<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1994
REGISTRATION NO. 33-56287
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UNION TANK CAR COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3104688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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225 WEST WASHINGTON STREET
CHICAGO, ILLINOIS 60606
(312) 372-9500
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
William M. Holzman, Esq.
Neal Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
(312) 269-8000
(Name, address, including zip code, and telephone number
area code, of agent for service)
Copies to:
Barry P. Biggar, Esq.
Mayer, Brown & Platt
787 Seventh Avenue
New York, New York 10019
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
AMOUNT PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Pass Through Certificates,
Series 1994-A......................... $100,000,000 100% $100,000,000 $34,483
</TABLE>
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(1) Estimated in accordance with Rule 457 solely for the purpose of determining
the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION
DECEMBER 5, 1994
PROSPECTUS
$95,000,000
UNION TANK CAR COMPANY
1994-A PASS THROUGH TRUST
PASS THROUGH CERTIFICATES, SERIES 1994-A
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in the Union Tank Car Company 1994-A Pass Through Trust (the
"Pass Through Trust") to be formed pursuant to a pass through trust agreement
between Union Tank Car Company (the "Company") and The First National Bank of
Chicago (the "Pass Through Trustee"), as trustee under the Pass Through Trust.
The property of the Pass Through Trust will consist of equipment notes (the
"Equipment Notes") to be issued on a nonrecourse basis by the trustee of two
separate owner trusts (each, an "Owner Trustee") in connection with two separate
leveraged lease transactions to finance not more than 80% of the cost of certain
tank cars and covered hopper cars (each rail car a "Unit" and, collectively, the
"Equipment") that will be purchased by the Owner Trustees from the Company and
leased to the Company. Amounts unconditionally payable under the leases will be
sufficient to pay in full when due all payments of principal of, Make-Whole
Amount (as hereinafter defined), if any, and interest on the Equipment Notes
held in the Pass Through Trust. However, neither the Pass Through Certificates
nor the Equipment Notes are obligations of, or guaranteed by, the Company.
Each Equipment Note will be issued under one of two indentures, each between an
Owner Trustee and an indenture trustee (an "Indenture Trustee"). The Equipment
Notes acquired by the Pass Through Trust will mature on or before the final
distribution date for the Pass Through Certificates. The Equipment Notes issued
under each indenture will be secured by a security interest in the Equipment
leased by the Company under the lease relating to such indenture and by an
assignment of certain of the Owner Trustee's rights under such lease, including
the right to receive rentals payable by the Company in respect of such Equipment
pursuant to such lease.
Interest paid on the Equipment Notes held in the Pass Through Trust will be
passed through to the Certificateholders on January 2 and July 2 of each year,
commencing on July 2, 1995, at the rate per annum set forth below until the
final distribution date for the Pass Through Trust. Principal paid on the
Equipment Notes held in the Pass Through Trust will be passed through to the
Certificateholders in scheduled amounts on January 2 or July 2, or both, of each
year, commencing on , and continuing until the final distribution
date for the Pass Through Trust. The Equipment Notes may be prepaid under
certain circumstances.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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FINAL
PRINCIPAL INTEREST DISTRIBUTION PRICE TO
AMOUNT RATE DATE PUBLIC(1)(2)
<S> <C> <C> <C> <C>
1994-A......................... $95,000,000 % 100%
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</TABLE>
(1) Plus accrued interest, if any, from December , 1994.
(2) The underwriting commission is $ , which constitutes % of the
principal amount of the Pass Through Certificates. The underwriting
commission, and certain other expenses estimated at $ , will be payable
by the Owner Trustees in the leveraged lease transactions. All of the
proceeds from the sale of the Pass Through Certificates will be used to
purchase the Equipment Notes from the Owner Trustees.
The Pass Through Certificates are offered by the Underwriter subject to prior
sale, when, as and if accepted by the Underwriter and subject to approval of
certain legal matters by Mayer, Brown & Platt, counsel for the Underwriter. It
is expected that delivery of the Pass Through Certificates in book-entry form
will be made on or before December , 1994 through the facilities of The
Depository Trust Company, against payment therefor in immediately available
funds.
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SALOMON BROTHERS INC
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The date of this Prospectus is December , 1994.
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE PASS THROUGH
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
Union Tank Car Company (with its wholly-owned subsidiaries herein
collectively referred to, unless the context otherwise requires, as the
"Company") has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Pass Through Certificates. This Prospectus, which forms a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information pertaining to the Pass Through Certificates and the Company,
reference is made to the Registration Statement. Any statement contained herein
concerning the provisions of any document is not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Information
concerning the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and New York Regional Office, 7 World Trade Center, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
REPORTS TO CERTIFICATEHOLDERS BY THE TRUSTEE
The First National Bank of Chicago, as trustee under the Pass Through Trust
Agreement, will provide to Certificateholders certain periodic statements
concerning distributions made with respect to the Pass Through Trust. See
"Description of the Pass Through Certificates--Reports to Certificateholders."
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and its Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994, and September 30, 1994, each as filed with the Commission
pursuant to the Exchange Act, are incorporated herein by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Pass Through Certificates shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein, or contained in
this Prospectus, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written request of such person, a copy (without
exhibits) of any or all documents incorporated by reference in this Prospectus.
Requests for such copies should be directed to the General Counsel and
Secretary, Union Tank Car Company, 225 West Washington Street, Chicago, Illinois
60606, telephone (312) 372-9500.
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<PAGE> 4
SUMMARY
The following summary of provisions relating to the Pass Through
Certificates does not purport to be complete and is qualified in its entirety by
the detailed information appearing elsewhere or incorporated by reference in the
Prospectus.
Glossary........................ Included at the end of this Prospectus as
Appendix I is a Glossary of certain of the
significant defined terms used herein.
Pass Through Trust.............. The Union Tank Car Company 1994-A Pass
Through Trust (the "Pass Through Trust") is
to be formed pursuant to a Pass Through
Trust Agreement (the "Agreement") between
Union Tank Car Company (the "Company") and
The First National Bank of Chicago (the
"Pass Through Trustee"), as trustee of the
Pass Through Trust.
Pass Through Trust Property..... The property of the Pass Through Trust will
consist of equipment notes (the "Equipment
Notes") issued on a nonrecourse basis by
State Street Bank and Trust Company, as
owner trustee (each, an "Owner Trustee") of
two separate trusts for the benefit of
certain institutional investors (each, an
"Owner Participant"), in connection with two
separate leveraged lease transactions to
finance not more than 80% of the cost to
such Owner Trustees of certain tank cars and
covered hopper cars (each rail car a "Unit"
and, collectively, the "Equipment") which
will be purchased by such Owner Trustees, on
behalf of certain Owner Participants, from
the Company and leased to the Company. Each
Equipment Note will be issued in connection
with such leveraged lease transactions under
one of two indentures (each, an
"Indenture"). See "Use of Proceeds" for
additional information concerning the
Equipment.
The Pass Through Certificates, Series 1994-A
(the "Pass Through Certificates"), that will
be issued by the Pass Through Trust will
bear interest at the same rate as the rate
on the Equipment Notes. The Equipment Notes
will mature on or before the final
distribution date of the Pass Through
Certificates. The aggregate principal amount
of the Equipment Notes to be held in the
Pass Through Trust will be the same as the
aggregate principal amount of the Pass
Through Certificates issued by the Pass
Through Trust.
Pass Through Certificates;
Book-Entry Registration...... Each Pass Through Certificate will represent
a fractional undivided interest in the Pass
Through Trust. The Pass Through Certificates
will be issued in fully registered form
only. See "Description of the Pass Through
Certificates--General." The Pass Through
Certificates will be registered in the name
of Cede & Co. ("Cede"), as the nominee of
The Depository Trust Company ("DTC"). No
person acquiring an interest in the Pass
Through
3
<PAGE> 5
Certificates will be entitled to receive a
definitive certificate (a "Registered
Certificate") representing such person's
interest in the Pass Through Trust, except
in the event that Registered Certificates
are issued under the limited circumstances
described herein. See "Description of the
Pass Through Certificates--Book-Entry
Registration" and "--Registered
Certificates."
Denominations................... The Pass Through Certificates will be issued
in minimum denominations of $1,000 and any
integral multiple of $1,000 in excess
thereof. See "Description of the Pass
Through Certificates--General."
Regular Distribution Dates...... January 2 and July 2.
Special Distribution Dates...... Regular Distribution Dates or in certain
cases any Business Day.
Record Dates.................... The fifteenth day preceding a Regular
Distribution Date or a Special Distribution
Date.
Initial Average Life Date....... The initial average life date of the Pass
Through Certificates is .
Distributions................... Payments of interest on the Equipment Notes
held in the Pass Through Trust are scheduled
to be received in specified amounts by the
Pass Through Trustee on January 2 and July 2
of each year, commencing July 2, 1995, and
are to be distributed to the
Certificateholders on the corresponding
Regular Distribution Dates. Payments of
principal on the Equipment Notes are
scheduled to be received in specified
amounts by the Pass Through Trustee on
January 2 or July 2, or both, of each year,
commencing , and are to be
distributed to the Certificateholders on the
corresponding Regular Distribution Dates.
Payments of principal of, Make-Whole Amount,
if any, and interest on the Equipment Notes
resulting from prepayments thereof, if any,
will be distributed on a Special
Distribution Date after not less than 15
days' notice from the Pass Through Trustee
to the Certificateholders. For a discussion
of distributions upon an Event of Default,
see "Description of the Pass Through
Certificates--Events of Default and Certain
Rights Upon an Event of Default."
To the extent that Equipment Notes are not
purchased by the Pass Through Trustee on or
prior to December 30, 1994, the unexpended
proceeds, together with interest thereon at
the rate applicable to the Pass Through
Certificates, will be distributed to
Certificateholders on January 2, 1995. See
"Description of the Pass Through
Certificates--Special Payments Under Certain
Circumstances."
Method of Distributions......... So long as the Pass Through Certificates are
registered in the name of Cede, as the
nominee of DTC, distributions by the Pass
Through Trustee will be made in same-day
4
<PAGE> 6
funds to DTC, which in turn will make
distributions to participants in DTC ("DTC
Participants") in same-day funds. The final
distribution of principal with respect to
the Pass Through Certificates will be made
by DTC to DTC Participants in same-day
funds. Responsibility for distributions by
DTC Participants to beneficial owners of the
Pass Through Certificates will be the
responsibility of such DTC Participants and
will be made in accordance with customary
industry practices. See "Description of the
Pass Through Certificates--Payments and
Distributions." At such time, if any, as
Registered Certificates are issued
representing the Pass Through Certificates
and are not registered in the name of Cede,
as the nominee of DTC, distributions by the
Pass Through Trustee to Certificateholders,
other than the final distribution, will be
made by check mailed to each
Certificateholder of record on the
applicable record date at its address
appearing on the register. The final
distribution with respect to the Pass
Through Certificates will be made only upon
surrender and presentation thereof at the
office or agency of the Pass Through
Trustee. See "Description of the Pass
Through Certificates--Payments and
Distributions."
Interest........................ Interest on the Pass Through Certificates
will be passed through to the
Certificateholders at the rate per annum
indicated on the cover of this Prospectus,
which is the interest rate borne by the
Equipment Notes to be held in the Pass
Through Trust. Interest is calculated on the
basis of a 360-day year consisting of twelve
30-day months. See "Description of the Pass
Through Certificates--General."
Principal....................... The principal of the Equipment Notes is
payable in scheduled amounts on January 2 or
July 2, or both, of each year, commencing
. See "Description of the
Pass Through Certificates--Payments and
Distributions" and "Description of the
Equipment Notes--Principal Payments."
Equipment Notes: General........ Interest will be payable in arrears on the
Equipment Notes on the unpaid principal
amount thereof on January 2 and July 2 of
each year, commencing on July 2, 1995. The
principal of each Equipment Note is payable
in accordance with the principal repayment
schedule set forth herein under "Description
of the Equipment Notes--Principal Payments."
Equipment Notes: Prepayment..... One or more of the Equipment Notes may be
prepaid, in whole or in part, under the
following circumstances:
(a) If an Event of Loss to a Unit shall
occur and the Company does not
substitute like kind equipment of equal
or greater value for such Unit, it is
obligated to pay the Stipulated Loss
Value of such Unit. Such payment will be
used to prepay a portion of the
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<PAGE> 7
Equipment Notes issued under the
Indenture relating to such Unit on (i)
the next Regular Distribution Date
following the election by the Company
to make such payment rather than
substitute like kind equipment or (ii)
in the case of the
occurrence of an Event of Loss in respect
of more than ten Units since the end of
the last six month reporting period under
a Lease (a "Multiple Loss"), on the first
Business Day succeeding the 60th day
following the date on which the Company
is required to report such Multiple Loss.
The amount prepaid will be equal to the
sum of (i) as to principal, an amount
equal to the product obtained by
multiplying the aggregate unpaid
principal amount of the Equipment Notes
issued under the Indenture to which such
Unit relates as of the prepayment date
(after deducting therefrom the scheduled
principal installment, if any, due on the
prepayment date) by a fraction, the
numerator of which shall be the Equipment
Cost of such Unit and the denominator of
which shall be the aggregate Equipment
Cost of all Equipment securing such
Indenture immediately prior to the
prepayment date, and (ii) as to interest,
the aggregate amount of interest accrued
and unpaid to but not including the
prepayment date in respect of the
principal amount to be prepaid pursuant
to clause (i) above on such prepayment
date. No Make-Whole Amount will be
payable in the event of a prepayment
under such circumstances.
(b) If (i) on or after July 2, 2002 the
Company elects to exercise its right to
terminate a Lease pursuant to the terms
thereof with respect to some or all of
the Units leased thereunder, (ii) on
January 2, 2005 with respect to certain
Units and January 2, 2006 with respect
to all other Units the Company exercises
its option to purchase some or all of
the Units in accordance with the terms
of the applicable Lease or (iii) the
Company elects to exercise its right
under a Participation Agreement to
purchase Equipment as a result of an
Owner Participant (or an affiliate
thereof) engaging in a business that is
in competition with the Company's full
service railcar leasing business, a
portion of the proceeds from the
Company's payment of the Termination
Value of such Unit or the exercise price
of the purchase option, as the case may
be, will be used to prepay Equipment
Notes relating to such Equipment, unless
the Company elects in connection with
the exercise of a purchase option to
assume on a full recourse basis all of
the Owner Trustee's obligations in
respect of the related Equipment Notes
and acquires such purchased Units
subject to the lien of the related
Indenture. Any such prepayment will be
in an amount at least equal to the
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<PAGE> 8
principal and accrued interest thereon,
computed as provided in paragraph (a)
above, plus, if such prepayment is made
prior to , , a
Make-Whole Amount. See "Description of
the Equipment Notes--Prepayment" for a
description of the manner of computing
the Make-Whole Amount.
(c) Subject to certain restrictions, the
Company may require an Owner Trustee to
effect a prepayment of the Equipment
Notes issued under an Indenture at a
price equal to the aggregate unpaid
principal amount thereof, together with
accrued interest thereon, plus, if such
prepayment is made prior to
, , a Make-Whole
Amount, as part of a refunding or
refinancing which will result in the
prepayment of the Pass Through
Certificates.
(d) If under any Indenture an Indenture
Default shall have occurred and be
continuing and (i) the Indenture Trustee
shall give notice of its intent to
accelerate the Equipment Notes
thereunder or to exercise other remedies
available to it or (ii) the Indenture
Trustee shall not have taken action with
respect to such Indenture Default for a
period of not less than 180 days, the
applicable Owner Trustee may elect to
prepay or purchase all of the then
outstanding Equipment Notes issued under
such Indenture at a price equal to the
unpaid principal amount thereof,
together with accrued interest thereon
to the date of prepayment or purchase,
but without any Make-Whole Amount.
See "Description of the Equipment
Notes--Prepayment."
Equipment Notes: Security....... The Equipment Notes issued under each
Indenture will be secured by a security
interest in the Equipment leased by the
Company under the Lease relating to such
Indenture and an assignment to the Indenture
Trustee of certain of the Owner Trustee's
rights under the Lease covering such
Equipment, including the right to receive
rent payable by the Company thereunder.
Equipment Notes issued under the Indentures
are not cross-collateralized and,
consequently, the Equipment Notes issued
under one Indenture are not secured by any
of the Equipment securing the other
Indenture or by the Lease related thereto.
There are no cross-default provisions in the
Indentures and, consequently, if the
Equipment Notes issued under one Indenture
are in default, the Equipment Notes issued
under the other Indenture may not be in
default and, if not in default, no remedies
will be exercisable under such Indenture.
See "Description of the Equipment
Notes--Security."
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<PAGE> 9
In the event of the bankruptcy of an Owner
Participant, it is possible that,
notwithstanding that the Equipment is owned
by an Owner Trustee in trust for the benefit
of such Owner Participant, the Equipment and
the related Lease and Equipment Notes might
become part of the bankruptcy proceeding. In
such event, payments on the Equipment Notes
might be interrupted and the ability of the
Indenture Trustee to exercise its remedies
under the Indenture might be restricted,
although the Indenture Trustee would retain
its status as a secured creditor in respect
of such Lease and the Equipment subject
thereto. See "Description of the Equipment
Notes--Remedies."
Although the Equipment Notes are not direct
obligations of, or guaranteed by, the
Company, the amounts unconditionally payable
by the Company under the Leases will be
sufficient to pay in full when due all
payments of principal of, Make-Whole Amount,
if any, and interest on the Equipment Notes.
See "Description of the Equipment
Notes--General."
Use of Proceeds................. The proceeds from the sale of the Pass
Through Certificates will be used by the
Pass Through Trustee to purchase the
Equipment Notes from the Owner Trustees. The
Owner Trustees will use such proceeds to
finance not more than 80% of the Equipment
Cost of the Equipment, representing in the
aggregate the entire debt portion of the two
separate leveraged lease transactions. The
net proceeds to the Company from the sale of
the Equipment will be used by the Company
for general corporate purposes. See "Use of
Proceeds."
Pass Through Trustee............ The First National Bank of Chicago will act
as trustee under the Pass Through Agreement
and as paying agent and registrar for the
Pass Through Certificates. The First
National Bank of Chicago also will act as
the Indenture Trustee under each Indenture.
Federal Income Tax
Consequences.................. The Pass Through Trust should be classified
as a grantor trust for federal income tax
purposes, and each Certificate Owner should
be treated as the owner of a pro rata
undivided interest in each of the Equipment
Notes and any other property held in the
Pass Through Trust and should report on its
federal income tax return its pro rata share
of income from such Equipment Notes in
accordance with such Certificate Owner's
method of accounting. See "Certain Federal
Income Tax Consequences."
ERISA Considerations............ The Pass Through Certificates, with certain
limited exceptions, are eligible for
purchase by employee benefit plans. See
"ERISA Considerations."
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<PAGE> 10
FORMATION OF THE PASS THROUGH TRUST
The Pass Through Trust will be formed pursuant to a Pass Through Trust
Agreement (the "Agreement") by and between the Company and the Pass Through
Trustee. Upon or prior to the execution and delivery of the Agreement, the Pass
Through Trustee, on behalf of the Pass Through Trust, will enter into two
separate participation agreements with the Company, the Indenture Trustee, the
applicable Owner Trustee and the applicable Owner Participant (in each case, a
"Participation Agreement") pursuant to which it will, among other things,
purchase the Equipment Notes, which notes will bear interest at the same rate as
the rate on the Pass Through Certificates and will mature on or before the final
distribution date of the Pass Through Certificates. The Pass Through Trust will
hold all of the Equipment Notes originally issued, representing in the aggregate
the entire debt portion of the two separate leveraged lease transactions. The
Pass Through Trustee will distribute the payments of principal, Make-Whole
Amount, if any, and interest received by it as the holder of the Equipment Notes
to the Certificateholders. See "Description of the Pass Through
Certificates--General" and "Description of the Equipment Notes--General."
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<PAGE> 11
DESCRIPTION OF PAYMENT FLOWS
The following diagram illustrates certain aspects of the payment flows in
each separate leveraged lease transaction among the Company, an Owner Trustee,
an Owner Participant, the Indenture Trustee, the Pass Through Trustee and the
Certificateholders.
In each of the two separate leveraged lease transactions, the Company will
lease certain Equipment from an Owner Trustee, as lessor of such Equipment under
a Lease. Equipment Notes with respect to such Equipment will be issued under an
Indenture by the Owner Trustee and will be purchased by the Pass Through Trustee
for the benefit of the Certificateholders. Rent is payable under the Lease to
the Owner Trustee, as lessor. However, as a result of the assignment of the
Lease to the Indenture Trustee, the Company will make rental payments directly
to the Indenture Trustee. From these rental payments the Indenture Trustee will,
on behalf of the Owner Trustee, first make payments to the Pass Through Trustee
as required to meet the Owner Trustee's obligations under the Equipment Notes
relating to such Equipment and will pay the remaining balance to the Owner
Trustee, for the benefit of the Owner Participant. The Pass Through Trustee will
distribute payments received in respect of the Equipment Notes relating to such
Equipment (together with payments received in respect of the Equipment Notes
relating to the other Equipment which is the subject of the other lease
transactions) held in the Pass Through Trust to the Certificateholders as
required under the terms of the Pass Through Certificates. The First National
Bank of Chicago will act initially both as Pass Through Trustee of the Pass
Through Trust and as Indenture Trustee under the Indentures.
|------------------------|
| Union Tank Car Company |
|------------------------|
|
| Lease Rental Payments
| Assigned by Owner Trustee
| to Indenture Trustee
|
\|/
|------------------------|
| Indenture |
| Trustee |
|------------------------|
| |
| |
Excess | | Equipment
Payments | | Note Payments
| |
|-------------------- --------------------|
\|/ \|/
|--------------| |----------------------|
| Owner | | Pass Through Trustee |
| Trustee | |----------------------|
|--------------| |
| |
| | Pass Through
| Excess | Certificate
| Payments | Distributions
| |
\|/ \|/
|--------------| |----------------------|
| Owner | | Holders of Pass |
| Participant | | Through |
|--------------| | Certificates |
|----------------------|
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<PAGE> 12
USE OF PROCEEDS
The Pass Through Certificates are being issued in order to facilitate the
financing by the Owner Trustees (as defined below) on behalf of certain Owner
Participants (as defined below) of their purchase of the Equipment to be leased
to the Company. All of the proceeds from the sale of Pass Through Certificates
will be used by the Pass Through Trustee to purchase Equipment Notes issued by
the Owner Trustees which, in turn, will use the proceeds, together with funds
provided by the Owner Participants, to purchase the Equipment from the Company,
on behalf of the Owner Participants.
The Equipment Notes will be issued under two separate Trust Indenture and
Security Agreements (each an "Indenture"), each such Indenture being between The
First National Bank of Chicago, as trustee thereunder (in such capacity, the
"Indenture Trustee"), and State Street Bank and Trust Company, not in its
individual capacity (except as expressly set forth therein) but solely as owner
trustee (each, an "Owner Trustee") of a separate trust for the benefit of an
institutional investor (the "Owner Participant"). Each Owner Participant will
provide from sources other than the Equipment Notes at least 20% of the
Equipment Cost of the related Equipment as an equity investment. No Owner
Participant, however, will be liable for any amount payable under the related
Indenture or any Equipment Notes issued thereunder.
The net proceeds to the Company from the sale of the Equipment will be used
by the Company for general corporate purposes.
The following table sets forth information with respect to the Equipment
(consisting of an aggregate of 2,261 rail cars, all of which were manufactured
in 1993 or 1994) expected to be purchased by the Owner Trustees and leased to
the Company:
<TABLE>
<CAPTION>
TYPE OF CAR NO. OF CARS
------------------------------------------------------------- -----------
<S> <C>
Covered Hopper (5,800 cu. ft.)............................... 548
Covered Hopper (3,000 cu. ft.)............................... 24
Tank (general purpose)....................................... 1,226
Tank (pressure).............................................. 463
-----------
Total........................................................ 2,261
=========
</TABLE>
The following table sets forth information with respect to each of the
Leases:
<TABLE>
<CAPTION>
AGGREGATE COST
OF EQUIPMENT PRINCIPAL
TO OWNER AMOUNT OF
LEASE NO. TRUSTEES EQUIPMENT NOTES
------------------------------------------- -------------- ---------------
<S> <C> <C>
1.......................................... $ $
2..........................................
Total................................. $ $
============ =============
</TABLE>
11
<PAGE> 13
THE COMPANY
The Company is principally engaged in the leasing of railway tank cars and
other rail cars to United States, Canadian and Mexican manufacturers and other
shippers of chemical products, including liquid fertilizers, petroleum products,
including liquid petroleum gas, food products and bulk plastics. The Company
owns and operates one of the largest fleets of privately-owned railway tank cars
in the world.
The Company, which was incorporated in Delaware in 1980 and is the
successor to a business which was incorporated in New Jersey in 1891 and
reincorporated in Delaware in 1968, is a wholly-owned subsidiary of Marmon
Industrial Corporation, an indirect wholly-owned subsidiary of Marmon Holdings,
Inc. Substantially all the stock of Marmon Holdings, Inc. is owned, directly or
indirectly, by trusts for the benefit of certain members of the Pritzker family.
As used herein, "Pritzker family" refers to the lineal descendants of Nicholas
J. Pritzker, deceased.
The Company's principal executive offices are located at 225 West
Washington Street, Chicago, Illinois 60606, and its telephone number is (312)
372-9500.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at September 30, 1994. The table does not give effect to the sale of the
Pass Through Certificates because the Pass Through Certificates are not direct
obligations of the Company. In addition, because the Leases are expected to be
classified as operating, rather than capital, leases, there will be no related
obligation recorded on the Company's consolidated balance sheet.
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING AT
SEPTEMBER 30,
1994
--------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Borrowed debt:
Equipment obligations, payable periodically through 2009 at 6.50%-15.55%
(average rate 9.37%)..................................................... $ 737,546
Senior notes, 9.75% due in 1997............................................. 143,000
Other long-term borrowings (average rate 12.20%)............................ 28,776
--------------
Total borrowed debt...................................................... 909,322
Stockholder's equity:
Common stock, no par value: 1,000 shares authorized and issued.............. 106,689
Additional capital.......................................................... 4,652
Retained earnings........................................................... 388,746
--------------
Total stockholder's equity............................................... 500,087
--------------
Total capitalization................................................... $1,409,409
============
</TABLE>
12
<PAGE> 14
SELECTED FINANCIAL INFORMATION
The selected financial information set forth below as of December 31, 1989
through 1993 and for the years then ended, with the exception of the operating
fleet data, has been derived from the Company's audited financial statements
contained in the Company's Annual Reports on Form 10-K. The audited financial
statements contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, together with the report of the Company's independent
auditors, Ernst & Young LLP, are incorporated herein by reference. See
"Documents Incorporated by Reference." The selected financial data set forth
below as of September 30, 1994 and 1993 and for the nine months then ended, with
the exception of the ratios of earnings to fixed charges and the operating fleet
data, were extracted from the Company's unaudited financial statements contained
in the Company's Quarterly Reports on Form 10-Q for the quarters ended September
30, 1994 and September 30, 1993, the former of which is incorporated herein by
reference. Interim results are not necessarily indicative of the results for the
full year. The selected financial information should be read in conjunction with
such financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993 and in
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Services and net sales(1).......... $ 430,489 $ 373,518 $ 504,823 $ 618,007 $ 483,416 $ 462,684 $ 477,388
Other income....................... 11,691 13,860 18,272 22,718 37,406 44,503 36,664
Total revenues..................... 442,180 387,378 523,095 640,725 520,822 507,187 514,052
Cost of services and sales......... 257,037 208,505 281,400 400,521 269,748 251,793 251,581
General and administrative......... 40,207 40,566 54,629 53,609 52,560 55,117 61,034
Interest expense................... 70,007 72,693 96,584 105,417 117,263 115,584 100,119
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes,
extraordinary loss and cumulative
effect of change in accounting
principle........................ 74,929 65,614 90,482 81,178 81,251 84,693 101,318
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before extraordinary loss
and cumulative effect of change
in accounting principle.......... 45,457 33,959 49,730 48,382 45,024 40,072 62,351
Extraordinary loss(2).............. -- -- -- -- -- (15,292) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
a change in accounting
principle........................ 45,457 33,959 49,730 48,382 45,024 24,780 62,351
Cumulative effect of a change in
accounting principle(3).......... -- 80,000 80,000 -- -- (2,640) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income......................... $ 45,457 $ 113,959 $ 129,730 $ 48,382 $ 45,024 $ 22,140 $ 62,351
========= ========= ========= ========= ========= ========= =========
BALANCE SHEET(4)
Total assets....................... 2,047,940 2,084,877 2,054,867 2,063,267 2,253,760 2,195,171 1,958,406
Borrowed debt...................... 909,322 991,950 951,031 942,907 1,131,558 1,107,746 906,647
Stockholder's equity............... 500,087 480,859 485,630 445,900 430,518 416,494 410,354
OTHER
Ratio of earnings to fixed
charges(5)....................... 2.01x 1.86x 1.89x 1.76x 1.69x 1.73x 2.00x
OPERATING FLEET(4)
Tank cars.......................... 51,885 50,549 51,021 49,580 48,837 47,998 48,288
Other railway cars................. 13,391 13,428 13,515 13,633 14,334 13,694 13,378
</TABLE>
- ---------------
(1) In May 1992, the Company entered into several sale-leaseback transactions
pursuant to which it sold (at approximately book value) approximately 2,100
rail cars. As a result of these transactions, the Company recorded sales
revenue of $124.9 million which accounts for the unusually high sales and
cost of sales figures in 1992 as compared to other periods.
(2) Extraordinary loss resulted from the early extinguishment of debt and is net
of $9,183 of income tax benefit.
13
<PAGE> 15
(3) The $80 million cumulative effect of a change in accounting principle for
the year ended December 31, 1993 resulted from the Company's adoption of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." As more fully discussed in the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, effective January 1, 1993,
the Company prospectively adopted the provisions of this new accounting
standard and, accordingly, changed to the asset and liability approach of
accounting for income taxes. The cumulative effect of this change in
accounting principle was an $80 million non-cash credit to earnings, which
represents the new, lower net deferred income tax liability calculated under
the new accounting method as compared to the net liability recorded under
the former income tax accounting method. Adoption of the new accounting
method had no impact on pre-tax income and has not and will not impact cash
flows related to income taxes. The $2.6 million cumulative effect of a
change in accounting principle (net of $1.4 million tax benefit) for the
year ended December 31, 1990 represents a charge to earnings for the
adoption of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits."
(4) As of the end of the period indicated.
(5) The ratio of earnings to fixed charges represents the number of times that
interest expense, amortization of debt discount and the interest component
of rent expense were covered by income before income taxes and such
interest, amortization and the interest component of rentals. In addition to
fluctuations in the ratio of earnings to fixed charges resulting from
changes in the Company's operations, the ratio of earnings to fixed charges
for the periods after 1989 was reduced because of the incurrence of
additional interest expense relating to the Company's commercial paper
program, which program was discontinued effective May 1994.
14
<PAGE> 16
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The Pass Through Certificates offered hereby will be issued pursuant to the
Agreement to be entered into between the Company and the Pass Through Trustee.
The Agreement will be qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The statements under this caption are a
summary only and do not purport to be complete. The summary makes use of terms
defined in the Agreement and is qualified in its entirety by reference to all of
the provisions of the Agreement. Except as otherwise indicated, the following
summary relates to the Agreement, the Pass Through Trust formed thereby and the
Pass Through Certificates issued by the Pass Through Trust. Citations to the
relevant sections of the Agreement appear below in parentheses unless otherwise
indicated.
GENERAL
The Pass Through Certificates will be issued in fully registered form only.
Each Pass Though Certificate will represent a fractional, undivided interest in
the Pass Through Trust. The property of the Pass Through Trust will include the
Equipment Notes held in such Pass Through Trust, all monies at any time paid
with respect to such Equipment Notes, all monies due and to become due
thereunder and funds from time to time deposited with the Pass Through Trustee
in accounts relating to the Pass Through Trust. Each Pass Through Certificate
will correspond to a pro rata share of the outstanding principal amount of the
Equipment Notes to be held in the Pass Through Trust and will be issued in
minimum denominations of $1,000 or any integral multiple of $1,000 in excess
thereof. (Sections 2.1 and 3.1) The Pass Through Certificates will be registered
in the name of Cede & Co. ("Cede") as the nominee of The Depository Trust
Company ("DTC"). No person acquiring an interest in the Pass Through
Certificates (a "Certificate Owner") will be entitled to receive a certificate
representing such persons interest in the Pass Through Certificates, except as
set forth below under "Registered Certificates." Unless and until Registered
Certificates are issued under the limited circumstances described herein, all
references to actions by Certificateholders shall refer to actions taken by DTC
upon instructions from DTC Participants (as defined below), and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer, as the case may be, to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Pass Through
Certificates, or to DTC Participants for distribution to Certificate Owners in
accordance with DTC procedures. See "Book-Entry Registration." (Section 3.9)
Interest will be passed through to Certificateholders of the Pass Through
Trust at the rate per annum set forth on the cover page of this Prospectus,
which is calculated on the basis of a 360-day year of twelve 30-day months.
The Pass Through Certificates represent interests in the Pass Through Trust
and do not represent an interest in or obligation of the Company, the Pass
Through Trustee, any Owner Participant, any Owner Trustee in its individual
capacity, or any affiliate of any such person. (Section 3.8)
The Agreement and the Indentures do not contain any financial or operating
covenants nor any "event risk" provisions specifically designed to afford
Certificate Owners protection in the event of a highly leveraged transaction
which may or may not result in a change of control of the Company. However, the
Certificate Owners have the indirect benefit of, among other things, a lien on
the Equipment and an assignment of rights to lease payments securing the
respective Equipment Notes.
BOOK-ENTRY REGISTRATION
DTC has advised the Company that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing
15
<PAGE> 17
agency" registered pursuant to Section 17A of the Exchange Act. DTC was created
to hold securities for its participants ("DTC Participants") and to facilitate
the clearance and settlement of securities transactions between DTC Participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. DTC Participants include securities brokers and
dealers (including Salomon Brothers Inc), banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant either directly or indirectly
("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Pass Through Certificates may do so only through DTC Participants
and Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Pass Through Trustee through
DTC Participants or Indirect Participants, as the case may be. Under a
book-entry format, Certificate Owners may experience some delay in their receipt
of payments, as such payments will be forwarded by the Pass Through Trustee to
Cede, as nominee for DTC. DTC will forward such payments to DTC Participants,
which thereafter will forward them to Indirect Participants or Certificate
Owners, as the case may be, in accordance with customary industry practices. The
forwarding of such distributions to the Certificate Owners will be the
responsibility of such DTC Participants. The only "Certificateholder" will be
Cede, as nominee of DTC. Certificate Owners will not be recognized by the Pass
Through Trustee as Certificateholders, as such term is used in the Agreements,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Pass Through Certificates among DTC Participants on whose behalf it acts with
respect to the Pass Through Certificates and to receive and transmit
distributions of principal of, Make-Whole Amount, if any, and interest on, the
Pass Through Certificates. DTC Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Pass Through Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Pass Through Certificates, the
Rules provide a mechanism by which Certificate Owners will receive payments and
will be able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
Pass Through Certificates to persons or entities that do not participate in the
DTC system, or to otherwise act with respect to such Pass Through Certificates,
may be limited due to the lack of a physical certificate for such Pass Through
Certificates.
DTC has advised the Company that it will take any action permitted to be
taken by a Certificateholder under the Agreements only at the direction of one
or more DTC Participants to whose accounts with DTC the Pass Through
Certificates are credited, which DTC Participants represent the percentage
interest of the Pass Through Trust necessary to provide such direction under the
Agreements. Additionally, DTC may take conflicting actions with respect to an
undivided interest held by a DTC Participant to the extent that it is directed
to do so by such DTC Participant as a result of instructions from various
Certificate Owners.
Neither the Company nor the Pass Through Trustee will have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of the Pass Through Certificates held by Cede, as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
16
<PAGE> 18
REGISTERED CERTIFICATES
The Pass Through Certificates will be issued in fully registered,
certificated form ("Registered Certificates") to Certificate Owners or their
nominees, rather than to DTC or its nominee, only if (i) the Company advises the
Pass Through Trustee in writing that DTC (or a successor thereto) is no longer
willing or able to discharge properly its responsibilities as depository with
respect to the Pass Through Certificates and the Pass Through Trustee or the
Company is unable to locate a qualified successor, (ii) the Company, at its
option, elects to terminate the book-entry system through DTC (or a successor
thereto) or (iii) after the occurrence of an Event of Default, Certificate
Owners representing an aggregate percentage interest in the Pass Through Trust
of not less than a majority advise the Pass Through Trustee through DTC in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the Certificate Owners best interest. (Section 3.9)
Upon the occurrence of any event described in the immediately preceding
paragraph, the Pass Through Trustee will be required to notify all Certificate
Owners through DTC Participants of the availability of Registered Certificates.
Upon surrender by DTC of the certificates representing the Pass Through
Certificates and receipt of instructions for re-registration, the Pass Through
Trustee will reissue the Pass Through Certificates as Registered Certificates to
Certificate Owners or their nominees. (Section 3.9)
Distribution of principal of, Make-Whole Amount, if any, and interest on
the Pass Through Certificates will thereafter be made by the Pass Through
Trustee directly to holders of Registered Certificates in accordance with the
procedures set forth in the Agreement. Such distributions will be made by check
mailed to the address of such holder as it appears on the register maintained by
the Pass Through Trustee. The final payment on any Pass Through Certificate,
however, will be made only upon presentation and surrender of such Pass Through
Certificate at the office or agency specified in the notice of final
distribution to Certificateholders. (Sections 4.2 and 11.1)
Registered Certificates will be freely transferable and exchangeable at the
office of the Pass Through Trustee upon compliance with the requirements set
forth in the related Agreements. No service charge will be imposed for any
registration of transfer or exchange, but payment of a sum sufficient to cover
any tax or other governmental charge will be required. (Sections 3.4 and 11.1)
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Pass Through Certificates will be required to be made in
immediately available funds. All payments made by the Company to each Indenture
Trustee as assignee of an Owner Trustee's rights under the corresponding Lease
will be in immediately available funds and will be passed through to DTC in
immediately available funds to the extent such payments are required to pay
principal of, Make-Whole Amount, if any, or interest on the Equipment Notes.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. Secondary trading in pass
through certificates such as the Pass Through Certificates is generally settled
in immediately available funds. The Pass Through Certificates will trade in
DTC's Same-Day Funds Settlement System until maturity, and secondary market
trading activity in the Pass Through Certificates will therefore be required by
DTC to settle in immediately available funds.
PAYMENTS AND DISTRIBUTIONS
Payments of principal of, Make-Whole Amount, if any, and interest on the
Equipment Notes will be distributed by the Pass Through Trustee to
Certificateholders on the date such receipt is confirmed, except in certain
cases when some or all of such Equipment Notes are in default. See "Description
of the Pass Through Certificates--Events of Default and Certain Rights Upon an
Event of Default." Payments of interest on the unpaid principal amount of the
Equipment Notes are
17
<PAGE> 19
scheduled to be received by the Pass Through Trustee on January 2 and July 2 of
each year, commencing July 2, 1995, until the final distribution date for the
Pass Through Trust, and payments of principal of the Equipment Notes are
scheduled to be received by the Pass Through Trustee on January 2 or July 2 or
both, of each year, commencing (such scheduled payments of
interest on and principal of the Equipment Notes are herein referred to as
"Scheduled Payments", and January 2 and July 2 of each year, commencing July 2,
1995, are herein referred to as "Regular Distribution Dates"). The Pass Through
Trustee will distribute on each Regular Distribution Date to the
Certificateholders all Scheduled Payments the receipt of which is confirmed by
the Pass Through Trustee on such Regular Distribution Date. Each such
distribution of Scheduled Payments will be made by the Pass Through Trustee to
the holders of record of the Pass Through Certificates as of the Record Date
preceding such Regular Distribution Date. (Sections 4.1 and 4.2) If a Scheduled
Payment is not received by the Pass Through Trustee on a Regular Distribution
Date, it will be distributed on the date received to such holders of record.
(Section 4.2)
Each Certificate Owner will be entitled to receive a pro rata share of any
distribution in respect of Scheduled Payments of principal and interest made on
the Equipment Notes. Scheduled Payments of principal of the Equipment Notes are
set forth below under "Description of the Equipment Notes--Principal Payments."
After a prepayment or default in respect of some or all of such Equipment Notes,
a Certificate Owner should refer to the information with respect to the Pool
Balance and the Pool Factor reported periodically by the Pass Through Trustee.
See "Description of the Pass Through Certificates--Pool Factors" and
"Description of the Pass Through Certificates--Reports to Certificateholders."
Payments of principal, Make-Whole Amount, if any, and interest received by
the Pass Through Trustee on account of the prepayment, if any, of the Equipment
Notes relating to certain Equipment, and payments received by the Pass Through
Trustee following a default in respect of the Equipment Notes relating to
certain Equipment (including payments received by the Pass Through Trustee on
account of the purchase by the Owner Trustee of such Equipment Notes or payments
received on account of the sale of such Equipment Notes by the Pass Through
Trustee) ("Special Payments") will be distributed (i) in the case of prepayments
with respect to a voluntary termination of a Lease, the purchase of any Units by
the Company or an ordinary Event of Loss, on a Regular Distribution Date, (ii)
in the case of prepayments with respect to a Multiple Loss (as hereinafter
defined), a refunding or refinancing of the Equipment Notes or a purchase of the
Equipment by the Company from an Owner Trustee of a competitor Owner
Participant, on any Business Day following 15 days notice from the Pass Through
Trustee to DTC and (iii) in the case of payments received following a default in
respect of any Equipment Note, on the second day of any month (each, a "Special
Distribution Date"). The Pass Through Trustee will mail notice to the
Certificateholders of record not less than 15 days prior to the Special
Distribution Date on which any Special Payment is scheduled to be distributed by
the Pass Through Trustee stating such anticipated Special Distribution Date.
(Section 4.2) Each distribution of a Special Payment, other than a final
distribution, on a Special Distribution Date will be made by the Pass Through
Trustee to the holders of record of the Pass Through Certificates as of the
Record Date preceding such Special Distribution Date. See "Description of the
Equipment Notes--Prepayment" and "Description of the Pass Through
Certificates--Events of Default and Certain Rights Upon an Event of Default."
The Agreement requires that the Pass Through Trustee establish and
maintain, for the Pass Through Trust and for the benefit of the
Certificateholders, one or more non-interest bearing accounts (the "Certificate
Account") for the deposit of payments representing Scheduled Payments. The
Agreement also requires that the Pass Through Trustee establish and maintain,
for the Pass Through Trust and for the benefit of the Certificateholders, one or
more non-interest bearing accounts (the "Special Payments Account") for the
deposit of payments representing Special Payments. Pursuant to the terms of the
Agreement, the Pass Through Trustee is required to deposit any Scheduled
Payments received by it in the Certificate Account and to deposit any Special
Payments so received by it in the Special Payments Account. (Section 4.1) All
amounts so
18
<PAGE> 20
deposited will be distributed by the Pass Through Trustee on a Regular
Distribution Date or a Special Distribution Date, as appropriate. (Section 4.2)
At such time, if any, as the Pass Through Certificates are issued in the
form of Registered Certificates and not to Cede, as nominee for DTC,
distributions by the Pass Through Trustee from the Certificate Account or the
Special Payments Account on a Regular Distribution Date or a Special
Distribution Date will be made by check mailed to each Certificateholder of
record on the applicable record date at its address appearing on the register
maintained with respect to the Pass Through Trust. (Section 4.2) The final
distribution for the Pass Through Trust, however, will be made only upon
presentation and surrender of the Pass Through Certificates at the office or
agency of the Pass Through Trustee specified in the notice given by the Pass
Through Trustee of such final distribution. The Pass Through Trustee will mail
such notice of the final distribution to the Certificateholders, specifying the
date set for such final distribution and the amount of such distribution.
(Section 11.1) See "Description of the Pass Through Certificates--Termination of
the Pass Through Trusts."
If any Regular Distribution Date or Special Distribution Date is not a
Business Day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date may be made on the next succeeding Business
Day without any additional interest. (Section 12.11)
POOL FACTORS
Unless there has been a prepayment, purchase or default, in respect of any
Equipment Notes held in the Pass Through Trust, as described below in
"Description of the Equipment Notes--Prepayment" and "Description of the Pass
Through Certificates--Events of Default and Certain Rights Upon an Event of
Default," the Pool Factor for the Pass Through Trust will decline in proportion
to the scheduled repayments of principal on the Equipment Notes as described
under "Description of the Equipment Notes--Principal Payments." In the event of
such a prepayment, purchase or default, the Pool Factor and the Pool Balance
will be recomputed after giving effect thereto and notice thereof will be mailed
to Certificateholders.
The "Pool Balance" indicates, as of any Regular Distribution Date or
Special Distribution Date, the aggregate unpaid principal amount of the
Equipment Notes held in the Pass Through Trust on such date plus any amounts in
respect of principal on such Equipment Notes held by the Pass Through Trustee
and not yet distributed. The Pool Balance as of any Regular Distribution Date or
Special Distribution Date, if any, shall be computed after giving effect to the
payment of principal, if any, of the Equipment Notes and distribution thereof to
be made on that date. (Section 1.1)
The "Pool Factor" as of any Regular Distribution Date or Special
Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance by (ii) the aggregate original
principal amount of the Pass Through Certificates. The Pool Factor as of any
Regular Distribution Date or Special Distribution Date shall be computed after
giving effect to the payment of principal, if any, on the Equipment Notes and
distribution thereof to be made on that date. (Section 1.1) The Pool Factor for
the Pass Through Trust will initially be 1.0000000; thereafter, the Pool Factor
will decline as described above to reflect reductions in the Pool Balance. The
amount of a Certificateholder's pro rata share of the Pool Balance can be
determined by multiplying the original denomination of such holder's Pass
Through Certificate by the Pool Factor as of the Regular Distribution Date or
Special Distribution Date. The Pool Factor and the Pool Balance will be mailed
to Certificateholders of record on each Regular Distribution Date and Special
Distribution Date.
As of the date of issuance of the Pass Through Certificates and assuming
that all proceeds are used to purchase Equipment Notes on or before December 30,
1994, and that no prepayment, purchase or default in respect of any Equipment
Notes shall occur, the scheduled payment of
19
<PAGE> 21
principal of such Equipment Notes and the resulting Pool Factors after taking
into account each such payment are set forth below:
<TABLE>
<CAPTION>
EQUIPMENT NOTES
SCHEDULED PASS THROUGH
PRINCIPAL TRUST POOL
REGULAR DISTRIBUTION DATE PAYMENTS FACTOR
- --------------------------------------------------------------- --------------- ------------
<S> <C> <C>
$
</TABLE>
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date or Special Distribution Date, the Pass
Through Trustee will include with each distribution of a Scheduled Payment or
Special Payment to Certificateholders of record a statement, giving effect to
such distribution to be made on such Regular Distribution Date or Special
Distribution Date, setting forth the following information (per a $1,000
principal amount Pass Through Certificate, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the amount
allocable to Make-Whole Amount, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor. (Section 4.3)
So long as any Pass Through Certificates are registered in the name of
Cede, as nominee for DTC, on the Record Date prior to each Regular Distribution
Date and Special Distribution Date, the Pass Through Trustee will request from
DTC a securities position listing setting forth the names of
20
<PAGE> 22
all participants reflected on DTC's books as holding interests in the Pass
Through Certificates on such Record Date. On each Regular Distribution Date and
Special Distribution Date, the Pass Through Trustee will mail to each such DTC
Participant the statement described above, and will make available additional
copies as requested by such DTC Participant, to be available for forwarding to
Certificate Owners. (Section 3.9)
In addition, after the end of each calendar year, the Pass Through Trustee
will prepare for each Certificateholder of record at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Pass Through Trust
for such calendar year or, in the event such person was a Certificateholder of
record during a portion of such calendar year, for the applicable portion of
such calendar year, and such other items as are readily available to the Pass
Through Trustee and which a Certificateholder shall reasonably request as
necessary for the purpose of such Certificateholders' preparation of its federal
income tax returns. (Section 4.3) Such report and such other items shall be
prepared on the basis of information supplied to the Pass Through Trustee by the
DTC Participants, and shall be delivered by the Pass Through Trustee to such DTC
Participants to be available for forwarding by such DTC Participants to
Certificate Owners.
At such time, if any, as the Pass Through Certificates are issued in the
form of Registered Certificates, the Pass Through Trustee will prepare and
deliver the information described above to each Certificateholder of record as
the name of such Certificateholder appears on the records of the registrar of
the Pass Through Certificates.
VOTING OF EQUIPMENT NOTES
The Pass Through Trustee, as holder of the Equipment Notes held in the Pass
Through Trust, has the right to vote and give consents and waivers in respect of
such Equipment Notes under the Indentures. The Agreement sets forth the
circumstances in which the Pass Through Trustee shall direct any action or cast
any vote as the holder of the Equipment Notes held in the Pass Through Trust at
its own discretion and the circumstances in which the Pass Through Trustee shall
seek instructions from the Certificateholders. Prior to an Event of Default (as
defined below) under the Agreement, all Equipment Notes shall be voted for or
against any action in the same proportion as the Pass Through Certificates held
by the Certificateholders were actually voted. (Sections 6.1 and 10.1) Whenever
the Agreement requires or permits actions to be taken based upon instructions or
directions of Certificateholders holding a specified percentage interest of the
Pass Through Trust, DTC shall be deemed to represent such percentage interest
only to the extent that it has received instructions to such effect from
Certificate Owners and/or DTC Participants owning or representing, respectively,
such required percentage interest and has delivered such instructions to the
Pass Through Trustee. (Section 3.9)
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
An event of default under the Agreement (an "Event of Default") is defined
as the occurrence and continuance of an event of default under one or more of
the Indentures (an "Indenture Default"). For a description of the Indenture
Defaults under the Indentures, see "Description of the Equipment
Notes--Indenture Defaults, Notice and Waiver." The Pass Through Trust will hold
Equipment Notes issued pursuant to each of the Indentures, which means a
continuing Indenture Default under any one Indenture will result in an Event of
Default under the Agreement. There are, however, no cross-default provisions in
the Indentures and events resulting in an Indenture Default under any particular
Indenture will not necessarily result in an Indenture Default occurring under
any other Indenture. See "Description of the Equipment Notes--Indenture
Defaults, Notice and Waiver." If an Indenture Default occurs with respect to
fewer than all of the Indentures, the Equipment Notes issued pursuant to the
Indentures with respect to which an Indenture Default has not occurred will
continue to be held in the Pass Through Trust, and payments of principal and
interest on such
21
<PAGE> 23
Equipment Notes will continue to be distributed to the holders of the Pass
Through Certificates as originally scheduled.
Under each Indenture, the Owner Trustee and the Owner Participant have the
right under certain circumstances to cure Indenture Defaults that result from
the occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee or the Owner Participant chooses to exercise such cure right, the
Indenture Default and consequently the Event of Default under the Agreement will
be deemed to be cured. In addition, in circumstances where (i) the Indenture
Trustee has given notice of its intent to accelerate the Equipment Notes issued
under such Indenture or to exercise other remedies or (ii) the Indenture Trustee
shall not have taken action for a period of not less than 180 days with respect
to such Indenture Default, the Owner Trustee has the option to prepay or
purchase such Equipment Notes at a price equal to the unpaid principal amount
thereof together with accrued interest thereon to the date of prepayment or
purchase, but without Make-Whole Amount. See "Description of the Equipment
Notes--Indenture Defaults, Notice and Waiver."
The Agreement provides that, so long as an Indenture Default under any
Indenture shall have occurred and be continuing, the Pass Through Trustee may
vote all of the Equipment Notes issued under such Indenture, and upon the
direction of the holders of Pass Through Certificates evidencing fractional
undivided interests aggregating not less than a majority in interest of the Pass
Through Trust, the Pass Through Trustee shall vote a corresponding majority of
such Equipment Notes in favor of directing the Indenture Trustee to declare the
unpaid principal amount of all Equipment Notes issued under such Indenture and
any accrued and unpaid interest thereon to be due and payable. The Agreement
also provides that, if an Indenture Default under any Indenture shall have
occurred and be continuing, the Pass Through Trustee may, and upon the direction
of the holders of the Pass Through Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of the Pass Through
Trust shall, vote all of the Equipment Notes issued under such Indenture in
favor of directing the Indenture Trustee as to the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee or
of exercising any trust or power conferred on the Indenture Trustee under such
Indenture. (Sections 6.1 and 6.4)
Each Indenture provides that, if an Indenture Default shall occur and be
continuing thereunder, the Indenture Trustee may, and upon the instructions of
the holders of a majority in aggregate principal amount of the Equipment Notes
outstanding under such Indenture shall, declare the unpaid principal amount of
the Equipment Notes issued under such Indenture to be immediately due and
payable, together with any accrued and unpaid interest thereon. Each Indenture
further provides that, if an Indenture Default shall occur and be continuing
thereunder, the holders of a majority in aggregate principal amount of the
Equipment Notes outstanding under such Indenture may direct the Indenture
Trustee with respect to the exercise of remedies thereunder. See "Description of
the Equipment Notes--Remedies."
As an additional remedy, if an Indenture Default under an Indenture shall
have occurred and be continuing, the Agreement provides that the Pass Through
Trustee may, and upon the direction of the holders of Pass Through Certificates
evidencing fractional undivided interests aggregating not less than a majority
in interest of the Pass Through Trust shall, sell all or part of the Equipment
Notes issued under such Indenture for cash to any person. In addition, if an
Owner Trustee elects to purchase all of the outstanding Equipment Notes issued
under such Indenture in lieu of prepayment, the Pass Through Trustee shall sell
such Equipment Notes to such Owner Trustee at a price equal to the unpaid
principal amount thereof together with accrued and unpaid interest thereon.
(Sections 6.1 and 6.2) Any proceeds received by the Pass Through Trustee upon
any such sale shall be deposited in the Special Payments Account and shall be
distributed to the Certificateholders on a Special Distribution Date. (Sections
4.1 and 4.2) The market for Equipment Notes in default may be very limited and
there can be no assurance that they could be sold for a reasonable price. If the
Pass Through Trustee sells any Equipment Notes with respect to which an
Indenture Default exists for less than their outstanding principal amount, the
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against the
22
<PAGE> 24
Company, the applicable Owner Participant, the applicable Owner Trustee in its
individual capacity or any affiliate thereof, or the Pass Through Trustee.
Furthermore, neither the Pass Through Trustee nor the Certificateholders could
take any action with respect to any remaining Equipment Notes so long as no
Indenture Defaults existed with respect thereto. (Sections 4.1 and 4.2)
Any amount distributed to the Pass Through Trustee by the Indenture Trustee
under any Indenture on account of the Equipment Notes following an Indenture
Default under such Indenture shall be deposited in the Special Payments Account
and shall be distributed to the Certificateholders on a Special Distribution
Date. In addition, if, following an Indenture Default under any Indenture, the
applicable Owner Trustee exercises its option to prepay or purchase the
outstanding Equipment Notes issued under such Indenture as described below under
"Description of the Equipment Notes--Prepayment," the amount paid by such Owner
Trustee to the Pass Through Trustee for the Equipment Notes issued under such
Indenture shall be deposited in the Special Payments Account and shall be
distributed to the Certificateholders on a Special Distribution Date. (Sections
4.1 and 4.2)
Any funds representing payments received with respect to any Equipment
Notes in default, or the proceeds from the sale by the Pass Through Trustee of
any such Equipment Notes, held by the Pass Through Trustee in the Special
Payments Account shall, to the extent practicable, be invested and reinvested by
the Pass Through Trustee in Permitted Investments pending the distribution of
such funds on a Special Distribution Date. (Sections 1.1 and 4.4)
The Agreement provides that the Pass Through Trustee shall, within 30 days
after the occurrence of a default (as defined below) in respect of the Pass
Through Trust, give to the Certificateholders notice, transmitted by mail, of
all uncured or unwaived defaults under the Agreement known to it; provided that,
except in the case of default in the payment of principal of, Make-Whole Amount,
if any, or interest on any of the Equipment Notes, the Pass Through Trustee
shall be protected in withholding such notice if it in good faith determines
that the withholding of such notice is in the interests of the
Certificateholders. The term "default," for the purpose of the provision
described in this paragraph only, shall mean the occurrence of any Event of
Default under the Agreement, except that in determining whether any such Event
of Default has occurred any grace period or notice in connection therewith shall
be disregarded. (Section 7.2)
The Agreement contains a provision entitling the Pass Through Trustee,
subject to the duty of the Pass Through Trustee during a default to act with the
required standard of care, to obtain security from or be indemnified by the
holders of the Pass Through Certificates before proceeding to exercise any right
or power under the Agreement at the request of such Certificateholders. (Section
7.3)
The holders of Pass Through Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of the Pass Through
Trust may on behalf of the holders of all Pass Through Certificates instruct the
Pass Through Trustee to waive any past default or Event of Default under the
related Agreement and thereby annul any direction given by the Pass Through
Trustee to the Indenture Trustee with respect thereto, except (i) a default in
payment of principal of, Make-Whole Amount, if any, or interest on, any of the
Equipment Notes and (ii) a default in respect of any covenant or provision of
the related Agreement that cannot be modified or amended without the consent of
each Certificateholder affected thereby. (Section 6.5) Each Indenture provides
that, with certain exceptions, the holders of a majority in aggregate unpaid
principal amount of the Equipment Notes thereunder may on behalf of all such
holders waive any past default or Indenture Default thereunder. (Indentures,
Section 5.06) For a discussion of waivers of Indenture Defaults under the
Indentures, see "Description of the Equipment Notes--Indenture Defaults, Notice
and Waiver."
MODIFICATION OF THE AGREEMENT
The Agreement contains provisions permitting the Company and requiring the
Pass Through Trustee to enter into supplements to the Agreement, without the
consent of the holders of any of the
23
<PAGE> 25
Pass Through Certificates, among other things (i) to evidence the succession of
another corporation to the Company and the assumption by such corporation of the
Company's obligations under the Agreement, (ii) to add to the covenants of the
Company for the benefit of holders of the Pass Through Certificates or to
surrender any of the Company's rights under the Agreement and (iii) to cure any
ambiguity, to correct any manifest error, to correct or supplement any defective
or inconsistent provision of the Agreement or any supplement to the Agreement,
or to make any other provisions with respect to matters or questions arising
under the Agreement, provided such action shall not adversely affect the
interests of the holders of the Pass Through Certificates. (Section 9.1)
The Agreement also contains provisions permitting the Company and the Pass
Through Trustee, with the consent of the holders of Pass Through Certificates
evidencing fractional undivided interests aggregating not less than a majority
in interest of the Pass Through Trust to enter into supplements to the Agreement
adding any provisions to or changing or eliminating any of the provisions of the
Agreement or modifying the rights of the Certificateholders, except that no such
supplement to the Agreement may without the consent of each Certificateholder so
affected (i) reduce in any manner the amount of, or delay the timing of, any
receipt by the Pass Through Trustee of payments on the Equipment Notes, or
distributions in respect of any Pass Through Certificate, or change any date of
payment on any Pass Through Certificate, or make distributions payable at a
place, or in coin or currency, other than that provided for in such Pass Through
Certificates, or impair the right of any Certificateholder to institute suit for
the enforcement of any such payment when due, (ii) permit the disposition of any
Equipment Note, except as provided in the Agreement or (iii) reduce the
percentage of the aggregate fractional undivided interests of the Pass Through
Trust provided for in the Agreement, the consent of the holders of which is
required for any such supplement to the Agreement or for any waiver provided for
in such Agreement. (Section 9.2)
MODIFICATION OF LEVERAGED LEASE AGREEMENTS
In the event that the Pass Through Trustee, as the holder of any Equipment
Notes, receives a request for its consent to any amendment, modification or
waiver under the Indenture, Lease or other document relating to such Equipment
Notes, the Pass Through Trustee shall mail a notice of such proposed amendment,
modification or waiver to each Certificateholder as of the date of such notice.
The Pass Through Trustee shall request instructions from the Certificateholders
as to whether or not to consent to such amendment, modification or waiver. The
Pass Through Trustee shall vote or consent with respect to all such Equipment
Notes in the same proportion as the Pass Through Certificates were actually
voted by the holders thereof by a certain date. Notwithstanding the foregoing,
if any Event of Default under the Agreement shall have occurred and be
continuing, the Pass Through Trustee may in its own discretion consent to such
amendment, modification or waiver, and may so notify the Indenture Trustee to
which such consent relates. (Section 10.1)
TERMINATION OF THE PASS THROUGH TRUST
The Agreement will terminate upon the distribution to all
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held in the Pass Through
Trust. The Pass Through Trustee will mail to each Certificateholder of record
notice of the termination of the Pass Through Trust, the amount of the proposed
final payment and the proposed date for the distribution of such final payment.
The final distribution to any Certificateholder will be made only upon surrender
of such Certificateholder's Pass Through Certificates at the office or agency of
the Pass Through Trustee specified in such notice of termination. (Section 11.1)
SPECIAL PAYMENTS UNDER CERTAIN CIRCUMSTANCES
To the extent that the full amount of the proceeds from the sale of the
Pass Through Certificates is not used to purchase Equipment Notes on or prior to
December 30, 1994, whether due to the physical unavailability of Units, the
failure by an Owner Trustee to issue Equipment Notes on or prior
24
<PAGE> 26
to such date or otherwise, an amount equal to the unexpended proceeds, together
with interest thereon, from the date of issuance of the Pass Through
Certificates to but not including January 2, 1995, at the rate applicable to the
Pass Through Certificates, but without premium, will be distributed on January
2, 1995 to the Certificateholders of record as of December 30, 1994. (Section
2.1(b)).
THE PASS THROUGH TRUSTEE
The First National Bank of Chicago will be the Pass Through Trustee for the
Pass Through Trust. The Pass Through Trustee and any of its affiliates may hold
Pass Through Certificates in their own names. (Section 7.5) With certain
exceptions, the Pass Through Trustee makes no representations as to the validity
or sufficiency of the Agreement, the Pass Through Certificates, the Equipment
Notes, the Indentures, the Leases or other related documents. (Section 7.4) The
First National Bank of Chicago also will initially be the Indenture Trustee of
each of the Indentures under which the Equipment Notes are issued.
The Pass Through Trustee may resign as such at any time, in which event the
Company will be obligated to appoint a successor trustee. If the Pass Through
Trustee fails to comply with certain provisions of the Trust Indenture Act;
ceases to be eligible to continue as Pass Through Trustee under the Agreement;
becomes incapable of acting as Pass Through Trustee; or becomes adjudged a
bankrupt or insolvent, the Company may remove the Pass Through Trustee, or any
holder of Pass Through Certificates for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Pass Through Trustee and the appointment of
a successor trustee. Any resignation or removal of the Pass Through Trustee and
appointment of a successor trustee for the Pass Through Trust does not become
effective until acceptance of the appointment by the successor trustee. (Section
7.9) Pursuant to such resignation and successor trustee provisions, it is
possible that a different trustee could be appointed to act as the successor
trustee under the Agreement.
The Agreement provides that the Company will pay the Pass Through Trustee's
fees and expenses, other than initial fees and reasonable actual disbursements
of the Pass Through Trustee, which shall be paid by the Owner Trustees. The
Agreement further provides that the Pass Through Trustee will be entitled to
indemnification by the Company for, and will be held harmless against, any loss,
liability or expense incurred by the Pass Through Trustee (other than through
its own wilful misconduct, bad faith or negligence or by reason of a breach of
any of its representations or warranties set forth in the Agreement), except to
the extent that such loss, liability or expense is for or with respect to taxes,
in which case the Pass Through Trustee may be entitled to be reimbursed by the
Pass Through Trust. (Section 7.7)
The First National Bank of Chicago serves as trustee under various
equipment trust certificates and other secured obligations of the Company. The
First National Bank of Chicago also provides customary banking services,
including commercial credit facilities and standby letters of credit, to the
Company and certain of its affiliates.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements under this caption are a summary only and do not purport to
be complete. The summary makes use of terms defined in, and is qualified in its
entirety by reference to all of the provisions of, the Equipment Notes, the
Indentures, the Leases and the Participation Agreements, the forms of which are
available without charge to each person to whom this Prospectus is delivered,
upon request of such person to the General Counsel and Secretary, Union Tank Car
Company, 225 West Washington Street, Chicago, Illinois 60606 (telephone
312/372-9500). Except as otherwise indicated, the following summary relates to
the Equipment Notes, the Indentures, the Leases and the Participation
Agreements.
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<PAGE> 27
GENERAL
Each Equipment Note will be issued under one of two Indentures between
State Street Bank and Trust Company, as Owner Trustee of an owner trust for the
benefit of an Owner Participant, and The First National Bank of Chicago, as
Indenture Trustee.
Each Owner Trustee will lease Equipment to the Company pursuant to a Lease
under which the Company is obligated to pay rent to such Owner Trustee in
respect of the Equipment covered thereby. The amounts unconditionally payable
under each Lease will be sufficient to pay when due all payments of principal
of, Make-Whole Amount, if any, and interest on the Equipment Notes issued in
respect of the Equipment subject to such Lease. The Equipment Notes are not,
however, obligations of, or guaranteed by, the Company. The Company's rental
obligations under each Lease are general obligations of the Company.
PRINCIPAL PAYMENTS
The aggregate principal amounts of the Equipment Notes issued with respect
to the Equipment covered by each Lease are as follows:
LEASE
<TABLE>
<CAPTION>
NO. % EQUIPMENT NOTES
- --- --------------------
<S> <C> <C>
1 $
2
Total $
==================
</TABLE>
Interest will be payable on each Equipment Note at the rate applicable to
such Equipment Note on the unpaid principal amount thereof on January 2 and July
2 of each year, commencing July 2, 1995. Such interest will be computed on the
basis of a 360-day year of twelve 30-day months. The principal of each Equipment
Note will be payable as follows:
26
<PAGE> 28
% EQUIPMENT NOTES
<TABLE>
<CAPTION>
LEASE NO. 1 LEASE NO. 2
----------------------------------- -----------------------------------
EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT
PAYMENT DATES GROUP A GROUP B GROUP C GROUP A GROUP B GROUP C TOTAL
- -------------------- --------- --------- --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total........ $ $ $ $ $ $ $
======== ======== ======== ======== ======== ======== ======
</TABLE>
If any date scheduled for any payment of principal of, Make-Whole Amount,
if any, or interest on the Equipment Notes is not a Business Day, such payment
may be made on the next Business Day without any additional interest.
27
<PAGE> 29
PREPAYMENT
The Equipment Notes may be prepaid under the following circumstances:
Mandatory Prepayments. If an Event of Loss to a Unit shall occur and like
kind equipment of equal or greater fair market sales value, utility, remaining
economic useful life, residual value and condition (assuming such Unit was in
the condition required to be maintained) is not substituted for the affected
Unit in accordance with the terms of the applicable Lease, then the Company is
obligated to pay the Stipulated Loss Value of such Unit. Such payment will be
used to prepay a portion of the Equipment Notes issued with respect to the
Equipment of which such Unit is a part on (i) the next Regular Distribution Date
following the election by the Company to pay the Stipulated Loss Value of such
Units rather than substitute like kind equipment or (ii) in the case of the
occurrence of an Event of Loss in respect of more than ten Units since the end
of the last six month reporting period under a Lease (a "Multiple Loss"), on the
first Business Day succeeding the 60th day following the date on which the
Company is required to report such Multiple Loss. The amount prepaid will be
equal to the sum of (i) as to principal, an amount equal to the product obtained
by multiplying the aggregate unpaid principal amount of the Equipment Notes
issued under the Indenture to which such Equipment relates as of the prepayment
date (after deducting therefrom the scheduled principal installment, if any, due
on the prepayment date) by a fraction, the numerator of which shall be the
Equipment Cost of such Unit and the denominator of which shall be the aggregate
Equipment Cost of all Equipment securing such Indenture immediately prior to the
prepayment date, and (ii) as to interest, the aggregate amount of interest
accrued and unpaid to but not including the prepayment date in respect of the
principal amount to be prepaid pursuant to clause (i) above on such prepayment
date. No Make-Whole Amount (as defined below) will be payable in the event of a
prepayment under such circumstances. See "Description of the Equipment
Notes--The Leases--Events of Loss." (Leases, Section 11; Indentures, Section
2.10)
In addition, under the Leases the Company may, so long as no Lease Event of
Default has occurred and is continuing, terminate a Lease at its option (i) at
any time after July 2, 2002, with respect to any Unit, if the Company determines
in good faith that (A) such Unit has become obsolete or surplus to its
requirements, or (B) any modification to a Unit required by law would be
economically impractical, (ii) on January 2, 2005 with respect to any or all of
certain Units or on January 2, 2006 with respect to any or all of the other
Units (each, an "Early Purchase Date") if the Company exercises its option to
purchase such Units or (iii) if the Company elects to exercise its right to
purchase Equipment as a result of an Owner Participant (or an affiliate thereof)
engaging in a business that is in competition with the Company's full service
railcar leasing business. Unless the Company elects in connection with the
exercise of a purchase option to assume on a full recourse basis all of the
Owner Trustee's obligations in respect of the related Equipment Notes and
acquires the purchased Units subject to the lien of the related Indentures, the
amount of Equipment Notes to be prepaid in the event of any such Lease
termination will be equal to the sum of (i) as to principal, an amount equal to
the product obtained by multiplying the aggregate unpaid principal amount of the
Equipment Notes issued under the Indenture to which such Unit relates as of the
prepayment date (after deducting therefrom the scheduled principal installment,
if any, due on the prepayment date) by a fraction, the numerator of which shall
be the Equipment Cost of such Unit and the denominator of which shall be the
aggregate Equipment Cost of all Equipment securing such Indenture immediately
prior to the prepayment date, and (ii) as to interest the aggregate amount of
interest accrued and unpaid to but not including the prepayment date in respect
of the principal amount to be prepaid pursuant to clause (i) of this sentence on
such prepayment date, plus, if such prepayment is made prior to ,
, a premium as set forth below (a "Make-Whole Amount"). Such
prepayment is to be made on the date which is the Lease termination date for
such Unit. See "Description of the Equipment Notes--The Leases--Termination."
(Leases, Section 10 and 22.1; Indentures, Section 2.10; Participation
Agreements, Section 6.9)
Voluntary Prepayments. Subject to certain restrictions, the Company may
require the relevant Owner Participant, Owner Trustee and Pass Through Trustee
to effect an optional prepayment of
28
<PAGE> 30
the Equipment Notes at a price equal to the unpaid principal amount thereof,
together with accrued but unpaid interest thereon to but not including the
specified prepayment date (which shall be a Special Distribution Date), plus, if
such prepayment is made prior to , , a Make-Whole
Amount, as part of a refunding or refinancing which will result in the
prepayment of the Pass Through Certificates. (Participation Agreements, Section
10.2; Indentures, Section 2.10)
The Equipment Notes are also subject to purchase in whole by the Owner
Trustee upon at least 30 days' notice on a Special Distribution Date, in the
case of (i) any acceleration of such Equipment Notes, (ii) the Indenture
Trustee, as assignee of a Lease, having exercised (or given notice of its
intention to exercise) any remedy in respect of the Units under such Lease,
(iii) one or more Lease Events of Default having occurred under a Lease and
continuing for a period of 180 days or more during which period such Equipment
Notes could, but shall not, have been accelerated by the Indenture Trustee or
(iv) the Indenture Trustee having commenced foreclosure of the lien of the
Indenture or otherwise exercised remedies which would result in the exclusion of
the Owner Trustee from any property subject to the lien of the Indenture or any
part thereof (or given notice of its intention to foreclose or exercise
remedies). Such purchase would be at a price equal to the unpaid principal
amount thereof and accrued interest on such Equipment Notes to the date of
payment, but without the payment of any Make-Whole Amount except in the case of
a purchase of the Equipment Notes pursuant to clause (iv) above, if the right to
exercise any remedies arises from action attributable to the Owner Trustee or
the Owner Participant. (Indentures, Section 5.04(b))
The term "Make-Whole Amount" means, with respect to the principal amount of
any Equipment Note to be prepaid on any prepayment date, the amount to be
determined as of the third Business Day prior to the applicable prepayment date,
equal to the product obtained by multiplying (a) the excess, if any, of (i) the
sum of the present values of all the remaining scheduled payments of principal
and interest from the prepayment date to maturity of such Equipment Note,
discounted semi-annually on each July 2 and January 2 at a rate equal to the
Treasury Rate, based on a 360-day year of twelve 30-day months, over (ii) the
aggregate unpaid principal amount of such Equipment Note plus any accrued but
unpaid interest thereon by (b) a fraction the numerator of which shall be the
principal amount of such Equipment Note to be prepaid on such prepayment date
and the denominator of which shall be the aggregate unpaid principal amount of
such Equipment Note; provided that the aggregate unpaid principal amount of such
Equipment Note for the purpose of clause (a)(ii) and (b) of this definition
shall be determined after deducting the principal installment, if any, due on
such prepayment date. The Make-Whole Amount will be calculated by an independent
investment banking institution of national standing appointed by the Company or,
if the Indenture Trustee does not receive notice of such appointment at least
ten days prior to a scheduled prepayment date or if a Lease Event of Default
under the applicable Lease shall have occurred and be continuing, appointed by
the Indenture Trustee (an "Independent Investment Banker"). In calculating the
Make-Whole Amount, the Independent Investment Banker will first determine the
Treasury Rate applicable to the relevant Equipment Note.
For purposes of determining the Make-Whole Amount, "Treasury Rate" means,
with respect to prepayment of each Equipment Note, a per annum rate (expressed
as a semiannual equivalent and as a decimal and, in the case of United States
Treasury bills, converted to a bond equivalent yield), determined to be the per
annum rate equal to the semiannual yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note, as
determined by interpolation between the most recent weekly average yields to
maturity for two series of United States Treasury securities, (A) one maturing
as close as possible to, but earlier than, the Average Life Date of such
Equipment Note and (B) the other maturing as close as possible to, but later
than, the Average Life Date of such Equipment Note, in each case as published in
the most recent H.15(519) (or, if a weekly average yield to maturity for United
States Treasury securities maturing on the Average Life Date of such Equipment
Note is reported in the most recent H.15(519), as published in H.15(519)).
H.15(519) means "Statistical Release H.15(519), Selected Interest Rates," or any
successor publication, published by the Board of Governors of the Federal
Reserve
29
<PAGE> 31
System. The most recent H.15(519) means the latest H.15(519) which is published
prior to the close of business on the third Business Day preceding the scheduled
prepayment date. As used herein, "Remaining Weighted Average Life" means, with
respect to any date of prepayment or any date of determination of any Equipment
Note, the number of days equal to the quotient obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
principal payment on such Equipment Note by (ii) the number of days from and
including the prepayment date or date of determination to but excluding the
scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note. As used herein, "Average Life Date" means, with
respect to an Equipment Note, the date which follows the prepayment date or, in
the case of an Equipment Note not being prepaid, the date of such determination,
by a period equal to the Remaining Weighted Average Life of such Equipment Note.
SECURITY
The Equipment Notes issued with respect to the Equipment purchased by each
Owner Trustee will be secured by (i) an assignment by such Owner Trustee to the
Indenture Trustee of such Owner Trustee's rights (other than certain excepted
rights reserved to the Owner Trustee) under the Lease relating to such Equipment
including the right to receive payments of rent thereunder and (ii) a security
interest held by the Indenture Trustee in all such Equipment, subject to the
rights of the Company under such Lease.
Unless and until an Indenture Default has occurred and is continuing, the
Indenture Trustee may not exercise certain rights of the Owner Trustee under the
related Lease; however, for so long as Equipment Notes under such Indenture are
outstanding, the Indenture Trustee shall retain the right to receive payments of
rent due under such Lease. The assignment by the Owner Trustee to the Indenture
Trustee of its rights under each Lease excludes certain rights of the Owner
Trustee and the applicable Owner Participant including rights relating to
indemnification by the Company for certain matters and to insurance proceeds
payable to such Owner Trustee in its individual capacity and as Owner Trustee
and to such Owner Participant under liability insurance maintained by the
Company under such Lease. (Indentures, Granting Clauses)
Funds, if any, held from time to time by the Indenture Trustee with respect
to any Equipment, including funds held as the result of an Event of Loss to such
Equipment or termination of the Lease relating thereto, will be invested and
reinvested by the Indenture Trustee, at the direction of the Company (except in
the case of a Lease Event of Default under the applicable Lease), in certain
investments described in such Lease. The Company will pay the amount of any loss
resulting from any such investment directed by it. (Indentures, Section 7.04)
LIMITATION OF LIABILITY
The Equipment Notes are nonrecourse notes. All payments of principal of,
Make-Whole Amount, if any, and interest on the Equipment Notes (other than
payments made in connection with an optional prepayment or purchase by the Owner
Trustee) will be made only from the assets subject to the lien of the Indenture
with respect to such Equipment or the income and proceeds received by the
Indenture Trustee therefrom (including rent payable by the Company under the
Lease with respect to such Equipment). The Equipment Notes are not obligations
of, or guaranteed by, the Company. None of the Owner Participants or the
Indenture Trustee, or any affiliates thereof, shall be liable to any holder of
an Equipment Note or, in the case of the Owner Participants, to the Indenture
Trustee for any amounts payable under the Equipment Notes or, except as provided
in each Indenture, for any liability under such Indenture. (Indentures, Section
2.03)
Except as otherwise provided in the Indentures, the Owner Trustee in its
individual capacity shall not be answerable or accountable under the Indentures
or under the Equipment Notes under any circumstances except for its own wilful
misconduct or gross negligence. None of the Owner
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Participants will have any duty or responsibility under any of the Indentures or
the Equipment Notes to the Indenture Trustee or to any holder of any Equipment
Note. (Indentures, Section 2.03)
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Events of Default under each Indenture include: (a) a Lease Event
of Default, (b) default by the Owner Trustee in making payments when due of
principal of, Make-Whole Amount, if any, or interest on any Equipment Note and
continuance of that default for 10 Business Days, (c) failure by the Owner
Trustee or the Owner Participant to perform any covenant contained in the
Indenture, the Equipment Notes or in the Participation Agreement continuing for
a period of 30 days after written notice by the Indenture Trustee or any holder
of an Equipment Note issued under such Indenture, (d) any representation or
warranty made by the Owner Trustee in such Indenture or made by the Owner
Trustee (except to the extent made with respect to State Street Bank and Trust
Company in its individual capacity) or the Owner Participant in the
Participation Agreement or in any document or certificate furnished to the
Indenture Trustee being incorrect in any material respect as of the date made
and remaining material and continuing unremedied for a period of 30 days after
written notice to the Owner Trustee and Owner Participant, and (e) the
occurrence of certain events of bankruptcy, reorganization or insolvency of the
Owner Participant or the Owner Trustee. (Indentures, Section 5.01)
In the event that (i) at any time one or more Lease Events of Default shall
occur and shall have continued for a period of 180 days or more during which
time the Equipment Notes could, but shall not, have been accelerated, (ii) the
Equipment Notes shall have been accelerated, (iii) the Indenture Trustee, as
assignee of such Lease, shall have exercised (or given notice of its intention
to exercise) any remedies in respect of the Units under such Lease or (iv) the
Indenture Trustee shall commence foreclosure of the lien of the Indenture or
otherwise exercise remedies which would result in the exclusion of the Owner
Trustee from any property subject to the lien of the Indenture or any part
thereof (or given notice of its intention to foreclose or exercise remedies),
upon 30 days' notice the Owner Trustee may elect to purchase all, but not less
than all, of the Equipment Notes then outstanding under such Indenture from the
holders thereof by paying to each such holder an amount equal to the aggregate
unpaid principal amount of all such Equipment Notes then held by such holder,
together with accrued and unpaid interest thereon to the date of payment, but
without the payment of any Make-Whole Amount except in the case of a purchase of
the Equipment Notes pursuant to clause (iv) above if the right to exercise any
remedies arises because of action attributable to the Owner Trustee or the Owner
Participant. (Indentures, Section 5.04(b))
In the event the Company fails to make any semiannual basic rental payment
within 10 Business Days after the date the same shall become due under a Lease,
then and as long as no other Indenture Event of Default under the Indenture
(which is not being concurrently cured) shall have occurred and be continuing
the Owner Participant or the Owner Trustee may, during the 10 Business Days
after receiving written notice of such failure from the Indenture Trustee, pay
to the Indenture Trustee the amount of such rental payment together with any
interest thereon on account of the delayed payment thereof, in which event such
payment by the Owner Participant or the Owner Trustee shall be deemed to cure
any Indenture Event of Default which arose from such failure of the Company (but
such cure shall not relieve the Company of any of its obligations); provided,
that the Owner Participant and the Owner Trustee, collectively, shall not be
entitled to cure more than three consecutive or six total failures to make
semiannual basic rental payments. In the event there shall occur a Lease Event
of Default under a Lease in respect of any other payment of rent, or which is
curable by the payment of money, then and as long as no other Indenture Event of
Default under the Indenture (which is not being concurrently cured) shall have
occurred and be continuing the Owner Participant or the Owner Trustee may,
during the 30 days after receiving written notice of such Lease Event of Default
from the Indenture Trustee, pay to the Indenture Trustee the amount of such
rental payment together with any interest thereon on account of the delayed
payment thereof, or otherwise make such payment as shall effect such cure, in
which event such payment by the Owner
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Participant or the Owner Trustee shall be deemed to cure any Indenture Event of
Default which arose as a result of such Lease Event of Default (but such cure
shall not relieve the Company of any of its obligations); provided, that the
Owner Participant and the Owner Trustee, collectively, shall not be entitled to
cure such other Lease Events of Default if the unreimbursed amount of such
payments shall exceed in the aggregate $5,000,000, as adjusted annually for
inflation. (Indentures, Section 5.04(a))
Each Indenture provides that the Indenture Trustee shall, upon the
occurrence of any event known to it that is an Indenture Default or Indenture
Event of Default thereunder, give notice thereof to the holders of the Equipment
Notes issued thereunder, the Company, the Owner Trustee and the Owner
Participant. (Indentures, Section 6.01)
The holders of a majority in aggregate principal amount of the outstanding
Equipment Notes issued under an Indenture, by notice to the Indenture Trustee,
may on behalf of all holders waive any past default under the Indenture except a
default in the payment of the principal of, Make-Whole Amount, if any, or
interest on any such Equipment Note or a default in respect of any covenant or
provision of such Indenture that cannot be modified or amended without the
consent of each holder of an Equipment Note affected thereby. (Indentures,
Section 5.06)
REMEDIES
If an Indenture Default shall occur and be continuing under an Indenture,
the Indenture Trustee may, and when instructed by the holders of at least a
majority in aggregate principal amount of the Equipment Notes outstanding under
such Indenture shall, declare the unpaid principal of all such Equipment Notes
outstanding under such Indenture immediately due and payable, together with all
accrued but unpaid interest thereon. The holders of a majority in aggregate
principal amount of Equipment Notes outstanding under such Indenture may rescind
any such declaration by the Indenture Trustee or by the holders at any time
prior to the sale of the Equipment covered by such Indenture after such an
Indenture Default if (i) there has been paid to or deposited with the Indenture
Trustee an amount sufficient to pay all due or overdue installments of principal
of, Make-Whole Amount, if any, and interest on any such Equipment Notes that
have become due otherwise than by such declaration of acceleration, (ii) the
rescission would not conflict with any judgment or decree and (iii) all other
Indenture Defaults under such Indenture have been cured or waived except
nonpayment of principal of, Make-Whole Amount, if any, or interest on any such
Equipment Notes that have become due solely because of acceleration.
(Indentures, Section 5.02)
Each Indenture provides that if any Indenture Default under such Indenture
has occurred and is continuing the Indenture Trustee may exercise certain rights
or remedies available to it under applicable law, including (if the
corresponding Lease has been declared in default) one or more of the remedies
under such Indenture or such Lease. The Indenture Trustee's right to exercise
remedies under an Indenture is subject in certain circumstances to its having
proceeded to exercise one or more remedies under the Lease with respect to the
Equipment, unless at the time, the Indenture Trustee is stayed or otherwise
prevented from doing so by operation of law, in which case the Indenture Trustee
has agreed to refrain from exercising remedies under such Indenture for a period
of 90 days. Further, the Indenture Trustee may not exercise remedies under an
Indenture in those circumstances in which the Company, as the debtor in a
bankruptcy proceeding, shall have affirmed the Lease and no Lease Event of
Default (other than a Lease Event of Default arising from the bankruptcy of the
Company) has occurred and is continuing. See "Description of the Equipment
Notes--The Lease--Lease Events of Default." Such remedies may be exercised by
the Indenture Trustee to the exclusion of the Owner Trustee and, subject to the
terms of the Lease, the Company. Any Equipment sold in the exercise of such
remedies will be free and clear of any rights of those parties including the
rights of the Company under the Lease with respect to such Equipment; provided
that no exercise of any remedies by the Indenture Trustee may affect the rights
of the Company under the Lease unless a Lease Event of Default under the Lease
has occurred and is continuing. (Indentures, Sections 5.03(a) and (c), 5.04(c)
and 5.05; Leases, Section 15)
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The holders of a majority in aggregate principal amount of the Equipment
Notes outstanding under the Indenture may instruct the Indenture Trustee to give
such notice, direction or consent, or exercise such right, remedy or power under
the Indenture or the Lease or in respect of the property subject to the lien of
the Indenture or take such other action as shall be specified in such
instructions, but in such event the Indenture Trustee shall not be required to
take or refrain from taking any action in connection therewith if it shall have
reasonable grounds to believe that adequate indemnity against such risk is not
reasonably assured to it. (Indentures, Sections 6.02 and 6.03)
If an Indenture Event of Default occurs and is continuing under the
Indenture and the Indenture Trustee (as security assignee) has declared the
Lease to be in default or the Equipment Notes outstanding under the Indenture
have been accelerated or the Indenture Trustee has exercised any remedies under
the Indenture, any sums held or received by the Indenture Trustee may be applied
to reimburse the Indenture Trustee for any tax, expense or other loss incurred
by it and to pay any other amounts then due the Indenture Trustee prior to any
payments to holders of the Equipment Notes. (Indentures, Section 3.03)
In the event of a bankruptcy or reorganization of the Company, the right of
the Indenture Trustee to repossess or dispose of the Equipment would be subject
to the provisions of the Bankruptcy Code applicable to industrial companies
generally, and not those provisions applicable to railroads, particularly
Section 1168 of the Bankruptcy Code.
In the event of the bankruptcy of an Owner Participant, it is possible
that, notwithstanding that the applicable Equipment is owned by the Owner
Trustee in trust for the benefit of such Owner Participant, such Equipment and
the related Lease and Equipment Notes might become part of the bankruptcy
proceeding. In such event, payments under such Lease or on such Equipment Notes
might be interrupted and the ability of the Indenture Trustee to exercise its
remedies under the applicable Indenture might be restricted, although the
Indenture Trustee would retain its status as a secured creditor in respect of
the Lease and the Equipment subject thereto.
If the Company were to become a debtor in a bankruptcy or reorganization
case under the Bankruptcy Code, the Company or its bankruptcy trustee could
reject any or all Leases to which it is a party. In such event, there could be
no assurance that the amount of any claim for damages under such Leases that
would be allowed in such bankruptcy case would be in an amount sufficient to
provide for the repayment of the applicable Equipment Notes. In any case,
rejection of a Lease by the Company or its bankruptcy trustee would not deprive
the Indenture Trustee of its security interest in the applicable Units.
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in unpaid principal amount of
the Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and the Lease and the Participation Agreement corresponding thereto
may not be amended or modified, except to the extent indicated below.
Certain provisions of each Lease and Participation Agreement may be amended
or modified by the parties thereto without the consent of any holders of the
Equipment Notes outstanding under the Indenture so long as no Indenture Event of
Default shall have occurred and be continuing. In the case of each Lease, such
provisions include, among others, provisions relating to (i) rental payments and
other payments, except to the extent indicated in clause (a) of the following
paragraph, (ii) the maintenance of the Equipment covered by such Lease,
modifications to the Units and the return to the Owner Trustee of the Equipment
at the end of the term of the Lease and (iii) the renewal of such Lease and the
option of the Company at the end of the term of the Lease to purchase any or all
of the Equipment subject to such Lease. (Indentures, Section 10.05)
Without the consent of the holder of each Equipment Note outstanding under
an Indenture, no amendment or modification of such Indenture may (a) change the
final maturity of, or reduce the
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principal amount of, or Make-Whole Amount, if any, or interest payable on any
Equipment Notes issued under such Indenture or impair the right to institute
suit for the enforcement of any such payment or change the date on which any
principal or Make-Whole Amount, if any, or interest is due and payable, (b)
create any lien with respect to the property subject to the Lien of the
Indenture ranking prior to or on a parity with the security interest created by
the Indenture, except as permitted in the Indenture, or deprive any holder of
any Equipment Note issued under such Indenture of the benefit of the Lien of the
Indenture or (c) reduce the percentage in principal amount of outstanding
Equipment Notes issued under such Indenture necessary to modify or amend any
provision of the Indenture or to waive compliance therewith. (Indentures,
Section 10.01)
THE LEASES
Terms and Rentals. The Equipment subject to each Lease will be leased by
the Owner Trustee to the Company for a term commencing on the delivery date
thereof and expiring on July 2, 2010, unless previously terminated as permitted
by each Lease. The rent payments under each Lease will be payable on January 2
and July 2 (or, if such day is not a Business Day, on the next succeeding
Business Day), commencing on January 2, 1996, and will be used to make payments
of principal of and interest due on the Equipment Notes issued under the
Indenture corresponding to such Lease, which will in turn furnish the funds to
be distributed by the Pass Through Trustee to the Certificateholders on January
2 and July 2 of each year. (Leases, Section 3.2; Indentures, Section 3.01) The
Company has also agreed to pay under each Lease on July 2, 1995 such amounts (to
the extent not paid by the Owner Participant) as necessary to enable the
Indenture Trustee to receive the scheduled payment of principal and interest on
the Equipment Notes relating to such Lease. (Leases, Section 3.5) Rental
payments that the Company is obligated to make or cause to be made under each
Lease will not be less than the scheduled payments of principal of and interest
on the Equipment Notes under the Indenture. In certain cases, the semi-annual
basic rent payments under a Lease may be adjusted, but, except as described
below, under no circumstances will such rent payments be less than the
corresponding scheduled payments of principal of and interest on the Equipment
Notes issued under the Indenture corresponding to such Lease. (Participation
Agreements, Section 2.6; Leases, Section 3) The balance of any such semi-annual
rent payment under a Lease, after payment of the scheduled principal of, and
interest on the Equipment Notes issued under the Indenture corresponding to such
Lease, will be paid over to or for the account of the applicable Owner
Participant as the beneficial owner of the Equipment covered by the Lease.
(Leases, Section 3)
Net Lease; Modifications. The Company's obligations in respect of the
Equipment are those of a lessee under a "net lease." Accordingly, the Company is
and will be obligated, at its expense, to pay all costs and expenses of
operating the Equipment and to maintain, service and repair the Equipment so as
to keep the Units included therein in good operating order, ordinary wear and
tear excepted. (Leases, Sections 8 and 19)
Subject to certain exceptions, the Company will, at its expense, make all
alterations, replacements or modifications required to be made by the
Association of American Railroads, the United States Department of
Transportation, or any other United States, state or local governmental agency
or other applicable law. The Company will have the right, at its expense, to
make other modifications, alterations and improvements, provided that such
modifications do not diminish the value, utility or remaining useful life of
such Unit or cause it to become "limited use" property. Severable modifications
that are not required by law will remain the property of the Company but may be
purchased by the Owner Trustee at fair market value upon termination of the
Lease. The Owner Trustee will acquire title to all nonseverable modifications
and severable modifications required by law. (Leases, Section 9)
Sublease; Possession and Use. The Company is in the business of leasing
railway tank cars and other railcars to third parties under full-service
operating leases. These leases vary in nature based on the needs of the
sublessee and the Company. The Company shall have the right to use the
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Equipment, subject to the applicable Lease, and to sublease the Equipment to any
railroad company incorporated in the United States, Canada or Mexico or to any
other responsible company which is not a railroad company for use in its
business; provided that the Units are used primarily on domestic routes in the
United States and that at no time shall more than 20% of the Units be used (as
determined by mileage records) outside the continental United States (exclusive
of Alaska) during any taxable year in which certain specified events occur; and
further provided that if the Company subleases any Units to a sublessee which
operates primarily in Mexico, subject to the provisions of each Lease, the
Company shall make all registration filings and deposits necessary or advisable
under then-current prudent industry practice (including any actions reasonably
requested by the Owner Trustee or the Indenture Trustee) to protect the interest
of the Owner Trustee under the Lease and the Indenture Trustee under the
Indenture corresponding to such Lease. The Company may not sublease any Unit for
a term that extends beyond the term of the Lease nor may it sublease any Unit on
terms and conditions that are not consistent with the terms of the Lease unless
the Company replaces such Unit on or prior to the expiration of the Lease term
in accordance with the provisions of the Lease. No sublease will discharge the
Company of its obligations under the Lease (Leases, Sections 8.2 and 8.3) If any
Unit is leased or the possession is otherwise transferred, such Unit will remain
subject to the lien of the related Indenture.
Maintenance. The Company, at its own cost and expense, shall maintain,
repair and keep each Unit (i) according to prudent industry practice, in good
working order, and in good physical condition for railcars of a similar age and
usage, normal wear and tear excepted, (ii) in a manner consistent with
maintenance practices used by the Company in respect of equipment owned or
leased by the Company similar in type to such Unit, (iii) in accordance in all
material respects with all manufacturers' warranties and in accordance with all
applicable provisions, if any, of insurance policies required to be maintained
pursuant to the Lease and (iv) in compliance in all material respects with all
applicable laws and regulations other than those being contested in good faith
in any reasonable manner which does not create any risk or danger of (x)
material interference with the use, possession, operation or return of any Unit,
or materially adversely affecting the rights or interests of the Company and the
Indenture Trustee in the Equipment, (y) the imposition of any criminal sanctions
on the part of the Owner Trustee, the Indenture Trustee or the Owner
Participant, or (z) the release of the Company from the obligation to return the
Equipment in compliance with the Lease. (Leases, Section 8)
Liens. The Equipment will be maintained free of any liens, other than the
respective rights of the Owner Participants, the Owner Trustee, the Indenture
Trustee, the holders of the Equipment Notes, the Company and any permitted
sublessee arising under the Leases, the Indentures, the Participation Agreements
and the separate Trust Agreements between the Owner Trustee and the Owner
Participants pursuant to which the Owner Trustee acts as trustee for the benefit
of the Owner Participants, and other than, in the case of the Equipment, certain
limited liens permitted under the Leases and the Indentures, including liens for
taxes either not yet due and payable or being contested in good faith (so long
as there exists no material risk of sale, forfeiture, loss or loss of use of the
Equipment or any interest therein), materialmen's, mechanics' and other similar
liens arising in the ordinary course of business and either not yet due and
payable or being contested (so long as there exists no material risk of sale,
forfeiture, loss or loss of use of the Equipment or any interest therein),
judgment liens that are being appealed in good faith and whose enforcement has
been stayed pending such appeal, and salvage rights of insurers under insurance
policies maintained pursuant to the Lease. (Leases, Section 7)
Insurance. The Company will at all times prior to the return of the
Equipment to the Owner Trustee, at its own expense, cause to be carried and
maintained insurance in respect of the Equipment in amounts and against such
risks and with deductibles and terms and conditions not less than the insurance,
if any, maintained by the Company in respect of similar equipment owned or
leased by the Company, but in no event shall such coverage be for amounts or
against risks less than the prudent industry standard for companies engaged in
full service leasing of tank and hopper
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cars. (Leases, Section 12) The Company does not maintain casualty insurance with
respect to the Equipment.
Termination. So long as no Lease Event of Default or event which, with
notice or the lapse of time or both, would become a Lease Event of Default
thereunder shall have occurred and be continuing, the Company may, upon at least
120 days prior written notice, terminate each Lease with respect to specific
groups of Equipment subject to such Lease (provided that if such termination is
for less than all of the Units in any one specific group of Equipment (as set
forth in the Leases), the determination as to which Units are subject to
termination shall be made by the Company on a random or other reasonable basis
without regard to maintenance status or operating condition) (the "Terminated
Units"), at its option any time after July 2, 2002, if the Company determines in
good faith (as evidenced by a certified copy of a resolution adopted by its
Board of Directors and a certificate executed by the Chief Financial Officer of
the Company) that such Terminated Units have become obsolete or surplus to its
requirements for any reason or that any modification required by law to such
Terminated Units would be economically impractical. The Company will act as
agent for the Owner Trustee in obtaining bids for the Terminated Units and, if
the Company succeeds in locating the eventual purchaser of the Terminated Units,
the Owner Trustee shall transfer all of its right, title and interest in and to
the Terminated Units to the bidder which has submitted the highest cash bid (who
may not be the Company or any affiliate of the Company but who may be the Owner
Trustee or any affiliate of the Owner Trustee) on the termination date. The net
proceeds of such sale shall be paid to the Owner Trustee. If the net proceeds
received from such sale are less than the Termination Value for the Terminated
Units, the Company shall pay to the Owner Trustee an amount equal to the
difference between such proceeds and such Termination Value, together with
certain other amounts including, if such payment is made prior to ,
, the Make-Whole Amount. All funds to be paid to or deposited with
the Owner Trustee as described in this paragraph shall, so long as the Indenture
shall not have been discharged, be deposited directly with the Indenture
Trustee. Amounts in excess of the outstanding principal amount of the Equipment
Notes issued in respect of such Terminated Units, the Make-Whole Amount, if
applicable, and the then accrued and unpaid interest thereon will be distributed
by the Indenture Trustee in accordance with the terms of the Indenture. The lien
of the Indenture shall terminate with respect to the Terminated Units after the
full Termination Value and any rent due has been received by the Indenture
Trustee and, if all amounts due such Owner Participant have also been paid, the
Lease with respect to such Terminated Units shall terminate and the obligation
of the Company thereafter to make rent payments with respect thereto shall
cease. (Leases, Sections 3.6, 10.1, 10.2 and 10.4, Indentures, Section 3.02)
The Owner Trustee shall have the option to retain the Terminated Units, but
it may do so only if the Owner Trustee shall pay, or cause to be paid, to the
Indenture Trustee funds in an amount equal to the principal of and accrued
interest on the outstanding Equipment Notes with respect to such Terminated
Units and, if applicable, an amount equal to the Make-Whole Amount. (Leases,
Section 10.3)
Purchase Options. So long as no Lease Event of Default or event which, with
notice or the lapse of time or both, would become a Lease Event of Default
thereunder, shall have occurred and be continuing, the Company shall have the
right to purchase, on January 2, 2005 with respect to certain Units and on
January 2, 2006 with respect to the other Units any or all of such Units subject
to each Lease at the option prices set forth in the Leases. The Company may
exercise its early purchase option in whole or in part by giving written notice
to the Owner Trustee at least 90 days prior to the Early Purchase Date. If the
Company exercises its early purchase option, a portion of the purchase price
shall be used to prepay the Equipment Notes relating to the purchased Units
unless the Company elects to assume on a full recourse basis all of the Owner
Trustee's obligations in respect of the related Equipment Notes and acquires the
purchased Units subject to the lien of the related Indenture. (Leases, Section
22.1) See "Description of the Equipment Notes--Prepayment."
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Events of Loss. If an Event of Loss occurs with respect to a Unit, the
Company shall give notice to the Owner Trustee in accordance with the terms of
the related Lease and, if the Indenture has not been discharged, to the
Indenture Trustee, and shall either (i) pay to the Owner Trustee the Stipulated
Loss Value of such Unit or (ii) substitute for such Unit like kind equipment, of
equal or greater fair market sales value, utility, remaining economic useful
life and residual value as the Unit being replaced (assuming such Unit was in
the condition required under the Lease). If the Company elects not to substitute
for the applicable Unit, Stipulated Loss Value will be paid on (i) the next
Regular Distribution Date following the election by the Company to pay the
Stipulated Loss Value of such Unit rather than substitute like kind Equipment or
(ii) in the case of the occurrence of a Multiple Loss, on the first Business Day
succeeding the 60th day following the date on which the Company is required to
report such Multiple Loss. If the Company elects to substitute for the
applicable Unit, it shall so substitute for such Unit on the Rent Payment Date
immediately following the date the Company delivers notice of such election. All
funds to be paid or deposited with the Owner Trustee as described in this
paragraph shall, so long as the applicable Indenture shall not have been
discharged, be deposited directly with the Indenture Trustee and shall be
applied to prepay all or a portion of the Equipment Notes as provided in the
Indenture. See "Description of the Equipment Notes--Prepayment." If the Company
pays the Stipulated Loss Value of a Unit subject to an Event of Loss and any
rent due, the lien of the Indenture and the Lease relating to such Unit shall
terminate with respect to such Unit, title thereto shall be transferred to the
Company and the obligation of the Company thereafter to make rent payments with
respect thereto shall cease, except for indemnification obligations which
otherwise may have accrued. (Leases, Section 11) Amounts in excess of the
amounts applied to prepay Equipment Notes in accordance with the Indenture will
be distributed by the Indenture Trustee in accordance with the terms of the
Indenture.
An Event of Loss with respect to any Unit shall mean any of the following
events: (i) damage or contamination of such Unit which, in the Company's
reasonable judgment (as evidenced by an Officers' Certificate to such effect),
makes repair uneconomic or renders such Unit unfit for commercial use, (ii)
destruction of such Unit or theft or disappearance thereof for a period
exceeding twelve months, (iii) the permanent return of such Unit to the
manufacturer pursuant to any patent indemnity provisions, (iv) the taking or
appropriating of title to such Unit by any governmental authority under the
power of eminent domain or otherwise, (v) the actual or constructive total loss
of the Unit, (vi) in the normal course of interstate rail transportation, the
Unit shall be prohibited from being used for a continuous period in excess of
six months as a result of any rule, regulation, order or other action by the
United States government or any agency or instrumentality thereof, (vii) the
Unit shall be subject to a sublease with any person which operates primarily
outside of the United States and shall not be returned to the Company within 60
days of a demand by the Company for return of such Unit following the
termination of such sublease or (viii) the taking or requisitioning of such Unit
for use by any governmental authority or any agency or instrumentality thereof
under the power of eminent domain or otherwise and such taking or requisition is
for a period that exceeds the remaining Basic Term or any Renewal Term then in
effect (unless such taking or requisition is by Mexico or any governmental
authority, agency or instrumentality thereof, in which case such period shall be
the lesser of the period described above or 365 days). (Leases, Section 11.1)
Lease Events of Default. Events of default (each, a "Lease Event of
Default") under the Lease include, among other things: (a) failure by the
Company to make any payment of Basic Rent, any purchase price to be paid by the
Company for any Units pursuant to the Lease or the Participation Agreement,
Stipulated Loss Value or Termination Value, within 10 Business Days after the
same shall have become due, (b) failure by the Company to make any payment of
Supplemental Rent, including indemnity or tax indemnity payments, but not
including any purchase price to be paid by the Company for any Units pursuant to
the Lease or the Participation Agreement, Stipulated Loss Value or Termination
Value, after the same shall become due and such failure shall continue
unremedied for 10 Business Days after receipt by the Company of written notice
of such failure from the Owner Trustee or Indenture Trustee, (c) failure to
maintain in effect insurance as required by
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the Lease, such failure not having been waived, (d) the Company shall make or
permit any possession of the Equipment of any portion thereof not permitted by
the Lease, provided that such unauthorized possession shall not constitute a
Lease Event of Default for a period of 45 days after the occurrence thereof, or
the Company shall make or permit an unauthorized assignment or transfer of the
Lease, (e) failure by the Company to observe or perform any of the agreements or
covenants relating to the merger, consolidation or transfer of assets of the
Company and such failure continues unremedied for 30 days, (f) failure by the
Company to perform or observe any other covenant or agreement to be performed or
observed by it in connection with the Lease (other than under the Tax Indemnity
Agreement) continuing for a period of 30 days after notice of such failure from
the Owner Trustee or the Indenture Trustee, or, if such failure is capable of
being remedied (and the remedy requires an action other than, or in addition to,
the payment of money), for a period of 90 days after receipt of such notice so
long as the Company is diligently proceeding to remedy such failure, (g) any
representation or warranty made by the Company in any Lessee Agreement (other
than the Tax Indemnity Agreement) being untrue or incorrect in any material
respect at the time made and such untruth or incorrectness continues to be
material and unremedied for a period of 30 days after notice thereof or, if such
untruth or incorrectness is capable of being remedied, for a period of 60 days
after receipt of such notice so long as the Company is diligently proceeding to
remedy such untruth or incorrectness and any adverse effects thereof, and (h)
the occurrence of certain events of bankruptcy, reorganization or insolvency of
the Company. (Leases, Section 14)
If a Lease Event of Default under a Lease has occurred and is continuing,
and such Lease has been declared to be in default, the Indenture Trustee, as
assignee of the Owner Trustee's rights under the Lease, may exercise one or more
of the remedies provided in the Lease with respect to the Equipment subject
thereto. These remedies include the right to repossess and use or operate the
Equipment to sell or release the Equipment free and clear of The Company's
rights and retain the proceeds and to require the Company to pay liquidated
damages specified therein. (Leases, Section 15)
THE PARTICIPATION AGREEMENTS
The Company is required to indemnify each Owner Participant, the Owner
Trustee, the Indenture Trustee and the Pass Through Trustee for certain losses
and claims and for certain other matters. In addition, the Company is required
under certain circumstances to indemnify each Owner Participant against the loss
of depreciation deductions and certain other benefits allowable for certain
income tax purposes with respect to the applicable Equipment. (Participation
Agreements, Section 7) Subject to certain restrictions, each Owner Participant
may transfer its beneficial interest in the related owner trust.
Each Participation Agreement provides that if the Owner Participant or any
affiliate thereof is or acquires, is acquired by, merges or otherwise
consolidates with any company or affiliate thereof engaged in full service
railcar leasing, whether or not a direct competitor of the Company or any
affiliate of the Company, or any person that has a material interest in an
enterprise that engages in a business that is in competition with the Company's
full service railcar operating leasing business, the Company may purchase the
applicable Equipment for a purchase price equal to the greater of the
Termination Value or the then appraised fair market value, each calculated as of
such Special Distribution Date, plus certain other amounts including, if
applicable, the Make-Whole Amount. If the Company elects to exercise its right
to purchase the applicable Equipment, unless the Company elects to assume the
related Equipment Notes on a full recourse basis, the purchase price shall be
used to prepay the related Equipment Notes and if such prepayment is prior to
, the applicable Make-Whole Amount shall be paid. See "Description
of the Equipment Notes--Prepayment." (Participation Agreements, Section 6.9)
Under each Participation Agreement, the Company will be prohibited from
consolidating or merging with or into any other corporation or transferring
substantially all of its assets to another
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corporation unless (a) the successor corporation, if other than the Company,
shall be a corporation organized and existing under the laws of the United
States or any state or the District of Columbia and shall expressly assume the
due and punctual performance and observance of all the covenants and conditions
of the operative agreements to be performed by the Company, (b) immediately
prior to and immediately after giving effect to such transaction, no Lease Event
of Default, or event which with notice or the passage of time or both would
become a Lease Event of Default, shall have occurred, whether as a result of
such transaction or otherwise, and (c) the Company shall have made all filings
necessary or appropriate in the reasonable opinion of the Owner Trustee and the
Indenture Trustee in order to preserve and protect the rights of the Owner
Trustee under the related Lease and of the Indenture Trustee under the related
Indenture. (Participation Agreements, Section 6.8)
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion by the Company of the anticipated
material federal income tax consequences of the purchase, ownership and
disposition of Pass Through Certificates. This summary is based on laws,
regulations, rulings and court decisions now in effect, all of which are subject
to change by legislative, administrative or judicial action, which change may be
retroactive. The statements of law and legal conclusions contained herein are
based on the opinion of Neal Gerber & Eisenberg, counsel to the Company. The
discussion below does not purport to address federal income tax consequences
applicable to particular categories of investors, some of which (for example,
banks, tax exempt organizations, insurance companies or foreign investors) may
be subject to special rules. Investors should consult their own tax advisors in
determining the federal, state, local and foreign tax consequences to them of
the purchase, ownership and disposition of Pass Through Certificates, including
the advisability of making any election discussed below. Prospective investors
should note that no rulings have been or will be sought from the Internal
Revenue Service (the "IRS") with respect to any of the federal income tax
consequences discussed below and no assurance can be given that the IRS will not
take contrary positions. The Pass Through Trust is not indemnified for any
federal income taxes that may be imposed upon it, the imposition of which could
significantly reduce the amounts available for distribution to the Certificate
Owners. For purposes of this "Certain Federal Income Tax Consequences" section,
the terms "Pass Through Certificate" and "Certificate" also refer to an indirect
interest in a Pass Through Certificate held by a Certificate Owner.
GENERAL
Based upon an interpretation of analogous authorities under currently
applicable law, the Pass Through Trust should not be classified as an
association taxable as a corporation, but rather should be classified as a
grantor trust for purposes of Sections 671 through 679 of the Code, and each
Certificate Owner should be treated as owning a pro rata undivided interest in
each Equipment Note and any other property held in the Pass Through Trust.
The Company believes that each Certificate Owner will be required to report
on its federal income tax return its pro rata share of the entire income from
the Equipment Notes and any other property in the Pass Through Trust, in
accordance with such Certificate Owner's method of accounting. A Certificate
Owner using the cash method of accounting should take into account its pro rata
share of income as and when received by the Pass Through Trustee. A Certificate
Owner using the accrual method of accounting should take into account its pro
rata share of income as it accrues or is received by the Pass Through Trustee,
whichever is earlier. Although Treasury Regulations characterizing contingent
obligations such as the Make-Whole Amount have yet to be finalized, Proposed
Treasury Regulations provide that contingent payments are treated entirely as
interest in the year in which the amount of such payments becomes fixed. As
such, the Company believes that the Make-Whole Amount described under
"Description of the Equipment
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Notes--Prepayment" should be taxed as contingent interest when it becomes fixed
and unconditionally payable.
A purchaser of a Pass Through Certificate should be treated as purchasing
an interest in each Equipment Note and any other property in the Pass Through
Trust at a price determined by allocating the purchase price paid for the Pass
Through Certificate among the related Equipment Notes and other property in
proportion to their fair market values at the time of purchase of the Pass
Through Certificate. The Company believes that when the Pass Through Trust has
acquired all the Equipment Notes, the purchase price paid for a Pass Through
Certificate by an original purchaser of such certificate will be allocated among
the Equipment Notes in the Pass Through Trust in proportion to their respective
principal amounts.
SALES OF PASS THROUGH CERTIFICATES
A Certificate Owner that sells or exchanges a Pass Through Certificate will
recognize gain or loss (in the aggregate) equal to the difference between its
adjusted tax basis in the Pass Through Certificate and the amount realized
(except to the extent attributable to accrued interest, which would be taxable
as interest income). Subject to the market discount provisions of the Code
(described below), if the Certificate Owner held such Pass Through Certificate
as a capital asset, any such gain or loss should be capital gain or loss, which
will be long-term capital gain or loss if the Pass Through Certificate was held
for more than one year (but only to the extent the Pass Through Trust also held
the underlying Equipment Notes for more than one year). Any long term capital
gains realized on a sale or exchange of Pass Through Certificates will be
taxable under current law to corporate taxpayers at the rates applicable to
ordinary income, and to individual taxpayers at their applicable marginal rate
for capital gains. Any capital losses realized generally will be deductible by a
corporate taxpayer only to the extent of capital gains and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
ORIGINAL ISSUE DISCOUNT
It is anticipated that the Equipment Notes will not be issued with original
issue discount.
MARKET DISCOUNT
A subsequent purchaser of a Pass Through Certificate will be considered to
have acquired an interest in an Equipment Note held in the Pass Through Trust at
a "market discount" to the extent the remaining principal amount of such
Equipment Note exceeds the Certificate Owner's tax basis allocable to such
Equipment Note, provided such excess exceeds a prescribed de minimis amount. If
such excess exceeds the de minimis amount, the Certificate Owner will be subject
to the market discount rules of Section 1276 of the Code with regard to its
interest in the Equipment Note.
In the case of a sale or other disposition by a domestic taxpayer of
indebtedness subject to the market discount rules, Section 1276 of the Code
requires that gain, if any, from such sale or other disposition be treated as
ordinary income to the extent such gain represents market discount that has
accrued during the period in which the indebtedness was held.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, Section 1276 of the Code requires that such payment be
included in gross income of domestic taxpayers as ordinary income to the extent
such payment does not exceed the market discount that has accrued during the
period such indebtedness was held. The amount of any accrued market discount
later required to be included in income upon a disposition, or subsequent
partial principal payment, will be reduced by the amount of accrued market
discount previously included in income.
Market discount generally accrues under either a straight line method or,
at the election of the taxpayer, a constant interest rate method. However, in
the case of installment obligations (such as the Equipment Notes), determination
of the manner in which market discount is to be accrued has
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been left to Treasury regulations not yet issued. Until such Treasury
regulations are issued, the Conference Committee Report to the Tax Reform Act of
1986 (the "Conference Report") indicates that holders of installment obligations
with market discount may elect to accrue market discount either (i) on the basis
of a constant interest rate or (ii) by treating as accrued market discount an
amount equal to total remaining market discount times a fraction, the numerator
of which is the amount of stated interest paid in the accrual period and the
denominator of which is the total amount of stated interest remaining to be paid
on the installment obligation as of the beginning of such period.
Under Section 1277 of the Code, if, in any taxable year, interest paid or
accrued on indebtedness incurred or continued to purchase or carry indebtedness
subject to the market discount rules exceeds the interest currently includible
in income with respect to such indebtedness, deduction of the excess interest
must be deferred to the extent of the market discount allocable to the taxable
year. The deferred portion of any interest expense will generally be deductible
when such market discount is included in income upon the sale or other
disposition (including repayment) of the indebtedness.
A taxpayer may elect to include market discount in gross income currently.
If such election is made, the rules of Sections 1276 and 1277 (described above)
will not apply to the taxpayer.
PREMIUM
A Certificate Owner will generally be considered to have acquired an
interest in an Equipment Note at a premium to the extent the purchaser's tax
basis allocable to such interest exceeds the remaining principal amount of the
Equipment Note allocable to such interest. In that event, a Certificate Owner
who holds a Pass Through Certificate as a capital asset may elect to amortize
that premium as an offset to interest income under Section 171 of the Code, with
corresponding reductions in the Certificate Owner's tax basis in its interest in
the Equipment Note. Generally, such amortization is on a constant yield basis.
However, in the case of installment obligations (such as the Equipment Notes),
the Conference Report indicates a Congressional intent that amortization will be
in accordance with the same rules that will apply to the accrual of market
discount on installment obligations (see the discussion above).
In the case of obligations that may be called at a premium prior to
maturity (such as the Equipment Notes), amortizable bond premium may be
determined by reference to an early call date. Due to the complexities of the
amortizable premium rules, particularly where there is more than one possible
call date and the amount of any premium is uncertain, Certificate Owners are
urged to consult their own tax advisors as to the amount of any amortizable
premium.
BACKUP WITHHOLDING
Payments made on the Pass Through Certificates and proceeds from the sale
of the Pass Through Certificates to or through certain brokers may be subject to
a "backup" withholding tax of 31% unless the Certificate Owner complies with
certain reporting procedures or is an exempt recipient under Section 6049(b)(4)
of the Code. Any such withheld amounts will be allowed as a credit against the
Certificate Owner's federal income tax.
CERTAIN ILLINOIS TAXES
The Pass Through Trustee is a national banking association with its
principal corporate trust office in Illinois. Neal Gerber & Eisenberg, counsel
to the Company, has advised the Company that, in its opinion, under currently
applicable law, assuming that the Pass Through Trust is not taxable as a
corporation, but, rather, is classified as a grantor trust under subpart E, Part
I of Subchapter J of the Code, (i) the Pass Through Trust will not be subject to
any tax (including, without limitation, net or gross income, tangible or
intangible property, net worth, capital, franchise or doing business tax),
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fee or other governmental charge under the laws of the State of Illinois or any
political subdivision thereof and (ii) Certificate Owners who are not residents
of or otherwise subject to tax in Illinois will not be subject to any tax
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax), fee or other
governmental charge under the laws of the State of Illinois or any political
subdivision thereof solely as a result of purchasing, holding (including
receiving payments with respect to) or disposing of a Pass Through Certificate,
except to the extent the Indenture Trustee forecloses on the Equipment and any
of the Equipment is located in Illinois or to the extent the indenture trust or
the Pass Through Trust engages in business in Illinois as a result of such
foreclosure. Neither the Pass Through Trust nor the Certificate Owners will be
indemnified for any state or local taxes imposed on them, the imposition of
which on the Pass Through Trust could reduce the amounts available for
distribution to the Certificate Owners of the Pass Through Trust. In general,
should a Certificate Owner or the Pass Through Trust be subject to any state or
local tax which would not be imposed if the Pass Through Trustee were located in
a different jurisdiction in the United States, the Pass Through Trustee will
resign and a new Pass Through Trustee in such other jurisdiction will be
appointed.
ERISA CONSIDERATIONS
Pass Through Certificates may be purchased by an employee benefit plan (a
"Plan") subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). A fiduciary of a Plan must determine that the purchase of a
Pass Through Certificate is consistent with its fiduciary duties under ERISA and
does not result in a non-exempt prohibited transaction as defined in Section 406
of ERISA or Section 4975 of the Code. Employee benefit plans which are
governmental plans (as defined in Section 3(33) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) are not subject to the fiduciary
responsibility provisions of ERISA. Any Plan that purchases a Pass Through
Certificate must be an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D promulgated under the Securities Act.
The United States Department of Labor has granted to Salomon Brothers Inc
an administrative exemption (Prohibited Transaction Exemption 89-89, Exemption
Application No. D-6446, 54 Fed. Reg. 42,589 (1989) as amended, 55 Fed. Reg.
48,939 (1990)) (the "Exemption") from certain of the prohibited transaction
rules of ERISA and the Code with respect to the initial purchase, the holding
and the subsequent resale by a Plan of certificates in certain pass through
trusts, the assets of which consist of secured credit instruments that bear
interest, including qualified equipment notes secured by leases. A number of
conditions must be satisfied in order for the Exemption to apply, including the
requirement that at the time of their purchase by a Plan the Pass Through
Certificates have a specified credit rating. Under the Exemptions an equipment
note secured by a lease will be considered qualified only if it is a note (a)
which is secured by equipment which is leased, (b) which is secured by the
obligation of the lessee to pay rent under the equipment lease and (c) with
respect to which the trust's security interest is at least as protective of the
rights of the trust as the trust would have if the equipment note were secured
only by the equipment and not by the lease.
It is not clear whether the Exemption applies to participant directed plans
described in Section 404(c) of ERISA or plans that are subject to Section 4975
of the Code but not Title I of ERISA, such as individual retirement plans and
certain plans for self-employed individuals. In addition, there are various
other terms and conditions to the applicability of the Exemption. Accordingly,
each fiduciary of a Plan should independently determine if its purchase of a
Pass Through Certificate will require an exemption, and if so, whether the
Exemption applies to the purchase, or whether any other prohibited transaction
exemption is available.
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UNDERWRITING
Under the terms of and subject to the conditions contained in an
Underwriting Agreement dated the date hereof, Salomon Brothers Inc (the
"Underwriter") has agreed to purchase from the Pass Through Trustee the entire
$95,000,000 aggregate principal amount of Pass Through Certificates.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Pass Through Certificates is subject to,
among other things, the approval of certain legal matters by its counsel and
certain other conditions. The Underwriter is obligated to take and pay for all
of the Pass Through Certificates to be purchased by it if any are taken.
The Underwriter proposes to offer all or part of the Pass Through
Certificates directly to the public at the public offering price per Pass
Through Certificate set forth on the cover page of this Prospectus and may offer
a portion of the Pass Through Certificates to dealers at a price which
represents a concession not in excess of %. The Underwriter may allow, and
such dealers may reallow, concessions not in excess of % to certain other
dealers. After the initial public offering, the public offering price and such
concessions may be changed.
The Company has agreed to indemnify the Underwriter and the Underwriter has
agreed to indemnify the Company against certain liabilities, including
liabilities under the Securities Act.
The Company does not intend to apply for listing of the Pass Through
Certificates on a national securities exchange, but has been advised by the
Underwriter that the Underwriter presently intends to make a market in the Pass
Through Certificates, as permitted by applicable laws and regulations. The
Underwriter is not obligated, however, to make a market in the Pass Through
Certificates and any such market making may be discontinued at any time at the
sole discretion of the Underwriter. Accordingly, no assurance can be given as to
the liquidity of, or trading markets for, the Pass Through Certificates.
LEGAL OPINIONS
The validity of the Pass Through Certificates is being passed upon for the
Company by Neal Gerber & Eisenberg, Chicago, Illinois, and for the Underwriters
by Mayer, Brown & Platt, New York, New York. Both Neal Gerber & Eisenberg and
Mayer, Brown & Platt will rely on the opinion of the Law Department of The First
National Bank of Chicago as to matters relating to the authorization, execution,
authentication, issuance and delivery of the Pass Through Certificates under the
Agreement.
EXPERTS
The consolidated financial statements and the related schedules of Union
Tank Car Company included in its Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 have been audited by Ernst & Young LLP, independent
auditors, as set forth in its report thereon which is incorporated herein by
reference. The report on such consolidated financial statements and related
schedules is incorporated herein by reference in reliance upon the authority of
such firm as experts in accounting and auditing.
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APPENDIX I
GLOSSARY OF CERTAIN TERMS
The following is a glossary of certain terms used in this Prospectus. The
definitions of terms used in this glossary that are also used in the Agreements,
Indentures, Leases or Participation Agreements are qualified in their entirety
by reference to the definitions of such terms contained therein.
"Agreement" means the Pass Through Trust Agreement by and among The First
National Bank of Chicago, as Pass Through Trustee, and the Company, pursuant to
which the Union Tank Car Company 1994-A Pass Through Trust will be formed.
"Basic Rent" means, with respect to any Unit, all scheduled rent payable by
the Company pursuant to each Lease.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, Chicago,
Illinois, the city and state (if different from the foregoing) in which the
principal corporate trust office of the Owner Trustee is located, or, until the
lien of the Indenture has been discharged, the city and state (if different from
the foregoing) in which the principal corporate trust office of the Indenture
Trustee is located.
"Certificate Account" means the one or more accounts established and
maintained pursuant to an Agreement for the benefit of the Certificateholders of
the Pass Through Trust, for the deposit of payments representing Scheduled
Payments on the Equipment Notes held in the Pass Through Trust.
"Certificate Owner" means a person acquiring an interest in a Pass Through
Certificate registered in the name of Cede & Co. as the nominee of The
Depository Trust Company.
"Certificateholder" means any holder of a Pass Through Certificate.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Equipment Cost" means the cost to an Owner Trust of Equipment purchased by
it from the Company.
"Equipment Notes" means the equipment notes issued on a nonrecourse basis
by the Owner Trustees pursuant to the Indentures and Indenture Supplements.
"Event of Default" means, with respect to an Agreement, the occurrence and
continuance of an Indenture Default under one or more of the Indentures.
"Event of Loss" means each of the events designated as such in a Lease.
"Indenture" means each of the two separate Trust Indenture and Security
Agreements to be entered into with respect to certain designated groups of
Equipment between an Owner Trustee and the Indenture Trustee and pursuant to
which such Owner Trustee will issue the Equipment Notes with respect to such
groups of Equipment, as such Trust Indenture and Security Agreements may from
time to time be amended or supplemented.
"Indenture Default" means each of the events designated as an "Indenture
Event of Default" in an Indenture. For a description of certain events
constituting Indenture Defaults, see "Description of the Equipment
Notes--Indenture Defaults, Notice and Waiver."
"Indenture Trustee" means The First National Bank of Chicago, in its
capacity as indenture trustee under each Indenture, and its successors and
assigns thereunder.
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"Lease" means each of the two separate Lease Agreements to be entered into
with respect to the Equipment subject thereto between an Owner Trustee and the
Company, as such Lease Agreements may from time to time be amended or
supplemented.
"Lease Default" means any event which, with notice or the passage of time
or both, would become a Lease Event of Default.
"Lease Event of Default" means each of the events designated as an event of
default in a Lease. For a description of certain events constituting Lease
Events of Default, see "Description of the Equipment Notes--The Leases--Lease
Events of Default."
"Owner Participant" means the owner participant for whose benefit an Owner
Trustee owns Equipment leased to the Company pursuant to a Lease and its
permitted successors and assigns.
"Owner Trustee" means State Street Bank and Trust Company, not in its
individual capacity but solely as trustee of two separate owner trusts, each for
the benefit of an Owner Participant, its successors and assigns.
"Participation Agreement" means each of the two separate Participation
Agreements to be entered into in connection with the leveraged lease financing
of the Equipment, as such Participation Agreements may from time to time be
amended or supplemented.
"Pass Through Certificate" means each of the Pass Through Certificates,
Series 1994-A to be issued by the Pass Through Trustee pursuant to the
Agreement.
"Pass Through Trust" means the Union Tank Car Company 1994-A Pass Through
Trust to be formed pursuant to the Agreement.
"Pass Through Trustee" means The First National Bank of Chicago, in its
capacity as Pass Through Trustee under the Agreement, and each other person
which may from time to time act as successor Pass Through Trustee under the
Agreement.
"Permitted Investment" means each of (i) direct obligations of the United
States of America and agencies thereof, (ii) obligations fully guaranteed by the
United States of America, (iii) certificates of deposit issued by, or bankers'
acceptances of, or time deposits with, any bank, trust company or national
banking association incorporated or doing business under the laws of the United
States of America or one of the States thereof having combined capital and
surplus and retained earnings of at least $100,000,000, having general
obligations rated at least A1 by Moody's Investors Service, Inc. or A+ by
Standard & Poor's Corporation (but excluding any new investment as to which
there is a public announcement by the rating agency providing a rating thereon
that such rating is under consideration for a possible downgrade below A1 or A+,
as the case may be), including the Owner Trustee in its individual capacity or
the Indenture Trustee in its individual capacity if such conditions are met,
(iv) commercial paper of any holding company of a bank, trust company or
national banking association described in clause (iii), (v) bearer note deposits
with, or certificates of deposit issued by, or promissory notes of, any
subsidiary incorporated under the laws of Canada (or any province thereof) of
any bank, trust company or national banking association described in clause
(iii), (vi) commercial paper of companies having a rating of A-1/P-1 or better
assigned to such commercial paper by Standard & Poor's Corporation or Moody's
Investors Service, Inc. (or, if neither such organization shall rate such
commercial paper at any time, by any nationally recognized rating organization
in the United States of America), (vii) U.S. dollar-denominated certificates of
deposit issued by, or time deposits with, the European subsidiaries of any bank,
trust company or national banking association described in clause (iii), (viii)
Canadian Treasury Bills fully hedged to U.S. dollars, (ix) bonds, notes or other
obligations of any state of the United States of America, or any political
subdivision of any such state, or any agencies or other instrumentalities of any
such state, including, but not limited to, industrial development bonds,
pollution control revenue bonds, public power bonds, housing bonds, other
revenue bonds or any general obligation bonds; provided that, at the time of
their purchase, such obligations are rated in the highest rating category by
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Standard & Poor's Corporation or Moody's Investors Service, Inc. (or, if neither
such organization shall rate such obligations at such time, by any nationally
recognized rating organization in the United States of America), and (x) bonds
or other debt instruments of any company, if such bonds or other debt
instruments, at the time of their purchase, are rated in the highest rating
category by Standard & Poor's Corporation or Moody's Investors Service, Inc.
(or, if neither such organization shall rate such obligations at such time, by
any nationally recognized rating organization in the United States of America);
provided that no investment shall be eligible as and included within the
definition of the term "Permitted Investment" unless either (x) the final
maturity or date of return of such investment is equal to one year or less from
the date of purchase thereof or (y) in the case of any investment referred to in
the foregoing clause (i) or (ii) only, such investment has a final maturity or
date of return greater than one year from the date of purchase thereof and
closing prices on a national securities exchange or bid and asked prices,
closing prices or yields to maturity for such investment are reported in The
Wall Street Journal (or if The Wall Street Journal is not at the time published
or ceases to report such prices, such prices are reported by any other
publication of nationally recognized standing of general circulation in New York
City).
"Pool Balance" means, for the Pass Through Trust, as of any Regular
Distribution Date or Special Distribution Date, the aggregate unpaid principal
amount of the Equipment Notes held in the Pass Through Trust plus any amounts in
respect of principal on such Equipment Notes held by the Pass Through Trustee
and not yet distributed plus any proceeds of the sale of the Pass Through
Certificates held in the Pass Through Trust and not yet used to purchase
Equipment Notes. The Pool Balance as of any Regular Distribution Date or Special
Distribution Date shall be computed after giving effect to the payment of
principal, if any, of the Equipment Notes and distribution thereof to be made on
that date.
"Pool Factor" means, for the Pass Through Trust, as of any Regular
Distribution Date or Special Distribution Date, if any, the quotient (rounded to
the seventh decimal place) computed by dividing (i) the Pool Balance by (ii) the
aggregate original principal amount of Pass Through Certificates issued by the
Pass Through Trust. The Pool Factor for the Pass Through Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes held in the
Pass Through Trust and distribution thereof to be made on that date.
"Record Date" means the fifteenth day preceding a Regular Distribution Date
or Special Distribution Date.
"Regular Distribution Date" means January 2 and July 2 of each year,
commencing July 2, 1995.
"Scheduled Payment" means each payment of principal of or interest on an
Equipment Note scheduled to be received by the Pass Through Trustee on January 2
or July 2 of each year, commencing July 2, 1995 until the final distribution
date for the Pass Through Trust, which payment represents the payment of
principal at stated maturity of, or the scheduled repayment of principal of,
such Equipment Note, or the regularly scheduled payment of interest accrued on
such Equipment Note.
"Special Distribution Date" means each day on which a Special Payment will
be distributed as specified in the Prospectus.
"Special Payment" means any payment of principal, Make-Whole Amount, if
any, and interest received by the Pass Through Trustee on account of the
prepayment, if any, of the Equipment Notes (or portion thereof) held in the Pass
Through Trust; any payment received by the Pass Through Trustee following an
Indenture Default in respect of the Equipment Notes held in the Pass Through
Trust, including payments received by the Pass Through Trustee on account of the
purchase by the applicable Owner Trustee of such Equipment Notes; payments
received by the Pass Through Trustee on account of the sale by it of such
Equipment Notes; and any return of escrowed funds
I-3
<PAGE> 48
which have not been used to purchase Equipment Notes plus any payment of amounts
received by the Pass Through Trustee representing interest that would have been
paid on such escrowed funds had Equipment Notes been purchased with such
escrowed funds.
"Specified Investments" means (i) direct obligations of the United States
of America and agencies thereof for which the full faith and credit of the
United States of America is pledged, (ii) obligations fully guaranteed by the
United States of America, (iii) certificates of deposit issued by, or bankers'
acceptances of, or time deposits with, any bank, trust company or national
banking association incorporated or doing business under the laws of the United
States of America or one of the States thereof having combined capital and
surplus and retained earnings of at least $500,000,000 (including any Indenture
Trustee or Owner Trustee, in their respective individual capacities if such
conditions are met), (iv) commercial paper of companies, banks, trust companies
or national banking associations incorporated or doing business under the laws
of the United States of America or one of the States thereof and in each case
having a rating of A-1/P-1 or better assigned to such commercial paper by
Standard & Poor's Corporation or Moody's Investors Service, Inc. (or, if neither
such organization shall rate such commercial paper at any time, by any
nationally recognized rating organization in the United States of America) and
(v) repurchase agreements with any financial institution having a combined
capital and surplus of at least $750,000,000 fully collateralized by obligations
of the type described in clauses (i) through (iv) above; provided, however, that
if all of the above investments are unavailable, the entire amount to be
invested may be used to purchase Federal Funds from an entity described in (iii)
above; and provided, further, that no investment shall be eligible as a
"Specified Investment" unless the final maturity or date of return of such
investment occurs no later than December 31, 1994.
"Special Payment Account" means the one or more accounts established and
maintained pursuant to the Agreement and for the benefit of the
Certificateholders of such Pass Through Trust, for the deposit of payments
representing Special Payments.
"Stipulated Loss Value" means, as to a Unit, the amount payable under a
Lease upon the occurrence of an Event of Loss with respect to such Unit subject
to such Lease.
"Termination Value" means, as to a Unit, the amount required to be received
by an Owner Trustee under a Lease following certain early terminations of such
Lease with respect to such Unit.
I-4
<PAGE> 49
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Available Information............ 2
Reports to Certificateholders by
the Trustee.................... 2
Documents Incorporated by
Reference...................... 2
Summary.......................... 3
Formation of the Pass Through
Trust.......................... 9
Description of Payment Flows..... 10
Use of Proceeds.................. 11
The Company...................... 12
Capitalization................... 12
Selected Financial Information... 13
Description of the Pass Through
Certificates................... 15
Description of the Equipment
Notes.......................... 25
Certain Federal Income Tax
Consequences................... 39
Certain Illinois Taxes........... 41
ERISA Considerations............. 42
Underwriting..................... 43
Legal Opinions................... 43
Experts.......................... 43
Glossary of Certain Terms........ Appendix I
</TABLE>
------------------
UNTIL MARCH , 1995 (90 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE PASS THROUGH CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$95,000,000
UNION TANK CAR COMPANY
1994-A
PASS THROUGH
TRUST
PASS THROUGH CERTIFICATES,
SERIES 1994-A
- ----------------------------------------------------
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
PROSPECTUS
DATED DECEMBER , 1994
<PAGE> 50
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses (other than
underwriting discounts and commissions) to be incurred by the registrant in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee...... $ 34,483
Blue Sky filing and counsel fees......................... 2,000
Trustees' fees and expenses.............................. 5,000
Printing expenses........................................ 35,000
Auditors' fees and expenses.............................. 20,000
Attorneys' fees and expenses............................. 100,000
Rating agency fees....................................... 55,000
Miscellaneous............................................ 8,517
--------
Total............................................. $260,000
</TABLE>
- ---------------
* Estimate
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, Article Sixth of the
Company's Restated Certificate of Incorporation and Article VIII of the
Company's By-Laws authorize and empower the Company to indemnify its directors,
officers, employees and agents against liabilities incurred in connection with,
and related expenses resulting from, any claim, action or suit brought against
any such person as a result of such person's relationship with the Company,
provided that such persons acted in accordance with a stated standard of conduct
in connection with the acts or events on which such claim, action or suit is
based. The finding of either civil or criminal liability on the part of such
persons in connection with such acts or events is not necessarily determinative
of the question of whether such persons have met the required standard of
conduct and are, accordingly, entitled to be indemnified.
Reference is made to Section 8 of the form of Underwriting Agreement filed
as Exhibit 1 hereto for provisions regarding indemnification of the Company and
its officers, directors and controlling persons against certain liabilities.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- --------- ---------------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement.+
4(a)(1) Form of Pass Through Trust Agreement between the Pass Through Trustee and the
Company relating to the Pass Through Certificates.+
4(a)(2) Form of Pass Through Certificates (included in Exhibit 4(a)(1)).
4(b)(1) Form of Participation Agreement among the Company, the Owner Participant, the
Indenture Trustee, the Owner Trustee and the Pass Through Trustee relating to
each separate leveraged lease transaction.+*
4(b)(2) Form of Lease Agreement between the Company and the Owner Trustee.*
4(b)(3) Form of Trust Indenture and Security Agreement between the Indenture Trustee and
the Owner Trustee.+*
4(b)(4) Form of Equipment Note (included in Exhibit 4(b)(3)).
4(b)(5) Form of Trust Agreement between the Owner Participant and the Owner Trustee.*
</TABLE>
II-1
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- --------- ---------------------------------------------------------------------------------
<S> <C>
5(a) Opinion of Neal Gerber & Eisenberg, counsel for the Company.
5(b) Opinion of the Law Department of The First National Bank of Chicago.
8 Tax Opinion of Neal Gerber & Eisenberg, counsel for the Company.
12 Computation of Ratios of Earnings to Fixed Charges.**
23(a) Consent of Ernst & Young LLP, Independent Auditors.
23(b) Consent of Neal Gerber & Eisenberg (included in Exhibits 5 and 8).
23(c) Consent of the Law Department of The First National Bank of Chicago (included in
Exhibit 5(b).
24 Powers of Attorney.+
25 Statement of Eligibility of Pass Through Trustee on Form T-1.
</TABLE>
- ---------------
+ Previously filed.
* Two separate Participation Agreements, Trust Indentures and Security
Agreements, Trust Agreements and Lease Agreements will be entered into with
respect to two separate leveraged lease transactions. Except for differences
in parties, dollar amounts, interest rates, percentages and the like, there
are no material details in which the indicated agreements relating to such
equipment not filed herewith differ from the corresponding exhibit for the
form of such document.
** The computation for each of the five fiscal years ended December 31, 1993,
1992, 1991, 1990 and 1989 is incorporated herein by reference to Exhibit 12
to the Company's Annual Report on Form 10-K for the year ended December 31,
1993.
ITEM 17. UNDERTAKINGS
A. UNDERTAKING REGARDING DOCUMENTS SUBSEQUENTLY FILED UNDER THE EXCHANGE
ACT.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
B. UNDERTAKING IN RESPECT OF INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described under Item 15 above, or otherwise,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
C. UNDERTAKINGS PURSUANT TO RULE 430A
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon
II-2
<PAGE> 52
Rule 430A and contained in a form of prospectus filed by the Company pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Union Tank Car
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois on the 1st day of
December, 1994.
UNION TANK CAR COMPANY
/s/ ROBERT C. GLUTH
------------------------------------
Robert C. Gluth,
Executive Vice President,
Treasurer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 1st day of December, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- --------------------------------------------
<S> <C>
* /s/ JAY A. PRITZKER Chairman of the Board
- --------------------------------------------- and Director
Jay A. Pritzker
* /s/ ROBERT A. PRITZKER President and Director
- --------------------------------------------- (principal executive officer)
Robert A. Pritzker
/s/ ROBERT C. GLUTH Executive Vice President,
- --------------------------------------------- Treasurer and Director
Robert C. Gluth (principal financial and accounting officer)
* /s/ KENNETH P. FISCHL Director
- ---------------------------------------------
Kenneth P. Fischl
*By: /s/ ROBERT C. GLUTH
- ---------------------------------------------
Robert C. Gluth
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 1
EXHIBIT 4(b)(2)
EQUIPMENT LEASE AGREEMENT
(UTC TRUST NO. 1994-A_)
Dated as of December ___, 1994
Between
STATE STREET BANK AND TRUST COMPANY
not in its individual capacity except
as expressly provided herein but
solely as Owner Trustee,
Lessor
And
UNION TANK CAR COMPANY,
Lessee
COVERED HOPPERS AND TANK CARS
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO THIS LEASE, THE
EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN
ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN
FAVOR OF, THE FIRST NATIONAL BANK OF CHICAGO, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT
(UTC TRUST NO. 1994-A ), DATED AS OF DECEMBER __, 1994 BETWEEN SAID INDENTURE
TRUSTEE, AS SECURED PARTY, AND LESSOR, AS DEBTOR. INFORMATION CONCERNING SUCH
SECURITY INTEREST MAY BE OBTAINED FROM THE INDENTURE TRUSTEE AT ITS ADDRESS SET
FORTH IN SECTION 20 OF THIS LEASE. SEE SECTION 25.2 FOR INFORMATION CONCERNING
THE RIGHTS OF THE ORIGINAL HOLDER AND HOLDERS OF THE VARIOUS COUNTERPARTS
HEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. ACCEPTANCE AND LEASING OF EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. TERM AND RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3.1 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3.2 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.3 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.4 Adjustment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.5 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.6 Manner of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4. OWNERSHIP AND MARKING OF EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.1 Retention of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.2 Duty to Number and Mark Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.3 Prohibition Against Certain Designations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5. DISCLAIMER OF WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 6. RETURN OF EQUIPMENT; STORAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6.1 Return; Holdover Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6.2 Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 7. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 8. MAINTENANCE; POSSESSION; COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.1 Maintenance and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8.3 Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 9. MODIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.1 Required Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.2 Optional Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 10. VOLUNTARY TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10.1 Right of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10.2 Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10.3 Retention of Equipment by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10.4 Termination of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11. LOSS, DESTRUCTION OR REQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.2 Replacement or Payment upon Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.3 Rent Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 11.4 Disposition of Equipment; Replacement of Unit . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 11.5 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 12. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.1 Physical Damage and Public Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.2 Physical Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 12.3 Public Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 12.4 Certificate of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 12.5 Additional Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 12.6 Pollution Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 13. REPORTS; INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.1 Duty of Lessee to Furnish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.2 Lessor's Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 14. LEASE EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 15. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 15.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 15.2 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 15.3 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 15.4 Notice of Lease Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 15.5 Lessee's Duty to Furnish Information with Respect to Subleases . . . . . . . . . . . . . . . . . 34
Section 15.6 Lessee's Duty to Return Equipment Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 15.7 Specific Performance; Lessor Appointed Lessee's Agent . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 16. FILINGS; FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.1 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.2 Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 16.3 Other Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 16.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 17. LESSOR'S RIGHT TO PERFORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 18. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 18.1 Assignment by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 18.2 Assignment by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 18.3 Sublessee's Performance and Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 19. NET LEASE, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 20. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 21. CONCERNING THE INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 21.1 Limitation of the Indenture Trustee's Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 21.2 Right, Title and Interest of the Indenture Trustee Under Lease . . . . . . . . . . . . . . . . . 41
SECTION 22. PURCHASE OPTIONS; RENEWAL OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 22.1 Early Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 22.2 Election to Retain or Return Equipment at End of Basic or Renewal Term . . . . . . . . . . . . . 43
Section 22.3 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 22.4 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 22.5 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 22.6 Stipulated Loss Value and Termination Value During Renewal Term . . . . . . . . . . . . . . . . . 45
SECTION 23. LIMITATION OF LESSOR'S LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 24. INVESTMENT OF SECURITY FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 25. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.1 Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.2 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.3 Headings and Table of Contents; Section References . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.5 True Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 25.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.8 Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.9 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.10 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.11 Lessee's Right of Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 25.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Attachments to Equipment Lease:
Exhibit A -- Form of Lease Supplement A-1
Appendix A -- Definitions
</TABLE>
iv
<PAGE> 6
EQUIPMENT LEASE AGREEMENT
(UTC TRUST NO. 1994-A )
THIS EQUIPMENT LEASE AGREEMENT (L- ) (UTC Trust No. 1994-A ), dated as of
December __, 1994 (the "Lease"), between STATE STREET BANK AND TRUST COMPANY, a
Massachusetts banking corporation, not in its individual capacity except as
expressly provided herein, but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and UNION TANK CAR COMPANY, a Delaware corporation
("Lessee").
W I T N E S S E T H:
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, all capitalized terms used herein
without definition shall have the respective meanings set forth in Appendix A
hereto for all purposes of this Lease.
SECTION 2. ACCEPTANCE AND LEASING OF EQUIPMENT.
Lessor hereby agrees (subject to satisfaction or waiver of the conditions
set forth in Sections 4.1 and 4.3 of the Participation Agreement) to accept
delivery of each Unit from Lessee and to lease such Unit to Lessee hereunder,
and Lessee hereby agrees (subject to satisfaction or waiver of the conditions
set forth in Section 4.4 of the Participation Agreement), immediately following
such acceptance by Lessor, to lease from Lessor hereunder such Unit. Such
acceptance by Lessor and lease by Lessee is to be evidenced by the execution
and delivery by Lessee and Lessor of a Lease Supplement covering such Unit, all
in accordance with Section 2.3(b) of the Participation Agreement. Lessee
hereby agrees that its execution and delivery of a Lease Supplement covering
any Unit shall, without further act, irrevocably constitute acceptance by
Lessee of such Unit for all purposes of this Lease.
SECTION 3. TERM AND RENT.
Section 3.1 Lease Term. The interim term of this Lease (the "Interim
Term") for each Unit shall commence on the Closing Date and shall terminate on
the day before the Basic Term Commencement Date. The basic term of this Lease
(the "Basic Term") shall commence on the Basic Term Commencement Date and,
subject to earlier termination pursuant to Sections 10, 11, 15 and 22 shall
expire at 11:59 P.M. (Chicago time) on the Basic Term Expiration Date. Subject
and pursuant to Section 22.4, Lessee may elect one or more Renewal Terms.
<PAGE> 7
Section 3.2 Basic Rent. Lessee hereby agrees to pay Lessor as Basic Rent
for each Unit throughout the Basic Term applicable thereto Basic Rent in
consecutive semi-annual installments payable on each Rent Payment Date. Each
such semi-annual payment of Basic Rent shall be in an amount equal to the
product of the Equipment Cost for such Unit multiplied by the Basic Rent
percentage for such Unit set forth opposite such Rent Payment Date on Schedule
3 to the Participation Agreement (as such Schedule 3 shall be adjusted pursuant
to Section 2.6 of the Participation Agreement). Basic Rent shall be payable in
advance on certain Rent Payment Dates and in arrears on certain Rent Payment
Dates, as specified in Schedule 3 to the Participation Agreement, as so
adjusted, such Schedule 3 as so adjusted from time to time being incorporated
herein by reference.
Anything contained herein or in the Participation Agreement to the contrary
notwithstanding, each installment of Basic Rent (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) shall be,
under any circumstances and in any event, in an amount at least sufficient for
Lessor to pay in full as of the due date of such installment, any payment of
principal of and interest on the Equipment Notes required to be paid by Lessor
pursuant to the Indenture on such due date.
Section 3.3 Supplemental Rent. Lessee also agrees to pay to Lessor, or to
whomsoever shall be entitled thereto, any and all Supplemental Rent, promptly
as the same shall become due and owing, or where no due date is specified,
promptly after demand by the Person entitled thereto, and in the event of any
failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have
all rights, powers and remedies provided for herein or by law or equity or
otherwise as in the case of nonpayment of Basic Rent. Lessee will also pay, as
Supplemental Rent, (a) on demand, to the extent permitted by applicable law, an
amount equal to interest at the Late Rate on any part of any installment of
Basic Rent not paid when due for any period for which the same shall be overdue
and on any payment of Supplemental Rent not paid when due or demanded, as the
case may be, for the period from such due date or demand until the same shall
be paid, (b) in the case of the termination of this Lease with respect to any
Unit pursuant to Section 10, on the applicable Termination Date, an amount
equal to the Make-Whole Amount, if any, with respect to the principal amount of
each Equipment Note to be prepaid as a result of such termination, (c) in the
case of the purchase of any Unit pursuant to Section 22.1 or Section 6.9 of the
Participation Agreement, on such date of purchase, an amount equal to the
Make-Whole Amount, if any, with respect to the principal amount of each
Equipment Note to be prepaid as a result of such purchase, (d) an amount equal
to any other amount payable by Lessor on the Equipment Notes in excess of the
principal and interest payments due thereunder, as and when such amount shall
be due and payable, in accordance with the terms of the Equipment Notes and the
Indenture, and (e) in the case of any refinancing of the Equipment Notes
pursuant to Section 10.2 of the Participation Agreement, on the Refunding Date,
an amount equal to the Make-Whole Amount, if any, with respect to the aggregate
principal amount of the Equipment Notes being prepaid. All Supplemental Rent
to be paid pursuant to this Section 3.3 shall be payable in the type of funds
and in the manner set forth in Section 3.6.
2
<PAGE> 8
Section 3.4 Adjustment of Rent. Lessee and Lessor agree that the Basic
Rent, Stipulated Loss Value and Termination Value percentages and the Early
Purchase Price and Basic Term Purchase Price shall be adjusted to the extent
provided in Section 2.6 of the Participation Agreement, subject in all cases to
the limitation set forth in the second paragraph of Section 3.2.
Section 3.5 Advances. Lessor agrees to give notice to Lessee and the
Indenture Trustee at least five Business Days prior to the Basic Term
Commencement Date if the funds for the payment of interest on the Equipment
Notes contemplated to be made by Owner Trustee pursuant to Section 2.2(c) of
the Participation Agreement will not be paid by Owner Trustee to the Indenture
Trustee in an amount equal to the amount contemplated to be paid pursuant to
Section 2.2(c) of the Participation Agreement. If and to the extent that the
Indenture Trustee on the Basic Term Commencement Date shall not have received
funds from Owner Trustee sufficient for the payment in full of the interest
then due and owing on the Equipment Notes, Lessee shall pay as Supplemental
Rent, in one installment due on the Basic Term Commencement Date, an amount, if
any, equal to such deficiency (such payment being referred to herein as an
"Advance"). In the event Lessee makes any Advance pursuant to this Section 3.5
and is not promptly reimbursed therefor by Owner Participant after demand for
such reimbursement in the manner set forth in Section 20 and provided no Lease
Default shall have occurred and be continuing, Lessee shall be entitled to
offset and deduct (without duplication) against that portion of each succeeding
payment of Basic Rent, Stipulated Loss Value or Termination Value which becomes
payable to or to the order of Owner Trustee under the Indenture and
distributable to Owner Participant under the Trust Agreement, an amount equal
to such Advance plus interest on such amount at the Late Rate until Lessee has
been fully reimbursed for such Advance plus such interest and in each such
case, such offset shall be deemed to constitute a reduction in the amount of
such Advance so payable. No such offset or aggregate combined effect of
separate offsets shall reduce the amount of any indemnity or other claim
payable by Lessee to any holder of an Equipment Note, the Indenture Trustee or
Owner Trustee in its individual capacity, nor reduce any installment of Basic
Rent, or any payment of Stipulated Loss Value or Termination Value, to an
amount that is insufficient to pay in full the payments then required to be
made on account of the principal and interest on the Equipment Notes then
outstanding.
Section 3.6 Manner of Payments. All Rent (other than Supplemental Rent
payable to Persons other than Lessor, which shall be payable to such other
Persons in accordance with written instructions furnished to Lessee by such
Persons, as otherwise provided in any of the Operative Agreements or as
required by law) shall be paid by Lessee to Lessor at its office at 225
Franklin Street, Boston, Massachusetts 02110, Attention: Corporate Trust
Department. All Rent shall be paid by Lessee in funds consisting of lawful
currency of the United States of America, which shall be immediately available
to the recipient not later than 12:00 noon (New York City time) on the date of
such payment, provided, that so long as the Indenture shall not have been
discharged pursuant to the terms thereof, Lessor hereby directs, and Lessee
agrees, that all Rent (excluding Excepted Property) payable to Lessor shall be
paid directly to the Indenture Trustee at the times and in funds of the type
specified in this
3
<PAGE> 9
Section 3.6 at the office of the Indenture Trustee at The First National Bank
of Chicago, One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126,
ABA No. [070100013], Corporate Trust Clearing Account No. [48115377], For
credit to trust number ____________________, Attention:
______________________-UTC Trust No. 1994-A Trust No. 1994-1, or at such other
location in the United States of America as the Indenture Trustee may otherwise
direct.
SECTION 4. OWNERSHIP AND MARKING OF EQUIPMENT.
Section 4.1 Retention of Title. Lessor shall and hereby does retain full
legal title to and beneficial ownership of the Equipment notwithstanding the
delivery to and possession and use of the Equipment by Lessee hereunder or any
sublessee under any sublease permitted hereby.
Section 4.2 Duty to Number and Mark Equipment. With respect to the Units
to be delivered on the Closing Date, Lessee has caused, and as soon as
practicable after the date on which a Lease Supplement is executed and
delivered in respect of a Replacement Unit pursuant to Section 11.2, Lessee
will cause, each Unit to be numbered with its reporting mark shown on the Lease
Supplement dated the date on which such Unit was delivered and covering such
Unit, and will from and after such date keep and maintain, plainly, distinctly,
permanently and conspicuously marked by a plate or stencil printed in
contrasting colors upon each side of each Unit, in letters not less than one
inch in height, a legend substantially as follows:
"OWNERSHIP SUBJECT TO A SECURITY AGREEMENT FILED WITH THE
INTERSTATE COMMERCE COMMISSION"
with appropriate changes thereof and additions thereto as from time to time may
be required by law in order to protect Lessor's right, title and interest in
and to such Unit, its rights under this Lease and the rights of the Indenture
Trustee. Except as provided hereinabove, Lessee will not place any such Units
in operation or exercise any control or dominion over the same until the
required legend shall have been so marked on both sides thereof, and will
replace promptly any such word or words in such legend which may be removed,
defaced, obliterated or destroyed. Lessee will not change the reporting mark
of any Unit except in accordance with a statement of new reporting marks to be
substituted therefor, which statement shall be delivered by Lessee to Lessor
and, so long as the Indenture shall not have been discharged pursuant to its
terms, to the Indenture Trustee prior to or contemporaneously with such change.
A supplement to this Lease and, if not so discharged, the Indenture, with
respect to such new reporting marks, shall, prior to or contemporaneously with
the substitution of such reporting marks, be filed or recorded in all public
offices where this Lease and the Indenture shall have been filed or recorded
and in such other places, if any, where Lessor and, so long as the Indenture
shall not have been discharged pursuant to its terms, the Indenture Trustee may
reasonably request in order to protect, preserve and maintain its right, title
and interest in the Units. The costs and expenses of all such supplements,
filings and recordings shall be borne by Lessee.
4
<PAGE> 10
Section 4.3 Prohibition Against Certain Designations. Except as above
provided, Lessee will not allow the name of any Person to be placed on any Unit
as a designation that might reasonably be interpreted as a claim of ownership;
provided, however, that subject to the delivery of the new reporting marks
statement specified in the third sentence of Section 4.2, Lessee may cause the
Equipment to be lettered with the names or initials or other insignia
customarily used by Lessee or any permitted sublessees or any of their
respective Affiliates on railroad equipment used by it of the same or a similar
type for convenience of identification of the right of Lessee to use the
Equipment hereunder or any permitted sublessee to use the Equipment pursuant to
a sublease permitted hereby.
SECTION 5. DISCLAIMER OF WARRANTIES.
Without waiving any claim Lessee may have against any seller, supplier or
manufacturer, LESSEE ACKNOWLEDGES AND AGREES THAT, (i) EACH UNIT IS OF A SIZE,
DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii)
LESSEE IS SATISFIED THAT EACH UNIT IS SUITABLE FOR ITS PURPOSES AND LESSEE HAS
ACCEPTED EACH UNIT, (iii) NEITHER LESSOR NOR OWNER PARTICIPANT IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND OR HAS INSPECTED THE UNITS
PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE, (iv) EACH UNIT IS LEASED
HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS NOW IN
EFFECT OR HEREAFTER ADOPTED, AND (v) LESSOR LEASES AND LESSEE TAKES EACH UNIT
"AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", IN WHATEVER CONDITION IT MAY BE, AND
LESSEE ACKNOWLEDGES THAT NEITHER LESSOR, AS LESSOR OR IN ITS INDIVIDUAL
CAPACITY, NOR OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND
EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR
REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS
FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO
THE TITLE, OF THE EQUIPMENT, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF
OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR
TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR
NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
WHATSOEVER WITH RESPECT THERETO AND EACH OF LESSOR AND OWNER PARTICIPANT
EXPRESSLY DISCLAIMS SELECTION OF THE UNITS, except that Lessor, in its
individual capacity, represents and warrants that on the Closing Date, Lessor
shall have received whatever title to the Equipment as was conveyed to Lessor
by Lessee and each Unit will be free of Lessor's Liens attributable to Lessor
and provided that the foregoing disclaimer in clause (v) shall not extend to
Owner Participant's representation and warranty contained in Section 3.6(e) of
the Participation Agreement. Lessor hereby appoints and constitutes Lessee its
agent and attorney-in-fact during the Lease Term to assert and enforce, from
time to time, in the name and for the account of Lessor and Lessee, as their
interests may appear, but in all cases at the sole
5
<PAGE> 11
cOst and expense of Lessee, whatever claims and rights Lessor may have as owner
of the Equipment against the manufacturers or any prior owner thereof;
provided, however, that if at any time a Lease Event of Default shall have
occurred and be continuing, at Lessor's option, such power of attorney shall
terminate, and Lessor may assert and enforce, at Lessee's sole cost and
expense, such claims and rights. Lessor shall have no responsibility or
liability to Lessee or any other Person with respect to any of the following:
(i) any liability, loss or damage caused or alleged to be caused directly or
indirectly by any Unit, or by any of the commodities, items or materials from
time to time contained therein, whether or not permitted by the terms hereof,
or by any inadequacy thereof or deficiency or defect therein or by any other
circumstances in connection therewith; (ii) the use, operation or performance
of any Unit or any risks relating thereto; (iii) any interruption of service,
loss of business or anticipated profits or consequential damages; or (iv) the
delivery, operation, servicing, maintenance, repair, improvement or replacement
of any Unit. Lessee's delivery of a Lease Supplement shall be conclusive
evidence as between Lessee and Lessor that all Units described therein are in
all the foregoing respects satisfactory to Lessee, and Lessee will not assert
any claim of any nature whatsoever against Lessor based on any of the foregoing
matters.
SECTION 6. RETURN OF EQUIPMENT; STORAGE.
Section 6.1 Return; Holdover Rent.
(a) Not less than 120 days prior to the end of the Basic Term, the end of
any Fixed Rate Renewal Term, or the end of any Fair Market Renewal Term, in
each case with respect to any Units which Lessee has elected to return under
Section 22.2, Lessee will provide Lessor with [_______]1 storage locations used
for the storage of rolling stock within the continental United States
(excluding Alaska), which locations, to the extent practicable, shall be
geographically diverse. Not less than 90 days prior to the end of the Lease
Term with respect to any Unit which has not been purchased by Lessee, Lessor
will give Lessee irrevocable notice of its decision either to take possession
of or store such Unit. If Lessor shall have decided to take possession of such
Unit, the terms of Section 6.1(b) will apply. If Lessor shall have decided to
store such Unit, the terms of Section 6.1(c) hereof will apply.
(b) If Lessor shall have decided to take possession of such Unit, Lessee
will, at its own cost and expense, deliver possession of such Unit at any track
location, f.o.b. such location, (i) as may be agreed upon by Lessor and Lessee
in writing, or (ii) in the absence of such agreement, as Lessor may reasonably
select by written notice to Lessee delivered on or before the 90th day before
the end of the Lease Term; provided, that (x) there shall be no more than
[______]1 such locations designated by Lessor (each of which shall be located
within the continental United States, exclusive of Alaska), (y) there shall be
no less than [25] Units (any group of 25 Units, an "Inspectable Group")
returned to each location, and (z) Lessor's notice
_______________
1 There will be a total of 21 return locations, allocated proportionately
between the two Leases based on the number of Units subject to each Lease.
6
<PAGE> 12
shall specify the total number and type of Units to be delivered to each
location. Upon the request of Lessor, maintenance records with respect to any
Unit shall be made available to Lessor or its designee upon the return of such
Unit.
(c) (i) If Lessor shall have elected to store any Unit upon the expiration
of the Lease Term with respect thereto, Lessee shall store such Unit, free of
charge for a period (the "Storage Period") beginning on the expiration of the
Lease Term and ending not more than 60 days after the later of (A) the date
of such expiration of the Lease Term and (B) the date on which such Unit is
in compliance with the conditions set forth in Section 6.2. Any storage
provided by Lessee during the Storage Period shall be at the sole risk and
expense of Lessee and Lessee shall maintain the insurance required by Section
12.1 with respect to all stored Units. During the Storage Period, Lessee
will permit Lessor or any person designated by it, including the authorized
representative or representatives of any prospective purchaser or user of
such Unit, to restencil the marks on such Unit and to inspect the same during
Lessee's normal business hours upon at least three Business Days' prior
telephonic notice; provided, however, that such inspection and restenciling
shall not unreasonably interfere with the normal conduct of Lessee's business
and shall be subject to Lessee's and the storage location's standard security
and safety rules and regulations; and provided, further, that (x) such
inspection and restenciling shall be at such Person's own risk, (y) Lessee
shall be protected against any loss or damage incurred by it in connection
with any such inspection or restenciling by such Person through
indemnification, insurance or other means reasonably satisfactory to Lessee
and (z) Lessee (except in the case of Lessee's gross negligence or wilful
misconduct) shall not be liable for any injury to, or the death of, any
Person exercising, either on behalf of Lessor or any prospective purchaser or
user, the rights of inspection and restenciling granted pursuant hereto.
Lessee shall not be required to store the Equipment after the Storage Period.
If Lessee does store any Unit after the expiration of the Storage Period,
such storage shall be at the sole risk and expense of Lessor.
(ii) Upon the request and direction of Lessor (and at Lessor's sole risk
and expense), on not more than one occasion with respect to each stored Unit
and upon not less than 30 days' prior written notice from Lessor to Lessee,
Lessee will, on or before the expiration of the Storage Period, transport
such Units to any railroad interchange point or points (not to exceed
[______]2 in total), within the continental United States (except Alaska),
with a minimum of at least an Inspectable Group delivered to each interchange
point on any railroad lines or to any connecting carrier for shipment,
whereupon Lessee shall have no further liability or obligation with respect
to such Units.
(d) Provided no Lease Default referred to in Section 14(g) or (h) or Lease
Event of Default shall have occurred and be continuing, all amounts
earned in respect of a Unit subsequent to the expiration of the Lease Term
with respect to such Unit and prior to the return
_______________
2 See footnote 1 on previous page.
7
<PAGE> 13
of the Unit hereunder shall belong to Lessee and, if received by Lessor, shall
be promptly turned over to Lessee.
(e) Subject to the other provisions of this Section 6.1 with respect to
additional Holdover Rent, Lessee shall pay Holdover Rent (hereinafter defined)
for each Unit for each day from the date of expiration or termination of the
Lease with respect to such Unit to the date such Unit is (i) returned to the
location specified pursuant to Section 6.1(b) or (ii) delivered and stored for
Lessor pursuant to Section 6.1(c). During such holdover period, Lessee shall
use its reasonable best efforts to secure the return of the Equipment as
required under this Section 6.
(f) In the event any Unit is not returned to Lessor in the condition
specified in Section 6.2, Lessee shall pay to Lessor the daily equivalent of
the rental rate in effect at the expiration or termination of the most recent
Lease Term with respect to such Unit (the "Holdover Rent") multiplied by the
number of days equal to the sum of (i) one-half of the number of days elapsed
between the delivery of the Unit to the location specified in Section 6.1(b) or
6.1(c), as appropriate, and the date on which such Unit was inspected by Lessor
(provided, however, that in no event shall the number determined pursuant to
this clause (i) exceed 30), plus (ii) the number of days following receipt by
Lessee of notice from Lessor, which is given within the three-day period
specified in Section 6.1(h), that such Unit is not in the condition specified
by Section 6.2 required by Lessee to restore such Unit to such condition.
Notwithstanding the foregoing, if the reasonable cost of repairs required to
restore any Unit to the condition set forth in Section 6.2 is less than $500,
then (A) Lessor shall be responsible for making such repairs, the cost of which
shall be reimbursed by Lessee, and (B) the Unit shall be deemed to comply with
the conditions set forth in Section 6.2 and no additional Holdover Rent shall
be payable under this Section 6.2(d) with respect thereto solely as a result of
the condition of the Unit.
(g) Holdover Rent shall be paid monthly in arrears, by payment from Lessee
to Lessor on or before the fifth day following the end of each calendar month,
in the manner specified in Section 3.6 hereof, such payment to be accompanied
by a statement setting forth in reasonable detail the calculation of such
payment on a per Unit basis.
(h) During the 60-day period commencing on the date on which a minimum of
at least an Inspectable Group is delivered, pursuant to Section 6.1 (b) or (c),
to Lessor or to a storage location, as appropriate (the "Inspection Period"),
Lessor shall be entitled to inspect any Unit so delivered to ensure that such
Unit is in the condition required under Section 6.2. Lessor shall promptly
(but in no event later than three Business Days following the foregoing
inspection) notify Lessee if any Units are not in compliance with the
conditions specified in Section 6.2. Subject to Section 6.1(f), no Holdover
Rent shall be payable by Lessee during the Inspection Period. All inspections
of any redelivered Unit shall be performed at Lessor's sole cost, expense and
risk (including, without limitation, the risk of personal injury or death), by
its authorized representatives. Lessee shall not be liable for any injury to,
or the death of, any Person exercising, on behalf of Lessor, the rights of
inspection granted under this Section 6.1
8
<PAGE> 14
unless caused by Lessee's gross negligence or wilful misconduct. If such Unit
is not in compliance with the conditions set forth in Section 6.2, then Lessee
shall promptly take such steps as are necessary to bring such Unit into such
compliance and shall, subject to the last sentence of Section 6.1(e) pay, in
addition to Holdover Rent otherwise owing under this Section 6.1, if any, the
reasonable cost and expense of any reinspection of such Unit conducted by
Lessor required because of such non-compliance with Section 6.2. No inspection
pursuant to this Section 6.1(f) shall unreasonably interfere with the normal
conduct of business by Lessee, any sublessee or the location to which such Unit
is returned. Lessee shall provide (or cause any sublessee or owner of the
return location to provide) reasonable cooperation to Lessor and its
representatives in connection with such inspection, but Lessee shall not be
required to undertake or incur any additional liabilities in connection
therewith. A Unit shall not be deemed to have been returned to Lessor for
purposes of this Lease unless and until it is in compliance with the conditions
set forth in Section 6.2.
Section 6.2 Condition of Equipment. Each Unit, when returned to Lessor
pursuant to Section 6.1, shall be (a) capable of performing the functions for
which it was designed, with all loading and unloading components operating in
good working order with allowance for normal wear and tear, (b) suitable for
use in interchange in accordance with the Field Manual of the AAR and FRA rules
and regulations, (c) suitable for continued commercial use in the commodity
last carried immediately prior to such return, (d) in all material respects, in
the condition required by Section 8.1, (e) in conformance with any requirement
pertaining to warranties of the manufacturer of the Units during the warranty
period, (f) fit for loading and acceptable for interchange service generally in
the transportation industry after giving effect to a transfer or change in
ownership (in accordance with applicable interchange rules), (g) empty, (h)
steam cleaned or otherwise cleaned in a comparable commercially acceptable
manner, and (i) free and clear of all Liens except Lessor's Liens and Permitted
Liens of the type described in clause (iii) of the definition of Permitted
Liens to the extent arising as a result of a fleet wide action which includes
such Unit; provided, however, that in the event Lessor fails to inspect any
Unit during the Inspection Period and/or fails to notify Lessee prior to the
end of the three-Business Day period specified in Section 6.1(h), that such
Unit is not in the condition specified by Section 6.2, Lessee's obligation to
comply with the conditions set forth in this Section 6.2 shall terminate.
SECTION 7. LIENS.
Lessee will not directly or indirectly create, incur, assume, permit or
suffer to exist any Lien on or with respect to any Units or Lessee's leasehold
interest therein under this Lease, except Permitted Liens, Lessor's Liens and
Liens described in Section 6.4(a) and 6.4(b) of the Participation Agreement,
and Lessee shall promptly, at its own expense, take such action or cause such
action to be taken as may be necessary to duly discharge (by bonding or
otherwise) any such Lien not excepted above if the same shall arise at any
time.
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SECTION 8. MAINTENANCE; POSSESSION; COMPLIANCE WITH LAWS.
Section 8.1 Maintenance and Operation. (a) Lessee, at its own cost and
expense, shall maintain, repair and keep each Unit (i) according to prudent
industry practice, in good working order, and in good physical condition for
railcars of a similar age and usage, normal wear and tear excepted, (ii) in a
manner consistent with maintenance practices used by Lessee in respect of
equipment owned or leased by Lessee similar in type to such Unit, (iii) in
accordance in all material respects with all manufacturer's warranties and in
accordance with all applicable provisions, if any, of insurance policies
required to be maintained pursuant to Section 12, and (iv) in compliance in all
material respects with any applicable laws and regulations, including, without
limitation, the Field Manual of the AAR, FRA rules and regulations and
Interchange Rules as they apply to the maintenance and operation of the
Equipment in interchange regardless of upon whom such applicable laws and
regulations are nominally imposed; provided, however, that Lessee may, in good
faith and by appropriate proceedings diligently conducted, contest the
validity or application of any such standard, rule or regulation in any
reasonable manner which does not materially interfere with the use, possession,
operation or return of any of the Units or materially adversely affect the
rights or interests of Lessor and the Indenture Trustee in the Equipment or
hereunder or otherwise expose Lessor, the Indenture Trustee or any Participant
to criminal sanctions or release Lessee from the obligation to return the
Equipment in compliance with the provisions of Section 6.2. Lessee shall
provide Lessor and the Indenture Trustee with notice of any contest of the type
described in the preceding sentence in detail sufficient to enable Lessor and
the Indenture Trustee to ascertain whether such contest may have an effect of
the type described in the preceding sentence. In no event shall Lessee
discriminate as to the use or maintenance of any Unit (including the
periodicity of maintenance or record keeping in respect of such Unit) as
compared to equipment of a similar nature which Lessee owns or leases. Lessee
will maintain all records, logs and other materials required by relevant
industry standards or any governmental authority having jurisdiction over the
Units required to be maintained in respect of any Unit, all as if Lessee were
the owner of such Units, regardless of whether any such requirements, by their
terms, are nominally imposed on Lessee, Lessor or Owner Participant.
(b) Lessee shall not or expressly permit any sublessee to change a DOT
classification (as provided for in 49 C.F.R. Part 179 or any successor
thereto), or expressly permit any sublessee to operate any Unit under a
different DOT classification, from that classification in effect for such Unit
on the Closing Date, except for any change in tank test pressure rating
provided such change does not increase the pressure rating of the Unit above
the tank test pressure to which the Unit was manufactured; provided however,
that in the event Lessor shall not have provided Lessee with a written waiver
or consent to such a reclassification or operation of any Unit within 10
Business Days of Lessee's written request therefor (or Lessor expressly rejects
such a request by Lessee), Lessee may replace such Unit in accordance with and
subject to the provisions of Section 11.2(i), 11.3 and 11.4.
Section 8.2 Possession. Lessee shall be entitled to the possession and use
of the Equipment by it or any Affiliate, in the United States, Canada and
Mexico, only in the manner
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for which it was designed and intended and so as to subject it only to ordinary
wear and tear. In no event shall Lessee make use of any Equipment in any
jurisdiction not included in the insurance coverage required by Section 12.
The Equipment shall be used primarily on domestic routes in the United States,
and in no event shall more than 20% of the Units be used (as determined by
mileage records) outside the continental United States (exclusive of Alaska)
during any taxable year in which the transaction generates tax losses. Nothing
in this Section 8.2 shall be deemed to constitute permission by Lessor to any
Person that acquires possession of any Unit to take any action inconsistent
with the terms and provisions of this Lease and any of the other Operative
Agreements. The rights of any Person that acquires possession of any Unit
pursuant to this Section 8.2 shall be subject and subordinate to the rights of
Lessor hereunder.
Section 8.3 Sublease. Provided Lessor shall not have declared the Lease to
be in default (or the Lease shall not be deemed to have been declared in
default) pursuant to Section 15.1 hereof, Lessee shall be entitled, without the
prior approval of Lessor, to enter into a sublease for any Unit or Units
(pursuant to a car service contract or otherwise) to, or to grant permission
for the use thereof under car contracts by, (a) a railroad company or companies
incorporated under the laws of the United States or any state thereof or the
District of Columbia, Canada or any province thereof, or Mexico or any state
thereof, upon lines of railroad owned or operated by such railroad company or
companies or over which such railroad company or companies have trackage rights
or rights for operation of their trains, and upon connecting and other carriers
in the usual interchange of traffic or (b) responsible companies other than
railroad companies for use in their business (leases to such sublessees being
herein referred to as "Permitted Subleases"); provided, however, that if Lessee
subleases any Unit to a sublessee which operates primarily in Mexico (or any
state thereof), Lessee shall first have made all registrations, filings and
deposits which are necessary or advisable under then-current prudent industry
practice (including any actions reasonably requested by Lessor or the Indenture
Trustee) to protect the right, title and interest of Lessor under this Lease
and the Indenture Trustee under the Indenture in and to the Units to be so
subleased. All subleases shall include appropriate provisions so that such
subleases, (i) shall in all events be subject and subordinate to this Lease and
the rights and interests of Lessor and its respective successors and assigns
hereunder and shall confirm such subordination by a provision substantially in
the form currently contained in Lessee's standard car service contract
delivered to Lessor and the Indenture Trustee prior to the Closing Date, or
otherwise as satisfactory to Lessor and the Indenture Trustee, (ii) shall not
be for a term which extends beyond the Basic Term and any agreed upon Renewal
Term, and (iii) shall not include any term or provision which could reasonably
be expected to result in material adverse consequences to Lessor, Owner
Participant or the Indenture Trustee. In the event Lessee (A) desires to
sublease one or more Units for a term which extends beyond the Basic Term or
Renewal Term, or (B) enters into a sublease with respect to one or more Units,
which sublease contains terms and conditions that are not consistent with the
requirements hereof, Lessee will have the option to replace such Unit on or
prior to the expiration of the Basic Term or any Renewal Term with another Unit
in accordance with and subject to the provisions hereof and of Section 11.2(i),
11.3 and 11.4 by delivering to Lessor, not less than 15 days prior to such
replacement a notice stating that Lessee has exercised its option hereunder and
advising Lessor of the date on which the replaced Unit will be so replaced;
provided that
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if replacement is made pursuant to foregoing clause (B), such notice shall be
accompanied by an Officer's Certificate (executed by Lessee's President or any
Vice President) stating that such replacement is required for valid business
reasons arising in the ordinary course of Lessee's business as an operating
lessor and briefly setting forth the reasons therefor. In the event Lessee
exercises its option pursuant to foregoing clause (A) or (B), on the date
specified for replacement in the notice delivered by Lessee in connection
therewith, Lessee shall transfer title of the replacement Unit to Lessor,
Lessor shall transfer title of the replaced Unit to Lessee, and Lessee and
Lessor shall deliver to each other such documents and other instruments as are
required by Section 11.4(b). Except in connection with an assignment pursuant
to a transaction permitted by Section 6.8 of the Participation Agreement, no
sublease entered into by Lessee hereunder shall relieve Lessee of any liability
or obligation hereunder, which shall be and remain those of a principal and not
a surety. Nothing in this Section 8.3 shall be deemed to constitute permission
to any Person in possession of any Unit pursuant to any such sublease to take
any action inconsistent with the terms and provisions of this Lease or any of
the other Operative Agreements.
SECTION 9. MODIFICATIONS.
Section 9.1 Required Modifications. In the event the AAR, the United
States Department of Transportation, or any other United States, state or local
governmental agency or any other applicable law requires that any Unit be
altered, replaced or modified (a "Required Modification"), Lessee agrees to
make such Required Modification at its own expense; provided, however, that
Lessee may, in good faith and by appropriate proceedings diligently conducted,
contest the validity or application of any such law, regulation, requirement or
rule in any reasonable manner which does not materially interfere with the use,
possession, operation or return of any Unit or materially adversely affect the
rights or interests of Lessor and the Indenture Trustee in the Equipment or
hereunder or otherwise expose Lessor, the Indenture Trustee or any Participant
to criminal sanctions or relieve Lessee of the obligation to return the
Equipment in compliance with the provisions of Section 6.2. Title to any
Required Modification shall immediately vest in Lessor. Notwithstanding
anything herein to the contrary, if Lessee determines in good faith that any
Required Modification to a Unit would be economically impractical, in lieu of
making the Required Modification as provided above, Lessee may provide written
notice of such determination to Lessor and either (i) treat such Unit as if an
Event of Loss had occurred as of the date of such written notice with respect
to such Unit; provided that upon such occurrence Lessee shall have only the
right to replace such Unit under the provisions of Section 11.2(i), 11.3 and
11.4, or (ii) if such determination is made on or after the seventh anniversary
of the Basic Term Commencement Date, either treat such Unit as provided in
clause (i) above or treat such Unit as a Terminated Unit on the terms and
conditions set forth in Section 10.1; provided that Lessee shall not
discriminate against such Unit in making such determination of economic
impracticality as compared with other equipment of the same type as such Unit
which is owned or leased by Lessee.
Section 9.2 Optional Modifications. Lessee at any time may in its
discretion and at its own cost and expense modify, alter or improve any Unit in
a manner which is not required
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by Section 9.1 (a "Modification"); provided that no Modification shall diminish
the fair market value, utility, or remaining useful life of such Unit below the
value, utility, or remaining useful life thereof immediately prior to such
Modification, other than in a de minimis manner, assuming such Unit was then in
the condition required to be maintained by the terms of this Lease, or cause
such Unit to become Limited Use Property. Title to any Non-Severable
Modification shall be immediately vested in Lessor. Title to any Severable
Modification shall remain with Lessee unless it is a Required Modification, in
which case title shall vest in Lessor pursuant to Section 9.1. If Lessee, at
its cost and expense, shall cause such Severable Modifications (which are not
Required Modifications) to be made to any Unit, Lessor shall have the right,
upon 90 days prior written notice in the case of a return other than pursuant
to Section 15.6, prior to the return of such Unit to Lessor hereunder, to
purchase such Severable Modifications (other than Severable Modifications
consisting of proprietary or communications equipment) at their then Fair
Market Sales Value (taking into account their actual condition). If Lessor
does not so elect to purchase such Severable Modifications, Lessee may remove
such Severable Modifications at Lessee's cost and expense and, if requested
(which request shall be made by not less than 90 days prior written notice in
the case of a return other than pursuant to Section 15.6) by Lessor will, so
remove such Severable Modifications at Lessee's cost and expense.
Section 9.3 Removal of Property; Replacements. Lessee may, in the ordinary
course of maintenance or repair of any Unit, remove any item of property
constituting a part of such Unit, and, unless the removal of such item is
required by Section 9.1 hereof, Lessee shall replace such item as promptly as
practicable with an item of property that is free and clear of all Liens (other
than Permitted Liens) and in as good operating condition as, and with a value,
utility and useful life at least equal to, the item of property being replaced,
assuming that such replaced item was in the condition required to be maintained
by the terms of this Lease. Any item of property removed from such Unit as
provided in the preceding sentence shall remain the property of Lessor free and
clear of all rights of Lessee until replaced in accordance with the terms of
such sentence, but shall then, without further act, become the property of
Lessee. Any such replacement property shall, without further act, become the
property of Lessor and be deemed part of such Unit for all purposes hereof.
SECTION 10. VOLUNTARY TERMINATION.
Section 10.1 Right of Termination. So long as no Lease Default or Lease
Event of Default shall have occurred and be continuing, Lessee shall have the
right, at its option at any time or from time to time during the Basic Term on
or after the seventh anniversary of the Basic Term Commencement Date, to
terminate the Lease Term with respect to any or all of the Units (provided
that, if such termination is for less than all Units in a Functional Group, the
determination as to which Units are subject to termination shall be made by
Lessee on a random or other reasonable basis without discrimination based on
maintenance status or operating condition of the Units in question) (the
"Terminated Units") if Lessee determines in good faith (as evidenced by a
certified copy of a resolution adopted by Lessee's Board of Directors and a
certificate executed by the Chief Financial Officer of Lessee) either (a) that
such Units have become obsolete or surplus to Lessee's requirements, or (b) in
the circumstances described in
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clause (ii) of the last sentence of Section 9.1, that a Required Modification
to such Units would be economically impractical. Lessee shall be entitled to
exercise its termination rights under this Section 10.1 by delivering at least
120 days' prior notice to Lessor, the Indenture Trustee and the Pass Through
Trustee (i) specifying a proposed date of termination for such Units (the
"Termination Date"), which date shall, except as provided in the last sentence
of Section 10.3, be a Rent Payment Date, any such termination to be effective
on the Termination Date, and (ii) if some but less than all of the Units in a
Functional Group are designated as Terminated Units, describing the
nondiscriminatory manner in which Lessee proposes to determine which Units in
that Functional Group are to be Terminated Units. Except as expressly provided
herein, there will be no conditions to Lessee's right to terminate this Lease
with respect to the Terminated Units pursuant to this Section 10.1. So long as
(A) Lessor shall not have given Lessee a notice of election to retain the
Terminated Units in accordance with Section 10.3, or (B) notice of prepayment
of the Equipment Notes shall not have been given pursuant to Section 2.10 of
the Indenture, Lessee may withdraw the termination notice referred to above at
any time prior to the Termination Date, whereupon this Lease shall continue in
full force and effect; provided that Lessee (1) may not exercise its right to
withdraw such a termination notice more than once annually, and (2) may not
withdraw any termination notice with respect to any Terminated Units after
receipt by Lessee of a bid equal to or greater than the Termination Value with
respect to such Terminated Units or later than sixty (60) days prior to the
scheduled Termination Date. Lessee agrees that if it withdraws a termination
notice it will reimburse Lessor, Owner Participant and the Indenture Trustee
for all reasonable out-of-pocket costs and expenses (including reasonable legal
fees and expenses) incurred by any thereof in connection therewith.
Section 10.2 Sale of Equipment. During the period from the date of such
notice given pursuant to Section 10.1 to the Termination Date, Lessee, as agent
for Lessor and, except as provided in Section 10.3, at Lessee's sole cost and
expense, shall use its reasonable best efforts to obtain bids from Persons
other than Lessee or Affiliates thereof for the cash purchase of the Terminated
Units, and Lessee shall promptly, and in any event at least five Business Days
prior to the proposed date of sale, certify to Lessor in writing the amount and
terms of each such bid, the proposed date of such sale and the name and address
of the party submitting such bid. Unless Lessor shall have elected to retain
the Terminated Units in accordance with Section 10.3, on the Termination Date:
(a) Lessee shall, subject to the prior or concurrent receipt (x) by Lessor of
all amounts owing to Lessor pursuant to the next sentence, and (y) by the
Persons entitled thereto of all unpaid Supplemental Rent due on or before the
Termination Date, deliver the Terminated Units (excluding any optional
Severable Modifications removed by Lessee pursuant to Section 9.2) to the
bidder (which shall not be Lessee or any Affiliate thereof), if any, which
shall have submitted the highest cash bid prior to such date (or to such other
bidder as Lessee and Lessor shall agree), in the same manner and condition as
if delivery were made to Lessor pursuant to Section 6 and (b) Lessor shall,
without recourse or warranty (except as to the absence of any Lessor's Lien)
simultaneously therewith transfer all of its right, title and interest in and
to the Terminated Units to such bidder. The net proceeds of sale realized at
such sale shall be paid to and retained by Lessor and, in addition, on the
Termination Date, Lessee shall pay to Lessor, (i) all unpaid Rent with respect
to such Terminated Units due and payable on or prior to the Termination Date
(exclusive of any in advance Basic Rent due on such date), (ii) the
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excess, if any, of (A) the Termination Value for the Terminated Units computed
as of the Termination Date, over (B) the net cash sales proceeds (after the
deduction of all reasonable costs and expenses of Lessor and Owner Participant
in connection with such sale) of the Terminated Units, and (iii) an amount
equal to the Make-Whole Amount, if any, in respect of the principal amount of
the Equipment Notes to be prepaid in accordance with Section 2.10(a) of the
Indenture. If no sale shall have occurred, whether as a result of Lessee's
failure to pay all of the amounts hereinabove required or otherwise, this Lease
shall continue in full force and effect with respect to such Units and Lessee
agrees to reimburse Lessor, Owner Participant and the Indenture Trustee for all
reasonable costs and expenses (including reasonable legal fees and expenses)
incurred by any thereof in connection therewith; provided that if such sale
shall not have occurred solely because of Lessee's failure to pay the amounts
hereinabove required, Lessee shall have no further right to terminate this
Lease with respect to such Units. Lessee, in acting as agent for Lessor, shall
have no liability to Lessor for failure to obtain the best price, shall act in
its sole discretion and shall be under no duty to solicit bids publicly or in
any particular market. Lessee's sole interest in acting as agent shall be to
use its reasonable best efforts to sell the Units at the highest price then
obtainable consistent with the terms of this Lease.
Section 10.3 Retention of Equipment by Lessor. Notwithstanding the
provisions of Sections 10.1 and 10.2, Lessor may irrevocably elect by written
notice to Lessee, no later than 60 days after receipt of Lessee's notice of
termination, not to sell the Terminated Units on the Termination Date,
whereupon Lessee shall (a) deliver the Terminated Units to Lessor in the same
manner and condition as if delivery were made to Lessor pursuant to Section 6,
treating the Termination Date as the termination date of the Lease Term with
respect to the Terminated Units, and (b) pay to Lessor, or to the Persons
entitled thereto, all Basic Rent and all Supplemental Rent due and owing on the
Termination Date and unpaid (exclusive of any in advance Basic Rent due on such
date but inclusive of any Supplemental Rent measured by the Make-Whole Amount).
If Lessor elects not to sell the Terminated Units as provided in this Section
10.3, then Lessor shall pay, or cause to be paid, to the Indenture Trustee in
funds of the type and in an amount equal to the outstanding principal amount of
the Equipment Notes issued in respect of such Terminated Units and all accrued
and unpaid interest to the date of prepayment of such Equipment Notes on such
Termination Date and an amount equal to the Make-Whole Amount, if any, in
respect of the principal amount of the Equipment Notes to be prepaid without in
any manner relieving Lessee of its obligation to pay any such amount pursuant
to the preceding sentence; provided that unless Lessor shall have paid all such
amounts to the Indenture Trustee on the Termination Date, this Lease shall
continue in full force and effect. If Lessor shall fail to pay the amounts
required pursuant to this Section 10.3 and as a result thereof this Lease shall
not be terminated with respect to the Terminated Units on a proposed
Termination Date, Lessor shall (x) thereafter no longer be entitled to exercise
its election to retain such Terminated Units, and (y) reimburse Lessee for any
expenses (including reasonable legal fees and expenses) incurred by it in
attempting to sell the Terminated Units pursuant to Section 10.2 immediately
prior to Lessor's exercise of such preemptive election, and Lessee may at its
option at any time thereafter prior to the immediately following Rent Payment
Date submit a new termination notice pursuant to Section 10.1 with respect to
such Terminated
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Units specifying a proposed Termination Date occurring on a Business Day
occurring not earlier than 25 days from the date of such notice; provided that
for purposes of determining the amount to be paid by Lessee pursuant to Section
10.2, the Termination Date shall be deemed to be the Termination Date on which
Lessor failed to make the payments provided in this Section 10.3.
Section 10.4 Termination of Lease. In the event of either (a) any such
sale and receipt by Lessor and the Indenture Trustee of all of the amounts
provided in Section 10.2 or (b) retention of the Equipment and payment in full
by Lessor in compliance with Section 10.3, and upon compliance by Lessee with
the other provisions of this Section 10, the obligation of Lessee to pay Basic
Rent hereunder for such Terminated Units shall cease and the Lease Term for
such Terminated Units shall end. Upon the conveyance of a Replacement Unit or
the payment of all sums required to be paid in respect of any Unit or Units,
Lessor will convey to Lessee or its designee all right, title and interest of
Lessor in and to such Unit or Units, "as is", "where is", without recourse or
warranty, except for a warranty against Lessor's Liens, and shall execute and
deliver to Lessee or its designee such bills of sale and other documents and
instruments as Lessee or its designee may reasonably request to evidence such
conveyance.
SECTION 11. LOSS, DESTRUCTION OR REQUISITION.
Section 11.1 Event of Loss. In the event that any Unit shall (a) suffer
damage or contamination which, in Lessee's reasonable judgment (as evidenced by
an Officers' Certificate to such effect), makes repair uneconomic or renders
such Unit unfit for commercial use, (b) suffer destruction, or shall suffer
theft or disappearance for a period exceeding 12 months, (c) be permanently
returned to the manufacturer pursuant to any patent indemnity provisions, (d)
have title thereto taken or appropriated by any governmental authority, agency
or instrumentality under the power of eminent domain or otherwise, (e) suffer
an actual or constructive total loss, (f) in the normal course of interstate
rail transportation, have been prohibited from being used for a continuous
period in excess of six months as a result of any rule, regulation, order or
other action by the United States government or any agency or instrumentality
thereof, (g) be subject to a sublease with any Person which operates primarily
outside the United States and shall not be returned to Lessee within 60 days of
a demand by Lessee for return of such Units following the termination or other
expiration of the term of such sublease, or (h) be taken or requisitioned for
use by any governmental authority or any agency or instrumentality thereof
under the power of eminent domain or otherwise, and such taking or requisition
is for a period that exceeds the remaining Basic Term or any Renewal Term then
in effect (unless such taking or requisition is by Mexico or any governmental
authority, agency or instrumentality thereof, in which case such period shall
be the lesser of the period as aforesaid or 365 days) (any such occurrence
being hereinafter called an "Event of Loss"), Lessee, in accordance with the
terms of Section 11.2, shall promptly and fully inform Lessor and the Indenture
Trustee of such Event of Loss; provided, however, that if any Unit shall suffer
a theft or disappearance as described in clause (b) above for a period
exceeding 6 months, Lessee shall use its reasonable best efforts to inform
Lessor and the Indenture Trustee of such theft or disappearance as an Event of
Loss once it has knowledge thereof, regardless of whether the 12-month period
referred to in said clause (b) has run.
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Section 11.2 Replacement or Payment upon Event of Loss. Lessee shall
report, by written notice to Lessor given (a) on the date that is 60 days prior
to each Rent Payment Date, or (b) promptly, but in no event later than 30 days,
after the date on which a Responsible Officer of Lessee shall have obtained
actual knowledge since the end of the last period for which a report was
delivered to Lessor under this Section 11.2 that 10 or more Units have suffered
an Event of Loss (a "Multiple Loss"), any and all occurrences of an Event of
Loss and shall notify Lessor of its election to perform one of the following
options with respect to each such Unit:
(i) on the Rent Payment Date immediately following delivery of the
foregoing notice (or, in the case of a Multiple Loss, on the first Business
Day succeeding the 60th day following the date on which Lessee is required to
report such Multiple Loss pursuant to this Section 11.2), Lessee shall comply
with Section 11.4 and shall convey or cause to be conveyed to Lessor a
Replacement Unit to be leased to Lessee hereunder, such Replacement Unit to
be of the same car type, the same or later year of manufacture of the Unit
replaced and free and clear of all Liens (other than Permitted Liens of the
type described in clause (ii) with respect to sublessees, and in clauses
(iii), (iv), (vi) and (vii) of the definition thereof) and to have a Fair
Market Sales Value, utility, remaining economic useful life, residual value
and condition at least equal to the Unit so replaced (assuming such Unit was
in the condition required to be maintained by the terms of this Lease);
provided that if at the time of such replacement, only railcars (x) of a
later year of manufacture or (y) with a greater Fair Market Sales Value than
the replaced Units are available as Replacement Units, Lessee shall convey
such Replacement Units to Lessor as set forth above but Lessee may, at a
later date, replace such Relacement Units with other Units that are closer in
Fair Market Sales Value to the original replaced Units; provided further that
if Lessee shall either fail to elect an option under clause (i) or (ii) of
this Section 11.2 by the applicable date, or timely elects the option under
this clause (i) but shall fail to perform its obligation to effect such
replacement under this paragraph (i) on a timely basis, then (except in the
case of a failure to perform an election to replace pursuant to Section
8.1(b), Section 8.3 or Section 9.1) Lessee shall immediately give Lessor, the
Indenture Trustee and the Pass Through Trustee notice of such failure Lessee
shall pay to Lessor on such Rent Payment Date (or, in the case of Multiple
Loss, on the first Business Day succeeding the 60th day following the date of
which Lessee is required to report such loss pursuant to Section 11.2), or in
the case of Supplemental Rent, to the Person entitled thereto, the amounts
specified in clause (ii) below; and provided further that Lessee shall have
no right to elect replacement under this clause (i) if at the time Lessee
delivers the notice described in the first sentence of this Section 11.2, a
Lease Event of Default or a Lease Default described in Section 14(a), Section
14(g) or Section 14(h) shall have occurred and be continuing; or
(ii) on the Rent Payment Date immediately following the delivery of the
notice described in the first sentence of this Section 11.2, Lessee shall pay
or cause to be paid to Lessor (or in the case of Supplemental Rent, to the
Person entitled thereto) in funds of the type specified in Section 3.6, (A)
an amount equal to the Stipulated Loss Value of each such Unit suffering an
Event of Loss or deemed Event of Loss determined as of
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such Rent Payment Date, (B) all Basic Rent payable on such date in respect of
such Unit (exclusive of any in advance Basic Rent due on such date), and (C)
all other Rent then due and payable hereunder with respect to such Units, it
being understood that until such Stipulated Loss Value and other sums are
paid, there shall be no abatement or reduction of Basic Rent; provided,
however, that in the event of a Multiple Loss, the amounts specified in the
foregoing clause (A) of this Section 11.2(ii) shall be paid by Lessee on the
first Business Day next succeeding the 60th day following the date on which
Lessee is required to report such Multiple Loss pursuant to Section 11.2,
together with (1) if such Business Day is also a Rent Payment Date, all Basic
Rent payable on such day in respect of such Unit, or, if such Business Day is
not a Rent Payment Date, an amount of Basic Rent equal to the product of (x)
the daily equivalent of the amount of Basic Rent scheduled to be paid with
respect to such Unit on the Rent Payment Date next succeeding such Business
Day and (y) the number of days from and including the Rent Payment Date next
preceding such Business Day to but excluding such Business Day and (2) to the
extent not previously paid, all other Supplemental Rent due on or prior to
such Business Day, it being understood that until such Stipulated Loss Value
and other sums are paid, there shall be no abatement or reduction of Basic
Rent; provided, further, that if Lessee elects the option under this clause
(ii), it shall notify the Lessor, the Indenture Trustee and the Pass Through
Trustee thereof at least 20 days prior to the date such payment is to be,
which election shall be irrevocable on the 15th day prior to the date payment
is required hereunder.
Section 11.3 Rent Termination. Upon the replacement of any Unit or Units
in compliance with Section 11.2(i) (but only as to replaced Units and not any
Replacement Unit) or upon the payment of all sums required to be paid pursuant
to Section 11.2 in respect of any Unit or Units, the Lease Term with respect to
such Unit or Units and the obligation to pay Basic Rent for such Unit or Units
accruing subsequent to the date of payment of Stipulated Loss Value or date of
conveyance of such Replacement Unit or Units pursuant to Section 11.2(ii) shall
terminate; provided that Lessee shall be obligated to pay all Rent in respect
of such Unit or Units which is payable under Section 11.2 with respect to such
payment of Stipulated Loss Value or such replacement of such Unit or Units and
in respect of all other Units then continuing to remain subject to this Lease;
provided further that it is understood and agreed that, in the event of a
replacement in compliance with Section 11.2(i), the Rent paid with respect
thereto on the Rent Payment Date next following the conveyance of the
Replacement Unit or Units shall be deemed paid in respect of, and allocated
between, both the Replacement Unit or Units and the original Unit or Units it
or they replaced.
Section 11.4 Disposition of Equipment; Replacement of Unit. (a) Upon the
payment of all sums required to be paid pursuant to Section 11.2 in respect of
any Unit or Units, Lessor will convey to Lessee or its designee all right,
title and interest of Lessor in and to such Unit or Units, "as is", "where is",
without recourse or warranty, except for a warranty against Lessor's Liens, and
shall execute and deliver to Lessee or its designee such bills of sale and
other documents and instruments as Lessee or its designee may reasonably
request to evidence such conveyance. As to each separate Unit so disposed of,
so long as no Lease Event of Default
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shall have occurred and be continuing, Lessee or its designee shall be entitled
to any amounts arising from such disposition, plus any awards, insurance or
other proceeds and damages received by Lessee, Lessor or the Indenture Trustee
by reason of such Event of Loss after having paid the Stipulated Loss Value
attributable thereto.
(b) At the time of or prior to any replacement of any Unit, Lessee, at its
own expense, will (i) furnish Lessor with a Bill of Sale with respect to the
Replacement Unit substantially in the form delivered pursuant to Section 4.1(g)
of the Participation Agreement, (ii) cause a Lease Supplement substantially in
the form of Exhibit A hereto, subjecting such Replacement Unit to this Lease,
and duly executed by Lessee, to be delivered to Lessor for execution and, upon
such execution, to be filed for recordation as required in Section 16.1, (iii)
so long as the Indenture shall not have been satisfied and discharged, cause an
Indenture Supplement substantially in the form of Exhibit A to the Indenture
for such Replacement Unit, to be delivered to Lessor and to the Indenture
Trustee for execution and, upon such execution, to be filed for recordation as
required in Section 16.1, (iv) furnish Lessor with an opinion of Lessee's
counsel (which may be Lessee's General Counsel or Assistant General Counsel),
to the effect that (A) the Bill of Sale referred to in clause (i) above
constitutes an effective instrument for the conveyance of title to the
Replacement Unit to Lessor, (B) legal and beneficial title to the Replacement
Unit has been delivered to Lessor, free and clear of all Liens (other than
Permitted Liens of the type described in clause (ii) with respect to
sublessees, and in clauses (iii), (iv), (v) and (vi) of the definition
thereof), and (C) all filings and recordings and other action necessary or
appropriate to protect the respective interests of Lessor and the Indenture
Trustee in the Replacement Units (to the extent required by the provisions of
this Lease) have been accomplished, (v) furnish Lessor with an engineer's
certificate (which may be from an employee of Lessee) certifying as to the
value, utility and remaining useful life required under clause (i) of Section
11.2, (vi) furnish to Lessor and the Indenture Trustee an Officer's Certificate
certifying that the Replacement Unit is free and clear of all Liens (other than
Permitted Liens of the type described in clause (ii) with respect to
sublessees, and in clauses (iii), (iv), (v) and (vi) of the definition
thereof), (vii) furnish to Owner Participant an agreement to indemnify Owner
Participant against any adverse tax consequences suffered as a result of such
replacement, and (viii) furnish such other documents and evidence as Owner
Participant, Lessor or the Indenture Trustee, or their respective counsel, may
reasonably request in order to establish the consummation of the transactions
contemplated by this Section 11.4. In addition, if in connection with any
substitution pursuant to this Section 11.4, Owner Participant's internal tax
counsel shall notify Lessee in writing that such substitution may not qualify
for like kind exchange treatment under the Code (which notice shall indicate
the basis for such counsel's opinion), Lessee shall elect, in its sole
discretion, to furnish (i) a tax opinion from Neal Gerber & Eisenberg or other
independent tax counsel reasonably acceptable to Owner Participant to the
effect that Owner Participant has a reasonable basis, within the meaning of
Section 6662(d)(2)(B)(ii) of the Code, for the opinion that Owner Participant
will not be required to recognize gain or loss for Federal income tax purposes
with respect to such replacement or (ii) in the event such reasonable basis tax
opinion cannot be furnished and Lessee wishes to make such replacement, Lessee
will, at such time as Lessee receives written notice from Owner Participant
that Owner Participant has filed its Federal income tax returns wherein such
gain or
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loss is recognized, make an indemnity payment to Owner Participant in the
incremental amount of such adverse tax consequence (on a net after-tax basis)
attributable to the conveyance of such Replacement Unit. For all purposes
hereof, upon passage of title thereto to Lessor, the Replacement Unit shall be
deemed part of the property leased hereunder and the Replacement Unit shall be
deemed a "Unit" of Equipment as defined herein. Upon such passage of title,
Lessor will transfer to Lessee, without recourse or warranty (except as to
Lessor's Liens), all Lessor's right, title and interest in and to the replaced
Unit (and shall execute and deliver to Lessee or its designee such bills of
sale and other documents and instruments as Lessee may reasonably request to
evidence such conveyance), and upon such transfer, Lessor will request in
writing that the Indenture Trustee execute and deliver to Lessee an appropriate
instrument releasing such replaced Unit from the lien of the Indenture. Lessee
shall pay all reasonable out-of-pocket costs and expenses (including reasonable
legal fees and expenses) incurred by Lessor, Owner Participant and the
Indenture Trustee in connection with any replacement pursuant to this Section
11.4.
Section 11.5 Eminent Domain. In the event that during the Lease Term the
use of any Unit is requisitioned or taken by any governmental authority under
the power of eminent domain or otherwise for a period which does not constitute
an Event of Loss, all of Lessee's obligations under the Operative Agreements,
including without limitation, Lessee's obligation to pay all installments of
Basic Rent, shall continue for the duration of such requisitioning or taking.
Lessee shall be entitled to receive and retain for its own account all sums
payable for any such period by such governmental authority as compensation for
requisition or taking of possession. Any amount referred to in this Section
11.5, 11.4(a) or 12 which is payable to Lessee shall not be paid to Lessee, or
if it has been previously paid directly to Lessee, shall not be retained by
Lessee, if at the time of such payment a Lease Default under Section 14(g) or
Section 14(h) or a Lease Event of Default shall have occurred and be
continuing, but shall be paid to and held by Lessor pursuant to Section 24, or
if the Indenture shall not then have been discharged pursuant to its terms, to
the Indenture Trustee, as security for the obligations of Lessee under this
Lease, and at such time as there shall not be continuing any such Lease Default
or Lease Event of Default, such amount shall be paid to Lessee.
SECTION 12. INSURANCE.
Section 12.1 Physical Damage and Public Liability Insurance. Lessee will
at all times after delivery and acceptance of each Unit and until such Unit is
returned to Lessor, at its own expense, keep such Unit or cause such Unit to be
kept insured by a reputable insurance company or companies, in amounts and
against risks and with deductibles and terms and conditions not less than the
insurance, if any, maintained by Lessee with respect to similar equipment which
it owns or leases, but in no event shall such coverage be for amounts or
against risks less than the prudent industry standard for companies engaged in
full service leasing of tank and hopper railcars. Without limiting the
foregoing, Lessee will in any event:
(a) for so long as a Lease Event of Default shall have occurred and be
continuing, and as required by the Letter Agreement dated as of the Closing
between Lessee and
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the Owner Participant (in the circumstances set forth therein), keep each Unit
of the Equipment insured against physical damage in an amount not less than the
Stipulated Loss Value attributable thereto as shown on Schedule 4 to the
Participation Agreement, subject to a limit of not less than $10 million per
occurrence (except for a $10 million annual aggregate for flood and earth
movement); provided that such coverage may provide for deductible amounts or
self-insured retention of not more than $1,000,000 per occurrence; and
(b) maintain public liability insurance naming Owner Participant, Lessor,
as Lessor of the Equipment and in its individual capacity, and the Indenture
Trustee as additional insureds (but only with respect to liability arising out
of or related to the Operative Agreements and the Equipment) against bodily
injury, death or property damage arising out of the use or operation of the
Equipment with general and excess liability limits of not less than
$100,000,000 per occurrence and annually in the aggregate; provided that such
coverage may provide for deductible amounts or self-insured retention not
exceeding $25,000,000.
It is understood and agreed that the insurance required hereunder may be
part of a group-wide insurance program, including risk-retention and
self-insurance. Any policy of insurance maintained in accordance with this
Section 12.1 and any policy purchased in substitution or replacement for any of
such policies shall provide that if any such insurance is cancelled or
terminated, for any reason whatever (other than upon normal policy expiration
or non-payment of premiums), Lessor, the Indenture Trustee and Owner
Participant shall receive 30 days' prior written notice of such cancellation or
termination and shall further provide that if any such insurance is cancelled
or terminated for non-payment of premiums, the Indenture Trustee and Owner
Participant shall receive 10 days' prior written notice of such cancellation or
termination.
Section 12.2 Physical Damage Insurance. (a) The insurance maintained
pursuant to Section 12.1(a) shall provide that (i) so long as the Equipment
Notes remain outstanding, the proceeds up to the Stipulated Loss Value for any
loss or damage to any Unit shall be made to the Indenture Trustee under a
standard mortgage loss payable clause, and thereafter to Lessor and (ii) so
long as no Lease Event of Default shall have occurred and be continuing, Lessee
will be entitled, at its own expense, to make all proofs of loss and take all
other steps necessary to collect the proceeds of such insurance.
(b) The entire proceeds of any property insurance or third party payments
for damages to any Unit received by Lessor or the Indenture Trustee shall be
held by such party until, with respect to such Unit, the repairs referred to in
clause (i) below are made as specified therein or payment of the Stipulated
Loss Value is made, and such entire proceeds will be paid, so long as no Lease
Event of Default shall have occurred and be continuing, either:
(i) to Lessee promptly following receipt by the Indenture Trustee or
Lessor, as the case may be, of a written application signed by Lessee for
payment to Lessee for repairing or restoring the Units which have been
damaged so long as (1) Lessee shall
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have complied with the applicable provisions of the Lease, and (2) Lessee
shall have certified that any damage to such Units shall have been fully
repaired or restored; or
(ii) if this Lease is terminated with respect to such Unit because of an
Event of Loss and Lessee has paid the Stipulated Loss Value due as a result
thereof, such proceeds shall promptly paid over to, or retained by, Lessee.
Section 12.3 Public Liability Insurance. (a) The public liability
insurance referred to in paragraph 12.1(b) shall (i) provide that in as much as
such policies cover more than one insured, all terms, conditions, insuring
agreements and endorsements, with the exception of limits of liability and
liability for premiums, commissions, assessments or calls (which shall be
solely a liability of Lessee), shall operate in the same manner as if there
were a separate policy or policies covering each insured, (ii) provide for and
the insurers shall acknowledge and recognize that Lessee has waived any rights
of subrogation of the insurers against Owner Participant, Lessor, as Lessor of
the Equipment and in its individual capacity, and the Indenture Trustee, (iii)
provide that neither Owner Participant, Lessor, as Lessor of the Equipment and
in its individual capacity, or the Indenture Trustee shall have any
responsibility for any insurance premiums, whether for coverage before or after
cancellation or termination of any such policies as to Lessee and (iv) be
primary without contribution from any similar insurance maintained by Owner
Participant, Lessor or the Indenture Trustee.
(b) Lessee shall use its reasonable best efforts to obtain public
liability insurance policies stipulating that coverage thereunder will not be
invalidated (as to Owner Participant, Lessor, as Lessor of the Equipment and in
its individual capacity, and the Indenture Trustee) due to any action or
inaction of Lessee or any other Person (other than Owner Participant, Lessor or
the Indenture Trustee, but only in respect of their respective coverages), but
shall be under no obligation to obtain such policies containing such
stipulations if they are not available to Lessee at commercially reasonable
rates in the markets in which Lessee has then placed its insurance program.
(c) In the event any public liability insurance policy or coverage
thereunder which are required to be maintained under Section 12.1(b) shall not
be available to Lessee in the commercial insurance market on commercially
reasonable terms, Lessor shall not unreasonably withhold its agreement to waive
such requirement to the extent the maintenance thereof is not so available upon
application therefore as set forth herein. Lessee shall make written request
for any such waiver in writing, accompanied by written reports prepared, at
Lessee's option, either by (i) one independent insurance advisor chosen by
Lessee and Lessor or (ii) three independent insurance advisors, one chosen by
Lessor, one chosen by Lessee and one chosen by the other two advisors (one of
which may be the regular insurance broker or brokers of Lessee), in either
case, such independent insurance advisors being of recognized national
standing. The fees and expenses of all such advisors shall be paid by Lessee.
The written reports required hereunder shall (x) state that such insurance (or
the required coverage thereunder) is not reasonably available to Lessee at
commercially reasonable premiums in the commercial insurance markets within
which Lessee normally purchases its insurance from
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insurers, acceptable to Lessee, with a Best's rating of A- or better for
railcars of similar type and capacity and (y) explain in detail the basis for
such conclusions. Upon the granting of any such waiver, Lessee shall within 15
days thereafter certify to Lessor in writing the cost (on a fleet-wide basis)
of liability insurance premiums for the coverage required by Section 12.1(b)
for the immediately preceding fiscal year; and in the event that any such
certificate is not received by Lessor within such 15 day period, any such
waiver shall be deemed revoked. At any time after the granting of such waiver,
but not more often than once a year, Lessor may make a written request for a
supplemental report (in form reasonably acceptable to Lessor) from such
insurance advisor(s) updating the prior report and reaffirming the conclusions
set forth therein. Lessee shall provide any such required supplemental report
within 60 days after receipt of the written request therefor. Any such waiver
shall be effective for only as long as such insurance is not reasonably
available to Lessee in the commercial markets in which Lessee normally
purchases its insurance at commercially reasonable rates, it being understood
that the failure of Lessee to furnish timely any such supplemental report shall
be conclusive evidence that such condition no longer exists. If such
supplemental report shows that such coverage is available, Lessee shall within
90 days of such report obtain such insurance coverage. During any period with
respect to which such waiver has been granted and remains in effect under this
Section 12.3(c), Lessee shall obtain public liability insurance as set forth in
Section 12.1(b) from such carriers, in such amounts and with coverage limits
and deductibles as is prudent under the circumstances, but in any event in an
amount that may be purchased for a premium equal to 110% of Lessee's cost (on a
fleet-wide basis) of public liability insurance premiums for the coverage
required by Section 12.1(b) for the fiscal year immediately preceding the
fiscal year in which such waiver first was granted.
Section 12.4 Certificate of Insurance. Lessee shall, prior to the Closing
Date and when the renewal certificate referred to below is sent (but in any
event not less than annually), furnish Lessor, the Indenture Trustee and the
Owner Participant with a certificate signed by the insurer or an independent
insurance broker showing the insurance then maintained by Lessee pursuant to
Section 12.1 and, with respect to any renewal policy or policies, furnish
certificates or binders evidencing such renewal as soon as practicable, but in
no event later than 30 days after the earlier of the date such renewal is
effected or the expiration date of the original policy or policies.
Simultaneously, with the furnishing of such certificate, Lessee will provide
appropriate evidence, reasonably satisfactory to Lessor and the Indenture
Trustee, that all premiums due on such insurance have been paid.
Section 12.5 Additional Insurance. In the event that Lessee shall fail to
maintain insurance as herein provided in Section 12.1 or, if applicable,
Section 12.3, Lessor may at its option, upon prior written notice to Lessee,
provide such insurance and, in such event, Lessee shall, upon demand from time
to time reimburse Lessor for the cost thereof together with interest from the
date of payment thereof at the Late Rate, on the amount of the cost to Lessor
of such insurance which Lessee shall have failed to maintain. If after Lessor
has provided such insurance, Lessee then obtains the coverage provided for in
Section 12.1 which was replaced by the insurance provided by Lessor, and Lessee
provides Lessor with evidence of such coverage reasonably satisfactory to
Lessor, Lessor shall cancel the insurance it has provided pursuant to
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the first sentence of this Section 12.5. In such event, Lessee shall reimburse
Lessor for all costs to Lessor of cancellation, including without limitation
any short rate penalty, together with interest from the date of Lessor's
payment thereof at the Late Rate. In addition, at any time Lessor (either
directly or in the name of Owner Participant) may at its own expense carry
insurance with respect to its interest in the Units, provided that such
insurance does not interfere with Lessee's ability to insure the Equipment as
required by this Section 12 or adversely affect Lessee's insurance or the cost
thereof, it being understood that all salvage rights to each Unit shall remain
with Lessee's insurers at all times. Any insurance payments received from
policies maintained by Lessor pursuant to the previous sentence shall be
retained by Lessor without reducing or otherwise affecting Lessee's obligations
hereunder, other than with respect to Unit(s) with respect to which such
payments have been made.
Section 12.6 Pollution Coverage. The public liability insurance policy
that is maintained pursuant to Section 12.1 on the date hereof includes
coverage for pollution incidents (other than as may occur on property owned,
leased, controlled or occupied by Lessee) of a sudden and accidental nature,
including, without limiting the generality of the foregoing, collision and
overturn of railcars arising out of the use or operation of the Units; provided
however, that such insurance shall cover third-party bodily injury and property
damage claims and shall not cover property owned, leased or occupied by Lessee.
Such insurance provides coverage for clean up should Lessee become legally
obligated to pay, subject to a limit of not less than $5,000,000 per occurrence
and annual aggregate. The coverage under such insurance shall be maintained as
long as it remains available at a reasonable cost under such public liability
insurance policy.
SECTION 13. REPORTS; INSPECTION.
Section 13.1 Duty of Lessee to Furnish. On or before May 31, 1995, and on
or before each May 31 thereafter, Lessee will furnish to Lessor, Owner
Participant and the Indenture Trustee an accurate statement, as of the
preceding December 31, (a) showing the amount, description and reporting marks
of the Units then leased hereunder, the amount, description and reporting marks
of all Units that may have suffered an Event of Loss during the 12 months
ending on such December 31 (or since the Closing Date, in the case of the first
such statement), and such other information regarding the condition or repair
of the Equipment as Lessor may reasonably request, (b) stating that, in the
case of all Equipment repainted during the period covered by such statement,
the markings required by Section 4.2 hereof shall have been preserved or
replaced, and (c) showing the percentage of use in both Canada and Mexico based
on the total mileage travelled by all railcars in Lessee's fleet for the prior
calendar year as reported to Lessee by railroads, and stating that Lessee is
not aware of any condition of any Unit which would cause such Unit not to
comply in any material respect with the rules and regulations of the FRA and
the Interchange Rules as they apply to the maintenance and operation of the
Equipment in interchange.
Section 13.2 Lessor's Inspection Rights. Lessor, Owner Participant and the
Indenture Trustee each shall have the right, but not the obligation, at their
respective sole cost,
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expense and risk (including, without limitation, the risk of bodily injury or
death), by their respective authorized representatives, to inspect (a) the
Equipment and Lessee's records with respect thereto, and (b) following the
occurrence of a Lease Default and during the continuance thereof, or following
notice by Lessee that it will be returning any Unit to Lessor pursuant to
Section 10 or Section 22, any sublease of the Equipment and Lessee's records
with respect thereto. All inspections shall be conducted during Lessee's
normal business hours and upon reasonable prior notice to Lessee. Lessee shall
not be liable for any injury to, or the death of, any Person exercising, either
on behalf of Lessor, any Owner Participant, the Indenture Trustee or any
prospective user, the rights of inspection granted under this Section 13.2
unless caused by Lessee's gross negligence or wilful misconduct. No inspection
pursuant to this Section 13.2 shall interfere with the use, operation or
maintenance of the Equipment or the normal conduct of Lessee's business, and
Lessee shall not be required to undertake or incur any additional liabilities
in connection therewith. Upon request by Lessor, which request shall not be
made more than once in any calendar year, Lessee, upon three Business Days'
prior notice from Lessor, will provide Lessor with reasonable access at
Lessee's office where such information is located to information regarding the
location and Person in possession of any or all Units as specified in such
request; provided that, prior to providing Lessor with access to such
information, Lessee and Lessor shall have executed a confidentiality agreement
in form and substance reasonably satisfactory to Lessee with respect to such
information.
SECTION 14. LEASE EVENTS OF DEFAULT.
The following events shall constitute Lease Events of Default hereunder
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Lease Event of Default shall
be deemed to exist and continue so long as, but only as long as, it shall not
have been remedied:
a. Lessee shall fail to make any payment of Basic Rent, Early Purchase
Price, Basic Term Purchase Price or any other purchase price to be paid by
Lessee for any Units pursuant to this Lease or the Participation Agreement,
Stipulated Loss Value or Termination Value within 10 Business Days after the
same shall have become due; or
b. Lessee shall fail to make any payment of Supplemental Rent, including
indemnity or tax indemnity payments, but not including Stipulated Loss Value,
Early Purchase Price, Basic Term Purchase Price or any other purchase price to
be paid by Lessee for any Units pursuant to this Lease or the Participation
Agreement, Stipulated Loss Value or Termination Value, after the same shall
have become due and such failure shall continue unremedied for 10 Business Days
after receipt by Lessee of written notice of such failure from Lessor or the
Indenture Trustee; or
c. Lessee shall fail to maintain in effect the insurance required by
Section 12 and such failure shall not have been waived as provided for therein;
or
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(d) Lessee shall make or permit any possession of the Equipment or any
portion thereof not permitted by this Lease; provided that such unauthorized
possession shall not constitute a Lease Event of Default for a period of 45
days after the occurrence thereof, or Lessee shall make or permit any
unauthorized assignment or transfer of this Lease in violation of Section 18.2;
or
(e) Lessee shall fail to observe or perform any of the covenants or
agreements to be observed or performed by Lessee in Section 6.8 of the
Participation Agreement, and such failure shall continue unremedied for 30
days; or
(f) any representation or warranty made by Lessee in any Lessee Agreement
(other than the Tax Indemnity Agreement) is untrue or incorrect in any material
respect as of the date of making thereof and such untruth or incorrectness
shall continue to be material and unremedied for a period of 30 days after
receipt by Lessee of written notice thereof from Lessor or the Indenture
Trustee; provided that, if such untruth or incorrectness is capable of being
remedied, no such untruth or incorrectness shall constitute a Lease Event of
Default hereunder for a period of 60 days after receipt of such notice so long
as Lessee is diligently proceeding to remedy such untruth or incorrectness and
shall in fact remedy such untruth or incorrectness within such period; provided
that such untrue or incorrect representation or warranty shall be deemed to be
remedied only after all adverse consequences thereof, if any, have been
remedied; or
(g) Lessee shall (i) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or (ii) consent to any such relief or to the appointment of or taking
possession by any such official in any voluntary case or other proceeding
commenced against it, or (iii) admit in writing its inability to pay its debts
generally as they come due, or (iv) make a general assignment for the benefit
of creditors, or (v) take any corporate action to authorize any of the
foregoing; or
(h) an involuntary case or other proceeding shall be commenced against
Lessee seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or
(i) Lessee shall fail to observe or perform any other of the covenants or
agreements to be observed or performed by Lessee under any Lessee Agreement
(other than the Tax Indemnity Agreement) and such failure shall continue
unremedied for 30 days after notice from Lessor or the Indenture Trustee to
Lessee, specifying the failure and demanding the same to be remedied; provided
that, if such failure is capable of being remedied, and the remedy
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requires an action other than, or in addition to, the
payment of money, no such failure (other than one relating to the payment of
such money) shall constitute a Lease Event of Default hereunder for a period of
90 days after receipt of such notice so long as Lessee is diligently proceeding
to remedy such failure and shall in fact remedy such failure within such
period; or
(j) Lessee shall have given notice of its intention to retain any Units at
the end of the Basic Term or any Renewal Term and, prior to the last day of the
Basic Term or such Renewal Term, as the case may be, Lessee shall not have
notified Lessor of its election to purchase or continue leasing such Unit;
provided that, notwithstanding anything to the contrary contained in this
Lease, any failure of Lessee to perform or observe any covenant or agreement
herein shall not constitute a Lease Event of Default if such failure is caused
solely by reason of an event referred to in the definition of "Event of Loss"
so long as Lessee is continuing to comply with the applicable terms of Section
11.
SECTION 15. REMEDIES.
Section 15.1. Remedies. Upon the occurrence of any Lease Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor may,
at its option, declare this Lease to be in default by a written notice to
Lessee (except that this Lease shall, without any action on the part of
Lessor, be automatically deemed to have been declared in default upon the
occurrence of a Lease Event of Default described in Section 14(g) or (h)); and
at any time thereafter, unless Lessee shall have remedied all outstanding Lease
Events of Default prior to the commencement of the exercise by Lessor of any of
its remedies hereunder, Lessor may do one or more of the following as Lessor in
its sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect:
(a) proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by Lessee of the applicable covenants of this
Lease or to recover damages for the breach thereof;
(b) by notice in writing to Lessee, Lessor may demand that Lessee, and
Lessee shall, upon written demand of Lessor and at Lessee's expense, forthwith
return all or any part of the Equipment to Lessor or its order in the manner
and condition required by, and otherwise in accordance with all of the
provisions of Section 15.6; or Lessor with or without notice or judicial
process may by its agents enter upon the premises of Lessee or other premises
where any of the Equipment may be located and take possession of and remove all
or any of the Units, and Lessor may use and employ in connection with such
removal any services, aids, equipment, trackage and other facilities of Lessee
as is reasonably required to remove such Units and thenceforth hold, possess
and enjoy the same free from any right of Lessee, or its successor or assigns,
to use such Units for any purpose whatever, and in connection with the
foregoing, Lessee hereby agrees that it will, if requested by Lessor, give
prompt notice of such demand for return of the Equipment to the AAR and all
railroads having possession of any such Unit;
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(c) sell any Unit at public or private sale by such advertisement or
publication, if any, as Lessor may determine, free and clear of any rights of
Lessee and without any duty to account to Lessee with respect to such sale or
for the proceeds thereof (except to the extent required by paragraph (f) below
if Lessor elects to exercise its rights under said paragraph), in which event
Lessee's obligation to pay Basic Rent with respect to such Unit hereunder due
for any periods subsequent to the date of such sale shall terminate (except to
the extent that Basic Rent is to be included in computations under paragraph
(e) or (f) below if Lessor elects to exercise its rights under either of said
paragraphs);
(d) hold, keep idle or lease to others any Unit as Lessor in its sole
discretion may determine, free and clear of any rights of Lessee and without
any duty to account to Lessee with respect to such action or inaction or for
any proceeds with respect thereto;
(e) whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under paragraph (a), (b), (c) or (d) above
with respect to any Unit, Lessor, by written notice to Lessee specifying a
payment date (which date shall be a Determination Date for the purposes of
computing Stipulated Loss Value), which shall be not earlier than 30 days after
the date of such notice, may demand that Lessee pay to Lessor, and Lessee shall
pay to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent
for such Unit due after the payment date specified in such notice), all Rent
due and payable, or accrued, for such Unit as of the payment date specified in
such notice (exclusive of any in advance Basic Rent due on such date) plus
whichever of the following amounts Lessor, in its sole discretion, shall
specify in such notice: (i) an amount with respect to each such Unit which
represents the excess of the present value, at the time of such payment date,
of all rentals for such Unit which would otherwise have accrued hereunder from
such payment date for the remainder of the Basic Term or any Renewal Term then
in effect over the then present value of the then Fair Market Rental Value of
such Unit (taking into account its actual condition) for such period computed
by discounting from the end of such Term to such payment date rentals which
Lessor reasonably estimates to be obtainable for the use of such Unit during
such period, such present value to be computed in each case on a basis of a per
annum discount at the Debt Rate, compounded semiannually from the respective
dates upon which rentals would have been payable hereunder had this Lease not
been terminated; or (ii) an amount equal to the excess, if any, of the
Stipulated Loss Value for such Unit computed as of the payment date specified
in such notice over the Fair Market Sales Value of such Unit (taking into
account its actual condition) as of the payment date specified in such notice;
or (iii) if Lessor shall not have sold such Unit pursuant to the exercise of
its rights under paragraph (c) above with respect to such Unit, an amount equal
to the higher of Stipulated Loss Value for such Unit computed as of the payment
date specified in such notice or the Fair Market Sales Value of such Unit
(assuming it is in the condition required by this Lease) as of the payment date
specified in such notice, and upon payment by Lessee pursuant to this clause
(iii) of such Stipulated Loss Value or Fair Market Sales Value, as the case may
be, and of all other amounts payable by Lessee under this Lease and under the
other Operative Agreements in respect of such Unit, Lessor shall transfer
without recourse or warranty all right, title and
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interest of Lessor in and to such Unit to Lessee or as it may direct, and
Lessor shall execute and deliver such documents evidencing such transfer as
Lessee shall reasonably request;
(f) if Lessor shall have sold any Unit pursuant to paragraph (c) above,
Lessor, in lieu of exercising its rights under paragraph (e) above with respect
to such Unit may, if it shall so elect, demand that Lessee pay to Lessor, and
Lessee shall pay to Lessor, as liquidated damages for loss of a bargain and not
as a penalty (in lieu of the Basic Rent for such Unit due subsequent to the
Rent Payment Date next preceding such sale), any accrued and unpaid Rent for
such Unit as of the date of such sale (Basic Rent for this purpose accruing at
a per diem rate equal to the semiannual amount due on the next following Rent
Payment Date divided by 180) and, if that date is a Rent Payment Date, the
Basic Rent due on that date (exclusive of any in advance Basic Rent due on such
date), plus the amount, if any, by which the Stipulated Loss Value of such Unit
computed as of the Rent Payment Date next preceding the date of such sale or,
if such sale occurs on a Rent Payment Date, then computed as of such Rent
Payment Date, exceeds the net proceeds of such sale, plus interest on such
amounts from the date of such sale to the date of payment at the Late Rate; and
(g) Lessor may terminate the leasing of any or all Units under this Lease or
may exercise any other right or remedy that may be available to it under
applicable law.
In addition, Lessee shall be liable, except as otherwise provided above, for
any and all unpaid Rent due hereunder before or during the exercise of any of
the foregoing remedies (exclusive of any in advance Basic Rent due on such
date), and for legal fees and other costs and expenses incurred by reason of
the occurrence of any Lease Event of Default or the exercise of Lessor's
remedies with respect thereto, including without limitation the repayment in
full of any costs and expenses necessary to be expended in repairing any Unit
in order to cause it to be in compliance with all maintenance and regulatory
standards imposed by this Lease.
Section 15.2. Cumulative Remedies. The remedies in this Lease provided in
favor of Lessor shall not be deemed exclusive, but shall be cumulative and
shall be in addition to all other remedies in its favor existing at law or in
equity. Lessee hereby waives any mandatory requirements of law, now or
hereafter in effect, which might limit or modify any of the remedies herein
provided, to the extent that such waiver is permitted by law. Lessee hereby
waives any and all existing or future claims of any right to assert any offset
or counterclaim against the Rent payments due hereunder, and agrees to make the
rent payments regardless of any offset or counterclaim or claim which may be
asserted by Lessee on its behalf in connection with the lease of the Equipment.
To the extent permitted by applicable law, Lessee hereby waives any rights now
or hereafter conferred by statute or otherwise that may require Lessor to sell,
lease or otherwise use the Equipment in mitigation of Lessor's damages as set
forth in Section 15.1 or that may otherwise limit or modify any of Lessor's
rights and remedies provided in this Section 15.
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Section 15.3. No Waiver. No delay or omission to exercise any right, power
or remedy accruing to Lessor upon any breach or default by Lessee under this
Lease shall impair any such right, power or remedy of Lessor, nor shall any
such delay or omission be construed as a waiver of any breach or default, or of
any similar breach or default hereafter occurring; nor shall any waiver of a
single breach or default be deemed a waiver of any subsequent breach or
default.
Section 15.4. Notice of Lease Default. Lessee agrees to furnish to Lessor,
Owner Participant and the Indenture Trustee, promptly upon any officer
acquiring actual knowledge of any condition which constituted or constitutes a
Lease Default under this Lease, written notice specifying such condition and
the nature and status thereof.
Section 15.5. Lessee's Duty to Furnish Information with Respect to
Subleases. Upon the occurrence of a Lease Event of Default pursuant to Section
14(a), (b), (g) or (h), Lessor may request that Lessee deliver to Lessor,
and upon such request Lessee agrees that it will promptly provide to Lessor, a
detailed list of all Units that are then being subleased by Lessee, the
identity of the sublessees with respect to such Units, the identity of an
employee or other agent of each such sublessee with whom Lessee regularly
communicates with in respect of such Units and the most recent known location
of such Units.
Section 15.6. Lessee's Duty to Return Equipment Upon Default. If Lessor or
any assignee of Lessor shall terminate the leasing of any or all Units pursuant
to this Section 15 and shall have provided to Lessee the written demand
specified in Section 15.1(b) with respect to such Units, Lessee shall forthwith
deliver possession of such Units to Lessor (except where Lessor has received
all amounts payable by Lessee pursuant to any notice provided by Lessor under
Section 15.1(e)(iii)). For the purpose of delivering possession of any Unit to
Lessor as above required, Lessee shall at its own cost, expense and risk
(except as hereinafter stated):
(a) Forthwith place such Equipment upon such storage tracks of Lessee or any
of its Affiliates or, at the expense of Lessee, on any other storage tracks, as
Lessor may designate or, in the absence of such designation, as Lessee may
select;
(b) permit Lessor to store such Equipment on such tracks without charge for
insurance, rent or storage until such Equipment has been sold, leased or
otherwise disposed of by Lessor and during such period of storage Lessee shall
continue to maintain all insurance required by Section 12.1 hereof; and
(c) transport the Equipment to any place on any lines of railroad or to any
connection carrier for shipment, all as Lessor may direct in writing.
All Equipment returned shall be in the condition required by Section 6.2
hereof.
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All amounts earned in respect of the Equipment after the date of termination
of this Lease pursuant to this Section 15, but not exceeding amounts actually
received therefor, shall be paid to Lessor or, so long as the Indenture shall
not have been discharged pursuant to its terms, the Indenture Trustee, and, if
received by Lessee, shall be promptly turned over to Lessor or the Indenture
Trustee as aforesaid. In the event any Unit is not assembled, delivered and
stored as hereinabove provided within 15 days after the termination of the
leasing of such Unit pursuant to Section 15, Lessee shall, in addition, pay to
Lessor or the Indenture Trustee as aforesaid as liquidated damages and not as a
penalty, for each day thereafter an amount equal to the amount, if any, by
which the higher of (i) an amount equal to 110% of the daily equivalent of the
Basic Rent in effect immediately prior to the expiration of the Lease for such
Unit and (ii) 125% of the Fair Market Rental Value for such Unit for each such
day exceeds the amount, if any, received by Lessor or the Indenture Trustee as
aforesaid (either directly or from Lessee) for such day for such Unit pursuant
to the preceding sentence.
Section 15.7. Specific Performance; Lessor Appointed Lessee's Agent. The
assembling, delivery, storage and transporting of the Equipment as provided in
Section 15.6 are of the essence of this Lease and, upon application to any
court of equity having jurisdiction in the premises, Lessor shall be entitled
to a decree against Lessee requiring specific performance of the covenants of
Lessee so to assemble, deliver, store and transport the Equipment. Without in
any way limiting the obligation of Lessee under the provisions of Section 15.6,
Lessee hereby irrevocably appoints Lessor as the agent and attorney of Lessee,
with full power and authority, at any time while Lessee is obligated to deliver
possession of any Units to Lessor pursuant to this Section 15, to demand and
take possession of such Unit in the name and on behalf of Lessee from whosoever
shall be at the time in possession of such Unit.
SECTION 16. FILINGS; FURTHER ASSURANCES.
Section 16.1. Filings. This Lease or a counterpart or copy hereof or
evidence hereof may be filed or recorded in any public office as may be
necessary or appropriate to protect the interest of Lessor, Owner Participant
or the Indenture Trustee herein or in the Units. On or prior to the Closing
Date Lessee will (a) cause this Lease, the Lease Supplements dated the Closing
Date, the Indenture and the Indenture Supplements dated the Closing Date to be
(i) duly filed and recorded with the ICC in accordance with 49 U.S.C. Section
11303, and (ii) deposited with the Registrar General of Canada pursuant to
Section 90 of the Railway Act of Canada (and all necessary actions shall have
been taken for publication of such deposit in The Canada Gazette in accordance
with said Section 90), and (b) cause notice of the security interests created
in this Lease, the Lease Supplement dated the Closing Date, the Indenture and
the Indenture Supplement to be filed in the appropriate offices in the Canadian
provinces of Ontario, Manitoba, Saskatchewan, Alberta and British Columbia, and
(c) furnish Lessor, the Indenture Trustee and Owner Participant proof thereof.
Section 16.2. Further Assurances. Lessee will duly execute and deliver to
Lessor such further documents and assurances and take such further action as
Lessor may from time to time reasonably request or as may be required by
applicable law or regulation in order to
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effectively carry out the intent and purpose of this Lease and to
establish and protect the rights and remedies created or intended to be
created in favor of Lessor, Owner Participant and the Indenture Trustee
hereunder, including, without limitation, the execution and delivery of
supplements or amendments hereto, in recordable form, subjecting to this Lease
any Replacement Unit and the recording or filing of counterparts hereof or
thereof in accordance with the laws of such jurisdiction as Lessor may from
time to time deem advisable; provided, however that Lessee shall not be
required to make any recording or filing in any province in Canada (or any
political subdivision thereof) or in Mexico (or any political subdivision
thereof) in respect of a Replacement Unit if (a) Lessee in good faith (as
evidenced by an Officers' Certificate to such effect) deems such action unduly
burdensome and (b) after giving effect to the failure to take such action,
Lessee has taken all action required by law so as to perfect and protect the
right, title and interests of Owner Trustee and Owner Participant in the Trust
Estate and of the Indenture Trustee in the Indenture Estate in respect of Units
having the Stipulated Loss Value of not less than 90% of the aggregate
Stipulated Loss Value of the Equipment.
Section 16.3. Other Filings. If, at any time during the Lease Term, Mexico,
or one or more states in Mexico, or any of the Canadian provinces of Quebec,
Nova Scotia or New Brunswick or the Canadian territory of the Northwest
Territories, establishes a state or provincial system for filing and perfecting
the security and/or ownership interests of entities such as Lessor and/or the
Indenture Trustee, Lessee shall cause any and all of the Operative Agreements
to be recorded with or under such system and shall cause all other filings and
recordings and all such other action required under such system to be effected
and taken, in order to perfect and protect the respective right, title and
interests of Lessor, Owner Participant and the Indenture Trustee.
Notwithstanding anything contained herein to the contrary, Lessee's obligations
in this Section 16.3 shall be subject in all respects to the provisions of
Section 16.2.
Section 16.4. Expenses. Except as provided in Section 2.5(a) of the
Participation Agreement, Lessee will pay all costs, charges and expenses
(including reasonable attorneys fees) incident to any such filing, refiling,
recording and rerecording or depositing and re-depositing of any such
instruments or incident to the taking of such action.
SECTION 17. LESSOR'S RIGHT TO PERFORM.
If Lessee fails to make any payment required to be made by it hereunder or
fails to perform or comply with any of its other agreements contained herein,
Lessor may itself make such payment or perform or comply with such agreement,
after giving not less than five Business Days' prior notice thereof to Lessee
(except in the event that an Indenture Default resulting from a Lease Default
or a Lease Event of Default shall have occurred and be continuing, in which
event Lessor may effect such payment, performance or compliance to the extent
necessary to cure such Indenture Default with notice given concurrently with
such payment, performance or compliance), but shall not be obligated hereunder
to do so, and the amount of such payment and of the reasonable expenses of
Lessor incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Late Rate from such date of payment, to the extent permitted
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by applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to
Lessor on demand.
SECTION 18. ASSIGNMENT.
Section 18.1. Assignment by Lessor. Lessee and Lessor hereby confirm that
concurrently with the execution and delivery of this Lease, Lessor has executed
and delivered to the Indenture Trustee the Indenture, which assigns as
collateral security and grants a security interest in favor of the Indenture
Trustee in, to and under this Lease and certain of the Rent payable hereunder
(excluding Excepted Property), all as more explicitly set forth in the
Indenture. Lessor agrees that it shall not otherwise assign or convey its
right, title and interest in and to this Lease, the Equipment or any Unit,
except as expressly permitted by and subject to the provisions of the
Participation Agreement, the Trust Agreement and the Indenture.
Section 18.2. Assignment by Lessee. Except as otherwise provided in Section
8.3 or in the case of any requisition for use by any governmental authority or
any agency or instrumentality thereof referred to in Section 11.5, Lessee will
not, without the prior written consent of Lessor and the Indenture Trustee,
assign any of its rights hereunder, except as provided herein and in the
Participation Agreement; provided that Lessee may assign its rights and/or
obligations hereunder to any corporation in accordance with the provisions of
Section 6.8 of the Participation Agreement or to any corporation which is an
Affiliate of Lessee, provided that in the case of an assignment to an
Affiliate, (a) Lessor shall have received an instrument or instruments
reasonably satisfactory to it, Owner Participant and the Indenture Trustee
under which such Affiliate assumes the obligations of Lessee hereunder, and (b)
Lessee irrevocably and unconditionally guarantees, pursuant to an agreement in
form and substance reasonably satisfactory to Lessor, Owner Participant and the
Indenture Trustee, such assignee's performance of all of such obligations as
primary obligor and not as a surety.
Section 18.3. Sublessee's Performance and Rights. Any obligation imposed on
Lessee in this Lease shall require only that Lessee perform or cause to be
performed such obligation, even if stated herein as a direct obligation, and
the performance of any such obligation by any permitted assignee, sublessee or
transferee under an assignment, sublease or transfer agreement then in effect
and permitted by the terms of this Lease shall constitute performance by Lessee
and discharge such obligation by Lessee. Except as otherwise expressly
provided herein, any right granted to Lessee in this Lease shall grant Lessee
the right to (a) exercise such right or permit such right to be exercised by
any such assignee or transferee, or (b) in Lessee's capacity as sublessor
pursuant to any sublease permitted pursuant to Section 8.3 hereof, permit any
sublessee to exercise substantially equivalent rights under any such sublease
as are granted to Lessee under this Lease; provided, however, that Lessee's
right to terminate this Lease pursuant to Sections 10 and 11 and Lessee's
purchase and renewal options set forth in Section 22 may be exercised only by
Lessee itself or by any assignee or transferee of, or successor to, Lessee in a
transaction permitted by Section 6.8 of the Participation Agreement; provided,
further, that nothing in this Section 18.3 shall or shall be deemed to (i)
create any privity of contract between any such sublessee, on the one hand, and
any of Lessor, any Owner
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Participant or any subsequent transferee or Affiliate of any such
Person, on the other hand, (ii) create any duty or other liability of any
nature whatsoever on the part of any of Lessor, any Owner Participant or any
subsequent transferee or Affiliate of any such Person, to any such sublessee or
any Affiliate thereof, or (iii) modify or waive any term or provision of
Section 8.3 hereof, which Section 8.3 shall control if any conflict arises
between any of the provisions thereof and this Section 18.3. The inclusion of
specific references to obligations or rights of any such assignee, sublessee or
transferee in certain provisions of this Lease shall not in any way prevent or
diminish the application of the provisions of the two sentences immediately
preceding with respect to obligations or rights in respect of which specific
reference to any such assignee, sublessee or transferee has not been made in
this Lease.
SECTION 19. NET LEASE, ETC.
This Lease is a net lease and Lessee's obligation to pay all Rent payable
hereunder shall, subject to Section 3.5, be absolute, unconditional and
irrevocable and shall not be affected by any circumstance of any character
including, without limitation, (a) any set-off, abatement, counterclaim,
suspension, recoupment, reduction, rescission, defense or other right that
Lessee may have (other than pursuant to Section 3.5 hereof) against Lessor,
Owner Participant, the Indenture Trustee or any holder of an Equipment Note or
Pass Through Certificate, any vendor or manufacturer of any Unit, or any other
Person for any reason whatsoever, (b) any defect in or failure of title,
merchantability, condition, design, compliance with specifications, operation
or fitness for use of all or any part of any Unit, (c) any damage to, or
removal, abandonment, requisition, taking, condemnation, loss, theft or
destruction of all or any part of any Unit or any interference, interruption,
restriction, curtailment or cessation in the use or possession of any Unit by
Lessee or any other Person for any reason whatsoever or of whatever duration,
(d) any insolvency, bankruptcy, reorganization or similar proceeding by or
against Lessee, Lessor, Owner Participant, the Indenture Trustee, any holder of
an Equipment Note or Pass Through Certificate or any other Person, (e) the
invalidity, illegality or unenforceability of this Lease, any other Operative
Agreement, or any other instrument referred to herein or therein or any other
infirmity herein or therein or any lack of right, power or authority of Lessee,
Lessor, Owner Participant, the Indenture Trustee, any holder of an Equipment
Note or Pass Through Certificate or any other Person to enter into this Lease
or any other Operative Agreement or to perform the obligations hereunder or
thereunder or consummate the transactions contemplated hereby or thereby or any
doctrine of force majeure, impossibility, frustration or failure of
consideration, (f) the breach or failure of any warranty or representation made
in this Lease or any other Operative Agreement by Lessee, Lessor, Owner
Participant, the Indenture Trustee, any holder of an Equipment Note or Pass
Through Certificate or any other Person, (g) the requisitioning, seizure or
other taking of title to or use of such Unit by any government or governmental
authority or otherwise, whether or not by reason of any act or omission of
Lessor, Lessee or the Indenture Trustee, or any other deprivation or limitation
of use of such Unit in any respect or for any length of time, whether or not
resulting from accident and whether or not without fault on the part of Lessee,
or (h) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, any present or future law to the contrary
notwithstanding to the extent permitted by applicable law. To the extent
permitted by applicable
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law, Lessee hereby waives any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease with respect to any Unit,
except in accordance with the express terms hereof. If for any reason
whatsoever this Lease shall be terminated in whole or in part by operation of
law or otherwise, except as specifically provided herein, Lessee nonetheless
agrees, subject to Section 3.5, to the maximum extent permitted by law, to pay
to Lessor or to the Indenture Trustee, as the case may be, an amount equal to
each installment of Basic Rent and all Supplemental Rent due and owing, at the
time such payment would have become due and payable in accordance with the
terms hereof had this Lease not been terminated in whole or in part. Each
payment of Rent made by Lessee hereunder shall be final and Lessee shall not
seek or have any right to recover all or any part of such payment from Lessor
or any Person for any reason whatsoever. Nothing contained herein shall be
construed to waive any claim which Lessee might have under any of the Operative
Agreements or otherwise or to limit the right of Lessee to make any claim it
might have against Lessor or any other Person or to pursue such claim in such
manner as Lessee shall deem appropriate, except in the manners precluded by
this Section 19.
SECTION 20. NOTICES.
Unless otherwise expressly specified or permitted by the terms hereof, all
communications and notices provided for herein shall be in writing or by
facsimile capable of creating a written record, and any such notice shall
become effective (a) upon personal delivery thereof, including, without
limitation, by overnight mail or courier service, (b) in the case of notice by
United States mail, certified or registered, postage prepaid, return receipt
requested, upon receipt thereof, or (c) in the case of notice by such
facsimile, upon confirmation of receipt thereof, provided such transmission is
promptly further confirmed in writing by either of the methods set forth in
clause (a) or (b), in each case addressed to the following Person at its
respective address set forth below or at such other address as such Person may
from time to time designate by written notice to the other Persons listed
below:
If to Lessor: State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Fax No.: (617) 664-5371
Confirmation No.: (617) 664-5677
With copies to Owner Participant.
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If to Owner Participant: BNY Capital Funding Corp.
c/o BNY Leasing Corporation
1290 Avenue of the Americas
29th Floor
New York, New York 10104
Attention: Chief Financial Officer
Fax No.: (212) 246-1803
Confirmation No.: (212) 408-4917
If to the Indenture Trustee: The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention:
(UTC Trust No. 1994-A )
Fax No.:
Confirmation No.:
If to Lessee: Union Tank Car Company
225 West Washington Street, 19th Floor
Chicago, Illinois 60606
Attention: General Counsel and Secretary
(UTC Trust No. 1994-A )
Fax No.: (312) 845-5305
Confirmation No.: (312) 372-9500
SECTION 21. CONCERNING THE INDENTURE TRUSTEE.
Section 21.1. Limitation of the Indenture Trustee's Liabilities.
Notwithstanding any provision herein or in any of the Operative Agreements to
the contrary, the Indenture Trustee's obligation to take or refrain from taking
any actions, or to use its discretion (including, but not limited to, the
giving or withholding of consent or approval and the exercise of any rights or
remedies under such Operative Agreements), and any liability therefor, shall,
in addition to any other limitations provided herein or in the other Operative
Agreements, be limited by the provisions of the Indenture, including, but not
limited to, Article VI thereof.
Section 21.2. Right, Title and Interest of the Indenture Trustee Under
Lease. It is understood and agreed that the right, title and interest of the
Indenture Trustee in, to and under this Lease and the Rent due and to become
due hereunder shall by the express terms granting and conveying the same be
subject to the interest of Lessee in and to the Equipment.
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SECTION 22. PURCHASE OPTIONS; RENEWAL OPTIONS.
Section 21.1. Early Purchase Option. (a) Provided that no Lease Event of
Default shall have occurred and be continuing either at the time of the notice
described below or on the Early Purchase Date (unless Lessor shall have waived
such Lease Event of Default solely for the purpose of this Section 22.1) and
Lessee shall have duly given the notice required by the next succeeding
sentence, Lessee shall have the right and, upon the giving of such notice, the
obligation to purchase any or all of the Units then leased hereunder (as
specified in such notice) on the Early Purchase Date; provided that if Lessee
elects to purchase some but less than all of the Units in any Functional Group
the determination as to which Units are to be purchased shall be made on a
random or other reasonable basis without discrimination based on maintenance
status or operating condition of the Units in question and such notice shall
describe such manner in which Lessee proposes to determine the Units in such
Functional Group which will be purchased. Lessee shall give Lessor, the
Indenture Trustee and the Pass Through Trustee written notice not less than 90
days prior to the Early Purchase Date of its election to exercise the purchase
option provided for in this Section 22.1, which notice shall be irrevocable.
(b) If Lessee elects to exercise the purchase option provided for in this
Section 22.1 with respect to any Units, Lessee shall, as the purchase price
therefor, in the sole discretion of Lessee, either (i) pay the Early Purchase
Price of such Units, together with all other amounts due and owing by Lessee
under the Operative Agreements with respect to such Units, including, without
limitation, all unpaid Basic Rent therefor due and payable on or prior to the
Early Purchase Date (exclusive of any in advance Basic Rent due on such date)
and any Make-Whole Amount with respect to the Equipment Notes then being
prepaid, payable at the place of payment specified in Section 3.6 hereof in
immediately available funds, or (ii) pay to Owner Trustee an amount equal to
the difference between the Early Purchase Price and the outstanding principal
amount of the related Equipment Notes as of the Early Purchase Date and assume,
on a full recourse basis, and agree to indemnify Lessor against, all of
Lessor's obligations in respect of the related Equipment Notes; provided, that,
following such assumption, the purchased Units shall remain subject to the Lien
of the related Indenture. Lessee will make the payments required by the
foregoing clause (i) or make the payments and assume the Equipment Notes as
provided in the foregoing clause (ii) on the Early Purchase Date in the manner
specified in Section 3.6 hereof against delivery of a Bill of Sale transferring
and assigning to Lessee all right, title and interest of Lessor in and to such
Units on an "as-is" "where-is" basis and containing a warranty against Lessor's
Liens; provided, however, that Lessee shall have the option of specifying in
such notice under this Section 22.1 its election to defer payment of the
Deferred Portion of the Early Purchase Price, which shall be paid in four (4)
equal installments on the Quarterly Dates occurring in the 12 months
immediately following the Early Purchase Date, which Deferred Portion (A) may
be prepaid by Lessee at any time in whole and (B) will be secured, at the
option of Lessee, by (1) a first lien on the purchased Units (but only if no
Equipment Note with respect to such Units are outstanding), (2) a letter of
credit in favor of Lessor in a form, and issued by a financial institution,
reasonably acceptable to Lessor, or (3) such other collateral as may be
mutually acceptable to Lessee and Lessor; and provided, further, that, unless
Lessee assumes Lessor's obligations in respect of the related
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Equipment Notes, the portion of the Early Purchase Price payable by
Lessee on the Early Purchase Date, together with other amounts of Supplemental
Rent paid by Lessee on such date will be under any circumstances and in any
event, at least sufficient to pay in full, as of the date of payment thereof,
the aggregate unpaid principal of, the Make Whole Amount, if any, and all
unpaid interest of the Equipment Notes issued in respect of such Units and all
other amounts owed by Lessee under the Operative Agreements with respect to
such Units. Lessor shall not be required to make any other representation or
warranty as to the condition of such Units or any other matters, and may
specifically disclaim any such representations or warranties. In the event of
any such purchase and receipt by Lessor and the Indenture Trustee of all of the
amounts provided in this Section 22.1, the obligation of Lessee to pay Basic
Rent hereunder for such Units shall cease and the Lease Term for such Units
shall end.
Section 22.2. Election to Retain or Return Equipment at End of Basic or
Renewal Term. Not less than 120 days prior to the end of the Basic Term, the
end of any Fixed Rate Renewal Term or the end of any Fair Market Renewal Term
(as the latter two terms are defined in Section 22.4), Lessee shall give Lessor
irrevocable written notice of its decision to return or retain any or all of
the Units at the end of the Basic Term or such Renewal Term; provided that if
Lessee elects to retain less than all of the Units in a Functional Group, the
determination as to which Units are to be retained shall be made on a random or
other reasonable basis without discrimination based on maintenance status or
operating condition of the Units in question, and Lessee shall describe in such
notice such manner in which it proposes to determine the Units in such
Functional Group which will be retained. If Lessee elects to retain some or
all of the Units, Lessee shall comply with Section 22.3 and/or 22.4 hereof, as
it may elect in accordance with the provisions thereof including the notice
requirements stated therein. If Lessee fails to give the 120 days' notice
required by this Section 22.2, Lessee shall be deemed to have irrevocably
elected to return the Units at the end of the Basic Term or the applicable
Renewal Term, as the case may be, in accordance with Section 6.
Section 22.3. Purchase Options. Provided that no Lease Event of Default
shall have occurred and be continuing either at the time of notice or the
expiration of the Lease Term (unless Lessor shall have waived such Lease Event
of Default solely for the purpose of this Section 22.3) and Lessee shall have
duly given the notice required by Section 22.2 and by the next succeeding
sentence of this Section 22.3, Lessee shall have the right and, upon the giving
of such notice under this Section 22.3, the obligation to purchase any or all
of the Units (as specified in such notice) (a) at the expiration of the Basic
Term at a price equal to the Basic Term Purchase Price of such Units; (b) on
July 2, 2017 (the "Outside Date") at a price equal to the Fixed Rate Purchase
Price of such Units; provided that with respect to such Units Lessee shall have
renewed this Lease through the Outside Date on one or more occasions pursuant
to Section 22.4(a) or (b); or (c) at the expiration of the Basic Term or any
Renewal Term at a price equal to the Fair Market Sales Value of such Units.
Lessee shall give Lessor written notice not less than 90 days prior to the end
of the Basic Term, the Outside Date, the Fixed Rate Renewal Term or the Fair
Market Renewal Term, as the case may be, of its election to exercise the
purchase option provided for in this Section 22.3, which notice shall be
irrevocable. Payment of the purchase price, together with all other amounts
due and owing by Lessee under the
38
<PAGE> 44
Operative Agreements, shall be made at the place of payment specified
in Section 3.6 hereof in immediately available funds against delivery of a Bill
of Sale transferring and assigning to Lessee all right, title and interest of
Lessor in and to such Units on an "as-is" "where-is" basis and containing a
warranty against Lessor's Liens. Lessor shall not be required to make any
other representation or warranty as to the condition of such Units or any other
matters, and may specifically disclaim any such representations or warranties.
Section 22.4. Renewal Options. Provided that no Lease Event of Default
shall have occurred and be continuing either at the time of notice or the
expiration of the Lease Term (unless Lessor shall have waived such Lease Event
of Default solely for the purpose of this Section 22.4) and Lessee shall
have duly given the notice required by Section 22.2, Lessee shall have the
right and, upon the giving of a notice under this Section 22.4 as below
provided, the obligation to lease pursuant to this Lease any or all of the
Units at the expiration of the Basic Term or any applicable Renewal Term which
Lessee has not elected to purchase pursuant to Section 22.3, which obligation
may be fulfilled by Lessee electing to renew this Lease under either of the
following Section 22.4(a) or (b):
(a) Fixed Rate. Lessee may give Lessor written notice not less than 90 days
prior to the end of the Basic Term (or, in the circumstances described in the
third sentence of this Section 22.4(a), the then Fixed Rate Renewal Term) that
Lessee elects to renew this Lease under this Section 22.4(a) with respect to
any or all of the Units then leased hereunder, which notice shall be
irrevocable. The foregoing notice from Lessee shall specify the term (the
"Fixed Rate Renewal Term") that Lessee selects for its initial renewal under
this Section 22.4(a), which shall be for one or more years as Lessee shall
select; provided that such Fixed Rate Renewal Term in no event shall extend
beyond the Outside Date. If Lessee selects a Fixed Rate Renewal Term such that
the period following such term until the Outside Date is at least one year,
then Lessee may elect one or more further renewals of one or more years
pursuant to this Section 22.4(a) so long as no such term extends beyond the
Outside Date. The Basic Rent for each Unit during any Fixed Rate Renewal Term
shall be 50% of the average of the semiannual Basic Rent installments payable
hereunder for such Unit during the Basic Term, payable semiannually in arrears.
Each Fixed Rate Renewal Term shall commence immediately upon the expiration of
the Basic Term or the preceding Fixed Rate Renewal Term, as the case may be.
(b) Fair Market. Lessee may give Lessor written notice not less than 90
days prior to the end of the Basic Term, a Fixed Rate Renewal Term or a Fair
Market Renewal Term (subject to the limitations otherwise provided in this
Section 22.4(b)), regardless of whether Lessee is then entitled to renew this
Lease for a Fixed Rate Renewal Term, that Lessee elects to renew this Lease
under this Section 22.4(b) with respect to any or all of the Units then leased
hereunder for a term of one or more years as Lessee shall specify in such
notice (the "Fair Market Renewal Term"), which notice shall be irrevocable.
The Basic Rent for the Units leased during the Fair Market Renewal Term shall
be the Fair Market Rental Value thereof, payable semiannually in arrears. The
Fair Market Renewal Term shall commence immediately upon the expiration of the
Base Term or the preceding Fixed Rate Renewal Term or Fair Market Renewal Term,
as the case may be.
39
<PAGE> 45
Section 22.5. Appraisal. Promptly following Lessee's written notice
pursuant to Section 22.2 of its election to retain any Units at the end of the
Basic Term or a Renewal Term, as the case may be, Lessor and Lessee shall
determine the useful life (based on the actual condition of a reasonable
sampling of such Units), Fair Market Sales Value and Fair Market Rental Value
of the Units to be retained, in each case assuming the Units are in the
condition required by this Lease.
Section 22.6. Stipulated Loss Value and Termination Value During Renewal
Term. All of the provisions of this Lease, other than Section 10, shall be
applicable during any renewal term for such Units, except as specified in the
next sentence. During any Renewal Term, the Stipulated Loss Value and
Termination Value of any Unit shall be determined on the basis of the Fair
Market Sales Value of such Unit as of the first day of such Renewal Term,
reduced in equal monthly increments to the Fair Market Sales Value of such Unit
as of the last day of such Renewal Term; provided that in no event during any
Fixed Rate Renewal Term shall the Stipulated Loss Value and Termination Value
of any Unit be less than 20% of the Equipment Cost of such Unit.
SECTION 23. LIMITATION OF LESSOR'S LIABILITY.
It is expressly agreed and understood that all representations, warranties
and undertakings of Lessor hereunder (except as expressly provided herein)
shall be binding upon Lessor only in its capacity as Owner Trustee under the
Trust Agreement and in no case shall State Street Bank and Trust Company be
personally liable for or on account of any statements, representations,
warranties, covenants or obligations stated to be those of Lessor hereunder,
except that Lessor (or any successor Owner Trustee) shall be personally liable
for its gross negligence or wilful misconduct and for its breach of its
covenants, representations and warranties contained herein to the extent
covenanted or made in its individual capacity.
SECTION 24. INVESTMENT OF SECURITY FUNDS.
Any moneys received by Lessor or the Indenture Trustee pursuant to Section
12.2 which are required to be paid to Lessee after completion of repairs to be
made pursuant to Section 12.2 or pursuant to Section 11.2, as the case may be,
until paid to Lessee as provided in Section 11.4(a), 11.5 or 12.2 or the curing
of Lease Default or a Lease Event of Default or otherwise applied as provided
herein or in the Trust Agreement and Indenture, shall be invested at the risk
and expense of Lessee in Specified Investments by Lessor (unless the Indenture
shall not have been discharged, in which case, by the Indenture Trustee as
provided in Section 6.04(b) of the Indenture) from time to time as directed by
telephone (and confirmed promptly thereafter in writing) by Lessee if such
investments are reasonably available for purchase. There shall be promptly
remitted to Lessee, so long as no Lease Default relating to Section 14(a), (b),
(g) or (h) or Lease Event of Default shall have occurred and be continuing, any
gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred
in connection with such investment) and Lessee will promptly pay to Lessor or
the Indenture Trustee, as the case may be, on demand, the amount of any loss
40
<PAGE> 46
realized as the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection with such
investment), such amount to be disposed of in accordance with the terms of the
Trust Agreement and the Indenture. If a Lease Event of Default shall have
occurred and be continuing, any moneys held pursuant to this Section 25, and
any gain from the investment thereof, may be applied to the Lessee's
obligations hereunder.
SECTION 25. MISCELLANEOUS.
Section 25.1. Governing Law; Severability. This Lease, and any extensions,
amendments, modifications, renewals or supplements hereto shall be governed by
and construed in accordance with the internal laws and decisions of the State
of New York; provided, however, that the parties shall be entitled to all
rights conferred by any applicable Federal statute, rule or regulation.
Whenever possible, each provision of this Lease shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Lease shall be prohibited by or invalid under the laws of any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Lease in any
other jurisdiction.
Section 25.2. Execution in Counterparts. This Lease may be executed in any
number of counterparts, each executed counterpart constituting an original and
in each case such counterparts shall constitute but one and the same
instrument; provided, however, that to the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code) no
security interest in this Lease may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page
hereof, which counterpart shall constitute the only "original" hereof for
purposes of the Uniform Commercial Code.
Section 25.3. Headings and Table of Contents; Section References. The
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof. All references herein
to numbered sections, unless otherwise indicated, are to sections of this
Lease.
Section 25.4. Successors and Assigns. This Lease shall be binding upon and
shall inure to the benefit of, and shall be enforceable by, the parties hereto
and their respective permitted successors and assigns.
Section 25.5. True Lease. It is the intent of the parties to this Lease
that it will be a true lease and not a "conditional sale," and that Lessor
shall at all times be considered to be the owner of each Unit which is
the subject of this Lease for the purposes of all Federal, state, city and
local income taxes or for franchise taxes measured by income, and that this
Lease conveys to Lessee no right, title or interest in any Unit except as
lessee. Nothing contained in
41
<PAGE> 47
this Section 25.5 shall be construed to limit Lessee's use or
operation of any Unit or constitute a representation, warranty or covenant by
Lessee as to tax consequences.
Section 25.6. Amendments and Waivers. No term, covenant, agreement or
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and except as may be permitted by the terms of the Indenture.
Section 25.7. Survival. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by such party or on the behalf of any such party under
this Lease, shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either such
party or on behalf of either such party, and to the extent having accrued and
not been paid or relating to or otherwise arising in connection with the
transactions contemplated by the Operative Agreements during the Lease Term,
shall survive the expiration or other termination of this Lease or any other
Operative Agreement.
Section 25.8. Business Days. If any payment is to be made hereunder or any
action is to be taken hereunder on any date that is not a Business Day, such
payment or action otherwise required to be made or taken on such date shall be
made or taken on the immediately succeeding Business Day with the same force
and effect as if made or taken on such scheduled date and as to any payment
(provided any such payment is made on such succeeding Business Day) no interest
shall accrue on the amount of such payment from and after such scheduled date
to the time of such payment on such next succeeding Business Day.
Section 25.9. Directly or Indirectly. Where any provision in this Lease
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
Section 25.10. Incorporation by Reference. The payment obligations set
forth in Sections 7.1 and 7.2 of the Participation Agreement are hereby
incorporated by reference.
Section 25.11. Lessee's Right of Quiet Enjoyment. So long as no Lease
Event of Default has occurred and is continuing, Lessor shall not take, or
cause to be taken, any action contrary to Lessee's rights under this Lease,
including, without limitation, the right to possession and use by Lessee or any
permitted sublessee of the Equipment.
Section 25.12. Entire Agreement. This Lease, together with the schedules,
exhibits and documents delivered hereunder, and the other Operative Agreements
contain the entire agreement between the parties with respect to the subject
matter covered herein and therein, and supersede all prior agreements (oral or
written), negotiations and discussions between the parties relating thereto.
42
<PAGE> 48
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly
executed and delivered on the day and year first above written.
Lessor:
State Street Bank and Trust Company,
not in its individual capacity except
as otherwise expressly provided but
solely as Owner Trustee
By:___________________________________
Name:
Title:
Lessee:
Union Tank Car Company
By:_____________________________________
Name:
Title:
<PAGE> 49
State of )
) SS
County of )
On this ____ day of December, 1994, before me personally appeared
______________, to me personally known, who being by me duly sworn, say that he
is __________________________ of State Street Bank and Trust Company, that said
instrument was signed on such date on behalf of said corporation by authority
of its Board of Directors, and he acknowledged that the execution of the
foregoing instrument was the free act and deed of said corporation.
____________________________
Notary Public
[Notarial Seal]
My commission expires:
State of Illinois )
) SS
County of Cook )
On this ___ day of December, 1994, before me personally appeared
________________, to me personally known, who being by me duly sworn, say that
he is the _________________ of Union Tank Car Company, that said instrument was
signed on such date on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
____________________________
Notary Public
[Notarial Seal]
My commission expires:
<PAGE> 50
EXHIBIT A
LEASE SUPPLEMENT NO. _______
(UTC TRUST NO. 1994-A_)
This Lease Supplement No. , dated as of ,
1994 between State Street Bank and Trust Company, a Massachusetts banking
corporation, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement ("Lessor"), and Union Tank Car Company, a Delaware
corporation ("Lessee");
Witnesseth:
Lessor and Lessee have heretofore entered into that certain
Equipment Lease Agreement (UTC Trust No. 1994-A ) dated as of December , 1994
(the "Lease"). The terms used herein are used with the meanings specified in
the Lease.
The Lease provides for the execution and delivery of one or more
Lease Supplements substantially in the form hereof for, among other things, the
purpose of particularly describing all or a portion of the Units of Equipment
to be leased to Lessee under the Lease.
Now, Therefore, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, Lessor and
Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease as herein supplemented, the
Units described in Schedule 1 hereto.
2. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
3. To the extent that this Lease Supplement constitutes chattel
paper (as such term is defined in the Uniform Commercial Code) no security
interest in this Lease Supplement may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page
hereof, which counterpart shall constitute the only "original" hereof for
purposes of the Uniform Commercial Code.
4. This Lease Supplement shall be governed by and construed in
accordance with the internal laws and decisions of the State of Illinois;
provided, however, that the parties shall be entitled to all rights conferred
by any applicable Federal statute, rule or regulation.
5. This Lease Supplement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
A-1
<PAGE> 51
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed as of the day and year first above written and
to be delivered as of the date first above written.
State Street Bank and Trust Company,
not in its individual capacity but
solely as Owner Trustee
By:_________________________________
Name:
Title:
Union Tank Car Company
By:_________________________________
Name:
Title:
A-2
<PAGE> 52
State of )
) SS
County of )
On this ____ day of December, 1994, before me personally appeared
__________________, to me personally known, who being by me duly sworn, say
that he is ________________________ of State Street Bank and Trust Company,
that said instrument was signed on such date on behalf of said corporation by
authority of its Board of Directors, and he acknowledged that the execution of
the foregoing instrument was the free act and deed of said corporation.
____________________________
Notary Public
[Notarial Seal]
My commission expires:
State of Illinois )
) SS
County of Cook )
On this ____ day of December, 1994, before me personally appeared
______________________, to me personally known, who being by me duly sworn,
say that he is _____________ of Union Tank Car Company, that said instrument
was signed on such date on behalf of said corporation by authority of its Board
of Directors, and he acknowledged that the execution of the foregoing
instrument was the free act and deed of said corporation.
____________________________
Notary Public
[Notarial Seal]
My commission expires:
<PAGE> 1
EXHIBIT 4(b)(5)
Trust Agreement
Dated as of December __, 1994
Between
BNY Capital Funding Corp.,
Owner Participant
and
State Street Bank and Trust Company,
Owner Trustee
Covered Hoppers and Tank Cars
UTC Trust No. 1994-A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.1. Definitions....................................................... 1
Section 1.2. Interpretation.................................................... 1
ARTICLE II
AUTHORITY DECLARATION OF TRUST
Section 2.1. Authority to Execute and Perform Various Documents................ 1
Section 2.2. Declaration of Trust.............................................. 2
ARTICLE III
DISTRIBUTIONS AND PAYMENTS
Section 3.1. Payments to the Indenture Trustee................................. 2
Section 3.2. Payments to the Owner Trustee; Other Parties...................... 2
Section 3.3. Certain Distributions to the Owner Participant.................... 3
Section 3.4. Excepted Property................................................. 3
Section 3.5. Method of Payment................................................. 3
ARTICLE IV
CERTAIN DUTIES OF THE OWNER TRUSTEE
Section 4.1. Notice of Certain Events.......................................... 4
Section 4.2. Action Upon Instructions.......................................... 4
Section 4.3. Indemnification................................................... 4
Section 4.4. No Duties Except as Specified..................................... 5
Section 4.5. No Action Except Under Specified Agreements or Instructions....... 5
Section 4.6. Tax Returns; Records.............................................. 5
Section 4.7. Absence of Certain Duties......................................... 6
Section 4.8. Finishing of Documents............................................ 6
ARTICLE V
THE OWNER TRUSTEE
Section 5.1. Acceptance of Trusts and Duties................................... 7
Section 5.2. No Representations or Warranties as to Equipment of Documents..... 7
Section 5.3. No Segregation of Moneys; No Interest............................. 8
Section 5.4. Reliance, Advice of Counsel....................................... 8
Section 5.5. Not Acting in Individual Capacity................................. 9
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification of Trust Company.................................. 9
Section 6.2. Expenses.......................................................... 10
ARTICLE VII
TERMINATION TRUST AGREEMENT
Section 7.1. Termination of Trust Agreement.................................... 11
Section 7.2. Termination at Option of the Owner Participant.................... 11
ARTICLE VIII
SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
AND SEPARATE OWNER TRUSTEES
Section 8.1. Resignation of the Owner Trustee; Appointment of Successor....... 12
Section 8.2. Additional and Separate Trustees................................. 13
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
Section 9.1. Supplements and Amendments........................................ 15
ARTICLE X
MISCELLANEOUS
Section 10.1. No Legal Title to Trust Estate in the Owner Participant........... 15
Section 10.2. Sale of Accepted Equipment by the Owner Trustee is Binding........ 16
Section 10.3. Notices........................................................... 16
Section 10.4. Severability...................................................... 16
Section 10.5. Separate Counterparts............................................. 16
Section 10.6. Waivers, etc...................................................... 16
Section 10.7. Successors and Assigns............................................ 16
Section 10.8. Transfer of Owner Participant's Interest.......................... 16
Section 10.9. Actions of the Owner Participants................................. 17
Section 10.10. Headings; Table of Contents....................................... 17
Section 10.11. Governing Law..................................................... 17
Section 10.12. Benefit........................................................... 17
Section 10.13. Performance by the Owner Participant.............................. 17
Section 10.14. Conflict with Operative Agreements................................ 17
Section 10.15. Limitation on Owner Participant's Liability....................... 17
Section 10.16. Identification of Trust........................................... 18
</TABLE>
<PAGE> 4
TRUST AGREEMENT
This Trust Agreement is entered into as of December , 1994 between
BNY Capital Funding Corp., a New York corporation (the "Owner Participant"),
and State Street Bank and Trust Company, a Massachusetts banking corporation
(in its individual capacity, "Trust Company," and otherwise not in its
individual capacity but solely as trustee hereunder, the "Owner Trustee"). In
consideration of the mutual agreements herein contained, the agreements
contained in the other Operative Agreements and the acceptance by Trust Company
of the trusts hereby created, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The capitalized terms used in this Trust
Agreement have the meanings given in Appendix A unless otherwise defined herein
or unless the context otherwise requires. For all purposes hereof, the
following terms shall have the following meanings:
"Accepted Equipment" means all of the Accepted Units.
"Accepted Unit" means each Unit that has been purchased by the Owner
Trustee pursuant to the Participation Agreement.
"Actual Knowledge" of Trust Company or the Owner Trustee means actual
knowledge of, including any written notices received by, a responsible officer
in the Corporate Trust Administration of Trust Company.
Section 1.2. Interpretation. Unless otherwise indicated, references
in this Trust Agreement to Sections, subsections, paragraphs and Appendices are
to Sections, subsections, paragraphs and Appendices of this Trust Agreement.
The terms "hereof," "herein," "hereby," "hereto" and "hereunder" refer to this
Trust Agreement, taken as a whole. References to a given agreement or
instrument are references to such agreement or instrument as originally entered
into, as modified, amended, supplemented and restated through the date as of
which such reference is made.
ARTICLE II
AUTHORITY DECLARATION OF TRUST
Section 2.1. Authority to Execute and Perform Various Documents. The
Owner Participant hereby authorizes and directs the Owner Trustee to, and the
Owner Trustee agrees for the benefit of the Owner Participant that it will, (i)
execute and
<PAGE> 5
deliver the Participation Agreement, (ii) on the Closing Date, upon receipt of
the confirmation by the Owner Participant pursuant to Section 2.4 of the
Participation Agreement, execute and deliver the Operative Agreements
contemplated by the Participation Agreement to be executed and delivered by the
Owner Trustee on the Closing Date, in the respective forms thereof in which
delivered by the Owner Participant to the Owner Trustee for execution and
delivery, and to take the other actions contemplated to be taken by the Owner
Trustee on the Closing Date in Section 2 of the Participation Agreement, (iii)
execute and deliver any other agreement, instrument or certificate contemplated
by the Operative Agreements as the Owner Participant from time to time may
direct in writing, (iv) subject to the terms of this Trust Agreement, exercise
the rights (upon written instructions received from the Owner Participant) and
perform the duties of the Owner Trustee under each of the documents,
agreements, instruments and certificates referred to in clauses (i) through
(iii) of this Section 2.1 as set forth in such documents, agreements,
instruments and certificates, and (v) subject to the terms of this Trust
Agreement, take such other action in connection with the foregoing as the Owner
Participant may from time to time direct in writing.
Section 2.2. Declaration of Trust. The Trust Company hereby declares
that it will hold as Owner Trustee all estate, right, title and interest of the
Owner Trustee in and to the Accepted Equipment and the Owner Trustee
Agreements, and any other property contributed by the Owner Participant
pursuant to the terms of any of the Operative Agreements, including without
limitation all amounts of Rent, insurance proceeds and requisition, indemnity
or other payments of any kind, but specifically excluding Excepted Property
(collectively, the "Trust Estate"), upon the trusts set forth herein and for
the use and benefit of the Owner Participant as sole beneficiary, subject,
however, to the provisions of and the Lien created by the Indenture.
ARTICLE III
DISTRIBUTIONS AND PAYMENTS
Section 3.1. Payments to the Indenture Trustee. Until the Lien of the
Indenture shall have been discharged pursuant to the terms thereof, all Basic
Rent, Supplemental Rent, insurance proceeds and requisition or other payments
of any kind (other than payments constituting Excepted Property and other than
payments received from the Indenture Trustee) for or with respect to any
Accepted Unit payable to the Owner Trustee shall be payable directly to the
Indenture Trustee for distribution in accordance with the provisions of the
Indenture, and if any such amount or payment is received by the Owner Trustee,
such amount or payment upon receipt thereof shall be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind for distribution
in accordance with the provisions of the Indenture.
Section 3.2. Payments to the Owner Trustee; Other Parties. Any
payment of the type referred to in Section 3.1 (other than payments
constituting Excepted
-2-
<PAGE> 6
Property) received by the Owner Trustee after the Indenture shall have been
discharged pursuant to the terms thereof, any payment received from the
Indenture Trustee other than as specified in Section 3.4 and any other amount
received as part of the Trust Estate and for the application or distribution of
which no provision is made herein shall be distributed forthwith upon receipt
by the Owner Trustee in the following order of priority: first, so much of such
payment as shall be required to reimburse the Owner Trustee for any expenses
not otherwise reimbursed as to which the Owner Trustee is entitled to be so
reimbursed pursuant to the provisions hereof shall be retained by the Owner
Trustee; second, so much of the remainder for which provision as to the
application thereof is contained in the Lease, any of the other Operative
Agreements or any of the other Owner Trustee Agreements shall be applied and
distributed in accordance with the terms of the Lease, such other Operative
Agreement or such other Owner Trustee Agreement, as the case may be; and third,
the balance, if any, shall be paid to the Owner Participant.
Section 3.3. Certain Distributions to the Owner Participant. All
amounts from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the terms of the Indenture shall, if paid to the Owner
Trustee, be distributed by the Owner Trustee to the Owner Participant.
Section 3.4. Excepted Property. Anything in this Trust Agreement to
the contrary notwithstanding, any amounts or payments constituting Excepted
Property received by the Owner Trustee shall be paid promptly by the Owner
Trustee to the Person to whom such amounts or payments are payable pursuant to
the terms of the Operative Agreements.
Section 3.5. Method of Payment.
(a) All amounts payable to the Owner Participant or to the Indenture
Trustee pursuant to this Trust Agreement shall be paid by the Owner Trustee, if
to the Owner Participant, by transferring such amount in immediately available
funds to the account of the Owner Participant specified in Schedule 2 to the
Participation Agreement or, if to the Indenture Trustee, in the manner
specified in the Indenture. The Owner Trustee shall pay such amounts on the
day received, or on the next succeeding Business Day if the funds to be so paid
shall not have been received by the Owner Trustee by 1:00 p.m. New York time,
provided that the Owner Trustee shall use reasonable efforts to invest
overnight in Specified Investments at the direction and for the benefit of the
Owner Participant all funds received by it at or later than 1:00 p.m. New York
time.
(b) Notwithstanding the foregoing, the Owner Trustee will pay, if so
requested by the Owner Participant in writing, any or all amounts in
immediately available funds payable by the Owner Trustee hereunder to the Owner
Participant either (i) by crediting such amount or amounts to an account or
accounts maintained by the Owner Participant with Trust Company, (ii) by
payment to such account at such financial institution as the Owner Participant
may from time to time direct in writing
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or (iii) by mailing an official bank check or checks in such amount or amounts
payable to the Owner Participant at such address as the Owner Participant may
from time to time designate in writing.
ARTICLE IV
CERTAIN DUTIES OF THE OWNER TRUSTEE
Section 4.1. Notice of Certain Events. In the event that the Owner
Trustee shall have Actual Knowledge of any Lease Default, Lease Event of
Default, Indenture Default, Indenture Event of Default or Event of Loss, the
Owner Trustee shall give prompt telephonic notice thereof (promptly confirmed
in writing) to the Owner Participant, the Lessee and the Indenture Trustee
unless such Lease Default, Lease Event of Default, Indenture Default, Indenture
Event of Default of Event of Loss, as the case may be, has been remedied before
the giving of such notice and the Owner Trustee has Actual Knowledge that such
Lease Default, Lease Event of Default, Indenture Default, Indenture Event of
Default or Event of Loss has been so remedied. Subject to the terms of Section
4.3, the Owner Trustee shall take or refrain from taking such action with
respect thereto, not inconsistent with the provisions of the Operative
Agreements, with respect thereto as the Owner Trustee shall be instructed in
writing by the Owner Participant.
Section 4.2. Action Upon Instruction. Subject to the terms of Sections
4.1 and 4.3, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following
actions as may be specified in such instructions: (i) give such notice or
direction or exercise such right, remedy or power under the Owner Trustee
Agreements with respect thereto or to any Accepted Equipment, including,
without limitation, the right to transfer, assign or convey the Owner Trustee's
interest in the Owner Trustee Agreements or any Accepted Unit, or take such
other action with respect to the Owner Trustee Agreements or any Accepted Unit
as shall be specified in such instructions; and (ii) after the expiration or
earlier termination of the Lease with respect to any Accepted Unit, convey all
of the Owner Trustee's right, title and interest in and to such Accepted Unit
to the Owner Participant or for such amount, on such terms and to such
purchaser or purchasers as shall be designated in such instructions, or net
lease such Accepted Unit as designated in such instructions; provided, however,
that if such instructions have not been delivered to the Owner Trustee prior to
the expiration of one year following such expiration or earlier termination of
the Lease, the Owner Trustee shall transfer title to such right, title and
interest to the Owner Participant.
Section 4.3. Indemnification. The Owner Trustee shall not be required
to take or refrain from taking any action under Section 4.1 or 4.2 (other than
the actions specified in the first sentence of Sections 3.1 and 4.1 and the
last sentence of Section 4.4) unless the Owner Trustee shall have been
indemnified, in manner and form reasonably satisfactory to the Owner Trustee,
against any liability, fee, cost or expense (including, without limitation,
reasonable attorneys' fees) which may be incurred or
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charged in connection therewith, other than any such liability, fee, cost or
expense which results from the willful misconduct or gross negligence of the
Owner Trustee. The Owner Trustee shall not be required to take any action under
any Operative Agreement or any Owner Trustee Agreement (other than the actions
specified in the first sentence of Section 4.1) if the Owner Trustee reasonably
shall determine, or shall have been advised by counsel, that such action is
likely to result in unindemnified personal liability to the Owner Trustee or is
contrary to the terms hereof or of any documents contemplated hereby to which
the Owner Trustee is a party, or otherwise contrary to law, and the Owner
Trustee in such case shall deliver promptly to the Owner Participant written
notice of the basis of its refusal to act.
Section 4.4. No Duties Except as Specified. The Owner Trustee shall
not have any duty or obligation to manage, control, use, make any payment in
respect of, register, record, insure, inspect, sell, dispose of or otherwise
deal with any Accepted Unit or any other part of the Trust Estate, or to
otherwise take or refrain from taking any action under, or in connection with,
any Owner Trustee Agreement or any of the other Operative Agreements, except as
expressly provided by the terms of this Trust Agreement, the Indenture or the
Owner Trustee Agreements or in written instructions from the Owner Participant
received pursuant to Section 4.1 or 4.2; and no implied duties or obligations
shall be read into this Trust Agreement against the Owner Trustee.
Notwithstanding and without limiting the foregoing, Trust Company agrees that
it will promptly (without any right to indemnification hereunder) take all
action necessary to discharge any Lessor's Lien attributable to Trust Company on
any part of the Trust Estate or Indenture Estate. Trust Company agrees to
indemnify, protect, save and keep harmless the Owner Participant from and
against any loss, cost or expense (including reasonable legal fees and
expenses) incurred by the Owner Participant as a result of the imposition or
enforcement of any such Lessor's Lien against the Accepted Units, any interest
herein or on the Trust Estate or the Indenture Estate resulting from the
Lessor's Liens attributable to Trust Company.
Section 4.5. No Action Except Under Specified Agreements or
Instructions. The Owner Trustee shall have no right, power or authority to,
and the Owner Trustee agrees that it will not, manage, control, use, sell,
dispose of or otherwise deal with any Accepted Unit or any other part of the
Trust Estate except as (i) expressly provided by the terms of this Trust
Agreement, (ii) expressly required by the terms of any Owner Trustee Agreement
or (iii) expressly directed or authorized in written instructions from the
Owner Participant pursuant to Section 4.1 or 4.2.
Section 4.6. Tax Returns; Records. The Owner Trustee shall be
responsible for the keeping of all appropriate books and records relating to
the receipt and disbursement of all money which it may receive or be entitled
to hereunder or under any agreement contemplated hereby. The Owner Trustee
agrees at the expense of the Lessee to file an application with the Internal
Revenue Service for a taxpayer identification number with respect to the trust
created by this Trust Agreement. The Owner Participant shall be responsible for
causing to be prepared all income tax returns required to be filed by the
Owner Participant. The Owner Trustee shall be
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responsible for causing to be prepared, at the request of the Owner
Participant and the expense of the Lessee, all income tax returns required to
be filed with respect to the trusts created hereby and shall execute and file
such returns. The Owner Trustee and the Owner Participant, upon request, will
furnish each other with all such information as may be reasonably required in
connection with the preparation of such tax returns; provided that the Owner
Trustee shall send a completed copy of such return to the Owner Participant not
more than 60 nor less than 30 days prior to the due date of the return
(provided that the Owner Trustee shall have timely received all necessary
information to complete and deliver to the Owner Participant such return). The
Owner Trustee shall keep copies of all returns delivered to or filed by it.
Section 4.7. Absence of Certain Duties. Except in accordance with
written instructions furnished pursuant to Sections 4.1 and 4.2, and except as
expressly provided in any Owner Trustee Agreement, and without limiting the
generality of Section 4.4, the Owner Trustee shall not have any duty to (i)
file, record or deposit any Operative Agreement or Owner Trustee Agreement,
including without limitation this Trust Agreement, or any other document, or to
maintain any such filing, recording or deposit, or to refile, re-record or
redeposit any such document, except that the Owner Trustee shall, upon written
request by the Lessee or the Owner Participant, sign and file such documents as
Lessee or the Owner Participant prepares as necessary to maintain the filing
and recordation for the Lease, any Lease Supplement, the Indenture and any
Indenture Supplement in the name of the Owner Trustee with the ICC pursuant to
49 U.S.C. Section 11303 of the Interstate Commerce Act or Registrar General of
Canada pursuant to Section 90 of the Railway Act of Canada, or as otherwise
required under applicable law, and to the extent that such documents for that
purpose are supplied by the Lessee pursuant to any of the Operative Agreements,
timely submit any and all such documents and reports with respect to the
Accepted Units which may from time to time be required by the ICC, the AAR, or
any other authority having jurisdiction, (ii) obtain insurance with respect to
any Accepted Unit or to effect or maintain any such insurance, other than to
receive and forward to the Owner Participant any notices, policies,
certificates or binders furnished to the Owner Trustee by the Lessee or its
insurance brokers, (iii) maintain or mark any Accepted Unit, (iv) pay or
discharge any tax, assessment or other governmental charge, or any Lien or
encumbrance of any kind, owing with respect to or assessed or levied against any
part of the Trust Estate, except as provided in Sections 4.4 or 5.1, and Section
6.3 of the Participation Agreement, (v) confirm, verify, investigate or inquire
into the failure to receive any reports or financial statements of the Lessee,
(vi) inspect the Accepted Equipment at any time, or ascertain or inquire as to
the performance or observance of any of the covenants of the Lessee or any
other Person under any Operative Agreement or Owner Trustee Agreement with
respect to any Accepted Unit or any other part of the Trust Estate or (vii)
manage, control, use, sell, dispose of or otherwise deal with any Accepted Unit
or any other part of the Trust Estate, or any part thereof, except as provided
in clauses (i), (ii) and (iii) of Section 4.5.
Section 4.8. Finishing of Documents. The Owner Trustee will furnish to
the Owner Participant, promptly upon receipt thereof, duplicates or copies of
all
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reports, notices, requests, demands, opinions, certificates, financial
statements and any other instruments furnished to the Owner Trustee under any
Operative Agreement or any Owner Trustee Agreement, unless the Owner Trustee
shall have determined that the same already has been furnished to the Owner
Participant.
ARTICLE V
THE OWNER TRUSTEE
Section 5.1 Acceptance of Trusts and Duties. Trust Company accepts the
trusts hereby created and agrees to perform the same on the terms of this Trust
Agreement. Trust Company also agrees to disburse all moneys actually received
by it constituting part of the Trust Estate pursuant to the terms of this Trust
Agreement. Trust Company shall not be answerable or accountable under any
circumstances except (i) for its own willful misconduct or gross negligence
(including, without limitation, in connection with any activities of the Owner
Trustee in violation of Section 4.5), (ii) in the case of the breach or
inaccuracy of any of its representations or warranties contained in any
Operative Agreement given expressly in its individual capacity and not in its
capacity as a trustee hereunder, (iii) as arising from its failure to perform
obligations expressly undertaken by it in the penultimate and last sentence of
Section 4.4 hereof or expressly undertaken by it in its individual capacity
under the Participation Agreement, (iv) for any Taxes based on or measured by
any fees, commissions or compensation received by it for acting as Owner
Trustee in connection with any of the transactions contemplated by the
Operative Agreements or (v) for its failure to disburse or invest funds in
accordance with the terms hereof or the Lease or for any negligence or willfull
misconduct of the Owner Trustee arising out of its obligations under Sections
4.1, 4.6 or 8.2.
Section 5.2. No Representations or Warranties as to Equipment of
Documents.
(a) NEITHER TRUST COMPANY NOR THE OWNER TRUSTEE MAKES ANY REPRESENTATION
OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE DESIGN, OPERATION OR
CONDITION OF ANY UNIT OR ANY PART THEREOF, THE MERCHANTABILITY THEREOF OR THE
FITNESS THEREOF FOR ANY PARTICULAR PURPOSE, TITLE TO ANY UNIT OR ANY PART
THEREOF, THE QUALITY OF THE MATERIALS OR WORKMANSHIP THEREOF OR CONFORMITY
THEREOF TO SPECIFICATIONS, OR THE PRESENCE OR ABSENCE OF ANY LATENT OR OTHER
DEFECTS, WHETHER OR NOT DISCOVERABLE, except that Trust Company hereby
represents and warrants that (i) on the Closing Date for such Accepted Unit,
the Owner Trustee shall have received whatever title thereto was conveyed to it
by the Lessee and (ii) while a part of the Trust Estate, such Accepted Unit
shall be free and clear of Lessor's Liens attributable to it.
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(b) Neither Trust Company nor the Owner Trustee makes any representation
or warranty as to the validity or enforceability of any Operative Agreement, or
as to the correctness of any statement therein, except to the extent that any
such representation, warranty or statement is expressly made therein or in any
written certificate delivered pursuant thereto by the Owner Trustee or Trust
Company and except that Trust Company hereby represents and warrants that this
Trust Agreement has been duly executed and delivered by Trust Company and each
of the Owner Trustee Agreements has been or will be executed and delivered by
officers of the Owner Trustee who are or will be duly authorized to execute and
deliver documents on its behalf, and that each of this Agreement and each of
the other Owner Trustee Agreements constitutes (assuming the due authorization,
execution, and delivery of this Agreement and each such other agreement by the
other parties thereto) the legal, valid and binding obligation of the Trust
Company (or the Owner Trustee if expressly stated therein) enforceable against
it in accordance with its terms except as limited by bankruptcy, insolvency,
reorganization or other similar laws or equitable principles of general
application to or affecting the enforcement of creditors rights generally from
time to time in effect.
Section 5.3. No Segregation of Moneys; No Interest. Except as required by
Section 3.5 of the Lease or Section 2.4 of the Participation Agreement, moneys
received by the Owner Trustee hereunder need not be segregated in any manner
except to the extent required by law, and such moneys may be deposited under
such general conditions as may be prescribed by law, and the Owner Trustee
shall not be liable for any interest thereon.
Section 5.4. Reliance, Advice of Counsel. The Owner Trustee shall not
incur any liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or
other document or paper reasonably believed by it in good faith to be genuine
and reasonably believed by it in good faith to be signed by the proper party or
parties. Any request, direction, order or demand of the Owner Participant or
the Lessee mentioned herein or in any other Operative Agreement to which the
Owner Trustee is a party shall be sufficiently evidenced by an Officer's
Certificate of the Owner Participant or the Lessee, as the case may be. The
Owner Trustee may accept in good faith a certified copy of a resolution of the
Board of Directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically prescribed herein, the Owner Trustee
may for all purposes hereof rely on an Officer's Certificate of the relevant
party as to such fact or matter, and such Officer's Certificate shall
constitute full protection to the Owner Trustee for any action taken or omitted
to be taken by it in good faith in reliance thereon. In the administration of
the trusts hereunder, the Owner Trustee may execute any of the trusts or powers
hereof and perform its powers and duties hereunder directly or through agents
or attorneys, and may consult with counsel, accountants and other skilled
persons to be selected and employed by it (other than persons regularly
employed by it), and the Owner Trustee shall not be liable for anything done,
suffered
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or omitted in good faith by it in accordance with the written advice or opinion
within the scope of the competence of any such counsel, accountants or other
skilled persons and not contrary to this Trust Agreement, except for the use of
due care in the appointment of counsel, accountants or other skilled persons.
Section 5.5. Not Acting in Individual Capacity. Trust Company is entering
into this Agreement and accepting the trust created hereby in its individual
capacity. Otherwise, except as provided in this Trust Agreement and in the
other Operative Agreements, Trust Company agrees to act solely as trustee
hereunder and not in its individual capacity; and all Persons having any claim
against the Owner Trustee by reason of the transactions contemplated by the
Operative Agreements or the Owner Trustee Agreements shall look only to the
Trust Estate (or a part thereof, as the case may be) for payment or
satisfaction thereof, except as specifically provided in this Trust Agreement
and except to the extent the Owner Trustee otherwise shall agree in any Owner
Trustee Agreement.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification of Trust Company. The Owner Participant
agrees to assume liability for, and to indemnify and hold harmless Trust
Company against and from any and all liabilities, obligations, losses, damages,
taxes (excluding any taxes, fees or other charges payable by Trust Company or
measured by any compensation received by Trust Company for its services
hereunder), penalties, claims, actions, suits, proceedings, costs, expenses and
disbursements of any kind and nature whatsoever, including, without limitation,
the reasonable fees and expenses of counsel (collectively, "Trust Expenses")
which may be imposed on, incurred by or asserted against Trust Company (whether
or not also indemnified by any other Person; provided, however, that to the
extent Trust Company shall have actually received any payment in the nature of
an indemnity payment from any such other Person relating to a claim hereunder,
Trust Company shall not be entitled to the amount of any such payment pursuant
to this Section 6.1) in any way relating to or arising out of (i) the
administration of the Trust Estate or the action or inaction of Trust Company
hereunder or under the other Operative Agreements, (ii) any Accepted Equipment
or any part thereof, (iii) the Operative Agreements or any of them, or the
enforcement by Trust Company of any of its rights under the Operative
Agreements, or (iv) the design, manufacture, financing, refinancing,
installation, acceptance, rejection, ownership, delivery, nondelivery, lease,
sublease, possession, control, use, operation, condition, modification,
servicing, maintenance, repair, improvement, replacement, sale, return or other
disposition of the Accepted Equipment, any Accepted Unit or any part thereof
including, without limitation, (A) any inadequacy or deficiency or defect
therein, including latent defects, whether or not discoverable or any claim
based on negligence or arising from any violation of law or for strict
liability in tort or any claim for patent, trademark or copyright tort or any
claim for patent, trademark or copyright infringement, and (B) any loss or
damage to property or the environment
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or injury or death to any Person; provided that, the Owner Participant shall
not be required to indemnify Trust Company for Trust Expenses arising or
resulting from any of the matters described in clauses (i) through (v) of the
last sentence of Section 5.1; and; provided further that the Owner Participant
shall be liable under this Section 6.1 only to the extent that the Trust
Company is indemnified by the Lessee pursuant to Section 7 of the Participation
Agreement (with the exception of the limitations to Lessee's indemnification
obligations set forth in Sections 7.2(d)(i), 7.2(d)(iv) to the extent relating
to any such transfer by the Owner Participant or transfer by the Owner Trustee
at the direction of the Owner Participant and 7.2(d)(vi) (when the Owner
Trustee is acting on instructions from the Owner Participant) of the
Participation Agreement); and provided further, that before asserting its right
to indemnification pursuant to this Section 6.1, the Trust Company shall first
demand its corresponding right to indemnification, if any, pursuant to Section
7 of the Participation Agreement (but need not exhaust any or all remedies
available thereunder), and the Owner Participant shall have the right to pursue
any such remedies against the Lessee which are not pursued by the Trust
Company. The indemnities contained in this Section 6.1 shall survive the
termination of this Trust Agreement. To secure the foregoing indemnities, the
Trust Company shall be entitled to apply any amount otherwise distributable to
the Owner Participant pursuant to Section 3.2 against any such indemnity which
has not been paid when due. The indemnities contained in this Section 6.1
extend to Trust Company only and shall not be construed as indemnities of the
Trust Estate. The payor of any indemnity under this Section 6.1 shall be
subrogated to any right of the Person indemnified in respect of the matter as
to which such indemnity was paid.
Section 6.2. Expenses. The Owner Participant shall pay, or reimburse the
Owner Trustee for, all reasonable expenses of the Owner Trustee, including,
without limitation, the reasonable expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and duties under
the Operative Agreements, unless and to the extent that the Owner Trustee
otherwise receives payment or reimbursement pursuant to any Operative
Agreement, whether or not the transactions contemplated hereby are consummated;
provided that the Owner Participant shall have no obligation hereunder to the
extent Lessee is not obligated to pay such amounts pursuant to Section 2.5 of
the Participation Agreement. The Owner Trustee agrees to look first to the
Lessee for such payment pursuant to Section 2.5 of the Participation Agreement.
Except as provided herein, the Owner Trustee and Trust Company shall have no
right to compensation with respect to the transactions contemplated by the
Operative Agreements.
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ARTICLE VII
TERMINATION TRUST AGREEMENT
Section 7.1. Termination of Trust Agreement.
(a) Subject to the terms of the Participation Agreement, the Indenture and
Section 7.2, this Trust Agreement and the trusts created hereby shall terminate
and the Trust Estate shall be distributed to the Owner Participant, and this
Trust Agreement shall be of no further force or effect, upon the earlier of (i)
the sale or other final disposition by the Owner Trustee of all property
constituting part of the Trust Estate and the final distribution by the Owner
Trustee of all moneys or other property or proceeds constituting part of the
Trust Estate in accordance with the terms of Article III and (ii) twenty-one
(21) years less one day after the death of the last survivor of all of the
descendants living on the date of this Trust Agreement of Joseph P. Kennedy,
the late ambassador of the United States to Great Britain, but if any rights,
privileges or options hereunder shall be or become valid under applicable law
for a period subsequent to the twenty-first anniversary of the death of such
last survivor (or, without limiting the generality of the foregoing, if
legislation shall become effective providing for the validity or permitting the
effective grant of such rights, privileges and options for a period in gross
exceeding the period for which such rights, privileges and options are
hereinabove stated to extend and be valid), then such rights, privileges or
options shall not terminate as aforesaid but shall extend to and continue in
effect, but only if such nontermination and extension shall then be valid under
applicable law, until such time as the same shall cease to be valid under
applicable law.
(b) Except as expressly provided in Section 7.2, the Owner Participant
shall not be entitled to revoke or terminate this Trust Agreement or the trust
created hereby. Except as otherwise provided herein, the Owner Participant may
not withdraw any of the Trust Estate until the Lien of the Indenture on the
Trust Estate shall have been discharged pursuant to the terms thereof.
Section 7.2. Termination at Option of the Owner Participant. The
provisions of Section 7.1 notwithstanding, this Trust Agreement and the trusts
created hereby shall terminate and the Trust Estate shall be distributed to the
Owner Participant, and this Trust Agreement shall be of no further force and
effect, upon the election of the Owner Participant by notice to the Owner
Trustee to revoke the trusts created hereby; provided that, in addition to the
giving of such notice, the Owner Participant, with the cooperation of the Owner
Trustee, shall execute and deliver such written agreements and instruments and
take such actions as shall be necessary in order to cause the succession of the
Owner Participant to all the rights, title, interests, duties and liabilities
of the Owner Trustee under the Operative Agreements (other than obligations
attributable to any gross negligence or willful misconduct of Trust Company or
any breach by the Owner Trustee of its obligations under the Operative
Agreements); provided, however, that until the Lien of the Indenture on the
Trust Estate shall have been discharged pursuant to the terms thereof the Owner
Participant may not revoke such trusts without the consent of the Indenture
Trustee. The written
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agreements and instruments referred to in the preceding sentence shall be
reasonably satisfactory in form and substance to the Owner Trustee and shall
release the Owner Trustee from all further obligations of the Owner Trustee
hereunder and under the agreements and other instruments mentioned in the
preceding sentence.
ARTICLE VIII
SUCCESSOR OWNER TRUSTESS, CO-OWNER TRUSTEES
AND SEPARATE OWNER TRUSTEES
Section 8.1. Resignation of the Owner Trustee; Appointment of Successor.
(a) The Owner Trustee may resign as the Owner Trustee at any time without
cause by giving at least thirty (30) days' prior written notice to the Owner
Participant, the Indenture Trustee and the Lessee, such resignation to be
effective on the acceptance of appointment by a successor to the Owner Trustee
under paragraph (b) of this Section 8.1. In addition, the Owner Participant at
any time may remove the Owner Trustee without cause by an instrument in writing
delivered to the Owner Trustee, the Indenture Trustee and the Lessee, such
removal to be effective upon the acceptance of appointment by a successor to
the Owner Trustee under paragraph (b) of this Section 8.1. In case of the
resignation or removal of the Owner Trustee, the Owner Participant may appoint
a successor to the Owner Trustee by an instrument in writing, signed by the
Owner Participant. If a successor to the Owner Trustee shall not have been
appointed within thirty (30) days after the giving of written notice of such
resignation or the delivery of the written instrument with respect to such
removal, the Owner Trustee or the Owner Participant may apply to any court of
competent jurisdiction to appoint a successor to the Owner Trustee to act until
such time, if any, as a successor shall have been appointed as above provided
in this Section 8.1. Any successor to the Owner Trustee so appointed by such
court shall immediately and without further act be superseded by any successor
to the Owner Trustee appointed as above provided in this Section 8.1.
(b) Any successor Owner Trustee, however appointed, shall execute and
deliver to the predecessor Owner Trustee an instrument accepting such
appointment and shall give the Owner Participant, the Indenture Trustee and
Lessee written notice of such acceptance. Upon the execution and delivery of
such instrument, such successor Owner Trustee, without further act, shall
become vested with all the estates, properties, rights, powers, duties and
trusts of the predecessor Owner Trustee in the trusts hereunder with like
effect as if originally named a trustee herein; provided, however, that upon
the written request of such successor Owner Trustee, such predecessor Owner
Trustee shall execute and deliver an instrument transferring to such successor
Owner Trustee, upon the trusts herein expressed, all the estates, properties,
rights, powers, duties and trusts of such predecessor trustee as the Owner
Trustee hereunder, and such predecessor trustee shall duly assign, transfer,
deliver and pay over to such successor Owner Trustee all moneys or other
property then held by such predecessor trustee as the Owner Trustee upon the
trusts herein expressed. Upon the appointment
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of any successor Owner Trustee hereunder, the predecessor Owner Trustee,
pursuant to written instructions of the Owner Participant, will execute all
documents and take all reasonable action within its control in order to cause
title to the Trust Estate to be transferred to the successor Owner Trustee.
(c) Any successor Owner Trustee, however appointed, shall be a bank or
trust company incorporated and doing business within the United States of
America and having a combined capital and surplus of at least $100,000,000, if
there be such an institution willing, able and legally qualified to perform the
duties of the Owner Trustee hereunder upon reasonable or customary terms.
(d) Any corporation into which the Owner Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Owner Trustee shall
be a party, or any corporation to which substantially all the corporate trust
business of the Owner Trustee may be transferred, shall be, subject to
compliance with the terms of paragraph (c) of this Section 8.1, the Owner
Trustee under this Trust Agreement without further act; provided, that such
corporation shall in no event be the Indenture Trustee.
Section 8.2. Additional and Separate Trustees.
(a) If the Owner Trustee or the Owner Participant shall conclude that
it is necessary or prudent in order to conform to the law of any jurisdiction
in which all or any part of the Trust Estate shall be situated, or to make or
defend any claim or bring or defend any suit with respect to the Trust Estate
or any Operative Agreement, or pursuant to advice of counsel satisfactory to
it, or if the Owner Trustee shall have been instructed to do so by the Owner
Participant, the Owner Trustee shall appoint another Person to act as
additional or separate trustee for all or any part of the Trust Estate with
such property, title, right, power or duty of the Owner Trustee as the Owner
Trustee and the Owner Participant may determine. In case any such additional
trustee or separate trustee shall resign or be removed, all the assets,
property, rights, powers or duties of such additional trustee or separate
trustee, as the case may be, so far as permitted by any applicable law, shall
vest in and be exercised by a new successor to such additional trustee,
appointed in the manner otherwise provided in this Trust Agreement.
(b) In the event that either the Owner Participant or the Owner
Trustee shall determine to appoint another Person as additional or separate
trustee, the Owner Trustee and the Owner Participant shall execute and deliver
an agreement supplemental hereto, and all other instruments and agreements
necessary or proper to constitute another bank or trust company, or one or more
Persons approved by the Owner Trustee and the Owner Participant, either to act
as an additional trustee or trustees of all or any part of the Trust Estate,
jointly with the Owner Trustee, or to act as separate trustee or trustees of
all or any part of the Trust Estate, in any such case with such powers of the
Owner Trustee as may be provided in such agreement supplemental hereto, and to
vest in such bank, trust company or Person as such
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<PAGE> 17
additional trustee or separate trustee, as the case may be, any property,
title, right or power of the Owner Trustee deemed necessary or proper by the
Owner Trustee or the Owner Participant, subject to the remaining provisions of
this Section 8.2. The Owner Trustee may execute, deliver and perform any deed,
conveyance, assignment or other instrument in writing as may be required by an
additional trustee or separate trustee for more fully and certainly vesting in
and confirming to such person any property, title, right or power which, by the
terms of such agreement supplemental hereto, are expressed to be conveyed or
conferred to or upon such additional trustee or separate trustee, and the Owner
Participant shall, upon the Owner Trustee's request, join therein and execute,
acknowledge and deliver the same.
(c) Every additional trustee and separate trustee hereunder shall, to
the extent permitted by law, be appointed to act and the Owner Trustee shall
act, subject to the following provisions and conditions:
(i) all powers, duties, obligations and rights conferred or
imposed upon the Owner Trustee in respect of the receipt, custody,
investment and payment of moneys, shall be exercised solely by the
Owner Trustee;
(ii) all other rights, powers, duties, and obligations
conferred or imposed upon the Owner Trustee shall be conferred or
imposed upon and exercised or performed by the Owner Trustee and such
additional trustee or trustees and separate trustee or trustees
jointly, except to the extent that under any law of the jurisdiction
in which any particular act or acts are to be performed by the Owner
Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Estate in any such
jurisdiction) shall be exercised and performed by such additional
trustee or trustees or separate trustee or trustees;
(iii) no power hereby given to, or which may be exercised by,
any such additional trustee or separate trustee shall be exercised
hereunder by such additional trustee or separate trustee except
jointly with, or with the consent of, the Owner Trustee; and
(iv) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder.
(d) If at any time the Owner Trustee and the Owner Participant shall
deem it no longer necessary or prudent in order to conform to any applicable
law or shall be advised by its counsel that it is no longer necessary or
prudent in the interest of the Owner Trustee and the Owner Participant to
maintain the appointment of such additional or separate trustee as provided
herein, the Owner Trustee and the Owner Participant shall execute and deliver
any agreement supplemental hereto and all other instruments and agreements
necessary or proper to remove any such additional or
-14-
<PAGE> 18
separate trustee. The Owner Participant, at any time, by an instrument in
writing may remove any separate trustee or additional trustee.
(e) Any additional trustee or separate trustee may at any time by an
instrument in writing constitute the Owner Trustee its agent or
attorney-in-fact with full power and authority, to the extent which may be
authorized by applicable law, to do all acts and things and exercise all
discretion which it is authorized or permitted to do or exercise, for and in
its behalf and in its name. In case any such additional trustee or separate
trustee shall die, become incapable of acting, resign or be removed, all the
assets, property, rights, powers, trusts, duties and obligations of such
additional trustee or separate trustee, as the case may be, so far as permitted
by law, shall vest in and be exercised by the Owner Trustee without necessity
of any act by any party and without the appointment of a new successor to such
additional or separate trustee, unless and until a successor is appointed in
the manner provided in this Section 8.2.
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
Section 9.1. Supplements and Amendments. Subject to Section 10.05 of the
Indenture, at the written request of the Owner Participant (and subject to the
provisions of Sections 6.5 and 6.6 of the Participation Agreement), this Trust
Agreement and each other Owner Trustee Agreement shall be amended by a written
instrument signed by Trust Company and the Owner Participant; provided,
however, if in the reasonable opinion of Trust Company any instrument required
to be so executed adversely affects any right, duty or liability of, or
immunity or indemnity in favor of, Trust Company under this Trust Agreement or
any of the documents contemplated hereby to which it is a party, or would cause
or result in any conflict with or breach of any term, condition or provision
of, or default under, its charter documents or by-laws, Trust Company in its
reasonable discretion may decline to execute such instrument, unless the Trust
Company is indemnified therefor under Section 4.3, as determined by the Trust
Company in its reasonable discretion.
ARTICLE X
MISCELLANEOUS
Section 10.1. No Legal Title to Trust Estate in the Owner Participant. The
Owner Participant shall not have legal title to any part of the Trust Estate.
No transfer, by operation of law or otherwise, of any right, title and interest
of the Owner Participant in and to the Trust Estate or hereunder, or
insolvency, dissolution or other termination of the Owner Participant, shall
operate to terminate this Trust Agreement or the trusts created hereby or
entitle any successor or transferee to an accounting or to the transfer to it of
legal title to any part of the Trust Estate.
-15-
<PAGE> 19
Section 10.2 Sale of Accepted Equipment by the Owner Trustee is Binding.
Any sale, transfer or other conveyance of any Accepted Unit or part thereof by
the Owner Trustee made pursuant to the terms of this Trust Agreement or the
Lease shall bind the Owner Participant and shall be effective to transfer or
convey all right, title and interest of the Owner Trustee and the Owner
Participant in and to such Accepted Unit or part thereof, as the case may be.
No purchaser or other grantee shall be required to inquire as to the
authorization, necessity, expediency or regularity of such sale or conveyance
or as to the application of any sale or other proceeds with respect thereto by
the Owner Trustee.
Section 10.3. Notices. Unless otherwise expressly specified or permitted
by the terms hereof, all notices hereunder shall be given as provided in
Section 10.4 of the Participation Agreement.
Section 10.4. Severability. If any term or provision of this Trust
Agreement is invalid or unenforceable in any jurisdiction, such term or
provision shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable any remaining
terms and provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 10.5. Separate Counterparts. This Trust Agreement may be
executed by the parties hereto in any number of counterparts and by the parties
hereto on separate counterparts, each of which when so executed and delivered
shall be an original, and all of which shall together constitute but one and
the same instrument.
Section 10.6. Waivers, etc. No term or provision hereof may be changed,
waived, discharged or terminated orally, but may be changed, waived, discharged
or terminated by an instrument in writing, and any waiver of the terms hereof
shall be effective only in the specific instance and for the specific purpose
given.
Section 10.7. Successors and Assigns. This Trust Agreement, including
the terms and provisions hereof, shall be binding upon the Owner Participant
and Trust Company or the Owner Trustee, whichever is applicable pursuant to the
terms hereof, and their respective successors and assigns, and inure to the
benefit of the Owner Participant and Trust Company or the Owner Trustee,
whichever is applicable pursuant to the terms hereof, and their respective
successors and permitted assigns, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by the Owner
Participant shall bind the successors and assigns of the Owner Participant.
Section 10.8. Transfer of Owner Participant's Interest. All provisions
of Section 6.1 of the Participation Agreement shall (with the same force and
effect as if set forth in full, mutatis mutandis, in this Section 10.8) be
applicable to any assignment, conveyance or other transfer by the Owner
Participant of any of its right,
-16-
<PAGE> 20
title or interest in and to the Trust Estate or this Trust Agreement or any
other Operative Agreement.
Section 10.9. Actions of the Owner Participants. If at any time prior
to the termination of this Trust Agreement there is more than one Owner
Participant, then during such time, if any action is required to be taken by the
Owner Participant, such action shall be taken by or on behalf of all Owner
Participants and whenever any direction, authorization, approval, consent,
instruction or other action is permitted to be given or taken by the Owner
Participant it shall be given or taken only upon such percentage agreement of
the Owner Participants as all Owner Participants may instruct the Owner
Trustee.
Section 10.10. Headings; Table of Contents. The division of this Trust
Agreement into sections, the provision of a table of contents and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation hereof.
Section 10.11. Governing Law. The terms of this Trust Agreement and
the rights and obligations of the parties hereto shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
Section 10.12. Benefit. Nothing herein, whether express or implied,
shall be construed to give any Person other than the Owner Trustee, the
Indenture Trustee and the Owner Participant any legal or equitable right,
remedy or claim under or in respect of this Trust Agreement.
Section 10.13. Performance by the Owner Participant. Any obligation of
Trust Company or the Owner Trustee hereunder or under any other Operative
Agreement or other document contemplated hereby, may be performed by the
Owner Participant and any such performance shall not be construed as a
revocation of the trusts created hereby.
Section 10.14. Conflict with Operative Agreements. If this Trust
Agreement (or any instructions given by the Owner Participant pursuant hereto)
shall require that any action be taken with respect to any matter or any other
Operative Agreement (or any instruction duly given in accordance with the
terms thereof) shall require that a different action be taken with respect to
such matter, and such actions shall be mutually exclusive, the provisions of
such other Operative Agreement, in respect thereof, shall control.
Section 10.15. Limitation on Owner Participant's Liability. The Owner
Participant shall not have any liability for the performance of this Trust
Agreement, except as expressly set forth herein.
-17-
<PAGE> 21
Section 10.16. Identification of Trust. The trust created hereunder may be
referred to for convenience as UTC Trust No. 1994-A.
In Witness Whereof, the parties hereto have each caused this Trust
Agreement to be duly executed and delivered as of the day and year first above
written.
STATE STREET BANK AND TRUST
COMPANY
By: _________________________
Name:
Title:
BNY CAPITAL FUNDING CORP.
By: _________________________
Name:
Title:
-18-
<PAGE> 1
EXHIBIT 5(a)
December 2, 1994
Union Tank Car Company
225 West Washington Street
Chicago, Illinois 60606
Re: Union Tank Car Company Pass Through Certificates,
Series 1994-A
Ladies and Gentlemen:
We have acted as counsel to Union Tank Car Company, a Delaware corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), of a Registration Statement on Form S-3 (Registration No.
33-56287), as amended by Amendment No. 1 thereto (the "Registration
Statement"). The Registration Statement relates to the Pass Through
Certificates, Series 1994-A (the "Pass Through Certificates") which will be
issued under a Pass Through Trust Agreement (the "Agreement"), to be dated as
of December 15, 1994, by and between the Company and The First National Bank of
Chicago, a national banking association, as trustee (the "Trustee").
As such counsel, we have examined the proposed form of the Agreement and such
other papers, documents and certificates of public officials and certificates
of officers of the Company as we have deemed relevant and necessary as a basis
for the opinions hereinafter expressed. In such examinations, we have assumed
the genuineness of all signatures and the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
documents submitted to us as conformed or photostatic copies. We have also
assumed that the Agreement will, when executed and delivered, be substantially
in the form submitted to us for examination.
Based upon and subject to the foregoing, it is our opinion that the execution
and delivery by the Company of the Agreement has been duly authorized by all
necessary corporate action and assuming (i) the due authorization, execution,
issuance, authentication and delivery of the Pass Through Certificates by the
Trustee in
<PAGE> 2
Union Tank Car Company
Page 2
December 2, 1994
accordance with the terms of the Agreement and (ii) the due authorization,
execution and delivery of the Agreement by the Trustee, when the Registration
Statement shall have become effective under the Act, the Agreement shall have
been qualified under the Trust Indenture Act of 1939, as amended, the
securities or Blue Sky laws of certain states shall have been complied with and
the Pass Through Certificates shall have been issued and sold in accordance
with the Underwriting Agreement to be executed and delivered by the Company and
Salomon Brothers Inc relating to the Pass Through Certificates, the Pass
Through Certificates will constitute valid and binding obligations of the
Trustee (to the extent set forth in the Agreement) entitling the holders
thereof to the benefits of the Agreement, except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
other similar laws relating to or affecting enforcement of creditors' rights
generally and general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity).
We are members of the Bar of the State of Illinois, and we express no opinion
herein concerning any laws other than the law of the State of Illinois and the
Federal law of the United States of America.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Opinions" in the Prospectus constituting a part of the Registration
Statement.
Very truly yours,
/s/ NEAL GERBER & EISENBERG
NEAL GERBER & EISENBERG
<PAGE> 1
EXHIBIT 5(b)
[LOGO] FIRST CHICAGO
The First National Bank of Chicago
Law Department
December 1, 1994
Union Tank Car Company
225 West Washington Street
Chicago, Illinois 60606
Re: Union Tank Car-Company
Pass Through Certificates, Series 1994-A
(the "Pass Through Certificates")
Ladies and Gentlemen:
We are counsel to the Corporate Trust Services Division of The First National
Bank of Chicago ("First Chicago") and have represented it in connection with
(i) the Pass Through Trust Agreement to be dated as of December 15, 1994 (the
"Pass Through Trust Agreement") to be entered into between Union Tank Car
Company ("Union") and The First National Bank of Chicago, as Pass Through
Trustee and (ii) the Pass Through Certificates to be issued under the Pass
Through Trust Agreement from time to time.
We are attorneys licensed to practice law in the State of Illinois and do not
purport to be an expert on the laws of any state other that the State of
Illinois. Consequently, with regard to the following opinion, no opinion is
expressed as to matters relating to laws of any jurisdiction other than the
laws of the State of Illinois and federal laws applicable to national banks,
and no opinion is expressed herein as to the Securities Act of 1933, as
amended, the Trust Indenture Act of 1939, as amended, or any state securities
or so-called "blue-sky" laws.
We have also examined such other documents and matters as we deemed relevant
together with such matters of law which we have considered necessary or
appropriate for the purposes of this opinion.
As such counsel, we are familiar with the Articles of Association and the
By-Laws of First Chicago, with certificates of authority to exercise corporate
trust powers issued to First Chicago by the Federal Reserve Board of the United
States (as predecessor in jurisdiction to the Comptroller of the Currency of
the United States), with certain Resolutions pertaining to the operation of the
Corporate Trust Services Division of First Chicago, and with procedures of the
Corporate Trust Services Division of First Chicago with respect to the
authorization, execution and delivery of the above-described document.
<PAGE> 2
[LOGO] FIRST CHICAGO
The First National Bank of Chicago
CONTINUING OUR LETTER OF DECEMBER 1, 1994
SHEET NO. 2
Basing our conclusions on such examination and familiarity, we are of the
opinion:
(i) First Chicago is a national banking association duly organized and
validly existing in good standing under the laws of the United States of
America and has full corporate power and authority to execute, deliver and
carry out the terms of the Pass Through Trust Agreement.
(ii) The execution and delivery of the Pass Through Trust Agreement and the
Pass Through Certificates have been duly authorized by First Chicago, and
assuming due authorization, execution and delivery of the Pass Through Trust
Agreement by Union, will constitute the legal, valid and binding obligations of
First Chicago, enforceable against First Chicago in accordance with their
respective terms except as the enforcement thereof may be (a) limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
rights of creditors generally, and (b) subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(iii) Upon the due execution, authentication, issuance and delivery thereof
in accordance with the requirements of the Pass Through Trust Agreement, the
Pass Through Certificates will have been duly and validly issued and will be
entitled to the benefits of the Pass Through Trust Agreement.
(iv) Neither the execution nor the delivery by First Chicago of the Pass
Through Trust Agreement nor the consummation of the transactions by First
Chicago contemplated thereunder 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 governmental authority or agency under any existing federal
law, rule or regulation governing the banking or trust powers of First Chicago.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement of the Company pursuant to which the Pass Through
Certificates are being registered under the Securities Act of 1933 and to the
reference to the Law Department of The First National Bank of Chicago under the
caption "Legal Opinions" in the Registration Statement.
This opinion is furnished to you solely for your benefit in connection with the
transactions contemplated by the Pass Through Trust Agreement and may not be
used, circulated, quoted or otherwise referred to without our prior written
consent.
Very truly yours,
/s/ The Law Department
The Law Department
The First National Bank of Chicago
<PAGE> 1
EXHIBIT 8
December 2, 1994
Union Tank Car Company
225 West Washington Street
Chicago, Illinois 60606
Re: Union Tank Car Company Pass Through Certificates
Series 1994-A
Ladies and Gentlemen:
We have acted as counsel to Union Tank Car Company, a Delaware corporation,
in connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a Registration
Statement on Form S-3 (Registration No. 33-56287), as amended by Amendment No.
1 thereto (the "Registration Statement"). The Registration Statement relates
to the Pass Through Certificates, Series 1994-A which will be issued under a
Pass Through Trust Agreement by and between the Company and The First National
Bank of Chicago, a national banking association, as trustee.
We are of the opinion that the discussions in the Prospectus constituting a
part of the Registration Statement under the captions "Certain Federal Income
Tax Consequences" and "Certain Illinois Taxes", insofar as they relate to
statements of law or legal conclusions, are correct in all material respects.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the references to our firm in the first paragraph
under the caption "Certain Federal Income Tax Consequences" and under the
caption "Certain Illinois Taxes" in the Prospectus constituting a part of the
Registration Statement.
Very truly yours,
/s/ NEAL GERBER & EISENBERG
NEAL GERBER & EISENBERG
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" and
"Selected Financial Information" in Amendment No. 1 to the Registration
Statement (Form S-3 No. 33-56287) and related Prospectus of Union Tank Car
Company for the registration of Pass Through Certificates Series 1994-A, and to
the incorporation by reference therein of our report dated March 9, 1994, with
respect to the consolidated financial statements and schedules of Union Tank
Car Company included in its Annual Report (Form 10-K) for the year ended
December 31, 1993, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Chicago, Illinois
December 2, 1994
<PAGE> 1
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) __
--------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
--------------------
UNION TANK CAR COMPANY
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3104688
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
225 WEST WASHINGTON STREET
CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
PASS THROUGH CERTIFICATES, SERIES 1994-A
(TITLE OF INDENTURE SECURITIES)
<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit
Insurance Corporation, Washington, D.C., The Board of Governors
of the Federal Reserve System, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE> 3
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of
1939, as amended, the trustee, The First National Bank of
Chicago, a national banking association organized and
existing under the laws of the United States of America, has
duly caused this Statement of Eligibility to be signed on
its behalf by the undersigned, thereunto duly authorized,
all in the City of Chicago and State of Illinois, on the
29th day of November, 1994.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE,
BY /s/ R. D. MANELLA
R. D. MANELLA
VICE PRESIDENT AND SENIOR COUNSEL
*Exhibits 1, 2, 3, and 4 are herein incorporated by reference to
Exhibits bearing identical numbers in Item 12 of the Form T-1 of The
First National Bank of Chicago, filed as Exhibit 26(b) to the
Registration Statement on Form S-3 of Dow Capital B.V. and The Dow
Chemical Company, filed with the Securities and Exchange Commission
on June 3, 1991 (Registration No. 33-36314).
3
<PAGE> 4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED BY
SECTION 321(B) OF THE ACT
November 29, 1994
Securities and Exchange Commission
Washington, D.C. 20549
GENTLEMEN:
In connection with the qualification of a Pass Through Trust Agreement between
Union Tank Car Company and The First National Bank of Chicago, the undersigned,
in accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, hereby consents that the reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very Truly Yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /s/ R. D. MANELLA
R. D. MANELLA
VICE PRESIDENT AND SENIOR COUNSEL
4
<PAGE> 5
EXHIBIT 7
A copy of the latest report of conditions of the trustee published pursuant to
law or the requirements of its supervising or examining authority.
5
<PAGE> 6
<TABLE>
<S> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 9/30/94 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-1
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1994
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
<TABLE>
<CAPTION>
SCHEDULE RC-BALANCE SHEET
C400 <-
DOLLAR AMOUNTS IN ------------------- ---------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) ............ 008 3,677,034 1.a.
b. Interest-bearing balances(2) ..................................... 007 7,396,406 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) ........ 175 169,280 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)...... 177 533,138 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold ............................................... 027 3,758,277 3.a.
b. Securities purchased under agreements to resell ................. 027 983,109 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) ............................................................... RCFD 2122 14,933,756 4.a.
b. LESS: Allowance for loan and lease losses ........................ RCFD 3123 355,626 4.b.
c. LESS: Allocated transfer risk reserve ............................ RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) ............................. 212 14,578,130 4.d.
5. Assets held in trading accounts ..................................... 354 9,793,010 5.
6. Premises and fixed assets (including capitalized leases) ............ 214 506,298 6.
7. Other real estate owned (from Schedule RC-M) ........................ 215 48,699 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) ...................................... 213 7,269 8.
9. Customers' liability to this bank on acceptances outstanding......... 215 583,073 9.
10. Intangible assets (from Schedule RC-M) .............................. 214 122,763 10.
11. Other assets (from Schedule RC-F) ................................... 216 1,217,250 11.
12. Total assets (sum of items 1 through 11) ............................ 217 43,373,736 12.
</TABLE>
________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
6
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 9/30/94 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-2
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
<CAPTION>
Schedule RC-Continued
Dollar Amounts in
Thousands BIL MIL THOU
----------------- ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) .................................. RCON 2200 14,587,998 13.a.
(1) Noninterest-bearing(1) ................................... RCON 6631 5,788,459 13.a.(1)
(2) Interest-bearing ......................................... RCON 6636 8,799,539 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) ........................... RCFN 2200 9,974,515 13.b.
(1) Noninterest bearing ...................................... RCFN 6631 850,522 13.b.(1)
(2) Interest-bearing ......................................... RCFN 6636 9,123,993 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased ...................................... RCFD 0278 2,211,005 14.a.
b. Securities sold under agreements to repurchase ............... RCFD 0279 765,393 14.b.
15. a. Demand notes issued to the U.S. Treasury ..................... RCON 2840 102,201 15.a.
b. Trading Liabilities........................................... RCFD 3548 6,291,743 15.b.
16. Other borrowed money:
a. With original maturity of one year or less ................... RCFD 2332 3,237,167 16.a.
b. With original maturity of more than one year ................. RCFD 2333 491,176 16.b.
17. Mortgage indebtedness and obligations under capitalized
leases .......................................................... RCFD 2910 275,794 17.
18. Bank's liability on acceptance executed and outstanding ......... RCFD 2920 583,073 18.
19. Subordinated notes and debentures ............................... RCFD 3200 1,325,000 19.
20. Other liabilities (from Schedule RC-G) .......................... RCFD 2930 638,753 20.
21. Total liabilities (sum of items 13 through 20) .................. RCFD 2948 40,483,818 21.
22. Limited-Life preferred stock and related surplus ................ RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus ................... RCFD 3838 0 23.
24. Common stock .................................................... RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) ........ RCFD 3839 2,289,398 25.
26. a. Undivided profits and capital reserves ....................... RCFD 3632 403,835 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities ................................................... RCFD 8434 [ 3,441) 26.b.
27. Cumulative foreign currency translation adjustments ............. RCFD 3284 (732) 27.
28. Total equity capital (sum of items 23 through 27) ............... RCFD 3210 2,889,918 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) ........................... RCFD 3300 43,373,736 29.
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the Number
bank by independent external auditors as of any date during 1993 ............ RCFD 6724 N/A M.1.
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards by a
certified public accounting firm (may be required by state
chartering authority)
</TABLE>
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(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
7
