EXHIBIT 10.5
FORM OF
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PARTICIPATION AGREEMENT (GARC II 98-A)
Dated as of September 1, 1998
among
GENERAL AMERICAN RAILCAR CORPORATION II,
as Lessee,
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Lessee Parent,
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Manager,
GARC II 98-A RAILCAR TRUST, BY WILMINGTON TRUST COMPANY,
as Owner Trustee,
[OWNER PARTICIPANT],
as Owner Participant,
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
and
STATE STREET BANK AND TRUST COMPANY,
as Pass Through Trustee
Tank Cars and Covered ▇▇▇▇▇▇ Cars
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST;
CLOSING; TRANSACTION COSTS
Section 2.1. Sale and Purchase.............................................................. 3
Section 2.2. Participation in Equipment Cost................................................ 3
Section 2.3. Closing Date; Procedure for Participation...................................... 3
Section 2.4. Owner Participant's Instructions to the Owner.................................. 5
Trustee; Satisfaction of Conditions.
Section 2.5. Expenses....................................................................... 5
Section 2.6. Calculation of Adjustments to Basic Rent,
Confirmation and Verification.................................................................. 8
Stipulated Loss Value and Termination Value;
Section 2.7. Postponement of Closing Date................................................... 11
SECTION 3. REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of WTC.......................................... 13
Section 3.2. Representations and Warranties of the Lessee................................... 15
Section 3.3. Representations and Warranties of the Indenture
Trustee........................................................................ 19
Section 3.4. Representations, Warranties and Covenants
Regarding Beneficial Interest and Equipment
Notes.......................................................................... 21
Section 3.5. Representations and Warranties of the Pass..................................... 21
Through Trustee.
Section 3.6. Representations and Warranties of the Owner
Participant.................................................................... 23
Section 3.7. Representations and Warranties of the Lessee................................... 25
Parent.
Section 3.8. Opinion Acknowledgment......................................................... 28
SECTION 4. CLOSING CONDITIONS
Section 4.1. Conditions Precedent to Investment by Each
Participant.................................................................... 28
Section 4.2. Additional Conditions Precedent to Investment by
the Pass Through Trustee and Indenture
Trustee........................................................................ 34
Section 4.3. Additional Conditions Precedent to Investment
by the Owner Participant....................................................... 34
Section 4.4. Conditions Precedent to the Obligation of the
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Lessee.................................................................... 35
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES
AND THE LESSEE
Section 6.1. Restrictions on Transfer of Beneficial Interest........................... 38
Section 6.2. Lessor's Liens Attributable to the Owner
Participant............................................................... 41
Section 6.3. Lessor's Liens Attributable to WTC........................................ 41
Section 6.4. Liens Created by the Indenture Trustee and the
Loan Participant.......................................................... 42
Section 6.5. Covenants of Owner Trustee, Owner Participant
and Indenture Trustee..................................................... 43
Section 6.6. Amendments to Operative Agreements........................................ 43
Section 6.7. Certain Representations, Warranties and
Covenants................................................................. 43
Section 6.8. Covenants of the Manager.................................................. 43
Section 6.9. Lessee's Purchase in Certain Circumstances................................ 44
Section 6.10. Owner Participant as Affiliate of Lessee.................................. 45
SECTION 7. LESSEE'S INDEMNITIES
Section 7.1. General Tax Indemnity..................................................... 45
Section 7.2. General Indemnification................................................... 54
Section 7.3. Indemnification by Lessee Parent.......................................... 58
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT
SECTION 9. SUCCESSOR INDENTURE TRUSTEE
SECTION 10. MISCELLANEOUS
Section 10.1. Consents.................................................................. 61
Section 10.2. Refinancing............................................................... 61
Section 10.3. Amendments and Waivers.................................................... 63
Section 10.4. Notices................................................................... 64
Section 10.5. Survival.................................................................. 66
Section 10.6. No Guarantee of Residual Value or Debt.................................... 67
Section 10.7. Successors and Assigns.................................................... 67
Section 10.8. Business Day.............................................................. 67
Section 10.9. Governing Law............................................................. 67
Section 10.10. Severability.............................................................. 67
Section 10.11. Counterparts.............................................................. 67
Section 10.12. Headings and Table of Contents............................................ 68
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Section 10.13. Limitations of Liability............................................................. 68
Section 10.14. Maintenance of Non-Recourse Debt..................................................... 69
Section 10.15. Ownership of and Rights in Units..................................................... 69
Section 10.16. No Petition.......................................................................... 69
Section 10.17. Consent To Jurisdiction.............................................................. 70
Section 10.18. WAIVER OF JURY TRIAL................................................................. 71
Section 10.19. Lessee Parent Status................................................................. 71
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EXHIBITS AND SCHEDULES
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Exhibit A-1 - Form of Certificate of Insurance Broker Confirming Insurance
Coverage (Primary Liability)
Exhibit A-2 - Form of Certificate of Insurance Broker Confirming Insurance
Coverage (Excess Liability)
Exhibit B - Insurance Requirements
Exhibit C - Form of Transfer Agreement
Exhibit D - Form of Notice of Assignment of Existing Car Service Contract
[Exhibit E - Equity Information]
Schedule 1 - Description of Equipment, Designation of Basic Groups,
Designation of Functional Groups, and Equipment Cost
Schedule 1A - List of Existing Car Service Contracts
Schedule 2 - Commitment Percentage and Payment Information for Participants
Schedule 3 - Schedule of Basic Rent Payments
Schedule 4 - Schedule of Stipulated Loss Value and Termination Value
Schedule 5 - Terms of Equipment Notes
Schedule 6 - Purchase Information
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PARTICIPATION AGREEMENT (GARC II 98-A)
This PARTICIPATION AGREEMENT (GARC II 98-A), dated as of September 1, 1998
(this "Agreement"), is by and among (i) General American Railcar Corporation II,
a Delaware corporation (together with its permitted successors and assigns, the
"Lessee"), (ii) General American Transportation Corporation, a New York
corporation, as Lessee Parent (the "Lessee Parent"), (iii) General American
Transportation Corporation, a New York corporation, as Manager (together with
its permitted successors and assigns, the "Manager") under the Management
Agreement (such term and other defined terms used herein shall have the meanings
assigned thereto in Section 1 below), (iv) GARC II 98-A Railcar Trust, a
Delaware business trust, by Wilmington Trust Company ("WTC"), not in its
individual capacity except as expressly provided herein but solely as trustee
under the Trust Agreement (together with its permitted successors and assigns,
the "Owner Trustee"), (v) [Owner Participant], a ___________ corporation
(together with its permitted successors and assigns, the "Owner Participant"),
(vi) State Street Bank and Trust Company, as trustee under the Indenture
(together with its permitted successors and assigns, the "Indenture Trustee"),
and (vii) State Street Bank and Trust Company, not in its individual capacity
except as expressly provided herein but solely as Pass Through Trustee under the
Pass Through Trust Agreement (herein in such capacity, together with its
permitted successors and assigns, called the "Pass Through Trustee" or the "Loan
Participant"). The Owner Participant and the Loan Participant are sometimes
hereinafter referred to collectively as the "Participants".
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Owner Participant and WTC have entered into the Trust Agreement pursuant to
which the Owner Trustee agrees, among other things, to hold the Trust Estate for
the benefit of the Owner Participant thereunder on the terms specified in the
Trust Agreement, subject, however, to the Lien created under the Indenture and,
subject to the terms and conditions hereof, to purchase the Equipment described
in Schedule 1 hereto from the Lessee and concurrently therewith to lease such
Equipment to the Lessee;
WHEREAS, pursuant to the Pass Through Trust Agreement, on the Closing
Date, a grantor trust will be created to facilitate the financing contemplated
hereby;
WHEREAS, on or prior to the Closing Date, the Owner Trustee and the
Indenture Trustee will enter into the Indenture, pursuant to which the Owner
Trustee will agree, among other things, to issue to the Pass Through Trustee, as
Loan Participant, the Equipment Notes as evidence of the loan made by the Loan
Participant in connection with the financing of the Total Equipment Cost;
WHEREAS, Lessee Parent will on the Closing Date, pursuant to the Transfer
and Assignment Agreement (i) sell to the Lessee all of Lessee Parent's right,
title and interest in and to the Equipment, and (ii) contribute to the capital
of the Lessee all of Lessee Parent's right, title
[Participation Agreement (GARC II 98-A)]
and interest in and to any and all lease agreements with customers of Lessee
Parent in respect of the Equipment and under which Lessee Parent is the lessor
(such lease agreements, together with the other lease agreements being assigned
to the Lessee on the Closing Date pursuant to the Transfer and Assignment
Agreement are hereinafter referred to collectively as the "Existing Car Service
Contracts");
WHEREAS, pursuant to the terms of the Trust Agreement, the Owner
Participant has authorized and directed the Owner Trustee, immediately following
the transactions described in the preceding paragraph, (i) to accept delivery
from the Lessee of the ▇▇▇▇ of Sale evidencing the purchase and transfer of
title of each Unit to the Owner Trustee and (ii) to execute and deliver the
Lease, pursuant to which, subject to the terms and conditions set forth therein,
the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease
from the Owner Trustee, each Unit to be delivered on the Closing Date, such
lease to be evidenced by the execution and delivery of a Lease Supplement
covering such Units;
WHEREAS, concurrently with the execution and delivery of this Agreement,
Lessee Parent and the Owner Participant will enter into the Tax Indemnity
Agreement relating to the Equipment;
WHEREAS, the proceeds from the sale of the Equipment Notes to the Loan
Participant will be applied, together with the equity contribution made by the
Owner Participant pursuant to this Agreement, to effect the purchase of the
Equipment by the Owner Trustee as contemplated hereby; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Lessee and the Manager have entered into the Management Agreement, pursuant
to which the Manager will provide management services with respect to the
Equipment.
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, receipt of which is acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT.
Unless otherwise defined herein or unless the context shall otherwise
require, capitalized terms used in this Agreement shall have the meanings
assigned to such terms in Appendix A to the Equipment Lease Agreement (GARC II
98-A) dated as of September 1, 1998 between the Owner Trustee and the Lessee.
Unless otherwise indicated, all references herein to Sections, Schedules and
Exhibits refer to Sections, Schedules and Exhibits of this Agreement.
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[Participation Agreement (GARC II 98-A)]
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING;
TRANSACTION COSTS.
Section 2.1. Sale and Purchase. Subject to the terms and
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conditions hereof and on the basis of the representations and warranties set
forth herein, the Lessee agrees to sell to the Owner Trustee, and the Owner
Trustee agrees to purchase from the Lessee, on the Closing Date and immediately
following consummation of the transactions described in the fourth recital
clause above, the Equipment described in Schedule 1, and in connection
therewith, the Owner Trustee agrees to pay to the Lessee the cost for each Unit
as specified in Schedule 1. On the Closing Date, the Lessee shall deliver each
Unit to the Owner Trustee, and the Owner Trustee shall accept such delivery.
Section 2.2. Participation in Equipment Cost.
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(a) Equity Participation. On the Closing Date, subject to the
--------------------
terms and conditions hereof and on the basis of the representations and
warranties set forth herein, the Owner Participant agrees to participate in the
payment of the Total Equipment Cost for the Units delivered on the Closing Date
by making an equity investment in the beneficial ownership of such Units in the
amount equal to the product of the Total Equipment Cost for the Units delivered
on the Closing Date and the percentage set forth opposite the Owner
Participant's name in Schedule 2 (the "Owner Participant's Commitment"). The
aggregate amount of the Owner Participant's Commitment plus the aggregate amount
of Transaction Costs payable by the Owner Participant shall not exceed the sum
of (x) the Owner Participant's Commitment and (y) 1.15% of the Total Equipment
Cost. The Owner Participant's Commitment shall be paid to the Indenture Trustee
to be held (but not as part of the Indenture Estate) and applied on behalf of
the Owner Trustee toward payment of the Total Equipment Cost as provided in
Section 2.3.
(b) Debt Participation. On the Closing Date, subject to the
------------------
terms and conditions hereof and on the basis of the representations and
warranties set forth herein, the Loan Participant agrees to participate in the
payment of the Total Equipment Cost for the Units delivered on the Closing Date
by making a secured loan, not from its own funds but solely from funds available
to it for such purpose under the Pass Through Trust to be evidenced by the
Equipment Note, to the Owner Trustee in the amount equal to the product of the
Total Equipment Cost for the Units delivered on the Closing Date and the
percentage set forth opposite such Loan Participant's name in Schedule 2 (the
"Loan Participant's Commitment"). The Equipment Notes shall bear interest at the
Debt Rate.
Section 2.3. Closing Date; Procedure for Participation.
-----------------------------------------
(a) Notice of Closing Date. Not later than the Pricing Date,
the Lessee shall give the Owner Participant, the Indenture Trustee, the Owner
Trustee and the Loan
3
[Participation Agreement (GARC II 98-A)]
Participant notice (a "Notice of Delivery") by telex, telegraph, facsimile or
other form of telecommunication or telephone (to be promptly confirmed in
writing) of the Closing Date, which Notice of Delivery shall specify in
reasonable detail the number and type of Units to be delivered on such date, the
aggregate Equipment Cost of such Units, and the respective amounts of the Owner
Participant's Commitment and the Loan Participant's Commitment required to be
paid with respect to such Units. Prior to 11:00 a.m., Chicago time, on the
Closing Date, subject to the satisfaction (or waiver) of the respective
conditions specified in Section 4, the Owner Participant shall make the amount
of the Owner Participant's Commitment required to be paid on the Closing Date
available to the Indenture Trustee, and immediately prior to the delivery and
acceptance of the Units as specified in Section 2.3(b), the Loan Participant
shall make the amount of such Loan Participant's Commitment for the Total
Equipment Cost required to be paid on the Closing Date available to the
Indenture Trustee, in either case, by transferring or delivering such amounts,
in funds immediately available on the Closing Date, to the Indenture Trustee,
either directly to, or for deposit in, the Indenture Trustee's account at State
Street Bank and Trust Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ABA
No. [_________], Account [_________], Att.: [_________], Trust GARC II 98-A. The
making available by the Owner Participant of the amount of the Owner
Participant's Commitment for the Total Equipment Cost shall be deemed a waiver
of the Notice of Delivery by the Owner Participant and the Owner Trustee. The
making available by the Loan Participant of the amount of the Loan Participant's
Commitment for the Total Equipment Cost shall be deemed a waiver of the Notice
of Delivery by the Loan Participant and the Indenture Trustee.
(b) Closing. The closing of the transactions contemplated hereby (the
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"Closing") shall take place at 11:00 a.m., Chicago time, on the Closing Date at
the offices of Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, or at such other place or time
as the parties hereto shall agree. Upon receipt by the Indenture Trustee on the
Closing Date of the full amount of the Owner Participant's Commitment and the
Loan Participant's Commitment in respect of the Units delivered on the Closing
Date, Lessee Parent shall pursuant to the Transfer and Assignment Agreement
deliver the Units to the Lessee by delivery of the GATC ▇▇▇▇ of Sale and shall
make an assignment of the Existing Car Service Contracts to the Lessee under the
GATC Assignment, and immediately thereafter, (i) the Indenture Trustee, on
behalf of the Owner Trustee, shall, subject to the conditions set forth in
Sections 4.1 and 4.3 having been fulfilled to the satisfaction of the
Participants or waived by the Participants, pay to the Lessee from the funds
then held by it, in immediately available funds, an amount equal to the Total
Equipment Cost for the Units delivered on the Closing Date, and (ii) the Lessee
shall pay to Lessee Parent pursuant to the Transfer and Assignment Agreement an
amount equal to the Equipment Cost for the Units purchased on the Closing Date,
(iii) the Lessee shall deliver the Units to the Owner Trustee, (iv) the Owner
Trustee shall, pursuant to the Lease, lease and deliver the Units to the Lessee,
and the Lessee, pursuant to the Lease, shall accept delivery of the Units under
the Lease, such lease, delivery and acceptance of the Units under the Lease
shall be conclusively evidenced by the execution and delivery by the Lessee and
the Owner Trustee of a Lease Supplement covering the
4
[Participation Agreement (GARC II 98-A)]
Equipment so delivered as described in Schedule 1, and (v) the Owner Trustee
shall execute and deliver an Equipment Note relating to such Lease Supplement to
the Loan Participant. Each of the Lessee, the Owner Participant, the Owner
Trustee, the Lessee Parent, the Loan Participant and the Indenture Trustee
hereby agrees to take all actions required to be taken by it in connection with
the Closing as contemplated by this Section 2.3(b).
Section 2.4. Owner Participant's Instructions to the Owner Trustee;
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Satisfaction of Conditions.
--------------------------
(a) The Owner Participant agrees that the making available to the
Indenture Trustee of the amount of the Owner Participant's Commitment for the
Units delivered on the Closing Date in accordance with the terms of this Section
2 shall constitute, without further act, authorization and direction by the
Owner Participant to the Owner Trustee, subject, on the Closing Date, to the
conditions set forth in Sections 4.1 and 4.3 having been fulfilled to the
satisfaction of the Owner Participant or waived by the Owner Participant, to
take the actions specified in Section 2.1 of the Trust Agreement with respect to
the Units on the Closing Date.
(b) The Owner Participant agrees that the authorization by the Owner
Participant or its counsel to the Indenture Trustee to release to the Lessee the
Owner Participant's Commitment with respect to the Units delivered on the
Closing Date shall constitute, without further act, notice and confirmation that
all conditions to closing set forth in Sections 4.1 and 4.3 were either met to
the satisfaction of the Owner Participant or, if not so met, were waived by the
Owner Participant.
Section 2.5. Expenses.
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(a) If the Owner Participant shall have made its investment provided
for in Section 2.2 and the transactions contemplated by this Agreement are
consummated, either the Owner Participant will promptly pay, or the Owner
Trustee will promptly pay, with funds the Owner Participant hereby agrees to pay
(which, together with the Owner Participant's Commitment, shall not exceed the
amount set forth in the penultimate sentence of Section 2.2(a)) to the Owner
Trustee, the following (collectively referred to as the "Transaction Costs") if
evidenced by an invoice delivered to the Owner Participant within four (4)
months after the Closing Date and approved by the Lessee (such approval not to
be unreasonably withheld or delayed):
(i) the cost of reproducing, printing and filing the Operative
Agreements, the Equipment Notes, the Pass Through Certificates, the
Prospectus relating to the Pass Through Certificates, and the Underwriting
Agreement and all amendments and supplements to the foregoing, including
all costs and fees in connection with the initial filing and recording of
the Lease, the Indenture and any
5
[Participation Agreement (GARC II 98-A)]
other document required to be filed or recorded pursuant to the provisions
hereof or of any other Operative Agreement and the fees and expenses of
the Rating Agencies in connection with the rating of the Pass Through
Certificates;
(ii) the reasonable out-of-pocket expenses of the Owner
Participant and the reasonable fees (which shall be the amount specified
in that letter dated _______) of Winston & ▇▇▇▇▇▇, special counsel for the
Owner Participant, plus disbursements, for their services rendered in
connection with the negotiation, execution and delivery of this Agreement
and the other Operative Agreements;
(ii) all costs and fees in connection with the qualification
of the Pass Through Certificates under federal or state securities laws or
Blue Sky laws in accordance with the provisions of Section 9(b) of the
Underwriting Agreement;
(iv) the reasonable fees and expenses of Ernst & Young,
accountants of the Lessee, for their services rendered in connection with
issuing an "agreed upon procedure letter" and "comfort letters" to the
Underwriters and the Owner Participant;
(v) the reasonable fees and expenses of Vedder, Price, ▇▇▇▇▇▇▇
& Kammholz, special counsel for Lessee Parent, Manager and the Lessee, for
their services rendered in connection with the preparation of
documentation, negotiation, execution and delivery of the Underwriting
Agreement, this Agreement and the other Operative Agreements;
(vi) the reasonable fees and expenses of Milbank, Tweed,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, special counsel for the Underwriters, for their services
rendered in connection with the preparation of documentation, negotiation,
execution and delivery of the Underwriting Agreement, this Agreement and
the other Operative Agreements;
(vii) the reasonable fees and expenses of (x) ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
special STB counsel and (y) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, special Canadian counsel;
(viii) the reasonable fees and expenses of Morris, James,
Hitchens & ▇▇▇▇▇▇▇▇, special counsel for the Owner Trustee, for their
services rendered in connection with the negotiation, execution and
delivery of this Agreement and the other Operative Agreements;
(ix) the reasonable fees and expenses of ▇▇▇▇▇▇▇, ▇▇▇▇ LLP,
special counsel for the Indenture Trustee, for their services rendered in
connection with
6
[Participation Agreement (GARC II 98-A)]
the negotiation, execution and delivery of this Agreement and the other
Operative Agreements;
(x) the commissions payable to the Underwriters in
connection with the sale of the Pass Through Certificates;
(xi) the initial fees and reasonable out-of-pocket expenses
of the Owner Trustee;
(xii) the initial fees and reasonable out-of-pocket expenses
of the Indenture Trustee;
(xiii) the initial fees and reasonable out-of-pocket expenses
of the Pass Through Trustee;
(xiv) the reasonable fees of Rail Solutions, Inc. (which fees
shall in no event exceed $18,000 in the aggregate in respect of the
amounts payable hereunder and under the corresponding documentation
relating to the Other Leases), plus disbursements, for their services
rendered in connection with delivering the Appraisal required by Section
4.3(a) and for other consulting services;
(xv) the reasonable fees of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(in an amount not to exceed $7,500 in the aggregate in respect of the
amounts payable hereunder and under the corresponding documentation
relating to the Other Leases), plus disbursements, for their services
rendered as insurance consultants to the Owner Participant;
(xvi) the reasonable fees and expenses of GATX Lease Funding,
Inc. for their services rendered as advisor to Lessee; and
(xviii) the costs incurred in connection with any adjustment
pursuant to Section 2.6(a).
Except as expressly provided above, Transaction Costs shall not
include internal costs and expenses such as salaries and overhead of whatsoever
kind or nature of, or costs incurred by, parties to this Agreement pursuant to
arrangements with third parties for services (other than those expressly
referred to above).
(b) Upon the consummation of the transactions contemplated by this
Agreement, the Lessee agrees to pay when due: (i) the reasonable expenses
(including reasonable legal fees and expenses) of the Owner Trustee, the
Indenture Trustee and the
7
[Participation Agreement (GARC II 98-A)]
Participants incurred subsequent to the delivery of the Equipment on the Closing
Date, in connection with any supplements, amendments, modifications,
alterations, waivers or consents (whether or not consummated) of any of the
Operative Agreements which are either (1) requested by, or necessitated by
action or inaction on the part of, the Lessee or by any applicable law or
regulation (other than laws or regulations solely relating to the business of
the Lessor or the Owner Participant) or entered into in connection with, or as a
result of, a Lease Default or (2) necessary or required to effectuate the
purpose or intent of any Operative Agreement (including costs incurred in
connection with any adjustment pursuant to Section 2.6) or (3) any other
supplement, amendment, modification, alteration, waiver or consent unless, in
the case of this clause (3), such action would require the consent of the Lessee
pursuant to Section 6.6 hereof and Lessee shall not have provided such consent,
and (ii) the ongoing fees and expenses (including reasonable legal fees and
expenses) of the Owner Trustee under the Trust Agreement; (iii) the ongoing fees
and expenses of the Indenture Trustee under the Operative Agreements; and (iv)
the ongoing fees and expenses of the Pass Through Trustee under the Pass Through
Trust Agreement.
(c) If the transactions contemplated hereby are not consummated as a
result of a default by the Owner Participant in its obligations to consummate
the transactions contemplated hereby, the Owner Participant shall pay those
Transaction Costs referred to in Sections 2.5(a)(ii), (xiv) and (xv) above and
Lessee shall pay the remainder. If the transactions contemplated hereby are not
consummated due to any other reason, the Lessee shall pay all Transaction Costs.
(d) Notwithstanding the foregoing provisions of this Section 2.5, the
Lessee shall have no liability for any costs or expenses relating to any
voluntary transfer of the Owner Participant's interest in the Equipment pursuant
to Section 6.1 other than during the continuance of an Event of Default and no
such costs or expenses shall constitute Transaction Costs.
(e) To the extent Transaction Costs exceed 1.15% of the Total
Equipment Cost, Lessee shall pay the Transaction Costs specified in Sections
2.5(a)(iv), (v) and (xvi) above up to an amount equal to the amount of such
excess.
Section 2.6. Calculation of Adjustments to Basic Rent, Stipulated
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Loss Value and Termination Value; Confirmation and Verification.
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(a) Calculation of Adjustments. In the event that (A) the Closing
--------------------------
Date is other than _____________, 1998, (B) the actual interest rate on the
Equipment Note is different than the Debt Rate or the amortization of the
Equipment Note is different from that set forth on Schedule 5, (C) a refinancing
contemplated by Section 10.2 occurs, (D) the actual aggregate Equipment Cost or
composition of the Units is different from that set forth on
8
[Participation Agreement (GARC II 98-A)]
Schedule 1, (E) the actual aggregate amount of Transaction Costs paid pursuant
to Section 2.5(e) is other than an amount equal to 1.15% of the Total Equipment
Cost, (F) there is any change in, or cost relating to a revision in, the
structure of the transaction contemplated hereby as required by any of the
Rating Agencies, or (G) there is any change in the Code or in the regulations
promulgated thereunder or other official administrative pronouncement, which
change is proposed, enacted or effective after the date hereof and prior to the
Closing Date (provided that the Owner Participant or the Lessee, as the case may
be, shall have provided notice to the other prior to the Closing Date), and
which change alters or eliminates the tax assumptions used in calculating Basic
Rent, Stipulated Loss Values, Termination Values, Early Purchase Price and Basic
Term Purchase Price, then, in each such case, the Owner Participant shall
recalculate the payments or amounts, as the case may be, of Basic Rent,
Stipulated Loss Values, Termination Values, Early Purchase Price and Basic Term
Purchase Price, (i) to preserve the Net Economic Return that the Owner
Participant would have realized had such event not occurred, and (ii) to
minimize to the greatest extent possible, consistent with the foregoing clause
(i), the present value (discounted monthly at an interest rate per annum equal
to the Debt Rate) of the payments of Basic Rent; provided, however, that in no
event shall the Early Purchase Price or the Basic Term Purchase Price be less
than the expected fair market value of the Equipment on the Early Purchase Date
and the Basic Term Expiration Date, respectively, as determined by the
Appraisal. Any such recalculation performed due to the occurrence of any one or
more of the events described in clause (A), (B), (D), (F) or (G) above shall be
made prior to the Closing Date. In performing any such recalculation and in
determining the Owner Participant's Net Economic Return, the Owner Participant
shall utilize the same methods and assumptions originally used in making the
computations of Basic Rent, Stipulated Loss Values, Termination Values, Early
Purchase Price and the Basic Term Purchase Price with respect to the Basic Term
initially set forth in Schedules 3, 4 and 6 (other than those assumptions
changed as a result of any of the events described in clauses (A) through (G) of
the preceding sentence necessitating such recalculation; it being agreed that
such recalculation shall reflect solely any changes of assumptions or facts
resulting directly from the event or events necessitating such recalculation).
Such adjustments shall comply (to the extent the original structure complied)
with Section 467 of the Code and the requirements of Sections 4.02(5), 4.07(1)
and (2) and 4.08(1) of Revenue Procedure 75-28, as amended, calculated, except
in the case of a refinancing pursuant to Section 10.2, without taking into
account any change after the Closing Date in or to (i) Section 467 of the Code
(and any regulations thereunder), or (ii) Section 4.08(l) of Revenue Procedure
75-28.
(b) Confirmation and Verification. Upon completion of any
-----------------------------
recalculation described in Section 2.6(a), a duly authorized officer of the
Owner Participant shall provide a certificate to the Lessee either (x) stating
that the payments of Basic Rent, Stipulated Loss Values, Termination Values,
Early Purchase Price and Basic Term Purchase Price with respect to the Basic
Term as are then set forth in Schedules 3, 4 and 6 do not require change, or (y)
setting forth such adjustments to the payments of Basic Rent, Stipulated Loss
Values,
9
[Participation Agreement (GARC II 98-A)]
Termination Values, Early Purchase Price or Basic Term Purchase Price with
respect to the Basic Term as have been calculated by the Owner Participant in
accordance with Section 2.6(a). Such certificate shall describe in reasonable
detail the basis for any such adjustments, and any such adjustment and
corresponding adjustments to the Stipulated Loss Values, Termination Values,
Early Purchase Price and Basic Term Purchase Price will be computed on a basis
consistent with that used by the Owner Participant in the original calculation
of Basic Rent. Any such adjustment shall be deemed approved upon notice of such
approval by the Lessee to the Owner Participant or on the thirty-first (31st)
day following delivery of such certificate by the Owner Participant to the
Lessee unless the Lessee, prior to such day, requests verification pursuant to
the following sentence, and shall become effective, in the case of adjustments
made pursuant to clause (A), (B), (D), (E), (F) or (G) of the first sentence of
Section 2.6(a), as of the earlier of (i) the first Rent Payment Date and (ii)
the date the Lessee approves or has been deemed to have approved such
adjustment, and, in the case of an adjustment made pursuant to clause (C) of the
first sentence of Section 2.6(a), as of the date of the refinancing. If the
Lessee shall so request, the recalculation of any such adjustments described in
this Section 2.6 shall be verified by a nationally recognized firm of
independent accountants selected by the Owner Participant and reasonably
acceptable to the Lessee, and any such recalculation of such adjustment as so
verified shall be binding on the Lessee and the Owner Participant. Such
accounting firm shall be requested to make its determination within 30 days. The
Owner Participant shall provide to a representative of such accounting firm, on
a confidential basis, such information as it may reasonably require, including
the original assumptions used by the Owner Participant and the methods used by
the Owner Participant in the original calculation of, and any recalculation of,
Basic Rent, Stipulated Loss Values, Termination Values, Early Purchase Price and
Basic Term Purchase Price and such other information as is necessary to
determine whether the computation is accurate and in conformity with the
provisions of this Agreement, provided that in no event shall the Owner
Participant have any obligation to provide the Lessee with any such information;
and provided, further, that the Owner Participant shall have no obligation to
disclose to the Lessee, such accounting firm or any other Person, or to permit
the Lessee, such accounting firm or any other Person, to examine any federal,
state or local income tax returns of the Owner Participant, or books or
accounting records related thereto, for any taxable year. Subject to the
immediately following sentence, the costs of such verification shall be borne by
the Lessee. If such accounting firm's verification shall result in a decrease in
the net present value (expressed as a percentage of Total Equipment Cost) of the
Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) under
the Lease calculated as of the Closing Date, as compared to the net present
value of Basic Rent proposed by the Owner Participant, by more than the greater
of (i) ten basis points or (ii) 5% of the proposed adjustment, then the Owner
Participant agrees to reimburse the Lessee for any amounts paid for such
verification. Any revised adjustment resulting from such verification shall
become effective on the next Rent Payment Date after such verification has been
concluded (except that in the case of an adjustment pursuant to clause (C) of
the first sentence of Section 2.6(c), such adjustment shall be effective as of
the date of the refinancing), and shall take into account any underpayment or
overpayment, together with
10
[Participation Agreement (GARC II 98-A)]
interest thereon at the Debt Rate, resulting from an earlier effectiveness of
the original adjustment.
(c) Compliance. Notwithstanding the foregoing, any adjustment
----------
made to the payments of Basic Rent, Stipulated Loss Values, Termination Values,
Early Purchase or Basic Term Purchase Price with respect to the Basic Term,
pursuant to the foregoing, shall comply with the following requirements: (i)
each installment of Basic Rent, as so adjusted, under any circumstances and in
any event, will be in an amount at least sufficient for the Owner Trustee 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 on the due date of such
installment of Basic Rent in accordance with the Scheduled Amortization, and
(ii) Stipulated Loss Value, Termination Value and Early Purchase Price, as so
adjusted, under any circumstances and in any event, will 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 or a termination of the Lease, as the
case may be, will be at least sufficient to pay in full, as of the date of
payment thereof, the aggregate unpaid principal of and all unpaid interest on
the Equipment Notes in accordance with the Scheduled Amortization accrued to the
date on which Stipulated Loss Value, Termination Value or Early Purchase Price,
as the case may be, is paid in accordance with the terms of the Lease.
(d) Invoices. All invoices in respect of Transaction Costs to
--------
the extent not delivered on the Closing Date shall be directed to the Owner
Participant at the address set forth in Section 10.4, with a copy to the Lessee.
Section 2.7. Postponement of Closing Date.
----------------------------
(a) The scheduled Closing Date may be postponed from time to
time with respect to all of the Units for any reason (but in no event later than
September 30, 1998) if the Lessee gives the Owner Participant, the Indenture
Trustee, the Pass Through Trustee, the Owner Trustee and the Underwriters telex,
telegraphic, facsimile or telephonic (confirmed in writing) notice of the
postponement and notice of the date to which such Closing Date has been
postponed, the notice of postponement to be received by each party no later than
5:30 p.m., New York, New York time, on the originally scheduled Closing Date,
and the term "Closing Date" as used in this Agreement shall mean the postponed
"Closing Date".
(b) In the event of any postponement of the originally scheduled
Closing Date pursuant to this Section 2.7 (the originally scheduled Closing Date
being referred to as the "Scheduled Closing Date" for the purposes of this
Section 2.7): (i) the Lessee will reimburse the Owner Participant for the loss
of the use of its funds with respect to the Owner Participant's Commitment
occasioned by such postponement or failure to deliver or accept (unless such
failure to accept is caused by a default by the Owner Participant hereunder or
by the
11
[Participation Agreement (GARC II 98-A)]
Owner Trustee (acting pursuant to instructions from the Owner Participant) under
the Trust Agreement, the Lease or the Indenture) by paying to the Owner
Participant on demand interest at the Debt Rate, for the period from and
including the Scheduled Closing Date to but excluding the earlier of the date
upon which such funds are returned to the Owner Participant (unless such funds
are returned after 1:00 p.m. (Chicago time) in which case such date of return
shall be included) or the actual Closing Date; provided that the Lessee shall in
any event pay to the Owner Participant at least one day's interest at the Debt
Rate on the amount of such funds, unless the Owner Participant shall have
received, prior to 12:00 noon (Chicago time) on the Business Day preceding the
Scheduled Closing Date, a notice of postponement of the Scheduled Closing Date
pursuant to Section 2.7(a), and (ii) the Indenture Trustee will return not later
than 10:00 a.m. Chicago time, on the first Business Day following the Scheduled
Closing Date, any funds which it shall have received from the Owner Participant
as the Owner Participant's Commitment for such Units, absent joint instructions
from the Lessee and the Owner Participant to retain such funds until the
specified date of postponement established under Section 2.7(a).
(c) The Indenture Trustee agrees that, in the event it has received
telephonic notice (to be confirmed promptly in writing) from the Lessee on the
Scheduled Closing Date that such Scheduled Closing Date is to be postponed, it
will, if instructed in the aforementioned notice from the Lessee (which notice
shall specify the Specified Investments to be purchased), use reasonable best
efforts to invest, at the risk of the Lessee Parent (except as provided below
with respect to the Indenture Trustee's gross negligence or willful misconduct),
the funds received by it from the Owner Participant with respect to the Owner
Participant's Commitment in Specified Investments in accordance with the
Lessee's instructions. Any such Specified Investments purchased by the
Indenture Trustee upon instructions from the Lessee shall be held in trust by
the Indenture Trustee (but not as part of the Indenture Estate under the
Indenture) for the benefit of the Owner Participant whose funds are invested in
Specified Investments upon instructions from the Lessee, and any net profits on
the investment of such funds (including interest), if any, shall be for the
account of and shall on the Closing Date, or on the date the Owner Participant's
Commitment is to be returned to the Owner Participant, be paid over to the
Lessee. The Lessee shall pay to the Indenture Trustee on the Closing Date (if
the Units are delivered and accepted pursuant hereto) the amount of any net loss
on the investment of such funds invested at the instruction of the Lessee. If
the funds furnished by the Owner Participant with respect to the Units are
required to be returned to the Owner Participant, the Lessee Parent shall, on
the date on which such funds are so required to be returned, reimburse the
Indenture Trustee, for the benefit of the Owner Participant, for any net losses
incurred on such investments. The Indenture Trustee shall not be liable for
failure to invest such funds or for any losses incurred on such investments
except for losses resulting from its own willful misconduct or gross negligence.
In order to obtain funds for the payment of the Equipment Cost for the Units or
to return funds furnished by the Owner Participant to the Indenture Trustee for
the benefit of the Owner Participant with respect to the Units, the Indenture
Trustee is authorized to
12
[Participation Agreement (GARC II 98-A)]
sell any Specified Investments purchased as aforesaid with the funds received by
it from the Owner Participant in connection with the Units.
(d) Notwithstanding the provisions of Section 2.7(a), the Owner
Participant shall not be under any obligation to make the Owner Participant's
Commitment available beyond 12:00 noon (Chicago time) on September 30, 1998.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
Section 3.1. Representations and Warranties of WTC. WTC, in its
-------------------------------------
individual capacity (except with respect to clauses (c) and (k) (to the extent
applicable to WTC in its capacity as Owner Trustee) below) and as Owner Trustee
with respect to clauses (c), (f) and (k) (to the extent applicable to WTC in its
capacity as Owner Trustee) below, represents and warrants to each of the Owner
Participant, the other Trustees, the Manager, the Lessee Parent and the Lessee,
notwithstanding the provisions of Section 10.13 or any similar provision in any
other Operative Agreement, that, as of the date hereof:
(a) WTC (i) is a trust company duly organized and validly
existing in good standing under the laws of the State of Delaware, (ii) has full
corporate power and authority to carry on its business as now conducted and
execute, deliver and perform its obligations hereunder and under the Trust
Agreement and (iii) (assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant) has full power and authority, as Owner
Trustee and/or, to the extent expressly provided herein or therein, in its
individual capacity, execute, deliver and perform its obligations under each of
the Owner Trustee Agreements;
(b) (i) WTC has duly authorized, executed and delivered the
Trust Agreement, (ii) (assuming the due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) WTC in its trustee capacity and,
to the extent expressly provided therein, in its individual capacity, has, or on
or prior to the Closing Date will have, duly authorized, executed and delivered
each of the other Owner Trustee Agreements and, as of the Closing Date, the
Equipment Notes, the Lease Supplements and the Indenture Supplements to be
delivered on the Closing Date, (iii) assuming the due authorization, execution
and delivery of the Trust Agreement by the Owner Participant, the Trust is a
Delaware business trust duly organized and validly existing in good standing
under the laws of the State of Delaware and (iv) the Trust Agreement constitutes
a legal, valid and binding obligation of WTC enforceable against it in
accordance with the terms thereof except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity;
13
[Participation Agreement (GARC II 98-A)]
(c) assuming the due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee Agreements
(other than the Trust Agreement) to which it is a party constitutes, or when
entered into will constitute, a legal, valid and binding obligation of the Owner
Trustee, enforceable against it in accordance with the terms thereof, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally and
by general principles of equity;
(d) neither the execution and delivery by WTC or as Owner Trustee, as
the case may be, of the Owner Trustee Agreements or the Equipment Notes to be
delivered on the Closing Date, nor the consummation by WTC or as Owner Trustee,
as the case may be, of any of the transactions contemplated hereby or thereby,
nor the compliance by WTC or as Owner Trustee, as the case may be, with any of
the terms and provisions hereof and thereof, (i) requires or will require any
approval of its stockholders, or approval or consent of any trustees or holders
of any indebtedness or obligations of it in its individual capacity, or (ii)
violates or will violate its charter or by-laws, or contravenes or will
contravene any provision of, or constitutes or will constitute a default under,
or results or will result in any breach of, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sale contract, bank loan or credit
agreement, license or other agreement or instrument to which WTC is a party or
by which it or any of its properties may be bound or affected, or contravenes or
will contravene any law, governmental rule or regulation of the United States of
America or the State of Delaware governing the banking or trust powers of WTC,
or any judgment or order applicable to or binding on it;
(e) there are no Taxes payable by WTC or the Owner Trustee, imposed by
the State of Delaware or any political subdivision thereof or by the United
States of America in connection with the execution and delivery by WTC of the
Trust Agreement, and, as WTC or as Owner Trustee, as the case may be, of this
Agreement, the other Owner Trustee Agreements (other than the Trust Agreement)
or the Equipment Notes to be delivered on the Closing Date solely because WTC is
a trust company with its principal place of business in Delaware and performs
certain of its duties as Owner Trustee in the State of Delaware; and there are
no Taxes payable by WTC or the Owner Trustee, as the case may be, imposed by the
State of Delaware or any political subdivision thereof or by the United States
of America in connection with the acquisition of its interest in the Equipment
(other than franchise or other taxes based on or measured by any fees or
compensation received by WTC or the Owner Trustee for services rendered in
connection with the transactions contemplated hereby) solely because WTC is a
trust company with its principal place of business in Delaware and performs
certain of its duties as Owner Trustee in the State of Delaware;
(f) there are no pending or, to its knowledge, threatened actions or
proceedings against WTC or the Owner Trustee, before any court or administrative
agency which individually or in the aggregate, if determined adversely to it,
would materially adversely affect
14
[Participation Agreement (GARC II 98-A)]
the ability of WTC or the Owner Trustee, as the case may be, to perform its
obligations under the Trust Agreement, the other Owner Trustee Agreements or the
Equipment Notes to be delivered on the Closing Date;
(g) both its chief executive office, and the place where its records
concerning the Equipment and all its interest in, to and under all documents
relating to the Trust Estate, are located in Wilmington, Delaware, and WTC
agrees to give the Owner Participant, the Indenture Trustee and the Lessee
written notice within 30 days following any relocation of said chief executive
office or said place from its present location;
(h) no consent, approval, order or authorization of, giving of notice
to, or registration with, or taking of any other action in respect of, any
Delaware state or local governmental authority or agency or any United States
federal governmental authority or agency regulating the banking or trust powers
of WTC is required for the execution and delivery of, or the carrying out by,
WTC or the Owner Trustee, as the case may be, of any of the transactions
contemplated hereby or by the Trust Agreement or of any of the transactions
contemplated by any of the other Owner Trustee Agreements, other than any such
consent, approval, order, authorization, registration, notice or action as has
been duly obtained, given or taken;
(i) on the Closing Date, the Owner Trustee's right, title and interest
in and to the Equipment delivered on the Closing Date shall be free and clear of
any Lessor's Lien attributable to WTC;
(j) proceeds received by the Owner Trustee from the Owner Participant
pursuant to the Trust Agreement will be administered by it in accordance with
Article III of the Trust Agreement;
(k) the Owner Trustee shall receive from the Lessee such title as was
conveyed to it by the Lessee, subject to the rights of the Owner Trustee and the
Lessee under the Lease and the Lien created pursuant to the Indenture and the
Indenture Supplement in respect of the Equipment delivered on the Closing Date,
and there will be no Lessor's Liens attributable to the Owner Trustee on the
Equipment or any interest therein or on the Trust Estate; and
(l) to its knowledge, no Indenture Default has occurred and is
continuing.
Section 3.2. Representations and Warranties of the Lessee. The
--------------------------------------------
Lessee represents and warrants to each of the Trustees and the Participants, as
of the date hereof:
(a) the Lessee is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware, is duly licensed or
qualified and in good
15
[Participation Agreement (GARC II 98-A)]
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its ability to carry on its business as now conducted
or to enter into and perform its obligations under the Lessee Agreements, is a
special purpose corporation organized to enter into the transactions
contemplated by this Agreement and similar railcar financings, has the corporate
power and authority to sell the Equipment to the Owner Trustee and to carry on
its business as now conducted, has the requisite power and authority to execute,
deliver and perform its obligations under the Lessee Agreements and has
conducted no business or operations prior to the date hereof (other than those
associated with its organization);
(b) the Lessee Agreements have been duly authorized by all necessary
corporate action (including the requisite approval of its sole stockholder),
this Agreement has been duly executed and delivered (and in the case of the
other Lessee Agreements, such other Lessee Agreements will on the Closing Date
have been duly executed and delivered) by the Lessee, and constitutes (and in
the case of the other Lessee Agreements, such other Lessee Agreements will on
the Closing Date constitute) the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their respective terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity;
(c) the execution, delivery and performance by the Lessee of each
Lessee Agreement and compliance by the Lessee with all of the provisions thereof
do not and will not contravene any law or regulation, or any order of any court
or governmental authority or agency applicable to or binding on the Lessee or
any of its properties, or contravene the provisions of, or constitute a default
by the Lessee under, or result in the creation of any Lien (except for Permitted
Liens) upon the property of the Lessee under its certificate of incorporation or
by-laws or any indenture, mortgage, contract or other agreement or instrument to
which the Lessee is a party or by which the Lessee or any of its properties may
be bound or affected;
(d) there are no proceedings pending or, to the knowledge of the
Lessee, threatened against the Lessee in any court or before any governmental
authority or arbitration board or tribunal. The Lessee is not subject to any
order of any court or governmental authority or arbitration board or tribunal;
(e) the unaudited balance sheet of the Lessee as at the Closing Date
fairly presents, in conformity with generally accepted accounting principles
applied on a pro forma basis, the pro forma financial position of the Lessee as
of such date;
(f) no consent, approval or authorization of, or filing, registration
or qualification with, or the giving of notice to, any trustee or any holder of
indebtedness of the Lessee or any governmental authority on the part of the
Lessee is required in the United States or Canada in connection with the
execution and delivery by the Lessee of the Lessee Agreements or
16
[Participation Agreement (GARC II 98-A)]
in order for the Lessee to perform its obligations thereunder in accordance with
the terms thereof, other than notice required to be filed with the STB and the
Registrar General of Canada, which notices shall have been filed on the Closing
Date, it being understood that the registration of the issuance and sale of the
Pass Through Certificates to be issued pursuant to the provisions of the Pass
Through Trust Agreement under the Securities Act of 1933, as amended, and under
the securities laws of any state in which the Pass Through Certificates may be
offered for sale if the laws of such state require such action has been duly
accomplished and the qualification of the Pass Through Trust Agreement under the
Trust Indenture Act of 1939, as amended, has been duly obtained;
(g) the Lease, the Indenture, the Intercreditor Agreement (or a
memorandum thereof), the Lease Supplements in respect of the Units delivered on
the Closing Date and the Indenture Supplements in respect of the Units delivered
on the Closing Date will on or before the Closing Date be duly filed with the
STB pursuant to 49 U.S.C. (S)11301 and deposited with the Registrar General of
Canada pursuant to Section 105 of the Canada Transportation Act, and such filing
with the STB pursuant to 49 U.S.C. (S)11301 and such deposit with the Registrar
General of Canada will under the laws of the United States and Canada perfect
the Owner Trustee's, the Indenture Trustee's and the Collateral Agent's rights
in such Operative Agreements and in the Units and no other filing, recording or
deposit with, or giving of notice to any other U.S. federal, state or local
government or Canadian national or provincial government or agency thereof, or
any other action, is necessary in order to protect the rights of the Owner
Trustee, the Indenture Trustee and the Collateral Agent in such Operative
Agreements or in such Units in the United States, any state thereof or the
District of Columbia or Canada or any province thereof;
(h) the Equipment is covered by the insurance required by Section 12
of the Lease, and all premiums due prior to the Closing Date in respect of such
insurance shall have been paid in full and such insurance is in full force and
effect;
(i) no Lease Default has occurred and is continuing and, to the
knowledge of Lessee, no Event of Loss, or event which, with the giving of
notice, the passage of time or both, would constitute an Event of Loss, has
occurred;
(j) the Lessee is not an "investment company" or an "affiliated
person" of an "investment company" within the meaning of the Investment Company
Act of 1940, as amended;
(k) the acquisition by the Owner Participant of the Beneficial
Interest for its own account will not constitute a prohibited transaction within
the meaning of Section 4975(c)(1)(A) through (D) of the Code or Section
406(a)(1)(A) through (D) of ERISA. The
17
[Participation Agreement (GARC II 98-A)]
representation made by the Lessee in the preceding clause is made in reliance
upon and subject to the accuracy of the representation of the Owner Participant
in Section 3.6(h) of this Agreement;
(l) on the Closing Date, (i) Lessee shall have and shall pursuant to
the ▇▇▇▇ of Sale relating to the Units convey to the Owner Trustee, all legal
and beneficial title to the Units free and clear of all Liens (other than
Permitted Liens of the type described in clause (ii) with respect to the
Existing Car Service Contracts, and in clauses (iv) and (vii) of the definition
thereof), and such conveyance will not be void or voidable under any applicable
law; and (ii) all of the Units are subject to sublease by Sublessees under the
Existing Car Service Contracts on rental and other terms which are no different,
taken as a whole, than those for similar railcars in the rest of the Manager's
Fleet;
(m) neither the Prospectus nor any written statement furnished by the
Lessee or on behalf of the Lessee in connection with the negotiation of the
Lease or any other Operative Agreement contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. The assumptions and related
financial information relating to the proposed business and operations of the
Lessee and the Company Fleet which are contained under "Structuring Assumptions"
in the Prospectus (the "Structuring Assumptions") and the Equity Information
have been prepared in good faith based upon information that the Lessee deems
fair and reasonable, and there are no statements or conclusions in any of the
Structuring Assumptions or the Equity Information which are based upon or
include information known to the Lessee to be misleading in any material respect
or which fail to take into account material information known to the Lessee
regarding the matters stated therein. Certain information contained in Equity
Information (e.g., statistical information relating to renewal and remarketing
of railcars, potential increases in absolute or nominal railcar lease rates,
anticipated utilization, and maintenance costs) was based upon the historical
experience of the Lessee Parent. Subject to the foregoing, there can be no
assurance that past experience will be indicative of future performance with
respect to these or other operating and marketing factors set forth in the
Equity Information. There is no fact which the Lessee has not disclosed in
writing which materially adversely affects or, so far as the Lessee can now
reasonably foresee, will materially affect adversely the properties, business,
profits or condition (financial or otherwise) of the Lessee;
(n) none of the transactions contemplated by the Operative Agreements
(including, without limitation, the use of the proceeds from the sale of the
Equipment Notes) will result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulations issued pursuant thereto,
including, without limitation, Regulations T, U and X, as applicable, of the
Board of Governors of the Federal Reserve System. None of the proceeds from the
sale of the Equipment Notes will be used to purchase or carry (or refinance any
borrowing the proceeds of which were used to purchase or carry) any "security"
within the meaning of the Securities Exchange Act of 1934, as amended;
18
[Participation Agreement (GARC II 98-A)]
(o) the Lessee is not in violation of any term of any charter
instrument, by-law or any other agreement or instrument to which it is a party
or by which it may be bound. The Lessee is in compliance with all laws,
ordinances, governmental rules and regulations to which it is subject, and has
obtained all licenses, permits, franchises and other governmental authorizations
material to the conduct of its business;
(p) on the Closing Date, all sales, use or transfer taxes due and
payable upon the purchase of the Equipment by Lessee from Lessee Parent and by
the Owner Trustee from Lessee and upon the lease thereof by the Owner Trustee to
the Lessee and, if applicable, the assignment of the Existing Car Service
Contracts from Lessee Parent to the Lessee will have been paid or such
transactions will then be exempt from any such taxes, and the Lessee will cause
any required forms or reports in connection with such taxes to be filed in
accordance with applicable laws and regulations. No taxes, fees or other
charges in connection with the execution and delivery of the Operative
Agreements or the issuance and sale of the Equipment Notes to be delivered on
the Closing Date are payable;
(q) no broker's or finder's or placement fee or commission will be
payable with respect to the transactions contemplated by the Operative
Agreements as a result of any action by Lessee, except for the fees of GATX
Lease Funding, Inc. and of the Underwriters, which shall be included in
Transaction Costs, and Lessee agrees that it will hold the Participants, the
Owner Trustee and the Indenture Trustee harmless from any claim, demand or
liability for any other broker's or finder's or placement fees or commission
alleged to have been incurred as a result of any action by Lessee in connection
with such transactions;
(r) each Unit, taken as a whole, and each major component thereof,
complies in all material respects with all applicable laws and regulations,
conforms with the specifications for such Unit contained in the Appraisal
referred to in Section 4.3(a) hereof and is substantially complete such that it
is ready and available to operate in commercial service and otherwise perform
the function for which it was designed; and the railcar identification marks
shown on Schedule 1 are the marks presently used on the Units of Equipment; and
(s) the Lessee is not subject to regulation as a "holding company," an
"affiliate" of a "holding company," or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Section 3.3. Representations and Warranties of the Indenture
-----------------------------------------------
Trustee. The Indenture Trustee represents and warrants to each of the Owner
-------
Participant, the Owner Trustee, the Loan Participant, the Manager, the Lessee
Parent and the Lessee that, as of the date hereof:
19
[Participation Agreement (GARC II 98-A)]
(a) the Indenture Trustee is a state chartered trust company duly
organized and validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the full corporate power, authority and
legal right under the laws of the Commonwealth of Massachusetts pertaining to
its banking, trust and fiduciary powers to execute, deliver and perform its
obligations under each of the Indenture Trustee Agreements;
(b) the execution, delivery and performance by the Indenture Trustee
of each of the Indenture Trustee Agreements have been duly authorized by the
Indenture Trustee and will not violate any applicable federal or Massachusetts
law governing its banking or trust powers or its charter documents or by-laws or
the provisions of any indenture, mortgage, contract or other agreement to which
it is a party or by which it or any of its properties may be bound or affected;
(c) this Agreement has been duly executed and delivered and
constitutes, and each of the other Indenture Trustee Agreements, when executed
and delivered, will constitute the legal, valid and binding obligation of the
Indenture Trustee, enforceable against the Indenture Trustee in accordance with
its terms except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity;
(d) there are no proceedings pending or, to the knowledge of the
Indenture Trustee, threatened, and to the knowledge of the Indenture Trustee
there is no existing basis for any such proceedings, against or affecting the
Indenture Trustee in or before any court or before any governmental authority or
arbitration board or tribunal which, individually or in the aggregate, if
adversely determined, might impair the ability of the Indenture Trustee to
perform its obligations under the Indenture Trustee Agreements;
(e) no authorization or approval or other action by, and no notice to
or filing with, any stockholder, trustee or holder of indebtedness or any
federal or Massachusetts state governmental authority or regulatory body
governing the Indenture Trustee in its trust capacity, is required for the due
execution, delivery and performance by the Indenture Trustee of the Indenture
Trustee Agreements, except as have been previously obtained, given or taken;
(f) the Indenture Trustee is not in default under any of the
Indenture Trustee Agreements; and
(g) neither the Indenture Trustee, nor any Person authorized to act on
behalf of the Indenture Trustee, has directly or indirectly offered any interest
in the Trust Estate or the Equipment Notes or any security similar to either
thereof related to this transaction for sale to, or solicited offers to buy any
of the same from, or otherwise approached or negotiated with respect to any of
the same with, any Person other than the Pass Through Trustee and the
Underwriters.
20
[Participation Agreement (GARC II 98-A)]
Section 3.4. Representations, Warranties and Covenants Regarding
---------------------------------------------------
Beneficial Interest and Equipment Notes.
---------------------------------------
(a) The Owner Trustee represents and warrants to each of the Lessee,
the other Trustees, the Manager, the Lessee Parent and the Owner Participant
that, as of the date hereof and as of the Closing Date, neither the Owner
Trustee nor any Person authorized or employed by the Owner Trustee as agent or
otherwise has offered any of the Beneficial Interest or the Equipment Notes or
any similar interest for sale to, or solicited offers to buy any thereof from,
or otherwise approached or negotiated with respect thereto with, any prospective
purchaser.
(b) The Lessee and the Lessee Parent represent and warrant to each of
the Trustees and the Owner Participant that, as of the date hereof and as of the
Closing Date, neither the Lessee, the Lessee Parent nor any Person authorized or
employed by the Lessee or the Lessee Parent as agent or otherwise in connection
with the placement of the Beneficial Interest or the Equipment Notes or any
similar interest has offered any of the Beneficial Interest or the Equipment
Notes or similar interest for sale to, or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
Person other than the Owner Participant and not more than [six (6)] other
institutional investors with respect to the Beneficial Interest, except for the
issue and sale of the Pass Through Certificates as contemplated by the
Underwriting Agreement.
(c) Each of the Owner Trustee, the Owner Participant and the Lessee
agrees, as to its own actions only, severally but not jointly, that neither the
Owner Trustee, the Owner Participant nor the Lessee nor anyone acting on behalf
of the Owner Trustee, the Owner Participant or the Lessee will offer the
Beneficial Interest, the Equipment Notes, or any part thereof or any similar
interest for issue or sale to any prospective purchaser, or solicit any offer to
acquire any of the Beneficial Interest, the Equipment Notes, or any part thereof
in violation of Section 5 of the Securities Act of 1933, as amended.
Section 3.5. Representations and Warranties of the Pass Through
--------------------------------------------------
Trustee. The Pass Through Trustee represents and warrants to each of the Owner
-------
Participant, the other Trustees, the Manager, the Lessee Parent and the Lessee
that, as of the date hereof:
(a) the Pass Through Trustee is a state chartered trust company duly
organized and validly existing in good standing under the laws of the
Commonwealth of Massachusetts and has the full corporate power, authority and
legal right under the laws of the Commonwealth of Massachusetts pertaining to
its banking, trust and fiduciary powers to execute, deliver and perform its
obligations under the Pass Through Trust Agreement, the Pass Through Trust
Supplement and this Agreement;
21
[Participation Agreement (GARC II 98-A)]
(b) this Agreement has been, and on the Closing Date, the Pass Through
Trust Agreement and the Pass Through Supplement will have been, duly authorized,
executed and delivered by the Pass Through Trustee; this Agreement constitutes,
and on the Closing Date, the Pass Through Trust Supplement and the Pass Through
Trust Agreement will constitute, the legal, valid and binding obligations of the
Pass Through Trustee, enforceable against the Pass Through Trustee in accordance
with their respective terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity;
(c) the execution, delivery and performance by the Pass Through
Trustee of the Pass Through Trust Agreement, the Pass Through Trust Supplement
and this Agreement, the purchase by the Pass Through Trustee of the Equipment
Notes pursuant to this Agreement, and the issuance of the Pass Through
Certificates pursuant to the Pass Through Trust Agreement and the Pass Through
Trust Supplement, do not contravene any law, rule or regulation of any federal
or Massachusetts governmental authority or agency regulating the Pass Through
Trustee's banking, trust or fiduciary powers or any judgment or order applicable
to or binding on the Pass Through Trustee and do not contravene or result in any
breach of, or constitute a default under, the Pass Through Trustee's articles of
association or by-laws or any agreement or instrument to which the Pass Through
Trustee is a party or by which it or any of its properties may be bound or
affected;
(d) neither the execution and delivery by the Pass Through Trustee of
the Pass Through Trust Agreement, the Pass Through Trust Supplement or this
Agreement nor the consummation by the Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or approval
of, the giving of notice to, or the registration with, or the taking of any
other action with respect to, any federal or Massachusetts governmental
authority or agency regulating the Pass Through Trustee's banking, trust or
fiduciary powers;
(e) there are no pending or, to its knowledge, threatened actions
or proceedings against the Pass Through Trustee before any court or
administrative agency which individually or in the aggregate, if determined
adversely to it, would materially adversely affect the ability of the Pass
Through Trustee to perform its obligations under this Agreement, the Pass
Through Trust Supplement or the Pass Through Trust Agreement;
(f) the Pass Through Trustee is not in default under the Pass Through
Trust Agreement, as supplemented by the Pass Through Trust Supplement;
(g) the Pass Through Trustee does not directly or indirectly control,
and is not directly or indirectly controlled by or under common control with,
[the Owner Participant,] the Owner Trustee, the Underwriters, the Lessee Parent
or the Lessee;
22
[Participation Agreement (GARC II 98-A)]
(h) the Pass Through Trustee is purchasing the Equipment Notes for the
purposes contemplated by the Operative Agreements and not with a view to the
transfer or distribution of any Equipment Note to any other Person, except as
contemplated by the Operative Agreements; and
(i) except for the issue and sale of the Pass Through Certificates
contemplated hereby, the Pass Through Trustee has not directly or indirectly
offered any Equipment Note or Pass Through Certificate or any interest in or to
the Trust Estate, the Trust Agreement or any similar interest for sale to, or
solicited any offer to acquire any of the same from, anyone other than the Owner
Trustee and the Owner Participant, and the Pass Through Trustee has not
authorized anyone to act on its behalf to offer directly or indirectly any
Equipment Note, any Pass Through Certificate or any interest in and to the Trust
Estate, the Trust Agreement or any similar interest related to this transaction
for sale to, or to solicit any offer to acquire any of the same from, any Person
other than the Owner Trustee and the Owner Participant.
Section 3.6. Representations and Warranties of the Owner
-------------------------------------------
Participant. The Owner Participant represents and warrants to each of the
-----------
Trustees, the Manager, the Lessee Parent and the Lessee that, as of the date
hereof:
(a) the Owner Participant is a [__________________] duly organized,
validly existing and in good standing under the laws of the State of [_________]
and has full corporate power and authority to carry on its business as now
conducted;
(b) the Owner Participant has the requisite corporate power and
authority to execute, deliver and perform its obligations under the Owner
Participant Agreements, and the execution, delivery and performance by it
thereof do not and will not contravene any law or regulation, or any order of
any court or governmental authority or agency applicable to or binding on the
Owner Participant or any of its properties, or contravene the provisions of, or
constitute a default under, or result in the creation of any Lien (other than
such as are created by the Operative Agreements) upon the Equipment under, its
[___________] or [___________] or any indenture, mortgage, contract or other
agreement or instrument to which the Owner Participant is a party or by which it
or any of its properties may be bound or affected;
(c) the Owner Participant Agreements have been duly authorized by all
necessary actions on the part of the Owner Participant, do not require any
approval not already obtained of the shareholders of the Owner Participant or
any approval or consent not already obtained of any trustee or holders of
indebtedness or obligations of the Owner Participant, have been, or on or before
the Closing Date will be, duly executed and delivered by the Owner Participant
and (assuming the due authorization, execution and delivery by each other party
thereto) constitute, or will constitute, the legal, valid and binding
obligations of the Owner
23
[Participation Agreement (GARC II 98-A)]
Participant, enforceable against the Owner Participant in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and by general principles of equity;
(d) no authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery or performance by the Owner Participant of the Trust
Agreement, the Tax Indemnity Agreement or this Agreement;
(e) the Trust Estate is free and clear of any Lessor's Lien
attributable to the Owner Participant;
(f) there are no pending or, to the Owner Participant's knowledge,
threatened actions or proceedings against the Owner Participant before any court
or administrative agency which would materially adversely affect the Owner
Participant's ability to perform its obligations under the Trust Agreement, the
Tax Indemnity Agreement or this Agreement;
(g) as of the Closing Date, the Owner Participant is purchasing the
Beneficial Interest to be acquired by it for its own account with no present
intention of distributing such Beneficial Interest or any part thereof in any
manner which would violate the Securities Act of 1933, as amended, but without
prejudice, however, to the right of the Owner Participant at all times to sell
or otherwise dispose of all or any part of such Beneficial Interest in
compliance with the Securities Act of 1933, as amended; provided, however, that
subject to the provisions of Section 6.1, the disposition of the Beneficial
Interest shall at all times be within the Owner Participant's control. The
Owner Participant acknowledges that its Beneficial Interest has not been
registered under the Securities Act of 1933, as amended, and that neither the
Owner Trustee nor the Lessee contemplates filing, or is legally required to
file, any such registration statement;
(h) with respect to the source of the amount to be invested by the
Owner Participant pursuant to Section 2.2, no part of such amount constitutes
assets of any employee benefit plan subject to Title I of ERISA or Section 4975
of the Code; and
(i) no broker's or finder's or placement fee or commission will be
payable with respect to the transactions contemplated by the Operative
Agreements as a result of any action by the Owner Participant, and the Owner
Participant agrees that it will hold Lessee Parent, the Lessee, the Indenture
Trustee, the Loan Participant and Lessor harmless from any claim, demand or
liability for broker's or finder's or placement fees or commission alleged to
have been incurred as a result of any action by the Owner Participant in
connection with this transaction.
24
[Participation Agreement (GARC II 98-A)]
Section 3.7. Representations and Warranties of the Lessee Parent.
---------------------------------------------------
The Lessee Parent represents and warrants to each of the Trustees and the
Participants, as of the date hereof:
(a) the Lessee Parent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New York, is duly
licensed or qualified and in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its ability to
carry on its business as now conducted or to execute, deliver and perform its
obligations under the Manager Agreements, has the power and authority to carry
on its business as now conducted, and has the requisite power and authority to
execute, deliver and perform its obligations under the Manager Agreements;
(b) the Manager Agreements have been duly authorized by all necessary
corporate action, executed and delivered by the Lessee Parent, and constitute
the legal, valid and binding obligations of the Lessee Parent, enforceable
against the Lessee Parent in accordance with their respective terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally and by
general principles of equity;
(c) the execution, delivery and performance by the Lessee Parent of
each Manager Agreement and compliance by the Lessee Parent with all of the
provisions thereof do not and will not contravene any law or regulation, or any
order of any court or governmental authority or agency applicable to or binding
on the Lessee Parent or any of its properties, or contravene the provisions of,
or constitute a default by the Lessee Parent under, its certificate of
incorporation or by-laws or any indenture, mortgage, contract or other agreement
or instrument to which the Lessee Parent is a party or by which the Lessee
Parent or any of its properties may be bound or affected;
(d) other than as disclosed in the Lessee Parent's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 or Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1998, there are no proceedings
pending or, to the knowledge of the Lessee Parent, threatened against the Lessee
Parent in any court or before any governmental authority or arbitration board or
tribunal which, if adversely determined, would materially adversely affect the
Lessee Parent's ability to perform its obligations under the Manager Agreements
or materially adversely affect its financial condition or business;
(e) the Lessee Parent is not in violation of any term of any charter
instrument, by-law or any other material agreement or instrument to which it is
a party or by which it may be bound. The Lessee Parent is in compliance with
all laws, ordinances, governmental rules and regulations to which it is subject,
the failure to comply with which would have a material and adverse effect on its
operations or condition, financial or otherwise, or would
25
[Participation Agreement (GARC II 98-A)]
impair the ability of the Lessee Parent to perform its obligations under the
Manager Agreements, and has obtained all licenses, permits, franchises and other
governmental authorizations material to the conduct of its business;
(f) no consent, approval or authorization of, or filing, registration
or qualification with, or the giving of notice to, any trustee or any holder of
indebtedness of the Lessee Parent or any governmental authority on the part of
the Lessee Parent is required in the United States in connection with the
execution and delivery by the Lessee Parent of the Manager Agreements or in
order for the Lessee Parent to perform its obligations thereunder in accordance
with the terms thereof, it being understood that the registration of the
issuance and sale of the Pass Through Certificates to be issued pursuant to the
provisions of the Pass Through Trust Agreement under the Securities Act of 1933,
as amended, and under the securities laws of any state in which the Pass Through
Certificates may be offered for sale if the laws of such state require such
action has been duly accomplished and the qualification of the Pass Through
Trust Agreement under the Trust Indenture Act of 1939, as amended, has been duly
obtained;
(g) to the best knowledge of the Lessee Parent, no Event of Loss has
occurred as of the date of this Agreement with respect to any Unit;
(h) (i) Lessee Parent shall have, and the GATC ▇▇▇▇ of Sale to be
delivered on the Closing Date shall convey to the Lessee, all legal and
98-Zbeneficial title to the Units which are being delivered on the Closing Date,
free and clear of all Liens (other than Permitted Liens of the type described in
clause (ii) hereof with respect to the Existing Car Service Contracts, and in
clauses (iv) and (vii) of the definition thereof), and such conveyance will not
be void or voidable under any applicable law; (ii) Lessee Parent shall have, and
the GATC Assignment to be delivered on the Closing Date shall assign to the
Lessee, all legal and beneficial title to the Existing Car Service Contracts,
free and clear of all Liens, and such assignment will not be void or voidable
under any applicable law; and (iii) all of the Units shall be subject to
sublease by Customers under the Existing Car Service Contracts on rental and
other terms which are no different, taken as a whole, than those for similar
railcars in the rest of the Manager's Fleet;
(i) all sales, use or transfer taxes due and payable upon the sale of
the Equipment and assignment of Existing Car Service Contracts by Lessee Parent
to the Lessee will have been paid or such transactions will then be exempt from
any such taxes and Lessee Parent will cause any required forms or reports in
connection with such taxes to be filed in accordance with applicable laws and
regulations;
(j) the Units are substantially similar in terms of objectively
identifiable characteristics that are relevant for purposes of the services to
be performed by the Manager under the Management Agreement to the equipment in
the Manager's Fleet;
26
[Participation Agreement (GARC II 98-A)]
(k) in selecting the Units to be sold to the Company pursuant to the
GATC ▇▇▇▇ of Sale, Lessee Parent has not discriminated against the Company in a
negative fashion when such Units are compared with the other equipment in the
Manager's Fleet;
(l) neither the Prospectus nor any written statement furnished by the
Lessee Parent or on behalf of the Lessee Parent in connection with the
negotiation of the Lease or any other Operative Agreement contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained therein or herein not misleading. The assumptions and
related financial information relating to the proposed business and operations
of the Lessee Parent and the Company Fleet which are contained under
"Structuring Assumptions" in the Prospectus (the "Structuring Assumptions") and
the Equity Information have been prepared in good faith based upon information
that the Lessee Parent deems fair and reasonable, and there are no statements or
conclusions in any of the Structuring Assumptions or the Equity Information
which are based upon or include information known to the Lessee Parent to be
misleading in any material respect or which fail to take into account material
information known to the Lessee Parent regarding the matters stated therein.
Certain information contained in Equity Information (e.g., statistical
information relating to renewal and remarketing of railcars, potential increases
in absolute or nominal railcar lease rates, anticipated utilization, and
maintenance costs) was based upon the historical experience of the Lessee
Parent. Subject to the foregoing, there can be no assurance that past
experience will be indicative of future performance with respect to these or
other operating and marketing factors set forth in the Equity Information.
There is no fact which the Lessee Parent has not disclosed in writing which
materially adversely affects or, so far as the Lessee Parent can now reasonably
foresee, will materially adversely affect the properties, business, profits or
condition (financial or otherwise) of the Lessee Parent;
(m) the representations and warranties of the Lessee contained in
Section 3.2 are true and correct as of the date hereof;
(n) Lessee Parent is not in default under any Existing Car Service
Contract and to the best of the Lessee Parent's knowledge, there are (i) no
defaults by any customer thereunder existing as of the date hereof under the
Existing Car Service Contracts, except such defaults as are not material and
(ii) no claims or liabilities arising as a result of the operation or use of any
Unit prior to the date hereof as to which Lessor, as owner of the Units, would
be liable;
(o) as of the Closing Date, the Lessee shall have provided, or caused
to be provided, in either case in accordance with the terms of the relevant
Existing Car Service Contract, a notice relating to each Existing Car Service
Contract (which notice shall be substantially in the form attached hereto as
Exhibit D) to the related customer under such Existing Car Service Contract;
27
[Participation Agreement (GARC II 98-A)]
(p) the consolidated balance sheet of the Lessee Parent and its
consolidated subsidiaries as of December 31, 1997, and the related statements of
operations, stockholders' equity and cash flows for the period then ended, have
been prepared in accordance with generally accepted accounting principles
(except as may be stated in the notes thereto), consistently applied, and fairly
set forth, in all material respects, the financial condition of the Lessee
Parent and its consolidated subsidiaries as of such dates and the results of
their operations and cash flows for the periods then ended. The consolidated
statements of earnings and cash flows of the Lessee Parent and its consolidated
subsidiaries for the fiscal quarter ended June 30, 1998, and the related
consolidated balance sheet as at the end of such period present fairly the
consolidated financial position and results of operations and cash flows of the
Lessee Parent and is consolidated subsidiaries in accordance with generally
accepted accounting principles, as at the end of, and for such period (subject
to normal year-end adjustments).
Section 3.8. Opinion Acknowledgment. Each of the parties hereto,
----------------------
with respect to such party, expressly consents to the rendering by its counsel
of the opinion referred to in Section 4.1(e) and acknowledges that such opinion
shall be deemed to be rendered at the request and upon the instructions of such
party.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions Precedent to Investment by Each
------------------------------------------
Participant. The obligation of each Participant to make the investment
specified with respect to such Participant in Section 2 on the Closing Date
shall be subject to the satisfaction or waiver of the following conditions
precedent (except that paragraph (k) and clause (i) of paragraph (p) shall not
be conditions precedent to the Owner Participant's obligations hereunder and
paragraph (n) and (s) and clause (ii) of paragraph (p) shall not be conditions
precedent to the Loan Participant's obligations hereunder):
(a) Execution of Operative Agreements. On or before the Closing Date,
---------------------------------
this Agreement, the Trust Agreement, the Lease, the Lease Supplements in respect
of the Units delivered on the Closing Date, the Indenture, the Indenture
Supplements in respect of the Units delivered on the Closing Date, the Equipment
Notes, the Pass Through Trust Agreement, the Pass Through Trust Supplements, the
Management Agreement, the Insurance Agreement, the Transfer and Assignment
Agreement, the ▇▇▇▇ of Sale, the GATC ▇▇▇▇ of Sale, the Intercreditor Agreement,
the Underwriting Agreement and the Lockbox Agreement shall each be satisfactory
in form and substance to such Participant, shall have been duly executed and
delivered by the parties thereto (except that the execution and delivery of the
documents referred to above (other than this Agreement) by a party hereto or
thereto shall not be a condition precedent to such party's obligations
hereunder), shall each be in full force and effect, and executed counterparts of
each shall have been delivered to such Participant or its counsel on or before
the Closing Date;
28
[Participation Agreement (GARC II 98-A)]
and no event shall have occurred and be continuing that constitutes a Lease
Default or an Indenture Default.
(b) Recordation and Filing. On or before the Closing Date (except as
----------------------
expressly stated below), the Lessee shall have caused the Lease, the Lease
Supplements in respect of Units delivered on the Closing Date, the Indenture and
the Indenture Supplements in respect of the Units delivered on the Closing Date
and the Intercreditor Agreement (or a memorandum in respect of any or all of the
foregoing), to be duly filed, recorded and deposited with the STB in conformity
with 49 U.S.C. (S)11301 and with the Registrar General of Canada pursuant to
Section 105 of the Canada Transportation Act, and all necessary actions shall
have been taken to cause publication of notice of such deposit in The Canada
Gazette in accordance with said Section 90 within 21 days after the Closing Date
and appropriate Uniform Commercial Code financing statements to be filed where
necessary or reasonably advisable, and the Lessee shall furnish the Indenture
Trustee, the Owner Trustee, the Collateral Agent and each Participant proof
thereof.
(c) Representations and Warranties of the Lessee. On the Closing
--------------------------------------------
Date, the representations and warranties of the Lessee contained in Section 3.2
and Section 3.4(b) hereof shall be true and correct in all material respects as
of the Closing Date as though then made on and as of such date, except to the
extent that such representations and warranties relate solely to an earlier date
(in which case such representations and warranties were true and correct on and
as of such earlier date), and each of the Owner Trustee, the Indenture Trustee
and the Participants shall have received an Officer's Certificate to such effect
dated such date from the Lessee certifying to the foregoing matters, and the
Lessee shall have performed and complied with all agreements and conditions
herein contained which are required to be performed or complied with by the
Lessee on or before said date.
(d) Representations and Warranties of the Owner Trustee. On the
---------------------------------------------------
Closing Date, the representations and warranties of WTC and the Owner Trustee
contained in Section 3.1 and Section 3.4(a) shall be true and correct in all
material respects as of the Closing Date as though then made on and as of such
date except to the extent that such representations and warranties relate solely
to an earlier date (in which case such representations and warranties were true
and correct on and as of such earlier date), and each of the Lessee, the
Indenture Trustee, the Pass Through Trustee, Lessee Parent, the Manager and the
Participants shall have received an Officer's Certificate to such effect dated
such date from WTC (in respect of WTC) the Owner Trustee (in respect of the
Owner Trustee) and WTC and the Owner Trustee shall have performed and complied
with all agreements and conditions herein contained which are required to be
performed or complied with by WTC and the Owner Trustee, respectively on or
before said date.
29
[Participation Agreement (GARC II 98-A)]
(e) Opinions of Counsel. On the Closing Date, the Owner Trustee, the
-------------------
Indenture Trustee and each Participant shall have received the favorable written
opinion of each of (i) Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, special counsel for
Lessee Parent, the Lessee and the Manager and counsel for Lessee Parent, the
Lessee and the Manager (which counsel shall be the General Counsel or Assistant
General Counsel of the Lessee Parent), (ii) Morris, James, Hitchens & ▇▇▇▇▇▇▇▇,
counsel to the Owner Trustee, (iii) Winston & ▇▇▇▇▇▇, special counsel to the
Owner Participant and ___________, counsel to the Owner Participant, (iv)
▇▇▇▇▇▇▇ ▇▇▇▇ LLP counsel to the Pass Through Trustee, (v) ▇▇▇▇▇▇▇ ▇▇▇▇ LLP,
counsel to the Indenture Trustee, (vi) ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special STB counsel, and
(vii) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, special Canadian counsel, in each case in form and
substance satisfactory to each Participant; provided that, except as otherwise
provided herein, receipt by a party hereto of a favorable written opinion from
counsel to such party with respect to a matter which is also covered by a
representation of such party shall not be a condition precedent to such party's
obligations hereunder.
(f) Title. On the Closing Date, after giving effect to the
-----
transactions contemplated hereby, (i) the Owner Trustee shall have all legal and
beneficial title to each Unit to be delivered on the Closing Date, free and
clear of all Liens (other than Permitted Liens of the type described in clause
(ii) with respect to the Existing Car Service Contracts, and in clauses (iv) and
(vii) of the definition thereof), (ii) the Lessee shall have received all right,
title and interest of Lessee Parent in and to the Existing Car Service
Contracts, free and clear of all Liens and (iii) each Customer under an Existing
Car Service Contract shall have been notified of the assignment thereof to the
Lessee.
(g) Bills of Sale; GATC Assignment. On the Closing Date, (i) the GATC
------------------------------
▇▇▇▇ of Sale and the ▇▇▇▇ of Sale, in each case in form and substance reasonably
satisfactory to the Lessee and the Owner Trustee, dated such date and covering
the Units to be delivered on such date, transferring to the Lessee and the Owner
Trustee, respectively, legal and beneficial title to such Units free and clear
of all Liens (other than Permitted Liens of the type described in clause (ii)
with respect to the Existing Car Service Contracts, and in clauses (iv) and
(vii) of the definition thereof) and warranting to the Owner Trustee that at the
time of delivery of each such Unit, Lessee Parent and the Lessee, as the case
may be, had legal and beneficial title thereto and good and lawful right to sell
the same, and title thereto was free and clear of all Liens (other than
Permitted Liens of the type described in clause (ii) with respect to the
Existing Car Service Contracts, and in clauses (iv) and (vii) of the definition
thereof), and (ii) the GATC Assignment in form and substance reasonably
satisfactory to the Lessee and the Owner Trustee, dated such date covering the
Existing Car Service Contracts, assigning to the Lessee all right, title and
interest of Lessee Parent to the Existing Car Service Contracts, free and clear
of all Liens (other than Permitted Liens) and warranting to the Lessee that at
the time of such assignment, Lessee Parent had legal and beneficial title to the
Existing Car Service Contracts and good and lawful right to sell the same, and
title thereto was free and clear of all Liens (other than Permitted Liens),
shall each have been duly executed and delivered.
30
[Participation Agreement (GARC II 98-A)]
(h) Insurance Certificate and Opinion. On or before the Closing Date,
---------------------------------
the Indenture Trustee and each Participant shall have received (x) each
certificate relating to insurance that is required pursuant to Section 12 of the
Lease and (y) certificates from a nationally recognized insurance broker
substantially in the forms attached hereto as Exhibits A-1 and A-2 with respect
to the public liability insurance required by Section 12.1(b) of the Lease.
(i) Corporate Documents. Each of the Participants shall have received
-------------------
such documents and evidence with respect to Lessee Parent, the Lessee, the
Manager, the Owner Participant, the Owner Trustee, the Pass Through Trustee and
the Indenture Trustee as the Participants may reasonably request in order to
establish the consummation of the transactions contemplated by this Agreement,
the taking of all corporate and other proceedings in connection therewith and
compliance with the conditions herein or therein set forth.
(j) No Threatened Proceedings. No action or proceeding shall have
-------------------------
been instituted nor shall governmental action be threatened before any court or
governmental agency, nor shall any order, judgment or decree have been issued or
proposed to be issued by any court or governmental agency at the time of the
Closing Date, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or the transactions contemplated hereby.
(k) Representations and Warranties of the Owner Participant. On the
-------------------------------------------------------
Closing Date, the representations and warranties of the Owner Participant
contained in Section 3.6 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, Lessee Parent,
the Manager, the Indenture Trustee and the Pass Through Trustee shall have
received an Officer's Certificate to such effect dated such date from the Owner
Participant, and the Owner Participant shall have performed and complied with
all agreements and conditions herein contained which are required to be
performed or complied with by the Owner Participant on or before said date.
(l) Notice of Delivery. The Indenture Trustee and the Participants
------------------
shall have received the Notice of Delivery described in Section 2.3(a).
(m) Representations and Warranties of the Indenture Trustee. On the
-------------------------------------------------------
Closing Date, the representations and warranties of the Indenture Trustee
contained in Section 3.3 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, Lessee Parent,
the
31
[Participation Agreement (GARC II 98-A)]
Manager, the Owner Trustee and the Participants shall have received an
Officer's Certificate to such effect dated such date from the Indenture Trustee,
and the Indenture Trustee shall have performed and complied with all agreements
and conditions herein contained which are required to be performed or complied
with by the Indenture Trustee on or before said date.
(n) Representations and Warranties of the Pass Through Trustee. On
----------------------------------------------------------
the Closing Date, the representations and warranties of the Pass Through Trustee
contained in Section 3.5 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, Lessee Parent,
the Manager, the Indenture Trustee, the Owner Trustee and the Owner Participant
shall have received an Officer's Certificate to such effect dated such date from
the Pass Through Trustee, and the Pass Through Trustee shall have performed and
complied with all agreements and conditions herein contained which are required
to be performed or complied with by the Pass Through Trustee on or before said
date.
(o) No Illegality. No change shall have occurred after the date of
-------------
the execution and delivery of this Agreement in applicable law or regulations
thereunder or interpretations thereof by regulatory authorities that, in the
opinion of such Participant or its counsel, would make it illegal for such
Participant to enter into any transaction contemplated by the Operative
Agreements.
(p) Participants' Investments. (i) The Owner Participant shall have
-------------------------
made available the Owner Participant's Commitment in the amount specified in,
and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan
Participant shall have made available the Loan Participant's Commitment in the
amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3
and the Underwriting Agreement.
(q) Consents. All approvals and consents of any trustees or holders
--------
of any indebtedness or obligations of the Lessee which are required in
connection with the transactions contemplated by this Agreement shall have been
duly obtained and be in full force and effect.
(r) Governmental Actions. All actions, if any, required to have been
--------------------
taken on or prior to the Closing Date in connection with the transactions
contemplated by this Agreement on the Closing Date shall have been taken by any
governmental or political agency, subdivision or instrumentality of the United
States, and all orders, permits, waivers, exemptions, authorizations and
approvals of such entities required to be in effect on the Closing Date in
connection with the transactions contemplated by this Agreement on the Closing
Date shall have
32
[Participation Agreement (GARC II 98-A)]
been issued, and all such orders, permits, waivers, exemptions, authorizations
and approvals shall be in full force and effect, on the Closing Date.
(s) Tax Indemnity Agreement. On or before the Closing Date, the Tax
-----------------------
Indemnity Agreement shall be satisfactory in form and substance to the Owner
Participant, shall have been duly executed and delivered by Lessee Parent and,
assuming due authorization, execution and delivery by the Owner Participant,
shall be in full force and effect.
(t) Appointment of Representative. The Owner Trustee shall have
-----------------------------
authorized its representative, who shall be an individual designated by the
Lessee and acceptable to the Owner Trustee, to accept the Units being delivered
on the Closing Date from the Lessee and to deliver such Units to the Lessee.
The Lessee shall have authorized its representative (who shall be the same
individual designated by the Lessee under this paragraph) to accept delivery of
the Units from the Owner Trustee as Lessor pursuant to the Lease.
(u) Solvency of the Lessee. The Lessee shall have furnished to the
----------------------
Participants an Officer's Certificate as to the solvency of the Lessee as of the
Closing Date stating, among other things, that on the Closing Date the Liquidity
Reserve Account (as defined in the Intercreditor Agreement) has a balance of
$500,000 and the Collection Account has a balance of $1,500,000.
(v) Schedule of Subleases and Units. The Participants and the
-------------------------------
Collateral Agent shall have received a schedule, certified by the Lessee and the
Manager, listing the Existing Car Service Contracts under the Lease and the
Other Leases, the Customer under each thereof and the Units covered hereby and
the units covered by the Other Leases (which shall constitute in the aggregate
all of the Units under the Lease and the Other Leases).
(w) Projected Coverage Ratio. The Manager shall have furnished to the
------------------------
Participants and the Collateral Agent that portion of the report provided for in
Section 7.1 of the Management Agreement setting forth the Projected Coverage
Ratio for the six-month period immediately succeeding the Closing Date.
(x) Procedures Letter. The Participants shall have received an agreed
-----------------
upon procedures letter from Ernst & Young in form and substance reasonably
satisfactory to each of them.
(y) Representations and Warranties of the Lessee Parent. On the
---------------------------------------------------
Closing Date, the representations and warranties of the Lessee Parent contained
in Section 3.7 hereof shall be true and correct in all material respects as of
the Closing Date as though then made on and as of such date, except to the
extent that such representations and warranties relate solely to an earlier date
(in which case such representations and warranties were true and correct
33
[Participation Agreeemnt (GARC II 98-A)]
on and as of such earlier date), and each of the Owner Trustee, the Indenture
Trustee and the Participants shall have received an Officer's Certificate to
such effect dated such date from the Lessee Parent, and the Lessee Parent shall
have performed and complied with all agreements and conditions herein contained
which are required to be performed or complied with by the Lessee Parent on or
before said date.
(z) Insurance Manager Letter. The Participants shall have received a
------------------------
letter from the Insurance Manager, in form reasonably satisfactory to them,
certifying that, in respect of the public liability insurance policies to be
renewed or put into effect as of October 1, 1998, the Insurance Manager has
obtained (i) the advance agreement of its insurers that such policies will
contain the provisions referred to in Section 12.3(b) of the Lease (except in
the case of Section 12.3(b)(iii), the Insurance Manager shall use reasonable
efforts to furnish), and (ii) the agreement of its independent insurance broker,
(A) with respect to the certificate of such broker to be supplied with reference
to such policies, to render the opinion set forth in clause (iii) of Section
12.4(a) of the Lease, and (B) to provide the notices required in Sections
12.4(b) of the Lease.
Section 4.2. Additional Conditions Precedent to Investment by the
----------------------------------------------------
Pass Through Trustee and Indenture Trustee. The obligation of the Pass Through
------------------------------------------
Trustee to fund the Loan Participant's Commitment and purchase and pay for the
Equipment Notes to be purchased by it pursuant to Sections 2.2(b) and 2.3 on the
Closing Date shall be subject to the additional conditions that the Equipment
Notes to be delivered on the Closing Date shall have been duly authorized,
executed and delivered to the Pass Through Trustee by a duly authorized officer
of the Owner Trustee and duly authenticated by the Indenture Trustee and that on
the Closing Date the Pass Through Trustee shall have received the proceeds from
the sale of the Pass Through Certificates.
Section 4.3. Additional Conditions Precedent to Investment by the
----------------------------------------------------
Owner Participant. The obligation of the Owner Participant to provide the funds
-----------------
specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date with
respect to any Unit to be delivered on the Closing Date shall be subject to the
satisfaction or waiver of the following additional conditions precedent:
(a) Appraisal. On or before the Closing Date, the Owner Participant
---------
shall have received an opinion (the "Appraisal") of Rail Solutions, Inc.,
satisfactory in form and substance to the Owner Participant (with a separate
summary or other evidence of such Appraisal as it relates to fair market value
and useful life being provided to the Rating Agencies), concluding that: (i)
the fair market value of each Unit being delivered on the Closing Date is equal
to the portion of the Total Equipment Cost with respect to such Unit; (ii) at
the expiration of the Basic Term, (A) without taking into account inflation or
deflation from and after the Closing Date or the existence of any purchase
option, it is reasonable to expect that each Unit
34
[Participation Agreement (GARC II 98-A)]
will have a fair market value of at least 20% of the Total Equipment Cost with
respect to such Unit and (B) the remaining economic life of each Unit will be at
least equal to 20% of the economic life of such Unit as estimated in the
Appraisal; (iii) as of the Early Purchase Date, the estimated fair market value
of each Unit being delivered on the Closing Date, taking into account inflation
or deflation from and after the Closing Date, will not exceed the portion of the
Early Purchase Price attributable to such Unit; (iv) as of the expiry of the
Basic Term, the estimated fair market value of each Unit being delivered on the
Closing Date, taking into account inflation or deflation from and after the
Closing Date, will not exceed the portion of the Basic Term Purchase Price; (v)
no Unit being delivered on the Closing Date is Limited Use Property; (vi) the
Fixed Rate Renewal is greater than or equal to the fair market rental value of
each Unit and the Lessee is not compelled to exercise any Fixed Rate Renewal
option; and (vii) such other matters as the Owner Participant may reasonably
request; provided that the Lessee makes no representation as to the fair market
value, useful life, fair market rental value or estimated residual value of the
Equipment, and the Lessee shall not be responsible for, or incur any liabilities
as a result of, the contents of such Appraisal or report to which it relates or,
except to the extent provided in the Tax Indemnity Agreement.
(b) Opinion with Respect to Certain Tax Aspects. On the Closing Date,
-------------------------------------------
the Owner Participant shall have received the opinion of Winston & ▇▇▇▇▇▇,
addressed to the Owner Participant, in form and substance satisfactory to the
Owner Participant, containing such counsel's favorable opinion with respect to
such tax matters as the Owner Participant may reasonably request.
(c) Absence of Change in Tax Laws. No change shall have occurred
-----------------------------
after the date of the execution and delivery of this Agreement in relevant
United States tax laws or regulations, which change would cause a material
adverse change in the projected coverage ratios used as part of the Basic Rent
structuring assumptions.
Section 4.4. Conditions Precedent to the Obligation of the Lessee.
----------------------------------------------------
The obligation of the Lessee with respect to the sale of the Units to the Owner
Trustee and acceptance of the Units under the Lease as of the Closing Date is
subject to the satisfaction or waiver of the following conditions precedent:
(a) Corporate Documents. On or before the Closing Date, the Lessee
-------------------
shall have received such documents and evidence with respect to the Owner
Participant, the Owner Trustee, the Indenture Trustee and the Pass Through
Trustee as the Lessee may reasonably request in order to establish the
authorization of the consummation of, or otherwise relating to the ability to
consummate, the transactions contemplated by this Agreement and the other
Operative Agreements, the taking of all corporate and other proceedings in
connection therewith and compliance with the conditions herein or therein set
forth.
35
[Participation Agreement (GARC II 98-A)]
(b) Operative Agreements. On or before the Closing Date, the
--------------------
Operative Agreements shall have been duly authorized, executed and delivered by
the respective party or parties thereto (other than the Lessee, the Manager and
Lessee Parent), and an executed counterpart of each thereof shall have been
delivered to the Lessee or its special counsel.
(c) Representations and Warranties. On the Closing Date, the
------------------------------
representations and warranties of each of the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Owner Participant contained in Section
3 hereof shall be true and correct in all material respects as of the Closing
Date as though made on and as of such date, and the Lessee shall have received
an Officer's Certificate to such effect dated such date from each of the Owner
Trustee as described in Section 4.1(d), the Owner Participant as described in
Section 4.1(k), the Indenture Trustee as described in Section 4.1(m) and the
Pass Through Trustee as described in Section 4.1(n), addressed to the Lessee.
(d) Opinions of Counsel. On the Closing Date, the Lessee shall have
-------------------
received the opinions of counsel referred to in Section 4.1(e) (other than that
set forth in clause (i) therein), addressed to the Lessee.
(e) No Threatened Proceedings. No action or proceeding shall have
-------------------------
been instituted nor shall governmental action be threatened before any court or
governmental agency, nor shall any order, judgment or decree have been issued or
proposed to be issued by any court or governmental agency at the time of the
Closing Date, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or the transactions contemplated hereby.
(f) Participants' Investments. (i) The Owner Participant shall have
-------------------------
made available the Owner Participant's Commitment in the amount specified in,
and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan
Participant shall have made available the Loan Participant's Commitment in the
amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3.
(g) Absence of Change in Tax Laws. No change shall have occurred
-----------------------------
after the date of the execution and delivery of this Agreement in relevant
United States tax laws or regulations, which change would cause an increase in
the net present value (expressed as a percentage of Total Equipment Cost) of the
Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) to
exceed ten (10) basis points.
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE.
The Lessee agrees during the Lease Term and (if longer, in the event that
the Lessee has assumed all of the rights and obligations of the Lessor under the
Indenture in respect of the
36
[Participation Agreement (GARC II 98-A)]
Equipment Notes) so long as any Equipment Note remains outstanding, that it will
furnish directly to each Participant the following:
(a) as soon as available and in any event within 60 days after the end
of each of the first three quarters, of each fiscal year, a balance sheet of the
Lessee as at the end of such quarter, together with the related consolidated
statements of income and cash flows of the Lessee for the period beginning on
the first day of such fiscal year and ending on the last day of such quarter,
setting forth in each case (except for the balance sheet) in comparative form
the figures for the corresponding periods of the previous fiscal year, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles;
(b) as soon as available and in any event within 120 days after the
last day of each fiscal year, a copy of the Lessee's audited annual report
covering the operations of the Lessee including a balance sheet, and related
statements of income and retained earnings and statement of cash flows of the
Lessee for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, which statements will have been certified by a firm of independent public
accountants of recognized national standing selected by the Lessee;
(c) as soon as available, one copy of any document filed by the Lessee
with the Securities and Exchange Commission or any successor agency pursuant to
Section 13(a), 13(c), 14 or 15(d) (or any successor sections) of the Securities
Exchange Act of 1934, as amended (excluding such documents or portions thereof
which are treated as confidential and not available to the public, in accordance
with applicable law, by the Securities and Exchange Commission);
(d) within the time periods prescribed in paragraphs (a) and (b)
above, a certificate, signed by the Treasurer or principal financial officer of
the Lessee, to the effect that the signer has reviewed the Operative Agreements
and activities and records of the Lessee during the immediately preceding fiscal
quarter or year, as the case may be, and that, after due inquiry, such officer
is not aware of any default in compliance by the Lessee with any of the
covenants, terms and provisions of this Agreement or the Lease (except as
specified), and if a Lease Default shall exist, specifying such Lease Default,
the nature and status thereof and what action Lessee is taking or plans to take
with respect thereto;
(e) within the time periods presented in Section 7 of the Management
Agreement, each of the reports referred to therein signed by the appropriate
Person designated therein; and
37
[Participation Agreeement (GARC II 98-A)]
(f) promptly after request therefor, such additional information with
respect to the financial condition or business of the Lessee as any Participant
may from time to time reasonably request.
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES
AND THE LESSEE.
Section 6.1. Restrictions on Transfer of Beneficial Interest. The
-----------------------------------------------
Owner Participant agrees that it shall not sell, convey, assign, pledge,
mortgage or otherwise transfer all or any part of the Beneficial Interest
(collectively, for purposes of this Section 6.1, a "transfer") prior to the
expiration or earlier termination of the Lease Term without the Lessee's prior
written consent (which consent shall not be unreasonably withheld); provided,
however, that no such consent shall be required if the following conditions are
satisfied:
(a) the Person to whom such transfer is to be made (a "Transferee") is
(i) an institutional or corporate investor with tangible net worth or, in the
case of a bank or lending institution, combined capital and surplus at the time
of such transfer, of at least $75,000,000, determined in accordance with
generally accepted accounting principles or (ii) any Affiliate of any such
institutional or corporate investor if such investor guarantees the obligations
so assumed by such Affiliate pursuant to a guaranty in form and substance
satisfactory to the Lessee or (iii) an Affiliate of the Owner Participant;
provided that in the event of a transfer pursuant to clause (iii) which does not
qualify under clauses (i) or (ii), the Owner Participant shall remain liable for
all of its obligations under this Agreement and the other Operative Agreements;
(b) so long as no Lease Event of Default has occurred and is
continuing, neither the Transferee nor any of its Affiliates shall compete
(directly or indirectly) (other than as a passive investor or loan participant
in the financing of equipment or facilities used in full service railcar
leasing) with Lessee Parent in any respect material to the business of Lessee's
Parent of leasing rail cars under full service operating leases; provided, that
no Transferee or Affiliate thereof shall be deemed to (i) be engaged in full
service railcar leasing or (ii) hold (directly or indirectly) any material
interest in any business that is competitive with Lessee's or Lessee Parent's
full service railcar leasing business, solely by reason of any sale, lease or
other disposition (or any actions in furtherance of any of the foregoing) of any
of such Person's interest in any equipment or facilities directly or indirectly
owned, leased or otherwise controlled pursuant to any such Person's passive
investment or loan participation in the financing of any such equipment or
facilities used in full service railcar leasing or any re-leasing or sale of any
rail equipment which is returned to or repossessed by or on behalf of such
Person from a lessee or borrower in connection with a lease financing or lender
transaction entered into by such Person as a passive lessor, investor or lender;
38
[Participation Agreement (GARC II 98-A)]
(c) each of the Indenture Trustee, the Owner Trustee and the Lessee
shall have received 10 days (or, if a Lease Event of Default shall have occurred
and is continuing and the proposed Transferee or any of its Affiliates would
not, but for the occurrence of such Lease Event of Default, have satisfied the
requirements set forth in subparagraph (b) above or (l) below, fifteen (15)
Business Days) prior written notice of such transfer specifying the name and
address of any proposed Transferee and such additional information as shall be
necessary to determine whether the proposed transfer satisfies the requirements
of this Section 6.1;
(d) such Transferee enters into an agreement (i) in the form attached
hereto as Exhibit C or (ii) otherwise in form and substance satisfactory to each
of the Lessee and the Owner Trustee and not reasonably objected to by the
Indenture Trustee whereby such Transferee confirms that it shall be deemed a
party to this Agreement and each other Operative Agreement to which the
transferring Owner Participant is a party, and agrees to be bound by all the
terms of, and to undertake all of the obligations and liabilities of the
transferring Owner Participant contained in, this Agreement and such other
Operative Agreements and in which the Transferee shall make representations and
warranties comparable to those of the Owner Participant contained herein and
therein;
(e) an opinion of counsel of the Transferee (which counsel shall be
reasonably acceptable to the Lessee, the Owner Trustee and the Indenture Trustee
and which may be internal counsel of the Transferee), confirming (i) the
existence, corporate power and authority of, and due authorization, execution
and delivery of all relevant documentation by, the Transferee (with appropriate
reliance on certificates of corporate officers or public officials as to matters
of fact), (ii) that each agreement referred to in subparagraph (d) above is the
legal, valid, and binding obligation of the Transferee, enforceable against the
Transferee in accordance with its terms (subject to customary qualifications as
to bankruptcy and equitable principles) and (iii) compliance of the transfer
with applicable requirements of federal securities laws and securities laws of
the Transferee's domicile, shall be provided, prior to such transfer, to each of
the Lessee, the Owner Trustee and the Indenture Trustee, which opinion shall be
in form and substance reasonably satisfactory to the Lessee, the Owner Trustee
and the Indenture Trustee;
(f) such transfer complies in all respects with and does not violate
any applicable provisions of the federal securities laws and the securities law
of any applicable state;
(g) except as specifically consented to in writing by each of the
Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee,
the terms of the Operative Agreements shall not be altered;
(h) after giving effect to such transfer, the Beneficial Interest
shall be held by not more than [two] Owner Participants and the total number of
owner participants (including the Owner Participants) holding beneficial
interests in the Company Fleet shall not
39
[Participation Agreement (GARC II 98-A)]
exceed [five] owner participants (including the Owner Participants); provided
that for the purpose of calculating the number of Owner Participants under this
paragraph (h), any Owner Participants that are Affiliates of each other shall be
considered to be one Owner Participant;
(i) all reasonable expenses of the parties hereto (including, without
limitation, reasonable legal fees and expenses of special counsel) incurred in
connection with each transfer of such Beneficial Interest shall be paid by the
transferring Owner Participant;
(j) such transfer either (i) does not involve the use of any funds
which constitute assets of an employee benefit plan subject to Title I of ERISA
or Section 4975 of the Code or (ii) if clause (i) is not applicable, will not
constitute a prohibited transaction under ERISA or the Code;
(k) as a result of and following such transfer, no Indenture Default
attributable to the Owner Participant or the Owner Trustee shall have occurred
and be continuing;
(l) unless a Lease Event of Default shall have occurred and is
continuing, the transfer does not involve the sale of the stock of any Owner
Participant, the sole asset of which is all or a portion of the Beneficial
Interest, to, or the merger of any such Owner Participant with or into, any
Person who is a competitor of the Lessee Parent as described in paragraph (b) of
this Section 6.1;
(m) the Transferee (i) is a "United States Person" within the meaning
of Section 7701(a)(30) of the Code or (ii) is engaged in a United States trade
or business for purposes of Subtitle A, Chapter 1, Subchapter N of the Code and
is acquiring such Beneficial Interest in connection with such trade or business;
and
(n) the Owner Participant shall deliver to the Lessee an Officer's
Certificate certifying as to compliance with the transfer requirements contained
herein.
Upon any such transfer (i) except as the context otherwise requires, such
Transferee shall be deemed the "Owner Participant" for all purposes, and shall
enjoy the rights and privileges and perform the obligations of the Owner
Participant to the extent of the interest transferred hereunder and under each
other Operative Agreement to which the Owner Participant is a party, and, except
as the context otherwise requires, each reference in this Agreement and each
other Operative Agreement to the "Owner Participant" shall thereafter be deemed
to include such Transferee for all purposes to the extent of the interest
transferred, and (ii) the transferor, except to the extent provided in Section
6.1(i) hereof and except in the case of a transfer to a Transferee described in
the proviso to Section 6.1(a)(iii) hereof, shall be released from all
obligations hereunder and under each other Operative Agreement to which such
transferor is a
40
[Participation Agreement (GARC II 98-A)]
party or by which such transferor is bound solely to the extent such obligations
are expressly assumed by a Transferee; and provided, further, that in no event
-------- -------
shall any such transfer or assignment waive or release the transferor from any
liability on account of any breach existing prior to such transfer of any of its
representations, warranties, covenants or obligations set forth herein or in any
of the other Operative Agreements or for any fraudulent or willful misconduct.
Subject to subsection 6.1(l), the provisions of this Section 6.1 shall not be
construed to restrict the Owner Participant from consolidating with or merging
into any other corporation or restricting another corporation from merging into
or consolidating with the Owner Participant. Notwithstanding any transfer, the
transferor Owner Participant shall be entitled to all benefits accrued and all
rights vested prior to such transfer, including, without limitation, rights to
indemnification under any of the Operative Agreements. No transfer hereunder
shall, by virtue of the Transferee engaging in a business or activity not
generally conducted by other institutional or corporate investors in lease
transactions, increase the Lessee's indemnification obligations under Section
7.1 or 7.2. The Owner Participant hereby acknowledges and agrees (and each
Transferee by virtue of any transfer shall be deemed to have acknowledged and
agreed) to the terms of the Intercreditor Agreement.
Section 6.2. Lessor's Liens Attributable to the Owner Participant.
----------------------------------------------------
The Owner Participant hereby unconditionally agrees with and for the benefit of
each of the other parties to this Agreement that the Owner Participant shall not
directly or indirectly create, incur, assume or suffer to exist any Lessor's
Lien attributable to the Owner Participant on or against all or any portion of
the Indenture Estate or the Equipment, and the Owner Participant agrees that it
shall, at its own cost and expense, take such action as may be necessary to duly
discharge and satisfy in full any such Lessor's Lien; provided that the Owner
Participant may contest any such Lessor's Lien in good faith by appropriate
proceedings so long as such proceedings do not involve any material danger of
the sale, forfeiture or loss of the Equipment or any interest therein or
interference with the use, operation, or possession of the Equipment or any
portion thereof by the Lessee under the Lease or the rights of the Indenture
Trustee under the Indenture.
Section 6.3. Lessor's Liens Attributable to WTC. WTC hereby
----------------------------------
unconditionally agrees with and for the benefit of each of the other parties to
this Agreement that it shall not directly or indirectly create, incur, assume or
suffer to exist any Lessor's Lien attributable to it on or against all or any
portion of the Trust Estate or the Equipment, WTC agrees that it shall, at its
own cost and expense, take such action as may be necessary to duly discharge and
satisfy in full any such Lessor's Lien; provided that WTC may contest any such
Lessor's Lien in good faith by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
of the Equipment or any interest therein or interference with the use,
operation, or possession of the Equipment or any portion thereof by the Lessee
under the Lease or the right of the Indenture Trustee under the Indenture.
Section 6.4. Liens Created by the Indenture Trustee and the Loan
---------------------------------------------------
Participant.
-----------
41
[Participation Agreement (GARC II 98-A)]
(a) The Indenture Trustee, in its individual capacity, covenants and
agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the
Loan Participant that it shall not cause or permit to exist any Lien on or
against all or any portion of the Equipment, the Trust Estate or the Indenture
Estate arising as a result of (i) claims against the Indenture Trustee in its
individual capacity not related to its interest in the Equipment and the Trust
Estate, or to the administration of the Indenture Estate pursuant to the
Indenture, (ii) acts of the Indenture Trustee in its individual capacity not
contemplated by, or failure of the Indenture Trustee to take any action it is
expressly required to perform by, any of the Operative Agreements, (iii) claims
against the Indenture Trustee attributable to the actions of the Indenture
Trustee in its individual capacity relating to Taxes or expenses that are not
indemnified against by the Lessee pursuant to Section 7 attributable to the
actions of the Indenture Trustee, or (iv) claims against the Indenture Trustee
arising out of the transfer by the Indenture Trustee of all or any portion of
its interest in the Equipment, the Indenture Estate or the Operative Agreements,
other than a transfer permitted by the Operative Agreements and with respect to
which the Indenture Trustee will, at its own cost and expense (and without any
right of reimbursement from any other party hereto), promptly take such action
as may be necessary duly to discharge any such Lien.
(b) The Loan Participant covenants and agrees with each of the Lessee,
the Owner Trustee, the Owner Participant and the Indenture Trustee that it shall
not cause or permit to exist any Lien on or against all or any portion of the
Equipment, the Trust Estate or the Indenture Estate arising as a result of (i)
claims against such Loan Participant not related to its interest in the
Equipment and the Trust Estate, (ii) acts of such Loan Participant not
contemplated by, or failure of such Loan Participant to take any action it is
expressly required to perform by, any of the Operative Agreements, (iii) claims
against such Loan Participant relating to Taxes or expenses that are not
indemnified against by the Lessee pursuant to Section 7, or (iv) claims against
such Loan Participant arising out of the transfer by such Loan Participant of
all or any portion of its interest in the Equipment, the Indenture Estate or the
Operative Agreements, other than a transfer permitted by the Operative
Agreements and with respect to which such Loan Participant will, at its own cost
and expense (and without any right of reimbursement from the Lessee), promptly
take such action as may be necessary duly to discharge any such Lien.
Section 6.5. Covenants of Owner Trustee, Owner Participant and
-------------------------------------------------
Indenture Trustee. Each of the Owner Participant and WTC, in its individual and
-----------------
trust capacities, hereby agrees, as to its own actions only and severally and
not jointly, with (a) the Loan Participant and the Indenture Trustee (so long as
the Equipment Notes remain outstanding), not to amend, supplement, or otherwise
modify any provision of the Trust Agreement in such a manner as to adversely
affect the rights of the Loan Participant or the Indenture Trustee without the
prior written consent of such party and (b) with the Lessee, not to terminate or
revoke the Trust Agreement or the trust created by the Trust Agreement prior to
the payment in full and discharge
42
[Participation Agreement (GARC II 98-A)]
of the Equipment Notes and all other indebtedness secured by the Indenture and
the final discharge thereof. Each of WTC and the Indenture Trustee agrees, for
the benefit of the Lessee and the Owner Participant, to comply with the
provisions of the Indenture and not to amend, supplement, or otherwise modify
any provision of the Indenture except in the manner provided in Article IX
thereof. Notwithstanding anything to the contrary contained herein or in any of
the other 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 Agreement), and any liability
therefor, shall, in addition to any other limitations provided herein or in any
of the other Operative Agreements, be limited by the provisions of the
Indenture.
Section 6.6. Amendments to Operative Agreements. Unless a Lease
----------------------------------
Event of Default shall have occurred and be continuing, the Trustees and
Participants shall not terminate the Operative Agreements to which the Lessee is
not or will not be a party, or amend, supplement, waive or modify such Operative
Agreements in any manner, (i) except in accordance with such Operative
Agreements in effect on the date hereof (as amended, modified or supplemented
from time to time in accordance with the terms hereof and of such Operative
Agreements), or (ii) adverse to the Lessee or to any of its rights or interests
under any of the Operative Agreements, except with the prior written consent of
the Lessee. Without limiting the generality of the foregoing, each of the Owner
Participant and the Trustees (as applicable) agrees that, in any event, unless a
Lease Event of Default shall have occurred and be continuing, it will not amend
Section 2.10 or Article IX of the Indenture or Article IX of the Trust Agreement
without the prior written consent of the Lessee.
Section 6.7. Certain Representations, Warranties and Covenants.
-------------------------------------------------
The Lessee hereby confirms its representations, warranties and covenants in
Article 6 of the Intercreditor Agreement, which are hereby incorporated in this
Agreement by this reference as fully as if set forth herein in their entirety.
Section 6.8. Covenants of the Manager. The Manager hereby confirms
------------------------
the covenants in Article 7 of the Management Agreement, which are hereby
incorporated in this Agreement by this reference as fully as if set forth herein
in their entirety.
Section 6.9. Lessee's Purchase in Certain Circumstances. If (A)
------------------------------------------
the Owner Participant or any Affiliate thereof is or acquires, is acquired by,
merges or otherwise consolidates with any company or Affiliate thereof who would
not be an eligible "Transferee" by reason of Section 6.1(b) (and, in the case of
an Affiliate, such entity continues to be an Affiliate of the Owner Participant
after such acquisition, merger or consolidation), or (B) the Lessee shall have
requested a waiver pursuant to Section 12.3(c) of the Lease and the Lessor and
the Owner Participant shall have refused to grant such waiver or shall have
granted such waiver but shall have refused to further waive the requirement that
amounts be deposited in the Special Insurance
43
[Participation Agreement (GARC II 98-A)]
Reserves Account pursuant to the Intercreditor Agreement in connection with the
granting of the initial waiver, the Lessee may, by prior written notice to the
Owner Participant, either (x) require that such Owner Participant transfer its
Beneficial Interest in accordance with the terms of Section 6.1 to Lessee or
such other transferee as Lessee shall designate (at a price which would result
in the same economics to such Owner Participant as if such Owner Participant had
been paid its applicable portion of the purchase price calculated as of the date
of such transfer plus all other amounts to which the Owner Participant would be
entitled upon the Lessee's payment in full of all amounts due and owing by
Lessee under the Operative Agreements, as set forth below); provided that,
without regard to such Owner Participant's obligations under the Operative
Agreements relating to the period prior to such transfer, any transfer pursuant
to this clause (x) shall be without additional representations or warranties of
or other liabilities or obligations on such Owner Participant, or (y) on a
Determination Date which is designated by the Lessee by written notice to the
Owner Trustee and the Indenture Trustee not less than 25 days prior to such
Determination Date, purchase the Equipment for a purchase price equal to (I) the
Termination Value calculated as of such Determination Date (provided that in the
case of (B) above, the amount referred to in this Clause (I) shall equal the
greater of the Termination Value or the Fair Market Sales Value of the Equipment
calculated as of such Determination Date), plus (II) all other amounts due and
owing by the Lessee under the Operative Agreements with respect to such Units,
including, without limitation, all accrued and unpaid Basic Rent therefor as of
such Determination Date (exclusive of any Basic Rent payable in advance on such
date), any interest accrued and unpaid with respect to such unpaid Basic Rent,
any Make-Whole Amount then payable on the Equipment Notes pursuant to Section
2.10(c) of the Indenture with respect to the Equipment and any then Late Payment
Premium due and owing under the Operative Agreements with respect to such Units
so that, after receipt and application of all such payments but without any
withdrawal from any Reserve Account the Owner Participant shall be entitled
under the terms of the Intercreditor Agreement to receive, and does receive, in
respect of all such Units, the sum of the Accumulated Equity Deficiency Amount
and Late Payment Interest related thereto and any other amounts then due to
Owner Participant. In the event that such Owner Participant holds less than 100%
of the Beneficial Interest (after excluding any Beneficial Interests held by the
Lessee, the Manager or any Affiliate of either thereof), in lieu of purchasing
of the Equipment as provided above, the Lessee may instead purchase such Owner
Participant's Beneficial Interest for a purchase price equal to (a) the excess
of (i) the purchase price for the Equipment determined as provided above in this
Section 6.9 over (ii) the sum of the principal amount of Equipment Notes then
outstanding (b) multiplied by a fraction equal to the portion such Owner
Participant's Beneficial Interest bears to 100% of the Beneficial Interests.
If the Lessee elects to exercise the option to purchase the Equipment (as
opposed to such Owner Participant's Beneficial Interest) as provided in this
Section 6.9, the Lessee shall, as the purchase price therefor, in the sole
discretion of the Lessee, either (i) pay the purchase price, as specified in the
above paragraph, with respect to the Equipment, together with all other amounts
due and owing by the Lessee under the Operative Agreements, or (ii) so long as
no
44
[Participation Agreement (GARC II 98-A)]
Lease Event of Default shall have occurred and be continuing and the Owner
Participant is entitled under the terms of the Intercreditor Agreement to and
does receive all such amounts, pay the difference between (x) the amounts
specified in clause (i) above and (y) the unpaid principal amount of the
Equipment Notes scheduled to be outstanding as of the Determination Date
specified by the Lessee in the second sentence of this Section 6.9 (after
deducting therefrom the principal installment, if any, to be paid on such date).
In connection with any purchase of the Units hereunder, the Lessee will make the
payments required by this Section 6.9 in immediately available funds against
delivery of a ▇▇▇▇ of sale transferring and assigning to the 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 with respect to the absence of any Lessor's
Lien. In such event, the costs of preparing the ▇▇▇▇ of sale or other transfer
documents and all other documentation relating to such purchase and the costs of
any necessary filings related thereto will be borne by the Lessee. If the
Lessee shall fail to fulfill its obligations under this second paragraph of
Section 6.9, all of the Lessee's obligations under the Lease and the Operative
Agreements, including, without limitation, the Lessee's obligation to pay
installments of Rent, with respect to the Units in question shall continue.
Section 6.1. Owner Participant as Affiliate of Lessee. If at any
----------------------------------------
time the original or any successor Owner Participant shall be an Affiliate of
the Lessee, such Owner Participant and the Lessee agree that, notwithstanding
Section 9.5 of the Indenture, they will not vote its Beneficial Interest in any
respect if there is another Owner Participant not affiliated with the Lessee,
and, if there is no such Owner Participant, they will not vote its Beneficial
Interest to modify, amend or supplement any provision of the Lease or this
Agreement or give, or permit the Owner Trustee to give, any consent, waiver,
authorization or approval thereunder if any such action would adversely affect
in a material manner the Indenture Trustee or any holder of an Equipment Note
unless such action shall have been consented to by a Majority in Interest.
SECTION 7. LESSEE'S INDEMNITIES.
Section 7.1. General Tax Indemnity.
---------------------
(a) Tax Indemnities Defined. For purposes of this Section 7.1, "Tax
-----------------------
Indemnitee" means the Loan Participant, the Owner Participant, its Affiliates,
the Owner Trustee both in its individual capacity and as trustee, the Indenture
Trustee both in its individual capacity and as trustee, the Pass Through Trustee
both in its individual capacity and as trustee, each of their successors or
assigns permitted under the terms of the Operative Agreements, any officer,
director, employee or agent of any of the foregoing, the Trust Estate and the
Indenture Estate.
(b) Taxes Indemnified. Except as provided below, all payments by the
-----------------
Lessee to any Tax Indemnitee in connection with the transactions contemplated by
the Operative Agreements shall be free of withholdings of any nature whatsoever
(and at the time that any
45
[Participation Agreement (GARC II 98-A)]
payment is made upon which any withholdings is required the Lessee shall pay an
additional amount such that the net amount actually received will, after such
withholding and on an After-Tax Basis, equal the full amount of the payment then
due) and shall be free of expense to each Tax Indemnitee for collection or other
charges. The Lessee shall defend, indemnify and save harmless each Tax
Indemnitee from and against, and as between the Lessee and each Tax Indemnitee
the Lessee hereby assumes liability with respect to, all fees (including,
without limitation, license fees and registration fees), taxes (including,
without limitation, income, gross receipts, franchise, sales, use, value added,
property and stamp taxes), assessments, levies, imposts, duties, charges or
withholdings of any nature whatsoever, together with any and all penalties,
additions to tax, fines or interest thereon ("Taxes") imposed against any of the
Tax Indemnitees, any item of Equipment or the Lessee, upon, arising from or
relating to
(i) any item of Equipment,
(ii) the construction, manufacture, financing, purchase,
delivery, ownership, acceptance, rejection, possession, improvement, use,
operation, leasing, subleasing, condition, maintenance, repair,
refinancing, registration, sale, return, replacement, storage, abandonment
or other application or disposition of any item of Equipment,
(iii) the rental payments, receipts or earnings arising from
any item of Equipment or payable pursuant to the Operative Agreements, or
(iv) the Operative Agreements, the Equipment Notes or any
Car Service Contract or otherwise with respect to or in connection with the
transactions contemplated thereby.
(c) Taxes Excluded. In the case of the Owner Participant, its
--------------
Affiliates, the Owner Trustee both in its individual capacity and as trustee,
and each of their respective successors, assigns, officers, directors, employees
and agents described in Section 7.1(a) and the Trust Estate (each, an "Equity
------
Tax Indemnitee" and each Tax Indemnitee which is not an Equity Tax Indemnitee, a
--------------
"Lender Tax Indemnitee") except with respect to indemnification payments
---------------------
hereunder or payments pursuant to this Section 7.1, the indemnity provided in
Section 7.1(b) shall not include:
(i) as to any Equity Tax Indemnitee, any Income Tax imposed
by the United States federal government;
(ii) as to any Equity Tax Indemnitee, any Income Tax imposed
by any state, local or foreign government or taxing authority or
subdivision thereof, except to the extent such Taxes are solely
attributable to the use or location of
46
[Participation Agreement (GARC II 98-A)]
any item of Equipment or the activities of the Lessee or its Affiliates or
any sublessee in the taxing jurisdiction;
(iii) as to any Equity Tax Indemnitee, any Tax that is imposed as
a result of the sale, transfer or other disposition, by the Lessor or the
Owner Participant of any of its rights with respect to any item of
Equipment or the Owner Participant's interest in the Trust Estate unless
such sale, transfer or other disposition is a result of an Event of
Default, results from any substitution, repair or replacement of any item
of Equipment under the Lease, or results from any sale, transfer or
disposition required under the Lease (including but not limited to Section
10 of the Lease);
(iv) as to any Equity Tax Indemnitee, any Taxes to the extent
they exceed the Taxes that would have been imposed had an Equity Tax
Indemnitee not transferred, sold or disposed of its Interest or rights in
any item of Equipment to a non-U.S. Person;
(v) Taxes imposed on a Lender Tax Indemnitee with respect to
any period after the payment in full of the Equipment Notes; provided that
the exclusion set forth in this clause (v) shall not apply to Taxes to the
extent such Taxes relate to events occurring or matters arising prior to or
simultaneously with the applicable time or relate to any payment made by
the Lessee after such date;
(vi) as to any Tax Indemnitee, Taxes to the extent caused by any
misrepresentation or breach of warranty or covenant by such Tax Indemnitee
under any of the Operative Agreements or by the gross negligence or willful
misconduct of such Tax Indemnitee;
(vii) as to any Lender Tax Indemnitee, Taxes which become payable
as a result of a sale, assignment, transfer or other disposition (whether
voluntary or involuntary) by such Lender Tax Indemnitee of all or any
portion of its interest in the Equipment or any part thereof, the Trust
Estate, the Indenture Estate or any of the Operative Agreements or rights
created thereunder, other than as a result of (A) the substitution,
modification or improvement of the Equipment or any part thereof, (B) a
modification to the Operative Agreements, or (C) a disposition which occurs
as the result of the exercise of remedies upon a Lease Event of Default;
provided, that, notwithstanding the foregoing, the Lessee shall not be
obligated to indemnify any Lender Tax Indemnitee with respect to net income
taxes imposed within the United States as the result of a sale, assignment,
transfer or other disposition by such Lender Tax Indemnitee or any Taxes
imposed as a result of the status of the Lender Tax Indemnitee as other
than a resident of the United States for tax purposes;
47
[Participation Agreement (GARC II 98-A)]
(viii) as to any Lender Tax Indemnitee, Taxes imposed as the
result of such Lender Tax Indemnitee not being a resident of the United
States for tax purposes;
(ix) As to any Lender Tax Indemnitee, Income Taxes or transfer
taxes relating to any payments of principal, interest or Make Whole Amount,
if any, on the Equipment Notes paid to any such Tax Indemnitee that are
imposed by the United States federal government, any state or local
government within the United States or any other jurisdiction in which such
Indemnitee is subject to such Taxes as a result of it or an Affiliate being
organized in such jurisdiction or conducting activities in that
jurisdiction unrelated to the transactions contemplated by the Operative
Agreements;
(x) Taxes to the extent directly resulting from or that would
not have been imposed but for (x) in the case of Taxes imposed on or with
respect to any Equity Tax Indemnitee, the existence of any Lessor Liens
with respect to such Equity Tax Indemnitee, (y) in the case of Taxes
imposed on or with respect to any Lender Tax Indemnitee, the existence of
any Indenture Trustee Liens;
(xi) Taxes imposed on a Tax Indemnitee to the extent that such
Taxes would not have been imposed upon such Tax Indemnitee but for any
failure of such Tax Indemnitee or any Affiliate thereof to comply with (x)
any certification, information, documentation, reporting or other similar
requirements concerning the nationality, residence, identity or connection
with the jurisdiction imposing such Taxes, if such compliance is required
under the laws or regulations of such jurisdiction to obtain or establish
relief or exemption from or reduction in such Taxes and the Tax Indemnitee
or such Affiliate was eligible to comply with such requirement or (y) any
other certification, information, documentation, reporting or other similar
requirements under the Tax laws or regulations of the jurisdiction imposing
such Taxes that would establish entitlement to otherwise applicable relief
or exemption from such Taxes; provided, however, that the exclusion set
forth in this clause (xii) shall not apply (I) if, such failure to comply
was due to a failure of the Lessee to provide reasonable assistance on
request in complying with such requirement, (II) if, in the case of Taxes
imposed on the Owner Participant, in the good faith judgment of the Owner
Participant there is a risk of adverse consequence to the Owner Participant
or any Affiliate from such compliance against which the Owner Participant
is not satisfactorily indemnified, (III) in the case of Taxes imposed on
the Owner Participant, if any such failure to comply on the part of the
Owner Trustee was the result of the Owner Trustee's gross negligence or
failure to act in accordance with instructions of the Owner Participant, or
(IV) in the case of any Tax Indemnitee, unless Lessee shall have given such
Tax Indemnitee prior written notice of such requirements;
48
[Participation Agreement (GARC II 98-A)]
(xii) Taxes that are imposed with respect to any period after
the earlier of (x) return of possession of the Equipment to the Lessor in
accordance with, and at a time and place contemplated by the Lease
(including the payment of all amounts due at such time) and (y) the
termination of the Term pursuant to Section 6, 10, 11, 15 or 22 of the
Lease and the discharge in full of Lessee's payment obligation's thereunder
unless the Equipment is thereafter required to be returned, in which case,
after such return; provided, however, that the exclusion set forth in this
-------- -------
clause (xiii) shall not apply to Taxes to the extent such Taxes relate to
events occurring or matters arising prior to or simultaneously with such
return or termination;
(xiii) As to any Lender Tax Indemnitee, Taxes in the nature of
an intangible or similar tax upon or with respect to the value of the
interest of a Loan Participant in the Trust Indenture Estate or in any
Equipment Note;
(xiv) Taxes imposed on the Owner Trustee or the Indenture
Trustee that are on, based on or measured by any trustee fees for services
rendered by such Tax Indemnitee in its capacity as trustee under the
Operative Agreements imposed as a result of the Indenture Trustee, the Loan
Participant or any Affiliate of the Loan Participant being organized in, or
conducting activities unrelated to the contemplated transactions in, the
jurisdiction imposing such Taxes;
(xv) Taxes imposed on any Tax Indemnitee, or any other
person who, together with such Tax Indemnitee, is treated as one employer
for employee benefit plan purposes, as a result of, or in connection with,
any "prohibited transaction," within the meaning of the provisions of the
Code or regulations thereunder or as set forth in Section 406 of ERISA or
the regulations implementing ERISA or Section 4975 of the Code or the
regulations thereunder;
(xvi) Taxes for so long as (x) such Taxes are being contested
in accordance with the provisions of Section 7.1(e) hereof, (y) the Lessee
is in compliance with its obligations under Section 7.1(e), and (z) the
payment of such Taxes is not required pursuant to Section 7.1(e);
(xvii) Taxes as to which such Tax Indemnitee is indemnified
pursuant to the Tax Indemnity Agreement;
(xviii) any Taxes imposed on or with respect to any Certificate
Holder; and
49
[Participation Agreement (GARC II 98-A)]
(xix) Taxes imposed as a result of the authorization or giving
of any future amendments, supplements, waivers or consents with respect to
any Operative Agreement other than (w) those which are legally required,
(x) in connection with the exercise of remedies pursuant to Section 15 of
the Lease, (y) such as have been proposed by the Lessee or consented to by
the Lessee or (z) those that are required pursuant to the terms of the
Operative Agreements.
(d) Payments to Tax Indemnitee. The Lessee agrees to pay, on demand,
--------------------------
any and all Taxes, and to keep at all times all and every part of each item of
Equipment free and clear of all Taxes which might in any way affect the interest
of any Tax Indemnitee therein or result in a Lien upon any such item of
Equipment; provided, however, that the Lessee shall be under no obligation to
pay any Tax so long as either the Tax Indemnitee or the Lessee is contesting in
good faith and by appropriate legal proceedings such tax and the nonpayment
thereof does not, in the reasonable opinion of the Tax Indemnitee, materially
adversely affect the interest of any Tax Indemnitee hereunder or under the
Indenture.
If any Tax indemnified under this Section 7.1 (an "Indemnified Tax") shall
have been charged or levied against any Tax Indemnitee directly and paid by such
Tax Indemnitee after such Tax Indemnitee shall have given written notice thereof
to the Lessee and the same shall have remained unpaid for a period of ten
Business Days thereafter, the Lessee shall reimburse such Tax Indemnitee
payment, such Tax Indemnitee shall promptly notify the Lessee of the Tax charged
or levied (but the failure to so notify the Lessee shall relieve the Lessee of
its obligation hereunder only to the extent such failure precludes a contest by
the Lessee) hereunder.
(e) Contests. If the Lessee shall so request within 30 days after
--------
receipt of such notice, then such Tax Indemnitee shall in good faith at Lessee's
expense contest such Tax; provided, however, that to the extent the contest
involves only Taxes constituting property taxes, sales taxes, or use taxes and
does not involve any taxes or other issues relating to a Tax Indemnitee which
are unrelated to the transactions contemplated by the Operative Agreements, such
contest shall be undertaken by the Lessee at the Lessee's expense and at no-
after-tax cost to the Lessor or the Owner Participant, but if such contest would
involve any other type of Tax or any taxes or issues relating to a Tax
Indemnitee which are unrelated to the transactions contemplated by Operative
Agreements, then such Tax Indemnitee may, in its sole discretion, control such
contest (including selecting the forum for such contest, and determining whether
any such contest shall be conducted by (i) paying such Tax under protest or (ii)
resisting payment of such Tax or (iii) paying such Tax and seeking a refund
thereof; provided, further, however, that at such Tax Indemnitee's option, such
contest shall be conducted by the Lessee in the name of such Tax Indemnitee).
In no event shall such Tax Indemnitee be required or the Lessee be permitted to
contest any Tax for which the Lessee is obligated to indemnify pursuant to this
Section unless: (i) the Lessee shall have acknowledged in writing its liability
to such Tax Indemnitee for an indemnity payment pursuant to this Section as a
result of such claim if and to
50
[Participation Agreement (GARC II 98-A)]
the extent such Tax Indemnitee or the Lessee, as the case may be, shall not
prevail in the contest of such claim; provided, however, that the Lessee shall
not be required to indemnify for such Taxes to the extent that the results of
the contest clearly and unambiguously demonstrate that the Tax is not a Tax for
which Lessee is required to indemnify; (ii) such Tax Indemnitee shall have
received the opinion of independent tax counsel selected by the Tax Indemnitee
and reasonably satisfactory to the Lessee furnished at the Lessee's sole
expense, to the effect that a reasonable basis exists for contesting such claim
or, in the event of an appeal, that it is more likely than not that an appellate
court or an administrative agency with appellate jurisdiction, as the case may
be, will reverse or substantially modify the adverse determination; (iii) the
Lessee shall have agreed to pay such Tax Indemnitee on demand (and at no after-
tax costs to the Lessor and the Owner Participant) all reasonable costs and
expenses that such Tax Indemnitee may incur in connection with contesting such
claim (including, without limitation, all costs, expenses, reasonable legal and
accounting fees, disbursements, penalties, interest and additions to the Tax);
(iv) no Lease Event of Default shall have occurred and shall have been
continuing, unless the Lessee shall have posted a satisfactory bond or other
security with respect to the costs of such contest and the Taxes which may be
required to be indemnified; (v) such Tax Indemnitee shall have determined that
the action to be taken will not result in any substantial danger of sale,
forfeiture or loss of, or the creation of any Lien, or the Lessee shall have or
otherwise made a provision to protect the interest of such Tax Indemnitee (in a
manner satisfactory to such Tax Indemnitee), on the Equipment or any portion
thereof or any interest therein; (vi) the amount of such claims alone, or, if
the subject matter thereof shall be of a continuing or recurring nature, when
aggregated with identical potential claims shall be at least $5,000; and (vii)
if such contest shall be conducted in a manner requiring the payment of the
claim, the Lessee shall have paid the amount required (and at no after-tax costs
to the Lessor and the Owner Participant). The Lessee shall cooperate with the
Tax Indemnitee with respect to any contest controlled and conducted by the Tax
Indemnitee and the Tax Indemnitee shall consult with the Lessee regarding the
conduct of such contest. The Tax Indemnitee shall cooperate with respect to any
contest controlled and conducted by the Lessee and the Lessee shall consult with
the Tax Indemnitee regarding the conduct of such contest.
Notwithstanding anything to the contrary contained in this Section 7.1, no
Tax Indemnitee shall be required to contest any claim if the subject matter
thereof shall be of a continuing or recurring nature and shall have previously
been adversely decided to the Tax Indemnitee pursuant to the contest provisions
of this Section unless there shall have been a change in the law (including,
without limitation, amendments to statutes or regulations, administrative
rulings or court decisions) enacted, promulgated or effective after such claim
shall have been so previously decided, and such Tax Indemnitee shall have
received an opinion of independent tax counsel selected by the Tax Indemnitee
and reasonably satisfactory to the Lessee, furnished at the Lessee's sole
expense, to the effect that such change is favorable to the position which such
Tax Indemnitee or the Lessee, as the case may be, had asserted in such previous
contest and as a result of such change, there is a reasonable basis to contest
such claim.
51
[Participation Agreement (GARC II 98-A)]
(f) Payments to Lessee. With respect to any payment or indemnity
------------------
hereunder, such payment or indemnity shall have included an amount payable to
the Tax Indemnitee sufficient to hold such Tax Indemnitee harmless on an After-
Tax Basis from all Taxes required to be paid by such Tax Indemnitee with respect
to such payment or indemnity under the laws of any federal, state or local
government or taxing authority in or of the United States, or under the laws of
any taxing authority or governmental subdivision in or of a foreign country;
provided that, if any Tax Indemnitee realizes and recognizes a permanent tax
benefit by reason of such payment or indemnity (whether such tax benefit shall
be by means of a foreign tax credit, investment tax credit, depreciation or
recovery deduction or otherwise), such Tax Indemnitee shall pay to the Lessee an
amount equal to the sum of such tax benefit plus any tax benefit realized as the
result of any payment made pursuant to this proviso, when, as, if and to the
extent realized; provided further that, (i) if at the time such payment shall be
due to the Lessee, a Lease Event of Default shall have occurred and be
continuing, such amount shall not be payable until such Lease Event of Default
shall have been cured, and (ii) the amount which such Tax Indemnitee shall be
required to pay to the Lessee shall not exceed the amounts which the Lessee has
theretofore paid such Tax Indemnitee hereunder with respect to such indemnity.
For purposes of this Section 7.1, in determining the order in which
any Tax Indemnitee utilizes withholding or other foreign taxes as a credit
against such Tax Indemnitee's United States income taxes, such Tax Indemnitee
shall be deemed to utilize (i) first, all foreign taxes other than those
described in clause (ii) below; provided, however, that such other foreign taxes
which are carried back to the taxable year for which a determination is being
made pursuant to such paragraph (i) shall be deemed utilized after the foreign
taxes described in clause (ii) below, and (ii) then, on a pro rata basis, all
foreign taxes (including fees, taxes and other charges hereunder) with respect
to which such Tax Indemnitee is entitled to obtain indemnification pursuant to
an indemnification provision contained in any lease, loan agreement, financing
document or participation agreement (including, without limitation, this
Agreement).
(g) Reports. In the event any reports with respect to Indemnified
-------
Taxes are required to be made, the Lessee will either prepare and file such
reports (and in the case of reports which are required to be filed on the basis
of individual items of Equipment, such reports shall be prepared and filed in
such manner as to show, if required, the interest of each Tax Indemnitee in such
items of Equipment) or, if it shall not be permitted to file the same, it will
notify each Tax Indemnitee of such reporting requirements, prepare such reports
in such manner as shall be satisfactory to each Tax Indemnitee and deliver the
same to each tax Indemnitee within a reasonable period prior to the date the
same is to be filed. The Lessee shall provide such information as the Owner
Participant or the Lessor may reasonably require from the Lessee to enable the
Owner Participant and the Lessor to fulfill their respective tax filing, tax
audit, and tax litigation obligations.
52
[Participation Agreement (GARC II 98-A)]
(h) Survival. In the event that, during the continuance of this
--------
Agreement, any Indemnified Tax accrues or becomes payable or is levied or
assessed (or is attributable to the period of time during which the Lease is in
existence or prior to the return of Equipment in accordance the provisions of
the Lease) which the Lessee is or will be obligated to pay or reimburse,
pursuant to this Section 7.1, such liability shall continue, notwithstanding the
expiration of the Lease, until all such Taxes are paid or reimbursed by the
Lessee.
(i) Affiliated Group. For purposes of applying this Section 7.1 with
----------------
respect to any Tax, the term "Owner Participant" shall include each member of
the affiliated group of corporations with which [_____________] (and its
successors and assigns) files consolidated or combined tax returns relating to
such Imposition.
(j) Income Tax. For purposes of this Section 7.1, the term Income Tax
means any Tax based on or measured by or with respect to gross or net income
(including without limitation, capital gains taxes, personal holding company
taxes, minimum taxes and tax preferences) or gross or net receipts and Taxes
which are capital, net worth, conduct of business, franchise or excess profits
taxes and interest, additions to tax, penalties, or other charges in respect
thereof (provided, however, that Taxes that are, or are in the nature of, sales,
-------- -------
use, rental, value-added, excise, ad valorem, or property (whether tangible or
intangible) taxes shall not constitute an Income Tax).
(k) Certain Withholding. All payments by the Lessee of Basic Rent,
-------------------
Stipulated Loss Value or Termination Value (or any other payment of purchase
price with respect to any Unit) shall, to the extent being applied to pay any
amount due as principal, interest or Make-Whole on the Equipment Notes, be free
of withholdings of any nature whatsoever (and at the time that any payment is
made upon which any such withholding is required the Lessee shall pay an
additional amount such that the net amount actually received will, after such
withholding and on an After-Tax Basis, equal the full amount of the payment then
due on the Equipment Notes) and shall be free of expense for collection or other
charges; provided, however, that (i) in the event an obligation to withhold
arises and such withholding would not be a Tax against which the payee is
indemnified under this Section 7.1, the Lessee shall be entitled to
reimbursement from such payee for such Taxes, and (ii) if such withholding Taxes
are not Taxes for which the holders of the Equipment Notes are indemnified, then
the Lessee shall not be required to gross up such payment.
Section 7.2. General Indemnification.
-----------------------
(a) Claims Defined. For the purposes of this Section 7, "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) which may be imposed on, incurred by, suffered by, or
53
[Participation Agreement (GARC II 98-A)]
asserted against an Indemnified Person, as defined herein, or any Unit and,
except as otherwise expressly provided in this Section 7.2, shall include, but
not be limited to, all reasonable out-of-pocket costs, disbursements and
expenses (including legal fees and expenses) paid or incurred by an Indemnified
Person in connection therewith or related thereto.
(b) Indemnified Person Defined. For the purposes of this Section 7,
--------------------------
"Indemnified Person" means the Owner Participant, the Owner Trustee, WTC, the
Indenture Trustee and the Pass Through Trustee, each of their Affiliates and
each of their respective directors, officers, employees, successors and
permitted assigns, agents and servants, the Trust Estate and the Indenture
Estate (the respective directors, officers, employees, successors and permitted
assigns, agents and servants of the Owner Participant, the Owner Trustee, WTC,
the Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as
applicable, together with the Owner Participant, the Owner Trustee, WTC, the
Indenture Trustee, the Pass Through Trustee and each of their Affiliates, as the
case may be, being referred to herein collectively as the "Related Indemnitee
Group" of the Owner Participant, the Indenture Trustee, the Owner Trustee, WTC
and the Pass Through Trustee, respectively).
(c) Claims Indemnified. Whether or not any Unit is accepted under the
------------------
Lease, or the Closing occurs, and subject to the exclusions stated in paragraph
(d) below, Lessee agrees to indemnify, protect, defend and hold harmless each
Indemnified Person on an After-Tax Basis against Claims directly or indirectly
resulting from or arising out of or alleged to result from or arise out of
(whether or not such Indemnified Person shall be indemnified as to such Claim by
any other Person):
(i) this Agreement or any other Operative Agreement or any of
the transactions contemplated hereby and thereby or any Unit or the
ownership, lease, operation, possession, modification, improvement,
abandonment, use, non-use, maintenance, sublease, substitution, control,
repair, storage, alteration, transfer or other application or disposition,
return, overhaul, testing, servicing, replacement or registration of any
Unit (including, without limitation, injury, death or property damage of
passengers, shippers or others, and environmental control, noise and
pollution regulations, or the presence, discharge, treatment, storage,
handling, generation, disposal, spillage, release, escape of or exposure
of any Person or thing to (directly or indirectly) Hazardous Substances or
damage to the environment (including, without limitation, costs of
investigations or assessments, clean-up costs, response costs, remediation
costs, removal costs, restoration costs, monitoring costs, costs of
corrective actions and natural resource damages)) whether or not in
compliance with the terms of the Lease, or by any of the commodities,
items or materials from time to time contained in any Unit, whether or not
in compliance with the terms of the Lease, or by the inadequacy of any
Unit or deficiency or defect in any Unit or by any other
54
[Participation Agreement (GARC II 98-A)]
circumstances in connection with any Unit, or by the performance of any
Unit or any risks relating thereto;
(ii) the construction, manufacture, financing, refinancing,
design, purchase, acceptance, rejection, delivery, non-delivery or
condition of any Unit (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent, trademark
or copyright infringement);
(iii) any act or omission (whether negligent or otherwise) or
any breach of or failure to perform or observe, or any other non-compliance
with, any covenant, condition or agreement to be performed by, or other
obligation of, the Lessee or any Affiliate of Lessee under any of the
Operative Agreements, or the falsity of any representation or warranty of
the Lessee or any Affiliate of Lessee in any of the Operative Agreements or
in any document or certificate delivered in connection therewith other than
representations and warranties in the Tax Indemnity Agreement;
(iv) the offer, sale or delivery of any Equipment Notes or Pass
Through Certificates or any interest in the Trust Estate;
(v) any violation of law, rule, regulation or order by the
Lessee or any Affiliate of Lessee or any Sublessee or their respective
directors, officers, employees, agents or servants; and
(vi) any sale, transfer or holding of Equipment Notes or Pass
Through Certificates being deemed to result in a "prohibited transaction"
under ERISA.
(d) Claims Excluded. The following are excluded from the Lessee's
---------------
agreement to indemnify under this Section 7.2:
(i) Claims with respect to any Unit to the extent attributable
to acts or events occurring after (except in any case where remedies are
being exercised under Section 15 of the Lease or the Lessee has assumed any
of the obligations with respect to the Equipment Notes under Section 3.6 of
the Indenture) the later to occur of (x) with respect to such Unit, the
earlier to occur of the termination of the Lease or the expiration of the
Lease Term in accordance with the terms thereof, and (y) with respect to
each Unit, the return of such Unit to the Lessor in accordance with the
terms of the Lease (it being understood that, so long as any Unit is in
storage as provided in Section 6.1(c) of the Lease, the date of return
thereof for the purpose of this clause (i) shall be the last day of the
Storage Period);
55
[Participation Agreement (GARC II 98-A)]
(ii) except in the case of (vi) above, Claims which are Taxes,
whether or not the Lessee is required to indemnify therefor under Section
7.1 hereof or under the Tax Indemnity Agreement;
(iii) with respect to any particular Indemnified Person, Claims
to the extent resulting from (x) the gross negligence or willful misconduct
of such Indemnified Person, or (y) any breach of any covenant to be
performed by such Indemnified Person under any of the Operative Agreements,
or the falsity of any representation or warranty of such Indemnified Person
in any of the Operative Agreements or in a document or certificate
delivered in connection therewith;
(iv) any Claim to the extent attributable to any transfer by the
Lessor of the Equipment or any portion thereof or any transfer by the Owner
Participant of all or any portion of its interest in the Trust Estate other
than (A) any transfer after a Lease Event of Default, (B) the transfer of
all or any portion of the Equipment or any Owner Participant's interest in
the Equipment to the Lessee, (C) the transfer of all or any portion of the
Equipment to a third party pursuant to Lessee's election to terminate the
Lease or (D) any transfer of all or any portion of the Equipment pursuant
to Section 6.9;
(v) with respect to any particular Indemnified Person, any
Claim resulting from the imposition of any Lessor's Lien attributable to
such Indemnified Person; or
(vi) with respect to any particular Indemnified Person, any
Claim, to the extent the risk thereof has been expressly assumed by such
Indemnified Person in connection with the exercise by such Indemnified
Person of the right of inspection granted under Section 6.2 of the Lease,
inspection or restenciling under Section 6.1(c) of the Lease or inspection
under Section 13.2 of the Lease.
(e) Insured Claims. In the case of any Claim indemnified by the
--------------
Lessee hereunder which is covered by a policy of insurance maintained by the
Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified Person
agrees to provide reasonable cooperation to the insurers in the exercise of
their rights to investigate, defend, settle or compromise such Claim as may be
required to retain the benefits of such insurance with respect to such Claim.
(f) Claims Procedure. An Indemnified Person shall, after obtaining
----------------
knowledge thereof, promptly notify the Lessee of any Claim as to which
indemnification is sought; provided, however, that the failure to give such
notice shall not release the Lessee from any of its obligations under this
Section 7.2, except (but only if neither the Lessee nor Lessee
56
[Participation Agreement (GARC II 98-A)]
Parent shall have actual knowledge of such Claim) to the extent that failure to
give notice of any action, suit or proceeding against such Indemnified Person
shall have a material adverse effect on Lessee's ability to defend such Claim or
recover proceeds under any insurance policies maintained by the Lessee. The
Lessee shall, after obtaining knowledge thereof, promptly notify each
Indemnified Person of any indemnified Claim affecting such Indemnified Person.
Subject to the provisions of the following paragraph, the Lessee shall at its
sole cost and expense be entitled to control, and shall assume full
responsibility for, the defense of such claim or liability; provided that the
Lessee shall confirm to such Indemnified Person Lessee's obligations to
indemnify hereunder for such Claim, shall keep the Indemnified Person which is
the subject of such proceeding fully apprised of the status of such proceeding
and shall provide such Indemnified Person with all information with respect to
such proceeding as such Indemnified Person shall reasonably request.
Notwithstanding any of the foregoing to the contrary, the Lessee shall
not be entitled to control and assume responsibility for the defense of any
Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2)
such proceeding will involve any material danger of the sale, forfeiture or loss
of, or the creation of any Lien (other than any Lien permitted under the
Operative Agreements or a Lien which is adequately bonded to the satisfaction of
such Indemnified Person) on, any Unit, (3) in the good faith opinion of such
Indemnified Person, there exists an actual or potential conflict of interest
such that it is advisable for such Indemnified Person to retain control of such
proceeding, (4) such Claim involves the possibility of criminal sanctions or
liability to such Indemnified Person or (5) an Equity Insufficiency Circumstance
shall exist. In the circumstances described in clauses (1) - (5), the
Indemnified Person shall be entitled to control and assume responsibility for
the defense of such claim or liability at the expense of the Lessee. In
addition, any Indemnified Person may participate in any proceeding controlled by
the Lessee pursuant to this Section 7.2, at its own expense, in respect of any
such proceeding as to which the Lessee shall have acknowledged in writing its
obligation to indemnify the Indemnified Person pursuant to this Section 7.2, and
at the expense of the Lessee in respect of any such proceeding as to which the
Lessee shall not have so acknowledged its obligation to the Indemnified Person
pursuant to this Section 7.2. Lessee may in any event participate in all such
proceedings at its own cost. Nothing contained in this Section 7.2(f) shall be
deemed to require an Indemnified Person to contest any Claim or to assume
responsibility for or control of any judicial proceeding with respect thereto.
(g) Subrogation. If a Claim indemnified by the Lessee under this
-----------
Section 7.2 is paid in full by the Lessee and/or an insurer under a policy of
insurance maintained by the Lessee, the Lessee and/or such insurer, as the case
may be, shall be subrogated to the extent of such payment to the rights and
remedies of the Indemnified Person (other than under insurance policies
maintained by such Indemnified Person) on whose behalf such Claim was paid with
respect to the transaction or event giving rise to such Claim. So long as no
Lease Event of Default or event referred to in clause (5) of Section 7.2(f)
hereof shall have occurred and be
57
[Participation Agreement (GARC II 98-A)]
continuing, should an Indemnified Person receive any refund, in whole or in
part, with respect to any Claim paid by the Lessee hereunder, it shall promptly
pay over the amount refunded (but not in excess of the amount the Lessee or any
of its insurers has paid) to the Lessee.
Section 7.3. Indemnification by Lessee Parent. (a) Claims Indemnified.
-------------------------------- ------------------
Whether or not any Unit is accepted under the Lease, or the Closing occurs, and
subject to the exclusions stated in paragraph (b) below, Lessee Parent agrees to
indemnify, protect, defend and hold harmless each Indemnified Person on an
After-Tax Basis against Claims directly or indirectly resulting from or arising
out of or alleged to result from or arise out of (whether or not such
Indemnified Person shall be indemnified as to such Claim by any other Person):
(i) any breach of or any inaccuracy in any representation or
warranty made by Lessee Parent in this Agreement or any of the other
Operative Agreements or in any certificate delivered pursuant hereto or
thereto;
(ii) any breach of or failure by the Lessee Parent to perform
any covenant or obligation of the Lessee Parent set out in or contemplated
by this Agreement or any of the other Operative Agreements;
(iii) the offer, sale or delivery of any Equipment Note or Pass
Through Certificate or any interest in the Trust Estate;
(iv) any violation of law, rule, regulation or order by the
Lessee Parent or its directors, officers, employees, agents or servants;
and
(v) any sale, transfer or holding of the Equipment Notes or
Pass Through Certificates being deemed to result in a "prohibited
transaction" under ERISA.
(b) Claims Excluded. The following are excluded from the Lessee Parent's
---------------
agreement to indemnify under this Section 7.3:
(i) with respect to any particular Indemnified Person,
Claims to the extent resulting from (x) the gross negligence or willful
misconduct of such Indemnified Person, or (y) any breach of any covenant to
be performed by such Indemnified Person under any of the Operative
Agreements, or the falsity of any representation or warranty of such
Indemnified Person in any of the Operative Agreements or in a document or
certificate delivered in connection therewith;
(ii) any Claim to the extent attributable to any transfer by
the Lessor of the Equipment or any portion thereof or any transfer by the
Owner Participant of all or any portion of its interest in the Trust Estate
other than (A) any transfer after a
58
[Participation Agreement (GARC II 98-A)]
Lease Event of Default, (B) the transfer of all or any portion of the
Equipment or any Owner Participant's interest in the Equipment to the
Lessee, (C) the transfer of all or any portion of the Equipment to a third
party pursuant to Lessee's election to terminate the Lease or (D) any
transfer of all or any portion of the Equipment pursuant to Section 6.9;
(iii) with respect to any particular Indemnified Person, any
Claim resulting from the imposition of any Lessor's Lien attributable to
such Indemnified Person; or
(iv) with respect to any particular Indemnified Person, any
Claim, to the extent the risk thereof has been expressly assumed by such
Indemnified Person in connection with the exercise by such Indemnified
Person of the right of inspection granted under Section 6.2 of the Lease,
inspection or restenciling under Section 6.1(c) of the Lease or inspection
under Section 13.2 of the Lease.
(c) Claims Procedure. An Indemnified Person shall, after obtaining
----------------
knowledge thereof, promptly notify the Lessee Parent of any Claim as to which
indemnification is sought; provided, however, that the failure to give such
notice shall not release the Lessee Parent from any of its obligations under
this Section 7.3, except (but only if the Lessee Parent shall not have actual
knowledge of such Claim) to the extent that failure to give notice of any
action, suit or proceeding against such Indemnified Person shall have a material
adverse effect on Lessee Parent's ability to defend such Claim or recover
proceeds under any insurance policies maintained by the Lessee Parent. The
Lessee Parent shall, after obtaining knowledge thereof, promptly notify each
Indemnified Person of any indemnified Claim affecting such Indemnified Person.
Subject to the provisions of the following paragraph, the Lessee Parent shall at
its sole cost and expense be entitled to control, and shall assume full
responsibility for, the defense of such claim or liability; provided that the
Lessee Parent shall confirm to such Indemnified Person Lessee Parent's
obligations to indemnify hereunder for such Claim, shall keep the Indemnified
Person which is the subject of such proceeding fully apprised of the status of
such proceeding and shall provide such Indemnified Person with all information
with respect to such proceeding as such Indemnified Person shall reasonably
request.
Notwithstanding any of the foregoing to the contrary, the Lessee
Parent shall not be entitled to control and assume responsibility for the
defense of any Claim if (1) a Lease Event of Default shall have occurred and be
continuing, (2) such proceeding will involve any material danger of the sale,
forfeiture or loss of, or the creation of any Lien (other than any Lien
permitted under the Operative Agreements or a Lien which is adequately bonded to
the satisfaction of such Indemnified Person) on, any Unit, (3) in the good
faith opinion of such Indemnified Person, there exists an actual or potential
conflict of interest such that it is advisable for such Indemnified Person to
retain control of such proceeding, (4) such Claim involves the
59
[Participation Agreement (GARC II 98-A)]
possibility of criminal sanctions or liability to such Indemnified Person or (5)
an event referred to in clause (5) of Section 7.2(f) hereof shall have occurred
and is continuing. In the circumstances described in clauses (1) - (5), the
Indemnified Person shall be entitled to control and assume responsibility for
the defense of such claim or liability at the expense of the Lessee Parent. In
addition, any Indemnified Person may participate in any proceeding controlled by
the Lessee Parent pursuant to this Section 7.3, at its own expense, in respect
of any such proceeding as to which the Lessee Parent shall have acknowledged in
writing its obligation to indemnify the Indemnified Person pursuant to this
Section 7.3, and at the expense of the Lessee Parent in respect of any such
proceeding as to which the Lessee Parent shall not have so acknowledged its
obligation to the Indemnified Person pursuant to this Section 7.3. Lessee Parent
may in any event participate in all such proceedings at its own cost. Nothing
contained in this Section 7.3(d) shall be deemed to require an Indemnified
Person to contest any Claim or to assume responsibility for or control of any
judicial proceeding with respect thereto.
(d) Subrogation. If a Claim indemnified by the Lessee Parent under
-----------
this Section 7.3 is paid in full by or on behalf of the Lessee Parent, the
Lessee Parent or its designee, shall be subrogated to the extent of such payment
to the rights and remedies of the Indemnified Person (other than under insurance
policies maintained by such Indemnified Person) on whose behalf such Claim was
paid with respect to the transaction or event giving rise to such Claim. So
long as no Lease Event of Default or event referred to in clause (5) of Section
7.2(f) hereof shall have occurred and be continuing, should an Indemnified
Person receive any refund, in whole or in part, with respect to any Claim paid
by the Lessee Parent hereunder, it shall promptly pay over the amount refunded
(but not in excess of the amount the Lessee Parent has paid) to the Lessee
Parent.
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT.
Each party to this Agreement acknowledges notice of, and consents in all
respects to, the terms of the Lease, and expressly, severally and as to its own
actions only, agrees that, so long as no Lease Event of Default has occurred and
is continuing, it shall not take or cause to be taken any action contrary to the
Lessee's rights under the Lease, including, without limitation, the right to
possession, use and quiet enjoyment by the Lessee or any Sublessee of the
Equipment.
SECTION 9. SUCCESSOR INDENTURE TRUSTEE.
In the event that the Indenture Trustee gives notice of its resignation
pursuant to Section 8.2 of the Indenture, the Owner Trustee shall promptly
appoint a successor Indenture Trustee reasonably acceptable to the Lessee and
the Pass Through Trustee.
SECTION 10. MISCELLANEOUS.
60
[Participation Agreement (GARC II 98-A)]
Section 10.1. Consents. Each Participant covenants and agrees (subject, in
--------
the case of the Loan Participant, to all of the terms and provisions of the
Trust Indenture) that it shall not unreasonably withhold its consent to any
consent requested of the Owner Trustee or the Indenture Trustee, as the case may
be, under the terms of the Operative Agreements that by its terms is not to be
unreasonably withheld by the Owner Trustee or the Indenture Trustee.
Section 10.2. Refinancing. So long as no Lease Event of Default shall have
-----------
occurred and be continuing, the Lessee shall have the right, at any time
following the fifth anniversary of the Closing Date, to request the Owner
Participant and the Owner Trustee to effect an optional prepayment of all, but
not less than all, of the Equipment Notes pursuant to Section 2.10(d) of the
Indenture as part of a refunding or refinancing operation, provided that the
Lessee shall obtain the prior consent of the Owner Participant to be granted in
the sole discretion of the Owner Participant if such refinancing imposes any
increased risk or liability on or otherwise adversely affects, the Owner
Participant; provided further, that the Owner Participant shall not withhold
such consent if in its sole judgment (i) any increased risk, or liability is
both remote and not material, (ii) Lessee Parent is at the time at least as
creditworthy as on the Funding Date and (ii) Lessee Parent provides an
indemnity, in form and substance satisfactory to the Owner Participant, for such
increased risk or liability. As soon as practicable after receipt of such
request and consent, if required, the Owner Participant and the Lessee will
enter into an agreement, in form and substance reasonably satisfactory to the
parties thereto, as to the terms of such refunding or refinancing as follows:
(a) the Lessee, the Owner Participant, the Indenture Trustee, the
Owner Trustee, and any other appropriate parties will enter into a financing or
loan agreement (which may involve an underwriting agreement in connection with a
public offering), in form and substance reasonably satisfactory to the parties
thereto, providing for (i) the issuance and sale by the Owner Trustee or such
other party as may be appropriate on the date specified in such agreement (for
the purposes of this Section 10.2, the "Refunding Date") of debt securities in
an aggregate principal amount (in the lawful currency of the United States)
equal to the principal amount of the Equipment Notes outstanding on the
Refunding Date, having the same maturity date as said Equipment Notes and having
a weighted average life which is not less than or greater than (in either case,
by more than three months) the Remaining Weighted Average Life of said Equipment
Notes, (ii) the application of the proceeds of the sale of such debt securities
to the prepayment of all such Equipment Notes on the Refunding Date, and (iii)
payment by Lessee to the Person or Persons entitled thereto of all other
amounts, in respect of accrued interest, any Make Whole Amount or other premium,
if any, payable on such Refunding Date;
(b) the Lessee and the Owner Trustee will amend the Lease in a manner
such that (i) if the Refunding Date is not a Rent Payment Date and the accrued
and unpaid interest on the Equipment Notes is not otherwise paid pursuant to
Section 10.2(a), the Lessee shall on the Refunding Date prepay that portion of
the next succeeding installment of Basic Rent
61
[Participation Agreement (GARC II 98-A)]
as shall equal the aggregate interest accrued on the Equipment Notes outstanding
to the Refunding Date, (ii) Basic Rent payable in respect of the period from and
after the Refunding Date shall be recalculated to preserve the Net Economic
Return which the Owner Participant would have realized had such refunding not
occurred, provided that the net present value of Basic Rent shall be minimized
to the extent consistent therewith, and (iii) amounts payable in respect of
Stipulated Loss Value, Early Purchase Price, Termination Value and Basic Term
Purchase Price from and after the Refunding Date shall be appropriately
recalculated to preserve the Net Economic Return which the Owner Participant
would have realized had such refunding not occurred (it being agreed that any
recalculations pursuant to subclauses (ii) and (iii) of this clause (b) shall be
performed in accordance with the requirements of Section 2.6 hereof);
(c) the Owner Trustee will enter into an agreement to provide for the
securing thereunder of the debt securities issued by the Owner Trustee pursuant
to clause (a) of this Section 10.2 in like manner as the Equipment Notes and/or
will enter into such amendments and supplements to the Indenture as may be
necessary to effect such refunding or refinancing, which agreements, amendments
and/or supplements shall be reasonably satisfactory in form and substance to the
Owner Participant; provided that, no such agreement or amendment shall provide
for any increase in the security for the new debt securities; and provided
further that, notwithstanding the foregoing (but subject to the provisions of
clauses (a) and (b) and the lead in paragraph of this Section 10.2 above), the
Lessee reserves the right to set the economic terms and other terms not
customarily negotiated between an owner participant and a lender of the
refunding or refinancing transaction except to the extent adversely affecting
cash flow, coverage ratios and reserve accounts as to the Owner Participant to
be so offered to the extent that they are passed through to the Lessee in, or
define rights or obligations of the Lessee under, the Operative Agreements;
provided, further, that no such amendment or supplement will in the sole
judgment of the Owner Participant increase its obligations or impair its rights
under the Operative Agreements or otherwise adversely affect it without the
consent of the Owner Participant;
(d) (i) in the case of a refunding or refinancing involving a public
offering of debt securities, neither the Owner Trustee nor the Owner Participant
shall be an "issuer" for securities law purposes or an "obligor" within the
meaning of the Trust Indenture Act of 1939, as amended, the offering materials
(including any registration statement) for the refunding or refinancing
transaction shall be reasonably satisfactory to the Owner Participant and (ii)
the Lessee and Lessee Parent shall provide satisfactory indemnity to the Owner
Trustee and Owner Participant with respect to the refunding or refinancing;
(e) unless otherwise agreed by the Owner Participant, the Lessee
shall pay to the Owner Trustee as Supplemental Rent an amount, on an After-Tax
Basis, equal to any Make-Whole Amount, Late Payment Premium, if any, payable in
respect of Equipment Notes outstanding on the Refunding Date, all interest which
is accrued and unpaid in respect of late payments of Basic Rent or any part
thereof, all reasonable fees, costs, expenses of such refunding
62
[Participation Agreement (GARC II 98-A)]
or refinancing and of the parties hereto incurred in connection with such
refunding or refinancing (including all reasonable out-of-pocket legal fees and
expenses and the reasonable fees of any financial advisors);
(f) the Lessee shall give the Indenture Trustee and the Owner
Participant not less than 25 days prior written notice of the Refunding Date;
(g) the Owner Participant, the Owner Trustee, the Indenture Trustee
and the Pass Through Trustee shall have received (i) such opinions of counsel as
they may reasonably request concerning compliance with the Securities Act of
1933, as amended, and any other applicable law relating to the sale of
securities and (ii) such other opinions of counsel and such certificates and
other documents, each in form and substance reasonably satisfactory to them, as
they may reasonably request in connection with compliance with the terms and
conditions of this Section 10.2; and
(h) all necessary authorizations, approvals and consents shall have
been obtained and shall be in full force and effect.
The Lessee shall pay to or reimburse the Participants, the Owner Trustee and the
Indenture Trustee for all costs and expenses (including reasonable attorneys'
and accountants' fees) paid or incurred by them in connection with such
refunding or refinancing.
Section 10.3. Amendments and Waivers. Except as otherwise provided in the
----------------------
Indenture, no term, covenant, agreement or condition of this Agreement 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 against which enforcement of the
termination, amendment or waiver is sought.
Section 10.4. 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, 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 facsimile, upon confirmation of receipt thereof,
provided such transmission is promptly further confirmed by any of the methods
set forth in clauses (i) or (ii) above, in each case addressed to each party
hereto at its address set forth below or, in the case of any such party hereto,
at such other address as such party may from time to time designate by written
notice to the other parties hereto:
63
[Participation Agreement (GARC II 98-A)]
If to Lessee Parent or the Manager:
General American Transportation Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
Re: GARC II 98-A
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Lessee:
General American Railcar Corporation II
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
Re: GARC II 98-A
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Owner Trustee:
GARC II 98-A Railcar Trust
c/o Wilmington Trust Company
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
the Owner Participant at the
address set forth below
64
[Participation Agreement (GARC II 98-A)]
If to the Owner Participant:
[[Owner Participant]
____________________
____________________
Attention: ___________________
Facsimile No.: _____________
Confirmation No.: _____________]
If to the Indenture Trustee:
State Street Bank and Trust Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Services Division
Facsimile No.: (617) 644-xxxx
Confirmation No.: (617) 664-xxxx
If to the Pass Through Trustee:
State Street Bank and Trust Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Services Division
Facsimile No.: (617) 644-xxxx
Confirmation No.: (617) 664-xxxx
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney, as Underwriter
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Structured Finance Group
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
65
[Participation Agreement (GARC II 98-A)]
If to the Rating Agencies:
▇▇▇▇▇'▇ Investors Service, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: [▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇]
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
Standard & Poor's Corporation
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: [▇▇▇▇▇▇ ▇▇▇▇▇▇]
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.5. Survival. All warranties, representations, indemnities and
--------
covenants made by any party hereto, herein or in any certificate or other
instrument delivered by any such party or on the behalf of any such party under
this Agreement, shall be considered to have been relied upon by each other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by any such
party or on behalf of any such party.
Section 10.6. No Guarantee of Residual Value or Debt. Nothing contained
--------------------------------------
herein or in the Lease, the Trust Indenture, the Trust Agreement, the Pass
Through Trust Agreement or the Tax Indemnity Agreement or in any certificate or
other statement delivered by the Lessee in connection with the transactions
contemplated hereby shall be deemed to be (i) a guarantee by the Lessee to the
Owner Trustee, the Owner Participant, the Indenture Trustee or the Loan
Participant that the Equipment will have any residual value or useful life, or
(ii) a guarantee by the Indenture Trustee or the Lessee of payment of the
principal of, premium, if any, or interest on the Equipment Notes.
Section 10.7. Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 6.1 hereof and each successive
holder of any Equipment Note issued and delivered pursuant to this Agreement or
the Indenture. Except as expressly provided herein or in the other Operative
Agreements, no party hereto may assign their interests herein without the
consent of the parties hereto.
66
[Participation Agreement (GARC II 98-A)]
Section 10.8. Business Day. Notwithstanding anything herein or in any
------------
other Operative Agreement to the contrary, if the date on which any payment is
to be made pursuant to this Agreement or any other Operative Agreement is not a
Business Day, the payment otherwise payable on such date shall be payable on the
next succeeding Business Day with the same force and effect as if made on such
succeeding Business Day and (provided such payment is made on such succeeding
Business Day) no interest shall accrue on the amount of such payment from and
after such scheduled date to the time of such payment on such next succeeding
Business Day.
SECTION 10.9. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS 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.
Section 10.10. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 10.11. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each executed counterpart constituting an original but all
together only one Agreement.
Section 10.12. Headings and Table of Contents. The headings of the
------------------------------
Sections of this Agreement 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.
Section 10.13. Limitations of Liability.
------------------------
(a) Liabilities of Participants. Neither the Indenture Trustee, the
---------------------------
Owner Trustee nor any Participant shall have any obligation or duty to the
Lessee, to Lessee Parent, to any other Participant or to others with respect to
the transactions contemplated hereby, except those obligations or duties of such
Participant expressly set forth in this Agreement and the other Operative
Agreements, and neither the Indenture Trustee nor any Participant shall be
liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall the Indenture Trustee or any
Participant be liable to the Lessee or Lessee Parent for any action or inaction
on the part of the Owner Trustee in connection with the transactions
contemplated herein, whether or not such action or inaction is caused by willful
misconduct or gross negligence of the Owner Trustee, unless such action or
inaction is at the direction of the Indenture Trustee or any Participant, as the
case may be, and such direction is expressly prohibited hereby.
67
[Participation Agreement (GARC II 98-A)]
(b) No Recourse to the Owner Trustee. It is expressly understood and
--------------------------------
agreed by and between WTC, the Owner Trustee, the Lessee, the Owner Participant,
the Indenture Trustee, and the Loan Participant, and their respective successors
and permitted assigns that, subject to the proviso contained in this Section
10.13(b), all representations, warranties and undertakings of the Owner Trustee
hereunder shall be binding upon the Owner Trustee only in its capacity as Owner
Trustee under the Trust Agreement, and (except as expressly provided herein) WTC
shall not be liable for any breach thereof, except for its gross negligence or
willful misconduct, or for breach of its covenants, representations and
warranties contained herein, except to the extent covenanted or made in its
individual capacity; provided, however, that nothing in this Section 10.13(b)
shall be construed to limit in scope or substance those representations and
warranties of WTC made expressly in its individual capacity set forth herein.
The term "Owner Trustee" as used in this Agreement shall include any successor
trustee under the Trust Agreement, or the Owner Participant if the trust created
thereby is revoked.
(c) Loan Participant's Source of Funds. It is expressly understood
----------------------------------
and agreed by and between the Owner Trustee, the Lessee, the Owner Participant,
the Indenture Trustee, and the Loan Participant, and their respective successors
and permitted assigns that, subject to the proviso contained in this Section
10.13(c), the undertakings of the Loan Participant hereunder are limited to the
application of the proceeds of the sale of the Pass Through Certificates to the
purchase by the Pass Through Trustee of the Equipment Notes; provided, however,
that nothing in this Section 10.13(c) shall be construed to limit in scope or
substance those representations and warranties of the Loan Participant made
expressly in its individual capacity set forth herein.
Section 10.14. Maintenance of Non-Recourse Debt. The parties hereto agree
--------------------------------
that if the Owner Trustee becomes a debtor subject to the reorganization
provisions of the Bankruptcy Code, 11 U.S.C. (S)101 et seq. (the "Bankruptcy
Code") or any successor provision, the parties hereto will make an election
under 1111(b)(1)(A)(i) of the Bankruptcy Code. If (a) the Owner Trustee becomes
a debtor subject to the reorganization provisions of the Bankruptcy Code or any
successor provision, (b) pursuant to such reorganization provisions the Owner
Trustee is required, by reason of the Owner Trustee being held to have recourse
liability to the Pass Through Trustee or the Indenture Trustee, directly or
indirectly, to make payment on account of any amount payable under the Equipment
Notes or any of the other Operative Agreements and (c) the Pass Through Trustee
and/or the Indenture Trustee actually receives any Excess Amount (as hereinafter
defined) which reflects any payment by the Owner Trustee on account of (b)
above, then the Pass Through Trustee and/or the Indenture Trustee, as the case
may be, shall promptly refund to the Owner Trustee such Excess Amount. For
purposes of this Section 10.14, "Excess Amount" means the amount by which such
payment exceeds the amount which would have been received by the Pass Through
Trustee or the Indenture Trustee if the Owner Trustee had not become subject to
the recourse liability referred to in (b) above.
68
[Participation Agreement (GARC II 98-A)]
Section 10.15. Ownership of and Rights in Units. The sale of the Units
--------------------------------
contemplated hereby is intended for all purposes to be a true sale of all of the
Lessee's right, title and interest in and to the Units to the Owner Trustee,
which shall be the legal owner thereof. Upon consummation of the sale and
leaseback transactions contemplated hereby, the Lessee's interest in the Units
is intended to be that of a lessee only. It is intended that for federal and
state income tax purposes the Owner Participant will be the owner of the Units.
The rights of the Indenture Trustee in and to the Units pursuant to the
Indenture is intended to be that of a secured party holding a security interest,
subject to the Lease and the rights of the Lessee thereunder. No holder of an
Equipment Note is intended to have any right, title or interest in or to the
Units except as a beneficiary of the Lien granted by the Owner Trustee to the
Indenture Trustee pursuant to the Indenture in trust for the equal and ratable
benefit of the holders from time to time of the Equipment Notes.
Section 10.16. No Petition. Each party hereto agrees that, prior to the
-----------
date which is one year and one day after payment in full of all outstanding
Equipment Notes and all obligations of the Lessee under the Operative Agreements
and release of all Collateral held under the Intercreditor Agreement (i) no
party hereto shall authorize the Lessee to commence a voluntary winding-up or
other voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to the Lessee or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect in any jurisdiction
or seeking the appointment of an administrator, a trustee, receiver, liquidator,
custodian or other similar official of the Lessee or any substantial part of its
property or to consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against the Lessee, or to make a general assignment for the benefit of
any party hereto or any other creditor of the Lessee, and (ii) none of the
parties hereto shall commence or join with any other Person in commencing any
proceeding against the Lessee under any bankruptcy, reorganization, liquidation
or insolvency law or statute now or hereafter in effect in any jurisdiction.
Each of the parties hereto agrees that, prior to the date which is one year and
one day after the payment in full of all outstanding Equipment Notes and all
obligations of the Lessee under the Operative Agreements and release of all
Collateral held under the Intercreditor Agreement, it will not institute
against, or join any other Person in instituting against, Lessee an action in
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or similar proceeding under the laws of the United States or any state of the
United States.
Section 10.17. Consent To Jurisdiction. Each of the parties hereto hereby
-----------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement or any other Operative
Agreement or for recognition and enforcement of any judgment in respect
hereof or thereof, to the
69
[Participation Agreement (GARC II 98-A)]
nonexclusive general jurisdiction of the courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and the appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form and mail), postage
prepaid, to each party hereto at its address set forth in Section 10.4
hereof, or at such other address of which the other parties shall have been
notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to ▇▇▇ in any other jurisdiction.
Section 10.18. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY
--------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH THIS AGREEMENT.
Section 10.19. Lessee Parent Status. Notwithstanding anything herein or in
--------------------
any other Operative Agreement to the contrary, any representation, warranty,
covenant, agreement or obligation of the "Lessee Parent", the "Manager", the
"Insurance Manager" or the "Administrator" shall, so long as the same entity
shall hold all such positions, shall be the representations, warranties,
covenants and agreements of such entity as if all made in the name of such
entity without distinction.
* * *
70
[Participation Agreement (GARC II 98-A)]
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered, all as of the date first above written.
Lessee:
GENERAL AMERICAN RAILCAR
CORPORATION II
By:__________________________________
Name:________________________________
Title:_______________________________
Manager:
GENERAL AMERICAN TRANSPORTATION
CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
Owner Trustee:
GARC II 98-A RAILCAR TRUST,
By: Wilmington Trust Company, not
in its individual capacity except as
expressly provided herein but solely
as Owner Trustee
By:__________________________________
Name:________________________________
Title:_______________________________
71
[Participation Agreement (GARC II 98-A)]
Owner Participant:
[OWNER PARTICIPANT]
By:__________________________________
Name:________________________________
Title:_______________________________
Indenture Trustee:
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity
except as expressly provided herein but
solely as Indenture Trustee
By:__________________________________
Name:________________________________
Title:_______________________________
72
[Participation Agreement (GARC II 98-A)]
Pass Through Trustee:
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity
except as expressly provided herein but
solely as Pass Through Trustee
By:___________________________________________
Name:_________________________________________
Title:________________________________________
73
EXHIBIT A-1
Form of
Certificate of Insurance Broker Confirming Insurance Coverage
(Primary Liability)
State Street Bank and Trust Company, individually and as Pass Through Trustee
State Street Bank and Trust Company, individually and as Indenture Trustee
GARC II 98-A Railcar Trust, by Wilmington Trust Company,
individually and as Owner Trustee
[Owner Participant], as Owner Participant
Re: Trust GARC II 98-A
Gentlemen:
Reference is hereby made to the Equipment Lease Agreement (GARC II 98-A)
dated as of September 1, 1998 (the "Lease") between the Owner Trustee referred
to above and General American Railcar Corporation II and the Equipment
thereunder. Attached hereto as Exhibit A is a certificate with respect to
certain insurance maintained by the Lessee on the Equipment which is or will
become effective as of any item thereof upon the acceptance by the Lessee
pursuant to the Lease. Such insurance (i) complies with the requirements
contained in Section 12 of the Lease and Exhibit B hereto except as noted below
and (ii) is in full force and effect as of the date hereof and all premiums due
and payable with respect thereto have been paid in full.
Capitalized terms not otherwise defined herein or in the exhibits attached
hereto have the meaning assigned thereto in the Lease.
We hereby agree that, with respect to any policy of insurance maintained
pursuant to Section 12.1 of the Lease, we will provide not less than 30 days'
prior written notice to Lessor, the Indenture Trustee, Loan Participant and
Owner Participant of any non-renewal or material adverse change with respect to
such policy. For purposes of this paragraph, "material adverse change" shall
mean a material adverse change in policy limits, exclusions or deductibles or
any material adverse change in policy coverages inconsistent with the
requirements of Section 12.1(b) of the Lease.
A1-1
EXHIBIT A
to Certificate of Insurance Broker
GATX Corporation Primary Liability Program
_______________, 199__ to __________, 199__
[________________ Insurance Company $3,500,000 per occurrence and
Policy #XXX XXXXXX-X $9,000,000 in the aggregate as
applicable; subject to a $3,000,000 per
occurrence retention and $8,000,000 in
the aggregate retention (indemnity only)]
▇▇▇-▇
▇▇▇▇▇▇▇ ▇-▇
Form of
Certificate of Insurance Broker Confirming Insurance Coverage
(Excess Liability)
State Street Bank and Trust Company, individually and as Pass Through Trustee
State Street Bank and Trust Company, individually and as Indenture Trustee
GARC II 98-A Railcar Trust, by Wilmington Trust Company, individually and as
Owner Trustee
[Owner Participant], as Owner Participant
Re: Trust GARC II 98-A
Gentlemen:
Reference is hereby made to the Equipment Lease Agreement (GARC II 98-A)
dated as of September 1, 1998 (the "Lease") between the Owner Trustee referred
to above and General American Railcar Corporation II. We hereby certify that the
Lessee is insured under various policies, effective (_______________), that
provide excess public liability coverage for personal injury and property
damage, subject to the policy terms, conditions and exclusions. We further
certify that said policies:
a. afford limits of liability as indicated on the attached Exhibit A,
---------
excess of various underlying insurances or retained amounts and subject to
aggregates where applicable;
b. are in full force and effect and all premiums due with respect to said
policies have been paid in full; and
c. comply with the requirements contained in Section 12 of the Lease and
all of the requirements listed on the attached Exhibit B.
---------
We hereby agree on each of the dates specified in Section 12.1 of the
Lease to issue a certificate (1) describing in reasonable detail the insurance
carried by the Lessee relating to the Equipment and (2) confirming that all
premiums due thereon have been paid.
We hereby agree that, with respect to any policy of insurance maintained
pursuant to Section 12.1 of the Lease, we will provide not less than 30 days'
prior written notice to Lessor, the Indenture Trustee, Loan Participant and
Owner Participant of any non-renewal or material adverse change with respect to
such policy. For purposes of this paragraph, "material adverse
A2-2
change" shall mean a material adverse change in policy limits, exclusions or
deductibles or any material adverse change in policy coverages inconsistent with
the requirements of Section 12.1(b) of the Lease.
Capitalized terms not otherwise defined herein or in the exhibits attached
hereto have the meaning assigned thereto in the Lease.
A2-3
EXHIBIT A
to Certificate of Insurance Broker
GATX Corporation Excess Liability Program
_____________, 199__ to ___________, 199__
[Umbrella Liability - Occurrence Basis $1,000,000 Each Occurrence and
_______________ Insurance Company Aggregate as Applicable Excess of
Policy #CUA-XXXXXX-X $3,500,000 Each Claim/$9,000,000
aggregate as applicable
Excess Liability - Claims Made Basis $50,000,000 Each Claim and Aggregate
[_____________________________] as Applicable, Excess of $1,000,000
Policy #XX XXX XXX Each Claim in turn Excess of
$3,500,000 Each Claim/$9,000,000
aggregate as applicable]
A2A-2
EXHIBIT B
Insurance Requirements
The following applies to the policies indicated on Exhibit A:
---------
1. The policies are in such amounts and for such risks and with such
insurance companies and subject to such self-insurance not less comprehensive in
amounts and against risks customarily insured against by the Lessee in respect
of equipment owned or leased by it similar in type to the Equipment and
consistent with prudent industry standards for companies engaged in the full
service leasing of railcars.
2. The policies have a third party liability limit of not less than
$100,000,000 per occurrence or in the aggregate, and provide coverage excess of
$[3,500,000] per occurrence (and $[9,000,000] in the aggregate) primary general
liability.
3. The policies:
(i) provide that if any such insurance is canceled or terminated
(other than for normal expiration) for any reason whatever, the Lessor,
Indenture Trustee and Owner Participant shall receive 30 days' prior notice of
such cancellation or termination,
(ii) name the Owner Participant, Lessor, Wilmington Trust Company,
the Indenture Trustee and the Loan Participant as additional insured as their
interests may appear (but only as respects liability arising out of the
Operative Agreements or the Equipment),
(iii) provide that inasmuch as such public liability insurance
policies cover more than one insured, all terms, conditions, insuring agreements
and endorsements, with the exceptions of limits of liability deductibles or
retentions and liability for premiums, commissions, assessments or calls,
operate in the same manner as if there were a separate policy or policies
covering each insured,
(iv) waive rights of subrogation against the Owner Participant,
Lessor, Wilmington Trust Company and the Indenture Trustee,
(v) provide that neither the Owner Participant, Lessor, Wilmington
Trust Company nor the Indenture Trustee shall have any liability or obligation
for insurance premiums whether for coverage before or after cancellation or
termination of any such policies,
(vi) shall be primary without contribution from any similar
insurance maintained by Owner Participant, Lessor, Wilmington Trust Company,
Indenture Trustee or Loan Participant.
B-1
(vii) provides for sudden and accidental pollution coverage due to
collision or overturn of railcars arising out of the use or operation of the
units. The scope of this coverage includes clean up should Lessee become
obligated to pay (other than on property owned, leased or occupied by Lessee).
B-2
EXHIBIT C
Form of Transfer Agreement
[To Come]
C-1
EXHIBIT D
Form of Notice of Assignment of
Existing Car Service Contract
[To Come]
D-1
EXHIBIT E
[Equity Information]
[To Come]
E-1
Schedule 1
Participation Agreement
Description of Equipment, Designation of Basic Groups,
Designation of Functional Groups, and Equipment Cost
See Attached
Schedule 1A
Participation Agreement
List of Existing Car Service Contracts
Schedule 2
Participation Agreement
Commitment Percentage and Payment Information for Participants
1. The percentage representing the Loan Participant's Commitment is
___________%
All Payments to Loan Participant should be made
by wire transfer of immediately available funds to:
State Street Bank and Trust Company
ABA No. ______________
Credit: _____________ Corporate Trust Administration
Attention: ______________
Reference: GARC II 98-A
Account # ___________
2. The percentage representing the Owner Participant's Commitment is
_____________%. All payments to ___________________, as Owner Participant
should be made by wire transfer of immediately available funds to:
_____________________
ABA No. _____________
Account # ___________________
Schedule 3
Participation Agreement
Schedule of Basic Rent Payments
See Attached
Schedule 4
Participation Agreement
Schedule of Stipulated Loss Value and Termination Value
The Stipulated Loss Value for a Unit of Equipment as of the Basic Term
Commencement Date and each Rent Payment Date shall be an amount equal to the
percentage of the Equipment Cost for such Unit set opposite such date in this
schedule. The Termination Value for a Unit of Equipment as of each Rent Payment
Date shall be an amount equal to the percentage of the Equipment Cost for such
Unit set opposite such date in this schedule.
See Attached
Schedule 5
Participation Agreement
Terms of Equipment Notes
See Attached
Schedule 6
Participation Agreement
Purchase Information
Early Purchase Date: ____________, 20__
Early Purchase Price: __________% (stated as a
percentage of Equipment Cost), of
which __________% may be deferred
at the option of the Lessee and
payable in ____ (__) equal
installments on ________, _______,
____________ and ___________, 20__
each in an amount of __________%
of Equipment Cost.
Basic Term Purchase Price: _____________________________