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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GENERAL AMERICAN RAILCAR CORPORATION II
(Exact Name of Registrant as Specified in its Charter)
DELAWARE -
--------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
500 WEST MONROE STREET
CHICAGO, ILLINOIS 60661
(312) 621-6451
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
DAVID B. ANDERSON, ESQ.
GATX CORPORATION
500 WEST MONROE STREET
CHICAGO, ILLINOIS 60661
(312) 621-6495
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES TO:
JENNIFER R. EVANS, ESQ. TRAYTON M. DAVIS, ESQ.
COURTNEY A. WILSON, ESQ. Milbank, Tweed, Hadley & McCloy
Vedder, Price, Kaufman & Kammholz 1 Chase Manhattan Plaza
222 North LaSalle Street New York, New York 10005
Suite 2600 (212) 530-5349
Chicago, Illinois 60601
(312) 609-7500
___________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
___________________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
___________________________
CALCULATION OF REGISTRATION FEE
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PROPOSED
AMOUNT MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE/(1)/ FEE/(1)/
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<S> <C> <C> <C>
Pass Through Certificates, Series 1998-1....... $120,000,000 $120,000,000 $35,400
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(1) Estimated pursuant to Rule 457 solely for the purpose of calculation of the
amount of the registration fee.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED July 8, 1998
PROSPECTUS
$120,000,000
GENERAL AMERICAN RAILCAR CORPORATION II
1998-1 PASS THROUGH TRUST
PASS THROUGH CERTIFICATES, SERIES 1998-1
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in the General American Railcar Corporation II 1998-1 Pass
Through Trust (the "Pass Through Trust") to be formed pursuant to a pass through
trust agreement between General American Railcar Corporation II (the "Company"),
a wholly-owned special purpose subsidiary of General American Transportation
Corporation ("GATC"), and The First National Bank of Chicago, as Pass Through
Trustee (the "Pass Through Trustee"). The property of the Pass Through Trust
will consist of $_______________ aggregate principal amount of equipment notes
(the "Equipment Notes") to be issued on a nonrecourse basis by the trustee of
one or more owner trusts (the "Owner Trustee") in connection with one or more
leveraged lease transactions to finance in each case not more than 80% of the
cost of certain railroad tank cars and covered hopper cars (each railcar an
"Equipment Unit" or "Unit" and, collectively, the "Equipment") that will be
purchased in each transaction by the applicable Owner Trustee from the Company
and leased back to the Company. Amounts unconditionally payable under each
lease will be sufficient to pay in full when due all payments of principal of,
if any, and interest on, the related Equipment Notes held in the Pass Through
Trust. The Equipment Notes are not obligations of, nor are they guaranteed by,
the Company.
(continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE PASS THROUGH
CERTIFICATES.
THE PASS THROUGH CERTIFICATES ARE NOT OBLIGATIONS OF, NOR GUARANTEED BY,
THE COMPANY OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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FINAL
PASS THROUGH PRINCIPAL INTEREST INITIAL PRINCIPAL DISTRIBUTION PRICE TO
CERTIFICATES AMOUNT RATE DISTRIBUTION DATE/(1)/ DATE/(1)/ PUBLIC/(2)(3)/
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1998-1............. $ % _______ 20, ____ September 20, 2020 100%
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(1) Based on the Rated Amortization Schedule. The initial principal
distribution date and final distribution date based on the Scheduled
Amortization Schedule are __________ 20, ____, and September 20, 2017,
respectively.
(2) Plus accrued interest, if any, from __________, 1998.
(3) The underwriting commission is $_______, which constitutes _____ of the
principal amount of the Pass Through Certificates. The underwriting
commission, and certain other expenses estimated at $__________, will be
payable by the Owner Trustees in the leveraged lease transactions. All of
the proceeds from the sale of the Pass Through Certificates will be used to
purchase the Equipment Notes.
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 Milbank, Tweed, Hadley & McCloy, counsel
for the Underwriters. It is expected that delivery of the Pass Through
Certificates in book-entry form will be made on or before __________, 1998
through the facilities of The Depository Trust Company, against payment therefor
in immediately available funds.
SALOMON SMITH BARNEY MORGAN STANLEY DEAN WITTER
The date of this Prospectus is __________, 1998
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Interest paid on the Equipment Notes held in the Pass Through Trust will be
passed through to the Certificateholders on the 20th day of each month,
commencing on September 20, 1998, at the rate per annum set forth above and the
principal of the Equipment Notes held in the Pass Through Trust is expected to
be paid and passed through to the Certificateholders in scheduled amounts, if
any, on the 20th day of certain months, commencing on __________, 1998.
The Equipment Notes will have a Rated Amortization Schedule and a Scheduled
Amortization Schedule, as described herein. Failure to pay interest on the
Equipment Notes or to pay principal on a cumulative basis in accordance with the
Rated Amortization Schedule will constitute an Event of Default. Failure to pay
principal on the Equipment Notes on a cumulative basis in accordance with the
Scheduled Amortization Schedule will not constitute an Event of Default but will
result in a premium being due and payable, as described herein. The Equipment
Notes will mature, based upon the Scheduled Amortization Schedule, on September
20, 2017, and will mature, based upon the Rated Amortization Schedule, on
September 20, 2020. Although neither the Pass Through Certificates nor the
Equipment Notes are direct obligations of, or guaranteed by, the Company, the
amounts of Basic Rent (as defined herein) unconditionally payable by the Company
under the leases are intended to be sufficient to pay in full when due all
payments of principal and interest on the related Equipment Notes in accordance
with the Scheduled Amortization Schedule and the expenses of the Owner Trustees
and the Pass Through Trustee. The Equipment Notes, however, represent
obligations of the applicable Owner Trust and do not represent obligations of,
and are not guaranteed by, the Company, GATC or any affiliate thereof.
In each transaction, the applicable Equipment Notes will be issued under an
indenture and will be secured by a security interest in the Equipment leased by
the Company under the related 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.
___________________________
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PASS THROUGH
CERTIFICATES, INCLUDING OVERALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN THE PASS THROUGH CERTIFICATES, AND THE IMPOSITION OF A PENALTY
BID DURING AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Pass Through Certificates. This Prospectus, which forms a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information pertaining to the Pass Through Certificates and the Company,
reference is made to the Registration Statement. Any statement contained herein
concerning the provisions of any document is not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
The Company will be subject to informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will file reports and other information with the Commission following
this offering. 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, DC 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, Suite 1300, 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, DC 20549 at prescribed rates. Such material
also may be accessed electronically by means of the Commission's web site on the
Internet at http://www.sec.gov, containing reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
Other than the pro forma balance sheet giving effect to the completion of
this offering, no separate financial statements of the Company have been
included or incorporated by reference herein. The Company does not consider
that such financial statements would be material to holders of the Certificates
because the Company is a newly-formed special purpose entity, has no independent
operations and will not engage in any activity other than leasing the Equipment.
In addition, the Company is a wholly-owned subsidiary of GATC which is itself a
reporting company under the Exchange Act.
REPORTS TO CERTIFICATEHOLDERS BY THE TRUSTEE
The First National Bank of Chicago, as trustee under the Pass Through Trust
Agreement, will provide to Certificateholders certain periodic statements
concerning distributions made with respect to the Pass Through Trust. See
"Description of the Pass Through Certificates -- Statements to
Certificateholders."
i
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus or incorporated by reference
herein. For a description of certain terms used in this Prospectus, please see
the Glossary attached to this Prospectus as Appendix A.
TRANSACTION OVERVIEW
On the Closing Date of the offering of the Pass Through Certificates (the
"Offering"), General American Transportation Company ("GATC") will sell the
Equipment to General American Railcar Corporation II (the "Company"). The
Equipment is subject to leases entered into between GATC and its customers. In
one or more separate leveraged lease transactions (the "Leases") each owner
trust (an "Owner Trust") will acquire a diversified portfolio of the Equipment
from the Company financed, in each case, not more than 80% by the sale of
equipment notes (collectively, the "Equipment Notes") to the Pass Through Trust
by the Owner Trustee of the applicable Owner Trust (not in its individual
capacity but solely as Owner Trustee) and at least 20% from an equity investment
in such Owner Trust by one or more owner participants. The proceeds of the
issuance of the Pass Through Certificates will be used by the Pass Through Trust
to finance its purchase of Equipment Notes. Pursuant to Leases between the
Company and each Owner Trust, the Company will lease back from each Owner Trust
the Equipment purchased by such Owner Trust.
Pursuant to the Operation, Maintenance, Servicing and Remarketing Agreement
(the "Management Agreement"), GATC will act as the manager of the fleet of
railcars leased by the Company and will perform, on behalf of the Company, all
services incidental to the management of the Company's fleet. Rental payments
in respect of the Leases are expected to be, in the aggregate, sufficient to
pay, among other things, interest and principal due in respect of the Equipment
Notes according to the Scheduled Amortization Schedule (as defined herein) and
all fees and expenses of the Pass Through Trustee and the Owner Trustee. The
Pass Through Certificates and the Equipment Notes represent obligations of the
Pass Through Trust and the Owner Trusts, respectively, and do not represent
obligations of, and are not guaranteed by, the Company or GATC or any of their
affiliates.
THE EQUIPMENT
The equipment consists of 2,443 railroad tank cars and covered hopper cars
newly manufactured by Trinity Industries Inc. ("Trinity") during 1997 or 1998.
The fleet is composed of approximately 74% tank cars and 26% hopper cars. Tank
cars are specialized railcars used for the transportation of a variety of
products including chemicals, semi-gaseous or gaseous products and other types
of industrial liquids. Covered hopper cars primarily carry plastic pellets,
cement, grain and other granular products. The Equipment is further classified
into one of six categories of railcars: general covered hopper, general service
tank, high pressure tank, specialty covered hopper, alloy and specialty chemical
(each, a "Car Type"). Each Owner Trust will purchase from the Company a
portfolio of the Equipment (each, an "Equipment Group"), consisting of a diverse
selection of Car Types. See "The Equipment."
THE COMPANY
General American Railcar Corporation II, a Delaware corporation, was
organized in July 1998 as a wholly-owned special purpose subsidiary of GATC,
solely for the purposes of (i) entering into one or more sales and leasebacks of
the Equipment, (ii) subleasing the Equipment to its customers pursuant to
subleases and (iii) engaging in such other activities as are necessary,
convenient or incidental thereto. The Company has taken steps in structuring
the transactions contemplated hereby so as to avoid any consolidation of its
assets and liabilities with those of GATC in a GATC bankruptcy proceeding. See
"The Company" and "Risk Factors--Certain Legal and Bankruptcy Considerations--
Bankruptcy of GATC." The Company will be capitalized with equity of at least
$700,000 at the Closing Date. The Company's principal executive office is
located at 500 West Monroe Street, Chicago, Illinois 60661 (telephone: 312-621-
6451).
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THE FULL SERVICE RAILCAR LEASING BUSINESS
The Company is engaged in the business of leasing specialized railcars to
its customers primarily under full service leases. Under full service leases
the lessor maintains and services the railcars subject to the lease, pays ad
valorem taxes and provides several other ancillary services, including mileage
credit audit services. Pursuant to the Management Agreement, the Manager will
provide these services on the Company's behalf to the Company's customers. See
"The Management Agreement" and "The Manager." The primary customers of the full
service railcar leasing industry are large industrial companies that ship and
use food products, chemicals, petroleum and other commodities. The full service
railcar leasing industry is comprised principally of GATC, Union Tank Car
Company ("Union Tank Car"), General Electric Railcar Service Corporation ("GE
Railcar"), Shippers Car Line division of ACF Industries, Incorporated ("ACF"),
Procor Limited ("Procor") and several smaller companies, including the Company.
See "Railcar Leasing Industry."
THE MANAGER
GATC is principally engaged in leasing specialized railcars, (primarily
tank cars), under full service leases and the management of railcars. Through
its wholly-owned subsidiary GATX Terminals Corporation ("Terminals"), GATC also
is engaged in the operation of public bulk liquid storage terminals and domestic
pipeline systems. GATC's principal executive office is located at 500 West
Monroe Street, Chicago, Illinois 60661 (telephone: 312-621-6200). GATC is a
wholly-owned subsidiary of GATX Corporation ("GATX").
THE SUBLEASES AND THE SUBLESSEES
The Company will sublease the Equipment to its customers (the "Sublessees")
pursuant to car service contracts and related riders (the "Subleases"). The
Sublessees all are, or were, prior to the assignment of the Subleases by GATC to
the Company, customers of GATC. Most, if not all, of the Sublessees will also
continue to be customers of GATC and/or other affiliates of GATC under separate
agreements with respect to other railcars. At the Closing Date, the Company
will have Subleases with 80 Sublessees whose businesses fall within the
chemical, petroleum, agriculture and mineral industries. Currently, 47.3% of
the Sublessees or their parent companies are rated BBB- or Baa3 or higher
(although the obligation of such Sublessees may not be guaranteed by their
parent companies) and 30.9% are unrated by the Rating Agencies. See "The
Sublessees-Rating of Sublessees." The Management Agreement will contain
provisions requiring the Manager to lease and re-lease the railcars it manages
on behalf of the Company without regard to whether such railcars are part of the
Company Fleet (as defined herein), or its own fleet or other fleets managed by
the Manager. However, there can be no assurance that the composition of the
pool of Sublessees will continue to have similar industry concentration, credit
quality and other characteristics to that of the initial Sublessees. See "The
Sublessees."
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[CHART OF TRANSACTION SCHEMATIC APPEARS HERE]
3
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SUMMARY OF PRINCIPAL AGREEMENTS
THE PASS THROUGH TRUST
AGREEMENT............................ The Pass Through Trust will be formed
pursuant to the Pass Through Trust
Agreement between the Pass Through
Trustee and the Company. The Pass
Through Trust will issue Pass Through
Trust Certificates in the Offering
and will use the proceeds of the
Offering to purchase Equipment Notes
from the Owner Trusts pursuant to the
Participation Agreements.
THE INDENTURES........................ Each Owner Trust will issue Equipment
Notes pursuant to an Indenture
between the related Indenture Trustee
and the related Owner Trustee. Each
Indenture provides for a Scheduled
Amortization Schedule and a Rated
Amortization Schedule on the
Equipment Notes as more fully
described under "Description of the
Equipment Notes--Principal and
Interest Payments--Principal."
THE PARTICIPATION AGREEMENTS.......... The Pass Through Trust will agree to
purchase the Equipment Notes from
each Owner Trust pursuant to a
Participation Agreement among the
Pass Through Trustee, the related
Owner Trustee, the respective Owner
Participant, the related Indenture
Trustee, the Company and the Manager.
Also, pursuant to the related
Participation Agreement, each Owner
Trust will agree to purchase an
Equipment Group from the Company.
Each Owner Trust will finance the
purchase of its Equipment Group with
the proceeds from the issuance of its
Equipment Notes.
THE LEASES............................ Each Owner Trustee will enter into a
Lease with the Company pursuant to
which the Company will lease the
Equipment Group owned by such Owner
Trustee and agree to make payments of
rent on such Equipment Group. The
payments of Basic Rent for each
Equipment Group are expected to be
sufficient to allow the related Owner
Trustee to make payments on the
related Equipment Notes in accordance
with the Scheduled Amortization
Schedule after payment of certain
expenses of the related Owner Trust.
THE MANAGEMENT AGREEMENT.............. The Company will enter into a
Management Agreement with GATC
pursuant to which GATC will perform,
on behalf of the Company, all of the
Company's obligations under its
Subleases with its customers and
provide other services necessary for
a company operating in the full
service railcar leasing industry.
Pursuant to the Management Agreement,
but subject to the direction of the
Company, GATC will also perform many
of the Company's operational
obligations under the other
agreements to which the Company is a
party.
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THE INTERCREDITOR AGREEMENT........... Pursuant to an Intercreditor
Agreement among the Company, the
Owner Trustees, the Indenture
Trustees, the Manager and the
Insurance Manager, the Company will
pledge to a Collateral Agent all of
its rights, title and interests in
certain documents to which it is a
party including the Subleases (as
defined herein), including the right
to receive any payments thereunder,
along with any amounts held in
certain accounts established by the
Collateral Agent. Each of the
parties to the Intercreditor
Agreement will agree that, so long as
any Equipment Notes are outstanding,
all amounts due to the Company,
including Sublease payments, will
flow through the Collateral Agent and
will be disbursed in accordance with
the terms of the Intercreditor
Agreement.
THE SUBLEASES......................... The Company will sublease the
Equipment to its customers pursuant
to car service contracts and related
riders (the "Subleases"). On the
Closing Date the Subleases will be
assigned to the Company by GATC.
RAILROAD MILEAGE CREDITS.............. Railroads pay cash credits to the
registered owners of the "marks" of
railcars with respect to the
railcars' mileage. The practice in
the railcar leasing industry is that
the party responsible for payment of
the shipping fees to the railroads
receives the benefit of these credits
(in this transaction, the
Sublessees). The "marks" with
respect to each Unit, as well as the
railcars in GATC's fleet and other
cars managed by GATC, are owned by
the General American Marks Company
("Marks Company"), a Delaware
business trust. All railroad mileage
credit payments will be made to the
Marks Company and then allocated to
the respective party in interest with
respect to the railcars as more fully
described under "Railcar Leasing
Industry - Railroad Mileage Credits,"
"The Management Agreement" and
"Collection and Application of the
Company's Cash Flows -Collection of
Railroad Mileage Credits."
GLOSSARY.............................. Included at the end of this
Prospectus as Appendix A is a
Glossary of certain of the
significant defined terms used herein.
THE OFFERING
SECURITIES OFFERED.................... $120,000,000 _____% General
American Railcar Corporation II Pass
Through Trust Certificates, Series
1998-1 in denominations of $100,000
and $1,000 integral multiples in
excess thereof.
RATINGS............................... It is expected that the Pass Through
Certificates will be issued with
ratings of Aa2 by Moody's Investors
Service, Inc. ("Moody's") and AA by
Standard & Poor's Ratings Services, a
division of McGraw-Hill Companies,
Inc. ("Standard & Poor's"). The
ratings on the Pass Through
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Certificates address only the payment of
interest when due and the payment of
principal on the Equipment Notes, which
will be passed through to
Certificateholders, according to the
Rated Amortization Schedule of the
Equipment Notes and do not address the
payment of principal in accordance with
the Scheduled Amortization Schedule or
any other faster rate or the payment of
any Make-Whole Amounts, Late Payment
Premiums or interest on overdue amounts.
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.
USE OF PROCEEDS....................... The proceeds from the sale of the Pass
Through Certificates will be used by the
Pass Through Trustee to purchase the
Equipment Notes from the Owner Trustees.
The Owner Trustees will use such
proceeds to finance not more than 80% of
the cost of the Equipment, representing
in the aggregate the entire debt portion
of one or more separate leveraged lease
transactions. See "Use of Proceeds."
PASS THROUGH TRUST PROPERTY........... The property of the Pass Through Trust
will consist of Equipment Notes issued
on a nonrecourse basis by the Owner
Trustees pursuant to one or more
separate leveraged lease transactions to
finance not more than 80% of the cost of
the Equipment. For a description of the
Equipment securing the Equipment Notes,
see "The Equipment." The Equipment Notes
will constitute the sole assets of the
Pass Through Trust.
PASS THROUGH CERTIFICATES:
SCHEDULED MATURITY DATE.............. September 20, 2017 which represents the
Regular Distribution Date (as defined
herein) on which the Owner Trustee of
the applicable Owner Trust will pay the
final installment of principal, which
will be passed through to
Certificateholders by the Pass Through
Trustee, if all payments of principal on
the related Equipment Notes are made in
accordance with the Scheduled
Amortization Schedule set forth in
Appendix B.
PASS THROUGH CERTIFICATES:
SCHEDULED WEIGHTED AVERAGE LIFE...... Assuming that payments on the Equipment
Notes are made in accordance with the
Scheduled Amortization Schedule, the
scheduled weighted average life of the
Pass Through Certificates will be ______
years.
PASS THROUGH CERTIFICATES:
RATED MATURITY DATE.................. September 20, 2020, which represents the
Regular Distribution Date by which the
Owner Trustee of the applicable Owner
Trust must pay all outstanding
principal, which will be passed through
to Certificateholders by the Pass
Through Trustee, on the related
Equipment Notes in accordance with the
Rated Amortization Schedule set forth in
Appendix B.
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PASS THROUGH CERTIFICATES:
DISTRIBUTIONS........................ Payments of interest on the Equipment
Notes are scheduled to be received by
the Pass Through Trustee on the 20th day
of each month (a "Regular Distribution
Date"), commencing September 20, 1998,
and are to be distributed to
Certificateholders on such dates.
Payments of principal on the Equipment
Notes held in the Pass Through Trust are
scheduled to be received in specified
amounts by the Pass Through Trustee on
certain Regular Distribution Dates
commencing _______20, _______, and are
to be distributed to the
Certificateholders on such dates.
Payments of principal, Make-Whole
Amount, if any, and interest on the
Equipment Notes resulting from
prepayments thereof, if any, will be
received and distributed on the 20th day
of any month (a "Special Distribution
Date") except in the case of a
refinancing which may occur on any
Business Day. See "Description of the
Pass Through Certificates--Payments and
Distributions."
PASS THROUGH CERTIFICATES:
INTEREST............................. Interest on the Pass Through
Certificates will be passed through to
the Certificateholders at the rate per
annum indicated on the cover of this
Prospectus, which is the same interest
rate borne by the Equipment Notes to be
held by the Pass Through Trust. Interest
will be calculated on the basis of a
360-day year of twelve 30-day months.
See "Description of the Pass Through
Certificates--General."
PASS THROUGH CERTIFICATES:
PRINCIPAL............................ Scheduled principal payments made on the
Equipment Notes will be passed through
to Certificateholders. The principal of
the Equipment Notes is payable monthly
in scheduled amounts (which may be zero)
according to the Scheduled Amortization
Schedule set forth in Appendix B. See
"--Equipment Notes: Scheduled
Amortization."
EQUIPMENT NOTES:
PROPERTY OF THE OWNER TRUSTS......... The assets of each Owner Trust will
consist of the Equipment owned by it and
the related Lease.
The Equipment Notes and the Pass Through
Certificates will not be obligations of,
or guaranteed by, the Pass Through
Trustee, any Indenture Trustee, any
Owner Trustee in its individual
capacity, the Collateral Agent, the
Company, GATC or any of their respective
affiliates. The Equipment Notes are the
obligations solely of the related Owner
Trust and not of the Owner Participants
or the Owner Trustees in their
individual capacities. The Pass Through
Certificates are the obligations solely
of the Pass Through Trust.
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EQUIPMENT NOTES:
INTEREST............................. Interest will be payable on each of the
Equipment Notes on the unpaid principal
amount thereof on the 20th day of each
month, or, if such date is not a
Business Day, the next succeeding
Business Day, commencing September 20,
1998.
EQUIPMENT NOTES:
SCHEDULED AMORTIZATION............... It is anticipated that the Company's
payments on the Leases will be made at a
rate sufficient to permit payment of
principal and interest on the Equipment
Notes in accordance with the Scheduled
Amortization Schedule. "Scheduled
Amortization" is the amount of principal
of the related Equipment Notes which an
Owner Trustee must have paid (on a
cumulative basis) through each Regular
Distribution Date in order to avoid the
payment of late payment premiums ("Late
Payment Premiums"). The "Scheduled
Amortization Amount" due on any Regular
Distribution Date will equal the excess
of (i) the cumulative amount of all
Scheduled Amortization which is required
to have been paid through and including
such Regular Distribution Date over (ii)
the cumulative amount of all principal
paid on the Equipment Notes prior to and
excluding such Regular Distribution
Date. Failure to pay principal in
accordance with the Scheduled
Amortization Schedule will not result in
a default under the Equipment Notes
(provided that the cumulative amount of
principal paid to date is at least equal
to the cumulative amount of principal
required to be paid to such date
pursuant to the Rated Amortization
Schedule), but will result in the
incurrence of Late Payment Premiums. The
Scheduled Amortization Schedule will be
adjusted to reflect any partial
prepayment of the Equipment Notes. See
"Description of the Equipment Notes--
Prepayments." For a description of
certain structuring assumptions used in
the transaction, see "Maturity, Payment
and Yield Considerations" and
"Structuring Assumptions."
EQUIPMENT NOTES:
RATED AMORTIZATION................... "Rated Amortization" is the minimum
amount of principal of the related
Equipment Notes which an Owner Trustee
must pay on or prior to each Regular
Distribution Date in order to avoid a
payment default under the applicable
Indenture. The "Rated Amortization
Amount" due on any Regular Distribution
Date will equal the excess, if any, of
(i) the cumulative amount of all Rated
Amortization which is required to have
been paid through and including such
Regular Distribution Date over (ii) the
cumulative amount of all principal paid
on the Equipment Notes prior to and
excluding such Regular Distribution
Date. The Rated Amortization Schedule
will be adjusted to reflect any partial
prepayment of the Equipment Notes. See
"Description of the Equipment Notes--
Prepayments."
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8
<PAGE>
- --------------------------------------------------------------------------------
EQUIPMENT NOTES:
LATE PAYMENT PREMIUMS.................. If the amount of principal paid on any
Regular Distribution Date is less than
the Scheduled Amortization Amount as
of such Regular Distribution Date,
then the applicable Owner Trustee will
be required to pay on the next Regular
Distribution Date a Late Payment
Premium. Late Payment Premiums will be
payable only on the difference between
(i) the greater of (a) the principal
amount of the Equipment Notes paid on
a Regular Distribution Date and (b)
the Rated Amortization Amount payable
on such Regular Distribution Date and
(ii) the Scheduled Amortization Amount
payable on such Regular Distribution
Date (such difference, a "Payment
Deficiency"), at a rate equal to 1.5%
per annum (the "Late Payment Rate").
See "Description of the Equipment
Notes--Principal and Interest
Payments--Late Payment Premium."
Late Payment Premiums will be payable
solely out of funds available after
providing for payment of certain
expenses and indemnities, all Basic
Rent under the Leases in an amount
sufficient to pay accrued and unpaid
interest and principal then due on the
Equipment Notes in accordance with the
Scheduled Amortization Schedule and
the equity portion of all scheduled
payments of Basic Rent due and payable
and after making the contributions
required to be made to certain reserve
accounts required to be maintained
pursuant to the Intercreditor
Agreement, and will be, in effect,
subordinate to such payments. The
ratings on the Pass Through
Certificates do not address the
payment of Late Payment Premiums. Any
deficiency in the payment of Late
Payment Premiums will bear interest at
the Late Payment Rate, and will be
included in the Late Payment Premiums
owing on subsequent Regular
Distribution Dates.
EQUIPMENT NOTES:
PREPAYMENT WITHOUT MAKE-WHOLE AMOUNT... The Equipment Notes may be prepaid in
whole or in part without payment of
the Make-Whole Amount under the
following circumstances:
(a) Upon the occurrence of an Event
of Loss (as defined herein) with
respect to an Equipment Unit, if
such Equipment Unit is not
replaced within 120 days after
knowledge of the Manager of such
Event of Loss, the portion of the
Equipment Notes related to such
Equipment Unit is subject to
prepayment without the payment of
any Make-Whole Amount.
(b) At the option of an Owner
Trustee, if under the related
Indenture any of the following
shall have occurred (i) one or
more Lease Events of Default
under the related Lease shall
have occurred and be continuing
for 180 days or more, (ii) the
Equipment Notes issued under such
Indenture shall have been
accelerated or (iii) the
applicable Indenture Trustee, as
assignee of the
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9
<PAGE>
- --------------------------------------------------------------------------------
related Lease, shall have
declared such Lease to be in
default and shall have commenced
the exercise of any significant
remedy in respect of the
Equipment Units under such Lease,
then such Owner Trustee may elect
to purchase all of the then
outstanding Equipment Notes
issued under such Indenture at a
price equal to the aggregate
unpaid principal amount thereof,
together with accrued interest
thereon, but without the payment
of any Make-Whole Amount.
See "Description of the Equipment
Notes--Prepayments."
EQUIPMENT NOTES:
PREPAYMENT WITH MAKE-WHOLE AMOUNT...... The Equipment Notes may be prepaid in
whole or in part with payment of the
Make-Whole Amount under the following
circumstances:
(a) In the event (i) the Company
elects to exercise its right to
terminate any Lease and purchase
an Equipment Group as a result of
a related Owner Participant or
any affiliate thereof being
engaged in a business that is in
competition with the Company's or
the Manager's railcar leasing
business and (ii) the Company
elects not to assume the related
Equipment Notes, such Equipment
Notes will be prepaid on a
Special Distribution Date
together with accrued interest
thereon, plus the Make-Whole
Amount (if any).
(b) In the event of a refinancing,
all (but not less than all) of
the Equipment Notes will be
prepaid on the date of such
refinancing, which may be any
Business Day. In such case the
prepayment price shall be equal
to the unpaid principal amount of
such Equipment Notes, together
with accrued interest thereon,
plus the Make-Whole Amount (if
any).
(c) If, at any time on or after 7th
anniversary of the Closing Date,
the Company elects to exercise
its right to terminate a Lease
with respect to one or more
Equipment Units within any
Equipment Group because such
Equipment Units have become
obsolete or surplus to the
Company's needs (the
"Obsolescence Termination
Option"), a portion of the
Equipment Notes issued with
respect to such Equipment Group
will be prepaid with the Make-
Whole Amount.
(d) If the Company exercises one or
more of its rights on an Early
Purchase Option Date to purchase
some or all of the Equipment
pursuant to the Leases (each, an
"Early Purchase Option") (and the
Company elects not to assume the
Equipment Notes), the related
portion of the Equipment Notes
will be prepaid with the Make-
Whole Amount.
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10
<PAGE>
- --------------------------------------------------------------------------------
(e) If under an Indenture all of the
following shall have occurred (i)
one or more Lease Events of Default
under the related Lease shall have
occurred and be continuing for less
than 180 days, (ii) the Equipment
Notes issued under such Indenture
shall not have been accelerated and
(iii) the applicable Indenture
Trustee, as assignee of the related
Lease, shall not have declared such
Lease to be in default and shall
not have commenced the exercise of
any significant remedy in respect
of the Equipment Units under such
Lease, then the related Owner
Trustee may elect to purchase all
of the then outstanding Equipment
Notes issued under such Indenture
at a price equal to the aggregate
unpaid principal amount thereof,
together with accrued interest
thereon, plus the Make-Whole
Amount.
See "Description of the Equipment
Notes--Prepayments" for a description
of the manner of computing the
Make-Whole Amount.
EQUIPMENT NOTES:
ASSUMPTION........................... In the event that the Company elects,
prior to the maturity of the
Equipment Notes, to purchase some or
all of an Equipment Group pursuant to
a related Early Purchase Option or as
a result of the related Owner
Participant or any affiliate thereof
being engaged in a business in
competition with the Company's or the
Manager's full service railcar
leasing business, the Company will
have the right to assume the related
Equipment Notes. In the event of
such an assumption, such Equipment
Notes will become the sole obligation
of the Company and would not in any
way represent obligations of GATC or
any of its affiliates, other than the
Company. See "Description of the
Equipment Notes--Assumption of
Equipment Notes Under Certain
Circumstances."
EQUIPMENT NOTES:
SECURITY............................. The Equipment Notes issued under each
Indenture will be equally and ratably
secured by (i) a perfected, first
priority security interest in the
Equipment leased by the Company under
the Lease relating to such Indenture,
(ii) a collateral assignment to the
applicable Indenture Trustee of
certain of the Owner Trustee's rights
under the Lease covering such
Equipment, including the right to
receive certain rental payments from
the Company in respect of such
Equipment pursuant to such Lease, and
(iii) a collateral assignment to the
applicable Indenture Trustee of
certain of the Owner Trustee's rights
under the Intercreditor Agreement,
including the right to receive
payments on the Leases, pro rata,
from the cash flows received by the
Collateral Agent from rent payable by
the Sublessees (after payment of
certain expenses and indemnities) and
certain reserve funds maintained by
the Collateral Agent. See
"Description of the
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Equipment Notes--Security" and "The
Intercreditor Agreement."
The Equipment Notes issued under the
Indentures are not cross-
collateralized and, consequently, any
Equipment Notes issued under an
Indenture will not be secured by any
of the Equipment securing another
Indenture or by the Lease related
thereto. There are no cross-default
provisions in the Indentures, and
events resulting in an Indenture Event
of Default under any particular
Indenture will not necessarily result
in an Indenture Event of Default under
any other Indenture. However, the
terms of the Indentures are identical
in all material respects and to the
extent that an Event of Default arises
under the terms of any Indenture, an
Event of Default may also arise under
the similar or same term in any other
Indenture.
RESERVE AND OTHER COLLATERAL ACCOUNTS... Pursuant to the Intercreditor
Agreement, the Collateral Agent will
establish a Liquidity Reserve Account,
a Stipulated Loss Value Deficiency
Account, a Special Reserves Account
and a Cash Trapping Account. See "The
Intercreditor Agreement." On the
Closing Date, the Liquidity Reserve
Account will be funded in the amount
of $500,000 out of the proceeds of the
capital contribution to the Company by
GATC. Thereafter, the Company will
fund the Liquidity Reserve Account
from available amounts with equal
monthly deposits of $42,000 until such
time as the balance in the Liquidity
Reserve Account shall equal
$2,000,000. The Cash Trapping Account
will also be initially funded in the
amount of $200,000 out of the proceeds
of GATC's capital contribution to the
Company. Thereafter, upon the
occurrence of certain Cash Trapping
Events the amounts which would
otherwise be available for payment of
the Incentive Component of the
Manager's fee and for distribution to
the Company will be accumulated and
held in the Cash Trapping Account, up
to an aggregate balance of $5,000,000,
so long as the Cash Trapping Event is
continuing. Amounts held in the Cash
Trapping Account will be released to
the Company, subject to a minimum
balance requirement of $200,000, when
no Cash Trapping Event or Cash
Trapping Hold is continuing. See
"Collection and Application of the
Company's Cash Flows--Cash Trapping
Events; Required Cash Trapping Amount;
Release From Cash Trapping Account."
THE CERTAIN COVENANTS................... The Company has agreed to certain
covenants in the transaction documents
which require the Company to (i)
maintain its separate legal existence,
(ii) maintain its status as a
bankruptcy-remote entity, (iii) not
consolidate or merge, (iv) not engage
in any other business, (v) limit
transactions with affiliates, (vi)
maintain insurance, (vii) not enter
into, as lessee, additional leases
without the consent of the Owner
Trustees and only after obtaining
Rating Agency
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12
<PAGE>
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Confirmation, and (viii) restrict the
extent to which the Equipment is used
outside the United States.
PASS THROUGH TRUSTEE AND INDENTURE The First National Bank of Chicago
TRUSTEE............................... will act as Pass Through Trustee, and
as paying agent and registrar for the
Pass Through Certificates. The First
National Bank of Chicago also will act
as the Indenture Trustee under each
Indenture.
FEDERAL INCOME TAX CONSIDERATIONS...... The Pass Through Trust will be
classified as a grantor trust for
federal income tax purposes, and each
Certificateholder will be treated as
the owner of a pro rata undivided
interest in each of the Equipment Notes
and any other property held in the Pass
Through Trust and will be required to
report on its federal income tax return
its pro rata share of income from such
Equipment Notes and such other property
in accordance with such
Certificateholder's method of
accounting. See "Federal Income Tax
Considerations."
ERISA CONSIDERATIONS................... The Pass Through Certificates, with
certain exceptions, are eligible for
purchase by employee benefit plans. See
"ERISA Considerations." Each
Certificateholder will be deemed to
have represented and warranted that
either (i) no plan assets have been
used to purchase such Pass Through
Certificate or (ii) the purchase and
holding of such Pass Through
Certificate is exempt from the
prohibited transaction restrictions of
Section 406 of ERISA (as defined
herein) and Section 4975 of the Code
(as defined herein). See "ERISA
Considerations." Each Plan fiduciary
(and each fiduciary for a governmental
or church plan subject to rules similar
to those imposed on Plans under ERISA)
should consult with its legal advisor
concerning an investment in any of the
Pass Through Certificates.
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13
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULED AND RATED AMORTIZATION SCHEDULES
The Scheduled Amortization and Rated Amortization for the Equipment Notes
as of the last Regular Distribution Date at the end of each year in which the
Equipment Notes are outstanding, are set forth below (see "Appendix B" for a
schedule of monthly amortization rates and Pool Factors (as defined herein)):
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION* RATED AMORTIZATION*
------------------------- ------------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL CUMULATIVE EXCESS OF
DATE PAYMENT BALANCE PAYMENT BALANCE SCHEDULED OVER RATED*
---- ----------- ----------- ----------- ----------- ------------------------
Closing $ $ $ $ $
<S> <C> <C> <C> <C> <C>
12/20/98
12/20/99
12/20/00
12/20/01
12/20/02
12/20/03
12/20/04
12/20/05
12/20/06
12/20/07
12/20/08
12/20/09
12/20/10
12/20/11
12/20/12
12/20/13
12/20/14
12/20/15
12/20/16
12/20/17
12/20/18
12/20/19
12/20/20
</TABLE>
___________
* May not total due to rounding.
- --------------------------------------------------------------------------------
14
<PAGE>
RISK FACTORS
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus or incorporated by reference
herein. Certain statements contained in this Prospectus, including statements
regarding the belief of the Company as to its future operating performance,
utilization rates and other statements contained in this Prospectus that are not
historical facts, are "forward-looking" statements within the meaning of U.S.
federal securities laws. Because such statements include risks and
uncertainties, actual results may differ materially from those anticipated in
such forward-looking statements as a result of certain factors, including those
set forth in "Prospectus Summary," "Risk Factors," "The Subleases," "The
Sublessees," "Collection and Application of the Company's Cash Flows," and
"Maturity, Payment and Yield Considerations." These forward-looking statements
are made as of the date of this Prospectus and the Company assumes no obligation
to update such forward-looking statements or to update the reasons why actual
results could differ materially from those anticipated in such forward-looking
statements.
CERTAIN LEGAL AND BANKRUPTCY CONSIDERATIONS
BANKRUPTCY OF GATC. The creation of the Company as a special purpose
entity and other aspects of the structure of the transaction are intended to
protect the Company, the Owner Trustees and the Indenture Trustees from the
claims of creditors of GATC, any trustee in bankruptcy of GATC or any GATC
Managed Subsidiary or GATC or any GATC Managed Subsidiary as a debtor-in-
possession in the event of a bankruptcy of GATC. One such aspect is the use of
the Marks Company to own the "marks" with respect to the Equipment Units and to
collect, account for and disburse the Railroad Mileage Credits. See,
"Collection and Application of the Company's Cash Flows - Collection of Railroad
Mileage Credits."
Counsel to the Company, the Marks Company and GATC has delivered an opinion
to the effect that in the event of a bankruptcy of GATC or any GATC Managed
Subsidiary, a bankruptcy court, applying the principles serving as the basis for
such opinion, (i) would not order the consolidation of the assets and
liabilities of the Company or the Marks Company with those of GATC or any GATC
Managed Subsidiary on the basis of the equitable bankruptcy doctrine commonly
known as the substantive consolidation doctrine, and (ii) would not hold that
the Subleases and Equipment transferred by GATC to the Company or the railcar
identification marks relating to the Equipment transferred to the Marks Company
are property of the estate of GATC in its bankruptcy case under Section 541 of
the Bankruptcy Code (as defined herein).
Such opinion is based on and subject to a number of assumptions concerning
facts and circumstances which have been noted, cited or acknowledged by courts
applying the substantive consolidation doctrine and Section 541 and related
authority in prior cases. Such opinion is also based on certain factual
assumptions, including, but not limited to, the assumptions that: (i) GATC and
the Company or the Marks Company, as the case may be, will observe certain
formalities and operating procedures that are generally recognized requirements
for maintaining the separate identity of legal entities; (ii) the assets and
liabilities of the Company and the Marks Company can be identified as separate
and distinct from those of GATC; (iii) creditors of the Company or the Marks
Company will rely on the separate existence of the Company or the Marks Company
in their dealings with the Company; (iv) the representations and warranties of
the Company set forth in the Intercreditor Agreement are and will continue to be
accurate and that the parties thereto will continue to be in compliance with
their obligations thereunder; (v) the Equipment Cost to be paid for each
Equipment Group by the related Owner Trust, and the form of consideration
tendered in satisfaction of the Equipment Cost, represents a fair market value
for the Equipment Group; and (vi) the transfer of the Subleases and Equipment to
the Company or of the railcar identification marks to the Marks Company does not
constitute a fraudulent conveyance or other voidable transfer under the
Bankruptcy Code or other applicable state law. The certificate of incorporation
of the Company and the certificate of trust of the Marks Company require that
the Company and the Marks Company conform substantially to several of the
foregoing assumptions. However, as stated in such opinion of counsel, there is
no controlling precedent in these areas. In addition, the adequacy of the
formalities and operating procedures, and the characterization of the transfers,
referred to above has not been considered by any court in the context of an
entity such as the Company, the Marks Company or the Owner Trusts involved in a
transaction similar to the one described herein. Based upon the present state of
the case law, the separate legal existence of the Company and the Marks Company
and the nature and circumstances of the transfers, the reliance by the
Certificateholders on the existence of each of the Company and the Marks Company
as being separate and distinct from that of GATC or any other subsidiary of GATC
15
<PAGE>
and the characterization of the pertinent transfers as being true contributions
and not secured loans should effectively preclude (1) the substantive
consolidation of the assets and liabilities of the Company or the Marks Company
with those of GATC or any other subsidiary of GATC, (2) the characterization of
the Subleases and Equipment initially transferred by GATC to the Company as
property of the estate in the event of a GATC bankruptcy, or (3) the
characterization of the railcar identification marks relating to the Equipment
transferred by GATC to the Marks Company as property of the estate in the event
of a GATC bankruptcy, however there can be no guarantee that a consolidation or
property of the estate claim by a creditor or trustee in bankruptcy of GATC or
GATC as a debtor-in-possession would not succeed under any set of circumstances.
In addition, if such a creditor, trustee in bankruptcy or debtor-in-possession
requests such an order of consolidation or order declaring such Subleases,
Equipment or railcar identification marks to be property of GATC's bankruptcy
estate, delays could occur in payments on the Equipment Notes, and consequently
distributions in respect of the Pass Through Certificates, even if such request
is ultimately denied, and if such consolidation is granted, delays in payments
on the Equipment Notes would occur and possible reductions in the amount of such
payments could occur.
Counsel to the Company, the Marks Company and GATC has also delivered an
opinion to the effect that based upon the present state of the case law, in the
event that a bankruptcy court orders the substantive consolidation of the assets
and liabilities of the Company with those of GATC and any other subsidiary of
GATC, the bankruptcy court would nonetheless recognize the respective superior
interests of the Owner Trustees and Indenture Trustees in the Equipment and the
Collateral Agent in the Collateral as against creditors of the Company and the
bankrupt or insolvent entity at least to the same extent as it would have in the
absence of such consolidation.
There can be no assurance, however, that a court would not decide any of
the issues described above differently from the views expressed in counsel's
opinions and such opinions represent only the best judgment of counsel and are
not binding on the courts. In particular, such opinions depend on certain
factual assumptions and the occurrence of different facts could lead a court to
reach a different conclusion.
BANKRUPTCY OF AN OWNER PARTICIPANT. In the event of the bankruptcy of an
Owner Participant, it is possible that, notwithstanding that the related
Equipment Group is owned by an Owner Trustee in trust, such Equipment Group and
the Lease and the Equipment Notes related thereto might become part of, or
otherwise be affected by, the bankruptcy proceeding. In such event, payments on
such Equipment Notes might be interrupted and the ability of the Indenture
Trustee to exercise its remedies under the applicable Indenture might be
restricted, although the related Indenture Trustee would retain its status as a
secured creditor in respect of such Lease and the related Equipment Group. See
"Description of the Equipment Notes--Remedies."
SOURCES OF PAYMENTS ON THE PASS THROUGH CERTIFICATES
The ability of the Pass Through Trust to make distributions in respect of
the Pass Through Certificates is directly dependent upon receipt by the Pass
Through Trust of corresponding payments on the Equipment Notes. The Pass
Through Trust will not have, nor is it permitted to have, any assets available
for distributions on the Pass Through Certificates other than the Equipment
Notes. Unless the Owner Trusts make payments as scheduled on the Equipment
Notes, the Pass Through Trust will not have the funds necessary to make
distributions of interest and principal to Certificateholders as contemplated
herein. There can be no assurance that the Pass Through Trust will receive
payment in full on the Equipment Notes.
SOURCE OF PAYMENTS ON THE EQUIPMENT NOTES; LIMITED RESOURCES OF THE COMPANY
Because the Company is a special purpose entity, its primary funding will
consist of payments made to it under the Subleases. Accordingly, payments of
rent under the Leases, and consequently principal, Late Payment Premiums or
Make-Whole Amounts, if any, and interest on the Equipment Notes, are dependent
on a number of factors, including: (i) the timing of receipt of rental payments
from the Sublessees under the Subleases and the ability of such Sublessees to
make such rental payments; (ii) the ability of the Manager, following the
expiration or termination of the initial or any subsequent terms of the
Subleases to re-lease a sufficient percentage of the Equipment, without
excessive levels of downtime, at sufficient rental rates; (iii) the amount of
maintenance and other obligations, including, but not limited to, management
fees, insurance, improvement costs and taxes, of the Company related to the
Equipment that the Company must pay; and (iv) whether the proceeds, if any,
received by an Owner Trust as a result of an Event of Loss or other event
16
<PAGE>
impairing the Equipment, or giving rise to liability, whether from insurance or
reimbursements by railroads or Sublessees or otherwise, are adequate to enable
the Company to pay the amounts required under the related Lease, which are
designed to allow such Owner Trust to prepay Equipment Notes as required by the
related Indenture if replacement Equipment has not been provided by the Company.
Significant negative variations with respect to one or more of these factors
could create a situation in which the Company would be unable to make rental
payments in respect of the Leases sufficient to satisfy the debt service
requirements of the Equipment Notes as they become due.
FAILURE OF ACTUAL EXPERIENCE TO MATCH THE STRUCTURING ASSUMPTIONS
In structuring the transaction and determining the Rated Amortization
Schedule and the Scheduled Amortization Schedule, certain assumptions regarding
utilization of the Equipment, Sublease rates, Sublease terms, operating and
maintenance expenses and other expenses and other factors, including, but not
limited to, casualty occurrences or write-offs for uncollectible Sublease
payments, were made. The assumptions include, among other things, that all rent
payments pursuant to the Subleases are received by the Company in a timely
manner and that at the expiration of the initial or any subsequent Sublease
terms the Equipment is re-leased at sufficient rental rates, without excessive
levels of downtime. It is unlikely however, that the assumptions will
correspond to actual experience. It is possible, therefore, that funds may not
be available to the Company in amounts which are sufficient to enable the
Company to make rental payments which are sufficient to allow the Owner Trusts
to pay the Equipment Notes in accordance with the Scheduled Amortization
Schedule. In addition, the Equipment Notes are subject to payment, in certain
circumstances, at levels which are faster or slower than those provided by the
Scheduled Amortization Schedule, including prepayment in whole or in part at
par, or, in certain circumstances, at par plus a Make-Whole Amount, (i) in
connection with the Company's exercise of its Obsolescence Termination Option
after the seventh anniversary of the Closing Date, (ii) in connection with the
exercise, in whole or in part by the Company of an Early Purchase Option
relating to each Equipment Group on any specified Early Purchase Options Date,
(iii) following payment of Stipulated Loss Value, and (iv) in certain other
circumstances described herein. See "Description of the Equipment Notes--
Prepayments." Accordingly, payments of principal on the Equipment Notes and the
corresponding distributions on the Pass Through Certificates may occur earlier
(in certain limited circumstances) or later than assumed, which may affect the
yield on the Pass Through Certificates. However, any such late payments would
incur Late Payment Premiums. See "Maturity, Payment and Yield Considerations"
and "Structuring Assumptions."
RELIANCE ON THE MANAGER
The Company will have no employees of its own (although the Company will
have a Board of Directors and officers) and, as such, the Company will rely upon
GATC, as Manager pursuant to the Management Agreement, as Insurance Manager
under the Insurance Agreement and as Administrator pursuant to an Administrative
Services Agreement between the Company and GATC (the "Administrative Services
Agreement"). The circumstances under which GATC or the Company may terminate
the Management Agreement, the Insurance Agreement and the Administrative
Services Agreement are limited and even in such limited circumstances no
termination is effective until a successor manager, insurance manager or
administrator, as the case may be, has been appointed. In the event that the
Management Agreement, the Insurance Agreement or the Administrative Services
Agreement is terminated, the Company would have to enter into one or more
replacement agreements with one or more other railcar leasing companies or other
service providers to perform some or all of such functions. The ability of the
Company to enter into any such third-party agreement will, particularly in the
case of the Management Agreement, depend on a number of factors, including the
number of participants in the railcar leasing industry and the railcar leasing
market in general at such time and may require payment of additional fees and
expenses, particularly if more than one party is required to provide all
necessary management and lease administration services. There can be no
assurance that a suitable replacement manager or other service providers may be
found, or found in a timely manner, and engaged on terms acceptable to the
Company or that would not cause a reduction or withdrawal of the then current
rating relating to the Pass Through Certificates. The Company's failure to
contract with another railcar leasing company or other service provider to
perform such services would, in the case of the Manager, and could, in the case
of the Insurance Manager or the Administrator, have a material adverse impact on
the Company's ability to meet its obligations under the Leases and the
Subleases. See "The Management Agreement" and "The Insurance Agreement."
17
<PAGE>
CONFLICTS OF INTEREST OF GATC
GATC, in addition to acting as Manager with respect to the Equipment, also
is and will be engaged in the leasing of its own railcars, and those of
affiliates, and providing railcar management and lease administration services
with respect to railcars of third parties or affiliates. Therefore, GATC may
from time to time have conflicts of interest in performing its obligations to
the Company and the other entities to which it provides railcar management and
lease administration services. Such conflicts may be particularly acute in
situations involving railcars owned by GATC or its affiliates or investment
vehicles sponsored by GATC or its affiliates to the extent such railcars are
available for re-lease. As described below, the terms of the Management
Agreement provide that GATC may not discriminate in any way in the management of
the Company Fleet and the Manager's Fleet (as such terms are defined herein).
The Company believes that adherence to such terms by GATC would minimize any
adverse consequences that might result from such conflicts of interest. See
"The Management Agreement."
As of May 31, 1998 the portfolio of railcars owned or leased by GATC in the
United States (the "Manager's Fleet") consisted of approximately 72,451
railcars, including railcars managed for other wholly-owned special purpose
subsidiaries of GATC. At the Closing Date, the portfolio of railcars leased by
the Company (the "Company Fleet") will be comprised of 2,443 railcars, or 3.4%
of the aggregate of the Manager's Fleet and the Company Fleet (the "Total
Managed Fleet"). From time to time, GATC will own, lease or manage additional
railcars that will be included in the Total Managed Fleet. In addition, GATC
may from time to time provide railcar management and lease administration
services to additional third parties and sponsor additional railcar or equipment
leasing programs, some of which may have investment objectives that are the same
as, or similar to, those of the Company. It is likely that the railcars in any
such programs will compete with the Equipment when the Equipment is being
marketed for re-lease and such programs may create additional conflicts of
interest with respect to the marketing of the Equipment for re-lease.
Pursuant to the terms of the Management Agreement, GATC has agreed to
perform the railcar management and lease administration services with respect to
the Equipment using reasonable care and diligence consistent with customary
commercial practices as would be used by a prudent person in the full service
railcar leasing industry (the "Services Standard"). To the extent that any
particular Equipment Units or the other railcars then managed by GATC are
substantially similar in terms of objectively identifiable characteristics that
are relevant for purposes of the particular services to be performed, GATC has
agreed in the Management Agreement not to discriminate between the Company Fleet
and the Manager's Fleet on the basis of ownership, on the basis of fees payable
in a particular transaction or on any other basis which could be considered
discriminatory.
LIMITATION OF OBLIGATIONS OF THE MANAGER
The duties and obligations of the Manager will be limited to those
expressly set forth in the Management Agreement and the Manager will not have
any fiduciary or other implied duties or obligations to any person, including
any Certificateholder.
RISKS RELATED TO THE LEASES
SUBLEASE RENEWALS. The weighted average initial and remaining terms (as of
May 31, 1998) of the Subleases are approximately 5.7 years and 5.2 years,
respectively. Certain of the Subleases have early termination options, and if
all of those were exercised such weighted average initial and remaining terms
would be approximately 5.3 years and 4.8 years, respectively. Approximately
14%, 2%, 67% and 17% of the Equipment is subject to Subleases expiring in up to
three years, between three and four years, between four and five years, and
greater than five years, respectively, from May 31, 1998. Because the terms of
the Subleases are shorter than the term of the Company's Leases with the Owner
Trusts, the Company, during the term of the Leases, will need to obtain renewals
from current Sublessees or obtain new Subleases from customers in sufficient
numbers to allow the Company to meet its payment obligations under the Leases.
GATC, as Manager pursuant to the Management Agreement, is obligated to comply
with the Services Standard to re-lease the Equipment. During 1995-1997 an
average of approximately 86% of the railcars in the Manager's Fleet that were
re-leased with the same customer were at rents equal to or above those in the
expired leases. Adverse market conditions in the railcar leasing market during
a period when a substantial number of Subleases are due to terminate could have
a material adverse impact on the re-leasing of the Equipment or on the rental
rates that could be obtained for the Equipment. See "The Subleases--Term and
Renewal."
18
<PAGE>
Competition in the full-service railcar leasing business is based largely
on the ability to (i) supply the desired type of railcar when requested by a
customer, (ii) provide ongoing inspection and mandated testing, repair and
mileage credit audit services, (iii) provide value-added services such as those
which help customers track movement of their equipment or increase utilization
of their fleets and (iv) competitively price leased railcars. The Company will
rely on the Manager to supply such services to the Sublessees under the
Subleases. See "--Reliance on the Manager."
INDUSTRY CONCENTRATION. Approximately 52%, 37% and 11% of the covered
hopper cars (26% of all railcars) included in the Equipment are currently leased
to users in the plastics, minerals and food and agriculture industries,
respectively, and approximately 65%, 23%, 7% and 4% of the tank cars (74% of all
railcars) included in the Equipment are leased to users in the chemical,
petroleum, food and agriculture, and mineral industries, respectively.
Consequently, any significant economic downturn in these industries could have a
material adverse effect on the creditworthiness of the Sublessees in these
industries and on their ability to pay rent under the Subleases as well as on
the Company's ability to re-lease the Equipment to those Sublessees.
CUSTOMER CONCENTRATION. The Company will initially sublease the Equipment
to 80 customers, none of which is expected to account initially for more than 6%
of the Company's total railcar leasing revenues. Over time, however, the
Company's customer base will vary, and there can be no assurance that one or
more Sublessees may not in the future account for a larger percentage of the
Company's revenues. All of the Company's current customers were customers of
GATC prior to the Offering. It is expected that most or all of the Company's
customers, both as of the Closing Date and thereafter, are and will continue to
be customers of GATC or affiliates of GATC with respect to other railcars.
SUBLESSEE DEFAULTS. The ability of each Sublessee to perform its
obligations under its Sublease will depend primarily on such Sublessee's
financial condition. A Sublessee's financial condition may be affected by
various factors beyond the control of the Company, including competition,
operating costs, general economic conditions and environmental and other
governmental regulation of or affecting the Sublessee's industry. There can be
no assurance as to the extent to which Sublessees will be able to perform their
financial and other obligations under the Subleases.
RISKS RELATING TO THE EQUIPMENT
COMPETING RAILCARS AVAILABLE FOR LEASE; OPERATIONAL RESTRICTIONS. In
connection with re-leasing of the Equipment, the Company may encounter
competition from, inter alia, other railcars in the Total Managed Fleet, other
railcar leasing companies (including Union Tank Car, GE Railcar and ACF) and
special purpose entities including other special purpose vehicles owned by GATC,
formed for the purpose of acquiring, leasing and/or selling railcars, some or
all of which may have investment objectives similar to those of the Company.
Further, the market for full-service railcar leasing services may also be
affected to the extent that potential customers choose to own, rather than
lease, their railcars.
The Company will be subject to restrictions in the Leases and the
Intercreditor Agreement, including limitations on (i) the scope of the Company's
business activity, (ii) the Company's ability to enter into other lease
arrangements, (iii) the Company's ability to enter into transactions with
affiliates and (iv) the Company's use of the Equipment. Such restrictions may
impair the Company's operational flexibility as compared to its competitors,
because the Company's competitors may not be subject to such limitations. As a
result, the Company may in the future be less able than its competitors to offer
flexible, market-driven, responses to commercial situations or provide financial
services or other inducements to potential Sublessees. In addition, certain
competing full-service railcar leasing companies may have access to financial
resources substantially greater than those of the Company.
POTENTIAL RAILCAR BUYERS. The re-sale market for previously leased
railcars is limited. The limited number of potential purchasers, which could
include other lessors and customers who seek to own their own railcars, could
impair the ability of the Indenture Trustee to realize sufficient value upon a
sale of the Equipment to satisfy an Owner Trust's obligations following an Event
of Default in respect of the Equipment Notes.
USE OF RAILCARS OUTSIDE OF THE UNITED STATES. The Leases impose a
restriction, among others, that the Company may not simultaneously use more
than 49% of the Equipment Units outside the continental United States. See "The
Leases--Restrictions on Subleases." Accordingly, upon any exercise of the
remedies under the Indentures with respect to the Equipment Units, the Indenture
Trustee will be required, with respect to the Equipment Units then located
outside of the United States, to enforce such remedies in the foreign
jurisdiction or jurisdictions in which such Equipment
19
<PAGE>
Units are located. There can be no assurance that the Indenture Trustee will be
able to enforce the remedies under the Indentures with respect to the Equipment
Units in any such jurisdictions. However, to the extent a U.S. entity subleases
Equipment and uses it outside of the continental United States, certain remedies
should be available against such Sublessee in the United States. See
"Description of the Equipment Notes--Security."
TECHNOLOGICAL RISKS. The Company's ability to sublease the Equipment may
be affected to the extent that the availability for lease or sale of newer, more
technologically advanced railcars makes the Equipment less competitive. The
extent to which the Company is able to manage these technological risks through
optional modifications to the Equipment may be limited. However, all of the
Equipment is relatively new, having been manufactured in 1997 or 1998.
Additionally, the Manager's Fleet currently has utilization rates which exceed
93% for railcars that have been in service for 21 to 30 years. See "The
Subleases--Term and Renewal." Although the Company expects the utilization
rates with respect to the Company Fleet to be substantially similar to
utilization rates the Manager has historically experienced for the Manager's
Fleet, there can be no assurance that the Company's utilization rates will be
consistent with those of the Manager's Fleet either historically or on an
ongoing basis. In the event that the Company were to exercise its Obsolescence
Termination Option, which begins on the seventh anniversary of the Closing Date,
with respect to all or any portion of an Equipment Group, the related portion of
Equipment Notes would be prepaid with a Make-Whole Amount (if any) as described
under "Description of the Equipment Notes--Prepayments."
RISKS RELATING TO REGULATION
REGULATORY MATTERS. The Equipment is subject to regulation by various
governmental agencies and industry trade associations as described under
"Railcar Leasing Industry--Regulation of the Railcar Leasing Industry."
Regulations passed by government agencies have traditionally affected large
numbers of railcars and required the modification of such railcars. However,
the time period from original proposal of such regulation to passage as law has
generally ranged from 18 months to 4 years and implementation periods have
tended, in the Manager's experience, to allow sufficient time to perform the
required modifications on such railcars. Regulation by the principal industry
trade association, the Association of American Railroads ("AAR"), while usually
affecting fewer railcars, often has had a shorter implementation period. Under
the Leases the Company will be responsible for keeping the Equipment in
compliance with any regulations affecting the Equipment. Both types of
regulation can increase the costs of operating the Equipment and, as a result,
may affect the Company's ability to make payments on the Leases. Further, if
the Company is unable to keep any or all of the Equipment in compliance with any
current or future regulation, the Company might be unable to sublease such
portion of the Equipment which would also affect the Company's ability to make
payments on the Leases.
The Scheduled Amortization Schedule and Rated Amortization Schedule of the
Equipment Notes were constructed after taking into account certain assumptions
as to utilization of the Equipment and the costs associated with the operation
of the Equipment, including certain assumptions regarding current regulatory
requirements. Any negative variations in such assumptions caused by the
Company's failure to comply with current or future regulations could adversely
affect the Company's ability to make payments on the Leases and the Owner
Trustees' ability to make payments on the applicable Equipment Notes and,
subsequently, payments by the Pass Through Trustee on the Pass Through
Certificates. Certain aspects of the transaction have been structured to
mitigate the effects of any such regulation. Under the Intercreditor Agreement,
the Collateral Agent upon the instruction of the Manager will periodically
deposit available amounts into the Special Reserves Account (as defined herein)
to fund the costs of any required (or in certain circumstances, optional)
modifications to the Equipment. See "The Intercreditor Agreement--The
Accounts," "Collection and Application of the Company's Cash Flows--Application
of Amounts in the Collection Account" and "Collection and Application of the
Company's Cash Flows--Required Special Reserves Amount." Additionally, the
Company may in certain circumstances be able to pass the cost of any Required
Modification through to the Sublessees over time in the form of increased
Sublease rates.
The Company cannot predict what laws and regulations, if any, will be
adopted or how they will affect the Company and its ability to sublease the
Equipment.
ENVIRONMENTAL MATTERS. The Company owns neither the Equipment nor the
maintenance facilities providing services to the Equipment. However, the
Company has agreed under the Participation Agreements to indemnify the Owner
Participants, the Owner Trustees, the Indenture Trustees and the Pass Through
Trustee against certain liabilities
20
<PAGE>
arising out of the use of the Equipment Units, including environmental
liabilities. Also, as operator of the Equipment the Company may be liable under
certain environmental statutes for claims arising from accidents, spills or
other casualties involving the Equipment. Under certain of these statutes,
including CERCLA (as defined herein), the Company could be held strictly liable
for such claims. Such liability, in the case of CERCLA, would be joint and
several among the Company and any other responsible parties. In such a case the
Company could be responsible for all such liability if other potentially
responsible parties were not financially capable of discharging their liability.
Amounts available to the Company will generally be limited to payments made on
the Subleases, the ability to collect on policies of insurance and payments from
other responsible third parties such as the Manager, any railroad on which an
accident occurs or a Sublessee. There can be no assurance that the Company will
be able to obtain sufficient policies of insurance to protect against such
risks, or that if available, such insurance will provide coverage for the
specific risk giving rise to such liability. See "The Insurance Agreement."
LACK OF PRIOR TRADING MARKET
There is currently no market for the Pass Through Certificates. Although
the Underwriters have informed the Company that they currently intend to make a
market in the Pass Through Certificates, they are not obligated to do so and any
such market-making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Pass Through Certificates. The Company does not intend to list the Pass
Through Certificates on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
21
<PAGE>
USE OF PROCEEDS
The Pass Through Certificates are being issued in order to facilitate the
financing by the Owner Trustees of their purchase from the Company of the
Equipment Groups to be leased back to the Company. All of the proceeds from the
sale of the Pass Through Certificates will be used by the Pass Through Trustee
on behalf of the Pass Through Trust to purchase the Equipment Notes issued by
each Owner Trustee which, in turn, will use the proceeds, together with funds
provided by the related Owner Participant, to purchase the related Equipment
Group from the Company, on behalf of such Owner Participant. The amounts paid
to the Company by the Owner Trustee will fund the Company's payment of its
purchase price of the Equipment from GATC.
The Equipment Notes will be issued under one or more separate Trust
Indenture and Security Agreements (each an "Indenture"), each such Indenture
being between The First National Bank of Chicago, as trustee thereunder (in such
capacity, the "Indenture Trustee"), and [__________________________], not in
its individual capacity (except as expressly set forth therein) but solely as
Owner Trustee of a separate trust for the benefit of each Owner Participant.
Each Owner Participant will provide from sources other than the Equipment Notes
at least 20% of the Equipment Cost of the related Equipment Group as an equity
investment.
The following table sets forth information with respect to the three
Equipment Groups (consisting of an aggregate of 2,443 railcars) expected to be
purchased by the Owner Trustees and leased to the Company:
EQUIPMENT GROUP 1
<TABLE>
<CAPTION>
AGGREGATE
TYPE OF CAR EQUIPMENT COST
----------- --------------
<S> <C>
High Pressure.......................... $
General Covered Hopper.................
General Service Tank...................
Specialty Covered Hopper...............
Alloy..................................
Specialty Chemical.....................
-------------
$
=============
</TABLE>
[EQUIPMENT GROUP 2]
<TABLE>
<CAPTION>
AGGREGATE
TYPE OF CAR EQUIPMENT COST
----------- --------------
<S> <C>
High Pressure.......................... $
General Covered Hopper.................
General Service Tank...................
Specialty Covered Hopper...............
Alloy..................................
Specialty Chemical.....................
-------------
$
=============
</TABLE>
22
<PAGE>
[EQUIPMENT GROUP 3]
<TABLE>
<CAPTION>
AGGREGATE
TYPE OF CAR EQUIPMENT COST
----------- --------------
<S> <C>
High Pressure.......................... $
General Covered Hopper.................
General Service Tank...................
Specialty Covered Hopper...............
Alloy..................................
Specialty Chemical.....................
-------------
Total Equipment Cost................... $
=============
</TABLE>
THE COMPANY
The Company is a wholly-owned, special purpose subsidiary of GATC. The
Company has been organized for the limited purposes of, and may not engage in
any business activity other than, leasing the Equipment from the Lessors
pursuant to the Leases, subleasing the Equipment pursuant to the Subleases,
maintaining insurance for such Equipment, preserving, exercising and enforcing
rights of the Company under any applicable agreements, applying funds and making
payments in accordance with any applicable agreements and engaging in any
activity necessary, convenient or advisable to accomplish the foregoing. The
principal offices of the Company are located at 500 West Monroe Street, Chicago,
Illinois 60661-3676 (telephone: (312) 621-6451).
The Company has taken steps in structuring the transactions contemplated
hereby that are intended to insure that the voluntary or involuntary application
for relief by GATC under any Federal or state bankruptcy, insolvency,
reorganization or similar law for the relief of debtors in effect from time to
time (an "Insolvency Law") will not result in consolidation of the assets and
liabilities of the Company with those of GATC. These steps include (a) the
appointment of two independent directors to the board of directors of the
Company, (b) the creation of the Company as a special purpose subsidiary of GATC
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Company's business and restrictions
on the Company's ability to commence a voluntary case or proceeding under any
Insolvency Law without the prior affirmative vote of all of its directors,
including, without limitation, the affirmative vote of its two independent
directors), (c) the maintenance by the Company of separate records and books of
account, and (d) the requirement that all transactions between the Company and
its affiliates be on an arms'-length basis. However, there can be no assurance
that the activities of the Company will not result in a court concluding that
the assets and liabilities of the Company should be consolidated with those of
GATC in a proceeding under any Insolvency Law. If a court were to reach such a
conclusion, delays in distributions on the Equipment Notes could occur or
reductions in the amounts of such distributions could result which would lead to
corresponding delays or reductions in payments on the Pass Through Certificates.
See "Risk Factors--Certain Legal and Bankruptcy Considerations--Bankruptcy of
GATC."
The Company expects to receive, concurrently with the issuance of the Pass
Through Certificates, an opinion of counsel to the Company to the effect that,
subject to certain facts, assumptions and qualifications, it would not be a
proper exercise by a court of its equitable discretion to disregard the separate
existence of the Company and to require the consolidation of the assets and
liabilities of the Company with the assets and liabilities of GATC in the event
of the application of any Insolvency Law to GATC. See "Risk Factors--Certain
Legal and Bankruptcy Considerations--Bankruptcy of GATC." Among other things,
such counsel will assume for the purposes of such opinion that the Company will
follow certain procedures in the conduct of its affairs, including maintaining
records and books of account separate from those of GATC or any affiliate
thereof, refraining from commingling its assets with those of GATC or any
affiliate thereof (except for amounts held in the lockboxes established under
the Management Agreement and the Servicing Agreement (as defined herein)) and
refraining from holding itself out as having agreed to pay, or being liable for,
the debts of GATC or any affiliate thereof. The certificate of incorporation of
the Company requires the Company to conform substantially to several of the
foregoing assumptions. Also, the Company intends to follow and
23
<PAGE>
will agree to certain covenants in the Intercreditor Agreement which require it
to follow the procedures outlined above related to maintaining its separate
identity.
Pursuant to the Management Agreement, the Company will hire GATC, as
Manager, to provide services with respect to the railcars leased to the Company
and the related Subleases. Pursuant to the Management Agreement, the Manager
will operate the Company Fleet in a manner substantially similar to the
Manager's current practices, subject to compliance with criteria consistent with
a bankruptcy remote subsidiary. See "The Management Agreement." As of the
Closing Date, the Company Fleet will consist of 2,443 railcars, including 1,805
tank cars and 638 covered hopper cars.
The following is a pro forma balance sheet of the Company as of the
Closing Date:
<TABLE>
<CAPTION>
($ in millions)
-------------
<S> <C>
ASSETS:
Cash............................. $ 0
Liquidity Reserve Amount......... 500,000
Cash Trapping Account............ 200,000
Collection Account............... -------
Accounts Receivable.............. -------
Total Assets..................... 700,000
=======
LIABILITIES AND EQUITY:
Liabilities...................... $ 0
Equity........................... 700,000
Total............................ 700,000
=======
</TABLE>
THE EQUIPMENT
Each of the 2,443 Equipment Units in the Company Fleet was newly
manufactured by Trinity Industries Inc. during 1997 or 1998. The Company Fleet
is composed of 74% tank cars and 26% covered hopper cars.
Each Owner Trust will acquire a diversified portfolio of Equipment
Units consisting of tank cars and covered hopper cars. Tank cars are specialized
railcars used for the transportation of a variety of products including
chemicals, semi-gaseous or gaseous products and other types of industrial
liquids. Some of the tank cars have either exterior or interior heating coils,
and can be insulated, depending on the product being transported. Covered hopper
cars primarily carry plastic pellets, grain, cement and other dry products.
Although there are additional types of railcars currently in use in the full
service railcar leasing industry, the railcars included in the Company's Fleet
consist of six Car Types (General Covered Hopper, General Service Tank, High
Pressure Tank, Specialty Covered Hopper, Specialty Chemical and Alloy).
General covered hopper cars are freight cars with capacities ranging
from 3,000 to 6,200 cubic feet that primarily carry plastic pellets, grain,
cement, soda ash and other dry commodities. General service tank cars are tank
cars with capacities ranging from 13,000 to 30,000 gallons that carry a variety
of liquid commodities including asphalt, caustic soda, lube oil additives,
ethylene glycol and vegetable oil, among others. High pressure tank cars have
capacities ranging from 17,200 to 33,500 gallons and carry products which
require a pressurized state due to their liquid, semi-gaseous or gaseous nature,
including, among others, anhydrous ammonia, propane, butane and carbon dioxide.
Specialty covered hopper cars which have capacities ranging from 4,180 to 5,125
cubic feet, use air to assist unloading and carry primarily flour, sugar and
corn starch. Alloy cars are tank cars made of aluminum or stainless steel which
range in size from 12,000 to 26,000 gallons. Alloy cars carry products such as
hydrogen peroxide, caprolactam and acetic acid. Specialty chemical cars are tank
cars with capacities ranging from 13,000 to 20,000 gallons. Specialty chemical
cars are cars dedicated to specific chemical products such as sulfuric acid or
hydrochloric acid.
In addition to being used for transporting commodities from one
location to another, certain railcar types are often used for storage purposes
by customers in certain industries. Covered hopper cars and, to a lesser degree,
tank cars,
24
<PAGE>
are used as efficient alternatives to the construction of expensive storage
facilities. Use of railcars for storage facilities allows customers to vary
their storage capacity in accordance with current needs. Plastic pellet cars in
particular are used to a large extent for long-term storage purposes. One reason
for this is the inflexible production capacity of the plastic pellet industry;
production remains relatively constant regardless of product demand, resulting
in increased storage requirements for producers during periods of low demand.
Other customers may use railcars for short-term storage.
The Manager estimates that the average useful life of a railcar is
approximately 30 years. The useful life is affected by a number of factors such
as the commodity carried, structural components and market dynamics. A railcar's
projected useful life will be taken into account when establishing the initial
lease rate under a Sublease. Generally, newer railcars will be leased at higher
rates than older railcars. However, the age of a railcar is usually not
determinative of its utility.
The following table reflects the composition of the Company Fleet
categorized by the type of product typically transported by the cars initially
comprising the Company Fleet:
PRODUCT DISTRIBUTION AMONG COMPANY FLEET
<TABLE>
<CAPTION>
PERCENT OF
COMMODITY CARRIED NUMBER OF CARS TOTAL
----------------- -------------- ----------
<S> <C> <C>
Chemical 1,184 48%
Petroleum 414 17%
Agricultural 220 9%
Mineral and other 309 13%
Plastics 316 13%
----- ---
2,443 100%
===== ===
</TABLE>
In certain instances, the past use of a railcar will determine the
types of products that it can carry in the future. For example, industry and
regulatory restrictions prohibit railcars from transporting food products if
such railcars have previously transported products such as chemicals or fuel.
However, such restrictions do not prohibit using railcars to transport chemical
or fuel products if they were previously used to transport food products.
Typically, clean or high-purity chemicals cannot be transported in a car that
previously held petroleum. Cars can be reconfigured throughout their lives to
take advantage of technological advancements or, within the restrictions
described above, to change the type of commodity being carried.
CASUALTIES
Historically, the impact of railcar casualties on the Manager's Fleet
has been relatively small. The most common types of casualties are railroad
accidents or derailments. Typical derailments result in minor railcar damage
with little or no spillage of commodity. Upon the occurrence of a railroad
accident, the Manager and the railroad will generally conduct a joint inspection
of the resulting damage and consult to determine the extent of necessary repairs
or, if a railcar is beyond repair, declare the railcar a total loss. If the
accident has been caused by the railroad, once the Manager and the railroad
reach agreement on the required repairs or agree to declare the railcar a total
loss, the Manager will bill the railroad in accordance with AAR rules, which set
forth rate schedules for repairs and reimbursement of total losses. Railroads
are required to reimburse owners of totally destroyed railcars based on a
depreciated value established by the AAR. Such depreciated value may not be
sufficient to pay the Stipulated Loss Value with respect to an Equipment Unit.
See "The Leases--Events of Loss." In most instances, the liability for
casualties rests with a railroad. In other instances the liability will be
allocated between the railroad and other participants, including the Manager,
with the method and proportion of the allocation dependent upon the specific
facts and circumstances of each instance. See "Casualty Experience of the
Manager's Fleet" below.
Because the railroads generally reimburse the Manager for damaged or
destroyed railcars, it has not filed a property insurance claim with respect to
a damaged or destroyed railcar since 1974. Set forth below is historical
casualty experience (total loss of individual railcars) for the Manager's Fleet
for the years ended December 31, 1993 to December 31, 1997. In isolated
instances, a customer or other third parties may be responsible for damage to,
or total
25
<PAGE>
loss of, a railcar, and is billed accordingly. The Manager believes that such
instances, combined with instances where the Manager itself is liable, account
for a very small percentage of the Manager's casualty experience. For a
discussion of the Manager's liability incurred in connection with railcar
accidents, see "The Manager--Recent Developments of the Manager." While the
Company expects its casualty experience with respect to the Company Fleet to be
similar to that of the Manager with respect to the Manager's Fleet, there can be
no assurance that the casualty experience of the Company Fleet will be
consistent with the historical experience of the Manager's Fleet.
CASUALTY EXPERIENCE OF THE MANAGER'S FLEET
(TOTAL RAILCAR LOSSES)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Casualty Cars....................................... 153 153 136 141 108
Total Number of Cars in Manager's Fleet............. 70,689 66,775 4,866 59,808 55,763
Casualty Cars as a Percentage of Manager's Fleet.... 0.22% 0.23% 0.21% 0.24% 0.19%
</TABLE>
RAILCAR LEASING INDUSTRY
OVERVIEW
The railcar leasing industry has experienced steady growth in the last
decade. As of December 31, 1997, railcar ownership in the United States was
split predominantly between the railroads and private railcar owners, with
railroads owning approximately 690,000 railcars and private companies owning
approximately 700,000 railcars. Railcar leasing companies participate primarily
in the tank car and covered hopper car segments. There were approximately
226,000 tank cars and 380,000 covered hopper cars in use in the United States as
of December 31, 1997.
Full service lessors own approximately 72% of the nation's tank car
fleet. As of July 1, 1997, the approximate percentage of tank cars owned in the
United States by GATC, Union Tank Car, GE Railcar, ACF and Trinity was 27%, 21%,
16%, 2%, and 2%, respectively. Tank cars represent a specialized segment of rail
transportation and, as such, both railroads and shippers have relied on full
service lessors for their needs. Railroads have generally avoided owning tank
cars because, among other things, tank cars are relatively expensive, railroads
generally do not have the facilities or the requisite expertise to maintain and
manage tank cars and tank cars make relatively fewer revenue trips annually than
other types of railcars.
Based on number of tank cars, GATC is the largest full-service tank car
leasing and management company in the United States and in North America with
100 years of experience in the business. Historically, GATC, Union Tank Car and
ACF have been involved in specialty railcars such as tank cars and have offered
customers similar types of railcars. GE Railcar has historically offered a
broader, less specialized spectrum of railcars. In March 1997, GE Railcar
entered into a long-term lease agreement to manage a substantial portion of
ACF's railcar fleet.
The Manager estimates that full service lessors account for
approximately 36% of the covered hopper fleet in the United States. As of July
1, 1997, the approximate percentage of covered hopper cars owned by GATC, Union
Tank Car, GE Railcar, and ACF was 3%, 2%, 19%, and 3%, respectively. The covered
hopper market includes a variety of car types including grain type cars, plastic
pellet cars and cement cars. The railcar industry classifies covered hoppers by
unloading systems which include pneumatic, fluidized, and gravity unloading.
Demand for railcars is primarily driven by industrial production and
economic growth. The principal customers of the full service railcar leasing
companies are large industrial companies that ship and use food, chemicals,
petroleum and other commodities. For 1997, approximately 54% of GATC's railcar
leasing revenue was attributable to shipments of chemical products, 21% to
petroleum products, 18% to food products, 6% to minerals and 1% to other
products.
A key factor affecting the demand for railcar leasing is a preference
among certain businesses for leasing rather than owning railcars. There are
several advantages to leasing railcars, including off-balance sheet financing,
flexibility
26
<PAGE>
in increasing or decreasing railcar fleet size, reduction or elimination of the
management of railcars, elimination of the monitoring of regulatory requirements
and reduction of administrative costs.
Generally customers in the railcar leasing industry do not maintain
exclusive relationships to lease railcars from one company. Customers often
prefer to have flexibility in meeting their railcar needs. The principal
competitive factors in the railcar leasing industry include price, service and
availability of railcars meeting customer specifications.
REGULATION OF THE RAILCAR LEASING INDUSTRY
The primary regulatory and industry authorities involved in the
regulation of the railcar industry are the Department of Transportation ("DOT"),
including the Research and Special Programs Administration (the "RSPA") and the
Federal Railroad Administration (the "FRA"), both of which are divisions of DOT;
and the AAR (together with DOT, RSPA and FRA, the "Regulators").
The primary agencies with regulatory authority over commodities shipped
in tank cars and tank car design are DOT and the AAR. The AAR is not a
government agency but an industry trade association of the railroads which
establishes standards and specifications for railroad operations. Many of these
standards and specifications have been incorporated into DOT regulations. The
AAR also has its own enforcement teams and inspectors that work in conjunction
with DOT field inspectors to ensure compliance with requirements.
The FRA has regulatory authority over railroad train operations in the
United States and regulates the safety of railroad equipment, tracks and
operation. The FRA creates rules which govern train equipment, braking systems
and safety appliances. Compliance with the rules of FRA and RSPA are monitored
through a network of regional field inspectors.
All commodities transported in tank cars fall into one of two broad
categories, "hazardous" or "non-hazardous." RSPA has regulatory authority over
the movement of hazardous materials in the United States and creates rules
pertaining to packaging and transportation requirements for hazardous materials
(regardless of the mode of transportation). The rules created by RSPA affect the
design of tank cars and the equipment permitted to be installed on tank cars.
RSPA's rules are enforced by FRA field inspectors. Hazardous materials
transported in covered hopper cars are generally packaged in drums. As a result,
the railcar itself does not contain the hazardous materials and is therefore not
subject to the same rules as tank cars carrying similar materials.
In addition to DOT regulations for governing the shipment of hazardous
materials, the AAR also has tank car specifications covering the shipment of
both hazardous and non-hazardous commodities. These specifications are published
by the AAR under the direction of the AAR Tank Car Committee and cover many
aspects of tank car design, including welding, materials, fittings, repairs,
testing, and stenciling or marking of the tank cars.
From time to time, the Regulators will issue regulations requiring
certain improvements designed to increase safety in the industry ("Required
Modifications"). These regulations are of two types. The first type involves
improvement programs mandated by DOT. DOT pronouncements have tended to require
modifications to a large number of railcars. DOT is governed by the
Administrative Procedures Act under which there is a statutory process DOT must
follow in implementing a new regulation. Timing from original proposal of such
regulation to adoption has historically ranged from 18 months to 4 years. It is
the Manager's experience that participants in the railcar leasing industry have
input in this process, either directly or through a railcar leasing lobbying
specialist. Additionally, in the Manager's experience, affected parties can
sometimes negotiate with DOT as to preferred effective dates and implementation
periods.
The second type of Required Modifications are those instituted by the
AAR. The AAR is not a government agency and, therefore, is not subject to the
same procedural requirements as DOT. As a result, in the Manager's experience,
participants in the railcar leasing industry have had less input into the
process as compared to the more formal process pursuant to which DOT regulations
are promulgated. Further, AAR pronouncements generally have had shorter proposal
to adoption times, and allow little latitude for industry participants in terms
of implementation. AAR pronouncements have tended to affect only certain classes
of cars, and generally have required inspection of such railcars.
27
<PAGE>
Three recent pronouncements issued by the Regulators have been directed to
the types of railcars carrying or capable of carrying hazardous materials and
limiting the types of railcars which can carry hazardous materials. The first
rule, HM175A, sets forth crash worthiness requirements for tank cars. The rule
became effective on July 1, 1996 and will be phased in over a ten-year period.
The second rule, HM201, also became effective on July 1, 1996 and will be
implemented in two steps the first of which begins on October 1, 1998 and the
second begins on July 1, 2000. HM201 sets forth new requirements for the
inspection and periodic requalification of tank cars. The new requirements
define six tests which must be performed on a periodic basis during the life of
the car to insure that the car may continue in service. The third rule, AAR
Rule 88B, requires a thorough inspection and, if required, repair of the railcar
structure. This inspection includes body bolsters, center sills, crossbearers,
draft gears systems, end sills and trucks. Rules 88B and HM201 will apply to
the Company Fleet; the Company Fleet is already in compliance with HM175A.
In addition to the regulations described above, companies in the full
service railcar leasing industry are subject to various regulations regarding
air, water, solid waste, hazardous and toxic materials and noise pollution by
applicable agencies of the federal government and those states in which they do
business. The Manager, on behalf of the Company, is required under the
Management Agreement to conduct the Company's operations in compliance with
applicable laws and regulations, including environmental regulations. See
"Environmental Matters." The Manager's policy is to monitor and actively
address environmental concerns in a responsible manner.
ENVIRONMENTAL MATTERS
The transportation by railcar of certain commodities raises potential risks
in the event of a derailment, spill or other accident. Generally, liability
under existing Federal, state and local laws in the United States for such an
event depends upon the negligence of a party, such as the railroad, the shipper
or the manufacturer of the railcar, unless the commodities being shipped are
inherently dangerous in which case strict liability concepts may be applicable.
Liability in the event of a spill or other accident that results in the exposure
of persons or property to dangerous or toxic materials can result in the
assessment of monetary damages for personal injury, property damage, emotional
distress, lost profits and, in certain circumstances, punitive damages. Under a
negligence theory it would be unlikely that the Company, as lessee under the
Leases and sublessor under the Subleases, would have any liability for damages
for such an occurrence unless the fault was found to have arisen in the
performance of those maintenance and similar obligations retained by the Company
under its Subleases and performed on its behalf by the Manager under the
Management Agreement (although the Company has agreed to indemnify the Owner
Participants, the Owner Trustees, the Indenture Trustees and the Pass Through
Trustee against environmental liabilities arising out of the operation or use of
the Equipment Units). However, liability under many Federal and state
environmental laws is based on strict liability concepts which would, in certain
circumstances, place liability upon the Company for such an event.
The principal Federal statute governing liability for releases of hazardous
substances into the environment is the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"). CERCLA authorizes
the Environmental Protection Agency ("EPA") to undertake investigation and
cleanup, and to seek recovery from responsible parties of costs it incurred in
connection with such investigation and cleanup, or to require responsible
parties to themselves undertake investigation and cleanup of contamination when
there has been release of "hazardous substances" into the environment. CERCLA
also authorizes certain private parties to recover investigation and cleanup
costs for releases of "hazardous substances." Damages for injury to or
destruction or loss of natural resources may also be assessed against
responsible parties. Costs under CERCLA for investigation and cleanup of
contamination, or for damages to natural resources can be significant. Most
states have laws similar to CERCLA.
CERCLA liability is imposed on "responsible parties," including the current
"owner and operator" of a facility, persons who arrange for the treatment,
disposal or transport of hazardous substances, transporters of hazardous
substances and persons who owned or operated the facility at the time of the
release. Railroad rolling stock is a "facility" for purposes of CERCLA and a
"release" is broadly defined to cover nearly any discharge of a hazardous
substance into the environment. Liability under CERCLA is strict (meaning
liability is assigned without fault) and joint and several. The defenses under
CERCLA have been narrowly construed and are difficult to prove. Thus, the
intent and operation of CERCLA puts an owner or lessee of a railcar at risk of
strict joint and several liability for cleanup costs and natural resource
damages in the event of a release from the car.
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<PAGE>
The term "hazardous substance" under CERCLA does not include petroleum,
natural gas or their fractions, although many comparable state laws do include
such substances. Oil spills into or upon "the navigable waters or adjoining
shorelines" are covered by the Oil Pollution Act of 1990. The Oil Pollution
Act, which also covers discharges from railroad rolling stock, is in many
respects similar to CERCLA though limited to discharges into water.
The Company currently has liability insurance policies in place which it
believes would be adequate to protect it in the event of a sudden and accidental
release giving rise to an environmental claim. There can be no assurance,
however, that such insurance coverage will continue to be made available to the
Company. In addition, to the extent that any such environmental claim would
arise out of the fault or negligence of GATC as Manager of the Units (or at a
facility owned or controlled by the Manager), GATC has agreed under the
Management Agreement to indemnify the Company against any such liabilities. For
a discussion of a recent development relating to GATC's liability experience
with the Manager's Fleet, see "The Manager--Recent Developments Relating to the
Manager."
THE SUBLEASES
GENERAL
The information set forth below with respect to the Subleases, including,
without limitation, information regarding lease rates, demand for Equipment
Units, Sublease renewal and other customer preferences is based on the
historical experience of the Manager in the management of the Manager's Fleet.
The Subleases relating to the Company Fleet were originated by GATC with
certain of its customers and, on the Closing Date, will be contributed to the
Company by GATC, the Company's sole stockholder. New Subleases entered into by
the Company will be arranged by the Manager pursuant to the Management Agreement
using marketing systems and procedures substantially identical to those
otherwise used by the Manager for the Manager's Fleet. Under such procedures,
railcars are leased to a customer pursuant to a car service contract which
specifies general terms applicable to the sublease of all Equipment to be leased
to such customer and one or more riders entered into from time to time which
describe the specific Equipment Units to be leased by the customer, together
with the applicable term and lease rates applicable to such Equipment Units
(each a "Rider" or "Riders"), which together form a Sublease. Customers are
invoiced monthly in advance. The Subleases are primarily "full service" leases
in that the Company is responsible for maintaining and servicing the Equipment,
paying applicable ad valorem taxes and providing many ancillary services to the
customers. The level of service provided under each Sublease may vary by
customer. Further, the Company (and the Manager on its behalf) may in the
future offer fewer or additional services to the Sublessees in accordance with
changes in industry practice or the Company's policies. All of these services,
together with all invoicing, collection and record keeping with respect to the
Subleases and the Equipment, will be provided on the Company's behalf by the
Manager pursuant to the Management Agreement. See "The Management Agreement."
TERM AND RENEWAL
The Manager typically leases new railcars to its customers for a term of
five years or, in connection with the lease of certain specialized railcars, up
to 10 or more years, with initial renewals typically being entered into for an
additional five-year term. Some subleases may allow for an early return of the
car under "early-out" options. In addition, under certain circumstances,
customers may be permitted to return cars earlier than provided under the
contractual lease terms if the Manager has an equivalent or better use for the
car or on the basis of subsequent negotiations of early termination terms.
Subsequent renewals and leases of used railcars are typically for periods
ranging from less than a year to seven years, with an average renewal term of
about three years. The renewal rate (the percentage of railcars for which
expiring subleases are renewed with the same customer) for the Manager's fleet
historically has been between 58% and 64%. Each Equipment Unit in the Company
Fleet was manufactured by and acquired from Trinity during 1997 or 1998, and the
entire Company Fleet is subject to Subleases.
The initial Sublease terms average 5.7 years without taking into account
the exercise of any "early-out" option and 5.3 years assuming the exercise of
"early-out" options. As of [May 31, 1998], the average remaining term for all
Subleases with respect to the Company Fleet was approximately 5.2 years without
taking into account the exercise of any "early-out" options and 4.8 years
assuming the exercise of "early-out" options. As of [May 31, 1998], 13% of the
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<PAGE>
Subleases contained "early-out" options. The range of the Sublease terms with
and without the exercise of the "early-out" options follows:
INITIAL SUBLEASE TERM STRATIFICATIONS
<TABLE>
<CAPTION>
NUMBER OF EQUIPMENT UNITS
-------------------------
TERM FULL TERM EARLY-OUTS
-------------- ----------- ------------
<S> <C> <C>
1 year ......... 1 148
2 years ........ 0 43
3 years ........ 29 148
4 years ........ 160 9
5 years ........ 1,809 1,680
6 years ........ 0 5
Over 6 years ... 444 410
</TABLE>
GATC currently uses a centralized asset management process in conjunction
with a national sales force which together enable the Manager to allocate
existing railcars to meet demands in various industries in an effort to ensure a
high percentage of renewals and assignments and to locate new customers. Under
the centralized asset management process, each Sublease will be examined one to
two years prior to expiration for certain factors, including among other things,
type of railcar, type of commodity or product transported and the customer's
industry. This information allows the Manager to manage and allocate the future
Subleases of a particular railcar type and minimize idle time. Ninety days
prior to expiration, a Sublease will be examined again to quote renewal pricing.
During this 90-day period, a higher short-term rate is established by the
Manager which may be automatically charged to the customer 60 days after
expiration of the Sublease term unless the railcar is returned or the Sublease
renewed. Concurrently with securing renewals, the Manager's sales force seeks
to meet new market demands for railcars.
For most customers, the decision whether to renew a Sublease is based on a
combination of need, convenience and price. While the customers' specific needs
and lease economics will be principal factors, customers have an incentive to
renew their Subleases in that failure to do so will require that each Equipment
Unit be cleaned prior to return, resulting in a period of overlap during which
the customer must pay for the new Equipment Unit while cleaning and transporting
the old Equipment Unit. In addition to the required cleaning of Equipment
Units, upon return each Equipment Unit is inspected and made ready for
assignment to another customer. In certain instances an Equipment Unit may be
leased "service to service," in which case the Equipment Unit is transported
from one customer to another without spending time in a maintenance facility for
inspection and maintenance. Some customers prefer to rent used equipment, for
which lease rates tend to be lower and lease terms may be more flexible, while
others prefer new cars. Pursuant to the Management Agreement, the Manager will
undertake to remarket the Equipment Units with respect to which the related
Sublease has expired or been terminated.
As of December 31, 1997, the utilization rate for the Manager's Fleet was
96.4% and the utilization rate for all railcars owned or leased by the Manager
(including those in Canada and Mexico) was 95.8%. A portion of the Manager's
Fleet may remain idle (i.e., not subject to a sublease) at any time. Set forth
below is the historical year-end utilization for all railcars owned or leased by
the Manager (including those in Canada and Mexico) from 1979 through 1997,
showing the percentage of all railcars owned or leased by the Manager (including
those in Canada and Mexico) subject to a sublease. While the Company believes
that utilization rates for the Company Fleet will be similar to those of the
Manager's Fleet at any particular time, there can be no assurance that the
actual utilization rates for the Company Fleet in the future will be consistent
with the historical experience of the Manager's Fleet.
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<PAGE>
YEAR-END UTILIZATION PERCENTAGE FOR ALL
RAILCARS OWNED OR LEASED BY THE MANAGER*
[GRAPH APPEARS HERE]
_________________
* Including those in Canada and Mexico.
SUBLEASE RATES
The sublease rate with respect to each Sublease is established at the
commencement of the related Sublease term. As of the Closing Date, all of the
Equipment will be subject to Subleases. After the initial Sublease terms have
expired, the Manager will establish renewal sublease rates for those Equipment
Units for which the related Subleases are renewed and new sublease rates for
Equipment Units that are assigned. While the initial sublease rates with
respect to each Sublease will remain in effect through the initial (or current)
Sublease term, renewal sublease rates are determined at the time of renewal, and
are based primarily on (i) the initial sublease rate, (ii) market strength,
(iii) customer demand, and (iv) the age of the applicable Equipment Unit. It
has been the experience of the Manager that sublease rates generally increase
with inflation and decrease with the aging of a railcar. However, sublease rate
increases resulting from inflation have generally exceeded reductions in
sublease rates resulting from aging.
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<PAGE>
The initial Sublease rates average $618 per month per Equipment Unit and
are distributed as follows:
INITIAL SUBLEASE RATE STRATIFICATION
<TABLE>
<CAPTION>
LEASE RATE # OF CARS
---------------- ---------
<S> <C>
Less than $500 81
$500-$599 1,167
$600-$699 676
$700-$799 474
$800 and over 45
-----
Total.............. 2,443
=====
</TABLE>
Although there has been some correlation between industry growth and demand
for railcars, the relationship is not linear. Increased production in a given
industry may lead to increased demand by such industry for Equipment Units,
resulting in upward pressure on applicable sublease rates. However, this
pressure may be offset by lack of growth (or contraction) in other industries,
in which case the demand for Equipment Units would not increase significantly.
Similarly, if overall industry growth is anticipated by the railcar industry and
supply is increased accordingly, sublease rates are not likely to increase.
Additional factors affecting sublease rates in any given period are the number
of railcars with expiring subleases in such period and the nature of such
railcars.
In order to continually monitor the strength of the railcar leasing market
as well as industry supply and demand, the Manager currently conducts periodic
market analyses including a comparison of industry-wide railcar registrations
(the AAR requires such registration for all railcars to be moved in interchange
service) versus registration trends in previous years, and a review of the level
of order inquiries received by the Manager. The Manager's sales representatives
assist in the monitoring process through regular interaction with customers.
Since the Manager's market share typically does not change in a material fashion
from month to month, the Manager believes these inquiries generally reflect
overall market demand. The Manager believes that the combination of its
analyses and the information obtained through its sales network allows it to
develop a fair assessment of the state of the railcar leasing market at any
time.
RENTAL PAYMENTS
Rental payments under the Subleases commence upon delivery of the related
Equipment Unit to the customer and continue to accrue (subject to Rent
Abatement, as defined herein) until such Equipment Unit is returned to the
Company in accordance with the terms of the Sublease. Delivery to a customer is
usually deemed to occur (i) with respect to an Equipment Unit not in the
customer's service, upon acceptance by a railroad of instructions to forward
such Equipment Unit to a destination point designated by the related customer
and (ii) with respect to an Equipment Unit already in the customer's service
under an expiring Sublease or a Sublease being terminated by the new Sublease,
immediately upon the expiration or termination, as the case may be, of such
Sublease. Under the terms of the Sublease (i) each customer is required to
inspect any Equipment Unit delivered within five days after receipt at the
destination point designated by such customer, and (ii) failure of such customer
to promptly report to the Manager any defect in such Equipment Unit constitutes
acceptance of such Equipment Unit by such customer. An Equipment Unit will
usually be deemed to have been returned to the Company upon release of such
Equipment Unit by the customer to a forwarding railroad within the continental
United States in accordance with instructions to such customer from the Manager.
If a Sublease is not renewed and the Equipment Unit not returned within 60 days
of expiration, the Sublease may be deemed by the Manager to have been converted
to a month-to-month term at a monthly lease rate established by the Company and
quoted to the customer prior to the expiration of the related Sublease term.
Rental payments under the Subleases are billed monthly in advance.
Although initially most of the Company's customers will also be customers of
GATC under separate railcar leases with GATC, the terms of the Subleases
prohibit any right to setoff obligations owing by any customer to the Company
against obligations owing by GATC, as lessor, to such customer, including any
Railroad Mileage Credits (as defined herein) or Rent Abatements.
Notwithstanding the foregoing, some customers may net payments and offset
between railcars leased from GATC and Equipment Units leased
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<PAGE>
from the Company, in which case the Manager will reconcile the related account
as described under "Collection and Application of the Company's Cash Flows--
Collection of Sublessee Payments." Customers may net Railroad Mileage Credits
owed to them by the Company against rental payments due under their Subleases.
If a physical alteration or modification to any Equipment Unit is required
by the AAR or any government, agency, group or committee exercising authority
over the design or operation of any Equipment (any such alteration or
modification, a "Required Modification"), the Manager will perform, or have a
third party perform, such Required Modifications and the Manager may require, as
is currently allowed under the Sublease, the customer to pay to the Company as
additional rent an amount equal to the greater of (i) $1.50 per Equipment Unit
per month for each $100 per Equipment Unit cost to perform such Required
Modification and (ii) such additional monthly charge that will cover the cost of
such Required Modification (including the Company's then current cost of money)
over the estimated life of such Required Modification of the Equipment Unit.
Any such charges become effective upon the date of acceptance by a railroad of
instructions to forward such Equipment Unit to the related customer upon
completion of the Required Modification. Rental charges with respect to any
Equipment Unit related to such alteration or modification are not subject to
abatement as described below.
RAILCAR MAINTENANCE AND MODIFICATIONS
A railcar may require running repairs throughout its life to ensure safe
operation. These repairs may be undertaken by a railroad when the car passes
through interchange or by a mobile repair unit which can travel to the railcar
location.
Maintenance costs historically have been very low during the first five to
eight years, until the railcar requires its first "major shopping", and increase
somewhat thereafter. A major shopping may require routine maintenance such as
truck and underframe work, component repair or replacement, airbrake work and
periodic painting. Various railcar regulations require scheduled testing as
well, including tank and safety valve testing. While a railcar is in a service
center, Required Modifications or Optional Modifications may also be performed.
Required Modifications are the consequences of rules and regulations promulgated
by the Regulators, such as the AAR or the DOT, to enhance the safety record of
railcars. These rules require that, if applicable, the railcar be modified as a
condition of continued use or operation. Optional Modifications are requested
by a specific customer or may be programs determined by the Manager designed to
enhance the marketability of the railcar.
Equipment Units are expected to be routed for maintenance under the
following conditions: (i) the Manager will generally be contacted by a customer
when it requires work to be performed on specified Equipment Units; (ii) the
Manager may require Required Modifications testing to be done with respect to an
Equipment Unit; (iii) the Manager may repair an Equipment Unit between
Subleases; and (iv) railroads will make running repairs as Equipment Units pass
through interchange.
RENT ABATEMENTS; DAMAGE
In certain circumstances, customers whose Equipment Units are being
serviced will not be required to pay rent on such Equipment Units for such
service period (a "Rent Abatement"). Rent Abatements during maintenance apply
whether the Equipment Unit is serviced at a facility run by the Manager or a
third-party. Once the Manager determines the actual amount of idle time as a
result of the related occurrence, the abatement may be adjusted and the customer
invoiced accordingly. Rent Abatement for any Equipment Unit subject to a
Sublease is adjusted or not granted, however, when such Equipment Unit is out of
service (a) due to damage to such Equipment Unit for which the customer is
responsible under the terms of the Sublease, (b) for lining application,
maintenance, renewal or removal for which the customer is responsible, (c)
during periods of delay in forwarding such Equipment Unit to a facility
designated by the Manager where such delay is caused by the customer, (d) for
work, other than normal maintenance, performed at the request of the customer,
(e) for any Required Modification or (f) when the customer has not caused the
Equipment Unit to be properly cleaned in accordance with the terms of the
Sublease.
Under the Subleases, each customer is responsible for any loss of or damage
to any Equipment Unit or any part thereof caused by the commodity contained
therein or incurred in the process of loading or unloading such commodity or
when abuse is evident, or caused by the chemical environment in which such
Equipment Unit is loaded, unloaded or
33
<PAGE>
stored. Generally, each customer is also responsible for any risk of loss of,
damage to, or destruction of any Equipment Unit, or part thereof, occurring
while such Equipment Unit is located upon private tracks or premises (i.e.,
tracks or premises owned or leased by an entity other than a railroad), other
than those of the Manager or an affiliate thereof. Each customer is further
responsible for the cost of the interior lining of any Equipment Unit and must
renew and maintain all such linings throughout the term of the Sublease. Upon
expiration or termination of the related Sublease, all linings generally must be
removed prior to return of the Equipment to the Company.
REMEDIES UPON DEFAULT
Upon the failure by any customer to perform any of its obligations under a
Sublease, the Company may (a) without notice or demand terminate such Sublease
with respect to any or all of the Equipment Units subject thereto and take
possession of any or all of such Equipment Units, (b) upon seven days prior
written notice to the related customer, change the term of the related Sublease
to a month-to-month term, subject to termination thereafter by either the
customer or the Company upon 10 days prior written notice, or (c) permit the
related customer to retain possession of any or all of the Equipment Units
subject thereto provided that such customer must (i) within five days after
written notice from the Company, cure any and all defaults under such Sublease,
and (ii) within such five-day period, provide to the Company adequate assurances
(including collateral security) of future performance under such Sublease. Each
Sublease is, by its terms, subordinate to the related Lease.
USE OF EQUIPMENT
Without the prior written consent of the Company, the Subleases provide
that Equipment may not be utilized in unit train service, nor shall the average
loaded mileage of all Equipment subject to a Sublease exceed 18,000 miles during
any calendar year. Equipment Unit use is further limited to the continental
United States, Canada and Mexico. Each customer is responsible for all taxes and
duties, and for complying with all governmental requirements arising out of any
Equipment Unit leaving, being outside of or returning to the continental United
States. Pursuant to the terms of each Lease, there are certain restrictions on
the Company's use of the Equipment Units outside the continental United States
and upon subleasing Equipment Units to Canadian or Mexican Sublessees. See "The
Leases--Restrictions on Subleases."
RAILROAD MILEAGE CREDITS
Railcars are required to carry a "mark" intended to designate the owner of
such railcars. Railroad Mileage Credits are cash credits the registered owners
(based on the "marks" thereon) receive from the railroads based on railcar
mileage. Since the tariffs charged by most railroads include the railroads'
"imputed" or "assumed" cost of the railroad owning the railcars, the Railroad
Mileage Credits represent the "assumed ownership" portion of the tariff to the
registered owners of the railcar "marks" (whether or not the railcar is leased
or owned by the owner of the related "marks"). This "assumed ownership" portion
of the railroad tariff is based in part on the original cost of the related
railcar. Accordingly, more expensive tank and covered hopper cars, based on
original cost, receive higher Railroad Mileage Credits than older or less
expensive railcars. Railroad Mileage Credits are determined by the railroads,
which track the mileage of railcars based on the markings on such railcars.
Under the terms of the leases GATC enters into with its customers and under
terms of the Subleases, GATC and the Company, respectively, agree to pay to
their customers all payments in respect of Railroad Mileage Credits with respect
to the related railcars or Equipment Units. At or prior to the Closing Date,
GATC's railcars and the Equipment will be "marked" with marks registered with
the AAR in the name of the Marks Company. Payments in respect of Railroad
Mileage Credits for GATC's customers and the Company's customers will be paid to
the Marks Company. These payments will then be allocated between GATC and the
Company in accordance with the respective railcars in the Company Fleet and the
Manager's Fleet. GATC, as Manager will, in turn, credit such payments under the
applicable Sublease against the Sublessee's account resulting in a reduction of
the amount due from such Sublessee. Sublessees may either apply the amount of
the credit to the amount due under their respective Subleases or request payment
of the amount of such credit. See "The Management Agreement" and "Collection
and Application of the Company's Cash Flows--Collection of Railroad Mileage
Credits."
Movement information with respect to each Equipment Unit is provided to
GATC, as servicer for the Marks Company, by the railroads. The Company will
agree to use its best efforts to collect Railroad Mileage Credits as paid by the
railroads to the Marks Company for all car movements during the term of each
Sublease and to credit such
34
<PAGE>
amounts to the related Sublessee's account. From time to time a railroad may
also assess certain charges on the Equipment to the Marks Company as owner of
the marks. Any such charges imposed by a railroad against the Marks Company with
respect to the Equipment will be paid by the Manager as a reimbursable item
under the Management Agreement.
INDEMNIFICATION OF THE COMPANY
The terms of the Subleases require each Sublessee to indemnify the Company
from and against any and all liabilities, charges, costs, losses, damages,
expenses or demands (including reasonable attorneys' fees and court costs)
(together, "claims") made against the Company or which the Company may incur
arising out of such Sublessee's failure to comply with the terms and conditions
of a Sublease, unless (i) such claim results directly from the negligent act or
omission of the Company or (ii) such claim is a claim for which one or more
railroads is responsible and has satisfied such responsibility.
The Subleases also require each Sublessee to indemnify the Company from and
against any and all claims made against the Company or which the Company may
incur resulting from (a) any condition which was, or should have been,
determined upon visual inspection by the Sublessee of any Equipment Unit prior
to the loading of such Equipment Unit, (b) any loss of or damage (including
corrosion damage) to any Equipment Unit or any part thereof caused by the
commodity contained therein or incurred in the process of loading or unloading
such commodity, or caused by the chemical environment in which such Equipment
Unit is loaded, unloaded or stored, unless such claim results directly from the
negligent act or omission of the Company, and (c) any claims made against the
Company or which the Company may incur arising out of any taxes, duties or
compliance with any governmental requirements arising out of any Equipment Unit
leaving, being outside of or returning to the continental United States.
TAXES
If the railcar is subject to a "full service" lease, the applicable
Sublease currently requires the Company to pay all ad valorem property taxes
levied upon the related Equipment Units and to file all necessary returns and
reports for such taxes. Each Sublessee must pay, cause to be paid or reimburse
the Company for all other taxes, including but not limited to sales, use,
rental, gross income and excise taxes (except net income taxes) as may be levied
or assessed against the Company or the Sublessee in connection with such
Sublease, or arising out of any sale, lease, rental, use, operation, ownership,
payment, shipment or delivery of any related Equipment.
Currently [34] states and 3 Native American tribes tax railcars on an ad
valorem (according to value) basis. The Manager is responsible for the filing of
returns, payment of taxes and, when necessary, contesting such taxes in an
appropriate forum in connection with the Company Fleet. Although the railcars'
owners (for tax purposes) are responsible for payment of taxes, the taxing
authorities levy the taxes on the owner of the marks on the individual railcars.
Accordingly, all ad valorem taxes with respect to the Equipment will be assessed
to the Marks Company, and GATC, as servicer of the Marks Company, will apportion
the taxes allocable to the Equipment and bill the Company. As the ad valorem
taxes cannot readily be traced to individual Equipment Units, the Company will,
under the Management Agreement, reimburse the Manager for its proportionate
share of the taxes assessed on the Company Fleet as a percentage of the Total
Managed Fleet.
THE SUBLESSEES
The Company's customers will initially use its Equipment to ship a wide
variety of different commodities, primarily chemicals, petroleum, food products
and minerals. Many of these products require cars with special features; the
Company offers a variety of sizes and Car Types to meet these needs. See "--
Description of the Equipment." At closing, the Company will be leasing
Equipment to approximately [80] customers, including major chemical, petroleum,
food and agricultural companies. Based on the Subleases currently in effect, no
single customer will initially account for more than 6% of the Company's total
railcar leasing revenue.
All of the Company's customers are, or were, prior to the contribution of
the Subleases by GATC to the Company, customers of GATC. The Company's customer
base will vary over time as Subleases expire or are terminated
35
<PAGE>
and the related Equipment Units are re-leased to other current customers of the
Company and of GATC or new customers. [As of the Closing Date, approximately 48%
of the Company's customers will be engaged in the chemical products industry,
17% in the petroleum products industry, 9% in the food products industry, 13% in
the plastics industry and 13% in the mineral industry.] For 1997, approximately
54% of GATC's railcar leasing revenue was attributable to customers in the
chemical products industry, 21% to the petroleum products industry, 18% to the
food products industry and 7% to other industries. There can be no assurance
that the Company's customer base will be comparable to that of GATC. See "The
Leases--Restrictions on Subleases" regarding subleases to Canadian or Mexican
Sublessees.
On the Closing Date the Company's Sublessees will consist of entities rated
by S&P and/or Moody's (or, in certain instances, entities whose parents are
rated by S&P and/or Moody's) as well as unrated entities. Parent companies of
Sublessees may not have guaranteed the obligations of their subsidiaries. All
new customers will be subject to prior credit approval, while in the case of
Sublease renewals existing customer approval will be based on the size of such
entity, payment history and the number of Equipment Units to be leased. All
credit approval, processing and reviewing of the Company's customers is the
responsibility of the Manager under the Management Agreement. The Manager
typically obtains Dun & Bradstreet reports ("D&B") and other financial
information (including audited financial statements when available) for all new
customers. If a new customer is a privately held company and sufficient
financial information is not publicly available, the Manager will contact other
creditors of such company to discuss its credit history. In some instances,
even if the Manager is satisfied with the results of discussions with other
creditors, financial information may still be requested from the customer. In
cases where the financial condition of a customer is not as strong as the
Manager desires, a security deposit of from 3 to 6 months rent may be required,
subject to the marketability of the Equipment Unit to be leased, as described
below. During sub-optimal market conditions, the Manager may become more
flexible in its credit requirements with respect to leasing the Equipment, so as
to maximize utilization. Set forth below are the ratings concentrations, by
number of Equipment Units, as of June 1, 1998, for the Sublessees or their
parents, as applicable.
RATINGS OF SUBLESSEES/(1)/
AS OF JUNE 1, 1998
<TABLE>
<CAPTION>
MOODY'S S&P
- ----------------------------------- ---------------------------------
# OF % OF # OF % OF
RATING CARS TOTAL CUMULATIVE RATING CARS TOTAL CUMULATIVE
- -------- ----- ------ ---------- ------ ----- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aaa 2 0.1 0.1 AAA 32 1.3 1.3
Aa1 28 1.1 1.2 AA+ 15 0.6 1.9
Aa2 62 2.5 3.7 AA 60 2.5 4.4
Aa3 325 13.3 17.0 AA- 253 10.4 14.8
A1 45 1.8 18.8 A+ 38 1.6 16.4
A2 61 2.5 21.3 A 68 2.8 19.2
A3 253 10.4 31.7 A- 242 9.9 29.1
Baa1 12.5 5.1 36.8 BBB+ 50 2.0 31.1
Baa2 271 11.2 48.0 BBB 192 7.9 39.0
Baa3 15 0.6 48.6 BBB- 203 8.3 47.3
Ba1 47 1.9 50.5 BB+ 35 1.4 48.7
Ba2 73 3.0 53.5 BB 0 0 48.7
Ba3 211 8.6 62.1 BB- 287 11.7 60.4
B1 0 0 62.1 B+ 37 1.5 61.9
B2 170 7.0 69.1 B 47 1.9 63.8
B3 0 0 69.1 B- 25 1.0 64.8
NR 755 30.9 100.0 NR 860 35.2 100.0
----- ----- ----- ----- ----- -----
Total 2,443 100.0% -- 2,443 100.0% --
===== ===== ===== ===== ===== =====
</TABLE>
_____________
(1) For unrated Sublessees whose parent companies are rated, the ratings set
forth are those of the rated parent. There can be no assurance that the
ratings assigned to the parent are reflective of the creditworthiness of the
Sublessee.
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<PAGE>
The Manager will conduct an annual credit review that will usually be
limited to Sublessees with a delinquent payment history. Such review generally
will consist of reviewing the D&B reports for such Sublessees and the periodic
"flagging" of delinquencies greater than 90 days. Certain customers seeking to
increase significantly the amount of their monthly obligations to the Company
will be reviewed more closely, similar to the process employed for new
customers, while the highly rated Sublessees and those with good payment
histories will require a less detailed review.
The Manager's experience has been that repossession of an Equipment Unit is
rarely necessary, seldom exceeding 50 railcars per year in the Manager's Fleet.
Although the Company expects similar collection and repossession experience to
that of the Manager's Fleet, there can be no assurance that the Company's
collection and repossession experience with respect to the Company's Fleet will
be similar to the Manager's experience with respect to the Manager's Fleet,
either historically or on an ongoing basis.
MANAGER'S DELINQUENCY AND WRITE-OFF EXPERIENCE; HISTORICAL RENT ABATEMENTS
The following tables set forth certain information with respect to the
amount of provisions for estimated writeoffs of the Manager in respect of its
railcar lease receivables for its fiscal years ended December 31, 1993 to
December 31, 1997 and for the period beginning January 1, 1998 and ended May 31,
1998 and the Manager's aging of its railcar lease receivables for the period
beginning January 1, 1998 and ending May 31, 1998, and for its fiscal years
ended December 31, 1993 to December 31, 1997. On the Closing Date, the
Subleases will consist of Subleases originated by the Manager that have been
assigned to the Company. There can be no assurance that the performance of the
Sublessees under the Subleases will be similar to the Manager's experience with
respect to the Manager's Fleet, either historically or on an ongoing basis.
MANAGER'S FLEET RECEIVABLES WRITE-OFFS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
% OF LEASE
PERIOD ENDING LEASE REVENUE WRITE-OFFS REVENUE
--------------- ------------- ---------- -----------
<S> <C> <C> <C>
06/30/98...... $___ $_____ ____%
12/31/97...... 406 0.306 0.07%
12/31/96...... 391 0.913 0.23%
12/31/95...... 354 1.232 0.35%
12/31/94...... 318 0.604 0.19%
12/31/93...... 296 0.069 0.02%
</TABLE>
ACCOUNTS RECEIVABLE AGING OF MANAGER'S FLEET AS A PERCENTAGE
OF TOTAL RECEIVABLES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF DAYS
-------------------------------------------------------------------
0-30 DAYS 31-60 DAYS 61-90 DAYS OVER 90 DAYS/(2)/
-------------- -------------- -------------- ----------------
% OF % OF % OF % OF TOTAL
DATE AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL RECEIVABLES
- ---------- ------ ----- ------ ----- ------ ----- ------ ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/30/98.......... $______ ____ $_____ ____ $_____ ____ $_____ ____ $______
12/31/97.......... 12,836 102.9 3,319 26.6 300 2.4 (3,928) (31.0) 12,476
12/31/96.......... 12,632 64.1 5,022 25.6 1,956 9.9 85 0.4 19,695
12/31/95.......... 11,078 50.5 4,736 21.6 3,210 14.6 2,911 13.3 21,935
12/31/94.......... 9,921 55.3 3,716 20.7 2,798 15.6 1,493 8.3 17,928
12/31/93.......... 5,297 44.4 3,915 32.8 2,464 20.7 251 2.1 11,927
</TABLE>
______________
(1) The receivables aging set forth above begins on the day that the related
invoice was generated, typically the first day of a calendar month. The
Manager invoices its customers in advance for the use of the railcar during
that month.
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<PAGE>
(2) The credit balance for the period ending June 30, 1998 in the over 90 days
past due column represents unapplied mileage credits paid to the manager by
the railroads and passed on to customers in the form of invoice credits.
Included as part of that net credit balance is [$2.95] million of accounts
due from, or in dispute with, customers.
The level of past due receivables has not resulted in a high level of
write-offs (see prior table). The majority of write-offs by the Manager have
not been the result of customer credit problems, but rather from billing
disputes related to Rent Abatement, car receipt or release dates, customer
liability, maintenance and cleaning charges, where a credit to adjust billing is
being processed and will not result in the write-off of such amount. Customers
from time to time dispute the railroads' calculation of mileage credit amounts
as well as the Manager's allocation thereof, and often adjust their lease
payments accordingly. From time to time, disputes arise over the number of days
the applicable railcars were not in service due to discrepancies in effective
dates, release dates and shipping dates. Rent Abatements result from GATC's
policy not to charge its customers rent during the time that a railcar is not in
use for certain maintenance conducted by the Manager. No Rent Abatements are
granted when repairs or maintenance are conducted by customer initiated contract
shop repairs, where the Manager is not properly notified in advance or for
repairs that take approximately one day.
Set forth below is historical Rent Abatement data for the Manager's Fleet
for the years ended December 31, 1993 to December 31, 1997. The reduction in
Rent Abatements over this period is due primarily to the reduction in the number
of service center throughput days. Throughput days have decreased due to major
upgrades at all of the Manager's U.S. service centers and the Manager's added
focus on the scheduling and railcar repair process. The Equipment Units subject
to the Subleases will be subject to Rent Abatements, and there can be no
assurance that the Rent Abatement experience of the Company with respect to the
Company Fleet will be similar to the Manager's experience with respect to the
Manager's Fleet, either historically or on an ongoing basis.
HISTORICAL RENT ABATEMENTS
MANAGER'S FLEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Rental Revenue............................... $ 406 $ 391 $ 354 $ 318 $ 296 $ 285
Rental Abatements............................ 6.9 6.4 7.7 8.2 8.0 8.3
Rent Abatement as a % of Revenue............. 1.69% 1.64% 2.18% 2.58% 2.70% 2.91%
Average Maintenance Throughput Time (days)... 32 32 38 54 52 55
</TABLE>
THE MANAGER
GATC will act as the Manager for the Company pursuant to the Management
Agreement. GATC is primarily engaged in leasing specialized railcars, primarily
tank cars and, to a lesser extent, covered hopper cars, including specialty
covered hopper, grain and plastic pellet cars, under full service leases similar
to the Subleases. GATC also manages a fleet of railcars leased by General
American Railcar Corporation, a separate wholly-owned special purpose subsidiary
of GATC formed in 1997 and may in the future manage fleets of railcars owned or
leased by other GATC affiliates. The Manager's wholly-owned subsidiary, GATX
Terminals Corporation, is engaged in the operation of public bulk liquid
terminals and domestic pipeline systems. The Manager is the largest lessor of
railroad tank cars in the United States, and Terminals is one of the largest
independent operators of public bulk liquid terminals in the world. The
principal offices of the Manager are located at 500 West Monroe Street, Chicago,
Illinois 60661-3676 (telephone: 312-621-6200).
The Manager is a wholly-owned subsidiary of GATX Corporation ("GATX").
GATX is also the parent of GATX Financial Services, which through its principal
subsidiary, GATX Capital Corporation as well as its other subsidiaries and joint
ventures, arranges and services the financing of equipment and other capital
assets on a worldwide basis, American Steamship Company, a shipping company
which operates self-unloading vessels on the Great Lakes, and GATX Logistics,
Inc., which provides distribution and logistics support services, warehousing
facilities, and related real estate services throughout North America.
38
<PAGE>
In addition to its corporate headquarters in Chicago, Illinois, the Manager
maintains six business offices in three national regions to manage customer
accounts. (The Manager's Midwestern regional office is in Chicago, Illinois,
its eastern regional offices are in Hackensack, New Jersey, Pittsburgh,
Pennsylvania and Atlanta, Georgia and its southwestern regional offices are
located in Houston, Texas and Valencia, California.)
The Manager maintains, repairs and modifies railcars at service centers in
Texas, Georgia, California and Indiana. At June 30, 1998, the Manager's "Field
Service Network" included 39 mobile units operated out of 22 locations,
including several locations where repairs are completed inside customer plants.
In the area of railcar service, the Manager concentrates on maximizing in-
service time for customers' railcars. Training programs utilizing the Manager's
Tank Trainer and School House cars are intended to educate customers regarding
applicable government regulations and proper use and handling of equipment. The
Manager's owned service center network provides "one-stop shopping" and
environmentally responsible service. This network employs closed loop car
cleaning technology along with modern equipment for repairing and painting
railcars. Through its Field Services Network, the Manager performs minor
repairs at customer plants or railyards. This network eliminates the time and
expense associated with moving cars to major service locations and has the
effect of reducing the amount of Rent Abatements. Railroads complete repairs to
the "running" components of the cars (wheels, axles, brakes, couplers, etc.)
under the AAR Interchange Rules and then pass on the cost of such repairs to the
owner of the marks contained on the repaired railcars. The Manager has a
process in place for monitoring and auditing these "running repair" expenses.
The Manager also has several operating agreements with "preferred contract
shops." These preferred contract shops provide customer information including
repair estimates and repair status of the railcars. The Manager periodically
audits these preferred contract shops to monitor the quality of repairs and
compliance with applicable environmental regulations.
In the area of supplying railcars, the Manager utilizes its industry
expertise and design system to design railcars that efficiently transport a wide
variety of bulk products. Railcars designed by the Manager are built primarily
by Trinity. In addition to supplying new equipment to the marketplace, the
Manager utilizes its engineering, fleet management and service expertise to
provide customers with a supply of properly designed, well conditioned used cars
to meet their needs.
RECENT DEVELOPMENTS RELATING TO THE MANAGER
In September of 1987, a tankcar fire occurred in the City of New Orleans.
The fire was caused by a leak of butadiene from a railcar owned by the Manager.
The fire resulted in no deaths or significant injuries, and only minor property
damage, but did result in the overnight evacuation of a number of residents from
the surrounding area. Immediately after the fire a number of lawsuits
(representing approximately 8,000 claims) were brought against a number of
defendants, including the Manager and its wholly-owned subsidiary GATX Terminals
Corporation ("Terminals"). The suits were ultimately consolidated into a class
action brought in the Civil District Court in the Parish of Orleans (the "Trial
Court"). A trial of the claims of twenty of the plaintiffs resulted in a jury
verdict in September 1997 which awarded the twenty plaintiffs approximately $1.9
million in compensatory damages plus interest from the date of the accident. In
addition, the jury awarded, and the Trial Court entered judgment on, punitive
damages totaling $3.4 billion against five of the nine defendants, including
$190 million as to Terminals. Subsequently, the Louisiana Supreme Court granted
a writ filed by one of the defendants, CSX Transportation, Inc., vacating the
punitive damage judgments and indicating that a judgment could not be entered
until all liability issues relating to all 8,000 class members have been
adjudicated. Having vacated the entire judgment in the process, the Louisiana
Supreme Court thus effectively precluded the defendants from seeking immediate
post-trial review of the finding of liability for punitive and compensatory
damage. Accordingly, the defendants filed a motion asking that the Trial Court
enter a judgment only on liability, and without reference to the amount of
damages, thereby permitting the defendants to seek review of the compensatory
and punitive liability findings but not the amount of damages.
In response to the defendants' motion, on June 18, 1998 the Trial Court
entered a judgment (a) finding each of the defendants responsible for
compensatory damages to the members of the plaintiff class in the specified
percentages in the jury verdict, including twenty percent as to the Manager and
ten percent to Terminals, but without specifying the quantum of damages; and (b)
finding five of the defendants, including Terminals, liable for punitive damages
in favor
39
<PAGE>
of the plaintiff class. The Trial Court designated the judgment to be final and
appealable. On June 25, 1998, the defendants filed post judgment motions seeking
a new trial or alternatively seeking to overturn the finding of punitive
liability.
Pursuant to a motion filed on behalf of the plaintiffs, the Trial Court
also ordered the commencement of trials of the claims of other members of the
class, and directed the defendants to show cause why there should not be a court
appointed statistician designated to assist the court in selecting
representative plaintiffs for such trials. The plaintiffs had asked the Trial
Court to conduct a sufficient number of trials of representative plaintiffs in
order to validate the findings of punitive damages. The defendants had urged
the Trial Court not to order additional trials until the defendants' Motion for
a New Trial addressing the errors attributable to the conduct of the plaintiffs'
attorneys had been resolved. It is not clear from the Trial Court's order when
such trials are to commence, the manner in which they are to proceed, or what
issues are to be tried. Terminals will oppose any attempt to enter judgment as
to the amount of punitive damages prior to the resolution of all liability
issues with respect to the remaining 8,000 claims.
The Manager and Terminals believe that the compensatory damages awarded to
the twenty plaintiffs are excessive, and intends to pursue post-judgment review
of the awards, and if necessary, vigorous appeals of any final judgment. The
Manager and Terminals believe that the damages, if any, that are awarded to the
remaining plaintiffs, whether by the trial or appellate courts, will, on average
be substantially less than the damages awarded to the twenty plaintiffs whose
claims have been tried. Terminals also believes that the punitive liability
judgment is unsupported by law and evidence. Accordingly, Terminals intends to
pursue vigorous appeals of the punitive damages liability judgment if it
survives post-judgment review. In addition, Terminals further believes that the
punitive damages awards rendered by the jury are clearly excessive. If a
judgment on the award against Terminals is entered by the Trial Court, Terminals
intends to pursue post-judgment review in the Trial Court, and if necessary,
vigorous appeal of that judgment as well. While the amounts claimed are
substantial and the ultimate liability with respect to such litigation and
claims cannot be determined at this time, the Manager does not expect the result
of the litigation to have a material adverse effect on its ability to perform
under the Management Agreement, the Insurance Agreement, the Administrative
Services Agreement or the Servicing Agreement.
Since 1990, the Manager has made payments or otherwise agreed to a
settlement in connection with liability claims resulting from railcar accidents
in 60 cases. The amounts paid by the Manager and its insurer with respect to
such accidents have ranged from $700 to approximately $6.6 million, with over
88% of such incidents requiring payments of less than $250,000. In most cases,
the Manager, as the owner or sublessor of the railcar, is one of a number of
defendants, along with its customer, the railroad, a shipper and a manufacturer,
and liability, whether upon judgment or pursuant to a settlement, is apportioned
among the parties. While the Company expects its liability claim experience to
be similar to that of the Manager, there can be no assurance that the Company's
experience will actually reflect that of the Manager, either historically or on
an ongoing basis.
The Manager is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith, files reports and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information concerning the Manager may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at Room 1028, Seven World Trade Center, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. The Commission maintains a web site (http://www.sec.gov.) that
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission. Copies of such material can also
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
THE MANAGEMENT AGREEMENT
The following summary relates to the Management Agreement. Section
references in parentheses are to the relevant sections of the Management
Agreement unless otherwise indicated. The statements under this caption are a
summary and do not purport to be complete. This summary makes use of terms
defined in and is qualified in its entirety by reference to all of the
provisions of the Management Agreement.
40
<PAGE>
GENERAL
Under the Management Agreement, the Manager has authority generally to
manage and administer the Equipment, the Leases and the Subleases. (Management
Agreement, Section [2.1]) The Manager will perform various services for the
Company, including, without limitation: (i) monitoring the creditworthiness and
performance of Sublessees; (ii) discharging the Company's obligations under the
Subleases and collecting Sublease Payments and other payments due with respect
to Equipment; (iii) accounting for and remitting all amounts due to the Company;
(iv) maintaining the Equipment pursuant to the terms of the applicable Lease and
Sublease with reasonable care and diligence consistent with customary commercial
practices as would be used by a prudent person in the full service railcar
leasing industry; (v) preparing tax returns with respect to the Equipment and
paying such taxes on behalf of the Company; (vi) monitoring and recording
movements of the Equipment Units; (vii) crediting Railroad Mileage Credit
adjustments and other compensation received with respect to the Equipment to the
appropriate Sublessee; (viii) maintaining records of all transactions relating
to the Equipment, including with respect to maintenance, repair and Subleases;
(ix) providing railcar market industry research reports to the Company as
reasonably requested; (x) causing each Equipment Unit to be numbered with an
appropriate reporting mark; (xi) investigating Events of Loss and providing
recommendations to the Company regarding actions to be taken subsequent to such
Event of Loss; (xii) terminating Subleases for cause and recovering possession
of such Equipment Units, and otherwise generally enforcing all rights of the
Company with respect to such Subleases; (xiii) negotiating renewals of expired
Subleases or remarketing the related Equipment Units; (xiv) storing or arranging
for the storage of an Equipment Unit upon expiration or termination of its
related Sublease until re-lease of such Equipment Unit or until it is no longer
subject to the Lease; (xv) taking such actions as the Manager deems necessary or
appropriate to keep the Company in compliance with its obligations under the
Lease, the Participation Agreement and the Subleases; (xvi) making
recommendations to the Company as to whether to (a) terminate any Lease with
respect to obsolete or surplus Equipment Units, (b) exercise the Company's
purchase options for Equipment Units under the Lease or (c) exercise the
Company's renewal options for Equipment Units under the Lease; (xvii) taking
such actions as the Manager shall deem necessary or appropriate to keep the
Company in compliance with all laws, rules and regulations applicable to the
Company and the Equipment; (xviii) enforcing on behalf of the Company the
warranties with respect to all repairs, maintenance and modifications made with
respect to the Equipment Units; (xix) making any optional modifications or
alterations to an Equipment Unit or any Required Modifications, so long as such
modifications and alterations are not economically impractical; and (xx)
performing such other services as may be reasonably necessary in connection with
the operation and maintenance of the Equipment or the providing of the Equipment
to Sublessees or the entering into of Subleases. (Management Agreement,
Sections [2.02, 4.01 and 4.02]) Under the Management Agreement, the Manager has
no obligation to procure or maintain insurance on the Equipment; such services
are to be provided to the Company under the Insurance Agreement. (Management
Agreement, Section [2.06(t)]) See "The Insurance Agreement."
In performing its duties and obligations under the Management Agreement,
the Manager is required to comply with the Services Standard. (Management
Agreement, Sections [2.02, 3.01]) Under the Management Agreement, the Manager
is entitled to employ its standard collection procedures for late payments with
respect to the Equipment or Subleases, although the Manager is not responsible
for the failure of a Sublessee to make timely payments. The Manager is also not
required to threaten or commence any legal or other proceeding on the Company's
behalf if in the Manager's reasonable judgment the potential expense or risk of
such action is significantly prohibitive. Acts beyond the reasonable control of
the Manager may excuse the Manager from full performance in limited
circumstances. However, the Manager must exercise reasonable efforts to
mitigate or limit damages to the Company and must resume the performance of its
obligations as soon as practicable. The Management Agreement allows the Manager
to make decisions with respect to Equipment Units to reflect Sublessee
preferences and other factors it considers with respect to railcars in its fleet
of a similar type, condition and location. Nonetheless, the Manager may not,
without the Company's consent, enter into a Sublease which would result in a
Unit subject thereto being used in a manner inconsistent with the provisions of
the Lease, [including, without limitation, that the term of such Sublease not
extend beyond three years after the Basic Term of the related Lease, or, if
later, beyond the Renewal Term of such Lease,] nor shall the Manager create or
permit to be created any lien, charge or encumbrance on any Equipment Unit other
than a Permitted Lien. (Management Agreement, Section [3.01])
The Manager will not have any fiduciary or other implied duties or
obligations to the Company or any other party except the duties and obligations
expressly set forth in the Management Agreement. One such obligation prohibits
the Manager from discriminating between the Units and any other railcars in the
Manager's Fleet on the basis of
41
<PAGE>
ownership or any other potentially discriminatory basis. (Management Agreement,
Section [3.02]) However, nothing in the Management Agreement prevents, prohibits
or restricts the Manager or any affiliate of the Manager from manufacturing,
selling, owning, leasing, managing or otherwise dealing with other railcars.
(Management Agreement, Section [3.04])
COMPENSATION OF MANAGER
As compensation to the Manager for its services under the Management
Agreement, the Company will pay the Manager a monthly management fee consisting
of a Base Component and an Incentive Component. (Management Agreement, Section
[5.01]) The Base Component shall be the product of (i) a monthly fee payable
per Equipment Unit, which shall initially be $20 per Unit, adjusted annually to
reflect inflation and changes in costs, multiplied by (ii) the number of Units
managed under the Management Agreement, each as determined on the first day of
each month. (Management Agreement, Section [5.02]) The Incentive Component
shall be $5 per Unit for the period from the Closing Date through and including
December 31, 2000, and shall thereafter be calculated based on the annual
Collections in each subsequent year on a per Unit basis, multiplied by the ratio
of the Incentive Component to Collections in the period from the Closing Date
through and including December 31, 2000. (Management Agreement, Section [5.3])
The Incentive Component will only be paid upon satisfaction of certain
performance criteria and only after payments of all other amounts owing by the
Company. See "Collection and Application of the Company's Cash Flows--
Application of Amounts in the Collection Account." In addition to the Base and
Incentive Components, the Company shall reimburse GATC for costs and expenses,
including, without limitation: (i) maintenance, modification and repair
expenses; (ii) all taxes (other than income taxes) paid by the Manager; (iii)
switching and storage expenses; and (iv) the amount of fines, penalties,
judgements or similar charges paid by GATC to governmental authorities arising
out of or in connection with the use and operation of the Units, but excluding
fines, penalties and judgments resulting from the Manager's negligence or wilful
misconduct. (Management Agreement, Section [5.4])
SUBLEASE PAYMENTS
All Sublease payments from Sublessees and all other amounts relating to the
Equipment which are invoiced by GATC on behalf of the Company will be deposited
in the Sublease Lockbox. The name of the Sublease Lockbox will include GATC, as
trustee for itself individually and for the Company and may include other
entities (including affiliates of GATC) for which GATC manages railcars and
invoices customers. The Manager shall not create or permit to exist any lien,
charge or encumbrance on any Lockbox other than a Permitted Lien. The Manager
will invoice each Sublessee pursuant to a single invoice. Each invoice will
separately designate amounts owing to GATC with respect to its own fleet for
which payments are due to GATC in its capacity as the provider of the railcars
and services from amounts owing which are attributable to railcars, including
the Equipment Units, for which GATC acts as manager or agent for the party who
has contracted with the customer with respect to the car. Each invoice will
provide a detailed listing of the railcars, and the applicable amounts due and
owing with respect to each railcar, to which the invoice relates (including in
each case the Equipment Units). The Equipment Units will be sufficiently
identified in the detail of the invoice, by serial or other identification
number, to allow the parties to specifically identify the amounts which are due
to the Company. The invoice will instruct the Sublessee to make all payments
directly to the Lockbox. The Manager will allocate amounts on deposit in the
Sublease Lockbox as described under "Collection and Application of the Company's
Cash Flows--Collection of Sublessee Payments." (Management Agreement, Section
[6.2])
OTHER MATTERS
In connection with the performance of its services under the Management
Agreement, the Manager will furnish to the Company, the Owner Trustees, the
Owner Participants, the Collateral Agent and the Rating Agencies monthly and
annual reports covering, among other things, amounts collected from Sublessees
and other sources, reimbursable services paid, and known material defaults under
any Subleases. (Management Agreement, Sections [7.1, 7.2]) Furthermore, the
Manager will provide on or before April 30 of each year a detailed Equipment
report to the Owner Trustees, Owner Participants and Indenture Trustees, which
report shall be as of the preceding December 31 and shall show, among other
things, the amount, description and reporting marks of the Units then leased
under the applicable Lease and the amount, description and reporting marks of
all Units subject to such Lease that may have suffered an Event of Loss during
the calendar year ending on such December 31. (Management Agreement, Section
[7.3]) The Manager shall also furnish to each Owner Participant on behalf of
the Company unaudited quarterly comparative financial statements, audited
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annual comparative financial statements, copies of documents filed by the
Company with the Securities and Exchange Commission, and certain other
information and reports. (Management Agreement, Section [7.5])
The term of the Management Agreement shall continue for the term of the
Leases and shall continue in effect, at the option of the Company if it does not
exercise its purchase options under a Lease, until the date that no Operative
Agreement is continuing in effect; provided, however, that the Company shall
have the option to extend the Management Agreement for a period of up to 12
months after the latest date of termination of any Lease. (Management
Agreement, Section [8.1]) The Manager's services under the Management Agreement
may, however, be terminated by the Company upon certain events, including: (i)
the Manager's failure to perform any of its obligations under the Management
Agreement where such failure materially and adversely affects the rights of the
Owner Trustees, the Owner Participants, the holders of any Equipment Notes or
any Certificateholders, and such failure is not remedied within 60 days of
receipt of written notice, subject to certain conditions and exceptions; (ii)
the Manager's failure to deliver to the Collateral Agent any applicable Sublease
payment or other payments actually received, which failure remains uncured for
five Business Days after the Manager becomes aware of such failure, including as
a result of written notice from any Owner Trustee or Owner Participant or the
Collateral Agent; (iii) certain events involving the voluntary or involuntary
bankruptcy of the Manager, subject to certain conditions and exceptions; (iv)
the Manager's ceasing to be actively involved in the railcar management or
maintenance businesses; or (v) under certain circumstances, if any
representation or warranty made by the Manager in the Operative Agreements is
untrue or incorrect in any material respect and the Manager fails to remedy the
untruth or incorrectness. The Manager's services under the Management Agreement
may also be terminated by an Owner Trustee, as assignee of the Company's rights
under the Management Agreement, if a default in the payment of Basic Rent
sufficient to pay the Rated Obligations Due shall have occurred under the
related Lease and such Owner Trustee shall have exercised certain cure rights or
its rights to purchase Equipment Notes under the related Indenture. (Management
Agreement, Section [8.2])
Upon the occurrence and during the continuation of a default by the
Manager, the Company, in its sole discretion, may (i) terminate the Management
Agreement, in certain circumstances, (ii) proceed by appropriate court action to
enforce performance of the Management Agreement, and/or (iii) sue to recover
actual direct damages which result from a breach by the Manager. (Management
Agreement, Section [8.3]) However, the Manager may not resign nor may it be
terminated in whole or in part unless a Successor Manager has been appointed by
the Company and the Owner Trustees, the Owner Participants and the Indenture
Trustees have accepted such appointment and the Company has received written
confirmation from the Rating Agencies that no lowering or withdrawal of the then
current ratings on the Certificates will occur. (Management Agreement, Section
[8.4]) Any Successor Manager must be (i) a nationally known corporation
incorporated in the United States which is engaged in the railcar leasing or
management business, (ii) be capable of performing the services under the
Management Agreement and (iii) have a net worth in excess of $[75,000,000].
(Management Agreement, Section [8.4])
The Manager is required to indemnify the Company, the Owner Trustees, the
Owner Participants, the Indenture Trustee, the Collateral Agent and their
respective affiliates and the directors, officers, employees and agents of each
thereof for any claims relating to any inaccuracy in any representation or
warranty made by the Manager, any failure by the Manager to perform any of its
covenants or obligations, the presence, discharge, spillage, release or escape
of hazardous substances or damage to the environment at a facility owned or
controlled by the Manager or any affiliate of the Manager or for the negligence,
recklessness or wilful misconduct of the Manager. (Management Agreement,
Section [9.01]) Similarly, the Company is required to indemnify GATC for any
claims relating to any inaccuracy in any representation or warranty made by the
Company, any failure by the Company to perform any of its covenants or
obligations or for the negligence, recklessness or wilful misconduct of the
Company. (Management Agreement, Section [9.02]) However, the indemnifying
party shall not be entitled to control and assume responsibility for the defense
of any claim, if in the good faith opinion of the party to be indemnified, there
exists an actual or potential conflict of interest such that it is advisable for
such party to retain control of such proceeding, in which circumstances the
party to be indemnified shall be entitled to control and assume the
responsibility for the defense of such claim at the expense of the indemnifying
party. (Management Agreement, Section 9.04)
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THE INTERCREDITOR AGREEMENT
GENERAL
The Company, the Owner Trustees, on behalf of the applicable Owner Trusts,
the Indenture Trustees, the Manager, the Insurance Manager and The First
National Bank of Chicago, not in its individual capacity but solely as
collateral agent (the "Collateral Agent"), will enter into a Collateral Agency
and Intercreditor Agreement dated as of [August 1], 1998 (the "Intercreditor
Agreement"). Pursuant to the Intercreditor Agreement, the Company will grant a
security interest in and pledge to the Collateral Agent for the benefit of the
Lessors, the Manager and the Insurance Manager (the "Beneficiaries") of all of
its right, title and interest in and to (i) the Subleases, the Insurance
Agreement, the Management Agreement, the Administrative Services Agreement, the
Transfer and Contribution Agreement and any other document (other than the
Operative Agreements) to which the Company is or becomes a party or under which
the Company has rights as a third party beneficiary or otherwise (collectively,
the "Company Documents") including the right to receive payments thereunder
(other than certain Non-Shared Payments), (ii) its rights in certain accounts
established pursuant to the Intercreditor Agreement (other than the Non-Shared
Payments Account and the Excess Cash Account) including any securities purchased
with funds on deposit therein and all income from the investment of funds
therein and (iii) all proceeds, accessions, profits, income benefits,
substitutions and replacements, whether voluntary or involuntary, of and to any
of the property, now owned or hereafter acquired, of the Company described in
(i) and (ii) above (including any claims for indemnity thereunder and payments
with respect thereto and any property pledged as security for any Sublease) (the
"Collateral").
The Intercreditor Agreement will provide that so long as any Equipment
Notes issued by any Owner Trustee which is a party to the Intercreditor
Agreement are outstanding, (i) each Owner Trustee will be entitled to a pro rata
portion of all cash flows receivable by the Company pursuant to the Company
Documents, after payment of certain expenses of the Company, as described in
"Collection and Application of the Company's Cash Flows--Application of Amounts
in the Collection Account," (ii) the cash flows of the Company shall be
collected and applied as set forth under "Collection and Application of the
Company Cash Flows," and (iii) as a condition to the Company, as lessee,
entering into any railcar leases in the future, the lessor under any such lease
shall be required to become a designated party to the Intercreditor Agreement
and agree to be bound by the provisions thereof.
THE ACCOUNTS
The Collateral Agent will establish the following interest bearing accounts
(the "Accounts") under the Intercreditor Agreement:
(i) the "Collection Account" into which all amounts received by the
Collateral Agent in respect of Collateral will be deposited;
(ii) the "Operating Account" into which amounts owing with respect
to certain administrative, operating and other expenses of the Company will
be transferred from the Collection Account;
(iii) the "Stipulated Loss Value Deficiency Account" into which
amounts will be deposited and withdrawn as described under "Collection and
Application of the Company's Cash Flows--Application of Amounts in the
Collection Account";
(iv) the "Liquidity Reserve Account" into which amounts will be
deposited and withdrawn as described under "Collection and Application of
the Company Cash Flows--Application of Amounts in the Collection Account";
(v) the "Special Reserves Account" into which amounts will be
deposited and withdrawn in connection with certain Required Modifications
or Programmatic Optional Modifications (as herein defined) of the Equipment
or the payments of insurance deductibles with respect to casualty events
involving the Equipment;
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(vi) the "Cash Trapping Account" into which amounts will be
deposited and withdrawn in connection with the occurrence or discontinuance
of a Cash Trapping Event;
(vii) the "Excess Cash Account" into which any amounts remaining in
the Collection Account after distributions to the other Accounts will be
deposited; and
(viii) the "Non-Shared Payments Account" into which amounts with
respect to contributions by GATC to the capital of the Company subsequent
to the Closing Date made expressly for the purpose of paying the Stipulated
Loss Value related to an Event of Loss or Termination Value pursuant to a
Lease, insurance or other proceeds received with respect to any loss or
damage to any Equipment, proceeds of the sale of any Equipment, or excess
cash available to the Company in the Excess Cash Account that the Company
requests the Collateral Agent to transfer to the Non-Shared Payments
Account for the express purpose of paying the Stipulated Loss Value related
to Events of Loss or Termination Value pursuant to a Lease (the "Non-Shared
Payments") will be deposited.
The Collateral Agent will establish sub-accounts related to each Lease in
the Stipulated Loss Value Deficiency Account and the Non-Shared Payments Account
as the need requires. All amounts held in the Accounts (other than amounts in
the Non-Shared Payments Account and the Excess Cash Account) will be held in the
name of the Collateral Agent for the benefit of the Beneficiaries. All amounts
held in a sub-account of the Non-Shared Payments Account will be held in the
name of the Collateral Agent for the benefit of the related Beneficiary for
which such Non-Shared Payment was made. Amounts on deposit in the Accounts will
be invested in Permitted Investments at the direction of the Company and any
amounts earned in respect of such investments will be deposited in the
Collection Account.
ACTIONS UPON A TRIGGER EVENT
The Intercreditor Agreement provides that any rights or remedies a
Beneficiary may have with respect to the Collateral will be subject to the
provisions of the Intercreditor Agreement. The Intercreditor Agreement also
provides that upon the occurrence of an "Event of Default" pursuant to any
Company Document (other than the Subleases) or an "Event of Default" by the
Company under any Operative Agreement to which it is a party (a "Trigger
Event"), the Collateral Agent will exercise the rights and remedies available to
the Beneficiaries under the Intercreditor Agreement at the direction of the
Required Beneficiaries. Any proceeds received by the Collateral Agent from the
liquidation of any or all of the Collateral will be applied by the Collateral
Agent in the order of preference described under "Collection and Application of
the Company's Cash Flows--Application of Amounts in the Collection Account"
unless at the time of such application no Equipment Notes shall be outstanding
in which case such proceeds will be applied as otherwise provided in the
Intercreditor Agreement.
CERTAIN COVENANTS IN THE INTERCREDITOR AGREEMENT
Pursuant to the Intercreditor Agreement the Company will agree to certain
covenants designed to protect the Beneficiaries' interests in the Collateral.
Those covenants include, but are not limited to, restrictions on the Company's
ability to (i) declare dividends unless funds are available therefor in the
Excess Cash Account, (ii) engage in business activities other than the leasing
and subleasing of the Equipment and certain activities related thereto, (iii)
incur additional indebtedness and (iv) enter into transactions with any
affiliates of the Company, including GATC, other than on an arm's-length basis.
The Company will be prohibited from issuing any additional stock to any Person
other than GATC, making any loan or providing any guarantee to any Person and
from merging or consolidating with, or selling any of its assets to, any Person.
The Company will also covenant that it will at all times be a party to the
Management Agreement, Administrative Services Agreement and an Insurance
Agreement or replacement agreements substantially similar thereto.
In addition to the covenants described above, the Company will agree to
certain covenants designed to protect the Company's assets from creditors of
GATC in the event of a bankruptcy of GATC. These covenants include, but are not
limited to, requirements that the Company (i) conduct its business separate from
GATC and any of GATC's affiliates and hold itself out as a separate and distinct
entity from any Person, (ii) maintain its own financial statements, books and
records, accounts and business forms, (iii) maintain an "arm's-length
relationship" with its affiliates, (iv) observe all
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corporate formalities required by the laws of the State of Delaware, and (v) not
commingle its assets with those of any Person, including any affiliate, except
with respect to Lockbox Accounts.
Pursuant to the Intercreditor Agreement the Company will also agree to
certain covenants with respect to its operation of the Equipment. These
covenants include, but are not limited to, covenants by the Company that it will
not (i) exercise any purchase or termination option under the Leases unless
funds are available to the Company therefor (x) in the Excess Cash Account, (y)
from the proceeds of any sale of the Equipment or insurance proceeds related to
the Equipment or (z) from a capital contribution by GATC; (ii) assume the
Equipment Notes unless the Company receives confirmation from the Rating
Agencies that the then current ratings on the Pass Through Certificates will not
be reduced after giving effect to any proposed assumption and the Company
receives an opinion of counsel that the assumption of such Equipment Notes will
not result in a consolidation of the Company's assets with those of GATC in the
event of a GATC bankruptcy; and (iii) act as lessee under any additional leases
with any Person unless such additional leases are consented to by the Owner
Participants and the Company receives from the Rating Agencies the confirmation
described in (ii) above.
COLLECTION AND APPLICATION OF
THE COMPANY'S CASH FLOWS
COLLECTION OF SUBLESSEE PAYMENTS
Pursuant to the Management Agreement, the Manager will deliver an invoice
monthly to each of the Sublessees as described under "The Subleases--Rental
Payments." Many, or all, of the Sublessees are also customers of GATC's railcar
leasing business, or are customers of third parties or affiliates of GATC for
whom GATC manages their railcars, and will, therefore, be billed by a single
invoice which will designate the amount of rent owed: (i) to GATC (in its
individual capacity and not as Manager for the Company or as manager for any
other entity) under leases maintained by GATC with such Sublessee (the "GATC
Leases") and (ii) in the aggregate the amount of rent owed with respect to
railcars (including the Equipment Units) for which GATC is acting as manager or
agent with respect to such railcars (the "GATC Managed Leases"). All payments
made by the Sublessees under the Subleases, the GATC Leases and other GATC
Managed Leases will be deposited into a lockbox account (the "Sublease Lockbox")
in the name of "GATC, as Trustee for GATC, individually, General American
Railcar Corporation, General American Railcar Corporation II" and other persons
as their interests may appear and will be under the control of The First
National Bank of Chicago, as lockbox bank (the "Lockbox Bank"). Interests in
the Sublease Lockbox may include other affiliates of GATC for which GATC manages
railcars and invoices customers.
Payments under each of the Subleases and the GATC Leases are payable
monthly in advance. By 1:00 p.m. on each Business Day, or as soon as
practicable thereafter, the Lockbox Bank will deliver to the Manager information
with respect to payments received in the Sublease Lockbox from 12:00 noon of the
previous Business Day through 12:00 noon of such Business Day. Using such
information, the Manager will segregate the amounts owing to: (i) GATC under
the GATC Leases, (ii) General American Railcar Corporation, and (iii) others
(including the Company) under the GATC Managed Leases. If such information is
insufficient to determine the allocation as between the Company, GATC and others
of any amounts in the Sublease Lockbox, the Manager will use such other
information as is available and conduct such other procedures as it deems
appropriate to determine the proper allocation of such amounts. In certain
circumstances a Sublessee which is a customer of more than one of the Company,
GATC or others for whom GATC manages railcars, may make payment of amounts owed
under the Subleases, the GATC Leases and/or the GATC Managed Leases by means of
a single payment which may be insufficient to pay the full amounts billed in
respect of the Subleases, the GATC Leases and the other GATC Managed Leases, if
the Sublessee disputes the amount billed for Equipment Units or other railcars
leased to it. Disputes typically arise, for example, when an Equipment Unit is
not being used because it is in a maintenance shop and the customer's record of
the number of days of Rent Abatement that should apply differs from the records
maintained by the Manager. In such cases, the Manager will use the information
provided by the Lockbox Bank, together with information gathered by contacting
the Sublessee, to determine the appropriate allocation of such payment between
the Company, GATC and others. By the close of business on the second Business
Day following receipt of the information by the Manager from the Lockbox Bank,
the Manager will transfer to the Collection Account and one or more accounts
designated by GATC all funds identified as belonging to the Company, GATC and
others, respectively. In the event that the Manager is unable to determine the
proper allocation
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of any amounts in the Sublease Lockbox through the process described above, the
Manager will allocate the remaining unallocated funds to the Company, GATC and
others pro rata based on the original amounts billed to each such customer with
respect to the Equipment and the other railcars reflected in the invoice. If
upon further investigation or otherwise the Manager determines that such pro
rata allocation did not accurately represent the actual allocation of such funds
between the parties, then the Manager will cause payment to be made among the
parties with an interest in the Sublease Lockbox in amounts sufficient to
reflect the actual allocation.
If GATC is terminated as Manager, a successor Manager (the "Successor
Manager") will be appointed and the Sublease Lockbox will be retitled in the
name of a third party as trustee for GATC, General American Railcar Corporation,
the Company and other affiliates of GATC which have an interest in amounts in
the Sublease Lockbox. Separate invoices for the Subleases will be prepared which
will refer to the Successor Manager, as Agent for the Company. Following any
such termination, the Successor Manager, the Company, GATC and other applicable
affiliates of GATC will each use commercially reasonable efforts to implement a
process on a timely basis whereby mutual customers of GATC, the Company and such
other affiliates will be invoiced separately. Until such time as separate
invoicing is accomplished, GATC and the Successor Manager will each submit
reports to the third party trustee indicating the amount billed to customers in
respect of the GATC Leases, the GATC Managed Leases and the Subleases,
respectively. The third party trustee will first allocate cash received to the
Company and the GATC Managed Leases in an amount equal to the Company's and the
GATC Managed Leases total reported billings and will allocate the balance to
GATC. In instances where the payment is insufficient to pay in full the amounts
due to the Company and with respect to the GATC Managed Leases, unless it is
manifestly clear to which party the shortfall should be allocated, any such
shortfall will be allocated pro-rata (based upon reported billings) between such
parties and GATC shall receive no payment. GATC will have the right to
investigate the reason for any shortfall and, if it is able to demonstrate to
the reasonable satisfaction of the third party trustee that the shortfall should
have been allocated to the Company or another party with an interest in the
Sublease Lockbox, the Company or such other party will refund such amount to
GATC, subject to a right to review the determination made by GATC.
COLLECTION OF RAILROAD MILEAGE CREDITS
Railroad Mileage Credits are paid by the railroad to the registered owner
of the "marks" carried by a railcar. Railcars owned or leased by GATC and its
affiliates, including the Equipment Units to be leased to the Company carry
marks that are registered with the AAR as being owned by the Marks Company, a
Delaware business trust formed in 1997 to own the marks registered to GATC, and
its affiliates or the marks relating to certain cars managed by GATC or its
affiliates. All of the marks relating to the Equipment are owned by the Marks
Company. As a result, monies owed to the Company or a Sublessee in respect of
Railroad Mileage Credits should not become property of the bankruptcy estate if
GATC were to become a debtor in bankruptcy. Payments of Railroad Mileage
Credits in respect of railcars carrying such marks (whether such cars are part
of the Equipment or are owned or leased by or to GATC and/or its affiliates)
will be directed to a lockbox account (the "Mileage Credits Lockbox") designated
by the Marks Company, which is maintained in the name of "General American Marks
Company, as agent for the beneficiaries of the Railroad Mileage Credits as their
interests may appear." Pursuant to a management and servicing agreement between
GATC and the Marks Company dated as of September 30, 1997, as to be supplemented
with respect to the Equipment to be leased to the Company (the "Servicing
Agreement"), GATC acts as servicer (the "Servicer") for the Mileage Credits
Lockbox. On each Business Day, the Servicer will allocate mileage credits to the
beneficiaries (including the Company) on a cumulative, historical experience
basis, making month-end settlements once it is able to determine the allocation
of mileage credit receipts based on then available current information. All
mileage credits received by the Company will be deposited in the Collection
Account maintained pursuant to the Intercreditor Agreement. The Servicing
Agreement contains provisions providing for the termination of such agreement
upon a bankruptcy of the Servicer (unless the Servicing Agreement is affirmed by
the trustee in such bankruptcy and the Marks Company is not liquidated). It is
anticipated that after such a termination a successor servicer would be selected
to service the Mileage Credits Lockbox pursuant to an agreement similar to the
Servicing Agreement.
APPLICATION OF AMOUNTS IN THE COLLECTION ACCOUNT
The Collection Account will be assigned to the Collateral Agent for the
benefit of the Beneficiaries. See "The Intercreditor Agreement." By 1:00 p.m.
on the 20th day of each month (a "Monthly Transfer Date") the Collateral Agent
will withdraw amounts on deposit in the Collection Account as of the close of
business on the last day of the calendar
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month immediately preceding such Monthly Transfer Date (the "Calculation Date")
and distribute such amounts in the order of priority set forth below but, in
each case, only to the extent that all amounts ranking prior thereto have been
paid in full:
First, to the Manager, for distribution to the Sublessees, if any,
whose payments in respect of the applicable Subleases are not made net of
any Railroad Mileage Credits due and owing to such Sublessee, an amount
equal to the Railroad Mileage Credits due to such Sublessees for which an
allocation has not previously been made pursuant to this clause as
certified to the Collateral Agent by the Manager not later than the Monthly
Report Date, see "Subleases--Railroad Mileage Credits";
Second, to the Operating Account, an amount which, together with any
amounts on deposit therein, is sufficient to pay (a) all Operating Expenses
of the Company which the Manager certifies to the Collateral Agent not
later than the Monthly Report Date are due or are to become due on or
before such Monthly Transfer Date, (b) the Base Component of the fee
payable pursuant to the Management Agreement (provided, that if a Lease
Default or a Lease Event of Default shall have occurred and be continuing
during any time when GATC is the Manager, then the Base Component of the
fee payable pursuant to the Management Agreement shall be paid pursuant to
clause Twelfth below) and (c) any amounts that have been previously
requested to pay Operating Expenses that have not been paid; provided, that
if the amounts available in the Collection Account as of the applicable
Calculation Date are insufficient to make the transfers required pursuant
to this clause, the Collateral Agent will make up such insufficiency first
by withdrawing an amount equal to such insufficiency from the Cash Trapping
Account and if the amount on deposit in the Cash Trapping Account is less
than the amount of such insufficiency, then the Collateral Agent will
withdraw from the Liquidity Reserve Account the amount of any remaining
insufficiency;
Third, to each Lender Agent or Lessor Agent an amount sufficient to
pay (a) the amount certified to the Collateral Agent by an Authorized
Representative of each such Lender Agent or Lessor Agent to be the amount
of Category 1 Supplemental Expenses due or to become due pursuant to its
related Lender Document or Lease on or before such Monthly Transfer Date
and which are not payable to the Person to which such expenses are owed
directly from the proceeds of insurance obtained by or on behalf of the
Company pursuant to the Operative Agreements, and (b) any amounts that have
been previously requested pursuant to this clause for such expenses and
not paid, less amounts then on deposit in the Special Reserve Account for
such purpose; provided that if the amounts available in the Collection
Account as of the applicable Calculation Date are insufficient to make the
transfers required pursuant to this clause, the Collateral Agent will make
up such insufficiency first by withdrawing an amount equal to such
insufficiency from the Cash Trapping Account and then, to the extent
necessary to pay any remaining insufficiency, from the Liquidity Reserve
Account and transferring such amount pro rata among the Lender Agents and
the Lessor Agents in the same proportion that the Category 1 Supplemental
Expenses requested by each Lender Agent or Lessor Agent bears to the total
amount of Category 1 Supplemental Expenses requested by all agents with
respect to such Monthly Transfer Date;
Fourth, (a) to each succeeding Lessor Agent an amount sufficient to
pay any Basic Rent sufficient to pay Rated Obligations Due certified to the
Collateral Agent by an Authorized Representative of each such agent not
later than the applicable Monthly Report Date to be the amount of Basic
Rent sufficient to pay Rated Obligations Due or to become due pursuant to
its related Lease on or before such Monthly Transfer Date, (b) to each
Lender Agent any principal and interest due in respect of any Assumed Debt
certified to the Collateral Agent by an Authorized Representative of each
such agent not later than the applicable Monthly Report Date to be the
amount of principal and interest due or to become due pursuant to the
Lender Document related to such Assumed Debt on or before such Monthly
Transfer Date (to the extent the failure to pay such principal or interest
prior to the next Monthly Transfer Date would result in an "Event of
Default" with respect to such Assumed Debt), and (c) to each Lessor Agent
and each Lender Agent any amounts pursuant to this clause that have been
previously requested in respect of Basic Rent sufficient to pay Rated
Obligations Due or Assumed Debt and not paid; provided, that if the amounts
available in the Collection Account as of the applicable Calculation Date
are insufficient to make the transfers required pursuant to this clause,
the Collateral Agent will make up such insufficiency by withdrawing an
amount equal to such insufficiency first, from the Cash Trapping Account
and then from the Liquidity Reserve Account, if necessary, and transferring
such amount pursuant to
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this clause; provided, further, that if the aggregate amount available for
transfer pursuant to this clause continues to be insufficient to make all
transfers required pursuant to this clause, then the Collateral Agent will
transfer the amounts then available for transfer pro rata among the Lender
Agents and the Lessor Agents in the same proportion that the Transaction
Exposure related to each agent bears to the Combined Exposure on such
Calculation Date;
Fifth, to the appropriate sub-account of the Stipulated Loss Value
Deficiency Account, an amount certified to the Collateral Agent by an
Authorized Representative of the Company not later than the applicable
Monthly Report Date to be sufficient to cause the amount on deposit in such
sub-account, to be at least equal to the Required Stipulated Loss Value
Deficiency Amount; provided, that, if the amounts available in the
Collection Account as of the applicable Calculation Date are insufficient
to make the transfers required pursuant to this clause, the Collateral
Agent will make up such insufficiency by withdrawing an amount equal to
such insufficiency from the Cash Trapping Account and depositing such
amount to the applicable sub-accounts of the Stipulated Loss Value
Deficiency Account; provided, further that, if the failure to pay such
Required Stipulated Loss Value Deficiency Amount on or before such Monthly
Transfer Date would result in a Lease Event of Default under the related
Lease, then the Collateral Agent will make up such insufficiency by
withdrawing from the Liquidity Reserve Account, an amount which, after
making the other transfers required pursuant to this clause, would prevent
such Lease Event of Default and depositing such amount in the applicable
sub-account of the Stipulated Loss Value Deficiency Account;
Sixth, to the Liquidity Reserve Account, an amount certified to the
Collateral Agent by an Authorized Representative of the Company not later
than the applicable Monthly Report Date to be sufficient to cause the
amount on deposit therein to be at least equal to the Required Liquidity
Reserve Amount; provided, that if the amounts available in the Collection
Account are insufficient to make the transfers required pursuant to this
clause, the Collateral Agent will make up such insufficiency by withdrawing
an amount equal to such insufficiency from the Cash Trapping Account and
depositing such amount in the Liquidity Reserve Account;
Seventh,(a) to each Lessor Agent an amount sufficient to pay any Basic
Rent sufficient to pay the Scheduled Amortization Amount less the Rated
Amortization Amount certified to the Collateral Agent by an Authorized
Representative of each such Lessor Agent not later than the applicable
Monthly Report Date to be the amount of Basic Rent sufficient to pay the
Scheduled Amortization Amount less the Rated Amortization Amount due or to
become due pursuant to its related Lease on or before such Monthly Transfer
Date, (b) to each Lender Agent, an amount sufficient to pay any principal
or interest due in respect of any Assumed Debt certified to the Collateral
Agent by an Authorized Representative of each Lender Agent to be the amount
of principal and interest due or to become due pursuant to the Lender
Document related to such Assumed Debt on or before such Monthly Transfer
Date (but only to the extent such amount has not been paid pursuant to
clause Fourth, above), and (c) to each Lender Agent any amounts pursuant to
this clause that have been previously requested and not paid pursuant to
this clause; provided, that if the amounts available in the Collection
Account as of the applicable Calculation Date are insufficient to make the
transfers required pursuant to this clause, the Collateral Agent will make
up such insufficiency by withdrawing an amount equal to such insufficiency
from the Cash Trapping Account and transferring such amount pursuant to
this clause; provided, further, that if the aggregate amount available for
transfer pursuant to this clause continues to be insufficient to make all
transfers required pursuant to this clause, then the Collateral Agent will
transfer the amounts then available for transfer pro rata among the Lender
Agents and the Lessor Agents in the same proportion that the Transaction
Exposure related to each agent bears to the Combined Exposure on such
Calculation Date;
Eighth, (a) to each Lessor Agent an amount sufficient to pay that
portion of any Scheduled Rent, to the extent constituting the Equity
Portion of Basic Rent (as defined in each Lease) certified to the
Collateral Agent by an Authorized Representative of such Lessor Agent not
later than the applicable Monthly Report Date to be the amount of Scheduled
Rent due or to become due pursuant to its related Lease on or before such
Monthly Transfer Date, and (b) to each Lessor Agent any amounts pursuant to
this clause that have been previously requested and not paid; provided,
that if the amounts available in the Collection Account as of the
applicable Calculation Date are insufficient to make the transfers required
pursuant to this clause, the Collateral Agent shall make up such
insufficiency by withdrawing an amount equal to such insufficiency from the
Cash Trapping Account and transferring such amount pursuant to this clause,
provided, further, that if the aggregate
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amount available for transfer pursuant to this clause shall continue to be
insufficient to make all transfers required pursuant to this clause, then
the Collateral Agent shall transfer the amounts then available for transfer
pro rata among the Lessor Agents in the same proportion that the
Transaction Exposure related to each agent bears to the Combined Exposure
on such Calculation Date;
Ninth, to the Special Reserves Account, an amount certified to the
Collateral Agent by an Authorized Representative of the Company not later
than the applicable Monthly Report Date to be sufficient to cause the
amount on deposit therein to be at least equal to the Required Special
Reserves Amount; provided, that if the amounts available in the Collection
Account as of the applicable Calculation Date are insufficient to make the
transfers required pursuant to this clause, the Collateral Agent will make
up such insufficiency by withdrawing an amount equal to such insufficiency
from the Cash Trapping Account and depositing such amount in the Special
Reserves Account;
Tenth, to each Lender Agent or Lessor Agent an amount certified to the
Collateral Agent by an Authorized Representative of each such Lender Agent
or Lessor Agent no later than the applicable Monthly Report Date to be the
amount sufficient to pay (a) Category 2 Supplemental Expenses due or to
become due pursuant to its related Lease or Lender Document on or before
such Monthly Transfer Date and for which request for payment has not been
previously made, and (b) any amounts of Category 2 Supplemental Expenses
that have been previously requested and not paid; provided, that if the
amounts available in the Collection Account as of the applicable
Calculation Date are insufficient to make the transfers required pursuant
to this clause, the Collateral Agent will pay such amounts pro rata among
the agents in the same proportion that the Category 2 Supplemental Expenses
requested by each Lender Agent and Lessor Agent bears to the total amount
of Category 2 Supplemental Expenses requested by all Lender Agents and
Lessor Agents with respect to such Monthly Transfer Date;
Eleventh, to the Cash Trapping Account, an amount certified to the
Collateral Agent by an Authorized Representative of the Company not later
than the applicable Monthly Report Date to be sufficient to cause the
amount on deposit therein to be at least equal to the Required Cash
Trapping Amount;
Twelfth, to each Person entitled to receive Category 3 Supplemental
Expenses an amount certified to the Collateral Agent by an Authorized
Representative of such Person not later than the applicable Monthly Report
Date to be the amount sufficient to pay (a) Category 3 Supplemental
Expenses due or to become due pursuant to any Company Document or Operative
Agreement to which the Company is a party on or before such Monthly
Transfer Date, and (b) any amounts of Category 3 Supplemental Expenses that
have been previously so certified and not paid; provided, that if the
amounts available in the Collection Account are insufficient to make the
transfers required pursuant to this clause, the Collateral Agent will pay
such amounts pro rata among such Persons and in the same proportion that
the Category 3 Supplemental Expenses requested by each Person bears to the
total amount of Category 3 Supplemental Expenses requested by all Persons
with respect to such Monthly Transfer Date;
Thirteenth, to the Manager, an amount certified to the Collateral
Agent by the Manager not later than the applicable Calculation Date to be
sufficient to pay (a) the Base Component of the Management Fee if not paid
pursuant to clause Second, above, as a result of a Lease Default or a Lease
Event of Default having occurred and continuing during a time when GATC is
the Manager, (b) the Incentive Component of the Management Fee due or to
become due on or prior to such Monthly Transfer Date, and (c) any portion
of the Incentive Component of the Management Fee previously requested and
not paid; and
Fourteenth, and if (a) the amounts on deposit in the Stipulated Loss
Deficiency Account (including each sub-account thereof), the Liquidity
Reserve Account, the Special Reserves Account and the Cash Trapping Account
are at least equal to the Required Stipulated Loss Value Deficiency Amount,
the Required Liquidity Reserve Amount, the Required Special Reserves Amount
and the Required Cash Trapping Amount, respectively, (b) no Lease Event of
Default or Lease Default with respect to payments, bankruptcy, maintenance
of the Equipment or insurance shall have occurred and be continuing and (c)
no Trigger Event shall have occurred and be continuing, to the Excess Cash
Account, or such other account as the Company may designate to the
Collateral Agent, any remaining amounts on deposit in the Collection
Account; provided that if any Lease
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Default or Lease Event of Default referred to in subclause (b) of this
clause Fourteenth or a Trigger Event shall have occurred and be continuing,
all remaining amounts shall remain on deposit in the Collection Account and
be applied on the next succeeding Monthly Transfer Date.
CASH TRAPPING EVENTS; REQUIRED CASH TRAPPING AMOUNT; RELEASE FROM CASH TRAPPING
ACCOUNT
Under the Intercreditor Agreement, upon the occurrence of any of the
following events (each a "Cash Trapping Event") the Required Cash Trapping
Amount shall be determined as described below. A Cash Trapping Event shall
exist for a Monthly Transfer Date if:
(a) the Monthly Average Lease Rate as of the related Calculation Date
shall have decreased by 10% or more as compared to the Monthly Average
Lease Rate calculated as of the related Calculation Date for the same month
of the immediately preceding year; or
(b) the Monthly Average Lease Rate as of the related Calculation Date
shall have decreased by 20% or more as compared to the Monthly Average
Lease Rate calculated in the same month in any of the second preceding
year, third preceding year, fourth preceding year or fifth preceding year;
or
(c) the Monthly Utilization Rate for the immediately preceding
calendar month shall have been 75% or less; or
(d) any Coverage Ratio shall be less than 1.15:1.
As used above, the following terms have the meanings set forth below.
"Monthly Average Lease Rate" means for any calendar month, the aggregate
Sublease monthly rental rates with respect to the Total Managed Fleet for such
calendar month divided by the total number of railcars in the Total Managed
Fleet which are subject to a lease or sublease on the last day of such calendar
month.
"Monthly Utilization Rate," for any calendar month, means the percentage
determined by dividing (i) the total number of railcars in the Total Managed
Fleet which are subject to a lease or Sublease on the last day of such calendar
month, by (ii) the total number of railcars in the Total Managed Fleet on the
last day of such calendar month.
"Coverage Ratio" means either the Historical Coverage Ratio or the
Projected Coverage Ratio where, as of any Calculation Date (1) "Historical
Coverage Ratio" means the ratio of (i) the sum of Available Amounts as of the
Calculation Date for each of the six calendar months immediately preceding such
Calculation Date to (ii) the sum of Basic Rent that was paid or payable on the
Rent Payment Dates which occurred or occur immediately after such Calculation
Dates, as such amounts are certified to by an Authorized Representative of each
of the Company and the Manager, and (2) "Projected Coverage Ratio" means the
ratio of (i) the sum of projected Available Amounts for the six month period
immediately succeeding such Calculation Date to (ii) the sum of Basic Rent due
or to become due and payable on the six consecutive Rent Payment Dates which
occur following such Calculation Date, as such amounts are certified to by an
Authorized Representative of each of the Company and the Manager.
"Available Amounts" means, in respect of any Calculation Date, the amount
in the Collection Account on such Calculation Date, less the amounts which would
be allocated on the next succeeding Monthly Transfer Date pursuant to clauses
First, Second, Third, Fifth and Sixth of "Applications of Amounts in Collection
Account" without giving effect to any transfers from any other Account.
Upon the occurrence or cessation of a Cash Trapping Event, the amount
required to be on deposit in the Cash Trapping Account (the "Required Cash
Trapping Amount") will be determined as follows for each Monthly Transfer Date:
(i) if no Cash Trapping Event exists with respect to such Monthly Transfer
Date, an amount equal to $200,000,
(ii) if for such Monthly Transfer Date a Cash Trapping Event exists, an
amount equal to $5,000,000.
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On each Monthly Transfer Date amounts on deposit in the Cash Trapping
Account will be applied as provided in clauses First through Thirteenth under "-
- -Application of Amounts in the Collection Account." In addition, on each
Calculation Date, provided that no Cash Trapping Event or Cash Trapping Hold
exists on such Calculation Date, amounts on deposit in the Cash Trapping Account
in excess of any amounts as may be required pursuant to the definition of
Required Cash Trapping Amount shall be released from the Cash Trapping Account
and transferred by the Collateral Agent to the Collection Account for
application on the next succeeding Monthly Transfer Date as described under "--
Application of Amounts in the Collection Account." A "Cash Trapping Hold" shall
exist on a Calculation Date when there has previously been a Cash Trapping Event
and with respect to such Cash Trapping Event: (a) if such Cash Trapping Event
related to the Monthly Average Lease Rate, the Monthly Average Lease Rate on
such Calculation Date is less than the Monthly Average Lease Rate as of the
Closing Date, (b) if such Cash Trapping Event related to the Monthly Utilization
Rate, the Monthly Utilization Rate is less than 85% for any of the twelve
immediately preceding consecutive monthly periods, or (c) if such Cash Trapping
Event related to a Coverage Ratio, any Coverage Ratio on such Calculation Date
is less than 1.175:1.
REQUIRED SPECIAL RESERVES AMOUNT
Under the Intercreditor Agreement, upon the determination by the Manager of
certain events as described below, the Collateral Agent shall transfer to the
Special Reserves Account the following amounts (the "Required Special Reserves
Amount") on the applicable Monthly Transfer Date:
(i) if the Company is required to make any Required Modifications
to the Equipment of any Car Type, an amount with respect to each Required
Modification such that an amount equal to one-third of the total cost of
implementing such Required Modification will be on deposit in the Special
Reserves Account by the date implementation of such Required Modification
is scheduled to begin; plus
(ii) if the Company has elected to implement any Programmatic
Optional Modification (i.e., the cost of implementing such modification in
any calendar year is reasonably expected to exceed $750,000) to any
Equipment an amount sufficient to fund the cost of such Programmatic
Optional Modification; plus
(iii) if an event shall occur with respect to which the Insurance
Manager determines that the Company will be required to pay any applicable
insurance deductible set forth in the Insurance Agreement, an amount (to be
payable in level installments commencing with the first Monthly Transfer
Date after the Insurance Manager shall have determined that the insurance
deductible will be required to be paid) that will result in (A) 100% of the
then current insurance deductible or (B) such other amount (including legal
costs) as the Insurance Manager deems sufficient being on deposit in the
Special Reserves Account by the date the insurance deductible is required
to be paid; plus
(iv) if any event shall occur or obligation shall arise pursuant to
which the Company will be required to pay Stipulated Loss Value with
respect to one or more Equipment Units (other than in connection with
Events of Loss as to which the payment of Stipulated Loss Value is
separately reserved for pursuant to clause Fifth under "--Application of
Amounts in the Collection Account" or as an Operating Expense), an amount
with respect to each such event or obligation (payable in level
installments commencing with the first Monthly Transfer Date after the
Company becomes aware of such payment obligation) that will result in the
Stipulated Loss Value required to be paid being on deposit in the Special
Reserves Account on the date such Stipulated Loss Value must be paid.
Amounts on deposit in the Special Reserves Account will be withdrawn by the
Collateral Agent upon certification by an Authorized Representative of the
Company (i) requesting amounts on deposit in the Special Reserves Account to be
made available to the Company to pay for Required Modifications, Programmatic
Optional Modification or to pay expenses not covered by any insurance proceeds
pursuant to the Company's insurance policies or (ii) indicating that all amounts
for which the respective reserves have been accumulated have been paid or
otherwise reduced to zero.
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THE LEASES
The following summary relates to the Leases. Section references in
parentheses are to the relevant sections of the Leases unless otherwise
indicated. The statements under this caption are a summary and do not purport
to be complete. This summary makes use of terms defined in and is qualified in
its entirety by reference to all of the provisions of the Leases.
TERM AND RENTALS
Each Equipment Group will be leased by each Lessor to the Company for a
term commencing on the Closing Date and expiring on September 20, 2020.
Each Lease requires the Company to pay rent on the 20th day of each month
(or, if such day is not a Business Day, on the next succeeding Business Day),
commencing on September 20, 1998. Rent payments made in respect of a Lease will
be used to make payments of principal and interest due on the Equipment Notes
issued under the related Indenture in accordance with the Scheduled Amortization
Schedule. Amounts received by the Company from the Subleases will be applied
from the Collection Account monthly (pursuant to a monthly report prepared by
the Manager) in the order of priority set forth in the Intercreditor Agreement.
See "Collection and Application of the Company's Cash Flows--Application of
Amounts in the Collection Account." Amounts distributed to each Indenture
Trustee as assignee of its related Owner Trust will be distributed in the order
of priority set forth in the related Indenture. See Description of the
Equipment Notes--"Payment Account; Distributions of Amounts Received by
Indenture Trustee."
Pursuant to the Leases, Basic Rent payable on any Rent Payment Date will be
payable monthly in accordance with a schedule designed to provide for the
payment of (i) principal and interest on the related Equipment Notes in
accordance with the Scheduled Amortization Schedule for such Equipment Notes and
(ii) in certain periods, cash distributions to the related Owner Trust for
distribution in accordance with the related Trust Agreement. Failure by the
Company to pay Basic Rent in full, however, will not result in a Lease Event of
Default so long as the amount of Basic Rent paid on any Rent Payment Date is
sufficient to make payments on the related Equipment Notes in accordance with
the Rated Obligations Due for such Equipment Notes. A premium equal to 1.5% per
annum payable monthly will be payable on each Rent Payment Date, together with
interest at the Note Rate, in respect of the cumulative amount of that portion
of Basic Rent not paid as of such Rent Payment Date equal to the Payment
Deficiency.
On any Rent Payment Date on which Basic Rent under a Lease includes an
amount for cash distributions to the Owner Trusts, such amounts will be
distributed to the related Owner Trustee for distribution to the related Owner
Participant on a specified distribution date in accordance with the related
Trust Agreement. Such cash distributions will only be payable to the extent
available and only to the extent that cumulative payments on the related
Equipment Notes have been paid in accordance with the Scheduled Amortization
Schedule for such Equipment Notes, but not including Late Payment Premium or
interest on overdue principal or interest on the Equipment Notes, which shall be
payable from available cash after payment to the Owner Trustees in respect of
Basic Rent. The Owner Trusts will also be entitled to interest on overdue
payments of Basic Rent, which shall be payable from cash available after payment
of Late Payment Premiums and interest on overdue principal or interest on the
Equipment Note.
RESTRICTIONS ON SUBLEASES
Pursuant to the Leases, the Company is permitted to sublease the Equipment
in the United States, Canada or Mexico to any company for use in its business;
provided that pursuant to each Lease the Company has agreed that it will not
sublease to a sublessee formed under the laws of Mexico or any state thereof
more than the lesser of 20% of the Equipment Units within any Equipment Group or
the percentage of railcars subleased to Mexican sublessees in the Total Managed
Fleet, and provided that in no event will it sublease more than 50 Equipment
Units to any single Mexican sublessee (other than a wholly-owned special purpose
subsidiary of GATC organized under the laws of Mexico (or any province or state
thereof), a "Mexican Affiliate", or a Mexican Sublessee with a credit rating of
a least BBB- or Baa3 as determined by either of S&P or Moody's respectively).
Each Lease provides that the Equipment is to be used primarily on domestic
routes in the United States and that at no time shall more than 49% of the
Equipment Units within any Equipment Group be used outside the United States at
the same time. No default by a Sublessee under a Sublease will relieve the
Company of its obligations under the related Lease. The Company is prohibited
from subleasing to
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GATC and to its Affiliates, except that (i) an aggregate of not more than 33% of
the Company Fleet may be subleased by the Company to wholly-owned subsidiaries
of GATC organized under the laws of Canada ("Canadian Affiliates") and (ii) to
Mexican Affiliates subject to the restrictions described above. Such Equipment
Units may in turn be subleased by the Canadian Affiliates or Mexican Affiliates
to customers under agreements containing terms and conditions similar in all
material respects to the Subleases ("Foreign Subleases"). The Foreign Subleases
will be assigned as collateral by the Canadian or Mexican Affiliates to the
Company, and in turn assigned by the Company to the Collateral Agent under the
Intercreditor Agreement. No other Sublessee may sub-sublease any Equipment Unit.
(Lease, Sections 8.2 and 8.3) If any Equipment Unit is leased or possession is
otherwise transferred, such Equipment Unit will remain subject to the Lien of
the Indenture. See "--The Sublessees" and "The Subleases."
LIENS
Each Lease requires the Company to maintain the related Equipment free of
any liens, other than the respective rights of the related Owner Participant and
Owner Trustee, the Collateral Agent, the holders of the related Equipment Notes,
the Company and any permitted sublessee, under the related Lease, Indenture or
Participation Agreement or the Intercreditor Agreement or the Trust Agreement
between such Owner Trustee and Owner Participant pursuant to which the Owner
Trustee acts as trustee for the benefit of such Owner Participant, and other
than certain limited liens permitted under the related Lease and Indenture,
including liens for taxes 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 interference with the payment of rent), materialmen's,
mechanics' and other similar liens arising in the ordinary course of business
and securing obligations which are 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), judgment liens that are being appealed and whose
enforcement has been stayed pending such appeal, and salvage rights of insurers.
(Lease, Section [7])
EARLY TERMINATION
So long as no Lease Event of Default (or certain specified events which,
with notice or the lapse of time or both, would become a Lease Event of Default)
shall have occurred and be continuing under a Lease, the Company may terminate
such Lease pursuant to its Obsolescence Termination Option at any time on or
after the seventh anniversary of the Closing Date with respect to any or all of
the Equipment Units contained in a Functional Group (provided that if such
termination is for less than all of the Equipment Units in a Functional Group,
(i) the Company shall exercise such termination with respect to at least 25
Equipment Units within the Functional Group, (ii) no fewer than 25 Equipment
Units shall remain in such Functional Group as a result of such termination and
(iii) the determination as to which Equipment Units are subject to termination
shall be made by the Company on a random or other basis (in each case reasonably
acceptable to the related Owner Trustee) without discrimination based on
maintenance status, operating condition or otherwise) (the "Terminated Units")
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 its
Chief Financial Officer) that such Terminated Units have become obsolete or
surplus to its requirements, and that following the termination of such
Terminated Units, the Units remaining subject to each Lease will constitute a
pool of Units which is of sufficient quantity and quality to sustain the
Coverage Ratio over the remaining Basic Term. The Company is required to give
notice to the related Owner Trustee and the related Indenture Trustee of its
intention to exercise its Obsolescence Termination Option at least 120 days
prior to the proposed date of termination, which date shall be a Regular
Distribution Date, and to provide an Officer's Certificate in connection
therewith to the effect that there has been no discrimination in the selection
of the Terminated Units when measured against the other Units and the Manager's
Fleet. No later than the Business Day immediately preceding the 60th day prior
to the proposed date of termination, the Company shall provide the applicable
Owner Trustee with assurances reasonably satisfactory to the related Owner
Participant of the Company's ability to pay the Termination Value for the
Terminated Units and other amounts payable by the Company on such date of
termination as provided in the relevant Lease, and if such assurances have not
been given by such date, the termination notice previously given by the Company
shall be deemed to have been withdrawn on such date. No Unit may be terminated
as obsolete or surplus if it is subject to a Sublease. The Company through the
Manager will act as agent for the related Owner Trustee in obtaining bids for
the Terminated Units and the related Owner Trustee shall sell the Terminated
Units to the bidder which has submitted the highest cash bid (who may not be the
Company, the Manager or any affiliate of either thereof but who may be the
related Owner Trustee or any affiliate of the related Owner Trustee) on the
termination date. The net proceeds of such sale shall be paid to the related
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
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related Owner Trustee an amount equal to the difference between such proceeds
and such Termination Value, together with certain other amounts including, if
applicable, unpaid Late Payment Premium and the Make-Whole Amount. All funds to
be paid to or deposited with the related Owner Trustee as described in this
paragraph shall, so long as the related Indenture shall not have been
discharged, be deposited directly with the Collateral Agent for deposit in the
Non-Shared Payments Account for the account of the related Indenture Trustee, as
assignee of the related Owner Trustee. Amounts in excess of the outstanding
principal amount of the Equipment Notes issued in respect of such Terminated
Units, any applicable premium or Make-Whole Amount thereon, and the then accrued
and unpaid interest thereon will be distributed by the related Indenture Trustee
in accordance with the terms of the related Indenture. The Lien of the related
Indenture shall terminate with respect to the Terminated Units after the full
Termination Value has been received by the related Indenture Trustee and, if all
amounts due the Owner Participant have also been paid, the related Lease shall
terminate with respect to such Terminated Units and the obligation of the
Company thereafter to make Basic Rent payments with respect thereto shall cease.
In the event any Terminated Unit is not sold by its proposed termination date,
the Lease relating thereto, including all the Company's obligations thereunder,
shall continue in effect. (Lease, Sections 3.5, 10.1, 10.2 and 10.4; Indenture,
Section 3.2)
The Owner Trustee shall have the option to retain the Terminated Units. In
such event, the Owner Trustee shall pay, or cause to be paid, to the Indenture
Trustee funds in an amount equal to the principal of, Late Payment Premium, if
any, 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)
EARLY PURCHASE OPTION
So long as no Lease Event of Default (or certain specified events which,
with notice or lapse of time or both, would become a Lease Event of Default)
shall have occurred and be continuing under a Lease (with certain exceptions),
the Company has one or more options to purchase on the respective Early Purchase
Option Dates any or all of the Equipment Units subject to such Lease at a price
equal to the Early Purchase Price of the Equipment Units. If the Company elects
to exercise a purchase option with respect to less than all of the Equipment
Units, then after giving effect to such partial purchase: (1) at least 800
Equipment Units shall remain in the Company Fleet, and (2) the allocation of
Equipment Units, by Basic Group, shall be substantially similar to the
allocation immediately prior to the exercise of such purchase option. The
Company is required to give notice to the related Owner Trustee not less than 90
days prior to the date of its election to exercise any Early Purchase Option
described herein. So long as the related Indenture shall not have been
discharged, the amount of any Early Purchase Price shall be deposited by the
Company directly with the Collateral Agent for deposit in the Non-Shared
Payments Account for the account of the related Indenture Trustee, as assignee
of the related Owner Trustee, unless the Company exercises its right to assume
all obligations of the Owner Trustee under the Equipment Notes issued in respect
of such Equipment Units. Amounts in excess of the outstanding principal amount
of the Equipment Notes issued in respect of such Equipment Units and the then
accrued and unpaid interest thereon will be distributed by the related Indenture
Trustee in accordance with the terms of the related Indenture. The Lien of the
related Indenture shall terminate with respect to the Equipment Units after the
Early Purchase Price and the payment of all other amounts due and owing by the
Company with respect to such Equipment Units have been paid, unless the Company
has exercised its right to assume all obligations of the Owner Trustee under the
Equipment Notes issued in respect of such Equipment Units. (Lease, Section
22.1)
EVENTS OF LOSS
If an Event of Loss occurs with respect to an Equipment Unit, the Manager
shall give notice of the occurrence thereof (the "initial notice") to the
related Owner Trustee and Indenture Trustee as soon as reasonably practical and
in any event within 60 days after obtaining knowledge thereof. Within 60 days
after such initial notice the Company shall notify the applicable Owner Trustee
("second notice") of its election to either (i) pay the Stipulated Loss Value of
such Equipment Unit, together with certain additional amounts, or (ii) if no
Lease Event of Default (or certain specified events which, with notice or lapse
of time or both, would become a Lease Event of Default) under the applicable
Lease has occurred and is continuing, replace such Equipment Unit. If the
Company elects to replace such Equipment Unit, it must do so within 60 days
after the Manager gives such second notice with a railcar of the same Car Type
of the same or newer model year (or otherwise approved by the related Owner
Trustee, which approval shall not be unreasonably withheld), and having a fair
market value, utility, capacity, residual value, remaining economic useful life
and condition at least equal to the Equipment Unit being replaced. If the
Company elects to pay the Stipulated Loss Value of any
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Equipment Unit or fails to replace such Equipment Unit within 60 days after the
Company gives its second notice or if the Company fails to give the second
notice, it must pay the Stipulated Loss Value on the Regular Distribution Date
which next succeeds the 25th day following the date of notice of the Company's
election to pay the Stipulated Loss Value or the expiration of the 60-day
period, as the case may be. Such payment will in all circumstances be at least
sufficient to pay in full as of the date of payment that portion of the
aggregate unpaid principal of, and Late Payment Premium, if any, on the
outstanding related Equipment Notes together with all unpaid interest thereon
accrued to the date on which such amount is paid, without the Make-Whole Amount.
Upon making such payment, the lien of the related Indenture and Lease shall
terminate with respect to such Equipment Unit, title thereto shall be
transferred to the Company or its designee and the obligation of the Company
thereafter to make rental payments with respect thereto shall cease. The
Stipulated Loss Value and other payments made by the Company to the Collateral
Agent shall be deposited in the Non-Shared Payments Account for the account of
the related Indenture Trustee, as assignee of the related Owner Trustee. Amounts
in excess of the allocable portion of the outstanding principal amount of the
Equipment Notes issued under the related Indenture and then accrued and unpaid
interest thereon to be prepaid as a result of such Event of Loss will be
distributed by the related Indenture Trustee in accordance with the terms of the
related Indenture. In the event of a partial loss in respect of an Equipment
Unit, the Manager must use the insurance proceeds or other available funds of
the Company to repair the damage.
An Event of Loss with respect to any Equipment Unit shall mean any of the
following events: (i) damage or contamination of such Equipment Unit which, in
the Manager's reasonable judgment, makes repair uneconomic or renders such
Equipment Unit unfit for commercial use; (ii) destruction of such Equipment Unit
which constitutes a total loss, or theft or disappearance (after reasonable
efforts by the Company to locate the same) thereof for a period exceeding twelve
months; (iii) the permanent return of such Equipment Unit to the manufacturer
pursuant to any patent indemnity provisions; (iv) the taking or appropriating of
title to such Equipment Unit by any governmental authority under the power of
eminent domain or otherwise; or (v) the taking or requisitioning of such
Equipment 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 any
governmental authority, agency or instrumentality other than the United States
or Canada, in which case such period shall be the lesser of the period described
above or 365 days). (Lease, Section 11.1)
LEASE EVENTS OF DEFAULT
Events of default (each, a "Lease Event of Default") under each 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 Equipment Units
pursuant to such Lease or the related Participation Agreement, Stipulated Loss
Value or Termination Value within 10 Business Days after the same shall have
become due; provided, however, that failure to pay Basic Rent will not be a
Lease Event of Default so long as the amount of Basic Rent actually paid by the
Company on any Rent Payment Date is sufficient to meet the Rated Obligations Due
on the Equipment Notes; (b) failure by the Company to make any payment of
Supplemental Rent, including indemnity or tax indemnity payments, but not
including Stipulated Loss Value, Termination Value or any purchase price to be
paid by the Company for any Equipment Unit pursuant to such Lease or the related
Participation Agreement, after the same shall have 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 related Owner Trustee, related Owner
Participant or related Indenture Trustee; (c) failure to maintain in effect
insurance as required by such Lease, such failure not having been waived by the
Owner Trustee; (d) the Company shall use or permit any use of the Equipment or
any portion thereof in a way which is not permitted by such Lease, provided that
such unauthorized use shall not constitute a Lease Event of Default for a period
of 45 days after the occurrence thereof so long as (i) such unauthorized use is
not the result of any willful action of the Company and (ii) such unauthorized
use is capable of being cured and the Company diligently pursues such cure
throughout such 45-day period, or Lessee shall make or permit an unauthorized
assignment or transfer of such Lease; (e) failure by the Company to observe or
perform certain agreements or covenants contained in the Participation Agreement
or the Intercreditor Agreement; (f) failure by the Company to perform or observe
any other covenant or agreement to be performed or observed by it under such
Lease or other Operative Agreement to which it is a party continuing for a
period of 30 days after notice of such failure from the related Owner Trustee,
related Owner Participant or the related 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 and shall in fact remedy
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such failure within such period; (g) any representation or warranty made by the
Company in such Lease or other Operative Agreement to which it is a party 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
does in fact remedy such untruth or incorrectness, including any adverse effects
thereof, within such period; (h) the occurrence of certain events of bankruptcy,
reorganization or insolvency of the Company; and (i) the Manager shall have
defaulted in the performance of any of its obligations under the Management
Agreement and the Company shall have failed to exercise its rights under the
Management Agreement in respect of such default for a period of 30 days after
receipt by the Company of written notice from the related Lessor or the related
Indenture Trustee demanding that such action be taken. There are no cross-
default provisions in the Leases and events resulting in a Lease Event of
Default under any particular Lease will not necessarily result in a Lease Event
of Default under any other Lease. (Lease, Section 14)
REMEDIES UPON A LEASE EVENT OF DEFAULT
If a Lease Event of Default has occurred and is continuing and the
applicable Lease has been declared to be in default (or deemed to have been
declared in default), the related Indenture Trustee, as assignee of the related
Owner Trustee's rights under such Lease, may, subject to a stay of such rights
if the Company were to become a debtor in a bankruptcy or reorganization case
under the Bankruptcy Code, exercise one or more of the remedies provided in such
Lease with respect to the Equipment subject thereto. These remedies include the
right, subject to the Intercreditor Agreement, to repossess the Equipment, to
terminate such Lease and any Sublease and to require the Company to pay as
liquidated damages any unpaid rent plus, at the related Indenture Trustee's
option, any one of the following amounts: (i) the excess of the present value of
all rental payments for such Equipment Unit for the remainder of the Basic Term
or any Renewal Term then in effect over the present value of the then fair
market rental value of such Equipment Unit; (ii) the excess of the Stipulated
Loss Value of such Equipment Unit over the fair market sale value of such
Equipment Unit; or (iii) the higher of the Stipulated Loss Value for such
Equipment Unit or the fair market sales value of such Equipment Unit. If
payment is made pursuant to the foregoing clause (iii), such Equipment Unit
shall be transferred to the Company. (Lease, Section 15.1)
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 Leases. In such event, there could be no assurance that the amount
of any claim for damages under the Leases 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 a Lease by the Company or its
bankruptcy trustee would not deprive the related Indenture Trustee of its
security interest in the Equipment in an Equipment Group.
The Company is not a railroad, and the protections against the automatic
stay in bankruptcy under Section 1168 of the Bankruptcy Code which are granted
to lessors, conditional vendors and purchase money financiers of rolling stock
to a common carrier by railroad will not be available to the related Indenture
Trustee upon the occurrence of a Lease Event of Default.
THE PARTICIPATION AGREEMENTS
The following summary relates to the Participation Agreements. Section
references in parentheses are to the relevant sections of the Participation
Agreements unless otherwise indicated. The statements under this caption are a
summary and do not purport to be complete. This summary makes use of terms
defined in and is qualified in its entirety by reference to all of the
provisions of the Participation Agreements.
Pursuant to the Participation Agreements, the Company is required to
indemnify each Owner Participant, each Owner Trustee, each Indenture Trustee and
the Pass Through Trustee for certain losses, fees and expenses arising out of
the use or operation of the Equipment Units, and for certain other matters.
(Participation Agreement, Section 7.2) In addition, the Company is required to
indemnify each Owner Participant, each Owner Trustee and each Indenture Trustee
for certain taxes in connection with the ownership, lease, sale or use of the
Equipment. (Participation Agreement, Section 7.1)
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Each Participation Agreement provides that if the related 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 to 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 competitive with the Company's
full service railcar leasing business, the Company may, on the Regular
Distribution Date which next succeeds the 25th day following the date of notice
to the related Owner Trustee and the related Indenture Trustee, purchase the
applicable Equipment Units within the Equipment Group for a purchase price equal
to either (i) the Termination Value for such Equipment Units calculated as of
such Regular Distribution Date, together with all other amounts due and owing by
the Company with respect to such Equipment Units, including, without limitation,
all accrued and unpaid rental payments and any Make-Whole Amount or (ii) if the
Company has elected to assume all of the related Owner Trustee's obligations in
respect of the Equipment Notes issued with respect to such Equipment Units, the
difference between the Termination Value for such Equipment Units and the
outstanding principal amount of the Equipment Notes issued with respect to such
Equipment Units. If the Company elects to exercise its right to purchase the
applicable Equipment Units within the Equipment Group, unless the Company elects
to assume the related Equipment Notes, the purchase price shall be used to
prepay the Equipment Notes issued with respect to such Equipment Units and the
applicable Make-Whole Amount, if any, shall be paid. See "Description of the
Equipment Notes--Prepayments." (Participation Agreement, Section 6.9)
THE INSURANCE AGREEMENT
The following summary relates to the Insurance Agreement. Section
references in parentheses are to the relevant sections of the Insurance
Agreement unless otherwise indicated. The statements under this caption are a
summary and do not purport to be complete. This summary makes use of terms
defined in and is qualified in its entirety by reference to all of the
provisions of the Insurance Agreement.
GENERAL
The Insurance Agreement establishes the terms and conditions pursuant to
which GATC shall act as insurance manager (the "Insurance Manager") on behalf of
the Company and perform certain specified insurance services with respect to
Equipment leased by the Company under the Leases. Under the Insurance
Agreement, the Insurance Manager will generally manage and administer all
insurance coverage placed or maintained on the Equipment as of the Closing Date,
and has the authority thereafter to enter into, administer and terminate all
insurance relating to the Equipment, subject to the terms and conditions of the
Insurance Agreement and the requirements of the applicable Lease. (Insurance
Agreement, Section [2.01])
The Insurance Manager is required to use reasonable commercial efforts and
diligence, consistent with customary commercial practice, as would be used by a
prudent person in the full service railcar leasing industry. (Insurance
Agreement, Sections [2.02, 3.01]) Under the Insurance Agreement, the Insurance
Manager will maintain or cause to be maintained, with insurers with whom the
Manager or its affiliates insure equipment owned or managed by them (or under
certain self-insurance programs), (i) public liability insurance, in amounts not
less than and with deductibles and retentions not greater than, those
customarily maintained by the Manager and its Affiliates for similar equipment
owned or managed by them and (ii) casualty insurance, in amounts not less than,
against risks and with deductible and retention amounts not greater than, those
customarily maintained by the Manager or its Affiliates for similar equipment
owned or managed by them, subject, in each case, to compliance with certain
insurance-related provisions in the Lease. (Insurance Agreement, Section
[2.02])
In addition to being required to maintain certain specified types and
levels of insurance in respect of the Equipment, the Insurance Manager will also
perform certain other duties under the Insurance Agreement, including, but not
limited to: (i) furnishing promptly to the Company and the Manager under the
Management Agreement copies of insurance policies and certificates of insurance
with respect to the Equipment; and (ii) notifying the Company and the Manager
under the Management Agreement immediately upon (x) receipt of any notice of
lapse of insurance coverage or decrease in such coverage below the limits
required under the Lease or (y) any default in the payment of any premium.
(Insurance Agreement, Section [2.03])
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REIMBURSEMENT OF INSURANCE MANAGER
The Company will reimburse GATC monthly in an amount equal to the greater
of (i) an appropriate share of the Manager's insurance costs for all railcars in
the Total Managed Fleet, allocated on a basis customarily used by the Insurance
Manager or its affiliates in allocating insurance costs or (ii) the Manager's
marginal insurance costs resulting from such insurance coverage. If insurance
coverage is maintained through a separate policy, whether obtained directly by
or on behalf of the Company, the cost of such policy will be borne by the
Company. Furthermore, there will be no apportionment of premiums in respect of
insurance maintained by the Insurance Manager under the Insurance Agreement for
periods extending beyond the Insurance Agreement's termination if coverage is
effected through blanket insurance policies which also cover other property
owned, leased or managed by the Manager or its affiliates. (Insurance
Agreement, Section [4.01])
OTHER MATTERS
The term of the Insurance Agreement shall continue for the term of the
Leases. (Insurance Agreement, Section [6.01]) The Insurance Manager's services
under the Insurance Agreement may, however, be terminated by the Company upon
certain events, including: (i) the Insurance Manager's material failure to
perform any of its obligations under the Insurance Agreement where such failure
materially and adversely affects the rights of holders of the Equipment Notes or
Certificateholders, and such failure is not remedied within 90 days of receipt
of written notice, subject to certain conditions and exceptions; (ii) the
occurrence of certain Lease Events of Default; (iii) certain events involving
the voluntary or involuntary bankruptcy of the Insurance Manager, subject to
certain conditions and exceptions; and (iv) the Manager's ceasing to be actively
involved in the railcar management or maintenance businesses. (Insurance
Agreement, Section [6.02])
GATC may not resign as Insurance Manager nor may it be terminated in whole
or in part unless a successor Insurance Manager has been appointed by the
Company, the Owner Trustees and Indenture Trustees and has accepted such
appointment and the Company has received written confirmation from the Rating
Agencies that no lowering or withdrawal of the then current ratings on the
Certificates will occur as a result of the selection of the successor Insurance
Manager. (Insurance Agreement, Section [6.03])
GATC is required to indemnify the Company for certain losses, fees and
expenses and for certain other matters arising out of its actions under the
Insurance Agreement. (Insurance Agreement, Section [7.01]) The Company is also
required to indemnify GATC for certain losses, fees and expenses and for certain
other matters arising out of its actions under the Insurance Agreement.
(Insurance Agreement, Section [7.02])
FORMATION OF THE PASS THROUGH TRUST
The Pass Through Trust will be formed, and the related Pass Through
Certificates will be issued, pursuant to a Trust Supplement to be entered into
between the Pass Through Trustee and the Company in accordance with the terms of
the Basic Agreement. Concurrently with the execution and delivery of the Trust
Supplement, the Pass Through Trustee, on behalf of the Pass Through Trust formed
thereby, will enter into a Participation Agreement with respect to each
Equipment Group. Pursuant to such Participation Agreement, the Pass Through
Trustee, on behalf of the Pass Through Trust, will purchase the Equipment Notes
issued with respect to such Equipment Group so that all of the Equipment Notes
held in the Pass Through Trust will have an interest rate equal to the interest
rate on the Pass Through Certificates. The final distribution date of the Pass
Through Certificates will correspond to the Rated Note Maturity Date on the
related Equipment Notes although it is expected that the Equipment Notes will be
fully amortized by the Scheduled Note Maturity Date of the related Equipment
Notes. The Pass Through Trustee will distribute the amount of payments of
principal, Late Payment Premium, Make-Whole Amount, if any and interest received
by it as holder of the Equipment Notes to the Certificateholders of the Pass
Through Trust. See "Description of the Pass Through Certificates" and
"Description of the Equipment Notes."
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DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The following summary relates to the Basic Agreement and the Trust
Supplement, the Pass Through Trust to be formed thereby and the Pass Through
Certificates to be issued by the Pass Through Trust. Section references in
parentheses are to the relevant sections of the Basic Agreement unless otherwise
indicated. The statements under this caption are a summary and do not purport
to be complete. This summary makes use of terms defined in and is qualified in
its entirety by reference to all of the provisions of the Basic Agreement and
the Trust Supplement.
GENERAL
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in the Pass Through Trust. The property of the Pass Through
Trust will consist of the Equipment Notes to be issued on a nonrecourse basis by
each of the Owner Trustees in connection with three separate leveraged lease
transactions to finance not more than 80% of the cost to such Owner Trustees of
certain railroad tank cars and covered hopper cars to be purchased by such Owner
Trustees from the Company and leased back to the Company. All of the Equipment
Notes acquired by the Pass Through Trust will have an interest rate equal to the
interest rate of the Pass Through Certificates and will have a Rated Note
Maturity Date corresponding to the final distribution date of the Pass Through
Certificates. The aggregate principal amount of the Equipment Notes will be the
same as the aggregate principal amount of the Pass Through Certificates to be
issued by the Pass Through Trust. For a description of the Equipment Notes and
the Indentures, see "Description of the Equipment Notes."
The Pass Through Certificates will be issued only in fully registered form,
without interest coupons, in minimum denominations of $100,000 and integral
multiples of $1,000 in excess thereof. (Sections 2.01. 2.02 and 3.01) Pass
Through Certificates will be issued at the closing of the Offering only against
payment in immediately available funds.
Interest will be passed through to Certificateholders of the Pass Through
Trust at the rate per annum set forth on the cover page of this Prospectus and
will be calculated on the basis of a 360-day year of twelve 30-day months.
The Pass Through Certificates represent interests only in the Pass Through
Trust and all payments and distributions shall be made only from the Trust
Property. (Section 2.01) The Pass Through Certificates do not represent an
interest in or obligation of the Company, GATC, the Pass Through Trustee or the
Owner Trustee in their individual capacities, the Owner Participant, or any
affiliate of any thereof.
BOOK-ENTRY REGISTRATION
DTC. DTC has advised the Company that it 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, 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, premium, if any, 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, because such payments will be forwarded by the Pass Through
Trustee to Cede & Co. ("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
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DTC. Certificate Owners will not be recognized by the Pass Through Trustee as
Certificateholders, as such term is used in the Basic Agreement, 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, premium. if any, and interest on the Pass Through
Certificates. DTC Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Pass Through Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificate Owners. Accordingly, although
Certificate Owners will not possess Pass Through Certificates, the Rules provide
a mechanism by which Certificate Owners will receive payments and will be able
to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
Pass Through Certificates to persons or entities that do not participate in the
DTC system, or to otherwise act with respect to such Pass Through Certificates,
may be limited due to the lack of a physical certificate for such Pass Through
Certificates.
The Company understands that DTC will take any action permitted to be taken
by Certificateholders only at the direction of one or more DTC Participants to
whose accounts with DTC the Pass Through Certificates are credited.
Additionally, the Company understands that DTC will take such actions with
respect to any specified percentage of the beneficial interest of
Certificateholders held in the Pass Through Trust only at the direction of and
on behalf of DTC Participants whose holders include undivided interests that
satisfy any such percentage. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on behalf of
DTC Participants whose holders include such undivided interests.
Neither the Company nor the Pass Through Trustee will have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of the Pass Through Certificates held by Cede, as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The information contained in this section concerning DTC and DTC's book-
entry system has been obtained from sources that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
DEFINITIVE CERTIFICATES. Pass Through Certificates will be issued in fully
registered, certificated form ("Definitive Certificates") to Certificate Owners
or their nominees, rather than to DTC or its nominee, only if (i) DTC advises
the Pass Through Trustee in writing that DTC is unwilling or unable to continue
as depository with respect to such Pass Through Certificates and the Pass
Through Trustee or the Company is unable to locate a qualified successor within
90 days of such notice, [(ii) the Company, at its option, elects to terminate
the book-entry system through DTC] or (iii) after the occurrence of an Event of
Default (as defined below), Certificate Owners representing an not less than a
majority in aggregate percentage interest in the Pass Through Trust 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.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Pass Through Trustee will be required to notify all affected
Certificate Owners through DTC Participants of the availability of Definitive
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 Definitive
Certificates to Certificate Owners.
Distributions of principal of, premium, if any, and interest on the Pass
Through Certificates will thereafter be made by the Pass Through Trustee in
accordance with the procedures set forth in the Pass Through Trust Agreement,
directly to holders of Definitive Certificates in whose names such Definitive
Certificates were registered at the close of business on the applicable record
date. Such distributions will be made by check mailed to the address of each
such holder as it appears on the register maintained with respect to the Pass
Through Trust. The final payment on any Pass
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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.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Pass Through Trustee upon compliance with the requirements set
forth in the Pass Through Trust 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 shall be required.
SAME-DAY SETTLEMENT AND PAYMENT. Settlement for the Pass Through
Certificates will be required to be made in immediately available funds. So
long as the Pass Through Certificates are registered in the name of Cede, all
payments made by the Company to the Indenture Trustees, as assignees of the
Owner Trustees' rights under the Leases, in the case of Equipment Notes, or by
the Company in respect of Assumed Debt, will be in immediately available funds
and will be passed through by the Pass Through Trustee to DTC in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Pass
Through Certificates will trade in DTC's Same Day Funds Settlement System until
maturity, and secondary market trading activity in the Pass Through Certificates
will therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Pass Through Certificates.
PAYMENTS AND DISTRIBUTIONS
Payments received by the Pass Through Trustee of principal, Late Payment
Premium and Make-Whole Amount, if any, and interest on the Equipment Notes will
be distributed by the Pass Through Trustee to the Certificateholders on the date
such receipt is confirmed, except in certain cases when some or all of such
Equipment Notes are in default. See "Events of Default and Certain Rights Upon
an Event of Default."
Payments of interest on the Equipment Notes are scheduled to be received by
the Pass Through Trustee on each Regular Distribution Date, commencing September
20, 1998, until the final distribution date for the Pass Through Trust, and
payments of principal on the Equipment Notes are scheduled to be received in
specified amounts by the Pass Through Trustee on each Regular Distribution Date
commencing ______________ 20, 1998 (such regularly scheduled payments of
principal of, and interest on, the Equipment Notes are herein referred to as
"Regular Payments"). The Pass Through Trustee will distribute to the
Certificateholders on each Regular Distribution Date all Regular Payments, the
receipt of which is confirmed by the Pass Through Trustee on such Regular
Distribution Date. Each such distribution of Regular Payments will be made by
the Pass Through Trustee to the holders of record of the Pass Through
Certificates on the fifteenth day immediately preceding such Regular
Distribution Date, subject to certain exceptions. (Sections 4.01 and 4.02) If
a Regular Payment is not received by the Pass Through Trustee on a Regular
Distribution Date but is received within five days thereafter, it will be
distributed on the date received to such holders of record. If it is received
after such five-day period, it will be treated as a Special Payment and
distributed as described below.
Each Certificateholder will be entitled to receive a pro rata share of any
distribution in respect of Regular Payments of principal, Late Payment Premium
and Make-Whole Amount, if any, and interest made on the Equipment Notes held by
the Pass Through Trust. After a partial or full prepayment or default in
respect of some or all of such Equipment Notes, a Certificateholder should refer
to the information with respect to the Pool Balance and the Pool Factor for the
Pass Through Trust reported periodically by the Pass Through Trustee. See "--
Pool Factors" and "--Statements to Certificateholders."
Payments of principal, Late Payment Premium and Make-Whole Amount, if any,
and interest received by the Pass Through Trustee on account of a partial or
full prepayment, if any, of the Equipment Notes and payments received by the
Pass Through Trustee following a default in respect of such Equipment Notes
(including payments received by the Pass Through Trustee on account of the
purchase by the related Owner Trustee of such Equipment Notes or payments
received on account of the sale of such Equipment Notes by the Pass Through
Trustee) ("Special Payments") will be distributed on the 20th day of a month (a
"Special Distribution Date"), except in the case of a refinancing of such
Equipment Notes which will be distributed on the date of such refinancing, which
may occur on any Business Day. Not less than 20 days' notice of such Special
Payments or refinancing shall be provided by the Pass Through Trustee to the
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holders of the Pass Through Certificates. See "Description of the Equipment
Notes--Prepayments" and "Description of the Pass Through Certificates--Events of
Default and Certain Rights Upon an Event of Default." 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 on the fifteenth day preceding such Special Distribution
Date. See "Description of the Equipment Notes--Prepayments" and "Description of
the Pass Through Certificates--Events of Default and Certain Rights Upon an
Event of Default."
The Pass Through Trust Agreement requires that the Pass Through Trustee
establish and maintain, for the Pass Through Trust and for the benefit of the
Certificateholders of the Pass Through Trust, one or more non-interest bearing
accounts (the "Certificate Account") for the deposit of payments representing
Regular Payments on the Equipment Notes. (Section 4.01) The Pass Through Trust
Agreement also requires that the Pass Through Trustee establish and maintain,
for the Pass Through Trust and for the benefit of the Certificateholders, one or
more accounts (the "Special Payments Account") for the deposit of payments
representing Special Payments.
Pursuant to the terms of the Pass Through Trust Agreement, the Pass Through
Trustee is required to deposit any Regular Payments received by it in the
Certificate Account and to deposit any Special Payments so received by it in the
Special Payments Account. (Section 4.01) 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 4.02)
At such time, if any, as the Pass Through Certificates are issued in the
form of Definitive Pass Through 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, as appropriate, will be made by check mailed to each
Certificateholder of record on the applicable record date at its address
appearing on the register maintained by the Pass Through Trustee. (Section
4.02) The final distribution for the Pass Through Trust, however, will be made
only upon presentation and surrender of the Pass Through Certificates at the
office or agency of the Pass Through Trustee specified in the notice given by
the Pass Through Trustee of such final distribution. The Pass Through Trustee
will mail such notice of the final distribution to the Certificateholders,
specifying the date set for such final distribution and the amount of such
distribution. (Section 11.01) See "Termination of the Pass Through Trust."
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 additional interest. (Section [12.10])
POOL FACTORS
Unless there has been a prepayment, a payment of less principal than is
provided for by the Scheduled Amortization Schedule on the Equipment Notes or a
default in respect of one or more issues of the Equipment Notes held by the Pass
Through Trust, the Pool Factor for the Pass Through Trust will decline in
proportion to the repayments of principal on the Equipment Notes in accordance
with the Scheduled Amortization Schedule as described in "Description of the
Equipment Notes--Principal and Interest Payments--Principal." In the event of a
partial or full prepayment or default, the Pool Factor and the Pool Balance will
be recomputed after giving effect thereto and notice thereof will be mailed to
the Certificateholders.
The "Pool Balance" for the Pass Through Trust indicates, as of any date,
the aggregate unpaid principal amount of the Equipment Notes on such date plus
any amounts in respect of principal on such Equipment Notes held by the Pass
Through Trustee and not yet distributed. The Pool Balance for the Pass Through
Trust as of any Regular Distribution Date or Special Distribution Date shall be
computed after giving effect to the payment of principal, if any, on the
Equipment Notes and distribution thereof to be made on that date.
The "Pool Factor" for the Pass Through Trust, as of any 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 Equipment
Notes. The Pool Factor as of any Regular Distribution Date or Special
Distribution Date shall be computed after giving effect to the payment of
principal, if any, on the Equipment Notes and distribution thereof to be made on
that date. The Pool Factor for the Pass Through Trust will initially be
1.0000000, and thereafter, the Pool Factor will decline as described above to
reflect reductions in the Pool Balance of the Pass Through Trust. The amount of
a Certificateholder's pro rata
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share of the Pool Balance of the Pass Through Trust can be determined by
multiplying the original denomination of the Certificateholder's Pass Through
Certificate by the Pool Factor for the Pass Through Trust as of the applicable
Regular Distribution Date or Special Distribution Date.
As of the date of issuance of the Pass Through Certificates, and assuming
that no prepayment, purchase or default in respect of any Equipment Notes shall
occur, the repayments of principal of such Equipment Notes in accordance with
both the Scheduled Amortization Schedule and the Rated Amortization Schedule and
the resulting Pool Factors for the Pass Through Trust after taking into account
each such repayment schedule are set forth in Appendix B. However, the Pool
Factor on any particular Regular Distribution Date may fall within the values
assigned for the Scheduled and Rated Pool Factors set forth on Appendix B to the
extent that payments are not made in accordance with either schedule.
STATEMENTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date, if any,
the Pass Through Trustee will include with each distribution of a Regular
Payment or Special Payment to Certificateholders of record a statement, giving
effect to such distribution to be made on such Regular Distribution Date or
Special Distribution Date, if any, setting forth the following information (per
$1,000 in aggregate principal amount of Pass Through Certificates, as to (i) and
(ii) below):
(i) the amount of such distribution allocable to principal and the
amount allocable to Late Payment Premium or Make-Whole Amount, if any;
(ii) the amount of such distribution allocable to interest;
(iii) the Scheduled Pool Balance, Rated Pool Balance, Scheduled Pool
Factor and Rated Pool Factor; and
(iv) the Pool Balance and Pool Factor, if different from the Pool
Balances and Pool Factors provided in (iii) above. (Section 4.03 of the
Basic Agreement and Section [4.01] of the Trust Supplement)
So long as the Pass Through Certificates are registered in the name of
Cede, as nominee for DTC, on the applicable record date prior to such Regular
Distribution Date or Special Distribution Date, the Pass Through Trustee will
request from DTC a Securities Position Listing setting forth the names of all
DTC Participants reflected on DTC's books as holding interests in the Pass
Through Certificates on such record date. On such 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.
In addition, after the end of each calendar year, the Pass Through Trustee
will prepare for each Certificateholder of record at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Pass Through Trust
for such calendar year or, in the event such Person was a Certificateholder of
record during a portion of such calendar year, for the applicable portion of
such calendar year, and such other items as are readily available to the Pass
Through Trustee and which a Certificateholder shall reasonably request as
necessary for the purpose of such Certificateholder's preparation of its federal
income tax returns. (Section 4.03) Such report and such other items shall be
prepared on the basis of information supplied to the Pass Through Trustee by the
DTC Participants, and shall be delivered by the Pass Through Trustee to such DTC
Participants to be available for forwarding by such DTC Participants to
Certificate Owners in the manner described above.
In addition to the statements provided for above, the Manager will provide
to the Certificateholders semiannually a statement setting forth certain
information regarding the Equipment, including Sublease rates and utilization
rates for such period.
At such time, if any, as the Pass Through Certificates are issued in the
form of Definitive Pass Through Certificates, the Pass Through Trustee will
prepare and deliver the information described above to each Certificateholder
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<PAGE>
of record as the name and period of record ownership of such Certificateholder
appears on the records of the Registrar of the Pass Through Certificates.
VOTING OF EQUIPMENT NOTES
The Pass Through Trustee, as holder of the Equipment Notes, has the right
to vote and give consents and waivers in respect of such Equipment Notes under
the applicable Indenture. The Pass Through Trust 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 at its own discretion and the
circumstances in which the Pass Through Trustee shall seek instructions from the
Certificateholders of the Pass Through Trust. In circumstances in which the
Pass Through Trustee is required to seek instructions from the
Certificateholders, the principal amount of the Equipment Notes directing any
action or being voted for or against any proposal shall be in proportion to the
principal amount of Pass Through Certificates held by the Certificateholders
taking the corresponding position. (Sections 6.01 and 10.01)
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The Pass Through Trust Agreement defines an event of default (an "Event of
Default") as the occurrence and continuance of an event of default under one or
more of the Indentures (an "Indenture Event of Default"). The Indenture Events
of Default are described in "Description of the Equipment Notes--Indenture
Events of Default, Notice and Waiver" below. The Indenture Events of Default
will include events of default under the related Lease (except in certain
limited circumstances).
The Owner Trustee and the Owner Participant under each Indenture will each
have the right under certain circumstances to cure an Indenture Event of Default
that results from the occurrence of a Lease Event of Default under the related
Lease. If the Owner Trustee or the Owner Participant chooses to exercise such
cure right, the Indenture Event of Default and consequently the Event of Default
with respect to the Pass Through Trust will be deemed to be cured.
The Pass Through Trust Agreement provides that, as long as an Indenture
Event of Default under any Indenture shall have occurred and be continuing, the
Pass Through Trustee may vote all of the Equipment Notes issued under such
Indenture, and upon the direction of the holders of Pass Through Certificates
evidencing fractional undivided interests aggregating not less than a majority
in interest shall vote not less than a corresponding majority of such Equipment
Notes in favor of directing the related Indenture Trustee to declare the unpaid
principal amount of all Equipment Notes issued under such Indenture and any
accrued and unpaid interest or Late Payment Premium thereon to be due and
payable. The Pass Through Trust Agreement also provides that, if an Indenture
Event of Default under any Indenture shall have occurred and be continuing, the
Pass Through Trustee may, and upon the direction of the holders of Pass Through
Certificates evidencing fractional undivided interests aggregating not less than
a majority in interest shall, subject to certain conditions, vote all of the
Equipment Notes issued under such Indenture in favor of directing the related
Indenture Trustee as to the time, method and place of conducting any proceeding
for any remedy available to such Indenture Trustee or of exercising any trust or
power conferred on such Indenture Trustee under such Indenture. (Sections 6.01
and 6.04)
As an additional remedy if an Indenture Event of Default shall have
occurred and be continuing, the Pass Through Trust Agreement provides that the
Pass Through Trustee may, and upon the direction of the holders of Pass Through
Certificates evidencing fractional undivided interests aggregating not less than
a majority in interest shall, sell all or part of the Equipment Notes issued
under such Indenture for cash to any Person. (Sections 6.01 and 6.02) 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 4.01 and 4.02)
The market for Equipment Notes in default may be very limited and there can be
no assurance that they could be sold for a reasonable price. If the Pass
Through Trustee sells any such Equipment Notes with respect to which an
Indenture Event of Default exists for less than their outstanding principal
amount, the Certificateholders will receive a smaller amount of principal
distributions than anticipated and will not have any claim for the shortfall
against the Company, the related Owner Trustee, the related Owner Participant or
the Pass Through Trustee. Furthermore, neither the Pass Through Trustee nor the
Certificateholders could take any action with respect to any remaining Equipment
Notes held by the Pass Through Trust so long as no Indenture Event of Default
existed with respect thereto.
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Any amount distributed to the Pass Through Trustee by the Indenture Trustee
under any Indenture following an Indenture Event of Default under such Indenture
shall be deposited in the Special Payments Account and shall be distributed to
the Certificateholders on a Special Distribution Date. In addition, if,
following an Indenture Event of Default under any Indenture, the related Owner
Trustee exercises its option to purchase the outstanding Equipment Notes issued
under such Indenture as described under "Description of the Equipment Notes--
Indenture Events of Default, Notice and Waiver", the price paid by such Owner
Trustee to the Pass Through Trustee for the Equipment Notes issued under such
Indenture shall be deposited in the Special Payments Account and shall be
distributed to the Certificateholders on a Special Distribution Date. (Sections
4.01 and 4.02)
Any funds held by the Pass Through Trustee in the Special Payments Account
representing either payments received with respect to any Equipment Notes
following an Indenture Event of Default or proceeds from the sale by the Pass
Through Trustee of any such Equipment Notes, shall, to the extent practicable,
be invested and reinvested by the Pass Through Trustee in Permitted Government
Investments pending the distribution of such funds on a Special Distribution
Date. (Sections 4.01 and 4.04)
The Pass Through Trust Agreement provides that the Pass Through Trustee
shall, within 90 days after the occurrence of a default (as defined below), give
to the Certificateholders notice, transmitted by mail, of all uncured or
unwaived defaults with respect to the Pass Through Trust known to it; provided
that, except in the case of default in the payment of principal, Late Payment
Premium or Make-Whole Amount, if any, or interest on any of the Equipment Notes,
the Pass Through Trustee shall be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interest of
such Certificateholders. The term "default" shall mean any event which is, or
with the giving of notice or the passage of time or both would become, an
Indenture Event of Default. (Section 7.02)
The Pass Through Trust 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 be indemnified by the
holders of the Pass Through Certificates before proceeding to exercise any right
or power under the Pass Through Trust Agreement at the request of such
Certificateholders. (Section 7.03)
In certain cases, the holders of Pass Through Certificates evidencing
fractional undivided interests aggregating not less than a majority in interest
may on behalf of the holders of all Pass Through Certificates waive any past
default or Event of Default with and thereby annul any direction given by the
Pass Through Trustee on behalf of such holders to the related Indenture Trustee
with respect thereto, except (i) a default in the deposit of any Regular Payment
or Special Payment or in the distribution of any such payment, (ii) a default in
payment of the principal, Late Payment Premium or Make-Whole Amount, if any, or
interest on any of the Equipment Notes, and (iii) a default in respect of any
covenant or provision of the Pass Through Trust Agreement that cannot be
modified or amended without the consent of each Certificateholder affected
thereby. (Section 6.05) For a discussion of waivers of Indenture Events of
Default under the Indentures, see "Description of the Equipment Notes--Indenture
Events of Default, Notice and Waiver."
MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENT
The Pass Through Trust Agreement contains provisions permitting the Company
and the Pass Through Trustee to enter into supplemental trust agreements,
without the consent of the holders of any of the Pass Through Certificates, (i)
to add to the covenants of the Company for the benefit of the holders of such
Pass Through Certificates, (ii) to cure any ambiguity, to correct any manifest
error or to correct or supplement any defective or inconsistent provision of the
Pass Through Trust Agreement or any supplemental trust agreement, or to make any
other provisions with respect to matters or questions arising thereunder,
provided such action shall not adversely affect the interest of the holders of
the Pass Through Certificates, (iii) to evidence and provide for a successor
Pass Through Trustee for the Pass Through Trust, or (iv) to make any other
amendments or modifications which shall only apply to Pass Through Certificates
of one or more series to be issued thereafter, provided that in each case, such
modification does not adversely affect the status of a Pass Through Trust as a
grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A
of the Code (as hereinafter defined) for U.S. federal income tax purposes.
(Section 9.01)
The Pass Through Trust Agreement also contains provisions permitting the
Company and the Pass Through Trustee, with the consent of the Certificateholders
evidencing fractional undivided interests aggregating not less than a majority
in interest of the Pass Through Trust, to execute supplemental trust agreements
adding any provisions to or
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changing or eliminating any of the provisions of the Pass Through Trust
Agreement, to the extent relating to the Pass Through Trust, or modifying the
rights or obligations of such Certificateholders, except that no such
supplemental trust agreement may, without the consent of the holder of each such
Pass Through Certificate so affected, (a) reduce in any manner the amount of, or
delay the timing of, any receipt by the Pass Through Trustee of payments on the
Equipment Notes, or distributions in respect of any Pass Through Certificate, or
make distributions payable in coin or currency other than that provided for in
such Pass Through Certificates, or impair the right of any Certificateholder to
institute suit for the enforcement of any such payment when due, (b) permit the
disposition of any Equipment Note, except as provided in the Pass Through Trust
Agreement, (c) reduce the percentage of the aggregate fractional undivided
interests of the Pass Through Trust provided for in the Pass Through Trust
Agreement, the consent of the holders of which is required for any such
supplemental trust agreement or for any waiver provided for in the Pass Through
Trust Agreement, (d) modify any of the provisions relating to supplemental
agreements that may be executed with the consent of Certificateholders as
described in this paragraph or relating to the rights of the Certificateholders
in respect of the waiver of Events of Default or receipt of payment or (e)
adversely affect the status of the Pass Through Trust as a grantor trust under
Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code for
U.S. federal income tax purposes. (Section 9.02)
MODIFICATION AND CONSENTS AND WAIVERS UNDER THE INDENTURES AND RELATED
AGREEMENTS
In the event that the Pass Through Trustee, as the holder of any Equipment
Notes, receives a request for its consent to any amendment, modification, waiver
or supplement under an Indenture, any Lease or other document relating to such
Equipment Notes, which requires the consent of the Certificateholders of the
Pass Through Trust, the Pass Through Trustee shall mail a notice of such
proposed amendment, modification, waiver or supplement to each Certificateholder
as of the date of such notice. The Pass Through Trustee shall request
instructions from the Certificateholders as to whether or not to consent to such
amendment, modification, waiver or supplement. The Pass Through Trustee shall
vote or consent with respect to such Equipment Notes in the same proportion as
the Pass Through Certificates were actually voted by the holders thereof by a
certain date. Notwithstanding the foregoing, if an Event of Default shall have
occurred and be continuing, the Pass Through Trustee, subject to the voting
instructions referred to under "Description of the Pass Through Certificates--
Events of Default and Certain Rights Upon an Event of Default," may in its own
discretion consent to such amendment, modification, waiver or supplement, and
may so notify the Indenture Trustee to which such consent relates. (Section
10.01)
TERMINATION OF THE PASS THROUGH TRUST
The obligations of the Company and the Pass Through Trustee with respect to
the Pass Through Trust will terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Pass Through Trust Agreement and the disposition of all property held in the
Pass Through Trust. The Pass Through Trustee will mail to each
Certificateholder of record a notice of the termination of the Pass Through
Trust, specifying the amount of the proposed final payment and the proposed date
for the distribution of such final payment. The final distribution to any
Certificateholder will be made only upon surrender of such Certificateholder's
Pass Through Certificates at the office or agency of the Pass Through Trustee
specified in such notice of termination. (Section 11.01)
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
The Company will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an entirety
to any other corporation. (Section 5.02)
THE PASS THROUGH TRUSTEE
[The First National Bank of Chicago] will be the Pass Through Trustee for
the Pass Through Trust. The Pass Through Trustee and any of its affiliates may
hold Pass Through Certificates in their own names. (Section 7.05) With certain
exceptions, the Pass Through Trustee makes no representations as to the validity
or sufficiency of the Pass Through Trust Agreement, the Pass Through
Certificates, the Equipment Notes, the Indentures, the Leases or other related
documents. (Section 7.04) The First National Bank of Chicago will also be the
Indenture Trustee of the Indentures under which the Equipment Notes are issued
and the Collateral Agent under the Intercreditor Agreement.
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The Pass Through Trustee may resign at any time, in which event the Company
will be obligated to appoint a successor trustee. If the Pass Through Trustee
ceases to be eligible to continue as Pass Through Trustee or becomes incapable
of acting as Trustee or becomes insolvent, the applicable Owner Participant may
remove such Pass Through Trustee. In addition, any holder of Pass Through
Certificates for at least six months may in such circumstances, on behalf of
itself and all others similarly situated, petition any court of competent
jurisdiction for the removal of such Pass Through Trustee and the appointment of
a successor trustee. Any resignation or removal of the Pass Through Trustee and
appointment of the successor trustee does not become effective until acceptance
of the appointment by the successor trustee. (Section 7.09) All references in
this Prospectus to the Pass Through Trustee are to the trustee acting in such
capacity and should be read to take into account the possibility that the Pass
Through Trust could have a different successor trustee in the event of such a
resignation or removal.
The Pass Through Trust Agreement provides that the Company will pay the
Pass Through Trustee's fees and expenses and will indemnify the Pass Through
Trustee in accordance with the Participation Agreement with respect to certain
taxes. To the extent not indemnified by the Company with respect to such taxes,
the Pass Through Trustee may be entitled to be reimbursed by the Pass Through
Trust. (Section 7.07)
MATURITY, PAYMENT AND YIELD CONSIDERATIONS
The expected maturity and weighted average life of the Pass Through
Certificates have been based on certain structuring assumptions. See
"Structuring Assumptions."
Principal payments on the Equipment Notes, and thereby the Pass Through
Certificates, will be affected by a number of factors, including (i) the timing
of receipt of payments under the Subleases or the failure of the Sublessees to
make all payments due under their Subleases, (ii) the ability to re-lease any
Equipment upon expiration of the Sublease terms, (iii) the exercise by the
Company of its Obsolescence Termination Option under the Lease, (iv) the
occurrence of an Event of Loss with respect to any Equipment Unit held by the
Owner Trust issuing such Equipment Notes and the timing of an Owner Trust's
receipt of insurance proceeds, if any, in respect thereof if the Company does
not elect to replace such Unit, and (v) the exercise by an Owner Trust of its
one-time refinancing option which would lead to a redemption of the Equipment
Notes. The likelihood of a Lessee default or delinquency will depend in part on
the financial strength of the Sublessees and their ability to make the required
payments under the Subleases. The ability of the Manager on behalf of the
Company to re-lease the Equipment will be affected by a variety of economic,
political, geographic, legal, tax, regulatory and other factors affecting the
supply of and demand for railcars in general and the Equipment in particular.
Greater than expected payments of principal will increase the yield on the
Pass Through Certificates purchased at a price less than par. Similarly,
greater than anticipated payments of principal will decrease the yield on Pass
Through Certificates purchased at a price greater than par. In addition, the
yield on Pass Through Certificates purchased at less than par will decrease if
principal payments are received later than expected.
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STRUCTURING ASSUMPTIONS
The following discussion summarizes certain of the key assumptions used by
the Company to develop the cash flow model (the "Structuring Assumptions") from
which the Scheduled Amortization Schedule has been derived. The Structuring
Assumptions are based on a complex set of detailed modeling assumptions
developed for each railcar type in the Company Fleet on the basis of the
Manager's historical experience and other considerations deemed relevant by the
Company. The summary below does not purport to describe the many variables in
detail but rather is intended only to provide an overview of the resulting key
assumptions used to develop the Scheduled Amortization Schedule. On the basis of
the Structuring Assumptions, the resulting net cash flow computed by deducting
all assumed expenses from assumed gross revenues (the "Pre-Financing Cash Flow")
is sufficient to pay all amounts of interest and principal when scheduled under
the Scheduled Amortization.
Any projections, forecasts or estimates and other "forward-looking"
statements reflected in or by the Structuring Assumptions are inherently subject
to significant business and economic uncertainties and contingencies beyond the
control of the Company. While the Company believes the Structuring Assumptions
are reasonable based on the historical experience of the Manager, the model does
not purport to represent a complete set of factors which may affect the revenues
and expenses of the Company and is not intended to be a forecast of the
Company's future results. Furthermore, actual results will vary from the
Structuring Assumptions since there can be no assurance that the Company's
future results will be comparable to the Manager's historical experience, and
the variations may be material. Some of the factors which could cause results to
differ materially include changes in interest rates, markets, financial or legal
uncertainties, casualty occurrences and differences in Sublease rental rates and
utilization rates.
Also set forth below are a sensitivity analysis and stress scenario which
are intended merely to illustrate certain, but not all, payment sensitivities of
the Pass Through Certificates to certain, but not all, market and economic
stresses. These tables have been developed by fixing certain of the Structuring
Assumptions and by varying other Structuring Assumptions and certain other
factors which will affect the Company's revenues and expenses. More severe
stresses may lead to payments of principal on the Pass Through Certificates
being delayed or decreased, or in certain cases, an Event of Default.
The Company does not intend to update or revise the information presented
to reflect changes occurring after the date hereof. Actual experience will vary
from the Structuring Assumptions.
Revenue Assumptions
General
(i) The average useful life for the Equipment Units is assumed to exceed
20 years.
(ii) All future payments in respect of the Subleases are assumed to be
received on a timely basis by the Company when due.
(iii) The one-month London Interbank Borrowing Rate ("LIBOR") is
assumed to remain constant at 5.65625% per annum.
(iv) Funds on deposit in the Liquidity Reserve Account, Cash Trapping
Account and Collection Account are assumed to earn interest at one-
month LIBOR.
(v) All other transaction accounts are assumed to earn no interest.
Sublease Rates
(i) The aggregate average monthly lease rate for the first four years is
assumed to be the actual average lease rate at closing.
(ii) [After the first four years,] the average sublease rate is assumed
to increase at an average annual rate of 1.14%, reflecting the
combined effects of assumed inflation and lease rate reductions over
time due to aging of the Company Fleet.
<PAGE>
Utilization
(i) The utilization for the first four years is assumed to be 100%.
Thereafter, utilization rates for the Company Fleet are assumed to
decline somewhat as set forth in the table below:
<TABLE>
<CAPTION>
Year Utilization
---- -----------
<S> <C>
5 97%
10 97%
15 96%
20 95%
</TABLE>
(ii) The initial Subleases are assumed to have four year terms.
Thereafter, the assumed lease renewal terms range from one to seven
years, with the average Sublease term for the Equipment assumed to
be approximately 3 years over the entire transaction.
Expense and Operating Cost Assumptions
Cost Inflation
(i) An assumed inflation rate of 2.25% was applied to all Operating
Expenses.
Maintenance
(i) It is assumed that during the first four years of the transaction
the Equipment Units will not require maintenance.
(ii) Commencing in year five, maintenance costs are assumed to increase
with the age of the Equipment Units. Maintenance age curves were
developed for each of the Equipment Types based on the Manager's
historical experience. Maintenance costs are assumed to be 5% of
gross revenues in year five, increasing linearly to 24% in year 20.
Rent Abatements
(i) Rent is assumed to be abated for the period that an Equipment Unit
is in a maintenance facility.
(ii) It is assumed that an Equipment Unit will spend an average of 30
days in a maintenance facility each time repair or maintenance is
performed on the Equipment Unit at such facility.
(iii) An Equipment Unit is assumed to require maintenance once every five
years for years five through ten of the transaction and once every
three years thereafter.
Receivables Write Off
Write-offs are assumed to be 0.25% per year of gross revenues for the
entire transaction.
Required Maintenance Programs
Two types of Required Maintenance Programs are assumed to be performed on
each applicable Equipment Unit. The average aggregate initial costs (before
inflation) for the Required Maintenance Programs (including costs related
to Rule HM201 and Rule 88B) is assumed to be approximately $_________ per
Unit, which costs are assumed to be incurred once every approximately 10
years.
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Optional Modifications
(i) Optional Modifications that are to be made by the Company at its own
expense are assumed to occur over the course of the transaction with
respect to approximately [25%] of the cars.
The average amount for such Optional Modifications is assumed to be
$771 per modified car.
(ii) Optional Modifications are assumed to be requested by customers with
respect to approximately 2.4% of the cars over the transaction and
are assumed to be repaid over five years with interest as specified
in the Subleases.
Management Fee
(i) The management fee provided for in the Management Agreement is made
up of a Base Component and an Incentive Component.
(ii) The Base Component, equal to $240 per Equipment Unit per year, is
assumed to be inflated by 2.25% every year.
(iii) The Incentive Component, equal to a percentage of revenue, is $60
per Equipment Unit in the first year of the transaction, increasing
thereafter based on revenue increases.
Car Tax
Initially, car taxes are assumed to be $160 per Equipment Unit per year.
Thereafter, car taxes are assumed to decrease with the book value of the
Equipment Unit (which is amortized "straight line" over a 30-year period),
inflated by 2.25% per year.
Other Expense
Switching, tracking, insurance and other expenses are assumed initially to
be $114 per Equipment Unit per year (before inflation) and are thereafter
inflated by 2.25%.
Trustee Fee
Aggregate fees of the Owner Trustee, Pass Through Trustee and the Indenture
Trustee are assumed to be $25,000 per year.
Sensitivity Analysis
The following table shows the effect on the assumed Pre-Financing Cash Flow
when selected factors underlying the Structuring Assumptions are varied
throughout the transaction (except as otherwise noted) as indicated under the
"Stress" column (in each case holding other Structuring Assumptions unchanged):
<TABLE>
<CAPTION>
Resulting Cash Flow as a
% of Pre-Financing
Cash Flow under
Variable Stress Structuring Assumptions
-------- ------ ------------------------
<S> <C> <C>
Monthly Lease Rates 20% permanent decrease 77.9%
Annual Maintenance Cost 40% increase 93.9
Mandated Improvements 40% increase 98.1
Utilization after year four 72% 76.7
Lease Rate Growth Rate 90 bps lower than the expense inflation rate 84.8
Receivable Write-Offs Expense 1% of revenues 99.0
</TABLE>
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Stress Scenario
The following set of stress factors is presented for illustrative purposes
only as an example of the combined effect on the cash flow model of a number of
stress factors which could occur concurrently. This combination results in
approximately a 68.9% decrease in Pre-Financing Cash Flow. Other combinations of
stress factors could result in greater reductions in Pre-Financing Cash Flow,
and expanding the above stresses would result in a still greater reduction in
annual Pre-Financing Cash Flow. Unless otherwise stated, all other Structuring
Assumptions remain the same.
Monthly Lease Rates sustain a permanent 10% decrease (before inflation).
Annual Maintenance Cost is increased by 20%.
Required Modification Costs are increased by 20%.
Utilization after year 4 is equal to 86% for the remainder of the
transaction.
The Lease Rate Inflation (1.90%) is 0.35% below the expense inflation rate
(2.25%).
Receivables Write-Offs are 0.50% of revenues.
When applying all of the above stresses simultaneously:
The Equipment Notes were repaid in 22 years.
The weighted average life of the debt was 12.7 years.
Pre-Financing Cash Flow decreased by 68.9%. All rated obligations (Interest
and Rated Amortization) were paid.
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THE OWNER TRUSTS
Each Owner Trust was formed pursuant to a Trust Agreement between the Owner
Trustee and an Owner Participant, and prior to formation had no assets or
obligations. Concurrently with the execution and delivery of each Trust
Agreement, each Owner Trustee entered into a Participation Agreement, a Lease
and an Indenture. Pursuant to the Trust Agreement and the Participation
Agreement, each Owner Trust acquired an Equipment Group from the Company, and,
pursuant to the Lease, leased the Equipment Group to the Company. On the Closing
Date, each Owner Trust will assign all its right, title and interest (subject to
certain limitations) in, to and under an Equipment Group and the Lease to the
Indenture Trustee. Also, each Owner Trust will assign certain of its rights
under the Intercreditor Agreement. The Owner Trusts will not engage in any
business activity other than owning and leasing an Equipment Group, issuing
Equipment Notes and certain other matters incidental thereto. As a consequence,
each Owner Trust is not expected to have any need for, or source of, additional
capital resources other than the assets of the Owner Trust. Each Owner
Participant will be the sole beneficiary of its Owner Trust.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements under this caption are summaries and do not purport to be
complete. The summaries make use of terms defined in and are qualified in their
entirety by reference to all of the provisions of the Equipment Notes, the
Indentures, the Leases, the Participation Agreements and the Trust Agreements.
Except as otherwise indicated, the following summaries relate to the Equipment
Notes, the Indenture, the Participation Agreement and the Trust Agreement
relating to each Equipment Group.
GENERAL
The Equipment Notes with respect to each Equipment Group will be issued
under a separate Indenture between __________________________________, as Owner
Trustee of a trust for the benefit of the Owner Participant who is the
beneficial owner of such Equipment Group, and The First National Bank of
Chicago, as Indenture Trustee.
The related Owner Trustee will lease each Equipment Group to the Company
pursuant to a separate Lease between such Owner Trustee and the Company with
respect to such Equipment Group. The Company is obligated to make or cause to be
made Basic Rent and other payments to the related Indenture Trustee on behalf of
the related Owner Trustee in amounts that are expected to be sufficient to pay
the principal of, and interest on, the Equipment Notes issued with respect to
such Equipment Group when due and payable in accordance with the Scheduled
Amortization Schedule. The Equipment Notes are not, however, direct obligations
of, or guaranteed by, the Company or any affiliate thereof. The Company's rental
and other obligations under the Leases are secured pursuant to the Intercreditor
Agreement and each Owner Trustee's obligations under its Equipment Notes are
secured pursuant to the related Indenture. See "The Intercreditor Agreement."
PRINCIPAL AND INTEREST PAYMENTS
Principal
The aggregate principal amount of the Equipment Notes is $120,000,000.
Scheduled Amortization of the Equipment Notes represents the amount of
principal which the Owner Trust must pay (on a cumulative basis) through each
Regular Distribution Date in order to avoid payment of Late Payment Premiums.
The "Scheduled Maturity Date," which is September 20, 2017 represents the
Regular Distribution Date on which the Owner Trust will pay the final
installment of principal, if all payments of principal are made in accordance
with Scheduled Amortization. Rated Amortization of the Equipment Notes
represents the minimum amount of principal which the Owner Trust must pay (on a
cumulative basis) through each Regular Distribution Date in order to avoid an
Indenture Event of Default attributable to the failure to make payments of
principal on the Equipment Notes. The "Rated Maturity Date," which is September
20, 2020, is the Regular Distribution Date by which the Owner Trust must pay all
outstanding principal on the Equipment Notes.
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The Scheduled Amortization and Rated Amortization for the Equipment Notes
as of the last Regular Distribution Date at the end of each year in which the
Equipment Notes are outstanding, are set forth below (see "Appendix B" for a
schedule of monthly amortization rates and Pool Factors (as defined herein)):
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION* RATED AMORTIZATION*
------------------------- ---------------------
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL CUMULATIVE EXCESS OF
DATE PAYMENT BALANCE PAYMENT BALANCE SCHEDULED OVER RATED*
- ----- ------------- ---------- --------- --------- ---------------------
<S> <C> <C> <C> <C> <C>
Closing $ $ $ $ $
12/20/98
12/20/99
12/20/00
12/20/01
12/20/02
12/20/03
12/20/04
12/20/05
12/20/06
12/20/07
12/20/08
12/20/09
12/20/10
12/20/11
12/20/12
12/20/13
12/20/14
12/20/15
12/20/16
12/20/17
12/20/18
12/20/19
12/20/20
</TABLE>
________________
* May not total due to rounding.
The "Scheduled Amortization Amount," at any Regular Distribution Date,
equals the excess, if any, of (i) the cumulative amount of all Scheduled
Amortization through and including such Regular Distribution Date over (ii) the
cumulative amount of all principal paid on the Equipment Notes prior to and
excluding such Regular Distribution Date. The "Rated Amortization Amount," at
any Regular Distribution Date, equals the excess, if any, of (i) the cumulative
amount of all Rated Amortization through and including such Regular Distribution
Date over (ii) the cumulative amount of all principal paid on the Equipment
Notes prior to and excluding such Regular Distribution Date.
If, on any Regular Distribution Date, a Payment Deficiency exists, Late
Payment Premium will be payable on the next Regular Distribution Date with
respect to such Payment Deficiency.
If, on any Regular Distribution Date, the principal paid on such date is
less than the Rated Amortization Amount, an Event of Default will occur if such
default continues beyond the applicable grace period.
If any date scheduled for any payment of principal, Late Payment Premium or
Make-Whole Amount, if any, or interest on the Equipment Notes is not a Business
Day, such payment will be made on the next succeeding Business Day without any
additional interest. (Indenture, Section [2.04(b)])
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Interest
Interest is payable on the outstanding principal amount of the Equipment
Notes at the rate set forth on the cover page hereof (computed on the basis of a
360-day year of twelve 30-day months) (the "Note Rate") on each Regular
Distribution Date. Interest on principal which is overdue under the Rated
Amortization Schedule and, to the extent permitted by law, overdue interest is
payable at the rate per annum equal to Note Rate plus 1.5% (the "Default Rate")
on each Regular Distribution Date. Interest on any overdue Late Payment Premium
payable in respect of the Equipment Notes is payable at the Late Payment Rate on
each Regular Distribution Date. See "--Late Payment Premium" below. Interest on
overdue principal and interest is payable solely out of funds available after
payment of the Scheduled Amortization Amount then due and the equity portion of
all scheduled Basic Rent then due. See "Payment Account" below.
If interest is payable on any date which is not a Business Day, the
interest which would be payable on such date shall be payable on the next
Business Day.
Late Payment Premium
The Late Payment Premium payable on any Regular Distribution Date with
respect to a Payment Deficiency on the previous Regular Distribution Date equals
an amount of interest (computed on the basis of a 360-day year of twelve 30-day
months) on the Payment Deficiency, for the period from and including the
previous Regular Distribution Date to but excluding such Regular Distribution
Date, at a rate per annum equal to the Late Payment Rate.
Late Payment Premiums and interest on Late Payment Premiums are payable on
a Regular Distribution Date solely out of funds available after payments of
interest (excluding interest on any past due principal and interest or interest
on Late Payment Premiums), after payment of the Rated Amortization Amount, after
payment of certain fees, expenses and indemnities of the Owner Trust, the
Indenture Trustee, the Pass Through Trustee and the Owner Participant, after
payment of the Scheduled Amortization Amount after giving effect to the payment
of the Rated Amortization Amount, after payment of the equity portion of all
scheduled payments of Basic Rent then due, after any required deposit to the
Liquidity Reserve Account, the Special Reserve Account and the Stipulated Loss
Value Deficiency Account on such Regular Distribution Date and after payment of
any interest on any past due principal and interest. In addition, funds in the
Liquidity Reserve Account, the Special Reserve Account and the Stipulated Loss
Value Deficiency Account are not available for payment of Late Payment Premiums
or interest on Late Payment Premiums to the Pass Through Trustee, as holder of
the Equipment Notes. Accordingly, payments of Late Payment Premiums and interest
on Late Payment Premiums are effectively subordinated to payments of the
foregoing amounts, and the ratings of the Certificates are not based on the
payment of Late Payment Premiums or interest on Late Payment Premiums on the
Equipment Notes.
PREPAYMENTS
If the Company elects to pay the Stipulated Loss Value following an Event
of Loss with respect to an Equipment Unit, or fails to replace such Equipment
Unit within a 120-day period following knowledge by the Manager of such Event of
Loss, a portion of the Equipment Notes issued with respect to such Equipment
Unit is required to be prepaid on the Regular Distribution Date next succeeding
the date 25 days after the Company gives notice of its election to pay the
Stipulated Loss Value of such Equipment Unit or the expiration of such 120-day
period at a price equal to the sum of (i) as to principal, an amount equal to
the product obtained by multiplying the unpaid principal amount of the Equipment
Notes issued with respect to such Equipment Unit (after deducting therefrom the
principal installment, if any, paid on such date) by a fraction, the numerator
of which shall be the Equipment Cost of such Equipment Unit and the denominator
of which shall be the aggregate Equipment Cost of all Equipment Units in such
Equipment Group immediately prior to such prepayment date, (ii) as to interest,
the aggregate amount of interest accrued and unpaid in respect of the principal
amount to be prepaid pursuant to clause (i) above to but not including such
prepayment date after giving effect to the application of any Basic Rent paid on
such prepayment date and (iii) any unpaid Late Payment Premium (and accrued and
unpaid interest thereon) in respect of the principal amount to be prepaid
pursuant to clause (i), but without the payment of any Make-Whole Amount or
other premium. See "The Leases--Events of Loss." (Lease, Sections 11.1 and
11.2; Indenture, Section 2.10(b))
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In the event of a termination by the Company, pursuant to its Obsolescence
Termination Option, of the Lease with respect to any Equipment Unit or the
purchase by the Company, pursuant to its Early Purchase Option, of some or all
of the Equipment Units (and the election by the Company not to assume the
Equipment Notes as described under "The Leases--Early Purchase Option), the
applicable Owner Trustee is required to prepay all or a portion, as applicable,
of the Equipment Notes issued with respect to the Equipment Group in which such
Equipment Unit was included. In the case of an exercise of the Obsolescence
Termination Option or an Early Purchase Option, such prepayment will be made on
a Regular Distribution Date upon at least 25 days' prior notice from the
applicable Owner Trustee to the applicable Indenture Trustee. In the case of an
exercise of either the Obsolescence Termination Option or an Early Purchase
Option, the prepayment price shall be equal to the unpaid principal amount
thereof (computed as provided in the preceding paragraph) together with accrued
and unpaid interest thereon to the date of prepayment and any unpaid Late
Payment Premium (and accrued and unpaid interest thereon) plus the applicable
Make-Whole Amount, if any. If the Company exercises its Obsolescence
Termination Option it will be required, pursuant to the applicable Lease, to
either sell such Equipment Unit as agent for the applicable Owner Trust and to
pay the proceeds of such sale to the applicable Indenture Trustee on behalf of
such Owner Trust, or elect not to sell the Terminated Units but retain such
Units as provided in such Lease and pay, or cause to be paid, to the applicable
Indenture Trustee an amount equal to the outstanding principal amount of the
Equipment Notes issued in respect of such Terminated Units and all accrued and
unpaid interest thereon to the date of prepayment of such Equipment Notes and an
amount equal to the Make-Whole Amount, if any, and any unpaid Late Payment
Premium in respect of the principal amount of the Equipment Notes to be prepaid,
without in any manner relieving the Company of its obligation to pay any unpaid
rent under such Lease. To the extent such proceeds are insufficient to prepay
the required portion of the Equipment Notes, the Company will also be required,
as a condition to exercise its Obsolescence Termination Option, to pay to the
applicable Indenture Trustee the amount of such insufficiency. No later than
the Business Day immediately preceding the 60th day prior to the proposed date
of termination, the Company shall provide the applicable Owner Trustee with
assurances reasonably satisfactory to the related Owner Participant of the
Company's ability to pay the Termination Value for the Terminated Units and
other amounts payable by the Company on such date of termination as provided in
the relevant Lease, and if such assurances have not been given by such date, the
termination notice previously given by the Company shall be deemed to have been
withdrawn on such date. See "The Leases--Termination" and "--Early Purchase
Option." (Lease, Sections 10.1, 10.2, 10.3 and 22.1; Indenture, Sections
2.10(a) and 2.10(c))
In the event (i) the Company elects to exercise its right to terminate any
Lease and purchase the related Equipment Group as a result of the related Owner
Participant or any affiliate thereof becoming or acquiring, or being acquired
by, merged or otherwise consolidated with any company or affiliate thereof
engaged in full service railcar leasing, whether or not a direct competitor to
the Company, the Manager or any affiliate of the Company or the Manager or any
Person that has a material interest (whether held directly or indirectly) in an
enterprise that engages in a business that is competitive with the Company's or
the Manager's full service railcar leasing business, and (ii) the Company
elects, in connection with such exercise of its right to purchase such Equipment
Group, not to assume all of the applicable Owner Trustee's obligations in
respect of the related Equipment Notes, all of the related Equipment Notes
issued by the applicable Owner Trustee will be prepaid on a Special Distribution
Date. In the event of a refinancing of the Equipment Notes issued with respect
to any Equipment Group, all of the related Equipment Notes issued by the
applicable Owner Trustee will be prepaid on the date of such refinancing, which
may be any Business Day. In either such case, the applicable Indenture Trustee
shall receive at least 25 days' prior notice from the applicable Owner Trustee
and the prepayment price shall be equal to the unpaid principal amount thereof,
together with accrued interest thereon to the date of prepayment, any unpaid
Late Payment Premium (and accrued and unpaid interest thereon), plus Make-Whole
Amount, if any. See "Description of the Equipment Notes--The Participation
Agreements." (Indenture, Section 2.10(c) and (d))
The Equipment Notes issued with respect to any Equipment Group are also
subject to purchase in whole by the applicable Owner Trustee, upon 30 days'
irrevocable notice on a Special Distribution Date, in the case of (i) one or
more Lease Events of Default having occurred and are continuing under the
related Lease, (ii) any acceleration of such Equipment Notes, or (iii) the
applicable Indenture Trustee, as assignee of the related Lease, having declared
such Lease to be in default and having commenced the exercise of any significant
remedy in respect of the Equipment Units under such Lease. Such prepayment
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. If, however, an Owner Trustee exercises its rights
pursuant to clause (i) above within 180 days of such Lease Event of Default and
none of the events described in clauses (ii) and (iii) thereof has occurred,
then such prepayment would be at a price equal to
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the unpaid principal amount thereof and accrued interest on such Equipment Notes
to the date of payment plus Make-Whole Amount, if any. During such 30-day notice
period, the applicable Indenture Trustee shall not exercise any of the rights,
remedies or powers under the related Lease or the related Indenture so long as
the applicable Owner Trustee (or any nominee of the Owner Trustee reasonably
acceptable to the Indenture Trustee) has notified the Indenture Trustee that
such notice constitutes a binding obligation of the Owner Trustee to purchase
such Equipment Notes. (Indenture, Section 4.4(b))
The Scheduled Amortization Schedule and the Rated Amortization Schedule
will be adjusted in the event of a partial prepayment of the Equipment Notes.
The Make-Whole Amount, if any, payable with respect to the Equipment Notes
will be determined by an independent investment banking institution of national
standing (the "Investment Banker") selected by the Company or, if the applicable
Indenture Trustee does not receive notice of such selection at least ten days
prior to a scheduled prepayment date or if a Lease Event of Default under the
applicable Lease shall have occurred and be continuing, selected by the
applicable Indenture Trustee.
The term "Make-Whole Amount" means, with respect to the principal amount of
any Equipment Note to be prepaid on any prepayment date, an amount to be
determined by the Investment Banker as of the third Business Day prior to the
applicable prepayment date, which amount shall equal the product obtained by
multiplying (a) the excess, if any, of (i) the sum of the present values of all
the remaining scheduled payments of principal and interest based upon Scheduled
Amortization from the prepayment date to the Scheduled Maturity Date of such
Equipment Note, discounted monthly at a rate equal to the Treasury Rate plus
0.15%, based on a 360-day year of twelve 30-day months, over (ii) the aggregate
unpaid principal amount of such Equipment Note, based upon Scheduled
Amortization, plus any accrued but unpaid interest thereon by (b) a fraction,
the numerator of which shall be the aggregate unpaid principal amount of such
Equipment Note to be prepaid on such prepayment date and the denominator of
which shall be the aggregate unpaid principal amount of such Equipment Note;
provided, that the aggregate unpaid principal amount of such Equipment Note for
the purpose of clause (a) (ii) and (b) above shall be determined after deducting
the principal installment, if any, due on such prepayment date.
The term "Treasury Rate" means, with respect to each Equipment Note to be
prepaid, a per annum rate (expressed as a monthly equivalent and as a decimal
and, in the case of United States Treasury bills, converted to a bond equivalent
yield), determined to be the per annum rate equal to the monthly yield to
maturity for United States Treasury securities maturing on the Average Life Date
(as defined below) 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 of 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.
The term "Average Life Date" of each Equipment Note shall be the date which
follows, in the case of an Equipment Note being prepaid, 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. The "Remaining Weighted Average Life" of such Equipment Note,
at the prepayment or determination date of such Equipment Note, shall be 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 in accordance with the Scheduled Amortization
Schedule by (ii) the number of days from and including the prepayment or
determination date to but excluding the scheduled payment date of such principal
payment, by (b) the unpaid principal amount of such Equipment Note.
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ASSUMPTION OF EQUIPMENT NOTES UNDER CERTAIN CIRCUMSTANCES
In the event that the Company elects to purchase the applicable Equipment
Units of an Equipment Group prior to the maturity of the related Equipment
Notes, either pursuant to an Early Purchase Option or as a result of a related
Owner Participant or any affiliate thereof engaging in a business in competition
with the Company's or the Manager's full service railcar leasing business as
described under "The Participation Agreements," the Company shall have the right
to assume the related Equipment Notes. Such assumption shall be subject to
certain terms and conditions, including, among other things, (i) delivery by the
Company of an indenture supplement giving effect to such assumption reasonably
satisfactory to the related Indenture Trustee and execution and delivery by the
Company of Equipment Notes reflecting such assumption, (ii) delivery by the
Company to the related Indenture Trustee and the related Owner Trustee of a
certificate stating that the Company has paid to such Owner Trustee all amounts
required to be paid to such Owner Trustee pursuant to the applicable Lease in
connection with such purchase and assumption, (iii) no Indenture Event of
Default or event which with notice or passage of time or both would become an
Indenture Event of Default having occurred and be continuing immediately
subsequent to such assumption, and (iv) receipt by the related Indenture Trustee
and the related Owner Trustee of an opinion of counsel to the Company to the
effect that, after giving effect to the indenture supplement, (x) the related
Indenture, the indenture supplement and the Equipment Notes issued thereunder
each constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their respective terms
(subject to customary exceptions), (y) all filings and recordings and other
action necessary or appropriate to protect the interests of the related
Indenture Trustee in the Equipment Units purchased by the Company have been
accomplished, and (z) no holder of Equipment Notes will be required to recognize
gain or loss for tax purposes in connection with such assumption. Following
such assumption, the Equipment Units so purchased by the Company shall remain
subject to the lien of the Indenture securing the related Equipment Notes but
the related Owner Trustee shall be released from all obligations under such
Equipment Notes and under the related Indenture in respect of such Equipment
Notes. (Indenture, Section 3.6; Lease, Section 22.1; and Participation
Agreement, Section 6.9)
PAYMENT ACCOUNT; DISTRIBUTIONS OF AMOUNTS RECEIVED BY THE INDENTURE TRUSTEE
Amounts distributed to the Indenture Trustee in respect of each Owner Trust
will be deposited into a Payment Account maintained by the Indenture Trustee
pursuant to the related Indenture. On each Regular Distribution Date the
Indenture Trustee shall apply the amounts on deposit in the applicable Payment
Account in the following order of priority:
(i) First, to the payment of interest accrued and unpaid on the
Equipment Notes issued by the related Owner Trust as of such date (but not
including interest on past due principal and interest, or interest on Make-
Whole Amounts or Late Payment Premiums);
(ii) Second, in accordance with the Rated Amortization Schedule, to
the payment of principal on the Equipment Notes issued by the related Owner
Trust;
(iii) Third, in accordance with the Scheduled Amortization Schedule,
to the payment of principal on the Equipment Notes issued by the related
Owner Trust, after giving effect to and without duplication of principal
paid pursuant to clause (ii) above;
(iv) Fourth, to the related Owner Trustee, the excess of the amount
of Basic Rent payable under the applicable Lease on or prior to such
Regular Distribution Date over the amount required to be paid pursuant to
clause (iii);
(v) Fifth, an amount equal to any interest on any past due
principal and interest on the Equipment Notes (but not including interest
on Make-Whole Amounts or Late Payment Premiums);
(vi) Sixth, an amount equal to any interest on any Late Payment
Premium then due and owing on the Equipment Notes;
(vii) Seventh, to the payment of any Late Payment Premiums, if any,
due on the Equipment Notes; and
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(viii) Eighth, to the related Owner Trustee, the balance of such
Payment Account for distribution in accordance with the related Trust
Agreement.
SECURITY
The Equipment Notes issued with respect to each Equipment Group will be
equally and ratably secured by (i) a collateral assignment by the related Owner
Trustee to the related Indenture Trustee of such Owner Trustee's rights (except
for certain rights described below) under the Lease with respect to such
Equipment Group, including the right to receive certain payments of rent
thereunder, (ii) a perfected first priority security interest of the related
Indenture Trustee in the related Equipment Group, a collateral assignment to the
Indenture Trustee of certain of the Owner Trustee's rights under the
Intercreditor Agreement, including the right to receive payments on the Leases,
pro rata, from the cash flows received by the Collateral Agent from rent payable
by the Sublessees (after payment of certain expenses and indemnities) and
certain reserve funds maintained by the Collateral Agent as described under "The
Intercreditor Agreement--The Accounts." The assignment by such Owner Trustee to
the related Indenture Trustee of its rights under such Lease excludes certain
rights of such Owner Trustee and the related Owner Participant, including rights
relating to indemnification by the Company for certain matters, insurance
proceeds payable to such Owner Trustee in its individual capacity and to such
Owner Participant under liability insurance maintained by the Company under such
Lease or by such Owner Trustee or such Owner Participant, insurance proceeds
payable to such Owner Trustee in its individual capacity or to such Owner
Participant under certain casualty insurance maintained by such Owner Trustee or
such Owner Participant under such Lease and certain reimbursement payments made
by the Company to such Owner Trustee. (Indenture, Granting Clause)
The Company will be required to file each Indenture, Indenture Supplement,
Lease, and Lease Supplement with respect to each Equipment Group with the United
States Surface Transportation Board and will be further required to deposit such
documents with the Registrar General of Canada under the Railway Act of Canada
and to publish notice of such deposit in accordance with such Act. The filing
with the Surface Transportation Board will give the Indenture Trustee a
perfected security interest in each Equipment Unit in such Equipment Group
whenever it is located in the United States and in the related Lease. Such
deposit and publication in Canada will be done in order to protect the lien of
the Indenture Trustee in and to the Lease and the Equipment Units created by the
Indenture in Canada or any province or territory thereof, to the extent provided
for in the Railway Act of Canada.
Each Equipment Unit may be operated by the Company or, subject to certain
limitations, under sublease or interchange arrangements in the United States,
Canada or Mexico. The extent to which the Indenture Trustee's security interest
would be recognized in an Equipment Unit located in countries other than the
United States is uncertain.
Funds, if any, held from time to time by the Indenture Trustee with respect
to any Equipment Units, including funds held as the result of the loss or
destruction of such Equipment Units or termination of the Lease relating
thereto, will be invested and reinvested by such Indenture Trustee, at the
direction and at the risk and expense of the Company, in Specified Investments.
The Manager will be obligated, pursuant to the terms of the Management
Agreement to maintain, repair and keep each Equipment Unit in accordance with
prudent industry maintenance practices and in compliance in all material
respects with all laws and regulations.
LIMITATION OF LIABILITY
Except in certain limited circumstances involving the Company's purchase of
Equipment and the assumption of the Equipment Notes related thereto, the
Equipment Notes will not be direct obligations of, or guaranteed by, the Company
or the Owner Trustees (in their individual capacities). None of the Collateral
Agent, the Owner Trustees (in their individual capacities), the Owner
Participants or the Indenture Trustees, or any affiliates thereof, shall be
personally liable to any holder of an Equipment Note or, in the case of the
Collateral Agent, the Owner Trustees (in their individual capacities) and the
Owner Participants, to the Indenture Trustees for any amounts payable under the
Equipment Notes or, except as provided in each Indenture, for any liability
under such Indenture. Except in the circumstances described above, all payments
of principal of, Make-Whole Amount, if any, Late Payment Premium and interest on
Equipment Notes issued with respect to any Equipment Group (other than payments
made in connection with an optional
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prepayment or purchase by the related Owner Trustee) will be made only from the
assets subject to the lien of the Indenture with respect to such Equipment Group
or the income and proceeds received by the related Indenture Trustee therefrom
(including rent payable by the Company under the Lease with respect to such
Equipment Group).
Except as otherwise provided in the Indentures, each Owner Trustee in its
individual capacity shall not be answerable or accountable under the Indentures
or under the Equipment Notes issued thereunder under any circumstances except
for its own wilful misconduct or gross negligence. None of the Owner
Participants will have any duty or responsibility under any of the Indentures or
the Equipment Notes to the Indenture Trustees or to any holder of any Equipment
Note.
INDENTURE EVENTS OF DEFAULT, NOTICE AND WAIVER
Indenture Events of Default under each Indenture include: (a) a Lease
Event of Default under the related Lease; provided that a Lease Event of Default
resulting solely from the Company's failure to pay Supplemental Rent under the
applicable Lease will only be an Indenture Event of Default if the Indenture
Trustee, upon the direction of 100% of the holders of the Equipment Notes then
outstanding, declares such Lease Event of Default to be an Indenture Event of
Default, (b) default by the related Owner Trustee (not resulting from a default
by the Company under the Lease) in making payments when due of the Rated
Amortization Amount, Make-Whole Amount, if any, or interest (other than interest
on overdue principal and interest) on any Equipment Note and continuance of such
default for three Business Days, (c) failure by the related Owner Trustee or the
related Owner Participant to perform any covenant contained in the Indenture,
the Equipment Notes issued thereunder or in the related Participation Agreement
continued for a period of 30 days after written notice by the related Indenture
Trustee or any holder of an Equipment Note issued under the Indenture, 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 an additional period
of 30 days after the expiration of the aforesaid 30-day period so long as such
Owner Trustee or Owner Participant, as the case may be, is diligently proceeding
to remedy such failure and shall in fact remedy such failure within such period,
(d) any representation or warranty made by the related Owner Trustee in the
Indenture or made by such Owner Trustee or the related Owner Participant in the
related Participation Agreement or in any document or certificate furnished to
the related 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 related Owner Trustee and related Owner
Participant, or, if such incorrectness is capable of being remedied, for an
additional period of 15 days after the expiration of the aforesaid 30-day period
so long as such Owner Trustee or Owner Participant, as the case may be, is
diligently proceeding to remedy such incorrectness and shall in fact remedy such
incorrectness, including any adverse effects thereof, within such period, and
(e) the occurrence of certain events of bankruptcy, reorganization or insolvency
of the related Owner Participant or the related Owner Trustee as Owner Trustee
(and not in its individual capacity). There are no cross-default provisions in
the Indentures and events resulting in an Indenture Event of Default under any
particular Indenture (or a default under any other indebtedness of the Company)
will not necessarily result in an Indenture Event of Default under any other
Indenture. (Indenture, Section 4.1)
In the event that (i) at any time one or more Lease Events of Default under
the related Lease shall occur and be continuing, (ii) such Equipment Notes shall
have been accelerated or (iii) the related Indenture Trustee, as assignee of the
related Lease, shall have declared such Lease to be in default and shall have
commenced the exercise of any significant remedy in respect of the Equipment
Units under such Lease, upon 30 days' irrevocable notice the related Owner
Trustee may elect to purchase all, but not less than all, of the Equipment Notes
then outstanding under such Indenture from the holders thereof by paying to each
such holder an amount equal to the aggregate unpaid principal amount of all such
Equipment Notes then held by such holder, together with accrued and unpaid
interest thereon to the date of payment, but without the payment of any Make-
Whole Amount. If, however, an Owner Trustee exercises its rights pursuant to
clause (i) above within 180 days of such Lease Event of Default and none of the
events described in clauses (ii) and (iii) thereof has occurred, then such
prepayment would be at a price equal to the unpaid principal amount thereof and
accrued interest on such Equipment Notes to the date of payment plus Make-Whole
Amount, if any. During such 30-day notice period, the applicable Indenture
Trustee shall not exercise any of the rights, remedies or powers under the
related Lease or the related Indenture so long as the applicable Owner
Participant (or any nominee of the Owner Participant reasonably acceptable to
the Indenture Trustee) has notified the Indenture Trustee that such notice
constitutes a binding obligation of the Owner Trustee to purchase such Equipment
Notes. (Indenture, Section 4.4(b))
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In the event the Company fails to make Basic Rent payments sufficient for
the Indenture Trustee to make principal payments on the Equipment Notes in
accordance with the Rated Amortization Schedule within ten Business Days after
the date the same shall become due under a Lease, then and as long as no other
Indenture Event of Default under the related Indenture (which is not being
concurrently cured) shall have occurred and be continuing, the applicable Owner
Participant or the applicable Owner Trustee may, during the ten Business Days
after receiving written notice of the Indenture Event of Default resulting from
such failure from the applicable Indenture Trustee, pay to the applicable
Indenture Trustee the Rated Amortization Amount due and payable together with
any interest thereon on account of the delayed payment thereof, in which event
such payment by such Owner Participant or such 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 applicable Owner Participant and the applicable Owner
Trustee, collectively, shall not be entitled to cure more than eighteen
consecutive or thirty-six total failures to make such monthly Basic Rent
payments. In the event there shall occur a Lease Event of Default under a Lease
in respect of any payment of rent other than Basic Rent, or which is curable by
the payment of money and such Lease Event of Default constitutes an Indenture
Event of Default, then and as long as no other Indenture Event of Default under
the related Indenture (which is not being concurrently cured) shall have
occurred and be continuing, the applicable Owner Participant or the applicable
Owner Trustee may, during the period of 30 days after receiving written notice
of such Indenture Event of Default from the applicable Indenture Trustee, pay to
such 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 such
Owner Participant or such 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 applicable Owner Participant and the applicable Owner Trustee,
collectively, shall not be entitled to cure such other Lease Events of Default
if the amount of such payments which have not been reimbursed by the Company
shall exceed $10,000,000, which amount shall be adjusted annually for inflation.
With respect to any amounts advanced by and owing to the applicable Owner
Trustee and the applicable Owner Participant, such Owner Trustee and such Owner
Participant shall be expressly subordinated to the rights of the holders of the
Equipment Notes to receive any and all amounts of principal and interest in
accordance with the Scheduled Amortization Schedule then due and owing on the
Equipment Notes prior to any payment from the Company to such Owner Participant
or such Owner Trustee. (Indenture, Section 4.4(a))
Each Indenture provides that in the event the applicable Indenture Trustee
shall have knowledge of an Indenture Default or Indenture Event of Default
thereunder, such Indenture Trustee shall give notice thereof to the holders of
the Equipment Notes issued thereunder, the Company, the applicable Owner Trustee
and the applicable Owner Participant. (Indenture, Section 5.1)
The holders of a majority in aggregate principal amount of the outstanding
Equipment Notes issued under an Indenture by notice to the related Indenture
Trustee may on behalf of all holders thereof waive any past default under such
Indenture except a default in the payment of the Rated Amortization Amount,
Make-Whole Amount or Late Payment Premium, if any, or interest on any Equipment
Note issued thereunder or a default in respect of any covenant or provision of
such Indenture that cannot be modified or amended without the consent of each
holder of an Equipment Note affected thereby. (Indenture, Section 4.6)
REMEDIES
If an Indenture Event of Default shall occur and be continuing under an
Indenture, the Indenture Trustee thereunder may, and when instructed by the
holders of a majority in aggregate principal amount of the Equipment Notes
outstanding under such Indenture shall, declare the unpaid principal of all such
Equipment Notes issued thereunder to be due and payable, together with all Late
Payment Premium and accrued interest thereon. The holders of a majority in
aggregate principal amount of Equipment Notes outstanding under such Indenture
may rescind and annul any such declaration by the related Indenture Trustee at
any time prior to the sale of the related Equipment Group after such an
Indenture Event of Default if (i) there has been paid to or deposited with such
Indenture Trustee an amount sufficient to pay all overdue installments of
interest and Late Payment Premium (and accrued interest thereon) on the
Equipment Notes and the principal of any Equipment Notes outstanding under such
Indenture 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 and Indenture Events of Default under
such Indenture, other than nonpayment of principal, Late
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Payment Premium or interest on the Equipment Notes outstanding under such
Indenture that have become due solely because of such acceleration, have been
cured or waived. (Indenture, Section 4.2)
Each Indenture provides that, if an Indenture Event of Default thereunder
has occurred and is continuing, the Indenture Trustee thereunder may, subject to
the Intercreditor Agreement, exercise certain rights or remedies available to it
under applicable law, including (if the related Lease has been declared in
default) one or more of the remedies under such Indenture or such Lease with
respect to the Equipment Group subject to such Lease. An Indenture Trustee's
right to exercise remedies under an Indenture is subject to the Intercreditor
Agreement and in certain circumstances to its having proceeded to terminate such
Lease and repossess the related Equipment Group, unless at the time such
Indenture Trustee is stayed or otherwise prevented from doing so by operation of
law, in which case such Indenture Trustee has agreed to refrain from exercising
remedies under such Indenture for a period of 90 days. Further, an Indenture
Trustee may not exercise remedies under an Indenture in those circumstances in
which the Company, as the debtor in a bankruptcy proceeding, shall have assumed
such Lease with the approval of the bankruptcy court having jurisdiction over
such case, under Section 365 of Title 11 of the United States Code (the
"Bankruptcy Code") or any amended or successor version thereof, and no Lease
Event of Default (other than a Lease Event of Default arising from the
bankruptcy of the Company) has occurred and is continuing under such Lease and
no Indenture Event of Default unrelated to a Lease Event of Default occurring
solely as a result of the bankruptcy of the Company shall have occurred and be
continuing under such Indenture. See "The Leases--Lease Events of Default."
Such remedies may be exercised by an Indenture Trustee to the exclusion of a
related Owner Trustee and, subject to the terms of the related 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
such Lease with respect to such Equipment; provided that no exercise of any
remedies by such Indenture Trustee may conflict with the terms of the
Intercreditor Agreement, or affect the rights of the Company under such Lease
unless a Lease Event of Default under such Lease has occurred and is continuing.
(Indenture, Sections 4.3(a) and (c), 4.4(c) and 4.5; Lease, Section 15)
In the event of the bankruptcy of an Owner Participant, it is possible
that, notwithstanding that the related Equipment Group is owned by an Owner
Trustee in trust, such Equipment Group and the Lease and the Equipment Notes
related thereto might become part of, or otherwise be affected by, the
bankruptcy proceeding. In such event, payments on such Equipment Notes might be
interrupted and the ability of the Indenture Trustee to exercise its remedies
under the applicable Indenture might be restricted, although the Indenture
Trustee would retain its status as a secured creditor in respect of such Lease
and the related Equipment Group. In addition, in the event of an Owner
Participant bankruptcy, the bankruptcy estate might seek court approval to
reject the related Lease under Section 365 of the Bankruptcy Code. Such a Lease
rejection, if successful, would leave the Indenture Trustee as a secured
creditor in respect of the related Equipment Group with a claim for damages
against the bankruptcy estate.
The holders of a majority of the aggregate principal amount of the
Equipment Notes outstanding under an Indenture may instruct the Indenture
Trustee thereunder to give such notice, direction or consent, or exercise such
right, remedy or power under such Indenture or the related Lease or in respect
of the Indenture Estate or take such other action as shall be specified in such
instructions, but in such event such Indenture Trustee shall not be required to
take or refrain from taking any action in connection therewith if it shall have
reasonable grounds for believing that adequate indemnity against such risk is
not reasonably assured to it. (Indenture, Sections 5.2 and 5.3)
If an Indenture Event of Default occurs and is continuing under an
Indenture and the Indenture Trustee thereunder (as security assignee) has
declared the related Lease to be in default or the Equipment Notes outstanding
under such Indenture have been accelerated or such Indenture Trustee has
exercised any remedies under such Indenture, any sums held or received by such
Indenture Trustee may be applied to reimburse such Indenture Trustee for any
tax, expense or other loss incurred by it and to pay any other amounts then due
such Indenture Trustee prior to any payments to holders of the Equipment Notes
issued under such Indenture. (Indenture, Section 3.3)
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority of the aggregate principal
amount of the Equipment Notes outstanding under an Indenture, the provisions of
such Indenture and the related Lease and the related Participation Agreement may
not be amended or modified, except to the extent indicated below.
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Certain provisions of each Lease and each Participation Agreement may be
amended or modified by the parties thereto without the consent of any holders of
the Equipment Notes outstanding under such Indenture so long as no Indenture
Event of Default thereunder shall have occurred and be continuing. In the case
of each Lease, such provisions include, among others, provisions relating to (i)
the return to the related Owner Trustee of such Equipment Group at the end of
the term of such Lease and (ii) the renewal of such Lease and the option of the
Company at the end of the term of such Lease to purchase such Equipment Group.
(Indenture, Section 9.5)
Without the consent of the holder of each Equipment Note outstanding under
an Indenture, no amendment or modification of such Indenture may (a) change the
final maturity of, or reduce the principal amount of, or Late Payment Premium or
Make-Whole Amount, if any, or interest payable on any Equipment Notes issued
under such Indenture or impair the right to institute suit for the enforcement
of any such payment or change the date on which any principal, Late Payment
Premium or Make-Whole Amount, if any, or interest is due and payable, (b) create
any lien with respect to the property subject to the Lien of such Indenture
ranking prior to or on a parity with the security interest created by such
Indenture, except as permitted in such Indenture, or deprive any holder of an
Equipment Note issued under such Indenture of the benefit of the Lien of such
Indenture or (c) reduce the percentage in principal amount of outstanding
Equipment Notes issued under such Indenture necessary to modify or amend any
provision of such Indenture or to waive compliance therewith. (Indenture,
Section 9.1)
FEDERAL INCOME TAX CONSIDERATIONS
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal tax
consequences resulting from the ownership and disposition of Pass Through
Certificates, subject to the limitations stated herein. This summary does not
purport to consider all the possible tax consequences of the purchase, ownership
or disposition of the Pass Through Certificates, and it is not intended to
reflect the individual tax position of any Certificateholder. It deals only
with Pass Through Certificates held as capital assets. Except as expressly
indicated, it is addressed only to Certificateholders purchasing Pass Through
Certificates at their issue price and does not deal with Certificateholders with
a special tax status or special tax situations, such as dealers in securities or
currencies, Pass Through Certificates held as a hedge against currency risks or
as part of a straddle with other investments or as part of a "synthetic
security" or other integrated investment (including a "conversion transaction")
consisting of a Pass Through Certificate and one or more other investments, or
situations in which the functional currency of the Certificateholder is not the
U.S. dollar. Except to the extent discussed below under "--Taxation of Non-
United States Certificateholders," this discussion may not be applicable to non-
United States persons not subject to United States federal income tax on a net
income basis. It is based upon the United States federal tax laws and
regulations as now in effect and as currently interpreted, and does not take
into account possible changes in such tax laws or such interpretations, all of
which may be applied retroactively. It does not include any description of the
tax laws of any state or local governments within the United States, or of any
foreign government, that may be applicable to the Pass Through Certificates or
Certificateholders thereof. Certificateholders should consult their own tax
advisors concerning the application of the United States federal tax laws to
their particular situations as well as any consequences arising under the laws
of any other taxing jurisdiction.
For purposes of the discussion below, (i) "United States person" means a
citizen or resident of the United States, a corporation, partnership or certain
other entities created or organized in or under the laws of the United States,
or any political subdivision thereof, or an estate or trust the income of which
is includible in gross income for United States federal income tax purposes
regardless of its source and (ii) "non-United States person" means a person
other than a United States person.
TAX STATUS OF THE TRUST
Vedder, Price, Kaufman & Kammholz, counsel to the Company, has provided its
opinion that the Pass Through Trust will be classified for United States federal
income tax purposes as a grantor trust and not as an association (or publicly
traded partnership) taxable as a corporation. Accordingly, each
Certificateholder will be treated as if it owned directly the portion of the
class of Equipment Notes allocable to such Pass Through Certificate.
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TAXATION OF UNITED STATES CERTIFICATEHOLDERS
Each Certificateholder that is a United States person will be required to
include in income, in accordance with its usual method of accounting, the
portion of the stated interest with respect to the Equipment Notes that is
allocable to the Pass Through Certificates held by such Certificateholder.
Failure of an Owner Trust to make payments on the Equipment Notes in accordance
with the Scheduled Amortization Schedule will result in the payment of Late
Payment Premiums, increasing the effective interest rate in the Equipment Notes
(See "Description of the Equipment Notes--Principal and Interest Payments--Late
Payment Premium"). Under the original issue discount ("OID") regulations, the
possibility of such an increase will not cause the Equipment Notes to be
considered to be issued with OID provided that, based on all the facts and
circumstances as of the issue date, it is significantly more likely than not
that an Owner Trust will make payments on the Equipment Notes in accordance with
the Scheduled Amortization Schedule. In this regard, GATC has concluded that it
is significantly more likely than not that payments on the Equipment Notes will
be made in accordance with the Scheduled Amortization Schedule. If, however, an
Owner Trust fails to make payments on the Equipment Notes in accordance with the
Scheduled Amortization Schedule, then, for purposes only of the OID rules, the
Equipment Notes would be treated as having been retired and reissued, possibly
with OID.
Each Certificateholder that is a United States person will be entitled to
deduct, consistent with its method of accounting, its pro rata share of fees and
expenses paid or incurred by the Pass Through Trust as provided in Section 162
or 212 of the Internal Revenue Code of 1986, as amended (the "Code"). Certain
fees and expenses, including fees paid to the Trustee, will be borne by parties
other than the Certificateholders. It is possible that such fees and expenses
will be treated as constructively received by the Pass Through Trust, in which
event a Certificateholder that is a United States person will be required to
include in income and will be entitled to deduct its pro rata share of such fees
and expenses. If a Certificateholder that is a United States person is an
individual, estate or trust, the deduction for such Certificateholder's share of
such fees or expenses will be allowed only to the extent that all of such
Certificateholder's miscellaneous itemized deductions, including such
Certificateholder's share of such fees and expenses, exceed 2% of such
Certificateholder's adjusted gross income. In addition, in the case of United
States Certificateholders who are individuals, certain otherwise allowable
itemized deductions will be subject generally to additional limitations on
itemized deductions under applicable provisions of the Code.
A Certificateholder that is a United States person will recognize capital
gain or loss upon the sale or exchange of a Certificate equal to the difference
between the amount realized from such sale or exchange (exclusive of any portion
thereof reflecting accrued but unpaid interest on the underlying Equipment Note)
and its tax basis in the Pass Through Certificate. Amounts attributable to
accrued interest are treated as interest subject to the treatment described
above. A Certificateholder that is a United States person will have a tax basis
in a Pass Through Certificate equal to the Certificateholder's purchase price
for such Pass Through Certificate, decreased by any principal repayments and any
amortization of bond premium. Capital gain or loss recognized on the sale or
exchange of a Pass Through Certificate will be long-term capital gain or loss if
at the time of sale or exchange, the Pass Through Certificate has been held for
more than one year. In the case of individuals, the long-term capital gains tax
rate is generally 20% for capital assets held for more than 18 months and 28%
for capital assets held for more than 12 months and not more than 18 months.
TAXATION OF NON-UNITED STATES CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of
principal and interest on the Equipment Notes to, or on behalf of, any
beneficial owner of a Pass Through Certificate that is a non-United States
person (a "Non-U.S. Certificateholder") will not be subject to United States
federal withholding tax; provided, in the case of interest, that (i) such Non-
U.S. Certificateholder does not actually or constructively own 10% or more of
the total combined voting power of all classes of the stock of any Owner
Participant or any transferee of such Owner Participant's interest in the Owner
Trust, (ii) such Non-U.S. Certificateholder is not a controlled foreign
corporation for U.S. tax purposes that is related to any Owner Participant or
any transferee of such Owner Participant's interest in the Owner Trust and (iii)
either (A) the Non-U.S. Certificateholder certifies, under penalties of perjury,
that it is a non-U.S. person and provides its name and address (and after
December 31, 2000, proof of foreign status and possibly a U.S. taxpayer
identification number) or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") and holds the Pass Through
Certificate
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certifies, under penalties of perjury, that such statement has been received
from the Non-U.S. Certificateholder by it or by another financial institution
and furnishes the payor with a copy thereof.
Any capital gain realized upon the sale, exchange, retirement or other
disposition of a Pass Through Certificate will not be subject to U.S. federal
income or withholding taxes if (i) such gain is not effectively connected with a
United States trade or business of the holder and (ii) in the case of an
individual, such Certificateholder is not present in the United States for 183
days or more in the taxable year of the sale, exchange, retirement or other
disposition or receipt.
Notwithstanding the foregoing, if interest or other income received with
respect to the Pass Through Certificates is effectively connected with a United
States trade or business conducted by a Certificateholder that is a non-United
States person, such Certificateholder, although exempt from the withholding tax
described above, may be subject to United States federal income tax on such
interest in the same manner as if it were a United States person. In addition,
if such Certificateholder is a corporation, it may be subject to a branch
profits tax equal to 30% of its effectively connected earnings and profits for
the taxable year, subject to certain adjustments.
BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the Pass Through Certificates to
Certificateholders who are not "exempt recipients" and who fail to provide
certain identifying information (such as the registered owner's taxpayer
identification number) in the manner required by IRS regulations. Generally,
individuals are not exempt recipients, whereas corporations and certain other
entities generally are exempt recipients. Payments made in respect of the Pass
Through Certificates to a Certificateholder that is a United States person must
be reported to the IRS, unless the Certificateholder is an exempt recipient or
establishes an exemption. Compliance with the identification procedures
described in clause (iii)(A) of the first paragraph of the preceding section
would establish an exemption from backup withholding for those non-U.S.
Certificateholders who are not exempt recipients.
Payment of the proceeds from the sale of a Pass Through Certificate to or
through a foreign office of a broker will not be subject to information
reporting or backup withholding, except to the extent that, if the broker is (i)
a United States person, (ii) a controlled foreign corporation for United States
federal income tax purposes or (iii) a foreign person 50 percent or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment was effectively connected with a
United States trade or business, information reporting may apply to such
payments. Payments of the proceeds from the sale of a Certificate to or through
the United States office of a broker is subject to information reporting and
backup withholding unless the Certificateholder or beneficial owner certifies as
to its taxpayer identification number or otherwise establishes an exemption from
information reporting and backup withholding.
CERTAIN ILLINOIS TAXES
Vedder, Price, Kaufman & Kammholz has provided its opinion that, under
existing Illinois law as of the date hereof (i) the Pass Through Trust will not
be classified as an association taxable as a corporation for purposes of
franchise and income taxation by the State of Illinois or any political
subdivision thereof; (ii) Certificateholders will be treated as the owners of
undivided interests in the assets of the Pass Through Trust for purposes of
franchise and income taxation by the State of Illinois and any political
subdivision thereof; (iii) the Pass Through Trust will not be subject to
taxation or any other governmental fee or charge by the State of Illinois or any
political subdivision thereof; (iv) neither the Equipment Notes nor the Pass
Through Certificates will be subject to ad valorem taxation or any other tax on
intangible property by the State of Illinois or any political subdivision
thereof; (v) neither the delivery of the Equipment Notes to the Pass Through
Trust nor the acquisition, ownership or disposition of the interest of any
Certificateholder in any Pass Through Certificate will be subject to any sales,
use or transfer taxes imposed by the State of Illinois or any political
subdivision thereof; and (vi) a Certificateholder will not be subject to
taxation or any governmental fee or charge by the State of Illinois or any
political subdivision thereof, if a Certificateholder (a) is not a resident of
the State of Illinois, or otherwise subject to any tax, governmental charge or
fee imposed by the State of Illinois or any political subdivision thereof, (b)
does not otherwise have part of its receipt or income includible (either
directly or indirectly) in a tax return filed by a Certificateholder (or an
affiliate of the Certificateholder) in the State of Illinois, and (c) would not
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be subject to taxation or any governmental fee or charge by the State of
Illinois if, instead of owning said Pass Through Certificates, the
Certificateholder owned its share of the assets of the Pass Through Trust
directly.
Neither the Pass Through Trust nor the Certificateholders will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on the Pass Through Trust could result in a reduction in the
amounts available for the distribution to the Certificateholders of the Pass
Through Trust. In general, should a Certificateholder of the Pass Through Trust
be subject to any state or local tax which would not be imposed if the Pass
Through Trustee were located in a different jurisdiction in the United States,
the Pass Through Trustee will resign and a successor Pass Through Trustee in
such other jurisdiction will be appointed.
ERISA CONSIDERATIONS
IN GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA ("ERISA
Plans") and on those persons who are fiduciaries with respect to ERISA Plans.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including, but not limited to, the requirements of investment
prudence and diversification and the requirement that an ERISA Plan's
investments be made in accordance with the documents governing the Plan.
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit
certain transactions involving the assets of an ERISA Plan (as well as those
plans that are not subject to ERISA but which are subject to Section 4975 of the
Code, such as individual retirement accounts (together with ERISA Plans,
"Plans")) and certain persons (referred to as "parties in interest" or
"disqualified persons") having certain relationships to such Plans, unless a
statutory or administrative exemption is applicable to the transaction. A
nonexempt prohibited transaction may have to be rescinded, and the party in
interest or disqualified person that engages in the nonexempt prohibited
transaction may be subject to excise taxes and other penalties under ERISA and
the Code.
An investment in Pass Through Certificates by a Plan might also result in
the assets of the corresponding Pass Through Trust being deemed to constitute
Plan assets, which in turn might mean that certain aspects of such investment,
or actions involving the assets of the Pass Through Trust, might be or become
prohibited transactions under ERISA and/or the Code, and the Plan fiduciary
might have engaged in an improper delegation of its investment management
responsibilities. Under Section 2510.3-101 of the United States Department of
Labor ("DOL") regulations (the "DOL Regulation"), a Plan's assets may include an
interest in the underlying assets of an entity (such as a trust) for certain
purposes, including the fiduciary responsibility provisions of ERISA and the
prohibited transaction provisions of ERISA and the Code, if the Plan acquires an
"equity interest" in such entity. Thus, if a Plan acquired a Pass Through
Certificate, for purposes of such fiduciary responsibility and prohibited
transaction provisions the Plan would be considered to own its share of the
underlying assets of the Pass Through Trust unless equity participation by
"benefit plan investors" in the Pass Through Certificates is not "significant".
Ownership of the Pass Through Certificates by benefit plan investors, which
are defined in the DOL Regulation as Plans, employee benefit plans not subject
to ERISA (for example, governmental plans and foreign plans) and other entities
deemed to hold Plan assets, would not be "significant" if at all times less than
25 percent of the value of the Pass Through Certificates is held by benefit plan
investors. Investment in and transfer of the Pass Through Certificates will not
be restricted or monitored with respect to this 25% limit. Accordingly, it is
possible that during the term of the Equipment Notes more than 25 percent or
more of the Pass Through Certificates will be held by Plans and other benefit
plan investors. Accordingly, under the DOL Regulation, an investment by a Plan
in a Pass Through Certificate during such period could, in effect, be
considered, for purposes of the fiduciary responsibility provisions of ERISA and
the prohibited transaction provisions of ERISA and the Code, to be an investment
in the corresponding Equipment Note and an ongoing loan to the applicable Owner
Trust and such transactions could be subject to the prohibited transaction
provisions of Section 406 of ERISA and Section 4975 of the Code unless a
statutory or administrative exemption is applicable to the transaction.
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Regardless of whether the assets of the Pass Through Trust are deemed to be
Plan assets, the fiduciary of a Plan that proposes to purchase and hold any Pass
Through Certificates should consider, among other things, whether such purchase
and holding may involve (i) the direct or indirect extension of credit to a
party in interest or a disqualified person, (ii) the sale or exchange or lease
of any property between a Plan and a party in interest or a disqualified person,
(iii) the transfer to, or use by or for the benefit of, a party in interest or a
disqualified person, of any Plan assets. Such parties in interest or
disqualified persons could include, without limitation, the Company, GATC and
its affiliates, the Initial Purchaser, the Pass Through Trustee and the
Indenture Trustee.
Any such prohibited transaction could be treated as exempt under ERISA and
the Code if the Pass Through Certificates were acquired pursuant to and in
accordance with one or more "class exemptions" issued by the DOL, such as
Prohibited Transaction Class Exemption ("PTCE") 91-38 (relating to investments
by bank collective investment funds), PTCE 84-14 (relating to transactions
determined by a "qualified professional asset manager"), PTCE 95-60 (relating to
investments by an insurance company general account), PTCE 96-23 (relating to
transactions determined by an in-house asset manager) or PTCE 90-1 (relating to
investments by insurance company pooled separate accounts). However, there can
be no assurance that any of these class exemptions or any other exemption will
be available with respect to any particular transaction involving the Pass
Through Certificates.
Governmental plans and certain church plans that are not subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of Section 406 of ERISA and Section 4975 of the Code may nevertheless
be subject to state or other federal laws that are substantially similar to the
foregoing provisions of ERISA and the Code. Fiduciaries of any such plans should
consult with their counsel before purchasing any Pass Through Certificates.
Any Plan fiduciary which proposes to cause a Plan to purchase any Pass
Through Certificates should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA
and Section 4975 of the Code to such an investment, and to confirm that such
purchase and holding will not constitute or result in a nonexempt prohibited
transaction or any other violation of an applicable requirement of ERISA.
UNDERWRITER EXEMPTION
In addition to the class exemptions referred to above, an individual
exemption may apply to the purchase, holding and secondary market sale of Pass
Through Certificates by Plans, provided that certain specified conditions are
met. In particular, the DOL has issued an individual administrative exemption
to Salomon Brothers Inc. in Prohibited Transaction Exemption 89-89 (54 Fed. Reg.
42569 (1989)), as amended (the "Underwriter Exemption"). The Underwriter
Exemption generally exempts from the application of certain, but not all, of the
prohibited transaction provisions of Section 406 of ERISA and Section 4975 of
the Code certain transactions relating to the initial purchase, holding and
subsequent secondary market sale of pass through certificates which represent an
interest in a trust that holds equipment notes secured by leases and certain
other assets, provided that certain conditions set forth in the Underwriter
Exemption are satisfied.
The Underwriter Exemption sets forth a number of general and specific
conditions that must be satisfied for a transaction involving the initial
purchase, holding or secondary market sale of certificates representing a
beneficial ownership interest in a trust to be eligible for exemptive relief
thereunder. In particular, the Underwriter Exemption requires that the
acquisition of certificates by a Plan be on terms that are at least as favorable
to the Plan as they would be in an arms'-length transaction with an unrelated
party; the trust corpus generally must be invested in qualifying receivables,
such as the Equipment Notes; the rights and interests evidenced by the
certificates must not be subordinated to the rights and interests evidenced by
other certificates of the same trust estate; the certificates at the time of
acquisition by the Plan must be rated in one of the three highest generic rating
categories by Moody's, Standard & Poor's, Duff & Phelps Inc. or Fitch Investors
Service, Inc., and the investing Plan must be an accredited investor as defined
in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act.
Even if all of the conditions of the Underwriter Exemption are satisfied
with respect to the Pass Through Certificates, no assurance can be given that
the Underwriter Exemption would apply with respect to all transactions involving
the Pass Through Certificates or the assets of the Pass Through Trust.
Therefore, the fiduciary of a Plan considering the purchase of a Pass Through
Certificate should consider the availability of the exemptive relief provided
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by the Underwriter Exemption, as well as the availability of any other
exemptions with respect to transactions to which the Underwriter Exemption may
not apply.
A plan fiduciary making an investment in the Pass Through Certificates
should consult its tax and/or legal advisors regarding under what circumstances
the assets of the Pass Through Trust would be considered plan assets, the
possibility of exemptive relief from any potential prohibited transaction and
other fiduciary issues and their potential consequences.
EACH HOLDER OF A PASS THROUGH CERTIFICATE WILL BE DEEMED TO REPRESENT OR
HAVE REPRESENTED AT THE TIME OF PURCHASE EITHER THAT IT IS NOT USING PLAN ASSETS
OR THAT ITS PURCHASE AND HOLDING OF THE PASS THROUGH CERTIFICATE WILL NOT OR DID
NOT RESULT IN A NONEXEMPT PROHIBITED TRANSACTION UNDER ERISA OR THE CODE.
The sale of a Pass Through Certificate to a Plan is in no respect a
representation by the Underwriter, the Pass Through Trustee, the Indenture
Trustee, the Company or any of their affiliates that such an investment meets
all of the relevant legal requirements with respect to investments by Plans
generally or by any particular Plan, or that such an investment is appropriate
for Plans generally or any particular Plan.
UNDERWRITING
Under the terms of and subject to the conditions contained in the
underwriting agreement with the Company (the "Underwriting Agreement"), Salomon
Brothers Inc. and Morgan Stanley Dean Witter & Co. (the "Underwriters") have
agreed to purchase from the Pass Through Trustee all of the Pass Through
Certificates offered hereby.
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 its counsel and
certain other conditions. The Underwriters are obligated to take and pay for
all of the Pass Through Certificates 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 price set forth on
the cover page of this Prospectus and may offer a portion of the Pass Through
Certificates to certain dealers at a price that represents a concession not in
excess of % of the principal amount of the Pass Through Certificates. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of ______% of the principal amount of the Pass Through Certificates to certain
other dealers. After the initial public offering, the public offering price and
such concessions may be changed.
The Company has agreed to indemnify the Underwriters and the Underwriters
have agreed to indemnify the Company, against certain liabilities, including
liabilities under the Securities Act.
The Company does not intend to apply for listing of the Pass Through
Certificates on a national securities exchange, but has been advised by the
Underwriters that the Underwriters presently intends 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 the Underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Pass Through Certificates.
During and after the Offering, the Underwriters may purchase and sell the
Pass Through Certificates in the open market. These transactions may include
overallotment and stabilizing transactions and purchases to cover short
positions created in connection with the Offering. The Underwriters also may
impose a penalty bid, whereby selling concessions allowed to broker-dealers in
respect of the Pass Through Certificates sold in the Offering for their account
may be reclaimed by the Underwriters if such Pass Through Certificates are
repurchased by the Underwriters in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Pass Through Certificates which may be higher than the price that might
otherwise prevail in the open market, and, if commenced, may be discontinued at
any time.
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It is expected that the delivery of the Pass Through Certificates will be
made against payment therefor on or about the date specified in the last
paragraph of the cover page of this Prospectus, which will be the fifth business
day following the date of pricing the Pass Through Certificates (such settlement
cycle being herein referred to as "T+5"). Under Rule 15c6-1 of the Exchange Act,
trades in the secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade Pass Through Certificates on the date
of pricing or the next succeeding business day will be required by virtue of the
fact that the Pass Through Certificates initially will settle T+5, to specify an
alternate settlement cycle at the time of any such trade to prevent a failed
settlement. Purchasers of Pass Through Certificates who wish to trade Pass
Through Certificates on the date of pricing or the next succeeding business day
should consult their own advisor.
LEGAL MATTERS
The validity of the Pass Through Certificates offered hereby will be passed
upon for the Company by Vedder, Price, Kaufman & Kammholz, Chicago, Illinois.
Certain legal matters in connection with the Pass Through Certificates offered
hereby will be passed upon for the Underwriters by Milbank, Tweed, Hadley &
McCloy, New York, New York. Both Vedder, Price, Kaufman & Kammholz and Milbank,
Tweed, Hadley & McCloy will rely on the opinion of the law department of The
First National Bank of Chicago as to basic matters relating to the
authorization, execution and delivery of the Pass Through Certificates under the
Basic Agreement and the Trust Supplement.
RATINGS
It is a condition to their issuance that the Pass Through Certificates be
rated at least Aa2 and AA by Moody's and S&P, respectively. The ratings of the
Pass Through Certificates are based primarily on the value of the Equipment, the
lease payments due under the Leases and the availability of amounts on deposit
in the Accounts. The Owner Trusts' ability to pay any Make-Whole Amount on the
Pass Through Certificates has not been rated by the Rating Agencies. The Owner
Trusts' ability to pay Late Payment Premiums has not been rated by the Rating
Agencies. The ratings of the Pass Through Certificates address the likelihood
that any payments of interest which are not timely made will be made with
accrued interest no later than the "Rated Maturity Date." Late Payment
Premiums, if any, will be payable solely out of funds available after providing
for payment of certain expenses and indemnities, all Basic Rent under the Leases
in an amount sufficient to pay accrued and unpaid interest and principal then
due on the Equipment Notes in accordance with the Scheduled Amortization
Schedule and the equity portion of all scheduled payments of Basic Rent due and
payable and after making the contributions required to be made to certain
reserve accounts required to be maintained pursuant to the Intercreditor
Agreement. The Owner Trusts' ability to pay in full the principal on the
Equipment Notes on the Scheduled Maturity Date for the corresponding series of
Pass Through Certificates (or on any other date prior to the Rated Maturity
Date) has not been rated by any of the Rating Agencies. See "Description of the
Equipment Notes--Principal and Interest Payments." The ratings assigned to the
Pass Through Certificates do not address the possible imposition of withholding
tax on any payments under the Leases, the Equipment Notes, the Pass Through
Certificates or otherwise.
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APPENDIX A
GLOSSARY OF CERTAIN TERMS
The following is a glossary of certain terms used in this Prospectus
relating to the Pass Through Certificates. The definitions of terms used in this
glossary that are also used in the Basic Agreement, the Trust Supplements,
Indentures, Leases or Participation Agreements are qualified in their entirety
by reference to the definitions of such terms contained therein.
"AAR" means the Association of American Railroads.
"Administrative Services Agreement" means the Administrative Services
Agreement dated as of _______, 1998 between the Company and GATC, as such
agreement may be amended or supplemented in accordance with its terms.
"Accounts" means each of the Collection Account, the Operating Account, the
Liquidity Reserve Account, the Special Reserves Account, the Non-Shared Payments
Account, the Stipulated Loss Value Deficiency Account, the Cash Trapping Account
and the Excess Cash Account.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Base Component" for each calendar month means the product of (i) the Unit
Monthly Fee, multiplied by (ii) the number of Units managed under the
Management Agreement, each as determined on the first day of such month. The
Unit Monthly Fee shall initially be $20 per Unit, and shall be thereafter
adjusted annually.
"Basic Agreement" means the Pass Through Trust Agreement, dated as of
August 1, 1998, between the Company and the Pass Through Trustee.
"Basic Rent" shall mean the rent payable by the Company to a Lessor under a
Lease.
"Business Day," when used with respect to the Pass Through Certificates of
any series, means any day other than a Saturday, a Sunday, or a day on which
commercial banking institutions in New York, New York, Chicago, Illinois or a
city and state in which the Pass Through Trustee or any related Indenture
Trustee maintains its Corporate Trust Office are authorized or obligated by law,
regulation or executive order to be closed.
"Calculation Date," with respect to any Monthly Transfer Date, means the
close of business on the last Business Day of the calendar month immediately
preceding such Monthly Transfer Date.
"Car Type" means each of the six categories of railcars being: general
covered hopper, general service tank, high pressure tank, specialty covered
hopper, alloy and specialty chemical.
"Cash Trapping Account" means the account of that name established pursuant
to the Intercreditor Agreement for the purposes described under "The
Intercreditor Agreement--The Accounts."
"Cash Trapping Cap" has the meaning given to such term in "Collection and
Application of the Company's Cash Flows--Cash Trapping Events; Required Cash
Trapping Amount."
"Cash Trapping Event" has the meaning given to such term in "Collection and
Application of the Company's Cash Flows--Cash Trapping Events; Required Cash
Trapping Amount."
"Cash Trapping Hold" has the meaning given to such term in "Collection and
Application of Company's Cash Flows -- Cash Trapping Events, Required Cash
Trapping Amount, Release from Cash Trapping Account."
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"Category 1 Supplemental Expenses" means all Supplemental Rent payable
under a Lease for (a) payments due from the Company to each Lender Agent, each
Loan Participant and each Lessor Agent in respect of fees and expenses payable
pursuant to each Participation Agreement; and (b) payments due from the Company
to each Lender Agent, each Loan Participant, each Lessor Agent and each Owner
Participant in respect of indemnities (including, without limitation, the
general tax indemnity and general indemnity) in each Participation Agreement.
"Category 2 Supplemental Expenses" means all Supplemental Rent payable
under a Lease to pay any Late Rent Premium due and payable under such Lease.
"Category 3 Supplemental Expenses" means all Supplemental Rent or other
amounts payable under a Lease, any other Operative Agreement to which the
Company is a party or any other Company Document to pay any and all other
amounts, liabilities, indemnities and obligations (other than Basic Rent,
renewal rent and other amounts included in other Categories of Supplemental
Expenses) which the Company assumes or agrees to pay to any Person under any
Lease or other Company Documents.
"Cede" means Cede & Co., as nominee for DTC.
"Certificate Account" means the one or more non-interest-bearing accounts
established and maintained by the Pass Through Trustee pursuant to the Pass
Through Trust Agreement on behalf of the Certificateholders of the Pass Through
Trust for the deposit of payments representing Scheduled Payments on the
Equipment Notes 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 the Person in whose name a Pass Through
Certificate is registered.
"Closing Date" means August ___, 1998.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Collateral," with respect to the security interest granted by the Company
pursuant to the Intercreditor Agreement, means all of the Company's right, title
and interest in and to (i) the Company Documents, including the right to receive
payments thereunder (other than certain Non-Shared Payments), (ii) the Accounts
(other than the Non-Shared Payments Account and the Excess Cash Account)
including any securities purchased with funds on deposit therein and all income
from the investment of funds therein and (iii) all proceeds, accessions,
profits, income benefits, substitutions and replacements, whether voluntary or
involuntary, of and to any of the property, now owned or hereafter acquired, of
the Company described in (i) and (ii) above (including any claims for indemnity
thereunder and payments with respect thereto).
"Collateral Agent" means The First National Bank of Chicago, in its
capacity as Collateral Agent under the Intercreditor Agreement, and each other
Person which may from time to time act as successor Collateral Agent under such
Intercreditor Agreement.
"Collection Account" means the account of that name established pursuant to
the Intercreditor Agreement for the purposes described under "The Intercreditor
Agreement--The Accounts."
"Collections" for any period means, without duplication, (i) all amounts
paid to the Collection Account in respect of the Subleases, including amounts
received in respect of claims for damages or in respect of breaches of contract
or nonpayment of any amount due thereunder, (ii) all income earned on amounts on
deposit in the Accounts and (iii) all other payments of whatever kind (other
than Non-Shared Payments and the proceeds from the sale of the Equipment Units
to the Lessors pursuant to the Participation Agreements on the Closing Date)
received by the Company pursuant to any other Company Document.
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"Combined Exposure" means, as of any date of determination, the sum
(calculated without duplication) of all the Transaction Exposures as of such
date.
"Commission" means the Securities and Exchange Commission.
"Company" means General American Railcar Corporation II, a corporation
formed under the laws of the state of Delaware.
"Company Documents" means each Sublease, the Insurance Agreement, the
Management Agreement, the Administrative Services Agreement, the Transfer and
Contribution Agreement and any other agreement or document (other than the
Operative Agreements) to which the Company is or becomes a party or under which
the Company has rights as third party beneficiary or otherwise.
"Company Fleet" means the Equipment leased by the Company pursuant to the
Leases.
"Corporate Trust Office" with respect to the Pass Through Trustee and the
Indenture Trustee, means the office of such trustee in the city at which at any
particular time its corporate trust business shall be principally administered.
"Coverage Ratio" means either of the Historical Coverage Ratio or the
Projected Coverage Ratio.
"Default Rate" means a rate per annum equal to the Note Rate plus 1.5%.
"Definitive Pass Through Certificates" means Pass Through Certificates
which are issued in fully registered, certificated form.
"DTC" means the Depository Trust Company.
"DTC Participants" means participants whose securities are held by DTC.
"Early Purchase Option Dates" shall mean the dates set forth in each Lease
with respect to which the Company can elect, subject to certain conditions, to
purchase some or all of the Units subject to such Lease.
"Equipment" means all of the Equipment Units leased by the Owner Trustees
to the Company pursuant to the Leases.
"Early Purchase Price" shall mean the amount set forth in each Lease which
represents the price the Company is required to pay to acquire one or more Units
on an Early Purchase Option Date.
"Equipment Cost" means the amount paid by the Owner Trust to the Company
for an Equipment Group or the amount of such payment allocable to an Equipment
Unit within such Equipment Group.
"Equipment Group" means all the railcars (which may include various types
or categories of standard gauge rolling stock) in respect of which a particular
series of Equipment Notes is issued.
"Equipment Notes" means the equipment notes issued on a nonrecourse basis
by the Owner Trustees pursuant to the Indentures relating to the Equipment.
"Equipment Unit" or "Unit" means an individual railcar.
"Event of Default" means, with respect to the Equipment Notes held in any
Pass Through Trust, the occurrence and continuance of an Indenture Event of
Default under one or more of the related Indentures.
"Event of Loss" means, for any Equipment Unit, each of the events
designated as such in the related Lease. For a description of certain events
constituting an Event of Loss, see "The Leases."
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"Excess Cash Account" means the account of that name established pursuant
to the Intercreditor Agreement for the purposes described under "The
Intercreditor Agreement--The Accounts."
"Excess Cash Flow" means any amount delivered to the Company on a Monthly
Transfer Date after payment of all amounts due on such Monthly Transfer Date
pursuant to the Intercreditor Agreement.
"Functional Group" means each and all of the various groups of Equipment
Units within an Equipment Group as designated in the applicable Participation
Agreement.
"GATC" means General American Transportation Corporation, a New York
corporation.
"GATC Managed Subsidiary" means a subsidiary of GATC for which GATC manages
railcars owned by or leased to such subsidiary on substantially similar terms as
those in the Management Agreement.
"Historical Coverage Ratio" as of any Calculation Date, means the ratio of
(i) the sum of Available Amounts as of the Calculation Date for each of the six
consecutive calendar months immediately preceding such Calculation Date to (ii)
the aggregate of Basic Rent that was paid or payable on the Rent Payment Dates
which occurred or occur during the six consecutive calendar months ending
immediately after such Calculation Dates, as such amounts are certified to in an
officer's certificate signed by an authorized representative of each of the
Company and the Manager.
"Incentive Component" means (i) $5.00 per Unit per month during the period
from the Closing Date through December 31, 1999, and (ii) the Current Incentive
Amount per Unit per month from and after January 1, 2000. The "Current
Incentive Amount" is an amount determined for each calendar month, commencing
January 1, 2000, which is equal to the product of (x) the Incentive Factor, and
(y) the Collections of the Company on a per Unit basis for the preceding
calendar month. The "Incentive Factor" is a fraction the numerator of which is
the total amount of Incentive Component payable for the period from the Closing
Date through December 31, 1999 (the "Measuring Period"), and the denominator of
which is the total gross revenues of the Company for the Measuring Period.
"Indenture" means each of the separate trust indenture and security
agreements entered into from time to time between an Owner Trustee and an
Indenture Trustee with respect to the issuance of Equipment Notes, as each such
agreement may be amended or supplemented in accordance with its respective
terms.
"Indenture Event of Default" means each of the events designated as an
event of default in an Indenture, as described in this Prospectus.
"Indenture Trustee," when used with respect to any Equipment Note or the
Indenture applicable thereto, means the bank or trust company designated as
indenture trustee under such Indenture, and any successor to such Indenture
Trustee as such trustee.
"Indirect Participants" means entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
DTC Participant either directly or indirectly.
"Insurance Agreement" means the Insurance Agreement dated as of August ___,
1998 between GATC and the Company, as such agreement may be amended or
supplemented in accordance with its terms.
"Insurance Manager" means GATC as insurance manager under the Insurance
Agreement.
"Intercreditor Agreement" means the Collateral Agency and Intercreditor
Agreement dated as of August ___, 1998 among the Company, the Collateral Agent,
the Owner Trustees, the Indenture Trustees, the Manager and the Insurance
Manager, as such agreement may be amended or supplemented in accordance with its
terms.
"Late Payment Premium" means the premium due on any Regular Distribution
Date on the amount of any Payment Deficiency.
"Late Payment Rate" means 1.5% per annum.
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"Late Rent Premium" means, with respect to any Lease and on any Monthly
Transfer Date, any premium on rent due under such Lease, in an amount sufficient
to pay the sum of (i) the supplemental rent or premiums, if any, due on any
overdue portions of principal and interest in respect of any related Lender
Loan, at the late payment rate set forth in the related Lender Documents; (ii)
the default rate interest or premiums, if any, due on any defaulted principal or
interest in respect of any related Lender Loan, at the default interest rate set
forth in the related Lender Document; and (iii) default interest, if any, due on
any unpaid cash distributions to the related Owner Participants at the rate set
forth in such Lease.
"Lease" means each of the lease agreements entered into with respect to the
Equipment between an Owner Trustee and the Company, as each such lease agreement
may from time to time be amended or supplemented.
"Lease Event of Default" means each of the events designated as an event of
default in a Lease, as described in this Prospectus.
"Lender Agent" means any agent which is acting on behalf of holders of
Assumed Debt which, so long as any Assumed Debt is the Equipment Notes, means
the person acting as Indenture Trustee with respect to such Equipment Notes or
such other agent as the Indenture Trustee shall have notified to the Lessor, the
Manager and the Collateral Agent.
"Lender Document" means any Indenture, loan agreement or other document
pursuant to which a Lender makes a Lender Loan to a Lessor.
"Lender Loan" means, with respect to any Lease, any security issued or loan
made to a Lessor to finance all or any part of the Equipment Cost with respect
to any Equipment Unit leased to the Company pursuant to such Lease.
"Lessee" means the Company.
"Lessor" means each Owner Trustee and each other owner trustee or other
person who may from time to time lease equipment to the Company pursuant to a
Lease.
"Lessor Agent" means, with respect to each Lease, the Lessor thereunder,
and, so long as any Equipment Notes of such Lessor are issued and outstanding,
the Indenture Trustee with respect to such Equipment Notes or such other agent
as such Indenture Trustee shall have notified to the Lessor, the Company, the
Manager and the Collateral Agent.
"Lien" means, as applied to the property or assets (or the income,
proceeds, products, rents or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise: (a) any mortgage, lien, right of detention,
pledge, attachment, charge, lease, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind; or (b) any
arrangement, express or implied, under which such property or assets (or such
income, proceeds, products, rents or profits) are transferred, sequestered or
otherwise identified for the purpose of subjecting or making available the same
for payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Liquidity Reserve Account" means the account of that name established
pursuant to the Inter-creditor Agreement for the purposes described under "The
Intercreditor Agreement--The Accounts."
"Make-Whole Amount" means the premium, if any, due in certain circumstances
upon the prepayment of the Equipment Notes, calculated as described under
"Description of the Equipment Notes--Prepayments."
"Management Agreement" means the Operation, Servicing, Maintenance and
Remarketing Agreement dated as of August ___, 1998 between the Company and GATC,
as such agreement may be amended or supplemented in accordance with its terms.
"Management Fee" means the Base Component plus the Incentive Component.
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"Manager" means GATC, in its capacity as Manager under the Management
Agreement, and each other Person which may from time to time act as a successor
Manager under such Management Agreement.
"Manager's Fleet" means all railcars owned or leased by the Manager in the
United States, including those managed for other wholly-owned special purpose
subsidiaries of GATC.
"Marks Company" or "General American Marks Company" means General American
Marks Company, a Delaware business trust, formed in 1997, to own the marks
registered to GATC and its affiliates or the marks relating to certain cars
managed by GATC or its affiliates.
"Monthly Average Lease Rate," for any calendar month, means the aggregate
Sublease monthly rental rates with respect to the Total Managed Fleet for such
calendar month divided by the total number of railcars in the Total Managed
Fleet which are subject to a lease or sublease on the last day of such calendar
month.
"Monthly Report Date," with respect to any Monthly Transfer Date, means the
second Business Day prior to such Monthly Transfer Date.
"Monthly Transfer Date" means the 20th day of each calendar month, or, if
such day is not a Business Day, the next succeeding Business Day.
"Monthly Utilization Rate," for any calendar month, means the percentage
determined by dividing (i) the total number of railcars in the Total Managed
Fleet which are subject to a lease or Sublease on the last day of such calendar
month, by (ii) the total number of railcars in the Total Managed Fleet on the
last day of such calendar month.
"Moody's" means Moody's Investors Service, Inc. or any successor to such
corporation's business of rating securities which is then providing a rating for
any securities.
"Non-Shared Payments" means any (a) contribution of capital by GATC to the
Company subsequent to the Closing Date made expressly for the purpose of paying
the Stipulated Loss Value on any Unit or Units pursuant to a Lease or amounts
due with respect to a purchase by the Company of any Unit or Units at the
termination of a Lease, (b) insurance proceeds received with respect to any
Event of Loss or damage to any Equipment, (c) proceeds of the sale of the
Equipment or (d) excess cash available to the Company from the Excess Cash
Account that the Company requests the Collateral Agent to transfer to the Non-
Shared Payments Account for the express purpose of paying the Stipulated Loss
Value pursuant to a Lease or amounts due with respect to a purchase by the
Company of any Unit or Units at the termination of a Lease.
"Non-Shared Payments Account" means the account of that name established
pursuant to the Intercreditor Agreement for the purposes described under "The
Intercreditor Agreement--The Accounts."
"Note Rate" means the rate per annum set forth on the cover page of the
Prospectus (computed on the basis of a 360-day year of 12 30-day months).
"Offering" means the offering of the Pass Through Certificates by the Pass
Through Trust.
"Officer's Certificate" shall mean a certificate signed (i) in the case of
a corporation, by the President, any Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership or limited liability company, by the Chairman of the
Board, the President or any Vice President, the Treasurer or an Assistant
Treasurer of a corporate general partner or member, as the case may be, and
(iii) in the case of a commercial bank or trust company, by the Chairman or Vice
Chairman of the Executive Committee or the Treasurer, any Trust Officer, any
Vice President, any Executive or Senior or Second or Assistant Vice President,
or any other officer or assistant officer customarily performing the functions
similar to those performed by the persons who at the time shall be such
officers, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject.
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"Operating Account" means the account of that name established pursuant to
the Intercreditor Agreement for the purposes described under "The Intercreditor
Agreement--The Accounts."
"Operative Agreements" shall mean the Transfer and Contribution Agreement,
the GATC Bill of Sale, the Participation Agreements, the Bills of Sale, the
Trust Agreements, the Pass Through Trust Agreement, the Pass Through Trust
Supplement, the Pass Through Certificates, the Equipment Notes, the Leases, the
Lease Supplements, the Indentures, the Indenture Supplements, the Tax Indemnity
Agreements, the Purchase Agreement, the Management Agreement, the Insurance
Agreement and the Intercreditor Agreement.
"Operating Expenses" means expenses provided for in the annual budget of
the Company, including (a) payments due to the Collateral Agent in respect of
fees, expenses or indemnities pursuant to the Intercreditor Agreement, (b) any
payments in respect of insurance premiums required to be paid in respect of the
Insurance Agreement or other insurance maintained by the Company, (c) any
payment in respect of Reimbursable Services pursuant to the Management
Agreement, (d) the fees and expenses payable pursuant to the Administrative
Services Agreement, (e) maintenance or repair expenses related to Events of Loss
(including the payment of Stipulated Loss Value or the cost of replacement of
Equipment in connection with such Event Loss) not in excess of $100,000 in any
calendar month and (f) expenses in connection with Optional Modifications to the
Equipment.
"Optional Modifications" means, with respect to any Lease, all
modifications to the related Equipment other than Required Modifications or
Programmatic Optional Modifications.
"Owner Participant" means each owner participant or other person for whose
benefit Lessor owns an Equipment Group leased to the Company pursuant to a
Lease, and its permitted successors and assigns.
"Owner Trustee," when used with respect to any Equipment Note or the
Indenture applicable thereto or the Lease related thereto, means the "Owner
Trustee" referred to in the applicable Indenture, not in its individual capacity
but solely as trustee and each other Person which may from time to time be
acting as Owner Trustee in accordance with the provisions of the applicable
Indenture, Lease or Participation Agreement.
"Participation Agreement" when used with respect to any Equipment Note,
means the note purchase, participation, refinancing or similar agreement or
agreements referred to in the related Indenture, providing for, among other
things, the purchase of Equipment Notes by the Pass Through Trustee.
"Pass Through Certificate" means each of the Pass Through Certificates to
be issued by the Pass Through Trust pursuant to the Pass Through Trust
Agreement.
"Pass Through Trust" means the General American Railcar Corporation II
1998-1 Pass Through Trust to be formed pursuant to the Pass Through Trust
Agreement.
"Pass Through Trust Agreement" means the Basic Agreement as supplemented by
the Trust Supplement.
"Pass Through Trustee" means The First National Bank of Chicago, in its
capacity as Pass Through Trustee and each other Person which may from time to
time act as successor Pass Through Trustee under such Pass Through Trust.
"Payment Deficiency" means the difference between (i) the greater of (a)
the principal amount of the Equipment Notes paid on a Regular Distribution Date
and (b) the Rated Amortization Amount payable on such Regular Distribution Date
and (ii) the Scheduled Amortization Amount payable on such Regular Distribution
Date.
"Permitted Government Investment" means obligations of the United States of
America and agencies thereof for the payment of which the full faith and credit
of the United States of America is pledged, maturing in not more than 60 days or
such lesser time as is necessary for payment of any Special Payments on a
Special Distribution Date.
"Permitted Investments" means (i) direct obligations of, and obligations
fully guaranteed as to timely payment by, the United States of America (having
remaining maturities of no more than the number of remaining days until the
A-7
<PAGE>
next Monthly Transfer Date), (ii) commercial paper (having remaining maturities
of no more than the number of days until the next Monthly Transfer Date having,
at the time of the investment or contractual commitment to invest therein, a
rating from each Rating Agency in its highest investment category), (iii) a
Guaranteed Investment Contract (a "GIC") from an Acceptable GIC provider, (iv) a
GIC provided by GATX; provided that such obligations are supported by an
Acceptable Letter of Credit, (v) investments in funds rated in the highest
investment category by each Rating Agency and (vi) repurchase agreements and
similar short term instruments.
"Person" means an individual, a corporation, a partnership, a trust, an
unincorporated organization, a limited liability company, or a government or
political subdivision thereof.
"Pool Balance" means, as of any date, the aggregate unpaid principal amount
of the Equipment Notes held in such Pass Through Trust on such date plus any
amounts in respect of principal on such Equipment Notes held by the Pass Through
Trustee and not yet distributed plus the amount of any moneys held in the
related escrow account (other than earnings thereon). 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, on the Equipment Notes
held in such Pass Through Trust and distribution thereof to be made on that
date.
"Pool Factor" means, as of any date, the quotient (rounded to the seventh
decimal place) computed by dividing (i) the Pool Balance of such Pass Through
Trust by (ii) the aggregate original principal amount of the Equipment Notes
held in such Pass Through Trust. The Pool Factor as of any Regular Distribution
Date or Special Distribution Date shall be computed after giving effect to the
payment of principal, if any, on the Equipment Notes held in such Pass Through
Trust and distribution thereof to be made on that date.
"Programmatic Optional Modifications" means any Optional Modification to
one or more Equipment Units in the Company Fleet which is reasonably expected to
cost more than $750,000.
"Projected Coverage Ratio," as of any Calculation Date, means the ratio of
(i) the sum of projected Available Amounts for the six month period immediately
succeeding such Calculation Date to (ii) the sum of the Basic Rent due or to
become due and payable on the six consecutive Rent Payment Dates which occur
following such Calculation Date, as such amounts are certified to by an
officer's certificate signed by an authorized representative of each of the
Company and the Manager.
"Railroad Mileage Credits" means the mileage credit payments made by the
railroads under their applicable tariffs to the registered owner of the
identifying marks on the railcar.
"Rating Agency Confirmation" means a confirmation by each of the Rating
Agencies that, after taking into account the event which necessitated such
confirmation, such Rating Agency will not reduce its then current rating on the
Pass Through Certificates.
"Rated Amortization" means the minimum amount of principal of the related
Equipment Notes which an Owner Trustee must pay on a cumulative basis on or
prior to each Regular Distribution Date in order to avoid a payment default
under the applicable Indenture.
"Rated Amortization Amount" as of a Regular Distribution Date, means the
excess of (i) the cumulative amount of all Rated Amortization which is required
to have been paid through and including such Regular Distribution Date over (ii)
the cumulative amount of all principal paid on the Equipment Notes prior to and
excluding such Regular Distribution Date.
"Rated Maturity Date" means [____________, 2020.]
"Rated Obligations Due" means, at any Regular Distribution Date, the sum of
(a) the Rated Amortization Amount at such Regular Distribution Date plus (b)
accrued and unpaid interest on the unpaid portions of the principal amounts of
the outstanding Equipment Notes that is due and payable on such Regular
Distribution Date.
A-8
<PAGE>
"Rated Pool Balance" means the Pool Balance determined in accordance with
the Rated Amortization Schedule.
"Rated Pool Factor" means the Pool Factor determined in accordance with the
Rated Amortization Schedule.
"Rating Agencies" means, at any time, S&P and Moody's, or any successor to
any such corporation's business of rating securities, which is then providing a
rating for the Equipment Notes.
"Record Date," for each Regular Distribution Date or Special Distribution
Date, means the close of business on the day 15 days prior to such Regular
Distribution Date or Special Distribution Date.
"Regular Distribution Date" means the 20th day of each month or, if such
day is not a Business Day, the next succeeding Business Day.
"Regular Payment" means each payment of interest or principal on an
Equipment Note scheduled to be received by the Pass Through Trustee on a Regular
Distribution Date.
"Rent Abatements" means sums not charged to a customer's rent during the
time that a railcar is not in use for certain maintenance conducted by GATC.
"Rent Payment Date" or "Payment Date" shall mean the 20th day of each month
occurring during the Lease Term, commencing [October 20, 1998,] provided that if
any such date shall not be a Business Day, then "Rent Payment Date" or "Payment
Date" shall mean the next succeeding Business Day.
"Required Beneficiaries" means, at any time, Beneficiaries that at such
time hold at least 66 2/3% of the Combined Exposure.
"Required Cash Trapping Amount" means the amount required to be deposited
in the Cash Trapping Account on any Monthly Transfer Date, calculated as
described under "Collection and Application of the Company's Cash Flows--Cash
Trapping Events; Required Cash Trapping Amount."
"Required Liquidity Reserve Amount" as of the Closing Date will be
$2,000,000 (of which $500,000 will be funded on the Closing Date and the balance
in equal monthly installments of $42,000) and thereafter will mean such amount
as the Owner Participants shall consent to and which will not result in a
reduction of the then current rating on the Pass Through Certificates by the
Rating Agencies.
"Required Modification," with respect to any Equipment Unit, means the
definition of such term in the related Lease, whether expressly set forth
therein or by reference to another related document.
"Required Special Reserves Amount" means the amount required to be
deposited in the Special Reserves Account on any Monthly Transfer Date,
calculated as described under "Collection and Application of the Company's Cash
Flows--Required Special Reserves Amount."
"Required Stipulated Loss Value Deficiency Amount" as of any Calculation
Date and with respect to any Lease, means the aggregate of the Stipulated Loss
Value Deficiency Amounts due and payable as of the next succeeding Monthly
Transfer Date.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor to such Corporation's business of rating securities,
which is then providing a rating for any securities.
"Scheduled Amortization" means the amount of principal of the related
Equipment Notes which an Owner Trustee must have paid (on a cumulative basis)
through each Regular Distribution Date in order to avoid the payment of a Late
Payment Premium.
A-9
<PAGE>
"Scheduled Amortization Amount" as of a Regular Distribution Date, means
the excess of (i) the cumulative amount of all Scheduled Amortization which is
required to have been paid through and including such Regular Distribution Date
over (ii) the cumulative amount of all principal paid on the Equipment Notes
prior to and excluding such Regular Distribution Date.
"Scheduled Maturity Date" means [August 20, 2017.]
"Scheduled Pool Balance" means the Pool Balance determined in accordance
with the Scheduled Amortization Schedule.
"Scheduled Pool Factor" means the Pool Factor determined in accordance with
the Scheduled Amortization Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicing Agreement" means the Management and Servicing Agreement to be
dated as of September 24, 1997, between the Marks Company and GATC, as such
agreement may be amended or supplemented in accordance with its terms.
"Special Distribution Date" means each date on which a Special Payment will
be distributed.
"Special Payment" means (i) any payment of principal, Make-Whole Amount, if
any, and interest resulting from the prepayment or purchase of an Equipment Note
held in a Pass Through Trust, (ii) any payment of principal and interest
(including any interest accruing upon default) on or any other amount in respect
of an Equipment Note held in a Pass Through Trust upon an Indenture Event of
Default in respect of, or upon acceleration relating to, such Equipment Note,
(iii) any payment of principal, Make-Whole Amount if any, and interest on an
Equipment Note which is not in fact paid within five days of a Regular
Distribution Date or (iv) any proceeds from the sale of any Equipment Note upon
an Event of Default.
"Special Payments Account" means the one or more accounts established and
maintained by the Pass Through Trustee pursuant to the Pass Through Trust
Agreement on behalf of the Certificateholders for the deposit of payments
representing Special Payments on the Equipment Notes held in such Pass Through
Trust.
"Special Reserves Account" means the account of that name established
pursuant to the Intercreditor Agreement for the purposes described under "The
Intercreditor Agreement--The Account."
"Specified Investments" (i) direct obligations of, and obligations fully
guaranteed as to timely payment by, the United States of America (having
remaining maturities of no more than the number of remaining days until the next
Monthly Transfer Date), (ii) commercial paper (having remaining maturities of no
more than the number of days remaining until the next Monthly Transfer Date
having, at the time of the investment or contractual commitment to invest
therein, a rating from each Rating Agency in its highest investment category),
(iii) a Guaranteed Investment Contract (a "GIC") from an Acceptable GIC
provider, (iv) a GIC provided by GATX, provided that such obligations are
supported by an Acceptable Letter of Credit, (v) investments in funds rated in
the highest investment category by each Rating Agency and (vi) repurchase
agreements and similar short term instruments.
"Stipulated Loss Value Deficiency Account" means the Account of that name
established pursuant to Intercreditor Agreement for the purposes described under
"The Intercreditor Agreement--The Accounts."
"Stipulated Loss Value Deficiency Amount" with respect to each Event of
Loss under a Lease, means the Stipulated Loss Value which will become due and
payable with respect to such Event of Loss within 120 days after such Event of
Loss occurs.
"Sublease" means each of the lease agreements entered into from time to
time with respect to the Equipment between the Company and a Sublessee, as each
such lease agreement may from time to time be amended or supplemented.
A-10
<PAGE>
"Sublessee" means any Person who subleases the Equipment from the Company
pursuant to a Sublease.
"Sublessor" means the Company.
"Total Managed Fleet" means the Manager's Fleet and the Company Fleet.
"Transaction Exposure" means as of any date of determination and with
respect to each Lease, the present value (discounted at the interest rate on the
related Lender Loan) of all the remaining payments of Basic Rent under such
Lease through the remaining term of such Lease, plus (ii) if all or a portion of
a Lender Loan related to such Lease shall have been assumed by the Company, the
present value (discounted at the interest rate on such assumed debt) of all the
remaining payments of principal of such assumed debt through the remaining term
of such assumed debt.
"Trigger Event" means the occurrence under any Operative Agreement or
Company Document (other than the Subleases) of an "Event of Default" as such
term, or a similar term, is defined under such Operative Agreement or Company
Document.
"Trust Property" means, with respect to any Pass Through Trust, the
Equipment Notes held as the property of such Pass Through Trust and all funds
from time to time deposited in the related Certificate Account, the related
Special Payments Account and any other account maintained as a part of such Pass
Through Trust, including any proceeds from the sale by the Pass Through Trustee
of any such Equipment Note in connection with an Event of Default.
"Trust Supplement" means each of the Pass Through Trust Supplements between
the Company and the Pass Through Trustee, pursuant to each of which a Pass
Through Trust is formed and a series of Pass Through Certificates is issued to
evidence fractional undivided ownership interests in the Trust Property held in
such Pass Through Trust.
"Underwriters" mean Salomon Brothers Inc. and Morgan Stanley Dean Witter &
Co.
A-11
<PAGE>
APPENDIX B
SCHEDULE OF MONTHLY AMORTIZATION RATES AND POOL FACTORS
The Scheduled Amortization, Rated Amortization and Pool Factors for the
Equipment Notes, as of the 20th day of each month, are set forth below.
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE EXCESS
------------------------------------------ ---------------------------------
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL OF SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
- ---- ------- --------- ------ --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Closing
09/20/98
10/20/98
11/20/98
12/20/98
01/20/99
02/20/99
03/20/99
04/20/99
05/20/99
06/20/99
07/20/99
08/20/99
09/20/99
10/20/99
11/20/99
12/20/99
01/20/00
02/20/00
03/20/00
04/20/00
05/20/00
06/20/00
07/20/00
08/20/00
09/20/00
10/20/00
11/20/00
12/20/00
01/20/01
02/20/01
03/20/01
04/20/01
05/20/01
06/20/01
07/20/01
08/20/01
09/20/01
10/20/01
11/20/01
12/20/01
01/20/02
02/20/02
03/20/02
04/20/02
05/20/02
06/20/02
07/20/02
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE EXCESS
------------------------------------------ ---------------------------------
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL OF SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
- ---- ------- --------- ------ --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
08/20/02
09/20/02
10/20/02
11/20/02
12/20/02
01/20/03
02/20/03
03/20/03
04/20/03
05/20/03
06/20/03
07/20/03
08/20/03
09/20/03
10/20/03
11/20/03
12/20/03
01/20/04
02/20/04
03/20/04
04/20/04
05/20/04
06/20/04
07/20/04
08/20/04
09/20/04
10/20/04
11/20/04
12/20/04
01/20/05
02/20/05
03/20/05
04/20/05
05/20/05
06/20/05
07/20/05
08/20/05
09/20/05
10/20/05
11/20/05
12/20/05
01/20/06
02/20/06
03/20/06
04/20/06
05/20/06
06/20/06
07/20/06
08/20/06
09/20/06
10/20/06
11/20/06
12/20/06
01/20/07
02/20/07
03/20/07
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE EXCESS
------------------------------------------ ---------------------------------
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL OF SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
- ---- ------- --------- ------ --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
04/20/07
05/20/07
06/20/07
07/20/07
08/20/07
09/20/07
10/20/07
11/20/07
12/20/07
01/20/08
02/20/08
03/20/08
04/20/08
05/20/08
06/20/08
07/20/08
08/20/08
09/20/08
10/20/08
11/20/08
12/20/08
01/20/09
02/20/09
03/20/09
04/20/09
05/20/09
06/20/09
07/20/09
08/20/09
09/20/09
10/20/09
11/20/09
12/20/09
01/20/10
02/20/10
03/20/10
04/20/10
05/20/10
06/20/10
07/20/10
08/20/10
09/20/10
10/20/10
11/20/10
12/20/10
01/20/11
02/20/11
03/20/11
04/20/11
05/20/11
06/20/11
07/20/11
08/20/11
09/20/11
10/20/11
11/20/11
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE EXCESS
------------------------------------------ ---------------------------------
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL OF SCHEDULED
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
- ---- ------- --------- ------ --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/20/11
01/20/12
02/20/12
03/20/12
04/20/12
05/20/12
06/20/12
07/20/12
08/20/12
09/20/12
10/20/12
11/20/12
12/20/12
01/20/13
02/20/13
03/20/13
04/20/13
05/20/13
06/20/13
07/20/13
08/20/13
09/20/13
10/20/13
11/20/13
12/20/13
01/20/14
02/20/14
03/20/14
04/20/14
05/20/14
06/20/14
07/20/14
08/20/14
09/20/14
10/20/14
11/20/14
12/20/14
01/20/15
02/20/15
03/20/15
04/20/15
05/20/15
06/20/15
07/20/15
08/20/15
09/20/15
10/20/15
11/20/15
12/20/15
01/20/16
02/20/16
03/20/16
04/20/16
05/20/16
06/20/16
07/20/16
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED AMORTIZATION RATED AMORTIZATION CUMULATIVE EXCESS
------------------------------------------ --------------------------------- OF SCHEDULED
PRINCIPAL PRINCIPAL POOL PRINCIPAL PRINCIPAL POOL
DATE PAYMENT BALANCE FACTOR PAYMENT BALANCE FACTOR OVER RATED
- ---- ------- --------- ------ --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
08/20/16
09/20/16
10/20/16
11/20/16
12/20/16
01/20/17
02/20/17
03/20/17
04/20/17
05/20/17
06/20/17
07/20/17
08/20/17
09/20/17
10/20/17
11/20/17
12/20/17
01/20/18
02/20/18
03/20/18
04/20/18
05/20/18
06/20/18
07/20/18
08/20/18
09/20/18
10/20/18
11/20/18
12/20/18
01/20/19
02/20/19
03/20/19
04/20/19
05/20/19
06/20/19
07/20/19
08/20/19
09/20/19
10/20/19
11/20/19
12/20/19
01/20/20
02/20/20
03/20/20
04/20/20
05/20/20
06/20/20
07/20/20
08/20/20
09/20/20
</TABLE>
B-5
<PAGE>
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 of solicitation.
_______________
Table of Contents
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Available Information ..................................................... i
Reports to Certificateholders by the Trustee .............................. i
Prospectus Summary ........................................................ 1
Risk Factors .............................................................. 15
Use of Proceeds ........................................................... 22
The Company ............................................................... 23
The Equipment ............................................................. 24
Railcar Leasing Industry .................................................. 26
The Subleases ............................................................. 29
The Sublessees ............................................................ 35
The Manager ............................................................... 38
The Management Agreement .................................................. 40
The Intercreditor Agreement ............................................... 44
Collection and Application of the
Company's Cash Flows ...................................................... 46
The Leases ................................................................ 53
The Participation Agreements .............................................. 57
The Insurance Agreement ................................................... 58
Formation of the Pass Through Trust ....................................... 59
Description of the Pass Through Certificates .............................. 60
Maturity, Payment and Yield Considerations ................................ 68
Structuring Assumptions ................................................... 69
The Owner Trusts .......................................................... 72
Description of the Equipment Notes ........................................ 72
Federal Income Tax Considerations ......................................... 82
Certain Illinois Taxes .................................................... 84
ERISA Considerations ...................................................... 85
Underwriting .............................................................. 87
Legal Matters ............................................................. 88
Ratings ................................................................... 88
Appendix A Glossary of Certain Terms ...................................... A-1
Appendix B Schedule of Monthly Amortization Rates
and Pool Factors........................................................... B-1
</TABLE>
Until , 1998 (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.
[$120,000,000]
General American Railcar
Corporation II
1998-1
Pass Through Trust
Pass Through Certificates,
Series 1998-1
PROSPECTUS
Salomon Smith Barney
Morgan Stanley Dean Witter
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows estimates of the various expenses to be paid in
connection with the registration of the Certificates offered pursuant to this
registration statement.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........... $
Legal Fees....................................................
Accounting Fees...............................................
Trustees' Fees and Expenses...................................
Rating Agencies' Fees.........................................
Printing Costs................................................
Miscellaneous................................................. -------
Total....................................................... $
</TABLE> =======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's officers and directors are and will be indemnified against
certain liabilities in accordance with Section 145 of the Delaware General
Corporation Law ("DGCL"), the Certificate of Incorporation and the By-laws of
the Company. The Certificate of Incorporation requires the Company to indemnify
its directors and officers to the fullest extent permitted from time to time
under the DGCL. The DGCL permits a corporation to indemnify its directors and
officers, among others, against expenses (including reasonable attorneys' fees),
judgments, fines and amounts they incur actually and reasonably in connection
with any proceeding to which they are a party by reasons of their service in
these or other capacities provided that it is established that the director or
officer acted in good faith and in a manner such person reasonably believed to
be in and not opposed to the best interests of the Corporation, and, in the case
of any criminal action, such person had no reasonable cause to believe such
person's conduct was unlawful.
ITEM 16. EXHIBITS
The exhibits to this registration statement are listed in the exhibit index
which follows the signature page and which is hereby incorporated by reference.
ITEM 17. UNDERTAKINGS
A. Undertaking Regarding Documents Subsequently Filed under the Exchange
Act.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
B. Undertaking in Respect of Indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions contained in the Certificate of Incorporation
and By-laws of the Company and the laws of the State of Delaware, or otherwise,
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such
II-1
<PAGE>
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
C. Undertakings Pursuant to Rule 430A.
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as a part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus field by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
D. Undertakings Under the Trust Indenture Act of 1939.
The Company hereby undertakes to file an application for the purpose
of determining the eligibility of the trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act of 1939.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois on the 8th day of
July, 1998.
General American Railcar Corporation II
By: /s/ D. Ward Fuller
--------------------------------
Name: D. Ward Fuller
Title: President
Each person whose signature appears below hereby constitutes and appoints
Ronald J. Ciancio and Thomas W. Reedy, and each of them, the true and lawful
attorney-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of the undersigned and
to file the same, with all exhibits thereto, in any and all capabilities, to
sign any and all amendments and any registration statement filed pursuant to
Rule 462(b) of the Securities Act of 1933, as amended (including post-effective
amendments thereto and other documents in connection therewith), with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 8th day of July, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ D. Ward Fuller President and Director
- -----------------------
D. Ward Fuller
- -----------------------
/s/ Donald J. Schaffer Principal Financial and Accounting Officer
- -----------------------
Donald J. Schaffer
- -----------------------
/s/ David B. Anderson Director
- -----------------------
David B. Anderson
- -----------------------
/s/ David M. Edwards Director
- -----------------------
David M. Edwards
- -----------------------
/s/ Ronald H. Zech Director
- -----------------------
Ronald H. Zech
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement*
4.1 Form of Pass Through Trust Agreement
4.2 Form of Pass Through Certificate (included in Exhibit 4.1)
4.3 Form of Owner Trust Agreement*
4.4 Form of Trust Indenture
4.5 Form of Equipment Note (included in Exhibit 4.4)
4.6 Form of Intercreditor Agreement
5.1 Opinion of Vedder, Price, Kaufman & Kammholz, counsel for the Company*
5.2 Opinion of counsel for the Pass Through Trustee*
8.1 Tax opinion of Vedder, Price, Kaufman & Kammholz, counsel for the Company*
10.1 Form of Operation, Maintenance, Servicing and Remarketing Agreement
10.2 Form of Administrative Services Agreement
10.3 Form of Insurance Agreement
10.4 Form of Equipment Lease Agreement
10.5 Form of Participation Agreement
23.1 Consent of Vedder, Price, Kaufman & Kammholz*
23.2 Consent of counsel for the Pass Through Trustee*
24.1 Powers of Attorney (included on the signature pages to the Registration Statement)
25.1 Statement of Eligibility of Pass Through Trustee on Form T-1*
</TABLE>
- ------------
* To be filed by amendment
II-4
<PAGE>
Exhibit 4.1
-----------
FORM OF
________________________________________________
PASS THROUGH TRUST AGREEMENT
Dated as of August 1, 1998
between
GENERAL AMERICAN RAILCAR CORPORATION II
and
[THE FIRST NATIONAL BANK OF CHICAGO],
as Trustee
Tank Cars and Covered Hopper Cars
________________________________________________
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS................................................................. 2
Section 1.01 Definitions...................................... 2
Section 1.02 Compliance Certificates and Opinions............. 10
Section 1.03 Form of Documents Delivered to Trustee........... 11
Section 1.04 Acts of Certificateholders....................... 11
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES
ACQUISITION OF EQUIPMENT NOTES.............................................. 13
Section 2.01 Amount Unlimited; Issuable in Series............. 13
Section 2.02 Acquisition of Equipment Notes................... 15
Section 2.03 Acceptance by Trustee............................ 17
Section 2.04 Limitation of Powers............................. 17
ARTICLE III
THE CERTIFICATES............................................................ 18
Section 3.01 Form, Denomination and Execution of
Certificates..................................... 18
Section 3.02 Authentication of Certificates................... 18
Section 3.03 Registration of Transfer and Exchange of
Certificates..................................... 19
Section 3.04 Mutilated, Destroyed, Lost or Stolen
Certificates..................................... 20
Section 3.05 Persons Deemed Owners............................ 21
Section 3.06 Cancellation..................................... 21
Section 3.07 Temporary Certificates........................... 21
Section 3.08 Limitation of Liability for Payments............. 21
Section 3.09 Book-Entry Provisions for Global Certificates.... 22
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS.......................................................... 24
Section 4.01 Certificate Account and Special Payments
Account.......................................... 24
Section 4.02 Distributions from Certificate Account and
Special Payments Account......................... 25
Section 4.03 Statements to Certificateholders................. 27
Section 4.04 Investment of Special Payment Moneys............. 28
ARTICLE V
THE COMPANY................................................................. 28
Section 5.01 Maintenance of Corporate Existence............... 28
Section 5.02 Consolidation, Merger or Sale of Assets
Prohibited....................................... 28
ARTICLE VI
DEFAULT..................................................................... 28
Section 6.01 Events of Default................................ 28
Section 6.02 Incidents of Sale of Equipment Notes............. 29
Section 6.03 Judicial Proceedings Instituted by Trustee....... 30
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 6.04 Control by Certificateholders................... 31
Section 6.05 Waiver of Defaults.............................. 31
Section 6.06 Right of Certificateholders to Receive
Payments not to be Impaired..................... 32
Section 6.07 Certificateholders may not bring suit except
under Certain Conditions........................ 32
Section 6.08 Remedies Cumulative............................. 33
ARTICLE VII
THE TRUSTEE................................................................ 33
Section 7.01 Certain Duties and Responsibilities............. 33
Section 7.02 Notice of Defaults.............................. 34
Section 7.03 Certain Rights of Trustee....................... 35
Section 7.04 Not Responsible for Recitals or Issuance of
Certificates.................................... 35
Section 7.05 May hold Certificates........................... 36
Section 7.06 Money held in Trust............................. 36
Section 7.07 Compensation and Reimbursement.................. 36
Section 7.08 Corporate Trustee Required; Eligibility......... 37
Section 7.09 Resignation and Removal; Appointment of
Successor....................................... 38
Section 7.10 Acceptance of Appointment by Successor.......... 39
Section 7.11 Merger, Conversion, Consolidation or Succession
to Business..................................... 40
Section 7.12 Maintenance of Agencies......................... 40
Section 7.13 Money for Certificate Payments to be held in
Trust........................................... 42
Section 7.14 Registration of Equipment Notes in Trustee's
Name............................................ 42
Section 7.15 Representations and Warranties of Trustee....... 43
Section 7.16 Withholding Taxes; Information Reporting........ 43
Section 7.17 Trustee's Liens................................. 44
ARTICLE VIII
CERTIFICATEHOLDER'S LISTS AND REPORTS BY TRUSTEE........................... 44
Section 8.01 The Company to furnish Trustee with Names and
Addresses of Certificateholders................. 44
Section 8.02 Preservation of Information; Communication to
Certificateholders.............................. 44
Section 8.03 Reports by Trustee.............................. 45
Section 8.04 Reports by Company.............................. 45
ARTICLE IX
SUPPLEMENTAL TRUST AGREEMENTS.............................................. 46
Section 9.01 Supplemental Trust Agreements without Consent of
Certificateholders.............................. 46
Section 9.02 Supplemental Trust Agreements with Consent of
Certificateholders.............................. 46
Section 9.03 Documents Affecting Immunity or Indemnity....... 47
Section 9.04 Execution of Supplemental Trust Agreements...... 48
Section 9.05 Effect of Supplemental Trust Agreements......... 48
Section 9.06 Conformity to Trust Indenture Act............... 48
Section 9.07 Reference in Certificates to Supplemental
Trust Agreements................................ 48
ARTICLE X
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS................................ 48
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 10.01 Amendments and Supplements to Indenture and
other Note Documents............................. 48
ARTICLE XI
TERMINATION OF TRUST........................................................ 49
Section 11.01 Termination of the Trust......................... 49
ARTICLE XII
MISCELLANEOUS PROVISIONS.................................................... 50
Section 12.01 Limitation on Rights of Certificateholders....... 50
Section 12.02 Certificates Nonassessable and Fully Paid........ 50
Section 12.03 Notices.......................................... 50
Section 12.04 GOVERNING LAW.................................... 51
Section 12.05 Severability of Provisions....................... 51
Section 12.06 Trust Indenture Act.............................. 51
Section 12.07 Effect of Headings and Table of Contents......... 51
Section 12.08 Successors and Assigns........................... 51
Section 12.09 Benefits of Agreement............................ 51
Section 12.10 Legal Holidays................................... 51
Section 12.11 Counterparts..................................... 52
Signature................................................................... 56
</TABLE>
EXHIBITS
EXHIBIT A -- FORM OF CERTIFICATE
iii
<PAGE>
PASS THROUGH TRUST AGREEMENT
THIS PASS THROUGH TRUST AGREEMENT, dated as of August 1, 1998, by and
between General American Railcar Corporation II, a Delaware corporation, and
[The First National Bank of Chicago, a national banking association], as
Trustee, is made with respect to the formation from time to time of separate
General American Railcar Corporation II Pass Through Trusts, and the issuance
from time to time of separate series of Pass Through Certificates representing
fractional undivided interests in the respective Trusts.
WITNESSETH:
WHEREAS, from time to time General American Railcar Corporation II and
the Trustee shall enter into a Trust Supplement pursuant to which the Trustee
shall declare the creation of a separate Trust for the benefit of the Holders of
the series of Certificates to be issued in respect of such Trust, and the
initial Holders of the Certificates of such series, as the grantors of such
Trust, by their respective acceptances of the Certificates of such series, shall
join in the creation of such Trust with the Trustee;
WHEREAS, all Certificates to be issued in respect of each separate
Trust will be issued as a separate series pursuant to this Basic Agreement and
the related Trust Supplement, will evidence fractional undivided interests in
such Trust, and will have no rights, benefits or interest in respect of any
other separate Trust or the property held therein;
WHEREAS, one Owner Trustee or each of two or more Owner Trustees, each
acting on behalf of one or more Owner Participants, may issue Equipment Notes to
finance a portion of the purchase price of Equipment to be purchased by such
Owner Trustee and leased to the Company pursuant to the related Lease;
WHEREAS, each such Owner Trustee will issue Equipment Notes on a non-
recourse basis under a separate Indenture in order to finance a portion of the
purchase price paid, or to be paid, for such Equipment;
WHEREAS, from time to time, pursuant to the terms and conditions of
this Basic Agreement as supplemented by a separate Trust Supplement with respect
to a separate Trust to be formed hereunder, the Trustee shall purchase one or
more series of Equipment Notes of the same tenor as the series of Certificates
to be issued in respect of such Trust and shall hold such Equipment Notes in
trust for the benefit of the Certificateholders of such Trust;
WHEREAS, to facilitate the sale of Equipment Notes to the Trustee on
behalf of each Trust created from time to time pursuant to this Basic Agreement
and the related Trust Supplement, General American Railcar Corporation II has
duly authorized the execution and delivery of this Basic Agreement and each
Trust Supplement as the "issuer," as such term is defined in and solely for
purposes of the Securities Act of 1933, as amended, of the Certificates to be
issued in respect of each Trust and as the "obligor," as such term is defined in
and solely
<PAGE>
for purposes of the Trust Indenture Act with respect to all such Certificates
and is undertaking to perform certain administrative and ministerial duties
hereunder and is also undertaking to pay the fees and expenses of the Trustee;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
and of the other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. For all purposes of this Basic Agreement,
-----------
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms used herein that are defined in this Article have the
meanings assigned to them in this Article, and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all references in this Basic Agreement to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Basic Agreement; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Basic Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Acceptable GIC Provider" shall have the meaning specified in Section 1.1
-----------------------
of the Intercreditor Agreement.
"Acceptable Letter of Credit" shall have the meaning specified in Section
---------------------------
1.1 of the Intercreditor Agreement.
"Act" when used with respect to any Holder, has the meaning specified in
---
Section 1.04.
"Affiliate" of any specified Person, means any other Person which directly
---------
or indirectly controls or is controlled by, or is under common control with,
such specified Person. For the purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
2
<PAGE>
"Authorized Agent" when used with respect to the Certificates of any
----------------
series, means any Paying Agent or Registrar for the Certificates of such series.
"Avoidable Tax" has the meaning specified in Section 7.09(e).
"Basic Agreement" means this Pass Though Trust Agreement, as the same
---------------
may from time to time be supplemented, amended or modified, but does not include
any Trust Supplement.
"Business Day" means any day other than a Saturday, a Sunday, or a day
------------
on which commercial banking institutions are authorized or obligated by law,
executive order, or governmental decree to be closed in New York, New York,
Chicago, Illinois, the city and state in which the Corporate Trust Office of the
Indenture Trustee is located or the city and state in which the Corporate Trust
Office of the Trustee is located.
"Cede & Co." means Cede & Co., as nominee for DTC.
----------
"Certificate" means any one of the certificates executed and
-----------
authenticated by the Trustee, substantially in the form of Exhibit A hereto or
in the form provided in the applicable Trust Supplement.
"Certificate Account" when used with respect to the Certificates of
-------------------
any series, means the account or accounts created and maintained for such series
pursuant to Section 4.01(a) and the related Trust Supplement.
"Certificateholder" or "Holder" when used with respect to the
----------------- ------
Certificates of any series, means the Person in whose name a Certificate of such
series is registered in the Register for Certificates of such series.
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects, directly or indirectly, book-entry transfers and pledges of
securities deposited with the Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral Agent" shall have the meaning specified in the
----------------
Intercreditor Agreement.
"Collection Account" shall have the meaning specified in Section 1.1
------------------
of the Intercreditor Agreement.
3
<PAGE>
"Commission" means the Securities and Exchange Commission, as from
----------
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties on such date.
"Company" means General American Railcar Corporation II, a Delaware
-------
corporation.
"Corporate Trust Office" with respect to the Trustee, the Owner
----------------------
Trustee and the Indenture Trustee, means the office of such trustee in the city
at which at any particular time its corporate trust business shall be
principally administered.
"Cut-Off-Date" when used with respect to the Certificates of any
------------
series, means the date designated as such in the Trust Supplement of such
series.
"Default" means any event which is, or with the giving of notice or
-------
the passage of time or both would become, an Event of Default.
"Definitive Certificates" when used with respect to the Certificates
-----------------------
of any series, has the meaning specified in Section 3.09.
"Direction" has the meaning specified in Section 1.04(c).
---------
"DTC" means The Depository Trust Company and any successor clearing
---
agency.
"Equipment" means items of railroad rolling stock which are the
---------
subject of any Lease.
"Equipment Note" when used with respect to any Trust, means any one of
--------------
the Equipment Notes (as defined in the applicable Indenture) described in, or on
a schedule attached to, the Trust Supplement in respect of such Trust and to be
held by the Trustee as a part of such Trust, including any Equipment Note (as so
defined) issued under the applicable Indenture in replacement or substitution
therefor.
"Escrow Account" when used with respect to the Certificates of any
--------------
series, has the meaning specified in Section 2.02(b).
"Escrowed Funds" when used with respect to any Trust, has the meaning
--------------
specified in Section 2.02(b).
"Event of Default" when used with respect to any Trust, means an event
----------------
described in Section 6.01.
4
<PAGE>
"Final Legal Distribution Date," with respect to the Certificates of
-----------------------------
any series, means the date designated as such in the Trust Supplement
establishing such series.
"Fractional Undivided Interest" means the fractional undivided
-----------------------------
interest in a Trust that is evidenced by a Certificate relating to such Trust.
"Global Certificate" means a Certificate evidencing all or part of the
------------------
Certificates issued to the Clearing Agency or its nominee, and registered in the
name of such Clearing Agency.
"Indenture" when used with respect to any Trust, means each of the one
---------
or more separate trust indenture and security agreements described in, or on a
schedule attached to, the Trust Supplement relating to such Trust and which
relates to a series of Equipment Notes to be held in such Trust, as such
agreement may be amended or supplemented in accordance with its terms; and
Indentures means all of such agreements.
"Indenture Event of Default" when used with respect to any Indenture,
--------------------------
means any Indenture Event of Default (as such term is defined in such
Indenture).
"Indenture Trustee" when used with respect to any Equipment Note or
-----------------
the Indenture applicable thereto, means the bank or trust company designated as
indenture trustee under such Indenture; and any successor to such Indenture
Trustee as such trustee; and Indenture Trustees means all of the Indenture
Trustees under the Indentures.
"Initial Regular Distribution Date" when used with respect to the
---------------------------------
Certificates of any series means the first Regular Distribution Date on which a
Regular Payment is to be made.
"Intercreditor Agreement" shall mean the Collateral Agency and
-----------------------
Intercreditor Agreement dated as of August 1, 1998 among the Company, The First
National Bank of Chicago, as Collateral Agent and Indenture Trustee, [Owner
Trustee], as Owner Trustee, General American Transportation Corporation, as
Manager and Insurance Manager and certain other Persons.
"Issuance Date" when used with respect to any Trust, means the date of
-------------
the issuance of the series of Certificates of such Trust.
"Lease" means any lease between an Owner Trustee, as the lessor, and
-----
the Company, as the lessee, described in an Indenture, as each such lease may be
amended or supplemented in accordance with its respective terms; and Leases
means all of such Leases.
"Monthly Transfer Date" shall have the meaning specified in Section
---------------------
1.1 of the Intercreditor Agreement.
5
<PAGE>
"Note Documents" when used with respect to any Equipment Note, means
--------------
the applicable Indenture, Participation Agreement and Lease.
"Officer's Certificate" means a certificate signed (i) in the case of
---------------------
a corporation by the President, any Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership by the Chairman of the Board, the President or any
Vice President, the Treasurer or an Assistant Treasurer of a corporate general
partner, and (iii) in the case of the Owner Trustee or the Indenture Trustee, a
certificate signed by a Responsible Officer of the Owner Trustee or Indenture
Trustee.
"Opinion of Counsel" means an opinion in writing, signed by legal
------------------
counsel, who may be (a) the General Counsel or Assistant General Counsel of the
Company or (b) such other counsel designated by the Company, the Owner Trustee
or the Indenture Trustee, whether or not such counsel is an employee of any of
them and who shall be acceptable to the Trustee.
"Outstanding" when used with respect to Certificates of any series,
-----------
means, as of the date of determination, all Certificates of such series
theretofore authenticated and delivered under this Basic Agreement and the
related Trust Supplement, except:
(i) Certificates of such series theretofore canceled by the
Registrar or delivered to the applicable Trustee or the Registrar for
cancellation;
(ii) Certificates of such series for which money in the full
amount has been theretofore deposited with the applicable Trustee or any Paying
Agent in trust for the Certificateholders of such series as provided in Section
4.01 pending distribution of such money to the Certificateholders of such series
pursuant to the final distribution payment to be made pursuant to Section 11.01
hereof; and
(iii) Certificates of such series in exchange for or in lieu of
which other Certificates of such series have been authenticated and delivered
pursuant to this Basic Agreement and the related Trust Supplement.
"Owner Participant" means the "Owner Participant" referred to in the
-----------------
applicable Indenture and any permitted successor or assign of any such Owner
Participant; and Owner Participants at any time of determination means all of
the Owner Participants then referred to in the Indentures.
"Owner Trustee" when used with respect to any Indenture or the
-------------
Equipment Notes, the Lease or the Equipment related thereto, means the "Owner
Trustee" referred to in such Indenture, not in its individual capacity but
solely as trustee, and each other Person which may from time to time be acting
as Owner Trustee in accordance with the provisions of the related
6
<PAGE>
Note Documents; and Owner Trustees means all of the Owner Trustees party to any
of the respective Indentures.
"Participation Agreement" means any participation or similar agreement
-----------------------
described in an Indenture providing for, among other things, the issuance of
Equipment Notes pursuant to such Indenture to finance a portion of the purchase
price of Equipment to be purchased by an Owner Trustee and leased to the Company
pursuant to a Lease; and Participation Agreements means all such agreements.
"Paying Agent" when used with respect to the Certificates of any
------------
series, means the paying agent maintained and appointed for the Certificates of
such series pursuant to Section 7.12.
"Permitted Government Investment" means obligations of the United
-------------------------------
States of America and agencies thereof for the payment of which the full faith
and credit of the United States of America is pledged, maturing in not more than
60 days or such lesser time as is necessary for payment of any Special Payments
on a Special Distribution Date.
"Person" means any individual, corporation, partnership, association,
------
trust, unincorporated organization, or government or any agency or political
subdivision thereof.
"Pool Balance" when used with respect to any Trust, means, as of any
------------
date, the aggregate unpaid principal amount of the Equipment Notes held in such
Trust on such date plus the amount of the principal payments on such Equipment
Notes held by the Trustee and not yet distributed plus the amount of any moneys
held in the related Escrow Account (other than earnings thereon). The Pool
Balance as of any Regular Distribution Date or Special Distribution Date, if
any, with respect to such Trust shall be computed after giving effect to the
payment of principal, if any, on the Equipment Notes and distribution thereof to
be made on that date.
"Pool Factor" when used with respect to any Trust, means, as of any
-----------
date, the quotient (rounded to the seventh decimal place) computed by dividing
(i) the Pool Balance of such Trust by (ii) the aggregate original principal
amount of the Equipment Notes held in such Trust. The Pool Factor, as of any
Regular Distribution Date or Special Distribution Date, if any, with respect to
such Trust shall be computed after giving effect to the payment of principal, if
any, on the Equipment Notes and distribution thereof to be made on that date.
"Postponed Notes" when used with respect to any Trust or the related
---------------
series of Certificates, means the Equipment Notes to be held in such Trust as to
which a Postponement Notice shall have been delivered pursuant to Section
2.02(b).
"Postponement Notice" when used with respect to any Trust or the
-------------------
related series of Certificates, means a certificate of the Company signed by an
officer of the Company
7
<PAGE>
(1) requesting that the Trustee temporarily postpone purchase of the related
Equipment Notes to a date later than the Issuance Date of such series of
Certificates, (2) identifying the amount of the purchase price of each such
Equipment Note and the aggregate purchase price of all such Equipment Notes and
(3) with respect to such Equipment Notes referred to in Clause (1), either (a)
setting or resetting a new Transfer Date (which shall be on or prior to the
applicable Cut-off Date) for payment by the Trustee of such purchase price and
issuance by the Owner Trustee of the related Equipment Note, or (b) indicating
that such new Transfer Date (which shall be on or prior to the applicable Cut-
off Date) will be set by subsequent written notice not less than one Business
Day prior to such new Transfer Date.
"Record Date" when used with respect to any Trust or the related
-----------
series of Certificates, means (i) for Regular Payments to be distributed on any
Regular Distribution Date, other than the final distribution, the day (whether
or not a Business Day) which is 15 days preceding such Regular Distribution
Date, and (ii) for Special Payments to be distributed on any Special
Distribution Date, if any, other than the final distribution, the day (whether
or not a Business Day) which is 15 days preceding such Special Distribution
Date.
"Register" or "Registrar" when used with respect to the Certificates
-------- ---------
of any series, means the register maintained and the registrar appointed
pursuant to Sections 3.03 and 7.12, respectively.
"Regular Distribution Date" when used with respect to distributions
-------------------------
from any Trust of Regular Payments, means each date designated as such in the
related Trust Supplement, until payment of all the Regular Payments to be made
under the Equipment Notes held in such Trust has been made.
"Regular Payment" when used with respect to a Regular Distribution
---------------
Date, means any payment (other than a Special Payment) of interest on or
principal and interest on an Equipment Note, due from the Owner Trustee which
issued the Equipment Note, which payment represents the payment of a regularly
scheduled installment of principal at the stated maturity of such installment of
principal on such Equipment Note or, the payment of regularly scheduled interest
accrued on such Equipment Note, or both.
"Request" means a request by the Company setting forth the subject
-------
matter of the request accompanied by an Officer's Certificate and an Opinion of
Counsel as provided in Section 1.02 hereof.
"Responsible Officer" when used with respect to the initial Trustee,
-------------------
the initial Indenture Trustee or the Owner Trustee means any officer in the
Corporate Trust Office; when used with respect to any successor Trustee, or
successor Indenture Trustee, means the chairman or vice-chairman of the board of
directors or trustees, the chairman or vice-chairman of the executive or
standing committee of the board of directors or trustees, the president, the
chairman
8
<PAGE>
of the committee on trust matters, any vice-president, any second vice-
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the comptroller and any assistant comptroller; and, when used
with respect to the Trustee and the Indenture Trustee, also means any other
officer of the Trustee or the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, when used with respect to the Trustee, Indenture Trustee or Owner Trustee
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Special Distribution Date" means each date on which a Special Payment
-------------------------
is to be distributed, as specified in the applicable Trust Supplement.
"Special Payment" when used with respect to a Special Distribution
---------------
Date, means (i) any payment of principal, premium, if any, and interest on an
Equipment Note resulting from the prepayment or purchase of such Equipment Note
held in a Trust, (ii) any payment of principal and interest (including any
interest accruing upon default) on, or any other amount in respect of, an
Equipment Note upon an Indenture Event of Default in respect thereof or upon an
acceleration under the Indenture relating thereto, (iii) any Regular Payment or
any Special Payment referred to in clause (i) of this definition which is not in
fact paid within five days of the Regular Distribution Date or Special
Distribution Date applicable thereto, (iv) the amounts required to be
distributed by the penultimate paragraph of Section 2.02(b) or (v) any proceeds
from the sale of any Equipment Note by the Trustee pursuant to Article VI
hereof; and Special Payments means all of such Special Payments.
"Special Payments Account" when used with respect to the Certificates
------------------------
of any series, means the account or accounts created and maintained for such
series pursuant to Section 4.01(b) and the related Trust Supplement.
"Specified Investments" when used with respect to any Trust, means,
---------------------
unless otherwise specified in the related Trust Supplement (i) direct
obligations of, and obligations fully guaranteed as to timely payment by, the
United States of America (having remaining maturities of no more than the number
of remaining days until the next Monthly Transfer Date), (ii) commercial paper
(having remaining maturities of no more than the number of days remaining until
the next Monthly Transfer Date having, at the time of the investment or
contractual commitment to invest therein, a rating from each of Standard &
Poor's Ratings Group and Moody's Investors Service, Inc. in its highest
investment category), (iii) a Guaranteed Investment Contract (a "GIC") from an
Acceptable GIC Provider, (iv) a GIC provided by GATX Corporation, provided that
such obligations are supported by an Acceptable Letter of Credit, (v)
investments in funds rated in the highest investment category by each of
Standard & Poor's Ratings Group and Moody's Investors Service, Inc. and (vi)
repurchase agreements and similar short term instruments.
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"Transfer Date" has the meaning assigned to that term or any of the
-------------
terms "Delivery Date," "Funding Date" or "Closing Date" in a Participation
Agreement.
"Trust" means the trust created by a Trust Supplement, the estate of
-----
which consists of the related Trust Property.
"Trustee" means the institution executing this Basic Agreement as
-------
Trustee, or its successor in interest, and any successor trustee appointed as
provided herein.
"Trust Indenture Act" except as otherwise provided in Section 9.06,
-------------------
means the Trust Indenture Act of 1939 as in force at the date as of which this
Basic Agreement was executed.
"Trust Property" when used with respect to any Trust, means the
--------------
Equipment Notes held as the property of such Trust and all monies at any time
paid thereon and all monies due and to become due thereunder, funds from time to
time deposited in the related Escrow Account, the related Certificate Account
and the related Special Payments Account and any proceeds from the sale by the
Trustee pursuant to Article VI hereof of any such Equipment Note.
"Trust Supplement" means an agreement supplement hereto pursuant to
----------------
which (i) a separate Trust is created for the benefit of the Holders of the
Certificates of a series, (ii) the issuance of the Certificates of such series
representing Fractional Undivided Interests in such Trust is authorized, and
(iii) the terms of the Certificates of such series are established, as such
agreement may from time to time be supplemented, amended or modified.
Section 1.02 Compliance Certificates and Opinions. Upon any
------------------------------------
application or request (except with respect to matters set forth in Article II)
by the Company, any Owner Trustee or any Indenture Trustee to the Trustee to
take any action under any provision of this Basic Agreement or any Trust
Supplement, the Company, such Owner Trustee or such Indenture Trustee, as the
case may be, shall furnish to the Trustee (i) an Officer's Certificate stating
that, in the opinion of the signer, all conditions precedent, if any, provided
for in this Basic Agreement or the applicable Trust Supplement relating to the
proposed action have been complied with, and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Basic Agreement or any Trust Supplement relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Basic Agreement or any Trust
Supplement shall include:
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(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein and in
the applicable Trust Supplement relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.03 Form of Documents Delivered to Trustee. In any case
--------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any Opinion of Counsel stated to be based on the opinion of other
counsel shall be accompanied by a copy of such other opinion.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Basic Agreement or any Trust Supplement, they may, but
need not, be consolidated and form one instrument.
Section 1.04 Acts of Certificateholders. (a) Any direction,
--------------------------
consent, waiver or other action provided by this Basic Agreement or any Trust
Supplement to be given or taken by Certificateholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders in person or by an agent or proxy duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company or any
Indenture Trustee. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Certificateholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Basic Agreement or any Trust Supplement
and (subject to Section 7.01)
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conclusive in favor of the Trustee, the Company and the Indenture Trustee, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or such other officer and where such execution is by
an officer of a corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other reasonable manner
which the Trustee deems sufficient.
(c) In determining whether the Certificateholders of the requisite
Fractional Undivided Interests of Certificates of any series Outstanding have
given any direction, consent or waiver (a "Direction"), under this Basic
Agreement or any Trust Supplement, Certificates owned by the Company, any
related Owner Trustee, any related Owner Participant or any Affiliate of any
such Person shall be disregarded and deemed not to be Outstanding for purposes
of any such determination. In determining whether the Trustee shall be
protected in relying upon any such Direction, only Certificates of such series
which the Trustee knows to be so owned shall be so disregarded. Notwithstanding
the foregoing, (i) if any such Person owns 100% of the Certificates of any
series Outstanding, such Certificates shall not be so disregarded as aforesaid,
and (ii) if any amount of Certificates of such series so owned by any such
Person have been pledged in good faith, such Certificates shall not be
disregarded as aforesaid if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Certificates and that
the pledgee is not the Company, any related Owner Trustee, any related Owner
Participant or any Affiliate of any such Persons.
(d) The Company may at its option by delivery of an Officer's
Certificate to the Trustee set a record date to determine the Certificateholders
entitled to give any consent, request, demand, authorization, Direction, notice,
waiver or other Act. Notwithstanding Section 316(c) of the Trust Indenture Act,
such record date shall be the record date specified in such Officer's
Certificate which shall be a date not more than 30 days prior to the first
solicitation of Certificateholders in connection therewith. If such a record
date is fixed, such consent, request, demand, authorization, Direction, notice,
waiver or other Act may be given before or after such record date, but only the
Certificateholders of record of the applicable series at the close of business
on such record date shall be deemed to be Certificateholders for the purposes of
determining whether Certificateholders of the requisite proportion of
Outstanding Certificates of such series have authorized or agreed or consented
to such consent, request, demand, authorization, Direction, notice, waiver or
other Act, and for that purpose the Outstanding Certificates of such series
shall be computed as of such record date; provided that
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no such consent, request, demand, authorization, Direction, notice, waiver or
other Act by the Certificateholders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Basic Agreement not later than one year after such record date.
(e) Any Direction, consent, waiver or other action by the
Certificateholder of any Certificate shall bind the Certificateholder of every
Certificate issued upon the transfer thereof or in exchange therefor or in lieu
thereof, whether or not notation of such action is made upon such Certificate.
(f) Except as otherwise provided in Section 1.04(c), Certificates of
any series owned by or pledged to any Person shall have an equal and
proportionate benefit under the provisions of this Basic Agreement and the
related Trust Supplement, without preference, priority, or distinction as among
all of the Certificates of such series.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES
ACQUISITION OF EQUIPMENT NOTES
Section 2.01 Amount Unlimited; Issuable in Series. (a) The
------------------------------------
aggregate principal amount of Certificates of each series which may be
authenticated and delivered under this Basic Agreement is unlimited. The
Certificates may be issued from time to time in one or more series and shall be
designated generally as the "Pass Through Certificates," with such further
designations added or incorporated in such title for the Certificates of each
series as specified in the related Trust Supplement. Each Certificate shall
bear upon its face the designation so selected for the series to which it
belongs. All Certificates of the same series shall be substantially identical
except that the Certificates of a series may differ as to denomination and as
may otherwise be provided in the Trust Supplement establishing the Certificates
of such series. Each separate series of Certificates issued pursuant to this
Basic Agreement and related Trust Supplement will evidence Fractional Undivided
Interests in the separate Trust formed by such Trust Supplement, and will have
no rights, benefits or interests in respect of any other separate Trust or the
Trust Property held therein. All Certificates of the same series issued under
this Basic Agreement and the related Trust Supplement shall be in all respects
equally and ratably entitled to the benefits of this Basic Agreement and the
related Trust Supplement without preference, priority, or distinction on account
of the actual time or times of authentication and delivery, all in accordance
with the terms and provisions of this Basic Agreement and the related Trust
Supplement.
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(b) The following matters shall be established with respect to the
Certificates of each series issued hereunder by a Trust Supplement executed and
delivered by and between the Company and the Trustee:
(1) the formation of the Trust as to which the Certificates
represent Fractional Undivided Interests and its designation (which
designation shall distinguish such Trust from each other Trust created
under this Basic Agreement and a Trust Supplement);
(2) the specific title of the Certificates (which title shall
distinguish the Certificates of the series from each other series of
Certificates issued under this Basic Agreement);
(3) any limit upon the aggregate principal amount of the
Certificates which may be authenticated and delivered under this Basic
Agreement (which limit shall not pertain to Certificates authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Certificates of the series pursuant to Sections 3.03, 3.04 and
3.07);
(4) the Cut-Off Date, if any, with respect to the Certificates
and the related Trust;
(5) the Regular Distribution Dates applicable to the
Certificates and the related Trust;
(6) the Special Distribution Dates applicable to the
Certificates and the related Trust;
(7) the Final Legal Distribution Date with respect to the
Certificates of such series;
(8) if other than as provided in Section 7.12, the Registrar or
the Paying Agent for the Certificates of such series, including any Co-
Registrar or additional Paying Agent;
(9) if other than as provided in Section 3.01, the denominations
in which the Certificates of such series shall be issuable;
(10) the specific form of the Certificates of such series
(including the interest rate applicable thereto and any provisions for
increasing such rate upon the occurrence of one or more specified events or
upon the failure of one or more specified events to occur) (or, in the case
of any Certificates denominated in a currency other than
14
<PAGE>
United States dollars and if other than as provided in Section 3.01,
whether and the circumstances under which beneficial owners of interests in
such Certificates in permanent global form may exchange such interests for
Certificates of such series and of like tenor of any authorized form and
denomination);
(11) a description of the Equipment Notes to be acquired and held
in the Trust formed by such Trust Supplement and of the related Equipment
and Note Documents;
(12) provisions with respect to the terms for which the
definitions set forth in Article I hereof permit or require further
specification in the related Trust Supplement; and
(13) any other terms of the Certificates of such series (which
terms shall not be inconsistent with the provisions of the Trust Indenture
Act or adversely affect the interest of the Certificateholders of any
series Outstanding at the time), including any terms which may be required
or advisable under United States laws or regulations or advisable in
connection with the marketing of Certificates of the series.
(c) At any time and from time to time after the execution and
delivery of this Basic Agreement and a Trust Supplement forming a Trust and
establishing the terms of Certificates of a series, Certificates of such series
shall be executed, authenticated and delivered by the Trustee to the Person or
Persons specified by the Company upon request of the Company and upon
satisfaction of any conditions precedent set forth in the related Trust
Supplement.
Section 2.02 Acquisition of Equipment Notes. (a) Certificates of a
------------------------------
series executed, authenticated and delivered by the Trustee upon request of the
Company in accordance with Section 2.01(c) shall equal in the aggregate the
aggregate principal amount of the Equipment Notes to be purchased by the Trustee
pursuant to the related Participation Agreements and shall evidence the entire
ownership of the related Trust. The Trustee shall issue and sell such
Certificates, in authorized denominations and in such Fractional Undivided
Interests, so as to result in the receipt of consideration in an amount equal to
the aggregate principal amount of such Equipment Notes and, concurrently
therewith, the Trustee shall purchase, pursuant to the terms and conditions of
the Participation Agreements, the Equipment Notes (except Postponed Notes, if
any) at a purchase price equal to the amount of such consideration so received.
Except as provided in Sections 3.03, 3.04 and 3.07 hereof, the Trustee shall not
execute, authenticate or deliver Certificates of such series in excess of the
aggregate amount specified in this paragraph. The provisions of this subsection
(a) are subject to the provisions of subsection (b) below.
(b) Unless otherwise provided in the applicable Trust Supplement, if
on or prior to the Issuance Date with respect to a series of Certificates and
the related Trust the
15
<PAGE>
Company shall deliver to the Trustee a Postponement Notice relating to one or
more Postponed Notes, the Trustee shall postpone the purchase of the related
Postponed Notes and shall deposit into an escrow account (the "Escrow Account")
to be maintained as a part of such Trust an amount equal to the purchase price
of such Postponed Notes (the "Escrowed Funds"). The Escrowed Funds so deposited
shall be invested by the Trustee at the direction and risk of, and for the
benefit of, the Company in Specified Investments (i) maturing no later than any
scheduled Transfer Date relating to such series of Certificates, or (ii) if no
such Transfer Date has been scheduled, maturing on the next Business Day, or
(iii) if the Company has given notice to the Trustee that any Postponed Notes
will not be issued, with respect to the portion of the Escrowed Funds relating
to such Postponed Notes, maturing on the next applicable Special Distribution
Date, if such investments are reasonably available for purchase. The Trustee
shall make withdrawals from the Escrow Account only as provided in this Basic
Agreement and the related Trust Supplement.
Upon request of the Company on one or more occasions, and the
satisfaction of the closing conditions specified in the applicable Participation
Agreements on or prior to the related Cut-Off Date, the Trustee shall purchase
the applicable Postponed Notes with the Escrowed Funds. The purchase price shall
equal the principal amount of such Postponed Notes. On the Initial Regular
Distribution Date, the Company will pay (in immediately available funds) to the
Trustee an amount equal to the interest that would have accrued on any Postponed
Notes purchased after the Issuance Date if such Postponed Notes had been
purchased on the Issuance Date, from the Issuance Date to, but not including,
the date of the purchase of such Postponed Notes by the Trustee.
The Trustee shall hold all such Specified Investments until the
maturity thereof and will not sell or otherwise transfer such Specified
Investments. If Specified Investments held in the Escrow Account mature prior
to any applicable Transfer Date, any proceeds received on the maturity of such
Specified Investments (other than any earnings thereon) shall be reinvested by
the Trustee at the direction and risk of, and for the benefit of, the Company in
Specified Investments maturing as provided in the first paragraph of this
subsection (b).
Any earnings on Specified Investments received from time to time by
the Trustee shall be promptly distributed to the Collateral Agent for deposit to
the Collection Account. Any losses realized on such Specified Investments shall
be charged to the applicable account.
If the Company notifies the Trustee prior to the applicable Cut-Off
Date that any of the Postponed Notes will not be issued on or prior to the Cut-
Off Date for any reason, on the next Special Distribution Date for the series of
Certificates related to such Postponed Notes occurring more than 10 days
following the date of such notice (i) the Company shall pay to the Trustee for
deposit in the related Special Payments Account, in immediately available funds,
an amount equal to the interest that would have accrued on the Postponed Notes
designated in such notice at a rate equal to the interest rate applicable to
such series of Certificates from the
16
<PAGE>
Issuance Date to, but not including, such Special Distribution Date and (ii) the
Trustee shall transfer an amount equal to that amount of Escrowed Funds that
would have been used to purchase the Postponed Notes designated in such notice
and the amount paid by the Company pursuant to the immediately preceding clause
(i) to the related Special Payments Account for distribution as a Special
Payment in accordance with the provisions hereof.
If, on the applicable Cut-Off Date, an amount equal to less than all
of the Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph has been used to purchase Postponed Notes, on the Special
Distribution Date for the series of Certificates related to such Postponed Notes
next following such Cut-Off Date by more than 10 days (i) the Company shall pay
to the Trustee for deposit in the related Special Payments Account, in
immediately available funds, an amount equal to the interest that would have
accrued on such Postponed Notes contemplated to be purchased with such unused
Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) but not so purchased at a rate equal to the interest rate
applicable to such series of Certificates from the Issuance Date to, but not
including, such Special Distribution Date and (ii) the Trustee shall transfer
such unused Escrowed Funds and the amount paid by the Company pursuant to the
immediately preceding clause (i) to such Special Payments Account for
distribution as a Special Payment in accordance with the provisions hereof.
Section 2.03 Acceptance by Trustee. The Trustee, upon the execution and
---------------------
delivery of a Trust Supplement creating a Trust and a series of Certificates,
shall acknowledge its acceptance of all right, title and interest in and to the
Equipment Notes to be acquired pursuant to Section 2.02 hereof and the
Participation Agreements and shall declare that the Trustee holds and will hold
such right, title, and interest, together with all other property constituting
the Trust Property, for the benefit of all present and future Certificateholders
of such series, upon the trusts herein and in such Trust Supplement set forth.
By its payment for and acceptance of each Certificate of such series issued to
it under this Basic Agreement and such Trust Supplement, each initial
Certificateholder of such series as grantor of the Trust thereby joins in the
creation and declaration of such Trust.
Section 2.04 Limitation of Powers. Each Trust shall be constituted
--------------------
solely for the purpose of making the investment in the Equipment Notes provided
for in the related Trust Supplement, and, except as set forth herein or in such
Trust Supplement, the Trustee shall not be authorized or empowered to acquire
any other investments or engage in any other activities and, in particular, the
Trustee shall not be authorized or empowered to do anything that would cause the
Trust to fail to qualify as a "grantor trust" for federal income tax purposes
(including, as subject to this restriction, acquiring any Equipment (as defined
in the related Indenture) by bidding the Equipment Notes or otherwise, or taking
any action with respect to any such Equipment once acquired).
17
<PAGE>
ARTICLE III
THE CERTIFICATES
Section 3.01 Form, Denomination and Execution of Certificates. (a) The
------------------------------------------------
Certificates of each series shall be issued in fully registered form without
coupons and shall be substantially in the form attached hereto as Exhibit A,
with such omissions, variations and insertions as are permitted by this Basic
Agreement or the related Trust Supplement, and may have such letters, numbers or
other marks of identification and such legends or endorsements printed,
lithographed or engraved thereon, as may be required to comply with the rules of
any securities exchange on which such Certificates may be listed or to conform
to any usage in respect thereof, or as may, consistently herewith, be prescribed
by the Trustee or by the officer executing such Certificates, such determination
by said officer to be evidenced by his signing the Certificates. Any portion of
the text of any Certificate may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Certificate. The definitive
Certificates of such series shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the
Certificates may be listed, all as determined by the officer executing such
Certificates, as evidenced by his execution of such Certificates.
(b) Except as otherwise provided in the related Trust Supplement,
the Certificates of each series shall be issued in minimum denominations of
$100,000 or integral multiples of $1,000 in excess thereof, except that one
Certificate of each series may be issued in a denomination of less than
$100,000.
(c) The Certificates of each series shall be executed on behalf
of the Trustee by manual or facsimile signature of a Responsible Officer of the
Trustee. Certificates of any series bearing the manual or facsimile signature of
an individual who was, at the time when such signature was affixed, authorized
to sign on behalf of the Trustee shall be valid and binding obligations of the
Trustee, notwithstanding that such individual has ceased to be so authorized
prior to the authentication and delivery of such Certificates or did not hold
such office at the date of such Certificates. No Certificate of any series shall
be entitled to any benefit under this Basic Agreement, or be valid for any
purpose unless there appears on such Certificate a certificate of authentication
substantially in the form set forth in Exhibit A hereto executed by the Trustee
by manual signature, and such certificate of authentication upon any Certificate
shall be conclusive evidence, and the only evidence, that such Certificate has
been duly authenticated and delivered hereunder. All Certificates of any series
shall be dated on the date of their authentication.
Section 3.02 Authentication of Certificates. (a) The Trustee shall duly
------------------------------
authenticate and deliver Certificates of each series in authorized denominations
equaling in the aggregate the aggregate principal amount of the Equipment Notes
to be purchased by the Trustee pursuant to the related Participation Agreements,
and evidencing the entire ownership of the related Trust.
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(b) No Certificate shall be entitled to any benefit under this
Basic Agreement or the related Trust Supplement or be valid or obligatory for
any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized signatories, and such
executed certificate upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been duly authenticated and delivered
hereunder.
Section 3.03 Registration of Transfer and Exchange of Certificates. The
-----------------------------------------------------
Trustee shall cause to be kept at the office or agency to be maintained by it in
accordance with the provisions of Section 7.12 a register (the "Register") for
each series of Certificates in which, subject to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of Certificates
of such series and of transfers and exchanges of such Certificates as herein
provided. The Trustee shall initially be the registrar (the "Registrar") for the
purpose of registering Certificates of each series and transfers and exchanges
of such Certificates as herein provided.
If a Person other than the Trustee is appointed by the Company as the
Registrar, the Company will give the Trustee prompt written notice of the
appointment of such Registrar and of the location, and any change in the
location, of the Register, and the Trustee shall have the right to inspect the
Register at all reasonable times and to obtain copies thereof, and the Trustee
shall have the right to conclusively rely upon an Officer's Certificate executed
on behalf of the Registrar as to the names and addresses of the
Certificateholders and the principal amounts and numbers of such Certificates.
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office or such other office or agency, the Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of like series, in authorized
denominations of a like aggregate Fractional Undivided Interest.
At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of like series, in authorized denominations and of a like
aggregate Fractional Undivided Interest, upon surrender of the Certificates to
be exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange, the Trustee shall execute, authenticate and deliver
the Certificates that the Certificateholder making the exchange is entitled to
receive.
All Certificates issued upon any registration of transfer or exchange of
Certificates shall be valid obligations of the Trust, evidencing the same
interest therein, and entitled to the same benefits under this Basic Agreement
and the related Trust Supplement, as the Certificates surrendered upon such
registration of transfer or exchange.
Every Certificate presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer stating the name of the proposed transferee and otherwise complying
with the terms of this Basic Agreement and the
19
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related Trust Supplement, including evidence of compliance with any restrictions
on transfer, in form satisfactory to the Trustee and the Registrar duly executed
by the Certificateholder thereof or its attorney duly authorized in writing. No
such transfer shall be effected until, and such transferee shall succeed to the
rights of a Certificateholder only upon, final acceptance and registration of
the transfer by the Registrar in the Register. Prior to the registration of any
transfer by a Certificateholder as provided herein, the Trustee shall treat the
Person in whose name the Certificate is registered as the owner thereof for all
purposes, and the Trustee shall not be affected by notice to the contrary. When
Certificates are presented to the Registrar with a request to register the
transfer or to exchange them for an equal face amount of Certificates of other
authorized denominations, the Registrar shall register the transfer or make the
exchange as requested if its requirements for such transactions are met. To
permit registrations of transfers and exchanges in accordance with the terms,
conditions and restrictions hereof, the Trustee shall execute and authenticate
Certificates at the Registrar's request.
No service charge shall be made to a Certificateholder for any registration
of transfer or exchange of Certificates, but the Trustee shall require payment
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of Certificates. All Certificates
surrendered for registration of transfer and exchange shall be canceled and
subsequently destroyed by the Trustee.
Notwithstanding the foregoing, any Global Certificate shall be exchangeable
pursuant to this Section 3.03 or Section 3.04 or 3.07 for Certificates
registered in the name of, and a transfer of a Global Certificate may be
registered to, any Person other than the Clearing Agency for such Certificate or
its nominee only pursuant to Section 3.09 of this Basic Agreement.
Notwithstanding any other provision of this Basic Agreement, any Certificate
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Global Certificate shall also be a Global Certificate
and bear the legend specified in Exhibit A hereto except for any Certificate
authenticated and delivered in exchange for, or upon registration of transfer
of, a Global Certificate pursuant to Section 3.09
Section 3.04 Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
-------------------------------------------------
any mutilated Certificate is surrendered to the Registrar, or the Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save each of them
harmless, then, in the absence of notice to the Registrar or the Trustee that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate or
Certificates of like series, in authorized denominations and of like Fractional
Undivided Interest. In connection with the issuance of any new Certificate under
this Section 3.04, the Trustee shall require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee
and the Registrar) connected therewith. Any duplicate
20
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Certificate issued pursuant to this Section 3.04 shall constitute conclusive
evidence of the appropriate Fractional Undivided Interest in the related Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 3.05 Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Trustee, the Registrar, and any
Paying Agent of the Trustee may treat the Person in whose name any Certificate
is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 4.02 and for all other purposes whatsoever,
and neither the Trustee, the Registrar, nor any Paying Agent of the Trustee
shall be affected by any notice to the contrary.
Section 3.06 Cancellation. All Certificates surrendered for payment or
------------
transfer or exchange shall, if surrendered to any Person party hereto other than
the Registrar, be delivered to the Registrar for cancellation. No Certificates
shall be authenticated in lieu of or in exchange for any Certificates canceled
as provided in this Section, except as expressly permitted by this Basic
Agreement. All canceled Certificates held by the Registrar shall be destroyed
and a certification of their destruction delivered to the Trustee.
Section 3.07 Temporary Certificates. Pending the preparation of
----------------------
definitive Certificates of any series, the Trustee may execute, authenticate and
deliver temporary Certificates of such series which are printed, lithographed,
typewritten, or otherwise produced, in any denomination, containing
substantially the same terms and provisions as set forth in Exhibit A hereto,
except for such appropriate insertions, omissions, substitutions and other
variations relating to their temporary nature as the officer executing such
temporary Certificates may determine, as evidenced by its execution of such
temporary Certificates.
If temporary Certificates of any series are issued, the Company will cause
definitive Certificates of such series to be prepared without unreasonable
delay. After the preparation of definitive Certificates of such series, the
temporary Certificates shall be exchangeable for definitive Certificates upon
surrender of such temporary Certificates at the Corporate Trust Office of the
Trustee, or at the office or agency of the Trustee maintained in accordance with
Section 7.11, without charge to the holder. Upon surrender for cancellation of
any one or more temporary Certificates, the Trustee shall execute, authenticate
and deliver in exchange therefor definitive Certificates of like series, in
authorized denominations and of a like aggregate Fractional Undivided Interest.
Until so exchanged, such temporary Certificates shall in all respects be
entitled to the same benefits under this Basic Agreement as definitive
Certificates.
Section 3.08 Limitation of Liability for Payments. All payments or
------------------------------------
distributions made to Certificateholders of any series under this Basic
Agreement or the related Trust Supplement shall be made only from the Trust
Property of the related Trust and only to the extent that the Trustee shall have
sufficient income or proceeds from such Trust Property to make such payments in
accordance with the terms of Article IV of this Basic Agreement and the related
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Trust Supplement. Each Certificateholder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Property of the related Trust to the extent available for distribution to such
Certificateholder as provided in this Basic Agreement and the related Trust
Supplement. Nothing in this Basic Agreement shall be construed as an agreement,
or otherwise creating an obligation, of the Company to pay any of the principal,
premium, if any, or interest due from time to time under the Equipment Notes or
in respect of the Certificates.
Section 3.09 Book-Entry Provisions for Global Certificates. (a) Except
---------------------------------------------
for one Certificate of each series that may be issued in a denomination of less
than $100,000, the Certificates of any series may be issued in the form of one
or more typewritten Global Certificates representing the beneficial interests in
such Certificates of such series, to be delivered to DTC, as the initial
Clearing Agency, by, or on behalf of, the Company. In such case, the
Certificates of such series delivered to DTC shall initially be registered on
the Register in the name of Cede & Co., and no holder of a beneficial interest
in the Certificates will receive a definitive certificate representing such
holder's beneficial interest in the Certificates of such series, except as
provided above and in subsection (e) below. As to the Certificates of any
series, except with respect to the one Certificate of such series that may be
issued in a denomination of less than $100,000, unless and until definitive,
fully registered Certificates (the "Definitive Certificates") have been issued
pursuant to subsection (e) below:
(i) the provisions of this Section 3.09 shall be in full
force and effect;
(ii) the Company, the Paying Agent, the Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including the
making of distributions on the Certificates) as the authorized
representative of the holders of the beneficial interests in the
Certificates;
(iii) to the extent that the provisions of this Section
3.09 conflict with any other provisions of this Basic Agreement (other than
the provisions of any Trust Supplement amending this Section 3.09 as
permitted by this Basic Agreement), the provisions of this Section 3.09
shall control;
(iv) the rights of holders of beneficial interests in the
Certificates shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such holders
of beneficial interests in the Certificates and the Clearing Agency
Participants, and until Definitive Certificates are issued pursuant to
subsection (e) below, the Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distributions on the Certificates to such Clearing Agency Participants; and
(v) whenever this Basic Agreement requires or permits
actions to be taken based upon instructions or directions of
Certificateholders of such series holding
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Certificates of such series evidencing a specified percentage of the
Fractional Undivided Interests in the related Trust, the Clearing Agency
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from holders of beneficial interests
in the Certificates and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in Certificates of such series and has delivered such instructions
to the Trustee. The Trustee shall have no obligation to determine whether
the Clearing Agency has in fact received any such instructions.
(b) Except with respect to the one Certificate of each series that
may be issued in a denomination of less than $100,000, whenever notice or other
communication to the Certificateholders of such series is required under this
Basic Agreement, unless and until Definitive Certificates shall have been issued
pursuant to subsection (e) below, the Trustee shall give all such notices and
communications specified herein to be given to Certificateholders of such series
to the Clearing Agency and/or the Clearing Agency Participants, and shall make
available additional copies as requested by such Clearing Agency Participants.
(c) Unless and until Definitive Certificates of a series are issued
pursuant to subsection (e) below, on the Record Date prior to each applicable
Regular Distribution Date and Special Distribution Date, the Trustee will
request from the Clearing Agency a Securities Position Listing setting forth the
names of all Clearing Agency Participants reflected on the Clearing Agency's
books as holding interests in the Certificates on such Record Date. The Trustee
shall mail to each such Clearing Agency Participant the statements described in
Section 4.03 hereof and will make available additional copies as requested by
such Clearing Agency Participant to be available for forwarding to holders of
beneficial interests in the Certificates.
(d) Clearing Agency Participants shall have no rights under this
Basic Agreement or the related Trust Supplement with respect to any Global
Certificate held on their behalf by the Clearing Agency, or the Trustee as its
custodian, and the Clearing Agency may be treated by the Trustee and any agent
of the Trustee as the absolute owner of such Global Certificate for all purposes
whatsoever. Notwithstanding the foregoing, nothing contained herein shall
prevent the Trustee or any agent of the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Clearing
Agency or shall impair, as between the Clearing Agency and its Clearing Agency
Participants, the operation of customary practices governing the exercise of the
rights of a holder of any Certificate. Upon the issuance of any Global
Certificate, the Registrar or its duly appointed agent shall record the Clearing
Agency as the registered holder of such Global Certificate.
(e) Transfers of any Global Certificate shall be limited to transfers
of such Global Certificate in whole, but not in part, to the Clearing Agency,
its successor or such successor's nominees. Beneficial interests in the Global
Certificate may be transferred in accordance with the rules and procedures of
the Clearing Agency. Beneficial interests in the
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Global Certificate shall be delivered to all beneficial owners in the form of
Definitive Certificates if (i) the Clearing Agency notifies the Trustee that it
is unwilling or unable to continue as Clearing Agency for such Global
Certificate and a successor clearing agency is not appointed by the Trustee
within 90 days of such notice, or (ii) after the occurrence of an Event of
Default, owners of beneficial interests in a Global Certificate with fractional
undivided interests aggregating not less than a majority in interest in such
Trust advise the Trustee, the Company and the Clearing Agency through Clearing
Agency Participants in writing that the continuation of a book-entry system
through the Clearing Agency or its successor is no longer in their best
interests. In such event, the Trustee shall notify each beneficial owner of a
Certificate, through the Clearing Agency, of the availability of Definitive
Certificates.
(f) In connection with the transfer of the entire Global Certificate
to the beneficial owners thereof pursuant to paragraph (e) of this Section 3.09,
such Global Certificate shall be deemed to be surrendered to the Trustee for
cancellation, and the Trustee shall execute, authenticate and deliver, to each
beneficial owner identified by the Clearing Agency in exchange for its
beneficial interest in such Global Certificate an equal aggregate principal
amount of Definitive Certificates of authorized denominations. None of the
Company, the Registrar, the Paying Agent nor the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such registration instructions. Upon the issuance of
Definitive Certificates of such series, the Trustee shall recognize the Person
in whose name the Definitive Certificates are registered in the Register as a
Certificateholder hereunder. Neither the Company nor the Trustee shall be liable
if the Trustee or the Company is unable to locate a qualified successor Clearing
Agency.
(g) The registered holder of any Global Certificate may grant proxies
and otherwise authorize any Person, including Clearing Agency Participants and
Persons that may hold interests through Clearing Agency Participants, to take
any action which a Holder is entitled to take under this Basic Agreement, the
related Trust Supplement or the Certificates.
(h) The provisions of this Section 3.09 may be made inapplicable to
any series or may be amended with respect to any series in the related Trust
Supplement.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01 Certificate Account and Special Payments Account. (a) The
------------------------------------------------
Trustee shall establish and maintain on behalf of the Certificateholders of each
series a Certificate Account as one or more non-interest-bearing accounts. The
Trustee shall hold the Certificate Account in trust for the benefit of the
Certificateholders of such series, and shall make or permit withdrawals
therefrom only as provided in this Basic Agreement or the related Trust
Supplement. On each
24
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day when a Regular Payment is made under any Indenture to the Trustee, as holder
of the Equipment Notes issued under such Indenture, the Trustee upon receipt
shall immediately deposit the aggregate amount of such Regular Payment in the
applicable Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders of each series a Special Payments Account as one or more
accounts, which shall be non-interest-bearing except as provided in Section
4.04. The Trustee shall hold such Special Payments Account in trust for the
benefit of the Certificateholders of such series, and shall make or permit
withdrawals therefrom only as provided in this Basic Agreement or the related
Trust Supplement. On each day when one or more Special Payments (other than a
Special Payment that represents either payment received with respect to an
Equipment Note upon an Event of Default in respect thereof or the proceeds of
any sale pursuant to Article VI hereof by the Trustee of an Equipment Note) is
made under any Indenture to the Trustee, as holder of the Equipment Notes issued
under such Indenture, the Trustee upon receipt shall immediately deposit the
aggregate amounts of such Special Payments in the applicable Special Payments
Account. Upon the sale of any Equipment Note by the Trustee pursuant to Article
VI hereof and the realization of any proceeds thereof, the Trustee shall deposit
the aggregate amount of such proceeds as a Special Payment in the applicable
Special Payments Account.
(c) The Trustee shall present to the Indenture Trustee to which
an Equipment Note relates such Equipment Note on the date of its stated final
maturity, or in the case of any Equipment Note which is to be prepaid or
purchased in whole pursuant to the relevant Indenture, on the applicable
prepayment or purchase date under such Indenture.
Section 4.02 Distributions from Certificate Account and Special Payments
-----------------------------------------------------------
Account. (a) On each Regular Distribution Date with respect to a series of
- -------
Certificates or as soon thereafter as the Trustee has confirmed receipt of the
payment of the Regular Payments due on the Equipment Notes held in the related
Trust on such date, the Trustee shall distribute out of the applicable
Certificate Account the entire amount deposited therein on account of Regular
Payments pursuant to Section 4.01(a). There shall be so distributed to each
Certificateholder of record on the Record Date with respect to such Regular
Distribution Date (other than as provided in Section 11.01 concerning the final
distribution) (i) by check mailed to such Certificateholder at the address
appearing in the Register or (ii) with respect to any Global Certificates, by
wire transfer of same-day funds to the account designated by the
Certificateholder to the Trustee on or prior to the Record Date relating to such
Regular Distribution Date, such Certificateholder's pro rata share (based on the
aggregate Fractional Undivided Interest in the related Trust held by such
Certificateholder) of the aggregate amount in the applicable Certificate
Account.
(b) On each Special Distribution Date with respect to any
Special Payment with respect to a series of Certificates or as soon thereafter
as the Trustee has confirmed receipt of the Special Payments due on the
Equipment Notes held in the related Trust or realized upon the sale of any such
Equipment Note, the Trustee shall distribute out of the applicable Special
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Payments Account the entire amount deposited therein on account of Special
Payments pursuant to Section 4.01(b). There shall be so distributed to each
Certificateholder of record of such series on the Record Date with respect to
such Special Distribution Date (other than as provided in Section 11.01
concerning the final distribution) (i) by check mailed to such Certificateholder
at the address appearing in the Register or (ii) with respect to any Global
Certificates, by wire transfer of same-day funds to the account designated by
the Certificateholder to the Trustee on or prior to the Record Date relating to
such Special Distribution Date, such Certificateholder's pro rata share (based
on the aggregate Fractional Undivided Interest in the related Trust held by such
Certificateholder) of the aggregate amount in the applicable Special Payments
Account on account of such Special Payment.
(c) The Trustee shall at the expense of the Company cause notice of
each Special Payment with respect to a series of Certificates to be mailed to
each Certificateholder of such series at his address as it appears in the
Register. In the event of a prepayment or purchase of Equipment Notes held in
the related Trust, such notice shall be mailed not less than 20 days prior to
the date any such Special Payment is scheduled to be distributed. In the case of
a Special Payment pursuant to either of the last two paragraphs of Section
2.02(b), such notice shall be mailed not less than 10 days prior to the date any
such Special Payment is scheduled to be distributed. In the case of any other
Special Payments, such notice shall be mailed as soon as practicable after the
Trustee has confirmed that it has received funds for such Special Payment.
Notices mailed by the Trustee shall set forth:
(i) the Special Distribution Date and the Record Date therefor
(except as otherwise provided in Section 11.01);
(ii) the amount of the Special Payment for each $100,000 face
amount Certificate (taking into account any payment to be made by the
Company pursuant to Section 2.02(b)) and the amount thereof constituting
principal, premium, if any, and interest;
(iii) the reason for the Special Payment; and
(iv) if the Special Distribution Date is the same date as a
Regular Distribution Date for the Certificates of such series, the total
amount to be received on such date for each $100,000 face amount
Certificate. If the amount of premium payable upon the prepayment or
purchase of an Equipment Note has not been calculated at the time that the
Trustee mails notice of a Special Payment, it shall be sufficient if the
notice sets forth the other amounts to be distributed and states that any
premium received will also be distributed.
If any redemption of the Equipment Notes held in any Trust is
canceled, the Trustee, as soon as possible after learning thereof, shall cause
notice thereof to be mailed to each Certificateholder of the related series at
its address as it appears on the Register.
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Section 4.03 Statements to Certificateholders. (a) On each Regular
--------------------------------
Distribution Date and Special Distribution Date, if any, with respect to a
series of Certificates the Trustee will include with each distribution to
Certificateholders of the related series a statement, giving effect to such
distribution to be made on such Regular Distribution Date or Special
Distribution Date, as the case may be, setting forth the following information
(per a $1,000 face amount Certificate as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal
and the amount allocable to premium, if any;
(ii) the amount of such distribution allocable to interest;
and
(iii) the Pool Balance and the Pool Factor of the related
Trust.
With respect to the Certificates registered in the name of a Clearing
Agency, on the record date prior to each Distribution Date, the Trustee will
request from such Clearing Agency a securities position listing setting forth
the names of all the Clearing Agency Participants reflected on the Clearing
Agency's books as holding interests in the Certificates on such record date. On
each Distribution Date, the applicable Trustee will mail to each such Clearing
Agency the statement described above and will make available additional copies
as requested by such Clearing Agency for forwarding to holders of interests in
the Certificates.
(b) Within a reasonable period of time after the end of each calendar
year but not later than the latest date permitted by law, the Trustee shall
furnish to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) with respect to the related
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 year, and such other items as are readily available
to the Trustee and which a Certificateholder shall reasonably request as
necessary for the purpose of such Certificateholder's preparation of its federal
income tax returns. With respect to Certificates registered in the name of a
Clearing Agency, such report and such other items shall be prepared on the basis
of information supplied to the Trustees by the Clearing Agency Participants and
shall be delivered by the Trustee to such Clearing Agency Participants to be
available for forwarding by such Clearing Agency Participants to holders of
interests in Certificates.
(c) The Trustee shall furnish a semiannual report within one hundred
twenty (120) days following each June 30 and the end of each calendar year to
each Person who at any time during such period was a Certificateholder of
record, the form of which to be agreed upon by the Company, the Manager and the
Owner Participants.
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Section 4.04 Investment of Special Payment Moneys. Any money received by
------------------------------------
the Trustee pursuant to Section 4.01(b) representing a Special Payment which is
not to be promptly distributed shall, to the extent practicable, be invested in
Permitted Government Investments by the Trustee pending distribution of such
Special Payment pursuant to Section 4.02. Any investment made pursuant to this
Section 4.04 shall be in such Permitted Government Investments having maturities
not later than the date that such moneys are required to be used to make the
payment required under Section 4.02 on the applicable Special Distribution Date
and the Trustee shall hold any such Permitted Government Investments until
maturity. The Trustee shall have no liability with respect to any investment
made pursuant to this Section 4.04, other than by reason of the willful
misconduct or negligence of the Trustee. All income and earnings from such
investments shall be distributed on such Special Distribution Date as part of
such Special Payment.
ARTICLE V
THE COMPANY
Section 5.01 Maintenance of Corporate Existence. The Company, at its
----------------------------------
own cost and expense, will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not prejudicial in any material respect
to the Certificateholders.
Section 5.02 Consolidation, Merger or Sale of Assets Prohibited. The
--------------------------------------------------
Company covenants that it will not consolidate with or merge into any other
corporation or sell, convey or otherwise dispose of all or substantially all of
its assets as an entirety to any Person.
ARTICLE VI
DEFAULT
Section 6.01 Events of Default. If in respect of any Trust, any
-----------------
Indenture Event of Default under any applicable Indenture (an "Event of
Default") shall occur and be continuing, then, and in each and every case, so
long as such Indenture Event of Default shall be continuing, the Trustee may
vote all of the Equipment Notes issued under the applicable Indenture and held
in the Trust, and upon the direction of the Certificateholders evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in such Trust, the Trustee shall vote a corresponding majority of such Equipment
Notes, in favor of directing the Indenture Trustee under such Indenture, to
declare the unpaid principal amount of the Equipment Notes then outstanding to
which such Event of Default relates and accrued interest thereon to be due and
payable under, and in accordance with the provisions of, the applicable
Indenture. In addition, if an Indenture Event of Default shall have occurred and
be continuing under any Indenture, the
28
<PAGE>
Trustee may in accordance with the applicable Indenture vote the Equipment Notes
held in the Trust to which such Event of Default relates to direct the Indenture
Trustee regarding the exercise of remedies provided in such Indenture.
In addition, after an Event of Default shall have occurred and be
continuing with respect to any Equipment Notes, the Trustee may in its
discretion, and upon the direction of the Certificateholders evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the related Trust shall, by such officer or agent as it may appoint, sell,
convey, transfer and deliver such Equipment Note or Equipment Notes, without
recourse to or warranty by the Trustee or any Certificateholder, to any Person.
In any such case, the Trustee shall sell, assign, contract to sell or otherwise
dispose of and deliver such Equipment Note or Equipment Notes in one or more
parcels at public or private sale or sales, at any location or locations at the
option of the Trustee, all upon such terms and conditions as it may reasonably
deem advisable and at such prices as it may reasonably deem advisable, for cash.
If the Trustee so decides or is required to sell or otherwise dispose of any
Equipment Note pursuant to this Section 6.01, the Trustee shall take such of the
actions described above as it may reasonably deem most effectual to complete the
sale or other disposition of such Equipment Note, so as to provide for the
payment in full of all amounts due on the related series of Certificates. The
Trustee shall give notice to the Company promptly after any such sale.
Notwithstanding the foregoing, any action taken by the Trustee under this
Section 6.01 shall not, in the reasonable judgment of the Trustee, be adverse to
the best interests of the Certificateholders of such series.
Section 6.02 Incidents of Sale of Equipment Notes. Upon any sale of
------------------------------------
all or any part of the Equipment Notes made either under the power of sale given
under this Basic Agreement or the related Trust Supplement or otherwise for the
enforcement of this Basic Agreement or the related Trust Supplement, the
following shall be applicable:
(1) Certificateholders and Trustee May Purchase Equipment Notes.
Any Certificateholder, the Trustee in its individual or any other capacity
or any other Person may bid for and purchase any of the Equipment Notes,
and upon compliance with the terms of sale, may hold, retain, possess and
dispose of such Equipment Notes in their or its or his own absolute right
without further accountability.
(2) Receipt of Trustee Shall Discharge Purchaser. The receipt of
the Trustee or of the officer making such sale shall be a sufficient
discharge to any purchaser for his purchase money, and, after paying such
purchase money and receiving such receipt, such purchaser or his personal
representative or assigns shall not be obliged to see to the application of
such purchase money, or be in any way answerable for any loss,
misapplication or non-application thereof.
(3) Application of Moneys Received upon Sale. Any moneys
collected by the Trustee upon any sale made either under the power of sale
given by this
29
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Basic Agreement and the related Trust Supplement or ot otherwise for the
enforcement of this Basic Agreement and the related Trust Supplement, shall
be applied as provided in Section 4.02.
Section 6.03 Judicial Proceedings Instituted by Trustee.
------------------------------------------
(a) Trustee May Bring Suit. If there shall be a failure to make
----------------------
payment of the principal of, premium, if any, or interest on any Equipment Note,
or if there shall be any failure to pay Rent (as defined in the applicable
Lease) under any Lease when due and payable, then the Trustee, in its own name,
and as trustee of an express trust, as holder of such Equipment Notes, shall be,
to the extent permitted by and in accordance with the terms of the Note
Documents, entitled and empowered to institute any suits, actions or proceedings
at law, in equity or otherwise, for the collection of the sums so due and unpaid
or proceedings at law, in equity or otherwise, for the collection of the sums so
due and unpaid on such Equipment Notes or under such Lease and may prosecute any
such claim or proceeding to judgment or final decree with respect to the whole
amount of any such sums so due and unpaid.
(b) Trustee May File Proofs of Claim; Appointment of Trustee as
-----------------------------------------------------------
Attorney-in-Fact in Judicial Proceedings. The Trustee in its own name, or as
- ----------------------------------------
trustee of an express trust, or as attorney-in-fact for the Certificateholders
of any series, or in any one or more of such capacities (irrespective of whether
distributions on the Certificates of any series shall then be due and payable,
or the payment of the principal on any Equipment Notes shall then be due and
payable, as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand to the relevant Indenture Trustee
for the payment of overdue principal, premium (if any) or interest on the
Equipment Notes), shall be entitled and empowered to file such proofs of claim
and other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee and of the Certificateholders of any series allowed in
any receivership, insolvency, bankruptcy, liquidation, readjustment,
reorganization or any other judicial proceedings relative to the Company or any
Owner Trustee or Owner Participant, their respective creditors or property. Any
receiver, assignee, trustee, liquidator, sequestrator (or similar official) in
any such judicial proceeding is hereby authorized by each Certificateholder to
make payments in respect of such claim to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Certificateholders of any series, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel. Nothing contained in this Basic Agreement or
any related Trust Supplement shall be deemed to give to the Trustee any right to
accept or consent to any plan of reorganization or otherwise by action of any
character in any such proceeding or to waive or change in any way any right of
any Certificateholder of any series.
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Section 6.04 Control by Certificateholders.
-----------------------------
(a) Subject to Section 6.03, the Certificateholders holding
Certificates of a series evidencing Fractional Undivided Interests aggregating
not less than a majority in interest in the related Trust shall have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee under this Basic Agreement or the related Trust Supplement, including
any right of the Trustee as holder of the Equipment Notes, provided that:
(1) such direction shall not be in conflict with any rule of law
or with this Basic Agreement or the related Trust Supplement and would not
involve the Trustee in personal liability or expense,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Certificateholders of such series not
taking part in such direction,
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(4) if any Indenture Event of Default under a related Indenture
shall have occurred and be continuing, such direction shall not obligate
the Trustee to vote more than a corresponding majority of the related
Equipment Notes held by the Trust in favor of directing any action by the
Indenture Trustee with respect to such Indenture Event of Default.
Section 6.05 Waiver of Defaults. The Certificateholders holding
------------------
Certificates of a series evidencing Fractional Undivided Interests aggregating
not less than a majority in interest in the Trust (i) may on behalf of all of
the Certificateholders of such series waive any Default or Event of Default and
its consequences hereunder or under the related Trust Supplement with respect to
such series or (ii) may instruct the Trustee to waive any default under the
related Indenture, this Basic Agreement or the related Trust Supplement with
respect to such series and its consequences, except a Default:
(1) in the deposit of any Regular Payment or Special Payment
under Section 4.01 or in the distribution of any payment under Section 4.02
on the Certificates of such series, or
(2) in the payment of the principal of, premium, if any, or
interest on any Equipment Notes, or
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(3) in respect of a covenant or provision hereof which under
Article IX hereof cannot be modified or amended without the consent of the
Certificateholder of each Outstanding Certificate of such series affected.
Upon any such waiver, such Default shall cease to exist with respect to the
Certificates of such series, and any Event of Default arising therefrom shall be
deemed to have been cured for every purpose in respect of such series and any
direction given by the Trustee on behalf of the Certificateholders of such
series to the Indenture Trustee shall be annulled with respect thereto; but so
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon. Upon any such waiver, the Trustee shall
vote the Equipment Notes issued under the Indenture to waive the corresponding
Indenture Default or Indenture Event of Default.
Section 6.06 Right of Certificateholders to Receive Payments not to be
---------------------------------------------------------
Impaired. Notwithstanding anything to the contrary contained in this Basic
- --------
Agreement or any Trust Supplement, including, without limitation, Section 6.07
hereof, the right of any Certificateholder to receive distributions of payments
required pursuant to Section 4.02 hereof on the Certificates when due, or to
institute suit for the enforcement of any such payment on or after the
applicable Regular Distribution Date or Special Distribution Date, shall not be
impaired or affected without the consent of such Certificateholder.
Section 6.07 Certificateholders may not bring suit except under Certain
----------------------------------------------------------
Conditions. A Certificateholder of any series shall not have the right to
- ----------
institute any suit, action or proceeding at law or in equity or otherwise with
respect to this Basic Agreement or the related Trust Supplement, for the
appointment of a receiver or for the enforcement of any other remedy under this
Basic Agreement or the related Trust Supplement, unless:
(1) such Certificateholder previously shall have given written
notice to the Trustee of a continuing Event of Default;
(2) the Certificateholders holding Certificates of such series
evidencing Fractional Undivided Interests aggregating not less than 25% in
interest of the Trust shall have requested the Trustee in writing to
institute such action, suit or proceeding and shall have offered to the
Trustee indemnity as provided in Section 7.03(e);
(3) the Trustee shall have refused or neglected to institute any
such action, suit or proceeding for 60 days after receipt of such notice,
request and offer of indemnity; and
(4) no direction inconsistent with such written request has been
given to the Trustee during such 60 day period by the Certificateholders
holding Certificates of
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such series evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the related Trust.
It is understood and intended that no one or more of the Certificateholders
of any series shall have any right in any manner whatever hereunder or under the
related Trust Supplement or under the Certificates of such series to (i)
surrender, impair, waive, affect, disturb or prejudice any property in the Trust
Property of the related Trust or the lien of any applicable Indenture on any
property subject thereto, or the rights of the Certificateholders of such series
or the holders of the applicable Equipment Notes, (ii) obtain or seek to obtain
priority over or preference to any other Certificateholder of such series or
(iii) enforce any right under this Basic Agreement or the related Trust
Supplement, except in the manner herein or therein provided and for the equal,
ratable and common benefit of all the Certificateholders of such series subject
to the provisions of this Basic Agreement and the related Trust Supplement.
Section 6.08 Remedies Cumulative. Every remedy given hereunder to the
-------------------
Trustee or to any of the Certificateholders of any series shall not be exclusive
of any other remedy or remedies, and every such remedy shall be cumulative and
in addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.
ARTICLE VII
THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities. (a) Except during the
-----------------------------------
continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties as are
specifically set forth in this Basic Agreement and related Trust
Supplement, and no implied covenants or obligations shall be read into this
Basic Agreement or related Trust Supplement against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Basic Agreement and the related Trust Supplement; but in the case of
any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not they conform
to the requirements of this Basic Agreement and related Trust Supplement.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this Basic
Agreement and related
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Trust Supplement, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Basic Agreement and related Trust Supplement
shall be construed to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that
(1) this Subsection shall not be construed to limit the effect
of subsection (a) of this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent
facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Certificateholders of any series evidencing Fractional
Undivided Interests aggregating not less than a majority in interest in the
relevant Trust relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Basic Agreement or any
related Trust Supplement; and
(4) no provision of this Basic Agreement or any related Trust
Supplement shall require the Trustee to expend or risk its own funds in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk is not
reasonably assured to it.
(d) Whether or not herein expressly so provided, every provision of
this Basic Agreement or any related Trust Supplement relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 7.02 Notice of Defaults. As promptly as practicable after, and
------------------
in any event within 90 days after, the occurrence of any Default hereunder, the
Trustee shall transmit by mail to the Company, the related Owner Trustee, the
related Owner Participants, the Collateral Agent, the related Indenture Trustee
and to all Certificateholders holding Certificates of the related series in
accordance with Section 313(c) of the Trust Indenture Act, as their names and
addresses appear in the Register, notice of such Default hereunder known to the
Trustee, unless such Default shall have been cured or waived; provided, however,
that, except in the case of a Default in the payment of the principal of,
premium, if any, or interest on any Equipment Note, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee
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in good faith determine that the withholding of such notice is in the interests
of the Certificateholders of the related series.
Section 7.03 Certain Rights of Trustee. Subject to the provisions of
-------------------------
Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Request;
(c) whenever in the administration of this Basic Agreement or any
Trust Supplement the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officer's Certificate of the
Company, any Owner Trustee or any Indenture Trustee;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Basic Agreement or any Trust Supplement at
the request or direction of any of the Certificateholders of any series pursuant
to this Basic Agreement or any Trust Supplement, unless such Certificateholders
shall have offered to the Trustee reasonable security or indemnity against the
cost, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties under this Basic Agreement or any Trust Supplement either
directly or by or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder.
Section 7.04 Not Responsible for Recitals or Issuance of Certificates.
--------------------------------------------------------
The recitals contained herein and in the Certificates of each series, except the
certificates of authentication,
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shall not be taken as the statements of the Trustee, and the Trustee assumes no
responsibility for their correctness. Subject to Section 7.15, the Trustee makes
no representations as to the validity or sufficiency of this Basic Agreement,
any Trust Supplement, the Note Documents, the Indentures, the Equipment Notes or
the Certificates, except that the Trustee hereby represents and warrants that
this Basic Agreement has been, and each Trust Supplement and each Certificate of
each series will be, executed, authenticated and delivered by one of its
officers who is duly authorized to execute, authenticate and deliver such
document on its behalf.
Section 7.05 May hold Certificates. The Trustee, any Paying Agent,
---------------------
Registrar or any other agent, in their respective individual or any other
capacity, may become the owner or pledgee of Certificates and may otherwise deal
with the Company, any Owner Trustee or any Indenture Trustee with the same
rights it would have if it were not Trustee, Paying Agent, Registrar or such
other agent.
Section 7.06 Money held in Trust. Money held by the Trustee or the
-------------------
Paying Agent in trust under this Basic Agreement or under any Trust Supplement
need not be segregated from other funds except to the extent required herein, in
any Trust Supplement or by law and neither the Trustee nor the Paying Agent
shall have any liability for interest upon any such moneys except as provided
for herein or in any Trust Supplement.
Section 7.07 Compensation and Reimbursement. The Company agrees:
------------------------------
(1) to pay, or cause to be paid, to the Trustee from time
to time the compensation set forth in the schedule agreed to by the Trustee
and the Company for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein or in any
Trust Supplement, to reimburse, or cause to be reimbursed, the Trustee upon
its request for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Basic Agreement or any Trust Supplement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence, willful misconduct or bad faith or as may be incurred due
to the Trustee's breach of its representations and warranties set forth in
Section 7.15;
(3) to indemnify, or cause to be indemnified, the Trustee
in accordance with the applicable Participation Agreement. The Trustee
shall notify the Company promptly of any claim for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel with the
consent of the Company and the Company will pay the
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reasonable fees and expenses of such counsel. The Company need not pay for
any settlement made without its consent; and
(4) to indemnify, or cause to be indemnified, the Trustee,
solely in its individual capacity, for, and to hold it harmless against,
any tax (other than for or with respect to any tax referred to in the next
paragraph, provided that no indemnification shall be available with respect
to any tax attributable to the Trustee's compensation for serving as such)
incurred without negligence, willful misconduct or bad faith, on its part,
arising out of or in connection with the acceptance or administration of
this Trust, including any costs and expenses incurred in contesting the
imposition of any such tax. The Trustee, in its individual capacity, shall
notify the Company promptly of any tax for which it may seek indemnity. The
Company shall defend against the imposition of such tax and the Trustee, in
its individual capacity, shall cooperate in the defense. The Trustee, in
its individual capacity, may have separate counsel with the consent of the
Company and the Company will pay the reasonable fees and expenses of such
counsel. The Company need not pay for any taxes paid, in settlement or
otherwise, without its consent.
In addition, the Trustee shall be entitled to reimbursement from, and shall
have a lien prior to the Certificates upon, all property and funds held or
collected by the Trustee in its capacity as Trustee for any tax incurred without
negligence, bad faith or willful misconduct, on its part, arising out of or in
connection with the acceptance or administration of the Trust created pursuant
to any Trust Supplement (other than any tax attributable to the Trustee's
compensation for serving as such), including any costs and expenses incurred in
contesting the imposition of any such tax. If the Trustee reimburses itself for
any such tax it will within 30 days mail a brief report setting forth the
circumstances thereof to all Certificateholders as their names and addresses
appear in the Register.
Section 7.08 Corporate Trustee Required; Eligibility. Each Trust shall
---------------------------------------
at all times have a Trustee which shall be eligible to act as a Trustee under
Section 310(a) of the Trust Indenture Act and which shall be a corporation
organized and doing business under the laws of the United States of America or
of any state, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000, and subject to
supervision or examination by federal or state authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section to act as
Trustee of any Trust, the Trustee shall resign immediately in the manner and
with the effect hereinafter specified in Section 7.09.
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Section 7.09 Resignation and Removal; Appointment of Successor. (a) No
-------------------------------------------------
resignation or removal of the Trustee of any Trust and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 7.10.
(b) The Trustee may resign at any time as Trustee of any or all Trusts
by giving written notice thereof to the Company, the Authorized Agents, the
related Owner Trustee and the related Indenture Trustee. If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Company,
the related Owner Trustee and the related Indenture Trustee within 30 days after
the giving by the Trustee of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(c) The Trustee may be removed at any time as Trustee of any Trust by
Act of Certificateholders of the related series holding Certificates of such
series evidencing Fractional Undivided Interests aggregating not less than a
majority in interest in such Trust delivered to the Trustee and to the Company,
the related Owner Trustee and the related Indenture Trustee.
(d) If at any time in respect of any Trust:
(1) unless the provisions of the Trust Indenture Act are made
inapplicable to this Basic Agreement pursuant to the terms of the related
Trust Supplement, the Trustee shall fail to comply with Section 310 of the
Trust Indenture Act after written request therefor by the Company or by any
Certificateholder of the related series who has been a bona fide
Certificateholder for at least six months; or
(2) the Trustee shall cease to be eligible under Section 7.08 and
shall fail to resign after written request therefor by the Company or by
any such Certificateholder; or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any case, (i) the Owner Participants of the related Owner Trust or
Owner Trusts, as applicable, may remove the Trustee or (ii) subject to Section
6.06, any Certificateholder of the related series who has been a bona fide
Certificateholder 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 Trustee and the appointment of a successor Trustee of such Trust.
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(e) If a Responsible Officer of the Trustee shall obtain actual
knowledge of an Avoidable Tax (as hereinafter defined) in respect of any Trust
which has been or is likely to be asserted, the Trustee shall promptly notify
the Company and the related Owner Trustees thereof and shall, within 30 days of
such notification, resign hereunder unless within such 30-day period the Trustee
of such Trust shall have received notice that the Company or the related Owner
Trustee has agreed to pay such tax. The Company shall promptly appoint a
successor Trustee of such Trust in a jurisdiction where there are no Avoidable
Taxes. As used herein, an "Avoidable Tax" means a state or local tax: (i) upon
(w) the Trust, (x) the Trust Property of such Trust, (y) Certificateholders of
such Trust or (z) the Trustee for which the Trustee is entitled to seek
reimbursement from the Trust Property of such Trust, and (ii) which would be
avoided if the Trustee were located in another state, or jurisdiction within a
state, within the United States. A tax shall not be an Avoidable Tax if the
Company or the related Owner Trustee shall agree to pay, and shall pay, such
tax.
(f) If the Trustee shall resign, be removed or become incapable of
acting as Trustee of any Trust, or if a vacancy shall occur in the office of the
Trustee of any Trust for any cause, the Company shall promptly appoint a
successor Trustee of such Trust. If, within 90 days after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
of such Trust shall be appointed by Act of the Certificateholders holding
Certificates evidencing Fractional Undivided Interests aggregating not less than
a majority in interest in such Trust delivered to the Company, the related Owner
Trustee, the related Indenture Trustee and the retiring Trustee, the successor
Trustee so appointed of such Trust shall, forthwith upon its acceptance of such
appointment, become the successor Trustee of such Trust and supersede the
successor Trustee appointed as provided above. If no successor Trustee of such
Trust shall have been so appointed as provided above and accepted appointment in
the manner hereinafter provided, any Certificateholder who has been a bona fide
Certificateholder of the related series for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee for such Trust.
(g) The successor Trustee of a Trust shall give notice of the
resignation and removal of the Trustee and appointment of the successor Trustee
by mailing written notice of such event by first-class mail, postage prepaid, to
the Certificateholders of the related series as their names and addresses appear
in the Register. Each notice shall include the name of such successor Trustee
and the address of its Corporate Trust Office.
Section 7.10 Acceptance of Appointment by Successor. (a) Every
--------------------------------------
successor Trustee appointment hereunder shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
with respect to the related Trusts shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to related Trusts; but, on request of the Company or the successor Trustee, such
retiring Trustee shall execute and deliver
39
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an instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and such successor Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee with respect to the related Trusts, subject nevertheless
to its lien, if any, provided for in Section 7.07. Upon request of any such
successor Trustee, the Company, the retiring Trustee and such successor Trustee
shall execute and deliver any and all instruments containing such provisions as
shall be necessary or desirable to transfer and confirm to, and for more fully
and certainly vesting in, such successor Trustee all such rights, powers and
trusts.
(b) If a successor Trustee is appointed with respect to one or more
(but not all) Trusts, the Company, the predecessor Trustee and each successor
Trustee with respect to any Trust shall execute and deliver an agreement
supplemental hereto which shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the predecessor Trustee with respect to the Trusts as to which the
predecessor Trustee is not retiring shall continue to be vested in the
predecessor Trustee, and shall add to or change any of the provisions of this
Basic Agreement as shall be necessary to provide for or facilitate the
administration of the Trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental agreement shall
constitute such Trustee co-Trustees of the same Trust and that each such Trustee
shall be Trustee of separate Trusts.
(c) No institution shall accept its appointment as a Trustee hereunder
unless at the time of such acceptance such institution shall be qualified and
eligible under this Article VII.
Section 7.11 Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any Person into which the Trustee may be merged or converted or with which it
may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided such Person shall be
otherwise qualified and eligible under this Article VII, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto. In case any Certificates shall have been executed or authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
execution or authentication and deliver the Certificates so executed or
authenticated with the same effect as if such successor Trustee had itself
authenticated such Certificates.
Section 7.12 Maintenance of Agencies. (a) With respect to each series
-----------------------
of Certificates, there shall at all times be maintained in the [Borough of
Manhattan, The City of New York], an office or agency where Certificates of such
series may be presented or surrendered for registration of transfer or for
exchange, and for payment thereof and where notices and demands to or upon the
Trustee in respect of the Certificates or of this Basic Agreement or any Trust
Supplement may be served. Such office or agency shall be initially at [First
Chicago Trust Company of New York, 14 Wall Street, 8th Floor, New York, New York
10005, Attention:
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Corporate Trust Administration]. Written notice of the location of each such
other office or agency and of any change of location thereof shall be given by
the Trustee to the Company, the Owner Trustees, the Indenture Trustees and the
Certificateholders of such series. In the event that no such office or agency
shall be maintained or no such notice of location or of change of location shall
be given, presentations and demands may be made and notices may be served at the
Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a Paying Agent with
respect to the Certificates of each series. Each such Authorized Agent shall be
a bank or trust company, shall be a corporation organized and doing business
under the laws of the United States or any state, with a combined capital and
surplus of at least $100,000,000, and shall be authorized under such laws to
exercise corporate trust powers, subject to supervision by federal or state
authorities. The Trustee shall initially be the Paying Agent and, as provided in
Section 3.03, Registrar hereunder with respect to the Certificates of each
series. Each Registrar shall furnish to the Trustee, at stated intervals of not
more than six months, and at such other times as the Trustee may request in
writing, a copy of the Register.
(c) Any Person into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, consolidation or conversion to which any Authorized Agent shall be a
party, or any Person succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor Person is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor Person.
(d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee, the Company, the related Owner Trustees
and the related Indenture Trustees. The Company may, and at the request of the
Trustee shall, at any time terminate the agency of any Authorized Agent by
giving written notice of termination to such Authorized Agent and to the
Trustee. Upon the resignation or termination of an Authorized Agent or in case
at any time any such Authorized Agent shall cease to be eligible under this
Section (when, in either case, no other Authorized Agent performing the
functions of such Authorized Agent shall have been appointed), the Company shall
promptly appoint one or more qualified successor Authorized Agents, reasonably
satisfactory to the Trustee, to perform the functions of the Authorized Agent
which has resigned or whose agency has been terminated or who shall have ceased
to be eligible under this Section. The Company shall give written notice of any
such appointment made by it to the Trustee, the related Owner Trustees and the
related Indenture Trustees; and in each case the Trustee shall mail notice of
such appointment to all Certificateholders of the related series as their names
and addresses appear on the Register for such series.
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(e) The Company agrees to pay, or cause to be paid, from time to time
to each Authorized Agent the compensation as set forth in the schedule agreed to
by each Authorized Agent and the Company for its services and to reimburse it
for its reasonable expenses.
Section 7.13 Money for Certificate Payments to be held in Trust. All
--------------------------------------------------
moneys deposited with any Paying Agent for the purpose of any payment on
Certificates of any series shall be deposited and held in trust for the benefit
of the Certificateholders entitled to such payment, subject to the provisions of
this Section. Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Certificateholders with respect to which such
money was deposited.
The Trustee will cause each Paying Agent other than the Trustee to execute
and deliver to it an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such Paying Agent will
(1) hold all sums held by it for payments on Certificates of
any series in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided;
(2) give the Trustee notice of any default by any obligor
upon the Certificates of any series in the making of any such payment; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Trustee may at any time, for the purpose of obtaining the satisfaction
and discharge of this Basic Agreement or for any other purpose, direct any
Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent,
such sums to be held by the Trustee upon the same trusts as those upon which
such sums were held by such Paying Agent; and, upon such payment by any Paying
Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Section 7.14 Registration of Equipment Notes in Trustee's Name. The
-------------------------------------------------
Trustee agrees that all Equipment Notes, Permitted Government Investments, if
any, and Specified Investments, if any, shall be issued in the name of the
Trustee for the applicable Trust or its nominee and held by the Trustee, or, if
not so held, the Trustee or its nominee shall be reflected as the owner of such
Equipment Notes, Permitted Government Investments or Specified Investments, as
the case may be, in the register of the issuer of such Equipment Notes,
Permitted Government Investments or Specified Investments under the applicable
provisions of the Uniform Commercial Code in effect where the Trustee holds such
Equipment Notes, Permitted Government Investments, Specified Investments, or
other applicable law then in effect.
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Section 7.15 Representations and Warranties of Trustee. The Trustee
-----------------------------------------
hereby represents and warrants that:
(i) the Trustee is a [national banking association] duly
organized, validly existing, and in good standing under the laws of [the
United States of America];
(ii) the Trustee has full power, authority and legal right
to execute, deliver, and perform this Basic Agreement and the Participation
Agreement and has taken all necessary action to authorize the execution,
delivery, and performance by it of this Basic Agreement and the
Participation Agreement;
(iii) the execution, delivery and performance by the
Trustee of this Basic Agreement (a) will not violate any provision of any
United States or [Illinois] law or regulation governing the banking and
trust powers of the Trustee or any order, writ, judgment, or decree of any
court, arbitrator, or governmental authority applicable to the Trustee or
any of its assets, (b) will not violate any provision of the articles of
association or by-laws of the Trustee, or (c) will not violate any
provision of, or constitute, with or without notice or lapse of time, a
default under, or result in the creation or imposition of any lien on any
properties included in the Trust Property or any Trust pursuant to the
provisions of any mortgage, indenture, contract, agreement or other
undertaking to which it is a party, which violation, default or lien could
reasonably be expected to have an adverse effect on the Trustee's
performance or ability to perform its duties hereunder or thereunder or on
the transactions contemplated herein or therein;
(iv) the execution, delivery and performance by the
Trustee of this Basic Agreement will not require the authorization,
consent, or approval of, the giving of notice to, the filing or
registration with, or the taking of any other action in respect of, any
United States or other governmental authority or agency regulating the
banking and corporate trust activities of the Trustee; and
(v) this Basic Agreement has been duly executed and
delivered by the Trustee and constitutes the legal, valid, and binding
agreement of the Trustee, enforceable in accordance with its terms,
provided that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally and general principles of equity.
Section 7.16 Withholding Taxes; Information Reporting. The Trustee, as
----------------------------------------
trustee of each grantor trust created by this Basic Agreement and the related
Trust Supplement, shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due hereunder or
under any Trust Supplement or under the Certificates of any series any and all
withholding taxes applicable thereto as required by law. The Trustee agrees to
act as
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such withholding agent and, in connection therewith, whenever any present or
future taxes or similar charges are required to be withheld with respect to any
amounts payable in respect of the Certificates of any series, to withhold such
amounts and timely pay the same to the appropriate authority in the name of and
on behalf of the holders of the Certificates of any series, that it will file
any necessary withholding tax returns or statements when due, and that, as
promptly as possible after the payment thereof, it will deliver to each holder
of a Certificate of any series appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such holders may
reasonably request from time to time. The Trustee agrees to file any other
information reports as it may be required to file under United States law.
Section 7.17 Trustee's Liens. The Trustee, in its individual capacity,
---------------
agrees that it will at its own cost and expense promptly take any action as may
be necessary to duly discharge and satisfy in full any mortgage, pledge, lien,
charge, encumbrance, security interest or claim on or with respect to the Trust
Property of any Trust which is either (i) attributable to the Trustee in its
individual capacity and which is unrelated to the transactions contemplated by
this Basic Agreement, any Trust Supplement, the related Participation Agreement
or the related Note Documents, or (ii) attributable to the Trustee as trustee
hereunder or in its individual capacity and which arise out of acts or omissions
which are prohibited by this Basic Agreement or any Trust Supplement.
ARTICLE VIII
CERTIFICATEHOLDER'S LISTS AND REPORTS BY TRUSTEE
Section 8.01 The Company to furnish Trustee with Names and Addresses of
----------------------------------------------------------
Certificateholders. With respect to the Certificates of any series, the Company
- ------------------
will furnish to the Trustee within 15 days after each Record Date with respect
to a Regular Payment, and at such other times as the Trustee may request in
writing, within 30 days after receipt by the Company of any such request, a
list, in such form as the Trustee may reasonably require, of all information, if
any, in the possession or control of the Company as to the names and addresses
of the Holders of Certificates of such series, in each case as of a date not
more than 15 days prior to the time such list is furnished; provided, however,
that so long as the Trustee is the sole Registrar, no such list need be
furnished; and provided further, however, that no such list need be furnished
for so long as a copy of the Register is being furnished to the Trustee pursuant
to Section 7.12(b).
Section 8.02 Preservation of Information; Communication to
---------------------------------------------
Certificateholders. (a) The Trustee shall preserve, in as current a form as is
- ------------------
reasonably practicable, the names and addresses of Certificateholders of each
series contained in the most recent list furnished to the Trustee as provided in
Section 7.12(b) or Section 8.01, as the case may be, and the names and addresses
of Certificateholders of each series, received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.12(b) or Section 8.01, as the case may be, upon receipt of
a new list so furnished.
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Section 8.03 Reports by Trustee. (a) Within 60 days after [May 15] of
------------------
each year commencing with the year 199[9], the Trustee shall transmit to the
Certificateholders of each series, as provided in Section 313(c) of the Trust
Indenture Act, a brief report dated as of such [May 15], if required by Section
313(a) of the Trust Indenture Act.
(b) The Trustee shall make available to any Certificateholder upon
request, the annual audited and quarterly unaudited financial statements of the
Company which are provided to the Trustee pursuant to Section 8.04(a).
Section 8.04 Reports by Company. The Company shall:
------------------
(a) file with the Trustee, within 30 days after the Company is
required to file the same with the Commission, copies of the annual reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company is required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934,
as amended; or, if the Company is not required to file information, documents or
reports pursuant to either of such sections, then to file with the Trustee and
the Commission, in accordance with rules and regulations prescribed by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Securities Exchange
Act of 1934, as amended, in respect of a security listed and registered on a
national securities exchange as may be prescribed in such rules and regulations.
(b) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed by the Commission, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Basic Agreement or any Trust
Supplement, as may be required by such rules and regulations, including, in the
case of annual reports, if required by such rules and regulations, certificates
or opinions of independent public accountants, conforming to the requirements of
Section 1.02;
(c) transmit to all Certificateholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act such summaries of
any information, documents and reports required to be filed by the Company
pursuant to subsections (a) and (b) of this Section 8.04 as may be required by
rules and regulations prescribed by the Commission;
(d) furnish to the Trustee, not less often than annually, a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this Basic Agreement and any
Trust Supplement. For purposes of this paragraph (d), such
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compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Basic Agreement or any Trust
Supplement.
ARTICLE IX
SUPPLEMENTAL TRUST AGREEMENTS
Section 9.01 Supplemental Trust Agreements without Consent of
------------------------------------------------
Certificateholders. Without the consent of the Certificateholders of any series,
- ------------------
the Company may, and the Trustee (subject to Section 9.03) shall, at any time
and from time to time enter into one or more agreements supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(1) to add to the covenants of the Company for the benefit of the
Certificateholders of any series, or to surrender any right or power in
this Basic Agreement conferred upon the Company; or
(2) to cure any ambiguity, to correct any manifest error or to
correct or supplement any provision herein, in any Trust Supplement or any
supplemental trust agreement which may be defective or inconsistent with
any other provision herein, in any Trust Supplement or any supplemental
trust agreement or to make any other provisions with respect to matters or
questions arising under this Basic Agreement or any Trust Supplement,
provided that any such action shall not adversely affect the interests of
the Certificateholders of any series; or
(3) to evidence and provide for the acceptance of appointment
hereunder and under the applicable Trust Supplements by a successor Trustee
with respect to one or more Trusts; or
(4) to make any other amendments or modifications hereto,
provided such amendments or modifications shall only apply to Certificates
of one or more series to be thereafter issued;
provided that in each case such supplement shall not adversely affect the status
of a Trust as a "grantor trust" under Subpart E, Part I of Subchapter J of
Chapter 1 of Subtitle A of the Code for U.S. federal income tax purposes.
Section 9.02 Supplemental Trust Agreements with Consent of
---------------------------------------------
Certificateholders. With respect to each separate Trust and the series of
- ------------------
Certificates relating thereto, with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in such Trust, by Act of said
Certificateholders delivered to the Company and the Trustee, the Company may and
the Trustee (subject to Section 9.03) shall,
46
<PAGE>
enter into an agreement or agreements supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Basic Agreement or the related Trust Supplement to the extent
applicable to such Certificateholders or of modifying in any manner the rights
and obligations of the Certificateholders of such series under this Basic
Agreement or the related Trust Supplement; provided, however, that no such
supplemental agreement shall, without the consent of the Holder of each
Outstanding Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing of,
any receipt by the Trustee of payments on the Equipment Notes held in such
Trust or distributions that are required to be made herein on any
Certificate of any series, or change any date of payment on any
Certificate, or change the place of payment where, or the coin or currency
in which, any Certificate of any series is payable, or impair the right to
institute suit for the enforcement of any such payment or distribution on
or after the Regular Distribution Date or Special Distribution Date
applicable thereto; or
(2) permit the disposition of any Equipment Note in the Trust
Property of such Trust except as permitted by this Basic Agreement or
related Trust Supplement; or
(3) reduce the percentage of the aggregate Fractional Undivided
Interests of such Trust which is required for any such supplemental
agreement, or reduce such percentage required for any waiver (of compliance
with certain provisions of this Basic Agreement or related Trust Supplement
or certain defaults hereunder and their consequences) provided for in this
Basic Agreement or such Trust Supplement; or
(4) modify any of the provisions relating to supplemental
agreements that may be executed pursuant to this Section 9.02 or relating
to the rights of Certificateholders with regard to a waiver of an Event of
Default hereunder or receipt of any payment hereunder; or
(5) adversely affect the status of any Trust as a grantor trust
under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the
Code for U.S. federal income tax purposes.
It shall not be necessary for any Act of Certificateholders under this
Section to approve the particular form of any proposed supplemental agreement,
but it shall be sufficient if such Act shall approve the substance thereof.
Section 9.03 Documents Affecting Immunity or Indemnity. If in the
-----------------------------------------
opinion of the Trustee any document required to be executed by it pursuant to
the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or
indemnity in favor of the Trustee under this Basic
47
<PAGE>
Agreement or any Trust Supplement, the Trustee may in its discretion decline to
execute such document.
Section 9.04 Execution of Supplemental Trust Agreements. In executing,
------------------------------------------
or accepting the additional trusts created by, any supplemental agreement
permitted by this Article or the modifications thereby of the trusts created by
this Basic Agreement and the related Trust Supplement, the Trustee shall be
entitled to receive, and (subject to Section 7.01) shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this Basic Agreement and
the related Trust Supplement.
Section 9.05 Effect of Supplemental Trust Agreements. Upon the execution
---------------------------------------
of any supplemental agreement under this Article, this Basic Agreement shall be
modified in accordance therewith, and such supplemental agreement shall form a
part of this Basic Agreement for all purposes; and every Certificateholder of
each series theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby to the extent applicable to such series.
Section 9.06 Conformity to Trust Indenture Act. Unless otherwise
---------------------------------
provided in the applicable Trust Supplement, every supplemental agreement
executed pursuant to this Article shall conform to the requirements of the Trust
Indenture Act as then in effect.
Section 9.07 Reference in Certificates to Supplemental Trust Agreements.
----------------------------------------------------------
Certificates of each series authenticated and delivered after the execution of
any supplemental agreement applicable to such series pursuant to this Article
may bear a notation in form approved by the Trustee as to any matter provided
for in such supplemental agreement; and, in such case, suitable notation may be
made upon Outstanding Certificates of such series after proper presentation and
demand.
ARTICLE X
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS
Section 10.01 Amendments and Supplements to Indenture and other Note
------------------------------------------------------
Documents. In the event that the Trustee, as holder of any Equipment Note in
- ---------
trust for the benefit of the Certificateholders of any series, receives a
request for a consent to any amendment, modification, waiver or supplement under
any related Indenture or other related Note Document, which requires the consent
of the Certificateholders of such series, the Trustee shall forthwith send a
notice of such proposed amendment, modification, waiver or supplement, to each
Certificateholder of such series registered on the Register as of such date.
The Trustee shall request from the Certificateholders of such series Directions
as to (i) whether or not to direct the applicable Indenture Trustee to take or
refrain from taking any action which a holder of such Equipment Note has the
option to direct, (ii) whether or not to give or execute any waivers, consents,
amendments, modifications or supplements as a holder of such Equipment Note and
48
<PAGE>
(iii) how to vote any Equipment Note if a vote has been called for with respect
thereto. Provided such a request for Certificateholder Direction shall have
been made, in directing any action or casting any vote or giving any consent as
the holder of any Equipment Note, the Trustee shall vote or consent with respect
to such Equipment Note in the same proportion as the Certificates of such series
were actually voted by Acts of Holders delivered to the Trustee prior to two
Business Days before the Trustee directs such action or casts such vote or gives
such consent. Notwithstanding the foregoing, but subject to Section 6.04, in
the case that an Event of Default hereunder with respect to such series shall
have occurred and be continuing, the Trustee may, in its own discretion and at
its own direction, consent and notify the applicable Indenture Trustee of such
consent to any amendment, modification, waiver or supplement under the
applicable Indenture or other related Note Document.
ARTICLE XI
TERMINATION OF TRUST
Section 11.01 Termination of the Trust. With respect to each Trust
------------------------
created hereby and by its related Trust Supplement, the respective obligations
and responsibilities of the Company and the Trustee created hereby and thereby
and such Trust created hereby and thereby shall terminate upon the distribution
to all Certificateholders of the related series of all amounts required to be
distributed to them pursuant to this Basic Agreement and the related Trust
Supplement and the disposition of all property held as part of the Trust
Property of such Trust; provided, however, that in no event shall such Trust
continue beyond the final expiration date determined as provided in such Trust
Supplement.
Notice of any termination of a Trust, specifying the applicable Regular
Distribution Date (or Special Distribution Date, as the case may be) upon which
the Certificateholders of any series may surrender their Certificates to the
Trustee for payment of the final distribution and cancellation, shall be mailed
promptly by the Trustee to Certificateholders of such series not earlier than
the 60th day and not later than the 20th day next preceding such final
distribution specifying (A) the Regular Distribution Date (or Special
Distribution Date, as the case may be) upon which final payment of the
Certificates of such series will be made upon presentation and surrender of
Certificates of such series at the office or agency of the Trustee therein
specified, (B) the amount of any such final payment, and (C) that the Record
Date otherwise applicable to such Regular Distribution Date (or Special
Distribution Date, as the case may be) is not applicable, payments being made
only upon presentation and surrender of the Certificates of such series at the
office or agency of the Trustee therein specified. The Trustee shall give such
notice to the Registrar at the time such notice is given to Certificateholders
of such series. Upon presentation and surrender of the Certificates of such
series, the Trustee shall cause to be distributed to Certificateholders of such
series amounts distributable on such Regular Distribution Date or Special
Distribution Date, as the case may be, pursuant to Section 4.02.
49
<PAGE>
In the event that all of the Certificateholders of such series shall not
surrender their Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Trustee shall give a second
written notice to the remaining Certificateholders of such series to surrender
their Certificates for cancellation and receive the final distribution with
respect thereto. In the event that any money held by the Trustee for the
payment of distributions on the Certificates of such series shall remain
unclaimed for two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to the escheat
period provided under applicable law) after the final distribution date with
respect thereto, the Trustee shall pay to the applicable Indenture Trustee the
appropriate amount of money relating to such Indenture Trustee and shall give
written notice thereof to the applicable Owner Trustee and the Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Limitation on Rights of Certificateholders. The death or
------------------------------------------
incapacity of any Certificateholder of any series shall not operate to terminate
this Basic Agreement, the related Trust Supplement or the related Trust, nor
entitle such Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the related Trust, nor otherwise affect the rights,
obligations, and liabilities of the parties hereto or any of them.
Section 12.02 Certificates Nonassessable and Fully Paid.
-----------------------------------------
Certificateholders of each series shall not be personally liable for obligations
of the related Trust, the Fractional Undivided Interests represented by the
Certificates of any series shall be nonassessable for any losses or expenses of
the related Trust or for any reason whatsoever, and Certificates of such series
upon authentication thereof by the Trustee pursuant to Section 3.02 are and
shall be deemed fully paid. No Certificateholder of such series shall have any
right (except as expressly provided herein) to vote or in any manner otherwise
control the operation and management of the related Trust Property, the related
Trust, or the obligations of the parties hereto, nor shall anything set forth
herein, or contained in the terms of the Certificates of such series, be
construed so as to constitute the Certificateholders of such series from time to
time as partners or members of an association.
Section 12.03 Notices. With respect to Certificates of each series, all
-------
demands, notices, and communications under the Basic Agreement or such Trust
Supplement with respect to such Trust shall be in writing, personally delivered
or mailed by certified mail-return receipt requested, and shall be deemed to
have been duly given upon receipt, in the case of the Company, at the following
address: General American Railcar Corporation II, 500 West Monroe Street,
Chicago, IL 60661-3676 Attention: Secretary, and, in the case of the Trustee,
at the following address: [The First National Bank of Chicago, Suite 0126,
Chicago, Illinois 60670-0126, Attention: Corporate Trust Services Division], or,
in each case, at such other
50
<PAGE>
address as shall be designated by such party in a written notice to the other
parties. Any notice required or permitted to be given to a Certificateholder of
any series hereunder shall be mailed by first class mail, postage prepaid, at
the address of such Holder as shown in the Register. Any notice so mailed within
the time prescribed in this Basic Agreement or the related Trust Supplement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder of such series received such notice. The Trustee shall
promptly furnish the Company with a copy of each demand, notice or written
communication received by the Trustee hereunder from any Certificateholder of
any series, any Owner Trustee or any Indenture Trustee.
Section 12.04 GOVERNING LAW. THIS BASIC AGREEMENT AND THE CERTIFICATES
-------------
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.
Section 12.05 Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions, or terms of this Basic Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions,
or terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Basic Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Basic Agreement or
any Trust, or of the rights of the Certificateholders thereof.
Section 12.06 Trust Indenture Act. Unless otherwise provided in the
-------------------
applicable Trust Supplement, this Basic Agreement and any Trust Supplement are
subject to the provisions of the Trust Indenture Act and shall, to the extent
applicable, be governed by such provisions.
Section 12.07 Effect of Headings and Table of Contents. The Article and
----------------------------------------
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 12.08 Successors and Assigns. All covenants, agreements,
----------------------
representations and warranties in this Basic Agreement by the Trustee and the
Company shall bind and, to the extent permitted hereby, shall inure to the
benefit of and be enforceable by their respective successors and assigns,
whether so expressed or not.
Section 12.09 Benefits of Agreement. Nothing in this Basic Agreement or
---------------------
in the Certificates of any series express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, and the
Certificateholders, any benefit or any legal or equitable right, remedy or claim
under this Basic Agreement.
Section 12.10 Legal Holidays. In any case where any Regular Distribution
--------------
Date or Special Distribution Date relating to any Certificate of any series
shall not be a Business Day,
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<PAGE>
then (notwithstanding any other provision of this Basic Agreement) payment need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on such Regular Distribution Date or
Special Distribution Date, and no interest shall accrue during the intervening
period.
Section 12.11 Counterparts. For the purpose of facilitating the execution
------------
of this Basic Agreement and for other purposes, this Basic Agreement may be
executed in any number of counterparts, each of which counterparts shall be
deemed to be an original, and all of which counterparts shall constitute but one
and the same instrument.
* * *
52
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this Basic
Agreement to be duly executed by their respective officers and their respective
seals, duly attested, to be hereunto affixed, all as of the day and year first
above written.
GENERAL AMERICAN RAILCAR
CORPORATION II
By:__________________________________
Name:________________________________
Title:_______________________________
[SEAL]
ATTEST:
[Secretary]
[THE FIRST NATIONAL BANK OF
CHICAGO], as Trustee
By:__________________________________
Name:________________________________
Title:_______________________________
[SEAL]
ATTEST:
Trust Officer
53
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE
/1/[THIS PASS THROUGH CERTIFICATE IS A GLOBAL PASS THROUGH CERTIFICATE
WITHIN THE MEANING OF THE PASS THROUGH TRUST AGREEMENT HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS PASS
THROUGH CERTIFICATE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A PASS THROUGH
CERTIFICATE REGISTERED, AND NO TRANSFER OF THIS PASS THROUGH CERTIFICATE IN
WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE PASS THROUGH TRUST AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS
GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 3.09 OF THE PASS THROUGH TRUST AGREEMENT.]
GENERAL AMERICAN RAILCAR CORPORATION II PASS THROUGH TRUST ____
Pass Through Certificate, Series___________
______________________
/1/ This legend to appear on Global Certificates to be deposited with The
Depository Trust Company. One Certificate may be issued in a denomination of
less than $100,000 which shall not have this legend.
<PAGE>
Issuance Date: _____________ __, ____
Final Distribution Date: ______________, ____
evidencing a Fractional Undivided Interest in
a trust, the property of which includes certain
Equipment Notes each secured by certain Equipment
leased to General American Railcar Corporation II.
Certificate
No.__________ $__________ Fractional Undivided Interest representing
________% of the Trust per $1,000 of Reference Principal
Amount
THIS CERTIFIES THAT ___________________, for value received, is the
registered owner of a Fractional Undivided Interest in the amount of
$________________ (_________________ dollars) (the "Reference Principal Amount")
in General American Railcar Corporation II Pass Through Trust _____________ (the
"Trust") created by [________________], as trustee (the "Trustee"), pursuant to
a Pass Through Trust Agreement dated as of August 1, 1998 (the "Basic
Agreement") between the Trustee and General American Railcar Corporation II, a
Delaware corporation (the "Company"), as supplemented by Trust Supplement
No.________ thereto dated ____________, ____ (collectively, the "Agreement"),
between the Trustee and the Company, a summary of certain of the pertinent
provisions of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them in
the Agreement. This Certificate is one of the duly authorized Certificates
designated as "General American Railcar Corporation II Pass Through
Certificates, Series _________" (the "Certificates"). This Certificate is
issued under and is subject to the terms, provisions, and conditions of the
Agreement, to which Agreement the Certificateholder of this Certificate by
virtue of the acceptance hereof assents and by which such Certificateholder is
bound. The property of the Trust includes certain Equipment Notes (the "Trust
Property"). Each issue of the Equipment Notes is secured by a security interest
in certain Equipment leased to the Company.
The Certificates represent fractional undivided interests in the Trust and
the Trust Property, and have no rights, benefits or interest in respect of any
other separate trust established pursuant to the terms of the Basic Agreement
for any other series of certificates issued pursuant thereto.
Subject to and in accordance with the terms of the Agreement, from funds
then available to the Trustee, there will be distributed on each [INSERT PAYMENT
TERM] (a "Regular Distribution Date"), commencing on ______________, ____, to
the Person in whose name this Certificate is registered at the close of business
on the 15th day preceding the Regular
A-2
<PAGE>
Distribution Date, an amount in respect of the Regular Payments on the Equipment
Notes due on such Regular Distribution Date, the receipt of which has been
confirmed by the Trustee, equal to the product of the percentage interest in the
Trust evidenced by this Certificate and an amount equal to the sum of such
Regular Payments. Subject to and in accordance with the terms of the Agreement,
in the event that Special Payments on the Equipment Notes are received by the
Trustee, from funds then available to the Trustee, there shall be distributed on
the applicable Special Distribution Date, to the Person in whose name this
Certificate is registered at the close of business on the 15th day preceding the
Special Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special Payments so received.
If a Regular Distribution Date or Special Distribution Date is not a Business
Day, distribution shall be made on the immediately following Business Day with
the same force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the intervening
period. The Trustee shall mail notice of each Special Payment and the Special
Distribution Date therefor to the Certificateholder of this Certificate.
Distributions on this Certificate will be made by the Trustee by check
mailed to the Person entitled thereto, without the presentation or surrender of
this Certificate or the making of any notation hereon. Except as otherwise
provided in the Agreement and notwithstanding the above, the final distribution
on this Certificate will be made after notice mailed by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency of the Trustee specified in such notice.
The Certificates do not represent a direct obligation of, or an obligation
guaranteed by, or an interest in, the Company or the Trustee or any Affiliate
thereof. The Certificates are limited in right or payment, all as more
specifically set forth on the face hereof and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the entire Agreement and reference is
made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds, and duties evidenced hereby. A copy of the
Agreement may be examined during normal business hours at the principal office
of the Trustee, and at such other places, if any, designated by the Trustee, by
any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the
A-3
<PAGE>
consent of the Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in interest in the
Trust. Any such consent by the Certificateholder of this Certificate shall be
conclusive and binding on such Certificateholder and upon all future
Certificateholders of this Certificate and of any Certificate issued upon
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain limitations set forth,
the transfer of this Certificate is registrable in the Register upon surrender
of this Certificate for registration of transfer at the offices or agencies
maintained by the Trustee in its capacity as Registrar, or by any successor
Registrar, duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Registrar, duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust will be
issued to the designated transferee or transferees.
The Certificates (except one Certificate having a denomination of less than
$100,000) are issuable only as registered Certificates without coupons in
minimum denominations of $100,000 Fractional Undivided Interest and in integral
multiples of $1,000 in excess thereof. As provided in the Agreement and subject
to certain limitations therein set forth, the Certificates are exchangeable for
new Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee shall require payment of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the Trustee or the Registrar
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Trustee, the Registrar, nor any such
agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon the distribution to Certificateholders of
all amounts to be distributed to them pursuant to the Agreement and the
disposition of all property held as part of the Trust Property.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
A-4
<PAGE>
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW
YORK.
Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
* * *
A-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
GENERAL AMERICAN RAILCAR
CORPORATION II PASS THROUGH
TRUST _______
By: [THE FIRST NATIONAL BANK OF CHICAGO],
as Trustee
By:________________________________________
Name:______________________________________
Title:_____________________________________
Dated:________________________
A-6
<PAGE>
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
[THE FIRST NATIONAL BANK OF
CHICAGO], as Trustee
By:_______________________________
Name:_____________________________
Title:____________________________
A-7
<PAGE>
Exhibit 4.4
-----------
FORM OF
________________________________________________________________________________
TRUST INDENTURE AND SECURITY AGREEMENT
(1998-1)
Dated as of August 1, 1998
between
[OWNER TRUSTEE],
as Owner Trustee
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Indenture Trustee
Tank Cars and Covered Hopper Cars
________________________________________________________________________________
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS
Section 1.1. Certain Definitions......................................................... 4
ARTICLE II. THE EQUIPMENT NOTES
Section 2.1. Form of Equipment Notes..................................................... 4
Section 2.2. Terms of Equipment Notes.................................................... 9
Section 2.3. Payment from Indenture Estate Only.......................................... 10
Section 2.4. Method of Payment........................................................... 10
Section 2.5. Application of Payments to Principal Amount, Premium and Interest........... 11
Section 2.6. Termination of Interest in Indenture Estate................................. 11
Section 2.7. Transfer of Equipment Notes................................................. 11
Section 2.8. Mutilated, Destroyed, Lost or Stolen Equipment Notes........................ 12
Section 2.9. Payment of Transfer Taxes................................................... 13
Section 2.10. Prepayments................................................................. 13
Section 2.11. Equally and Ratably Secured................................................. 15
ARTICLE III. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE INDENTURE ESTATE;
ASSUMPTION OF OBLIGATIONS OF THE OWNER TRUSTEE BY THE LESSEE
Section 3.1. Basic Rent Distribution..................................................... 15
Section 3.2. Payments in the Event of Prepayment......................................... 16
Section 3.3. Payments after Indenture Default or Indenture Event of Default.............. 17
Section 3.4. Other Payments.............................................................. 19
Section 3.5. Distribution of Excepted Property........................................... 19
Section 3.6. Assumption of Obligations of Owner Trustee by the Lessee.................... 19
ARTICLE IV. REMEDIES OF THE INDENTURE TRUSTEE UPON AN INDENTURE EVENT OF DEFAULT
Section 4.1. Indenture Events of Default................................................. 21
Section 4.2. Acceleration; Rescission and Annulment...................................... 23
Section 4.3. Remedies with Respect to Indenture Estate................................... 23
Section 4.4. Right to Cure; Option to Purchase; Etc...................................... 26
Section 4.5. Rights of Lessee............................................................ 29
Section 4.6. Waiver of Existing Defaults................................................. 29
ARTICLE V. DUTIES OF THE INDENTURE TRUSTEE
Section 5.1. Action upon Indenture Event of Default...................................... 29
Section 5.2. Action upon Instructions.................................................... 30
Section 5.3. Indemnification............................................................. 31
Section 5.4. No Duties Except as Specified in Indenture or Instructions.................. 31
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 5.5. No Action Except under Lease, Indenture or Instructions..................... 31
Section 5.6. Disposition of Units........................................................ 32
Section 5.7. Indenture Supplements for Replacements...................................... 32
Section 5.8. Effect of Replacements...................................................... 32
Section 5.9. Withholding Taxes........................................................... 32
Section 5.10. Lessee's Right of Quiet Enjoyment........................................... 33
Section 5.11. Certain Rights of Owner Trustee and Owner Participant....................... 33
ARTICLE VI. THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE
Section 6.1. Acceptance of Trusts and Duties............................................. 35
Section 6.2. Absence of Duties........................................................... 35
Section 6.3. No Representations or Warranties as to the Equipment or Documents........... 36
Section 6.4. Segregation of Moneys; No Interest; Investments............................. 36
Section 6.5. Reliance; Agents; Advice of Counsel......................................... 37
Section 6.6. Not Acting in Individual Capacity........................................... 38
ARTICLE VII. CERTAIN LIMITATIONS ON OWNER TRUSTEE'S AND INDENTURE TRUSTEE'S RIGHTS
ARTICLE VIII. SUCCESSOR TRUSTEES
Section 8.1. Notice of Successor Owner Trustee........................................... 38
Section 8.2. Resignation of Indenture Trustee; Appointment of Successor.................. 39
ARTICLE IX. SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS
Section 9.1. Supplemental Indentures without Consent of Holders.......................... 40
Section 9.2. Indenture Trustee Protected................................................. 42
Section 9.3. Request of Substance, Not Form.............................................. 42
Section 9.4. Documents Mailed to Holders................................................. 42
Section 9.5. Amendments, Waivers, Etc. of Other Documents................................ 42
ARTICLE X. MISCELLANEOUS
Section 10.1. Termination of Indenture.................................................... 45
Section 10.2. No Legal Title to Indenture Estate in Holders............................... 45
Section 10.3. Sale of Equipment by Indenture Trustee is Binding........................... 46
Section 10.4. Remedies Cumulative......................................................... 46
Section 10.5. Discontinuance of Proceedings............................................... 46
Section 10.6. Indenture and Equipment Notes for Benefit of Owner Trustee, Indenture
Trustee, Owner Participant and Holders Only................................ 46
Section 10.7. Notices..................................................................... 46
Section 10.8. Severability................................................................ 48
Section 10.9. Separate Counterparts....................................................... 48
Section 10.10. Successors and Assigns...................................................... 48
Section 10.11. Headings.................................................................... 49
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 10.12. Governing Law............................................................... 49
Section 10.13. Normal Commercial Relations................................................. 49
Section 10.14. No Recourse Against Others.................................................. 49
Section 10.15. Intercreditor Agreement..................................................... 49
</TABLE>
APPENDICES, EXHIBITS AND ANNEXES
- --------------------------------
APPENDIX A - Definitions
EXHIBIT A - Form of Trust Indenture Supplement
EXHIBIT B - Terms of Equipment Notes
EXHIBIT C - Loan Participant
ANNEX A - Rated Amortization Schedule
ANNEX B - Scheduled Amortization Schedule
iii
<PAGE>
TRUST INDENTURE AND SECURITY AGREEMENT
(1998-1)
This TRUST INDENTURE AND SECURITY AGREEMENT (1998-1) dated as of August 1,
1998 (this "Indenture"), is by and between [Owner Trustee], not in its
individual capacity, except as otherwise expressly set forth herein, but solely
as trustee under the Trust Agreement referred to below and any successor
appointed in accordance with the terms hereof and of the Trust Agreement (in
such trustee capacity, the "Owner Trustee"), and The First National Bank of
Chicago, a national banking association, as Indenture Trustee hereunder and any
successor appointed in accordance with the terms hereof (the "Indenture
Trustee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Owner Participant and the Owner Trustee in its individual
capacity have entered into the Trust Agreement pursuant to which, among other
things, (i) the Owner Trustee establishes a certain trust for the use and
benefit of the Owner Participant, subject, however, to the Indenture Estate
created pursuant hereto for the use and benefit of, and with the priority of
payment to, the holders of the Equipment Notes, and (ii) the Owner Trustee is
authorized and directed to execute and deliver this Indenture;
WHEREAS, the Owner Trustee and the Indenture Trustee desire by this
Indenture, among other things, (i) to provide for the issuance by the Owner
Trustee of the Equipment Notes, and (ii) to provide for the assignment, mortgage
and pledge by the Owner Trustee to the Indenture Trustee, as part of the
Indenture Estate hereunder, among other things, of, and the grant of a security
interest in, certain of the Owner Trustee's right, title and interest in and to
the Equipment and the Lease and certain payments and other amounts received
hereunder or thereunder, in accordance with the terms hereof, in trust, as
security for, among other things, the Owner Trustee's obligations for the equal
and ratable benefit of the holders of the Equipment Notes; and
WHEREAS, all things necessary to make this Indenture the legal, valid and
binding obligation of the Owner Trustee and the Indenture Trustee, for the uses
and purposes herein set forth, in accordance with its terms, have been done and
performed and have happened.
GRANTING CLAUSE
NOW, THEREFORE, WITNESSETH, that, to secure the prompt payment of the
principal of and interest and Premium, if any, on and all other amounts due with
respect to, the Equipment Notes from time to time outstanding hereunder and the
performance and observance by the Owner Trustee of all the agreements, covenants
and provisions contained herein, in the other Operative Agreements and in the
Equipment Notes all for the benefit of the holders of the Equipment Notes, and
the prompt payment of any and all amounts from time to time owing hereunder and
<PAGE>
under the other Operative Agreements by the Owner Trustee, the Owner Participant
and the Lessee to the holders of the Equipment Notes, and for the uses and
purposes and subject to the terms and provisions hereof, and in consideration of
the premises and of the covenants herein contained, and of the acceptance of the
Equipment Notes by the Loan Participant, the Owner Trustee does hereby sell,
assign, transfer, convey, mortgage, pledge, and confirm unto the Indenture
Trustee, its successors and assigns, for the security and benefit of the holders
of the Equipment Notes from time to time, a first priority security interest in
and mortgage lien on all right, title and interest of the Owner Trustee in and
to the following described property, rights, interests and privileges insofar as
it does not constitute Excepted Property or Excepted Rights (which collectively,
including all property hereafter required to be subjected to the Lien of this
Indenture by any instrument supplemental hereto, but excluding Excepted Property
and Excepted Rights, being herein called the "Indenture Estate"), to wit:
(1) the Lease (including, without limitation, all amounts of Basic Rent,
Supplemental Rent, insurance proceeds and other payments of any kind for or with
respect to the Equipment), the Participation Agreement, the Transfer and
Contribution Agreement, the Intercreditor Agreement, the GATC Bill of Sale and
the Bill of Sale;
(2) the Equipment, the Replacement Units and all substitutions therefor in
which the Owner Trustee shall from time to time acquire an interest under the
Lease, all as more particularly described in the Indenture Supplements and Lease
Supplements executed and delivered with respect to the Equipment or any such
Replacement Units or any substitutions therefor, as provided in this Indenture
and the Lease;
(3) all requisition proceeds with respect to the Equipment or any Unit
thereof (to the extent of the Owner Trustee's interest therein pursuant to the
terms of the Lease);
(4) all monies and securities now or hereafter paid or deposited or
required to be paid or deposited with the Indenture Trustee pursuant to any term
of this Indenture, the Lease or the Participation Agreement or required to be
held by the Indenture Trustee hereunder or thereunder (including, without
limitation, the Payment Account); and
(5) all proceeds of the foregoing;
PROVIDED, HOWEVER, that the foregoing granting clause shall not subject to the
Lien of this Indenture any (i) Excepted Rights, (ii) Excepted Property or (iii)
payment of amounts which have been distributed to the Owner Trustee or any other
Person in accordance with the provisions of this Indenture.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture
Trustee, its successors and assigns, in trust for the benefit and security of
the holders of the Equipment
2
<PAGE>
Notes from time to time, without any priority of any one Equipment Note over any
other, and for the uses and purposes, and subject to the terms and provisions,
set forth in this Indenture.
It is expressly agreed that, notwithstanding anything to the contrary
contained herein, the Owner Trustee shall remain liable under each of the
Operative Agreements to which it is a party to perform all of the obligations,
if any, assumed by it thereunder, all in accordance with and pursuant to the
terms and provisions thereof, and the Indenture Trustee and the holders of the
Equipment Notes shall have no obligation or liability under any of the Operative
Agreements to which the Owner Trustee is a party by reason of or arising out of
this assignment, nor shall the Indenture Trustee (unless the Indenture Trustee
shall have become the "Lessor" under the Lease) or the holders of the Equipment
Notes be required or obligated in any manner to perform or fulfill any
obligations of the Owner Trustee under or pursuant to any of the Operative
Agreements to which the Owner Trustee is a party or, except as herein expressly
provided, to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or present or file any claim, or take
any action to collect or enforce the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
The Owner Trustee does hereby constitute the Indenture Trustee the true and
lawful attorney of the Owner Trustee, irrevocably, with full power (in the name
of the Owner Trustee or otherwise), to ask, require, demand, receive, compound
and give acquittance for any and all moneys and claims for moneys due and to
become due to the Owner Trustee (other than Excepted Property), under or arising
out of the Lease and the other Operative Agreements and all other property which
now or hereafter constitutes part of the Indenture Estate, or to endorse any
checks or other instruments or orders in connection therewith and to file any
claims or take any action or institute any proceedings which the Indenture
Trustee may deem to be necessary or advisable in the premises. The Owner
Trustee has directed the Lessee to make all payments of Rent (other than
Excepted Property) payable to the Owner Trustee by the Lessee and all other
amounts which are required to be paid to or deposited with the Owner Trustee
pursuant to the Lease (other than Excepted Property) directly to the Indenture
Trustee at such address as the Indenture Trustee shall specify, for application
as provided in this Indenture. The Owner Trustee agrees that promptly on
receipt thereof, it will transfer to the Indenture Trustee any and all moneys
from time to time received by it constituting part of the Indenture Estate, for
distribution by the Indenture Trustee pursuant to this Indenture, except that
the Owner Trustee shall accept for distribution pursuant to the Trust Agreement
any amounts distributed to it by the Indenture Trustee as expressly provided in
this Indenture and any Excepted Property.
The Owner Trustee agrees that at any time and from time to time, upon the
written request of the Indenture Trustee, the Owner Trustee will promptly and
duly execute and deliver or cause to be executed and delivered any and all such
further instruments and documents as the Indenture Trustee may reasonably deem
to be necessary in order to obtain the full benefits of this assignment and of
the rights and powers herein granted.
3
<PAGE>
The Owner Trustee does hereby warrant and represent that it has not
assigned or pledged, and hereby covenants that it will not assign or pledge, so
long as the assignment hereunder shall remain in effect, any of its right, title
or interest hereby assigned, to anyone other than the Indenture Trustee, and
that it will not (other than in respect of Excepted Property), except as
provided in or permitted by this Indenture, accept any payment from the Lessee,
enter into an agreement amending or supplementing any of the Operative
Agreements, execute any waiver or modification of, or consent under the terms of
any of the Operative Agreements (other than the Tax Indemnity Agreement), settle
or compromise any claim (other than claims in respect of Excepted Property)
against the Lessee arising under any of the Operative Agreements, or submit or
consent to the submission of any dispute, difference or other matter arising
under or in respect of any of the Operative Agreements, to arbitration
thereunder.
IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as
follows:
ARTICLE I. DEFINITIONS
Section 1.1. Certain Definitions. Unless the context otherwise requires,
-------------------
all capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Appendix A hereto for all purposes of this Indenture. All
references to articles, sections, clauses, schedules and appendices in this
Indenture are to articles, sections, clauses, schedules, exhibits, annexes and
appendices in and to this Indenture unless otherwise indicated.
ARTICLE II. THE EQUIPMENT NOTES
Section 2.1. Form of Equipment Notes. The Equipment Notes shall be
-----------------------
substantially in the form set forth below:
4
<PAGE>
_____% EQUIPMENT NOTE
(1998-1)
(Secured by, among others, Lease Obligations of
General American Railcar Corporation II)
Issued in Connection with certain Railroad Rolling Stock
No. ______ [New York, New York]
$_____________ ____, 1998
[Owner Trustee], not in its individual capacity, but solely as owner
trustee (herein in such capacity called the "Owner Trustee") under that certain
Trust Agreement (1998-1), dated as of August 1, 1998, as from time to time
supplemented and amended (herein called the "Trust Agreement"), between the
Owner Trustee in its individual capacity and the institution referred to therein
as the "Owner Participant", hereby promises to pay to __________________, or
registered assigns, the principal sum of $________________ (or such lesser
amount as shall equal the unpaid principal amount of this Equipment Note), in
lawful currency of the United States of America, on the Rated Maturity Date and
on each Payment Date commencing on ___________ ____, 1998 that precedes the
Rated Maturity Date, (i) the principal amount required to be paid on such date
by Sections 2.2 and 3.1 of the Indenture, (ii) interest (computed on the basis
of a 360-day year of twelve 30-day months) on the unpaid principal balance
hereof, from and including the date hereof or the most recent Payment Date for
which interest has been duly paid to but excluding such Payment Date at the Debt
Rate, (iii) without duplication of any amount payable pursuant to clause (ii),
interest (computed on the basis of a 360-day year of twelve 30-day months) on
any Rated Amortization of this Equipment Note, and, to the extent lawful,
interest payable under the foregoing clause (ii), that is not paid on the date
such principal or interest becomes due and payable, for the period from and
including the date such Rated Amortization becomes due and payable to but
excluding the date such principal is paid in full, at the Default Rate, (iv) any
Premium required to be paid on such date by Sections 2.2 and 3.1 of the
Indenture, and (v) any interest (computed on the basis of a 360-day year of
twelve 30-day months) required to be paid on such date by Sections 2.2 and 3.1
of the Indenture on any Premium payable on this Equipment Note.
All payments of principal and interest and Premium, if any, to be made
hereunder and under the Trust Indenture and Security Agreement (1998-1), dated
as of August 1, 1998 as from time to time amended and supplemented (herein
called the "Indenture"; unless otherwise defined herein, defined terms used
herein shall have the meanings assigned to such terms in the Indenture), between
the Owner Trustee and The First National Bank of Chicago, as Indenture Trustee
thereunder for the holder of this Equipment Note and the holders of other
Equipment Notes outstanding thereunder (in such capacity, the "Indenture
Trustee") shall be made only from the
5
<PAGE>
income and proceeds from the Indenture Estate and only to the extent that the
Indenture Trustee shall have sufficient income or proceeds from the Indenture
Estate to make such payments in accordance with the terms of Article III of the
Indenture. Each holder hereof, by its acceptance of this Equipment Note, agrees
that it will look solely to the income and proceeds from the Indenture Estate to
the extent available for distribution to the holder hereof as provided in the
Indenture and that none of the Owner Trustee, the Owner Participant, the
Indenture Trustee or their permitted successors and assigns is or shall be
personally liable to the holder hereof for any amount payable under this
Equipment Note or the Indenture or, except as expressly provided in the
Participation Agreement or the Indenture, for any liability under the
Participation Agreement or (in the case of the Owner Trustee or the Indenture
Trustee) the Indenture.
Payments with respect to the principal amount hereof, Premium, if any, and
interest thereon shall be payable in U.S. dollars in immediately available funds
at the principal bond and trustee administration office of the Indenture
Trustee, or as otherwise provided in the Indenture. Each such payment shall be
made on the date such payment is due and without any presentment or surrender of
this Equipment Note, except as provided in Section 2.4. Whenever the date
scheduled for any payment to be made hereunder or under the Indenture shall not
be a Business Day, then such payment need not be made on such scheduled date but
may be made on the next succeeding Business Day with the same force and effect
as if made on such scheduled date and (provided that such payment is made on
such next succeeding Business Day) no interest shall accrue on the amount of
such payment from and after such scheduled date to the time of such payment on
such next succeeding Business Day.
Each holder hereof, by its acceptance of this Equipment Note, agrees that
each payment received by it hereunder shall be applied in the order of priority
set forth in Article III of the Indenture.
This Equipment Note is one of the Equipment Notes referred to in the
Indenture which have been or are to be issued by the Owner Trustee pursuant to
the terms of the Indenture and relates to the Units described in Lease
Supplement No. __. The Indenture Estate is held by the Indenture Trustee as
security for the Equipment Notes. Reference is hereby made to the Indenture for
a statement of the rights of the holder of, and the nature and extent of the
security for, this Equipment Note, as well as for a statement of the terms and
conditions of the trusts created by the Indenture, to all of which terms and
conditions in the Indenture each holder hereof agrees by its acceptance of this
Equipment Note.
This Equipment Note is not subject to redemption or prepayment except as
provided in Sections 2.10, 3.2 and 3.3 of the Indenture. This Equipment Note is
subject to purchase by the Owner Trustee as provided in Section 4.4(b) of the
Indenture (including purchase without Make-Whole Amount under certain
circumstances as described therein). The holder hereof, by its acceptance of
this Equipment Note, agrees to be bound by said provisions.
6
<PAGE>
This Equipment Note is a registered Equipment Note and is transferable, as
provided in the Indenture, only upon surrender of this Equipment Note for
registration of transfer duly endorsed by, or accompanied by a written statement
of transfer duly executed by, the registered holder hereof or his attorney duly
authorized in writing. Prior to the due presentation for registration of
transfer of this Equipment Note, the Owner Trustee and the Indenture Trustee may
deem and treat the registered holder of this Equipment Note as the absolute
owner and holder hereof for the purpose of receiving payment of all amounts
payable with respect hereto and for all other purposes and shall not be affected
by any notice to the contrary.
THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT. THIS
EQUIPMENT NOTE SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Indenture Trustee by manual signature, this Equipment Note shall
not be entitled to any benefit under the Indenture or be valid or obligatory for
any purpose.
7
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Note to be
executed by one of its authorized officers as of the date hereof.
[OWNER TRUSTEE], not in its individual capacity except as set forth in
the Indenture, but solely as Owner Trustee
By:
Name:
Title:
[FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Equipment Notes referred to in the within-mentioned
Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Indenture Trustee
By:
Authorized Officer
8
<PAGE>
Section 2.2. Terms of Equipment Notes. There shall be issued and delivered
------------------------
to the Loan Participant one Equipment Note related to the Lease Supplement
executed and delivered in respect of the Units delivered on the Closing Date in
the maturity, principal amount and bearing the interest rate as set forth in
Exhibit B hereto, and the Equipment Note related to each such Lease Supplement
shall be in a principal amount equal to the loan made by the Loan Participant to
the Owner Trustee pursuant to Section 2 of the Participation Agreement relating
to the Units under such Lease Supplement. Such Equipment Note shall evidence
the loan made by the Loan Participant in connection with the purchase of the
Equipment by the Owner Trustee from the Lessee, shall be substantially in the
form set forth in Section 2.1, with deletions and insertions as appropriate, and
duly authenticated by the Indenture Trustee and dated the Closing Date of the
Equipment.
The principal amount of, Premium, if any, and interest on the Equipment
Notes issued pursuant to the provisions of this Indenture shall be payable as
follows:
(i) accrued and unpaid Regular Interest on the Equipment Notes
shall become due and payable on each Payment Date commencing on
[____________ ____], 1998;
(ii) on each Payment Date that precedes the Rated Maturity Date,
there shall become due and payable an aggregate unpaid principal amount of
the outstanding Equipment Notes equal to the Rated Amortization Amount at
such Payment Date;
(iii) on each Payment Date that precedes the Rated Maturity Date,
there shall become due and payable, in addition to any aggregate unpaid
principal amount of the outstanding Equipment Notes that becomes due and
payable on that Payment Date pursuant to clause (ii) above, an aggregate
unpaid principal amount of the outstanding Equipment Notes equal to any
Scheduled Obligations Due;
(iv) any accrued and unpaid Default Interest on the Equipment
Notes shall become due and payable on each Payment Date;
(v) if the Scheduled Amortization Amount at any Payment Date
exceeds the aggregate principal amount of the Equipment Notes paid on that
Payment Date, then (y) the amount equal to the difference between (1) the
greater of (A) the principal amount of the Equipment Notes paid on such
Payment Date and (B) the Rated Amortization Amount payable on such Payment
Date and (2) the Scheduled Amortization Amount payable on such Payment Date
shall constitute a "Payment Deficiency" for the period from and including
that Payment Date to but excluding the next succeeding Payment Date and (z)
on the next succeeding Payment Date, there shall become payable a Late
Payment Premium with respect to such Payment Deficiency.
9
<PAGE>
Notwithstanding the foregoing, the final payment made under each Equipment
Note shall be in an amount sufficient to discharge in full the unpaid principal
of and all accrued and unpaid interest on, unpaid Premium (if any), and any
other amounts due under, such Equipment Note.
Any unpaid portion of Late Payment Premium that has accrued under the
Equipment Notes shall bear interest (computed on the basis of a 360-day year of
twelve 30-day months) from the date such Late Payment Premium became payable
until such Late Payment Premium is paid in full at a rate per annum equal to
[1.5]%. Any unpaid portion of Make-Whole Amount, if any, that has accrued and
any other amounts (other than principal, interest and Premium) payable under the
Equipment Notes which are overdue shall bear interest at the Default Rate from
the date such amount became payable until such amount is paid in full. The
Owner Trustee shall cause such interest to be paid on such amount on the date or
dates provided for in this Indenture, pro rata among the Equipment Notes.
All amounts payable pursuant to this Section 2.2 shall be payable from
funds to be withdrawn from the Payment Account pursuant to Section 3.1 in the
priority set forth therein.
No Equipment Note shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless it shall have been authenticated
by or on behalf of the Indenture Trustee by manual signature.
Section 2.3. Payment from Indenture Estate Only. All payments to be made
----------------------------------
under the Equipment Notes and this Indenture shall be made only from the income
and the proceeds from the Indenture Estate and only to the extent that the
Indenture Trustee shall have received sufficient income or proceeds from the
Indenture Estate to make such payments in accordance with the terms of Article
III hereof. Each holder of an Equipment Note, by its acceptance of such
Equipment Note, agrees that it will look solely to the income and proceeds from
the Indenture Estate to the extent available for distribution to such holder as
herein provided and that none of the Owner Trustee, the Owner Participant, the
Indenture Trustee or their permitted successors and assigns is or shall be
personally liable to the holder of any Equipment Note for any amount payable
under such Equipment Note or the Indenture or, except as expressly provided in
the Participation Agreement or the Indenture, for any liability under the
Participation Agreement or (in the case of the Owner Trustee or the Indenture
Trustee) the Indenture.
Section 2.4. Method of Payment. (a) The principal of and Premium, if any,
-----------------
and interest on each Equipment Note will be payable in U.S. dollars in
immediately available funds at the principal corporate trust administration
office of the Indenture Trustee or as otherwise directed in the manner provided
herein. Notwithstanding the foregoing or any provision in any Equipment Note to
the contrary, the Indenture Trustee will pay, or cause to be paid, if so
requested by any holder of an Equipment Note by written notice to the Owner
Trustee and the Indenture Trustee, all amounts payable by the Owner Trustee
hereunder to such holder or a nominee therefor either (i) by transferring by
wire in immediately available funds to an account maintained by such
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holder with a bank in the United States the amount to be distributed to such
holder or (ii) by mailing a check denominated in U.S. dollars to such holder at
such address as such holder shall have specified in such notice, in any case
without any presentment or surrender of any Equipment Note, except that the
holder of an Equipment Note shall surrender such Equipment Note to the Indenture
Trustee upon payment in full of the principal amount of and interest on such
Equipment Note and such other sums payable to such holder hereunder or under the
Equipment Note.
(b) Whenever the date scheduled for any payment to be made hereunder
or under any Equipment Note shall not be a Business Day, then such payment need
not be made on such scheduled date but may be made on the next succeeding
Business Day with the same force and effect as if made on such scheduled date,
and (provided that such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business Day.
Section 2.5. Application of Payments to Principal Amount, Premium and
--------------------------------------------------------
Interest. In the case of each Equipment Note, each payment of principal thereof
- --------
and Premium, if any, and interest thereon shall be applied in the order of
priority set forth in Article III hereof; provided, that the Owner Trustee may
only prepay such Equipment Note in accordance with the provisions of Sections
2.10, 3.2 and 3.3 hereof.
Section 2.6. Termination of Interest in Indenture Estate. A holder shall
-------------------------------------------
have no further interest in, or other right with respect to, the Indenture
Estate when and if the principal amount of and interest on all Equipment Notes
held by such holder and all other sums payable to such holder hereunder and
under such Equipment Notes and under the Participation Agreement shall have been
paid in full.
Section 2.7. Transfer of Equipment Notes. The Indenture Trustee shall
---------------------------
maintain at its corporate trust administration office in Chicago, Illinois or in
the city in which the corporate trust office of a successor Indenture Trustee is
located, a register for the purpose of registering transfers and exchanges of
Equipment Notes. A holder of an Equipment Note intending to transfer such
Equipment Note to a new payee, or to exchange any Equipment Note or Equipment
Notes held by it for an Equipment Note or Equipment Notes of a different
denomination or denominations, may surrender such Equipment Note or Equipment
Notes to the Indenture Trustee at such principal corporate trust administration
office of the Indenture Trustee, together with a written request from such
holder for the issuance of a new Equipment Note or Equipment Notes, specifying
the denomination or denominations (each of which shall be not less than
$[100,000] or a whole multiple thereof or such smaller denomination as may be
necessary due to the original issuance of Equipment Notes of the applicable
maturity in an aggregate principal amount not evenly divisible by $[100,000]) of
the same, and, in the case of a surrender for registration of transfer, the name
and address of the transferee or transferees. Promptly upon receipt of such
documents, the Owner Trustee will issue, and the Indenture Trustee will
authenticate, a new
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Equipment Note or Equipment Notes in the same aggregate principal amount and
dated the same date or dates as, with the same payment schedule, in the form set
forth in Section 2.1, having the same maturity and bearing the same interest
rate as the Equipment Note or Equipment Notes surrendered, in such denomination
or denominations and payable to such payee or payees as shall be specified in
the written request from such holder. All Equipment Notes issued upon any
registration of transfer or exchange of Equipment Notes shall be the valid
obligations of the Owner Trustee evidencing the same respective obligations, and
entitled to the same security and benefits under this Indenture, as the
Equipment Notes surrendered upon such registration of transfer or exchange. The
Indenture Trustee shall make a notation on each new Equipment Note or Equipment
Notes of the amount of all payments or prepayments of principal and interest
previously made on the old Equipment Note or Equipment Notes with respect to
which such new Equipment Note or Equipment Notes is or are issued. From time to
time, the Indenture Trustee will provide the Owner Trustee and the Lessee with
such information as either of them may request as to the registered holders of
Equipment Notes. The Owner Trustee shall not be required to exchange any
surrendered Equipment Notes as above provided during the 10-day period preceding
the due date of any payment on such Equipment Notes.
Prior to the due presentment for registration of transfer of an Equipment
Note, the Owner Trustee and the Indenture Trustee may deem and treat the
registered holder of such Equipment Note as the absolute owner and holder of
such Equipment Note for the purpose of receiving payment of all amounts payable
with respect to such Equipment Note and for all other purposes and shall not be
affected by any notice to the contrary.
The Indenture Trustee will promptly notify the Owner Trustee and the Lessee
of each request for a registration of transfer of an Equipment Note. The
Indenture Trustee will promptly cancel and destroy all Equipment Notes
surrendered for transfer or exchange pursuant to this Section.
Section 2.8 Mutilated, Destroyed, Lost or Stolen Equipment Notes. If any
----------------------------------------------------
Equipment Note shall become mutilated, destroyed, lost or stolen, the Owner
Trustee shall, upon the written request of the holder of such Equipment Note,
issue, and the Indenture Trustee shall authenticate and deliver in replacement
thereof, a new Equipment Note in the form set forth in Section 2.1, payable to
the same holder in the same principal amount, of the same maturity, with the
same payment schedule, bearing the same interest rate and dated the same date as
the Equipment Note so mutilated, destroyed, lost or stolen. The Indenture
Trustee shall make a notation on each new Equipment Note of the amount of all
payments or prepayments of principal and interest theretofore made on the
Equipment Note so mutilated, destroyed, lost or stolen and the date to which
interest on such old Equipment Note has been paid. If the Equipment Note being
replaced has become mutilated, such Equipment Note shall be surrendered to the
Indenture Trustee and forwarded to the Owner Trustee by the Indenture Trustee.
If the Equipment Note being replaced has been destroyed, lost or stolen, the
holder of such Equipment Note shall furnish to the Owner Trustee and the
Indenture Trustee such security or indemnity as may be required by them to save
the Owner Trustee and the Indenture Trustee harmless and evidence satisfactory
to the Owner
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Trustee and the Indenture Trustee of the destruction, loss or theft of such
Equipment Note and of the ownership thereof.
Section 2.9 Payment of Transfer Taxes. Upon the transfer of any Equipment
-------------------------
Note or Equipment Notes pursuant to Section 2.7, the Owner Trustee or the
Indenture Trustee may require from the party requesting such new Equipment Note
or Equipment Notes payment of a sum to reimburse the Owner Trustee or the
Indenture Trustee for, or to provide funds for the payment of, any tax or other
governmental charge in connection therewith.
Section 2.1 Prepayments. (a) Each Equipment Note shall be prepaid in
-----------
whole or in part by the Owner Trustee on a Rent Payment Date upon at least 25
days' prior notice from the Owner Trustee (or the Lessee on its behalf) to the
Indenture Trustee in the event that the Lease as applicable to any Unit or Units
related to such Equipment Note is terminated pursuant to Section 10 of the
Lease, at a price equal to the sum of (i) as to principal thereof, an amount
equal to the product obtained by multiplying the unpaid principal amount of such
Equipment Note as at the date of such prepayment (after deducting therefrom the
principal installment, if any, paid on the date of such prepayment) by a
fraction, the numerator of which shall be the Equipment Cost of such Unit or
Units and the denominator of which shall be the aggregate Equipment Cost of all
Units included in the Indenture Estate under the related Indenture Supplement
immediately prior to the date of such prepayment, (ii) as to interest, the
aggregate amount of interest accrued and unpaid in respect of the principal
amount to be prepaid pursuant to clause (i) above on the date of such payment
after giving effect to the application of any Basic Rent paid on the date of
such prepayment, (iii) any unpaid Late Payment Premium (and accrued and unpaid
interest thereon) in respect of the principal amount to be prepaid pursuant to
clause (i), (iv) a premium in an amount equal to the Make-Whole Amount, if any,
applicable in respect of the principal amount to be prepaid pursuant to clause
(i) above on the date of such prepayment, and (v) all other amounts payable
hereunder or under the other Operative Agreements to the holders of the
Equipment Notes in respect of the principal amount to be prepaid pursuant to
clause (i).
(b) Each Equipment Note shall be prepaid in whole or in part by the
Owner Trustee on a Rent Payment Date upon at least 25 days' prior notice from
the Owner Trustee (or the Lessee on its behalf) to the Indenture Trustee in
connection with the occurrence of an Event of Loss or the deemed occurrence of
an Event of Loss pursuant to Section 9.1 of the Lease with respect to any Unit
or Units related to such Equipment Note (if such Unit or Units are not replaced
pursuant to Section 11.2(i) of the Lease) at a price equal to the sum of (i) as
to principal thereof, an amount equal to the product obtained by multiplying the
aggregate unpaid principal amount of such Equipment Note as at such prepayment
date (after deducting therefrom the principal installment, if any, paid on such
date) by a fraction, the numerator of which shall be the Equipment Cost of such
Unit or Units and the denominator of which shall be the aggregate Equipment Cost
of all Units included in the Indenture Estate under the related Indenture
Supplement immediately prior to such date, (ii) as to interest, the aggregate
amount of interest accrued and unpaid in respect of the principal amount to be
prepaid pursuant to clause (i) above to but not including the date of
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prepayment after giving effect to the application of any Basic Rent paid on the
date of such prepayment, (iii) any unpaid Late Payment Premium (and accrued and
unpaid interest thereon) in respect of the principal amount to be prepaid
pursuant to clause (i), but without the payment of any Make-Whole Amount, and
(iv) all other amounts payable hereunder or under the other Operative Agreements
to the holders of the Equipment Notes in respect of the principal amount to be
prepaid pursuant to clause (i).
(c) (A) Unless Lessee shall have elected pursuant to Section 6.9 of
the Participation Agreement to assume all of the rights and obligations of the
Owner Trustee under this Indenture in respect of the Equipment Notes, each
Equipment Note shall be prepaid in whole by the Owner Trustee on the
Determination Date specified by Lessee to Owner Trustee and Indenture Trustee in
accordance with Section 6.9 of the Participation Agreement, in the event that
Lessee exercises the purchase option under Section 6.9 of the Participation
Agreement with respect to all Units related to such Equipment Note, at a price
equal to the sum of (i) as to principal thereof, the aggregate unpaid principal
amount of such Equipment Note as at the date of such prepayment in whole under
Section 6.9 of the Participation Agreement, (ii) as to interest, the aggregate
amount of interest accrued and unpaid in respect of the principal amount to be
prepaid pursuant to clause (i) above on the date of such prepayment after giving
effect to the application of any Basic Rent paid on the date of such prepayment,
(iii) any unpaid Late Payment Premium (and accrued and unpaid interest thereon)
on such Equipment Note, (iv) a premium in an amount equal to the aggregate Make-
Whole Amount, if any, applicable in respect of the principal amount to be
prepaid pursuant to clause (i) above on the date of such prepayment, and (v) all
other amounts payable hereunder or under the other Operative Agreements to the
holders of the Equipment Notes in respect of the principal amount to be prepaid
pursuant to clause (i).
(B) Unless Lessee shall have elected pursuant to Section 22.1 of
the Lease to assume all of the rights and obligations of the Owner Trustee under
this Indenture in respect of the Equipment Notes, each Equipment Note shall be
prepaid in whole or in part by the Owner Trustee on the Determination Date
specified by Lessee to Owner Trustee and Indenture Trustee in accordance with
Section 22.1 of the Lease, in the event that Lessee exercises the purchase
option under Section 22.1 of the Lease, with respect to all Units related to
such Equipment Note, at a price equal to the sum of (i) as to principal thereof,
the aggregate unpaid principal amount of such Equipment Note as at the date of
such prepayment in whole under Section 22.1 of the Lease (after deducting
therefrom the principal installment, if any, paid on the date of such
prepayment) by a fraction, the numerator of which shall be the Equipment Cost of
such Unit or Units and the denominator of which shall be the aggregate Equipment
Cost of all Units included in the Indenture Estate under the related Indenture
Supplement immediately prior to the date of such prepayment, (ii) as to
interest, the aggregate amount of interest accrued and unpaid in respect of the
principal amount to be prepaid pursuant to clause (i) above on the date of such
prepayment after giving effect to the application of any Basic Rent paid on the
date of such prepayment, (iii) any unpaid Late Payment Premium (and accrued and
unpaid interest thereon) on such Equipment Note, (iv) a premium in an amount
equal to the aggregate Make-Whole Amount, if
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any, applicable in respect of the principal amount to be prepaid pursuant to
clause (i) above on the date of such prepayment, and (v) all other amounts
payable hereunder or under the other Operative Agreements to the holders of the
Equipment Notes in respect of the principal amount to be prepaid pursuant to
clause (i). (d) In the event of a refunding or refinancing pursuant to Section
10.2 of the Participation Agreement, all Equipment Notes shall be prepaid in
whole but not in part on the Refunding Date specified by the Lessee to the
Indenture Trustee in accordance with Section 10.2(f) of the Participation
Agreement at a price equal to the unpaid principal amount thereof together with
accrued but unpaid interest thereon, plus, any unpaid Late Payment Premium (and
accrued and unpaid interest thereon) on such Equipment Notes, plus, a premium in
an amount equal to the Make-Whole Amount, if any, and all other amounts due and
payable hereunder or under the other Operative Agreements to the holders of the
Equipment Notes.
(e) The Indenture Trustee shall give prompt notice of any prepayment
of any of the Equipment Notes to all holders of the Equipment Notes as soon as
the Indenture Trustee shall have knowledge that such prepayment is expected to
occur, which notice shall specify the Equipment Note or Notes to be prepaid, the
principal amount of such Equipment Note or Notes to be prepaid and the expected
date of prepayment which date shall be not less than 25 days after the date of
such notice.
Section 2.11. Equally and Ratably Secured. All Equipment Notes at any time
---------------------------
outstanding under this Indenture shall be equally and ratably secured hereby
without preference, priority or distinction on account of the date or dates or
the actual time or times of the issue or maturity of such Equipment Notes so
that all Equipment Notes at any time issued and outstanding hereunder shall have
the same rights, Liens and preferences under and by virtue of this Indenture.
ARTICLE III. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME
FROM THE INDENTURE ESTATE; ASSUMPTION OF
OBLIGATIONS OF THE OWNER TRUSTEE BY THE LESSEE
Section 3.1 Basic Rent Distribution. Except as otherwise provided in
-----------------------
Section 3.3 or 3.5, each installment of Basic Rent, as well as any installment
of interest on overdue installments of Basic Rent and any other moneys paid over
by the Lessee or the Owner Trustee to the Indenture Trustee for such purpose,
shall be deposited into the Payment Account maintained by the Indenture Trustee
pursuant to Section 6.4(c) hereof and distributed by the Indenture Trustee as
promptly as possible (it being understood that any payments of Basic Rent
received by the Indenture Trustee on a timely basis and in accordance with the
provisions of Section 3.5 of the Lease shall be distributed on the date received
in the funds so received) in the following order of priority:
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first, to the holders of the Equipment Notes, an amount equal to all
-----
interest accrued and unpaid on the Equipment Notes as of such date,
computed on the basis of a 360-day year of twelve 30-day months (but not
including interest on past due principal and interest or interest on
Premium),
second, after giving effect to the first clause above, so much of such
------
installment or payment remaining as shall be available to pay to the
holders of the Equipment Notes, an amount equal to any Rated Amortization
Amount of principal due on the Equipment Notes as of such date,
third, after giving effect to the second clause above, so much of such
-----
installment or payment remaining as shall be available to pay to the
holders of the Equipment Notes, an amount equal to any Scheduled
Obligations Due as of such Payment Date,
fourth, after giving effect to the third clause above, so much of such
------
installment or payment remaining as shall be available to pay the
Accumulated Equity Deficiency Amount to the Owner Trustee for distribution
in accordance with the terms of the Trust Agreement,
fifth, after giving effect to the fourth clause above, so much of such
-----
installment or payment remaining as shall be available to pay to the
holders of the Equipment Notes accrued and unpaid interest on past due
principal and accrued and unpaid interest (but not including interest on
Premium),
sixth, after giving effect to the fifth clause above, so much of such
-----
installment or payment remaining as shall be available to pay to the
holders of the Equipment Notes, an amount equal to any interest on Late
Payment Premium then due and owing on the Equipment Notes,
seventh, after giving effect to the sixth clause above, so much of
-------
such installment or payment remaining as shall be available to pay to the
holders of the Equipment Notes, an amount equal to any Late Payment Premium
then due and owing on the Equipment Notes, and
eighth, the balance, if any, of such Payment Account, to the Owner
------
Trustee for distribution in accordance with the terms of the Trust
Agreement.
To the extent there are insufficient proceeds in the Payment Account
to pay all amounts pursuant to clauses "first", "second", "third", "fourth",
"sixth", and "seventh", in the order of priority set forth therein, any partial
payment with respect to any such clause shall be made pro rata in respect of
--- ----
such clause in proportion to the unpaid principal amounts of the
outstanding Equipment Notes on such date.
Section 3.2 Payments in the Event of Prepayment. (a) Except as otherwise
-----------------------------------
provided in Section 3.3 or 3.5, in the event of any prepayment of an Equipment
Note or Notes, in whole or in part, in accordance with the provisions of Section
2.10 any amount received by the Indenture Trustee
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<PAGE>
shall in each case be distributed and paid in the following order of priority:
first, so much of such amount as shall be required to pay the aggregate amount
- -----
of the principal, Premium, if any, and interest and all other amounts to be paid
on such Equipment Note or Notes pursuant to Section 2.10 shall be paid to the
holders of such Equipment Note or Notes, such prepayment to be made ratably to
such Equipment Note or Notes to which such prepayment relates, without priority
of one over any other, in the proportion that the amount to be prepaid on each
such Equipment Note bears to the aggregate amount to be paid on all such
Equipment Notes; and second, the balance, if any, of such amount remaining
------
thereafter shall be distributed to the Owner Trustee for distribution in
accordance with the terms of the Trust Agreement.
(b) Except as otherwise provided in Section 3.3 or 3.5 hereof, any
amounts received directly or through the Lessee from any governmental authority
or other party pursuant to Section 11 of the Lease with respect to any Unit as
the result of an Event of Loss, to the extent that such amounts are not at the
time required to be paid to the Lessee pursuant to said Section 11, and any
amounts of insurance proceeds for damage to the Indenture Estate received
directly or though the Lessee from any insurer pursuant to Section 12 of the
Lease with respect thereto as the result of an Event of Loss, to the extent such
amounts are not at the time required to be paid to the Lessee pursuant to said
Section 12, shall be applied as provided in clause (a) of this Section 3.2;
provided that, if any Replacement Unit is to be substituted for the Unit subject
to such Event of Loss as provided in Section 11.2 of the Lease and Section 5.7
hereof, any proceeds which result from such Event of Loss and are paid to the
Indenture Trustee shall be held by the Indenture Trustee as part of the
Indenture Estate as security for the obligations of the Lessee under the
Operative Agreements and invested in accordance with the terms of Section 6.4(b)
hereof and, unless theretofore applied in accordance with the provisions of the
Lease and this Indenture, such proceeds shall, to the extent payable to the
Lessee under the Lease, be released to the Lessee upon or in connection with the
replacement thereof as provided in such Sections.
Section 3.3. Payments after Indenture Default or Indenture Event of
------------------------------------------------------
Default. (a) Except as provided in Section 3.5, all payments received and
amounts realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and be continuing and after the Indenture Trustee has
declared (as assignee from the Owner Trustee of the Lease) the Lease to be in
default pursuant to Section 15 thereof or has declared the Equipment Notes to be
accelerated pursuant to Section 4.2, as the case may be, or has elected to
foreclose or otherwise exercise any remedies under this Indenture (including any
amounts realized by the Indenture Trustee from the exercise of any remedies
pursuant to Section 15 of the Lease or Article IV), as well as all payments or
amounts then held or thereafter received by the Indenture Trustee as part of the
Indenture Estate while such Indenture Event of Default shall be continuing,
shall be distributed forthwith by the Indenture Trustee in the following order
of priority:
First, so much of such payments or amounts as shall be required to
-----
reimburse the Indenture Trustee for any fees which are due and payable for its
services under this Indenture and any tax, expense (including reasonable
attorneys' fees) or other loss incurred by the Indenture Trustee (to
17
<PAGE>
the extent reimbursable and not previously reimbursed and to the extent incurred
in connection with its duties as Indenture Trustee) shall be distributed to the
Indenture Trustee;
Second, so much of such payments or amounts as shall be required to
------
reimburse the holders of the Equipment Notes for payments made by them to the
Indenture Trustee pursuant to Section 5.3 (to the extent not previously
reimbursed), and to pay such holders of the Equipment Notes the amounts payable
to them pursuant to the provisions of the Participation Agreement, shall be
distributed to such holders of the Equipment Notes, without priority of one over
the other, in accordance with the amount of the payment or payments made by, or
payable to, each such holder;
Third, so much of such payments or amounts remaining as shall be
-----
required to pay the principal of, Premium, if any, and accrued interest (to the
date of distribution) on all Equipment Notes (including any accrued interest on
any Premium), then due and payable to the Loan Participant, whether by
declaration of acceleration pursuant to Section 4.2 or otherwise, shall be
applied in the following order of priority: first, to the interest accrued and
unpaid on the Equipment Notes, second, to any Premium then due and owing under
the Equipment Notes, third, to all other amounts due and owing under the
Equipment Notes (other than principal), and fourth, to the unpaid principal of
the Equipment Notes, and in case the aggregate amount so to be distributed shall
be insufficient to pay in full the aforesaid amounts in clauses "first" through
"fourth", any partial distribution with respect to any such clause shall be made
pro rata in respect of such clause in proportion to the unpaid principal amounts
- --- ----
of the outstanding Equipment Notes;
Fourth, the balance, if any, of such payments or amounts remaining
------
thereafter shall be distributed to the Owner Trustee for distribution in
accordance with the terms of the Trust Agreement.
(b) Except as provided in Sections 3.3(a) and 3.5, if an Indenture
Default or Indenture Event of Default shall have occurred and be continuing, the
Indenture Trustee shall not make any distribution to the Owner Trustee but shall
hold amounts otherwise distributable to the Owner Trustee as collateral security
for the obligations secured hereby and invested as provided in Section 6.4(b)
until the earlier to occur of (a) the date on which such Indenture Default or
Indenture Event of Default shall have been cured or waived, and (b) the date on
which such acceleration occurs and such amounts are applied pursuant to Section
3.3(a); provided, that if any amounts are held pursuant to this Section 3.3(b)
for a period of 90 days, then (x) all amounts then held by the Indenture Trustee
under this Section 3.3(b) with respect to such Indenture Default or Indenture
Event of Default which have been so held for at least 60 days shall on the 91st
day be distributed to the Owner Trustee for distribution in accordance with the
terms of the Trust Agreement and (y) any such amounts which are being held
pursuant to this Section 3.3(b) with respect to such Indenture Default or
Indenture Event of Default but which have not been released pursuant to clause
(x) because they had not been held for at least 60 days at the time the funds
are released pursuant to clause (x) and any other amounts thereafter held by the
Indenture Trustee with respect to such Indenture Default or Indenture Event of
Default shall, on the 61st
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<PAGE>
day following the date on which such amount was initially received by the
Indenture Trustee, thereafter be distributed to the Owner Trustee for
distribution in accordance with the terms of the Trust Agreement.
Section 3.4. Other Payments. Except as otherwise provided in Section 3.3
--------------
or 3.5, (a) any payments received by the Indenture Trustee for which no
provision as to the application thereof is made in the Lease or the
Participation Agreement or elsewhere in this Article III, and (b) all payments
received and amounts realized by the Indenture Trustee under the Lease or
otherwise with respect to the Equipment to the extent received or realized at
any time after payment in full of the principal of and interest and Premium, if
any, on all Equipment Notes, as well as any other amounts remaining as part of
the Indenture Estate after payment in full of the principal of and interest and
Premium, if any, shall be distributed forthwith by the Indenture Trustee in the
order of priority set forth in Section 3.3(a), except that in the case of any
payment described in clause (b) of this Section 3.4, such payment shall be
distributed omitting clause "third" of such Section 3.3(a) on all Equipment
Notes issued hereunder.
Any payments received by the Indenture Trustee for which provision as to
the application thereof is made in the Lease or the Participation Agreement but
not elsewhere in this Indenture shall be applied to the purposes for which such
payments were made in accordance with the provisions of the Lease or the
Participation Agreement, as the case may be.
Section 3.5. Distribution of Excepted Property. All amounts constituting
---------------------------------
Excepted Property received by the Indenture Trustee shall be paid promptly by
the Indenture Trustee to the Person or Persons entitled thereto.
Section 3.6. Assumption of Obligations of Owner Trustee by the Lessee. In
--------------------------------------------------------
the event that the Lessee shall have elected to assume all of the rights and
obligations of the Owner Trustee under this Indenture in respect of the
Equipment Notes and any other obligations or liabilities of the Owner Trustee
(whether as trustee or in its individual capacity) from which the Owner Trustee
will be released hereby upon such purchase in connection with the purchase by
the Lessee of Units pursuant to Section 6.9 of the Participation Agreement or
Section 22.1 of the Lease and, if on or prior to the applicable purchase date:
(a) The Lessee shall have delivered to the Indenture Trustee and the
Owner Trustee a certificate, dated the date of such purchase, of a Responsible
Officer of the Lessee stating that the Lessee has paid to the Owner Trustee all
amounts required to be paid to the Owner Trustee pursuant to Section 3.3 of the
Lease in connection with such purchase and assumption;
(b) no Indenture Default shall have occurred and be continuing
immediately subsequent to such purchase or assumption after giving effect to the
indenture supplement referred to below and the Indenture Trustee and the Owner
Trustee shall have received a certificate, dated the date of such purchase, of a
Responsible Officer of the Lessee to such effect;
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(c) the Indenture Trustee shall have received, on or prior to the
date of such purchase, evidence of all filings, recordings and other action
referred to in the opinion or opinions of counsel referred to below;
(d) the Indenture Trustee and the Owner Trustee shall have received
an opinion or opinions of counsel for the Lessee, dated the date of such
purchase which without unusual qualification and permitting reliance on proposed
Treasury Regulations shall be to the effect that, after giving effect to the
indenture supplement referred to below:
(i) this Indenture, the indenture supplement referred to below
and the Equipment Notes issued thereunder each constitutes the legal, valid and
binding obligation of the Lessee, enforceable against the Lessee in accordance
with their respective terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity, and except as
limited by applicable laws which may affect the remedies provided for in this
Indenture, which laws, however, do not in the opinion of such counsel make the
remedies provided for in this Agreement inadequate for the practical realization
of the rights and benefits provided for in this Indenture;
(ii) all filings and recordings and other action necessary or
appropriate to protect the interests of the Indenture Trustee in the Units to be
so purchased by the Lessee have been accomplished;
(iii) no holder of Equipment Notes will be required to recognize
gain or loss for tax purposes in connection with such assumption; and
(iv) covering such other matters as the Indenture Trustee shall
reasonably request that are customary for transactions of this type;
(e) upon delivery of an indenture supplement giving effect to such
assumption reasonably satisfactory to the Indenture Trustee and amending the
Indenture to incorporate such covenants, events of default, agreements, terms
and conditions from the Lease as may be reasonably required by the Indenture
Trustee, and execution and delivery of Equipment Notes reflecting such
assumption, each dated the date of such purchase; and
(f) the Lessee shall have delivered to the Indenture Trustee and the
Pass Through Trustee a written confirmation from each Rating Agency that such
assumption would not result in a (i) reduction of the rating of the Pass Through
Certificates below the then current rating for such Pass Through Certificates or
(ii) a withdrawal or suspension of the rating of the Pass Through Certificates;
20
<PAGE>
then, automatically and without the requirement of further action by any Person,
effective as of the date of such purchase, the Owner Trustee shall be released
from all of its obligations under the Equipment Notes and under this Indenture
in respect of the Equipment Notes or otherwise and the Lien of this Indenture
upon the sale proceeds and other amounts paid or payable to the Owner Trustee
shall be discharged. If requested by the Owner Trustee, the Indenture Trustee
shall execute and deliver an instrument, in form and substance satisfactory to
the Owner Trustee, confirming such release and discharge.
ARTICLE IV. REMEDIES OF THE INDENTURE TRUSTEE UPON AN INDENTURE
EVENT OF DEFAULT
Section 4.1. Indenture Events of Default. The following events shall
---------------------------
constitute "Indenture Events of Default" and each such Indenture Event of
Default shall be deemed to exist and continue so long as, but only so long as,
it shall not have been remedied:
(a) a Lease Event of Default (other than a Lease Event of Default by
reason of a default by the Lessee to pay any amounts which are part of the
Excepted Property); provided that a Lease Event of Default arising solely from
the Lessee's failure to make any payment of Supplemental Rent, including
indemnity or tax indemnity payment as set forth in Section 14(b) of the Lease
shall not constitute an "Indenture Event of Default" hereunder unless and until
the Indenture Trustee, acting solely upon the direction of a Super-Majority in
Interest, shall expressly declare such Lease Event of Default to be an
"Indenture Event of Default"; or
(b) default (not attributable to a default by the Lessee under the
Lease) by the Owner Trustee in making any payment when due of the Rated
Amortization Amount of, Make-Whole Amount, if any, or interest (other than
interest on overdue principal and interest) on, any Equipment Note or Equipment
Notes, and the continuance of such default unremedied for three Business Days
after the same shall have become due and payable; or
(c) any failure by the Owner Trustee or the Owner Participant to
observe or perform any covenant or obligation (other than payment of Scheduled
Amortization Amount) of them or any of them, in this Indenture or the Equipment
Notes (other than as set forth in clause (b) above) or in the Participation
Agreement or by any Person guaranteeing or supporting the obligations of the
Owner Participant or the Owner Trustee under the Operative Agreements in any
related guarantee or support agreement, if such failure is not remedied within a
period of 30 days after there has been given to the Owner Trustee, the Owner
Participant and the Lessee or such Person, as the case may be, by the Indenture
Trustee or by any holder of an Equipment Note a written notice specifying such
failure and requiring it to be remedied; provided that, if such failure is
--------
capable of being remedied, and the remedy requires an action other than, or in
addition to, the payment of money, no such failure (other than one relating to
the payment of such money) shall constitute an Indenture Event of Default
hereunder for an additional period of 30 days after the expiration of the
aforesaid 30-day period so long as the Owner Trustee or the Owner Participant
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or such Person, as the case may be, is diligently proceeding to remedy such
failure and shall in fact remedy such failure within such period; or the
disaffirmance or repudiation by any Person that has guaranteed or may guarantee
or support the obligations of the Owner Participant or the Owner Trustee under
the Operative Agreements; or
(d) any representation or warranty made by the Owner Trustee or the
Owner Participant under the Participation Agreement, or by the Owner Trustee
hereunder, or by any representative of the Owner Trustee or the Owner
Participant in any document or certificate furnished to the Indenture Trustee or
the Loan Participant in connection herewith or therewith or pursuant hereto or
thereto or by any Person guaranteeing or supporting the obligations of the Owner
Participant or the Owner Trustee under the Operative Agreements in any related
guarantee or support agreement, shall prove at any time to have been incorrect
in any material respect as of the date made and such incorrectness shall remain
material and continue unremedied for a period of 30 days after the Indenture
Trustee or any holder of an Equipment Note has given to the Owner Trustee and
the Owner Participant or such Person, as the case may be, a written notice
specifying such incorrectness, stating that such incorrectness is a default
hereunder and requiring it to be remedied; provided that, if such incorrectness
is capable of being remedied, no such incorrectness shall constitute an
Indenture Event of Default hereunder for an additional period of 15 days after
the expiration of the aforesaid 30-day period so long as the Owner Trustee or
the Owner Participant or such Person, as the case may be, is diligently
proceeding to remedy such incorrectness and shall in fact remedy such
incorrectness within such period; provided that such incorrect representation or
warranty shall be deemed to be remedied only after the Indenture Trustee
receives an opinion of counsel stating that all adverse consequences thereof, if
any, have been remedied; or
(e) the Owner Trustee (as Owner Trustee and not in its individual
capacity) or the Owner Participant or any Person that has guaranteed or may
guarantee or support the obligations of the Owner Participant or the Owner
Trustee under the Operative Agreements, as the case may be, shall (i) commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
similar law now or hereafter in effect, or seeking the appointment of a trustee,
receiver, liquidator, custodian or similar official of it or any substantial
part of its property, or (ii) consent to any such relief or to the appointment
of or taking possession by any such official in any voluntary case or other
proceeding commenced against it, or (iii) admit in writing its inability to pay
its debts generally as they come due, or (iv) make a general assignment for the
benefit of creditors, or (v) take any action to authorize any of the foregoing;
or
(f) an involuntary case or other proceeding shall be commenced
against the Owner Trustee (as Owner Trustee and not in its individual capacity)
or the Owner Participant or any Person that has guaranteed or may guarantee or
support the obligations of the Owner Participant or the Owner Trustee under the
Operative Agreements seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter
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in effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 days.
Section 4.2. Acceleration; Rescission and Annulment. (a) If an Indenture
--------------------------------------
Event of Default occurs and is continuing, the Indenture Trustee may, subject to
clause (b) of this Section 4.2, and upon the directions of a Majority in
Interest shall, subject to Section 4.4, declare the unpaid principal amount of
all Equipment Notes then outstanding, Late Payment Premium and accrued interest
thereon and on the Equipment Notes to be due and payable, it being agreed that
no Make-Whole Amount shall be payable in such event. At any time after the
Indenture Trustee has declared the unpaid principal amount of all Equipment
Notes then outstanding to be due and payable and prior to the sale of any of the
Indenture Estate pursuant to this Article IV, a Majority in Interest, by written
notice to the Owner Trustee, the Lessee and the Indenture Trustee, may rescind
and annul such declaration and thereby annul its consequences if: (i) there has
been paid to or deposited with the Indenture Trustee an amount sufficient to pay
all overdue installments of interest and Late Payment Premium (and accrued
interest thereon) on the Equipment Notes, and the principal of any Equipment
Notes that has 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 and Indenture Events of Default, other than
nonpayment of principal, Late Payment Premium or interest on the Equipment Notes
that have become due solely because of such acceleration, have been cured or
waived.
(b) If an Indenture Event of Default referred to in clause (e) or (f)
of Section 4.1 shall have occurred, or a Lease Event of Default under clause (g)
or (h) of Section 14 of the Lease shall have occurred, then and in every such
case the unpaid principal amount of all Equipment Notes then outstanding, Late
Payment Premium and accrued interest thereon and on the Equipment Notes shall
immediately and without further act become due and payable without presentment,
demand, protest or notice, all of which are hereby waived.
Section 4.3. Remedies with Respect to Indenture Estate. (a) After an
-----------------------------------------
Indenture Event of Default shall have occurred and so long as such Indenture
Event of Default shall be continuing, then and in every such case the Indenture
Trustee, as assignee hereunder of the Lease or as mortgagee hereunder of the
Equipment or otherwise, may, and when required pursuant to the provisions of
Article V hereof shall, subject to Sections 4.4 and 4.5, exercise any or all of
the rights and powers and pursue any and all of the remedies pursuant to Section
15 of the Lease and this Article IV and may recover judgment in its own name as
Indenture Trustee against the Indenture Estate and may take possession of all or
any part of the Indenture Estate, and may exclude the Owner Trustee and the
Owner Participant and all Persons claiming under any of them wholly or partly
therefrom; provided, however, that nothing contained in this Indenture shall
permit or require the Indenture Trustee to take any action contrary to, or to
disturb, the Lessee's rights under the Lease, except in accordance with the
provisions of the Lease.
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(b) Subject to Section 4.4 and Section 4.5, the Indenture Trustee
may, if at the time such action may be lawful and always subject to compliance
with any mandatory legal requirements, either with or without taking possession,
and either before or after taking possession, and without instituting any legal
proceedings whatsoever, and having first given notice of such sale by registered
mail to the Owner Trustee, the Owner Participant and the Lessee once at least 20
days prior to the date of such sale or the date on which the Indenture Trustee
enters into a binding contract for a private sale, and any other notice which
may be required by law, sell and dispose of the Indenture Estate, or any part
thereof, or interest therein, at public auction to the highest bidder or at
private sale in one lot as an entirety or in separate lots, and either for cash
or on credit and on such terms as the Indenture Trustee may determine, and at
any place (whether or not it be the location of the Indenture Estate or any part
thereof) and time designated in the notice above referred to; provided, however,
that, notwithstanding any provision herein to the contrary, the Indenture
Trustee shall not sell any of the Indenture Estate or exercise any other
remedies which would result in the exclusion of the Owner Trustee from the
Indenture Estate or any part thereof unless a declaration of acceleration has
been made pursuant to Section 4.2; provided further, that, in the event the
circumstances contemplated by Section 4.4(c) exist, the Indenture Trustee shall
not be allowed to deliver the notice required by this Section 4.3(b) (x) until
the earlier of (1) such time as such circumstances no longer exist or (2) the
expiration of the [90-day] period set forth in Section 4.4(c) or (y) if the
circumstances contemplated by the second proviso of Section 4.4(c) then exist.
Any such public sale or sales may be adjourned from time to time by announcement
at the time and place appointed for such sale or sales, or for any such
adjourned sale or sales, without further notice, and the Indenture Trustee or
the holder or holders of any Equipment Notes, or any interest therein, may bid
and become the purchaser at any such public sale. The Indenture Trustee may
exercise such right without possession or production of the Equipment Notes or
proof of ownership thereof, and as representative of the holders may exercise
such right without including the holders as parties to any suit or proceeding
relating to foreclosure of any property in the Indenture Estate. The Owner
Trustee hereby irrevocably constitutes the Indenture Trustee the true and lawful
attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee or
otherwise) for the purpose of effectuating any sale, assignment, transfer or
delivery for enforcement of the Lien of this Indenture, whether pursuant to
foreclosure or power of sale or otherwise, to execute and deliver all such bills
of sale, assignments and other instruments as the Indenture Trustee may consider
necessary or appropriate, with full power of substitution, the Owner Trustee
hereby ratifying and confirming all that such attorney or any substitute shall
lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture
Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such
sale, assignment, transfer or delivery, by executing and delivering to the
Indenture Trustee or such purchaser all bills of sale, assignments, releases and
other proper instruments to effect such ratification and confirmation as may be
designated in any such request.
(c) Subject to Section 4.4 and Section 4.5, the Owner Trustee agrees,
to the fullest extent that it lawfully may, that, in case one or more of the
Indenture Events of Default shall have occurred and be continuing, then, in
every such case, the Indenture Trustee may take possession of all or
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any part of the Indenture Estate and may exclude the Owner Trustee and the Owner
Participant and all Persons claiming under any of them wholly or partly
therefrom. At the request of the Indenture Trustee, the Owner Trustee shall
promptly execute and deliver to the Indenture Trustee such instruments of title
and other documents as the Indenture Trustee may deem necessary or advisable to
enable the Indenture Trustee or an agent or representative designated by the
Indenture Trustee, at such time or times and place or places as the Indenture
Trustee may specify, to obtain possession of all or any part of the Indenture
Estate. If the Owner Trustee shall fail for any reason to execute and deliver
such instruments and documents to the Indenture Trustee, the Indenture Trustee
may pursue all or part of the Indenture Estate wherever it may be found and may
enter any of the premises of the Lessee wherever the Indenture Estate may be or
be supposed to be and search for the Indenture Estate and, subject to Section
4.4 and Section 4.5, take possession of and remove the Indenture Estate. Upon
every such taking of possession, the Indenture Trustee may, from time to time,
at the expense of the Indenture Estate, make all such expenditures for
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to any of the Indenture Estate, as it may deem proper. In each such
case, the Indenture Trustee shall have the right to use, operate, store, control
or manage the Indenture Estate, and to carry on the business and to exercise all
rights and powers of the Owner Trustee relating to the Indenture Estate, as the
Indenture Trustee shall deem best, including the right to enter into any and all
such agreements with respect to the maintenance, operation, leasing or storage
of the Indenture Estate or any part thereof as the Indenture Trustee may
determine; and the Indenture Trustee shall be entitled to collect and receive
all tolls, rents, revenues, issues, income, products and profits of the
Indenture Estate and every part thereof, without prejudice, however, to the
right of the Indenture Trustee under any provision of this Indenture to collect
and receive all cash held by, or required to be deposited with, the Indenture
Trustee hereunder. Such tolls, rents, revenues, issues, income, products and
profits shall be applied to pay the expenses of holding and operating the
Indenture Estate and of conducting the business thereof, and of all maintenance,
repairs, replacements, alterations, additions and improvements, and to make all
payments which the Indenture Trustee may be required or may elect to make, if
any, for taxes, assessments, insurance or other proper charges upon the
Indenture Estate or any part thereof (including the employment of engineers and
accountants to examine, inspect and make reports upon the properties and books
and records of the Indenture Estate), and all other payments which the Indenture
Trustee may be required or authorized to make under any provision of this
Indenture, as well as just and reasonable compensation for the services of the
Indenture Trustee, and of all persons properly engaged and employed by the
Indenture Trustee, including the reasonable expenses of the Indenture Trustee.
(d) If an Indenture Event of Default occurs and is continuing and the
Indenture Trustee shall have obtained possession of a Unit, the Indenture
Trustee shall not be obligated to use or operate such Unit or cause such Unit to
be used or operated directly or indirectly by itself or through agents or other
representatives or to lease, license or otherwise permit or provide for the use
or operation of such Unit or Equipment by any other Person unless (i) the
Indenture Trustee shall have been able to obtain insurance in kinds, at rates
and in amounts satisfactory to it in its discretion to
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protect the Indenture Estate and the Indenture Trustee, as trustee and
individually, against any and all liability for loss or damage to such Unit and
for public liability and property damage resulting from use or operation of such
Unit and (ii) funds are available in the Indenture Estate to pay for all such
insurance or, in lieu of such insurance, the Indenture Trustee is furnished with
indemnification from the holders of the Equipment Notes or any other Person upon
terms and in amounts satisfactory to the Indenture Trustee in its discretion to
protect the Indenture Estate and the Indenture Trustee, as trustee and
individually, against any and all such liabilities.
(e) Notwithstanding anything contained herein, so long as the Pass
Through Trustee under any Pass Through Trust Agreement is the registered holder
of any Equipment Note issued hereunder, the Indenture Trustee is not authorized
or empowered to acquire title to any Indenture Estate or take any action with
respect to any Indenture Estate so acquired by it if such acquisition or action
would cause the trust created by the Trust Agreement or the Pass Through Trust
Agreement to fail to qualify as a "grantor trust" for federal income tax
purposes.
Section 4.4. Right to Cure; Option to Purchase; Etc.
--------------------------------------
(a) Right to Cure. (A) If there shall occur a Lease Event of Default
-------------
in respect of the payment of Basic Rent as described in Section 14(a) of the
Lease, then as long as no other Indenture Event of Default (other than arising
from such failure to pay Basic Rent or which is concurrently being cured
pursuant to this Section 4.4(a)) shall have occurred and be continuing the Owner
Participant or the Owner Trustee may (but need not) pay to the Indenture
Trustee, at any time prior to the expiration of a period of [10 Business Days]
(a "[10-Day Period]") after receiving written notice of such Indenture Event of
Default from the Indenture Trustee (prior to the expiration of which [10-Day]
Period the Indenture Trustee shall not declare the Lease in default pursuant to
Section 15 thereof or exercise any of the rights, powers or remedies pursuant to
such Section 15 or this Article IV), an amount equal to the Rated Amortization
Amount due and payable, together with any interest due thereon on account of the
delayed payment thereof, and 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 Lessee (but such cure shall not relieve the Lessee of any of
its obligations and shall not cure any other Indenture Event of Default) or (B)
if there shall occur a Lease Event of Default in respect of any other payment of
Rent (other than Basic Rent) or a Lease Event of Default shall have occurred and
be continuing, which Lease Event of Default is curable by the payment of money
(it being understood that actions such as the obtaining of insurance or the
procuring of maintenance services can be so effected), and, in each case, such
Lease Event of Default constitutes an Indenture Event of Default then as long as
no other Indenture Event of Default (other than arising from such Indenture
Event of Default or which is concurrently being cured pursuant to this Section
4.4(a)) shall have occurred and be continuing the Owner Participant or the Owner
Trustee may (but need not) pay to the Indenture Trustee, at any time prior to
the expiration of a period of [30 days] (a "[30-Day Period]") after receiving
written notice of such Lease Event of Default from the Indenture Trustee (prior
to the expiration of which [30-Day] Period the Indenture Trustee shall
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not declare the Lease in default pursuant to Section 15 thereof or exercise any
of the rights, powers or remedies pursuant to such Section 15 or this Article
IV), an amount equal to the full amount of such payment of Rent, together with
any interest due thereon on account of the delayed payment thereof or otherwise
make such payment as shall effect such cure, and such payment by the Owner
Participant or the Owner Trustee shall be deemed to cure any Indenture Event of
Default which arose from such Lease Event of Default (but such cure shall not
relieve the Lessee of any of its obligations); provided however, Owner
Participant and Owner Trustee, collectively, shall not be entitled to (x) cure
more than eighteen consecutive or thirty-six total defaults in the payment of
Basic Rent, or (y) cure other Lease Events of Default if the outstanding amount
which has been paid by the Owner Participant or the Owner Trustee and not
reimbursed to such parties by the Lessee pursuant to this clause (y) exceeds in
the aggregate $[10,000,000], which amount shall be adjusted by the Indenture
Trustee after the Closing Date by notice to the Owner Trustee not more
frequently than annually by reference only to increases (and without regard to
decreases) in the Consumer Price Index released by the Bureau of Labor
Statistics, United States Department of Labor since the date of this Indenture.
Upon any cure by the Owner Participant or the Owner Trustee in accordance with
the first sentence of this Section 4.4(a), the Owner Participant or the Owner
Trustee shall, to the extent of their respective payments, be subrogated to the
rights of the Indenture Trustee, as assignee hereunder of the Owner Trustee to
receive such payment of Rent (and any interest due thereon on account of the
delayed payment thereof) or right of reimbursement, and shall be entitled to
receive such payment upon its receipt by the Indenture Trustee as aforesaid (but
in each case only if the Rated Obligations Due and the Scheduled Obligations Due
shall have been paid in full); provided that neither the Owner Participant nor
the Owner Trustee shall attempt to recover any such amount paid by it on behalf
of the Lessee pursuant to this Section 4.4(a) except, subject to the
Intercreditor Agreement, by demanding of the Lessee payment of such amount or by
prosecuting an action against the Lessee to require the payment of such amount;
provided further, that with respect to any amounts advanced by and owing to the
Owner Trustee and the Owner Participant, the Owner Trustee and the Owner
Participant shall be expressly subordinated to the right of the holders of the
Equipment Notes to receive any and all Rated Obligations Due and Scheduled
Obligations Due then due and owing on the Equipment Notes prior to any payment
from the Lessee to the Owner Trustee or the Owner Participant.
(b) Option to Purchase Equipment Notes. In the event that (i) at any
----------------------------------
time one or more Lease Events of Default shall have occurred and be continuing,
(ii) the Equipment Notes shall have been accelerated pursuant to Section 4.2 or
(iii) the Indenture Trustee, as assignee hereunder of the Lease, shall have
declared the Lease to be in default and shall have commenced the exercise of any
significant remedy in respect of the Units under the Lease, then and in any such
case, upon 30 days' notice (which notice shall be irrevocable) from the Owner
Trustee to the Indenture Trustee designating a date of purchase (the "Purchase
Date") which shall be a Determination Date, each holder of an Equipment Note
will be obligated to, upon and subject to receipt by the Indenture Trustee from
the Owner Trustee or its nominee of an amount equal to the aggregate unpaid
principal amount of all Equipment Notes, together with accrued interest
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thereon to the Purchase Date, plus all other sums then due and payable to such
holder of an Equipment Note hereunder, but without any Make-Whole Amount,
forthwith sell, assign, transfer and convey to the Owner Trustee or its nominee
on the Purchase Date all of the right, title and interest of such holder in and
to the Equipment Notes then held by such holder, and the Owner Trustee or its
nominee shall assume all of such holder's obligations under the Participation
Agreement; provided that the Owner Trustee or its nominee must purchase all and
not less than all of the Equipment Notes then outstanding; and provided further
that if such option is exercised pursuant to clause (i) above at a time when
there shall have occurred and be continuing for less than 180 days a Lease Event
of Default (and none of the events described in clauses (ii) and (iii) above
shall have occurred), a Make-Whole Amount shall be due and payable to such
holder of an Equipment Note hereunder. During such 30-day notice period, the
Indenture Trustee shall not exercise any of the rights, remedies or powers
pursuant to Section 15 of the Lease or this Article IV, so long as the Owner
Participant (or any nominee of the Owner Participant reasonably acceptable to
the Indenture Trustee) has notified the Indenture Trustee that the notice so
provided by the Owner Trustee or its nominee pursuant to this Section 4.4(b)
constitutes the binding obligation of the Owner Trustee or its nominee to
purchase the Equipment Notes.
(c) Restrictions on Certain Actions. Notwithstanding any provision to
-------------------------------
the contrary contained in this Indenture, the Indenture Trustee shall not
foreclose the Lien of this Indenture or otherwise exercise remedies hereunder
which would result in the exclusion of the Owner Trustee from the Indenture
Estate or any part thereof as a result of an Indenture Event of Default that
constitutes or occurs solely by virtue of one or more Lease Events of Default
(at a time when no other Indenture Event of Default unrelated to any Lease Event
of Default shall have occurred and be continuing) unless the Indenture Trustee,
as security assignee of the Owner Trustee, has proceeded or is then currently
proceeding, to the extent it is then entitled to do so hereunder and under the
Lease and is not then stayed or otherwise prevented from doing so by operation
of law, to terminate the Lease and repossess the Equipment as provided for in
Section 15 of the Lease with respect to the Equipment, provided that in the
event the Indenture Trustee shall be so stayed or otherwise prevented from
exercising such remedies under the Lease, it shall in any event refrain from so
foreclosing or exercising such other remedies hereunder for a period of not less
than [90] days, and further provided that in the event the Lessee as debtor in a
proceeding under Chapter 11 of the Bankruptcy Code (or any trustee appointed for
the Lessee as debtor in any such bankruptcy case) shall have assumed the Lease
with the approval of the bankruptcy court having jurisdiction over such case,
under Section 365 of the Bankruptcy Code or any amended or successor version
thereof, and no Lease Event of Default other than as specified in Section 14(g)
or Section 14(h) of the Lease has occurred and is continuing and no Indenture
Event of Default unrelated to a Lease Event of Default occurring solely pursuant
to Section 14(g) or 14(h) of the Lease shall have occurred and be continuing,
the Indenture Trustee shall refrain from so foreclosing or exercising such other
remedies hereunder. Subject to Sections 4.4(a) and 4.4(b), nothing in this
Section 4.4(c) shall prevent the Indenture Trustee from foreclosing or
exercising such other remedies hereunder to the extent the Lessee fails to
comply with any provisions of
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any order issued in connection with the assumption of the Lease and the
Indenture Trustee has been stayed or otherwise prevented from exercising such
remedies under the Lease for a period of not less than [90] days.
Section 4.5 Rights of Lessee. Notwithstanding the provisions of this
----------------
Indenture, including, without limitation, Section 4.3, so long as no Lease Event
of Default shall have occurred and be continuing, neither the Indenture Trustee
nor the Owner Trustee shall take any action contrary to, or disturb, the
Lessee's rights under the Lease, except in accordance with the provisions of the
Lease, including, without limitation, (i) the right to receive all monies due
and payable to it in accordance with the provisions of the Lease and (ii) the
Lessee's rights to possession and use of, and of quiet enjoyment of, the
Equipment.
Section 4.6 Waiver of Existing Defaults. A Majority in Interest, by
---------------------------
notice to the Indenture Trustee on behalf of all holders of the Equipment Notes,
may waive any past default hereunder and its consequences, except a default:
(i) in the payment of the principal of, Premium, if any, or interest on any
Equipment Note, or (ii) in respect of a covenant or provision hereof which under
Article IX hereof cannot be modified or amended without the consent of the
holder of each Equipment Note affected. Upon any such waiver, such default
shall cease to exist, and any Indenture Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
ARTICLE V. DUTIES OF THE INDENTURE TRUSTEE
Section 5.1 Action upon Indenture Event of Default. If any payments of
--------------------------------------
Basic Rent or payments of the Rated Amortization Amount of or interest or
Premium, if any, on the Equipment Notes due and payable on any Rent Payment Date
shall not have been paid in full on such Rent Payment Date, the Indenture
Trustee shall give telephonic notice within one Business Day (followed by prompt
written notice) to the Owner Trustee, the Collateral Agent, the Owner
Participant, the Loan Participant and the Lessee specifying the amount and
nature of such deficiency in payment. In the event the Indenture Trustee shall
have knowledge of an Indenture Event of Default or an Indenture Default, the
Indenture Trustee shall give prompt notice of such Indenture Event of Default or
Indenture Default to the Lessee, the Owner Trustee, the Owner Participant and
the Loan Participant by telegram, facsimile, or telephone (to be promptly
confirmed in writing). In the event the Owner Trustee shall have knowledge of
an Indenture Event of Default or an Indenture Default, the Owner Trustee shall
give notice of such Indenture Event of Default or Indenture Default in the same
manner to the Lessee, the Indenture Trustee, the Owner Participant and the Loan
Participant. Subject to the terms of Section 5.3 and Section 4.1(a), the
Indenture Trustee shall take such action, or refrain from taking such action,
with respect to such Indenture Event of Default or Indenture Default as the
Indenture Trustee shall be instructed in writing by a Majority in Interest. If
the Indenture Trustee shall not have received instructions as above provided
within 20 days after the mailing of notice of such
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Indenture Event of Default or such Indenture Default to the Loan Participant by
the Indenture Trustee, the Indenture Trustee may, but shall not be obligated to,
take such action, or refrain from taking such action, with respect to such
Indenture Event of Default or Indenture Default as it shall determine to be
advisable in the best interests of the Loan Participant. Notwithstanding any
provision to the contrary contained in this Section 5.1, the Indenture Trustee
shall not declare the Lease to be in default solely in respect of the Lessee's
failure to make any payment of Basic Rent within [10 Business Days] after the
same shall have become due, unless the [10-Day] Period within which, pursuant to
Section 4.4(a), the Owner Participant or the Owner Trustee are entitled to cure
such failure shall have expired. For all purposes of this Indenture, in the
absence of actual knowledge, neither the Owner Trustee nor the Indenture Trustee
shall be deemed to have knowledge of an Indenture Event of Default (except, in
the case of the Indenture Trustee, the failure of the Lessee to pay any
installment of Basic Rent that is required to be paid directly to the Indenture
Trustee within the [10 Business Days] after the same shall become due or the
failure of the Lessee to maintain insurance as required under Section 12 of the
Lease if the Indenture Trustee shall receive notice thereof from an insurer or
insurance broker) unless notified in writing by the Lessee, the Owner Trustee,
one or more Loan Participants or the Owner Participant; and "actual knowledge"
(as used in the foregoing clause) of the Owner Trustee or the Indenture Trustee
shall mean actual knowledge of an officer in the [Corporate Trust
Administration] of the Owner Trustee or the Corporate Trust Department of the
Indenture Trustee, as the case may be. Whenever the Indenture Trustee gives any
notice hereunder to the holders of the Equipment Notes it shall provide a copy
thereof to each Rating Agency.
Section 5.2. Action upon Instructions. Subject to the terms of Sections
------------------------
5.1 and 5.3, upon the written instructions at any time and from time to time of
a Majority in Interest, the Indenture Trustee shall take such of the following
actions as may be specified in such instructions (subject to the rights of the
other parties thereto, except to the extent assigned hereunder): (i) subject to
and solely to the extent permitted by the terms hereof and of the Lease, give
such notice, direction or consent, or exercise such right, remedy or power
hereunder or under the Lease or in respect of any part or all of the Indenture
Estate or take such other action as shall be specified in such instructions; and
(ii) after an Indenture Event of Default shall have occurred and so long as such
Indenture Event of Default shall be continuing, subject to Section 5.11, approve
as satisfactory to it all matters required by the terms of the Lease to be
satisfactory to the Owner Trustee, it being understood that without the written
instructions of a Majority in Interest the Indenture Trustee shall not take any
action described in clauses (i) and (ii) above.
Upon the expiration or earlier termination of the Lease Term with respect
to any Unit under the Lease, or, if and so long as no Indenture Event of Default
shall have occurred and be continuing, upon the transfer by the Owner Trustee to
the Lessee or its designee of any Unit pursuant to Section 10 or 11 of the Lease
or the retention by the Owner Trustee of any Unit pursuant to Section 10.3 of
the Lease, then the Indenture Trustee shall in either such case, upon the
written request of the Owner Trustee, and receipt by the Indenture Trustee of
funds necessary to prepay the Equipment Notes required to be prepaid in
connection with such purchase, termination,
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retention or Event of Loss, execute and deliver to, or as directed in writing
by, the Owner Trustee an appropriate instrument (in due form for recording)
furnished by the Owner Trustee or the Lessee releasing the affected Unit or
Units from the Lien of this Indenture.
Section 5.3. Indemnification. (a) The Indenture Trustee shall not be
---------------
required to take any action or refrain from taking any action under Section 5.1
(other than the first two sentences thereof) or 5.2 or Article IV if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk is not reasonably assured to it. The
Indenture Trustee shall not be required to take any action under Section 5.1 or
5.2 or Article IV, nor shall any other provision of this Indenture be deemed to
impose a duty on the Indenture Trustee to take any action, if the Indenture
Trustee shall have been advised in writing by independent counsel that such
action is contrary to the terms hereof or of the Lease or the Participation
Agreement, or is otherwise contrary to law.
(b) Each Loan Participant may, but shall not be required to, participate
in any indemnification of the Indenture Trustee given pursuant to paragraph (a)
of this Section 5.3. Each Loan Participant so participating shall be entitled to
reimbursement for such participation in accordance with Article III.
Section 5.4. No Duties Except as Specified in Indenture or Instructions.
----------------------------------------------------------
The Indenture Trustee shall not have any duty or obligation to manage, control,
use, sell, dispose of or otherwise deal with the Equipment or any other part of
the Indenture Estate, or to otherwise take or refrain from taking any action
under, or in connection with, this Indenture, the Lease, or the Participation
Agreement, except as expressly provided by the terms of this Indenture or as
expressly provided in written instructions received pursuant to the terms of
Section 5.1 or 5.2; and no implied duties or obligations shall be read into this
Indenture against the Indenture Trustee. Each of the Owner Trustee (only in its
individual capacity) and the Indenture Trustee nevertheless agrees that it will,
at its own cost and expense, promptly take such action as may be necessary duly
to discharge any Lien on all or any part of the Indenture Estate, or on any
properties of the Owner Trustee assigned, pledged or mortgaged as part of the
Indenture Estate, which result from claims against it in its individual capacity
not related to the ownership of the Equipment (in the case of the Owner
Trustee), administration of the Indenture Estate (in the case of the Indenture
Trustee) or any other transaction under this Indenture or the Trust Agreement or
any document included in the Indenture Estate.
Section 5.5. No Action Except under Lease, Indenture or Instructions. The
-------------------------------------------------------
Indenture Trustee agrees that it will not manage, control, use, sell, dispose of
or otherwise deal with the Equipment or other property constituting part of the
Indenture Estate except (i) as required by the terms of the Lease and the
Participation Agreement, (ii) in accordance with the powers granted to, or the
authority conferred upon, the Indenture Trustee pursuant to this Indenture, or
(iii) in accordance with the express terms hereof or with written instructions
pursuant to Section 5.1 or 5.2.
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Section 5.6. Disposition of Units. At any time and from time to time prior
--------------------
to the expiration of the Lease Term, any Unit for which the provisions of
Section 11.4(a) of the Lease have been satisfied may be disposed of in
accordance with the provisions of Section 11.4(a) of the Lease, and the Owner
Trustee shall, from time to time, direct the Indenture Trustee to, provided no
Lease Event of Default shall have occurred and be continuing, execute and
deliver to it, or as directed in writing by the Owner Trustee, an appropriate
instrument furnished by the Owner Trustee or the Lessee releasing such Unit from
the Lien of the Indenture, but only in respect of such Unit.
Section 5.7. Indenture Supplements for Replacements. In the event of a
--------------------------------------
Replacement Unit being substituted as contemplated by Section 11.2 of the Lease,
the Owner Trustee and the Indenture Trustee agree for the benefit of the holders
of the Equipment Notes and the Lessee, subject to compliance by the Lessee with
its obligations set forth in Section 11 of the Lease, to execute and deliver an
Indenture Supplement substantially in the form of Exhibit A hereto and, provided
that no Lease Event of Default, or Lease Default pursuant to Section 14(a),
14(b), 14(g) or 14(h), shall have occurred and be continuing, execute and
deliver to the Lessee an appropriate instrument releasing the Unit being
replaced from the Lien of the Indenture.
Section 5.8. Effect of Replacements. In the event of the substitution of
----------------------
a Replacement Unit, all provisions of this Indenture relating to the Unit or
Units being replaced shall be applicable to such Replacement Unit with the same
force and effect as if such Replacement Unit was the same Unit being replaced.
Section 5.9. Withholding Taxes. The Indenture Trustee, as agent for the
-----------------
Owner Trustee, shall exclude and withhold from each payment of principal,
Premium, if any, and interest and other amounts due hereunder or under the
Equipment Notes any and all withholding taxes applicable thereto as required by
law. The Indenture Trustee agrees to act as such withholding agent and, in
connection therewith, whenever any present or future taxes or similar charges
are required to be withheld with respect to any amounts payable in respect of
the Equipment Notes, to withhold such amounts and timely pay the same to the
appropriate authority in the name of and on behalf of the holders of the
Equipment Notes, that it will file any necessary withholding tax returns or
statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each holder of an Equipment Note appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such holders may reasonably request from time to time.
Section 5.10. Lessee's Right of Quiet Enjoyment. Notwithstanding anything
---------------------------------
to the contrary contained in this Indenture, so long as the Lessee is in
compliance with its obligations under the Lease (including applicable grace
periods) and no Lease Event of Default has occurred and is continuing
unremedied, the Indenture Trustee will comply with Section 8 of the
Participation Agreement to the same extent as if it were the Lessor under the
Lease. Each holder of an
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Equipment Note, by its acceptance thereof, consents in all respects to the terms
of the Lease and the Participation Agreement and agrees to the provisions of
this Section 5.10.
Section 5.11. Certain Rights of Owner Trustee and Owner Participant.
-----------------------------------------------------
Notwithstanding any other provisions of this Indenture, including the Granting
Clause, but subject always to the penultimate paragraph of this Section 5.11,
the following rights (the "Excepted Rights") shall be reserved to the Owner
Trustee or Owner Participant, as the case may be (as separate and independent
rights) to the extent described herein:
(a) subject to the Intercreditor Agreement, the Owner Trustee or the
Owner Participant shall at all times retain the right, to the exclusion of the
Indenture Trustee, (i) to demand, collect, sue for or otherwise obtain all
amounts included in Excepted Property from the Lessee, exercise any election or
option or make any decision or determination or give or receive any notice,
consent, waiver or approval in respect of any Excepted Property and seek
equitable remedies to require the Lessee to maintain the insurance coverage
referred to in Section 12 of the Lease and specific performance of the covenants
of the Lessee under the Lease relating to the protection, maintenance,
possession and use of the Units; provided, that the rights referred to in this
clause (a) shall not be deemed to include the exercise of any remedies provided
for in Section 15.1 of the Lease other than the right to proceed by appropriate
court action, either at law or in equity, to enforce payment by the Lessee of
such amounts included in Excepted Property or obtain specific performance by the
Lessee of such insurance covenant or for specific performance of any other
covenant of the Lessee or to recover damages for the breach thereof and (ii) to
adjust Basic Rent, the percentages relating to Stipulated Loss Value and
Termination Value and Early Purchase Price as provided in Section 3.4 of the
Lease and Section 2.6 of the Participation Agreement, subject always to the
second paragraph of Section 3.2 of the Lease and the second sentence of the
definitions of "Stipulated Loss Value", "Termination Value" and "Early Purchase
Price";
(b) (i) the Indenture Trustee shall not, without the consent of the
Owner Trustee, enter into, execute and deliver amendments or modifications in
respect of any of the provisions of the Lease or the Intercreditor Agreement,
and (ii) unless an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall not, without the consent of the Owner
Trustee, which consent shall not be withheld if no right or interest of the
Owner Trustee or the Owner Participant shall be materially diminished or
impaired thereby, (A) enter into, execute and deliver waivers or consents in
respect of any of the provisions of the Lease or the Intercreditor Agreement, or
(B) approve any accountants, engineers, appraisers or counsel as satisfactory to
render services for or issue opinions to the Owner Trustee pursuant to the
Operative Agreements (other than counsel rendering tax opinions issued to the
Owner Participant or the Owner Trustee, the approval of which shall be reserved
exclusively to the Owner Participant or the Owner Trustee, as the case may be);
provided that, whether or not an Indenture Event of Default has occurred and is
continuing the Owner Trustee's consent shall be required with respect to any
waivers or consents in respect of any of the provisions of Sections 6, 8 or 12
of the Lease, or of
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any other Section of the Lease or the Intercreditor Agreement to the extent such
action shall affect (x) the amount or timing of, or the right to enforce payment
of, any Excepted Property, (y) the timing or priority of any transfer or
distribution of funds pursuant to the Intercreditor Agreement or the release of
funds from, or the imposition of caps on, the Cash Trapping Account (as defined
in the Intercreditor Agreement) or (z) the amount or timing of any amounts
payable by the Lessee under the Lease or the Intercreditor Agreement as
originally executed (or as subsequently modified with the consent of the Owner
Trustee) which, absent the occurrence and continuance of an Indenture Event of
Default hereunder, would be distributable to the Owner Trustee under Article III
hereof;
(c) at all times, whether or not an Indenture Event of Default has
occurred and is continuing, the Owner Trustee and the Owner Participant shall
have the right, together with the Indenture Trustee, (i) to receive from the
Lessee, the Manager, the Insurance Manager and the Collateral Agent all notices,
certificates, reports, filings, opinions of counsel and other documents and all
information which any thereof is permitted or required to give or furnish to the
Owner Trustee pursuant to any Operative Agreement (including pursuant to Section
13 of the Lease and Sections 2.5(a) and 3.14 of the Intercreditor Agreement),
(ii) to exercise inspection rights pursuant to Section 13 of the Lease and
Section 2.5(b) of the Intercreditor Agreement, (iii) to retain all rights with
respect to insurance maintained for its own account which Section 12 of the
Lease specifically confers on the Owner Participant or the Owner Trustee in its
individual capacity and (iv) to exercise, to the extent necessary to enable it
to exercise its rights under Section 4.4 hereof, the rights of the Owner Trustee
to give any notices of default under Section 15 of the Lease;
(d) so long as no Indenture Event of Default has occurred and is
continuing (other than an Indenture Event of Default caused by a Lease Event of
Default), the Owner Trustee shall have the right, together with the Indenture
Trustee, (i) to consent to any amendment or modification of the Lessee's
certificate of incorporation or bylaws in accordance with Section 6.2(q) of the
Intercreditor Agreement, and (ii) to consent to the Lessee's entering into any
additional lease and related documents in accordance with Section 6.4(f) of the
Intercreditor Agreement;
(e) except as expressly provided to the contrary in clauses (a), (b),
(c) and (d) above, so long as no Indenture Event of Default has occurred and is
continuing, all rights (including options, elections, determinations, consents,
approvals, waivers and the giving of notices) of the Owner Trustee and the Owner
Participant, as the case may be, under the Lease and the Intercreditor Agreement
to the exclusion of the Indenture Trustee and any holder of an Equipment Note
and without the consent of the Indenture Trustee or any holder of an Equipment
Note; provided that the foregoing shall not, nor shall any other provision of
this Section 5.11, limit (A) any rights separately and expressly granted to the
Indenture Trustee or any holder of an Equipment Note under the Lease or the
other Operative Agreements (including, without limitation, Section 9.5 hereof,
Sections 8.2 and 8.4 of the Management Agreement and Sections 6.02 and 6.03 of
the Insurance Agreement) or (B) the right of the Indenture Trustee or any holder
of an Equipment
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Note to receive any funds to be delivered to the Owner Trustee under the Lease
or the Intercreditor Agreement (except with respect to Excepted Property).
Notwithstanding the foregoing provisions of this Section 5.11, but subject
always to Section 4.5 hereof and to the rights of the Owner Participant under
Section 4.4 hereof, the Indenture Trustee shall at all times have the right, to
the exclusion of the Owner Trustee and the Owner Participant, to (A) demand,
collect, sue for or otherwise receive and enforce the payment of all Rent due
and payable under the Lease (other than any thereof constituting an Excepted
Property or Excepted Right), (B) declare the Lease to be in default under
Section 15 thereof and (C) subject only to the provisions of Sections 4.3 and
4.4 hereof, exercise the remedies set forth in such Section 15 (other than in
connection with the Excepted Property) and in Article IV hereof.
The term "Indenture Event of Default" as used in this Section 5.11 only
shall have the meaning attributed to such term in Section 4.1 but excluding the
proviso in Section 4.1(a) thereof.
ARTICLE VI. THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE
Section 6.1. Acceptance of Trusts and Duties. The Indenture Trustee
-------------------------------
accepts the trusts hereby created and applicable to it and agrees to perform the
same but only upon the terms of this Indenture and agrees to receive and
disburse all moneys received by it constituting part of the Indenture Estate in
accordance with the terms hereof. The Indenture Trustee shall not be answerable
or accountable under any circumstances, except for its own willful misconduct or
gross negligence (or negligence or willful misconduct in the case of application
or investment of moneys constituting the Indenture Estate) or breach of any of
its representations or warranties or covenants set forth herein or in the
Participation Agreement, or failure in the performance of its obligations under
the last sentence of Section 5.4, and the Owner Trustee shall not be liable for
any action or inaction of the Indenture Trustee and the Indenture Trustee shall
not be liable for any action or inaction of the Owner Trustee. The Owner
Trustee shall not be deemed a trustee for, or agent of, the holders of the
Equipment Notes for any purpose.
Section 6.2. Absence of Duties. Except in accordance with written
-----------------
instructions or requests furnished pursuant to Section 5.1 or Section 5.2 and
except as provided in, and without limiting the generality of, Section 5.4, the
Indenture Trustee shall have no duty (i) to see to any registration of the
Equipment or any recording or filing of the Lease, or of this Indenture or any
other document, or to see to the maintenance of any such registration, recording
or filing, (ii) to see to any insurance on the Equipment or to effect or
maintain any such insurance, whether or not the Lessee shall be in default with
respect thereto, (iii) to confirm, verify or inquire into the failure to receive
any financial statements of the Lessee or (iv) to inspect the Equipment at any
time or ascertain or inquire as to the performance or observance of any of the
Lessee's covenants under the Lease with respect to the Equipment.
Notwithstanding the foregoing, the Indenture Trustee will furnish to any Loan
Participant, so long as such Loan Participant or its nominees shall hold any of
the Equipment Notes and to each of the Rating Agencies, promptly upon
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receipt thereof, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and other instruments furnished to
the Indenture Trustee under this Indenture, to the extent that the same shall
not have been furnished to the Indenture Trustee and the Loan Participants or
the Rating Agencies, as the case may be, pursuant to the Lease or the
Participation Agreement.
Section 6.3. No Representations or Warranties as to the Equipment or
-------------------------------------------------------
Documents. Neither the Owner Trustee nor the Owner Trustee in its individual
- ---------
capacity nor the Indenture Trustee makes or shall be deemed to have made (i) any
representation or warranty, express or implied, as to the value, condition,
design, operation, merchantability or fitness for use of the Equipment or as to
their title thereto, or any other representation or warranty with respect to the
Equipment whatsoever, or (ii) any representation or warranty as to the validity,
legality or enforceability of this Indenture, the Trust Agreement, the
Participation Agreement, the Equipment Notes, the Lease, any Lease Supplement,
any Indenture Supplement or any other document or instrument or as to the
correctness of any statement contained in any thereof (except as to the
representations and warranties made by the Owner Trustee in its individual
capacity as set forth in Section 3.1 of the Participation Agreement), except
that the Owner Trustee and the Indenture Trustee each in its individual capacity
hereby confirms the representations and warranties made by it in its individual
capacity in Sections 3.1 and 3.3, respectively, of the Participation Agreement.
Section 6.4. Segregation of Moneys; No Interest; Investments. (a) Subject
-----------------------------------------------
to Section 6.4(b) and 6.4(c), no moneys received by the Indenture Trustee
hereunder need be segregated in any manner except to the extent required by law,
and any such moneys may be deposited under such general conditions for the
holding of trust funds as may be prescribed by law applicable to the Indenture
Trustee, and, except as otherwise agreed by the Owner Trustee or the Indenture
Trustee, as the case may be, neither the Owner Trustee nor the Indenture Trustee
shall be liable for any interest thereon.
(b) Any amounts held by the Indenture Trustee pursuant to the express
terms of this Indenture or the Lease and not required to be distributed as
herein provided shall be invested and reinvested by the Indenture Trustee from
time to time in Specified Investments at the written direction and at the risk
and expense of the Lessee, except that in the absence of any such direction,
such amounts need not be invested and reinvested and except that after a Lease
Event of Default shall have occurred and be continuing, such amounts shall be so
invested and reinvested by the Indenture Trustee in Indenture Investments. Any
net income or gain realized as a result of any such investments or reinvestment
shall be held as part of the Indenture Estate and shall be applied by the
Indenture Trustee at the same times, on the same conditions and in the same
manner as the amounts in respect of which such income or gain was realized are
required to be distributed in accordance with the provisions hereof or of the
Lease pursuant to which such amounts were required to be held and if no Lease
Event of Default shall have occurred and be continuing any excess shall be paid
to the Collateral Agent. Any such Specified Investments or Indenture
Investments may be sold or otherwise reduced to cash (without regard to maturity
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date) by the Indenture Trustee whenever necessary to make any application as
required by such provisions. The Indenture Trustee shall have no liability for
any loss resulting from any such investment or reinvestment other than by reason
of the willful misconduct or gross negligence of the Indenture Trustee.
(c) On or prior to the Closing Date, the Indenture Trustee shall
establish and thereafter maintain, in the name of the Indenture Trustee, for the
benefit of the holders of the Equipment Notes, at the offices of the Indenture
Trustee, a segregated account (the "Payment Account") bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the holders of the Equipment Notes, but subject to the terms and conditions of
this Indenture. The Indenture Trustee shall have sole dominion and control over
the Payment Account and all amounts on deposit therein, including the sole power
to direct withdrawals from the Payment Account. Amounts may be withdrawn from
the Payment Account only in accordance with the provisions of Article III of
this Indenture and only by officers and employees authorized by the Indenture
Trustee in writing.
Section 6.5. Reliance; Agents; Advice of Counsel. The Indenture Trustee
-----------------------------------
shall incur no liability to anyone acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Indenture Trustee may accept a copy
of a resolution of the Board of Directors of any party to the Participation
Agreement, certified by the Secretary or an Assistant Secretary of such party as
duly adopted and in full force and effect, as conclusive evidence that such
resolution has been duly adopted by said Board and that the same is in full
force and effect. As to any fact or matter the manner of ascertainment of which
is not specifically described herein, the Indenture Trustee may for all purposes
hereof rely on a certificate, signed by an officer of the Lessee, as to such
fact or matter, and such certificate shall constitute full protection to the
Indenture Trustee for any action taken or omitted to be taken by it in good
faith in reliance thereon. The Indenture Trustee shall furnish to the Owner
Trustee upon request such information and copies of such documents as the
Indenture Trustee may have and as are necessary for the Owner Trustee to perform
its duties under Article II hereof. The Indenture Trustee shall assume, and
shall be fully protected in assuming, that the Owner Trustee is authorized by
the Trust Agreement to enter into this Indenture and to take all action
permitted to be taken by it pursuant to the provisions hereof, and need not
inquire into the authorization of the Owner Trustee with respect thereto. In the
administration of the trusts hereunder, the Indenture Trustee may execute any of
the trusts or powers hereof and perform its powers and duties hereunder directly
or through agents or attorneys and may, at the reasonable expense of the
Indenture Estate, consult with independent counsel, accountants and other
skilled persons to be selected and employed by it, and the Indenture Trustee
shall not be liable for anything done, suffered, or omitted in good faith by it
in accordance with the written advice or opinion of any such independent
counsel, accountants or other skilled persons acting within such persons' area
of competence (so long as the Indenture Trustee shall have exercised reasonable
care in selecting such persons).
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Section 6.6 Not Acting in Individual Capacity. The Owner Trustee and the
---------------------------------
Indenture Trustee each acts hereunder solely as trustee hereunder and, in the
case of the Owner Trustee, under the Trust Agreement and not in its individual
capacity unless otherwise expressly provided; and all Persons, other than the
holders of Equipment Notes to the extent expressly provided in this Indenture,
having any claim against the Owner Trustee or the Indenture Trustee by reason of
the transactions contemplated hereby shall, subject to the Lien and priorities
of payment as herein provided, look only to the Indenture Estate for payment or
satisfaction thereof.
ARTICLE VII. CERTAIN LIMITATIONS ON OWNER TRUSTEE'S
AND INDENTURE TRUSTEE'S RIGHTS
Each of the Owner Trustee and the Indenture Trustee agrees that it shall
have no right against the holders of the Equipment Notes or the Indenture Estate
(except in the case of the Indenture Trustee as expressly provided in Section
4.3 hereof) for any fee as compensation for its services hereunder or any
expenses or disbursements incurred in connection with the exercise and
performance of its powers and duties hereunder or any indemnification against
liability which it may incur in the exercise and performance of such powers and
duties but, on the contrary, shall look solely to the Lessee for such payment
and indemnification and that neither the Owner Trustee nor the Indenture Trustee
shall have any Lien on the Indenture Estate as security for such compensation,
expenses, reasonable counsel fees, if any, disbursements and indemnification.
ARTICLE VII. SUCCESSOR TRUSTEES
Section 8.1 Notice of Successor Owner Trustee. In the case of any
---------------------------------
appointment of a successor Owner Trustee pursuant to the Trust Agreement or any
merger, conversion, consolidation or sale of substantially all the business
involving the Owner Trustee pursuant to the Trust Agreement, the successor Owner
Trustee shall give prompt written notice thereof to the Indenture Trustee, the
Lessee and the holders of all Equipment Notes at the time outstanding.
Section 8.2 Resignation of Indenture Trustee; Appointment of Successor.
----------------------------------------------------------
The resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section 8.2.
The Indenture Trustee or any successor thereto may resign at any time without
cause by giving at least 30 days' prior written notice to the Owner Trustee, the
Owner Participant, the Lessee and the holders of the Equipment Notes. A
Majority in Interest may at any time remove the Indenture Trustee without cause
by an instrument in writing delivered to the Owner Trustee, the Owner
Participant, the Lessee and the Indenture Trustee. The Owner Trustee may remove
the Indenture Trustee if: (1) the Indenture Trustee fails to comply with
Section 8.2(c); (2) the Indenture Trustee is adjudged a bankrupt or an
insolvent; (3) a receiver or public officer takes charge of the Indenture
Trustee or its property; or (4) the Indenture Trustee becomes incapable of
performing its duties hereunder.
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(a) In the case of the resignation or removal of the Indenture
Trustee, the Owner Trustee shall, unless otherwise directed by a Majority in
Interest, promptly appoint a successor Indenture Trustee, provided that a
Majority in Interest may appoint, within one year after such resignation or
removal, a successor Indenture Trustee which may be other than the successor
Indenture Trustee appointed as provided above, and such successor Indenture
Trustee appointed as provided above shall be superseded by the successor
Indenture Trustee so appointed by a Majority in Interest. If a successor
Indenture Trustee shall not have been appointed and accepted its appointment
hereunder within 60 days after the Indenture Trustee gives notice of resignation
or is removed as provided above, the retiring Indenture Trustee, the Lessee, the
Owner Trustee or a Majority in Interest may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee. Any
successor Indenture Trustee so appointed by such court shall immediately and
without further act be superseded by any successor Indenture Trustee appointed
as provided in the proviso to the first sentence of this paragraph (a) within
one year from the date of the appointment by such court.
(b) Any successor Indenture Trustee, however appointed, shall execute
and deliver to the Owner Trustee and the Lessee and to the predecessor Indenture
Trustee an instrument accepting such appointment, and thereupon such successor
Indenture Trustee, without further act, shall become vested with all the
estates, properties, rights, powers, duties and trusts of the predecessor
Indenture Trustee hereunder in the trusts hereunder applicable to it with like
effect as if originally named the Indenture Trustee herein; but nevertheless,
upon the written request of such successor Indenture Trustee, such predecessor
Indenture Trustee shall execute and deliver an instrument transferring to such
Indenture Trustee, upon the trusts herein expressed applicable to it, all the
estates, properties, rights, powers and trusts of such predecessor Indenture
Trustee, and such Indenture Trustee shall duly assign, transfer, deliver and pay
over to such successor Indenture Trustee all moneys or other property then held
by such predecessor Indenture Trustee hereunder.
(c) The Indenture Trustee shall be a bank or trust company organized
under the laws of the United States or any State thereof having a combined
capital and surplus of at least $[100,000,000], if there be such an institution
willing, able and legally qualified to perform the duties of the Indenture
Trustee hereunder upon reasonable or customary terms.
(d) Any corporation into which the Indenture Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Indenture Trustee
shall be a party, or any corporation to which substantially all the corporate
trust business of the Indenture Trustee may be transferred, shall, subject to
the terms of paragraph (c) of this Section, be the Indenture Trustee under this
Indenture without further act.
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ARTICLE IX. SUPPLEMENTS AND AMENDMENTS
TO THIS INDENTURE AND OTHER DOCUMENTS
Section 9.1 Supplemental Indentures without Consent of Holders. (a) The
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Owner Trustee and the Indenture Trustee, at any time and from time to time,
without notice to or the consent of any holders of any Equipment Notes (except
that the Indenture Trustee shall give notice to each of the Rating Agencies),
may enter into one or more indentures supplemental hereto for any of the
following purposes:
(i) to correct or amplify the description of any property at
any time subject to the Lien of this Indenture or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required to
be subject to the Lien of this Indenture or to subject to the Lien of this
Indenture any Unit or Units substituted for any Unit or Units in accordance
with the Lease; provided, however, that indenture supplements entered into
for the purpose of subjecting to the Lien of this Indenture any Unit or
Units substituted for any Unit or Units in accordance with the Lease need
only be executed by the Owner Trustee; or
(ii) to evidence the succession of another trustee to the Owner
Trustee and the assumption by any such successor of the covenants of the
Owner Trustee herein and in the Equipment Notes contained, or to evidence
(in accordance with Article VIII) the succession of a new Indenture Trustee
hereunder; or
(iii) to add to the covenants of the Owner Trustee, for the
benefit of the holders of the Equipment Notes, or to surrender any right or
power herein conferred upon the Owner Trustee; or
(iv) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to matters
or questions arising hereunder so long as any such action does not
adversely affect the interests of the holders of the Equipment Notes;
provided that no such supplement to this Indenture or waiver or modification of
the terms hereof shall adversely affect in a substantive manner the interests of
the Lessee without the Lessee's prior written consent, and in no event shall the
terms of (x) the proviso to the first sentence of Section 4.3(a) or (y) Section
4.5 be so altered or modified without such Lessee consent.
(b) Supplemental Indentures with Consent of Majority In Interest.
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With the written consent of a Majority in Interest, the Owner Trustee (but only
on the written request of the Owner Participant) may, and the Indenture Trustee,
subject to Section 9.2 hereof, shall, at any time and from time to time, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or of modifying in any manner the rights and obligations of
holders of the Equipment
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Notes and of the Owner Trustee under this Indenture; provided, however, without
the consent of each holder of an Equipment Note affected thereby, no such
supplemental indenture shall:
(1) change the final maturity of the principal of any Equipment
Note, or change the dates or amounts of payment of any installment of the
principal of, Premium, if any, or interest on any Equipment Note, or reduce
the principal amount thereof or the Premium, if any, or interest thereon,
or change to a location outside the United States the place of payment
where, or the coin or currency in which, any Equipment Note or the Premium,
if any, or interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment of principal or Premium, if
any, or interest on or after the date such principal or Premium, if any, or
interest becomes due and payable; or
(2) create any Lien with respect to the Indenture Estate ranking
prior to, or on a parity with, the security interest created by this
Indenture except such as are permitted by this Indenture, or deprive any
holder of an Equipment Note of the benefit of the Lien on the Indenture
Estate created by this Indenture; or
(3) reduce the percentage in principal amount of the Equipment
Notes, the consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver (of
compliance with certain provisions of this Indenture, or of certain
defaults hereunder and their consequences) provided for in this Indenture;
or
(4) modify any provisions of this Section 9.1(b), except to
provide that certain other provisions of this Indenture cannot be modified
or waived without the consent of the holder of each Equipment Note affected
thereby;
provided that so long as no Lease Event of Default shall have occurred and be
continuing, no such supplement to this Indenture or waiver or modification of
the terms hereof shall adversely affect in a substantive manner the interests of
the Lessee without the Lessee's prior written consent, and in no event shall the
terms of (x) the proviso to the first sentence of Section 4.3(a) or (y) Section
4.5 be so altered or modified without such Lessee consent.
Section 9.2 Indenture Trustee Protected. If in the opinion of the
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Indenture Trustee any document required to be executed pursuant to the terms of
Section 9.1 adversely affects any right, duty, immunity or indemnity in favor of
the Indenture Trustee under this Indenture, the Participation Agreement or the
Lease, the Indenture Trustee may in its discretion decline to execute such
document.
Section 9.3 Request of Substance, Not Form. It shall not be necessary for
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the consent of the holders of Equipment Notes under Section 9.1(b) to approve
the particular form of any proposed supplemental indenture, but it shall be
sufficient if such consent shall approve the substance thereof.
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Section 9.4 Documents Mailed to Holders. Promptly after the execution by
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the Indenture Trustee of any document entered into pursuant to Section 9.1(b),
the Indenture Trustee shall mail, by first-class mail, postage prepaid, a
conformed copy thereof to each holder of an Equipment Note at its address last
known to the Indenture Trustee, but the failure of the Indenture Trustee to mail
such conformed copies shall not impair or affect the validity of such document.
Section 9.5 Amendments, Waivers, Etc. of Other Documents. (a)
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Notwithstanding any provision of this Indenture to the contrary, without the
consent of a Majority in Interest, the respective parties to the Lease, the
Participation Agreement, the Intercreditor Agreement and the Trust Agreement may
not modify, amend or supplement any of such agreements, or give any consent,
waiver, authorization or approval under any of such agreements, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the respective
parties thereunder; provided, however, that the actions specified in subsection
(b) of this Section 9.5 may be taken, except as otherwise expressly provided
therein, without the consent of the Indenture Trustee or of a Majority in
Interest or any holder of an Equipment Note.
(b) Subject to the provisions of subsection (c) of this Section 9.5,
the respective parties to the Lease, the Trust Agreement and the Participation
Agreement, at any time and from time to time without the consent of the
Indenture Trustee or of a Majority in Interest or any holder of an Equipment
Note, may:
(1) so long as no Indenture Event of Default shall have occurred
and be continuing, modify, amend or supplement the Lease, or give any
consent, waiver, authorization or approval with respect thereto, except
that without the consent of a Majority in Interest, the parties to the
Lease shall not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or of
modifying in any manner the rights of the respective parties thereunder,
with respect to the following provisions of the Lease: Sections 2, 3.1 (if
the result thereof would be to shorten the Basic Term to a period shorter
than the period ending with the final maturity of the Equipment Notes),
3.2, 3.3, 3.4, 3.5 (except insofar as it relates to the address or account
information of the Owner Trustee or Indenture Trustee) (other than as such
Sections 3.1 through 3.5 may be amended pursuant to Section 3.4 of the
Lease as originally executed), 4, 6 (but only to the extent such Section is
made operative by Section 15), 7, 8, 9, 10 (except that additional
requirements may be imposed on the Lessee's ability to terminate the Lease
with respect to a Unit), 11 (except that additional requirements may be
imposed on the Lessee's ability to replace a Unit subject to an Event of
Loss), 12 (except that additional insurance requirements may be imposed on
the Lessee), 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 (if the result thereof
would be to provide any renewal or purchase option contained in such
Section prior to the final maturity of the Equipment Notes), 24, 25.1,
25.4, 25.6, 25.10, and any definition of terms used in the Lease,
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to the extent that any modification of such definition would result in a
modification of the Lease not permitted as aforesaid in this clause (1) of
subsection (b); provided that, subject to Section 5.11 hereof, in the event
an Indenture Event of Default shall have occurred and be continuing, the
Indenture Trustee shall have all rights of the Owner Trustee as "Lessor"
under the Lease to modify, amend or supplement the Lease or give any
consent, waiver, authorization or approval thereunder, for the purpose of
adding any provisions to or changing in any manner or eliminating any of
the provisions thereof or of modifying in any manner the rights of the
"Lessor" thereunder;
(2) modify, amend or supplement the Trust Agreement, or give any
consent, waiver, authorization or approval with respect thereto, except
that without the consent of a Majority in Interest, the parties to the
Trust Agreement shall not modify, amend or supplement, or give any consent,
waiver, authorization or approval for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to Sections [2.1, 2.2, 3.1, 4.4, 7.1, 7.2, 9.1,
10.1, 10.2, 10.7, 10.11] or any other Section of the Trust Agreement if
such action would materially adversely affect the interest of the Loan
Participants, and any definition of terms used in the Trust Agreement, to
the extent that any modification of such definition would result in a
modification of the Trust Agreement not permitted pursuant to this
subsection (b);
(3) modify, amend or supplement the Participation Agreement, or
give any consent, waiver, authorization or approval with respect thereto,
except that without the consent of a Majority in Interest, the parties to
the Participation Agreement shall not modify, amend or supplement, or give
any consent, waiver, authorization or approval for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the
respective parties thereunder, with respect to the following provisions of
the Participation Agreement: Sections 1, 2, 3, 4, 5, 6, 7, 10.2, 10.5,
10.7, 10.9 and 10.13(a), each provision of the Participation Agreement
which specifically refers to the Indenture Trustee or Loan Participants and
any definition of terms used in the Participation Agreement, to the extent
that any modification of such definition would result in a modification of
the Participation Agreement not permitted pursuant to this Section 9.5(b);
and
(4) modify, amend or supplement any of said agreements in order
to cure any ambiguity, to correct or supplement any provision thereof which
may be defective or inconsistent with any other provision thereof or any
provision of this Indenture, or to make any other provision with respect to
matters or questions arising thereunder or under this Indenture which shall
not be inconsistent with the provisions of this Indenture, provided any
such action shall not adversely affect the interests of the holders of the
Equipment Notes.
(c) No modification, amendment, supplement, consent, waiver,
authorization or approval with respect to the Lease or the Participation
Agreement, whether effected pursuant to subsection (a) or pursuant to subsection
(b) of this Section 9.5, and anything in such subsections or elsewhere
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in this Indenture to the contrary notwithstanding, shall, without the consent of
the holder of each Equipment Note affected thereby:
(1) modify, amend or supplement the Lease in such a way as to
extend the time of payment of Basic Rent or Stipulated Loss Value and any
other amounts payable under, or as provided in, the Lease upon the
occurrence of an Event of Loss or Termination Value and any other amounts
payable under, or as provided in, the Lease upon termination thereof or
reduce the amount of any installment of Basic Rent so that the same is less
than the payment of interest and principal (in accordance with Scheduled
Amortization) on the Equipment Notes, as the case may be, to be made from
such installment of Basic Rent or reduce the aggregate amount of Stipulated
Loss Value and any other amounts payable under, or as provided in, the
Lease upon the occurrence of an Event of Loss so that the same is less than
the accrued interest on and principal (in accordance with Scheduled
Amortization) of the Equipment Notes required to be paid at the time of
such payments, or reduce the amount of Termination Value, Early Purchase
Price and any other amounts payable under, or as provided in, the Lease
upon termination thereof so that the same is less than the accrued interest
on and principal (in accordance with Scheduled Amortization) of the
Equipment Notes required to be paid at the time of such payments;
(2) modify, amend or supplement the Lease in such a way as to, or
consent to any assignment of the Lease or give any consent, waiver,
authorization or approval which would, release the Lessee from its
obligation in respect of payment of Basic Rent or Stipulated Loss Value and
any other amounts payable under, or as provided in, the Lease upon the
occurrence of an Event of Loss, or Termination Value or Early Purchase
Price and any other amounts payable under, or as provided in, the Lease
upon termination thereof, except as provided in the Lease; or
(3) modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or of
modifying in any manner the rights of the respective parties under the
respective documents, in respect of (i) the second paragraph of Section 3.2
of the Lease, (ii) Section 2.6(c) of the Participation Agreement, (iii) the
second sentence of the definitions of "Early Purchase Price", "Stipulated
Loss Value", and "Termination Value" and (iv) Section 8.9 of the
Intercreditor Agreement.
ARTICLE X. MISCELLANEOUS
Section 10.1. Termination of Indenture. With respect to the Equipment,
------------------------
this Indenture and the trusts created hereby shall terminate and this Indenture
shall be of no further force or effect upon the earliest to occur of (i) the
termination of the Lease Term with respect to all Units by Lessee pursuant to
Section 10 or Section 22.1 thereof and upon payment in full to the Indenture
Trustee of the amounts required to be paid pursuant to Section 2.10(a) or
Section 2.10(c), as the case may be, in respect of all Units, (ii) the
termination of the Lease with respect to all Units pursuant to Section 11
thereof and upon payment in full to the Indenture Trustee of the amounts
required
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to be paid pursuant to Section 2.10(b) in respect of all Units, and (iii) the
payment in full of the principal amount of and interest on all Equipment Notes
outstanding hereunder and all other sums payable to the Indenture Trustee and
the holders of the Equipment Notes hereunder and under such Equipment Notes and
under the Participation Agreement.
Section 10.2. No Legal Title to Indenture Estate in Holders. No holder of
---------------------------------------------
an Equipment Note shall have legal title to any part of the Indenture Estate.
No transfer, by operation of law or otherwise, of any Equipment Note or other
right, title and interest of any holder of an Equipment Note in and to the
Indenture Estate or hereunder shall operate to terminate this Indenture or the
trusts hereunder or entitle any successor or transferee of such holder to an
accounting or to the transfer to it of legal title to any part of the Indenture
Estate.
Section 10.3. Sale of Equipment by Indenture Trustee is Binding. Any sale
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or other conveyance of the Equipment by the Indenture Trustee made pursuant to
the terms of this Indenture or the Lease shall bind the holders of the Equipment
Notes, the Owner Trustee and the Owner Participant and shall be effective to
transfer or convey all right, title and interest of the Indenture Trustee, the
Owner Trustee, the Owner Participant and such holders of the Equipment Notes in
and to the Equipment. No purchaser or other grantee shall be required to
inquire as to the authorization, necessity, expediency or regularity of such
sale or conveyance or as to the application of any sale or other proceeds with
respect thereto by the Indenture Trustee.
Section 10.4. Remedies Cumulative. Each and every right, power and remedy
-------------------
herein specifically given to the Indenture Trustee or otherwise in this
Indenture shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or now or hereafter existing at law,
in equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Indenture
Trustee, and the exercise or the beginning of the exercise of any power or
remedy shall not be construed to be a waiver of the right to exercise at the
time or thereafter any other right, power or remedy. No delay or omission by
the Indenture Trustee in the exercise of any right, remedy or power or in the
pursuance of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of the Owner Trustee or the
Lessee or to be an acquiescence therein.
Section 10.5. Discontinuance of Proceedings. In case the Indenture
-----------------------------
Trustee shall have proceeded to enforce any right, power or remedy under this
Indenture by foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Indenture Trustee, then and in every such case the Owner
Trustee, the Owner Participant, the Indenture Trustee and the Lessee shall be
restored to their former positions and rights hereunder with respect to the
Indenture Estate, and all rights, remedies and powers of the Indenture Trustee
shall continue as if no such proceedings had been undertaken (but otherwise
without prejudice).
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Section 10.6. Indenture and Equipment Notes for Benefit of Owner Trustee,
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Indenture Trustee, Owner Participant and Holders Only. Nothing in this
- -----------------------------------------------------
Indenture, whether express or implied, shall be construed to give to any Person
other than the Owner Trustee (individually and as trustee), the Indenture
Trustee, the Owner Participant (as set forth herein) and the holders of the
Equipment Notes any legal or equitable right, remedy or claim under or in
respect of this Indenture or any Equipment Note.
Section 10.7. Notices. Unless otherwise expressly specified or permitted
-------
by the terms hereof, all communications and notices provided for herein shall be
in writing or by facsimile capable of creating a written record, and any such
notice shall become effective (i) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (ii) in the case of
notice by United States mail, certified or registered, postage prepaid, return
receipt requested, upon receipt thereof, or (iii) in the case of notice by such
facsimile, upon confirmation of receipt thereof, provided such transmission is
promptly further confirmed in writing by either of the methods set forth in
clause (i) or (ii), in each case addressed to the following Person at its
respective address set forth below or at such other address as such Person may
from time to time designate by written notice to the other Persons listed below:
If to the Owner Trustee: [Owner Trustee]
Attention: ________________
Fax No.: ________________
Confirmation No.: _________
with copies to Owner Participant.
If to Owner Participant: [Owner Participant]
Attention: _________________
Fax No.: __________________
Confirmation No.: __________
If to the Indenture Trustee: The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services Division
Fax No.: [(312) 407-1708]
Confirmation No.: [(312) 407-1892]
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If to Lessee: General American Railcar Corporation II
c/o General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer (1998-1)
Fax No.: (312) 621-6645
Confirmation No.: (312) 621-6200
If to a Loan Participant: At such address as is set forth on Schedule 2 of
the Participation Agreement or, if not so specified, at the address set forth in
the register maintained pursuant to Section 2.7 hereof, or at such address as
such Loan Participant shall have furnished by notice to the Owner Trustee and
the Indenture Trustee.
If to a Rating Agency: Standard & Poor's Ratings Group
25 Broadway
New York, New York 10004
Attention: [Steven Rooney]
Structured Finance Ratings
Fax No.: [(212) 208-0027]
Confirmation No.: [(212) 208-1829]
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: [Christina Cotton]
Structured Finance
Fax No.: [(212) 553-3856]
Confirmation No.: [(212) 553-4148]
Notwithstanding the foregoing provisions, for purposes of Sections 4.1,
4.2, 4.4, 5.1 and 5.2, written notice shall be deemed given when it is in fact
received (by mail or otherwise) by any addressee at the respective addresses
specified above.
Section 10.8. Severability. Any provision of this Indenture which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. In the event of any
inconsistency or conflict between any provision of this Indenture and any
provision of the Trust Agreement, such provision in this Indenture shall govern
and control.
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Section 10.9. Separate Counterparts. This Indenture may be executed in
---------------------
any number of counterparts (and each of the parties hereto shall not be required
to execute the same counterpart). Each counterpart of this Indenture including a
signature page executed by each of the parties hereto shall be an original
counterpart of this Indenture, but all of such counterparts together shall
constitute one instrument.
Section 10.10. Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, the Owner
Trustee and its successors and permitted assigns, the Owner Participant and its
successors and permitted assigns, and the Indenture Trustee and its successors
and permitted assigns, and each holder of an Equipment Note, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument
or action by any holder of an Equipment Note shall bind the successors and
assigns of such holder.
Section 10.11. Headings. The headings of the various Articles and Sections
--------
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 10.12. Governing Law. This Indenture shall in all respects be
-------------
governed by, and construed in accordance with, the laws of the State of New
York, including all matters of construction, validity and performance, without
regard to principles of conflict of laws.
Section 10.13. Normal Commercial Relations Anything contained in this
---------------------------
Indenture to the contrary notwithstanding, the Owner Participant, the Owner
Trustee or the Indenture Trustee or any affiliate of the Owner Participant, the
Owner Trustee or the Indenture Trustee may enter into commercial banking or
other financial transactions, and conduct banking or other commercial
relationships, with the Lessee, any holder of an Equipment Note or the Indenture
Trustee (in its individual capacity or otherwise) fully to the same extent as if
this Indenture were not in effect, including, without limitation, the making of
loans or other extensions of credit for any purpose whatsoever.
Section 10.14. No Recourse Against Others. No director, officer, employee
--------------------------
or stockholder, as such, of Lessee, Owner Trustee, Owner Participant or
Indenture Trustee shall have any liability for any obligations of Lessee, Owner
Participant, Owner Trustee or Indenture Trustee or under the Equipment Notes or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each holder of the Equipment Notes by accepting
an Equipment Note waives and releases all such liability. The waiver and release
are part of the consideration of the Equipment Notes.
Section 10.15. Intercreditor Agreement. Each party hereto agrees that,
-----------------------
notwithstanding anything to the contrary contained herein or in any other
Operative Agreement, the exercise by such party of any and all rights and/or
remedies that such party may have hereunder is subject in all respects to the
terms of the Intercreditor Agreement.
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* * *
49
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed by their respective officers or attorneys-in-fact, as the case may be,
thereunto duly authorized, as of the day and year first above written.
[Owner Trustee],
not in its individual capacity except as set forth in Section 6.3 hereof, but
solely as Owner Trustee
By:
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Indenture Trustee
By:
Name:
Title:
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State of)
) SS:
County of)
On this ____ day of _______________, 1998, before me personally
appeared _________________________, to me personally known, who being by me duly
sworn, did say that he is the _________________________ of [Owner Trustee], that
said instrument was signed on such date on behalf of said corporation by
authority of its Board of Directors, and he acknowledged that the execution of
the foregoing instrument was the free act and deed of said corporation.
__________________________
Notary Public
[Notarial Seal]
My commission expires:
State of)
) SS:
County of)
On this ____ day of _______________, 1998, before me personally
appeared _________________________, to me personally known, who being by me duly
sworn, did say that he is __________________________ of The First National Bank
of Chicago, that said instrument was signed on such date on behalf of said
corporation by authority of its Board of Directors, and he acknowledged that the
execution of the foregoing instrument was the free act and deed of said
corporation.
__________________________
Notary Public
[Notarial Seal]
My commission expires:
51
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EXHIBIT A
TRUST INDENTURE SUPPLEMENT NO._
(1998-1)
This Indenture Supplement No. ___ (1998-1), dated ____________ (this
"Indenture Supplement"), of [Owner Trustee], not in its individual capacity but
solely as trustee (the "Owner Trustee") under the Trust Agreement (1998-1),
dated as of August 1, 1998 (the "Trust Agreement"), between the Owner Trustee in
its individual capacity and [Owner Participant], as Owner Participant;
WITNESSETH:
WHEREAS, the Trust Indenture and Security Agreement (1998-1) dated as of
August 1, 1998 (the "Indenture"), between the Owner Trustee and The First
National Bank of Chicago, as Indenture Trustee (the "Indenture Trustee"),
-----------------
provides for the execution and delivery of Indenture Supplements thereto
substantially in the form hereof each of which shall particularly describe the
Units covered by a related Lease Supplement under the Lease, by having attached
thereto a copy of such related Lease Supplement, and shall specifically mortgage
such Units to the Indenture Trustee;
WHEREAS, the Indenture includes the Equipment described in the copy of
Lease Supplement No. __ attached hereto and made a part hereof; and
[WHEREAS, an executed counterpart of the Indenture is attached to this
Indenture Supplement;]
NOW, THEREFORE, in order to secure the prompt payment of the principal of,
and Premium, if any, and interest on all of the Equipment Notes from time to
time outstanding under the Indenture and the performance and observance by the
Owner Trustee of all the agreements, covenants and provisions in the Indenture
for the benefit of the holders of the Equipment Notes and in the Equipment
Notes, subject to the terms and conditions of the Indenture, and in
consideration of the premises and of the covenants contained in the Indenture
and of the acceptance of the Equipment Notes by the holders thereof, and of the
sum of $1.00 paid to the Owner Trustee by the Indenture Trustee at or before the
delivery hereof, the receipt whereof is hereby acknowledged, the Owner Trustee
(i) has sold, assigned, transferred, pledged and confirmed, and does hereby
sell, assign, transfer, pledge and confirm, a security interest in and mortgage
lien on all right, title and interest of the Owner Trustee in and to the
property comprising the Equipment described in the copy of Lease Supplement No.
__ attached hereto, and (ii) has sold, assigned, transferred and set over, a
security interest in and mortgage lien on all of the right, title and interest
of the Owner Trustee under, in and to such Lease Supplement (excluding, however,
any rights to Excepted Property thereunder), referred to above, to the
<PAGE>
Indenture Trustee, its successors and assigns, in the trust created by the
Indenture for the benefit of the holders from time to time of the Equipment
Notes.
To have and to hold all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, in trust for the benefit and
security of the holders from time to time of the Equipment Notes and for the
uses and purposes and subject to the terms and provisions set forth in the
Indenture.
This Supplement shall be construed as supplemental to the Indenture
and shall form a part of it, and the Indenture is hereby incorporated by
reference herein and is hereby ratified, approved and confirmed.
This Supplement may be executed by the Owner Trustee in separate
counterparts, each of which when so executed and delivered is an original, but
all such counterparts shall together constitute but one and the same Supplement.
AND FURTHER, the Owner Trustee hereby acknowledges that the Equipment
referred to in the aforesaid Lease Supplement attached hereto and made a part
hereof has been delivered to the Owner Trustee and is included in the property
of the Owner Trustee covered by all the terms and conditions of the Trust
Agreement, subject to the pledge or mortgage thereof under the Indenture.
* * *
A-2
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Indenture
Supplement to be duly executed by one of its duly authorized officers, as of the
day and year first above written.
[Owner Trustee],
not in its individual capacity, but solely as Owner Trustee
By:
Name:
Title
A-3
<PAGE>
State of)
) SS:
County of)
On this ____ day of ____________, 1998, before me personally appeared
__________________________, to me personally known, who being by me duly sworn,
did say that he is ______________________ of [Owner Trustee], that said
instrument was signed on such date on behalf of said corporation by authority of
its Board of Directors, and he acknowledged that the execution of the foregoing
instrument was the free act and deed of said corporation.
___________________________ Notary Public
[Notarial Seal]
My commission expires:
A-4
<PAGE>
EXHIBIT B
TERMS OF EQUIPMENT NOTE
Principal Amount Interest Rate Rated Maturity Date
- ---------------- ------------- -------------------
$_______________ ________% _________________, 20___
<PAGE>
EXHIBIT C
LOAN PARTICIPANT
Percentage of
Loan Participant Principal Amount
---------------- -----------------
Equipment Note The First National Bank of 100%
Chicago, as Trustee under the
Pass Through Trust
Agreement
<PAGE>
ANNEX A
RATED AMORTIZATION SCHEDULE
[to come]
C-2
<PAGE>
ANNEX B
SCHEDULED AMORTIZATION SCHEDULE
[to come]
C-3
<PAGE>
FORM OF
Appendix A
to
Participation Agreement
Lease Agreement
Trust Indenture
Trust Agreement
(1998-1)
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all purposes of
the Operative Agreements referred to below, unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require, and such
meanings shall be equally applicable to both the singular and the plural forms
of the terms herein defined. In the case of any conflict between the provisions
of this Appendix A and the provisions of the main text of any Operative
Agreement, the provisions of the main text of such Operative Agreement shall
control the construction of such Operative Agreement.
Unless otherwise required by the context, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended,
supplemented and otherwise modified from time to time, and (ii) references to
parties to agreements shall be deemed to include the permitted successors and
assigns of such parties.
Defined Terms
"AAR" shall mean the Association of American Railroads or any successor
---
thereto.
"Accounts" shall mean the Collection Account, the Operating Account, the
--------
Liquidity Reserve Account, the Special Reserves Account, the Non-Shared Payments
Account, the Stipulated Loss Value Deficiency Account, the Cash Trapping Account
and the Excess Cash Account specified in Section 3.1 of the Intercreditor
Agreement.
"Accumulated Equity Deficiency Amount" shall mean, on any Payment Date, an
------------------------------------
amount equal to any aggregate outstanding and then unpaid Equity Portion of
Basic Rent.
"Adjusted Payment Amount" shall mean, for each Adjusted Principal Period,
-----------------------
the product of (i) the sum of all principal payments made during such Adjusted
Principal Period (excluding
<PAGE>
any Prepaid Amount), and (ii) the Adjustment Multiplier at the Payment Date
occurring for such Adjusted Principal Period.
"Adjusted Principal Period" shall mean, at any Payment Date (the "Relevant
-------------------------
Payment Date"), (i) in the event no Prepayment has been made, the period from
the Closing Date to, but not including, the Relevant Payment Date, or (ii) in
the event one or more Prepayments have been made on or prior to the Relevant
Payment Date, each of the following periods, without duplication: (a) the
period from the Closing Date to, but not including, the first Payment Date
thereafter on which a Prepayment has been made on the Relevant Payment Date, (b)
each period, if any, between two Payment Dates on which successive Prepayments
have been made, in each case including the Payment Date upon which such period
commences to, but not including, the Payment Date upon which such period ends,
and (c) the period from the Payment Date immediately preceding the Relevant
Payment Date on which a Prepayment was made to, but not including, the Relevant
Payment Date.
"Adjustment Multiplier" shall mean, for any Adjusted Principal Period at
---------------------
any Payment Date, a fraction, the numerator of which shall be the aggregate
Equipment Cost of all Units included in the Indenture Estate immediately after
such Payment Date (excluding the Equipment Cost of any Excluded Unit) and the
denominator of which shall be the aggregate Equipment Cost of all Units included
in the Indenture Estate at the commencement of such Adjusted Principal Period.
"Administrative Services Agreement" shall mean the Administrative Services
---------------------------------
Agreement (1998-1) dated as of August 1, 1998, between GATC and the Company.
"Affiliate" shall mean, with respect to any Person, any other Person which
---------
directly or indirectly controls, or is controlled by, or is under a common
control with, such Person. The term "control" means the possession, directly or
-------
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" shall have
----------- ----------
meanings correlative to the foregoing.
"After-Tax Basis" shall mean, with respect to any payment due to any
---------------
Person, that the amount of such payment is supplemented by a further payment or
payments so that the sum of all such payments, after reduction for all Taxes
payable by such Person by reason of the receipt or accrual of such payments,
shall be equal to the payment due to such Person.
"Alternative Minimum Tax" shall mean the alternative minimum tax imposed
------------------------
under Section 55 of the Code.
"Appraisal" shall have the meaning assigned thereto in Section 4.3(a) of
---------
the Participation Agreement.
2
<PAGE>
"Average Life Date" shall mean, with respect to an Equipment Note, the date
-----------------
which follows (i) in the case of an Equipment Note being prepaid, the prepayment
date or, (ii) in the case of an Equipment Note not being prepaid, the date of
such determination, by a period equal to the Remaining Weighted Average Life of
such Equipment Note.
"Bankruptcy Code" shall mean Chapter 11 of Title 11 of the United States
---------------
Code, 11 U.S.C. (S)101 et. seq.
--- ----
"Base Component" shall have the meaning assigned thereto in Section 5.2 of
--------------
the Management Agreement.
"Basic Rent" shall mean, with respect to any Unit, all rent payable by the
----------
Lessee to the Lessor pursuant to Section 3.2 of the Lease for the Basic Term for
such Unit, and all rent payable pursuant to Section 22.4 of the Lease for any
Renewal Term for such Unit.
"Basic Term" shall have the meaning assigned thereto in Section 3.1 of the
----------
Lease.
"Basic Term Commencement Date" shall mean the Closing Date.
----------------------------
"Basic Term Expiration Date" shall mean _____________, 20__.
--------------------------
"Basic Term Purchase Price" shall mean, with respect to any Unit, the
-------------------------
amount equal to the product of the percentage set forth in Section 6 of the
Participation Agreement and the Equipment Cost for such Unit.
"Beneficial Interest" shall mean the interest of the Owner Participant
-------------------
under the Trust Agreement.
"Bill of Sale" shall mean the full warranty bill of sale, dated the Closing
------------
Date or the date that any Replacement Unit is subjected to the Lease, from the
Lessee to the Owner Trustee covering the Units delivered on the Closing Date or
such Replacement Unit, as the case may be.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
------------
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, Chicago,
Illinois, the city and state in which the principal corporate trust office of
the Owner Trustee is located, or, until the Lien of the Indenture has been
discharged, the city and state in which the principal corporate trust office of
the Indenture Trustee is located.
"Car Service Contract" shall have the meaning assigned thereto in the first
--------------------
recital clause of the Management Agreement.
"Certificateholder" means the Person in whose name a Pass Through
-----------------
Certificate is registered in the register for Pass Through Certificates of a
particular series.
"Claims" shall mean any and all costs, expenses, liabilities, obligations,
------
losses, damages, penalties, actions or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability
or liability in tort), including, without limitation, all
3
<PAGE>
reasonable out-of-pocket costs, disbursements and expenses (including legal fees
and expenses) paid or incurred in connection therewith or related thereto.
"Closing" shall have the meaning assigned thereto in Section 2.3(b) of the
-------
Participation Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral Agent" shall have the meaning assigned thereto in the
----------------
Intercreditor Agreement.
"Collection Account" shall have the meaning assigned thereto in the
------------------
Intercreditor Agreement.
"Company" or "Lessee" shall mean General American Railcar Corporation II, a
------- ------
Delaware corporation.
"Company Documents" shall have the meaning assigned thereto in the
-----------------
Intercreditor Agreement.
"Company Fleet" shall mean, collectively, the Equipment [and the
-------------
"Equipment" under the Other Leases].
"Contiguous United States" shall mean the continental United States (except
------------------------
Alaska).
"Credit Bankrupt" shall mean a Person which is subject to any bankruptcy or
---------------
insolvency proceeding, for reasons other than the occurrence of an extraordinary
adverse event or circumstance which has led such Person to seek protection from
its creditors, or is not paying its debts as they become due.
"Customer" shall have the meaning assigned thereto in the first recital
--------
clause of the Management Agreement.
"Debt Rate" shall mean an interest rate equal to ____% per annum (computed
---------
on the basis of a 360-day year of twelve 30-day months).
"Default Interest" shall mean interest on any amount of the Rated
----------------
Amortization Amount of, or Regular Interest on, Equipment Notes that was not
paid when such amount became due and payable.
"Default Rate" shall mean the lesser of [1.5]% over the Debt Rate and the
------------
maximum interest rate from time to time permitted by law.
4
<PAGE>
"Determination Date" shall mean a Payment Date.
------------------
"Early Purchase Date" shall mean the early purchase date specified on
-------------------
Schedule 6 to the Participation Agreement.
"Early Purchase Price" shall mean, with respect to any Unit, the amount
--------------------
equal to the product of the percentage set forth in Schedule 6 to the
Participation Agreement and the Equipment Cost for such Unit. Notwithstanding
anything to the contrary contained in the Lease or in the Participation
Agreement, the Early Purchase Price for such Unit (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) will, under
any circumstances and in any event, be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with its
exercise of the option under Section 22.1 of the Lease, will be at least
sufficient to pay in full as of the Early Purchase Date the Accumulated Equity
Deficiency Amount, the aggregate unpaid principal of the Equipment Notes issued
in respect of such Unit, together with all unpaid interest, Late Payment Premium
and Make-Whole Amount, if any, thereon accrued to the date on which such amount
is paid in accordance with the terms hereof and all other amounts then due to
the holders of the Equipment Notes in respect of such Unit.
"Eligible Group" shall mean a number and type of Units which, after the
--------------
purchase by the Lessee of such Units, will (i) leave no fewer than 800 Equipment
Units (as defined in the Intercreditor Agreement) subject to this Lease or Other
Leases, and (ii) result in an allocation of Equipment Units (as defined in the
Intercreditor Agreement) substantially similar to the allocation of Equipment
Units (as defined in the Intercreditor Agreement) immediately prior to the
purchase of such Units by the Lessee.
"Equipment" shall mean, collectively, those items of railroad rolling stock
---------
described in the Lease Supplements and the Indenture Supplements, together with
any and all accessions, additions, improvements to and replacements from time to
time incorporated or installed in any item thereof which are the property of the
Owner Trustee pursuant to the terms of a Bill of Sale or the Lease.
"Equipment Cost" shall mean, for each Unit, the purchase price therefor
--------------
paid by the Owner Trustee to the Lessee pursuant to Section 2 of the
Participation Agreement and as set forth in Schedule 1 to the Participation
Agreement with respect to such Unit. Notwithstanding anything to the contrary
contained in the Operative Agreements, the Equipment Cost for any Replacement
Unit shall be deemed to be the Equipment Cost or deemed Equipment Cost of the
Unit replaced by such Replacement Unit.
5
<PAGE>
"Equipment Notes" shall mean the Equipment Notes, each substantially in the
---------------
form set forth in Section 2.1 of the Indenture, issued by the Owner Trustee
pursuant to Section 2.2 of the Indenture, and authenticated by the Indenture
Trustee, in principal amounts, maturities and bearing interest at the rates and
payable as provided in Section 2.2 of the Indenture and secured as provided in
the Granting Clause of the Indenture, and shall include any Equipment Note
issued in exchange therefor or replacement thereof pursuant to Section 2.7 or
2.8 of the Indenture.
"Equity Portion of Basic Rent" shall mean, at any Payment Date, the excess
----------------------------
of the amount of Basic Rent payable under the Lease on such Payment Date over
the Scheduled Amortization Amount payable under the Indenture on such Payment
Date.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor law.
"Event of Loss" shall have the meaning assigned thereto in Section 11.1 of
-------------
the Lease.
"Excepted Property" shall mean (i) all indemnity payments (including,
-----------------
without limitation, payments pursuant to Section 7 of the Participation
Agreement, payments under the Tax Indemnity Agreement and payments pursuant to
Section [5.04 of the Intercreditor Agreement]) to which the Owner Participant,
the Owner Trustee, in its individual capacity, or any of their respective
successors, permitted assigns, directors, officers, employees, servants and
agents is entitled pursuant to the Operative Agreements, (ii) any right, title
or interest of the Owner Trustee, in its individual capacity, or the Owner
Participant to any payment which by the terms of Section 17 of the Lease or any
corresponding payment under Section 3.3 of the Lease shall be payable to or on
behalf of the Owner Trustee, in its individual capacity, or to the Owner
Participant, as the case may be, (iii) any insurance proceeds payable under
insurance maintained by the Owner Trustee, in its individual capacity, or the
Owner Participant pursuant to Section 12.5 of the Lease, (iv) any insurance
proceeds payable to or on behalf of the Owner Trustee, in its individual
capacity, or to the Owner Participant, under any public liability insurance
maintained by the Lessee pursuant to Section 12 of the Lease (which shall
include the amount of any self-insured retention paid by the Lessee) or by any
other Person, (v) Transaction Costs or other amounts or expenses paid or payable
to, or for the benefit of the Owner Trustee, in its individual capacity, or the
Owner Participant pursuant to the Participation Agreement or the Trust
Agreement, (vi) all right, title and interest of the Owner Participant or the
Owner Trustee, in its individual capacity, in or relating to any portion of the
Units and any other property (tangible or intangible), rights, titles or
interests to the extent any of the foregoing has been released from the Lien of
the Indenture pursuant to the terms thereof, (vii) upon termination of the
Indenture pursuant to the terms thereof with respect to any Unit, all remaining
amounts which shall have been paid or are payable by the Lessee and calculated
on the basis of Stipulated Loss Value, (viii) any rights of the Owner
Participant or the Owner Trustee, in its individual capacity, to demand,
collect, sue for, or otherwise receive and enforce payment of the foregoing
amounts, (ix) any amount payable to the Owner Participant by any Transferee as
the purchase price of the Owner Participant's interest in the Trust Estate in
compliance with the terms of the
6
<PAGE>
Participation Agreement and the Trust Agreement and (x) the respective rights of
the Owner Trustee, in its individual capacity, or the Owner Participant to the
proceeds of and interest on the foregoing.
"Excepted Rights" shall have the meaning assigned thereto in Section 5.11
---------------
of the Indenture.
"Excluded Unit" shall mean, at any Payment Date, any Unit (i) for which the
-------------
applicable Lease is to be terminated pursuant to Section 10 of the Lease on such
Payment Date, (ii) which suffers an Event of Loss or a deemed Event of Loss
under Section 9.1 of the Lease and is not replaced pursuant to Section 11.2(i)
prior to or on such Payment Date, or (iii) which is to be purchased by the
Lessee pursuant to Section 6.9 of the Participation Agreement or Section 22.1 of
the Lease, as the case may be, on such Payment Date; provided that the principal
amount of the Equipment Note or Notes which corresponds to the Equipment Cost of
such Unit is to be prepaid in accordance with Section 2.10 of the Indenture on
such Payment Date.
"Existing Car Service Contracts" shall have the meaning assigned thereto in
------------------------------
the fourth recital clause of the Participation Agreement.
"Extended Unit" shall have the meaning assigned thereto in Section 22.7 of
-------------
the Lease.
"Fair Market Rental Value" or "Fair Market Sales Value" with respect to any
------------------------ -----------------------
Unit, shall mean the cash rent or cash price obtainable for such Unit in an
arm's length lease or sale between an informed and willing lessee or purchaser
under no compulsion to lease or purchase, as the case may be, and an informed
and willing lessor or seller, under no compulsion to lease or sell, as the case
may be, as the same shall be specified by agreement between the Lessor and the
Lessee. If the parties are unable to agree upon a Fair Market Rental Value
and/or a Fair Market Sales Value within 30 days after delivery of notice by the
Lessee pursuant to Section 22.2 of the Lease, or otherwise where such
determination is required, within a reasonable period of time, such value shall
be determined by appraisal. The Lessee will, within 15 days after such 30-day
period, provide the Lessor with the name of an appraiser that would be
satisfactory to the Lessee, and the Lessor and the Lessee shall consult with
each other with the intent of selecting a mutually acceptable appraiser. If a
mutually acceptable appraiser is selected, the Fair Market Rental Value or the
Fair Market Sales Value, as the case may be, shall be determined by such
appraiser, and the Lessee shall bear the cost thereof. If the Lessee and the
Lessor are unable to agree upon a single appraiser within such 15-day period,
two independent qualified appraisers, one chosen by the Lessee and one chosen by
the Lessor shall jointly determine such value, and the Lessor shall bear the
cost of the appraiser selected by the Lessor, and the Lessee shall bear the cost
of the appraiser selected by the Lessee. If such appraisers cannot agree on the
amount of such value within 15 days of appointment, one independent qualified
appraiser shall be chosen by the American Arbitration Association. All three
appraisers shall make a determination within a period of 15 days following
appointment, and shall promptly communicate such determination in writing to the
Lessor and the Lessee. If there shall be a panel of three appraisers, the three
appraisals shall be averaged, and such average shall be the Fair Market Rental
Value or Fair
7
<PAGE>
Market Sales Value, as the case may be. The determination made shall be
conclusively binding on both the Lessor and the Lessee. If there shall be a
panel of three appraisers, the Lessee and the Lessor shall equally share the
cost of the third appraiser. If such appraisal is pursuant to Section 6.1(e) of
the Lease or is in connection with the exercise of remedies set forth in Section
15 of the Lease, the Lessee shall pay the costs of such appraisal.
Notwithstanding any of the foregoing, for the purposes of Section 15 of the
Lease, the Fair Market Rental Value or the Fair Market Sales Value, as the case
may be, shall be zero with respect to any Unit if the Lessor is unable to
recover possession of such Unit in accordance with the terms of paragraph (b) of
Section 15.1 of the Lease.
"FRA" shall mean the Federal Railroad Administration or any successor
---
thereto.
"Functional Group" shall mean each and all of the various groups of Units
----------------
so designated in Schedule 1 to the Participation Agreement.
"GATC" shall mean General American Transportation Corporation, a New York
----
corporation.
"GATC Assignment" shall mean the assignment by GATC to the Lessee of the
---------------
Existing Car Service Contracts on the Closing Date.
"GATC Bill of Sale" shall mean the Bill of Sale, dated the Closing Date and
-----------------
executed and delivered by GATC pursuant to the Transfer and Contribution
Agreement, conveying the Equipment to the Lessee.
"Hazardous Substances" shall mean any hazardous or toxic substances,
--------------------
materials or wastes, including, but not limited to, those substances, materials,
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR (S) 172.101) or by the Environmental Protection Agency
as hazardous substances (40 CFR (S) 302.4), or such substances, materials and
wastes which are or become regulated under any applicable local, state or
federal law or the equivalent under applicable foreign laws including, without
limitation, any materials, waste or substance which is (a) petroleum, (b)
asbestos, (c) polychlorinated biphenyls, (d) defined as a "hazardous material,"
"hazardous substance" or "hazardous waste" under applicable local, state or
federal law or the equivalent under applicable foreign laws, (e) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act of 1977,
(f) defined as "hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act of 1976, or (g) defined as "hazardous substances"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
"Incentive Component" shall have the meaning assigned thereto in Section
-------------------
5.3 of the Management Agreement.
"Indemnified Person" shall have the meaning assigned thereto in Section
------------------
7.2(b) of the Participation Agreement.
8
<PAGE>
"Indenture" or "Trust Indenture" shall mean the Trust Indenture and
--------- ---------------
Security Agreement (1998-1), dated as of August 1, 1998 between the Owner
Trustee, in the capacities described therein, and the Indenture Trustee. The
term "Indenture" shall include, except where the context otherwise requires,
---------
each Indenture Supplement entered into pursuant to the terms of the Indenture.
"Indenture Default" shall mean an Indenture Event of Default or an event
-----------------
which, with notice or the passage of time or both, would become an Indenture
Event of Default.
"Indenture Estate" shall have the meaning assigned thereto in the Granting
----------------
Clause of the Indenture.
"Indenture Event of Default" shall have the meaning assigned thereto in
--------------------------
Section 4.1 of the Indenture.
"Indenture Investment" shall mean any obligation issued or guaranteed by
--------------------
the United States of America or any of its agencies for the payment of which the
full faith and credit of the United States of America is pledged and with a
final maturity on or before the date which is the earlier of (a) ninety days
from the date of purchase thereof and (b) the first Payment Date occurring after
the date of purchase thereof.
"Indenture Supplement" shall mean an Indenture Supplement (1998-1) dated
--------------------
the Closing Date or the date that any Replacement Unit is subjected to the Lien
of the Indenture, substantially in the form of Exhibit A to the Indenture,
between the Owner Trustee, in the capacities described therein, and the
Indenture Trustee, covering the Units delivered on the Closing Date or such
Replacement Unit, as the case may be. A "related" Indenture Supplement, when
-------
used with respect to any Unit or Units, shall mean the Indenture Supplement
under which such Unit or Units is or are included in the Indenture Estate.
"Indenture Trustee" shall mean The First National Bank of Chicago, a
-----------------
national banking association, as trustee under the Indenture and any successor
institution.
"Indenture Trustee Agreements" shall mean the Operative Agreements to which
----------------------------
the Indenture Trustee is or will be a party.
"Inflation Factor" means, with respect to any calendar year, the quotient
----------------
(expressed as a decimal) obtained by dividing (i) the PPI published in respect
of the most recently ended calendar year (the "New Year"), by (ii) the PPI
published in respect of the calendar year immediately preceding the New Year.
"PPI", for purposes hereof, means, with respect to any calendar year or any
---
period during any calendar year, the "Producer Price Index" applicable to the
capital equipment sector as published by the Bureau of Labor Statistics for the
United States Department of Labor. If the PPI shall be converted to a different
standard reference base or otherwise revised after the date hereof, PPI shall
thereafter be calculated with use of such new or
9
<PAGE>
revised statistical measure published by the Bureau of Labor Statistics or, if
not so published, as may be published by any other reputable publisher of such
price index selected by the Manager.
"Initial Manager" shall mean GATC.
---------------
"Insurance Agreement" shall mean the Insurance Agreement dated as of August
-------------------
1, 1998 between the Lessee and GATC.
"Insurance Letter" shall mean that certain letter dated August __, 1998
----------------
(1998-1) from the Lessee and the Manager to the Owner Trustee, which contains
the acknowledgment and consent of the Owner Participant, the Pass Through
Trustee and the Indenture Trustee.
"Insurance Manager" shall have the meaning assigned thereto in the
-----------------
Insurance Agreement.
"Interchange Rules" shall mean the interchange rules or supplements thereto
-----------------
of the AAR, as the same may be in effect from time to time.
"Intercreditor Agreement" shall mean the Collateral Agency and
-----------------------
Intercreditor Agreement dated as of August 1, 1998 among the Lessee, the
Collateral Agent, the Owner Trustee, the Indenture Trustee, GATC, as Manager,
GATC, as Insurance Manager and certain other Persons.
"Investment Banker" shall mean an independent investment banking
-----------------
institution of national standing appointed by the Lessee or, if the Indenture
Trustee does not receive notice of such appointment at least ten days prior to a
scheduled prepayment date or if a Lease Event of Default under the Lease shall
have occurred and be continuing, appointed by the Indenture Trustee.
"Late Payment Interest" shall mean (i) in the case of the Accumulated
---------------------
Equity Deficiency Amount, interest at the Late Rate, (ii) in the case of that
portion of any overdue payment of Stipulated Loss Value or Termination Value
that is in excess of the principal amount of the Equipment Notes then
outstanding and which are allocated to the Units with respect to which such
payment is made, interest at the Late Rate, (iii) in the case of a portion of
overdue Basic Rent equal to any Payment Deficiency, interest at a rate equal to
the sum of the Debt Rate and the rate specified in the definition of "Late
Payment Premium," (iv) in the case of any interest referred to in clause (iii)
of this definition or any Late Payment Premium that is overdue, interest at the
rate specified in the definition of "Late Payment Premium," and (v) in respect
of any other overdue amount, including, without limitation, in the case of the
Equipment Notes and Basic Rent in respect thereof, interest at the Default Rate.
"Late Payment Premium" shall mean, with respect to any Payment Deficiency
--------------------
to which a Late Payment Premium is payable on a Payment Date, an amount of
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the Payment Deficiency, for the period
10
<PAGE>
from and including the Payment Date immediately preceding such Payment Date to
but excluding such Payment Date, at a rate equal to 1.5% per annum.
"Late Rate" shall mean an interest rate per annum equal to the Debt Rate
---------
plus 1.5% per annum.
"Lease" or "Lease Agreement" or "Equipment Lease" shall mean the Equipment
----- --------------- ---------------
Lease Agreement (1998-1), relating to the Equipment, dated as of August 1, 1998,
between the Owner Trustee, in the capacities described therein, as Lessor, and
the Lessee. The term "Lease" shall, except where the context otherwise
-----
requires, include each Lease Supplement entered into pursuant to the terms of
the Lease.
"Lease Default" shall mean a Lease Event of Default or an event which, with
-------------
notice or passage of time or both, would become a Lease Event of Default.
"Lease Event of Default" shall have the meaning assigned thereto in Section
----------------------
14 of the Lease.
"Lease Supplement" shall mean a Lease Supplement (1998-1), dated the
----------------
Closing Date or the date that any Replacement Unit is subjected to the Lease,
substantially in the form of Exhibit A to the Lease, between the Lessor and the
Lessee, covering the Units delivered on the Closing Date or such Replacement
Unit, as the case may be. A "related" Lease Supplement, when used with respect
-------
to any Unit or Units, shall mean the Lease Supplement under which such Unit or
Units is or are leased.
"Lease Term" shall mean, with respect to any Unit, the Basic Term
----------
applicable to such Unit and any Renewal Term applicable to such Unit then in
effect.
"Lessee Agreements" shall mean the Operative Agreements to which the Lessee
-----------------
is or will be a party.
"Lessor" shall have the meaning assigned thereto in the recitals to the
------
Lease.
"Lessor's Lien" means any Lien affecting, on or in respect of, the
-------------
Equipment, the Lease or any other part of the Trust Estate arising as a result
of (i) claims against the Lessor (in its individual capacity or as Owner
Trustee) or the Owner Participant, in each case unrelated to the transactions
contemplated by the Operative Agreements, or (ii) acts or omissions of the
Lessor (in its individual capacity or as Owner Trustee) or the Owner
Participant, in each case unrelated to the transactions contemplated by the
Operative Agreements or in breach of any covenant or agreement of such Person
set forth in any of the Operative Agreements, or (iii) taxes imposed against the
Lessor (in its individual capacity or as Owner Trustee) or the Owner Participant
or the Trust Estate which are not required to be indemnified against by the
Lessee pursuant to the Participation Agreement or under the Tax Indemnity
Agreement.
11
<PAGE>
"Lien" shall mean any mortgage, pledge, security interest, lien,
----
encumbrance, lease, disposition of title or other charge of any kind on
property.
"Limited Use Property" shall have the meaning set forth in Rev. Proc. 76-
--------------------
30, 1976-2 C.B. 647.
"Loan Participant" shall mean and include each registered holder from time
----------------
to time of an Equipment Note issued under the Indenture, including, so long as
it holds any Equipment Notes issued thereunder, the Pass Through Trustee under
the Pass Through Trust Agreement.
"Loan Participant's Commitment" shall have the meaning assigned thereto in
-----------------------------
Section 2.2(b) of the Participation Agreement.
"Lockbox" shall have the meaning assigned thereto in Section 6.2(a) of the
-------
Management Agreement.
"Lockbox Agreement" shall mean the agreement by and between GATC, as
-----------------
Trustee for itself, individually, General American Railcar Corporation II, and
the Lockbox Bank.
"Lockbox Bank" shall have the meaning assigned thereto in Section 6.2(a) of
------------
the Management Agreement.
"Majority In Interest" shall mean, as of a particular date of determination
--------------------
and with respect to any action or decision of the holders of the Equipment
Notes, the holders of more than 50% of the aggregate unpaid principal amount of
the Equipment Notes, if any, then outstanding which are affected by such
decision or action, excluding any Equipment Notes held by the Owner Participant
or the Lessee or an Affiliate of the Owner Participant or the Lessee unless all
Equipment Notes are so held.
"Make-Whole Amount" shall mean, with respect to the principal amount of any
-----------------
Equipment Note to be prepaid on any prepayment date, the amount which the
Investment Banker determines as of the third Business Day prior to such
prepayment date to equal the product obtained by multiplying (a) the excess, if
any, of (i) the sum of the present values of all the remaining scheduled
payments of principal and interest, based upon Scheduled Amortization, from the
prepayment date to the Scheduled Maturity Date of such Equipment Note,
discounted monthly on the day of each month at a rate equal to the Treasury Rate
plus [.15]%, based upon a 360-day year of twelve 30-day months, over (ii) the
aggregate unpaid principal amount of such Equipment Note , based upon Scheduled
Amortization, plus any accrued but unpaid interest thereon by (b) a fraction,
the numerator of which shall be the aggregate unpaid principal amount of such
Equipment Note to be prepaid on such prepayment date and the denominator of
which shall be the aggregate unpaid principal amount of such Equipment Note;
provided that the aggregate unpaid principal amount of such Equipment Note for
- --------
the purpose of clause (a)(ii) and (b) of this definition shall be determined
after deducting the principal installment, if any, due on such prepayment date.
12
<PAGE>
"Management Agreement" shall mean the Operation, Maintenance, Servicing and
--------------------
Remarketing Agreement dated as of August 1, 1998 between the Company and the
Manager.
"Management Fee" shall have the meaning assigned thereto in Section 5.1 of
--------------
the Management Agreement.
"Manager" shall mean General American Transportation Corporation, a New
-------
York corporation, and any Successor Manager under the Management Agreement.
"Manager Agreements" shall mean the Operative Agreements to which the
------------------
Manager is or is to be a party.
"Manager's Cost" shall have the meaning assigned thereto in Section 5.4(a)
--------------
of the Management Agreement.
"Manager's Fleet" shall have the meaning assigned thereto in Section 2.2(j)
---------------
of the Management Agreement.
"Marks Company" shall have the meaning assigned thereto in Section 6.4 of
-------------
the Management Agreement.
"Minimum Units" shall mean 100 Units (or, if less than 100 Units are then
-------------
subject to the Lease or being stored pursuant to the terms of the Lease, all
Units).
"Modification" shall have the meaning assigned thereto in Section 9.2 of
------------
the Lease.
"Net Economic Return" shall mean the anticipated net after-tax yield and
-------------------
total after-tax cash flow expected by the original Owner Participant with
respect to the Equipment (both through the Early Purchase Date and the Basic
Term Expiration Date), utilizing the multiple investment sinking fund method of
analysis and the same assumptions as used by such Owner Participant in making
the computations of Basic Rent, Stipulated Loss Value and Termination Value,
terms of Equipment Notes and Early Purchase Price initially set forth in
Schedules 3, 4, 5 and 6 to the Participation Agreement.
"Non-Shared Payments Account" shall be the Account specified in Section 3.1
---------------------------
of the Intercreditor Agreement.
"Non-Severable Modification" shall mean any Modification that is not
--------------------------
readily removable without impairing, other than in a de minimis respect, the
----------
value, utility or remaining useful life of the Equipment or any Unit immediately
prior to removal of such modification.
13
<PAGE>
"Notice of Delivery" shall have the meaning assigned thereto in Section
------------------
2.3(a) of the Participation Agreement.
"Officer's Certificate" shall mean a certificate signed (i) in the case of
---------------------
a corporation, by the President, any Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership, by the Chairman of the Board, the President or any
Vice President, the Treasurer or an Assistant Treasurer of a corporate general
partner, (iii) in the case of a commercial bank or trust company, by the
Chairman or Vice Chairman of the Executive Committee or the Treasurer, any Trust
Officer, any Vice President, any Executive or Senior or Second or Assistant Vice
President, or any other officer or assistant officer customarily performing the
functions similar to those performed by the persons who at the time shall be
such officers, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject, and (iv) in the case
of a limited liability company, any manager thereof and any President, Managing
Director or Vice President thereof.
"Operative Agreements" shall mean the Transfer and Contribution Agreement,
--------------------
the GATC Bill of Sale, the Participation Agreement, the Bill of Sale, the Trust
Agreement, the Pass Through Trust Agreement, the Pass Through Trust Supplements,
the Pass Through Certificates, the Equipment Notes, the Lease, the Lease
Supplements, the Indenture, the Indenture Supplements, the Tax Indemnity
Agreement, the Intercreditor Agreement, the Purchase Agreement, the Management
Agreement, the Insurance Agreement, the Insurance Letter and the Lockbox
Agreement.
["Other Leases" means (i) the Equipment Lease Agreement (1998-2) dated as
------------
of August 1, 1998 between the Lessee and [Owner Trustee], not in its individual
capacity but solely as Owner Trustee under a Trust Agreement dated as of
[_________], 1998 with [______________________], and (ii) the Equipment Lease
Agreement (1998-3) dated as of August 1, 1998 between the Lessee and [Owner
Trustee], not in its individual capacity but solely as Owner Trustee under a
Trust Agreement dated as of [_____________], 1998 with [__________________].
"Outside Renewal Date" shall have the meaning assigned thereto in Section
--------------------
22.5 of the Lease.
"Owner Participant" shall mean [Owner Participant], a [__________________],
-----------------
and its successors and permitted assigns.
"Owner Participant Agreements" shall mean the Operative Agreements to which
----------------------------
the Owner Participant is or will be a party.
["Owner Participant Parent Guarantee" shall mean that certain Guarantee
----------------------------------
(1998-1) dated as of August 1, 1998 executed by [Owner Participant Parent] in
favor of the Lessee, GATC, the Owner Trustee, the Indenture Trustee and the Pass
Through Trustee.]
14
<PAGE>
"Owner Participant's Commitment" shall have the meaning assigned thereto in
------------------------------
Section 2.2(a) of the Participation Agreement.
"Owner Trustee" shall mean [Owner Trustee,] not in its individual capacity
-------------
but solely as Owner Trustee under the Trust Agreement and its successors
thereunder.
"Owner Trustee Agreements" shall mean the Operative Agreements to which the
------------------------
Owner Trustee, either in its individual or fiduciary capacity, is or will be a
party.
["Owner Trustee Parent Guarantee" shall mean that certain Guarantee (1998-
------------------------------
1) dated as of August 1, 1998 executed by Owner Trustee Parent, in favor of the
Lessee, GATC, the Owner Participant, the Indenture Trustee and the Pass Through
Trustee.]
"Parent" means GATX Corporation, a New York corporation.
------
"Participants" shall mean, collectively, the Loan Participant and the Owner
------------
Participant.
"Participation Agreement" shall mean the Participation Agreement (1998-1)
-----------------------
dated as of August 1, 1998, among the Lessee, the Manager, the Pass Through
Trustee, the Owner Participant, the Owner Trustee and the Indenture Trustee.
"Pass Through Certificates" or "Certificates" shall mean the Pass Through
------------------------- ------------
Certificates issued pursuant to each of the Pass Through Trust Supplements and
the Pass Through Trust Agreement.
"Pass Through Trust Agreement" shall mean the Pass Through Trust Agreement,
----------------------------
dated as of August 1, 1998, between the Lessee and the Pass Through Trustee.
"Pass Through Trust Estate" shall mean the Trust (as defined in the Pass
-------------------------
Through Trust Agreement) created by the Pass Through Trust Supplement.
"Pass Through Trust Supplement" shall mean Trust Supplement No. 1 dated
-----------------------------
______________, 1998 between the Lessee and the Pass Through Trustee, which
supplements the Pass Through Trust Agreement (i) by creating a separate trust
for the holders of certain Pass Through Certificates, (ii) by authorizing the
issuance of such Pass Through Certificates and (iii) by establishing the terms
of such Pass Through Certificates.
"Pass Through Trustee" shall mean The First National Bank of Chicago, in
--------------------
its capacity as trustee under the Pass Through Trust Agreement, as supplemented
by the Pass Through Trust Supplements, and each other Person which may from time
to time act as successor trustee under the Pass Through Trust Agreement, as
supplemented by the Pass Through Trust Supplement.
"Pass Through Trustee Agreements" shall mean the Operative Agreements to
-------------------------------
which the Pass Through Trustee is or will be a party.
15
<PAGE>
"Payment Account" shall have the meaning assigned thereto in Section 6.4(c)
---------------
of the Indenture.
"Payment Date" shall mean the __ day of each month through and including
------------
the Rated Maturity Date, commencing ___________, 1998, provided that if any such
date shall not be a Business Day, then "Payment Date" shall mean the next
------------
succeeding Business Day; provided, however, that interest and Late Payment
-------- -------
Premium payable on such Payment Date, and all other calculations as of such
Payment Date, shall be computed as of the date which would have been a Payment
Date if such date were a Business Day.
"Payment Deficiency" shall have the meaning assigned thereto in Section 2.2
------------------
of the Indenture.
"Permitted Liens" shall mean: (i) the interests of the Lessee and the
---------------
Owner Trustee under the Lease and the Lease Supplements; (ii) the interest of
the Lessee and any sublessee as provided in any Permitted Sublease; (iii) any
Liens for taxes, assessments, levies, fees and other governmental and similar
charges not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings so long as there exists no
material risk of sale, forfeiture, loss, or loss of or interference with use or
possession of any Unit or interference with the payment of Rent; (iv) any Liens
of mechanics, suppliers, materialmen, laborers, employees, repairmen and other
like Liens arising in the ordinary course of Lessee's (or if a sublease is then
in effect, any sublessee's) business securing obligations which are not yet due
and payable or the amount or validity of which is being contested in good faith
by appropriate proceedings so long as there exists no material risk of sale,
forfeiture, loss, or loss of or interference with use or possession of any Unit
or interference with the payment of Rent; (v) the Lien granted to the Indenture
Trustee under and pursuant to the Indenture, and the respective rights of the
Loan Participant, the Indenture Trustee, the Owner Participant and the Owner
Trustee under the Operative Agreements; (vi) Liens arising out of any judgment
or award against the Lessee (or any sublessee permitted pursuant to Section 8.3
of the Lease) with respect to which an appeal or proceeding for review is being
presented in good faith and for the payment of which adequate reserves have been
provided as required by generally accepted accounting principles or other
appropriate provisions have been made and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding for review
and there exists no material risk of sale, forfeiture, loss, or loss of or
interference with the use or possession of any Unit or any interest therein or
interference with the payment of Rent, and (vii) salvage rights of insurers
under insurance policies maintained pursuant to Section 12 of the Lease.
"Permitted Subleases" shall have the meaning assigned thereto in Section
-------------------
8.3 of the Lease.
"Person" shall mean an individual, partnership, limited liability company,
------
corporation, trust, association or unincorporated organization, and a government
or agency or political subdivision thereof.
16
<PAGE>
"Premium" shall mean any Make-Whole Amount and any Late Payment Premium
-------
payable pursuant to the Indenture.
"Prepaid Amount" shall mean, at any Payment Date, the aggregate principal
--------------
amount that was prepaid, if any, pursuant to Section 2.10 of the Indenture prior
to and including such Payment Date.
"Prepayment" shall mean a prepayment of outstanding principal under the
----------
Equipment Notes in accordance with Section 2.10 of the Indenture at any Payment
Date.
"Prepayment Multiplier" shall mean, at any Payment Date, a fraction, the
---------------------
numerator of which shall be the aggregate Equipment Cost of all Units then
included in the Indenture Estate as of such Payment Date (excluding the
Equipment Cost of any Excluded Unit) and the denominator of which shall be the
aggregate Equipment Cost of all Units originally included in the Indenture
Estate as of the Closing Date.
"Pricing Date" shall mean the date on which the Purchase Agreement is
------------
executed and delivered by the Lessee and the Underwriters.
"Projected Coverage Ratio" as of any Calculation Date (as defined in the
------------------------
Intercreditor Agreement), shall mean the ratio of (i) the sum of projected
Available Amounts (as defined in the Intercreditor Agreement) for the six-month
period immediately succeeding such Calculation Date to (ii) the sum of Basic
Rent due or to become due and payable on the six consecutive Rent Payment Dates
which occur following such Calculation Date, as such amounts are certified to by
an officer's certificate signed by an authorized representative of each of the
Company and the Manager.
"Prospectus" shall mean the Prospectus dated August __, 1998 relating to
----------
the offering of the Pass Through Certificates.
"Rated Amortization" shall mean the amount of principal of the Equipment
------------------
Notes specified for each Payment Date set forth in Annex A to the Indenture.
"Rated Amortization Amount" shall mean, at any Payment Date, the excess, if
-------------------------
any, of (i) the product of (A) the sum of all amounts specified in Annex A to
the Indenture as Rated Amortization opposite the respective dates occurring on
or before such Payment Date and (B) the Prepayment Multiplier, over (ii) the sum
of the Adjusted Payment Amount for each Adjusted Principal Period prior to such
Payment Date.
"Rated Maturity Date" shall mean ____________, 20__.
-------------------
17
<PAGE>
"Rated Obligations Due" shall mean, at any Payment Date, the sum of (a) the
---------------------
Rated Amortization Amount at such Payment Date plus (b) accrued and unpaid
----
Regular Interest that is due and payable on such Payment Date (computed on the
basis of [a 360-day year of twelve 30-day months]).
"Rating Agencies" shall mean, at any time, Standard & Poor's Ratings Group,
---------------
a division of McGraw Hill, Inc. and Moody's Investors Service, Inc., or any
successor to any such corporation's business of rating securities which is then
providing a rating for the Pass Through Certificates.
"Refunding Date" shall have the meaning assigned thereto in Section 10.2(a)
--------------
of the Participation Agreement.
"Regular Interest" shall mean interest on the unpaid portions of the
----------------
principal amounts of the outstanding Equipment Notes (computed on the basis of
[a 360-day year of twelve 30-day months]).
"Reimbursable Services" shall have the meaning assigned thereto in Section
---------------------
5.4 of the Management Agreement.
"Related Indemnitee Group" shall have the meaning assigned thereto in
------------------------
Section 7.2(b) of the Participation Agreement.
["Related Transactions" shall mean the additional leveraged lease
--------------------
transactions evidenced by the Other Leases and with respect to which the Pass
Through Trustee has agreed to acquire the related equipment notes.]
"Remaining Weighted Average Life" shall mean, with respect to any date of
-------------------------------
prepayment or any date of determination of any Equipment Note, the number of
days equal to the quotient obtained by dividing (a) the sum of the products
obtained by multiplying (i) the amount of each then remaining principal payment
on such Equipment Note (assuming that after such date, principal payments are
made only in the Scheduled Amortization Amounts) by (ii) the number of days
from and including the prepayment date or date of determination to but excluding
the scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note.
"Renewal Term" shall mean, with respect to any Unit, any term in respect of
------------
which the Lessee shall have exercised its option to renew the Lease for such
Unit pursuant to Section 22.4 thereof, [including any Fixed Rate Renewal Term]
or in respect of which the Lease Term has been deemed to have been renewed as
provided in Section 22.7 of the Lease.
"Rent" shall mean all Basic Rent and Supplemental Rent.
----
18
<PAGE>
"Rent Payment Date" or "Payment Date" shall mean the [__] day of each month
----------------- ------------
occurring during the Lease Term, commencing [_____________], 1998, provided that
if any such date shall not be a Business Day, then "Rent Payment Date" or
"Payment Date" shall mean the next succeeding Business Day.
"Replacement Unit" shall mean a covered hopper car or tank car, as the case
----------------
may be, which shall have been leased under the Lease pursuant to Section 11.4 of
the Lease.
"Required Modification" shall have the meaning assigned thereto in Section
---------------------
9.1 of the Lease.
"Responsible Officer" shall mean, with respect to the subject matter of any
-------------------
covenant, agreement or obligation of any party contained in any Operative
Agreement, the President, or any Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer or other officer, who in the normal performance
of his or her operational responsibility would have knowledge of such matter and
the requirements with respect thereto; and when used in connection with the
Lessee, "Responsible Officer" shall include any such officer of the Manager or
the Insurance Manager acting on behalf of the Lessee under the Management
Agreement or the Insurance Agreement, as the case may be.
"Scheduled Amortization" shall mean the amount of principal of the
----------------------
Equipment Notes specified for each Payment Date set forth in Annex B to the
Indenture.
"Scheduled Amortization Amount" shall mean, at any Payment Date, the
-----------------------------
excess, if any, of (i) the product of (A) the sum of all amounts specified in
Annex B to the Indenture as Scheduled Amortization opposite the respective dates
occurring on or before such Payment Date and (B) the Prepayment Multiplier, over
(ii) the sum of the Adjusted Payment Amount for each Adjusted Principal Period
prior to such Payment Date.
"Scheduled Obligations Due" shall mean, at any date, an amount equal to the
-------------------------
excess, if any, of (i) the Scheduled Amortization Amount at such date over (ii)
the Rated Amortization Amount at such date.
"Scheduled Closing Date" shall have the meaning assigned thereto in Section
----------------------
2.7(b) of the Participation Agreement.
"Security" shall have the meaning assigned thereto in Section 2(1) of the
--------
Securities Act of 1933, as amended.
"Services Standard" shall have the meaning assigned thereto in Section 2.2
-----------------
of the Management Agreement.
"Servicing Agreement" shall mean the Management and Servicing Agreement
-------------------
dated as of [___________, 1998] between GATC and the Marks Company.
19
<PAGE>
"Severable Modification" shall mean any Modification that is readily
----------------------
removable without causing material damage to the Equipment or any Unit and
without diminishing, other than in a de minimis respect, the value, utility or
----------
useful life of such Unit below the value, utility or useful life of such Unit
immediately prior to such Modification, assuming that such Unit was then in the
condition required to be maintained by the terms of the Lease.
"Special Purchase Defeasance" shall mean, with respect to any election by
---------------------------
the Lessee to purchase Units under Section 22.1 or 22.3 of the Lease, the
deposit by the Lessee with the Indenture Trustee prior to the date as of which
the Lessor shall have declared the Lease to be in default as a result of a Lease
Event of Default under Section 14(c), 14(d), 14(e), 14(f) or 14(i) of the Lease
(in circumstances where such Lease Event of Default occurs after the date of the
Lessee's notice to purchase under Section 22.1 or 22.3 but before the Early
Purchase Date or the expiration of the Basic Term or any Renewal Term, as
applicable), of an amount sufficient to pay (i) the Early Purchase Price,
together with all other amounts due and owing by the Lessee under the Operative
Agreements, with respect to those Units which the Lessee has elected to purchase
on the Early Purchase Date under Section 22.1 of the Lease, or (ii) the Fair
Market Sales Value or Basic Term Purchase Price, together with all other amounts
due and owing by the Lessee under the Operative Agreements, with respect to
those Units which the Lessee has elected to purchase at the expiration of the
Basic Term or any Renewal Term, as applicable, under Section 22.3 of the Lease.
All amounts deposited by the Lessee with the Indenture Trustee in connection
with a Special Purchase Defeasance shall be held and invested by the Indenture
Trustee in accordance with Section 6.4(b) of the Indenture pending consummation
of the purchase of the related Units on the Early Purchase Date or upon the
expiration of the Basic Term or the related Renewal Term, as applicable.
"Specified Investments" (i) direct obligations of, and obligations fully
---------------------
guaranteed as to timely payment by, the United States of America (having
remaining maturities of no more than the number of remaining days until the next
Monthly Transfer Date), (ii) commercial paper (having remaining maturities of no
more than the number of days remaining until the next [Monthly Transfer Date]
having, at the time of the investment or contractual commitment to invest
therein, a rating from each Rating Agency in its highest investment category),
(iii) a Guaranteed Investment Contract (a "GIC") from an [Acceptable GIC]
---
provider, (iv) a GIC provided by GATX, provided that such obligations are
supported by an [Acceptable Letter of Credit], (v) investments in funds rated in
the highest investment category by each Rating Agency and (vi) repurchase
agreements and similar short term instruments.
"STB" shall mean the Surface Transportation Board of the United States
---
Department of Transportation, or any successor thereto.
"Stipulated Loss Value" for any Unit as of any date of determination shall
---------------------
mean the amount determined by multiplying the Equipment Cost for such Unit by
the percentage set forth in Schedule 4 to the Participation Agreement opposite
the Rent Payment Date on which such Stipulated Loss Value is being determined;
provided that during any Renewal Term, "Stipulated Loss Value" shall be
determined as provided in Section 22.6 of the Lease. Notwithstanding
20
<PAGE>
anything to the contrary contained in the Lease or in the Participation
Agreement, Stipulated Loss Value for such Unit (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) will, under
any circumstances and in any event, be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with an
Event of Loss, will be at least sufficient to pay in full as of the date of
payment thereof the aggregate unpaid principal of the Equipment Notes issued in
respect of such Unit, together with all unpaid interest, Late Payment Premium
and Make-Whole Amount, if any, thereon accrued to the date on which such amount
is paid in accordance with the terms hereof and all other amounts then due to
the holders of the Equipment Notes.
"Storage Period" shall have the meaning assigned thereto in Section
--------------
6.1(c)(i) of the Lease.
"Storage Period Commencement Date" shall have the meaning assigned thereto
--------------------------------
in Section 6.1(c)(i) of the Lease.
"Sublease Payments" shall mean all amounts paid or payable by or on behalf
-----------------
of, or credited to, the Company under, or in respect of, a Car Service Contract,
including, without limitation, all service charges, rentals, excess mileage
charges, delivery costs reimbursed by the Customer and cancellation or penalty
payments, as well as all amounts paid or payable by the Customer as
reimbursement, indemnity, fees or commissions, or on account of assumed
financial responsibility or liability or otherwise.
"Sublessees" shall mean the lessees under Permitted Subleases.
----------
"Subsidiary" of any Person shall mean any corporation, association, or
----------
other business entity of which more than 50% (as determined by reference to the
total number of votes) of the voting stock outstanding at the time of
determination shall at such time be owned, directly or indirectly, by such
Person or by any other corporation, association or trust which is itself a
Subsidiary within the meaning of this definition, or collectively by such Person
and any one or more such Subsidiaries.
"Successor Lockbox Trustee" shall have the meaning assigned thereto in
-------------------------
Section 6.3 of the Management Agreement.
"Successor Manager" shall have the meaning assigned thereto in Section 8.4
-----------------
of the Management Agreement.
"Super-Majority in Interest" as of a particular date of determination shall
--------------------------
mean with respect to any action or decision of the holders of the Equipment
Notes, the holders of 100% of the aggregate unpaid principal amount of the
Equipment Notes, if any, then outstanding, excluding any Equipment Notes held by
the Owner Participant or the Lessee or an Affiliate of the Owner Participant or
the Lessee.
21
<PAGE>
"Supplemental Rent" shall mean all amounts, liabilities and obligations
-----------------
(other than Basic Rent) which the Lessee is obligated to pay under the Operative
Agreements to or on behalf of any of the other parties thereto, including, but
not limited to, Termination Value and Stipulated Loss Value payments.
"Tax Indemnitee" shall have the meaning assigned thereto in Section 7.1 of
--------------
the Participation Agreement.
"Tax Indemnity Agreement" shall mean the Tax Indemnity Agreement (1998-1)
-----------------------
dated as of August 1, 1998 between GATC and the Owner Participant.
"Taxes" shall have the meaning assigned thereto in Section 7.1(b) of the
-----
Participation Agreement.
"Terminated Units" shall have the meaning assigned thereto in Section 10.1
----------------
of the Lease.
"Termination Date" shall have the meaning assigned thereto in Section 10.1
----------------
of the Lease.
"Termination Value" for any Unit as of any date of determination shall mean
-----------------
the amount determined by multiplying the Equipment Cost for such Unit by the
percentage set forth in Schedule 4 to the Participation Agreement opposite the
Rent Payment Date on which such Termination Value is being determined; provided
--------
that during any Renewal Term, "Termination Value" shall be determined as
provided in Section 22.6 of the Lease. Notwithstanding anything to the contrary
contained in the Lease or in the Participation Agreement, Termination Value for
such Unit (both before and after any adjustment pursuant to Section 2.6 of the
Participation Agreement) will, under any circumstances and in any event, be an
amount which, together with any other amounts required to be paid by the Lessee
under the Lease in connection with such termination, will be at least sufficient
to pay in full as of the date of payment thereof the aggregate unpaid principal
of the Equipment Notes issued in respect of such Unit, together with all unpaid
interest, Late Payment Premium and Make-Whole Amount, if any, thereon accrued to
the date on which such amount is paid in accordance with the terms thereof and
all other amounts then due to the holders of the Equipment Notes.
"Total Equipment Cost" shall mean the sum of the Equipment Costs for each
--------------------
Unit.
"Total Managed Fleet" shall mean the Manager's Fleet and the Company Fleet.
-------------------
"Transaction Costs" shall have the meaning assigned thereto in Section
-----------------
2.5(a) of the Participation Agreement.
"Transfer and Contribution Agreement" shall mean the Transfer and
-----------------------------------
Contribution Agreement dated as of August 1, 1998 between GATC and the Company.
22
<PAGE>
"Transferee" shall have the meaning assigned thereto in Section 6.1(a) of
----------
the Participation Agreement.
"Treasury Rate" shall mean with respect to prepayment of each Equipment
-------------
Note, a per annum rate (expressed as a monthly equivalent and as a decimal and,
in the case of United States Treasury bills, converted to a bond equivalent
yield), determined to be the per annum rate equal to the monthly yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Equipment Note, as determined by interpolation between the most recent
weekly average yields to maturity for two series of United States Treasury
securities, (A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Equipment Note and (B) the other maturing as close as
possible to, but later than, the Average Life Date of such Equipment Note, in
each case as published in the most recent H.15(519) (or, if a weekly average
yield to maturity for United States Treasury securities maturing on the Average
Life Date of such Equipment Note is reported in the most recent H.15(519), as
published in H.15(519)). H.15(519) means "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System. The most recent H.15(519) means the
latest H.15(519) which is published prior to the close of business on the third
Business Day preceding the scheduled prepayment date.
"Trust" shall mean the trust created under the Trust Agreement.
-----
"Trust Agreement" shall mean that certain Trust Agreement (1998-1), dated
---------------
as of August 1, 1998, between the Owner Participant and [Owner Trustee].
"Trust Estate" shall have the meaning assigned thereto in Section 2.2 of
------------
the Trust Agreement.
"Trustee" shall mean each of the Owner Trustee, the Indenture Trustee or
-------
the Pass Through Trustee, and "Trustees" shall mean the Owner Trustee, Indenture
--------
Trustee and the Pass Through Trustee, collectively.
"Underwriters" shall mean Salomon Brothers Inc. and Morgan Stanley & Co.
------------
Incorporated.
"Underwriting Agreement" shall mean that certain Purchase Agreement between
----------------------
the Lessee and the Underwriters, relating to the sale and purchase of the Pass
Through Certificates.
"Unit" shall mean each unit or item of Equipment.
----
"Unit Monthly Fee" shall have the meaning assigned thereto in Section
----------------
5.2(b) of the Management Agreement.
23
<PAGE>
Exhibit 4.6
-----------
FORM OF
_____________________________________________
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
Dated as of August 1, 1998
among
General American Railcar Corporation II,
as Company,
The First National Bank of Chicago,
as Collateral Agent,
[Owner Trustee,
as Initial Owner Trustee (Trust No. 1998-1),]
[Owner Trustee,
as Initial Owner Trustee (Trust No. 1998-2),]
[Owner Trustee,
as Initial Owner Trustee (Trust No. 1998-3),]
The First National Bank of Chicago,
as Initial Indenture Trustee (Trust No. 1998-1),
[The First National Bank of Chicago,
as Initial Indenture Trustee (Trust No. 1998-2),]
[The First National Bank of Chicago,
as Initial Indenture Trustee (Trust No. 1998-3),]
General American Transportation Corporation,
as Manager, and
General American Transportation Corporation,
as Insurance Manager
_____________________________________________
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1.
DEFINITIONS.............................................................................................. 2
SECTION 2.
THE COLLATERAL.......................................................................................... 16
Section 2.1. Security Interest and Collateral Assignment...................................... 16
Section 2.2. Priority......................................................................... 17
Section 2.3. Continuance of Security.......................................................... 17
Section 2.4. No Transfer of Duties............................................................ 18
Section 2.5. Maintenance of Collateral........................................................ 19
Section 2.6. Releases......................................................................... 19
Section 2.7. Termination and Release of Rights................................................ 20
SECTION 3.
THE ACCOUNTS............................................................................................ 20
Section 3.1. Establishment of Accounts........................................................ 20
Section 3.2. Deposits to the Collection Account and Non-Shared Payments Account............... 21
Section 3.3. Application of Amounts on Deposit in the Non-Shared Payments Account............. 21
Section 3.4. Application of Amounts on Deposit in the Collection Account ..................... 22
Section 3.5. Application of Amounts in the Stipulated Loss Value Deficiency Account........... 27
Section 3.6. Application of Amounts in the Liquidity Reserve Account.......................... 27
Section 3.7. Application of Amounts in the Special Reserves Account........................... 27
Section 3.8. Release of Amounts in Cash Trapping Account...................................... 27
Section 3.9. Application of Amounts in Excess Cash Account................................... 28
Section 3.10. Security Interest in Accounts.................................................... 28
Section 3.11. Notice of Amounts Owed........................................................... 28
Section 3.12. Investment of Funds in the Accounts.............................................. 28
Section 3.13. Disposition of Accounts Upon Retirement of Secured Obligations .................. 29
Section 3.14. Account Balance Statements....................................................... 29
SECTION 4.
CERTAIN AGREEMENTS AMONG THE SECURED PARTIES............................................................ 29
Section 4.1. Priority of Security Interests................................................... 29
Section 4.2. Exercise of Rights............................................................... 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.3. Actions Upon a Trigger Event..................................................... 30
Section 4.4. Exercise of Remedies and Application of Proceeds................................. 31
Section 4.5. Receipt of Money or Proceeds..................................................... 31
Section 4.6. Additional Beneficiaries......................................................... 32
SECTION 5.
THE COLLATERAL AGENT.................................................................................... 32
Section 5.1. Appointment and Duties of Collateral Agent....................................... 32
Section 5.2. Rights of Collateral Agent; Limitation of Liability.............................. 32
Section 5.3. Lack of Reliance on the Collateral Agent......................................... 35
Section 5.4. Indemnification; Bankruptcy...................................................... 35
Section 5.5. Resignation or Removal of the Collateral Agent................................... 35
Section 5.6. Relationships with Collateral Agent.............................................. 36
SECTION 6.
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY.......................................................................................... 36
Section 6.1. Representations and Warranties................................................... 36
Section 6.2. General Covenants................................................................ 38
Section 6.3. Covenants........................................................................ 43
Section 6.4. Operation of Equipment; Leases................................................... 44
SECTION 7.
REPRESENTATIONS AND WARRANTIES
OF THE BENEFICIARIES.................................................................................... 45
Section 7.1. Representations and Warranties................................................... 45
SECTION 8.
MISCELLANEOUS........................................................................................... 46
Section 8.1. Agreement for Benefit of Parties Hereto.......................................... 46
Section 8.2. Severability..................................................................... 47
Section 8.3. Notices.......................................................................... 47
Section 8.4. Successors and Assigns........................................................... 48
Section 8.5. Counterparts..................................................................... 49
Section 8.6. Governing Law.................................................................... 49
Section 8.7. Consent To Jurisdiction.......................................................... 49
Section 8.8. Waiver of Jury Trial............................................................. 49
Section 8.9. Amendment; Waiver................................................................ 50
Section 8.10. Headings........................................................................ 50
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 8.11. Termination..................................................................... 50
Section 8.12. Entire Agreement................................................................ 50
Section 8.13. Limitation of Liability......................................................... 50
Section 8.14. Conflict With Other Agreements.................................................. 51
Section 8.15. Consequential Damages........................................................... 51
Section 8.16. No Petition in Bankruptcy....................................................... 51
Section 8.17. No Partnership Created.......................................................... 51
</TABLE>
ANNEXES
Annex A - Form of Designation Letter
<PAGE>
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
This COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT (this "Agreement")
dated as of August 1, 1998, among General American Railcar Corporation II, a
Delaware corporation (the "Company"), The First National Bank of Chicago, acting
in its capacity as the trustee under the Initial Indenture (1998-1) (the
"Initial Indenture Trustee (1998-1)"), [The First National Bank of Chicago,
acting in its capacity as the trustee under the Initial Indenture (1998-2) (the
"Initial Indenture Trustee (1998-2)"), The First National Bank of Chicago,
acting in its capacity as the trustee under the Initial Indenture (Trust No.
1998-3) (the "Initial Indenture Trustee (1998-3)"),] [Owner Trustee], acting in
its capacity as the trustee under the Initial Trust Agreement (Trust No. 1998-1)
(the "Initial Owner Trustee (1998-1)"), [Owner Trustee], acting in its capacity
as the trustee under the Initial Trust Agreement (Trust No. 1998-2) (the
"Initial Owner Trustee (Trust No. 1998-2)"), [Owner Trustee], acting in its
capacity as the trustee under the Initial Trust Agreement (Trust No. 1998-3)
(the "Initial Owner Trustee (Trust No. 1998-3)"),] General American
Transportation Corporation ("GATC"), acting in its capacity as Manager under the
Management Agreement (the "Manager"), GATC, acting as Insurance Manager (the
"Insurance Manager") under the Insurance Agreement and The First National Bank
of Chicago, acting in its capacity as the collateral agent appointed hereunder
for the Beneficiaries, (the "Collateral Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company is a special purpose subsidiary of GATC organized to
engage in the full service railcar leasing business, to lease the Equipment from
the Lessors pursuant to the Leases and sublease the Equipment to Sublessees
pursuant to the Subleases;
WHEREAS, the Lenders will make loans to the Lessors for the purpose of
financing Equipment to be leased to the Company;
WHEREAS, the Company has entered into a Management Agreement and Insurance
Agreement pursuant to which the Manager and the Insurance Manager will provide
certain services to the Company as provided in such agreements;
WHEREAS, the parties hereto desire to enter into this Agreement to set
forth their mutual understanding with respect to (a) the distribution of
Collections, (b) the exercise of certain rights of the Company under the Company
Documents, (c) the appointment of the Collateral Agent and (d) certain other
matters set forth herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby covenant and agree as follows:
<PAGE>
SECTION 1.
DEFINITIONS
Section 1.1. Definitions. The following terms shall have the meanings
-----------
herein specified. Such definitions shall be equally applicable to the singular
and plural forms of the terms defined. All terms used herein which are not
defined herein and are defined in the New York Uniform Commercial Code shall
have the meanings therein stated. Unless otherwise stated, any agreement,
contract or document defined or referred to herein shall mean such agreement,
contract or document and all schedules, exhibits and attachments thereto as in
effect as of the date hereof, as the same may thereafter be amended,
supplemented or otherwise modified from time to time. Any reference to any
Person shall include its permitted successors and assigns, and in the case of
any Governmental Authority, any Persons succeeding to its functions and
capacities. Unless the context otherwise requires, references in Article 5
hereof to the "Beneficiaries" shall exclude the Collateral Agent.
"Acceptable GIC Provider" means a provider of a Guaranteed Investment
-----------------------
Contract whose short-term unsecured senior debt is rated at least "AA" by S&P or
"Aa2" by Moody's (or equivalent ratings by another nationally recognized credit
rating agency if both of such corporations are not in the business of rating
short-term unsecured senior debt at the time of issuance) or who has provided
collateral in acceptable form to S&P and Moody's with respect to such Guaranteed
Investment Contract such that the rating with respect to such Guaranteed
Investment Contract is at least "AA" by S&P or "Aa2" by Moody's.
"Acceptable Letter of Credit" means one or more irrevocable, direct pay
---------------------------
letters of credit, (i) issued to the Collateral Agent on behalf of the
Beneficiaries by a commercial bank, acceptable to the Collateral Agent, having a
short-term unsecured senior debt rating of at least "AA" by S&P or "Aa2" by
Moody's (or equivalent ratings by another nationally recognized credit rating
agency if both of such corporations are not in the business of rating short-term
unsecured senior debt of commercial banks at the time of issuance), (ii) in form
and substance acceptable to the Collateral Agent, (iii) providing for the amount
thereof to be available to the Collateral Agent in drawings conditioned only
upon presentation of sight drafts accompanied by the applicable certificate in
the form attached to such letter of credit and (iv) automatically extending
unless the issuing bank provides at least thirty days' prior written notice of
termination or non-renewal to the Collateral Agent.
"Accounts" means the Collection Account, the Operating Account, the
--------
Liquidity Reserve Account, the Special Reserves Account, the Non-Shared Payments
Account, the Stipulated Loss Value Deficiency Account, the Cash Trapping Account
and the Excess Cash Account.
"Administrative Services Agreement" means the Administrative Services
---------------------------------
Agreement dated as of August 1, 1998, between GATC and the Company.
2
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means each Lender Agent and each Lessor Agent.
-----
"Agreement" has the meaning specified in the first paragraph of this
---------
Agreement.
"Assumed Debt" means any Lender Loan which, subject to Section 6.4(e),
------------
shall have been assumed by the Company in connection with the exercise of any
purchase option pursuant to any Lease.
"Authorized Representative" of any entity means the person or persons
-------------------------
authorized to act on behalf of such entity.
"Available Amounts" means, as of any Calculation Date, the amount on
-----------------
deposit in the Collection Account as of such Calculation Date less the amounts
which would be allocated on the next succeeding Monthly Transfer Date pursuant
to clauses (i), (ii), (iii), (v) and (vi) of Section 3.4 without giving effect
to any transfers from any other Account.
"Base Component" shall have the meaning set forth in Section 5.2 of the
--------------
Management Agreement.
"Basic Rent" has the meaning set forth in the related Lease.
----------
"Beneficiaries" means each Lessor, the Manager and the Insurance Manager
-------------
and any other Person that becomes a Beneficiary hereunder pursuant to a
Designation Letter.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
------------
which commercial banking institutions in New York, New York, Chicago, Illinois
or the city and state in which the Collateral Agent maintains its corporate
trust office are authorized or obligated by law, regulation or executive order
to be closed.
"Calculation Date" means the last Business Day of each calendar month.
----------------
"Cash Trapping Account" means the account of that name established pursuant
---------------------
to Section 3.1.
3
<PAGE>
"Cash Trapping Cap" means as of any Monthly Transfer Date an amount equal
-----------------
to $5,000,000.
"Cash Trapping Event" means as of any Calculation Date, the occurrence of
-------------------
any of the following:
(a) The Monthly Average Lease Rate as of such Calculation Date shall
have decreased by 10% or more as compared to the Monthly Average Lease Rate
calculated as of the Calculation Date for the same month of the immediately
preceding year; or
(b) The Monthly Average Lease Rate as of such Calculation Date shall
have decreased by 20% or more as compared to the Monthly Average Lease Rate
calculated in the same month of the second preceding year, third preceding year,
fourth preceding year or fifth preceding year; or
(c) The Monthly Utilization Rate for the immediately preceding
calendar month shall have been 75% or less; or
(d) Any Coverage Ratio shall be less than 1.15:1.
"Cash Trapping Hold" means as of any Calculation Date when there has
------------------
previously been a Cash Trapping Event, and with respect to such Cash Trapping
Event, the occurrence of any of the following:
(a) if such Cash Trapping Event is related to the Monthly Average
Lease Rate, the Monthly Average Lease Rate on such Calculation Date is less than
the Monthly Average Lease Rate as of the Closing Date, or
(b) if such Cash Trapping Event is related to the Monthly Utilization
Rate, the Monthly Utilization Rate is less than 85% for any of the twelve
immediately preceding consecutive monthly periods, or
(c) if such Cash Trapping Event is related to a Coverage Ratio, any
Coverage Ratio on such Calculation Date is less than 1.175:1.
"Category 1 Supplemental Expenses" means all Supplemental Rent payable
--------------------------------
under a Lease for (a) payments due from the Company to each Indenture Trustee,
each Loan Participant, each Lender Agent and each Owner Trustee in respect of
fees and expenses payable pursuant to Sections 2.5(b) and (e) of each
Participation Agreement; and (b) payments due from the Company to each Indenture
Trustee, each Loan Participant, each Lender Agent, each Owner Trustee and each
Owner Participant in respect of indemnities contained in Section 7 of each
Participation Agreement.
4
<PAGE>
"Category 2 Supplemental Expenses" means all Supplemental Rent payable
--------------------------------
under a Lease to pay any Late Rent Premium due and payable under such Lease and
all Late Rent Premium due and payable under the Loan Documentation in respect of
any Assumed Debt.
"Category 3 Supplemental Expenses" means all Supplemental Rent or other
--------------------------------
amounts payable under a Lease, a Loan Document, any other Operative Agreement to
which the Company is a party or any Company Document to pay any and all other
amounts, liabilities, indemnities and obligations (other than Basic Rent,
Renewal Rent, principal, interest and other amounts included in other Categories
of Supplemental Expenses) which the Company assumes or agrees to pay to any
Person under any Lease, any Loan Document any other Operative Agreement to which
the Company is a party or any Company Document.
"Collateral" has the meaning set forth in Section 2.1.
----------
"Collateral Agent" has the meaning specified in the first paragraph of this
----------------
Agreement.
"Collection Account" means the account of that name established pursuant to
------------------
Section 3.1. The Collection Account shall initially be funded with $[1,300,000]
from the Company.
"Collections" for any period means, without duplication, (i) all amounts
-----------
paid to the Collection Account in respect of the Subleases, including amounts
received in respect of claims for damages or in respect of breaches of contract
or nonpayment of any amount due thereunder, (ii) all income earned on amounts on
deposit in the Accounts and (iii) all other payments of whatever kind (other
than Non-Shared Payments and amounts distributed to the Company pursuant to
Section 3.9 hereof) received by the Company pursuant to any other Company
Document, but, excluding the proceeds from the sale of the Equipment Units to
the Lessors pursuant to the Participation Agreements on the Closing Date.
"Combined Exposure" means, as of any date of determination, the sum
-----------------
(calculated without duplication) of all the Transaction Exposures as of such
date.
"Company" has the meaning specified in the first paragraph of this
-------
Agreement.
"Company Documents" means each Sublease, the Insurance Agreement, the
-----------------
Management Agreement, the Administrative Services Agreement, the Transfer and
Contribution Agreement and any other agreement or document (other than an
Operative Agreement) to which the Company is or becomes a party or under which
the Company has rights as third party beneficiary or otherwise.
"Company Fleet" means, collectively, all Equipment owned or leased by the
-------------
Company.
5
<PAGE>
"Coverage Ratio" means the Historical Coverage Ratio or the Projected
--------------
Coverage Ratio.
"Damages" has the meaning specified in Section 5.4.
-------
"Designation Letter" means any letter executed and delivered pursuant to
------------------
Section 4.6 hereof and substantially in the form of Annex A hereto.
"Equipment" means all of the Equipment Units leased by the Company from a
---------
Lessor pursuant to a Lease.
"Equipment Cost" with respect to any Equipment Unit, has the meaning set
--------------
forth in the related Operative Agreements.
"Equipment Notes" means the equipment notes issued on a nonrecourse basis
---------------
by the Initial Owner Trustees pursuant to the Initial Indentures.
"Equipment Unit" means an individual railcar.
--------------
"Event of Default" means a "Default" under the Management Agreement and an
----------------
"event of default" (or correlative term) under any other Company Document or
Operative Agreement to which the Company is a party, in each case after the
giving of any required notice thereunder and/or the expiration of any applicable
cure period provided therein.
"Event of Loss", with respect to any Equipment Unit, has the meaning set
-------------
forth in the related Lease or Loan Documentation.
"Excess Cash Account" means the account of that name established pursuant
-------------------
to Section 3.1 or such other account as shall be designated to the Collateral
Agent by the Company.
"Final Termination Date" means the last to occur of the Termination Dates
----------------------
with respect to each of the Beneficiaries.
"GATC Fleet" means all railcars owned, leased or managed by GATC in the
----------
United States.
"Historical Coverage Ratio" as of any Calculation Date, means the ratio of
-------------------------
(i) the sum of the Available Amounts for each of the six consecutive calendar
months ending with such Calculation Date to (ii) the sum of the Basic Rent and
principal and interest on the Assumed Debt that was paid or payable on the six
consecutive Rent Payment Dates (or corresponding dates in respect of the Assumed
Debt) which occurred or occur immediately after the
6
<PAGE>
Calculation Dates included in the six month period referred to in clause (i), as
such amounts are certified to by an Authorized Representative of each of the
Company and the Manager.
"Incentive Component" shall have the meaning set forth in Section 5.3 of
-------------------
the Management Agreement.
"Indemnified Party" has the meaning specified in Section 5.4 of this
-----------------
Agreement.
"Indenture" means, in respect of each Lease, the Initial Indenture related
---------
thereto and each other trust indenture and security agreement entered into from
time to time between the related Lessor and the related Indenture Trustee with
respect to the issuance of Securities, as each such agreement may be amended or
supplemented in accordance with its terms.
"Indenture Trustee" means, in respect of each Initial Indenture, the
-----------------
Initial Indenture Trustee related thereto and, when used with respect to any
other Security or the related Indenture, Indenture Trustee means the bank or
trust company designated as indenture trustee with respect to such Security or
related Indenture, and any successor to such Indenture Trustee as such trustee.
"Initial Indenture" means any of (a) the Trust Indenture and Security
-----------------
Agreement (1998-1), dated as of August 1, 1998, between the Initial Owner
Trustee (1998-1) and the Initial Indenture Trustee (1998-1), [(b) the Trust
Indenture and Security Agreement (1998-2), dated as of August 1, 1998, between
the Initial Owner Trustee (1998-2) and the Initial Indenture Trustee (1998-2)
and (c) the Trust Indenture and Security Agreement (1998-3), dated as of August
1, 1998, between the Initial Owner Trustee (1998-3) and the Initial Indenture
Trustee (1998-3)].
"Initial Indenture Trustee" means any of (a) the Initial Indenture Trustee
-------------------------
(1998-1), [(b) the Initial Indenture Trustee (1998-2) and (c) the Initial
Indenture Trustees (1998-3)].
"Initial Lease" means any of (a) the Equipment Lease Agreement (1998-1)
-------------
dated as of August 1, 1998, between the Initial Owner Trustee (1998-1), as
lessor, and the Company, as lessee[, (b) the Equipment Lease Agreement (1998-2)
dated as of August 1, 1998, between the Initial Owner Trustee (1998-2), as
lessor, and the Company, as lessee and (c) the Equipment Lease Agreement (1998-
3) dated as of August 1, 1998, between the Initial Owner Trustee (1998-3), as
lessor, and the Company, as lessee].
"Initial Owner Trustee" means any of (a) [Owner Trustee], as owner trustee
---------------------
pursuant to the Initial Trust Agreement (1998-1)[, (b) [Owner Trustee], as owner
trustee pursuant to the Initial Trust Agreement (1998-2) and (c) [Owner
Trustee], as owner trustee pursuant to the Initial Trust Agreement (1998-3)].
7
<PAGE>
"Initial Participation Agreement" means any of (a) the Participation
-------------------------------
Agreement (1998-1), dated as of August 1, 1998, among the Company, the Manager,
the Initial Owner Trustee (1998-1), the related Owner Participant, the Initial
Indenture Trustee (1998-1) and the Initial Pass Through Trustee[, (b) the
Participation Agreement (1998-2), dated as of August 1, 1998, among the Company,
the Manager, the Initial Owner Trustee (1998-2), the related Owner Participant,
the Initial Indenture Trustee (1998-2) and the Initial Pass Through Trustee and
(c) the Participation Agreement (1998-3), dated as of August 1, 1998, among the
Company, the Manager, the Initial Owner Trustee (1998-3), the related Owner
Participant, the Initial Indenture Trustee (1998-3) and the Initial Pass Through
Trustee].
"Initial Pass Through Trust Agreement" means the Pass Through Trust
------------------------------------
Agreement dated as of August 1, 1998 between the Company and the Initial Pass
Through Trustee.
"Initial Pass Through Trustee" means The First National Bank of Chicago as
----------------------------
pass through trustee pursuant to the Initial Pass Through Trust Agreement.
"Initial Trust Agreement" means any of (a) the Trust Agreement dated as of
-----------------------
August 1, 1998, between the related Owner Participant and the Initial Owner
Trustee (1998-1), [(b) the Trust Agreement dated as of August 1, 1998, between
the related Owner Participant and the Initial Owner Trustee (1998-2), and (c)
the Trust Agreement dated as of August 1, 1998, between the related Owner
Participant and the Initial Owner Trustee (1998-3)].
"Insurance Agreement" means the insurance agreement dated August __, 1998
-------------------
between GATC and the Company.
"Late Rent Premium" means (x) with respect to any Lease and on any Monthly
-----------------
Transfer Date, any supplemental rent or premium on rent due under such Lease, in
an amount sufficient to pay the sum of (i) the premiums, if any, due on any
overdue portions of principal and interest in respect of any related Lender
Loan, at the late payment rate set forth in the related Lender Documents; (ii)
the default rate interest, if any, due on any defaulted principal or interest in
respect of any related Lender Loan, at the default interest rate set forth in
the related Lender Document; and (iii) default interest, if any, due on any
unpaid cash distributions to the related Owner Participants at the rate set
forth in such Lease, and (y) with respect to any Assumed Debt and on any Monthly
Transfer Date, the sum of (i) the premiums, if any, due on any overdue portions
of principal and interest in respect of any Assumed Debt at the late payment
rate set forth in the related Loans and (iii) the default rate interest, if any,
due on any defaulted principal or interest in respect of any Related Assumed
Debt, at the default interest rate set forth in the related Loan Documentation.
"Lease" means each Initial Lease and each other lease agreement entered
-----
into with respect to one or more Equipment Units between a Lessor and the
Company as each such lease agreement may from time to time be amended or
supplemented.
8
<PAGE>
"Lease Event of Default" has the meaning set forth in the related Lease or,
----------------------
if applicable, the Loan Documentation related to the issuance of the related
Assumed Debt.
"Lender" means, with respect to any Lease, each Person who makes a loan to
------
a Lessor to finance all or any part of the Equipment Cost with respect to any
Equipment Unit leased to the Company pursuant to such Lease.
"Lender Agent" means any agent which is acting on behalf of holders of
------------
Assumed Debt which, so long as any Assumed Debt is the Equipment Notes, means
the Person acting as Indenture Trustee with respect to such Equipment Notes or
such other agent as the Indenture Trustee shall have notified to the Lessor, the
Manager and the Collateral Agent.
"Lender Document" means any Indenture, loan agreement or other document
---------------
pursuant to which a Lender makes a Lender Loan to a Lessor.
"Lender Loan" means, with respect to any Lease, any Security issued by or
-----------
loan made to a Lessor to finance all or any part of the Equipment Cost with
respect to any Equipment Unit leased to the Company pursuant to such Lease.
"Lessor" means each Initial Owner Trustee and each other owner trustee or
------
other Person who may from time to time lease Equipment to the Company pursuant
to a Lease.
"Lessor Agent" means, with respect to each Lease, the Lessor thereunder,
------------
and, so long as any Equipment Notes of such Lessor are issued and outstanding,
the Indenture Trustee with respect to such Equipment Notes or such other agent
as such Indenture Trustee shall have notified to the Lessor, the Company, the
Manager and the Collateral Agent.
"Lien" means, as applied to the property or assets (or the income,
----
proceeds, products, rents or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise: (a) any mortgage, lien, right of detention,
pledge, attachment, charge, lease, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind; or (b) any
arrangement, express or implied, under which such property or assets (or such
income, proceeds, products, rents or profits) are transferred, sequestered or
otherwise identified for the purpose of subjecting or making available the same
for payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Liquidity Reserve Account" means the account of that name established
-------------------------
pursuant to Section 3.1.
"Loan Documentation" means the documentation evidencing the Assumed Debt.
------------------
9
<PAGE>
"LockBox Change Notice" means the notice attached as Annex A to the letter
---------------------
agreement dated August __, 1998 among GATC, the Company, the Collateral Agent
and First Chicago National Processing Corporation with respect to the LockBox
and LockBox Account (as defined therein), a copy of which is attached hereto as
Annex B.
"Management Agreement" means the Operation, Maintenance, Servicing and
--------------------
Remarketing Agreement, dated as of August 1, 1998 between GATC and the Company.
"Management Fee" shall have the meaning set forth in Section 5.1 of the
--------------
Management Agreement.
"Manager" means GATC, acting in its capacity as Manager under the
-------
Management Agreement, or any Person succeeding to the responsibilities of the
Manager in accordance with the terms thereof.
"Manager's Fleet" means the GATC Fleet if GATC is the Manager and, if a
---------------
Successor Manager shall have been appointed pursuant to the Management
Agreement, Manager's Fleet means all railcars owned, leased or managed by such
Manager or its Affiliates, other than railcars in the Company Fleet.
"Monthly Average Lease Rates" means for any calendar month, the aggregate
---------------------------
Sublease monthly rental rates with respect to the Total Managed Fleet for such
calendar month divided by the number of Equipment Units in the Total Managed
Fleet which are subject to a lease or a sublease on the last day of such
calendar month.
"Monthly Report" means the monthly report prepared by the Company pursuant
--------------
to Section 7.1 of the Management Agreement.
"Monthly Report Date" means, with respect to any Monthly Transfer Date, the
-------------------
second preceding Business Day prior to such Monthly Transfer Date.
"Monthly Transfer Date" means the [___] day of each calendar month;
---------------------
provided, however, that if any such day shall not be a Business Day, then the
Monthly Transfer Date shall mean the next succeeding Business Day.
"Monthly Utilization Rate," for any calendar month, means the percentage
------------------------
determined by dividing (i) the total number of railcars in the Total Managed
Fleet, which are subject to a Lease or a sublease on the last day of such
calendar month, by (ii) the total number of railcars in the Total Managed Fleet
on the last day of such calendar month.
"Moody's" means Moody's Investors Service, Inc. or any successor to such
-------
corporation's business of rating securities, which is then providing a rating
for any Securities.
10
<PAGE>
"Non-Shared Payments" means any (a) contribution of capital by GATC to the
-------------------
Company subsequent to the Closing Date, made expressly for the purpose of paying
the Stipulated Loss Value or Termination Value of any Equipment Unit pursuant to
a Lease, (b) prior to the payment of Stipulated Loss Value or Termination Value
with respect to any Equipment, insurance proceeds received with respect to any
loss or damage to any Equipment, (c) prior to the payment of Stipulated Loss
Value or Termination Value with respect to any Equipment, proceeds of the sale
of the Equipment or (d) excess cash available to the Company pursuant to clause
(xiv) of Section 3.4 that the Company requests the Collateral Agent to transfer
to the Non-Shared Payments Account for the express purpose of paying the
Stipulated Loss Value or Termination Value pursuant to a Lease.
"Non-Shared Payments Account" means the account of that name established
---------------------------
pursuant to Section 3.1.
"Operating Account" means the account of that name established pursuant to
-----------------
Section 3.1.
"Operating Expenses" mean (a) payments due to the Collateral Agent in
------------------
respect of fees, expenses or indemnities pursuant to this Agreement, (b) any
payments in respect of insurance premiums required to be paid in respect of the
Insurance Agreement or other insurance maintained by the Company, (c) any
payments in respect of Reimbursable Services pursuant to the Management
Agreement, (d) the fees and expenses payable pursuant to the Administrative
Services Agreement, (e) maintenance or repair expenses related to damage to any
Equipment Unit, [(f) the payment of Stipulated Loss Value or the cost of
replacement Equipment in connection with any Event Loss, not in excess of
$100,000 in any calendar month and] (g) expenses in connection with Optional
Modifications to the Equipment (other than Programmatic Optional Modifications).
"Operative Agreements" with respect to any Lease, has the meaning set forth
--------------------
or referenced in the related Lease, and with respect to any Assumed Debt, has
the meaning set forth or referenced in the related Loan Documentation, provided
that the Management Agreement, the Administrative Services Agreement, the
Insurance Agreement, the Transfer and Contribution Agreement and the Subleases
shall be Company Documents notwithstanding any such definition of Operative
Agreement.
"Optional Modifications" means, with respect to any Lease, all
----------------------
modifications to the related Equipment other than Required Modifications or
Programmatic Optional Modifications.
"Owner Participant" means each owner participant or other person for whose
-----------------
benefit a Lessor owns Equipment leased to the Company pursuant to a Lease, and
its permitted successors and assigns.
11
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"Participation Agreement" means each Initial Participation Agreement and
-----------------------
each other participation agreement entered into from time to time among the
Company and the other parties thereto in connection with a Lease, as each such
agreement may be amended or supplemented in accordance with its terms.
"Permitted Investments" means (i) direct obligations of, and obligations
---------------------
fully guaranteed as to timely payment by, the United States of America (having
remaining maturities of no more than the number of days to the Business Day next
preceding the next Monthly Transfer Date), (ii) commercial paper (having
remaining maturities of no more than the number of days to the Business Day next
preceding the next Monthly Transfer Date), having, at the time of the investment
or contractual commitment to invest therein, a rating from each Rating Agency in
its highest investment category, (iii) a Guaranteed Investment Contract (a
"GIC") from an Acceptable GIC provider, (iv) a GIC provided by GATX, provided
that such obligations are supported by an Acceptable Letter of Credit, (v)
investments in funds rated in the highest investment category by each Rating
Agency and (vi) repurchase agreements and similar short term instruments.
"Person" means an individual, a corporation, a partnership, a trust, an
------
unincorporated organization, a limited liability company, or a government or
political subdivision thereof.
"Premium Amount" means the premium, if any, due in certain circumstances
--------------
upon the prepayment of any Lender Loan pursuant to the related Lender Document.
"Programmatic Optional Modification" means any Optional Modification to one
----------------------------------
or more Equipment Units in the Company Fleet the cost of implementation for
which in any calendar year is reasonably expected to exceed $750,000.
"Projected Coverage Ratio" as of any Calculation Date means the ratio of
------------------------
(i) the sum of projected Available Amounts for the six-month period immediately
succeeding such Calculation Date to (ii) the sum of the Basic Rent and principal
and interest on the Assumed Debt due or to become due and payable on the six
consecutive Rent Payment Dates (or corresponding dates in respect of the Assumed
Debt) which occur following such Calculation Date, as such amounts are certified
by an Authorized Representative of each of the Company and the Manager.
"Railroad Mileage Credits" means the mileage credit payments made by
------------------------
railroads under their applicable tariffs to the registered owner of identifying
marks on the railcars.
"Rated Rent" means, as of any Rent Payment Date with respect to any Lease,
----------
the portion of accrued and unpaid Basic Rent payable by the Company on such Rent
Payment Date under any Lease which if not paid by the Company within the number
of days specified in such Lease would constitute a Lease Event of Default under
such Lease.
12
<PAGE>
"Rated Security" means the Pass Through Trust Certificates issued by The
--------------
First National Bank of Chicago as Pass Through Trustee for General American
Railcar Corporation II 1998-1 Pass Through Trust, pursuant to the Pass Through
Trust Agreement dated August 1, 1998 between the Company and the Pass Through
Trustee.
"Rating Agencies" means, at any time, S&P and Moody's.
---------------
"Reimbursable Services" has the meaning set forth in Section 5.4 of the
---------------------
Management Agreement.
"Rent Payment Date" has the meaning set forth in the Related Lease.
-----------------
"Required Beneficiaries" means, at any time, Beneficiaries that at such
----------------------
time hold at least 66-2/3% of the Combined Exposure.
"Required Cash Trapping Amount" means an amount equal to:
-----------------------------
(i) if no Cash Trapping Event exists with respect to such Monthly
Transfer Date, an amount equal to $200,000; or
(ii) if for such Monthly Transfer Date a Cash Trapping Event exists,
an amount equal to $5,000,000.
"Required Liquidity Reserve Amount" means (x) as of the Closing Date,
---------------------------------
$500,000, and thereafter increasing by $42,000 per month until such time as such
amount shall equal or exceed $2,000,000 and thereafter $2,000,000 or (y) such
other amount agreed to in accordance with Section 8.9.
"Required Modification" with respect to any Equipment Unit the definition
---------------------
of such term in the related Lease, whether expressly set forth therein or by
reference to another related document.
"Required Special Reserves Amount" means:
--------------------------------
(i) if the Company is required to make any Required
Modifications to any Equipment (which Required Modifications are not
contemplated by the Company as of the Closing Date), an amount with
respect to each Required Modification one-third of the total cost of
implementing such Required Modification will be on deposit in the
Special Reserves Account by the date implementation of such Required
Modification is scheduled to begin;
13
<PAGE>
(ii) if the Company has elected to implement any Programmatic
Optional Modification to any Equipment, an amount sufficient to fund
the cost of such Programmatic Optional Modification; plus
(iii) if an event shall occur with respect to which the
Insurance Manager determines that the Company will be required to pay
any applicable insurance deductible set forth in the Insurance
Agreement, an amount (to be payable in level installments commencing
with the first Monthly Transfer Date after the Insurance Manager shall
have determined that the insurance deductible will be required to be
paid) that will result in (A) 100% of the then current insurance
deductible or (B) such other amount (including legal costs) as the
Insurance Manager deems sufficient being on deposit in the Special
Reserves Account by the date the insurance deductible is required to be
paid;
(iv) if any event shall occur or obligation shall arise
pursuant to which the Company will be required to pay Stipulated Loss
Value with respect to one or more Equipment Units (other than in
connection with Events of Loss as to which the payment of Stipulated
Loss Value is separately reserved for pursuant to clause (v) of Section
3.4 or as an Operating Expense), an amount with respect to each such
event or obligation (payable in level installments commencing with the
first Monthly Transfer Date after the Company becomes aware of such
payment obligation) that will result in the Stipulated Loss Value
required to be paid being on deposit in the Special Reserves Account on
the date such Stipulated Loss Value must be paid.
"Required Stipulated Loss Value Deficiency Amount" as of any Calculation
------------------------------------------------
Date and with respect to any Lease or Assumed Debt, means the aggregate of the
Stipulated Loss Value Deficiency Amounts due and payable as of the next
succeeding Monthly Transfer Date.
"Responsible Officer" means the president or any vice president, assistant
-------------------
vice president, any trust officer at its corporate trust office or any other
officer of the Collateral Agent to whom any matter has been referred because of
such officer's knowledge and familiarity with the particular subject.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
---
Inc. or any successor to such corporation's business of rating securities, which
is then providing a rating for any Securities.
"Scheduled Rent" means, as of any Rent Payment Date with respect to any
--------------
Lease, the difference, if any, between accrued and unpaid Basic Rent and accrued
and unpaid Rated Rent.
14
<PAGE>
"Secured Obligations" has the meaning assigned to such term in Section 2.1
-------------------
of this Agreement.
"Security" means any note, debenture, promissory note or other evidence of
--------
indebtedness issued pursuant to an Indenture.
"Security Interests" means the Liens and other security interest granted or
------------------
expressed to be granted in the Collateral pursuant to this Agreement.
"Special Reserves Account" means the account of that name established
------------------------
pursuant to Section 3.1.
"Special Transfer Date" means each date on which Non-Shared Payments will
---------------------
be distributed.
"Stipulated Loss Value" with respect to each Lease, has the meaning set
---------------------
forth in such Lease.
"Stipulated Loss Value Deficiency Account" means the Account of that name
----------------------------------------
established pursuant to Section 3.1.
"Stipulated Loss Value Deficiency Amount" with respect to each Event of
---------------------------------------
Loss under a Lease, means the Stipulated Loss Value which will become due and
payable with respect to such Event of Loss within 120 days after such Event of
Loss occurs.
"Sublease" means each of the lease agreements entered into from time to
--------
time with respect to the Equipment by or on behalf of the Company and a
Sublessee, as each such lease agreement may from time to time be amended or
supplemented.
"Sublessee" means any Person who subleases Equipment from the Company
---------
pursuant to a Sublease.
"Termination Date" means, with respect to any Beneficiary, the date on
----------------
which all the Secured Obligations owing to such Beneficiary by the Company, have
been paid and performed in full.
"Total Managed Fleet" means the Manager's Fleet and the Company Fleet.
-------------------
"Transaction Exposure" means as of any date of determination and with
--------------------
respect to each Lease, the present value [(discounted at the interest rate on
the related Lender Loan)] of all the remaining payments of Basic Rent under such
Lease through the remaining term of such Lease, plus (ii) if all or a portion of
a Lender Loan related to such Lease shall at the
15
<PAGE>
time be Assumed Debt, the [present value (discounted at the interest rate on
such Assumed Debt)] of all the remaining payments of principal of such Assumed
Debt through the remaining term of such Assumed Debt.
"Trigger Event" means an Event of Default (i) by the Company under any
-------------
Operative Agreement to which the Company is a party (other than a Tax Indemnity
Agreement) or (ii) under any Company Document (other than the Subleases).
SECTION 2.
THE COLLATERAL
Section 2.1. Security Interest and Collateral Assignment.
-------------------------------------------
(a) The Company hereby assigns and grants to the Collateral
Agent, for the benefit and security of the Beneficiaries, a security interest in
and general lien upon all of its right, title and interest in and to (a) each
Company Document and all payments thereon or with respect thereto (other than
any Non-Shared Payments), (b) the Accounts (other than the Non-Shared Payments
Account and the Excess Cash Account), including, without limitation, any
securities purchased with funds on deposit therein, and all income from the
investment of funds therein and (c) all proceeds, accessions, profits, income
benefits, substitutions and replacements, whether voluntary or involuntary, of
and to any of the property, now owned or hereafter acquired, of the Company
described in the preceding clauses (including, without limitation, the Company's
claims for indemnity thereunder and payments with respect thereto) (the
"Collateral"). Such Security Interests are made, in trust and subject to the
terms and conditions of this Agreement, to secure the payment by the Company of
amounts due under the Company Documents and the Operative Agreements to which
the Company is a party (collectively, the "Secured Obligations"), all as
provided in this Agreement.
(b) The Collateral Agent acknowledges such Security Interests,
accepts the trusts created hereby in accordance with the provisions hereof and
agrees to hold and administer all Collateral in trust for the use and benefit of
all present and future Beneficiaries.
Section 2.2. Priority. The Company intends the Security Interests in
--------
favor of the Collateral Agent to be prior to all other Liens in respect of the
Collateral, and the Company shall take or cause to be taken all actions
necessary to obtain and maintain, in favor of the Collateral Agent, for the
benefit of the Beneficiaries, a first priority, perfected security interest in
the Collateral; provided, however, that with respect to the Subleases the
requirement of perfection shall not apply. The Collateral Agent shall have all
of the rights, remedies and recourses with respect to the Collateral afforded a
secured party under all applicable law in addition to, and not in limitation of,
the other rights, remedies and recourses granted to the
16
<PAGE>
Collateral Agent by this Agreement or any law relating to the creation and
perfection of liens on, and security interests in, the Collateral.
Section 2.3. Continuance of Security. (a) Except as otherwise provided in
-----------------------
Section 2.6, Section 2.7 or Section 3.9, the Security Interests contained in
this Agreement shall remain in force as continuing security to the Collateral
Agent, for the benefit of the Beneficiaries, until the Final Termination Date
with respect to all Secured Obligations (subject to the provisions of Section
8.11) notwithstanding any intermediate payment or satisfaction of any part of
the Secured Obligations or any settlement of account or any other act, event or
matter whatsoever and shall secure the ultimate balance of the moneys and
liabilities hereby secured.
(b) No assurance, security or payment which may be avoided or
adjusted under the law, including under any enactment relating to bankruptcy or
insolvency and no release, settlement or discharge given or made by the
Collateral Agent on the faith of any such assurance, security or payment, shall
prejudice or affect the right of the Collateral Agent to recover the Secured
Obligations from the Company (including any moneys which it may be compelled to
pay or refund under the provisions of any applicable insolvency legislation of
any applicable jurisdiction and any costs payable by it pursuant to or otherwise
incurred in connection therewith) or to enforce the Security Interests contained
in this Agreement to the full extent of the Secured Obligations and accordingly,
if any release, settlement or discharge is or has been given pursuant to Section
2.7 and there is subsequently any such avoidance or adjustment under the law, it
is expressly acknowledged and agreed that such release, settlement or discharge
shall be void and of no effect whatsoever.
(c) If the Collateral Agent shall have grounds in its absolute
discretion for believing that the Company may be insolvent pursuant to the
provisions of any applicable insolvency legislation in any relevant jurisdiction
as at the date of any payment made by the Company to the Collateral Agent, the
Collateral Agent shall retain the Security Interests contained in or created
pursuant to this Agreement until the expiration of a period of one month plus
such statutory period within which any assurance, security, guarantee or payment
can be avoided or invalidated after the payment and discharge in full of all
Secured Obligations notwithstanding any release, settlement, discharge or
arrangement which may be given or made by the Collateral Agent on, or as a
consequence of, such payment or discharge of liability provided that, if at any
time within such period, the Company shall commence a voluntary winding-up or
other voluntary case or other preceding under any bankruptcy, reorganization,
liquidation or insolvency law or statute now or hereafter in effect in any
jurisdiction seeking liquidation, reorganization or other relief with respect to
the Company or the Company's debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect in any jurisdiction or seeking the
appointment of an administrator, a trustee, receiver, liquidator, custodian or
other similar official of the Company or any substantial part of its property or
if the Company shall consent to any such relief or to the appointment of or
taking
17
<PAGE>
possession by any such official in an involuntary case or other proceeding
commenced against the Company, or making a general assignment for the benefit of
any creditor of the Company under any bankruptcy, reorganization, liquidation or
insolvency law or statute now or hereafter in effect in any jurisdiction, the
Collateral Agent shall continue to retain such security for such further period
as the Collateral Agent may determine and such security shall be deemed to have
continued to have been held as security for the payment and discharge to the
Collateral Agent of all Secured Obligations.
Section 2.4. No Transfer of Duties. The Security Interests are granted as
---------------------
security only and shall not (i) transfer or in any way affect or modify, or
relieve the Company from, any obligation to perform or satisfy any term,
covenant, condition or agreement to be performed or satisfied by the Company
under or in connection with this Agreement or any Company Document or any
Collateral or (ii) impose any obligation on any of the Beneficiaries or the
Collateral Agent to perform or observe any such term, covenant, condition or
agreement or impose any liability on any of the Beneficiaries or the Collateral
Agent for any act or omission on the part of the Company relative thereto or for
any breach of any representation or warranty on the part of the Company
contained therein or made in connection therewith.
Section 2.5. Maintenance of Collateral. (a) Safekeeping. The Collateral
------------------------- -----------
Agent agrees to maintain the Collateral received by it and all records and
documents relating thereto at such address or addresses as may from time to time
be specified by the Collateral Agent in writing to each Beneficiary and the
Company. The Collateral Agent shall keep all Collateral and related
documentation in its possession separate and apart from all other property that
it is holding in its possession and from its own general assets and shall
maintain accurate records pertaining to the Permitted Investments and Accounts
included in the Collateral in such a manner as shall enable the Collateral
Agent, the Beneficiaries and the Company to verify the accuracy of such
recordkeeping. The Collateral Agent's books and records shall at all times show
that the Collateral is held by the Collateral Agent as agent of the
Beneficiaries and is not the property of the Collateral Agent. The Collateral
Agent will promptly report to each Beneficiary and the Company any failure on
its part to hold the Collateral as provided in this Section 2.5(a) and will
promptly take appropriate action to remedy any such failure. It is understood
and agreed that possession of the Subleases will be maintained by the Manager on
behalf of the Collateral Agent.
(b) [Access. The Collateral Agent shall permit the Company and each
------
of the Beneficiaries, or their respective duly authorized representatives,
attorneys, auditors or designees, to inspect the Collateral in the possession of
or otherwise under the control of the Collateral Agent pursuant hereto at such
reasonable times during normal business hours as the Company or any such
Beneficiary may reasonably request with prior written notice.]
18
<PAGE>
(c) Notifications. The Collateral Agent at the expense of the
-------------
Company shall promptly forward to the Company and the Manager a copy of each
notice, request, report, or other document relating to any Company Document
included in the Collateral that is received by a Responsible Officer of the
Collateral Agent from any Person other than the Company or the Manager on and
after the date hereof.
Section 2.6. Releases. If at any time all or any part of the Collateral
--------
is to be sold, transferred, assigned or otherwise disposed of by the Company or
the Collateral Agent or any Person on its or their behalf, the Collateral Agent
shall, on or prior to the date of such sale, transfer, assignment or disposal,
at the expense of the Company, execute such instruments of release prepared by
the Company, in recordable form, if necessary, in favor of the Company or any
other Person as the Company may reasonably request, deliver the relevant part of
the Collateral in its possession to the Company, otherwise release the Security
Interest constituted by this Agreement and each other Company Document on such
Collateral and release and deliver such Collateral to the Company and issue
confirmation, to the relevant purchaser, transferee, assignee, insurers and such
other Persons as the Collateral Agent shall determine to be appropriate upon
being requested to do so by the Company, that the relevant Collateral is no
longer subject to the Security Interests. Any release to the Company shall
release or reassign as appropriate in respect of the Collateral such grants and
assignments arising pursuant to Section 2.1 of this Agreement and/or under each
other Company Document. The parties hereto hereby authorize the Collateral Agent
to release, reconvey, retransfer or reassign (as appropriate) any Permitted
Investments sold by the Collateral Agent, the proceeds of which the Collateral
Agent causes to be credited to the Account in which such Permitted Investment
was held.
Section 2.7. Termination and Release of Rights. (a) On the Termination
---------------------------------
Date with respect to any Beneficiary, the rights, remedies, powers, duties,
authority and obligations conferred upon such Beneficiary pursuant to this
Agreement shall terminate and be of no further force and effect and all rights,
remedies, powers, duties, authority and obligations of such Beneficiary with
respect to the Collateral shall be automatically released; provided that any
indemnity provided to such Beneficiary herein or in any other Company Document
shall survive such Termination Date if so provided.
(b) On the Final Termination Date, the rights, remedies, powers,
duties, authority and obligations conferred upon the Collateral Agent and each
Beneficiary pursuant to this Agreement shall terminate and be of no further
force and effect and all rights, remedies, powers, duties, authority and
obligations of the Collateral Agent and each Beneficiary with respect to the
Collateral shall be automatically released. On the Final Termination Date, the
Collateral Agent agrees, at the expense of the Company, to execute such
instruments of release, in recordable form if necessary, in favor of the Company
as the Company may reasonably request, to deliver any Collateral in its
possession to the Company, to otherwise release the security interests
constituted by this Agreement release and deliver the
19
<PAGE>
Collateral to the Company and to issue confirmation, to such Persons as the
Collateral Agent shall determine to be appropriate upon being requested to do so
by the Company, that the Collateral is no longer subject to the Security
Interests.
SECTION 3.
THE ACCOUNTS
Section 3.1. Establishment of Accounts. The Collateral Agent hereby
-------------------------
establishes the following accounts (the "Accounts") in the form of non-interest
bearing accounts, which shall be maintained at all times until the termination
of this Agreement:
(a) Collection Account;
(b) Operating Account;
(c) Stipulated Loss Value Deficiency Account;
(d) Liquidity Reserve Account;
(e) Special Reserves Account;
(f) Cash Trapping Account;
(g) Excess Cash Account; and
(f) Non-Shared Payments Account.
The Collateral Agent shall establish a sub-account in the Stipulated Loss
Value Deficiency Account and the Non-Shared Payments Account for each Lease. In
addition, certain additional sub-accounts within certain of the Accounts may be
established and created by the Collateral Agent from time to time to facilitate
compliance with this Agreement.
All amounts from time to time held in each Account (other than amounts in
the Non-Shared Payments Account and the Excess Cash Account) shall be held (a)
in the name of the Collateral Agent, for the benefit of the Beneficiaries and
(b) in the custody of the Collateral Agent for the purposes and on the terms set
forth in this Agreement and all such amounts shall constitute a part of the
Collateral and shall not constitute payment of any Secured Obligation or any
other obligation of the Company until applied as hereinafter provided. All
amounts held from time to time in a sub-account of the Non-Shared Payments
Account shall be held in the name of the Collateral Agent for the benefit of the
related Beneficiary for which such Non-Shared Payment was made. In respect of
any Secured Obligation owed to the Beneficiaries, each Beneficiary hereby
acknowledges and agrees to look solely to the amounts on deposit in the Accounts
to the extent amounts are available for distribution to such Beneficiary in the
priority of payments set forth in Section 3.4, subject, however, to the
provisions of Sections 4.3 and 4.4.
20
<PAGE>
Section 3.2. Deposits to the Collection Account and Non-Shared Payments
----------------------------------------------------------
Account. (a) The Collateral Agent shall, upon receipt thereof, deposit in the
- -------
Collection Account all Collections or other payments received by it, except any
Non-Shared Payments.
(b) The Collateral Agent shall, on each date when one or more Non-
Shared Payments are made to the Collateral Agent, deposit in the applicable sub-
account of the Non-Shared Payments Account the aggregate amount of the related
Non-Shared Payments.
Section 3.3. Application of Amounts on Deposit in the Non-Shared Payments
------------------------------------------------------------
Account. (a) The Company shall provide the Collateral Agent, all Lender Agents,
- -------
Lessor Agents and Participants with written notice of any Non-Shared Payment to
be made by, on behalf of, or with respect to obligations of, the Company not
less than ten Business Days prior to the date on which such payment is expected
to be received and in any event not less than two Business Days before the
Payment Date on which such Non-Shared Payment is to be distributed in accordance
with the Operative Agreement or Agreements pursuant to which it is to be
received. Such notice shall set out (i) the total amount of such Non-Shared
Payment, and (ii) the Lender Agent or Lessor Agent to and related Lease in
respect of which it is to be paid.
(b) By [10:00] a.m. (Chicago, Illinois time) on the applicable
Payment Date, the Collateral Agent shall withdraw all amounts on deposit in the
applicable sub-account of the Non-Shared Payments Account and shall distribute
such amounts to the applicable Lender Agent or Lessor Agent in an amount not in
excess of the aggregate amount to be allocated to such agent pursuant to the
written notice provided to the Collateral Agent pursuant to Section 3.3(a)
above, for application in accordance with the terms of the related Loan
Documentation or Lease and the Transaction Exposure relating to such Agent shall
be recalculated following such distribution to reflect the Basic Rent payments
then payable over the remaining term of the applicable Lease.
Section 3.4. Application of Amounts on Deposit in the Collection Account.
-----------------------------------------------------------
By [10:00] a.m. (Chicago, Illinois time) on each Monthly Transfer Date, using
the information provided in the applicable Monthly Report and the notices
provided pursuant to Section 3.11, the Collateral Agent will withdraw all
amounts on deposit in the Collection Account as of the immediately preceding
Calculation Date and distribute such amounts in the order of priority set forth
below but, in each case, only to the extent that all amounts ranking prior
thereto have been paid in full:
(1) to the Manager, for distribution to the Sublessees, if
any, whose payments in respect of the applicable Subleases are not made net
of any Railroad Mileage Credits due and owing to such Sublessee, an amount
equal to the Railroad Mileage Credits due to such Sublessees for which an
allocation has not previously
21
<PAGE>
been made pursuant to this clause (i), as certified to the Collateral Agent
by the Manager not later than the Monthly Report Date;
(2) to the Operating Account, an amount which together with
any amounts on deposit therein, is sufficient to pay (a) all Operating
Expenses of the Company which the Manager certifies to the Collateral Agent
not later than the applicable Monthly Report Date are due or to become due
on or before such Monthly Transfer Date, (b) the Base Component of the fee
payable pursuant to the Management Agreement [(provided, that if a Lease
Default or a Lease Event of Default shall have occurred and be continuing
during any time when GATC is the Manager, then the Base Component of the
fee payable pursuant to the Management Agreement shall be paid pursuant to
clause (xii) of this Section 3.4)] and (c) any amounts that have been
previously requested to pay Operating Expenses that have not been paid;
provided, that if the amounts available in the Collection Account as of the
applicable Calculation Date are insufficient to make the transfers required
pursuant to this clause (ii), the Collateral Agent shall make up such
insufficiency by withdrawing an amount equal to such insufficiency first,
from the Cash Trapping Account and then from the Liquidity Reserve Account,
if necessary, and transferring such amount pursuant to this clause (ii);
(3) to each Lessor Agent and Lender Agent, if any, an
amount sufficient to pay (a) the amount certified to the Collateral Agent
by an Authorized Representative of each such Lender Agent or Lessor Agent
not later than the applicable Monthly Report Date to be the amount of
Category 1 Supplemental Expenses due or to become due pursuant to its
related Lender Document or Lease on or before such Monthly Transfer Date,
and which are not payable to the Person to which such expenses are owed
directly from the proceeds of insurance obtained by or on behalf of the
Company pursuant to any Operative Agreement and (b) any amounts that have
been previously requested pursuant to this clause (iii) and not paid, [less
amounts, if any, than on deposit in the Special Reserves Account for such
purpose;] provided, that if the amounts available in the Collection Account
as of the applicable Calculation Date are insufficient to make the
transfers required pursuant to this clause (iii), the Collateral Agent
shall make up such insufficiency first by withdrawing an amount equal to
such insufficiency from the Cash Trapping Account and then from the
Liquidity Reserve Account, if necessary, and transferring such amount
pursuant to this clause (iii); provided, further, that if the aggregate of
all amounts available for transfer pursuant to this clause (iii) shall
continue to be insufficient to make all transfers required pursuant to this
clause (iii), then the Collateral Agent shall transfer the amounts then
available for transfer pro rata among the Lender Agents and the Lessor
Agents in the same proportion that the Category 1 Supplemental Expenses
requested by each Lender Agent and Lessor Agent bears to the total amount
of
22
<PAGE>
Category 1 Supplemental Expenses requested by all Agents with respect to
such Monthly Transfer Date;
(4) (a) to each Lessor Agent an amount sufficient to pay
any Rated Rent certified to the Collateral Agent by an Authorized
Representative of each such agent not later than the applicable Monthly
Report Date to be the amount of Rated Rent due or to become due pursuant to
its related Lease on or before such Monthly Transfer Date, (b) to each
Lender Agent any principal and interest due in respect of any Assumed Debt
certified to the Collateral Agent by an Authorized Representative of each
such Lender Agent not later than the applicable Monthly Report Date to be
the amount of principal and interest due or to become due pursuant to the
Lender Documents related to such Assumed Debt on or before such Monthly
Transfer Date (but only to the extent the failure to pay such principal or
interest prior to the next succeeding Monthly Transfer Date would result in
an Event of Default with respect to such Assumed Debt), and (c) to each
Lessor Agent and each Lender Agent any amounts pursuant to this clause (iv)
that have been previously requested in respect of Rated Rent or Assumed
Debt and not paid; provided, that if the amounts available in the
Collection Account as of the applicable Calculation Date are insufficient
to make the transfers required pursuant to this clause (iv), the Collateral
Agent shall make up such insufficiency by withdrawing an amount equal to
such insufficiency first, from the Cash Trapping Account and then from the
Liquidity Reserve Account, if necessary, and transferring such amount
pursuant to this clause (iv), provided, further, that if the aggregate
amount available for transfer pursuant to this clause (iv) shall continue
to be insufficient to make all transfers required pursuant to this clause
(iv), then the Collateral Agent shall transfer the amounts then available
for transfer pro rata among the Lender Agents and the Lessor Agents in the
same proportion that the Transaction Exposure related to each agent bears
to the Combined Exposure on such Calculation Date.
(5) to the appropriate sub-account of the Stipulated Loss
Value Deficiency Account, an amount certified to the Collateral Agent by an
Authorized Representative of the Company not later than the applicable
Monthly Report Date to be sufficient to cause the amount on deposit in such
sub-account to be at least equal to the Required Stipulated Loss Value
Deficiency Amount; provided, that, if the amounts available in the
Collection Account as of the applicable Calculation Date are insufficient
to make the transfers required pursuant to this clause (v), the Collateral
Agent shall make up such insufficiency by withdrawing an amount equal to
such insufficiency from the Cash Trapping Account and depositing such
amount to the applicable sub-accounts of the Stipulated Loss Value
Deficiency Account; provided, further that, if failure to pay such Required
Stipulated Loss Value Deficiency Amount on or before such Monthly Transfer
Date would result in a Lease Event of Default under the related Lease or
Assumed Debt, then the Collateral Agent will make up such
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insufficiency by withdrawing from the Liquidity Reserve Account, an amount
which, after making the other transfers required pursuant to this clause
(v), would prevent such Lease Event of Default and depositing such amount
to the applicable sub-account of the Stipulated Loss Value Deficiency
Account;
(6) to the Liquidity Reserve Account, an amount certified
to the Collateral Agent by an Authorized Representative of the Company not
later than the applicable Monthly Report Date to be sufficient to cause the
amount on deposit therein to be at least equal to the Required Liquidity
Reserve Amount; provided, that if the amounts available in the Collection
Account are insufficient to make the transfers required pursuant to this
clause (vi), the Collateral Agent shall make up such insufficiency by
withdrawing an amount equal to such insufficiency from the Cash Trapping
Account and depositing such amount in the Liquidity Reserve Account;
(7) (a) to each Lessor Agent an amount sufficient to pay
that portion of any Scheduled Rent corresponding to the Scheduled
Amortization on a related Lender Loan as certified to the Collateral Agent
by an Authorized Representative of each Lessor Agent not later than the
applicable Monthly Report Date to be the amount of Scheduled Rent due or
become due pursuant to its related Lease on or before such Monthly Transfer
Date (but only to the extent such amount has not been paid pursuant to
clause (iv) above), (b) to each Lender Agent, an amount sufficient to pay
any principal or interest due in respect of any Assumed Debt certified to
the Collateral Agent by an Authorized Representative of such Lender Agent
to be the amount of principal and interest due or to become due pursuant to
the Loan Documentation related to such Assumed Debt on or before such
Monthly Transfer Date (but only to the extent such amount has not been paid
pursuant to clause (iv) above) and (c) to each Lessor Agent and Lender
Agent any amounts pursuant to this clause (vii) that have been previously
requested and not paid; provided, that if the amounts available in the
Collection Account as of the applicable Calculation Date are insufficient
to make the transfers required pursuant to this clause (vii), the
Collateral Agent shall make up such insufficiency by withdrawing an amount
equal to such insufficiency from the [Cash Trapping Account] and
transferring such amount pursuant to this clause (viii), provided, further,
that if the aggregate amount available for transfer pursuant to this clause
(viii) shall continue to be insufficient to make all transfers required
pursuant to this clause (viii), then the Collateral Agent shall transfer
the amounts then available for transfer pro rata among the Lender Agents
and the Lessor Agents in the same proportion that the Transaction Exposure
related to each agent bears to the Combined Exposure on such Calculation
Date;
(8) (a) to each Lessor Agent an amount sufficient to pay
that portion of any Scheduled Rent, to the extent constituting the Equity
Portion of Basic Rent (as defined in each Lease) certified to the
Collateral Agent by an Authorized
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Representative of such Lessor Agent not later than the applicable Monthly
Report Date to be the amount of Scheduled Rent due or become due pursuant
to its related Lease on or before such Monthly Transfer Date, and (b) to
each Lessor Agent any amounts pursuant to this clause (viii) that have been
previously requested and not paid; provided, that if the amounts available
in the Collection Account as of the applicable Calculation Date are
insufficient to make the transfers required pursuant to this clause (viii),
the Collateral Agent shall make up such insufficiency by withdrawing an
amount equal to such insufficiency from the Cash Trapping Account and
transferring such amount pursuant to this clause (vii), provided, further,
that if the aggregate amount available for transfer pursuant to this clause
(vii) shall continue to be insufficient to make all transfers required
pursuant to this clause (vii), then the Collateral Agent shall transfer the
amounts then available for transfer pro rata among the Lessor Agents in
the same proportion that the Transaction Exposure related to each agent
bears to the Combined Exposure on such Calculation Date;
(9) to the Special Reserves Account, an amount certified to
the Collateral Agent by an Authorized Representative of the Company not
later than the applicable Monthly Report Date to be sufficient to cause the
amount on deposit therein to be at least equal to the Required Special
Reserves Amount; provided, that if the amounts available in the Collection
Account as of the applicable Calculation Date are insufficient to make the
transfers required pursuant to this clause (viii), the Collateral Agent
shall make up such insufficiency by withdrawing an amount equal to such
insufficiency from the Cash Trapping Account and depositing such amount in
the Special Reserves Account;
(10) to each Lender Agent or Lessor Agent an amount
certified to the Collateral Agent by an Authorized Representative of each
such agent not later than the applicable Monthly Report Date to be the
amount sufficient to pay (a) Category 2 Supplemental Expenses due or to
become due pursuant to its related Lease or Lender Document on or before
such Monthly Transfer Date, and (b) any amounts of Category 2 Supplemental
Expenses that have been previously requested and not paid; provided, that
if the amounts available in the Collection Account as of the applicable
Calculation Date are insufficient to make the transfers required pursuant
to this clause (ix), the Collateral Agent shall pay such amounts pro rata
among the agents in the same proportion that the Category 2 Supplemental
Expenses requested by each Lender Agent and Lessor Agent bears to the total
amount of Category 2 Supplemental Expenses requested by all Agents with
respect to such Monthly Transfer Date;
(11) to the Cash Trapping Account, an amount certified to
the Collateral Agent by an Authorized Representative of the Company not
later than the applicable Monthly Report Date to be sufficient to cause the
amount on deposit therein to be at least equal to the Required Cash
Trapping Amount;
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(12) to each Person entitled to receive Category 3
Supplemental Expenses an amount certified to the Collateral Agent by an
Authorized Representative of such Person not later than the applicable
Monthly Report Date to be the amount sufficient to pay (a) Category 3
Supplemental Expenses due or to become due pursuant to any Company Document
or Operative Agreement to which the Company is a party on or before such
Monthly Transfer Date, and (b) any amounts of Category 3 Supplemental
Expenses that have been previously certified and not paid; provided, that
if the amounts available in the Collection Account as of the applicable
Calculation Date are insufficient to make the transfers required pursuant
to this clause (xi), the Collateral Agent shall pay such amounts pro rata
among such Persons in the same proportion that the Category 3 Supplemental
Expenses requested by each Person bears to the total amount of Category 3
Supplemental Expenses requested by all Persons with respect to such Monthly
Transfer Date;
(13) to the Manager, an amount certified to the Collateral
Agent by the Manager not later than the applicable Calculation Date to be
sufficient to pay [(a) the Base Component of the Management Fee if not paid
pursuant to clause (ii) of this Section 3.4 as a result of a Lease Default
or a Lease Event of Default having occurred and continuing during a time
when GATC is the Manager,] (b) the Incentive Component of the Management
Fee due or to become due on or prior to such Monthly Transfer Date, and (c)
any portion of the Incentive Component of the Management Fee previously
requested and not paid; and
(14) if (a) the amounts on deposit in the Stipulated Loss
Value Deficiency Account (including each sub-account thereof), the
Liquidity Reserve Account, the Special Reserves Account and the Cash
Trapping Account are at least equal to the Required Stipulated Loss Value
Deficiency Amount, Required Liquidity Reserve Amount, the Required Special
Reserves Amount and the Required Cash Trapping Amount, respectively and (b)
no Trigger Event shall have occurred and be continuing, to the Excess Cash
Account any remaining amounts on deposit in the Collection Account;
provided that if any Trigger Event shall have occurred and be continuing,
all remaining amounts shall remain on deposit in the Collection Account for
application in accordance with this Section 3.4 on the next succeeding
Monthly Transfer Date.
Section 3.5. Application of Amounts in the Stipulated Loss Value
---------------------------------------------------
Deficiency Account. (a) With respect to any Event of Loss under a Lease with
- ------------------
respect to which the Company has not exercised its right to replace the related
equipment, amounts on deposit in the related sub-account of the Stipulated Loss
Value Deficiency Account shall be used to pay Stipulated Loss Value Deficiency
under such Lease if by the [120]th day following the occurrence of such Event of
Loss the Stipulated Loss Value applicable to such Event of Loss
26
<PAGE>
shall not have been previously paid out of amounts on deposit in the sub-account
of the Non-Shared Payments Account related to such Event of Loss.
(b) If on any Monthly Transfer Date the amount on deposit in any sub-
account of the Stipulated Loss Value Deficiency Account shall not be required to
remain on deposit therein because the related Stipulated Loss Value shall have
been previously paid in full, then such amount shall be withdrawn from such sub-
account and deposited in the Collection Account for application in accordance
with Section 3.4.
Section 3.6. Application of Amounts in the Liquidity Reserve Account.
-------------------------------------------------------
Amounts on deposit in the Liquidity Reserve Account shall be applied solely in
accordance with Section 3.4.
Section 3.7. Application of Amounts in the Special Reserves Account.
------------------------------------------------------
Amounts on deposit in the Special Reserves Account shall be made available to
the Company to pay for Required Modifications, Programmatic Optional
Modifications or to pay expenses not covered by any insurance deductibles
pursuant to the Company's insurance policies upon certification by an Authorized
Representative of the Company.
Section 3.8. Release of Amounts in Cash Trapping Account. (a) On each
-------------------------------------------
Monthly Transfer Date, amounts on deposit in the Cash Trapping Account shall be
applied as provided in Section 3.4. In addition, on each Calculation Date,
amounts on deposit in the Cash Trapping Account in excess of the amounts
required pursuant to the definition of Required Cash Trapping Amount shall,
provided that no Cash Trapping Event or Cash Trapping Hold shall exist on such
Calculation Date, be released from the Cash Trapping Account and transferred by
the Collateral Agent to the Collection Account for application on the next
succeeding Monthly Transfer Date.
Section 3.9. Application of Amounts in Excess Cash Account. So long as
----------------------------------------------
no Lease Event of Default shall have occurred and be continuing, on each Monthly
Transfer Date the Company shall have the right to withdraw any amounts on
deposit in the Excess Cash Account, if any, free and clear of the Security
Interests.
Section 3.10. Security Interest in Accounts. All amounts in the Accounts
-----------------------------
(other than the Non-Shared Payments Account and the Excess Cash Account) shall
be held in trust by the Collateral Agent on behalf of the Beneficiaries. The
Company and the Beneficiaries acknowledge and agree that the Collateral Agent
shall have exclusive possession of and sole dominion and control over and the
exclusive right of withdrawal from the Accounts as provided herein. The Company
shall have no right to withdraw, or to cause the withdrawal of funds held in the
Accounts or to direct the investment of such funds or the liquidation of any
Permitted Investments, in each case other than as expressly provided herein.
Amounts deposited in the Accounts shall be applied exclusively as provided in
this Agreement. In the
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event either the Company or any Beneficiary receives any amounts which should
have been deposited to the Collection Account, the Company or such Beneficiary,
as the case may be, shall hold the same in trust for and on behalf of the
Beneficiaries and promptly deliver the same to the Collateral Agent in the form
received (with any necessary endorsement) for deposit in the Collection Account
and application in accordance with this Agreement.
Section 3.11. Notice of Amounts Owed. Not less than three Business Days
----------------------
before each Monthly Report Date, an Authorized Representative of each Lender
Agent and Lessor Agent shall certify to the Collateral Agent in writing, the
amounts owed pursuant to each clause of Section 3.4(a) with respect to its
related Lease or Loan Documentation for the next occurring Monthly Transfer
Date. Each Lender Agent and Lessor Agent hereby agrees to include in such
certification amounts which are owed to any other Person pursuant to the related
Operative Agreements and which are so certified to such Lender Agent or Lessor
Agent.
Section 3.12. Investment of Funds in the Accounts. Funds on deposit in
-----------------------------------
the Accounts, including any sub-account thereof, shall be invested and
reinvested in Permitted Investments at the written direction of the Company (or
the Manager on behalf of the Company). If at any time the Company, or the
Manager on behalf of the Company, fails to direct investment, the Collateral
Agent is hereby authorized to invest funds held in any of the Accounts in its
Corporate Trust Short Term Investment Fund so long as such fund otherwise
qualifies as a Permitted Investment. All Permitted Investments shall be
maintained in the name of the Collateral Agent and held by the Collateral Agent
in its name for the benefit of the Beneficiaries. Possession of a certificate
evidencing any Permitted Investment shall be maintained by the Collateral Agent.
All such investments made with funds on deposit in any Account shall mature not
later than the Business Day next preceding the Monthly Transfer Date next
succeeding the day such investment is made. Investment earnings on funds on
deposit in any Account (net of losses and investment expenses) shall be
deposited in the Collection Account monthly and treated as Collections. Any
losses shall be charged to the applicable account.
Section 3.13. Disposition of Accounts Upon Retirement of Secured
--------------------------------------------------
Obligations. Upon termination of this Agreement and after payment in full of all
- -----------
amounts due in respect of all Secured Obligations and any other amounts required
to be paid hereunder, all amounts remaining in any Account established in
Section 3.1 shall at the written direction of the Company be paid by the
Collateral Agent to or upon the order of the Company.
Section 3.14. Account Balance Statements. The Collateral Agent shall, on
--------------------------
a monthly basis and at such other times as a Beneficiary or the Company may from
time to time reasonably request, provide to the Beneficiary or the Company,
Account balance statements in respect of each of the Accounts and sub-accounts,
if any. Such balance statements shall also include deposits, withdrawals and
transfers from and to any Account and sub-account, if any.
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SECTION 4.
CERTAIN AGREEMENTS AMONG THE SECURED PARTIES
Section 4.1. Priority of Security Interests. (a) Each Beneficiary
------------------------------
agrees that the Security Interest of such Beneficiary in any Collateral ranks
and will rank equally in priority with the Security Interest of the other
Beneficiaries in the Collateral, subject to the priority of payments set forth
in Section 3.4 and subject to Section 4.3 and 4.4.
(b) The priorities specified in this Agreement with respect to (i) the
Collateral, (ii) all proceeds of the Collateral and (iii) all amounts and funds
on deposit in the Accounts, in each case are applicable irrespective of any
statement to the contrary in any Operative Agreement or any Company Document,
the time or order or method of attachment or perfection of Liens, the time or
order of filing of financing statements, or the giving or failure to give notice
of the acquisition or expected acquisition of purchase money or other security
interests and to the extent not provided for in this Agreement, the rights and
priorities of the Beneficiaries shall be determined in accordance with
applicable law.
Section 4.2. Exercise of Rights. So long as any Secured Obligations
------------------
remain outstanding, each of the Beneficiaries hereby acknowledges and agrees as
follows:
(a) Subject to Section 5.2 hereof until a Trigger Event shall have
occurred, the Collateral Agent shall administer the Collateral in the manner
contemplated by this Agreement, including, in particular Article 3 hereof, and
only upon the occurrence and continuance of a Trigger Event, the Collateral
Agent shall exercise and only upon the written instruction of, and on behalf of,
the Required Beneficiaries in accordance with this Section 4.2 and Sections 4.3
and 4.4 hereof, such rights and remedies with respect to the Collateral as are
granted to it under this Agreement and applicable law.
(b) No Beneficiaries and no class or classes of Beneficiaries shall
have any right, other than in accordance with this Section 4.2 and Sections 4.3
and 4.4 hereof, to (i) sell, exchange, release, not perfect and otherwise deal
with any property at any time pledged, assigned or mortgaged to secure the
Secured Obligations, (ii) exercise or refrain from exercising any rights to
direct the Collateral Agent to take any action in respect of the Collateral, or
(iii) take any other action with respect to the Collateral (A) independently of
the Collateral Agent or (B) other than to direct the Collateral Agent to take
action in accordance with this Section 4.2 and Sections 4.3 and 4.4 hereof. Any
of the Beneficiaries or the Collateral Agent may, at any time and from time to
time (i) amend in any manner any outstanding Company Documents to which they are
a party in accordance with the terms thereof, (ii) release anyone liable in any
manner under or in respect of such Beneficiary's Secured Obligations in
accordance with the terms of the Company Documents to which they
29
<PAGE>
are a party and (iii) apply any sums from time to time received for payment or
satisfaction of such Beneficiary's Secured Obligations except as otherwise
provided in Section 4.5 hereof.
(c) Each Beneficiary hereby agrees that upon the request of the
Collateral Agent it will give the Collateral Agent notice of the outstanding
Secured Obligations owed by the Company to such Beneficiary in connection with
the related Lease and any other information that the Collateral Agent may
reasonably request.
Section 4.3. Actions Upon a Trigger Event. So long as any Secured
----------------------------
Obligations remain outstanding, the following provisions shall apply:
(a) Each Beneficiary hereby agrees to give each other Beneficiary and
the Collateral Agent written notice of the occurrence of an Event of Default or
Lease Event of Default under such related Lease or Company Document and of the
occurrence of the termination of such related Lease or Company Document or an
acceleration of a Lender Loan under such Beneficiary's related Lender Documents,
wherein such Beneficiary's Secured Obligations have been declared to be or have
become due and payable earlier than the scheduled term or maturity thereof and
setting forth the aggregate amount of Secured Obligations that have been so
accelerated under such related Lease, Company Document or related Lender
Documents, in each case, as soon as practicable after such Beneficiary obtains
actual knowledge of the occurrence thereof; provided, however, that the failure
to provide such notice shall not limit or impair the rights of the Beneficiaries
hereunder, or under the related Lender Documents, related Operative Agreements
or related Company Documents. No Beneficiary shall be deemed to have knowledge
or notice of the occurrence of any Event of Default or Lease Event of Default
until such Beneficiary has received a written notice of such Event of Default or
related Lease Event of Default from the Company or any other Person, if any, for
whom such Beneficiary is acting as agent or trustee.
(b) The Company hereby agrees that if a Trigger Event shall have
occurred and is continuing, the Collateral Agent and any agent described in
Section 5.2 hereof is here by irrevocably authorized and empowered to act as the
attorney-in-fact for the Company with respect to the giving of any instructions
or notices under this Agreement.
Section 4.4. Exercise of Remedies and Application of Proceeds. So long
------------------------------------------------
as any Secured Obligations remain outstanding to more than one Beneficiary, the
following provisions shall apply:
(a) If a Trigger Event shall have occurred and is continuing, upon
the written request of the Required Beneficiaries, the Collateral Agent shall
render an accounting of the current balance of each Account.
30
<PAGE>
(b) If a Trigger Event shall have occurred and is continuing, and
only in such event, upon the written request of the Required Beneficiaries the
Collateral Agent shall be authorized to take any and all actions and to exercise
any and all rights, remedies and options which it may have under this Agreement
and which the Required Beneficiaries direct it to take under this Agreement,
including realization and foreclosure on the Collateral.
(c) If a Trigger Event relating to a default by the Manager under the
Management Agreement shall have occurred and is continuing, and GATC is
terminated as Manager under the Management Agreement, the Collateral Agent shall
be authorized to send the LockBox Change Notice to the LockBox Bank.
(d) The proceeds of any sale, disposition or other realization or
foreclosure by the Collateral Agent upon the Collateral or any portion thereof
shall be governed by this Section 4.4(d). Any non-cash proceeds resulting from
such liquidation of the Collateral shall be held by the Collateral Agent for the
benefit of the Beneficiaries until later sold or otherwise converted into cash,
at which time the Collateral Agent shall transfer any cash proceeds net of
expenses resulting from liquidation of the Collateral (i) in accordance with
Section 3.4 hereof so long as any Lender Loan or Assumed Debt are outstanding
and (ii) thereafter, at the direction of the Required Beneficiaries.
Section 4.5. Receipt of Money or Proceeds. Each Beneficiary hereby
----------------------------
agrees that if, at any time during the term of this Agreement, such Beneficiary
receives any payment or distribution of assets of the Company of any kind or
character, whether monies or cash proceeds resulting from liquidation of the
Collateral, other than in accordance with the terms of this Agreement, such
Beneficiary shall hold such payment or distribution in trust for the benefit of
the Collateral Agent on behalf of all Beneficiaries and shall immediately remit
such payment or distribution to the Collateral Agent.
Section 4.6. Additional Beneficiaries. Each Person replacing any of the
------------------------
Beneficiaries and each Person (or trustee or agent thereof) to which the Company
incurs an obligation for the payment of any Lease obligations or Assumed Debt,
is required to become a party to this Agreement, and any person which executes
and delivers a counterpart to this Agreement and is designated as a Beneficiary
pursuant to the terms of the Designation Letter, shall become a party hereto,
shall be bound by and subject to the terms and conditions hereof and the
covenants, stipulations and agreements contained herein.
SECTION 5.
THE COLLATERAL AGENT
Section 5.1. Appointment and Duties of Collateral Agent. (a) Subject to
------------------------------------------
Section 5.2 hereof, each Beneficiary hereby designates and appoints The First
National Bank of Chicago
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<PAGE>
to act as the Collateral Agent under this Agreement, and each of the
Beneficiaries hereby authorizes The First National Bank of Chicago, as the
Collateral Agent, to take such actions on its behalf under the provisions of
this Agreement and to exercise such powers and perform such duties as are
expressly delegated to the Collateral Agent by the terms of this Agreement,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in the Lender Documents,
Operative Agreements or the Company Documents, the Collateral Agent shall not
have any duties or responsibilities, except those expressly set forth in this
Agreement, and no implied covenants, functions or responsibilities shall be read
into this Agreement or otherwise exist against the Collateral Agent. The
Collateral Agent shall not be liable for any action taken or omitted to be taken
by it hereunder or under any Company Document, or in connection herewith or
therewith, or in connection with the Collateral, unless caused by its gross
negligence or willful misconduct.
(b) Notwithstanding anything to the contrary in this Agreement or any
Lender Document, Operative Agreement or Company Document, the Collateral
Agent shall not exercise any rights or remedies under this Agreement, or
give any consent under any Company Documents or this Agreement, or enter
into any agreement amending, modifying, supplementing or waiving any
provision of any Company Document or including this Agreement unless it
shall have been directed to do so in writing by the Required Beneficiaries.
Section 5.2. Rights of Collateral Agent; Limitation of Liability. (a)
---------------------------------------------------
The Collateral Agent may at any time, both before and after any Trigger Event,
delegate any of its duties under this Agreement to agent(s) or attorney(s)-in-
fact, and shall be entitled to rely fully on the advice of counsel or other
experts (including accountants, broker-dealers, investment bankers, and similar
professionals) concerning all matters. If the Collateral Agent elects to utilize
an agent, it shall not have any duty to monitor nor be responsible for the
misconduct or negligence of any agent appointed with due care. Except as
otherwise expressly provided in this Agreement, at no time shall the Collateral
Agent have any duty or responsibility with respect to the safekeeping,
management, administration, preservation, operation, sufficiency, value, or
condition of any Collateral, nor any duty or responsibility to take any action,
including any execution or filing, to perfect or maintain any security interest
in any Collateral or any priority, nor to monitor the same.
(b) Neither the Collateral Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall (i) be liable for
any action lawfully taken or omitted to be taken by it under or in
connection with this Agreement or any Company Document (except for its
gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Beneficiaries for any recitals, statements,
representations or warranties made by the Company or any representative
thereof contained in this Agreement or any Company Document or in any
certificate, report, statement or other document referred to or provided
for in, or received by the
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Collateral Agent under or in connection with, this Agreement or any Company
Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any Company Document or
for any failure of the Company to perform their obligations hereunder or
thereunder. The Collateral Agent shall not be under any obligation to any
Beneficiary to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this Agreement or
any Company Document, or to inspect the properties, books or records of the
Company.
(c) The Collateral Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, facsimile, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected by the
Collateral Agent. In connection with any request of the Required
Beneficiaries, the Collateral Agent shall be fully protected in relying on
a certificate of any Person, signed by an Authorized Representative of such
Person, which certificate shall state that the Person signing such
certificate is an Authorized Representative of such Person and shall state
specifically the Company Document and provision thereof pursuant to which
the Collateral Agent is being directed to act. The Collateral Agent shall
be entitled to rely, and shall be fully protected in relying on such
certificate. The Collateral Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any Company Document
(i) if such action would, in the reasonable opinion of the Collateral
Agent, be contrary to law or the terms of this Agreement or the Company
Document, (ii) if such action is not specifically provided for in this
Agreement or such Company Document, it shall not have received any such
advice or concurrence of the Required Beneficiaries as it deems appropriate
or (iii) if, in connection with the taking of any such action that would
constitute an exercise of remedies under this Agreement or any Company
Document, it shall not first be indemnified to its satisfaction by the
Beneficiaries against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action.
The Collateral Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any Company Document in
accordance with a request of the Required Beneficiaries (to the extent that
the Required Beneficiaries are expressly authorized to direct the
Collateral Agent to take or refrain from taking such action), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Beneficiaries.
(d) The Collateral Agent shall not be deemed to have actual,
constructive, direct or indirect knowledge or notice of the occurrence of
any Event of Default,
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Lease Event of Default or Trigger Event unless and until a Responsible
Officer of the Collateral Agent has received a written notice or a
certificate from a Beneficiary stating that an Event of Default, Lease
Event of Default or Trigger Event has occurred under their respective
Lender Documents, Operative Agreements or Company Documents. The Collateral
Agent shall have no obligation whatsoever either prior to or after
receiving such notice or certificate to inquire whether an Event of
Default, Lease Event of Default or a Trigger Event has in fact occurred and
shall be entitled to rely conclusively, and shall be fully protected in so
relying, on any such notice or certificate so furnished to it. No provision
of this Agreement shall require the Collateral Agent to expend or risk its
own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or under any Company Document or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. In the
event that the Collateral Agent receives such a notice of or certificate
regarding the occurrence of any Trigger Event, the Collateral Agent shall
give notice thereof to the Beneficiaries. The Collateral Agent shall take
such action with respect to such Trigger Event as so requested pursuant to
Sections 4.2, 4.3 and 4.4 hereof.
(e) The Company will pay the Collateral Agent upon demand the amount
of any and all compensation for its services as may be agreed with the
Company from time to time and reasonable out-of-pocket expenses, including
the reasonable fees and expenses of its counsel (and any local counsel) and
of any experts and agents, which the Collateral Agent may reasonably incur
in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement
(whether through negotiations, legal proceedings or otherwise) of any of
the rights of the Collateral Agent or the Beneficiaries hereunder or under
the Company Documents or (iv) the failure by the Company to perform or
observe any of the provisions hereof or of any Company Document.
Section 5.3. Lack of Reliance on the Collateral Agent. Each of the
----------------------------------------
Beneficiaries expressly acknowledges that neither the Collateral Agent nor any
of its officers, directors, employees, agents or attorneys-in-fact has made any
representations or warranties to it and that no act by the Collateral Agent
hereinafter taken, including, without limitation, any review of the affairs of
the Company, shall be deemed to constitute any representation or warranty by the
Collateral Agent to any Beneficiary. Each Beneficiary represents that it is not
relying on the Collateral Agent to grant, perfect and maintain the pledge of,
security interest in, and priority of, the Collateral; provided that the
Collateral Agent shall be required to perform its obligations under this
Agreement. Except for notices, reports and other documents expressly required to
be furnished to the Beneficiaries by the Collateral Agent hereunder, the
Collateral Agent shall not have any duty or responsibility to provide any
Beneficiary with any credit or
34
<PAGE>
other information concerning the business, operations, property, financial and
other condition or creditworthiness of the Company which may come into the
possession of the Collateral Agent or any of its officers, directors, employees,
agents or attorneys-in-fact.
Section 5.4. Indemnification; Bankruptcy. The Company hereby agrees to
---------------------------
indemnify the Collateral Agent and each of its officers, directors,
shareholders, controlling persons, employees, agents and servants (each an
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities, obligations penalties, actions, causes of action, judgments, suits,
costs, expenses or disbursements (including, without limitation, reasonable
attorneys' and consultants' fees and expenses) (collectively "Damages") of any
kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against any Indemnified Party (or which may be claimed against any
Indemnified Party by any Person) by reason of, in connection with or in any way
relating to or arising out of any Collateral or any other documents or
transactions in connection with or relating thereto, unless due to the gross
negligence or willful misconduct of such Indemnified Party. The Company further
shall, upon demand by any Indemnified Party, pay to such Indemnified Party all
reasonable costs and expenses incurred by such Indemnified Party in enforcing
any rights under Company Documents, including reasonable fees and expenses of
counsel. The agreements in this Section 5.4 shall survive the payment or
satisfaction in full of the Secured Obligations and the resignation or removal
of the Collateral Agent or the termination of this Agreement and shall be
without duplication of any amounts due to an Indemnified Party under any other
Company Document, Lender Document or Operation Agreement.
Section 5.5. Resignation or Removal of the Collateral Agent. The
----------------------------------------------
Collateral Agent may resign as Collateral Agent upon ninety (90) days' notice to
the Beneficiaries and may be removed at any time with or without cause by the
Required Beneficiaries, with any such resignation or removal to become effective
only upon the appointment of a successor Collateral Agent under this Section
5.5. If no successor Collateral Agent shall have been so appointed within ninety
(90) days, the resigning Collateral Agent may petition any court of competent
jurisdiction for the appointment of a new Collateral Agent. The Company shall
have the right to remove the Collateral Agent upon ninety (90) days' notice to
the Beneficiaries with or without cause, effective upon the appointment of a
successor Collateral Agent under this Section 5.5, which is reasonably
acceptable to the Required Beneficiaries. If the Collateral Agent shall resign
or be removed as Collateral Agent by the Required Beneficiaries or the Company,
as applicable, then the Required Beneficiaries shall (and if no such successor
shall have been appointed within ninety (90) days of the Collateral Agent's
resignation or removal, the Collateral Agent may) appoint a successor agent for
the Beneficiaries, which successor agent shall be reasonably acceptable to the
Company, whereupon such successor agent shall succeed to the rights, powers and
duties of the "Collateral Agent", and the term "Collateral Agent" shall mean
such successor agent effective upon its appointment, and except as provided in
Section 5.4 above, the former Collateral Agent's rights, powers and duties as
Collateral Agent shall be terminated, without any other
35
<PAGE>
or further act or deed on the part of such former Collateral Agent (except that
the resigning Collateral Agent shall deliver all Collateral then in its
possession to the successor Collateral Agent) or any of the Beneficiaries. After
any retiring Collateral Agent's resignation or removal hereunder as Collateral
Agent, the provisions of this Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Collateral Agent.
Section 5.6. Relationships with Collateral Agent. The Collateral Agent
-----------------------------------
and its Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with any party to any of the Operative Agreements or any
of their Affiliates as though the Collateral Agent were not the Collateral Agent
hereunder.
SECTION 6.
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY
Section 6.1. Representations and Warranties. The Company represents and
------------------------------
warrants to the Collateral Agent and the Beneficiaries as follows:
(a) Due Organization. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Delaware,
is duly licensed or qualified and in good standing in each jurisdiction in which
the failure to so qualify would have a material adverse effect on its ability to
carry on its business as now conducted or to enter into and perform its
obligations under the Company Documents and the Operative Agreements to which
the Company is a party, has the corporate power and authority to carry on its
business as now conducted, and has the requisite power and authority to execute,
deliver and perform its obligations under the Company Documents and the
Operative Agreements to which the Company is a party.
(b) Special Purpose Status. The Company has not engaged in any
----------------------
activities since its incorporation other than those incidental to its
incorporation and other appropriate corporate steps including the issue of
shares and arrangements for the payment of fees to its directors, the leasing
and subleasing of the Equipment and the execution of the Company Documents and
the Operative Agreements to which the Company is a party and the activities
referred to in or contemplated by such agreements.
(c) Non-Contravention. The creation of the Security Interests and
-----------------
the execution, delivery and performance by the Company of this Agreement and
compliance by the Company with all of the provisions hereof do not and will not
contravene any law or regulation, or any order of any court or governmental
authority or agency applicable to or binding on the Company or any of its
properties, or contravene the provisions of, or constitute a default by the
Company under, or result in the creation of any Lien (except for Permitted
36
<PAGE>
Liens) upon the property of the Company under its certificate of incorporation
or by-laws or any indenture, mortgage, contract or other agreement or instrument
to which the Company is a party or by which the Company or any of its property
is bound or affected.
(d) Due Authorization, Validity and Enforceability. This Agreement
----------------------------------------------
has been duly authorized by all necessary corporate action executed and
delivered by the Company, and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity.
(e) No Trigger Event. No Trigger Event has occurred and is
----------------
continuing and to the knowledge of the Company, no event with which the giving
of notice and/or the passage of time or both would constitute a Trigger Event
has occurred.
(f) No Liens. There exists no Lien other than the security interests
--------
created by or pursuant to this Agreement and the other Company Documents and the
Operative Agreements to which the Company is a party over the assets or
undertaking of the Company which, had this Agreement been executed, would rank
in priority to or pari passu with the Security Interests.
(g) No Consents. All consents, approvals (including shareholder
-----------
approval, if necessary), authorizations or other orders of all regulatory
authorities required for or in connection with the execution and performance of
this Agreement by the Company and the creation of the security therefor have
been obtained and are in full force and effect and not contingent upon
fulfillment of any condition.
(h) No Litigation. There are no proceedings pending or, to the
-------------
knowledge of the Company, threatened against the Company in any court or before
any governmental authority or arbitration board or tribunal.
(i) Employees, Subsidiaries. The Company has no employees or
-----------------------
subsidiaries.
(j) Security Interests. The Company is or will be, at the point at
------------------
which the Collateral becomes subject to the Security Interests for the Secured
Obligations created by this Agreement, the beneficial owner of all of such
Collateral free from all Liens and claims whatsoever other than Permitted Liens.
(k) [On or before [August __], 1998, all filings, recordings,
registrations and other actions have been made, obtained and taken in all
relevant jurisdictions that are
37
<PAGE>
necessary to create and perfect the Liens in all right, title, estate and
interest of the Company in the Collateral covered, subject to no prior, equal or
junior Liens.]
(l) No Other Conditions. All acts, conditions and things required to
-------------------
be done, fulfilled and performed in order (a) to enable the Company to enter
into, exercise its rights under and perform and comply with the obligations
expressed to be assumed by it in this Agreement, (b) to ensure that the
obligations expressed to be assumed by it in this Agreement are legal and
binding and (c) to make this Agreement admissible in evidence in its
jurisdiction of incorporation and operation have been done, fulfilled and
performed.
(m) No Filing. Under the law of New York and the United States in
---------
force at the date hereof, it is not necessary or desirable that this Agreement
be filed, recorded or enrolled with any court or other authority in any such
jurisdictions or that any stamp, registration or similar tax be paid on or in
relation to this Agreement.
(n) Lockbox Bank and Accounts. The Lockbox Bank is the only
-------------------------
institution holding any lockbox accounts for the receipt of payments from
obligors in respect of the Collateral. On or before [August __], 1998, all
obligors of the Collateral will have been instructed by invoice or otherwise to
make payments only to a Lockbox or the Collection Account, as applicable, and
such instructions are in full force and effect.
Section 6.2. General Covenants. The Company covenants with the
-----------------
Collateral Agent and the Beneficiaries as follows:
(a) No Liens. The Company will not incur, create, assume or suffer
--------
to exist upon any of the Collateral any Lien whatsoever, except for the rights
of the Sublessees under the Subleases and the Security Interests pursuant to
this Agreement.
(b) No Disposition. Except with the prior written consent of the
--------------
Collateral Agent and the Required Beneficiaries or as contemplated by this
Agreement or the Operative Agreements, the Company will not sell or otherwise
dispose of any of the Collateral or any interest therein or agree or attempt or
purport to do so. [Except with the prior written consent of the Collateral Agent
and the Required Beneficiaries, the Company will not sell, transfer, pledge,
assign or otherwise dispose of the [1998-1 SUBI Certificate] (as defined in the
Supplement 98-1 to the Management and Services Agreement dated as of [September
30, 1997] between GATC and the General American Marks Company (the "Marks
Company")) evidencing an undivided 100% interest in the [1998-1 SUBI Portfolio]
of the Marks Company, a Delaware business trust. Amounts received by the Company
in respect of such certificate shall be deposited in the Collection Account and
applied as provided in Section 3.4.
(c) No Accounts. Except as contemplated herein, the Company will not
-----------
have an interest in any bank account (other than the Accounts and other than any
account
38
<PAGE>
which may be required to be established as a necessary consequence of or in
order to invest in or otherwise acquire a Permitted Investment) unless (i) any
such further account and the Company's interest therein shall be further charged
or otherwise secured in favor of the Collateral Agent on terms consistent with
the Accounts and (ii) there shall have been delivered to the Collateral Agent
and each Rating Agency an opinion of counsel reasonably satisfactory to them to
the effect that the Collateral Agent has a duly perfected security interest in
such account, subject to customary exceptions which are no more extensive than
those indicated in any opinion of counsel to the Company delivered on the
Closing Date.
(d) Notices. If at any time any creditor of the Company seeks to
-------
enforce any judgment or order of any competent court or other competent tribunal
against any of the Collateral, the Company shall (i) promptly give written
notice to such creditor and to such court or tribunal of the Collateral Agent's
interests therein; (ii) if at any time an examiner, administrator,
administrative receiver, receiver, trustee, custodian, sequestrator, conservator
or other similar appointee (an "Insolvency Appointee") is appointed in respect
of any secured creditor or any of their assets, promptly give notice to such
appointee of the Collateral Agent's interests therein; and (iii) notify the
Collateral Agent thereof in either case. The Company will not voluntarily
appoint or cause to be appointed or commence any proceeding to appoint any
Insolvency Appointee over all or any of its property.
(e) Compliance with Relevant Documents. The Company will comply with
----------------------------------
and perform all its obligations under this Agreement, the other Company
Documents and the Operative Agreements to which the Company is a party and the
Company will use its commercially reasonable efforts to procure that the
Manager, the Insurance Manager and each other party to a Company Document each
complies with their respective obligations thereunder and forthwith give notice
in writing to the Collateral Agent of any breach by the Company or any of such
other parties (of which it has knowledge) of any of the covenants or provisions
contained in the Company Documents and the Operative Agreements to which the
Company is a party, except in each case to the extent that any such breach could
not reasonably be expected to have a material adverse effect on the Company or
the Company's ability to perform its obligations under the Company Documents or
the Operative Agreements to which the Company is a party.
(f) Information. The Company will at all times give to the
-----------
Collateral Agent such information as the Collateral Agent may reasonably require
for the purpose of the discharge of the trusts, powers, rights, duties,
authorities and discretions vested in it hereunder, under any other Company
Document or by operation of law.
(g) Further Assurances. The Company will comply with all reasonable
------------------
directions given to it by the Collateral Agent to perfect the Security Interests
in the Collateral. The Company will execute such further documents and do all
acts and things as the Collateral Agent may require at any time or times to give
effect to the Company Documents.
39
<PAGE>
(h) No Effect on Security Interest. Except as otherwise provided in
------------------------------
this Agreement, the Company will not agree to the amendment of any Company
Document unless the Collateral Agent has confirmed to the Company that it has
received from legal counsel acceptable to it an opinion to the effect that such
amendment will not result in the Security Interests being prejudiced.
(i) Restrictions on Certain Actions. The Company (i) will not take,
-------------------------------
or knowingly permit to be taken, any action which would amend, terminate or
discharge or prejudice the validity or effectiveness or priority of the Security
Interests or permit any party to any of the Company Documents whose obligations
form part of the security created by this Agreement to be released from such
obligations except, in each case as permitted or contemplated by this Agreement,
or the other Company Documents or the Operative Agreements to which the Company
is a party and (ii) will not knowingly take, or knowingly permit to be taken,
any action which, subject to the performance of its obligations under the
Company Documents and the fiduciary obligations of the members of its board of
directors, would reasonably be expected to result in the lowering or withdrawal
of the then current rating of any Rated Security.
(j) Subsidiaries. Except with the consent of the Required
------------
Beneficiaries, the Company will not have or establish any subsidiaries.
(k) Restrictions on Dividends. The Company shall not declare or pay
-------------------------
any dividend or make any other payment on its share capital or to the holders of
its share capital, as such (other than dividends payable in share capital), or
purchase, redeem or otherwise acquire or retire for value, any such share
capital of the Company except out of funds available to the Company pursuant to
clause (xiii) of Section 3.4.
(l) Business Restrictions. The Company shall not engage in any
---------------------
business activity other than leasing and subleasing the Equipment pursuant to
the Leases and the Subleases, maintaining the insurance provided for in the
Insurance Agreement relating to the Equipment, preserving, exercising or
enforcing its rights, under any Company Documents or Operative Agreements to
which the Company is a party, entering into and performing its obligations under
the Company Documents and such Operative Agreements, applying its funds and
making payments in accordance with the Company Documents and such Operative
Agreements and engaging in any transaction reasonably incidental thereto.
(m) Restriction on Loans and Guarantees. The Company shall not make
-----------------------------------
any loan, advance or guarantee to any Person other than (i) indemnities under
the Company Documents, (ii) indemnities under the Operative Agreements to which
the Company is a party, and (iii) advances as may be made in the ordinary course
of business in favor of Sublessees under the Subleases.
40
<PAGE>
(n) Restriction on Consolidation and Merger. The Company (a) shall
---------------------------------------
not consolidate or merge into any other Person; (b) shall not permit any other
Person to consolidate with or merge into the Company; (c) shall not, directly or
indirectly, transfer, convey, sell (other than pursuant to the Participation
Agreements on the Closing Date), lease (other than pursuant to a Sublease) or
otherwise dispose of all or substantially all of its properties and assets as an
entirety; and (d) shall not (i) acquire capital stock or other ownership
interests of any other Person such that such Person becomes a subsidiary of the
Company or (ii) directly or indirectly, purchase, lease, or otherwise acquire
all or substantially all of the property and assets of any Person as an entirety
or any existing business (whether existing as a separate entity, subsidiary,
division, unit or otherwise) of any Person.
(o) Restriction on Assets Dealings. Subject to the last sentence of
------------------------------
this Section 6.2, the Company shall not sell, transfer, release or otherwise
dispose of any of, or grant options, warrants or other rights with respect to,
any of its assets to any Person.
(p) Dealings with Stock. The Company shall not issue, deliver or sell
-------------------
any additional shares or other capital stock of the Company, except to GATC.
(q) Constituent Documents. The Company shall not amend, modify or
---------------------
supplement its By-laws and Certificate of Incorporation without the consent of
the Required Beneficiaries.
(r) Directors' Remuneration. The Company shall not pay any fees to
-----------------------
its directors other than its independent directors.
(s) Management. The Company shall at all times be a party to the
----------
Management Agreement and shall, if necessary, take any steps required of it in
connection with the appointment of any Successor Manager thereunder. The
Company shall at all times procure that it is party to the Administrative
Services Agreement or a substitute agreement substantially similar thereto.
(t) Insurance Agreement. The Company shall at all times be a party to
-------------------
the Insurance Agreement and shall maintain the insurance provided for under the
Leases, and shall, if necessary, take any steps required of it in connection
with the appointment of any Successor Insurance Manager thereunder.
(u) Existence. The Company will do or cause to be done all things
---------
necessary to preserve and keep in full force and effect its existence and form,
rights (charter and statutory) and franchises.
41
<PAGE>
(v) Limitation on Transactions with Affiliates and Related Persons.
--------------------------------------------------------------
Other than the Company Documents and the Operative Agreements to which the
Company is a party on the Closing Date, the Company shall not directly or
indirectly enter into any transaction (including, without limitation, the
purchase, sale, lease or exchange of property, the rendering of any service or
the making of any loan or advance, with any Affiliate, unless its Board of
Directors shall determine in its good faith judgment and evidenced by a Board
Resolution that:
(1) the terms of such transaction are in the best interests of
the Company; and
(2) such transaction is on terms no less favorable to the Company
than those that could be obtained in a comparable arm's length transaction
with an entity that is not an Affiliate of the Company.
(w) Limitation on Indebtedness. The Company shall not create or incur
--------------------------
or suffer to exist any additional indebtedness other than in accordance with the
Company Documents and the Operative Agreements to which the Company is a party.
Notwithstanding anything to the contrary contained in this Section 6.2, it
is understood and agreed that the Company shall have full right, power and
authority to deal with the Equipment Units, the Subleases and the other Company
Documents in the ordinary course of its railcar leasing business, including,
without limitation, the right, power and authority from time to time to amend,
modify, supplement, terminate, and extend Subleases, to enter into new or
additional Subleases and to release Sublessees from all or any part of their
obligations under Subleases, subject, however, to the security interest granted
in Section 2.1(a), the express provisions of Sections 6.3 and 6.4 hereof and the
express provisions of the Leases and the Operative Agreements.
Section 6.3. Covenants. The Company shall at all times:
---------
(a) not commingle its assets with those of any Person, including any
Affiliate, except with respect to the Lockbox Accounts.
(b) conduct its business separate from any direct or ultimate parent
of the Company.
(c) maintain separate financial statements from those of any other
Person.
(d) pay its own expenses and liabilities and pay the salaries of its
own employees, if any, from its own funds.
42
<PAGE>
(e) maintain an "arm's-length relationship" with its Affiliates.
(f) not guarantee or become obligated for the debts of any other
Person and not hold out its credit as being available to satisfy the obligations
of others.
(g) use separate stationery, invoices and checks and hold itself out
as a separate and distinct entity from any other Person.
(h) observe all corporate formalities required by the law of its
jurisdiction of incorporation.
(i) not acquire obligations or securities of any Person, except
Permitted Investments.
(j) allocate fairly and reasonably overhead for shared office space,
if any.
(k) except as for the Security Interests, not pledge its assets
(except cash available to the Company in the Excess Cash Account) for the
benefit of any other Person (other than to the related Indenture Trustee in
connection with the assumption of the Equipment Notes pursuant to Section 3.6 of
any Initial Indenture) or make any loans or advances to any Person.
(l) correct any known misunderstanding regarding its separate identity
from other Persons.
(m) maintain adequate capital in light of its contemplated business
operations.
(n) maintain books and records (in accordance with generally accepted
accounting principle in the United States) separate from any other Person at its
principal office which show a true and accurate record in United States dollars
of all business transactions arising out of and in connection with the conduct
of the Company and the operation of its business in sufficient detail to allow
preparation of tax returns required to be prepared and the maintenance of the
Accounts.
(o) maintain accounts separate from any other person or entity other
than the Lockbox.
(p) conduct its business in its own name.
43
<PAGE>
Section 6.4. Operation of Equipment; Leases. The Company covenants with
------------------------------
the Collateral Agent and the Beneficiaries as follows with respect to the
operation of each Equipment Unit and the Leases:
(a) Licenses, etc. The Company shall obtain or cause to be obtained
-------------
all necessary certificates, licenses, permits and authorizations required for
the use and operation by the Company of the Equipment from time to time and will
maintain or cause to be maintained each such certificate, license, permit and
authorization in full force and effect for so long as the same shall be
required; provided, however, that the Company may, in good faith and by
appropriate proceedings diligently conducted, contest the validity or
application of any such certificate, license, permit or authorization in any
reasonable manner which does not (i) materially interfere with the use,
possession, operation or return of the Equipment, or (ii) materially adversely
affect the rights or interests of Lessor and the Indenture Trustee in the
Equipment or under the Leases, (iii) otherwise expose Lessor, the Indenture
Trustee or any Participant to criminal sanctions or (iv) release the Company
from the obligation to return the Equipment in compliance with the applicable
provisions of any Lease.
(b) Operation Outside the United States. The Company shall not allow
-----------------------------------
more than 49% of the Company Fleet (as allocated on a pro-rata basis from
mileage records provided annually to the Manager by the AAR for the Total
Managed Fleet) to be operated outside the United States at the same time.
(c) [Subleases with Mexican Entities. The Company shall not, nor
-------------------------------
shall the Company permit the Manager on its behalf to, at any time, (A) sublease
to a sublessee organized under the laws of Mexico or any state thereof (a
"Mexican Sublessee") if, after giving effect to such sublease, the percentage of
[the Company Fleet] subleased to Mexican Sublessees exceeds the lesser of 20%
and the percentage of Manager's Fleet (including for this purpose, railcars
owned or managed by Manager) leased to Mexican Sublessees, or (B) sublease more
than 50 Equipment Units to any single Mexican Sublessee or Mexican Sub-Sublessee
(other than a Mexican Affiliate or a Mexican Sub-Sublessee [with satisfactory
credit quality to be agreed upon]).]
(d) Restriction on Exercise of Lease Options. The Company will not
----------------------------------------
exercise any purchase option or obsolescence termination option under any Lease
(i) if any Lease Event of Default or an Event of Default under any Lender
Document shall have occurred and be continuing (ii) unless all amounts required
to be on deposit in the Accounts are on deposit therein, or (iii) unless funds
for the payment of the Termination Value and any Premium Amount, break funding
costs, swap breakage costs, or other prepayment or early payment premium
pursuant to the related Operative Agreements and other amounts payable in
connection therewith shall be available to the Company from (a) the proceeds
from the sale of such Equipment Units, (b) insurance proceeds (c) a capital
contribution from GATC, or (c) monies available to the Company from the Excess
Cash Account.
44
<PAGE>
(e) Assumption of Debt. The Company shall not assume any debt
------------------
pursuant to any option in any lease unless, after giving effect to the
assumption of such debt by the Company, (i) each of the Rating Agencies shall
have confirmed (x) its initial rating with respect to any Rated Security and (y)
that the assumption of such debt by the Company will not result in the lowering
of its then current rating on any Rated Security, and (ii) the Rating Agencies
shall have received a "bring-down" opinion from counsel to the Company with
respect to the non-consolidation of the Company in the event of a bankruptcy of
GATC.
(f) Additional Leases. The Company shall not enter into any Lease or
-----------------
related documents other than the Initial Leases, the related Operative
Agreements and the Subleases without the prior written consent of each Lessor
which is then a Beneficiary under this Agreement and unless each of the Rating
Agencies, after giving effect to such transaction, shall have confirmed (x)
their initial ratings with respect to any Rated Security and (y) that the
Company entering into such Lease and related documents will not result in the
lowering of their rating on any Rated Security.
SECTION 7.
REPRESENTATIONS AND WARRANTIES
OF THE BENEFICIARIES
Section 7.1. Representations and Warranties. Each of the Beneficiaries
------------------------------
hereby makes the following representations and warranties as of the date hereof
or as of any date such Beneficiary executes and delivers a counterpart of this
Agreement and is designated as a Beneficiary pursuant to the Designation Letter,
with respect to itself and for the benefit of the other Beneficiaries:
(a) It is a corporation (or other such entity as applicable) duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, as the case may be, and is duly
qualified to do business in, and is in good standing in all jurisdictions where
the nature of its business makes such qualification necessary, except where the
failure to effect such qualification would not have a material adverse effect
upon its ability to perform its obligations pursuant to this Agreement.
(b) It has all necessary corporate or other relevant power, as the
case may be, to execute, deliver and perform under this Agreement. All action
on its part that is required for the authorization, execution, delivery and
performance of this Agreement has been duly and effectively taken; and the
execution, delivery and performance of this Agreement do not require the
approval or consent of any shareholder or other owner or the holder or trustee
of any debt or other of its obligations which has not been obtained.
45
<PAGE>
(c) This Agreement has been duly executed and delivered by it, and
constitutes the valid and binding obligation of it, enforceable against it in
accordance with the terms hereof, except as such enforceability (i) may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws of general applicability
affecting the enforcement of creditors' rights and remedies generally and (ii)
is subject to general principles of equity and the effect of public policy
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
(d) Neither the execution, delivery and performance of this Agreement
nor the consummation of any of the transactions contemplated hereby nor
performance of or compliance with the terms and conditions hereof (i)
contravenes any material requirement of law applicable to it or (ii) constitutes
(x) a default under or results in the violation of the provisions in its
charter, certificate of incorporation, by-laws, or other formation or governance
document, as applicable, or (y) a material default of any indenture, loan or
credit agreement or any other agreement, lease, instrument or document to which
it is a party or by which it or its properties may be bound.
(e) To the best of its knowledge, there are no actions, suits or
proceedings at law or in equity or by or before any Governmental Authority now
pending or threatened which could reasonably be expected to have a material and
adverse effect on its performance of its obligations hereunder or which
questions the validity, binding effect or enforceability hereof, any action to
be taken pursuant hereto or any transactions contemplated hereby.
SECTION 8.
MISCELLANEOUS
Section 8.1. Agreement for Benefit of Parties Hereto. Nothing in this
---------------------------------------
Agreement, express or implied, is intended or shall be construed to confer upon,
or to give to, any Person other than the parties hereto (including any Persons
who have executed and delivered a Designation Letter) and their respective
successors and assigns and Persons for whom the parties hereto are acting as
agents or representatives, any right, remedy or claim under or by reason of this
Agreement or any covenant, condition or representation hereof, and the
covenants, representations and agreements contained in this Agreement are and
shall be for the sole and exclusive benefit of the parties hereto and their
respective successors and assigns and Persons for whom the parties hereto are
acting as agents or representatives.
Section 8.2. Severability. In case any one or more of the provisions
------------
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected and/or impaired thereby.
46
<PAGE>
Section 8.3. Notices. All notices, demands, certificates or other
-------
communications hereunder shall be in writing and shall be deemed sufficiently
given or served for all purposes when delivered personally, when sent by
certified or registered mail, postage prepaid, return receipt requested, or by
private courier service, or, if followed and confirmed by mail or courier
service notice, when telecopied, in each case, with the proper address as
indicated below or as set forth in any effective Designation Letter. Each party
may, by written notice given to the other parties, designate any other address
or addresses to which notices, certificates or other communications to them
shall be sent as contemplated by this Agreement. Notices shall be deemed to have
been given if and when received by an officer, manager or supervisor in the
department of the addressee specified for attention (unless the addressee
refuses to accept delivery, in which case they shall be deemed to have been
given when first presented to the addressee for acceptance). Until otherwise so
provided by the respective parties, and as otherwise provided in the relevant
Designation Letter, all notices, certificates and communications to each of them
shall be addressed as follows:
If to the Collateral Agent:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services Division
Fax No.: (312) 407-1708
Confirmation No.: (312) 407-8810
If to the Company:
General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
If to any Initial Indenture Trustee:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services Division
Fax No.: (312) 407-1708
Confirmation No.: (312) 407-8810
47
<PAGE>
If to any Initial Owner Trustee:
[Owner Trustee]
____________________________________
____________________________________
____________________________________
Attention: ________________________
Fax No.: _____________________
Confirmation No.: ________________
If to the Manager:
General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
If to the Insurance Manager:
General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
Section 8.4. Successors and Assigns. Whenever in this Agreement any of
----------------------
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included and all covenants, promises and agreements
in this Agreement by or on behalf of the respective parties hereto shall bind
and inure to the benefit of the respective successors and assigns of such
parties, whether so expressed or not.
Section 8.5. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each executed counterpart constituting an original but all
counterparts together constituting only one instrument.
SECTION 8.6. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL
-------------
GOVERN THIS AGREEMENT, EXCLUDING (TO THE GREATEST EXTENT A NEW YORK COURT WOULD
PERMIT) ANY RULE OF LAW THAT WOULD CAUSE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
48
<PAGE>
Section 8.7. Consent To Jurisdiction.
-----------------------
Each of the parties hereto hereby irrevocably and unconditionally:
(1) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Company Document, or for
recognition and enforcement of any judgment in respect hereof or thereof,
to the nonexclusive general jurisdiction of the courts of the State of New
York, the courts of the United States of America for the Southern District
of New York, and the appellate courts from any thereof;
(2) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(3) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form and mail), postage
prepaid, to each party hereto at its address set forth in Section 8.3
hereof, or at such other address of which the other parties shall have been
notified pursuant thereto; and
(4) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
Section 8.8. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY
--------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH THIS AGREEMENT.
Section 8.9. Amendment; Waiver. No amendment or waiver of any provision
-----------------
of this Agreement shall be effective unless the same shall be in writing and
signed by all the Beneficiaries, the Company and all other parties hereto, which
consents from all such parties shall not be unreasonably withheld, and any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, that any decrease in the Required
Liquidity Reserve Amount or the Required Cash Trapping Amount may only be made
if, after giving effect to any such decrease, each of the Rating Agencies shall
have confirmed (x) its initial rating with respect to any Rated Security and (y)
that the decrease in the Required Liquidity Reserve Amount and/or the Required
Cash Trapping Amount, as the case may be, will not result in the lowering of its
then current rating on any Rated Security. No delay on the part of any
Beneficiary in the exercise of any right, power or remedy shall
49
<PAGE>
operate as a waiver thereof, nor shall any single or partial waiver by such
Beneficiary of any right, power or remedy preclude any further exercise thereof,
or the exercise of any other right, power or remedy.
Section 8.10. Headings. Headings herein are for convenience only and
--------
shall not be relied upon in interpreting or enforcing this Agreement.
Section 8.11. Termination. This Agreement shall remain in full force and
-----------
effect until the Final Termination Date. Following the Final Termination Date,
Section 5.4(a) and (b) of this Agreement shall continue in full force and
effect.
Section 8.12. Entire Agreement. This Agreement, including the documents
----------------
referred to herein, embodies the entire agreement and understanding of the
parties hereto and supersedes all prior agreements and understandings of the
parties hereto relating to the subject matter herein contained.
Section 8.13. Limitation of Liability. Notwithstanding anything to the
-----------------------
contrary contained in this Agreement, the Company Documents and the Operative
Agreements, the liability and obligation of the Company to perform and observe
and make good the obligations contained in this Agreement and the Company
Documents shall not be enforced by any action or proceeding wherein damages or
any money judgment or any deficiency judgment or any judgment establishing any
personal obligation or liability shall be sought, collected or otherwise
obtained against any officer, director or shareholder (solely by reason of being
a shareholder but without prejudice to the obligations any shareholder may have
under any Company Document) or related Person of the Company or any Beneficiary,
and the Collateral Agent, for itself and its successors and assigns, and on
behalf of the other Beneficiaries and the Company, irrevocably waives any and
all right to sue for, seek or demand any such damages, money judgment,
deficiency judgment or personal judgment against any officer, director or
shareholder or related Person of the Company under or by reason of or in
connection with this Agreement and agrees to look solely to the Company and the
security and Collateral held under or in connection with the Company Documents
for the enforcement of such liability and obligation of the Company.
Section 8.14. Conflict With Other Agreements. Notwithstanding any other
------------------------------
provision hereof, in the event of any conflict between the terms of this
Agreement and the other Lender Documents, Operative Agreements or Company
Documents, the provisions of this Agreement shall control.
Section 8.15. Consequential Damages. In no event shall the Collateral
---------------------
Agent or any agent described in Section 5.2 hereof be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the
50
<PAGE>
Collateral Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action.
Section 8.16. No Petition in Bankruptcy. The Beneficiaries hereby agree
-------------------------
that, prior to the date which is one year and one day after the payment in full
of all outstanding Secured Obligations, (i) no Beneficiary shall authorize the
Company to commence a voluntary winding-up or other voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
the Company or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect in any jurisdiction or seeking the appointment of an
administrator, a trustee, receiver, liquidator, custodian or other similar
official of the Company or any substantial part of its property or to consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against the
Company, or to make a general assignment for the benefit of any Beneficiary or
any other creditor of the Company, and (ii) none of the Beneficiaries shall
commence or join with any other Person in commencing any proceeding against the
Company under any bankruptcy, reorganization, liquidation or insolvency law or
statute now or hereafter in effect in any jurisdiction.
Section 8.17. No Partnership Created. The parties hereto do not intend
----------------------
to create, and nothing herein shall be construed as creating, a partnership
under any applicable law.
* * *
51
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their duly authorized officers, all as of the date first
written above.
GENERAL AMERICAN RAILCAR
CORPORATION II, as Company
By:__________________________________
Name:________________________________
Title:_______________________________
GENERAL AMERICAN TRANSPORTATION
COMPANY, as Manager
By:__________________________________
Name:________________________________
Title:_______________________________
GENERAL AMERICAN TRANSPORTATION
COMPANY, as Insurance Manager
By:__________________________________
Name:________________________________
Title:_______________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as the Initial Indenture Trustee (1998-1)
By:__________________________________
Name:________________________________
Title:_______________________________
[OWNER TRUSTEE],
as the Initial Owner Trustee (1998-1)
By:__________________________________
Name:________________________________
52
<PAGE>
Title:_______________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as the Initial Indenture Trustee (1998-2)
By:__________________________________
Name:________________________________
Title:_______________________________
[OWNER TRUSTEE],
as the Initial Owner Trustee (1998-2)
By:__________________________________
Name:________________________________
Title:_______________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as the Initial Indenture Trustee (1998-3)
By:__________________________________
Name:________________________________
Title:_______________________________
[OWNER TRUSTEE],
as the Initial Owner Trustee (1998-3)
By:__________________________________
Name:________________________________
Title:_______________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as the Collateral Agent
By:__________________________________
Name:________________________________
Title:_______________________________
53
<PAGE>
Annex A
[FORM OF DESIGNATION LETTER]
[Date]
The First National Bank
of Chicago
One First National Plaza
Suite 0126
Chicago, Illinois 60670-0126
Re: General American Railcar Corporation II
Ladies and Gentlemen:
Reference is made to (i) the Collateral Agency and Intercreditor Agreement
(the "Intercreditor Agreement") dated as of August 1, 1998 among General
American Railcar Corporation II (the "Company"), General American Transportation
Corporation (the "Manager") (as defined in the Intercreditor Agreement), General
American Transportation Corporation, as Manager and Insurance Manager, the
Initial Owner Trustees, the Initial Indenture Trustees, any trustees or agents
under any other Company Documents and the Collateral Agent (as defined in the
Intercreditor Agreement) and (ii) [Describe New Company Documents]. Capitalized
terms used herein and not defined herein shall have the meanings set forth in
the Intercreditor Agreement.
The undersigned is the [Title] [Agent for the [Title] under the [New
Company Documents]].
The undersigned is delivering this Designation Letter pursuant to Section
4.6 of the Intercreditor Agreement in order to permit the undersigned [Insert
party to become Beneficiary] under the [New Company Documents] to become
Beneficiaries under the Intercreditor Agreement and to benefit from the
Collateral in accordance with the terms of the Intercreditor Agreement.
Attached hereto is a copy of the certificate to be delivered by the
Company.
1
<PAGE>
The undersigned [on behalf of itself and the [Title] accedes to and agrees
to be bound by all of the terms and provisions of the Intercreditor Agreement.
In furtherance thereof, the undersigned [on behalf of itself and the [Title]
agrees to execute a counterpart of the Intercreditor Agreement.
Our address for notices is:
[Insert Information]
Our wire transfer instructions are:
[Insert Information]
This Designation Letter may be executed in any number of counterparts, each
executed counterpart constituting an original but all counterparts together
constituting only one instrument.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS AGREEMENT, EXCLUDING
(TO THE GREATEST EXTENT A NEW YORK COURT WOULD PERMIT) ANY RULE OF LAW THAT
WOULD CAUSE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
NEW YORK.
[BENEFICIARY]
By:__________________________________
Name:________________________________
Title:_______________________________
Consented to by:
THE FIRST NATIONAL BANK
OF CHICAGO, as Collateral Agent
By:__________________________________
Name:________________________________
Title:_______________________________
2
<PAGE>
CERTIFICATE OF GENERAL AMERICAN RAILCAR CORPORATION II
I, [name], [title] of General American Railcar Corporation II, a Delaware
corporation (the "Company"), DO HEREBY CERTIFY on behalf of the Company that
-------
[ ] is the [ ] under the [New Company Documents].
WITNESS my hand this _____ day of _________, ______.
________________________________
Name:___________________________
Title:__________________________
3
<PAGE>
Schedule 1
GATC Affiliates Whose Railcars are Excluded from
Definition of GATC Fleet
1
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the _____ day of August, 1998, before me, a Notary Public in
and for said County and State, personally appeared ___________________________,
who being by me duly sworn, says that he is the ______________________________
of GENERAL AMERICAN RAILCAR CORPORATION II, that said instrument was signed on
August __, 1998 on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said association.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
2
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the ____ day of August, 1998, before me, a Notary Public in
and for said County and State, personally appeared ___________________, who
being by me duly sworn, says that he is the __________________ of GENERAL
AMERICAN TRANSPORTATION CORPORATION II, that said instrument was signed on
August __, 1998 on behalf of said corporation as Manager by authority of its
Board of Directors, and he acknowledged that the execution of the foregoing
instrument was the free act and deed of said corporation as Manager.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:_________________________
Notary Public Expires:
My Commission Expires:
Residing in___________________
3
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the ____ day of August, 1998, before me, a Notary Public in
and for said County and State, personally appeared ________________, who being
by me duly sworn, says that he is the ___________________ of GENERAL AMERICAN
TRANSPORTATION CORPORATION II, that said instrument was signed on August __,
1998 on behalf of said corporation as Insurance Manager by authority of its
Board of Directors, and he acknowledged that the execution of the foregoing
instrument was the free act and deed of said corporation as Insurance Manager.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
4
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the _____ day of ____________, 1998, before me, a Notary
Public in and for said County and State, personally appeared __________________,
who being by me duly sworn, says that he is the ____________ of THE FIRST
NATIONAL BANK OF CHICAGO, that said instrument was signed on August __, 1998
behalf of said bank as Initial Indenture Trustee (1998-1) by authority of its
Board of Directors, and he acknowledged that the execution of the foregoing
instrument was the free act and deed of said bank as Initial Indenture Trustee
(1998-1).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
5
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the ____ day of August, 1998, before me, a Notary Public in
and for said County and State, personally appeared _________________, who being
by me duly sworn, says that he is the _____________ of [OWNER TRUSTEE], that
said instrument was signed on August __, 1998 on behalf of said bank as Initial
Owner Trustee (1998-1) by authority of its Board of Directors, and he
acknowledged that the execution of the foregoing instrument was the free act and
deed of said bank as Initial Owner Trustee (1998-1).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
6
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the ____ day of August, 1998, before me, a Notary Public in
and for said County and State, personally appeared _________________, who being
by me duly sworn, says that he is the _________________ of THE FIRST NATIONAL
BANK OF CHICAGO, that said instrument was signed on August __, 1998 on behalf of
said bank as Initial Indenture Trustee (1998-2) by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said bank as Initial Indenture Trustee (1998-2).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
7
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the ___ day of August, 1998 before me, a Notary Public in and
for said County and State, personally appeared __________________, who being by
me duly sworn, says that he is the _________________ of [OWNER TRUSTEE], that
said instrument was signed on August __, 1998 on behalf of said bank as Initial
Owner Trustee (1998-2) by authority of its Board of Directors, and he
acknowledged that the execution of the foregoing instrument was the free act and
deed of said bank as Initial Owner Trustee (1998-2).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
8
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the _____ day of August, 1998, before me, a Notary Public in
and for said County and State, personally appeared ______________________, who
being by me duly sworn, says that he is the ______________________ of THE FIRST
NATIONAL BANK OF CHICAGO, that said instrument was signed on August __, 1998 on
behalf of said bank as Initial Indenture Trustee (1998-3) by authority of its
Board of Directors, and he acknowledged that the execution of the foregoing
instrument was the free act and deed of said bank as Initial Indenture Trustee
(1998-3).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
9
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the ____ day of August, 1998, before me, a Notary Public in
and for said County and State, personally appeared ___________________, who
being by me duly sworn, says that he is the ______________________ of [OWNER
TRUSTEE], that said instrument was signed on August __, 1998 behalf of said bank
as Initial Owner Trustee (1998-3) by authority of its Board of Directors, and he
acknowledged that the execution of the foregoing instrument was the free act and
deed of said bank as Initial Owner Trustee (1998-3).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
10
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this, the ____ day of August, 1998, before me, a Notary Public in
and for said County and State, personally appeared ____________________, who
being by me duly sworn, says that he is the ___________________ of THE FIRST
NATIONAL BANK OF CHICAGO, that said instrument was signed on August __, 1998 on
behalf of said bank as Collateral Agent by authority of its Board of Directors,
and he acknowledged that the execution of the foregoing instrument was the free
act and deed of said bank as Collateral Agent.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the date above mentioned.
______________________________
Name:
Notary Public
My Commission Expires:
Residing in___________________
11
<PAGE>
Exhibit 10.1
------------
FORM OF
-----------------------
OPERATION, MAINTENANCE, SERVICING
AND REMARKETING AGREEMENT(1998-1)
Dated as of August 1, 1998
Between
GENERAL AMERICAN RAILCAR CORPORATION II
and
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Manager
Covered Hopper and Tank Cars
-----------------------
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
<PAGE>
TABLE OF CONTENTS
SECTION 1.
DEFINITIONS
-----------
<TABLE>
SECTION 2.
APPOINTMENTS AND DUTIES OF MANAGER
<S> <C>
Section 2.1. Appointment......................................... 2
Section 2.2. Duties of the Manager............................... 2
SECTION 3.
MANAGER'S STANDARD OF PERFORMANCE
Section 3.1. Standards........................................... 6
Section 3.2. Conflicts of Interest............................... 9
Section 3.3. Event of Loss; Replacement Units.................... 9
Section 3.4. Similar Services.................................... 10
Section 3.5. Custody of Documents................................ 10
Section 3.6. No Greater Standards................................ 10
SECTION 4.
MODIFICATIONS
Section 4.1. Required Modifications.............................. 10
Section 4.2. Optional Modifications.............................. 11
SECTION 5.
COMPENSATION AND REIMBURSEMENT OF THE MANAGER
Section 5.1. Compensation of the Manager......................... 12
Section 5.2. Base Component...................................... 12
Section 5.3. Incentive Component................................. 13
Section 5.4. Reimbursable Services............................... 13
SECTION 6.
PAYMENTS
Section 6.1. Receipt of Payments................................. 14
Section 6.2. Lockboxes; Payments................................. 14
Section 6.3. Successor Lockbox Trustee........................... 16
Section 6.4. Mileage Credits..................................... 17
</TABLE>
i
<PAGE>
<TABLE>
SECTION 7.
REPORTS AND INFORMATION
<S> <C>
Section 7.1. Monthly Reports..................................... 17
Section 7.2. Annual Reports...................................... 17
Section 7.3. Equipment Reports................................... 18
Section 7.4. Compliance Information.............................. 18
Section 7.5. Company's Financial Reports......................... 18
Section 7.6. Rights of Inspection................................ 19
SECTION 8.
TERM OF AGREEMENT; TERMINATION
Section 8.1. Term................................................ 20
Section 8.2. Termination of Manager for Default.................. 20
Section 8.3. Remedies Upon Default............................... 21
Section 8.4. Replacement of the Manager.......................... 22
Section 8.5. Merger or Sale...................................... 22
SECTION 9.
INDEMNIFICATION
Section 9.1. Indemnification by Manager.......................... 22
Section 9.2. Indemnification by Company.......................... 23
Section 9.3. Claims Excluded..................................... 23
Section 9.4. Third Party Claims.................................. 23
Section 9.5. Cooperation......................................... 24
Section 9.6. Survival............................................ 24
SECTION 10.
REPRESENTATIONS AND WARRANTIES
Section 10.1. Representations of Company.......................... 25
Section 10.2. Representations of Manager.......................... 26
SECTION 11.
MISCELLANEOUS
Section 11.1. Table of Contents and Headings...................... 27
Section 11.2. The Manager as Independent Contractor............... 27
Section 11.3. Relations Among Parties............................. 27
Section 11.4. Governing Law....................................... 27
Section 11.5. Notices............................................. 27
Section 11.6. Entire Agreement; Amendment; Waivers................ 28
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 11.7. Assignment.......................................... 28
Section 11.8. Further Assurances.................................. 29
Section 11.9. Third Party Beneficiary............................. 29
Section 11.10. Counterparts........................................ 29
Section 11.11. Severability........................................ 29
Section 11.12. No Petition in Bankruptcy........................... 30
</TABLE>
APPENDICES AND SCHEDULES
Appendix A -- Definitions
Schedule 1 -- Description of Equipment
Schedule 6.2 -- Form of Lockbox Agreement with Lockbox Bank
Schedule 6.4 -- List of Marks
Schedule 7.1 -- Monthly Report Form
Schedule 7.2 -- Annual Report Form
iii
<PAGE>
OPERATION, MAINTENANCE, SERVICING
AND REMARKETING AGREEMENT
THIS OPERATION, MAINTENANCE, SERVICING AND REMARKETING AGREEMENT (this
"Agreement"), dated as of August 1, 1998, is made and entered into between
General American Transportation Corporation, a New York corporation, as manager
(in such capacity, together with any successor manager, the "Manager"), and
General American Railcar Corporation II, a Delaware corporation (the "Company").
W I T N E S S E T H
- - - - - - - - - -
A. The Company has acquired from General American Transportation
Corporation, a New York corporation ("GATC"), (i) certain railroad tank cars and
covered hopper cars (each railcar individually a "Unit" and all railcars
collectively the "Equipment"), as such Units are more fully described in
Schedule 1 to this Agreement, and (ii) all of GATC's right, title and interest
in and to the lease agreements respecting the Equipment in which GATC is the
lessor, such lease agreements being with customers of GATC (such lease
agreements and future lease agreements entered into by the Manager on behalf of
the Company respecting the Equipment pursuant to this Agreement are hereinafter
referred to as "Car Service Contracts" and such customers and future customers
under Car Service Contracts are hereinafter referred to as "Customers").
B. The Company has sold the Equipment to [Owner Trustee], as Owner
Trustee under [three] separate Trust Agreements, each dated as of August 1,
1998, with the Owner Participants therein named (such Owner Trustees under each
Trust Agreement being herein referred to collectively as the "Owner Trustees"
and, individually, as an "Owner Trustee"), and the Owner Trustees have
simultaneously leased the Equipment to the Company pursuant to the terms of
[three] separate Equipment Lease Agreements, each dated as of August 1, 1998
(collectively, the "Leases" and, individually, a "Lease").
C. The Company, The First National Bank of Chicago, as Collateral Agent
(the "Collateral Agent"), the Owner Trustees, the Indenture Trustees (as
hereinafter defined), the Manager and the Insurance Manager have entered into a
Collateral Agency and Intercreditor Agreement dated as of August 1, 1998 (the
"Intercreditor Agreement") providing, among other things, for the distribution
of Collections (as hereinafter defined) and the exercise of certain rights of
the Company under the Company Documents (as defined in the Intercreditor
Agreement).
D. GATC is engaged in the business of owning, leasing and managing
railcars for itself and others, and the Company desires to retain GATC, on the
terms and conditions set forth in this Agreement, to perform operating,
maintenance, servicing and remarketing services on behalf of the Company in
respect of the Equipment leased by the Company under the Leases and the related
Car Service Contracts.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the Company and the Manager hereby agree as follows:
SECTION 1.
DEFINITIONS
-----------
Unless otherwise defined herein, all capitalized terms used but not defined
herein have the meanings assigned to such terms in Appendix A to this Agreement.
SECTION 2.
APPOINTMENTS AND DUTIES OF MANAGER
----------------------------------
Section 2.1. Appointment. The Company hereby appoints the Manager to
-----------
act as the manager with respect to the Equipment, the Leases and the Car Service
Contracts effective as of the Closing Date and grants to the Manager the
authority to operate and maintain the Equipment as required by the terms of the
Leases, to administer the Leases and the Car Service Contracts relating to the
Equipment, to arrange for the storage, maintenance and re-lease of the Equipment
upon termination of the Car Service Contracts or any of them, and to collect
monies and make disbursements on behalf of the Company as contemplated or
required by the Car Service Contracts, the Intercreditor Agreement and the
Leases, and generally to manage and administer the operation of the Equipment,
the Car Service Contracts and the Leases, all on the terms and conditions
contained herein. The Manager shall manage each Unit from the date of its
acquisition by the Company until the date that the Manager's obligations with
respect to such Unit shall terminate pursuant to Section 8.1.
Section 2.2. Duties of the Manager. The Manager hereby accepts its
---------------------
appointment as manager under this Agreement and, subject to the terms and
conditions of this Agreement, agrees to use reasonable care and diligence
consistent with customary commercial practice as would be used by a prudent
Person in the railcar leasing industry but in all cases at the level of care and
diligence utilized by the Manager in the management of the Manager's Fleet and
as shall be required in order for the Company to perform its obligations under
the Leases (the "Services Standard"), and to provide and perform the following
services for or on behalf of the Company:
(a) Monitor the creditworthiness and performance of the Customers, as
appropriate, and discharge and perform the obligations of the Company under the
Car Service Contracts; provide all billing and collection services with respect
to collecting all Sublease Payments and payments due from other persons with
respect to the Equipment; maintain separate books and records reflecting the
financial condition and results of operations of the Company in accordance with
generally accepted accounting principles; account for and remit all sums due to
or for the account of the Company, as hereinafter set forth; and employ the
Manager's then
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standard collection procedures (including, where appropriate, the initiation of
litigation, the termination of Car Service Contracts, the repossession of Units
and the exercise of other remedies) in the event Sublease Payments and such
payments due from other persons are not timely paid.
(b) Maintain the Equipment (i) pursuant to the terms of the
applicable Leases and Car Service Contracts; (ii) according to prudent industry
practice, in good working order and in good physical condition for railcars of
similar age and usage, normal wear and tear excepted; (iii) in a manner
consistent with maintenance practices used by the Manager in respect of railcars
owned, leased or managed by the Manager and its Affiliates similar in type to
the Equipment; (iv) in accordance in all material respects with manufacturer's
warranties and all applicable insurance policies; and (v) in compliance in all
material respects with any applicable laws and regulations, including, without
limitation, the AAR rules and the Interchange Rules and FRA Rules and
Regulations.
(c) Prepare or cause to be prepared the necessary returns or other
filings for all Taxes imposed upon or against the Equipment or the Company of
whatever kind or nature and where it deems appropriate (or as otherwise directed
by the Company) protest the application of such taxes or the rate or amount of
assessment thereunder. The Manager shall pay such Taxes on behalf of the
Company using the Company's own funds; provided, however, that any Successor
Manager shall have no responsibility hereunder with respect to Taxes measured by
or upon the income of the Company. In the Manager's discretion (or as otherwise
directed by the Company), contest or defend against any Taxes imposed upon or
against the Equipment and seek revision or appeal from any such Taxes deemed
improper, all such actions to be in the name of the Company or the Manager as
Agent for the Company.
(d) Monitor and record movements of the Units, including (i) keeping
records pertaining to the movement of the Units, mileage and other compensation
earned and mileage and other compensation received with respect to such Units as
well as charges from railroads as a result of mileage adjustments; (ii) subject
to all rules and tariffs of the railroads, crediting such mileage and other
compensation, as and when received from Marks Company, to the appropriate
Customer as provided for in the related Car Service Contract; and (iii) such
other matters as may be reasonably related thereto.
(e) Maintain, to the extent practicable, separate records of the
Company with respect to all transactions relating to the Equipment (including,
without limitation, records relating to maintenance, repair and Car Service
Contracts) and make such records available for inspection by the Company, its
auditors or other designees or the Owner Trustees or any Participant upon
reasonable notice during ordinary business hours in accordance with the terms of
the Participation Agreements.
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(f) Maintain research capability and provide mutually agreeable
railcar market industry research reports to the Company as reasonably requested,
which reports shall be of the type regularly maintained and compiled by the
Manager in the ordinary course of its business and may include market
information with respect to railcar demand in terms of traffic growth,
regulatory and industry requirements for new railcars and other information
relevant to the Company's long-term planning with respect to Car Service
Contracts, market conditions, industry trends and the Equipment; provide copies
of any such reports requested by the Company to the Owner Trustees and each
Participant.
(g) Cause each Unit to be numbered with its reporting mark shown on
the Lease Supplement dated the date on which such Unit was delivered under the
Lease and covering such Unit, and from and after such date keep and maintain,
plainly, distinctly, permanently and conspicuously marked by a plate or stencil
printed in contrasting colors upon each side of each Unit, in letters not less
than one inch in height, a legend substantially as follows:
"OWNERSHIP SUBJECT TO A SECURITY AGREEMENT
FILED WITH THE SURFACE TRANSPORTATION BOARD"
with appropriate changes thereof and additions thereto as may be required by law
in order to protect the Lessor's right, title and interest in and to such Unit,
its rights under the Lease and the rights of the Indenture Trustee.
(h) If a Unit either suffers damage or contamination which, in the
Manager's reasonable judgment, makes repair uneconomic or renders such Unit
unfit for commercial use or if a Unit otherwise suffers an Event of Loss, (i)
investigate the facts and circumstances giving rise to such Event of Loss and
provide such notices and Officer's Certificates with respect thereto on behalf
of the Company as may be required under the applicable Lease, (ii) collect or
arrange for appropriate payment of compensation from the relevant railroad,
Customer, third party or other source, or combination thereof, and take such
other steps, including field inspection and investigation, as deemed appropriate
by the Manager, and (iii) take all steps and actions, including the hiring of
attorneys and consultants, required with respect to such Event of Loss under the
applicable Lease, including an investigation of the availability of a
Replacement Unit for the Unit suffering the Event of Loss. Following such
investigation and consideration of such other facts and circumstances as the
Manager feels are necessary or appropriate, the Manager shall recommend to the
Company whether it should pay the Stipulated Loss Value for such Unit or to
replace such Unit with a Replacement Unit as provided in the applicable Lease,
such recommendation to be made a reasonable period of time before the Company is
required to make such election under the Lease.
(i) Subject to Section 3.1(c), when appropriate or necessary in the
judgment of the Manager (or as otherwise directed by the Company), (i) terminate
Car Service Contracts
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for cause and recover possession of the related Units thereunder and enforce all
rights of the Company with respect thereto, including the rights of the Company
to payment of all amounts owed under Car Service Contracts or otherwise with
respect to the Units; (ii) institute and prosecute legal proceedings in the name
of the Company or the Manager as permitted by applicable laws in order to
terminate Car Service Contracts and/or recover possession of the Units; and
(iii) settle, compromise and/or release such actions or suits or reinstate Car
Service Contracts.
(j) Upon the expiration of any Car Service Contracts, negotiate
appropriate renewals thereof or remarket the related Units on terms and
conditions which are customary at such time for Car Service Contracts with
respect to other railcars owned, leased or managed by the Manager (the
"Manager's Fleet") and with adequate regard as to credit quality in accordance
with the Services Standard; inspect, clean (to the extent not done by the
Customer) and refurbish any Unit which is to be remarketed in a manner
consistent with the Services Standard; and take such steps as may be required to
see that all obligations and duties arising under Car Service Contracts with
respect to the remarketed Units are performed or complied with to the extent
required thereunder.
(k) Store or arrange for the storage of a Unit on tracks designated
by the Manager (whether such tracks are owned by the Manager or otherwise) upon
expiration or termination of its related Car Service Contract until such Unit
shall have been re-leased or until such Unit shall no longer be subject to the
Lease.
(l) Take such actions as the Manager shall deem necessary or
appropriate or as the Company shall request to keep the Company in compliance
with its obligations under any Lease, Participation Agreement, Car Service
Contract or other Operative Agreement.
(m) Make recommendations to the Company as to whether to terminate
any Lease with respect to certain Units which the Manager believes are obsolete
or surplus to the Company's requirements under the terms of such Lease and, if
directed by the Company, provide such notices and Officer's Certificates with
respect thereto as may be required under such Lease to effect such a
termination; if such election is made, take the necessary action on behalf of
the Company to arrange for the sale of such Units and the termination of the
lease of such Units as is required by such Lease.
(n) Make recommendations to the Company as to whether to exercise any
of the Company's purchase options for any of the Units under any Lease and, if
directed by the Company, take the necessary action on behalf of the Company
thereunder to arrange for the purchase of such Units by the Company.
(o) Make recommendations to the Company as to whether to exercise the
Company's renewal option for any of the Units under any Lease and, if directed
by the
5
<PAGE>
Company, take the necessary action on behalf of the Company thereunder in
connection with any such renewal.
(p) Comply with the return provisions of any Lease with respect to
any Units which are being returned to the Lessor thereunder.
(q) Take such actions as the Manager shall deem necessary or
appropriate or as the Company shall request to keep the Company in compliance
with all laws, rules and regulations applicable to the Company and the
Equipment; provided, however, that, if directed by the Company, the Manager
shall on behalf of the Company, in good faith and by appropriate proceedings
diligently conducted, contest the validity or application of any such law, rule
or regulation in any reasonable manner which does not materially interfere with
the use, possession, operation or return of any of the Units or materially
adversely affect the rights or interests of the Company, any Lessor and any
Indenture Trustee in any Equipment or under any Lease or otherwise expose the
Company, any Lessor, any Indenture Trustee or any Participant to criminal or
financial sanctions or release the Company, from any of its obligations under
the Lease.
(r) Enforce on behalf of the Company the warranties with respect to
all repairs, maintenance and Modifications made with respect to the Units at
facilities not owned by the Manager or an Affiliate of the Manager.
(s) Perform for the Company such other services incidental to the
foregoing as may from time to time be reasonably necessary in connection with
any Operative Agreement or in connection with the operation and maintenance of
the Equipment as required by the terms of the Leases or the providing of the
Equipment to Customers or the entering into of Car Service Contracts.
(t) It is understood and agreed that the Manager shall have no
obligation or responsibility under this Agreement for the placement or
maintenance of insurance on the Equipment, which services are to be provided to
the Company under the Insurance Agreement.
SECTION 3.
MANAGER'S STANDARD OF PERFORMANCE
---------------------------------
Section 3.1. Standards.
---------
(a) All of the functions, services, duties and obligations of
the Manager under this Agreement shall be performed by the Manager in compliance
with the Services Standard.
(b) The Manager shall employ its standard collection procedures,
including, where appropriate, the appointment of collection agents and
attorneys, in the event Sublease Payments under any Car Service Contract or
payments due from other Persons with respect to
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<PAGE>
the Equipment or the Car Service Contracts or use thereof or damage thereto are
not timely paid, but the Manager shall have no responsibility for any failure of
a Customer or such other person to make any payment when due.
(c) Unless otherwise directed by the Company, the Manager shall not
be required to exercise on the Company's behalf any right or rights under any
Car Service Contract or to threaten or commence any legal or other proceedings
before any court or governmental agency or nongovernmental organization in
connection with its performance or actions hereunder if in the Manager's
reasonable judgment the potential expense or risk associated with such exercise
or action is such that the Manager would not undertake such exercise or action
with respect to other railcars owned, leased or managed by the Manager.
(d) If the Manager is rendered unable to perform any of its
obligations under this Agreement as a result of acts beyond the reasonable
control of the Manager or its Affiliates or the control of their agents,
suppliers or subcontractors including, without limitation, acts of God, acts of
civil or military authorities, embargoes, governmental priorities, fires or
other casualties, strikes or other labor disturbances, floods, riots, war, lack
or shortage of transportation facilities, delays in transportation or inability
or difficulty in obtaining necessary labor, materials or goods then the Manager
will be excused from whatever performance is affected by the foregoing, to the
extent so affected; provided that:
(i) the Manager gives the Company, the Owner Trustees, the
Participants and the Indenture Trustee written notice of the occurrence of
the event as soon as practicable after the occurrence thereof describing in
reasonable detail the particulars of such occurrence, including an
estimation of its expected duration and probable impact on the performance
of the Manager's obligations hereunder, and thereafter continues to furnish
timely regular reports with respect thereto during the continuation of such
event (provided that the failure of the Manager to give such notice on a
timely basis shall not impose any additional obligation on the Manager
except to the extent that such failure has a material adverse effect on the
Company);
(ii) the suspension of performance hereunder shall be of no
greater scope and of no longer duration than is reasonably required by such
event;
(iii) no liability of the Manager which arose before the
occurrence of the event which caused the suspension of performance shall be
excused as a result of the occurrence;
(iv) the Manager shall exercise its reasonable efforts to
mitigate or limit damages to the Company, the Owner Trustees, the
Participants and the Indenture Trustees and shall use its reasonable
efforts to remove or terminate, as soon as practicable, the event causing
such suspension;
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(v) the Manager shall use its reasonable efforts to continue
to perform its obligations hereunder; and
(vi) when the Manager is able to resume the performance of its
obligations hereunder, the Manager shall give written notice to that effect
to the Company, the Owner Trustees, the Participants and the Indenture
Trustee and shall promptly resume performance hereunder.
(e) Each Car Service Contract entered into after the date hereof (i)
will be with a Customer with which the Manager would enter into a lease
arrangement with respect to other railcars owned, leased or managed by the
Manager, (ii) will not contain terms and conditions materially different from
those contained in then current similar arrangements utilized by the Manager
with respect to other railcars of similar ages and types owned, leased or
managed by the Manager unless, in the reasonable judgment of the Manager, such
difference is deemed necessary to market the Unit and still not otherwise
adversely affect the market value or utility of such Unit and (iii) will meet
the standards therefor set forth in the Operative Agreements relating to any
Unit, including, without limitation, that such Car Service Contract (A) in all
events be subject and subordinate to the related Lease and the rights and
interests of the related Lessor and its respective successors and assigns
thereunder, (B) contain a consent of the Customer to the Company's collateral
assignment of such Customer Service Contract and confirm such subordination and
consent to assignment by provisions substantially in the form currently
contained in the Company's standard car service contract (including any
applicable riders) delivered to the related Lessor and Indenture Trustee prior
to the date hereof, or otherwise as satisfactory to the related Lessor and
Indenture Trustee, (C) prohibit the Customer from exercising any right of setoff
against the Company, (D) not include any term or provision which is inconsistent
with the terms and conditions of the related Lease (other than the Basic Term of
the related Lease) or which could reasonably be expected to result in material
adverse consequences to the related Lessor, any related Participant or the
related Indenture Trustee, (E) not extend more than three (3) years after the
expiration of the Basic Term of the related Lease and (F) not relieve the
Company of any liability or obligation hereunder, which shall be and remain
those of a principal and not a surety.
(f) The Manager will not enter into any Car Service Contract which
would result in a Unit subject thereto being used in a manner inconsistent with
the provisions of any Lease.
(g) The Manager shall not create or permit to exist any Lien on any
Unit other than a Permitted Lien.
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(h) The Manager shall, in connection with the performance of the
services, comply in all material respects with all laws, rules and regulations
applicable to the Manager, the Company, the Equipment, the Leases and the Car
Service Contracts.
(i) Without limiting the generality of the foregoing and subject to
the requirements of the related Operative Agreements, the Manager shall perform
its obligations in accordance with the Services Standard and deal with the Units
in a manner such that the Units (considered as a single fleet) shall have
characteristics (including, without limitation, rental rates, Car Service
Contract terms, Car Service Contract expiration dates, Customers, credit
quality, location, Customer indemnities, dedication to foreign use, utilization
and purpose of use) substantially equivalent to those with respect to the cars
of a similar type and age in the Manager's Fleet. In this regard, the Manager
understands that, pursuant to Sections 8.2 and 8.3 of the Leases, there are
geographic restrictions on the use of the Units or the sublease to Persons
outside the continental United States. The Company acknowledges that, subject to
compliance with the Services Standard and Section 3.2, the Manager is entitled
to make decisions with respect to the Units of Equipment to reflect Customer
preferences and any other factors it considers with respect to railcars in the
Manager's Fleet (other than the Units) of a similar type, condition and
location.
(j) The duties and obligations of the Manager will be limited to
those expressly set forth in this Agreement, and the Manager will not have any
fiduciary or other implied duties or obligations, except as provided herein.
Section 3.2. Conflicts of Interest. Section 3.4 notwithstanding, the
---------------------
Manager shall perform the services under this Agreement on a fair and equitable
basis. Without prejudice to the generality of the foregoing, to the extent that
any particular Units or other particular railcars in the Manager's Fleet are
substantially similar in terms of objectively identifiable characteristics that
are relevant for purposes of the particular services to be performed, the
Manager will not discriminate between the Units and any such other railcars in
the Manager's Fleet on any basis which could reasonably be considered
discriminatory.
Section 3.3. Event of Loss; Replacement Units.
---------------------------------
(a) With respect to any Unit suffering an Event of Loss, and in
accordance with the performance or its services under Section 2.2(h), the
Manager is hereby granted full power and authority, subject to the terms and
conditions of the Leases, to sell (or dispose as scrap) on the Company's behalf
any such Unit which has been settled for under the rules of the AAR or settled
with Customers or any insurer and, upon direction of the Company, the Manager
will effect such sale or disposition in accordance with the Services Standard,
for no additional fee or other compensation. The Manager shall have no other
obligation to the Company in respect of such Unit following such sale or
disposition other than to transfer to the Company any amounts the Manager
receives in respect of such Event of Loss from such sources. The
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Company hereby agrees to execute all necessary powers of attorney and other
documents evidencing such power and authority.
(b) With respect to any Unit suffering an Event of Loss as to which
the Company or the Manager on behalf of the Company has elected to replace such
Unit with a Replacement Unit under any Lease, in addition to the matters set
forth in Section 3.3(a) with respect to such Unit, the Manager is hereby granted
full power and authority on the Company's behalf to obtain such Replacement
Unit, to execute and deliver the Bill of Sale therefor on behalf of the Company
and to cause it to be conveyed to the applicable Lessor, all in accordance with,
and subject to the terms and conditions of, the applicable Lease. Upon
direction of the Company, the Manager will arrange for the acquisition of such a
Replacement Unit which meets the requirements of the applicable Lease and will
take or cause to be taken all such other actions as shall be required to effect
such replacement pursuant to the applicable Lease.
Section 3.4. Similar Services. It is expressly understood and agreed
----------------
that nothing herein shall be construed to prevent, prohibit or restrict the
Manager or any Affiliate of the Manager from providing the same or similar
services as those provided under this Agreement to any other Person or from
manufacturing, selling, owning, leasing, managing or otherwise dealing in other
railcars; provided that no such activity shall in any way diminish the
obligations of the Manager hereunder, including, without limitation, its
obligation contained in Section 3.2.
Section 3.5. Custody of Documents. The Manager agrees to hold all
--------------------
original documents of the Company that relate to the Equipment (other than
those, if any, which are held by the Indenture Trustees under the related
Indentures) in the possession of the Manager in safe custody and according to
the Services Standard.
Section 3.6. No Greater Standards. IT IS OF THE ESSENCE OF THIS
--------------------
AGREEMENT THAT THE MANAGER SHALL PERFORM ITS SERVICES AND ACTIVITIES HEREUNDER
IN ACCORDANCE WITH THE SERVICES STANDARD BUT THAT, UNLESS OTHERWISE PROVIDED
HEREIN, THE MANAGER SHALL NOT HAVE ANY OBLIGATION TO PERFORM ANY SUCH SERVICES
OR ACTIVITIES AT A STANDARD OF PERFORMANCE GREATER THAN THE SERVICES STANDARD.
SECTION 4.
MODIFICATIONS
-------------
Section 4.1. Required Modifications. in the event the AAR, the United
----------------------
States Department of Transportation or any other United States or state
governmental agency or any other applicable law requires as a condition of
continued use or operation of any such Unit that such Unit be altered or
modified (a "Required Modification"), the Manager agrees to make or have made
such Required Modification in accordance with the applicable Lease on behalf of
the Company in a timely manner; provided, however, that the Manager may, on
behalf of the
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Company, in good faith and by appropriate proceedings diligently conducted,
contest the validity or application of any such law, regulation, requirement or
rule in any reasonable manner which does not materially interfere with the use,
possession, operation or return of any Unit or materially adversely affect the
rights or interests of the Company or the applicable Lessor or Indenture Trustee
in the Equipment or under the applicable Lease or other related Operative
Agreement or otherwise expose the Company or such Lessor or such Indenture
Trustee or any Participant to criminal or material financial sanctions or
relieve the Company of the obligation to return the Equipment in compliance with
the provisions of such Lease or other related Operative Agreement (or the
obligations of the Manager hereunder in respect of such return). Promptly after
the Manager becomes aware of the requirement to make a Required Modification,
the Manager shall notify the Company, the Owner Trustees and the Indenture
Trustees thereof, which notice shall also set forth the time period for the
making of such Required Modification and the Manager's reasonable estimate of
the cost thereof. If the Manager believes that any Required Modification to a
Unit would be economically impractical, it shall so advise the Company and, if
directed by the Company, in lieu of making the Required Modification as provided
above, the Manager shall provide written notice to the applicable Lessor that
such Required Modification is economically impractical, and shall treat such
Unit as if an Event of Loss had occurred as of the date of such written notice
with respect to such Unit. In such event the provisions of the related Lease and
this Agreement with respect to Events of Loss shall apply with respect to such
Unit. In reaching any decision as to whether a Required Modification is
economically impractical, the Manager shall assess the cost and timing of the
Required Modification, the anticipated revenues and other sources of funds which
would be available to the Company to fund such costs, the requirements of the
applicable Leases and such other factors as the Manager considers necessary or
appropriate and shall provide a report to the Company, with copies to the Owner
Trustees and the Participants regarding such assessment. The Manager shall not
discriminate against any Unit in making a determination of economic
impracticality as compared with other equipment of the same type and age as such
Unit in the Manager's Fleet and shall so certify in the report referred to in
the immediately preceding sentence.
Section 4.2. Optional Modifications. The Manager is authorized at any
----------------------
time to modify, alter or improve any Unit in a manner which is not a Required
Modification, including any Unit not then under a Car Service Contract
("Optional Modification"), if the Manager concludes in good faith that the
proposed Optional Modification is likely to enhance the marketability of the
Equipment (or such Optional Modification is requested by a Customer), that such
Optional Modification meets the standards set forth in Section 9.2 of the
applicable Lease, and that, following such Optional Modification and taking into
account any costs incurred in connection therewith, it is reasonable to expect
that the Projected Coverage Ratios throughout the remaining Lease term would not
be adversely affected by such Optional Modification.
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SECTION 5.
COMPENSATION AND REIMBURSEMENT OF THE MANAGER
---------------------------------------------
Section 5.1. Compensation of the Manager. As compensation to the
---------------------------
Manager for the performance of its services hereunder, the Company shall pay to
the Manager a management fee (the "Management Fee") consisting of a Base
Component, an Incentive Component and a charge for Reimbursable Services.
Subject to the terms and conditions of the Intercreditor Agreement, the
Management Fee shall be payable to the Manager from the Collection Account, to
the extent monies are available for the payment thereof in accordance with
Section 3.4 of the Intercreditor Agreement, as follows:
(a) on each Monthly Transfer Date, an amount equal to the Base
Component for the calendar month preceding the month in which such payment is
due;
(b) on each Monthly Transfer Date, the amount of any invoice for
Reimbursable Services submitted by the Manager to the Company on or prior to the
last day of the calendar month immediately preceding the month in which such
payment is due; and
(c) on each Monthly Transfer Date, an amount equal to the
Incentive Component measured as of the last day of the calendar month preceding
the date on which such payment is due.
Section 5.2. Base Component.
--------------
(a) The base component of the Management Fee (the "Base
Component") for each calendar month (or any portion thereof) shall be the
product of (i) the Unit Monthly Fee, multiplied by (ii) the number of Units
managed under this Agreement, each as determined on the first day of such month.
The Manager shall, not less than three Business Days before the relevant Monthly
Transfer Date referred to in Section 5.1(a), submit an invoice to the Company
(with copies to the Collateral Agent and the Owner Participant) for the Base
Component of the Management Fee for such month.
(b) The monthly fee under this Agreement (the "Unit Monthly
Fee") shall initially be $[20] per Unit.
(c) The Unit Monthly Fee shall be adjusted annually as follows:
(i) The Unit Monthly Fee shall be automatically adjusted as
of each April 30 during the term of this Agreement, commencing April 30,
1999, for inflation by multiplying the Unit Monthly Fee in effect on such
April 30 by the sum of 1.00 plus the Inflation Factor with respect to the
immediately preceding calendar year; and
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(ii) In addition, the Unit Monthly Fee may be adjusted once
annually by agreement of the Company and the Manager to reflect changes in
costs (excluding those increases contemplated by clause (i) above), as
certified by the Manager to the Company, the Lessors and the Indenture
Trustees, which arise out of material increases of its duties under the Car
Service Contracts due to either a change in law or a change in the nature
or type of services required in order to be competitive in the full
service railcar leasing industry market place. Any such adjustment
proposed by the Manager shall be accompanied by all relevant information
relating to the proposed adjustment.
(d) The Base Component, as adjusted from time to time under
Section 5.2(c), is intended to include all direct costs and expenses relating to
the performance of the Manager's services, duties and obligations under this
Agreement but shall not include the costs and expenses of the Manager which are
incurred in connection with the Reimbursable Services.
Section 5.3. Incentive Component. The incentive component of the
-------------------
Management Fee (the "Incentive Component") payable by the Company to the Manager
shall be (i) $5 per Unit per month during the period from the date hereof
through December 31, 1999, and (ii) the Current Incentive Amount (as hereinafter
defined) per Unit per month from and after January 1, 2000. The "Current
Incentive Amount" for purposes hereof, shall be an amount determined for each
calendar month, commencing January 1, 2000, which is equal to the product of (x)
the Incentive Factor (as hereinafter defined), and (y) the gross Sublease
revenues of the Company for the preceding calendar month divided by (z) the
number of Units managed under this Agreement. The "Incentive Factor," for
purposes hereof, shall mean a fraction the numerator which is the total amount
of Incentive Component payable for the period from the date hereof through
December 31, 1999 (the "Measuring Period") pursuant to clause (i) above, and the
denominator of which is the total gross Sublease revenues of the Company for the
Measuring Period. Gross revenues shall be determined from the Company's books
and records in accordance with generally accepted accounting principles.
Section 5.4. Reimbursable Services. The Manager shall be separately
---------------------
compensated for the following services rendered on behalf of the Company under
this Agreement (collectively, the "Reimbursable Services") in accordance with
the priorities established therefor in the Intercreditor Agreement:
(a) The Manager shall be reimbursed by the Company for
maintenance and repair services under Section 2.2(b), Required Modifications and
Optional Modifications in an amount equal to (i) the actual cost of such repair
or Modification if performed at a facility not owned or controlled by the
Manager or any Affiliate of the Manager or (ii) the Manager's Cost if performed
at a facility owned or controlled by the Manager or an Affiliate of the Manager.
"Manager's Cost" shall mean the sum of (A) the Manager's actual cost of material
and labor, and (B) applied overhead of the Manager (based upon the aggregate
number of direct labor hours budgeted for the year in which such maintenance and
repair is performed).
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(b) The Manager shall be reimbursed by the Company for the
amount of all Taxes (other than Income Taxes) paid by the Manager with respect
to the Equipment determined in accordance with Section 2.2(c). It is understood
and agreed that State taxes imposed upon or against the Equipment may be
determined, in the case of the Initial Manager, on a (i) initially pro rata
basis for the Total Manager's Fleet resulting in an average tax cost per railcar
(including the Units) and (ii) then multiplying such average tax cost per Unit
by the tax adjustment factor shown on Schedule 5.4(b) for the applicable year of
the term of the Leases.
(c) The Manager shall be reimbursed by the Company for
demurrage, switching, storage, and all other similar and dissimilar services in
respect of Units or the movement thereof, including, without limitation, those
rendered in connection with the return provisions in any Lease referenced in
Section 2.2(p), in an amount equal to (i) the actual cost of such services if
performed by a third party on behalf of the Manager, or (ii) to the extent such
services shall be performed by the Manager or shall occur on tracks owned or
leased by the Manager, the Manager's Cost of such services.
(d) The Manager shall be reimbursed by the Company for the
amount of any fines, penalties, judgments or similar charges paid by the Manager
to governmental authorities arising out of or in connection with the use and
operation of the Units; provided, however, that such amounts for which the
Company is responsible shall not include any such fines, penalties, judgments or
similar charges resulting from the negligence or willful misconduct of the
Manager.
SECTION 6.
PAYMENTS
--------
Section 6.1. Receipt of Payments. The Manager shall direct that all
-------------------
Sublease Payments from Customers and all other amounts relating to Equipment
which are invoiced by the Manager on behalf of the Company as contemplated by
this Agreement or received by the Manager be deposited either in the lockbox
pursuant to Section 6.2 or, in connection with mileage credits, the lockbox
referred to in Section 6.5, in each case pending transfer to the Collection
Account maintained under the Intercreditor Agreement as required by Section
6.2(d).
Section 6.2. Lockboxes; Payments.
-------------------
(a) The Initial Manager will cause its existing lockbox (the
"Lockbox") for payments under its car service contracts (which, prior to their
assignment to the Company, included the Car Service Contracts for the Units) to
be retitled by the lockbox bank (the "Lockbox Bank") in the name of "General
American Transportation Corporation, as Trustee for itself, individually, and
General American Railcar Corporation II" and such title may include other
Persons for whom the Manager manages railcars ("Additional Lockbox Parties").
The
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Manager shall not create or permit to exist any lien, charge or encumbrance
on the Lockbox. The Lockbox Agreement with the Lockbox Bank shall be
substantially in the form of Schedule 6.2 to this Agreement.
(b) The Manager will bill each Customer monthly, as agent
for the Company, which may be accomplished pursuant to a single invoice
(including electronic invoicing with certain Customers) which separately
designates amounts owing (i) to GATC (in its individual capacity and not as
Manager for the Company or as manager for any other entity) under leases
maintained by GATC with such Customer (the "GATC Leases"), (ii) General American
Railcar Corporation, and (iii) the amount of rent (or other amounts) owed with
respect to railcars (including the Units) by the Customer for which GATC is
acting as manager or agent with respect to such railcars (the "GATC Managed
Leases"). Each invoice will provide a detailed listing of the railcars, and the
applicable amounts due and owing with respect to each railcar, to which the
invoice relates (including the Units). The Units will be sufficiently identified
in the detail of the invoice, by serial or other identification number, to allow
the parties to specifically identify the amounts which are due to the Company.
All invoices will instruct the obligor thereunder to make payment of such
invoice directly into the Lockbox.
(c) The Manager shall arrange with the Lockbox Bank that by 1:00
p.m. on each Business Day (or as soon thereafter as practicable), the Lockbox
Bank will make available to the Manager a computer file or customer checks and
related documentation containing information with respect to all payments
received in the Lockboxes from 12:00 noon of the previous Business Day through
12:00 noon of such Business Day. Using the payment information provided, the
Manager will segregate the individual funds of GATC, General American Railcar
Corporation, the Company and any Additional Lockbox Parties.
(d) If the payment information made available by the Lockbox
Bank to the Manager under Section 6.1(c) is insufficient to determine the proper
allocation of a payment (or any portion thereof) between GATC, the Company and
any Additional Lockbox Parties, the Manager will use such other information as
is available and conduct such procedures as are appropriate to determine the
proper allocation of such payment, including a review of original Customer and
invoice information and contacting Customers. By the close of business on the
second Business Day after receipt of the payment information from the Lockbox
Bank, the Manager will cause to be transferred to the Collection Account
maintained under the Intercreditor Agreement, all funds identified as belonging
to the Company.
(e) In order not to delay the transfer of funds under Section
6.1(d), the Manager will also cause to be transferred to the Company by the
close of business on the second Business Day after receipt of the payment
information from the Lockbox Bank, on a pro rata basis between the Company, GATC
and any Additional Lockbox Parties, any remaining payments reflected in such
information from a Customer or Customers which have not yet been identified as
belonging to the Company or GATC. Such pro rata allocation will be based on the
15
<PAGE>
original amounts billed to each such Customer with respect to the Equipment and
its railcars in the Manager's Fleet on an invoice-by-invoice basis. To the
extent that after continued investigation and discussions with Customers, if
necessary, it is determined that the allocation of such remaining amounts was
not actually pro rata, the Manager will notify the Company, GATC or such
Additional Lockbox Parties, as the case may be, of its obligation to pay, and
upon receipt of such notice the Company, GATC or such Additional Lockbox
Parties, as the case may be, will pay the other the amount necessary to reflect
the actual allocations; provided, however, that no such payments by the Company
shall be made from funds which are held pursuant to the Intercreditor Agreement
(other than amounts held in the Excess Cash Account).
(f) If notwithstanding the payment instructions given by the
Manager in its invoices under Section 6.1(b), Sublease Payments or other amounts
in respect of the Equipment are received directly by the Manager, the Manager
agrees to hold any such Sublease Payments or other amounts in trust and
forthwith, upon receipt, to transmit and deliver to the Lockbox Bank (for
transfer pursuant to Section 6.1 to the Collection Account maintained under the
Intercreditor Agreement), in the form received, all cash, checks and other
instruments or writings for the payment of money so received by the Manager.
Section 6.3. Successor Lockbox Trustee. If the Initial Manager is
-------------------------
terminated as the Manager, the Lockbox will be retitled in the name of a third
party as trustee (the "Successor Lockbox Trustee") for each of the Company, GATC
and any Additional Lockbox Parties, which Successor Lockbox Trustee shall be
either the commercial bank previously serving as the Lockbox Bank or a new
institution acceptable to the Successor Manager, GATC, the Owner Trustees, the
Owner Participants and the Collateral Agent. Following any such termination of
the Initial Manager, it is contemplated that the Successor Manager, the Company
and GATC will each use commercially reasonable efforts to implement a process on
a timely basis whereby mutual customers of GATC and the Company will be invoiced
separately. As to the Company billings following the appointment of a Successor
Manager, the Successor Manager shall re-caption the invoices to refer to the
Successor Manager, as agent for the Company. Effective as of the date of
termination of the Initial Manager, the Successor Manager will submit reports,
as needed, to the Successor Lockbox Trustee indicating the amount billed to
Customers in respect of the Units, and it is contemplated that GATC will
separately submit such reports to the Successor Lockbox Trustee indicating the
amount billed to its customers, or for GATC Managed Leases, for railcars in the
Manager's Fleet. The Successor Lockbox Trustee will first allocate cash received
in the Lockbox to the Company and any Additional Lockbox Parties in an amount
equal to the Company's and any Additional Lockbox Parties, total reported
billings for the applicable period and will allocate the balance of the cash
received to GATC. In instances where a customer of more than one of GATC, the
Company and any Additional Lockbox Parties pays with a single check that is not
in the full amount owed to all such parties, unless it is manifestly clear that
the deduction is allocable to the Company, or an Additional Lockbox Party, the
Successor Lockbox Trustee will be instructed to assume that the deduction is
allocable to GATC and to the extent that such deduction exceeds the amount due
to GATC, any such excess
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<PAGE>
shall be allocated pro-rata (based upon reported billings) among the Company
and any Additional Lockbox Parties. Under the arrangement with the Successor
Lockbox Trustee, GATC will have the right to investigate the deduction taken by
the Customer and, if it is able to demonstrate that the deduction should have
been allocated to the Company, the Company will promptly refund such amount to
GATC; provided however, that no such refund shall be made from funds which are
held pursuant to the Intercreditor Agreement (other than amounts held in Excess
Cash Account).
Section 6.4. Mileage Credits. General American Marks Company, a
---------------
Delaware business trust (the "Marks Company") of which GATC, General American
Railcar Corporation and the Company are presently the owners of the entire
beneficial interest, owns the rights to all the currently used GATC railcar
marks and has made appropriate notification to the AAR of the transfer of such
GATC railcar marks from GATC to the Marks Company. A list of such currently used
GATC railcar marks is attached as Schedule 6.4. As a result of such ownership,
all mileage credit payments for the Units will be paid by the railroads under
their applicable tariffs to the Marks Company by direct deposit in a lockbox in
the name of the Marks Company as trustee for the beneficiaries of the mileage
credits (including the Company), as their interests may appear. If
notwithstanding the ownership of the marks by the Marks Company, mileage credits
or other amounts from the railroads in respect of the Equipment are received
directly by the Manager, the Manager agrees to hold any such amounts in trust
and forthwith, upon receipt, to transmit and deliver to the lockbox of the Marks
Company under the Servicing Agreement, in the form received, all cash, checks
and other instruments or writings for the payment of money so received by the
Manager. The Marks Company has engaged GATC pursuant to the Servicing Agreement
to service the mileage credit payments that are deposited in the lockbox. GATC,
as servicer for the Marks Company, will under the Servicing Agreement on a daily
basis allocate mileage credits or any other amounts received from the railroads
to GATC, the Company, General American Railcar Corporation and any other mileage
credit beneficiaries on a cumulative, historical experience basis. There will be
periodic settlements once GATC, as servicer, is able to determine the allocation
of mileage credit receipts based on then available current information. All
mileage credits received by the Company, or the Manager on behalf of the
Company, will be deposited in the Collection Account maintained pursuant to the
Intercreditor Agreement.
SECTION 7.
REPORTS AND INFORMATION
-----------------------
Section 7.1. Monthly Reports. The Manager will furnish to the Company,
---------------
the Owner Trustees, the Indenture Trustees, the Owner Participants, the
Collateral Agent and the Rating Agencies a report for each month substantially
in the form of Schedule 7.1 to this Agreement on or before the Monthly Report
Date following each calendar month.
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Section 7.2. Annual Reports. The Manager will within one hundred
--------------
twenty (120) days following the end of each calendar year, furnish to the
Company, the Owner Trustees, the Indenture Trustees, the Owner Participants, the
Collateral Agent and the Rating Agencies an annual report in a form to be agreed
upon by the Company, the Manager, the Owner Participants and the Initial
Purchaser on or before [_______________], 199_.
Section 7.3. Equipment Reports. On or before April 30, 1999, and on or
-----------------
before each April 30 thereafter, the Manager will furnish to the Lessors, Owner
Participants and the Indenture Trustees an accurate statement, as of the
preceding December 31, (a) showing the amount, description and reporting marks
of the Units then leased under the Leases, the amount, description and reporting
marks of all Units that may have suffered an Event of Loss during the 12 months
ending on such December 31 (or since the Closing Date, in the case of the first
such statement), and such other information regarding the condition or repair of
the Equipment as any Lessor may reasonably request, (b) stating that, in the
case of all Equipment repainted during the period covered by such statement, the
markings required by the applicable Lease shall have been preserved or replaced,
(c) showing the percentage of use in the United States and in each of Canada and
Mexico based on the total mileage traveled by the Manager's Fleet and the
Equipment, as a whole (or by the Units, if and to the extent generally made
available to the Manager in the ordinary course with respect to railcars in
general interchange service similar to the Units) for the prior calendar year as
reported to the Marks Company by railroads (provided, that the Manager shall
cooperate with the Owner Participants and Lessors and shall provide such
additional information on such matters as any Owner Participant or any Lessor
may reasonably request to enable such Owner Participant or such Lessor to pursue
or fulfill its respective tax audit and tax litigation rights and obligations),
and (d) stating that the Manager is not aware of any condition of any Unit which
would cause such Unit not to comply in any material respect with the rules and
regulations of the FRA and the interchange rules of the Field Manual of the AAR
as they apply to the maintenance and operation of the Equipment in interchange.
Section 7.4. Compliance Information. So long as this Agreement is in
----------------------
effect, the Manager shall supply the Company, on a timely basis, with such
information respecting the Units and the Car Service Contracts as is reasonably
necessary to enable the Company to prepare and file any annual, quarterly and
other reports which the Company or any of its Affiliates may be required to file
pursuant to the federal securities laws.
Section 7.5. Company's Financial Reports. So long as this Agreement is
---------------------------
in effect, the Manager shall prepare and furnish to each Participant, the
Collateral Agent and any Indenture Trustee on behalf of the Company:
(a) as soon as available and in any event within [sixty (60)]
days after the end of each quarter, except the last quarter, of each fiscal
year, a balance sheet of the Company as at the end of such quarter, together
with the related statement of income and cash flows of the Company for the
period beginning on the first day of such fiscal year and ending on the last day
18
<PAGE>
of such quarter, setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, all in reasonable detail and
prepared in accordance with generally accepted accounting principles (other than
any requirement of footnotes);
(b) as soon as available and in any event within [120] days
after the last day of each fiscal year, a copy of the Company's annual audited
report covering the operations of the Company, including a balance sheet, and a
related consolidated statement of income and retained earnings and consolidated
statement of cash flows of the Company for such fiscal year, setting forth in
comparative form the figures for the previous fiscal year, all in reasonable
detail and prepared in accordance with generally accepted accounting principles
applied on a consistent basis, which statements will have been certified by a
firm of independent public accountants of recognized national standing selected
by the Company;
(c) as soon as available, one copy of each document, if any,
filed by the Company with the Securities and Exchange Commission or any
successor agency pursuant to Section 13(a), 13(c), 14 or 15(d) (or any successor
sections) of the Securities Exchange Act of 1934, as amended (or any successor
statute) (excluding such documents or portions thereof which are treated as
confidential and not available to the public, in accordance with applicable law,
by the Securities and Exchange Commission);
(d) within the time period prescribed in subparagraphs (a) and
(b) above, a certificate, signed by the Treasurer or principal financial officer
of the Manager, to the effect that the signer has reviewed the activities of the
Company during the immediately preceding fiscal quarter or year, as the case may
be, and that he is not aware of any default in compliance by the Company with
any of the covenants, terms and provisions of any Participation Agreement or any
Lease (except as specified), and if a Lease Default pursuant to Sections 14(a),
14(b), 14(g) or (h) of any Lease or Lease Event of Default shall exist,
specifying such Lease Default or Lease Event of Default and the nature and
status thereof;
(e) promptly, such additional information with respect to the
financial condition or business of the Company as any Participant may from time
to time reasonably request; and
(f) such other information and reports as may be required in the
Operative Agreements.
Section 7.6. Rights of Inspection. The Company shall be entitled to
--------------------
inspect from time to time upon reasonable notice during regular business hours
the books and records of the Manager relating to the business and operations of
the Company and the performance of the Manager's obligations hereunder. The
Collateral Agent, any Indenture Trustee and any Participant shall be entitled to
inspect those books and records of the Manager relating to the business and
operations of the Company and otherwise to the extent reasonably necessary to
19
<PAGE>
verify the information provided by the Manager hereunder with respect to the
Manager's Fleet or any other information included in the reports provided
pursuant hereto, in each case to the extent permitted in any applicable
Participation Agreement or Lease.
SECTION 8.
TERM OF AGREEMENT; TERMINATION
------------------------------
Section 8.1. Term. The term of this Agreement shall commence on the
----
Closing Date and shall continue in effect until the date that no Operative
Agreement is continuing in effect (as they may be renewed or otherwise
extended); provided, however, that the Company shall have the option to extend
this Agreement for a period of up to 12 months after the latest date of
termination of any Lease.
Section 8.2. Termination of Manager for Default. The services of the
----------------------------------
Manager under this Agreement may be terminated as to all Equipment by the
Company upon giving notice to the Manager in any of the following events:
(a) If the Manager fails to perform any of its obligations under
this Agreement (other than a failure excused as described in Section 3.1(d))
which failure materially and adversely affects the rights of the Owner Trustees,
the Owner Participants or the holders of any Equipment Notes or any Certificate
holders (other than a default set forth in Section 8.2(b) below) and fails to
cure or remedy such failure to perform within 60 days following the receipt by
the Manager of a written notice of the alleged failure to perform; provided,
however, that if the cause of such failure to perform can be cured, but cannot
reasonably be cured within such 60 day period, the period for remedying such
failure to perform shall be extended by the time necessary to effect such cure
(but not in excess of 60 ADDITIONAL days);
(b) If the Manager fails to deliver to the Collateral Agent any
applicable payment required to be paid hereunder, which failure remains uncured
for FIVE (5) Business Days after the Manager become aware of such failure,
including as a result of written notice from any Owner Trustee, Owner
Participant or Collateral Agent, or if the Manager shall breach its covenants
under Sections 8.5 or 11.7;
(c) If the Manager shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or consent to any such relief or to the appointment of or taking
possession by any such official in any voluntary case or other proceeding
commenced against it, or admit in writing its inability to pay its debts
generally as they come due, or make a general assignment for the benefit of
creditors, or take any corporate action to authorize any of the foregoing;
20
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(d) If an involuntary case or other proceeding shall be commenced
against the Manager seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days;
(e) If the Manager shall cease to be actively involved in the railcar
management or maintenance businesses;
(f) If there has been an Event of Default as described in Section
14(a) of any Lease and during such time as any Equipment Notes are outstanding
and unpaid which are related to such Lease, the related Owner Trustee or Owner
Participant has made a payment in accordance with Section 4.4(a) of the related
Indenture or the related Owner Trustee has exercised its right to purchase
Equipment Notes pursuant to Section 4.4(b) of the related Indenture; or
(g) Any representation or warranty made by the Manager in the
Participation Agreement or this Agreement is untrue or incorrect in any material
respect as of the date of making thereof and such untruth or incorrectness shall
continue to be material and unremedied for a period of [30] days after receipt
by the Manager of written notice thereof from the Company or any Owner Trustee,
Owner Participant or Indenture Trustee; provided that, if such untruth or
incorrectness is capable of being remedied, no such untruth or incorrectness
shall constitute cause for termination hereunder for a period of 60 days after
receipt of such notice so long as the Manager is diligently proceeding to remedy
such untruth or incorrectness and shall in fact remedy such untruth or
incorrectness within such period; provided that such untrue or incorrect
representation or warranty shall be deemed to be remedied only after all adverse
consequences thereof, if any, have been remedied.
Notwithstanding anything to the contrary contained in this Agreement,
any failure of the Manager to perform or observe any of its obligations under
this Agreement shall not constitute a default under this Section 8.2 if such
failure is caused solely by reason of an event referred to in the definition of
"Event of Loss" so long as the Manager is continuing to comply on the Company's
behalf with the terms of the applicable Lease with respect to such Event of
Loss.
Section 8.3. Remedies Upon Default. Upon the occurrence and during
---------------------
the continuation of a default by the Manager under Section 8.2, the Company, in
its sole discretion, may (i) terminate this Agreement by written notice to the
Manager, which termination shall be effective as of the date of such notice or
such later date, in the discretion of the Company, as such notice may specify,
(ii) proceed by appropriate court action to enforce performance of this
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Agreement by the Manager and/or (iii) sue to recover actual direct damages
(including lost rents but not consequential damages) which result from a breach
hereof, and the Manager shall bear the Company's costs and expenses, including
reasonable attorney's fees, in securing such enforcement or damages. Each right,
power and remedy herein specifically given to the Company shall be in addition
to every other right, power and remedy herein specifically given or now or
hereafter existing at law or in equity, and each and every right, power and
remedy may be exercised from time to time and simultaneously and as often and in
such order as may be deemed expedient by the Company. All such rights, powers
and remedies shall be cumulative, and the exercise of one shall not be deemed a
waiver of the right to exercise any other or others. No delay or omission of the
Company in the exercise of any such right, power or remedy and no extension of
time for any payment due hereunder shall impair any such power or shall be
construed to be a waiver of any default or an acquiescence therein.
Section 8.4. Replacement of the Manager. The Manager may not resign
--------------------------
from its obligations and duties as the Manager, nor may the Manager be
terminated in whole or in part, unless a successor Manager ("Successor Manager")
has been appointed by the Company (or, in the case of a removal of the Manager
upon the occurrence of the event described under Section 8.2(f), the Owner
Trustees) with the approval of the Owner Trustees, the Owner Participants and
the Indenture Trustees, and such Successor Manager has accepted such appointment
and, the Company has received written confirmation from the Rating Agencies
that, after giving effect to the selection of the Successor Manager, no lowering
or withdrawal of the then current ratings on the Certificates will occur. Any
Successor Manager shall be a nationally known corporation incorporated in the
United States which is engaged in the railcar leasing or management business, be
capable of performing the services under the Agreement and have a net worth in
excess of $50,000,000. Any Successor Manager, however appointed, shall execute
and deliver to the Company and to the predecessor Manager an instrument
accepting such appointment, including customary confidentiality provisions in
favor of the predecessor Manager and the Company, and thereupon such Successor
Manager, without further act, shall become vested with all the rights, powers,
duties and trusts of the predecessor Manager hereunder with like effect as if
originally named the Manager herein.
Section 8.5. Merger or Sale. Any corporation into which the Manager
--------------
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Manager shall be a party, or any
corporation to which substantially all the business of the Manager may be
transferred, shall be the Manager under this Agreement without further act;
[provided such corporation meets the criteria applicable to a Successor Manager
set forth in Section 8.4].
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SECTION 9.
INDEMNIFICATION
---------------
Section 9.1. Indemnification by Manager. The Manager agrees to
--------------------------
indemnify the Company, the Owner Trustees, the Owner Participants, the Indenture
Trustees, the Collateral Agent and their respective affiliates and the
directors, officers, employees and agents of each thereof (the "Indemnified
Parties") against, and agrees to hold each Indemnified Party harmless from, any
and all Claims incurred or suffered by such Indemnified Party relating to or
arising out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by the Manager in this Agreement or in the Participation Agreement
or in any certificate delivered pursuant thereto;
(b) any breach of or failure by the Manager to perform any
covenant or obligation of the Manager set out or contemplated in this Agreement;
(c) the presence, discharge, spillage, release or escape of
Hazardous Substances or damage to the environment or noncompliance with any
applicable law with respect to Hazardous Substances or the environment (i) at or
arising from a facility owned, operated or controlled by the Manager or any
Affiliate of the Manager or (ii) arising from any act, failure to act or
omission by the Manager or any Affiliate of the Manager; or
(d) the negligence, recklessness or wilful misconduct of the
Manager.
Section 9.2. Indemnification by Company. The Company agrees to indemnify
--------------------------
the Manager against, and agrees to hold it harmless from, any and all Claims
incurred or suffered by the Manager relating to or arising out of or in
connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by the Company in this Agreement;
(b) any breach of or failure by the Company to perform any
covenant or obligation of the Company set out or contemplated in this Agreement;
or
(c) the negligence, recklessness or willful misconduct of the
Company.
Section 9.3. Claims Excluded. There are excluded from the agreements to
---------------
indemnify under Section 9.1 and 9.2 with respect to any particular indemnified
Person, Claims to the extent resulting from the breach, failure to perform,
negligence, recklessness or willful misconduct of such indemnified Person.
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Section 9.4. Third Party Claims. In the event any party to be indemnified
------------------
is entitled to indemnification hereunder based upon a Claim asserted by a third
party, the indemnifying party shall be given prompt notice thereof in reasonable
detail; provided, however, the failure to give prompt notice shall not relieve
the indemnifying party of any liability hereunder to the extent that the failure
to give such notice is not prejudicial. The indemnifying party shall have the
right (without prejudice to the right of any party to be indemnified to
participate at its expense through counsel of its own choosing) to defend such
Claim at its expense and through counsel of its own choosing which is reasonably
acceptable to the party to be indemnified if the indemnifying party gives notice
of its intention to do so not later than twenty (20) days following its receipt
of notice of such Claim from the party to be indemnified (or such shorter time
period as is required so that the interests of the party to be indemnified would
not be materially prejudiced as a result of its failure to have received such
notice from the indemnifying party); provided, however, the indemnifying party
shall not be entitled to control and assume responsibility for the defense of
any Claim if in the good faith opinion of the party to be indemnified, there
exists an actual or potential conflict of interest such that it is advisable for
such party to retain control of such proceeding, in which circumstances the
party to be indemnified shall be entitled to control and assume responsibility
for the defense of such Claim at the expense of the indemnifying party. The
indemnifying party shall not have the power to bind the indemnified party,
without the indemnified party's prior written consent, which shall not be
unreasonably withheld, with respect to any settlement pursuant to which anything
is required other than the payment of money and then only to the extent that the
indemnifying party shall make full payment of such money. If the indemnifying
party does not so choose to defend any such claim asserted by a third party for
which the party to be indemnified would be entitled to indemnification
hereunder, then the party to be indemnified shall be entitled to recover from
the indemnifying party, on a monthly basis, all of its reasonable attorneys'
fees and other costs and expenses of litigation of any nature whatsoever
incurred in the defense of such claim. If the indemnifying party assumes the
defense of any such claim, the indemnifying party will hold the party to be
indemnified harmless from and against any and all damages arising out of any
settlement approved by such indemnifying party or any judgment in connection
with such claim or litigation. Notwithstanding the assumption of the defense of
any claim by an indemnifying party pursuant to this paragraph, the party to be
indemnified shall have the right to approve the terms of any settlement of a
claim (which approval shall not be unreasonably withheld or delayed).
Notwithstanding anything to the contrary contained herein, an indemnifying party
will not be liable for any settlement of a claim effected without its prior
written consent.
Section 9.5 Cooperation. The indemnifying party and the indemnified party
-----------
shall cooperate in furnishing evidence and testimony and in any other manner
which the other may reasonably request, and shall in all other respects have an
obligation of good faith dealing, one to the other, so as not to unreasonably
expose the other to an undue risk of loss. The party to be indemnified shall be
entitled to reimbursement for out-of-pocket expenses reasonably incurred by it
in connection with such cooperation. Except for fees and expenses for which
indemnification is provided pursuant to Sections 9.1 or 9.2 hereof, as the case
may be, and as
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<PAGE>
provided in the preceding sentence, each party shall bear its own fees and
expenses incurred pursuant to this Section 9.5.
Section 9.6. Survival. The indemnity obligations of the parties pursuant
--------
to this Section 9 (including, without limitation, obligations to indemnify
against third party claims made after the expiration or termination of this
Agreement) shall survive the expiration or termination hereof.
SECTION 10.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 10.1. Representations of Company. The Company hereby represents
--------------------------
and warrants to the Manager as follows:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. It has all necessary
corporate power and authority and has taken all corporate action necessary to
enter into this Agreement, to consummate the transactions contemplated hereby
and to perform its obligations hereunder.
(b) This Agreement has been duly executed and delivered by it
and is a legal, valid and binding obligation of it, enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
the effect of bankruptcy, insolvency, reorganization, moratorium, marshaling or
other similar laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors generally and (ii) general principles of
equity, whether such enforceability is considered in a proceeding in equity or
at law.
(c) Neither the execution and delivery by it of this Agreement,
the performance by it of its obligations hereunder nor the consummation of the
transactions contemplated hereby will (i) with or without the giving of notice
or the passage of time, or both, violate, or be in conflict with, or permit the
termination of, or constitute a default under, or cause the acceleration of the
maturity of, any agreement, debt or obligations of any nature of it or to which
it is a party or bound; (ii) require the consent of any party to any agreement,
instrument or commitment to which it is a party or to which it or its properties
is bound; (iii) violate any statute or law or any judgment, decree, order,
regulation or rule of any court, regulatory authority or other governmental
authority to which it is subject; or (iv) result in the creation of any Lien on
its assets, which in the case of (i), (ii), (iii), or (iv) would cause the
transactions contemplated by this Agreement not to be consummated or which would
have a material adverse effect on the business, financial condition or
operations of the other party to this Agreement.
(d) No consent, approval or authorization of, or declaration,
filing or registration with, any regulatory authority or other governmental
agency or authority is required to be made or obtained by it in connection with
the execution, delivery and performance of this
25
<PAGE>
Agreement, the performance by it of its obligations hereunder or the
consummation of the transactions contemplated hereby, the failure of which to
have been made or obtained would have a material adverse effect on the ability
of such party to perform its obligations hereunder, on the right, title or
interest of the Company in the Equipment or on the business, financial
condition, or operations of any party to this Agreement.
Section 10.2. Representations of Manager. The Manager hereby represents
--------------------------
and warrants to the Company as follows:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. It has all necessary
corporate power and authority and has taken all corporate action necessary to
enter into this Agreement and the other Manager Agreements, to consummate the
transactions contemplated hereby and thereby, and to perform its obligations
hereunder and thereunder.
(b) This Agreement and the other Manager Agreements have been
duly executed and delivered by it and are legal, valid and binding obligations
of it, enforceable against it in accordance with their respective terms, except
as such enforceability may be limited by (i) the effect of bankruptcy,
insolvency, reorganization, moratorium, marshaling or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors generally and (ii) general principles of equity, whether such
enforceability is considered in a proceeding in equity or at law.
(c) Neither the execution and delivery by it of this Agreement
or the other Manager Agreements, the performance by it of its obligations
hereunder or thereunder nor the consummation of the transactions contemplated
hereby or thereby will (i) with or without the giving of notice or the passage
of time, or both, violate, or be in conflict with, or permit the termination of,
or constitute a default under, or cause the acceleration of the maturity of, any
agreement, debt or obligations of any nature of it or to which it is a party or
bound; (ii) require the consent of any party to any agreement, instrument or
commitment to which it is a party or to which it or its properties is bound;
(iii) violate any statute or law or any judgment, decree, order, regulation or
rule of any court, regulatory authority or other governmental authority to which
it is subject; or (iv) result in the creation of any Lien on its assets, which
in the case of (i), (ii), (iii), or (iv) would cause the transactions
contemplated by this Agreement or the other Manager Agreements not to be
consummated or which would have a material adverse effect on the business,
financial condition or operations of the other party to this Agreement or the
other Manager Agreements.
(d) No consent, approval or authorization of, or declaration,
filing or registration with, any regulatory authority or other governmental
agency or authority is required to be made or obtained by it in connection with
the execution, delivery and performance of this Agreement or the other Manager
Agreements, the performance by it of its obligations hereunder
26
<PAGE>
or thereunder or the consummation of the transactions contemplated hereby or
thereby, the failure of which to have been made or obtained would have a
material adverse effect on the ability of such party to perform its obligations
hereunder or thereunder, on the right, title or interest of the Company in the
Equipment or on the business, financial condition, or operations of the other
party to this Agreement or the other Manager Agreements.
SECTION 11.
MISCELLANEOUS
-------------
Section 11.1. Table of Contents and Headings. The table of contents and
------------------------------
the descriptive headings of the several subsections and sections of this
Agreement are inserted for convenience only and do not constitute part of this
Agreement.
Section 11.2. The Manager as Independent Contractor. Except to the extent
-------------------------------------
specifically set forth in this Agreement, all of the functions, duties and
services performed by the Manager under this Agreement shall be performed by the
Manager as an independent contractor and not as Agent of the Company.
Section 11.3. Relations Among Parties. The parties intend, in entering
-----------------------
into this Agreement, that the Manager is an independent contractor and that no
partnership relationship exists among the Manager and the Company; that the
Manager does not have the authority to act as Agent of, or partner or co-
venturer with, the Company except to the extent specifically provided herein;
that the Manager, in its capacity as such, does not, except as specifically set
forth in this Agreement, have the authority to bind the Company; that the
Company, as such, does not have liability for the acts of the Manager; and that
any fees or other compensation payable by the Company to the Manager are
ordinary and necessary business expenses of the Company.
Section 11.4. Governing Law. This Agreement shall be in all respects
-------------
governed by and construed in accordance with the laws of the State of New York,
including all matters of construction, validity and performance, without regard
to principles of conflicts of laws.
Section 11.5. Notices. Any notice, certificate, document, acceptance or
-------
report required or permitted to be given by either party hereto to the other
party shall be in writing and shall be deemed delivered when deposited in the
United States mails, first-class postage prepaid, or when delivered personally,
by facsimile transmission or reputable air courier, addressed as follows:
If to the Company: General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
Facsimile No.: (312) 621-6645
27
<PAGE>
Confirmation No.: (312) 621-6200
If to the Manager: General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
Facsimile No.: (312) 621-6645
Confirmation No.: (312) 621-6200
or addressed to either party at such other address as such party shall hereafter
furnish to the other party by written notice as provided above.
Section 11.6. Entire Agreement; Amendment; Waivers. This Agreement
------------------------------------
constitutes, with respect to the subject matter hereof, the entire agreement of
the parties and supersedes and cancels all prior agreements, discussions,
negotiations, memoranda or correspondence with respect to such subject matter,
and may not be amended orally, but only by an agreement in writing signed by the
party against which enforcement of such amendment is sought. The failure of
either party hereto at any time or times to require performance of any provision
hereof shall in no manner affect its right at a later time to enforce the same.
No waiver by either party hereto of the breach of any term or agreement
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any breach, or a waiver of the breach of any other term or agreement
contained herein.
Section 11.7. Assignment.
----------
(a) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Except as otherwise provided in Section 8.4, the Manager will not, without the
prior written consent of the Lessors and the Indenture Trustees (which consent
shall not be unreasonably withheld), assign any of its rights and/or obligations
hereunder, except as provided herein and in the Participation Agreements;
provided that the Manager may assign any or all of its rights and/or obligations
hereunder without any such consent to (i) any Person which shall consolidate
with the Manager, which the Manager shall merge into or to which the Manager
shall convey, transfer or lease all or substantially all of its assets, and
which meets the requirements of Section 8.4 or (ii) any corporation which is an
Affiliate of the Manager; provided further that in the case of an assignment to
an Affiliate, (a) the Manager shall have received an instrument or instruments
reasonably satisfactory to it, Owner Trustees and the Indenture Trustees under
which such Affiliate assumes the obligations of the Manager hereunder, and (b)
the Manager irrevocably and unconditionally guarantees, pursuant to an Agreement
in form and substance reasonably satisfactory to the Lessors, Owner Participants
and the Indenture Trustees, such assignee's performance of all of such
obligations as primary obligor and not as a surety.
28
<PAGE>
(b) The Manager and the Company hereby confirm that concurrently
with the execution and delivery of this Agreement, (i) the Company has executed
and delivered the Intercreditor Agreement which, among other things, assigns as
collateral security and grants a security interest in favor of the Collateral
Agent in the rights of the Company hereunder and (ii) each Owner Trustee has
executed and delivered to its related Indenture Trustee an Indenture, which
assigns as collateral security and grants a security interest in favor of such
Indenture Trustee in the rights of such Owner Trustee under the Intercreditor
Agreement, all as more explicitly set forth in the Intercreditor Agreement and
the respective Indentures. The Company agrees that it shall not otherwise assign
or convey its right, title and interest in and to this Agreement except as
expressly permitted by and subject to the provisions of the Participation
Agreement and except that the Company shall have the right to assign this
Agreement to an Owner Trustee in connection with a return of Equipment as
provided in the applicable Lease.
Section 11.8. Further Assurances. If at any time the parties hereto shall
------------------
consider or be advised that any further assignments, conveyances or assurances
are necessary or desirable to carry out the provisions hereof and the
transactions contemplated hereby, the parties hereto shall execute and deliver
any and all documents, instruments, contracts, leases, assignments and
assurances and do all things necessary or proper to carry out fully the
provisions hereof.
Section 11.9. Third Party Beneficiary. The Company and the Manager hereby
-----------------------
agree that the Collateral Agent, each Owner Trustee, and each Indemnified Party
referred to in Section 9.1 shall each be a third party beneficiary of this
Agreement.
Section 11.10. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.11. Severability. Any provision of this Agreement that may be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof so long as the economic or legal
substance of the transactions contemplated thereby is not affected in any manner
adverse to any party. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereby waive any
provision of law that renders any provision of this Agreement prohibited or
unenforceable in any respect. In addition, in the event of any such prohibition
or unenforceability, the parties agree that it is their intention and agreement
that any such provision which is held or determined to be prohibited or
unenforceable, as written, in any jurisdiction shall nonetheless be in force and
binding to the fullest extent permitted by the law of such jurisdiction as
though such provision had been written in such a manner and to such an extent as
to be enforceable therein under the circumstances.
29
<PAGE>
Section 11.12. No Petition in Bankruptcy. The Manager hereby agrees
-------------------------
that, prior to the date which is one year and one day after the later of payment
in full of all outstanding Equipment Notes and Pass Through Certificates and the
expiration of the term of this Agreement, the Manager will not institute
against, or join any other Person in instituting against, the Company an action
in bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or similar proceeding under the laws of the United States or any
state of the United States.
30
<PAGE>
IN WITNESS WHEREOF, the Company and the Manager have caused this Agreement
to be duly executed and delivered on the day and year first above written.
GENERAL AMERICAN
RAILCAR CORPORATION II
By:_______________________________
Name:_____________________________
Title:____________________________
GENERAL AMERICAN
TRANSPORTATION CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
31
<PAGE>
APPENDIX A
Definitions
-----------
<PAGE>
Schedule 1
Description of Equipment
<PAGE>
Schedule 6.2
Form of Lockbox Agreement with Lockbox Bank
-------------------------------------------
<PAGE>
Schedule 6.4
List of Marks
-------------
<TABLE>
<CAPTION>
Type of
Mark Railcar
---- -------
<S> <C>
GPDX......................... Freight
GATX......................... Tank
GACX......................... Freight
GPLX......................... Freight
GPFX......................... Freight
GGPX......................... Freight
POTX......................... Tank
GETX......................... Tank
GARX......................... Tank
LCPX......................... Tank
GUEX......................... Freight
UOCX......................... Tank
TCX ......................... Tank
</TABLE>
<PAGE>
Schedule 7.1
Monthly Report Form
-------------------
<PAGE>
Schedule 7.2
Annual Report Form
------------------
<PAGE>
FORM OF
APPENDIX A
OPERATION, MAINTENANCE, SERVICING AND
REMARKETING AGREEMENT (1998-1)
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all purposes of
the Management Agreement, the Insurance Agreement and the Administrative
Services Agreement, unless otherwise defined in any such Agreement or the
context thereof shall otherwise require and such meanings shall be equally
applicable to both the singular and the plural forms of the terms herein
defined. In the case of any conflict between the provisions of this Appendix A
and the provisions of the main body of any such Agreement, the provisions of the
main body of such Agreement shall control the construction of such Agreement.
Unless otherwise required by the context, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended,
supplemented and otherwise modified from time to time, and (ii) references to
parties to agreements shall be deemed to include the permitted successors and
assigns of such parties.
Defined Terms
"AAR" shall mean the Association of American Railroads or any successor
---
thereto.
"Administrative Services Agreement" shall mean the Administrative Services
---------------------------------
Agreement dated as of August 1, 1998, GATC and the Company.
"Administrator" shall have the meaning assigned thereto in the
-------------
Administrative Services Agreement.
"Affiliate" of any Person shall mean any other Person which directly or
---------
indirectly controls, or is controlled by, or is under a common control with,
such Person. The term "control" means the possession, directly or indirectly,
-------
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" shall have meanings
----------- ----------
correlative to the foregoing.
"Bankruptcy Code" shall mean Chapter 11 of Title 11 of the United States
---------------
Code, 11 U.S.C. (S)101 et. seq.
--- ----
<PAGE>
"Base Component" shall have the meaning assigned thereto in Section 5.2 of
--------------
the Management Agreement.
"Basic Term" shall have the meaning assigned thereto in Section 3.1 of each
----------
Lease.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
------------
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, Chicago,
Illinois, the city and state in which the principal corporate trust office of
the Owner Trustee is located, or, until the Lien of the Indenture has been
discharged, the city and state in which the principal corporate trust office of
the Indenture Trustee is located.
"Car Service Contract" shall have the meaning assigned thereto in the first
--------------------
recital of the Management Agreement.
"Claims" shall mean any and all costs, expenses, liabilities, obligations,
------
losses, damages, penalties, actions or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability
or liability in tort), including, without limitation, all reasonable out-of-
pocket costs, disbursements and expenses (including legal fees and expenses)
paid or incurred in connection therewith or related thereto.
"Closing" shall have the meaning assigned thereto in Section 2.3(b) of the
-------
Participation Agreements.
"Closing Date" shall have the meaning assigned thereto in Section 2.1 of
------------
the Participation Agreements.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral Agent" shall have the meaning assigned thereto in the
----------------
Intercreditor Agreement.
"Company" or "Lessee" shall mean General American Railcar Corporation II, a
------- ------
Delaware corporation.
"Company Documents" shall have the meaning assigned thereto in Section 1.1
-----------------
of the Intercreditor Agreement.
"Customer" shall have the meaning assigned thereto in the first recital of
--------
the Management Agreement.
"Equipment" shall mean collectively those items of railroad rolling stock
---------
described in the Lease Supplements and the Indenture Supplements, together with
any and all accessions, additions, improvements and replacements from time to
time incorporated or installed in any
2
<PAGE>
item thereof which are the property of the Owner Trustee pursuant to the terms
of a Bill of Sale or the Lease, and "Unit" shall mean individually the various
----
items thereof.
"Equipment Notes" shall mean the Equipment Notes issued and outstanding
---------------
under, and as defined in each of the Indentures.
"Event of Loss" shall have the meaning assigned thereto in Section 11.1 of
-------------
the Leases.
"Existing Car Service Contracts" shall have the meaning assigned thereto in
------------------------------
the fourth recital of the Participation Agreements.
"FRA" shall mean the Federal Railroad Administration or any successor
---
thereto.
"GATC" shall mean General American Transportation Corporation, a New York
----
corporation.
"Hazardous Substances" shall mean any hazardous or toxic substances,
--------------------
materials or wastes, including, but not limited to, those substances, materials,
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR (S)172.101) or by the Environmental Protection Agency as
hazardous substances (40 CFR (S)302.4) and amendments thereto, or such
substances, materials and wastes which are or become regulated under any
applicable local, state or federal law or the equivalent under applicable
foreign laws including, without limitation, any materials, waste or substance
which is (a) petroleum, (b) asbestos, (c) polychlorinated biphenyls, (d) defined
as a "hazardous material," "hazardous substance" or "hazardous waste" under
------------------ ------------------- ---------------
applicable local, state or federal law or the equivalent under applicable
foreign laws, (e) designated as a "hazardous substance" pursuant to Section 311
-------------------
of the Clean Water Act of 1977, (f) defined as "hazardous waste" pursuant to
---------------
Section 1004 of the Resource Conservation and Recovery Act of 1976, or (g)
defined as "hazardous substances" pursuant to Section 101 of the Comprehensive
--------------------
Environmental Response, Compensation, and Liability Act of 1980.
"Incentive Component" shall have the meaning assigned thereto in Section
-------------------
5.3 of the Management Agreement.
"Income Tax" shall have the meaning assigned thereto in Section 7.1(1) of
----------
the Participation Agreements.
"Indemnified Expenses" shall have the meaning assigned thereto in the
--------------------
Administrative Services Agreement.
"Indemnified Parties" shall have the meaning assigned thereto in the
-------------------
Administrative Services Agreement.
3
<PAGE>
"Indemnified Person" shall have the meaning assigned thereto in Section
------------------
7.2(b) of the Participation Agreements.
"Indentures" or "Trust Indentures" shall mean the [three] Trust Indenture
---------- ----------------
and Security Agreements [(Trust Nos. 98-1, 98-2 and 98-3)], each dated as of
August 1, 1998 between the related Owner Trustee, in the capacities described
therein, and the Indenture Trustee. The term "Indentures" shall include, except
----------
where the context otherwise requires, each Indenture Supplement entered into
pursuant to the terms of the Indentures.
"Indenture Trustee" shall mean The First National Bank of Chicago, a
-----------------
national banking association, as trustee under the Indenture and its successors
thereunder.
"Indenture Trustee Agreements" shall mean the Operative Agreements to which
----------------------------
the Indenture Trustee is or will be a party.
"Insurance Agreement" shall mean the Insurance Agreement dated as of August
-------------------
1, 1998 between the Lessee and GATC.
"Insurance Letters" shall mean the [three] letters dated as of August 1,
-----------------
1998 [(Trust Nos. 98-1, 98-2 and 98-3)], each from the Lessee and the Manager to
the Owner Trustee, and each of which contains the acknowledgment and consent of
the Owner Participant, the Pass Through Trustee and the Indenture Trustee.
"Insurance Manager" shall have the meaning assigned thereto in the
-----------------
Insurance Agreement.
"Intercreditor Agreement" shall mean the Collateral Agency and
-----------------------
Intercreditor Agreement dated as of August 1, 1998 among the Lessee, the
Collateral Agent, the Owner Trustees, the Indenture Trustees, GATC, as Manager,
GATC, as Insurance Manager and certain other Persons.
"Leases" or "Lease Agreements" or "Equipment Leases" shall mean the three
------ ---------------- ----------------
Equipment Lease Agreements [(Trust Nos. 98-1, 98-2 and 98-3)], each dated as of
August 1, 1998, between the related Owner Trustee, in the capacities described
therein, as Lessor, and the Lessee. The term "Leases" shall, except where the
------
context otherwise requires, include each Lease
Supplement entered into pursuant to the terms of the Leases.
"Lease Default" shall mean an event which with notice or lapse of time or
-------------
both would become a Lease Event of Default.
"Lease Event of Default" shall mean a Lease Event of Default under the
----------------------
related Lease as specified in Section 14 thereof.
"Lessor" shall have the meaning assigned thereto in the recitals to each
------
Lease.
4
<PAGE>
"Lien" shall mean any mortgage, pledge, security interest, lien,
----
encumbrance, lease, disposition of title or other charge of any kind on
property.
"Lockbox" shall have the meaning assigned thereto in Section 6.2(a) of the
-------
Management Agreement.
"Lockbox Agreement" shall mean the agreement by and between GATC, as
-----------------
Trustee for itself, individually, and General American Railcar Corporation II,
such other Persons as may be named parties thereto from time to time and the
Lockbox Bank.
"Lockbox Bank" shall have the meaning assigned thereto in Section 6.2(a) of
------------
the Management Agreement.
"Management Agreement" shall mean the Operation, Maintenance, Servicing and
--------------------
Remarketing Agreement dated as of August 1, 1998 between the Company and the
Manager.
"Management Fee" shall have the meaning assigned thereto in the Management
--------------
Agreement.
"Manager" shall have the meaning assigned thereto in the Management
-------
Agreement.
"Manager Agreements" shall mean the Operative Agreements to which the
------------------
Manager is or is to be a party.
"Manager's Cost" shall have the meaning assigned thereto in Section 5.4(a)
--------------
of the Management Agreement.
"Manager's Fleet" shall have the meaning assigned thereto in Section 2.2(j)
---------------
of the Management Agreement.
"Marks Company" shall have the meaning assigned thereto in Section 6.4 of
-------------
the Management Agreement.
"Modification" shall have the meaning assigned thereto in Section 9.2 of
------------
each Lease.
"Moody's" shall mean Moody's Investors Service, Inc.
-------
"Officer's Certificate" shall mean a certificate signed (i) in the case of
---------------------
a corporation by the President, any Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership by the Chairman of the Board, the President or any
Vice President, the Treasurer or an Assistant Treasurer of a corporate general
partner or a member, as the case may be, and (iii) in the case of a commercial
bank or trust company, by the Chairman or Vice Chairman of the Executive
Committee or the Treasurer, any Trust Officer, any Vice President, any Executive
or Senior or Second or Assistant Vice
5
<PAGE>
President, or any other officer or assistant officer customarily performing the
functions similar to those performed by the persons who at the time shall be
such officers, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject, and (iv) in the case
of a limited liability company, any Manager thereof and any President, Managing
Director or Vice President thereof.
"Operative Agreements" shall mean the Transfer and Contribution Agreement,
--------------------
the GATC Bill of Sale, the Participation Agreements, the Bills of Sale, the
Trust Agreements, the Pass Through Trust Agreement, the Pass Through Trust
Supplement, the Pass Through Certificates, the Equipment Notes, the Leases, the
Lease Supplements, the Indentures, the Indenture Supplements, the Tax Indemnity
Agreements, the Intercreditor Agreement, the Purchase Agreement, the Management
Agreement, Insurance Agreement, the Insurance Letters and the Lockbox Agreement.
"Optional Modification" shall have the meaning assigned thereto in Section
---------------------
9.1 of each Lease.
"Owner Participants" shall mean _____________________________, and their
------------------
respective successors and permitted assigns.
"Owner Trustee" shall mean [Owner Trustee], not in its individual capacity
-------------
but solely as Owner Trustee under the Trust Agreements and its successors
thereunder.
"Parent" shall mean GATX Corporation, a New York corporation.
------
"Participants" shall mean the Loan Participant and the Owner Participants.
------------
"Participation Agreements" shall mean the three Participation Agreements
------------------------
[(Trust Nos. 98-1, 98-2 and 98-3)], each dated as of August 1, 1998, among the
Lessee, the Manager, the Pass Through Trustee, the related Owner Participant,
the related Owner Trustee and the related Indenture Trustee.
"Pass Through Certificates" or "Certificates" shall mean the Pass Through
------------------------- ------------
Certificates issued pursuant to the Pass Through Trust Supplement and the Pass
Through Trust Agreement.
"Permitted Liens" with respect to the Equipment and each Unit thereof shall
---------------
mean: (i) the interests of the Lessee and the related Owner Trustee under the
related Lease and the related Lease Supplements; (ii) the interest of the Lessee
and any sublessee as provided in any Permitted Sublease; (iii) any Liens for
taxes, assessments, levies, fees and other governmental and similar charges not
yet due and payable or the amount or validity of which is being contested in
good faith by appropriate proceedings so long as there exists no material risk
of sale, forfeiture, loss, or loss of or interference with use or possession of
any Unit or interference with the payment of Rent; (iv) any Liens of mechanics,
suppliers, materialmen, laborers, employees, repairmen and other like Liens
arising in the ordinary course of Lessee's (or if a sublease is then in effect,
any
6
<PAGE>
sublessee's) business securing obligations which are not yet due and payable
or the amount or validity of which is being contested in good faith by
appropriate proceedings so long as there exists no material risk of sale,
forfeiture, loss, or loss of or interference with use or possession of any Unit
or interference with the payment of Rent; (v) the Lien granted to the related
Indenture Trustee under and pursuant to the related Indenture, and the
respective rights of the Loan Participant, the related Indenture Trustee, the
related Owner Participant and the related Owner Trustee under the Operative
Agreements; (vi) Liens arising out of any judgment or award against the Lessee
(or any sublessee permitted pursuant to Section 8.3 of the related Lease) with
respect to which an appeal or proceeding for review is being presented in good
faith and for the payment of which adequate reserves have been provided as
required by generally accepted accounting principles or other appropriate
provisions have been made and with respect to which there shall have been
secured a stay of execution pending such appeal or proceeding for review and
there exists no material risk of sale, forfeiture, loss, or loss of or
interference with the use or possession of any Unit or any interest therein or
interference with the payment of Rent, and (vii) salvage rights of insurers
under insurance policies maintained pursuant to Section 12 of the related Lease.
"Permitted Subleases" shall have the meaning assigned thereto in Section
-------------------
8.3 of the Leases.
"Person" shall mean an individual, partnership, limited liability company,
------
corporation, trust, association or unincorporated organization, and a government
or agency or political subdivision thereof.
"Projected Coverage Ratio" shall have the meaning set forth in Section 1.1
------------------------
of the Intercreditor Agreement.
"Railroad Mileage Credits" shall mean the mileage credit payments made by
------------------------
the railroads under their applicable tariffs to the owner of the marks on the
railcar.
"Rating Agencies" shall mean, at any time, S&P's and Moody's, or any
---------------
successor to any such corporation's business of rating securities which is then
providing a rating for the Pass Through Certificates.
"Reimbursable Services" shall have the meaning assigned thereto in Section
---------------------
5.4 of the Management Agreement.
"Replacement Unit" shall mean a covered hopper car or tank car, as the case
----------------
may be, which shall have been leased under the Lease pursuant to Section 11.4 of
each Lease.
"Required Modification" shall have the meaning assigned thereto in Section
---------------------
9.1 of each Lease.
7
<PAGE>
"Responsible Officer" shall mean, with respect to the subject matter of any
-------------------
covenant, agreement or obligation of any party contained in any Operative
Agreement, the President, or any Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer or other officer, who in the normal performance
of his operational responsibility would have knowledge of such matters and the
requirements with respect thereto; and when used in connection with the Lessee,
"Responsible Officer" shall include any such officer of the Manager or the
-------------------
Insurance Manager acting on behalf of the Lessee under the Management Agreement
or the Insurance Agreement, as the case may be.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
---
Hill, Inc.
"Services Standard" shall have the meaning assigned thereto in Section 2.2
-----------------
of the Management Agreement.
"Servicing Agreement" shall mean the Management and Servicing Agreement
-------------------
dated as of September 30, 1997 between GATC and the Marks Company.
"Stipulated Loss Value" for any Unit as of any date of determination shall
---------------------
mean the amount determined by multiplying the Equipment Cost for such Unit by
the percentage set forth in Schedule 4 to the related Participation Agreement
opposite the Rent Payment Date on which such Stipulated Loss Value is being
determined; provided that during any Renewal Term, "Stipulated Loss Value" shall
-------- ---------------------
be determined as provided in Section 22.6 of the related Lease. Anything
contained in the related Lease or in the related Participation Agreement to the
contrary notwithstanding, Stipulated Loss Value for such Unit (both before and
after any adjustment pursuant to Section 2.6 of the related Participation
Agreement) will, under any circumstances and in any event, be an amount which,
together with any other amounts required to be paid by Lessee under the related
Lease in connection with an Event of Loss, will be at least sufficient to pay in
full as of the date of payment thereof the aggregate unpaid principal of the
Equipment Notes issued in respect of such Unit, together with all unpaid
interest, Late Payment Premium and Make-Whole Amount, if any, thereon accrued to
the date on which such amount is paid in accordance with the terms hereof and
all other amounts then due to the holders of the Equipment Notes.
"Sublease Payments" shall mean all amounts paid or payable by or on behalf
-----------------
of, or credited to, the Company under, or in respect of, a Car Service Contract,
including, without limitation, all service charges, rentals, excess mileage
charges, delivery costs reimbursed by Customer and cancellation or penalty
payments, as well as all amounts paid or payable by the Customer as
reimbursement, indemnity, fees or commissions, or on account of assumed
financial responsibility or liability or otherwise.
"Subsidiary" of any Person shall mean any corporation, association, or
----------
other business entity of which more than 50% (by number of votes) of the voting
stock at the time outstanding shall at the time be owned, directly or
indirectly, by such Person or by any other corporation,
8
<PAGE>
association or trust which is itself a Subsidiary within the meaning of this
definition, or collectively by such Person and any one or more such
Subsidiaries.
"Successor Insurance Manager" shall have the meaning assigned thereto in
---------------------------
the Insurance Agreement.
"Successor Lockbox Trustee" shall have the meaning assigned thereto in
-------------------------
Section 6.3 of the Management Agreement.
"Successor Manager" shall have the meaning assigned thereto in Section 8.4
-----------------
of the Management Agreement.
"Taxes" shall have the meaning assigned thereto in Section 7.1(b) of the
-----
Participation Agreement.
"Trust Agreements" shall mean those three certain Trust Agreements [(Trust
----------------
Nos. 98-1, 98-2 and 98-3)], dated as of August 1, 1998, between the related
Owner Participant and the related Owner Trustee.
"Unit" shall mean each unit or item of Equipment.
----
"Unit Monthly Fee" shall have the meaning assigned thereto in Section
----------------
5.2(b) of the Management Agreement.
9
<PAGE>
Exhibit 10.2
------------
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT (1998-1)
This Agreement, dated as of the 1st day of August, 1998, is made and
entered into between General American Transportation Corporation, a New York
corporation (together with any successor administrator, the "Administrator"),
and General American Railcar Corporation II, a Delaware corporation (the
"Company"). Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings given thereto in Appendix A of the
Operation, Maintenance, Servicing and Remarketing Agreement (1998-1), dated as
of the date hereof (as amended from time to time), between the Company and the
Administrator (the "Management Agreement").
W I T N E S S E T H
WHEREAS, the Company has acquired from General American Transportation
Corporation, a New York corporation ("GATC"), (i) certain railroad tank cars and
covered hopper cars (each railcar individually a "Unit" and all railcars
collectively the "Equipment"), and (ii) all of GATC's right, title and interest
in and to the lease agreements respecting the Equipment in which GATC is the
lessor, such lease agreements being with customers of GATC;
WHEREAS, the Company has sold the Equipment to [Owner Trustee], as Owner
Trustee under [three] separate Trust Agreements, each dated as of August 1,
1998, with the Owner Participants therein named (such Owner Trustees under each
Trust Agreement being herein referred to collectively as the "Owner Trustees"
and, individually, as an "Owner Trustee"), and the Owner Trustees have
simultaneously leased the Equipment to the Company pursuant to the terms of
[three] separate Equipment Lease Agreements, each dated as of August 1, 1998
(collectively, the "Leases" and, individually, a "Lease"); and
WHEREAS, to enable the Company to carry out its corporate functions,
Administrator has agreed to furnish clerical and bookkeeping services, prepare
financial statements and tax returns, provide office space and perform other
ancillary services for the Company;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Company and the Administrator hereby agree as follows:
Section 1. Administrative Services.
-----------------------
The Administrator hereby agrees to provide the following administrative
management services to the Company:
<PAGE>
(a) designate one or more individuals who are directors, officers or
employees of the Administrator and who are available to serve, from time to
time, as directors of the Company;
(b) upon request by the Board of Directors of the Company, designate
one or more individuals who are directors, officers or employees of the
Administrator to serve, from time to time, as officers of the Company;
(c) through directors, officers and employees of the Administrator
who are directors or officers of the Company;
(i) furnish the Company with ordinary clerical and bookkeeping
services;
(ii) take such actions on behalf of the Company as are necessary
or desirable for the Company to remain organized in its jurisdiction of
incorporation and qualified (in those foreign jurisdictions in which it
becomes qualified) and to carry out its business, including, without
limitation, the filing of such reports and payment of such fees and
expenses as may be required;
(iii) maintain the general ledger of the Company, and on a timely
basis, and in cooperation with the Manager acting pursuant to the
Management Agreement, prepare the financial statements and tax returns of
the Company, subject to year-end audit, in accordance with generally
accepting accounting principles;
(iv) direct and, in cooperation with the Manager acting pursuant
to the Management Agreement, prepare the auditing staff of the Company's
independent accountants to facilitate the timely completion of the year-end
audit review;
(v) provide, or cause to be provided, notice to each of the
Rating Agencies and the Collateral Agent in the event that:
(A) any action, suit or proceeding is pending against the
Company;
(B) any amendment occurs with respect to the Certificate of
Incorporation or By-Laws of the Company;
in each of the above instances, such notice shall be provided by the
Administrator within 30 days of the Administrator's obtaining knowledge of
such event; and
2
<PAGE>
(vi) defend, at the direction of the Company's Board of
Directors, any action, suit or proceeding to cause a substantive
consolidation of the assets and liabilities of the Company with the
Administrator, the Manager, the Parent or any other Person.
(d) provide separately identified office space, stationery and
telephone numbers and such other reasonable ancillary services as may be
necessary for the Company to carry out its obligations under Sections 1(a)
through (c) hereof, including telecopying, duplicating and word processing
services;
(e) provide such other services as are incidental to the foregoing or
as the Company and the Administrator may agree; provided such services do not
--------
conflict with the services to be provided by the Manager pursuant to the
Management Agreement; and
(f) provide notice to each of the Rating Agencies in the event that
any Independent Director is removed or appointed.
In providing the services under this Section 1 and as otherwise provided
under this Agreement, the Administrator agrees to comply with the Services
Standard and will not knowingly take any actions on behalf of the Company which
would cause the Company to be in violation of any federal law of the United
States of America or any law of any state, territory or domicile of the United
States.
Section 2. Compensation of the Administrator.
---------------------------------
The compensation to the Administrator for the performance of its services
hereunder shall be included in the Base Component under the Management Agreement
so long as the Administrator remains as the Manager thereunder. Such Base
Component is intended, so long as the Administrator is acting as Manager under
the Management Agreement, to include all direct costs and expenses relating to
the performance by the Administrator of its services, duties and obligations
under this Agreement. In the event that the Administrator is terminated as
Manager under the Management Agreement, the Company and the Administrator shall
agree upon a mutually acceptable compensation arrangement based on the then
current market rate for such services.
Section 3. Term of Agreement
-----------------
This Agreement shall commence on August 1, 1998 and shall be terminable by
the Administrator or the Company upon ninety (90) days written notice after the
Management Agreement is no longer continuing in effect (as it may be renewed or
otherwise extended).
3
<PAGE>
Section 4. The Administrator's Liability
-----------------------------
The Administrator and its directors, officers and employees who serve as
directors and officers of the Company assume no liability for anything other
than to render or stand ready to render the services specifically called for
herein, and neither the Administrator nor any of its directors, officers,
employees or subsidiaries or Persons controlling, controlled by or under common
control or affiliated with the Administrator shall be responsible for any action
of the Company under any of the Company Documents or Operative Agreements to
which the Company is a party. Neither the Administrator nor any director,
officer or employee of the Administrator who serves as a director or officer of
the Company shall be liable for or shall have any obligation with regard to any
of the liabilities, whether direct or indirect, absolute or contingent, of the
Company in connection with such Company Documents or Operative Agreements,
instruments or documents. The directors, officers and employees of the
Administrator who serve as directors and officers of the Company shall act in
accordance with the standards of conduct imposed on officers and directors under
Delaware law. Notwithstanding anything to the contrary contained in this Section
4, the Administrator hereby agrees that if it or any of its officers, employees,
directors or agents shall fail to observe any of its obligations under this
Agreement and as a result of such failure the Company incurs (whether as a
result of any action so taken or omitted to be taken in violation of terms
hereof) any costs, expenses, actions, suits, judgments, demands, damages, losses
or liabilities (including, without limitation, reasonable attorneys' fees and
expenses) (collectively, the "Indemnified Expenses"), then the Administrator
shall indemnify and hold harmless the Company for such Indemnified Expenses;
provided, however, that the Administrator shall only be liable for any such
- -------- -------
Indemnified Expense to the extent arising in connection with, or as a result of,
its or its officers', employees', directors' or agents' negligence or willful
misconduct. The indemnities set forth in the preceding sentence shall survive
the termination of this Agreement.
Section 5. Miscellaneous
-------------
(a) The descriptive headings of the several subsections and articles
of this Agreement are inserted for convenience only and do not constitute part
of this Agreement.
(b) All of the functions, duties and services performed by the
Administrator under this Agreement shall be performed by the Administrator as an
independent contractor and not as agent of the Company.
(c) The parties intend, in entering into this Agreement, that the
Administrator is an independent contractor and that no partnership relationship
exists among the Administrator and the Company; that the Administrator does not
have the authority to act as agent of, or partner or co-venturer with, the
Company except to the extent specifically provided herein; that the
Administrator, in its capacity as such, does not, except as specifically set
forth in this
4
<PAGE>
Agreement, have the authority to bind the Company; that the Company, as such,
does not have liability for the acts of the Administrator; and that any fees or
other compensation payable by the Company to the Administrator are ordinary and
necessary business expenses of the Company.
(d) This Agreement shall be in all respects governed by and construed
in accordance with the laws of the State of New York, including all matters of
construction, validity and performance, without regard to principles of
conflicts of laws.
(e) Any notice, certificate, document, acceptance or report required
or permitted to be given by either party hereto to the other party shall be in
writing and shall be deemed delivered when deposited in the United States mails,
first-class postage prepaid, or when delivered personally, by facsimile
transmission or reputable air courier, addressed as follows:
If to the Company: General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
If to the Administrator: General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
or addressed to either party at such other address as such party shall hereafter
furnish to the other party by written notice as provided above.
(f) This Agreement constitutes, with respect to the subject matter
hereof, the entire agreement of the parties and supersedes and cancels all prior
agreements, discussions, negotiations, memoranda or correspondence with respect
to such subject matter, and may not be amended orally, but only by an agreement
in writing signed by the party against which the enforcement of such amendment
is sought. The failure of either party hereto at any time or times to require
performance of any provision hereof shall in no manner affect its right at a
later time to enforce the same. No waiver by either party hereto of the breach
of any term or agreement contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any breach, or a waiver of the breach of any
other term or agreement contained herein. The parties hereto reserve the right
to amend, modify, supersede and cancel this Agreement, or waive the terms or
conditions hereof, without the consent of any other person or entity.
(g) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns,
provided that the Administrator will
- --------
5
<PAGE>
not, without the prior written consent of the Collateral Agent, assign any of
its rights hereunder, except as provided herein, in the Intercreditor Agreement
and in the Participation Agreement.
(h) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(i) Any provision of this Agreement that may be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof so long as the economic or legal substance of the
transactions contemplated thereby is not affected in any manner adverse to any
party. Any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the fullest extent permitted by law, the parties hereby waive any provision of
law that renders any provision of this Agreement prohibited or unenforceable in
any respect. In addition, in the event of any such prohibition or
unenforceability, the parties agree that it is their intention and agreement
that any such provision which is held or determined to be prohibited or
unenforceable, as written, in any jurisdiction shall nonetheless be in force and
to the fullest extent permitted by the law of such jurisdiction as though such
provision had been written in such a manner and to such an extent as to be
enforceable therein under the circumstances.
(j) The Administrator hereby agrees that, prior to the date which is
one year and one day after the payment in full of all outstanding Equipment
Notes and Pass Through Certificates, the Administrator will not institute
against, or join any other Person in instituting against, the Company an action
in bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or similar proceeding under the laws of the United States or any
state of the United States.
[Signatures on Next Page]
6
<PAGE>
IN WITNESS WHEREOF, the Company and the Administrator have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
GENERAL AMERICAN RAILCAR
CORPORATION II
By:_______________________________
Its:_________________________
GENERAL AMERICAN
TRANSPORTATION CORPORATION
By:_______________________________
Its:_________________________
7
<PAGE>
Exhibit 10.3
------------
FORM OF
INSURANCE AGREEMENT (1998-1)
----------------------------
This Agreement, dated as of the 1st day of August, 1998, is made and
entered into between General American Transportation Corporation, a New York
corporation (the "Insurance Manager"), and General American Railcar Corporation
II, a Delaware corporation (the "Company").
W I T N E S S E T H
- - - - - - - - - -
A. The Company has acquired from General American Transportation
Corporation, a New York corporation ("GATC"), (i) certain railroad tank cars and
covered hopper cars (each railcar individually a "Unit" and all railcars
collectively the "Equipment"), as such Units are more fully described in
Schedule 1 to the respective Participation Agreements, and (ii) all of GATC's
right, title and interest in and to any and all lease agreements respecting the
Equipment in which GATC is the lessor, such lease agreements being with
customers of GATC (such lease agreements and future lease agreements entered
into by the Manager on behalf of the Company respecting the Equipment are
hereinafter referred to as "Car Service Contracts" and such customers and future
customers under Car Service Contracts are hereinafter referred to as
"Customers").
B. The Company has sold the Equipment to [Owner Trustee], as Owner
Trustee under [three] separate Trust Agreements, each dated as of August 1,
1998, with the Owner Participants therein named (such Owner Trustees under each
Trust Agreement being herein referred to collectively as the "Owner Trustees"
and, individually, as an "Owner Trustee"), and the Owner Trustees have
simultaneously leased the Equipment to the Company pursuant to the terms of
[three] separate Equipment Lease Agreements, each dated as of August 1, 1998
(collectively, the "Leases" and, individually, a "Lease").
C. The Company, The First National Bank of Chicago, as Collateral Agent
(the "Collateral Agent"), the Owner Trustees, the Indenture Trustees (as
hereinafter defined), the Manager and the Insurance Manager have entered into a
Collateral Agency and Intercreditor Agreement dated as of August 1, 1998 (the
"Intercreditor Agreement") providing, among other things, for the distribution
of Collections and the exercise of certain rights of the Company under the
Company Documents (as defined in the Intercreditor Agreement).
D. GATC is engaged in the business of owning, leasing and managing
railcars for itself and others, and the Company desires to retain the Insurance
Manager, on the terms and conditions set forth in this Agreement, to perform
insurance services on behalf of the Company with respect to the Equipment leased
by the Company under the Leases and the related Car Service Contracts.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the Company and the Insurance Manager hereby agree as follows:
Section 1.
Definitions
-----------
Unless otherwise defined herein, all capitalized terms used but not defined
herein have the meanings assigned to such terms in Appendix A to the Operation,
Maintenance, Servicing and Remarketing Agreement dated as of August 1, 1998
between GATC and the Company.
Section 2.
Appointment and Duties of Insurance Manager
-------------------------------------------
Section 2.1. Appointment. The Company hereby appoints the Insurance
-----------
Manager to act as the manager for all insurance coverage placed or maintained on
the Equipment effective as of the Closing Date and grants to the Insurance
Manager the authority to enter into, administer and terminate all such insurance
relating to the Equipment on behalf of the Company, and generally to manage and
administer the insurance on the Equipment, all on the terms and conditions
contained herein. The Insurance Manager shall manage the insurance on each Unit
from the date as of which the Company first acquires possession of such Unit
until the date the Company no longer has an ownership or leasehold interest
therein or, if a Unit suffers an Event of Loss under any Lease, until such date
as such Unit is no longer subject to the terms of such Lease. During such time
as any of the Leases remains in effect, the Insurance Manager agrees to manage
the insurance on each Unit in accordance with the terms and provisions of the
Lease to which such Unit is subject.
Section 2.2. Duties of the Insurance Manager. The Insurance Manager
-------------------------------
hereby accepts its appointment as manager for all insurance coverage placed or
maintained on the Equipment and agrees to use reasonable care and diligence,
consistent with customary commercial practice as would be used by a prudent
Person in the railcar leasing industry (the "Insurance Services Standard") and,
subject to the terms and conditions of this Agreement and the requirements of
the respective Leases, to maintain or cause to be maintained, with such insurers
with whom Insurance Manager or its Affiliates insure equipment owned or managed
by them (or under such program of self-insurance generally covering equipment
owned or managed by Insurance Manager), public liability insurance in respect of
the Equipment in amounts not less than and with deductibles or retentions not
greater than those customarily maintained by Insurance Manager and its
Affiliates for similar equipment owned or managed by them and casualty insurance
in amounts not less than, against risks and with deductible or retention amounts
not greater than those customarily maintained by Insurance Manager or its
Affiliates for similar equipment owned or managed by them; provided, however,
that in all events the insurance policies maintained pursuant to this Agreement
shall comply with the specific requirements of Section 2.3(a) below.
2
<PAGE>
Section 2.3. Certain Insurance Covenants
---------------------------
(a) Insurance Manager shall cause all insurance policies required to
be maintained by Insurance Manager pursuant to Section 2.2 to comply with the
requirements of Section 12 of each of the Leases, including Sections 12.2
(physical damage insurance) and 12.3 (public liability insurance) thereof;
provided, however, that it is understood that in complying with said Section
12.3, the provisions of Section 12.3(c) of the Lease shall be available to the
Insurance Manager.
(b) Insurance Manager shall provide the Company and/or the Lessors
such documents and information as the Company and/or any Lessor may reasonably
request from time to time to evidence the maintenance of the insurance required
under Section 2.2, including annual certificates and notices of material changes
in or cancellation of such policies. Nothing herein shall be construed to
prohibit the Company or any other Person from carrying any insurance on the
Units of Equipment for its own benefit.
(c) When available, copies of policies and certificates of insurance
with respect thereto shall be furnished promptly to the Company and the Manager.
(d) If at any time the insurance maintained on the Units by Insurance
Manager on behalf of the Company shall lapse or have limits lower than as
required under any Lease for whatever reason, Insurance Manager, immediately
upon receipt of notice of the lapse of or decrease in such insurance coverage,
shall give notice to the Company, the Manager, the Owner Participants and the
Lessors of the same. Insurance Manager shall also notify the Company, the
Manager and the Lessors promptly with respect to any default in the payment of
any premium or of any other act or omission of Insurance Manager or of any other
person of which Insurance Manager has knowledge which might invalidate, render
unenforceable, result in a lapse of or reduce any insurance coverage on the
Units maintained by Insurance Manager pursuant to this Agreement.
Section 3.
Insurance Manager's Standard of Performance
-------------------------------------------
Section 3.1. Standards.
---------
(a) All of the functions, services, duties and obligations of the
Insurance Manager under this Agreement shall be performed by the Insurance
Manager in compliance with the Insurance Services Standard.
3
<PAGE>
(b) If the Insurance Manager is rendered unable to perform any of its
obligations under this Agreement as a result of acts beyond the reasonable
control of the Insurance Manager or its Affiliates or the control of their
agents, suppliers or subcontractors including, without limitation, acts of God,
acts of civil or military authorities, embargoes, governmental priorities, fires
or other casualties, strikes or other labor disturbances, floods, riots, war,
lack or shortage of transportation facilities, delays in transportation or
inability or difficulty in obtaining necessary labor, materials or goods then
the Insurance Manager will be excused from whatever performance is affected by
the foregoing to the extent so affected; provided that:
--------
(i) the Insurance Manager gives the Company, the Owner
Trustees, the Participants and the Indenture Trustees written notice of the
occurrence of the event as soon as practicable after the occurrence thereof
describing in reasonable detail the particulars of such occurrence,
including an estimation of its expected duration and probable impact on the
performance of the Insurance Manager's obligations hereunder, and
thereafter continues to furnish timely regular reports with respect thereto
during the continuation of such event (provided that the failure of the
Insurance Manager to give such notice on a timely basis shall not impose
any additional obligation on the Insurance Manager except to the extent
that such failure has a material adverse effect on the Company);
(ii) the suspension of performance hereunder shall be of no
greater scope and of no longer duration than is reasonably required by such
event;
(iii) no liability of the Insurance Manager which arose before
the occurrence of the event which caused the suspension of performance
shall be excused as a result of the occurrence;
(iv) the Insurance Manager shall exercise its reasonable efforts
to mitigate or limit damages to the Company, the Owner Trustees, the
Participants and the Indenture Trustees and shall use its reasonable
efforts to remove or terminate, as soon as practicable, the event causing
such suspension;
(v) the Insurance Manager shall use its reasonable efforts to
continue to perform its obligations hereunder; and
(vi) when the Insurance Manager is able to resume the
performance of its obligations hereunder, the Insurance Manager shall give
written notice to that effect to the Company, the Owner Trustees, the
Participants and the Indenture Trustees and shall promptly resume
performance hereunder.
4
<PAGE>
(c) The Insurance Manager shall, in connection with the performance of
the services, comply in all material respects with all laws, rules and
regulations applicable to the Insurance Manager, the Company and the Equipment.
(d) The duties and obligations of the Insurance Manager will be
limited to those expressly set forth in this Agreement, and the Insurance
Manager will not have any fiduciary or other implied duties or obligations to,
except as provided herein.
Section 3.2. Similar Services. It is expressly understood and agreed
----------------
that nothing herein shall be construed to prevent, prohibit or restrict the
Insurance Manager or any Affiliate of the Insurance Manager from providing the
same or similar services as those provided under this Agreement to any other
Person; provided that no such activity shall in any way diminish the obligations
--------
of the Insurance Manager hereunder.
Section 4.
Reimbursement and Compensation of the Insurance Manager
-------------------------------------------------------
Section 4.1. Reimbursement. The Company shall reimburse the Insurance
-------------
Manager in connection with its services hereunder an amount equal to the greater
of (i) an appropriate share of Insurance Manager's insurance costs (including
any allocation thereof to Insurance Manager from its Affiliates) for all
railcars owned, leased or managed by Insurance Manager, allocated on such basis
as is customarily used by Insurance Manager or its Affiliates in allocating
insurance costs, or (ii) Insurance Manager's marginal insurance costs resulting
from such insurance coverage on behalf of the Company, as reasonably determined
by Insurance Manager, provided, however, that in no event shall the amount to be
reimbursed hereunder be greater than the premiums which would have been payable
by the Company for comparable insurance; and, provided, further, that if
insurance coverage is effected through a separate policy, whether obtained by,
or on behalf of, the Company, the cost thereof shall be borne by the Company.
There shall be no apportionment of premiums in respect of insurance maintained
by Insurance Manager hereunder for periods extending beyond the termination of
this Agreement if coverage is effected through blanket insurance policies which
also cover other property or assets owned, leased or managed by Insurance
Manager or its Affiliates. Insurance Manager may cancel any such blanket
insurance policies at any time and obtain any premium refunds incident thereto,
and Insurance Manager shall be entitled to any premium refund or dividend
received by the Company or Insurance Manager on account of any such blanket
insurance policy maintained by Insurance Manager, unless such premium refund or
dividend, or a portion thereof, represents a refund of Insurance Manager's
identifiable marginal insurance costs as set forth in the immediately preceding
clause (ii), in which event such identifiable amount shall be paid by Insurance
Manager to the Company or retained by the Company, as the case may be.
5
<PAGE>
Section 4.2. Payment. Insurance Manager shall bill the Company monthly
-------
for its charges for insurance under Section 4.1, which amount shall be payable
to the Insurance Manager from the Collection Account in accordance with the
terms of the Intercreditor Agreement.
Section 4.3. Compensation. The compensation to the Insurance Manager
------------
for the performance of its services hereunder shall be included in the Base
Component under the Management Agreement so long as the Insurance Manager is
acting as Manager under the Management Agreement. Such Base Component is
intended, so long as the Insurance Manager is acting as Manager under the
Management Agreement, to include all direct costs and expenses related to the
performance by the Insurance Manager of its services, duties and obligations
under this Agreement other than the charges for insurance covered by Section
4.1. In the event that the Insurance Manager is terminated as Manager under the
Management Agreement, the Company and the Manager shall agree upon a mutually
acceptable compensation arrangement based on the then current market rate for
such services.
Section 5.
Reports and Information
-----------------------
Section 5.1. Annual Certificate. The Insurance Manager shall furnish to
------------------
the Company, the Owner Trustees, the Owner Participants, the Collateral Agent
and the Rating Agencies a copy of the certificate of insurance and other
information required by Section 12.4 of each Lease.
Section 5.2. Rights of Inspection. The Company shall be entitled to
--------------------
inspect from time to time upon reasonable notice during regular business hours
the books and records of the Insurance Manager relating to the insurance
maintained on the Equipment hereunder. The Intercreditor Agent, any Indenture
Trustee and any Participant shall be entitled to inspect those books and records
of the Insurance Manager relating to the insurance maintained on the Equipment
to the extent permitted in any applicable Participation Agreement or Lease.
Section 6.
Term of Agreement; Termination
-------------------------------
Section 6.1. Term. The term of this Agreement shall commence on the
----
Closing Date and shall continue until the latest termination date under any of
the Leases (as any thereof may be renewed or otherwise extended); provided,
--------
however, that the obligation of the Insurance Manager to provide insurance for
- -------
any Unit under this Agreement shall terminate on the date such Unit is no longer
subject to its applicable Lease.
6
<PAGE>
Section 6.2. Termination of Insurance Manager. The services of the
--------------------------------
Insurance Manager under this Agreement may be terminated as to all Equipment
(or, at the option of the Company, as to all Units as to which a default under
clause (a), below, relates) by the Company upon giving notice to the Insurance
Manager in any of the following events:
(a) Except as provided in clause (b) below, if the Insurance Manager
fails in any material respect to perform any of its obligations under this
Agreement which failure materially and adversely affects the rights of the
holders of the Equipment Notes or the Certificateholders and fails to cure or
remedy such failure to perform within sixty (60) days following the earlier of
the Insurance Manager becoming aware of such failure or delivery to the
Insurance Manager of a written notice of the alleged failure to perform;
provided, however, that if the cause of such failure to perform can be cured,
- -------- -------
but cannot reasonably be cured within such 60 day period, the period for
remedying such failure to perform shall be extended by the time necessary to
effect such cure (but not in excess of 60 additional days);
(b) If an Event of Default has occurred and is continuing under
Section 14(c) of any of the Leases;
(c) If the Insurance Manager shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or consent to any such relief or to the appointment of or taking
possession by any such official in any voluntary case or other proceeding
commenced against it, or admit in writing its inability to pay its debts
generally as they come due, or make a general assignment for the benefit of
creditors, or take any corporate action to authorize any of the foregoing;
provided, however, that in the event the Insurance Manager as debtor in a
- -------- -------
proceeding under Chapter 11 of the Bankruptcy Code (or any trustee appointed for
the Insurance Manager as debtor in any such bankruptcy case) shall have assumed
this Agreement with the approval of the bankruptcy court having jurisdiction
over such case, under Section 365 of the Bankruptcy Code or any amended or
successor version thereof, the Company shall refrain from terminating the
Insurance Manager or exercising such other remedies hereunder based solely on
the bankruptcy of the Insurance Manager;
(d) If an involuntary case or other proceeding shall be commenced
against the Insurance Manager seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect, or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or
7
<PAGE>
(e) If the Insurance Manager ceases to be an Affiliate of the Company.
Notwithstanding anything to the contrary contained in this Agreement, any
failure of the Manager to perform or observe any of its obligations under this
Agreement shall not constitute a default under this Section 6.2 if such failure
is caused solely by reason of an event referred to in the definition of "Event
of Loss" so long as the Insurance Manager is continuing to comply on the
Company's behalf with the terms of the applicable Lease with respect to such
Event of Loss.
Section 6.3. Replacement of the Insurance Manager. So long as the
------------------------------------
Insurance Manager is an Affiliate of the Company, and any Equipment is subject
to a Lease, the Insurance Manager may not resign from its obligations and duties
as the Insurance Manager with respect to such Equipment or any liabilities
associated therewith without the consent of the Required Beneficiaries. Without
limiting the foregoing, the Insurance Manager may not resign or be terminated in
whole or in part, unless a successor Insurance Manager ("Successor Insurance
Manager") has been appointed by the Company and the Owner Trustees, the Owner
Participants and the Indenture Trustees and has accepted such appointment and
the Company has received written confirmation from the Rating Agencies that,
after giving effect to the selection of the Successor Insurance Manager, no
lowering or withdrawal of the then current ratings on the Certificates will
occur. Any Successor Insurance Manager, however appointed, shall execute and
deliver to the Company and to the predecessor Insurance Manager an instrument
accepting such appointment, including customary confidentiality provisions in
favor of the predecessor Insurance Manager and the Company, and thereupon such
Successor Insurance Manager, without further act, shall become vested with all
the rights, powers, duties and trusts of the predecessor Insurance Manager
hereunder with like effect as if originally named the Insurance Manager herein.
Section 6.4. Merger or Sale. Any corporation into which the Insurance
--------------
Manager may be merged or with which it may be consolidated, or any corporation
to which substantially all the business of the Insurance Manager may be
transferred, shall be the Insurance Manager under this Agreement without further
act.
Section 7.
Indemnification
---------------
Section 7.1. Indemnification by Insurance Manager. The Insurance
------------------------------------
Manager agrees to indemnify the Company, the Owner Trustees, the Owner
Participants, the Indenture Trustees, the Collateral Agent and their respective
affiliates and the directors, officers, employees and agents of each thereof
(the "Indemnified Parties") against, and agrees to hold each Indemnified Party
harmless from, any and all Claims incurred or suffered by such Indemnified Party
relating to or arising out of or in connection with (i) any breach of or
inaccuracy in any representation made by the Insurance Manager in this Agreement
or in the Participation Agreement or in any certificate delivered pursuant
thereto; (ii) any breach or failure by the Insurance Manager to
8
<PAGE>
perform any covenant or obligation of the Insurance Manager set out or
contemplated in this Agreement; or (iii) the negligence, recklessness or willful
misconduct of the Insurance Manager.
Section 7.2. Indemnification by Company. The Company agrees to
--------------------------
indemnify the Insurance Manager against, and agrees to hold it harmless from,
any and all Claims incurred or suffered by the Insurance Manager relating to or
arising out of or in connection with (i) any breach of or any inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
breach of or failure by the Company to perform any covenant or obligation of the
Company set out or contemplated in this Agreement, or (iii) the negligence,
recklessness or willful misconduct of the Company.
Section 7.3. Claims Excluded. There are excluded from the agreements to
---------------
indemnify under Sections 7.01 and 7.02 with respect to any particular
indemnified Person, Claims to the extent resulting from the breach, failure to
perform, negligence, recklessness or willful misconduct of such indemnified
Person.
Section 7.4. Third Party Claims. In the event any party to be
------------------
indemnified is entitled to indemnification hereunder based upon a Claim asserted
by a third party, the indemnifying party shall be given prompt notice thereof in
reasonable detail; provided, however, the failure to give prompt notice shall
-------- -------
not relieve the indemnifying party of any liability hereunder. The indemnifying
party shall have the right (without prejudice to the right of any party to be
indemnified to participate at its expense through counsel of its own choosing)
to defend such Claim at its expense and through counsel of its own choosing
which is reasonably acceptable to the party to be indemnified if the
indemnifying party gives notice of its intention to do so not later than twenty
(20) days following its receipt of notice of such Claim from the party to be
indemnified (or such shorter time period as is required so that the interests of
the party to be indemnified would not be materially prejudiced as a result of
its failure to have received such notice from the indemnifying party); provided,
--------
however, the indemnifying party shall not be entitled to control and assume
- -------
responsibility for the defense of any Claim if in the good faith opinion of the
party to be indemnified, there exists an actual or potential conflict of
interest such that it is advisable for such party to retain control of such
proceeding, in which circumstances the party to be indemnified shall be entitled
to control and assume responsibility for the defense of such Claim at the
expense of the indemnifying party. The indemnifying party shall not have the
power to bind the indemnified party, without the indemnified party's prior
written consent, which shall not be unreasonably withheld, with respect to any
settlement pursuant to which anything is required other than the payment of
money and then only to the extent that the indemnifying party shall make full
payment of such money. If the indemnifying party does not so choose to defend
any such claim asserted by a third party for which the party to be indemnified
would be entitled to indemnification hereunder, then the party to be indemnified
shall be entitled to recover from the indemnifying party, on a monthly basis,
all of its reasonable attorneys' fees and other costs and expenses of litigation
of any nature whatsoever incurred in the defense of such claim. If the
indemnifying party assumes the defense of any such claim, the
9
<PAGE>
indemnifying party will hold the party to be indemnified harmless from and
against any and all damages arising out of any settlement approved by such
indemnifying party or any judgment in connection with such claim or litigation.
Notwithstanding the assumption of the defense of any claim by an indemnifying
party pursuant to this paragraph, the party to be indemnified shall have the
right to approve the terms of any settlement of a claim (which approval shall
not be unreasonably withheld or delayed). Notwithstanding anything to the
contrary contained herein, an indemnifying party will not be liable for any
settlement of a claim effected without its prior written consent.
Section 7.5. Cooperation. The indemnifying party and the party to be
-----------
indemnified shall cooperate in furnishing evidence and testimony and in any
other manner which the other may reasonably request, and shall in all other
respects have an obligation of good faith dealing, one to the other, so as not
to unreasonably expose the other to an undue risk of loss. The party to be
indemnified shall be entitled to reimbursement for out-of-pocket expenses
reasonably incurred by it in connection with such cooperation. Except for fees
and expenses for which indemnification is provided pursuant to Sections 7.01 or
7.02 hereof, as the case may be, and as provided in the preceding sentence, each
party shall bear its own fees and expenses incurred pursuant to this Section
7.05.
Section 8.
Miscellaneous
-------------
Section 8.1. Table of Contents and Headings. The table of contents and
------------------------------
the descriptive headings of the several subsections and sections of this
Agreement are inserted for convenience only and do not constitute part of this
Agreement.
Section 8.2. The Insurance Manager as Independent Contractor. Except to
-----------------------------------------------
the extent specifically set forth in this Agreement, all of the functions,
duties and services performed by the Insurance Manager under this Agreement
shall be performed by the Insurance Manager as an independent contractor and not
as agent of the Company.
Section 8.3. Relations Among Parties. The parties intend, in entering
------------------------
into this Agreement, that the Insurance Manager is an independent contractor and
that no partnership relationship exists among the Insurance Manager and the
Company; that the Insurance Manager does not have the authority to act as agent
of, or partner or co-venturer with, the Company except to the extent
specifically provided herein; that the Insurance Manager, in its capacity as
such, does not, except as specifically set forth in this Agreement, have the
authority to bind the Company; that the Company, as such, does not have
liability for the acts of the Insurance Manager; and that any fees or other
compensation payable by the Company to the Insurance Manager are ordinary and
necessary business expenses of the Company.
10
<PAGE>
Section 8.4. Governing Law. This Agreement shall be in all respects
-------------
governed by and construed in accordance with the laws of the State of New York,
including all matters of construction, validity and performance, without regard
to principles of conflicts of laws.
Section 8.5. Notices. Any notice, certificate, document, acceptance or
-------
report required or permitted to be given by either party hereto to the other
party shall be in writing and shall be deemed delivered when deposited in the
United States mails, first-class postage prepaid, or when delivered personally,
by facsimile transmission or reputable air courier, addressed as follows:
If the Company: General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
If the Insurance Manager: General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois 60661
Attention: Secretary
or addressed to either party at such other address as such party shall hereafter
furnish to the other party by written notice as provided above.
Section 8.6. Entire Agreement; Amendment; Waivers. This Agreement
------------------------------------
constitutes, with respect to the subject matter hereof, the entire agreement of
the parties and supersedes and cancels all prior agreements, discussions,
negotiations, memoranda or correspondence with respect to such subject matter,
and may not be amended orally, but only by an agreement in writing signed by the
party against which enforcement of such amendment is sought. The failure of
either party hereto at any time or times to require performance of any provision
hereof shall in no manner affect its right at a later time to enforce the same.
No waiver by either party hereto of the breach of any term or agreement
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any breach, or a waiver of the breach of any other term or agreement
contained herein.
Section 8.7. Assignment.
----------
(a) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Except as otherwise provided in Section 6.03, the Insurance Manager will not,
without the prior written consent of the Lessors and the Indenture Trustees
(which consent shall not be unreasonably withheld), assign any of its rights
hereunder, except as provided herein and in the Participation Agreement;
provided that the Insurance Manager may assign any or all of its rights and/or
- --------
obligations hereunder without any
11
<PAGE>
such consent to (i) any Person which shall consolidate with the Insurance
Manager, which the Insurance Manager shall merge into or to which the Insurance
Manager shall convey, transfer or lease all or substantially all of its assets,
or (ii) any corporation which is an Affiliate of the Insurance Manager; provided
--------
further that in the case of an assignment to an Affiliate, (a) the Insurance
- -------
Manager shall have received an instrument or instruments reasonably satisfactory
to it, the Owner Participant and the Indenture Trustee under which such
Affiliate assumes the obligations of the Insurance Manager hereunder, and (b)
the Insurance Manager irrevocably and unconditionally guarantees, pursuant to an
agreement in form and substance reasonably satisfactory to the Lessor, the Owner
Participant and the Indenture Trustee, such assignee's performance of all of
such obligations as primary obligor and not as a surety.
(b) The Insurance Manager and the Company hereby confirm that
concurrently with the execution and delivery of this Agreement, (i) the Company
has executed and delivered to the Owner Trustee the Intercreditor Agreement
which, among other things, assigns as collateral security and grants a security
interest in favor of the Collateral Agent in the rights of the Company hereunder
for the benefit of, among others, the Owner Trustees and (ii) each of the Owner
Trustees has executed and delivered to the related Indenture Trustee an
Indenture which assigns as collateral security and grants a security interest in
favor of such Indenture Trustee in the rights of such Owner Trustee under the
Intercreditor Agreement, all as more explicitly set forth in the Intercreditor
Agreement and the Indentures. The Company agrees that it shall not otherwise
assign or convey its right, title and interest in and to this Agreement except
as expressly permitted by and subject to the provisions of the Participation
Agreements.
Section 8.8. Further Assurances. If at any time the parties hereto
------------------
shall consider or be advised that any further assignments, conveyances or
assurances are necessary or desirable to carry out the provisions hereof and the
transactions contemplated hereby, the parties hereto shall execute and deliver
any and all documents, instruments, contracts, leases, assignments and
assurances and do all things necessary or proper to carry out fully the
provisions hereof.
Section 8.9. Third Party Beneficiary. The Company and the Insurance
-----------------------
Manager hereby agree that the Collateral Agent, each Owner Trustee, each
Participant, any Indenture Trustee and any Indemnified Party referred to in
Section 7.1 shall each be a third party beneficiary of this Agreement.
Section 8.10. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12
<PAGE>
Section 8.11. Severability. Any provision of this Agreement that may be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof so long as the economic or legal
substance of the transactions contemplated thereby is not affected in any manner
adverse to any party. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereby waive
any provision of law that renders any provision of this Agreement prohibited or
unenforceable in any respect. In addition, in the event of any such prohibition
or unenforceability, the parties agree that it is their intention and agreement
that any such provision which is held or determined to be prohibited or
unenforceable, as written, in any jurisdiction shall nonetheless be in force and
binding to the fullest extent permitted by the law of such jurisdiction as
though such provision had been written in such a manner and to such an extent as
to be enforceable therein under the circumstances.
Section 8.12. No Petition in Bankruptcy. The Insurance Manager hereby
-------------------------
agrees that, prior to the date which is one year and one day after the payment
in full of all outstanding Equipment Notes and Pass Through Certificates, the
Insurance Manager will not institute against, or join any other Person in
instituting against, the Company an action in bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or similar proceeding under
the laws of the United States or any state of the United States.
13
<PAGE>
IN WITNESS WHEREOF, the Company and the Insurance Manager have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
GENERAL AMERICAN RAILCAR
CORPORATION II
By:_________________________________
Its:________________________________
GENERAL AMERICAN
TRANSPORTATION CORPORATION
By:_________________________________
Its:________________________________
14
<PAGE>
Exhibit 10.4
------------
FORM OF
-------------------------------------------------------
EQUIPMENT LEASE AGREEMENT
(1998-1)
Dated as of August 1, 1998
Between
[OWNER TRUSTEE],
not in its individual capacity except as
expressly provided herein but solely as Owner Trustee,
Lessor
GENERAL AMERICAN RAILCAR CORPORATION II,
Lessee
Tank Cars and Covered Hopper Cars
-------------------------------------------------------
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF LESSOR IN AND TO THIS LEASE,
THE EQUIPMENT COVERED HEREBY AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE
BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST
IN FAVOR OF, THE FIRST NATIONAL BANK OF CHICAGO, NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND SECURITY AGREEMENT
(1998-1), DATED AS OF AUGUST 1, 1998 BETWEEN SAID INDENTURE TRUSTEE, AS SECURED
PARTY, AND LESSOR, AS DEBTOR. INFORMATION CONCERNING SUCH SECURITY INTEREST MAY
BE OBTAINED FROM THE INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH IN SECTION 20 OF
THIS LEASE. SEE SECTION 25.2 FOR INFORMATION CONCERNING THE RIGHTS OF THE
ORIGINAL HOLDER AND HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Definitions............................................................. 1
SECTION 2. Acceptance and Leasing of Equipment..................................... 1
SECTION 3. Term and Rent........................................................... 1
Section 3.1. Lease Term............................................... 1
Section 3.2. Basic Rent............................................... 2
Section 3.3. Supplemental Rent........................................ 2
Section 3.4. Adjustment of Rent....................................... 3
Section 3.5. Manner of Payments....................................... 3
SECTION 4. Ownership and Marking of Equipment...................................... 3
Section 4.1. Retention of Title....................................... 3
Section 4.2. Duty to Number and Mark Equipment........................ 3
Section 4.3. Prohibition Against Certain Designations................. 4
SECTION 5. Disclaimer of Warranties................................................ 5
Section 5.1. Disclaimer of Warranties................................. 5
SECTION 6. Return of Equipment; Storage............................................ 6
Section 6.1. Return; Holdover Rent.................................... 6
Section 6.2. Condition of Equipment................................... 9
Section 6.3. Assignment of Management Contract........................ 10
SECTION 7. Liens................................................................... 10
SECTION 8. Maintenance; Possession; Compliance with Laws........................... 10
Section 8.1. Maintenance and Operation................................ 10
Section 8.2. Possession and Use....................................... 11
Section 8.3. Sublease................................................. 12
SECTION 9. Modifications........................................................... 13
Section 9.1. Required Modifications................................... 13
Section 9.2. Optional Modifications................................... 14
Section 9.3. Removal of Property; Replacements........................ 14
SECTION 10. Voluntary Termination................................................... 15
Section 10.1. Right of Termination..................................... 15
Section 10.2. Sale of Equipment........................................ 16
Section 10.3. Retention of Equipment by Lessor......................... 17
Section 10.4. Termination of Lease..................................... 18
</TABLE>
<PAGE>
TABLE OF CONTENTS (con't)
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11. Loss, Destruction, Requisition, Etc......................................... 18
Section 11.1. Event of Loss................................................ 18
Section 11.2. Replacement or Payment upon Event of Loss.................... 18
Section 11.3. Rent Termination............................................. 20
Section 11.4. Disposition of Equipment; Replacement of Unit................ 20
Section 11.5. Eminent Domain............................................... 22
SECTION 12. Insurance................................................................... 22
Section 12.1. Insurance.................................................... 22
Section 12.2. Physical Damage Insurance.................................... 23
Section 12.3. Public Liability Insurance................................... 24
Section 12.4. Certificate of Insurance..................................... 25
Section 12.5. Additional Insurance......................................... 25
SECTION 13. Reports; Inspection......................................................... 26
Section 13.1. Duty of Lessee to Furnish.................................... 26
Section 13.2. Lessor's Inspection Rights................................... 26
SECTION 14. Lease Events of Default..................................................... 27
SECTION 15. Remedies.................................................................... 29
Section 15.1. Remedies..................................................... 29
Section 15.2. Cumulative Remedies.......................................... 31
Section 15.3. No Waiver.................................................... 32
Section 15.4. Notice of Lease Default...................................... 32
Section 15.5. Lessee's Duty to Return Equipment Upon Default............... 32
Section 15.6. Specific Performance; Lessor Appointed Lessee's Agent........ 33
SECTION 16. Filings; Further Assurances................................................. 33
Section 16.1. Filings...................................................... 33
Section 16.2. Further Assurances........................................... 34
Section 16.3. Other Filings................................................ 34
Section 16.4. Expenses..................................................... 34
SECTION 17. Lessor's Right to Perform................................................... 34
SECTION 18. Assignment.................................................................. 35
Section 18.1. Assignment by Lessor......................................... 35
Section 18.2. Assignment by Lessee......................................... 35
Section 18.3. Sublessee's or Others Performance and Rights................. 35
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS(cont'd)
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 19. Net Lease, etc............................................................... 36
SECTION 20. Notices...................................................................... 37
SECTION 21. Concerning the Indenture Trustee............................................. 38
Section 21.1. Limitation of the Indenture Trustee's Liabilities............. 38
Section 21.2. Right, Title and Interest of the Indenture Trustee Under
Lease......................................................... 38
SECTION 22. Purchase Options; Renewal Options; and Deemed Renewals....................... 38
Section 22.1. Early Purchase Option......................................... 38
Section 22.2. Election to Retain or Return Equipment at End of Basic or
Renewal Term.................................................. 40
Section 22.3. Purchase Option............................................... 40
Section 22.4. Renewal Option................................................ 41
Section 22.5. Appraisal; Outside Renewal Date............................... 42
Section 22.6. Stipulated Loss Value and Termination Value During
Renewal Term.................................................. 42
Section 22.7. Deemed Renewals............................................... 42
SECTION 23. Limitation of Lessor's Liability............................................. 43
SECTION 24. Investment of Security Funds................................................. 43
SECTION 25. Miscellaneous................................................................ 43
Section 25.1. Governing Law; Severability................................... 43
Section 25.2. Execution in Counterparts..................................... 43
Section 25.3. Headings and Table of Contents; Section References............ 44
Section 25.4. Successors and Assigns........................................ 44
Section 25.5. True Lease.................................................... 44
Section 25.6. Amendments and Waivers........................................ 44
Section 25.7. Survival...................................................... 44
Section 25.8. Business Days................................................. 44
Section 25.9. Directly or Indirectly; Performance by Managers............... 45
Section 25.10. Incorporation by Reference.................................... 45
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS(cont'd)
-----------------
<TABLE>
APPENDICES AND EXHIBITS
Page
----
<S> <C>
Exhibit A -- Form of Lease Supplement .......................................... A-1
Appendix A -- Definitions
</TABLE>
iv
<PAGE>
EQUIPMENT LEASE AGREEMENT
(1998-1)
This Equipment Lease Agreement (1998-1), dated as of August 1, 1998 (this
"Lease"), is by and between [Owner Trustee], not in its individual capacity
except as expressly provided herein, but solely as Owner Trustee under the Trust
Agreement ("Lessor"), and General American Railcar Corporation II, a Delaware
corporation ("Lessee").
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. Definitions.
-----------
Unless otherwise defined herein or required by the context, all capitalized
terms used herein shall have the respective meanings assigned to such terms in
Appendix A hereto for all purposes of this Lease.
SECTION 2. Acceptance and Leasing of Equipment.
-----------------------------------
Lessor hereby agrees (subject to satisfaction or waiver of the conditions
set forth in Sections 4.1 and 4.3 of the Participation Agreement) to accept
delivery of each Unit from Lessee and to lease such Unit to Lessee hereunder,
and Lessee hereby agrees (subject to satisfaction or waiver of the conditions
set forth in Section 4.4 of the Participation Agreement), immediately following
such acceptance by Lessor, to lease from Lessor hereunder such Unit, such
acceptance by Lessor and lease by Lessee to be evidenced by the execution and
delivery by Lessee and Lessor of a Lease Supplement covering such Unit, all in
accordance with Section 2.3(b) of the Participation Agreement. Lessee hereby
agrees that its execution and delivery of a Lease Supplement covering any Unit
shall, without further act, irrevocably constitute acceptance by Lessee of such
Unit for all purposes of this Lease.
SECTION 3. Term and Rent.
-------------
Section 3.1. Lease Term. The basic term of this Lease (the "Basic Term")
----------
shall commence on the Basic Term Commencement Date and, subject to earlier
termination pursuant to Section 10, 11, 15 or 22.1, shall expire at 11:59 p.m.
(Chicago, Illinois time) on the Basic Term Expiration Date. Subject and
pursuant to Section 22.4, Lessee may elect one or more Renewal Terms and, as
provided in Section 22.7 hereof, in certain circumstances a Renewal Term shall
be deemed to have occurred with respect to some or all of the Units.
<PAGE>
Section 3.2. Basic Rent. Lessee hereby agrees to pay Lessor as Basic
----------
Rent for each Unit throughout the Basic Term applicable thereto Basic Rent in
consecutive monthly installments payable on each Rent Payment Date. Each such
monthly payment of Basic Rent shall be in an amount equal to the product of the
Equipment Cost for such Unit multiplied by the Basic Rent percentage for such
Unit set forth opposite such Rent Payment Date on Schedule 3 to the
Participation Agreement (as such Schedule 3 shall be adjusted pursuant to
Section 2.6 of the Participation Agreement). Basic Rent shall be payable in
advance on certain Rent Payment Dates and in arrears on certain Rent Payment
Dates, as specified in Schedule 3 to the Participation Agreement, as so
adjusted, such Schedule 3 as so adjusted from time to time being incorporated
herein by reference. Each installment of Basic Rent that is indicated as
payable in advance will be allocated over the month beginning on the Rent
Payment Date on which such advance payment is scheduled to be made, and each
installment of Basic Rent that is indicated as payable in arrears will be
accrued over the month ending on the Rent Payment Date on which such arrears
payment is scheduled to be made. It is the intention of Lessor and Lessee that
the allocations of Basic Rent set forth on Schedule 3 to the Participation
Agreement constitute specific allocations of fixed rent within the meaning of
Prop. Treas. Reg. (S) 1.467(1)(c).
Notwithstanding anything to the contrary contained herein or in the
Participation Agreement, each installment of Basic Rent (both before and after
any adjustment pursuant to Section 2.6 of the Participation Agreement) shall be,
under any circumstances and in any event, in an amount at least sufficient for
Lessor to pay in full as of the due date of such installment, any payment of
principal of and interest on the Equipment Notes required to be paid by Lessor
pursuant to the Indenture on such due date in accordance with the Scheduled
Amortization.
Section 3.3. Supplemental Rent. Lessee also agrees to pay to Lessor, or
-----------------
to whomsoever shall be entitled thereto, any and all Supplemental Rent, promptly
as the same shall become due and owing, or where no due date is specified,
promptly after demand by the Person entitled thereto, and in the event of any
failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have
all rights, powers and remedies provided for herein or by law or equity or
otherwise as in the case of nonpayment of Basic Rent. Lessee will also pay, as
Supplemental Rent, (i) on demand, to the extent permitted by applicable law, an
amount equal to Late Payment Interest on any part of any installment of Basic
Rent not paid when due for any period for which the same shall be overdue and on
any payment of Supplemental Rent not paid when due or demanded, as the case may
be, for the period from such due date or demand until the same shall be paid,
(ii) in the case of the termination of this Lease with respect to any Unit
pursuant to Section 10, on the applicable Termination Date, an amount equal to
the Make-Whole Amount, if any, with respect to the principal amount of each
Equipment Note to be prepaid as a result of such termination and any Late
Payment Interest, (iii) in the case of the purchase of any Unit pursuant to
Section 22.1 or Section 6.9 of the Participation Agreement, on such date of
purchase, an amount equal to the Make-Whole Amount, if any, with respect to the
principal amount of each Equipment Note to be prepaid as a result of such
purchase and any Late Payment Interest, (iv) an amount equal to any other amount
payable by Lessor on the Equipment Notes in excess
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of the principal and interest payments due thereunder, as and when such amount
shall be due and payable, in accordance with the terms of the Equipment Notes
and the Indenture, and (v) in the case of any refinancing of the Equipment Notes
pursuant to Section 10.2 of the Participation Agreement, on the Refunding Date,
an amount equal to the Make-Whole Amount, if any, with respect to the aggregate
principal amount of the Equipment Notes being prepaid and any Late Payment
Interest. All Supplemental Rent to be paid pursuant to this Section 3.3 shall be
payable in the type of funds and in the manner set forth in Section 3.5.
Section 3.4. Adjustment of Rent. Lessee and Lessor agree that the Basic
------------------
Rent, Stipulated Loss Value and Termination Value percentages and the Early
Purchase Price shall be adjusted to the extent provided in Section 2.6 of the
Participation Agreement, subject in all cases to the limitation set forth in the
second paragraph of Section 3.2.
Section 3.5. Manner of Payments. All Rent (other than Supplemental Rent
------------------
payable to Persons other than Lessor, which shall be payable to such other
Persons in accordance with written instructions furnished to Lessee by such
Persons, as otherwise provided in any of the Operative Agreements or as required
by law) shall be paid by Lessee to Lessor at its office at
[___________________________________________________], Attention:
[_______________]. All Rent shall be paid by Lessee to the recipient not later
than ______ __m. [New York, New York time] on the date of such payment in funds
consisting of lawful currency of the United States of America, which shall be
immediately available, provided, that so long as the Indenture shall not have
--------
been discharged pursuant to the terms thereof, Lessor hereby directs, and Lessee
hereby agrees, that all Rent (excluding Excepted Property) payable to Lessor
shall be paid from the Payment Account directly to the Indenture Trustee at the
times and in funds of the type specified in this Section 3.5 at the office of
the Indenture Trustee at One First National Plaza, Suite 0126, Chicago, Illinois
60670-0126, ABA No. [_____________], Attn: Corporate Trust Services Division,
Account # [______________] or at such other location in the United States of
America as the Indenture Trustee may otherwise direct.
SECTION 4. Ownership and Marking of Equipment.
----------------------------------
Section 4.1. Retention of Title. Lessor shall and hereby does retain
------------------
full legal title to and beneficial ownership of the Equipment notwithstanding
the delivery to and possession and use of the Equipment by Lessee hereunder or
any sublessee under any sublease permitted hereby.
Section 4.2. Duty to Number and Mark Equipment. With respect to the
---------------------------------
Units to be delivered on the Closing Date, Lessee represents that GATC has
caused, and as soon as practicable after the date on which a Lease Supplement is
executed and delivered in respect of a Replacement Unit pursuant to Section
11.4(b), Lessee will cause, each Unit to be numbered with its reporting mark
shown on the Lease Supplement dated the date on which such Unit was delivered
and covering such Unit, and will from and after such date keep and maintain,
plainly,
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distinctly, permanently and conspicuously marked by a plate or stencil
printed in contrasting colors upon each side of each Unit, in letters not less
than one inch in height, a legend substantially as follows:
"OWNERSHIP SUBJECT TO A SECURITY AGREEMENT
FILED WITH THE SURFACE TRANSPORTATION BOARD"
with appropriate changes thereof and additions thereto as from time to time may
be required by law in order to protect Lessor's right, title and interest in and
to such Unit, its rights under this Lease and the rights of the Indenture
Trustee. Except as provided hereinabove, Lessee will not place any such Units
in operation or exercise any control or dominion over the same until the
required legend shall have been so marked on both sides thereof, and will
replace promptly any such word or words in such legend which may be removed,
defaced, obliterated or destroyed. In the event of a change in the reporting
mark of any Unit, within 60 days after a Responsible Officer or the Manager has
received notice of any such changed mark, a statement of the new reporting mark
to be substituted therefor, shall be delivered by Lessee to Lessor and, so long
as the Indenture shall not have been discharged pursuant to its terms, to the
Indenture Trustee. As soon as practicable after the delivery of such statement
a supplement to this Lease and, if not so discharged, the Indenture, with
respect to such new reporting marks, shall be filed or recorded in all public
offices where this Lease and the Indenture shall have been filed or recorded and
in such other places, if any, where Lessor and, so long as the Indenture shall
not have been discharged pursuant to its terms, the Indenture Trustee may
reasonably request in order to protect, preserve and maintain its right, title
and interest in the Units. The costs and expenses of all such supplements,
filings and recordings shall be borne by Lessee.
Section 4.3. Prohibition Against Certain Designations. Except as above
----------------------------------------
provided, Lessee will not allow the name of any Person to be placed on any Unit
as a designation that might reasonably be interpreted as a claim of ownership;
provided, however, that, subject to the delivery of the statement of new
reporting marks specified in Section 4.2, Lessee may cause the Equipment to be
lettered with the names or initials or other insignia customarily used by Lessee
or any permitted sublessees or any of their respective Affiliates on railroad
equipment used by it of the same or a similar type for convenience of
identification of the right of Lessee to use the Equipment hereunder or any
permitted sublessee to use the Equipment pursuant to a sublease permitted
hereby.
4
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SECTION 5. Disclaimer of Warranties.
------------------------
Section 5.1. Disclaimer of Warranties. Without waiving any claim Lessee
------------------------
may have against any seller, supplier or manufacturer, LESSEE ACKNOWLEDGES AND
AGREES THAT, (i) EACH UNIT IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED THAT EACH UNIT IS
SUITABLE FOR ITS PURPOSES AND LESSEE HAS ACCEPTED EACH UNIT, (iii) NEITHER
LESSOR NOR OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH
KIND OR HAS INSPECTED THE UNITS PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE,
(iv) EACH UNIT IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND
GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, AND (v) LESSOR
LEASES AND LESSEE TAKES EACH UNIT "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", IN
WHATEVER CONDITION IT MAY BE, AND LESSEE ACKNOWLEDGES THAT NEITHER LESSOR, AS
LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR OWNER PARTICIPANT MAKES NOR SHALL BE
DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS,
WARRANTIES OR REPRESENTATIONS EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE, OF THE EQUIPMENT, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM
FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR
OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO AND EACH OF LESSOR
AND OWNER PARTICIPANT EXPRESSLY DISCLAIMS SELECTION OF THE UNITS, except that
Lessor, in its individual capacity, represents and warrants that on the Closing
Date, Lessor shall have received whatever title to the Equipment as was conveyed
to Lessor by Lessee and each Unit will be free of Lessor's Liens attributable to
Lessor and provided that the foregoing disclaimer in clause (v) shall not extend
to Owner Participant's representation and warranty contained in Section 3.6(e)
of the Participation Agreement. Lessor hereby appoints and constitutes Lessee
its agent and attorney-in-fact during the Lease Term to assert and enforce, from
time to time, in the name and for the account of Lessor and Lessee, as their
interests may appear, but in all cases at the sole cost and expense of Lessee,
whatever claims and rights Lessor may have as owner of the Equipment against the
manufacturers or any prior owner thereof; provided, however, that if at any time
a Lease Event of Default shall have occurred and be continuing, at Lessor's
option, such power of attorney shall terminate, and Lessor may assert and
enforce, at Lessee's sole cost and expense, such claims and rights. Lessor
shall have no responsibility or liability to Lessee or any other Person with
respect to any of the following: (i) any liability, loss or damage caused or
alleged to be caused directly or indirectly by any Unit, or by any of the
commodities, items or materials from
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<PAGE>
time to time contained therein, whether or not permitted by the terms hereof, or
by any inadequacy thereof or deficiency or defect therein or by any other
circumstances in connection therewith; (ii) the use, operation or performance of
any Unit or any risks relating thereto; (iii) any interruption of service, loss
of business or anticipated profits or consequential damages; or (iv) the
delivery, operation, servicing, maintenance, repair, improvement or replacement
of any Unit. Lessee's delivery of a Lease Supplement shall be conclusive
evidence as between Lessee and Lessor that all Units described therein are in
all the foregoing respects satisfactory to Lessee, and Lessee will not assert
any claim of any nature whatsoever against Lessor based on any of the foregoing
matters.
SECTION 6. Return of Equipment; Storage.
----------------------------
Section 6.1. Return: Holdover Rent. (a) Not less than 180 days prior to
---------------------
the end of the Basic Term or the end of any Renewal Term, in each case with
respect to any Units which Lessee has elected to return under Section 22.2,
Lessee will provide Lessor with a list of alternative storage locations used for
the storage of rolling stock within the Contiguous United States sufficient to
store the returned Units and the available storage capacities of such locations.
Not less than 90 days prior to the end of the Lease Term with respect to any
Unit which has not been purchased by Lessee, Lessor will give Lessee irrevocable
notice of its decision either to take possession of or store such Unit. If
Lessor shall have decided to take possession of such Unit, the terms of Section
6.1(b) will apply. If Lessor shall have decided to store such Unit, the terms
of Section 6.1(c) hereof will apply.
(b) If Lessor shall have decided to take possession of such Unit,
Lessee will, at its sole risk and expense, deliver possession of such Unit at
any storage location, f.o.b. such location, (i) as may be agreed upon by Lessor
and Lessee in writing or (ii) in the absence of such agreement as Lessor may
reasonably select by written notice to Lessee on or before the 90th day before
the end of the Lease Term; provided, that (x) there shall be no less than the
Minimum Units returned to each of no more than five (5) locations (each of which
shall be located within the Contiguous United States), and (y) Lessor's notice
shall specify the total number and type of Units to be delivered to each
location.
(c) (i) If Lessor shall have elected to store any Unit upon the
expiration of the Lease Term with respect thereto, Lessee shall store such
Unit free of charge and at the risk and expense of the Lessee for a period
(the "Storage Period") beginning, for any particular storage location, on
the expiration of the Lease Term (the "Storage Period Commencement Date")
and ending not more than 30 days after the later of (A) the date on which
50% of the total number of Units being returned (excluding in such 50%
determination any Units then under a Sublease which is subject to the
deemed renewal provisions of Section 22.7 hereof), and stored at such
location have arrived at such location and (B) the date on which such Unit
is in compliance with the conditions set forth in Section 6.2, and for an
additional 30 days thereafter at the sole risk and expense
6
<PAGE>
of Lessor. On or before the 90th day before the end of the Lease Term,
Lessor shall provide Lessee with written notice designating its choices
from among the alternative storage locations provided by Lessee pursuant to
Section 6.1(a). Any storage provided by Lessee during the Storage Period
(except for such additional 30-day period referred to above) shall be at
the sole risk and expense of Lessee, and Lessee shall maintain the
insurance required by Section 12.1 with respect to all stored Units. During
the Storage Period, Lessee will permit Lessor or any Persons designated by
it, including the authorized representative or representatives of any
prospective purchaser or user of such Unit, to restencil the marks on such
Unit and to inspect the same during Lessee's normal business hours upon at
least three Business Days' prior written or telephonic notice; provided,
however, that such inspection and restenciling shall not interfere with the
normal conduct of Lessee's business; and provided, further, that (x) such
inspection and restenciling shall be at such Person's own risk, (y) Lessee
shall be protected against any loss or damage incurred by it in connection
with any such inspection or restenciling by such Person through
indemnification, insurance or other means reasonably satisfactory to Lessee
and (z) Lessee (except in the case of Lessee's negligence or wilful
misconduct) shall not be liable for any injury to, or the death of, any
person exercising, either on behalf of Lessor or any prospective purchaser
or user, the rights of inspection and restenciling granted pursuant hereto.
Lessee shall not be required to store the Equipment after the Storage
Period. If Lessee does store any Unit after the expiration of the Storage
Period, such storage shall be at the sole risk and expense of Lessor.
(ii) Upon the request and direction of Lessor (and at Lessor's
sole risk and expense), on not more than one occasion with respect to each
stored Unit and upon not less than 30 days' prior written notice from
Lessor to Lessee, Lessee will, on or before the expiration of the Storage
Period, transport such Units to any railroad interchange point or points
within the Contiguous United States with no fewer than the Minimum Units
per interchange point on any railroad lines or to any connecting carrier
for shipment, whereupon Lessee shall have no further liability or
obligation with respect to such Units.
(iii) Upon receipt of Lessor's written notice designating its
choices from among the alternative storage locations provided by Lessee
under Section 6.1(a), Lessee shall have the option to store such Units at
such storage locations anywhere within the Contiguous United States as it
shall choose (provided that there shall be no less than the Minimum Units
stored at each such location) in which case the Storage Period shall be at
the sole risk and expense of Lessee for a period of 60 days, during which
period the Lessee shall be obligated to insure such Units as provided in
Section 12. Upon receipt of such notice, Lessee will promptly give notice
to Lessor of the locations at which Lessee will store such Units. If
Lessee shall exercise such option, Lessee shall on or before the expiration
of the Storage Period transport the Equipment to any railroad interchange
point or points within the Contiguous United States with no fewer than the
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<PAGE>
Minimum Units per interchange point, designated by Lessor upon not less
than 30 days' prior written notice. The movement of any Unit from such
Unit's location as designated by Lessee pursuant to this Section
6.1(c)(iii) to an interchange point thereafter designated by Lessor in
accordance with the foregoing sentence will be at the risk and expense of
Lessor; provided, however, that any incremental costs associated with
movement from the storage facility designated by the Lessee pursuant to
this clause (iii) over the costs that would be incurred in movement from
the storage facility designated by the Lessor pursuant to Section 6.1(a)
shall be for the account of the Lessee. During any Storage Period, Lessee
shall store the Equipment in such manner as Lessee or the Manager normally
stores similar units of railroad equipment owned or leased by it.
(d) Upon the latest of (i) expiration of the Lease Term with respect
to a Unit, (ii) tender of such Unit at the location determined in accordance
with Section 6.1(b) or, as applicable, the tender of such Unit for storage in
accordance with Section 6.1(c), and (iii) compliance by such Unit with Section
6.2, this Lease and the obligation to pay Basic Rent for such Unit accruing
subsequent to the expiration of the Lease Term with respect to such Unit shall
terminate.
(e) So long as no Lease Event of Default has occurred and is
continuing, all amounts earned in respect of a Unit after the date of expiration
of the Lease Term with respect to such Unit and prior to the return of such Unit
hereunder shall belong to Lessee, and if received by Lessor, shall be promptly
turned over to Lessee. In the event any Unit is not returned to Lessor in
accordance with the provisions of Section 6.1(b) (the "Holdover Period") on the
last day of the Lease Term with respect thereto, or, if requested by Lessor
pursuant to Section 6.1(c), delivered and stored on such last day of the Lease
Term, and, in either case, in the condition specified in Section 6.2, Lessee
shall pay to Lessor for each such day from the expiration of the Lease Term with
respect to such Unit until the date on which such Unit is returned to Lessor in
accordance with the provisions of Section 6.1(b) and in the condition specified
in Section 6.2, an amount equal to the daily equivalent of the average Basic
Rent for the Basic Term or the Renewal Term as applicable to such Unit (the
"Holdover Rent"). If such Unit is not returned to Lessor in accordance with the
provisions of Section 6.1(b) and in the condition specified in Section 6.2 on or
prior to the 180th day after the expiration of the Lease Term with respect to
such Unit, Lessor shall have the right to require Lessee to purchase such Unit
for a purchase price equal to the higher of (x) the Fair Market Sales Value and
(y) the Stipulated Loss Value of such Unit as of the 181st day after the
expiration of such Lease Term, together with the unpaid amount, if any, of such
daily Holdover Rent hereinabove provided for with respect to such Unit; provided
that, during the Holdover Period described in this sentence and the immediately
preceding sentence, Lessee shall use its best efforts to secure the return of
the Equipment as required under this Section 6 in the condition specified in
Section 6.2. Nothing herein shall be in abrogation of Lessor's right to have
such Unit returned to it for possession or storage. Payment of the purchase
price, together with all other amounts due and owing by Lessee under the
Operative Agreements, shall be made at the place of payment specified in Section
3.5 hereof in immediately available funds against delivery
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<PAGE>
of a Bill of Sale transferring and assigning to Lessee all right, title and
interest of Lessor in and to such Units on an "as-is" "where-is" basis and
containing a warranty as to the absence of Lessor's Liens. Lessor shall not be
required to make any other representation or warranty as to the condition of
such Units or any other matters except as to the absence of any Lessor's Liens,
and may specifically disclaim any such representations or warranties.
Section 6.2. Condition of Equipment. Each Unit when returned to Lessor
----------------------
pursuant to Section 6.1 shall be (i) capable of performing the functions for
which it was designed, with all loading and unloading components operating in
good working order, (ii) suitable for continued commercial use in the commodity
last carried immediately prior to such return, (iii) suitable for use in
interchange by a new owner in the operating lease business in accordance with
then applicable Federal regulations, the Field Manual of the AAR, the
Interchange Rules and FRA rules and regulations (including any such regulations,
rules or Manual requirements or other applicable law requiring a Required
Modification which has a final implementation date which is within 90 days of
the Basic Term Expiration Date; provided that if the final implementation date
--------
for such Required Modification program is more than 90 days after the Basic Term
Expiration Date, then there shall also be provided to Lessor an Officer's
Certificate of the Lessee and the Manager to the effect that there has been no
discrimination in the making of such Required Modification as between the
returned Unit which has not received such Required Modification and any other
railcars generally in the Manager's Fleet), (iv) in all material respects in the
condition required by Section 8.1, (v) in conformance with any requirement
pertaining to warranties of the manufacturer of the Units during the warranty
period, (vi) empty, (vii) unless industry custom or practice indicates to the
contrary, steam cleaned or otherwise cleaned in a comparable commercially
acceptable manner, and (viii) free and clear of all Liens except Lessor's Liens.
All logs, records, books and other materials, or appropriate copies of any
thereof, relating to the maintenance of such Unit shall, upon Lessor's request,
be delivered to Lessor or its designee upon the return of such Unit. Lessor
shall have the right to inspect any Unit that is returned pursuant to Section
6.1 to ensure that such Unit is in compliance with the conditions set forth in
this Section 6.2, at Lessor's sole cost, expense and risk (including, without
limitation, the risk of personal injury or death), by its authorized
representatives, during Lessee's normal business hours and upon reasonable prior
notice to Lessee; provided, however, that Lessee shall not be liable for any
injury to, or the death of, any Person exercising, on behalf of Lessor, the
rights of inspection granted under this Section 6.2 unless caused by Lessee's
gross negligence or wilful misconduct; and further provided, that if such Unit
is not in compliance with the conditions set forth in this Section 6.2, then
Lessee will (i) promptly take such steps as are necessary to bring such Unit in
compliance with the conditions set forth in this Section 6.2 and (ii) pay the
reasonable cost and expense of any reinspection of such Unit conducted by Lessor
required because of such non-compliance with Section 6.2. No inspection pursuant
to this Section 6.2 shall interfere with the normal conduct of Lessee's business
or the normal conduct of any sublessee's business, and, except as provided
herein, Lessee shall not be required to undertake or incur any additional
liabilities in connection therewith. A Unit shall not be deemed to have been
returned to Lessor for purposes of this Lease unless and until it is in
compliance with the conditions set forth in this Section 6.2.
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Section 6.3. Assignment of Management Contract. If requested by the
---------------------------------
Lessor, at the time of the return of any Unit, the Lessee shall deliver to the
Lessor an assignment of all right, title and interest of the Lessee in and to
the Management Agreement for an additional one (1) -year term, such assignment
to be in form and substance reasonably satisfactory to the Lessor with such
mutually acceptable amendments to the Management Agreement (including, without
limitation, appropriate adjustments to the fee provisions) as may be necessary
at such time to reflect then current conditions in the full service railcar
management business; provided, however, if at such time, there are other
railcars leased by Lessee and financed in other transactions which remain under
the Management Agreement, then in lieu of an assignment, Lessee shall arrange
for an appropriate alternative means to enable Lessor to have the benefits of
the services contemplated by the Management Agreement for such period. If any
amendments requested to be made to the Management Agreement pursuant to the
immediately preceding sentence have not been agreed to prior to a date on which
such Unit is to be returned, such Management Agreement shall (subject to the
proviso to the immediately preceding sentence) be assigned without modification,
and Lessee shall ensure that the Management Agreement remains in full force and
effect for a period of not less than 90 days, after which, if Lessor and the
Manager are not in agreement with respect to the amendments requested to be made
to the Management Agreement, the matter shall be submitted to an independent
expert satisfactory to such parties and such expert shall determine the changes,
if any (including, without limitation, appropriate adjustments to the fee
provisions), which would be required in an arm's-length management agreement
under the conditions then in effect in the full-service railcar leasing
business.
SECTION 7. Liens.
-----
Lessee will not directly or indirectly create, incur, assume, permit or
suffer to exist any Lien on or with respect to any Unit or Lessee's leasehold
interest therein under this Lease, except Permitted Liens, Lessor's Liens and
Liens described in Section 6.4(a) and 6.4(b) of the Participation Agreement.
Lessee shall promptly, at its own expense, take such action or cause such action
to be taken as may be necessary to duly discharge (or bond to the reasonable
satisfaction of Lessor and Indenture Trustee) any such Lien not excepted above
if the same shall arise at any time.
SECTION 8. Maintenance; Possession; Compliance with Laws.
---------------------------------------------
Section 8.1. Maintenance and Operation. (a) Lessee, at its own cost and
-------------------------
expense, shall maintain, repair and keep each Unit, or cause the Manager under
the Management Agreement to maintain, repair and keep each Unit, (i) according
to prudent industry practice, in good working order, and in good physical
condition for railcars of a similar age and usage, normal wear and tear
excepted, (ii) in a manner consistent with maintenance practices used by Lessee
and the Manager in respect of equipment owned or leased by Lessee and the
Manager
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similar in type to such Unit, (iii) in accordance in all material respects with
all manufacturer's warranties in effect and in accordance with all applicable
provisions, if any, of insurance policies required to be maintained pursuant to
Section 12, and (iv) in compliance in all material respects with any applicable
laws and regulations, including, without limitation, the Field Manual of the
AAR, FRA rules and regulations and Interchange Rules as they apply to the
maintenance and operation of the Equipment in interchange regardless of upon
whom such applicable laws and regulations are nominally imposed; provided,
however, that Lessee may, in good faith and by appropriate proceedings
diligently conducted, contest the validity or application of any such standard,
rule or regulation in any reasonable manner which does not materially interfere
with the use, possession, operation or return of any of the Units or materially
adversely affect the rights or interests of Lessor and the Indenture Trustee in
the Equipment or hereunder or otherwise expose Lessor, the Indenture Trustee or
any Participant to criminal sanctions or release Lessee from the obligation to
return the Equipment in compliance with the provisions of Section 6.2. Lessee
shall provide Lessor and the Indenture Trustee with notice of any contest of the
type described in the preceding sentence in detail sufficient to enable Lessor
and the Indenture Trustee to ascertain whether such contest may have an effect
of the type described in the preceding sentence. In no event shall Lessee
discriminate as to the use or maintenance of any Unit (including the periodicity
of maintenance or recordkeeping in respect of such Unit) as compared to
equipment of a similar nature which Lessee or the Manager owns or leases. Lessee
will maintain all records, logs and other materials required by relevant
industry standards or any governmental authority having jurisdiction over the
Units required to be maintained in respect of any Unit, all as if Lessee were
the owner of such Units, regardless of whether any such requirements, by their
terms, are nominally imposed on Lessee, Lessor or Owner Participant.
(b) Without the written waiver or consent of Lessor (which waiver
or consent will not be unreasonably withheld), Lessee shall not change, or
permit any sublessee to change, a DOT classification (as provided for in 49
C.F.R. Part 179 or any successor thereto), or permit any sublessee to operate
any Unit under a different DOT classification, from that classification in
effect for such Unit on the Closing Date, except for any change in tank test
pressure rating provided such change does not increase the pressure rating of
the Unit above the tank test pressure to which the Unit was manufactured;
provided however, that in the event Lessor shall not have provided Lessee with a
written waiver or consent to such a reclassification or operation of any Unit
within 10 Business Days after receipt of Lessee's written request therefor (or
Lessor expressly rejects such a request by Lessee), Lessee may elect to replace
such Unit in accordance with and subject to the provisions of Sections 11.2(i),
11.3 and 11.4.
Section 8.2. Possession and Use. Lessee shall be entitled to the
------------------
possession of the Equipment and to the use of the Equipment by it or any
Affiliate in the United States and, subject to the remaining provisions of this
Section 8.2 and Section 8.3, Canada and Mexico, only in the manner for which it
was designed and intended and so as to subject it only to ordinary wear and
tear. In no event shall Lessee use, store or permit the use or storage of any
Equipment in any jurisdiction not included in the insurance coverage required by
Section 12. The Equipment shall
11
<PAGE>
be used primarily on domestic routes in the United States, and in no event shall
more than forty-nine percent (49%) of the Units (as determined by mileage
records) shall be used outside the Contiguous United States at the same time.
Nothing in this Section 8.2 shall be deemed to constitute permission by Lessor
to any Person that acquires possession of any Unit to take any action
inconsistent with the terms and provisions of this Lease or any of the other
Operative Agreements.
Section 8.3. Sublease. Provided Lessor shall not have declared the Lease
--------
to be in default (or the Lease shall be deemed to have been declared in default)
pursuant to Section 15.1 hereof, Lessee shall be entitled, without the prior
approval of Lessor, to enter into a sublease for any Unit or Units (pursuant to
a Car Service Contract or otherwise) to, or to grant permission for the use
thereof under car contracts by, (i) a railroad company or companies (that is not
a Credit Bankrupt, GATC or any Affiliate thereof) incorporated under the laws of
the United States of America or any state thereof or the District of Columbia,
Canada or any province thereof, or Mexico or any state thereof, upon lines of
railroad owned or operated by such railroad company or companies or over which
such railroad company or companies have trackage rights or rights for operation
of their trains, and upon connecting and other carriers in the usual interchange
of traffic, (ii) responsible companies (i.e., a company with which the Manager
would do business in the ordinary course of its business with respect to
railcars which it owns, leases or manages) other than railroad companies, GATC,
Affiliates of GATC or Credit Bankrupts for use in their business or (iii)
wholly-owned Subsidiaries of GATC organized under the laws of (x) Canada or any
political subdivision thereof (each a "Canadian Affiliate"), or (y) Mexico or
------------------
any political subdivision thereof (each a "Mexican Affiliate"), (leases to any
of such sublessees being herein referred to as "Permitted Subleases"); provided,
------------------- --------
however, that Lessee shall not sublease more than the lesser of 20% of the Units
- -------
to a sublessee formed under the laws of Mexico or any state thereof or the
percentage of railcars subleased to Mexican sublessees in the Total Managed
Fleet, and provided and that in no event will Lessee sublease more than 50
Equipment Units to any single Mexican sublessee (other than (x) Mexican
Affiliate or (y) a Mexican sublessee with a credit rating of at least BBB- or
Baa3 as determined by either of S&P or Moody's respectively), and provided,
---------
further that the Lessee shall not at any time sublease more than 33% of the
- -------
Equipment in the aggregate to Canadian Affiliates. All subleases (and to the
extent permitted, sub-subleases) shall include appropriate provisions so that
such subleases, (i) shall in all events be subject and subordinate to this Lease
and the rights and interests of Lessor and its respective successors and assigns
hereunder, shall contain a consent of the sublease to Lessee's collateral
assignment of such sublease and shall confirm such subordination by and consent
to assignment by provisions substantially in the form currently contained in
Lessee's standard car service contract (including any applicable riders)
delivered to Lessor and the Indenture Trustee prior to the Closing Date, or
otherwise as satisfactory to Lessor and the Indenture Trustee, (ii) shall not
permit any sub-subleasing, other than sub-subleases by Canadian Affiliates or
Mexican Affiliates to Persons of the type described in clauses (i) or (ii) of
the immediately preceding sentence containing terms and conditions similar in
all material respects to the applicable sublease between the Lessee and the
applicable Canadian Affiliate or Mexican Affiliate and not
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permitting any sub-sub-subleasing ,and (iii) shall not include any term or
provision which is inconsistent with the terms and conditions of this Lease
(other than the Lease Term) or which could reasonably be expected to result in
material adverse consequences to Lessor, any Participant or the Indenture
Trustee. No sublease entered into by Lessee hereunder shall relieve Lessee of
any liability or obligation hereunder, which shall be and remain those of a
principal and not a surety. Nothing in this Section 8.3 shall be deemed to
constitute permission to any Person in possession of any Unit pursuant to any
such sublease to take any action inconsistent with the terms and provisions of
this Lease or any of the other Operative Agreements.
SECTION 9. Modifications.
-------------
Section 9.1. Required Modifications. In the event the AAR, the United
----------------------
States Department of Transportation, or any other United States or state
governmental agency or any other applicable law requires that any Unit be
altered or modified (a "Required Modification"), Lessee agrees to make such
Required Modification at its own expense; provided, however, that Lessee may, in
good faith and by appropriate proceedings diligently conducted, contest the
validity or application of any such law, regulation, requirement or rule in any
reasonable manner which does not materially interfere with the use, possession,
operation or return of any Unit or materially adversely affect the rights or
interests of Lessor or the Indenture Trustee in the Equipment or hereunder or
otherwise expose Lessor, the Indenture Trustee or any Participant to criminal
sanctions or relieve Lessee of the obligation to return the Equipment in
compliance with the provisions of Section 6.2. Title to any Required
Modification shall immediately vest in Lessor. Notwithstanding anything herein
to the contrary, if Lessee determines in its reasonable judgment (as evidenced
by an Officer's Certificate of the Lessee to such effect, confirmed by an
Officer's Certificate of the Manager) that any Required Modification to a Unit
would be economically impractical, in lieu of making the Required Modification
as provided above, Lessee may provide written notice of such determination to
Lessor in such Officer's Certificate and treat such Unit as if an Event of Loss
had occurred as of the date of such written notice with respect to such Unit and
in such event the provisions of Sections 11.2, 11.3 and 11.4 shall apply with
respect to such Unit except that the amount payable under Section 11.2(ii)(a) as
a result of such determination shall be an amount equal to the greater of the
Fair Market Sales Value or Stipulated Loss Value of such Unit; provided that
Lessee shall not discriminate nor suffer the Manager to discriminate against
such Unit in making such determination of economic impracticality as compared
with other equipment of the same type as such Unit which is owned or leased by
Lessee or the Manager; and provided further that there shall also be included in
such Officer's Certificate a statement of how Lessee intends to meet the
financial obligations imposed under said Sections 11.2, 11.3 and 11.4 with
respect to such Units.
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Section 9.2. Optional Modifications. Lessee at any time may in its
----------------------
discretion and at its own cost and expense modify, alter or improve any Unit in
a manner which is not required by Section 9.1 (a "Modification"); provided that
no Modification shall diminish the fair market value, utility, capacity, or
remaining economic useful life of such Unit below the fair market value,
utility, capacity, residual value or remaining economic useful life thereof
immediately prior to such Modification, in any non de minimis respect, assuming
such Unit was then in the condition required to be maintained by the terms of
this Lease or cause such Unit to become Limited Use Property. Title to any Non-
Severable Modification shall be immediately vested in Lessor. Title to any
Severable Modification (other than Required Modifications) shall remain with
Lessee. If Lessee shall at its cost cause such Severable Modifications (other
than Required Modifications) to be made to any Unit, Lessor shall have the
right, upon 90 days prior written notice in the case of a return other than
pursuant to Section 15.6, to purchase such Severable Modifications (other than
Severable Modifications consisting of proprietary or communications equipment)
at their then Fair Market Sales Value (taking into account their actual
condition). If Lessor does not so elect to purchase such Severable
Modifications, Lessee may remove such Severable Modifications at Lessee's cost
and expense, and if requested (which request shall be made by not less than 90
days prior written notice in the case of a return other than pursuant to Section
15.6) by Lessor will so remove such Severable Modifications at Lessee's cost and
expense, and Lessee shall, at its expense, repair any damage resulting from the
removal of any such Severable Modifications in a manner consistent with Section
8.1. If Lessee has not removed any Severable Modification prior to the return
of the related Unit as provided herein, title to such Severable Modification
shall pass to Lessor as of the date of such return.
Section 9.3. Removal of Property; Replacements. Lessee may, in the
---------------------------------
ordinary course of maintenance or repair of any Unit, remove any item of
property constituting a part of such Unit, and unless the removal of such item
is required by Section 9.1 hereof, Lessee shall replace such item as promptly as
practicable by an item of property that is free and clear of all Liens (other
than Permitted Liens) and in as good operating condition as, and with a fair
market value, utility, capacity, residual value and remaining economic useful
life at least equal to, the item of property being replaced, assuming that such
replaced item was in the condition required to be maintained by the terms of
this Lease. Any item of property removed from such Unit in the ordinary course
of maintenance and repair as provided in the preceding sentence shall remain the
property of Lessor free and clear of all rights of Lessee until replaced in
accordance with the terms of such sentence, but shall then, without further act,
become the property of Lessee. Any replacement property which is incorporated
into a Unit in the ordinary course of maintenance and repair shall, without
further act, become the property of Lessor and be deemed part of such Unit for
all purposes hereof.
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SECTION 10. Voluntary Termination.
---------------------
Section 10.1. Right of Termination. So long as no Lease Default pursuant
--------------------
to Section 14(a), 14(b), 14(g) or 14(h) or Lease Event of Default shall have
occurred and be continuing, Lessee shall have the right, at its option at any
time or from time to time during the Basic Term on or after the seventh
anniversary of the Basic Term Commencement Date to terminate the Lease Term with
respect to any or all of the Units (provided that, if such termination is for
less than all Units in a Functional Group, Lessee shall exercise such
termination with respect to at least 25 Units, no fewer than 25 Units shall
remain in such Functional Group as a result of such termination and the
determination as to which Units are subject to termination shall be made by
Lessee on a random or other basis (in each case reasonably acceptable to Lessor)
without discrimination based on maintenance status, operating condition of the
Units in question or otherwise) (the "Terminated Units") if (x) Lessee
determines in good faith (as evidenced by a certified copy of a resolution
adopted by Lessee's Board of Directors and a certificate executed by the Chief
Financial Officer of Lessee) that such Units have become obsolete or surplus to
Lessee's requirements, (y) Lessor has received an Officer's Certificate from the
Lessee and the Manager to the effect that there has been no discrimination in
the selection of the Terminated Units when measured against the other Units and
the Manager's Fleet, and that, following the termination of this Lease with
respect to the Terminated Units, the Units remaining subject to this Lease will
constitute a pool of Units, which is of a sufficient quantity and quality to
sustain over the remaining Basic Term the Coverage Ratios applicable at the time
of such termination and (z) Lessee delivers at least 120 days' prior notice to
Lessor and the Indenture Trustee (i) specifying a proposed date of termination
for such Units (the "Termination Date"), which date shall, except as provided in
the last sentence of Section 10.3, be a Rent Payment Date, any such termination
to be effective on the Termination Date upon Lessee's compliance with this
Section 10, and (ii) if some but less than all of the Units in a Functional
Group are designated as Terminated Units, describing in such Officer's
Certificate the nondiscriminatory manner in which Lessee proposes to determine
which Units in that Functional Group are to be Terminated Units. Notwithstanding
anything herein contained to the contrary, there shall be no determination that
a Unit is surplus or obsolete for purposes of this Lease if, on the Termination
Date, such Unit is subject to a Car Service Contract. Except as expressly
provided otherwise herein, there will be no conditions to Lessee's right to
terminate this Lease with respect to the Terminated Units pursuant to this
Section 10.1. So long as (a) Lessor shall not have given Lessee a notice of
election to retain the Terminated Units in accordance with Section 10.3, or (b)
notice of prepayment of the Equipment Notes shall not have been given pursuant
to Section 2.10 of the Indenture, Lessee may withdraw the termination notice
referred to above at any time prior to the 60th day prior to the scheduled
Termination Date, whereupon this Lease shall continue in full force and effect;
provided that Lessee (i) may not exercise its right to withdraw such a
termination notice more than once annually or more than four times during the
Basic Term, and (ii) may not withdraw any termination notice with respect to any
Terminated Units after receipt by Lessee of a bid equal to or greater than
Termination Value with respect to such Terminated Units; and provided further
15
<PAGE>
that no later than the Business Day immediately preceding the date on which
Lessee no longer has the right to withdraw its termination notice, Lessee shall
provide Lessor with assurances reasonably satisfactory to the Owner Participant
of Lessee's ability to pay Termination Value and other amounts which would be
payable by Lessee on the Termination Date as provided in Section 10.2, taking
into the account the expected sale proceeds to be received pursuant to any
agreement for the sale of the Unit, and if such assurances have not been given
by such date, the termination notice previously given by Lessee shall be deemed
to have been withdrawn on such date. Lessee agrees that if it withdraws a
termination notice it will reimburse Lessor, each Participant and the Indenture
Trustee on an After Tax Basis for all reasonable out-of-pocket costs and
expenses (including reasonable legal fees and expenses) incurred by any thereof
in connection therewith.
Section 10.2. Sale of Equipment. During the period from the date of such
-----------------
notice given pursuant to Section 10.1 to the Termination Date, Lessee, as agent
for Lessor and, except as provided in Section 10.3, at Lessee's sole cost and
expense, shall use reasonable best efforts to obtain bids from Persons other
than Lessee or Affiliates thereof for the cash purchase of the Terminated Units,
and Lessee shall promptly, and in any event at least five Business Days prior to
the proposed date of sale, certify to Lessor in writing the amount and terms of
each such bid, the proposed date of such sale and the name and address of the
party submitting such bid. Unless Lessor shall have elected to retain the
Terminated Units in accordance with Section 10.3, on the Termination Date: (i)
Lessee shall deliver the Terminated Units (excluding any optional Severable
Modifications removed by Lessee pursuant to Section 9.2) to the bidder (which
shall not be Lessee, the Manager or an Affiliate of either thereof (for the
avoidance of doubt the bidder may be a Customer, or a customer of the Manager,
and neither the Manager or any Affiliate shall be prohibited from managing the
Units for such bidder after the purchase by such bidder)), which shall have
submitted the highest cash bid prior to such date (or to such other bidder as
Lessee and Lessor shall agree) and (ii) subject to the prior or concurrent
receipt (x) by Lessor of all amounts owing to Lessor pursuant to the next
sentence, and (y) by the Persons entitled thereto of all unpaid Supplemental
Rent due on or before the Termination Date, Lessor shall, without recourse or
warranty (except as to the absence of any Lessor's Lien) simultaneously
therewith transfer all of its right, title and interest in and to the Terminated
Units to such bidder. The net proceeds of sale realized at such sale shall be
paid to and retained by Lessor and, in addition, on the Termination Date, Lessee
shall pay to Lessor, (A) all Basic Rent with respect to such Terminated Units
due and payable on or prior to the Termination Date (exclusive of any in advance
Basic Rent due on such date), (B) the excess, if any, of (1) the Termination
Value for the Terminated Units computed as of the Termination Date, over (2) the
net cash sales proceeds (after the deduction of all reasonable costs and
expenses of Lessor and Owner Participant in connection with such sale) of the
Terminated Units, (C) an amount equal to the Make-Whole Amount, if any, and any
unpaid Late Payment Premium in respect of the principal amount of the Equipment
Notes to be prepaid in accordance with Section 2.10(a) of the Indenture and any
Accumulated Equity Deficiency Amount with respect to such Units, and (D) all
other Rent then due and payable hereunder. If no sale shall have occurred,
whether as a
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result of Lessee's failure to pay all of the amounts hereinabove required or
otherwise, this Lease shall continue in full force and effect with respect to
such Units and Lessee agrees to reimburse Lessor, each Participant and the
Indenture Trustee for all reasonable costs and expenses (including reasonable
legal fees and expenses) incurred by any thereof in connection therewith;
provided that if such sale shall not have occurred solely because of Lessee's
failure to pay the amounts hereinabove required, Lessee shall have no further
right to terminate this Lease with respect to such Units. Lessee, in acting as
agent for Lessor, shall have no liability to Lessor for failure to obtain the
best price, shall act in its sole discretion and shall be under no duty to
solicit bids publicly or in any particular market. Lessee's sole interest in
acting as agent shall be to use its reasonable best efforts to sell the Units at
the highest price then obtainable consistent with the terms of this Lease.
Lessor and Owner Participant shall each have the right, but not the obligation,
to make a bid and to obtain bids either directly or through agents other than
Lessee.
Section 10.3. Retention of Equipment by Lessor. Notwithstanding the
--------------------------------
provisions of Sections 10.1 and 10.2, Lessor may irrevocably elect by written
notice to Lessee, not later than 60 days after receipt of Lessee's notice of
termination, not to sell the Terminated Units on the Termination Date, whereupon
Lessee shall (i) deliver the Terminated Units to Lessor in the same manner and
condition as if delivery were made to Lessor pursuant to Section 6.1(b) and
Section 6.2, and shall extend storage rights to the same extent as provided in
Section 6.1(c), treating the Termination Date as the termination date of the
Lease Term with respect to the Terminated Units, and (ii) pay to Lessor, or to
the Persons entitled thereto, all Basic Rent and all Supplemental Rent due and
owing on the Termination Date and unpaid (exclusive of any in advance Basic Rent
due on such date in respect of the Terminated Units, but inclusive of any
Supplemental Rent measured by the Make-Whole Amount and any unpaid Late Payment
Interest in respect of the Terminated Units). If Lessor elects not to sell the
Terminated Units as provided in this Section 10.3, then Lessor shall pay, or
cause to be paid, to the Indenture Trustee in funds of the type and in an amount
equal to the outstanding principal amount of the Equipment Notes issued in
respect of such Terminated Units and all accrued and unpaid interest to the date
of prepayment of such Equipment Notes on such Termination Date and an amount
equal to the Make-Whole Amount, if any, and any unpaid Late Payment Interest in
respect of the principal amount of the Equipment Notes to be prepaid without in
any manner relieving the Lessee of its obligation to pay any such amount
pursuant to the preceding sentence; provided that unless all such amounts shall
have been paid to the Indenture Trustee on the Termination Date, this Lease
shall continue in full force and effect. If Lessor shall fail to pay the
amounts required pursuant to this Section 10.3 and as a result thereof this
Lease shall not be terminated with respect to the Terminated Units on a proposed
Termination Date, Lessor shall (x) thereafter no longer be entitled to exercise
its election to retain such Terminated Units, and (y) reimburse Lessee for any
reasonable out-of-pocket expenses (including reasonable legal fees and expenses)
incurred by it in attempting to sell the Terminated Units pursuant to Section
10.2 immediately prior to Lessor's exercise of such preemptive election, and
Lessee may at its option at any time thereafter prior to the immediately
following Rent Payment Date submit a new termination notice pursuant to Section
10.1 with respect to such Terminated Units specifying a proposed Termination
Date
17
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occurring on a Determination Date occurring not earlier than 25 days from the
date of such notice.
Section 10.4. Termination of Lease. In the event of either (x) any such
--------------------
sale and receipt by Lessor and the Indenture Trustee of all of the amounts
provided in Section 10.2 in respect of the Terminated Units or (y) retention of
the Terminated Units and full performance by Lessor of its payment obligations
in compliance with Section 10.3, and upon compliance by Lessee with the other
provisions of this Section 10, the obligation of Lessee to pay Basic Rent
hereunder for such Terminated Units shall cease and the Lease Term for the
Terminated Units shall end.
SECTION 11. Loss, Destruction, Requisition, Etc.
------------------------------------
Section 11.1. Event of Loss. In the event that any Unit (i) shall suffer
-------------
damage or contamination which, in Lessee's reasonable judgment (as evidenced by
an Officer's Certificate of the Lessee to such effect, confirmed by an Officer's
Certificate of the Manager), makes repair uneconomic or renders such Unit unfit
for commercial use, (ii) shall suffer destruction which constitutes a total
loss, or shall suffer theft or disappearance (after reasonable efforts by Lessee
to locate the same) for a period exceeding 12 months (or, if earlier, the end of
the Basic Term or Renewal Term then in effect), (iii) shall be permanently
returned to the manufacturer pursuant to any patent indemnity provisions, (iv)
shall have title thereto taken or appropriated by any governmental authority,
agency or instrumentality under the power of eminent domain or otherwise, or (v)
shall be taken or requisitioned for use by any governmental authority or any
agency or instrumentality thereof under the power of eminent domain or
otherwise, and such taking or requisition is for a period that exceeds the
remaining Basic Term or any Renewal Term then in effect (unless such taking or
requisition is by any governmental authority, agency or instrumentality other
than the United States or Canada in which case such period shall be the lesser
of the period as aforesaid or 365 days) (any such occurrence being hereinafter
called an "Event of Loss"), Lessee, in accordance with the terms of Section
-------------
11.2, shall promptly and fully inform Lessor and the Indenture Trustee of such
Event of Loss.
Section 11.2. Replacement or Payment upon Event of Loss. Upon the
-----------------------------------------
occurrence of an Event of Loss or the deemed occurrence of an Event of Loss
pursuant to Section 9.1, Lessee shall as soon as reasonably practical and in any
event within 60 days after a Responsible Officer of the Manager shall have
actual knowledge of the occurrence of such Event of Loss or election to replace
give Lessor and the Indenture Trustee notice thereof (which initial notice shall
identify the Unit involved). Thereafter, within the 60-day period following
such initial notice, Lessee shall give Lessor and the Indenture Trustee a second
notice as to which of the following options Lessee shall elect to perform (it
being agreed that if Lessee shall fail to give such second notice, Lessee shall
be deemed to have elected to perform the option set forth in Section 11.2(ii)):
(i) Upon Lessee's election to perform under this clause (i)
pursuant to the above-mentioned second notice (or in the circumstances of
an election described in
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Section 8.1(b) with respect to any Unit), as promptly as practicable
following such election, and in any event on or before the 60th day
following such second notice (or Section 8.1(b) election), Lessee shall
comply with Section 11.4(b) and shall convey or cause to be conveyed to
Lessor a Replacement Unit to be leased to Lessee hereunder, such
Replacement Unit to be of the same car type of the same or newer model year
(or otherwise approved by Lessor, which approval shall not be unreasonably
withheld), and free and clear of all Liens (other than Permitted Liens of
the type described in clause (ii) with respect to sublessees, and in
clauses (iv) and (vii) of the definition thereof) and to have a fair market
value, utility, capacity, residual value, remaining economic useful life
and condition at least equal to the Unit so replaced (assuming such Unit
was in the condition required to be maintained by the terms of this Lease);
provided that, if Lessee shall elect the option under this clause (i) but
shall fail to perform its obligation to effect such replacement under this
clause (i) within the 60-day period hereinabove provided for, then (except
in the case of a failure to perform an election to replace pursuant to
Section 8.1(b)) at the end of such 60-day period Lessee shall immediately
give Lessor and the Indenture Trustee notice of such failure and specify
that Lessee shall pay to Lessor on the next succeeding Rent Payment Date
that is at least 25 days after the end of such 60-day period, or in the
case of Supplemental Rent, to the Person entitled thereto, the amounts
specified in clause (ii) below as of such next succeeding Rent Payment
Date, and Lessee shall pay such amounts on such Rent Payment Date; provided
further that Lessee shall have no right to elect replacement under this
clause (i) if, at the time of the notice of the Event of Loss under Section
11.2 above, a Lease Default pursuant to Sections 14(a), 14(b), 14(g) or
14(h) or Lease Event of Default shall have occurred and be continuing; and
provided further that any replacement during a Renewal Term shall be
subject to a Permitted Sublease; or
(ii) on the Rent Payment Date which is not less than 25 days
following the date of notice of Lessee's election to perform under this
clause (ii), Lessee shall pay or cause to be paid to Lessor (or in the case
of Supplemental Rent, to the Persons entitled thereto) in funds of the type
specified in Section 3.5, (a) an amount equal to the Stipulated Loss Value
of each such Unit suffering an Event of Loss or deemed Event of Loss
determined as of such Rent Payment Date, (b) all Basic Rent payable on such
date in respect of such Unit (exclusive of any in advance Basic Rent due on
such date in respect of the Unit or Units suffering the Event of Loss), (c)
any unpaid Late Payment Premium in respect of the principal amount of the
Equipment Notes to be prepaid in accordance with Section 2.10(b) of the
Indenture and any Accumulated Equity Deficiency Amount with respect to such
Units, and (d) all other Rent then due and payable hereunder, it being
understood that until such Stipulated Loss Value and such other sums are
paid, there shall be no abatement or reduction of Basic Rent.
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Section 11.3. Rent Termination. Upon the replacement of any Unit or Units
----------------
in compliance with Sections 11.2(i) and 11.4(b) (but only as to replaced Units
and not any Replacement Unit) or upon the payment of all sums required to be
paid pursuant to Section 11.2 in respect of any Unit or Units, the Lease Term
with respect to such Unit or Units and the obligation to pay Basic Rent for such
Unit or Units accruing subsequent to the date of payment of Stipulated Loss
Value or date of conveyance of such Replacement Unit or Units pursuant to
Section 11.2 shall terminate; provided that Lessee shall be obligated to pay all
Rent in respect of such Unit or Units which is payable under Section 11.2 with
respect to such payment of Stipulated Loss Value or such replacement of such
Unit or Units and in respect of all other Units then continuing to remain
subject to this Lease.
Section 11.4. Disposition of Equipment; Replacement of Unit. (a) Upon
---------------------------------------------
the payment of all sums required to be paid pursuant to Section 11.2 in respect
of any Unit or Units, Lessor will convey to Lessee or its designee all right,
title and interest of Lessor in and to such Unit or Units, "as is", "where is",
without recourse or warranty, except for a warranty as to the absence of
Lessor's Liens, and shall execute and deliver to Lessee or its designee, at
Lessee's cost and expense, such bills of sale and other documents and
instruments as Lessee or its designee may reasonably request to evidence such
conveyance. As to each separate Unit so disposed of, so long as no Lease Event
of Default shall have occurred and be continuing, Lessee or its designee shall
be entitled to any amounts arising from such disposition, plus any awards,
insurance or other proceeds and damages received by Lessee, Lessor or the
Indenture Trustee by reason of such Event of Loss after having paid the
Stipulated Loss Value and any other Rent attributable thereto.
(b) At the time of or prior to any replacement of any Unit or
Replacement Unit, Lessee, at its own expense, will (A) furnish Lessor with a
Bill of Sale with respect to the Replacement Unit substantially in the form
delivered pursuant to Section 4.1(g) of the Participation Agreement, (B) cause a
Lease Supplement substantially in the form of Exhibit A hereto, subjecting such
Replacement Unit to this Lease, and duly executed by Lessee, to be delivered to
Lessor for execution by the appropriate parties, it being understood that upon
such execution (x) Lessee will cause such Lease Supplement to be filed for
recordation in the same manner as provided for the original Lease Supplement in
Section 16.1, and (y) to the extent that the Indenture has not been satisfied
and discharged, Lessor shall deliver possession of the "original" counterpart of
such Lease Supplement to be delivered to the Indenture Trustee, (C) so long as
the Indenture shall not have been satisfied and discharged, cause an Indenture
Supplement substantially in the form of Exhibit A to the Indenture for such
Replacement Unit, to be delivered to Lessor and to the Indenture Trustee for
execution and, upon such execution, to be filed for recordation in the same
manner and within the same time periods as provided for the original Indenture
Supplement in Section 16.1, (D) furnish Lessor with an opinion of Lessee's
counsel (which may be the General Counsel or Assistant General Counsel of the
Parent), (x) to the effect that the Bill of Sale referred to in clause (A) above
constitutes an effective instrument for the conveyance of title to the
Replacement Unit to Lessor, and that legal and beneficial title
20
<PAGE>
to the Replacement Unit has been delivered to Lessor, free and clear of all
Liens (other than Permitted Liens of the type described in clause (ii) with
respect to sublessees, and in clauses (iv) and (vii) of the definition thereof),
and (y) describing all filings and recordings and other action necessary or
appropriate to protect the respective interests of Lessor and the Indenture
Trustee in the Replacement Units, (E) in the event that the opinion provided for
in (H) below cannot be delivered, furnish to Owner Participant an agreement of
GATC to indemnify Owner Participant against any adverse tax consequences
suffered as a result of such replacement, (F) furnish Lessor with an engineer's
certificate (which may be from an employee of the Manager) certifying as to the
utility, capacity, condition, model year and remaining useful life required
under clause (i) of Section 11.2, (G) furnish to Lessor and the Indenture
Trustee an Officer's Certificate certifying that the Replacement Unit has a fair
market value, utility, capacity, residual value, model year and remaining
economic useful life and condition at least equal to the Unit being replaced and
is free and clear of all Liens (other than Permitted Liens of the type described
in clause (ii) with respect to sublessees, and in clauses (iv) and (vii) of the
definition thereof), (H) furnish Lessor with a tax opinion from counsel
reasonably acceptable to the Owner Participant to the effect that the Owner
Participant would have a reasonable basis under ABA Opinion 85-832 not to
recognize gain or loss for federal income tax purposes with respect to the
conveyance of title to the Replacement Unit to Lessor, (I) in the event such
replacement occurs during a Renewal Term, furnish Lessor with the appropriate
information regarding the Permitted Sublease thereof, and (J) furnish such other
documents and evidence as any Participant, Lessor or the Indenture Trustee, or
their respective counsel, may reasonably request in order to establish the
consummation of the transactions contemplated by this Section 11.4. For all
purposes hereof, (i) Lessee shall be deemed to have complied with the
requirements of this Section 11.4(b) as of the date of its delivery to Lessor,
the Participants and the Indenture Trustee of the documents and instruments
referred to in the foregoing clauses (A) through (H), signed by Lessee or its
counsel, as applicable, in due form for any required filing or recording, and
such filing or recording shall have been made if such documents and instruments
have been executed and delivered by the Lessor or Indenture Trustee or both of
them in a timely manner, (ii) title to the Replacement Unit shall be deemed to
have been transferred to Lessor as of such date, and (iii) upon such passage of
title thereto to Lessor the Replacement Unit shall be deemed part of the
property leased hereunder and the Replacement Unit shall be deemed a "Unit" of
----
Equipment as defined herein. Upon such passage of title, Lessor will transfer to
Lessee, "as is" and "where is" and without recourse or warranty (except as to
Lessor's Liens), all Lessor's right, title and interest in and to the replaced
Unit, and upon such transfer, Lessor will request in writing that the Indenture
Trustee execute and deliver to Lessee an appropriate instrument releasing such
replaced Unit from the lien of the Indenture. Lessee shall pay all reasonable
out-of-pocket costs and expenses (including reasonable legal fees and expenses)
incurred by Lessor, any Participant or the Indenture Trustee in connection with
any replacement pursuant to this Section 11.4. Lessee further agrees that, upon
receipt of fully signed counterparts of the Lease Supplement and Indenture
Supplement referred to in clauses (B) and, if applicable, (C) of the first
sentence of this Section 11.4(b), it will, at its sole cost and expense, cause
such documents to be filed or recorded in the manner contemplated by Section
16.1.
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Section 11.5. Eminent Domain. In the event that during the Lease Term the
--------------
use of any Unit is requisitioned or taken by any governmental authority under
the power of eminent domain or otherwise for a period which does not constitute
an Event of Loss, all of Lessee's obligations under the Operative Agreements,
including without limitation, Lessee's obligation to pay all installments of
Basic Rent, shall continue for the duration of such requisitioning or taking.
Any amount referred to in Section 11.4(a) or in Section 12 which is payable to
Lessee, shall be deposited in the related Non-Shared Payment Account established
under the Intercreditor Agreement.
SECTION 12. Insurance.
---------
Section 12.1. Insurance. Lessee will at all times after delivery and
---------
acceptance of each Unit, at its own expense, keep or cause the Insurance Manager
under the Insurance Agreement to keep such Unit insured by a reputable insurance
company or companies in amounts and against risks and with deductibles and terms
and conditions not less than the insurance, if any, maintained by Lessee with
respect to similar equipment which it owns or leases, but in no event shall such
coverage be for amounts or against risks less than the prudent industry standard
for companies engaged in full service leasing of railcars. Without limiting the
foregoing, Lessee will in any event;
(a) keep each Unit of the Equipment insured against physical damage
in an amount not less than the Stipulated Loss Value attributable thereto as
shown on Schedule 4 to the Participation Agreement, subject to a limit of not
less than $10,000,000 per occurrence (except for a $10,000,000 annual aggregate
each for flood and earth movement), provided that such coverage may provide for
deductible amounts of not more than $1,000,000 per occurrence; and
(b) maintain public liability insurance naming Owner Participant, the
Lessor (as Lessor of the Equipment and in its individual capacity), the
Indenture Trustee and the Loan Participant as additional insureds (but only with
respect to liability arising out of or related to the Operative Agreements and
the Equipment) against bodily injury, death or property damage arising out of
the use or operation of the Equipment with general and excess liability limits
of not less than $50,000,000 per occurrence or in the aggregate, provided that
such coverage may provide for deductible amounts not exceeding the lesser of (x)
$10,000,000 or (y) the difference (not less than zero (0)) between (i) the level
of the then current deductible maintained by GATC for the GATC Fleet (or if
GATC, its successors and assigns is no longer engaged in the railcar leasing
business under full service leases, the average level of the then current
deductible amounts maintained by the three largest companies engaged in such
business in the United States), and (ii) such amount of additional coverage as
may be obtained by the Lessee in reduction of the then current deductible
maintained by GATC for an additional incremental annual premium payable by the
Lessee of up to $75,000.
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It is understood and agreed that the insurance required hereunder may be
part of a company-wide insurance program of the Manager, including risk-
retention and self-insurance. Any policy of insurance maintained in accordance
with this Section 12.1 and any policy purchased in substitution or replacement
for any of such policies shall provide that if any such insurance is cancelled
or terminated for any reason whatever (other than upon normal policy
expiration), Lessor, the Indenture Trustee, Loan Participant and Owner
Participant shall receive 30 days' prior written notice of such cancellation or
termination.
Section 12.2. Physical Damage Insurance. (a) The insurance maintained
-------------------------
pursuant to Section 12.1(a) shall provide that (i) so long as the Equipment
Notes remain outstanding, the proceeds up to the Stipulated Loss Value for any
loss or damage to any Unit shall be made to the Indenture Trustee under a
standard loss payable clause, and thereafter to Lessor and (ii) so long as no
Lease Event of Default shall have occurred and be continuing, Lessee will be
entitled, at its own expense, to make all proofs of loss and take all other
steps necessary to collect the proceeds of such insurance.
(b) In lieu of maintaining the physical damage insurance required by
Section 12.1(a), Lessee may self-insure with respect to the Equipment as shall
be consented to by Lessor and the Indenture Trustee.
(c) The entire proceeds of any property insurance or third party
payments for damages to any Unit received by Lessor or the Indenture Trustee
shall be held by such party until, with respect to such Unit, the repairs
referred to in clause (i) below are made as specified therein or payment of the
Stipulated Loss Value is made, and such entire proceeds will be paid, so long as
no Lease Event of Default shall have occurred and be continuing, either:
(i) to Lessee promptly following receipt by the Indenture
Trustee or Lessor, as the case may be, of a written application signed by
Lessee for payment to Lessee for repairing or restoring the Units which
have been damaged so long as (1) Lessee shall have complied with the
applicable provisions of the Lease, and (2) Lessee shall have certified
that any damage to such Units shall have been fully repaired or restored;
or
(ii) if this Lease is terminated with respect to such Unit
because of an Event of Loss and Lessee has paid the Stipulated Loss Value
and all other amounts due as a result thereof, such proceeds shall be
promptly paid over to, or retained by, Lessee.
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Section 12.3. Public Liability Insurance. (a) The public liability
--------------------------
insurance referred to in paragraph 12.1(b) shall (i) provide that in as much as
such policies cover more than one insured, all terms, conditions, insuring
agreements and endorsements, with the exception of limits of liability and
liability for premiums, commissions, assessments or calls (which shall be solely
a liability of Lessee), shall operate in the same manner as if there were a
separate policy or policies covering each insured, (ii) waive any rights of
subrogation of the insurers against Owner Participant, Lessor, as Lessor of the
Equipment and in its individual capacity, and the Indenture Trustee, (iii)
provide that neither Owner Participant, Lessor, as Lessor of the Equipment and
in its individual capacity, the Indenture Trustee nor Loan Participant shall
have any responsibility for any insurance premiums, whether for coverage before
or after cancellation or termination of any such policies as to Lessee and (iv)
be primary without contribution from any similar insurance maintained by Owner
Participant, Lessor, the Indenture Trustee or Loan Participant.
(b) Lessee shall use its reasonable efforts to obtain public
liability insurance policies stipulating that coverage thereunder will not be
invalidated (as to Owner Participant, Loan Participant, Lessor, as Lessor of the
Equipment and in its individual capacity, and the Indenture Trustee) due to any
action or inaction of Lessee or any other Person (other than Owner Participant,
Loan Participant, Lessor or the Indenture Trustee, but only in respect of their
respective coverages), but shall be under no obligation to obtain such policies
containing such stipulations if they are not available to Lessee at commercially
reasonable rates in the markets in which Lessee has then placed its insurance
program.
(c) In the event any public liability insurance policy or coverage
thereunder which are required to be maintained under Section 12.1(b) shall not
be available to Lessee in the commercial insurance market on commercially
reasonable terms, Lessor shall not unreasonably withhold its agreement to waive
such requirement. Lessee shall make written request for any such waiver in
writing, accompanied by written reports prepared, at Lessee's option, either by
(i) one independent insurance advisor chosen by Lessee and Lessor or (ii) three
independent insurance advisors, one chosen by Lessor, one chosen by Lessee and
one chosen by the other two advisors (one of which may be the regular insurance
broker or brokers of Lessee) in either case, such independent insurance advisors
being of recognized national standing. The fees and expenses of all such
advisors shall be paid by Lessee. The written reports required hereunder shall
(x) state that such insurance (or the required coverage thereunder) is not
reasonably available to Lessee at commercially reasonable premiums in the
commercial insurance markets within which Lessee or the Manager normally
purchases its insurance from insurers, acceptable to Lessee, with a Best's
rating of A-or better for railcars of similar type and capacity and (y) explain
in detail the basis for such conclusions. Upon the granting of any such waiver,
Lessee shall within 15 days thereafter certify to Lessor in writing the cost (on
a fleet-wide basis) of liability insurance premiums for the coverage required by
Section 12.1(b) for the immediately preceding fiscal year; and in the event that
any such certificate is not received by Lessor within such 15-day period, any
such waiver shall be deemed revoked. At any time after the granting of such
waiver, but not more often than once a year, Lessor may make a written request
for a
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supplemental report (in form reasonably acceptable to Lessor) from such
insurance advisor(s) updating the prior report and reaffirming the conclusions
set forth therein. Lessee shall provide any such required supplemental report
within 60 days after receipt of the written request therefor. Any such waiver
shall be effective for only as long as such insurance is not reasonably
available to Lessee in the commercial markets in which Lessee normally purchases
its insurance at commercially reasonable rates, it being understood that the
failure of Lessee to furnish timely any such supplemental report shall be
conclusive evidence that such condition no longer exists. If such supplemental
report shows that such coverage is available, Lessee shall within 90 days of
such report obtain such insurance coverage. During any period with respect to
which such waiver has been granted and remains in effect under this Section
12.3(c), Lessee shall obtain public liability insurance as set forth in Section
12.1(b) from such carriers, in such amounts and with coverage limits and
deductibles as may be reasonable in its judgment under the circumstances, but in
any event no less than prudent industry standards.
Section 12.4. Certificate of Insurance. Lessee shall, prior to the
------------------------
Closing Date and when the renewal certificate referred to below is sent (but in
any event not less than annually), furnish Lessor, the Indenture Trustee, the
Owner Participant and the Loan Participant with a certificate signed by the
insurer or an independent insurance broker showing the insurance then maintained
by Lessee pursuant to Section 12.1. With respect to any renewal policy or
policies, certificates or binders evidencing such renewal shall be furnished as
soon as practicable, but in no event later than 30 days after the earlier of the
date such renewal is effected or the expiration date of the original policy or
policies. Simultaneously, with the furnishing of such certificate, Lessee will
provide appropriate evidence, reasonably satisfactory to Lessor and the
Indenture Trustee, that all premiums due on such insurance have been paid.
Section 12.5. Additional Insurance. In the event that Lessee shall fail
--------------------
to maintain insurance as herein provided in Section 12.1 or, if applicable,
Section 12.3, Lessor may at its option, upon prior written notice to Lessee,
provide such insurance and, in such event, Lessee shall, upon demand from time
to time reimburse Lessor for the cost thereof together with interest from the
date of payment thereof at the Late Rate, on the amount of the cost to Lessor of
such insurance which Lessee shall have failed to maintain. If after Lessor has
provided such insurance, Lessee then obtains the coverage provided for in
Section 12.1 which was replaced by the insurance provided by Lessor, and Lessee
provides Lessor with evidence of such coverage reasonably satisfactory to
Lessor, Lessor shall cancel the insurance it has provided pursuant to the first
sentence of this Section 12.5. In such event, Lessee shall reimburse Lessor for
all costs to Lessor of cancellation, including without limitation any short rate
penalty, together with interest from the date of Lessor's payment thereof at the
Late Rate. In addition, at any time Lessor (either directly or in the name of
Owner Participant) may at its own expense carry insurance with respect to its
interest in the Units, provided that such insurance does not interfere with
Lessee's ability to insure the Equipment as required by this Section 12 or
adversely affect Lessee's insurance or the cost thereof, it being understood
that all salvage rights to each Unit shall remain with Lessee's insurers at all
times. Any insurance payments received from policies
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maintained by Lessor pursuant to the previous sentence shall be retained by
Lessor without reducing or otherwise affecting Lessee's obligations hereunder,
other than with respect to Unit(s) with respect to which such payments have been
made.
SECTION 13. Reports; Inspection.
-------------------
Section 13.1. Duty of Lessee to Furnish. On or before April 30, 1999, and
-------------------------
on or before each April 30 thereafter, Lessee will furnish (or cause the Manager
under the Management Agreement to furnish) to Lessor, Owner Participant, Loan
Participant, the Indenture Trustee and the Rating Agencies an accurate
statement, as of the preceding December 31, (a) showing the amount, description
and reporting marks of the Units then leased hereunder, the amount, description
and reporting marks of all Units that may have suffered an Event of Loss during
the 12 months ending on such December 31 (or since the Closing Date, in the case
of the first such statement), and such other information regarding the condition
or repair of the Equipment as Lessor may reasonably request, (b) stating that,
in the case of all Equipment repainted during the period covered by such
statement, the markings required by Section 4.2 hereof shall have been preserved
or replaced, (c) showing the percentage of use in the United States and in each
of Canada and Mexico based on the total mileage traveled by all railcars in the
Total Managed Fleet (or by the Units, if and to the extent generally made
available to the Manager in the ordinary course with respect to railcars in
general interchange service similar to the Units) for the prior calendar year as
reported to the Manager by railroads (provided, that Lessee shall cooperate with
Owner Participant and Lessor and shall provide such additional information on
such matters as Owner Participant or Lessor may reasonably request to enable
Owner Participant and Lessor to pursue or fulfill their respective tax audit and
tax litigation rights and obligations), and (d) stating that Lessee is not aware
of any condition of any Unit which would cause such Unit not to comply in any
material respect with the rules and regulations of the FRA and the interchange
rules of the Field Manual of the AAR as they apply to the maintenance and
operation of the Equipment in interchange.
Section 13.2. Lessor's Inspection Rights. Lessor, Owner Participant and
--------------------------
the Indenture Trustee each shall have the right, but not the obligation, at
their respective sole cost and expense, unless an Event of Default shall have
occurred and be continuing, by their respective authorized representatives, to
inspect the Equipment, all subleases thereof and Lessee's records with respect
thereto. All inspections shall be conducted during Lessee's normal business
hours, on the Manager's premises or in areas that are not the premises of a
sublessee to which Lessee has reasonable access, and upon reasonable prior
notice to Lessee. Lessee shall not be liable for any injury to, or the death
of, any Person exercising, either on behalf of Lessor, any Owner Participant,
the Indenture Trustee or any prospective user, the rights of inspection granted
under this Section 13.2 unless caused by Lessee's negligence or wilful
misconduct. Except following the occurrence and continuance of an Event of
Default, no inspection pursuant to this Section 13.2 shall interfere with the
use, operation or maintenance of the Equipment or the
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ordinary course of Lessee's or any sublessee's business, and except as provided
herein, Lessee shall not be required to undertake or incur any additional
liabilities in connection therewith.
SECTION 14. Lease Events of Default.
-----------------------
The following events shall constitute Lease Events of Default hereunder
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Lease Event of Default shall
be deemed to exist and continue so long as, but only as long as, it shall not
have been remedied:
(a) Lessee shall fail to make any payment of Basic Rent, Early
Purchase Price, or any other purchase price to be paid by Lessee for any Units
pursuant to this Lease or the Participation Agreement, Stipulated Loss Value or
Termination Value within 10 Business Days after the same shall have become due;
provided, however, that failure to make an entire payment of Basic Rent shall
not be a Lease Event of Default so long as the amount of Basic Rent paid on any
Rent Payment Date is sufficient to meet the Rated Obligations Due, if any, on
the Equipment Notes; or
(b) Lessee shall fail to make any payment of Supplemental Rent,
including indemnity or tax indemnity payments, but not including Stipulated Loss
Value, Termination Value, Early Purchase Price, or any other purchase price to
be paid by Lessee for any Units pursuant to this Lease or the Participation
Agreement after the same shall have become due and such failure shall continue
unremedied for 10 Business Days after receipt by Lessee of written notice of
such failure from Lessor, the Owner Participant or the Indenture Trustee; or
(c) Lessee shall fail to maintain in effect the insurance required by
Section 12 and such failure shall not have been waived as provided for therein;
or
(d) Lessee shall use or permit the use of the Equipment or any
portion thereof in a way which is not permitted by this Lease, provided that
such unauthorized possession shall not constitute a Lease Event of Default for a
period of 45 days after the occurrence thereof so long as (i) such unauthorized
use is not the result of any willful action of Lessee and (ii) such unauthorized
use is capable of being cured and Lessee diligently pursues such cure throughout
such 45-day period; or Lessee shall make or permit any unauthorized assignment
or transfer of this Lease in violation of Section 18.2; or
(e) Lessee shall fail to observe or perform any of the covenants or
agreements to be observed or performed by Lessee in Section 6.7 of the
Participation Agreement or Section 6.02 or 6.03 of the Intercreditor Agreement;
or
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(f) Any representation or warranty made by Lessee in any Lessee
Agreement is untrue or incorrect in any material respect as of the date of
making thereof and such untruth or incorrectness shall continue to be material
and unremedied for a period of 30 days after receipt by Lessee of written notice
thereof from Lessor, the Owner Participant or the Indenture Trustee; provided
that, if such untruth or incorrectness is capable of being remedied, no such
untruth or incorrectness shall constitute a Lease Event of Default hereunder for
a period of 60 days after receipt of such notice so long as Lessee is diligently
proceeding to remedy such untruth or incorrectness and shall in fact remedy such
untruth or incorrectness within such period; provided that such untrue or
incorrect representation or warranty shall be deemed to be remedied only after
all adverse consequences thereof, if any, have been remedied; or
(g) Lessee shall (i) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or (ii) consent to any such relief or to the appointment of or taking
possession by any such official in any voluntary case or other proceeding
commenced against it, or (iii) admit in writing its inability to pay its debts
generally as they come due, or (iv) make a general assignment for the benefit of
creditors, or (v) take any corporate action to authorize any of the foregoing;
or
(h) An involuntary case or other proceeding shall be commenced
against Lessee seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or
(i) Lessee shall fail to observe or perform any other of the
covenants or agreements to be observed or performed by Lessee under any Lessee
Agreement or any certificate and such failure shall continue unremedied for 30
days after notice from Lessor, the Owner Participant or the Indenture Trustee to
Lessee, specifying the failure and demanding the same to be remedied; provided
that, if such failure is capable of being remedied, and the remedy requires an
action other than, or in addition to, the payment of money, no such failure
(other than one relating to the payment of such money) shall constitute a Lease
Event of Default hereunder for a period of 90 days after receipt of such notice
so long as Lessee is diligently proceeding to remedy such failure and shall in
fact remedy such failure within such period; or
(j) The Manager shall have defaulted in the performance of any of its
obligations under the Management Agreement, and Lessee shall have failed to
exercise its rights under the Management Agreement in respect of such default
for a period of 30 days after receipt
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by Lessee of written notice from Lessor, the Owner Participant or the Indenture
Trustee demanding that such action be taken.
Notwithstanding anything to the contrary contained in this Lease, any failure of
Lessee to perform or observe any covenant or agreement herein shall not
constitute a Lease Event of Default if such failure is caused solely by reason
of an event which constitutes an "Event of Loss" so long as Lessee is continuing
to comply with the applicable terms of Section 11.
SECTION 15. Remedies.
--------
Section 15.1. Remedies. Upon the occurrence of any Lease Event of Default
--------
and at any time thereafter so long as the same shall be continuing, Lessor may,
at its option, declare this Lease to be in default by a written notice to Lessee
(except that this Lease shall, without any action on the part of Lessor, be
automatically deemed to have been declared in default upon the occurrence of a
Lease Event of Default described in Section 14(g) or (h)); and at any time
thereafter, unless Lessee shall have remedied all outstanding Lease Events of
Default prior to the commencement of the exercise by Lessor of any of its
remedies hereunder, Lessor may do one or more of the following as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect:
(a) proceed by appropriate court action or actions, either at law or
in equity, to enforce performance by Lessee of the applicable covenants of this
Lease or to recover damages for the breach thereof;
(b) by notice in writing to Lessee, Lessor may demand that Lessee,
and Lessee shall, upon written demand of Lessor and at Lessee's expense,
forthwith return all or any part of the Equipment so demanded to Lessor or its
order in the manner and condition required by, and otherwise in accordance with
all of the provisions of, Section 15.6; or Lessor with or without notice or
judicial process may by its agents enter upon the premises of Lessee or other
premises where any of the Equipment may be located and take possession of and
remove all or any of the Units, and Lessor may use and employ in connection with
such removal any services, aids, equipment, trackage and other facilities of
Lessee as is reasonably required to remove such Units and thenceforth hold,
possess and enjoy the same free from any right of Lessee, or its successor or
assigns, to use such Units for any purpose whatever;
(c) sell any Unit at public or private sale in such manner as Lessor
may determine, free and clear of any rights of Lessee and, if any sublease of
such Unit is terminated (which Lessor shall have a right to do), any sublease
thereof and without any duty to account to Lessee or any sublessee with respect
to such sale or for the proceeds thereof (except to the extent required by
paragraph (f) below if Lessor elects to exercise its rights under said
paragraph), in which event Lessee's obligation to pay Basic Rent with respect to
such Unit hereunder due for any periods subsequent to the date of such sale
shall terminate (except to the extent that Basic
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Rent is to be included in computations under paragraph (e) or (f) below if
Lessor elects to exercise its rights under either of said paragraphs);
(d) hold, keep idle or lease to others any Unit as Lessor in its sole
discretion may determine, free and clear of any rights of Lessee and, if any
sublease of such Unit is terminated (which Lessor shall have a right to do), any
sublease thereof and without any duty to account to Lessee or any sublessee with
respect to such action or inaction or for any proceeds with respect thereto,
except that Lessee's obligation to pay Basic Rent with respect to such Unit due
for any periods subsequent to the date upon which Lessee shall have been
deprived of possession and use of such Unit pursuant to this Section 15 shall be
reduced by the net proceeds, if any, received by Lessor from leasing such Unit
to any Person other than Lessee;
(e) whether or not Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under paragraph (a), (b), (c) or (d)
above with respect to any Unit, Lessor, by written notice to Lessee specifying a
payment date (which date shall be a Determination Date for the purposes of
computing Stipulated Loss Value) which shall be not less than 10 days after the
date of such notice, may demand that Lessee pay to Lessor, and Lessee shall pay
to Lessor, on the payment date specified in such notice, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Basic Rent for such
Unit due after the payment date specified in such notice), all Rent due and
payable, or accrued, in respect of such Unit as of the payment date specified in
such notice (exclusive of any in advance Basic Rent due on such date) plus
whichever of the following amounts Lessor, in its sole discretion, shall specify
in such notice: (i) an amount with respect to each such Unit which represents
the excess of the present value, as of such payment date, of all rentals for
such Unit which would otherwise have accrued hereunder from such payment date
for the remainder of the Basic Term or any Renewal Term then in effect over the
then present value of the then fair market rental value of such Unit (taking
into account its actual condition) for such period computed by discounting from
the end of such Term to such payment date rentals which Lessor reasonably
estimates to be obtainable for the use of such Unit during such period, such
present value to be computed in each case using a per annum discount rate equal
to the Debt Rate, compounded monthly from the respective dates upon which
rentals would have been payable hereunder had this Lease not been terminated; or
(ii) an amount equal to the excess, if any, of the Stipulated Loss Value for
such Unit computed as of the payment date specified in such notice over the fair
market sales value of such Unit reasonably estimated by Lessor (taking into
account its actual condition) as of the payment date specified in such notice;
or (iii) if Lessor shall not have sold such Unit pursuant to the exercise of its
rights under paragraph (c) above with respect to such Unit, an amount equal to
the higher of Stipulated Loss Value for such Unit computed as of the payment
date specified in such notice or the Fair Market Sales Value of such Unit
(assuming it is in the condition required by this Lease) as of the payment date
specified in such notice; and upon payment by Lessee pursuant to said clause
(iii) of such Stipulated Loss Value or Fair Market Sales Value, as the case may
be, any Late Payment Premium and of all other amounts payable by Lessee under
this Lease and under the other Operative Agreements in respect of such Unit,
Lessor shall transfer "as is" and
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"where is" and without recourse or warranty all right, title and interest of
Lessor in and to such Unit to Lessee or as it may direct, and Lessor shall
execute and deliver such documents evidencing such transfer as Lessee shall
reasonably request;
(f) if Lessor shall have sold any Unit pursuant to paragraph (c)
above, Lessor, in lieu of exercising its rights under paragraph (e) above with
respect to such Unit may, if it shall so elect, demand that Lessee pay to
Lessor, and Lessee shall pay to Lessor, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Rent for such Unit due
subsequent to the Rent Payment Date next preceding such sale), any accrued and
unpaid Rent for such Unit as of the date of such sale (Basic Rent for this
purpose accruing at a per diem rate equal to the monthly amount due on the next
following Rent Payment Date divided by 30) and, if that date is a Rent Payment
Date, the Basic Rent due on that date (exclusive of any in advance Basic Rent
due on such date), plus the amount, if any, by which the Stipulated Loss Value
of such Unit computed as of the Rent Payment Date next preceding the date of
such sale or, if such sale occurs on a Rent Payment Date, then computed as of
such Rent Payment Date, plus the amount of any Late Payment Premium, exceeds the
net proceeds of such sale (taking into account for this purpose all costs and
expenses, including legal fees and expenses, incurred by Lessor in connection
with such sale or otherwise exercising remedies hereunder) plus interest on such
excess from the date of such sale to the date of payment at the Late Rate; and
(g) Lessor may terminate the leasing of any or all Units under this
Lease and/or any sublease or may exercise any other right or remedy that may be
available to it under applicable law.
In addition, Lessee shall be liable, except as otherwise provided above,
for any and all unpaid Rent due hereunder before or during the exercise of any
of the foregoing remedies (including, without limitation, Late Payment Interest
with respect to the Equipment Notes and the Accumulated Equity Deficiency
Amount, but exclusive of any in advance Basic Rent due on such date), and for
legal fees and other costs and expenses incurred by reason of the occurrence of
any Lease Event of Default or the exercise of Lessor's remedies with respect
thereto, including without limitation the repayment in full of any costs and
expenses necessary to be expended in repairing any Unit in order to cause it to
be in compliance with all maintenance and regulatory standards imposed by this
Lease.
Section 15.2. Cumulative Remedies. The remedies in this Lease provided in
-------------------
favor of Lessor shall not be deemed exclusive, but shall be cumulative and shall
be in addition to all other remedies in its favor existing at law or in equity.
Lessee hereby waives any mandatory requirements of law, now or hereafter in
effect, which might limit or modify any of the remedies herein provided, to the
extent that such waiver is permitted by law. Lessee hereby waives any and all
existing or future claims of any right to assert any offset or counterclaim
against the Rent payments due hereunder, and agrees to make the rent payments
regardless of any offset or counterclaim or claim which may be asserted by
Lessee on its behalf in connection with the lease
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of the Equipment. Lessee further agrees that Lessee's obligations to pay all
Rent (including, without limitation, all Basic Rent and Supplemental Rent) and
its obligations to maintain the Equipment pursuant to Section 8 hereof and to
maintain the insurance pursuant to Section 12 hereof shall constitute monetary
obligations of the Lessee for all purposes of Section 365 of the Bankruptcy
Code. To the extent permitted by applicable law, Lessee hereby waives any rights
now or hereafter conferred by statute or otherwise that may require Lessor to
sell, lease or otherwise use the Equipment in mitigation of Lessor's damages as
set forth in Section 15.1 or that may otherwise limit or modify any of Lessor's
rights and remedies provided in this Section 15.
Section 15.3. No Waiver. No delay or omission to exercise any right,
---------
power or remedy accruing to Lessor upon any breach or default by Lessee under
this Lease shall impair any such right, power or remedy of Lessor, nor shall any
such delay or omission be construed as a waiver of any breach or default, or of
any similar breach or default hereafter occurring; nor shall any waiver of a
single breach or default be deemed a waiver of any subsequent breach or default.
Section 15.4. Notice of Lease Default. Lessee agrees to furnish to
-----------------------
Lessor, Owner Participant and the Indenture Trustee, promptly upon any officer
acquiring actual knowledge of any condition which constituted or constitutes a
Lease Default under this Lease, written notice specifying such condition and the
nature and status thereof.
Section 15.5. Lessee's Duty to Return Equipment Upon Default. If Lessor
----------------------------------------------
or any assignee of Lessor shall terminate this Lease pursuant to this Section 15
and shall have provided to Lessee the written demand specified in Section
15.1(b), Lessee shall forthwith deliver possession of the Equipment to Lessor
(except where Lessor has received all amounts payable by Lessee pursuant to any
notice provided by Lessor under Section 15.1(e)(iii)). For the purpose of
delivering possession of any Unit to Lessor as above required, Lessee shall at
its own cost, expense and risk (except as hereinafter stated):
(a) Forthwith place such Equipment upon such storage tracks of Lessee
or any of its Affiliates or, at the expense of Lessee, on any other storage
tracks, as Lessor may designate or, in the absence of such designation, as
Lessee may select;
(b) Permit Lessor to store such Equipment on such tracks without
charge for insurance, rent or storage until such Equipment has been sold, leased
or otherwise disposed of by Lessor and during such period of storage Lessee
shall continue to maintain all insurance required by Section 12.1 hereof; and
(c) Transport the Equipment to any place on any lines of railroad or
to any connection carrier for shipment, all as Lessor may direct in writing.
All Equipment returned shall be in the condition required by Section 6.2 hereof.
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All amounts earned in respect of the Equipment after the date of
termination of this Lease pursuant to this Section 15, but not exceeding amounts
actually received therefor, shall be paid to Lessor or, so long as the Indenture
shall not have been discharged pursuant to its terms, the Indenture Trustee,
and, if received by Lessee, shall be promptly turned over to Lessor or the
Indenture Trustee as aforesaid. In the event any Unit is not assembled,
delivered and stored as hereinabove provided within 15 days after the
termination of the leasing of such Unit pursuant to Section 15, Lessee shall, in
addition, pay to Lessor or the Indenture Trustee as aforesaid as liquidated
damages and not as a penalty, for each day thereafter an amount equal to the
amount, if any, by which the higher of (i) an amount equal to [110]% of the
daily equivalent of the Basic Rent in effect immediately prior to the expiration
of the Lease for such Unit and (ii) [125]% of the Fair Market Rental Value for
such Unit for each such day exceeds the amount, if any, received by Lessor or
the Indenture Trustee as aforesaid (either directly or from Lessee) for such day
for such Unit pursuant to the preceding sentence.
Section 15.6. Specific Performance; Lessor Appointed Lessee's Agent. The
-----------------------------------------------------
assembling, delivery, storage and transporting of the Equipment as provided in
Section 15.5 are of the essence of this Lease, and upon application to any court
of equity having jurisdiction in the premises, Lessor shall be entitled to a
decree against Lessee requiring specific performance of the covenants of Lessee
so to assemble, deliver, store and transport the Equipment. Without in any way
limiting the obligation of Lessee under the provisions of Section 15.5, Lessee
hereby irrevocably appoints Lessor as the agent and attorney of Lessee, with
full power and authority, at any time while Lessee is obligated to deliver
possession of any Units to Lessor pursuant to this Section 15, to demand and
take possession of such Unit in the name and on behalf of Lessee from whosoever
shall be at the time in possession of such Unit.
SECTION 16. Filings; Further Assurances.
---------------------------
Section 16.1. Filings. This Lease or a counterpart or copy hereof or
-------
evidence hereof may be filed or recorded in any public office as may be
necessary or appropriate to protect the interest of Lessor, Owner Participant or
the Indenture Trustee herein or in the Units. On or prior to the Closing Date
Lessee will cause this Lease, the Lease Supplements dated the Closing Date, the
Indenture and the Indenture Supplements dated the Closing Date (i) to be duly
filed and recorded with the STB in accordance with 49 U.S.C. (S) 11301, (ii) to
be deposited with the Registrar General of Canada pursuant to Section 105 of the
Canada Transportation Act (and all necessary actions shall have been taken for
publication of such deposit in The Canada Gazette in accordance with said
------------------
Section 105) and (iii) will furnish Lessor, the Indenture Trustee and Owner
Participant proof thereof.
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Section 16.2. Further Assurances. Lessee will duly execute and deliver to
------------------
Lessor such further documents and assurances and take such further action as
Lessor may from time to time reasonably request or as may be required by
applicable law or regulation in order to effectively carry out the intent and
purpose of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor, the Participants and the
Indenture Trustee hereunder, including, without limitation, the execution and
delivery of supplements or amendments hereto, in recordable form, subjecting to
this Lease any Replacement Unit and the recording or filing of counterparts
hereof or thereof or Uniform Commercial Code financing statements in accordance
with the laws of such jurisdiction as Lessor may from time to time deem
advisable.
Section 16.3. Other Filings. If, at any time during the Lease Term,
-------------
Mexico, or one or more states in Mexico, or any of the Canadian provinces
establishes a state or provincial or other system for filing and perfecting the
ownership and/or security interests of entities such as Lessor and/or the
Indenture Trustee, at the time that Lessee or the Manager takes such action with
respect to other equipment similar to the Equipment (whether owned or leased by
Lessee) and also upon the request of Lessor, any Participant, or the Indenture
Trustee, Lessee shall cause any and all of the Operative Agreements to be
recorded with or under such system and shall cause all other filings and
recordings and all such other action required under such system to be effected
and taken, in order to perfect and protect the respective right, title and
interests of Lessor, Owner Participant, Loan Participant and the Indenture
Trustee.
Section 16.4. Expenses. Lessee will pay all costs, charges and expenses
--------
(including reasonable attorneys fees) incident to any such filing, refiling,
recording and rerecording or depositing and re-depositing of any such
instruments or incident to the taking of such action.
SECTION 17. Lessor's Right to Perform.
-------------------------
If Lessee fails to make any payment required to be made by it hereunder or
fails to perform or comply with any of its other agreements contained herein,
Lessor may itself make such payment or perform or comply with such agreement,
after giving not less than five Business Days' prior notice thereof to Lessee
(except in the event that an Indenture Default resulting from a Lease Default or
a Lease Event of Default shall have occurred and be continuing, in which event
Lessor may effect such payment, performance or compliance to the extent
necessary to cure such Indenture Default with notice given concurrently with
such payment, performance or compliance), but shall not be obligated hereunder
to do so, and the amount of such payment and of the reasonable expenses of
Lessor incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Late Rate from such date of payment, to the extent permitted by
applicable law, shall be deemed to be Supplemental Rent, payable by Lessee to
Lessor on demand.
34
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SECTION 18. Assignment.
----------
Section 18.1 Assignment by Lessor. Lessee and Lessor hereby confirm that
--------------------
concurrently with the execution and delivery of this Lease, Lessor has executed
and delivered to the Indenture Trustee the Indenture, which assigns as
collateral security and grants a security interest in favor of the Indenture
Trustee in, to and under this Lease and certain of the Rent payable hereunder
(excluding Excepted Property), all as more explicitly set forth in the
Indenture. Lessor agrees that, so long as no Lease Event of Default shall have
occurred and be continuing, it shall not otherwise assign or convey its right,
title and interest in and to this Lease, the Equipment or any Unit, except as
expressly permitted by and subject to the provisions of the Participation
Agreement, the Trust Agreement and the Indenture.
Section 18.2 Assignment by Lessee. Except in the case of any requisition
--------------------
for use by any governmental authority or any agency or instrumentality thereof
referred to in Section 11.1, Lessee will not, without the prior written consent
of Lessor and the Indenture Trustee, assign any of its rights hereunder.
Section 18.3 Sublessee's or Others Performance and Rights. Any
--------------------------------------------
obligation imposed on Lessee in this Lease shall require only that Lessee
perform or cause to be performed such obligation, even if stated herein as a
direct obligation, and the performance of any such obligation by the Manager
under the Management Agreement, the Insurance Manager under the Insurance
Agreement or any sublessee under a Permitted Sublease then in effect and
permitted by the terms of this Lease shall constitute performance by Lessee and
discharge such obligation by Lessee. Except as otherwise expressly provided
herein, any right granted to Lessee in this Lease shall grant Lessee the right
to (a) exercise such right or permit such right to be exercised by the Manager
or the Insurance Manager, or (b) in Lessee's capacity as sublessor pursuant to
any Permitted Sublease permit any sublessee to exercise substantially equivalent
rights under any such sublease as are granted to Lessee under this Lease;
provided, however, that Lessee's right to terminate this Lease pursuant to
Section 10 and Lessee's purchase and renewal options set forth in Section 22 may
be exercised only by Lessee; provided, further, that nothing in this Section
18.3 shall or shall be deemed to (i) create any privity of contract between any
such sublessee, on the one hand, and any of Lessor, any Owner Participant or any
subsequent transferee or Affiliate of any such Person, on the other hand, (ii)
create any duty or other liability of any nature whatsoever on the part of any
of Lessor, any Owner Participant or any subsequent transferee or Affiliate of
any such Person, to any such sublessee or any Affiliate thereof, or (iii) modify
or waive any term or provision of Section 8.3 hereof, which Section 8.3 shall
control if any conflict arises between any of the provisions thereof and this
Section 18.3. The inclusion of specific references to obligations or rights of
any such sublessee in certain provisions of this Lease shall not in any way
prevent or diminish the application of the provisions of the two sentences
immediately preceding with respect to obligations or rights in respect of which
specific reference to any such sublessee has not been made in this Lease.
35
<PAGE>
SECTION 19. Net Lease, etc.
---------------
This Lease is a net lease and Lessee's obligation to pay all Rent payable
hereunder shall be absolute, unconditional and irrevocable and shall not be
affected by any circumstance of any character including, without limitation, (i)
any set-off, abatement, counterclaim, suspension, recoupment, reduction,
rescission, defense or other right that Lessee may have against Lessor, Owner
Participant, the Indenture Trustee or any holder of an Equipment Note or Pass
Through Certificate, any vendor or manufacturer of any Unit, or any other Person
for any reason whatsoever, (ii) any defect in or failure of title,
merchantability, condition, design, compliance with specifications, operation or
fitness for use of all or any part of any Unit, (iii) any damage to, or removal,
abandonment, requisition, taking, condemnation, loss, theft or destruction of
all or any part of any Unit or any interference, interruption, restriction,
curtailment or cessation in the use or possession of any Unit by Lessee or any
other Person for any reason whatsoever or of whatever duration, (iv) any
insolvency, bankruptcy, reorganization or similar proceeding by or against
Lessee, Lessor, Owner Participant, the Indenture Trustee, Loan Participant, any
holder of an Equipment Note or Pass Through Certificate or any other Person, (v)
the invalidity, illegality or unenforceability of this Lease, any other
Operative Agreement, or any other instrument referred to herein or therein or
any other infirmity herein or therein or any lack of right, power or authority
of Lessee, Lessor, Owner Participant, the Indenture Trustee, any holder of an
Equipment Note or Pass Through Certificate or any other Person to enter into
this Lease or any other Operative Agreement or to perform the obligations
hereunder or thereunder or consummate the transactions contemplated hereby or
thereby or any doctrine of force majeure, impossibility, frustration or failure
of consideration, (vi) the breach or failure of any warranty or representation
made in this Lease or any other Operative Agreement by Lessee, Lessor, Owner
Participant, Loan Participant, the Indenture Trustee, any holder of an Equipment
Note or Pass Through Certificate or any other Person, (vii) the requisitioning,
seizure or other taking of title to or use of such Unit by any government or
governmental authority or otherwise, whether or not by reason of any act or
omission of Lessor, Lessee or the Indenture Trustee, or any other deprivation or
limitation of use of such Unit in any respect or for any length of time, whether
or not resulting from accident and whether or not without fault on the part of
Lessee, or (viii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing. To the extent permitted by applicable law,
Lessee hereby waives any and all rights which it may now have or which at any
time hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease with respect to any Unit, except in
accordance with the express terms hereof. If for any reason whatsoever this
Lease shall be terminated in whole or in part by operation of law or otherwise,
except as specifically provided herein, Lessee nonetheless agrees, to the
maximum extent permitted by law, to pay to Lessor or to the Indenture Trustee,
as the case may be, an amount equal to each installment of Basic Rent and all
Supplemental Rent due and owing, at the time such payment would have become due
and payable in accordance with the terms hereof had this Lease not been
terminated in whole or in part. Each payment of Rent made by Lessee hereunder
shall be final and Lessee shall not seek or have any right to recover all or any
part of such payment from Lessor or any Person for any
36
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reason whatsoever. Nothing contained herein shall be construed to waive any
claim which Lessee might have under any of the Operative Agreements or otherwise
or to limit the right of Lessee to make any claim it might have against Lessor
or any other Person or to pursue such claim in such manner as Lessee shall deem
appropriate.
SECTION 20. Notices.
-------
Unless otherwise expressly specified or permitted by the terms hereof, all
communications and notices provided for herein shall be in writing or by
facsimile capable of creating a written record, and any such notice shall become
effective (i) upon personal delivery thereof, including, without limitation, by
overnight mail or courier service, (ii) in the case of notice by United States
mail, certified or registered, postage prepaid, return receipt requested, upon
receipt thereof, or (iii) in the case of notice by such facsimile, upon
confirmation of receipt thereof, provided such transmission is promptly further
confirmed in writing by either of the methods set forth in clause (i) or (ii),
in each case addressed to the following Person at its respective address set
forth below or at such other address as such Person may from time to time
designate by written notice to the other Persons listed below:
If to Lessor: [Owner Trustee]
__________________
__________________
__________________
Attention: ________________
Fax No.: ________________
Confirmation No.: ________________
With copies to Owner Participant.
If to Owner Participant: [Owner Participant]
__________________
__________________
__________________
Attention: _______________
Fax No.: _______________
Confirmation No.: _______________
37
<PAGE>
If to the Indenture Trustee: The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services
Division
Fax No.: (312) 407-1708
Confirmation No.: (312) 407-1892
If to Lessee: General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
(1998-1)
Fax No.: (312) 621-6270
Confirmation No.: (312) 621-6451
SECTION 21. Concerning the Indenture Trustee.
--------------------------------
Section 21.1. Limitation of the Indenture Trustee's Liabilities.
-------------------------------------------------
Notwithstanding any provision to the contrary contained herein or in any of the
Operative Agreements, the Indenture Trustee's obligation to take or refrain from
taking any actions, or to use its discretion (including, but not limited to, the
giving or withholding of consent or approval and the exercise of any rights or
remedies under such Operative Agreements), and any liability therefor, shall, in
addition to any other limitations provided herein or in the other Operative
Agreements, be limited by the provisions of the Indenture, including, but not
limited to, Article VI thereof.
Section 21.2. Right, Title and Interest of the Indenture Trustee Under
--------------------------------------------------------
Lease. It is understood and agreed that the right, title and interest of the
- ------
Indenture Trustee in, to and under this Lease and the Rent due and to become due
hereunder shall by the express terms granting and conveying the same be subject
to the interest of Lessee in and to the Equipment.
SECTION 22. Purchase Options; Renewal Options; and Deemed Renewals.
-----------------------------------------------------
Section 22.1. Early Purchase Option. Provided that no Lease Event of
---------------------
Default shall have occurred and be continuing either at the time of the notice
described below or on the Early Purchase Date (unless (i) Lessor shall have
waived such Lease Event of Default solely for the purpose of this Section 22.1,
(ii) in the case of a Lease Event of Default under Section 14(c), 14(d), 14(e),
14(f) or 14(i), Lessee shall have properly made a Special Purchase Defeasance
and after giving effect to the purchase described below, no such Lease Event of
Default shall be continuing or (iii) in the case of a Lease Event of Default
under Section 14(g) or 14(h), Lessee shall have obtained a final, nonappealable
order of a United States court having appropriate bankruptcy jurisdiction over
Lessee which (x) authorizes such purchase and (y) is in form and
38
<PAGE>
substance satisfactory to Lessor and Indenture Trustee) and Lessee shall have
duly given the notice required by the next succeeding sentence, Lessee shall
have the right and, upon the giving of such notice, the obligation to purchase
all, or an Eligible Group, of the Units leased hereunder (as specified in such
notice) on the Early Purchase Date for such Units at a price equal to the Early
Purchase Price of such Units. Lessee shall give Lessor written notice not less
than 90 days prior to the Early Purchase Date of its election to exercise the
purchase option provided for in this Section 22.1, which notice shall be
irrevocable. Payment of the Early Purchase Price, together with all other
amounts due and owing by Lessee under the Operative Agreements, with respect to
such Units, including, without limitation, all unpaid Basic Rent therefor due
and payable, or accrued, on or prior to the Early Purchase Date (exclusive of
any in advance Basic Rent due on such date) and any Make-Whole Amount and Late
Payment Interest with respect to the Equipment Notes then being prepaid and any
Accumulated Equity Deficiency Amount with respect to such Units, shall be made
on the Early Purchase Date at the place of payment specified in Section 3.5
hereof in immediately available funds against delivery of a bill of sale
transferring and assigning to Lessee all right, title and interest of Lessor in
and to such Units on an "as-is" "where-is" basis and containing a warranty as to
the absence of Lessor's Liens. Lessor shall not be required to make any other
representation or warranty as to the condition of such Units or any other
matters, and may specifically disclaim any such representations or warranties.
The costs of preparing the bill of sale and all other documentation relating to
any purchase by the Lessee pursuant to this Section 22.1 and the costs of all
necessary filings relating to such purchase will be borne by the Lessee. In the
event of any such purchase and receipt by Lessor of all of the amounts provided
in this Section 22.1, the obligation of Lessee to pay Basic Rent hereunder shall
cease and the Lease Term shall end.
If Lessee elects to exercise the purchase option provided for in this
Section 22.1, Lessee shall, as the purchase price therefor, in the sole
discretion of Lessee, either (i) pay Early Purchase Price, as specified in the
paragraph above, together with all other amounts due and owing by Lessee under
the Operative Agreements, or (ii) pay the difference between the Early Purchase
Price and the outstanding principal amount of the Equipment Notes related to
such Units as of the Early Purchase Date and assume on a full recourse basis,
and indemnify the Lessor against, all of the Owner Trustee's obligations under
the Indenture in respect of the indebtedness evidenced by such Equipment Notes
related to such Units; provided, that, following such assumption, the purchased
Units shall remain subject to the Lien of a separate indenture similar to the
Indenture pursuant to Section 3.6 of the Indenture. Lessee will make the
payments required by foregoing clause (i) or assume the indebtedness evidenced
by the Equipment Notes as provided in foregoing clause (ii) on the Early
Purchase Date in immediately available funds against delivery of a bill of sale
transferring and assigning to Lessee all right, title and interest of the Lessor
in and to the Units on an "as-is" "where-is" basis and containing a warranty as
to the absence of Lessor's Liens; provided, however, that Lessee shall have the
option of specifying in such notice under this Section 22.1 its election to
defer payment of a portion of the Early Purchase Price for such Units in [four
(4)] equal installments in the amounts set forth on Schedule 6 to the
Participation Agreement so long as the portion of the Early Purchase Price
payable by Lessee on the Early Purchase Date in the
39
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event of any such election by Lessee, under any circumstances and in any event,
together with other amounts of Supplemental Rent payable by Lessee on such date,
will be at least sufficient to pay in full, as of the date of payment thereof,
the aggregate unpaid principal and accrued interest of the Equipment Notes
together with any Make Whole Amount, Late Payment Interest and all other amounts
owed to the holders of the Equipment Notes under the Operative Agreements; and
provided further, that such deferred portion (i) may be prepaid by Lessee at any
time in whole and (ii) will be secured in favor of Lessor by a letter of credit
by a bank or financial institution acceptable to the Owner Participant in its
sole discretion or guaranty of GATC in form and substance reasonably
satisfactory to Lessor. If Lessee shall fail to fulfill its obligations under
this second paragraph of Section 22.1, all of Lessee's obligations under this
Lease and the Operative Agreements, including, without limitation, the Lessee's
obligation to pay installments of Rent, shall continue and Lessee shall be
obligated to pay all costs and expenses, including legal fees and expenses,
incurred by Lessor, the Owner Participant and Indenture Trustee as a result of
the notice given by Lessee pursuant to this Section.
Section 22.2. Election to Retain or Return Equipment at End of Basic or
---------------------------------------------------------
Renewal Term. Not less than 180 days prior to the end of the Basic Term
- ------------
or any Renewal Term, Lessee shall give Lessor a preliminary notice of its
decision to return or retain all or a portion of the Units at the end of the
Basic Term or such Renewal Term and not less than 120 days prior to the end of
the Basic Term or the end of any Renewal Term, Lessee shall give Lessor
irrevocable written notice of its decision to return or retain all or a portion
of the Units at the end of the Basic Term or such Renewal Term. If Lessee elects
to retain Units, Lessee shall comply with Section 22.3 and/or 22.4 hereof, as it
may elect in accordance with the provisions thereof including the notice
requirements stated therein. If Lessee fails to give the 120 days' notice
required by this Section 22.2, Lessee shall be deemed to have irrevocably
elected to return all of the Units at the end of the Basic Term or the
applicable Renewal Term, as the case may be, in accordance with Section 6;
provided, however, that if there are any Units under a sublease which, in
accordance with clause (i) of the penultimate sentence of Section 8.3, expires
after the end of the Basic Term and Lessee does not elect to retain these Units
under Section 22.3 or Section 22.4 hereof, then such Units shall, in any event,
be subject to the deemed renewal provisions of Section 22.7.
Section 22.3. Purchase Option. Provided that no Lease Event of Default
---------------
shall have occurred and be continuing either at the time of notice or the
expiration of the Lease Term or any Renewal Term (unless (i) Lessor shall have
waived such Lease Event of Default solely for the purpose of this Section 22.3,
(ii) in the case of a Lease Event of Default under Section 14(c), 14(d), 14(e),
14(f) or 14(i), Lessee shall have properly made a Special Purchase Defeasance
and after giving effect to the purchase described below, no such Lease Event of
Default shall be continuing or (iii) in the case of a Lease Event of Default
under Section 14(g) or 14(h), Lessee shall have obtained a final, nonappealable
order of a United States court having appropriate bankruptcy jurisdiction over
Lessee which (x) authorizes such purchase and (y) is in form and substance
satisfactory to Lessor and Indenture Trustee) and Lessee shall have duly given
the notice required by Section 22.2 and by the next succeeding sentence of this
Section 22.3, Lessee
40
<PAGE>
shall have the right and, upon the giving of such notice under this Section
22.3, the obligation to purchase, at a price equal to at Lessee's option: (i)
the Fair Market Sales Value of such Units, at the expiration of the Basic Term,
or at the end of any Renewal Term (other than a Renewal Term pursuant to Section
22.7), or (ii) the Basic Term Purchase Price with respect to the option at the
end of the Basic Term, any or all of the Units as specified in such notice;
provided that if Lessee elects to retain less than all of the Units in a
Functional Group in connection with a purchase at the end of the Basic Term or
any Renewal Term, Lessee must return at least 25 Units from such Functional
Group to Lessor and the determination as to which Units are to be retained shall
be made on a random or other basis (in each case reasonably acceptable to
Lessor) without discrimination based on maintenance status, operating condition
of the Units in question or otherwise, and Lessee shall describe in such notice
such manner in which it proposes to determine the Units in such Functional Group
which will be retained. Lessee shall give Lessor written notice not less than 90
days prior to the end of the Basic Term or any Renewal Term, as the case may be,
of its election to exercise the purchase option provided for in this Section
22.3, which notice shall be irrevocable; provided, however, that with respect to
any Extended Units, Lessee may elect for convenience to give such a notice as of
[_________] and [______________] in each year as to those Extended Units whose
Renewal Terms expire in the following 6-month period. Payment of the purchase
price, together with all other amounts due and owing by Lessee under the
Operative Agreements, including, without limitation, Late Payment Interest and
any unpaid Rent, shall be made at the place of payment specified in Section 3.5
hereof in immediately available funds against delivery of a bill of sale
transferring and assigning to Lessee all right, title and interest of Lessor in
and to such Units on an "as-is" "where-is" basis and containing a warranty as to
the absence of Lessor's Liens. Lessor shall not be required to make any other
representation or warranty as to the condition of such Units or any other
matters, and may specifically disclaim any such representations or warranties.
Section 22.4. Renewal Option. Provided that no Lease Event of Default
--------------
shall have occurred and be continuing either at the time of notice or the
expiration of the Lease Term (unless Lessor shall have waived such Lease Event
of Default or Lease Default solely for the purpose of this Section 22.4) and
Lessee shall have duly given the notice required by Section 22.2, Lessee shall
have the right and, upon the giving of a notice under this Section 22.4 as below
provided, the obligation to lease pursuant to this Lease any or all, of the
Units (including, without limitation, all Extended Units) specified in such
notice at the expiration of the Basic Term or any applicable Renewal Term which
Lessee has not elected to purchase at the expiration of the Basic Term or a
Renewal Term pursuant to Section 22.3 provided that if Lessee elects to lease
less than all of the Units in a Functional Group in connection with a renewal
lease at the end of the Basic Term or any Renewal Term, Lessee must return at
least 25 Units from such Functional Group to Lessor and the determination as to
which Units are to be retained shall be made on a random or other basis (in each
case reasonably acceptable to Lessor) without discrimination based on
maintenance status, operating condition of the Units in question or otherwise,
and Lessee shall describe in such notice such manner in which it proposes to
determine the Units in such Functional Group which will be retained. Lessee may
exercise this renewal option by
41
<PAGE>
giving Lessor written notice not less than 90 days prior to the end of the Basic
Term (or, in the circumstances described below the then Renewal Term) that
Lessee elects to renew this Lease with respect to all, but not less than all, of
the Units then leased hereunder, for a term of one or more years (or, in
connection with any Renewal Term following the initial Renewal Term, a term of
one year or more expiring not later than the Outside Renewal Date) as Lessee
shall specify in such notice, but in no event shall any such term extend beyond
the Outside Renewal Date (each such term, a "Renewal Term"), which notice shall
be irrevocable. The Basic Rent for each Unit during any Renewal Term (the
"Renewal Rent") shall be 50% of the average of the monthly Basic Rent
installments payable hereunder for such Unit during the Basic Term, payable
monthly in arrears. Each Renewal Term shall commence immediately upon the
expiration of the Basic Term or the preceding Renewal Term, as the case may be.
Section 22.5. Appraisal; Outside Renewal Date. Promptly following
-------------------------------
Lessee's written notice pursuant to Section 22.2 of its election to retain any
Units at the end of the Basic Term (and, in any event, if there are any Extended
Units), Lessor and Lessee shall determine (a) the remaining useful life (based
on the actual condition of a reasonable sampling of such Units and determined
pursuant to the appraisal procedure set forth in the definition of Fair Market
Sales Value), (b) the Fair Market Sales Value of the Units to be retained as of
various dates for the purposes of this Section 22, in each case assuming the
Units are in the condition required by this Lease, and (c) the date such that
(1) the period from the Closing Date to such date would not exceed 80% of the
useful life of the Units from and after the Closing Date, and (2) the Fair
Market Sales Value (determined without regard to inflation or deflation) on such
date would not be less than 20% of the Equipment Cost of the Units. Such date
determined under clause (c) shall thereafter be the latest date to which this
Lease may be renewed pursuant to Section 22.4 (the "Outside Renewal Date").
--------------------
Section 22.6. Stipulated Loss Value and Termination Value During Renewal
----------------------------------------------------------
Term. All of the provisions of this Lease, other than Section 10, shall be
- ----
applicable during any Renewal Term for such Units, except as specified in the
next sentence. During any Renewal Term, the Stipulated Loss Value and
Termination Value of any Unit shall be determined on the basis of the Fair
Market Sales Value of such Unit as of the first day of such Renewal Term,
reduced in equal monthly increments to the Fair Market Sales Value of such Unit
as of the last day of such Renewal Term; provided that in no event during any
--------
Renewal Term shall the Stipulated Loss Value and Termination Value of any Unit
be less than 20% of the Equipment Cost of such Unit.
Section 22.7. Deemed Renewals. If Lessee does not exercise its renewal
---------------
option under Section 22.4 at the end of the Basic Term, then any Unit subject to
a sublease at the end of the Basic Term which is not purchased by Lessee under
Section 22.3 shall be deemed automatically renewed for a Renewal Term expiring
at the expiration of such sublease's term (such Unit, an "Extended Unit"). The
terms and conditions of any such deemed renewal of a Unit under this Section
22.7 shall otherwise be those generally provided in Section 22.4 for the period
thereof (which shall be considered a Renewal Term).
42
<PAGE>
SECTION 23. Limitation of Lessor's Liability.
--------------------------------
It is expressly agreed and understood that all representations, warranties
and undertakings of Lessor hereunder (except as expressly provided herein) shall
be binding upon Lessor only in its capacity as Owner Trustee under the Trust
Agreement and in no case shall [Owner Trustee] be personally liable for or on
account of any statements, representations, warranties, covenants or obligations
stated to be those of Lessor hereunder, except that Lessor (or any successor
Owner Trustee) shall be personally liable for its gross negligence or wilful
misconduct and for its breach of its covenants, representations and warranties
contained herein to the extent covenanted or made in its individual capacity.
SECTION 24. Investment of Security Funds.
----------------------------
Any moneys received by Lessor or the Indenture Trustee pursuant to Section
12.2 which are required to be paid to Lessee after completion of repairs to be
made pursuant to Section 12.2 or pursuant to Section 11.4(a) or 11.5, as the
case may be, shall be paid directly to the appropriate Non-Shared Payments
Account established under the Intercreditor Agreement.
SECTION 25. Miscellaneous.
-------------
Section 25.1. Governing Law; Severability. This Lease, and any
---------------------------
extensions, amendments, modifications, renewals or supplements hereto, shall be
governed by and construed in accordance with the laws of the State of New York,
including all matters of construction, validity and performance, without regard
to principles of conflicts of laws. Whenever possible, each provision of this
Lease shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Lease shall be prohibited by or
invalid under the laws of any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Lease in any other jurisdiction.
Section 25.2. Execution in Counterparts. This Lease may be executed in
-------------------------
any number of counterparts, each executed counterpart constituting an original
and in each case such counterparts shall constitute but one and the same
instrument; provided, however, that to the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code) no
security interest in this Lease may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page hereof,
which counterpart shall constitute the only "original" hereof for purposes of
the Uniform Commercial Code.
43
<PAGE>
Section 25.3. Headings and Table of Contents; Section References. The
--------------------------------------------------
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof. All references herein
to numbered sections, unless otherwise indicated, are to sections of this Lease.
Section 25.4. Successors and Assigns. This Lease shall be binding upon
----------------------
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective permitted successors and permitted assigns.
Section 25.5. True Lease. It is the intent of the parties to this Lease
----------
that it will be a true lease and not a "conditional sale", that Lessor shall at
all times be considered to be the owner of each Unit which is the subject of
this Lease for the purposes of all federal, state, city and local income taxes
or for franchise taxes measured by income, that this Lease conveys to Lessee no
right, title or interest in any Unit except as lessee and that the Lease will be
a finance lease under the provisions of Article 2A of the New York Uniform
Commercial Code. Nothing contained in this Section 25.5 shall be construed to
limit Lessee's use or operation of any Unit or constitute a representation,
warranty or covenant by Lessee as to tax consequences.
Section 25.6. Amendments and Waivers. No term, covenant, agreement or
----------------------
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and except as may be permitted by the terms of the Indenture.
Section 25.7. Survival. All warranties, representations, indemnities and
--------
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by such party or on the behalf of any such party under this
Lease, shall be considered to have been relied upon by the other party hereto
and shall survive the consummation of the transactions contemplated hereby on
the Closing Date regardless of any investigation made by either such party or on
behalf of either such party, and to the extent having accrued and not been paid
or relating to or otherwise arising in connection with the transactions
contemplated by the Operative Agreements during the Lease Term, shall survive
the expiration or other termination of this Lease or any other Operative
Agreement.
Section 25.8. Business Days. If any payment is to be made hereunder or
-------------
any action is to be taken hereunder on any date that is not a Business Day, such
payment or action otherwise required to be made or taken on such date shall be
made or taken on the immediately succeeding Business Day with the same force and
effect as if made or taken on such scheduled date and as to any payment
(provided any such payment is made on such succeeding Business Day) no interest
shall accrue on the amount of such payment from and after such scheduled date to
the time of such payment on such next succeeding Business Day.
44
<PAGE>
Section 25.9. Directly or Indirectly; Performance by Managers. Where any
-----------------------------------------------
provision in this Lease refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person. In this
regard, it is understood and agreed that Lessee has entered into the Management
Agreement with the Manager and the Insurance Agreement with the Insurance
Manager, under which Agreements certain rights and obligations of Lessee
hereunder will be exercised and performed by such Persons on behalf of Lessee on
the terms and conditions set forth therein.
Section 25.10. Incorporation by Reference. The payment obligations set
--------------------------
forth in Sections 7.1 and 7.2 of the Participation Agreement are hereby
incorporated by reference.
* * *
45
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly
executed and delivered on the day and year first above written.
Lessor:
[OWNER TRUSTEE], not in its individual
capacity except as otherwise expressly
provided but solely as Owner Trustee
By:___________________________________
Name:_________________________________
Title:________________________________
Lessee:
GENERAL AMERICAN RAILCAR
CORPORATION II
By:___________________________________
Name:_________________________________
Title:________________________________
46
<PAGE>
State of )
) SS
County of )
On this ____ day of _____________, 1998, before me personally appeared
_______________, to me personally known, who being by me duly sworn, say that he
is __________________ of [Owner Trustee], that said instrument was signed on
such date on behalf of said corporation by authority of its Board of Directors,
and he acknowledged that the execution of the foregoing instrument was the free
act and deed of said corporation.
__________________________________
Notary Public
[Notarial Seal]
My commission expires: _________________
47
<PAGE>
State of )
) SS
County of )
On this ___ day of ___________, 1998, before me personally appeared
_______________, to me personally known, who being by me duly sworn, say that he
is the _______________ of General American Railcar Corporation II, that said
instrument was signed on such date on behalf of said corporation by authority of
its Board of Directors, and he acknowledged that the execution of the foregoing
instrument was the free act and deed of said corporation.
__________________________________
Notary Public
[Notarial Seal]
My commission expires: _______________
48
<PAGE>
EXHIBIT A
LEASE SUPPLEMENT NO. _______
(1998-1)
This Lease Supplement No. ___, dated as of _________, between [Owner
Trustee], not in its individual capacity but solely as Owner Trustee under the
Trust Agreement ("Lessor"), and General American Railcar Corporation II, a
Delaware corporation ("Lessee");
Witnesseth:
Lessor and Lessee have heretofore entered into that certain Equipment Lease
Agreement (1998-1) dated as of August 1, 1998 (the "Lease"). The terms used
herein are used with the meanings assigned to such terms in the Lease.
The Lease provides for the execution and delivery of one or more Lease
Supplements substantially in the form hereof for, among other things, the
purpose of particularly describing all or a portion of the Units of Equipment to
be leased to Lessee under the Lease.
Now, Therefore, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, Lessor and
Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby accepts
and leases from Lessor, under the Lease as herein supplemented, the Units
described in Schedule 1 hereto.
2. All of the terms and provisions of the Lease are hereby incorporated
by reference in this Lease Supplement to the same extent as if fully set forth
herein.
3. To the extent that this Lease Supplement constitutes chattel paper (as
such term is defined in the Uniform Commercial Code) no security interest in
this Lease Supplement may be created through the transfer or possession of any
counterpart hereof other than the counterpart bearing the receipt therefor
executed by the Indenture Trustee on the signature page hereof, which
counterpart shall constitute the only "original" hereof for purposes of the
Uniform Commercial Code.
4. This Lease Supplement shall be governed by and construed in accordance
with the laws of the State of New York, including all matters of construction,
validity and performance, without regard to principles of conflicts of laws.
<PAGE>
5. This Lease Supplement may be executed in any number of counterparts,
each executed counterpart constituting an original but all together constituting
one and the same instrument.
* * *
A-2
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed as of the day and year first above written and to be delivered
as of the date first above written.
Lessor:
[OWNER TRUSTEE] not in its individual
capacity but solely as Owner Trustee
By:__________________________________
Name:________________________________
Title:_______________________________
Lessee:
GENERAL AMERICAN RAILCAR
CORPORATION II
By:__________________________________
Name:________________________________
Title:_______________________________
A-3
<PAGE>
State of )
) SS
County of )
On this ____ day of _________, 19__, before me personally appeared
______________, to me personally known, who being by me duly sworn, say that he
is ____________________ of [Owner Trustee], that said instrument was signed on
such date on behalf of said corporation by authority of its Board of Directors,
and he acknowledged that the execution of the foregoing instrument was the free
act and deed of said corporation.
__________________________________
Notary Public
[Notarial Seal]
My commission expires: ______________
A-4
<PAGE>
State of )
) SS
County of )
On this ____ day of _________, 19__, before me personally appeared
_____________ _____________, to me personally known, who being by me duly sworn,
say that he is _____________ of General American Railcar Corporation II, that
said instrument was signed on such date on behalf of said corporation by
authority of its Board of Directors, and he acknowledged that the execution of
the foregoing instrument was the free act and deed of said corporation.
___________________________________
Notary Public
[Notarial Seal]
My commission expires: ______________
A-5
<PAGE>
FORM OF
Appendix A
to
Participation Agreement
Lease Agreement
Trust Indenture
Trust Agreement
(1998-1)
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all purposes of
the Operative Agreements referred to below, unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require, and such
meanings shall be equally applicable to both the singular and the plural forms
of the terms herein defined. In the case of any conflict between the provisions
of this Appendix A and the provisions of the main text of any Operative
Agreement, the provisions of the main text of such Operative Agreement shall
control the construction of such Operative Agreement.
Unless otherwise required by the context, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended,
supplemented and otherwise modified from time to time, and (ii) references to
parties to agreements shall be deemed to include the permitted successors and
assigns of such parties.
Defined Terms
"AAR" shall mean the Association of American Railroads or any successor
---
thereto.
"Accounts" shall mean the Collection Account, the Operating Account, the
--------
Liquidity Reserve Account, the Special Reserves Account, the Non-Shared Payments
Account, the Stipulated Loss Value Deficiency Account, the Cash Trapping Account
and the Excess Cash Account specified in Section 3.1 of the Intercreditor
Agreement.
"Accumulated Equity Deficiency Amount" shall mean, on any Payment Date, an
------------------------------------
amount equal to any aggregate outstanding and then unpaid Equity Portion of
Basic Rent.
"Adjusted Payment Amount" shall mean, for each Adjusted Principal Period,
-----------------------
the product of (i) the sum of all principal payments made during such Adjusted
Principal Period (excluding
<PAGE>
any Prepaid Amount), and (ii) the Adjustment Multiplier at the Payment Date
occurring for such Adjusted Principal Period.
"Adjusted Principal Period" shall mean, at any Payment Date (the "Relevant
-------------------------
Payment Date"), (i) in the event no Prepayment has been made, the period from
the Closing Date to, but not including, the Relevant Payment Date, or (ii) in
the event one or more Prepayments have been made on or prior to the Relevant
Payment Date, each of the following periods, without duplication: (a) the
period from the Closing Date to, but not including, the first Payment Date
thereafter on which a Prepayment has been made on the Relevant Payment Date, (b)
each period, if any, between two Payment Dates on which successive Prepayments
have been made, in each case including the Payment Date upon which such period
commences to, but not including, the Payment Date upon which such period ends,
and (c) the period from the Payment Date immediately preceding the Relevant
Payment Date on which a Prepayment was made to, but not including, the Relevant
Payment Date.
"Adjustment Multiplier" shall mean, for any Adjusted Principal Period at
---------------------
any Payment Date, a fraction, the numerator of which shall be the aggregate
Equipment Cost of all Units included in the Indenture Estate immediately after
such Payment Date (excluding the Equipment Cost of any Excluded Unit) and the
denominator of which shall be the aggregate Equipment Cost of all Units included
in the Indenture Estate at the commencement of such Adjusted Principal Period.
"Administrative Services Agreement" shall mean the Administrative Services
---------------------------------
Agreement (1998-1) dated as of August 1, 1998, between GATC and the Company.
"Affiliate" shall mean, with respect to any Person, any other Person which
---------
directly or indirectly controls, or is controlled by, or is under a common
control with, such Person. The term "control" means the possession, directly or
-------
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" shall have
----------- ----------
meanings correlative to the foregoing.
"After-Tax Basis" shall mean, with respect to any payment due to any
---------------
Person, that the amount of such payment is supplemented by a further payment or
payments so that the sum of all such payments, after reduction for all Taxes
payable by such Person by reason of the receipt or accrual of such payments,
shall be equal to the payment due to such Person.
"Alternative Minimum Tax" shall mean the alternative minimum tax imposed
------------------------
under Section 55 of the Code.
"Appraisal" shall have the meaning assigned thereto in Section 4.3(a) of
---------
the Participation Agreement.
2
<PAGE>
"Average Life Date" shall mean, with respect to an Equipment Note, the date
-----------------
which follows (i) in the case of an Equipment Note being prepaid, the prepayment
date or, (ii) in the case of an Equipment Note not being prepaid, the date of
such determination, by a period equal to the Remaining Weighted Average Life of
such Equipment Note.
"Bankruptcy Code" shall mean Chapter 11 of Title 11 of the United States
---------------
Code, 11 U.S.C. (S)101 et. seq.
--- ----
"Base Component" shall have the meaning assigned thereto in Section 5.2 of
--------------
the Management Agreement.
"Basic Rent" shall mean, with respect to any Unit, all rent payable by the
----------
Lessee to the Lessor pursuant to Section 3.2 of the Lease for the Basic Term for
such Unit, and all rent payable pursuant to Section 22.4 of the Lease for any
Renewal Term for such Unit.
"Basic Term" shall have the meaning assigned thereto in Section 3.1 of the
----------
Lease.
"Basic Term Commencement Date" shall mean the Closing Date.
----------------------------
"Basic Term Expiration Date" shall mean _____________, 20__.
--------------------------
"Basic Term Purchase Price" shall mean, with respect to any Unit, the
-------------------------
amount equal to the product of the percentage set forth in Section 6 of the
Participation Agreement and the Equipment Cost for such Unit.
"Beneficial Interest" shall mean the interest of the Owner Participant
-------------------
under the Trust Agreement.
"Bill of Sale" shall mean the full warranty bill of sale, dated the Closing
------------
Date or the date that any Replacement Unit is subjected to the Lease, from the
Lessee to the Owner Trustee covering the Units delivered on the Closing Date or
such Replacement Unit, as the case may be.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
------------
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, Chicago,
Illinois, the city and state in which the principal corporate trust office of
the Owner Trustee is located, or, until the Lien of the Indenture has been
discharged, the city and state in which the principal corporate trust office of
the Indenture Trustee is located.
"Car Service Contract" shall have the meaning assigned thereto in the first
--------------------
recital clause of the Management Agreement.
"Certificateholder" means the Person in whose name a Pass Through
-----------------
Certificate is registered in the register for Pass Through Certificates of a
particular series.
"Claims" shall mean any and all costs, expenses, liabilities, obligations,
------
losses, damages, penalties, actions or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability
or liability in tort), including, without limitation, all
3
<PAGE>
reasonable out-of-pocket costs, disbursements and expenses (including legal fees
and expenses) paid or incurred in connection therewith or related thereto.
"Closing" shall have the meaning assigned thereto in Section 2.3(b) of the
-------
Participation Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral Agent" shall have the meaning assigned thereto in the
----------------
Intercreditor Agreement.
"Collection Account" shall have the meaning assigned thereto in the
------------------
Intercreditor Agreement.
"Company" or "Lessee" shall mean General American Railcar Corporation II, a
------- ------
Delaware corporation.
"Company Documents" shall have the meaning assigned thereto in the
-----------------
Intercreditor Agreement.
"Company Fleet" shall mean, collectively, the Equipment [and the
-------------
"Equipment" under the Other Leases].
"Contiguous United States" shall mean the continental United States (except
------------------------
Alaska).
"Credit Bankrupt" shall mean a Person which is subject to any bankruptcy or
---------------
insolvency proceeding, for reasons other than the occurrence of an extraordinary
adverse event or circumstance which has led such Person to seek protection from
its creditors, or is not paying its debts as they become due.
"Customer" shall have the meaning assigned thereto in the first recital
--------
clause of the Management Agreement.
"Debt Rate" shall mean an interest rate equal to ____% per annum (computed
---------
on the basis of a 360-day year of twelve 30-day months).
"Default Interest" shall mean interest on any amount of the Rated
----------------
Amortization Amount of, or Regular Interest on, Equipment Notes that was not
paid when such amount became due and payable.
"Default Rate" shall mean the lesser of [1.5]% over the Debt Rate and the
------------
maximum interest rate from time to time permitted by law.
4
<PAGE>
"Determination Date" shall mean a Payment Date.
------------------
"Early Purchase Date" shall mean the early purchase date specified on
-------------------
Schedule 6 to the Participation Agreement.
"Early Purchase Price" shall mean, with respect to any Unit, the amount
--------------------
equal to the product of the percentage set forth in Schedule 6 to the
Participation Agreement and the Equipment Cost for such Unit. Notwithstanding
anything to the contrary contained in the Lease or in the Participation
Agreement, the Early Purchase Price for such Unit (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) will, under
any circumstances and in any event, be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with its
exercise of the option under Section 22.1 of the Lease, will be at least
sufficient to pay in full as of the Early Purchase Date the Accumulated Equity
Deficiency Amount, the aggregate unpaid principal of the Equipment Notes issued
in respect of such Unit, together with all unpaid interest, Late Payment Premium
and Make-Whole Amount, if any, thereon accrued to the date on which such amount
is paid in accordance with the terms hereof and all other amounts then due to
the holders of the Equipment Notes in respect of such Unit.
"Eligible Group" shall mean a number and type of Units which, after the
--------------
purchase by the Lessee of such Units, will (i) leave no fewer than 800 Equipment
Units (as defined in the Intercreditor Agreement) subject to this Lease or Other
Leases, and (ii) result in an allocation of Equipment Units (as defined in the
Intercreditor Agreement) substantially similar to the allocation of Equipment
Units (as defined in the Intercreditor Agreement) immediately prior to the
purchase of such Units by the Lessee.
"Equipment" shall mean, collectively, those items of railroad rolling stock
---------
described in the Lease Supplements and the Indenture Supplements, together with
any and all accessions, additions, improvements to and replacements from time to
time incorporated or installed in any item thereof which are the property of the
Owner Trustee pursuant to the terms of a Bill of Sale or the Lease.
"Equipment Cost" shall mean, for each Unit, the purchase price therefor
--------------
paid by the Owner Trustee to the Lessee pursuant to Section 2 of the
Participation Agreement and as set forth in Schedule 1 to the Participation
Agreement with respect to such Unit. Notwithstanding anything to the contrary
contained in the Operative Agreements, the Equipment Cost for any Replacement
Unit shall be deemed to be the Equipment Cost or deemed Equipment Cost of the
Unit replaced by such Replacement Unit.
5
<PAGE>
"Equipment Notes" shall mean the Equipment Notes, each substantially in the
---------------
form set forth in Section 2.1 of the Indenture, issued by the Owner Trustee
pursuant to Section 2.2 of the Indenture, and authenticated by the Indenture
Trustee, in principal amounts, maturities and bearing interest at the rates and
payable as provided in Section 2.2 of the Indenture and secured as provided in
the Granting Clause of the Indenture, and shall include any Equipment Note
issued in exchange therefor or replacement thereof pursuant to Section 2.7 or
2.8 of the Indenture.
"Equity Portion of Basic Rent" shall mean, at any Payment Date, the excess
----------------------------
of the amount of Basic Rent payable under the Lease on such Payment Date over
the Scheduled Amortization Amount payable under the Indenture on such Payment
Date.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor law.
"Event of Loss" shall have the meaning assigned thereto in Section 11.1 of
-------------
the Lease.
"Excepted Property" shall mean (i) all indemnity payments (including,
-----------------
without limitation, payments pursuant to Section 7 of the Participation
Agreement, payments under the Tax Indemnity Agreement and payments pursuant to
Section [5.04 of the Intercreditor Agreement]) to which the Owner Participant,
the Owner Trustee, in its individual capacity, or any of their respective
successors, permitted assigns, directors, officers, employees, servants and
agents is entitled pursuant to the Operative Agreements, (ii) any right, title
or interest of the Owner Trustee, in its individual capacity, or the Owner
Participant to any payment which by the terms of Section 17 of the Lease or any
corresponding payment under Section 3.3 of the Lease shall be payable to or on
behalf of the Owner Trustee, in its individual capacity, or to the Owner
Participant, as the case may be, (iii) any insurance proceeds payable under
insurance maintained by the Owner Trustee, in its individual capacity, or the
Owner Participant pursuant to Section 12.5 of the Lease, (iv) any insurance
proceeds payable to or on behalf of the Owner Trustee, in its individual
capacity, or to the Owner Participant, under any public liability insurance
maintained by the Lessee pursuant to Section 12 of the Lease (which shall
include the amount of any self-insured retention paid by the Lessee) or by any
other Person, (v) Transaction Costs or other amounts or expenses paid or payable
to, or for the benefit of the Owner Trustee, in its individual capacity, or the
Owner Participant pursuant to the Participation Agreement or the Trust
Agreement, (vi) all right, title and interest of the Owner Participant or the
Owner Trustee, in its individual capacity, in or relating to any portion of the
Units and any other property (tangible or intangible), rights, titles or
interests to the extent any of the foregoing has been released from the Lien of
the Indenture pursuant to the terms thereof, (vii) upon termination of the
Indenture pursuant to the terms thereof with respect to any Unit, all remaining
amounts which shall have been paid or are payable by the Lessee and calculated
on the basis of Stipulated Loss Value, (viii) any rights of the Owner
Participant or the Owner Trustee, in its individual capacity, to demand,
collect, sue for, or otherwise receive and enforce payment of the foregoing
amounts, (ix) any amount payable to the Owner Participant by any Transferee as
the purchase price of the Owner Participant's interest in the Trust Estate in
compliance with the terms of the
6
<PAGE>
Participation Agreement and the Trust Agreement and (x) the respective rights of
the Owner Trustee, in its individual capacity, or the Owner Participant to the
proceeds of and interest on the foregoing.
"Excepted Rights" shall have the meaning assigned thereto in Section 5.11
---------------
of the Indenture.
"Excluded Unit" shall mean, at any Payment Date, any Unit (i) for which the
-------------
applicable Lease is to be terminated pursuant to Section 10 of the Lease on such
Payment Date, (ii) which suffers an Event of Loss or a deemed Event of Loss
under Section 9.1 of the Lease and is not replaced pursuant to Section 11.2(i)
prior to or on such Payment Date, or (iii) which is to be purchased by the
Lessee pursuant to Section 6.9 of the Participation Agreement or Section 22.1 of
the Lease, as the case may be, on such Payment Date; provided that the principal
amount of the Equipment Note or Notes which corresponds to the Equipment Cost of
such Unit is to be prepaid in accordance with Section 2.10 of the Indenture on
such Payment Date.
"Existing Car Service Contracts" shall have the meaning assigned thereto in
------------------------------
the fourth recital clause of the Participation Agreement.
"Extended Unit" shall have the meaning assigned thereto in Section 22.7 of
-------------
the Lease.
"Fair Market Rental Value" or "Fair Market Sales Value" with respect to any
------------------------ -----------------------
Unit, shall mean the cash rent or cash price obtainable for such Unit in an
arm's length lease or sale between an informed and willing lessee or purchaser
under no compulsion to lease or purchase, as the case may be, and an informed
and willing lessor or seller, under no compulsion to lease or sell, as the case
may be, as the same shall be specified by agreement between the Lessor and the
Lessee. If the parties are unable to agree upon a Fair Market Rental Value
and/or a Fair Market Sales Value within 30 days after delivery of notice by the
Lessee pursuant to Section 22.2 of the Lease, or otherwise where such
determination is required, within a reasonable period of time, such value shall
be determined by appraisal. The Lessee will, within 15 days after such 30-day
period, provide the Lessor with the name of an appraiser that would be
satisfactory to the Lessee, and the Lessor and the Lessee shall consult with
each other with the intent of selecting a mutually acceptable appraiser. If a
mutually acceptable appraiser is selected, the Fair Market Rental Value or the
Fair Market Sales Value, as the case may be, shall be determined by such
appraiser, and the Lessee shall bear the cost thereof. If the Lessee and the
Lessor are unable to agree upon a single appraiser within such 15-day period,
two independent qualified appraisers, one chosen by the Lessee and one chosen by
the Lessor shall jointly determine such value, and the Lessor shall bear the
cost of the appraiser selected by the Lessor, and the Lessee shall bear the cost
of the appraiser selected by the Lessee. If such appraisers cannot agree on the
amount of such value within 15 days of appointment, one independent qualified
appraiser shall be chosen by the American Arbitration Association. All three
appraisers shall make a determination within a period of 15 days following
appointment, and shall promptly communicate such determination in writing to the
Lessor and the Lessee. If there shall be a panel of three appraisers, the three
appraisals shall be averaged, and such average shall be the Fair Market Rental
Value or Fair
7
<PAGE>
Market Sales Value, as the case may be. The determination made shall be
conclusively binding on both the Lessor and the Lessee. If there shall be a
panel of three appraisers, the Lessee and the Lessor shall equally share the
cost of the third appraiser. If such appraisal is pursuant to Section 6.1(e) of
the Lease or is in connection with the exercise of remedies set forth in Section
15 of the Lease, the Lessee shall pay the costs of such appraisal.
Notwithstanding any of the foregoing, for the purposes of Section 15 of the
Lease, the Fair Market Rental Value or the Fair Market Sales Value, as the case
may be, shall be zero with respect to any Unit if the Lessor is unable to
recover possession of such Unit in accordance with the terms of paragraph (b) of
Section 15.1 of the Lease.
"FRA" shall mean the Federal Railroad Administration or any successor
---
thereto.
"Functional Group" shall mean each and all of the various groups of Units
----------------
so designated in Schedule 1 to the Participation Agreement.
"GATC" shall mean General American Transportation Corporation, a New York
----
corporation.
"GATC Assignment" shall mean the assignment by GATC to the Lessee of the
---------------
Existing Car Service Contracts on the Closing Date.
"GATC Bill of Sale" shall mean the Bill of Sale, dated the Closing Date and
-----------------
executed and delivered by GATC pursuant to the Transfer and Contribution
Agreement, conveying the Equipment to the Lessee.
"Hazardous Substances" shall mean any hazardous or toxic substances,
--------------------
materials or wastes, including, but not limited to, those substances, materials,
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR (S) 172.101) or by the Environmental Protection Agency
as hazardous substances (40 CFR (S) 302.4), or such substances, materials and
wastes which are or become regulated under any applicable local, state or
federal law or the equivalent under applicable foreign laws including, without
limitation, any materials, waste or substance which is (a) petroleum, (b)
asbestos, (c) polychlorinated biphenyls, (d) defined as a "hazardous material,"
"hazardous substance" or "hazardous waste" under applicable local, state or
federal law or the equivalent under applicable foreign laws, (e) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act of 1977,
(f) defined as "hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act of 1976, or (g) defined as "hazardous substances"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
"Incentive Component" shall have the meaning assigned thereto in Section
-------------------
5.3 of the Management Agreement.
"Indemnified Person" shall have the meaning assigned thereto in Section
------------------
7.2(b) of the Participation Agreement.
8
<PAGE>
"Indenture" or "Trust Indenture" shall mean the Trust Indenture and
--------- ---------------
Security Agreement (1998-1), dated as of August 1, 1998 between the Owner
Trustee, in the capacities described therein, and the Indenture Trustee. The
term "Indenture" shall include, except where the context otherwise requires,
---------
each Indenture Supplement entered into pursuant to the terms of the Indenture.
"Indenture Default" shall mean an Indenture Event of Default or an event
-----------------
which, with notice or the passage of time or both, would become an Indenture
Event of Default.
"Indenture Estate" shall have the meaning assigned thereto in the Granting
----------------
Clause of the Indenture.
"Indenture Event of Default" shall have the meaning assigned thereto in
--------------------------
Section 4.1 of the Indenture.
"Indenture Investment" shall mean any obligation issued or guaranteed by
--------------------
the United States of America or any of its agencies for the payment of which the
full faith and credit of the United States of America is pledged and with a
final maturity on or before the date which is the earlier of (a) ninety days
from the date of purchase thereof and (b) the first Payment Date occurring after
the date of purchase thereof.
"Indenture Supplement" shall mean an Indenture Supplement (1998-1) dated
--------------------
the Closing Date or the date that any Replacement Unit is subjected to the Lien
of the Indenture, substantially in the form of Exhibit A to the Indenture,
between the Owner Trustee, in the capacities described therein, and the
Indenture Trustee, covering the Units delivered on the Closing Date or such
Replacement Unit, as the case may be. A "related" Indenture Supplement, when
-------
used with respect to any Unit or Units, shall mean the Indenture Supplement
under which such Unit or Units is or are included in the Indenture Estate.
"Indenture Trustee" shall mean The First National Bank of Chicago, a
-----------------
national banking association, as trustee under the Indenture and any successor
institution.
"Indenture Trustee Agreements" shall mean the Operative Agreements to which
----------------------------
the Indenture Trustee is or will be a party.
"Inflation Factor" means, with respect to any calendar year, the quotient
----------------
(expressed as a decimal) obtained by dividing (i) the PPI published in respect
of the most recently ended calendar year (the "New Year"), by (ii) the PPI
published in respect of the calendar year immediately preceding the New Year.
"PPI", for purposes hereof, means, with respect to any calendar year or any
---
period during any calendar year, the "Producer Price Index" applicable to the
capital equipment sector as published by the Bureau of Labor Statistics for the
United States Department of Labor. If the PPI shall be converted to a different
standard reference base or otherwise revised after the date hereof, PPI shall
thereafter be calculated with use of such new or
9
<PAGE>
revised statistical measure published by the Bureau of Labor Statistics or, if
not so published, as may be published by any other reputable publisher of such
price index selected by the Manager.
"Initial Manager" shall mean GATC.
---------------
"Insurance Agreement" shall mean the Insurance Agreement dated as of August
-------------------
1, 1998 between the Lessee and GATC.
"Insurance Letter" shall mean that certain letter dated August __, 1998
----------------
(1998-1) from the Lessee and the Manager to the Owner Trustee, which contains
the acknowledgment and consent of the Owner Participant, the Pass Through
Trustee and the Indenture Trustee.
"Insurance Manager" shall have the meaning assigned thereto in the
-----------------
Insurance Agreement.
"Interchange Rules" shall mean the interchange rules or supplements thereto
-----------------
of the AAR, as the same may be in effect from time to time.
"Intercreditor Agreement" shall mean the Collateral Agency and
-----------------------
Intercreditor Agreement dated as of August 1, 1998 among the Lessee, the
Collateral Agent, the Owner Trustee, the Indenture Trustee, GATC, as Manager,
GATC, as Insurance Manager and certain other Persons.
"Investment Banker" shall mean an independent investment banking
-----------------
institution of national standing appointed by the Lessee or, if the Indenture
Trustee does not receive notice of such appointment at least ten days prior to a
scheduled prepayment date or if a Lease Event of Default under the Lease shall
have occurred and be continuing, appointed by the Indenture Trustee.
"Late Payment Interest" shall mean (i) in the case of the Accumulated
---------------------
Equity Deficiency Amount, interest at the Late Rate, (ii) in the case of that
portion of any overdue payment of Stipulated Loss Value or Termination Value
that is in excess of the principal amount of the Equipment Notes then
outstanding and which are allocated to the Units with respect to which such
payment is made, interest at the Late Rate, (iii) in the case of a portion of
overdue Basic Rent equal to any Payment Deficiency, interest at a rate equal to
the sum of the Debt Rate and the rate specified in the definition of "Late
Payment Premium," (iv) in the case of any interest referred to in clause (iii)
of this definition or any Late Payment Premium that is overdue, interest at the
rate specified in the definition of "Late Payment Premium," and (v) in respect
of any other overdue amount, including, without limitation, in the case of the
Equipment Notes and Basic Rent in respect thereof, interest at the Default Rate.
"Late Payment Premium" shall mean, with respect to any Payment Deficiency
--------------------
to which a Late Payment Premium is payable on a Payment Date, an amount of
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the Payment Deficiency, for the period
10
<PAGE>
from and including the Payment Date immediately preceding such Payment Date to
but excluding such Payment Date, at a rate equal to 1.5% per annum.
"Late Rate" shall mean an interest rate per annum equal to the Debt Rate
---------
plus 1.5% per annum.
"Lease" or "Lease Agreement" or "Equipment Lease" shall mean the Equipment
----- --------------- ---------------
Lease Agreement (1998-1), relating to the Equipment, dated as of August 1, 1998,
between the Owner Trustee, in the capacities described therein, as Lessor, and
the Lessee. The term "Lease" shall, except where the context otherwise
-----
requires, include each Lease Supplement entered into pursuant to the terms of
the Lease.
"Lease Default" shall mean a Lease Event of Default or an event which, with
-------------
notice or passage of time or both, would become a Lease Event of Default.
"Lease Event of Default" shall have the meaning assigned thereto in Section
----------------------
14 of the Lease.
"Lease Supplement" shall mean a Lease Supplement (1998-1), dated the
----------------
Closing Date or the date that any Replacement Unit is subjected to the Lease,
substantially in the form of Exhibit A to the Lease, between the Lessor and the
Lessee, covering the Units delivered on the Closing Date or such Replacement
Unit, as the case may be. A "related" Lease Supplement, when used with respect
-------
to any Unit or Units, shall mean the Lease Supplement under which such Unit or
Units is or are leased.
"Lease Term" shall mean, with respect to any Unit, the Basic Term
----------
applicable to such Unit and any Renewal Term applicable to such Unit then in
effect.
"Lessee Agreements" shall mean the Operative Agreements to which the Lessee
-----------------
is or will be a party.
"Lessor" shall have the meaning assigned thereto in the recitals to the
------
Lease.
"Lessor's Lien" means any Lien affecting, on or in respect of, the
-------------
Equipment, the Lease or any other part of the Trust Estate arising as a result
of (i) claims against the Lessor (in its individual capacity or as Owner
Trustee) or the Owner Participant, in each case unrelated to the transactions
contemplated by the Operative Agreements, or (ii) acts or omissions of the
Lessor (in its individual capacity or as Owner Trustee) or the Owner
Participant, in each case unrelated to the transactions contemplated by the
Operative Agreements or in breach of any covenant or agreement of such Person
set forth in any of the Operative Agreements, or (iii) taxes imposed against the
Lessor (in its individual capacity or as Owner Trustee) or the Owner Participant
or the Trust Estate which are not required to be indemnified against by the
Lessee pursuant to the Participation Agreement or under the Tax Indemnity
Agreement.
11
<PAGE>
"Lien" shall mean any mortgage, pledge, security interest, lien,
----
encumbrance, lease, disposition of title or other charge of any kind on
property.
"Limited Use Property" shall have the meaning set forth in Rev. Proc. 76-
--------------------
30, 1976-2 C.B. 647.
"Loan Participant" shall mean and include each registered holder from time
----------------
to time of an Equipment Note issued under the Indenture, including, so long as
it holds any Equipment Notes issued thereunder, the Pass Through Trustee under
the Pass Through Trust Agreement.
"Loan Participant's Commitment" shall have the meaning assigned thereto in
-----------------------------
Section 2.2(b) of the Participation Agreement.
"Lockbox" shall have the meaning assigned thereto in Section 6.2(a) of the
-------
Management Agreement.
"Lockbox Agreement" shall mean the agreement by and between GATC, as
-----------------
Trustee for itself, individually, General American Railcar Corporation II, and
the Lockbox Bank.
"Lockbox Bank" shall have the meaning assigned thereto in Section 6.2(a) of
------------
the Management Agreement.
"Majority In Interest" shall mean, as of a particular date of determination
--------------------
and with respect to any action or decision of the holders of the Equipment
Notes, the holders of more than 50% of the aggregate unpaid principal amount of
the Equipment Notes, if any, then outstanding which are affected by such
decision or action, excluding any Equipment Notes held by the Owner Participant
or the Lessee or an Affiliate of the Owner Participant or the Lessee unless all
Equipment Notes are so held.
"Make-Whole Amount" shall mean, with respect to the principal amount of any
-----------------
Equipment Note to be prepaid on any prepayment date, the amount which the
Investment Banker determines as of the third Business Day prior to such
prepayment date to equal the product obtained by multiplying (a) the excess, if
any, of (i) the sum of the present values of all the remaining scheduled
payments of principal and interest, based upon Scheduled Amortization, from the
prepayment date to the Scheduled Maturity Date of such Equipment Note,
discounted monthly on the day of each month at a rate equal to the Treasury Rate
plus [.15]%, based upon a 360-day year of twelve 30-day months, over (ii) the
aggregate unpaid principal amount of such Equipment Note , based upon Scheduled
Amortization, plus any accrued but unpaid interest thereon by (b) a fraction,
the numerator of which shall be the aggregate unpaid principal amount of such
Equipment Note to be prepaid on such prepayment date and the denominator of
which shall be the aggregate unpaid principal amount of such Equipment Note;
provided that the aggregate unpaid principal amount of such Equipment Note for
- --------
the purpose of clause (a)(ii) and (b) of this definition shall be determined
after deducting the principal installment, if any, due on such prepayment date.
12
<PAGE>
"Management Agreement" shall mean the Operation, Maintenance, Servicing and
--------------------
Remarketing Agreement dated as of August 1, 1998 between the Company and the
Manager.
"Management Fee" shall have the meaning assigned thereto in Section 5.1 of
--------------
the Management Agreement.
"Manager" shall mean General American Transportation Corporation, a New
-------
York corporation, and any Successor Manager under the Management Agreement.
"Manager Agreements" shall mean the Operative Agreements to which the
------------------
Manager is or is to be a party.
"Manager's Cost" shall have the meaning assigned thereto in Section 5.4(a)
--------------
of the Management Agreement.
"Manager's Fleet" shall have the meaning assigned thereto in Section 2.2(j)
---------------
of the Management Agreement.
"Marks Company" shall have the meaning assigned thereto in Section 6.4 of
-------------
the Management Agreement.
"Minimum Units" shall mean 100 Units (or, if less than 100 Units are then
-------------
subject to the Lease or being stored pursuant to the terms of the Lease, all
Units).
"Modification" shall have the meaning assigned thereto in Section 9.2 of
------------
the Lease.
"Net Economic Return" shall mean the anticipated net after-tax yield and
-------------------
total after-tax cash flow expected by the original Owner Participant with
respect to the Equipment (both through the Early Purchase Date and the Basic
Term Expiration Date), utilizing the multiple investment sinking fund method of
analysis and the same assumptions as used by such Owner Participant in making
the computations of Basic Rent, Stipulated Loss Value and Termination Value,
terms of Equipment Notes and Early Purchase Price initially set forth in
Schedules 3, 4, 5 and 6 to the Participation Agreement.
"Non-Shared Payments Account" shall be the Account specified in Section 3.1
---------------------------
of the Intercreditor Agreement.
"Non-Severable Modification" shall mean any Modification that is not
--------------------------
readily removable without impairing, other than in a de minimis respect, the
----------
value, utility or remaining useful life of the Equipment or any Unit immediately
prior to removal of such modification.
13
<PAGE>
"Notice of Delivery" shall have the meaning assigned thereto in Section
------------------
2.3(a) of the Participation Agreement.
"Officer's Certificate" shall mean a certificate signed (i) in the case of
---------------------
a corporation, by the President, any Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership, by the Chairman of the Board, the President or any
Vice President, the Treasurer or an Assistant Treasurer of a corporate general
partner, (iii) in the case of a commercial bank or trust company, by the
Chairman or Vice Chairman of the Executive Committee or the Treasurer, any Trust
Officer, any Vice President, any Executive or Senior or Second or Assistant Vice
President, or any other officer or assistant officer customarily performing the
functions similar to those performed by the persons who at the time shall be
such officers, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject, and (iv) in the case
of a limited liability company, any manager thereof and any President, Managing
Director or Vice President thereof.
"Operative Agreements" shall mean the Transfer and Contribution Agreement,
--------------------
the GATC Bill of Sale, the Participation Agreement, the Bill of Sale, the Trust
Agreement, the Pass Through Trust Agreement, the Pass Through Trust Supplements,
the Pass Through Certificates, the Equipment Notes, the Lease, the Lease
Supplements, the Indenture, the Indenture Supplements, the Tax Indemnity
Agreement, the Intercreditor Agreement, the Purchase Agreement, the Management
Agreement, the Insurance Agreement, the Insurance Letter and the Lockbox
Agreement.
["Other Leases" means (i) the Equipment Lease Agreement (1998-2) dated as
------------
of August 1, 1998 between the Lessee and [Owner Trustee], not in its individual
capacity but solely as Owner Trustee under a Trust Agreement dated as of
[_________], 1998 with [______________________], and (ii) the Equipment Lease
Agreement (1998-3) dated as of August 1, 1998 between the Lessee and [Owner
Trustee], not in its individual capacity but solely as Owner Trustee under a
Trust Agreement dated as of [_____________], 1998 with [__________________].
"Outside Renewal Date" shall have the meaning assigned thereto in Section
--------------------
22.5 of the Lease.
"Owner Participant" shall mean [Owner Participant], a [__________________],
-----------------
and its successors and permitted assigns.
"Owner Participant Agreements" shall mean the Operative Agreements to which
----------------------------
the Owner Participant is or will be a party.
["Owner Participant Parent Guarantee" shall mean that certain Guarantee
----------------------------------
(1998-1) dated as of August 1, 1998 executed by [Owner Participant Parent] in
favor of the Lessee, GATC, the Owner Trustee, the Indenture Trustee and the Pass
Through Trustee.]
14
<PAGE>
"Owner Participant's Commitment" shall have the meaning assigned thereto in
------------------------------
Section 2.2(a) of the Participation Agreement.
"Owner Trustee" shall mean [Owner Trustee,] not in its individual capacity
-------------
but solely as Owner Trustee under the Trust Agreement and its successors
thereunder.
"Owner Trustee Agreements" shall mean the Operative Agreements to which the
------------------------
Owner Trustee, either in its individual or fiduciary capacity, is or will be a
party.
["Owner Trustee Parent Guarantee" shall mean that certain Guarantee (1998-
------------------------------
1) dated as of August 1, 1998 executed by Owner Trustee Parent, in favor of the
Lessee, GATC, the Owner Participant, the Indenture Trustee and the Pass Through
Trustee.]
"Parent" means GATX Corporation, a New York corporation.
------
"Participants" shall mean, collectively, the Loan Participant and the Owner
------------
Participant.
"Participation Agreement" shall mean the Participation Agreement (1998-1)
-----------------------
dated as of August 1, 1998, among the Lessee, the Manager, the Pass Through
Trustee, the Owner Participant, the Owner Trustee and the Indenture Trustee.
"Pass Through Certificates" or "Certificates" shall mean the Pass Through
------------------------- ------------
Certificates issued pursuant to each of the Pass Through Trust Supplements and
the Pass Through Trust Agreement.
"Pass Through Trust Agreement" shall mean the Pass Through Trust Agreement,
----------------------------
dated as of August 1, 1998, between the Lessee and the Pass Through Trustee.
"Pass Through Trust Estate" shall mean the Trust (as defined in the Pass
-------------------------
Through Trust Agreement) created by the Pass Through Trust Supplement.
"Pass Through Trust Supplement" shall mean Trust Supplement No. 1 dated
-----------------------------
______________, 1998 between the Lessee and the Pass Through Trustee, which
supplements the Pass Through Trust Agreement (i) by creating a separate trust
for the holders of certain Pass Through Certificates, (ii) by authorizing the
issuance of such Pass Through Certificates and (iii) by establishing the terms
of such Pass Through Certificates.
"Pass Through Trustee" shall mean The First National Bank of Chicago, in
--------------------
its capacity as trustee under the Pass Through Trust Agreement, as supplemented
by the Pass Through Trust Supplements, and each other Person which may from time
to time act as successor trustee under the Pass Through Trust Agreement, as
supplemented by the Pass Through Trust Supplement.
"Pass Through Trustee Agreements" shall mean the Operative Agreements to
-------------------------------
which the Pass Through Trustee is or will be a party.
15
<PAGE>
"Payment Account" shall have the meaning assigned thereto in Section 6.4(c)
---------------
of the Indenture.
"Payment Date" shall mean the __ day of each month through and including
------------
the Rated Maturity Date, commencing ___________, 1998, provided that if any such
date shall not be a Business Day, then "Payment Date" shall mean the next
------------
succeeding Business Day; provided, however, that interest and Late Payment
-------- -------
Premium payable on such Payment Date, and all other calculations as of such
Payment Date, shall be computed as of the date which would have been a Payment
Date if such date were a Business Day.
"Payment Deficiency" shall have the meaning assigned thereto in Section 2.2
------------------
of the Indenture.
"Permitted Liens" shall mean: (i) the interests of the Lessee and the
---------------
Owner Trustee under the Lease and the Lease Supplements; (ii) the interest of
the Lessee and any sublessee as provided in any Permitted Sublease; (iii) any
Liens for taxes, assessments, levies, fees and other governmental and similar
charges not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings so long as there exists no
material risk of sale, forfeiture, loss, or loss of or interference with use or
possession of any Unit or interference with the payment of Rent; (iv) any Liens
of mechanics, suppliers, materialmen, laborers, employees, repairmen and other
like Liens arising in the ordinary course of Lessee's (or if a sublease is then
in effect, any sublessee's) business securing obligations which are not yet due
and payable or the amount or validity of which is being contested in good faith
by appropriate proceedings so long as there exists no material risk of sale,
forfeiture, loss, or loss of or interference with use or possession of any Unit
or interference with the payment of Rent; (v) the Lien granted to the Indenture
Trustee under and pursuant to the Indenture, and the respective rights of the
Loan Participant, the Indenture Trustee, the Owner Participant and the Owner
Trustee under the Operative Agreements; (vi) Liens arising out of any judgment
or award against the Lessee (or any sublessee permitted pursuant to Section 8.3
of the Lease) with respect to which an appeal or proceeding for review is being
presented in good faith and for the payment of which adequate reserves have been
provided as required by generally accepted accounting principles or other
appropriate provisions have been made and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding for review
and there exists no material risk of sale, forfeiture, loss, or loss of or
interference with the use or possession of any Unit or any interest therein or
interference with the payment of Rent, and (vii) salvage rights of insurers
under insurance policies maintained pursuant to Section 12 of the Lease.
"Permitted Subleases" shall have the meaning assigned thereto in Section
-------------------
8.3 of the Lease.
"Person" shall mean an individual, partnership, limited liability company,
------
corporation, trust, association or unincorporated organization, and a government
or agency or political subdivision thereof.
16
<PAGE>
"Premium" shall mean any Make-Whole Amount and any Late Payment Premium
-------
payable pursuant to the Indenture.
"Prepaid Amount" shall mean, at any Payment Date, the aggregate principal
--------------
amount that was prepaid, if any, pursuant to Section 2.10 of the Indenture prior
to and including such Payment Date.
"Prepayment" shall mean a prepayment of outstanding principal under the
----------
Equipment Notes in accordance with Section 2.10 of the Indenture at any Payment
Date.
"Prepayment Multiplier" shall mean, at any Payment Date, a fraction, the
---------------------
numerator of which shall be the aggregate Equipment Cost of all Units then
included in the Indenture Estate as of such Payment Date (excluding the
Equipment Cost of any Excluded Unit) and the denominator of which shall be the
aggregate Equipment Cost of all Units originally included in the Indenture
Estate as of the Closing Date.
"Pricing Date" shall mean the date on which the Purchase Agreement is
------------
executed and delivered by the Lessee and the Underwriters.
"Projected Coverage Ratio" as of any Calculation Date (as defined in the
------------------------
Intercreditor Agreement), shall mean the ratio of (i) the sum of projected
Available Amounts (as defined in the Intercreditor Agreement) for the six-month
period immediately succeeding such Calculation Date to (ii) the sum of Basic
Rent due or to become due and payable on the six consecutive Rent Payment Dates
which occur following such Calculation Date, as such amounts are certified to by
an officer's certificate signed by an authorized representative of each of the
Company and the Manager.
"Prospectus" shall mean the Prospectus dated August __, 1998 relating to
----------
the offering of the Pass Through Certificates.
"Rated Amortization" shall mean the amount of principal of the Equipment
------------------
Notes specified for each Payment Date set forth in Annex A to the Indenture.
"Rated Amortization Amount" shall mean, at any Payment Date, the excess, if
-------------------------
any, of (i) the product of (A) the sum of all amounts specified in Annex A to
the Indenture as Rated Amortization opposite the respective dates occurring on
or before such Payment Date and (B) the Prepayment Multiplier, over (ii) the sum
of the Adjusted Payment Amount for each Adjusted Principal Period prior to such
Payment Date.
"Rated Maturity Date" shall mean ____________, 20__.
-------------------
17
<PAGE>
"Rated Obligations Due" shall mean, at any Payment Date, the sum of (a) the
---------------------
Rated Amortization Amount at such Payment Date plus (b) accrued and unpaid
----
Regular Interest that is due and payable on such Payment Date (computed on the
basis of [a 360-day year of twelve 30-day months]).
"Rating Agencies" shall mean, at any time, Standard & Poor's Ratings Group,
---------------
a division of McGraw Hill, Inc. and Moody's Investors Service, Inc., or any
successor to any such corporation's business of rating securities which is then
providing a rating for the Pass Through Certificates.
"Refunding Date" shall have the meaning assigned thereto in Section 10.2(a)
--------------
of the Participation Agreement.
"Regular Interest" shall mean interest on the unpaid portions of the
----------------
principal amounts of the outstanding Equipment Notes (computed on the basis of
[a 360-day year of twelve 30-day months]).
"Reimbursable Services" shall have the meaning assigned thereto in Section
---------------------
5.4 of the Management Agreement.
"Related Indemnitee Group" shall have the meaning assigned thereto in
------------------------
Section 7.2(b) of the Participation Agreement.
["Related Transactions" shall mean the additional leveraged lease
--------------------
transactions evidenced by the Other Leases and with respect to which the Pass
Through Trustee has agreed to acquire the related equipment notes.]
"Remaining Weighted Average Life" shall mean, with respect to any date of
-------------------------------
prepayment or any date of determination of any Equipment Note, the number of
days equal to the quotient obtained by dividing (a) the sum of the products
obtained by multiplying (i) the amount of each then remaining principal payment
on such Equipment Note (assuming that after such date, principal payments are
made only in the Scheduled Amortization Amounts) by (ii) the number of days
from and including the prepayment date or date of determination to but excluding
the scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note.
"Renewal Term" shall mean, with respect to any Unit, any term in respect of
------------
which the Lessee shall have exercised its option to renew the Lease for such
Unit pursuant to Section 22.4 thereof, [including any Fixed Rate Renewal Term]
or in respect of which the Lease Term has been deemed to have been renewed as
provided in Section 22.7 of the Lease.
"Rent" shall mean all Basic Rent and Supplemental Rent.
----
18
<PAGE>
"Rent Payment Date" or "Payment Date" shall mean the [__] day of each month
----------------- ------------
occurring during the Lease Term, commencing [_____________], 1998, provided that
if any such date shall not be a Business Day, then "Rent Payment Date" or
"Payment Date" shall mean the next succeeding Business Day.
"Replacement Unit" shall mean a covered hopper car or tank car, as the case
----------------
may be, which shall have been leased under the Lease pursuant to Section 11.4 of
the Lease.
"Required Modification" shall have the meaning assigned thereto in Section
---------------------
9.1 of the Lease.
"Responsible Officer" shall mean, with respect to the subject matter of any
-------------------
covenant, agreement or obligation of any party contained in any Operative
Agreement, the President, or any Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer or other officer, who in the normal performance
of his or her operational responsibility would have knowledge of such matter and
the requirements with respect thereto; and when used in connection with the
Lessee, "Responsible Officer" shall include any such officer of the Manager or
the Insurance Manager acting on behalf of the Lessee under the Management
Agreement or the Insurance Agreement, as the case may be.
"Scheduled Amortization" shall mean the amount of principal of the
----------------------
Equipment Notes specified for each Payment Date set forth in Annex B to the
Indenture.
"Scheduled Amortization Amount" shall mean, at any Payment Date, the
-----------------------------
excess, if any, of (i) the product of (A) the sum of all amounts specified in
Annex B to the Indenture as Scheduled Amortization opposite the respective dates
occurring on or before such Payment Date and (B) the Prepayment Multiplier, over
(ii) the sum of the Adjusted Payment Amount for each Adjusted Principal Period
prior to such Payment Date.
"Scheduled Obligations Due" shall mean, at any date, an amount equal to the
-------------------------
excess, if any, of (i) the Scheduled Amortization Amount at such date over (ii)
the Rated Amortization Amount at such date.
"Scheduled Closing Date" shall have the meaning assigned thereto in Section
----------------------
2.7(b) of the Participation Agreement.
"Security" shall have the meaning assigned thereto in Section 2(1) of the
--------
Securities Act of 1933, as amended.
"Services Standard" shall have the meaning assigned thereto in Section 2.2
-----------------
of the Management Agreement.
"Servicing Agreement" shall mean the Management and Servicing Agreement
-------------------
dated as of [___________, 1998] between GATC and the Marks Company.
19
<PAGE>
"Severable Modification" shall mean any Modification that is readily
----------------------
removable without causing material damage to the Equipment or any Unit and
without diminishing, other than in a de minimis respect, the value, utility or
----------
useful life of such Unit below the value, utility or useful life of such Unit
immediately prior to such Modification, assuming that such Unit was then in the
condition required to be maintained by the terms of the Lease.
"Special Purchase Defeasance" shall mean, with respect to any election by
---------------------------
the Lessee to purchase Units under Section 22.1 or 22.3 of the Lease, the
deposit by the Lessee with the Indenture Trustee prior to the date as of which
the Lessor shall have declared the Lease to be in default as a result of a Lease
Event of Default under Section 14(c), 14(d), 14(e), 14(f) or 14(i) of the Lease
(in circumstances where such Lease Event of Default occurs after the date of the
Lessee's notice to purchase under Section 22.1 or 22.3 but before the Early
Purchase Date or the expiration of the Basic Term or any Renewal Term, as
applicable), of an amount sufficient to pay (i) the Early Purchase Price,
together with all other amounts due and owing by the Lessee under the Operative
Agreements, with respect to those Units which the Lessee has elected to purchase
on the Early Purchase Date under Section 22.1 of the Lease, or (ii) the Fair
Market Sales Value or Basic Term Purchase Price, together with all other amounts
due and owing by the Lessee under the Operative Agreements, with respect to
those Units which the Lessee has elected to purchase at the expiration of the
Basic Term or any Renewal Term, as applicable, under Section 22.3 of the Lease.
All amounts deposited by the Lessee with the Indenture Trustee in connection
with a Special Purchase Defeasance shall be held and invested by the Indenture
Trustee in accordance with Section 6.4(b) of the Indenture pending consummation
of the purchase of the related Units on the Early Purchase Date or upon the
expiration of the Basic Term or the related Renewal Term, as applicable.
"Specified Investments" (i) direct obligations of, and obligations fully
---------------------
guaranteed as to timely payment by, the United States of America (having
remaining maturities of no more than the number of remaining days until the next
Monthly Transfer Date), (ii) commercial paper (having remaining maturities of no
more than the number of days remaining until the next [Monthly Transfer Date]
having, at the time of the investment or contractual commitment to invest
therein, a rating from each Rating Agency in its highest investment category),
(iii) a Guaranteed Investment Contract (a "GIC") from an [Acceptable GIC]
---
provider, (iv) a GIC provided by GATX, provided that such obligations are
supported by an [Acceptable Letter of Credit], (v) investments in funds rated in
the highest investment category by each Rating Agency and (vi) repurchase
agreements and similar short term instruments.
"STB" shall mean the Surface Transportation Board of the United States
---
Department of Transportation, or any successor thereto.
"Stipulated Loss Value" for any Unit as of any date of determination shall
---------------------
mean the amount determined by multiplying the Equipment Cost for such Unit by
the percentage set forth in Schedule 4 to the Participation Agreement opposite
the Rent Payment Date on which such Stipulated Loss Value is being determined;
provided that during any Renewal Term, "Stipulated Loss Value" shall be
determined as provided in Section 22.6 of the Lease. Notwithstanding
20
<PAGE>
anything to the contrary contained in the Lease or in the Participation
Agreement, Stipulated Loss Value for such Unit (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) will, under
any circumstances and in any event, be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with an
Event of Loss, will be at least sufficient to pay in full as of the date of
payment thereof the aggregate unpaid principal of the Equipment Notes issued in
respect of such Unit, together with all unpaid interest, Late Payment Premium
and Make-Whole Amount, if any, thereon accrued to the date on which such amount
is paid in accordance with the terms hereof and all other amounts then due to
the holders of the Equipment Notes.
"Storage Period" shall have the meaning assigned thereto in Section
--------------
6.1(c)(i) of the Lease.
"Storage Period Commencement Date" shall have the meaning assigned thereto
--------------------------------
in Section 6.1(c)(i) of the Lease.
"Sublease Payments" shall mean all amounts paid or payable by or on behalf
-----------------
of, or credited to, the Company under, or in respect of, a Car Service Contract,
including, without limitation, all service charges, rentals, excess mileage
charges, delivery costs reimbursed by the Customer and cancellation or penalty
payments, as well as all amounts paid or payable by the Customer as
reimbursement, indemnity, fees or commissions, or on account of assumed
financial responsibility or liability or otherwise.
"Sublessees" shall mean the lessees under Permitted Subleases.
----------
"Subsidiary" of any Person shall mean any corporation, association, or
----------
other business entity of which more than 50% (as determined by reference to the
total number of votes) of the voting stock outstanding at the time of
determination shall at such time be owned, directly or indirectly, by such
Person or by any other corporation, association or trust which is itself a
Subsidiary within the meaning of this definition, or collectively by such Person
and any one or more such Subsidiaries.
"Successor Lockbox Trustee" shall have the meaning assigned thereto in
-------------------------
Section 6.3 of the Management Agreement.
"Successor Manager" shall have the meaning assigned thereto in Section 8.4
-----------------
of the Management Agreement.
"Super-Majority in Interest" as of a particular date of determination shall
--------------------------
mean with respect to any action or decision of the holders of the Equipment
Notes, the holders of 100% of the aggregate unpaid principal amount of the
Equipment Notes, if any, then outstanding, excluding any Equipment Notes held by
the Owner Participant or the Lessee or an Affiliate of the Owner Participant or
the Lessee.
21
<PAGE>
"Supplemental Rent" shall mean all amounts, liabilities and obligations
-----------------
(other than Basic Rent) which the Lessee is obligated to pay under the Operative
Agreements to or on behalf of any of the other parties thereto, including, but
not limited to, Termination Value and Stipulated Loss Value payments.
"Tax Indemnitee" shall have the meaning assigned thereto in Section 7.1 of
--------------
the Participation Agreement.
"Tax Indemnity Agreement" shall mean the Tax Indemnity Agreement (1998-1)
-----------------------
dated as of August 1, 1998 between GATC and the Owner Participant.
"Taxes" shall have the meaning assigned thereto in Section 7.1(b) of the
-----
Participation Agreement.
"Terminated Units" shall have the meaning assigned thereto in Section 10.1
----------------
of the Lease.
"Termination Date" shall have the meaning assigned thereto in Section 10.1
----------------
of the Lease.
"Termination Value" for any Unit as of any date of determination shall mean
-----------------
the amount determined by multiplying the Equipment Cost for such Unit by the
percentage set forth in Schedule 4 to the Participation Agreement opposite the
Rent Payment Date on which such Termination Value is being determined; provided
--------
that during any Renewal Term, "Termination Value" shall be determined as
provided in Section 22.6 of the Lease. Notwithstanding anything to the contrary
contained in the Lease or in the Participation Agreement, Termination Value for
such Unit (both before and after any adjustment pursuant to Section 2.6 of the
Participation Agreement) will, under any circumstances and in any event, be an
amount which, together with any other amounts required to be paid by the Lessee
under the Lease in connection with such termination, will be at least sufficient
to pay in full as of the date of payment thereof the aggregate unpaid principal
of the Equipment Notes issued in respect of such Unit, together with all unpaid
interest, Late Payment Premium and Make-Whole Amount, if any, thereon accrued to
the date on which such amount is paid in accordance with the terms thereof and
all other amounts then due to the holders of the Equipment Notes.
"Total Equipment Cost" shall mean the sum of the Equipment Costs for each
--------------------
Unit.
"Total Managed Fleet" shall mean the Manager's Fleet and the Company Fleet.
-------------------
"Transaction Costs" shall have the meaning assigned thereto in Section
-----------------
2.5(a) of the Participation Agreement.
"Transfer and Contribution Agreement" shall mean the Transfer and
-----------------------------------
Contribution Agreement dated as of August 1, 1998 between GATC and the Company.
22
<PAGE>
"Transferee" shall have the meaning assigned thereto in Section 6.1(a) of
----------
the Participation Agreement.
"Treasury Rate" shall mean with respect to prepayment of each Equipment
-------------
Note, a per annum rate (expressed as a monthly equivalent and as a decimal and,
in the case of United States Treasury bills, converted to a bond equivalent
yield), determined to be the per annum rate equal to the monthly yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Equipment Note, as determined by interpolation between the most recent
weekly average yields to maturity for two series of United States Treasury
securities, (A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Equipment Note and (B) the other maturing as close as
possible to, but later than, the Average Life Date of such Equipment Note, in
each case as published in the most recent H.15(519) (or, if a weekly average
yield to maturity for United States Treasury securities maturing on the Average
Life Date of such Equipment Note is reported in the most recent H.15(519), as
published in H.15(519)). H.15(519) means "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System. The most recent H.15(519) means the
latest H.15(519) which is published prior to the close of business on the third
Business Day preceding the scheduled prepayment date.
"Trust" shall mean the trust created under the Trust Agreement.
-----
"Trust Agreement" shall mean that certain Trust Agreement (1998-1), dated
---------------
as of August 1, 1998, between the Owner Participant and [Owner Trustee].
"Trust Estate" shall have the meaning assigned thereto in Section 2.2 of
------------
the Trust Agreement.
"Trustee" shall mean each of the Owner Trustee, the Indenture Trustee or
-------
the Pass Through Trustee, and "Trustees" shall mean the Owner Trustee, Indenture
--------
Trustee and the Pass Through Trustee, collectively.
"Underwriters" shall mean Salomon Brothers Inc. and Morgan Stanley & Co.
------------
Incorporated.
"Underwriting Agreement" shall mean that certain Purchase Agreement between
----------------------
the Lessee and the Underwriters, relating to the sale and purchase of the Pass
Through Certificates.
"Unit" shall mean each unit or item of Equipment.
----
"Unit Monthly Fee" shall have the meaning assigned thereto in Section
----------------
5.2(b) of the Management Agreement.
23
<PAGE>
Exhibit 10.5
------------
FORM OF
__________________________________
PARTICIPATION AGREEMENT (1998-1)
Dated as of August 1, 1998
among
GENERAL AMERICAN RAILCAR CORPORATION II,
as Lessee
GENERAL AMERICAN TRANSPORTATION CORPORATION,
as Manager
[OWNER TRUSTEE],
as Owner Trustee
[OWNER PARTICIPANT],
as Owner Participant
THE FIRST NATIONAL BANK OF CHICAGO,
as Indenture Trustee
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Pass Through Trustee
Tank Cars and Covered Hopper Cars
__________________________________
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST;
CLOSING; TRANSACTION COSTS
Section 2.1. Sale and Purchase........................................ 3
Section 2.2. Participation in Equipment Cost.......................... 3
Section 2.3. Closing Date; Procedure for Participation................ 4
Section 2.4. Owner Participant's Instructions to the Owner Trustee;
Satisfaction of Conditions............................... 5
Section 2.5. Expenses................................................. 5
Section 2.6. Calculation of Adjustments to Basic Rent, Stipulated Loss
Value and Termination Value; Confirmation and
Verification............................................. 9
Section 2.7. Postponement of Closing Date............................. 11
SECTION 3. REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Owner Trustee...... 13
Section 3.2. Representations and Warranties of the Lessee............. 16
Section 3.3. Representations and Warranties of the Indenture Trustee.. 20
Section 3.4. Representations, Warranties and Covenants Regarding
Beneficial Interest and Equipment Notes.................. 21
Section 3.5. Representations and Warranties of the Pass Through
Trustee.................................................. 22
Section 3.6. Representations and Warranties of the Owner Participant.. 23
Section 3.7. Representations and Warranties of the Manager............ 25
Section 3.8. Opinion Acknowledgment................................... 27
SECTION 4. CLOSING CONDITIONS
Section 4.1. Conditions Precedent to Investment by Each Participant... 27
Section 4.2. Additional Conditions Precedent to Investment by the
Pass Through Trustee and Indenture Trustee............... 33
Section 4.3. Additional Conditions Precedent to Investment by the
Owner Participant........................................ 33
Section 4.4. Conditions Precedent to the Obligation of the Lessee..... 34
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES
AND THE LESSEE
Section 6.1. Restrictions on Transfer of Beneficial Interest.......... 36
Section 6.2. Lessor's Liens Attributable to the Owner Participant..... 40
Section 6.3. Lessor's Liens Attributable to the Owner Trustee......... 40
Section 6.4. Liens Created by the Indenture Trustee and the Loan
Participant.............................................. 40
Section 6.5. Covenants of Owner Trustee, Owner Participant and
Indenture Trustee........................................ 41
Section 6.6. Amendments to Operative Agreements....................... 42
Section 6.7. Certain Representations, Warranties and Covenants........ 42
Section 6.8. Covenants of the Manager................................. 42
Section 6.9. Lessee's Purchase in Certain Circumstances............... 42
Section 6.10. Owner Participant as Affiliate of Lessee................. 44
Section 6.11. No Impairment of Warranties.............................. 44
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 7. LESSEE'S INDEMNITIES
Section 7.1. General Tax Indemnity................................... 44
Section 7.2. General Indemnification and Waiver of Certain Claims.... 53
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT
SECTION 9. SUCCESSOR INDENTURE TRUSTEE
SECTION 10. MISCELLANEOUS
Section 10.1. Consents................................................ 58
Section 10.2. Refinancing............................................. 58
Section 10.3. Amendments and Waivers.................................. 61
Section 10.4. Notices................................................. 61
Section 10.5. Survival................................................ 64
Section 10.6. No Guarantee of Residual Value or Debt.................. 64
Section 10.7. Successors and Assigns.................................. 64
Section 10.8. Business Day............................................ 65
Section 10.9. Governing Law........................................... 65
Section 10.10. Severability............................................ 65
Section 10.11. Counterparts............................................ 65
Section 10.12. Headings and Table of Contents.......................... 65
Section 10.13. Limitations of Liability................................ 65
Section 10.14. Maintenance of Non-Recourse Debt........................ 66
Section 10.15. Ownership of and Rights in Units........................ 67
Section 10.16. No Petition............................................. 67
Section 10.17. Consent To Jurisdiction................................. 68
Section 10.18. WAIVER OF JURY TRIAL.................................... 68
</TABLE>
APPENDICES, EXHIBITS AND SCHEDULES
- ----------------------------------
Appendix A - Definitions
Exhibit A-1 - Form of Certificate of Insurance Broker Confirming
Insurance Coverage
(Primary Liability)
Exhibit A-2 - Form of Certificate of Insurance Broker Confirming
Insurance Coverage
(Excess Liability)
Exhibit B - Insurance Requirements
Schedule 1 - Description of Equipment, Designation of Basic Group
Designation of
Functional Groups, and Equipment Cost
Schedule 1A - List of Existing Car Service Contracts
Schedule 2 - Commitment Percentage and Payment Information for
Participants
Schedule 3 - Schedule of Basic Rent Payments
Schedule 4 - Schedule of Stipulated Loss Value and Termination
Value
Schedule 5 - Terms of Equipment Notes
Schedule 6 - Purchase Information
ii
<PAGE>
PARTICIPATION AGREEMENT (1998-1)
This PARTICIPATION AGREEMENT (1998-1), dated as of August 1, 1998 (this
"Agreement"), is by and among (i) General American Railcar Corporation II, a
Delaware corporation (together with its permitted successors and assigns, the
"Lessee"), (ii) General American Transportation Corporation, a New York
corporation, as Manager (together with its permitted successors and assigns, the
"Manager") under the Management Agreement (such term and other defined terms
used herein shall have the meanings assigned thereto in Section 1 below), (iii)
[Owner Trustee], not in its individual capacity except as expressly provided
herein, but solely as trustee under the Trust Agreement (together with its
permitted successors and assigns, the "Owner Trustee"), (iv) [Owner
Participant], a ___________ corporation (together with its permitted successors
and assigns, the "Owner Participant"), (v) The First National Bank of Chicago,
as trustee under the Indenture (together with its permitted successors and
assigns, the "Indenture Trustee"), and (vi) The First National Bank of Chicago,
not in its individual capacity except as expressly provided herein but solely as
Pass Through Trustee under the Pass Through Trust Agreement (herein in such
capacity, together with its permitted successors and assigns, called the "Pass
Through Trustee" or the "Loan Participant"). The Owner Participant and the Loan
Participant are sometimes hereinafter referred to collectively as the
"Participants".
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Owner Participant has entered into the Trust Agreement pursuant to which the
Owner Trustee agrees, among other things, to hold the Trust Estate for the
benefit of the Owner Participant thereunder on the terms specified in the Trust
Agreement, subject, however, to the Lien created under the Indenture and,
subject to the terms and conditions hereof, to purchase the Equipment described
in Schedule 1 hereto from the Lessee and concurrently therewith to lease such
Equipment to the Lessee;
WHEREAS, pursuant to the Pass Through Trust Agreement, on the Closing
Date, a grantor trust will be created to facilitate the financing contemplated
hereby;
WHEREAS, on or prior to the Closing Date, the Owner Trustee and the
Indenture Trustee will enter into the Indenture, pursuant to which the Owner
Trustee will agree, among other things, to issue to the Pass Through Trustee, as
Loan Participant, the Equipment Notes as evidence of the loan made by the Loan
Participant in connection with the financing of the Equipment Cost;
WHEREAS, General American Transportation Corporation, a New York
corporation ("GATC"), will on the Closing Date, pursuant to the Transfer and
Contribution Agreement (i) sell to the Lessee all of GATC's right, title and
interest in and to the Equipment, and (ii) contribute to the capital of the
Lessee all of GATC's right, title and interest in and to any and all lease
agreements with customers of GATC in respect of the Equipment and under which
GATC is the Lessor (such lease agreements, together with the other lease
agreements being assigned to the Lessee on
<PAGE>
the Closing Date pursuant to the Transfer and Contribution Agreement are
hereinafter referred to collectively as the "Existing Car Service Contracts");
WHEREAS, pursuant to the terms of the Trust Agreement, the Owner
Participant has authorized and directed the Owner Trustee, immediately following
the transactions described in the preceding paragraph, (i) to accept delivery
from the Lessee of the Bill of Sale evidencing the purchase and transfer of
title of each Unit to the Owner Trustee and (ii) to execute and deliver the
Lease, pursuant to which, subject to the terms and conditions set forth therein,
the Owner Trustee agrees to lease to the Lessee, and the Lessee agrees to lease
from the Owner Trustee, each Unit to be delivered on the Closing Date, such
lease to be evidenced by the execution and delivery of a Lease Supplement
covering such Units;
WHEREAS, concurrently with the execution and delivery of this Agreement,
GATC and the Owner Participant have entered into the Tax Indemnity Agreement
relating to the Equipment;
WHEREAS, the proceeds from the sale of the Equipment Notes to the Loan
Participant will be applied, together with the equity contribution made by the
Owner Participant pursuant to this Agreement, to effect the purchase of the
Equipment by the Owner Trustee as contemplated hereby; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Lessee and the Manager have entered into the Management Agreement, pursuant
to which the Manager will provide management services with respect to the
Equipment.
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, receipt of which is acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS AGREEMENT.
Unless otherwise defined herein or unless the context shall otherwise
require, capitalized terms used in this Agreement shall have the meanings
assigned to such terms in Appendix A hereto. Unless otherwise indicated, all
references herein to Sections, Schedules and Exhibits refer to Sections,
Schedules and Exhibits of this Agreement.
SECTION 2. SALE AND PURCHASE; PARTICIPATION IN EQUIPMENT COST; CLOSING;
TRANSACTION COSTS.
2
<PAGE>
Section 2.1. Sale and Purchase. Subject to the terms and conditions
-----------------
hereof and on the basis of the representations and warranties set forth herein,
the Lessee agrees to sell to the Owner Trustee, and the Owner Trustee agrees to
purchase from the Lessee, on the Closing Date and immediately following
consummation of the transactions described in the fourth recital clause above,
the Units described in Schedule 1, and in connection therewith, the Owner
Trustee agrees to pay to the Lessee the cost for each of the Units as specified
in Schedule 1; provided, however, that the Owner Trustee shall not be obligated
to purchase on the Closing Date any Unit that is destroyed, damaged, defective,
in unsuitable condition or otherwise unacceptable to the Lessee for lease
pursuant to the Lease. On the Closing Date, the Lessee shall deliver the Units
to the Owner Trustee, and the Owner Trustee shall accept such delivery.
Section 2.2. Participation in Equipment Cost.
-------------------------------
(a) Equity Participation. On the Closing Date, subject to the terms
--------------------
and conditions hereof and on the basis of the representations and warranties set
forth herein, the Owner Participant agrees to participate in the payment of the
Equipment Cost for the Units delivered on the Closing Date by making an equity
investment in the beneficial ownership of such Units in the amount equal to the
product of the aggregate Equipment Cost for the Units delivered on the Closing
Date and the percentage set forth opposite the Owner Participant's name in
Schedule 2 (the "Owner Participant's Commitment"). The aggregate amount of the
Owner Participant's Commitment plus the aggregate amount of Transaction Costs
payable by the Owner Participant shall not exceed the sum of (x) the Owner
Participant's Commitment and (y) 1% of the Equipment Cost. The Owner
Participant's Commitment shall be paid to the Indenture Trustee to be held (but
not as part of the Indenture Estate) and applied on behalf of the Owner Trustee
toward payment of the Equipment Cost as provided in Section 2.3.
(b) Debt Participation. On the Closing Date, subject to the terms
------------------
and conditions hereof and on the basis of the representations and warranties set
forth herein, the Loan Participant agrees to participate in the payment of the
Equipment Cost for the Units delivered on the Closing Date by making a secured
loan, not from its own funds but solely from funds available to it for such
purpose under the Pass Through Trust to be evidenced by the Equipment Notes, to
the Owner Trustee in the amount equal to the product of the aggregate Equipment
Cost for the Units delivered on the Closing Date and the percentage set forth
opposite such Loan Participant's name in Schedule 2 (the "Loan Participant's
Commitment"). The Equipment Notes shall bear interest at the Debt Rate.
3
<PAGE>
Section 2.3. Closing Date; Procedure for Participation.
-----------------------------------------
(a) Notice of Closing Date. Not later than the Pricing Date, the
----------------------
Lessee shall give the Owner Participant, the Indenture Trustee, the Owner
Trustee and the Loan Participant notice (a "Notice of Delivery") by telex,
telegraph, facsimile or other form of telecommunication or telephone (to be
promptly confirmed in writing) of the Closing Date, which Notice of Delivery
shall specify in reasonable detail the number and type of Units to be delivered
on such date, the aggregate Equipment Cost of such Units, and the respective
amounts of the Owner Participant's Commitment and the Loan Participant's
Commitment required to be paid with respect to such Units. Prior to 12:00 noon,
[New York, New York] time, on the Closing Date, subject to the satisfaction (or
waiver) of the respective conditions specified in Section 4, the Owner
Participant shall make the amount of the Owner Participant's Commitment required
to be paid on the Closing Date available to the Indenture Trustee, and
immediately prior to the delivery and acceptance of the Units as specified in
Section 2.3(b), the Loan Participant shall make the amount of such Loan
Participant's Commitment for the Equipment Cost required to be paid on the
Closing Date available to the Indenture Trustee, in either case, by transferring
or delivering such amounts, in funds immediately available on the Closing Date,
to the Indenture Trustee, either directly to, or for deposit in, the Indenture
Trustee's account at The First National Bank of Chicago, One First National
Plaza, Suite 0126, Chicago, Illinois 60670-0126, ABA No. [_________], Account
[_________], Att.: [_________], Trust No. 1998-1. The making available by the
Owner Participant of the amount of the Owner Participant's Commitment for the
Equipment Cost shall be deemed a waiver of the Notice of Delivery by the Owner
Participant and the Owner Trustee. The making available by the Loan Participant
of the amount of the Loan Participant's Commitment for the Equipment Cost shall
be deemed a waiver of the Notice of Delivery by the Loan Participant and the
Indenture Trustee.
(b) Closing. The closing of the transactions contemplated hereby
-------
(the "Closing") shall take place at 11:00 a.m., [_________] time, on the
-------
Closing Date at the offices of [________________________], or at such other
place or time as the parties hereto shall agree. Upon receipt by the Indenture
Trustee on the Closing Date of the full amount of the Owner Participant's
Commitment and the Loan Participant's Commitment in respect of the Units
delivered on the Closing Date, the Indenture Trustee, on behalf of the Owner
Trustee, shall, subject to the conditions set forth in Sections 4.1 and 4.3
having been fulfilled to the satisfaction of the Participants or waived by the
Participants, pay to the Lessee from the funds then held by it, in immediately
available funds, an amount equal to the Equipment Cost for the Units delivered
on the Closing Date, and simultaneously therewith, (i) the Lessee shall pay to
GATC pursuant to the Transfer and Contribution Agreement an amount equal to the
Equipment Cost for the Units purchased on the Closing Date, (ii) GATC shall
pursuant to the Transfer and Contribution Agreement deliver the Units to the
Lessee by delivery of the GATC Bill of Sale and shall make a capital
contribution of the Existing Car Service Contracts to the Lessee under the GATC
Assignment, (iii) the Lessee shall deliver the Units to the Owner Trustee, (iv)
the
4
<PAGE>
Owner Trustee shall, pursuant to the Lease, lease and deliver the Equipment
to the Lessee, and the Lessee, pursuant to the Lease, shall accept delivery of
the Units under the Lease, such lease, delivery and acceptance of the Units
under the Lease shall be conclusively evidenced by the execution and delivery by
the Lessee and the Owner Trustee of a Lease Supplement covering the Equipment so
delivered as described in Schedule 1, and (v) the Owner Trustee shall execute
and deliver an Equipment Note relating to such Lease Supplement to the Loan
Participant. Each of the Lessee, the Owner Participant, the Owner Trustee, the
Loan Participant and the Indenture Trustee hereby agrees to take all actions
required to be taken by it in connection with the Closing as contemplated by
this Section 2.3(b).
Section 2.4. Owner Participant's Instructions to the Owner Trustee;
------------------------------------------------------
Satisfaction of Conditions.
- --------------------------
(a) The Owner Participant agrees that the making available to the
Indenture Trustee of the amount of the Owner Participant's Commitment for the
Units delivered on the Closing Date in accordance with the terms of this Section
2 shall constitute, without further act, authorization and direction by the
Owner Participant to the Owner Trustee, subject, on the Closing Date, to the
conditions set forth in Sections 4.1 and 4.3 having been fulfilled to the
satisfaction of the Owner Participant or waived by the Owner Participant, to
take the actions specified in [Section 2.1] of the Trust Agreement with respect
to the Units on the Closing Date.
(b) The Owner Participant agrees that the authorization by the Owner
Participant or its counsel to the Indenture Trustee to release to the Lessee the
Owner Participant's Commitment with respect to the Units delivered on the
Closing Date shall constitute, without further act, notice and confirmation that
all conditions to closing set forth in Sections 4.1 and 4.3 were either met to
the satisfaction of the Owner Participant or, if not so met, were waived by the
Owner Participant.
Section 2.5. Expenses.
--------
(a) If the Owner Participant shall have made its investment provided
for in Section 2.2 and the transactions contemplated by this Agreement are
consummated, either the Owner Participant will promptly pay, or the Owner
Trustee will promptly pay, with funds the Owner Participant hereby agrees to pay
(which, together with the Owner Participant's Commitment, shall not exceed the
amount set forth in Section 2.2(a)) to the Owner Trustee, the following
("Transaction Costs") if evidenced by an invoice delivered to the Owner
Participant within six (6) months after the Closing Date and approved by the
Lessee (such approval not to be unreasonably withheld or delayed):
(i) the cost of reproducing, printing and filing the Operative
Agreements, the Equipment Notes, the Pass Through Certificates, the
Prospectus relating to the Pass Through Certificates, and the Underwriting
Agreement and all amendments and supplements to the foregoing, including
all costs and fees in connection with the initial filing and recording of
the Lease, the Indenture and
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any other document required to be filed or recorded pursuant to the
provisions hereof or of any other Operative Agreement and the fees and
expenses of the rating agencies in connection with rating the Pass Through
Certificates;
(ii) the reasonable fees and expenses (which shall in no event
exceed [$_______________] in the aggregate) of [___________], special
counsel for the Owner Participant, plus disbursements, for their services
rendered in connection with the negotiation, execution and delivery of this
Agreement and the other Operative Agreements;
(iii) all costs and fees in connection with the qualification of
the Pass Through Certificates under federal or state securities laws in
accordance with the provisions of [Section 9(b)] of the Underwriting
Agreement, including filing fees and the fees and disbursements of Milbank,
Tweed, Hadley & McCloy in connection therewith and in connection with the
preparation of any blue sky memorandum;
(iv) the reasonable fees and expenses of Ernst & Young,
accountants of the Lessee, for their services rendered in connection with
issuing an "agreed upon procedure letter" and "comfort letters" to the
Underwriters and the Owner Participant;
(v) the reasonable fees and expenses of Vedder, Price, Kaufman
& Kammholz, special counsel for GATC and the Lessee, for their services
rendered in connection with the preparation of documentation, negotiation,
execution and delivery of the Underwriting Agreement, this Agreement and
the other Operative Agreements;
(vi) the reasonable fees and expenses of Milbank, Tweed, Hadley
& McCloy, special counsel for the Underwriters, for their services rendered
in connection with the preparation of documentation, negotiation, execution
and delivery of the Underwriting Agreement, this Agreement and the other
Operative Agreements;
(vii) the reasonable fees and expenses of [Alvord & Alvord],
special STB counsel, [ ], special Mexican counsel, and
[ ], special Canadian counsel;
(viii) the reasonable fees and expenses of [____________],
special counsel for the Owner Trustee, for their services rendered in
connection with the negotiation, execution and delivery of this Agreement
and the other Operative Agreements;
(ix) the reasonable fees and expenses of [_______________],
special counsel for the Indenture Trustee, for their services rendered in
connection with the negotiation, execution and delivery of this Agreement
and the other Operative Agreements;
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(x) the commissions payable to the Underwriters in connection
with the sale of the Pass Through Certificates;
(xi) the initial fees and reasonable out-of-pocket expenses of
the Owner Trustee;
(xii) the initial fees and reasonable out-of-pocket expenses of
the Indenture Trustee;
(xiii) the initial fees and reasonable out-of-pocket expenses of
the Pass Through Trustee;
(xiv) the reasonable fees and expenses of Rail Solutions, Inc.
for their services rendered in connection with delivering the Appraisal
required by Section 4.3(a) and for other consulting services; and
(xv) the costs incurred in connection with any adjustment
pursuant to Section 2.6(a).
Except as expressly provided above, Transaction Costs shall not
include internal costs and expenses such as salaries and overhead of whatsoever
kind or nature of, or costs incurred by, parties to this Agreement pursuant to
arrangements with third parties for services (other than those expressly
referred to above).
(b) Upon the consummation of the transactions contemplated by this
Agreement, the Lessee agrees to pay when due: (i) the reasonable expenses
(including reasonable legal fees and expenses) of the Owner Trustee, the
Indenture Trustee and the Participants incurred subsequent to the delivery of
the Equipment on the Closing Date, in connection with any supplements,
amendments, modifications, alterations, waivers or consents (whether or not
consummated) of any of the Operative Agreements which are (1) requested by, or
necessitated by action or inaction on the part of, the Lessee or by any
applicable law or regulation (other than laws or regulations solely relating to
the business of the Lessor or the Owner Participant) or entered into in
connection with, or as a result of, a Lease Default or (2) necessary or required
to effectuate the purpose or intent of any Operative Agreement (including costs
incurred in connection with any adjustment pursuant to Section 2.6); and (ii)
the ongoing reasonable fees and expenses (including reasonable legal fees and
expenses) of the Owner Trustee under the Trust Agreement; (iii) the ongoing
reasonable fees and expenses of the Indenture Trustee under the Operative
Agreements;
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and (iv) the ongoing reasonable fees and expenses of the Pass Through Trustee
under the Pass Through Trust Agreement.
(c) If the transactions contemplated hereby are not consummated as a
result of bad faith on the part of the Owner Participant or default by the Owner
Participant in its obligations to consummate the transactions contemplated
hereby, the Owner Participant shall pay any and all Transaction Costs (other
than any Transaction Costs incurred in connection with items that will benefit
the Lessee in connection with the closing of the transactions contemplated
hereby with an owner participant other than the Owner Participant). If the
transactions contemplated hereby are not consummated due to any other reason,
the Lessee shall pay all Transaction Costs; provided, however, that in the case
of a failure to close due to a change in tax law or regulation the Owner
Participant shall be responsible for its own fees and expenses (including fees
and expense of its counsel and out of pocket costs).
(d) Notwithstanding the foregoing provisions of this Section 2.5,
except as specifically provided in Section 7.2 or in any other Operative
Agreement, the Lessee shall have no liability for any costs or expenses relating
to any voluntary transfer of the Owner Participant's interest in the Equipment
including any transfer prior to the Closing Date of the Owner Participant's
obligation to fund its participation pursuant to Section 2 (other than in
connection with any transfer pursuant to Sections 10.2, 11.4, 22.1 or 22.3 of
the Lease or Section 6.9 hereof or following a Lease Event of Default), and no
such costs or expenses shall constitute Transaction Costs, and the Lessee will
not have any obligation with respect to the costs and expenses resulting from
any voluntary transfer of any equity interest by any transferee of the Owner
Participant, whenever occurring (other than in connection with a Lease Event of
Default).
(e) In addition, the Lessee agrees to pay all Transaction Costs for
which the Owner Participant is not responsible pursuant to Section 2.5(a).
Section 2.6. Calculation of Adjustments to Basic Rent, Stipulated Loss
---------------------------------------------------------
Value and Termination Value; Confirmation and Verification.
- ----------------------------------------------------------
(a) Calculation of Adjustments. In the event that (A) the Closing
--------------------------
Date is other than August __, 1998, (B) the actual interest rate on the
Equipment Notes is different than the Debt Rate or the amortization of the
Equipment Notes is different from that set forth on Schedule 5, (C) a
refinancing contemplated by Section 10.2 occurs, (D) the actual aggregate
Equipment Cost or composition of the Units is different from that set forth on
Schedule 1, (E) the actual aggregate amount of Transaction Costs is other than
an amount equal to 1% of the Total Equipment Cost, (F) there is any change in,
or cost relating to a revision in, the structure of the transaction contemplated
hereby as required by any of the Rating Agencies, or (G) there is any change in
the Code or in the regulations promulgated thereunder, which change is enacted
(in the case of the Code) or promulgated and adopted (in the case of such
regulations) and effective after the date hereof and
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prior to the Pricing Date (provided that the Owner Participant or the Lessee, as
the case may be, shall have provided notice to the other prior to the Pricing
Date), and which change alters or eliminates the tax assumptions used in
calculating Basic Rent, Stipulated Loss Values, Termination Values and Early
Purchase Price, then, in each such case, the Owner Participant shall recalculate
the payments or amounts, as the case may be, of Basic Rent, Stipulated Loss
Values, Termination Values and Early Purchase Price, (i) to preserve the Net
Economic Return that the Owner Participant would have realized had such event
not occurred, and (ii) to minimize to the greatest extent possible, consistent
with the foregoing clause (i), the present value (discounted monthly at an
interest rate per annum equal to the Debt Rate) of the payments of Basic Rent.
Any such recalculation performed due to the occurrence of an event described in
clause (B), (D) or (G) above shall be made prior to the Pricing Date, and any
such recalculation performed due to the occurrence of an event described in
clause (A) or (F) above shall be made prior to the Closing Date. In performing
any such recalculation and in determining the Owner Participant's Net Economic
Return, the Owner Participant shall utilize the same methods and assumptions
originally used in making the computations of Basic Rent, Stipulated Loss
Values, Termination Values and Early Purchase Price with respect to the Basic
Term initially set forth in Schedules 3, 4 and 6 (other than those assumptions
changed as a result of any of the events described in clauses (A) through (G) of
the preceding sentence necessitating such recalculation; it being agreed that
such recalculation shall reflect solely any changes of assumptions or facts
resulting directly from the event or events necessitating such recalculation).
Such adjustments shall comply (to the extent the original structure complied)
with Section 467 of the Code and the requirements of Sections 4.02(5), 4.07(1)
and (2) and 4.08(1) of Revenue Procedure 75-28, as amended, calculated, except
in the case of a refinancing pursuant to Section 10.2, without taking into
account any change after the Pricing Date in or to (i) Section 467 of the Code
(and any regulations thereunder), or (ii) Section 4.08(l) of Revenue Procedure
75-28.
(b) Confirmation and Verification. Upon completion of any
-----------------------------
recalculation described in Section 2.6(a), a duly authorized officer of the
Owner Participant shall provide a certificate to the Lessee either (x) stating
that the payments of Basic Rent, Stipulated Loss Values, Termination Values and
Early Purchase Price with respect to the Basic Term as are then set forth in
Schedules 3, 4 and 6 do not require change, or (y) setting forth such
adjustments to the payments of Basic Rent, Stipulated Loss Values, Termination
Values or Early Purchase Price with respect to the Basic Term as have been
calculated by the Owner Participant in accordance with Section 2.6(a). Such
certificate shall describe in reasonable detail the basis for any such
adjustments, and any such adjustment and corresponding adjustments to the
Stipulated Loss Values, Termination Values and Early Purchase Price will be
computed on a basis consistent with that used by the Owner Participant in the
original calculation of Basic Rent. Any such adjustment shall be deemed
approved upon notice of such approval by the Lessee to the Owner Participant or
on the thirty-first (31st) day following delivery of such certificate by the
Owner Participant to the Lessee unless the Lessee, prior to such day, requests
verification pursuant to
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the following sentence, and shall become effective, in the case of adjustments
made pursuant to clause (A), (B), (D), (E), (F) or (G) of the first sentence
of Section 2.6(a), as of the earlier of (i) the first Rent Payment Date and (ii)
the date the Lessee approves or has been deemed to have approved such adjustment
(except that any such adjustment to Stipulated Loss Value shall be effective [as
of the Closing Date]), and, in the case of an adjustment made pursuant to clause
(C) of the first sentence of Section 2.6(a), as of the date of the refinancing.
If the Lessee shall so request, the recalculation of any such adjustments
described in this Section 2.6 shall be verified by a nationally recognized firm
of independent accountants selected by the Owner Participant and reasonably
acceptable to the Lessee, and any such recalculation of such adjustment as so
verified shall be binding on the Lessee and the Owner Participant. Such
accounting firm shall be requested to make its determination within 30 days. The
Owner Participant shall provide to a representative of such accounting firm, on
a confidential basis, such information as it may reasonably require, including
the original assumptions used by the Owner Participant and the methods used by
the Owner Participant in the original calculation of, and any recalculation of,
Basic Rent, Stipulated Loss Values, Termination Values and Early Purchase Price
and such other information as is necessary to determine whether the computation
is accurate and in conformity with the provisions of this Agreement, provided
that in no event shall the Owner Participant have any obligation to provide the
Lessee with any such information; and provided, further, that the Owner
Participant shall have no obligation to disclose to the Lessee, such accounting
firm or any other Person, or to permit the Lessee, such accounting firm or any
other Person, to examine any federal, state or local income tax returns of the
Owner Participant, or books or accounting records related thereto, for any
taxable year. Subject to the immediately following sentence, the costs of such
verification shall be borne by the Lessee. If such accounting firm's
verification shall result in an increase in the net present value (expressed as
a percentage of Total Equipment Cost) of the Basic Rent (discounted monthly at a
rate per annum equal to the Debt Rate) under the Lease calculated as of the
Closing Date, as compared to the net present value of Basic Rent proposed by the
Owner Participant, by more than the greater of (i) ten basis points or (ii) 5%
of the proposed adjustment, then the Owner Participant agrees to reimburse the
Lessee for any amounts paid for such verification. Any revised adjustment
resulting from such verification shall become effective on the next Rent Payment
Date after such verification has been concluded (except that, in the case of
adjustments made pursuant to clause (A), (B), (D), (E), (F) or (G) of the first
sentence of Section 2.6(a), any such adjustment to Stipulated Loss Value shall
be effective as of the Closing Date and, in the case of an adjustment pursuant
to clause (C) of the first sentence of Section 2.6(c), as of the date of the
refinancing), and shall take into account any underpayment or overpayment,
together with interest thereon at the Debt Rate, resulting from an earlier
effectiveness of the original adjustment.
(c) Compliance. Notwithstanding the foregoing, any adjustment made to
----------
the payments of Basic Rent, Stipulated Loss Values, Termination Values or Early
Purchase Price with respect to the Basic Term, pursuant to the foregoing, shall
comply with the following requirements: (i) each installment of Basic Rent, as
so adjusted, under any circumstances and in any event, will be in an
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amount at least sufficient for the Owner Trustee to pay in full as of the due
date of such installment any payment of principal of and interest on the
Equipment Notes required to be paid on the due date of such installment of Basic
Rent in accordance with the Scheduled Amortization, and (ii) Stipulated Loss
Value, Termination Value and Early Purchase Price, as so adjusted, under any
circumstances and in any event, will be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with an
Event of Loss or a termination of the Lease, as the case may be, will be at
least sufficient to pay in full, as of the date of payment thereof, the
aggregate unpaid principal of and all unpaid interest on the Equipment Notes in
accordance with the Scheduled Amortization accrued to the date on which
Stipulated Loss Value, Termination Value or Early Purchase Price, as the case
may be, is paid in accordance with the terms of the Lease.
(d) Invoices. All invoices in respect of Transaction Costs to the
--------
extent not delivered on the Closing Date shall be directed to the Owner
Participant at the address set forth in Section 10.4, with a copy to the Lessee.
Section 2.7. Postponement of Closing Date.
----------------------------
(a) The scheduled Closing Date may be postponed from time to time with
respect to all of the Units for any reason (but to no later than September 30,
1998) if the Lessee gives the Owner Participant, the Indenture Trustee, the Pass
Through Trustee, the Owner Trustee and the Underwriters telex, telegraphic,
facsimile or telephonic (confirmed in writing) notice of the postponement and
notice of the date to which such Closing Date has been postponed, the notice of
postponement to be received by each party no later than 5:30 p.m., [New York,
New York] time, on the originally scheduled Closing Date, and the term "Closing
Date" as used in this Agreement shall mean the postponed "Closing Date".
(b) In the event of any postponement of the originally scheduled
Closing Date pursuant to this Section 2.7 (the originally scheduled Closing Date
being referred to as the "Scheduled Closing Date" for the purposes of this
Section 2.7): (i) the Lessee will reimburse the Owner Participant for the loss
of the use of its funds with respect to each such Unit occasioned by such
postponement or failure to deliver or accept (unless such failure to accept is
caused by a default by the Owner Participant hereunder or by the Owner Trustee
(acting pursuant to instructions from the Owner Participant) under the Trust
Agreement, the Lease or the Indenture) by paying to the Owner Participant on
demand interest at the Debt Rate, for the period from and including the
Scheduled Closing Date to but excluding the earlier of the date upon which such
funds are returned to the Owner Participant (unless such funds are returned
after 1:00 p.m. ([New York, New York] time) in which case such date of return
shall be included) or the actual Closing Date; provided that the Lessee shall in
any event pay to the Owner Participant at least one day's interest at the Debt
Rate on the amount of such funds, unless the Owner Participant shall have
received, prior to 12:00 noon ([New York, New York] time) on the Business Day
preceding the
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Scheduled Closing Date, a notice of postponement of the Scheduled Closing Date
pursuant to Section 2.7(a), and (ii) the Indenture Trustee will return not later
than 10:00 a.m. [New York, New York] time, on the first Business Day following
the Scheduled Closing Date, any funds which it shall have received from the
Owner Participant as the Owner Participant's Commitment for such Units, absent
joint instructions from the Lessee and the Owner Participant to retain such
funds until the specified date of postponement established under Section 2.7(a).
(c) The Indenture Trustee agrees that, in the event it has received
telephonic notice (to be confirmed promptly in writing) from the Lessee on the
Scheduled Closing Date that such Scheduled Closing Date is to be postponed, it
will, if instructed in the aforementioned notice from the Lessee (which notice
shall specify the Specified Investments to be purchased), use reasonable best
efforts to invest, at the risk of the Lessee (except as provided below with
respect to the Indenture Trustee's gross negligence or willful misconduct), the
funds received by it from the Owner Participant with respect to the Owner
Participant's Commitment in Specified Investments in accordance with the
Lessee's instructions. Any such Specified Investments purchased by the
Indenture Trustee upon instructions from the Lessee shall be held in trust by
the Indenture Trustee (but not as part of the Indenture Estate under the
Indenture) for the benefit of the Owner Participant whose funds are invested in
Specified Investments upon instructions from the Lessee, and any net profits on
the investment of such funds (including interest), if any, shall be for the
account of and shall on the Closing Date, or on the date such funds are returned
to the Owner Participant, be paid over to, the Lessee. The Lessee shall pay to
the Indenture Trustee on the Closing Date (if such Unit or Units are delivered
and accepted pursuant hereto) the amount of any net loss on the investment of
such funds invested at the instruction of the Lessee. If the funds furnished by
the Owner Participant with respect to such Unit or Units are required to be
returned to the Owner Participant, the Lessee shall, on the date on which such
funds are so required to be returned, reimburse the Indenture Trustee, for the
benefit of the Owner Participant, for any net losses incurred on such
investments. The Indenture Trustee shall not be liable for failure to invest
such funds or for any losses incurred on such investments except for its own
willful misconduct or gross negligence. In order to obtain funds for the
payment of Equipment Cost for such Unit or Units or to return funds furnished by
the Owner Participant to the Indenture Trustee for the benefit of the Owner
Participant with respect to such Unit or Units, the Indenture Trustee is
authorized to sell any Specified Investments purchased as aforesaid with the
funds received by it from the Owner Participant in connection with such Unit or
Units.
(d) Notwithstanding the provisions of Section 2.7(a), the Owner
Participant shall not be under any obligation to make the Owner Participant's
Commitment available beyond 12:00 noon ([New York, New York] time) on September
30, 1998.
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SECTION 3. REPRESENTATIONS AND WARRANTIES.
Section 3.1. Representations and Warranties of the Owner Trustee. The
---------------------------------------------------
Owner Trustee, in its individual capacity (except with respect to clauses (c)
and (k) (to the extent applicable to the Owner Trustee in its capacity as Owner
Trustee) below) and as Owner Trustee with respect to clauses (c), (e) (to the
extent provided therein), (f) and (k) (to the extent applicable to the Owner
Trustee in its capacity as Owner Trustee) below, represents and warrants to each
of the Owner Participant, the other Trustees and the Lessee, notwithstanding the
provisions of Section 10.13 or any similar provision in any other Operative
Agreement, that, as of the date hereof:
(a) the Owner Trustee in its individual capacity (i) is a [national
banking association] duly organized and validly existing in good standing under
the laws of [the United States of America], (ii) has full corporate power and
authority to carry on its business as now conducted and execute, deliver and
perform its obligations hereunder and under the Trust Agreement and (iii)
(assuming due authorization, execution and delivery of the Trust Agreement by
the Owner Participant) has full power and authority, as Owner Trustee and/or, to
the extent expressly provided herein or therein, in its individual capacity,
execute, deliver and perform its obligations under each of the Owner Trustee
Agreements;
(b) (i) the Owner Trustee, in its individual capacity, has duly
authorized, executed and delivered the Trust Agreement, (ii) (assuming the due
authorization, execution and delivery of the Trust Agreement by the Owner
Participant) the Owner Trustee in its trust capacity and, to the extent
expressly provided therein, in its individual capacity, has, or on or prior to
the Closing Date will have, duly authorized, executed and delivered each of the
other Owner Trustee Agreements and, as of the Closing Date, the Equipment Notes,
the Lease Supplements and the Indenture Supplements to be delivered on the
Closing Date, and (iii) the Trust Agreement constitutes a legal, valid and
binding obligation of the Owner Trustee, in its individual capacity, enforceable
against it in its individual capacity in accordance with the terms thereof
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity;
(c) assuming the due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee Agreements
(other than the Trust Agreement) to which it is a party constitutes, or when
entered into will constitute, a legal, valid and binding obligation of the Owner
Trustee, enforceable against it in accordance with the terms thereof, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally and
by general principles of equity;
(d) neither the execution and delivery by the Owner Trustee, in its
individual capacity or as Owner Trustee, as the case may be, of the Owner
Trustee Agreements or the Equipment Notes to be delivered on the Closing Date,
nor the consummation by the Owner Trustee, in its individual capacity or as
Owner Trustee, as the case may be, of any of the transactions contemplated
hereby
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or thereby, nor the compliance by the Owner Trustee, in its individual
capacity or as Owner Trustee, as the case may be, with any of the terms and
provisions hereof and thereof, (i) requires or will require any approval of its
stockholders, or approval or consent of any trustees or holders of any
indebtedness or obligations of it in its individual capacity, or (ii) violates
or will violate[ its articles of association] or by-laws, or contravenes or will
contravene any provision of, or constitutes or will constitute a default under,
or results or will result in any breach of, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sale contract, bank loan or credit
agreement, license or other agreement or instrument to which the Owner Trustee
in its individual capacity is a party or by which it or any of its properties
may be bound or affected, or contravenes or will contravene any law,
governmental rule or regulation of the United States of America or the State of
[____________] governing the banking or trust powers of the Owner Trustee, or
any judgment or order applicable to or binding on it;
(e) there are no Taxes payable by the Owner Trustee, either in its
individual capacity or as Owner Trustee, imposed by the State of [____________]
or any political subdivision thereof or by the United States of America in
connection with the execution and delivery by the Owner Trustee in its
individual capacity of the Trust Agreement, and, in its individual capacity or
as Owner Trustee, as the case may be, of this Agreement, the other Owner Trustee
Agreements (other than the Trust Agreement) or the Equipment Notes to be
delivered on the Closing Date solely because the Owner Trustee in its individual
capacity is a [national banking association] with its principal place of
business in [____________] and performs certain of its duties as Owner Trustee
in the State of [____________]; and there are no Taxes payable by the Owner
Trustee, in its individual capacity or as Owner Trustee, as the case may be,
imposed by the State of [____________]or any political subdivision thereof or by
the United States of America in connection with the acquisition of its interest
in the Equipment (other than franchise or other taxes based on or measured by
any fees or compensation received by the Owner Trustee for services rendered in
connection with the transactions contemplated hereby) solely because the Owner
Trustee in its individual capacity is a [national banking association] with its
principal place of business in [____________] and performs certain of its duties
as Owner Trustee in the State of [____________];
(f) there are no pending or, to its knowledge, threatened actions or
proceedings against the Owner Trustee, either in its individual capacity or as
Owner Trustee, before any court or administrative agency which individually or
in the aggregate, if determined adversely to it, would materially adversely
affect the ability of the Owner Trustee, in its individual capacity or as Owner
Trustee, as the case may be, to perform its obligations under the Trust
Agreement, the other Owner Trustee Agreements or the Equipment Notes to be
delivered on the Closing Date;
(g) both its chief executive office, and the place where its records
concerning the Equipment and all its interest in, to and under all documents
relating to the Trust Estate, are located in [____________], and the Owner
Trustee, in its individual capacity, agrees to give the Owner
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Participant, the Indenture Trustee and the Lessee written notice within 30 days
following any relocation of said chief executive office or said place from its
present location;
(h) no consent, approval, order or authorization of, giving of notice
to, or registration with, or taking of any other action in respect of, any
[____________] state or local governmental authority or agency or any United
States federal governmental authority or agency regulating the banking or trust
powers of the Owner Trustee, in its individual capacity, is required for the
execution and delivery of, or the carrying out by, the Owner Trustee in its
individual capacity or as Owner Trustee, as the case may be, of any of the
transactions contemplated hereby or by the Trust Agreement or of any of the
transactions contemplated by any of the other Owner Trustee Agreements, other
than any such consent, approval, order, authorization, registration, notice or
action as has been duly obtained, given or taken;
(i) on the Closing Date, the Owner Trustee's right, title and interest
in and to the Equipment delivered on the Closing Date shall be free and clear of
any Lessor's Lien attributable to the Owner Trustee in its individual capacity;
(j) proceeds received by the Owner Trustee from the Owner Participant
pursuant to the Trust Agreement will be administered by it in accordance with
[Article III of the Trust Agreement];
(k) the Owner Trustee shall receive from the Lessee such title as was
conveyed to it by the Lessee, subject to the rights of the Owner Trustee and the
Lessee under the Lease and the Lien created pursuant to the Indenture and the
Indenture Supplement in respect of the Units delivered on the Closing Date, and
there will be no Lessor's Liens attributable to the Owner Trustee on the
Equipment or any interest therein or on the Trust Estate; and
(l) to its knowledge, no Indenture Default has occurred and is
continuing.
Section 3.2. Representations and Warranties of the Lessee. The Lessee
--------------------------------------------
represents and warrants to each of the Trustees and the Participants, as of the
date hereof:
(a) the Lessee is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware, is duly licensed or
qualified and in good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on its ability to carry on its
business as now conducted or to enter into and perform its obligations under the
Lessee Agreements, is a special purpose corporation organized to enter into the
transactions contemplated by this Agreement and similar railcar financings, has
the corporate power and authority to sell the Equipment to the Owner Trustee and
to carry on its business as now conducted, has the requisite power and authority
to execute, deliver and perform its obligations under the Lessee Agreements and
has conducted no business or operations prior to the date hereof (other than
those associated with its organization);
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(b) the Lessee Agreements have been duly authorized by all necessary
corporate action (including the requisite approval of its sole stockholder),
this Agreement has been duly executed and delivered (and in the case of the
other Lessee Agreements, such other Lessee Agreements will on the Closing Date
have been duly executed and delivered) by the Lessee, and constitutes (and in
the case of the other Lessee Agreements, such other Lessee Agreements will on
the Closing Date constitute) the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their respective terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity;
(c) the execution, delivery and performance by the Lessee of each
Lessee Agreement and compliance by the Lessee with all of the provisions thereof
do not and will not contravene any law or regulation, or any order of any court
or governmental authority or agency applicable to or binding on the Lessee or
any of its properties, or contravene the provisions of, or constitute a default
by the Lessee under, or result in the creation of any Lien (except for Permitted
Liens) upon the property of the Lessee under its certificate of incorporation or
by-laws or any indenture, mortgage, contract or other agreement or instrument to
which the Lessee is a party or by which the Lessee or any of its properties may
be bound or affected;
(d) there are no proceedings pending or, to the knowledge of the
Lessee, threatened against the Lessee in any court or before any governmental
authority or arbitration board or tribunal. The Lessee is not subject to any
order of any court or governmental authority or arbitration board or tribunal;
(e) the unaudited balance sheet of the Lessee as at the Closing Date
fairly presents, in conformity with generally accepted accounting principles
applied on a pro forma basis, the pro forma financial position of the Lessee as
of such date;
(f) no consent, approval or authorization of, or filing, registration
or qualification with, or the giving of notice to, any trustee or any holder of
indebtedness of the Lessee or any governmental authority on the part of the
Lessee is required in connection with the execution and delivery by the Lessee
of the Lessee Agreements or in order for the Lessee to perform its obligations
thereunder in accordance with the terms thereof, other than notices required to
be filed with the STB and the Registrar General of Canada, which notices shall
have been filed on the Closing Date, it being understood that the registration
of the issuance and sale of the Pass Through Certificates to be issued pursuant
to the provisions of the Pass Through Trust Agreements under the Securities Act
of 1933, as amended, and under the securities laws of any state in which the
Pass Through Certificates may be offered for sale if the laws of such state
require such action has been duly accomplished and the qualification of the Pass
Through Trust Agreement under the Trust Indenture Act of 1939, as amended, has
been duly obtained;
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(g) the Lease, the Indenture, the Memorandum of Intercreditor
Agreement, the Lease Supplements in respect of the Units delivered on the
Closing Date and the Indenture Supplements in respect of the Units delivered on
the Closing Date will on or before the Closing Date be duly filed with the STB
pursuant to 49 U.S.C. (S)11301 and deposited with the Registrar General of
Canada pursuant to Section 105 of the Canada Transportation Act, and such filing
with the STB pursuant to 49 U.S.C. (S)11301 will perfect the Owner Trustee's,
the Indenture Trustee's and the Collateral Agent's rights in such Operative
Agreements and in the Units, and such deposit with the Registrar General of
Canada will perfect the Owner Trustee's, the Indenture Trustee's and the
Collateral Agent's rights in such Operative Agreements and in the Units and no
other filing, recording or deposit with, or giving of notice to any other
federal, state, provincial or local government or agency thereof, or any other
action, is necessary in order to protect the rights of the Owner Trustee, the
Indenture Trustee and the Collateral Agent in such Operative Agreements or in
such Units in the United States, any state thereof, the District of Columbia or
to protect the rights of the Owner Trustee, the Indenture Trustee and the
Collateral Agent in such Operative Agreements or in such Units in Canada or any
province thereof;
(h) the Equipment is covered by the insurance required by Section 12
of the Lease, and all premiums due prior to the Closing Date in respect of such
insurance shall have been paid in full and such insurance is in full force and
effect;
(i) no Lease Default has occurred and is continuing and, to the
knowledge of Lessee, no Event of Loss, or event which, with the giving of
notice, the passage of time or both, would constitute an Event of Loss, has
occurred;
(j) the Lessee is not an "investment company" or an "affiliated
person" of an "investment company" within the meaning of the Investment Company
Act of 1940, as amended;
(k) the acquisition by the Owner Participant of the Beneficial
Interest for its own account will not constitute a prohibited transaction within
the meaning of Section 4975(c)(1)(A) through (D) of the Code or Section
406(a)(1)(A) through (D) of ERISA. The representation made by the Lessee in the
preceding clause is made in reliance upon and subject to the accuracy of the
representation of the Owner Participant in Section 3.6(h) of this Agreement;
(l) on the Closing Date, (i) GATC shall have conveyed, and the GATC
Bill of Sale to be delivered on the Closing Date shall convey, to Lessee all
legal and beneficial title to the Units which are being delivered on the Closing
Date, free and clear of all Liens (other than Permitted Liens of the type
described in clause (ii) with respect to the Existing Car Service Contracts, and
in clauses (iv) and (vii) of the definition thereof), and such conveyance will
not be void or voidable under any applicable law; (ii) Lessee shall have, and
the Bill of Sale to be delivered on the Closing Date immediately following the
transactions described in the foregoing clause (i)
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shall convey to the Owner Trustee, all legal and beneficial title to the Units
which are being delivered on the Closing Date, free and clear of all Liens
(other than Permitted Liens of the type described in clause (ii) with respect to
the Existing Car Service Contracts, and in clauses (iv) and (vii) of the
definition thereof), and such conveyance will not be void or voidable under any
applicable law; and (iii) all of the Units shall be subject to sublease by
Sublessees under the Existing Car Service Contracts on rental and other terms
which are no different, taken as a whole, than those for similar railcars in the
rest of the Manager's Fleet;
(m) neither the Prospectus nor any written statement furnished by the
Lessee or on behalf of the Lessee in connection with the negotiation of the
Lease or any other Operative Agreement contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. The assumptions and related
financial information relating to the proposed business and operations of the
Lessee and the Company Fleet which are contained under ["Structuring
Assumptions"] in the Prospectus (the "Structuring Assumptions") have been
prepared in good faith based upon information that the Lessee deems fair and
reasonable, and there are no statements or conclusions in any of the Structuring
Assumptions which are based upon or include information known to the Lessee to
be misleading in any material respect or which fail to take into account
material information known to the Lessee regarding the matters stated therein.
There is no fact which the Lessee has not disclosed in writing which materially
adversely affects or, so far as the Lessee can now reasonably foresee, will
materially affect adversely the properties, business, prospects, profits or
condition (financial or otherwise) of the Lessee;
(n) none of the transactions contemplated by the Operative Agreements
(including, without limitation, the use of the proceeds from the sale of the
Equipment Notes) will result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulations issued pursuant thereto,
including, without limitation, Regulations T, U and X, as applicable, of the
Board of Governors of the Federal Reserve System. None of the proceeds from the
sale of the Equipment Notes will be used to purchase or carry (or refinance any
borrowing the proceeds of which were used to purchase or carry) any "security"
within the meaning of the Securities Exchange Act of 1934, as amended;
(o) the Lessee is not in violation of any term of any charter
instrument, by-law or any other agreement or instrument to which it is a party
or by which it may be bound. The Lessee is in compliance with all laws,
ordinances, governmental rules and regulations to which it is subject, and has
obtained all licenses, permits, franchises and other governmental authorizations
material to the conduct of its business;
(p) on the Closing Date, all sales, use or transfer taxes due and
payable upon the purchase of the Equipment both by Lessee from GATC and the
Owner Trustee from Lessee and upon the lease thereof by the Owner Trustee to the
Lessee will have been paid or such transactions will then be
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exempt from any such taxes, and the Lessee will cause any required forms or
reports in connection with such taxes to be filed in accordance with applicable
laws and regulations. No taxes, fees or other charges in connection with the
execution and delivery of the Operative Agreements or the issuance and sale of
the Equipment Notes to be delivered on the Closing Date are payable;
(q) no broker's or finder's or placement fee or commission will be
payable with respect to the transactions contemplated by the Operative
Agreements as a result of any action by Lessee, except for the fees of GATX
Lease Funding, Inc., which Lessee agrees will be paid by it, and of the
Underwriters, which shall be included in Transaction Costs, and Lessee agrees
that it will hold the Participants, the Owner Trustee and the Indenture Trustee
harmless from any claim, demand or liability for any other broker's or finder's
or placement fees or commission alleged to have been incurred as a result of any
action by Lessee in connection with such transactions;
(r) each Unit of the Equipment, taken as a whole, and each major
component thereof, complies in all material respects with all applicable laws
and regulations, conforms with the specifications for such Unit contained in the
Appraisal referred to in Section 4.3(a) hereof and is substantially complete
such that it is ready and available to operate in commercial service and
otherwise perform the function for which it was designed; and the railcar
identification marks shown on Schedule 1 are the marks presently used on the
Units of Equipment; and
(s) the Lessee is not subject to regulation as a "holding company," an
"affiliate" of a "holding company," or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Section 3.3. Representations and Warranties of the Indenture Trustee.
-------------------------------------------------------
The Indenture Trustee represents and warrants to each of the Owner Participant,
the Owner Trustee, the Loan Participant and the Lessee that, as of the date
hereof:
(a) the Indenture Trustee is a national banking association duly
organized and validly existing and in good standing under the laws of the United
States of America and has the full corporate power, authority and legal right
under the laws of the United States of America pertaining to its banking, trust
and fiduciary powers to execute, deliver and perform its obligations under each
of the Indenture Trustee Agreements;
(b) the execution, delivery and performance by the Indenture Trustee
of each of the Indenture Trustee Agreements have been duly authorized by the
Indenture Trustee and will not violate any applicable law or its articles of
association or by-laws or the provisions of any indenture, mortgage, contract or
other agreement to which it is a party or by which it or any of its properties
may be bound or affected;
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(c) this Agreement has been duly executed and delivered and
constitutes, and each of the other Indenture Trustee Agreements, when executed
and delivered, will constitute the legal, valid and binding obligation of the
Indenture Trustee, enforceable against the Indenture Trustee in accordance with
its terms except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity;
(d) there are no proceedings pending or, to the knowledge of the
Indenture Trustee, threatened, and to the knowledge of the Indenture Trustee
there is no existing basis for any such proceedings, against or affecting the
Indenture Trustee in or before any court or before any governmental authority or
arbitration board or tribunal which, individually or in the aggregate, if
adversely determined, might impair the ability of the Indenture Trustee to
perform its obligations under the Indenture Trustee Agreements;
(e) no authorization or approval or other action by, and no notice to
or filing with, any stockholder, trustee or holder of indebtedness or any
federal or state governmental authority or regulatory body governing the
Indenture Trustee in its trust capacity, is required for the due execution,
delivery and performance by the Indenture Trustee of the Indenture Trustee
Agreements, except as have been previously obtained, given or taken;
(f) the Indenture Trustee is not in default under any of the Indenture
Trustee Agreements; and
(g) neither the Indenture Trustee, nor any Person authorized to act on
behalf of the Indenture Trustee, has directly or indirectly offered any interest
in the Trust Estate or the Equipment Notes or any security similar to either
thereof related to this transaction for sale to, or solicited offers to buy any
of the same from, or otherwise approached or negotiated with respect to any of
the same with, any Person other than the Pass Through Trustee and the
Underwriters.
Section 3.4. Representations, Warranties and Covenants Regarding
---------------------------------------------------
Beneficial Interest and Equipment Notes.
- ---------------------------------------
(a) The Owner Trustee represents and warrants to each of the Lessee,
the other Trustees and the Owner Participant that, as of the date hereof and as
of the Closing Date, neither the Owner Trustee nor any Person authorized or
employed by the Owner Trustee as agent or otherwise in connection with the
placement of the Beneficial Interest or the Equipment Notes or any similar
interest has offered any of the Beneficial Interest or the Equipment Notes or
any similar interest for sale to, or solicited offers to buy any thereof from,
or otherwise approached or negotiated with respect thereto with, any prospective
purchaser.
(b) The Lessee represents and warrants to each of the Trustees and the
Owner Participant that, as of the date hereof and as of the Closing Date,
neither the Lessee nor any Person authorized or
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employed by the Lessee as agent or otherwise in connection with the placement of
the Beneficial Interest or the Equipment Notes or any similar interest has
offered any of the Beneficial Interest or the Equipment Notes or similar
interest for sale to, or solicited offers to buy any thereof from, or otherwise
approached or negotiated with respect thereto with, any Person other than the
Owner Participant and not more than [six (6)] other institutional investors with
respect to the Beneficial Interest, except for the issue and sale of the Pass
Through Certificates as contemplated by the Underwriting Agreement.
(c) Each of the Owner Trustee, the Owner Participant and the Lessee
agrees, as to its own actions only, severally but not jointly, that neither the
Owner Trustee, the Owner Participant nor the Lessee nor anyone acting on behalf
of the Owner Trustee, the Owner Participant or the Lessee will offer the
Beneficial Interest, the Equipment Notes, or any part thereof or any similar
interest for issue or sale to any prospective purchaser, or solicit any offer to
acquire any of the Beneficial Interest, the Equipment Notes, or any part thereof
in violation of Section 5 of the Securities Act of 1933, as amended.
Section 3.5. Representations and Warranties of the Pass Through Trustee.
----------------------------------------------------------
The Pass Through Trustee represents and warrants to each of the Owner
Participant, the other Trustees and the Lessee that, as of the date hereof:
(a) the Pass Through Trustee is a national banking association duly
organized and validly existing in good standing under the laws of the United
States of America and has the full corporate power, authority and legal right
under the laws of the United States of America pertaining to its banking, trust
and fiduciary powers to execute, deliver and perform its obligations under the
Pass Through Trust Agreement, the Pass Through Trust Supplement and this
Agreement;
(b) this Agreement has been, and on the Closing Date, the Pass Through
Trust Agreement and the Pass Through Supplement will have been, duly authorized,
executed and delivered by the Pass Through Trustee; this Agreement constitutes,
and on the Closing Date, the Pass Through Trust Supplement and the Pass Through
Trust Agreement will constitute, the legal, valid and binding obligations of the
Pass Through Trustee, enforceable against the Pass Through Trustee in accordance
with their respective terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity;
(c) the execution, delivery and performance by the Pass Through
Trustee of the Pass Through Trust Agreement, the Pass Through Trust Supplement
and this Agreement, the purchase by the Pass Through Trustee of the Equipment
Notes pursuant to this Agreement, and the issuance of the Pass Through
Certificates pursuant to the Pass Through Trust Agreement and the Pass Through
Trust Supplement, do not contravene any law, rule or regulation of any federal
or Illinois governmental authority or agency regulating the Pass Through
Trustee's banking, trust or
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fiduciary powers or any judgment or order applicable to or binding on the Pass
Through Trustee and do not contravene or result in any breach of, or constitute
a default under, the Pass Through Trustee's articles of association or by-laws
or any agreement or instrument to which the Pass Through Trustee is a party or
by which it or any of its properties may be bound or affected;
(d) neither the execution and delivery by the Pass Through Trustee of
the Pass Through Trust Agreement, the Pass Through Trust Supplement or this
Agreement nor the consummation by the Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or approval
of, the giving of notice to, or the registration with, or the taking of any
other action with respect to, any federal or Illinois governmental authority or
agency regulating the Pass Through Trustee's banking, trust or fiduciary powers;
(e) there are no pending or threatened actions or proceedings against
the Pass Through Trustee before any court or administrative agency which
individually or in the aggregate, if determined adversely to it, would
materially adversely affect the ability of the Pass Through Trustee to perform
its obligations under this Agreement, the Pass Through Trust Supplement or the
Pass Through Trust Agreement;
(f) the Pass Through Trustee is not in default under the Pass Through
Trust Agreement, as supplemented by the Pass Through Trust Supplement;
(g) the Pass Through Trustee does not directly or indirectly control,
and is not directly or indirectly controlled by or under common control with,
the Owner Participant, the Owner Trustee, the Underwriters or the Lessee;
(h) the Pass Through Trustee is purchasing the Equipment Notes for the
purposes contemplated by the Operative Agreements and not with a view to the
transfer or distribution of any Equipment Note to any other Person, except as
contemplated by the Operative Agreements; and
(i) except for the issue and sale of the Pass Through Certificates
contemplated hereby, the Pass Through Trustee has not directly or indirectly
offered any Equipment Note or Pass Through Certificate or any interest in or to
the Trust Estate, the Trust Agreement or any similar interest for sale to, or
solicited any offer to acquire any of the same from, anyone other than the Owner
Trustee and the Owner Participant, and the Pass Through Trustee has not
authorized anyone to act on its behalf to offer directly or indirectly any
Equipment Note, any Pass Through Certificate or any interest in and to the Trust
Estate, the Trust Agreement or any similar interest related to this transaction
for sale to, or to solicit any offer to acquire any of the same from, any Person
other than the Owner Trustee and the Owner Participant.
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Section 3.6. Representations and Warranties of the Owner Participant.
-------------------------------------------------------
The Owner Participant represents and warrants to each of the Trustees and the
Lessee that, as of the date hereof:
(a) the Owner Participant is a [__________________] duly organized,
validly existing and in good standing under the laws of the State of [_________]
and has full corporate power and authority to carry on its business as now
conducted;
(b) the Owner Participant has the requisite power and authority to
execute, deliver and perform its obligations under the Owner Participant
Agreements, and the execution, delivery and performance thereof do not and will
not contravene any law or regulation, or any order of any court or governmental
authority or agency applicable to or binding on the Owner Participant or any of
its properties, or contravene the provisions of, or constitute a default under,
or result in the creation of any Lien (other than such as are created by the
Operative Agreements) upon the Equipment under, its [___________] or
[___________] or any indenture, mortgage, contract or other agreement or
instrument to which the Owner Participant is a party or by which it or any of
its properties may be bound or affected;
(c) the Owner Participant Agreements have been duly authorized by all
necessary actions on the part of the Owner Participant, do not require any
approval not already obtained of the members of the Owner Participant or any
approval or consent not already obtained of any trustee or holders of
indebtedness or obligations of the Owner Participant, have been, or on or before
the Closing Date will be, duly executed and delivered by the Owner Participant
and (assuming the due authorization, execution and delivery by each other party
thereto) constitute, or will constitute, the legal, valid and binding
obligations of the Owner Participant, enforceable against the Owner Participant
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general principles of equity;
(d) no authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery or performance by the Owner Participant of the Trust
Agreement, the Tax Indemnity Agreement or this Agreement;
(e) the Trust Estate is free and clear of any Lessor's Lien
attributable to the Owner Participant;
(f) there are no pending or, to the Owner Participant's knowledge,
threatened actions or proceedings against the Owner Participant before any court
or administrative agency which would materially adversely affect the Owner
Participant's ability to perform its obligations under the Trust Agreement, the
Tax Indemnity Agreement or this Agreement;
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(g) as of the Closing Date, the Owner Participant is purchasing the
Beneficial Interest to be acquired by it for its own account with no present
intention of distributing such Beneficial Interest or any part thereof in any
manner which would violate the Securities Act of 1933, as amended, but without
prejudice, however, to the right of the Owner Participant at all times to sell
or otherwise dispose of all or any part of such Beneficial Interest in
compliance with the Securities Act of 1933, as amended; provided, however, that
subject to the provisions of Section 6.1, the disposition of the Beneficial
Interest shall at all times be within the Owner Participant's control. The
Owner Participant acknowledges that its Beneficial Interest has not been
registered under the Securities Act of 1933, as amended, and that neither the
Owner Trustee nor the Lessee contemplates filing, or is legally required to
file, any such registration statement;
(h) with respect to the source of the amount to be invested by the
Owner Participant pursuant to Section 2.2, no part of such amount constitutes
assets of any employee benefit plan subject to Title I of ERISA or Section 4975
of the Code; and
(i) no broker's or finder's or placement fee or commission will be
payable with respect to the transactions contemplated by the Operative
Agreements as a result of any action by the Owner Participant, and the Owner
Participant agrees that it will hold GATC, the Lessee, the Indenture Trustee,
the Loan Participant and Lessor harmless from any claim, demand or liability for
broker's or finder's or placement fees or commission alleged to have been
incurred as a result of any action by the Owner Participant in connection with
this transaction.
Section 3.7. Representations and Warranties of the Manager. The Manager
---------------------------------------------
represents and warrants to each of the Trustees and the Participants, as of the
date hereof:
(a) the Manager is a corporation duly organized, validly existing, and
in good standing under the laws of the State of New York, is duly licensed or
qualified and in good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on its ability to carry on its
business as now conducted or to execute, deliver and perform its obligations
under the Manager Agreements, has the corporate power and authority to carry on
its business as now conducted, and has the requisite power and authority to
execute, deliver and perform its obligations under the Manager Agreements;
(b) the Manager Agreements have been duly authorized by all necessary
corporate action, executed and delivered by the Manager, and constitute the
legal, valid and binding obligations of the Manager, enforceable against the
Manager in accordance with their respective terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles of equity;
(c) the execution, delivery and performance by the Manager of each
Manager Agreement and compliance by the Manager with all of the provisions
thereof do not and will not contravene any
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law or regulation, or any order of any court or governmental authority or agency
applicable to or binding on the Manager or any of its properties, or contravene
the provisions of, or constitute a default by the Manager under, its certificate
of incorporation or by-laws or any indenture, mortgage, contract or other
agreement or instrument to which the Manager is a party or by which the Manager
or any of its properties may be bound or affected;
(d) there are no proceedings pending or, to the knowledge of the
Manager, threatened against the Manager in any court or before any governmental
authority or arbitration board or tribunal which would materially adversely
affect the Manager's ability to perform its obligations under the Manager
Agreements;
(e) the Manager is not in violation of any term of any charter
instrument, by-law or any other material agreement or instrument to which it is
a party or by which it may be bound. The Manager is in compliance with all
laws, ordinances, governmental rules and regulations to which it is subject, the
failure to comply with which would have a material and adverse effect on its
operations or condition, financial or otherwise, or would impair the ability of
the Manager to perform its obligations under the Manager Agreements, and has
obtained all licenses, permits, franchises and other governmental authorizations
material to the conduct of its business;
(f) to the best knowledge of the Manager, no Event of Loss has
occurred as of the date of this Agreement with respect to any Unit;
(g)(i) GATC shall have, and the GATC Bill of Sale to be delivered on
the Closing Date shall convey to the Company, all legal and beneficial title to
the Units which are being delivered on the Closing Date, free and clear of all
Liens (other than Permitted Liens of the type described in clause (ii) hereof
with respect to the Existing Car Service Contracts, and in clauses (iv) and
(vii) of the definition thereof), and such conveyance will not be void or
voidable under any applicable law; (ii) GATC shall have, and the GATC Assignment
to be delivered on the Closing Date shall assign to the Company, all legal and
beneficial title to the Existing Car Service Contracts, free and clear of all
Liens (other than Permitted Liens), and such assignment will not be void or
voidable under any applicable law; and (iii) all of the Units shall be subject
to sublease by Customers under the Existing Car Service Contracts on rental and
other terms which are no different, taken as a whole, than those for similar
railcars in the rest of the Manager's Fleet;
(h) all sales, use or transfer taxes due and payable upon the sale of
the Equipment and assignment of Existing Car Service Contracts by GATC to the
Company will have been paid or such transactions will then be exempt from any
such taxes and GATC will cause any required forms or reports in connection with
such taxes to be filed in accordance with applicable laws and regulations;
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(i) the Units are substantially similar in terms of objectively
identifiable characteristics that are relevant for purposes of the services to
be performed by the Manager under the Management Agreement to the equipment in
the Manager's Fleet;
(j) in selecting the Units to be sold to the Company pursuant to the
GATC Bill of Sale, GATC has not discriminated against the Company in a negative
fashion when such Units are compared with the other equipment in the Manager's
Fleet; and
(k) neither the Prospectus nor any written statement furnished by the
Manager or on behalf of the Manager in connection with the negotiation of the
Lease or any other Operative Agreement contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. The assumptions and related
financial information relating to the proposed business and operations of the
Manager and the Company Fleet which are contained under ["Structuring
Assumptions"] in the Prospectus (the "Structuring Assumptions") have been
prepared in good faith based upon information that the Manager deems fair and
reasonable, and there are no statements or conclusions in any of the Structuring
Assumptions which are based upon or include information known to the Manager to
be misleading in any material respect or which fail to take into account
material information known to the Manager regarding the matters stated therein.
There is no fact which the Manager has not disclosed in writing which materially
adversely affects or, so far as the Manager can now reasonably foresee, will
materially adversely affect the properties, business, prospects, profits or
condition (financial or otherwise) of the Manager.
Section 3.8. Opinion Acknowledgment. Each of the parties hereto, with
----------------------
respect to such party, expressly consents to the rendering by its counsel of the
opinion referred to in Section 4.1(e) and acknowledges that such opinion shall
be deemed to be rendered at the request and upon the instructions of such party.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions Precedent to Investment by Each Participant.
------------------------------------------------------
The obligation of each Participant to make the investment specified with respect
to such Participant in Section 2 on the Closing Date shall be subject to the
satisfaction or waiver of the following conditions precedent (except that
paragraph (k) and clause (i) of paragraph (p) shall not be conditions precedent
to the Owner Participant's obligations hereunder and paragraph (n) and (s) and
clause (ii) of paragraph (p) shall not be conditions precedent to the Loan
Participant's obligations hereunder):
(a) Execution of Operative Agreements. On or before the Closing Date,
---------------------------------
this Agreement, the Trust Agreement, the Lease, the Lease Supplements in respect
of the Units delivered on the Closing Date, the Indenture, the Indenture
Supplements in respect of the Units delivered on the Closing Date, the Equipment
Notes, the Pass Through Trust Agreement, the Pass Through Trust
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Supplements, the Management Agreement, the Insurance Agreement, the Transfer
and Contribution Agreement, the Bill of Sale, the GATC Bill of Sale, the
Intercreditor Agreement, the Underwriting Agreement, the Lockbox Agreement, the
Owner Trustee Parent Guaranty and the Owner Participant Parent Guaranty (if any)
shall each be satisfactory in form and substance to such Participant, shall have
been duly executed and delivered by the parties thereto (except that the
execution and delivery of the documents referred to above (other than this
Agreement) by a party hereto or thereto shall not be a condition precedent to
such party's obligations hereunder), shall each be in full force and effect, and
executed counterparts of each shall have been delivered to such Participant or
its counsel on or before the Closing Date; and no event shall have occurred and
be continuing that constitutes a Lease Default or an Indenture Default.
(b) Recordation and Filing. On or before the Closing Date, the Lessee
----------------------
shall have caused the Lease, the Lease Supplements in respect of Units delivered
on the Closing Date, the Indenture and the Indenture Supplements in respect of
the Units delivered on the Closing Date and the Memorandum of Intercreditor
Agreement, to be duly filed, recorded and deposited with the STB in conformity
with 49 U.S.C. (S)11301 and with the Registrar General of Canada pursuant to
Section 105 of the Canada Transportation Act, and all necessary actions shall
have been taken to cause publication of notice of such deposit in The Canada
Gazette in accordance with said Section 90 within 21 days after the Closing Date
and appropriate Uniform Commercial Code financing statements to be filed where
necessary or reasonably advisable, and the Lessee shall furnish the Indenture
Trustee, the Owner Trustee, the Collateral Agent and each Participant proof
thereof.
(c) Representations and Warranties of the Lessee. On the Closing
--------------------------------------------
Date, the representations and warranties of the Lessee contained in Section 3.2
and Section 3.4(b) hereof shall be true and correct in all material respects as
of the Closing Date as though then made on and as of such date, except to the
extent that such representations and warranties relate solely to an earlier date
(in which case such representations and warranties were true and correct on and
as of such earlier date), and each of the Owner Trustee, the Indenture Trustee
and the Participants shall have received an Officer's Certificate to such effect
dated such date from the Lessee certifying to the foregoing matters, and the
Lessee shall have performed and complied with all agreements and conditions
herein contained which are required to be performed or complied with by the
Lessee on or before said date.
(d) Representations and Warranties of the Owner Trustee. On the
---------------------------------------------------
Closing Date, the representations and warranties of the Owner Trustee contained
in Section 3.1 and Section 3.4(a) shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, the Indenture
Trustee, the Pass Through Trustee and the Participants shall have received an
Officer's Certificate to such effect dated such date
27
<PAGE>
from the Owner Trustee and the Owner Trustee shall have performed and complied
with all agreements and conditions herein contained which are required to be
performed or complied with by the Owner Trustee on or before said date.
(e) Opinions of Counsel. On the Closing Date, the Owner Trustee, the
-------------------
Indenture Trustee and each Participant shall have received the favorable written
opinion of each of (i) special counsel for GATC, the Lessee and the Manager and
counsel for GATC, the Lessee and the Manager (which counsel shall be the General
Counsel or Assistant General Counsel of the Parent), (ii) counsel to the Owner
Trustee, (iii) special counsel to the Owner Participant, (iv) counsel to the
Pass Through Trustee, (v) counsel to the Indenture Trustee, (vi) special STB
counsel and (vii) special Canadian counsel, in each case in form and substance
satisfactory to each Participant; provided that, except as otherwise provided
herein, receipt by a party hereto of a favorable written opinion from counsel to
such party with respect to a matter which is also covered by a representation of
such party shall not be a condition precedent to such party's obligations
hereunder.
(f) Title. On the Closing Date, after giving effect to the
-----
transactions contemplated hereby, (i) the Owner Trustee shall have all legal and
beneficial title to each Unit to be delivered on the Closing Date, free and
clear of all Liens (other than Permitted Liens of the type described in clause
(ii) with respect to sublessees, and in clauses (iv) and (vii) of the definition
thereof), (ii) the Lessee shall have received all right, title and interest of
GATC in and to the Existing Car Service Contracts, free and clear of all Liens
and (iii) each Customer under an Existing Car Service Contract shall have been
notified of the assignment thereof to the Lessee.
(g) Bills of Sale; GATC Assignment. On the Closing Date, (i) the GATC
------------------------------
Bill of Sale and the Bill of Sale, in each case in form and substance reasonably
satisfactory to the Lessee and the Owner Trustee, dated such date and covering
the Units to be delivered on such date, transferring to the Lessee and the Owner
Trustee, respectively, legal and beneficial title to such Units free and clear
of all Liens (other than Permitted Liens of the type described in clause (ii)
with respect to sublessees, and in clauses (iv) and (vii) of the definition
thereof) and warranting to the Owner Trustee that at the time of delivery of
each such Unit, GATC and the Lessee, as the case may be, had legal and
beneficial title thereto and good and lawful right to sell the same, and title
thereto was free and clear of all Liens (other than Permitted Liens of the type
described in clause (ii) with respect to sublessees, and in clauses (iv) and
(vii) of the definition thereof), and (ii) the GATC Assignment in form and
substance reasonably satisfactory to the Lessee and the Owner Trustee, dated
such date covering the Existing Car Service Contracts, assigning to the Lessee
all right, title and interest of GATC to the Existing Car Service Contracts,
free and clear of all Liens (other than Permitted Liens) and warranting to the
Lessee that at the time of such assignment, GATC had legal and beneficial title
to the Existing Car Service Contracts and good and lawful right to sell the
same, and title thereto was free and clear of all Liens (other than Permitted
Liens), shall each have been duly executed and delivered.
28
<PAGE>
(h) Insurance Certificate and Opinion. On or before the Closing Date,
---------------------------------
the Indenture Trustee and each Participant shall have received (x) any
certificate relating to insurance that is required pursuant to Section 12 of the
Lease and (y) certificates from a nationally recognized insurance broker
substantially in the forms attached hereto as Exhibits A-1 and A-2 with respect
to the public liability insurance required by Section 12.1(b) of the Lease.
(i) Corporate Documents. Each of the Participants shall have received
-------------------
such documents and evidence with respect to GATC, the Lessee, the Manager, the
Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture
Trustee as the Participants may reasonably request in order to establish the
consummation of the transactions contemplated by this Agreement, the taking of
all corporate and other proceedings in connection therewith and compliance with
the conditions herein or therein set forth.
(j) No Threatened Proceedings. No action or proceeding shall have
-------------------------
been instituted nor shall governmental action be threatened before any court or
governmental agency, nor shall any order, judgment or decree have been issued or
proposed to be issued by any court or governmental agency at the time of the
Closing Date, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or the transactions contemplated hereby.
(k) Representations and Warranties of the Owner Participant. On the
-------------------------------------------------------
Closing Date, the representations and warranties of the Owner Participant
contained in Section 3.6 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, the Indenture
Trustee and the Pass Through Trustee shall have received an Officer's
Certificate to such effect dated such date from the Owner Participant, and the
Owner Participant shall have performed and complied with all agreements and
conditions herein contained which are required to be performed or complied with
by the Owner Participant on or before said date.
(l) Notice of Delivery. The Indenture Trustee and the Participants
------------------
shall have received the Notice of Delivery described in Section 2.3(a).
(m) Representations and Warranties of the Indenture Trustee. On the
-------------------------------------------------------
Closing Date, the representations and warranties of the Indenture Trustee
contained in Section 3.3 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, the Owner
Trustee and the Participants shall have received an Officer's Certificate to
such effect dated such date from the Indenture Trustee, and the
29
<PAGE>
Indenture Trustee shall have performed and complied with all agreements and
conditions herein contained which are required to be performed or complied with
by the Indenture Trustee on or before said date.
(n) Representations and Warranties of the Pass Through Trustee. On
----------------------------------------------------------
the Closing Date, the representations and warranties of the Pass Through Trustee
contained in Section 3.5 hereof shall be true and correct in all material
respects as of the Closing Date as though then made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date), and each of the Lessee, the Indenture
Trustee, the Owner Trustee and the Owner Participant shall have received an
Officer's Certificate to such effect dated such date from the Pass Through
Trustee, and the Pass Through Trustee shall have performed and complied with all
agreements and conditions herein contained which are required to be performed or
complied with by the Pass Through Trustee on or before said date.
(o) No Illegality. No change shall have occurred after the date of
-------------
the execution and delivery of this Agreement in applicable law or regulations
thereunder or interpretations thereof by regulatory authorities that, in the
opinion of such Participant or its counsel, would make it illegal for such
Participant to enter into any transaction contemplated by the Operative
Agreements.
(p) Participants' Investments. (i) The Owner Participant shall have
-------------------------
made available the Owner Participant's Commitment in the amount specified in,
and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan
Participant shall have made available the Loan Participant's Commitment in the
amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3
and the Underwriting Agreement.
(q) Consents. All approvals and consents of any trustees or holders
--------
of any indebtedness or obligations of the Lessee which are required in
connection with the transactions contemplated by this Agreement shall have been
duly obtained and be in full force and effect.
(r) Governmental Actions. All actions, if any, required to have been
--------------------
taken on or prior to the Closing Date in connection with the transactions
contemplated by this Agreement on the Closing Date shall have been taken by any
governmental or political agency, subdivision or instrumentality of the United
States, and all orders, permits, waivers, exemptions, authorizations and
approvals of such entities required to be in effect on the Closing Date in
connection with the transactions contemplated by this Agreement on the Closing
Date shall have been issued, and all such orders, permits, waivers, exemptions,
authorizations and approvals shall be in full force and effect, on the Closing
Date.
(s) Tax Indemnity Agreement. On or before the Closing Date, the Tax
-----------------------
Indemnity Agreement shall be satisfactory in form and substance to the Owner
Participant, shall have been duly
30
<PAGE>
executed and delivered by GATC and, assuming due authorization, execution and
delivery by the Owner Participant, shall be in full force and effect.
(t) Appointment of Representative. The Owner Trustee shall have
-----------------------------
authorized its representative, who shall be an individual designated by the
Lessee and acceptable to the Owner Trustee, to accept the Units being delivered
on the Closing Date from the Lessee and to deliver such Units to the Lessee.
The Lessee shall have authorized its representative (who shall be the same
individual designated by the Lessee under this paragraph) to accept delivery of
the Units from the Owner Trustee as Lessor pursuant to the Lease.
(u) Capitalization of the Lessee. The Lessee shall have furnished
----------------------------
evidence to the Participants that, upon consummation of the transactions
contemplated hereby on the Closing Date, it will have capital of at least
$[x,xxx,xxx] ($x,xxx,xxx shall have been deposited in the Collection Account,
$200,000 in the Cash Trapping Account and $500,000 in the Liquidity Reserve
Account), exclusive of subleases and amounts necessary to pay certain
Transaction Expenses, together with an Officer's Certificate as to the solvency
of the Lessee as of the Closing Date.
(v) Schedule of Subleases and Units. The Participants and the
-------------------------------
Collateral Agent shall have received a schedule, certified by the Lessee and the
Manager, listing the Existing Car Service Contracts under the Lease and the
Other Leases, the Customer under each thereof and the Units covered thereby
(which shall constitute in the aggregate all of the Units under the Lease and
the Other Leases).
(w) Projected Coverage Ratio. The Lessee shall have furnished to the
------------------------
Participants and the Collateral Agent that portion of the report provided for in
Section 7.1 of the Management Agreement setting forth the Projected Coverage
Ratio for the six-month period immediately succeeding the Closing Date.
(x) Procedures Letter. The Participants shall have received an agreed
-----------------
upon procedures letter from Ernst & Young in form and substance reasonably
satisfactory to each of them.
(y) Representations and Warranties of the Manager. On the Closing
---------------------------------------------
Date, the representations and warranties of the Manager contained in Section 3.7
hereof shall be true and correct in all material respects as of the Closing Date
as though then made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date (in which case
such representations and warranties were true and correct on and as of such
earlier date), and each of the Owner Trustee, the Indenture Trustee and the
Participants shall have received an Officer's Certificate to such effect dated
such date from the Manager, and the Manager shall have performed and complied
with all agreements and conditions herein contained which are required to be
performed or complied with by the Manager on or before said date.
31
<PAGE>
Section 4.2. Additional Conditions Precedent to Investment by the Pass
---------------------------------------------------------
Through Trustee and Indenture Trustee. The obligation of the Pass Through
- -------------------------------------
Trustee to purchase and pay for the Equipment Notes to be purchased by it
pursuant to Sections 2.2(b) and 2.3 on the Closing Date and of the Loan
Participant to fund the Loan Participant's Commitment shall be subject to the
additional conditions that the Equipment Notes to be delivered on the Closing
Date shall have been duly authorized, executed and delivered to the Pass Through
Trustee by a duly authorized officer of the Owner Trustee and duly authenticated
by the Indenture Trustee and that on the Closing Date the Pass Through Trustee
shall have received the proceeds from the sale of the Pass Through Certificates.
Section 4.3. Additional Conditions Precedent to Investment by the Owner
----------------------------------------------------------
Participant. The obligation of the Owner Participant to provide the funds
- -----------
specified with respect to it in Sections 2.2(a) and 2.3 on the Closing Date with
respect to any Unit to be delivered on the Closing Date shall be subject to the
following satisfaction or waiver of the additional conditions precedent:
(a) Appraisal. On or before the Pricing Date, the Owner Participant
---------
and each Rating Agency shall have received an opinion (the "Appraisal") of Rail
Solutions, Inc., satisfactory in form and substance to the Owner Participant,
concluding that: (i) the fair market value of the Equipment being delivered on
the Closing Date is equal to the Total Equipment Cost with respect to such
Equipment; (ii) at the expiration of the Basic Term, (A) without taking into
account inflation or deflation from and after the Closing Date or the existence
of any purchase option, it is reasonable to expect that the Equipment will have
a fair market value of at least 20% of the Total Equipment Cost with respect to
such Equipment and (B) the remaining economic life of such Equipment will be at
least equal to 20% of the economic life of such Equipment as estimated in the
Appraisal; (iii) as of the Early Purchase Date, the estimated fair market value
of the Equipment being delivered on the Closing Date, taking into account
inflation or deflation from and after the Closing Date, will not exceed the
Early Purchase Price; and (iv) the Equipment being delivered on the Closing Date
is not Limited Use Property; provided that the Lessee makes no representation as
to the fair market value, useful life or estimated residual value of the
Equipment, and the Lessee shall not be responsible for, or incur any liabilities
as a result of, the contents of such Appraisal or report to which it relates or,
except to the extent provided in the Tax Indemnity Agreement.
(b) Opinion with Respect to Certain Tax Aspects. On the Closing Date,
-------------------------------------------
the Owner Participant shall have received the opinion of [___________],
addressed to the Owner Participant, in form and substance satisfactory to the
Owner Participant, containing such counsel's favorable opinion with respect to
such tax matters as the Owner Participant may reasonably request.
32
<PAGE>
(c) Absence of Change in Tax Laws. No change shall have occurred
-----------------------------
after the date of the execution and delivery of this Agreement in relevant
United States tax laws or regulations, which change would cause an increase in
the net present value (expressed as a percentage of Total Equipment Cost) of the
Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) to
exceed 50 basis points.
Section 4.4. Conditions Precedent to the Obligation of the Lessee. The
----------------------------------------------------
obligation of the Lessee with respect to the sale of the Units to the Owner
Trustee and acceptance of the Units under the Lease as of the Closing Date is
subject to the satisfaction or waiver of the following conditions precedent:
(a) Corporate Documents. On or before the Closing Date, the Lessee
-------------------
shall have received such documents and evidence with respect to the Owner
Participant, the Owner Trustee, the Indenture Trustee and the Pass Through
Trustee as the Lessee may reasonably request in order to establish the
authorization of the consummation of, or otherwise relating to the ability to
consummate, the transactions contemplated by this Agreement and the other
Operative Agreements, the taking of all corporate and other proceedings in
connection therewith and compliance with the conditions herein or therein set
forth.
(b) Operative Agreements. On or before the Closing Date, the
--------------------
Operative Agreements shall have been duly authorized, executed and delivered by
the respective party or parties thereto (other than the Lessee and GATC), and an
executed counterpart of each thereof shall have been delivered to the Lessee or
its special counsel.
(c) Representations and Warranties. On the Closing Date, the
------------------------------
representations and warranties of each of the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Owner Participant contained in Section
3 hereof shall be true and correct in all material respects as of the Closing
Date as though made on and as of such date, and the Lessee shall have received
an Officer's Certificate to such effect dated such date from each of the Owner
Trustee as described in Section 4.1(d), the Owner Participant as described in
Section 4.1(k), the Indenture Trustee as described in Section 4.1(m) and the
Pass Through Trustee as described in Section 4.1(n), addressed to the Lessee.
(d) Opinions of Counsel. On the Closing Date, the Lessee shall have
-------------------
received the opinions of counsel referred to in Section 4.1(e) (other than that
set forth in clause (i) therein), addressed to the Lessee.
(e) No Threatened Proceedings. No action or proceeding shall have
-------------------------
been instituted nor shall governmental action be threatened before any court or
governmental agency, nor shall any order, judgment or decree have been issued or
proposed to be issued by any court or governmental
33
<PAGE>
agency at the time of the Closing Date, to set aside, restrain, enjoin or
prevent the completion and consummation of this Agreement or the transactions
contemplated hereby.
(f) Participants' Investments. (i) The Owner Participant shall have
-------------------------
made available the Owner Participant's Commitment in the amount specified in,
and otherwise in accordance with, Sections 2.2(a) and 2.3 and (ii) the Loan
Participant shall have made available the Loan Participant's Commitment in the
amount specified in, and otherwise in accordance with, Sections 2.2(b) and 2.3.
(g) Absence of Change in Tax Laws. No change shall have occurred
-----------------------------
after the date of the execution and delivery of this Agreement in relevant
United States tax laws or regulations, which change would cause an increase in
the net present value (expressed as a percentage of Total Equipment Cost) of the
Basic Rent (discounted monthly at a rate per annum equal to the Debt Rate) to
exceed 50 basis points.
SECTION 5. FINANCIAL AND OTHER REPORTS OF THE LESSEE.
The Lessee agrees during the Lease Term and so long as any Equipment Note
remains outstanding, that it will furnish directly to each Participant the
following:
(a) as soon as available and in any event within 60 days after the end
of each of the first three quarters, of each fiscal year, a balance sheet of the
Lessee as at the end of such quarter, together with the related consolidated
statements of income and cash flows of the Lessee for the period beginning on
the first day of such fiscal year and ending on the last day of such quarter,
setting forth in each case (except for the balance sheet) in comparative form
the figures for the corresponding periods of the previous fiscal year, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles;
(b) as soon as available and in any event within 120 days after the
last day of each fiscal year, a copy of the Lessee's audited annual report
covering the operations of the Lessee including a balance sheet, and related
statements of income and retained earnings and statement of cash flows of the
Lessee for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, which statements will have been certified by a firm of independent public
accountants of recognized national standing selected by the Lessee;
(c) as soon as available, one copy of any document filed by the Lessee
with the Securities and Exchange Commission or any successor agency pursuant to
Section 13(a), 13(c), 14 or 15(d) (or any successor sections) of the Securities
Exchange Act of 1934, as amended (excluding such
34
<PAGE>
documents or portions thereof which are treated as confidential and not
available to the public, in accordance with applicable law, by the Securities
and Exchange Commission);
(d) within the time periods prescribed in paragraphs (a) and (b)
above, a certificate, signed by the Treasurer or principal financial officer of
the Lessee, to the effect that the signer has reviewed the Operative Agreements
and activities and records of the Lessee during the immediately preceding fiscal
quarter or year, as the case may be, and that, after due inquiry, such officer
is not aware of any default in compliance by the Lessee with any of the
covenants, terms and provisions of this Agreement or the Lease (except as
specified), and if a Lease Default shall exist, specifying such Lease Default,
the nature and status thereof and what action Lessee is taking or plans to take
with respect thereto; and
(e) promptly after request therefor, such additional information with
respect to the financial condition or business of the Lessee as any Participant
may from time to time reasonably request.
SECTION 6. CERTAIN COVENANTS OF THE PARTICIPANTS, THE TRUSTEES AND THE LESSEE.
Section 6.1. Restrictions on Transfer of Beneficial Interest. The Owner
-----------------------------------------------
Participant agrees that it shall not sell, convey, assign, pledge, mortgage or
otherwise transfer all or any part of the Beneficial Interest (collectively, for
purposes of this Section 6.1, a "transfer") prior to the expiration or earlier
termination of the Lease Term without the Lessee's prior written consent (which
consent shall not be unreasonably withheld); provided, however, that no such
consent shall be required if the following conditions are satisfied:
(a) the Person to whom such transfer is to be made (a "Transferee") is
(i) an institutional or corporate investor with tangible net worth or, in the
case of a bank or lending institution, combined capital and surplus at the time
of such transfer, of at least $75,000,000, determined in accordance with
generally accepted accounting principles or (ii) any Affiliate of any such
institutional or corporate investor if such investor guarantees the obligations
so assumed by such Affiliate pursuant to a guaranty in form and substance
satisfactory to the Lessee or (iii) an Affiliate of the Owner Participant;
provided that in the event of a transfer pursuant to clause (iii) which does not
qualify under clauses (i) or (ii), the Owner Participant shall remain liable for
all of its obligations under this Agreement and the other Operative Agreements;
(b) neither the Transferee nor any of its Affiliates shall be a direct
or indirect competitor (other than as a passive investor or loan participant in
the financing of equipment or facilities used in full service railcar leasing)
of the Lessee or GATC in the business of leasing rail cars under full service
operating leases; provided, that no Transferee or Affiliate thereof shall be
deemed to (i) be engaged in full service railcar leasing or (ii) hold (directly
or indirectly) any material interest in any business that is competitive with
Lessee's or GATC's full service railcar leasing
35
<PAGE>
business, solely by reason of any sale, lease or other disposition (or any
actions in furtherance of any of the foregoing) of any of such Person's interest
in any equipment or facilities directly or indirectly owned, leased or otherwise
controlled pursuant to any such Person's passive investment or loan
participation in the financing of any such equipment or facilities used in full
service railcar leasing or any re-leasing or sale of any rail equipment which is
returned to or repossessed by or on behalf of the Owner Participant or any
Affiliate of the Owner Participant from a lessee or borrower in connection with
a lease financing or lender transaction entered into by the Owner Participant or
such Affiliate as a passive lessor, investor or lender;
(c) each of the Indenture Trustee, the Owner Trustee and the Lessee
shall have received 10 days prior written notice of such transfer specifying the
name and address of any proposed Transferee and such additional information as
shall be necessary to determine whether the proposed transfer satisfies the
requirements of this Section 6.1;
(d) such Transferee enters into an agreement or agreements in form and
substance satisfactory to each of the Lessee and the Owner Trustee and not
reasonably objected to by the Indenture Trustee whereby such Transferee confirms
that it shall be deemed a party to this Agreement and each other Operative
Agreement to which the transferring Owner Participant is a party, and agrees to
be bound by all the terms of, and to undertake all of the obligations and
liabilities of the transferring Owner Participant contained in, this Agreement
and such other Operative Agreements and in which the Transferee shall make
representations and warranties comparable to those of the Owner Participant
contained herein and therein;
(e) an opinion of counsel of the Transferee (which counsel shall be
reasonably acceptable to the Lessee and not reasonably objected to by the Owner
Trustee or the Indenture Trustee and which may be internal counsel of the
Transferee), confirming (i) the existence, power and authority of, and due
authorization, execution and delivery of all relevant documentation by, the
Transferee (with appropriate reliance on certificates of corporate officers or
public officials as to matters of fact), (ii) that each agreement referred to in
subparagraph (d) above is the legal, valid, and binding obligation of the
Transferee, enforceable against the Transferee in accordance with its terms
(subject to customary qualifications as to bankruptcy and equitable principles)
and (iii) compliance of the transfer with applicable laws and regulations
including any registration requirements of federal securities laws and
securities laws of the Transferee's domicile and other jurisdictions reasonably
identified by the Lessee, the Owner Trustee or the Indenture Trustee as
potentially applicable to the transfer, shall be provided, prior to such
transfer, to each of the Lessee, the Owner Trustee and the Indenture Trustee,
which opinion shall be in form and substance reasonably satisfactory to the
Lessee and not reasonably objected to by the Owner Trustee or the Indenture
Trustee;
(f) such transfer complies in all respects with and does not violate
any applicable provisions of the federal securities laws and the securities law
of any applicable state;
36
<PAGE>
(g) except as specifically consented to in writing by each of the
Lessee, the Owner Trustee, the Indenture Trustee and the Pass Through Trustee,
the terms of the Operative Agreements shall not be altered;
(h) [in the case of a transfer by the original Owner Participant, the
original Owner Participant shall have delivered on a timely basis the
certificates required pursuant to Section [_______];]
(i) after giving effect to such transfer, no Owner Participant shall
hold less than 30% of the Beneficial Interest, and the Beneficial Interest shall
be held by not more than three Owner Participants at any one time; provided that
for the purpose of calculating the number of Owner Participants under this
paragraph (i), any Owner Participants that are Affiliates of each other shall be
considered to be one Owner Participant;
(j) all reasonable expenses of the parties hereto (including, without
limitation, reasonable legal fees and expenses of special counsel) incurred in
connection with each transfer of such Beneficial Interest shall be paid by the
transferring Owner Participant;
(k) such transfer either (i) does not involve the use of any funds
which constitute assets of an employee benefit plan subject to Title I of ERISA
or Section 4975 of the Code or (ii) will not constitute a prohibited transaction
under ERISA or the Code;
(l) as a result of and following such transfer, no Indenture Default
attributable to the Owner Participant or the Owner Trustee shall have occurred
and be continuing;
(m) the transfer does not involve the sale of the stock of any Owner
Participant, the sole asset of which is all or a portion of the Beneficial
Interest to, or the merger of any such Owner Participant with or into, any
Person who is a competitor of the Lessee or GATC as described in paragraph (b)
of this Section 6.1;
(n) the Transferee (i) is a "United States Person" within the meaning
of Section 7701(a)(30) of the Code or (ii) is engaged in a United States trade
or business for purposes of Subtitle A, Chapter 1, Subchapter N of the Code and
is acquiring such Beneficial Interest in connection with such trade or business;
(o) the transfer does not increase the Lessee's indemnification
obligations under Section 7.1 or 7.2; and
(p) the Owner Participant shall deliver to the Lessee an Officer's
Certificate certifying as to compliance with the transfer requirements contained
herein.
37
<PAGE>
Upon any such transfer (i) except as the context otherwise requires, such
Transferee shall be deemed the "Owner Participant" for all purposes, and shall
enjoy the rights and privileges and perform the obligations of the Owner
Participant to the extent of the interest transferred hereunder and under each
other Operative Agreement to which the Owner Participant is a party, and, except
as the context otherwise requires, each reference in this Agreement and each
other Operative Agreement to the "Owner Participant" shall thereafter be deemed
to include such Transferee for all purposes to the extent of the interest
transferred, and (ii) the transferor, except to the extent provided in Section
6.1(j) hereof and except in the case of a transfer to a Transferee described in
the proviso to Section 6.1(a)(iii) hereof, shall be released from all
obligations hereunder and under each other Operative Agreement to which such
transferor is a party or by which such transferor is bound solely to the extent
such obligations are expressly assumed by a Transferee; and provided, further,
-------- -------
that in no event shall any such transfer or assignment waive or release the
transferor from any liability on account of any breach existing prior to such
transfer of any of its representations, warranties, covenants or obligations set
forth herein or in any of the other Operative Agreements or for any fraudulent
or willful misconduct. Subject to subsections 6.1(m) and (n), the provisions of
this Section 6.1 shall not be construed to restrict the Owner Participant from
consolidating with or merging into any other corporation or restricting another
corporation from merging into or consolidating with the Owner Participant.
Notwithstanding any transfer, the transferor Owner Participant shall be entitled
to all benefits accrued and all rights vested prior to such transfer, including,
without limitation, rights to indemnification under any of the Operative
Agreements.
Section 6.2. Lessor's Liens Attributable to the Owner Participant. The
----------------------------------------------------
Owner Participant hereby unconditionally agrees with and for the benefit of each
of the other parties to this Agreement that the Owner Participant shall not
directly or indirectly create, incur, assume or suffer to exist any Lessor's
Lien attributable to the Owner Participant on or against all or any portion of
the Trust Estate or the Equipment, and the Owner Participant agrees that it
shall, at its own cost and expense, take such action as may be necessary to duly
discharge and satisfy in full any such Lessor's Lien (by bonding or otherwise,
so long as the Lessee's operation and use of the Equipment and the interest of
the Indenture Trustee in the Indenture Estate is not impaired); provided that
the Owner Participant may contest any such Lessor's Lien in good faith by
appropriate proceedings so long as such proceedings do not involve any material
danger of the sale, forfeiture or loss of the Equipment or any interest therein
or interference with the use, operation, or possession of the Equipment by the
Lessee under the Lease or the rights of the Indenture Trustee under the
Indenture.
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Section 6.3. Lessor's Liens Attributable to the Owner Trustee. The Owner
------------------------------------------------
Trustee, in its individual capacity, hereby unconditionally agrees with and for
the benefit of each of the other parties to this Agreement that the Owner
Trustee in its individual capacity shall not directly or indirectly create,
incur, assume or suffer to exist any Lessor's Lien attributable to the Owner
Trustee in its individual capacity on or against all or any portion of the Trust
Estate or the Equipment, and the Owner Trustee in its individual capacity agrees
that it shall, at its own cost and expense, take such action as may be necessary
to duly discharge and satisfy in full any such Lessor's Lien (by bonding or
otherwise, so long as the Lessee's operation and use of the Equipment and the
interest of the Indenture Trustee in the Indenture Estate is not impaired);
provided that the Owner Trustee may contest any such Lessor's Lien in good faith
by appropriate proceedings so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss of the Equipment or any interest
therein or interference with the use, operation, or possession of the Equipment
by the Lessee under the Lease or the right of the Indenture Trustee under the
Indenture.
Section 6.4. Liens Created by the Indenture Trustee and the Loan
---------------------------------------------------
Participant.
- -----------
(a) The Indenture Trustee, in its individual capacity, covenants and
agrees with each of the Lessee, the Owner Trustee, the Owner Participant and the
Loan Participant that it shall not cause or permit to exist any Lien on or
against all or any portion of the Equipment, the Trust Estate or the Indenture
Estate arising as a result of (i) claims against the Indenture Trustee in its
individual capacity not related to its interest in the Equipment and the Trust
Estate, or to the administration of the Indenture Estate pursuant to the
Indenture, (ii) acts of the Indenture Trustee in its individual capacity not
contemplated by, or failure of the Indenture Trustee to take any action it is
expressly required to perform by, any of the Operative Agreements, (iii) claims
against the Indenture Trustee attributable to the actions of the Indenture
Trustee in its individual capacity relating to Taxes or expenses that are not
indemnified against by the Lessee pursuant to Section 7 attributable to the
actions of the Indenture Trustee, or (iv) claims against the Indenture Trustee
arising out of the transfer by the Indenture Trustee of all or any portion of
its interest in the Equipment, the Indenture Estate or the Operative Agreements,
other than a transfer permitted by the Operative Agreements and with respect to
which the Indenture Trustee will, at its own cost and expense (and without any
right of reimbursement from any other party hereto), promptly take such action
as may be necessary duly to discharge any such Lien.
(b) The Loan Participant covenants and agrees with each of the Lessee,
the Owner Trustee, the Owner Participant and the Indenture Trustee that it shall
not cause or permit to exist any Lien on or against all or any portion of the
Equipment, the Trust Estate or the Indenture Estate arising as a result of (i)
claims against such Loan Participant not related to its interest in the
Equipment and the Trust Estate, (ii) acts of such Loan Participant not
contemplated by, or failure of such Loan Participant to take any action it is
expressly required to perform by, any of the Operative Agreements, (iii) claims
against such Loan Participant relating to Taxes or expenses that are not
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indemnified against by the Lessee pursuant to Section 7, or (iv) claims against
such Loan Participant arising out of the transfer by such Loan Participant of
all or any portion of its interest in the Equipment, the Indenture Estate or the
Operative Agreements, other than a transfer permitted by the Operative
Agreements and with respect to which such Loan Participant will, at its own cost
and expense (and without any right of reimbursement from the Lessee), promptly
take such action as may be necessary duly to discharge any such Lien.
Section 6.5. Covenants of Owner Trustee, Owner Participant and Indenture
-----------------------------------------------------------
Trustee. Each of the Owner Participant and the Owner Trustee, in its individual
- -------
and trust capacities, hereby agrees, as to its own actions only and severally
and not jointly, with the Lessee, the Loan Participant and the Indenture Trustee
(a) not to amend, supplement, or otherwise modify any provision of the Trust
Agreement in such a manner as to adversely affect the rights of the Lessee, the
Loan Participant or the Indenture Trustee without the prior written consent of
such party and (b) not to terminate or revoke the Trust Agreement or the
trust created by the Trust Agreement prior to the payment in full and discharge
of the Equipment Notes and all other indebtedness secured by the Indenture and
the final discharge thereof or prior to the expiration or early termination of
the Lease. Each of the Owner Trustee and the Indenture Trustee agrees, for the
benefit of the Lessee and the Owner Participant, to comply with the provisions
of the Indenture and not to amend, supplement, or otherwise modify any provision
of the Indenture except in the manner provided in Article IX thereof.
Notwithstanding anything to the contrary contained herein or in any of the other
Operative Agreements, the Indenture Trustee's obligation to take or refrain from
taking any actions, or to use its discretion (including, but not limited to, the
giving or withholding of consent or approval and the exercise of any rights or
remedies under such Operative Agreement), and any liability therefor, shall, in
addition to any other limitations provided herein or in any of the other
Operative Agreements, be limited by the provisions of the Indenture.
Section 6.6. Amendments to Operative Agreements. Unless a Lease Event of
----------------------------------
Default shall have occurred and be continuing, the Trustees and Participants
shall not terminate the Operative Agreements to which the Lessee is not or will
not be a party, or amend, supplement, waive or modify such Operative Agreements
in any manner that increases the obligations or liabilities, or decreases the
rights, of the Lessee under the Operative Agreements, except in accordance with
such Operative Agreements in effect on the date hereof (as amended, modified or
supplemented from time to time in accordance with the terms hereof and of such
Operative Agreements). Without limiting the generality of the foregoing, each
of the Owner Participant and the Trustees (as applicable) agrees that, in any
event, unless a Lease Event of Default shall have occurred and be continuing, it
will not amend Section 2.10 or Article IX of the Indenture or Article [IX] of
the Trust Agreement without the prior written consent of the Lessee.
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Section 6.7. Certain Representations, Warranties and Covenants. The
-------------------------------------------------
Lessee hereby (i) confirms its representations, warranties and covenants in
Article 6 of the Intercreditor Agreement, which are hereby incorporated in this
Agreement by this reference as fully as if set forth herein in their entirety
and (ii) agrees with the Owner Trustee, each Participant and the Indenture
Trustee to use its reasonable best efforts to meet each of the conditions
precedent for which it is responsible under Section 4 hereof.
Section 6.8. Covenants of the Manager. The Manager hereby confirms the
------------------------
covenants in Article 7 of the Management Agreement, which are hereby
incorporated in this Agreement by this reference as fully as if set forth herein
in their entirety.
Section 6.9. Lessee's Purchase in Certain Circumstances. If the Owner
------------------------------------------
Participant or any Affiliate thereof is or acquires, is acquired by, merges or
otherwise consolidates with any company or Affiliate thereof engaged in full
service railcar leasing, whether or not a direct competitor to the Lessee or any
Affiliate thereof, or any Person that has a material interest (whether held
directly or indirectly) in an enterprise that engages in a business that is
competitive with the Lessee's full service railcar leasing business, the Lessee
may, no later than ninety (90) days after a Responsible Officer of the Lessee
has actual knowledge of such event, either (x) request that such Owner
Participant transfer its Beneficial Interest in accordance with the terms of
Section 6.1, or (y) on a Determination Date which is designated by the Lessee by
written notice to the Owner Trustee and the Indenture Trustee not less than 25
days prior to such Determination Date, purchase the Equipment for a purchase
price equal to the Termination Value calculated as of such Determination Date,
together with all other amounts due and owing by the Lessee under the Operative
Agreements with respect to such Units, including, without limitation, all
accrued and unpaid Basic Rent therefor as of such Determination Date (exclusive
of any in advance Basic Rent due on such date), any interest accrued and unpaid
with respect to such unpaid Basic Rent, any Make-Whole Amount then payable on
the Equipment Notes pursuant to Section 2.10(c) of the Indenture with respect to
such Units and any then Late Payment Premium due and owing under the Operative
Agreements with respect to such Units; provided, that an institutional investor
which is a passive investor in the financing of equipment or facilities used in
full service railcar leasing shall not, solely by reason of such investment, be
deemed to be engaged in such businesses; provided, further, that none of any
Owner Participant or Affiliate thereof shall be deemed to (i) be engaged in full
service railcar leasing or (ii) hold (directly or indirectly) any material
interest in any business that is competitive with the Lessee's full service
railcar leasing business, solely by reason of any sale, lease or other
disposition (or any actions in furtherance of any of the foregoing) of any of
such Person's interest in any equipment or facilities directly or indirectly
owned, leased or otherwise controlled pursuant to any such Person's passive
investment in the financing of any such equipment or facilities used in full
service railcar leasing. In the event that the Lessee, pursuant to clause (x)
of the preceding sentence, has requested the Owner Participant to transfer its
Beneficial Interest, and such Owner Participant has not transferred its
Beneficial Interest within 180 days of such request, the Lessee
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may purchase the Equipment in accordance with clause (y) of the preceding
sentence. In the event that such Owner Participant holds less than 100% of the
Beneficial Interest (after excluding any Beneficial Interests held by the
Lessee, the Manager or any Affiliate of either thereof), in lieu of purchasing
of the Equipment as provided above, the Lessee may instead purchase such Owner
Participant's Beneficial Interest for a purchase price equal to (a) the excess
of (i) the purchase price for the Equipment determined as provided above in this
Section 6.9 over (ii) the sum of the principal amount of Equipment Notes then
outstanding (b) multiplied by a fraction equal to the portion such Owner
Participant's Beneficial Interest bears to 100% of the Beneficial Interests.
If the Lessee elects to exercise the option to purchase the Equipment (as
opposed to such Owner Participant's Beneficial Interest) as provided in this
Section 6.9, the Lessee shall, as the purchase price therefor, in the sole
discretion of the Lessee, either (i) pay the Termination Value, as specified in
the above paragraph, with respect to such Units, together with all other amounts
due and owing by the Lessee under the Operative Agreements, or (ii) so long as
no Lease Event of Default shall have occurred and be continuing, pay the
difference between the Termination Value and the portion of the outstanding
principal amount of the Equipment Notes as of the Determination Date specified
by the Lessee in the second sentence of this Section 6.9, together with all
other amounts due and payable and assume, and indemnify the Lessor against, all
of the Owner Trustee's obligations under the Indenture in respect of such
portion of the indebtedness evidenced by such Equipment Notes; provided, that,
following such assumption, the purchased Units shall remain subject to the Lien
of a separate indenture similar to the Indenture pursuant to Section 3.6 of the
Indenture; which separate indenture shall incorporate such covenants, events of
default including appropriate cross-defaults to the Indenture and the Other
Leases, agreements, terms and conditions from the Lease as may be reasonably
required by the Indenture Trustee and shall include appropriate cross-
collateralization with the security granted under the Indenture. The Lessee
will make the payments required by foregoing clause (i) or assume the
indebtedness evidenced by the Equipment Notes on the Determination Date
designated in accordance with the first sentence of this Section 6.9 in
immediately available funds against delivery of a bill of sale transferring and
assigning to the Lessee all right, title and interest of the Lessor in and to
the Units on an "as-is" "where-is" basis and containing a warranty with respect
to the absence of any Lessor's Lien. In such event, the costs of preparing the
bill of sale or other transfer documents and all other documentation relating to
such purchase and the costs of any necessary filings related thereto will be
borne by the Lessee. If the Lessee shall fail to fulfill its obligations under
this second paragraph of Section 6.9, all of the Lessee's obligations under the
Lease and the Operative Agreements, including, without limitation, the Lessee's
obligation to pay installments of Rent, with respect to the Units in question
shall continue.
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Section 6.10. Owner Participant as Affiliate of Lessee. If at any time
----------------------------------------
the original or any successor Owner Participant shall be an Affiliate of the
Lessee, such Owner Participant and the Lessee agree that, notwithstanding
Section 9.5 of the Indenture, they will not vote its Beneficial Interest to
modify, amend or supplement any provision of the Lease or this Agreement or
give, or permit the Owner Trustee to give, any consent, waiver, authorization or
approval thereunder if any such action would adversely affect in a material
manner the Indenture Trustee or any holder of an Equipment Note unless such
action shall have been consented to by a Majority in Interest.
Section 6.11. No Impairment of Warranties. From and after the Closing
---------------------------
Date and throughout the Lease Term, the Lessee shall not take any action (or
fail to take any action) if the result of such action (or failure to act) would
abrogate or invalidate or otherwise materially adversely affect the validity of
any warranties applicable to the Units which would otherwise be available with
respect to the Units.
SECTION 7. LESSEE'S INDEMNITIES.
Section 7.1. General Tax Indemnity.
---------------------
(a) Tax Indemnities Defined. For purposes of this Section 7.1, "Tax
-----------------------
Indemnitee" means the Loan Participant, the Owner Participant, its Affiliates,
the Owner Trustee both in its individual capacity and as trustee, the Indenture
Trustee both in its individual capacity and as trustee, the Pass Through Trustee
both in its individual capacity and as trustee, each of their successors or
assigns permitted under the terms of the Operative Agreements, any officer,
director, employee or agent of any of the foregoing, the Trust Estate and the
Indenture Estate.
(b) Taxes Indemnified. Except as provided below, all payments by the
-----------------
Lessee to any Tax Indemnitee in connection with the transactions contemplated by
the Operative Agreements shall be free of withholdings of any nature whatsoever
(and at the time that any payment is made upon which any withholdings is
required the Lessee shall pay an additional amount such that the net amount
actually received will, after such withholding and on an After-Tax Basis, equal
the full amount of the payment then due) and shall be free of expense to each
Tax Indemnitee for collection or other charges. The Lessee shall defend,
indemnify and save harmless each Tax Indemnitee from and against, and as between
the Lessee and each Tax Indemnitee the Lessee hereby assumes liability with
respect to, all fees (including, without limitation, license fees and
registration fees), taxes (including, without limitation, income, gross
receipts, franchise, sales, use, value added, property and stamp taxes),
assessments, levies, imposts, duties, charges or withholdings of any nature
whatsoever, together with any and all penalties, additions to tax, fines or
interest thereon ("Taxes") imposed against any of the Tax Indemnitees, any item
of Equipment or the Lessee, upon, arising from or relating to
(i) any item of Equipment,
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(ii) the construction, manufacture, financing, purchase,
delivery, ownership, acceptance, rejection, possession, improvement, use,
operation, leasing, subleasing, condition, maintenance, repair,
refinancing, registration, sale, return, replacement, storage, abandonment
or other application or disposition of any item of Equipment,
(iii) the rental payments, receipts or earnings arising from any
item of Equipment or payable pursuant to the Operative Agreements, or
(iv) the Operative Agreements or the Equipment Notes or otherwise
with respect to or in connection with the transactions contemplated
thereby.
(c) Taxes Excluded. In the case of the Owner Participant, its
--------------
Affiliates, the Owner Trustee both in its individual capacity and as trustee,
and each of their respective successors, assigns, officers, directors, employees
and agents described in Section 7.1(a) (each, an "Equity Tax Indemnitee" and
---------------------
each Tax Indemnitee which is not an Equity Tax Indemnitee, a "Lender Tax
----------
Indemnitee") except with respect to indemnification payments hereunder or
- ----------
payments pursuant to this Section 7.1, the indemnity provided in Section 7.1(B)
shall not include:
(i) as to any Equity Tax Indemnitee, any Income Tax imposed by
the United States federal government;
(ii) as to any Equity Tax Indemnitee, any Income Tax imposed by
any state, local or foreign government or taxing authority or subdivision
thereof, except to the extent such Taxes are solely attributable to the
use or location of any item of Equipment in the taxing jurisdiction or are
in the nature of sales, use, property (whether tangible or intangible), ad
valorem or similar taxes;
(iii) as to any Equity Tax Indemnitee, any Tax that is imposed as
a result of the sale, transfer or other disposition, by the Lessor or the
Owner Participant of any of its rights with respect to any item of
Equipment unless such sale, transfer or other disposition is a result of
an Event of Default, results from any substitution, repair or replacement
of any item of Equipment under the Lease, or results from any sale,
transfer or disposition required or provided for under the Lease;
(iv) as to any Equity Tax Indemnitee, any Taxes to the extent
they exceed the Taxes that would have been imposed had an Equity Tax
Indemnitee not transferred, sold or disposed of its Interest or rights in
any item of Equipment to a non-U.S. Person, unless such transfer, sale or
disposition is a result of a Lease Event of Default;
(v) Taxes imposed on a Lender Tax Indemnitee with respect to any
period after the payment in full of the Equipment Notes; provided that the
exclusion set forth in this clause (v) shall not apply to Taxes to the
extent such Taxes relate to events occurring or matters arising prior to
or
44
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simultaneously with the applicable time or relate to any payment made by
the Lessee after such date;
(vi) as to any Tax Indemnitee, Taxes to the extent caused by any
misrepresentation or breach of warranty or covenant under any of the
Operative Agreements or by the gross negligence or willful misconduct of
such Tax Indemnitee;
(vii) as to any Lender Tax Indemnitee, Taxes which become payable
as a result of a sale, assignment, transfer or other disposition (whether
voluntary or involuntary) by such Lender Tax Indemnitee of all or any
portion of its interest in the Equipment or any part thereof, the Trust
Estate or any of the Operative Agreements or rights created thereunder,
other than as a result of (A) the substitution, modification or
improvement of the Equipment or any part thereof, (B) a modification to
the Operative Agreements, (C) a disposition which occurs as the result of
the exercise of remedies upon a Lease Event of Default, or (D) any
disposition which occurs during the continuance of a Lease Event of
Default or a purchase of any Unit pursuant to the Lease; provided, that,
notwithstanding the foregoing, the Lessee shall not be obligated to
indemnify any Lender Tax Indemnitee with respect to net income taxes
imposed within the United States as the result of a sale, assignment,
transfer or other disposition by such Lender Tax Indemnitee or any Taxes
imposed as a result of the status of the Lender Tax Indemnitee as other
than a resident of the United States for tax purposes;
(viii) as to any Lender Tax Indemnitee, Taxes to the extent they
exceed the Taxes that would have been imposed (other than amounts
necessary to make payments on an After-Tax Basis) had the transferor to
such Lender Tax Indemnitee not transferred, sold or otherwise disposed of
any interest held by such Lender Tax Indemnitee pursuant to any of the
Operative Agreements (other than a transfer (i) during the continuance of
a Lease Event of Default or (ii) on or prior to the Closing Date);
provided, that this clause (viii) shall not apply to any Tax imposed as a
consequence of the exercise of any remedy upon a Lease Event of Default;
(ix) as to any Lender Tax Indemnitee, Taxes imposed as the
result of such Lender Tax Indemnitee being either a nonresident alien
within the meaning of Section 7701(b) of the Code or a foreign corporation
within the meaning of Section 7701(a)(5) of the Code;
(x) In the case of any Lender Tax Indemnitee to Income Taxes or
transfer taxes relating to any payments of principal, interest or Make
Whole Amount, if any, on the Equipment Notes or to any such Tax
Indemnitee;
(xi) Taxes to the extent directly resulting from or that would
not have been imposed but for (x) in the case of Taxes imposed on or with
respect to the Owner Trustee, the Trust Estate, the Owner Participant or
any Tax Indemnitee that is an Affiliate of any of the foregoing, the
existence of any Lessor Liens with respect to such Tax Indemnitee, (y) in
the case of Taxes imposed on or
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with respect to the Indenture Trustee, the Trust Indenture Estate, any
Loan Participants or any Tax Indemnitee that is an Affiliate of any of the
foregoing, the existence of any Indenture Trustee Liens;
(xii) Taxes imposed on a Tax Indemnitee to the extent that such
Taxes would not have been imposed upon such Tax Indemnitee but for any
failure of such Tax Indemnitee or any Affiliate thereof to comply with (x)
any certification, information, documentation, reporting or other similar
requirements concerning the nationality, residence, identity or connection
with the jurisdiction imposing such Taxes, if such compliance is required
under the laws or regulations of such jurisdiction to obtain or establish
relief or exemption from or reduction in such Taxes and the Tax Indemnitee
or such Affiliate was eligible to comply with such requirement or (y) any
other certification, information, documentation, reporting or other
similar requirements under the Tax laws or regulations of the jurisdiction
imposing such Taxes that would establish entitlement to otherwise
applicable relief or exemption from such Taxes; provided, however, that
-------- -------
the exclusion set forth in this clause (xii) shall not apply (I) if, such
failure to comply was due to a failure of the Lessee to provide
reasonable assistance on request in complying with such requirement, (II)
if, in the case of Taxes imposed on the Owner Participant, in the good
faith judgment of the Owner Participant there is a material risk of
adverse consequence to the Owner Participant or any Affiliate from such
compliance against which the Owner Participant is not satisfactorily
indemnified, or (III) in the case of Taxes imposed on the Owner
Participant, to the extent any such failure to comply on the part of the
Owner Trustee was the result of the Owner Trustee's gross negligence or
failure to act in accordance with instructions of the Owner Participant;
(xiii) Taxes that are imposed with respect to any period after the
earlier of (x) return of possession of the Equipment to the Lessor in
accordance with, and at a time and place contemplated by the Lease and (y)
the termination of the Term pursuant to Section 6, 10, 11, 15 or 22 of
the Lease and the discharge in full of Lessee's payment obligation's
thereunder unless the Equipment is thereafter required to be returned, in
which case, after such return; provided, however, that the exclusion set
-------- -------
forth in this clause (xiii) shall not apply to Taxes to the extent such
Taxes relate to events occurring or matters arising prior to or
simultaneously with such return or termination;
(xiv) In the case of a Tax Indemnitee which is the Indenture
Trustee, the Trust Indenture Estate or any Loan Participant, Taxes in the
nature of an intangible or similar tax upon or with respect to the value
of the interest of a Loan Participant in the Trust Indenture Estate or in
any Equipment Note;
(xv) Taxes imposed on the Owner Trustee or the Indenture Trustee
that are on, based on or measured by any trustee fees for services
rendered by such Tax Indemnitee in its capacity as trustee under the
Operative Agreements;
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(xvi) Taxes imposed on any Tax Indemnitee which is the Owner
Participant or an Affiliate of the Owner Participant, or any other person
who, together with such Tax Indemnitee, is treated as one employer for
employee benefit plan purposes, as a result of, or in connection with, any
"prohibited transaction," within the meaning of the provisions of the Code
or regulations thereunder or as set forth in Section 406 of ERISA or the
regulations implementing ERISA or Section 4975 of the Code or the
regulations thereunder; provided, however, that the exclusion set forth in
-------- -------
this clause (xvi) shall not apply to the extent Taxes result from, arise
out of, or are attributable to the incorrectness of a representation or
warranty made pursuant to Section [ ] hereof;
(xvii) Taxes imposed on any Tax Indemnitee which is a Loan
Participant or an Affiliate of a Loan Participant or any other person who,
together with such Tax Indemnitee, is treated as one employer for employee
benefit plan purposes, as a result of, or in connection with, any
"prohibited transaction", within the meaning of the provisions of the Code
or regulations thereunder or as set forth in Section 406 of ERISA or the
regulations implementing ERISA or Section 4975 of the Code or the
regulations thereunder; provided, however, that the exclusion set forth in
-------- -------
this clause (xvii) shall only apply to the extent Taxes result from, arise
out of, or are attributable to the incorrectness of a representation or
warranty made pursuant to Section [ ] hereof or its failure to perform or
observe the covenant or condition required to be performed by it under
Section [ ] hereof;
(xviii) Taxes for so long as (x) such Taxes are being contested in
accordance with the provisions of Section 7.1(e) hereof, (y) the Lessee is
in compliance with its obligations under Section 7.1(e) and (z) the
payment of such Taxes is not required pursuant to Section 7.1(e);
(xix) Taxes as to which such Tax Indemnitee is indemnified
pursuant to the Tax Indemnity Agreement;
(xx) any Taxes imposed on or with respect to any Certificate
Holder; and
(xxi) Taxes imposed as a result of the authorization or giving
or withholding of any future amendments, supplements, waivers or consents
with respect to any Operative Agreement other than (w) those which are
legally required (x) in connection with the exercise of remedies pursuant
to Section 15 of the Lease, (y) such as have been proposed by the Lessee
or consented to by the Lessee or (z) those that are required pursuant to
the terms of the Operative Agreements.
(d) Payments to Tax Indemnitee. The Lessee agrees to pay, on demand,
--------------------------
any and all Impositions, and to keep at all times all and every part of each
item of Equipment free and clear of all Taxes which might in any way affect the
interest of any Tax Indemnitee therein or result in a Lien upon
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any such item of Equipment; provided, however, that the Lessee shall be under no
obligation to pay any Tax so long as either the Tax Indemnitee or the Lessee is
contesting in good faith and by appropriate legal proceedings such Imposition
and the nonpayment thereof does not, in the reasonable opinion of the Tax
Indemnitee, materially adversely affect the interest of any Tax Indemnitee
hereunder or under the Indenture.
If any Tax indemnified under this Section 7.1 shall have been charged or
levied against any Tax Indemnitee directly and paid by such Tax Indemnitee after
such Tax Indemnitee shall have given written notice thereof to the Lessee and
the same shall have remained unpaid for a period of ten Business Days
thereafter, the Lessee shall reimburse such Tax Indemnitee payment, such Tax
Indemnitee shall promptly notify the Lessee of the Impositions charged or levied
(but the failure to so notify the Lessee shall relieve the Lessee of its
obligation hereunder only to the extent such failure precludes a contest by the
Lessee) hereunder.
(e) Contests. If the Lessee shall so request within 30 days after
--------
receipt of such notice, then such Tax Indemnitee shall in good faith at Lessee's
expense contest such Tax; provided, however, that to the extent the contest
involves only Taxes constituting property taxes, sales taxes, or use taxes such
contest shall be undertaken by the Lessee at the Lessee's expense and at no-
after-tax cost to the Lessor or the Owner Participant, but if such contest would
involve any other type of Tax, then such Tax Indemnitee may, in its sole
discretion, control such contest (including selecting the forum for such
contest, and determining whether any such contest shall be conducted by (i)
paying such Tax under protest or (ii) resisting payment of such Tax or (iii)
paying such Tax and seeking a refund thereof; provided, further, however, that
(iv) at such Tax Indemnitee's option, such contest shall be conducted by the
Lessee in the name of such Tax Indemnitee). In no event shall such Tax
Indemnitee be required or the Lessee be permitted to contest any Tax for which
the Lessee is obligated to indemnify pursuant to this Section unless: (i) the
Lessee shall have acknowledged its liability to such Tax Indemnitee for an
indemnity payment pursuant to this Section as a result of such claim if and to
the extent such Tax Indemnitee or the Lessee, as the case may be, shall not
prevail in the contest of such claim; provided, however, that the Lessee shall
not be required to indemnify for such Taxes to the extent that the results of
the contest clearly and unambiguously demonstrate that the Tax is not a Tax for
which Lessee is required to indemnify; (ii) such Tax Indemnitee shall have
received the opinion of independent tax counsel selected by the Tax Indemnitee
and satisfactory to the Lessee furnished at the Lessee's sole expense, to the
effect that a reasonable basis exists for contesting such claim or, in the event
of an appeal, that it is more likely than not that an appellate court or an
administrative agency with appellate jurisdiction, as the case may be, will
reverse or substantially modify the adverse determination; (iii) the Lessee
shall have agreed to pay such tax Indemnitee on demand (and at no after-tax
costs to the Lessor and the Owner Participant) all reasonable costs and expenses
that such Tax Indemnitee may incur in connection with contesting such claim
(including, without limitation, all costs, expenses, reasonable legal and
accounting fees, disbursements, penalties, interest and additions to the Tax);
(iv) no Lease Event of Default shall
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have occurred and shall have been continuing, unless the Lessee shall have
posted a satisfactory bond or other security with respect to the costs of such
contest and the Taxes which may be required to be indemnified; (v) such Tax
Indemnitee shall have determined that the action to be taken will not result in
any substantial danger of sale, forfeiture or loss of, or the creation of any
Lien or otherwise made a provision to protect the interest of such Tax
Indemnitee (in a manner satisfactory to such Tax Indemnitee) on the Equipment or
any portion thereof or any interest therein; (vi) the amount of such claims
alone, or, if the subject matter thereof shall be of a continuing or recurring
nature, when aggregated with identical potential claims shall be at least
$5,000; and (vii) if such contest shall be conducted in a manner requiring the
payment of the claim, the Lessee shall have paid the amount required (an at no
after-tax costs to the Lessor and the Owner Participant). The Lessee shall
cooperate with the Tax Indemnitee with respect to any contest controlled and
conducted by the Tax Indemnitee and the Tax Indemnitee shall consult with the
Lessee regarding the conduct of such contest. The Tax Indemnitee shall cooperate
with respect to any contest controlled and conducted by the Lessee and the
Lessee, shall consult with the Tax Indemnitee regarding the conduct of such
contest.
Notwithstanding anything to the contrary contained in this Section 7.1, no
Tax Indemnitee shall be required to contest any claim if the subject matter
thereof shall be of a continuing or recurring nature and shall have previously
been adversely decided to the Tax Indemnitee pursuant to the contest provisions
of this Section unless there shall have been a change in the law (including,
without limitation, amendments to statutes or regulations, administrative
rulings or court decisions) enacted, promulgated or effective after such claim
shall have been so previously decided, and such Tax Indemnitee shall have
received an opinion of independent tax counsel selected by the Tax Indemnitee
and reasonably satisfactory to the Lessee, furnished at the Lessee's sole
expense, to the effect that such change is favorable to the position which such
Tax Indemnitee or the Lessee, as the case may be, had asserted in such previous
contest and as a result of such change, there is a reasonable basis to contest
such claim.
(f) Payments to Lessee. With respect to any payment or indemnity
------------------
hereunder, such payment or indemnity shall have included an amount payable to
the Tax Indemnitee sufficient to hold such Tax Indemnitee harmless on an After-
Tax Basis from all taxes required to be paid by such Tax Indemnitee with respect
to such payment or indemnity under the laws of any federal, state or local
government or taxing authority in or of the United States, or under the laws of
any taxing authority or governmental subdivision in or of a foreign country;
provided that, if any Tax Indemnitee realizes and recognizes a permanent tax
benefit by reason of such payment or indemnity (whether such tax benefit shall
be by means of a foreign tax credit, investment tax credit, depreciation or
recovery deduction or otherwise), such Tax Indemnitee shall pay to the Lessee an
amount equal to the sum of such tax benefit plus any tax benefit realized as the
result of any payment made pursuant to this proviso, when, as, if and to the
extent realized; provided further that, (i) if at the time such payment shall be
due to the Lessee a Lease Event of Default shall have occurred and be
continuing, such amount shall not be payable until such Lease Event
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of Default shall have been cured, and (ii) the amount which such Tax Indemnitee
shall be required to pay to the Lessee shall not exceed the amounts which the
Lessee has theretofore paid such Tax Indemnitee hereunder with respect to such
indemnity.
For purposes of this Section 7.1, in determining the order in which
any Tax Indemnitee utilizes withholding or other foreign taxes as a credit
against such Tax Indemnitee's United States income taxes, such Tax Indemnitee
shall be deemed to utilize (i) first, all foreign taxes other than those
described in clause (ii) below; provided, however, that such other foreign taxes
which are carried back to the taxable year for which a determination is being
made pursuant to such paragraph (i) shall be deemed utilized after the foreign
taxes described in clause (ii) below, and (ii) then, on a pro rata basis, all
foreign taxes (including fees, taxes and other charges hereunder) with respect
to which such Tax Indemnitee is entitled to obtain indemnification pursuant to
an indemnification provision contained in any lease, loan agreement, financing
document or participation agreement (including, without limitation, this
Agreement).
(g) Reports. In the event any reports with respect to Indemnified
-------
Taxes are required to be made, the Lessee will either prepare and file such
reports (and in the case of reports which are required to be filed on the basis
of individual items of Equipment, such reports shall be prepared and filed in
such manner as to show as required the interest of each Tax Indemnitee in such
items of Equipment) or, if it shall not be permitted to file the same, it will
notify each Tax Indemnitee of such reporting requirements, prepare such reports
in such manner as shall be satisfactory to each Tax Indemnitee and deliver the
same to each tax Indemnitee within a reasonable period prior to the date the
same is to be filed. The Lessee shall provide such information as the Owner
Participant or the Lessor may reasonably require from the Lessee to enable the
Owner Participant and the Lessor to fulfill their respective tax filing, tax
audit, and tax litigation obligations.
(h) Survival. In the event that, during the continuance of this
--------
Agreement, any Indeminified Tax accrues or becomes payable or is levied or
assessed (or is attributable to the period of time during which the Lease is in
existence or prior to the return of Equipment in accordance the provisions of
the Lease) which the Lessee is or will be obligated to pay or reimburse,
pursuant to this Section 7.1, such liability shall continue, notwithstanding the
expiration of the Lease, until all such Taxes are paid or reimbursed by the
Lessee.
(i) Affiliated Group. For purposes of applying this Section 7.1 with
----------------
respect to any Imposition, the term "Owner Participant" shall include each
member of the affiliated group of corporations with which [_____________] (and
its successors and assigns) files consolidated or combined tax returns relating
to such Imposition.
(j) Income Tax. For purposes of this Section 7.1, the term Income Tax
----------
means any Tax based on or measured by or with respect to gross or net income
(including without limitation, capital gains
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taxes, personal holding company taxes, minimum taxes and tax preferences) or
gross or net receipts and Taxes which are capital, net worth, conduct of
business, franchise or excess profits taxes and interest, additions to tax,
penalties, or other charges in respect thereof (provided, however, that sales,
-------- -------
use, rental, value-added, excise, or property taxes shall not constitute an
Income Tax).
Section 7.2 General Indemnification and Waiver of Certain Claims.
----------------------------------------------------
(a) Claims Defined. For the purposes of this Section 7.2, "Claims"
--------------
shall mean any and all costs, expenses, liabilities, obligations, losses,
damages, penalties, actions or suits or claims of whatsoever kind or nature
(whether or not on the basis of negligence, strict or absolute liability or
liability in tort) which may be imposed on, incurred by, suffered by, or
asserted against an Indemnified Person, as defined herein, or any Unit and,
except as otherwise expressly provided in this Section 7.2, shall include, but
not be limited to, all reasonable out-of-pocket costs, disbursements and
expenses (including legal fees and expenses) paid or incurred by an Indemnified
Person in connection therewith or related thereto.
(b) Indemnified Person Defined. For the purposes of this Section 7.2,
--------------------------
"Indemnified Person" means the Owner Participant, the Owner Trustee (both in its
individual capacity and as Owner Trustee), the Indenture Trustee and the Pass
Through Trustee, each of their Affiliates and each of their respective
directors, officers, employees, successors and permitted assigns, agents and
servants, the Trust Estate and the Indenture Estate (the respective directors,
officers, employees, successors and permitted assigns, agents and servants of
the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass
Through Trustee and each of their Affiliates, as applicable, together with the
Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through
Trustee and each of their Affiliates, as the case may be, being referred to
herein collectively as the "Related Indemnitee Group" of the Owner Participant,
the Indenture Trustee, the Owner Trustee and the Pass Through Trustee,
respectively).
(c) Claims Indemnified. Whether or not any Unit is accepted under the
------------------
Lease, or the Closing occurs, and subject to the exclusions stated in paragraph
(d) below, Lessee agrees to indemnify, protect, defend and hold harmless each
Indemnified Person on an After-Tax Basis against Claims directly or indirectly
resulting from or arising out of or alleged to result from or arise out of
(whether or not such Indemnified Person shall be indemnified as to such Claim by
any other Person):
(i) this Agreement or any other Operative Agreement or any of
the transactions contemplated hereby and thereby or any Unit or the
ownership, lease, operation, possession, modification, improvement,
abandonment, use, non-use, maintenance, sublease, substitution, control,
repair, storage, alteration, transfer or other application or disposition,
return, overhaul, testing, servicing, replacement or registration of any
Unit (including, without limitation, injury, death or
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property damage of passengers, shippers or others, and environmental
control, noise and pollution regulations, or the presence, discharge,
treatment, storage, handling, generation, disposal, spillage, release,
escape of or exposure of any Person or thing to (directly or indirectly)
Hazardous Substances or damage to the environment (including, without
limitation, costs of investigations or assessments, clean-up costs,
response costs, remediation costs, removal costs, restoration costs,
monitoring costs, costs of corrective actions and natural resource
damages)) whether or not in compliance with the terms of the Lease, or by
any of the commodities, items or materials from time to time contained in
any Unit, whether or not in compliance with the terms of the Lease, or by
the inadequacy of any Unit or deficiency or defect in any Unit or by any
other circumstances in connection with any Unit, or by the performance of
any Unit or any risks relating thereto, or by any interruption of service,
loss of business or anticipated profits or consequential damages;
(ii) the construction, manufacture, financing, refinancing,
design, purchase, acceptance, rejection, delivery, non-delivery or
condition of any Unit (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent, trademark
or copyright infringement);
(iii) any act or omission (whether negligent or otherwise) or any
breach of or failure to perform or observe, or any other non-compliance
with, any covenant, condition or agreement to be performed by, or other
obligation of, the Lessee under any of the Operative Agreements, or the
falsity of any representation or warranty of the Lessee in any of the
Operative Agreements or in any document or certificate delivered in
connection therewith other than representations and warranties in the Tax
Indemnity Agreement;
(iv) the offer, sale or delivery of any Equipment Notes or Pass
Through Certificates or any interest in the Trust Estate; and
(v) any violation of law, rule, regulation or order by the
Lessee or any sublessee or their respective directors, officers,
employees, agents or servants.
(d) Claims Excluded. The following are excluded from the Lessee's
---------------
agreement to indemnify under this Section 7.2:
(i) Claims with respect to any Unit to the extent attributable
to acts or events occurring after (except in any case where remedies are
being exercised under Section 15 of the Lease or the Lessee has assumed
any of the obligations with respect to the Equipment Notes under Section
3.6 of the Indenture) the last to occur of (x) with respect to such Unit,
the earlier to occur of the termination of the Lease or the expiration of
the Lease Term in accordance with the terms thereof, (y) with respect to
each Unit, the return of such Unit to the Lessor in accordance with the
terms of the Lease (it being understood that, so long as any Unit is in
storage as provided in
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Section 6.1(c) of the Lease, the date of return thereof for the purpose of
this clause (i) shall be the last day of the Storage Period), and (z) the
release of the Lien of the Indenture on such Unit;
(ii) Claims which are Taxes, whether or not the Lessee is
required to indemnify therefor under Section 7.1 hereof or under the Tax
Indemnity Agreement;
(iii) with respect to any particular Indemnified Person, Claims to
the extent resulting from (x) the gross negligence or willful misconduct
of such Indemnified Person, or (y) any breach of any covenant to be
performed by such Indemnified Person under any of the Operative
Agreements, or the falsity of any representation or warranty of such
Indemnified Person in any of the Operative Agreements or in a document or
certificate delivered in connection therewith;
(iv) any Claim to the extent attributable to any transfer by the
Lessor of the Equipment or any portion thereof or any transfer by the
Owner Participant of all or any portion of its interest in the Trust
Estate other than (A) any transfer after a Lease Event of Default, (B) the
transfer of all or any portion of the Equipment or any Owner Participant's
interest in the Equipment to the Lessee, (C) the transfer of all or any
portion of the Equipment to a third party pursuant to Lessee's election to
terminate the Lease or (D) any transfer of all or any portion of the
Equipment pursuant to Section 6.9; provided, however, that with respect
to any such Claim, if the Lessee shall have elected to assume all of the
rights and obligations of the Owner Trustee under the Indenture in respect
of the Equipment Notes, pursuant to Section 3.6 of the Indenture, the Pass
Through Trustee and the Indenture Trustee shall remain Indemnified Persons
and shall not be excluded from the indemnification under this Section 7.2;
(v) with respect to any particular Indemnified Person, any Claim
resulting from the imposition of any Lessor's Lien attributable to such
Indemnified Person; or
(vi) with respect to any particular Indemnified Person, any
Claim, to the extent the risk thereof has been expressly assumed by such
Indemnified Person in connection with the exercise by such Indemnified
Person of the right of inspection granted under Section 6.2 of the Lease,
inspection or restenciling under Section 6.1(c) of the Lease or inspection
under Section 13.2 of the Lease.
(e) Insured Claims. In the case of any Claim indemnified by the
--------------
Lessee hereunder which is covered by a policy of insurance maintained by the
Lessee pursuant to Section 12 of the Lease or otherwise, each Indemnified Person
agrees to provide reasonable cooperation to the insurers in the exercise of
their rights to investigate, defend, settle or compromise such Claim as may be
required to retain the benefits of such insurance with respect to such Claim.
(f) Claims Procedure. An Indemnified Person shall, after obtaining
----------------
knowledge thereof, promptly notify the Lessee of any Claim as to which
indemnification is sought; provided, however, that the failure to give such
notice shall not release the Lessee from any of its obligations under this
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Section 7.2, except to the extent that failure to give notice of any action,
suit or proceeding against such Indemnified Person shall have a material adverse
effect on Lessee's ability to defend such Claim or recover proceeds under any
insurance policies maintained by the Lessee. The Lessee shall, after obtaining
knowledge thereof, promptly notify each Indemnified Person of any indemnified
Claim affecting such Indemnified Person. Subject to the provisions of the
following paragraph, the Lessee shall at its sole cost and expense be entitled
to control, and shall assume full responsibility for, the defense of such claim
or liability; provided that the Lessee shall confirm to such Indemnified Person
Lessee's obligations to indemnify hereunder for such Claim, shall keep the
Indemnified Person which is the subject of such proceeding fully apprised of the
status of such proceeding and shall provide such Indemnified Person with all
information with respect to such proceeding as such Indemnified Person shall
reasonably request.
Notwithstanding any of the foregoing to the contrary, the Lessee shall
not be entitled to control and assume responsibility for the defense of any
Claim if (1) a Lease Event of Default shall have occurred and be continuing, (2)
such proceeding will involve any material danger of the sale, forfeiture or loss
of, or the creation of any Lien (other than any Lien permitted under the
Operative Agreements or a Lien which is adequately bonded to the satisfaction of
such Indemnified Person) on, any Unit, (3) the amounts involved, in the good
faith opinion of such Indemnified Person, are likely to have a materially
adverse effect on the business of such Indemnified Person other than the
ownership, leasing and financing of the Equipment, (4) in the good faith opinion
of such Indemnified Person, there exists an actual or potential conflict of
interest such that it is advisable for such Indemnified Person to retain control
of such proceeding or (5) such Claim involves the possibility of criminal
sanctions or liability to such Indemnified Person. In the circumstances
described in clauses (1) - (5), the Indemnified Person shall be entitled to
control and assume responsibility for the defense of such claim or liability at
the expense of the Lessee. In addition, any Indemnified Person may participate
in any proceeding controlled by the Lessee pursuant to this Section 7.2, at its
own expense, in respect of any such proceeding as to which the Lessee shall have
acknowledged in writing its obligation to indemnify the Indemnified Person
pursuant to this Section 7.2, and at the expense of the Lessee in respect of any
such proceeding as to which the Lessee shall not have so acknowledged its
obligation to the Indemnified Person pursuant to this Section 7.2. Lessee may
in any event participate in all such proceedings at its own cost. Nothing
contained in this Section 7.2(f) shall be deemed to require an Indemnified
Person to contest any Claim or to assume responsibility for or control of any
judicial proceeding with respect thereto.
(g) Subrogation. If a Claim indemnified by the Lessee under this
-----------
Section 7.2 is paid in full by the Lessee and/or an insurer under a policy of
insurance maintained by the Lessee, the Lessee and/or such insurer, as the case
may be, shall be subrogated to the extent of such payment to the rights and
remedies of the Indemnified Person (other than under insurance policies
maintained by such Indemnified Person) on whose behalf such Claim was paid with
respect to the transaction or event giving rise to such Claim. So long as no
Lease Event of Default shall have occurred and
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be continuing, should an Indemnified Person receive any refund, in whole or in
part, with respect to any Claim paid by the Lessee hereunder, it shall promptly
pay over the amount refunded (but not in excess of the amount the Lessee or any
of its insurers has paid) to the Lessee.
(h) Waiver of Certain Claims. The Lessee hereby waives and releases
------------------------
any Claim now or hereafter existing against any Indemnified Person arising out
of death or personal injury to personnel of the Lessee, pollution incidents,
loss or damage to property of the Lessee, or the loss of profits or use of any
property of the Lessee, which may result from or arise out of the condition, use
or operation of the Equipment during the Lease Term, including without
limitation any latent or patent defect whether or not discoverable.
(i) No Guaranty. The general indemnification provisions of this
-----------
Section 7.2 do not constitute a guaranty by the Lessee that the principal of,
interest on or any amounts payable with respect to the Equipment Notes will be
paid.
SECTION 8. LESSEE'S RIGHT OF QUIET ENJOYMENT.
Each party to this Agreement acknowledges notice of, and consents in all
respects to, the terms of the Lease, and expressly, severally and as to its own
actions only, agrees that, so long as no Lease Event of Default has occurred and
is continuing, it shall not take or cause to be taken any action contrary to the
Lessee's rights under the Lease, including, without limitation, the right to
possession, use and quiet enjoyment by the Lessee or any permitted sublessee of
the Equipment.
SECTION 9. SUCCESSOR INDENTURE TRUSTEE.
In the event that the Indenture Trustee gives notice of its resignation
pursuant to Section 8.2 of the Indenture, the Owner Trustee shall promptly
appoint a successor Indenture Trustee reasonably acceptable to the Lessee and
the Pass Through Trustee.
SECTION 10. MISCELLANEOUS.
Section 10.1. Consents. Each Participant covenants and agrees (subject,
--------
in the case of the Loan Participant, to all of the terms and provisions of the
Trust Indenture) that it shall not unreasonably withhold its consent to any
consent requested of the Owner Trustee or the Indenture Trustee, as the case may
be, under the terms of the Operative Agreements that by its terms is not to be
unreasonably withheld by the Owner Trustee or the Indenture Trustee.
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Section 10.2. Refinancing. So long as no Lease Event of Default shall
-----------
have occurred and be continuing, the Lessee shall have the right to request the
Owner Participant and the Owner Trustee to effect an optional prepayment of all,
but not less than all, of the Equipment Notes (including any Equipment Notes
assumed at such time under Section 3.6 of the Indenture) pursuant to Section
2.10(d) of the Indenture as part of a refunding or refinancing operation,
provided that the Lessee (a) shall have the right to refinance not more than two
times prior to the termination of the Lease, and (b) shall obtain the prior
consent of the Owner Participant, which shall not be unreasonably withheld, to
such refinancing if the Scheduled Amortization Amount measured after the receipt
of the Basic Rent on the preceding Payment Date was other than zero (0). As soon
as practicable after receipt of such request, the Owner Participant and the
Lessee will enter into an agreement, in form and substance reasonably
satisfactory to the parties thereto, as to the terms of such refunding or
refinancing as follows:
(a) the Lessee, the Owner Participant, the Indenture Trustee, the
Owner Trustee, and any other appropriate parties will enter into a financing or
loan agreement (which may involve an underwriting agreement in connection with a
public offering), in form and substance reasonably satisfactory to the parties
thereto, providing for (i) the issuance and sale by the Owner Trustee or such
other party as may be appropriate on the date specified in such agreement (for
the purposes of this Section 10.2, the "Refunding Date") of debt securities in
an aggregate principal amount (in the lawful currency of the United States)
equal to the principal amount of the Equipment Notes outstanding on the
Refunding Date, having the same maturity date as said Equipment Notes and having
a weighted average life which is not less than or greater than the Remaining
Weighted Average Life of said Equipment Notes by more than three months, (ii)
the application of the proceeds of the sale of such debt securities to the
prepayment of all such Equipment Notes on the Refunding Date, and (iii) payment
by Lessee to the Person or Persons entitled thereto of all other amounts, in
respect of accrued interest, any Make Whole Amount or other premium, if any,
payable on such Refunding Date;
(b) the Lessee and the Owner Trustee will amend the Lease in a manner
such that (i) if the Refunding Date is not a Rent Payment Date and the accrued
and unpaid interest on the Equipment Notes is not otherwise paid pursuant to
Section 10.2(a), the Lessee shall on the Refunding Date prepay that portion of
the next succeeding installment of Basic Rent as shall equal the aggregate
interest accrued on the Equipment Notes outstanding to the Refunding Date, (ii)
Basic Rent payable in respect of the period from and after the Refunding Date
shall be recalculated to preserve the Net Economic Return which the Owner
Participant would have realized had such refunding not occurred, provided that
the net present value of Basic Rent shall be minimized to the extent consistent
therewith, and (iii) amounts payable in respect of Stipulated Loss Value, Early
Purchase Price and Termination Value from and after the Refunding Date shall be
appropriately recalculated to preserve the Net Economic Return which the Owner
Participant would have realized had such refunding not occurred (it being agreed
that
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any recalculations pursuant to subclauses (ii) and (iii) of this clause (b)
shall be performed in accordance with the requirements of Section 2.6 hereof);
(c) the Owner Trustee will enter into an agreement to provide for the
securing thereunder of the debt securities issued by the Owner Trustee pursuant
to clause (a) of this Section 10.2 in like manner as the Equipment Notes and/or
will enter into such amendments and supplements to the Indenture as may be
necessary to effect such refunding or refinancing, which agreements, amendments
and/or supplements shall be reasonably satisfactory in form and substance to the
Owner Participant; provided that, no such agreement or amendment shall provide
for any increase in the security for the new debt securities; and provided
further that, notwithstanding the foregoing (but subject to the provisions of
clauses (a) and (b) above), the Lessee reserves the right to set the economic
terms and other terms not customarily negotiated between an owner participant
and a lender of the refunding or refinancing transaction to be so offered to the
extent that they are passed through to the Lessee in, or define rights or
obligations of the Lessee under, the Operative Agreements; provided, further,
that no such amendment or supplement will in the reasonable judgment of the
Owner Participant increase its obligations or impair its rights under the
Operative Agreements without the consent of the Owner Participant;
(d) in the case of a refunding or refinancing involving a public
offering of debt securities, neither the Owner Trustee nor the Owner Participant
shall be an "issuer" for securities law purposes or an "obligor" within the
meaning of the Trust Indenture Act of 1939, as amended, the offering materials
(including any registration statement) for the refunding or refinancing
transaction shall be reasonably satisfactory to the Owner Participant and the
Lessee shall provide satisfactory indemnity to the Owner Trustee and Owner
Participant with respect thereto;
(e) unless otherwise agreed by the Owner Participant, the Lessee shall
pay to the Owner Trustee as Supplemental Rent an amount, on an After-Tax Basis,
equal to any Make-Whole Amount, Late Payment Premium, if any, payable in respect
of Equipment Notes outstanding on the Refunding Date, all interest which is
accrued and unpaid in respect of late payments of Basic Rent or any part
thereof, all reasonable fees, costs, expenses of such refunding or refinancing
and of the parties hereto incurred in connection with such refunding or
refinancing (including all reasonable out-of-pocket legal fees and expenses and
the reasonable fees of any financial advisors);
(f) the Lessee shall give the Indenture Trustee not less than 25 days
prior written notice of the Refunding Date;
(g) the Owner Participant, the Owner Trustee, the Indenture Trustee
and the Pass Through Trustee shall have received (i) such opinions of counsel as
they may reasonably request concerning compliance with the Securities Act of
1933, as amended, and any other applicable
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law relating to the sale of securities and (ii) such other opinions of counsel
and such certificates and other documents, each in form and substance
satisfactory to them, as they may reasonably request in connection with
compliance with the terms and conditions of this Section 10.2;
(h) the Projected Coverage Ratio, calculated on a pro forma basis for
each payment period occurring during the remaining portion of the Basic Term
following the Refunding Date, shall be no less for any such payment period than
would have been the case had the refinancing proposed pursuant to this Section
10.2 not occurred.
(i) all necessary authorizations, approvals and consents shall have
been obtained and shall be in full force and effect;
provided, however, that the Lessee will, to the extent then known, promptly
provide to the Owner Participant, the Owner Trustee, the Indenture Trustee and
the Pass Through Trustee substantially final terms and conditions of any such
refunding or refinancing within 30 days prior to the execution and delivery of
the documents contemplated hereunder in connection therewith; and provided,
further, that (w) no refunding or refinancing of the Equipment Notes will be
permitted unless within 20 days after receipt by the Owner Participant of a
request from the Lessee to effect a refunding or refinancing pursuant to this
Section 10.2 and of information regarding the terms of such refunding or
refinancing necessary to render the opinion referred to below, the Lessee has
provided the Owner Participant with (a) a tax opinion from [____________] or
other tax counsel reasonably acceptable to the Owner Participant and (b) an
agreement of GATC to indemnify the Owner Participant against any adverse tax
consequence suffered as a result of such refinancing or refunding;
alternatively, in the event such reasonable basis tax opinion cannot be provided
and the Lessee wishes to effect such refunding or refinancing, the Lessee will,
at such time as the Lessee receives written notice from the Owner Participant
that the Owner Participant has filed any income tax return wherein such adverse
income tax consequences are recognized, make an indemnity payment to the Owner
Participant in the incremental amount of such adverse tax consequence (on an
After-Tax Basis) attributable to such refunding or refinancing; (x) the Lessee
shall pay to or reimburse the Participants, the Owner Trustee and the Indenture
Trustee for all costs and expenses (including reasonable attorneys' and
accountants' fees) paid or incurred by them in connection with such refunding or
refinancing; (y) no refunding or refinancing of the Equipment Notes will be
permitted if it shall cause the Owner Participant to account for the transaction
contemplated hereby as other than a "leveraged lease" under the Financial
Accounting Standards Board ("FASB") Statement No. 13, as amended (including any
amendment effected by means of the adoption by FASB of a new statement in lieu
of FASB Statement No. 13); and (z) in no event, in connection with or after
giving effect to such refunding or refinancing shall the Owner Participant be
exposed to any unindemnified risk or liability (including tax risk) to which it
is not exposed prior to such refunding or refinancing.
58
<PAGE>
Section 10.3. Amendments and Waivers. Except as otherwise provided in the
----------------------
Indenture, no term, covenant, agreement or condition of this Agreement may be
terminated, amended or compliance therewith waived (either generally or in a
particular instance, retroactively or prospectively) except by an instrument or
instruments in writing executed by each party against which enforcement of the
termination, amendment or waiver is sought.
Section 10.4. Notices. Unless otherwise expressly specified or permitted
-------
by the terms hereof, all communications and notices provided for herein shall be
in writing or by facsimile, and any such notice shall become effective (i) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (ii) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(iii) in the case of notice by facsimile, upon confirmation of receipt thereof,
provided such transmission is promptly further confirmed by any of the methods
set forth in clauses (i) or (ii) above, in each case addressed to each party
hereto at its address set forth below or, in the case of any such party hereto,
at such other address as such party may from time to time designate by written
notice to the other parties hereto:
If to GATC:
General American Transportation Corporation
500 West Monroe Street
Chicago, Illinois
60661
Attention: Treasurer
(1998-1)
Facsimile No:(312) 621-6645
Confirmation No.:(312) 621-6200
If to the Lessee:
General American Railcar Corporation II
500 West Monroe Street
Chicago, Illinois 60661
Attention: Treasurer
Facsimile No.:(312) 621-6270
Confirmation No.:(312) 621-6451
59
<PAGE>
If to the Owner Trustee:
[[Owner Trustee]
_____________________
_____________________
Attention: ______________
Facsimile No.: _____________
Confirmation No.: _____________]
with a copy to:
the Owner Participant at the
address set forth below
If to the Owner Participant:
[[Owner Participant]
____________________
____________________
Attention: ___________________
Facsimile No.: _____________
Confirmation No.: _____________]
If to the Indenture Trustee:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services Division
Facsimile No.:[(312) 407-1708]
Confirmation No.:[(312) 407-8810]
If to the Pass Through Trustee:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services Division
Facsimile No.: [(312) 407-1708]
Confirmation No.:[(312) 407-8810]
60
<PAGE>
with a copy to:
[Salomon Smith Barney, as Underwriter
7 World Trade Center
New York, New York 10048
Attention: Structured Finance Group
Facsimile No.:(212) 783-7808
Confirmation No.:(212) 783-7154]
If to the Rating Agencies:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: [Christina Cotton]
Facsimile No.:[(212) 553-1350]
Confirmation No:[(212) 553-4148]
Standard & Poor's Corporation
25 Broadway
New York, New York 10004
Attention: [Steven Rooney]
Facsimile No.:[(212) 208-0027]
Confirmation No.:[(212) 208-1829]
Section 10.5. Survival. All warranties, representations, indemnities and
--------
covenants made by any party hereto, herein or in any certificate or other
instrument delivered by any such party or on the behalf of any such party under
this Agreement, shall be considered to have been relied upon by each other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by any such
party or on behalf of any such party.
Section 10.6. No Guarantee of Residual Value or Debt. Nothing contained
--------------------------------------
herein or in the Lease, the Trust Indenture, the Trust Agreement, the Pass
Through Trust Agreement or the Tax Indemnity Agreement or in any certificate or
other statement delivered by the Lessee in connection with the transactions
contemplated hereby shall be deemed to be (i) a guarantee by the Lessee to the
Owner Trustee, the Owner Participant, the Indenture Trustee or the Loan
Participant that the Equipment will have any residual value or useful life, or
(ii) a guarantee by the Indenture Trustee or the Lessee of payment of the
principal of, premium, if any, or interest on the Equipment Notes.
61
<PAGE>
Section 10.7. Successors and Assigns. This Agreement shall be binding
----------------------
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 6.1 hereof and each successive
holder of any Equipment Note issued and delivered pursuant to this Agreement or
the Indenture. Except as expressly provided herein or in the other Operative
Agreements, no party hereto may assign their interests herein without the
consent of the parties hereto.
Section 10.8. Business Day. Notwithstanding anything herein or in any
------------
other Operative Agreement to the contrary, if the date on which any payment is
to be made pursuant to this Agreement or any other Operative Agreement is not a
Business Day, the payment otherwise payable on such date shall be payable on the
next succeeding Business Day with the same force and effect as if made on such
succeeding Business Day and (provided such payment is made on such succeeding
Business Day) no interest shall accrue on the amount of such payment from and
after such scheduled date to the time of such payment on such next succeeding
Business Day.
Section 10.9. Governing Law. This Agreement shall in all respects be
-------------
governed by and construed in accordance with the laws of the State of New York
including all matters of construction, validity and performance, without regard
to principles of conflicts of laws.
Section 10.10. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 10.11. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each executed counterpart constituting an original but all
together only one Agreement.
Section 10.12. Headings and Table of Contents. The headings of the
------------------------------
Sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 10.13. Limitations of Liability.
------------------------
(a) Liabilities of Participants. Neither the Indenture Trustee, the
---------------------------
Owner Trustee nor any Participant shall have any obligation or duty to the
Lessee, to GATC, to any other Participant or to others with respect to the
transactions contemplated hereby, except those obligations or duties of such
Participant expressly set forth in this Agreement and the other Operative
Agreements, and neither the Indenture Trustee nor any Participant shall be
liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the
62
<PAGE>
generality of the foregoing, under no circumstances whatsoever shall the
Indenture Trustee or any Participant be liable to the Lessee or GATC for any
action or inaction on the part of the Owner Trustee in connection with the
transactions contemplated herein, whether or not such action or inaction is
caused by willful misconduct or gross negligence of the Owner Trustee unless
such action or inaction is at the direction of the Indenture Trustee or any
Participant, as the case may be, and such direction is expressly permitted
hereby.
(b) No Recourse to the Owner Trustee. It is expressly understood and
--------------------------------
agreed by and between the Owner Trustee, the Lessee, the Owner Participant, the
Indenture Trustee, and the Loan Participant, and their respective successors and
permitted assigns that, subject to the proviso contained in this Section
10.13(b), all representations, warranties and undertakings of the Owner Trustee
hereunder shall be binding upon the Owner Trustee only in its capacity as Owner
Trustee under the Trust Agreement, and (except as expressly provided herein) the
Owner Trustee shall not be liable in its individual capacity for any breach
thereof, except for its gross negligence or willful misconduct, or for breach of
its covenants, representations and warranties contained herein, except to the
extent covenanted or made in its individual capacity; provided, however, that
nothing in this Section 10.13(b) shall be construed to limit in scope or
substance those representations and warranties of the Owner Trustee made
expressly in its individual capacity set forth herein. The term "Owner Trustee"
as used in this Agreement shall include any successor trustee under the Trust
Agreement, or the Owner Participant if the trust created thereby is revoked.
(c) Loan Participant's Source of Funds. It is expressly understood
----------------------------------
and agreed by and between the Owner Trustee, the Lessee, the Owner Participant,
the Indenture Trustee, and the Loan Participant, and their respective successors
and permitted assigns that, subject to the proviso contained in this Section
10.13(c), the undertakings of the Loan Participant hereunder are limited to the
application of the proceeds of the sale of the Pass Through Certificates to the
purchase by the Pass Through Trustee of the Equipment Notes; provided, however,
that nothing in this Section 10.13(c) shall be construed to limit in scope or
substance those representations and warranties of the Loan Participant made
expressly in its individual capacity set forth herein.
Section 10.14. Maintenance of Non-Recourse Debt. The parties hereto agree
--------------------------------
that if the Owner Trustee becomes a debtor subject to the reorganization
provisions of the Bankruptcy Code, 11 U.S.C. (S)101 et seq. (the "Bankruptcy
Code") or any successor provision, the parties hereto will make an election
under 1111(b)(1)(A)(i) of the Bankruptcy Code. If (a) the Owner Trustee becomes
a debtor subject to the reorganization provisions of the Bankruptcy Code or any
successor provision, (b) pursuant to such reorganization provisions the Owner
Trustee is required, by reason of the Owner Trustee being held to have recourse
liability to the Pass Through Trustee or the Indenture Trustee, directly or
indirectly, to make payment on account of any amount payable under the Equipment
Notes or any of the other Operative Agreements and (c) the Pass Through Trustee
and/or the Indenture Trustee actually receives any Excess Amount
63
<PAGE>
(as hereinafter defined) which reflects any payment by the Owner Trustee on
account of (b) above, then the Pass Through Trustee and/or the Indenture
Trustee, as the case may be, shall promptly refund to the Owner Trustee such
Excess Amount. For purposes of this Section 10.14, "Excess Amount" means the
amount by which such payment exceeds the amount which would have been received
by the Pass Through Trustee or the Indenture Trustee if the Owner Trustee had
not become subject to the recourse liability referred to in (b) above.
Section 10.15. Ownership of and Rights in Units. The sale of the Units
--------------------------------
contemplated hereby is intended for all purposes to be a true sale of all of the
Lessee's right, title and interest in and to the Units to the Owner Trustee,
which shall be the legal owner thereof. Upon consummation of the sale and
leaseback transactions contemplated hereby, the Lessee's interest in the Units
is intended to be that of a lessee only. It is intended that for federal and
state income tax purposes the Owner Participant will be the owner of the Units.
The rights of the Indenture Trustee in and to the Units pursuant to the
Indenture is intended to be that of a secured party holding a security interest,
subject to the Lease and the rights of the Lessee thereunder. No holder of an
Equipment Note is intended to have any right, title or interest in or to the
Units except as a beneficiary of the Lien granted by the Owner Trustee to the
Indenture Trustee pursuant to the Indenture in trust for the equal and ratable
benefit of the holders from time to time of the Equipment Notes.
Section 10.16. No Petition. Each party hereto agrees that, prior to the
-----------
date which is one year and one day after payment in full of all outstanding
Equipment Notes and all obligations of the Lessee under the Operative Agreements
(i) no party hereto shall authorize the Lessee to commence a voluntary winding-
up or other voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to the Lessee or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect in any
jurisdiction or seeking the appointment of an administrator, a trustee,
receiver, liquidator, custodian or other similar official of the Lessee or any
substantial part of its property or to consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against the Lessee, or to make a general
assignment for the benefit of any party hereto or any other creditor of the
Lessee, and (ii) none of the parties hereto shall commence or join with any
other Person in commencing any proceeding against the Lessee under any
bankruptcy, reorganization, liquidation or insolvency law or statute now or
hereafter in effect in any jurisdiction. Each of the parties hereto agrees
that, prior to the date which is one year and one day after the payment in full
of all outstanding Equipment Notes and all obligations of the Lessee under the
Operative Agreements, it will not institute against, or join any other Person in
instituting against, Lessee an action in bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or similar proceeding under
the laws of the United States or any state of the United States.
64
<PAGE>
Section 10.17. Consent To Jurisdiction. Each of the parties hereto hereby
-----------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Operative Agreement or
for recognition and enforcement of any judgment in respect hereof or
thereof, to the nonexclusive general jurisdiction of the courts of the
State of New York, the courts of the United States of America for the
Southern District of New York, and the appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form and mail), postage
prepaid, to each party hereto at its address set forth in Section 10.4
hereof, or at such other address of which the other parties shall have
been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
Section 10.18. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY
--------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH THIS AGREEMENT.
* * *
65
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered, all as of the date first above written.
Lessee:
GENERAL AMERICAN RAILCAR CORPORATION II
By:
Name:
Title:
Manager:
GENERAL AMERICAN TRANSPORTATION
CORPORATION
By:
Name:
Title:
Owner Trustee:
[OWNER TRUSTEE], not in its individual capacity except as expressly
provided herein but solely as Owner Trustee
By:
Name:
Title:
66
<PAGE>
Owner Participant:
[OWNER PARTICIPANT]
By:
Name:
Title:
Indenture Trustee:
THE FIRST NATIONAL BANK OF CHICAGO, not in its individual capacity
except as expressly provided herein but solely as Indenture Trustee
By:
Name:
Title:
67
<PAGE>
Pass Through Trustee:
THE FIRST NATIONAL BANK OF CHICAGO, not in its individual capacity
except as expressly provided herein but solely as Pass Through Trustee
By:
Name:
Title:
68
<PAGE>
EXHIBIT A-1
Form of
Certificate of Insurance Broker Confirming Insurance Coverage
(Primary Liability)
The First National Bank of Chicago, individually and as Pass Through Trustee
The First National Bank of Chicago, individually and as Indenture Trustee
[Owner Trustee],
individually and as Owner Trustee
[Owner Participant], as Owner Participant
Re: Trust No. 1998-1
Gentlemen:
Reference is hereby made to the Equipment Lease Agreement (1998-1) dated
as of August 1, 1998 (the "Lease") between the Owner Trustee referred to above
and General American Railcar Corporation II and the Equipment thereunder.
Attached hereto as Exhibit A is a certificate with respect to certain insurance
maintained by the Lessee on the Equipment which is or will become effective as
of any item thereof upon the acceptance by the Lessee pursuant to the Lease.
Such insurance (i) complies with the requirements contained in Exhibit B hereto
except as noted below and (ii) is in full force and effect as of the date hereof
and all premiums due and payable with respect thereto have been paid in full.
Capitalized terms not otherwise defined herein or in the exhibits attached
hereto have the meaning assigned thereto in the Lease.
A1-1
<PAGE>
EXHIBIT A
to Certificate of Insurance Broker
GATX Corporation Primary Liability Program
_______________, 199__ to __________, 199__
[________________ Insurance Company $3,500,000 per occurrence and
Policy #XXX XXXXXX-X $9,000,000 in the aggregate as applicable;
subject to a $3,000,000 per occurrence
retention and $8,000,000 in the aggregate
retention (indemnity only)]
A1A-1
<PAGE>
EXHIBIT A-2
Form of
Certificate of Insurance Broker Confirming Insurance Coverage
(Excess Liability)
The First National Bank of Chicago, individually and as Pass Through Trustee
The First National Bank of Chicago, individually and as Indenture Trustee
[Owner Trustee], individually and as Owner Trustee
[Owner Participant], as Owner Participant
Re: Trust No. 1998-1
Gentlemen:
Reference is hereby made to the Equipment Lease Agreement (1998-1) dated
as of August 1, 1998 (the "Lease") between the Owner Trustee referred to above
and General American Railcar Corporation II. We hereby certify that the Lessee
is insured under various policies, effective (_______________), that provide
excess public liability coverage for personal injury and property damage,
subject to the policy terms, conditions and exclusions. We further certify that
said policies:
a. afford limits of liability as indicated on the attached Exhibit A,
---------
excess of various underlying insurances or retained amounts and subject to
aggregates where applicable;
b. are in full force and effect and all premiums due with respect to
said policies have been paid in full; and
c. comply with all of the requirements listed on the attached Exhibit
-------
B.
- -
We hereby agree on each of the dates specified in Section 12.1 of the
Lease to issue a certificate (1) describing in reasonable detail the insurance
carried by the Lessee relating to the Equipment and (2) confirming that all
premiums due thereon have been paid.
Capitalized terms not otherwise defined herein or in the exhibits attached
hereto have the meaning assigned thereto in the Lease.
A2-2
<PAGE>
EXHIBIT A
to Certificate of Insurance Broker
GATX Corporation Excess Liability Program
_____________, 199__ to ___________, 199__
[Umbrella Liability - Occurrence Basis $1,000,000 Each Occurrence and
________________ Insurance Company Aggregate as Applicable Excess of
Policy #CUA-XXXXXX-X $3,500,000 Each Claim/$9,000,000
aggregate as applicable
Excess Liability - Claims Made Basis $50,000,000 Each Claim and
[___________________________________] Aggregate as Applicable, Excess of
Policy #XX XXX XXX $1,000,000 Each Claim in turn
Excess of $3,500,000 Each
Claim/$9,000,000 aggregate as
applicable]
A2A-2
<PAGE>
EXHIBIT B
Insurance Requirements
The following applies to the policies indicated on Exhibit A:
---------
1. The policies are in such amounts and for such risks and with such
insurance companies and subject to such self-insurance not less comprehensive in
amounts and against risks customarily insured against by the Lessee in respect
of equipment owned or leased by it similar in type to the Equipment and
consistent with prudent industry standards for companies engaged in the full
service leasing of railcars.
2. The policies have a third party liability limit of not less than
$[50,000,000] per occurrence or in the aggregate, and provide coverage excess of
$[3,500,000] per occurrence (and $[9,000,000] in the aggregate) primary general
liability.
3. The policies:
(i) provide that if any such insurance is canceled or terminated
(other than for normal expiration) for any reason whatever, the Lessor,
Indenture Trustee and Owner Participant shall receive 30 days' prior notice of
such cancellation or termination,
(ii) name the Owner Participant, Lessor (both as lessor of the
Equipment and in its individual capacity), the Indenture Trustee and the Loan
Participant as additional insured as their interests may appear (but only as
respects liability arising out of the Operative Agreements or the Equipment),
(iii) provide that inasmuch as such public liability insurance
policies cover more than one insured, all terms, conditions, insuring agreements
and endorsements, with the exceptions of limits of liability and liability for
premiums, commissions, assessments or calls, operate in the same manner as if
there were a separate policy or policies covering each insured,
(iv) waive rights of subrogation against the Owner Participant,
Lessor (both as lessor of the Equipment and in its individual capacity) and the
Indenture Trustee,
(v) provide that neither the Owner Participant, Lessor (both as
lessor of the Equipment and in its individual capacity) nor the Indenture
Trustee shall have any liability or obligation for insurance premiums whether
for coverage before or after cancellation or termination of any such policies,
(vi) shall be primary without contribution from any similar insurance
maintained by Owner Participant, Lessor, Indenture Trustee or Pass Through
Trustee.
B-1
<PAGE>
(vii) provides for sudden and accidental pollution coverage due to
collision or overturn of railcars arising out of the use or operation of the
units. The scope of this coverage includes clean up should Lessee become
obligated to pay (other than on property owned, leased or occupied by Lessee).
B-2
<PAGE>
Schedule 1
Participation Agreement
Description of Equipment, Designation of Basic Groups,
Designation of Functional Groups, and Equipment Cost
See Attached
<PAGE>
Schedule 1A
Participation Agreement
List of Existing Car Service Contracts
<PAGE>
Schedule 2
Participation Agreement
Commitment Percentage and Payment Information for Participants
1. The percentage representing the Loan Participant's Commitment
is___________%
All Payments to Loan Participant should be made
by wire transfer of immediately available funds to:
The First National Bank of Chicago
ABA No. ______________
Credit: _____________ Corporate Trust Administration
Attention: ______________
Reference: GARC II __________ 1998-1
Account # ___________
2. The percentage representing the Owner Participant's Commitment is
_____________%. All payments to ___________________, as Owner Participant
should be made by wire transfer of immediately available funds to:
_____________________
ABA No. _____________
Account # ___________________
<PAGE>
Schedule 3
Participation Agreement
Schedule of Basic Rent Payments
See Attached
<PAGE>
Schedule 4
Participation Agreement
Schedule of Stipulated Loss Value and Termination Value
The Stipulated Loss Value for a Unit of Equipment as of the Basic Term
Commencement Date and each Rent Payment Date shall be an amount equal to the
percentage of the Equipment Cost for such Unit set opposite such date in this
schedule. The Termination Value for a Unit of Equipment as of each Rent Payment
Date shall be an amount equal to the percentage of the Equipment Cost for such
Unit set opposite such date in this schedule.
See Attached
<PAGE>
Schedule 5
Participation Agreement
Terms of Equipment Notes
See Attached
<PAGE>
Schedule 6
Participation Agreement
Purchase Information
Early Purchase Date: ____________, 20__
Early Purchase Price: __________% (stated as a percentage of Equipment
Cost), of which __________% may be deferred at the option of the Lessee and
payable in ____ (__) equal installments on ________, _______, ____________ and
___________, 20__ each in an amount of __________% of Equipment Cost.
End of Basic Term:_____________________________
Fixed Option Price:_____________________________
<PAGE>
FORM OF
Appendix A
to
Participation Agreement
Lease Agreement
Trust Indenture
Trust Agreement
(1998-1)
DEFINITIONS
General Provisions
The following terms shall have the following meanings for all purposes of
the Operative Agreements referred to below, unless otherwise defined in an
Operative Agreement or the context thereof shall otherwise require, and such
meanings shall be equally applicable to both the singular and the plural forms
of the terms herein defined. In the case of any conflict between the provisions
of this Appendix A and the provisions of the main text of any Operative
Agreement, the provisions of the main text of such Operative Agreement shall
control the construction of such Operative Agreement.
Unless otherwise required by the context, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended,
supplemented and otherwise modified from time to time, and (ii) references to
parties to agreements shall be deemed to include the permitted successors and
assigns of such parties.
Defined Terms
"AAR" shall mean the Association of American Railroads or any successor
---
thereto.
"Accounts" shall mean the Collection Account, the Operating Account, the
--------
Liquidity Reserve Account, the Special Reserves Account, the Non-Shared Payments
Account, the Stipulated Loss Value Deficiency Account, the Cash Trapping Account
and the Excess Cash Account specified in Section 3.1 of the Intercreditor
Agreement.
"Accumulated Equity Deficiency Amount" shall mean, on any Payment Date, an
------------------------------------
amount equal to any aggregate outstanding and then unpaid Equity Portion of
Basic Rent.
"Adjusted Payment Amount" shall mean, for each Adjusted Principal Period,
-----------------------
the product of (i) the sum of all principal payments made during such Adjusted
Principal Period (excluding
<PAGE>
any Prepaid Amount), and (ii) the Adjustment Multiplier at the Payment Date
occurring for such Adjusted Principal Period.
"Adjusted Principal Period" shall mean, at any Payment Date (the "Relevant
-------------------------
Payment Date"), (i) in the event no Prepayment has been made, the period from
the Closing Date to, but not including, the Relevant Payment Date, or (ii) in
the event one or more Prepayments have been made on or prior to the Relevant
Payment Date, each of the following periods, without duplication: (a) the
period from the Closing Date to, but not including, the first Payment Date
thereafter on which a Prepayment has been made on the Relevant Payment Date, (b)
each period, if any, between two Payment Dates on which successive Prepayments
have been made, in each case including the Payment Date upon which such period
commences to, but not including, the Payment Date upon which such period ends,
and (c) the period from the Payment Date immediately preceding the Relevant
Payment Date on which a Prepayment was made to, but not including, the Relevant
Payment Date.
"Adjustment Multiplier" shall mean, for any Adjusted Principal Period at
---------------------
any Payment Date, a fraction, the numerator of which shall be the aggregate
Equipment Cost of all Units included in the Indenture Estate immediately after
such Payment Date (excluding the Equipment Cost of any Excluded Unit) and the
denominator of which shall be the aggregate Equipment Cost of all Units included
in the Indenture Estate at the commencement of such Adjusted Principal Period.
"Administrative Services Agreement" shall mean the Administrative Services
---------------------------------
Agreement (1998-1) dated as of August 1, 1998, between GATC and the Company.
"Affiliate" shall mean, with respect to any Person, any other Person which
---------
directly or indirectly controls, or is controlled by, or is under a common
control with, such Person. The term "control" means the possession, directly or
-------
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" shall have
----------- ----------
meanings correlative to the foregoing.
"After-Tax Basis" shall mean, with respect to any payment due to any
---------------
Person, that the amount of such payment is supplemented by a further payment or
payments so that the sum of all such payments, after reduction for all Taxes
payable by such Person by reason of the receipt or accrual of such payments,
shall be equal to the payment due to such Person.
"Alternative Minimum Tax" shall mean the alternative minimum tax imposed
------------------------
under Section 55 of the Code.
"Appraisal" shall have the meaning assigned thereto in Section 4.3(a) of
---------
the Participation Agreement.
2
<PAGE>
"Average Life Date" shall mean, with respect to an Equipment Note, the date
-----------------
which follows (i) in the case of an Equipment Note being prepaid, the prepayment
date or, (ii) in the case of an Equipment Note not being prepaid, the date of
such determination, by a period equal to the Remaining Weighted Average Life of
such Equipment Note.
"Bankruptcy Code" shall mean Chapter 11 of Title 11 of the United States
---------------
Code, 11 U.S.C. (S)101 et. seq.
--- ----
"Base Component" shall have the meaning assigned thereto in Section 5.2 of
--------------
the Management Agreement.
"Basic Rent" shall mean, with respect to any Unit, all rent payable by the
----------
Lessee to the Lessor pursuant to Section 3.2 of the Lease for the Basic Term for
such Unit, and all rent payable pursuant to Section 22.4 of the Lease for any
Renewal Term for such Unit.
"Basic Term" shall have the meaning assigned thereto in Section 3.1 of the
----------
Lease.
"Basic Term Commencement Date" shall mean the Closing Date.
----------------------------
"Basic Term Expiration Date" shall mean _____________, 20__.
--------------------------
"Basic Term Purchase Price" shall mean, with respect to any Unit, the
-------------------------
amount equal to the product of the percentage set forth in Section 6 of the
Participation Agreement and the Equipment Cost for such Unit.
"Beneficial Interest" shall mean the interest of the Owner Participant
-------------------
under the Trust Agreement.
"Bill of Sale" shall mean the full warranty bill of sale, dated the Closing
------------
Date or the date that any Replacement Unit is subjected to the Lease, from the
Lessee to the Owner Trustee covering the Units delivered on the Closing Date or
such Replacement Unit, as the case may be.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
------------
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, Chicago,
Illinois, the city and state in which the principal corporate trust office of
the Owner Trustee is located, or, until the Lien of the Indenture has been
discharged, the city and state in which the principal corporate trust office of
the Indenture Trustee is located.
"Car Service Contract" shall have the meaning assigned thereto in the first
--------------------
recital clause of the Management Agreement.
"Certificateholder" means the Person in whose name a Pass Through
-----------------
Certificate is registered in the register for Pass Through Certificates of a
particular series.
"Claims" shall mean any and all costs, expenses, liabilities, obligations,
------
losses, damages, penalties, actions or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability
or liability in tort), including, without limitation, all
3
<PAGE>
reasonable out-of-pocket costs, disbursements and expenses (including legal fees
and expenses) paid or incurred in connection therewith or related thereto.
"Closing" shall have the meaning assigned thereto in Section 2.3(b) of the
-------
Participation Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral Agent" shall have the meaning assigned thereto in the
----------------
Intercreditor Agreement.
"Collection Account" shall have the meaning assigned thereto in the
------------------
Intercreditor Agreement.
"Company" or "Lessee" shall mean General American Railcar Corporation II, a
------- ------
Delaware corporation.
"Company Documents" shall have the meaning assigned thereto in the
-----------------
Intercreditor Agreement.
"Company Fleet" shall mean, collectively, the Equipment [and the
-------------
"Equipment" under the Other Leases].
"Contiguous United States" shall mean the continental United States (except
------------------------
Alaska).
"Credit Bankrupt" shall mean a Person which is subject to any bankruptcy or
---------------
insolvency proceeding, for reasons other than the occurrence of an extraordinary
adverse event or circumstance which has led such Person to seek protection from
its creditors, or is not paying its debts as they become due.
"Customer" shall have the meaning assigned thereto in the first recital
--------
clause of the Management Agreement.
"Debt Rate" shall mean an interest rate equal to ____% per annum (computed
---------
on the basis of a 360-day year of twelve 30-day months).
"Default Interest" shall mean interest on any amount of the Rated
----------------
Amortization Amount of, or Regular Interest on, Equipment Notes that was not
paid when such amount became due and payable.
"Default Rate" shall mean the lesser of [1.5]% over the Debt Rate and the
------------
maximum interest rate from time to time permitted by law.
4
<PAGE>
"Determination Date" shall mean a Payment Date.
------------------
"Early Purchase Date" shall mean the early purchase date specified on
-------------------
Schedule 6 to the Participation Agreement.
"Early Purchase Price" shall mean, with respect to any Unit, the amount
--------------------
equal to the product of the percentage set forth in Schedule 6 to the
Participation Agreement and the Equipment Cost for such Unit. Notwithstanding
anything to the contrary contained in the Lease or in the Participation
Agreement, the Early Purchase Price for such Unit (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) will, under
any circumstances and in any event, be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with its
exercise of the option under Section 22.1 of the Lease, will be at least
sufficient to pay in full as of the Early Purchase Date the Accumulated Equity
Deficiency Amount, the aggregate unpaid principal of the Equipment Notes issued
in respect of such Unit, together with all unpaid interest, Late Payment Premium
and Make-Whole Amount, if any, thereon accrued to the date on which such amount
is paid in accordance with the terms hereof and all other amounts then due to
the holders of the Equipment Notes in respect of such Unit.
"Eligible Group" shall mean a number and type of Units which, after the
--------------
purchase by the Lessee of such Units, will (i) leave no fewer than 800 Equipment
Units (as defined in the Intercreditor Agreement) subject to this Lease or Other
Leases, and (ii) result in an allocation of Equipment Units (as defined in the
Intercreditor Agreement) substantially similar to the allocation of Equipment
Units (as defined in the Intercreditor Agreement) immediately prior to the
purchase of such Units by the Lessee.
"Equipment" shall mean, collectively, those items of railroad rolling stock
---------
described in the Lease Supplements and the Indenture Supplements, together with
any and all accessions, additions, improvements to and replacements from time to
time incorporated or installed in any item thereof which are the property of the
Owner Trustee pursuant to the terms of a Bill of Sale or the Lease.
"Equipment Cost" shall mean, for each Unit, the purchase price therefor
--------------
paid by the Owner Trustee to the Lessee pursuant to Section 2 of the
Participation Agreement and as set forth in Schedule 1 to the Participation
Agreement with respect to such Unit. Notwithstanding anything to the contrary
contained in the Operative Agreements, the Equipment Cost for any Replacement
Unit shall be deemed to be the Equipment Cost or deemed Equipment Cost of the
Unit replaced by such Replacement Unit.
5
<PAGE>
"Equipment Notes" shall mean the Equipment Notes, each substantially in the
---------------
form set forth in Section 2.1 of the Indenture, issued by the Owner Trustee
pursuant to Section 2.2 of the Indenture, and authenticated by the Indenture
Trustee, in principal amounts, maturities and bearing interest at the rates and
payable as provided in Section 2.2 of the Indenture and secured as provided in
the Granting Clause of the Indenture, and shall include any Equipment Note
issued in exchange therefor or replacement thereof pursuant to Section 2.7 or
2.8 of the Indenture.
"Equity Portion of Basic Rent" shall mean, at any Payment Date, the excess
----------------------------
of the amount of Basic Rent payable under the Lease on such Payment Date over
the Scheduled Amortization Amount payable under the Indenture on such Payment
Date.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor law.
"Event of Loss" shall have the meaning assigned thereto in Section 11.1 of
-------------
the Lease.
"Excepted Property" shall mean (i) all indemnity payments (including,
-----------------
without limitation, payments pursuant to Section 7 of the Participation
Agreement, payments under the Tax Indemnity Agreement and payments pursuant to
Section [5.04 of the Intercreditor Agreement]) to which the Owner Participant,
the Owner Trustee, in its individual capacity, or any of their respective
successors, permitted assigns, directors, officers, employees, servants and
agents is entitled pursuant to the Operative Agreements, (ii) any right, title
or interest of the Owner Trustee, in its individual capacity, or the Owner
Participant to any payment which by the terms of Section 17 of the Lease or any
corresponding payment under Section 3.3 of the Lease shall be payable to or on
behalf of the Owner Trustee, in its individual capacity, or to the Owner
Participant, as the case may be, (iii) any insurance proceeds payable under
insurance maintained by the Owner Trustee, in its individual capacity, or the
Owner Participant pursuant to Section 12.5 of the Lease, (iv) any insurance
proceeds payable to or on behalf of the Owner Trustee, in its individual
capacity, or to the Owner Participant, under any public liability insurance
maintained by the Lessee pursuant to Section 12 of the Lease (which shall
include the amount of any self-insured retention paid by the Lessee) or by any
other Person, (v) Transaction Costs or other amounts or expenses paid or payable
to, or for the benefit of the Owner Trustee, in its individual capacity, or the
Owner Participant pursuant to the Participation Agreement or the Trust
Agreement, (vi) all right, title and interest of the Owner Participant or the
Owner Trustee, in its individual capacity, in or relating to any portion of the
Units and any other property (tangible or intangible), rights, titles or
interests to the extent any of the foregoing has been released from the Lien of
the Indenture pursuant to the terms thereof, (vii) upon termination of the
Indenture pursuant to the terms thereof with respect to any Unit, all remaining
amounts which shall have been paid or are payable by the Lessee and calculated
on the basis of Stipulated Loss Value, (viii) any rights of the Owner
Participant or the Owner Trustee, in its individual capacity, to demand,
collect, sue for, or otherwise receive and enforce payment of the foregoing
amounts, (ix) any amount payable to the Owner Participant by any Transferee as
the purchase price of the Owner Participant's interest in the Trust Estate in
compliance with the terms of the
6
<PAGE>
Participation Agreement and the Trust Agreement and (x) the respective rights of
the Owner Trustee, in its individual capacity, or the Owner Participant to the
proceeds of and interest on the foregoing.
"Excepted Rights" shall have the meaning assigned thereto in Section 5.11
---------------
of the Indenture.
"Excluded Unit" shall mean, at any Payment Date, any Unit (i) for which the
-------------
applicable Lease is to be terminated pursuant to Section 10 of the Lease on such
Payment Date, (ii) which suffers an Event of Loss or a deemed Event of Loss
under Section 9.1 of the Lease and is not replaced pursuant to Section 11.2(i)
prior to or on such Payment Date, or (iii) which is to be purchased by the
Lessee pursuant to Section 6.9 of the Participation Agreement or Section 22.1 of
the Lease, as the case may be, on such Payment Date; provided that the principal
amount of the Equipment Note or Notes which corresponds to the Equipment Cost of
such Unit is to be prepaid in accordance with Section 2.10 of the Indenture on
such Payment Date.
"Existing Car Service Contracts" shall have the meaning assigned thereto in
------------------------------
the fourth recital clause of the Participation Agreement.
"Extended Unit" shall have the meaning assigned thereto in Section 22.7 of
-------------
the Lease.
"Fair Market Rental Value" or "Fair Market Sales Value" with respect to any
------------------------ -----------------------
Unit, shall mean the cash rent or cash price obtainable for such Unit in an
arm's length lease or sale between an informed and willing lessee or purchaser
under no compulsion to lease or purchase, as the case may be, and an informed
and willing lessor or seller, under no compulsion to lease or sell, as the case
may be, as the same shall be specified by agreement between the Lessor and the
Lessee. If the parties are unable to agree upon a Fair Market Rental Value
and/or a Fair Market Sales Value within 30 days after delivery of notice by the
Lessee pursuant to Section 22.2 of the Lease, or otherwise where such
determination is required, within a reasonable period of time, such value shall
be determined by appraisal. The Lessee will, within 15 days after such 30-day
period, provide the Lessor with the name of an appraiser that would be
satisfactory to the Lessee, and the Lessor and the Lessee shall consult with
each other with the intent of selecting a mutually acceptable appraiser. If a
mutually acceptable appraiser is selected, the Fair Market Rental Value or the
Fair Market Sales Value, as the case may be, shall be determined by such
appraiser, and the Lessee shall bear the cost thereof. If the Lessee and the
Lessor are unable to agree upon a single appraiser within such 15-day period,
two independent qualified appraisers, one chosen by the Lessee and one chosen by
the Lessor shall jointly determine such value, and the Lessor shall bear the
cost of the appraiser selected by the Lessor, and the Lessee shall bear the cost
of the appraiser selected by the Lessee. If such appraisers cannot agree on the
amount of such value within 15 days of appointment, one independent qualified
appraiser shall be chosen by the American Arbitration Association. All three
appraisers shall make a determination within a period of 15 days following
appointment, and shall promptly communicate such determination in writing to the
Lessor and the Lessee. If there shall be a panel of three appraisers, the three
appraisals shall be averaged, and such average shall be the Fair Market Rental
Value or Fair
7
<PAGE>
Market Sales Value, as the case may be. The determination made shall be
conclusively binding on both the Lessor and the Lessee. If there shall be a
panel of three appraisers, the Lessee and the Lessor shall equally share the
cost of the third appraiser. If such appraisal is pursuant to Section 6.1(e) of
the Lease or is in connection with the exercise of remedies set forth in Section
15 of the Lease, the Lessee shall pay the costs of such appraisal.
Notwithstanding any of the foregoing, for the purposes of Section 15 of the
Lease, the Fair Market Rental Value or the Fair Market Sales Value, as the case
may be, shall be zero with respect to any Unit if the Lessor is unable to
recover possession of such Unit in accordance with the terms of paragraph (b) of
Section 15.1 of the Lease.
"FRA" shall mean the Federal Railroad Administration or any successor
---
thereto.
"Functional Group" shall mean each and all of the various groups of Units
----------------
so designated in Schedule 1 to the Participation Agreement.
"GATC" shall mean General American Transportation Corporation, a New York
----
corporation.
"GATC Assignment" shall mean the assignment by GATC to the Lessee of the
---------------
Existing Car Service Contracts on the Closing Date.
"GATC Bill of Sale" shall mean the Bill of Sale, dated the Closing Date and
-----------------
executed and delivered by GATC pursuant to the Transfer and Contribution
Agreement, conveying the Equipment to the Lessee.
"Hazardous Substances" shall mean any hazardous or toxic substances,
--------------------
materials or wastes, including, but not limited to, those substances, materials,
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR (S) 172.101) or by the Environmental Protection Agency
as hazardous substances (40 CFR (S) 302.4), or such substances, materials and
wastes which are or become regulated under any applicable local, state or
federal law or the equivalent under applicable foreign laws including, without
limitation, any materials, waste or substance which is (a) petroleum, (b)
asbestos, (c) polychlorinated biphenyls, (d) defined as a "hazardous material,"
"hazardous substance" or "hazardous waste" under applicable local, state or
federal law or the equivalent under applicable foreign laws, (e) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act of 1977,
(f) defined as "hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act of 1976, or (g) defined as "hazardous substances"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
"Incentive Component" shall have the meaning assigned thereto in Section
-------------------
5.3 of the Management Agreement.
"Indemnified Person" shall have the meaning assigned thereto in Section
------------------
7.2(b) of the Participation Agreement.
8
<PAGE>
"Indenture" or "Trust Indenture" shall mean the Trust Indenture and
--------- ---------------
Security Agreement (1998-1), dated as of August 1, 1998 between the Owner
Trustee, in the capacities described therein, and the Indenture Trustee. The
term "Indenture" shall include, except where the context otherwise requires,
---------
each Indenture Supplement entered into pursuant to the terms of the Indenture.
"Indenture Default" shall mean an Indenture Event of Default or an event
-----------------
which, with notice or the passage of time or both, would become an Indenture
Event of Default.
"Indenture Estate" shall have the meaning assigned thereto in the Granting
----------------
Clause of the Indenture.
"Indenture Event of Default" shall have the meaning assigned thereto in
--------------------------
Section 4.1 of the Indenture.
"Indenture Investment" shall mean any obligation issued or guaranteed by
--------------------
the United States of America or any of its agencies for the payment of which the
full faith and credit of the United States of America is pledged and with a
final maturity on or before the date which is the earlier of (a) ninety days
from the date of purchase thereof and (b) the first Payment Date occurring after
the date of purchase thereof.
"Indenture Supplement" shall mean an Indenture Supplement (1998-1) dated
--------------------
the Closing Date or the date that any Replacement Unit is subjected to the Lien
of the Indenture, substantially in the form of Exhibit A to the Indenture,
between the Owner Trustee, in the capacities described therein, and the
Indenture Trustee, covering the Units delivered on the Closing Date or such
Replacement Unit, as the case may be. A "related" Indenture Supplement, when
-------
used with respect to any Unit or Units, shall mean the Indenture Supplement
under which such Unit or Units is or are included in the Indenture Estate.
"Indenture Trustee" shall mean The First National Bank of Chicago, a
-----------------
national banking association, as trustee under the Indenture and any successor
institution.
"Indenture Trustee Agreements" shall mean the Operative Agreements to which
----------------------------
the Indenture Trustee is or will be a party.
"Inflation Factor" means, with respect to any calendar year, the quotient
----------------
(expressed as a decimal) obtained by dividing (i) the PPI published in respect
of the most recently ended calendar year (the "New Year"), by (ii) the PPI
published in respect of the calendar year immediately preceding the New Year.
"PPI", for purposes hereof, means, with respect to any calendar year or any
---
period during any calendar year, the "Producer Price Index" applicable to the
capital equipment sector as published by the Bureau of Labor Statistics for the
United States Department of Labor. If the PPI shall be converted to a different
standard reference base or otherwise revised after the date hereof, PPI shall
thereafter be calculated with use of such new or
9
<PAGE>
revised statistical measure published by the Bureau of Labor Statistics or, if
not so published, as may be published by any other reputable publisher of such
price index selected by the Manager.
"Initial Manager" shall mean GATC.
---------------
"Insurance Agreement" shall mean the Insurance Agreement dated as of August
-------------------
1, 1998 between the Lessee and GATC.
"Insurance Letter" shall mean that certain letter dated August __, 1998
----------------
(1998-1) from the Lessee and the Manager to the Owner Trustee, which contains
the acknowledgment and consent of the Owner Participant, the Pass Through
Trustee and the Indenture Trustee.
"Insurance Manager" shall have the meaning assigned thereto in the
-----------------
Insurance Agreement.
"Interchange Rules" shall mean the interchange rules or supplements thereto
-----------------
of the AAR, as the same may be in effect from time to time.
"Intercreditor Agreement" shall mean the Collateral Agency and
-----------------------
Intercreditor Agreement dated as of August 1, 1998 among the Lessee, the
Collateral Agent, the Owner Trustee, the Indenture Trustee, GATC, as Manager,
GATC, as Insurance Manager and certain other Persons.
"Investment Banker" shall mean an independent investment banking
-----------------
institution of national standing appointed by the Lessee or, if the Indenture
Trustee does not receive notice of such appointment at least ten days prior to a
scheduled prepayment date or if a Lease Event of Default under the Lease shall
have occurred and be continuing, appointed by the Indenture Trustee.
"Late Payment Interest" shall mean (i) in the case of the Accumulated
---------------------
Equity Deficiency Amount, interest at the Late Rate, (ii) in the case of that
portion of any overdue payment of Stipulated Loss Value or Termination Value
that is in excess of the principal amount of the Equipment Notes then
outstanding and which are allocated to the Units with respect to which such
payment is made, interest at the Late Rate, (iii) in the case of a portion of
overdue Basic Rent equal to any Payment Deficiency, interest at a rate equal to
the sum of the Debt Rate and the rate specified in the definition of "Late
Payment Premium," (iv) in the case of any interest referred to in clause (iii)
of this definition or any Late Payment Premium that is overdue, interest at the
rate specified in the definition of "Late Payment Premium," and (v) in respect
of any other overdue amount, including, without limitation, in the case of the
Equipment Notes and Basic Rent in respect thereof, interest at the Default Rate.
"Late Payment Premium" shall mean, with respect to any Payment Deficiency
--------------------
to which a Late Payment Premium is payable on a Payment Date, an amount of
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the Payment Deficiency, for the period
10
<PAGE>
from and including the Payment Date immediately preceding such Payment Date to
but excluding such Payment Date, at a rate equal to 1.5% per annum.
"Late Rate" shall mean an interest rate per annum equal to the Debt Rate
---------
plus 1.5% per annum.
"Lease" or "Lease Agreement" or "Equipment Lease" shall mean the Equipment
----- --------------- ---------------
Lease Agreement (1998-1), relating to the Equipment, dated as of August 1, 1998,
between the Owner Trustee, in the capacities described therein, as Lessor, and
the Lessee. The term "Lease" shall, except where the context otherwise
-----
requires, include each Lease Supplement entered into pursuant to the terms of
the Lease.
"Lease Default" shall mean a Lease Event of Default or an event which, with
-------------
notice or passage of time or both, would become a Lease Event of Default.
"Lease Event of Default" shall have the meaning assigned thereto in Section
----------------------
14 of the Lease.
"Lease Supplement" shall mean a Lease Supplement (1998-1), dated the
----------------
Closing Date or the date that any Replacement Unit is subjected to the Lease,
substantially in the form of Exhibit A to the Lease, between the Lessor and the
Lessee, covering the Units delivered on the Closing Date or such Replacement
Unit, as the case may be. A "related" Lease Supplement, when used with respect
-------
to any Unit or Units, shall mean the Lease Supplement under which such Unit or
Units is or are leased.
"Lease Term" shall mean, with respect to any Unit, the Basic Term
----------
applicable to such Unit and any Renewal Term applicable to such Unit then in
effect.
"Lessee Agreements" shall mean the Operative Agreements to which the Lessee
-----------------
is or will be a party.
"Lessor" shall have the meaning assigned thereto in the recitals to the
------
Lease.
"Lessor's Lien" means any Lien affecting, on or in respect of, the
-------------
Equipment, the Lease or any other part of the Trust Estate arising as a result
of (i) claims against the Lessor (in its individual capacity or as Owner
Trustee) or the Owner Participant, in each case unrelated to the transactions
contemplated by the Operative Agreements, or (ii) acts or omissions of the
Lessor (in its individual capacity or as Owner Trustee) or the Owner
Participant, in each case unrelated to the transactions contemplated by the
Operative Agreements or in breach of any covenant or agreement of such Person
set forth in any of the Operative Agreements, or (iii) taxes imposed against the
Lessor (in its individual capacity or as Owner Trustee) or the Owner Participant
or the Trust Estate which are not required to be indemnified against by the
Lessee pursuant to the Participation Agreement or under the Tax Indemnity
Agreement.
11
<PAGE>
"Lien" shall mean any mortgage, pledge, security interest, lien,
----
encumbrance, lease, disposition of title or other charge of any kind on
property.
"Limited Use Property" shall have the meaning set forth in Rev. Proc. 76-
--------------------
30, 1976-2 C.B. 647.
"Loan Participant" shall mean and include each registered holder from time
----------------
to time of an Equipment Note issued under the Indenture, including, so long as
it holds any Equipment Notes issued thereunder, the Pass Through Trustee under
the Pass Through Trust Agreement.
"Loan Participant's Commitment" shall have the meaning assigned thereto in
-----------------------------
Section 2.2(b) of the Participation Agreement.
"Lockbox" shall have the meaning assigned thereto in Section 6.2(a) of the
-------
Management Agreement.
"Lockbox Agreement" shall mean the agreement by and between GATC, as
-----------------
Trustee for itself, individually, General American Railcar Corporation II, and
the Lockbox Bank.
"Lockbox Bank" shall have the meaning assigned thereto in Section 6.2(a) of
------------
the Management Agreement.
"Majority In Interest" shall mean, as of a particular date of determination
--------------------
and with respect to any action or decision of the holders of the Equipment
Notes, the holders of more than 50% of the aggregate unpaid principal amount of
the Equipment Notes, if any, then outstanding which are affected by such
decision or action, excluding any Equipment Notes held by the Owner Participant
or the Lessee or an Affiliate of the Owner Participant or the Lessee unless all
Equipment Notes are so held.
"Make-Whole Amount" shall mean, with respect to the principal amount of any
-----------------
Equipment Note to be prepaid on any prepayment date, the amount which the
Investment Banker determines as of the third Business Day prior to such
prepayment date to equal the product obtained by multiplying (a) the excess, if
any, of (i) the sum of the present values of all the remaining scheduled
payments of principal and interest, based upon Scheduled Amortization, from the
prepayment date to the Scheduled Maturity Date of such Equipment Note,
discounted monthly on the day of each month at a rate equal to the Treasury Rate
plus [.15]%, based upon a 360-day year of twelve 30-day months, over (ii) the
aggregate unpaid principal amount of such Equipment Note , based upon Scheduled
Amortization, plus any accrued but unpaid interest thereon by (b) a fraction,
the numerator of which shall be the aggregate unpaid principal amount of such
Equipment Note to be prepaid on such prepayment date and the denominator of
which shall be the aggregate unpaid principal amount of such Equipment Note;
provided that the aggregate unpaid principal amount of such Equipment Note for
- --------
the purpose of clause (a)(ii) and (b) of this definition shall be determined
after deducting the principal installment, if any, due on such prepayment date.
12
<PAGE>
"Management Agreement" shall mean the Operation, Maintenance, Servicing and
--------------------
Remarketing Agreement dated as of August 1, 1998 between the Company and the
Manager.
"Management Fee" shall have the meaning assigned thereto in Section 5.1 of
--------------
the Management Agreement.
"Manager" shall mean General American Transportation Corporation, a New
-------
York corporation, and any Successor Manager under the Management Agreement.
"Manager Agreements" shall mean the Operative Agreements to which the
------------------
Manager is or is to be a party.
"Manager's Cost" shall have the meaning assigned thereto in Section 5.4(a)
--------------
of the Management Agreement.
"Manager's Fleet" shall have the meaning assigned thereto in Section 2.2(j)
---------------
of the Management Agreement.
"Marks Company" shall have the meaning assigned thereto in Section 6.4 of
-------------
the Management Agreement.
"Minimum Units" shall mean 100 Units (or, if less than 100 Units are then
-------------
subject to the Lease or being stored pursuant to the terms of the Lease, all
Units).
"Modification" shall have the meaning assigned thereto in Section 9.2 of
------------
the Lease.
"Net Economic Return" shall mean the anticipated net after-tax yield and
-------------------
total after-tax cash flow expected by the original Owner Participant with
respect to the Equipment (both through the Early Purchase Date and the Basic
Term Expiration Date), utilizing the multiple investment sinking fund method of
analysis and the same assumptions as used by such Owner Participant in making
the computations of Basic Rent, Stipulated Loss Value and Termination Value,
terms of Equipment Notes and Early Purchase Price initially set forth in
Schedules 3, 4, 5 and 6 to the Participation Agreement.
"Non-Shared Payments Account" shall be the Account specified in Section 3.1
---------------------------
of the Intercreditor Agreement.
"Non-Severable Modification" shall mean any Modification that is not
--------------------------
readily removable without impairing, other than in a de minimis respect, the
----------
value, utility or remaining useful life of the Equipment or any Unit immediately
prior to removal of such modification.
13
<PAGE>
"Notice of Delivery" shall have the meaning assigned thereto in Section
------------------
2.3(a) of the Participation Agreement.
"Officer's Certificate" shall mean a certificate signed (i) in the case of
---------------------
a corporation, by the President, any Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such corporation, (ii) in
the case of a partnership, by the Chairman of the Board, the President or any
Vice President, the Treasurer or an Assistant Treasurer of a corporate general
partner, (iii) in the case of a commercial bank or trust company, by the
Chairman or Vice Chairman of the Executive Committee or the Treasurer, any Trust
Officer, any Vice President, any Executive or Senior or Second or Assistant Vice
President, or any other officer or assistant officer customarily performing the
functions similar to those performed by the persons who at the time shall be
such officers, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject, and (iv) in the case
of a limited liability company, any manager thereof and any President, Managing
Director or Vice President thereof.
"Operative Agreements" shall mean the Transfer and Contribution Agreement,
--------------------
the GATC Bill of Sale, the Participation Agreement, the Bill of Sale, the Trust
Agreement, the Pass Through Trust Agreement, the Pass Through Trust Supplements,
the Pass Through Certificates, the Equipment Notes, the Lease, the Lease
Supplements, the Indenture, the Indenture Supplements, the Tax Indemnity
Agreement, the Intercreditor Agreement, the Purchase Agreement, the Management
Agreement, the Insurance Agreement, the Insurance Letter and the Lockbox
Agreement.
["Other Leases" means (i) the Equipment Lease Agreement (1998-2) dated as
------------
of August 1, 1998 between the Lessee and [Owner Trustee], not in its individual
capacity but solely as Owner Trustee under a Trust Agreement dated as of
[_________], 1998 with [______________________], and (ii) the Equipment Lease
Agreement (1998-3) dated as of August 1, 1998 between the Lessee and [Owner
Trustee], not in its individual capacity but solely as Owner Trustee under a
Trust Agreement dated as of [_____________], 1998 with [__________________].
"Outside Renewal Date" shall have the meaning assigned thereto in Section
--------------------
22.5 of the Lease.
"Owner Participant" shall mean [Owner Participant], a [__________________],
-----------------
and its successors and permitted assigns.
"Owner Participant Agreements" shall mean the Operative Agreements to which
----------------------------
the Owner Participant is or will be a party.
["Owner Participant Parent Guarantee" shall mean that certain Guarantee
----------------------------------
(1998-1) dated as of August 1, 1998 executed by [Owner Participant Parent] in
favor of the Lessee, GATC, the Owner Trustee, the Indenture Trustee and the Pass
Through Trustee.]
14
<PAGE>
"Owner Participant's Commitment" shall have the meaning assigned thereto in
------------------------------
Section 2.2(a) of the Participation Agreement.
"Owner Trustee" shall mean [Owner Trustee,] not in its individual capacity
-------------
but solely as Owner Trustee under the Trust Agreement and its successors
thereunder.
"Owner Trustee Agreements" shall mean the Operative Agreements to which the
------------------------
Owner Trustee, either in its individual or fiduciary capacity, is or will be a
party.
["Owner Trustee Parent Guarantee" shall mean that certain Guarantee (1998-
------------------------------
1) dated as of August 1, 1998 executed by Owner Trustee Parent, in favor of the
Lessee, GATC, the Owner Participant, the Indenture Trustee and the Pass Through
Trustee.]
"Parent" means GATX Corporation, a New York corporation.
------
"Participants" shall mean, collectively, the Loan Participant and the Owner
------------
Participant.
"Participation Agreement" shall mean the Participation Agreement (1998-1)
-----------------------
dated as of August 1, 1998, among the Lessee, the Manager, the Pass Through
Trustee, the Owner Participant, the Owner Trustee and the Indenture Trustee.
"Pass Through Certificates" or "Certificates" shall mean the Pass Through
------------------------- ------------
Certificates issued pursuant to each of the Pass Through Trust Supplements and
the Pass Through Trust Agreement.
"Pass Through Trust Agreement" shall mean the Pass Through Trust Agreement,
----------------------------
dated as of August 1, 1998, between the Lessee and the Pass Through Trustee.
"Pass Through Trust Estate" shall mean the Trust (as defined in the Pass
-------------------------
Through Trust Agreement) created by the Pass Through Trust Supplement.
"Pass Through Trust Supplement" shall mean Trust Supplement No. 1 dated
-----------------------------
______________, 1998 between the Lessee and the Pass Through Trustee, which
supplements the Pass Through Trust Agreement (i) by creating a separate trust
for the holders of certain Pass Through Certificates, (ii) by authorizing the
issuance of such Pass Through Certificates and (iii) by establishing the terms
of such Pass Through Certificates.
"Pass Through Trustee" shall mean The First National Bank of Chicago, in
--------------------
its capacity as trustee under the Pass Through Trust Agreement, as supplemented
by the Pass Through Trust Supplements, and each other Person which may from time
to time act as successor trustee under the Pass Through Trust Agreement, as
supplemented by the Pass Through Trust Supplement.
"Pass Through Trustee Agreements" shall mean the Operative Agreements to
-------------------------------
which the Pass Through Trustee is or will be a party.
15
<PAGE>
"Payment Account" shall have the meaning assigned thereto in Section 6.4(c)
---------------
of the Indenture.
"Payment Date" shall mean the __ day of each month through and including
------------
the Rated Maturity Date, commencing ___________, 1998, provided that if any such
date shall not be a Business Day, then "Payment Date" shall mean the next
------------
succeeding Business Day; provided, however, that interest and Late Payment
-------- -------
Premium payable on such Payment Date, and all other calculations as of such
Payment Date, shall be computed as of the date which would have been a Payment
Date if such date were a Business Day.
"Payment Deficiency" shall have the meaning assigned thereto in Section 2.2
------------------
of the Indenture.
"Permitted Liens" shall mean: (i) the interests of the Lessee and the
---------------
Owner Trustee under the Lease and the Lease Supplements; (ii) the interest of
the Lessee and any sublessee as provided in any Permitted Sublease; (iii) any
Liens for taxes, assessments, levies, fees and other governmental and similar
charges not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings so long as there exists no
material risk of sale, forfeiture, loss, or loss of or interference with use or
possession of any Unit or interference with the payment of Rent; (iv) any Liens
of mechanics, suppliers, materialmen, laborers, employees, repairmen and other
like Liens arising in the ordinary course of Lessee's (or if a sublease is then
in effect, any sublessee's) business securing obligations which are not yet due
and payable or the amount or validity of which is being contested in good faith
by appropriate proceedings so long as there exists no material risk of sale,
forfeiture, loss, or loss of or interference with use or possession of any Unit
or interference with the payment of Rent; (v) the Lien granted to the Indenture
Trustee under and pursuant to the Indenture, and the respective rights of the
Loan Participant, the Indenture Trustee, the Owner Participant and the Owner
Trustee under the Operative Agreements; (vi) Liens arising out of any judgment
or award against the Lessee (or any sublessee permitted pursuant to Section 8.3
of the Lease) with respect to which an appeal or proceeding for review is being
presented in good faith and for the payment of which adequate reserves have been
provided as required by generally accepted accounting principles or other
appropriate provisions have been made and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding for review
and there exists no material risk of sale, forfeiture, loss, or loss of or
interference with the use or possession of any Unit or any interest therein or
interference with the payment of Rent, and (vii) salvage rights of insurers
under insurance policies maintained pursuant to Section 12 of the Lease.
"Permitted Subleases" shall have the meaning assigned thereto in Section
-------------------
8.3 of the Lease.
"Person" shall mean an individual, partnership, limited liability company,
------
corporation, trust, association or unincorporated organization, and a government
or agency or political subdivision thereof.
16
<PAGE>
"Premium" shall mean any Make-Whole Amount and any Late Payment Premium
-------
payable pursuant to the Indenture.
"Prepaid Amount" shall mean, at any Payment Date, the aggregate principal
--------------
amount that was prepaid, if any, pursuant to Section 2.10 of the Indenture prior
to and including such Payment Date.
"Prepayment" shall mean a prepayment of outstanding principal under the
----------
Equipment Notes in accordance with Section 2.10 of the Indenture at any Payment
Date.
"Prepayment Multiplier" shall mean, at any Payment Date, a fraction, the
---------------------
numerator of which shall be the aggregate Equipment Cost of all Units then
included in the Indenture Estate as of such Payment Date (excluding the
Equipment Cost of any Excluded Unit) and the denominator of which shall be the
aggregate Equipment Cost of all Units originally included in the Indenture
Estate as of the Closing Date.
"Pricing Date" shall mean the date on which the Purchase Agreement is
------------
executed and delivered by the Lessee and the Underwriters.
"Projected Coverage Ratio" as of any Calculation Date (as defined in the
------------------------
Intercreditor Agreement), shall mean the ratio of (i) the sum of projected
Available Amounts (as defined in the Intercreditor Agreement) for the six-month
period immediately succeeding such Calculation Date to (ii) the sum of Basic
Rent due or to become due and payable on the six consecutive Rent Payment Dates
which occur following such Calculation Date, as such amounts are certified to by
an officer's certificate signed by an authorized representative of each of the
Company and the Manager.
"Prospectus" shall mean the Prospectus dated August __, 1998 relating to
----------
the offering of the Pass Through Certificates.
"Rated Amortization" shall mean the amount of principal of the Equipment
------------------
Notes specified for each Payment Date set forth in Annex A to the Indenture.
"Rated Amortization Amount" shall mean, at any Payment Date, the excess, if
-------------------------
any, of (i) the product of (A) the sum of all amounts specified in Annex A to
the Indenture as Rated Amortization opposite the respective dates occurring on
or before such Payment Date and (B) the Prepayment Multiplier, over (ii) the sum
of the Adjusted Payment Amount for each Adjusted Principal Period prior to such
Payment Date.
"Rated Maturity Date" shall mean ____________, 20__.
-------------------
17
<PAGE>
"Rated Obligations Due" shall mean, at any Payment Date, the sum of (a) the
---------------------
Rated Amortization Amount at such Payment Date plus (b) accrued and unpaid
----
Regular Interest that is due and payable on such Payment Date (computed on the
basis of [a 360-day year of twelve 30-day months]).
"Rating Agencies" shall mean, at any time, Standard & Poor's Ratings Group,
---------------
a division of McGraw Hill, Inc. and Moody's Investors Service, Inc., or any
successor to any such corporation's business of rating securities which is then
providing a rating for the Pass Through Certificates.
"Refunding Date" shall have the meaning assigned thereto in Section 10.2(a)
--------------
of the Participation Agreement.
"Regular Interest" shall mean interest on the unpaid portions of the
----------------
principal amounts of the outstanding Equipment Notes (computed on the basis of
[a 360-day year of twelve 30-day months]).
"Reimbursable Services" shall have the meaning assigned thereto in Section
---------------------
5.4 of the Management Agreement.
"Related Indemnitee Group" shall have the meaning assigned thereto in
------------------------
Section 7.2(b) of the Participation Agreement.
["Related Transactions" shall mean the additional leveraged lease
--------------------
transactions evidenced by the Other Leases and with respect to which the Pass
Through Trustee has agreed to acquire the related equipment notes.]
"Remaining Weighted Average Life" shall mean, with respect to any date of
-------------------------------
prepayment or any date of determination of any Equipment Note, the number of
days equal to the quotient obtained by dividing (a) the sum of the products
obtained by multiplying (i) the amount of each then remaining principal payment
on such Equipment Note (assuming that after such date, principal payments are
made only in the Scheduled Amortization Amounts) by (ii) the number of days
from and including the prepayment date or date of determination to but excluding
the scheduled payment date of such principal payment by (b) the unpaid principal
amount of such Equipment Note.
"Renewal Term" shall mean, with respect to any Unit, any term in respect of
------------
which the Lessee shall have exercised its option to renew the Lease for such
Unit pursuant to Section 22.4 thereof, [including any Fixed Rate Renewal Term]
or in respect of which the Lease Term has been deemed to have been renewed as
provided in Section 22.7 of the Lease.
"Rent" shall mean all Basic Rent and Supplemental Rent.
----
18
<PAGE>
"Rent Payment Date" or "Payment Date" shall mean the [__] day of each month
----------------- ------------
occurring during the Lease Term, commencing [_____________], 1998, provided that
if any such date shall not be a Business Day, then "Rent Payment Date" or
"Payment Date" shall mean the next succeeding Business Day.
"Replacement Unit" shall mean a covered hopper car or tank car, as the case
----------------
may be, which shall have been leased under the Lease pursuant to Section 11.4 of
the Lease.
"Required Modification" shall have the meaning assigned thereto in Section
---------------------
9.1 of the Lease.
"Responsible Officer" shall mean, with respect to the subject matter of any
-------------------
covenant, agreement or obligation of any party contained in any Operative
Agreement, the President, or any Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer or other officer, who in the normal performance
of his or her operational responsibility would have knowledge of such matter and
the requirements with respect thereto; and when used in connection with the
Lessee, "Responsible Officer" shall include any such officer of the Manager or
the Insurance Manager acting on behalf of the Lessee under the Management
Agreement or the Insurance Agreement, as the case may be.
"Scheduled Amortization" shall mean the amount of principal of the
----------------------
Equipment Notes specified for each Payment Date set forth in Annex B to the
Indenture.
"Scheduled Amortization Amount" shall mean, at any Payment Date, the
-----------------------------
excess, if any, of (i) the product of (A) the sum of all amounts specified in
Annex B to the Indenture as Scheduled Amortization opposite the respective dates
occurring on or before such Payment Date and (B) the Prepayment Multiplier, over
(ii) the sum of the Adjusted Payment Amount for each Adjusted Principal Period
prior to such Payment Date.
"Scheduled Obligations Due" shall mean, at any date, an amount equal to the
-------------------------
excess, if any, of (i) the Scheduled Amortization Amount at such date over (ii)
the Rated Amortization Amount at such date.
"Scheduled Closing Date" shall have the meaning assigned thereto in Section
----------------------
2.7(b) of the Participation Agreement.
"Security" shall have the meaning assigned thereto in Section 2(1) of the
--------
Securities Act of 1933, as amended.
"Services Standard" shall have the meaning assigned thereto in Section 2.2
-----------------
of the Management Agreement.
"Servicing Agreement" shall mean the Management and Servicing Agreement
-------------------
dated as of [___________, 1998] between GATC and the Marks Company.
19
<PAGE>
"Severable Modification" shall mean any Modification that is readily
----------------------
removable without causing material damage to the Equipment or any Unit and
without diminishing, other than in a de minimis respect, the value, utility or
----------
useful life of such Unit below the value, utility or useful life of such Unit
immediately prior to such Modification, assuming that such Unit was then in the
condition required to be maintained by the terms of the Lease.
"Special Purchase Defeasance" shall mean, with respect to any election by
---------------------------
the Lessee to purchase Units under Section 22.1 or 22.3 of the Lease, the
deposit by the Lessee with the Indenture Trustee prior to the date as of which
the Lessor shall have declared the Lease to be in default as a result of a Lease
Event of Default under Section 14(c), 14(d), 14(e), 14(f) or 14(i) of the Lease
(in circumstances where such Lease Event of Default occurs after the date of the
Lessee's notice to purchase under Section 22.1 or 22.3 but before the Early
Purchase Date or the expiration of the Basic Term or any Renewal Term, as
applicable), of an amount sufficient to pay (i) the Early Purchase Price,
together with all other amounts due and owing by the Lessee under the Operative
Agreements, with respect to those Units which the Lessee has elected to purchase
on the Early Purchase Date under Section 22.1 of the Lease, or (ii) the Fair
Market Sales Value or Basic Term Purchase Price, together with all other amounts
due and owing by the Lessee under the Operative Agreements, with respect to
those Units which the Lessee has elected to purchase at the expiration of the
Basic Term or any Renewal Term, as applicable, under Section 22.3 of the Lease.
All amounts deposited by the Lessee with the Indenture Trustee in connection
with a Special Purchase Defeasance shall be held and invested by the Indenture
Trustee in accordance with Section 6.4(b) of the Indenture pending consummation
of the purchase of the related Units on the Early Purchase Date or upon the
expiration of the Basic Term or the related Renewal Term, as applicable.
"Specified Investments" (i) direct obligations of, and obligations fully
---------------------
guaranteed as to timely payment by, the United States of America (having
remaining maturities of no more than the number of remaining days until the next
Monthly Transfer Date), (ii) commercial paper (having remaining maturities of no
more than the number of days remaining until the next [Monthly Transfer Date]
having, at the time of the investment or contractual commitment to invest
therein, a rating from each Rating Agency in its highest investment category),
(iii) a Guaranteed Investment Contract (a "GIC") from an [Acceptable GIC]
---
provider, (iv) a GIC provided by GATX, provided that such obligations are
supported by an [Acceptable Letter of Credit], (v) investments in funds rated in
the highest investment category by each Rating Agency and (vi) repurchase
agreements and similar short term instruments.
"STB" shall mean the Surface Transportation Board of the United States
---
Department of Transportation, or any successor thereto.
"Stipulated Loss Value" for any Unit as of any date of determination shall
---------------------
mean the amount determined by multiplying the Equipment Cost for such Unit by
the percentage set forth in Schedule 4 to the Participation Agreement opposite
the Rent Payment Date on which such Stipulated Loss Value is being determined;
provided that during any Renewal Term, "Stipulated Loss Value" shall be
determined as provided in Section 22.6 of the Lease. Notwithstanding
20
<PAGE>
anything to the contrary contained in the Lease or in the Participation
Agreement, Stipulated Loss Value for such Unit (both before and after any
adjustment pursuant to Section 2.6 of the Participation Agreement) will, under
any circumstances and in any event, be an amount which, together with any other
amounts required to be paid by the Lessee under the Lease in connection with an
Event of Loss, will be at least sufficient to pay in full as of the date of
payment thereof the aggregate unpaid principal of the Equipment Notes issued in
respect of such Unit, together with all unpaid interest, Late Payment Premium
and Make-Whole Amount, if any, thereon accrued to the date on which such amount
is paid in accordance with the terms hereof and all other amounts then due to
the holders of the Equipment Notes.
"Storage Period" shall have the meaning assigned thereto in Section
--------------
6.1(c)(i) of the Lease.
"Storage Period Commencement Date" shall have the meaning assigned thereto
--------------------------------
in Section 6.1(c)(i) of the Lease.
"Sublease Payments" shall mean all amounts paid or payable by or on behalf
-----------------
of, or credited to, the Company under, or in respect of, a Car Service Contract,
including, without limitation, all service charges, rentals, excess mileage
charges, delivery costs reimbursed by the Customer and cancellation or penalty
payments, as well as all amounts paid or payable by the Customer as
reimbursement, indemnity, fees or commissions, or on account of assumed
financial responsibility or liability or otherwise.
"Sublessees" shall mean the lessees under Permitted Subleases.
----------
"Subsidiary" of any Person shall mean any corporation, association, or
----------
other business entity of which more than 50% (as determined by reference to the
total number of votes) of the voting stock outstanding at the time of
determination shall at such time be owned, directly or indirectly, by such
Person or by any other corporation, association or trust which is itself a
Subsidiary within the meaning of this definition, or collectively by such Person
and any one or more such Subsidiaries.
"Successor Lockbox Trustee" shall have the meaning assigned thereto in
-------------------------
Section 6.3 of the Management Agreement.
"Successor Manager" shall have the meaning assigned thereto in Section 8.4
-----------------
of the Management Agreement.
"Super-Majority in Interest" as of a particular date of determination shall
--------------------------
mean with respect to any action or decision of the holders of the Equipment
Notes, the holders of 100% of the aggregate unpaid principal amount of the
Equipment Notes, if any, then outstanding, excluding any Equipment Notes held by
the Owner Participant or the Lessee or an Affiliate of the Owner Participant or
the Lessee.
21
<PAGE>
"Supplemental Rent" shall mean all amounts, liabilities and obligations
-----------------
(other than Basic Rent) which the Lessee is obligated to pay under the Operative
Agreements to or on behalf of any of the other parties thereto, including, but
not limited to, Termination Value and Stipulated Loss Value payments.
"Tax Indemnitee" shall have the meaning assigned thereto in Section 7.1 of
--------------
the Participation Agreement.
"Tax Indemnity Agreement" shall mean the Tax Indemnity Agreement (1998-1)
-----------------------
dated as of August 1, 1998 between GATC and the Owner Participant.
"Taxes" shall have the meaning assigned thereto in Section 7.1(b) of the
-----
Participation Agreement.
"Terminated Units" shall have the meaning assigned thereto in Section 10.1
----------------
of the Lease.
"Termination Date" shall have the meaning assigned thereto in Section 10.1
----------------
of the Lease.
"Termination Value" for any Unit as of any date of determination shall mean
-----------------
the amount determined by multiplying the Equipment Cost for such Unit by the
percentage set forth in Schedule 4 to the Participation Agreement opposite the
Rent Payment Date on which such Termination Value is being determined; provided
--------
that during any Renewal Term, "Termination Value" shall be determined as
provided in Section 22.6 of the Lease. Notwithstanding anything to the contrary
contained in the Lease or in the Participation Agreement, Termination Value for
such Unit (both before and after any adjustment pursuant to Section 2.6 of the
Participation Agreement) will, under any circumstances and in any event, be an
amount which, together with any other amounts required to be paid by the Lessee
under the Lease in connection with such termination, will be at least sufficient
to pay in full as of the date of payment thereof the aggregate unpaid principal
of the Equipment Notes issued in respect of such Unit, together with all unpaid
interest, Late Payment Premium and Make-Whole Amount, if any, thereon accrued to
the date on which such amount is paid in accordance with the terms thereof and
all other amounts then due to the holders of the Equipment Notes.
"Total Equipment Cost" shall mean the sum of the Equipment Costs for each
--------------------
Unit.
"Total Managed Fleet" shall mean the Manager's Fleet and the Company Fleet.
-------------------
"Transaction Costs" shall have the meaning assigned thereto in Section
-----------------
2.5(a) of the Participation Agreement.
"Transfer and Contribution Agreement" shall mean the Transfer and
-----------------------------------
Contribution Agreement dated as of August 1, 1998 between GATC and the Company.
22
<PAGE>
"Transferee" shall have the meaning assigned thereto in Section 6.1(a) of
----------
the Participation Agreement.
"Treasury Rate" shall mean with respect to prepayment of each Equipment
-------------
Note, a per annum rate (expressed as a monthly equivalent and as a decimal and,
in the case of United States Treasury bills, converted to a bond equivalent
yield), determined to be the per annum rate equal to the monthly yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Equipment Note, as determined by interpolation between the most recent
weekly average yields to maturity for two series of United States Treasury
securities, (A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Equipment Note and (B) the other maturing as close as
possible to, but later than, the Average Life Date of such Equipment Note, in
each case as published in the most recent H.15(519) (or, if a weekly average
yield to maturity for United States Treasury securities maturing on the Average
Life Date of such Equipment Note is reported in the most recent H.15(519), as
published in H.15(519)). H.15(519) means "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System. The most recent H.15(519) means the
latest H.15(519) which is published prior to the close of business on the third
Business Day preceding the scheduled prepayment date.
"Trust" shall mean the trust created under the Trust Agreement.
-----
"Trust Agreement" shall mean that certain Trust Agreement (1998-1), dated
---------------
as of August 1, 1998, between the Owner Participant and [Owner Trustee].
"Trust Estate" shall have the meaning assigned thereto in Section 2.2 of
------------
the Trust Agreement.
"Trustee" shall mean each of the Owner Trustee, the Indenture Trustee or
-------
the Pass Through Trustee, and "Trustees" shall mean the Owner Trustee, Indenture
--------
Trustee and the Pass Through Trustee, collectively.
"Underwriters" shall mean Salomon Brothers Inc. and Morgan Stanley & Co.
------------
Incorporated.
"Underwriting Agreement" shall mean that certain Purchase Agreement between
----------------------
the Lessee and the Underwriters, relating to the sale and purchase of the Pass
Through Certificates.
"Unit" shall mean each unit or item of Equipment.
----
"Unit Monthly Fee" shall have the meaning assigned thereto in Section
----------------
5.2(b) of the Management Agreement.
23
