<PAGE> 1
PROSPECTUS
$112,009,000
UNION TANK CAR COMPANY
1996-A PASS THROUGH TRUSTS
PASS THROUGH CERTIFICATES, SERIES 1996-A
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in one of two separate Union Tank Car Company 1996-A Pass
Through Trusts (the "Pass Through Trusts") to be formed pursuant to two separate
pass through trust agreements. One pass through trust agreement is between Union
Tank Car Company (the "Company") and The First National Bank of Chicago, as Pass
Through Trustee (the "Pass Through Trustee"), establishing Pass Through Trust
1996-A1, and the other pass through trust agreement is among the Company, Procor
Limited, an indirect wholly-owned subsidiary of the Company ("Procor"), and the
Pass Through Trustee establishing Pass Through Trust 1996-A2. The property of
Pass Through Trust 1996-A1 will consist of $33,969,000 aggregate principal
amount of equipment notes (the "Equipment Notes") to be issued on a nonrecourse
basis by the trustee of an owner trust (the "Owner Trustee") in connection with
a leveraged lease transaction 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 Trustee from
the Company and leased to the Company. The property of Pass Through Trust
1996-A2 will consist of (i) $63,809,000 aggregate principal amount of Equipment
Notes to be issued in the same leveraged lease transactions as the Equipment
Notes to be held by Pass Through Trust 1996-A1, (ii) $11,441,000 aggregate
principal amount of equipment trust certificates (the "Company ETCs") to be
issued pursuant to an equipment trust agreement between the Company and The
First National Bank of Chicago, as trustee, and (iii) a $2,790,000 principal
amount equipment trust certificate (the "Procor ETC") to be issued pursuant to
an equipment trust agreement between Procor and The First National Bank of
Chicago, as trustee. 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 each Pass Through Trust, except for the prepayment of principal required
to be made as part of a mandatory refinancing of certain Equipment Notes on the
final distribution date applicable to the Pass Through Certificates issued by
Pass Through Trust 1996-A2. Amounts payable pursuant to the equipment trust
agreements will be sufficient to pay in full when due all payments of principal
of and interest on the Company ETCs and the Procor ETC. The Equipment Notes are
not obligations of, or guaranteed by the Company; however, the Company will
fully and unconditionally guarantee (i) the payment as and when due of the
principal of and interest on the Company ETCs and (ii) the due and punctual
distribution to Certificateholders of principal and interest payable in respect
of the Procor ETC.
The Equipment Notes will be issued in two series under an indenture and will be
secured by a security interest in the Equipment leased by the Company under the
lease and by an assignment of certain of the Owner Trustee's rights under such
lease, including the right to receive rent payable by the Company in respect of
such Equipment pursuant to such lease.
Interest paid on the Equipment Notes, the Company ETCs and the Procor ETC held
in the Pass Through Trusts will be passed through to the Certificateholders on
January 2 and July 2 of each year, commencing on January 2, 1997, at the rate
per annum set forth below until the final distribution date as set forth below
for such Pass Through Trust. The principal of the Equipment Notes held in Pass
Through Trust 1996-A1 will be paid and passed through to the Certificateholders
in scheduled amounts on January 2 or July 2, or both, of each year, commencing
on January 2, 1999 and continuing until the final distribution date set forth
below for such Pass Through Trust. The Equipment Notes held in Pass Through
Trust 1996-A2 will amortize as to principal commencing on July 2, 2006, with the
final payment of principal due on January 2, 2012; however, such Equipment Notes
are required to be prepaid pursuant to a mandatory refinancing on July 2, 2006.
The Equipment Notes may be prepaid under certain circumstances. The Company ETCs
and the Procor ETC held in Pass Through Trust 1996-A2 will not amortize as to
principal, and the entire principal amount thereof will be paid and passed
through to Certificateholders on July 2, 2006. Neither the Company ETCs nor the
Procor ETC are redeemable prior to maturity.
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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<TABLE>
<CAPTION>
PASS THROUGH PRINCIPAL INTEREST INITIAL PRINCIPAL FINAL PRICE TO
CERTIFICATES AMOUNT RATE DISTRIBUTION DATE DISTRIBUTION DATE PUBLIC(1)(2)
<S> <C> <C> <C> <C> <C>
1996-A1....................... $33,969,000 6.94% January 2, 1999 January 2, 2005 100%
1996-A2....................... $78,040,000 7.21% July 2, 2006 July 2, 2006 100%
</TABLE>
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(1) Plus accrued interest, if any, from May 29, 1996.
(2) The underwriting commission is $700,056, which constitutes .625% of the
principal amount of the Pass Through Certificates. The underwriting
commission, and certain other expenses estimated at $700,000, will be
payable by the Owner Trustee in the leveraged lease transactions and by the
Company and Procor. All of the proceeds from the sale of the Pass Through
Certificates will be used to purchase the Equipment Notes, the Company ETCs
and the Procor ETC.
The Pass Through Certificates are offered by the Underwriters subject to prior
sale, when, as and if accepted by the Underwriters and subject to approval of
certain legal matters by Mayer, Brown & Platt, counsel for the Underwriters. It
is expected that delivery of the Pass Through Certificates in book-entry form
will be made on or before May 29, 1996 through the facilities of The Depository
Trust Company, against payment therefor in immediately available funds.
SALOMON BROTHERS INC MORGAN STANLEY & CO.
INCORPORATED
The date of this Prospectus is May 21, 1996
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS 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
The Company and Procor have 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,
the Company and Procor, 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, Citicorp Center, 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
Agreements, will provide to Certificateholders certain periodic statements
concerning distributions made with respect to the Pass Through Trusts. 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, 1995, as amended, and its Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996, each as filed with the Commission pursuant to the Exchange
Act (Commission file no. 1-5666), 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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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
this 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 TRUSTS........... Each of the Union Tank Car Company 1996-A Pass
Through Trusts (the "Pass Through Trusts") will
be formed pursuant to one of two separate Pass
Through Trust Agreements (each, an
"Agreement"), one between Union Tank Car
Company (the "Company") and The First National
Bank of Chicago, as Pass Through Trustee (the
"Pass Through Trustee"), and the other among
the Company, Procor Limited, an indirect
wholly-owned subsidiary of the Company
("Procor"), and the Pass Through Trustee. Each
Pass Through Trust will be a separate entity.
PASS THROUGH TRUST PROPERTY... The property of Pass Through Trust 1996-A1 will
consist of $33,969,000 aggregate principal
amount of equipment notes (the "Equipment
Notes") to be issued on a non-recourse basis by
State Street Bank and Trust Company of
Connecticut, National Association, as owner
trustee (the "Owner Trustee") of an owner trust
for the benefit of an institutional investor
(the "Owner Participant") in connection with a
leveraged lease transaction to finance not more
than 80% of the cost to the Owner Trustee of
certain tank cars and covered hopper cars (each
rail car a "Unit" and, collectively, the
"Equipment") that will be purchased by the
Owner Trustee, on behalf of the Owner
Participant, from the Company and leased to the
Company. Until all of such Equipment Notes are
issued, the Pass Through Trustee will hold in
cash an amount equal to the aggregate principal
amount of unissued Equipment Notes. Such cash
shall be invested by the Pass Through Trustee
in Specified Investments. See "Description of
the Pass Through Certificates--General." The
Equipment Notes will be issued in series in
connection with such leveraged lease
transaction under an indenture (the
"Indenture").
The property of Pass Through Trust 1996-A2 will
consist of:
(a) $63,809,000 aggregate principal amount of
Equipment Notes to be issued in the same
leveraged lease transactions as the
Equipment Notes to be held by Pass Through
Trust 1996-A1.
(b) $11,441,000 aggregate principal amount of
equipment trust certificates (the "Company
ETCs") to be issued pursuant to an
equipment trust agreement between the
Company and The First National Bank of
Chicago, as trustee (the "Company Trust
Agreement").
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(c) a $2,790,000 principal amount equipment
trust certificate (the "Procor ETC") to be
issued pursuant to an equipment trust
agreement between Procor and The First
National Bank of Chicago, as trustee (the
"Procor Trust Agreement").
Until all of such Equipment Notes and Company
ETCs are issued, the Pass Through Trustee will
hold in cash an amount equal to the aggregate
principal amount of Equipment Notes and Company
ETCs not yet issued. Such cash will be invested
by the Pass Through Trustee in Specified
Investments. See "Description of the Pass
Through Certificates--General."
Pass Through Trust 1996-A1 will acquire
Equipment Notes having an interest rate equal
to the interest rate applicable to the Pass
Through Certificates, Series 1996-A1. Pass
Through Trust 1996-A2 will acquire Equipment
Notes, the Company ETCs and the Procor ETC
having an interest rate equal to the interest
rate applicable to the Pass Through
Certificates, Series 1996-A2 (together with
Pass Through Certificates, Series 1996-A1, the
"Pass Through Certificates"). The Equipment
Notes acquired by Pass Through Trust 1996-A1
will mature on the final distribution date
applicable to the Pass Through Certificates
issued by such Pass Through Trust. The
Equipment Notes acquired by Pass Through Trust
1996-A2 will mature after the final
distribution date applicable to such Pass
Through Trust; however, such Equipment Notes
are required to be prepaid on such final
distribution date pursuant to a mandatory
refinancing. The Company ETCs and the Procor
ETC acquired by Pass Through Trust 1996-A2 will
mature on the final distribution date
applicable to the Pass Through Certificates,
Series 1996-A2. The aggregate principal amount
of the Equipment Notes, the Company ETCs and
the Procor ETC to be held in the Pass Through
Trusts will be the same as the aggregate
principal amount of the Pass Through
Certificates issued by the Pass Through Trusts.
PASS THROUGH CERTIFICATES;
BOOK-ENTRY REGISTRATION....... Each Pass Through Certificate will represent a
fractional undivided interest in the related
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
Certificates will be entitled to receive a
definitive certificate (a "Registered
Certificate") representing such person's
interest in a 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."
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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 issued by Pass Through
Trust 1996-A1 is September 6, 2002. The initial
average life date of the Pass Through
Certificates issued by Pass Through Trust
1996-A2 is July 2, 2006.
DISTRIBUTIONS................. Payments of interest on the Equipment Notes,
the Company ETCs and the Procor ETC held in the
Pass Through Trusts are scheduled to be
received in specified amounts by the Pass
Through Trustee of the applicable Pass Through
Trust on January 2 and July 2 of each year,
commencing January 2, 1997, and are to be
distributed to the Certificateholders on the
corresponding Regular Distribution Dates.
Payments of principal of the Equipment Notes
held in Pass Through Trust 1996-A1 are
scheduled to be received in specified amounts
by the Pass Through Trustee of the applicable
Pass Through Trust on January 2 or July 2, or
both, of each year, commencing on January 2,
1999 and are to be distributed to the
Certificateholders on the corresponding Regular
Distribution Dates. The payment of the
outstanding principal amount of the Equipment
Notes, the Company ETCs and the Procor ETC held
in Pass Through Trust 1996-A2 is scheduled to
be received by the Pass Through Trustee on July
2, 2006 and is to be distributed to the
Certificateholders on such date. 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
of such Pass Through Trust. 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."
EXTRAORDINARY DISTRIBUTIONS... It is anticipated that (i) approximately
$58,763,000 principal amount of Equipment
Notes, a $9,587,000 principal amount Company
ETC and a $2,790,000 principal amount Procor
ETC will be acquired by the Pass Through Trusts
immediately after the issuance of the Pass
Through Certificates and (ii) approximately
$39,015,000 principal amount of Equipment Notes
and a $1,854,000 principal amount Company ETC
will be acquired by the Pass Through Trusts on
or about June 27, 1996. All proceeds of the
issuance of the Pass
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Through Certificates not immediately used to
purchase Equipment Notes and Company ETCs will
be held by the Pass Through Trustee and
invested in Specified Investments at the
direction of and for the account of the
Company. To the extent that the return on the
Specified Investments is less than the return
that would have been received on the remaining
Equipment Notes and Company ETCs had they been
purchased immediately after the issuance of the
Pass Through Certificates, the Company will
make up any shortfall in an amount equal to the
amount that would have been distributable to
Certificateholders on the first Regular
Distribution Date had all of such proceeds been
used to purchase Equipment Notes and Company
ETCs on the date of issuance of the Pass
Through Certificates. To the extent that the
remaining Equipment Notes and Company ETCs are
not purchased by the Pass Through Trustee on or
prior to June 30, 1996, the unexpended
proceeds, together with interest thereon at the
rate applicable to the Pass Through
Certificates, will be distributed to
Certificateholders on July 2, 1996. See
"Description of the Pass Through
Certificates--Delayed Purchase; Extraordinary
Distribution."
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 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 of
each Pass Through Trust will be passed through
to the Certificateholders at the rate per annum
indicated on the cover of this Prospectus for
such Pass Through Trust, which is the interest
rate borne by the Equipment Notes held in the
respective Pass Through Trust, and in the case
of Pass Through Trust 1996-A2, the Company ETCs
and the Procor ETC to be held
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in such 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 held in
Pass Through Trust 1996-A1 is payable in
scheduled amounts on January 2 or July 2, or
both, of each year, commencing on January 2,
1999. The principal of the Equipment Notes held
in Pass Through Trust 1996-A2 is payable in
scheduled amounts commencing on July 2, 2006;
however, such Equipment Notes are required to
be prepaid pursuant to a mandatory refinancing
on July 2, 2006, the final distribution date
for such Pass Through Trust. The Company ETCs
and the Procor ETC will not amortize as to
principal, and the entire principal amount
thereof is payable on July 2, 2006. See
"Description of the Pass Through
Certificates--Payments and Distributions,"
"Description of the Equipment Notes-- Principal
Payments" and "Description of the ETCs--Payment
of Principal and Interest."
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 January 2, 1997. 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 Equipment Notes 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 the 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 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
the Indenture immediately prior to the
prepayment date, and (ii) as to interest,
the
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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 January 2, 2004 the
Company elects to exercise its right to
terminate the Lease pursuant to the terms
thereof with respect to some or all of the
Units leased thereunder as a result of such
Units becoming obsolete or surplus, or (ii)
on July 2, 2006 the Company exercises its
option to purchase some or all of the Units
in accordance with the terms of the Lease
or (iii) the Company elects to exercise its
right under the Participation Agreement to
purchase Equipment as a result of the Owner
Participant (or an affiliate thereof)
(other than the initial 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 Units or the exercise price
of such 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
Indenture. Any such prepayment will be in
an amount at least equal to the principal
and accrued interest thereon, computed as
provided in paragraph (a) above, plus 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 the Owner Trustee to
effect a prepayment of the Equipment Notes
at a price equal to the aggregate unpaid
principal amount thereof, together with
accrued interest thereon, plus a Make-Whole
Amount, as part of a refunding or
refinancing which will result in the
prepayment of the Pass Through
Certificates. The Equipment Notes held in
Pass Through Trust 1996-A2 are required to
be prepaid as part of a mandatory
refinancing on the final distribution date
applicable to the Pass Through Certificates
issued by such Pass Through Trust.
(d) If under the 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 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
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period of not less than 180 days, the Owner
Trustee may elect to prepay or purchase all
of the then outstanding 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 any Make-Whole
Amount.
See "Description of the Equipment
Notes--Prepayment."
EQUIPMENT NOTES: SECURITY..... The Equipment Notes will be secured by a
security interest in the Equipment leased by
the Company under the Lease and an assignment
to the Indenture Trustee of certain of the
Owner Trustee's rights under the Lease,
including the right to receive rent payable by
the Company thereunder.
Although the Equipment Notes are not direct
obligations of, or guaranteed by, the Company,
the amounts unconditionally payable by the
Company under the Lease 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, except for the prepayment
of principal required to be made as part of a
mandatory refinancing on the final distribution
date applicable to the Pass Through
Certificates issued by Pass Through Trust
1996-A2 of the Equipment Notes held by such
Pass Through Trust. See "Description of the
Equipment Notes--General."
COMPANY ETCS: GENERAL......... Interest will be payable in arrears on the
Company ETCs on the unpaid principal amount
thereof on January 2 and July 2 of each year,
commencing on January 2, 1997. The Company
ETCs, which will not amortize as to principal,
mature on July 2, 2006.
COMPANY ETCS: REDEMPTION...... The Company ETCs are not redeemable prior to
maturity.
COMPANY ETCS: SECURITY........ The Company Trust Agreement will provide for
(i) the sale by the Company to the trustee
thereunder of certain tank cars and other rail
cars having an estimated cost of approximately
125% of the aggregate principal amount of the
Company ETCs and (ii) the lease of such
equipment by such trustee to the Company. The
rent and other amounts payable by the Company
will be sufficient to enable the trustee to pay
when due the principal of and interest on the
Company ETCs. At the termination of the lease,
such payments will be treated as purchase money
as the full purchase price of the equipment,
and title to all such equipment will vest in
the Company.
PROCOR ETC: GENERAL........... Interest will be payable in arrears on the
Procor ETC on the unpaid principal amount
thereof on January 2 and July 2 of each year,
commencing on January 2, 1997. The Procor ETC,
which will not amortize as to principal,
matures on July 2, 2006.
PROCOR ETC: REDEMPTION........ The Procor ETC is not redeemable prior to
maturity.
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PROCOR ETC: SECURITY.......... The Procor Trust Agreement will provide for (i)
the sale by Procor to the trustee thereunder of
certain tank cars and other rail cars having an
estimated cost of approximately 125% of the
principal amount of the Procor ETC and (ii) the
conditional sale of such equipment by such
trustee to Procor. The payments in respect of
the purchase of such equipment and other
amounts payable by Procor will be sufficient to
enable the trustee to pay when due the
principal of and interest on the Procor ETC.
After all such payments have been made by
Procor, such payments will be deemed to
represent payment of the full purchase price of
the equipment, and title to all such equipment
will vest in Procor.
PROCOR ETC: GUARANTEE......... The Company will fully and unconditionally
guarantee the due and punctual distribution to
Certificateholders of principal and interest
payable in respect of the Procor ETC. In
addition, the Company will fully and
unconditionally guarantee the due and punctual
performance by Procor of its obligations under
the Procor Trust Agreement.
USE OF PROCEEDS............... The proceeds from the sale of the Pass Through
Certificates will be used by the Pass Through
Trustee for each Pass Through Trust to purchase
the Equipment Notes, and in the case of Pass
Through Trust 1996-A2, the Company ETCs and the
Procor ETC. The Owner Trustee will use the
proceeds from the sale of the Equipment Notes
to finance not more than 80% of the Equipment
Cost of the Equipment, representing in the
aggregate the entire debt portion of the
leveraged lease transaction. The net proceeds
to the Company from the sale of the Equipment
will be used by the Company for general
corporate purposes. The net proceeds to the
Company from the issuance of the Company ETCs
will be used to provide long-term financing for
the addition of rail cars to the Company's
fleet. The net proceeds to Procor from the
issuance of the Procor ETC will be used 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 the Indenture and as the trustee under
each of the Company Trust Agreement and the
Procor Trust Agreement.
RATING........................ It is a condition to the issuance of the Pass
Through Certificates that they receive ratings
of "A2 senior secured" by Moody's Investors
Service, Inc. and "A+" by Standard & Poor's
Corporation. A security rating is not a
recommendation to buy, sell or hold securities,
and such ratings may be subject to revision or
withdrawal at any time.
FEDERAL INCOME TAX
CONSEQUENCES.................. Each Pass Through Trust will be classified as a
grantor trust for federal income tax purposes,
and each Certificate Owner of each Pass Through
Trust will be treated as the owner of a
10
<PAGE> 11
pro rata undivided interest in each of the
Equipment Notes and, in the case of Pass
Through Trust 1996-A2, the Company ETCs and the
Procor ETC held by such Pass Through Trust and
any other property held in such Pass Through
Trust and should report on its federal income
tax return its pro rata share of income from
such Equipment Notes, Company ETCs and Procor
ETC and any other property held, as the case
may be, by such Pass Through Trust in
accordance with such Certificate Owner's method
of accounting. See "Material 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."
11
<PAGE> 12
FORMATION OF THE PASS THROUGH TRUSTS
The Pass Through Trusts will be formed pursuant to two separate Pass
Through Trust Agreements (each, an "Agreement"), one Agreement between the
Company and the Pass Through Trustee and the other Agreement by and among the
Company, Procor and the Pass Through Trustee. Upon or prior to the execution and
delivery of the Agreements, the Pass Through Trustee, on behalf of each Pass
Through Trust, will enter into a participation agreement with the Company, the
Indenture Trustee, the Owner Trustee and the Owner Participant (the
"Participation Agreement") pursuant to which such Pass Through Trust will, among
other things, purchase certain Equipment Notes. Concurrently, Pass Through Trust
1996-A2 will purchase a portion of the Company ETCs and the Procor ETC. Pass
Through Trust 1996-A1 will acquire Equipment Notes, and Pass Through Trust
1996-A2 will acquire Equipment Notes, the Company ETCs and the Procor ETC, in
each case having an interest rate corresponding to the interest rate borne by
the Pass Through Certificates that will be issued by such Pass Through Trust.
The Company ETCs and the Procor ETC acquired by Pass Through Trust 1996-A2 will
mature on the final distribution date applicable to the Pass Through
Certificates issued by such Pass Through Trust. The Equipment Notes acquired by
Pass Through Trust 1996-A1 will mature on the final distribution date applicable
to the Pass Through Certificates issued by such Pass Through Trust. The
Equipment Notes acquired by Pass Through Trust 1996-A2 will mature after the
final distribution date applicable to such Pass Through Trust; however, such
Equipment Notes are required to be prepaid pursuant to a mandatory refinancing
on such final distribution date. The two Pass Through Trusts, taken together,
will hold all of the Equipment Notes, representing in the aggregate the entire
debt portion of the leveraged lease transaction, as well as the Company ETCs and
the Procor ETC. The Pass Through Trustee will distribute to the
Certificateholders of the relevant Pass Through Trust the payments of principal,
Make-Whole Amount, if any, and interest received by it as the holder of the
Equipment Notes, the Company ETCs and the Procor ETC. See "Description of the
Pass Through Certificates--General", "Description of the Equipment
Notes--General" and "Description of the ETCs."
12
<PAGE> 13
DESCRIPTION OF PAYMENT FLOWS
LEVERAGED LEASE TRANSACTION
The following diagram illustrates certain aspects of the payment flows in
the leveraged lease transaction among the Company, the Owner Trustee, the Owner
Participant, the Indenture Trustee, the Pass Through Trustee and the
Certificateholders.
In the leveraged lease transaction, the Company will lease the Equipment
from the Owner Trustee, as lessor of such Equipment under the Lease. Equipment
Notes with respect to the Equipment will be issued under the 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 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 held in such Pass Through Trust to the
Certificateholders as required under the terms of the Pass Through Certificates.
The First National Bank of Chicago will act both as Pass Through Trustee of the
two Pass Through Trusts and as Indenture Trustee under the Indenture.
--------------------------
| 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 THROUGH |
| PARTICIPANT | | CERTIFICATES |
----------------- ---------------------------
13
<PAGE> 14
COMPANY ETCS AND PROCOR ETC
The following diagram illustrates certain aspects of the payment flows in
the other financing transactions to which this Prospectus relates.
The Company will lease and Procor will conditionally purchase the Trust
Equipment (as hereinafter defined) from The First National Bank of Chicago, as
trustee (in such capacity, the "Equipment Trust Trustee"). The Equipment Trust
Trustee will issue under the Company Trust (as hereinafter defined) the Company
ETCs and under the Procor Trust (as hereinafter defined) the Procor ETC, which
will be purchased by the Pass Through Trustee of Pass Through Trust 1996-A2 for
the benefit of the Certificateholders of such Pass Through Trust. The Company
will make rental and Procor will make conditional sale payments to the Equipment
Trust Trustee. From these payments, the Equipment Trust Trustee will make
principal and interest payments to the Pass Through Trustee of Pass Through
Trust 1996-A2 as required to meet the obligations under the Company ETCs and the
Procor ETC. The Pass Through Trustee will distribute such payments to the
Certificateholders of such Pass Through Trust as required under the terms of the
Pass Through Certificates. The Company will fully and unconditionally guarantee
the due and punctual distribution to Certificateholders of principal and
interest payable in respect of the Procor ETC.
-------------------------- ------------------
| UNION TANK CAR COMPANY | | PROCOR LIMITED |
-------------------------- ------------------
| |
Lease Rental | Conditional Sale |
Payments | Payments |
| |
------------------- -------------------
| EQUIPMENT TRUST | | EQUIPMENT TRUST |
| TRUSTEE | | TRUSTEE |
------------------- -------------------
| |
Company ETC | | Procor ETC
Payments | ------------------------ | Payments
| | | |
----------| PASS THROUGH TRUSTEE |-----------
| |
------------------------
|
Certificate | Distributions --------------------
| | UNION TANK CAR |
| | COMPANY |
| --------------------
| Guarantee of the |
| Distribution of Principal |
| and Interest Payable in |
| Respect of the Procor ETC |
| |
------------------------ |
| HOLDERS OF PASS | -------------------|
| THROUGH CERTIFICATES |
------------------------
14
<PAGE> 15
USE OF PROCEEDS
A portion of the proceeds from the sale of Pass Through Certificates will
be used by each Pass Through Trustee to purchase for the Pass Through Trusts
$97,778,000 aggregate principal amount of Equipment Notes issued by the Owner
Trustee which, in turn, will use the proceeds, together with funds provided by
the Owner Participant, to purchase the Equipment from the Company, on behalf of
the Owner Participant.
The Equipment Notes will be issued under a Trust Indenture and Security
Agreement (the "Indenture") between The First National Bank of Chicago, as
trustee thereunder (in such capacity, the "Indenture Trustee"), and State Street
Bank and Trust Company of Connecticut, National Association, not in its
individual capacity (except as expressly set forth therein) but solely as owner
trustee (the "Owner Trustee") of a trust for the benefit of an institutional
investor (the "Owner Participant"). The Owner Participant will provide from
sources other than the Equipment Notes at least 20% of the cost of the Equipment
as an equity investment. The Owner Participant, however, will not be liable for
any amount payable under the Indenture or the Equipment Notes issued thereunder.
The approximately $142,232,000 of 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 2,151 rail cars, all of which were manufactured
in 1995 or 1996) expected to be purchased by the Owner Trustee and leased to the
Company in the leveraged lease transaction:
<TABLE>
<CAPTION>
TYPE OF CAR NO. OF CARS
--------------------------------------------------------- -----------
<S> <C>
Covered Hopper........................................... 907
Tank (general purpose)................................... 706
Tank (pressure).......................................... 538
-----
Total............................................... 2,151
=====
</TABLE>
The aggregate cost of the Equipment to the Owner Trustee will be
approximately $142,382,000.
The remaining proceeds from the sale of the Pass Through Certificates,
Series 1996-A2 will be used by the Pass Through Trustee for Pass Through Trust
1996-A2 to purchase $11,441,000 aggregate principal amount of equipment trust
certificates (the "Company ETCs") to be issued pursuant to an equipment trust
agreement (the "Company Trust Agreement") between the Company and The First
National Bank of Chicago, as trustee, and a $2,790,000 principal amount
equipment trust certificate (the "Procor ETC" and, together with the Company
ETCs, the "ETCs") to be issued pursuant to an equipment trust agreement (the
"Procor Trust Agreement" and, together with the Company Trust Agreement, the
"Trust Agreements") between Procor and The First National Bank of Chicago, as
trustee. The approximately $11,327,000 of net proceeds to the Company from the
issuance of the Company ETCs will be used to provide long-term financing for the
addition of rail cars to the Company's fleet. These rail cars were initially
financed with cash provided by operating activities. The approximately
$2,762,000 of net proceeds to Procor from the issuance of the Procor ETC will be
used for general corporate purposes.
Immediately following the issuance of the Pass Through Certificates, the
Pass Through Trusts will purchase an aggregate of approximately $58,763,000
principal amount of Equipment Notes, and Pass Through Trust 1996-A2 will
purchase a $9,587,000 principal amount Company ETC and a $2,790,000 principal
amount Procor ETC. Pending the scheduled purchase on or about June 27, 1996 of
the remaining $39,015,000 aggregate principal amount of Equipment Notes and a
$1,854,000 principal amount Company ETC, the unexpended proceeds from the sale
of Pass Through Certificates will be held by the Pass Through Trustee and
invested in Specified Investments. Any shortfall between the earnings on such
investments and the amount to be paid Certificateholders shall be paid by the
Company. See "Description of the Pass Through Certificates--Delayed Purchases;
Extraordinary Distribution."
15
<PAGE> 16
THE COMPANY
Union Tank Car Company (with its wholly-owned subsidiaries herein
collectively referred to, except as the context otherwise requires, as the
"Company") and Procor are 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. Procor, which was incorporated in Canada in 1952, is an
indirect wholly-owned subsidiary of the Company.
The Company's principal executive offices are located at 225 West
Washington Street, Chicago, Illinois 60606, and its telephone number is (312)
372-9500. Procor's principal executive offices are located at 2001 Speers Road,
Oakville, Ontario, Canada L6J 5E1, and its telephone number is (905) 827-4111.
16
<PAGE> 17
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at March 31, 1996 and as adjusted to give effect to the issuance of the
Company ETCs and the Procor ETC. 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 Lease is expected to
be classified as an operating, rather than a capital, lease, there will be no
related obligation recorded on the Company's consolidated balance sheet.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
OUTSTANDING AS ADJUSTED
----------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Borrowed debt:
Equipment obligations, payable periodically through 2009 at
6.50%-15.55% (average rate 8.99% at March 31, 1996).......... $ 622,583 $ 636,814
Senior notes, 9.75% due in 1997................................. 143,000 143,000
Other long-term borrowings, payable periodically through 2005
(average rate 12.20%)........................................ 26,855 26,855
---------- ----------
Total borrowed debt..................................... 792,438 806,669
Stockholder's equity:
Common stock, no par value: 1,000 shares authorized and
issued....................................................... 106,689 106,689
Additional capital.............................................. 4,652 4,652
Retained earnings............................................... 426,775 426,775
---------- ----------
Total stockholder's equity.............................. 538,116 538,116
---------- ----------
Total capitalization............................... $ 1,330,554 $ 1,344,785
========== ==========
</TABLE>
17
<PAGE> 18
SELECTED FINANCIAL INFORMATION
The selected financial information set forth below as of December 31, 1991
through 1995 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, 1995, together with the report of the Company's independent
auditors are incorporated herein by reference. See "Documents Incorporated by
Reference." The selected financial data set forth below as of March 31, 1996 and
1995 and for the three 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 Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996
and March 31, 1995, the former of which is incorporated herein by reference.
Interim results are not necessarily indicative of the results of 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, 1995, as amended, and
in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Services and net sales(1)............ $148,687 $165,942 $856,229 $720,864 $504,823 $618,007 $483,416
Other income......................... 4,327 5,529 19,607 15,959 17,033 22,374 37,406
Total revenues....................... 153,014 171,471 875,836 736,823 521,856 640,381 520,822
Cost of services and sales(1)........ 85,227 105,989 608,534 487,742 280,161 400,177 269,748
General and administrative........... 13,254 13,802 55,630 54,120 54,629 53,609 52,560
Interest expense..................... 18,600 21,117 81,179 91,442 96,584 105,417 117,263
Income before income taxes and
cumulative effect of change in
accounting principle............... 35,933 30,563 130,493 103,519 90,482 81,178 81,251
Income before cumulative effect of a
change in accounting principle..... 22,643 19,064 84,465 63,378 49,730 48,382 45,024
Cumulative effect of a change in
accounting principle(2)............ -- -- -- -- 80,000 -- --
Net income........................... 22,643 19,064 84,465 63,378 129,730 48,382 45,024
BALANCE SHEET(3)
Total assets......................... 2,003,723 2,031,089 2,003,346 2,017,772 2,054,867 2,063,267 2,253,760
Borrowed debt due in one year........ 77,669 76,104 69,378 75,378 81,591 73,251 72,486
Total borrowed debt.................. 792,438 872,738 801,585 882,407 951,031 942,907 1,131,558
Stockholder's equity................. 538,116 511,072 530,473 505,008 485,630 445,900 430,518
OTHER
Ratio of earnings to fixed
charges(4)......................... 2.63x 2.28x 2.41x 2.05x 1.89x 1.76x 1.69x
OPERATING FLEET(3)
Tank cars............................ 54,443 52,331 53,669 52,090 51,021 49,580 48,837
Other railway cars................... 14,215 13,534 13,943 13,300 13,515 13,633 14,334
</TABLE>
- ---------------
(1) In 1995, 1994 and 1992, the Company entered into sale-leaseback transactions
pursuant to which it sold and leased back an aggregate of $130.5 million,
$125.5 million and $124.9 million, respectively, of railcars. The unusually
high sales and cost of sales figures in 1995, 1994 and 1992 as compared to
other periods are primarily attributable to these transactions.
(2) 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.
(3) As of the end of the period indicated.
(4) 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 beginning in 1991 was reduced because of the incurrence of
additional interest expense relating to the Company's commercial paper
program, which program was suspended effective May 1994.
18
<PAGE> 19
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The Pass Through Certificates offered hereby will be issued pursuant to two
separate Agreements, one between the Company and the Pass Through Trustee and
the other among the Company, Procor and the Pass Through Trustee. Each Agreement
will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and will contain substantially the same terms and conditions,
except that the interest rate, scheduled repayments of principal, and maturity
dates applicable to the Equipment Notes held in each Pass Through Trust, the
aggregate principal amount of Equipment Notes held in each Pass Through Trust,
and the final distribution date applicable to each Pass Through Trust will
differ. In addition, Pass Through Trust 1996-A1 will only hold certain Equipment
Notes, and Pass Through Trust 1996-A2 will hold certain Equipment Notes and the
ETCs. 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 Agreements and is
qualified in its entirety by reference to all of the provisions of the
Agreements. Except as otherwise indicated, the following summary relates to the
Agreements, the Pass Through Trusts formed thereby and the Pass Through
Certificates issued by the Pass Through Trusts. Citations to the relevant
sections of the Agreements 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 created by the Agreement pursuant to which such Pass
Through Certificate was issued. The property of each Pass Through Trust will
include (i) Equipment Notes, and in the case of Pass Through Trust 1996-A2, the
Company ETCs and the Procor ETC, held in such Pass Through Trust, (ii) all
monies at any time paid with respect to such Equipment Notes, and in the case of
Pass Through Trust 1996-A2, the Company ETCs and the Procor ETC, (iii) all
monies due and to become due thereunder and (iv) funds from time to time
deposited with the Pass Through Trustee in accounts relating to such Pass
Through Trust. Each Pass Through Certificate will correspond to a pro rata share
of the outstanding principal amount of the Equipment Notes, and in the case of
Pass Through Trust 1996-A2, the Company ETCs and the Procor ETC, to be held in
the related 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 each 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 respective Pass
Through Trusts and do not represent an interest in or obligation of the Company,
Procor, the Pass Through Trustee, any Owner Participant, any Owner Trustee in
its individual capacity, or any affiliate of any such person. (Section 3.8)
19
<PAGE> 20
Neither the Agreements, the Indentures nor the Trust Agreements 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 or Procor. 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, and in the case of Certificate
Owners of Pass Through Trust 1996-A2, title to the Trust Equipment securing the
Company ETCs and the Procor ETC as well as the Company's full and unconditional
guarantee of (i) the payment as and when due of the principal of and interest on
the Company ETCs and (ii) the due and punctual distribution to
Certificateholders of principal and interest payable in respect of the Procor
ETC. See "--Guarantee," "Description of the Equipment Notes--Security,"
"Description of the ETCs--Guarantees" and "--Security."
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 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 and Morgan Stanley & Co. Incorporated), 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
20
<PAGE> 21
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, Procor 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.
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 Pass Through Certificates will be freely transferable and
exchangeable at the office of the Pass Through Trustee upon compliance with the
requirements set forth in the Agreement. 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,
as well as all payments made by the
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<PAGE> 22
Company and Procor in respect of the Company ETCs and the Procor ETC, 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 or to pay
principal or interest on the Company ETCs and the Procor ETC.
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 DTCs
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, and in the case of Pass Through Trust 1996-A2, the Company ETCs
and the Procor ETC, held in each Pass Through Trust received by the Pass Through
Trustee will be distributed by the Pass Through Trustee to Certificateholders of
such Pass Through Trust on the date such receipt is confirmed, except in certain
cases when some or all of such Equipment Notes, Company ETCs or the Procor ETC,
as the case may be, 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, and
in the case of Pass Through Trust 1996-A2, the Company ETCs and the Procor ETC,
held in such Pass Through Trust are scheduled to be received by the Pass Through
Trustee on January 2 and July 2 of each year, commencing January 2, 1997, until
the final distribution date for the Pass Through Trust. Payments of principal of
the Equipment Notes held in Pass Through Trust 1996-A1 are scheduled to be
received by the Pass Through Trustee on January 2 or July 2 or both, of each
year, commencing January 2, 1999 (such scheduled payments of interest and
principal are herein referred to as "Scheduled Payments", and January 2 and July
2 of each year, commencing January 2, 1997, are herein referred to as "Regular
Distribution Dates"). The payment of the outstanding principal amount of the
Equipment Notes (as a result of the mandatory refinancing of such Equipment
Notes), the Company ETCs and the Procor ETC held in Pass Through Trust 1996-A2
is scheduled to be received by the Pass Through Trustee on July 2, 2006. 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, the Company ETCs and the Procor ETC held in the related
Pass Through Trust. Scheduled Payments of principal of the Equipment Notes held
in Pass Through Trust 1996-A1 are set forth below under "Description of the
Equipment Notes--Principal Payments." After a prepayment of some or all of the
Equipment Notes or a default in respect of some or all of such Equipment Notes,
Company ETCs or the Procor ETC, 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 of such Pass Through Trust. 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, Company ETCs or the Procor ETC (including payments
22
<PAGE> 23
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, Company ETCs or the Procor ETC 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 competitive 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, a Company ETC or the Procor ETC, 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 Pass Through Certificates--Events of Default and Certain Rights Upon an
Event of Default" and "Description of the Equipment Notes--Prepayment."
Each Agreement requires that the Pass Through Trustee establish and
maintain, for the Pass Through Trust created by such Agreement 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. Each Agreement also requires that the Pass Through Trustee establish
and maintain, for the Pass Through Trust created by such Agreement and for the
benefit of the Certificateholders of such Pass Through Trust, one or more
non-interest bearing accounts (the "Special Payments Account") for the deposit
of payments representing Special Payments. Pursuant to the terms of each
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 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 of such Pass Through Trust on the applicable record date at its address
appearing on the register maintained with respect to such Pass Through Trust.
(Section 4.2) The final distribution for each Pass Through Trust, however, will
be made only upon presentation and surrender of the Pass Through Certificates
for such Pass Through Trust 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)
GUARANTEE
The Company will fully and unconditionally guarantee the due and punctual
distribution to Certificateholders of principal and interest payable in respect
of the Procor ETC. In addition, the Company will fully and unconditionally
guarantee the due and punctual performance by Procor of its obligations under
the Procor Trust Agreement.
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<PAGE> 24
POOL FACTORS
Unless there has been a prepayment or purchase of any Equipment Notes or a
default in respect of any Equipment Notes, a Company ETC or the Procor ETC held
in a Pass Through Trust, as described below in "Events of Default--Events of
Default and Certain Rights Upon an Event of Default" and "Description of the
Equipment Notes--Prepayment", the Pool Factor for each Pass Through Trust will
decline in proportion to the scheduled repayments of principal of the Equipment
Notes and, in the case of Pass Through Trust 1996-A2, the Company ETCs and the
Procor ETC, held in such Pass Through Trust as described under "Description of
the Equipment Notes--Principal Payments" and "Description of the ETCs--Payment
of Principal and Interest." In the event of such a prepayment, purchase or
default, the Pool Factor and the Pool Balance of each Pass Through Trust so
affected will be recomputed after giving effect thereto and notice thereof will
be mailed to Certificateholders of such Pass Through Trust.
The "Pool Balance" for each Pass Through Trust indicates, as of any Regular
Distribution Date or Special Distribution Date, the aggregate unpaid principal
amount of the Equipment Notes and, in the case of Pass Through Trust 1996-A2,
the Company ETCs and the Procor ETC held in each Pass Through Trust on such date
plus any amounts in respect of principal of such Equipment Notes, and in the
case of Pass Through Trust 1996-A2, such Company ETCs and the Procor ETC 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, in the case of Pass Through Trust 1996-A2, the Company ETCs
and the Procor ETC held in the Pass Through Trust and distribution thereof to be
made on that date. (Section 1.1)
The "Pool Factor" for each Pass Through Trust 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 issued by
such Pass Through Trust. The Pool Factor for each 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, of the Equipment Notes and,
in the case of Pass Through Trust 1996-A2, the Company ETCs and the Procor ETC,
held in such Pass Through Trust and distribution thereof to be made on that
date. (Section 1.1) The Pool Factor for each Pass Through Trust will initially
be 1.0000000; thereafter, the Pool Factor will decline as described above to
reflect reductions in the Pool Balance of such Pass Through Trust. The amount of
a Certificateholder's pro rata share of the Pool Balance of a Pass Through Trust
can be determined by multiplying the original denomination of such holder's Pass
Through Certificate of such Pass Through Trust by the Pool Factor for such Pass
Through Trust as of the Regular Distribution Date or Special Distribution Date.
The Pool Factor and the Pool Balance for each Pass Through Trust will be mailed
to Certificateholders of record of such Pass Through Trust on each Regular
Distribution Date and Special Distribution Date.
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<PAGE> 25
As of the date of issuance of the Pass Through Certificates and assuming
that all proceeds are used to purchase Equipment Notes, Company ETCs and the
Procor ETC on or before June 30, 1996, and that no prepayment or purchase in
respect of any Equipment Notes or default in respect of any Equipment Notes,
Company ETCs or the Procor ETC shall occur, the scheduled payment of principal
of the Equipment Notes, Company ETCs and the Procor ETC and the resulting Pool
Factors for the Pass Through Trusts after taking into account each such payment
are set forth below:
<TABLE>
<CAPTION>
PASS THROUGH PASS THROUGH
TRUST 1996-A1 TRUST 1996-A2
SCHEDULED PASS THROUGH SCHEDULED PASS THROUGH
PRINCIPAL TRUST 1996-A1 PRINCIPAL TRUST 1996-A2
REGULAR DISTRIBUTION DATE PAYMENTS POOL FACTOR PAYMENTS POOL FACTOR
- --------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
January 2, 1999........................ $ 313,689 0.9907654
July 2, 1999........................... 525,868 0.9752846
January 2, 2000........................ 2,531,278 0.9007673
January 2, 2001........................ 6,760,380 0.7017512
January 2, 2002........................ 5,846,807 0.5296293
January 2, 2003........................ 5,261,281 0.3747445
January 2, 2004........................ 6,268,470 0.1902095
January 2, 2005........................ 6,461,227 0.0000000
July 2, 2006........................... $ 78,040,000 0.0000000
</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 of the related Pass Through
Trust 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 of such Pass
Through Trust, 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 for such Pass Through
Trust. (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 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 of each Pass Through Trust 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 such
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
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<PAGE> 26
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 of
each Pass Through Trust as the name of such Certificateholder appears on the
records of the Registrar of the Pass Through Certificates.
VOTING OF THE EQUIPMENT NOTES AND THE ETCS
The Pass Through Trustee, as holder of the Equipment Notes and, in the case
of Pass Through Trust 1996-A2, the ETCs in the respective Pass Through Trust,
has the right to vote and give consents and waivers in respect of such Equipment
Notes and ETCs, as applicable. Each 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 applicable Pass Through Trust at its
own discretion and the circumstances in which the Pass Through Trustee shall
seek instructions from the Certificateholders of such Pass Through Trust. Prior
to an Event of Default (as defined below) with respect to either Pass Through
Trust, all Equipment Notes and, in the case of Pass Through Trust 1996-A2, all
ETCs held in such Pass Through Trust shall be voted for or against any action in
the same proportion as the Pass Through Certificates held by the
Certificateholders of such Pass Through Trust were actually voted. (Sections 6.1
and 10.1) Whenever the Agreements require or permit actions to be taken based
upon instructions or directions of Certificateholders of such Pass Through Trust
holding a specified percentage interest of a 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 an Agreement (an "Event of Default") is defined
as the occurrence and continuance of (i) an event of default under the Indenture
(an "Indenture Default") or (ii) an event of default under the Company Trust
Agreement or the Procor Trust Agreement (an "Equipment Trust Default"). For a
description of the Indenture Defaults under the Indenture, see "Description of
the Equipment Notes--Indenture Defaults, Notice and Waiver." For a description
of the Equipment Trust Defaults under the Trust Agreements, see "Description of
the ETCs--Equipment Trust Defaults and Provisions Relating Thereto." There are
no cross-default provisions in the Trust Agreements, and an Equipment Trust
Default under the Company Trust Agreement will not constitute an Equipment Trust
Default under the Procor Equipment Trust Agreement, nor will an Equipment Trust
Default under the Procor Trust Agreement (other than a Company bankruptcy
related default) constitute an Equipment Trust Default under the Company Trust
Agreement. Accordingly, if an Equipment Trust Default occurs with respect to one
Trust Agreement, but no Equipment Trust Default has occurred with respect to the
other Trust Agreement, the ETCs under the non-defaulted Trust Agreement will
continue to be held in Pass Through Trust 1996-A2, and payments of principal and
interest on such ETCs will continue to be distributed to the holders of such
Certificates as originally scheduled. However, a failure by the Company to
perform in respect of its guarantee of the due and punctual distribution to
Certificateholders of principal and interest payable in respect of the Procor
ETC and the due and punctual performance by Procor of its obligations under the
Procor Trust Agreement will constitute an Equipment Trust Default under the
Company Trust Agreement. (Section 6.1) In addition, an Indenture Default will
not constitute an Equipment Trust Default nor will an Equipment Trust Default
constitute an Indenture Default.
Under the 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
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under the 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 each 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 the 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 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
shall, declare the unpaid principal amount of the Equipment Notes to be
immediately due and payable, together with any accrued and unpaid interest
thereon. The 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 may direct the Indenture Trustee with
respect to the exercise of remedies thereunder. See "Description of the
Equipment Notes--Remedies." Accordingly, the ability of the holders of the Pass
Through Certificates issued with respect to either Pass Through Trust to cause
the Indenture Trustee to accelerate the Equipment Notes or to direct the
exercise of remedies by the Indenture Trustee will depend, in part, upon the
proportion between the aggregate principal amount of the Equipment Notes held in
such Pass Through Trust and the aggregate principal amount of all Equipment
Notes. If, for example, the Equipment Notes held in a Pass Through Trust
constitute only 45% in aggregate principal amount of the Equipment Notes, even
if all of the Certificateholders of such Pass Through Trust were to instruct the
Pass Through Trustee to direct the Indenture Trustee to accelerate the Equipment
Notes issued under such Indenture, the Equipment Notes so voted by such Pass
Through Trust in favor of acceleration would not alone be sufficient under the
terms of the Indenture to compel the Indenture Trustee to act. Moreover, there
can be no assurance that the Certificateholders of the other Pass Through Trust
would at such time vote the Equipment Notes held in such Pass Through Trust in
favor of acceleration. Each Pass Through Trust will hold Equipment Notes with
different terms than the Equipment Notes held in the other Pass Through Trust
and therefore the Certificateholders of one Pass Through Trust may have
divergent or conflicting interests from those of the Certificateholders of the
other Pass Through Trust. In addition, so long as the same institution acts as
Pass Through Trustee of both Pass Through Trusts, in the absence of instructions
from the Certificateholders of either such Pass Through Trust, the Pass Through
Trustee could for the same reason be faced with a potential conflict of interest
upon an Indenture Default.
Each Agreement provides that, so long as an Indenture Default shall have
occurred and be continuing, the Pass Through Trustee of the Pass Through Trust
created by such Agreement may vote all of the Equipment Notes, and upon the
direction of the holders of Pass Through Certificates evidencing fractional
undivided interests aggregating not less than a majority in interest of such
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 and any accrued and unpaid
interest thereon to be due and payable. Each Agreement also provides that, if an
Indenture Default shall have occurred and be continuing, the Pass Through
Trustee of the Pass Through Trust created by such Agreement 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 such
Pass Through Trust shall, vote all of the Equipment Notes 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 the Indenture.
(Sections 6.1 and 6.4)
As an additional remedy, if an Indenture Default shall have occurred and be
continuing, each Agreement provides that the Pass Through Trustee of the Pass
Through Trust created by such
27
<PAGE> 28
Agreement 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 such Pass Through Trust shall, sell all or part of the
Equipment Notes that are held in such Pass Through Trust for cash to any person.
In addition, if an Owner Trustee elects to purchase all of the outstanding
Equipment Notes 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 for such Pass Through Trust
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. Furthermore, so long as the same institution acts as Pass
Through Trustee of both Pass Through Trusts, it may be faced with a conflict in
deciding from which Pass Through Trust to sell Equipment Notes to available
buyers. 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 of such Pass Through Trust will receive a smaller
amount of principal distributions than anticipated and will not have any claim
for the shortfall against the Company, the Owner Participant, the Owner Trustee
in its individual capacity or any affiliate thereof, or the Pass Through
Trustee. (Sections 4.1 and 4.2)
Each Trust Agreement provides that, if an Equipment Trust Default shall
occur and be continuing thereunder, the Equipment Trust Trustee may, and upon
the instructions of the holders of a majority in aggregate principal amount of
the ETCs issued thereunder shall, declare the unpaid principal amount of such
ETCs to be immediately due and payable, together with any accrued and unpaid
interest thereon. Each Trust Agreement further provides that, if an Equipment
Trust Default shall occur and be continuing thereunder, the holders of a
majority in aggregate principal amount of the ETCs issued thereunder may direct
the Equipment Trust Trustee with respect to the exercise of remedies thereunder.
See "Description of the ETCs--Equipment Trust Defaults and Provisions Relating
Thereto." Accordingly, since all of the ETCs will be held in Pass Through Trust
1996-A2, the holders of such Pass Through Certificates will have the ability to
cause the Equipment Trust Trustee to accelerate the ETCs issued under a Trust
Agreement and to direct the exercise of remedies by the Equipment Trust Trustee
under a Trust Agreement.
The Agreement creating Pass Through Trust 1996-A2 provides that, so long as
an Equipment Trust Default under either Trust Agreement shall have occurred and
be continuing, the Pass Through Trustee may vote the ETCs issued under the
defaulted agreement and, upon the direction of the holders of Pass Through
Certificates evidencing fractional undivided interests aggregating not less than
a majority in interest in such Pass Through Trust, the Pass Through Trustee
shall vote a corresponding majority of the principal amount of the ETCs under
the defaulted agreement in favor of directing the Equipment Trust Trustee to
declare the unpaid principal amount of such ETCs and any accrued and unpaid
interest thereon to be due and payable. Such Agreement also provides that, if an
Equipment Trust Default under either Trust Agreement shall have occurred and be
continuing, the Pass Through Trustee of the Pass Through Trust 1996-A2 may, and
upon the direction of the holders of the Pass Through Certificates, Series
1996-A2 evidencing fractional undivided interests aggregating not less than a
majority in interest in such Pass Through Trust shall, vote the ETCs issued
thereunder in favor of directing the Equipment Trust Trustee as to the time,
method and place of conducting any proceeding for any remedy available to such
Equipment Trust Trustee or of exercising any trust or power conferred on the
Equipment Trust Trustee. In addition, if an Equipment Trust Default has occurred
and is continuing under the Procor ETC, the Pass Through Trustee may, and upon
direction of the holders of Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of such Pass Through
Trust shall, commence the exercise of remedies against the Company under its
guarantee of the due and punctual distribution to Certificateholders of
principal and interest payable in respect of the Procor ETC. (Sections 6.1 and
6.4)
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<PAGE> 29
As an additional remedy, if an Equipment Trust Default shall have occurred
and be continuing, the Agreement creating Pass Through Trust 1996-A2 provides
that the Pass Through Trustee of such Pass Through Trust may, and upon the
direction of the holders of Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of such Pass Through
Trust shall sell the ETCs in default or a portion thereof for cash to any
person. The Pass Through Trustee is required to give notice to Procor of its
proposed sale of the Procor ETC at least 20 days prior to such proposed sale.
Such notice shall constitute an offer to sell the Procor ETC to Procor for a
price equal to the outstanding principal amount thereof, plus all accrued and
unpaid interest thereon, and all other amounts due and owing with respect
thereto. If, prior to the expiration of such 20 day period, Procor pays such
purchase price to the Pass Through Trustee, the Procor ETC will be transferred
to Procor. If Procor does not pay such purchase price prior to the expiration of
such period, the Pass Through Trustee may sell the Procor ETC to any person.
(Section 6.1) 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, 4.2,
6.2) The market for equipment trust certificates in default may be very limited
and there can be no assurance that an ETC in default could be sold for a
reasonable price. If the Pass Through Trustee sells a Company ETC for less than
its outstanding principal amount, the Certificateholders of Pass Through Trust
1996-A2 will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall amount against the
Company or the Pass Through Trustee. If the Pass Through Trustee sells the
Procor ETC for less than its outstanding principal amount, plus all accrued and
unpaid interest thereon and all other amounts due and owing with respect
thereto, the Certificateholders will have a claim for the shortfall amount
against the Company pursuant to its guarantee. See "--Guarantee."
Any amount distributed to the Pass Through Trustee of either Pass Through
Trust following an Indenture Default and any amount distributed to the Pass
Through Trustee of Pass Through Trust 1996-A2 following an Equipment Trust
Default under either Trust Agreement shall be deposited in the Special Payments
Account for such Pass Through Trust and shall be distributed to the
Certificateholders of such Pass Through Trust on a Special Distribution Date. In
addition, if, following an Indenture Default, the applicable Owner Trustee
exercises its option to prepay or purchase the outstanding Equipment Notes 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 shall be deposited in the Special Payments Account for such Pass Through
Trust and shall be distributed to the Certificateholders of such Pass Through
Trust on a Special Distribution Date. (Sections 4.1 and 4.2)
Any funds representing payments received with respect to an Equipment Note
or ETC in default, or the proceeds from the sale by the Pass Through Trustee of
such Equipment Note or ETC, held by the Pass Through Trustee in the Special
Payments Account for such Pass Through Trust 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)
Each 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 created by such Agreement, give to the Certificateholders of such
Pass Through Trust notice, transmitted by mail, of all uncured or unwaived
defaults under such 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 an Equipment Note or an ETC, as applicable, 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 an 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)
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Each 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 of the Pass Through Trust relating to
such Agreement before proceeding to exercise any right or power under such
Agreement at the request of such Certificateholders. (Section 7.3)
The holders of Pass Through Certificates of a Pass Through Trust evidencing
fractional undivided interests aggregating not less than a majority in interest
of such Pass Through Trust may on behalf of the holders of all Pass Through
Certificates of such Pass Through Trust 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 or the Equipment Trust Trustee with respect thereto, except (i) a
default in payment of principal of, Make-Whole Amount, if any, or interest on,
an Equipment Note or an ETC, as applicable, 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 of such Pass Through Trust
affected thereby. (Section 6.5) The Indenture provides that, with certain
exceptions, the holders of a majority in aggregate unpaid principal amount of
the Equipment Notes may on behalf of all such holders waive any past default or
Indenture Default thereunder. (Indenture, Section 5.06) For a discussion of
waivers of Indenture Defaults under the Indenture, see "Description of the
Equipment Notes--Indenture Defaults, Notice and Waiver." Each Trust Agreement
provides that, with certain exceptions, the holders of a majority in aggregate
unpaid principal amount of the ETCs outstanding thereunder may on behalf of all
such holders waive any past default or Equipment Trust Default thereunder.
Therefore, if the Certificateholders of a Pass Through Trust waive a past
default or Event of Default under the related Agreement such that the principal
amount of the Equipment Notes or ETCs, as applicable, held in such Pass Through
Trust constitute the required majority in aggregate unpaid principal amount of
Equipment Notes or ETCs, as applicable, such past default or Indenture Default
or Equipment Trust Default shall be waived. For a discussion of waivers of
Equipment Trust Defaults under the Trust Agreements, see "Description of the
ETCs--Equipment Trust Defaults and Provisions Relating Thereto."
MODIFICATION OF THE AGREEMENTS
Each Agreement contains provisions permitting the Company and, in the case
of Pass Through Trust 1996-A2, Procor, and requiring the Pass Through Trustee to
enter into supplements to such Agreements, without the consent of the holders of
any of the Pass Through Certificates of the Pass Through Trust created by such
Agreement, among other things (i) to evidence the succession of another
corporation to the Company or Procor and the assumption by such corporation of
the Company's or Procor's obligations under the Agreement, (ii) to add to the
covenants of the Company or Procor, as the case may be, for the benefit of
holders of the applicable Pass Through Certificates or to surrender any of the
Company's or Procor's, as the case may be, rights under such Agreement and (iii)
to cure any ambiguity, to correct any manifest error, to correct or supplement
any defective or inconsistent provision of such Agreement or any supplement to
such Agreement, or to make any other provisions with respect to matters or
questions arising under such Agreement, provided such action shall not adversely
affect the interests of the holders of such Pass Through Certificates. (Section
9.1)
Each Agreement also contains provisions permitting the Company and the Pass
Through Trustee and, in the case of Pass Through Trust 1996-A2, Procor, with the
consent of the holders of Pass Through Certificates or the Pass Through Trust
created by such Agreement evidencing fractional undivided interests aggregating
not less than a majority in interest of such Pass Through Trust, to enter into
supplements to such Agreement adding any provisions to or changing or
eliminating any of the provisions of such Agreement or modifying the rights of
the Certificateholders, except that no such supplement to such 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
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<PAGE> 31
Pass Through Trustee of payments on the Equipment Notes or ETCs, as applicable,
held in such Pass Through Trust, or distributions in respect of any related Pass
Through Certificate, or change any date of payment on any such 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 of such Pass Through Trust to institute suit for
the enforcement of any such payment when due, (ii) permit the disposition of the
Equipment Notes or the ETCs, as applicable, held in such Pass Through Trust,
except as provided in such Agreement or (iii) reduce the percentage of the
aggregate fractional undivided interests of the Pass Through Trust provided for
in such Agreement, the consent of the holders of which is required for any such
supplement to such Agreement or for any waiver provided for in such Agreement.
(Section 9.2)
MODIFICATION OF LEVERAGED LEASE AND TRUST AGREEMENTS
In the event that the Pass Through Trustee, as the holder of an Equipment
Note or, in the case of Pass Through Trust 1996-A2, an ETC held in a Pass
Through Trust, receives a request for its consent to any amendment, modification
or waiver under the Indenture, Lease or other document relating to such
Equipment Note or under a Trust Agreement or other agreement relating to an ETC,
the Pass Through Trustee shall mail a notice of such proposed amendment,
modification or waiver to each Certificateholder of such Pass Through Trust 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 or, in the case of Pass Through Trust
1996-A2, ETCs in such Pass Through Trust in the same proportion as the Pass
Through Certificates of such Pass Through Trust were actually voted by the
holders thereof by a certain date. Notwithstanding the foregoing, if any Event
of Default under the related 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 or Equipment
Trust Trustee to which such consent relates. (Section 10.1)
TERMINATION OF THE PASS THROUGH TRUSTS
Each Agreement will terminate upon the distribution to all
Certificateholders of the Pass Through Trust of all amounts required to be
distributed to them pursuant to such Agreement and the disposition of all
property held in such Pass Through Trust. The Pass Through Trustee will mail to
each Certificateholder of record of such Pass Through Trust notice of the
termination of such 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 of such Pass Through Trust 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)
DELAYED PURCHASE; EXTRAORDINARY DISTRIBUTION
Earnings on Specified Investments in the escrow account in excess of
amounts required to be paid to Certificateholders for each Pass Through Trust
will be paid to the Company periodically and the Company will be responsible for
any losses. 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 and ETCs
on or prior to June 30, 1996, whether due to the physical unavailability of
Units, the failure by the Owner Trustee to issue Equipment Notes on or prior to
such date, the failure of the Equipment Trust Trustee to issue ETCs on or prior
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 Certificate
to but not including July 2, 1996, at the rate appertaining to the applicable
Pass Through Certificates, but without premium, will be distributed on July 2,
1996 to the Certificateholders of record as of June 30, 1996. (Section 2.1 (b)).
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<PAGE> 32
The Company will pay to the Pass Through Trustee on July 2, 1996 an amount
equal to the amount, if any, distributable by the Pass Through Trustee on such
date and thereupon will be entitled to any balance in the escrow account. On the
Regular Distribution Date occurring on January 2, 1997, the Company will also
pay to the Pass Through Trustee an amount equal to the difference between the
interest accrued on any Equipment Notes or ETCs, as applicable, purchased after
the issuance of the Pass Through Certificates and the interest that would have
accrued on such Equipment Notes or ETCs if they had been purchased at the time
of issuance of the Pass Through Certificates.
THE PASS THROUGH TRUSTEE
The First National Bank of Chicago will be the Pass Through Trustee for
each of the two Pass Through Trusts. 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 Agreements, the Pass Through Certificates,
the Equipment Notes, the ETCs, the Indenture, the Lease, the Trust Agreements or
other related documents. (Section 7.4) The First National Bank of Chicago also
will initially be the Indenture Trustee of the Indenture under which the
Equipment Notes are issued and the Equipment Trust Trustee under the Trust
Agreements.
The Pass Through Trustee may resign with respect to either or both of the
Pass Through Trusts at any time, in which event the Company and, in the case of
Pass Through Trust 1996-A2, Procor, 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 related Agreement; becomes incapable of acting as Pass Through
Trustee; or becomes adjudged a bankrupt or insolvent, the Company or, in the
case of Pass Through Trust 1996-A2, Procor, may remove the Pass Through Trustee,
or any holder of Pass Through Certificates of such Pass Through Trust 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 with respect to a Pass Through Trust and appointment
of a successor trustee for such 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 each Agreement with respect to the related Pass Through Trust. All
references in this Prospectus to the Pass Through Trustee are to the Pass
Through Trustee acting in such capacity under each of the Pass Through Trusts
and should be read to take into account the possibility that the two Pass
Through Trusts could each have a different successor trustee in the event of
such a resignation or removal.
Each Agreement provides that the Company and, in the case of Pass Through
Trust 1996-A2, Procor, will pay the Pass Through Trustee's fees and expenses,
other than a portion of the initial fees and reasonable actual disbursements of
the Pass Through Trustee, which shall be paid by the Owner Trustees. Each
Agreement further provides that the Pass Through Trustee will be entitled to
indemnification by the Company and, in the case of Pass Through Trust 1996-A2,
Procor, 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 related 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, as
well as under various trusts relating to other leveraged lease transactions to
which the Company is a party. 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.
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<PAGE> 33
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
Indenture, the Lease and the Participation Agreement, 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 Indenture, the Lease and the Participation Agreement.
GENERAL
Each series of Equipment Notes will be issued under the Indenture between
State Street Bank and Trust Company of Connecticut, National Association, as
Owner Trustee of an owner trust for the benefit of the Owner Participant, and
The First National Bank of Chicago, as Indenture Trustee.
The Owner Trustee will lease Equipment to the Company pursuant to the 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 the 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 the Lease. The Equipment Notes are not, however,
obligations of, or guaranteed by, the Company. The Company's rental obligations
under the Lease are general obligations of the Company.
PAYMENTS OF PRINCIPAL AND INTEREST
The aggregate principal amount of the Equipment Notes issued with respect
to the Equipment covered by the Lease will be $97,778,000.
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 January 2, 1997. Such interest will be computed on
the basis of a 360-day year of twelve 30-day months. The principal of the 6.94%
Equipment Note to be issued on May 29, 1996 (Note A) and the Equipment Note
issuable on or about June 27, 1996 (Note B) to be held in Pass Through Trust
1996-A1 will be payable as set forth below:
<TABLE>
<CAPTION>
NOTE A NOTE B
PRINCIPAL PRINCIPAL PRINCIPAL
PAYMENT DATES PAYMENT PAYMENT PAYMENT
------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C> <C>
January 2, 1999............................ $ 313,689 $ $ 313,689
July 2, 1999............................... 525,868 525,868
January 2, 2000............................ 2,531,278 2,531,278
January 2, 2001............................ 2,640,151 4,120,229 6,760,380
January 2, 2002............................ 3,458,560 2,388,247 5,846,807
January 2, 2003............................ 3,153,908 2,107,373 5,261,281
January 2, 2004............................ 3,758,745 2,509,725 6,268,470
January 2, 2005............................ 3,868,801 2,592,426 6,461,227
----------- ----------- -----------
Total............................ $20,251,000 $13,718,000 $33,969,000
=========== =========== ===========
</TABLE>
The 7.21% Equipment Notes held in Pass Through Trust 1996-A2, in an
aggregate principal amount of $63,809,000, will amortize as to principal
commencing on July 2, 2006, with the final payment of principal due on January
2, 2012; however, such Equipment Notes are required to be prepaid on July 2,
2006 pursuant to a mandatory refinancing. See "-- Prepayment."
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<PAGE> 34
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.
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
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 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 the 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 Lease--Events of
Loss." (Lease, Section 11; Indenture, Section 2.10)
In addition, under the Lease the Company may, so long as no Lease Event of
Default has occurred and is continuing, terminate the Lease at its option (i) at
any time after January 2, 2004, 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, or (ii) on July 2, 2006 with respect to any or all of
the Units (the "Early Purchase Date") if the Company exercises its option to
purchase such Unit or (iii) if the Company elects to exercise its right to
purchase Equipment as a result of an Owner Participant (or an affiliate thereof)
(other than the initial 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 Indenture, 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 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 the 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 on such prepayment
date, plus 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
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<PAGE> 35
Equipment Notes--The Lease--Termination." (Lease, Section 10 and 22.1;
Indenture, Section 2.10; Participation Agreement, Section 6.9)
The Equipment Notes held in Pass Through Trust 1996-A2 are required to be
prepaid at a price equal to the unpaid principal amount thereof, together with
accrued but unpaid interest thereon to but not including the prepayment date, as
part of a mandatory refinancing, to be arranged by the Company, of the Equipment
Notes held by such Pass Through Trust on the final distribution date applicable
to the Pass Through Certificates, Series 1996-A2.
Voluntary Prepayments. Subject to certain restrictions, the Company may
require the Owner Participant, the Owner Trustee and the Pass Through Trustee to
effect an optional prepayment of 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 a Make-Whole Amount, as part of a refunding or
refinancing which will result in the prepayment of the Pass Through
Certificates. (Participation Agreement, Section 10.2; Indenture, 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 the Lease, having exercised (or given notice of its
intention to exercise) any remedy in respect of the Units under the Lease, (iii)
one or more Lease Events of Default having occurred under the 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. (Indenture, 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 January 2 and July 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
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),
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<PAGE> 36
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 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 will be secured by (i) an assignment by the Owner
Trustee to the Indenture Trustee of the Owner Trustee's rights (other than
certain excepted rights reserved to the Owner Trustee) under the Lease 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 the 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
Lease; however, for so long as Equipment Notes are outstanding, the Indenture
Trustee shall retain the right to receive payments of rent due under the Lease.
The assignment by the Owner Trustee to the Indenture Trustee of its rights under
the Lease excludes certain rights of the Owner Trustee and the Owner Participant
including rights relating to indemnification by the Company for certain matters
and to insurance proceeds payable to the Owner Trustee in its individual
capacity and as Owner Trustee and to the Owner Participant under liability
insurance maintained by the Company under the Lease. (Indenture, 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, 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 Lease), in certain investments described in the
Lease. The Company will pay the amount of any loss resulting from any such
investment directed by it. (Indenture, 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 or mandatory 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). The Equipment Notes are not obligations of, or guaranteed by, the
Company.
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<PAGE> 37
Neither the Owner Trustee, in its individual capacity, the Owner Participant 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 Trustee, in its individual
capacity, or the Participant, to the Indenture Trustee for any amounts payable
under the Equipment Notes or, except as provided in the Indenture, for any
liability under the Indenture. (Indenture, Section 2.03)
Except as otherwise provided in the Indenture, the Owner Trustee, in its
individual capacity, shall not be answerable or accountable under the Indenture
or under the Equipment Notes under any circumstances except for its own wilful
misconduct or gross negligence. The Owner Participant will not have any duty or
responsibility under the Indenture or the Equipment Notes to the Indenture
Trustee or to any holder of any Equipment Note. (Indenture, Section 2.03)
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Events of Default under the Indenture include: (a) a Lease Event
of Default, (b) default by the Owner Trustee in making payments when due of
principal of, premium, 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 the Indenture or made by the Owner Trustee (except to the
extent made with respect to State Street Bank and Trust Company of Connecticut,
National Association 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 (f) the
occurrence of certain events of bankruptcy, reorganization or insolvency of the
Owner Participant or the Owner Trustee. (Indenture, 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 the Lease, shall have exercised (or given notice of its intention to
exercise) any remedies in respect of the Units under the 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 the 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. (Indenture, 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 the
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
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consecutive or six total failures to make semiannual basic rental payments. In
the event there shall occur a Lease Event of Default under the 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
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. (Indenture, Section 5.04(a))
The 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. (Indenture, Section 6.01)
The holders of a majority in aggregate principal amount of the outstanding
Equipment Notes issued under the 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 the Indenture that cannot be modified or amended without the
consent of each holder of an Equipment Note affected thereby. (Indenture,
Section 5.06)
REMEDIES
If an Indenture Default shall occur and be continuing under the 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
the Indenture shall, declare the unpaid principal of all such Equipment Notes
outstanding under the 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 the 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 the 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, premium, 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 the Indenture have been cured or waived except nonpayment of
principal of, premium, if any, or interest on any such Equipment Notes that have
become due solely because of acceleration. (Indenture, Section 5.02)
The Indenture provides that if any Indenture Default under the Indenture
has occurred and is continuing the Indenture Trustee may exercise certain rights
or remedies available to it under applicable law, including (if the Lease has
been declared in default) one or more of the remedies under the Indenture or the
Lease. The Indenture Trustee's right to exercise remedies under the Indenture is
subject in certain circumstances to its having proceeded to exercise one or more
remedies under the Lease, 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 the
Indenture for a period of 90 days. Further, the Indenture Trustee may not
exercise remedies under the 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)
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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; 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.
(Indenture, Sections 5.03(a) and (c), 5.04(c) and 5.05; Lease, Section 15)
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. (Indenture, 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. (Indenture, 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 the Owner Participant, it is possible
that, notwithstanding that the Equipment is owned by the Owner Trustee in trust
for the benefit of the Owner Participant, the Equipment and the Lease and
Equipment Notes might become part of the bankruptcy proceeding. In such event,
payments under the Lease or on the 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 the Lease. In such event, there could be no assurance that the amount of
any claim for damages under the Lease that would be allowed in such bankruptcy
case would be in an amount sufficient to provide for the repayment of the
Equipment Notes. In any case, rejection of the Lease by the Company or its
bankruptcy trustee would not deprive the Indenture Trustee of its security
interest in the Units.
MODIFICATION OF THE INDENTURE AND THE LEASE
Without the consent of holders of a majority in unpaid principal amount of
the Equipment Notes, the provisions of the Indenture, the Lease and the
Participation Agreement may not be amended or modified, except to the extent
indicated below.
Certain provisions of the Lease and the 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 the
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
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maintenance of the Equipment covered by the 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 the 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 the Lease. (Indenture, Section 10.05)
Without the consent of the holder of each Equipment Note outstanding under
the Indenture, no amendment or modification of the Indenture may (a) change the
final maturity of, or reduce the principal amount of, or premium, if any, or
interest payable on any Equipment Notes issued under the Indenture or impair the
right to institute suit for the enforcement of any such payment or change the
date on which any principal or premium, 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 the Indenture of the benefit of the Lien of the
Indenture or (c) reduce the percentage in principal amount of outstanding
Equipment Notes issued under the Indenture necessary to modify or amend any
provision of the Indenture or to waive compliance therewith. (Indenture, Section
10.01)
THE LEASE
Terms and Rentals. The Equipment subject to the 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, 2012, unless previously terminated as permitted by the
Lease. The rent payments under the 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, 1997, and will be used to make payments of principal of
and interest due on the Equipment Notes, 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. (Lease, Section 3.2; Indenture, Section 3.01) The
Company has also agreed to pay under the Lease on January 2, 1997 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. (Lease, Section 3.5) Rental payments that the Company is
obligated to make or cause to be made under the Lease will not be less than the
scheduled payments of principal of and interest on the Equipment Notes, except
for the prepayment of principal required to be made as part of a mandatory
refinancing of the Equipment Notes held by Pass Through Trust 1996-A2 on the
final distribution date for such Pass Through Trust. In certain cases, the
semiannual basic rent payments under the Lease may be adjusted, but, except as
described below, under no circumstances will such rent payments be adjusted so
as to be less than the corresponding scheduled payments of principal of and
interest on the Equipment Notes. (Participation Agreement, Section 2.6; Lease,
Section 3) The balance of any such semi-annual rent payment under the Lease,
after payment of the scheduled principal of, and interest on the Equipment
Notes, will be paid over to or for the account of the Owner Participant as the
beneficial owner of the Equipment covered by the Lease. (Lease, 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. (Lease, 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
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<PAGE> 41
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. (Lease, 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
Equipment, subject to the 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 the 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. 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. (Lease, 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 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. (Lease, Section 8)
Liens. The Equipment will be maintained free of any liens, other than the
respective rights of the Owner Participant, the Owner Trustee, the Indenture
Trustee, the holders of the Equipment Notes, the Company and any permitted
sublessee arising under the Lease, the Indenture, the Participation Agreement
and the trust agreement between the Owner Trustee and the Owner Participant
pursuant to which the Owner Trustee acts as trustee for the benefit of the Owner
Participant, and other than, in the case of the Equipment, certain limited liens
permitted under the Lease and the Indenture, 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. (Lease, Section 7)
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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 cars. (Lease, 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 the Lease with respect to any or all of
the Units (provided that if such termination is for less than all of the Units
in any Equipment Group (as defined in the Lease), 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 January 2,
2004, 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, the
Make-Whole Amount, if any. 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 will terminate
with respect to such Terminated Units and the obligation of the Company
thereafter to make rent payments with respect thereto shall cease. (Lease,
Sections 3.6, 10.1, 10.2 and 10.4, Indenture, 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. (Lease,
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 July 2, 2006 any or all of such Units subject to the Lease
at the option prices set forth in the Lease. 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
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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 Indenture. (Lease, Section 22.1) See
"Description of the Equipment Notes -- Prepayment."
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 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 (i) the Rent Payment
Date immediately following the date the Company delivers notice of such election
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. 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. (Lease, 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). (Lease, 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
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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 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 under
any Lessee Agreement (other than 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, (h) failure of the Owner Trustee
to effect a mandatory refinancing of the Equipment Notes held by Pass Through
Trust 1996-A2 and (i) the occurrence of certain events of bankruptcy,
reorganization or insolvency of the Company. (Lease, Section 14)
If a Lease Event of Default under the Lease has occurred and is continuing,
and the 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. (Lease, Section 15)
THE PARTICIPATION AGREEMENT
The Company is required to indemnify the 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 the Owner Participant for the loss of
depreciation deductions and certain other benefits allowable for certain income
tax purposes with respect to the Equipment. (Participation Agreement, Section 7)
Subject to certain restrictions, the Owner Participant may transfer its
beneficial interest in the related owner trust.
The Participation Agreement provides that if the Owner Participant or any
affiliate thereof (other than the initial 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 Equipment for a
purchase price equal to the greater of the Termination Value or the then
appraised fair market value, each calculated as of the designated Special
Distribution Date, plus certain other amounts including, if applicable, the
Make-Whole Amount. If the Company elects to exercise its right
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to purchase the Equipment, unless the Company elects to assume the Equipment
Notes on a full recourse basis, the purchase price shall be used to prepay the
Equipment Notes and the Make-Whole Amount shall be paid. The Participation
Agreement requires the Owner Trustee to effect a refinancing of the Equipment
Notes held by Pass Through Trust 1996-A2 on or prior to the final distribution
date for the Pass Through Certificates issued thereunder. See "Description of
the Equipment Notes -- Prepayment." (Participation Agreement, Section 6.9)
Under the Participation Agreement, the Company is prohibited from
consolidating or merging with or into any other corporation or transferring
substantially all of its assets to another 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 Lease and of the
Indenture Trustee under the Indenture. (Participation Agreement, Section 6.8)
DESCRIPTION OF THE ETCS
The Company ETCs are to be issued under and pursuant to the provisions of
the Company Trust Agreement between the Company and The First National Bank of
Chicago, as trustee (the "Equipment Trust Trustee"), creating Union Tank Car
Company Equipment Trust (Series 26) (the "Company Trust"). The Procor ETC is to
be issued under and pursuant to the provisions of the Procor Trust Agreement
between Procor and the Equipment Trust Trustee, creating Procor Limited
Equipment Trust (Series 26-Can) (the "Procor Trust"). 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 ETCs and the Trust Agreements. Citations to the relevant
sections of the Trust Agreements appear below in parentheses.
ISSUANCE
The Company ETCs will be limited to $11,441,000 aggregate principal amount,
and the Procor ETC will be limited to $2,790,000 aggregate principal amount. The
Company ETCs and the Procor ETC will be issued against the deposit with the
Equipment Trust Trustee by the Pass Through Trustee of like amounts of Deposited
Cash. The Company ETCs will represent an interest equal to the aggregate
principal amount thereof in the Company Trust, and the Procor ETC will represent
an interest equal to the principal amount thereof in the Procor Trust.
PAYMENT OF PRINCIPAL AND INTEREST
The ETCs, which will not amortize as to principal, mature on July 2, 2006.
Interest will be payable on the unpaid principal amount of the ETCs at the rate
of 7.21% per annum on January 2 and July 2 of each year, commencing January 2,
1997. (Section 2.02)
GUARANTIES
The Company will fully and unconditionally guarantee (i) the payment as and
when due of the principal of and interest on the Company ETCs and (ii) the due
and punctual distribution to Certificateholders of principal and interest
payable in respect of the Procor ETC and the due and punctual performance by
Procor of its obligations under the Procor Trust Agreement. For a description of
the Company's guarantee of Procor's obligations under the Procor Trust
Agreement,
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see "Description of the Pass Through Certificates--Guarantee." Procor will fully
and unconditionally guarantee the payment as and when due of the principal of
and interest on the Procor ETC.
REDEMPTION
The ETCs are not redeemable prior to maturity.
SECURITY
The Company Trust Agreement will provide for the sale by the Company to the
Equipment Trust Trustee of railway tank cars and other rail cars of the types
used in the Company's business having an estimated cost of approximately
$14,301,000(125% of the aggregate principal amount of the Company ETCs).
(Section 3.01) The Procor Trust Agreement will provide for the sale by Procor to
the Equipment Trust Trustee of railway tank cars and other rail cars of the
types used in Procor's business having an estimated cost of approximately
$3,488,000(125% of the aggregate principal amount of the Procor ETC). (Section
3.01) None of the Equipment to be initially subject to the Company Trust or the
Procor Trust will have been in use prior to 1995. For the purpose of determining
the cost of any unit of Equipment built by the Company or Procor, so-called "car
builder's cost" (which includes direct cost of labor, material and overhead, but
excludes any manufacturing profit) will be used; otherwise the actual cost to
the Company or Procor will be used. (Section 1.01) Of the Equipment which the
Company and Procor initially propose to subject to the Company Trust and the
Procor Trust, all of the railway tank cars have been or will be built either by
the Company or Procor, and all of the other rail cars have been built by other
manufacturers.
When and as any of the Trust Equipment shall be delivered to the Equipment
Trust Trustee, the Equipment Trust Trustee will pay to the Company or Procor, as
applicable, out of Deposited Cash an amount which will not exceed 80% of the
aggregate cost (without deduction for depreciation) of such Trust Equipment, and
the balance of the cost will be paid by the Equipment Trust Trustee from advance
rentals paid to the Equipment Trust Trustee by the Company or Procor, as
applicable. (Sections 3.01, 3.02, 3.03) Until so paid out, Deposited Cash and
other funds held by the Equipment Trust Trustee pending delivery to it of Trust
Equipment may be invested, at the risk of the Company or Procor, as applicable,
in direct obligations of the United States, in certain obligations guaranteed by
the United States, in certificates of deposit or time deposits or in prime
commercial paper. (Sections 1.01, 8.04)
The Trust Agreements will contain provisions requiring the Company and
Procor to cause such agreements and each supplement thereto, promptly after the
execution and delivery thereof, to be recorded with the Surface Transportation
Board of the Department of Transportation and the Registrar General of Canada.
In addition, the Company and Procor will be required to take similar actions in
all other jurisdictions required by law or reasonably requested by the Equipment
Trust Trustee for the purposes of proper protection of the Equipment Trust
Trustee's title to the Trust Equipment subject thereto and the rights of the
holders of the ETCs; provided, however, that the Company and Procor shall not be
required to so record in any jurisdiction if (1) in the opinion of the Company
or Procor, as applicable, such recording would be unduly burdensome, and (2)
after giving effect to such failure to record, the Company or Procor, as
applicable, has taken all action required by law to protect the title of the
Equipment Trust Trustee to Trust Equipment subject to the Company Trust or the
Procor Trust having a value (defined as the greater of (a) the actual value of
such Trust Equipment and (b) the cost thereof less 1/20th of such cost for each
year the Trust Equipment has been in use) of not less than 90% of the value of
all such Trust Equipment. (Section 6.04)
The Company Trust Agreement will provide for the lease to the Company of
all the Trust Equipment subject to such agreement for a period commencing on May
29, 1996 with respect to Trust Equipment sold to the Equipment Trust Trustee on
such date and on the date (which shall be not later than June 30, 1996) on which
the other Trust Equipment is sold to the Equipment Trust
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Trustee and ending July 2, 2006. The rent and other amounts payable by the
Company will be sufficient to enable the Equipment Trust Trustee to pay when due
the principal of and interest on the Company ETCs, as well as all the expenses
of the Company Trust and certain other charges. At the termination of the lease
and after all payments due or to become due from the Company under the Company
Trust Agreement shall have been fully made, such payments shall be applied and
treated as purchase money as the full purchase price of the Trust Equipment, and
title to all Trust Equipment held in the Company Trust shall vest in the
Company. (Sections 4.01, 4.04, 4.05)
The Procor Trust Agreement will provide for the conditional sale to Procor
of all the Trust Equipment subject to such agreement and will obligate Procor to
make payments to the Equipment Trust Trustee during the period commencing on May
29, 1996 and ending July 2, 2006. The payments in respect of the purchase of the
Trust Equipment and other amounts payable will be sufficient to enable the
Equipment Trust Trustee to pay when due the principal of and interest on the
Procor ETC, as well as all the expenses of the Procor Trust and certain other
charges. After all payments due or to become due from Procor under the Procor
Trust Agreement shall have been fully made, such payments shall be deemed to
represent payment of the full purchase price for Procor's purchase of the Trust
Equipment, and title to all Trust Equipment held in the Procor Trust shall vest
in Procor. (Sections 4.01, 4.04, 4.05)
Each Trust Agreement will permit the possession and use of the Trust
Equipment in the Company's or Procor's business, as applicable, including the
sublease thereof to others subject to the terms and conditions of such equipment
trust agreement. (Section 4.09)
The Trust Equipment subject to the Company Trust Agreement will not secure
the payment of the Procor ETC, and the Trust Equipment subject to the Procor
Trust Agreement will not secure the payment of the Company ETCs. The Trust
Equipment subject to the Company Trust Agreement will secure the Company ETC
issued on May 29, 1996 as well as the Company ETC to be issued not later than
June 30, 1996, and a default under either Company ETC will constitute a default
under the other Company ETC.
MAINTENANCE, RELEASE AND SUBSTITUTION OF TRUST EQUIPMENT
The Company and Procor will be required to maintain and keep the relevant
Trust Equipment in good order and proper repair unless and until it becomes worn
out, unsuitable for use, lost or destroyed (a "Casualty Occurrence"). The Trust
Agreements will provide that, whenever Trust Equipment having a value of
$250,000 shall have suffered a Casualty Occurrence, the Company or Procor, as
applicable, shall either deposit with the Equipment Trust Trustee an amount in
cash equal to the value of such Trust Equipment as of the date of the Casualty
Occurrence or convey to the Equipment Trust Trustee units of Equipment with a
value at least equal to the value of such Trust Equipment as of the date of the
Casualty Occurrence. (Section 4.08)
Each Trust Agreement will provide that if the aggregate cost of the Trust
Equipment initially delivered to the Equipment Trust Trustee by the Company or
Procor, as applicable, shall exceed 125% of the aggregate principal amount of
the relevant Company ETC or the relevant Procor ETC, the Equipment Trust
Trustee, upon request of the Company or Procor, as applicable, shall release
Trust Equipment from the Company Trust or the Procor Trust, as applicable,
having an aggregate cost of not more than the amount of such excess. (Section
3.01)
Each Trust Agreement will provide for the release by the Equipment Trust
Trustee of any Trust Equipment upon request of the Company or Procor, as
applicable, and upon (a) the conveyance to the Equipment Trust Trustee of other
Equipment (irrespective of when first put into use) of value not less than the
value of the Trust Equipment to be released or (b) the payment to the Equipment
Trust Trustee of cash in an amount not less than the value of the Trust
Equipment to be released. Any cash so deposited (and any cash deposited as
provided in the second preceding paragraph) will be paid over by the Equipment
Trust Trustee to the Company or Procor, as applicable, against
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the conveyance to the Equipment Trust Trustee of additional Equipment having a
value not less than the amount of cash to be paid over. (Sections 4.03, 4.07)
INFORMATION CONCERNING THE EQUIPMENT TRUST TRUSTEE
The First National Bank of Chicago will be the Equipment Trust Trustee
under each Trust Agreement. The First National Bank of Chicago will also be the
Pass Through Trustee and the Indenture Trustee. See "Description of the Pass
Through Certificates -- Information Concerning the Pass Through Trustee."
EQUIPMENT TRUST DEFAULTS AND PROVISIONS RELATING THERETO
Equipment Trust Defaults will be defined in each Trust Agreement as being:
default for more than 10 Business Days in the payment of any rental payable
under the Company Trust Agreement or any amount payable under the Procor Trust
Agreement; any unauthorized assignment or transfer of the Company's or Procor's
rights under such Trust Agreement, continuing as provided therein; any
unauthorized transfer, sublease or parting with the possession of any of the
Trust Equipment, continuing as provided therein; any failure or refusal to
perform any other covenant in such Trust Agreement for the shorter of (i) 60
days after the Equipment Trust Trustee shall have demanded in writing such
performance and (ii) 30 days after the Company or Procor has knowledge of any
such failure; certain events of bankruptcy; or the termination of the lease
provided for in the Company Trust Agreement or the security interest provided
for in the Procor Trust Agreement by operation of law or by the Equipment Trust
Trustee in the event of any unauthorized assignment or transfer of the Company's
or Procor's rights under such equipment trust agreement or any unauthorized
transfer or sublease of any of the Trust Equipment. (Section 5.01) The
appointment of a receiver or trustee in bankruptcy or reorganization for the
Company or Procor or for their respective property will be deemed to be an
unauthorized assignment if, prior to the exercise of the remedies of the
Equipment Trust Trustee under such Trust Agreement, such receiver or trustee
shall not be discharged or duly assume the Company's or Procor's obligations
under such Trust Agreement. (Section 4.09) In addition, (i) the Company Trust
Agreement provides that a failure by the Company to perform in respect of its
guarantee of the due and punctual distribution to Certificateholders of
principal and interest payable in respect of the Procor ETC and the due and
punctual performance by Procor of its obligations under the Procor Trust
Agreement will constitute an Equipment Trust Default under the Company Trust
Agreement, and (ii) the Procor Trust Agreement provides that certain events of
bankruptcy of the Company will constitute an Equipment Trust Default under the
Procor Trust Agreement. Each Trust Agreement will provide that the Equipment
Trust Trustee shall promptly after the occurrence of any Equipment Trust Default
thereunder known to it, give to the holders of the Company ETCs or the Procor
ETC, as applicable, notice of the occurrence thereof. However, unless such
default is the failure to make payments in respect of the principal of or
interest on an ETC, the Equipment Trust Trustee shall be protected in
withholding such notice if and so long as it in good faith determines that the
withholding of such notice is in the interest of the holders of the defaulted
ETC. (Section 5.07)
In the event of the bankruptcy or reorganization of the Company, the right
of the Equipment Trust Trustee to repossess or dispose of Trust Equipment
subject to the Company Trust Agreement would be subject to the provisions of the
Bankruptcy Code of 1978, as amended, applicable to industrial companies
generally, and not those provisions applicable to railroads, particularly
Section 1168 thereof. In the event of the bankruptcy or reorganization of
Procor, the right of the Equipment Trust Trustee to repossess or dispose of
Trust Equipment subject to the Procor Trust Agreement would be subject to the
provisions of the Canadian federal Bankruptcy and Insolvency Act and the
Companies' Creditors Arrangement Act and applicable provincial legislation which
governs the manner in which creditors can enforce interests in the assets of a
debtor.
Upon the happening of an Equipment Trust Default, the Equipment Trust
Trustee or the holders of not less than a majority in aggregate principal amount
of the outstanding Company ETCs or
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Procor ETC, as applicable, may declare the principal thereof and all accrued
interest thereon to be due and payable. (Section 5.01) Subject to certain
conditions, however, any such declaration may be rescinded by the holders of a
majority in principal amount of the outstanding Company ETCs or the Procor ETC
upon payment of all sums then due otherwise than by acceleration. Prior to such
declaration, the holders of a majority in principal amount of the outstanding
Company ETCs or the Procor ETC may waive any past Equipment Trust Default,
except an Equipment Trust Default in the payment of rentals or conditional sale
payments due in respect of the principal of or interest on the Company ETCs or
the Procor ETC. (Section 5.04)
The right of any holder of the Company ETCs or the Procor ETC to institute
action for any remedy under the Company Trust Agreement or the Procor Trust
Agreement (except his right to enforce payment of the principal of and interest
on the Company ETCs or the Procor ETC when due if such enforcement will not
impair the Equipment Trust Trustee's title to the Trust Equipment) will be
subject to certain conditions precedent, including a written request by the
holders of not less than a majority in principal amount of the outstanding
Company ETCs or the Procor ETC to the Equipment Trust Trustee to take action,
and an offer to the Equipment Trust Trustee of reasonable indemnification
against liabilities incurred by it in so doing. (Section 5.09)
The Company Trust Agreement and the Procor Trust Agreement will require the
annual filing by the Company and Procor, respectively, with the Equipment Trust
Trustee of a certificate as to the absence of default and as to compliance with
the terms of the relevant equipment trust agreement. (Section 4.08)
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Neal, Gerber & Eisenberg, counsel to the Company, the
following summary accurately describes 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
discussion below is a summary for general purposes only and 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 Trusts are not indemnified for any federal income taxes that may be
imposed upon them, the imposition of which could significantly reduce the
amounts available for distribution to the Certificate Owners. For purposes of
this "Material 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
In the opinion of Neal, Gerber & Eisenberg, based upon an interpretation of
analogous authorities under currently applicable law, neither Pass Through Trust
will be classified as an association taxable as a corporation, but rather each
will be classified as a grantor trust for purposes of Sections 671 through 679
of the Internal Revenue Code of 1986, as amended (the "Code"), and each
Certificate Owner of each Pass Through Trust will be treated as owning a pro
rata undivided interest in each of the Equipment Notes and, in the case of Pass
Through Trust 1996-A2, the ETCs and the Procor ETC, and any other property held
in such Pass Through Trust.
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Each Certificate Owner of a Pass Through Trust will be required to report
on its federal income tax return its pro rata share of the entire income from
the Equipment Notes and, in the case of Pass Through Trust 1996-A2, the Company
ETCs and the Procor ETC, and any other property in such 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. The Make-Whole Amount described under "Description of the
Equipment 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, in the case of Pass Through Trust
1996-A2, the Company ETCs and the Procor ETC, 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, ETCs and other
property in proportion to their fair market values at the time of purchase of
the Pass Through Certificate. When each Pass Through Trust has acquired all the
Equipment Notes and, in the case of Pass Through Trust 1996-A2, the Company ETCs
and the Procor ETC, the purchase price paid for a Pass Through Certificate by an
original purchaser of such certificate will be allocated among the Equipment
Notes and, in the case of Pass Through Trust 1996-A2, the Company ETCs and the
Procor ETC in such Pass Through Trust in proportion to their respective purchase
prices.
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 and in the case of Pass Through Trust 1996-A2,
the Company ETCs and the Procor ETC 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
Assuming that the Equipment Notes, the Company ETCs, the Procor ETC and the
Pass Through Certificates are issued at prices equal to the respective face
amounts thereof, it is the opinion of Neal, Gerber & Eisenberg that neither the
Equipment Notes, the Company ETCs nor the Procor ETC will 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, Company ETC or Procor ETC held,
as the case may be, in a Pass Through Trust at a "market discount" to the extent
the remaining aggregate principal amount of such Equipment Note, Company ETC or
Procor ETC exceeds the Certificate Owner's tax basis allocable to such Equipment
Note, Company ETC or Procor ETC, provided such excess exceeds a prescribed de
minimis amount. If such excess exceeds the de minimis amount, the Certificate
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Owner will be subject to the market discount rules of Section 1276 of the Code
with regard to its interest in such Equipment Note, Company ETC or Procor ETC.
In the case of a sale or other disposition 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 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 certain of the Equipment Notes),
determination of the manner in which market discount is to be accrued has 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, Company ETC or Procor ETC held, as the case may
be, in a Pass Through Trust at a premium to the extent the purchaser's tax basis
allocable to such interest exceeds the remaining aggregate principal amount of
the Equipment Note, Company ETC or Procor ETC 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, Company ETC or Procor
ETC. Generally, such amortization is on a constant yield basis. However, in the
case of installment obligations (such as certain of 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
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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 reponing 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 CANADIAN TAX CONSEQUENCES
The following is, as of the date hereof, a fair and accurate summary of the
material Canadian federal income tax consequences to a Certificate Owner who is
a non-resident of Canada and who purchased Pass Through Certificates issued by
Pass Through Trust 1996-A2 in connection with this offering. This summary is
based on the current provisions of the Income Tax Act (Canada) (the "Tax Act")
and the regulations thereunder, counsel's understanding of the current
administrative practices published by Revenue Canada and all specific proposals
to amend the Tax Act and the regulations announced by the Minister of Finance
prior to the date hereof. This summary does not otherwise take into account or
anticipate changes in the law, whether by judicial, governmental or legislative
decision or action, nor does it take into account tax legislation or
considerations of any province or territory of Canada or any jurisdiction other
than Canada.
This summary is of a general nature only and is not intended to be, and
should not be construed as, legal or tax advice to any particular Certificate
Owner. Purchasers of Pass Through Certificates, Series 1996-A2 should consult
their own tax advisors with respect to their particular circumstances.
In the opinion of Osler, Hoskin & Harcourt, Canadian counsel for the
Company and Procor, the payment by Procor of interest and principal on the
Procor ETC to the Pass Through Trustee of Pass Through Trust 1996-A2 will be
exempt from Canadian withholding tax. Also, the payment by such Pass Through
Trustee of interest and principal on the Pass Through Certificates, Series
1996-A2 to a Certificate Owner will be exempt from Canadian withholding tax for
a Certificate Owner who is, or is deemed to be, a non-resident of Canada and
with whom the Company and Procor deal at arm's length, within the meaning of the
Tax Act, at the time of making the payment. For the purposes of the Tax Act,
related persons (as therein defined) are deemed not to deal at arm's length, and
it is a question of fact whether persons not related to each other deal at arm's
length.
In the opinion of Osler, Hoskin & Harcourt, no other taxes on income
(including taxable capital gains) will be payable under the Tax Act in respect
of the holding or disposition of the Procor ETC, or the receipt of interest
thereon, by the Pass Through Trustee of Pass Through Trust 1996-A2. Furthermore,
no other taxes on income (including taxable capital gains) will be payable under
the Tax Act in respect of the acquisition, holding or disposition of the Pass
Through Certificates, Series 1996-A2 or the receipt of interest thereon by
Certificate Owners who are, or are deemed to be, non-residents of Canada for
purposes of the Tax Act at any time during which they hold Pass Through
Certificates and who do not use or hold and are not deemed by such laws to use
or hold the Pass Through Certificates in carrying on business in Canada for the
purposes of the Tax Act, and, in the case of a Certificate Owner who carries on
an insurance business in Canada and elsewhere, whose Pass Through Certificates
are not effectively connected with its Canadian insurance business.
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CERTAIN ILLINOIS TAXES
The Pass Through Trustee is a national banking association with its
principal corporate trust office in Chicago, Illinois. Neal, Gerber & Eisenberg,
counsel to the Company, has advised the Company that, in its opinion, under
currently applicable law, (i) neither Pass Through Trust will 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, (ii) Certificate Owners who are not residents of or
otherwise subject to tax in the State of 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 the State of Illinois or the Equipment Trust
Trustee forecloses on the Trust Equipment and any of the Trust Equipment is
located in the State of Illinois or to the extent the Indenture Trust, the
Company Trust, the Procor Trust or the Pass Through Trust, as applicable,
engages in business in the State of Illinois as a result of such foreclosure.
Neither of the Pass Through Trusts nor the Certificate Owners will be
indemnified for any state or local taxes imposed on them, the imposition of
which on a Pass Through Trust could reduce the amounts available for
distribution to the Certificate Owners of such Pass Through Trust. In general,
should a Certificate Owner or a 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 each of Salomon
Brothers Inc and Morgan Stanley & Co. Incorporated an administrative exemption
(Prohibited Transaction Exemption 89-89, Exemption Application No. D-6446, et
al. 54 Fed. Reg. 42,589 (1989) as amended, 55 Fed. Reg. 48,939 (1990)) and
Prohibited Transaction Exemption 90-24 et al., Exemption Application No. D-8019
et al., 55 Fed. Reg. 20, 548 (1990) (collectively, the "Exemptions") 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 Exemptions 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.
53
<PAGE> 54
It is not clear whether the Exemptions apply 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 Exemptions. 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
Exemptions apply to the purchase, or whether any other prohibited transaction
exemption is available.
54
<PAGE> 55
UNDERWRITING
Under the terms of and subject to the conditions contained in an
Underwriting Agreement dated the date hereof, Salomon Brothers Inc and Morgan
Stanley & Co. Incorporated (the "Underwriters") have agreed to purchase from the
Pass Through Trustee the principal amount of Pass Through Certificates set forth
opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITER PASS THROUGH CERTIFICATES
- ---------------------------------------------------------------------- -------------------------
<S> <C>
Salomon Brothers Inc.................................................. $ 56,005,000
Morgan Stanley & Co. Incorporated..................................... 56,004,000
--------
Total....................................................... $ 112,009,000
========
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Pass Through Certificates is subject to,
among other things, the approval of certain legal matters by their counsel and
certain other conditions. The Underwriters are obligated to take and pay for all
of the Pass Through Certificates to be purchased by them if any are taken.
The Underwriters propose to offer all or part of the Pass Through
Certificates directly to the public at the public offering prices 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 amounts set forth below. The
Underwriters may allow, and such dealers may reallow, concessions not in excess
of the amounts set forth below to certain other dealers. After the initial
public offering, the public offering price and such concessions may be changed.
<TABLE>
<CAPTION>
PASS THROUGH CERTIFICATE CONCESSIONS TO DEALERS REALLOWANCE CONCESSIONS
- ----------------------------------------------- ---------------------- -----------------------
<S> <C> <C>
1996-A1........................................ 0.375% 0.250%
1996-A2........................................ 0.375% 0.250%
</TABLE>
The Company and Procor have agreed to indemnify the Underwriters and the
Underwriters have agreed to indemnify the Company and Procor against certain
liabilities, including liabilities under the Securities Act.
The Company and Procor do not intend to apply for listing of the Pass
Through Certificates on a national securities exchange, but has been advised by
the Underwriters that the Underwriters presently intend to make a market in the
Pass Through Certificates, as permitted by applicable laws and regulations. The
Underwriters are 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 either 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
Agreements. Certain legal matters with respect to United States and Illinois
income taxation are being passed upon for the Company by Neal, Gerber &
Eisenberg, and certain legal matters with respect to Canadian federal income
taxation are being passed upon for the Company and Procor by Osler, Hoskin &
Harcourt, Toronto, Ontario, Canada.
55
<PAGE> 56
EXPERTS
The consolidated financial statements of Union Tank Car Company appearing
in Union Tank Car Company's Annual Report (Form 10-K) for the year ended
December 31, 1995, as amended, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
56
<PAGE> 57
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,
the Indenture, the Lease or the Participation Agreement are qualified in their
entirety by reference to the definitions of such terms contained therein.
"Agreement" means each of the two separate Pass Through Trust Agreements,
one between the Company and The First National Bank of Chicago, as Pass Through
Trustee, and the other among The First National Bank of Chicago, as Pass Through
Trustee, the Company and Procor, pursuant to which the two separate Union Tank
Car Company 1996-A Pass Through Trusts will be formed.
"Basic Rent" means, with respect to any Unit, all scheduled rent payable by
the Company pursuant to the Lease.
"Business Day" means 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.
"Cede" means Cede & Co., as the nominee of The Depository Trust Company.
"Certificate Account" means the one or more accounts established and
maintained pursuant to an Agreement for the benefit of the Certificateholders of
such Pass Through Trust, for the deposit of payments representing Scheduled
Payments on the Equipment Notes, the Company ETCs and the Procor ETC held in
such 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.
"Company" means Union Tank Car Company and its wholly-owned subsidiaries
(unless the context otherwise requires).
"Company ETCs" means the equipment trust certificates issued pursuant to
the Company Trust Agreement.
"Company Trust Agreement" means the equipment trust agreement between the
Company and The First National Bank of Chicago, as trustee.
"Commission" means the Securities and Exchange Commission.
"ETCs" means the Company ETCs and the Procor ETC.
"Equipment" means the tank cars and the covered hopper cars subject to the
Lease.
"Equipment Cost" means the cost to the Owner Trustee of Equipment purchased
by it from the Company.
"Equipment Notes" means the equipment notes issued on a nonrecourse basis
by the Owner Trustee pursuant to the Indenture and Indenture Supplement.
"Equipment Trust Default" means each of the events designated as an "Event
of Default" in the Company Trust Agreement or the Procor Trust Agreement.
<PAGE> 58
"Equipment Trust Trustee" means The First National Bank of Chicago in its
capacity as trustee under each Trust Agreement, and its successors and assigns
thereunder.
"Event of Default" means, with respect to an Agreement, the occurrence and
continuance of an Indenture Default under the Indenture.
"Event of Loss" means each of the events designated as such in the Lease.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Indenture" means the Trust Indenture and Security Agreement to be entered
into between the Owner Trustee and the Indenture Trustee and pursuant to which
the Owner Trustee will issue the Equipment Notes with respect to the Equipment,
as the Trust Indenture and Security Agreement may from time to time be amended
or supplemented.
"Indenture Default" means each of the events designated as an "Indenture
Event of Default" in the 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 the Indenture, and its successors and
assigns thereunder.
"Lease" means the Lease Agreement to be entered into with respect to the
Equipment between the Owner Trustee and the Company, as such Lease Agreement 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 the Lease. For a description of certain events constituting Lease
Events of Default, see "Description of the Equipment Notes -- The Lease -- Lease
Events of Default."
"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 January 2 and July 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 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.
"Multiple Loss" means 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 the
Lease.
"Owner Participant" means the owner participant for whose benefit the Owner
Trustee owns Equipment leased to the Company pursuant to the Lease and its
permitted successors and assigns.
I-2
<PAGE> 59
"Owner Trustee" means State Street Bank and Trust Company of Connecticut,
National Association, not in its individual capacity but solely as trustee of
the owner trust for the benefit of the Owner Participant, its successors and
assigns.
"Participation Agreement" means the Participation Agreement to be entered
into in connection with the leveraged lease financing of the Equipment, as such
Participation Agreement may from time to time be amended or supplemented.
"Pass Through Certificate" means each of the Pass Through Certificates,
Series 1996-A to be issued by the Pass Through Trustee pursuant to the
Agreements.
"Pass Through Trust" means each of the two separate Union Tank Car Company
1996-A Pass Through Trusts to be formed pursuant to the Agreements.
"Pass Through Trustee" means The First National Bank of Chicago, in its
capacity as Pass Through Trustee under each Agreement, and each other person
which may from time to time act as successor Pass Through Trustee under such
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
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
I-3
<PAGE> 60
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 each Pass Through Trust, as of any Regular
Distribution Date or Special Distribution Date, the aggregate unpaid principal
amount of the Equipment Notes, and in the case of Pass Through Trust 1996-A2,
the Company ETCs and the Procor ETC, held in such Pass Through Trust plus any
amounts in respect of principal on such Equipment Notes, Company ETCs and the
Procor ETC held, as the case may be, 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, or in
the case of Pass Through Trust 1996-A2 Company ETCs. 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,
Company ETCs and the Procor ETC, as the case may be, and distribution thereof to
be made on that date.
"Pool Factor" means, for each 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 such
Pass Through Trust. The Pool Factor for each 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, and
in the case of Pass Through Trust 1996-A2, the Company ETCs and the Procor ETC,
held in such Pass Through Trust and distribution thereof to be made on that
date.
"Procor" means Procor Limited, a wholly-owned subsidiary of the Company.
"Procor ETC" means the equipment trust certificate issued pursuant to the
Procor Trust Agreement.
"Procor Trust Agreement" means the equipment trust agreement between Procor
and The First National Bank of Chicago, as trustee.
"Record Date" means the fifteenth day preceding a Regular Distribution Date
or Special Distribution Date.
"Registrar" shall have the meaning specified in Section 2.3 of the
Indenture.
"Registration Statement" means the Registration Statement of which this
Prospectus is a part.
"Regular Distribution Date" means January 2 and July 2 of each year,
commencing January 2, 1997.
"Scheduled Payment" means each payment of principal of or interest on an
Equipment Note, and in the case of Pass Through Trust 1996-A2, a Company ETC or
the Procor ETC, scheduled to be received by the Pass Through Trustee on January
2 or July 2 of each year, commencing January 2, 1997 until the final
distribution date for the relevant Pass Through Trust, which payment represents
the payment of principal at stated maturity of, or the scheduled payment or
prepayment of principal of, such Equipment Note, Company ETC or Procor ETC, or
the regularly scheduled payment of interest accrued on such Equipment Note,
Company ETC or Procor ETC.
"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 a Pass
Through Trust; any payment received by the Pass Through Trustee following an
Indenture Default in respect of the Equipment Notes, Company ETCs or the Procor
ETC held in a 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;
I-4
<PAGE> 61
payments received by the Pass Through Trustee on account of the sale by it of
such Equipment Notes, Company ETCs or the Procor ETC; and any return of escrowed
funds which have not been used to purchase Equipment Notes, Company ETCs or the
Procor ETC 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, Company ETCs or the Procor ETC been purchased with such
escrowed funds.
"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.
"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 June 30, 1996.
"Stipulated Loss Value" means, as to a Unit, the amount payable under the
Lease upon the occurrence of an Event of Loss with respect to such Unit.
"Termination Value" means, as to a Unit, the amount required to be received
by the Owner Trustee under the Lease following certain early terminations of the
Lease with respect to such Unit.
"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 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
I-5
<PAGE> 62
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.
"Trust Agreements" means the Company Trust Agreement and the Procor Trust
Agreement.
"Underwriters" means Salomon Brothers Inc and Morgan Stanley & Co.
Incorporated.
"Unit" means each rail car subject to the Lease.
I-6
<PAGE> 63
NO DEALER, SALESPERSON 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 UNDERWRITERS. 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 Trusts...... 12
Description of Payment Flows.............. 13
Use of Proceeds........................... 15
The Company............................... 16
Capitalization............................ 17
Selected Financial Information............ 18
Description of the Pass Through
Certificates............................ 19
Description of the Equipment Notes........ 33
Description of the ETCs................... 45
Material Federal Income Tax
Consequences............................ 49
Certain Canadian Tax Consequences......... 52
Certain Illinois Taxes.................... 53
ERISA Considerations...................... 53
Underwriting.............................. 55
Legal Opinions............................ 55
Experts................................... 56
Glossary of Certain Terms...........Appendix I
</TABLE>
UNTIL AUGUST 20, 1996 (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.
$112,009,000
UNION TANK CAR
COMPANY
1996-A
PASS THROUGH
TRUSTS
PASS THROUGH CERTIFICATES,
SERIES 1996-A
SALOMON BROTHERS INC
MORGAN STANLEY & CO.
INCORPORATED
PROSPECTUS
DATED MAY 21, 1996
