent hereinabove provided for with respect to such Unit; provided
that, during the Holdover Period described in this sentence and the immediately
preceding sentence, Lessee shall use its best efforts to secure the return of
the Equipment as required under this Section 6 in the condition specified in
Section 6.2. Nothing herein shall be in abrogation of Lessor's right to have
such Unit returned to it for possession or storage. 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
3.5 hereof in immediately available funds against delivery
8
of a ▇▇▇▇ 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 as to the absence of 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 except as to the absence of any Lessor's Liens,
and may specifically disclaim any such representations or warranties.
Section 6.2. Condition of Equipment. Each Unit when returned to Lessor
----------------------
pursuant to Section 6.1 shall be (i) capable of performing the functions for
which it was designed, with all loading and unloading components operating in
good working order, (ii) suitable for continued commercial use in the commodity
last carried immediately prior to such return, (iii) suitable for use in
interchange by a new owner in the operating lease business in accordance with
then applicable Federal regulations, the Field Manual of the AAR, the
Interchange Rules and FRA rules and regulations (including any such regulations,
rules or Manual requirements or other applicable law requiring a Required
Modification which has a final implementation date which is within 90 days of
the Basic Term Expiration Date; provided that if the final implementation date
--------
for such Required Modification program is more than 90 days after the Basic Term
Expiration Date, then there shall also be provided to Lessor an Officer's
Certificate of the Lessee and the Manager to the effect that there has been no
discrimination in the making of such Required Modification as between the
returned Unit which has not received such Required Modification and any other
railcars generally in the Manager's Fleet), (iv) in all material respects in the
condition required by Section 8.1, (v) in conformance with any requirement
pertaining to warranties of the manufacturer of the Units during the warranty
period, (vi) empty, (vii) unless industry custom or practice indicates to the
contrary, steam cleaned or otherwise cleaned in a comparable commercially
acceptable manner, and (viii) free and clear of all Liens except Lessor's Liens.
All logs, records, books and other materials, or appropriate copies of any
thereof, relating to the maintenance of such Unit shall, upon Lessor's request,
be delivered to Lessor or its designee upon the return of such Unit. Lessor
shall have the right to inspect any Unit that is returned pursuant to Section
6.1 to ensure that such Unit is in compliance with the conditions set forth in
this Section 6.2, at Lessor's sole cost, expense and risk (including, without
limitation, the risk of personal injury or death), by its authorized
representatives, during Lessee's normal business hours and upon reasonable prior
notice to Lessee; provided, however, that 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 6.2 unless caused by Lessee's
gross negligence or wilful misconduct; and further provided, that if such Unit
is not in compliance with the conditions set forth in this Section 6.2, then
Lessee will (i) promptly take such steps as are necessary to bring such Unit in
compliance with the conditions set forth in this Section 6.2 and (ii) pay the
reasonable cost and expense of any reinspection of such Unit conducted by Lessor
required because of such non-compliance with Section 6.2. No inspection pursuant
to this Section 6.2 shall interfere with the normal conduct of Lessee's business
or the normal conduct of any sublessee's business, and, except as provided
herein, 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 this Section 6.2.
9
Section 6.3. Assignment of Management Contract. If requested by the
---------------------------------
Lessor, at the time of the return of any Unit, the Lessee shall deliver to the
Lessor an assignment of all right, title and interest of the Lessee in and to
the Management Agreement for an additional one (1) -year term, such assignment
to be in form and substance reasonably satisfactory to the Lessor with such
mutually acceptable amendments to the Management Agreement (including, without
limitation, appropriate adjustments to the fee provisions) as may be necessary
at such time to reflect then current conditions in the full service railcar
management business; provided, however, if at such time, there are other
railcars leased by Lessee and financed in other transactions which remain under
the Management Agreement, then in lieu of an assignment, Lessee shall arrange
for an appropriate alternative means to enable Lessor to have the benefits of
the services contemplated by the Management Agreement for such period. If any
amendments requested to be made to the Management Agreement pursuant to the
immediately preceding sentence have not been agreed to prior to a date on which
such Unit is to be returned, such Management Agreement shall (subject to the
proviso to the immediately preceding sentence) be assigned without modification,
and Lessee shall ensure that the Management Agreement remains in full force and
effect for a period of not less than 90 days, after which, if Lessor and the
Manager are not in agreement with respect to the amendments requested to be made
to the Management Agreement, the matter shall be submitted to an independent
expert satisfactory to such parties and such expert shall determine the changes,
if any (including, without limitation, appropriate adjustments to the fee
provisions), which would be required in an arm's-length management agreement
under the conditions then in effect in the full-service railcar leasing
business.
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 Unit 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.
Lessee shall promptly, at its own expense, take such action or cause such action
to be taken as may be necessary to duly discharge (or bond to the reasonable
satisfaction of Lessor and Indenture Trustee) 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, or cause the Manager under
the Management Agreement to 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
and the Manager in respect of equipment owned or leased by Lessee and the
Manager
10
similar in type to such Unit, (iii) in accordance in all material respects with
all manufacturer's warranties in effect and in accordance with all applicable
provisions, if any, of insurance policies required to be maintained pursuant to
Section 12, and (iv) in compliance in all material respects with any applicable
laws and regulations, including, without limitation, the Field Manual of the
AAR, FRA rules and regulations and Interchange Rules as they apply to the
maintenance and operation of the Equipment in interchange regardless of upon
whom such applicable laws and regulations are nominally imposed; provided,
however, that Lessee may, in good faith and by appropriate proceedings
diligently conducted, contest the validity or application of any such standard,
rule or regulation in any reasonable manner which does not materially interfere
with the use, possession, operation or return of any of the Units or materially
adversely affect the rights or interests of Lessor and the Indenture Trustee in
the Equipment or hereunder or otherwise expose Lessor, the Indenture Trustee or
any Participant to criminal sanctions or release Lessee from the obligation to
return the Equipment in compliance with the provisions of Section 6.2. Lessee
shall provide Lessor and the Indenture Trustee with notice of any contest of the
type described in the preceding sentence in detail sufficient to enable Lessor
and the Indenture Trustee to ascertain whether such contest may have an effect
of the type described in the preceding sentence. In no event shall Lessee
discriminate as to the use or maintenance of any Unit (including the periodicity
of maintenance or recordkeeping in respect of such Unit) as compared to
equipment of a similar nature which Lessee or the Manager 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) Without the written waiver or consent of Lessor (which waiver
or consent will not be unreasonably withheld), Lessee shall not change, or
permit any sublessee to change, a DOT classification (as provided for in 49
C.F.R. Part 179 or any successor thereto), or permit any sublessee to operate
any Unit under a different DOT classification, from that classification in
effect for such Unit on the Closing Date, except for any change in tank test
pressure rating provided such change does not increase the pressure rating of
the Unit above the tank test pressure to which the Unit was manufactured;
provided however, that in the event Lessor shall not have provided Lessee with a
written waiver or consent to such a reclassification or operation of any Unit
within 10 Business Days after receipt of Lessee's written request therefor (or
Lessor expressly rejects such a request by Lessee), Lessee may elect to replace
such Unit in accordance with and subject to the provisions of Sections 11.2(i),
11.3 and 11.4.
Section 8.2. Possession and Use. Lessee shall be entitled to the
------------------
possession of the Equipment and to the use of the Equipment by it or any
Affiliate in the United States and, subject to the remaining provisions of this
Section 8.2 and Section 8.3, 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 use, store or permit the use or storage of any
Equipment in any jurisdiction not included in the insurance coverage required by
Section 12. The Equipment shall
11
be used primarily on domestic routes in the United States, and in no event shall
more than forty-nine percent (49%) of the Units (as determined by mileage
records) shall be used outside the Contiguous United States at the same time.
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.
Section 8.3. Sublease. Provided Lessor shall not have declared the Lease
--------
to be in default (or the Lease shall 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, (i) a railroad company or companies (that is not
a Credit Bankrupt, GATC or any Affiliate thereof) incorporated under the laws of
the United States of America 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, (ii) responsible companies (i.e., a company with which the Manager
would do business in the ordinary course of its business with respect to
railcars which it owns, leases or manages) other than railroad companies, GATC,
Affiliates of GATC or Credit Bankrupts for use in their business or (iii)
wholly-owned Subsidiaries of GATC organized under the laws of (x) Canada or any
political subdivision thereof (each a "Canadian Affiliate"), or (y) Mexico or
------------------
any political subdivision thereof (each a "Mexican Affiliate"), (leases to any
of such sublessees being herein referred to as "Permitted Subleases"); provided,
------------------- --------
however, that Lessee shall not sublease more than the lesser of 20% of the Units
-------
to a sublessee formed under the laws of Mexico or any state thereof or the
percentage of railcars subleased to Mexican sublessees in the Total Managed
Fleet, and provided and that in no event will Lessee sublease more than 50
Equipment Units to any single Mexican sublessee (other than (x) Mexican
Affiliate or (y) a Mexican sublessee with a credit rating of at least BBB- or
Baa3 as determined by either of S&P or ▇▇▇▇▇'▇ respectively), and provided,
---------
further that the Lessee shall not at any time sublease more than 33% of the
-------
Equipment in the aggregate to Canadian Affiliates. All subleases (and to the
extent permitted, sub-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, shall contain a consent of the sublease to Lessee's collateral
assignment of such sublease and shall confirm such subordination by and consent
to assignment by provisions substantially in the form currently contained in
Lessee's standard car service contract (including any applicable riders)
delivered to Lessor and the Indenture Trustee prior to the Closing Date, or
otherwise as satisfactory to Lessor and the Indenture Trustee, (ii) shall not
permit any sub-subleasing, other than sub-subleases by Canadian Affiliates or
Mexican Affiliates to Persons of the type described in clauses (i) or (ii) of
the immediately preceding sentence containing terms and conditions similar in
all material respects to the applicable sublease between the Lessee and the
applicable Canadian Affiliate or Mexican Affiliate and not
12
permitting any sub-sub-subleasing ,and (iii) shall not include any term or
provision which is inconsistent with the terms and conditions of this Lease
(other than the Lease Term) or which could reasonably be expected to result in
material adverse consequences to Lessor, any Participant or the Indenture
Trustee. 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 or state
governmental agency or any other applicable law requires that any Unit be
altered 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 or 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 its reasonable judgment (as evidenced
by an Officer's Certificate of the Lessee to such effect, confirmed by an
Officer's Certificate of the Manager) 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 in such Officer's Certificate and treat such Unit as if an Event of Loss
had occurred as of the date of such written notice with respect to such Unit and
in such event the provisions of Sections 11.2, 11.3 and 11.4 shall apply with
respect to such Unit except that the amount payable under Section 11.2(ii)(a) as
a result of such determination shall be an amount equal to the greater of the
Fair Market Sales Value or Stipulated Loss Value of such Unit; provided that
Lessee shall not discriminate nor suffer the Manager to 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 or the Manager; and provided further that there shall also be included in
such Officer's Certificate a statement of how Lessee intends to meet the
financial obligations imposed under said Sections 11.2, 11.3 and 11.4 with
respect to such Units.
13
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, capacity, or
remaining economic useful life of such Unit below the fair market value,
utility, capacity, residual value or remaining economic useful life thereof
immediately prior to such Modification, in any non de minimis respect, 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 (other than Required Modifications) shall remain with
Lessee. If Lessee shall at its cost cause such Severable Modifications (other
than 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, 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, and Lessee shall, at its expense, repair any damage resulting from the
removal of any such Severable Modifications in a manner consistent with Section
8.1. If Lessee has not removed any Severable Modification prior to the return
of the related Unit as provided herein, title to such Severable Modification
shall pass to Lessor as of the date of such return.
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 by 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 fair
market value, utility, capacity, residual value and remaining economic 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 in the ordinary course
of maintenance and repair 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 replacement property which is incorporated
into a Unit in the ordinary course of maintenance and repair shall, without
further act, become the property of Lessor and be deemed part of such Unit for
all purposes hereof.
14
SECTION 10. Voluntary Termination.
---------------------
Section 10.1. Right of Termination. So long as no Lease Default pursuant
--------------------
to Section 14(a), 14(b), 14(g) or 14(h) or Lease Event of Default shall have
occurred and be continuing, Lessee shall have the right, at its option at any
time or from time to time during the Basic Term on or after the seventh
anniversary of the Basic Term Commencement Date to terminate the Lease Term with
respect to any or all of the Units (provided that, if such termination is for
less than all Units in a Functional Group, Lessee shall exercise such
termination with respect to at least 25 Units, no fewer than 25 Units shall
remain in such Functional Group as a result of such termination and the
determination as to which Units are subject to termination shall be made by
Lessee on a random or other basis (in each case reasonably acceptable to Lessor)
without discrimination based on maintenance status, operating condition of the
Units in question or otherwise) (the "Terminated Units") if (x) 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) that such Units have become obsolete or surplus to
Lessee's requirements, (y) Lessor has received an Officer's Certificate from the
Lessee and the Manager to the effect that there has been no discrimination in
the selection of the Terminated Units when measured against the other Units and
the Manager's Fleet, and that, following the termination of this Lease with
respect to the Terminated Units, the Units remaining subject to this Lease will
constitute a pool of Units, which is of a sufficient quantity and quality to
sustain over the remaining Basic Term the Coverage Ratios applicable at the time
of such termination and (z) Lessee delivers at least 120 days' prior notice to
Lessor and the Indenture 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 upon Lessee's compliance with this
Section 10, and (ii) if some but less than all of the Units in a Functional
Group are designated as Terminated Units, describing in such Officer's
Certificate the nondiscriminatory manner in which Lessee proposes to determine
which Units in that Functional Group are to be Terminated Units. Notwithstanding
anything herein contained to the contrary, there shall be no determination that
a Unit is surplus or obsolete for purposes of this Lease if, on the Termination
Date, such Unit is subject to a Car Service Contract. Except as expressly
provided otherwise 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 60th day prior to the scheduled
Termination Date, whereupon this Lease shall continue in full force and effect;
provided that Lessee (i) may not exercise its right to withdraw such a
termination notice more than once annually or more than four times during the
Basic Term, and (ii) may not withdraw any termination notice with respect to any
Terminated Units after receipt by Lessee of a bid equal to or greater than
Termination Value with respect to such Terminated Units; and provided further
15
that no later than the Business Day immediately preceding the date on which
Lessee no longer has the right to withdraw its termination notice, Lessee shall
provide Lessor with assurances reasonably satisfactory to the Owner Participant
of Lessee's ability to pay Termination Value and other amounts which would be
payable by Lessee on the Termination Date as provided in Section 10.2, taking
into the account the expected sale proceeds to be received pursuant to any
agreement for the sale of the Unit, and if such assurances have not been given
by such date, the termination notice previously given by Lessee shall be deemed
to have been withdrawn on such date. Lessee agrees that if it withdraws a
termination notice it will reimburse Lessor, each Participant and the Indenture
Trustee on an After Tax Basis 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 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: (i)
Lessee shall 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, the Manager or an Affiliate of either thereof (for the
avoidance of doubt the bidder may be a Customer, or a customer of the Manager,
and neither the Manager or any Affiliate shall be prohibited from managing the
Units for such bidder after the purchase by such bidder)), which shall have
submitted the highest cash bid prior to such date (or to such other bidder as
Lessee and Lessor shall agree) and (ii) 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, Lessor shall, without recourse or
warranty (except as to the absence of any Lessor's Lien) simultaneously
therewith transfer all of its right, title and interest in and to the Terminated
Units to such bidder. The net proceeds of sale realized at such sale shall be
paid to and retained by Lessor and, in addition, on the Termination Date, Lessee
shall pay to Lessor, (A) all Basic 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), (B) the excess, if any, of (1) the Termination
Value for the Terminated Units computed as of the Termination Date, over (2) 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, (C) an amount equal to the Make-Whole Amount, if any, and any
unpaid Late Payment Premium in respect of the principal amount of the Equipment
Notes to be prepaid in accordance with Section 2.10(a) of the Indenture and any
Accumulated Equity Deficiency Amount with respect to such Units, and (D) all
other Rent then due and payable hereunder. If no sale shall have occurred,
whether as a
16
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, each 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.
Lessor and Owner Participant shall each have the right, but not the obligation,
to make a bid and to obtain bids either directly or through agents other than
Lessee.
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, not 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 (i) deliver the Terminated Units to Lessor in the same manner and
condition as if delivery were made to Lessor pursuant to Section 6.1(b) and
Section 6.2, and shall extend storage rights to the same extent as provided in
Section 6.1(c), treating the Termination Date as the termination date of the
Lease Term with respect to the Terminated Units, and (ii) 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 in respect of the Terminated Units, but inclusive of any
Supplemental Rent measured by the Make-Whole Amount and any unpaid Late Payment
Interest in respect of the Terminated Units). 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, and any unpaid Late Payment Interest in
respect of the principal amount of the Equipment Notes to be prepaid without in
any manner relieving the Lessee of its obligation to pay any such amount
pursuant to the preceding sentence; provided that unless all such amounts shall
have been paid to the Indenture Trustee on the Termination Date, this Lease
shall continue in full force and effect. If Lessor shall fail to pay the
amounts required pursuant to this Section 10.3 and as a result thereof this
Lease shall not be terminated with respect to the Terminated Units on a proposed
Termination Date, Lessor shall (x) thereafter no longer be entitled to exercise
its election to retain such Terminated Units, and (y) reimburse Lessee for any
reasonable out-of-pocket 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
17
occurring on a Determination Date occurring not earlier than 25 days from the
date of such notice.
Section 10.4. Termination of Lease. In the event of either (x) any such
--------------------
sale and receipt by Lessor and the Indenture Trustee of all of the amounts
provided in Section 10.2 in respect of the Terminated Units or (y) retention of
the Terminated Units and full performance by Lessor of its payment obligations
in compliance with Section 10.3, and upon compliance by Lessee with the other
provisions of this Section 10, the obligation of Lessee to pay Basic Rent
hereunder for such Terminated Units shall cease and the Lease Term for the
Terminated Units shall end.
SECTION 11. Loss, Destruction, Requisition, Etc.
------------------------------------
Section 11.1. Event of Loss. In the event that any Unit (i) shall suffer
-------------
damage or contamination which, in Lessee's reasonable judgment (as evidenced by
an Officer's Certificate of the Lessee to such effect, confirmed by an Officer's
Certificate of the Manager), makes repair uneconomic or renders such Unit unfit
for commercial use, (ii) shall suffer destruction which constitutes a total
loss, or shall suffer theft or disappearance (after reasonable efforts by Lessee
to locate the same) for a period exceeding 12 months (or, if earlier, the end of
the Basic Term or Renewal Term then in effect), (iii) shall be permanently
returned to the manufacturer pursuant to any patent indemnity provisions, (iv)
shall have title thereto taken or appropriated by any governmental authority,
agency or instrumentality under the power of eminent domain or otherwise, or (v)
shall be taken or requisitioned for use by any governmental authority or any
agency or instrumentality thereof under the power of eminent domain or
otherwise, and such taking or requisition is for a period that exceeds the
remaining Basic Term or any Renewal Term then in effect (unless such taking or
requisition is by any governmental authority, agency or instrumentality other
than the United States or Canada 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.
Section 11.2. Replacement or Payment upon Event of Loss. Upon the
-----------------------------------------
occurrence of an Event of Loss or the deemed occurrence of an Event of Loss
pursuant to Section 9.1, Lessee shall as soon as reasonably practical and in any
event within 60 days after a Responsible Officer of the Manager shall have
actual knowledge of the occurrence of such Event of Loss or election to replace
give Lessor and the Indenture Trustee notice thereof (which initial notice shall
identify the Unit involved). Thereafter, within the 60-day period following
such initial notice, Lessee shall give Lessor and the Indenture Trustee a second
notice as to which of the following options Lessee shall elect to perform (it
being agreed that if Lessee shall fail to give such second notice, Lessee shall
be deemed to have elected to perform the option set forth in Section 11.2(ii)):
(i) Upon Lessee's election to perform under this clause (i)
pursuant to the above-mentioned second notice (or in the circumstances of
an election described in
18
Section 8.1(b) with respect to any Unit), as promptly as practicable
following such election, and in any event on or before the 60th day
following such second notice (or Section 8.1(b) election), Lessee shall
comply with Section 11.4(b) 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 of the same or newer model year
(or otherwise approved by Lessor, which approval shall not be unreasonably
withheld), 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 (iv) and (vii) of the definition thereof) and to have a fair market
value, utility, capacity, residual value, remaining economic useful life
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 Lessee shall elect the option under this clause (i) but
shall fail to perform its obligation to effect such replacement under this
clause (i) within the 60-day period hereinabove provided for, then (except
in the case of a failure to perform an election to replace pursuant to
Section 8.1(b)) at the end of such 60-day period Lessee shall immediately
give Lessor and the Indenture Trustee notice of such failure and specify
that Lessee shall pay to Lessor on the next succeeding Rent Payment Date
that is at least 25 days after the end of such 60-day period, or in the
case of Supplemental Rent, to the Person entitled thereto, the amounts
specified in clause (ii) below as of such next succeeding Rent Payment
Date, and Lessee shall pay such amounts on such Rent Payment Date; provided
further that Lessee shall have no right to elect replacement under this
clause (i) if, at the time of the notice of the Event of Loss under Section
11.2 above, a Lease Default pursuant to Sections 14(a), 14(b), 14(g) or
14(h) or Lease Event of Default shall have occurred and be continuing; and
provided further that any replacement during a Renewal Term shall be
subject to a Permitted Sublease; or
(ii) on the Rent Payment Date which is not less than 25 days
following the date of notice of Lessee's election to perform under this
clause (ii), Lessee shall pay or cause to be paid to Lessor (or in the case
of Supplemental Rent, to the Persons entitled thereto) in funds of the type
specified in Section 3.5, (a) an amount equal to the Stipulated Loss Value
of each such Unit suffering an Event of Loss or deemed Event of Loss
determined as of 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 in respect of the Unit or Units suffering the Event of Loss), (c)
any unpaid Late Payment Premium in respect of the principal amount of the
Equipment Notes to be prepaid in accordance with Section 2.10(b) of the
Indenture and any Accumulated Equity Deficiency Amount with respect to such
Units, and (d) all other Rent then due and payable hereunder, it being
understood that until such Stipulated Loss Value and such other sums are
paid, there shall be no abatement or reduction of Basic Rent.
19
Section 11.3. Rent Termination. Upon the replacement of any Unit or Units
----------------
in compliance with Sections 11.2(i) and 11.4(b) (but only as to replaced Units
and not any Replacement Unit) or upon the payment of all sums required to be
paid pursuant to Section 11.2 in respect of any Unit or Units, the Lease Term
with respect to such Unit or Units and the obligation to pay Basic Rent for such
Unit or Units accruing subsequent to the date of payment of Stipulated Loss
Value or date of conveyance of such Replacement Unit or Units pursuant to
Section 11.2 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.
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 as to the absence of
Lessor's Liens, and shall execute and deliver to Lessee or its designee, at
Lessee's cost and expense, 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 and any other Rent attributable thereto.
(b) At the time of or prior to any replacement of any Unit or
Replacement Unit, Lessee, at its own expense, will (A) furnish Lessor with a
▇▇▇▇ of Sale with respect to the Replacement Unit substantially in the form
delivered pursuant to Section 4.1(g) of the Participation Agreement, (B) cause a
Lease Supplement substantially in the form of Exhibit A hereto, subjecting such
Replacement Unit to this Lease, and duly executed by Lessee, to be delivered to
Lessor for execution by the appropriate parties, it being understood that upon
such execution (x) Lessee will cause such Lease Supplement to be filed for
recordation in the same manner as provided for the original Lease Supplement in
Section 16.1, and (y) to the extent that the Indenture has not been satisfied
and discharged, Lessor shall deliver possession of the "original" counterpart of
such Lease Supplement to be delivered to the Indenture Trustee, (C) 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 in the same
manner and within the same time periods as provided for the original Indenture
Supplement in Section 16.1, (D) furnish Lessor with an opinion of Lessee's
counsel (which may be the General Counsel or Assistant General Counsel of the
Parent), (x) to the effect that the ▇▇▇▇ of Sale referred to in clause (A) above
constitutes an effective instrument for the conveyance of title to the
Replacement Unit to Lessor, and that legal and beneficial title
20
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 (iv) and (vii) of the definition thereof),
and (y) describing 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, (E) in the event that the opinion provided for
in (H) below cannot be delivered, furnish to Owner Participant an agreement of
GATC to indemnify Owner Participant against any adverse tax consequences
suffered as a result of such replacement, (F) furnish Lessor with an engineer's
certificate (which may be from an employee of the Manager) certifying as to the
utility, capacity, condition, model year and remaining useful life required
under clause (i) of Section 11.2, (G) furnish to Lessor and the Indenture
Trustee an Officer's Certificate certifying that the Replacement Unit has a fair
market value, utility, capacity, residual value, model year and remaining
economic useful life and condition at least equal to the Unit being replaced and
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 (iv) and (vii) of the
definition thereof), (H) furnish Lessor with a tax opinion from counsel
reasonably acceptable to the Owner Participant to the effect that the Owner
Participant would have a reasonable basis under ABA Opinion 85-832 not to
recognize gain or loss for federal income tax purposes with respect to the
conveyance of title to the Replacement Unit to Lessor, (I) in the event such
replacement occurs during a Renewal Term, furnish Lessor with the appropriate
information regarding the Permitted Sublease thereof, and (J) furnish such other
documents and evidence as any 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. For all
purposes hereof, (i) Lessee shall be deemed to have complied with the
requirements of this Section 11.4(b) as of the date of its delivery to Lessor,
the Participants and the Indenture Trustee of the documents and instruments
referred to in the foregoing clauses (A) through (H), signed by Lessee or its
counsel, as applicable, in due form for any required filing or recording, and
such filing or recording shall have been made if such documents and instruments
have been executed and delivered by the Lessor or Indenture Trustee or both of
them in a timely manner, (ii) title to the Replacement Unit shall be deemed to
have been transferred to Lessor as of such date, and (iii) upon such 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, "as is" and "where is" and without recourse or warranty (except as to
Lessor's Liens), all Lessor's right, title and interest in and to the replaced
Unit, 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, any Participant or the Indenture Trustee in connection with
any replacement pursuant to this Section 11.4. Lessee further agrees that, upon
receipt of fully signed counterparts of the Lease Supplement and Indenture
Supplement referred to in clauses (B) and, if applicable, (C) of the first
sentence of this Section 11.4(b), it will, at its sole cost and expense, cause
such documents to be filed or recorded in the manner contemplated by Section
16.1.
21
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.
Any amount referred to in Section 11.4(a) or in Section 12 which is payable to
Lessee, shall be deposited in the related Non-Shared Payment Account established
under the Intercreditor Agreement.
SECTION 12. Insurance.
---------
Section 12.1. Insurance. Lessee will at all times after delivery and
---------
acceptance of each Unit, at its own expense, keep or cause the Insurance Manager
under the Insurance Agreement to keep such Unit 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 railcars. Without limiting the
foregoing, Lessee will in any event;
(a) keep each Unit of the Equipment insured against physical damage
in an amount not less than the Stipulated Loss Value attributable thereto as
shown on Schedule 4 to the Participation Agreement, subject to a limit of not
less than $10,000,000 per occurrence (except for a $10,000,000 annual aggregate
each for flood and earth movement), provided that such coverage may provide for
deductible amounts of not more than $1,000,000 per occurrence; and
(b) maintain public liability insurance naming Owner Participant, the
Lessor (as Lessor of the Equipment and in its individual capacity), the
Indenture Trustee and the Loan Participant 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 $50,000,000 per occurrence or in the aggregate, provided that
such coverage may provide for deductible amounts not exceeding the lesser of (x)
$10,000,000 or (y) the difference (not less than zero (0)) between (i) the level
of the then current deductible maintained by GATC for the GATC Fleet (or if
GATC, its successors and assigns is no longer engaged in the railcar leasing
business under full service leases, the average level of the then current
deductible amounts maintained by the three largest companies engaged in such
business in the United States), and (ii) such amount of additional coverage as
may be obtained by the Lessee in reduction of the then current deductible
maintained by GATC for an additional incremental annual premium payable by the
Lessee of up to $75,000.
22
It is understood and agreed that the insurance required hereunder may be
part of a company-wide insurance program of the Manager, 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), Lessor, the Indenture Trustee, Loan Participant and Owner
Participant shall receive 30 days' prior written notice of such cancellation or
termination.
Section 12.2. Physical Damage Insurance. (a) The insurance maintained
-------------------------
pursuant to Section 12.1(a) shall provide that (i) so long as the Equipment
Notes remain outstanding, the proceeds up to the Stipulated Loss Value for any
loss or damage to any Unit shall be made to the Indenture Trustee under a
standard 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) In lieu of maintaining the physical damage insurance required by
Section 12.1(a), Lessee may self-insure with respect to the Equipment as shall
be consented to by Lessor and the Indenture Trustee.
(c) The entire proceeds of any property insurance or third party
payments for damages to any Unit received by Lessor or the Indenture Trustee
shall be held by such party until, with respect to such Unit, the repairs
referred to in clause (i) below are made as specified therein or payment of the
Stipulated Loss Value is made, and such entire proceeds will be paid, so long as
no Lease Event of Default shall have occurred and be continuing, either:
(i) to Lessee promptly following receipt by the Indenture
Trustee or Lessor, as the case may be, of a written application signed by
Lessee for payment to Lessee for repairing or restoring the Units which
have been damaged so long as (1) Lessee shall 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
and all other amounts due as a result thereof, such proceeds shall be
promptly paid over to, or retained by, Lessee.
23
Section 12.3. Public Liability Insurance. (a) The public liability
--------------------------
insurance referred to in paragraph 12.1(b) shall (i) provide that in as much as
such policies cover more than one insured, all terms, conditions, insuring
agreements and endorsements, with the exception of limits of liability and
liability for premiums, commissions, assessments or calls (which shall be solely
a liability of Lessee), shall operate in the same manner as if there were a
separate policy or policies covering each insured, (ii) waive any rights of
subrogation of the insurers against Owner Participant, Lessor, as Lessor of the
Equipment and in its individual capacity, and the Indenture Trustee, (iii)
provide that neither Owner Participant, Lessor, as Lessor of the Equipment and
in its individual capacity, the Indenture Trustee nor Loan Participant 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, the Indenture Trustee or Loan Participant.
(b) Lessee shall use its reasonable efforts to obtain public
liability insurance policies stipulating that coverage thereunder will not be
invalidated (as to Owner Participant, Loan 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,
Loan 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. 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 or the Manager 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 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
24
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 may be reasonable in its judgment under the circumstances, but in
any event no less than prudent industry standards.
Section 12.4. Certificate of Insurance. Lessee shall, prior to the
------------------------
Closing Date and when the renewal certificate referred to below is sent (but in
any event not less than annually), furnish Lessor, the Indenture Trustee, the
Owner Participant and the Loan 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. With respect to any renewal policy or
policies, certificates or binders evidencing such renewal shall be furnished as
soon as practicable, but in no event later than 30 days after the earlier of the
date such renewal is effected or the expiration date of the original policy or
policies. Simultaneously, with the furnishing of such certificate, Lessee will
provide appropriate evidence, reasonably satisfactory to Lessor and the
Indenture Trustee, that all premiums due on such insurance have been paid.
Section 12.5. Additional Insurance. In the event that Lessee shall fail
--------------------
to maintain insurance as herein provided in Section 12.1 or, if applicable,
Section 12.3, Lessor may at its option, upon prior written notice to Lessee,
provide such insurance and, in such event, Lessee shall, upon demand from time
to time reimburse Lessor for the cost thereof together with interest from the
date of payment thereof at the Late Rate, on the amount of the cost to Lessor of
such insurance which Lessee shall have failed to maintain. If after Lessor has
provided such insurance, Lessee then obtains the coverage provided for in
Section 12.1 which was replaced by the insurance provided by Lessor, and Lessee
provides Lessor with evidence of such coverage reasonably satisfactory to
Lessor, Lessor shall cancel the insurance it has provided pursuant to 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
25
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 13. Reports; Inspection.
-------------------
Section 13.1. Duty of Lessee to Furnish. On or before April 30, 1999, and
-------------------------
on or before each April 30 thereafter, Lessee will furnish (or cause the Manager
under the Management Agreement to furnish) to Lessor, Owner Participant, Loan
Participant, the Indenture Trustee and the Rating Agencies an accurate
statement, as of the preceding December 31, (a) showing the amount, description
and reporting marks of the Units then leased hereunder, the amount, description
and reporting marks of all Units that may have suffered an Event of Loss during
the 12 months ending on such December 31 (or since the Closing Date, in the case
of the first such statement), and such other information regarding the condition
or repair of the Equipment as Lessor may reasonably request, (b) stating that,
in the case of all Equipment repainted during the period covered by such
statement, the markings required by Section 4.2 hereof shall have been preserved
or replaced, (c) showing the percentage of use in the United States and in each
of Canada and Mexico based on the total mileage traveled by all railcars in the
Total Managed Fleet (or by the Units, if and to the extent generally made
available to the Manager in the ordinary course with respect to railcars in
general interchange service similar to the Units) for the prior calendar year as
reported to the Manager by railroads (provided, that Lessee shall cooperate with
Owner Participant and Lessor and shall provide such additional information on
such matters as Owner Participant or Lessor may reasonably request to enable
Owner Participant and Lessor to pursue or fulfill their respective tax audit and
tax litigation rights and obligations), and (d) stating that Lessee is not aware
of any condition of any Unit which would cause such Unit not to comply in any
material respect with the rules and regulations of the FRA and the interchange
rules of the Field Manual of the AAR 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 and expense, unless an Event of Default shall have
occurred and be continuing, by their respective authorized representatives, to
inspect the Equipment, all subleases thereof and Lessee's records with respect
thereto. All inspections shall be conducted during Lessee's normal business
hours, on the Manager's premises or in areas that are not the premises of a
sublessee to which Lessee has reasonable access, 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 negligence or wilful
misconduct. Except following the occurrence and continuance of an Event of
Default, no inspection pursuant to this Section 13.2 shall interfere with the
use, operation or maintenance of the Equipment or the
26
ordinary course of Lessee's or any sublessee's business, and except as provided
herein, Lessee shall not be required to undertake or incur any additional
liabilities in connection therewith.
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, 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;
provided, however, that failure to make an entire payment of Basic Rent shall
not be a Lease Event of Default so long as the amount of Basic Rent paid on any
Rent Payment Date is sufficient to meet the Rated Obligations Due, if any, on
the Equipment Notes; or
(b) Lessee shall fail to make any payment of Supplemental Rent,
including indemnity or tax indemnity payments, but not including Stipulated Loss
Value, Termination Value, Early Purchase Price, or any other purchase price to
be paid by Lessee for any Units pursuant to this Lease or the Participation
Agreement after the same shall have become due and such failure shall continue
unremedied for 10 Business Days after receipt by Lessee of written notice of
such failure from Lessor, the Owner Participant 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 use or permit the use of the Equipment or any
portion thereof in a way which is 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 so long as (i) such unauthorized
use is not the result of any willful action of Lessee and (ii) such unauthorized
use is capable of being cured and Lessee diligently pursues such cure throughout
such 45-day period; 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 6.7 of the
Participation Agreement or Section 6.02 or 6.03 of the Intercreditor Agreement;
or
27
(f) Any representation or warranty made by Lessee in any Lessee
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, the Owner Participant or the Indenture Trustee; provided
that, if such untruth or incorrectness is capable of being remedied, no such
untruth or incorrectness shall constitute a Lease Event of Default hereunder for
a period of 60 days after receipt of such notice so long as Lessee is diligently
proceeding to remedy such untruth or incorrectness and shall in fact remedy such
untruth or incorrectness within such period; provided that such untrue or
incorrect representation or warranty shall be deemed to be remedied only after
all adverse consequences thereof, if any, have been remedied; or
(g) Lessee shall (i) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or (ii) consent to any such relief or to the appointment of or taking
possession by any such official in any voluntary case or other proceeding
commenced against it, or (iii) admit in writing its inability to pay its debts
generally as they come due, or (iv) make a general assignment for the benefit of
creditors, or (v) take any corporate action to authorize any of the foregoing;
or
(h) An involuntary case or other proceeding shall be commenced
against Lessee seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or
(i) Lessee shall fail to observe or perform any other of the
covenants or agreements to be observed or performed by Lessee under any Lessee
Agreement or any certificate and such failure shall continue unremedied for 30
days after notice from Lessor, the Owner Participant 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) The Manager shall have defaulted in the performance of any of its
obligations under the Management Agreement, and Lessee shall have failed to
exercise its rights under the Management Agreement in respect of such default
for a period of 30 days after receipt
28
by Lessee of written notice from Lessor, the Owner Participant or the Indenture
Trustee demanding that such action be taken.
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 which constitutes an "Event of Loss" so long as Lessee is continuing
to comply with the applicable terms of Section 11.
SECTION 15. Remedies.
--------
Section 15.1. Remedies. Upon the occurrence of any Lease Event of Default
--------
and at any time thereafter so long as the same shall be continuing, Lessor may,
at its option, declare this Lease to be in default by a written notice to Lessee
(except that this Lease shall, without any action on the part of Lessor, be
automatically deemed to have been declared in default upon the occurrence of a
Lease Event of Default described in Section 14(g) or (h)); and at any time
thereafter, unless Lessee shall have remedied all outstanding Lease Events of
Default prior to the commencement of the exercise by Lessor of any of its
remedies hereunder, Lessor may do one or more of the following as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect:
(a) proceed by appropriate court action or actions, either at law or
in equity, to enforce performance by Lessee of the applicable covenants of this
Lease or to recover damages for the breach thereof;
(b) by notice in writing to Lessee, Lessor may demand that Lessee,
and Lessee shall, upon written demand of Lessor and at Lessee's expense,
forthwith return all or any part of the Equipment so demanded 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;
(c) sell any Unit at public or private sale in such manner as Lessor
may determine, free and clear of any rights of Lessee and, if any sublease of
such Unit is terminated (which Lessor shall have a right to do), any sublease
thereof and without any duty to account to Lessee or any sublessee 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
29
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, if any
sublease of such Unit is terminated (which Lessor shall have a right to do), any
sublease thereof and without any duty to account to Lessee or any sublessee with
respect to such action or inaction or for any proceeds with respect thereto,
except that Lessee's obligation to pay Basic Rent with respect to such Unit due
for any periods subsequent to the date upon which Lessee shall have been
deprived of possession and use of such Unit pursuant to this Section 15 shall be
reduced by the net proceeds, if any, received by Lessor from leasing such Unit
to any Person other than Lessee;
(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 less than 10 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, in respect of 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, as of such payment date, of all rentals for
such Unit which would otherwise have accrued hereunder from such payment date
for the remainder of the Basic Term or any Renewal Term then in effect over the
then present value of the then fair market rental value of such Unit (taking
into account its actual condition) for such period computed by discounting from
the end of such Term to such payment date rentals which Lessor reasonably
estimates to be obtainable for the use of such Unit during such period, such
present value to be computed in each case using a per annum discount rate equal
to the Debt Rate, compounded monthly 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 reasonably estimated by Lessor (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 said clause
(iii) of such Stipulated Loss Value or Fair Market Sales Value, as the case may
be, any Late Payment Premium 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 "as is" and
30
"where is" and without recourse or warranty all right, title and interest of
Lessor in and to such Unit to Lessee or as it may direct, and Lessor shall
execute and deliver such documents evidencing such transfer as Lessee shall
reasonably request;
(f) if Lessor shall have sold any Unit pursuant to paragraph (c)
above, Lessor, in lieu of exercising its rights under paragraph (e) above with
respect to such Unit may, if it shall so elect, demand that Lessee pay to
Lessor, and Lessee shall pay to Lessor, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Rent for such Unit due
subsequent to the Rent Payment Date next preceding such sale), any accrued and
unpaid Rent for such Unit as of the date of such sale (Basic Rent for this
purpose accruing at a per diem rate equal to the monthly amount due on the next
following Rent Payment Date divided by 30) 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, plus the amount of any Late Payment Premium, exceeds the
net proceeds of such sale (taking into account for this purpose all costs and
expenses, including legal fees and expenses, incurred by Lessor in connection
with such sale or otherwise exercising remedies hereunder) plus interest on such
excess 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 and/or any sublease or may exercise any other right or remedy that may be
available to it under applicable law.
In addition, Lessee shall be liable, except as otherwise provided above,
for any and all unpaid Rent due hereunder before or during the exercise of any
of the foregoing remedies (including, without limitation, Late Payment Interest
with respect to the Equipment Notes and the Accumulated Equity Deficiency
Amount, but 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
31
of the Equipment. Lessee further agrees that Lessee's obligations to pay all
Rent (including, without limitation, all Basic Rent and Supplemental Rent) and
its obligations to maintain the Equipment pursuant to Section 8 hereof and to
maintain the insurance pursuant to Section 12 hereof shall constitute monetary
obligations of the Lessee for all purposes of Section 365 of the Bankruptcy
Code. 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 Return Equipment Upon Default. If Lessor
----------------------------------------------
or any assignee of Lessor shall terminate this Lease pursuant to this Section 15
and shall have provided to Lessee the written demand specified in Section
15.1(b), Lessee shall forthwith deliver possession of the Equipment to Lessor
(except where Lessor has received all amounts payable by Lessee pursuant to any
notice provided by Lessor under Section 15.1(e)(iii)). For the purpose of
delivering possession of any Unit to Lessor as above required, Lessee shall at
its own cost, expense and risk (except as hereinafter stated):
(a) Forthwith place such Equipment upon such storage tracks of Lessee
or any of its Affiliates or, at the expense of Lessee, on any other storage
tracks, as Lessor may designate or, in the absence of such designation, as
Lessee may select;
(b) Permit Lessor to store such Equipment on such tracks without
charge for insurance, rent or storage until such Equipment has been sold, leased
or otherwise disposed of by Lessor and during such period of storage Lessee
shall continue to maintain all insurance required by Section 12.1 hereof; and
(c) Transport the Equipment to any place on any lines of railroad or
to any connection carrier for shipment, all as Lessor may direct in writing.
All Equipment returned shall be in the condition required by Section 6.2 hereof.
32
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 15.6. Specific Performance; Lessor Appointed Lessee's Agent. The
-----------------------------------------------------
assembling, delivery, storage and transporting of the Equipment as provided in
Section 15.5 are of the essence of this Lease, and upon application to any court
of equity having jurisdiction in the premises, Lessor shall be entitled to a
decree against Lessee requiring specific performance of the covenants of Lessee
so to assemble, deliver, store and transport the Equipment. Without in any way
limiting the obligation of Lessee under the provisions of Section 15.5, Lessee
hereby irrevocably appoints Lessor as the agent and attorney of Lessee, with
full power and authority, at any time while Lessee is obligated to deliver
possession of any Units to Lessor pursuant to this Section 15, to demand and
take possession of such Unit in the name and on behalf of Lessee from whosoever
shall be at the time in possession of such Unit.
SECTION 16. Filings; Further Assurances.
---------------------------
Section 16.1. Filings. This Lease or a counterpart or copy hereof or
-------
evidence hereof may be filed or recorded in any public office as may be
necessary or appropriate to protect the interest of Lessor, Owner Participant or
the Indenture Trustee herein or in the Units. On or prior to the Closing Date
Lessee will cause this Lease, the Lease Supplements dated the Closing Date, the
Indenture and the Indenture Supplements dated the Closing Date (i) to be duly
filed and recorded with the STB in accordance with 49 U.S.C. (S) 11301, (ii) to
be deposited with the Registrar General of Canada pursuant to Section 105 of the
Canada Transportation Act (and all necessary actions shall have been taken for
publication of such deposit in The Canada Gazette in accordance with said
------------------
Section 105) and (iii) will furnish Lessor, the Indenture Trustee and Owner
Participant proof thereof.
33
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, the Participants 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 or Uniform Commercial Code financing statements in accordance
with the laws of such jurisdiction as Lessor may from time to time deem
advisable.
Section 16.3. Other Filings. If, at any time during the Lease Term,
-------------
Mexico, or one or more states in Mexico, or any of the Canadian provinces
establishes a state or provincial or other system for filing and perfecting the
ownership and/or security interests of entities such as Lessor and/or the
Indenture Trustee, at the time that Lessee or the Manager takes such action with
respect to other equipment similar to the Equipment (whether owned or leased by
Lessee) and also upon the request of Lessor, any Participant, or the Indenture
Trustee, Lessee shall cause any and all of the Operative Agreements to be
recorded with or under such system and shall cause all other filings and
recordings and all such other action required under such system to be effected
and taken, in order to perfect and protect the respective right, title and
interests of Lessor, Owner Participant, Loan Participant and the Indenture
Trustee.
Section 16.4. Expenses. 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.
34
SECTION 18. Assignment.
----------
Section 18.1 Assignment by Lessor. Lessee and Lessor hereby confirm that
--------------------
concurrently with the execution and delivery of this Lease, Lessor has executed
and delivered to the Indenture Trustee the Indenture, which assigns as
collateral security and grants a security interest in favor of the Indenture
Trustee in, to and under this Lease and certain of the Rent payable hereunder
(excluding Excepted Property), all as more explicitly set forth in the
Indenture. Lessor agrees that, so long as no Lease Event of Default shall have
occurred and be continuing, 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 in the case of any requisition
--------------------
for use by any governmental authority or any agency or instrumentality thereof
referred to in Section 11.1, Lessee will not, without the prior written consent
of Lessor and the Indenture Trustee, assign any of its rights hereunder.
Section 18.3 Sublessee's or Others 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 the Manager
under the Management Agreement, the Insurance Manager under the Insurance
Agreement or any sublessee under a Permitted Sublease 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 the Manager
or the Insurance Manager, or (b) in Lessee's capacity as sublessor pursuant to
any Permitted Sublease 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
Section 10 and Lessee's purchase and renewal options set forth in Section 22 may
be exercised only by Lessee; provided, further, that nothing in this Section
18.3 shall or shall be deemed to (i) create any privity of contract between any
such sublessee, on the one hand, and any of Lessor, any Owner Participant or any
subsequent transferee or Affiliate of any such Person, on the other hand, (ii)
create any duty or other liability of any nature whatsoever on the part of any
of Lessor, any Owner Participant or any subsequent transferee or Affiliate of
any such Person, to any such sublessee or any Affiliate thereof, or (iii) modify
or waive any term or provision of Section 8.3 hereof, which Section 8.3 shall
control if any conflict arises between any of the provisions thereof and this
Section 18.3. The inclusion of specific references to obligations or rights of
any such sublessee in certain provisions of this Lease shall not in any way
prevent or diminish the application of the provisions of the two sentences
immediately preceding with respect to obligations or rights in respect of which
specific reference to any such sublessee has not been made in this Lease.
35
SECTION 19. Net Lease, etc.
---------------
This Lease is a net lease and Lessee's obligation to pay all Rent payable
hereunder shall be absolute, unconditional and irrevocable and shall not be
affected by any circumstance of any character including, without limitation, (i)
any set-off, abatement, counterclaim, suspension, recoupment, reduction,
rescission, defense or other right that Lessee may have 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, (ii) 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, (iii) 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, (iv) any
insolvency, bankruptcy, reorganization or similar proceeding by or against
Lessee, Lessor, Owner Participant, the Indenture Trustee, Loan Participant, any
holder of an Equipment Note or Pass Through Certificate or any other Person, (v)
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, (vi) the breach or failure of any warranty or representation
made in this Lease or any other Operative Agreement by Lessee, Lessor, Owner
Participant, Loan Participant, the Indenture Trustee, any holder of an Equipment
Note or Pass Through Certificate or any other Person, (vii) 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 (viii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing. 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, to the
maximum extent permitted by law, to pay to Lessor or to the Indenture Trustee,
as the case may be, an amount equal to each installment of Basic Rent and all
Supplemental Rent due and owing, at the time such payment would have become due
and payable in accordance with the terms hereof had this Lease not been
terminated in whole or in part. Each payment of Rent made by Lessee hereunder
shall be final and Lessee shall not seek or have any right to recover all or any
part of such payment from Lessor or any Person for any
36
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.
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 (i) upon personal delivery thereof, including, without limitation, by
overnight mail or courier service, (ii) in the case of notice by United States
mail, certified or registered, postage prepaid, return receipt requested, upon
receipt thereof, or (iii) 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 (i) or (ii),
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: [Owner Trustee]
__________________
__________________
__________________
Attention: ________________
Fax No.: ________________
Confirmation No.: ________________
With copies to Owner Participant.
If to Owner Participant: [Owner Participant]
__________________
__________________
__________________
Attention: _______________
Fax No.: _______________
Confirmation No.: _______________
37
If to the Indenture Trustee: The First National Bank of Chicago
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Services
Division
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lessee: General American Railcar Corporation II
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
(1998-1)
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 21. Concerning the Indenture Trustee.
--------------------------------
Section 21.1. Limitation of the Indenture Trustee's Liabilities.
-------------------------------------------------
Notwithstanding any provision to the contrary contained herein or in any of the
Operative Agreements, 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; and Deemed Renewals.
-----------------------------------------------------
Section 22.1. Early Purchase Option. 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 (i) Lessor shall have
waived such Lease Event of Default solely for the purpose of this Section 22.1,
(ii) in the case of a Lease Event of Default under Section 14(c), 14(d), 14(e),
14(f) or 14(i), Lessee shall have properly made a Special Purchase Defeasance
and after giving effect to the purchase described below, no such Lease Event of
Default shall be continuing or (iii) in the case of a Lease Event of Default
under Section 14(g) or 14(h), Lessee shall have obtained a final, nonappealable
order of a United States court having appropriate bankruptcy jurisdiction over
Lessee which (x) authorizes such purchase and (y) is in form and
38
substance satisfactory to Lessor and Indenture Trustee) 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
all, or an Eligible Group, of the Units leased hereunder (as specified in such
notice) on the Early Purchase Date for such Units at a price equal to the Early
Purchase Price of such Units. Lessee shall give Lessor 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. Payment of the Early Purchase Price, 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, or accrued, on or prior to the Early Purchase Date (exclusive of
any in advance Basic Rent due on such date) and any Make-Whole Amount and Late
Payment Interest with respect to the Equipment Notes then being prepaid and any
Accumulated Equity Deficiency Amount with respect to such Units, shall be made
on the Early Purchase Date at the place of payment specified in Section 3.5
hereof in immediately available funds against delivery of a ▇▇▇▇ 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 as to
the absence of 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.
The costs of preparing the ▇▇▇▇ of sale and all other documentation relating to
any purchase by the Lessee pursuant to this Section 22.1 and the costs of all
necessary filings relating to such purchase will be borne by the Lessee. In the
event of any such purchase and receipt by Lessor of all of the amounts provided
in this Section 22.1, the obligation of Lessee to pay Basic Rent hereunder shall
cease and the Lease Term shall end.
If Lessee elects to exercise the purchase option provided for in this
Section 22.1, Lessee shall, as the purchase price therefor, in the sole
discretion of Lessee, either (i) pay Early Purchase Price, as specified in the
paragraph above, together with all other amounts due and owing by Lessee under
the Operative Agreements, or (ii) pay the difference between the Early Purchase
Price and the outstanding principal amount of the Equipment Notes related to
such Units as of the Early Purchase Date and assume on a full recourse basis,
and indemnify the Lessor against, all of the Owner Trustee's obligations under
the Indenture in respect of the indebtedness evidenced by such Equipment Notes
related to such Units; provided, that, following such assumption, the purchased
Units shall remain subject to the Lien of a separate indenture similar to the
Indenture pursuant to Section 3.6 of the Indenture. Lessee will make the
payments required by foregoing clause (i) or assume the indebtedness evidenced
by the Equipment Notes as provided in foregoing clause (ii) on the Early
Purchase Date in immediately available funds against delivery of a ▇▇▇▇ of sale
transferring and assigning to Lessee all right, title and interest of the Lessor
in and to the Units on an "as-is" "where-is" basis and containing a warranty as
to the absence of 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 a portion of the Early Purchase Price for such Units in [four
(4)] equal installments in the amounts set forth on Schedule 6 to the
Participation Agreement so long as the portion of the Early Purchase Price
payable by Lessee on the Early Purchase Date in the
39
event of any such election by Lessee, under any circumstances and in any event,
together with other amounts of Supplemental Rent payable by Lessee on such date,
will be at least sufficient to pay in full, as of the date of payment thereof,
the aggregate unpaid principal and accrued interest of the Equipment Notes
together with any Make Whole Amount, Late Payment Interest and all other amounts
owed to the holders of the Equipment Notes under the Operative Agreements; and
provided further, that such deferred portion (i) may be prepaid by Lessee at any
time in whole and (ii) will be secured in favor of Lessor by a letter of credit
by a bank or financial institution acceptable to the Owner Participant in its
sole discretion or guaranty of GATC in form and substance reasonably
satisfactory to Lessor. If Lessee shall fail to fulfill its obligations under
this second paragraph of Section 22.1, all of Lessee's obligations under this
Lease and the Operative Agreements, including, without limitation, the Lessee's
obligation to pay installments of Rent, shall continue and Lessee shall be
obligated to pay all costs and expenses, including legal fees and expenses,
incurred by Lessor, the Owner Participant and Indenture Trustee as a result of
the notice given by Lessee pursuant to this Section.
Section 22.2. Election to Retain or Return Equipment at End of Basic or
---------------------------------------------------------
Renewal Term. Not less than 180 days prior to the end of the Basic Term
------------
or any Renewal Term, Lessee shall give Lessor a preliminary notice of its
decision to return or retain all or a portion of the Units at the end of the
Basic Term or such Renewal Term and not less than 120 days prior to the end of
the Basic Term or the end of any Renewal Term, Lessee shall give Lessor
irrevocable written notice of its decision to return or retain all or a portion
of the Units at the end of the Basic Term or such Renewal Term. If Lessee elects
to retain 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 all of the Units at the end of the Basic Term or the
applicable Renewal Term, as the case may be, in accordance with Section 6;
provided, however, that if there are any Units under a sublease which, in
accordance with clause (i) of the penultimate sentence of Section 8.3, expires
after the end of the Basic Term and Lessee does not elect to retain these Units
under Section 22.3 or Section 22.4 hereof, then such Units shall, in any event,
be subject to the deemed renewal provisions of Section 22.7.
Section 22.3. Purchase Option. 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 or any Renewal Term (unless (i) Lessor shall have
waived such Lease Event of Default solely for the purpose of this Section 22.3,
(ii) in the case of a Lease Event of Default under Section 14(c), 14(d), 14(e),
14(f) or 14(i), Lessee shall have properly made a Special Purchase Defeasance
and after giving effect to the purchase described below, no such Lease Event of
Default shall be continuing or (iii) in the case of a Lease Event of Default
under Section 14(g) or 14(h), Lessee shall have obtained a final, nonappealable
order of a United States court having appropriate bankruptcy jurisdiction over
Lessee which (x) authorizes such purchase and (y) is in form and substance
satisfactory to Lessor and Indenture Trustee) 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
40
shall have the right and, upon the giving of such notice under this Section
22.3, the obligation to purchase, at a price equal to at Lessee's option: (i)
the Fair Market Sales Value of such Units, at the expiration of the Basic Term,
or at the end of any Renewal Term (other than a Renewal Term pursuant to Section
22.7), or (ii) the Basic Term Purchase Price with respect to the option at the
end of the Basic Term, any or all of the Units as specified in such notice;
provided that if Lessee elects to retain less than all of the Units in a
Functional Group in connection with a purchase at the end of the Basic Term or
any Renewal Term, Lessee must return at least 25 Units from such Functional
Group to Lessor and the determination as to which Units are to be retained shall
be made on a random or other basis (in each case reasonably acceptable to
Lessor) without discrimination based on maintenance status, operating condition
of the Units in question or otherwise, and Lessee shall describe in such notice
such manner in which it proposes to determine the Units in such Functional Group
which will be retained. Lessee shall give Lessor written notice not less than 90
days prior to the end of the Basic Term or any 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; provided, however, that with respect to
any Extended Units, Lessee may elect for convenience to give such a notice as of
[_________] and [______________] in each year as to those Extended Units whose
Renewal Terms expire in the following 6-month period. Payment of the purchase
price, together with all other amounts due and owing by Lessee under the
Operative Agreements, including, without limitation, Late Payment Interest and
any unpaid Rent, shall be made at the place of payment specified in Section 3.5
hereof in immediately available funds against delivery of a ▇▇▇▇ 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 as to
the absence of 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 Option. 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 or Lease Default solely for the purpose of this Section 22.4) and
Lessee shall have duly given the notice required by Section 22.2, Lessee shall
have the right and, upon the giving of a notice under this Section 22.4 as below
provided, the obligation to lease pursuant to this Lease any or all, of the
Units (including, without limitation, all Extended Units) specified in such
notice at the expiration of the Basic Term or any applicable Renewal Term which
Lessee has not elected to purchase at the expiration of the Basic Term or a
Renewal Term pursuant to Section 22.3 provided that if Lessee elects to lease
less than all of the Units in a Functional Group in connection with a renewal
lease at the end of the Basic Term or any Renewal Term, Lessee must return at
least 25 Units from such Functional Group to Lessor and the determination as to
which Units are to be retained shall be made on a random or other basis (in each
case reasonably acceptable to Lessor) without discrimination based on
maintenance status, operating condition of the Units in question or otherwise,
and Lessee shall describe in such notice such manner in which it proposes to
determine the Units in such Functional Group which will be retained. Lessee may
exercise this renewal option by
41
giving Lessor written notice not less than 90 days prior to the end of the Basic
Term (or, in the circumstances described below the then Renewal Term) that
Lessee elects to renew this Lease with respect to all, but not less than all, of
the Units then leased hereunder, for a term of one or more years (or, in
connection with any Renewal Term following the initial Renewal Term, a term of
one year or more expiring not later than the Outside Renewal Date) as Lessee
shall specify in such notice, but in no event shall any such term extend beyond
the Outside Renewal Date (each such term, a "Renewal Term"), which notice shall
be irrevocable. The Basic Rent for each Unit during any Renewal Term (the
"Renewal Rent") shall be 50% of the average of the monthly Basic Rent
installments payable hereunder for such Unit during the Basic Term, payable
monthly in arrears. Each Renewal Term shall commence immediately upon the
expiration of the Basic Term or the preceding Renewal Term, as the case may be.
Section 22.5. Appraisal; Outside Renewal Date. 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 (and, in any event, if there are any Extended
Units), Lessor and Lessee shall determine (a) the remaining useful life (based
on the actual condition of a reasonable sampling of such Units and determined
pursuant to the appraisal procedure set forth in the definition of Fair Market
Sales Value), (b) the Fair Market Sales Value of the Units to be retained as of
various dates for the purposes of this Section 22, in each case assuming the
Units are in the condition required by this Lease, and (c) the date such that
(1) the period from the Closing Date to such date would not exceed 80% of the
useful life of the Units from and after the Closing Date, and (2) the Fair
Market Sales Value (determined without regard to inflation or deflation) on such
date would not be less than 20% of the Equipment Cost of the Units. Such date
determined under clause (c) shall thereafter be the latest date to which this
Lease may be renewed pursuant to Section 22.4 (the "Outside Renewal Date").
--------------------
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
--------
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 22.7. Deemed Renewals. If Lessee does not exercise its renewal
---------------
option under Section 22.4 at the end of the Basic Term, then any Unit subject to
a sublease at the end of the Basic Term which is not purchased by Lessee under
Section 22.3 shall be deemed automatically renewed for a Renewal Term expiring
at the expiration of such sublease's term (such Unit, an "Extended Unit"). The
terms and conditions of any such deemed renewal of a Unit under this Section
22.7 shall otherwise be those generally provided in Section 22.4 for the period
thereof (which shall be considered a Renewal Term).
42
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 [Owner Trustee] 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 11.4(a) or 11.5, as the
case may be, shall be paid directly to the appropriate Non-Shared Payments
Account established under the Intercreditor Agreement.
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 laws of the State of New York,
including all matters of construction, validity and performance, without regard
to principles of conflicts of laws. 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.
43
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 permitted 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", 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, that this Lease conveys to Lessee no
right, title or interest in any Unit except as lessee and that the Lease will be
a finance lease under the provisions of Article 2A of the New York Uniform
Commercial Code. 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 generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and except as may be permitted by the terms of the Indenture.
Section 25.7. Survival. All warranties, representations, indemnities and
--------
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by such party or on the behalf of any such party under this
Lease, shall be considered to have been relied upon by the other party hereto
and shall survive the consummation of the transactions contemplated hereby on
the Closing Date regardless of any investigation made by either such party or on
behalf of either such party, and to the extent having accrued and not been paid
or relating to or otherwise arising in connection with the transactions
contemplated by the Operative Agreements during the Lease Term, shall survive
the expiration or other termination of this Lease or any other Operative
Agreement.
Section 25.8. Business Days. If any payment is to be made hereunder or
-------------
any action is to be taken hereunder on any date that is not a Business Day, such
payment or action otherwise required to be made or taken on such date shall be
made or taken on the immediately succeeding Business Day with the same force and
effect as if made or taken on such scheduled date and as to any payment
(provided any such payment is made on such succeeding Business Day) no interest
shall accrue on the amount of such payment from and after such scheduled date to
the time of such payment on such next succeeding Business Day.
44
Section 25.9. Directly or Indirectly; Performance by Managers. 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. In this
regard, it is understood and agreed that Lessee has entered into the Management
Agreement with the Manager and the Insurance Agreement with the Insurance
Manager, under which Agreements certain rights and obligations of Lessee
hereunder will be exercised and performed by such Persons on behalf of Lessee on
the terms and conditions set forth therein.
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.
* * *
45
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:
[OWNER TRUSTEE], not in its individual
capacity except as otherwise expressly
provided but solely as Owner Trustee
By:___________________________________
Name:_________________________________
Title:________________________________
Lessee:
GENERAL AMERICAN RAILCAR
CORPORATION II
By:___________________________________
Name:_________________________________
Title:________________________________
46
State of )
) SS
County of )
On this ____ day of _____________, 1998, before me personally appeared
_______________, to me personally known, who being by me duly sworn, say that he
is __________________ of [Owner Trustee], 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: _________________
47
State of )
) SS
County of )
On this ___ day of ___________, 1998, before me personally appeared
_______________, to me personally known, who being by me duly sworn, say that he
is the _______________ of General American Railcar Corporation II, 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: _______________
48
EXHIBIT A
LEASE SUPPLEMENT NO. _______
(1998-1)
This Lease Supplement No. ___, dated as of _________, between [Owner
Trustee], not in its individual capacity but solely as Owner Trustee under the
Trust Agreement ("Lessor"), and General American Railcar Corporation II, a
Delaware corporation ("Lessee");
Witnesseth:
Lessor and Lessee have heretofore entered into that certain Equipment Lease
Agreement (1998-1) dated as of August 1, 1998 (the "Lease"). The terms used
herein are used with the meanings assigned to such terms 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 laws of the State of New York, including all matters of construction,
validity and performance, without regard to principles of conflicts of laws.
5. This Lease Supplement may be executed in any number of counterparts,
each executed counterpart constituting an original but all together constituting
one and the same instrument.
* * *
A-2
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed as of the day and year first above written and to be delivered
as of the date first above written.
Lessor:
[OWNER TRUSTEE] not in its individual
capacity but solely as Owner Trustee
By:__________________________________
Name:________________________________
Title:_______________________________
Lessee:
GENERAL AMERICAN RAILCAR
CORPORATION II
By:__________________________________
Name:________________________________
Title:_______________________________
A-3
State of )
) SS
County of )
On this ____ day of _________, 19__, before me personally appeared
______________, to me personally known, who being by me duly sworn, say that he
is ____________________ of [Owner Trustee], 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-4
State of )
) SS
County of )
On this ____ day of _________, 19__, before me personally appeared
_____________ _____________, to me personally known, who being by me duly sworn,
say that he is _____________ of General American Railcar Corporation II, 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-5
FORM OF
Appendix A
to
Participation Agreement
Lease Agreement
Trust Indenture
Trust Agreement
(1998-1)
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all purposes of
the Operative Agreements referred to below, unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require, and such
meanings shall be equally applicable to both the singular and the plural forms
of the terms herein defined. In the case of any conflict between the provisions
of this Appendix A and the provisions of the main text of any Operative
Agreement, the provisions of the main text of such Operative Agreement shall
control the construction of such Operative Agreement.
Unless otherwise required by the context, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended,
supplemented and otherwise modified from time to time, and (ii) references to
parties to agreements shall be deemed to include the permitted successors and
assigns of such parties.
Defined Terms
"AAR" shall mean the Association of American Railroads or any successor
---
thereto.
"Accounts" shall mean the Collection Account, the Operating Account, the
--------
Liquidity Reserve Account, the Special Reserves Account, the Non-Shared Payments
Account, the Stipulated Loss Value Deficiency Account, the Cash Trapping Account
and the Excess Cash Account specified in Section 3.1 of the Intercreditor
Agreement.
"Accumulated Equity Deficiency Amount" shall mean, on any Payment Date, an
------------------------------------
amount equal to any aggregate outstanding and then unpaid Equity Portion of
Basic Rent.
"Adjusted Payment Amount" shall mean, for each Adjusted Principal Period,
-----------------------
the product of (i) the sum of all principal payments made during such Adjusted
Principal Period (excluding
any Prepaid Amount), and (ii) the Adjustment Multiplier at the Payment Date
occurring for such Adjusted Principal Period.
"Adjusted Principal Period" shall mean, at any Payment Date (the "Relevant
-------------------------
Payment Date"), (i) in the event no Prepayment has been made, the period from
the Closing Date to, but not including, the Relevant Payment Date, or (ii) in
the event one or more Prepayments have been made on or prior to the Relevant
Payment Date, each of the following periods, without duplication: (a) the
period from the Closing Date to, but not including, the first Payment Date
thereafter on which a Prepayment has been made on the Relevant Payment Date, (b)
each period, if any, between two Payment Dates on which successive Prepayments
have been made, in each case including the Payment Date upon which such period
commences to, but not including, the Payment Date upon which such period ends,
and (c) the period from the Payment Date immediately preceding the Relevant
Payment Date on which a Prepayment was made to, but not including, the Relevant
Payment Date.
"Adjustment Multiplier" shall mean, for any Adjusted Principal Period at
---------------------
any Payment Date, a fraction, the numerator of which shall be the aggregate
Equipment Cost of all Units included in the Indenture Estate immediately after
such Payment Date (excluding the Equipment Cost of any Excluded Unit) and the
denominator of which shall be the aggregate Equipment Cost of all Units included
in the Indenture Estate at the commencement of such Adjusted Principal Period.
"Administrative Services Agreement" shall mean the Administrative Services
---------------------------------
Agreement (1998-1) dated as of August 1, 1998, between GATC and the Company.
"Affiliate" shall mean, with respect to any Person, any other Person which
---------
directly or indirectly controls, or is controlled by, or is under a common
control with, such Person. The term "control" means the possession, directly or
-------
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" shall have
----------- ----------
meanings correlative to the foregoing.
"After-Tax Basis" shall mean, with respect to any payment due to any
---------------
Person, that the amount of such payment is supplemented by a further payment or
payments so that the sum of all such payments, after reduction for all Taxes
payable by such Person by reason of the receipt or accrual of such payments,
shall be equal to the payment due to such Person.
"Alternative Minimum Tax" shall mean the alternative minimum tax imposed
------------------------
under Section 55 of the Code.
"Appraisal" shall have the meaning assigned thereto in Section 4.3(a) of
---------
the Participation Agreement.
2
"Average Life Date" shall mean, with respect to an Equipment Note, the date
-----------------
which follows (i) in the case of an Equipment Note being prepaid, the prepayment
date or, (ii) in the case of an Equipment Note not being prepaid, the date of
such determination, by a period equal to the Remaining Weighted Average Life of
such Equipment Note.
"Bankruptcy Code" shall mean Chapter 11 of Title 11 of the United States
---------------
Code, 11 U.S.C. (S)101 et. seq.
--- ----
"Base Component" shall have the meaning assigned thereto in Section 5.2 of
--------------
the Management Agreement.
"Basic Rent" shall mean, with respect to any Unit, all rent payable by the
----------
Lessee to the Lessor pursuant to Section 3.2 of the Lease for the Basic Term for
such Unit, and all rent payable pursuant to Section 22.4 of the Lease for any
Renewal Term for such Unit.
"Basic Term" shall have the meaning assigned thereto in Section 3.1 of the
----------
Lease.
"Basic Term Commencement Date" shall mean the Closing Date.
----------------------------
"Basic Term Expiration Date" shall mean _____________, 20__.
--------------------------
"Basic Term Purchase Price" shall mean, with respect to any Unit, the
-------------------------
amount equal to the product of the percentage set forth in Section 6 of the
Participation Agreement and the Equipment Cost for such Unit.
"Beneficial Interest" shall mean the interest of the Owner Participant
-------------------
under the Trust Agreement.
"▇▇▇▇ of Sale" shall mean the full warranty ▇▇▇▇ of sale, dated the Closing
------------
Date or the date that any Replacement Unit is subjected to the Lease, from the
Lessee to the Owner Trustee covering the Units delivered on the Closing Date or
such Replacement Unit, as the case may be.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
------------
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, Chicago,
Illinois, the city and state in which the principal corporate trust office of
the Owner Trustee is located, or, until the Lien of the Indenture has been
discharged, the city and state in which the principal corporate trust office of
the Indenture Trustee is located.
"Car Service Contract" shall have the meaning assigned thereto in the first
--------------------
recital clause of the Management Agreement.
"Certificateholder" means the Person in whose name a Pass Through
-----------------
Certificate is registered in the register for Pass Through Certificates of a
particular series.
"Claims" shall mean any and all costs, expenses, liabilities, obligations,
------
losses, damages, penalties, actions or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability
or liability in tort), including, without limitation, all
3
reasonable out-of-pocket costs, disbursements and expenses (including legal fees
and expenses) paid or incurred in connection therewith or related thereto.
"Closing" shall have the meaning assigned thereto in Section 2.3(b) of the
-------
Participation Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral Agent" shall have the meaning assigned thereto in the
----------------
Intercreditor Agreement.
"Collection Account" shall have the meaning assigned thereto in the
------------------
Intercreditor Agreement.
"Company" or "Lessee" shall mean General American Railcar Corporation II, a
------- ------
Delaware corporation.
"Company Documents" shall have the meaning assigned thereto in the
-----------------
Intercreditor Agreement.
"Company Fleet" shall mean, collectively, the Equipment [and the
-------------
"Equipment" under the Other Leases].
"Contiguous United States" shall mean the continental United States (except
------------------------
Alaska).
"Credit Bankrupt" shall mean a Person which is subject to any bankruptcy or
---------------
insolvency proceeding, for reasons other than the occurrence of an extraordinary
adverse event or circumstance which has led such Person to seek protection from
its creditors, or is not paying its debts as they become due.
"Customer" shall have the meaning assigned thereto in the first recital
--------
clause of the Management Agreement.
"Debt Rate" shall mean an interest rate equal to ____% per annum (computed
---------
on the basis of a 360-day year of twelve 30-day months).
"Default Interest" shall mean interest on any amount of the Rated
----------------
Amortization Amount of, or Regular Interest on, Equipment Notes that was not
paid when such amount became due and payable.
"Default Rate" shall mean the lesser of [1.5]% over the Debt Rate and the
------------
maximum interest rate from time to time permitted by law.
4
"Determination Date" shall mean a Payment Date.
------------------
"Early Purchase Date" shall mean the early purchase date specified on
-------------------
Schedule 6 to the Participation Agreement.
"Early Purchase Price" shall mean, with respect to any Unit, the amount
--------------------
equal to the product of the percentage set forth in Schedule 6 to the
Participation Agreement and the Equipment Cost for such Unit. Notwithstanding
anything to the contrary contained in the Lease or in the Participation
Agreement, the Early Purchase Price for such Unit (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) will, under
any circumstances and in any event, be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with its
exercise of the option under Section 22.1 of the Lease, will be at least
sufficient to pay in full as of the Early Purchase Date the Accumulated Equity
Deficiency Amount, the aggregate unpaid principal of the Equipment Notes issued
in respect of such Unit, together with all unpaid interest, Late Payment Premium
and Make-Whole Amount, if any, thereon accrued to the date on which such amount
is paid in accordance with the terms hereof and all other amounts then due to
the holders of the Equipment Notes in respect of such Unit.
"Eligible Group" shall mean a number and type of Units which, after the
--------------
purchase by the Lessee of such Units, will (i) leave no fewer than 800 Equipment
Units (as defined in the Intercreditor Agreement) subject to this Lease or Other
Leases, and (ii) result in an allocation of Equipment Units (as defined in the
Intercreditor Agreement) substantially similar to the allocation of Equipment
Units (as defined in the Intercreditor Agreement) immediately prior to the
purchase of such Units by the Lessee.
"Equipment" shall mean, collectively, those items of railroad rolling stock
---------
described in the Lease Supplements and the Indenture Supplements, together with
any and all accessions, additions, improvements to and replacements from time to
time incorporated or installed in any item thereof which are the property of the
Owner Trustee pursuant to the terms of a ▇▇▇▇ of Sale or the Lease.
"Equipment Cost" shall mean, for each Unit, the purchase price therefor
--------------
paid by the Owner Trustee to the Lessee pursuant to Section 2 of the
Participation Agreement and as set forth in Schedule 1 to the Participation
Agreement with respect to such Unit. Notwithstanding anything to the contrary
contained in the Operative Agreements, the Equipment Cost for any Replacement
Unit shall be deemed to be the Equipment Cost or deemed Equipment Cost of the
Unit replaced by such Replacement Unit.
5
"Equipment Notes" shall mean the Equipment Notes, each substantially in the
---------------
form set forth in Section 2.1 of the Indenture, issued by the Owner Trustee
pursuant to Section 2.2 of the Indenture, and authenticated by the Indenture
Trustee, in principal amounts, maturities and bearing interest at the rates and
payable as provided in Section 2.2 of the Indenture and secured as provided in
the Granting Clause of the Indenture, and shall include any Equipment Note
issued in exchange therefor or replacement thereof pursuant to Section 2.7 or
2.8 of the Indenture.
"Equity Portion of Basic Rent" shall mean, at any Payment Date, the excess
----------------------------
of the amount of Basic Rent payable under the Lease on such Payment Date over
the Scheduled Amortization Amount payable under the Indenture on such Payment
Date.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor law.
"Event of Loss" shall have the meaning assigned thereto in Section 11.1 of
-------------
the Lease.
"Excepted Property" shall mean (i) all indemnity payments (including,
-----------------
without limitation, payments pursuant to Section 7 of the Participation
Agreement, payments under the Tax Indemnity Agreement and payments pursuant to
Section [5.04 of the Intercreditor Agreement]) to which the Owner Participant,
the Owner Trustee, in its individual capacity, or any of their respective
successors, permitted assigns, directors, officers, employees, servants and
agents is entitled pursuant to the Operative Agreements, (ii) any right, title
or interest of the Owner Trustee, in its individual capacity, or the Owner
Participant to any payment which by the terms of Section 17 of the Lease or any
corresponding payment under Section 3.3 of the Lease shall be payable to or on
behalf of the Owner Trustee, in its individual capacity, or to the Owner
Participant, as the case may be, (iii) any insurance proceeds payable under
insurance maintained by the Owner Trustee, in its individual capacity, or the
Owner Participant pursuant to Section 12.5 of the Lease, (iv) any insurance
proceeds payable to or on behalf of the Owner Trustee, in its individual
capacity, or to the Owner Participant, under any public liability insurance
maintained by the Lessee pursuant to Section 12 of the Lease (which shall
include the amount of any self-insured retention paid by the Lessee) or by any
other Person, (v) Transaction Costs or other amounts or expenses paid or payable
to, or for the benefit of the Owner Trustee, in its individual capacity, or the
Owner Participant pursuant to the Participation Agreement or the Trust
Agreement, (vi) all right, title and interest of the Owner Participant or the
Owner Trustee, in its individual capacity, in or relating to any portion of the
Units and any other property (tangible or intangible), rights, titles or
interests to the extent any of the foregoing has been released from the Lien of
the Indenture pursuant to the terms thereof, (vii) upon termination of the
Indenture pursuant to the terms thereof with respect to any Unit, all remaining
amounts which shall have been paid or are payable by the Lessee and calculated
on the basis of Stipulated Loss Value, (viii) any rights of the Owner
Participant or the Owner Trustee, in its individual capacity, to demand,
collect, ▇▇▇ for, or otherwise receive and enforce payment of the foregoing
amounts, (ix) any amount payable to the Owner Participant by any Transferee as
the purchase price of the Owner Participant's interest in the Trust Estate in
compliance with the terms of the
6
Participation Agreement and the Trust Agreement and (x) the respective rights of
the Owner Trustee, in its individual capacity, or the Owner Participant to the
proceeds of and interest on the foregoing.
"Excepted Rights" shall have the meaning assigned thereto in Section 5.11
---------------
of the Indenture.
"Excluded Unit" shall mean, at any Payment Date, any Unit (i) for which the
-------------
applicable Lease is to be terminated pursuant to Section 10 of the Lease on such
Payment Date, (ii) which suffers an Event of Loss or a deemed Event of Loss
under Section 9.1 of the Lease and is not replaced pursuant to Section 11.2(i)
prior to or on such Payment Date, or (iii) which is to be purchased by the
Lessee pursuant to Section 6.9 of the Participation Agreement or Section 22.1 of
the Lease, as the case may be, on such Payment Date; provided that the principal
amount of the Equipment Note or Notes which corresponds to the Equipment Cost of
such Unit is to be prepaid in accordance with Section 2.10 of the Indenture on
such Payment Date.
"Existing Car Service Contracts" shall have the meaning assigned thereto in
------------------------------
the fourth recital clause of the Participation Agreement.
"Extended Unit" shall have the meaning assigned thereto in Section 22.7 of
-------------
the Lease.
"Fair Market Rental Value" or "Fair Market Sales Value" with respect to any
------------------------ -----------------------
Unit, shall mean the cash rent or cash price obtainable for such Unit in an
arm's length lease or sale between an informed and willing lessee or purchaser
under no compulsion to lease or purchase, as the case may be, and an informed
and willing lessor or seller, under no compulsion to lease or sell, as the case
may be, as the same shall be specified by agreement between the Lessor and the
Lessee. If the parties are unable to agree upon a Fair Market Rental Value
and/or a Fair Market Sales Value within 30 days after delivery of notice by the
Lessee pursuant to Section 22.2 of the Lease, or otherwise where such
determination is required, within a reasonable period of time, such value shall
be determined by appraisal. The Lessee will, within 15 days after such 30-day
period, provide the Lessor with the name of an appraiser that would be
satisfactory to the Lessee, and the Lessor and the Lessee shall consult with
each other with the intent of selecting a mutually acceptable appraiser. If a
mutually acceptable appraiser is selected, the Fair Market Rental Value or the
Fair Market Sales Value, as the case may be, shall be determined by such
appraiser, and the Lessee shall bear the cost thereof. If the Lessee and the
Lessor are unable to agree upon a single appraiser within such 15-day period,
two independent qualified appraisers, one chosen by the Lessee and one chosen by
the Lessor shall jointly determine such value, and the Lessor shall bear the
cost of the appraiser selected by the Lessor, and the Lessee shall bear the cost
of the appraiser selected by the Lessee. If such appraisers cannot agree on the
amount of such value within 15 days of appointment, one independent qualified
appraiser shall be chosen by the American Arbitration Association. All three
appraisers shall make a determination within a period of 15 days following
appointment, and shall promptly communicate such determination in writing to the
Lessor and the Lessee. If there shall be a panel of three appraisers, the three
appraisals shall be averaged, and such average shall be the Fair Market Rental
Value or Fair
7
Market Sales Value, as the case may be. The determination made shall be
conclusively binding on both the Lessor and the Lessee. If there shall be a
panel of three appraisers, the Lessee and the Lessor shall equally share the
cost of the third appraiser. If such appraisal is pursuant to Section 6.1(e) of
the Lease or is in connection with the exercise of remedies set forth in Section
15 of the Lease, the Lessee shall pay the costs of such appraisal.
Notwithstanding any of the foregoing, for the purposes of Section 15 of the
Lease, the Fair Market Rental Value or the Fair Market Sales Value, as the case
may be, shall be zero with respect to any Unit if the Lessor is unable to
recover possession of such Unit in accordance with the terms of paragraph (b) of
Section 15.1 of the Lease.
"FRA" shall mean the Federal Railroad Administration or any successor
---
thereto.
"Functional Group" shall mean each and all of the various groups of Units
----------------
so designated in Schedule 1 to the Participation Agreement.
"GATC" shall mean General American Transportation Corporation, a New York
----
corporation.
"GATC Assignment" shall mean the assignment by GATC to the Lessee of the
---------------
Existing Car Service Contracts on the Closing Date.
"GATC ▇▇▇▇ of Sale" shall mean the ▇▇▇▇ of Sale, dated the Closing Date and
-----------------
executed and delivered by GATC pursuant to the Transfer and Contribution
Agreement, conveying the Equipment to the Lessee.
"Hazardous Substances" shall mean any hazardous or toxic substances,
--------------------
materials or wastes, including, but not limited to, those substances, materials,
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR (S) 172.101) or by the Environmental Protection Agency
as hazardous substances (40 CFR (S) 302.4), or such substances, materials and
wastes which are or become regulated under any applicable local, state or
federal law or the equivalent under applicable foreign laws including, without
limitation, any materials, waste or substance which is (a) petroleum, (b)
asbestos, (c) polychlorinated biphenyls, (d) defined as a "hazardous material,"
"hazardous substance" or "hazardous waste" under applicable local, state or
federal law or the equivalent under applicable foreign laws, (e) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act of 1977,
(f) defined as "hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act of 1976, or (g) defined as "hazardous substances"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
"Incentive Component" shall have the meaning assigned thereto in Section
-------------------
5.3 of the Management Agreement.
"Indemnified Person" shall have the meaning assigned thereto in Section
------------------
7.2(b) of the Participation Agreement.
8
"Indenture" or "Trust Indenture" shall mean the Trust Indenture and
--------- ---------------
Security Agreement (1998-1), dated as of August 1, 1998 between the Owner
Trustee, in the capacities described therein, and the Indenture Trustee. The
term "Indenture" shall include, except where the context otherwise requires,
---------
each Indenture Supplement entered into pursuant to the terms of the Indenture.
"Indenture Default" shall mean an Indenture Event of Default or an event
-----------------
which, with notice or the passage of time or both, would become an Indenture
Event of Default.
"Indenture Estate" shall have the meaning assigned thereto in the Granting
----------------
Clause of the Indenture.
"Indenture Event of Default" shall have the meaning assigned thereto in
--------------------------
Section 4.1 of the Indenture.
"Indenture Investment" shall mean any obligation issued or guaranteed by
--------------------
the United States of America or any of its agencies for the payment of which the
full faith and credit of the United States of America is pledged and with a
final maturity on or before the date which is the earlier of (a) ninety days
from the date of purchase thereof and (b) the first Payment Date occurring after
the date of purchase thereof.
"Indenture Supplement" shall mean an Indenture Supplement (1998-1) dated
--------------------
the Closing Date or the date that any Replacement Unit is subjected to the Lien
of the Indenture, substantially in the form of Exhibit A to the Indenture,
between the Owner Trustee, in the capacities described therein, and the
Indenture Trustee, covering the Units delivered on the Closing Date or such
Replacement Unit, as the case may be. A "related" Indenture Supplement, when
-------
used with respect to any Unit or Units, shall mean the Indenture Supplement
under which such Unit or Units is or are included in the Indenture Estate.
"Indenture Trustee" shall mean The First National Bank of Chicago, a
-----------------
national banking association, as trustee under the Indenture and any successor
institution.
"Indenture Trustee Agreements" shall mean the Operative Agreements to which
----------------------------
the Indenture Trustee is or will be a party.
"Inflation Factor" means, with respect to any calendar year, the quotient
----------------
(expressed as a decimal) obtained by dividing (i) the PPI published in respect
of the most recently ended calendar year (the "New Year"), by (ii) the PPI
published in respect of the calendar year immediately preceding the New Year.
"PPI", for purposes hereof, means, with respect to any calendar year or any
---
period during any calendar year, the "Producer Price Index" applicable to the
capital equipment sector as published by the Bureau of Labor Statistics for the
United States Department of Labor. If the PPI shall be converted to a different
standard reference base or otherwise revised after the date hereof, PPI shall
thereafter be calculated with use of such new or
9
revised statistical measure published by the Bureau of Labor Statistics or, if
not so published, as may be published by any other reputable publisher of such
price index selected by the Manager.
"Initial Manager" shall mean GATC.
---------------
"Insurance Agreement" shall mean the Insurance Agreement dated as of August
-------------------
1, 1998 between the Lessee and GATC.
"Insurance Letter" shall mean that certain letter dated August __, 1998
----------------
(1998-1) from the Lessee and the Manager to the Owner Trustee, which contains
the acknowledgment and consent of the Owner Participant, the Pass Through
Trustee and the Indenture Trustee.
"Insurance Manager" shall have the meaning assigned thereto in the
-----------------
Insurance Agreement.
"Interchange Rules" shall mean the interchange rules or supplements thereto
-----------------
of the AAR, as the same may be in effect from time to time.
"Intercreditor Agreement" shall mean the Collateral Agency and
-----------------------
Intercreditor Agreement dated as of August 1, 1998 among the Lessee, the
Collateral Agent, the Owner Trustee, the Indenture Trustee, GATC, as Manager,
GATC, as Insurance Manager and certain other Persons.
"Investment Banker" shall mean an independent investment banking
-----------------
institution of national standing appointed by the Lessee or, if the Indenture
Trustee does not receive notice of such appointment at least ten days prior to a
scheduled prepayment date or if a Lease Event of Default under the Lease shall
have occurred and be continuing, appointed by the Indenture Trustee.
"Late Payment Interest" shall mean (i) in the case of the Accumulated
---------------------
Equity Deficiency Amount, interest at the Late Rate, (ii) in the case of that
portion of any overdue payment of Stipulated Loss Value or Termination Value
that is in excess of the principal amount of the Equipment Notes then
outstanding and which are allocated to the Units with respect to which such
payment is made, interest at the Late Rate, (iii) in the case of a portion of
overdue Basic Rent equal to any Payment Deficiency, interest at a rate equal to
the sum of the Debt Rate and the rate specified in the definition of "Late
Payment Premium," (iv) in the case of any interest referred to in clause (iii)
of this definition or any Late Payment Premium that is overdue, interest at the
rate specified in the definition of "Late Payment Premium," and (v) in respect
of any other overdue amount, including, without limitation, in the case of the
Equipment Notes and Basic Rent in respect thereof, interest at the Default Rate.
"Late Payment Premium" shall mean, with respect to any Payment Deficiency
--------------------
to which a Late Payment Premium is payable on a Payment Date, an amount of
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the Payment Deficiency, for the period
10
from and including the Payment Date immediately preceding such Payment Date to
but excluding such Payment Date, at a rate equal to 1.5% per annum.
"Late Rate" shall mean an interest rate per annum equal to the Debt Rate
---------
plus 1.5% per annum.
"Lease" or "Lease Agreement" or "Equipment Lease" shall mean the Equipment
----- --------------- ---------------
Lease Agreement (1998-1), relating to the Equipment, dated as of August 1, 1998,
between the Owner Trustee, in the capacities described therein, as Lessor, and
the Lessee. The term "Lease" shall, except where the context otherwise
-----
requires, include each Lease Supplement entered into pursuant to the terms of
the Lease.
"Lease Default" shall mean a Lease Event of Default or an event which, with
-------------
notice or passage of time or both, would become a Lease Event of Default.
"Lease Event of Default" shall have the meaning assigned thereto in Section
----------------------
14 of the Lease.
"Lease Supplement" shall mean a Lease Supplement (1998-1), dated the
----------------
Closing Date or the date that any Replacement Unit is subjected to the Lease,
substantially in the form of Exhibit A to the Lease, between the Lessor and the
Lessee, covering the Units delivered on the Closing Date or such Replacement
Unit, as the case may be. A "related" Lease Supplement, when used with respect
-------
to any Unit or Units, shall mean the Lease Supplement under which such Unit or
Units is or are leased.
"Lease Term" shall mean, with respect to any Unit, the Basic Term
----------
applicable to such Unit and any Renewal Term applicable to such Unit then in
effect.
"Lessee Agreements" shall mean the Operative Agreements to which the Lessee
-----------------
is or will be a party.
"Lessor" shall have the meaning assigned thereto in the recitals to the
------
Lease.
"Lessor's Lien" means any Lien affecting, on or in respect of, the
-------------
Equipment, the Lease or any other part of the Trust Estate arising as a result
of (i) claims against the Lessor (in its individual capacity or as Owner
Trustee) or the Owner Participant, in each case unrelated to the transactions
contemplated by the Operative Agreements, or (ii) acts or omissions of the
Lessor (in its individual capacity or as Owner Trustee) or the Owner
Participant, in each case unrelated to the transactions contemplated by the
Operative Agreements or in breach of any covenant or agreement of such Person
set forth in any of the Operative Agreements, or (iii) taxes imposed against the
Lessor (in its individual capacity or as Owner Trustee) or the Owner Participant
or the Trust Estate which are not required to be indemnified against by the
Lessee pursuant to the Participation Agreement or under the Tax Indemnity
Agreement.
11
"Lien" shall mean any mortgage, pledge, security interest, lien,
----
encumbrance, lease, disposition of title or other charge of any kind on
property.
"Limited Use Property" shall have the meaning set forth in Rev. Proc. 76-
--------------------
30, 1976-2 C.B. 647.
"Loan Participant" shall mean and include each registered holder from time
----------------
to time of an Equipment Note issued under the Indenture, including, so long as
it holds any Equipment Notes issued thereunder, the Pass Through Trustee under
the Pass Through Trust Agreement.
"Loan Participant's Commitment" shall have the meaning assigned thereto in
-----------------------------
Section 2.2(b) of the Participation Agreement.
"Lockbox" shall have the meaning assigned thereto in Section 6.2(a) of the
-------
Management Agreement.
"Lockbox Agreement" shall mean the agreement by and between GATC, as
-----------------
Trustee for itself, individually, General American Railcar Corporation II, and
the Lockbox Bank.
"Lockbox Bank" shall have the meaning assigned thereto in Section 6.2(a) of
------------
the Management Agreement.
"Majority In Interest" shall mean, as of a particular date of determination
--------------------
and with respect to any action or decision of the holders of the Equipment
Notes, the holders of more than 50% of the aggregate unpaid principal amount of
the Equipment Notes, if any, then outstanding which are affected by such
decision or action, excluding any Equipment Notes held by the Owner Participant
or the Lessee or an Affiliate of the Owner Participant or the Lessee unless all
Equipment Notes are so held.
"Make-Whole Amount" shall mean, with respect to the principal amount of any
-----------------
Equipment Note to be prepaid on any prepayment date, the amount which the
Investment Banker determines as of the third Business Day prior to such
prepayment date to equal the product obtained by multiplying (a) the excess, if
any, of (i) the sum of the present values of all the remaining scheduled
payments of principal and interest, based upon Scheduled Amortization, from the
prepayment date to the Scheduled Maturity Date of such Equipment Note,
discounted monthly on the day of each month at a rate equal to the Treasury Rate
plus [.15]%, based upon a 360-day year of twelve 30-day months, over (ii) the
aggregate unpaid principal amount of such Equipment Note , based upon Scheduled
Amortization, plus any accrued but unpaid interest thereon by (b) a fraction,
the numerator of which shall be the aggregate unpaid principal amount of such
Equipment Note to be prepaid on such prepayment date and the denominator of
which shall be the aggregate unpaid principal amount of such Equipment Note;
provided that the aggregate unpaid principal amount of such Equipment Note for
--------
the purpose of clause (a)(ii) and (b) of this definition shall be determined
after deducting the principal installment, if any, due on such prepayment date.
12
"Management Agreement" shall mean the Operation, Maintenance, Servicing and
--------------------
Remarketing Agreement dated as of August 1, 1998 between the Company and the
Manager.
"Management Fee" shall have the meaning assigned thereto in Section 5.1 of
--------------
the Management Agreement.
"Manager" shall mean General American Transportation Corporation, a New
-------
York corporation, and any Successor Manager under the Management Agreement.
"Manager Agreements" shall mean the Operative Agreements to which the
------------------
Manager is or is to be a party.
"Manager's Cost" shall have the meaning assigned thereto in Section 5.4(a)
--------------
of the Management Agreement.
"Manager's Fleet" shall have the meaning assigned thereto in Section 2.2(j)
---------------
of the Management Agreement.
"Marks Company" shall have the meaning assigned thereto in Section 6.4 of
-------------
the Management Agreement.
"Minimum Units" shall mean 100 Units (or, if less than 100 Units are then
-------------
subject to the Lease or being stored pursuant to the terms of the Lease, all
Units).
"Modification" shall have the meaning assigned thereto in Section 9.2 of
------------
the Lease.
"Net Economic Return" shall mean the anticipated net after-tax yield and
-------------------
total after-tax cash flow expected by the original Owner Participant with
respect to the Equipment (both through the Early Purchase Date and the Basic
Term Expiration Date), utilizing the multiple investment sinking fund method of
analysis and the same assumptions as used by such Owner Participant in making
the computations of Basic Rent, Stipulated Loss Value and Termination Value,
terms of Equipment Notes and Early Purchase Price initially set forth in
Schedules 3, 4, 5 and 6 to the Participation Agreement.
"Non-Shared Payments Account" shall be the Account specified in Section 3.1
---------------------------
of the Intercreditor Agreement.
"Non-Severable Modification" shall mean any Modification that is not
--------------------------
readily removable without impairing, other than in a de minimis respect, the
----------
value, utility or remaining useful life of the Equipment or any Unit immediately
prior to removal of such modification.
13
"Notice of Delivery" shall have the meaning assigned thereto in Section
------------------
2.3(a) of the Participation Agreement.
"Officer's Certificate" shall mean a certificate signed (i) in the case of
---------------------
a corporation, by the President, any Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership, by the Chairman of the Board, the President or any
Vice President, the Treasurer or an Assistant Treasurer of a corporate general
partner, (iii) in the case of a commercial bank or trust company, by the
Chairman or Vice Chairman of the Executive Committee or the Treasurer, any Trust
Officer, any Vice President, any Executive or Senior or Second or Assistant Vice
President, or any other officer or assistant officer customarily performing the
functions similar to those performed by the persons who at the time shall be
such officers, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject, and (iv) in the case
of a limited liability company, any manager thereof and any President, Managing
Director or Vice President thereof.
"Operative Agreements" shall mean the Transfer and Contribution Agreement,
--------------------
the GATC ▇▇▇▇ of Sale, the Participation Agreement, the ▇▇▇▇ of Sale, the Trust
Agreement, the Pass Through Trust Agreement, the Pass Through Trust Supplements,
the Pass Through Certificates, the Equipment Notes, the Lease, the Lease
Supplements, the Indenture, the Indenture Supplements, the Tax Indemnity
Agreement, the Intercreditor Agreement, the Purchase Agreement, the Management
Agreement, the Insurance Agreement, the Insurance Letter and the Lockbox
Agreement.
["Other Leases" means (i) the Equipment Lease Agreement (1998-2) dated as
------------
of August 1, 1998 between the Lessee and [Owner Trustee], not in its individual
capacity but solely as Owner Trustee under a Trust Agreement dated as of
[_________], 1998 with [______________________], and (ii) the Equipment Lease
Agreement (1998-3) dated as of August 1, 1998 between the Lessee and [Owner
Trustee], not in its individual capacity but solely as Owner Trustee under a
Trust Agreement dated as of [_____________], 1998 with [__________________].
"Outside Renewal Date" shall have the meaning assigned thereto in Section
--------------------
22.5 of the Lease.
"Owner Participant" shall mean [Owner Participant], a [__________________],
-----------------
and its successors and permitted assigns.
"Owner Participant Agreements" shall mean the Operative Agreements to which
----------------------------
the Owner Participant is or will be a party.
["Owner Participant Parent Guarantee" shall mean that certain Guarantee
----------------------------------
(1998-1) dated as of August 1, 1998 executed by [Owner Participant Parent] in
favor of the Lessee, GATC, the Owner Trustee, the Indenture Trustee and the Pass
Through Trustee.]
14
"Owner Participant's Commitment" shall have the meaning assigned thereto in
------------------------------
Section 2.2(a) of the Participation Agreement.
"Owner Trustee" shall mean [Owner Trustee,] not in its individual capacity
-------------
but solely as Owner Trustee under the Trust Agreement and its successors
thereunder.
"Owner Trustee Agreements" shall mean the Operative Agreements to which the
------------------------
Owner Trustee, either in its individual or fiduciary capacity, is or will be a
party.
["Owner Trustee Parent Guarantee" shall mean that certain Guarantee (1998-
------------------------------
1) dated as of August 1, 1998 executed by Owner Trustee Parent, in favor of the
Lessee, GATC, the Owner Participant, the Indenture Trustee and the Pass Through
Trustee.]
"Parent" means GATX Corporation, a New York corporation.
------
"Participants" shall mean, collectively, the Loan Participant and the Owner
------------
Participant.
"Participation Agreement" shall mean the Participation Agreement (1998-1)
-----------------------
dated as of August 1, 1998, among the Lessee, the Manager, the Pass Through
Trustee, the Owner Participant, the Owner Trustee and the Indenture Trustee.
"Pass Through Certificates" or "Certificates" shall mean the Pass Through
------------------------- ------------
Certificates issued pursuant to each of the Pass Through Trust Supplements and
the Pass Through Trust Agreement.
"Pass Through Trust Agreement" shall mean the Pass Through Trust Agreement,
----------------------------
dated as of August 1, 1998, between the Lessee and the Pass Through Trustee.
"Pass Through Trust Estate" shall mean the Trust (as defined in the Pass
-------------------------
Through Trust Agreement) created by the Pass Through Trust Supplement.
"Pass Through Trust Supplement" shall mean Trust Supplement No. 1 dated
-----------------------------
______________, 1998 between the Lessee and the Pass Through Trustee, which
supplements the Pass Through Trust Agreement (i) by creating a separate trust
for the holders of certain Pass Through Certificates, (ii) by authorizing the
issuance of such Pass Through Certificates and (iii) by establishing the terms
of such Pass Through Certificates.
"Pass Through Trustee" shall mean The First National Bank of Chicago, in
--------------------
its capacity as trustee under the Pass Through Trust Agreement, as supplemented
by the Pass Through Trust Supplements, and each other Person which may from time
to time act as successor trustee under the Pass Through Trust Agreement, as
supplemented by the Pass Through Trust Supplement.
"Pass Through Trustee Agreements" shall mean the Operative Agreements to
-------------------------------
which the Pass Through Trustee is or will be a party.
15
"Payment Account" shall have the meaning assigned thereto in Section 6.4(c)
---------------
of the Indenture.
"Payment Date" shall mean the __ day of each month through and including
------------
the Rated Maturity Date, commencing ___________, 1998, provided that if any such
date shall not be a Business Day, then "Payment Date" shall mean the next
------------
succeeding Business Day; provided, however, that interest and Late Payment
-------- -------
Premium payable on such Payment Date, and all other calculations as of such
Payment Date, shall be computed as of the date which would have been a Payment
Date if such date were a Business Day.
"Payment Deficiency" shall have the meaning assigned thereto in Section 2.2
------------------
of the Indenture.
"Permitted Liens" shall mean: (i) the interests of the Lessee and the
---------------
Owner Trustee under the Lease and the Lease Supplements; (ii) the interest of
the Lessee and any sublessee as provided in any Permitted Sublease; (iii) any
Liens for taxes, assessments, levies, fees and other governmental and similar
charges not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings so long as there exists no
material risk of sale, forfeiture, loss, or loss of or interference with use or
possession of any Unit or interference with the payment of Rent; (iv) any Liens
of mechanics, suppliers, materialmen, laborers, employees, repairmen and other
like Liens arising in the ordinary course of Lessee's (or if a sublease is then
in effect, any sublessee's) business securing obligations which are not yet due
and payable or the amount or validity of which is being contested in good faith
by appropriate proceedings so long as there exists no material risk of sale,
forfeiture, loss, or loss of or interference with use or possession of any Unit
or interference with the payment of Rent; (v) the Lien granted to the Indenture
Trustee under and pursuant to the Indenture, and the respective rights of the
Loan Participant, the Indenture Trustee, the Owner Participant and the Owner
Trustee under the Operative Agreements; (vi) Liens arising out of any judgment
or award against the Lessee (or any sublessee permitted pursuant to Section 8.3
of the Lease) with respect to which an appeal or proceeding for review is being
presented in good faith and for the payment of which adequate reserves have been
provided as required by generally accepted accounting principles or other
appropriate provisions have been made and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding for review
and there exists no material risk of sale, forfeiture, loss, or loss of or
interference with the use or possession of any Unit or any interest therein or
interference with the payment of Rent, and (vii) salvage rights of insurers
under insurance policies maintained pursuant to Section 12 of the Lease.
"Permitted Subleases" shall have the meaning assigned thereto in Section
-------------------
8.3 of the Lease.
"Person" shall mean an individual, partnership, limited liability company,
------
corporation, trust, association or unincorporated organization, and a government
or agency or political subdivision thereof.
16
"Premium" shall mean any Make-Whole Amount and any Late Payment Premium
-------
payable pursuant to the Indenture.
"Prepaid Amount" shall mean, at any Payment Date, the aggregate principal
--------------
amount that was prepaid, if any, pursuant to Section 2.10 of the Indenture prior
to and including such Payment Date.
"Prepayment" shall mean a prepayment of outstanding principal under the
----------
Equipment Notes in accordance with Section 2.10 of the Indenture at any Payment
Date.
"Prepayment Multiplier" shall mean, at any Payment Date, a fraction, the
---------------------
numerator of which shall be the aggregate Equipment Cost of all Units then
included in the Indenture Estate as of such Payment Date (excluding the
Equipment Cost of any Excluded Unit) and the denominator of which shall be the
aggregate Equipment Cost of all Units originally included in the Indenture
Estate as of the Closing Date.
"Pricing Date" shall mean the date on which the Purchase Agreement is
------------
executed and delivered by the Lessee and the Underwriters.
"Projected Coverage Ratio" as of any Calculation Date (as defined in the
------------------------
Intercreditor Agreement), shall mean the ratio of (i) the sum of projected
Available Amounts (as defined in the Intercreditor Agreement) for the six-month
period immediately succeeding such Calculation Date to (ii) the sum of Basic
Rent due or to become due and payable on the six consecutive Rent Payment Dates
which occur following such Calculation Date, as such amounts are certified to by
an officer's certificate signed by an authorized representative of each of the
Company and the Manager.
"Prospectus" shall mean the Prospectus dated August __, 1998 relating to
----------
the offering of the Pass Through Certificates.
"Rated Amortization" shall mean the amount of principal of the Equipment
------------------
Notes specified for each Payment Date set forth in Annex A to the Indenture.
"Rated Amortization Amount" shall mean, at any Payment Date, the excess, if
-------------------------
any, of (i) the product of (A) the sum of all amounts specified in Annex A to
the Indenture as Rated Amortization opposite the respective dates occurring on
or before such Payment Date and (B) the Prepayment Multiplier, over (ii) the sum
of the Adjusted Payment Amount for each Adjusted Principal Period prior to such
Payment Date.
"Rated Maturity Date" shall mean ____________, 20__.
-------------------
17
"Rated Obligations Due" shall mean, at any Payment Date, the sum of (a) the
---------------------
Rated Amortization Amount at such Payment Date plus (b) accrued and unpaid
----
Regular Interest that is due and payable on such Payment Date (computed on the
basis of [a 360-day year of twelve 30-day months]).
"Rating Agencies" shall mean, at any time, Standard & Poor's Ratings Group,
---------------
a division of McGraw Hill, Inc. and ▇▇▇▇▇'▇ Investors Service, Inc., or any
successor to any such corporation's business of rating securities which is then
providing a rating for the Pass Through Certificates.
"Refunding Date" shall have the meaning assigned thereto in Section 10.2(a)
--------------
of the Participation Agreement.
"Regular Interest" shall mean interest on the unpaid portions of the
----------------
principal amounts of the outstanding Equipment Notes (computed on the basis of
[a 360-day year of twelve 30-day months]).
"Reimbursable Services" shall have the meaning assigned thereto in Section
---------------------
5.4 of the Management Agreement.
"Related Indemnitee Group" shall have the meaning assigned thereto in
------------------------
Section 7.2(b) of the Participation Agreement.
["Related Transactions" shall mean the additional leveraged lease
--------------------
transactions evidenced by the Other Leases and with respect to which the Pass
Through Trustee has agreed to acquire the related equipment notes.]
"Remaining Weighted Average Life" shall mean, with respect to any date of
-------------------------------
prepayment or any date of determination of any Equipment Note, the number of
days equal to the quotient obtained by dividing (a) the sum of the products
obtained by multiplying (i) the amount of each then remaining principal payment
on such Equipment Note (assuming that after such date, principal payments are
made only in the Scheduled Amortization Amounts) by (ii) the number of days
from and including the prepayment date or date of determination to but excluding
the scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note.
"Renewal Term" shall mean, with respect to any Unit, any term in respect of
------------
which the Lessee shall have exercised its option to renew the Lease for such
Unit pursuant to Section 22.4 thereof, [including any Fixed Rate Renewal Term]
or in respect of which the Lease Term has been deemed to have been renewed as
provided in Section 22.7 of the Lease.
"Rent" shall mean all Basic Rent and Supplemental Rent.
----
18
"Rent Payment Date" or "Payment Date" shall mean the [__] day of each month
----------------- ------------
occurring during the Lease Term, commencing [_____________], 1998, provided that
if any such date shall not be a Business Day, then "Rent Payment Date" or
"Payment Date" shall mean the next succeeding Business Day.
"Replacement Unit" shall mean a covered ▇▇▇▇▇▇ car or tank car, as the case
----------------
may be, which shall have been leased under the Lease pursuant to Section 11.4 of
the Lease.
"Required Modification" shall have the meaning assigned thereto in Section
---------------------
9.1 of the Lease.
"Responsible Officer" shall mean, with respect to the subject matter of any
-------------------
covenant, agreement or obligation of any party contained in any Operative
Agreement, the President, or any Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer or other officer, who in the normal performance
of his or her operational responsibility would have knowledge of such matter and
the requirements with respect thereto; and when used in connection with the
Lessee, "Responsible Officer" shall include any such officer of the Manager or
the Insurance Manager acting on behalf of the Lessee under the Management
Agreement or the Insurance Agreement, as the case may be.
"Scheduled Amortization" shall mean the amount of principal of the
----------------------
Equipment Notes specified for each Payment Date set forth in Annex B to the
Indenture.
"Scheduled Amortization Amount" shall mean, at any Payment Date, the
-----------------------------
excess, if any, of (i) the product of (A) the sum of all amounts specified in
Annex B to the Indenture as Scheduled Amortization opposite the respective dates
occurring on or before such Payment Date and (B) the Prepayment Multiplier, over
(ii) the sum of the Adjusted Payment Amount for each Adjusted Principal Period
prior to such Payment Date.
"Scheduled Obligations Due" shall mean, at any date, an amount equal to the
-------------------------
excess, if any, of (i) the Scheduled Amortization Amount at such date over (ii)
the Rated Amortization Amount at such date.
"Scheduled Closing Date" shall have the meaning assigned thereto in Section
----------------------
2.7(b) of the Participation Agreement.
"Security" shall have the meaning assigned thereto in Section 2(1) of the
--------
Securities Act of 1933, as amended.
"Services Standard" shall have the meaning assigned thereto in Section 2.2
-----------------
of the Management Agreement.
"Servicing Agreement" shall mean the Management and Servicing Agreement
-------------------
dated as of [___________, 1998] between GATC and the Marks Company.
19
"Severable Modification" shall mean any Modification that is readily
----------------------
removable without causing material damage to the Equipment or any Unit and
without diminishing, other than in a de minimis respect, the value, utility or
----------
useful life of such Unit below the value, utility or useful life of such Unit
immediately prior to such Modification, assuming that such Unit was then in the
condition required to be maintained by the terms of the Lease.
"Special Purchase Defeasance" shall mean, with respect to any election by
---------------------------
the Lessee to purchase Units under Section 22.1 or 22.3 of the Lease, the
deposit by the Lessee with the Indenture Trustee prior to the date as of which
the Lessor shall have declared the Lease to be in default as a result of a Lease
Event of Default under Section 14(c), 14(d), 14(e), 14(f) or 14(i) of the Lease
(in circumstances where such Lease Event of Default occurs after the date of the
Lessee's notice to purchase under Section 22.1 or 22.3 but before the Early
Purchase Date or the expiration of the Basic Term or any Renewal Term, as
applicable), of an amount sufficient to pay (i) the Early Purchase Price,
together with all other amounts due and owing by the Lessee under the Operative
Agreements, with respect to those Units which the Lessee has elected to purchase
on the Early Purchase Date under Section 22.1 of the Lease, or (ii) the Fair
Market Sales Value or Basic Term Purchase Price, together with all other amounts
due and owing by the Lessee under the Operative Agreements, with respect to
those Units which the Lessee has elected to purchase at the expiration of the
Basic Term or any Renewal Term, as applicable, under Section 22.3 of the Lease.
All amounts deposited by the Lessee with the Indenture Trustee in connection
with a Special Purchase Defeasance shall be held and invested by the Indenture
Trustee in accordance with Section 6.4(b) of the Indenture pending consummation
of the purchase of the related Units on the Early Purchase Date or upon the
expiration of the Basic Term or the related Renewal Term, as applicable.
"Specified Investments" (i) direct obligations of, and obligations fully
---------------------
guaranteed as to timely payment by, the United States of America (having
remaining maturities of no more than the number of remaining days until the next
Monthly Transfer Date), (ii) commercial paper (having remaining maturities of no
more than the number of days remaining until the next [Monthly Transfer Date]
having, at the time of the investment or contractual commitment to invest
therein, a rating from each Rating Agency in its highest investment category),
(iii) a Guaranteed Investment Contract (a "GIC") from an [Acceptable GIC]
---
provider, (iv) a GIC provided by GATX, provided that such obligations are
supported by an [Acceptable Letter of Credit], (v) investments in funds rated in
the highest investment category by each Rating Agency and (vi) repurchase
agreements and similar short term instruments.
"STB" shall mean the Surface Transportation Board of the United States
---
Department of Transportation, or any successor thereto.
"Stipulated Loss Value" for any Unit as of any date of determination shall
---------------------
mean the amount determined by multiplying the Equipment Cost for such Unit by
the percentage set forth in Schedule 4 to the Participation Agreement opposite
the Rent Payment Date on which such Stipulated Loss Value is being determined;
provided that during any Renewal Term, "Stipulated Loss Value" shall be
determined as provided in Section 22.6 of the Lease. Notwithstanding
20
anything to the contrary contained in the Lease or in the Participation
Agreement, Stipulated Loss Value for such Unit (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) will, under
any circumstances and in any event, be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with an
Event of Loss, will be at least sufficient to pay in full as of the date of
payment thereof the aggregate unpaid principal of the Equipment Notes issued in
respect of such Unit, together with all unpaid interest, Late Payment Premium
and Make-Whole Amount, if any, thereon accrued to the date on which such amount
is paid in accordance with the terms hereof and all other amounts then due to
the holders of the Equipment Notes.
"Storage Period" shall have the meaning assigned thereto in Section
--------------
6.1(c)(i) of the Lease.
"Storage Period Commencement Date" shall have the meaning assigned thereto
--------------------------------
in Section 6.1(c)(i) of the Lease.
"Sublease Payments" shall mean all amounts paid or payable by or on behalf
-----------------
of, or credited to, the Company under, or in respect of, a Car Service Contract,
including, without limitation, all service charges, rentals, excess mileage
charges, delivery costs reimbursed by the Customer and cancellation or penalty
payments, as well as all amounts paid or payable by the Customer as
reimbursement, indemnity, fees or commissions, or on account of assumed
financial responsibility or liability or otherwise.
"Sublessees" shall mean the lessees under Permitted Subleases.
----------
"Subsidiary" of any Person shall mean any corporation, association, or
----------
other business entity of which more than 50% (as determined by reference to the
total number of votes) of the voting stock outstanding at the time of
determination shall at such time be owned, directly or indirectly, by such
Person or by any other corporation, association or trust which is itself a
Subsidiary within the meaning of this definition, or collectively by such Person
and any one or more such Subsidiaries.
"Successor Lockbox Trustee" shall have the meaning assigned thereto in
-------------------------
Section 6.3 of the Management Agreement.
"Successor Manager" shall have the meaning assigned thereto in Section 8.4
-----------------
of the Management Agreement.
"Super-Majority in Interest" as of a particular date of determination shall
--------------------------
mean with respect to any action or decision of the holders of the Equipment
Notes, the holders of 100% of the aggregate unpaid principal amount of the
Equipment Notes, if any, then outstanding, excluding any Equipment Notes held by
the Owner Participant or the Lessee or an Affiliate of the Owner Participant or
the Lessee.
21
"Supplemental Rent" shall mean all amounts, liabilities and obligations
-----------------
(other than Basic Rent) which the Lessee is obligated to pay under the Operative
Agreements to or on behalf of any of the other parties thereto, including, but
not limited to, Termination Value and Stipulated Loss Value payments.
"Tax Indemnitee" shall have the meaning assigned thereto in Section 7.1 of
--------------
the Participation Agreement.
"Tax Indemnity Agreement" shall mean the Tax Indemnity Agreement (1998-1)
-----------------------
dated as of August 1, 1998 between GATC and the Owner Participant.
"Taxes" shall have the meaning assigned thereto in Section 7.1(b) of the
-----
Participation Agreement.
"Terminated Units" shall have the meaning assigned thereto in Section 10.1
----------------
of the Lease.
"Termination Date" shall have the meaning assigned thereto in Section 10.1
----------------
of the Lease.
"Termination Value" for any Unit as of any date of determination shall mean
-----------------
the amount determined by multiplying the Equipment Cost for such Unit by the
percentage set forth in Schedule 4 to the Participation Agreement opposite the
Rent Payment Date on which such Termination Value is being determined; provided
--------
that during any Renewal Term, "Termination Value" shall be determined as
provided in Section 22.6 of the Lease. Notwithstanding anything to the contrary
contained in the Lease or in the Participation Agreement, Termination Value for
such Unit (both before and after any adjustment pursuant to Section 2.6 of the
Participation Agreement) will, under any circumstances and in any event, be an
amount which, together with any other amounts required to be paid by the Lessee
under the Lease in connection with such termination, will be at least sufficient
to pay in full as of the date of payment thereof the aggregate unpaid principal
of the Equipment Notes issued in respect of such Unit, together with all unpaid
interest, Late Payment Premium and Make-Whole Amount, if any, thereon accrued to
the date on which such amount is paid in accordance with the terms thereof and
all other amounts then due to the holders of the Equipment Notes.
"Total Equipment Cost" shall mean the sum of the Equipment Costs for each
--------------------
Unit.
"Total Managed Fleet" shall mean the Manager's Fleet and the Company Fleet.
-------------------
"Transaction Costs" shall have the meaning assigned thereto in Section
-----------------
2.5(a) of the Participation Agreement.
"Transfer and Contribution Agreement" shall mean the Transfer and
-----------------------------------
Contribution Agreement dated as of August 1, 1998 between GATC and the Company.
22
"Transferee" shall have the meaning assigned thereto in Section 6.1(a) of
----------
the Participation Agreement.
"Treasury Rate" shall mean with respect to prepayment of each Equipment
-------------
Note, a per annum rate (expressed as a monthly equivalent and as a decimal and,
in the case of United States Treasury bills, converted to a bond equivalent
yield), determined to be the per annum rate equal to the monthly yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Equipment Note, as determined by interpolation between the most recent
weekly average yields to maturity for two series of United States Treasury
securities, (A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Equipment Note and (B) the other maturing as close as
possible to, but later than, the Average Life Date of such Equipment Note, in
each case as published in the most recent H.15(519) (or, if a weekly average
yield to maturity for United States Treasury securities maturing on the Average
Life Date of such Equipment Note is reported in the most recent H.15(519), as
published in H.15(519)). H.15(519) means "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System. The most recent H.15(519) means the
latest H.15(519) which is published prior to the close of business on the third
Business Day preceding the scheduled prepayment date.
"Trust" shall mean the trust created under the Trust Agreement.
-----
"Trust Agreement" shall mean that certain Trust Agreement (1998-1), dated
---------------
as of August 1, 1998, between the Owner Participant and [Owner Trustee].
"Trust Estate" shall have the meaning assigned thereto in Section 2.2 of
------------
the Trust Agreement.
"Trustee" shall mean each of the Owner Trustee, the Indenture Trustee or
-------
the Pass Through Trustee, and "Trustees" shall mean the Owner Trustee, Indenture
--------
Trustee and the Pass Through Trustee, collectively.
"Underwriters" shall mean Salomon Brothers Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
------------
Incorporated.
"Underwriting Agreement" shall mean that certain Purchase Agreement between
----------------------
the Lessee and the Underwriters, relating to the sale and purchase of the Pass
Through Certificates.
"Unit" shall mean each unit or item of Equipment.
----
"Unit Monthly Fee" shall have the meaning assigned thereto in Section
----------------
5.2(b) of the Management Agreement.
23